MGMA logo


of the

Medical Group Management Association

to the

National Committee on Vital and Health Statistics

Subcommittee on Standards and Security

Presented by
Robert M. Tennant, MA
Senior Policy Advisor


April 6, 2005

Mr. Chairman and members of the Subcommittee, the Medical Group Management Association (MGMA) is pleased to submit our testimony to the National Committee on Vital and Health Statistics Subcommittee on Standards and Security.  My name is Robert Tennant and I am a Senior Policy Advisor at MGMA where I lead the association’s health information technology implementation efforts.  I am also on the board of directors of the Workgroup for Electronic Data Interchange (WEDI) and Co-Chair of WEDI’s Strategic National Implementation Process (SNIP).

MGMA is the nation’s principal voice for medical group practice. MGMA’s 19,500 members manage and lead more than 11,500 organizations in which more than 240,000 physicians practice.

We are pleased that the NCVHS has invited MGMA to testify on an important topic in health care today, implementation of the Transactions and Code Sets (TCS) provisions of HIPAA.  As MGMA does not have definitive data related to the ROI of the transactions, nor on the specific adoption rate for medical groups, I would like to focus my attention on the positive business impacts of HIPAA TCS, the business challenges faced by medical groups as they attempt to gain ROI, and offer some recommendations on how we as an industry can improve the implementation of these and other important regulations.

HIPAA ROI in Medical Practices

In theory HIPAA TCS should produce substantial administrative simplification leading directly to cost savings.  Practices submitting information electronically using the HIPAA standards have some advantages: a health plan may not refuse to accept a HIPAA-standard transaction, health plans must respond to the provider with the appropriate electronic message standard format and health plans may not delay payment because the transactions are submitted electronically in the standard format.

The clear expectation was that several of the HIPAA TCS standards would give numerous advantages to medical practices that conduct their transactions electronically.

Claim and COB (837)

With the standard claim format replacing the hundreds of proprietary formats, the 837 transaction should have enabled health care providers to submit the same transaction to any health plan in the United States.  We would expect efficiency gains from this transaction alone to be substantial.  In fact, many in the industry expected that much of the cost saving would come from a reduction in the need for providers to contract with clearinghouses to submit claims and other transactions.  Going direct to health plans could eliminate the per transaction or per month fees typically paid by practices to clearinghouses.  And in some cases practices have been able to reduce their clearinghouse fees.

Pre-Certification and Referral Authorization Transaction (278)

The 278 Pre-Certification and Referral Authorization Transaction provides for communication between a physician office and the health plan. Use of this transaction has proven to be particularly useful when a practice treats a large number of managed care patients. This transaction can save a substantial amount of time and money for office nurses, who, for many practices, are usually the ones discussing cases on the phone with the plan.

The 278 transaction allows providers to specify the provider and services. Providers can request authorization for a service by a specific specialty rather than a specific provider and practices can request reviews for multiple providers and services in one transaction.  This translates into significant ROI for the practice.

Claim Status Inquiry (276/277)

The 276/277 claim status inquiry allows the practice to determine where their claim is in the health plan’s system.  This increased “transparency” is extremely important for practices—allowing them to resubmit claims that are missing data elements and reduce their accounts receivable days.  Practices can ascertain which claims have been pended and why, receive the settled amount and date, and get a description of the now standard message codes.

Remittance Advice (835)

HIPAA provides for electronic remittance advice through use of the 835 Remittance Advice standard transaction. This automates the explanation of benefits (EOB) that providers typically receive on paper.  Moving away from paper EOBs to electronic remittance receipt and posting – saves considerable time in manual posting and significantly reduces errors.

Eligibility Inquiry and Response Transactions (270/271)

However, the real ROI for many practices relates to several of the other transactions—eligibility verification and benefits, claim status, and remittance.

Some health plans are offering eligibility verification in real time, where a practice can enter an inquiry into their information system and while still connected and within seconds receive a response.  Eligibility can also be performed in batch mode, where a group of inquiries is sent to a health plan at a specified time of day in order to receive most responses back the following (business) day.  This can result in substantial efficiencies, especially for larger group practices.

The intent of the eligibility verification transactions is to significantly reduce having to spend time making telephone calls or sending faxes to health plans. This mean s that practices can verify the eligibility of more patients with less staff time. In addition to productivity improvements, information from these transactions could be available, depending on the payer, to permit you to collect more co-payments at the time of the patient visit, or at a minimum, better inform patients about their financial obligations.  A large percentage of bad debt in a practice is a direct result of eligibility being checked (usually by phone) after the patient had been treated.  Some larger practices have 10 or more staff solely dedicated to checking patient eligibility by phone, an enormous cost for the organization.  Electronic eligibility, especially in batch mode, held the promise of significant time and labor savings for practices.

As we can see, there are significant opportunities for medical practices to gain ROI from HIPAA TCS.  MGMA has seen that the larger the medical group, generally there is more prospects for gaining these benefits.  Certainly economy of scale plays a role here, but as well, larger practices have more negotiating power with vendors, clearinghouses, and health plans.  It is also important to remember that there is potential ROI with the National Provider Identifier (NPI), as medical practices can transition away from having to collect and report multiple proprietary identification numbers.  ROI is also expected from the implementation of electronic claim attachments.  Health plans will have the ability to request additional documentation in support of a claim electronically and practices will be able to expedite that request—thus speeding up payment of the claim.

Let me turn next to some of the challenges that medical practices have faced as they seek to achieve ROI.

HIPAA ROI Challenges (Achieving Return on Investment—the Reality)

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.

Why haven’t providers realized the many potential benefits of the transactions and code sets?

  • Focus on privacy—when Subtitle F of HIPAA was crafted, it was designed to streamline the many inefficient primarily paper-based business processes.  At the same time, legislators sought to ensure the protection of health information from unauthorized disclosure.  The focus of HIPAA implementation, however, has been the latter, not the former.  Ask 100 medical practices their impression of “HIPAA” and 99 respond that “Privacy has been a significant challenge and expense.”  Providers associate HIPAA with cost, not ROI.
  • Lack of educational outreach on TCS 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.
  • 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 these practices were forced 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 either a proprietary or other clearinghouse and of course imposed fees.  We had calls from members complaining that they actually went 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.
  • Marginal compliance by some health plans—of great concern of providers is the marginal compliance on the 837 and 270/271.  With the claim, we’ve gone from 400+ different claim formats (quoted in the final rule by CMS) to several hundred “versions” of the 837 professional, as identified by Dr. Kepa Zubeldia’s Convergence Project.  This lack of uniformity has forced many providers to utilize clearinghouses in order to have their claims paid.  It is expected that after Medicare lifts the contingency plan, and the data requirements become more stringent, providers my experience an increase in the number of rejected claims.  On the eligibility side, 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.

There is some hope that the industry can move to correct the 837 and 270/271.  For example, many in the industry anticipate that the 5010 version of the 837 will produce significantly less deviation in data requirements between health plans, thus making it easier for practices to go direct with their claim submission.  On the eligibility side, recently the Council for Affordable Quality Healthcare (CAQH) initiated their CORE project which seeks to develop a standard set of operating rules for the eligibility transaction.  These rules, once voluntarily adopted by health plans, would provide providers with at least the minimum level of data they require.  MGMA, along with a number of provider associations, are working on this CORE project and we are hopeful that this initiative will be the beginning of numerous industry administrative simplification collaborations.

Additional challenges include:

  • 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 submit paper claims and maintain a paper-based patient record system.  HIPAA was seen by some of these individuals as a reason to avoid moving to an electronic billing and record system.  Yet these smallest of provider organizations are generally the most in need of financial assistance.
  • Few reliable cost/benefit analyses of HIPAA—The tables included in several of the NPRMs were believed by most observers to grossly underestimate the costs of HIPAA.  With a more accurate description of the costs, practices could have better planned and budgeted for implementation.
  • Problem with the delayed timing of the regulations—By most accounts, the cost to upgrade practice management systems and claims software has been substantial.  These costs have increase significantly due to the fact that the regulations were released piecemeal and on a very extended timetable.  The delayed timetable also sent mixed messages to the healthcare community.  Many thought the regulations would never be implemented, or that they would be repealed by Congress.  Other adopted a “wait-and-see” approach that delayed their implementation efforts.  Some software vendors that took this latter approach were unable to upgrade their provider clients in time to meet the Oct. 16 deadline.

MGMA Recommendations

  • Medicare and private health plans should be permitted to continue accepting proprietary claim formats—In order to avoid potential catastrophic cash flow disruptions stemming from providers not being ready to submit compliant claims, health plans should continue to be permitted to accept non-standard, proprietary claims.  In addition, significant notice should be sent to the industry before Medicare ends this enforcement flexibility.
  • Reporting of missing data to providers –It is imperative that Medicare, Medicaid and commercial health plans report back to the submitting provider any data content deficiencies.  Providers will benefit most by having claims sent back with an explanation of data content deficiencies, as opposed to simply having their claims rejected.
  • 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 trade associations to ensure that a unified message is communicated.
  • CMS should expand vendor educational activities—CMS and WEDI have held very successful face-to-face vendor forums in the past.  These should be continued and offered in more areas of the country.  CMS should offer technical assistance to vendors to facilitate the development of appropriate compliance 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.
  • Recognition that there must be staggered compliance dates and sufficient time to ensure successful implementation.  Significant industry migrations, such as the proposed transition to the NPI, claim attachments and potentially ICD-10, should first require health plan implementation, followed by provider implementation.  This would encourage the industry to have a delineated testing period without both sectors focused on the same compliance date, as was the case with Electronic Transactions and Code Sets.
  • Identification of financial resources to assist physician practices in their migration to the existing and future standards.  Physician practices experience significant costs for all health information upgrades and staff training.  It is imperative that HHS acknowledge the financial impact that these transitions will have, particularly on small and rural providers already struggling to comply with numerous unfunded mandates.
  • 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.  Every day without the benefits of administrative simplification results in the loss of millions of dollars in savings.  The federal government sends a negative message to the industry when the release of standards are significantly delayed or compliance is not achieved.


In conclusion, MGMA is highly supportive of the development and use of national standards for the health care industry.  We are confident that, properly implemented, standards for the collection and transmission of electronic health data will improve the quality of health care, while at the same time lowering costs.

In addition, we view the HIPAA regulations collectively, including Privacy and Security, as an important foundation for all future health information standards efforts led by industry and/or government.  Perhaps HIPAA will act as a catalyst to move the industry forward with new initiatives to improve the delivery of health care.

We appreciate the subcommittee’s interest in this important topic and thank them for inviting us to present our views on this issue.