[Federal Register: August 15, 2003 (Volume 68, Number 158)]
[Rules and Regulations]
[Page 48805-48813]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15au03-11]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 424
[CMS-0008-IFC]
RIN 0938-AM22
Medicare Program; Electronic Submission of Medicare Claims
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period implements the
statutory requirement that claims for reimbursement under the Medicare
Program be submitted electronically as of October 16, 2003,except where
waived. This rule identifies those circumstances for which mandatory
submission of electronic claims to the Medicare Program is waived.
DATES: Effective date: October 16, 2003. These regulations are
applicable for Medicare claims submitted on or after October 16, 2003.
Comment date: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on October
14, 2003.
ADDRESSES: In commenting, please refer to file code CMS-0008-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail. Mail written comments (one
original and three copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-0008-IFC, P.O. Box 8010, Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays. If you prefer, you may
deliver (by hand or courier) your written comments (one original and
three copies) to one of the following addresses: Room 445-G, Hubert H.
Humphrey (HHH) Building, 200 Independence Avenue, SW., Washington, DC
20201, or Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-
8010.
(Because access to the interior of the HHH 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 commenters wishing to retain a proof of filing by
stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed, and could be considered untimely.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Kathleen Simmons, (410) 786-6157.
Stewart Streimer, (410) 786-9318.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
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, contact Sharon Jones (410) 786-9994.
Copies: Additional copies of the Federal Register containing this
interim final rule with comment period can be made at most libraries
designated as Federal Depository Libraries and at many other public and
academic libraries throughout the country that receive the Federal
Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
I. Background
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
[[Page 48806]]
the Medicare Program, subject to subsection (h), to deny payment under
Part A or Part B for 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.''
Section 3 of ASCA operates in the context of the Administrative
Simplification provisions of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), Pub. L. 104-191. Those provisions
require the Secretary to adopt, among other standards, standards for
financial and administrative transactions for the health care industry,
including the health care claim transaction (see section 1173(a) of the
Act). In 2000, the Secretary of Health and Human Services (HHS) adopted
standards for eight electronic transactions, including the Health Care
Claim or Equivalent Encounter Information transaction, 65 FR 50312
(August 17, 2000). These rules, which are codified at 45 CFR part 162,
subparts A and I through R, are generally known as the Transactions
Rule.
The HIPAA standards apply to health plans, health care
clearinghouses, and certain health care providers; collectively, these
entities are known as ``covered entities.'' Covered entities are
required to comply not only with the Transactions Rule, but also with
the other HIPAA Administrative Simplification rules--the Privacy Rule,
the Employer Identifier Rule, and the Security Rule--when the
respective applicable compliance dates for those rules occur.
Compliance with the standards for the electronic transactions
covered by the Transactions Rule was required for all covered entities
other than small health plans by October 16, 2002; compliance by small
health plans is required by October 16, 2003. However, section 2 of
ASCA extended the October 16, 2002 compliance deadline to October 16,
2003 for covered entities that submitted a compliance plan by October
15, 2002. Covered entities that were not small health plans and that
did not timely submit a compliance plan under ASCA were required to
comply with the Transactions Rule by October 16, 2002. Regardless, no
later than October 16, 2003, all covered entities must be in compliance
with the Transactions Rule.
By statute, the Medicare Program is a health plan under HIPAA (see
section 1171(5)(D) of the Act). It is, therefore, a covered entity.
Health care providers are covered entities if they transmit health
information in electronic form in connection with a transaction for
which the Secretary has adopted a standard (covered transaction) (see
45 CFR 160.102). Under the Transactions Rule, if a covered entity
electronically conducts a covered transaction with another covered
entity, it must conduct it as a standard transaction (see 45 CFR
162.923(a)).
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 requires Medicare providers to submit claims
electronically by October 16, 2003, unless one of the specified grounds
for waiver applies. Section 3 of ASCA, thus, in general has the effect
of requiring Medicare providers that are not already covered entities
to conduct a covered transaction (the health care claim transaction)
electronically and, thereby, become covered entities. In submitting
claims electronically, the providers will be required to comply with
the applicable HIPAA standard for the health care claim transaction, by
virtue of the Transactions Rule. Thus, section 3 of ASCA promotes the
submission of standard transactions and will further the goal of
improved health care delivery by reducing the administrative burden and
paperwork associated with Medicare claims submission.
Although 86.1 percent of Medicare claims are submitted
electronically, the volume of Medicare claims submitted in paper form
is substantial, and moving from paper to electronic submission has the
potential for significant savings and efficiencies for Medicare
physicians, practitioners, facilities, suppliers, and other health care
providers, as well as for the Medicare program itself. Although these
Medicare physicians, practitioners, facilities, suppliers, and other
health care providers would incur a cost to comply with the mandatory
electronic billing requirement, we believe their savings will offset
the cost. Further, the use of the HIPAA electronic claim standard could
result in additional savings should these entities begin electronically
billing other payers. However, the statute recognizes that certain
circumstances may preclude or make less attractive converting from a
paper to an electronic environment. ASCA, thus, identifies exceptions
to the mandatory submission of electronic Medicare claims. These
exceptions are interpreted and provided for by this interim final rule
with comment period.
We considered whether the amendment to section 1862(a) 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. The question was raised by the provision in
section 4 of ASCA which 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).
The plain language of section 1862(a), 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), 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. 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 in the title of section 4 of ASCA: ``Clarification
with Respect to Applicability of Administrative Simplification
Requirement to M+C Organizations.''
The M+C organizations, as health plans for the purposes of HIPAA
Administrative Simplification, are required to come into compliance
with the requirements of the HIPAA Transactions Rule no later than
October 16, 2003. We understand that all M+C organizations properly
filed ASCA compliance plans prior to October 16, 2002. They, therefore,
obtained extensions and have a compliance date of October 16, 2003.
An M+C organization that pays a non-compliant electronic claim
after October 16, 2003, would accordingly be out of compliance with the
HIPAA Transactions Rule requirements, but would not violate the
provisions of section 1862(a)(22) or the requirements of this
regulation. This regulation applies only to providers, practitioners
and suppliers who submit claims under Part A or Part B of Medicare. It
does not apply to the submission of claims by providers to M+C
organizations. Moreover, the waiver provisions for small providers,
practitioners and suppliers established by section 3 of ASCA and this
regulation do not extend to claims submitted by such providers to any
health plans other than Medicare.
[[Page 48807]]
II. Provisions of the Interim Final Rule With Comment Period
Section 3 of ASCA established the requirements and exceptions under
the Medicare Program for the mandatory submission of claims submitted
in electronic form. 45 CFR 162.1101(a) defines a health care claim as
the transmission of ``A request to obtain payment, and the necessary
accompanying information from a health care provider to a health plan,
for health care.'' 45 CFR 160.103 defines electronic media as--
(1) Electronic storage media including memory devices in
computers (hard drives) and any such removable/transportable digital
memory medium, such as magnetic tape or disk, optical disk, or
digital memory card; or (2) Transmission media used to exchange
information already in electronic storage media. Transmission media
include, for example, the internet (wide-open), extranet (using
internet technology to l ink a business with information accessible
only to collaborating parties), leased lines, dial-up lines, private
networks, and the physical movement of removable/transportable
electronic storage media. Certain transmissions, including of paper,
via facsimile, and of voice, via telephone, are not considered to be
transmissions via electronic media, because the information being
exchanged did not exist in electronic form before the transmission.
In this interim final Rule with comment period, we integrate the
definitions of ``electronic media'' and ``claims submitted in
electronic form'' into the newly defined term, ``electronic claim.''
Furthermore, for brevity, and to reflect common use, the term
``electronic claim(s)'' is considered to be synonymous with and is
being used in lieu of the term ``claims submitted in electronic form''
in this Rule.
A. Definitions Used for Electronic Claim Submission
In Sec. 424.32(d)(1), we are adding a definition section to define
terms used in paragraph (d). We define the following terms: claim;
electronic claim; direct data entry; electronic media; initial Medicare
claim; physician, practitioner, facility or supplier; provider of
services; and small provider or small supplier. We define ``claim'' to
mean the transaction defined at 45 CFR 162.1101(a), which is the
regulatory definition of `` health care claim'' in the Transactions
Rule. We specify the definition of ``electronic claim'' to mean a claim
that is submitted via electronic media. We specify 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 Sec. 424.32(d)(1)(iv), we define 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 Medicare for the first time for secondary payment
purposes. Initial Medicare claim excludes any adjustment or appeal of a
previously submitted claim.
We specify in Sec. 424.32(d)(1)(vi) that a ``Physician,
practitioner, facility, or supplier'' is a Medicare provider other than
a provider of services. In Sec. 424.32(d)(1)(vii), we define a
``Provider of services'' as a provider of services as defined in
section 1861(u) of the Act. We define in Sec. 424.32(d)(1)(viii), a
``Small provider 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.
B. Submission of Electronic Claims Required
Electronic submission of Medicare claims is required for initial
Medicare claims, including initial claims with paper attachments,
submitted for processing by the Medicare fiscal intermediary (FI) or
carrier that serves the physician, practitioner, facility, supplier, or
other health care provider. No other transactions, including changes,
adjustments, or appeals to the initial claim, are required to be
submitted electronically.
In Sec. 424.32(d)(2), we specify that except for claims to which
Sec. 424.32(d)(3) applies, an initial Medicare claim under Part A and/
or Part B 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 provider of services. This
requirement does not apply to any other transactions, including
adjustment or appeal of the initial Medicare claim.
C. Exceptions to Requirement To Submit Electronic Claims
The regulation set forth at 45 CFR 162.923 states 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 care 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
). Only electronic media accepted by Medicare, and as defined in
the Medicare Carrier and Intermediary Manuals and Program Memoranda
issued by CMS, are affected by this requirement of ASCA. At present,
Medicare does not accept claims via the internet, an extranet or, in
many cases, via removable/transportable storage media. This rule does
not change this Medicare policy. 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.
Claims submitted via a direct data entry screen maintained for
Medicare, and as permitted by 45 CFR 162.923, are considered to be
electronic claims for purposes of this requirement. Claims transmitted
to a Medicare contractor using the free or low cost claims software
issued by Medicare fee-for-service plans are also electronic claims for
purposes of this requirement.
The ASCA provides for exceptions to the mandatory electronic
submission of Medicare claims. Under the ASCA, the Secretary of Health
and Human Services will waive the application of the electronic claim
requirement for specific cases. This interim final rule with comment
period provides more explicit requirements to implement the statutory
mandate that we specify in the regulations at Sec. 424.32(d).
Specifically, in Sec. 424.32(d)(3), we specify the exceptions when
electronic submission of initial Medicare claims can be waived. In
Sec. 424.32(d)(3)(i), we specify that electronic submission will be
waived when: (a) there is no method available for the submission of an
electronic claim. We cannot 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 is no method available in those 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. At this time, we have
identified three situations which fall into this category, in addition
to beneficiary claims: (1) Roster billing of
[[Page 48808]]
vaccinations covered by the Medicare Program (In order to promote an
increase in the flu vaccinations for Medicare beneficiaries, since 1993
Medicare allowed mass immunizers to bill the program using a single
claim form with an attached list of beneficiaries to which a flu
vaccine was administered. Generally, mass immunizers bill
electronically, but in a non-standard format. This roster billing
simplified provider billing but is not available in electronic form
under the HIPAA Transaction Rule); (2) claims for payment under
Medicare demonstration projects (Medicare demonstration projects often
allow for unusual situations not normally handled by the standard
transactions.); and (3) claims where more than one plan is responsible
for payment prior to Medicare. The standard electronic formats do not
currently have a clear method for the reporting of per service payments
made by more than one primary payer. Efforts are being made to resolve
this deficiency. These claims can continue to be submitted to Medicare
on paper, but once a solution is reached we will notify the public, and
providers will then be required to submit these claims electronically.
Specific program guidance will be issued to Medicare providers
concerning submission of these claims on paper effective October 16,
2003. We will also issue specific guidance or regulations, as
necessary, informing covered entities if this or another exception no
longer applies. (b) In 424.32(d)(3)(ii), we provide that electronic
submission will be waived when the entity submitting the claim is a
small provider or small supplier. The statute is quite specific as to
the size requirements and the rule simply incorporates the statutory
requirements.
D. Unusual Circumstances
The Secretary may waive the electronic submission requirement in
certain situations as the Secretary finds appropriate. In Sec.
424.32(d)(4), we specify three circumstances that will provide for an
exception to exist in the following situations: (1) The submission of
dental claims (This exception is being included because, under HIPAA,
dentists are required to submit electronic transactions to other payers
in a format different from that generally used in the Medicare Program.
Since Medicare does not generally cover dental services, this exception
is added to minimize the burden on dentists who may, at times, need to
bill the Program.); (2) A service interruption in the mode of
submitting the electronic claim that is outside of the control of the
entity submitting the claim, for the period of the interruption (This
exception will apply only if the physician, practitioner, facility,
supplier, or other health care provider has no telephone or other
communication service. If telephone service exists but is unavailable
for a period of time (for example, because of inclement whether or due
to telephone company technical breakdowns), paper claims will be
accepted during the period of disrupted telephone service.); and (3) On
demonstration, satisfactory to the Secretary, of other extraordinary
circumstances precluding submission of electronic claims.
Entities will not generally need to make a special request to
determine whether an exception applies that would make them eligible
for a mandatory waiver under Sec. 424.32(d)(3) or a discretionary
waiver under Sec. 424.32(d)(4). A special request must be submitted to
a Medicare FI or carrier when an entity does not meet the mandated or
discretionary waiver criteria being established but believes there are
other extraordinary circumstances that preclude their submission of
electronic claims. We will 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.
E. Enforcement
ASCA's amendment to section 1862(a) of the Act prescribes that ``no
payment may be made under Part A or Part B of the Medicare Program for
any expenses incurred for items or services'' for which a claim is
submitted in a non-electronic form. Consequently, absent an applicable
exception, paper claims submitted to Medicare will not be paid.
The Secretary may audit entities that bill Medicare non-
electronically. Entities determined to be in violation of the statute
or this rule may be subject to claim denials, overpayment recoveries,
and applicable interest on overpayments.
F. Effective Date
In Sec. 424.32(d)(6), we specify the effective date for these
amendments will be for claims submitted on or after October 16, 2003.
This effective date is specified in section 3(b) of ASCA.
III. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we revise this final rule, we will
respond to the major comments in the preamble to that document.
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority, under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
We find that it would be contrary to the public interest to
undertake prior notice and comment procedures before implementing this
interim final rule with comment period. The ASCA evidences the
Congress' intent to increase electronic claims submission to the
Medicare Program through mandatory electronic billing requirements and
to tie the mandatory Medicare electronic billing requirement's October
16, 2003 effective date to the compliance date for national
implementation of the electronic transactions standards required under
the Administrative Simplification provisions of HIPAA (see 45 CFR parts
160 and 162). However, the ASCA also provides that not all Medicare
health care providers must engage in electronic billing and identifies,
in general terms, those circumstances under which health care providers
will be exempt from the requirements.
The implementation of the HIPAA standards by health care providers
requires detailed planning, budgeting, implementation, and testing in
order for those covered entities to be ready to submit HIPAA
transactions by the October 16, 2003 compliance date. Since section 3
of ASCA mandates electronic billing for Medicare providers, these
entities must come into compliance with the HIPAA requirements on the
same date and, in turn, they must plan appropriately like those covered
entities that were already planning to be electronic billers. It is
imperative that the affected Medicare billers have sufficient time to
ascertain whether they must transition to electronic billing as a
result of section 3 of ASCA and, if so, begin the implementation
process for the HIPAA transaction standards. This interim final rule
with comment period allows those
[[Page 48809]]
Medicare paper billers to fully understand their obligations under ASCA
and, in turn, begin preparing for HIPAA implementation, if required to
do so. We believe any delay in implementing this rule, effective
October 16, 2003, would hinder Medicare providers' ability to meet the
October 16, 2003 HIPAA compliance date or determine that they did not
have to file electronically with Medicare and so incur unnecessary
costs.
Thus, we find, for good cause, that providing notice and
opportunity to comment under 5 U.S.C. 553(b) would be impracticable and
contrary to the public interest. We are providing a 60-day public
comment period.
This rule is effective October 16, 2003, as required by section
3(b) of the ASCA.
V. Collection of Information Requirements
Under the Paperwork Reduction Act (PRA) of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement 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 PRA of 1995 requires that
we solicit comment on the following issues:
[sbull] The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
[sbull] The accuracy of our estimate of the information collection
burden.
[sbull] The quality, utility, and clarity of the information to be
collected.
[sbull] Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comments on each of these
issues for the information collection requirements discussed below.
The information collection requirements and associated burdens in
Sec. 424.32 are subject to the PRA. The burden of submitting the
information required is addressed under OMB approval number:
0938-0866, HIPAA Standards for Coding Electronic Transactions, with
a one-time burden of 34,000,000 hours. The current approval expires 5/
31/05.
0938-0279, Medicare Uniform Institutional Provider Bill, with an
annual burden of 1,666,208 (form CMS-1450). The current approval
expires 12/31/05.
0938-0042, Request for Medicare Payment--Ambulance, with an annual
burden of 390,418 hours (form CMS-1491). The current approval expires
3/31/04.
0938-0008, Common Claim form, instructions, and supporting
regulations at Sec. Sec. 414.40, 424.32, and 414.40, with an annual
burden of 44,189,007 (form CMS-1500). The current approval expires 3/
31/06.
Approximately 205,409 providers and suppliers will be affected by
this rule and will have to change the format for the claims they submit
(the information collected does not change). They will incur some
costs, either that of switching to clearinghouses, which will not
affect the time it takes to submit the information for a claim, but
will cost them $.30 per claim, or that of purchasing computer
equipment, which we estimate at $500 to $1,000.
For our rule published to implement the electronic transactions in
general, we estimated that it would take an average of ten hours per
entity to switch over to the mandated standard transaction. (The switch
could be from paper to electronic or from another electronic format to
the standard format.)
For purposes of this discussion, we are estimating that 37.5
percent of the affected providers and suppliers (that is, those not
meeting one of the exceptions) already own computers and will not incur
capital costs. We are also estimating that 50 percent of the affected
providers and suppliers will start using a clearinghouse or billing
service, which will not impose any capital costs subject to the PRA.
The remaining 12.5 percent (25,676) will buy computers at an average of
$750, for a total capital cost of $19.3 million.
On the other hand, the providers and suppliers who own or who will
buy a computer will require less time to submit claims. Form CMS-1450
takes approximately 9 minutes to submit in hard copy and .5 minutes to
submit electronically; form CMS-1500 takes 15 minutes and 1 minute,
respectively; form CMS-1491 takes 10 minutes and 1 minute,
respectively.
If the 50 percent of the entities that will bill us directly are
responsible for 25 percent of the paper bills (we assume that half of
the bills are submitted by entities that will be excepted from the
requirements, and that 25 percent will be submitted through an
intermediate party), they will save 7,651,089 million hours for form
1500, 58,850 hours for form 1491, and 129,196 hours for form 1450.
Mailing costs will be reduced by approximately $.40 per claim on
average and the cost of the forms by $.03 for the form 1450 and form
1500 (the third form is furnished by CMS). We welcome comments on this
aspect of the collection.
We are submitting a copy of the revision to Sec. 424.32 to OMB for
its review of the information collection requirements. The revision is
not effective until OMB has approved it. If you comment on any of these
information collection and record keeping requirements, please mail
copies directly to the following: Office of Strategic Operations and
Regulatory Affairs, Centers for Medicare and Medicaid Services, 7500
Security Boulevard, Attn: PRA Reports Clearance Officer, Baltimore, MD
21244, Attn: Julie Brown, CMS-0008-IFC, and Office of Information and
Regulatory Affairs, Office of Management and Budget, Room 10235, New
Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar,
Desk Officer, CMS-0008-IFC.
VI. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
For the purpose of this analysis, CMS uses a pre-statute baseline;
therefore, all costs and benefits identified in this impact analysis
are attributed to this rulemaking. Nevertheless, the ASCA mandates most
aspects of this rulemaking. In particular, the ASCA requires Medicare
providers to submit claims electronically and stipulates exceptions
that will and may be granted. However, CMS did have discretion in
setting the conditions for exceptions, and believes that these
exceptions reduce the burden relative to the burden that may have been
imposed by ASCA without this enabling regulation.
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
[[Page 48810]]
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 2000 ``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 who do not fall into one of the excepted groups.
Approximately 139 million paper claims were submitted to Medicare
in FY 2002. This represents about 13.9 percent of all claims processed.
Broken down between paper claims submitted to FIs and carriers, the
number of paper claims in FY 2002 was 3.4 million and 136 million,
respectively (source of data is CROWD).
Over the past 4 years, Medicare's electronic media claims rate
(EMC) has slowly grown at an average of 0.3 percent per year for FIs
and 0.9 percent per year for carriers (source of data is CROWD). We do
not expect a change in this trend for the immediate future. Therefore,
we assume that similar changes will continue for, at least, FY 2003 and
FY 2004, the first year of implementation of mandatory Medicare EMC.
Using workload growth projections from the CMS FY 2004 budget
submission to the Congress, we estimate the FY 2004 volume of paper
claims impacted by the ASCA, factoring out Medicare's continuing trend
of higher EMC rates, will be 2.5 million for Medicare FIs and 133.7
million for carriers. Please note that these volumes could be even
smaller in FY 2004 due to the simultaneous implementation of HIPAA.
However, the impact of HIPAA, coupled with Medicare's EMC trends,
cannot be quantified, though the impact would only further reduce the
cost/savings impact of ASCA and further support that a RIA is not
needed.
We do not know at this time how many providers will be excepted
from the ASCA requirements, but projections have been made based upon
the percentage of health care providers reported in the Census Bureau's
``Year 2000 Statistics of U.S. Businesses,'' which includes data on the
number of health care providers by type with fewer than 20 employees
and the numbers of physician, practitioner, and supplier entities with
fewer than 10 employees. The Census figures do not differentiate
between part-time and full-time employees, and would be expected to
result in inflated numbers on the whole when applied to Medicare, but
that is acceptable for impact assessment purposes. The Census did not
have a category for fewer than 25 employees; fewer than 20 employees
was their closest statistic. Overall, the Census data would still be
reliable indicators of the anticipated worse case scenario of the
maximum number of Medicare providers, physicians, practitioners, and
suppliers likely to be impacted by this regulation. The percentages of
small providers, physicians, practitioners, and suppliers based on
employment numbers for the universe of all U.S. providers, physicians,
practitioners, and suppliers should be comparable to the percentage of
the subset of those providers that bill the Medicare program.
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 track
differently by CMS and the Census Bureau include regional referral
centers, Christian Science Sanitoria, rural health clinics, critical
access facilities, and hospices. The ``2002 CMS Statistics'' directory
and the 2000 Census data health care establishment totals reported the
following:
----------------------------------------------------------------------------------------------------------------
Percentage of
Number of providers with Likely number
Provider type providers less than 20 excepted
employees
----------------------------------------------------------------------------------------------------------------
Hospitals....................................................... 6,031 10.6 639
Home Health Agencies............................................ 7,099 69.2 4,913
ESRD Facilities................................................. 3,991 16.6 663
Skilled Nursing Facilities...................................... 14,841 25.7 3,814
-----------------
Totals...................................................... 31,962 31.4 10,029
----------------------------------------------------------------------------------------------------------------
Percentage of
Number of providers with Likely number
Type of physician, practitioner or supplier providers less than 10 excepted
employees
----------------------------------------------------------------------------------------------------------------
Clinical Labs................................................... 168,333 41.4 69,690
Ambulatory Surgical Centers..................................... 3,147 34.9 1,098
Physicians...................................................... 567,412 70.6 400,593
All Other Practitioners......................................... 297,967 71.8 213,940
-----------------
Totals...................................................... 1,036,859 66.1 685,321
----------------------------------------------------------------------------------------------------------------
As there was a 10 percent difference between the Census provider,
physician, practitioner, and supplier types and the Medicare provider
types, dues to differences in type 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
[[Page 48811]]
all Medicare providers, and 753,853 (66.1 percent) of all Medicare
physicians, practitioners and suppliers could 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).
Approximately 98 percent of providers, and 83 percent or
physicians, practitioners, and suppliers already submit claims to
Medicare electronically though, and are expected to continue doing so,
so the total impacted must be further reduced to determine the
approximate number of current paper claim submitters that would likely
be affected. It is reasonable to assume that the majority of the paper
claims received by Medicare are submitted by smaller providers,
physicians, practitioners, and suppliers. As a result, it would not be
accurate to reduce the number of affected providers by the full 98
percent of 83 percent. In the absence of reliable statistics to project
the current source of all paper claims however, the number of providers
potentially affected by the mandatory Medicare electronic claim
requirement will be conservatively estimated at a maximum of 50 percent
of the entities that would not qualify for a waiver. This leaves 12,063
providers and 193,346 physicians, practitioners, and suppliers (a total
of 205,409) that would need to begin submitting claims to Medicare
electronically.
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.
Today, many Medicare providers use billing agents or clearinghouses
to bill the Medicare program. Many providers, physicians,
practitioners, and suppliers that currently submit paper claims have
indicated anecdotally that they use paper as they would rather avoid
the ``hassle'' of dealing with the multiple electronic claim formats
currently required by payers, and the need to have staff keep abreast
of the updates to those formats. HIPAA will largely eliminate format
differences among payers, but there will continue to 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 x 50
percent = 102,704) of those entities that do not submit claims to
Medicare electronically today would prefer to contract with 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 x {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{time} , reduced by 50 percent to account for the assumption
that 50 percent of the firms will contract with the third party claims
processors).
Finally, in regard to the balance of 102,704 (205,409 x 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
submitted 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 claim preparation, patient scheduling and other aspects of their
practice.
We estimate that at a maximum, the remaining total of 25,676 (25
percent of 102,704) providers, physicians, practitioners, and suppliers
will obtain personal computers to allow them to submit their claims
directly to Medicare electronically. A recent review of ads in Sunday
newspapers indicated that personal computers sufficient to meet the
mandatory electronic claim requirement could be obtained for between
$500 to $1,000 for hardware (personal computer, monitor, printer, and
modem). Billing software is available free or at low cost (less than
$25 for shipping and handling) from Medicare. At the average rate of
$750, it would cost $19.3 million to purchase 25,676 personal computer
systems. More expensive equipment and peripherals could be used, but
would not be necessary for basic compliance. Therefore, the total
maximum cost should be no higher than $26.4 million ($7.1 million for
users of clearinghouses or billing services, and $19.3 million for
those that obtain personal computers).
Following the HIPAA savings calculation used in the Transaction
Rule, but projected to FY 2004 to account for inflation, a savings of
$615 per provider could result in a total provider savings of
approximately $15.8 million (that is, 25,676 times $615).
We note that pages 50353 through 50359 of the August 17, 2000
transaction final rule for HIPAA used a 10-year time frame 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 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 that may have
been imposed by ASCA without this enabling regulation.
[[Page 48812]]
Individuals and States are not considered small entities. Therefore, no
regulatory relief options are considered. A rule has a significant
economic impact if it exceeds 3-5 percent of its total costs or
revenues according to criterion set by the SBA. The statute exempts
many small firms from this rulemaking, affording considerable relief to
small entities. At most, small firms that are not exempt will incur an
average of either $69 per firm ($7.1 million/102,704 firms) to contract
out their claims filing, or purchase computer equipment at an average
net cost of $135 per firm ($750 cost-$615 savings.) Therefore, we
expect the impact of this rulemaking to fall well below the SBA
threshold.
In addition, section 1102(b) of the Act 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 604 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. As indicated above, this
rule could have an impact on those small rural hospitals that bill
Medicare and that do not meet one of the exceptions. However, we do not
believe the impact is significant since the cost of compliance is
relatively small ($500 to $1,000) and small rural hospitals may be able
to qualify for the small provider exception. Therefore, no regulatory
impact analysis is required as the impact on small rural hospitals is
not significant.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in an expenditure in any 1 year by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $110 million. This interim final rule with comment
period will not have an impact on State, local, or tribal governments
or on the private sector. Instead, the primary impact on State, local,
or tribal governments, or the private sector will be that entities that
must begin billing Medicare electronically as a result of the ASCA are
likely to use that capability to also bill other payers (such as State,
local, or tribal governments and the private sector).
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a final rule that imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has federalism implications. This
interim final rule with comment period will not have a substantial
effect on State or local governments for the reasons noted above.
B. Anticipated Effects
1. Effects on Beneficiaries, Physicians, Practitioners, Facilities,
Suppliers, and Other Health Care Providers
The anticipated effects on Medicare's beneficiaries will be that
additional attention and services may be provided by their health care
physician because, for example, electronic billing should reduce
administrative paperwork. (This assertion has been made by the medical
community in numerous forums over the years, though documentation to
this effect is not available.)
The anticipated effects on the entities required to bill
electronically will reduce or eliminate paper in their administrative
operations, realizing increased efficiencies and indeterminable
savings. These savings may be increased by the fact that the
Administrative Simplification provisions of HIPAA mandate a standard
transaction for electronic claim submissions, and this will facilitate
electronic claims submissions to all health care payers. At this time,
we do not have additional data to estimate those savings to Medicare
physicians, practitioners, facilities, suppliers, and other healthcare
providers. As previously stated, there will be a cost incurred by those
entities that cannot satisfy one of the exceptions and would be
required to bill Medicare in electronic form.
2. Effects on the Medicare and Medicaid Programs
Implementation of this interim final rule with comment period will
result in a savings to the Medicare program. If the FY 2004 projected
paper claims submissions of 136.2 million (HHS FY 2004 Budget
submission to the Congress and estimated electronic media claims rate),
are reduced by half and we assume a savings of $1.40 per claim as a
result, the program could realize administrative savings of over $95
million per year. (Note: The $1.40 per claim savings is the CMS
estimate of savings based upon a 1990 Industrial Engineering Study,
contracted by CMS (then HCFA). The study documented that FI paper
claims cost about $3.30 more to process than electronic claims and,
similarly, carrier paper claims cost about $1.00 more to process than
electronic claims. Weighing these differences by the 2004 workloads and
combining them yields the $1.40 estimated per claim savings.)
We might expect similar types of savings for the States, which
administer the Medicaid Program. That is, Medicare providers who become
electronic billers due to ASCA may decide to begin billing Medicaid
electronically as well. However, this would depend on which of the
affected Medicare physicians, practitioners, facilities, suppliers, and
other healthcare providers also bill Medicaid. Again, the fact that the
Administrative Simplification provisions of HIPAA mandate a standard
transaction for electronic claim submissions will facilitate electronic
claims submissions to all health care payers.
C. Alternatives Considered
Section 3 of ASCA requires electronic claims submission by those
who bill Medicare. There is little room for us to consider
alternatives, though we expect that public comment may focus upon
further definition regarding the mandatory waivers or regarding those
``unusual cases'' for which the Secretary may waive the mandatory
electronic claims submission requirement.
D. Conclusion
As described above, this interim final rule with comment period
establishes the requirements for implementing the statutory provisions
under section 3 of the ASCA. The law requires, with few exceptions,
that physicians, practitioners, facilities, suppliers, and other health
care providers that bill Medicare must do so electronically. Coupled
with the electronic standard transaction requirements under HIPAA, this
rule facilitates greater administrative efficiencies for the Medicare
program as well as for those that bill Medicare. There will be a cost
incurred for those entities that are unable to meet one of the
statutory exceptions, but we expect these initial costs to be offset by
increased efficiencies and ongoing lower costs attributable to Medicare
claims processing.
In accordance with the provisions of Executive Order 12866, the
Office of Management and Budget reviewed this regulation.
List of Subjects in 42 CFR Part 424
Emergency medical services, Health facilities, Health professions,
Medicare, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, CMS proposes to amend 42 CFR
chapter VI part 424 as set forth below:
[[Page 48813]]
PART 424--CONDITIONS FOR MEDICARE PAYMENT
0
1. The authority citation for part 424 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
0
2. In Sec. 424.32, add a new paragraph (d) to read as follows:
Sec. 424.32 Basic requirements for all claims.
* * * * *
(d) Submission of electronic claims.
(1) Definitions. For purposes of this paragraph, the following
terms have the following meanings:
(i) Claim means a transaction defined at 45 CFR 162.1101(a).
(ii) Electronic claim means a claim that is submitted via
electronic media. A claim submitted via direct data entry is considered
to be an electronic claim.
(iii) Direct data entry is defined at 45 CFR 162.103.
(iv) Electronic media is defined at 45 CFR 160.103.
(v) Initial Medicare claim means a claim submitted to Medicare for
payment under Part A or Part B of the Medicare Program under title
XVIII of the Act for the first time for processing, including claims
sent to Medicare for the first time for secondary payment purposes.
Initial Medicare claim excludes any adjustment or appeal of a
previously submitted claim, and claims submitted for payment under Part
C of the Medicare program under Title XVIII of the Act.
(vi) Physician, practitioner, facility, or supplier is a Medicare
provider other than a provider of services.
(vii) Provider of services means a provider of services as defined
in section 1861(u) of the Act.
(viii) Small provider of services or small supplier means--
(A) A provider of services with fewer than 25 full-time equivalent
employees; or
(B) A physician, practitioner, facility, or supplier with fewer
than 10 full-time equivalent employees.
(2) Submission of electronic claims required. Except for claims to
which paragraph (d)(3) or (d)(4) of this section applies, an initial
Medicare claim may be paid only if submitted as an electronic claim for
processing by the Medicare fiscal intermediary or carrier that serves
the physician, practitioner, facility, supplier, or provider of
services. This requirement does not apply to any other transactions,
including adjustment or appeal of the initial Medicare claim.
(3) Exceptions to requirement to submit electronic claims. The
requirement of paragraph (d)(2) of this section is waived for any
initial Medicare claim when--
(i) There is no method available for the submission of an
electronic claim. This exception includes claims submitted by Medicare
beneficiaries and situations in which the standard adopted by the
Secretary at 45 FR 162.1102 does not support all of the information
necessary for payment of the claim. The Secretary may identify
situations coming within this exception in guidance.
(ii) The entity submitting the claim is a small provider or small
supplier.
(4) Unusual circumstances. The Secretary may waive the requirement
of paragraph (d)(2) of this section in such unusual circumstances as
the Secretary finds appropriate. Unusual circumstances are deemed to
exist in the following situations:
(i) The submission of dental claims.
(ii) There is a service interruption in the mode of submitting the
electronic claim that is outside the control of the entity submitting
the claim, for the period of the interruption.
(iii) On demonstration, satisfactory to the Secretary, of other
extraordinary circumstances precluding submission of electronic claims.
(5) Effective date. This paragraph (d) is effective October 16,
2003, and applies to claims submitted on or after October 16, 2003.
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)
Dated: April 22, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: August 12, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-20955 Filed 8-14-03; 8:45 am]
BILLING CODE 4120-01-P