Source: https://www.federalregister.gov/documents/2005/11/25/05-23080/medicare-program-electronic-submission-of-medicare-claims
Timestamp: 2018-07-17 04:42:39
Document Index: 514554801

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70 FR 71008
71008-71020 (13 pages)
CMS-0008-F
05-23080
D. Unusual Cases
B. Determining Small Provider Status
C. Contingency for Paper Billers
D. Definition of Initial Medicare Claim
F. Unusual Cases
G. Testing With Medicare
H. Impact of HIPAA Standards
J. Costs To Convert From the Submission of “Paper Claims” to “Electronic Claims”
K. Outside the Scope of This Rule
https://www.federalregister.gov/d/05-23080 https://www.federalregister.gov/d/05-23080
Effective date: These regulations are effective on December 27, 2005.
Section 3 of the Administrative Simplification Compliance Act (ASCA), Pub. L. 107-105, was enacted by the Congress to improve the administration of the Medicare Program by facilitating program efficiencies gained through the electronic submission of Medicare claims. Section 3 of ASCA amends subsection (a) of section 1862 of the Social Security Act (the Act) (42 U.S.C. 1395y(a)) and adds a new subsection (h) to section 1862 (42 U.S.C. 1395y). The amendment to subsection (a) requires the Medicare Program, subject to subsection (h), to deny payment under Part A or Part B for any expenses for items or services “for which a claim is submitted other than in an electronic form specified by the Secretary.” Subsection (h) provides that the Secretary shall waive such denial in two types of cases and may also waive such denial “in such unusual cases as the Secretary finds appropriate.”
The HIPAA standards apply to health plans, health care clearinghouses, and certain health care providers; collectively, these entities are known as “covered entities.” An additional category of covered entities—prescription drug card sponsors—was added by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Pub. L. 108-173. Covered entities are required to comply not only with the standards established by the Transactions Rule, but also with those established via other HIPAA Administrative Simplification rules—such as the Privacy Rule, the Employer Identifier Rule, the Security Rule, and the National Provider Identifier Rule—by the respective applicable compliance dates specified in those rules.
Approximately 86.1 percent of claims submitted to the Medicare Program are submitted electronically, which means that approximately 139 million claims are submitted on paper per year (fiscal year (FY) 2002). Section 3 of ASCA required Medicare providers to submit Medicare claims electronically by October 16, 2003, unless one of the specified grounds for waiver applies. As the October 16, 2003 deadline approached, we made the decision to implement our own contingency plan after reviewing statistics showing that an unacceptably low number of Medicare providers would likely be capable of submitting compliant claims Start Printed Page 71009by the compliance date. Concerned that many of its trading partners were still completing their transition to HIPAA-compliant transactions, Medicare implemented a contingency plan permitting the submission and processing of claims in electronic formats that were then in use and giving providers additional time to complete the testing processes. Neither CMS's contingency plan for Medicare nor HHS's enforcement guidance modified the October 16, 2003 compliance date for HIPAA transactions.
We considered whether the amendment to section 1862(a) of the Act in section 3 of ASCA could be interpreted to apply to payments made by Medicare + Choice (M+C) organizations to providers for services provided to Medicare beneficiaries. (Note: The MMA, enacted December 8, 2003, changed and renamed M+C to Medicare Advantage. For discussion purposes and to remain consistent with the interim final rule, the term “M+C” will continue to be used in this preamble.) The question was raised by the provision in section 4 of ASCA that expressly adds Medicare Part C, found in Part C of Title XVIII, to the definition of Medicare “health plans” found in section 1171(5)(D) of the Act.
The plain language of section 1862(a) of the Act, however, provides that “payment may not be made under Part A or Part B” for a number of activities. The Congress could have amended this provision, just as it amended section 1171(5) of the Act, if it had wanted to prohibit M+C organizations from paying for claims for services given to M+C enrollees by the M+C organization's participating providers if those claims were not submitted electronically. The fact that it did not so amend this provision indicates that it did not intend to apply the ASCA payment prohibition to the M+C organizations. The Congress's intent to apply the broader definition of “health plan” in section 4 of ASCA solely to the Administrative Simplifications provisions of HIPAA and not to the electronic submission requirement for Medicare claims is further suggested by the title of section 4 of ASCA: “Clarification with Respect to Applicability of Administrative Simplification Requirement to M+C Organizations.”
The interim final rule added a new paragraph (d) to § 424.32. Section 424.32(d)(1) specified the following definitions for the purposes of paragraph (d): Claim; electronic claim; direct data entry; electronic media; initial Medicare claim; physician, practitioner, facility, or supplier; provider of services; and small provider of services or small supplier. We defined “claim” to mean the transaction defined at 45 CFR 162.1101(a) (that is, “health care claim”). We specified the definition of “electronic claim” to mean a claim that is submitted via electronic media. In addition, we specified that the definitions of “direct data entry” and “electronic media” are defined as those terms are defined in 45 CFR 162.103 and 160.103, respectively.
In § 424.32(d)(1)(v) of the interim final rule, we defined an “initial Medicare claim” as a claim submitted to Medicare for payment under Part A or Part B of the Medicare Program for the first time for processing, including claims sent to Start Printed Page 71010Medicare for the first time for secondary payment purposes. This definition also specified that an initial Medicare claim excludes any adjustment or appeal of a previously submitted claim. This final rule adds the phrase “for initial processing” to the definition of “initial Medicare claim” to clarify that the requirement for electronic submission applies to claims that have been previously rejected before being accepted into the Medicare processing system.
In § 424.32(d)(1)(vi), we defined a “physician, practitioner, facility, or supplier” as a Medicare provider other than a provider of services. The final rule adds the words “or supplier” to make the definition precise, so that the term is defined as “a Medicare provider or supplier other than a provider of services.” In § 424.32(d)(1)(vii), we defined a “provider of services” as a provider of services as defined in section 1861(u) of the Act. In § 424.32(d)(1)(viii), we defined a “small provider of services or small supplier” as a provider of services with fewer than 25 full-time equivalent employees; or a physician, practitioner, facility, or supplier (other than provider of services) with fewer than 10 full-time equivalent employees.
In § 424.32(d)(2), we specified that, except for claims to which § 424.32(d)(3) or (d)(4) applies, an initial Medicare claim under Part A or Part B or both may be paid only if submitted as an electronic claim for processing by the Medicare FI or carrier that serves the physician, practitioner, facility, supplier, or other health care provider. This requirement does not apply to any other transactions, including adjustment or appeal of the initial Medicare claim.
The regulations at 45 CFR 162.923 state that, “except as otherwise provided in this part, if a covered entity conducts with another covered entity (or within the same covered entity), using electronic media, a transaction for which the Secretary has adopted a standard under this part, the covered entity must conduct the transaction as a standard transaction.” HIPAA does not require that a health plan be able to accept claims via every type of electronic media, only that claims received via such media comply with the standard format and content requirements of HIPAA (www.wpc-edi.com/​HIPAA). The reference in section 3 of ASCA to the filing of claims “in electronic form” does not dictate the use of a particular electronic form. Thus, the Medicare program will continue to accept only those forms identified in Chapter 24 of the Medicare Internet Only Claims Processing Manual (IOM Pub. L. 100-04) that we issue. At present, Medicare does not accept claims via the Internet, an extranet or, in many cases, via removable/transportable storage media. This final rule does not change this Medicare policy. The interim final rule stated that an advance notice of any future plans for expansion or contraction in the electronic media accepted for submission of Medicare claims would be published in Medicare program instructions and via routine contractor notification and instructional media.
The ASCA provided for exceptions to the requirement for mandatory electronic submission of Medicare claims. In accordance with ASCA, the interim final rule established that the Secretary of HHS could waive the application of the electronic claim requirement in specific cases. To implement the statutory mandate, we provided more explicit requirements that are specified in § 424.32(d). Specifically, § 424.32(d)(3) states that there are two exceptions to electronic submission of initial Medicare claims.
The first exception, specified in § 424.32(d)(3)(i), applies when there is no method available for the submission of an electronic claim. For example, we could not reasonably expect Medicare beneficiaries to submit electronic claims. Even though the statute requires, with very few exceptions, that providers of health care bill Medicare on behalf of a beneficiary (sections 1814(a) and 1848(g)(4) of the Act), some beneficiaries will still submit claims to Medicare. However, those relatively few beneficiaries who submit claims are not likely to possess the capability to submit a HIPAA compliant claim. Further, there are situations in which the standard adopted by the Secretary at 45 CFR 162.1102 does not support all of the information necessary for payment of the claim. We identified three other situations that fall into this category:
The second exception, described in § 424.32(d)(3)(ii), provided that electronic submission would be waived when the entity submitting the claim is a small provider of services or small supplier. The statute is quite specific as to the size requirements, and the interim final rule simply incorporated the statutory requirements. This final rule Start Printed Page 71011makes a slight technical revision, in order to use a defined term consistently.
In the interim final rule, we established that the Secretary may waive the electronic submission requirement in certain unusual situations as the Secretary finds appropriate. In § 424.32(d)(4), we specified that such an exception would exist in the following three situations:
The interim final rule specified that entities would not generally need to make a special request to determine whether an exception applies that would make them eligible for a mandatory waiver under § 424.32(d)(3) or a discretionary waiver under § 424.32(d)(4). A special request would have to be submitted to a Medicare FI or carrier when an entity did not meet the mandated exceptions at § 424.32(d)(3), or the specified discretionary waiver criteria at § 424.32(d)(4)(i) and (d)(4)(ii), but believed there were other extraordinary circumstances that precluded its submission of electronic claims. We also proposed to issue program guidance to Medicare FIs and carriers to enable them to handle, on a case-by-case basis, requests for relief in extraordinary circumstances. This program guidance was issued on December 19, 2003 (Transmittal 44, CR 2966, Instructions for the Mandatory Electronic Submission of Medicare Claims), and may be found at www.cms.hhs.gov/​manuals/​. Publication of this final rule will result in some changes to Transmittal 44, CR 2966, which will be reissued following publication of this final rule.
This final rule adds two more unusual situations under § 424.32(d)(4) for which an exception would exist. Specifically, the requirement to submit electronic claims may be waived when the entity submitting the claim (1) submits, on average, less than 10 claims per month, or (2) furnishes services only outside of the U.S. territory. See our response to comments in section III of this preamble for further discussion regarding these additional exceptions.
In accordance with section 3(b) of ASCA, we specified, in § 424.32(d)(5) of the regulations, that the effective date for these amendments would be for claims submitted on or after October 16, 2003.
We received 17 timely public comments on the August 15, 2003 interim final rule. Based upon some of the comments we received from members of the health care provider community who bill Medicare, there remain questions about Medicare's electronic claim submission requirement and how this rule applies in certain situations. Additional information was provided through Medicare manual instructions to FIs and carriers (Transmittal 44, CR 2966, December 19, 2003, which may be found at www.cms.hhs.gov/​manuals/​). Several providers are uncertain about how to determine if they meet the definition of “small provider of services or small supplier,” especially when deciding who should be included in the “full time equivalent” (FTE) employee calculation. Furthermore, some providers have questions concerning whether they are required to submit a request to HHS for a small provider waiver, which would allow them to continue submitting their claims to Medicare on paper.
Response: Providers who in good faith believe they qualify as “small providers of services or small suppliers” automatically qualify for the small provider waiver unless, upon subsequent review, the Department determines that the waiver requirements in fact are not met. In that case, if the Department finds that none of the exceptions applies, the provider must submit all claims to Medicare electronically. Providers must assess their own situation and determine for themselves whether they meet the small provider criteria.
Small providers of services and small suppliers may elect to submit some of their claims to Medicare electronically, and some claims on paper. Submission of some claims electronically does not revoke or cancel their status as a small provider of services or small supplier, Start Printed Page 71012nor obligate them to submit all of their claims electronically. (More information about this will be published through the Medicare contractors. The first in a series of publications was Transmittal 44, CR 2966 dated December 19, 2003.)
Comment: Several commenters requested additional guidance on the term “FTE,” including direction on who is considered an FTE and how the number of FTEs should be calculated for a small provider of services or small supplier. One commenter suggested that only clinical staff should be included in the FTE count. Other commenters believe owners of practices should not count toward the FTE total.
Response: ASCA and its implementing regulation do not modify pre-existing laws or employer policies defining full-time employment. Employers have established policies and practices, subject to State and Federal laws, which define “full-time equivalent” and provide methods for calculating the number of hours their employees must work on average on a weekly, biweekly, monthly, or yearly basis to constitute a “full-time equivalent” employee. Some employers classify employees who work an average of 32 hours per week as one FTE, whereas other employers consider only employees who work 35 to 40 hours per week on average as one FTE. An employee who works an average of 40 or more hours a week would virtually always be considered full-time and one FTE, but employees who work fewer hours weekly could also be considered full-time and one FTE according to the policies of, and laws applicable to, a different employer.
Everyone on staff for whom a health care provider withholds taxes and files reports with the Internal Revenue Service (IRS) using an Employer Identification Number (EIN) is considered an employee including, if applicable, the physician(s) who owns a practice and provides hands-on services, and those support staff who do not furnish health care services but do retain records of, perform billing for, order supplies related to, provide personnel services for, and otherwise perform support services to enable the provider to function. Unpaid volunteers would not be considered employees for purposes of calculating FTEs. Individuals who perform services under independent contract for a provider, such as individuals employed by a billing agency or medical placement service, for whom a provider does not withhold taxes, are not considered members of a provider's staff for FTE calculation purposes when determining whether a provider of services or supplier can be considered as “small” for electronic billing waiver purposes.
Medical staff members may sometimes work part-time, or may work full-time but their time is split among multiple providers. Part-time employee hours must also be counted when determining the number of FTEs employed by a provider. For example, if a provider has a policy that anyone who works at least 35 hours per week on average qualifies as full-time (that is, as one FTE), and has five full-time employees and seven part-time employees, each of whom works 25 hours a week, that provider would have ten FTEs (5+[7 × 25 = 175 divided by 35 = 5]).
Neither unpaid volunteers nor individuals that perform services for a provider under independent contract, such as individuals employed by a billing agency or medical placement service, for whom a provider does not withhold taxes, should be considered toward an entity's FTE count when determining if a provider of services or supplier can be considered as “small” for electronic billing waiver purposes.
Response: The ASCA enacted on December 27, 2001 (Pub. L. 107-105) Start Printed Page 71013requires the electronic submission of Medicare claims in an electronic form specified by the Secretary of the HHS. The statute waives this requirement only in limited situations, which are detailed in § 424.32 of this regulation. The “electronic form” specified by the Secretary generally means the electronic transactions and code sets standards adopted as part of the HIPAA as detailed in 45 CFR parts 160 and 162.
Comment: One commenter expressed concerns that Medicare would not be able to handle an increase in paper claims submission if a larger portion of providers eligible for the “small provider of services or supplier” waiver opted to continue, or drop back to, paper claims submission.
We received a number of comments related to our definition of “initial Medicare claim.” In the interim final rule, this term was defined in § 424.32(d)(1)(v) as a claim submitted to Medicare for payment under Part A or Part B of the Medicare program for the first time for processing, including for secondary payment purposes. Some disagree with our decision to require electronic submission of Medicare Secondary Payer (MSP) claims. We have responded to comments submitted on this definition below and provided added clarity. Some commenters also expressed concerns with their ability to submit an electronic MSP claim with a paper attachment.
Comment: One commenter expressed concerns with our inclusion of a claim sent to Medicare for secondary payment (MSP) purposes in our definition of “initial Medicare claim.” They argued that although primary claims and MSP claims use the same HIPAA 837 standard, the HIPAA regulations make a distinction between the two transactions and, as a result, MSP claims should be treated differently than other Medicare claims.
Response: While MSP claims were not specifically highlighted, the statutory language does not exclude them from consideration as initial Medicare claims. Furthermore, we do not believe that MSP claims should be treated as a different type of claims transaction for purposes of Medicare electronic claims submission, because submission of a secondary claim would still constitute an initial submission of a claim to Medicare. Therefore, we have interpreted the statute to mean they must not be excluded from the electronic submission requirement. Our definition of an “initial Medicare claim” is consistent with this interpretation.
Claims submitted to Medicare when there is more than one primary payer must be submitted on paper as it is difficult to submit service level data for more than one primary payer electronically at this time. The only alternative is for providers to submit those claims to Medicare on paper with copies of the explanation of benefits (EOBs)/remittance advices (RAs) from the primary payers attached.
Response: Transmittal 44, CR 2966, December 19, 2003, required Medicare contractors to issue further guidance to providers and submitters on the Start Printed Page 71014submission of electronic claims when there are paper attachments. Providers and submitters who experience difficulty getting their electronic claims that have paper attachments processed must first contact their Medicare contractor. If problems persist, providers and submitters are encouraged to contact their regional CMS office to troubleshoot these issues. Phone numbers for Medicare contractors and CMS regional offices can be found on our Web site at: http://www.cms.hhs.gov/​physicians/​default.asp.
While commenters expressed their support for electronic claims submission, they were also pleased with the flexibility afforded by the outlined exceptions, which permit continued paper claims submission such as in the case of roster vaccinations billing and certain Medicare demonstration claims. We received a number of comments on “unusual cases,” asking for further clarity.
Comment: One commenter stated the interim final rule was unclear concerning whether paper claims would be allowable after the compliance deadline. The commenter proposed designating the HIPAA transition period to a largely electronic submission environment for Medicare, an “unusual case.”
Response: The “unusual case” provision is intended to operate as an exception to a situation in which Medicare providers are generally submitting claims electronically. The commenter, however, proposes making the exception to be the norm, which would appear to be contrary to what the Congress intended.
Response: We have interpreted an “unusual case” exception to be one applied to a temporary situation outside of a provider's control that effectively precludes electronic submission of claims. For a situation to fall under an “unusual case” exception, the circumstances must be truly out of the ordinary and they must genuinely prevent the provider from complying with the applicable electronic submission requirement.
Based on comments received and our assessment of the reasonableness of an entity's ability to comply, we have identified the following two additional “unusual case” situations we consider to be eligible for a waiver under § 424.32(d)(4). First, an unusual case is deemed to exist when an entity submits fewer than 10 claims to Medicare per month on average. We believe entities that submit such low volumes of Medicare claims are “unusual cases” in that the volume does not support mandating the acquisition of hardware/software to submit claims electronically. The exception for small providers indicates to us the Congress's intention that the electronic submission requirement not apply to providers for whom the electronic submission requirement of claims would be truly burdensome. This would be the case for providers who submit fewer than 10 claims per month, as the cost of converting their billing systems for so few claims would be uneconomic. If the volume increases, then electronic claim submission would be required, unless another exception applies. This is self-assessable and the entity need not submit a waiver request. Second, it is deemed to be an unusual case when the entity submitting a claim furnishes services only outside of the U.S. territory. The HIPAA transactions and code sets standards are consensus-based, American National Standards Institute (ANSI)-accredited standards that rely upon hardware and software that meet certain specifications, which may not be readily available outside of the U.S. territory. We believe that entities furnishing services solely outside of the U.S. in many cases could not properly submit electronic claims. Moreover, we think those entities are few in number and truly constitute an unusual case. This is also self-assessable and the entity need not submit a waiver request. Section 424.32(d)(4) is revised to include these two additional “unusual case” situations.
Instructions to the Medicare contractors that describe how to go about requesting an “unusual case” waiver were issued December 19, 2003 (Transmittal 44, CR 2966).
Response: We are considering these suggestions; however, claims submission for roster billing for vaccinations is still considered exempt from the electronic claims submission requirement. To the extent certain Medicare contractors' software permits electronic submission of roster bills, we Start Printed Page 71015encourage providers to use it; however, it is not required.
We have issued instructions to the Medicare contractors that describe in greater detail how this regulation is operationalized, including instructions for requesting an “unusual case” waiver (refer to Transmittal 44, CR 2966, dated December 19, 2003). In addition, Medicare contractors will be instructed to include information on their provider Web sites and in their newsletters that addresses these and other issues pertinent to operationalization of the regulation.
Comment: Another commenter suggested we find an alternate term for “audit” when discussing enforcement.
Response: We accept this comment; therefore, in the future we will reference the Secretary's ability to “audit” an entity as the ability to “review” an entity for compliance. In addition, the preliminary enforcement process will be conducted on a prospective basis and will focus on providers that appear to be submitting extraordinarily high numbers of paper claims. If a review establishes that a provider is submitting paper claims without properly qualifying for a waiver, the provider will be notified that any paper claims submitted after a certain date will be rejected by Medicare. However, providers will be afforded a reasonable amount of time under the circumstances to come into compliance with the electronic claim submission requirement.
Due to the high number of Medicare claims already submitted electronically and the waivers issued for “small providers,” moderately sized providers are most likely to be affected by this requirement. While we do agree that a provider's staff will need some time to become fully familiar and proficient with the use of the free/low cost Medicare billing software, a physician's office (which presently submits claims on paper) can purchase hardware to enable compliance with this requirement for less than $1,000. Although the electronic conversion will not be reimbursed, we continue to believe that we have tried to provide the most economical software for providers, and we will even provide free technical support on the installation and usage through our Medicare contractors.
Response: Although we appreciate the commenter's concerns, nursing service claim reimbursement was not covered Start Printed Page 71016in the August 15, 2003 interim final rule. Therefore, we are unable to address this concern in this final regulation.
With some minor editing and modification to include two additional “unusual cases” for an automatic exception and changed “unusual circumstances” to “unusual cases”, we are adopting all of the provisions set forth in the August 15, 2003 interim final rule as final.
0938-0008, Common Claim form, instructions, and supporting regulations at § 414.40, § 424.32, and § 414.40, with an annual burden of 44,189,007 hours (form CMS-1500). The current approval expires 3/31/06.
As required by section 3504(h) of the PRA of 1995, we have submitted a copy of the revision to § 424.32 to OMB for its review of the information collection requirements. The revision is not effective until OMB has approved it.
Executive Order 12866 directs 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). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This is not a major rule. While additional costs will be imposed on those entities that do not meet any of the exception requirements and which must purchase the capability to bill Medicare electronically, we estimate the impact to be less than $100 million. Our estimates of the cost impact are based on the following analysis. (Note: The primary sources of data contained herein are the Medicare Program's “Contractor Reporting of Operational Workload Data” (CROWD), the “2002 CMS Statistics” Handbook, and the Year Start Printed Page 710172000 “Statistics of U.S. Business” issued by the U.S. Census Bureau.)
The Administrative Simplification provisions under HIPAA establish the standards for electronic data transmission when transactions are conducted electronically, but they do not require physicians, practitioners, facilities, suppliers, and other health care providers to transmit claims and other transactions electronically. ASCA, however, does require Medicare physicians, practitioners, facilities, suppliers, and other health care providers (except those for which this rule provides for an exception) to submit claims electronically to Medicare. Consequently, Medicare claims must be submitted in the HIPAA-prescribed electronic format. Thus, this rule will only have an impact on that group of entities that now submit paper claims to the Medicare Program and that do not fall into one of the excepted groups.
The Census figures did not include each of the same provider, physician, practitioner, and supplier breakouts as tracked by Medicare's statistics, but the Census figures did include the largest provider, physician, practitioner, and supplier types. The Census figures included 90 percent of all Medicare providers, physicians, practitioners, and suppliers by type. The provider types, tracked differently by the Census Bureau and us, include regional referral centers, Christian Science Sanitoria, rural health clinics, critical access facilities, and hospices. The “2002 CMS Statistics” directory (number of providers) and the 2000 Census data health care establishment totals (percentage of providers with less than 20 employees) reported the following:
As there was a 10 percent difference between the Census provider, physician, practitioner, and supplier types and the Medicare provider types, due to differences in type of collection, the numbers impacted would need to be increased by 10 percent to account for the difference. Increased by 10 percent, approximately 11,032 (31.4 percent) of all Medicare providers, and 753,853 (66.1 percent) of all Medicare physicians, practitioners, and suppliers Start Printed Page 71018could qualify for an exception of the electronic claim-filing requirement based on provider size, leaving approximately 24,126 providers and 386,692 physicians, practitioners, and suppliers (a total of 410,818) potentially affected by the ASCA Medicare requirement nationally.
Statistics collected for PRA clearance of the Medicare paper claim forms and referenced in the “Collection of Information Requirements” section of this preamble indicate that, in the absence of a mandatory electronic claim requirement effective for FY 2004, 2.5 million paper claims are expected to be sent to Medicare intermediaries and 133.7 million paper claims are to be sent to Medicare carriers.
Prior to HIPAA, many Medicare providers used billing agents or clearinghouses to bill the Medicare program. Many providers, physicians, practitioners, and suppliers that submitted paper claims indicated anecdotally that they used paper as they would rather avoid the “hassle” of dealing with the multiple electronic claim formats required by payers, and the need to have staff keep abreast of the updates to those formats. HIPAA largely eliminates format differences among payers, but there will always be differences concerning use of certain “situational” segments and data elements in the formats. It is reasonable to assume that up to half (205,409 × 50 percent = 102,704) of those entities that do not submit claims to Medicare electronically today would prefer to contract with a third party to deal with such differences on their behalf.
A small sampling of Medicare contractors indicated an average cost of $0.30 per claim for billing agent and clearinghouse services. The total cost to physicians, practitioners, facilities, suppliers, and other health care providers to use a billing agent or clearinghouse should not be more than $7,055,895 (that is, $.30 × {the sum of 2.5 million paper claims sent to intermediaries as estimated previously for FY 2004 multiplied by the 68.6 percent of providers that would not meet the exception criteria, plus 133.7 million paper claims estimated to be sent to carriers multiplied by the 33.9 percent of physicians, practitioners, and suppliers that would not meet the exception criteria}).
Finally, in regard to the balance of 102,704 (205,409 × 50 percent) providers, physicians, practitioners, and suppliers that would not be expected to meet the criteria to submit paper claims, we conservatively estimate that approximately 75 percent of these already own personal computers that are used to prepare the paper claim forms they currently submit to Medicare. Very few hand-written or manually typed claims are submitted to Medicare. Although many paper claim submitters have not used personal computers for electronic billing, they have used them for claims preparation, patient scheduling, and other aspects of their practice.
We note that the Transaction Final Rule (65 FR 50353 through 50359) used a 10-year timeframe to capture the full extent of costs and savings that could be attributed to the use of the transactions adopted under HIPAA. Data from the 2000 edition of Faulkner and Gray's “Health Data Directory,” from a Workgroup for Electronic Data Interchange study report, and from the Department of Labor was used in those calculations to determine total claims in the health care industry, costs to use the transactions electronically, savings expected to be realized, the historical growth rate for claims overall as well as electronic claims, the percentage of electronic health care claims nationally in 2000, and the anticipated inflation rate for the 10-year period.
The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. According to the Small Business Administration's (SBA's) data, approximately 95 percent of offices of physicians are considered small businesses (see the Small Business Administration's final rule titled “Small Business Size Standards, Health Care,” published in the Federal Register on November 17, 2000, 65 FR 69432). Most practitioners, facilities, suppliers, and other providers are small entities either because of nonprofit status or because of having revenues of $6 million to $29 million or less in any 1 year. For purposes of the RFA, all physicians, practitioners, facilities, suppliers, and other health care providers that serve Medicare beneficiaries are considered to be small entities. However, as stated earlier, this rule in and of itself does not impose a regulatory burden. The ASCA mandates most aspects of this rule, in particular, the ASCA requires Medicare providers to submit claims electronically and stipulates the exceptions that will and may be granted. We did have discretion however, in setting conditions for exceptions, and believe these exceptions reduce the burden relative to the burden Start Printed Page 71019that may have been imposed by ASCA without this implementing regulation. If this final rule has an average annual impact that exceeds 3 to 5 percent of total costs or revenues, it would be considered significant according to the Department of Health and Human Services (HHS) Guidelines. However, at a cost of $750 per computer and savings of $615 ($750-$615), we expect this to fall significantly below the revenue rule given by the HHS. Therefore, we have determined that this rule will not have a significant economic impact on a substantial number of small entities. Individuals and States are not considered small entities. Therefore, no regulatory relief options are considered.
For the reasons set forth in the preamble, the interim rule amending 42 CFR part 424 that CMS published on August 15, 2003 (68 FR 48805) is adopted as a final rule with the following amendments:
End Amendment Part Start Part Start Printed Page 71020
2. Amend § 424.32 by—
A. Revising paragraphs (d)(1)(v); (d)(1)(vi); (d)(3)(ii), and (d)(4) introductory text.
B. Redesignating (d)(4)(iii) as paragraph (d)(4)(v).
C. Adding paragraphs (d)(4)(iii) and (iv).
(vi) Physician, practitioner, facility, or supplier is a Medicare provider or supplier other than a provider of services.
(4) Unusual cases. The Secretary may waive the requirement of paragraph (d)(2) of this section in unusual cases as the Secretary finds appropriate. Unusual cases are deemed to exist in the following situations: