DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Office of the Secretary 

45 CFR Parts 160 and 162 

[CMS-0032-IFC] 

RIN 0938-AQ12 

Administrative Simplification: Adoption of Operating Rules for Eligibility for a Health 

Plan and Health Care Claim Status Transactions 

AGENCY: Office of the Secretary, HHS. 

ACTION: Interim final rule with comment period. 

SUMMARY: Section 1104 of the Administrative Simplification provisions of the Patient 

Protection and Affordable Care Act (hereafter referred to as the Affordable Care Act) establishes 

new requirements for administrative transactions that will improve the utility of the existing 

HIPAA transactions and reduce administrative costs. Specifically, in section 1104(b)(2) of the 

Affordable Care Act, Congress required the adoption of operating rules for the health care 

industry and directed the Secretary of Health and Human Services to "adopt a single set of 

operating rules for each transaction . . . with the goal of creating as much uniformity in the 

implementation of the electronic standards as possible." 

This interim final rule with comment period adopts operating rules for two Health 

Insurance Portability and Accountability Act of 1996 (HIPAA) transactions: eligibility for a 

health plan and health care claim status. This rule also defines the term "operating rules" and 

explains the role of operating rules in relation to the adopted transaction standards. In general, 

transaction standards adopted under HIPAA enable electronic data interchange through a 

common interchange structure, thus minimizing the industry's reliance on multiple formats. 
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Operating rules, in turn, attempt to define the rights and responsibilities of all parties, security 

requirements, transmission formats, response times, liabilities, exception processing, error 

resolution and more, in order to facilitate successful interoperability between data systems of 

different entities. 

DATES: Effective Date: These regulations are effective on [OFR—insert date of public 

inspection in the Federal Register]. The incorporation by reference of the publications listed in 

this interim final rule is approved by the Director of the Office of the Federal Register [OFR—

insert date of public inspection in the Federal Register]. 

 Compliance Date: The compliance date for this regulation is January 1, 2013. 

 Comment Date: To be assured consideration, comments must be received at one of the 

addresses provided below, no later than 5 p.m. on [OFR--insert date 60 days after date of 

publication in the Federal Register]. 

ADDRESSES: In commenting, please refer to file code CMS-0032-IFC. Because of staff and 

resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please choose only one of the ways 

listed) 

1. Electronically. You may submit electronic comments on this regulation to 

http://www.regulations.gov. Follow the "Submit a comment" instructions. 

 2. By regular mail. You may mail written comments to the following address ONLY: 
CMS-0032-IFC 3 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-0032-IFC, 

P.O. Box 8013, 

Baltimore, MD 21244-8013 

Please allow sufficient time for mailed comments to be received before the close of the 

comment period. 

3. By express or overnight mail. You may send written comments to the following 

address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-0032-IFC, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your 

written comments before the close of the comment period to either of the following addresses: 

a. For delivery in Washington, DC-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW, 

 Washington, DC 20201 
CMS-0032-IFC 4 

(Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, commenters are encouraged to 

leave their comments in the CMS drop slots located in the main lobby of the building. A 

stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and 

retaining an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850 

If you intend to deliver your comments to the Baltimore address, please call telephone 

number (410) 786-1066 in advance to schedule your arrival with one of our staff members. 

 Comments mailed to the addresses indicated as appropriate for hand or courier delivery 

may be delayed and received after the comment period. 

For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Shannon Whetzel (410) 786-3267. 

Matthew Albright (410) 786-2546. 

Denise Buenning (410) 786-6711. 

SUPPLEMENTARY INFORMATION: 

 Inspection of Public Comments: All comments received before the close of the comment 

period are available for viewing by the public, including any personally identifiable or 
CMS-0032-IFC 5 

confidential business information that is included in a comment. We post all comments received 

before the close of the comment period on the following Web site as soon as possible after they 

have been received: http://regulations.gov. Follow the search instructions on that Web site to 

view public comments. 

 Comments received timely will be also available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of a document, at the 

headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To 

schedule an appointment to view public comments, phone 1-800-743-3951. 

I. Background 

A. Introduction

The background discussion below presents a partial statutory and regulatory history 

related only to the statutory provisions and regulations that are important and relevant for 

purposes of this interim final rule with comment period. For further information about electronic 

data interchange, the complete statutory background, and the regulatory history, see the proposed 

rule entitled "Health Insurance Reform; Modifications to the Health Insurance Portability and 

Accountability Act (HIPAA) Electronic Transaction Standards," published in the Federal 

Register on August 22, 2008 (73 FR 49742). 

Congress addressed the need for a consistent framework for electronic health care 

transactions and other administrative simplification issues through the Health Insurance 

Portability and Accountability Act of 1996 (HIPAA), (P.L. 104-191), enacted on 

August 21, 1996. HIPAA amended the Social Security Act (hereinafter referred to as the Act) by 

adding Part C–Administrative Simplification–to Title XI of the Act requiring the Secretary of the 
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Department of Health and Human Services (hereinafter referred to as the Secretary) to adopt 

standards for certain transactions to enable health information to be exchanged electronically and 

to achieve greater uniformity in the transmission of health information. Electronic Data 

interchange (EDI) enables providers and payers to process financial and administrative 

transactions faster and at a lower cost than manual transactions. 

In the August 17, 2000 Federal Register (65 FR 50312) we published a final rule 

entitled "Health Insurance Reform: Standards for Electronic Transactions" (hereinafter referred 

to as the Transactions and Code Sets rule). This rule implemented some of the HIPAA 

Administrative Simplification requirements by adopting standards for electronic health care 

transactions developed by standard setting organizations (SSOs), and medical code sets to be 

used in those transactions. Accordingly, we adopted the Accredited Standards Committee (ASC) 

X12 standards Version 4010 and the National Council for Prescription Drug Programs (NCPDP) 

Telecommunication standard Version 5.1, which are specified at 45 CFR part 162, subparts K 

through S. All health plans, health care clearinghouses, and health care providers who transmit 

health information in electronic form (referred to as covered entities) are required to comply with 

these adopted standards. 

In the January 16, 2009 Federal Register, we published a final rule entitled, "Health 

Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act 

(HIPAA) Electronic Transaction Standards" (74 FR 3296) (hereinafter referred to as the 

Modifications final rule), that, among other things, adopted updated versions of the standards 

[(ASC X12 Version 5010 (hereinafter referred to as Version 5010)] and NCPDP Version D.0) 

for the electronic health care transactions originally adopted in the Transactions and Code Sets 
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final rule. Covered entities are required to comply with the updated standards for electronic 

health care transactions on January 1, 2012. Table 1 lists HIPAA standard transactions. 

TABLE 1. CURRENT ADOPTED STANDARDS FOR HIPAA TRANSACTIONS 

Standard Transaction 

ASC X12 837 D Health care claims – Dental. 

ASC X12 837 P Health care claims – Professional. 

ASC X12 837 I Health care claims – Institutional. 

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

ASC X12 837 P and 

NCPDP D.0 

Health care claims – Retail pharmacy supplies and professional 

services. 

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

ASC X12 837 D Coordination of Benefits – Dental. 

ASC X12 837 P Coordination of Benefits – Professional. 

ASC X12 837 I Coordination of Benefits – Institutional. 

ASC X12 270/271 Eligibility for a health plan (request and response) – dental, 

professional, and institutional. 

NCPDP D.0 Eligibility for a health plan (request and response) – Retail 

pharmacy drugs. 

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

ASC X12 834 Enrollment and disenrollment in a health plan. 

ASC X12 835 Health care payment and remittance advice. 

ASC X12 820 Health plan premium payment. 

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

NCPDP D.0 Referral certification and authorization (request and response) – 

retail pharmacy drugs. 

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

standards). 

NCPDP 3.0 Medicaid pharmacy subrogation (batch standard). 

In general, the transaction standards adopted under HIPAA enable electronic data 

interchange using a common interchange structure, thus minimizing the industry's reliance on 

multiple formats. While the standards significantly decrease administrative burden on covered 

entities by creating greater uniformity in data exchange, and reduce the amount of paper forms 

needed for transmitting data, gaps created by the flexibility in the standards permit each health 

plan to use the transactions in very different ways, which remains an obstacle to achieving 
CMS-0032-IFC 8 

greater health care industry administrative simplification. These gaps include all of the 

following: 

 • Performance and system availability. Because the standards permit the flexibility of 

conducting the transactions in batch mode or real-time, in order to minimize the number of 

different implementations, some submitters have resorted to contracting with clearinghouses for 

transaction exchanges that require batch submissions, and simultaneously are utilizing internal 

resources for real-time submissions. Some batch submissions are only conducted overnight. 

Typically batch submissions can be substantially slower than real-time transmissions, and 

systems may be available only at certain times for conducting certain transactions. 

 • Connectivity and transportation of information. In traditional trading partner 

agreements, health plans specify their connectivity options for conducting the standard 

transactions. These options can vary from plan to plan. For example, some payers only conduct 

the transactions through a contracted clearinghouse. Others offer a direct connection to their 

system. Still others use both--contract with a clearinghouse for some transactions, and offer 

direct connect solutions for other transactions. Also, there are some plans that offer a number of 

options, and negotiate a choice with each trading partner, including providers. 

 • Security and authentication. Currently, security standards do not prescribe requirements 

for levels of security and authentication when conducting the standard transactions and accessing 

protected health information. A covered entity's level of security and authentication 

requirements is determined by the individual entity's periodic assessments for security risk and 

vulnerabilities. Organizations have latitude to determine and document the number and types of 

security safeguards that they implement. Although this flexibility supports the implementation 
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of security safeguards that are consistent with the uniqueness of various organizations, it also 

limits standardization for security compliance. 

• Business scenarios and expected responses. The standards do not define methods by 

which trading partners, including providers, establish electronic communication links, or types of 

hardware and software to exchange EDI data. Each trading partner, including providers, 

separately provides specific requirements; for example, the number of transactions that are 

submitted in a file. Transaction processing in each entity's system will vary from one trading 

partner, including providers, to another. The responses to compliantly implementing these 

various transaction processing systems are identified by trading partners, including providers, in 

documentation that is in addition to the adopted implementation guides. These types of 

documented business requirements can vary in terms of number and complexity. 

 • Data content refinements. In accordance with trading partner agreements, plans can 

ignore certain data that are submitted if not needed by them to conduct the transaction. They 

also can refine certain data elements and require their submission. Trading partner agreements 

and additional documentation that plans develop permit plans to define specific types of data and 

to clarify the specific data that is required to be submitted for successful completion of a 

transaction. Although the standards limit the number of data elements that can be defined or 

optionally submitted, a plan's individual business flow and operations may impose specific data 

definition and submission requirements. 

These gaps, among other challenges in the implementation of the standards, have spurred 

the creation of companion guides by health plans. Health plans have created these companion 

guides to describe their unique implementation of HIPAA transactions and how they will work 

with their business partners. Historically, companion guides have been used to establish 
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business practices such as response time, system availability, communication protocols, hours of 

operation, amount of claim history available for inquiries and real-time adjustments, security 

practices, and more. Health plans' companion guides vary in format and structure. Such 

variance can be confusing to trading partners (those entities, including providers, who exchange 

HIPAA compliant electronic transactions), who must implement them in addition to the 

specifications in the transaction standard implementation guides. Further, each companion guide 

is unique for each different health plan. 

Currently, according to the American Medical Association (AMA) there are over 1,200 

such companion guides in existence (http://www.ama-assn.org/ama1/pub/upload/mm/368/hipaatcs.pdf). As mentioned previously, companion guides require providers and trading partners, 

including providers, to adhere to different transaction implementation rules for different health 

plans. Therefore, the widespread proliferation of health plan companion guides is particularly 

burdensome to health care providers, and we believe has subverted the goal of administrative 

simplification. 

Over the past 5 years, this proliferation of health plan companion guides has given 

rise to the development of operating rules. To facilitate successful interoperability between 

data systems of different entities, operating rules more clearly define the rights and 

responsibilities of all parties, security requirements, transmission formats, response times, 

liabilities, exception processing, error resolution and more. Operating rules have been 

shown to reduce costs and administrative complexities as will be described later in this 

interim final rule with comment period. 

The use of operating rules is widespread and varied among other industries. For 

example, uniform operating rules for the exchange of Automated Clearing House (ACH) 
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payments among ACH associations are used in compliance with U.S. Federal Reserve 

regulations (12 CFR Part 370), and maintained by the Federal Reserve and the Electronic 

Payments Network. Additionally, credit card issuers employ detailed operating rules (for 

example, Cirrus Worldwide Operating Rules) describing types of members, their 

responsibilities and obligations, licensing and display of service marks, etc. 

B. Operating Rules Mandated by the Affordable Care Act

Congress sought to address the aforementioned problems in the health care industry by 

requiring the adoption of operating rules for the health care industry as outlined in the Patient 

Protection and Affordable Care Act (Pub L. 111-148), enacted on March 23, 2010, and by the 

Health Care and Education Reconciliation Act of 2010, (Pub. L. 111-152), which was enacted on 

March 30, 2010 (hereinafter referred to as the Affordable Care Act). Section 1173(g)(1) of the 

Act, as added by section 1104(b)(2) of the Affordable Care Act, requires the Secretary to "adopt 

a single set of operating rules for each transaction ...with the goal of creating as much uniformity 

in the implementation of the electronic standards as possible." 

The role of operating rules is to support the adopted standards for health care transactions 

in order to foster and enhance uniform use of the adopted standards and implementation guides 

across the health care industry. Standards and operating rules overlap in their functions to 

increase uniformity, but differ in their purposes. While standards are mainly concerned with the 

content transmitted in a transaction, operating rules provide for the method of how the 

information should be transmitted, as well as the elimination of certain situationality in the use of 

data content contained in the standards. Situationality refers to the fact that many transaction 

requirements only apply if the situation is presented. For example, in the 271 eligibility response 
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transaction, the health plan name is only required when a specific plan name exists for the plan 

for which the individual has coverage. 

Operating rules augment the standards in the following three important ways: 

 • They contain additional requirements that help implement the standard for a transaction 

in a more consistent manner across health plans. For example, when a provider currently sends 

an eligibility for a health plan inquiry to a health plan, the standard allows responses ranging 

from a simple "yes" or "no", to the inclusion of a complete range of information. The operating 

rule requires the health plan to return patient eligibility and financial responsibility for a 

specified list of service type codes including, but not limited to, dental, vision, medical, hospital 

inpatient, and emergency care. This requirement ensures that a provider, who submits the same 

inquiry to multiple payers, receives a consistent response for an eligibility for a health plan 

inquiry. This reduces the number of customized transactions when dealing with multiple health 

plans, thus saving both time and money. 

• They address ambiguous or conditional requirements in the standard and clarify when 

to use or not use certain data elements or code values. For example, the standard may leave it to 

the discretion of the health plan whether or not to return the health plan's name in a particular 

field, creating the possibility of inconsistency in health plan responses. An operating rule may 

require that the health plan name always be returned and that it always be returned in one 

particular specified manner. This encourages uniformity and alleviates the problem of providers 

receiving inconsistent information. 

 • They specify how trading partners, including providers, should communicate with each 

other and exchange patient information, with the goal of eliminating connectivity 

inconsistencies. Currently, individual health plans specify the transmission methods they expect 
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each of their trading partners, including providers, to use for electronic transactions. Mandating 

one uniform method decreases the amount of work and inconsistencies providers experience 

when dealing with multiple payers with differing transmission methods. 

The Affordable Care Act presents a definition of operating rules and provides a great deal 

of guidance about the role Congress envisioned for operating rules in relation to the standards. 

Operating rules are defined by section 1171(9) of the Act (as added by section 1104(b)(1) of the 

Affordable Care Act) as "the necessary business rules and guidelines for the electronic exchange 

of information that are not defined by a standard or its implementation specifications as adopted 

for purposes of this part." Additionally, section 1173(a)(4)(A) of the Act (as added by section 

1104(b)(2) of the Affordable Care Act) requires that-- 

The standards and associated operating rules adopted by the Secretary shall— 

 (i) to the extent feasible and appropriate, enable determination of an individual's 

eligibility and financial responsibility for specific services prior to or at the point of care; 

 (ii) be comprehensive, requiring minimal augmentation by paper or other 

communications; 

 (iii) provide for timely acknowledgment, response, and status reporting that 

supports a transparent claims and denial management process (including adjudication and 

appeals); and 

(iv) describe all data elements (including reason and remark codes) in unambiguous 

terms, require that such data elements be required or conditioned upon set values in other 

fields, and prohibit additional conditions (except where necessary to implement State or 

Federal law, or to protect against fraud and abuse)." 

Section 1104(b)(2) of the Affordable Care Act also amended section 1173 of the Act by 

adding new subsection (a)(4)(B), which states that, "[i]n adopting standards and operating rules 

for the transactions..., the Secretary shall seek to reduce the number and complexity of forms 

(including paper and electronic forms) and data entry required by patients and providers." 

Section 1104(b)(2) of the Affordable Care Act added section 1173(g)(1) to the Act, 

which states that, "[s]uch operating rules shall be consensus-based and reflect the necessary 
CMS-0032-IFC 14 

business rules affecting health plans and health care providers and the manner in which they 

operate pursuant to standards issued under Health Insurance Portability and Accountability Act 

of 1996." 

New sections 1173(g)(2)(D), (g)(3)(C), and (g)(3)(D) of the Act also clarify the scope of 

operating rules. They provide that, 

In adopting operating rules under this subsection, the Secretary shall consider 

recommendations for operating rules developed by a qualified nonprofit entity 

that meets the following requirements . . . (D) The entity builds on the 

transactions issued under Health Insurance Portability and Accountability Act of 

1996. . . . The National Committee on Vital and Health Statistics shall . . . (C) 

determine whether such operating rules represent a consensus view of health care 

stakeholders and are consistent with and do not conflict with other existing 

standards; (D) evaluate whether such operating rules are consistent with electronic 

standards adopted for health information technology 

 We take from the statutory context the following information about operating rules to be 

adopted under HIPAA: 

 • They are business rules and guidelines; 

 • They are necessary for the electronic exchange of information; 

 • They are not defined by a standard; 

 • They do not conflict with the existing HIPAA standards; 

• They are consensus based; 

• They are consistent with HIPAA and Health Information Technology (HIT) standards 

adopted by the Secretary; and 

 • Together with standards they encourage the use of electronic transactions by reducing 

ambiguities currently permitted by the standard, resulting in better-defined inquiries and 

responses that add value to provider practice management and health plan operations. 
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II. Provisions of the Interim Final Rule with Comment Period 

A. Definition of Operating Rules

Section 1171(9) of the Act, as added by section 1104(b)(1) of the Affordable Care Act, 

defines operating rules as "the necessary business rules and guidelines for the electronic 

exchange of information that are not defined by a standard or its implementation specifications 

as adopted for purposes of this part." We are adding the term "operating rules" to the definitions 

in regulations at 45 CFR 162.103, and defining it just as it appears in the statute. We note that, 

in the statutory reference, "this part" refers to Part C of Title XI of the Act, Administrative 

Simplification. In the regulation at 45 CFR 162.103, "this part" refers to Part 162 of the CFR, 

the part in which the definition appears, which contains the regulations that pertain to, among 

other things, the HIPAA transactions and code sets. The following discussion further explains 

operating rules and their scope, in light of their relationship to the standards. 

Business rules and guidelines are not defined by the statute, nor has the health care 

industry specifically defined business rules or guidelines for itself. These are very broad terms 

and there are many ways to define them. Generally, business rules and guidelines are statements 

that refine and specify. For purposes of operating rules, business rules and guidelines are 

statements that refine and specify. 

While operating rules may have a very broad scope as business rules and guidelines in 

order to cover the full spectrum of data content, from data elements to standards, we believe 

there are limitations. To meet the definition of operating rules, business rules and guidelines 

must be "necessary . . . for the electronic exchange of information that are not defined by a 

standard or its implementation specifications." We interpret the term "necessary" to be those 

operating rules needed to facilitate better communication between trading partners, including 
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providers, to fill gaps in the standards, and to fulfill the purposes and principles set out in 

sections 1173(a)(4)(A)(i) through (iv) and (B) of the Act. 

If a business rule or guideline is necessary for the electronic exchange of information, it 

must also be one that is "not defined by" a HIPAA standard or its implementation specifications 

in order to meet the definition of an operating rule. We consider a business rule or guideline that 

does not duplicate what is in the standard to be one that is not defined by the standard. Business 

rules and guidelines that duplicate what is in the standard are not operating rules under our 

interpretation. 

The National Committee on Vital and Health Statistics (NCVHS) is tasked with 

reviewing any operating rule developed and recommended to the Secretary for adoption. The 

NCVHS is to make recommendations to the Secretary and determine whether such operating 

rules represent a consensus view of the health care stakeholders and are consistent with and do 

not conflict with other existing standards under section 1173(g)(3)(C) of the Act. The NCVHS 

must also determine if such operating rules are consistent with electronic standards adopted for 

health information technology under section 1173(g)(3)(D) of the Act. From these statutory 

provisions, we understand that operating rules should be consistent with and not be in conflict 

with the adopted HIPAA standards and HIT standards (for example, those standards that address 

governance, funding and infrastructure of controlled vocabularies, value sets and vocabulary 

subsets to be used primarily to further interoperability between providers and systems). We 

believe that, if an operating rule imposes a requirement that would make it impossible for a party 

to comply with both the associated HIPAA standard and the operating rule, then the operating 

rule conflicts with the standard. This interpretation is consistent with fundamental principles and 

precedents regarding when a conflict exists. If a party is able to satisfy both the requirements of 
CMS-0032-IFC 17 

the standard and the requirements of the operating rule, there is no conflict and the operating rule 

is consistent with the standard. Table 2 illustrates what we consider to be a conflict by 

presenting hypothetical scenarios that illustrate when an operating rule could or could not 

conflict with a standard. 

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

Statement in the 

Standard 

Statement in 

the Operating 

Rule 

Does the Operating 

Rule's Statement 

Conflict with the 

Standard's 

Statement? 

Justification 

"X is recommended." "X is "required." No It is possible for an entity to comply with 

both the standard and the operating rule. 

"X is not required." "X is required." 

No It is possible for an entity to comply with 

both the standard and the operating rule. 

"X cannot be required." "X is required." Yes 

It is impossible for an entity to comply 

with both the standard and the operating 

rule. 

"X is required." "X is required." No 

It is possible for an entity to comply with 

both the standard and the operating rule. 

(However, to the extent that the statement 

in the operating rule duplicates the 

statement in the standard, the operating 

rule statement would not be considered an 

operating rule.) 

"X is at the discretion of 

person #1. Person #2 

cannot require it." 

"X is required." No It is possible for an entity to comply with 

both the standard and the operating rule. 

"X is required." "X is required, 

so is Y." No It is possible for an entity to comply with both the standard and the operating rule. 

"X is required. No other 

can be required." 

"X is required, 

so is Y." Yes 

It is impossible for an entity to comply 

with both the standard and the operating 

rule. 

Our current definition of standard at 45 CFR 160.103 is very broad. In fact, it is so broad 

that it could include operating rules as we are defining that term at §162.103. Therefore, we are 

revising the definition of standard at §160.103 to be clear that standards and operating rules are 

separate and distinct. See the "Additional Requirements" section for discussion of this change. 
CMS-0032-IFC 18 

B. National Committee on Vital and Health Statistics and the Affordable Care Act

 The National Committee on Vital and Health Statistics (NCVHS) was established by 

Congress to serve as an advisory body to the Department of Health and Human Services (DHHS) 

on health data, statistics and national health information policy, and has been assigned a 

significant role in the Secretary's adoption of operating rules under section 1173(g)(3) of the Act 

(as added by section 1104(b)(2) of the Affordable Care Act). 

 In July 2010, the NCVHS' Subcommittee on Standards convened a hearing to discuss the 

Affordable Care Act's provisions pertaining to operating rules for the eligibility for a health plan 

and health care claim status transactions. Section 1173(g)(3) requires the NCVHS to do the 

following: 

 • Advise the Secretary whether a nonprofit entity meets the requirements for 

development of operating rules. 

 • Review the operating rules developed and recommended by such nonprofit entity. 

 • Determine whether such operating rules represent a consensus view of the health care 

stakeholders and are consistent with and do not conflict with other existing standards. 

• Evaluate whether such operating rules are consistent with electronic standards adopted 

for health information technology. 

• Submit to the Secretary a recommendation as to whether the Secretary should adopt 

such operating rules. 

The NCVHS engaged in a comprehensive review of health care operating rules and their 

authors, with the goal of determining whether an entity was qualified to develop operating rules 

for transactions and to evaluate existing operating rules for purposes of making a 

recommendation to the Secretary as to whether those operating rules should be adopted. The 
CMS-0032-IFC 19 

process consisted of a full day of public testimony on July 20, 2010, with participation by more 

than 20 stakeholders representing a cross section of the health care industry, including health 

plans, provider organizations, health care clearinghouses, pharmacy industry representatives, 

health care industry associations, standards developers, professional associations, representatives 

of Federal and State health plans, the banking industry, and the entities proposing to serve as 

operating rules authoring entities. 

During the hearing, testifiers reiterated the need for greater consistency and 

standardization in HIPAA transactions consistent with the Affordable Care Act amendments to 

the HIPAA, which highlight the need to improve the use of standard transactions, increase 

industry adherence to the implementation specifications of the standards, encourage greater 

adoption of electronic transactions, and enable more timely updates and adoption of the HIPAA 

standards. Testifiers claimed that all of these could help reduce the clerical burden on the 

industry in the use of paper and the non-standard use of the current transaction standards. 

We believe that the considerable public participation in the NCVHS hearings for adoption 

of operating rules demonstrates an increasing level of support and interest from broader 

segments of the health care industry. Per the NCVHS' recommendation, we will work with 

industry to continue this public exchange of information regarding operating rules, standards and 

their respective roles in administrative simplification. 

Based on the NCVHS testimony (http://www.ncvhs.hhs.gov/100719ag.htm) and the 

NCVHS' analysis of the operating rules and qualifications of the candidate authoring entities, the 

NCVHS developed a set of recommendations to the Secretary, which are outlined in the 

following discussions. 
CMS-0032-IFC 20 

C. Operating Rules Authoring Entities 

Section 1173(g)(3)(A) of the Act charges the NCVHS with advising the Secretary as to 

whether a nonprofit entity meets the statutory requirements for developing the operating rules to 

be adopted by the Secretary. Those requirements, at section 1173(g)(2) of the Act, include all of 

the following: 

• The entity focuses its mission on administrative simplification. 

 • The entity demonstrates a multi-stakeholder and consensus-based process for 

development of operating rules, including representation by or participation from health plans, 

health care providers, vendors, relevant Federal agencies, and other standards development 

organizations. 

 • The entity has a public set of guiding principles that ensure the operating rules and 

process are open and transparent, and supports nondiscrimination and conflict of interest policies 

that demonstrate a commitment to open, fair, and nondiscriminatory practices. 

 • The entity builds on the transaction standards issued under the Health Insurance 

Portability and Accountability Act of 1996. 

 • The entity allows for public review and updates of its operating rules. 

Of those organizations testifying at the July 2010 NCVHS hearing, two organizations 

formally requested to be considered authoring entities for operating rules. These entities were 

the Council for Affordable Quality Healthcare's (CAQH) Committee on Operating Rules for 

Information Exchange (CORE) and the National Council for Prescription Drug Programs 

(NCPDP). 

The CAQH, a nonprofit alliance of health plans and trade associations, supports industry 

collaboration on initiatives that simplify health care administration 
CMS-0032-IFC 21 

(http://www.caqh.org/about.php). The CAQH launched the CORE with the goal of giving 

providers access to eligibility and benefits information before or at the time of service. The 

CAQH CORE is engaged in the development of voluntary operating rules for the facilitation of 

administrative health care transactions. It has already developed operating rules for the 

eligibility for a health plan and health care claim status transactions. The CAQH CORE has also 

demonstrated that the use of these rules yields a return on investment for both business 

operations and systems within today's complex health care environment 

(http://www.caqh.org/COREIBMstudy.php). 

The NCPDP is a not-for-profit standards development organization (SDO) accredited by 

the American National Standards Institute (ANSI), with over 1,500 members representing the 

pharmacy services industry (http://ncpdp.org/WP.aspx). It is one of several SDOs involved in 

health care information technology and standardization, with a focus on retail pharmacy services, 

and has member representation from the pharmacy services sector of health care 

(http://ncpdp.org/about.aspx). The operating rules the NCPDP brought forth to NCVHS focus 

on the retail-pharmacy sector. 

The July 2010 NCVHS hearings were followed by a request from the NCVHS 

Subcommittee on Standards to both the CAQH CORE and the NCPDP as authoring entity 

candidates, to respond to detailed questionnaires about their ability to meet the statutory 

requirements of the Affordable Care Act as authoring entities for health care operating rules. 

The NCVHS request solicited specific documentation from the two candidates to validate their 

previous testimony, including minutes, voting records and copies of bylaws. Both the CAQH 

CORE and the NCPDP responded to the Subcommittee's request and submitted their respective 
CMS-0032-IFC 22 

applicable materials. A synopsis of the candidates' responses can be found on the internet at 

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

Upon review of the CAQH CORE's and the NCPDP's respective responses to the 

NCVHS questionnaire, the NCVHS determined that both organizations met the statutory 

requirements to be an operating rules authoring entity. The NCVHS noted, however, that there 

are still adjustments to process and procedures that may be required of both organizations to 

enhance transparency, citing the need for more formalized relations with each other and with 

other SDOs, inclusion of a more diverse cadre of stakeholders, and a more formal public review 

process. Both the CAQH CORE and the NCPDP acknowledged these issues in their submitted 

responses to the NCVHS (http://www.ncvhs.hhs.gov/100930lt2.pdf). 

The NCVHS advised the Secretary in its letter dated September 30, 2010, 

(http://www.ncvhs.hhs.gov/100930lt2.pdf) that the CAQH CORE meets the requirements of 

section 1173(g)(2) of the Act to be the operating rules authoring entity for the non-retail 

pharmacy-related eligibility for a health plan and health care claim status standard transactions 

with additional qualifying requirements. In the same letter, the NCVHS stated that the NCPDP 

met the requirements to be the authoring entity for operating rules for retail pharmacy-related 

eligibility transactions (as outlined in the Telecommunications Standard Implementation Guide 

Version D.0) also with additional qualifying requirements. Those requirements for both the 

CAQH CORE and the NCPDP are as follows: 

• Require authoring entities to maintain minutes, attendance, voting records, and other 

appropriate documentation that will help the NCVHS conduct verification that the authoring 

entities have utilized an open, consensus-driven process with broad stakeholder participation and 

provided an opportunity for public comment in authoring any new operating rules or new 
CMS-0032-IFC 23 

versions of existing operating rules, consistent with such processes followed by ANSI-accredited 

standards development organizations. 

• Continue to use the NCVHS and its open process to evaluate, select, and recommend 

any new qualifying operating rules authoring entities when it comes time to adopt operating rules 

for other transactions, or for newer versions of the operating rules for the transactions for which 

the CAQH CORE and the NCPDP are being recommended to be named authoring entities at this 

time. 

After our own review and analysis of the CAQH CORE and the NCPDP applications for 

consideration to be authoring entities for their respective developed operating rules, and the 

NCVHS' recommendation, we have determined that the CAQH CORE is qualified to be the 

operating rules authoring entity for non-retail pharmacy-related eligibility for a health plan and 

health care claim status standard transactions per section 1173(g)(2) of the Act. 

At the time of the hearing, the NCVHS based its recommendation to appoint the NCPDP 

as an operating rules authoring entity on the testimony presented. However, upon further review 

and consultation, we have determined that the NCPDP's standard provides enough detail and 

clarity to operationalize the standards to the point where no gaps exist that operating rules would 

need to fill and no further infrastructure or data content rules need to be adopted. (For a more 

detailed discussion, see section III. of this interim final rule with comment period). 

D. Adoption of Operating Rules

1. Adoption of the CAQH CORE Phase I and Phase II Operating Rules for the Non-Retail 

Pharmacy Eligibility for a Health Plan and Health Care Claim Status Transactions (updated for 

Version 5010) 
CMS-0032-IFC 24 

The CAQH CORE builds consensus among health care industry stakeholders on a set of 

operating rules that facilitate administrative interoperability between health plans and providers 

by building on applicable HIPAA transaction requirements, enabling providers to submit 

transactions from any system, and facilitating administrative and clinical data integration. The 

CAQH CORE uses a phased approach for developing operating rules. This approach allows for 

developing rules and implementing them via incremental, achievable milestones, and helps to 

maximize rule adoption. The CAQH CORE Phase I operating rules were developed in 2006 and 

focused on the eligibility for a health plan transaction. The CAQH CORE Phase II rules, 

developed in 2008, added operating rules for the health care claim status transaction, and more 

rules for the eligibility for a health plan transaction that were not included in Phase I. Both the 

CAQH CORE Phase I and Phase II operating rules were updated to accommodate the Version 

5010 HIPAA standards, which were adopted by the Secretary via the final rule published in the 

Federal Register on January 16, 2009 (74 FR 3296) and with which HIPAA covered entities 

must be compliant on January 1, 2012. 

The CAQH CORE operating rules (updated for Version 5010) include both infrastructure 

rules and data content rules. The infrastructure rules help improve data content flow between 

provider and payer. They improve interoperability by addressing all of the following: 

 • Connectivity--provide a uniform way for stakeholders to connect (through the 

internet). 

 • Response Times--specify that information will be available in real time. 

 • System Availability--specify systems delivering information be available a certain 

amount of time. 

 • Patient Identification--help assure patient matching/identification can occur. 
CMS-0032-IFC 25 

The CAQH CORE's first set of operating rules (updated for Version 5010) are Phase I 

rules for eligibility for a health plan transaction. They help electronically confirm patient benefit 

coverage, copay, coinsurance, and base deductible. In addition, through requirements to use 

common internet protocols, they allow providers to access needed patient information prior to or 

at the point of care. The CAQH CORE's second set of operating rules (updated for Version 

5010) are the Phase II rules for the eligibility for a health plan and health care claim status 

transactions. They expand on the first set by adding a requirement for transaction recipients to 

send back patient remaining deductible amounts, rules to improve patient matching, health care 

claim status infrastructure requirements (for example, response time) and more prescriptive 

connectivity requirements. 

We have examined each of the CAQH CORE Phase I and Phase II operating rules and 

are adopting those that we believe further enhance the HIPAA transactions by better facilitating 

communication between trading partners, including providers, filling gaps in the associated 

standards, and fulfilling the requirements, purposes, and principles set out in the statute at 

sections 1173(a)(4)(A)(i through iv) and (B). Of the eight CAQH CORE Phase I operating rules 

(updated for Version 5010), we are adopting the following six: 

• Phase I CORE 152: Eligibility and Benefit Real Time Companion Guide Rule, version 

1.1.0, March 2011, and CORE Version 5010 Master Companion Guide Template, 005010, 1.2, 

March 2011. 

• Phase I CORE 153: Eligibility and Benefits Connectivity Rule, version 1.1.0, March 

2011. 

• Phase I CORE 154: Eligibility and Benefits 270/271 Data Content Rule, version 1.1.0, 

March 2011. 
CMS-0032-IFC 26 

• Phase I CORE 155: Eligibility and Benefits Batch Response Time Rule, version 1.1.0, 

March 2011. 

• Phase I CORE 156: Eligibility and Benefits Real Time Response Time Rule, version 

1.1.0, March 2011. 

• Phase I CORE 157: Eligibility and Benefits System Availability Rule, version 1.1.0, 

March 2011. 

 We are adopting all five of the CAQH CORE Phase II operating rules (updated for Version 

5010). They include the following: 

• Phase II CORE 250: Claim Status Rule, version 2.1.0, March 2011, and CORE 

Version 5010 Master Companion Guide Template, 005010, 1.2, March 2011. 

• Phase II CORE 258: Eligibility and Benefits 270/271 Normalizing Patient Last Name 

Rule, version 2.1.0, March 2011. 

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

Rule, version 2.1.0, March 2011. 

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

2.1.0, March 2011. 

• Phase II CORE 270: Connectivity Rule, version 2.2.0, March 2011. 

Both the CAQH CORE Phase I and Phase II operating rules (updated for Version 5010) 

that we are adopting in this interim final rule with comment period can be found on the CAQH 

CORE website at http://www.caqh.org/COREVersion 5010.php. Below we briefly describe 

those operating rules. 

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

(updated for Version 5010) and CORE Version 5010 Master Companion Guide Template 
CMS-0032-IFC 27 

provide a standardized format for health plan companion guides. As mentioned previously, 

health plans have the option of creating a companion guide that describes the specifics of how 

they implement the HIPAA transactions. Currently, health plans have independently created 

companion guides that vary in format and structure, which can be confusing to trading partners, 

including providers, and providers who must review numerous companion guides along with the 

Version 5010 Implementation Guides. To address this issue, the CAQH CORE developed the 

CORE Version 5010 Master Companion Guide Template to ensure that the structure of each 

health plan's companion guide is similar to every other health plan's companion guide, making it 

easier for providers to find information quickly. 

Developed with input from multiple health plans, system vendors, provider 

representatives and healthcare and HIPAA industry experts, the CAQH CORE template 

organizes information into several sections including, general information (sections 1 through 9) 

and transaction-specific information (section 10) , as well as appendices that provide helpful 

information, such as an information checklist, descriptions of typical business scenarios, 

transmission examples, FAQs, and a summary of the changes between companion guides. The 

CAQH CORE recognizes that different health plans may have different requirements, so the 

CORE v5010 Master Companion Guide Template gives health plans the flexibility to tailor 

companion guides to meet each of their own particular needs. 

The Phase I CORE 153: Eligibility and Benefits Connectivity Rule (updated for Version 

5010) addresses usage patterns for both batch and real time transactions, the exchange of security 

identifiers, and communications-level errors and acknowledgements. It does not define the 

specific content of the message. 
CMS-0032-IFC 28 

Currently, multiple connectivity methods, some based on open standards, others on 

proprietary approaches, are in use for administrative electronic transactions in the health care 

industry. Health care providers and health plans support multiple connectivity methods to 

connect to different health plans, clearinghouses, provider organizations and others, which add 

costs for health plans and providers. This rule is designed to provide a "safe harbor" that 

providers and health plans can be assured will be supported by any trading partner, including 

providers. Safe harbors are essentially connectivity requirements. When trading partners 

including providers, agree to follow the same connectivity requirements, connectivity is better 

enabled. This rule is not intended to require trading partners, including providers, to remove 

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

partners, including providers, must use this method for all new connections. It is expected that

some trading partners, including providers, may agree to use different communication 

mechanism(s) and/or security requirements than that described by this rule. The rule simply 

provides a secure connection for those entities that do not currently have one. 

The Phase I CORE 154: Eligibility and Benefits 270/271 Data Content Rule (updated for 

Version 5010) provides more robust and consistent information prior to or at the point of care. It 

specifies the minimum requirements for using the ASC X12 005010X279A1 Eligibility Benefit 

Request and Response (270/271) to inquire about health plan insurance coverage and to respond 

to such an inquiry using the ASC X12 005010X279A1 Eligibility Benefit Request and Response 

(270/271). The requirements address certain situational elements and codes and are in addition 

to requirements contained in the Version 5010 270/271 implementation guides. This rule 

provides for not only determination of an individual's eligibility but also his financial 
CMS-0032-IFC 29 

responsibility information for co-pay, deductible, and coinsurance prior to or at the point of care. 

This rule covers, for example, the following content in the Version 5010 271: 

• The dates of eligibility under the health plan (contract) level for past and future dates 

and the dates of eligibility at the benefit level if different from the contract level. 

• The patient financial responsibility for each specified benefit at the base contract 

amounts for both in-network and out-of-network. 

• The name of the health plan when it exists in the health plan's system. 

 Compliance with the requirements of this operating rule will ultimately reduce the time it 

takes providers to track down such information after the service has been rendered, and decrease 

the provider's accounts receivable. 

The Phase I CORE 155 and 156: Eligibility and Benefits Batch Response and Real Time 

Response Rules (updated for Version 5010) streamline and improve the flow of transactions by 

imposing timeframe requirements for when a response is to be submitted for an eligibility for a 

health plan inquiry. 

For a Version 5010 270 batch mode response to a provider's inquiry submitted by 

9:00 pm Eastern time of a business day, the response must be returned by 7:00 am Eastern time 

the following business day. The maximum response time when processing in real time mode 

must be 20 seconds or less. 

 The Phase I CORE 157: Eligibility and Benefits System Availability Rule (updated for 

Version 5010) also streamlines and improves the flow of transactions. It recognizes that many 

institutional providers need to be able to conduct health plan eligibility activities at any time. It 

also recognizes that health plans have a business need to take their eligibility and other systems 

offline periodically in order to perform system maintenance, which means that some systems will 
CMS-0032-IFC 30 

not be available for eligibility inquiries and responses on certain nights and weekends. The rule 

requires that systems be available to process eligibility inquiries no less than 86 percent of the 

time per calendar week for real and batch modes, and requires health plans to publish regularly 

scheduled downtime. It ensures that systems are up and running in a consistent manner and that 

trading partners, including providers, are aware of any downtime so they can plan accordingly. 

 The Phase II CORE 250: Claim Status Rule (updated for Version 5010) encourages and 

increases the use of the health care claim status transaction by providing for batch and real-time 

response times, system availability, the use of a companion guide template, and support for the 

CORE "safe harbor" connectivity requirement. These elements included in the CORE 250 rule 

follow the same requirements as and build upon the same requirements as for the eligibility for a 

health plan transaction infrastructure rules included in Phase I CORE 152, Phase I CORE 155, 

Phase I CORE 156 and Phase I CORE 157 rules we are adopting in this interim final rule with 

comment period. This means that Phase II CORE 250 rule (updated for Version 5010) requires 

each health plan to: follow the companion guide format requirement as provided in CORE 152, 

which is the CORE Version 5010 Master Companion Guide Template; support the CORE "safe 

harbor" connectivity requirements; support a maximum response time of 20 seconds from the 

time of submission of a Version 5010 276 for real time and for batch mode response to a 

provider's inquiry submitted by 9:00 pm Eastern time of a business day, the response must be 

returned by 7:00 am Eastern time the following business day; ensure system availability of no 

less than 86 percent per calendar week for both real time and batch modes; and follow the 

companion guide format requirement as provided in CORE 152, which is the CORE v5010 

Master Companion Guide Template. 
CMS-0032-IFC 31 

The CORE 258: Eligibility and Benefits 270/271 Normalizing Patient Last Name Rule 

(updated for Version 5010). Health plans and health care providers must be able to uniquely 

identify patients in order to ascertain patient eligibility. Although the Version 5010 270/271 

standards specify data elements and data element attributes that may be used to identify an 

individual, the standards do not address the use of punctuation and special characters. Therefore, 

the way health plans identify individuals does not always match the way providers identify 

individuals, which results in the rejection or denial of eligibility transactions. The CAQH CORE 

258 rule addresses certain aspects of individual identification that enhance the real time 

processing of eligibility inquiries and responses. 

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

Rule (updated for Version 5010) provides consistent and specific patient identification 

information on reasons for patient identification errors on an eligibility for a health plan inquiry. 

This allows providers to know specifically why they did not receive a match in an eligibility for 

a health plan inquiry, instead of trying to determine for themselves the reasons for the error and 

what corrective action is needed. This rule improves the specificity and standardized use of the 

AAA codes that would give providers better feedback to understand what information is missing 

or incorrect in order to obtain a valid match. It defines a standard way for health plans to report 

errors in the eligibility response that cause a health plan not to be able to respond with a Version 

5010 271 showing eligibility information for the requested patient or subscriber. The goal is to 

use a unique error code wherever possible for a given error condition so that the re-use of the 

same error code is minimized. Where this is not possible, the goal (when re-using an error code) 

is to return a unique combination of one or more AAA segments along with one or more of the 
CMS-0032-IFC 32 

submitted patient identifying data elements such that the provider will be able to determine as 

precisely as possible what data elements are in error and take the appropriate corrective action. 

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

for Version 5010) builds on and enhances the Phase I CORE 154: Eligibility and Benefits 

270/271 Data Content Rule (updated for Version 5010) by requiring the provision in the 

eligibility response of the remaining patient deductible amounts for certain service type codes. 

The use of this rule further reduces the time it takes to track down this information manually or 

eliminates the time completely after the service has been rendered and decreases the provider's 

accounts receivable. 

 The CAQH CORE determined that Phase I CORE rules should focus on improving 

electronic eligibility and benefits verification, as eligibility is the first transaction in the claims 

process. Thus, if eligibility and benefits are accurately known to health care providers, all the 

associated electronic transactions that follow will be more effective and efficient. The Phase I 

CORE 154: Eligibility and Benefits 270/271 Data Content Rule (updated for Version 5010) 

primarily outlined a set of requirements for health plans to return base (not remaining or 

accumulated) patient financial responsibility related to the deductible, co-pay and co-insurance 

for a set of 12 services in the ASC X12 005010X279A1 Eligibility Benefit Request and 

Response (270/271), and for vendors, clearinghouses and providers to transmit and use that 

financial data. The Phase II CORE 260: Eligibility & Benefits Data Content (270/271) Rule 

(updated for Version 5010) extends and enhances the CORE Phase I Version 5010 271 

transaction by requiring the provision of remaining deductible amounts for both the Phase I 

required 12 service type codes and an additional set of 39 other service type codes. 
CMS-0032-IFC 33 

 The Phase II CORE 270: Connectivity Rule (updated for Version 5010), which applies to 

both the eligibility for a health plan and health care claim status transactions, builds on CORE 

153: Eligibility and Benefits Connectivity Rule (updated for Version 5010) by requiring 

additional connectivity specifications which further facilitate interoperability. This rule 

addresses the message envelope metadata (that information which defines the context for 

interpretation of the rest of the data in the message, for example, response codes, request 

methods, etc.) and the message envelope, (a fixed number of fields that show source, destination, 

tag, and communicator. and the submitter authentication requirements for both batch and real 

time transactions, and communications-level errors. 

This rule improves utilization of electronic transactions by enabling more entities to 

interoperate with other entities, including reducing the implementation barrier for small entities 

(for example, small providers). It also extends the Phase I CORE 153: Eligibility and Benefits 

Connectivity Rule (updated for Version 5010) and establishes a safe harbor by further specifying 

the connectivity that all covered entities must demonstrate and implement. 

Tables 3 and 4 summarize each of the CAQH CORE Phase I and Phase II Version 5010 

operating rules, which we are adopting in this interim final rule with comment period, as 

reflected in 45 CFR 162.920, 162.1203, and 162.1403. 
CMS-0032-IFC 34 

TABLE 3. THE CAQH CORE PHASE I OPERATING RULES (UPDATED FOR 

VERSION 5010) 

Rule High Level Requirements 

Phase I CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule, Version 1.1.0, March 2011 and 

CORE Version 5010 Master 

Companion Guide Template, 005010, 

1.2, March 2011 

Goal: Standardize template/common structure of companion guides for 

more efficient reference. 

Requirements: Standard template/structure for companion guides. 

Phase I CORE 153: Eligibility and 

Benefits Connectivity Rule, Version 

1.1.0, March 2011 

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

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

including providers, to facilitate connectivity standardization and 

interoperability across the exchange of health information. 

Requirements: Supports data exchange over the public internet (HTTP/S).

Phase I CORE 154: Eligibility and 

Benefits 270/271 Data Content Rule, 

Version 1.1.0, March 2011 

Goal: Enable more robust and consistent exchange of eligibility 

information. 

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

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

Phase I CORE 155: Eligibility and 

Benefits Batch Response Time Rule, 

Version 1.1.0, March 2011 

Phase I CORE 156: Eligibility and 

Benefits Real Time Response Time 

Rule, Version 1.1.0, March 2011 

Goal: Streamline and improve flow of transactions. 

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

for batch. 

Phase I CORE 157: Eligibility and 

Benefits System Availability Rule, 

Version 1.1.0, March 2011 

Goal: Streamline and improve flow of transactions. 

Requirements: Systems must be available 86 percent per calendar week, 

and regular downtime must be published. 

TABLE 4. THE CAQH CORE PHASE II VERSION 5010 

Rule High Level Requirements 

Phase II CORE 250: Claim Status Rule, 

Version 2.1.0, March 2011 

Goal: Promote increased availability and usage of the health care claim 

status transaction through rules for real-time and batch response times, 

system availability, and connectivity. 

Requirements: Application of real-time and batch response times, system 

availability, and connectivity rules for health care claim status 

transactions, which were derived from the eligibility Phase I infrastructure 

rules. 

Phase II CORE 258: Eligibility and 

Benefits 270/271 Normalizing Patient 

Last Name Rule, Version 2.1.0, March 

2011 

Goal: Improve patient matching. 

Requirements: Normalize the submitted and stored last name (e.g., 

remove special characters, suffixes/prefixes) before trying to match. 
CMS-0032-IFC 35 

Rule High Level Requirements 

Phase II CORE 259: Eligibility and 

Benefits 270/271 AAA Error Code 

Reporting Rule, Version 2.1.0, March 

2011 

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

eligibility for a health plan request. 

Requirements: Return specified AAA codes for each error condition. 

Phase II CORE 260: Eligibility & 

Benefits Data Content (270/271) Rule, 

Version 2.1.0 , March 2011 

Goal: Provide additional financial responsibility/patient liability 

information in response to an inquiry and support more high volume 

service type codes. 

Requirements: Includes remaining deductible amount (plus static copay 

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

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

type codes provided in Phase I. 

Phase II CORE 270: Connectivity Rule, 

Version 2.2.0, March 2011 

Goal: Provide more comprehensive connectivity specifications to further 

interoperability. 

Requirements: Includes requirements for two message envelope standards 

submitter authentication (i.e., username/password, digital certificates) and 

metadata. 

In 45 CFR 162.103, we provide that a standard transaction means "a transaction that 

complies with an applicable standard adopted under this part." In this interim final rule with 

comment period we are adopting operating rules and requiring that covered entities comply with 

those operating rules when conducting a transaction for which we have adopted a standard. In 

order to reflect that requirement in regulation text, in part, we need to modify the definition of 

standard transaction to be clear that a standard transaction is one that complies with the adopted 

standard and the adopted associated operating rule. Therefore, we are amending the definition of 

standard transaction at 45 CFR 162.103. See the "Additional Requirements" section for 

discussion of this change. 

In the following sections, we identify and discuss several specific CAQH CORE 

operating rule requirements that we believe require further explanation. These include 

acknowledgements, certification, and the use of the CAQH CORE companion guide template. 

We believe these topics require additional explanation because in this interim final rule with 

comment period, we are not adopting the operating rules that pertain to acknowledgements or the 
CMS-0032-IFC 36 

requirements within the adopted operating rules that pertain to acknowledgements, nor are we 

adopting the CAQH CORE certification policies. Additionally, we believe we need to be 

especially clear that we are adopting the CAQH CORE companion guide template to avoid any 

confusion as to whether the companion guide template is included as part of the companion 

guide rules under CAQH CORE Phase I and Phase II rules we are adopting. 

a. Acknowledgements Operating Rules 

Acknowledgements are responses transmitted by EDI that inform submitters whether or 

not their transaction has been received or if there are problems with the transaction. The use of 

acknowledgements adds a great deal of value to the underlying transactions for which they are 

sent by informing the sender that a transaction has been received or has been rejected. Without 

acknowledgements, it is difficult for the sender to know whether the intended recipient received 

the transmission, which often results in the sender repeatedly querying the intended receiver as to 

the status of the transmission. 

In the February 2010 report to the NCVHS, the Designated Standards Maintenance

Organization (DSMO), which receives and processes requests for adopting new standards or 

modifying adopted standards recommended that the NCVHS consider acknowledgements for 

adoption as HIPAA transactions, using the Version 5010 999, 271, 277, and TA1 standards. In 

the DSMO recommendation, it was noted that acknowledgements help the health care industry 

better reconcile the status of transmitted EDI transactions, especially when sending claims and 

remittance transactions. The transaction sender benefits from knowing that the receiving party 

has successfully received the transaction or has encountered errors that need to be reconciled. 

We have received anecdotal reports of wide-spread industry use of acknowledgements on 

a voluntary basis, and we understand that provisions for acknowledgements are contained in 
CMS-0032-IFC 37 

many health plans' companion guides. It is our understanding also that the health care industry 

has long supported, and even anticipated, the adoption of an acknowledgement transaction 

standard under HIPAA. The CAQH CORE 150 and 151 rules (updated for Version 5010) 

specifically pertain to requiring the use of the Version 5010 999, 271, and 277 

acknowledgements. Additionally, the use of acknowledgements is referenced throughout many 

of the other CAQH CORE rules adopted in this interim final rule with comment period, 

including the CORE v5010 Master Companion Guide Template. 

Section 1173(a)(4)(A)(iii) of the Act, as added by section 1104(b) of the Affordable Care 

Act, provides that standards and associated operating rules shall "provide for timely 

acknowledgement, response, and status reporting that supports a transparent claims and denial 

management process (including adjudication and appeals)." This new provision is an indication 

of Congress' recognition of the important role acknowledgements play in EDI. Although we are 

not requiring compliance with any of the CAQH CORE rule requirements regarding 

acknowledgements, we are addressing the important role acknowledgements play in EDI by 

strongly encouraging the industry to implement the acknowledgements requirements in the 

CAQH CORE rules we are adopting herein. We reflect the exclusion of the requirement to use 

acknowledgments in regulation text at §162.1203 and §162.1403. 

Until such time as the Secretary adopts a standard for acknowledgments, we support the 

industry's ongoing voluntary use of acknowledgements and encourage even more widespread 

use. We welcome industry and stakeholder comments on this topic. 

b. CAQH CORE Operating Rules Certification 

Currently, the CAQH CORE administers a voluntary certification process, for a fee. 

Once the entity passes the certification requirements, the CAQH CORE assigns the status of 
CMS-0032-IFC 38 

"CORE-certified Entity" and requires those entities to adhere to the CAQH CORE policies. The 

CAQH CORE operating rules are free and available for voluntary use today, and any trading 

partner, including providers, can opt to use them, they would simply not be able to claim that 

they were "CORE certified entities." 

Throughout the CAQH CORE rules we are adopting, there are also many references to 

CORE certification. For example, the rules reference CORE-certified entity, CORE-authorized 

testing vendor, CORE-certified participant, and the like. In many places, the rules describe what 

is required for the successful completion of the approved CORE test suite, CORE testing 

requirements, etc. In this interim final rule with comment period, we are not requiring covered 

entities to obtain the CAQH CORE certification or to adhere to the CAQH certification policies 

for Phase I and Phase II operating rules. We want to be clear that we are not requiring 

compliance with any aspect of CORE certification. 

We note that section 1173(h)(1)(A) of the Act (as added by section 1104(b)(2) of the 

Affordable Care Act) requires that health plans certify to the Secretary no later than 

December 31, 2013 that they are in compliance with any applicable HIPAA standards and 

associated operating rules for the eligibility for a health plan, health care claim status, and health 

care payment and remittance advice transactions. Until we develop a certification process in 

accordance with section 1173(h) of the Act specifying health plan compliance requirements, 

health plans and all other covered entities are not required to certify compliance with the CAQH 

CORE Version 5010 operating rules we are adopting. We reflect the exclusion of CORE 

certification in regulation text at §162.1203 and §162.1403. 

c. Use of the CAQH CORE Companion Guide Template 
CMS-0032-IFC 39 

During the July 2010 NCVHS hearing, the NCVHS also heard testimony concerning the 

continued use of companion guides when operating rules are adopted. The NCVHS indicated 

that it does not wish to encourage the perpetual use of companion guides, which subvert the 

goals of administrative simplification; however, it acknowledged that companion guides may 

continue to be necessary for proprietary information, transmission instructions, and other limited 

business purposes, and will likely never be totally replaced by operating rules or updated 

versions of the standards. 

The NCVHS recommended that the Secretary require that any companion guides deemed 

necessary by health plans not conflict with the HIPAA standards, implementation specifications 

and operating rules, and that they follow a standard format and content agreed upon by industry 

consensus across all sectors. The NCVHS stated that companion guides should be limited to 

providing basic trading partner, including providers, facts, such as contact information, websites, 

service phone numbers, and other necessary information for conducting business, etc. 

With input from health plans, system vendors, provider representatives and 

healthcare/HIPAA industry experts, the CAQH CORE has developed a companion guide 

template as part of their Phase I and Phase II operating rules (updated for Version 5010) that 

organizes information into several simple sections and gives health plans the flexibility to tailor 

the document to meet their particular needs. The CORE 152: Eligibility and Benefit Real Time 

Companion Guide Rule states that the ASC X12 005010X279A1 Eligibility Benefit Request and 

Response (270/271) transactions must follow the format/flow as defined in the CORE v5010 

Master Companion Guide Template. The CORE 250: Claim Status Rule (updated for Version 

5010) includes a requirement that entities using the ASC X12N/005010X212 Health Care Claim 

Status Request and Response (276/277) transactions must follow the format/flow as defined in 
CMS-0032-IFC 40 

the Phase I CORE 152, which is the CORE v5010 Master Companion Guide Template. The 

CAQH CORE companion guide template can be found on the CAQH CORE website at 

http://www.caqh.org/pdf/CLEAN5010/MasterCompGuidTemp-Version 5010.pdf.

We are requiring that covered entities that use or plan to use companion guides comply 

with the CORE 152 and CORE 250 rules requirement to use the CORE v5010 Master 

Companion Guide Template for the eligibility for a health plan and health care claim status 

transactions. 

d. Updates to Standards and Operating Rules 

Section 1173(i) of the Act provides for the establishment of a review committee for the 

purposes of reviewing and amending the adopted standards and operating rules. It calls for a 

hearing of this review committee no later than April 2014 and not less than biennially thereafter 

as well as a report outlining recommendations for updating and improving the standards and 

operating rules. Per the statute, this review committee can include the NCVHS, or any 

appropriate committee as determined by the Secretary. 

Additionally, section 1173(a)(5) of the Act provides for the solicitation of input from the 

NCVHS and the Health Information Technology Standards Committee, as well as the standards 

setting organizations and stakeholders as determined appropriate by the Secretary for the 

purposes of describing "(i) whether there could be greater uniformity in financial and 

administrative activities and items, as determined appropriate by the Secretary; and (ii) whether 

such activities should be considered financial and administrative transactions...for which the 

adoption of standards and operating rules would improve the operation of the health care system 

and reduce administrative costs." 
CMS-0032-IFC 41 

Finally, we note that this interim final rule with comment period does not specify the 

timing or the process for updating operating rules. The timing and process for updating these, as 

well as future operating rules will be forthcoming. 

e. Additional Information 

The current definition of standard at 45 CFR 160.103 is written so broadly that it could 

include operating rules as we are defining that term at §162.103. However, as we have 

determined that operating rules are separate and distinct from standards, and that standards do 

not encompass operating rules, we believe it is necessary to revise the definition of standard to 

specifically exclude operating rules. Therefore, we have amended the definition of standard at 

§160.103 to exclude operating rules. 

Currently, 45 CFR 162.103 provides that a standard transaction means "a transaction that 

complies with an applicable standard adopted under this part." In this interim final rule with 

comment period we are adopting operating rules and requiring covered entities to comply with 

those operating rules when conducting a transaction for which we have adopted a standard. We 

believe it is necessary to revise the definition of a standard transaction in order to be clear that a 

standard transaction is one that uses the adopted standard as well as the adopted operating rule 

for that transaction. Therefore, we are amending the definition of a standard transaction at 

45 CFR 162.103 to mean "a transaction that complies with an applicable standard and associated 

operating rules adopted under this part." 

Section 1173(a)(4)(A)(iv) of the Act provides that the standards and associated operating 

rules must "describe all data elements (including reason and remark codes) in unambiguous 

terms, require that such data elements be required or conditioned upon set values in other fields, 

and prohibit additional conditions (except where necessary to implement State or Federal law, or 
CMS-0032-IFC 42 

to protect against fraud and abuse)." We interpret this provision to mean that covered entities 

may not require additional data conditions of their trading partners, including providers, outside 

of those already included in the adopted standards and associated operating rules, except where it 

is necessary to implement State or Federal law, or to protect against fraud and abuse. Our 

regulations at 45 CFR 162.915 already place restrictions on covered entities with regard to what 

they may require of their trading partners including providers, concerning standards. Currently, 

under §162.915(a), covered entities may not enter into a trading partner agreement that would 

change the definition, data condition, or use of a data element or segment in a standard. We do 

not need to do anything to incorporate the statutory requirement of section 1173(a)(4)(iv) of the 

Act into our regulations with regard to standards; however we believe it is appropriate to revise 

§162.915(a) to expand the restriction to include operating rules. Therefore, we are amending 

§162.915(a) to include operating rules. The law permits limited circumstances under which 

covered entities may require additional data conditions where necessary to implement State or 

Federal law, or to protect against fraud and abuse. Therefore, we are also amending §162.915(a) 

to reflect that narrow exception. 

f. Conclusion 

Based on our analysis of the CAQH CORE operating rules and the recommendations of 

the NCVHS, and for the reasons provided in the previous discussions, we are adopting the 

CAQH CORE operating rules (updated for Version 5010), including the companion guide 

template, for the non-retail pharmacy eligibility for a health plan and health care claim status 

transactions, as reflected at 45 CFR 162.920, 162.1203, and 162.1403. We are not requiring 

compliance with any of the requirements of the operating rules that pertain to the use of 

acknowledgements and CAQH CORE certification. 
CMS-0032-IFC 43 

2. NCPDP Telecommunication Standard Implementation Guide Version D.0 Operating Rules 

for Retail Pharmacy Transactions 

In its testimony before the NCVHS, the NCPDP stated that the NCPDP Version D.0 

standard represents retail pharmacy industry consensus on clarification of transactions, data 

elements, data values, and situations of usage. Additionally, the NCPDP testified at the July 

2010 NCVHS hearing that it also publishes a free NCPDP Version D.0 Editorial document, 

which is updated quarterly, and contains frequently asked questions, examples, and further 

clarifications, as well as addresses Medicare Part D prescription drug program needs that the 

industry brings forward. As business requirements change, as clarifications are needed, and as 

questions are asked, the NCPDP has indicated that, where possible, the information in the 

NCPDP Version D.0 Editorial will be incorporated into future versions of the NCPDP Version 

D.0 standard to further support ongoing retail pharmacy business needs. 

The NCPDP formally requested that the NCVHS recommend to the Secretary that the 

NCPDP Version D.0 standard be adopted as the operating rule for use with the retail pharmacy 

eligibility for a health plan transaction, and the NCVHS included this recommendation in its 

September 30, 2010 letter to the Secretary. 

The pharmacy industry has long been utilizing NCPDP standards to conduct electronic 

transactions. These standards provide for real-time claims adjudication, eligibility and benefit 

verification, real-time ordering by the physician, and sharing of medication history. We believe 

that the NCPDP Version D.0 standard itself provides enough detail and clarity to operationalize 

the standards to the point where no gaps exist that operating rules would need to fill, so that no 

further infrastructure or data content rules need to be adopted at this time. Additionally, we 

believe that the NCPDP Version D.0 standard already fulfills the purposes and principles of 
CMS-0032-IFC 44 

sections 1173(a)(4)(A) and (B) of the Act so that the adoption of operating rules to supplement 

or enhance the standard is not appropriate at this time. 

III. Effective and Compliance Dates 

 Section 1173(g)(4)(B)(i) of the Act states that "[t]he set of operating rules for eligibility 

for a health plan and health claim status transactions shall be adopted not later than July 1, 2011, 

in a manner ensuring that such operating rules are effective not later than January 1, 2013." In 

each of our previous HIPAA rules, the date on which the rule was effective was the date on 

which the rule was considered to be established or adopted, or, in other words, the date on which 

adoption took effect and the CFR was accordingly amended. Typically, the effective date of a 

rule is 30 or 60 days after publication in the Federal Register. Under certain circumstances the 

delay in the effective date can be waived, in which case the effective date of the rule may be the 

date of filing for public inspection or the date of publication in the Federal Register. 

 The effective date of standards, implementation specifications, modifications, or 

operating rules that are adopted in a rule, however, is different than the effective date of the rule. 

The effective date of standards, implementation specifications, modifications, or operating rules 

is the date on which covered entities must be in compliance with the standards, implementation 

specifications, modifications, or operating rules. Here, the Act requires that the operating rules 

be effective not later than January 1, 2013. This means that covered entities must be in 

compliance with the operating rules by January 1, 2013. If we receive comments that compel us 

to change any of the policies we are finalizing in this interim final rule with comment period, we 

will seek to finalize any such changes by January 1, 2012, to allow sufficient time for industry 

preparation for compliance. 
CMS-0032-IFC 45 

IV. Waiver of Proposed Rulemaking 

Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), we are required to 

publish a notice of proposed rulemaking in the Federal Register. In addition, the APA 

mandates a 30-day delay in the effective date. Sections 553(b) and (d) of the APA provide for an 

exception from these APA requirements. Section 553(b)(B) of the APA authorizes an agency to 

dispense with normal rulemaking requirements for good cause if the agency makes a finding that 

notice and comment procedures are impracticable, unnecessary, or contrary to the public interest. 

Section 553(d)(3) of the APA allows the agency to avoid the 30-day delay in effective date 

where the agency finds good cause to do so and includes a statement of support. 

Subsection (C) of section 1173(g)(4) of the Act is titled "Expedited Rulemaking" and 

provides that "[t]he Secretary shall promulgate an interim final rule applying any standard or 

operating rule recommended by the [NCVHS] pursuant to paragraph (3). The Secretary shall 

accept and consider public comments on any interim final rule published under this subparagraph 

for 60 days after the date of such publication." It is clear to us the statute intends that the 

ordinary notice and comment rulemaking procedures of the APA do not apply here. We are 

statutorily required to proceed with an interim final rule with comment period, which means we 

are compelled by the statute to dispense with normal APA notice and comment procedures. In 

light of the statutory requirement for us to publish an IFC for the adoption of these operating 

rules, we conclude that it is unnecessary for us to undertake ordinary notice and comment 

procedures and therefore, for good cause, we waive them. In accordance with the requirements 

of section 1173(g)(4)(C) of the Act, we are providing a 60-day public comment period. 

We also find good cause for waiving the 30-day delay in the effective date of this interim 

final rule with comment period. The 30-day delay is intended to give affected parties time to 
CMS-0032-IFC 46 

adjust their behavior and make preparations before a final rule takes effect. Sometimes a waiver 

of the 30-day delay in the effective date of a rule directly impacts the entities required to comply 

with the rule by minimizing or even eliminating the time during which they can prepare to 

comply with the rule. That is not the case here. In this case, covered entities are not required to 

comply with the adopted operating rules until January 1, 2013, nearly one-and-one-half years 

after the publication of this interim final rule with comment period; a waiver of the 30-day delay 

in the effective date of the rule does not change that fact. A waiver is in fact inconsequential 

here to covered entities—their statutorily-prescribed date of compliance remains 

January 1, 2013. Because we believe the 30-day delay is unnecessary, we find good cause to 

waive it. 

V. Collection of Information Requirements 

 Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in 

the Federal Register and solicit public comment before a collection of information is submitted 

to the Office of Management and Budget (OMB) for review and approval. In order to fairly 

evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) 

of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following 

issues: 

• The need for the information collection and its usefulness in carrying out the proper 

functions of our agency. 

• The accuracy of our estimate of the information collection burden. 

• The quality, utility, and clarity of the information to be collected. 

• Recommendations to minimize the information collection burden on the affected 

public, including automated collection techniques. 
CMS-0032-IFC 47 

We are soliciting public comment on each of these issues for the following section of this 

document that contains information collection requirements (ICRs): Specifications: Companion 

Guides Template. 

 In current practice, companion guides are developed by individual health plans and 

require providers to adhere to different transaction implementation rules for each health plan. 

Health plans have created these companion guides to describe the specifics of how they 

implement the HIPAA transactions and how they will work with their trading partners. Health 

plans' companion guides vary not only in format and structure, but also in size, being anywhere 

from a few to 60 pages or more. Such variances can be confusing to trading partners and 

providers who must implement them along with the standard implementation guides, and who 

must refer to different companion guides for different health plans. As previously stated, there 

are currently more than 1,200 such companion guides in use today. 

Use of the CORE 152: Eligibility and Benefit Real Time Companion Guide Rule and the 

CORE 250: Claim Status Rule, two of the operating rules adopted in this interim final rule with 

comment period provide a standard template/common structure that health plans must use that is 

more efficient for providers to reference, given the multiple industry companion guides they 

must consult today. 

The increasing use of health care EDI standards and transactions has raised the issue of 

the applicability of the PRA. The OMB has determined that this regulatory requirement (which 

mandates that the private sector disclose information and do so in a particular format) constitutes 

an agency-sponsored third-party disclosure as defined under the PRA. 

The burden associated with the requirements of this interim final rule with comment 

period, which is subject to the PRA, is the initial onetime burden on health plans to use a 
CMS-0032-IFC 48 

standardized template for companion guides. The burden associated with the routine or ongoing 

maintenance of the information reported in the standard template format for companion guides is 

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

Based on the assumption that the burden associated with systems modifications that need 

to be made to implement the standard template for companion guides may overlap with the 

systems modifications needed to implement other HIPAA standards, and the fact that the 

standard template for companion guides will replace the use of multiple companion guides, 

resulting in an overall reduction of burden for providers, commenters should take into 

consideration when drafting comments that: (1) one or more of these current companion guides 

may not be used; (2) companion guide modifications may be performed in an aggregate manner 

during the course of routine business; and/or (3) systems modifications may be made by 

contractors such as practice management vendors, in a single effort for a multitude of affected 

entities. 

 Health plans that issue companion guides do so, in part, to direct providers on how to 

implement the ASC X12 and, in the case of the NCPDP standards, they issue payer sheets 

specific to their requirements and often times provide other plan-specific information, such as 

contact information, address, etc. It is expected that even with the advent of operating rules, 

companion guides will never be completely eliminated, but the companion guides themselves 

may be greatly reduced in size and complexity as a result of the use of operating rules. The 

companion guide templates serve the purpose of providing a uniform structure for health plans to 

use when preparing companion guides. The use of these templates by health plans currently 

issuing companion guides is considered to be a one-time action and is considered a permanent 

standard template for a health plan companion guide. 
CMS-0032-IFC 49 

 The information collection burden associated with this interim final rule with comment 

period is for the costs for adapting a health plan companion guide(s) to the CORE v5010 Master 

Companion Guide Template, 005010, 1.2, March 2011 as required by the CAQH CORE 

operating rules for the eligibility for a health plan and health care claim status standard 

transactions. This is a one-time burden on health plans that will commence no later than 

January 1, 2013, the date by which HIPAA covered entities must be using the adopted operating 

rules for eligibility for a health plan and health care claim status transactions. 

 Common practice in the industry is for companion guides to be published as electronic 

documents and updated periodically in the routine course of business. Companion guides are 

posted to and made available on health plan websites trading partners, including providers, to 

access; therefore, printing and shipping costs are not considered. As the transition to the 

template is a one-time requirement, we do not estimate any ongoing labor costs associated with 

the use of this template beyond the initial first year conversion. We have estimated the one-time 

conversion to the template will cost industry $3,028,000. Our calculations were determined as 

follows: 

 The current length of health plan companion guides related to the eligibility for a health 

plan and health care claim status transactions, is anecdotally estimated at anywhere from just a 

few, to 60 or more pages. We estimate it will take a health plan staff person, most likely a 

technical writer, from 1 to 4 hours per page to reformat companion guides into the standard 

template for companion guides. This burden would involve re-entering of information, 

reconfiguration of the sequence in which information appears, addition of information, and other 

word processing and related tasks. It also would require specific technical knowledge, such as 

expertise in the Version 5010 standard transactions. We estimate that a technical writer, at an 
CMS-0032-IFC 50 

estimated hourly salary rate of $31.55, would make these revisions. Using the high estimate 

obtained in testimony to the NCHVS by the American Medical Association of 1,200 companion 

guides currently in use, we calculate an estimated average of 40 pages, (48,000 responses) at an 

average rate of 2 hours per page (1,200 guides x 40 pages x 2 hours per page x hourly rate of 

$31.55), for a one-time burden of $3,028,800 across the industry for health plans that issue 

companion guides to adopt the standard template for health plan companion guides. As existing 

word processing capabilities would be used for this task, we do not anticipate any software, 

hardware or other specialized equipment to be purchased and/or maintained for this specific 

purpose. 

If you comment on these information collection and recordkeeping requirements, please 

do either of the following: 

 1. Submit your comments electronically as specified in the ADDRESSES section of this 

interim final rule; or 

 2. Submit your comments to the Office of Information and Regulatory Affairs, Office of 

Management and Budget, 

 Attention: CMS Desk Officer, CMS-0032-IFC 

 Fax: (202) 395-6974; or 

 Email: OIRA_submission@omb.eop.gov 

VI. Response to Comments 

Because of the large number of items of correspondence we normally receive on Federal 

Register documents published for comment, we are not able to acknowledge or respond to them

individually. We will consider all comments we receive by the date and time specified in the 
CMS-0032-IFC 51 

DATES section of this preamble, and, if we proceed with a subsequent document, we will

respond to the comments in the preamble to that document. 

VII. Regulatory Impact Analysis 

A. Introduction

We have examined the impacts of this interim final rule with comment as required by 

Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354) (as amended by the 

Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. 104–121), section 

1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional 

Review Act (5 U.S.C. 804(2)). 

We have prepared a Regulatory Impact Analysis that, to the best of our ability, presents 

the costs and benefits of this interim final rule with comment period. Executive Orders 12866 

and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, 

if regulation is necessary, to select regulatory approaches that maximize net benefits (including 

potential economic, environmental, public health and safety effects, distributive impacts, and 

equity). Executive Order 13563 emphasizes the importance of quantifying both costs and 

benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 

13563 also directs agencies to not only engage public comment on all regulations, but to also 

calls for greater communication across all agencies to eliminate redundancy, inconsistency and 

overlapping, as well as outlines processes for improving regulation and regulatory review. 

A regulatory impact analysis (RIA) must be prepared for major rules with economically 

significant effects ($100 million in 1995 dollars or more in any 1 year). This rule has been 
CMS-0032-IFC 52 

designated an "economically" significant regulatory action, under section 3(f)(1) of Executive 

Order 12866 as it will have an impact of over $100 million on the economy in any 1 year. 

Accordingly, the rule has been reviewed by the Office of Management and Budget. We 

anticipate that the adoption of these operating rules would result in benefits that outweigh the 

costs to providers and health plans. 

Our Regulatory Impact Analysis also meets the various requirements of the Unfunded 

Mandates Reform Act of 1995 (URMA). Section 202 of the URMA requires that agencies 

assess the anticipated costs and benefits before issuing any rule whose mandate requires 

spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation in any 1 

year by State, local, or tribal governments, in the aggregate, or by the private sector. That 

threshold level is currently approximately $136 million. Based on our analysis, we anticipate 

that the private sector would incur costs exceeding $136 million per year in the first 2 years 

following publication of the rule. 

In addition, under section 205 of the UMRA (2 U.S.C. 1535), having considered at least 

three alternatives that are referenced in the RIA section of this rule, HHS has concluded that the 

provisions in this rule are the most cost-effective alternative for implementing HHS' statutory 

obligation of administrative simplification. 

B. Current State, Need for Mandated Operating Rules and General Impact of Implementation 

Based on the current environment, there is a need for operating rules. When a patient 

calls to set up an appointment with a provider, or comes into the office or hospital for an 

appointment, a staff member will often verify the patient's eligibility, coverage, and cost-sharing 

requirements. However, not all providers will verify the eligibility of their patients, and even for 

providers' offices that do, often just a subset of patients are verified. Some providers, however, 
CMS-0032-IFC 53 

do not conduct eligibility verification at all, and a claim is submitted to the health plan without 

an eligibility inquiry. 

Eligibility verification is done in a variety of ways including the following: 

 • Accessing patient "eligibility" information via a health plan's secure website. 

 • Telephone. 

 • The ASC X12 270 eligibility for a health plan inquiry. This is an electronic data 

interchange (EDI). 

 After an actual claim has been submitted to a health plan, the need sometimes arises for a 

provider to follow-up on the claim regarding where it is in the payment process. This is called a 

claim status inquiry and, again, this inquiry is conducted via website, telephone, or through EDI. 

 Currently, many providers do not use EDI at all as a means to conduct these two 

transactions and, of those that do, do not necessarily conduct them through EDI for every patient. 

Rather, most providers that use EDI transactions to verify a patient's eligibility or claim status 

also use telephone or other means. 

In a larger context, most providers use EDI, but only for some transactions. For instance, 

according to the Healthcare Efficiency Index and the Oregon Study, over 75 percent of health 

care claims are now submitted by providers through EDI. 

Because of the infinite number of variations of a specific provider's use of EDI, it is very 

difficult to determine the following: (1) the number of providers who use the eligibility for a 

health plan or the claim status transactions (or any other specific transaction) via EDI; and (2) the 

percent of eligibility for a health plan or claim status transactions that the average provider 

makes through EDI. However, studies have estimated the total number of electronic transactions 
CMS-0032-IFC 54 

conducted by all providers, even at the level of a specific transaction, and we will use such 

estimates to arrive at our saving assumptions. 

We assume that most providers have the technological capacity to perform EDI (or have 

hired a trading partner with that capacity). We base this assumption on-- (1) the high percentage 

of claim submissions that are conducted through EDI; (2) responses to the Oregon study from 

providers indicating that 96 percent of hospitals and 93 percent of ambulatory clinics (that is, 

physicians offices) are ready or would be ready for EDI transactions within 2 years; and (3) the 

impact analysis in the Modifications proposed rule (73 FR 49757 through 49790) that, through 

industry interviews, stated "we do not believe that the number of providers who have no 

electronic capability is very high." 

There are a number of studies that have illustrated the benefits and savings in conducting 

EDI in contrast to manual or paper-based transactions. We have noted a number of them in the 

Impact Analysis Resources section in this interim final rule with comment period. The basic 

idea is that systems can conduct these transactions faster, less expensive, and more accurate than 

human intervention. Specific to our purpose, it is faster, less expensive, and more accurate than 

human intervention for a provider's system to communicate with a health plan's system to verify 

the eligibility of a patient or check the status of a claim. 

 So, why do not the majority of providers who have EDI capacity: (1) use EDI to conduct 

the eligibility for a health plan or the claim status transaction; or (2) verify all their patients' 

eligibility through EDI instead of just a few? In the Oregon Survey, the most robust study with 

regard to a provider environment, 87 percent of hospitals and 60 percent of physician clinics said 

that the barrier to using the electronic eligibility for a health plan transaction is that health plans 

"do not provide enough information in response to this type of inquiry." This was the most 
CMS-0032-IFC 55 

frequently selected response among the providers surveyed. In addition, 16 percent of hospitals 

and 20 percent of physician clinics stated that the barrier was that health plans "do not provide 

fast enough responses." 

 The June 22, 2009 AMA document entitled "Standardization of the Claims Process: 

Administrative Simplification White Paper" (hereinafter referred to as the 2009 AMA White 

Paper) describes the importance of a robust response in the eligibility for a health plan 

transaction: "Receiving an explicit answer can quickly assist in patient scheduling, billing the 

appropriate payer with financial responsibility for the service, communicating the patient's 

financial responsibility and reducing the number of denied claims which the physician practice 

must manually handle." (http://www.ama-assn.org/ama1/pub/upload/mm/368/admin-simpwp.pdf) 

The picture that emerges is that providers conduct the electronic eligibility for a health 

plan transaction only with health plans that return robust eligibility information and return the 

response quickly. If a provider's staff will get more and faster eligibility information out of a 

specific health plan by picking up the phone or looking up the patient online, then the manual 

transaction will be used instead of the electronic transaction. 

In terms of the claim status inquiry, we know that the average providers' office 

telephones the health plan in order to check on claim status. The "Health Care Administration 

Expense Analysis", produced by the State of Washington Office of the Insurance Commissioner, 

found that 37 percent of the telephone calls from providers to the State's largest insurer were 

claim status inquiries (costing the plan $4 million a year on staffing costs to answer only claim 

status calls) (Health Care Administration Expense Analysis: Blue Ribbon Commission 

Recommendation #6, Final Report, 11-16-2007, 
CMS-0032-IFC 56 

http://www.insurance.wa.gov/consumers/documents/BRC_Efficiencies_Report.pdf .) Other 

studies indicate that less than 40 percent of all claim status inquires are conducted electronically. 

Although we do not have direct data that informs the reasons why providers use the telephone 

instead of EDI for claim status inquiries, we can assume that the same dynamic as the eligibility 

verification is at play: If the electronic transaction is slower and produces less information, than 

a manual process will be used instead. 

Operating rules address this need for more and faster information. As noted in the 

provision section, this interim final rule with comment period is adopting specific operating rules 

with requirements regarding response times and robust responses about a patient's eligibility 

from health plans. 

A number of extensive surveys, both private and governmental, have reinforced the 

causal link between requiring health plans to return fast, robust responses to the eligibility for a 

health plan electronic request and an increased use in the transaction itself. In its Blue Ribbon 

report, the state of Washington reported that less than 9 percent of eligibility verification requests 

are conducted electronically in the state, while the state of Utah reported closer to 50 percent 

usage. The report credited Utah's adoption rate with the State having an "enhanced transaction" 

in place for the eligibility verification in which providers are told exactly the benefits a particular 

patient has. The report concluded that "improving the enhanced message [of the eligibility for a 

health plan response]... will greatly improve this area of administration." 

The Oregon Survey explicitly expressed the causal link between "standardizing the 

standard" and greater use of EDI by concluding from its research that "the healthcare industry is 

unlikely to take major strides toward automated processes until there is greater standardization of 

the methods for conducting the transactions electronically." 
CMS-0032-IFC 57 

The 2009 AMA White Paper also speaks to providers' need for robust health plan 

responses to the eligibility for a health plan transactions and how such a response would affect 

providers: "Such information would also be extraordinarily valuable to physicians to ensure 

accurate and timely payment, and this value would encourage wide-spread utilization of the 

standard transactions by physicians and increased physician automation. The AMA strongly 

supports the efforts of the Council on Affordable Quality Healthcare Committee on Operating 

Rules for Information Exchange [CAQH CORE] to not only expand the value of the eligibility 

standard transaction but also continue its efforts of adding value to electronic remittance advice 

and other standard transactions..." 

The IBM study demonstrates that electronic eligibility for health plan transactions would 

increase with use of operating rules. The study illustrates that providers' use of the eligibility for 

a health plan transaction increases on two levels after operating rules are adopted. First, more 

patients as a whole are having their eligibility verified, either electronically or otherwise. 

Second, there is an increased use of the electronic transaction. The participating health care 

entities in the study reported increases in use of the eligibility for a health plan electronic 

transaction at the average rate of 33 percent in the first year after adopting CORE Phase I rules – 

a rate that participants of the study credited to operating rules. Additionally, the IBM study 

showed that providers saw on average 20 percent increase of patients verified prior to a visit, 

significantly reducing practice administrative and financial burden at the point of care. 

On a more general level, in both the Transactions and Code Sets final rule and the update 

to the standards in the Modifications final rule, the savings analysis has been based on the 

increased use of electronic transactions due to the implementation of standards (in the 

Transactions and Code Sets final rule) and increased use of electronic transactions due to 
CMS-0032-IFC 58 

improved standards (in the Modifications final rule). The cost benefit of both these rules rested 

on the causal relationship between improved standards and the predicted increased use of EDI 

(and the cost savings that use of EDI brought with it). The impact analysis for this interim final 

rule with comment period rests on the same causality, except that we are more specific in how 

operating rules cause increased use of electronic transactions. 

As an example, the need for more robust and faster response to the eligibility for a health 

plan transaction has been realized by states seeking to reduce the administrative costs of health 

care in general. In the "Health Care Administration Expense Analysis, required by Colorado 

state law and developed under the state's Commissioner of Insurance, recommendations included 

requiring all health plans and providers to use CAQH CORE Phase I and II data content and 

infrastructure rules for the eligibility for a health plan and the claim status transactions "as a 

means of streamlining and standardizing administrative interoperability between plans and 

providers." (Senate Bill 08-135 Work Group to Develop Standardized Electronic Identification 

System for Health Insurance: Final Report and Recommendations. September 3, 2009; 

http://caqh.org/Host/CORE/SB135_COreport.pdf) 

As well, Minnesota has a set of companion guides for the HIPAA standard transactions. 

These companion guides are analogous to the operating rules developed by the CAQH CORE in 

that they are intended to standardize "administrative processes when implementation of the 

processes will reduce administrative costs." We have already mentioned initiatives and reports 

by Oregon and Washington that seek to achieve similar savings. 

(http://www.health.state.mn.us/auc/mn270271guide.pdf). 

It is evident that both state governments and private industry recognize the cost 

advantage to operating rules and similar "enhanced transaction" business rules to accompany the 
CMS-0032-IFC 59 

HIPAA standard transactions, in this case with regard to the eligibility for a health plan 

transaction. However, both state governments and private industry recognized the need for the 

adoption of operating rules on the federal level because of the clear advantages to a faster 

adoption by all covered entities that a federal mandate would engender. As illustrated by the 

numerous State and private initiatives, there is the danger that, without Federally mandated 

operating rules, different sets of "operating rules" will emerge, on a State by State or health plan 

by health plan basis. In such a case, both plans and providers would have to continue to 

customize their EDI transactions depending on the operating rules required under a particular 

state or contract. 

As well, some health care entities may be slow to adopt and implement any "operating 

rules" voluntarily for fear that the federal government, or a particular State government, will 

adopt "operating rules" that require a new set of implementation requirements with associated 

costs. 

 Finally, most providers now have to conduct transactions such as the eligibility for a 

health plan and the claim status transaction through two different processes, electronic and 

manual and paper-based, depending on the health plan that covers the patient or processes the 

claim. As long as some health plans continue to conduct standard transactions that are not fast or 

robust enough for providers' needs, providers may continue to conclude that manually processing 

all such transactions is easier and more economical. 

C. Regulatory Flexibility Analysis: Impact on Small Entities

The Regulatory Flexibility Act (RFA) of 1980, Pub. L. 96–354, requires agencies to 

describe and analyze the impact of the rule on small entities unless the Secretary can certify that 

the regulation will not have a significant impact on a substantial number of small entities. In the 
CMS-0032-IFC 60 

health care sector, a small entity is one with between $7 million to $34.5 million in annual 

revenues or is a nonprofit organization. For details, see the SBA's Web site at 

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf (refer to Sector 62 - Health 

Care and Social Assistance). (Accessed 2–1–11). 

For the purposes of this analysis (pursuant to the RFA), nonprofit organizations are 

considered small entities; however, individuals and States are not included in the definition of a 

small entity. We attempted to estimate the number of small entities and provided a general 

discussion of the effects of this interim final rule with comment period, and where we had 

difficulty, or were unable to find information, we solicited industry comment. We discuss the 

impact of the rule on small entities in section VII.K. of this interim final rule with comment 

period. 

As well, section 1102(b) of the RFA requires us to prepare a regulatory impact analysis if 

a rule may have a significant impact on the operations of a substantial number of small rural 

hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes 

of section 1102(b) of the RFA, we define a small rural hospital as a hospital that is located 

outside of a Metropolitan Statistical Area and has fewer than 100 beds. (See the discussion at 

section VII.K. of this interim final rule with comment period for our discussion of the expected 

impact on small rural hospitals.) 

D. Alternatives Considered

In deciding to adopt operating rules for the eligibility for a health plan and the health care 

claim status transactions, we considered a number of alternatives, on which we solicit public and 

industry comments. 

1. Do Not Adopt Operating Rules for Non-Retail Pharmacy Industry 
CMS-0032-IFC 61 

We considered this option, but determined that this would only be appropriate if 

operating rules for use in the health care industry were not available, or available and already in 

use on a voluntary basis. Per the aforementioned NVCHS hearings, public testimony and 

analysis, the NCVHS deemed that two authoring entities who came forward and applied to be 

candidates as authoring entities were qualified under the stipulations for the adoption of 

operating rules in the Affordable Care Act to act as authoring entities, namely the Council for 

Affordable Quality Healthcare's (CAQH) Committee on Operating Rules for Information 

Exchange (CORE) and the National Council for Prescription Drug Programs (NCPDP). The 

CAQH CORE offered operating rules that, with some exceptions, have been determined to be 

feasible for use with the eligibility for a health plan transaction, and the health care claim status 

transaction under HIPAA, as specified in the Affordable Care Act. The NCPDP also offered 

operating rules, which are already in use in all retail pharmacies by virtue of the pharmacies' use 

of the NCPDP Telecommunications standard Version 5.1, and which will be updated on 

January 1, 2012, when the update to this standard, NCPDP Telecommunications standard 

Version D.0, goes into effect. Additionally, not adopting any operating rules for the eligibility 

for a health plan transaction and health care claim status transaction, as required by the 

Affordable Care Act, would violate the Act's statutory requirements under section 1104(c) 

"Promulgation of Rules", which requires the Secretary to adopt operating rules for the two 

aforementioned electronic health care transactions by no later than July 1, 2011 with a 

compliance date of January 1, 2013. 

2. Adopt Another Authoring Entity's Operating Rules 

 As previously discussed in section II.B. of this interim final rule with comment period,

section 1104(b)(3) of the Affordable Care Act amends section 1173(g)(3)(a) of the Act by 
CMS-0032-IFC 62 

charging the NCVHS with advising the Secretary as to whether a nonprofit entity meets the 

statutory requirements for developing the operating rules to be adopted by the Secretary, and 

outlines the entity's specific qualification requirements. Of those organizations testifying at the 

NCVHS hearing, two organizations formally requested to be considered authoring entities for 

operating rules, namely the CAQH CORE and the NCPDP. 

 In its testimony before the NCVHS, the ASC X12, the standards development 

organization responsible for the development of the Version 5010 standards for electronic health 

care transactions, expressed its support for the NCPDP being named as an operating rule 

authoring entity not only for the pharmacy industry, but for the entire health care industry 

(transcript of the July 20, 2010 NCVHS Subcommittee on Standards hearing at 

http://www.ncvhs.hhs.gov). The ASC X12's support was based upon their belief that-- 

 • The NCPDP's ANSI-approved organization status supports consensus building and 

open participation; 

 • The infrastructure for the NCPDP is able to handle the development of operating rules 

in the associated workgroup task group without any modifications to procedures or processes; 

 • The NCPDP members are frequent users of the ASC X12 standards and thus the 

NCPDP is familiar with them; and 

 • The pharmacy industry's growing experience with real-time eligibility, real-time claim 

status, and real-time submission of claims beyond pharmacy. 

Based on the ASC X12 testimony, the NCPDP stated that it would consider playing a 

larger role if the NCVHS deemed that there should only be one authoring entity, and would take 

on the role of more than just the NCPDP standards, as appropriate. 
CMS-0032-IFC 63 

 However, with respect to the requirements for the operating rules themselves, neither the 

NCPDP nor the CAQH CORE met all of the requirements for operating rules for both health care 

segments. As noted earlier, the July 2010 NCVHS hearings were followed by a request from the 

NCVHS to each candidate to respond to a detailed questionnaire about the statutory 

requirements. The questionnaire solicited specific documentation to validate the testimony. 

Based on review of the CAQH CORE and the NCPDP submissions to this questionnaire the 

NCVHS determined, and we have concurred, that neither organization can unilaterally provide 

operating rules to support both retail pharmacy and non-retail pharmacy health care segments. 

The NCPDP naturally focuses on the NCPDP retail pharmacy standards, while the CAQH CORE 

has focused on the ASC X12 administrative health care transactions. While both entities have 

similar policies related to securing a consensus view of health care stakeholders and ensuring 

that rules are consistent with (and do not conflict with) other existing standards, neither 

organization has rules in place for both health care segments. While addressing the retail 

pharmacy industry's needs relative to operating rules, the NCPDP did not present to the NCVHS 

for their consideration any existing NCPDP operating rules to accommodate the ASC X12 

standards. The CAQH CORE has phases of operating rules that accommodate the ASC X12 

standard for electronic health care transactions, but are not specific to retail pharmacy 

transactions. 

3. Wait for Resolution of all Outstanding Technical and Administrative Issues Before Adopting 

the Operating Rules Developed by the Authoring Entities 

Both the CAQH CORE and the NCPDP demonstrated to the NCVHS that their operating 

rules were based upon broad public and stakeholder input. However, as previously discussed in 

section II. of this interim final rule with comment period, there are certain exceptions that exist 
CMS-0032-IFC 64 

with regard to our adoption of the CAQH CORE operating rules in their entirety. Upon analysis, 

we declined to adopt the CAQH CORE operating rules for the ASC X12 999 acknowledgement 

transaction, and the references to being "CORE certified" contained in the CAQH CORE 

Operating Rules as we have already described in section II.F. of this interim final rule with 

comment period. If we had opted to wait until the resolution of the administrative issues 

affecting the adoption of the entire CAQH CORE operating rules, it would seriously delay the 

health care industry's ability to begin to achieve the benefits of administrative simplification. 

 Additionally, as described in section III of this interim final rule with comment period, 

we have declined to adopt the NCPDP business rules and guidelines as embedded in its NCPDP 

Telecommunication Standard Version D.0, as they do not qualify as operating rules as defined in 

section II.A. of this interim final rule with comment period. The NCPDP business rules and 

guidelines are embedded within the NCPDP Telecommunications Standard Version D.0, and 

while technically not operating rules as defined by this interim final rule with comment period, 

they function as such nonetheless in that they provide robust business rules and guidelines for 

use in retail pharmacy transactions. The pharmacy industry is already preparing to use the 

NCPDP Version D.0 standard in their day-to-day pharmacy transactions as required by the 

January 16, 2009 final rule (74 FR 3296) adopting the NCPDP Telecommunication Standard 

Version D.0 for use in retail pharmacy transactions, effective January 1, 2012. The NCPDP 

Telecommunications Standard Version D.0 already provides a full and robust array of tools for 

the retail pharmacy industry to realize the potential benefits of administrative simplification. 

E. Impact Analysis Resources

 We have considered a number of different cost benefit studies that have been conducted 

by industry and independent entities in recent years. The background and conclusions on these 
CMS-0032-IFC 65 

studies and surveys will illuminate how we calculated our assumptions and how we applied them 

to this impact analysis. In this section, we briefly describe these studies, as well as an 

explanation of all of the following: 

 • The depth and completeness of the analysis and supporting evidence for the 

conclusions. 

 • Data sources and a presentation of the data limitations. 

 • The perceived objectivity of the analysis as demonstrated by the discussion of data 

sources and the rigor of the analysis. 

 • Our ability to explain and justify the findings and conclusions presented in the study. 

We then present assumptions and an impact analysis for each of the covered entity types, 

referencing the data and conclusions of the various studies. The following is a description of the 

studies and reports referenced for this impact analysis. 

1. The Milliman Study 

Electronic Transaction Savings Opportunities for Physician Practices, hereinafter referred 

to as the Milliman study, was published by Milliman in January 2006 

(http://transact.emdeon.com/documents/milliman_study.pdf). Milliman is an international 

consulting and actuarial firm serving health care payers, service providers and consumer 

organizations. The Milliman study was commissioned by the Emdeon Corporation, a nationwide 

clearinghouse that provides a wide variety of information exchange services that connects 

payers, providers and patients in the U.S. health care system. The study's main objective focused 

on how much providers could save by implementing electronic transactions. The Milliman 

study's calculations are based on examining labor time and costs required to perform both 

manual and electronic transactions. These labor costs include employee benefits, payroll taxes, 
CMS-0032-IFC 66 

and general and administrative overhead. Notably, the study compensated for related fees for 

transactions and set-up costs for electronic transactions. 

The Milliman study's methodology was basically mathematical, using factors established 

through payrolls and average administrative costs, as opposed to research based on surveys or 

interviews with providers. Milliman's calculations were based on a model of a provider's 

administrative processes developed with assumptions about the operating environment of the 

typical solo physician practice. Ultimately, Milliman tested its results "by observing 

administrative procedures in actual physician practices and medical groups." 

The study reflected other industry research that found that, while manual processes are 

very similar among physicians, "there is much greater variance among practices... in the use of 

technology and the associated costs for electronic transactions." In some cases, providers are 

fully automated. In the majority, however, there is a mix of electronic and manual processes, as 

well as processes that require a wide range of levels of human intervention. 

Milliman found that a single-physician practice could save as much as $42,000 a year by 

moving processes from manual to electronic. This estimate is based on a physician office that 

moves from all manual transactions to fully electronic for six standard transactions. For our 

impact analysis, this savings could not be used as a factor to project savings for all physicians 

($42,000 X the number of physicians), as other studies have demonstrated that most providers 

are already using some of the electronic transactions. 

Milliman's approach was to look at provider costs and benefits, and we opine that it 

appears to be objective in its assumptions. The Milliman study will be useful in our impact 

analysis as it provides labor and administrative overhead costs. 
CMS-0032-IFC 67 

The Milliman study was published in 2006. In its calculations, it accounted for inflation 

and other factors that may have changed since its source data were gathered and the study was 

finally published. However, its final conclusions are somewhat dated, and we will consider this 

in our assumptions. 

2. The AHIP Survey (2006) 

America's Health Insurance Plans' (AHIP) Center for Policy and Research conducted 

a survey of its members to examine the issue of claims processing and turnaround times for 

claim payments. The survey is summarized in the document entitled "An Updated Survey of 

Health Care Claims Receipt and Processing Times, May 2006" at 

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

AHIP is a national association representing nearly 1,300 companies providing health 

insurance coverage to more than 200 million Americans. The study is a follow-up to a survey 

done in 2002. We took data from the AHIP study to develop assumptions about savings 

calculations for health plans. 

3. The McKinsey Analysis 

Overhauling the U.S. Healthcare Payment System conducted by McKinsey & Company, 

hereinafter referred to as the McKinsey analysis, was published in The McKinsey Quarterly on 

June 2007 

(http://www.mckinseyquarterly.com/Overhauling_the_US_health_care_payment_system_2012). 

McKinsey & Company is an international management consulting firm advising companies on 

strategic, organizational, technology, and operational issues. The McKinsey analysis relies on a 

number of different resources in order to calculate the cost of non-electronic transactions 

compared with the cost of electronic transactions. As in the Milliman study, the McKinsey 
CMS-0032-IFC 68 

analysis makes the case for the move from paper to electronic transactions. Their analysis used 

sources including Faulkner & Gray Health Data Directory; Health Data Management; HIPAA 

Survey - Claims and Payment Practices; Milliman; National Health Expenditures, Centers for 

Medicare & Medicaid Services (CMS); U.S. Department of Health and Human Services (HHS); 

and McKinsey's own analysis. For its analysis' cost per transaction, it appears McKinsey relied 

mostly on the Milliman study. 

As noted, the McKinsey analysis brings together secondary sources to make its 

assumptions, so it is not based on any primary research or surveys. However, the McKinsey 

analysis does summarize these secondary sources into quantitative ranges that are useful to our 

impact analysis. For instance, based on secondary sources, the McKinsey analysis gives a range 

of 1.4 to 3.5 billion total eligibility verifications annually, both electronic and non-electronic, 

across the health care industry. While this is a broad range, it is useful in estimating the low and 

high estimates for our calculations. 

The McKinsey analysis suggests that making the flow of dollars in the health care 

industry more efficient through electronic means will trim the administrative costs that are spent 

on the payment system, which its analysis calculates as 15 percent of every healthcare dollar. 

The McKinsey analysis was objective in its approach, especially with regard to its data 

on eligibility for a health plan transactions because it was focused on claim-centered 

transactions. Its emphasis was mostly on the deficiencies and possibilities regarding payment 

flow between payers and providers, with commentary on the involvement of financial 

institutions. Its recommendations did not include mention of operating rules or the eligibility for 

a health plan transaction, so we find its data neutral with regard to the purpose of this impact 

analysis. The McKinsey analysis, presented in June 2007, is used by other related industry 
CMS-0032-IFC 69 

studies, and, because we could not identify studies or analyses that argued against its 

conclusions, we presume that it reflects industry assumptions. 

4. The Healthcare Efficiency Report 

The National Progress Report on Healthcare Efficiency, hereinafter referred to as the 

Healthcare Efficiency Report, is the first annual report from the U.S. Healthcare Efficiency Index 

(USHEI), (http://www.ushealthcareindex.com). an industry forum for monitoring business 

efficiency in healthcare USHEI's advisory council consists of representatives from hospitals, 

clearinghouses, health care consultants, health plans and other entities 

(http://www.ushealthcareindex.com/advisorycouncil.php). The USHEI was launched in 2008 to 

raise awareness of the cost savings associated with the adoption of electronic transactions in 

health care. The USHEI National Progress Report takes the Milliman, McKinsey, and other 

studies and applies them to a tool that measures current status of electronic transaction usage (in 

percentages of transactions) and projects possible cost savings if those percentages are increased. 

The Healthcare Efficiency Report analyzed the eligibility for a health plan transaction as 

a part of its Phase 1, which relied on the Milliman study and the McKinsey report for most of its 

data. Nevertheless, the Healthcare Efficiency Report consolidates the secondary sources in an 

original and illustrative manner, and appears to be an accepted yardstick for administrative 

simplification in the health care industry. 

The Healthcare Efficiency Report repeats an important point presented by Milliman and 

which we considered in our analysis: Even among providers that use electronic means to 

conduct some of their transactions, there is a broad range of how much they utilize standard 

transactions, which standard electronic transactions they use, and which transactions are still 

conducted manually. 
CMS-0032-IFC 70 

5. The Oregon Provider and Payer Survey 

Like the Milliman, McKinsey, and the Healthcare Efficiency Report, the Oregon Provider 

and Payer Survey, hereinafter referred to as the Oregon Survey, 

(http://www.oregon.gov/OHPPR/HEALTHREFORM/AdminSimplification/Docs/FinalReport_A

dminSimp_6.3.10.pdf) sought to estimate the possible cost savings that would be realized if there 

was a continual shift from nonelectronic to electronic transactions among healthcare entities in 

Oregon. The survey was conducted by the Oregon Health Authority, Office for Oregon Health 

Policy and Research, which conducts impartial, non-partisan policy analysis, research, and 

evaluation, and provides technical assistance to support health reform planning and 

implementation in Oregon. The Office serves in an advisory capacity to Oregon Health Policy 

Board, the Oregon Health Authority, the Governor, and the Legislature. The survey asked 

payers, providers, and clearinghouses a number of qualitative questions in terms of how 

administrative simplification can best be realized. 

 The study was comprehensive, and used both secondary sources and a survey in which 

responses were gathered from 55 percent of the State's hospitals and 225 of the State's 

"ambulatory clinics." Of those 225 ambulatory clinics, 69 percent were clinics with less than 9 

clinicians, and 23 percent were clinics with only 1 clinician. In our impact analysis on providers, 

the category of "physicians" corresponds to the Oregon Survey's category of "ambulatory 

clinics." 

 Of all the studies cited in this impact analysis, the Oregon Survey had the most recent and 

statistically valid data with regard to provider use of electronic transactions and gave the clearest 

picture of how providers verify eligibility. The study received quantitative and qualitative data 

from a large number and range of providers. Oregon itself is a mix or rural and urban 
CMS-0032-IFC 71 

communities. However, we recognize that there are regional differences in the health care 

industry and the fact that only Oregon health care entities were surveyed. 

6. The IBM Study 

In 2009, the CAQH CORE contracted with IBM's Global Business Services, the world's 

largest business and technology services provider with the aim towards helping companies 

manage their IT operations and resources, to conduct a study (hereinafter referred to as the IBM 

study) (http://www.caqh.org/COREIBMstudy.php) to assess the costs and benefits to health 

plans, provider groups, and vendors of adopting the CAQH CORE Phase I rules, which include 

the operating rules for the electronic eligibility for a health plan transaction, as adopted under 

this interim final rule with comment period. According to the IBM study, industry-wide 

adoption of the CAQH CORE Phase I rules could potentially yield $3 billion in savings in 3 

years. 

The IBM study consisted of interviews during which participants answered a set of 

questions geared towards assessing the costs and savings of adopting the CAQH CORE 

operating rules. Participants in the study included six national and regional health plans, five 

clearinghouses and vendors, and six providers. The health plans together represented 33 million 

commercial members, 1.2 million providers, 22 million eligibility verifications per month, and 

30 million claims per month. The providers included hospitals, physician groups, and a surgery 

center. 

The IBM study did not track the costs and benefits of adopting the operating rules for the 

health care claim status transactions. It did attempt to track the costs and benefits of the 

infrastructure elements of the operating rules (connectivity, response time, system availability, 

acknowledgements, and companion guides) but health plan study participants were not able to 
CMS-0032-IFC 72 

fully account for the costs related to implementation, citing that they may have allocated some 

costs to IT overhead. , 

Highlights of the IBM study closely parallel the three key objectives outlined above that 

necessitate the adoption of operating rules: 

• Providers rapidly took advantage of the new capabilities that the operating rules 

provided; for example, real-time transactions (page 20 of IBM study report). 

• The average return on investment (ROI) for health plans surveyed in the study was less 

than a year. Average initial and on-going cost of implementing the operating rules for an 

individual health plan was $592,000. The average savings, due mostly to moving away from 

telephone to electronic transaction over the same time period, was nearly $2.7 million for an 

individual health plan (page 23 of the IBM study report). The ratio of verifications to claims was 

up from .63 to .73 after the operating rules were adopted (page 20 of IBM study report). 

7. The 2009 Health Affairs Survey 

 In 2009, Health Affairs published survey results in an article entitled "What Does It Cost 

Physician Practices to Interact With Health Insurance Plans," authored by Lawrence P. Casalino, 

Sean Nicholson, David N. Gans, Terry Hammons, Dante Morra, Theodore Karrison, and Wendy 

Levinson (Health Affairs, 28, no. 4(2009):w533-w543, published online May 14, 2009; 

10:1377hlthaff.28.4.2533). The survey collected data from physicians from those identified as 

working in solo or two-physician practices, and physicians from those working in practices of 

three or more. Selection was stratified by specialty type—primary care (including family 

physicians, general internists, and general pediatricians), medical specialists, and surgical 

specialists, for a total of 895 physician practices. The survey asked about the physicians' offices' 

interactions with health plans by the physicians themselves and by staff at the administrative 
CMS-0032-IFC 73 

level, including the nursing staff, clerical staff, senior administrators, and lawyers and 

accountants. 

The survey was able to calculate the mean time and cost that a physician's office 

spent interacting with health plans according to the size of the practice and according to the 

level at which the interaction took place, that is, whether the interaction was with the 

physicians themselves, the nursing staff, the administrative staff, or with the accountants, 

etc. 

Among other conclusions, the study demonstrated that a single physician spent a 

mean average of 3 hours a week interacting with plans, while nursing and clerical staff spent 

much larger amounts of time.

We find the conclusions of the survey to be valid based on the large sampling of 

physicians' offices that were used. We will be applying some of the results of the survey to 

our calculation of savings for providers. 

8. The Project SwipeIt (MGMA) Study 

 In 2009, the Medical Group Management Association (MGMA) launched an 

industry wide effort calling on health insurers, vendors, and healthcare providers to adopt 

standardized, machine-readable patient ID cards by Jan. 1, 2010. In support of the effort, 

the MGMA developed costs estimates of implementing a machine-readable patient ID card. 

Ultimately, the project's aim is for administrative simplification. The Project SwipeIt study 

demonstrated the quantifiable benefits to administrative simplification. Therefore, some of 

Project SwipeIt study's estimates, especially the base assumptions used in the savings 

calculations can be applied to our impact analysis of the implementation of operating rules. 
CMS-0032-IFC 74 

 Through their study, the MGMA estimated that it costs $25 to resubmit a denied claim. 

Additionally they found that 50 percent of the time claims are being denied because of incorrect 

patient information. We believe this could also be alleviated through the implementation of 

operating rules since eligibility information, including patient information, will be returned prior 

to or at the point of care. 

The MGMA cites many resources that were used to gather their data for their analysis. 

We find that the data used in the MGMA study are relevant to our analysis and therefore we 

will use some of this data in our calculations of provider savings. 

We invite public and industry stakeholder comments on our assumptions.

F. Impacted Entities 

All HIPAA covered entities would be affected by this interim final rule with comment 

period, as well as software vendors and any other business associates providing transaction 

related services, such as billing support and third party administrators (TPAs). Covered entities 

include all health plans, health care clearinghouses, and health care providers that transmit health 

information in electronic form in connection with a transaction for which the Secretary has 

adopted a standard. We note that health care providers may choose not to conduct transactions 

electronically. Therefore, they would be required to use these operating rules only for HIPAA 

transactions that they conduct electronically. However, one of the objectives of operating rules 

is to not only decrease manual transactions by entities that currently conduct some health care 

transactions electronically, but to make electronic transactions, specifically the eligibility for a 

health plan and health care claim status transactions attractive to those entities that do not 

currently use the HIPAA standards in EDI transactions to verify eligibility or claim status. (See 
CMS-0032-IFC 75 

the Transactions and Code Sets rule (65 FR 50361) for a more detailed discussion of affected 

entities under the HIPAA.) 

As mentioned previously in this interim final rule with comment period, the barrier to 

adoption of the HIPAA standards is due to their flexibility and "situationality" that allows health 

plans to implement them in very different ways. It allows plans to send back information that is 

inconsistent from plan to plan. By making these optional or situational elements mandatory, 

more entities, especially providers, will have more consistent data across health plans, making it 

easier to determine what information they will be receiving in a transaction, thus increasing the 

use of electronic transactions. 

We recognize that a few health plans have already embraced the use of the CAQH CORE 

operating rules and have, in a published report on the utility of operating rules in the health care 

industry, noted substantive return on investment (ROI) derived from reduced costs associated 

with avoidance of manual (both paper and staff time) response to provider inquiries. This raises 

the question of why all health plans would not voluntarily adopt the use of operating rules (or 

standards, for that matter) given the benefits. We opine that there are a number of barriers, 

including a tendency by providers to simply accept the status quo, for example, whatever 

information currently is provided to them by a health plan; a health plan's lack of experience 

with, and knowledge of, the role that operating rules play in making a standard work more 

efficiently, given that the use of operating rules is not yet widespread throughout the health care 

industry; and the expense to a health plan of systems and other business transitions without a 

regulatory mandate for adoption. Despite projected savings, health plan system managers would 

be hard pressed to obtain from their managements the upfront funds, staff and/or contractors, and 

corporate commitment needed for such a transition without a regulatory requirement. Absent 
CMS-0032-IFC 76 

specifications as codified in regulation, health plans could be confused as to which operating rule 

version to use, and/or any exceptions to the use of operating rules that may or may not be 

effective, which would adversely affect enforcement of the HIPAA transaction and code sets. In 

our impact analysis, we analyze the impact of moving from non-electronic to electronic 

transactions among all entities, whether they currently use some electronic transactions or not. 

We assume that most providers and health plans use some electronic transactions and very few if 

any use none. Through the use of operating rules, we assume that all entities will increase their 

use of electronic transactions. The total savings and return on investment for each category of 

covered entity will not include the costs associated with setting up the basic infrastructure to 

send and receive standard health care transactions. Those costs are accounted for in the 

May 7, 1998 (63 FR 25300) proposed rule entitled, "Health Care Reform: Standards for 

Electronic Transactions". The costs included in this impact analysis include only those that are 

necessary to implement the operating rules as adopted for the two HIPAA transactions stipulated 

in this interim final rule with comment period. 

 Based on industry surveys and research referenced herein, we do not believe there are 

many entities that are not capable of conducting electronic transactions. As stated previously, 

according to the Oregon Survey, 96 percent of hospitals and 93 percent of ambulatory clinics 

(physicians) in that state indicated that they were ready, or could be ready within 2 years, to 

implement a system for electronic information exchange. Although the study only reflects 

Oregon providers, we believe the study's findings demonstrate that there will be very few 

covered entities that will not have the ability to conduct electronic health care transactions by the 

time the operating rules are required to be implemented. 
CMS-0032-IFC 77 

The segments of the health care industry that will be affected by the implementation of 

operating rules include the following: 

• Providers: Physicians and Hospitals 

• Health Plans 

• Clearinghouses and Vendors 

Please note that we have not included an impact to pharmacies because this interim final 

rule with comment period adopts only operating rules for the eligibility for a health plan 

(270/271) and the health care claim status (276/277) transactions which are not used by the retail 

pharmacy industry for drugs and medications. Therefore, we assume no impact to pharmacies of 

this interim final rule with comment period. 

Table 5 outlines the number of entities in the health care industry that we use in our 

analysis along with the sources of those numbers. We have not apportioned the data to reflect 

any particular sub-segment of the industry, other than "physicians" and "hospitals" in general 

terms. In this impact analysis, the number of providers impacted is not a factor in our calculation 

of the benefits of the adoption of these operating rules. (The number if providers are a factor in 

our calculation of providers costs.) Rather, benefits for providers are based on the total number 

of all health care claims throughout the health care system, including non-hospital institutions. 

We invite public comment on our assumptions and estimates, particularly as they related to nonhospital institutions. 

TABLE 5. TYPE AND NUMBER OF AFFECTED ENTITIES 

Type Number Source 
CMS-0032-IFC 78 

Type Number Source 

Providers – Offices of Physician 

Offices(includes offices of 

mental health specialists) 234,222

Health Insurance Reform; Modifications 

to the Health Insurance Portability and 

Accountability Act (HIPAA) Electronic 

Transaction Standards; Proposed Rule 

http://edocket.access.gpo.gov/2008/pdf/E8-

19296.pdf

(based on the AMA statistics) 

Providers – Hospitals 5,764

Health Insurance Reform; Modifications 

to the Health Insurance Portability and 

Accountability Act (HIPAA) Electronic 

Transaction Standards; Proposed Rule 

http://edocket.access.gpo.gov/2008/pdf/E8-

19296.pdf

Providers – All 239,986 Physicians Offices + Hospitals 

Health Plans – Commercial 4,523

The # of health plans was obtained from the 2007 

Economic Census Data – Finance and Insurance 

(sector 52) – NAICS code 5241114 (Direct health 

and medical insurance carriers). (n=4,523) 

http://factfinder.census.gov/servlet/IBQTable?_b

m=y&-ds_name=EC0752A1&-

geo_id=01000US&-dataitem=*

Health Plans – Government 54

Represents the 51 state Medicaid programs, 

Medicare, the Veteran's Administration (VA), and 

Indian Health Service (IHS) 

Health Plans – All 4577

Census Data for commercial plans (n=4,523) + 

Medicaid agencies (N=51) + Medicare, VA and 

IHS = 4,577 total health plans 

Clearinghouses 51

EC EDI Vantage Point Healthcare Directory – 6th 

Edition (n=51) http://www.ecedi.biz/content/en/dir-guest-login.asp 

Vendors 51

EC EDI Vantage Point Healthcare Directory – 6th 

Edition (n=51) http://www.ecedi.biz/content/en/dir-guestlogin.asphttp://www.ec-edi.biz/content/en/dirguest-login.asp
CMS-0032-IFC 79 

Also, although we acknowledge the impact to ERISA (Employee Retirement Income 

Security Act) plans, we did not include them in our analysis due to the complexity involved with 

describing downstream costs to these plans, as well as members/beneficiaries of health plans, tax 

payers, etc. While it is understood that the approximately 2.5 million ERISA plans (and, 

ultimately, their members) may be charged by their third party administrators (TPAs) and health 

insurance companies to comply with any Federal regulation, ultimately we assume that the 4, 

577 plans that do business as health plans, or their business associates, are the entities conducting 

the transactions and that is where the costs will be incurred. We assume that few, if any, of the 

ERISA plans do their own transactions. Additionally, because not all ERISA plans are required 

to report, it is difficult to determine the exact number of ERISA plans. 

G. Impact Analysis Approach

This impact analysis is framed by the two key objectives that operating rules will achieve 

by augmenting the eligibility for a health plan and health care claim status transactions: 

 • Decrease covered entities' use of more costly manual activities, including telephone 

and paper-based transactions, by addressing ambiguous requirements of the standards and 

clarifying when to use or not use certain elements or code values. We assume that the cost and 

benefits of these operating rules will be directed toward covered entities that currently perform 

some or no eligibility for a health plan and claim status transactions. For those who currently 

perform these two standard transactions, we assume that their volumes of electronic transactions 

will increase due to operating rules. 

 • Decrease the clerical burdens that are associated with the inconsistent use of these two 

standard transactions; for example, the instances of denied claims and pended claims that 

burdens patients, providers, and health plans in terms of time and money. 
CMS-0032-IFC 80 

Our overall calculation for this analysis is as follows: 

 (X * Y) + C-Z = Annual Return on investment of operating rules implementation 

Where--

 X = annual increase in number of electronic eligibility for a health plan and health care 

 claim status transactions due to operating rules implementation 

 Y = savings per transaction conducted electronically 

 C = savings through decrease in claim denials for providers and pended claims for health 

 plans 

 Z = cost of operating rules implementation 

 In order to make this calculation, we need to describe baseline assumptions, transaction 

increase assumptions, and cost assumptions that correspond to the X, Y, C, and Z factors in the 

calculation before arriving at costs and benefits. 

In section VII.H. of this interim final rule with comment period, we describe the baseline 

assumptions for each of the two transactions. The baseline assumptions include, first, an 

estimate on the number of electronic and non-electronic eligibility for a health plan transactions 

and health care claim status transactions, respectively, that physicians, providers, and health 

plans will be conducting in 2012, the year before the operating rules take effect. Second, from 

those estimates, we will estimate the number of eligibility for a health plan transactions and 

health care claim status transactions that are conducted electronically starting in 2012. For the 

baseline assumption on the number of electronic transactions in 2012, we have developed a 

range of high and low estimates derived from data gathered from a number of studies. This 

range of high and low reflects different estimates that are presented by industry studies that have 

attempted to arrive at a similar baseline. The final baseline assumption is an estimate on the rate 

of increased use of each of the two transactions due to operating rules adopted herein for 10 

years after implementation of the operating rules (X factor in the calculation). 
CMS-0032-IFC 81 

The transaction increase estimate (X factor in the calculation) assumes an annual 

percentage increase in the use of the eligibility for a health plan and health care claims status 

electronic transactions due to the implementation of operating rules. In this specific baseline 

assumption, we will be giving a range of high and low estimates. Although these estimates on 

the increase in usage due to operating rules are informed by industry studies, specifically the 

IBM study, they also illustrate the uncertainty inherent in such a predictive estimate. As we have 

described, there is a causal link between operating rules and increased use of EDI. However, the 

rate of increased use of the two transactions is dependent on many factors above and beyond 

operating rules. For instance, visits to physicians' offices and hospital emergency and outpatient 

departments are experiencing a steady rise, translating into an accompanying rise in health care 

transactions in general. (The CDC reports that health care visits increased 25 percent from 1997 

to 2007: http://www.cdc.gov/nchs/data/series/sr_13/sr13_169.pdf accessed on June 21). The 

range of estimates on the increased use of the two electronic transactions included in our baseline 

assumptions should be viewed as a reflection of the uncertainties involved. 

 For our cost assumptions, Z in the calculation is the total cost of implementing the 

operating rules for both the eligibility for a health plan transaction and the health care claim 

status transaction. The costs will be analyzed according to each impacted category of health care 

entity. Many of our estimates in terms of cost are derived from the cost estimates in the 

Modifications final rule because industry studies we surveyed focused on savings rather than 

costs. These costs will be presented in a range of high and low estimates to reflect the broad 

range in readiness for operating rule implementation among covered entities in terms of 

infrastructure, software, and business process. In section VII.I. of this interim final rule with 

comment period, we describe our cost assumptions. 
CMS-0032-IFC 82 

 For our savings assumptions, Y and C in the calculation, Y is the dollar savings per 

eligibility of a health plan and health care claim status transaction that is saved when the 

transactions are conducted electronically as opposed to non-electronically, and C is the dollar 

saved, or cost avoided, of a decrease in claim denials for providers and a decrease in pended 

claims for health plans. For the C estimate, we will again provide a high and low range of 

estimates. Industry studies indicate that more robust eligibility for a health plan transactions will 

result in a decrease in pended and denied claims (which, in turn, will result in savings). 

However, we are less certain of the percent of decrease that operating rules will effect, so we 

have reflected this uncertainty with a range. In section VII.J. of this interim final rule with 

comment period, we describe our savings assumptions. 

Our analysis begins with a description of the baseline and transaction increase 

assumptions; that is, how we arrived at the numbers of eligibility for a health plan transactions 

and health care claim status conducted electronically as of 2012, and our assumptions on what 

percentage of annual increase in the transactions are due to the implementation of operating 

rules. We will subsequently describe our cost assumptions, savings assumptions, and finally 

summarize the costs and savings. The costs and savings will also be presented in a range of high 

and low estimates. 

In general, the high and low range approach used in this impact analysis illustrates both 

the range of probable outcomes, based on state and industry studies, as well as the uncertainty 

germane to a mandated application of business rules on an industry with highly complex 

business needs and processes. Within those ranges, however, the summary demonstrates that 

there is considerable return on investment resulting from the implementation of operating rules. 
CMS-0032-IFC 83 

We solicit comments on these assumptions as well as the direct costs of implementing these 

operating rules adopted under this interim final rule with comment period. 

H. Baseline Assumptions

1. Baseline Assumption A 

Total number of electronic and nonelectronic eligibility for a health plan and health care 

claim status transactions conducted by providers. 

We estimate that the total number of claims submitted, both electronically and manually, 

for the year 2012 is 5.6 billion. This estimate is the average of the high and low estimates given 

in the January 2009 Modifications final rule, http://edocket.access.gpo.gov/2009/pdf/E9-740.pdf. 

In order to arrive at the number of eligibility verifications conducted in 2012, both 

electronic and non-electronic, we applied the per claim ratio as concluded by the Oregon Survey. 

The Oregon Survey concluded that, for every claim submitted, the low estimate was 0.68 

eligibility verifications per claim; the high estimate was 1.12 eligibility verifications per claim 

submitted. We use the average of these two estimates, 0.9 eligibility verifications per claim 

submitted. We then assume that of the 5.6 billion claims submitted, 0.9 of those were preceded 

by an eligibility inquiry to come up with approximately 5 billion eligibility verifications. 

In order to arrive at the number of claim status inquiries conducted in 2012, both 

electronic and non-electronic, we again applied the per claim submitted ratio as concluded by the 

Oregon Survey. The Oregon Survey concluded that, for every claim submitted, they estimated 

that 0.14 claim status inquiries were submitted. We looked at other studies that included various 

numbers for claim status transactions, but we believe the Oregon Survey to be the most valid 

picture of providers' use of these transactions based on the interviews conducted. Based on our 
CMS-0032-IFC 84 

previous assumptions, we estimate that there will be 784 million claim status inquiries conducted 

in 2012. 

 To find the total number of eligibility for a health plan transactions and health care claim 

status transactions that physicians and hospitals conducted individually, we divided the total 

number of eligibility for a health plan transactions and health care claim status transactions 

between physicians and hospitals by a factor of 9 to 1; that is, approximately 90 percent of all 

eligibility for a health plan and health care claim status inquiries, electronic and non-electronic, 

are conducted by physicians, while 10 percent are conducted by hospitals. We have taken this 

physician to hospital ratio from the Oregon Survey due to its reliance on direct provider input. 

The survey indicated that physicians are responsible for 91 percent of all eligibility for a health 

plan transactions and 89 to 90 percent of health care claim status transactions. 

TABLE 6. ESTIMATES ON TOTAL NUMBER OF ELIGIBILITY AND 

HEALTH CARE CLAIM STATUS INQUIRIES, ELECTRONIC AND 

NON-ELECTRONIC CONDUCTED ANNUALLY 

Total Number of Transactions, 

Electronic and Non-electronic, 

Conducted Per Year 

(in millions) 

Number Conducted by 

Physicians (90%) 

Number Conducted by 

Hospitals (10%) 

Claim submissions 5,600 N/A N/A 

Eligibility inquiries 5,040 4,536 504 

Claim status inquiries 784 705.6 78.4 

 For the health plan eligibility transaction, we determined that the total number of 

eligibility for a health plan inquiries conducted electronically by physicians to be between 453.6 

million, and 201.6 million for hospitals. The Oregon Survey found that approximately 10 

percent of all eligibility for a health plan transactions conducted by physicians are electronic. 

Other studies appear to contradict Oregon’s findings by a considerable margin. For instance, the 

Healthcare Efficiency Index reports that 40 percent of all eligibility for a health plan transactions 

are conducted electronically and the McKinsey report estimates 40 to 50 percent. We weighed 
CMS-0032-IFC 85 

the Oregon Survey more heavily, and estimated that 10 percent, or 453.6 million, of all eligibility 

for a health plan transactions conducted by physicians are electronic. (Table 7). For the 

percentage of hospitals’ use of the electronic eligibility for a health plan transaction, we relied on 

the Oregon Survey’s finding that 40 percent, or 201.6, of all eligibility for a health plan inquiries 

conducted by hospitals are electronic. This Oregon estimate appears to be more in line with 

other industry studies on the use of these transactions. (Table 7). 

For the health care claim status electronic transaction, the Oregon Survey found that none 

of the physicians or hospitals it surveyed uses the health care claim status electronic transaction. 

Instead, physicians and hospitals use the telephone and, to a lesser extent, a secure internet 

website provided by the health plan or contractor to check the status of health care claims. 

 Although, as we have stated before, the Oregon Survey appears to have the most valid 

methodology, the McKinsey study's conclusion implies that many providers do conduct the 

health care claim status transaction electronically (30 to 50 percent). The two studies are 

basically incompatible with respect to conclusions about usage of the electronic health care claim 

status transaction. As noted, a percentage of the health care claim status checks are conducted 

through the Internet. It is possible that the numbers of the McKinsey analysis are affected by 

considering web-based health care claim status transactions as "electronic." Only the Oregon 

Survey is clear in its methodology to make a distinction between electronic data interchange of 

HIPAA transactions and electronic web-based transactions. Still, the McKinsey analysis has 

been used by others, for example, the Healthcare Efficiency Report, to demonstrate the 

frequency of use of HIPAA standard transactions. 

We assume that there are some physicians who use the electronic health care claim status 

and response transaction, but believe that the McKinsey study’s high estimate of 30 to 50 percent 
CMS-0032-IFC 86 

of health care claim status transactions being electronic is too high given the Oregon Survey 

finding. We estimate that 10 percent of all health care claim status inquiries, 70.56 million for 

physicians and 7.84 million for hospitals, will be made electronically in 2012. Again, we weigh 

the Oregon Survey more heavily. (See Table 7). 

In order to determine the number of eligibility for a health plan and health care claim 

status transactions that health plans respond to electronically, we use the number of eligibility for 

a health plan inquiries for physicians and hospitals added to the number of health claim status 

inquiries for physicians and hospitals, based on our assumption that for all inquiries submitted by 

physicians and hospitals, health plans will submit the same number of responses. We assume 

that health plans will conduct 655.2 million electronic eligibility responses and 78.4 million 

claim status responses. 

TABLE 7. ESTIMATES ON NUMBER OF ELECTRONIC ELIGIBILITY FOR A 

HEALTH PLAN AND HEALTH CARE CLAIM STATUS TRANSACTIONS 

CONDUCTED BY PROVIDERS AND HEALTH PLANS 

For 2012 

Number of Total 

Eligibility for a Health 

Plan and Health Care 

Claim status Inquiries 

(Non-electronic and 

Electronic) Conducted 

(in millions) 

Percentage of 

Inquiries that 

are Electronic 

Total Number of 

Electronic 

Eligibility for a 

Health Plan and 

Health Care 

Claim Status as of 

2012 (in millions) 

Physicians 

Eligibility for a Health Plan 4,536 10% 453.6

Health Care Claim Status 705.6 10% 70.56

Hospitals 

Eligibility for a Health Plan 504 40% 201.6

Health Care Claim Status 78.4 10% 7.84

Health Plans 

Eligibility for a Health Plan N/A N/A 655.2

Health Care Claim Status N/A N/A 78.4

2. Baseline Assumption B 

 Transaction Increase Assumptions: Annual increase in use of electronic eligibility for a 

health plan and health care claims status transactions due to implementation of operating rules. 
CMS-0032-IFC 87 

a. Providers 

As stated, there is a direct causal link between the implementation of operating rules and 

an increase in the use of eligibility for a health plan and health care claim status transactions 

industry-wide. 

In its conclusions, the IBM study estimated the baseline growth of total health care 

eligibility for a health plan transaction transactions (electronic and non-electronic) to be 

10 percent without operating rules over a period of 3 years. It then estimated a 25 percent 

increase in the use of electronic eligibility for a health plan transaction across the entire industry 

if operating rules are implemented. For our analysis, we have assumed a more conservative 

growth rate in the use of the electronic eligibility for a health plan transactions than that of the 

IBM study both in general (that is, not attributed to any particular factor) and as a result of the 

implementation of operating rules. 

We have estimated a 15 percent annual growth rate in general from 2013 through 2017, 

and then an 8 percent annual growth for 5 years thereafter. This general growth rate is reflected 

in Table 8. In general, eligibility for a health plan inquiries, electronic and non electronic, for 

both physicians and hospitals, are expected to increase annually due to a number of market 

forces. For one, it is anticipated that population trends will increase the total overall number of 

patient visits and claims in the United States, especially in regards to baby-boomers who will 

require more care in the coming years. (http://www.cdc.gov/nchs/data/databriefs/db41.htm). It 

is probable that this increase alone will account for our 15 percent estimated annual growth rate 

of the use of the eligibility for a health plan transaction. As well, it is probable that providers 

will adopt EDI out of necessity from the sheer number of health care visits and claims that will 
CMS-0032-IFC 88 

experienced. In summary, we have chosen this estimate as our general predicted increase 

because it is a probable increase, even without the mandated implementation of operating rules. 

With the implementation of operating rules, the estimate on the increased use of 

transactions by providers moves from probable to practical. The estimate on the percentage 

increase due to operating rules is the primary savings driver in our per transaction benefit 

analysis. Again, we assume a more conservative growth rate due to operating rules than the 

IBM study. In this regard, our analysis of the IBM study follows: Although the IBM study did 

not control for other factors that may have contributed to an increased use of the eligibility for a 

health plan transaction, the study was based on interviews which directed respondents to isolate 

the costs and benefits of operating rules in particular. While it is probable that other factors 

contributed to the extreme increase in the use of the transaction among the study's participants, 

the participants themselves believed that both the costs and benefits were a consequence of the 

operating rules and CAQH CORE certification. 

However, because the IBM study analyzed a comparably small number of entities that 

have adopted operating rules, we are hesitant to accept the study's conclusions as the normative 

result of implementing operating rules for the eligibility for a health plan transaction. There may 

be entities that have implemented (or will implement) the operating rules that did not experience 

the same success as those that were surveyed in the study. 

With this in mind, we have given a high and low range of probable increase usage rates 

due to operating rules. Our low and high estimate of 10 to 12 percent annual for the first 5 years 

falls far below the IBM study’s average rate (25 percent annual increase). We believe these 

estimates are conservative, but do not believe that we are justified in estimating a more 

aggressive growth. 
CMS-0032-IFC 89 

We also assume that 5 years after implementation of the operating rules the 10 to 12 

percent annual growth due to operating rules will decrease to 5 percent a year. We assume this 

will be due to the fact that by this time the health care industry will have implemented the 

operating rules thus making the use of the electronic transactions more widespread, resulting in 

market stabilization and less of an increase in the number of electronic transactions. 

We then estimate the annual increase in the number of electronic eligibility for a health 

plan inquiries from physicians and hospitals respectively due to operating rules. It is calculated 

by multiplying the range of total number of electronic eligibility for a health plan inquiries by the 

range of total percent increase in electronic transactions due to operating rules per year. 
TABLE 8. ANNUAL INCREASE IN NUMBER OF ELECTRONIC ELIGIBILITY FOR A HEALTH PLAN TR

PHYSICIANS DUE TO IMPLEMENTATION OF OPERATING RULES 

I II III IV V VI 

Year 

Number of 

Electronic 

Eligibility for a 

Health Plan 

Transactions (in 

millions). 

Assumes 15% 

increases first 5 

yrs/8% increase 

second 5 yrs 

Number Increase 

in Electronic 

Eligibility for a 

Health Plan 

Transactions from 

Previous Year 

(in millions) 

(HIGH = LOW) 

Total Percentage 

Increase in 

Electronic 

Eligibility for a 

Health Plan 

Transactions from 

Previous Year due 

to Operating 

Rules (LOW) 

Total Percentage 

increase in 

Electronic 

Eligibility for a 

Health Plan 

Transactions from 

Previous Year due 

to Operating 

Rules (HIGH) 

Number Increase 

in Electronic 

Eligibility for a 

Health Plan 

Transactions from 

Previous Year due 

to Operating 

Rules (in millions) 

(LOW) 

2012 453.6 0.0 0% 0% 0.0 2013 521.6 68.0 10% 12% 45.4 2014 599.9 78.2 10% 12% 52.2 2015 689.9 90.0 10% 12% 60.0 2016 793.3 103.5 10% 12% 69.0 2017 912.4 119.0 10% 12% 79.3 2018 985.3 73.0 5% 5% 45.6 2019 1064.2 78.8 5% 5% 49.3 2020 1149.3 85.1 5% 5% 53.2 2021 1241.2 91.9 5% 5% 57.5 2022 1340.5 99.3 5% 5% 62.1 

 Totals 573.5 
CMS-0032-IFC 91 

TABLE 9. ANNUAL INCREASE IN NUMBER OF ELECTRONIC ELIGIBILITY FOR 

A HEALTH PLAN TRANSACTIONS FOR HOSPITALS DUE TO IMPLEMENTATION 

OF OPERATING RULES 

I II III IV V VI VII 

Year 

Number of 

Electronic 

Eligibility 

for a Health 

Plan 

Transactions 

(in millions). 

Assumes 

15% 

increases 

first 5 

yrs/8% 

increase 

second 5 yrs 

Number 

Increase in 

Electronic 

Eligibility for 

a Health Plan 

Transactions 

from Previous 

Year (in 

millions) 

(LOW=HIGH) 

Total 

Percentage 

Increase in 

Electronic 

Eligibility 

for a Health 

Plan 

Transactions 

from 

Previous 

Year due to 

Operating 

Rules 

(LOW) 

Total 

Percentage 

increase in 

Electronic 

Eligibility 

for a Health 

Plan 

Transactions 

from 

Previous 

Year due to 

Operating 

Rules 

(HIGH) 

Number 

Increase in 

Electronic 

Eligibility 

for a Health 

Plan 

Transactions 

from 

Previous 

Year due to 

Operating 

Rules (in 

millions) 

(LOW) 

Number 

Increase in 

Electronic 

Eligibility 

for a Health 

Plan 

Transactions 

from 

Previous 

Year due to 

Operating 

Rules (in 

millions) 

(HIGH) 

2012 201.6 0.0 0% 0.0 

2013 231.8 30.2 10% 12% 20.2 24.2 

2014 266.6 34.8 10% 12% 23.2 27.8 

2015 306.6 40.0 10% 12% 26.7 32.0 

2016 352.6 46.0 10% 12% 30.7 36.8 

2017 405.5 52.9 10% 12% 35.3 42.3 

2018 437.9 32.4 5% 5% 20.3 20.3 

2019 473.0 35.0 5% 5% 21.9 21.9 

2020 510.8 37.8 5% 5% 23.6 23.6 

2021 551.7 40.9 5% 5% 25.5 25.5 

2022 595.8 44.1 5% 5% 27.6 27.6 

 254.9 282.1 

We assume that health care claim status inquiries will increase annually for all providers 

in general at a rate of 20 percent a year for the first 5 years, for many of the same reasons as our 

estimates on the usage rate of the eligibility for a health plan transaction. We also assume that 

this rate of increase will slow after 5 years to about 10 percent a year. This general growth rate 

is reflected in Tables 10 and 11. We expect health care claim status transactions to be adopted at 

a higher rate than the eligibility for a health plan transaction because there is significantly less 

use of the transaction now (and so there is more room for growth). 

We again have given a range of high and low estimates for the rate of increase that can be 

attributed to the implementation of operating rules. We have estimated a 12 to 15 percent annual 
CMS-0032-IFC 92 

growth in usage attributable to operating rules from 2013 through 2017, and then a 7 percent 

annual growth in usage for 5 years thereafter. 
TABLE 10. ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM STATUS TRANSACTION

DUE TO IMPLEMENTATION OF OPERATING RULES 

I II III IV V VI 

Year 

MINIMUM 

Number of 

Electronic Health 

Care Claim 

Status 

transactions (in 

millions). 

Assumes 20% 

increases first 5 

yrs/10% increase 

second 5 yrs 

Number Increase 

in Electronic 

Health Care 

Claim Status 

Transactions from 

Previous Year 

(in millions) 

(HIGH = LOW) 

Total Percentage 

Increase in 

Electronic Health 

Care Claim Status 

Transactions from 

Previous Year due 

to Operating 

Rules (LOW) 

Total Percentage 

increase in 

Electronic Health 

Care Claim Status 

Transactions from 

Previous Year due 

to Operating 

Rules (HIGH) 

Number Increase 

Electronic Heal

Care Claim Stat

transactions fro

Previous Year d

to Operating Ru

(in millions) 

(LOW) 

2012 70.6 0.0 0% 0% 2013 84.7 14.1 12% 15% 2014 101.6 16.9 12% 15% 12015 121.9 20.3 12% 15% 12016 146.3 24.4 12% 15% 12017 175.6 29.3 12% 15% 12018 193.1 17.6 7% 7% 12019 212.4 19.3 7% 7% 12020 233.7 21.2 7% 7% 12021 257.1 23.4 7% 7% 12022 282.8 25.7 7% 7% 1

 Totals 13
CMS-0032-IFC 94 

TABLE 11. ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM STATUS TRANSACTION

DUE TO IMPLEMENTATION OF OPERATING RULES 

I 

II III IV V VI 

Year 

MINIMUM Number of Electronic Health Care Claim Status Transactions (in millions). Assumes 20% increases first 5 yrs/10% increase second 5 yrs 

Number Increase in Electronic Health Care Claim Status Transactions from Previous Year (in millions) (HIGH = LOW) 

Total Percentage Increase in Electronic Health Care Claim Status Transactions from Previous Year due to Operating Rules (LOW) 

Total Percentage increase in Electronic Health Care Claim Status Transactions from Previous Year due to Operating Rules (HIGH) 

Number Increain Electronic Health Care Claim Status Transactions from Previous Year due to Operating Rule(in millions) (LOW) 

2012 7.8 0.0 0% 0% 0.0 2013 9.4 1.6 12% 15% 0.9 2014 11.3 1.9 12% 15% 1.1 2015 13.5 2.3 12% 15% 1.4 2016 16.3 2.7 12% 15% 1.6 2017 19.5 3.3 12% 15% 2.0 2018 21.5 2.0 7% 7% 1.4 2019 23.6 2.1 7% 7% 1.5 2020 26.0 2.4 7% 7% 1.7 2021 28.6 2.6 7% 7% 1.8 2022 31.4 2.9 7% 7% 2.0  Totals 15.3 
CMS-0032-IFC 95 

b. Health Plans 

To find the increase in electronic eligibility for a health plan and health care claims status 

transactions annually for health plans, we add the total annual increase usage of the two 

transactions by providers. The sum again gives us a low to high range of increased usage of the 

two transactions due to operating rules. 

We solicit comments on these baseline assumptions. 

TABLE 12. ANNUAL INCREASE IN NUMBER OF ELIGIBILITY FOR A 

HEALTH PLAN TRANSACTIONS DUE TO IMPLEMENTATION OF OPERATING 

RULES 

I II III IV V VI VII 

Year 

Physician Number increase 

in electronic eligibility for a 

health plan transactions 

from previous year DUE TO 

OPERATING RULES in 

millions 

Hospital Number increase in 

electronic eligibility for a 

health plan transactions 

from previous year DUE TO 

OPERATING RULES in 

millions 

Plan Number increase in 

electronic eligibility for a 

health plan transactions 

from previous year due to 

operating rules in millions 

 LOW HIGH LOW HIGH LOW HIGH 

2012 0.0 0.0 0.0 0.0 0.0 0.0

2013 45.4 54.4 20.2 24.2 65.5 78.6

2014 52.2 62.6 23.2 27.8 75.3 90.4

2015 60.0 72.0 26.7 32.0 86.7 104.0

2016 69.0 82.8 30.7 36.8 99.6 119.6

2017 79.3 95.2 35.3 42.3 114.6 137.5

2018 45.6 45.6 20.3 20.3 65.9 65.9

2019 49.3 49.3 21.9 21.9 71.2 71.2

2020 53.2 53.2 23.6 23.6 76.9 76.9

2021 57.5 57.5 25.5 25.5 83.0 83.0

2022 62.1 62.1 27.6 27.6 89.6 89.6

Totals 573.5 634.6 254.9 282.1 828.3 916.7
CMS-0032-IFC 96 

TABLE 13. ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM 

STATUS TRANSACTIONS FOR HEALTH PLANS DUE TO IMPLEMENTATION OF 

OPERATING RULES 

I II III IV V VI VII 

Year 

Physician Number increase in 

electronic Health Care Claim 

Status transactions from 

previous year DUE TO 

OPERATING RULES in 

millions 

Hospital Number increase in 

electronic Health Care Claim 

Status transactions from 

previous year DUE TO 

OPERATING RULES in 

millions 

Plan Number increase in 

Health Care Claim Status 

transactions from previous 

year DUE TO OPERATING 

RULES in millions 

 LOW HIGH LOW HIGH LOW HIGH 

2012 0.0 0.0 0.0 0.0 0.0 0.0 

2013 8.5 10.6 0.9 1.2 9.4 11.8 

2014 10.2 12.7 1.1 1.4 11.3 14.1 

2015 12.2 15.2 1.4 1.7 13.5 16.9 

2016 14.6 18.3 1.6 2.0 16.3 20.3 

2017 17.6 21.9 2.0 2.4 19.5 24.4 

2018 12.3 12.3 1.4 1.4 13.7 13.7 

2019 13.5 13.5 1.5 1.5 15.0 15.0 

2020 14.9 14.9 1.7 1.7 16.5 16.5 

2021 16.4 16.4 1.8 1.8 18.2 18.2 

2022 18.0 18.0 2.0 2.0 20.0 20.0 

Totals 138.0 153.8 15.3 17.1 153.4 170.9 

I. Cost Assumptions

1. Providers 

We assume that physicians and hospitals will incur some start-up costs for implementing 

operating rules. These include training of staff and changes to internal business processes. 

Unlike the costs to health plans, we assume that the costs are less likely to be expensive 

infrastructure updates, because we assume most providers will already have the necessary 

infrastructure in place to accommodate the operating rules adopted under this interim final rule 

with comment period. We base this assumption on industry studies that demonstrates that EDI is 

utilized in over 75 percent of claim submissions. This means that the majority of providers or 

their business partners are capable of transmitting EDI. 

While we assume that there may remain some providers who do not conduct any EDI, the 

operating rules adopted herein do not apply to providers who prefer paper-based or manual 
CMS-0032-IFC 97 

transactions. If such a provider were to move to EDI after learning of the advantages of 

operating rules, the provider's costs for initial EDI infrastructure can be found in the Transaction 

and Code Sets final rule, and impacts of the operating rules per se can be found in this interim 

final rule with comment period. In summary, costs regarding initial EDI infrastructure to 

transmit HIPAA transactions are not a factor in our estimates. We solicit comments on these 

assumptions. 

We assume the costs of implementing operating rules will mostly be borne by health 

plans. However, we expect that some costs will be borne by providers in the form of increased 

fees from vendors and clearinghouses, such as upgraded software costs and an increase in perclaim transaction fees based on the increase in volume of transactions. These fees are variable 

depending on existing infrastructure, number of providers in a practice, geographic areas, etc. 

To account for possible costs to providers, we have assumed that the costs attributed to 

implementing the Modifications final rule are applicable here. We estimate the cost for 

providers to implement operating rules will be 25 percent of the total unadjusted costs estimated 

by the Modifications rule. We use this estimate based on the fact that most of the costs of 

implementing operating rules will be realized by health plans due to the more robust information 

they will be required to send in these transactions. As well, any software updates that providers 

will need may only apply to the eligibility for a health plan and health care claim status 

transactions, unlike the Modifications rule, which required software updates that applied to up to 

seven transactions. (See Table 14.) 

We base our estimates on provider costs solely on the Modifications final rule because 

the types of costs included in that impact analysis are similar to those that would be borne by 
CMS-0032-IFC 98 

implementing operating rules: software upgrades; training; and testing of transaction 

improvements. 

We believe that these costs are high considering the fact that the Modifications rule 

applies to seven different transactions, while the operating rules adopted in this interim final rule 

with comment period only applies to two. However, we have no evidence or justification for 

supporting a lower cost. 

TABLE 14. PROVIDER COSTS

Unadjusted 

Total 

Physicians' 

Cost from 

Modifications 

Final rule 

Physicians' 

Cost to 

Implement 

Operating 

Rules for 

Eligibility for 

a Health Plan 

and Health 

Care Claim 

Status 

Transactions 

(25% of 

Modifications 

Final rule 

estimates) 

Unadjusted 

Total 

Hospital's 

Cost from 

Modifications 

Final rule 

Hospitals' 

Cost to 

Implement 

Operating 

Rules for 

Eligibility for 

a Health Plan 

and Health 

Care Claim 

Status 

Transactions 

(25% of 

Modifications 

Final rule 

estimates) 

Total 

Cost to 

Providers 

5010 Implementation Costs - Low $370 $93 $792 $198 $291 

5010 Implementation Costs - High $740 $185 $1,584 $396 $581 

5010 Transition Costs - Low $174 $44 $373 $93 $137 

5010 Transition Costs - High $348 $87 $746 $187 $274 

Total Costs - Low $544 $136 $1,165 $291 $427 

Total Costs - High $1,088 $272 $2,330 $583 $855 

2. Health Plans 

As stated earlier, we assume that health plans will bear the majority of costs of adopting 

operating rules. All of the studies that were considered for this impact analysis provided 

qualitative descriptions of the possible costs of adoption; however, the IBM study was the only 

one to attribute specific costs of operating rule adoption for health plans. The IBM study gave a 

range of costs: $8,000 to $1.7 million total cost of adoption including IT staff services such as 

programming, software, and hardware across a number of systems; and annual ongoing costs of 
CMS-0032-IFC 99 

$0 to $79,000 for IT staff services such as programming, and minor hardware and software 

upgrades to annually update operating rules. 

In contrast, total implementation costs to implement the updated Version 5010 of the 

HIPAA standards ranged from an average of $1.14 to $2.28 million per health plan, excluding 

government health plans. We assume that implementing Version 5010 may be comparable to 

implementing the operating rules adopted herein. However the Modifications rule broadly 

amends or alters seven HIPAA standard transactions. This interim final rule with comment 

period adopts operating rules for only two transactions. 

To calculate the range of costs for health plans we start with the low and high costs to 

health plans estimated in the Modifications rule. We increased these costs by 14 percent to 

account for the 14 percent increase in the number of health plans from the Modifications rule. 

We estimate the cost for health plans to implement operating rules will be 50 percent of the total 

costs estimated by the Modifications rule. We estimated a low cost of $ 2.6 billion and a high 

$5.1 billion for health plans. We reduced the estimate of health plans costs based upon the 

Modifications final rule because, unlike the Modifications final rule, operating rules adopted 

herein only apply to the eligibility for a health plan and health care claim status transactions. 

We will assume that the ongoing cost to maintaining operating rules for eligibility for a 

health plan and health care claim status will continue 2 years after implementation. However, 

since we do not know what updates will be needed at this time, we cannot determine costs for 

those updates. Afterwards, we will assume that ongoing costs will decrease to zero. We base 

this assumption on the IBM study finding that the majority of the ongoing cost was due to IT 

staff services for programming, and after 2 years we assume that this programming will no 

longer be necessary. 
CMS-0032-IFC 100 

Note that by using 4,577 as the total number of health plans, we have not adjusted for the 

number of health plans that have already updated their infrastructure and communications, and 

have already implemented the operating rules. This includes not only those health plans that 

have been certified by the CAQH CORE as having implemented portions of Phase I and, 

perhaps, Phase II, but also health plans that have done so without going through the CAQH 

CORE certification process. As we have noted, a number of states have statutes that are similar, 

to the CAQH CORE operating rules with which all health care entities operating in the same 

state must comply. Therefore, we believe our costs may be overstated. We invite public and 

interested stakeholder comments on our cost assumptions.

TABLE 15. COST TO HEALTH PLANS OF OPERATING RULE ADOPTION 

FOR ELIGIBILITY FOR A HEALTH PLAN AND HEALTH CARE CLAIM STATUS 

TRANSACTIONS 

Total Health Plans' 

Cost from Modifications 

Final rule (+14% to 

account for increase in 

number of plans) 

Health Plans' Cost to 

Implement Operating Rules 

for Eligibility for a Health 

Plan and Claim Status 

Transactions (50% of 

Adjusted Modifications Final 

rule estimates) 

5010 Implementation Costs – Low $3,483 $ 1,742 

5010 Implementation Costs – High $6,968 $3,484 

5010 Transition Costs – Low $1,640 $820 

5010 Transition Costs – High $3,279 $1,639 

Total Costs – Low $5,123 $2,562 

Total Costs – High $10,246 $5,123 

3. Vendors and Clearinghouses 

None of the studies considered for this impact analysis were able to quantify the costs 

and savings, or the return on investment of adopting operating rules for vendors or 

clearinghouses. As previously mentioned, we expect that some costs will be borne by providers 
CMS-0032-IFC 101 

in the form of increased fees from vendors and clearinghouses, such as upgraded software costs 

and an increase in per-claim transaction fees based on the increase in volume of transactions. 

Because of this we believe that costs to vendors will be the same as the costs expected by 

providers since vendors pass along their costs to their provider clients in the form of increased 

fees, which are included as the costs to providers of implementing these operating rules. 

Additionally, we believe that costs to clearinghouses for routing of additional electronic 

transactions, which we assume will be due to implementation of the operating rules, are included 

in the costs expected by health plans. We invite interested stakeholder comments regarding 

these costs and assumptions for vendors and clearinghouses. 

J. Savings Assumptions

1. Providers 

We have analyzed two areas in which providers will find savings or avoid costs upon 

implementation of the operating rules for eligibility for a health plan and health care claim status 

transactions. The first area that provides considerable cost savings is the avoidance of claim 

denials that implementation of the eligibility for a health plan operating rules is estimated to 

provide. The second area of savings for providers will be the per transaction savings of moving 

eligibility for a health plan and health care claim status transactions from non-electronic to EDI. 

It is difficult, if not impossible, to estimate the number of eligibility for a health plan and 

claim status transactions conducted per provider, even as an average. Given the added difficulty 

of the range of technological capabilities of providers, it would be difficult, if not impossible, to 

make any assumptions on the cost or benefit on a per provider basis, or to project an estimate of 

increased EDI use for any one provider. 
CMS-0032-IFC 102 

This impact analysis will not base its cost or benefit to providers on the number of 

providers or on a per-provider or average provider basis. It would be specious to presume that 

such numbers reflect any real situation in a provider's office. Rather, we will look at the total 

number of eligibility for a health plan and claim status transactions that we estimate all providers 

conduct through a given year, and estimate an increase based on the implementation of operating 

rules. In the same vein, we will calculate a savings based on an estimate of the total number of 

denied claims, instead of attempting to calculate an average of denied claims per provider. 

In the area of claims denials, we assume that there will be a low to high range of $$560 

million to $700 million annual cost savings in the reduction of denied claims once the eligibility 

for a health plan transaction operating rules are implemented. We base this assumption on a 

number of studies. We use the total annual number of claims submitted from the Modifications 

final rule as mentioned above, 5.6 billion, and divide it between physicians and hospitals 

according to the Oregon Survey’s 9 to 1 ratio of physician to hospital transactions. We then take 

the 5 billion annual claims for physicians and 560 million for hospitals and apply the 5 percent of 

denied claims as outlined in the MGMA Project Swipe IT study. With this number, we consider 

the IBM study data that found that the implementation of eligibility for a health plan operating 

rules resulted in a 10 percent to 12 percent decrease in denied claims. We have consistently 

created low to high ranges in this impact analysis that uses the results of the IBM study as the 

“best case” or high estimates, and we will do so here as well. We have provided a range of 8 to 

10 percent decrease in denied claims due to operating rules. 

This results in a total of 22.4 million to 28 million denied claims for providers that could 

be avoided through eligibility for a health plan operating rules. We then take these numbers and 

apply them to the cost to providers of processing denied claims, which is $25 per denied claims 
CMS-0032-IFC 103 

according to a December 2000 study sponsored by the Medical Group Management Association 

http://www.acpinternist.org/archives/2000/12/claimsdenied.htm). This results in $560 million to 

$700 million in annual savings for providers due to implementation of operating rules for the 

eligibility for a health plan transaction . 

X * Y * Z * A = Total annual savings to providers by avoiding denied claims 

Where

X = Total number of claims (Column II) 

Y = Percent of claims that are denied (Column III) 

Z = Percent of denied claims that will be avoided by implementing eligibility for a health 

plan operating rules (Column V) 

A = Cost for providers to resubmit a single denied claim (Column VII) 
CMS-0032-IFC 104 

TABLE 16. ANNUAL SAVINGS TO PROVIDERS FOR AVOIDING CLAIMS DENIALS AFTER IMPL

OPERATING RULES FOR ELIGIBILITY FOR A HEALTH PLAN 

I II III IV V VI VII VIII IX 

Total 

Number 

of Claims 

(in 

millions) 

Percent 

of 

claims 

denied 

(MGMA 

2007) 

Number 

of claims 

denied in 

millions = 

(Col 

II)x(Col 

III)

Percent of denied 

claims that will be 

avoided through 

eligibility for a health 

plan operating rules 

(IBM: 10%-12%) 

Number of denied claims 

that will be avoided 

through eligibility for a 

health plan operating 

rules in millions = (Col 

IV)x(Col V/VI)

Cost to 

resubmit a 

denied claim 

(Larch 2000, 

ACP-ASIM 

Observer) 

LOW HIGH LOW HIGH 

Physician 5,040 5% 252 8% 10% 20.16 25.2 $25 Hospital 560 5% 28 8% 10% 2.24 2.8 $25 Totals 22.4 28 
CMS-0032-IFC 105 

In the area of per transaction savings, we assume that the move from non-electronic to 

electronic transmission of the eligibility for a health plan transaction will save providers, 

physicians and hospitals, $2.10 per transaction. This number reflects the difference in labor time 

and costs required to conduct the electronic transaction compared to the manual transaction. It 

includes the difference in the cost of labor – employee salary, benefits, and payroll taxes – as 

well as the difference in general overhead. 

We arrived at $2.10 savings per transaction after analyzing a number of the studies 

already mentioned, including the Health Efficiency Report, the Milliman study, and the IBM 

study. We decided that the IBM study's estimate of a savings of $2.10 per eligibility for a health 

plan transaction that moves from non-electronic to electronic was the best starting estimate 

because, unlike the other studies, the IBM study surveyed entities that actually realized costs 

savings as a result of the use of operating rules for the electronic eligibility for a health plan 

transactions. As well, the IBM study gives us the most conservative estimate, as can be seen by 

comparing it with other studies' conclusions. 

We assume that the move from non-electronic to EDI transmission of the health care 

claim status transaction will save physicians and hospitals $3.33 per transaction. The benefits to 

physicians in streamlining the health care claim status transaction through operating rules are 

potentially significant if, as we assume, it leads to less dependence on more time consuming and 

costly manual means, and increased use of the EDI transaction.

Unlike the eligibility for a health plan transaction analysis, we did not base our savings 

per health care claim status transaction for providers on the IBM study, as the IBM study did not 

measure the impact of the operating rules for the health care claim status transaction. Instead, we 

took our assumptive savings of $3.33 per transaction from the number that is used in all studies 
CMS-0032-IFC 106 

we analyzed and which was first illustrated in the Milliman study. We will use this assumption 

as this is the number on which industry studies appear to agree. However, we note that, as the 

health care claim status transaction is very seldom used, there is very little data on which to base 

actual savings. 

Note that the low to high estimates on the estimated increase in the transactions based on 

operating rules are carried through this calculation. We arrived at this range in our calculations 

described in the baseline assumptions. 

TABLE 17. SAVINGS FOR PROVIDERS PER ELIGIBILITY FOR A HEALTH PLAN 

AND HEALTH CARE CLAIMS STATUS TRANSACTION THAT MOVES FROM 

NONELECTRONIC TO ELECTRONIC FOR PROVIDERS 

Source 

Savings for Every Eligibility for a 

Health Plan Transaction that Moves 

from Non-electronic to Electronic 

Savings for Every Health Care Claim 

Status Transaction that Moves from 

Non-electronic to Electronic 

Health Efficiency Report $2.95 $3.33

Oregon Survey (low estimate) $2.46 $3.33

Milliman study $2.44 $3.33

IBM study $2.10 NA

Our assumption $2.10 $3.33
CMS-0032-IFC 107 

TABLE 18: PROVIDER (PHYSICIAN AND HOSPITALS) SAVINGS FOR 

ELIGIBILITY 

I II III IV V VI 

Year 

LOW 

Number 

increase in 

eligibility for 

a health plan 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 12) 

HIGH 

Number 

increase in 

eligibility for 

a health plan 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 12) 

Savings per 

transaction 

LOW Annual 

Savings in 

millions 

HIGH Annual 

Savings in 

millions 

2012 0.0 0.0 $0.0 $0.0 $0.0 

2013 65.5 78.6 $2.10 $137.6 $165.1 

2014 75.3 90.4 $2.10 $158.2 $189.9 

2015 86.7 104.0 $2.10 $182.0 $218.4 

2016 99.6 119.6 $2.10 $209.3 $251.1 

2017 114.6 137.5 $2.10 $240.6 $288.8 

2018 65.9 65.9 $2.10 $138.4 $138.4 

2019 71.2 71.2 $2.10 $149.4 $149.4 

2020 76.9 76.9 $2.10 $161.4 $161.4 

2021 83.0 83.0 $2.10 $174.3 $174.3 

2022 89.6 89.6 $2.10 $188.3 $188.3 

 TOTAL $1,739.5 $1,925.0 

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

I II III IV V VI 

Year LOW 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 13) 

HIGH 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 13) 

Savings per 

transaction 

LOW Annual 

Savings in 

millions 

HIGH Annual 

Savings in 

millions 

2012 0.0 0.0 $0.0 $0.0 $0.0 

2013 9.4 11.8 $3.33 $31.3 $39.2 

2014 11.3 14.1 $3.33 $37.6 $47.0 

2015 13.5 16.9 $3.33 $45.1 $56.4 

2016 16.3 20.3 $3.33 $54.1 $67.7 
CMS-0032-IFC 108 

I II III IV V VI 

Year LOW 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 13) 

HIGH 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES in 

millions (from 

Table 13) 

Savings per 

transaction 

LOW Annual 

Savings in 

millions 

HIGH Annual 

Savings in 

millions 

2017 19.5 24.4 $3.33 $65.0 $81.2 

2018 13.7 13.7 $3.33 $45.5 $45.5 

2019 15.0 15.0 $3.33 $50.0 $50.0 

2020 16.5 16.5 $3.33 $55.0 $55.0 

2021 18.2 18.2 $3.33 $60.5 $60.5 

2022 20.0 20.0 $3.33 $66.6 $66.6 

 TOTAL $510.8 $569.0 
CMS-0032-IFC 109 

TABLE 20: PROVIDER SAVINGS SUMMARIZED 

LOW SAVINGS HIGH SAVIN

 Year 

Annual Provider 

Savings due to 

Increased use of 

Electronic 

Transactions 

Annual Provider 

Savings due to Decrease 

in Claim Denials 

Total Annual 

Savings to 

Providers 

(in millions) 

 Annual 

Provider 

Savings due to 

Increased use of 

Electronic 

Transactions 

 Annual 

Provider 

Savings due to 

Decrease in 

Claim Denials 

2013 $168.92 $560 $729 $204.27 $700 2014 $195.83 $560 $756 $236.87 $700 2015 $227.08 $560 $787 $274.75 $700 2016 $263.40 $560 $823 $318.78 $700 2017 $305.61 $560 $866 $369.98 $700 2018 $183.85 $560 $744 $183.85 $700 2019 $199.46 $560 $759 $199.46 $700 2020 $216.42 $560 $776 $216.42 $700 2021 $234.84 $560 $795 $234.84 $700 2022 $254.83 $560 $815 $254.83 $700 

CUMULATIVE TOTALS $7,850 
CMS-0032-IFC 110 

2. Health Plans 

We have analyzed two areas in which health plans will find savings or avoid costs upon 

implementation of the operating rules for eligibility for a health plan and health care claim status 

transactions. The first area that provides considerable cost savings is a decrease in the number of 

pended claims that implementation of the eligibility for a health plan operating rules is estimated 

to provide. Pended claims are claims that necessitate a manual review by the health plan. The 

second area of savings for health plans will be the per transaction savings of moving eligibility 

for a health plan and health care claim status transactions from non-electronic to EDI transmittal. 

In the area of pended claims, we base this assumption on a study by the America's Health 

Insurance Plans in 2006 (AHIP Center for Policy and Research, An Updated Survey of Health 

Care Claims Receipt and Processing Times (May 2006) at 

http://www.ahipresearch.org/pdfs/PromptPayFinalDraft.pdf). 

We start our calculation with the total annual number of claims submitted based on the 

Modifications final rule as mentioned previously, 5.6 billion. AHIP reported that 14 percent of 

all claims were pended by health plans, which calculates to 784 million pended claims. The 

AHIP study broke down the reasons why claims were pended. Four of those categories, 

including lack of necessary information, no coverage based on date of service, non-covered/nonnetwork benefit or service, and coverage determination, we believe can be avoided by 

implementing operating rules for the eligibility for a health plan transaction and the increased use 

of the eligibility for a health plan transactions. These categories comprise 31 percent of all 

pended claims. We also assume that many pended claims can be avoided with increased use of 

the claim status transaction and its operating rules. However, we were unable to establish a 
CMS-0032-IFC 111 

correlation between use of claim status operating rules and a decrease in pended claims, and have 

not included any savings attributable to the claim status operating rules. 

To reflect the uncertainty of this effect of operating rules on a “downstream” process, we 

estimate that 20 to 25 percent of pended claims could be avoided through use of operating rules. 

(See Table 21.) 

AHIP estimated that $0.85 was the cost to reply electronically to a “clean” claim 

submission, while $2.05 was the cost to claims that “necessitate manual or other review cost,” 

according to the study. The difference is $1.20, which is the per pended claim factor we use for 

our cost savings analysis. (See Table 21.) 

This results in $188 million to $235 million for health plans in annual savings of 

eligibility for a health plan operating rules through reduction in pended claims. 

X * Y * Z * A = Total annual savings to providers by avoiding denied claims 

Where

X = Total number of claims (Column I) 

Y = Percent of claims that are pended (Column II) 

Z = Percent of pended claims that will be avoided by implementing eligibility for a health 

plan operating rules (Column IV) 

A = Cost for health plans to manually review a pended claim (Column VI) 
CMS-0032-IFC 112 

TABLE 21. ANNUAL SAVINGS TO PLANS FOR AVOIDING PENDED CLAIMS AFTER IMPLEM

OPERATING RULES FOR ELIGIBILITY FOR A HEALTH PLAN 

I II III IV V VI VII VIII IX 

Total 

Number 

of 

Claims 

in 

millions 

Percent 

of claims 

pended 

(AHIP 

2006) 

Number of 

claims 

pended 

claims in 

millions = 

(Col I)x(Col 

II)

Percent of 

pended 

claims that 

will be 

avoided 

through 

eligibility 

for a health 

plan 

operating 

rules 

(AHIP 

2006) 

LOW 

Percent 

of 

pended 

claims 

that will 

be 

avoided 

through 

eligibility 

for a 

health 

plan 

operating 

rules 

(AHIP, 

2006) 

HIGH 

Number of 

pended 

claims that 

will be 

avoided 

through 

eligibility 

for a health 

plan 

operating 

rules in 

millions = 

(Col 

III)x(Col 

IV) LOW 

Number of 

pended 

claims that 

will be 

avoided 

through 

eligibility for 

a health plan 

operating 

rules in 

millions = 

(Col III)x(Col 

V) HIGH 

Cost to 

review a 

pended 

claim 

(AHIP, 

2006) 

Total a

saving

eligibili

a health 

opera

rules th

reducti

pend

claim

million

VI)x(

VIII) L

5,600 14% 784 20% 25% 156.8 196 $1.20 
CMS-0032-IFC 113 

The second area of savings for health plans is the per transaction savings of moving 

eligibility for a health plan and health care claim status transactions from non-electronic to 

electronic transmittal. We assume that the average savings for health plans in adopting operating 

rules for eligibility for a health plan is approximately $3.13 per transaction that moves from nonelectronic to electronic, and $3.75 for health care claim status transactions that move from nonelectronic to electronic. 

To determine these savings, we assumed that the IBM study and the Oregon Survey were 

the most recent and the most valid with regard to eligibility for a health plan savings, as they are 

based on detailed surveys with health plans. To arrive at our savings assumption, therefore, we 

averaged the two studies. (See Table 22) 

For health care claim status transactions, we relied solely on the Oregon Survey, again 

based on the validity of its results. (See Table 22) 

TABLE 22. SAVINGS PER ELIGIBILITY FOR A HEALTH PLAN AND HEALTH 

CARE CLAIM STATUS TRANSACTION THAT MOVES FROM NON-ELECTRONIC 

TO ELECTRONIC FOR HEALTH PLANS 

Source Savings for Every 

Eligibility for a Health 

Plan Transaction that 

Moves from Nonelectronic to Electronic 

Savings for Every Health 

Care Claims Status 

Transaction that Moves 

from Non-electronic to 

Electronic 

Oregon Survey $3.75 $3.75 

IBM study $2.50 NA 

Our assumption $3.13 $3.75 

Note that the low to high estimates on the estimated increase in the transactions based on 

operating rules are carried through this calculation (in Tables 23 and 24). We arrived at this 

range in our calculations described in the baseline assumptions. 

TABLE 23: SAVINGS FOR ELIGIBILITY FOR A HEALTH PLAN 

OPERATING RULES FOR HEALTH PLANS 
CMS-0032-IFC 114 

I II III IV V VI

Year 

Number 

increase in 

electronic 

eligibility for a 

health plan 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

LOW 

Number 

increase in 

electronic 

eligibility for a 

health plan 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

HIGH 

Savings per 

Transaction 

Annual Savings 

(in millions) 

LOW 

Annual Savings 

(in millions) 

HIGH 

2012 0.0 0.0 $0.0 $0.0 $0.0

2013 65.5 78.6 $3.13 $205.1 $246.1

2014 75.3 90.4 $3.13 $235.8 $283.0

2015 86.7 104.0 $3.13 $271.2 $325.5

2016 99.6 119.6 $3.13 $311.9 $374.3

2017 114.6 137.5 $3.13 $358.7 $430.4

2018 65.9 65.9 $3.13 $206.2 $206.2

2019 71.2 71.2 $3.13 $222.7 $222.7

2020 76.9 76.9 $3.13 $240.6 $240.6

2021 83.0 83.0 $3.13 $259.8 $259.8

2022 89.6 89.6 $3.13 $280.6 $280.6

 TOTAL $2,592.7 $2,869.2

TABLE 24. SAVINGS FOR HEALTH CARE CLAIM STATUS OPERATING 

RULES FOR HEALTH PLANS 

I II III IV V VI 

Year 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

LOW 

Number 

increase in 

claim status 

health care 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

HIGH 

Savings per 

Transaction 

Annual Savings 

(in millions) 

LOW 

Annual Savings 

(in millions) 

HIGH 

2012 0.0 0.0 $0.0 $0.0 $0.0 

2013 9.4 11.8 $3.75 $35.3 $44.1 

2014 11.3 14.1 $3.75 $42.3 $52.9 

2015 13.5 16.9 $3.75 $50.8 $63.5 

2016 16.3 20.3 $3.75 $61.0 $76.2

2017 19.5 24.4 $3.75 $73.2 $91.4
CMS-0032-IFC 115 

I II III IV V VI 

Year 

Number 

increase in 

health care 

claim status 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

LOW 

Number 

increase in 

claim status 

health care 

transactions 

from previous 

year DUE TO 

OPERATING 

RULES 

(in millions) 

HIGH 

Savings per 

Transaction 

Annual Savings 

(in millions) 

LOW 

Annual Savings 

(in millions) 

HIGH 

2018 13.7 13.7 $3.75 $51.2 $51.2

2019 15.0 15.0 $3.75 $56.3 $56.3

2020 16.5 16.5 $3.75 $62.0 $62.0

2021 18.2 18.2 $3.75 $68.2 $68.2

2022 20.0 20.0 $3.75 $75.0 $75.0

 TOTAL $575.2 $640.8
CMS-0032-IFC 116 

TABLE 25: HEALTH PLAN SAVINGS SUMMARIZED 

LOW SAVINGS HIGH SAVIN

Annual Health 

Plan Savings due to 

Increased use of 

Electronic 

Transactions 

 Annual Health Plan 

Savings due to 

Decrease in Claim 

Denials 

Total Annual 

Savings to 

Health Plans 

(in millions) 

 Annual 

Health Plan Savings due 

to Increased 

use of 

Electronic 

Transactions 

 Annual 

Health Plan 

Savings due to 

Decrease in 

Claim Denials 

2013 $240.4 $188 $429 $290.19 $235 2014 $278.2 $188 $466 $335.93 $235 2015 $322.0 $188 $510 $388.96 $235 2016 $372.9 $188 $561 $450.48 $235 2017 $431.8 $188 $620 $521.86 $235 2018 $257.5 $188 $446 $257.45 $235 2019 $279.1 $188 $467 $279.07 $235 2020 $302.5 $188 $491 $302.52 $235 2021 $328.0 $188 $516 $327.97 $235 2022 $355.6 $188 $544 $355.57 $235 

TOTALS $5,049 
CMS-0032-IFC 117 

3. Vendors and Clearinghouses 

None of the studies considered for this analysis were able to quantify the costs and 

savings, or the return on investment of adopting operating rules for the eligibility for a health 

plan and health care claim status inquiry and response transactions for vendors and 

clearinghouses. As noted previously, we expect that some costs will be borne by providers in the 

form of increased fees from vendors and clearinghouses such as upgraded software costs. 

We would anticipate that the savings, as well as the costs, to vendors of upgrading 

provider software will be passed along to their provider clients. Therefore, we assume that the 

costs and benefits for vendors in implementing the operating rules will be same as those for 

providers. 

Additionally, since clearinghouses work on behalf of health plans and act as 

intermediaries between providers and health plan in regards to electronic transactions, we believe 

that the savings, as well as the costs, to clearinghouses for routing of additional electronic 

transactions will be the same savings and costs as those expected by health plans. We invite 

public and interested stakeholder comments on our assumptions. 

K. Summary

1. Providers 

 As previously noted, providers will assume the least cost and see the greatest benefit 

from the implementation of operating rules as required by this interim final rule with comment 

period. Within 10 years of implementation of the operating rules for eligibility for a health plan 

and health care claim status transactions, we estimate that there will be $7.9 billion to $9.5 

billion in savings for providers at a cost of up to $855 million. 

TABLE 26: SUMMARY OF PROVIDER SAVINGS AND COSTS OVER 10 YEARS 

(IN MILLIONS) 
CMS-0032-IFC 118 

 LOW HIGH 

Provider Savings $7,850 $9,494

Total Provider Costs $427 $855

2. Health Plans 

We estimate that health plans will see a savings of $5 billion to $5.8 billion within 10 

years of the implementation of operating rules (both for eligibility for a health plan and health 

care claim status transactions). We believe that this is a conservative estimate. The IBM study 

found an average return on investment of over $2 million per health plan within 1 year of 

implementation. If multiplied by the number of health plans, this results in over $9 billion 

savings after the first year. We estimate that costs to health plans will range from $2.6 billion to 

$5.1 billion over 10 years. 

 In March 2010, the Congressional Budget Office (CBO) 

(http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf) estimated that the 

administrative simplification requirements in the Affordable Care Act would produce savings to 

the Federal budget. In contrast to the CBO analysis, government health plans are not considered 

separately in our impact analysis and summary estimate, and were instead included along with 

private health plans. When considering the impact on the federal government of this interim 

final rule with comment period, note that the operating rules adopted herein are only one part of 

the broader administrative simplification mandates outlined in section 1104 of the Affordable 

Care Act, from which a greater return on investment (ROI) in total is anticipated. Also, because 

we are addressing requirements that will impact the entire health care industry, we again reiterate 

that we choose to make conservative estimates based on the variation within the studies on which 

to base such estimates. 
CMS-0032-IFC 119 

TABLE 27: SUMMARY OF HEALTH PLAN SAVINGS AND COSTS OVER 10 YEARS 

(IN MILLIONS) 

 LOW HIGH 

Health Plan Savings $5,049 $5,862 

Health Plan Costs $2,562 $5,123 

TABLE 28: SUMMARY OF PROVIDER AND HEALTH PLAN SAVINGS AND 

COSTS OVER 10 YEARS (IN MILLIONS) 

LOW HIGH

Provider and Health Plan Savings $12,899 $15,356

Total Provider and Health Plan Costs $2,989 $5,978

L. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (RFA) of 1980, Public Law 96–354, requires agencies to 

describe and analyze the impact of the interim final rule with comment on small entities unless 

the Secretary can certify that the regulation will not have a significant impact on a substantial 

number of small entities. In the healthcare sector, the Small Business Administration (SBA) 

size standards define a small entity as one with between revenues of $7 million to $34.5 

million in any 1 year. For details, see the SBA's Web site at 

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf (refer to Sector 62 - Health 

Care and Social Assistance). (Accessed 2–1–11). 

For the purposes of this analysis (pursuant to the RFA), nonprofit organizations are 

considered small entities; however, individuals and States are not included in the definition of a 

small entity. We have attempted to estimate the number of small entities and provide a general 

discussion of the effects of this interim final rule with comment period, and where we had 

difficulty, or were unable to find information, we solicit industry comment. Because most 
CMS-0032-IFC 120 

medical providers are either nonprofit or meet the SBA's size standard for small business, we 

treat all medical providers as small entities. 

1. Number of Small Entities 

The following sections discuss which entities across the health care industry, that are 

impacted by this interim final rule with comment period, are considered small entities as part of 

this Regulatory Flexibility Analysis. 

• Providers - All health care providers are assumed to be small entities. The number of 

providers utilized in this analysis is taken from the August 21, 2008 HIPAA Electronic 

Transaction Standards proposed rule, as well as the U.S. Census Bureau, Detailed Statistics, 

2007 Economic Census, August 31, 2010. The determination to include all health care providers 

as small entities is modeled after many previous HHS rules which utilized the same assumption. 

• Clearinghouses – All clearinghouses were assumed to not be small entities. Three 

national association websites were consulted (EHNAC, HIMSS and the Cooperative Exchange). 

Additionally, the Health Data Dictionary by Faulkner and Gray which was last published in 2000 

determined that the number of clearinghouses that would be considered small entities was 

negligible. The top 51 clearinghouse entities were listed, and the range of monthly transactions 

was 2,500 to 4 million, with transaction fees of $0.25 per transaction to $2.50 per transaction. It 

was determined that even based on this data, few of the entities would fall into the small entity 

category, and as such, we did not count them in this RFA analysis. 

• Health Plans – All health plans are assumed to not be small entities. Based on the 

available public data, the number of plans that meet the SBA size standard of $7 million in 

annual receipts was unable to be determined; therefore we did not include an analysis of the 

impact on health plans. 
CMS-0032-IFC 121 

• Software Vendors – Vendors are not considered covered entities under HIPAA; 

however we assume that all vendors are small entities based on their relation to providers. Based 

on our analysis in the regulatory impact analysis, we assume that the costs and benefits for 

software vendors would be the same as those for providers. 

We solicit industry comment on our above assumptions. 

In total, we estimate that there are approximately 300,000 health care organizations that 

may be considered small entities either because of their nonprofit status or because of their 

revenues. On the provider side, practices of doctors of osteopathy, podiatry, chiropractors, 

mental health independent practitioners with annual receipts of less than $7 million are 

considered to be small entities. Solo and group physicians' offices with annual receipts of less 

than $9 million (97 percent of all physician practices) are also considered small entities, as are 

clinics. Approximately 92 percent of medical laboratories, 100 percent of dental laboratories and 

90 percent of durable medical equipment suppliers are assumed to be small entities as well. The 

American Medical Billing Association (AMBA) (http://www.ambanet.net/AMBA.htm) lists 

97 billing companies on its web site. It notes that these are only ones with web sites. 

The Business Census data shows that there are 4,526 (plus Medicare, VA, and IHS) firms 

considered as health plans and/or payers responsible for conducting transactions with health care 

providers (not including State Medicaid Agencies). For purposes of the RFA, we did not 

identify a subset of small plans, and instead solicit industry comment as to the percentage of 

plans that would be considered small entities. State Medicaid agencies were also excluded from 

the analysis as well because States are not considered small entities in any Regulatory Flexibility 

Analysis. We solicit industry comment on this assumption. 
CMS-0032-IFC 122 

We identified the top 51 clearinghouses/vendors in the Faulkner and Gray health data 

directory from 2000, the last year this document was produced. Health care clearinghouses 

provide transaction processing and translation services to both providers and health plans. 

The following table outlines the estimated number of small entities utilized in the 

preparation of the initial regulatory flexibility analysis. 

TABLE 29. NUMBER OF IMPACTED SMALL ENTITIES (IN WHOLE NUMBERS) 

 

Type Number Source 

Hospitals 

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

Census, August 31, 2010 

Ambulatory health care services 

(NAICS code 6211) 547,561 

U.S. Census Bureau, Detailed Statistics, 2007 Economic 

Census, August 31, 2010 

Clearinghouses 

0 

Survey of EHNAC, HIMSS, the Cooperative Exchange, and 

the Maryland Commission for Healthcare)Assume, all 

clearinghouse are not small entities 

Health Plans (including Government 

Health Plans such as Medicare, VA 

and IHS) 

0 

Assume all health plans are not small entities 

Vendors 

(NAICS code 5415 – Computer 

design and related services) 

51 

EC EDI Vantage Point Healthcare Directory – 6th Edition 

(n=51) http://www.ec-edi.biz/content/en/dir-guest-login.asp

Health Plans – Medicaid 

0 

State Medicaid agencies were excluded from the analysis 

because States are not considered small entities in any 

Regulatory Flexibility Analysis. 

2. Cost for Small Entities 
CMS-0032-IFC 123 

To determine the impact on health care providers we used Business Census data on the 

number of establishments for hospitals and firms for the classes of providers and revenue data 

reported in the Survey of Annual Services for each NAICS code. Because each hospital 

maintains its own financial records and reports separately to payment plans, we decided to report 

the number of establishments rather than firms. For other providers, we assumed that the costs to 

implement the operating rules for eligibility for a health plan and health care claim status 

transactions would be accounted for at the level of firms rather than at the individual 

establishments. Therefore, we reported the number of firms for all other providers. 

 In the following tables, we take the information from the impact analysis and break out 

the costs for both physicians and hospitals. As stated earlier in the impact analysis, we assume 

that vendor costs will be the same as those for providers because of our assumption that vendors 

will pass along their costs in the form of increased fees to their provider clients.

As we are treating all health care providers as small entities for the purpose of the 

regulatory flexibility analysis, we allocated 100 percent of the implementation costs reported in 

the impact analysis for physicians and hospitals. Accordingly we treat all software vendors as 

small entities based on their relationship to providers and allocate the same costs. Table 30 

shows the impact of the implementation costs of operating rules as a percent of the provider 

revenues. Data on the number of entities for these tables were gathered from the 2007 census 

(http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&-fds_name=EC0700A1&-

_skip=0&-ds_name=EC0762SSSZ1&-_lang=en).We used the NAICS code 5415 computer 

system design and related services for software vendors. 
CMS-0032-IFC 124 

TABLE 30. ANALYSIS OF THE BURDEN OF IMPLEMENTATION OF OPERATING RULES ON S

ENTITIES 

NAICS 

Number Entities 

Total 

Number of 

Entities 

Number of 

Small 

Entities 

Revenues or 

Receipts 

($ in millions) 

Small Entity 

Receipts of 

Total Receipts 

(percent) 

Op Rules 

Annu

($ in mill

6211 Ambulatory health care services 547,561 547,561 668,453 100 13

622 Hospitals 6,505 6,505 702,960 100 29

5415 Computer system design and related services 105,710 105,710 297,200 100 13
CMS-0032-IFC 125 

In Column I we display the NAICS code for class of entity. Column II shows the 

number of entities that are reported in the Business Census for 2002 and Column III 

shows the number of small entities that were computed based the Business Census and 

Survey of Annual Service. As mentioned previously, we assume that all health care 

providers are small. Column IV shows revenues that were reported for 2008 in the 

Survey of Annual Services (http://www.census.gov/services/sas_data.html). Column V 

shows the percent of small entity revenues. Column VI shows the costs to providers for 

implementation of eligibility for a health plan and health care claim status operating 

rules. Column VII shows the costs allocated to the small entities based on the percent of 

small entity revenues to total revenues. 

Column VIII presents the percent of the small entity share of implementation 

costs as a percent of the small entity revenues. We have established a baseline threshold 

of 3 percent of revenues that would be considered a significant economic impact on 

affected entities. None of the entities exceeded or came close to this threshold. 

We note that the impact in our scenarios is consistently under the estimated 

impact of 3 percent for all of the entities previously listed, which is below the threshold 

we consider as a significant economic impact. As expressed in the guidance on 

conducting regulatory flexibility analyses, the threshold for an economic impact to be 

considered significant is 3 percent to 5 percent of either receipts or costs. As is clear 

from the analysis, the impact does not come close to the threshold. Thus, based on the 

foregoing analysis, we conclude that some small health care providers may encounter 
CMS-0032-IFC 126 

some burdens in the course of implementing the eligibility for a health plan and health 

care claim status operating rules. However, we are of the opinion that, for most small 

providers, the costs will not be significant, and for providers who are not HIPAA covered 

entities and do not conduct electronic health care transactions, there is no cost. 

We did not include an analysis of the impact on small health plans here, because 

we were not able to determine the number of plans that meet the SBA size standard of 

$7 million in annual receipts. 

In evaluating whether there were any clearinghouses that could be considered 

small entities, we consulted with three national associations (EHNAC, HIMSS, and the 

Cooperative Exchange), as well as the Maryland Commission for Health Care, and 

determined that the number of clearinghouses that would be considered small entities was 

negligible. 

Revenues cited on the Cooperative Exchange Web site 

(www.cooperativeexchange.org/faq.html) divided clearinghouses into three revenue 

categories—small ($10 million); medium ($10 million to $50 million) and large ($50 

million or greater). We identified the top 51 clearinghouses, and determined that they are 

typically part of large electronic health networks, such as Siemens, RxHub, Availity, GE 

Healthcare etc., none of which fit into the category of small entity. As referenced earlier, 

in a report by Faulkner and Gray in 2000, the top 51 entities were listed, and the range of 

monthly transactions was 2,500 to 4 million, with transaction fees of $0.25 per 

transaction to $2.50 per transaction. We determined that even based on this data, few of 
CMS-0032-IFC 127 

the entities would fall into the small entity category, and we do not count them in this 

analysis. 

Based on the results of this analysis, we are reasonably confident that the rule will 

not have a significant impact on a substantial number of small entities. Nevertheless, we 

are specifically requesting comments on our analysis and asking for any data that will 

help us determine the number and sizes of firms implementing the operating rules 

adopted in this interim final rule with comment period. 

We solicit industry comment on our above assumptions. 

3. Alternatives Considered 

As stated in section VII.D. of this interim final rule with comment period, we 

considered various policy alternatives to adopting operating rules, including not adopting 

operating rules, adopting another authoring entity's operating rules, or waiting for 

resolution of all outstanding technical and administrative issues before adopting the 

operating rules developed by the authoring entities. For reason cited in section VII.D. of 

this interim final rule with comment period we have determined that none of these 

options were viable. Please see section VII.D. of this interim final rule with comment 

period for a discussion of these options and why we determined they were not viable. 

4. Conclusion 

As stated in the HHS guidance cited earlier in this section, HHS uses a baseline 

threshold of 3 percent of revenues to determine if a rule would have a significant 

economic impact on affected small entities. None of the entities exceeded or came close 
CMS-0032-IFC 128 

to this threshold. Based on the foregoing analysis, we could certify that this interim final 

rule with comment would not have a significant economic impact on a substantial 

number of small entities. 

However, because of the relative uncertainty in the data, the lack of consistent 

industry data, and our general assumptions, we invite public comments on the analysis 

and request any additional data that would help us determine more accurately the impact 

on the various categories of small entities affected by this interim final rule with 

comment period. In addition, section 1102(b) of the Act requires us to prepare a 

regulatory impact analysis if a rule would have a significant impact on the operations of a 

substantial number of small rural hospitals. This analysis must conform to the provisions 

of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small 

rural hospital as a hospital that is located outside of a metropolitan statistical area and has 

fewer than 100 beds. Based on the analysis above, including that the overall costs to 

small hospitals is under the $136 million threshold, we do not believe this rule would 

have a significant impact on small rural hospitals, for the reasons stated above in 

reference to small entities. Therefore, the Secretary has determined that this interim final 

rule with comment period would not have a significant impact on the operations of a 

substantial number of small rural hospitals. 
CMS-0032-IFC 129 

M. Accounting Statement 

TABLE 31. ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED 

EXPENDITURES, FROM FY 2011 TO FY 2023 (IN MILLIONS) 

Category Primary Estimate 

(millions) 

Minimu

m 

Estimate

(millions

) 

Maximum 

Estimate 

(millions) 

Source 

Citation 

(RIA, 

preamble, 

etc.) 

BENEFITS 

Annualized Monetized 

benefits 

 

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

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

Qualitative (un-quantified) 

benefits 

Wider adoption of standards due to consistent 

use of standards and responses robust in data; 

increased productivity due to decrease in 

manual intervention requirements; avoidance of 

pended claims, claim denials, and other 

obstacles to expedited billing 

 

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

COSTS 

Annualized Monetized costs 

 7% Discount Not estimated $373 $745 RIA 

 3% Discount Not estimated $314 $627 RIA 

Qualitative (un-quantified) 

costs 

None None None 

Providers will pay costs to vendors and clearinghouses. Health plans will pay costs to software vendors, programming 

and IT staff/contractors, and clearinghouses. Clearinghouses will pay costs to programming and IT staff/contractors and 

software developers. Government will pay costs to vendors and staff. 

TRANSFERS 

Annualized monetized 

transfers: “on budget” 

N/A N/A N/A 

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

Annualized monetized 

transfers: “off-budget” 

N/A N/A N/A 
CMS-0032-IFC 130 

List of Subjects 

45 CFR Part 160 

Administrative practice and procedure, Computer technology, Health care, Health 

facilities, Health insurance, Health records, Hospitals, Medicaid, Medicare, Penalties, 

Reporting and recordkeeping requirements. 

45 CFR Part 162

Administrative practice and procedures, electronic transactions, health facilities, 

health insurance, hospitals, incorporation by reference, Medicaid, Medicare, Reporting 

and recordkeeping requirements. 
CMS-0032-IFC 131 

For the reasons set forth in this preamble, the Department of Health and Human Services 

amends 45 CFR parts 160 and 162 to read as follows: 

PART 160 – ADMINISTRATIVE DATA STANDARDS AND RELATED 

REQUIREMENTS 

1. The authority citation for part 160 is revised to read as follows:

Authority: 42 U.S.C. 1302(a), 42 U.S.C. 1320d–1320d–8, sec. 264 of Pub. L. 

104–191, 110 Stat. 2033–2034 (42 U.S.C. 1320d–2 (note)), 5 U.S.C. 552; secs. 13400 

and 13402, Pub. L. 111–5, 123 Stat. 258–263, and sec. 1104 of Pub. L. 111-148, 124 

Stat. 146-154. 

Subpart A-- General Provisions 

§160.101 [Amended] 

2. Amend §160.101 by removing the phrase “and section 13410(d) of Public Law 

111-5.” and adding in its place the phrase “section 13410(d) of Public Law 111-5, and 

section 1104 of Public Law 111-148.” 

3. Amend §160.103 by adding a paragraph (3) to the definition of "standard" to 

read as follows: 

§160.103 Definitions. 

* * * * * 

Standard * * * 

 (3) With the exception of operating rules as defined at §162.103. 

* * * * * 
CMS-0032-IFC 132 

PART 162—ADMINISTRATIVE REQUIREMENTS 

4. The authority citation for part 162 is revised to read as follows:

Authority: Secs. 1171 through 1180 of the Social Security Act (42 U.S.C. 

1320d–1320d–9), as added by sec. 262 of Pub. L. 104–191, 110 Stat. 2021–2031, sec. 

105 of Pub. L. 110–233, 122 Stat. 881–922, and sec. 264 of Pub. L. 104–191, 110 Stat. 

2033–2034 (42 U.S.C. 1320d–2(note), and secs. 1104 and 10109 of Pub. L. 111-148, 124 

Stat. 146-154 and 915-917. 

Subpart A--General Provisions 

 5. Amend §162.103 as follows: 

 A. Adding the definition of "operating rules". 

 B. Revising the definition of "standard transaction". 

 The revision and addition read as follows: 

§162.103 Definitions. 

* * * * * 

Operating rules means the necessary business rules and guidelines for the 

electronic exchange of information that are not defined by a standard or its 

implementation specifications as adopted for purposes of this part. 

* * * * * 

Standard transaction means a transaction that complies with an applicable 

standard and associated operating rules adopted under this part. 

Subpart I--General Provisions for Transactions 
CMS-0032-IFC 133 

 6. Amend §162.915 by revising paragraph (a) to read as follows: 

§162.915 Trading partner agreements. 

* * * * * 

(a) Change the definition, data condition, or use of a data element or segment in a 

standard or operating rule, except where necessary to implement State or Federal law, or 

to protect against fraud and abuse. 

* * * * * 

 7. Amend §162.920 as follows: 

 A. Revising the section heading and introductory text. 

 C. Adding paragraph (c). 

The revisions and addition read as follows: 

§162.920 Availability of implementation specifications and operating rules.

Certain material is incorporated by reference into this subpart with the approval of 

the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. To 

enforce any edition other than that specified in this section, the Department of Health and 

Human Services must publish notice of change in the Federal Register and the material 

must be available to the public. All approved material is available for inspection at the 

National Archives and Records Administration (NARA). For information on the 

availability of this material at NARA, call (202) 714–6030, or go to: 

http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html
CMS-0032-IFC 134 

. The materials are also available for inspection by the public at the Centers for Medicare 

& Medicaid Services (CMS), 7500 Security Boulevard, Baltimore, Maryland 21244. For 

more information on the availability on the materials at CMS, call (410) 786–6597. The 

materials are also available from the sources listed below. 

* * * * * 

(c) Council for Affordable Quality Healthcare's (CAQH) Committee on 

Operating Rules for Information Exchange (CORE), 601 Pennsylvania Avenue, NW 

South Building, Suite 500 Washington, DC 20004; Telephone (202) 861-1492; Fax (202) 

861- 1454; E-mail info@CAQH.org; and Internet at http://www.caqh.org/benefits.php. 

(1) CAQH, Committee on Operating Rules for Information Exchange, CORE 

Phase I Policies and Operating Rules, Approved April 2006, v5010 Update March 2011.. 

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

Rule, version 1.1.0, March 2011, as referenced in § 162.1203. 

(ii) Phase I CORE 153: Eligibility and Benefits Connectivity Rule, version 1.1.0, 

March 2011, as referenced in § 162.1203. 

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

version 1.1.0, March 2011, as referenced in § 162.1203. 

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

version 1.1.0, March 2011, as referenced in § 162.1203. 

(v) Phase I CORE 156: Eligibility and Benefits Real Time Response Time Rule, 

version 1.1.0, March 2011, as referenced in § 162.1203. 
CMS-0032-IFC 135 

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

version 1.1.0, March 2011, as referenced in § 162.1203. 

(2) ACME Health Plan, HIPAA Transaction Standard Companion Guide, Refers 

to the Implementation Guides Based on ASC X12 version 005010, CORE v5010 Master 

Companion Guide Template, 005010, 1.2, (CORE v 5010 Master Companion Guide 

Template, 005010, 1.2), March 2011, as referenced in §§ 162.1203 and 162.1403. 

(3) CAQH, Committee on Operating Rules for Information Exchange, CORE 

Phase II Policies and Operating Rules, Approved July 2008, v5010 Update March 2011. 

(i) Phase II CORE 250: Claim Status Rule, version 2.1.0, March 2011, as 

referenced in § 162.1403. 

(ii) Phase II CORE 258: Eligibility and Benefits 270/271 Normalizing Patient 

Last Name Rule, version 2.1.0, March 2011, as referenced in § 162.1203. 

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

Reporting Rule, version 2.1.0, March 2011, as referenced in § 162.1203. 

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

version 2.1.0, March 2011, as referenced in § 162.1203. 

(v) Phase II CORE 270: Connectivity Rule, version 2.2.0, March 2011, as 

referenced in § 162.1203 and § 162.1403. 

Subpart L--Eligibility for a Health Plan 

 8. Adding a new §162.1203 to read as follows: 

§162.1203 Operating rules for eligibility for a health plan transaction. 
CMS-0032-IFC 136 

On and after January 1, 2013, the Secretary adopts the following: 

(a) Except as specified in paragraph (b) of this section, the following CAQH 

CORE Phase I and Phase II operating rules (updated for Version 5010) for the eligibility 

for a health plan transaction: 

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

Rule, version 1.1.0, March 2011, and CORE v5010 Master Companion Guide Template. 

(Incorporated by reference in § 162.920). 

 (2) Phase I CORE 153: Eligibility and Benefits Connectivity Rule, version 1.1.0, 

March 2011. (Incorporated by reference in § 162.920). 

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

version 1.1.0, March 2011. (Incorporated by reference in § 162.920). 

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

version 1.1.0, March 2011. (Incorporated by reference in § 162.920). 

 (5) Phase I CORE 156: Eligibility and Benefits Real Time Response Rule, 

version 1.1.0, March 2011. (Incorporated by reference in § 162.920). 

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

version 1.1.0, March 2011. (Incorporated by reference in § 162.920). 

 (7) Phase II CORE 258: Eligibility and Benefits 270/271 Normalizing Patient 

Last Name Rule, version 2.1.0, March 2011. (Incorporated by reference in § 162.920). 

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

Reporting Rule, version 2.1.0. (Incorporated by reference in § 162.920). 
CMS-0032-IFC 137 

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

version 2.1.0, March 2011. (Incorporated by reference in § 162.920). 

 (10) Phase II CORE 270: Connectivity Rule, version 2.2.0, March 2011. 

(Incorporated by reference in § 162.920). 

(b) Excluding where the CAQH CORE rules reference and pertain to 

acknowledgements and CORE certification. 

Subpart N--Health Care Claim Status 

9. Add §162.1403 to read as follows: 

§162.1403 Operating rules for health care claim status transaction. 

On and after January 1, 2013, the Secretary adopts the following: 

(a) Except as specified in paragraph (b) of this section, the following CAQH 

CORE Phase II operating rules (updated for Version 5010) for the health care claim 

status transaction: 

 (1) Phase II CORE 250: Claim Status Rule, version 2.1.0, March 2011, and 

CORE v5010 Master Companion Guide, 00510, 1.2, March 2011. (Incorporated by 

reference in § 162.920). 

 (2) Phase II CORE 270: Connectivity Rule, version 2.2.0, March 2011. 

(Incorporated by reference in § 162.920). 

(b) Excluding where the CAQH CORE rules reference and pertain to 

acknowledgements and CORE certification. 
CMS-0032-IFC 

Dated: __May 26, 2011__________ 

 

 ___________________________________ 

Donald M. Berwick, 

Administrator. 

Centers for Medicare & Medicaid Services. 

Dated: June 29, 2011

 ___________________________________ 

Kathleen Sebelius, 

Secretary, 

Department of Health and Human Services. 

BILLING CODE: 4120-01-P 
CMS-0032-IFC 

[FR Doc. 2011-16834 Filed 06/30/2011 at 2:00 pm; Publication Date: 07/08/2011]