Vol. 77 Wednesday, 

No. 172 September 5, 2012 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

45 CFR Part 162 

Administrative Simplification: Adoption of a Standard for a Unique Health 

Plan Identifier; Addition to the National Provider Identifier Requirements; 

and a Change to the Compliance Date for the International Classification 

of Diseases, 10th Edition (ICD–10–CM and ICD–10–PCS) Medical Data 

Code Sets; Final Rule 

mstockstill on DSK4VPTVN1PROD with RULES2

54664 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

45 CFR Part 162 

[CMS–0040–F] 

RIN 0938–AQ13 

Administrative Simplification: 

Adoption of a Standard for a Unique 

Health Plan Identifier; Addition to the 

National Provider Identifier 

Requirements; and a Change to the 

Compliance Date for the International 

Classification of Diseases, 10th Edition 

(ICD–10–CM and ICD–10–PCS) Medical 

Data Code Sets 

AGENCY: Office of the Secretary, HHS. 

ACTION: Final rule. 

SUMMARY: This final rule adopts the 

standard for a national unique health 

plan identifier (HPID) and establishes 

requirements for the implementation of 

the HPID. In addition, it adopts a data 

element that will serve as an other 

entity identifier (OEID), or an identifier 

for entities that are not health plans, 

health care providers, or individuals, 

but that need to be identified in 

standard transactions. This final rule 

also specifies the circumstances under 

which an organization covered health 

care provider must require certain 

noncovered individual health care 

providers who are prescribers to obtain 

and disclose a National Provider 

Identifier (NPI). Lastly, this final rule 

changes the compliance date for the 

International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) for diagnosis coding, 

including the Official ICD–10–CM 

Guidelines for Coding and Reporting, 

and the International Classification of 

Diseases, 10th Revision, Procedure 

Coding System (ICD–10–PCS) for 

inpatient hospital procedure coding, 

including the Official ICD–10–PCS 

Guidelines for Coding and Reporting, 

from October 1, 2013 to October 1, 2014. 

DATES: Effective date: These regulations 

are effective on November 5, 2012. 

Compliance dates: Health plans with 

the exception of small health plans must 

obtain an HPID by November 5, 2014. 

Small health plans must obtain an HPID 

by November 5, 2015. Covered entities 

must use HPIDs in the standard 

transactions on or after November 7, 

2016. An organization covered health 

care provider must comply with the 

implementation specifications in 

§ 162.410(b) by May 6, 2013. 

FOR FURTHER INFORMATION CONTACT: Kari 

Gaare (410) 786–8612, Matthew Albright 

(410) 786–2546, and Denise Buenning 

(410) 786–6711. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Background 

A. Executive Summary for This Final 

Rule 

1. Purpose 

a. Need for the Regulatory Action 

This rule adopts a standard unique 

health plan identifier (HPID) and a data 

element that will serve as an other 

entity identifier (OEID). This rule also 

adopts an addition to the National 

Provider Identifier (NPI) requirements. 

Finally, this rule changes the 

compliance date for the ICD–10–CM and 

ICD–10–PCS medical data code sets 

(hereinafter ‘‘code sets’’) from October 1, 

2013 to October 1, 2014. 

(1) HPID 

Currently, health plans and other 

entities that perform health plan 

functions, such as third party 

administrators and clearinghouses, are 

identified in Health Insurance 

Portability and Affordability Act of 1996 

(HIPAA) standard transactions with 

multiple identifiers that differ in length 

and format. Covered health care 

providers are frustrated by various 

problems associated with the lack of a 

standard identifier, such as: improper 

routing of transactions; rejected 

transactions due to insurance 

identification errors; difficulty in 

determining patient eligibility; and 

challenges resulting from errors in 

identifying the correct health plan 

during claims processing. 

The adoption of the HPID and the 

OEID will increase standardization 

within HIPAA standard transactions 

and provide a platform for other 

regulatory and industry initiatives. 

Their adoption will allow for a higher 

level of automation for health care 

provider offices, particularly for 

provider processing of billing and 

insurance related tasks, eligibility 

responses from health plans, and 

remittance advice that describes health 

care claim payments. 

(2) NPI 

In the January 23, 2004 Federal 

Register (69 FR 3434), the U.S. 

Department of Health and Human 

Services (HHS) published a final rule 

establishing the standard for a unique 

health identifier for health care 

providers for use in the health care 

system and adopting the National 

Provider Identifier (NPI) as that 

standard (‘‘2004 NPI final rule’’). The 

rule also established the 

implementation specifications for 

obtaining and using the NPI. Since that 

time, pharmacies have encountered 

situations where they need to include 

the NPI of a prescribing health care 

provider in a pharmacy claim, but 

where the prescribing health care 

provider has been a noncovered health 

care provider who did not have an NPI 

because he or she was not required to 

obtain one. This situation has become 

particularly problematic in the Medicare 

Part D program. The addition to the NPI 

requirements addresses this issue. 

(3) ICD–10–CM and ICD–10–PCS Code 

Sets 

In the January 16, 2009 Federal 

Register (74 FR 3328), HHS published a 

final rule in which the Secretary of HHS 

(the Secretary) adopted the ICD–10–CM 

and ICD–10–PCS (ICD–10) code sets as 

the HIPAA standards to replace the 

previously adopted International 

Classification of Diseases, 9th Revision, 

Clinical Modification, Volumes 1 and 2 

(diagnoses), and 3 (procedures) 

including the Official ICD–9–CM 

Guidelines for Coding and Reporting. 

The compliance date set by the final 

rule was October 1, 2013. 

Since that time, some provider groups 

have expressed strong concern about 

their ability to meet the October 1, 2013 

compliance date and the serious claims 

payment issues that might ensue if they 

do not meet the date. Some providers’ 

concerns about being able to meet the 

ICD–10 compliance date are based, in 

part, on difficulties they had meeting 

the compliance deadline for the adopted 

Associated Standard Committee’s (ASC) 

X12 Version 5010 standards (Version 

5010) for electronic health care 

transactions. Compliance with Version 

5010 and ICD–10 by all covered entities 

is essential to a smooth transition to the 

updated medical data code sets, as the 

failure of any one industry segment to 

achieve compliance would negatively 

affect all other industry segments and 

result in returned claims and provider 

payment delays. We believe the change 

in the compliance date for ICD–10 gives 

covered health care providers and other 

covered entities more time to prepare 

and fully test their systems to ensure a 

smooth and coordinated transition by 

all covered entities. 

b. Legal Authority for the Regulatory 

Action 

(1) HPID 

This final rule implements section 

1104(c)(1) of the Affordable Care Act 

and section 1173(b) of the Social 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54665 

1 Version 5010 and ICD–10 Readiness 

Assessment: Conducted among health Care 

providers, payers and Vendors for the Centers for 

Medicare & Medicaid Services (CMS), December 

2011 (OMB Approval No: 09938–1149). The 

assessment surveyed 404 providers, 101 payers, and 

90 vendors, which represents 0.1% of all physician 

practices, 3% of hospitals, and 5% of health plans. 

2An impact assessment for ICD–10 is performed 

by a covered entity to determine business areas, 

policies, processes and systems, and trading 

partners that will be affected by the transition to 

ICD–10. An impact assessment is a tool to aid in 

planning for implementation. ‘‘Survey: ICD–10 

Brief Progress,’’ February 2012, conducted by the 

Workgroup for Electronic Data Interchange (WEDI). 

Security Act (the Act) which require the 

adoption of a standard unique health 

plan identifier. 

(2) NPI 

This final rule imposes an additional 

requirement on organization health care 

providers under the authority of 

sections 1173(b) and 1175(b) of the Act. 

It also accommodates the needs of 

certain types of health care providers in 

the use of the covered transactions, as 

required by section 1173(a)(3) of the 

Act. 

(3) ICD–10–CM and ICD–10–PCS 

This final rule sets a new compliance 

date for the ICD–10 code sets, in 

accordance with section 1175(b)(2) of 

the Act, under which the Secretary 

determines the date by which covered 

entities must comply with modified 

standards and implementation 

specifications. 

2. Summary of the Major Provisions 

a. HPID 

This rule adopts the HPID as the 

standard unique identifier for health 

plans and defines the terms 

‘‘Controlling Health Plan’’ (CHP) and 

‘‘Subhealth Plan’’ (SHP). The definitions 

of these two terms differentiate health 

plan entities that are required to obtain 

an HPID, and those that are eligible, but 

not required, to obtain an HPID. This 

rule requires all covered entities to use 

an HPID whenever a covered entity 

identifies a health plan in a covered 

transaction. Because health plans today 

have many different business structures 

and arrangements that affect how health 

plans are identified in standard 

transactions, we established 

requirements for CHPs and SHPs in 

order to enable health plans to obtain 

HPIDs to reflect different business 

arrangements so they can be identified 

appropriately in standard transactions. 

This rule also adopts a data element 

to serve as an other entity identifier. The 

OEID will function as an identifier for 

entities that are not health plans, health 

care providers, or individuals (as 

defined in 45 CFR 160.103), but that 

need to be identified in standard 

transactions (including, for example, 

third party administrators, transaction 

vendors, clearinghouses, and other 

payers). Under this final rule, other 

entities are not required to obtain an 

OEID, but they could obtain and use one 

if they need to be identified in covered 

transactions. Because other entities are 

identified in standard transactions in a 

similar manner as health plans, we 

believe that establishing an identifier for 

other entities will increase efficiency by 

facilitating the use of a uniform 

identifier. 

b. NPI 

This rule requires an organization 

covered health care provider to require 

certain noncovered individual health 

care providers who are prescribers to: 

(1) obtain NPIs; and (2) to the extent the 

prescribers write prescriptions while 

acting within the scope of the 

prescribers’ relationship with the 

organization, disclose them to any entity 

that needs the NPIs to identify the 

prescribers in standard transactions. 

This addition to the NPI requirements 

would address the issue that pharmacies 

are encountering when the NPI of a 

prescribing health care provider needs 

to be included on a pharmacy claim, but 

the prescribing health care provider 

does not have, or has not disclosed, an 

NPI. 

c. ICD–10–CM and ICD–10–PCS 

This rule changes the compliance date 

for ICD–10–CM and ICD–10–PCS from 

October 1, 2013 to October 1, 2014. We 

believe this change will give covered 

entities the additional time needed to 

synchronize system and business 

process preparation and changeover to 

the updated medical data code sets. 

3. Summary of Costs and Benefits 

a. HPID 

The HPID is expected to yield the 

most benefit for providers, while health 

plans will bear most of the costs. Costs 

to all commercial and government 

health plans together (Medicare, 

Medicaid programs, Indian Health 

Service (IHS), and Veterans Health 

Administration (VHA)) are estimated to 

be $650 million to $1.3 billion. 

However, commercial and government 

health plans are expected to make up 

those costs in savings. Further, it is our 

understanding that the industry will not 

find the HPID requirements to be overly 

burdensome. Many entities have 

indicated that they have delayed regular 

system updates and maintenance, as 

well as the issuance of new health plan 

identification cards, in order to 

accommodate the adoption of the HPID. 

Health care providers can expect 

savings from two indirect consequences 

of HPID implementation: (1) The cost 

avoidance of decreased administrative 

time spent by providers interacting with 

health plans; and (2) a material cost 

savings through automation of processes 

for every transaction that moves from 

manual to electronic implementation. 

HPID’s anticipated 10-year return on 

investment for the entire health care 

industry is expected to be between $1.3 

billion to $6 billion. (This estimate 

includes savings resulting from the 

ongoing effects of adopting the HPID 

rather than the immediate and direct 

budgetary effects.) 

b. NPI 

The addition to the requirements for 

the NPI will have little impact on health 

care providers and on the health 

industry at large because few health care 

providers do not already have an NPI. 

In addition, covered organization health 

care providers may comply by various 

means. For example, a covered 

organization could use a simple verbal 

directive to prescribers whom they 

employ or contract with to meet the 

requirements. Alternately, a covered 

organization could update employment 

or contracting agreements with the 

prescribers. For these reasons, we 

believe the additional NPI requirements 

do not impose spending costs on State 

government or the private sector in any 

1 year of $136 million or more, the 

threshold specified in the Unfunded 

Mandates Reform Act (UMRA). 

c. Change of Compliance Date of ICD– 

10 

According to a recent survey 

conducted by the Centers for Medicare 

& Medicaid Services (CMS), up to one 

quarter of health care providers believe 

they will not be ready for an October 1, 

2013 compliance date.1 While the 

survey found no significant differences 

among practice settings regarding the 

likelihood of achieving compliance 

before the deadline, based on recent 

industry feedback we believe that larger 

health care plans and providers 

generally are more prepared than 

smaller entities. The uncertainty about 

provider readiness is confirmed in 

another recent readiness survey in 

which nearly 50 percent of the 2,140 

provider respondents did not know 

when they would complete their impact 

assessment of the ICD–10 transition.2

By delaying the compliance date of 

ICD–10 from October 1, 2013 to October 

1, 2014, we are allowing more time for 

covered entities to prepare for the 

transition to ICD–10 and to conduct 

mstockstill on DSK4VPTVN1PROD with RULES2

54666 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

thorough testing. By allowing more time 

to prepare, covered entities may be able 

to avoid costly obstacles that would 

otherwise emerge while in production. 

Savings will come from the avoidance 

of costs that would occur as a 

consequence of significant numbers of 

providers being unprepared for the 

transition to ICD–10. In the Regulatory 

Impact Analysis (RIA) of this final rule, 

we estimate that there would be a cost 

avoidance of approximately $3.6 billion 

to nearly $8 billion in this regard. This 

range of estimates reflects the avoidance 

of two costly consequences that could 

occur should the compliance date 

remain October 1, 2013: (1) both health 

care providers and health plans could 

have to process health care claims 

manually in order for claims to be paid; 

and (2) small health care providers 

could have to take out loans or apply for 

lines of credit in order to continue to 

provide health care in the face of 

delayed payments. 

In terms of costs, commercial health 

plans, medium and large hospitals, and 

large physician practices are far along in 

their ICD–10 implementation planning, 

and therefore have devoted funds, 

resources, and staff to the effort. 

According to our estimates, a 1-year 

delay of the ICD–10 compliance date 

would add 10 to 30 percent to the total 

cost that these entities have already 

spent or budgeted for the transition—an 

additional cost to commercial entities of 

approximately $1 billion to $6.4 billion. 

Medicare and State Medicaid Agencies 

have also reported estimates of costs of 

a change in the compliance date in 

recent informal polls. Accordingly, the 

calculations in the RIA in this final rule 

demonstrate that a 1-year delay in the 

compliance date of ICD–10 would cost 

the entire health care industry 

approximately $1 billion to $6.6 billion. 

We assume that the costs and cost 

avoidance calculated in the RIA will be 

incurred roughly over a 6- to 12-month 

period, from October 1, 2013 to October 

1, 2014. For simplicity sake, however, 

both the costs and the cost avoidance 

that result from a change in the 

compliance date of ICD–10 are 

calculated over the calendar year, 2014. 

We solicited comments on our 

assumptions and conclusions in the 

RIA. 

B. Background 

1. Legislative and Regulatory Overview 

In the April 17, 2012 Federal Register 

(77 FR 22950), we published a proposed 

rule titled ‘‘Administrative 

Simplification: Adoption of a Standard 

for a Unique Health Plan Identifier; 

Addition to the National Provider 

Identifier Requirements; and a Change 

to the Compliance Date for ICD–10–CM 

and ICD–10–PCS Medical Data Code 

Sets’’ (hereinafter referred to as the 

April 2012 proposed rule). The April 

2012 proposed rule provides an 

overview of the statutory provisions and 

regulations that are relevant for 

purposes of the April 2012 proposed 

rule (77 FR 22952 through 22954) and 

this final rule. We refer readers to that 

discussion. 

C. The Unique Health Plan Identifier 

(HPID) and the Affordable Care Act 

Section 1104(c)(1) of the Affordable 

Care Act directs the Secretary to 

promulgate a final rule establishing a 

unique health plan identifier that is 

based on the input of a Federal advisory 

committee, the National Committee on 

Vital and Health Statistics (NCVHS). 

Congress created the NCVHS to serve as 

an advisory body to the Secretary on 

health data, statistics, and national 

health information policy. Section 1104 

of the Affordable Care Act authorizes 

the Secretary to promulgate the rule on 

an interim final basis and indicates that 

such rule shall be effective not later 

than October 1, 2012. 

Health plans are currently identified 

for different purposes using different 

identifiers that have different sources, 

formats, and meaning. A health plan 

may have multiple identifiers, each 

assigned by a different organization for 

a different purpose. The following 

discussion focuses on the types of 

identifiers that currently may be used to 

identify health plans in standard 

transactions. State regulators, for 

instance, use the National Association 

of Insurance Commissioners’ (NAIC) 

Company code to identify health plans 

when a health plan is licensed to sell or 

offer health insurance in a particular 

State. The U.S. Department of Labor 

(DOL) and the Internal Revenue Service 

(IRS) use the 9-digit Employer 

Identification Number (EIN) and a 1- 

digit alphabetic or a 3-digit plan number 

to identify health plans. Employers, sole 

proprietorships, corporations, 

partnerships, non-profit associations, 

trusts, estates of decedents, government 

agencies, certain individuals, and other 

business entities, use EINs to identify 

health plans for a host of purposes and 

transactions. The IRS uses the EIN to 

identify taxpayers that are required to 

file various business tax returns. Health 

care clearinghouses assign proprietary 

identifiers to health plans for use in 

standard transactions. Multiple 

clearinghouses may identify the same 

health plan using different proprietary 

identifiers in different covered 

transactions. Health plans may use other 

identifiers, such as a tax identification 

number (TIN) or an EIN, to identify 

themselves in the standard transactions, 

to more easily integrate into existing 

proprietary systems, or for use on health 

insurance cards that they issue to health 

plan enrollees. 

Not only are health plans identified 

using a variety of identifiers, but these 

identifiers have different formats. For 

instance, some identifiers are 

alphanumeric while other identifiers are 

only numeric. Identifiers also differ in 

length; for example, NAIC codes are 

typically five digits while an EIN is nine 

digits. 

The current versions of the adopted 

standards (ASC X12N and NCPDP) 

allow health plans to use these and 

other identifiers in standard 

transactions. Therefore, for the covered 

transactions there is currently no 

requirement for consistency in the use 

of identifiers for health plans. The 

transaction standards implementation 

guides, though, do provide for the use 

of the HPID once its use is mandated 

and during a phase-in period. Prior to 

this rule, health care providers, health 

plans, and health care clearinghouses 

consequently could use EINs, TINs, 

NAIC numbers, or health care 

clearinghouse or health plan-assigned 

proprietary numbers to identify health 

plans in standard transactions. Industry 

stakeholders, especially health care 

providers, have indicated that the lack 

of a standard unique health plan 

identifier has resulted in increased costs 

and inefficiencies in the health care 

system. Health care providers are 

frustrated by problems with: the routing 

of transactions; rejected transactions 

due to insurance identification errors; 

difficulty determining patient eligibility; 

and challenges resolving errors 

identifying the health plan during 

claims processing. 

The Affordable Care Act specifically 

calls for the establishment of a unique 

identifier for health plans. There are 

however, other entities that are not 

health plans but that perform certain 

health plan functions and are currently 

identified in the standard transactions 

in the same fields using the same types 

of identifiers as health plans. For 

example, health care clearinghouses, 

third party administrators (TPAs), and 

repricers often contract with insurance 

companies, self-funded group health 

plans, and provider- or hospital-run 

health plans to perform claims 

administration, premium collection, 

enrollment, and other administrative 

functions. As explained later in this 

final rule, we are adopting a data 

element—an other entity identifier—to 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54667 

serve as an identifier for these other 

entities. 

D. The National Committee on Vital and 

Health Statistics (NCVHS) 

The NCVHS has been assigned a 

significant role in the Secretary’s 

adoption of all standards, code sets, and 

operating rules under HIPAA, including 

the unique health plan identifier. In 

section 1104(c)(1) of the Affordable Care 

Act, the Secretary is directed to conduct 

rulemaking to establish a unique health 

plan identifier based on input of the 

NCVHS. 

The NCVHS Subcommittee on 

Standards fulfilled these duties by 

conducting public hearings on the 

health plan identifier on July 19 through 

21, 2010. Industry stakeholders, 

including representatives from health 

plans, health care provider 

organizations, health care 

clearinghouses, pharmacy industry 

representatives, standards developers, 

professional associations, 

representatives of Federal and State 

public programs, the Workgroup on 

Electronic Data Interchange (WEDI), the 

National Uniform Billing Committee 

(NUBC), the National Uniform Claim 

Committee (NUCC), and individuals 

with health plan identifier proposals 

provided in-person and written 

testimony. Stakeholder testimony at the 

hearings focused on the use and need 

for an HPID to: facilitate the appropriate 

routing of transactions; reduce the cost 

of managing financial and 

administrative information; improve the 

accuracy and timeliness of claims 

payment; and reduce dissatisfaction 

among health care providers and 

patients/members by improving 

communications with health plans and 

their intermediaries. Stakeholders 

provided suggestions on the types of 

entities that need to be identified in 

standard transactions, those that should 

be eligible to obtain an HPID, and the 

level of enumeration for each plan (for 

example, the legal entity, product, 

benefit package etc.). 

For a full discussion of the key topics 

and recommendations from the July 19 

through 21, 2010 NCVHS hearings, we 

refer the reader to the April 2012 

proposed rule (77 FR 22950). For the 

complete text of the NCVHS’ 

observations and recommendations, go 

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

100930lt1.pdf. 

E. Definition of Health Plan 

The regulatory definition of health 

plan at 45 CFR 160.103 was initially 

adopted in the August 17, 2000 

Standards for Electronic Transactions 

final rule (65 FR 50312) (hereafter 

Transactions and Code Sets final rule). 

The basis for the additions to, and 

clarifications of, the definition of health 

plan is further discussed in the 

preamble to the December 28, 2000 final 

rule (65 FR 82478 and 82576) titled 

‘‘Standards for Privacy of Individually 

Identifiable Health Information’’ 

(hereinafter referred to as the Privacy 

Rule). For additional information on the 

definition of health plan, we refer 

readers to these rules. 

F. The April 2012 Proposed Rule and 

Analysis of and Responses to Public 

Comments 

In the April 2012 proposed rule, we 

proposed the following: 

• The adoption of the standard for a 

national unique HPID for use in all 

transactions for which the Secretary has 

adopted a standard (hereinafter referred 

to as standard transactions). 

• An OEID for use by entities that do 

not meet the definition of a health plan, 

but that need to be identified in the 

standard transactions. 

• Requirements and provisions for 

the implementation of both the HPID 

and OEID. 

• Additions to the NPI requirements 

mandating that covered health care 

providers require certain noncovered 

individual health care providers who 

are prescribers to obtain NPIs. 

• To change the compliance date for 

ICD–10 code sets from October 1, 2013 

to October 1, 2014. 

In the April 2012 proposed rule, we 

solicited public comments on a number 

of proposals. In response to our 

solicitation, we received approximately 

536 timely pieces of correspondence. 

Summaries of the public comments that 

are within the scope of the proposed 

rule and our responses to those 

comments are set forth in the various 

sections of this final rule under the 

corresponding headings. 

II. Adopting a Standard for a Unique 

Health Plan Identifier (HPID) 

A. The Health Plan Identifier 

We proposed HPID as the standard 

unique identifier for health plans. We 

also proposed: (1) Instructions and 

guidance concerning how health plans 

may obtain an HPID; (2) the 

requirements that covered entities will 

have to meet to use the HPID in 

standard transactions; and (3) 

provisions for the HPID in a new 

subpart (subpart E) at 45 CFR part 162. 

1. Definition of ‘‘Controlling Health 

Plan’’ and ‘‘Subhealth Plan’’ 

Health plans today have many 

different business structures and 

arrangements that affect how health 

plans are identified in standard 

transactions. There is often a ‘‘parent’’ 

corporation that meets the definition of 

health plan, which may be controlled by 

entities, such as holding companies, 

that do not meet the definition of health 

plan. This ‘‘parent’’ health plan may 

own and operate several other entities 

and organizations, which may also meet 

the definition of a health plan. While 

these individual health plans that are 

owned by the same ‘‘parent’’ 

corporation may have their own EIN or 

NAIC number, they may all use a single 

identifier in covered transactions 

because of data processing 

arrangements. In these situations, some 

health plans may not need to be 

identified separately in covered 

transactions, and may not need their 

own health plan identifier. To 

differentiate between health plan 

entities that would be required to obtain 

an HPID, and those that would be 

eligible, but not required, to obtain an 

HPID, we proposed and are adopting in 

this final rule, to categorize health plans 

as controlling health plans (CHPs) and 

subhealth plans (SHPs). 

The definitions of CHPs and SHPs are 

established in 45 CFR 162.103 as 

follows: 

a. Controlling Health Plan (CHP) 

A CHP means a health plan that—(1) 

controls its own business activities, 

actions, or policies; or (2)(i) is 

controlled by an entity that is not a 

health plan; and (ii) if it has a subhealth 

plan(s), exercises sufficient control over 

the subhealth plan(s) to direct its/their 

business activities, actions, or policies. 

We suggested that the following 

considerations may be helpful in 

determining if an entity is a CHP: 

• Does the entity itself meet the 

definition of health plan at 45 CFR 

160.103? 

• Does either the entity itself or a non 

health plan organization control the 

business activities, actions, or policies 

of the entity? 

If the answer to both questions is 

‘‘yes,’’ then the entity would meet the 

definition of CHP. We proposed that an 

entity that meets the definition of CHP 

would be required to obtain a health 

plan identifier. 

b. Subhealth Plan (SHP) 

We proposed that a SHP means a 

health plan whose business activities, 

actions, or policies are directed by a 

controlling health plan. 

We suggested that the following 

considerations may be helpful in 

determining whether an entity is a SHP: 

mstockstill on DSK4VPTVN1PROD with RULES2

54668 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

• Does the entity meet the definition 

of health plan at § 160.103? 

• Does a CHP direct the business 

activities, actions, or policies of the 

health plan entity? 

If the answer to both questions is 

‘‘yes,’’ then the entity meets the 

definition of SHP. We proposed that a 

SHP would not be required to obtain an 

HPID, but may choose to obtain an 

HPID, or its CHP may obtain an HPID 

on its behalf. 

Comment: We received a few 

comments on the proposed definitions 

of CHP and SHP. Some commenters 

liked the proposed definitions, believing 

they would aid health plans in 

determining the appropriate 

enumeration level. A few commenters 

suggested alternatives to either broaden 

or narrow the definition of CHP. 

Commenters that requested a broader 

definition were generally concerned that 

the definition was not sufficiently broad 

to encompass the legal structures 

utilized by various third party payors. 

As a result, ambiguity in the standard 

transactions occurs because of the 

numerous different ways in which 

health plans functions are performed by 

different entities and the numerous 

ways the term ‘‘health plan’’ is 

interpreted. These commenters 

suggested that HHS expand the 

definition of CHP to encompass any and 

all potential legal relationships between 

holding companies and their 

subsidiaries that hold health insurance 

licenses. These commenters also 

requested that after HHS broadens the 

definition of CHP, that the CHP be 

required to obtain a separate HPID for 

each of the health plans’ subsidiaries 

involved in the healthcare delivery 

system, specifically for the entities that 

are involved as fiduciaries with legal 

responsibilities for paying claims, any 

administrator responsible for 

administering any aspect of the benefits, 

and any holder of the participation 

contract with the physicians or other 

health care providers. These 

commenters suggested that HHS revisit 

the definition of health plan at 45 CFR 

160.103 to include each of the 

intermediaries involved in the 

multitude of transactions that occur in 

administering payment. 

Response: HHS was tasked with 

creating a unique health plan identifier. 

The term ‘‘health plan’’ is defined in 

section 1171(5) of the Act and at 45 CFR 

160.103 of the regulations. We do not 

believe Congress intended to include in 

the definition of health plan entities that 

solely perform the functions of third 

party administrators or repricers. In 

addition, while we recognize that health 

plans and other entities that perform 

health plan functions may be identified 

in similar fields in the standard 

transactions, they are distinctly different 

organizations with different purposes. 

Furthermore, we proposed the adoption 

of a data element that will serve as the 

OEID discussed in section II.B. of this 

final rule to meet industry’s need for a 

standard identifier for entities that do 

not meet the definition of health plan, 

but that perform related functions. 

Comment: A commenter suggested 

that HHS narrow the definition of a CHP 

so that it means ‘‘a health plan that—(1) 

controls its own business activities, 

actions, and policies; or (2) (i) is 

controlled by an entity that is not a 

health plan; and (ii) if it has a subhealth 

plan(s) (as defined in this section), 

exercises sufficient control over the 

subhealth plan(s) to direct its/their 

business activities, actions, and 

policies.’’ 

Response: We believe that a narrow 

definition of CHP would not capture all 

of the ‘‘parent’’ organizations that 

should be required to obtain HPIDs for 

themselves and be authorized to obtain 

HPIDs for their subhealth plans, to 

accomplish the goals at this stage of 

standardization. We distinguish 

between CHPs and SHPs because health 

plans have different business structures 

and arrangements that determine how 

they are identified in the standard 

transactions. We recognize that different 

organizations may divide business 

responsibilities in various ways. For 

example, a ‘‘parent’’ organization that 

meets the definition of health plan may 

dictate some business activities, actions, 

or policies, but may not control all 

business activities, actions, or policies 

of entities that they own or operate that 

also meet the definition of health plan. 

Given the variations in structures and 

relationships, we used the word ‘‘or’’ 

rather than ‘‘and’’ to provide more 

flexibility to health plans and ensure 

that ‘‘parent’’ organizations are 

classified as CHPs and are required to 

obtain HPIDs. 

After consideration of the public 

comments received, we are finalizing 

the definitions of CHP and SHP without 

modification. 

2. Use of the HPID 

In 45 CFR 162.510, we proposed that 

all covered entities would be required to 

use an HPID where a covered entity 

identifies a health plan in a covered 

transaction. We proposed further that, if 

a covered entity uses a business 

associate to conduct standard 

transactions on its behalf, the covered 

entity must require its business 

associate to use an HPID to identify a 

health plan where the business associate 

identifies a health plan in all covered 

transactions. 

We proposed in § 162.506 that the 

HPID could also be used for any other 

lawful purpose, and provided some 

examples of permitted uses including 

the following: 

• Health plans may use HPIDs in 

their internal files to facilitate 

processing of health care transactions. 

• A health plan may use an HPID on 

a health insurance card. 

• The HPID may be used as a crossreference in health care fraud and abuse 

files and other program integrity files. 

• Health care clearinghouses may use 

HPIDs in their internal files to create 

and process standard and nonstandard 

transactions and in communications 

with health plans and health care 

providers. 

• HPIDs may be used in patient 

medical records to help specify patients’ 

health care benefit package(s). 

• HPIDs may be used to identify 

health plans in electronic health records 

(EHRs). 

• HPIDs may be used to identify 

health plans in Health Information 

Exchanges (HIEs). 

• HPIDs may be used to identify 

health plans in Federal and State health 

insurance exchanges. 

• HPIDs may be used to identify 

health plans for public health data 

reporting purposes. 

Comment: Many commenters 

requested further clarification of the 

purpose, intent, and use of the HPID, 

specifically if and how the HPID should 

be used in the standard transactions. For 

instance, they suggested more guidance 

on if and where the HPID should be 

used in the standard transactions and on 

the ISA envelope. 

Response: We direct these 

commenters to the adopted transaction 

standards, the relevant implementation 

guides, and as appropriate, adopted 

operating rules, for direction on if and 

when to use the HPID. We note that the 

only required use of the HPID is that a 

covered entity must use an HPID to 

identify a health plan that has an HPID 

in the standard transactions where the 

covered entity is identifying a health 

plan in the standard transaction. This 

final rule does not require that health 

plans now be identified in the standard 

transactions if they were not identified 

before this rule. For instance, if a 

covered entity is currently identifying a 

health plan as the information source in 

the eligibility response transaction 

(271), Loop 2100A, Segment NM1— 

information source name, the covered 

entity will be required to use an HPID 

to identify that health plan as the 

information source once the HPID is 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54669 

required. If a covered entity is currently 

identifying a third party administrator 

as the information source, the covered 

entity can continue to identify that third 

party administrator as the information 

source using whatever identifier the 

third party administrator uses after the 

adoption of the HPID. We anticipate we 

will provide additional examples of 

how the HPID can be used in the 

standard transactions outside of this 

final rule. 

In their request for clarification, some 

of these commenters appeared confused 

regarding the affirmative obligation in 

45 CFR 162.510 for covered entities to 

use an HPID to identify a health plan in 

standard transactions, when a SHP may 

not have its own HPID. In those cases, 

covered entities would use the HPID 

that the SHP indicates should be used 

to identify that SHP, which may be the 

HPID of its controlling health plan. If an 

entity has in good faith sought to 

identify the HPID that should be used 

for a SHP that has no HPID and has been 

unsuccessful, then it obviously cannot 

use an HPID to identify that SHP. 

However, we would anticipate that 

those circumstances would be rare. 

Nevertheless, consistent with these 

commenters’ request to clarify the 

requirement, we have inserted ‘‘that has 

an HPID’’ immediately after ‘‘health 

plan’’ in § 162.510(a) and (b). We 

consider a health plan as ‘‘having an 

HPID’’ if that health plan communicates 

with its trading partners that it 

consistently uses a particular HPID, 

even if the HPID it uses is associated 

with another health plan, such as its 

controlling health plan. 

Comment: A few commenters stated 

that they saw the primary purpose of the 

HPID as a way to eliminate the 

ambiguity that currently exists in the 

covered transactions. They note that 

various nonhealth plans perform certain 

administrative functions currently 

performed by health plans. 

Response: These comments imply that 

the Department should expand the 

definition of ‘‘health plan’’ to include 

entities that are not health plans as 

defined by statute and regulation. 

Previously, we addressed why this rule 

does not expand the definition of health 

plan, and further, why we take an 

incremental approach in the adoption of 

the HPID and OEID. We seek to allow 

the industry time and flexibility for 

implementing these unique identifiers. 

We created the other entity identifier to 

provide standardization for these 

entities that do not meet the definition 

of health plan, for instance. While the 

use of the OEID is voluntary, its use can 

facilitate the standardization of 

electronic administrative and financial 

transactions. 

Comment: Some commenters 

expressed concern that the HPID 

requirements and provisions are not 

clearly defined for industry 

implementation. Commenters 

recommended that pilot testing occur 

prior to the adoption of the HPID, to 

ensure proper and consistent 

implementation. Some commenters 

suggested that the Department work 

with the NCVHS to determine if 

operating rules for the use of HPID are 

necessary to clarify any implementation 

issues that arise following HPID 

implementation. 

Response: We anticipate this rule 

serving as a first step in standardizing 

the way health plans are identified in 

the standard transactions. We note that 

the only required use of the HPID is to 

identify a health plan that has an HPID 

where a health plan is identified in the 

standard transactions. Health plans, 

except small health plans, have until 2 

years after the effective date of this rule 

to obtain HPIDs. Small health plans 

have until 3 years after the effective date 

of this rule to obtain HPIDs. Covered 

entities are not required to use HPIDs in 

the standard transactions until 4 years 

after the effective date of this rule. (For 

further discussion of the HPID 

compliance date see section II.E. of this 

final rule.) The rule provides ample 

time for covered entities to develop 

their own implementation timelines, 

which we suggest could include pilot 

testing, and milestones to ensure they 

meet the compliance dates. 

As we explained in the April 2012 

proposed rule, a health plan may need 

to be identified in different fields in the 

transactions and these fields may not 

always require the use of a health plan 

identifier. For instance, the information 

source, in the eligibility response 

transaction (271), Loop 2100A, Segment 

NM1, may be a health plan, or an other 

entity that performs health plan 

functions, like a third party 

administrator. So after the applicable 

compliance date of the HPID, if a 

covered entity is identifying a health 

plan as the information source in the 

eligibility response transaction (271), 

Loop 2100A, Segment NM1, then the 

covered entity will be required to use an 

HPID to identify that health plan in the 

standard transactions. However, if after 

the adoption of the HPID, the covered 

entity is identifying a third party 

administrator as the information source 

in the eligibility response transaction 

(271), Loop 2100A, Segment NM1, the 

covered entity can use whatever 

identifier it was using previously or an 

OEID to identify that third party 

administrator. This final rule does not 

impose any new requirement for when 

to identify a health plan that has an 

HPID in standard transactions. It merely 

requires the use of the HPID where the 

health plan is identified. We did 

provide an example of a use of the HPID 

in transaction standards in the April 

2012 proposed rule (77 FR 22961). 

Comment: Some commenters question 

what the HPID will actually accomplish. 

Response: The establishment of the 

HPID and the requirement to use it in 

the standard transactions to identify 

health plans is another step towards 

standardization. In standard 

transactions, the HPID will replace 

proprietary identifiers for health plans 

which have different lengths and 

formats. In addition, it will provide 

public access to information necessary 

to accurately identify health plans. This 

will save providers time when verifying 

a health plan’s identity. Standardization 

of the health plan identifier is also 

expected to ameliorate some electronic 

transaction routing problems. The HPID 

and OEID will add consistency to 

identifiers, may provide for a higher 

level of automation, particularly for 

provider processing of the X12 271 

(eligibility response) and X12 835 

(remittance advice). In the case of the 

X12 835, the HPID and OEID may allow 

reconciliation of claims with the claim 

payments to be automated at a higher 

level. While the implementation of 

HPID, in and of itself, may not 

immediately provide significant 

monetary savings for covered entities, it 

is expected to provide significant time 

savings by immediately resolving 

certain transaction routing problems. 

Comment: Commenters raised issues 

about whether the early use of the HPID 

in the standard transactions could result 

in denied or misrouted claims with the 

potential to cause privacy or security 

breaches. 

Response: We believe the HPID will 

reduce denied and misrouted claims 

once fully implemented, given that all 

HPIDs and information related to HPIDs 

will be available in one database. While 

we recognize that there is the potential 

for misrouted or denied claims during 

the transition to the HPID, we believe 

that privacy or security breaches can be 

avoided, particularly with prior 

implementation planning. We believe 

there is more than adequate time 

between the compliance date for when 

health plans obtain HPIDs and when 

covered entities are required to use 

HPIDs in the standard transactions, 

which will allow industry ample 

opportunity to make system changes 

and perform extensive testing with 

trading partners. This additional time 

mstockstill on DSK4VPTVN1PROD with RULES2

54670 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

and phased-in approach to compliance 

should reduce denied or misrouted 

claims during the early use of the HPID. 

Comment: Some commenters 

requested more specific guidance about 

how the HPID should be used in 

business models, for instance in 

situations where one health plan may be 

adjudicating the claim and a separate 

health plan may hold the actual contract 

with the provider. 

Response: The implementation of the 

HPID does not require a change to 

health plans’ business models. Changing 

a health plan’s current identifiers to an 

HPID does not change the structural 

organization and/or its contractual 

relationships with other entities, or 

whether it is identified in the standard 

transactions. For example, if the health 

plan that adjudicates the claim needs to 

be identified in a standard transaction, 

then the HPID of that health plan should 

be used. If the health plan that holds the 

actual contract with the provider needs 

to be identified in a standard 

transaction, then the HPID of that health 

plan should be used. 

Comment: Several commenters raised 

concerns about the use of the HPID on 

health plan members’ ID cards. 

Commenters were split between making 

the use of the HPID on member ID cards 

mandatory or optional. Others raised 

concerns that the cost of re-issuing all 

member ID cards far outweighs any 

benefit. 

Response: In this rule, we only 

require the use of the HPID in the 

standard transactions. The HPID is 

permitted to be used for any other 

lawful purpose and inclusion of the 

HPID on health plan members’ ID cards 

is just one example of an optional use 

of the HPID. While health plans are 

permitted to put the HPID on member 

ID cards, we do not require it, so the 

determination of whether to reissue 

cards, and the associated costs, lie with 

the health plans. 

Comment: Other commenters 

recommended that health plans be 

required to comply with the health plan 

ID card standards set forth in the 

Workgroup for Electronic Data 

Interchange (WEDI) Health ID Card 

Implementation Guide, Version 1.0 

(November 30, 2007). 

Response: We did not address or 

propose the adoption of a standard 

format for a health plan identification 

card. The goal of this rule was to adopt 

a standard health plan identifier for use 

in the standard transactions. While the 

use of the HPID on a health plan ID card 

is a permitted use, we did not require 

it in this rule because further analysis 

and industry feedback is needed on 

standard identification cards after the 

implementation of the HPID. 

After consideration of the public 

comments, we are finalizing the 

required and permitted uses of the HPID 

with the minor clarifying modifications 

to § 162.510(a) and (b), adding ‘‘that has 

an HPID’’ immediately after ‘‘health 

plan.’’ 

3. Health Plan Identifier Requirements 

a. Requirements and Options for 

Obtaining an HPID 

This final rule discusses how CHPs 

and SHPs will obtain an HPID from the 

Enumeration System. In 45 CFR 

162.512, we proposed to require a CHP 

to obtain an HPID for itself from the 

Enumeration System. In addition, we 

proposed that a CHP may obtain an 

HPID from the Enumeration System for 

its SHP, or direct a SHP to obtain an 

HPID from the Enumeration System. We 

proposed that any SHP would be able to 

obtain an HPID regardless of whether or 

not its CHP directed it to obtain an 

HPID. While a CHP could only obtain 

one HPID for itself, a CHP could use the 

HPID of its SHPs for any lawful 

purpose. 

While a CHP would be required to 

obtain an HPID, there would be different 

options available for the enumeration of 

SHPs based on a CHP’s organizational 

structure and business needs. The CHP 

would analyze its organizational 

structure to determine if and which of 

its SHPs need an HPID based on 

whether the SHP needs to be identified 

in covered transactions. We encouraged 

CHPs and SHPs to coordinate their 

HPID applications to prevent 

duplication and possible confusion. See 

Table 1 for a comparison of 

requirements for obtaining an HPID. 

TABLE 1—ENUMERATION REQUIREMENTS AND OPTIONS FOR CHPS AND SHPS

Entity Enumeration requirements Enumeration options 

CHPs .................................... Must obtain an HPID for itself ......................................... May obtain an HPID(s) for its SHP(s). 

May direct its SHP(s) to obtain an HPID(s). 

SHPs .................................... Not required to obtain an HPID ...................................... May obtain an HPID at the direction of its CHP. 

May obtain an HPID on its own initiative. 

For further illustrations and examples 

of enumeration options to demonstrate 

the ways a CHP could choose to 

enumerate itself and its SHPs, see the 

April 2012 proposed rule (77 FR 22957 

through 22962). 

In the proposed rule, we clarified that 

self-insured group health plans are 

included in the definition of health plan 

in § 160.103 and therefore will need to 

obtain a health plan identifier if they 

meet the definition of a CHP. We 

specifically mentioned self-insured 

group health plans as there was industry 

discussion about whether these health 

plans should be required to obtain 

HPIDs because they do not often need 

to be identified in the standard 

transactions. Some industry 

stakeholders noted that many selfinsured group health plans contract 

with third party administrators or other 

entities to perform health plan functions 

on their behalf and those entities, not 

the self-insured group health plans, may 

be identified in the standard 

transactions. Therefore, many in the 

industry suggested not requiring selfinsured group health plans to obtain 

HPIDs, while others recommended 

requiring these plans to obtain HPIDs 

because they are typically the 

financially responsible party. Given that 

self-insured group health plans are 

included in the definition of health plan 

and potentially need to be identified in 

the standard transactions, we proposed 

that they be required to obtain an HPID 

if they meet the definition of a CHP. We 

solicited comments on this issue. 

b. Options for Enumeration of Health 

Plans 

As discussed previously in this final 

rule, stakeholders at the NCVHS 

hearings expressed differing viewpoints 

on the appropriate level of health plan 

enumeration. Some industry 

stakeholders encouraged health plan 

enumeration at a very high level (for 

example, at the level of the health plan’s 

legal entity), while other stakeholders 

supported enumeration at the benefit 

package level. We analyzed and 

considered these viewpoints when we 

developed the policies associated with 

HPID adoption and implementation. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54671 

In the April 2012 proposed rule, we 

considered multiple uses for the HPID. 

We determined that the primary 

purpose of the HPID was for use in 

standard transactions in order to 

identify health plans in the appropriate 

loops and segments and to provide a 

consistent standard identifier for 

covered entities to use when identifying 

health plans in standard transactions. 

We analyzed the transaction standards 

to determine the existing segments and 

loops where a health plan may need to 

be identified, what identifiers are 

currently used in those loops and 

segments to identify health plans, and 

what information a loop or segment 

conveys when a health plan is being 

identified. We also carefully considered 

the information that industry 

stakeholders reported was missing in 

covered transactions, such as 

information related to patient financial 

responsibility. 

We determined that much of the 

information testifiers wanted to obtain 

from the HPID might already be 

available in other parts of the 

transaction standards and associated 

operating rules. To illustrate this point, 

in the proposed rule, we discussed the 

CAQH CORE 154 Eligibility and 

Benefits 270/271 Data Content Rule, 

which we adopted through an interim 

final rule with comment period in the 

July 8, 2011 Federal Register (76 FR 

40458). That operating rule is to be used 

with the ASC X12 Version 5010 

Standard for Electronic Data Interchange 

Technical Report Type 3—Health Care 

Eligibility Benefit Inquiry and Response 

(270/271) (hereinafter referred to as the 

Version 5010 270/271 eligibility 

inquiry/response standard. The 

operating rule requires certain 

additional information to be included in 

the Version 5010 270/271 eligibility 

inquiry/response transaction standard, 

including information about a patient’s 

health plan name, coinsurance, 

copayment, and deductibles including 

in-network and out-of-network, as well 

as remaining deductible amounts. 

Moreover, we believe that the 

transaction standards themselves could 

more appropriately address many of the 

other issues raised by stakeholders 

about the appropriate level of 

enumeration. Therefore, HPID does not 

need to provide the level of detail that 

some testifiers suggested. 

We discussed in the April 2012 

proposed rule how requiring health 

plans to enumerate at a more granular 

level may prove burdensome to the 

industry as benefit package information 

and offerings change frequently and 

would require constant updates by 

health plans. For example, health care 

providers would need to update their 

software and systems frequently to 

ensure the accuracy of information. A 

failure of either health care providers or 

health plans to ensure that the HPIDs 

and the corresponding health plan 

information is up-to-date could result in 

increased time spent by health plan and 

health care provider staff to ensure the 

most accurate information is being used 

for eligibility determinations and claim 

payments. 

As discussed in the April 2012 

proposed rule, we developed the 

policies associated with HPID adoption 

and implementation after considering 

stakeholder testimony, analyzing 

transaction standards’ loops and 

segments where the health plan 

identifier will be used, and taking into 

account newer versions of the 

transaction standards and the adoption 

of associated operating rules. 

We received many comments on the 

enumeration requirements for CHPs and 

SHPs. 

Comment: Some commenters 

generally supported our proposal that a 

CHP be required to obtain an HPID, 

while a SHP would be eligible but not 

required to obtain one. These 

commenters supported the flexibility 

this approach provided to a health plan 

to determine the appropriate level of 

enumeration for its organization and 

enumerate itself in a way that supports 

its business needs. 

Response: We thank commenters for 

their support. 

Comment: Some commenters 

emphasized that it is critical that the 

approach in the proposed rule be 

finalized so that health plans have the 

flexibility to determine how the health 

plan chooses to enumerate itself for use 

in the standard transaction. For 

instance, whether it chooses to have one 

HPID for its entire organization or 

whether it chooses to obtain separate 

HPIDs for its subhealth plans. While 

these commenters supported the 

proposed enumeration requirements 

and required uses of the HPID, they 

expressed concerns that future 

rulemaking could result in requiring 

divisions within health plans to be 

enumerated. 

Response: While we appreciate the 

commenters’ support for our proposed 

approach to establishing an HPID, we 

find the concerns expressed about 

future rulemaking to be outside the 

scope of this rule. Nevertheless, we 

anticipate that future changes in the 

requirements or prohibitions will be 

aligned with industry business needs 

and experience. 

Comment: A commenter expressed 

concern about limiting a health plan to 

a single HPID. This commenter was 

concerned that a single HPID may 

present issues from a routing 

perspective because a single health plan 

may use multiple processing systems or 

administrators. The commenter also 

noted that if a health plan were limited 

to being enumerated with a single HPID, 

there would need to be intelligence 

associated with the HPID, such as a data 

element to redirect incoming 

transactions from the single receiving 

site to the multiple processing sites. 

This commenter further suggested that a 

health plan be able to obtain and use 

subordinate identifiers for routing 

purposes. 

Response: This final rule limits CHPs 

to obtaining one HPID for themselves. 

Permitting a CHP to obtain multiple 

HPIDs would lead to unnecessary 

complexity and potential confusion for 

no discernible benefit. Any additional 

information necessary for the 

transaction should be included within 

the transaction standard, 

implementation specifications, or 

associated operating rule. However, we 

note that we do allow CHPs to obtain 

HPIDs for their subhealth plans based 

on their business needs and 

arrangements and allow CHPs to use the 

HPID of their SHPs in the standard 

transactions. 

Comment: Some commenters 

supported not enumerating at a more 

granular level of enumeration because 

certain information about patient 

eligibility or financial information can 

be provided in other data fields in the 

transactions. They stressed that a more 

granular approach would add 

significant administrative costs to the 

implementation of the HPID and would 

require the creation of a clearinghouse 

to maintain the various separate 

identifiers and this would not benefit 

vendors, health care providers or health 

plans. 

Response: We agree with these 

commenters that a greater level of 

granularity has the potential to be 

unnecessarily burdensome and 

expensive for all segments of industry. 

If the industry determines that 

additional information is needed for 

certain electronic transactions, changes 

to the transaction standards would 

likely be more appropriate. 

Comment: Commenters recommended 

that HHS work with the Operating Rules 

Authoring Entity for the applicable 

transactions if additional information is 

needed in the future. 

Response: The Affordable Care Act 

authorized the Secretary to establish a 

review committee to conduct hearings 

to evaluate and review the adopted 

standards and operating rules. The 

mstockstill on DSK4VPTVN1PROD with RULES2

54672 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

review committee will provide 

recommendations for updating and 

improving such standards and operating 

rules. We believe that the industry will 

have sufficient opportunities to provide 

information about developing needs and 

ways to address those needs with 

possible changes to standards and 

operating rules. 

Comment: Some commenters 

suggested that HHS provide additional 

guidance on enumeration to support 

health plans in making informed 

decisions on the most appropriate 

approach for enumeration. These 

commenters cautioned that, without 

more guidance, the proposed 

enumeration approach would result in 

health plans enumerating their 

organizations in different ways and this 

lack of consistency across health plans 

would impact the industry. 

Response: We do not believe 

additional guidance on enumeration is 

needed at this time. This final rule seeks 

in large part to substitute the use of 

proprietary and other non-standard 

identifiers with a unique standard 

health plan identifier in HIPAA 

standard transactions. Covered entities 

nevertheless retain certain flexibility to 

use identifiers in ways that best serve 

their own business needs, even within 

standard transactions. As health plans 

are enumerated, HHS will monitor the 

industry and assess whether any 

clarification or guidance is necessary. 

More likely, the industry will quickly 

identify best practices for health plan 

enumeration and HHS will seek to 

facilitate the dissemination of this 

information. 

Comment: Commenters urged HHS to 

require a greater level of health plan 

enumeration granularity. For example, 

some commenters suggested that a 

patient-specific benefit plan ID is 

needed. They stated that an identifier 

should include this information because 

from the perspective of patients, 

physicians, and other health care 

providers, the patient-specific benefit 

plan information is routinely necessary 

prior to the patient encounter. They also 

stated that while the current set of 

adopted operating rules will ensure 

additional information is available, they 

will not provide all the information 

associated with the patient-specific 

benefit plan the commenters believe is 

needed. They suggested that the need 

for a patient-specific benefit plan ID will 

only increase as the number of people 

purchasing coverage directly from 

Exchanges grows. According to these 

commenters, this information is needed 

at the point of service, on the eligibility 

response, and on the electronic 

remittance advice (ERA). Currently this 

information is only required to be 

provided on the ERA in text, which 

makes automation difficult. These 

commenters suggested that having 

specific benefit plan information 

associated with the HPID would 

improve automation. 

Response: Given our gradual 

approach to standardization, a patientspecific benefit plan identifier is a more 

specific requirement than we believe 

would be appropriate to impose at this 

early stage. As other commenters have 

suggested, a more granular level of 

enumeration has the potential to cause 

ongoing administrative burden and 

would need to be continually updated 

by both the health plans and the 

providers to ensure accuracy. We 

understand that this first step of 

standardization for the identification of 

health plans is not going to achieve as 

much transparency initially as some 

commenters state is needed in the 

transactions. After experience with the 

implementation and use of the HPID, we 

will work with industry to explore next 

steps of enumeration that may include 

patient-specific benefit plan 

information. We also want to caution 

that we do not believe a standard 

identifier alone will be the final solution 

to all of the transparency challenges in 

standard transactions. The health plan 

identifier is foundational and will allow 

the gradual move towards greater utility. 

Comment: Some commenters 

emphasized the need to enumerate each 

SHP because there are situations where 

the specific benefit package of that 

health plan under which services were 

performed needs to be identified, such 

as with coordination of benefit 

transactions or laboratory services. 

Response: For this phase of 

implementation of HPID, we determined 

that it would not be necessary to require 

each SHP to obtain an HPID because 

health plans are essentially transitioning 

their multiple proprietary identifiers to 

HPIDs. We are not changing what is 

required to be identified in the standard 

transaction so if there are situations 

where the SHP may need to be 

identified, such as with laboratory 

services or coordination of benefit 

transactions, it will be up to the CHP 

within the limitations of this rule to 

determine how that SHP is identified in 

the standard transaction to ensure 

continuous flow of the transactions. We 

believe that at this stage of transition, it 

is wise to allow CHPs to make these 

decisions based on their business needs 

and structures. 

In a previous response, we provided 

clarification about the affirmative 

obligation in 45 CFR 162.510 for 

covered entities to use an HPID to 

identify a health plan in standard 

transactions, when a SHP may not have 

its own HPID, and we believe the 

discussion is applicable to this 

comment. As we explained previously, 

in those cases, covered entities would 

use the HPID that the SHP indicates 

should be used to identify that SHP, 

which may be the HPID of its 

controlling health plan. If an entity has 

in good faith sought to identify the HPID 

that should be used for a SHP that has 

no HPID and has been unsuccessful, 

then it obviously cannot use an HPID to 

identify that SHP. While we anticipate 

those circumstances would be rare, we 

have inserted ‘‘that has an HPID’’ 

immediately after ‘‘health plan’’ in 

§ 162.510(a) and (b). We consider a 

health plan as ‘‘having an HPID’’ if that 

health plan communicates with its 

trading partners that it consistently uses 

a particular HPID, even if the HPID it 

uses is associated with another health 

plan, such as its controlling health plan. 

Comment: It was also suggested by 

commenters that there be a national 

standard fee schedule identifier that is 

separate from the HPID. A payerassigned fee schedule identifier and a 

mandate that each entity that serves as 

a contracting agent issue a unique fee 

schedule identifier in conformance with 

that standard for each separate fee 

schedule would allow physicians and 

other health care providers to 

automatically post and reconcile claims 

payments from multiple payers for 

multiple products. 

Response: For this rule, we decided to 

take a gradual approach towards 

standardization of the health plan 

identifier and not attempt to address all 

information needs that industry wants 

from the standard transactions with a 

health plan identifier. We understand 

that other types of identifiers, such as a 

payer-assigned fee schedule identifier 

may be useful in the future to move 

towards a system where health care 

providers can automatically post and 

reconcile payments. For some of the 

suggested identifiers, we may not have 

the necessary legal authority to adopt 

them, and regardless, we believe this 

final rule provides a foundation that can 

be built upon in the future. 

Comment: We received numerous 

comments on enumeration of selfinsured group health plans. Some 

commenters supported the requirement 

because self-insured group health plans 

may need to be identified as the 

financially responsible entity in the 

standard transactions. A majority of 

commenters recommended that only 

self-insured group health plans that are 

conducting the standard transactions 

directly should be required to be 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54673 

enumerated since few self-insured 

group health plans directly conduct 

transactions. These commenters 

recommended that if business needs are 

identified that require the identification 

of a self-insured group health plan, 

changes to the standards or operating 

rules should be considered to address 

these issues. 

Response: The definition of health 

plan at 45 CFR 160.103 specifically 

includes the self-insured group health 

plans. While self-insured group health 

plans will be required to obtain an HPID 

to the extent they meet the definition of 

a CHP, the HPID of a self-insured group 

health plan will only need to be used by 

covered entities if that self-insured 

group health plan is identified in the 

standard transactions. While many 

commenters recommended that a selfinsured group health plan only be 

required to obtain an HPID if it needs to 

be identified in the standard 

transactions, we believe it is important 

that the requirement to obtain an HPID 

extend to any entity that meets the 

definition of CHP. Therefore, we require 

self-insured group health plans to obtain 

an HPID to the extent they meet the 

definition of CHP. 

Comment: Some commenters also 

discussed operational challenges that 

health plans functioning as TPAs would 

encounter because of the requirement 

that self-insured group health plans 

obtain an HPID. These commenters 

stated that self-insured group health 

plans would need to enumerate on 

behalf of their plan sponsors so that 

they can be identified in the standard 

transactions. 

Response: We are not requiring that 

the HPID of the self-insured group 

health plan be used to identify that selfinsured group health plan, if the 

transaction standard does not require it. 

For example, if a covered entity is 

identifying the self-insured group health 

plan in the standard transaction, then 

the covered entity must use the HPID of 

the self-insured group health plan. If, 

however, the covered entity was not 

identifying the self-insured group health 

plan prior to this final rule, because, for 

example, it was identifying either 

another health plan or an entity such as 

a TPA, then the covered entity would 

not be required to identify a self-insured 

group health plan. This rule does not 

require that a self-insured group health 

plan be identified in the standard 

transactions. 

Comment: Commenters also requested 

clarification about what identifier a 

health plan should use in the standard 

transaction if it is functioning as a third 

party administrator. 

Response: The primary purposes of 

this rule include adopting a unique 

health plan identifier and establishing 

the enumeration system for the HPID. 

While we recognize that health plans 

have various business structures and 

arrangements, health plans need to be 

identified with a unique identifier using 

a standardized format. HPIDs will 

therefore need to be used in standard 

transactions to identify health plans in 

accordance with the requirements of the 

implementation guides for the relevant 

transaction standards. We would also 

note that because health plans are 

eligible to obtain an HPID, they are 

ineligible to receive an OEID. 

Comment: A number of commenters 

requested additional guidance on 

enumeration for various business 

arrangements. A commenter specifically 

requested additional guidance on 

situations where the holding 

companies/controlling entities for 

multiple affiliated health plans do not 

meet the definition of health plan and 

consider allowing affiliated CHPs to 

share a single HPID in certain clearly 

defined circumstances. 

Response: While each CHP is required 

to obtain an HPID, these comments 

suggest it may be helpful and more 

efficient for affiliated CHPs to share an 

HPID in limited circumstances in the 

standard transactions based on their 

unique organizational structures and 

business arrangements. We appreciate 

these comments and will provide 

further guidance in the near future. We 

would note that the regulation text 

broadly states that a covered entity must 

use an HPID to identify a health plan 

that has an HPID. 

Under this latter requirement, we 

envision that a health plan would be 

considered to ‘‘have an HPID’’ if it 

communicates to its trading partners 

that it should be identified with a 

particular HPID of an entity with which 

it is associated, such as its CHP. A CHP 

for instance could direct its SHPs to use 

its own HPID for all HIPAA covered 

transactions. Presuming that the SHPs 

have communicated with their trading 

partners that they use their CHP’s HPID, 

the SHPs would be considered to ‘‘have 

an HPID’’ which the trading partners 

must use to identify the SHPs. 

Comment: A few commenters stated 

that they already have health plan 

identifiers that are identical in format 

and are consistent with ISO 7812, like 

the HPID and OEID. These identifiers 

had been assigned by a private firm. 

These commenters recommended that 

these existing identifiers be 

incorporated in the Enumeration System 

so they do not have to reissue health 

insurance cards. 

Response: We regret that entities may 

have already obtained identifiers from 

other parties that were not issued 

through the Enumeration System. 

However, this final rule requires that 

HPIDs only be obtained from the 

Enumeration System. This requirement 

ensures that HHS oversees the issuance 

of all HPIDs, that the HPIDs meet the 

requirements in this rule, and that 

necessary information about the health 

plan is available in the Enumeration 

System database. To grandfather in 

existing numbers could cause confusion 

among industry, a lack of integrity in 

the database, and disproportionate 

burden on health plans that do not have 

a current number that can be 

grandfathered in. While health plans are 

permitted to put the HPID on health 

insurance cards, we do not require it so 

the determination to reissue cards lies 

with the health plans. 

Comment: One commenter requested 

that expatriate health plans, which they 

defined as plans whose principal 

purpose is covering those lives outside 

their country of citizenship and their 

dependents, be exempted from 

complying with the HPID requirements. 

This commenter alleged that 

compliance would be an added burden 

on U.S.-based insurers of expatriate 

plans and would competitively 

disadvantage them vis-a`-vis their nonU.S. competitors. 

Response: As discussed previously, 

this rule adopts the HPID as the 

standard unique health plan identifier 

for all health plans covered by HIPAA. 

Section 162.504 provides that all health 

plans that are not small health plans 

have until 2 years after the effective date 

of this rule and small health plans have 

until 3 years after the effective date of 

this rule to obtain an HPID and comply 

with the other provisions of § 162.512. 

To fully implement the HPID, all 

covered entities have until 4 years after 

the effective date of this rule to use an 

HPID to identify a health plan that has 

an HPID in standard transactions and 

comply with the other provisions of 

§ 162.510. (For more information 

regarding the HPID compliance dates, 

see section II.E. of this final rule.) We 

believe that these dates provide covered 

entities, including ‘‘expatriate plans’’ 

that are health plans covered by HIPAA, 

sufficient time to meet the requirements 

of this rule. Moreover, we note that if a 

category of health plans were exempted 

from obtaining an HPID, other covered 

entities needing to identify those health 

plans would be adversely affected when 

attempting to conduct standard 

transactions with such exempted 

entities. Furthermore, neither HIPAA 

nor the Affordable Care Act authorizes 

mstockstill on DSK4VPTVN1PROD with RULES2

54674 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

HHS to exempt health plans from 

complying with these adopted 

regulations simply because those health 

plans also conduct certain financial and 

administrative transactions 

electronically outside of the United 

States or are also covering individuals 

that are not U.S. citizens. 

c. Changes to a Health Plan’s HPID in 

the Enumeration System 

In the April 2012 proposed rule, we 

proposed to require each health plan to 

disclose its HPID, upon request, to any 

entity that needs the HPID to identify 

that health plan in a standard 

transaction. We proposed to require 

each health plan to communicate 

changes (updates, corrections, etc.) to its 

own data to the Enumeration System 

within 30 days of the date of the change. 

We proposed that a SHP would 

ultimately be responsible for submitting 

updates for its own data in the 

Enumeration System regardless of 

whether it obtained its HPID 

independently or the CHP obtained the 

HPID on its behalf. 

Comment: We received comments 

about CHP and SHP responsibilities for 

obtaining HPIDs and maintaining 

information related to the HPID in the 

Enumeration System. Some commenters 

suggested that HHS should clarify the 

respective obligations of CHPs and SHPs 

and that there should be a clear and 

defined responsible party for both the 

HPID application process and the HPID 

maintenance process to avoid the need 

for coordination. For instance, these 

commenters suggested that a CHP have 

responsibility for application and 

maintenance of HPIDs for itself and its 

SHPs. These commenters believe this 

would prevent duplicate numbers that 

could cause confusion and costly 

manual intervention in the claims 

process. Some commenters 

recommended that rather than have the 

SHP be responsible for updating its own 

information in the Enumeration System, 

the responsibility for updating 

information associated with an HPID 

should be left to the CHP and SHP to 

determine based on their business 

practices. 

Response: We allow a CHP or SHP to 

obtain the HPID for a SHP because we 

recognize there are different 

arrangements that impact what entity 

may control the business actions, 

activities, or policies of an organization. 

For example, a CHP may dictate or 

manage the data and information 

systems for all of its SHPs and choose 

to obtain HPIDs on behalf of their SHPs 

to ensure coordination. On the other 

hand, a CHP may instruct its SHPs to 

obtain HPIDs. While we wanted to 

ensure flexibility during the application 

process, we also wanted to be sure that 

the responsibility to update the 

information rested with one entity and 

was clearly delineated. We believe that 

the simplest way to ensure the integrity 

of the data is that each entity be 

responsible for updating the information 

linked to its HPID. We anticipate that 

entities may delegate the update 

responsibility to other entities, although 

the health plan identified by an HPID 

still retains the responsibility to update 

its required data elements in the 

Enumeration System. 

Comment: A few commenters 

recommended that changes to 

information associated with an 

identifier should be required within 5 

days of the change, rather than the 

proposed 30 days. Another commenter 

recommended that an enumerated entity 

provide a minimum of 60 days’ notice 

prior to the effective date of any change 

that would impact the HPID and OEID 

under which that entity is enumerated, 

which would be sufficient time to allow 

providers and their vendors or 

clearinghouses to make adjustments in 

their systems to avoid transaction 

rejections or failures. 

Response: We have considered the 

comments about notification of changes 

and believe that entities should be given 

up to 30 days to make changes during 

this initial implementation stage. We 

recognize the operational challenges 

often associated with organizational 

changes or restructuring, and believe 

that 30 days strikes a good balance 

between the need to update the 

information in the Enumeration System 

and the entity’s competing operational 

responsibilities. With that said, we 

encourage entities to make any 

necessary changes in a shorter 

timeframe when possible. 

After consideration of the public 

comments, we are finalizing the policy 

regarding health plan requirements 

without modification. 

4. HPID Standard Format 

a. Introduction 

Per the NCVHS recommendations, 

which were based on stakeholder 

testimony from a wide range of potential 

HPID users, in the April 2012 proposed 

rule, we proposed to adopt an HPID that 

is a 10-digit, all-numeric identifier with 

a Luhn check-digit as the 10th digit. The 

Luhn check-digit is an algorithm used 

most often on credit cards as a check 

sum to validate that the card number 

issued is correct. We sought public and 

stakeholder comments on the feasibility 

and utility of this format for the HPID. 

b. The International Organization for 

Standardization (ISO) Standard 

The International Organization for 

Standardization (ISO) is the world’s 

largest developer and publisher of 

international standards. National 

standards institutes from 160 nations 

comprise the ISO. The ISO has 

published more than 16,500 standards 

for numerous industries such as 

agriculture, electrical engineering, and 

other information technology industries. 

For more information on the ISO, refer 

to the Web site at http://www.iso.org. 

Based on stakeholder testimony, the 

NCVHS recommendations, and our 

review, we proposed that the ISO 7812 

standard format, ISO/IEC 7812–1:2006 

and ISO/IEC 7812–2:2007, which 

consists of a 10-digit, all-numeric 

identifier with a Luhn check-digit as the 

10th digit, be adopted as the standard 

for the HPID. We proposed that the 

HPID format will essentially be an 

intelligence-free identifier, except that 

the start digit of the identifier would 

signal that the identifier is assigned to 

a health plan, as opposed to an ‘‘other 

entity’’ or a health care provider, which 

each have a different start digit. In the 

proposed rule, we explained that the 

number of digits of the HPID will not 

exceed the number permitted for 

identifiers in the relevant data fields of 

the standard transactions. 

Comment: We received many 

comments regarding the proposed HPID 

format. The majority of the commenters 

supported the proposed format. A few 

commenters offered additional 

suggestions and questions, many of 

which were technical. One commenter 

responded to the following language in 

the proposed rule: ‘‘that if additional 

capacity for HPIDs were needed in the 

future, the relevant data fields would 

permit additional numeric digits to be 

added at that time.’’ (77 FR 22962). The 

commenter suggested that HHS adopt a 

format that would exceed capacity but 

was concerned that HHS would then 

expand the number of digits in the 

format identifier past 10 digits to 

increase capacity. Increasing the 

number of digits in the identifier though 

would not meet the Luhn check digit. 

This commenter emphasized that HHS 

should adopt a format with ample 

capacity in order to avoid the need to 

perform additional programming and 

testing of systems in the future. 

Response: In the proposed rule, we 

did not intend to suggest that we would 

be increasing the length of the identifier 

when we stated we would add 

additional numeric digits. Instead, we 

meant that we would increase capacity 

by introducing a new start digit that still 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54675 

3 Individual is defined at 45 CFR 160.103 as ‘‘the 

person who is the subject of protected health 

information.’’ 

met the Luhn check digit logic; 

therefore, we believe that this 

commenter’s concern has been 

adequately addressed. 

Comment: A commenter supported 

the rule’s proposal to adopt the ISO 

Standard 7812 format for the HPID and 

OEID, similar to the NPI. The 

commenter suggested that it may be 

helpful to provide more information 

about the ISO Standard 7812. For 

instance, information that the full 

identifier number under the ISO 7812 

Standard is a composite of the ISO 

80840 Issuer Identification Number 

(IIN), a number assigned by the holder 

of the IIN, and the Luhn modulus ¥10 

check digit. The commenter stated this 

information is clearly provided in the 

NPI final rule. 

Response: We appreciate the 

comment regarding the importance of 

providing information about the ISO 

7812 Standard. For those readers 

interested in more background on the 

ISO 7812 Standard, we recommend that 

they refer to the discussion in the NPI 

final rule (69 FR 3442). 

After consideration of the public 

comments received, we are finalizing 

the policy to adopt an HPID that is a 10- 

digit, all-numeric identifier with a Luhn 

check-digit as the 10th digit without 

modification. 

B. Adoption of the Other Entity 

Identifier (OEID) 

In addition to proposing the adoption 

of an identifier for health plans, in the 

April 2012 proposed rule we proposed 

to adopt a data element that will serve 

as the OEID, which would be an 

identifier for other entities for use in 

standard transactions. We proposed that 

the OEID would be optional—other 

entities could choose to obtain one or 

not. 

Health plans often use the services of 

other entities to conduct certain 

financial and administrative 

transactions on their behalf. Rental 

networks, benefit managers, third party 

administrators, health care 

clearinghouses, repricers, and other 

third parties often perform functions 

similar to, or on behalf of, health plans. 

In many cases, these other entities are 

identified in standard transactions in 

the same fields and using the same type 

of identifiers as health plans. The 

NCVHS recommended that HHS 

consider allowing these entities to 

obtain HPIDs as they may be the actual 

recipients of eligibility queries or claims 

on behalf of the health insurance issuer 

or the entity ultimately responsible for 

payment. The NCVHS recommended 

that HHS consider making these entities 

eligible to obtain an HPID when there is 

a clear case for them to be enumerated. 

Based on the NCVHS recommendation, 

we found that a clear case does exist for 

these other entities to be enumerated. 

We proposed that the OEID would 

serve as an identifier for entities that are 

not health plans, health care providers, 

or individuals,3 yet need to be identified 

in standard transactions. We proposed 

that these other entities would not be 

required to obtain an OEID, but that 

they could obtain one from the 

Enumeration System and use it where 

they need to be identified in covered 

transactions. We proposed that the OEID 

could also be used for any other lawful 

purpose. If they obtained an OEID, other 

entities would be expected to disclose it 

upon request to entities that need to 

identify the other entities in covered 

transactions. 

Offering the OEID as an adopted data 

element to identify other entities that 

need to be identified in covered 

transactions should reduce costs and 

improve efficiency for covered entities. 

Because other entities are identified in 

the transaction standards in a similar 

manner as health plans, we believe that 

establishing a data element to serve as 

an identifier for these entities will 

increase efficiency by encouraging the 

use of a uniform identifier and promote 

compliant use of the HPID for health 

plans. Like the standard for HPID we 

proposed to adopt, the OEID would also 

follow ISO standard 7812, and be a 10- 

digit, all-numeric identifier with a Luhn 

check-digit as the 10th digit. 

Consequently, entities would not need 

to significantly modify their information 

technology systems to accommodate the 

OEID since they would follow the same 

ISO standard as the HPID. 

We solicited industry and stakeholder 

comments on the enumeration of other 

entities and adoption of the OEID for 

use in the standard transactions. 

We received many comments on our 

proposal to adopt the OEID for use in 

the standard transactions. 

Comment: Commenters requested that 

we provide greater clarification about 

the definition of an OEID as it relates to 

the eligibility to obtain an OEID. For 

example, a few commenters questioned 

whether or not a non-individual health 

care provider qualifies for an OEID and 

whether non-covered entities, such as 

auto liability and workers compensation 

carriers, are able to obtain OEIDs. A few 

other commenters suggested that the 

definition of OEID be further limited to 

entities that perform functions of a 

health plan and should not include 

healthcare clearinghouses because they 

state the only place the health care 

clearinghouse could be identified 

independently in the existing 

transactions is on the ISA envelope. 

Response: The intent of the proposal 

for an OEID is to provide a mechanism 

that facilitates standardization to 

provide greater transparency in 

electronic transactions. Thus, we have 

proposed that the definition and 

eligibility for the OEID include a wide 

variety of entities, and have provided 

few limits on the types of entities that 

can obtain OEIDs. One limit is that it 

cannot be an individual. Another limit 

is that the entity cannot be eligible to 

obtain either an HPID or an NPI. The 

reason is to avoid having multiple and 

differing types of identifiers for the 

same entity. Therefore, if the nonindividual health care provider is 

eligible for an NPI, it would not be 

eligible to obtain an OEID. On the other 

hand, HIPAA non-covered entities, such 

as auto liability and workers 

compensation carriers, would be eligible 

to obtain an OEID as long as they need 

to be identified in a HIPAA covered 

transaction. They are entities that are 

not individuals and not eligible to 

obtain an HPID or NPI. We included 

clearinghouses as an example in the 

proposed rule as our goal was to keep 

the definition broad so that use and 

requirements for the OEID in the 

standard transactions could be further 

developed in the future. 

Comment: A few commenters 

requested clarification about whether 

specific entities are eligible to obtain an 

OEID, specifically atypical providers, 

accountable care organizations (ACOs), 

and clearinghouses. Some commenters 

recommended that we state clearly 

whether atypical providers are eligible 

to obtain an OEID. A few of these 

commenters stated that if atypical 

providers obtained OEIDs, they should 

be required to disclose them and use 

them to identify themselves in all 

standard transactions. A commenter 

stated that the OEID should be available 

to any entity that performs the functions 

of a payer but acts as an independent 

third party. 

Response: We appreciate the 

comments about atypical providers. 

Atypical providers are individuals or 

organizations that furnish atypical or 

nontraditional services that are 

indirectly health-care related, such as 

taxi, home, and vehicle modification, 

insect control, habilitation, and respite 

services. We encourage entities to 

review the definition of health care 

provider in § 160.103 and the discussion 

of atypical providers in the NPI final 

rule (69 FR 3437) in determining their 

mstockstill on DSK4VPTVN1PROD with RULES2

54676 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

eligibility to obtain an OEID. We 

decided to place few requirements on 

entities that obtain an OEID, because we 

wanted to allow industry business 

needs to drive industry use of the OEID, 

presumably through contractual 

arrangements. 

A determination of eligibility for an 

OEID will be specific for each entity 

based on individual factors. 

Comment: A commenter cautioned 

that if atypical providers are eligible to 

obtain OEIDs, the Health Care Provider 

Taxonomy code should not be included 

as a data field in the OEID application. 

These commenters stated that if all 

atypical non-individual providers 

qualify for an OEID and taxonomy 

code(s) are included in the data 

elements for the OEID application, it 

will require adding new taxonomy 

codes for this purpose, which will 

create a potential problem due to the 

structure of the code set. 

Response: We are still developing the 

required data elements but do not 

anticipate using this taxonomy code. 

Comment: A number of commenters 

requested that we provide clarification 

on the use of the OEID in the standard 

transactions. A commenter requested 

clarification on whether the OEID could 

be used in the provider identifier field, 

in some instances. 

Response: We will provide further 

examples of potential ways the OEID 

can be used in the standard transactions 

outside of this final rule. In the 

meantime, we encourage those 

commenters and others to review the 

directions within the relevant 

implementation guides to determine the 

appropriateness of using an OEID in 

particular data fields. 

Comment: Some commenters 

requested that the Department work 

with the appropriate standard 

development organizations to determine 

where the OEID should be included in 

the standard transactions. They 

emphasized that it is important to 

specify that the OEID should be used in 

all places in the standard transactions 

where the HPID can be used to avoid 

confusion and inconsistency. Other 

commenters suggested that there should 

be a pilot test of the OEID to determine 

if and what changes are needed to the 

standard transactions and the operating 

rules to clarify OEID use and 

requirements. 

Response: We appreciate the 

commenters’ interest in the 

development and use of the OEID. Our 

intent was to create a standard identifier 

and allow business needs and 

efficiencies to drive its adoption and 

uses. At this initial stage of 

implementation, we do not believe it is 

necessary yet to work with standards 

organizations to address this question or 

conduct independent pilot tests. 

Comment: We received many 

comments regarding our proposal that 

the OEID be voluntary. Some 

commenters supported that the OEID be 

voluntary, while others advocated that 

the OEID should be mandatory. 

Supporters of a voluntary OEID believed 

that business needs will drive the use of 

the OEID and industry can refine OEID 

requirements as experience with the 

OEID is gained. In addition, some 

commenters believed that if the OEID 

were required it may result in entities 

that have no current business need to 

use an OEID nevertheless obtaining an 

OEID. Those commenters in support of 

the OEID being mandated advocated 

that the OEID requirements match the 

HPID requirements to limit system 

requirement variability. They believed 

that this approach promotes 

administrative simplification and 

encourages a greater return on 

investment. They suggested that a 

voluntary OEID would result in 

additional changes to existing 

connections as some entities replace 

their current identifiers and thus would 

introduce another level of complexity. 

They added that a voluntary 

enumeration system would add just 

another identifier option for other 

entities to use in the standard 

transactions and would not necessarily 

lead to standardization. One commenter 

even suggested that the Tax 

Identification Number be required 

rather than create a new identifier. 

Response: We created the OEID based 

on industry input and NCVHS 

recommendations that it would be 

helpful to have a standard identifier for 

entities that need to be identified in the 

standard transactions but that do not 

meet the definition of a health plan. The 

value of the OEID would be to create 

greater standardization in the 

transaction so that all parties that 

needed to be identified in the 

transactions would have a standard 

identifier that would be listed in a 

publicly available searchable database. 

Because of the diversity of entity types 

that may need an OEID and potential 

new uses for the OEID, we believe it 

would be helpful to begin with a 

voluntary approach that allows for 

gradual implementation and improvised 

use based on industry needs and 

practices. We recognize this approach 

may have certain risks associated with 

it, but we believe the risk of harm to the 

industry is relatively low and the 

potential benefit quite high. 

Comment: A commenter suggested 

that the Secretary should require all 

covered entities to require any trading 

partner that would qualify for an OEID 

to be enumerated by contract, trading 

partner agreement, or business associate 

agreement to require that the identifier 

be used according to the transaction 

standards. 

Response: We reiterate that covered 

entities could require their trading 

partners and business associates to 

obtain and use an OEID, and we believe 

that entities will take advantage of that 

approach if it is appropriate for them. 

Comment: A few commenters 

suggested that other entities be able to 

obtain more than a single OEID for use 

in the standard transactions. 

Response: At this point, we believe 

this proposed approach has the 

potential to lead to significant confusion 

while undermining the goal of having 

one unique number tied to each entity. 

After consideration of the public 

comments received, we are finalizing 

the OEID requirements without 

modification. 

C. Assignment of the HPID and OEID— 

The Enumeration System 

We proposed in 45 CFR 162.508, that 

the Enumeration System would assign 

unique HPIDs and OEIDs to eligible 

health plans and eligible other entities, 

respectively. Once operational, the 

Enumeration System will be a 

comprehensive system for uniquely 

identifying and enumerating all eligible 

health plans and other entities. It will 

collect and maintain certain identifying 

and administrative information about 

CHPs, SHPs, and other entities. The 

Enumeration System will also 

disseminate information through a 

publicly available searchable database 

or through downloadable files. 

HPIDs and OEIDs will be assigned by 

the Enumeration System through an 

online application process. A health 

plan or other entity, when applying 

online for an HPID or OEID, will be 

required to provide certain identifying 

and administrative information for 

verification and eligibility 

determinations during the application 

process. For assistance, a help desk or 

other applicant assistance functions will 

be available to assist with and 

troubleshoot the online application 

process. 

We proposed that the Enumeration 

System would also be able to deactivate 

or reactivate an HPID or OEID based on 

receipt of sufficient information to 

justify deactivation or reactivation. 

Deactivation of an HPID may occur in 

the event of fraudulent or unlawful use 

of the HPID by the health plan itself or 

another entity, the change of ownership 

of a health plan, or the restructuring of 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54677 

a health plan’s data processing systems 

such that the SHP determines that its 

HPID would no longer be needed. 

Deactivation of an OEID may also occur 

for the fraudulent or unlawful use of an 

OEID by itself or another entity, the 

change of ownership of the other entity, 

or if the other entity no longer exists. 

Reactivation of an HPID or OEID could 

occur, for example, if there were a 

change of ownership of a health plan or 

other entity, or for health plans if there 

were a restructuring of a health plan’s 

data processing systems and a SHP 

determines that it again needs its HPID. 

With that said, upon further 

reviewing the proposed regulation text 

in the April 2012 proposed rule, we 

noticed that while we had discussed 

having the Enumeration System be able 

to reactivate a deactivated OEID or HPID 

in the preamble of the April 2012 

proposed rule, we unintentionally 

omitted ‘‘or OEID’’ in the proposed 

§ 162.508(c) that would have enabled 

the Enumeration System to deactivate 

an OEID, as it would an HPID. Because 

this reflects a technical drafting error 

that was obviously inconsistent with the 

preamble discussion at (77 FR 22963), 

and further, § 162.508(d) clearly 

presupposes that the Enumeration 

System would have that authority, we 

are finalizing § 162.508(c) with ‘‘or 

OEID’’ inserted. 

We solicited stakeholder comment on 

our proposals regarding the 

enumeration system and process. 

Comment: We received numerous 

comments on the type of information to 

be collected in the Enumeration System. 

Some commenters recommended that 

HHS collect only ‘‘minimally 

necessary’’ information that does not 

include confidential business 

information in order to decrease burden. 

These commenters recommended 

collecting data elements, such, as name 

of health plan, tax identification 

number, address, EDI contact phone 

number, email address, other legacy 

identifiers, and the BIN/IIN or PCN 

number associated with that health 

plan. Other commenters suggested 

collecting a robust amount of 

information in the Enumeration System. 

These commenters suggested collecting 

routing and demographic information. 

For example, all demographic 

information related to that health plan 

and all information necessary to enroll 

with the health plan to send and receive 

standard transactions as well as transmit 

standard transactions to the correct 

destination. In addition, they 

recommended that the database include 

information to identify the health plan 

type, the health plan’s relationship with 

any other entity serving in a health plan 

role, and if the health plan utilizes a 

different network of physicians through 

a rental network of the physician 

network by region. These commenters 

also suggested that specific routing 

information for each standard 

transaction for each mode of transaction 

(that is, nearly real-time batch) be 

included in the database. Many 

commenters stated they could not 

provide detailed feedback on the design 

and information collected in the 

Enumeration System because they were 

not in the proposed rule and they would 

like the opportunity to review and 

comment on this information. 

Response: We appreciate commenters’ 

suggestions regarding the type of 

information to be collected in the 

Enumeration System. The purpose of 

the Enumeration System is to provide 

an identifier and collect only that 

amount of information that is necessary 

to uniquely identify a health plan and 

ensure that a link exists between a CHP 

and its SHPs. We have not at this point 

developed the data fields or identified 

the specific information we will need to 

collect to achieve the purpose of the 

Enumeration System. At this point, we 

believe that only minimally necessary 

information will be collected in the 

Enumeration System, based on the 

current limited purpose of the 

Enumeration System. When we develop 

the data fields, we will take into 

consideration the comments offered to 

the proposed rule and further consult 

industry. In the future, if and when the 

purpose and use of the Enumeration 

System expands, we will work with 

industry to identify other data elements 

that will need to be collected. 

Comment: A commenter requested 

specific guidance that would clarify 

when an HPID that has been issued for 

a health plan can continue to be used 

after that health plan has undergone a 

business merger or acquisition. 

Response: If a health plan wants to 

retain its HPID after a merger or 

acquisition, it should update its healthplan related data in the Enumeration 

System. If the health plan does not want 

to retain its HPID, it should deactivate 

its HPID. We anticipate that there will 

be more guidance available on 

operational questions, such as these, as 

the Enumeration System is 

implemented. 

Comment: Some commenters stressed 

the importance of the Enumeration 

System having both a look-up 

capability, similar to that for the NPI, 

and downloadable files to easily 

disseminate information about HPIDs 

and OEIDs. 

Response: We anticipate that both a 

look-up function and downloadable 

files will be available in the future. 

Comment: Some commenters asked 

when entities could apply for identifiers 

from the Enumeration System. 

Response: While we anticipate 

entities may access the system and learn 

more about the application process and 

Enumeration System on October 1, 

2012, we anticipate providing 

additional information about the 

Enumeration System in the near future. 

Comment: A few commenters 

provided other suggestions about system 

design and specific system features. For 

instance, a commenter stated that all 

user activity should be conducted 

through an ‘‘account’’ and a user is 

granted access to the system by a system 

administrator. Through the 

establishment of an ‘‘account’’ in the 

system, the user would have the ability 

to apply for identifiers, maintain 

information associated with identifiers, 

download reports, establish users who 

could access or perform activities 

related to the account, transfer control 

over an identifier to another account, 

and upload batch files. The benefit of 

this ‘‘account’’ approach is that it would 

enable an administrator to access and 

manage all identifiers for itself and 

subordinate plans and other entities. It 

would also enable the Enumeration 

System administrator to deal with fewer 

entities, reduce phone calls, and 

increase accuracy and efficiency. 

Another commenter suggested that the 

Enumeration System have a listserv 

function so entities could be notified of 

any changes in identifier information. 

Another commenter suggested that the 

database have the capability to provide 

near real-time updates and the ability to 

electronically ping databases from a 

practice management system or other 

provider administrative systems based 

on selected search criteria. 

Response: We are still in the process 

of collecting information and 

developing the Enumeration System and 

will take these comments into 

consideration in the process. 

After consideration of the public 

comments received, we are finalizing 

the Enumeration System policies 

without modification with the one 

minor exception of inserting ‘‘or OEID’’ 

in § 162.508(c). 

D. Other Considerations 

1. Pharmacy Transactions 

In the April 2012 proposed rule, we 

noted that currently, the pharmacy 

industry utilizes two unique identifiers 

to identify entities responsible for 

administering claims in retail pharmacy 

mstockstill on DSK4VPTVN1PROD with RULES2

54678 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

transactions, the Bank Identification 

Number/Issue Identification Number 

(BIN/IIN) and the Processor Control 

Number (PCN). These identifiers are 

programmed into the pharmacy’s 

software and identify the route for 

processing the transaction from the 

pharmacy to the entity responsible for 

administering the claim, which could be 

the health plan or the pharmacy benefit 

manager. A pharmacy benefit manager 

is a third party administrator for 

prescription drug programs and is 

responsible for processing and paying 

claims on behalf of the health plan or 

drug plan sponsor. The BIN/IIN is a 6- 

digit number, requested by the 

pharmacies from either the American 

National Standards Institute (ANSI) or 

the National Council for Prescription 

Drug Programs (NCPDP), for use by 

retail pharmacies to route prescription 

drug claims to the entity responsible for 

processing the transaction, usually the 

pharmacy benefit manager. The PCN is 

an identifier of up to 10 characters that 

is assigned by pharmacy benefit claim 

processors if there is a need to further 

define benefits and routing. For 

instance, the Medicare Part D 

prescription drug benefit plan 

Coordination of Benefits (COB) 

contractor has unique requirements for 

processing Medicare Part D claims. To 

accommodate those requirements, many 

administrators or processors have 

created PCNs to further differentiate the 

Medicare Part D prescription drug plan 

benefit COB business from their other 

(commercial or Medicaid) COB 

business. 

The BIN/IIN and PCN identifiers are 

included in information from pharmacy 

benefit managers and/or health plans 

that are distributed to pharmacies to 

provide details on who will be 

processing the transaction, where to 

route the transaction and what rules are 

expected to be applied during 

transaction processing. We took note of 

the NCPDP’s testimony from the July 

20120 NCVHS Subcommittee on 

Standards meeting that the use of these 

two identifiers has been very effective in 

ensuring efficient, timely prescription 

claim processing. 

We also considered testimony from 

the July 2010 NCVHS meeting that the 

HPID, BIN/IIN and PCN identifiers 

convey different information and serve 

different purposes. The BIN/IIN and 

PCN identifiers cannot provide the 

information needed about the health 

plan, nor can the information in the 

HPID provide the information inherent 

in the BIN/IIN and PCN identifiers. We 

considered the claims that if the health 

plan identifier were required to replace 

the BIN/IIN and/or PCN, such a change 

would be extremely costly to the retail 

pharmacy industry and cards would 

need to be re-issued with the HPID, with 

no direct patient or pharmacy benefit. 

There was also testimony that an 

HPID-only requirement would require a 

substantive change to the NCPDP D.0. In 

Version D.0, the Plan ID field is either 

not used or its use is optional, meaning 

its use was intentionally not defined in 

the standard. However, the use of the 

BIN and PCN fields is mandatory. 

We reviewed the September 30, 2010 

NCVHS recommendation letter to the 

Secretary, where the NCVHS observed 

that retail pharmacy transactions utilize 

the BIN/IIN and/or PCN identifier to 

facilitate their transaction processing, 

and that changing to another identifier 

would significantly affect existing data 

flows in the retail pharmacy industry 

that currently work effectively. As such, 

the pharmacy industry requested an 

exemption from the requirement to use 

only HPID in retail pharmacy 

transactions because of the current 

success with the BIN/IIN and PCN 

identifiers for routing purposes. 

We further considered the NCVHS 

recommendation that use of the HPID in 

place of the existing BIN/IIN and PCN 

identifier in retail pharmacy business 

transactions not be required, but that the 

use of HPID be required on the HIPAAnamed standard transactions for retail 

pharmacy. 

In the April 2012 proposed rule, we 

did not propose any changes to the 

NCPDP Version D.0 standard. So where 

the D.0 calls for the BIN/IIN and PCN to 

be used, this final rule has no impact or 

effect because health plans are not being 

identified in those fields. We clarified 

that we do not believe that the HPID 

should be required in place of the 

existing BIN/IIN and PCN identifier in 

retail pharmacy transactions. 

We received a few comments 

regarding the use of the HPID in 

pharmacy transactions. 

Comment: Several commenters did 

not believe the HPID should be used in 

place of the BIN/IIN and PCN in 

pharmacy transactions, but that the 

HPID be required on the HIPAA-named 

standard transactions for retail 

pharmacy. 

Response: We thank commenters for 

their comments. 

After consideration of the public 

comments received, we are finalizing 

the policy regarding the use of the HPID 

in pharmacy transactions without 

modification. 

2. Definition of Covered Health Care 

Provider 

We proposed to move the definition 

of ‘‘covered health care provider’’ from 

45 CFR 162.402 to 45 CFR 162.103 

because the term has a broader 

application beyond just Subpart D. We 

did not receive any comments on the 

proposal to move the definition of 

‘‘covered health care provider’’ from 45 

CFR 162.402 to 45 CFR 162.103, and 

therefore, we are finalizing this change 

as proposed. 

E. Effective Date and Compliance 

Requirements for the HPID 

In section 1104(c)(1) of the Affordable 

Care Act, Congress specified that ‘‘the 

Secretary shall establish a standard for 

a unique health plan identifier based on 

the input of the National Committee on 

Vital and Health Statistics.’’ Congress 

further provided that the rule shall be 

‘‘effective’’ not later than October 1, 

2012. The effective date would mark the 

beginning of the implementation period 

for the HPID, which we indicated in the 

proposed rule is the day we expect 

would be the first day health plans 

could apply to obtain an HPID and the 

first day an entity could apply to obtain 

an OEID from the Enumeration System. 

We would like to clarify that entities 

will not be able to obtain identifiers on 

that date, but that they may begin to 

access the Enumeration System and 

learn more about the application 

process. We proposed that the 

compliance date for all covered entities, 

except small health plans, to use the 

HPID in standard transactions be 2 years 

after the effective date of the final rule 

which, if the effective date is October 1, 

2012 as we proposed, would be October 

1, 2014. The compliance date for small 

health plans would be October 1, 2015. 

Neither small health plans nor other 

covered entities would be prohibited 

from using HPIDs in their transactions 

at any time before their respective 

compliance dates. 

In line with our previous 

interpretations, we have interpreted the 

‘‘effective date’’ of this rule to mean the 

date the Secretary adopts the HPID as 

the unique health plan identifier. In the 

NPI final rule, for instance, the effective 

date of the rule was the date the 

Secretary adopted a standard unique 

health identifier for health care 

providers, and the compliance date 

marked the date by which an entity had 

to obtain and use an NPI in the standard 

transactions. We consequently 

interpreted section of the 1104(c)(1) of 

the Affordable Care Act as specifying 

October 1, 2012 as the effective date of 

the final rule, the date on which the 

policies take effect and the 

implementation period for the HPID 

begins. 

We solicited comment on the effective 

and compliance dates for the HPID. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54679 

Comment: We received extensive 

comments on the compliance dates and 

implementation requirements of HPID. 

The majority of commenters 

emphasized the need for additional time 

to test and implement HPID, and 

requested that we establish a date by 

which health plans should obtain their 

HPIDs in advance of the date by which 

covered entities are required to use the 

HPID in standard transactions. These 

commenters emphasized that health 

plans must obtain their identifiers and 

communicate them to all covered 

entities well in advance of the required 

use of the HPID in the standard 

transactions. This additional time 

would allow for internal system changes 

to accommodate the HPID and for 

extensive testing among trading 

partners. Commenters explained that 

ample time to perform system changes 

and testing is critical to the successful 

implementation of the HPID by all 

covered entities. Implied in many of 

these comments was that because 

covered transactions virtually always 

involve multiple parties, a single ‘‘golive’’ date by which all covered entities 

must use the HPID should be 

established. 

Response: We have considered the 

significant operational challenges 

described by commenters that occur as 

a result of a single compliance date for 

both the health plans to obtain HPIDs 

and covered entities to use the HPIDs to 

identify health plans in the standard 

transactions. We agree that the 

successful implementation of HPID 

could be jeopardized. Therefore, in this 

final rule we are changing the approach 

to compliance with new 

implementation requirements shown in 

Chart 1. 

Comment: Commenters warned that if 

ICD–10 and the HPID have the same 

compliance date of October 1, 2014, it 

will be financially and administratively 

burdensome. In addition, commenters 

suggested that it would be difficult to 

determine the cause of any claim delays 

or problems with implementation. 

Response: We agree that 

implementation of these two initiatives 

at the same time could impose technical 

and operational problems, which would 

be difficult to diagnose and address. 

Comment: Some commenters 

suggested that there be a dual use period 

for implementation of HPID, during 

which time both legacy health plan 

identifiers and the new health plan ID 

is permitted in the transactions. These 

commenters suggested that the dual use 

period would assist industry during 

simultaneous compliance for both ICD– 

10 and HPID. A dual use period was 

allowed in the transition to NPI and this 

provided the ability to validate 

crosswalks and resolve any 

implementation issues prior to full 

transition. Finally, these commenters 

stated that a dual use period would 

allow CMS to monitor the rate of 

adoption and readiness of the industry 

through metric reporting. 

Response: While we believe that a 

period of dual usage would be helpful, 

we do not believe it necessary to 

mandate such a dual use period. The 

new HPID compliance dates will 

address many of the concerns raised by 

these commenters. The compliance date 

for HPID to be used in the standard 

transaction, which we are now referring 

to as the full implementation date, is no 

longer the same date as for ICD–10. In 

addition, in contrast to the single 

compliance date for NPI, the new 

phased-in approach for HPIDs, where 

there is lag time between when health 

plans are required to obtain an HPID 

and when covered entities are required 

to begin using HPIDs in the standard 

transactions, will allow the opportunity 

for dual use and sufficient time for a 

successful transition. The additional 

time will allow industry the opportunity 

to perform extensive testing of the HPID 

prior to full implementation. 

Comment: Commenters recommended 

that large and small health plans have 

the same full implementation date by 

which all covered entities must use the 

HPID should be established. 

Response: Based on the comments 

above regarding the compliance dates 

for HPID, the following changes have 

been made to the implementation 

requirements to ensure a smooth 

transition to the HPID. The effective 

date of this final rule is 60 days after the 

publication date of this rule. 

Compliance with the implementation 

specifications for obtaining the HPID 

will be 2 years after the effective date of 

this rule, except for small health plans, 

which will have 3 years after the 

effective date of this rule. Full 

implementation of the HPID—or the 

date by which all covered entities must 

use HPIDs to identify health plans that 

have an HPID—will be 4 years after the 

effective date of this rule. To reflect our 

intention of having a single date by 

which all covered entities must have 

fully implemented the HPID, we are 

referring to 4 years after the effective 

date of this rule) as the full 

implementation date for the HPID. We 

determined that 2 years after the time 

health plans (other than small health 

plans) are required to have obtained 

their HPIDs and 1 year after the time 

when small health plans are required to 

have obtained their HPIDs provides 

more than sufficient time for all covered 

entities to make any necessary system 

changes prior to the full implementation 

date of 4 years after the effective date of 

this rule. In Chart 1, we provide the 

actual HPID compliance and 

implementations dates based on the 

timeframes discussed in this section of 

the final rule. These dates are also 

reflected in the DATES section of this 

final rule. 

CHART 1—HPID IMPLEMENTATION

Entity type Compliance date for 

obtaining HPID 

Full implementation date— 

for using HPID in standard 

transactions 

Health Plans, except small health plans ....................................................................... November 5, 2014 ............. November 7, 2016. 

Small Health Plans ........................................................................................................ November 5, 2015 ............. November 7, 2016. 

Healthcare Clearinghouses ........................................................................................... N/A ..................................... November 7, 2016. 

Healthcare Providers ..................................................................................................... N/A ..................................... November 7, 2016. 

After consideration of the public 

comments received, we are modifying 

the compliance requirements of the 

HPID and have made changes to the 

regulation text to reflect these new 

dates. We have revised § 162.504(a) to 

reflect the new policy that all covered 

entities are required to use HPIDs in the 

standard transaction by 4 years after the 

effective date of this rule and removed 

references to compliance dates for 

covered health care providers and 

health care clearinghouses that are no 

longer necessary. 

mstockstill on DSK4VPTVN1PROD with RULES2

54680 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

III. Addition to the National Provider 

Identifier Requirements 

A. Background 

As discussed in section I of this final 

rule, the final rule adopting the NPI as 

the standard unique health identifier for 

health care providers was published on 

January 23, 2004 (69 FR 3434) (‘‘2004 

NPI final rule’’). While the 2004 NPI 

final rule requires covered health care 

providers to obtain NPIs for themselves 

and certain subparts and use them in 

standard transactions, it does not 

require a health care provider who is 

not a covered entity to obtain an NPI. 

Even if a noncovered health care 

provider chooses to obtain an NPI, the 

provider is not required to comply with 

certain NPI requirements, which means 

the provider does not have to disclose 

its NPI to entities who may need it for 

standard transactions. When a 

noncovered health care provider does 

not obtain an NPI or does not disclose 

it, certain problems arise for entities that 

need to identify that noncovered health 

care provider in standard transactions. 

We proposed an addition to the 

requirements in the NPI regulations to 

address such problems. 

The 2004 NPI final rule (69 FR 3445) 

recognized that, ‘‘[s]ituations exist in 

which a standard transaction must 

identify a health care provider that is 

not a covered entity * * *. A 

noncovered health care provider may or 

may not have applied for and received 

an NPI. In the latter case, * * * an NPI 

would not be available for use in the 

standard transaction. We encourage 

every health care provider to apply for 

an NPI, and encourage all health care 

providers to disclose their NPIs to any 

entity that needs that health care 

provider’s NPI for use in a standard 

transaction. Obtaining NPIs and 

disclosing them to entities so they can 

be used by those entities in standard 

transactions will greatly enhance the 

efficiency of health care transactions 

throughout the health care industry 

* * *. The absence of NPIs when 

required in * * * claims by the 

implementation specifications may 

delay preparation or processing of those 

claims, or both. Therefore, we strongly 

encourage health care providers that 

need to be identified in standard 

transactions to obtain NPIs and make 

them available to entities that need to 

use them in those transactions.’’ 

The 2004 NPI final rule (69 FR 3445) 

provided the following example of a 

situation when a health care provider is 

not a covered entity but its NPI is 

needed for a standard transaction: ‘‘A 

pharmacy claim that is a standard 

transaction must include the identifier 

(which, as of the compliance date, 

would be the NPI) of the prescriber. 

Therefore, the pharmacy needs to know 

the NPI of the prescriber in order to 

submit the pharmacy claim. The 

prescriber may be a physician or other 

practitioner who does not conduct 

standard transactions. The prescriber is 

encouraged to obtain an NPI so it can be 

furnished to the pharmacy for the 

pharmacy to use on the standard 

pharmacy claim.’’ 

Within just a few months after 

implementation of the 2004 NPI final 

rule, this issue had been raised so 

frequently to HHS that, on September 

23, 2008, it published a Frequently 

Asked Question to address questions 

about pharmacy claims rejected by 

payers for lack of an individual 

prescriber NPI (Answer ID 9419) 

(https://questions.cms.hhs.gov/app/ 

answers/detail/a_id/9419/∼/does-thenational-provider-identifier-(npi)-finalrule-require-individual). 

Due to recurring issues, we believe 

this scenario described in the 2004 NPI 

final rule needs to be addressed. 

Pharmacies are encountering situations 

where the NPI of a prescribing health 

care provider needs to be included in 

the pharmacy claim, but the prescribing 

health care provider does not have an 

NPI or has not disclosed it. This 

situation has become particularly 

problematic in the Medicare Part D 

program, as we explain more fully later 

in this final rule. 

By way of background, every 

prescriber has at least one identifier that 

may be submitted on a pharmacy claim. 

These identifiers include the NPI, Drug 

Enforcement Administration (DEA) 

number, uniform provider identification 

number (UPIN), or State license number. 

The Medicare Part D program is an 

optional prescription drug benefit for all 

Medicare beneficiaries. Medicare Part D 

contracts with private companies, called 

plan sponsors, to administer the benefit 

through Part D drug plans. In the 

Medicare Part D program, plan sponsors 

must submit a prescription drug event 

(PDE) record to Medicare Part D every 

time a beneficiary’s prescription is filled 

under the program. Plan sponsors use 

information from the claim generated by 

the pharmacy to complete the PDE 

record, which contains summary 

information. These PDE records, which 

currently must contain a prescriber 

identifier, are necessary to support 

accurate payments to plan sponsors by 

Medicare Part D. 

The use of multiple and invalid 

prescriber identifiers in the Medicare 

Part D program has been identified as a 

concern. In a June 2010 report titled, 

‘‘Invalid Prescriber Identifiers on 

Medicare Part D Drug Claims’’ (‘‘June 

2010 report’’), the HHS Office of the 

Inspector General (OIG) reported the 

findings of its review of prescriber 

identifiers on 2007 Part D PDE records. 

The OIG reported finding 18.4 million 

PDE records that contained 527,749 

invalid identifiers, including invalid 

NPIs, DEA registration numbers, and 

UPINs. Payments by Part D drug plans 

and enrollees for prescriptions 

associated with these PDE records 

totaled $1.2 billion. Prescriber 

identifiers are valuable Part D program 

safeguards. These identifiers are the 

only data on Part D drug claims to 

represent that licensed practitioners 

have written prescriptions for Medicare 

enrollees. Although invalid prescriber 

identifiers are not an automatic 

indication of erroneous or fraudulent 

prescriptions or pharmacy claims, the 

lack of valid prescriber identifiers on 

Part D drug claims hampers Medicare’s 

program integrity efforts. 

To address these concerns raised by 

the June 2010 report, in the ‘‘Medicare 

Program; Changes to the Medicare 

Advantage and the Medicare 

Prescription Drug Benefit Programs for 

Contract Year 2013 and Other Changes’’ 

final rule (which was published in the 

April 12, 2012 Federal Register (77 FR 

22072) and is hereinafter referred to as 

the April 2012 final rule), CMS requires 

Part D sponsors to include an active and 

valid prescriber NPI on prescription 

drug event records (PDEs) that they 

submit to CMS beginning January 1, 

2013. This change will assist the Federal 

government in fighting possible 

fraudulent activity in the Part D 

program, because prescribers will be 

consistently and uniformly identified. 

This policy will not interfere with 

beneficiary access to needed 

medications because Part D sponsors 

must validate the NPI at point of sale, 

and if this is not possible, permit the 

prescription to be dispensed by paying 

the claim and obtaining the valid NPI 

afterwards (77 FR 22075). 

Pharmacies that contract with Part D 

sponsors may be involved in obtaining 

a prescriber’s NPI depending on the 

agreement between the pharmacies and 

Part D sponsors. However, Part D 

sponsors and pharmacies generally have 

no regulatory leverage or other recourse 

over prescribers who do not have NPIs 

or do not disclose them. In the latter 

case, the sponsors and pharmacies must 

resort to using provider information 

databases to determine if a prescriber 

has an NPI, or contact the prescriber if 

known. If a Part D sponsor or network 

pharmacy is unable to obtain a 

prescriber NPI for use on the claim and 

PDE, the reimbursement from Medicare 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54681 

Part D to the sponsor (or alternatively, 

from the sponsor to the pharmacy 

depending on the agreement between 

the parties), could be negatively 

affected. This final rule addresses the 

problems that are presented by 

prescribers who do not have NPIs or do 

not disclose them, by proposing an 

additional requirement in the NPI 

regulations. 

B. Provisions for a Requirement To 

Obtain and Use NPIs 

We proposed an additional 

requirement for organization covered 

health care providers that have as a 

member, employ, or contract with, an 

individual health care provider who is 

not a covered entity and is a prescriber. 

Organization health care providers are 

health care providers that are not 

individuals. Our proposal would require 

an organization to require such a 

prescriber to: (1) Obtain an NPI; and (2) 

to the extent the prescriber writes a 

prescription while acting within the 

scope of the prescriber’s relationship 

with the organization, disclose the NPI 

upon request to any entity that needs it 

to identify the prescriber in a standard 

transaction. 

Organization covered health care 

providers would be required to 

implement the requirement within 180 

days after the effective date of the final 

rule, which we proposed would be 

reflected in 45 CFR 162.404(a)(2) with 

regulation text stating that an 

organization covered health care 

provider must comply with the 

implementation specifications in 45 

CFR 162.410(b). For example, if the final 

rule was effective on October 1, 2012, 

covered organization health care 

providers would have to meet the 

requirement by April 7, 2013. 

We proposed that the requirement 

would be reflected in the regulation text 

in 45 CFR 162.410(b) by adding the 

following new language. ‘‘An 

organization covered health care 

provider that has as a member, employs, 

or contracts with an individual health 

care provider who is not a covered 

entity and is a prescriber, must require 

such health care provider to: (1) Obtain 

an NPI from the National Plan and 

Provider Enumeration System (NPPES) 

and (2) to the extent the prescriber 

writes a prescription while acting 

within the scope of the prescriber’s 

relationship with the organization, 

disclose the NPI upon request to any 

entity that needs it to identify the 

prescriber in a standard transaction.’’ 

This requirement represents a narrow 

exception to the position we took in the 

2004 NPI final rule. In the 2004 NPI 

final rule (69 FR 3440), we stated ‘‘[w]e 

do not consider individuals who are 

health care providers * * * and who 

are members or employees of an 

organization health care provider to be 

‘‘subparts’’ of those organization health 

care providers, as described earlier in 

this section. Individuals who are health 

care providers are legal entities in their 

own right. The eligibility for an ‘‘Entity 

type code 1’’ NPI of an individual who 

is a health care provider and a member 

or an employee of an organization 

health care provider is not dependent 

on a decision by the organization health 

care provider as to whether or not an 

NPI should be obtained for, or by, that 

individual. The eligibility for an ‘‘Entity 

type code 1’’ NPI of a health care 

provider who is an individual is 

separate and apart from that 

individual’s membership or 

employment by an organization health 

care provider.’’ 

We still do not consider noncovered 

health care providers that are 

prescribers to be subparts of 

organization health care providers, and 

we did not propose that they would not 

be legal entities in their own right. This 

final rule closes a gap in the NPI rule 

by virtue of the types of relationships 

that covered organization health care 

providers have with noncovered 

individual health care providers. 

The providers we intend to reach are 

prescribers who are not required to 

obtain and disclose an individual NPI 

under the current NPI regulations. To 

the best of our understanding, these 

prescribers are largely hospital-based 

providers who staff clinics and 

emergency departments, or otherwise 

provide on-site medical services, such 

as medical residents and interns, as well 

as prescribers in group practices, whose 

services are billed under a group, or 

‘‘Entity type code 2’’, NPI regardless of 

whether they have obtained an 

individual, or ‘‘Entity type code 1,’’ NPI. 

These prescribers are using the ‘‘Entity 

type code 2’’ to identify themselves on 

prescriptions, which does not identify 

them as individuals, or are using no 

identifier. 

We believe this final rule describes 

the various relationships that 

organization health care providers have 

with such prescribers, and that the 

relationship is one in which 

organizations can exercise control over 

these prescribers and require them to do 

something. For instance, a physician or 

dentist who prescribes may be a 

member of a group practice. As noted in 

the 2004 NPI final rule (69 FR 3439 and 

3440), ‘‘group health care providers are 

entities composed of one or more 

individuals (members), generally 

created to provide coverage of patients’ 

needs in terms of office hours, 

professional backup and support, or 

range of services resulting in specific 

billing or payment arrangements. For 

purposes of this rule, we consider group 

health care providers to be organization 

health care providers.’’ By virtue of the 

contractual or other relationship 

between a group and a member, a group 

can require the member to do certain 

things, such as work certain on-call 

hours. Likewise, a resident or nurse 

practitioner who performs medical 

services at a hospital can be required to 

do certain things, such as to abide by 

medical staff by-laws and hospital 

policies and procedures, as a hospital 

employee or contractor. 

This final rule does not specify how 

organization covered health care 

providers should impose the 

requirement to obtain an NPI and 

disclose it on prescribers. Organization 

covered health care providers may have 

a number of alternatives by which they 

may accomplish this, for example, 

through a written agreement, an 

employment contract, or a directive to 

abide by the organization health care 

provider’s policies and procedures. 

We proposed that the requirement for 

a prescriber to disclose his or her NPI 

would apply for prescriptions written 

pursuant to the prescriber’s relationship 

with the covered health care 

organization provider. For example, if a 

physician works for two group 

practices, A and B, group practice A 

would have to require the physician to 

disclose his or her NPI for pharmacy 

claims that are for prescriptions written 

by the prescriber for a patient of group 

practice A, and group practice B would 

be required to do the same for pharmacy 

claims for prescriptions written by the 

prescriber for a patient of that group 

practice. 

We considered expanding our 

proposal to organization covered health 

care providers that grant clinical 

privileges to individual health care 

providers who are not covered entities 

and are prescribers, so that we would be 

certain to encompass hospital residents 

and interns under our proposal (to the 

extent they are not otherwise required to 

obtain Type 1 NPIs). However, it is our 

belief such prescribers will be 

encompassed under this final rule, as 

we believe it encompass virtually all 

prescribers who are not currently 

required to obtain and disclose an 

individual NPI. Very limited exceptions 

may include, by way of example, a selfemployed physician who does not bill 

insurance plans and does not have a 

member, employee or contractual 

relationship with an organization 

covered health care provider (or has one 

mstockstill on DSK4VPTVN1PROD with RULES2

54682 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

with a noncovered organization health 

care provider), such as a psychiatrist or 

plastic surgeon who only accepts cashpaying patients. Even with respect to 

these prescribers, we hope this final rule 

highlights the importance of voluntarily 

obtaining NPIs to facilitate their 

patients’ access to prescribed items. 

We believe this final rule furthers 

several goals and purposes identified in 

the Act. First, the statutory purpose of 

the Administrative Simplification 

provisions of HIPAA (see section 261 of 

the Act (42 U.S.C. 1320d note)) is to 

improve the Medicare program under 

title XVIII of the Act, the Medicaid 

program under title XIX of such Act, 

and the efficiency and effectiveness of 

the health care system, by encouraging 

the development of a health information 

system through the establishment of 

uniform standards and requirements for 

the electronic transmission of certain 

health information and to reduce the 

clerical burden on patients, health care 

providers, and health plans. In accord 

with this statutory purpose, this final 

rule will improve the Medicare program 

by virtually ensuring the availability of 

an NPI as a prescriber identifier on 

pharmacy claims in the Part D program, 

because virtually all prescribers would 

have to obtain an NPI and disclose it to 

entities that need it for use in standard 

transactions. This, in turn, would 

support program integrity efforts 

described in the April 2012 final rule 

which requires Part D sponsors to 

submit PDEs that contain only 

individual NPIs as prescriber identifiers, 

effective January 1, 2013. 

As noted in the April 2012 final rule, 

‘‘[w]hen multiple prescriber identifiers, 

not to mention dummy or invalid 

identifiers, are used, authorities must 

take an additional step in their data 

analysis before even achieving a refined 

data set to use for further analysis to 

identify possible fraud. For example, 

having to cross-reference multiple 

databases that update on different 

schedules to be certain of the precise 

prescribers involved when multiple 

identifiers were used, would necessitate 

several additional steps of data preanalysis and also would introduce 

potential errors in correctly matching 

prescribers among databases.’’ Invalid 

identifiers are generally those that do 

not appear as current in any prescriber 

identifier registry. Dummy or default 

identifiers have never appeared in any 

prescriber identifier registry but have 

been used successfully on pharmacy 

claims in place of valid prescriber 

identifiers (for instance, when the 

prescriber’s NPI was not available), 

because they met the length and format 

requirements of a prescriber identifier. 

Dummy and default identifiers present 

additional challenges to authorities, 

since the actual prescription must be 

researched to identify the prescriber. 

Valid prescriber identifiers are 

essential to conducting claims analyses 

to identify aberrant claims prescribing 

patterns that may indicate fraudulent 

activity, such as drug diversion schemes 

or billing for prescription drugs not 

provided, which includes circumstances 

with active prescriber participation and 

those involving forged prescriptions. 

Improving the accuracy and 

dependability of the prescriber 

identifier on Part D claims and PDEs, 

improves the ability to identify fraud 

and, in turn, protects and improves the 

Medicare program. 

This final rule further improves the 

Medicare program by nearly eliminating 

the instances in which Part D sponsors’ 

reimbursement (or possibly their 

network pharmacies’ reimbursement, 

depending on the contractual 

relationship between the sponsors and 

the pharmacies) would be negatively 

impacted due to the actions of 

prescribers with whom they may have 

no business relationship. Part D 

sponsors would be expected to price 

any measurable expectation of financial 

risk, if any, due to nonreimbursement 

by CMS into their Part D bids, thus 

possibly increasing premiums and 

subsidies paid under the program. This 

final rule makes such action by Part D 

sponsors unnecessary by virtually 

ensuring the availability of prescriber 

NPIs for PDEs. 

This final rule also accords with the 

purpose of HIPAA as amended by the 

Affordable Care Act. Section 1104(a)(2) 

of the Affordable Care Act revised the 

statutory purpose of HIPAA 

Administrative Simplification by 

adding, at the end, that its purpose is to 

‘‘reduce the clerical burden on patients, 

health care providers, and health 

plans.’’ To the extent pharmacies only 

have to accept one identifier—the NPI— 

rather than four possible identifiers 

from prescribers for the majority of their 

claims, the administrative burden on all 

parties involved in the processing and 

payment of these claims is lessened. 

Pharmacies and payers should no longer 

have to cross-check provider identifier 

databases to determine if the prescriber 

has an NPI when an alternate identifier 

was used, or contact the prescriber. 

Moreover, pharmacies and prescribers 

should no longer have to respond to 

inquiries from payers regarding the 

existence of an NPI because an alternate 

prescriber identifier is used. 

The final rule is also supported by 

section 1173(a)(3) of the Act, which 

requires the transaction standards 

adopted by the Secretary to 

accommodate the needs of different 

types of health care providers. This final 

rule accommodates the needs of 

pharmacies, a type of health care 

provider, by ensuring that a prescriber 

NPI is available to them when needed 

for their claims and reducing the 

instances in which they must crossreference provider information 

databases or research a prescription. 

Similarly, section 1173(b)(1) of the Act 

states that, 

[t]he Secretary shall adopt standards 

providing for a standard unique health 

identifier for each individual, employer, 

health plan, and health care provider for use 

in the health care system. In carrying out 

[this requirement] for each health plan and 

health care provider, the Secretary shall take 

into account multiple uses for identifiers and 

multiple locations and specialty 

classifications for health care providers. 

This final rule takes into account the 

particular needs of pharmacies for an 

NPI. 

While some prescribers will have to 

apply to obtain an NPI under this 

requirement, the NPI is free of charge 

and requires only the completion of a 

three-page application form that 

primarily seeks identifying and location 

information. Thus, we believe the 

reduction in administrative burden that 

will be achieved by this final rule 

outweighs the minimal burden placed 

on prescribers who will have to obtain 

NPIs. 

The 2004 NPI final rule, as noted 

previously, foretold the issues that 

could arise if noncovered health care 

providers did not obtain NPIs, and 

therefore encouraged them to do so. The 

preamble of the 2004 NPI final rule 

stated that disclosing NPIs to entities for 

use in standard transactions will greatly 

enhance the efficiency of health care 

transactions throughout the health care 

industry, and that the absence of NPIs 

when required in those claims by the 

implementation specifications may 

delay preparation or processing of those 

claims, or both. Health care providers 

responded by obtaining NPIs in large 

numbers, even when not required to, 

and we believe the vast majority of 

prescribers already have NPIs. CMS data 

shows that approximately 90 percent of 

Medicare Part D claims as reported in 

PDEs submitted through January 2012 

contained valid prescriber NPIs even 

though alternate prescriber IDs are 

currently permitted. Less than 1 percent 

of PDEs were submitted without a valid 

identifier. Nevertheless, while the vast 

majority of Medicare Part D claims 

contain individual NPIs, 10 percent do 

not. We note that this submission rate 

increased incrementally through the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54683 

latter months of 2011, likely due to the 

issuance of the CY 2012 Part D final call 

letter on April 4, 2011, signaling that 

CMS was considering only accepting 

individual prescriber NPIs on PDEs for 

CY2013, the subsequent CMS outreach 

to sponsors and pharmacies, and the 

CMS April 12, 2012 final rule requiring 

individual prescriber NPIs be submitted 

with PDEs. This final rule, coupled with 

the CMS April 12, 2012 final rule, will 

help ensure this last 10 percent is 

addressed. 

After discussions with representatives 

of the provider data industry in the fall 

of 2011, we estimated at that time that 

there were approximately 1.4 million 

active prescribers in the United States, 

of which approximately 160,000 did not 

have an NPI. It is these prescribers who 

will have to obtain an NPI under this 

final rule. 

Comment: A national and a state 

hospital association, several health care 

provider associations, a standards 

organization and a company offering 

connectivity solutions to health care 

providers, supported our proposal. The 

state hospital association stated that it 

was aware of patients being unable to 

fill pharmacy prescriptions because the 

prescriber NPIs were not available and 

had already encouraged its members to 

obtain NPIs for interns, residents and 

other prescribers. One provider 

association specifically acknowledged 

that our proposal would improve 

coordination of patient care, increase 

anti-fraud detection capabilities, and is 

in line with the goal of modernizing and 

reforming the health system at large. 

The company agreed with our statement 

that, because there are few health care 

providers who do not already have an 

individual NPI, our proposal would 

have little impact on health care 

providers and the industry at large. 

Response: We appreciate and agree 

with these comments. We are concerned 

about any pharmacy claims being 

denied for lack of a prescriber NPI, for 

instance, because the payer requires an 

individual NPI to be submitted on the 

pharmacy claim, especially when the 

payer is not required to pay the claim 

and obtain the NPI later. We believe this 

final rule will address this issue. 

Comment: Two prescription health 

plans/pharmacy benefit managers 

supported the proposal, but encouraged 

us to go further and require all 

prescribers to obtain and disclose 

individual NPIs. Another commenter, a 

hospital association, echoed the idea 

that all prescribers be required to obtain 

and disclose individual NPIs. A third 

commenter recommended expanding 

the requirement to all individual 

referring, ordering, and rendering 

providers. In the alternative, one of the 

commenters expressed the hope that our 

rule would highlight the importance of 

health care providers voluntarily 

obtaining individual NPIs to facilitate 

their patients’ access to prescribed 

items. 

Response: We appreciate the support 

for our proposal and also hope that all 

health care providers who do not 

currently have an individual NPI will 

voluntarily obtain them and not wait to 

be directed to do so by an organization 

covered health care provider of whom 

they are a member, are employed by, or 

with whom they have a contractual 

relationship. We note that HIPAA does 

not give us direct authority over health 

care providers who are not covered 

entities. 

In addition, our proposal was 

intended to address specific problems 

that are presented by prescribers who do 

not have NPIs or do not disclose them. 

Therefore, our proposal was designed in 

consideration of our authority under 

HIPAA and narrowly tailored to address 

these specific problems. 

Comment: A commenter, expressed 

concern about the compliance burden 

placed on hospitals, stating that 

significant staff time would be required 

to mandate, track and disclose NPIs for 

all prescribers who are a member, 

employee, or contract with a hospital, 

because it would necessitate the 

maintenance of a central database that 

would have to provide 24-hour staffing 

to disclose these NPIs to retail 

pharmacies. Another commenter, urged 

us not to underestimate the impact of 

this final rule on software vendors and 

their customers, especially those in the 

hospital systems market, without 

providing any specific details about the 

concerns. However, another commenter 

agreed with our statement that 

organization covered health care 

providers may have several alternatives 

for compliance. 

Response: The proposed rule did not 

specify how organization covered health 

care providers should impose the 

requirement on individual health care 

providers who are prescribers. We tried 

to be very clear in the preamble of the 

proposed rule that organization health 

care providers may have a number of 

alternatives for doing so, for example 

through a written agreement, an 

employment contract, or a directive to 

abide by the organization health care 

provider’s policies and procedures. 

Organization covered health care 

providers may choose a proactive 

approach to ensure the requirement it 

imposes upon individual prescribers is 

followed by the prescribers. Other 

organizations may choose to take action 

upon any inquiries or complaints that a 

prescriber does not have an NPI or has 

not disclosed it on prescriptions, for 

instance. With respect to the latter, 

organization covered health care 

providers may want to also voluntarily 

impose an additional requirement on 

prescribers to proactively disclose their 

individual NPIs, so the organization 

covered health care provider receives as 

few inquiries or complaints as possible. 

In addition, we note that pharmacies 

and payers have access to prescriber NPI 

databases which are routinely consulted 

at point-of-sale, to which the additional 

NPIs that must be obtained under this 

final rule will be added. In this regard, 

we fully expect that prescribers will 

abide by an organization covered health 

care provider’s requirement to obtain an 

NPI, if they have not already done so 

voluntarily. We do not expect hospitals 

to respond to NPI inquiries on a 24-hour 

basis, but rather, to respond in a 

reasonable timeframe to what we 

believe will be infrequent inquiries 

about prescriber NPIs, or virtually no 

inquiries, if the prescribers proactively 

disclose them on the prescriptions they 

write. We note that such action by 

prescribers will assist their patients in 

obtaining the medications they have 

prescribed for them. 

With respect to hospital computer 

updates, we note that individual NPIs 

are already obtained by prescribers, who 

are members of, employed by, or 

contracted with, hospitals, and 

disclosed to pharmacies. Our proposal 

merely marginally expands the pool of 

prescribers who will be required, by 

virtue of certain relationships with 

organization covered health care 

providers, to obtain individual NPIs and 

disclose them. While some hospitals 

may desire to implement computer 

updates to prevent the use of an 

alternate prescriber identifier on a 

prescription, it is not required by this 

final rule. Thus, we do not believe 

compliance with this new requirement 

will necessarily be burdensome. 

Comment: A commenter responded to 

our specific request for comments on 

whether our proposal would reach 

residents and interns by stating that it 

would. Another commenter expressed 

concerns about our proposal’s 

applicability to residents, interns and 

medical students, stating that residents 

and interns are not in full control of 

what is ordered and are typically acting 

upon an attending physician’s directive, 

and that medical students would not 

order or prescribe without counter 

signature. This commenter suggested 

that residents obtain an NPI for use 

during their training tenure and later, a 

different one for actual practice. A third 

mstockstill on DSK4VPTVN1PROD with RULES2

54684 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

commenter requested that we require 

residents, medical students, and 

prescribers coming from abroad to 

obtain their NPIs before they leave 

training/school and before they enter 

the United States, respectively. 

Response: With respect to the 

concerns expressed about the 

applicability of our proposal to resident, 

interns, and medical students, and what 

their authority is to prescribe, our 

proposal applies to all health care 

providers who are prescribers. Thus, to 

the extent a resident, for example, is a 

prescriber under applicable state law, 

and is reached by this new NPI 

requirement by virtue of his or her 

relationship with an organization 

covered health care provider, such 

resident will have to obtain and disclose 

his or her individual NPI. While there 

is currently no NPI type that identifies 

a person as being in his or her 

residency, for purposes of data analysis, 

a physician can identify the period of 

time during which they are/were a 

resident with certainty in any outlier 

analysis. In addition, the NPI is 

intended to be a lasting identifier for the 

health care provider to which or whom 

it has been assigned. In the 2004 NPI 

final rule (69 FR 3441), we stated that, 

‘‘[f]or health care providers with an 

‘Entity type code’ of 1, the NPI will be 

a permanent identifier, assigned for life, 

unless circumstances justify 

deactivation.’’ Residents and other 

health care providers en route to this 

country should be reached by this final 

rule by virtue of their relationships with 

the organization covered health care 

providers pursuant to which they are 

prescribers. If they are not prescribers, 

they will not be reached by this final 

rule. 

Comment: A commenter suggested 

that we replace ‘‘NPI’’ in the regulation 

text with ‘‘Type 1 NPI.’’ The commenter 

also suggested that, in order to be more 

precise as to our intent, we add the 

word ‘‘proactively’’ before ‘‘disclose’’ in 

§ 162.410(b)(2) so that the regulation 

would read ‘‘To the extent the 

prescriber writes a prescription while 

acting within the scope of the 

prescriber’s relationship with the 

organization, proactively disclose the 

NPI * * *’’ 

Response: We disagree with the 

commenter about the suggestion to add 

‘‘Type 1’’ to the regulations text. Only 

individuals may obtain a Type 1 NPI, so 

adding ‘‘Type 1’’ to the regulation text 

as the commenter suggested would be 

redundant. With respect to the comment 

that urges us to add the term 

‘‘proactively’’ to the regulation, we do 

not require other covered health care 

providers to proactively disclose their 

NPIs, and we do not believe it would be 

appropriate to single out individual 

prescriber health care providers to do 

so. We did not propose such a change, 

but we do encourage organization 

covered health care providers to require 

prescribers who are members, 

employees, or with whom they have a 

contractual relationship, to proactively 

disclose their Type 1 NPIs on the 

prescriptions they write, so the 

pharmacy has it for the claim and there 

will be no need for additional follow-up 

by the pharmacy or payer. 

Comment: A commenter stated that 

there appears to be a loophole in the 

regulation text, when a provider who is 

not contracted (for example, out of 

network), but who bills a health plan, 

would not need to obtain an individual 

NPI. 

Response: We believe the commenter 

misunderstands the applicability of our 

proposal. Our proposal applies to 

organization covered health care 

providers. Health plans are not 

organization covered health care 

providers. In addition, to the extent a 

health care provider bills a health plan, 

such health care provider, if a covered 

health care provider, would be required 

to obtain an NPI under HIPAA. If the 

prescriber is not a covered health care 

provider but is, for example, a member 

of a group practice that does bill health 

plans, this final rule will reach that 

prescriber by virtue of his or her 

relationship with the group practice. 

Comment: A few commenters made a 

number of suggestions concerning data 

enhancements to the NPPES data base 

and NPI registry. 

Response: Our proposal was very 

limited. We consider these comments, 

suggesting the creation of new types of 

NPI numbers and data base 

enhancements, to be beyond the scope 

of our proposal, although we appreciate 

suggestions for future improvements. 

After consideration of the public 

comments received, we are finalizing 

these provisions as proposed 

C. Effective and Compliance Dates 

We proposed that the date by which 

an organization covered health care 

provider must comply is 180 days after 

the effective date of the final rule. In 

other words, if the final rule is effective 

60 days after the date of publication; 

then 180 days after the effective date, 

organization covered health care 

providers that have a prescriber as a 

member, employ, or contract with a 

prescriber who is not a covered entity 

must require him or her to: (1) obtain an 

NPI and; (2) to the extent the prescriber 

writes a prescription while acting 

within the scope of the prescriber’s 

relationship with the organization, 

disclose the NPI upon request to any 

entity that needs it to identify the 

prescriber in a standard transaction. 

Comment: A commenter stated that 

the NPI implementation date of October 

1, 2013 is not attainable. Other 

commenters requested that the 

compliance deadline be delayed until 1 

year after the publication of the final 

rule so that organization covered health 

care providers have sufficient time to 

implement the requirement. 

Response: We are not certain why the 

other commenter is referring to a 

compliance date of October 1, 2013. We 

proposed that the compliance date for 

the modification to the NPI rule would 

be 180 days after the effective date of 

the final rule. This final rule is effective 

on 60 days after the date of publication, 

which means that the compliance date 

is 180 days after the effective date of 

this final rule. In other words, by 180 

days after the effective date of this final 

rule, a organization covered health care 

provider that has a member, employs, or 

contracts with, an individual health care 

provider who is not a covered entity and 

is a prescriber, must require such health 

care provider to obtain an NPI from 

NPPES and, to the extent the prescriber 

writes a prescription while acting 

within the scope of the prescriber’s 

relationship with the organization, 

disclose the NPI upon request to any 

entity that needs it to identify the 

prescriber in a standard transaction. 

Comment: A few commenters 

requested that CMS align the 

compliance date of this NPI requirement 

with the compliance date in the 

Medicare Part D program requirement 

that PDEs be submitted with individual 

NPIs beginning January 1, 2013. 

Response: The Medicare Part D 

Program PDE requirement that PDEs 

must include a valid and active NPI is 

effective on January 1, 2013. In order to 

align the compliance date of the Part D 

requirement with the NPI requirement 

adopted in this final rule, CMS would 

have to delay the new requirement for 

PDEs or we would have to provide a 

compliance date for the NPI 

requirement that is substantially shorter 

than 180 days. We are not willing to 

shorten the 180-day compliance date in 

order to give covered organization 

health care providers sufficient time to 

comply with this final rule. Further, the 

CMS Medicare Part D program 

requirement is not within the scope of 

this regulation. Therefore, we cannot 

accept the commenter’s suggestion. 

After consideration of the public 

comments received, we are finalizing 

these provisions as proposed. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54685 

IV. Change to the Compliance Date for 

ICD–10–CM and ICD–10–PCS 

A. Background 

As discussed in section I. of this final 

rule, the final rule adopting ICD–10–CM 

and ICD–10–PCS (collectively, ‘‘ICD– 

10’’) as HIPAA standard medical data 

code sets was published in the Federal 

Register on January 16, 2009 (74 FR 

3328) (the ‘‘2009 ICD–10 final rule’’). 

The 2009 ICD–10 final rule requires 

covered entities to use ICD–10 

beginning October 1, 2013. 

In late 2011 and early 2012, three 

issues emerged that led the Secretary to 

reconsider the compliance date for ICD– 

10: (1) The industry transition to 

Version 5010 did not proceed as 

effectively as expected; (2) providers 

expressed concern that other statutory 

initiatives are stretching their resources; 

and (3) surveys and polls indicated a 

lack of readiness for the ICD–10 

transition. 

1. The Transition to Version 5010 and 

Its Effect on ICD–10 Readiness 

Concurrent with the publication of 

the 2009 ICD–10 final rule, HHS 

published in the Federal Register the 

Modifications final rule which set 

January 1, 2012 as the compliance date 

for Version 5010 (74 FR 3296). As the 

industry approached the January 1, 2012 

Version 5010 compliance date, a 

number of implementation problems 

emerged, some of which were 

unexpected. These included— 

• Trading partners were not ready to 

test the Version 5010 standards due to 

vendor delays in delivering and 

installing Version 5010-compliant 

software to their provider clients; 

• Version 5010 errata were issued to 

correct typographical mistakes and 

other maintenance issues were 

discovered as the industry began its 

internal testing of the standards, which 

delayed vendor delivery of compliant 

products and external testing; 

• Differences between address 

requirements in the ‘‘provider billing 

address’’ and ‘‘pay to’’ address fields 

adversely affected crossover claims 

processing; 

• Inconsistent payer interpretation of 

standard requirements at the front ends 

of systems resulted in rejection of 

claims, as well as other technical and 

standard misinterpretation issues; 

• Edits made in test mode were later 

changed when claims went into 

production without adequate notice of 

the change to claim submitters; and 

• Insufficient end to end testing with 

the full scope of edits and business rules 

in place to ensure a smooth transition to 

full production. 

Given concerns that industry would 

not be compliant with the Version 5010 

standards by the January 1, 2012 

compliance date, we announced on 

November 17, 2011 that we would not 

initiate any enforcement action against 

any covered entity that was not in 

compliance with Version 5010 until 

March 31, 2012, to enable industry 

adequate time to complete its testing 

and software installation activities. On 

March 15, 2012, this date was extended 

an additional 3 months, until June 30, 

2012. 

The 2009 ICD–10 final rule set 

October 1, 2013 as the compliance date, 

citing industry testimony presented to 

NCVHS and many of the over 3,000 

industry comments received on the 

2009 ICD–10 final rule. The analysis in 

the 2009 ICD–10 final rule with regard 

to setting a compliance date emphasized 

the interdependency between 

implementation of ICD–10 and Version 

5010, and the need to balance the 

benefits of ICD–10 with the need to 

ensure adequate time for preparation 

and testing before implementation. As 

noted in the 2009 ICD–10 final rule (74 

FR 3334), ‘‘[w]e cannot consider a 

compliance date for ICD–10 without 

considering the dependencies between 

implementing Version 5010 and ICD– 

10. We recognize that any delay in 

attaining compliance with Version 5010 

would negatively impact ICD–10 

implementation and compliance.’’ 

Based on NCVHS recommendations and 

industry feedback received on the 2009 

ICD–10 final rule (74 FR 3334), we 

determined that ‘‘24 months (2 years) is 

the minimum amount of time that the 

industry needs to achieve compliance 

with ICD–10 once Version 5010 has 

moved into external (Level 2) testing.’’ 

In the 2009 ICD–10 final rule, we 

concluded that the October 2013 date 

provided the industry adequate time to 

change and test systems given the 5010 

compliance date of January 1, 2012. 

As implementation of ICD–10 is 

predicated on the successful transition 

of industry to Version 5010, we are 

concerned that the delays encountered 

in the implementation of Version 5010 

have affected ICD–10 planning and 

transition timelines. 

2. Providers’ Concerns That Other 

Statutory Initiatives Are Stretching 

Their Resources 

Since publication of the 2009 ICD–10 

and Modifications final rules, a number 

of other statutory initiatives were 

enacted, requiring health care provider 

compliance and reporting. Providers are 

concerned about their ability to expend 

limited resources to implement and 

participate in the following initiatives 

that all have similar compliance 

timeframes. 

The EHR Incentive Program was 

established under the Health 

Information Technology for Economic 

and Clinical Health (HITECH) Act, a 

part of the American Recovery and 

Reinvestment Act of 2009 (ARRA) (Pub. 

L. 111–5). Medicare and Medicaid 

incentive payments are available to 

eligible professionals and hospitals for 

adopting EHR technology and 

demonstrating meaningful use of such 

technology. Eligible professionals and 

hospitals that fail to meaningfully use 

EHR technology could be subject to 

Medicare payment adjustments 

beginning in FY 2015. The Physician 

Quality Reporting System (PQRS) is 

currently a voluntary reporting program 

that provides incentive payments to 

eligible professionals and group 

practices that satisfactorily report data 

on quality measures for covered 

Physician Fee Schedule services 

furnished to Medicare Part B fee-forservice beneficiaries. However, eligible 

professionals and group practices who 

do not meet the reporting requirements 

will start receiving penalties in 2015. 

The Electronic Prescribing (eRx) 

Incentive Program is a reporting 

program that uses a combination of 

incentive payments and payment 

adjustments to encourage electronic 

prescribing by eligible professionals. 

Beginning in 2012 through 2014, 

eligible professionals who are not 

successful electronic prescribers are 

subject to a payment adjustment. 

Finally, section 1104 of the Affordable 

Care Act imposes additional HIPAA 

Administrative Simplification 

requirements on covered entities, shown 

in Chart 2. 

mstockstill on DSK4VPTVN1PROD with RULES2

54686 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

4 ‘‘Version 5010 and ICD–10 Readiness 

Assessment: Conducted among Health Care 

Providers, payers, and Vendors for the Centers for 

Medicare & Medicaid Services (CMS),’’ December, 

2011, Prepared by CMS. Survey responses received 

from 404 health care providers, 101 payers, and 90 

vendors. 

5 ‘‘Survey: ICD–10 Brief Progress,’’ February 2012, 

conducted by the Workgroup for Electronic Data 

Interchange (WEDI). 

6An impact assessment for ICD–10 is performed 

by a covered entity to determine business areas, 

policies, processes and systems, and trading 

partners that will be affected by the transition to 

ICD–10. An impact assessment is a tool to aid in 

planning for implementation. 

7For providers, the CMS ICD–10 Implementation 

Guide recommends that they complete their impact 

assessments by Winter 2012 and begin external 

testing in the Fall of 2012. CMS provides 

implementation guides for providers, payers, and 

vendors to assist with the transition from ICD–9 to 

ICD–10 codes. It is a resource for covered entities 

providing detailed information for planning and 

executing the ICD–10 transition process. CMS 

recommends industry use the guide as a reference. 

CHART 2—HIPAA COMPLIANCE DATES FROM THE AFFORDABLE CARE ACT

Covered entity 

compliance date HIPAA Requirements from the Affordable Care Act 

January 1, 2013 .............................. • Operating rules for eligibility for a health plan and health care claim status transactions. 

December 31, 2013 ........................ • Health plan compliance certification requirements for health care electronic funds transfers (EFT) and remittance advice, eligibility for a health plan, and health care claim status transactions. 

January 1, 2014 .............................. • Standards and operating rules for health care electronic funds transfers (EFT) and remittance advice 

transactions. 

December 31, 2015 ........................ • Health plan compliance certification requirements for health care claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, health care claims 

attachments, and referral certification and authorization transactions. 

January 1, 2016 .............................. • Standard for health care claims attachments. 

• Operating rules for health care claims or equivalent encounter information, enrollment and disenrollment 

in a health plan, health plan premium payments, referral certification and authorization transactions. 

4 years from effective date of this 

rule (For more information see 

section II.E. of this final rule.).

• Unique health plan identifier. 

3. Current State of Industry Readiness 

for ICD–10 

It is crucial that all segments of the 

health care industry transition to ICD– 

10 at the same time because the failure 

of any one industry segment to 

successfully implement ICD–10 has the 

potential to affect all other industry 

segments. Ultimately, such failure could 

result in returned claims and provider 

payment delays that disrupt provider 

operations and negatively impact 

patient access to care. 

In early 2012, it became evident that 

sectors of the health care industry 

would not be prepared for the October 

1, 2013 ICD–10 compliance date. 

Providers in particular voiced concerns 

about their ability to meet the ICD–10 

compliance date as a result of a number 

of factors, including obstacles they 

experienced in transitioning to Version 

5010 and the other initiatives that 

stretch their resources. A CMS survey 

conducted in November and December 

2011 (hereinafter referred to as the CMS 

readiness survey) found that 26 percent 

of providers surveyed indicated that 

they are at risk for not meeting the 

October 1, 2013 compliance date.4

In February 2012, the Workgroup for 

Electronic Data Interchange (WEDI) 

conducted a survey on ICD–10 

readiness, hereinafter referred to as the 

WEDI readiness survey.5 WEDI received 

responses from more than 2,600 

providers, health plans, and vendors 

showing that the industry is uncertain 

about its ability to meet ICD–10 

compliance milestones. Data from the 

WEDI survey indicated that nearly 50 

percent of the provider respondents did 

not know when they would complete 

their impact assessment.6 In addition, 

the survey found that approximately 33 

percent of providers did not expect to 

begin external testing in 2013, while 

approximately 50 percent of providers 

did not know when testing would 

occur.7

Other segments of the industry, such 

as health plans and software vendors, 

also reported that they would benefit 

from additional time for 

implementation. While the CMS ICD–10 

Implementation Guide recommends that 

payers begin external testing in the fall 

of 2012, the WEDI readiness survey 

found that most health plans do not 

expect to begin external testing until 

2013. In addition, about 50 percent of 

vendors are not yet halfway through 

development of ICD–10 products. 

Vendor delays in product development 

can result in provider and payer delays 

in implementing ICD–10. 

Given the evidence that segments of 

the health care industry will likely not 

meet the October 1, 2013 compliance 

date, the reasons for that likelihood, and 

the likelihood that a compliance date 

delay would significantly improve the 

successful and concurrent 

implementation of ICD–10 across the 

health care industry, we proposed to 

extend the compliance date for ICD–10. 

B. Public Comments on the 1-Year Delay 

of ICD–10 

Faced with growing evidence that a 

group of providers would not be ready 

to transition to ICD–10 on October 1, 

2013, and the possibility that payment 

for millions of health care claims would 

be delayed, we considered the following 

options before proposing a 1-year delay 

of the compliance date in the April 2012 

proposed rule: 

Option 1: Maintain October 1, 2013 

deadline 

Option 2: Maintain the October 1, 2013 

compliance date for ICD–10–PCS 

(procedure codes) and only delay the 

compliance date for ICD–10–CM 

(diagnosis codes) 

Option 3: Forgo ICD–10 and wait for 

ICD–11 

Option 4: Mandate a uniform delay of 

the compliance date for ICD–10 

We proposed Option 4, mandate a 

uniform delay for 1 year of the ICD–10 

compliance date, because we believed it 

would be the most effective way to 

mitigate the significant systemic 

disruptions and payment delays that 

could result if a large percentage of 

providers are not ready to implement 

ICD–10 on October 1, 2013. In addition, 

as the Regulatory Impact Analysis (RIA) 

in this final rule indicates, Option 4 is 

most likely to minimize the costs of 

delay and to maximize the benefits to 

providers who need more time to 

implement. 

Of the more than 500 public 

comments submitted, there was some 

support for each of the options 

considered. The compliance date of 

October 1, 2014, as proposed in the 

April 2012 proposed rule, was 

supported by the highest number of 

public comments in comparison to the 

other options. We summarize the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54687 

8See ‘‘Survey: Industry Reaction to Potential 

Delay of ICD–10—A Delay will be Costly, but 

Manageable * * * Unless it’s more than a Year,’’ 

Edifecs, February 27, 2012: http:// 

www.edifecs.com/downloads/EdifecsSurveyICD10Delay.pdf. 

options from the April 2012 proposed 

rule below, present the public 

comments related to them, and provide 

our responses. We also summarize and 

respond to additional options and 

suggestions commenters presented that 

were not considered in the April 2012 

proposed rule. Finally, we summarize 

some of the comments that address 

issues outside the scope of this 

regulation. 

1. Option 1: Maintain October 1, 2013 

Deadline 

Segments of the health care industry 

expressed support for staying the course 

regarding the October 2013 compliance 

date. Many health plans, large hospitals, 

physician practices, and IT vendors 

have already made large investments 

upgrading systems, hiring personnel for 

the transition, and making other 

preparations for implementation. There 

is a financial and psychological 

momentum toward implementing ICD– 

10 that may be disrupted by a delay. 

According to the Edifecs poll, ‘‘a 

potential delay of the ICD–10 

compliance deadline could have far 

reaching—and highly negative—impact 

to the health care industry’s effort to 

implement the mandate.’’ 8

Comment: Some commenters 

recommended maintaining the October 

1, 2013 deadline. Some commenters 

argued that considerable expense has 

been expended by many entities in 

order to meet the October 1, 2013 

deadline, and any delay will be costly. 

Another commenter described the 

investment of time and resources that 

has been spent on education, outreach, 

and policy discussions in order to meet 

the October 1, 2013 compliance date. 

Some commenters noted the costs that 

would be incurred by coders, students, 

teaching institutions, and training 

programs if the compliance date were 

delayed. Students and teaching 

programs have invested much in 

training geared toward an October 1, 

2013 compliance date. 

One commenter noted that, among the 

downsides to delaying implementation 

of ICD–10, if we continue to use current 

codes, the ability to progress 

population-based healthcare and 

improve patient care will be limited. 

Commenters suggested that a delay 

prolongs the period until industry can 

use the improved code sets that support 

the improvement of quality and 

outcomes data, cost-effective 

approaches to delivering care, and 

information for better research. 

Another commenter urged no delay, 

noting that the U.S. health care industry 

has known for at least 15 years that 

ICD–10 would be adopted as a 

replacement for the severely outdated 

and broken ICD–9. The commenter 

stated that the industry has had 3 years 

to prepare, since the publication of the 

ICD–10 final rule, and, therefore, it does 

not seem likely that the provision of 

more time, by itself, will be sufficient to 

ensure those lagging in ICD–10 will be 

ready by a delayed compliance date. 

Other commenters recommended that 

if a delay is necessary, that it be for less 

than 1 year, citing similar reasons to 

those already described. 

One commenter suggested that 

maintaining the October 1, 2013 

compliance date would be difficult 

because the ICD–10 project timelines for 

both physicians and vendors—on which 

physicians are often dependent—were 

affected by the obstacles associated with 

the implementation of Version 5010. 

Another commenter argued that the 

survey results used in the RIA that 

indicated that 25 percent of physicians 

did not think they were prepared for IC– 

10 may well overestimate the percentage 

of physicians who would be wellprepared for an October 1, 2013 

compliance date, and that maintaining 

the October 1, 2013 date would be illadvised. 

Response: We recognize that many 

individual entities that were on target to 

meet the October 1, 2013 deadline will 

be financially impacted by a delay. We 

also recognize that there are opportunity 

costs associated with a delay, such as a 

delay in taking advantage of the 

improved code sets that support the 

improvement of quality and outcomes 

data, cost-effective approaches to 

delivering care, and information for 

better research. But we believe that the 

risk of a major disruption in physicians’ 

reimbursements nationwide and the 

possible effects on patient care 

outweighs those costs. 

As we indicated in the April 2012 

proposed rule, it is clear to us that a 

significant number of health care 

entities will not be prepared to meet an 

October 1, 2013 compliance date. 

Reasons for this include that entities 

may not have altered their systems, 

thoroughly analyzed their processes, 

changed their forms, prepared for 

training their personnel, begun testing 

their internal systems, or are not in a 

financial position to begin these 

preparations. 

While we cannot project precisely 

what percentage of certain sectors of the 

health care industry would not be 

prepared for an October 1, 2013 

deadline, the studies we have used in 

the RIA of this final rule reflect that the 

numbers are significant enough to cause 

a disruption in health care claim 

payments. We project a number of 

quantifiable negative consequences of 

such a disruption in the RIA and believe 

that there may be a number of 

unanticipated costs as well, including 

possible indirect economic impacts on 

related industries and the economy at 

large. 

It is also likely that health care 

entities have stopped or slowed their 

preparations for an October 1, 2013 

deadline since the Secretary announced 

in February 2012 that a delay would be 

considered through rulemaking. 

Because of this, there may be more 

entities that would be unprepared for an 

October 1, 2013 deadline than what we 

predicted in the April 2012 proposed 

rule. 

We believe a delay of the ICD–10 

compliance date will increase the 

readiness of the industry at large, and 

thus avoid a large disruption in health 

care claim payments. Entities that were 

not on schedule to be ready by October 

1, 2013 can use the time to become 

prepared, and entities that are on 

schedule can use the delay to conduct 

more thorough testing and work with 

their trading partners to decrease the 

possibility of unforeseen obstacles to 

implementation and increase the 

possibility of a smooth transition. 

We recognize that the 1-year delay in 

compliance date does not guarantee that 

entities will use the time to become 

better prepared to meet the original 

compliance date of October 1, 2013. 

However, additional activities are 

planned to mitigate this risk. During the 

1-year delay, we expect to increase 

education and outreach events and to 

work with industry on improvements to 

the overall standards implementation 

process. 

2. Option 2: Maintain the October 2013 

Compliance Date for ICD–10–PCS 

(Procedure Codes) and Only Delay the 

Compliance Date for ICD–10–CM 

(Diagnosis Codes) 

In the April 2012 proposed rule, we 

considered a split implementation 

alternative: Maintaining the compliance 

date for ICD–10–PCS, which is used for 

inpatient hospital procedure coding, at 

October 1, 2013, while delaying the 

compliance date for ICD–10–CM, the 

diagnosis codes used by physicians, to 

some later date, for example October 1, 

2015. The rationale for this option was 

that hospitals, with their greater access 

to resources, would be in a better 

position to move forward with ICD–10– 

mstockstill on DSK4VPTVN1PROD with RULES2

54688 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

PCS, which would result in at least 

partial compliance with the October 1, 

2013 date. This option would also afford 

small providers additional time to 

become compliant with the ICD–10–CM 

diagnosis codes. 

Comment: Some commenters believed 

that a split implementation of the ICD– 

10 procedure versus diagnosis codes 

would be an appropriate approach. 

Moving first to adopt ICD–10–PCS for 

the inpatient setting, commenters stated, 

would permit HHS and the industry to 

evaluate the impact on a defined part of 

the health care system and better inform 

challenges and solutions before moving 

the broader health care industry to ICD– 

10–CM codes. 

One commenter noted that moving to 

adopt ICD–10–PCS for the inpatient 

setting first would alleviate the issue of 

the lack of granular coding for inpatient 

procedures, a concern vocalized by both 

hospitals and device manufacturers. 

Other commenters argued against 

mandating different compliance dates 

for procedure and diagnosis codes. One 

commenter stated that a split approach 

would result in significant increases in 

costs to vendors because they would 

have to support dual systems. These 

costs would then be passed on to 

clients. Another commenter noted that a 

split approach would be costly with 

regard to the coordination of concurrent 

payer rules for ICD–9 and ICD–10 as 

applied to adjudication, duplicate 

claims checking, and fraud and abuse. 

The same commenter stated that there 

would be added complexities for 

clearinghouses because they would be 

running dual systems. 

Other commenters argued that 

splitting the compliance date could 

confuse certain providers because of the 

overlap of hospitals and ambulatory 

sites of services in some contexts. 

Another commenter argued that 

splitting the implementation date would 

have three consequences: Added cost to 

support dual coding systems and the 

analyses, coding, and testing that each 

of the two code sets would require 

before implementation; increased 

provider confusion because the industry 

is supporting both code sets; and the 

need for a complete rewrite of CMS’ 

diagnostic related groups (DRGs). This 

would eventually have an impact on 

revenue neutrality, the commenter 

suggested. Staggered implementation 

would also make interpretation of data 

difficult, the commenter added. 

Response: We agree with commenters 

that argue against a phased-in approach 

to implementation of ICD–10–PCS 

followed at a later date by ICD–10–CM. 

We believe that different compliance 

dates for diagnostic and procedure 

codes would burden the health care 

industry with a substantially greater 

cost than a uniform implementation 

because many sectors of the health care 

industry would have to run dual 

systems. This option would also place 

considerably more burden on hospitals 

because they would effectively have to 

implement ICD–10 twice: once in 2013 

for ICD–10–PCS and then again at a later 

date for ICD–10–CM, increasing their 

implementation costs. 

Further, there is a risk that a split 

implementation of procedure and 

diagnostic codes would render an 

operationally difficult implementation 

of the new code set even more difficult. 

These operational complexities would 

translate into added costs for all parties. 

Also, where a split-compliance 

approach contributes its own 

implementation challenges—that is, 

complexities in terms of dual processing 

and dual payer rules—we do not believe 

that HHS would easily be able to derive 

useful lessons that could applied to a 

successive implementation of ICD–10– 

CM. 

Given that the costs of such an 

approach would be greater than a 

uniform delay of ICD–10–PCS and ICD– 

10–CM, and that the experience of a 

phased approach would yield few 

beneficial lessons that could be applied 

to implementation of ICD–10–CM for 

the broader industry, we do not support 

such an approach. 

Comment: Some commenters 

suggested a related option of adopting 

ICD–10–PCS and ICD–10–CM both, but 

only in the inpatient setting. One 

commenter stated that this would mirror 

the approach taken by other nations, 

and would capture much of the nation’s 

public health data. Commenters noted 

that moving to ICD–10–CM in the 

inpatient setting would provide data 

that would inform a decision whether to 

move to ICD–10–CM in outpatient 

settings. 

One commenter suggested 

implementing a small ‘‘subset’’ of ICD– 

10–CM in the outpatient setting and 

excluding certain providers from 

detailed requirements. The commenter 

referred to Germany’s approach in this 

regard. 

Response: Both these approaches 

would appear to have the same costs 

and involve the same complexities as 

implementing ICD–10–PCS first and 

ICD–10–CM later: (1) Many entities 

would be required to maintain dual 

processing, which is costly and adds 

complexity; (2) there would be 

confusion among providers that are in 

settings where there is overlap between 

inpatient and outpatient environments 

or environments where ICD–9 and the 

small subset of ICD–10–CM would be 

used; and (3) concurrent sets of payer 

rules would have to be followed. 

The suggestion that data could be 

garnered from using ICD–10 in the 

inpatient setting to inform a decision 

whether to move the code set to 

outpatient settings, implies that the 

decision to mandate ICD–10–CM in 

outpatient settings has not yet been 

made, but could be made based on the 

experience of implementing ICD–10 in 

the inpatient setting only. This is 

incorrect. The decision to require ICD– 

10 to be used by covered entities has 

already been made, and it was based on 

years of industry discussions, consensus 

building, and government rulemaking. 

Before publishing the proposed rule that 

proposed to require covered entities to 

implement ICD–10–CM and ICD–10– 

PCS, the Secretary considered 

recommendations of the NCVHS, as 

well as input from Federal and State 

agencies, private and professional 

organizations, and industry 

stakeholders, including organizations 

representing providers, health plans, 

clearinghouses, and vendors. For a 

history of the adoption of ICD–10, see 

the proposed rule titled ‘‘HIPAA 

Administrative Simplification: 

Modification to Medical Data Code Set 

Standards to Adopt ICD–10–CM and 

ICD–10–PCS’’, published on August 22, 

2008 (73 FR 49796) (hereinafter referred 

to as the August 2008 ICD–10 proposed 

rule). After the August 2008 ICD–10 

proposed rule was published, HHS 

considered over 3,000 public comments 

on the proposed mandate. (See the 

January 16, 2009 final rule titled 

‘‘HIPAA Administrative Simplification 

Modifications to Medical Data Code Set 

Standards to Adopt ICD–10–CM and 

ICD–10–PCS’’ (74 FR 3328).) 

3. Option 3: Forgo ICD–10 and Wait for 

ICD–11 

The option to forego a transition from 

ICD–9 to ICD–10, and instead wait for 

ICD–11, was another alternative that 

was considered. This option was 

eliminated from consideration because 

the World Health Organization (WHO), 

which creates the basic version of the 

medical data code set from which all 

countries create their own specialized 

versions, is not expected to release the 

basic ICD–11 medical data code set until 

2015 at the earliest. 

From the time of that release, subject 

matter experts state that the transition 

from ICD–9 directly to ICD–11 would be 

more difficult for industry and it would 

take anywhere from 5 to 7 years for the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54689 

9Rhonda Butler, ‘‘Why we can’t skip ICD–10 and 

go straight to ICD–11,’’ Healthcare Finance News, 

March 29, 2012; Carl Natale, ‘‘Why we’re not ready 

to plan ICD–11 implementation,’’ ICD10Watch, 

February 20, 2012, http://www.icd10watch.com/, 

‘‘ICD–10 Frequently Asked Questions,’’ American 

Health Information Management Association 

(AHIMA), http://www.ahima.org/ICD10/ 

faqsall.aspx#36. 

10C. Chute, S. Huff, J. Ferguson, J. Walker, and 

J. Halamka, ‘‘There are Important Reasons for 

Delaying Implementation of the New ICD–10 

Coding System,’’ Health Affairs, May 2012, Vol. 31, 

No. 5. 

11R. Averill and S. Bowman, ‘‘There are critical 

reasons for not further delaying the Implementation 

of the new ICD–10 coding system,’’ Journal of 

AHIMA, vol. 83, no. 7, July 2012. 

United States to develop its own ICD– 

11–CM and ICD–11–PCS versions.9

Comment: A number of commenters 

referred to an article titled ‘‘There are 

Important Reasons for Delaying 

Implementation of the New ICD–10 

Coding System,’’ published in Health 

Affairs in May 2012, using it to support 

their opinion that the United States 

should forgo ICD–10 and wait for ICD– 

11.10 Commenters noted a number of 

highlights from the article, including the 

following: 

• Reference to a study that found that 

ICD–10 codes failed to outperform ICD– 

9 codes in capturing clinical data. 

• Reference to an analysis of ICD–10 

codes that found a lower percent of 

codes dedicated to diseases, compared 

to ICD–9 codes. 

• Deficiencies in the ICD–10 code set, 

including a lack of genomic information 

such as family history. 

• Reasons why SNOMED–CT, on 

which ICD–11 is based, is a superior 

clinical coding language. 

• Reasons why ICD–10 is nearing 

obsolescence. 

One commenter pointed out that, if 

ICD–11, as scheduled for release by the 

WHO, should be accepted without 

further modifications as the reporting 

standard for the U.S., ICD–11 could be 

ready for adoption before the 2020–2022 

date estimated in the April 2012 

proposed rule. Another commenter 

argued that we should forgo ICD–10 

because implementing ICD–10 in 2013 

or 2014 would delay the eventual 

adoption of ICD–11 given the time it 

takes for code sets to be implemented in 

the U.S. This would again put us behind 

the rest of the world because we would 

be using an obsolete code set—ICD–10— 

for 13+ years after the WHO adopts 

ICD–11. 

One commenter recommended 

moving to ICD–11 in the same 

timeframe as the rest of the world in 

order not to defeat the primary purpose 

of having the interoperability to 

exchange the most accurate health care 

data. 

Other commenters argued against 

waiting for ICD–11 and argued for 

preceding with ICD–10 as mandated. 

Some of these commenters quoted an 

article that was published in the July 

2012 Journal of AHIMA that rebutted 

the article Chute et.al. point by point. 

(One commenter submitted the entire 

article as her comment.) 11 Some 

commenters argued against waiting for 

ICD–11 because the current code set, 

ICD–9–CM, is not adequate to support 

health information and data needs. ICD– 

9 does not allow for clinically relevant 

or robust data, commenters wrote, and 

its continued use reduces physicians’ 

ability to assess patient outcomes, track 

public health risks, and exchange 

meaningful data with other health care 

organizations and reporting entities. It 

could also slow the adoption of valuebased purchasing and other payment 

reform models, according to the 

commenter. 

Some commenters noted that the 

structure of ICD–10 was designed to 

allow for the eventual changeover to 

ICD–11, and that failure to have this 

structure in place for ICD–11 would 

result in retrofitting many more health 

care systems at catastrophic costs. One 

commenter noted that, while ICD–11 

may hold great promise, the commenter 

believed that claims about ICD–11’s 

benefits were speculative, at best, 

because so much of it had yet to be 

developed. 

Another commenter noted that, 

despite the appeal of putting off the cost 

and disruption of transitioning to a new 

code set indefinitely, the disruption and 

costs of transitioning to ICD–11 are 

highly unlikely to be less those of 

transitioning to ICD–10. 

Response: We recognize that there is 

a debate within the health care industry 

as to the value of ICD–10 compared to 

ICD–11. We do not participate in this 

debate in this rule, except to say that we 

are convinced of the benefit of ICD–10 

to health care delivery in this country. 

One of our responsibilities is to consider 

costs and benefits. We can make some 

rough calculations as to the investment 

that would be lost if we were to forgo 

ICD–10. In the RIA, we estimate the cost 

of a 1-year delay to be $1 to $6.6 billion. 

This represents what we believe to be 

approximately 10 to 30 percent what 

has been invested or budgeted, to date, 

into implementation of ICD–10. 

Forgoing ICD–10 translates into a loss of 

up to $22 billion for the U.S. health care 

industry. This does not take into 

account the projected fiscal and public 

health benefits that would be lost every 

additional year that we use ICD–9. 

Given the considerable financial 

investment made by entities in 

preparation for ICD–10, and the 

timelines and uncertainties regarding a 

possible adoption of ICD–11, we cannot 

forgo ICD–10 in the hopes that a future, 

more effective code set will be adopted. 

Comment: One commenter 

recommended that October 1, 2014 

remain the compliance date for ICD–10– 

PCS since this is the area that has run 

out of ICD–9 procedure codes. HHS 

should then set October 1, 2016 as the 

compliance date for ICD–11 diagnosis 

codes, using ICD–11 as established by 

the WHO without the clinical 

modification. This would allow the 

industry to spend the time prior to 

October 1, 2016 preparing for ICD–11. 

Response: This approach appears to 

require the processing of three different 

code sets over a 2-year period: ICD–10– 

PCS and ICD–9–CM from October 1, 

2014 to October 1, 2016; ICD–10–PCS 

and ICD–11 from October 1, 2016 on. It 

is unlikely that any version of ICD–11 

would be adopted in the timeframes 

suggested and, as we have noted, dual 

processing is a more costly and complex 

approach than a uniform 

implementation. We do not believe that 

this is an appropriate approach. 

4. Option 4: Mandate a Uniform Delay 

of the Compliance Date for ICD–10 

The fourth option considered was a 

uniform delay of the compliance date 

for both ICD–10–CM and ICD–10–PCS. 

The advantage to an across-the-board 

delay is that it will yield a single 

compliance date among all industry 

segments. Contemplating such an option 

gave rise to a secondary question—what 

length of delay would be appropriate? 

In the proposed rule, we considered a 

1-year and a 2-year delay of the 

compliance date. We believed a 1-year 

delay achieves a balance between the 

needs of those who have already taken 

the initiative to plan for one-time 

compliance with ICD–10 and the need 

for other entities to have additional time 

to become ICD–10 compliant. While not 

without additional costs, a 1-year delay, 

to October 1, 2014, represents what we 

consider to be a reasonable compromise. 

Short of maintaining the October 1, 

2013 date, delaying ICD–10–CM and 

ICD–10–PCS by one year does the least 

to disrupt existing implementation 

efforts, while affording the small 

provider community an additional year 

to become compliant. 

a. 2-Year Delay 

Comment: Some commenters 

suggested extending the ICD–10 

compliance date 2 years, until October 

1, 2015, or beyond. In general, these 

mstockstill on DSK4VPTVN1PROD with RULES2

54690 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

commenters stated that an additional 2 

years is needed to perform system 

testing, staff training, further analysis, 

and outreach and education by both the 

federal government and the private 

sector to those entities that experience 

difficulty implementing ICD–10. 

One commenter suggested that 2 years 

would be preferable in order for front 

line care providers to ‘‘buy into’’ the 

change and integrate ICD–10 into their 

day-to-day operations. One commenter 

suggested that, given the 

interdependency between implementing 

Version 5010 and implementing ICD– 

10, HHS should monitor the 

implementation of Version 5010 

carefully, as an additional delay in its 

implementation may require a delay 

longer than one year for ICD–10. 

One commenter noted that its state 

Medicaid program would incur 

substantial costs if the delay was 1 year 

instead of 2 years due to the schedule 

in which it Medicaid Management 

Information System MMIS would be 

updated. 

Another commenter stated that the 

uncertainty over the compliance date 

had caused resource planning 

challenges because organizations have 

put on hold their partially complete 

planning and implementation efforts. A 

2-year delay would allow organizations 

to more effectively re-plan their efforts. 

One commenter noted that a 2-year 

delay would better align resources and 

spread costs out over time. 

One commenter noted that a 2-year 

delay is necessary because federal 

mandates and independent business 

initiatives were straining already 

constrained resources in health services 

delivery and health plan administration. 

The commenter’s organization had 

committed significant resources in EHR 

development, Meaningful Use 

certification, PQRS creation and ACO 

design and development. Two years 

would also give the commenter’s entity 

time to implement significant business 

model changes in 2013 to accommodate 

provisions of the Affordable Care Act. 

One commenter argued that a 2-year 

delay would give worker’s 

compensation (WC) and third party 

liability (TPL) insurances time to 

implement ICD–10 voluntarily because 

of industry pressure to do so. The 

commenter further argued that a 2-year 

delay would enable further study 

demonstrating the positive impact of 

ICD–10 for providers who have yet to be 

convinced. 

Some commenters suggested that a 

delay longer than 2 years was necessary, 

citing some of the same reasons given 

for a 2-year delay. 

Many commenters agreed with the 

assumption that implementation costs 

would increase with every year of a 

delay, while there were no commenters 

that argued otherwise. Commenters 

reported that a 2-year delay would 

increase costs to maintain 

implementation efforts, staff training, 

and systems changes. One commenter 

stated that a delay in ICD–10 beyond 1 

year would result in higher 

implementation costs for insurers and 

ultimately for customers. They stated 

that a delay beyond 1 year would 

require costly and time-consuming 

work, including conducting systems 

inventories that will have become 

outdated and would need to be 

completely reassessed. 

Some commenters noted that each 

year of delay prevents the industry from 

realizing the anticipated benefits of 

implementing ICD–10. 

Some commenters also suggested that 

any delay beyond 1 year would result in 

the industry losing momentum in 

implementation efforts, which could 

ultimately jeopardize the 

implementation of ICD–10. One 

commenter argued that, in the case of a 

2-year delay, the staffing and financial 

resources that were dedicated to the 

implementation would likely be 

diverted elsewhere. Some commenters 

expressed concern about the system 

implications of moving to ICD–10 the 

same year some may implement Stage 2 

of Meaningful Use. 

A commenter stated that our analysis 

did not include some categories of 

additional costs of a 2-year delay 

associated with the ICD–9–CM code set, 

including ‘‘inaccurate diagnosis and 

clinical decisions, administrative 

inefficiencies due to manual processes, 

coding errors due to outdated codes, 

worsening imprecision of the ICD–9– 

CM code (due to stasis if the code freeze 

is not lifted), and ongoing maintenance 

of both ICD–9–CM and ICD–10–CM/PCS 

code sets.’’ 

Response: Based upon the 

methodology and baseline estimates 

from the RIA that follows, we estimate 

it will cost health plans up to an 

additional 30 percent of their current 

ICD–10 implementation budgets for a 1- 

year delay. Therefore, we can assume 

that a 2-year delay would be at least 

double the cost. 

An informal survey of State Medicaid 

programs also indicated that an October 

1, 2015 compliance date may be 

problematic for some states that are 

undergoing IT-intensive MMIS 

transitions that same year. 

Extending the ICD–10 compliance 

date to October 1, 2015 would likely 

result in having to lift the current code 

set freeze, as the industry could not wait 

an additional 2 years for maintenance 

updates to the medical data code sets. 

A code set freeze is a suspension of 

updates to code sets, in this case, the 

existing and outdated ICD–9 medical 

code set. Updates to code sets are 

usually necessary on an annual basis in 

order to encompass new diagnosis and 

procedure codes that capture new 

technologies or diseases. Lifting the 

code set freeze would result in the 

release of potentially thousands of 

changes to the ICD–10–CM and ICD–10– 

PCS code sets, all of which would have 

to be re-programmed into systems in 

order to be ready for an October 1, 2015 

compliance date, at considerable 

industry cost. The Medicare fee-forservice health plan estimated that the 

cost for re-programming just one of its 

systems due to a code set freeze lift 

would result in, at minimum, $1 million 

in additional expense. If each of the 

nation’s approximately 1,887 health 

plans incurred a similar cost, it would 

translate into a minimum additional 

expense of nearly $2 billion. 

A 2-year delay in the ICD–10 

compliance date could also signal a lack 

of HHS’ commitment to ICD–10, 

potentially engendering industry fear 

that there could be another delay in, or 

complete abandonment of, ICD–10 

implementation, with subsequent heavy 

financial losses attributable to ICD–10 

investments already made. 

We agree that a 2-year delay would 

provide more time for entities to 

coordinate implementation with other 

federal mandates and programs and 

would give the entire industry more 

time to conduct system testing, training, 

further analysis and outreach and 

education. However, as illustrated in the 

RIA and as reflected in many of the 

comments, every year carries 

considerable costs for those that have 

already invested resources in order to 

meet an October 1, 2013 deadline. As 

well, the entire health care industry will 

suffer the opportunity costs of not 

moving to a more effective code set. We 

also believe there is a risk that ICD–10 

could be abandoned altogether if a 2- 

year delay was established. We do not 

believe the benefits of more time 

outweigh the costs and risks of a 2-year 

delay. 

b. 1-Year Delay 

Comment: Of all the options, the 

highest number of commenters 

supported the proposed 1-year delay of 

ICD–10. Commenters supported the 

proposed delay for a number of reasons. 

Some stated they would benefit from the 

additional time for implementation 

given that they are in the process of 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54691 

implementing numerous other 

competing priorities during the same 

time frame. Some commenters believed 

a 1-year delay would ensure that all 

industry segments had ample time to 

transition to ICD–10 and would be ready 

to do so on the same date. 

One commenter supported the 1-year 

delay because it would allow additional 

time for planning, testing, training, and 

price negotiation with vendors, the 

opportunity for additional business 

impact assessments, and 

implementation of appropriate 

workflow changes, additional time for 

vendor and payer readiness, and 

alignment with other health systemwide initiatives. 

Some commenters supported the 

proposed 1-year delay because of the 

financial advantages. One commenter 

noted that the 1-year delay would be 

helpful in order to recover from the cash 

outlay that was made in order to 

transition to Version 5010. Some 

commenters argued in support of the 1- 

year delay because they believed that 

their organizations could not support 

the financial investment necessary to 

make the ICD–10 transition by the 

original compliance date. 

One commenter supported a 1-year 

delay because the delay effectively 

balances the interests and current 

implementation status of multiple 

stakeholders. The commenter described 

the range of opinions and readiness of 

physicians in the commenter’s state, 

noting that some physicians preferred a 

longer delay due to competing 

initiatives, lack of resources, and other 

mitigating factors, while others 

preferred no delay because of their early 

investment in staff and resources to 

support the effort. 

Many commenters did not agree that 

a 1-year delay was a reasonable 

approach, arguing for one of the other 

options or arguing for options that we 

did not consider in the proposed rule. 

We have included their arguments 

under those options. 

Response: We agree with commenters 

that believe a 1-year delay would be 

helpful operationally, financially, and 

in terms of planning and coordinating 

with other initiatives. We agree that a 

delay beyond one year carries costs and 

risks that do not outweigh the benefit of 

a longer delay. 

5. Options Not Considered in the April 

2012 Proposed Rule 

Comment: Some commenters 

suggested a staggered approach to 

implementation based on covered entity 

type. These commenters recommended 

that clearinghouses and health plans 

should comply with ICD–10 first and 

then providers should comply at least 

12 months later. Commenters argued 

that implementation by health plans 

must be thoroughly vetted before 

involving providers in the 

implementation. They believed this 

would allow providers to fully test with 

trading partners before their compliance 

date. These commenters stated that 

separate compliance dates would 

minimize the disruption to health care 

delivery and claims payment processes. 

One commenter recommended against 

any dual implementation period for 

ICD–10. The commenter argued that 

such an approach would be nearly 

impossible to implement from an 

operational perspective and would 

cause great challenges both in the 

development of health plan and 

provider contracts as well as the 

implementation of quality improvement 

strategy reporting, which depends on 

ICD–10 diagnostic and procedure codes. 

It would also add significant costs and 

marketplace confusion to the 

implementation of ICD–10. 

Response: With respect to health 

plans, all analysis, design and 

development has been done according 

to the initial requirement of a cutover 

implementation. This means health 

plans have not prepared for processing 

both ICD–9 and ICD–10 code values on 

initial claims with dates of service 

received after the cutover date, as would 

be expected if health plans were 

required to be ICD–10 compliant before 

providers. The strategy to require ICD– 

10 codes as of a specific date of service 

has been reinforced in industry outreach 

and education by HHS, and vendor 

contracts have been based on this 

strategy. Some entities have recently 

indicated a change in this foundational 

requirement would effectively require 

them to start over, which would cause 

a multiyear delay. We assume that the 

same would be true for many entities 

were we to change approaches. 

A specific compliance date for health 

plans, followed by another date a year 

later for providers’ compliance, is 

effectively a 2-year delay of the date 

when the health care industry as a 

whole ‘‘goes live’’ with ICD–10. In 

practice, therefore, an argument for a 

different compliance date for providers 

and health plans/clearinghouses is an 

argument for a 2-year delay of the 

compliance date. We have estimated 

that a 2-year delay of the compliance 

date of ICD–10 carries with it 

considerable costs. We do not believe 

that the benefits of a 2-year compliance 

delay would be worth the costs. 

Comment: Some commenters made 

suggestions that went beyond 

consideration of a delay in compliance 

date of ICD–10 and questioned the 

implementation of ICD–10 in general. 

Commenters stated that the initiative 

should be abandoned completely 

because it represents an enormous 

burden on medical practices with no 

benefit to patients or no improvement to 

quality of care. Another commenter 

argued that ICD–10 will not enhance the 

process of reporting medical claims. 

Response: Beyond stating the basic 

thesis that there is no benefit to 

implementing ICD–10, the commenters 

did not provide detail as to how they 

arrived at this conclusion. We 

respectfully disagree with these 

commenters’ conclusion. Although the 

benefits of ICD–10 have been reiterated 

in many studies and articles, we 

emphasize a number of the benefits 

here: standardized medical data for 

research, accessing and interpolating 

global health data in any language, drug 

discovery for complex diseases, 

individualized medicine (both 

predictive and preventative), clinical 

decision support, improved patient 

outcomes, optimized billing, and 

accurate insurance administration, 

leading to lower health care costs. ICD– 

10 will allow for better monitoring of 

patients with chronic conditions such as 

asthma, diabetes, and sickle cell disease, 

and will permit better tracking of 

injuries that can lead to improved 

preventive and safety measures. For a 

comprehensive discussion of the 

expected benefits of ICD–10, and the 

reasons why we adopted it, see the ICD– 

10 proposed and final rules (August 22, 

2008 (73 FR 49796) and January 16, 

2009 (74 FR 3328), respectively.) 

6. Other Suggestions From Commenters 

on How Best To Implement ICD–10 

(a) Increased Education and Outreach 

Comment: Many commenters urged 

increased education and outreach on 

ICD–10, both from the federal 

government and from industry resources 

and organizations. One commenter 

urged HHS to continue to engage the 

30+ organizations that are working on 

ICD–10 education and to leverage their 

tools and resources. One commenter 

noted that industry surveys continue to 

show the lack of awareness of ICD–10 

among providers and that education and 

outreach might mitigate this. Another 

commenter suggested that HHS educate 

providers on the synergies between 

Meaningful Use and ICD–10. The 

commenter suggested that private sector 

firms and entrepreneurs should be 

engaged in education and outreach 

tasks. One commenter suggested that 

HHS reach out to health care 

professions and trade organizations to 

mstockstill on DSK4VPTVN1PROD with RULES2

54692 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

assist the health care industry, 

including local and state providers, 

plans, and payers—governmental and 

private. 

One commenter suggested that HHS 

create an education plan and conduct 

education in a wide range of formats, 

including webinars, handouts, podcasts, 

frequently asked questions, and a 

variety of other formats. 

Some commenters suggested that HHS 

develop and publish specific milestones 

or benchmarks on the implementation 

of ICD–10 so that industry could 

measure its own progress toward ICD– 

10 readinesss. 

One commenter stated that, while 

large providers many not need 

assistance, small providers will need 

assistance to determine if their current 

documentation practices will enable the 

selection of an appropriate ICD–10 code. 

Response: We will continue to work 

with industry to provide outreach and 

education. We will continue to engage 

stakeholders on a wide variety of ICD– 

10 implementation issues, including 

reduction of burden on physicians and 

other healthcare segments. 

Comment: One commenter urged HHS 

to engage a national Coding Authority to 

provide a recognized source of accurate 

and timely coding information. The 

Coding Authority for ICD–10, such as 

the Cooperating Parties, would provide 

the needed awareness and timely 

answers for ICD–10 transition questions. 

Response: We note that the 

Cooperating Parties, which includes 

CMS, the Centers for Disease Control 

and Prevention (CDC), the American 

Hospital Association (AHA) and the 

American Health Information 

Management Association (AHIMA), 

serve as the national coding authorities 

on both the ICD–10 and the ICD–9–CM 

code sets. CMS has the lead on ICD–9– 

CM and ICD–10–PCS procedure code 

maintenance. CDC has the lead on ICD– 

9–CM and ICD–10–CM diagnosis 

maintenance. AHA has established a 

Central Office on ICD–9–CM coding and 

will continue that role with ICD–10. The 

AHA’s Editorial Advisory Board for 

Coding Clinic is already addressing 

ICD–10 coding issues for inclusion in 

their publication Coding Clinic for ICD– 

9–CM. All of the Cooperating Parties 

serve on the Editorial Advisory Board. 

We are confident in the Cooperating 

Parties continuing role as the national 

authorities on both ICD–9–CM and ICD– 

10. 

(b) Code Freeze 

Comment: Some commenters 

suggested the ICD–10 code freeze be 

extended an additional year or until 

October 1, 2015. One commenter 

requested clarification on when the 

code freeze would be lifted. 

Response: The issue of the partial 

code freeze was discussed over several 

meetings of the ICD–9–CM Coordination 

and Maintenance Committee. Based on 

these discussions it was decided to 

make the last regular update to ICD–9– 

CM and ICD–10 codes on October 1, 

2011. Beginning on October 1, 2012, 

only codes for new technologies and 

new diseases would be considered for 

code updates. The committee decided 

that, 1 year after the initial compliance 

date of October 1, 2013, regular updates 

to ICD–10 would begin and no further 

updates to ICD–9–CM would occur 

upon the implementation of ICD–10. 

The Committee is the public forum for 

discussions on the maintenance and 

updates to both ICD–9–CM and ICD–10 

code sets and will therefore be the 

source of discussion and any decisions 

on the implementation of any further 

code freeze based on the provisions of 

this final rule. 

(c) Crosswalks 

Comment: One commenter argued 

that, even with a delayed compliance 

date, the lack of a single forward 

crosswalk from ICD–9–CM to ICD–10– 

CM and a single backward crosswalk 

from ICD–10–CM to ICD–9–CM that is 

more specific than the General 

Equivalence Mappings (GEMs) will 

hamper implementation. According to 

the commenter, the GEMs are not actual 

crosswalks that are sufficiently specific 

to be useful for forward or backward 

cross-walking in automated billing 

systems. The commenter suggested that 

HHS establish true forward and 

backward crosswalks that eliminate the 

ambiguity of the GEMs for billing and 

reimbursement purposes while 

providing a single authoritative 

standard for the industry. 

Another commenter urged that HHS 

not endorse a single crosswalk that 

enhances GEMs with one-to-one 

mapping forward and backward. ICD–10 

creates many-to-many mappings, the 

commenter noted, and, in contrast to 

relying on national crosswalks 

established by HHS, health plans should 

build rules and medical policy and 

ensure their use of ICD–10 supports that 

policy. Another commenter urged that 

HHS take a lesson from the Canadian 

transition to ICD–10: ‘‘don’t crosswalk.’’ 

Response: We are aware that there is 

not an exact one-to-one match in the 

forward or backward translation 

between ICD–9 and ICD–10. However, 

we believe that our General Equivalency 

Mapping (GEMs) is a useful tool to 

assist with transitioning between ICD–9 

and ICD–10. Furthermore, we believe 

that the training materials posted to the 

CMS Web site, as well as the scheduled 

outreach and educational opportunities 

which are periodically provided by 

CMS, suffice for training and technical 

support. 

(d) Implementation and Testing Plan 

and Certification 

Comment: Some commenters 

recommended that HHS develop an 

implementation and testing plan that 

expands outreach and education, 

ensures adequate testing, and develops 

milestones/timelines to ensure the new 

compliance date is met. Some 

commenters discussed the need for HHS 

to apply lessons learned from Version 

5010 implementation when designing a 

testing plan. Many commenters 

suggested that there was a false sense of 

readiness with regard to the transition to 

Version 5010. True readiness could only 

be realized through adequate testing. 

One commenter suggested that a 

consistent testing approach be applied 

by all stakeholders. Another commenter 

suggested that an ICD–10 Pilot Test 

could include a representative number 

of covered entities that, after testing, 

could establish regional solution centers 

that would identify best practices on 

problem solving, obstacles to avoid, and 

concrete solutions in the 

implementation of ICD–10. The 

commenter also recommended 

standardizing the ICD–10 testing 

process, which should also include endto-end testing, so that a national 

approach could be used for each 

particular category of entity. 

Another commenter suggested we 

work with NCVHS to develop an ICD– 

10 testing and implementation plan. 

The plan should include milestones and 

metrics that would provide a better 

understanding of the state of the 

industry. 

Another commenter suggested we tap 

the Workgroup for Electronic Data 

Interchange (WEDI), to identify and 

coordinate pilot participants, liaise with 

CMS, and work with the agency to 

disseminate the results to industry. 

One commenter suggested that, along 

with certification, HHS should survey 

and publish the expected downstream 

costs that health plans, clearinghouses, 

Medicare Intermediaries, and Medicare 

Advantage contractors intend to transfer 

to their internal and external customers. 

One commenter argued against the 

development of a certification program, 

and urged HHS to leverage and adopt 

existing best practice guides and 

schedules. 

One commenter suggested HHS 

require the certification of all health 

plans and clearinghouses to be able to 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54693 

accept ICD–10 codes. The commenter 

suggested that provider management 

systems (PMS) and billing systems 

should be certified by a private entity. 

Certification of these products, the 

commenter stated, would greatly assist 

physician practices in identifying the 

software necessary to comply with 

federal mandates and in taking 

advantage of the various administrative 

simplification initiatives. The 

commenter added that certification can 

also drive implementation by 

standardizing software requirements 

and leveraging market forces to ensure 

practices can meet federal requirements. 

Response: We agree that 

implementation and testing plans are 

essential for a successful transition to 

ICD–10. We recognize the need for a 

shared, industry-wide definition and 

understanding of ‘‘readiness’’ based on 

testing. We are evaluating methods to 

establish that common understanding 

and will issue guidance and offer 

general assistance on timelines and 

testing protocols through education and 

outreach. 

(E) PM and Billing Software Vendors 

Comment: Some commenters 

emphasized the integral role PMS and 

billing software vendors play in covered 

entities’ abilities to meet compliance 

dates. Commenters noted that vendors 

needed to provide ICD–10 products and 

services in a timely manner in order to 

achieve timely compliance and 

functionality for all ICD–10 processes. 

Some commenters therefore suggested 

that there be compliance tracking and 

testing of practice management and 

billing software vendors. 

One commenter agreed that software 

vendors played an important role, but 

urged that vendors self-report readiness 

to implement ICD–10. The commenter 

believed that the self-reporting approach 

affords an organization more time than 

a full-blown certification process that 

will likely increase the cost of 

implementation for providers and 

vendors. One commenter suggested that 

HHS aggressively educate and monitor 

billing software vendors for the reasons 

given above. 

Response: We agree with commenters 

that software vendor readiness impacts 

covered entities’ ability to meet 

compliance dates. While certification of 

software vendors is not within our 

authority in this rule, we will issue 

guidance on expected deliverables and 

timelines for vendors, and work to 

establish effective communication, 

education and outreach for vendor 

support in realizing these objectives. 

(f) Coordinating With Other CMS and 

Federal Initiatives 

Comment: Some commenters 

emphasized the need for CMS to 

expedite the availability of a mainframe 

version of the DRG grouper. 

One commenter urged CMS to 

provide specific guidance on how 

Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) should approach claim 

submission and medical necessity 

documentation, specifically when an 

initial claim is made in ICD–9 and 

subsequent claims are made in ICD–10. 

One commenter recommended that 

CMS evaluate and alleviate the financial 

impact of implementation on state 

Medicaid programs. The short-term and 

long-term financial cost associated with 

ICD–10 will place excessive stress on 

safety net payer systems that are already 

under duress, the commenter said. 

Some commenters argued that CMS 

should modify the Medical Loss Ratio 

(MLR) rule. According to the 

commenters, in the MLR final rule 

published on December 7, 2011, CMS 

recognized that ICD–10 conversion 

implementation costs are quality 

improvement activities, and the rule 

‘‘proposed to limit the amount of ICD– 

10 conversion costs to only those 

incurred in 2012 and 2013. The 

commenter suggested that the MLR final 

rule should adjust the 0.3 percent cap 

on ICD–10 costs to reflect the proposed 

changes’ costs and extend the ability to 

take costs into account beyond 2013 

into 2013. 

One commenter requested that all 

references within the Meaningful Use 

Stage 2 regulations from both CMS and 

the Office of the National Coordinator 

(ONC) be adjusted to align with the 

ultimate decision on the timing of ICD– 

10 compliance, including the 

availability of and flexibility in 

certification to clinical quality measure 

specifications that reference ICD–10. 

Another commenter suggested that 

ONC require that all certified EHRs be 

required to include the capabilities 

necessary for the use of ICD–10–CM and 

ICD–10–PCS in the 2014 certification 

requirements. 

Another commenter suggested that 

CMS use its Quality Improvement 

Organizations to assist providers in the 

implementation and testing of ICD–10. 

Another commenter brought forward 

a number of concerns about ICD–10 and 

CMS’ policies regarding the payment 

system and classification criteria for 

inpatient rehabilitation units of general 

hospitals (IRH/Us) and access to care for 

the patients they serve. 

One commenter suggested leveraging 

existing programs, such as Regional 

Extension Centers, to enhance provider 

outreach and education (ONC has 

implemented a set of Regional 

Extension Centers (RECs), which are 

defined as organizations that receive 

funding under the Health Information 

Technology for Economic and Clinical 

Health Act to assist health care 

providers with the selection and 

implementation of electronic health 

records). The commenter suggested that 

we work with ONC to create and 

disseminate educational and operational 

programs, tools, and other ICD–10 

resources. 

Other commenters addressed specific 

impacts of ICD–10 on other CMS 

programs and requested guidance or 

changes to the policies of those 

programs based on a delay of ICD–10 

implementation. 

Some commenters urged that HHS 

harmonize federal programs with regard 

to ICD–10. Lack of a coordination of 

multiple overlapping initiatives could 

threaten ICD–10 implementation, one 

commenter stated. Another commenter 

stated that it was critical that we align 

the ICD–10 deadline with any 

dependencies built into all other federal 

and state programs, such as those 

involving clinical quality measures that 

reference ICD–10 codes. Another 

commenter stated that existing federal 

health information technology mandates 

on physicians, such as meaningful use, 

e-prescribing and quality reporting, 

must be evaluated in the context of the 

enormous burden and cost of ICD–10. 

Response: We appreciate these 

observations and suggestions. However, 

these programs, regulations, and 

initiatives are the purview of the CMS 

and other federal agencies and are, 

therefore, outside of the scope of this 

regulation. We cannot represent CMS’ 

policy decisions or the programs of 

other federal agencies. 

Comment: Some commenters 

suggested that HHS review upcoming 

administrative simplification deadlines 

and other federal deadlines to see if 

some of them should be adjusted. One 

commenter suggested that HHS work 

with the NCVHS to determine if the 

compliance dates for operating rules 

related to the electronic remittance 

advice, electronic funds transfers, and 

future operating rules related to 

enrollment, authorizations, and 

referrals, and claims should be adjusted. 

One commenter stated that the HPID 

compliance date being on the same date 

as the compliance date of ICD–10 

(October 1, 2014) would create a 

potentially difficult situation in the 

industry. 

Response: We appreciate these 

observations. We are working to 

mstockstill on DSK4VPTVN1PROD with RULES2

54694 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

improve future regulatory alignment, 

timetables and scheduled deliverables 

within the limits of our authority. For 

instance, with HPID, we believe we 

accommodated some commenters’ 

concerns about the timeframe for 

compliance by mandating in this final 

rule that October 1, 2016 be the date by 

which covered entities must use HPID 

in standard transactions. 

Comment: One commenter 

recommended that the ICD–10 mandate 

be extended to noncovered entities, 

such as workman’s compensation and 

auto insurance, to eliminate the 

duplicity of administrative processes 

and systems for health care providers. 

Otherwise, health care providers will 

have to maintain dual processes and 

system capabilities to perform 

transactions using ICD–9 and ICD–10, 

which will result in increased 

administrative burden for providers. 

Response: We agree with commenters 

that some noncovered entities create 

duplicate processes for health care 

providers. For purposes of this rule, 

however, workman’s compensation and 

auto insurance companies are not 

required to implement ICD–10. 

Comment: Commenters urged that, 

once the final rule is published, HHS 

not introduce any further delays to ICD– 

10 implementation, including 

‘‘discretionary enforcement periods’’ 

like those used after the Version 5010 

compliance date. Further delays would 

impact other areas of health care such 

as the successful implementation of 

electronic health records and reporting 

that will be required as part of state 

based exchanges. One commenter noted 

that further changes in the compliance 

date would cause significant costs for 

health plans and ultimately for their 

customers at a time when the industry 

will be preparing for the 

implementation of health insurance 

exchanges and other Affordable Care 

Act-mandated changes. This is because 

systems naturally evolve for a number of 

reasons over time and an extended 

delay will require an extension of 

testing activities and prolonged 

maintenance of the testing environment. 

Other commenters suggested that, as 

the delayed compliance date draws 

closer, HHS assess industry readiness 

and, if necessary, postpone compliance 

further. One commenter suggested 

establishing a delay, but delaying still 

further at a later date if the industry 

continues to struggle with Version 5010. 

Response: We agree with commenters 

that further delay of the ICD–10 

compliance date would be costly to the 

industry at large. We do not expect any 

further delays of the ICD–10 compliance 

date. 

(g) Further Analysis 

Comment: One commenter suggested 

that an analysis of the costs of ICD–10 

implementation for providers should be 

conducted by HHS, including how those 

costs would contribute to the cost of 

total health care delivery. The 

commenter wanted the study to include 

an analysis of whether the ‘‘costs have 

any benefit to the nation’s health,’’ and 

stated that, once the study was 

conducted, HHS should consider 

whether implementation of ICD–10 was 

still in the best interests of the country 

or if alternatives or an extended 

timetable for further study would 

achieve the best results. 

Some commenters suggested 

additional studies and analysis be 

undertaken before HHS mandate any 

compliance date for providers. For one, 

commenters suggested that, as an 

interim step, HHS fully examine the 

current ICD–9–CM code development 

allocation process and make the 

necessary changes to permit the full 

utilization of the current code set and 

the rapid assignment of necessary codes. 

Some commenters suggested an 

analysis be conducted that compared 

the costs to industry of using ICD–9 for 

another few years before transitioning to 

ICD–11 to the industry costs of using 

ICD–10 for those years. Commenters 

suggested HHS conduct a further 

analysis of the cost of requiring two 

code conversions—to ICD–10 then to 

ICD–11—over the next 15 years. These 

analyses, commenters stated, are 

necessary in order to make a betterinformed decision (ostensibly about 

whether to implement ICD–10). 

Some commenters urged that HHS 

complete a comprehensive cost-benefit 

analysis to determine the impact of 

ICD–10 implementation on each health 

care industry sector before mandating 

ICD–10. The commenters stated that this 

analysis should include consultations 

with appropriate provider organizations 

and HHS advisory groups, and a final 

report should be issued that includes 

the benefits to physician practices and 

other sectors. The commenters 

suggested that the analysis include costs 

for information system changes, rate 

negotiations, recalculation of 

reimbursement methodologies, training, 

and changes to forms. Further, the 

analysis should consider the timing of 

the transition, including the impact of 

timing options on costs and benefits, 

potential return on investment, and 

interaction with other major health 

information investment tasks, including 

participation in other CMS HIT and 

quality initiatives. The commenters 

stated that the analysis should identify 

immediate and future costs and benefits 

on physician practices and others of 

improved data for, but not limited to, 

patient safety, outcomes analysis, 

reimbursement, disease management, 

utilization review and health statistics. 

Response: A common assumption of 

these suggestions is that, after a 

particular analysis, HHS would consider 

the merits of implementing ICD–10 and 

whether to mandate its use or not. In 

terms of this assumption, we make the 

following observations: 

• The decision to mandate ICD–10 for 

covered entities has already been made, 

and it was based on years of industry 

discussions, consensus building, and 

government rulemaking. Before 

publishing the proposed rule that 

proposed to require covered entities to 

implement ICD–10–CM and ICD–10– 

PCS, the Secretary considered 

recommendations of the NCVHS as well 

as input from federal and state agencies, 

private and professional organizations, 

and industry stakeholders, including 

organizations representing providers, 

health plans, clearinghouses, and 

vendors. For a history of the adoption of 

ICD–10, see the ICD–10 proposed rule 

and final rules (August 22, 2008 (73 FR 

49796) and January 16, 2009 (74 FR 

3328), respectively). 

• A number of studies have been 

conducted with regard to the costs and 

benefits of ICD–10. The April 2012 

proposed rule listed a number of 

analyses in this regard. A robust 

analysis of the cost and benefits of ICD– 

10 was provided in the August 2008 

ICD–10 proposed rule, and public 

comments on the analysis were 

subsequently incorporated or responded 

to in the January 2009 ICD–10 final rule. 

As well, there have been numerous 

other academic studies, analysis, and 

articles related to ICD–10. All of these 

studies have demonstrated costs and 

benefits with implementation. 

Given these points, there is little 

evidence that another study would, 

itself, convince HHS to overturn years of 

rulemaking (or, in the likelihood of it 

approximately concurring with the 

results of previous studies, serve any 

use whatsoever). However, it is clear 

that further analysis or study means 

more delay and uncertainty for the 

health care industry. Because ICD–10 

has been mandated, many entities have 

invested considerable resources to 

comply. As our RIA—and many of the 

comments we received—illustrate: 

Every day that we delay—or create 

uncertainty around—the 

implementation of what has been 

mandated translates to considerable cost 

to the health care industry. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54695 

We do not believe that further 

analysis of ICD–9 or ICD–10 would be 

a responsible use of stakeholders’ and 

the federal government’s resources. 

Comment: Another commenter 

suggested that a 2-year delay would 

provide us with the time to analyze the 

costs and benefits of implementing 

ICD1–10 on physician practices. The 

commenter suggested that, at the same 

time, we should engage all stakeholders 

to assess whether an alternative code set 

approach is more appropriate than the 

full implementation of ICD–10. The 

commenter noted that other countries 

implemented ICD–10 with a modified 

version of the code set. The commenter 

argued that stakeholders should reach 

consensus on the question of costs, 

scope, and whether a modified version 

is appropriate within the 2-year delay; 

otherwise, the industry should not 

implement ICD–10. 

Response: We reiterate that further 

analysis of the costs and benefits of 

ICD–10 is probably not a responsible 

approach given the substantial 

rulemaking and analysis conducted to 

date and the fact that a significant 

proportion of the health care industry 

has already spent resources 

implementing ICD–10. While we 

appreciate the suggestion that this 

analysis take place within a limited 

time; that is, a 2-year period, and that 

the analysis is narrowed only to the 

impact on physician practices, we do 

not believe the health care industry 

would participate in a cost/benefit 

analysis on the current version of ICD– 

10 while at the same time participating 

in a decision on whether to create a 

modified version, as the commenter 

suggests. This would send contradictory 

messages to the industry as to what is 

being proposed or mandated and, again, 

the delay and uncertainty would be 

costly, whatever the outcome of these 

discussions. 

It is unclear from the commenters’ 

comments how the concept of 

consensus is defined and whether 

consensus refers to stakeholder 

agreement on the costs of ICD–10 on 

physicians, stakeholder agreement on 

the decision to modify ICD–10, or 

stakeholder agreement on a suggested 

modified version itself. Regardless, it is 

questionable whether some defined 

methodology for achieving consensus 

would be a valid or appropriate 

mechanism for agreeing on cost 

estimates or a decision to modify ICD– 

10, and whether such a process could or 

should override years of industry input 

and government rulemaking that has 

been used to arrive at the current 

mandate. 

Given the obstacles and uncertainties 

that we envision 2 years of analysis and 

decision-making would engender, it is 

unlikely that any consensus could be 

made with regard to costs or a proposed 

modification of ICD–10 within 2 years. 

For reasons stated earlier, however, it is 

clear that there would be tremendous 

costs for the both government and 

commercial entities. 

7. Summary 

After analysis and consideration of 

these comments, we are finalizing the 

policy to delay the ICD–10 compliance 

date by 1 year to October 1, 2014. 

IV. Provisions of the Final Rule 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule. Those provisions of this 

final rule that differ from the proposed 

rule are as follows: 

• In 162.504, we have revised the 

term ‘‘dates’’ to read ‘‘requirements’’. 

• In 162. 504(a), we have revised the 

term ‘‘specifications’’ to read 

‘‘requirements’’. 

• In 162.504(a), we have revised the 

term ‘‘Covered health care providers’’ to 

read ‘‘Covered entities’’. 

• In 162.504(a), we have revised the 

year ‘‘2014’’ to read ‘‘2016’’. 

• In 162.504(b), we have removed the 

reference to ‘‘162.510’’. 

• In 162.504, we have deleted 

paragraph (c). 

• In 162.508 (c), we have inserted ‘‘or 

OEID’’ after the phrase ‘‘deactivate an 

HPID’’. 

• In 162.510, we have inserted the 

term ‘‘Full’’ before implementation and 

revised the term ‘‘specifications’’ to read 

‘‘requirements’’. 

• In 162.510(a), we have inserted 

‘‘that has an HPID’’ immediately after 

‘‘health plan’’. 

• In 162.510(b), we inserted the 

phrase ‘‘that has an HPID’’ immediately 

after ‘‘health plan’’. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), agencies are required to 

provide a 60-day notice in the Federal 

Register and solicit public comment on 

a collection of information requirement 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the PRA requires that 

we solicited comment on the following 

issues: 

• Whether the information collection 

is necessary and useful to carry out the 

proper functions of the agency. 

• The accuracy of the agency’s 

estimate of the information collection 

burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

A. Information Collection Requirements 

(ICRs) Regarding HPID/OEID on Health 

Plan and Other Entities (§ 162.512 and 

§ 162.514) 

In order to apply for an HPID or OEID, 

there is an initial one-time requirement 

for information from health plans that 

seek to obtain an HPID and other 

entities that elect to obtain an OEID. In 

addition, health plans and other entities 

may need to provide updates to 

information. 

With respect to the collection of 

information requirements for the HPID, 

it is important to bear in mind that: (1) 

Systems modifications necessary to 

implement the HPID/OEID may overlap 

with the other systems modifications 

needed to implement other Affordable 

Care Act standards; (2) some 

modifications may be made by 

contractors such as practice 

management vendors, in a single effort 

for a multitude of affected entities; and 

(3) identifier fields are already in place 

and HPID/OEID will, in many instances, 

simply replace the multiple identifiers 

currently in use. 

Under this final rule, a CHP, as 

defined in 45 CFR 162.103, will have to 

obtain an HPID from a centralized 

electronic Enumeration System. A SHP, 

as defined in 45 CFR 162.103, would be 

eligible but not required to obtain an 

HPID. If a SHP seeks to obtain an HPID, 

it would apply either directly to the 

Enumeration System or its CHP would 

apply to the Enumeration System on its 

behalf. Other entities may apply to 

obtain an OEID from the Enumeration 

System. Health plans that obtain an 

HPID would have to communicate any 

changes to their information to the 

Enumeration System within 30 days of 

the change. A covered entity must use 

an HPID to identify a health plan that 

has an HPID in a standard transaction. 

We estimate that there will be up to 

15,000 entities that will be required to, 

or will elect to, obtain an HPID or OEID. 

We based this number on the following 

data in Chart 3. 

mstockstill on DSK4VPTVN1PROD with RULES2

54696 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

12See Robinson, James C., ‘‘Consolidation and the 

Transformation of Competition in Health 

Insurance,’’ Health Affairs, 23, no.6 (2004):11–24; 

‘‘Private Health insurance: Research on Competition 

in the Insurance Industry,’’ U.S. Government 

Accountability Office (GAO), July 31, 2009 (GAO– 

09–864R); American Medical Association, 

‘‘Competition in Health Insurance: A 

Comprehensive Study of US Markets,’’ 2008 and 

2009. 

CHART 3—NUMBER AND TYPE OF ENTITIES THAT MAY OBTAIN AN HPID OR OEID 

Type of entity Number of 

entities 

Self insured group health plans ........................................................................................................................................................... * 12,000 

Health insurance issuers, individuals and group health markets, HMOs, including companies offering Medicaid managed care ... ** 1,827 

Medicare, Veterans Health Administration (VHA), Indian Health Service (IHS), TRICARE, and State Medicaid programs ............. 60 

Clearinghouses and Transaction Vendors .......................................................................................................................................... *** 162 

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

Total .............................................................................................................................................................................................. ∼15,000 

* ‘‘Report to Congress: Annual Report on Self-Insured Group Health Plans,’’ by Hilda L. Solis, Secretary of Labor, March 2011. 

** ‘‘Patient Protection and Affordable Care Act; Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment, 2011 Federal Register (Vol. 76), July, 2011,’’ referencing data from www.healthcare.gov. 

*** Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8–19296.pdf, based on a study by Gartner. 

**** Summary of Benefits and Coverage and the Uniform Glossary; Notice of Proposed Rulemaking http://www.gpo.gov/fdsys/pkg/FR-2011-08- 

22/pdf/2011-21193.pdf. 

Note that the number of health plans 

that will be required, or have the option, 

to obtain an HPID is considerably larger 

than the number of health plans which 

we used in the calculations in section V. 

of this final rule. This is because selfinsured group health plans are required 

to obtain HPIDs if they meet the 

requirements of a CHP under this final 

rule. However, we assume that very few 

self-insured group health plans conduct 

standard transactions themselves; 

rather, they typically contract with 

TPAs or insurance issuers to administer 

the plans. Therefore, there will be 

significantly fewer health plans that use 

HPIDs in standard transactions than 

health plans that are required to obtain 

HPIDs, and only health plans that use 

the HPIDs in standard transactions will 

have direct costs and benefits. 

To comply with these requirements, 

health plans and other entities will 

complete the appropriate application/ 

update form online through the 

Enumeration System. This online form 

serves two purposes: applying for an 

identifier and updating information in 

the Enumeration System. 

Most health plans and other entities 

will not have to furnish updates in a 

given year. However, lacking any 

available data on rate of change, we 

elected to base our assumptions on 

information in the Medicare program 

that approximately 12.6 percent of 

health care providers provide updates in 

a calendar year. We anticipate this 

figure would be on the high end for 

health plans and other entities. 

Applying this assumption, we can 

expect that 1,764 health plans will need 

to complete and submit the HPID 

application update form in a given year. 

Applying for an HPID or OEID is a 

one-time burden, although we anticipate 

health plans will need to update any 

information changes in the Enumeration 

System. In future years, the burden to 

apply for HPIDs and OEIDs will impact 

only new health plans and other entities 

that choose to obtain an OEID as 

described in the section V of this final 

rule. While health plans will need to 

update their information in the 

Enumeration System, we anticipate the 

burden associated with this requirement 

will be negligible as health plans will 

already have access to the Enumeration 

System and the information collected 

about the health plan is minimal so 

little information will need to be 

updated on a regular basis. From 2013 

to 2018, industry trends indicate that 

the number of health plans will remain 

constant, or even decrease.12 We assume 

that the number of new health plans 

will be small, and that the costs for 

application and update of information 

in the Enumeration System will be 

negligible. Therefore, our calculations 

reflect that there will be no statistically 

significant growth in the number of 

health plans or other entities and we 

calculate zero growth in new 

applications. 

We estimate it will take 30 minutes to 

complete the application form and use 

an hourly labor rate of approximately 

$23/hour, the average wage reported for 

professional and business and services 

sector, based on data from the 

Department of Labor, Bureau of Labor 

Statistics, June 2011, ‘‘Average hourly 

and weekly earnings of production and 

nonsupervisory employees (1) on 

private nonfarm payrolls.’’ (ftp:// 

ftp.bls.gov/pub/suppl/ 

empsit.ceseeb11.txt). This represents a 

unit cost of $11.50 per application for 

both HPID and OEID. 

Because our initial estimate for the 

number of applications for OEID is 

small (162 Clearinghouses and 

Transaction Vendors + 750 TPAs = 912) 

and the costs negligible, we do not 

include separate calculations. We have 

elected instead to offer the unit cost 

figure as a baseline if commenters 

demonstrate that the universe of 

applications for OEID is likely to 

expand significantly. 

To further reduce burden and plan for 

compliance with the Government 

Paperwork Elimination Act, we 

proposed accepting electronic 

applications and updates over the 

internet. We explicitly solicited 

comment on how we might conduct this 

activity in the most efficient and 

effective manner, while ensuring the 

integrity, authenticity, privacy, and 

security of health plan and other entity 

information. 

We did not receive any comments on 

these [requirements?] and we are 

finalizing these provisions as proposed. 

B. ICRs Regarding Implementation 

Specifications: Health Care Providers 

(§ 162.410) 

We proposed to put an additional 

requirement on covered organization 

health care providers that employ, have 

as members, or have contracts with 

individual health care providers who 

are not covered entities but who are 

prescribers. By 180 days after the 

effective date of the final rule, such 

organizations must require such health 

care providers: (1) To obtain, by 

application if necessary, an NPI from 

the National Plan and Provider 

Enumeration System (NPPES); (2) to the 

extent the prescriber writes a 

prescription while acting within the 

scope of the prescriber’s relationship 

with the organization, disclose his or 

her NPI, upon request, to any entity that 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54697 

13 J. Daley, ‘‘Testimony before the NCVHS 

Subcommittee on Standards on the National Health 

Plan Identifier on behalf of America’s Health 

Insurance Plans and the Blue Cross and Blue Shield 

Association,’’ July 19, 2010, http:// 

www.ncvhs.hhs.gov. 

needs the NPI to identify the prescriber 

in a standard transaction. 

The burden associated with the 

addition to the requirements of 

§ 162.410 as discussed in this final rule 

is the one-time application burden, and 

later update burden as necessary, on 

prescribers who do not already have an 

NPI, who have a relationship with a 

covered health care provider, and who 

must be identified in a standard 

transaction. We estimate that as of the 

fall of 2011 there were approximately 

1.4 million prescribers in the United 

States, of which approximately 160,000 

did not have an NPI. It is these 

prescribers who would have to obtain 

an NPI. Based on the estimations in the 

NPI final rule, we estimate that it will 

take 20 minutes to complete an 

application for an NPI and use an 

hourly labor rate of approximately $23/ 

hour, the average wage reported for 

professional and business and services 

sector, based on data from the 

Department of Labor, Bureau of Labor 

Statistics, June 2011, ‘‘Average hourly 

and weekly earnings of production and 

nonsupervisory employees (1) on 

private nonfarm payrolls.’’ (ftp:// 

ftp.bls.gov/pub/suppl/ 

empsit.ceseeb11.txt). Additionally, we 

have calculated an increase of 3 percent 

for labor costs for each of the years 2013 

through 2016 for an hour rate of 

approximately $24/hour for year 2013. 

Table 2 shows the estimated annualized 

burden for the HPID and NPI PRA in 

hours. 

We did not receive any comments and 

we are finalizing these provisions as 

proposed. 

TABLE 2—TOTAL INFORMATION COLLECTION BURDEN * 

Regulation 

section 

OMB 

Control 

No. 

Respondents Responses 

Burden 

per 

response 

(hours) 

Total 

annual 

burden 

Hourly labor 

cost of 

reporting ($) 

Total labor 

cost 

Total capital/ 

maintenance 

costs ($) 

Total cost 

($) 

§ 162.410 ......... 0938– 

New.

160,000 160,000 0.33 52,800 24 1,267,200 0 1,267,200 

§ 160.512 ......... 0938– 

New.

15,000 15,000 0.50 7,500 24 180,000 0 180,000 

Total .......... ................ 175,000 175,000 ................ 60,300 .................... .................... ........................ 1,447,200 

* 2013 dollars. 

To obtain copies of the supporting 

statement and any related forms for the 

paperwork collections referenced 

previously, access our Web Site address 

at http://www.cms.hhs.gov/ 

PaperworkReductionActof1995, or 

Email your request, including your 

address, phone number, OMB number, 

and CMS document identifier, to 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office on (410) 786– 

1326. If you comment on these 

information collection and 

recordkeeping requirements, please do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this final rule; or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–0040–F; Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

VI. Regulatory Impact Statement (or 

Analysis) 

A. Statement of Need 

1. NPI for Non-Covered Health Care 

Providers 

The compliance date for use of the 

NPI by health care providers was May 

23, 2007. As of the fall of 2011, we 

believe there were 160,000 prescribing 

health care providers who do not 

already have an NPI. For these health 

care providers, obtaining an NPI is not 

a burdensome endeavor, as it is free of 

charge and takes approximately 20 

minutes to file an application to obtain 

one. However, the availability of these 

additional prescriber NPIs will greatly 

assist entities who need them for use in 

standard transactions, including for the 

Medicare Part D program, as described 

previously. See section V.B. of this final 

rule specifically for a summary of the 

time costs associated with obtaining an 

NPI. We have included the costs 

associated with obtaining an NPI 

detailed in section V.B. of this final rule 

and in the summary Tables 20 and 21 

of the RIA. 

2. HPID 

As noted in section I of this final rule, 

health plans, and other payers are 

identified in a number of different ways 

in covered transactions by the health 

care industry. Health plan identifiers are 

currently used to facilitate routing of 

covered transactions or, in other words, 

‘‘to determine either where the standard 

electronic transactions are to be sent if 

the receiver is [a] health plan or from 

where they came from if the sender is 

a health plan.’’ 13 The primary function 

of the HPID in this rule is to create a 

standard for covered entities to identify 

health plans in HIPAA covered 

transactions. 

Different segments in each HIPAA 

standard transaction require an 

identifier to identify the payer or 

sender/recipient of a particular 

transaction. (See Table 1 in the April 

2012 proposed rule for a list of HIPAA 

standard transactions, and Table 2 for 

an example of a segment that requires a 

payer identifier.) Currently, when a 

covered entity, for business reasons, 

inputs an identifier that identifies a 

health plan into a transaction segment, 

the identifier is proprietary or based on 

the NAIC code, EIN, or TIN of the health 

plan or other entity. Some health plans 

use multiple identifiers to identify 

themselves in transactions. 

Standardization of the health plan 

identifier is expected to ameliorate some 

routing issues. It is expected to clarify, 

to some extent, the sender or recipient 

of standard transactions, when the 

sender or recipient is a health plan. For 

instance, a health plan that uses 

different identifiers to identify itself in 

covered transactions creates 

inefficiencies and potential confusion 

among its trading partners. Participating 

health care providers that are its trading 

partners, for instance, could be required 

to use different identifiers for different 

transactions, even to identify the same 

health plan. With the adoption of the 

HPID, such a health plan will likely use 

one identifier, thereby making it easier 

for the covered health care provider to 

mstockstill on DSK4VPTVN1PROD with RULES2

54698 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

14 ‘‘National Health Plan Identifier White Paper,’’ 

prepared by the American Medical Association 

(AMA) Practice Management Center (PMC), 

September 22, 2009. 15 Ibid. 

16 ‘‘Version 5010 and ID–10 Readiness 

Assessment: Conducted among Health Care 

Providers, payers, and Vendors for the Centers for 

Medicare & Medicaid Services (CMS),’’ December, 

2011, Prepared by CMS. 

17 ‘‘Survey: ICD–10 Brief Progress,’’ February 

2012, conducted by the Workgroup for Electronic 

Data Interchange (WEDI). 

identify the health plan as the sender or 

recipient of the standard transaction. 

By ameliorating routing issues, the 

HPID and OEID will add consistency to 

identifiers, which will provide for a 

higher level of automation, particularly 

for provider processing of the X12 271 

(eligibility response) and X12 835 

(remittance advice). In the case of the 

X12 835, the HPID and OEID will allow 

reconciliation of claims with the claim 

payments to be automated at a higher 

level. 

However, according to testimony and 

industry studies, the most significant 

value of the HPID and the OEID is that 

they will serve as foundations for other 

regulatory and industry initiatives. The 

implementation of HPID, in and of 

itself, may not provide significant 

monetary savings for covered entities, 

with the exception of providing time 

savings by immediately solving certain 

routing issues. Instead, financial 

benefits are expected to be realized 

mostly downstream, when the HPID is 

used in coordination with other 

regulatory and industrial administrative 

simplification initiatives. Testimony 

from the July 19, 2010 NCVHS hearing 

reinforced this idea. 

As an analogy, the standardization of 

the width of railroad tracks does not, in 

and of itself, result in monetary savings. 

However, such standardization has 

ensured connectivity between diverse 

railroad systems that has resulted in 

time and cost savings in the movement 

of freight across the country. In a like 

manner, standardization of a single data 

element in health care transactions does 

not, in and of itself, produce substantial 

time or cost savings. However, the 

diverse identifiers currently used by 

multiple health plans are akin to the 

different track widths used by various 

railroad systems. Like the 

standardization of railroad track widths, 

the HPID serves as a foundation for 

more efficient and cost effective 

transmission of health care information. 

In an industry white paper, one health 

care provider association echoed the 

foundational importance of the HPID 

and stated that a standard identifier for 

health plans is ‘‘viewed by many as a 

crucial step toward one-stop, automated 

billing.’’ 14 In the same paper, that 

association stated that, in order to begin 

the movement toward automated 

billing, standard identifiers were needed 

for more entities with ‘‘payer’’ function 

than just ‘‘health plans,’’ including 

entities with primary financial 

responsibility for paying a particular 

claim, entities responsible for 

administering a claim, entities that have 

the direct contract with the health care 

provider, and secondary or tertiary 

payers for the claim.15 The association 

went on to contend that fee schedules 

and plan and product types would need 

to be identified with this health plan 

identifier. 

We did not propose that the HPID or 

the OEID contain intelligence that 

would include fee schedules or benefit 

plans or product types. However, we 

view the adoption of the HPID and the 

OEID as foundations for the ‘‘one-stop, 

automated billing’’ that this professional 

association advocated. 

This impact analysis will take these 

foundational benefits of HPID and, for 

the sake of illustration, attribute some of 

the monetary savings from the 

downstream results to implementation 

and use of the HPID. It is important to 

view these estimates as an attempt to 

illustrate the foundational effect of the 

HPID rather than as a precise budgetary 

prediction. 

3. Need for a Delay in Implementation 

of ICD–10, and General Impact of 

Implementation 

The ICD–10 final rule requires 

covered entities to comply with ICD–10 

on October 1, 2013. The provisions of 

this final rule changes the compliance 

date to October 1, 2014. 

The process of transitioning from 

ICD–9 to ICD–10, if not carefully 

coordinated, poses significant risk to 

provider reimbursement. Should health 

care entities’ infrastructure not be ready 

or thoroughly tested, providers may 

experience returned claims and delayed 

payment for the health care services 

they render to patients. There has been 

mounting evidence that a significant 

percentage of providers believe they do 

not have sufficient resources or time to 

be ready to meet the October 1, 2013 

ICD–10 compliance deadline. 

Two distinct types of issues are 

implicated by a transition of this 

magnitude, and the costs associated 

with both might be avoided if the ICD– 

10 compliance date is delayed. First, 

there may be entities that have not 

readied their systems, personnel, or 

processes to achieve compliance by 

October 1, 2013. For example, vendor 

practice management and/or other 

software must be updated to process 

claims with ICD–10 codes, then 

installed and tested internally. 

Likewise, staff needs to be trained and 

systems and forms prepared for the new 

code set. In a CMS survey conducted in 

November and December 2011 

(hereinafter referred to as the CMS 

readiness survey), 25 percent of 

providers surveyed indicated that they 

are at risk for not meeting the October 

1, 2013 compliance date.16 In February 

2012, the Workgroup for Electronic Data 

Interchange (WEDI) conducted a survey 

on ICD–10 readiness (WEDI readiness 

survey) that indicated that nearly 50 

percent of the 2,140 provider 

respondents did not know when they 

would complete their impact 

assessment.17 An illustration of what 

could occur if elements of industry are 

not prepared for the transition to ICD– 

10 can be seen by the January 1, 2012 

transition to Version 5010, where we 

have heard from several provider 

organizations reporting that numerous 

practices were not paid for long periods 

due to the Version 5010 transition. 

Second, beyond ‘‘readiness’’ and 

‘‘compliance,’’ there are issues that will 

arise if trading partners have not 

thoroughly tested ICD–10. ‘‘Readiness’’ 

is only a self-reported indicator of the 

potential success of an ICD–10 

transition and can be unreliable; we 

know this from similar industry surveys 

done for Version 5010 that indicated 

high levels of readiness only to find 

multiple issues once claims were 

submitted in production mode. The 

other indicator of success is the quality 

and robustness of testing. 

Clearinghouses cannot assist in the ICD– 

10 transition as they are unable to 

correct coding issues without viewing 

the underlying documentation, which is 

not a typical clearinghouse role. In 

general, only a provider can change/ 

modify a code, so it is incumbent upon 

providers to ensure a successful ICD–10 

conversion. In many cases, providers’ 

success will be predicated upon timely 

vendor delivery of ICD–10-compliant 

software, and coordination must be 

developed with payer systems and new 

fee schedules. Providers’ practice 

management systems (PMS) must be 

programmed to process ICD–10 codes, 

and, with many providers transitioning 

to EHRs, there needs to be a well-tested 

interface between electronic health 

records and the PMS. 

In an informal poll conducted by 

Edifecs (hereinafter referred to as the 

Edifecs poll), a health care IT company, 

with responses from 50 senior health 

care officials representing a wide range 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54699 

18 ‘‘Survey: Industry Reaction to Potential Delay 

of ICD–10—A Delay will be Costly, but Manageable 

* * * Unless it’s more than a Year,’’ February 27, 

2012, conducted by Edifecs. The survey’s 

participants included commercial payers (25%), 

Blue Cross Blue Shield plans (25%), healthcare 

providers (18%), government entities such as State 

Medicaid (9%), medical claim clearinghouses (6%), 

and other healthcare industry organizations (17%). 

19 Ibid. 

of organizations, 37 percent of 

respondents stated that a 1-year delay 

would be beneficial for them.18

According to the Edifecs analysis, ‘‘For 

those organizations that have the 

determination to keep moving forward 

as if the delay had never been 

announced, it may end up being a true 

gift on the testing front.’’ 19

In the CMS readiness survey, 75 

percent of providers surveyed cited the 

lack of time and/or staff as a barrier to 

implementing ICD–10 on time. The 

survey also indicated that given just 3 

additional months, an additional 14 

percent of providers would be able to 

achieve compliance by December 31, 

2013. This indicates that a delay would 

be helpful in overcoming one of the 

major obstacles to compliance—lack of 

time—and that a delay of a year would 

enable providers to achieve not only 

‘‘readiness’’ in terms of system 

interoperability, but also give the time 

for more thorough testing of ICD–10. 

B. Introduction 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993, as 

further amended), Executive Order 

13563 on Improving Regulation and 

Regulatory Review (January 18, 2011), 

the Regulatory Flexibility Act (RFA) 

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

amended by the Small Business 

Regulatory Enforcement Fairness Act of 

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

of the Social Security Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4), Executive Order 

13132 on Federalism (August 4, 1999), 

and the Congressional Review Act (5 

U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. Executive 

Order 13563 also directs agencies not 

only to engage the public and provide 

an opportunity to comment on all 

regulations, but also calls for greater 

communication across all agencies to 

eliminate redundancy, inconsistency, 

and overlapping, as well as outlines 

processes for improving regulation and 

regulatory review. 

A Regulatory Impact Analysis must be 

prepared for major rules with 

economically significant effects ($100 

million in 1995 dollars or more in any 

1-year). Because of the impact on the 

health care industry of the adoption, 

implementation, and use of the HPID 

and the delay in the compliance date for 

ICD–10, this rule has been designated an 

‘‘economically’’ significant regulatory 

action, under section 3(f)(1) of Executive 

Order 12866 as it will have an impact 

of over $100 million on the economy in 

any 1 year. 

The impacts of implementing the 

HPID and delaying the compliance date 

for transition to ICD–10 are quite 

different, and, because of their 

respective impacts, both provisions of 

the final rule would be considered 

economically significant. Accordingly, 

we have prepared two independent 

RIAs: One analysis of the impact of the 

adoption and use of the HPID and one 

for the impact associated with the delay 

of the compliance date for transition to 

ICD–10. These RIAs, to the best of our 

ability, present the costs and benefits of 

this final rule, which has been reviewed 

by the Office of Management and 

Budget. 

The RIA on the delay of ICD–10 

follows the RIA on the implementation 

and use of the HPID. 

We anticipate that the adoption of the 

HPID and the OEID and the additional 

requirement for organization covered 

health care providers to require certain 

non-covered individuals who are 

prescribers to obtain and use an NPI 

would result in benefits that outweigh 

the costs to providers and health plans. 

We believe that the delay of ICD–10 will 

have costs to health plans and 

clearinghouses, though it will be 

beneficial to a group of providers. 

In addition, under section 205 of the 

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

considered at least three alternatives for 

the HPID that are referenced in the 

section VI.C. of this final rule, HHS has 

concluded that the provisions in this 

rule are the most cost effective 

alternative for implementing HHS’ 

statutory requirements concerning 

administrative simplification. 

We did not consider alternatives to 

the addition to the NPI requirements 

that are in this rule. The NPI is the 

standard identifier for health care 

providers under HIPAA. Based on 

ongoing industry feedback, prescriber 

NPIs are not always available. 

Therefore, we believe a regulatory 

requirement closing the prescriber 

loophole in the NPI rule is necessary to 

ensure that the remaining prescribers 

without an NPI obtain one. We estimate 

that the addition will have little 

financial impact on industry and is 

therefore cost effective in its own right. 

Similarly, we have considered four 

alternatives for delaying ICD–10 

compliance, and considered comments 

regarding those alternatives. The 

summary of the alternatives, the 

comments, and our responses to the 

comments are included in the preamble 

and will not be repeated for the RIA. 

The Regulatory Flexibility Act (RFA), 

as amended, requires agencies to 

analyze options for regulatory relief of 

small businesses if a rule has a 

significant impact on a substantial 

number of small entities. For purposes 

of the RFA, small entities include small 

businesses, nonprofit organizations, and 

small government jurisdictions. Small 

businesses are those with sizes below 

thresholds established by the Small 

Business Administration (SBA). 

Individuals and States are not included 

in the definition of a small entity. 

For purposes of the RFA, most 

physician practices, hospitals and other 

health care providers are small entities, 

either by nonprofit status or by having 

revenues less than $10 million for 

physician practices and less than $34.5 

million for hospitals in any 1 year. 

We have determined that the adoption 

of the HPID in this final rule will have 

an impact on a substantial number of 

small entities and that a regulatory 

flexibility analysis, an analysis on the 

impact of this final rule on small 

entities, is required. The regulatory 

flexibility analysis on the impact of the 

adoption of HPID will come after the 

RIA. The regulatory flexibility analysis 

for HPID concludes that, although a 

significant number of small entities may 

be affected by this final rule, the 

economic impact on small entities will 

not be significant. 

We have also determined that the 

delay of the compliance date for the use 

of the ICD–10 medical code set will 

have an impact on a substantial number 

of small entities and this regulatory 

flexibility analysis will follow the RIA 

for the delay of ICD–10. The regulatory 

flexibility analysis for the delay of ICD– 

10 concludes that small entities will be 

positively impacted economically by the 

compliance date delay and that there 

will be no significant burden. 

In addition, section 1102(b) of the Act 

requires a regulatory impact analysis for 

‘‘any rule or regulation proposed under 

mstockstill on DSK4VPTVN1PROD with RULES2

54700 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

title XVIII, title XIX, or part B of [the 

Act] that may have a significant impact 

on the operations of a substantial 

number of small rural hospitals.’’ This 

final rule, with regard to the HPID, ICD– 

10, and NPI provisions, is being 

finalized under title XI, part C, 

‘‘Administrative Simplification,’’ of the 

Act, and, therefore, does not apply. 

However, we assume that the impact to 

small rural hospitals will be similar to 

that of other small providers in terms of 

the HPID, NPI, and ICD–10 provisions; 

that is, implementation of the 

provisions will either not have a 

significant economic impact, in the case 

of HPID and NPI provisions. Or, in the 

case of the ICD–10 provision, there will 

be a positive impact. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1-year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. This final rule contains 

mandates that would likely impose 

spending costs on State governments 

and the private sector, of more than 

$139 million. We will therefore 

illustrate the costs of adoption of the 

HPID to the State governments, 

specifically the impact to State 

Medicaid programs, and to the private 

sector in our consideration of costs to 

health plans in the RIA. We will also 

illustrate the costs of the delay of ICD– 

10 to State Medicaid programs and to 

the private sector in our consideration 

of costs to health plans in the RIA that 

addresses costs and benefits of the delay 

of compliance of ICD–10. 

As to the addition to the NPI 

requirements, again, since the method 

for compliance by covered organization 

health care providers is discretionary 

and could vary, for example, from a 

verbal directive to prescribers whom 

they employ or with whom they 

contract, to updating employment or 

contracting agreements, we believe there 

is no mandate which imposes spending 

costs on State government or the private 

sector in any 1 year of $139 million or 

more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State laws, or 

otherwise has Federalism implications. 

The adoption of the HPID in this final 

rule will not have a substantial direct 

effect on State or local governments, 

does not preempt States, or otherwise 

have Federalism implications. The 

delay of compliance with ICD–10 in this 

final rule will not have a substantial 

direct effect on State or local 

governments, does not preempt States, 

or otherwise have Federalism 

implications. 

In the RIA for implementation of the 

HPID in the April 2012 proposed rule, 

we used the proposed provision that the 

HPID would be implemented for use 

starting in October 2013. In that RIA, we 

used data projected for 2013 as our 

baseline, and 2014 as the first year when 

benefits attributable to use of the HPID 

would begin. We also assumed that 

2013 would be the year in which most 

of the costs would be incurred, with 

2014 and 2015 as the years in which 

transition costs would be incurred. We 

projected those benefits and costs out 

until 2023. 

Because this final rule has established 

a date 4 years from effective date of this 

rule as the date by which all covered 

entities will be required to use HPIDs to 

identify health plans in the standard 

transactions, we have changed the year 

that we will use as a baseline from 2013 

to 2016. (See section II.E. of this final 

rule for more information regarding 

effective and compliance dates.) For the 

RIA in this final rule, we assume, as we 

did in the proposed rule, that benefits 

from the use of the HPID will occur over 

a ten-year period beginning the first full 

year covered entities are required to use 

the HPID in standard transactions. That 

10-year period will begin in 2017 and 

continue through 10 years (that is, 

through 2026) and transition costs will 

be incurred in the years 2017 through 

2018. 

Because we have shifted our costs and 

savings forward three years, our 

conclusions on costs and benefits are 

different from those in the RIA of the 

April 2012 proposed rule. 

B. Consideration of Public Comments 

Regarding the Impact Analysis 

In the April 2012 proposed rule, we 

solicited additional data that would 

help us determine more accurately the 

impact on the various categories of 

entities affected by the April 2012 

proposed rule. We received numerous 

comments on our analysis of the costs 

and benefits of implementing the HPID 

and the delay in the compliance date of 

ICD–10. We have provided summaries 

of those comments and our responses. 

Some of our assumptions in the April 

2012 proposed rule have changed 

because of new information we received 

through public comments. However, the 

assumptions that we changed were 

based on comments that were 

qualitative or anecdotal. The comments 

did not contain new data or estimates 

that would impact the quantitative 

estimates with regard to the impact of 

implementation of HPID and delay of 

ICD–10 that were made in the April 

2012 proposed rule. Therefore, none of 

the comments we received required us 

to change the calculations and 

conclusions of the RIA that we provided 

in the April 2012 proposed rule with 

regard to both the HPID and ICD–10 

provisions. 

We will summarize those comments 

and the changes we made to the 

assumptions. 

We have maintained or summarized 

sections of the RIA that we provided in 

the April 2012 proposed rule in which 

comments were made or new 

information was provided within the 

comments. We removed or summarized 

sections of the RIA where we received 

no comments. 

Although we have not changed any of 

the calculations or conclusions of the 

RIA that we provided in the April 2012 

proposed rule with regard to the ICD– 

10 provisions of that rule, we have 

duplicated the summary tables from the 

April 2012 proposed rule that illustrate 

those calculations for reference. 

C. 

In deciding to adopt the HPID as the 

format for the national unique health 

plan identifier, we considered a number 

of alternatives, on which we solicited 

public and stakeholder comments. As 

noted, we did not consider alternatives 

to the addition to the NPI requirements. 

We did not receive comments with 

regard to the alternatives considered in 

the April 2012 proposed rule regarding 

the HPID and the NPI. For more detail 

about the alternatives we considered, 

please refer to the April 2012 proposed 

rule. Having received no comments 

meriting a change in policy, we are 

finalizing the policy to adopt an HPID 

that is a 10-digit, all-numeric identifier 

with a Luhn check-digit as the 10th 

digit. 

D. Impacted Entities—HPID and NPI 

All HIPAA covered entities may be 

affected by the HPID standard as 

detailed in this final rule although, as 

we estimate, only a segment of covered 

entities will have substantive cost or 

benefits associated with the adoption of 

the HPID. Impacted HIPAA covered 

entities include all health plans, health 

care clearinghouses, and health care 

providers that transmit health 

information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a standard. 

Table 3 outlines the estimated number 

of entities that may be affected by the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54701 

HPID and OEID, along with the sources 

of those data. 

TABLE 3—TYPES AND NUMBERS OF AFFECTED ENTITIES

Type Number Source 

Health Care Providers—Offices of Physicians (includes offices of mental health specialists and 

substance use treatment practitioners).

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 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 2007 Economic Census Data—Health Care and Social Assistance (sector 

62) using the number of establishments 

∼NAICS code 623: Nursing Homes & Residential Care Facilities n=76,395 x 

87 percent (percent of nursing and residential care facilities not associated with a hospital) = 66,464 

Other Health Care Providers—Offices of dentists, 

chiropractors, optometrists, mental health practitioners, substance use treatment 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 2007 Economic Census Data—Health Care and Social Assistance (sector 

62) using the number of establishments.: 

∼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 Plans—Commercial: Impacted commercial 

health plans considered in this RIA are health insurance issuers; that is, insurance companies, 

services, or organizations, including HMOs, that 

are required to be licensed to engage in the business of insurance in a State..

1,827 This number represents the most recent number as referenced in ‘‘Patient 

Protection and Affordable Care Act; Standards Related to Reinsurance, 

Risk Corridors, and Risk Adjustment,’’ Proposed Rule, 2011 Federal 

Register (76 FR 41930), July 15, 2011,’’ from http://federalregister.gov/a/ 

2011-17609 

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

Health Plans—All ...................................................... 1,887 Insurance issuers (n=1,827) + Medicaid agencies + Medicare, VHA, 

TRICARE, and IHS (n=60)= 1,887 total health plans 

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

Proposed Rulemaking http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/ 

2011-21193.pdf 

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

and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf, based 

on a study by Gartner. 

Pharmacy Benefit Managers (PBMs) ....................... 60 National Council for Prescription Drug Programs (NCPDP) May 17, 2012 

letter to Centers for Medicare & Medicaid Services, Re: CMS–0040–P. 

E. Scope and Methodology of the Impact 

Analysis for the HPID and NPI 

This impact analysis estimates the 

costs and benefits that will be realized 

through the implementation and use of 

the HPID. We do not analyze the costs 

and benefits of the addition to the NPI 

requirements, apart from the costs 

associated with applying for an NPI that 

are already addressed in section V.B. of 

this final rule concerning the collection 

of information requirements. Aside from 

the time necessary to apply, we do not 

anticipate any financial impact as a 

result of the addition to the NPI 

requirements. We asked for comments 

on this approach. 

Comment: A commenter expressed 

concerns about the burden placed on 

hospitals that would be incurred in 

order to meet the addition to the NPI 

requirements. The commenter noted 

that NPI requirements would require 

hospitals and other organization health 

care providers to maintain a central 

location where prescribers’ NPIs would 

be tracked as well as provide 24-hour 

staffing to provide pharmacies with 

these NPIs. 

Response: The preamble makes clear 

that the rule does not specify how 

organization covered health care 

providers should impose the 

requirement on individual health care 

providers and that they may have a 

number of alternatives to do so, for 

example, through a written agreement, 

an employment contract, or a directive 

to abide by the organization health care 

provider’s policies and procedures. 

Thus, we do not believe compliance 

with this new requirement will 

necessarily be burdensome. 

In this RIA, we do not analyze the 

impact of implementation and use of the 

OEID. The OEID, as finalized herein, is 

a data element that could be voluntarily 

used by entities other than health plans. 

These other entities may include, for 

example, health care clearinghouses, 

transaction vendors, and third party 

administrators that provide 

administration or management for selfinsured group health plans. The range of 

total entities that may apply for and use 

an OEID is from zero to approximately 

1,000 entities (750 Third party 

administrators + 169 transaction 

vendors + 60 Pharmacy Benefit 

Managers). Therefore, using the 

methodology employed in this RIA, the 

cost for implementation of the OEID for 

other entities ranges from no cost to 

over $500 million, depending on 

choices made by those entities. Because 

of the uncertainty inherent in this range 

of cost, based on the number of entities 

that may apply for the OEID we will not 

attempt to quantify the impact of 

mstockstill on DSK4VPTVN1PROD with RULES2

54702 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

20 ‘‘Excess Billing and Insurance-Related 

Administrative Costs,’’ by James Kahn, in The 

Healthcare Imperative; Lowering Costs and 

Improving Outcomes: Workshop Series Summary, 

edited by Pierre L. Yong, Robert S. Saunders, and 

Leigh Anne Olsen, Institute of Medicine of the 

National Academies, the National Academies Press, 

Washington, DC: 2010. 

applying for or using an OEID beyond 

this limited analysis. Nor will we 

include this range of costs in our 

summary of this RIA. However, we can 

assume that implementing and using an 

OEID would be accompanied by a 

proportional range of costs and benefits 

akin to the cost and benefits estimated 

for health plans in this RIA. In the 

proposed rule, we welcomed 

stakeholder comment on the number 

and kind of entities that may apply for 

and use an OEID. 

Comment: A commenter noted that he 

was unable to ascertain whether 

Pharmacy Benefit Managers (PBMs), 

TPAs, transaction vendors and other 

entities that might want to obtain OEIDs 

were included in the RIA. 

Response: We limited our RIA to the 

analysis of costs and benefits in relation 

to the HPID, and not the costs or 

benefits of the OEID. We concluded that 

there was no way of projecting how 

many other entities would ultimately 

obtain and use an OEID as it is a 

voluntary enumeration. As such, we did 

not consider costs or benefits to entities 

that might want to obtain OEID. 

However, we assume that there will 

be some impact to PBMs, just as we 

assume that there will be some impact 

to other entities that may obtain and use 

an OEID. We have included PBMs in 

Table 3 as a category of impacted 

entities, even as we are unable to 

quantify the impact on PBMs. 

We estimate the cost of the 

Enumeration System to be $1.5 million. 

The Federal Government will bear the 

costs associated with the Enumeration 

System that will enumerate health plans 

and other entities and maintain their 

HPID and enumeration information. 

These include the costs of enumerating 

health plans and other entities, the cost 

of maintaining health plan and other 

entity information in the Enumeration 

System, and the costs of disseminating 

HPID and OEID data to the health care 

industry and others, as appropriate. 

HHS will develop the Enumeration 

System, and conduct the application, 

updating, and data dissemination 

activities. We will not provide any 

further analysis of this cost within the 

narrative of the RIA. 

The costs to health plans of applying 

for an HPID and updating and 

maintaining the information in the 

Enumeration System are detailed in 

section III. of this final rule. We will 

reflect these costs in the summary of the 

costs to health plans in this RIA. 

While we assume that adoption of the 

HPID will affect a broad range of health 

care providers, as illustrated in Table 3, 

we only examine the costs and benefits 

of implementation and use of the HPID 

on two types of health care providers: 

hospitals and physician practices. We 

did not analyze the impact to nursing 

and residential care facilities, dentists, 

or suppliers of durable medical 

equipment. 

There are two reasons for narrowing 

the scope of this analysis to only two 

categories of health care providers: First, 

we have very little data on the usage of 

EDI among dentists, suppliers of durable 

medical equipment, nursing homes, and 

residential care facilities. The lack of 

data for these types of health care 

providers has been noted in other 

studies on administrative 

simplification.20 Second, we assume 

that the greatest benefits will be gained 

by hospitals and physician practices as 

they conduct the majority of standard 

transactions. In our proposed rule, we 

welcomed comment from industry and 

the public as to our assumptions. 

We did not include an analysis of the 

impact on pharmacies because the HPID 

will not be used extensively in 

electronic transactions by the pharmacy 

industry. Therefore, we assume no 

impact of the HPID on pharmacies. 

Comment: A commenter disagreed 

with the assumption that there would be 

no impact to pharmacies with regard to 

implementing and using the HPID. The 

commenter noted that the HPID/OEID 

would be used in other areas as defined 

by the NCPDP and ASC X12. The 

commenter noted that the pharmacy 

industry has presented 

recommendations to NCVHS on specific 

fields in the NCPDP Telecommunication 

VD.0 Standard and ASC X12 5010 in 

which the HPID/OEID might be used, 

and the commenter included a list of 

recommendations for where and under 

what circumstances an HPID might be 

required to be used. 

Response: While the commenter’s 

recommendations of where and under 

what circumstances the HPID might be 

used in future ASC X12 and NCPDP 

standards appear reasonable, they were 

not considered in the context of the RIA 

because they went beyond the 

provisions of the April 2012 proposed 

rule, and, subsequently, this final rule 

with regard to required use of the HPID. 

The commenter did not argue that the 

pharmacy industry would use the HPID 

in the manner in which it is required in 

the provisions of this final rule. 

Therefore, we did not change the 

assumption we made regarding the 

pharmacy industry’s use of the HPID as 

noted in the April 2012 proposed rule: 

‘‘[T]he HPID will not be used 

extensively in electronic transactions by 

the pharmacy industry’’ (77 FR 22979). 

With respect to health care providers, 

only health care providers that transmit 

health information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a HIPAA 

transaction standard are considered 

covered entities under HIPAA. 

We assumed that the HPID may be 

used to identify health plans in 

nonelectronic transactions as well, but, 

as this standard is only required for use 

in HIPAA standard transactions, we 

have not tried to measure the impact on 

nonelectronic transactions. The costs 

and benefits included in this analysis do 

not include infrastructure or software 

costs for health care providers who are 

equipping their practices for the 

transmittal of electronic transactions for 

the first time. The costs in this impact 

analysis include only those that are 

necessary to implement the HPID. 

We include health care 

clearinghouses and transaction vendors 

as affected entities in Table 3. 

Transaction vendors are entities that 

process claims or payments for other 

entities, which may include health 

plans. Transaction vendors may not 

meet the HIPAA definition of health 

care clearinghouse, but as used in this 

context, health care clearinghouses 

would constitute a subset of transaction 

vendors. Payment vendors are a type of 

transaction vendor—a transaction 

vendor that ‘‘associates’’ or 

‘‘reassociates’’ health care claim 

payments with the payments’ 

remittance advice for either a health 

plan or provider. For our purposes here, 

transaction vendors do not include 

developers or retailers of computer 

software, or entities that are involved in 

installing, programming or maintaining 

computer software. Health care 

clearinghouses and transaction vendors 

may be impacted because their systems 

would have to accommodate the 

adoption of the new standards such as 

the HPID to identify health plans in 

standard transactions. However, we did 

not calculate costs and benefits to health 

care clearinghouses and transaction 

vendors in this cost analysis because we 

assume that any associated costs and 

benefits will be passed on to the health 

plans or providers, and will be included 

in the costs and benefits we apply to 

health plans or providers. 

We used the total number of health 

insurance issuers as the number of 

commercial health plans that will be 

affected by this final rule, and used this 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54703 

number in our impact analysis. A health 

insurance issuer is an insurance 

company, insurance service, or 

insurance organization, including an 

HMO, that is required to be licensed to 

engage in the business of insurance in 

a State, and that is subject to State law 

that regulates insurance. Although this 

number is specific to the individual and 

small group markets, we assume that 

many health insurance issuers in the 

large group market are included in this 

number because they are likely to 

market to individuals and small groups 

as well. While the category or ‘‘health 

insurance issuers’’ represents a larger 

number of health plans than those 

included in the NAICs codes for ‘‘Direct 

Health and Medical Insurance Carriers’’ 

(897 firms), we believe the category of 

health insurance issuers is a more 

accurate representation of companies 

conducting HIPAA transactions. 

Companies that provide Medicaid 

managed care plans are included in the 

category of commercial health plans. 

Although self-insured group health 

plans meet the HIPAA definition of 

‘‘health plan,’’ we did not include them 

in this impact analysis. While selfinsured group health plans will be 

required to obtain the HPID, we 

assumed that, with a few exceptions, 

such plans do not send or receive 

HIPAA electronic transactions because 

most are not involved in the day-to-day 

activities of a health plan and outsource 

those services to third party 

administrators or transaction vendors. 

Because they do not meet the definition 

of ‘‘health plans,’’ TPAs and 

transactions vendors are not required to 

obtain or use an HPID, though they may 

elect to obtain and use an OEID. The 

costs and benefits associated with the 

HPID are applicable only to entities that 

are directly involved in sending or 

receiving standard transactions, though 

we recognize that some of the cost and 

benefits will trickle down to employers 

and their employees. 

The projection of costs in this RIA is 

based on the number of health plans 

that will use the HPID in standard 

transactions. However, we do not have 

data concerning how many health plans 

are actually identified in standard 

transactions, as opposed to ‘‘other 

entities’’ that are identified in their 

stead. Therefore, we have no assurance 

of how many health plans will use the 

HPID in standard transactions. We base 

our cost estimates on the highest 

number of entities that would likely use 

the HPID in standard transactions. The 

number of health plans is used as a 

factor in our calculation of costs, but not 

in our calculation for savings. Therefore, 

we took a conservative approach to the 

costs to health plans which we believe 

is warranted given the uncertainties in 

our estimates. In our proposed rule, we 

solicited industry and stakeholder 

comments on our assumptions. 

Comment: We received a number of 

comments that expressed concern 

regarding the validity of the RIA for the 

HPID because the commenters believed 

that the purpose and the use of the HPID 

was unclear. 

Response: We cannot project how 

individual health care entities might 

implement and use the HPID given their 

specific business organization and 

needs. We also believe that, to the 

extent that the HPID will be used to 

facilitate transactions in ways that are 

beyond what is required by the 

provisions of this final rule, it is not 

clear what all the downstream effects of 

adopting a national health plan 

identifier may be. We believe that the 

HPID may be used within and outside 

of the transactions in ways that we have 

not required or envisioned. However, 

the required use of the HPID was 

specified in the preamble of the April 

2012 proposed rule. The only required 

use of the HPID in this final rule is that 

if a health plan is identified in the 

standard transactions, a covered entity 

must identify a health plan using a 

HPID. 

The RIA put forward in the April 

2012 proposed rule is based on the 

HPID being used as required by the 

provisions of this final rule. We agree 

that there is uncertainty in projecting 

and estimating the benefits and costs, 

even given this specific usage. We 

emphasize that the RIA is based on the 

premise that the HPID is a foundational 

standard that will facilitate the routing 

of all standardized transactions, but not 

necessarily directly related to specific 

benefits. We deliberately did not claim 

in the April 2012 proposed rule that the 

HPID would be directly responsible for 

cost savings due to its required use in 

the standard transactions, with the 

exception of attributing some cost 

benefit to time savings in routing certain 

transactions. The cost savings, we 

believe, are derived from an efficiency 

in routing transactions which, in turn, 

will incentivize more health care 

entities to use those transactions. 

Comment: A commenter stated that 

the cost savings outlined in the April 

2012 proposed rule was conducted prior 

to the implementation of Version 5010 

and projected savings are therefore 

questionable. 

Response: While much of the RIA in 

the April 2012 proposed rule was 

developed before the January 1, 2012 

implementation of Version 5010, some 

of the baseline assumptions and data 

were based on the cost and savings 

estimates of Version 5010 as included in 

the RIA of the Modifications final rule. 

The RIA was also written under the 

assumption that the HPID would be 

used in Version 5010 standard 

transactions. That being said, the 

benefits of the HPID are only 

tangentially related to the benefits of 

Version 5010, and we do not believe the 

implementation of Version 5010 has a 

direct affect on the savings or costs of 

implementing and using HPID. 

Comment: A commenter suggested 

that we only move forward to adopt the 

HPID when the savings to be realized 

from its use exceeded the cost of its 

implementation. 

Response: As illustrated in Table 12, 

our analysis concludes that the savings 

outweighs the cost, so it is reasonable to 

assume that we should move forward to 

adopt the HPID. We reiterate that we 

based many of our calculations on the 

assumption that the HPID is a 

foundational standard that will enable 

other initiatives and efficiencies to be 

built off of it. HPID cannot be viewed as 

an individual band-aid that fixes a 

specific problem. Instead, HPID is part 

of a broader picture of standardizing 

billing and insurance-related 

transactions and tasks. 

F. Costs Associated with HPID and NPI 

1. Costs of HPID to Health Plans 

Health plans will bear most of the cost 

of implementing the HPID. We estimate 

the cost to health plans to implement 

and use an HPID will be 25 percent of 

the costs that the impact analysis in the 

Modifications final rule calculated in 

order for industry to implement Version 

5010 of the standard transactions. As 

noted previously, implementation of the 

HPID will be analogous to—yet 

significantly less than—implementation 

of Version 5010 because the same 

systems will be affected, and, in both 

cases, there are both implementation 

and transition costs. 

For more detail on the justification for 

using 25 percent of the cost estimates in 

the Modifications final rule, please refer 

to the April 2012 proposed rule. 

The estimate that HPID 

implementation and transition will be 

25 percent of the cost of Version 5010 

is a conservative estimate, we believe, 

and it is probable that the costs will be 

much less. However, by estimating 

HPID implementation at 25 percent of 

the cost of Version 5010, we are able to 

reflect the uncertainty in our 

calculations because our calculations 

maintain the range of minimum and 

maximum costs from the Modifications 

final rule. 

mstockstill on DSK4VPTVN1PROD with RULES2

54704 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

In addition, the cost estimates from 

the Modifications final rule have been 

adjusted down because we estimate 

there will be fewer health plans 

impacted by this rule than are impacted 

by the Modifications final rule. For costs 

associated with applying for and 

obtaining an HPID, see section V.A. of 

this final rule. In our proposed rule, we 

solicited comments and data from the 

industry and other stakeholders on this 

assumption, but received no substantive 

comments in this regard. 

While we expect these costs will 

accrue between the time the final rule 

is published and the date the HPID is 

fully implemented, for purposes of 

simplification we have placed all 

system implementation costs— 

including those for small health plans— 

in 2016. Transition costs will occur 

from 2017 through 2018. 

TABLE 4—HPID COST FOR COMMERCIAL AND GOVERNMENT HEALTH PLANS* 

Cost category 

Minimum cost 

estimate per 

modifications 

rule 

(in millions) 

Maximum cost 

estimate per 

modifications 

rule 

(in millions) 

Applied 

percentage 

Minimum estimated cost of 

implementing 

HPID 

(in millions) 

Maximum estimated cost of 

implementing 

HPID 

(in millions) 

Commercial Health Plans ** System Implementation ...... $1935.0 $3870.5 25% $483.76 $967.63 

Transition (Year 2 and 3) ... 341.5 683.0 25% 85.37 170.76 

Government Health Plans 

(Medicare, Medicaid, 

VHS, TRICARE, IHS).

System Implementation ...... 281.0 537.8 25% 70.25 134.45 

Transition (Year 2 and 3) ... 49.6 94.9 25% 12.40 23.73 

All Health Plans .................. Enrollment and Updates *** ........................ ........................ ........................ 0.18 0.18 

System Implementation ...... ........................ ........................ ........................ 554.19 1102.26 

Transition (Year 2 and 3) ... ........................ ........................ ........................ 97.77 194.48 

Total ............................. ............................................. ........................ ........................ ........................ 651.95 1296.74 

* Based on 2012 dollars 

** Minimum and maximum cost estimates per Modifications Rule for commercial health plans is adjusted to account for a lesser number of 

health plans considered than is estimated in the Modifications Rule. 

*** See section V.A of this final rule; Collection of Information Requirements, for calculations on enrollment to HPID enumeration system. 

2. Costs of HPID for Physician Practices 

and Hospitals 

Covered physician practices and 

hospitals will be required to use the 

HPID in standard transactions. Health 

care providers that do not conduct 

covered transactions electronically (for 

example, by submitting a paper claim 

that the health plan subsequently 

transmits electronically to a secondary 

payer) could also use the HPID, but 

would not be required to do so. 

Implementation costs for covered 

physician practices and hospitals 

depend on whether they generate claims 

directly or use a health care 

clearinghouse or transaction vendor. 

If covered physician practices and 

hospitals submit claims directly, they 

would incur implementation costs in 

converting their systems to 

accommodate the HPID. Some covered 

health care providers may choose to use 

the services of software system vendors, 

billing companies, transaction vendors, 

and/or health care clearinghouses to 

facilitate the transition to the HPID. 

These health care providers would incur 

costs in the form of potential fee 

increases from billing agents or health 

care clearinghouses. For example, if a 

health care provider pays a fee to a 

billing agent or health care 

clearinghouse to process its health care 

transactions, the billing agent or health 

care clearinghouse might increase the 

cost to perform this service for the 

health care provider. 

Table 5 illustrates the costs to covered 

hospitals and physician practices. 

Again, the costs are 25 percent of the 

costs estimated in the Modifications 

proposed and final rules. In our 

proposed rule, we invited stakeholder 

comment on our assumptions and 

method for estimating the 

implementation costs, but received no 

comments in this regard. 

TABLE 5—HPID COSTS TO COVERED HOSPITALS AND PHYSICIAN PRACTICES * 

I II III IV V VI VII 

Cost category 

Minimum cost 

estimate per 

modifications 

rule 

(in millions) 

Maximum cost 

estimate per 

modifications 

rule 

(in millions) 

Applied 

percentage 

Estimated cost 

of implementing HPID 

(in millions) 

Maximum estimated cost of 

implementing 

HPID 

(in millions) 

Hospitals ............................. System Implementation ...... $1042.5 $2085.9 25% $260.63 $521.48 

Transition (Year 2 and 3) ... 184.0 368.1 25% 45.99 92.03 

Physician Practices ............. System Implementation ...... 486.8 973.6 25% 121.70 243.40 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54705 

21 ‘‘An Updated Survey of Health Care Claims 

Receipt and Processing Times, May 2006,’’ 

America’s Health Insurance Plans (AHIP) Center for 

Policy and Research. 

22A comprehensive survey of 55 percent of 

Oregon’s hospitals and 225 of the State’s 

ambulatory clinics. http://www.oregon.gov/OHPPR/ 

HEALTHREFORM/AdminSimplification/Docs/ 

FinalReport_AdminSimp_6.3.10.pdf. 

23AHIP, 2006. 

24 ‘‘An Updated Survey of Health Care Claims 

Receipt and Processing Times, May 2006,’’ 

America’s Health Insurance Plans (AHIP) Center for 

Policy and Research. 

25 ‘‘National Health Plan Identifier White Paper,’’ 

prepared by the American Medical Association 

(AMA) Practice Management Center (PMC), 

September 22, 2009. 

TABLE 5—HPID COSTS TO COVERED HOSPITALS AND PHYSICIAN PRACTICES *—Continued 

I II III IV V VI VII 

Cost category 

Minimum cost 

estimate per 

modifications 

rule 

(in millions) 

Maximum cost 

estimate per 

modifications 

rule 

(in millions) 

Applied 

percentage 

Estimated cost 

of implementing HPID 

(in millions) 

Maximum estimated cost of 

implementing 

HPID 

(in millions) 

Transition (Year 2 and 3) ... 85.9 171.8 25% 21.48 42.95 

All Providers (Total) ............ System Implementation ...... 1529.3 3059.5 25% 382.33 764.88 

Transition (Year 2 and 3) ... 269.9 539.9 25% 67.47 134.98 

Total ............................. ............................................. ........................ ........................ ........................ 449.80 899.86 

* Based on 2012 dollars 

G. Savings Associated With HPID and 

NPI 

1. Savings to Health Plans 

In our proposed rule, we identified 

two areas in which health plans will 

experience savings due to the adoption 

of HPID: a reduction in the number of 

pended claims and an increased use of 

electronic health care transactions. 

Comment: A commenter disagreed 

with the savings analysis stating that the 

savings to be realized are from Version 

5010 implementation and not due to use 

of the HPID. 

Response: The savings and benefits 

associated with the HPID are not the 

same as the savings that were calculated 

in the Modifications final rule, although 

we derive the costs associated with the 

HPID by using the Modification final 

rule costs as a baseline. 

The savings associated with the HPID 

are derived from an increase in three 

transactions and from the number of 

pended claims that we have projected 

will be decreased on account of better 

routing through use of the HPID . In 

contrast, the savings associated with 

Version 5010 implementation are based 

on benefits in three areas: Better 

standards or savings due to improved 

claims standards, cost savings due to 

new users of claims standards, and 

operational savings or savings due to 

increased auxiliary standards usage. 

In both this final rule and the 

Modifications final rule, some of the 

cost savings are based on an increase in 

electronic transactions. However, the 

specific electronic transactions that will 

be affected are different in the two rules, 

and the calculations used to link savings 

to the increase are different. 

2. Pended Claims 

Pended claims are claims that 

necessitate a manual review by the 

health plan. Pended claims are more 

expensive than ‘‘clean’’ claims, which 

do not require a manual review or 

additional information in order to be 

processed. We are projecting a 5 to 10 

percent annual reduction of pended 

claims as attributable to implementation 

of the HPID. We have calculated the 

savings that would come from this 

estimated projection as resulting from: 

data about claims receipts from the 

trade association America’s Health 

Insurance Plans (AHIP),21 information 

about eligibility transactions from the 

Oregon Provider and Payer Survey,22

and data from the Modifications 

proposed and final rules. 

One of the main goals of the use of the 

HPID is to have a consistent identifier 

for each health plan for use in standard 

transactions. This lack of a single 

identifier has resulted in the need for 

manual intervention to resolve 

eligibility questions and billing and 

payment issues when there are 

inconsistent approaches for identifying 

health plans. Covered health care 

providers would no longer have to keep 

track of and use multiple identifiers for 

a single health plan. After the initial 

outlay for changes to their systems, 

health care providers would be able to 

consistently identify the health plan to 

which they must submit claims. 

According to AHIP, 14 percent of all 

claims were pended by health plans.23

Assuming 6.8 billion claims will be 

submitted in 2017, as is projected in the 

Modifications proposed rule, this 

calculates to about 950 million pended 

claims (Table 6, Column 2). 

We assumed that pended claims will 

decrease by a minimum of 5 percent to 

a maximum of 10 percent annually 

attributable to use of the HPID (Table 6, 

Columns 4 and 6). This estimate is 

based on an AHIP survey entitled, ‘‘An 

Updated Survey of Health Care Claim 

Receipt and Processing Times.’’ The 

survey concluded that 35 percent of all 

claims are pended because they are 

duplicate claims (or assumed to be 

duplicate claims), 12 percent are 

pended because of the lack of necessary 

information, 5 percent because of 

coordination of benefits (COB), and 1 

percent because of invalid codes.24 The 

HPID may help alleviate these particular 

pended claims issues by enabling the 

automation of the COB process 25 and 

providing for more accurate routing of 

claims to the correct payer. This 

conclusion presumes that providing an 

HPID will lead to a measurable 

reduction of duplicate claims and/or 

claims pended because of a lack of 

necessary information. There is a large 

measure of uncertainty in this 

assumption and, as noted, the HPID 

would be foundational for subsequent 

activities such as the automation of the 

COB process. By itself, though, the HPID 

does not automate any processes. To 

reflect the uncertainty, we apply a range 

of percentages to the assumption. 

According to AHIP, it costs a health 

plan $0.85 to reply electronically to a 

‘‘clean’’ claim submission and $2.05 to 

reply to claims that ‘‘necessitate manual 

or other review cost.’’ Therefore, a 

health plan could save $1.20 per claim 

by automating a claim otherwise 

needing manual review (Table 6, 

Column 3). In order to calculate the 

savings from a 5 to 10 percent decrease 

in pended claims due to 

implementation of the HPID, we 

mstockstill on DSK4VPTVN1PROD with RULES2

54706 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

multiply the projected number of 

pended claims (Table 6, Column 2) 

times 5 percent for the low estimate and 

10 percent for the high estimate. We 

then multiplied the high and low range 

of numbers of pended claims that will 

be avoided due to use of HPID times the 

$1.20 per claim that can be saved. In considering how to project this cost 

avoidance, we decided that the 5 to 10 

percent savings should continue each 

year over the 10 years starting the first 

full year the HPID is required for use in 

standard transactions, 2017, resulting in 

a savings of approximately $776 million 

to $1.6 billion. As stated previously, we 

consider the HPID standard adopted in 

this final rule to be foundational 

standards that will be built upon by 

future operating rules and regulations 

over the next decade. 

TABLE 6—ANNUAL SAVINGS TO HEALTH PLANS DUE TO DECREASE IN PENDED CLAIMS

[In millions]* 

Year 

Number of 

pended claims 

annually 

(in millions)** 

Cost to review a 

pended claim*** 

LOW number of 

pended claims 

(5%) that will be 

avoided attributable to HPID 

(in millions) 

LOW total annual 

savings through 

reduction in 

pended claims 

(in millions) 

HIGH number of 

pended claims 

(10%) that will be 

avoided attributable to HPID 

(in millions) 

HIGH total annual savings 

through reduction 

in pended claims 

(in millions) 

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

2017 ................................. 952.0 $1.35 47.6 $64.3 95.2 $128.5 

2018 ................................. 994.0 1.35 49.7 67.1 99.4 134.2 

2019 ................................. 1036.0 1.35 51.8 69.9 103.6 139.9 

2020 ................................. 1077.4 1.35 53.9 72.7 107.7 145.5 

2021 ................................. 1120.5 1.35 56.0 75.6 112.1 151.3 

2022 ................................. 1165.4 1.35 58.3 78.7 116.5 157.3 

2023 ................................. 1212.0 1.35 60.6 81.8 121.2 163.6 

2024 ................................. 1260.5 1.35 63.0 85.1 126.0 170.2 

2025 ................................. 1310.9 1.35 65.5 88.5 131.1 177.0 

2026 ................................. 1363.3 1.35 68.2 92.0 136.3 184.0 

Total .......................... ............................ ............................ ............................ 776 ............................ 1,551 

* Based on 2012 dollars 

** Based on 14% of total number of annual claims as projected in Modifications proposed rule. 

*** AHIP, 2006, adjusted to 2012 dollars. 

Comment: A commenter stated that 

the 5 to 10 percent reduction in pended 

claims was a gross overestimate. The 

commenter, representing a health plan, 

stated that the health plan has a front 

end clearinghouse that verifies 

eligibility and then routes transactions 

or rejects them. The commenter stated 

that they anticipate no reduction in 

pended claims volume. 

Response: We appreciate the 

commenter’s perspective, although we 

have no certitude as to how widespread 

this way of filtering claims may be 

among health plans. We received no 

other comments about our calculations 

or assumptions with regard to our 

estimate on decreased pended claims. 

Therefore, we are maintaining the 

estimates and calculations on our 

assumptions in this regard. 

Comment: A commenter expressed 

concerned that the cost savings analysis 

did not reflect the efficiency gained by 

the HPID as proposed by the April 2012 

proposed rule and adopted by this final 

rule. The commenter stated that the 

time and cost savings as stated in the 

April 2012 proposed rule could only be 

achieved if the health plan was 

enumerated down to the product level. 

Another commenter stated similarly that 

the cost savings estimated in the 

proposed rule could not be realized 

without the adoption of an HPID that 

was much more granular; that is, an 

HPID that identified the entity that 

holds the participation contract with the 

physician, an identification of the 

patient-specific benefit plan, and the 

claim specific fee schedule identifier. 

Response: The provisions in the April 

2012 proposed rule and this final rule 

do not require health plans to 

enumerate to the product level. 

However, we do believe that, even at the 

level in which health plans must 

enumerate as per this final rule, there 

will be the savings that we estimate 

herein. One of the above-referenced 

commenters noted that, if health plans 

were enumerated at a more granular 

level than that which we have adopted 

in this final rule, then the need for 

manual processes in 80 to 85 percent of 

the transactions could be eliminated. 

The estimated cost savings in this final 

rule, derived from use of the HPID as it 

is adopted, is based, partly, on a 

decrease in a particular manual 

process—the process that stems from 

processing pended claims. However, the 

decrease in this manual process is 

substantially less than what the 

commenter envisioned were health 

plans to enumerate at a lower level. 

We estimated a 5 to 10 percent 

decrease in total pended claims based 

on the reasoning that a standard HPID 

used in the standard transactions would 

improve routing and so decrease a small 

number of pended claims. We do not 

presume to infer that the HPID, as it is 

adopted, will decrease a large 

proportion of manual processes related 

to eligibility and claim submissions. 

In this final rule, we maintain the 

range of savings, as presented in the 

April 2012 proposed rule that is 

possible through implementation of the 

HPID. 

3. Increase in Electronic Transmittal of 

Three Standard Transactions 

The implementation of all 

administrative simplification initiatives 

mandated by the Affordable Care Act 

are expected to streamline HIPAA 

electronic transactions, make them more 

consistent, and decrease the 

dependence on manual intervention in 

the transmission of health care and 

payment information. This, in turn, will 

drive more health care providers and 

health plans to utilize electronic 

transactions in their operations. Each 

transaction that moves from a 

nonelectronic, manual transmission of 

information to an electronic transaction, 

brings with it material and time cost 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54707 

26Tammy Banks, Director, Practice Management 

Center and Payment Advocacy, ‘‘Testimony By The 

American Medical Association,’’ National Committee on Vital and Health Statistics 

Subcommittee on Standards, July 19, 2010. 

savings by virtue of reducing or 

eliminating the paper, postage, and 

equipment and additional staff time 

required to conduct paper-based 

transactions. 

We estimate an annual increase of 1 

(LOW) to 2 (HIGH) percent in the use of 

the eligibility for a health plan 

transaction and the health care claim 

status transaction attributable to the 

implementation of the HPID from 2017 

through 2026 as illustrated in Table 7. 

We estimate an annual increase of 2 

(LOW) to 3 (HIGH) percent in the use of 

the electronic remittance advice 

transaction resulting from the adoption 

of the HPID. These are not annual 

increases in percentage points, but 

rather percent increases in the use of 

electronic transactions from the year 

before. The impact of the HPID on the 

electronic health care payment and 

remittance advice transaction is more 

than the impact on the other two 

transactions because NCVHS testimony 

supported the notion that the greatest 

impact of a standardized health plan 

identifier would be on the payment 

process.26

For more detail regarding our 

assumptions and calculations in this 

regard, please refer to the April 2012 

proposed rule. 

We estimate that the savings to health 

plans because of increased usage in 

three transactions will be at least $850 

million within 10 years of HPID use in 

transactions. Health plan savings are 

summarized in Table 7. 

The results of this calculation are 

higher in cost savings than the results of 

the same calculation in the April 2012 

proposed rule. We have projected that 

the number of overall health care 

information transactions—electronic 

and nonelectronic—increases with 

every year. The overall number of health 

care information transactions is a 

primary factor in our projection of 

savings derived from an increase in 

electronic transactions. Because the cost 

savings begins in 2017 in this final rule, 

in contrast to 2014 as was assumed in 

the April 2012 proposed rule, there is an 

increase in the cost savings of this rule 

when compared to the April 2012 

proposed rule. 

TABLE 7—ANNUAL COST SAVINGS FOR HEALTH PLANS FROM INCREASE DUE TO HPID IN VOLUME OF THREE

ELECTRONIC TRANSACIONS * 

I II III IV V VI VII 

Savings from increase in eligibility for a 

health plan transaction attributable to 

HPID 

Savings from increase in health care 

claim status transaction attributable 

to HPID 

Savings from increase in health care 

payment and remittance advice 

transaction attributable to HPID (remittance advice only) 

Year LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

attributable to 

HPID (in millions) 

LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

attributable to 

HPID (in millions) 

LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

attributable to 

HPID (in millions) 

2017 ..................... $41.5 $72.2 $7.4 $12.3 $9.2 $23.0 

2018 ..................... 44.8 83.0 8.1 14.7 11.0 27.6 

2019 ..................... 48.4 89.7 8.9 16.2 12.4 33.1 

2020 ..................... 52.3 96.8 9.8 17.8 13.8 37.1 

2021 ..................... 56.5 104.6 10.8 19.6 15.5 41.5 

2022 ..................... 61.0 113.0 11.9 21.6 17.4 46.5 

2023 ..................... 63.4 122.0 12.5 23.8 19.5 52.1 

2024 ..................... 66.0 126.9 13.1 24.9 20.6 58.4 

2025 ..................... 68.6 131.9 13.7 26.2 21.9 61.9 

2026 ..................... 71.4 137.2 14.4 27.5 23.2 65.6 

Cumulative Annual Cost Savings: 

LOW: $849 million. 

HIGH: $1,728 million. 

* Based on 2012 dollars. 

TABLE 8—TOTAL SAVINGS FOR COMMERCIAL AND GOVERNMENTAL HEALTH PLANS * 

[In millions] 

I II III IV V VI 

Savings from decrease in pended claims Savings from increase in usage of EDI in 

three transactions 

Total savings for health plans 

LOW HIGH LOW HIGH LOW HIGH 

$776 $1,551 $849 $1,729 $1,625 $3,280 

* Based on 2012 dollars. 

4. Savings to Health Care Providers 

We have quantified two areas of 

savings for health care providers. First, 

time and money will be saved at an 

administrative-level because of a 

decrease in claims issues that require 

manual intervention. Medical practices 

will experience these administrative 

savings by virtue of decreased time 

spent interacting with health plans. 

Second, material savings will be derived 

because of an increase in the number of 

mstockstill on DSK4VPTVN1PROD with RULES2

54708 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

27Lawrence P. Casalino, S. Nicholson, D.N. Gans, 

T. Hammons, D. Morra, T. Karrison and W. 

Levinson, ‘‘What does it cost physician practices to interact with health insurance plans?’’ Health 

Affairs, 28(4)(2009):w533–w543. 

transactions that are conducted 

electronically, as we explained in our 

discussion of the potential impact of 

this rule on health plans. 

a. Time Savings for Health Care 

Providers 

One of the main goals of the use of the 

HPID is to have a consistent identifier 

for each health plan for use in standard 

transactions. The lack of a single 

identifier has resulted in the need for 

manual intervention to resolve 

eligibility questions and billing and 

payment issues when there are 

inconsistent approaches for identifying 

health plans. Covered health care 

providers would no longer have to keep 

track of and use multiple identifiers for 

a single controlling health plan. After 

the initial outlay for changes to their 

systems, health care providers would be 

able to simplify their billing systems 

and processes and reduce 

administrative expenses. 

The HPID would also assist and 

simplify coordination of benefits. Health 

plans that have sole or shared fiduciary 

responsibilities for payment would be 

more readily identified, and the 

movement of information among these 

entities would be enhanced. According 

to a 2009 study published in Health 

Affairs, approximately 60 hours per 

physician per week are spent on average 

interacting with health plans when the 

time spent by the single physician, the 

staff, and the physician practice’s 

administration are totaled.27 Of the time 

spent interacting with health plans, 88 

percent was spent on authorizations and 

claims/billing issues. 

We believe the implementation of an 

HPID will eliminate some of the manual 

intervention that is required when there 

are questions or errors identifying the 

entity responsible for eligibility of a 

patient or the payment of a claim. We 

estimate that the implementation and 

use of an HPID by health plans would 

save a physician’s practice a number of 

phone calls and emails otherwise 

required to investigate or verify the 

identifier needed for the health plan or 

to manually investigate claims that have 

been rejected by health plans. Of the 60 

hours reported previously, our estimate 

would be that 15 minutes to 30 minutes 

per week—or .4 to .8 percent of the total 

time spent interacting with health 

plans—could be eliminated if the HPID 

were implemented. 

In our proposed rule, we solicited 

stakeholder input on our basic 

assumptions, but we received no 

comments in this regard. Therefore, we 

have retained those basic assumptions. 

For more details on our assumptions 

and calculations, please refer to the 

April 2012 proposed rule. 

As a result of use of the HPID in the 

standard transactions, we anticipate that 

the time physicians in physician 

practices will spend per week 

interacting with health plans will 

slightly decrease, resulting in a cost 

avoidance of approximately $1.4 to $2.8 

billion. 

The estimated range of cost avoidance 

represent an increase in the estimates 

that were made in the April 2012 

proposed rule because the savings in 

this rule are calculated starting in 2017 

while the savings in the proposed rule 

started in 2014. Due to an increase in 

the anticipated number of physicians, 

the cost avoidance is higher in this final 

rule than it was in the April 2012 

proposed rule (Table 9). 

Due to a lack of baseline data 

regarding other providers and 

physicians working in hospitals, we 

have not calculated any similar 

anticipated decrease in time for other 

providers and physicians working in 

hospitals. We assume, though, that 

hospitals, because they typically 

consolidate their billing functions, will 

have analogous savings to physicians in 

physician practices, albeit less on a ‘‘per 

physician’’ basis. 

TABLE 9—PHYSICIAN SAVINGS THROUGH DECREASE IN TIME INTERACTING WITH HEALTH PLANS

I II III IV V VI VII 

Year 

Hours spent 

per week 

per physician interacting with 

health plans 

LOW to HIGH percent of 

time interacting with 

health plans (Col I) 

saved per week per physician attributable to 

HPID (15 to 30 minutes) 

Total annual 

cost per single physician to interact with 

health insurance plans 

LOW reduction in cost 

per year per 

physician 

attributable 

to HPID 

HIGH reduction in 

cost per 

year per 

physician 

attributable 

to HPID 

Number of 

physicians 

LOW to HIGH total savings per year attributable 

to HPID (in millions) 

2017 ............... 60 0.4 to 0.8% ..................... $81,523 $ 340 $679 352,103 $120 to $239.2 

2018 ............... 60 0.4 to 0.8% ..................... 83,969 350 700 355,568 $124 to $248.8 

2019 ............... 60 0.4 to 0.8% ..................... 86,488 360 721 359,033 $129 to $258.8 

2020 ............... 60 0.4 to 0.8% ..................... 89,082 371 742 362,498 $135 to $269.1 

2021 ............... 60 0.4 to 0.8% ..................... 91,755 382 765 366,561 $140 to $280.3 

2022 ............... 60 0.4 to 0.8% ..................... 94,507 394 788 370,625 $146 to $291.9 

2023 ............... 60 0.4 to 0.8% ..................... 97,343 389 779 374,688 $146 to $292 

2024 ............... 60 0.4 to 0.8% ..................... 100,263 401 802 378,752 $152 to $304 

2025 ............... 60 0.4 to 0.8% ..................... 103,271 413 826 382,815 $158 to $316 

2026 ............... 60 0.4 to 0.8% ..................... 106,369 425 851 382,815 $163 to $326 

Total ........ .................... ......................................... .................... .................... .................... .................... $1,413 to $2,826 

* In 2012 dollars. 

b. Increase in Three Transactions 

The second area of savings for health 

care providers is the per transaction 

savings of moving from nonelectronic to 

electronic transactions. We used the 

same assumptions on the number and 

rate of increase of three electronic 

transactions methodology as illustrated 

for health plans in Table 7. However, 

the savings per transaction for health 

care providers differ from the savings 

that health plans will realize, as 

reflected in Table 14. We estimate an 

annual increase of 1 (LOW) to 2 (HIGH) 

percent in the use of the eligibility for 

a health plan transaction and the health 

care claim status transaction attributable 

to implementation of the HPID over the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54709 

next 10 years as illustrated in Table 10. 

We estimate an annual increase of 1 

(LOW) to 3 (HIGH) percent in the use of 

the electronic health care payment and 

remittance advice transaction (in the 

health care electronic funds transfers 

(EFT) remittance advice transaction). 

The savings in each column are a 

product of the number increase in each 

transaction, with high and low ranges, 

multiplied by the cost savings of each 

move to an electronic transaction. 

For a more detailed description of the 

basic assumptions and calculations we 

used to arrive at the savings associated 

with these three transactions, please see 

the April 2012 proposed rule. 

TABLE 10—ANNUAL COST SAVINGS FOR PROVIDERS FROM INCREASE DUE TO HPID IN VOLUME OF THREE ELECTRONIC

TRANSACTIONS * 

I II III IV V VI VII 

Savings from increase in eligibility for a 

health plan transaction attributable to 

HPID 

Savings from increase in health care 

claim status transaction attributable 

to HPID 

Savings from increase in health care 

payment and remittance advice 

transaction attributable to HPID/OEID 

(remittance advice only) 

Year LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

attributable to 

HPID (in millions) 

LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

attributable to 

HPID (in millions) 

LOW annual cost 

savings 

attributable to 

HPID (in millions) 

HIGH annual cost 

savings 

Attributable to 

HPID (in millions) 

2017 ..................... $26.62 $46.30 $4.72 $7.87 $3.36 $8.41 

2018 ..................... 28.75 53.24 5.19 9.44 4.04 10.09 

2019 ..................... 31.05 57.50 5.71 10.39 4.52 12.11 

2020 ..................... 33.53 62.10 6.28 11.42 5.06 13.56 

2021 ..................... 36.22 67.07 6.91 12.57 5.67 15.19 

2022 ..................... 39.11 72.43 7.60 13.82 6.35 17.01 

2023 ..................... 40.68 78.23 7.98 15.21 7.11 19.05 

2024 ..................... 42.31 81.36 8.38 15.97 7.54 21.34 

2025 ..................... 44.00 84.61 8.80 16.77 7.99 22.62 

2026 ..................... 45.76 88.00 9.24 17.60 8.47 23.98 

Cumulative Annual Cost Savings: 

LOW: $499 million. 

HIGH: $985 million. 

* Based on 2012 dollars. 

To summarize health care provider 

savings, providers can expect savings 

from two indirect consequences of the 

implementation of a health plan 

identifier, as demonstrated in Table 11: 

the cost avoidance of a decrease in 

administrative time spent by physician 

practices interacting with health plans, 

and a cost savings for physician 

practices and hospitals for every 

transaction that moves from a manual 

transaction to an electronic transaction. 

TABLE 11—TOTAL HEALTH CARE PROVIDER HPID SAVINGS * 

[In millions] 

I II III IV V VI 

Savings from decrease in provider time spent 

interacting with health plans 

Savings from increase in usage of EDI in 

three transactions 

Total savings for providers 

LOW HIGH LOW HIGH LOW HIGH 

$1,413 $2,826 $499 $985 $1,912 $3,811 

* Based on 2012 dollars. 

H. Summary for the HPID and NPI 

TABLE 12—HPID SUMMARY TABLE FOR HEALTH CARE INDUSTRY

I II III IV V VI 

Savings (in millions) Costs (in millions) Range of return on investment 

(in millions) 

LOW HIGH LOW HIGH LOW (low 

savings/high 

costs) 

HIGH (high 

savings/low 

costs) 

Commercial and Governmental Health 

Plans ..................................................... $1,625 $3,280 $652 $1,297 $328 $2,628 

Health Care Providers ............................. 1,912 3,811 451 901 1,011 3,360 

mstockstill on DSK4VPTVN1PROD with RULES2

54710 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

TABLE 12—HPID SUMMARY TABLE FOR HEALTH CARE INDUSTRY—Continued 

I II III IV V VI 

Total .................................................. 3,537 7,091 1,103 2,198 1,339 5,988 

* Calculated in 2012 dollars. 

I. Regulatory Flexibility Analysis of the 

HPID and NPI 

The Regulatory Flexibility Act (RFA) 

of 1980 (Pub. L. 96–354) requires 

agencies to describe and analyze the 

impact of the final rule on small entities 

unless the Secretary can certify that the 

regulation will not have a significant 

impact on a substantial number of small 

entities. 

In the April 2012 proposed rule, we 

used a baseline threshold of 3 percent 

of revenues to determine if a rule would 

have a significant economic impact on 

affected small entities (Table 13). 

Table 13, Column II shows the 

number of small entities as discussed in 

the April 2012 proposed rule. Table 13, 

Column III shows revenues that were 

reported for 2009 in the Survey of 

Annual Services (http:// 

www.census.gov/services/ 

sas_data.html). Table 13, Column IV 

shows the costs to health care providers 

for implementation of the HPID, as 

described in the RIA. The estimated 

high range of costs was used. Table 13, 

Column V shows the percent of the 

small entity share of implementation 

costs as a percent of the small entity 

revenues. 

In the April 2012 proposed rule we 

concluded that the anticipated 

economic effect of this rule on small 

entities would not exceed or even come 

close to meeting the threshold of 3 

percent of revenues. 

We did not receive any comments 

regarding the RFA in the April 2012 

proposed rule, therefore we make no 

changes to the assumptions, 

calculations, and conclusions to that 

analysis. Based on that analysis, we 

certify that the HPID provision of this 

final rule would not have a significant 

economic impact on a substantial 

number of small entities. 

TABLE 13—ANALYSIS OF THE BURDEN OF IMPLEMENTATION OF HPID ON SMALL COVERED ENTITIES * 

I II III IV V 

Entities Total number of 

small entities 

Revenues or receipts (in millions) 

Maximum cost of 

implementation of 

HPID (in millions) 

Implementation 

cost revenue receipts (percent) 

Physician practices ................................................................ 220,100 $359,853 $288 0 .0014 

Hospitals ................................................................................ 6,500 729,870 645 0 .00033 

* In 2012 dollars. 

J. Alternatives Considered for the ICD– 

10 

Faced with growing evidence that a 

group of providers would not be ready 

for the transition to ICD–10 by October 

1, 2013, and the possibility that 

payment for millions of health care 

claims would be delayed, we considered 

a number of options before proposing a 

1-year delay in the compliance date in 

the April, 2012 proposed rule. We list 

these options in the preamble and 

summarize the public comments we 

received concerning them. Our 

responses are included in the preamble. 

We decided that Option 4 was the 

most effective in mitigating the 

significant systemic disruption and 

payment delays that could have resulted 

from a large percentage of providers 

who might not have been ready to 

implement ICD–10 this October 1; and, 

in addition, as the RIA in this final rule 

suggests, Options 4 is most likely to 

minimize the costs of delay and to 

maximize the benefits to providers who 

need more time to implement. 

K. Impacted Entities—ICD–10 

All HIPAA covered entities may be 

affected by a delay in the compliance 

date of ICD–10 in this rule. Covered 

entities include all health plans, health 

care clearinghouses, and health care 

providers that transmit health 

information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a standard. 

Table 4 outlines the number of 

covered entities that may be affected by 

a delay in ICD–10, along with the 

sources of those data. These are the 

same entities that will be affected by 

HPID. 

While covered entities are required to 

transition to ICD–10, many other 

entities not required to abide by HIPAA 

(such as workers’ compensation 

programs and automobile and personal 

liability insurers) currently use ICD–9 

for a variety of purposes. Because their 

operational and business needs often 

intersect with covered entities, for 

practical and business purposes these 

other entities may voluntarily transition 

to ICD–10 alongside HIPAA covered 

entities. The ICD codes are used in 

nearly every sector of the medical and 

health industry. 

Comment: A commenter noted that it 

was inaccurate to state that workers’ 

compensation programs and automobile 

and personal liability insurers are not 

required to abide by HIPAA but may 

voluntarily do so. The association noted 

that Medicare has mandatory Medicare 

Secondary Payer reporting requirements 

for non group health plans (NGHPs) for 

liability insurance, no-fault insurance, 

and workers’ compensation. Included in 

these required data elements for NGHP 

is the appropriate ICD–9 for the reported 

injury with mandated transition to ICD– 

10 when it is implemented. 

Response: We agree with the 

commenter and refine our language to 

recognize that, while many health care 

entities are not required by HIPAA to 

comply with the code sets, standards 

and operating rules therein, these same 

health care entities may be required by 

other state and federal laws or trade 

agreements to use ICD codes, as is the 

case with Medicare’s reporting 

requirements. 

L. Scope and Methodology of the Impact 

Analysis for ICD–10 

This impact analysis estimates the 

costs and benefits of a delay in 

compliance with ICD–10. We are 

analyzing only the impact of a delay, 

not the impact of ICD–10 

implementation, which we addressed in 

the 2008 ICD–10 proposed rule (73 FR 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54711 

28 ‘‘Excess Billing and Insurance-Related 

Administrative Costs,’’ by James Kahn, in The 

Healthcare Imperative; Lowering Costs and 

Improving Outcomes: Workshop Series Summary, 

edited by Pierre L. Yong, Robert S. Saunders, and 

Leigh Anne Olsen, Institute of Medicine of the 

National Academies, the National Academies Press, 

Washington, DC: 2010. 

49476) and the January 2009 ICD–10 

final rule (74 FR 3328). 

Despite the broad utilization of ICD 

codes that extends beyond covered 

entities, with one exception our analysis 

is restricted only to those entities as 

only they fall under the auspices of this 

final rule. With respect to health care 

providers, only health care providers 

that transmit health information in 

electronic form in connection with a 

transaction for which the Secretary has 

adopted a HIPAA transaction standard 

are covered entities. The one area for 

which we provide additional analysis is 

the cost to educational institutions to 

educate students being trained in ICD– 

10 coding because such training costs 

have been of particular concern to 

industry and have been included in the 

previous Federal Register ICD–10 rules 

cost analyses. 

Moreover, while we assume that a 

delay in the implementation of ICD–10 

will affect a broad range of health care 

providers, as illustrated in Table 4, we 

only examine the costs and benefits of 

a delay on two types of health care 

providers—hospitals and physician 

practices. We do not analyze the impact 

on other industry sectors, including, but 

not limited to, nursing and residential 

care facilities, dentists, durable medical 

equipment (DME) suppliers, or 

pharmacies for various reasons. 

Consistent with our previous impact 

analysis in the 2008 ICD–10 proposed 

rule, we continue to have very little data 

on the use of EDI among dentists, DME 

suppliers, nursing homes, and 

residential care facilities. The lack of 

data for these types of health care 

providers has been noted in other 

studies on administrative 

simplification.28 We assume that the 

greatest benefits will be gained by 

hospitals and physician practices as 

they conduct the majority of standard 

transactions, although it cannot be 

assumed that the costs will necessarily 

be borne by physician practices and 

hospitals only. We have not included an 

analysis of the impact on pharmacies 

because pharmacies typically do not use 

ICD codes in their routine course of 

business so we assume there is no 

impact on pharmacies. 

We include health care 

clearinghouses and transaction vendors 

as affected entities in Table 4. 

Transaction vendors are entities that 

process claims or payments for other 

entities such as health plans. 

Transaction vendors may not meet the 

HIPAA definition of health care 

clearinghouse, but, as used in this 

context, health care clearinghouses 

would constitute a subset of transaction 

vendors. Payment vendors also would 

be a type of transaction vendor—a 

transaction vendor that ‘‘associates’’ or 

‘‘reassociates’’ health care claim 

payments with the payments’ 

remittance advice for either a health 

plan or provider. For our purposes, 

transaction vendors do not include 

developers or retailers of computer 

software, or entities that are involved in 

installing, programming or maintaining 

computer software. Health care 

clearinghouses and transaction vendors 

will be impacted because they will need 

to transition their systems to accept 

ICD–10 codes. However, we did not 

calculate costs and benefits to health 

care clearinghouses and transaction 

vendors in this cost analysis because, as 

in our previous impact analysis in the 

August 2008 ICD–10 proposed rule, we 

assume that any associated costs and 

benefits will be passed on to the health 

plans or providers and will be included 

in the costs and benefits we apply to 

health plans or providers. 

Although self-insured group health 

plans meet the HIPAA definition of 

‘‘health plan,’’ we did not include them 

in this impact analysis. While selfinsured group health plans will be 

required to implement ICD–10, we 

assume that, with a few exceptions, 

such plans do not send or receive 

HIPAA electronic transactions because 

most are not involved in the day-to-day 

activities of a health plan and outsource 

those services to TPAs or transaction 

vendors. 

However, we do include TPAs in this 

RIA. Although TPAs do not meet the 

definition of ‘‘health plans’’ and 

therefore are not required by HIPAA to 

use code sets such as ICD–10, as a 

practical matter they will be required to 

make the transition in order to continue 

to conduct electronic transactions on 

the part of self-insured group health 

plans. However, the impact of a delay of 

the compliance date of ICD–10 on TPAs 

will be similar to the commercial 

insurer cost/benefit impact profile since 

they serve a similar function and will 

have to implement and test their 

systems in the same manner as health 

plans. Therefore, when we refer to 

‘‘commercial health plans’’ in this RIA 

we will be including TPAs, and we 

include all TPAs in the category of 

‘‘small health plans’’ in the RFA. 

In the proposed rule, we stated that 

‘‘Software vendors will incur 

considerable responsibility and cost 

with respect to ICD–10 implementation, 

but we do not analyze the cost of delay 

to software vendors as they ultimately 

pass their costs to their clients’’ (77 FR 

22991). 

Comment: A commenter disagreed 

with our assumption that software 

vendors will pass on any incurred costs 

to their clients. The commenter noted 

that his organization had incurred costs 

nearing $1 billion and that further costs 

would be incurred with a delay. The 

commenter stated that the update to 

ICD–10 is part of the normal regulatory 

update process and that no conversion 

costs are passed on to the health plans 

or providers. Another commenter made 

a similar statement with regard to 

software vendors, but added that there 

are clearinghouses as well that make 

regulatory changes to their software 

without costs to their clients. Both 

commenters suggested including the 

costs to clearinghouses and vendors in 

the cost analysis. 

Response: After consideration of the 

public comment received, we are 

revising our assumption with regard to 

software vendors and clearinghouses 

passing their costs of ICD–10 changes on 

to their clients, and recognize that there 

will be substantial costs associated with 

any delay for software vendors and 

clearinghouses in and of themselves. 

However, beyond anecdotal evidence, 

we do not have data on the numbers of 

software vendors or clearinghouses who 

will be affected or what the financial 

burden or benefit will be for software 

vendors or clearinghouses as a group. 

Therefore, we will not attempt to 

quantify the impact to software vendors 

or clearinghouses in this RIA. 

M. Cost Avoidance of a 1-Year Delay in 

the ICD–10 for the Health Care Industry 

Our analysis of industry benefit is 

based on cost avoidance. That is, we 

anticipate that there will be greater costs 

associated with the compliance date of 

October 1, 2013 than if the compliance 

date were to be delayed 1 year. 

Therefore, our analysis will demonstrate 

the costs associated with the current 

compliance date of October 2013, and 

apply those as savings or benefits 

attributable to a delayed compliance 

date. 

The assumption behind these savings 

is that a specific number of physicians 

and hospitals will not be prepared to 

use ICD–10 by October 1, 2013. This 

lack of readiness would engender a 

number of costly consequences. 

Estimates on the benefit of a 1-year 

delay are subject to considerable 

variation. A delay in the ICD–10 

compliance date increases the 

mstockstill on DSK4VPTVN1PROD with RULES2

54712 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

opportunity for a successful, timely 

transition and provides an opportunity 

to reduce disruptions in health care 

delivery and payment. A basic 

assumption in this projection of a 

benefit is that entities will take the 1- 

year delay to become compliant and to 

conduct robust testing as discussed 

previously. This is possible, but by no 

means inevitable, even if a vigorous 

public/private campaign is undertaken 

to promote and assist with compliance 

and testing. 

Based on the CMS readiness survey, 

we will use the percentage of providers 

who believed they would not be 

compliant by October 1, 2013 (26 

percent) as our high estimate and the 

percentage of providers who believed 

they would not be compliant by 

December 31, 2013 (12 percent) as our 

low estimate. We based our estimates of 

the cost of not delaying the compliance 

date of ICD–10 on the projection that 12 

to 26 percent of providers will not be 

ready or will not have appropriately 

tested for implementation of ICD–10 by 

October 1, 2013. 

We recognize that the survey does not 

represent a statistically valid sample of 

providers, but we have no other recent 

data with which to base our readiness 

estimates. 

The total savings attributable to the 1- 

year compliance date delay is based on 

the premise that providers who are not 

ready for ICD–10 will submit claims to 

payers that will be automatically 

returned beginning on the October 1, 

2013 compliance date. We calculate the 

cost avoidance of a 1-year delay in the 

compliance date of ICD–10 based on 

two probable scenarios: Returned claims 

will: (1) cause expensive manual 

intervention on the part of both 

providers and health plans in order for 

the ‘‘not ready’’ providers to be paid; 

and (2) financially impact providers by 

potentially requiring them to take out 

loans or apply for lines of credit to be 

able to continue to provide health care 

in the face of delayed payments. We 

apply calculations to each of these 

scenarios in the analysis that follows. 

Although the cost to manually process 

returned claims will ostensibly occur 

from, roughly, October 1, 2013 through 

March, 2014, for simplicity sake our 

calculations reflect a cost avoidance that 

is calculated for 1 year only—the year 

2014. 

A halt to the payment process for 12 

to 26 percent of all providers has a 

greater effect than requiring manual 

intervention and requiring business 

loans or lines of credit. In some cases, 

a payment delay may pose a serious 

threat to the continued operation of 

some providers. For example, many 

health care safety net clinics operate 

with no more than 30 to 60 days of cash 

on hand, so any prolonged delay would 

threaten such entities’ viability. 

We also anticipated that health care 

services for a great number of patients 

will be adversely affected or interrupted 

because providers will need to spend 

more time to obtain health care claim 

payments leaving less time to render 

health care services. 

We received no substantive comments 

with regard to our calculations and 

estimates of the cost avoidance of a 1- 

year delay in the compliance date of 

ICD–10 as described in the April 2012 

final rule. We have provided the 

estimates and results of our calculations 

in the summary Table 17. 

While there is a high level of 

uncertainty in terms of all of our 

assumptions, we believe it illustrative to 

make the calculation in order to 

demonstrate the affect that a delay in 

payments will have on small physician 

practices. 

Comment: A commenter noted that 

the cost avoidance calculations are 

based on the assumption that certain 

costs will be completely avoided if the 

compliance date is delayed for 1 year. 

However, the commenter also noted that 

if providers are not prepared a year 

later, then all that will occur will be a 

delay of these costs, not an avoidance. 

Response: We agree that if the delay 

is not used by the industry to be better 

prepared for the ICD–10 transition, then 

there will be no cost avoided by the 

delay. While there is no guarantee that 

the delay will translate into better 

preparation on the part of all health care 

entities, we anticipate that additional 

testing, outreach and education efforts 

will be targeted to help endangered 

segments, such as small providers, to 

achieve 

N. Costs of a 1-Year Delay of 

Implementation of ICD–10 for Health 

Plans 

1. Cost for Commercial Health Plans and 

TPAs 

Health plans are a varied group in 

terms of size, and the cost of a delay is 

calculated using a range that reflects 

this variance. We assume that system 

costs for health plans to transition to 

ICD–10 have already been budgeted and 

funds already spent. A delay of a year 

for ICD–10 compliance primarily will 

allow entities more time to thoroughly 

test, but the testing and the continued 

maintenance of contracts and personnel 

required for the transition will be 1 year 

longer than was originally budgeted. In 

fact, one of the main issues for entities 

that argue against a delay is the concern 

that their companies would divert funds 

currently dedicated to the transition to 

ICD–10 to other priorities. 

Table 14 illustrates the calculation of 

10 to 30 percent of the total costs of 

health plans’ ICD–10 system 

implementation and training as the 

range of costs for a 1-year delay. For 

simplicity sake, we have calculated all 

costs as if they occurred in the calendar 

year 2014. 

TABLE 14—COST IN 2014 OF A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD–10* 

Health insurer categories 

Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 

Number of 

health plans 

LOW total 

cost per 

health plan 

(in millions) 

HIGH total 

cost per 

health plan 

(in millions) 

LOW total 

implementation/training 

for all health 

plans in category (col. 1 

* col 2) 

HIGH total 

implementation/training 

for all health 

plans in category (col. 1 

* col. 3) 

LOW percent of total 

cost for a 

1-year delay 

HIGH percent of total 

cost for 

1-year delay 

LOW estimate of 

1-year delay 

(in millions) 

HIGH estimate of 

1-year delay 

(in millions) 

National ..................................... 6 $50.40 $100.80 $302.40 $604.80 10 30 $30.24 $181 

Multi Regional ........................... 6 24.00 40.32 144.00 241.92 10 30 14.40 73 

Large ......................................... 75 14.40 24.19 1080.00 1814.40 10 30 108.00 544 

Mid-Sized .................................. 325 3.60 6.05 1170.00 1965.60 10 30 117.00 589 

TPAs and Small Health Plans .. 2166 1.20 2.02 2599.20 4366.66 10 30 259.92 1310 

Total ................................... .................... .................... .................... .................... .................... .................... .................... 530 2,698 

* Calculated in 2012 Dollars. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54713 

2. Cost of a 1-Year Delay for CMS Health 

Plans 

The Medicare program reports that it 

is prepared to be ICD–10 compliant on 

October 1, 2013. The CMS components 

affected by an ICD–10 transition delay 

estimate that there will be additional 

costs for extending contracts for systems 

programming and testing work and 

extended staff training and associated 

development costs. It is estimated that 

a 1-year delay in ICD–10 compliance 

would be reflected by additional work at 

an estimated total cost of $5 to $10 

million in addition to funding already 

requested for the coming fiscal years. 

3. Cost of a 1-Year Delay in the 

Compliance Date of ICD–10 for State 

Medicaid Agencies 

State Medicaid Agencies (SMAs) were 

queried informally during routine status 

update calls in February 2012 regarding 

potential mitigation strategies for ICD– 

10 implementation. Thirty-nine SMAs 

responded, representing all regions of 

the country from predominantly rural to 

densely populated States. We have 

extrapolated from these responses as 

best we could to present a quantitative 

assessment of costs and benefits. 

In Table 15, we calculate the cost to 

SMAs of a 1-year delay in the 

compliance date of ICD–10. We use the 

following assumptions: 

• Based on the informal poll of 

SMAs, we assume that 37 percent or 20 

SMAs would be ready for the October 1, 

2013 compliance date. Therefore, the 

assumption is that 21 SMAs would be 

affected negatively by a delay. 

• We assume that $4 million is the 

low estimate for a cost increase, as 

exemplified by the rural State that 

provided that estimate, while $7 million 

is the high estimate for a cost increase, 

as reported by an SMA. The high 

estimate is derived from a SMA that 

anecdotally described its costs per year 

of delay. For simplicity sake, we have 

calculated all costs as occurring in 

calendar year 2014. One State Medicaid 

program commented that a 1-year delay 

in the compliance date would add $5 

million to the overall cost of 

implementation, and this supports our 

assumption of high and low costs. 

TABLE 15—COST IN 2014 TO STATE MEDICAID AGENCIES OF A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD–10* 

# of State Medicaid that would be negatively affected 

LOW cost of a 

1-year delay per 

state agency 

(in millions) 

HIGH cost of a 

1-year delay per 

state agency 

(in millions) 

LOW cost of a 

1-year delay for 

Medicaid agencies 

(in millions) 

HIGH cost of a 

1-year delay for 

Medicaid agencies 

(in millions) 

21 ............................................................................................. $4 $7 $83 $145 

* In 2012 dollars. 

2. Cost of a 1-Year Delay for Providers 

We expect that many, if not most, 

hospitals and large provider 

organizations have already spent funds 

in preparation for the ICD–10 transition. 

As with health plans, any delay in 

compliance date will add costs because 

large providers must maintain the 

personnel and renegotiate contracts 

necessary to lengthen preparations an 

extra year. Likewise, large providers 

must maintain technological resources 

for an extra year. 

Because the October 1, 2013 

compliance date is more than a year out, 

it is likely that few small physician 

practices have invested a modest 

amount of money and resources into the 

implementation of and training for ICD– 

10, although they may have begun 

planning and budgeting for the 

transition and may have contracts in 

place with vendors to purchase tools to 

manage the transition. While we 

recognize that there will be costs, we 

assume that these costs are negligible 

and that the extra time to prepare for the 

transition, as will be possible with a 1 

year compliance date delay, will be 

more beneficial than costly for small 

providers. Therefore, we will not 

include small providers (under 50 

physicians) in the cost analysis for 

providers. 

Table 16 illustrates the calculations 

for the cost to hospitals and large 

physician practices. 

TABLE 16*—COST TO HOSPITALS AND LARGE PHYSICIAN PRACTICES IN 2014 FOR 1–YEAR DELAY IN THE COMPLIANCE

DATE OF ICD–10 ***

Hospitals: 

400 or more 

beds 

Hospitals: 

100-400 

beds 

Hospitals: 

Fewer than 

100 beds 

Large physician practices 

(over 100 

physicians) 

Mid sized 

physician 

groups 

(50-100 

physicians) 

Total cost of 

ICD–10 implementation 

(in millions) 

LOW cost 

for 1-Yr 

delay 

(10% of current implementation 

costs) 

(in millions) 

HIGH cost 

of 1-Yr 

delay 

(30% of current implementation 

costs) 

(in millions) 

Number of entities ............ 521 2486 2757 393 590 

LOW Cost Per Entity (in 

millions) ........................ $1.85 $0.62 $0.12 $2.46 $0.5 

HIGH Cost Per Entity (in 

millions) ........................ $6.16 $1.85 $0.31 $7.39 $1.48 

Total LOW (in millions) ...................... $963 $1,531 $339 $968 $291 $4,093 $409 $1,227 

Total HIGH (in millions) ...................... $3209 $4,594 $850 $2,905 $872.17 $12,429 $1,243 $3,728 

* Numbers are rounded, so totals may not reflect sum of numbers shown. 

**Adjusted to 2012 dollars. *** High and low ranges from Nolan 2003, adjusted to 2012 dollars. 

mstockstill on DSK4VPTVN1PROD with RULES2

54714 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

Comment: A commenter took issue 

with assumptions that we derived from 

the Edifecs poll. The commenter noted 

that the conclusions of the poll were 

based on a small sample of 

representatives from the various 

categories of health care entities, 

specifically providers. 

Response: We agree with the 

commenter about the Edifecs poll. 

However, it is the only information we 

have, however scant, that specifically 

addresses the question of a delay and its 

costs. We used the Edifecs poll to arrive 

at one assumption in this RIA of the 

impact of a 1-year delay in the 

compliance date of ICD–10: A 1-year 

delay will cost an additional 10 to 30 

percent of what commercial health 

plans and large providers have already 

budgeted on the ICD–10 transition to 

date. 

Comment: Some commenters 

questioned the total cost to health care 

entities of transitioning to ICD–10 that 

we used as an assumption to calculate 

the cost of a 1-year delay. One 

commenter noted that our costs were 

higher than what was calculated in the 

January 16, 2009 ICD–10 final rule, and 

a number of commenters suggested that 

we conduct a robust survey of how 

much the transition is actually costing 

by polling health care entities that are 

in preparation for the transition. Other 

commenters also suggested conducting 

different kind of studies and further 

analyses in order to better make a 

decision on an ICD–10 compliance date. 

For example, one commenter suggested 

that a full examination be made of ICD– 

9–CM code development and allocation 

process and that necessary codes to that 

code set be assigned quickly. 

Response: While we recognize that 

more robust data and further analysis 

could better substantiate a cost 

analysis—and, thus, better inform 

policy decisions– the purpose of this 

impact analysis was to help inform 

whether the health care industry 

necessitated a delay in the ICD–10 

compliance date and, if so, to inform a 

policy as to the length of that delay. 

However, a great many of the comments 

insisted that the regulations that would 

adopt a compliance date be published as 

soon as possible in order that 

unreasonable costs and obstacles not be 

created while the rule itself was being 

developed. Thus, it was not deemed 

prudent to conduct a robust survey in 

order to obtain what is truly budgeted 

for the implementation of ICD–10. 

We received no data or substantive 

arguments during the public comment 

period that our estimated cost of 

implementation was either too much or 

too little; only observations and 

anecdotes that the calculations were less 

accurate than they could be and based 

on surveys and polls that had 

questionable validity. We received some 

data from commenters on the cost of 

implementation from specific 

organizations: One commenter noted 

that it had dedicated $40 million to date 

on preparing for the ICD–10 transition. 

This is considerably above our 

estimates. Another commenter stated 

that, although they had started planning 

and dedicating resources to the 

transition, they had not expended any 

funds with regard to training or 

technical modifications. This is 

considerably less than our estimates. In 

light of the fact that there were no 

substantive arguments—or contradictory 

data—offered through public comment 

against our calculations, we continue to 

rely upon them in this final rule. 

O. Summary for ICD–10 

Our RIA confirms the need for a delay 

in the compliance date of ICD–10. In 

spite of the lack of conclusive data with 

regard to the overall status of the health 

care industry’s preparation for the 

transition and the variables inherent in 

making projections on such a transition, 

it is apparent that a significant number 

of providers would not be ready for the 

original October 1, 2013 compliance 

date. If a significant number of 

providers would not be ready, it follows 

that there could be delays in the 

payment of health care claims and risk 

that disrupted cash flow to providers 

could affect access to health services. 

We have attempted to quantify a 

number of the consequences of such a 

disruption in this RIA, but possible 

disruptions in patient care are not 

quantifiable. 

Given the risk of disruption in health 

care claim payments, we sought to 

measure the negative effects of a delay 

in the compliance date in this RIA. 

Although all the data we cite may not 

be statistically valid, there is a cost to 

every day that the date of ICD–10 

compliance is delayed for entities that 

have already invested significant 

resources preparing for the transition. It 

is also likely that the consequences of a 

delay would affect entities and 

industries beyond the HIPAA covered 

entities that are required to use the code 

set. The cost to students and 

educational institutions in the RIA are 

but one example of this. 

Weighing the risks and consequences 

of a disruption to health care claim 

payments with an apparent increased 

cost of delay to the estimated 75 percent 

of covered entities who would be able 

to comply October 1, 2013, we believe 

that a one-year delay in the 

implementation date strikes the best 

regulatory balance. It is our best 

judgment that, to go forward with the 

original compliance date would risk 

disruptions on many levels, while a 

delay of any more than a year would 

incur costs that could not be justified in 

the name of avoiding risk. 

We summarize the low and high 

estimates of a 1-year delay in the 

compliance date for ICD–10 in Table 17. 

The total costs and cost avoidance of 

a delay in the compliance date will 

likely be incurred over a 12-month 

period; however, due to the range in 

impacted entities, including educational 

institutions, those 12 months may span 

different dates and different budget 

periods. Given the diversity of 

budgeting in the industry, there is no 

precise way of calculating how much of 

the cost and cost avoidance falls outside 

of the October 1, 2013 to October 1, 

2014 delay in compliance date. For 

simplicity sake, we calculate all cost 

avoidance and costs of a delay in the 

compliance date for ICD–10 as occurring 

in the calendar year 2014. 

In Table 17, the net cost avoidance is 

illustrated with a— 

• Low net estimate that reflects the 

low estimate of cost avoidance less the 

high estimate of costs; 

• High net estimate that reflects the 

high estimate of cost avoidance less the 

low estimate of costs; and 

• Medium net cost avoidance that 

reflects the average cost avoidance less 

the average cost. 

TABLE 17—SUMMARY OF COST AVOIDANCE AND COSTS IN 2014 OF A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD– 

10 *

LOW 

(in millions) 

HIGH 

(in millions) 

MEAN 

(average) 

(in millions) 

Cost Avoidance for Providers (manual submission of claims) ................................................................ $1,385 $3,001 $2,193 

Cost Avoidance for Providers (cost of loan interest) .............................................................................. 1,446 3,134 2,290 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54715 

TABLE 17—SUMMARY OF COST AVOIDANCE AND COSTS IN 2014 OF A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD– 

10 *—Continued 

LOW 

(in millions) 

HIGH 

(in millions) 

MEAN 

(average) 

(in millions) 

Cost Avoidance for Health Plans (manual submission of claims) .......................................................... 804 1,742 1,273 

TOTAL COST AVOIDANCE FROM A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD-10 3,635 7,877 5,756 

Cost to Commercial Health plans ............................................................................................................ 530 2,698 1,614 

Cost to Medicare ..................................................................................................................................... 5 10 8 

Cost to State Medicaid Agencies ............................................................................................................ 83 145 114 

Cost to Large Providers ........................................................................................................................... 409 3,728 2,069 

Cost to Students ...................................................................................................................................... 4 4 4 

TOTAL COST OF A 1-YEAR DELAY IN THE COMPLIANCE DATE OF ICD–10 .......................... 1,031 6,586 3,808 

* Calculated in 2012 dollars. 

TABLE 18—COST AVOIDANCE LESS

COST (NET) OF A 1-YEAR DELAY IN

THE COMPLIANCE DATE OF ICD–10 

[In millions] *

Low Net Estimate (Low Cost 

Avoidance with High Costs). ¥$2,950 

High Net Estimate (High Cost 

Avoidance with Low Costs). 6,846 

Mean Net Cost Avoidance (average) .................................... 1,948 

* Calculated in 2012 dollars. 

P. Regulatory Flexibility Analysis: 

Impact on Small Entities of a Delay in 

the Compliance Date of ICD–10 

The Regulatory Flexibility Act (RFA) 

of 1980 (Pub. L. 96–354) requires 

agencies to describe and analyze the 

impact of the final rule on small entities 

unless the Secretary can certify that the 

regulation will not have a significant 

impact on a substantial number of small 

entities. According to the Small 

Business Administration’s size 

standards, a small entity is defined as 

follows according to health care 

categories: Offices of Physicians are 

defined as small entities if they have 

revenues of $10 million or less; most 

other health care providers (dentists, 

chiropractors, optometrists, mental 

health specialists) are small entities if 

they have revenues of $7 million or less; 

hospitals are small entities if they have 

revenues of $34.5 million or less. (For 

details, see the SBA’s Web site at http:// 

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

Size_Standards_Table.pdf Refer to 

Sector 62—Health Care and Social 

Assistance). 

We stated in the April 2012 proposed 

rule that there were a number of health 

maintenance organizations (HMOs) that 

are small entities by virtue of their 

nonprofit status even though few if any 

of them are small by SBA size 

standards. There are approximately one 

hundred such HMOs. We also assumed, 

for purposes of the RFA, that all 

physician practices and hospitals were 

small entities. Accordingly, we found in 

the April 2012 proposed rule that a oneyear delay in implementation of the 

ICD–10 will affect a ’’substantial 

number’’ of small entities. 

However, as illustrated in Tables 19 

and20, we concluded in the April 2012 

proposed rule that the 1-year delay in 

the compliance date of ICD–10 will be 

more beneficial to small and nonprofit 

entities than it will be burdensome. 

Based on that analysis, we certify that 

the provisions related to ICD–10 in this 

final rule would not have a significant 

economic impact on a substantial 

number of small entities. 

Comment: One commenter stated that 

it was impossible to see how we could 

arrive at the conclusion that the final 

rule would not affect small entities 

when the cost to implement ICD–10 is 

so high. The commenter noted that it 

was rather falsehearted for us to state, as 

we did in the April 2012 proposed rule, 

that we were only analyzing the impact 

of the delay, not the impact of the ICD– 

10 implementation that we addressed in 

the August 2008 proposed rule. Instead, 

our latest cost estimates of 

implementing ICD–10—that the 

commenter viewed as improperly 

documented and misleading—should 

have triggered a re-review of the RIA 

conducted in the August 2008 proposed 

rule. 

Response: The RIA of the April 2012 

proposed rule, and this final rule, are 

focused on the impact of the provision 

of the proposed and final rule; that is, 

a delay in the compliance date of ICD– 

10. As noted in this RFA, a delay will 

be beneficial for small entities, 

otherwise there is no reason to go 

forward with a delay. We cannot revisit 

cost/benefits of implementing ICD–10, 

at least to the extent it was done so in 

the August 2008 proposed rule, because 

this rule does not mandate ICD–10; it 

delays it. As for our estimates on costs 

and cost avoidance of a delay in the 

compliance date of ICD–10, we believe 

that we have been transparent in 

admitting that our calculations are 

based on some studies and polls that 

lack statistical validity. Weighing 

industry’s need for clarity on the ICD– 

10 compliance date and the need to 

meet high standards of analysis by 

conducting a comprehensive study or 

poll, we believed that an expedient 

answer on the compliance date would 

be more beneficial to industry’s 

financial and business needs. 

TABLE 19—COSTS AND BENEFITS IN 2014 OF A DELAY IN THE COMPLIANCE DATE OF ICD–10 FOR PROVIDERS

[Small Entities] *

Physician 

practices 

with less 

than 50 

physicians 

Physician 

practices 

with 50 to 

100 physicians 

Physician 

practices 

with more 

than 100 

physicians 

Hospitals 

with less 

than 100 

beds 

Hospitals 

with 100 to 

400 beds. 

Hospitals 

with more 

than 400 

beds 

Totals 

Number of Entities ................................... 233,239 590 393 2,757 2,486 521 239,986 

LOW Costs (in millions) ........................... $.00 $29.07 $97 $34 $153 $96 $409 

HIGH Costs (in millions) .......................... $.00 $261.65 $871 $255 $1,378 $963 $3,728 

mstockstill on DSK4VPTVN1PROD with RULES2

54716 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

TABLE 19—COSTS AND BENEFITS IN 2014 OF A DELAY IN THE COMPLIANCE DATE OF ICD–10 FOR PROVIDERS— 

Continued 

[Small Entities] *

Physician 

practices 

with less 

than 50 

physicians 

Physician 

practices 

with 50 to 

100 physicians 

Physician 

practices 

with more 

than 100 

physicians 

Hospitals 

with less 

than 100 

beds 

Hospitals 

with 100 to 

400 beds. 

Hospitals 

with more 

than 400 

beds 

Totals 

LOW Cost Avoidance (in millions) ........... $1,446 $.00 $.00 $.00 $.00 .00 $1,446 

HIGH Cost Avoidance (in millions) .......... $3,134 $.00 $.00 $.00 $.00 .00 $3,134 

*Both cost and cost avoidance occur in 2014. In 2012 dollars. 

TABLE 20—COSTS AND COST AVOIDANCE IN 2014 FOR NON–PROFIT HEALTH PLANS FOR A 1–YEAR DELAY OF THE

COMPLIANCE DATE FOR ICD–10 *

Number of 

non profit 

health plans 

LOW COST 

per health 

plan 

(in millions) 

HIGH COST 

per health 

plan 

(in millions) 

LOW COST 

AVOIDANCE 

(in millions) 

HIGH COST 

AVOIDANCE 

(in millions) 

Blue Cross Blue Shield ............................................................................ 38 $1.44 $7.26 $88.26 $122.21

HMO ......................................................................................................... 100 .12 .60 4.02 5.57 

Total ......................................................................................................... $.00 $1.56 7.86 92.28 127.77 

*Both cost and cost avoidance occur in 2014. In 2012 dollars. 

Q. Summary and Accounting Statement 

for HPID, NPI and ICD–10 

Table 21 summarizes the impacts of 

this final rule, including the costs and 

benefits of implementation of the HPID 

and the costs and cost avoidance of a 1- 

year delay in the compliance date of 

ICD–10. The costs and benefits of 

implementation of the HPID are 

calculated over an 11-year period, 2016 

through 2026, while the cost avoidance 

and costs of the delay of the compliance 

date of ICD–10 will all occur in 2014. 

TABLE 21—SUMMARY OF COSTS AND SAVINGS/COST AVOIDANCE, OF IMPLEMENTATION OF HPID, NPI AND A 1-YEAR

DELAY IN THE COMPLIANCE DATE OF ICD–10 

[In millions]* 

LOW HIGH MEAN 

Total Savings/Cost Avoidance ................................................................................................................. $7,172 $14,968 $11,070 

Total Costs ............................................................................................................................................... 2,134 8,784 5,459 

* Costs and savings of HPID are calculated over 11 years, 2016 through 2026. Costs and cost avoidance of a delay in the compliance date of 

ICD–10 are calculated over 1 year, 2014. In 2012 dollars. 

In Table 22, the LOW estimate Net 

Savings/Cost Avoidance is calculated 

using the LOW Savings/Cost Avoidance 

minus the HIGH estimated Costs; that is, 

the worst case scenario in terms of low 

benefits and high costs. The HIGH 

estimate Net Savings/Cost Avoidance is 

estimated using the HIGH Savings/Cost 

Avoidance minus the LOW estimated 

Costs; that is, the best case scenario in 

terms of high benefits and low costs. 

The Mean Net Savings/Cost Avoidance 

is the average of the best case scenario 

and the worst case scenario. 

TABLE 22—SUMMARY OF NET COST AVOIDANCE/SAVINGS OF IMPLEMENTATION OF HPID, NPI, AND A 1-YEAR DELAY IN

THE COMPLIANCE DATE OF ICD–10 

[In 2012 dollars] 

LOW NET 

SAVINGS 

(cost avoidance/savings less 

HIGH costs) 

(in millions) 

HIGH NET 

SAVINGS 

(cost avoidance/savings less 

LOW costs) 

(in millions) 

MEAN NET 

SAVINGS 

(in millions) 

Net Savings/Cost Avoidance ................................................................................................................... ¥$1,612 $12,834 $5,611 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54717 

29 ‘‘Circular A–4,’’ September 17, 2003, Office of 

Management and Budget (OMB), http:// 

www.whitehouse.gov/omb/circulars_a004_a-4/. 

As required by OMB Circular A–4,29

Tables 23, 24, and 25 are accounting 

statements showing the classification of 

the expenditures associated with the 

provisions of this final rule. Table 23 

provides our best estimate of the costs 

and benefits associated with the 

implementation and use of the HPID. 

Table 24 provides our best estimates of 

the costs and benefits associated with a 

1-year delay in the compliance date of 

ICD–10. Table 25 provides a combined 

estimate of the costs and benefits 

associated with implementation and use 

of HPID and a 1-year delay in the 

compliance date of ICD–10. 

TABLE 23—ACCOUNTING STATEMENT FOR HPID IMPLEMENTATION: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM

FY 2016 TO FY 2026 

[In millions of 2012 dollars] 

Category Primary estimate 

(millions) 

Minimum estimate 

(millions) 

Maximum estimate 

(millions) 

Source citation 

(RIA, preamble, 

etc.) 

BENEFITS: 

Annualized Monetized benefits: 

7% Discount ........................... $348 ..................................................... $246 ...................... $525 ...................... RIA. 

3% Discount ........................... 329 ....................................................... 246 ........................ 506 ........................ RIA. 

Qualitative (un-quantified) 

benefits.

HPID: Environmental (electronic over 

paper), patient benefits (more staff 

time), benefits from a decrease in 

time interacting with health plans for 

hospitals, dentists, suppliers of durable medical equipment, nursing 

homes, and residential care facilities, and providers other than physician practices.

COSTS: 

Annualized Monetized costs: 

7% Discount ........................... $203 ..................................................... $135 ...................... $270 ...................... RIA and Collection 

of Information. 

3% Discount ........................... 172 ....................................................... 115 ........................ 229 ........................ RIA and Collection 

of Information. 

Qualitative (unquantified) 

costs.

HPID: Cost for system changes for 

dentists, suppliers of durable medical equipment, nursing homes, residential care facilities, and providers 

other than physician practices and 

hospitals.

None ..................... None.

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.

TABLE 24—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR 1-YEAR DELAY OF ICD–10 

COMPLIANCE DATE FOR 2014 

[In millions of 2012 dollars] 

Category Primary estimate 

(millions) 

Minimum estimate 

(millions) 

Maximum estimate 

(millions) 

Source citation 

(RIA, preamble, 

etc.) 

BENEFITS: 

Annualized Monetized benefits: 

7% Discount ........................... $5,756 .................................................. $3,635 ................... $7,874 ................... RIA. 

3% Discount ........................... 5,756 .................................................... 3,635 ..................... 7,874 ..................... RIA. 

Qualitative (unquantified) benefits.Avoidance of returned health care 

claims.

COSTS: 

Annualized Monetized costs: 

7% Discount ........................... $3,808 .................................................. $1,031 ................... $6,586 ................... RIA and Collection 

of Information. 

3% Discount ........................... 3,808 .................................................... 1,031 ..................... 6,586 ..................... RIA and Collection 

of Information. 

Qualitative (unquantified) 

costs.

Downstream costs of a delayed return 

on investment for covered entities.

None ..................... None.

TRANSFERS: 

mstockstill on DSK4VPTVN1PROD with RULES2

54718 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

TABLE 24—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR 1-YEAR DELAY OF ICD–10 

COMPLIANCE DATE FOR 2014—Continued 

[In millions of 2012 dollars] 

Category Primary estimate 

(millions) 

Minimum estimate 

(millions) 

Maximum estimate 

(millions) 

Source citation 

(RIA, preamble, 

etc.) 

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.

TABLE 25—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR HPID IMPLEMENTATION AND 1- 

YEAR DELAY OF ICD–10 COMPLIANCE DATE, FROM FY 2014 TO FY 2026 

[In millions of 2012 dollars] 

Category Primary estimate 

(millions) 

Minimum estimate 

(millions) 

Maximum estimate 

(millions) 

Source citation 

(RIA, preamble, 

etc.) 

BENEFITS: 

Annualized Monetized benefits: 

7% Discount ........................... $916 ..................................................... $613 ...................... $1,292 ................... RIA. 

3% Discount ........................... 795 ....................................................... 540 ........................ 1,134 ..................... RIA. 

Qualitative (unquantified) benefits.HPID: Environmental (electronic over 

paper), patient benefits (more staff 

time), benefits from a decrease in 

time interacting with health plans for 

hospitals, dentists, suppliers of durable medical equipment, nursing 

homes, and residential care facilities, and providers other than physician practices.

DELAY IN COMPLIANCE DATE FOR 

ICD-10: Avoidance of returned 

health care claims.

COSTS: 

Annualized Monetized costs: 

7% Discount ........................... $596 ..................................................... $229 ...................... $963 ...................... RIA and Collection 

of Information. 

3% Discount ........................... 493 ....................................................... 191 ........................ 795 ........................ RIA and Collection 

of Information. 

Qualitative (unquantified) 

costs.

HPID: Cost for system changes for 

dentists, suppliers of durable medical equipment, nursing homes, residential care facilities, and providers 

other than physician practices and 

hospitals.

DELAY IN COMPLIANCE DATE OF 

ICD–10: Downstream costs of a delayed return on investment for covered entities.

None ..................... None.

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 in 45 CFR Part 162 

Administrative practice and 

procedures, electronic transactions, 

health facilities, health insurance, 

hospitals, incorporation by reference, 

Medicaid, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in this 

preamble, the Department of Health and 

Human Services amends 45 CFR part 

162 to read as follows: 

PART 162—ADMINISTRATIVE 

REQUIREMENTS 

■ 1. The authority citation for part 162 

continues to read as follows: 

Authority: Secs. 1171 through 1180 of the 

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

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

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

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

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

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

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

917. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54719 

Subpart A—General Provisions 

■ 2. Section 162.103 is amended by 

adding the definitions of ‘‘Controlling 

health plan (CHP),’’ ‘‘Covered health 

care provider,’’ and ‘‘Subhealth plan 

(SHP)’’ to read as follows: 

§ 162.103 Definitions. 

* * * * * 

Controlling health plan (CHP) means 

a health plan that— 

(1) Controls its own business 

activities, actions, or policies; or 

(2)(i) Is controlled by an entity that is 

not a health plan; and 

(ii) If it has a subhealth plan(s) (as 

defined in this section), exercises 

sufficient control over the subhealth 

plan(s) to direct its/their business 

activities, actions, or policies. 

Covered health care provider means a 

health care provider that meets the 

definition at paragraph (3) of the 

definition of ‘‘covered entity’’ at 

§ 160.103. 

* * * * * 

Subhealth plan (SHP) means a health 

plan whose business activities, actions, 

or policies are directed by a controlling 

health plan. 

Subpart D—Standard Unique Health 

Identifier for Health Care Providers 

§ 162.402 [Removed and Reserved] 

■ 3. Section 162.402 is removed and 

reserved. 

■ 4. Section 162.404 is amended as 

follows: 

■ A. Redesignating paragraph (a) as 

paragraph (a)(1). 

■ B. Adding paragraph (a)(2). 

The addition reads as follows: 

§ 162.404 Compliance dates of the 

implementation of the standard unique 

health identifier for health care providers. 

(a) * * * 

(2) An organization covered health 

care provider must comply with the 

implementation specifications in 

§ 162.410(b) by May 6, 2013. 

* * * * * 

■ 5. Section 162.410 is amended as 

follows: 

■ A. Redesignating paragraph (b) as 

paragraph (c). 

■ B. Adding a new paragraph (b). 

The addition reads as follows: 

§ 162.410 Implementation specifications: 

Health care providers. 

* * * * * 

(b) An organization covered health 

care provider that has as a member, 

employs, or contracts with, an 

individual health care provider who is 

not a covered entity and is a prescriber, 

must require such health care provider 

to— 

(1) Obtain an NPI from the National 

Plan and Provider Enumeration System 

(NPPES); and 

(2) To the extent the prescriber writes 

a prescription while acting within the 

scope of the prescriber’s relationship 

with the organization, disclose the NPI 

upon request to any entity that needs it 

to identify the prescriber in a standard 

transaction. 

* * * * * 

■ 6. Part 162 is amended by adding 

subpart E to read as follows: 

Subpart E—Standard Unique Health 

Identifier for Health Plans 

Sec. 

162.502 [Reserved] 

162.504 Compliance requirements for the 

implementation of the standard unique 

health plan identifier. 

162.506 Standard unique health plan 

identifier. 

162.508 Enumeration System. 

162.510 Full implementation requirements: 

Covered entities. 

162.512 Implementation specifications: 

Health plans. 

162.514 Other entity identifier. 

Subpart E—Standard Unique Health 

Identifier for Health Plans 

§ 162.502 [Reserved] 

§ 162.504 Compliance requirements for the 

implementation of the standard unique 

health plan identifier. 

(a) Covered entities. A covered entity 

must comply with the implementation 

requirements in § 162.510 no later than 

November 5, 2014. 

(b) Health plans. A health plan must 

comply with the implementation 

specifications in § 162.512 no later than 

one of the following dates: 

(1) A health plan that November 5, 

2014. 

(2) A health plan that is a small health 

plan– 

November 5, 2014. 

§ 162.506 Standard unique health plan 

identifier. 

(a) Standard. The standard unique 

health plan identifier is the Health Plan 

Identifier (HPID) that is assigned by the 

Enumeration System identified in 

§ 162.508. 

(b) Required and permitted uses for 

the HPID. (1) The HPID must be used as 

specified in § 162.510 and § 162.512. 

(2) The HPID may be used for any 

other lawful purpose. 

§ 162.508 Enumeration System. 

The Enumeration System must do all 

of the following: 

(a) Assign a single, unique— 

(1) HPID to a health plan, provided 

that the Secretary has sufficient 

information to permit the assignment to 

be made; or 

(2) OEID to an entity eligible to 

receive one under § 162.514(a), 

provided that the Secretary has 

sufficient information to permit the 

assignment to be made. 

(b) Collect and maintain information 

about each health plan that applies for 

or has been assigned an HPID and each 

entity that applies for or has been 

assigned an OEID, and perform tasks 

necessary to update that information. 

(c) If appropriate, deactivate an HPID 

or OEID upon receipt of sufficient 

information concerning circumstances 

justifying deactivation. 

(d) If appropriate, reactivate a 

deactivated HPID or OEID upon receipt 

of sufficient information justifying 

reactivation. 

(e) Not assign a deactivated HPID to 

any other health plan or OEID to any 

other entity. 

(f) Disseminate Enumeration System 

information upon approved requests. 

§ 162.510 Full implementation 

requirements: Covered entities. 

(a) A covered entity must use an HPID 

to identify a health plan that has an 

HPID when a covered entity identifies a 

health plan in a transaction for which 

the Secretary has adopted a standard 

under this part. 

(b) If a covered entity uses one or 

more business associates to conduct 

standard transactions on its behalf, it 

must require its business associate(s) to 

use an HPID to identify a health plan 

that has an HPID when the business 

associate(s) identifies a health plan in a 

transaction for which the Secretary has 

adopted a standard under this part. 

§ 162.512 Implementation specifications: 

Health plans. 

(a) A controlling health plan must do 

all of the following: 

(1) Obtain an HPID from the 

Enumeration System for itself. 

(2) Disclose its HPID, when requested, 

to any entity that needs the HPID to 

identify the health plan in a standard 

transaction. 

(3) Communicate to the Enumeration 

System any changes in its required data 

elements in the Enumeration System 

within 30 days of the change. 

(b) A controlling health plan may do 

the following: 

(1) Obtain an HPID from the 

Enumeration System for a subhealth 

plan of the controlling health plan. 

(2) Direct a subhealth plan of the 

controlling health plan to obtain an 

HPID from the Enumeration System. 

mstockstill on DSK4VPTVN1PROD with RULES2

54720 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

(c) A subhealth plan may obtain an 

HPID from the Enumeration System. 

(d) A subhealth plan that is assigned 

an HPID from the Enumeration System 

must comply with the requirements that 

apply to a controlling health plan in 

paragraphs (a)(2) and (a)(3) of this 

section. 

§ 162.514 Other entity identifier. 

(a) An entity may obtain an Other 

Entity Identifier (OEID) to identify itself 

if the entity meets all of the following: 

(1) Needs to be identified in a 

transaction for which the Secretary has 

adopted a standard under this part. 

(2) Is not eligible to obtain an HPID. 

(3) Is not eligible to obtain an NPI. 

(4) Is not an individual. 

(b) An OEID must be obtained from 

the Enumeration System identified in 

§ 162.508. 

(c) Uses for the OEID. (1) An other 

entity may use the OEID it obtained 

from the Enumeration System to 

identify itself or have itself identified on 

all covered transactions in which it 

needs to be identified. 

(2) The OEID may be used for any 

other lawful purpose. 

■ 7. Section 162.1002 is amended by 

revising paragraph (b) introductory text 

and paragraph (c) introductory text to 

read as follows: 

§ 162.1002 Medical data code sets. 

* * * * * 

(b) For the period on and after 

October 16, 2003 through September 30, 

2014: 

* * * * * 

(c) For the period on and after October 

1, 2014: 

* * * * * 

Dated: August 21, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Dated: August 22, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–21238 Filed 8–24–12; 12:00 pm] 

BILLING CODE 4120–01–P 

mstockstill on DSK4VPTVN1PROD with RULES2