[This Transcript Is Unedited]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

NATIONAL COMMITTEE ON VITAL AND HEALTH STATISTICS

SUBCOMMITTEE ON STANDARDS AND SECURITY

July 31, 2007

Wilbur Cohen Building
330 Independence Avenue, S.W.
Washington, D.C.

Proceedings By:
CASET Associates, Ltd.
10201 Lee Highway, Suite 180
Fairfax, Virginia 22030
(703)352-0091

List of Participants:

  • Harry Reynolds, Chairman
  • Denise Buenning
  • Jeffrey Blair
  • Steve Steindel
  • Justine Carr
  • Jorge Ferrer
  • Vivian Auld
  • Donna Pickett
  • Karen Trudel
  • Marjorie Greenberg
  • Simon Cohn
  • Judith Warren

TABLE OF CONTENTS

P R O C E E D I N G S (9:04 a.m.)

MR. REYNOLDS: I’d like to welcome you to the Standards and Security
Subcommittee of the NCVHS, the National Committee on Vital and Health
Statistics. I am Harry Reynolds, co-chair, along with Jeff Blair. The NCVHS
serves as a statutory public advisory body to the Secretary of Health and Human
Services.

Over the rest of today, we will be hearing testimony on the HIPAA
transaction revisions version 5010. Our hearings are recorded and available on
the Internet.

I will now begin introductions. I ask members of the subcommittee to
mention any conflicts of interest they may have.

I will mention today, I don’t believe it is a conflict of interest, but our
company is a member of the Blue Cross Association, and the Association will be
testifying today. Since CAQH Corps was mentioned yesterday even though it was
just mentioned, I am also chair of that.

DR. BLAIR: I’m Jeff Blair from Loveless Clinic Foundation, co-chair of the
subcommittee. I am not aware of any conflicts of interest.

MR. STEINDEL: Steve Steindel, Centers for Disease Control and Prevention,
staff to the subcommittee and liaison to the full committee.

MS. GABEL: I’m Annette Gabel with MEDCO Health Solutions.

MR. LAW: I’m Dwight Law with Blue Shield of California.

MS. STAHLECKER: Chris Stahlecker with the Centers for Medicare and Medicaid
Services.

DR. COHN: Simon Cohn. I am the Associate Executive Director with Kaiser
Permanente. I am chair of the committee and a member of the subcommittee. I
have no conflicts of interest.

DR. WARREN: Judy Warren, University of Kansas School of Nursing, member of
the committee, member of the subcommittee, no conflicts.

MS. BUENNING: Denise Benning, CMS, lead staff to the subcommittee.

(Whereupon, the remainder of the introductions were performed.)

Agenda Item: 5010/D.0 Plans/Payor/PBM Panel

MR. REYNOLDS: Before we get started today, the committee would again like
to thank everybody that set the stage yesterday for us. That was very rich and
complete testimony about the status of 5010.

Today we will be hearing from a number of panels. The first one is the
Plans/Payor/PBM panel. I am just going to go in order on the agenda if that is
okay with all of you that are presenting. So, Dwight Law representing the Blue
Cross Association.

MR. LAW: Thank you very much. Good morning. My name is Dwight Law, and I am
an IT director for application services for Blue Shield of California. Blue
Shield of California is a not-for-profit health plan covering 3.2 million
members in California.

I am testifying on behalf of the Blue Cross Blue Shield Association. The
Blue Cross Blue Shield Association is comprised of 39 independent community
based and locally operated Blue Cross Blue Shield companies that collectively
provide health care coverage to more than 98 million Americans.

On behalf of the Blue Cross Blue Shield Association, I would like to thank
you for the opportunity to offer our comments on the subject of adoption and
implementation of the accredited standards committee X12 version 5010, standard
transaction suite as anticipated as the next HIPAA ETI transaction rule, and
the National Council for Prescription Drug Programs version D.0.

My testimony, based on the experience of other Blue Cross Blue Shield plans
as well as my own company, will address 5010 from the perspective of background
information and the importance of an appropriate, efficient implementation
adoption period.

I would like to acknowledge the outstanding work NCPDP has done to
establish a standard that is flexible and allows plans and pharmacy benefit
managers to decide how to use the business information they have contained
within the layouts and fields created. However, since a majority of the Blues’
health plans rely on business associates to manage the pharmacy program, my
testimony will focus on 5010 and the four critical elements that need to be
considered when preparing the rule.

First, keep in mind that HIPAA must be put in the context of where we are
as an industry and what challenges we can expect in the next few years. Health
plans have many initiatives that require additional staff and considerable
funding. Competing with HIPAA are self service projects, consumer directed
products and legacy system replacements. For instance, Blue Shield of
California is underlying a major overhaul to replace our core legacy systems.
The window for implementing these changes is short, as a work force
knowledgeable about how to transition processes and procedures to these new
systems is nearing retirement.

Our society, IT, has to react to the impact the retiring baby boomers will
have on implementing technology in the next three to five years. Health care,
never a leading edge industry, is more acutely sensitive to these demographic
changes. In addition to these projects are a wave of interoperability
initiatives making its way through the Health Information Technology Standards
Panel and the Department of Health and Human Services.

Second, implementing 5010 transactions is a big deal, not a simple update,
that will demand at least a two-year time frame.

Third, in implementing 5010, we need to incorporate lessons learned from
4010A1, the need for pilot testing and adequate time for rollout.

Finally, version 5010 must be fully implemented before beginning to
implement the system and business process changes resulting from the adoption
of an ICD-10 code set. Any overlap will be disastrous for efficient adoption
and ultimately result in delays and implementation issues for both roles.

Many Blue Cross Blue Shield plans are in a process of upgrading or
replacing multiple legacy systems. My plan, Blue Shield of California, is
revamping our aging COBOL assembler based circa 1970 core systems. Legacy
modernization is expected to cost a half billion dollars and will take us into
the next decade.

This three to five year multi-phase uplift in our technology includes
upgrading Internet capabilities by adding more self service functions, an
especially important consideration in light of the growing trend to consumerism
and the development of new consumer directed health products, and a business
process redesigned that will enable our systems to be quicker and more flexible
in implementing new products and services.

In spite of these technological challenges, Blue Shield of California like
many other Blue Cross Blue Shield plans, has been harnessing information
technology to improve the quality of care, specifically by identifying patients
whose treatment is inconsistent with clinical practice guidelines.

To improve compliance with evidence based clinical practice guidelines
related to management of chronic diseases, Blue Shield of California undertook
an intervention which employed monthly computerized analysis of diverse but
integrated medical and pharmacy claims data using the patient as a unit of
analysis and messages mailed to physicians regarding specific opportunities to
improve quality of care in specific patients.

Finally, most health care organizations, payors and providers alike lack
sufficient IT staff or business engineering resources to implement all state
and federal regulations as well as health care quality initiatives, new
products and operational needs. The demand on IT resources simply exceeds our
ability to implement our projects in the queue. Strategic work designed to
benefit member care could be hindered by implementing multiple rules
simultaneously. The alternative is utilizing a consultative work force, adding
significant cost which impacts administrative simplification and the financial
savings HIPAA was designed to provide.

As an upgrade, it might seem that the transition to 5010 will be less
complicated than the original adoption of the version 4010A1 transactions.
However, to put the 5010 upgrade in perspective, the implementation of version
4010A1 turned out to be much more lengthy and complicated in some ways, much
less successful than was originally envisioned.

Below highlights a chronology of important events. After CMS adopted the
initial HIPAA transaction standards by final rule in August of 2000, so many
significant change requests were submitted to designed standards maintenance
organizations that CMS had to publish a modification rule in February 2003 to
adopt modified transaction standards. Pilot testing would have identified many
issues ahead of time and thus would have helped avoid the extension and delays
that plagued HIPAA. Because pilot testing was skipped, Congress had to extend
that HIPAA compliance date by one year from October 2002 to October 2003, and
then CMS had to permit contingency operations through October 1, 2005.

Medicare only ended the contingency period for noncompliant electronic
remittance advices under the HIPAA transaction and code set regulation on
October 1, 2006. Medicare has a contingency plan in place for the 270-271
transaction.

As you well know, with the exception of the 837 claims transaction, the
other electronic HIPAA transaction, especially the 200 series real times, are
not in high use by providers.

As a major upgrade, implementing 5010 will force plans to go through all
the phases of a major system implementation. We will need time to complete
systems and process analysis, application coding, conduct internal testing and
training and of the utmost importance, conduct external testing with our
trading partners.

Testing especially with trading partners was underestimated for 4010A1.
Experience has shown that testing rollout to the provider communities,
submitters, software vendors and clearinghouses is a key and lengthy component
of implementation. For many entities, testing cannot be done until the
entities’ vendors have done their testing and rollout.

During the transition period, there will also be a need to support those
4010A1 and 5010 transactions. Based on experience with the original
implementation of 4010 and then the subsequent 4010A1, this is a multi-year
endeavor.

In addition to system impacts, implementing 5010 will force plans and
providers to evaluate and perhaps change many of their business processes. For
example, we know that the 5010 has made significant changes in the 835 claims
payment transactions. This may impact not only payors’ work flow, but also
providers of accounts receivable processes. Also consider that when the 4010A1
was implemented, HIPAA edits to the front end and back end payment systems were
modified. With 5010, many of the edits will need to be revised, therefore a
full business analysis of data flow must be conducted by payors and providers
to insure that process work flows, front end claims submission, back end claims
processing, financial, medical and operation procedures, that require
alteration or identified and properly incorporated entity implementation
project plan. This not only adds additional requirements to the project, but
also additional resources, human, time and financial. Moreover, plans need time
to determine the impact on plans’ systems, not just transactions but also new
data elements and business associates.

Given the history of 4010 and the extensive phases we go through for 5010,
and given all the other changes that are impacting health plans, we cannot see
fully implementing 5010 in less than two years from the time a final rule is
published and 5010 is adopted. In addition, the provider community has a number
of other initiatives to address such as inoperable health records. These
projects also need to be considered in order to determine provider ability to
implement 5010 at the same time.

From a cost standpoint, it is hard to think about 5010 without also
considering the transition to ICD-10, because one of the major reasons for
instituting 5010 is to accept ICD-10CM and ICD-10 PCS codes. We expect that
moving to 5010 and then to ICD-10 will cost twice as much as the move to
4010A1. This is due to potential system overhauls needed to meet 5010
requirements and prepare for ICD-10, as well as other pending transactions such
as claims attachment. These heavier costs entail complex system and business
process re-engineering, hardware upgrades, system applications modifications of
new version upgrades and staff training. Bottom line: If the industry does not
have adequate time to do 5010 right, not only will the costs of implementing
5010 be higher than would otherwise be, the costs of implementing ICD-10 will
be considerably higher.

As the industry is learning with claims attachments, as the 4010A1
experience shows, significant pilot testing is essential to insure an
appropriate and efficient implementation and without adequate testing in
advance of the rule implementation date, the industry could realize a
significant system issue. This translates to delays, implementation
inefficiencies, and ultimately contingencies.

Pilot testing has to identify issues with the rule related implementation
guides prior to a majority rollout. Even a limited pilot consisting of select
transaction sets could help payors, providers and clearinghouses adjust systems
and work flows earlier in the process to help insure cleaner claims processing
and payment flows. If conducted concurrently with final rule development
process, it would help to streamline the adoption process. Identifying business
process and technical issues earlier in the transaction implementation life
cycle can mitigate the rework that ultimately resulted in the issuance of
4010A1. To do otherwise results in history repeating itself, hundreds of
changes for the next standard format, contingency and no administrative
simplification.

If the cornerstone of HIPAA is to help insure administrative simplification
for electronic standards, the baseline is to insure that the transactions are
implemented correctly and efficiently. Pilot testing will help make this
difference.

In addition to pilot testing, it is imperative the rule offer a realistic
rollout time to go into need for contingency operations or extending the
compliance date. The 4010A1 implementation resulted in an extension, then
contingency. If timed appropriately, 5010 could be extended and the time lines
established by the final rule.

We recommend no less than the two-year time line provided for the
additional final HIPAA rule, that this time is essential, especially if pilot
testing is incorporated into the final rule and the industry wants to implement
without delays or contingency.

Two major issues underlie the need to implement 5010 before beginning
ICD-10 system changes, cost and resource constraints. It would be costly to
build system and develop business processes to accept and process claims
transaction with 4010A1 ICD-9, 5010 ICD-9 and 5010 ICD-10. System designs
constraints, a basic tenet of system designs to implement and test one major
system change at a time. to reduce overall complexity, it is critical that the
version 5010 transaction standard are stable before payors and providers begin
analyzing the testing other significant changes. It will be difficult to fully
identify ICD-10 requirements until stakeholders can finalize the business
process and system changes associated with implementing 5010.

It is critical that the version 5010 transaction standard are stable before
payors and providers begin analyzing and testing other significant changes.
Since ICD-10 is dependent on 5010, effective analysis and design could be
impacted if done simultaneously. Insuring that we have converted to 5010, and
it mirrors the processing of 4010A1 and allows us to validate that we have the
infrastructure necessary and solid on which to base the significant business
change of ICD-10.

In conclusion, the primary concern of Blue Cross Blue Shield Association
companies is to allow sufficient time for implementation, adoption and
stabilization of the 5010 standard transaction suite, for the following
reasons: To avoid derailing the current phase of extensive IT system changes
underway in many of our plans; to allow adequate time to complete all the
phases of implementing a large system change, especially the finalization of
vendor rollout and external testing with trading partners; to incorporate pilot
testing and build in realistic rollout times to avoid costly and confusing
contingency periods and delays, and to complete the implementation of 5010
transaction suite prior to beginning the implementation of the ICD-10 coding
structure.

I thank the subcommittee for the opportunity to discuss the 5010
implementation project, and look forward to answering any questions you might
have.

MR. REYNOLDS: Thank you. We will hold all our questions until we get to the
full panel. Chris Stahlecker from CMS.

MS. STAHLECKER: Thank you very much. I am very pleased to be here and
address the subcommittee to the National Committee on Vital and Health
Statistics, the Subcommittee on Standards and Security. I am Chris Stahlecker,
and I am with the Centers for Medicare and Medicaid Services in the Office of
Information Services. I am with the business applications and management group,
and my division is the Division of Medicare Billing Procedures, formerly known
as the Division of Data Interchange Standards.

Today I would like to share a few insights about our Medicare fee for
service program and how we have been successful with implementing HIPAA 1, and
where we are with starting our approach to HIPAA 2, and then try to address
some of the comments that the committee had forwarded.

In the Medicare program we have over 43 million beneficiaries. We have over
1.2 million providers enrolled in the Medicare program. This results in over
one billion claims being processed on an annual basis.

Let me just say right at the get-go here that I am speaking for the
Medicare fee for service program, and these are metrics based on our fiscal
year 2007 annualized numbers, so we have forecasts until the end of the fiscal
year.

We have 99.6 percent of our institutional claims coming in in the 837
institutional format. On the professional side, which does include both carrier
and DME contractors, we have 94.5 percent of the 935 million carrier claims
coming in in the 837 professional format. The remainder of our claims are
coming in on paper. It is helpful that we have an additional federal regulation
called the Administrative Simplification Compliance Act that gave Medicare fee
for service the opportunity to deny payment on paper submitted claims for a
large majority of our providers.

Since we started to enforce ASCA, we have seen a steady decline in the
number of paper claims submitted. We measured the market forces before we
started to enforce ASCA, and our paper claims were declining on average about
one and a half million per year. After we started to enforce ASCA, which
started in our fiscal year ’05, which is about April of 2005, we had an
announcement, and we saw a dramatic decrease in the number of paper claims
being submitted. It was a drop of about three and a half million. So the market
forces are taking it down about one and a half million a year, with ASCA
enforcement it dropped three and half. Of course, that increased our electronic
claims. We think this is a windfall to the industry, because if the provider
electronically, they would likely bill other payors electronically as well.

We are approaching our target of two million. We are currently averaging
about 3.7 million paper claims. That is annualized for the year.

Back to the electronic view, we are looking at our crossover programs. Most
of our Medicare beneficiaries do have supplemental insurance. Over 570 million
crossover claims are generated. We have about a 99 percent compliant rate with
the 837 institutional and professionals. We do have some fallout, but not much.
Once we implement the eligibility — this is all based on eligibility based
crossover; when we implement our claim based crossover, we expect that target
to approach 650 million claims annually.

The eligibility inquiry side, we have over 160 million eligibility
inquiries processed in the 270-271 transactions. That is about one third of the
transactions that we currently are exchanging. A large number of our
eligibility inquiries are exchanged by direct data entry, telephone IBR. We do
have some additional transition work to do.

We have made a significant infrastructure enhancement to our beneficiary
data repositories and we are now in the process of lining up data content from
some of our legacy systems into our standard transaction, so that our users are
not preferring to take a different avenue such as DDE or phone.

On the claims data side, we have over 16 million claims data inquiries in
the 276-277 compliance format. That is our only exchange, other than DDE, IBR
and phones. So we do have that contingency as well.

We have over 67 million remittances that are produced annually, and 57.9
percent of them are in the 835 and the institutional side, 34 percent on the
carrier side, and the 60.3 remittances that are submitted are in the complaint
835. The remainder of our remittances are in the paper remittance format, so we
do see that as a cost savings opportunity for the program to continue to
convert to the electronic standard remittance advice.

Now that we are starting to approach HIPAA 2, I would like to share a
little bit about what we have done so far. We heard yesterday a little bit
about the technical changes versus the business changes. We started our
approach by analyzing the technical changes. We have done some preliminary
analysis and a side by side comparison of the current 4010A1 and the D.0
version of the standards — not the D.0, the 5.1 version of NCPDP, the side by
side comparison to the proposed standard. We have prepared some documentation
highlighting the differences and the variances. We have even gone so far as to
prepare a draft file layout that we would introduce to our shared system. That
is about as far as we could get, because we do now need to face the business
need, the changes to our use of the data changes that are being made evident to
us in the new transaction.

We have reflected on how we have done our analysis for HIPAA 1. That was
essentially to make sure that our core adjudication systems could continue to
process. We did a gap and wrap approach. Even with our coordination of benefits
we built a store and forward repository for the data elements that were not
necessaRY to be introduced into our core adjudication systems. But today, now
that we start to begin to do that same analysis with a new version of the
standards or the proposed version of the standards, we are integrating our
business units to help us make decisions about what data should be brought into
the systems and how that data may be used.

We are forming teams to understand the potential scope of change if we do
want to make a major overhaul to our systems and bring in this additional data.
We are developing internal CMS cross component teams. We are including our
shared system maintainers. We have our Medicare administrative contractors, our
fiscal intermediaries and our carriers. We are even including our enterprise
data centers, because we need significant change. We need a real understanding
of what will operate in our enterprise data center versus what is going to
still remain operating at the contractor’s data center of choice.

On some of these next slides, we wanted to share some of the questions that
we have started to ask ourselves. Should Medicare use any of these additional
pieces of data that would be available for adjudication, medical reviews, fraud
detection and other purposes? We don’t want to just look at the data that is
required in our core systems. We want to make an intelligent decision about our
future with some strategic planning about the programs that are about to
unfold, and which data we might need to bring in now, and if we should continue
to retain the store forward approach or bring all the data that is submitted in
these new transactions into our core systems.

Today we have the situation that our 43 Medicare contractors select their
won translators. We need to decide if we want to switch to a shared consumer
off the shelf product or update a current translator solution. If we do want to
go down the approach of the COPS product, when will the new version of the
standards be available in those COPS products? We need to converge on our
implementation planning. Should the system interfaces that we will be defining
these file layouts from the new standards into our shared systems, should we
reconfigure them to be X12 or NCPDP based file layouts or continue to have them
look a little bit like the paper claim layout, the old UB-92 layout.

We also want to address where the new data — if we decide to bring it in,
where it should be retained, how long it should be retained. Should it be made
available for direct interacted inquiry, should it be available for our claims
examiner to look at, for example, claims attachment data; how many shared
system quarterly releases are going to be required to implement the full
functionality of all of these new transactions. We have a limited number of
hours, and when we have major changes such as NPI, we need to define the scope
of change per release and have components move forward through our
implementation process, how are we going to address carving our and divvying up
the pieces of work around 5010 so that our shared systems can have their
regular quarterly release schedules, and when will our systems be ready to
support testing with trading partners.

With resource planning, questions we are asking ourselves. We need to
establish this project’s priority. That alone is going to be difficult, given
the plate of work that is in front of Medicare fee for service, but then
maintaining this priority over the multi-year implementation effort is going to
be even more difficult. As you know, with the financial planning for Medicare,
our budget cycle is two years in advance, and although we have requested
funding we are a little unsure if we requested the amount, and we don’t know
when it is going to be approved or if the full amount that we have requested
will be approved.

We also are thinking about how we address limiting change to our current
ETI during this transition, the 4010A1 and 5.1.1. versions. We need to address
bringing our COB trading partners up on the same implementation and cutover
schedule, or what other accommodations we might need to address for them. We
want to think about whether or not the first time transactions — and we heard
yesterday that there are several that are being proposed for consideration in
HIPAA 2, and if they are adopted or promoted as a first time transaction such
as claims attachments or standard error reporting — we heard them called
acknowledgements yesterday — will they be implemented on the same time frame
as the HIPAA 2 transactions.

I want to talk a little bit about the project plan. We do have a project
plan. It is very tentative at this point, which is why we are reticent to put
it up here and in your handout materials, but we do know that the standards are
not yet selected. They are nominated, of course, and we believe that we know
the scope of change that these new transactions reflect. We were suggesting to
ourselves that if they should be promoted in 2000 and the NPRI recommending
these transactions came out in 2008 and the final rule came out in 2009, what
an implementation time line might look like. We did think that given
appropriate testing we would be in a position to tentatively target 2010. But
for a full transition for the marketplace to transition, we would need probably
a year to conduct that transition making the transactions available in the 2011
time frame.

We wholeheartedly support earlier testimony regarding staging the use of
ICD-10 codes as a secondary effort after the transactions have been fully
implemented. So we would like to see having the 5010 D.0 implementation with
the termination of the current transactions that would cause the entire
industry to be ready to implement ICD-10. So we would suggest that as an
approach. We don’t want to lose the sense of urgency and the interest in
getting to ICD-10, but we do want to have an opportunity as was previously
stated for the ICD-10 and D.0 versions to stabilize before we bite off trying
to implement ICD-10.

The issues that were identified by the subcommittee for particular input
today were what the business benefits of HIPAA 2 really were. We do perceive
that the standards have become more standard. We heard yesterday how the
implementation guides have given more user friendliness and more stability to
how they are interpreted.

We have a couple of examples here, the 270-271, the required search and
match criteria and the 837. We have an increased number of investigational
device exemption numbers for demonstration projects that will help the Medicare
program. The 835, we recognize the URL for identifying where a particular
plan’s medical policy may be located as a significant improvement.

While these all are improvements, we do want to also mention that the
maintenance to the 4010A1 transactions continue. One example is this present on
admission indicator that is desperately needed. We have had to modify the
current 4010A1 transactions to accommodate that. We have taken an approach that
will take an unspecified segment, and we have given definition to that.
Although that has been approved through a data maintenance approach in the X12
body, we recognize that the 5010 version will have a different approach. So
that will cause the Medicare program and others who use this to need to make
two implementations, will have to make two changes to accommodate that need,
because of the very different way they will be accommodated in the two versions
of the transaction.

What are some of the lessons learned from HIPAA 1? I think we have heard we
were changing the tires while we were changing the car. There was no
infrastructure — I don’t say there was no infrastructure, but a large majority
was new as we embraced HIPAA 1, with discovery.

Considerations for HIPAA 2 that are driving us to step back and make some
observations is that the Medicare fee for service program is undergoing a major
realignment as we implement our Medicare administrative contractors.

We are unsettling and realigning the provider to contractor to data center
relationships. That needs to be stable in and of itself. We do intend to
complete that transition prior to HIPAA 2 testing. So we are trying to look at
our calendar time opportunity and see how we might dovetail the strategic
implementations.

Also for lessons learned on HIPAA 1, I think we have heard this over and
over again, that the early adopters were the pilot group. The HIPAA 1
transaction, we have to recognize, were not pretested by the industry, and that
did cause the addenda to be necessary, and it was not issued until February of
2003 because of the difficulties we were having with implementing those first
suite of transactions.

So we offer some considerations here. This is just a consideration. We
would suggest that as the standards development organizations are promoting the
work product that there be some requirement before they could be considered to
be eligible for adoption as a national standard, that they have completed some
level of testing.

We think that that could be accommodated through a certification process.
We are not trying to belabor the good work that the standards development
organizations are doing, but we do need to recognize that it is like writing a
computer program and only doing a desk check in implementing that into
production. That is the equivalent of what we have done with our HIPAA 1
implementation. So we would strongly suggest that the transactions are tested
and it is part of the HIPAA transaction process that the transactions must be
certified by the FDO and that users of these, those that claim to have become
HIPAA compliant are able to undergo a certification. We would suggest that the
ANSE standards — ANSE does allow a two-year address standard as a trial use
time frame, and perhaps that might be overlapped with what the FDOs could
publish as a certification process. But we do need some time to have
stabilization, rather than to deploy across the country standards that have not
yet been tested.

We think that some of the key components that are missing in HIPAA 1 were
the standard error reporting, also called acknowledgements. We believe that
standardized trading partner identification is also necessary, and we would
like to see secure transaction exchange using the Internet as part of what is
defined in terms of the world of HIPAA 2.

We understand that there is a little bit of an overlap with these
identification of key components in some of the other national efforts, the
national health information network and the health information exchange, but we
would like to suggest that there be some strategic thinking applied so that
some of the pilots and the recommendations coming out from the Office of the
National Coordinator have room for the HIPAA transaction.

I know that we don’t want to rip out the infrastructure that has been
built, but we don’t want to turn a blind eye to the need for having it
converge. We would like to see some opportunity for that so that we don’t
approach this crossroad and become divergent.

We have many of our personal health records and electronic health records
and HIE initiatives in this fast tracking, but we have not seen the overlap
discussed yet for how the HIPAA transactions will be blended in. We believe
that that is necessary for the provider community to avoid building separate
connectivity capabilities.

The question was asked, is the vendor a covered entity. We would suggest
that we do not want to consider the vendor to be a covered entity, but we do
want to recognize that the vendors may become a community in and of themselves.
As we spoke about certifications, we believe the vendor deliverable should also
undergo a certification. We would like to have a distinct category — as we
have covered entities for provider, payor and clearinghouse, we would like to
have a distinct category created for vendors with specific performance criteria
indicated in order to achieve the HIPAA certification.

We would suggest that the performance criteria for vendors would be beyond
just claiming that they can conduct HIPAA compliance standard transactions. We
would like to think that there is a deployment schedule, and not names based,
but perhaps percent of market share and geographic location identified for how
a vendor would deploy in a set time frame their upgrades for 5010 and D.0. We
would also suggest that vendors in order to be certified would be required to
support current and new versions of the HIPAA standards.

Just as in the Medicare fee for service program, I can tell you we are
still getting requests for waivers for some of our implemented transactions,
because the provider is saying their vendor has disappointed them. They
promised to have the product implemented and they failed to deliver, and now
they are shopping for new hardware to support the new products that they had to
select. So the problem still does exist.

Should there be an overall industry implementation plan? We learned through
WIDI flip that the term plan is ambiguous and is open to many interpretations.
We would support the term road map. We would like to see a targeted end date
for the current standards, so that the industry could converge again and be
ready for ICD-10. We can’t emphasize enough that we believe that the standards,
the implementation guides, need industry testing. It doesn’t do anyone any good
to have one line of business such as Medicare fee for service do its pilot
testing all by itself, because it can only uncover a certain set of issues with
the transactions. We would suggest that it needs to be industry testing. We
would also like to again reiterate that we believe it should happen as early in
the process as possible, perhaps even before the DSMO transactions for redo.

Again, I would take questions, but we will hold them until the end. Thank
you very much.

MR. REYNOLDS: Chris, thank you, very comprehensive. I don’t see Susan
Mateja from the State of Delaware Medicaid, so we will move on to Annette Gabel
from MEDCO.

MS. GABEL: Good morning. My name is Annette Gabel. I am the Executive
Director of Industry Standard Compliance for MEDCO Health Solutions.

For those of you that aren’t familiar with MEDCO Health, we manage
prescription drug benefit programs. In 2006, MEDCO managed more than 553
million prescriptions, including 89 million dispensed at our mail order
facilities. MEDCO serves approximately eight million Medicare eligible members
through its commercial business and Medicare Part D. At year end 2006, MEDCO
served more than 1.3 million Medicare Part D members.

MEDCO also has a specialty pharmacy division. This time around for HIPAA we
will have some new challenges because the specialty pharmacies fill their
claims through the 837. I am providing this information as background so that
you will understand the information that I am presenting, and how am I an
expert in some of the history part of this information.

I led MEDCO’s HIPAA transaction standards project in 2000. MEDCO has been
conducting HIPAA compliance transactions both for NCPDP and the X12 standard
since 2002. MEDCO has created a HIPAA charter for the next version of the NCPDP
and X12 transactions. MEDCO is currently funded for 2007. We started to create
business requirements, and we hope to begin analysis on the transaction
standards this year. We did that because of the House and Senate bills that
were introduced in late 2006. Understanding that those bills are no longer
viable, we still had the expectation that we could be required to implement the
transaction standards by 2010.

As far as why we think we need the new transaction standards, we are
currently experiencing a number of challenges with the Medicare Part D program,
with Medicaid, with new products that are coming to market, and with new
benefit designs that are being demanded by our clients.

I know that testimony has been provided on the current process of bringing
standards forward for HIPAA. There is concern that unless we modify how
transaction standards become part of the HIPAA standards, we will continue to
have issues with the standard not supporting our current and future business
needs, as we are seeing that benefit designs continue to increase in
complexity.

It concerns me when some requests for formats that are being introduced in
the standards development organizations are being asked not to be put forward
for HIPAA transactions. The reason that people are concerned about that is
because they feel that they will need to modify the standards to accommodate
their business needs, and if they become HIPAA standards it will take too long
to allow those modifications to occur.

HIPAA came along, and we are now required to use those standards. I believe
that the industry that is using those standards wants the ability to have them
updated so that we can accommodate the things that we need to do today.

In the current standards, and I am speaking specifically about NCPDP 5.1
and the back standard 1.1 representing the pharmacy side of the industry, I
will touch a little bit on the 5010, but since our experience is mostly with
the pharmacy transactions, what we have seen is that in the 5.1 claim response,
in order to get the information that we need back to the pharmacies, especially
for some of the generic drug programs as well as the Medicare Part D programs,
because we don’t have the fields and the segments that we need, we are putting
a lot of the information in the free text fields. We have a free text field
that goes back on the 5.1 claim response, and we are forced to put information
in there, and because of that we have issues where important messages are not
reaching pharmacies, or the pharmacies are having difficulty understanding the
message because we have to use so many abbreviations.

NCPDP continues to put out guidance to support new requirements, so we have
created — and I believe either Margaret or Lynn spoke yesterday about the FAQ
that we have for the version 5.1 standard. We put out guidance to support new
requirements that come to us to tell people how to use some of the standards
and the fields and segments more creatively, but because it is just guidance it
can’t be mandated, which causes less standardization in the industry because
you have payors requiring different uses of the fields, because there is really
no teeth in the information that NCPDP is putting out that provides guidance on
how to possibly use these fields and segments.

We have had a big influx of COB because of the Medicare Part D program. Our
current processing needs cannot be accommodated. So we need new fields and new
values in order to accommodate the requirements that we have for coordination
of benefits.

On the Medicaid segregation side, we have seen since the last round of
HIPAA transaction standards an increase in requirements for processing Medicaid
segregation. The current back standard does not support the industry needs.

On the X12 side, the 835 5010 has additional enhancements that the 4010A1
does not have. So from the pharmacy side of the world, we were required to use
the 835 standards, but unfortunately none of the pharmacy side of the industry
participated in the creation of the 835 4010, so it doesn’t accommodate our
needs.

For the 834 enrollment standard, because of the requirements that have
since come about because of the Medicare Part D program, we don’t have the
fields that we need in the 834 transaction to accommodate the reporting
information for the Medicare Part D.

These are just some examples of what cannot be accommodated today. There
are many more.

We talked yesterday about education. I strongly agree that in order to make
this a smooth implementation, we have to be proactive in our education. What I
saw last time that worked, but it obviously has to start earlier, is
communication from CMS in the form of e-mail blasts, HIPAA listserves, a
dedicated HIPAA website and the posting of questions and answers. We have seen
some of this with the NPI regulation, so we are definitely moving in the right
direction, but with the last HIPAA transaction standards we did not start early
enough.

Also from the WIDI and NCPDP standpoints, we have created — last time with
WIDI a little bit after the fact, we created listserves. We also created white
papers, and on NCPDP’s side we did also create white papers. I think we have
done a better job at creating the things that we need for NPI, and maybe it was
because we learned so much from the first set of HIPAA transaction standards.
But I think more information that we can have available early will help the
industry get ready.

I also believe that when the NPRM comes out, it should indicate what
resources will be available for education, and it should provide instructions
on how people can participate. WIDI and NCPDP should collaborate on white
papers as they did for NPI. I think that putting that information together and
publishing it and getting it out to the industry is very effective.

Some of the things that we talked about yesterday, and I added this to my
testimony, I agree that right now the industry is very busy with NPI. Hopefully
when the in-test file is available in August as has been promised, the angst in
the industry will subside, and attention can be given to transaction standards.
But the reality is, most companies wait for the NPRM, and that was indicated by
the survey results yesterday. So when we listened to the survey results
yesterday and they said what is going to have you move towards the next
transaction standards, the majority of responses said, when they are mandated.
So unfortunately the NPRM seems to drive industry to start being concerned
about the transaction standards.

As far as the standards implementation approach, yesterday we talked about
time lines. I already have thought about time lines. Working with CMS so
closely in the past few years on both the NPI and Medicare Part D, one of the
things that I learned is that CMS likes for the industry to collaborate and
come to them with suggestions, especially when the industry goes as a unified
front.

So what I would suggest is that in the NPRM, it should indicate that both
WIDI and NCPDP will have SNP committees that will create time lines for the
industry to follow for transaction standards. This may include an approach for
implementation of standards, for example, enrollment may be first followed by
eligibility and claims, but the NPRM must contain an end date that all
standards must be adopted by.

The regulation must allow production pilot testing of the new standards so
the industry is not in a turnkey situation, where the old standard is in place
one day and the next day the entire industry must be on the new standard. If we
don’t plan that approach, there could be a significant impact to all of health
care.

What I would suggest is that we also include a reporting entity. The
industry would be required to communicate their readiness for each stage of the
time lines, and the time lines that I have outlined are internal testing,
external testing, industry testing and production pilot testing. All of these
time lines should occur before the end date of when the transaction standards
must be used in production.

We should also include penalties. I think if CMS put into the NPRM that
there would be penalties imposed if the industry did not meet the published
time lines, we would see more compliant use of the standards.

As far as lessons learned, for NPI and HIPAA transaction standards, we do
not reach the audiences that lag behind. Others were not concerned with time
lines and did not plan accordingly. So again, communication from CMS and
industry groups early and often is very important.

Vendors who should have been concerned about losing business were not
prepared early enough in passing their clients who were covered entities. The
regulation should consider what other entities should be include as covered.
CMS should hold their software vendors in cases where they outsource work
accountable, so the industry is not impacted by CMS meeting their time lines.
We felt a lot of that was the NPI regulations.

CMS’ decisions should be more timely. They should include time lines in the
NPRM that they should follow when their responses are needed or situations have
to be addressed, and of course they should be required to adhere to those time
lines.

We need to put teeth into the regulation. CMS must stay on target. We need
to include as I said earlier compliance dates for them and their vendors, and
we need to publish time lines for CMS’ responsiveness.

We have experienced a delay with the transaction standards in 2002. We are
now experiencing a delay with the NPI implementation. Contingency periods are
very expensive and are usually not budgeted by the entities that are involved
in reaching compliance for these transaction standards.

This time around there are many more standards going into this round of
HIPAA. We must learn from our previous mistakes. Otherwise this implementation
will be very expensive and will have extreme impacts on the health care
industry.

Thank you.

MR. REYNOLDS: Thanks to all of you. We appreciate your testimony, and we
also appreciate everybody staying right on your 20 minutes. So you may get the
gold star from the panel already.

I’d like to open it now for questions. I know that Jeff and Steve have
questions, Simon, Judy. Jeffrey, please.

DR. BLAIR: Thanks. Very helpful testimony. Chris, you pointed out the need
for testing. I’m sorry, the last presenter from MEDCO? Annette, you laid out
four levels of testing. You started with eternal testing, external testing. The
third area was industry testing and then the fourth you said was pilot testing.

I found that helpful. You were saying all that should occur before the
adoption date. So my thinking is, and I don’t know if you necessarily have
answers off the top of your heads right now, but I think those are constructive
suggestions. If we were to adopt them, I think the next questions that come up
would be, how does the industry — and Chris, you mentioned some of the vendors
that did not move quickly enough or were not able to support health care
providers and payors, so that was one of the weak links. So I am wondering if
we were to go forward with this, whether we focus on how do we get the vendors
to respond more quickly to provide the capability to go to a multi-phase
testing plan, in other words, not waiting until the mandated date.

The second is, you pointed out that this testing is expensive, and what
ideas you might have for the industry to fund this pre-adoption testing
activity.

So those are the two questions I have, how do we fund the pre-adoption
testing activities, and number two, do you have any suggestions for mechanisms
to reach out to the industry to provide more effective education on what these
requirements are, so that they can begin to act and implement more quickly.

MS. STAHLECKER: This is Chris Stahlecker speaking, Jeff. There are a couple
of thoughts that we had. One was to separate the testing of the standards
themselves from the testing of a covered entity’s implementation of those
standards.

So what I was trying to convey is that the work product itself needs to be
validated prior to the industry being asked to implement those same standards.
If we could separate them, we could almost begin to consider the testing that a
covered entity would be doing as user acceptance testing of the standard. It
would still be pilot testing of their implementation of that standard, but the
standard itself would have already been validated.

I hope I am making some sense.

DR. BLAIR: Yes.

MS. STAHLECKER: So we would suggest that those two aspects of testing need
to be separated. We would like to think that the testing of the standard itself
could be embraced by the standards development organizations. Funding for that
might be blended into the certification process, where agents that could
credential the standards would be able to charge a fee for the privilege of
conducting tests. The standards development organizations would likely need to
be expanded a bit to require use cases that would then be made available to the
certifying agents. When any covered entity even after the vendor — we would
like to think vendors and software suppliers would be one of the first to want
to become certified, but eventually all stakeholders may want to use that same
set of use cases to run through their implementation as a validation of their
interpretation of their implementation.

So we see it almost as two steps. I hope I hit the topic. Maybe Annette
would like to add on.

MS. GABEL: Yes. Actually from the NCPDP perspective, we have a little bit
of experience in this already. One of the things that we did with the last set
of HIPAA transaction standards was, we had created similar to the WIDI SNP,
NCPDP had a SNP, and we created industry testing. So we had the processors and
usually chain pharmacies. Some software vendors participate in an industry
test, where we created as a group claim transactions for testing purposes. We
involved a vendor who conducted the transactions, so was situated as the
middleman in between the processors and the pharmacies.

So we created test eligibility, test claims, and we initiated those
transactions so that the testing occurred prior to the production date. So as
that testing was happening, there were some things that came up that required
to go in and modify some of the information that we had in the test plan, and
it helped us get a better understanding of what we would see once the claims
were in production.

So I think it is very important that we do have that. When I speak about
that, that is really the external testing in what I was presenting. The pilot
testing, which I think I explained a little bit, but I just want to go into a
little more detail on that.

The way I view, and I believe a lot of others in the industry, the way we
view HIPAA transaction standards right now is that we are required to comply
with the current transaction standards until the new transaction standards are
in place. So without CMS allowing us to do production pilot testing, meaning,
don’t be in a test environment, you need to be in your production system to
conduct some of those new transaction standards, if not all, before the
compliance date, we would be in a situation where we would be doing these
external tests.

They wouldn’t be millions of transactions as you conduct today every day,
they would be a subset, probably hundreds of transactions that you would be
doing in a test environment. So you don’t really get the full impact of being
able to test in a production environment with the number of claims that you are
processing on a daily basis.

I think that is important to be able to do that. Otherwise, let’s say May
1, 2010 you are required to move to the new HIPAA transaction standards; all of
a sudden the whole health care industry has to process these new transaction
standards in their production system without any idea of what that impact will
be.

DR. BLAIR: Thank you.

MR. STEINDEL: I would like to echo Jeff’s initial comments. I thank the
panel for some very thoughtful insights on this process. It adds a lot to what
we heard yesterday, and I think will help in the subcommittee’s formation of
opinions on this issue.

I would like to start off by picking up on a comment from this set of
discussions on testing. As many people are aware, I am involved with HITSPE and
CCHIT, so I have been involved with the certification discussions. At the CCHIT
level, which is at systems, we are starting to realize at the CCHIT level that
we have to go to lower level certification to make it work. We are starting to
realize at the HITSPE level that we have to have pretesting of the standards
before they go into play.

I just got off a phone call conversation last week between CDC and NIST. As
people are aware, CDC has a public health information network. We realized
there needs to be subsystems testing, so we are starting to develop the idea of
federally sponsored test sites for these purposes.

So I think industry is starting to coalesce on this idea of, we can’t just
field test or paper test standards, that we do actually have to provide sites.
So I am hoping that we will move in that direction.

My first question for the panel is kind of a general question. But because
of what I have heard from Blue Cross Blue Shield and CMS, this is mostly
directed to Annette and MEDCO. We heard yesterday about mandates. The comment
that you made that the NPRM is needed because it will force the industry to
start moving, our experience has been that the NPRM doesn’t force anyone to
move anywhere. It seems to be that the final rule is what does it.

I’d like your comments on that statement. The reason I am addressing it
mostly to you is because what I have heard from Blue Cross Blue Shield and from
CMS, they are already starting to plan. They will continue to plan regardless
of the NPRM. It may influence their thinking, but they have started.

Is the NPRM enough? I think that is my question.

MS. GABEL: I think it would be great if everyone started planning. As I
said during my presentation, MEDCO has already started planning as well, so we
are already working on the transaction standards. But I think from an industry
perspective, looking at the industry, a lot of companies will not allow you to
budget for transaction standards until there is something from the government
that says they are going to be required on a certain date.

So if the NPRM comes out and in the NPRM there is a proposed date, you now
have the backing that you need to go to senior management and say, here is the
end date. It is going to take us two years, whatever the amount of time is for
your organization to get there. We need to start working now.

I think until that happens, there are a lot of companies that won’t fund
the project. That is my personal opinion.

MR. STEINDEL: Do the other two concur with that idea?

MS. STAHLECKER: Yes, about the budgets, for sure. In the absence of
testing, the NPRM will open up the standards for an industry-wide desk review.
So the comments that come back from the NPRM are a good indicator of how
problematic the industry perceives the transactions to be.

MR. LAW: I would simply echo the comments that have been made.

MR. STEINDEL: I have some specific questions for each one of the
presenters. The first one is to you. You made the point about, 5010 is needed
before ICD-10 can be approached. I started this questioning a little bit
yesterday; it is just a thought process. What if we could introduce ICD-10 into
the present transaction sets without major perturbation, so we keep 4010? Does
that change your thoughts about 5010 needing to go in place first?

MR. LAW: First I would like to know what that will look like, because it
will be hard to get your head around something that really is not out there.
But I think the key point about the testimony is that, the time it will take
just to go ahead and move to 5010.

So to answer your question, I would like to add on that the state of the
industry is not where it was in 2003. We had some transactions that we were
working towards. What is different about today? Why would it be more difficult
just to do the standard testing, regardless of whether it is a 5010 or a 4010,
different version?

A couple of things have changed. One of the things that we have to realize
is that we have the same set of characters that were involved in 4010 in terms
of clearinghouses, but what we have is, about 15 to 20 percent of the business
that we do is with direct connections. So that is different than what we had in
2003. That will require more testing, because we have more trading partners. It
is not a number that we had in 2003 comparing to the same number that we have
in 2007.

So I just want to make sure that that is one of the reasons why. There is a
triangle that all IT people go through. There are people, processes and
technology. This is just about technology, but the other component to that is
the processes that have to be changed and the people that have to be affected
by it.

Another thing that we look at. We know that we have business associate
agreements, and some of this may require us to examine and look at, do we need
to change some of the business associate agreements in order to go to a
different version.

I don’t know your experience, but mine is, when you have to get legal
involved, which would be required, it again adds on a certain level of
complexity and time. So those are elements that I think we need to consider.

The final point I would add is, if we look at the 835s in 2003, how many
trading partners did we have for that? We were really a small number. Now it is
one of our most popular or most utilized transactions. What does that mean?
Again, significant involvement with the trading partner in testing.

So while you could say that you could go to some other version, less than a
5010, my comment would be, it still requires the basic elements of testing
people in packs and processes.

I hope that answers the question.

MR. STEINDEL: Thank you. That was a good clarification. I appreciate it.

Chris, my question to you. We heard from Dwight that they are starting to
redo their 1970 systems regardless of 5010. What I heard in your talk is, in
introducing 5010 if I can translate it maybe inappropriately, but it is to redo
your 1970 systems as well. Would you do this if 5010 was not put into place?
MS. STAHLECKER: We do have some legacy issues that we need to deal with, yes,
that is a certainty. However, we would like to use real business drivers, real
data business needs to help us determine the scope of change that we want to
make to our systems and when we would apply that change.

So it is a little premature to ask us that question, because we are still
forming our teams, and we are just now introducing our business owners into
looking at the data content in these transactions. I can come back and speak to
that at a later date, but right now we are waiting to have more of our business
owners drive that.

MR. STEINDEL: Thank you. If we just decided, let’s bag 5010 and just say
the NCPDP transactions seem to be a good consensus from what we hear from the
pharmaceutical industry, if we just said, let’s move forward with the new
versions of the NCPDP transactions, would that solve most of your problems? Or
would you still need 5010?

MS. GABEL: It would solve most of our problems but not all, because we do
use the 834, and we did add fields to the 834 enrolment for Med D. So we would
need at least that transaction to move forward.

Some of the PBMs use the 270-271 as well when we are conducting electronic
prescriptions. So there are some — not all the transactions in the 5010 are
used by the PBMs, but there are some that are used. So I would say yes, the
majority, but it wouldn’t help us completely.

MR. STEINDEL: Thank you.

DR. COHN: Like the others, I want to thank the testifiers for what has been
some very useful discussions. Some of this begins to take on a flavor of phase
two of lessons learned from HIPAA, so I want to thank you all.

I have a couple of questions. Christine, I wanted to start with you. I am
reflecting back on the many years we have all worked together on implementation
of HIPAA. Christine had a previous life before CMS which we won’t reference
specifically.

But I was reminded as you were testifying, and correct me if I’m wrong,
that you were part of the claims attachment pilots. I am reminded of the letter
we sent out a couple of years ago about the issue about pilot testing of new
transactions. Could I ask you to wear a different hat and reflect on how that
all worked when you tried to do it? Was it helpful? Did it help move the
industry forward? Just help guide us.

MS. STAHLECKER: I can say, I wish I was able to have participated in the
complete pilot test. However, the funding that came to the contractors that had
planned on pilot testing was absorbed by Y2K.

So at that time, although we did come to the committee and we were prepared
to test, and we had selected our vendor, and we had the software and we trained
on the software and we were ready to start testing, the completion of that test
at that time was delayed. It was reintroduced and was part of the second test,
although I was not part of that.

I know folks who did work on that project, and I have been at HL7 and
listened to the success stories, and some of the issues that they had
uncovered. So pilot testing does still play a very important part when the
standards have not yet been completely developed, if you will. It is unit
testing of the standards development product.

They did discover that dialup will not work for claims attachment. It would
need to be a more robust method of communicating that standard. They did find
some issues with MIME protocol. I won’t get into some of that because I’m sure
it has been presented here before, but I do want to emphasize that pilot
testing of the standards development work product is crucial before we start to
roll it out.

DR. COHN: So your comment is that it may not be quite the same for any sort
of testing of this version, but it would probably be similar sort of testing,
at least on some basis.

MS. STAHLECKER: We were trying to suggest earlier in the testimony that the
industry stakeholders would be incented to participate in a test of the
standards development work product in order to be able to become certified. The
certification would be almost a business requirement in order to sell product
in the marketplace, in order to have a provider want to implement the new HIPAA
version if you will with a mandated deadline. The provider business problem
becomes, how do I select the vendor product to put my business on, my 99
percent electronic claims submission process to Medicare? How do I select a
product? It would be nice if that product could be certified as HIPAA
compliant.

So backing into that, the vendor would need some certification
credentialing criteria. That might be to participate in this industry based
test.

DR. COHN: Just to follow up, because maybe I’m getting confused, it sounded
like you were talking about a test that would be handled more in the SDO level
as a phase one activity. Am I mistaken about that, Christine?

MS. STAHLECKER: No, you are exactly correct. But I would make sure we are
communicating on the phase one term. As the standards development groups
promote or are ready to promote new standards, before they could advance that
out that there would be a certification requirement, it is not just a
documentation exercise. It should be proven in the industry.

We could call upon some of the associations and the groups that would
participation in this industry test, that the culmination of that would be a
certifying agent or agents, and they would be allowed to participate with any
of the standards development organizations.

I’m not trying to suggest the standards development organizations pay a
fee, I’m not trying to suggest that, but that the credentialing be robust
enough to make it be an incentivizer to the vendors to achieve that credential
and be willing to pay a fee for whatever working documents, if that be use
cases, if that be an ability to exchange one vendor’s test with another
vendor’s test, could that be an ability to use some of the transaction
validating tools, but they would be willing to subsidize that in some fashion
in order to achieve that certification.

DR. COHN: I think I have followed up enough on this one, but there is a
slightly different topic I just wanted to reflect on for a minute. This has to
do with the products of standards organizations. We have heard something about
streamlining and getting more involvement by the business community earlier in
the process, but I am struck when I look at two very sophisticated
organizations, both of whom I know have very substantial involvement in at
least one of the organizations we are talking about, X12.

Yet, I am sensing that there is a disconnect about the product that has
come out. If you think about it, with that much involvement, one would think it
would be the best of all worlds that you would be knowledgeable about the
improvements. You would have helped provide input into them. You would be being
supportive of all of the new functionality that is coming out, and of course
you would support it because your people would be involved.

Yet, I’m not exactly hearing that. Is it just early in the morning from
California, or can you comment?

MS. STAHLECKER: I’d like to comment. We would like the standards to go
forward. However, we would like them to be tested before they are scheduled and
mandated to go forward with deadlines.

We would like to have them tested before we begin to embark upon
implementing them. However, in the absence of that, if they go forward and they
are nominated as new standards within Medicare fee for service, we will test
them. But we just need to recognize that they have not yet been industry
tested.

So it is like the life cycle, data processing 101. When you discover change
early, it is less costly to fix that problem. When you discover it in user
acceptance testing, which is what happens when we deploy these standards out to
all the stakeholders to implement, we are discovering problems at the very last
stages of implementation. That is the most costly place to identify a change
that is needed.

So we are just suggesting data processing 101 be applied here, and we bring
the testing back to the earliest point of opportunity which we believe is when
the standards development organization is ready to promote their work product
out. We would like to see some activity there to test these new promoted
standards.

MR. LAW: I come to think about a product like Microsoft. We all have the —
we know we can go from 95 to 97 to XP and Vista. The reality of it is, they
dominate the market and so therefore they can do that.

So when we talk about our product. When we talk about the X12, when we talk
about the changes that are required, they are not upgrades, they are
implementations, because we don’t have that kind of software that we can put on
a laptop and click and it gets automatically uploaded and things change. It
requires again to kick the tires before we go into production.

I think that is what Christine really is talking about. If you look at NPI
as an example, and this is certainly bigger than NPI, I need to make that
clear, in terms of going to 5010, but if you look at NPI, all of a sudden on a
certain date — and we try to get it early on and start it in 2007, in April
for my particular plan, but that is at the end of the process. It is right
before implementation.

So there were some issues that came up and we had programmers and
developers going around and make all these changes. How great would it have
been if we would have had the advantage, because it is pretty much clear that
if we would have had the advantage of having a subset which again is what I am
interpreting from our comments, to have tested it in a production environment
and with a certain number of trading partners and providers, et cetera, how
much richer, how much smoother would that implementation have been. I think
that is what we are all agreeing upon.

DR. WARREN: I think it is interesting that so far my three colleagues have
all hit the same questions I have. But as I was listening to your answers, I
keep thinking back. We have had a request to streamline the adoption process.
Yet, what I am hearing is that we need to add another step. So we need now to
test the standard and certify it, which takes a certain amount of time.

Then we keep coming back to this pilot testing, and we keep coming back to
the original statement of, nobody does anything until it has a mandate. There
is a date out there, and we always miss the mandated date because no one has
done the pilot testing, and no one will do the pilot testing until there is a
mandated date.

So it seems we have this chicken and egg. What I am wondering is, would it
be helpful or would it just create ore chaos in the system if we mandated a
time line for the pilot testing? Everybody is shaking their heads, for those
who are not present. But do you have any recommendations for how we might do
that?

MS. GABEL: I have suggested that there be mandates for specific time lines.
So when the NPRM comes out, it mandates time lines for internal testing,
external testing, as well as production pilot testing. That all has to happen
before the end date.

DR. WARREN: Dwight, before you answer me, you had also mentioned that it
would take you two years to implement. So would that include the pilot testing,
that two-year time frame?

MR. LAW: Yes, it would have to be in front of the two years, as I think
about it, yes. The reason for that is, you want to take advantage of what the
results are.

So if you do the pilot testing and you are in fact finding some changes, as
I would imagine you would, you want to make sure that you had the breadth of
time to implement those things, so the rest of the industry doesn’t go down the
same path.

Really, what Annette was saying, it goes back to Christine’s 101. You want
to have deliverables there. What we have had is one deliverable, so we have
that mandate, and everything has to be done there. I think what we are
suggesting is the phases that Annette has talked about gives you more control
in terms of milestones and more accomplishments, more successes, so that when
you go for implementation it is smoother, it has been tested, and the results
can be achieved in actually a smaller time period, because you have found out
what are the things that need to be improved, and you have done that up front,
not while the industry altogether is making the change.

MS. STAHLECKER: I would agree with those comments, and also add on that one
of the missing components from what we heard yesterday was the return on
investment or cost estimates for doing this implementation. If we did have some
testers, we would be able to measure and see the benefits, and perhaps even
conduct a benchmark.

DR. WARREN: One last question for Christine. You mentioned in your
presentation, when you were talking about your project plan, that one slide
that had plan on it, that what you really wanted was a version of ICD-10 that
was stable. Could you talk a bit about what you mean by stable?

MS. STAHLECKER: I think I meant to say 5010. We would like to have the
transaction implemented, and I apologize if I mis-spoke.

DR. WARREN: Good, because I heard ICD-10.

MS. STAHLECKER: We would like to have the transactions implemented and
stable before we start to introduce processing ICD-10.

MR. REYNOLDS: Many people that implemented HIPAA put up websites. One of
our esteemed colleagues from the past was the father of a lot of this through
Claredi and other things, where everybody could create a transaction and send
it to a website. The website would validate the in. Every player in the
industry could send either in or out. There was some kind of a process. The
website was set up on implementation guides and everything. The website was not
parochial in any way. In other words, anybody that could create the transaction
could send it. Somebody owned the website and so on.

The hardest part of some of this testing is getting somebody in the middle
ready, but these websites were that middle capability. If you took those
entities that were set up in many, many places and in many, many ways by many,
many entities, and you made that somewhat singular so that there was a standard
implementation guide going back to the SDOs, there was a standard
implementation guide, standard approach, this is what you do in the fields,
this is what you do. If you send in this claim, this is the remittance you
should get back and so on.

Then to play off of Steve’s comments, add in something like CCHIT which
would say, if you did certain things on that, then you would have a certified
system, whoever you might be, just thinking, not recommending.

When you talk about streamlining and pilot testing, everybody says
everybody has to get ready. But if you go back to the way it was actually done
in many places, that process was exactly what I think is being heard. So I
would love your comments on whether or not you see that as maybe a way to go
about this.

MS. STAHLECKER: I do see that as a definite possibility. Yes, I agree that
that is how the testing was conducted for HIPAA 1, and that did give each
covered entity an opportunity to be ready themselves, and test independently
from trying to exchange with a trading partner. So each covered entity could do
the equivalent of unit testing.

The unfortunate part is many uncovered discrepancies in the transactions in
the early time. I don’t want to belabor that point. But if we had that kind of
capability, where there were an opportunity to exchange test transactions with
something you refer to as a website, we don’t know that those vendors are going
to step up to that challenge again or what might be put in place to encourage
them to step up to that.

Jeff had asked questions about fees and how we might deploy something.
Perhaps if the certification were a requirement, then there would be interest
in paying a fee to do that test.

MR. LAW: What I recall from that time period is that while that was out
there, the certification came at a point in time, and what the problem was,
many times change occurred afterwards. So while that process did work to build
the Claredi and say you were certified on a particular date, guess what? The
development still required changes. So it kind of like invalidated that initial
certification.

Certainly there are ways to do that. I think that again, you have to have
vendors incented or have a return for them to get involved in doing those kind
of things. But it is absolutely one way to looking at things.

I would just caution, because I remember looking at the dates out there for
some of the vendors and some of the trading partners, and knowing that those
dates were given early and they didn’t subsequently make changes to their
system and go back and get recertified.

MS. GABEL: I think that involving an entity or entities in doing that type
of testing is very valuable. I think we are talking about Claredi, because they
did the —

MR. REYNOLDS: No, I was just using an example. I am not directing anything
anywhere.

MS. GABEL: I know. I’m just saying, they were the ones in the past that did
it. One of the things that they did to get people involved is to say that they
would put your name on their website to say that you certified your
transactions. But there was not a lot of people that were involved in that
certification.

It wasn’t mandated, it was voluntary. So if you wanted to do it, you did
it. But again, if you put something in the regulation that requires that, then
you will get more compliance.

MR. REYNOLDS: That was where I was headed. I was using it as an example to
start the discussion. Jeffrey, you have got the last question.

DR. BLAIR: Dwight, you helped educate us as you listed all of the different
considerations that have to be made that could require either resources or
time, that needed to be considered in these factors in the transaction from
4010 to 5010.

I understood all of them, but there was one I didn’t quite understand, so
help me with this. You indicated that you might have to renegotiate or add
business associate agreements as you move from 4010 to 5010. Since the data
elements are essentially the same, I didn’t quite understand why you need to do
that. So could you help me understand that?

MR. LAW: Sure. One of the things that I hope I said is that we may have to
do this. I was involved — in a previous life I was the director for the PMO
for Majors Health Care Company in Southern California. So for those who guessed
it, I’ll talk offline and confirm it.

I was involved in the negotiations for some of the business associate
agreements. Some of them were very, very specific, to the extent that we called
out specific translations, specific fields, et cetera. So what I am concerned
about is, because of the specificity involved there, if we go to a new release
and we are asking different testing to occur or different changes to be made,
that we have to revisit those documents.

Now, instead of looking in 2003 where there was a subset, now there are
more of those documents. If we have to revisit those documents and we have to
get legal involved, that takes a time frame.

But certainly, I do not know, not being a lawyer, that it will be required.
All I am suggesting is that we will have to spend some time to look at and
examine to determine whether or not we have to make those changes.

MR. REYNOLDS: Thank you to all of you, well done. We are using this clock
up here. I don’t know what your watch says, but I know what that one says. So
if we could come back at 11 o’clock, we’ll take a ten-minute break since we are
running a little bit behind. Thank you.

(Brief recess.)

Agenda Item: Vendor/Clearinghouse Panel

MR. REYNOLDS: Our next panel is on the vendors and clearinghouses. We will
hear first from Bing Herald from HBMA and then Miriam Paramore from Integra
Professional Services, Margaret Weiker from EDS and Linda Campbell from Smith
Premier. If you could keep your comments brisk, that would be good, since we
have a large panel. That would be great.

With that, Bing, please.

MR. HERALD: Mr. Chairman and members of the National Committee on Vital and
Health Statistics Standards and Security Subcommittee, I am Bing Herald,
immediate past president of the Health Care Billing and Management Association,
HBMA. We represent the more than 600 companies in our association who do
trading partner medical billing on behalf of mostly physician practices, but
also some other ancillary, what could be determined as Part B services.

In addition to my responsibilities as immediate past president of HBMA, I
am also president and owner of Medical Business Service, a large medical
billing company based in Coral Gables, Florida. We are one of the largest
privately owned billing services for hospital based physician practices in the
country.

With me today is Mr. Richard Uthrie. Richard is a senior vice president and
chief technology officer of ArborMed Corporation. ArborMed operates in 39
states. They are also a medical billing company. They work directly with all
Medicare and Medicaid Blue Cross Blue Shield plans in their service states, for
all ANSE 4010A1 claims processing, as well as interfacing with over ten major
clearinghouses. I asked Richard to be here with me this morning to assist with
any technical questions that may be beyond my pay grade.

Just a note. Both Richard and I, although we look very young, we have been
in this industry for 30-plus years. Richard and I were vying to be the first
sender of electronic claims to Blue Cross Blue Shield of Florida. I don’t think
it was a competition of any kind, but our company ended up as sender number one
for submitting claims in the country.

HBMA is the only tarde association representing trading partner medical
billing companies, Mr. Chairman. Our members process medical billing and other
claims processing services integral to the health care delivery system. Upon
recent member surveys, we estimate that HBMA’s member companies submit more
than 100 million claims a year for revenues exceeding $15 billion.

Although a large percentage of billing companies work for the hospital
based specialties, billing companies can be found working for physicians in
virtually every specialty as well as for home health and DME providers.

In preparing for today’s testimony we were asked to focus on three core
questions related to the move to the 5010 standards. One is work flow, then
training, and system changes. Before getting into the specifics of our
testimony, I want to say at the outset that HBMA has been a strong supporter of
the move to electronic transactions in the health care environment. We support
the original HIPAA legislation and worked with third party payors, government
and commercial, to develop workable systems. Like so many others, we are
frustrated by some of the lack of progress.

Billing companies find it ironic that nearly every aspect of our business
can be handled electronically. Our companies can order supplies, we can order
and pay for and track their movement electronically, our customers can pay us
electronically, our staff and employees have their paychecks deposited
electronically, and all of those standards seem to exist and flow probably
without hearings like this, because commercial business and business needs tend
to drive those requirements, and they end up just happening.

Virtually the only area that we cannot conduct seamless efficient
transaction processes is in our core business function. As we have in the past
and must ask again why, why has it taken ten years to develop the
infrastructure necessary to move medicines along and higher education along
into this century.

When the 4010 standards were announced several years ago, they were
initially greeted by the industry with great fanfare. Finally we would be
creating a uniform platform for health care claims 837, 835, 276-77, 278. I
believe we heard about the pharmacy standard transactions a few minutes ago.
These visionary standards were supposed to eliminate the numerous claim forms
of the individual third party payors. Gone would be the NSF, which was the
national standard format, and in cynical water cooler discussions became the
national similar format, the national sometimes format in the ways payors ask
for information and transmitted advices to physician.

Unfortunately, our euphoria over the adoption of the 4010 standard was
short lived, and a new term entered our lexicon, companion guides. Soon, every
third party payor including Medicare contractors announced the development of
companion guides to the 837 and 4010A1.

The different ways third party payors wanted you to organize the
information on the 835 were as numerous as there were companies. For example,
the 4010A1 set the standard of 50 line items per claim, but a companion guide
from any commercial payor in the country could, and some of them limited you to
six lines per claim. There are hundreds more examples of these non-standard
requirements that billing services are required to deal with. At one point, it
was estimated that there were more than 1200 companion guides published by the
various third party payors. As Yogi Berra would say, it is deja vu all over
again.

So as we look toward moving the adoption of the 5010 standards, the first
question we were asked by our members is, will this eliminate the need for
companion guides. Unfortunately, our assessment thus far leads us to conclude
that while 5010 will eliminate the necessity for many companion guides and
precludes payors from issuing new guides, nor does it eliminate the need of
some plans to want to continue them. This conclusion is important because it
leads directly to the questions you have asked us to address.

One, system changes. Since 4010A1 became mandatory in 2003, billing
companies, medical software companies and the clearinghouse industry have all
worked hard to develop software and processes that would take standard
information and properly format that for the specific demands of individual
payors. Basically we would develop patches in the system to accommodate the
various 4010A1 companion guides in order to quote-unquote make it work.

I’m sure all the members of the subcommittee are familiar with the old saw,
if it ain’t broke, don’t fix it. But our system was broken when 4010 first came
out. We have largely fixed the problems it created. Billing companies, software
vendors and clearinghouses have spent millions of dollars to try to achieve
some of the efficiencies that were promised by HIPAA. The patches are working.
The staffs have learned the nuances of individual companies, and from an
electronic standpoint we believe the system is functioning.

There is no question that adoption of the 5010 will result in system
changes. In all likelihood, the electronic patches and work-arounds we put in
place will not work with the new standard, and may cause systems to crash.
Billing companies and physicians will incur costs for these systems, both
direct and indirect.

To speak to the direct, the cost of purchasing the software necessary to
meet the 5010 format standards do not have any firm pricing data at this time.
However, based on preliminary discussions with some vendors, we believe the
software development costs could be minimal when mapping the format changes
from 4010A1 to 5010.

The same software vendors tell us that their costs will be significant, but
they will likely have to absorb these costs as an expense of doing business. So
while there will likely be some direct costs, we do not believe that this will
have major impact.

The indirect costs. There will be glitches in the system. As we heard from
the previous panel, in the more than 30 years we have been working in medical
billing, we have yet to see a software or system change that goes over without
a hitch. Problems are inevitable, and this means added costs are inevitable. As
a business, you hope to keep those costs at a minimum, but you have to presume
that there will be some costs involved with the system changes. When I as a
business person consider a system change, I look at what can I expect in return
for what I spend on that investment. Will it make me more efficient? Will it
make business for our members’ overhead go down? Will it make our staff more
productive?

I mentioned earlier that virtually every other type of electronic
transaction we can conduct can be done efficiently, and results come in at
either lower costs or competitive advantage in the marketplace. We don’t do
these things because the government tells us to do them; we do them because
they make business sense.

Billing companies, software vendors and clearinghouses want the more
efficient transaction processing. Third party payors, whether government or
commercial, have little incentive, we believe, to make the system work more
smoothly or at least, there are some cross purposes that could be identified.
Now you ask us to react to new standards which we believe will seriously
disrupt our business operations with little or no improvement and efficiency to
show for this investment. That is really our members’ biggest objection.

So to the question, will adoption of the 5010 standards force our members
to make system changes? The answer is yes, and these systems will be expensive
from a training perspective.

The subcommittee also asked us to address the issue of training. Billing
companies spend a considerable amount of money on employee training. This is
due to the constantly changing nature of the business as well as to employee
turnover. Billing companies and HBMA members alone represent almost 30,000 FTEs
or jobs in this country. All of those folks will touch electronic commerce in
some fashion, because that is the nature of the business, is to get health care
encounters paid for in an efficient manner.

Work flow topics. With the patches and work-arounds we have instituted in
our business, we have made the current system work, as I stated previously. We
are able to submit claims in a timely fashion, get paid on those claims in a
timely fashion, and do this at a reasonable cost. However, as a billing company
we believe that for some period of time, transition to the 5010 will cause work
flow disruptions. Billing staff will be populating fields not previously
captured on the claim form or claims format, and this will lead to decreasing
staff productivity. New information will have to be captured on the claims,
which will also reduce employee productivity for no added payment or benefit or
efficiency.

Billing companies often rely upon others to provide the information that
gets populated into our claims, especially in tertiary care markets like
hospital based specialties. With additional fields to complete, staff will have
to ask for additional information. If past is prologue, collecting that
information will take time and cause delays in submission of these claims.

If as the 5010 field suggests CMS will be requiring more information for
claim payment, then CMS must enforce the chain of data population of the
fields. For example, it is not uncommon for a hospital to collect admit data
but fail to provide that data to a tertiary care provider like a radiologist.
The radiologist has no access to the data, there is a whole interruption of
data flow, and having to go capture information to populate a claim when it
really has nothing to do with the eventual value or remittance on a claim just
seems to be a little silly.

In addition, we anticipate serious problems in getting paid in a timely
fashion by adding all this burdensome data with no benefit to the system. An
example of a recent change in work flow that has caused consternation and
delays in the whole system is the Pecos implementation or the provider
enrollment chain and ownership system, which is the whole credentialing
process. I had a whole elaboration on that, but I think everybody knows what
that is about. It is in my testimony if you would like to see that.

The rollout of that system was supposed to be efficient. It is so messed up
today that we have providers waiting six to ten months and sometimes to a year,
waiting to get their credentialing accomplished. It is our understanding that
that is going to go online. Bill Rogers with the physician regulatory
improvement team announced to us a couple of months ago that it is going to go
online. It is supposed to be this fall. We will anticipate there may be a delay
in that, but we are very excited about having that come online.

We have providers now, to a large degree Medicare beneficiaries, that may
be going unserviced by these very significant delays, and we don’t want to see
that happen as a result of transaction standard changes. Our cynical evaluation
of that was, we were told about the dissemination notice for making the NPI a
public use file back in November. We were told that the dissemination would be
soon. In February we were told it would be very soon. In June it was announced
as imminent, and it is still not out today. So the industry gets a little
cynical about the deadlines and the mandates that have been placed out into our
environment.

Mr. Chairman, billing companies and physicians will be asked to invest
thousands of dollars and hundreds of person hours in a system that will slow
down payments and complicate the system. Again we must ask, for what return?

The rollout of these changes in which numerous entities are involved should
be restructured. We are using the metaphor of a relay race. With NPI, what
should have been a relay was a sprint to a common finish line for everyone
involved. The evidence of the folly of this approach, we have seen reports that
upwards of 90 percent of physicians have their NPI, but fewer than 40 percent
of claims are being processed using it.

Much as articulated by the payor panel we just heard, of the 5010 we
recommend the rollout be structured with health plans being required to adopt
the 5010 standard by a time certain prior to moving to the next phase in the
rollout. There should be adequate testing.

The rest of my part of this testimony is redundant, so I am going to cut
that, but it is readable in the testimony.

What the billing and provider community — the providers themselves would
like to be the anchor in the net relay race if at all possible, because we are
the ones that have to deal with the largest impact if things get screwed up
prior to us taking it on.

The reality is, Mr. Chairman, there are still other interim steps that have
to be taken before we reach our desired goal as a fully automated efficient
claims and payment system. Adoption of the 5010 is a stopping point along the
way, but it is a stopping point that we believe frankly is unnecessary.

There is nothing in 5010 that is going to make the lives of our billing
service members easier. What in 5010 will make us more efficient? What in 5010
will allow us to reduce our costs or our overhead? It is a transitional set of
standards that will still have to be replaced by future iterations, so we still
ask why. Adopting 5010 won’t get us to the finish line any faster. It won’t
accelerate any savings providers might realize as a result of improved
efficiency. Its adoption will raise costs, slow down work flow, make it more
expensive for health care to be delivered. Please do not allow everyone to keep
dropping the proverbial baton.

On behalf of the billing community, we appreciate this opportunity to
testify today. We are happy to answer any questions.

MR. REYNOLDS: Thank you, well done. It is the first time we have been
beseeched in awhile, but we will go with that. Miriam.

MS. PARAMORE: Good morning. Harry, I think I can help you with some
briskness. I’ll defer to some testimony from yesterday.

My name is Mariam Paramore. I am Vice President of Integra Professional
Services. Our organization is a billing company that also provides IT
infrastructure to physicians, offers an ASP Internet access environment, and
also acts as a clearinghouse in some cases. So we are a vendor and have been an
HBMA vendor in the past.

Today my primary role in speaking to you is as the chair of the HEMS Affect
Financial Systems Steering Committee. Some of you may know that Affect merged
with HEMS last year and now has the standing of a steering committee inside of
HEMS.

As an aside, I can also put on two other hats that I have heard in the last
day or two may be relevant. One is as the board chair of the Louisville Health
Information Exchange, that is trying to focus on how to exchange financial and
clinical data in our RIO in our community, and the other is in the Kentucky
statewide HIT adoption committee, where we are struggling with broadband access
in rural Kentucky, and less than ten percent adoption of EMR and a whole lot of
paper still going on in the practice management world.

Thank you for the opportunity to be here. I am click us through these
slides. Again, today my role is as the chair of the HEMS Affect Financial
Systems Steering Committee, whose members are primarily health care
clearinghouses but also vendors and other transaction processing companies, and
also as a HEMS board of directors member.

We are going to talk about three things from a real world impressions point
of view. One, the NCPDP standard 5010 and then deadline dates we have carved
out as the specialty focus of our comments. Look how brisk this is, Harry. We
are not even going to comment on NCPDP. I don’t think anybody could be faster.
It is not relevant to the majority of our membership at this time, so we will
move on to the 5010.

I think that Don Bechtel and others have done an outstanding job of
articulating all of the details of how and why 5010 is an improvement over
4010A1 from a data content and perhaps format and processing perspective, so I
am going to skip through and be very brisk, and show that we have articulated
some of the highlights by transaction type.

We agree that 5010 is an improvement over the 4010A1 format. Here are some
of those highlights. As Bing said, there is a way to pick up a little bit of
time.

To sum that up, we do see it as an improvement. We can go back to Don’s
comments or some of these if you would like in the question and answer time
frame.

I would like to use the rest of my time to discuss this issue of deadline
dates and our real world impressions on what we have learned from HIPAA 1, and
some ideas we have had for moving forward at this time. I think we all know
that everyone waits until the last minute. I think that we understand that by
statute no one has to be any readier than anybody else. So what we are talking
about when we say last minute is all industry stakeholders for all transaction
types do on the same day. That has been discussed widely as to why there are
some flaws in that logic.

We got some recommendations. Like my Dad used to always tell me, don’t
bring me a problem, bring me a solution. So we are going to make a suggestion
in just a minute.

We see three key issues with the two-year deadline process. We don’t think
there is enough time in that process. When I say vendor, I use that term very
broadly. That is to include clearinghouses and vendors of software and other
switches and transaction processing organizations, so that is a broad term.

We do not feel the two-year deadline gives the entire industry in the
vendor sense time to analyze the changes, do the coding, test it and then
implement the changes. Chris did a good job of talking about the life cycle
101, and we agree with some of those comments.

We also feel that it does not allow enough time for the vendors to then
deploy changes to their massive customer base. Even if a vendor isn’t ready,
our experience has been that especially the small provider community may not
buy the upgrade, download the upgrade, load it, have it working in their office
or any version thereof, even if the vendor could say they were quote-unquote
ready.

Then finally, once they get it into their shop, they have to test it
themselves, which is again the equivalent of unit testing and not systematic
testing.

So our bottom line is that two years is typically not long enough to
adequately prepare for compliance for even maybe one transaction type, but
certainly not for our transaction types in a mandated environment.

One of the major problems is that most don’t begin until the final rule is
there. There have been historically some significant differences between the
proposed rule and the final rule. So as business people, organizations aren’t
comfortable expending money to do something they are not sure will have to be
done in the final rule, so that exacerbates the problem.

There has been some discussion of this, and I will come back to this point
in more detail. There has been historically some evidence that federal
government programs have not been ready by the compliance date. We have seen
that experience with Medicaid programs, Indian Health and others. What that
does is dilute the effectiveness of the federal government’s leadership in
putting out mandates and/or enforcing them. Past efforts have not been
successful due to unrealistic deadline dates. We will comment more about that.

In conclusion, our industry experience and historical view based on history
is that simply giving new compliance dates for a new set of standards is not
going to do anything to change what we have experienced so far. The definition
of insanity is doing the same thing and expecting different results. Two years
is typically not long enough to adequately prepare, as we already said.
Regardless of any decision on compliance deadline dates, any deadlines must be
endorsed and in line with CMS’ capabilities to meet them. We feel very strongly
about that point. If compliance dates are not sequenced appropriately, we feel
the industry will fail again.

Before I offer up our suggestion, I will tell you, there may be a few
issues with our suggestion, but we are going to make it anyway. We would be
happy to comment. At least we did our homework to try to identify some issues
with our own suggestions from other peoples’ perspectives.

Here is our recommendation to break this historic cycle. We are suggesting
that the industry convene some sort of summit or collaborative meeting to do a
mega project management session. We would be happy as HEMS Affect to help
facilitate that, working with other groups in the organization.

I am going to tell you a little bit about what our thoughts are around
this. Let me back up just a second. Our key point is, we would like to do that
prior to the final rule coming out. I’ll talk about why that is important to
us. What we are saying is that a project management meeting — and there has
been prior testimony talking about WIDI SNP, how powerful and huge and wide and
deep that was, how much we learned. But at the end of the day it might not have
been as effective as we would have liked because there were certain issues that
we could not get around.

What we would like to suggest is that prior to the final rule coming out,
we have CMS, Medicaid programs, clearinghouses, large providers, large systems
of software vendors and payors. We know that we can’t get everyone, but if we
think about market share and key players, and we get the stakeholders together
around the table to have a discussion, we want to talk about realistic
deadlines for compliance, a realistic plan, and try to create some
collaboration and cooperation.

We would like to first suggest specifically that CMS be involved and
committed to the overall planning process in tandem with this group and the
establish of deadline dates. We would like to ask specifically that this
include CMS operations staff versus regulatory staff. We would like to suggest
that CMS commit to implement according to the final regulation that comes from
this industry-wide group. We feel that is absolutely critical for the plan to
succeed.

We would like to suggest that there is a hole in the process of even
betting everyone to the table. That hole is that there is no trade group that
we have been able to find that coalesces and brings together all of the small
practice management vendors into one voice. We do have MGMA and other things
that coalesce certain voices, but not necessarily all of those small practice
management vendors and/or EMR/practice management vendors as we emerge in the
market.

So a little bit more about what we think the purpose of this summit might
be. Number one, to identify realistic industry compliance dates that are
achievable by the industry stakeholders. This would allow time for gap
analysis, for looking at current systems, for business and work flow, which has
been briefly mentioned in some prior testimony but I think is a discussion unto
itself, operations with the new rule requirements, and to insure that the
required steps are identified and that compliance will be achieved.

We would also like to suggest secondly that this summit identify and
clearly link the activities and dependencies with key milestones required to
achieve these realistic compliance dates. This is project management 101,
finish to start, concurrent activity, et cetera, but with multiple players.

For example, we would like to identify the sequence of activities with
associated stakeholder responsibility, again as an example. Payors and
clearinghouses, clearinghouses being our own group, who receive transactions
may be the first group of stakeholders that should reach compliance, so that
other stakeholders can insure there is someone to receive the transactions when
their systems are in compliance and ready for testing and implementation.

I always use this as my catcher’s mitt analogy. There is a whole lot of
people out there throwing balls. If nobody can catch it and throw it back,
you’re not doing much. So this is getting that catcher’s mitt ready and then
doing the full circle of transactions out and back, compliance along the entire
process.

Then, that we align or stagger — I know those words are contradictory, but
I think we really mean stagger — the compliance date to conform with a
realistic project plan. When we say stagger, we like to stress looking at
staggering by stakeholder type, as we just suggested in the prior example, and
by transaction type.

A couple of other key points to consider. Some of these are a recap. This
summit would help us take a look at the adequate time requirements for
analysis, coding and testing, testing at every level including unit testing and
alpha testing. We also would like to have the software vendors have time for
beta testing with their trading partners. We would like to look at that time of
rollout from software of the vendors to their customers, which I personally
believe is completely overlooked in our planning, at the multi month; it is not
a year plus process for people to get versions and download it and put it in.

We would like to insure that providers and payors have the time to test
internally and then tap into that full life cycle. We would like to insure that
there is adequate time to test externally with trading partners and then to
test the transaction flow when all of the pieces of software are in place for
all the different players.

Finally, perhaps our major point, we would like to see this have some sort
of pilot testing prior to the deadline date. The pilot testing has been
discussed now from several different perspectives, so I think you are hearing
consensus from yesterday and today that some sort of phase of something before
drop dead would be helpful, but I certainly understand the common questions
from the committee here, that how do you ever create a drop dead and an interim
drop dead. It is a difficult problem that we are tackling with here.

One thing we might look at is something like a connect-a-thon that has been
had for IHE, something like that, that could be used as a pilot test. There
have been some other suggestions mentioned by other parties here, but that
could congeal or come together with this idea.

So to summarize, no comment on NCPDP D.0. We support moving to 5010. We see
it as an improvement, and that is why we support it, with the caveat that we
urge that the compliance deadline must be realistic and we have offered up a
suggestion for something that might help to create that. That happened prior to
the final rule, such that the drop dead, but come out in the prior rule guided
by this summit process, this industry wide sharing process.

You have my information. I’ll be happy to take questions when you are
ready.

MR. REYNOLDS: Good, thank you. Margaret, welcome back.

MS. WEIKER: Thanks. I’m Margaret Weiker. I am the Director of the ETS
Business Exchange Services product, which provides scalable B to B solutions
and services that allow our clients to better communicate, connect and exchange
data with our trading partners. In the health care industry sector, this
product is a clearinghouse.

ETS is the leader in transforming the health care industry to our products
and services, aimed at reducing costs, driving quality and improving lives. ETS
has been delivering solutions to the health care market for almost 45 years.
With more than 7500 health care employees dedicated to serving approximately
250 clients in 21 countries, ETS touches more than 200 million patient lives
daily through our services and solutions. Our clinical and administrative
applications support 38.4 million patient visits per year, and we perform 2.4
billion health care transactions annually, including one billion in health care
claims.

ETS supports the adoption of the following HIPAA standards: The ASC X12
version 5010 transactions and the NCPDP telecommunications standard version
D.0, that standard version 1.2 and the Medicaid segregation standard version
3.0.

The primary value in moving to the next versions will be the ability to
process ICD-10 codes, bringing the level of detail and severity needed to
handle medical management and reporting needs. The new versions must be in
production and precede the adoption of ICD-10.

In addition, the current transactions are over six years old, with
approximately one thousand industry change requests submitted via the DSMO and
directly to the standards organizations. These changes will reduce the number
of work-arounds and improve the usefulness of the transactions.

For example, the ASC X12 and 278 is rarely used today due to the inability
to submit payor required data for prior authorization. Other examples include
work-arounds for anesthesia data in the 837 professionals, dental servicing
provide address in the 837 dental. Sequencing of loops and inconsistencies of
situations has required extra mapping efforts. Support of the MPI, multiple
methods of submitting compound drug claims, coordination of benefits processing
and Medicare Part D processing.

The final rule needs to establish a clear timetable and milestone targets
with a turnkey approach to implementation. A phased implementation approach
introduces additional support and cost as old software is maintained and
additional conversion bridges are built to support the phases. An overall
industry implementation plan would create severe coordination problems, and the
whole implementation process would only proceed at the rate of the slowest
adopter. Establishing realistic dates and adhering to them is the best way to
insure the necessary budget allocations and work, including translation,
validation, software vendor readiness, is accomplished.

Readiness can be tracked through the reporting of testing results and dates
to a third party entity such as WIDI or the FDOs. A set of complex test cases
and transactions would be useful for internal testing.

While there may be overlap with other HIPAA changes or other health care
initiatives, this will always be the case, and there is no best time to begin
other than now. Most vendors will need nine to 18 months to incorporate the
changes into their products, and covered entities will need nine to 12 months
after vendor readiness to install, integrate and test before the compliance
date.

It is critical that education and outreach begin immediately. While all
parties involved should be more aware of the size of the tasks and
dependencies, detailed analysis is needed in order to properly allocate
budgets, resources and plan for system changes. A CMS weekly e-mail newsletter
or notification containing key postings and/or URLs would be beneficial to the
industry as well as the HIPAA list serve with a robust section. The standards
bodies would be responsible for addressing questions surrounding the standards.

The biggest mistake to avoid in the next version of the HIPAA transaction
sets is the introduction of the addenda version at the 11th hour in an
indeterminate time frame. By creating a long term schedule and sticking to it,
all vendors and covered entities will benefit. The long term schedule would
establish the adoption every X or N years of a new version of the ASC X12 and
NCPDP transactions, which would allow for planning, budgeting, staffing and
execution to be approached in a deliberative rather than a relative fashion.

In conclusion, I would like to reiterate that EDS supports the adoption of
the next version of the ASC X12N and NCPDP transaction set. We believe the
adoption process should begin immediately and that a firm clear timetable be
established, adhered to and communicated to the industry.

I would like to thank the subcommittee for the opportunity to testify
today, and welcome any questions you may have.

MR. REYNOLDS: Thank you. Linda.

MS. CAMPBELL: Good morning. My name is Linda Campbell, and I am with the
James Smith Corporation representing QS-1 Data Systems, which is a pharmacy
system vendor, and the Smith Premier Services Division, which is a pharmacy
benefits manager. I have had nearby 25 years experience now in the corporation.
Eighteen of those years were in the pharmacy sector, developing software. We
have as a corporation now over 55 million claims representing well over 7,000
independent pharmacies throughout the country. There are some small chains that
we still look upon as being the independent pharmacy arena.

With 23 years of experience dealing with NCPDP, I have represented NCPDP
and my corporation as a work group co-chair heavily involved in the process of
developing these standards, and I am very proud to be here today to speak to
you on behalf of my corporation and NCPDP.

Regarding the benefit that we see to the next version of each of these
transactions, I would like to speak specifically to the E1 eligibility
verification. We feel that that will bring additional benefits to the pharmacy
and help to streamline their processes. The coordination of benefit claims will
certainly bring a lot of relief to the pharmacies in being able to submit those
information claims correctly and receive correct information back. That will
not only benefit the pharmacy, but it will also benefit the patients who are
involved in these transactions.

It will also be better to have a new standard way to process the one time
fill to the Part D drugs that are not on the new plan’s formularies. That is
creating an enormous workload for the pharmacies today. We also look forward to
the fact that LTC information, more of that information will be embedded in the
claims, which will also facilitate their processing, the claims submission and
the reporting after the fact of information.

We currently have transactions programmed into the systems, but we do not
feel that they are being utilized very heavily. Specifically the B3 rebill
transaction is not being used very much at all. Again, that is a process
situation we can’t control very much at all, but we do recognize that it is not
being a large factor in the implementation today. The eligibility transaction
verification is also not used very much from the pharmacies, but it is used
frequently to the true facilitators. The N1 information reporting is not used
by the pharmacies as much either, but it is used between the facilitator and
the payor for the Part D information.

We have not made any work-arounds in the processing and the utilization of
these standards, but we have had to make work-arounds in the process in the
pharmacies themselves. Sometimes that means that we have had to break up
transactions and submit them two times just in order to get the information
submitted correctly.

Regarding the suggestion that there should be an overall implementation
plan to insure successful implementation, I disagree that there should be an
overall implementation plan at the industry level, especially if it pertains to
the implementation of pharmacy and CPDP D.0. In the pharmacy industry, the
sheer volume of the claims being transmitted, combined with the fact that the
pharmacies will not dispense the medication to the patient without having
received a reply from the claims processor regarding the proper copay and
payment information, has caused a lot of the pharmacy software vendors,
pharmacies and PDM claim processors to have time to conduct a slow and
methodical implementation. The initial test period should include voluntary
participation by payors and pharmacies, using a mix of CANS tests, ones that we
have designed that we know will test our systems and the processes that are
involved completely.

We also should insure that certain scenarios and claim types are tested,
but we also need to make sure that we allow the pharmacies to process the
claims as they know them to exist. Ideally, periods of several days worth of
claims should also be able to be reprocessed to compare the actual results with
those of the test system, giving everyone an ability to compare results and
justify or correct any differences.

In the next phase of the testing period, I envision a phased-in approach
with a few test sites, payors and pharmacies b being both represented, using
live data, real processing. Those live tests should be conducted for at least
three payment cycles to allow for the complete claims submission and claim
payment cycle, using the 835 or paper remittance process, to be completed.
After a test period of actual implementation such as I described, any problems
or issues resulting from deficiencies or errors in the standard should be able
to be corrected or changed as necessary before having the standard mandated by
CMS.

Software vendors have commitments to their software users and customers to
maintain their compliance with the NCPDP standards. They all must incorporate
the standards into their software systems, otherwise they would not be able to
sell their software to the pharmacies. That being said, the magnitude of the
project to prepare the software systems to make use of the new standard, while
still supporting the old standard, will differ from one vendor to the other.
That is not something we can predict, because we must also remember that these
claims systems that are active and utilized in the pharmacies and in the PBM
processors today are part of an all-encompassing business process system, so
there is much more going on in that system than just claims.

QS-1 and Smith Premier Services have a long track record of always being
ready to test the new version of the standard as soon as there are pharmacies,
payors and processors willing to work with us. What we cannot be controlling of
is the cost and the time involved at the pharmacy level to update their
computer systems due to the unique factors at each pharmacy. Many of the other
panel members today have spoken to this issue, but it cannot be disregarded
that we are especially in my corporation representing pharmacists who must pay
for the pharmacy upgrades other than being software upgrades or even computer
upgrades because their system — as you know when you have a home system
yourself and you want to upgrade to the new Vista, maybe the actually computer
itself will not incorporate it, it just can’t run on it, so you have to buy a
whole new computer system. We face that same issue with the pharmacies. They
sometimes are working with three year old or older pharmacy system computers
that do not contain the space nor the memory to accelerate that system up to a
new version. So there is a lot of cost involved even down at the lower pharmacy
level.

Regarding a phased implementation, controlling of a phased implementation
should be mandated — I do not believe we should be mandating that, but
especially not by transaction. That will unnecessarily complicate things. It
will be extremely confusing to the pharmacies, and I think it will also cause
more errors. The end result, we are complicating and unnecessarily aggravating
the people that we serve the most, and that is the patients who are entering
our pharmacies to receive these medications.

I prefer to allow testing first by those willing to participate and share
results with those in the industry regarding any issues needing attention and
changes that must be made in the standard, and then let the natural market
forces work to roll out the changes. Of course, some future date must be
mandated by which all entities must be using the new standard, but we must keep
in mind that other factors are involved, not the least of which are the right
now expenditures to be borne by the pharmacies, system vendors and processors
for software, programming, computer upgrades and the like. These expenses can
be significant and have to be considered when setting your compliance dates.

It is impossible to declare that everyone in the entire industry must begin
the use of a new standard on a particular day. We have dealt with phasing
through natural business and industry processes for over 20 years now.
Controlled phasing would unnecessarily increase the cost of support and
definitely create confusion throughout the industry.

As far as my company is concerned, we have extensive abilities to conduct
internal testing, including comparisons of data from existing live systems
which would be reprocessed under newer systems and claims standards to insure
like results.

We have participated in external testing with our partners in the NCPDP
industry. As Annette Gabel from MEDCO alluded to earlier this morning, we have
had great results by collaborating and working together to try and insure that
our pharmacy systems are operating correctly, our PBM systems are operating
correctly, payments are made, reversals are processed, and we have the liberty,
especially with the 3.1 version which was many years ago, of making the
modifications we found necessary, so that we weren’t all forced to utilize a
standard which had some errors and deficiencies in it.

It is hard to predict the time period necessary to insure complete testing
of a new standard. Not every situation can be simulated in a test situation.
However, once alpha testing has been completed, beta testing can be
implemented. Pilots should again be long enough to insure that all the back end
processes are also working properly and in concert with the new standard.

I am going to skip numbers seven and eight, because we have touched on
that, and in the interest of time we have all spoken to the need for everybody
to be able to test and make modifications.

Regarding tracking the progress of vendors and other entities, while you
can have some mechanism by which vendors and entities can report their
progress, I firmly believe that the natural marketplace forces, competition
between vendors, data needs of the processors and other continuous software
updates, have facilitated the natural migration to the newer versions of the
standards. Vendors and processors may be ready to process claims using a new
standard, but until the pharmacies upgrade their systems to be able to provide
claims in the new system, nothing will happen.

What is most important to monitor and measure in terms of the readiness?
The measures are different for every entity, however, the bottom line is, are
we processing claims correctly, are we sending responses back correctly to the
pharmacies to convey the information that needs to be conveyed, and is it
correct, and are we able to report our payments correctly, deposit the money
correctly, provide the correct remittance advices. All of that has a bearing,
and some of that is not even addressed or hasn’t been addressed when we first
went into HIPAA 5.1.

How can an application vendor demonstrate that their software can process
the standard? The only way to demonstrate that is to test. I have always found
that the vendors have been eager to test their software. We must keep in mind
that when a prospective customer is reviewing a vendor’s system for purchase,
one of the questions that is always asked is, are they compliant with the
newest version of the standard. You are not able to sell your system if you
cannot answer that question correctly.

What is the impact of a vendor not being a covered entity? I don’t see that
there is an impact. It has been a very few times that a pharmacy system
processor has not wanted to test with QS-1 because we haven’t been a covered
entity. We have gotten over that speed bump in the road, and been able to
continue along. But I don’t see that a pharmacy system vendor nor a PBM needs
to be a covered entity.

As far as education is concerned, while it is beneficial to have listserves
and white papers and information and education coming out from NCPDP, regarding
the pharmacies, they look to their pharmacy system vendor for their source of
knowledge and information.

How does that pharmacy system vendor become an expert in what is going on
with the standard and how to translate that information down to the pharmacy? I
feel that it is imperative that the organizations, the standards developing
organizations be that resource tool. I find from my own experience with over 20
years of experience in NCPDP, that NCPDP is definitely a resource tool for
everyone in the industry to gain information about utilization of standards,
but you cannot substitute pieces of paper or websites and telephone calls for
the actual participation in the organization. People need to get in and have a
voice. I think NCPDP has been extremely open and accommodating, so that we make
sure that we do find consensus.

I think that regarding the changes that we see coming along in D.0, while
it is hard for any company to justify modifying their software to accommodate
changes, we need to do it in order to be compliant and be able to market our
software system. So in the end result, we look forward to implementing D.0,
because it will streamline the processes in the pharmacy and make things easier
for our constituents that utilize our software systems.

The mistakes HIPAA again have already been alluded to by the other
panelists. They were now allowing enough time to test the standard, and not
allowing us to modify the standard and correct problems that we saw in our
testing. So I implore you to allow us to begin the testing with D.0 and to have
the opportunity to correct and modify where we see needed.

The time period needed? We don’t know. We have created a standard that we
felt in our infinite wisdom would address the needs of the industry, but until
we begin to utilize the standard and see how it looks within the process —
because pharmacies being an online real time claim happening in three or four
seconds, it is an entire process, so we need to make sure that we haven’t
adversely impacted that process, that we have not only improved it, but we have
helped it along the way to utilize and helped the patient. That is the bottom
line here.

In conclusion, I thank you for the opportunity to testify, and I am open to
any questions that you might have.

MR. REYNOLDS: Thanks to everyone. I am going to ask a question this time,
because I need some clarification. As each of you were discussing, you said the
right amount of time, the right sequencing, the right testing, pilot testing
and other things. Margaret was the only one that put a time frame in the
ground.

We heard earlier throughout the last two days, two years from the time of
the final rule and so on. So as this panel has presented it very logically
using Chris’ earlier IT 101, but as you look across the whole industry, the
right amount of time for testing and the right sequencing and others is in the
eye of the beholder a lot of times.

So if any of you can go one step further and talk about time frames,
because on the one hand we hear two years and that may be too short. If the
word proper is thrown in, there is no time frame, because proper may be in the
eye of each beholder.

Then the other thing — and I really appreciate the aggressive positions;
that is part of what is very helpful to us also. But as we have written our
letter at NCVHS, and not everybody is using all the transactions, so if you
have the proper amount of time, do you have any idea if that will improve the
number of people that would use all the transactions, which as our letter said
may return a better ROI than if we took longer or did what we did. So I open
that to the panel for discussion.

MS. CAMPBELL: I think that utilization of all of the transaction standards
is independent of our ability to predict. It depends on your business need, and
that will depend on the vendor and what specific market niche they address.

Regarding the time for testing and then final implementation, I think we
have all touched on the fact that it must include all facets, so therefore in
my time period it has got to be at least three cycles, a billing, a payment and
a reversal cycle. We are looking at testing amongst our industry players of at
least three months in order to allow that cycle process to completely play out.

But that is just testing. If we have any modifications that we have to make
to correct, then we are looking at at least several more months. I think you
need to at least allow for 12 to 18 months for that testing and final standards
development process to take place, and then the implementation time frame, I
think it is safe to say, depending on vendor specifics, 12 to 24 months for
them to be able to incorporate those changes and begin to work them out. Then
we have the unpredictable factor of what time frame is involved in getting it
to be installed in the marketplace itself. You always have your early adopters.
Then you have the ones that say it didn’t hurt several hundred sites, now I can
implement. Then you always are going to have the people you have to drag
kicking and screaming to the table. But without some time period to force those
people there, they would never be there.

Margaret, do you have any other things to add there?

MS. WEIKER: Our comment about getting a summit together and having input
prior to the final rule is to answer that question more precisely, Harry, by
taking into account what is reasonable from each stakeholder’s perspective, and
then trying to map that to a master schedule — I know it sounds very
aggressive, but to try to map that to a master schedule that would have
dependencies.

We know it would be a subset of people that we might be able to get
together, and they probably would be the early adopters. But it would at least
be a comprehensive view of deadlines that are laid side by side and then
interlinked where the dependencies would be, such that you could say when you
calculate that out, it is three years and two months, or it is four years and
18 days, whatever it would be. But that would be one of our hopes for that
outcome.

MR. HERALD: I guess my only comment goes back to part of our testimony.
That is, if we can define the world in which we will live once the standards
are fully implemented, and what value we are creating, I think that the process
can speed up or slow down as a result of that incentive being in place. An
incentive doesn’t have to be cash paid out to a contractor or to a pharmacy or
to a software company. It can be in the form of other types of incentives.

For example, if you have adopted the 5010, then you will not be subject to
having to complete a companion guide alteration for — I don’t mean to pick on
Blue Cross Blue Shield, but Blue Cross Blue Shield of the 54th state or
whatever, we don’t pick on anybody, but if there is some incentive there, it
will bring the players to the table more readily.

Basically we are all in private businesses here, trying to make a profit
and pay taxes. So with the taxpayers as the largest purchasers of health care
in the country, they tend to drive a lot of the market. But even they contract
with private companies to process claims.

So whatever the return is going to be, there must be some kind of value out
there and if there isn’t, then nobody is going to want to make it happen,
anyway.

DR. COHN: I am listening to the conversation, and I just had a question or
two about all of this stuff. The vision of HIPAA, I just want to remind you of
at least what was contemplated, was that there was going to be this big initial
implementation, and then on a predicable basis, every year, two, every three
years, taking some defined length of time, not multiple years, to implement,
there would be updates that people would be able to accommodate.

Now, so far what we are talking about is an update. We are not talking
about the penultimate, we are not including ten or 12 new administrative
transactions. Yet I am hearing multi-year implementations, I am hearing things
that are making me wonder whether two years is enough. Maybe we need five years
for this implementation, based on some of the conversations.

I contrast g with the fact that each of you, and actually everybody in the
country deals with new versions of ICD and CPT every year. They get them around
now, and somehow are able to implement them by the end of the year. The whole
industry doesn’t fall apart, doesn’t come to a screeching halt. So maybe you
can help inform me of your views on this. There is this general disconnect.
Maybe you can help clarify this one for me.

MS. WEIKER: It goes back to a predictable process. I have implemented CPT,
ICD 20 years ago, and every year in May or in April I know I am going to get
this update that I have to take the process and blah, blah, blah. It is
predictable.

We basically know the type of changes that are going to be made, new codes
are going to be added, some are going to be deleted, some may be changed, kind
of thing. We are going as an example from like 4010A1 to 5010. This isn’t just
a year’s worth of changes that have been made to these guides.

For NCPDP D.0 this is like five years worth of changes that are being
incorporated. Some are very major changes. For example, NCPDP has removed the
optionality from all of its fields except for a few defined specific
situations. So payors hopefully paid enough attention when those guides were
balloted to make sure their business needs could be met by the situation.

The 278 is basically an unusable transaction as it exists today. What we
have done is, we will accept it, but we give a canned response because we can’t
process it, because it doesn’t have the data that is required to do a prior
all. So it is like, now I have got to go — and we will gladly automate and
re-engineer. It will save money to do that, which is why we would need some of
these new versions and some of these new changes.

It is just, the others are very predictable, very timely. You know when it
is going to happen. You know it is a year’s worth of changes, you understand.
Now we are looking at at least five years worth of changes and a thousand
different types of changes. It is a massive undertaking.

MS. CAMPBELL: If I could add to that, Simon, you speak to the ICD-10
changes; those are more or less file changes, whereas the changes that we are
looking at with X12 and D.0, they are process changes. So they are not just an
expansion from 50 records to 60 or you delete a few. It is whole processes
involving the pharmacy or the medical practice, whichever.

MR. REYNOLDS: George, you had a question? If you would introduce yourself,
please?

MR. ARGUS: Sure. My name is George Argus, and I am with the American
Hospital Association. I have a question for the vendor panel. I know when we
first were introduced to the HIPAA standards some years ago, there was a lot of
talk about translation software and the focus of translation software in
helping to deal with moving from one version to the other.

I’d like to know what your thoughts are around the use of translation
software to make that change, and whether the vendors themselves would support
the current version as well as the previous version during the implementation
period or migration period.

MS. WEIKER: I know that we will support both versions at the same time. We
do use some third party tools in our solutions. When you look at translators
you have a variation of what they do and how they support. Some will take the
base X12 standard which these HIPAA implementation guides are based on, and
just do that. Then you have to go in and make some modifications to that.
Others will incorporate those actual TR-3’s into their products, to where you
don’t have to go in and code it yourself, so to speak.

So there is a different variation based upon some of those third party
tools, but I know that we will support both versions at the same time. It is
going to be necessary, because not everybody is going to be ready at the same
time no matter what. MS. CAMPBELL: And not all vendors use translators, either,
at least third party solutions. They may write something that, yes, technically
we could call it a translator, but not everybody uses them. But yes, we need as
Margaret says to support versions of the standard for some period of time. At
some time it becomes prudent to discontinue the use of an old version, but that
is certainly not even within a six-month time period. That is probably 18
months or longer, way longer, to support an old standard.

MS. PARAMORE: George, I think from the HEMS Affect perspective, most of our
members who are clearinghouses and translators by their nature are already
supporting multiple formats. Some are 4010, some are 4010A1. Then you have got
the 31 flavors of the companion guides, the permutations back and forth.

So it would certainly be inside the standard business model to create and
to retain the ability to translate between multiple versions.

MR. ARGUS: This is helpful for me just to understand, but I just wonder
whether this would help mitigate the difficulties in moving to a new time
period.

MS. PARAMORE: It is ironic if that would be the case. One of the promises
of administrative simplification is the need for less translation between
Egyptian and English and French and Spanish and whatever. But I think it would
still be possible. There are certainly lots of third party stand-alone
translator software vendors who will be in the business of helping to make that
happen.

DR. WARREN: Mine is for Margaret. In your testimony, Margaret, you said
that one of the ways we could predictability of change is within the standards
themselves, roll them out on a certain time schedule.

One of the things that has hit me in all the presentations is the number of
changes between 4010 and 5010. How would the standards organizations go about
figuring a predictable rollout of these changes?

MS. WEIKER: You go back to our streamlining paper that we developed, X12,
NCPDP and HL7. We each had that project plan. We each looked at the project
plan that was in there and said, we can all basically adhere to this. There is
a little bit of difference in some of the processes and procedures with each
organization in regard to balloting versus public comment periods and those
type of things.

I know from an NCPDP point of view, we can basically put out a standard
once a quarter. We do it today. But nobody is going to implement it because of
HIPAA unless there are other business needs, workers compensation, those type
of things.

So I am going to refer back to that streamlining paper that says we can get
this predictable. We are willing to get this predictable. Our membership wants
it predictable. We just need to figure out how to get that done either through
legislation, rulemaking or whatever. Even if it is every two years we can put
out new standards, so to speak. This major upheaval that we are all hearing
about and even talking about ourselves doesn’t exist anymore. It becomes an ICD
update, a CPT update, an NBC update versus the sky falling.

MR. STEINDEL: I really don’t have a question, I just have an observation. I
appreciate what this panel has illuminated from the vendor perspective and
everything. But the one thing I would like to note, and this has been a common
theme starting yesterday and I will just abbreviate it very simply, that is,
when we consider making recommendations, one thing that should come across very
clearly is that we should ask for test, test and then test again. I think that
has been the very clear statement that has come across from everybody
concerning the past implementation of HIPAA, that there was not enough time to
allow for testing before systems went live.

DR. BLAIR: Miriam, I was really impressed by your idea of trying to set up
some entity to provide some coordination of the testing. We have heard all of
the different levels of testing. In the 5010 we have got eight or nine
different standards, not just one. You have got different aspects or use cases
that might be involved.

I can’t see how this can be done without some entity coordinating the
testing of the 837, the 835, the 270, without some entity coordinating this it
just looks to me like it would be just a prescription for further delays and
frustration.

I’m not sure what entity that should be. I think there is a number of
candidates that could possibly play that role, whether it is HEMS or WIDI or
whether even the SDOs themselves might be able to be part of that.

But the other observation that I had as I was listening to you, I’m afraid
that if we want it to be done in a two or three year time frame, with all of
the steps that are involved and all of the different industry segments that
have to work together and all of the investments that have to take place, I’m
concerned that the coordinating entity could do it strictly calling on
volunteers. I think there needs to be some financial support for that
coordinating entity during this transformation process.

May I have the reaction of the panelists to the observations that I just
made?

MS. PARAMORE: I would agree that having that staffed voluntarily, whatever
that overarching entity might be, would be a particular challenge. I can speak
from very relevant experience in the Louisville Health Information Exchange,
which is completely voluntary and coordinates all stakeholders in the industry
without staff, but it is only for one city. It is extremely time consuming to
get that group together to talk about what we are doing in our home town.

So I agree. I’m not sure where that funding support to have the machine
would come from. We did not approach that in our comments, as you noted. I’m
not exactly sure either who the convening body might be. But HEMS Affect would
be happy to take a leadership role in whatever might come from this to help to
make that happen. It could certainly put together some financial budget
projections or something based on numerous experiences with HEIs and convening
bodies that we have done in other arenas. So I would offer that perhaps as some
additional research we would be willing to supply to the committee if you would
like.

DR. BLAIR: Can any other panelists give us feedback on this?

MR. USRY: This is Richard Usry with HBMA. The testing certainly is one of
the most important facets of going through this process, whether it be the
5010, the modification of the 4010 or whatever. The idea of having a testing
organization that would monitor that capability could be a very useful tool for
everybody in the industry.

The problem that I see is, it becomes an enormous — like a blooming onion,
it has got tentacles everywhere. But it has to have the ability — and I am not
as privy to the pharmacy operation as these people are, because we don’t deal
in it in our industry, but from the standpoint of the pharmacy and all the
tentacles that have got to go out once you do some testing and they go out, it
just becomes enormous to get down to the individual mom and pop pharmacy that
has got to validate the transaction and issue the prescription. So that entity
could just be huge.

But in looking at this whole process of the 5010 versus the 4010 versus the
4010A1, the 5010 in our opinion from the HBMA standpoint is, the 5010 that
affects us is merely additional data elements that need to be added. It is not
changing the whole schema from the beginning. It is just adding data elements.
That is all this is.

Now, granted you are going from A standard to standard B. But it is just
adding data elements, that is all it is doing. It is not restructuring the
entire operation. It is not starting from scratch and coming out with a new
implementation. It is adding data elements. It is like you order a car and you
decide at the last minute, I want this added. Well, if you order from General
Motors, they got it in their computer system, they add this change, and then
somehow it appears on the end product at the end. That to me is what we are
doing here.

Now, granted there are transactional information that is needed in these
other industries to accommodate things. But a lot of them are just adding
information. You said the 278 is not valid today because you don’t have this
additional information. Add the piece of information. Why have a new standard?
Let’s add the information and add it to the transaction set. It is a fairly
simple change. It is not rewriting software from scratch. It is adding a data
field.

When we talk about the ICD-10, there is no reason, no reason that the
ICD-10 can’t be put into 4010A1. There is no reason. Yes, you may need a
category code. Add it in the data element, but why reinvent the wheel? Just add
the data elements. That is the way we look at it. If we have got to modify
something, modify it and move forward. We are talking about coming up with new
deadlines in two years and three years and five years or whatever it is. It
just doesn’t make sense to me. I have been developing software for over 30
years, and I don’t see it. I just don’t see it, I’m sorry.

MR. HERALD: The only comment I wanted to add was, if we are going to find
an oversight committee, coalition, what have you, I think soon the world is
going to run out of these vernaculars of HEMS and Affects and CCHITs and the
ABC soup. Let’s just find one that is willing to take it on that already exists
so a new infrastructure doesn’t have to be created in order to oversee it.

HBMA sits on a health care administrative simplification coalition. It is
an initiative from MGMA. Everybody can think of a great reason why that should
exist. Here we are in the nation’s capital; you can probably find hundreds of
associations of all these different industries that sprout up just as a result
of a panel that interviews the industry.

I like Mariam’s idea. Let’s find someone who has a passion for it, champion
it and then make sense out of it. That is my only comment to Jeffrey.

MR. REYNOLDS: Don Bechtel, you have the last comment, question, whatever
you are here for.

MR. BECHTEL: I’ll try to be brief. I know we are ready for lunch. I came up
here with one question, and after listening to the last comment I have two
questions or comments to make, probably more comments than questions.

The first comment in response to the last person speaking. The 5010 changes
are pretty much what he was asking for. When we look at 4010 and we want to
make a change to it, we do just that. We change the 4010 standard to
accommodate what we need. But we can’t call it 4010 anymore. We have to move it
to a new version because of the way the standards are constructed.

There is a great deal of technology behind the creation and development and
delivery of standards in our industry than just simply adding a data field to
it or adding a component to it or even adding a data value to a code set. These
things are contained in databases that are versions so that we have consistency
in our industry as to how a version exists. If you want to add something to a
previous version, you are creating a new version. This is how the business
works.

I would also point out that even a very simple change like adding a
qualifier to an existing version requires significant industry change. It
requires changes at the vendor level, it requires changes at the user level, it
requires changes at all the implementations of that software to support it. So
no matter how we try to do this, there is change.

Yes, we want to minimize it. I think that is why the SDOs are asking for
more frequent updates that is more timely and predictable, so that we don’t
have these large gaps and tremendously large amounts of change. But we can’t do
the laser surgery that we were asked about yesterday.

The other comment that I wanted to make. I have listened today to a couple
of speakers suggest that there is no benefit to 5010, and they don’t wish to
move forward, or the would like not to. I want to ask the question, what is the
alternative?

When we think about changes to standards that have no benefits, the
industry for health care is larger than just one segment. We have an X12, we
have HL7 or NCPDP, many constituents of our industry there, and they represent
the payors, the providers, the clearinghouses, the vendors, the billing
services, whatever, and they want to make a change. They need to have a
modification to support a new business requirement or to add data that they are
required by regulation or whatever. They have to come to X12 and ask for it,
and X12 will accommodate those changes. But if we don’t implement them, what is
going to happen? Where will these people go if they need to have business
improvements or business data that they don’t have today, and we don’t
accommodate by implementing the changes that they have come and looked at at
the SDO table, we are setting ourselves up for some alternative. We will see
more companion guides come out to accommodate the need.

When you can’t address it with a companion guide because the standard no
longer supports it, you are going to see proprietary standards come out, or
modifications to the standard that aren’t the standard at all anymore. I don’t
think it is sending us in the right direction.

I think what we really need to consider is, modifications to standards
represent the broader good of the industry, and they are all constituents who
benefit from these. I think there is tremendous benefit on the provider side.
There is clearly a benefit on the payor side for these standard changes that we
are proposing. Vendors and service organizations perhaps rarely see real
significant benefit from this, other than we can provide the services to our
customers who will benefit from it. I think that is the point I wanted to
relate to.

MR. USRY: Don, I understand what you are saying about standards, I
understand that, but what we look at is, what is the end point, when is it
going to stop? When are we going to have the final standard? Give us the final
standard and let us implement that, and take the two years, three years. But if
every couple of years we have got a new standard to implement, then we are back
at this type of meeting going through the same process. She is saying one
thing, she is saying one thing, she is saying something else, and it is just a
never-ending product.

Give us the final. Tell us what the final standard is. Then let us
implement that. Granted, there is a difference between adding a field and a
version, but all we are doing here with 5010 — and you have to be honest about
this — is adding data sets, adding fields. We are not rewriting it, we are
just adding fields. That is all we are doing.

So what we need to see is what is our return on investment. Yes, there is
some return on investment in the pharmacy system, I’ll grant you that. Yes,
there is maybe return on investment in some of the transaction sets. But it is
working right now except for some of these areas that they need data. It is
just a data element. Add the data element. Give them the ability. Call it A2,
call it A6, whatever you want to call it, but why reinvent and go through
implementation and go through all this stuff? It just doesn’t make sense. There
is a lot of cost being implemented that I don’t see is needed.

MR. REYNOLDS: With that comment, we will break until 1:30 by this clock.

(The meeting recessed for lunch at 12:24 p.m., to reconvene at 1:25 p.m.)

A F T E R N
O O N S E S S I
O N (1:25 p.m.)

Agenda Item: 5010 Provider/Pharmacist Panel

MR. REYNOLDS: Welcome back. Our first panel this afternoon is the
provider/pharmacist panel. We have from the American Dental Association Robert
Ahlstrom, from the AHA Karen Raines, and from the MGMA Larrie Dawkins. So we
will just go ahead and go in order on the agenda, unless you guys have worked
some other agenda out. If you would start, Robert, we would appreciate it.

MR. AHLSTROM: Thank you very much. Mr. Blair, Mr. Reynolds and members of
the subcommittee, I want to thank you as a member of the American Dental
Association testifying on the issues related to the successful migration of the
next version of the HIPAA standards.

My name is Robert Ahlstrom. I am a practicing dentist from Reno, Nevada. I
have been doing this for 30 years. I have recently transitioned to teaching
fulltime, so I have a different perspective, one from an old time practitioner
and then seeing what our young students are doing.

The ADA is one of the world’s oldest and largest dental professional
associations, and it represents over 150,000 dentists, or almost 72 percent of
those dentists in clinical practice. Since HIPAA was signed into law in 1996,
the ADA has been monitoring the development and adoption of these regulations.
Through our Division of Dental Practices and Office of Standards
Administration, we participate in the standards making process to insure that
the interests of dentistry are incorporated into health related standards. We
are continually researching and developing resources to help dentists make
informed decisions on managing their practice and providing for the oral health
care of patients.

Taking the subcommittee’s questions in order, the first one deals with
business benefit and other transactions that are currently implemented but have
limited or decreased utilization than other transactions. Potentially there are
many benefits to dentists related to the implementation of the HIPAA standard.
These are listed, and I would just highlight probably the bigger ones involved
with this.

Dental offices’ computer systems will be compatible with those of
hospitals, physicians and other plans that conduct business with them. Referral
inquiries will be handled easily. However at the present time this is very
labor intensive, unreliable and mostly not compatible, and certainly not
interoperable.

The other thing that will give us a great deal involved with this is that
dentists will have a more complete data set of the patients they are treating,
and even better care and decreasing overall administrative costs. This will
result in more accurate information hopefully and decrease our errors of
admission.

There is also some potential benefits to our patients. Patients who are
seeking information on enrollment status or other health care benefits will be
given more accurate, complete and easier to understand information. Consumer
documents will be made more uniform and easier to read, hopefully. Patients
will have the ability to see what is contained in their medical and dental
records and who has accessed them. Patient records will adequately be protected
through organizational policies and technical security controls. Consumer
correspondence with insurers about problems with claims will also be reduced.

However, the ADA does have several concerns regarding the potential
migration from version 4010, in particular with the 837 D dental implementation
guide for claims. We do want to go on record and indicate that the ADA is
currently working collaboratively with X12 and various other industry groups on
potential modifications to address some of these concerns.

However, we also believe that NCVHS needs to have a full picture of the
potential effects of adopting this new version of the HIPAA standard. First,
the ADA asserts that NCVHS and others should note that there are concerns with
the coordination process between X12 and content committees that need to be
addressed. The ADA believes that this process could be improved and continues
to work with other industry groups to look at these concerns.

One of the ways that the ADA believes improvements can happen is through
the development of MOUs or memorandum of understanding between the various
participating organizations. The ADA is currently working on an MOU with X12N
so that the ADA’s standards committee on dental informatics will be able to
contribute to the content for future dental transactions for X12 messages. This
type of a relationship is similar to what we have accomplished with HL7. The
SCDI provided the content for the electronic claims attachment and an HL
message is now being developed. In addition, HL7 collaborated with SCDI on a
harmonization of some of the SCDI and HL7 standards. The ADA also has an MOU in
progress with ASTM for the development of other standards.

Second, the development of standards such as the 837D 5010 applies to a
defined community of users, i.e., a subset of the whole. That being said, the
need for focused expert opinion on the development of such standards must rely
on those most affected by them. The ADA believes that there is room for
improvement in the development process for such standards. One example that was
discussed is the ability to correct the guides in a timely fashion. Third, the
ADA is pleased that they have been able to work with X12 and to gain acceptance
of our proposal to consider the reference to HCPCS procedure modifiers in the
5010 version of the 837D as a type one errata. I was chairman of the ADA
standards committee on dental informatics, and I have to say that this
subcommittee has taken some acronyms to levels that we didn’t even do in dental
informatics. In the original version, the ADA successfully argued that HCPCS
modifiers cannot be used with the CDT codes because those modifiers were not
approved for use for dental claims and not mentioned as part of other HIPAA
regulations as a recognized code set for dental claims. In addition, HCPCS is
not included as an external code set in the 5010 837D. However, this process
has been resolved, but it still has taken many months to come to a conclusion.

Fourth, the ADA is also collaborating with other X12 groups and industry
representatives to address another concern for dentistry. In the 5010 version
of 837D, there is a reference to the use of diagnostic codes. Diagnostic codes
are not typically applied to dental claims unless the services are covered by a
medical plan.

The ADA recognizes the difficulty faced by providers in reporting oral and
maxillofacial and dental anesthesia services. However, it maintains that the
situational use of diagnostic codes does not address this problem.

The ADA is currently developing a compromise change request for the
subsequent version of the standards. However, should the 5010 version be
adopted, it will present problems to dentists whose vendors may not be clear as
to when diagnostic codes should be used.

The ADA also continues to address other solutions that have been proposed,
such as adding tooth numbers or codes for tooth numbers to the 837 professional
TR3.

The second question has to do with the overall industry implementation
plan. The ADA believes that there should be an overall implementation plan to
insure successful integration and migration from version 4010. The ADA also
believes that all members of the industry should participate in this process to
insure successful implementation.

There is no question that this will be very difficult to do, but we also
realize that if this is a phased plan, additional costs will be passed on to
the provider instead of a one-time overall cost increase. It seems to me if we
are looking at simplification, this would defeat some of the primary edicts of
the simplification plan.

What are the milestones for an implementation plan? The ADA believes that
there are several concerns related to the issues raised in the questions, as
well as others.

Software vendor readiness. Some practice management system vendors have not
yet updated their software to include NPI, and may have similar problems with
updating the next version of HIPAA standards in a timely manner. In addition,
some vendors are not willing to update dental office current versions, and are
requiring that dentists purchase new versions of the hardware and software just
to accommodate the NPI.

For upgrades to the HIPAA standards, the same situation will present a
significant cost to dental offices. One dentist recently contacted the ADA and
said the current vendor was not going to update his current version in use
today, and instead the dental office would be forced to buy a new system of
$30,000 to $40,000 or return to submitting paper claims.

This is not uncommon with the migration that has occurred with practice
management spenders in the dental field. There has been a rather substantial
group buyout by vendors so that we have a very limited number of dental
software vendors.

Phased implementation. The ADA believes that implementing a phased approach
to the migration of the standard, either by transaction, industry group or some
other classification, would most likely put additional monetary staff and time
costs on providers and their offices.

As mentioned earlier, many software vendors are charging dental offices for
new systems instead of upgrading existing software. If this is done separately
for each transaction, costs would be significant.

Trading partner flexibility. Most of the electronic transactions that are
sent from a dental office go through some type of clearinghouse for translation
into an appropriate format. The clearinghouse function could be accomplished by
routing a claim to the practice management system vendor utilized by the dental
office, and then the transaction may go to a clearinghouse or eventually a
payor, or the transaction may go from a dental office directly to a
clearinghouse.

These vendors are considered trading partners. These trading partners
should be capable of transmitting all the appropriate data elements required by
most HIPAA standards.

Testing. The ADA does not have the ability to track the status of testing
phase for transaction compliance of dental claims. But based on the comments we
have received, the ADA believes payors/clearinghouses are behind schedule and
believes that there need to be assurances that this will not occur with updated
HIPAA standards.

As with any technical or IT development, testing would be appropriate for
the majority of SDOs that are developed if these are truly consensus based.
However, the cost is an issue that will have to be finalized and worked out.

Payment continuity concerns. Dentists are concerned about several patient
issues, including revenue cycle management, payment monitoring and the
availability of error resolution plan.

Data requirements. There are also concerns related to new data requirements
that will be required with the migration to the next version of the HIPAA
standard, including payor crosswalk solutions from version 4010A1 to legacy and
other data systems and availability and provider practice management systems.

Once again, I greatly thank you for the opportunity to present information
relative to dentistry’s position on the migration to the migration of the next
HIPAA standards.

MR. REYNOLDS: Thank you, we appreciate it, Robert. Karen.

MS. RAINES: Thank you, Mr. Chairman and members of the Standards and
Security Subcommittee. My name is Karen Raines, Assistant Vice President of
Regulatory Compliance Support for the Hospital Corporation of America, commonly
known as HCA.

HCA is the nation’s largest nongovernmental system with 173 hospitals and
other health care facilities. HCA is an active member of the American Hospital
Association and the Federation of American Hospitals. Also, I represent the
Federation on the National Uniform Billing Committee.

I would like to thank you for the opportunity to present testimony today on
ASC, X12N, 5010 standards. HCA believes 5010 contains many improvements to the
current standards. One of the key benefits of 5010 is facilitating ICD-10DM and
ICD-10PCS. Also, we believe the more definitive language in 5010 will eliminate
many of the variances in interpretation in health plan companion guides today.

The new standards should be adopted as the replacement to 4010 and 4010A1
as soon as possible. At HCA, we can support 5010 electronic claims attachments,
ICD-10, the implementation of the national health plan identifier and other
regulatory requirements as final rules are published.

An industry wide implementation plan should be set forth in regulations.
Thes should include requirements with regard to testing and should contain a
clear timetable for implementation. It appears that CMS’ best position to track
progress regarding implementation and to provide education, perhaps using the
listserve process.

As further background for the subcommittee, HCA outsources our support of
the 837 claim to an external billing vendor. External billing vendors will not
begin the process of implementing new standards until definitive guidance is
published by HHS. These billing vendors have the most insight as to individual
provider and payor readiness when standards change.

With regards to the electronic remittance, we support much of that work
internally. While we transitioned our hospitals to the current version of the
835 electronic remittance advice, consistent with the pace outlined by the
health plans, it took over two years for HCA to migrate to the current
standard. As recently as six months ago, we worked jointly with the health
plans to revise lingering issues with the implementation of 4010 and 4010A1.

Extensive end to end testing is critical to the successful implementation
of 5010. Health plans have been reluctant to test the providers, as evidenced
by both the current test and the NPI. Health plans need encouragement to be
cooperative with such testing.

We encourage the publication of an NPRM to address the adoption of 5010 by
the end of this year, with the final rule being published in early 2008 and a
compliance date of 2010. A 2010 compliance date for 5010 permits transition to
the next version of the HIPAA standards one year ahead of implementing ICD-10.

A phased transition to 5010, similar to what the NUBC approved for the EBF4
could be considered as an option. Health plans, clearinghouses and vendors
should be required to transition first, followed by a dual use period and a
mandatory compliance date for all covered entities.

Enforcement of the compliance date is of greatest importance. With EBF4,
some state Medicaid programs still cannot project an implementation date. State
governments must insure Medicaid programs transition according to schedule with
5010.

In conclusion, we are supportive of the adoption of the next version of the
new transaction standard. Thank you again for the opportunity to provide
testimony today, and I welcome any questions you may have.

MR. REYNOLDS: Thank you very much. Both of those were very concise and
insightful. Larrie Dawkins.

MR. DAWKINS: Mr. Chairman and members of the committee, the Medical Group
Management Association, MGMA, is pleased to submit testimony to the National
Committee on Vital and Health Statistics Subcommittee on Standards and
Security. My name is Larrie Dawkins. I am the chief compliance officer for Wake
Forest University Health Sciences in Wake Forest University, located in
Winston-Salem, North Carolina. I have spent 35 years in medical group practice
and compliance and regulatory affairs.

MGMA was founded in 1926 as the nation’s principal voice for medical group
practice. MGMA represents nearly 21,000 managers who lead some 12,500
organizations and have 270,000 physicians practicing in those organizations.
Approximately 80 percent of the MGMA members practice in ten physicians or
fewer as far as group size is concerned.

In my testimony today, I will focus my attention on the issue of the
forthcoming implementation of the 5010 version of the electronic transactions
mandated as part of HIPAA. In addition to looking back at the physician
practice experience with the implementation of the 4010 version of the
transaction standards and the national provider identifier, we will also look
ahead and offer a series of recommendations that may assist the industry in
implementing the new 5010 version of the transactions.

If there is a theme to my presentation today, it is that 5010 is a clear
improvement over 4010A1 and is needed, but if it is not implemented
appropriately and in a cost effective manner, it will create additional and
significant burden on providers, especially small and medium-sized physician
practices. It is not a question of, should we change, it is a question of
managing the change.

Why do we need 5010 transactions? Almost as soon as we had done 4010, the
regulations were released, and it appeared that there were many problems that
needed to be solved and modifications that needed to occur. In the period,
designated standards and maintenance organizations, DSMOs, along with X12, have
reviewed nearly a thousand industry change requests. Countless hours from
dedicated DSMO volunteers have produced a superior set of HIPAA and non-HIPAA
electronic transactions.

The 5010 version addresses many of the problems encountered with the 4010A1
version. We believe that moving to the 5010 transaction will produce an
augmented and clear set of implementation instructions, improved data content
and business functions, important clarifications of NPI instructions, cross
transaction consistency, more consistent implementation by trading partners,
reducing the reliance on proprietary trading guides, support for the potential
move to ICD-10 codes, and enhanced industry consensus on critical transactions.

With many covered entities unable to meet the original 4010 compliance
date, CMS responded by issuing first an extension and then a contingency plan
for all transactions. In addition, the contingency plans are still in effect
for some of these standards.

Why was the industry unable to meet the deadline? From our perspective, the
lack of education and outreach from CMS, difficulty in securing provider
buy-in. Reliance on non-covered entities for compliance was a major concern.
Providers found out very quickly that their practice management vendor and
billing system vendors are critical partners in the compliance effort.
Unfortunately, these vendors typically are not covered entities and in many
cases move slowly to upgrade the provider systems. These upgrades in many cases
were expensive, and in some cases vendors would not upgrade older versions of
their software, forcing practices to purchase the newest versions of their
software. Providers also encountered vendors that refused to allow the vendor
to go directly to health plans with their transactions, but instead wanted them
to use proprietary clearinghouses, and of course incurring fees for these
transactions.

Proprietary data requirements for health plans. Of large concern to our
providers is the data content compliance for the 837 and of the 270-271. With
the 837 claim, the industry went from 400 plus claim format as quoted in the
final rule to more than 800 versions of the 837P as identified in the
convergence projects. The lack of uniformity has forced many providers to
utilize clearinghouses in order to have their claims paid. On the eligibility
side, some providers have been receiving only yes and no to their electronic
inquiries, and were forced to pick up the phone to access information regarding
copays and deductibles. This failure to report the necessary data may be
compliant with HIPAA, but it is certainly not in the spirit of the regulation.

No piloting of the standards prior to the national rollout. Some of the
problems associated with the 4010A1 version of the transactions could have been
identified prior to full nationwide implementation had the government initiated
a comprehensive pilot testing of the standards. This is something that CMS is
doing with the pay for performance model. This seems to have worked much
better.

Few reliable cost-benefit analysis of HIPAA. The tables included in several
of the NPRMs are not believable by most observers. They were either
underestimates of the cost and overestimates of the savings. With a more
accurate description of the costs and benefits, practices could have had better
planning and budgeting to implement the process.

Of particular importance to physician practices is the necessity to modify
or replace practice management and/or billing software. Many group practices
reported they experienced significant challenges getting their software
upgrades for the 4010 versions of the transactions and later for NPI. In some
cases, years after the promulgation of the final rules, practices have not been
able to take full advantage of all the HIPAA transactions, as their software
still does not offer the ability to incorporate transactions such as
eligibility verification, claim status, and remittance into the work flow of
the practice.

Costs of the practices for 4010 and NPI modification range from zero, as
the practice’s maintenance contract with their vendor covered federally
mandated changes, to several hundred dollars for software modification to many
thousands of dollars to replace older software with versions that could be
modified to generate NPI. Upgrade and replacements of practice management
and/or billing software often requires practices to replace hardware as well,
as the new software requires faster processors and larger memory capacities.

MGMA recommendations. CMS should expand provider and vendor education
activities, should establish 5010 pilot projects. CMS should conduct
comprehensive pilots for 5010 transactions utilizing results from the pilots
prior to national implementation. Successful pilots can jumpstart the vendor
community and produce supporting products in a timely manner that is expediting
the process.

As an aside, I would just say, in my state of North Carolina there is a
group called the North Carolina Health Care Information Communication Line,
that brings vendors and providers and clearinghouses to the same place. I’m
sure they would love to do pilot projects and assists in this process.

The 5010 standards must be staggered as far as their compliance dates, and
allow sufficient time to insure successful implementation. Significant
migration of the new standards such as the 5010 standards should first require
implementation by health plans and clearinghouses. Implementation by health
care providers should follow at a later date. This would delineate a
significant testing period without focusing all covered entities to funnel into
the same compliance date. Staggering the compliance dates may forego the
necessity for CMS issuing contingency plans.

Consideration of a sequencing rollout of the 5010 standards. As the
industry experienced with the 4010, certain of the transactions are more
critical to business processes. Claims, eligibility and remittance in that
order were for many providers the focal point of their implementation efforts.
CMS should consider a sequential rollout of 5010 in recognition of the
importance of these three transactions.

NCVHS assessment of industry readiness. Just as you did successfully with
NPI, we strongly encourage you to hold regular hearings and work with industry
groups to assess the readiness and levels of implementation challenges faced by
each of the various industry sectors impacted by the change to 5010.

Reduced variability in data content. HHS should make every effort to reduce
data content variability from health plan to health plan and the necessity for
voluminous companion guides. Removal of the exceptions for federal and state
programs. When the original rule was published, there may have been
justification for permitting certain federal and state programs to continue
using proprietary transactions and allowing them to exempt them from the
requirements under HIPAA. However, it has been seven years now, more than
enough time to modify software and allow programs that utilize the standard
claim forms to be required to adhere to the data content requirements.

Full implementation of 5010 before implementation of ICD-10. If the
industry has learned anything from the very complex and costly implementation
of 4010 and NPI, it is that these types of massive industry overhauls cannot be
achieved easily or in a short period of time.

Simultaneous implementation of 5010 and ICD-10 will be an impossible task.
Such an effort will surely overtax the ability of the industry to comply with
the standards and divert scarce educational, financial and human resources from
patient care.

In conclusion, we strongly encourage HHS to adopt a very different approach
to implementing of these transactions than they did for 4010. Should they fail
to do so, the industry most likely will be mired in a similar protected and
costly implementation that we experienced with 4010 versions of the
transactions and with NPI.

Again, in order to achieve successful implementation of 5010, we must manage
the change process better than we have done in the past.

We appreciate the committee’s interest in this important topic, and are
available to answer questions.

MR. REYNOLDS: Larrie, thank you. Excellent testimony from everyone. I would
like to open it now for questions from the group. I’ll go ahead and start.

Some of you have heard the other testimony today. As I look at yours from
an ADA standpoint, the issue of making sure you were included in the X12
negotiations and what was in there, everybody talks about some kind of a
transition as we go. So what kind of time frames are you talking about? You
mentioned testing and education and so on. So as you go through it, what is
that sequence to you? The comments are about sequence, but what is that
sequence and what is the possible duration of that sequence?

MR. AHLSTROM: From the ADA’s standpoint, we have already instituted time
lines. For instance, we know that we are going to have to have some sort of
diagnostic code setup. We have a task force with NHII to help the profession
migrate towards that. We also resurrected our initial diagnostic code event for
SNODENT, with the realization that there may be other diagnostic codes that we
are looking at. Our guideline for that is approximately around 2009.

The other problem that we have is with our practice management vendors.
They have been telling us that they are driven number one by mandates and
number two, by the profession, by our actual practicing dentists. Our
practicing dentists don’t go, when are you going to be ready for 5010, because
most dentists have no idea what 5010 is, nor any idea what 4010 is, nor do they
particularly care. They want at the end of the day to press their buttons and
have everything occur transparently or relatively seamlessly.

A lot of this has happened because of the work that you folks are doing and
other things that are making this occur. That is one of the things we wish to
continue to do, working with other standards developing organizations such as
HL7, X12 and ASTM.

MR. DAWKINS: I guess it is hard to put a date on the time frame, because as
all of us have said, we are driven by entities that are not covered, which are
the business partners that we have that provide software and so forth. But if
you said that you could wave your magic wand and make those folks comply, then
for the practices to move there, in our case it is very dependent upon what we
learned in 4010, is, some practices were ready, some payors were ready, some
clearinghouses were ready, but there was a large number in both of those areas
that were not ready, which made the whole system not work.

So I think a practice can move as fast as its vendor can move. The problem
is that moving to full implementation requires various sets of the industry to
be ready. So for me to sit here and predict how fast a payor can move to being
compliant, I can’t do. But I can say a practice can move extremely fast,
depending upon what their company is able to do for them and what their
clearinghouse is able to do for them.

MS. RAINES: I would agree with Larrie’s comments from a hospital
perspective. I know there has been a significant amount of discussion about
various types of testing, various stages of the testing process. But a true end
to end testing to emulate some type of a production environment from womb to
tomb, so to speak, you can be talking as much as 18 to 25 months.

So with an NPRM by the end of this year if at all possible with the final
rule published as early as possible in 2008, and then 18 to 25 months from that
point forward.

DR. COHN: Thank you all for very good testimony. This is a general question
to all of you, and one we may ask Don Bechtel to comment on, representing X12.

I want to use a case in point, but I think it is more of a general
question. Throughout today we have been hearing from people talking about the
need for testing at various points, preferably within an SDO prior to
completion of a standard, as well as potentially industry testing.

Now, having said that, we are in a situation now where there has actually
been a completed standard that has come out that is identified as 5010, that
has gone through the complete SDO process, and has been approved and brought
forward by the DSMOs.

Now, in the case in point, I just want to use it as an example to
understand how things might work. Robert, you have identified and commented on
a number of issues you have with the dental transaction that you commented on
during the course of your testimony. You commented about HCPCS and you
commented about uses of diagnosis codes, all things that I would presume are
part of the 5010 standard currently, and it made it through the complete
balloting.

Now, I am trying to figure out how these changes occur. Changes do occur to
standards after they have done completely through the process. Or whether you
are contemplating that the issues that you are describing are going to be
handled in 5050 or the next version, and what gets handled where.

I am going to ask Don to help clarify that. I am trying to figure out if we
would recommend any sort of a testing piece, whether it shows up as
improvements to this standard or whether it is improvements to the next version
of the standard, trying to avoid 4010A or B or C.

So Robert, can you tell me your understanding?

MR. AHLSTROM: I think I do. The big concerns we had were mostly under the
professional claims of 5010. There was not tooth numbering systems placed in
there. While our oral surgery colleagues do medical procedures in a hospital,
there is no way of putting tooth numbers down on the 5010, nor I also believe
on 4010.

That by default means that it has to go back to the dental claim form,
which in actuality is wrong. It should go under a professional claim, not a
dental claim. So there is a transcription that has to go back that is being
denied, and then has to come back to medical, then they say it will work.

That is why we came up with MOUs with X12 and HL7 to try and get to this
point. We would be developing some of the content that would be necessary in
order to provide for those transactions in a manner that would in essence
satisfy all the requirements that would be necessary for submission.

Does that make sense?

DR. COHN: It does, except that you are now dealing with all these currently
in the 5010. I was just trying to figure out, were you anticipating that these
things would be modified prior to more general release?

MR. AHLSTROM: I believe we were under the impression that 5010 would not be
modified until it went to the 5010A or B or whatever.

DR. COHN: So basically this is for the future. Maybe that is the answer to
the question. I’m sorry to put you on the spot here. My apologies.

MR. BECHTEL: That’s quite all right. I believe we were talking about an
errata one correction to the 837 for the dental guide, is that correct? I think
that is what I rad in your testimony.

Typically, if I have this right, there are two ways we would approach this.
We can issue a new release of the 5010 implementation guide for the dental
claim, which would come out as a new document or a new implementation guide.
That is essentially what we are doing with the 270-271.

We recently at our last trimester meeting made an agreement to change what
we had written prior for the alternate search option. We agreed to make a
modification. So we are issuing a new 5010 implementation guide for the
270-271. It comes out with a brand new number, X something-something number at
the end, but it is a 5010 guide, but it will be a new release of it.

I think the same thing will be happening with the dental guide.

DR. COHN: So basically there is a capability that X12 has when issues are
identified to upgrade implementation guides?

MR. BECHTEL: There are some types of changes we can make like this. We are
simply changing instructions. If we are changing something about the standard
that is not supportable in the version we were writing for, then we would have
to move it to a new version. Then it might go to 5050 or 5060, depending on
what needed to be changed.

If this change is only for wording or instructions, then we can probably do
it the way I just said.

MR. DAWKINS: May I add a comment there? I think what you are talking about
is, there is a process just as you heard Don speak to. The changes will be made
through the DSMO process and all. We have the industry who has come together
and talked and debated and come up with, this is our standard and this is what
we are going to propose, and we put it out and let people comment, and done all
that.

This process in my mind is a living, breathing thing. It is going to go on
forever. To me, what we are tasked with is, 4010 didn’t really go well, but
that was the first time out of the box and we were all doing from zero. 5010
needs to go better.

From our perspective from MGMA, part of our problem is that there are some
people at play that we need to rely on which are vendors that are not covered
entities, that make their own business decisions about what they are going to
do whether we want to do it or not.

We want the standardization. The standardization, I think all of us
believe, eventually gets us to the point of simplification, which is more cost
effective than anybody can realize in this very complex system.

So I think the deal here is that we are looking at, we have got a process
that gets a standard, but how do we move that standard out and do that in an
orderly fashion, is what the issue in my mind becomes. Then addressing some of
the things we learned from last time, it is better if the clearinghouses are
ready than it is if they are not. It is better than the payors are ready from a
provider’s perspective. I’m sure if I am a payor, it is better if the providers
are ready, because they are going to invest money in doing this also.

But I think the issue is, how do we roll this out in a logical businesslike
manner, so that we don’t kill the industry, also realizing that this is not the
only thing out there on the plate. There are many other changes that are coming
at us that we are trying to absorb, and we are all trying to work within the
budgets that we have with low margins. That is what we are wrestling with.

I don’t know if that addresses your question.

DR. COHN: I agree with what you are saying. I was just reflecting that
earlier today we had heard from a couple of testifiers that something would
reassure the industry is some actual testing of the standard prior to beginning
the implementation or at the first step, or whatever, and that that would
lessen the risk for everyone.

There was a real world example here of somebody who had evaluated a
standard even before he had started implementing, and had discovered, it
sounded like some errors or some misunderstandings. I was trying to figure out
whether those things could be reflected in the version of the standard, or
whether you were then going to be stuck with implementing the standard you knew
already had problems, and you had to wait until the next time HIPAA comes
around.

I think your vendors would probably be much happier to know that the kinks
had been worked out, or at least had been further validated before they start
implementing the software.

MR. BECHTEL: I don’t think any of us are naive enough to believe that we
are after 100 percent testing, and it is all 100 percent functioning well. We
are after some of the, for lack of a better term, the 80-20 rule, 80 percent of
the big things.

If I remember right, when we implemented the 4010 version, a lot of places
used the Claredi certification of levels one through seven of whether you were
HIPAA compliant or not. Well, different payors picked different levels to
determine what was HIPAA compliant or not. That was problematic for providers.
But after awhile everybody got to the same level and we were fine. That would
have been something that would have been nice to flush out during the testing
phase and make that decision and call and move on. That is just one of those
issues that might have surfaced. That would have been helpful.

MR. REYNOLDS: Can I play off of that comment? Earlier, I’m not sure you
were here, there was a discussion about, as we look at testing going forward,
maybe in a more national way than just an individual way. You said it was much
more helpful to you when there was one level of certification which allowed you
then to focus on being able to produce those transactions in a way that would
work consistently rather than just one for everybody that you dealt with.

Stanley, would you introduce yourself?

MR. NOCHIMSON: Yes, this is Stanley Nochimson. In the discussions there has
been a lot of talk about testing and transition and figuring out a way to get
this done. From a regulatory perspective that has been difficult, but it seems
to me that instead of a post compliance date contingency period, if there is a
way that we could have a pre compliance date contingency period that would
allow covered entities to switch to the new standard before the compliance
date, as long as they promise to support the old standard, that would allow a
transition so that everyone would not have to change on the compliance date.
People could start processing.

Maybe there will be people that want to start the processing early to try
to work out some of the bugs. Some of the vendors may be able to jump in early
and say if you go with us you will have an opportunity to get this done and you
will be ready.

So I think there could be some consideration for that sort of transition
somehow, either as suggested in the NPRM or through a contingency plan.

MR. REYNOLDS: Can you run me back through pre contingency?

MR. NOCHIMSON: In other words, from an enforcement perspective, technically
the new standard can’t be adopted until a regulation comes out and says, adopt
the standard on a compliance date. Usually that has been one day. Then we said,
if you don’t meet that day, later on we won’t enforce — the government will
allow a contingency until you become compliant.

What I am suggesting is that we say you can switch to a new standard before
the compliance date, which technically would mean you would not be complying
with the old regulation. But the government would not have any enforcement, or
would agree not to enforce any type of a violation, as long as the covered
entity continued as necessary to support the old standard until the compliance
date.

So it would allow you to support two standards, the old one and the new
one.

MR. REYNOLDS: That is dual processing under today’s world. That is going on
right now. It is called dual processing. I wanted to make sure I understood it.

MR. DAWKINS: I like what you are saying. The only concern is going to what
Harry was talking about, the dual processing. The worst case for providers,
especially a small provider, is to have one company that wants to be at one
standard and another company wants to be at another standard, and their
software won’t support sending both standards.

In the NPI and the proprietary identifier, we had some latitude there,
because there was a place for both items to be covered in the same transaction,
which allowed us great flexibility, which we were most appreciative for. But I
don’t know how payors would feel about supporting two and doing dual
processing, which I’m sure they would have an opinion about that.

I will tell you, if it came to the point of, I’ve got to remember that Blue
Cross does it A and Medicare does it B, that is very difficult especially for
small practices who are driven completely by a vendor who may not be as
flexible as large vendors.

MR. REYNOLDS: I think Larrie makes a good point also. We heard discussion
earlier about backward compatible and so on with the NPI, the fact that both
numbers were there allowed that to go on.

MS. RAINES: I think the shift when we transition as an industry from the
paper world, that is something similar in nature that we did. We did have a
dual use period. Maybe that is not the best analogy, because we are talking
from a real estate perspective and a form perspective to an electronic
transaction, but there was a dual use period.

Now, relative to 5010 it might take a longer window of time than that. But
I know from my hospital perspective, our vendor as clearinghouse would be
charged at the individual payor level, based on who that payor was and what
type of claim maybe that was, as to whether to transmit 4010A1 versus 5010. At
least from a hospital perspective, that might not be something that we would
have to monitor and track and research on a daily basis, that that type of
intelligence would be within the clearinghouse, the vendor world and within
their operation.

MR. REYNOLDS: From a committee standpoint, we produced some letters in the
past about HIPAA ROI and some other things. As you look at 5010, since you
three represent the lion’s share of the providers out there, does 5010
implemented as it is now — Larrie, you made a comment a little bit ago about
eligibility. In the past it could be yes or no and so on, and that may not have
been sufficient. Does 5010 start moving so that it will give more of an ROI,
and so that people that might not be using those transactions now would go to
those transactions because of 5010? That is a question for all of you.

MS. RAINES: From an HCA perspective, we believe yes, that it does.

MR. DAWKINS: And I would say from MGMA’s perspective, I would believe
likewise. For instance, a good for instance in our mind, is on the 4010A1
everyone is not required to use reason and remark codes, from a payor’s
perspective. That makes it complicated. Even though they are using the reason
codes, without the remark codes you can’t quite figure out what is the need
that you are having to get the denial.

With the new version, the requirement is for the reason and remark codes
across the board. Most third parties have gone there, but some have not. It is
much easier for us, instead of picking up the phone and going why did you deny
my claim, to know the reason and remark code and move on with it. That is a
very tangible, concrete example that makes it much more efficient for us to
process.

MR. REYNOLDS: That is in the 835, correct? How about in the other
transactions? We heard this morning that the 200 range is one of the ranges
that hasn’t been implemented quite as much. Does the 5010 help in those ranges?

MR. DAWKINS: I don’t know specifically. Folks that I have talked to have
said yes, but I can’t give you a specific. I also believe that the referral
ones are also enhanced in this process, as versus the one previously, which has
not been used as much.

MR. REYNOLDS: Any other comments from the committee? What I would like to
do now is, we are a little bit ahead of schedule. Since this is probably our
own hearing on this, we are scheduled maybe in October, but we had hoped to
consider whether or not we put something together for the September’s full
committee, I would like to take the next seven minutes or so, if there is
anybody in the audience that as you have heard the testimony wanted to make any
comments. Then after our next panel the committee will start going through some
deliberations, and I will go around the table asking each of the committee
members for their insights and thoughts.

So I’d like to make sure, if there is time available, if anybody that has
been listening or anything else, since they didn’t testify, you can come and
sit at the table if you want to make a comment. That way, nobody feels left out
and we have got a chance to hear from everybody. If you are a little bashful
now, if we finish the next panel early, you may get the option again. We want
to make sure that we are inclusive. Then when we are finished we will then
begin our process of deliberation, and probably through a series of conference
calls or something else start working on a letter.

So I want to make that available to you right now. I don’t see anybody at
the table. Yes, ma’am, if you will come up and introduce yourself.

MS. JOHNSON: This is Mara Johnson at the AMA. We submitted testimony
written for the record. One thing that I heard today that I thought was
important was from CMS, from Christine, the considerations on page 16 with
regards to trying to complete the MAC and the EDC transitions prior to going to
what they are calling HIPAA 2 testing.

I thought that was interesting, because one of the points we made was
trying to take a more global picture with regards to what is on the plate
especially with Medicare. I know Medicare is not the purview of this committee,
but there are so many things that compete for a physician’s attention. One of
them is the MAC stuff. That is coming. That is going to be a major transition.

In fact, if not today, in the next few days CMS is scheduled to release the
names of the contractors that are being awarded for the MAC for several states,
a handful of jurisdictions. This is a major transition. So that will happen in
the next few days, end of September. That has big implications for physicians
who are going to be — they may be in one contractor or carrier today and they
are going to be in a different MAC, so they have to look at a number of
different things, for instance, a consolidation of the local coverage
decisions.

So these are things that add workload to a small physician’s office. I
would just hope that NCVHS would consider the workload and other things that
CMS or Medicare may be having on a physician’s plate.

Also, the Medicare enrollment process is something that has been
experiencing significant disruptions since last May when they changed the
process. I have been in contact with several doctors who right now are sitting
on hundreds of thousands of dollars of claims. They have been working well with
CMS on this issue, but they are not in a position financially to take on some
of the changes that were brought about by HIPAA and NPI and 5010.

So it is not so much that they don’t necessarily want to. In fact, we do
support the transition to 5010. It is just that looking at the global picture
of what else is on the plate of this doctor can sometimes be helpful.

So I thought maybe hearing from CMS and what they are considering, like the
MAC and EDC, also hearing from them on other major things might be impacting
doctors. We can always weigh in on that as well. I talked to some of my
provider colleagues who agree with me on this.

I don’t know the plan necessarily with regard to what HEMS put forward. I
thought that was interesting, too. That might be another way to gather that
sort of input with regards to globally what else is out there as you decide on
time frames and implementation strategies.

MR. REYNOLDS: We have heard discussion today about the possibility of
trying — some people recommended trying to get the NPRM out for 5010 this
year. Does your referencing those other things make you agree with that?

MS. JOHNSON: I guess it would depend on which date — what the
implementation time frame was. We recommended a staggered implementation time
frame, as many other people testified today, so we think that would be useful.
The smaller physicians and practitioners are going to have the toughest time
implementing, as they have traditionally, precisely for these reasons, because
they have limited resources that are competing for their time. So I think that
would be a good discussion to have prior to deciding what those implementation
dates are.

MR. REYNOLDS: Anybody else want to comment on that?

MR. DAWKINS: I would be very supportive of that. I think from the MGMA’s
perspective in practice management, you have to remember, the same people that
are doing pay for performance are going to 5010. The same people are going to
be doing ICD-10. The same people are doing provider enrollment, if there is a
new electronic provider enrollment. The same people are going to have to do the
transition to the new MAC and the new carrier.

All of these are the same resources, because this is highly electronic, and
these are either companies that you are outsourcing it to or they are in-house
resources that you are having to use. If it was such that it was, registration
did one thing and billing did something else and we could divide this up — but
unfortunately a lot of these changes, it is almost like, I’ve got this laundry
list, what is the priority, what do you want us to accomplish first.

We can accomplish these things, but we can’t do them all at once. I think
that is the important point, is that there are many of these changes that
impact us as we go on.

MR. REYNOLDS: So basically, are both of you saying that one of our goals,
whether we look at e-prescribing or anything we did as this committee, was to
make sure adoption happens. So you have always got to look at the smaller
entities first.

So with all this going on, if we recommend too early and it puts a burden
on them, then your implementation gets stretched way out because they can’t
keep up. So that is the other thing. As you look at staggering and other
things, where people would get ready early, if others can’t get there then we
have got these dual things going on for a long, long time.

Any comments either of you have on that?

MS. JOHNSON: I guess I would be engaging CMS, specifically the payor in
Medicare, early and often, along with the small physician community, so that we
can collectively tell you what is on the plates of physicians.

The Medicare enrollment process right now is something that has been
causing the physicians difficulty. If they can’t clear an enrollment in
Medicare they can’t submit their claims, so they can’t get paid, so they have
no money to do anything. I’m not trying to say that every doctor is in that
position because that is not the case. But there have been widespread problems.

CMS when they do implement their enrollment system electronically, which is
coming soon, that will alleviate some of these. But if you just look at each
point in time and touch base, they will be able to see what it is that may be a
point of difficulty that year. Enrollment may not be an issue next year, but
there may be something else.

MR. REYNOLDS: One message that seems to be coming across is that when it
has finally said something has to be done, or if CMS does something, those are
the main drivers, and everybody else, no matter who else it is, is secondary. I
think I have heard that consistently, that that is really what the front line
is.

So if the regulation comes out or CMS decides to do something, that is
driving it. You don’t hear any of the peripherals.

MR. DAWKINS: And I think what we are asking you is to be sure that CMS
looks at the overall picture, not just do one. Whatever that deadline is going
to be, we are going to drop and go there, and if you drop another deadline on
us, then we are going to have to turn around and drop and go to that one.

What we are saying is, that is not absorbable in the current environment,
too many of those. We are trying to change the industry. We are all supportive
of transaction standards, efficiency. That is not the issue. The issue is like
we talked about, managing the change process. You can only push so much down
the pipe at one time, and somebody has got to make the call of which ones are
first and which ones are second. They all can’t be first because the resources
are the same.

We want to go there. We want them all. There is not an issue about not
doing them. There is an issue about how to do them without breaking out backs
in the process and everybody going to list them.

MR. REYNOLDS: Margaret, that got you out of your chair.

MS. WEIKER: Yes, it did, Harry. I think that may be applicable to a lot of
the industry segments. Your comment about, so goes CMS, so goes the nation, so
to speak, —

MR. REYNOLDS: Remember, I was stating the words said today.

MS. WEIKER: Okay. I would say that that may not be applicable to the
pharmacy industry. There is a piece of that, the Part D, but it is not the
whole driving force there. So I just want to make sure that we don’t do this
broad-based comment.

MR. REYNOLDS: That’s a good point.

MS. WEIKER: Also, while I am up here, I think it is important to — hearing
the testimony, and I know I have used these words myself; we talk about the
word stagger and we talk about the word pilot testing. But I think it is
important, maybe we need to define what we mean by pilot testing somewhere.
When we stagger, are we staggering the entities and how they implement? In
other words, the vendors, the practice management systems go first and the
clearinghouse second, et cetera? And/or are we talking about, the vendors go
first and they do these transactions, or is it staggering transactions?

So when you say stagger, we may need to define exactly who and what we are
staggering. So it may be important.

MR. DAWKINS: I think what we would say is, we are all staggering, we just
need somebody to knock us out.

MS. WEIKER: There you go. But I do think when you write your letter, that
it may be beneficial to put some definition, so everyone understands, and that
there is no confusion in regard to what exactly did this mean. There is no
assumptions.

MR. REYNOLDS: So do you have those definitions, or are you just wishing us
well?

MS. WEIKER: I would be more than happy to help figure that out.

MR. REYNOLDS: With that, using the clock up there, we will be back at ten
minutes to three. Thank you very much to that panel. Well done. We hope you can
stick around for the rest of it.

(Brief recess.)

MR. REYNOLDS: Our next group is a continuation of the provider/pharmacist
panel. From NACDS is Michele Vilaret, and from SuperValu Inc is John Klimek.

MS. VILARET: Thank you. I am Michele Vilaret, and I am the Director of
Telecommunications Standards with the National Association of Chain Drug
Stores. I would like to say thank you for the opportunity to comment on this
important topic today.

NACDS represents the nation’s leading retail chain pharmacies and
suppliers, helping them better meet the changing needs of their patients and
customers. Chain pharmacies operate more than 38,000 pharmacies, employ 114,000
pharmacists, fill more than 2.3 billion prescriptions yearly and have annual
sales of nearly $700 billion.

During this presentation I am going to attempt to answer most of the
questions asked by the panel. For this presentation I polled our members to
obtain their opinions on these various issues.

The first question dealt with the business benefits of the various HIPAA
standards. The 835 remittance advice is essential to pharmacies to insure
payment. Tighter business rules to eliminate options is badly needed with the
835. Most of the problems that we deal with today are due to the various
interpretations of the 835. The business rules are tightened and better
defined, and there should be less room for interpretation.

It is very helpful that several of the codes have been eliminated. We are
in the process currently of reviewing the list of eliminated codes, and so far
there has been only one that we have found we needed as an industry, which we
were able to prove is useful and get returned to the list.

It has been very helpful to be able to keep the NCPDP work group involved
in this process, and I am thankful to X12 for allowing us to be involved in
this process as well as NACDS. It is always good to eliminate codes that are no
longer used, to keep the code list to a minimum.

Reporting of payment options is not as important to pharmacy as to other
entities. Pharmacy prefers EFT. Secondary payment reporting is extremely
important to pharmacies. This section results in a lot of errors and a lot of
time spent manually reconciling claims. The changes made in this area are
essential to our business.

Although the 837 is used in NTM and service billing, as well as by some
state Medicaid plans for DME claims, chain pharmacies do not plan to implement
this transaction. Implementation is just too complicated and expensive.
Instead, pharmacies plan to use outside vendors in the billing process. There
is just no return on investment to the provider if they invest the time and
money to code for the 837. It is estimated that it takes well over one year to
code for the 837 alone. It is not a good investment, and the transaction is not
widely used by pharmacies. We are still waiting for a ruling from CMS on
whether NCPDP 5.1 can be used in conjunction with the 837 for NTM and/or
service billing.

Pharmacy needs D.0 to provide better guidance in coordination of benefits
situations. Currently most of the problems that we have with NCPDP 5.1 deal
with misinterpretation of coordination of benefits. NCPDP went to great lengths
to redefine the other coverage codes and to provide claim examples in COB
situations in order to eliminate future confusion. Pharmacists also need D.0 to
process Medicare Part D claims due to all the enhancements that NCPDP and CMS
have added to D.0 for processing of Part D claims, including the enhanced
eligibility check and enhanced coordination of benefits section, which now
identifies patient responsibility and benefit stage to help identify the
coverage gaps on secondary claims.

Several enhancements have also been added to service billing for NTM claims
processing, and hopes that CMS will rule that D.0 can be used to process NTM
claims, especially for Part D. We currently have too many workarounds in
pharmacy systems due to the shortcomings of NCPDP version 5.1, especially when
it comes to processing coordination of benefit claims. D.0 is badly needed with
its redefined pricing segment and its robust coordination of benefits, as well
as streamlined compound claims processing.

As far as implementation, we need an implementation plan similar to what we
had with 5.1. We found that working through NHIN, the Nationwide Health
Information Network, for version 5.1 was very successful. For version D.0 we
want to use the WIDI if NHIN is not available, or some other similar type
organization.

It would be a good idea for the regulation to set milestone dates. This
would help to keep the industry on track. But let the industry monitor its own
progress through NHIN or WIDI. Some pharmacies will implement D.0 as a phased
in approach, but others will not. Because of this, we would not support a
mandatory phased in approach.

Testing between trading partners will be necessary but not mandatory for
all. Testing will need to be mandated for plans or payors that are not going to
implement a D.0 5.1 dual version strategy. Therefore, we cannot support
mandatory testing for all, only for those who will not implement a dual version
strategy. I explain that a little later.

We surveyed our members, and all of the chain pharmacies can support a dual
version of translations for the phase in periods and beyond. This includes
processors. If there are other pharmacies that may have difficulties with the
dual version approach, there are vendors that are capable of assisting them
through the transition.

Implementation process should be tracked through one entity as we did in
5.1 through NHIN. Pharmacies may not code for all segments, depending on the
companion guides from the various payors. Suggested milestones for pharmacy
provider in D.0 would be claims, eligibility, and these are just my suggestions
for our particular piece of the industry, service billing, and this is just if
it is approved for use in NTM, and prior authorization, and this depends on if
we find that the different payors are using the prior authorization segments.

As far as education, education to the providers, payors and software
vendors needs to begin as soon as the final rule is released. NCPDP has already
had a series of educational questions. Additional educational questions will
definitely be needed, since D.0 is quite different from NCPDP version 5.1.
Previously CMS provided the Ask HIPAA listserve, which was very valuable. We
recommend the reactivation of this service. Providers found this to be very
helpful during the implementation of HIPAA 1.

Pharmacies have very limited resources, so the overlap with other HIPAA
initiatives such as ICD-10 would tie up these limited resources that are
already dedicated to priority projects such as D.0. This makes it very
difficult to keep to an implementation schedule, since pharmacies don’t always
have dedicated resources for these types of projects. We ask that you not have
overlapping compliance dates for these types of HIPAA requirements.

Lessons learned from the initial HIPAA implementation. The lack of time. We
did not have enough time to implement. We definitely need a full two years to
properly implement D.0. The state Medicaid programs were especially slow to
implement the initial HIPAA standard. We must make sure they are on the same
page this time. We also need to make sure that payors are flexible. We spent a
lot of time last time dealing with plans that had misinterpreted the standards.
It wastes a lot of everyone’s valuable time. We need assistance from CMS or
NCPDP in enforcing and interpreting the standards.

We cannot have all plans implementing on the compliance date. Plans should
be required to implement D.0 prior to the compliance date with an either-or
strategy. They can eliminate the use of 5.1 on the compliance date. So we want
to be using a dual use strategy.

We also need to make sure that we don’t have any early implementers. That
was also a problem the last time. If a plan wants to mandate D.0 only, they can
only do so on the compliance date, not before. Prior to the compliance date,
they must implement with the dual version strategy. If plans are going to
implement with a hard cut over to D.0, then testing must be mandated. There is
no other way for us to insure a seamless implementation without mandated
testing for this group of payors.

So how do we avoid extensions? We have to work with the slow adopters from
the previous version of HIPAA, make sure that the Medicaid directors are on
board and insure that the time line is workable. Also, make sure that
pharmacies receive payor sheets or companion guides at least 90 days prior to
the go live date with the plans. This should be mandated in the rule.

Based on experience with 5.1, it is very important that payors allow
flexibility, especially in areas where they the payors have misinterpreted a
standard and are asking pharmacies to provide inappropriate information,
especially when this causes a HIPAA violation.

As far as the need for D.0, I’m just going to go through this real quick
because everybody else has talked about it. You understand the eligibility
transaction and the Part B enhancements with the ability to perform crossover
claims. We only have one way to bill compounds now for the additional
coordination of benefits section. That is the big, big bonus of D.0 and the
enhanced service billing.

So I will get right down to the conclusions. Given the complexity of D.0,
the chain pharmacy is going to need one full year to implement this standard.
That is in talking to all my chain pharmacies. It will take them about one year
to code and test. Our concern is that the state Medicaid programs will not be
compliant even within this time frame. There is also concern that some plans
may try to implement the standard early before systems are compliant.
Therefore, we ask that the rule mandate that plans cannot implement prior to
the compliance date with D.0 only. We prefer the plans implement prior to the
compliance date and allow the use of either 5.1 or D.0. If a plan can only
implement using D.0, then the plan must test with providers and cannot
implement using this strategy until the compliance date. So we want to use the
dual version strategy only prior to compliance date.

Our suggested final compliance date would be two years after the final
rule. At that time, all entities should be able to process claims accordingly,
using all aspects of D.0.

Thank you. We will talk about questions later.

MR. REYNOLDS: Thanks, Michele. John.

MR. KLIMEK: Mr. Chairman and members of the committee, good afternoon.
Thank you for the opportunity to present to this panel from the pharmacy
providers’ perspective concerning implementation issues as it relates to NCPDP
version D.0 and the X12 standards. My name is John Klimek, manager of the RXV
department within SuperValu Pharmacies. In my current capacity I also assist
our IT teams and project development as it relates to implementing NCPDP
standards and other HIPAA related standards in our pharmacies. I would also
like to mention that in the last ten years I have been actively involved in the
standardization process of pharmacy claim information through my involvement
with NCPDP. I am currently a board member at NCPDP, as well as hold various
volunteer positions such as co-chair for work group two, standard product
identifiers, and chair a committee for strategic planning for NCPDP.

Just a little history about SuperValu. We have approximately 950
pharmacies. Our company operates under multiple food and pharmacy banners as
shown below. We process in excess of 50 million prescriptions per year. We
manage and develop our own pharmacy software as well as our own accounting
software.

Just a little information about what our patients see as being important to
them. This source is coming straight from Drug Topics. They look at pulling
prescriptions quickly; 92 percent of the patients see that as being important.
Supplying written or printed materials, 90 percent. Pharmacist available for
questions, 85 percent, and advice on OTC drugs, 64 percent. So as you can see,
patient demands on our pharmacy teams require less confusion when it comes to
the actual claims processing.

It is with the NCPDP standards that our pharmacies enjoy most claims to be
positively adjudicated within seconds. The pharmacy community has benefitted
greatly from the NCPDP standards. Any change in the standards that affect the
pharmacies should be looked at as positive changes, with all entities using the
same implementation guidelines. Any deviations from the standard on a plan by
plan basis could change the normal process time from seconds to minutes to
hours. That is why it is important when we implement new standards at store
level, we make the claims processing as automated as possible, so as not to
disrupt patient care.

Some past history on project development at SuperValu/Albertson’s involved
upgrading from NCPDP version 3.X to version 5.1. At initial phases, a team was
developed to identify project scope and ROI. Our estimated cost for that
project ran approximately $500,000 plus. Changes to accommodate the new NCPDP
standard involved multiple changes to multiple infrastructure layers. The
rollout involved a dedicated testing team that involved internal testing as
well as testing with over 100 different trading partners.

The important thing to note with the external testing is that none of this
would have been possible without an entity that NCPDP had identified to help
with this process, which was NHIN, Nationwide Health Information Network. They
helped monitor and hold weekly conference calls to providers. This was
instrumental in timely testing and rollout. Our internal process also involves
training store level personnel and approximately 10,000 associates. The project
ran for approximately three and a half years.

Some items learned from the rollout with version 5.1. We needed a
certification process for all processors, payors and switchers. Not having a
certification process in place left uncertain outcomes at times of rollout.
When rolling out 5.1, we found often that requirements to certify required us
to send claims with information that violated internal coding. Examples of that
were, when a certain drug was required to test, and the claim value and the
certification process required us to make additional changes to our internal
system to accommodate the expected claim value.

Our current pharmacy application uses industry known pricing values for
drugs, and any changes in these values required additional coding. With that
said, it was important that claims and testing packets mimicked real case
scenarios. Any problem we ran into was when we were given very short time
frames to test them and make any corrections.

As mentioned previously, it was very early in the process of implementing
NCPDP version 5.1 that we realized the need for a central standards liaison.
Working with NHIN and NECDS as our central contact, we were able to identify
technical issues, coordinate testing dates and times, develop key contacts with
trading partners as well as monitor the progress of rollout within the
industry.

In the normal course of business, we require trading partners to share
their payor sheets. This payor sheet outlines the claim requirements needed to
create a successful transaction. Because we deal with hundreds of different
payors, these requirements are needed in a timely manner in order to set up
processing. It is with these payor sheets that we identify the required fields
that may be different from other entities.

These payor sheets also identify COB or coordination of benefits segment
information. The COB segment was the point of much confusion, being that it was
a newer segment being used by industry and had much room for ambiguity. Getting
payor sheets that outlined the plan COB process was essential to timely
rollout.

It was with our process testing that we ran into many entities that
developed their own interpretation of data element definitions or data
conditions. With the help of industry involvement we were successful in getting
many to change, but often there was much struggle.

Most of these issues revolved around COB processing. It was important in
pharmacy that we didn’t have to code COB or any other functionality multiple
ways. That is why often through our weekly calls we identified these issues and
collectively tried to resolve them.

Pharmacy providers code for the standard according to the implementation
guide. Deviations require additional work effort and possible increase in
programming costs. These deviations also cause a change in the training at
store level. Any changes we require the pharmacy team to make from the standard
process has the potential to cause the claim not to process correctly, which
then introduces the possible disruption in patient care.

I just listed a few examples here of some instances we ran into with plans
at our initial rollout in 5.1. I won’t read through this, but this gives you
the ideas where we ran into issues with plans requiring something that was
different than what the standard called for. Again, a lot of these issues were
brought forward in our NHIN weekly calls, and most of them we were able to
identify and rectify before rollout of 5.1.

Some additional issues we ran into with implementing version 5.1 as it
related to implementation dates. We had to call payors repeatedly for payor
sheet information, because payor sheets are the blueprints that outline claim
specific information needed in order to successfully process a prescription
claim. It was very important that we receive these well in advance. Without
this information we would see possible delays in rolling out the testing and
implementation.

Early implementation of standards by plans or processors also caused
disruption, because industry most likely was following the implementation date
set out in the HIPAA rule. Although not NCPDP 5.1 related, recently we ran into
issues with entities rolling out the use of NPI prior to the implementation
date of April 23, 2007 of this year. We saw the same issues with plans rolling
out 5.1 before the mandated date. Often the only pressure we could apply
towards entities not complying with the standards was through a coordinated
effort with all providers using NACDS and NCPDP and a forum.

Now for some items the pharmacy industry is looking for with version D.0. A
big change for us and something that all our pharmacies are looking for is some
clarification on the COB process. Right now, a lot of pharmacies are struggling
through this.

Also, with Part B, one thing to mention there is that although there is
much work that is being done with Part B enhancements, the reality is that Part
B is not processed real time online, so these claims are usually sent to a
clearinghouse, and our pharmacies and patients are often left in the dark at
the point of sale. So although Part B enhancements are great, we would
certainly like for that process to be online eventually one day.

Some additional benefits we look forward to in the next NCPDP HIPAA
approved standard is defined situations for fields and segments within the
standard. This will help remove ambiguity which caused deviations from the
standard. We will also see fields and segments that once were displayed as
optional, given better definition as not used, required if, required or
optional.

My hat goes off to NCPDP staff and its members for the grueling task of
going through the entire implementation guide and making these changes. It is
my hope that these changes will help prevent interpretation and variations from
the true standard.

Changes were also made in the service billing standard by adding additional
fields to help supplement the needs for clinical, MTM, medical therapy
management. It is our hope one day that the standard be used for our day to day
processing of MTM claims, for our Medicare, Medicaid and private pay patients.
Even today within NCPDP version 5.1, there are current recommendations for
Medicare Part D dispensing and administration of vaccines which outlines a
process of both drug and administration to be billed within one claim. This
process of drug charge and administration fee all in one claim will enhance and
maximize quality of care for our Medicare Part D patients.

The X12 standards coded and used internally in SuperValu is the X12 835. We
saw similar needs and opportunities when it came to implementing the standard
with all payors. Often we saw multiple interpretations of the standard which
created additional work in coding.

One particular problem was the method in which payors reported reversals.
We used the same method to monitor rollout of the X12 835 that we used for
monitoring the NCPDP 5.1 rollout, by using NACDS as our forum for calls with
payors. This worked with regard to identifying issues and working out the
implementation date.

Today, SuperValu uses a clearinghouse to process claims that require HIPAA
approved X12 837. This is achieved by our pharmacies submitting a 5.1 claim to
a clearinghouse, which is then converted to an 837. Currently we have no
project on scope to build an in-house application using the X12 837. This
decision will be re-evaluated as market conditions change.

So in conclusion, in looking at moving forward with the new HIPAA approved
standards, there are some internal steps needed derived from lessons learned.
Each company will need to develop internal project development teams and
process several of the prerequisites in determining ROI as well as time frames.
As seen in previous standards projects, we anticipate significant drains on
budget capital as well as resources. With this process there will also be
multiple departments involved. We will also include but not limit it to the
internal development testing protocols, as well as developing training pieces
for our store teams that outline some of the newly added features that NCPDP
version D.0 brings us.

In looking forward to the new HIPAA approved standards, here are some
external steps needed as we move forward. Obviously needed is a time frame for
implementation. From history, we know that entities require a minimum of two
years to implement these standards. Along with this time frame it would be very
beneficial to have outlined an industry implementation date.

As seen with rollout in the pharmacy industry of NCPDP version 5.1, a
central source was needed that monitored progress of implementation as well as
identified issues and help resolve them. It is highly recommended that we
develop the same central monitoring resource.

In the process of rolling out a new version of 5.1, we found the need to
maintain and support two separate NCPDP versions, until all entries were
converted. This created a phased-in approach. At SuperValu we saw the need for
this, and recommend that other entities plan for this.

It is also recommended that entities follow an industry wide approved
testing plan. Everyone should be held to an implementation schedule as well as
allow for some flexibility. We look forward to CMS’ support in this matter. As
mentioned earlier, payor sheets were beneficial and given a lot of time prior
to testing and implementation. We also look for assistance from CMS as it
pertains to entities wishing to implement these HIPAA approved standards before
any implementation date. The ability for entities to be allowed to do this
usually creates issues that affect other rollouts.

So in conclusion, today’s increase in pharmacy business mainly due to the
Medicare Part B requires additional time for pharmacists and pharmacy teams to
deliver quality care. Anything we can do to maximize pharmacists’ time spent
with individual patient care as opposed to their time spent resolving pharmacy
claims issues is a win-win for all involved.

Again, I want to thank the committee for this opportunity to speak in front
of you, and the opportunities we see moving forward with new standards that
affect pharmacy. Thank you.

MR. REYNOLDS: Questions?

MR. STEINDEL: Thank you for your interesting talk. I have a clarification
question. I didn’t think I could run into acronym collision, but what is NHIN
with respect to your talk? The NHIN most of us are familiar with is the project
initiated by the Office of the National Coordinator, and I have a feeling that
is not what you are talking about.

MR. KLIMEK: That is not the same organization. This is actually a private
organization. I think it is owned by PDX. They came to the plate and offered
their time and efforts to coordinate efforts with all the other providers out
there.

I do realize there is a another NHIN. I didn’t want to confuse them.

MR. STEINDEL: Thank you. I wonder if they have their acronym trademarked.

MR. KLIMEK: I don’t know.

MR. REYNOLDS: Any other comments?

MR. STEINDEL: I didn’t have anything else, because they covered most of it.

DR. WARREN: I had one. It was an acronym, too. MTM?

MS. VILARET: Medication therapy management.

MR. KLIMEK: With Medicare Part D, that is one of the prerequisites in
pharmacy.

MS. VILARET: Sorry, I should have spelled that out.

DR. COHN: Michele, I just wanted to clarify about your comments regarding
dual processing.

MS. VILARET: Yes, dual version strategy.

DR. COHN: What I think I heard you say was, as an organization you
recommend dual processing. It appeared that all of the people you queried
indicated they were going to use a dual processing strategy, at least as I
could tell by your note. Yet, you also didn’t say everyone should do dual
processing. Rather, you said if you don’t do dual processing you need to do
testing in advance.

Could you clarify that? I couldn’t quite tell why you were doing that. Is
that in case somebody else decides not to?

MS. VILARET: All the chains can support a dual version processing, but we
would like all the processors of plans to implement using a dual version.
However, there may be some that cannot. If they cannot, then we would advocate
that they cannot implement until the compliance date, and they must test. If
they cannot implement using this dual version, then we have to have mandatory
testing with them.

By implementing using the dual version, that is an awful way of testing
because you have the option of submitting 5.1 or D.0. The testing is up to
trading partner agreements. If you run into issues you can always go back to
5.1, but if you are implementing in a hard cutover environment and have no
testing, you are dead in the water.

So that is why we said if there is a payor that is going to implement as a
hard cutover to D.0, then that is where the mandatory testing has to be
implemented. When I told the chains, they did not want to advocate for
mandatory testing across the board, because that would be impossible for them.
There are so many trading partners that they work with, they couldn’t possibly
test with absolutely every single entity. That was the reason. But there are
certain entities that they do have to test with.

Does that make sense?

DR. COHN: Yes, I think it was a very good suggestion. I just wasn’t sure
why you weren’t saying everybody should do it. I think effectively you are,
actually.

MR. REYNOLDS: Any other comments? One thing I would like to say is thank
you. We appreciate that a lot of the stuff as you said has been covered
earlier, and I think you just added on to what we already heard, but that is
always good for us too, to make sure that we have that.

With that, I want to open it one more time. Don, would you mind coming back
up again? I wanted to ask you a question on dual processing, if you don’t mind.

Let’s hold on a second. Jeff has a question, and then I want to ask Don
something.

DR. BLAIR: Did you have an idea of when the dual testing would begin?

MS. VILARET: Actually, as far as the dual implementation, there is no date.
That is the beauty of dual implementation. It can begin whenever, because there
is no early date as far as the dual strategy for that. Anybody could implement
— or some of the chains could be ready as early as one year after the final
rule, from what I understand.

DR. BLAIR: Thank you.

MR. REYNOLDS: Don, we heard dual processing. A lot of us know that with
NPI, the first HIPAA was, you could do it because you didn’t have all the HIPAA
transactions in place. Then NPI was easy because you had both numbers. Now when
you go to the 5010, to where you have the current 837 and the current 835 which
match, then you go to the new 837 and the new 835 that match, does dual
processing work as well this time, now that it is the 5010, versus the original
when we implemented it, because you were HIPAA or not. Then you had both
numbers on NPI, so it didn’t really matter what you were. In other words, you
just had some logic in the system. But now that you are matching 837s and 835s
and all this and that, and this provider does this or this clearinghouse does
this, and somebody does that — we have heard dual processing, and it is a
great term, and a lot of us have used it, but it seems as you think about this
one, then maybe dual processing may or may not be possible.

So could you help us with that, or anybody else that wants to talk about
that? We hear that a lot. I sense that it worked out in this implementation
because you are more of an incremental change. This is changing the meaning of
already existing fields. The old version means this and the new version means
this in 5010, and what was situational is not situational in some of those
things. So any way you can help.

MR. BECHTEL: I think you just answered it. I don’t think going from 4010A1
to 5010 is going to be like adding NPI and running dual systems.

MR. REYNOLDS: A little closer to the mike.

MR. BECHTEL: I don’t believe that when we convert from 4010A1 to 5010 we
are going to have the same kind of dual processing experience we had with NPI.

You are absolutely correct in what you said. With 4010A1 we had a way to
support both numbers, so there was a way for us to use the same transaction to
do processing either with NPI or without NPI. When we go to 5010, it is a
different situation. The changes that we have made in a claims transaction, a
lot of the business rules or situational rules have changed to either be more
strict or more clear. Certainly entities who had a different interpretation
than we intended are going to have to make modifications to their systems to
conform to what was intended.

So if I understand your question, a provider who wants to send a 5010 to
one payor who is ready to do that and still send 4010A1s to another payor who
is not ready to do that, they would be in a situation where they would have to
create two different transactions. They can’t send 5010 to both and have it
work. So they would have to have the ability to make a 4010A1 as well as the
ability to make a 5010 as a provider to support that scenario.

On the other hand, a health plan who has to receive 4010A1s from those
providers that aren’t ready but still wants to support 5010 for those who are,
that would be the dual processing we know and love from 4010 conversion. I
think that is going to be like you experienced it with 4010A1. It is not going
to be any different in my opinion.

I don’t know how much further you want me to answer your question.

MR. REYNOLDS: I’m just asking. Simon, please.

DR. COHN: I thought initially you were saying no, you can’t, or it doesn’t
work. Then I heard at the end you say it is exactly like the NCPDP rule,
processing using version 5.X and D.0 because they are relatively different
transactions also. You are sending one in and they choose which one to use. Is
there any difference that we are talking about here?

MR. BECHTEL: No, I don’t think so.

DR. COHN: So you are saying this actually would work.

MR. BECHTEL: Maybe I misunderstood.

MR. REYNOLDS: Let me add one other thing to the question to see if it helps
in the discussion. 837s map to 835s now.

MR. BECHTEL: The 837 mapping to an 835, you are talking about a claim
mapping to a remittance?

MR. REYNOLDS: Yes. So basically when somebody puts in an 837, if somebody
sends a 5010 837 and everybody is not ready to put out a 5010 835, you have got
a whole different N, and those are not matched.

MR. BECHTEL: Right.

MR. REYNOLDS: So that is the one that is complicated. In other words, one
or the other is fine matched together, especially if a situational field that
is sent in has changed in the new version. The old version of the 835 doesn’t
expect it to be changed. So it is a little different, because everybody either
did the 837 under the original implementation of 4010 and then the people that
were ready to go to 835, but everything was proprietary other than that, so it
was a different situation.

MR. BECHTEL: On the 835 relationship between 4010A1 and whatever goes
forward, we tried to bring forward the 835 4050 about a year ago, in the hopes
that we could understand what the change process was going to be like. We did
verify that we would be able to run the 4010A1 837 with the 4050 835.

We felt that was possible. I believe we feel that running the 837 4010A1
with the 5010 835 is also possible. I am quite sure I heard that from the work
group. But that may not hold true with all the transactions. It doesn’t hold
true with what you are actually sending on an 835 4010 versus an 835 5010. They
are going to be different.

MR. REYNOLDS: John mentioned in his testimony just now a hundred-plus
trading partners, whereas CMS mentioned this morning a million and a half
trading partners. So it is back to that one on one, what level are you sending,
what level do you want back, how are you going.

So it is the same thing as what happened before, but as we look at the size
of 5010, those are the things that are the quiet pieces, because as soon as you
have got to go to that new version and test with everybody, everybody has got
to open those same things again. So when you have got 15,000 trading partners
or a million and a half like CMS, it is a piece that is always there.

Again, it wasn’t quite there in as difficult a situation with NPI, because
you could play in place. It was a little different situation.

So not to belabor the point, but we have heard consistently dual
processing, but I think it is just a little different as we think about it
going in. I still think it is a great idea. You can’t do the big bang. It is
just something that we really hadn’t drilled in on in our discussions. So thank
you.

MR. BECHTEL: Sure.

MR. REYNOLDS: Why don’t you stay there until we decide we are done? With
that, I would like to see if anybody else in the audience would like to say
anything, and then I would like to spend a minute with the committee going
around the room, just getting a sense of what everybody has, and we will talk a
little bit about next steps.

With that, the floor is open if anybody wants to come to the table and make
any other comments that you want to be on the record as part of this
deliberation? If you don’t, we will go around the room, and we will chat.
Seeing no movement and nobody is coming up, let’s start. Steve, why don’t we
start with you?

Agenda Item: Subcommittee Discussion

MR. STEINDEL: Thanks, Harry. I thought this was a fascinating set of
hearings. I think I started off with maybe a slightly negative to no opinion to
how we were going to go, and I left the session yesterday afternoon when you
asked around the room at the same time about, if there was any committee
opinions, subcommittee opinions on this, and I said I need to hear what I need
today.

I have to say that I was very surprised about what I heard today. It was
very interesting, what I heard today. I think I heard a very constant theme
that convinced me that one of the recommendations should be that we recommend
to the Secretary that they go forward with an NPRM for 5010.

There are a multitude of reasons for this. I actually didn’t hear a very
over compelling business reason that 5010 is this great improvement over 4010,
and the industry processes will automatically be changed. I did hear that there
was a vast number of technical improvements made in 5010 that would be very
helpful. I also heard that there is 4010 working today and solving some of
these issues, maybe not in the best ways we would like to see, but businesses
moving forward.

But what I also heard was that the movement forward of an NPRM and a
process to 5010 actually will help elicit a lot of comments, a lot of opinions,
a lot of maybe necessary changes in the way we do HIPAA, to move HIPAA forward
to 5010 and perhaps beyond 5010. I think that is one thing that we should focus
on in the letter to the Secretary about the items we have heard about
implementation plans, firmness of dates, clarity of timetables, the need for
testing sites, multiple phases of testing.

We heard comments about staggered and pilot testing. I agree with those
people. I have multitude different definitions of what is meant by staggered
and pilot testing. I think that the NPRM process will help us clarify a lot of
that information.

I think it is very clear that I came in with an idea that maybe we can
introduce ICD-CM without going laboriously through the 5010 process. I actually
still think that there are ways, surgical ways, to implement ICD-10 without
going through the full 5010 process. But after hearing all the testimony today,
I’m not convinced that we would save much money in the long run by doing it
that way.

That is an entirely different statement than whether or not we can do it
technically. This has to do with what we heard about testing. Even if we made
small surgical changes, even if they were relatively harmless, we might
implement those surgical changes relatively quickly, go through the ICD-10
process, but then we would still have to redo all the testing as we move to a
new version. So I don’t know if we gain much by bypassing 5010. So I would
think we need to stay the route of the 5010 course, the ICD-10 course.

I think I agree with a lot of the time frames of the testifiers. Even at
our optimistic best we are not going to have this in place, this whole new
system. 2012, 2014 is the earliest. I’m sorry, I’m just a realist there.

Harry, those are my observations.

DR. BLAIR: I think that the way Steve expressed his feelings is probably —
I think he expressed his feelings fairly similar to many of us on the
subcommittee. But if you notice what he said, he observed that after the first
day we didn’t hear that there was a direct business case justifying moving
forward, but that by the end of the second day we heard indirect rationales
that were very compelling to move forward.

Now, we are all in the same room. It is going to take months or years while
this process goes through. The fact that we may support moving forward now
after two days where we all heard the same thing and went through the same
mental recognitions of what justifies this, that is going to evaporate.

I think if the industry, the SDOs, the WIDIs, the HEMs, the industry that
has worked so hard to create these improvements in 5010 and NCPDP D.0, if we
don’t take advantage of the next six months or a year to go that extra mile to
gather the information, whether it is education or education and surveys, to be
able to present a definitive business case, it is going to come up again, and
in another setting six months or a year from now, we may not have the same
opportunity we have in these two days to wind up saying, the indirect benefits
that we heard are compelling.

So I think we should take advantage of the next six months to a year, the
industry, to continue to work on education and showing where the justification
for moving forward exists.

MR. STEINDEL: I’d just like to comment. Jeff, what I recommended is that we
move forward with the NPRM. I did that in part because I heard statements from
a lot of the testifiers today that we are really not going to get a coalescence
of industry opinion or even industry looking in depth at 5010 until we start
the regulatory process, that they use this as a point in time to allow things
to start happening within their organizations.

Now, after we publish an NPRM, after CMS analyzes all the comments and we
start looking at what is going on with a final rule in that area, I agree with
you one hundred percent; we may change a lot of our perceptions. I don’t know.
I think we need the NPRM to get that information.

DR. BLAIR: Well, we seem to have a conversation here. I think that we are
converging a little bit. The only concern that I have is that if the industry
doesn’t use this time between now and when an NPRM is issued, which as you know
experience tells us could be a year or more, to provide that education to the
industry, maybe do some other surveys, the NPRM will come up, and the folks
that are not convinced might prevail.

So I guess what I am saying is, I think there is a window of opportunity
here for education to take place. I think the NPRM is essential, that is going
to be a driving force, but it could be driving it positively or negatively. I’m
just saying that the time should be used to lay the framework so that it will
be positive.

MR. STEINDEL: And the only reaction I can make to that comment which I
totally agree with is something that we have observed throughout these
testimonies today, that there was a coalesce from industry as there was with
e-prescribing in the pharmacy arena. The industry got together, their act was
very together.

I think all of us would be in favor of moving forward right now with the
NCPDP transactions from a HIPAA point of view, because they garnered a lot of
industry support. What I would love to see is the same type of coalescence in
the X12 world, so that we would be in the state that you are describing. Maybe
this situation will force them to start looking at that coalescence.

DR. WARREN: Like everyone else, I think it is probably time for us to move
forward and recommend 5010 NPRM. The things that really hit me that were
different on this one was from the lessons learned, that we needed to do pilot
testing that occurs before this two year time line of implementation.

But I don’t think we have heard things that clearly before, so I would like
a chance to take a look at what that time line means. Are we looking at a
three-year time line now, one year for the pilots and two years for the
implementation? Is there something that we can put together for that?

We also heard some testimony about certification of the standard. I still
need to think about that before I can make too many comments.

My final thing was following up on Margaret. She came up with, we needed to
define terms about staggered implementation and pilot testing. I started
thinking about that and I thought, there are probably some others. When we take
this letter back to the full committee, they will not have sat in this room and
heard all of our dialogue.

So if anybody has things they think they want defined in the letter they
know, because I told Harry I will be responsible for following this draft
through. But other terms I thought would be interesting to define were plan. We
have used the word plan in about four or five different ways today, so I think
we need to be clear about which kind of plan we are talking about when we write
this letter. It may turn out when the letter is written that there is only one
kind, but that kind of hit me.

Also, testing and certification, what those words really mean. Then we had
my favorites, which I know we will have to define for the full committee of
processor and switch. It almost sounds like a comedy team or something. Dual
processing I think we need to define. The one that Steve mentioned, which was
one I stumbled across last summer when we were working on the function
requirements of the NHIN. There is another NHIN, and there is only one word
difference in their titles, and they mean very different things. So we need to
be clear if that shows up in the letter that we define those, especially if the
Nationwide Health Information Network comes up in the letter as a place for
testing that can occur.

So those are my preliminary ideas right now of where we are.

DR. COHN: I guess I should help first of all with acronym collision here,
by noting that as we described the acronym, it is actually nationwide.

DR. WARREN: Yes, it is, but there is also a national.

DR. COHN: That’s right.

DR. WARREN: There are two groups.

DR. COHN: It is not two groups.

MR. STEINDEL: Yes, they are both different. The ONC is the Nationwide
Health Information Network. What they were describing here is not the
nationwide, it is the national health information network.

DR. COHN: What they are describing is a firm.

DR. WARREN: A particular organization.

DR. COHN: Right.

DR. WARREN: Which means both had to be defined here if we wind up
mentioning that.

DR. COHN: Or we have to describe it in its long name rather than as an
acronym.

DR. WARREN: Yes.

DR. COHN: I made some notes too as I was going through. I think a lot has
already been said. I think that there is a view of certainly going forward. I
do find it interesting that we have Don up here, but we don’t have an NCPDP
representative, because we have got a lot more questions about X12.

But I would just observe that I think we have had a lot less question about
the NCPDP, versus X12. I think we all observed that there is perhaps more of an
issue.

I am thinking back to our claims attachment letter. We probably need to
review that with the recommended testing. Testing has a very different names
and very different meanings. I think I heard in the testimony that there was
some testing that resulted in standard certification, and then a bunch of
testing that related to implementation processes and best practices and all of
that.

I think as we try to make this definition better, and I am referring back
to the claims attachment letter, that we had talked about that initial testing
being done prior to promulgation of the final rule, to make sure that that
information provided input into the final rule. So that may be a useful frame
for us to think about that, just harkening back to something that we did
previously or that might have applicability here. So I think that is a piece
that might be helpful for us.

Now, I did find dual processing to be a very — I know Harry has been doing
dual processing for years in a variety of things, but I did think it was a very
interesting concept. I think that it is an alternative to staggered
implementations and a whole bunch of other things that add complexity to the
implementation and may be difficult for CMS to in any way put into an NPRM or a
final rule.

Dual processing does allow a wide variety of staggered implementations, if
you think about it. It is a way of actually doing that. It may be more
asynchronous. So it is just a thought of another tool that might help meet some
of the industry needs on that.

Now, I did hear — if I could read my handwriting, I could be so much
better. That is why I got into electronic health records back in the ’80s. One
of the things that I did hear was CMS outreach. I heard it in a slightly
different way this time. I think a lot of CMS outreach previously has been
going around to places and talking about the standards. I was hearing it in
some of our morning testimony as bringing together stakeholders, implementers
to talk about implementation challenges and issues, and figure out strategies
together, which I think especially in the context of dual implementation might
be a very fruitful conversation, to see if it can help galvanize and move the
industry. That is a recommendation more to CMS than something that would
necessarily have to be absolutely implemented.

I think I heard a unanimity from the industry about the issue of two year
implementation from publication of the final rule. Even though I think HIPAA
provides shorter periods for updating standards, I certainly didn’t hear
anybody that was advocating for a shorter implementation window.

I also heard a lot of support for not doing it at the same time as ICD-10
implementation; whether or not there is some possible overlapping I think would
yet to be determined on that.

So that was the final piece which I think were in the notes here that I
couldn’t read.

In all of this stuff, one of the questions that I have, having been through
this once with X12 at NCPDP and others, and I think we are trying to avoid
being in the situation where there is a 4010A, an A version of the 5010 or
whatever. But I think we need help from the standards organizations that, for
example, if there is testing and standards certification and additional review
or whatever, how best that could be reflected in the next HIPAA implementation,
without having to send anybody back to the drawing board, as well as without
referring all the learnings into the next update, which might be two to three
years hence.

So I think that is something where we need guidance and advice, and maybe
something that CMS might query the standards organizations as part of an NPRM,
I would imagine.

Anyway, I think it was very useful. Like Steve and others, I came away with
a much different opinion about things today than I did yesterday.

MS. TRUDEL: I think I would just like to follow up on what both Simon and
Judy alluded to. I heard the word testing used in three different contexts
today, interchangeably and totally confusingly. The first kind of testing was
the testing of the standard itself to make sure that it is makes sense and it
is workable, which is what keeps us from going to a 5010A.

The second is the testing of a particular implementation or product, which
is where the certification comes in. The third part is the actual live testing
between two parties. They are all important, but they all occur at different
times. They have different requirements, they have different participants. I
think when we do those definitions, we need to keep those three things
separate.

MR. REYNOLDS: Denise, do you want to make any comments before I make mine?

MS. BUENNING: No, I think everybody has already covered my comments, thank
you.

MR. REYNOLDS: Okay. I guess what I take away is a really well defined list
of the 5010 changes, which Don, thank you, whoever helped you. All of you did a
great job on that.

It is obviously the same transactions we did with HIPAA 1, even though
there is not a HIPAA 1 or HIPAA 2. Those are not words of art. Individual
changes on the 5010 are for good business reasons, but not compelling when
added together, and no huge jump in ROI, and they are costly. So we heard
those, I think.

5010 may be a necessary part of the HIPAA journey and a momentum that if
stopped could be viewed by some as positive or it could be a major impediment
for the future. If we are really on a journey to standards, we are at a
crossroads today, that with all the changes that have come up in the last five
years which is a thousand or more changes that were submitted for this, every
year that it goes on — as a matter of fact we heard from the Dental
Association today that they are already looking at the next set for some other
things. So business doesn’t stop, needs don’t stop. If the world is going to
buy into the HIPAA journey, this is a logical next step in the HIPAA journey.

Pilot and implementation testing may be a little more central. Right now,
what I heard in the discussion was, maybe you do it a little more consistently.
Right now, every entity has set it up in a different way. If it was set up a
little more consistently in some way, and once everybody got to the same level
of editing, then the provider only had to do it one way and it was much better.

As you get all the entities that want to test grouped up whether it is CMS
and payors and clearinghouses or whatever that turns out to be, and providers,
and get that a little more central and a little cleaner process, then you can
have people do things a little better going forward.

Some type of certification, I thought that was interesting. As a committee
we are always hearing about CCHIT and the CHR and other stuff. We are dealing
with probably bigger and more imposing systems and changes right now, not
necessarily in the future, but right now. So that could be a process that we
would consider.

Another thing I would like to see us consider is, going back to our ROI
letters, is making sure as we do 5010 — and Jeff mentioned what happens over
this next year on business cases, taking a look at the transactions that aren’t
as heavily used now, and making sure that the business case that 5010 would
bring to the table is well known by the industry, because if we write HIPAA the
second, it would be nice to pick up some of those things that we had noted in
one. The other things that pick up that ROI I think would be a good service to
everyone.

Definitions need clarity and ongoing work. So maybe we need to cerate some
terms of art, whether it is staggered or sequenced or whatever it is, and once
it is out there, it is out there, so people are using the same rhetoric,
because different rhetoric in the same room means that we aren’t together. As
an industry and as the whole group we have got to make sure that people are
talking together and staying together, whether it is education or anything
else. You use that word outside of the people in this room, everybody makes
their own decision, and now they are either together or completely apart.

I heard 5010 and ICD-10 sequentially. I heard that consistently throughout
the day. Do 5010, get it in place, then do ICD-10.

I made four or five pages of notes of a possible letter. Those would be my
comments. Since a lot of us are moving right away onto secondary uses, I have
asked Judy to work with me and Denise to try to get something together out of
what we hear today so that we can start working on it right away, and then
start getting something out, taking everything that everybody said plus
anything else that we add as we go along.

Comments?

DR. COHN: Yes. I think the direction you are describing is fine. I do want
to publicly comment that the NCVHS does willingly accept letters and comments
from the public on all these issues. We have received letters before today. I
welcome letters after today and ongoing.

I do this for the public record. There is one letter that I am looking at
that included Avamed and HIMA and American Hospital Association and American
Medical Informatics Association, Premier, Federation of American Hospitals,
Siemens and MDMA. I have no conflict of interest other than that I am a member
of AMIA. But we do elicit and welcome additional public input on this stuff as
we move forward through our deliberations.

Having said that, I am curious in your view of what you think are the next
steps in terms of this issue.

MR. REYNOLDS: I think the next steps are that we all just summarize what we
thought. I think I hear from the committee the minimum is that we would want —
you could go as simple a letter as, we heard enough from the industry, we heard
enough questions and issues. It needs to now be clearly surfaced so that the
process starts, so that other public comment and processes need to go. You
could go as simple as that letter, which I think we all agreed on. I didn’t
hear anybody disagree that we should consider recommending that the NPRM go
out.

Now, I think that we need to start immediately, which we will, taking some
of those other things that we seem to have a good synergy on. Steve started it
off, and you heard people build off of that. Those things were pretty clear. I
think we need to try to put some of those down. It is probably important enough
to try to get something out for the September meeting, and if that is as basic
as the NPRM with a further letter to follow as we would work it, or make sure
that if we got four or five other things that we want to definitely put in it,
we are going to get started on trying to put some straw person together, like
immediately. I think that is what we need to make sure that we do, and put
together a conference call fairly soon as to what that might look like, so that
the committee says I agree with one, two, three, four, five, and then we put
the right words around it and make a letter.

So I don’t see any other way to do that, because if we don’t do it in
September, then we do it in December. That would be fine too, but CMS would
rather have us consider something sooner. So that is what I am saying. We know
number one. I haven’t seen anybody say we don’t want to recommend that an NPRM
go out.

DR. BLAIR: Can I add an observation on this? There are a number of times
when we have gone through this process. This value of a particular standard is
very clear, and the value of going forward is very clear. We have tended to
look upon the NPRM process as something that is a bureaucratic necessity.

This I think is different. I think if we don’t recognize the difference we
may fail to take advantage of this. In this case, I think we are looking at the
NPRM to do three things. Number one is to alert the industry that this change
is coming, and to try to get the attention of the industry to start moving.

Number two, it is giving us time to strengthen that business case, so when
these issues come up again, we are on more solid ground. Number three, it is
going to help us to clarify exactly how the testing would take place, when it
will take place and who will wind up coordinating it and/or performing it.

MR. REYNOLDS: Say number two again, Jeffrey.

DR. BLAIR: Number two is that it is giving the industry time to pull
together a stronger justification of those indirect and multifaceted
justifications that we have heard here but are not on paper, that we may need
to have set forth in a more compelling manner six months, a year from now or a
year and a half from now. So it is buying time for us.

Then the third piece is that it is going to be a process that will help us
shake out and define exactly how the multifaceted testing process should occur
and what coordination will be necessary to be sure that it proceeds on time and
on schedule. It seemed like everybody was talking about the testing process as
a vehicle to try to avoid another situation where we come to the final deadline
and people aren’t ready.

So the testing that I was hearing was saying, let’s get the testing done
first so that we won’t have another delay.

MR. STEINDEL: Picking up on what Jeff said, I agree with him. I think the
way the letter should be shaped is, there should be a very simple statement,
that we think the NPRM for 5010 should go forward. But I also think there
should be a second part of the letter that picks up on Jeff’s points two and
three.

Judy listed a whole bunch of things, you did, Harry, Simon, you did, of
things that we heard that we want clarification on. I think we should have a
second section in the letter that is also relatively short but basically says,
in an NPRM CMS should seek comments on the following points, and listing a lot
of the things that you have in your four pages of notes, what Judy listed, what
Simon listed, just very short bullet points. NCVHS could be suggesting that CMS
use the NPRM as a mechanism to find comments from the industry on things that
we are interested in and how to improve the HIPAA process as well, which is a
lot of what this relates to.

DR. COHN: I think I agree. What we want to do is, we want to assist CMS as
it begins to think through the developing of an NPRM and questions and all of
this. I do however want to take an opportunity, since Jeff has said this a
number of times, to maybe provide perhaps a different view of return on
investment and the benefits.

I think I listened just like Jeff did. I think I heard something very
different though than he did. Maybe this is a slightly different view of the
world. First of all, I heard a very significant benefit being identified by
almost the entire pharmacy industry, of moving to a newer version of NCPDP. So
describing this as not having cost-benefit I think is missing part of the
point.

I also heard — and I once again reflect on pervious letters that we have
written, where we have talked about the real ROI for HIPAA being the non-claims
transactions. So I think when I hear comments and proposals coming forward to
increase the utility of the non-claims transactions, things that right now are
not useful but that will become useful, it makes me believe that there actually
is.

Now, can they come forward and give dollars and cents? I think that is the
responsibility of CMS assisted by the industry, in terms of an NPRM. But I
didn’t come away from the conversation today feeling that nobody had identified
any value or return on investment for the change.

Jeff, I wouldn’t have commented, except you said this a number of times
today, and I thought I would provide my input on that.

MR. REYNOLDS: Remember, I asked Larrie Dawkins to specifically go into
that. That is one of the reasons I mentioned it here, because those would be
the ones that would be very helpful to all of us. Karen had her hand up.

MS. TRUDEL: Let me clarify how this process works, because CMS doesn’t get
to make these decisions. These are HHS regs and they have to be cleared and
discussed through the policy makers at HHS. So it is really very, very
important to make sure that these letters convey all of the appropriate
information for the many policy makers we will have to engage in this process,
who are not in this room, are not part of this discussion, and will just be
looking at that set of recommendations.

Most specifically, there are things that came out of the discussion about
whatever sequencing means, and whatever pilot testing means, that the committee
is going to recommend be included in an NPRM. That is very important. If there
is a distinction, and the committee isn’t prepared to make a recommendation and
simply says we should solicit comments, that is an important distinction, too.

So the letter really needs to inform people who aren’t in this room.

MR. REYNOLDS: Simon, back to your question and next steps, that is why if
we start from that base of the NPRM and then we pick the things that we know we
agree on, because we would have another opportunity in December to send a
followup if necessary. In other words, we need that one in September, we know
that.

Again, our goal is to try to get any letter we want, any key comments in by
September, but we are going to have to see how that plays here and plays with
the full committee as we go through it.

DR. COHN: I think that if we are going to come forward with the letter on
this one, we need to come forward with a letter, not a letter in three parts.
We may determine that there are issues that deserve additional public
testimony, and we might so indicate in the letter and then have that public
testimony for December. But I think we should try to provide our best thinking
on this.

When I was asking you about what was going on next, I was thinking that it
sounds like there is a desire by the subcommittee to come forward with the
letter for full committee consideration in September.

MR. REYNOLDS: Yes.

DR. COHN: It sounds like there will also be at least one and potentially a
number of open subcommittee conference calls to consider that letter and
develop a letter for the full committee between now and September.

I know this is a pleasure for everybody in the middle of summer, but I
still think that given our testimony with all this stuff, —

MR. REYNOLDS: I am in total agreement with everything. I didn’t want to
oversell. In other words, I think we heard clearly from everybody, and that is
why we went around the room, that we have got to put something together that we
can quickly agree on the structure, agree on the things that are in there, and
then make sure we get them fleshed out well in advance. So I think we are all
in clear agreement. It is just exactly what that is and what exactly those
words are that we have got to get on right away, and we have committed to doing
it.

Is there anything else anyone has? Everybody got to say everything they
wanted. We opened it to the public a number of times, and we are done an hour
and 15 minutes early.

MR. BECHTEL: If I may make one rebuttal statement. In listening to Steve’s
comments, I agree with most everything he said, but the one point that I keep
thinking about over and over again since he said it was, the changes that we
see in 5010 are mostly technical.

I would really disagree with that. I think the changes that you see that
are most significant in 5010 are business rules, of how to form and complete
the transactions. This will significantly impact the success of these
transactions in the industry. Maybe there won’t be cash ROI, but there will
certainly be a smoother implementation and a better use of the data. It will
just make everything work better. I don’t view it as technical.

So I just wanted to make a clarification on that.

MR. REYNOLDS: If I could make one followup comment. When you take
situational fields and make them required, getting the NPRM in will be
important, because that basically takes something that was discretionary and
makes it mandatory, and will generate comments. I’m not saying it would
generate them bad or good, but back to your business rules, you are taking
something that was used in certain cases, and now it is either gone or
required. Those are the kinds of things that drive business differently.

DR. WARREN: I just want to clarify with Don, when you are talking about
business rules, how you fill out the slots or fields or whatever you want to
call those little boxes, and Steve can clarify this, but when I was thinking of
the business case for going to this, I am talking about going to the board of
directors and being the CIO that has to request the budget to implement that.
That is what we have not heard. We should probably make that distinction
between the business case and the business rules.

MR. REYNOLDS: Yes. That is why I made the statement earlier, they are for
good business reasons, but not necessarily have we heard a compelling business
case.

DR. BLAIR: Simon, when you indicated that you thought there were compelling
business reasons for going forward, I agree, and I saw those. But the most
compelling ones that I saw were not the individual changes for business rules.
They were things that were indirect, that were synergistic, that were related
to. Those were very compelling, in addition to the specific things.

But what Judy just said is the thing that I have been concerned about, that
there is going to be six months or a year from now, a lot of folks who are
going to go out there trying to get their corporations, their hospitals, their
medical practices to begin to move forward on this. They will be told, like
they have been told for a long period of time, we are going to wait until it is
mandated, and we are trying to see if we could get things to move forward
before there is an ultimate mandate and things working the last minute.

At that point in time, if we could take advantage of the time between now
and then to provide enough education where we can start to quantify, that is
where I am talking about a business case. We have some quantification that you
could show that executive officer that we are going to save money on this. Then
you get a whole different way of moving forward than if we don’t take advantage
of this time.

MR. REYNOLDS: Using the word journey, the journey makes good business
sense, not necessarily good standard sense only.

MR. STEINDEL: Despite Don’s comment, I stand by my original statement. I
think I made it in large part because of the conversation we just had around
the table.

MR. REYNOLDS: So noted for the record. Any other comments from anyone
before we adjourn? With that, thank you for your attention and focus, and we
appreciate everything you had to say. That’s it.

(Whereupon, the meeting was adjourned at 4:18 p.m.)