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Statement of the

Medical Group Management Association

to the

National Committee on Vital and Health Statistics
Subcommittee on Standards and Security

Presented by
Larrie Dawkins, MBA, CMPE
Chief Compliance Officer
Wake Forest University Health Sciences
Wake Forest University
Winston-Salem, N.C.

RE:  Implementation of the HIPAA 5010 Transactions

July 31, 2007

Chairmen and members of the Subcommittee, 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 and I am the chief compliance officer at Wake Forest University Health Sciences, Wake Forest University, located in Winston-Salem, North Carolina.

MGMA, founded in 1926, is the nation’s principal voice for medical group practice. MGMA’s nearly 21,000 members manage and lead some 12,500 organizations, in which almost 270,000 physicians practice. MGMA’s core purpose is to improve the effectiveness of medical group practices and the knowledge and skills of the individuals who manage and lead them. Approximately 80% of MGMA member practices have 10 physicians or less.  MGMA headquarters are in Englewood, Colo.

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 the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  In addition to looking back at the physician practice experience with implementing the 4010 version of the transaction standards and the national provider identifier (NPI), I will also look ahead and offer a series of recommendations that may assist the industry in implementing the new 5010 version of the transactions.

Why Move to the 5010?

Originally, Congress passed the HIPAA legislation with the belief that national standards for electronic health care transactions will reduce the administrative burden on the health care industry.  Providers, health plans, and others were using a myriad of over 400 different claim formats, many of them proprietary to their specific organization.  The goal of implementing the 4010 A1 version of the transactions would to reduce the 400 formats to one national standard.

Why move to these new 5010 transactions? Almost as soon as the 4010 regulations were released it was apparent that there were many problems needed to be solved and modifications that needed to occur.  In that period, the Designated Standards Maintenance Organizations (DSMOs), including ASC X12, have reviewed more than 1,000 industry change requests. Countless hours from dedicated DSMO volunteers has produced a superior set of HIPAA and non-HIPAA electronic transactions.

The 5010 version addresses many of the problems encountered with the 4010A1 version.  Many in the industry believe that moving to the 5010 transactions will produce:

  • An augmented and clearer set of implementation instructions.
  • Improved data content and business functions.
  • Important clarification of NPI instructions.
  • Cross transaction consistency (data consistency across the various implementation guides).
  • More consistent implementations by trading partners (reduced reliance on proprietary companion guides and health plan individualized data requirements).
  • Support for the potential move to ICD-10 codes.
  • Enhanced industry consensus on critical transactions.

The Lessons of Implementing 4010

The Department of Health and Human Services (HHS) published the final rule on electronic transactions and code sets on August 17, 2000, almost seven years ago.  This was the first of the HIPAA administrative simplification provisions to be published in final form.

HIPAA has been no less than a complete re-engineering of the business side of the health care system. The migration to this new system has proven to be particularly daunting to physician practices. Successful deployment of HIPAA’s EDI standards have relied heavily on coordination between critical trading partners—providers, vendors, clearinghouses, and health plans—coordination that has proven at times to be elusive.

With many covered entities unable to meet the original compliance dates, CMS responded by issuing an extension and then contingency plans for all the transactions.  In fact, contingency plans are still in effect for several of the standards.  Why was the industry unable to meet these deadlines?

  • Lack of educational outreach on transactions from CMS—with the focus of the government (and the popular media) on Privacy, many providers were not made fully aware of (a) what benefits could accrue to a practice from adopting TCS or (b) how best to migrate to these new standards. The government failed to fully explain why the industry was migrating to these new standards and build the case for providers to embrace them.
  • Difficulty in securing provider “buy-in” —Many providers, especially those in smaller office settings, have not yet merged onto the ehealth highway. HIPAA has been viewed by many of these organizations as strictly an electronic issue and thus not pertinent to them as they continue to submit paper claims to clearinghouses and maintain a paper-based patient record system. In fact, HIPAA was seen by some of these practices as a reason to avoid moving to an expensive electronic billing and record system. The case for a strong ROI was never made to these types of practices.
  • Reliance on a “non covered entity” for compliance—Providers found out very quickly that their practice management system vendors and billing system vendors were critical partners in their compliance efforts. Unfortunately, these vendors typically were not covered entities and, in many cases, moved slowly to upgrade provider systems. These upgrades in many cases were expensive, and in some cases vendors would not upgrade older versions of the software thus forcing practices to purchase all new software. Providers also encountered vendors that refused to allow the provider to go direct to the health plan with their transactions—and instead had them to go through a proprietary clearinghouse and of course incurred fees for these transactions. In some cases, practice actually took a step backward under HIPAA—as they used to go direct to their Medicare carrier and Blue Cross Blue Shield plan and after HIPAA they were directed to a clearinghouse by their vendor for these transactions.
  • Proprietary data content requirements by health plans—Of great concern to providers is the data content “compliance” with the 837 and 270/271. With the 837 claim, the industry went from 400+ different claim formats (quoted in the final rule by CMS) to more than 800 “versions” of the 837P, as identified in the Convergence Project. This 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” or “no” to their electronic inquires and are thus forced to pick up the phone to access information such as co-pays and deductibles. This failure to report the necessary data may be “compliant” with HIPAA yet is clearly not following the spirit of the regulation.
  • No piloting of the standards prior to national rollout—Some of the problems associated with the 4010 version of the transactions could have been identified prior to full nationwide implementation had the government initiated a comprehensive pilot test of the standards.  The only pilot conducted to date of any HIPAA standard was the ANSI X12N Healthcare Claim Request for Additional Information (277), and the ANSI X12 Additional Information to Support a Healthcare Claim or Encounter (275).  The pilot of these electronic claim attachment standards identified several problems that many anticipate will be corrected prior to release of the final rule.
  • Few reliable cost/benefit analyses of HIPAA—The tables included in several of the NPRMs are believed by most observers to grossly underestimate the costs of HIPAA and grossly overestimate the savings. With a more accurate description of the costs and benefits, practices could have better planned and budgeted for implementation.

Implementation of the 5010 Transactions in Group Practices

In a typical physician group practice, the following steps will have to be completed prior to successful implementation.  This is a daunting list for any provider and each step takes staff time and resources to accomplish.  Many of the steps require assistance from outside the provider organization, including the staff education, software upgrades, and external testing.:

  1. Pre-implementation education of practice administrative staff focused on compliance requirements and timelines;
  2. Education of physician leadership within the practice focused on timelines;
  3. Creation of a 5010 transition team;
  4. Development of a task list and timelines (potentially including staff training, software upgrades, workflow modifications, clearinghouse partnerships, outreach to health plans, internal and external testing, “go live” date);
  5. Outreach to vendor partner(s) to ascertain nature of practice management and/or billing software modifications/replacement, costs for these modifications/replacement, timing of the modifications/replacement;
  6. Development of the practice’s 5010 implementation budget;
  7. Educate administrative staff regarding specific data content issues (required versus situational) and other business rules issues;
  8. Develop appropriate changes to workflow required to implement 5010;
  9. Develop contingency plans (i. software vendor, ii. clearinghouse, iii. health plan);
  10. Development of “dual transactions” contingency plan (running 4010A1 and 5010)
  11. Modify/replace practice management and/or billing software;
  12. Train staff on modified/replaced software;
  13. Internal testing of modified/replaced practice management and/or billing software;
  14. External testing with clearinghouse(s);
  15. External testing with health plans; and
  16. Go live date.

Of particular importance to physician practice is the necessity to modify or replace practice management and/or billing software. Many group practices reported that they experienced significant challenges getting their software upgraded for the 4010 version of the transactions, and later for the NPI.  In some cases, years after promulgation of the final rules, practices have not been able to take full advantage of 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 workflow of the practice.

Costs to a practice for the 4010 and NPI modifications ranged from zero, as the practice’s maintenance contract with their vendor covered federally mandated changes, to “several hundred dollars” for software modifications, to many thousands of dollars to replace older software with versions that would not be modified to generate the NPI.  Upgrades and replacement of practice management and/or billing software often requires practices to replace hardware as the new software requires faster processors and larger memory capacities.

MGMA Recommendations

  • CMS should expand provider educational activities. It is imperative that CMS augment its current level of educational outreach. This outreach should focus on the steps to take to implement and achieve ROI from the current set of transactions as well as the NPI and electronic claim attachments. This outreach should: (1) target small and medium sized physician practices; (2) target rural providers, community health centers, and other “at-risk” organizations; (3) expand the current very successful face-to-face and conference call activities; and (4) coordinate closer with industry to ensure that a unified message is communicated.
  • CMS should expand vendor educational activities. As the industry found with the 4010 transactions and the NPI, providers and others must rely on non-covered entities to come into compliance. CMS should work more closely with the vendor community to ensure that they understand the regulation and what the government expects of their covered-entity customers. CMS should partner with industry organizations such as the Workgroup for Electronic Data Interchange (WEDI) to conduct face-to-face vendor forums across the country. CMS should offer vendors technical assistance to facilitate the development of appropriate products for all covered entities.
  • Prior to implementation, completion of an independent and comprehensive analysis of the costs and benefits of all electronic health initiatives. This analysis should be segmented by health care sector and, in particular, should examine the real costs and benefits by provider type. This is particularly important because providers (unlike health plans, clearinghouses and vendors) will not have the opportunity to convey increased operating expenses to their customers.
  • Establish 5010 pilot projects – CMS should conduct comprehensive pilot of each of the 5010 transactions and utilize the results from this pilot prior to national implementation.  Pilots serve several functions.  First, they identify general problems and unforeseen issues that can be solved prior to full national implementation.  Second, pilots can be targeted to specific sectors of the industry (i.e., community health centers) to identify focused problems and issues.  Thirdly, pilots that identify a clear ROI can encourage more rapid adoption of the standard by covered entities. Finally, successful pilots can jumpstart the vendor community into producing supporting products in a timely manner, thus expediting the implementation process.
  • The 5010 standards must have staggered compliance dates and allow sufficient time to ensure successful implementation. Significant migrations to 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 specific testing period without forcing all covered entities to funnel into the same compliance date.  Staggering the compliance dates and extending the typical 24 month implementation period to a minimum of 36 months may forgo the necessity of CMS issuing contingency plans.  As CMS permitted “small health plans” an additional 12 months to comply, they should allocate additional time for providers to implement the standards.
  • Consideration of a sequenced rollout of the 5010 standards.  As the industry experienced with the 4010, certain of the transactions are more critical to business continuity.  Claim, eligibility, and remittance (in that order) were, for many providers, the focal point for their implementation efforts.  CMS should consider a sequenced rollout of the 5010 in recognition of the importance of these three transactions.
  • NCVHS assessment of industry readiness.  Just as you have so successfully done with the NPI, we strongly encourage the NCVHS to hold regular hearings and work with industry groups to ascertain the readiness levels and implementation challenges faced by each of the various industry sectors impacted by the change to the 5010.
  • Continued identification of the roadblocks and difficulties faced by providers and other covered entities as they worked toward compliance. Critical lessons learned from this process must be identified and applied to future standards to ensure that implementation of any additional provisions are as cost-effective as possible. With literally billions of dollars at stake, including significant savings for both the Medicare and Medicaid programs, the federal government should identify implementation roadblocks and achieve compliance as quickly as possible.
  • Reduced variability in data content. The return on investment from these transactions occurs when the data content is standardized.  That standardization clearly was not evident with the 4010 with enormous variability between health plans.  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 exemptions for federal and state programs.  When the final rule was published, there may been justification for permitting certain federal and state programs to continue using proprietary transactions and allow them to be exempt from the requirements under HIPAA.  However, it has been seven years, more than enough time to modify software, and all programs that utilize the standard claim form should 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 the 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 both 5010 and ICD-10 would be an impossible task.  Such an effort would severely overtax the ability of the industry to comply with the standards and divert scare educational, financial, and human resources from patient care.


In conclusion, MGMA strongly supports the development and use of national standards for the health care industry. Standards for the collection and transmission of electronic health data will improve the quality of health care and lower the cost of providing it. While MGMA is confident that full implementation of the 5010 version of the electronic transactions will ease administrative burdens and facilitate improved data interchange within the health care community, significant roadblocks must be addressed before successful implementation can be achieved.

We strongly encourage HHS to adopt a very different approach to implementing these new transactions than the 4010 transactions.  Should they fail to do so, the industry most likely will be mired in a similar protracted and costly implementation that we experienced with 4010 version of the transactions and with the NPI. We appreciate the subcommittee’s interest in this important topic and thank you for inviting us to present our views.