[This Transcript is Unedited]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Subcommittee on Standards

Hearing on HPAA and ACA Administrative Simplification

-Operating Rules, ICD-10, Health Plan ID, Pharmacy Prior Authorization –

February 19, 2014

Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, D.C. 20024

Proceedings by:
CASET Associates, Ltd.
caset@caset.net

TABLE OF CONTENTS

P R O C E E D I N G S (9:03 a.m.)

Agenda Item: Welcome

DR. SUAREZ: Good morning, everyone. Welcome to sunny Washington, D.C. We are
going to have a warm and sunny day, hopefully, today. My name is Walter Suarez.
I work for Kaiser Permanente, and I am a member of the National Committee on
Vital and Health Statistics and co-chair of the Subcommittee on Standards,
which is responsible for convening this hearing.

We are going to be going through introduction of the members of the
committee and staff and then the audience. We will go ahead and get started.

I do not have any conflicts.

(Introductions around the table)

DR. SUAREZ: I think we have a couple of members on the phone from the
subcommittee and staff. Can the people on the phone introduce themselves?

(Introduction of telephone participants)

DR. SUAREZ: Why don’t we go ahead and introduce all the members of the
public and the testifiers as we go through, just your name and organization.

(Introductions of testifiers and audience)

DR. SUAREZ: We are going to go ahead and start.

First of all, on behalf of the subcommittee and the national committee, I
want to express really our appreciation to everyone who is joining us today to
testify on the various topics we have. This is a very important hearing, and it
is packed with several very critical topics that we want to have a lot of time
for discussion on.

We are going to just go ahead and jump in, unless all of you have any
introductory remarks. We are going to go ahead and start.

Just a couple of logistic points. We have asked testifiers to try to limit
their testimony to about 5 minutes and give us enough time to really have a
rich discussion with the committee and subcommittee members. So there will be
some time monitoring here. You will be seeing some signs as you go through.

We are going to start with our first panel, which focuses on the status of
the development of operating rules for what we call the remaining HIPAA
transactions, transactions for which operating rules are to be developed and
defined and adopted, and also have a chance to discuss the status of operating
rules implementation for two recently started transactions, operating rule
transaction elements, the EFT and ERA. We are going to go ahead and start with
that panel.

I think we are going to go through this in the order in which we have on the
agenda. We are going to start with Gwen and then down through the list. So,
Gwen.

Panel 1: Review of Status of Operating Rules

Agenda Item: Operating Rules Authoring Entity

MS. LOHSE: As you have said, we are going to just quickly go through and
update on the EFT and ERA operating rules and then give a quick update on the
third set of rules.

With the status of the operating rules, I think there has been tremendous
progress. It is actually amazing seeing some of the people here today when we
think about where we were less than 3 years ago.

That all said, based upon our sources — I am going to talk really
quickly about sources — probably half of these are done. That doesn’t
represent the transactions. It’s half of the entities. A lot of the large
entities have a large percentage of the transactions.

Then there is different progress with each of the types of entities.
Practice-management systems continue to be a challenge, since they are not
HIPAA covered. I think it’s a little bit too early to measure progress and
benefits, although we are hearing from the sources that we have that there is
progress, people are getting an uptake, but it is really early to track.

What are the sources? In the last year we’ve had about 1,100 requests. About
54 percent of those have been on EFT and ERA and 60 percent of those are from
non-CORE participants.

We’ve done a social media campaign with the CORE board leading, specifically
the MGMA executive director and a member from the AMA board who is on the board
of trustees. Twenty-three thousand unique visitors to a homepage that has NACHA
information, MGMA information, AMA information, and CORE information, et
cetera. There have been about 1,200 downloads of free information.

Education sessions. There are about 22,000 registrants. Just a note: 55
percent of those are providers. So you are seeing a big change from last year
to this year. We’re seeing a big uptake.

On sources, FAQs. These are generated from the requests for information, but
180 of those — and a lot of those, we actually asked them to go to other
entities for more information. Again, that is not just —

CORE certifications. You’ll see, for instance, Florida Medicaid. The
Medicaids are making a lot of progress, have pledged to get CORE III certified.
The amount of covered entities by CORE certification is pretty high.

And then rule maintenance, this group, I give them a lot of credit.
Multi-stakeholder. They’ve gone through 900 code combinations using evaluation
criteria.

We did have a baseline. The U.S. Efficiency Index now is transferred over to
CAQH. There is about 56 percent payment, 53 percent remittance. We will be
coordinating and updating this data. This is pre-mandate information so it’s
from 2012, so it’s outdated, but it will give us a good baseline.

Caveats to source data. NACHA has some very solid ways to track, but we’ve
got to remember that this cannot correlate to ERA because you can do EFT
without ERA and you can do EFT in different ways beyond ACH because of the way
the rule is written.

Additionally, the small entities drive a lot of volume. So even if you know
the numbers, you need to know the volume behind the numbers. But we are
committed to tracking that baseline, and that is critical.

With what we are hearing from early adopters — we’ve had a lot of
speakers on the 33-plus Webinars, et cetera, ROI studies — they are
telling us these things to do. These are all based on feedback from early
adopters. We’ve created tools based on all the feedback from the early
adopters.

I have to say these entities have been sharing staff hours, costs,
challenges. It has been amazing how open they are, which is fantastic.

With the adoption challenges, resource constraints are huge. This obviously
affects not only the set but also the coming-up set, everything you guys are
talking about today.

Coordinating with trading partners. Everyone is learning a lot more, but
this continues to be a challenge, especially now you put the banks in it.
That’s a new area, but people are really working forward.

Then the CARCs and the RARCs. Again, this is a new area and a lot of volume
to go through. The practice-management systems, and specifically the providers’
basic messages, we’ve created some in conjunction with the providers, and
they’re getting used, but we need to do more.

The CORE board is committed to doing EFT/ERA education until the end of the
third quarter, because they feel like, with these that are still adopting, they
want to be able to do that.

Update on the third set. I am trying to go pretty fast here. There is both
infrastructure and content. Infrastructure opportunities were ranked the
highest. That rule-writing has already started. You will see that the content
is developing. It is going to have some ongoing operational needs, like the
CARCs and the RARCs, so that is going to be a little more resource intensive.

Lessons learned. There is already a CORE rule for claims, for instance.
Everyone wants the claims acknowledgment. But I think we all know
acknowledgments are not mandated, so we have a rule, everyone wants it, but
could we actually submit it? Probably people don’t want to spend more time if
it’s not going to pass through.

Additionally, what is happening in the other industries, it’s all about
alignment and how to move the momentum. So how do we work with meaningful use?
What are we seeing with the insurance exchanges? They’re using two of the
transactions, so how do we take those lessons learned? Then, additionally,
there are no doubt educational gaps, so a lot of people don’t know about direct
very well because of the surveying we did, or they don’t know HL7 well.

We are in this work plan. With the infrastructure and connectivity, they
have completed two of the steps about environmental scan, identifying
opportunities, and doing an analysis about what are the most important things.
They picked evaluation criteria, so they can take the opportunities, overlay
them with the criteria, and then pick the final opportunities.

What are the evaluation criteria? You will see ROI is right up on the top,
then additionally alignment with other national initiatives because of the
momentum.

Some of the examples for the identified rule opportunities: ONC DIRECT for
attachments, not the other transactions in the third set but for attachments,
although the people don’t necessarily know a lot; digital certification; and
then use of real-time or batch for certain of the transactions, not all of them
but for some of them.

We hope to have a set of drafts by the end of the year.

With that, we did wrap up with how NCVHS can help. Here are some ideas about
especially education. I know WEDI is doing a lot, the provider associations
are. There is more to be done. CMS is continuing to do it. Cataloguing the
mechanisms to track. Then encouraging some of the things like acknowledgments
and attachments from CMS.

Thank you.

DR. SUAREZ: Thank you very much for that very rapid —

MS. LOHSE: You said 5 minutes.

(Laughter)

DR. SUAREZ: That’s good, that’s very good. I think you are opening a lot of
opportunities for dialogue.

MS. LOHSE: And we have a lot of background on each of these if you want more
detail.

DR. SUAREZ: Perfect. Thanks so much.

Janet.

Agenda Item: EFT Standards Authoring Entity

MS. ESTEP: Thank you very much. Many of you may not know NACHA, but I am
pleased to be here this morning representing the Electronic Payments
Association. I will provide an overview on implementation of the EFT standard
and answer some of the questions that were provided in advance by the
committee.

NACHA does manage the development, administration, and governance of the ACH
network and is the backbone of electronic movement of money and data across the
United States from thousands of financial institutions and millions of their
customers.

The subcommittee recommended that the secretary of HHS identify the NACHA’s
CCD-plus addenda as the HIPAA standard for electronic funds transfer, EFT, and
names NACHA as the standards organization for the transaction.

In October 2012, the NACHA members actually approved changes to the CCD-plus
standard and the NACHA operating rules to support the efficient and consistent
use of the standards by the healthcare industry in confluence with financial
institutions. These changes then became effective for financial institutions on
September 20, 2013. They allow NACHA to identify and track the EFT standards
that are transmitted through the ACH network, and they really provide the
benefit of accurate and consistent re association between the payment and data.

For the month of January 2014, the first month in which plans were actually
required to be compliant with the standard, there were just over 8.1 million
healthcare EFTs using NACHA’s CCD-plus standard. These transactions moved
$45 billion from payers to payees. Even with no additional growth
throughout this calendar year, the ACH network would move 100 million EFTs in
2014 and transfer about $40 billion (sic – written testimony says $540 billion)
from plans to providers.

A second component of the EFT standard is the X12 TRN segment, which is
required to be put in the addenda record of the CCD-plus. According to the data
that we have, 99.93 percent of all healthcare EFTs included an addenda record.
While we don’t have insight into whether or not the TRN segment is included
correctly in all cases, in my view this is a very high percentage, and the
implementation of that component standard is very accurate and very high.

In addition to the actual transaction numbers, we also have some insight
into the number of plans that are using the EFT standard. The ACH network data
shows that 3,558 unique company identifications were associated with the volume
of healthcare EFTs. This number represents really the maximum possible of
distinct payers using the transaction. While the number is probably somewhat
lower due to duplicates or individual organizations using multiple company IDs,
even half of that number represents very broad adoption of the standard by the
health plans.

That is an overview of use of the EFT transactions during the month of
January. I now want to address the second question, which involved answering
whether or not there were any implementation challenges. I will address three
in my comments and then be available for questions.

The first is compliance with the EFT standard and the NACHA operating rules.
From our perspective, the implementation of the standard appears to have gone
very smooth. We have been contacted by a small number of financial institutions
and processors to discuss and trouble-shoot a small number of processing
issues, but these all seem to be resolved or acted upon in good faith.

We do want to call out, though, that NACHA has received reports from
financial institutions that some EFTs received from CMS are not formatted
according to the EFT standard or the NACHA operating rules. An inspection of
the specific transactions shows that CMS is not correctly formatting the TRN
segment in the addenda portion of the CCD-plus. This can lead to the TRN
segment not being identifiable or consistently matched up with the payment. We
encourage CMS to verify its compliance and provide some additional information
in that regard.

The second challenge is provider enrollment. One of the potential barriers
raised up for using the EFT standard is that the plan must receive banking
information from the provider to direct the EFT to the proper account. This is
referred to as enrollment. In most instances, enrollment is not a barrier to
using EFT. Think of how you enroll in payroll direct deposit. It should be as
simple as providing your account number to your employer, and after that the
payment happens automatically.

Many providers, however, deal with dozens, if not perhaps hundreds, of
payers, and so the barrier here is not the single process but one of scale. For
example, a payer might enroll in EFT with 20 percent and then leave the 80
percent of its funds to devote to other issues. The CAQH EFT enrollment utility
of an example of a utility that can overcome this barrier by providing
information once and having it be used by many different payers.

A second potential barrier to enrollment is when plans require providers to
submit information that is extraneous to enrollment and unnecessary for the EFT
itself. Also, this type of information may then vary from plan to plan.
Enrollment should be simple, straightforward, and with minimal data, just like
getting your direct deposit of payroll. This is the rationale for the CORE EFT
enrollment rule. Compliance with it will reduce the barrier to enrollment that
we are seeing, making it as simple as direct deposit of payroll.

The last issue is promotion of virtual cards and cost shifting to providers.
Providers’ use of the EFT standard is impacted when they are not accurately
informed of choice in the method to receive claim payments. In promulgating a
final rule, HHS regrettably included the statement that health plans are not
required to send healthcare EFT through the ACH network. This is the only HIPAA
standard where the standard is not a standard.

Predictably, this has been interpreted by many in the healthcare industry,
including vendors, processors, and clearinghouses, that it is an explicit
opt-out for health plans to not support the designated HIPAA standard
transaction. Many see this as an opportunity to replace checks and EFT standard
transactions with virtual credit card payments.

In the virtual card process, the health plan issues, probably through a
vendor, a single-use credit card number that is either mailed or faxed to a
provider, infusing inefficiencies at the beginning. This is known as a virtual
card because a physical card is never created. The provider is then required to
manually key-enter the card number into a point-of-sale terminal. They pay for
this an interchange around 3 percent of the total amount of the payment.

But in this process, the provider ultimately receives their payment via an
ACH deposit to their merchant account, but they pay the high interchange fee
for an authorization that really provides no extra value in the process.
Vendors are promoting this service as a way to increase the plans’ revenues
and, as vendors, rebate a portion of the interchange fee. They are able to
generate additional money that, in the end, providers pay for.

Anecdotally, we have heard of health plans leading providers into accepting
virtual card payments through a variety of methods, an automatic opt-in, which
makes opt-out a necessary part of the process to receive another payment, and
sometimes vendors telling providers that if they want to opt out of virtual
cards, it may take up to 60 days to either get their check for their ACH
payment; or they may create an unnecessarily burdensome enrollment process,
they may raise inaccuracies about sharing bank account information with plans,
or they may charge a fee for use of the EFT standard.

Consider the impact of just our January volume of the EFT transactions.
Average transaction was $5,194. When paid by a virtual card, a provider would
have to pay $155 for that transaction. If in fact the total number of
transactions in January were extended over the year, providers would have
totaled a payment of $1.35 billion on an annualized basis, coming up to $16.2
billion.

Even as a replacement for check payments, virtual card payments impose
substantial costs on providers, costs that they will not incur with a standard
EFT transaction. And if these additional costs are borne by providers, the
industry will not meet its goals of efficiency through administrative
simplification.

There certainly may be cases where a virtual card is useful, but we believe
that, at least in some cases, providers are not afforded the opportunity to
freely make choices about claim payments, may not be informed as to the
options, or the enrollment may become inappropriately burdensome.

NACHA recommends that HHS act immediately to give clear effect to providers’
use of the HIPAA standard transaction for EFT, that it become more of a
standard, as other HIPAA standards are, and that plans be prohibited from
disadvantaging those providers that choose to use the HIPAA standard
transaction.

Thank you.

DR. SUAREZ: Thank you very much, Janet.

We are going to go next to Heather. While we wait for the slides to come up,
do we have Linda on the phone now?

(No response)

For committee members and staff, I think what we want to start doing is
formulating the questions that we want to ask for the Q&A. So be thinking
about those questions after we hear this testimony.

Agenda Item: Other Payment Methods

MS. MCCOMAS: I am Heather from the AMA. Thanks for inviting us here today.

My testimony is going to be focusing on the subject of virtual credit cards.
Jan did a really nice job of providing you with an overview of how these
virtual cards work, so I am not going to be redundant and go over how they
work.

But I am going to start off by saying, to kind of loosely paraphrase George
Orwell, not all credit cards are created equal. The implications for a
physician practice of accepting a patient credit card are very different than
the implications of accepting one of these virtual credit cards from a payer.

The primary reason for this is the high direct costs for physician practices
for processing these virtual credit cards. Of course, there are banking fees
associated with all credit cards. The largest amount of this is usually the
interchange fee, which is a percent of the payment. Interchange fees are higher
for payer credit cards than for patient credit cards. On top of this, a higher
interchange, up to 5 percent, is charged for manually entering credit card
information due to additional fraud protections. As Jan indicated, these are
not physical cards that are swiped, and so there are additional fees for the
additional fraud protections for these types of virtual cards.

Let’s do a little quick math here. Let’s compare a $1,500 claim, the
contracted amount the physician is supposed to receive, using both an ACH EFT
payment versus a virtual credit card payment. On the left we can see that the
physician is only charged a 34-cent fee using the EFT transaction. However, on
the right, you can see using a virtual credit card payment the physician is
being charged over $75 to get their paycheck, essentially. If you multiply this
out across many patients, many claims, and many payers, you can see what a huge
financial impact this can have on providers.

It is not just the direct costs that are hurting physician practices. There
are a lot of indirect costs involved, too, regarding these virtual credit
cards.

First of all, as Jan indicated, they have to be manually keyed in by the
provider’s staff. It takes time. If there is an entry error, again it takes
more time to sort out the problem. In addition, standard electronic remittance
advice is not equipped to carry credit card information.

There was a recent response to a request for interpretation of ASC X12. It
indicated that the X12 835 transaction cannot carry credit card information in
a compliant fashion.

So that means that physicians are forced to get their remittance advice
either via paper or by logging on to a payer portal, which again is very
manual. This further drives more manual processes in the physician’s office.
They have to manually post their payments, they have to manually reconcile
their payments and the remittance advice. Then, furthermore, there can be
additional reconciliation challenges if there are multiple claims paid on a
single virtual credit card.

Obviously, providers are very concerned about the loss of income represented
through these virtual credit cards. This comes at a time when physician
practices are already being hard hit by other financial challenges, such as the
sequestration and HIT investments.

These income reductions are often unanticipated on the provider’s side. They
are not aware of these transaction fees until they start figuring out that they
lost money.

This is additionally concerning because the shifts of payment processing are
being shifted from the payers to the providers, without any associated benefit.
For a provider to accept a patient credit card, there is a benefit there
because at least they know they’re going to get paid. But there is not that
associated risk (sic) on the other side with claim payments, so there is not
any benefit to the physician practice for accepting those credit cards.

We also have some real concerns regarding payers’ motivation for using these
virtual credit cards. We’ve heard from payers that they’re easier to use than
paper checks. But we cannot help but notice the payers are receiving up to 1.75
percent cash-back incentives to use these virtual credit cards. The card
companies are splitting that interchange fee with the payers to offer these
rebates.

Additionally, as Jan indicated, payers are being heavily solicited to use
these credit cards, and the cards are being positioned as revenue generators.
Physicians find this extremely troublesome because these reward programs are
coming at their expense and the expense of their income.

If the true motivation for using these cards is administrative
simplification, we would put forward that ACH EFT is truly the best way to
reduce administrative burdens on the system for all stakeholders.

We are also very concerned, as Jan indicated, by the lack of choice
regarding these virtual credit cards. As we’ve been talking about this morning,
the EFT operating rules kicked in, in fact, at the beginning of this year, but
challenges remain in terms of allowing providers to get access to this new form
of payment.

Inflexible contract terms may lock them in to accepting virtual credit card
payments. Physicians oftentimes, unfortunately, don’t read their contracts as
closely as they should, and they might not realize that they have to get their
payment through these virtual credit cards.

Sometimes health plans kind of pose this as a take-it-or-leave-it sort of
thing; if you want to get paid, you’re going to have to use the credit card. We
just don’t think that’s fair.

The other problem is that the credit cards come into the billing side of the
physician’s office, and so they might just get automatically processed without
the physicians or the decision-makers realizing that there is income being lost
to these credit cards.

Finally, we need to realize that not all physician offices are set up to
accept credit cards. There are a lot of small practices that don’t have credit
card machines, and a lot of physicians, up to about 35 (percent?) of them,
don’t take credit cards at this time. So again, this is not an effective
payment option.

Kind of the last big concern about this, the whole spirit of administrative
simplification does not jibe with these virtual credit cards. As I indicated,
the credit card information cannot be carried in the electronic remittance
advice transaction. This kind of pushes the whole stream of manual processes
back into the physician’s office. There is manual payment posting, manual
reconciliation, and manual card entry.

If virtual credit cards are going to be used, we would say that they should
be used by mutual agreement and informed consent of both parties, both the
payers and the providers. There may be cases where a provider does want to
accept a virtual credit card, and that’s okay. Maybe it’s a low-volume payer or
a low-cost claim. But the provider should be aware up front of any and all
transaction fees that they are going to be hit with by accepting this virtual
credit card.

We also strongly believe that contract terms should not limit physicians to
this form of payment or preclude the use of ACH EFT.

Finally, we feel that payers really should not be receiving incentives to
use these credit cards, or if in fact they do get these rebates, that the
rebates should be passed back to the physician to at least partially offset the
interchange fees of the credit cards.

Finally, for the big picture of what we think is ideal, we really feel that
ACH EFT should be promoted and encouraged as the best payment option for all
stakeholders. It is easy to use, it achieves our common goal of administrative
simplification, and it is the least costly option.

To that end, AMA continues to educate physicians on the new EFT operating
rules, and we also continue to encourage physicians to understand their
contract terms regarding payment.

Thank you.

DR. SUAREZ: Thank you for that testimony.

Then we have Rob next.

Agenda Item: Provider Perspective

MR. TENNANT: Thank you so much for inviting me to speak.

I think it is extremely astute and strategic to put EFT first because it’s
actually a very positive transaction and sets the stage for maybe a very
positive discussion for today.

I just wanted to say MGMA is a nonprofit trade association based in Denver
with a D.C. office. We have about 33,000 members nationally and in these
states.

I wanted to talk about EFT and really paint the picture of this is an
absolute low-hanging-fruit transaction for providers. This is an opportunity to
save money both on the plan side and the provider side. You can see here some
really significant opportunities for savings, perhaps $3 per claim, which,
again, when you look at the number of claims sent to providers, is a
significant amount of money. The CAQH U.S. Efficiency Index suggests $11
billion savings with EFT.

We estimate that about three-quarters of our members receive some of their
payments via EFT, but virtually none receive all of their payments. So I think
there are some huge opportunities for improvement.

Just to run over some of the benefits that providers see. One EFT standard
is critical, and I will talk about the virtual cards a little bit later. Trace
numbers alone, if that was the only operating rule that came out of CORE, that
would be a tremendous benefit. The hassle factor for practices of trying
re-associate a remittance with a payment costs practices millions of dollars a
year.

But they went on, and they standardized the enrollment data. They were also
very cognizant that you had to have the timeframe between the payment and the
remittance fee as short as possible without delaying the payment. I think they
reached a very good compromise there.

Gwen talked about the CARCS and the RARCs, still way too many but much
better than before.

Talking about enrollment, and I know Jan talked about it a little bit,
that’s a real opportunity for the industry to move forward. CAQH really has to
be commended for taking on the role of developing a module which would allow
the provider to come in, put in their EFT data one time, and then instruct CAQH
to disseminate that information to their health plans. That’s the good news.

The bad news is not all health plans have jumped on this. The question why
is answered very simply: Payers have put a lot of money into their proprietary
systems. So it’s a challenge for the industry to give up what they have created
and join a national process. But we are confident that more payers will get
involved with this.

For providers, EFT presents an opportunity for secure payment. You avoid
postal delays, and we have certainly seen plenty of those in the last few
weeks, even here in the Washington area.

Obviously, it reduces administrative costs tremendously by eliminating the
need for an individual to be opening up the envelope and processing the check
and bringing it down to the bank. It certainly promotes quicker turnaround for
secondary billing.

But on another level, by giving EFT a relatively easy transaction, you don’t
need a lot of infrastructure in the practice. It sort of allows them to dip
their toe in the electronic water. So we think it is going to encourage the
adoption of the 835 as well.

To pile on to the testimony from Heather and Janet, virtual payment cards
are simply unacceptable. We are certainly hearing a lot of reports coming from
our members. We do not believe that these should be allowed to be considered
EFT payment. Even though there is that loophole, we think that should be
closed.

We have heard that the costs are between 2 and 5 percent on these
transactions. The fees are not always transparent to the provider. The bottom
line is it’s a reduction in the payment for providers. We’ve seen enough of
that with SGR. We don’t need any more of that.

As they have talked about, there is additional cost for the staff. We are
concerned that especially smaller providers may be forced into these payments
through their contracts.

I put down here, “Are health plans sharing ‘profit’ with credit
card companies?” with a question mark. I guess that has been answered. It
is clear, and it seems grossly unfair that a health plan would take this route
for payment and then split the profits with the credit card companies.

What we’ve done and I think what we’ve found is EFT, as positive as it is,
is not as well known as it should be. The standards are not as well known. We
have produced articles and we have done Webinars, we have done face-to-face
presentations at our meetings, we have created a guide to help our members work
through EFT and ERA, show them the benefits of it. But we are not quite there.

I think one of the issues is that it is guilt by association. It was
interesting, Gwen mentioned that our CEO did a post on a physician online site
talking about the positive aspects of EFT, and all of the responses were on
ICD-10.

(Laughter)

So we are not quite there yet. I think they associate anything electronic
with some negatives things, and so we need to disassociate EFT/ERA from some of
these other things.

In terms of recommendations, obviously, we need to expand provider
education. When you look at the education that goes out on meaningful use, it
is staggering. So I would immediately call for a doubling of the OESS budget,
which will be a challenge.

(Laughter)

I say that in jest, but on the other hand, these are true opportunities for
savings in the industry, and if we cannot get it done, then how are we going to
get the large things done? So I am pushing it out as something positive that
will not only help providers but will also set the stage for other transactions
down the road.

Obviously, we should not permit virtual cards to be EFT payments.

I will push the industry — I will look at Gwen, but I will push the
industry into a single sign-up for all e-transactions. I think if we can
decrease the administrative burden of enrolling providers in these programs, I
think everybody wins.

And supporting CORE. They have done a yeoman’s job in producing the
operating rules. They’ve got tight budgets. We need to support them in the work
they do.

Finally, we believe that the only true way to push the providers forward is
to give them the technology that will allow them to do that. Certification for
EHRs has produced meaningful use and an enormous change in the industry. Some
60 to 70 percent of eligible professionals now use EHRs, at least partially due
to the fact that there is a certification process in place.

We again call for the development of a practice-management certification
process. I can say that some folks in the room are working on that, and we hope
that there will be an announcement soon on that. We call on CMS to support that
industry effort should it move forward.

Thank you so much.

DR. SUAREZ: Thank you, Rob, for that testimony.

I think next we have Janet Jackson from Blue Cross-Blue Shield, North
Carolina. She is going to join us by phone. Janet, can you hear us?

Agenda Item: Health Plan Perspectives

MS. JACKSON: Yes. Good morning, Walter. Thank you. Can you hear me?

DR. SUAREZ: Yes, we can hear you very well. I think we are loading your
PowerPoints, and if you could let us know when to advance the slides, we can
drive from this end.

MS. JACKSON: All right, that’s great. Just let me know when they’re loaded.

I will go ahead and just introduce myself. I am Janet Jackson, the director
of document operations and electronic solutions at Blue Cross and Blue Shield
of North Carolina.

Today I am speaking on behalf of our plan. We are an independent licensee of
the Blue Cross Association. I was asked to present today by AHIP, to give a
payer perspective.

If you will go ahead to the next slide, I am going to cover the
implementation of our EFT and 835 operating rules mandate, include our lessons
learned, our CAQH CORE voluntary status, and our thoughts on the next set of
operating rules.

A little bit about Blue Cross and Blue Shield of North Carolina. We are
headquartered in Chapel Hill, in the Triangle area. We have 3.8 million
members. That includes approximately 1 million members served on behalf of
other Blues plan. We have a broad network in North Carolina, and in 2013 we
processed about 200 million HIPAA transactions.

Our experience with the 835 and EFT operating rules, we began our project in
early 2012. Then we worked heavily in 2013 and implemented the necessary system
and process changes over the last half of 2013, with a project cost of about
$1.5 million.

We have two EDI gateways at Blue Cross as a result of a merger that we had
several years ago. We took the opportunity during our 835 and EFT operating
rules implementation to provide one location for the providers to obtain their
835s. Previously, they had to go to two different electronic mailboxes to get
them.

In January 2014 we sent out 92 percent of our claims dollars via the 835.
That represented about 74 percent of our provider checks.

We also have multiple payment systems for our different product lines. Prior
to the implementation, one of our product lines did not offer EFT. Since we
implemented this exception, we have seen an 8 percent increase in the number of
checks sent via EFT, which is a good thing.

In January 2014, we sent out 86.5 percent of our claims dollars via EFT.
That represented 59 percent of our provider checks. We also increased the
provider satisfaction by simplifying where they can pick up the 835 and then
eliminating the exception for one of our product lines.

We have several lessons learned from our operating rules project. It is not
just this one but previous projects as well: Stay involved in CAQH CORE and
their rules development, and start the projects early and don’t underestimate
the complexity of their requirements.

One of the things that was especially true with the 835 EFT project
implementation is our communication with our trading partners. We needed to
communicate more often, we needed to include more detail, and we needed to
increase the lead time to give the trading partners time to implement the
necessary system changes, especially related to the CARCs and RARCs mapping, so
that we could ensure that the financial system posts the codes properly and
does not create problems. We did have one situation with one of our mappings
that was not correct that we had to correct after our implementation that
impacted our providers.

Blue Cross of North Carolina voluntarily became CAQH CORE Phase I certified
in May 2007. We finished our Phase II certification in January of 2014, and we
are waiting for CORE to finish the processing of our documentation for our
Phase III seal.

As part of our operating rules implementations, we implemented the Edifecs
Operating Rules dashboards for eligibility, claim status, remittances, and EFT
to allow us to continually monitor our system for compliance. On a daily basis,
we analyze the information available to us from the dashboards and other
reporting that we have to identify and resolve operational issues. We feel this
is going to be a really important ongoing activity for us as we prepare for
health plan certification of compliance and also just every day to ensure we
remain compliant.

As everybody else’s systems do, our systems will continue to evolve over
time as our business transforms, both due to internal forces like system
changes, mergers and acquisitions, or vendor capabilities, and external forces
such as the mandates and the evolving healthcare models. Since the systems are
not static, we expect that despite our best efforts we will encounter system
issues that we will need to address. We would request that you consider this
operational reality and recommend HHS to consider some allowable enforcement
discretion for payers to remediate compliance issues in good faith.

For the future set of operating rules, we anticipate that the new rules will
bring new opportunities for growth and return on investment but will also bring
additional challenges. The current timeline as stated in the ACA legislation in
conjunction with the other mandates still to be implemented over the 2 years
— ICD-10, health plan identifier, health plan certification, and health
insurance exchange, just to mention a few — create resource constraints,
high implementation costs, and limit the resources that our company has
available to spend on creative solutions to further improve quality of care and
customer satisfaction while reducing medical and administrative costs.

Therefore, we request that you recommend that HHS allow additional time to
be given to implement the next sets of operating rules, and that they have
discrete compliance dates to allow the industry adequate time and resources to
define and implement all the mandated changes.

Like CAQH talked about a while ago, we highly recommend that the operating
rule development be firmly based on ROI evaluations and that priorities are
established for the order in which we develop and implement these rules. We
recommend that the claim attachments be first in this order of implementation,
as it has a strong probability of offering real gains in business process
efficiencies, therefore bringing a demonstrable ROI with its implementation.

We believe that the development of the 837 claims operating rules should be
delayed until the industry is able to take action on implementing a claims
acknowledgement transaction, as the 837 claims transaction is already widely
adopted and productively used in our industry.

We see less value in the 278 authorization transaction due to its low
adoption and usage rate across the industry. Here in North Carolina, we have
zero providers using our 278s. We highly recommend an ROI study on 278 to
determine if operating rules beyond the connectivity protocols and availability
rules would be of any measurable benefit.

Finally, we propose that the 834 enrollment and 820 premium payment
operating rules development wait until the Health Insurance Exchange
implementation stabilizes and the lessons learned can be vigorously applied to
the transactions.

We are committed to partner with all the stakeholders in this, and we
continue our outreach efforts with CAQH and other industry groups to share our
experience. We are also committed to increase our outreach with our trading
partners to ensure they understand how we are meeting and will continue to meet
the operating rules and to encourage them to increase adoption of all
transactions. That will be the only way we see that will allow the industry to
truly realize the expected ROI of the mandate.

I thank you for the opportunity to offer our comments today.

DR. SUAREZ: Thank you so much, Janet, for that testimony.

We are going to go to our last testifier on this panel and then we will open
it up for questions.

Stuart.

Agenda Item: Banking Perspective

MR. HANSON: Thanks. Subcommittee members, thank you for the opportunity to
speak with you today. This has been a lot of work that has occurred, I think to
Gwen’s comments, over the past 3-plus years, and it is nice to see the progress
that everyone has been speaking to.

My name is Stuart Hanson. I am the head of healthcare business development
for Citi, for our Retail Services Division. I am happy to be here with you
today to present my observations on the ongoing implementation of the operating
rules related to EFT and ERA transactions.

It was just over 3 years ago when I appeared before this subcommittee to
discuss the payment and remittance advice process, and how far we’ve come and
how recently that seems to have been, despite the time that has actually
transpired. That was basically the precursor topic to the implementation of
those operating rules that we’re talking about today.

First of all, I was very pleased with the subcommittee’s recommendation that
CAQH CORE and NACHA work together as the authoring entities for the EFT and ERA
operating rules. Subsequently, I co-chaired a sub-workgroup at CAQH CORE
related to this effort that allowed me to work very closely with Gwen Lohse at
CAQH and her team, as well as Jan Estep and Priscilla Holland and the great
team at NACHA and all of their wonderful support teams on both sides.

Since that time, I have changed organizations and taken on a broader
business development role for Citi’s new healthcare payment platform. In this
capacity I work extensively with health plan and healthcare provider clients,
with a focus toward building solutions and implementing strategies to help our
clients deal with the accelerating trends towards consumerism in health care
and the related provider-managed increase in patient payment flows, which is
another challenge that all of the provider organizations are facing today. This
trend is accelerating and creating new challenges for all of the provider
community as well as the health plans alike.

Through my ongoing work with healthcare clients and industry research
activities, I have stayed close to the issue of the implementation of the EFT
and the ERA operating rules. I would like to convey that we are starting to see
clients truly reap some of the benefits of administrative simplification.

Specifically, I would like to make a few brief comments based on combining
some client insights that I have received directly with a few anecdotal
examples from our operations and treasury solutions team members within our
bank that work very closely with clients on implementing and adjudicating the
EFT and the ERA transactions.

Regarding the implementation of the EFT and the ERA operating rules, there
were certainly some challenges late last year that we heard about through
several of our clients through the transition period. I think there was some
confusion as to what September 20 meant versus January 1, and it left
room, I think, for a lot of improved communications that could have occurred
between trading partners.

But this transition period continues as different health plans were
implemented on various schedules and varied time frames and encountered some
issues with some of their originating banks. However, one of our largest
provider clients has established what they call their new Affordable Care Act
account, electronic account, for processing transactions that they have
migrated to the new operating rule for processing. They are currently in the
process of continuing to migrate all of their EFT payers after they certify
them for compliance on the EFT and the ERA.

They expect this effort to continue through this year, but they have
currently achieved almost 100 percent electronic straight-through processing
transactions for all of the payers that they have moved to that electronic
account. So they are very, very pleased with the ability to post transactions
automatically once they have verified and certified that all of those
transactions are properly formatted.

For most health plans, banks rely on the payer to identify specific payment
transactions as healthcare claim payments. There is an opportunity to identify
that in the ACH instructions. At Citi we actively apply the NACHA criteria to
validate that the transactions are compliant with the EFT standards and verify
the addenda record has been populated for all payment files that are identified
as healthcare claim payments properly. If the transactions are not compliant,
we will work very closely with our clients before submitting those transactions
into the ACH network and offer consulting and implementation services to help
those clients become compliant.

Likewise on the provider side, we work very closely with our large provider
clients and receivables clients to make sure that they are able to receive the
ACH addenda records that they need to re-associate the payments, which is what
facilitates the electronic straight-through processing.

In short, we realize that many healthcare clients are dealing with a lot of
challenges last year and this year and for the foreseeable future, many will
tell you. Many of those are covered under your agenda topics later today.
Encouragingly, we have seen examples of increased adoption of EFT, more
streamlined re-association of electronic transactions, and reduced printing of
EOBs and checks, which I think are all in line with the stated goals of
administrative simplification.

I am happy to share my perspective with the subcommittee on the successes
and also some of the challenges, and I am very happy to take any questions.

DR. SUAREZ: Thank you so much.

Agenda Item: Q&A Session

I think we are reading for some of the dialogue. We do have a good 45
minutes or so.

I don’t know if any of our members have already questions. I do have already
some questions, but I wanted to see if all the members have and want to start
with.

MS. GOSS: Good morning, everyone. Thank you for the really good testimony.
It was very insightful.

I have been spending the last 4 or 5 years, almost 6 actually, focused more
in the world of clinical data exchange. So when I am hearing you talk this
morning about this virtual credit card dynamic, it is really clear the pain
that is coming from this exception. It seems like one sentence in a reg has
opened a door for large interpretation. So I want to understand a little bit
more about the dynamic.

If we have a standard adopted which has very specific rules about how things
should work, and if we don’t provide for the provisions of a credit card within
the base transaction, then how do we close this loop? If a provider doesn’t
want to use it and it’s not accounted for in the standard, then how can we
allow an exception? I don’t understand it. So I am looking for the gold nuggets
of what you think we can do or ask OESS to do to close this loop, because it is
deviating from the CORE standard, which I have spent a lot of time in my past
history focused on.

Maybe, Gwen, it looks like you might have an answer there. Do you have any
commentary?

MS. LOHSE: I have two thoughts. One is I think initially when the regulation
was written, the regulators were trying to be open to say this is a new area
for standards. They didn’t want to close all the doors. So Fedwire was
recognized and then, additionally, other payment mechanisms.

So now that we are in the process of implementation — we can start
tracking and seeing what is happening in the market — there is an
opportunity now to look and say, based on what we didn’t know before, because
we didn’t have the data — no one was tracking it, we didn’t have the
information — is it a time now to go back and look at that and revise it?

Then, additionally, beyond the regulation, there is going to be a lot more
education. I had highlighted, I think everyone here did, that we’ve been
putting out actual talking points for the providers to walk in and hand to
their health plans or hand to their banks literally one page of talking points:
This is what I want and this is why I want it. It is incumbent upon the whole
industry to do that, so not only if the regulations are revisited, then how do
we execute that in a way that we are educating? I think we are just in the
process of doing that because now we actually have statistics that I think you
heard about today.

MS. GOSS: I am concerned about the timing of getting a reg changed, because
we don’t know how painful that process can be. An FAQ goes a long way, but that
cannot always be gospel. So I think that the communication aspect, and if there
is an industry movement towards this aspect, then I agree. It needs to be very
well orchestrated.

I have one other question which is directed for you, which is sort of a
curiosity question on my part, related to a comment you made on the principles
for the CARC codes.

Having spent some time in the world of CARCs and RARCs, I know that there
was a deep philosophical debate over what should be the approach that we took.
Should it be more generic? Should it be highly specified? That was two ends of
the pole.

Could you speak a little bit to the principles that CAQH is using in really
trying to advance the use of that code set?

MS. LOHSE: Yes, absolutely.

Just as a level set, prior to the rules, everyone could pair the codes
themselves. There were thousands of code combinations, and people had their own
logic behind it, all of which was good, but it was all different.

There was a multi-stakeholder task group, and it is still meeting on a
constant basis. They created evaluation criteria to say, okay, does a code
belong? And if so, evaluation criteria such as is this code combination
repetitive of something else that exists? Is it clear enough? Does it fit into
the business case? Does it actually relate to the business case?

I think philosophically now, it took some time to say I have to get through
thousands of codes and apply the criteria. It wasn’t an easy process, and
they’ve done a great job while they were actually writing the rule and
submitting data, and then now the compliance phase in coordinating with the
code committees.

So I think there is a philosophical change going on to say this criteria is
very useful. It takes time, though. We’re talking about 20 minutes per code
combination to look at the evaluation criteria. It’s a lot of time. But I think
the industry is getting used to it.

Now we are at a place where, because people believe in the evaluation
criteria, there is the debate — and I think Rob brought this up, or
someone, maybe Janet — do you want a longer list or a shorter list? There
are some people that look at that criteria and they read it word by word and
absolutely no exceptions, and other people would like a little bit longer list.

So this is a good debate. I feel like we are finally at a point where people
are saying, let’s really have the debate. Does this belong in or out? And they
are using the same criteria habit.

MS. GOSS: So are you road-testing as far as piloting those proposed
combinations to really vet out whether the new methodology is going to work for
the diversity of the scenarios?

MS. LOHSE: It is all based on usage data. For instance, right now, today
actually, there was a 60-day comment submission period, CORE participants and
non-CORE participants. Anyone who is a HIPAA-covered entity could submit codes.
They can submit it based on the evaluation criteria and also based on usage
data. So the committee — it is multi-stakeholder and it is chaired by
—

MS. GOSS: Usage as in current, historical — I am not sure how you are
road-testing the current set.

MS. LOHSE: Historical and current. Historical, and then some people are
using — CMS actually has data up to last month. Medicare went through.
They’ve submitted several hundred codes, and they have usage data from
literally the last month. So they are actually showing the usage data to make
the case to say we may only use this code five times, but it is really
important why we have it. They are sharing that usage data with the other
people.

It has been kind of interesting to see the health plans and the providers
say, Okay, I understand a little bit more why you need this code or you don’t
want this code. So, hopefully, that answered your question.

I think, in a sense, the piloting is based on actual historical information
and a review of that historical information. Then where there are gaps in it
—

MS. GOSS: Yes, I was trying to see how you were looking to the transition of
how we used to work with thousands of codes which may not have been
interrogated against good criteria, to now finding out, did we really hit the
mark for using those? My sense is that maybe we’re a little too early in that
process.

MS. LOHSE: I think we are too early. There are two ways. One is this annual
review; the 60 days is just up today. Then there is also three times a year the
code committees issue new codes. So there is an evaluation of those codes three
times a year. Those two combined are the way that the process is going. I think
with the annual review and more data on the compliance-based review, which we
already saw some today, we will know what is the usage going forward.

MS. GOSS: Thank you. I also wanted to open it up for anybody else who wanted
to talk about the credit card aspects.

MR. TENNANT: Just a couple of points. I think that is a great question. I
would disagree only slightly by saying that I think a FAQ or guidance from OESS
would go a long way. I don’t think it has been settled yet. I think the jury is
out on whether or not these —

MS. GOSS: I think FAQs are a great idea, because I think that is sometimes
the only way to really get the message out before we can get to the APA stuff.

MR. TENNANT: Exactly. But there is also the other side of the coin, and that
is the leverage that a large health plan has, especially against the smaller
providers, is such that they could sort of strong-arm the providers into taking
this. I think it was mentioned that they may say, “Well, if you don’t want
to take our virtual card, it will be 60 days or longer before you get
paid.” Again, a lot of providers will just say, “Well, okay, I’ll
take my discounted rate and move forward.”

So I think there has got to be some education from the provider side to
explain to them, no, you don’t need to take it, but also perhaps again some
guidance from CMS chiding the health plans for doing this. I don’t think they
can prohibit it, but they can certainly raise the issue, and maybe plans like
the Blues of North Carolina can take the lead in saying, “No, we refuse to
go down that path.”

MS. MCCOMAS: I would agree with that. I think there definitely is a
strong-arm dynamic of the whole thing. I think bigger provider groups sometimes
feel that they can fight back, but smaller docs are just like — I mean
they don’t have the time, they are like, “Okay, I’ll process the credit
card,” and they just kind of accept it. So I think some kind of guidance
would be definitely in order and helpful.

MS. ESTEP: Alex, I have a question, not an answer. It is only due to my lack
of a specific memory on the topic. But I recall when the regulations were first
promulgated that there was some standard review process every 2 years or
something for the standard. Maybe someone from CMS can answer that. Am I
recalling that correctly, that there was actually built into the reg a review
process?

DR. SUAREZ: Yes.

MS. ESTEP: I am just wondering when that timeline is hit, because that may
be some of the answer to the question.

DR. SUAREZ: I think you are referring to the review committee that was
mentioned in the Affordable Care Act. I think we are working with CMS on the
development of a strategy for implementing that review committee process, and
there is some more work to be done. But yes, I think that is an eventual
vehicle to getting to more details about —

MS. ESTEP: So a timely review process would be sort of the answer.

DR. SUAREZ: Yes.

MS. GOSS: I think that adding to that review process is the standards
development cycle and that usually — at least X12 used to be a 2-year
cycle as well for upgrading — they are now called TR3s.

MS. ESTEP: For EFT it is not that long.

(Laughter)

It’s a lot more flexible.

DR. SUAREZ: Okay, great. Thank you.

MR. SOONTHORNSIMA: Another perspective, I was wondering, when you look at
the emergence of this virtual pay, has anybody tracked the usage of this? Is
this an outlier, or is this actually becoming a major trend?

MS. LOHSE: We at the CAQH CORE board, which is multi-stakeholder, just have
started to have that conversation. We have some data from various different
entities, and it is a small trend at this point, but the small trend has grown
a percentage rate. It’s under double digits in most places, but it is growing.
Therefore, because it is growing, people want to track it to see where does the
growth go. So there is enough of a little bit of a growth of that sliver that
it needs to be tracked to see what level of problem it is.

MR. SOONTHORNSIMA: Okay, thank you. To follow up — go ahead.

MR. TENNANT: I was just going to say that it is clustered as well, so it is
not like all the health plans offer it but they only do it on 1 percent of the
claims. I think it is clustered with certain health plans. For whatever the
reason, they’ve seen the opportunities.

I have spoken to some of the large national ones who say they don’t do it at
all. So I think we’ve got to look at the specific health plans.

MS. GOSS: And is this only a medical issue, not a pharmacy issue?

MS. LOHSE: I can’t answer that. We know it from the medical side.

MR. SOONTHORNSIMA: To follow up on that, I think we need some data points.
More philosophically, if you step back, what I am hearing is that most of you
are asking that we have more concise or more of a mandate — I am not sure
if you used the word “mandate, but stronger language, if you will, to
refine or clarify how the operating rules in the EFT area are deduced.

One concern I have is are we chasing innovators and abusers by continuously
having to go back and refine some of these things in finer detail, or is there
a better way to do this, to your point, because otherwise, to have to go back
and rewrite the rules or modify the rules would take too long? Maybe there are
other ways to do this by providing some sort of guidance as to, look, if you’re
going to innovate, here’s where we ought to draw the line if it’s above X
percentage, and then couple with the FAQs and education and really flesh out
the abusers and not squash any future innovations that could come out as a
result of — I am not suggesting a Bitcoin type of innovation, but who
knows? Right now it’s virtual card. In the future it could be something else
that is even more innovative, but there is going to be some fee attached to
that.

I just want to get your reaction to that.

MS. LOHSE: I think that is one reason why OESS has to leave it open. We’ve
all been following Bitcoin, for instance, or PayPal, so education and tracking,
especially about the cost that the provider groups brought up that is going
back to the provider, and educating the market about what that cost is, is
going to be essential to the process.

We probably cannot do it all through mandate no matter what, so you have
that data and you have to be able to distribute the data.

MR. TENNANT: Just to add to that, innovation is wonderful, but if all of the
costs are passed on to the provider, then it’s a problem. So I think if the
innovation is such that it saves somewhere in the work flow, where with virtual
cards it’s the worst of both worlds — it adds more challenges to the work
flow and there’s a deduction. So I think there has to be a tradeoff. The
provider has got to get something out of it if it goes outside of the standard.

MR. SOONTHORNSIMA: And that is the point about fleshing out who the abusers
are. Like you said, this is not happening broadly across the board, but if it
is a growing trend, in what pockets, in what geography, what types of plans are
abusing this?

MS. TENNANT: One lever that CMS has, of course, is plan certification. It
could be folded into that. The problem with that as the reg is written now, if
they offer it on day one, that doesn’t preclude them from moving to virtual
cards later because there is no recertification process.

MS. ESTEP: I would offer only one other perspective to your comments.
Certainly innovation is something that we have thrived on within the ACH
network as it has changed and evolved over the last 40 years, being very
flexible and adaptable, such as how we change the standard for healthcare
payments. With that, I think your logic, though, to not enforce the standard
because innovation might come in the future, could also be applied to all of
the other HIPAA standards.

So I think CMS needs to look at why there was an exception to the standard
and to really look at the problems that have come of that, because if it is not
substantiated up front in a way that meets, really, the goal of the regulation,
then it is a loophole that we see being taken advantage of.

So innovation will happen across any of the standards, across technology,
over time, and if there is exception on one standard, there should be an
exception on all. I think what we’re seeing is the result of the exception not
going well at this point.

MR. SOONTHORNSIMA: Point well taken. Thank you.

DR. SUAREZ: I think Jim?

DR. SORACE: Yes. I had a quick sort of detail question, and that is you
mentioned trace numbers. Those currently exist in the standard and are being
used?

MR. TENNANT: Correct, yes.

DR. SORACE: And so do we have any idea how — so that is going on at a
national scale now and it is being implemented by clearinghouses and
practice-management software as well?

MR. TENNANT: The problem is that practice-management software is not a
HIPAA-covered entity, so they are not required to do it. Obviously,
clearinghouses can. But I think you hit the nail on the head that we have the
standard, it is robust, it is an opportunity, but it has got to filter down to
the smallest practices. I think that’s where we’re trying to push our members
to take advantage of it but also recognize that there has got to be some market
pressure exerted on the vendors themselves to produce the products that will
allow the practices to take advantage of these standards.

DR. SUAREZ: Good.

Well, I will take the next turn, I guess. I do have a couple of questions
about the operating rules development process. I am really trying to understand
the timeline so that actually we also can plan for activities in 2014.

My understanding right now is that for the new transactions, for the
operating rule for new transactions, there is right now a market analysis and
understanding of the need for an area where these operating rules are to be
developed, and it sounded like there are some — you have identified like
about 13, according to the testimony, about 13 areas where potentially
operating rules could be developed.

As I was looking at them, all of them really are areas that, in my
understanding, would apply to all the transactions, not transaction-specific
areas. So my question would be that. Are those 13 areas pretty much operating
rules that will be applicable to all future and existing transactions?

Then the second question is, do you expect that there will be
recommendations on operating rules that are specific to specific transactions,
like a prior authorization operating rule set and claim operating rule set? And
what would be the timeline?

MS. LOHSE: Last year, the infrastructure group, which applies across the
transactions, started meeting. They are the group that had identified the
opportunities. They did spend some time saying how do you have an
infrastructure description that would apply across all the transactions? So
that is the goal, understanding there will probably be exceptions to that.

For instance, I brought up direct. People only want to use direct for
attachments. They don’t want to use a direct for prior authorization or for
enrollment or premium payment. So understanding, yes, across the board, the
infrastructure group has been meeting, the connectivity piece of it and the
response times across the transactions.

For the individual transactions, we had identified through a lot of outreach
a few opportunities. A few of those opportunities are a challenge, like, for
instance, for the claims. Everyone wants that acknowledgment, and there is
actually already a draft rule for it, but it’s hard for us to go out and tell
people to sit on a group when we know we’re going to submit it and it mostly
likely will not end up in the — there is no mandate for the standard, so
it cannot end up in the mandated set. So given people’s resource constraints,
to ask them to sit on a group for certain things where we don’t know the
outcome, it is very hard for us to get people to sit on that group. That is
pretty straightforward.

There are a few other opportunities that we will be looking at for trace
numbers, for instance, across the transactions. That will be throughout this
year. Again, the goal is to have a draft set by the end of the year.

So yes, connectivity and infrastructure are across transactions in a few
areas, understanding we have limitations as to what we can get people to do,
knowing there are not mandates in certain areas.

DR. SUAREZ: How would those infrastructure rules apply to the transactions
for which operating rules have already been adopted? For example, transfer and
enveloping or enhancing reliability and security in communication, that seems
to apply to the new transactions as well as probably to the ones where we have
already adopted operating rules. Would the implication be that this new set of
operating rules apply not just to the five remaining, what we call the five
remaining HIPAA transactions, but really to the entire set?

MS. LOHSE: I think there is a goal across the board, Walter, as you are
saying, to have a common infrastructure and connectivity for all the
transactions, absolutely. That is what the group has talked about.

It does allow for —one of the lessons learned from the EFT and the ERA
is to insert some maintenance ability within the rule so we don’t have to wait
for regulation every single time. I think that is one of the absolutely key
lessons learned.

It requires a lot more resources from the industry and a lot more resources
from the authors of the standards as well as the operating rule. But that said,
it provides much more value to the industry to get where they want to go. So
the time is worth the effort. So absolutely, yes, that is the goal. The group
has already talked about that.

DR. SUAREZ: Great. And you answered my other question about maintenance of
the operating rules, so I think that — and I see, I think, our goal as
well being to have a common set of rules that are applicable potentially to all
the transactions, with some specific areas of applicability of certain things
to specific transactions due to the nature of the transactions.

Then from that point on, really begin to talk about the maintenance process
in updating that applies across the board. I think that is very good for here.

MS. LOHSE: Yes, absolutely. I think it is even more essential. We heard a
lot about the ACH network today, and I think we’ve learned a lot from all the
folks here over the last few years: the ability to track, the transparency, all
the other benefits. And so because we don’t have a similar network for all the
other transactions, having a common set of infrastructure really helps the fact
that we don’t use a common network. So it allows us to track ROI, allows us to
track adoption, see the progress. It also helps entities like Blue Cross-Blue
Shield of North Carolina and other HIPAA-covered entities that they don’t need
to have different requirements for different transactions.

There is a whole set of value and lessons learned from, I think, what we’ve
seen within the EFT.

DR. SUAREZ: Right, thank you.

I have one question and I will go back to you guys. My question, and Rob
covered part of my other question about the virtual credit cards, how pervasive
this was. I wanted to know and understand how pervasive this was with the
virtual credit cards.

But I also want to ask about the alternative payment open. Well, there are a
couple of things. One is alternative payment option, which means not just
talking about virtual credit card but other methods of payment between a payer
and a provider that are potentially acceptable and agreeable that might not
necessarily be covered within the realm of options in the current operating
rules and the current EFT opportunities. So I wanted to ask about that.

Besides this concept or the issue of virtual credit cards, are there other
potential payment options that are outside of that realm? Someone mentioned
PayPal or just a regular credit card-type payment, not the so-called virtual
credit card. What is the perspective that you all have about these other
alternative payment options outside of the virtual credit card?

MS. ESTEP: My background is that I have been with NACHA for the last almost
6 years. Before that I was in a banking organization and managed all other
payment types. So I am going to just speak from an education standpoint, as
opposed to a NACHA-specific standpoint, in answering your question, Walter.

When we think about the EFT/ERA operating rules and standards, it is not
only the passing of a payment but the passing of a payment with the trace
number to allow for straight-through processing of the remittance information.
So when you think about it that way, you narrow your choices of electronic
payment types that really can facilitate that straight-through processing and
afford the industry the benefit of the reconciliation.

When you consider normal credit cards, they would operate the same way as a
virtual card except that the mechanism for accepting and transmitting and
swiping would be reversed, and the flow just doesn’t work well. But unless you
move to something like a purchasing card with level 3 data, it also would not
have remittance information and it would not be structured in an 835 unless
there were rules around that. So there is a way to do it. It would be a little
bit backwards and there is not a standard on the remittance information. Debit
card does not have the remittance information with it.

A wire is closest to an ACH transaction for an EFT. Two years ago we did
implement a consistent way compared to ACH for carrying remittance data. Again,
a wire is available as an electronic payment that could have that data. It also
is substantially more expensive than an ACH transaction. Bluebook prices
comparing payment types show an ACH transaction between 30 and 50 cents; a wire
is somewhere between $10 and $25 per transaction. So again, you are dealing
with different attributes, and wire is one where it is more of an immediate
payment. If it is needed today, certainly the certainty and the timeliness of
that is what affords the higher price. But the mechanism would work.

DR. SUAREZ: Thank you.

Any other perspectives on this alternative payment? Anybody?

MS. ESTEP: I am sorry, I had one other thing. PayPal uses the ACH network on
the back. So again, when you’re looking at other payment mechanisms, usually
they have one of the standard rails, as they’re called in the industry, to
enact it. So you actually move the money from one entity to another and then
from the PayPal account back out, but they use ACH for both of those
transactions.

DR. SUAREZ: If I use PayPal, do I have the re association key in it, too? I
mean do I have the option to include it, or is it just a plain payment without
every —

MS. ESTEP: It would not be classified as standard business-to-business,
CCD-plus, with the same formatting requirements. But again, it’s using ACH, so
why infuse another party into the process?

DR. SUAREZ: Yes, that part I —

MS. ESTEP: Mechanically, again, it is a little more burdensome.

DR. SUAREZ: That re-association key seems to be a really critical part.

MS. LOHSE: We have also seen entities that have come to us to say, well, I’m
going to use this other option; how do I make sure the operating rules —
meaning the re association requirement, timing requirement that Rob was —
all the things that the operating rules pushed forward — they want those
with the other options, and we said we cannot provide that because there are no
industry rules around providing those benefits within the other options.

I don’t think there is enough understanding of that. It is not only the cost
but it is these other indirect benefits that don’t come with the other options
here.

MR. TENNANT: Having said that, I think there could be some opportunities on
a case-by-case basis. I am thinking of a one-time payment that is not
associated perhaps with a remittance — capitation payment, something like
that. But even with those sort of specialized types of payments, there has got
to be a different part of work flow. So if you get a PayPal, you get a wire,
well, that’s not something you deal with as a practice every day, so now you’ve
got to have a staff be trained in that.

Ultimately, you are getting at the payment, which there is no reason why
they couldn’t send it through the ACH. So unless there is some compelling
reason why the payer cannot follow the standard, I don’t think we should be
encouraging any other types of payments.

MS. MCCOMAS: And I would just throw in the general comment that it’s not
like we are totally anti-innovation, but there needs to be benefit for all
parties. There can’t be a one-sided — this is really for the payers and
they’re making money off of it. There needs to be benefit for the providers.

DR. SUAREZ: Great. Thank you for that comment.

I will make my last comment and then pass it to Ob and Alex.

This is an important point, I think. We do have the situation under HIPAA
where the payer, as a payer, must be ready and capable of doing all the
transactions. And then on the provider side, HIPAA doesn’t really require
people to do the electronic transactions. HIPAA requires basically if the
provider chooses to do things electronically, then they have to meet the
standard.

So we have that kind of situation where if the expectation of a payer is
that the provider use the virtual credit card, even though there is this
loophole, are there other considerations that might not be taken into account;
for example, the fact that the virtual credit card is an electronic payment,
and now that we have a standard, can a provider really do that transaction via
that virtual credit card without violating the standard? So that’s an important
consideration.

But here’s the other one, which is the one I really wanted to mention here.
I couldn’t find the actual citation, but I do recall in the provisions in the
original HIPAA transaction regulations that there was specific provision that
prohibited a covered entity from establishing mechanisms that would be counter
or would be road-blocking the use of the standard mandated by, for example,
increasing the cost or making certain things that would make the use of the
standard not the attractive one. So there was a provision, and I don’t recall
exactly but I think we can find it, in which covered entities could not really
exercise any special forces to try to entice people not to do the standard by
virtue of blocking — whether it is by costing more or delaying payments or
things like that — the use of the standard. So that might be another part
of it, perhaps as a cue or explanation about being considerate about the
situation.

So I just wanted to mention it for the record.

MR. SOONTHORNSIMA: While we are talking about today the challenges of
adopting EFT and the ERA, look forward a little bit. You all probably know
this, that across the country there are PCMH arrangements, there are ACO
arrangements going on now. I am just wondering what the industry might be
thinking about, because those are special payments, not reimbursements anymore;
it’s really a special payment such as a disease management fee or in some cases
even some additional bonuses. I am just curious whether those are some of the
things that we have to think forward and incorporate those into the fold and
making not so much rigid in terms of rules.

I would love to hear what you guys are thinking about right now.

MS. LOHSE: I know with the transition of the Efficiency Index to CAQH, we
are looking to track the frequency of those payments to see, based on the
frequency, is there value to doing something. It’s always hard because a lot of
things are under development right now, as we all are involved in them in many
different ways.

So what is that number? Is it 3 percent? Is it 5 percent? Is it 7 percent?
That was one of the comments we made even with the use of another — the
credit card industry wanted to have some operating rules for credit cards. What
is the percentage that then the industry should act to say it’s enough of a
volume that we should look to see how do we have policies and operating rules,
potentially, or standards around this.

So the answer is yes, we’re looking at it, but we don’t know what that level
is, what that volume is, to act on it. It might be something that would be
really useful for this committee to think about: What do you think that number
is? First, we have to make sure we have the right tracking numbers, and then we
need to say what is going to drive us, what is that figure that drives the
change.

MR. TENNANT: A couple of points on that. There is no question that the ACO
model and patient-centered medical home model is going to be a lump-sum payment
in most cases. There is no reason why that could not be, again, an EFT/ACH
payment.

When I think about meaningful use, the vast majority of those payments were
made as if it were a Medicare payment.

Walter, to your earlier point, even though providers are sort of carved out
from the requirements, that’s not the approach that some health plans are
taking. Medicare, for example, requires EFT. Another major health plan, I heard
last week, is going to be transitioned away from paper checks. So I see this
trend accelerating, and it will put more pressure on the providers to adopt
these standards.

The nice thing about EFT is you don’t have to have any technology in the
practice. You can have all paper based, but who doesn’t have a bank account? So
I think it’s a very low-hanging fruit, very easy one for providers to take
advantage of. Why haven’t they? Well, because of the enrollment issues, the
fear of recoupment, which I think is a sort of old wives’ tale in the industry
that an overpayment would be scooped out of their account by the health plan.
So education is going to be important. But the trend is clearly there.

DR. SUAREZ: Thank you.

I wanted to ask Janet, on the phone, if you have any comments on the last
couple of questions, if you wanted to provide any thoughts on those.

MS. JACKSON: Walter, I don’t have additional ones, other than the ones that
have been expressed. From a payer perspective, we want providers to adopt all
the electronic transactions. We have not forced it. I know payers who have as
far as the EFT is concerned. We have chosen to use the carrot approach and just
encourage, encourage, encourage. But we are spending millions of dollars on
mandates, and it is beneficial to us if the providers adopt them.

DR. SUAREZ: That was very helpful. Thank you.

MS. GOSS: I am not sure I really want to ask this question right before we
are all about to go to break, because it might be an easy, simple question or
it might not be.

Just because there is no mandate to adopt an acknowledgment, but yet there
is clamor across the industry for years to get a standardized adoption of an
acknowledgment, and we’ve debated the 997 versus the 999, why can’t we adopt a
mandate for acknowledgments? I mean what is really blocking us as OESS and the
rest of the industry from getting behind that bandwagon?

MR. TENNENT: First of all, I think there is a philosophical discussion that
is actually happening now with a lot of e-help that is meaningful use, whether
it is administrative simplification, whether it is pay for performance. So the
question becomes, what is the optimal way of doing business, and is it really
regulation?

I have actually had several conversations over the last few weeks, and I
literally hear the split: too much regulation, and so is there another way of
not doing regulation but moving the industry and the healthcare industry
forward? And that includes CMS and all other payers, to — I also hear,
well, in terms of like infrastructure or this kind of interoperability —
and it’s not just OESS; it is, of course, ONC and others — which is, oh, I
think you need to regulate a bit more in order to get that kind of
standardization and arrive at that holy grail.

So I think, quite frankly, it is this committee and others in order to have
that discussion, because I don’t think it has been resolved. I have a feeling
it is going to require an ongoing conversation and discernment. It is almost
like splitting hairs.

So which route should we have? Because we have several routes —
regulatory, sub-regulatory, just payment policy — well, not just payment
policy; that’s a big incentive. So I just want to put it out there that I don’t
have the answer or we don’t have the answer. I think we need to have a
mechanism and maybe what we were talking about in terms of infrastructure. How
we discuss what is optimal and what is the optimal strategy is a way of doing
it, rather than just being simply prescriptive.

MS. LOHSE: Thank you. I would agree with Rob. It is that public-private
partnership. One of the things with CORE certification, it requires
acknowledgments. So when Janet Jackson from North Carolina said she is CORE
certified, it means for eligibility she is using non-clean(?), now ERA. So
there is that public-private piece, and I think there is also the discussion,
is it truly an infrastructure, so do you need a standard? Do you need a
standard or is it just an infrastructure piece? We’ve had a legal debate about
this.

A lot of people say it doesn’t stand alone as a transaction, so it is not a
standard, because it is only sent if you send a standard. So is it really just
part of the infrastructure, and how far do you need to go with the regulation
as a result?

So I think there are a few different ways to look at it. Rob put it well.

MR. TAGALICOD: Just to inject some irony, when you look at the Medlearn
Matters article discussing the March 3-7 front-end testing week for ICD-10, you
will notice that the transaction that CMS is going to send back to the direct
submitter will be — Rob, correct me if I’m wrong — the 277CA and the
999.

MR. TENNANT: That’s correct.

MR. TAGALICOD: So it’s ironic that they accelerated their use of it, yet
— I certainly understand we don’t want to be overregulated, certainly. We
complain here at the table about regulations. But there are some that suggest
ROI on both sides, and I think the acknowledgment is clearly one of those.

MS. LOHSE: If you think about HTPPS, it’s a standard that everyone uses, and
so therefore it ended up in the infrastructure. We didn’t have a big debate
about it because we all use it. Is it headed in that direction for
acknowledgments? Therefore, is there a different way to look at it versus just
a typical standard?

MS. GOSS: Except that it has been in debate for years and it needs to go
away. It’s a basic function of doing business to say, “I got it,
thanks” and move on. Without the confirmation, you don’t know.

So I think that we need to find that sweet spot. It might actually go back
to some of the things that Ob was talking about in setting those boundaries to
not prevent innovation and to sort of let things advance. But it’s going to be
a hard sweet spot, having been involved in this conversation and some of the
irony of not being involved in the whole HIPAA world for a bunch of years, and
we’re still talking about the same issues, really to claims attachments and
acknowledgments.

I realize it is painful to make standardization, but we have tried to let
the industry self-regulate and advance itself, and that’s how we got HIPAA in
the first place. It’s a pendulum swinging. Hopefully, maybe we can find
something to kind of stop it from swinging and let us get moving forward with
not spending so much time responding to regulations and focusing on the core
business.

MS. LOHSE: Agreed.

DR. SUAREZ: Well, what a way to start the morning. I really want to thank
everyone for your testimony. This was an exceptionally wonderful panel.

We rarely actually end on time. This is something that is unusual, but we
are on time, so we are going to take a 15-minute break to get into our next
very important panel on ICD-10.

(Brief recess)

Panel 2: ICD-10: Achieving a Successful Transition

DR. SUAREZ: People on the phone, first of all, I want to make sure you can
hear us well.

PARTICIPANT: Walter, we can hear.

DR. SUAREZ: I know there are a couple of people who will be on this panel
via phone. Also, I just wanted to check if Linda Kloss was able to make it.

We are going to start with this panel number 2. We have a very large number
of testifiers. Again, thank you for taking the time to meet with us today and
present your testimony. We really appreciate it.

The topic, as you know, is on ICD-10: Achieving a successful transition. We
are about 8 months from the deadline of compliance, and so we wanted to take a
check on the transition process and how to really move towards a successful
completion of this transition.

With that, we wanted to start with some remarks from CMS, OESS, an update
from Matthew, and then we will go down the list. So Matthew.

Agenda Item: CMS OESS Update

MR. ALBRIGHT: Thank you, and thank you, subcommittee, for the opportunity to
talk today. We are actually very excited about this panel, to hear about this
discussion, and I think we have some exciting news all the way around.

I just wanted to clarify that we are Office of EHealth Standards and
Services under CMS, and so we are the regulators. We also do a lot of the
outreach in education on ICD-10, but later in this panel you will hear from our
cohorts in Medicare and Medicaid. They can talk about those specific questions.
So I am just talking as a regulator.

Despite any of the rumors, this week’s rumors, a date is set, no delays,
October 1 of this year. So we will just clarify that one more time, and we’ll
open every one of our discussions with that.

I would like to say that CMS, of course, is taking this implementation very
seriously. We are meeting on a weekly basis with the administrator, who reports
to the White House. We are meeting with the administrator with, again, our
cohorts in Medicare and Medicaid and the various CMS agencies.

We are also in OESS having ongoing discussions, weekly discussions, with
industry — industry sectors, clearinghouses, vendors, providers, the
associations — and we are using this as a kind of biofeedback to get a
pulse of where the industry is in terms of readiness but also to hear about
issues and things that we can clear up with questions, ways that we can
customize and tailor our education and outreach.

Denesecia here in a minute is going to talk about a technical assistance
plan that has been targeted at providers, specifically small providers. This
all comes from an ongoing discussion with industry. If you all — I think
many of you have been involved in those discussions. If you haven’t been
involved in those discussions, please come talk to me or Denesecia or any of
our staff in the back there, and we’ll be happy to pull you in and keep those
lines open.

The other thing I just want to touch upon is the tremendous amount of tools
and resources that have derived both from the discussions with industry and
that we have collected over the years. I urge everybody to go to the CMS
Website and look at the resources. Really with this final push, our emphasis is
on providers, specifically small providers.

To that end you will see that this week we are coming out with the
Administrative Simplification Transaction Testing Checklist that providers, as
well as other industry sectors, health plans, and clearinghouses can use. Some
of you, many of you, may have been involved with the pilot that produced this
document. It was a pilot that CMS sponsored, run by NGS, many industry
representatives, to talk about the different levels and define the different
levels of testing and from that pilot derive these checklists.

I think the checklist probably gives it a disservice, because you pick up
one of these checklists, say, for the provider and it points to all sorts of
resources throughout the industry and CMS that can help providers in the
various sectors to get to where they need to go.

So, again, I would urge everybody to take a look at our resources.

Then the other big tool and resource that we’re excited about is this
Physician Practice Technical Assistance. I am going to turn it over to
Denesecia Green here, who is our team lead for the ICD-10 implementation.

MS. GREEN: Good morning, everyone. Thank you for joining us today.

I just wanted to say that this ICD-10 implementation has been very much a
collaborative effort across the board. We know that it’s going to take all
parts of the healthcare industry to make this work. We are talking about
providers, we are talking about clearinghouses, vendors, payers, and alignment
across the healthcare industry to ensure that this goes off successfully.

One of the things that we’ve been doing, as Matt mentioned, is actually
inviting industry stakeholders into our internal meetings, talking through risk
planning, talking through how we can be proactive in reaching the provider
community, and offering up solutions and best practices and maybe some of those
lessons learned out there and share that across the board. That is really the
intent of inviting groups to the table, to talk through that. I see many of you
around the table who have been part of those discussions, and we will continue
past the implementation and into post-implementation.

Today I am going to walk through our small physician practice tool. As Matt
mentioned, we are developing a lot of outreach and education and technical
assistance and training. The reason is we are not developing it because it’s
fun to do. We are actually wanting to develop something very meaningful and
useful to the provider community.

A lot of these tools and resources that Matt mentioned are very much
industry inspired. They are suggestions by the industry where there is a gap
out there that we need to fill.

This is one of them. We have heard from some of the small physician
practices. We have been hosting a couple of focus groups. We have been actually
talking with small physician practice offices and doctors and nurses and other
clinical staff about what is actually needed. What tools do they need to be
successful in this?

I would like to walk through a little bit of what we are laying out over the
next couple of months.

What you see here is our local field training and support for providers. I
will mention that we are launching training in 50 states and several
territories. We are highlighting 18 states that you can see behind me here:
California, New York, Texas, you name it. It’s a number of those that we will
actually be on site working very closely with the medical societies in those
states, including a number of associations and partners that are coming to the
table to be a part of this.

We are actually going into some small physician practice offices and
bringing together sort of coalitions at the community level. We know very much
that this has been a national effort. We really want to get to the regional and
local level and ensure that everyone has the information and is equipped with
the tools that they need to transition.

In terms of timelines, we’ve been developing a small physician practice tool
that actually helps the provider and the small physician practice to develop
their plan. They can develop that, they can delegate that to staff, they can
develop a team if a team is there for a medium or large practice, for those
solo physicians, our small physicians. Then they also see the task that needs
to be completed in order to achieve ICD-10 implementation.

The tool includes primers for ICD-10, clinical scenarios, clinical
documentation scenarios, common codes across the board — and that was
pooled by several data sources, including Medicare, Medicaid, and other
commercial sources across the board.

I will just mention here that we are actually launching our Wave 2, Phase 2,
in February, into February. So you will start to see a lot of activity at the
local levels. We would be happy to kind of share where we are and ask that you
push that information out to your local partners as well.

We also have what we’re calling an implementation training center. What this
is, is an opportunity for us to actually reach out into the community, identify
some community champions — physicians, small physician offices, or office
managers — that are willing to spread the word, talk through ICD-10, and
achieve some best practices and sharing of those best practices. So we will be
actively calling, talking with physicians, staff, coding, billers, you name it.

Here is the contact approach. I know it’s very small, so bear with us. But
it just shows the breadth of the types of organizations we are reaching out to
— payers, clearinghouses, other federal agencies, associations, the MACs
also, state Medicaid agencies, QIOs, the RECs, you name it. This is not an
exhaustive list. This is very much a preliminary list, and we would invite your
organization to be a part of this as well. We hope to have more than one page
here and to expand this list.

Here are some of the upcoming events. We are actually finalizing a lot of
these, but we are working closely with the medical societies. This is where the
physicians have told us that we need to be in contact with these organizations
to really get to them and get the word out.

This set I will end and turn the next part of this over to our next speaker.

MR. EVANGELIST: Thank you.

Thank you for letting me come and speak today. My name is John Evangelist. I
work for the Centers for Medicare and Medicaid Services. I am responsible for
the software management group overseeing the Medicare service claims-processing
software.

I was asked to speak today, to talk a little bit about our ICD-10
preparedness and our approach to ICD-10.

The implementation of ICD-10 represents a significant code-set change. It
impacts the entire healthcare community. As the implementation data approaches,
CMS is taking a comprehensive four-pronged approach to preparedness and testing
to ensure that CMS, as well as the Medicare fee-for-service provider community,
is ready come October 1, 2014.

The four-pronged approach includes: CMS internal testing of its
claims-processing systems; beta testing tools for the provider community;
acknowledgment testing, which was mentioned earlier, and announcing today
end-to-end testing.

First, CMS internal testing. CMS has a very mature and rigorous testing
program for its Medicare fee-for-service claims-processing systems that
supports the implementation of four quarterly releases per year. Each release
is supported by three-tiered and time-sensitive testing methodology.

Alpha testing is performed by each one of our maintainers for approximately
4 weeks. The next step in that SDLC is beta testing, which is performed by a
separate integration contractor for approximately 8 weeks. Finally, the
user-acceptance testing, which is performed by our administrative contractors,
is performed for approximately 4 weeks. Part of the work that they do is smoke
testing and to ensure that local coverage determinations are being met and the
systems are functioning as expected.

CMS Medicare fee-for-service began installing and testing ICD-10 changes in
2011. As of October 1, 2013, all Medicare fee-for-service claims-processing
systems were ready for ICD-10 implementation. CMS continues to test, however,
all software changes with each quarterly release.

Second, provider-initiated beta testing. To help the provider community
prepare for ICD-10, CMS recommends that the provider community leverage the
variety of beta versions of its software that include ICD-10 codes, as well as
national coverage determination code crosswalks, to test the readiness of the
provider systems.

The following testing tools are available for download from the CMS Website
and include: national coverage determinations converted from ICD-9 to ICD-10;
the ICD-10 Medicare severity diagnoses-related group conversion project along
with payment logic and software replicating the current MS-DRGs which use the
general equivalence mappings, or GEMs, to convert ICD-9 codes to ICD-10.

Versions of the current ICD-10 MS-DRG grouper, Medicare code editor, and
MS-DRG definitions manual allow analysis of payment impact on the conversion of
the MS-DRGs from ICD-9 to ICD-10.

A pilot version of the October 2013 Integrated Outpatient Code Editor
utilizing ICD-10 CM, the final version of the IOCE utilizing ICD-10 is
scheduled to be released August 2014. Croswalks for local coverage
determinations will be available in April 2014. CMS encourages providers and
submitters to utilize these tools as they test ICD readiness of their own
systems.

Providers who will not be able to complete the necessary system changes to
submit claims with ICD-10 code by October 1, 2014, should investigate
downloading the free billing software that CMS offers from their MACs. This
software has been updated to support ICD-10 codes and requires an Internet
connection. Alternatively, many MACs offer provider Internet portals, and a
subset of those portals offers the ability for providers to submit professional
claims.

Professional providers that bill to a MAC whose portal offers this
functionality should register with the portals to ensure that they have the
flexibility to submit claims this way as a contingency plan.

Third, acknowledgment testing, which was mentioned earlier today. In
November 2013 CMS announced that it will offer ICD-10 acknowledgment testing
from March 3 to March 7. This testing will allow all providers, billing
companies, and clearinghouses the opportunity to determine whether CMS will be
able to accept their claims with ICD-10 codes. While test claims will not be
adjudicated, the MACs will return an acknowledgment to the submitter or a 277A
confirming whether the submitted test claims were accepted or rejected. For
more information about acknowledgment testing, we recommend that you visit your
MAC Website.

CMS is exploring the possibility of offering other weeks of acknowledgment
testing after it analyzes the results of the March testing.

Then finally, end-to-end testing. In the summer of 2014, CMS will offer
end-to-end testing for a small sample group of providers. CMS defines
end-to-end testing as the submission of test claims to CMS with ICD-10 codes
and the receipt of remittance advice explaining the adjudication of those
claims, or submit to remit.

The goal of this testing is to demonstrate that providers or submitters are
able to successfully submit claims containing ICD-10 codes to the Medicare
fee-for-service claims systems. CMS software changes made to support ICD-10
result in appropriately adjudicated claims based on the pricing data available
for the testing purposes. Finally, accurate remittance advices will be
produced.

The small sample group of providers participating in end-to-end testing will
be selected to represent a broad cross-section of provider types, claim types,
and submitter types. Additional details about end-to-end testing will be
disseminated at a later date. I believe it has already been — correct me
if I’m wrong, but I believe it has been pushed out this morning.

MS. GREEN: Right.

MR. EVANGELIST: That concludes my remarks.

DR. SUAREZ: Thank you so much, and thank you, Matthew, for your testimony.

I think we have Godwin Odia from CMS on the phone.

DR. ODIA: Yes.

DR. SUAREZ: Can you go ahead with your testimony?

Agenda Item: State Medicaid Agencies

DR. ODIA: Greetings everyone, from San Francisco, California. My name is
Godwin Odia. I am the CMS lead responsible for supporting the State Medicaid
agencies and territories of the United States in their ICD-10 implementation.

I would like to have been there to meet with all of you in person, but I am
in San Francisco Office, where my team and I are conducting an ICD-10 training
workshop for the State Medicaid Agencies that comprise of San Francisco and
Seattle regions. I will be providing more detail as to the technical assistance
we are providing a little bit later in the presentation.

DR. SUAREZ: I am sorry. Excuse me. We are trying to get your presentation
material displayed.

DR. ODIA: Oh, it is not up yet?

DR. SUAREZ: Sorry about that. We have paper copies for the members here of
the presentation.

DR. ODIA: I sent an electronic copy.

DR. SUAREZ: Yes. The electronic copy is being connected right now. I am
sorry.

DR. ODIA: All right, I will wait. Just let me know when to start because I
am not seeing anything.

DR. SUAREZ: All right, I think we can move to slide 2 in the presentation.

DR. ODIA: Yes, slide 2.

DR. SUAREZ: And that’s your nice picture.

DR. ODIA: That’s me right there.

(Laughter)

DR. SUAREZ: We can see you very well.

DR. ODIA: Go to slide 3.

The topic I will be speaking on today includes ICD-10 implementation
timeline developed specifically for the State Medicaid Agencies. An overview of
the technical assistance CMS is provided to the State Medicaid Agencies and
territories of the United States. The five operational requirements that CMS
has identified as being the critical success factors that states must be able
to perform on October 1, 2014, and the testing requirements, risk mitigation
planning, current focus of CMS technical assistance to the states, and then
some closing thoughts.

As a starting point, I would like to share with you a high-level overview of
the states’ ICD-10 implementation timeline.

One of the first areas of technical support provided to the states was a
detailed ICD-10 implementation handbook and timeline. The handbook was
organized in five implementation phases to include awareness, assessment,
remediation, testing, and transition.

As you can see, as of January 1 of this year, State Medicaid Agencies should
have been in the testing phase of their ICD-10 project.

CMS has been providing technical assistance to the State Medicaid Agencies
since 2009, with a dedicated team consisting of: subject-matter experts
experienced in Medicaid operations, ICD-10 trainers, and certified coders.
Health care professionals to include a physician and registered nurses, health
information management, business analysts and project management professionals.

Technical assistance has been at the strategic and granular level, and topic
areas covered in concert with CMS/industry ICD-10 implementation timeline.

Broad categories of technical support include a comprehensive implementation
handbook and a number of other “how to” guides, tools, and templates,
and as appropriate, materials were reviewed by Medicaid Medical Directors
Learning Network. Other professionals such as AAPC, WEDI, and the American
Health Information Management Association.

We also have facilitated forums and discussion groups, dedicated website and
monitored mailbox. Many of the tools have been made available for public use
through the CMS website under ICD-10 resources.

In-depth training has been a major area of support to the states: to date,
CMS has conducted 57 training sessions on site at CMS regional offices, and
individual State Medicaid Agencies.

Training syllabus included “need-to-know topics” applicable to all
State Medical Agencies as well as sessions customized to meet the informational
needs of each individual state agency.

A little further along in the presentation I will review the training
workshops that we have just launched this week.

In recognition of the impending implementation date, the emphasis of
Technical Assistance has progressed to the topics of risk planning and testing.
In particular, CMS is working with state’s to assure their ability to perform
five business operations required to support Medicaid services and operations
during the ICD-10 transition period.

The five critical operational requirements that must be fully functional on
October 1, 2014, to include the ability of states to accept electronic claims
with ICD-9/10 codes based on date of service and date of discharge. Adjudicate
claims. Pay institutional professional providers, and managed care
organizations.

Complete coordination of benefits with Medicare and others. And to submit
Medicaid eligibility and claims program data to CMS using MSIS and TMSIS.

All states are required to develop risk mitigation plans for each of the
critical operational requirements, regardless of the state’s anticipated
ability to perform the functions on the implementation date.

CMS Medicaid test requirements with the states will be centered on the five
critical operational requirements. Additionally, CMS Central Office is working
with the Regional Offices to obtain state-level test results and reports that
will assist in assessing whether the five critical operational requirements
will be met.

As I noted earlier, January 1, 2014, was the official start of the testing
phase for State Medicaid Agencies, in accordance with the ICD-10 project
timeline.

States are required to report to CMS the projected start and stop dates for
both internal and external testing, and the status of their test plans.

As a component of their testing with CMS, the states will need to ensure
their ability to satisfy the five critical operational requirements. States are
also required to conduct testing with their own external stakeholders.

For those in the audience that have State Medicaid Agencies as their
business partner, I encourage you to reach out to those State Medicaid Agencies
that you need to test with to determine where they are in this process.

In addition to the risk mitigation planning for each of the critical success
factors I just spoke to, states are responsible for defining risk mitigation
plans related to provider readiness. This is an area that states have reported
a primary concern with, so CMS is working with the states to define risk
mitigation specific to provider readiness.

Additionally, CMS is working with the states to identify the best method to
monitor claims performance early in the ICD-10 transition period to identify
indications of an unintended impact to the integrity of the state plan.

The 2014 focus areas – In addition to providing technical support in
the areas of Testing and Risk Mitigation Planning, CMS also communicates on a
regular basis with the states to understand their current technical support
needs.

CMS closely monitors states ICD-10 project progress with a formal process
that includes quarterly State Medicaid self-reported readiness assessments, and
detailed 1-on-1 conference calls with each state.

This ongoing monitoring and communication with the states is leveraged to
inform the type of technical assistance expected to be of the greatest value to
the states.

This week CMS began another cycle of training. States and territories of the
US will convene at five Regional Offices for a two-day training workshop. The
first of these workshops are in progress here in San Francisco.

The workshop agenda covers topics that reflect the current testing phase of
implementation, and will also be forward thinking and introduce the topic of
post-ICD-10 implementation opportunities and impact.

Additional technical assistance is planned for five State Medicaid Agencies
with the largest Medicaid population including California, Florida, New York,
Texas, and Illinois, as well as states that are behind on their project
timeline. Additional technical assistance will be targeted based on the ICD-10
implementational needs of each designated State Medicaid Agency.

Of importance to many of you, State Medicaid Agency stakeholder engagement
is a key requirement for the states and is specified in the State Medicaid
Implementation Handbook. States are responsible for reporting to CMS the status
of stakeholder engagement quarterly.

As CMS does not disclose state-specific project status; I encourage those of
you that do business with the states to reach out to them to continue to
coordinate your ICD-10 project efforts.

Many of the artifacts that have been developed for the states are available
to you through the CMS website.

In conclusion, I want to assure the audience that CMS is committed to
supporting states, as well as the territories, at all levels of ICD-10
readiness.

Thank you for having me.

DR. SUAREZ: Thank you for that testimony. Thank you very much.

We are going to move to Jim.

Agenda Item: WEDI Perspective

MR. DALEY: Good morning. For those of you attending virtually, I am Jim
Daley. In addition to being chairman of WEDI, I am also a co-chair of the
ICD-10 work group.

For those of you not familiar with WEDI, we are an industry organization
representing a broad group of stakeholders across all segments of the industry,
and we are a named advisor to HHS in the HIPAA regulations.

Today I am going to have a couple of slides: general comments about our
survey that we did in October of last year; the detailed survey results, which
I will go through really quickly because I have a very short time limit here;
and then closing comments with some thoughts and recommendations responding to
the questions of the committee.

This is our eighth survey. We conducted it in October of last year and
published the results to OESS in December. It was about 6 months after the last
survey. What we were looking to see is, is the industry catching up on meeting
the compliance date? We all knew it was falling behind, so we had hopes that
maybe we would see some movement forward.

Also, we wanted to talk about how much external testing is being planned.
That has been a really hot topic: How are we going to test ICD-10, since it has
such broad impact to everyone? So we asked some questions related to that.

It was a voluntary survey, so it’s not necessarily statistically valid. But
we got several hundred responses, I think it was 353 total responses.

The issue with our surveys is we send them out to a bunch of groups, and the
ones that respond tend to be those that are more aware, more ready. So this is
probably on the brighter side of the spectrum than if you actually surveyed
randomly hundreds of people out there across the country.

As I mentioned, we had 353 total. This was down from a year prior to that we
had done a survey and had over 2,600 responses. So there is less enthusiasm at
this point, it appears, about saying where you are, especially if you’re not as
far ahead as you had hoped to be.

You see there were about 59 vendors, 98 health plans, and 196 providers.
There was a mix across all of those segments in there.

One thing in this one, the providers leaned a little bit more towards the
institutional side. The prior ones, it seemed like more of the smaller
practices were responding to that one.

Overall observations. What we saw was the industry is making some progress.
It is slow progress, though, and it is not what we need to really make this
thing work smoothly on October 1. I am not sure that’s a surprise to anyone.

Health plans and providers are completing their impact assessments. As we
know, that’s about time that they are doing that. Even at that, they are not
all done at that point.

Remediation and internal testing is beginning, but some organizations lag
behind in those and will not complete them until this year, until 2014.

Some vendor products were not ready. I have a couple of slides on that.

The industry, in summation, they won’t have enough time for
internal/external testing to prevent significant disruptions. So everything is
boiling down to the last minute. What’s the last thing you do? You test and put
it into production. So that’s the part that’s going to suffer as a result of
delaying these earlier steps.

Vendor results. When do you plan to have your services ready for customers?
More than a third did have them ready as of October. So that was great. But it
was only a slight increase over the February survey, so they weren’t moving
along really fast, but some did have them ready. Over two-fifths, 40 percent,
said they would not be ready until 2014, which doesn’t leave a lot of time to
get them installed, working, and do testing with the trading partners.

Health plans. About three-fifths had completed their impact assessment. This
is one of the first things you need to do is figure out where your gaps are and
figure out the workload in front of you. They still had not finished that. So
there are more than the last time we did it, but if they weren’t done by that
point in time, they’re really far behind the curve.

I did talk to a consultant friend who in early January had just been hired
by a small payer to start doing an impact assessment. So there are some
organizations out there that are significantly behind.

Estimated date to begin external testing. Some had already started that or
expected to start it by the end of the year, so that’s a good sign. In 2013
some external testing was starting to occur. But most were pushing it off till
the end, till 2014.

I will just cover this quickly. Providers — they had a lot of unknown
results in earlier surveys. Now they knew the answers, but the answers were
2014 is when we’re going to start doing these things.

Time is running out. These are some actions I think the industry should be
taking. The first one they are taking very well: The compliance date is not
changing. We’ve been hearing that for a year or two now, and we cannot hear
that enough.

Emphasize the importance of communication and collaboration among the
entities.

Continue outreach and education — the fact sheets, issue briefs. Great
stuff on the CMS network out there, and WEDI has great tools, as do many other
organizations as well.

Certainly finish your impact assessments. Find out what you’ve got to do. If
you don’t know what you have to do, how are you going to start actually making
the changes?

Prioritize what you’ve got left. If your time is running out, you probably
cannot do it all, so pick and choose your battles.

Focusing on clinical documentation improvements. Testing. Another key item:
Get your metrics in place. You can start to measure what might be deviating
from the norm once ICD-10 goes into place. Early detection means you can help
fix whatever issues may arise a little bit earlier.

Conduct your contingency planning and plan to mitigate the risks. The
picture I’ve painted is the industry will probably not all be ready, so you’ve
got to deal with that situation and figure out how you’re going to handle
various scenarios as they arise.

And, of course, monitor progress.

Anecdotal test results found that there are coding issues. People were not
using codes correctly, at least at that point in time. There were some minor
DRG shifts, so there are some things that can occur on that day.

WEDI plans to conduct additional surveys in 2014. Around March-April time
frame we should have updated results on this one.

We are working with CMS and other industry partners to engage the industry.
We have this HIPAA success initiative, a database of issues, concerns, not what
is ICD 10 but things about as you go to implement this, what are the questions
arising and how do you address those?

We’ve had state collaboratives we’ve brought together so the state
collaboratives could share their results and some of their best practices
together.

We will continue to do white papers, issue briefs, hold our monthly national
calls and our programming at conferences, et cetera.

Thank you very much for the opportunity to testify here.

DR. SUAREZ: Thank you, Jim. Thanks so much.

I think next we have Sid Hebert.

Agenda Item: Health Plans

MR. HEBERT: Just for clarification, it’s Ay’bear (phonetic). It looks like
Hebert.

I want to thank the subcommittee for having me here today.

My name is Sid Hebert. I am the ICD-10 program director for Humana, with the
primary responsibility for assisting my company with implementation of the
revised HIPAA electronic standards, ICD-10 code set implementation, and the
administrative simplifications mandated by the Affordable Care Act.

Humana is headquartered in Louisville, Kentucky, for those who are not aware
of that. We are one of the leading healthcare companies that offers a wide
range of insurance products and health and wellness services that incorporate
an integrated approach to lifelong well-being.

Today I am testifying on behalf of America’s Health Insurance Plans.

Humana began planning and execution of the ICD-10 remediation program in
2009 because we recognized that the complex coding system requires careful,
systematic management for successful implementation.

To date, Humana has completed remediation of its core processing platforms
and is well into the internal and external end-to-end testing phase.

Humana began its external testing program, which is based on a select group
of 70 large facilities, in July of 2012. Currently 30 of those facilities have
entered our program and are progressing through our three-stage process. Humana
expects to complete testing with approximately 66 of those 70 facilities. We
began planning and design phases for our external professional and outpatient
practices in January and anticipate that we will begin provider engagement in
the second quarter of this year. We actually delayed the initiation of that
component of our testing because of significant provider readiness (sic) to
engage.

On behalf of AHIP, I want to let the subcommittee know that we are committed
to the implementation of ICD-10. Today I will address implementation dates,
education and testing, provider readiness, as well as some important
considerations regarding quality measures.

I am very pleased to hear the opening comments today because we do recommend
that the Department and the Standards Subcommittee continue to stress that the
October 1 implementation date will not change. Future delays will add
additional costs and require a longer time frame in which we are operating dual
systems.

Beginning in October, we have to maintain dual ICD-9 and ICD-10-capable
systems to account for the runout period of claims for services rendered prior
to October 1. Currently, we anticipate maintaining our ICD-9-compatible systems
for approximately 18 months, only fixing system bugs or issues identified,
while we plan for a reduced claims volume in the ICD-9 space. Operating these
dual systems comes at great administrative cost.

Secondly, education and testing focus should transition from larger
facilities, which in our view are predominantly ready, to smaller hospitals and
physician organizations. We are now deep into implementing testing for larger
facilities in our network across the country. We have developed a three-stage
methodology to help us and our providers understand the financial implications
of the migration.

Our testing is based on 350 core scenarios that are derived from deep
analysis of areas where payment variations or major condition code variations
might occur.

Stage 1 is basically a coding test. Large facilities demonstrate that they
can accurately code in ICD 10 by completing 10 basic scenarios as a coding test
alone.

The second stage is coding and mapping between ICD-9 and ICD-10. The purpose
of this stage is to determine whether the documentation within the facility is
sufficient to support ICD-10 coding. We select about 150 to 300 historical
claims drawn from those 350 high-risk conditions and ask them to recode in
ICD-10 claims that they have previously submitted to us. We grade those and
share the results with the providers.

They move into stage 3, where they are ready to electronically submit
claims. Stage 3 is our electronic claims submission or our production
equivalent test. We then ask the 70 facilities to recode approximately 350 to
500 claims, once again chosen from the 350 top risk conditions, and send them
to us electronically. Again, we evaluate their responses and sit down and
produce the 835s, and we sit down and discuss any payment variations or any
difference in expectations based on those results. Once we complete that, we
consider the testing phase complete.

Going through these three stages with large facilities will complete
end-to-end testing, in our view. However, it will not be possible to do this
type of testing with all providers, and we are not able to tell providers
exactly how to code, so it is imperative that they engage bilaterally with us.
This is why it is so important that CMS greatly increase its focus on provider
training and outreach. Once again, we are encouraged to hear the comments
today.

The key to a successful rollout will be providers’ understanding of how to
correct code claims using ICD-10. After all, folks, it is really all about the
codes. This effort must focus on small and rural hospitals and small provider
practices and should reinforce the importance of October 1 readiness this year.

Humana has conducted provider surveys, readiness surveys, both in November
2012 and again in November 2013. The readiness numbers were about the same.
About 25 percent of providers have indicated that they will be ready for
ICD 10. We surveyed in 2012 106,000 providers across all disciplines, and again
in 2013 we surveyed 130,000 providers across all disciplines. We had
statistically relevant samples in most categories. So we feel confident that
the survey does represent the true state of readiness in the industry.

We understand that small practice providers and community hospitals will
need a place to go to get answers to questions concerning clinical
documentation needed to determine the correct and most appropriate diagnosis
codes. While large institutions and provider practices may not need such
assistance, the smaller community practices will need assistance to determine
if their current documentation practices will enable them to select the
appropriate ICD-10 code.

There was some work done earlier in the year by WEDI and MGMA and by APC to
look at specialty practices and provide coding guides for those practices. I
think that’s an example of good quality material that can be disseminated.

Finally, we recommend that the subcommittee focus on the impact of the
migration to ICD-10 on quality reporting and rating. ICD diagnosis codes are
used are used by physicians, hospitals, and other healthcare providers to
capture diagnoses for all patient encounters, as well as for health plan and
provider quality measurements and reporting. Significant differences exist
between ICD-9 and 10, and organizations such as the National Committee for
Quality Assurance, NCQA, have taken steps to support the transition. For
example, NCQA has identified a set of ICD-10 codes for their HEDIS measures,
which are used to assess commercial, Medicaid, and Medicare Advantage health
plan policies.

One of the issues likely to arise with the transition to ICD-10 is the time
required for providers to adjust to the new coding system and submit claims
with appropriate diagnosis codes that will capture denominator populations
accurately comparable to those under ICD-10. It will be critical to monitor for
any provider the coding trends or issues with data capture, so that the
appropriate action can be taken to ensure valid and reliable measurements.

In a synopsis, if you change the selection criteria for the denominator of a
ratio that indicates some type of quality performance, you are going to shift
the entire result. There is going to be discontinuity. It’s important that we
understand that at the quality-measures level.

In closing, I want to reiterate the health insurance industry’s support for
the implementation of ICD-10, which has numerous benefits. Health plans have
expended significant resources to date in implementation, and it is critical
that this momentum continues through October 1.

We recommend that CMS focus its efforts on reaching all providers and
educating providers on proper coding.

Finally, the subcommittee should closely monitor steps being taken to update
quality measures and monitor the impact of ICD-10 on quality reporting and
rating.

I do appreciate your time and attention today. Thank you.

DR. SUAREZ: Thanks so much, Steve.

We have Rob next.

Agenda item: Provider Perspective

MR. TENNANT: Thank you very much for the opportunity to speak on ICD-10,
what we consider to be perhaps the most pressing challenge practices have faced
in decades.

What differentiates ICD-10 from, for example, EFT that we discussed this
morning is that every link in the chain has to be ready. So if the provider’s
software is not ready, it is okay, they can still get paid by check. But with
ICD-10, if any part of the link — if the payer, clearinghouse, vendor,
provider, professional coder — if any of those are not ready, then there’s
a problem.

You ask yourself, why are providers so concerned about ICD-10? Why are they
complaining so much? The implications of compliance, if they do it right, are
high cost and decreased productivity. That’s the upside. The downside of this
non-compliance is significant disruption in cash flow. I know Nancy is going to
talk about some costs. But this is the only HIPAA transition that I’ve gone
through — and I’ve gone through them all — that we’ve seen the
pushback from the providers to the extent that we have.

So I want to share with you some of our most recent research. We conducted
it late in January. We got 570 practices where more than 21,000 physicians
practice in more than 44 specialties. The average practice size was eight
physicians.

We asked the question, tell us if you are concerned or very concerned about
various things. You can see here 87 percent saying they are very concerned
about the changes to clinical documentation; they are very concerned about
clinician and coder productivity. There are all kinds of anecdotes. There is a
little bit of evidence floating around the industry suggesting that it is an
extra 5 minutes per clinical encounter. You may think 5 minutes is not so bad,
but if you’re a primary care physician seeing 25 patients a day, that’s a
decrease in perhaps 20 percent of your patient load, which is equivalent to a
20 percent pay cut. So again, they are very, very concerned about the
implications of ICD-10.

They are also concerned about the various things that they’ll have to do.
For example, the patient encounter, the documentation to support that is going
to change. Will it be more difficult? Well, about 90 percent say somewhat or
much more difficult.

The ability of the clinician and the coding staff to identify the right code
— again, in the 90 percent-plus range. And the ability to compare data is,
of course, very much a concern as well.

In terms of cost — and people throw figures around — but what we
found with our survey is about 40 percent of vendors are offering their upgrade
or replacement as part of the maintenance agreement. So of the rest of them, we
asked, okay, assuming you’re going to pay for it, what will be the cost that
you will be expecting to incur? For the PM, or the practice-management system,
per physician, the cost is $11,500, and for the EHR, almost $13,000. So you
extrapolate that to a 10-physician practice, and that is almost a quarter of a
million dollars just for the software upgrades.

We’ve also seen some issues about lack of communication in the industry. You
can see here from our slide that communication flowing from the vendor to the
providers is not happening as quickly as we want. I think the WEDI survey
collaborates this. Almost a quarter of practices report that they have not
heard anything from their vendor, and here we are, as Walter said, nine, eight,
seven months or somewhere in there away from compliance, and very, very few
vendors have actually reached out and made the upgrade. Again, the practice
cannot move forward with ICD 10 without that upgrade to the PM and the EHR.

We have also found — and these numbers have gone up a little bit from
our last survey in June — but still, almost 60 percent of practices report
that they have heard nothing from their health plans in terms of testing. It is
good to hear that Sid and others are moving ahead, but we have not heard of
anybody who is actively testing now.

We are not that far away from the compliance date, and as you all know, the
vast majority of claims from practices, especially smaller ones, are sent to
health plans via clearinghouses. You can see here almost half are reporting
that they have not heard anything from their clearinghouse regarding testing.

A few other critical industry issues. Obviously — and it has been
alluded to by Sid — payment policies are going to change. It’s great to
hear that CMS is going to release some of their payment policies, but from a
provider perspective, that is only one payer. All of the payers are likely to
change their payment policies. That is very concerning.

There is the myth of payment neutrality, and we will see what happens after
October 1 with that. I think a lot of us feel there are going to be winners and
losers, and the losers are typically the smaller and rural-based practices.

There is, again, another myth that using ICD-10 codes will result in fewer
requests from health plans for additional documentation. There is no evidence
at all to support that. We in fact believe the opposite, that if a specific
code is entered and there is not the supporting documentation, it is very
likely that they are going to be asked for more information before the claim is
paid.

We are also very concerned that we’ve been hearing — I won’t steal any
thunder from Tim, but I have talked to some clearinghouses personally that have
indicated very, very few plans — of 1,200 in their database, 40 had
submitted their claim edits. Again, the clearinghouses need time to be able to
incorporate those payment edits. They are the key link between the provider and
the payer, and if they are not ready, clearly, there are going to be issues.

Again, it reinforces why testing is absolutely critical, not just the front
end but also the end-to-end. It was very good to hear, John, that you’ve
decided to change your policy on that.

So what are we saying to our members? We have all kinds of education out
there — free Webinars and guides. We have certainly pointed them towards
the thousands of documents that CMS has produced. But again, it’s a chain, it’s
a process as well. So we’re telling them.

Staff buy-in. You’ve got to convince physicians that this is happening, that
Matt is telling us the date is not moving, and we have to assume that.

You’ve got to change or at least review your documentation. I think that is
one of the key messages we are pushing out. Don’t just allow your salesmen to
tell you your software is going to be ready. You’ve got to be aggressive,
you’ve got to have it in writing, review your contracts, review your options.
Focus on the codes and the payers that make up the vast majority of your
payments. Ideal testing will be end to end, but any testing is better than no
testing at all.

Obviously, closely monitor your processing and reimbursement once the date
comes. You have to assume there are going to be problems, and I say prepare for
the what-ifs. What if your vendor is not ready? What if your professional coder
retires? What happens if your clinicians aren’t ready, your payers are not
ready? The practice has to be assuming the worst and hoping for the best.

Our recommendations. Nothing surprising here. Good to hear the edits will be
released at some point, maybe April. April 1 would be appropriate. Testing end
to end. Again, good to hear that you’ll be doing some limited testing. You
didn’t give a number, but I assume it is five or more, I guess?

I would suggest that as soon as you get any data back — and it applies
to Sid and any payer — push it out to say, Hey, here are the areas we’re
seeing concern with. Pay particular close attention to these areas.

We will talk about this this afternoon, but clearly there are lots of
non-covered entities out there in the industry that may or may not move to 10,
and that is going to add, again, additional confusion to the industry.

Work closely with all the vulnerable stakeholders.

I hate to bring up the dreaded C word, but contingency has to be put on the
table. We’ve not gone through any HIPAA transaction or identifier change
without having a contingency period. That’s just the reality of it. So we have
to assume there is going to be one. Let’s get started on it. Let’s work as an
industry to say, Okay, this is going to work, this is not going to work —
not that we want to slow down progress, but the reality is there are going to
be problems. So what can we do to mitigate them?

Again, if there is a problem with EFT, we fall back to paper. If there is a
problem with claims and we are not paid, the door is closed. So it is not the
same level.

You are looking at relaxed edits; dual use of codes, albeit it is going to
be a challenge for the plans; advance payments to providers, especially those
in the more vulnerable practices; and, I hate to say it, but potentially
looking at extensions. If things are not looking good, we are going to continue
to monitor our guys. I strongly encourage you, Robert, to push out as many
surveys as possible. If things are looking like we’re moving towards a cliff,
then we have to reevaluate.

Thanks.

DR. SUAREZ: Thank you, Rob.

We are going to go quickly to Nancy, I think, next.

Agenda Item: AMA Perspective

MS. SPECTOR: Thank you.

On behalf of the physician and medical student members of the American
Medical Association, thank you for inviting us here today to provide our input
on ICD-10 implementation transition.

Our testimony on this topic is going to focus on three recent activities by
us. The first is the study that we commissioned by Nachimson Advisors to update
the estimated cost of implementing ICD-10.

The second is a survey that we had done in January asking physicians on the
status of their ICD-10 software upgrades by their vendors.

The final is a letter that we sent last week to Secretary Sebelius
expressing our ongoing concerns with ICD 10.

As background, many of you are aware that AMA has long recognized that the
transition to ICD-10 for physicians is a massive unfunded mandate that is not
expected to improve the care physicians provide to their patients. The work on
ICD-10 also comes at a time of unprecedented numbers of overlapping
requirements that physicians must meet, including the EHR meaningful use
program, e-prescribing, physician quality reporting system requirements. All of
these are competing for the practices’ time, staff, and resources.

I am going to start first with talking about the Nachimson Advisors’ report
that came out last week. In 2008 the Nachimson Advisors had done a study
estimating cost for ICD-10 implementation. At that time, it was all just
estimates. There was no real-world information about actual cost. So this 2014
study is using updated data, costs, real-world examples, and provides much more
up-to-date information around the costs.

You can see here in the table what those costs were estimated to be in 2008
versus the range of costs that were provided in the study. You can see that,
and you can see at the high end of the range in some cases the costs are going
to be nearly three times what was predicted in 2008.

The study does break out the estimated costs based on these different
categories. So it’s looking at training, assessment, vendor/software upgrades,
process remediation, testing, productivity loss, payment disruption. So it is
pretty comprehensive in terms of looking at all the impacts cost-wise on a
practice.

The conclusion is that we view ICD-10 as being financially disastrous for
physicians. For those of you who are interested in looking at the full report,
this is the Website. It is available on our Website. I did provide that as
support materials for the subcommittee.

The second activity we did in January was to do a quick, very short survey
of physician practices on the status of their ICD-10 software upgrades. What we
found in that was actually not as good data as what Rob just talked about in
their survey. But we are seeing that fewer than half, so around 47 percent, of
practices responded that they are aware that their vendor plans to upgrade
their software for ICD-10. So that means that 40 percent don’t know, and that
to us indicates that there is just not good communication happening between the
practices and the vendors. That is a pretty high number at this point in time.

Then looking at when those expected upgrades will happen, 5 percent reported
that they did receive those before January 1, 26 percent expect to receive
those upgrades before April, and then you can see the numbers trail off after
that. What is really concerning out of this to us is that nearly one-third do
not know at all when their upgrades are going to happen.

The results of the survey, as limited as they are, do leave us questioning
just how ready the vendor industry is for ICD-10, and without these system
upgrades in place in the practices, they are going to be unable to test their
systems both internally and externally with their trading partners. This, of
course, puts them at a greater risk for disruptions in claims processing once
the deadline comes.

The other piece that I want to talk about is the letter that we had sent to
Secretary Sebelius last week and the concerns that we outlined in that letter.

One of the first concerns is something we’ve been talking about, which is
testing. We are very concerned about the lack of industry-wide, true end-to-end
testing, and we are very encouraged by the recent announcement this morning,
just now, that CMS was going to look at doing some end-to-end testing in a
small sample essentially of providers. That is something that we had
specifically put into our letter as an option that we would like to see happen.

Another activity that has us encouraged is we saw that Senator Coburn sent a
letter yesterday to CMS asking very pointed, very specific questions about what
testing will be and what the results of that testing will look like and how
that will relate to the industry’s readiness.

So again, we believe that end-to-end testing is essential for ensuring that
physicians will not suffer the massive disruptions in claims and payment
processing and ultimately risking physicians’ ability to care for their
patients.

The other concern that we have again goes into the disruption of payments.
We are very concerned about payments and payment flowing. We are concerned that
Medicare is not seeking to be more flexible in their advance payment policy,
which would address those situations where there are cash flow interruptions.
We just want to point out that this was a recommendation that NCVHS had made to
CMS in a letter dated September 11, 2011, and that language is there.

In terms of coding requirements, we are concerned that payers are going to
put strict requirements on the specificity of codes reported and reject or pend
claims and further compound payment disruptions. That is something that Rob was
just talking a little bit about, too, in terms of attachments and asking for
more information. Those are concerns that we have.

Finally, we feel that ICD-10 is part of a mix right now that is just
impeding progress towards other requirements that physicians are being asked to
do. Right now we’ve got Stage 2 meaningful use that is coming on board.
Physicians need to have their 2014 EHRs in place, and that is requiring a
software upgrade. The patch for ICD-10 in many cases is going to be installed
separately by the vendors.

Again, we are hearing for the timing of the EHR upgrades we have concerns
that the practices are not going to have enough time to have everything
installed and test before the compliance deadline. Also, physicians who are
starting meaningful use in 2014 have until September 30 to attest, and we just
feel there are so many moving parts going on right now and potentials for
collisions between meaningful use and ICD-10.

It is also impeding the ability for physicians to purchase technology and
participate in new payment and delivery reform models that can improve care
coordination and reduce costs. Those are things that they are unable to do
because of this ICD-10 requirement.

In conclusion, we just have the following points which address the questions
that were asked. Again, the cost studies — we are very concerned about
ICD-10’s cost and it being far higher than what was initially estimated. What
we are seeing is that software upgrades by vendors are behind schedule.

We don’t have specific data on testing at this point, but we have strong
doubts about what kind of testing is happening, since we only saw that 5
percent of practices have gotten their software upgrades as of January 1. We do
see that testing is a major priority and ask that that be true in testing, and
we are again happy to hear what Medicare is announcing.

Again, all of these points raise serious doubts about the industry’s
readiness and ability to meet the deadline, and we strongly urge CMS to
reconsider the mandate.

So thank you again for inviting us to testify.

DR. SUAREZ: Thanks, Nancy.

Let’s move to George.

Agenda Item: AHA Perspective

MR. ARGES: Good morning, everyone, and distinguished members of the National
Committee on Vital and Health Statistics. I want to thank you on behalf of the
American Hospital Association, these 5,000 member hospitals, health systems,
and other healthcare organizations and our 43,000 individual members for the
opportunity to testify today regarding the transition to ICD-10.

My remarks will speak really to three topics: hospital readiness for ICD-10,
the extensive investments already made to prepare for ICD-10, and the
importance of end-to-end testing to ensure a successful transition.

In terms of readiness for ICD-10, the AHA has always supported the statutory
requirement that we transition to ICD-10 because it provides modernization of
coding and billing systems.

While it entails significant effort and cost, the move to ICD-10 is
important to ensure payment accuracy and build our understanding of healthcare
delivery. ICD-9 has simply run out of room and likely does not provide
sufficient detail on patient severity to support advance payment models.

In order to achieve the successful transition to ICD-10, the entire
healthcare community — hospitals, physicians, payers, clearinghouses, and
government agencies — must stop debating ICD-10 and take the needed
actions to achieve successful implementation.

Based on preliminary data from an AHA survey that concluded last week, we
found that the vast majority of hospitals are confident that they will be ready
to transition to ICD-10 by October 1, the implementation date. Most are
actively training coders, educating physicians, and either beginning or
planning for testing with payers.

When asked about risks to timely transition, hospitals most commonly cited
lack of external testing with Medicare and other payers. They are also
concerned about the competing priority of meaningful use. Indeed, the AHA and
other provider organizations have requested that CMS extend the meaningful use
timelines for 2014, in part to allow hospitals and physicians to focus on
ICD-10.

Hospitals and physicians have had significant advance warning of the
transition date for ICD-10. Hospitals have been preparing for ICD-10 for 3
years, with the understanding that it will be a challenge but will need to be
accomplished, and that it can be accomplished if all parties work together.

It is true that under ICD-10 the coding system will significantly grow.
However, the expansion is based on reasons such as the identification of
laterality — left, right, bilateral — creation of combination codes,
and identification of chronology of encounters for injuries, such as initial,
subsequent, or sequelae.

Although the code set is large, any physician practice would use only a
small subset that is relevant to the services it delivers. Specialty societies
have developed many tools to facilitate the transition, such as developing
top-50 lists by specialty.

In addition, the superbill updated to ICD-10 will continue to be a crucial
tool for physician offices and will aid them in learning the segment of ICD-10
relevant to their work.

Investments already made to prepare. Clearly, hospitals have invested
significant financial and staff resources in preparing for the October 1, 2014,
transition date, on the understanding that this date was firm. Specifically,
hospitals are actively training coding staff, educating physicians about ICD-10
coding concepts and the importance of improving documentation, finalizing
information system changes that they have already worked with vendors to
implement. Also, they are conducting financial impact assessments and
completing the internal testing and contacting payers, clearinghouses, and
other trading partners to schedule testing.

Hospitals do not want to see the large investments that they have already
made to prepare for ICD-10 wasted. Hospitals’ proactive approach to ICD-10
preparation should be recognized and serve as an example to others, including
Medicare.

The importance of end-to-end testing. To this end, last November the AHA
sent a letter to the Centers for Medicare and Medicaid Services urging the
agency to expedite its ICD-10 testing plans to ensure testing begins no later
than January 2014 and be made available to all hospitals. Extensive end-to-end
testing by Medicare contractors and state Medicaid agencies for both the
electronic transaction and the adjudication of the claim is crucial to ensure a
smooth transition from ICD-9 to ICD-10.

Indeed, the implementation timelines on CMS’ own ICD-10 Web page show that
testing for hospitals should have started in October 2013 and continue through
this summer. Therefore, we are very concerned about a recent CMS notice that
identified only one week in March for ICD-10 testing, although we are
encouraged to hear that testing has been expanded. Testing only one week in
March is not adequate. The AHA urges CMS to expedite the testing process to
begin as soon as possible and ensure all testing is complete by the end of
June, so that providers, payers, and clearinghouses can resolve any issues
discovered during the testing and complete training well in advance of the
October 1 transition date.

In my written testimony you will see a graphic of the steps that we believe
are needed for adequate testing. While the graphic is specific to Medicare, it
also applies to private payers and Medicaid.

The graphic illustrates two key components that should be part of ICD-10
testing: testing for connectivity and for content. The initial testing approach
that many hospitals are using consists of selecting a representative sample of
previously paid claims and recoding them to ICD 10. If the claim passes the
front-end edits, it is then ready for the content evaluation.

In this step, the health plan will typically examine the diagnosis and
procedure codes along with the pertinent information on the claim to determine
how it would adjudicate the claim for payment purposes.

For inpatient hospital claims that are paid under a diagnosis-related group,
payment would be based on the DRG assigned using ICD-10 codes. Hospitals should
be able to compare the DRG assigned using ICD-10 to the DRG assignment on the
original claim. If the two DRG assignments are consistent, then the hospital
can feel confident that the coders have appropriately interpreted the medical
record and used the right ICD-10 code. If not, the hospital must investigate
the cause of the discrepancy.

To ensure successful transition between now and the end of June, the focus
must be on testing both connectivity and content of claims using ICD-10 codes.
The lessons learned from this testing period will allow providers and health
plans the opportunity to evaluate whether additional adjustments or
improvements are needed, and it would give them enough time to make any
necessary adjustments.

Medicare and other payers must also develop and share their contingency
plans for those providers who have difficulty in the transition period.

I would like to thank you for the opportunity to participate in today’s
discussion.

DR. SUAREZ: Thank you, George.

We will move quickly to Meryl.

Agenda Item: Professional Association
Perspective

MS. BLOOMROSEN: Good morning, or afternoon almost, I guess. My name is Meryl
Bloomrosen. I am the vice president of Thought Leadership, Practice Excellence,
and Public Policy for the American Health Information Management Association,
or AHIMA, and I am delighted to be here on behalf of our 71,000 members to
address the issues before the subcommittee.

For those of you that may not be familiar with AHIMA, I would just like to
say a few words. We’ve been around since 1929 and have been the premier
association of professionals educated, trained, certified, and working in the
field of health information management and health informatics. AHIMA has often
been recognized as a leading source of HIM knowledge, a leader in assuring that
health information is valid, accurate, complete, trustworthy, and timely. We
are a respected authority for rigorous professional education and training.

I would like to thank you all for inviting us to provide some information.
Denesecia, I would like to make sure that our acronym can go on your slide, and
we offer our 72,000 members and our component state and local associations to
assist you with nationwide training for all providers, particularly the small
physician practices that you mentioned. So I would like to follow up with you
on behalf of AHIMA and see what we can do to assist in that regard.

I would also offer our expertise and our members’ collective abilities to
help with the Medicaid implementations as well. We have component state
associations throughout the country, primarily one in each state or territory,
and then there are local and regional associations, and we would be delighted
to help you.

AHIMA and our members have been involved in many aspects of coding,
classification, terminology and standards and systems for decades. Many of us,
including myself personally, have actually lived through the implementation and
transition from 8 to 9, although the issues on the table back then were not as
significant or as profound and, I guess, as complicated as they are today. But
those of us who were around back then can testify that it can be done. We do
have some scars and bruises probably to show for it, but we are here, still
pushing the ball down the court, and in support of the implementation of ICD-10
on October 1 of 2014.

I would also like to mention that since the 1960s AHIMA has been a proud
member of the Cooperating Parties for the United States for the use of ICD in
classification, along with the AHA, the CDC, and CMS, and we do serve on the
editorial boards for ICD-9, ICD-10, HCPCS, PCS, and CPT. AHIMA also happens to
be the designated secretariat for ISO-215 health informatics and the
administrator for the US-TAG.

I don’t want to repeat some of the findings and issues and challenges that
have already been mentioned by the previous panelists. Obviously, we are
pressed for time this afternoon, given that we all have so much to say about
this important topic.

I would like to emphasize a couple of things on behalf of our members. That
is that we recognize that the cost of ICD-10 implementation, especially for the
smaller physician practices, has been raised as a significant challenge. We
would echo the comments that the previous panelists have said and suggest
strongly that CMS — and applaud CMS for your announcements earlier today
about the training that you’re making available, the resources that you’re
making available, and the end-to-end testing that you have described.

There have been lots of studies that have been alluded to. We cite several
of them in our written testimony. We would just offer an observation that in
terms of all of the various studies that have been done and those that are
still planned, I am not sure that there is agreement on what the word
“readiness” means in terms of getting ready for ICD-10. I think
there’s a gut feeling that we’ll know it when we see it, but we would just
caution that there are probably gradations in terms of readiness as well as the
ability for practices and providers to be ready. We support provider, payer,
and clearinghouse activities to that end.

There are a couple of risks that we’ve identified on behalf of our members
and the folks that they serve. Some of them have already been mentioned. We do
want to emphasize, and I would like to emphasize today, that we believe, of all
these risks, many of them can be mitigated — not eliminated but mitigated
— through thorough training and education, advance planning and
preparation. I am here to again reinforce some of the activities that AHIMA and
its members have been doing and our willingness to work side by side with the
industry stakeholders to assure that these efforts continue.

Significant implementation challenges have been identified by our members
and by numbers of stakeholders around the table. Those also relate to coder
education, clinician education, workforce shortages, and clinical documentation
improvement. Ensuring high-quality, comprehensive ICD-10 education is critical
to assuring coding accuracy and lessening the expected (decline in)
productivity of coders and clinicians.

We have observed during our ICD-10 training programs that coders and others
involved in the coding process are, in general, embracing the need to go
forward with ICD-10 implementation and are trying their very best to prepare
themselves on behalf of the folks they work with to develop and enhance their
coding skills to be able to code using ICD-10 in advance of the October 1
implementation date.

Clinical documentation improvement is in fact something that others have
mentioned this morning that is seen as a major challenge in the ICD-10
transition. AHIMA stands ready and offers training and support to help
transition to better coding/clinical documentation improvement.

I would like to mention some data on coder training. Since July of 2009,
AHIMA has conducted extensive ICD-10 academies for over 8,500 participants.
These academies train individuals who self-identified that they wanted to
provide coding training to others, a term kind of like train-the-trainer
concept. According to our records, in addition to the participants of these
academies, we currently have more than 6,000 active AHIMA-approved ICD-10
trainers. That is a designation earned upon successful completion of our
academy, as well as a proficiency exam.

Since 2010 we have also been working with a diverse array of healthcare
organization and payers. We have been providing private ICD-10 training either
in the form of train-the-trainer training or coder workforce training. Many of
these individuals who have completed the train-the-trainer coding have gone on
to train others in ICD-10 coding.

Again, as I mentioned earlier, we would be pleased to work with CMS and
other payers to see how these types of training academies could be leveraged to
assure that others who need to be trained or want to be trained, that can be
done in time for ICD-10 implementation.

There are lots of comments that we could make about computer-assisted coding
and clinical documentation improvement. Those you could find in my written
testimony.

We would also urge CMS to consider those types of tools and resources. I am
not totally sure, and I apologize for not knowing, to what extent we could
co-link to each other’s Websites, but we would like to make available the
resources that we’ve got to the members that might come up on your Website.

We agree that communicating with non-covered entities is an issue, and we
urge that healthcare providers discuss ICD-10 transition plans with non-covered
entities with whom they do business. We do have a resource entitled Universal
Use of ICD-10 CM PCS in the U.S. to assist in communicating the value to
non-covered entities to transition to ICD-10, and we would be pleased to make
that available.

We agree and acknowledge that planning for sufficient testing with external
partners prior to the compliance date is essential for achieving a smooth and
successful nationwide transition. We believe and agree with the issues related
to whether or not or to what extent vendors are in fact ready, and we urge CMS
to urge the vendor community to become as ready as they can be in as quick a
time period as possible.

To summarize and to be mindful of the time — it’s a red light I am
seeing in front of me — AHIMA is committed to helping the healthcare
industry successfully transition to ICD-10 on October 1, 2014. In addition to
the training I mentioned earlier, we have produced a wide range of resources to
assist with this transition and implementation, and we would be pleased to make
them available not just to the HIM community but to other sectors within the
industry.

We would like to mention — and, Rob, maybe you are aware of this —
that we have actually had several of our members help produce training videos
for CMS. I think they are available on YouTube and elsewhere, and we are
delighted to have had that opportunity and look forward to working with the
stakeholders to further this endeavor.

Thank you.

DR. SUAREZ: Thank you, Meryl. Thank you very much.

Jill?

MS. VENSKYTIS: Hello. I will just briefly introduce myself, since many of
you do not know who I am. I am representing PAHCOM today, Professional
Association of Health Care Office Management. I am on the national advisory
board for 4 years now. I have also worked with a local chapter for 11 years. We
meet with managers monthly. I am a practice manager who is in the trenches
right now for small office practices. I have been in the healthcare industry
for 26 years.

To begin, I am very appreciative for the invitation to participate in this
hearing. I do have a few slides.

PAHCOM represents small physician office practices across all specialties.
Thousands of solo and two-to-ten group practices still exist across the
country. It is essential to get buy-in by these physicians who still own small
practices and who play different roles. Some physicians want to take the lead
and be involved in the entire process and some not.

It is important for providers and managers to be in sync. Practice managers
continue to play an integral role in facilitating full office transition and
compliance.

PAHCOM did participate in CMS ICD-10 Readiness Assessment Survey, with
respondents representing small practices from across the country. These are
just a few of the states I have listed on that slide. There were varying levels
of awareness. Nearly 100 percent of small practices are aware of the ICD-10
requirements. Only .8 percent admitted to being unaware.

However, there are varying levels of awareness of and familiarity with these
requirements. Only 23 percent said they were very aware and very familiar. When
polled, a concerning number of respondents reported unknown expected dates due
to begin external testing, 31.3 percent. Small practices are still dependent,
as previously mentioned, on their vendors. There is a disconnect between
vendors and the practice.

The survey reveals moderate confidence within the industry. Recommend
improved confidence in small practice industry; their reaffirmation; continue
the massive education, outreach, and guidance; provide a feeling of
hand-holding before, during, and after the implementation.

Online training continues to prove invaluable. A startling number of
practices admit to not starting key implementation processes with training and
billing update software, things like that. Websites, implementation guides, and
online training continue to prove to be valuable resources for offices. Fact
sheets and face-to-face training were also very high.

As you just mentioned, training videos are fantastic. The PAHCOM YouTube
channel contains many detailed ICD-10 training videos. We hope to gain some
more. One of the videos on there has received over 7,000 views. Some of the
other videos posted are already up to 4,000 views.

Continued resources. We also send “eNote blasts” with the latest
updates. That is how the survey link was distributed. It is fantastic, once you
get to the end of that, that you are then connected to more CMS resources.

PAHCOM.com offers a CMS resource page providing additional ways to navigate
to CMS small practice guides. This is considered a go-to place for small
practice management guidance. It is non-intimidating. It directs you to
starting places on the CMS site. Then most will continue to navigate on their
own once they are there.

Additionally, practices are asking for a live person to call with questions
and for troubleshooting support. Yes, live support is a dying breed but still
requested whenever they are faced with uncertainties. I agree automation is
more efficient and personally like the online chat options.

Additionally, practices are asking for assistance with vendor readiness and
upgrades, in-house chart audit guides, more on-demand Webinars, additional
training tools for physician documentation.

Concerns remain among small office physician practices for funding ICD-10
training and transition. Still concerns for disruptions in the business of
delivering care, cost of software upgrades, lack of provider time to train and
educate, and loss of productivity during that time, physicians’ resistance and
physicians’ understanding. Yes, there are so many moving parts.

There are concerns for claims rejections and denials, insufficient time to
implement along with meaningful use, PQRS, patient-centered medical homes, ACA.
There is a feeling of no more absorption in the sponge of change. There is a
fear of insurance company readiness.

Additional suggestions for assisting small physician office practices:
additional Website resources and training videos, presented in different ways
to appeal to all the different learning styles, offered at different levels of
implementation; CMS trainers dispatched to PAHCOM chapters, focusing training
on both the physicians and the managers. It will not only offer a finger on the
pulse of progress but it will also send the message of we’re here to help.

CMS presenter at national conferences. Ours is in October. Provide
troubleshooting guidance. I think that panic may set in for those who thought
that they were ready but find that they were not. So plan to be there for
guidance, reassurance, and post-implementation issues.

Facilitate vendor and provider communications. Small practices are highly
dependent on their vendors. Talks are just now beginning about expected system
changes, et cetera, in these small practices.

Maybe allow a grace period for submission of ICD-9 and ICD-10 by providers
to allow real-time trial and error. If the claim is denied under ICD-10, then
allow resubmission under ICD-9 and allow a practice time to figure out where
their problems lie, maybe a soft go-live date or a progressive format — 20
percent of claims, then 50 percent — things like that.

I thank you for allowing me to contribute some comments.

DR. SUAREZ: Thank you, Jill. Thank you very much.

Debbie.

Agenda Item: Clearinghouse Perspective

MS. MEISNER: Good afternoon. I am Debbie Meisner with Emdeon. I know many of
you, so I won’t go into who Emdeon is — I think most of you are familiar
with us — other than to say that entering 2014, Emdeon is now processing
over 7 billion healthcare transactions each year. So we have a broad reach to
over 700,000 physicians, 81,000 dentists, pharmacies, 5,000 hospitals, et
cetera. So we do have a very broad reach in the industry.

This is just to give you a perspective on who we are reaching in our
communication and how we are handling things. Today I want to focus on our
remediation efforts; the challenges that we’ve faced, as well as our customers;
some of the strategies for helping our customers through this transition; our
testing approach; and key messages to our customers.

One of the things I do want to point out as I am going through this is I am
going to try to be clear, because I think there has been some confusion in
discussions, when I am speaking from the clearinghouse perspective versus
Emdeon’s products. I think those of us in this clearinghouse industry all have
our products that help us support things that are at the hands of the
physicians versus the clearinghouse. So I am going to try to make sure I am
clear in discussing which ones I am talking about.

At the clearinghouse or our Emdeon Exchange, we are fully remediated. We did
this as part of our 5010 migration. We made sure all of our internal processes
were ready. Our product that we use, or several of our products, will be fully
remediated by the end of Q1 of this year. We have worked directly with our
channel partners, who are the vendors that sit in front of us, and our payers
to provide education on what we are doing.

We have a HIPAA Website that we call the hipaasimplified.com, which is very
actively hit by the industry as a whole. We have on that Website our playbook.
We put that out very early in the process and made sure that our customers were
aware of it. We published this in October of 2012 that clearly stated what
ICD-10 was and what the expectations would be.

In an effort to gauge the readiness of our customers, Emdeon does analytics
on the transaction formats that are exchanged with our trading partners. I know
there is some concern of clearinghouses taking proprietary formats, and will
they be ICD-10 ready. At this point in time, what we are finding is 96.78
percent of all of the volume coming into the clearinghouse for professional
claims is in a 5010 format. There still remains 3.2 percent that are in legacy
formats, either 4010 or NSF or paper print image or proprietary formats still
coming in. On the hospital side, we are seeing 99.76 percent that has moved to
a 5010 format and 2.4 percent that still remain on legacy formats coming into
the clearinghouse.

It is important to note that although these transactions are coming in in
the 5010 format that can accommodate ICD-10, it doesn’t necessarily mean that
the applications that feed into the 5010 have been remediated. So the
practice-management systems still may be feeding ICD 9, which 5010 is capable
of carrying. So we need to make sure that there isn’t a false sense of security
that people are moving to 5010. However, we are very encouraged that this
number is where it is right now.

It does present a challenge to us in determining what the actual readiness
is of providers, since ICD-10 is going to be “big bang” point in
time, unlike other transactions where we’ve been able to help you folks with
what is going on.

Some of the challenges we’re seeing you’ve heard about. I am not going to
belabor them. They are dependent on their POMIS systems to be delivered to
accommodate test data. There is an expectation that payers are going to provide
accurate payment outcomes during testing, so there is that expectation that may
or may not be there. Again, and we will hear later this afternoon, the
non-covered entities are also a challenge.

Our strategies. We are actively involved in our outreach and education. We
work very closely with the SDOs. We were involved with the CMS end-to-end
testing model. We are positioned to participate in the CMS testing week. We
have been announcing this, so I was a little concerned to hear that providers
are not getting this information. It is my understanding that since December we
have been putting this out on a weekly basis, telling our providers,
“Come, we’re ready.”

Our approach to this is going to be — this is an asynchronous
implementation. The providers are relying on their software getting delivered,
and they are not going to know when the payers are ready. So we have provided a
portal for them to come in, deliver your claims to us. We’ll look at it, make
sure it is format correct and that you are providing ICD-10 codes correctly,
and we will give the providers the clearinghouse feedback.

We are going to store those claims. When payers are ready, we have an
automated process called ON24/7 where the payers can come in and pick up any
claims that have been natively coded on their behalf. So providers can send us
all their claims. If you think of the clearinghouse, we are getting claims for
all of our payers on the back side. So these can be stored, and when the payers
are ready, they can come and pick it up.

Unfortunately, the challenge that we’re facing is, although we have made
this announcement in December that we would be participating in CMS’ program
— and please send your claims now, don’t wait for that week, we can store
them and be ready to give them to the MACs during the week of testing — we
have to date received four claims. This is alarming to us. We have been
continually sending this information out to the providers to let them know.

I’ve talked about this. The approach that we’re taking, it is unlimited
volume. They can send as many claims in to us as they want, whenever they want.
What we are finding is payers are going to be limiting, so they can come in and
take however many claims they can handle in their test portal that had been
designated for them.

We did participate in a pilot test with one of our large payers, and we are
engaged ongoing with our account managers, working directly with the larger
payers, making sure that we all have our milestones and that we are ready and
all singing the same song.

Our product is going to be ready to begin testing through this test portal
that we have set up, this automated system. We also in the Claim Master —
so I’ve heard this — we are going to be providing feedback to the
providers, letting them know what their top rejections are around their
testing.

In addition, we have created in that product a tool that will help them,
that they can customize for their own, to the point of where some of the
specialties have lists of here are your critical codes to be testing for in
your specialty. They can customize their pop-up screen to do their ICD-10
coding based on their business practice. So the tool that sits at the provider
desk is going to allow that type of education for them.

Our key message is that we believe — and so this is where the product
versus the clearinghouse — we believe that a clearinghouse cannot up-code
or down-code for the providers. It is critical to have the medical records to
make sure that you’re selecting the appropriate code. That does not mean it is
not appropriate to up-code or down-code at the desktop where the providers have
control of it, where they have the clinical information. But as the
clearinghouse part of our business, we believe that we should not be doing
that. We’ve been pretty vocal with that.

Not all of our trading partners are going to be ready, and people need to
understand that. As much as we want, it’s important for us to have these
contingency plans and communicate what is your contingency plan if, on October
1, you install your ICD-10 programs and something doesn’t work. What is your
backup plan? And make sure that your trading partners, your clearinghouses and
your direct providers, understand what your backup plan is going to be, and
providers, make sure you’re communicating to your trading partners if on August
31 or September 1 you still have not received your software. What is the backup
plan for you? Do you know how you’re going to get claims to your payers and how
they’re going to get paid?

I have been doing this for 40-some-odd years. I hate to say that. But I have
never seen anything get implemented without a little bit of a glitch somewhere.
So always make sure that we have contingency plans, and what are they? That’s a
big communication that we’re going out there.

We ask that lessons be shared as people test this. What did you find out?
Were there some codes that caused more problems than others? We have (not) yet
really seen any good communication on how things are really going with what
you’re doing, and so we are concerned that the testing that we are doing may
provide a false sense of security, so we are also encouraging our providers to
make sure that they keep track of what is going on after the implementation
compliance date. How are things going? Did you see an impact to your cash flow?
What was wrong? What do you need to adjust? Don’t just put it in there and
think, okay, everything went well, nothing blew up, everything is working
great. They do need to monitor, and this is a message we are clearly giving to
our providers.

I thank you, and we would be glad to take any questions.

DR. SUAREZ: All right, thanks.

Tim, please.

MR. MCMULLEN: Thank you, Walter.

Good afternoon, everyone. My name is Tim McMullen, executive director of the
Cooperative Exchange, which is a recognized resource and representative of the
clearinghouse industry. We are committed to promote and advance electronic data
interchange in the healthcare industry by improving efficiency, advocacy, and
education for industry stakeholders and government entities.

On behalf of our 30 million clearinghouse members — well, everybody
else was throwing a number out, so I thought, oh, well — along the lines
of helping with education and advocacy, I wanted to let everyone know that to
help facilitate ICD-10 testing during the remaining transition period, the
Cooperative Exchange will gather information on payers regarding their testing
parameters. There has been an industry concern about the lack of knowledge on
what to expect in testing from payers, and this will be a public one-stop
resource on the Cooperative Exchange’s Website. We actually spoke to Denesecia
Green about that yesterday, and they have been willing to help on that.

Speaking of that, I wanted to publicly acknowledge how wonderful Denesecia
has been in making herself quite available to us and others and really being a
great voice for CMS.

There still are a number of issues that CMS, commercial payers, vendors, and
providers must focus on before the compliance date. Overall, we feel that the
due diligence for ICD-10 implementation and readiness of all trading partners
for end-to-end testing are still the cornerstones of our concern.

Again, for CMS, during 5010 it was clear that the MACs were affected by
system updates for their front-end systems and that their due diligence in
preparation, internal testing of updates, and selected beta partner testing was
not conducted prior to release of the software updates and go live. So as
Debbie was saying, the testing gave us all a false sense of security. When
actual production came into account, it was a disaster.

But we did share some of our concerns with Denesecia yesterday about CMS.
Some of those were the technical and operational remediation and readiness; the
DRG shift analysis, especially in the high-risk categories; the shifts and
problematic code identification completion; testing and remediation of systems
and processing; identification of impacts of the DRG groupers Version 31
product updates still outstanding, the status of those product updates; the
readiness of external testing in depth. Again, we were happy to hear today
about the end-to-end testing.

Another concern of ours that we saw in 5010 was the addition of personnel
and the need for a lot more folks, telephone lines, and so forth, to be able to
help whenever those issues occur.

Have the communication plans internally and externally been enhanced to
ensure all personnel and customers are notified of any changes, problems,
issues, et cetera?

To echo what Debbie was saying about contingency plans, at ASC X12 we held a
clearinghouse caucus. One of the interesting — somebody mentioned this; I
don’t even know who it was — but they said, “Does CMS have a
contingency plan if things go horribly wrong on their end?” So I don’t
know.

We also have concern, of course, with commercial payers. Large payers have
been working on their initiatives for 2 or 3 years, as we heard about the
hospitals, but of course there are the smaller payers. How are they getting
along? Are they doing their due diligence?

Commercial payers differ in their business modes, number of types of lines
of business, and with the complexity of the integration of ICD-10, payer
systems are very complex and accommodate many lines of business, so it is
really extremely difficult to identify and run every scenario during testing,
because there are just so many lines of business out there.

Again, with commercial payers, remediation — have approaches and
complexities been identified to include shifts in systems and work flow? Again,
with commercial payers, the same thing about ramping up your call centers. Are
they doing the job of opening up new phone lines and things like that?

Have their test plans been published? Of course, this database I was talking
about — you can go to the Website and check — we will have payer
testing plans. When are there going to be the release edits? That also will be
on their Website. And have their communication plans internally and externally
been enhanced to ensure all personnel and customers are notified of changes,
problems, et cetera?

Vendors. We heard from Rob about the vendors getting ready and others. You
know, their software releases, most of them say that in the spring and the
summer. Well, that is going to cause a bottleneck of testing. That is just
going to be a nightmare for clearinghouses when everybody knocks on our door on
September 1 and says, “Hey, we’re ready to test,” along with 60,000
other providers.

Getting to the providers, it was an interesting point that Rob made about a
lot of providers haven’t heard from the clearinghouses what is going on, and I
guess maybe we are not doing our due diligence of going back to the providers
and saying we don’t have anything to tell you because the payers aren’t telling
us anything.

Providers are upgrading as many as one to 44,000 software programs in their
organizations to accommodate ICD 10. With that many platforms, there are a
million points of potential failure. So providers must understand their due
diligence and identification of all those points of failure. Again, like
everybody else, we are very concerned about the provider readiness.

But talking about the provider readiness — and, Jill, I definitely want
to get your card, because WEDI and the CE are going to be giving a Webinar on
Friday on sort of giving providers an opportunity on how to prepare for ICD-10.

One quick thing that we’re offering as a suggestion is claim tracking
identification. A claim tracking ID would create a true benefit to all EDI
stakeholders. This tracking ID would be assigned to the primary payer for each
transaction within a claim batch. The claim is then sent, say, to a secondary
payer like Medicaid. That same tracking ID continues through all the
transactions throughout the life cycle of the transaction. It is written in the
837 at the submitter loop. It stamps the claim similar to the ICN number
assigned to a Medicare claim.

So that is coming from the clearinghouse standpoint. Thank you.

DR. SUAREZ: Thank you so much, Tim.

All right. As I said at the beginning, our subcommittee is not well known
for keeping the time. We are, of course, way over our allocated time for the
session. What we want to do is give you a full 40 minutes for lunch, and we
will come back at 1:30, so that will probably mean 35 minutes. We are going to
adjust a little bit of the time.

Right after lunch we will invite you all to please sit on your spots and we
will have at least a good 40-minute discussion. From that point on, we are
going to adjust the schedule for the remainder of the day. But we do want to
have at least a good 40 minutes for questions. We have a number of questions
from different.

Thank you again for the testimony, and we will look forward to the
discussion right after lunch, and we look forward to seeing you all at 1:30
back here. Thank you.

(Recess for lunch was taken at 12:53 p.m.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A F T E R N O O N S E S S I O N

DR. SUAREZ: Thank you so much again for the testimony on ICD-10. First, I
want to acknowledge a couple of new people that have joined us. I know there is
a person that is new to the panel. Larry, do you want to introduce yourself?

DR. GREEN: I am Larry Green. I am a member of the full committee. I have no
conflicts.

DR. SUAREZ: Thank you. Do we have anybody else that has joined on the phone
that has not introduced themselves yet? Nobody. Mari, do you want to —

MS. SAVICKIS: Hi. Mari Savickis, AMA. I am sitting in for Nancy. She caught
the stomach flu so we sent her home.

DR. SUAREZ: I do not think it was ICD-10.

MS. SAVICKIS: It was totally ICD-10 and I am going to need a diagnosis code.

(Laughter)

Agenda Item: Q&A Session Panel 2

DR. SUAREZ: What we wanted to do was have a few Q&A with the
subcommittee on many issues. I think the bigger panel gave an opportunity to
show off a picture of generally, where things are with respect to the
transition process and what are priorities that we have ahead.

I will start with just a general question to the group. I know I had a
question also online from one our members of the subcommittee, which I will
pose as well. My question is probably one that everybody has in mind and some
comments have led to that. What are the plans really to do or how are
organizations going to handle the reality that is going to happen October 1
when people have to use ICD-10, but they are not going to be ready, not all of
them? They are going to still be exchanging transactions even though it is not
going to be compliant, sending transactions with ICD-9 codes. What are the
actions or the approaches that are going to be taken by organizations? I heard
a couple.

There is certainly the expectation that a dual system is going to have to be
in place for a few months, maybe several months after the deadline. What are
the actions and really approaches that organizations have in mind with respect
to certainly what seems to be a reality that is going to happen after October
1? We will start with Debbie.

MS. MEISNER: So from a provider perspective, our provider products, they
already realize that they are going to have to support both 9 and 10 to do
workers comp and non-covered entities and run out claims. Their contingency is
to be able to continue to code 9 if they need to.

From the clearinghouse perspective, what we have made clear to our customers
is our contingency plan is to executive your contingency plan. As a payer, you
need to communicate to us if you have a glitch and you need us to continue or
for some reason you have communicated with your providers and you are worried
about the rejection rate that you are going to get. If you say do not turn the
edits on, continue to send us 9, that is what we will do.

If you say turn my edits on for October 1 and reject claims if they come in
with a 10 code, then that is what we will do. We feel our role as a
clearinghouse is to execute the contingency plans of our customers. We cannot
do anything else. We certainly cannot up or down code without clinical
information. We have set up our clearinghouse edits to be able to be configured
and turned on and off if midway through the first week, the payers are saying
they are rejecting a large percentage of their provider customers and they do
not want to do that. Then they can just shut the edit off or turn the edit on,
whichever way they want to go. That is our contingency plan.

MS. BLOOMROSEN: Just a thought maybe for point of clarification. It seems to
me that regardless of whether people are compliant or noncompliant or ready or
not ready, there is going to be a time period where ICD-9 and ICD-10 are going
to overlap for some period of time just based on claims adjudication and coding
processes and doctors and other providers’ completion of clinical
documentation. There is probably some time period. I do not know what it is. It
may vary by provider. Since I am not representing providers, I would not want
to speak on their behalf. But I would think we might want as an industry to
think through how to help providers understand that the switch may turn on or
off on October 1, but nevertheless there is going to be dual coding going on
for a period of time just under normal circumstances, “normal”
whatever that is. Maybe there needs to be some resources that we could — and I
would be happy to explore that from an AHIMA perspective if we could be of any
help.

MR. SOONTHORNSIMA: Do you mean beyond date of service?

MS. BLOOMROSEN: No. I am just thinking — for treatment that occurred prior
to the date of service. I am talking about that, not just to have a long period
of time.

MR. SOONTHORNSIMA: I want to clarify. What I heard earlier is that there
will be run out, but run out is driven by date of service. It is not processing
date of service after October 1 that you can do dual. I do not think that was a
context. Could you clarify that? Thank you.

MS. BLOOMROSEN: I did not mean to confuse it any further. I think there
might be confusion out there that it would be helpful for us as a group for the
committee and for the stakeholders to assist in making that clarification so
people understand that point.

DR. SUAREZ: Any other comments from providers or payers about what is going
to happen?

MS. MEISNER: Walter, could I inject in that for a second? I think that the
critical thing is going to be how is this going to get communicated throughout
the industry and this is some place — if we had a one-stop shop that I have
heard talk about where people could say let me go and see if this payer has had
to revert back to 9 and I have to code as 9 if I am provider.

How will the providers know that the payer ran into a problem and had to
pull their code out and back off for a few minutes? And maybe the payer’s
contingency is just hold your claims for five days until we can fix this and we
are going to put it back in again. How can we have that — is here a place
where we can capture that information where payers could report to the
providers if they are having any issues with their implementation or the
clearinghouse or the providers could report in that they are having a problem
with their software to let people know? Is this something you guys could
explore to give a one place for communicating any issues following 10/1?

DR. SUAREZ: I think that is one of the opportunities I see is really
ensuring that there is a strong communication mechanism and a facilitated
mechanism to communicate. I mean health plan and providers and others, they all
should think about how they communicate this and maybe have a yellow button to
call it some way to talk about blue buttons and other things. A yellow button
on the screen that says ICD-10 and you just click on it as a provider and see
what are the latest things about ICD-10 or something like that.

MR. TENNANT: First on Debbie’s point, we have actually talked about that at
WEDI about having WEDI create a repository of readiness, which would include
payers, clearinghouses, and potentially vendors. We have some buy in from some
of the payers. Again, it could be a living type of document. You could have the
readiness and then once you transition, you could have the contingency
planning. But that raises an issue. The dual coding raises an issue. Let’s just
say Rob in his wisdom decided to move in that direction. Probably you could
make it mandatory on the commercial plans. It would be an option for them. Now
as a provider, again, different from all of the other HIPAA transitions, you
are sitting in front of your patient. You have almost got to know not just what
health plan they are with, but what particular product they are using because
each product will have not only potentially a different contingency plan, but
they could have a different set of payment policies and a different level of
specificity. No one is talking about this. It revolves around what the
physician documents and what code you select. If health plan A says do not
worry, dual coding is fine, you can put in a 9 code. But if it is another plan,
then you are out of luck. There has to be an industry agreement around it. It
cannot be by payer or else it is going to be a disaster.

From the provider perspective as well. As the old saying, cash is king. The
contingency plans are all revolving around making sure that the operation
continues. What we are telling our guys is assume the absolute worst in every
link in the chain. If your coder is not ready, whom do you have on staff? Maybe
you have a second person who is not maybe as expert, but could fill in at a
moment’s notice. You are telling your staff no vacation time around October 1.
As strange as it sounds, you guys say nobody is going anywhere.

But also you have to realize that even a small practice, let’s say five
physicians, their operating budget for the month might be in the million-dollar
range, which means they need contingency plans that include lines of credit and
they need cash on hand. You say no problem. But today’s environment is
different than ten years ago. It is not as easy for a physician to go to the
local bank and say I need a million-dollar line of credit. They need to add
that to their long list of people to talk to find out can we get that line of
credit. Is it accessible? If not, what are we going to do?

And then finally, the idea is what if you get to the point where the vendor
just says I am sorry. We tried. We just could not make it. Or yes, you are
going to get your upgrade and it will be ready November 1. You have to have a
backup plan. It is easy to say just go down to Best Buy and get yourself some
software and install it or use the CMS one. It is wonderful. Well, that is for
CMS. That is not necessarily going to work for other payers. And to think that
a provider is going to get on a DDD portal and enter in all their claims is
just not realistic. It is going to drive down productivity. We have to be
thinking again about trying to push the vendors harder than we have and again
we hope that if we can get the certification process off the ground, which will
be a catalyst.

DR. SUAREZ: Thank you. Any other comments?

MS. SAVICKIS: Having also been through every single HIPAA implementation,
our experience has been that the private payers seem to be a little more fluid
with the way that they treat the providers, at least the physicians. That has
been our experience.

Medicare has been a little bit more of a challenge. I think one of the pleas
I would make today is to have the mac staff up on the contractor service lines.
We need a huge bandwidth. Open it up. Train them early. What is going to happen
is they are going to flood your lines. And when they are done flooding your
lines and not being able to get through for two hours, that is when they start
calling Rob and me. It is really fun because we get 30 calls a day and then we
start developing complaint forms and we push them off to OESS and then we get
Gladys involved. It is much more of a blunt way to address these things.

We pretty much have a work around for this because they will bottleneck and
so we will feed them. I think I would like to get Humana’s information because
we need to make those connections on the private side. I know how to navigate
Medicare pretty well, but do you really want everyone going through Rob and me?
It is sort of like a funnel, but it is really not the best way to approach it.
I think if you can staff up on the mac lines and just know you are going to get
a tremendous flood and maybe make them open longer. Don’t tell people to call
Sunday at four in the morning. That is not helpful. Do you see what I am
saying? Just open them up.

We will continue to work with you guys to try and — this is the only way we
know how to do it. I have been to this rodeo a number of times. What would a
doctor do? They would literally stand on their head to do whatever it takes to
get paid. I am not going to lie. If it means dropping a paper, it is the
worst-case scenario, they will do it. If it means using — I would argue this
is not necessarily a solution, free billing software, assuming that the problem
is not with Medicare because it does not matter what software you have. If the
problem is on the Medicare side or the other payer side, you just cannot get
through. But they would do whatever it took. I am not the first point of —
they do not pick up the phone to us. We are like a moment of desperation like
when they cannot figure out and they have called their congress person. A
little it kind of comes to that. I think that to the degree that we can have a
little bit more — if there is maybe a technical assistance line available for
Medicare because we are going to have problems. I think it is just making sure
that that bottleneck is just not so narrow.

MR. ARGES: A couple of points. Just going to pick up a little bit with what
Meryl was saying about items that are in the pipeline. Obviously, items that
are for services that occur prior to October 1 often times have to be
resubmitted. They may have to be resubmitted after October 1. Consistency of
policy in terms of how you deal with that is important.

From a coding perspective, you have already coded the claim once. An I-9
code even though their claim is for services prior to October 1 should be
processed with I-9 codes because that was in effect at the time. And a health
plan should have the capability of taking it in as an I-9 code and not
rejecting it because of that. That is number one.

Number two, I was encouraged to hear about tools that might be available
from CMS. I am not sure direct data entry is the best way to deal with it, but
I would like to see more of that sort of thing occur. If I ran the world, I
probably would say if you did not do testing early enough, you should basically
add six more months of dual support as a health plan until you basically
demonstrate that you have the capability of handling that volume of test
claims.

I am glad to hear some — were talking earlier about maybe some sensitivity
of supporting both because I think there are going to be some very small
providers who for whatever reason are not going to be ready. The question is
what type of tools are there going to be.

But the other thing is obviously diagnosis codes really feed a lot of
information for a lot of organizations. Medicare uses them basically to
reevaluate how they carve up inpatient DRGs at a later date. The question is a
window. You have several months and then you have a new inpatient PPS rule
coming out the following year in mid-May. What type of data are they going to
use in the following year?

The question still is reliability of data. I am sensitive to the
productivity issue because for our purposes, the date is the date is the date
and dual coding is expensive. We either make the switch and hope that everybody
is ready at that point in time, but I also think there needs to be some
sensitivity provided with tools either to allow somebody who is not ready the
opportunity to convert it to I-10 code as part of that process.

DR. SUAREZ: Thanks George. Jim.

MR. DALEY: From WEDI’s perspective, we have heard all sorts of stories and
of course, no one wants to say that we plan to violate the regulations. They
are all going to only use the proper codes at the proper times. But a lot of
organizations are saying what if something changes. If they can, they have
built in some capabilities to go with a 9 or 10 depending on how the
regulations work at that point in time.

Others have said we have things like portals, work arounds, things like
that, not just the payers, but some of the clearinghouses or vendors provide a
capability for a provider to go in there and either provide supplemental
information about what the code might be or to actually select the code from
potentially a general list or some other list to say I know I sent you
something with a 9 — business associate. I would like to fix it. Give me some
options and they pick the right codes — really submitting 9s. They are
submitting a 10 when a claim actually gets generated. There is a whole variety
of things people are looking at.

I know in some payers, they do not even use a diagnosis for the physician’s
claims. It is just a CBT-based reimbursement. It comes in. They may say it got
some kind of a code whether it is a decent one, bad one, whether it has Greek
letters in it or whatever. Just ignore it and say bad edit, but I will pass it
through so not really using I-9s. They are just not even using it period. That
may be an actor for some of those as well. There is just a whole gamut.

I think it depends on the entity itself. It depends on the type of claim
coming through. There are so many factors in there to say one type of
contingency is the right way to go is not really the answer. There is a whole
bunch of potential contingencies out there, as we say risk mitigations. A lot
of them are ugly. There is going to be some pain in here, but I do not think
there is a perfect solution that says this is the way everybody can do it and
it is going to work perfectly. We are hearing a lot of stories especially
outside of public meetings.

DR. ALBRIGHT: I am probably just going to summarize here, but just to
reiterate what has already been said first in terms of the idea of a place
where health plans can go and talk about their policies with regard to
preauthorization and other questions come up with ICD-10. I think WEDI’s
success initiative is a great place to start. It comes from industry. CMS is
partnering with it. And certainly, that is an excellent fix for that.

And then in terms of risk management and mitigation, risk management is
things that we think that we can control and that we can have a direct impact
on that decreasing the risk. Risk mitigation is doing what we can. We think
about this daily. One of the risks out there is providers not being ready.

Just to summarize, some of the tools we are thinking about for risk
mitigation in terms of that risk which are already available are things that we
have already talked about. Going to paper claims, the portals, and the billing
software. AMA has been mentioned. Advance payments. We are investigating that.
Certainly, the policy and advanced payments right now is that if it is boiling
it down, if it is CMS’ fault, then certainly advance payment is an option to go
for.

Beyond that, in terms of it was a provider who could not do it or a
provider’s vendor who could not do it or whatever the case may be, that is a
little bit difficult. I probably do not need to reiterate this. CMS is the —
we are taking care of taxpayer’s money. There is the philosophical wall that we
have to steward. We are the stewards of the taxpayer’s money. There is your
philosophical wall. Nevertheless, we are exploring that as an option and seeing
what we can do that regard.

I do want to say what is pretty much off the table — certainly, delaying
the date is off the table. I am just saying that in all of our discussions of
risk mitigation at every level that we are discussing this, this is never
brought up. Delaying the date is never brought up.

The second part of that is the concept of dual processing. I would say as
both a regulator and as CMS, the payer, it is pretty much off the table because
if you hear about what is being talked about, Rob made good points. We are not
helping the transition at all by dual processing if only 10 percent of the
plans are doing it or if only CMS does it and nobody else does it. That just
confuses it and it will push off any successful transition.

That idea of ICD-10 switching on a date of service difficult though it is
there has been many discussions at this table for the last eight years about
why it had to happen that way and why you cannot fold things in from a regional
standpoint or fold things in from a date standpoint. Enforcement discretion,
dual processing. It is just not a viable option because of the cost and I think
Sid could probably talk about that. The cost involves. And that it does not
actually help the transition.

I think what we are looking at is risk mitigation and looking at as many
different tools as Jim alluded to. Many different tools as we can get to if we
come to day one and provider is not ready.

I think what Rob pointed out is actually a great reason why we should get
out and advertise these tools because these tools are not a lot of fun. If you
say it is all right. October 1. You do not have to transition to ICD-10 because
you can do all your stuff on paper. Hopefully, that is frightening enough to
say let’s save some time here and these are the mitigating factors that I can
use, switch to paper or start to feed one by one through a portal. I think we
need to talk about that. We need to advertise it and say here are the things
you can do if you are not ready on October 1. I think that would actually be
effective in pushing people that way. Thank you.

MR. HEBERT: I would like to enter into the public record that my new BFF is
Matthew. I grew up in large-scale integration and six-sigma world. The way you
ring down problems is to do it quickly because if you spread them out, they
basically clone new problems. I think for this industry to take on something
this aggressive to embark on any strategy that would elongate our ring down
time is a very painful and the costs are probably not calculable today. I
suggest we stay as close to our plan as possible, avoiding some catastrophe
that we cannot even probably speak of here. Staying on the date I think is an
imperative.

Secondly, from a small physician perspective, Jim Daley has an outstanding
point. We use the diagnosis code to validate the benefit. Beyond that, the
payment is based on the service content, which will be a CPT, rev code, HCPC or
whatever. I do not see the payment stream at risk for the professional side of
the house if we can get a valid diagnosis code.

The third observation I will make is a physician is not dealing with 185,000
combined codes. He is dealing with a set that is specific to his line of
business. Most practices that I have been in as a consumer have some kind of
tick sheet. You go in. I have a cough. I have a fever. Check, check, check, and
it is coded. That is really the problem that we are dealing with for a lot of
the smaller practices. I think that is very manageable. To turn it into
something where we are trying to assume what might have been met in order to
get things paid, not based explicitly on the codes submitted to us, is probably
the wrong strategy.

Then my last comment is it is always more desirable or at least it feels
better to say we could just delay a little bit. Delays a little bit on things
of this magnitude turn into delays pretty extensive. In the payer world, in our
world specifically and we only have two adjudicators. There are other payers
out there that have many more than two.

We are dealing with somewhere in the vicinity of 30 million codes that are
embedded in our systems that are configuration items. Either it defines a
benefit plan. It defines a contract carve out or some edit. I am sure CMS has a
similar situation. To keep those current in a dual mode is absolutely not
practical.

We may conclude that it would be in everybody’s best interest to prolong the
pain, but quite frankly very quickly, payers will not be able to effectively
correctly calculate. It is going to be insidious. It is going to be a slowly
atrophy of the capabilities. It is not going to be something that is going to
be overt and immediate. My recommendation is that in our current strategy is to
follow CMS guidelines and look at every element of our organization where we
can put in a contingency plan or a specific set of business conditions. That is
what we are doing.

MR. SOONTHORNSIMA: Actually, what I was going to ask Matthew already took
care of. I was going to ask let’s get rid of some ambiguity. What we are not
going to do. I think, Jim, you nailed both. We are not going to extend the date
and we are not going to allow dual processing for 9 and 10.

I will flip the question around and say then what specifically might we be
able to do to address those smaller practices. I have heard from you, Sid, and
Jim that a lot of these practices are professional providers. They are building
using CPT today by and large. However, there are some. If we can be a lot more
specific that way we can come up with a contingency plan for those who are not
going to make it as of this point whatever percentage is. If their vendors are
not ready, they are not going to be ready.

Therefore, the contingency plan — I would love to hear from the panel what
other specific things that we could do for those providers who are not going to
be ready. By the way, I am not sure training is — you keep talking about
training and training. I think people know how to spell ICD-10. At the end of
the day, it is just not — maybe there are some more specific things that we
can do for those providers. We would love to get some guidance around that.

MS. SAVICKIS: I have a comment about the advance payments. At the risk of
beating a dead horse, but I will do it. Just to be clear, we are the stewards
of patient care and physicians just as you are the stewards of the trust fund.
The vast majority of physicians and health care providers are honest and
getting an advanced payment for Medicare is not going to the ATM and getting a
cash advance. Let’s just be clear. This service has already been rendered. You
have been to the doctor’s office. You have seen the doctor. The patient has
left the office. It is weeks later. This service was delivered. It is like
going to a store and buying something and walking out of the store, but not
being paid.

I just want to be clear. If you are in good standing with Medicare, there
should not be a problem as to why you should get advanced payment if the
problem is on the end of Medicare. CVHS has already made the recommendation
that Medicare should do advanced payments. It would reiterate that request
because there seems to be a significant reluctance on the part of the people
who are in charge of the trust fund to do this. This is not a silver bullet or
panacea. In fact, most physicians probably would be low to have to go down this
road because it is very manual. You are going to have to manually reconcile
some lump sum payment.

But keep in mind too that the vast majority of small practitioners are
Middle America. They hire nurses, medical assistants, and in some cases,
coders. These are the people who are small business owners. As Rob reiterated,
they are not going to be able to just go to the bank and get a cash advance or
some sort of line of credit as easily as they were even during MPI. It is not
pre-2008. They have to pay for their medical liability stuff.

This is not them rolling in the dough here. This is paying like payroll.
People’s jobs are at stake here, not to mention the Medicare beneficiaries who
at some point if you cannot get paid by Medicare and they represent a
substantial portion of your patient population, you are going to have to at
some point start turning them away.

I just want to reiterate. For those who are in good standing and are not on
some OIG watch list, you should be able to as a last resort and I mean really
last resort go to Medicare and say I need some help here. Unfortunately, they
end up coming to us when things have gotten so dire.

I have one question. It is not an answer, but I have a question with respect
to these portals and the online or the free billing software as you are doing
your — meeting reporting requirements for Medicare like quality and meaningful
use. How is that data going to be transferred over when you start attesting and
trying to capture the geocodes and all the kind of things that have to line up?
It is like synchronicity. How do you get that stuff all to line up so that you
can — I think quality reporting goes all the way through the end of the year
and then there is meaningful use like for 90 days for 2014. Everything has to
line up otherwise later than you will have a penalty. I am just not sure how
this is going to happen.

MR. SOONTHORNSIMA: How long would you allow that advanced payment? What is
reasonable?

MS. SAVICKIS: My experience over the past several years is only few
physicians I have asked for it has gotten it. It does not go on to perpetuity
just to be clear. You kind of get them over the hump. Usually by the time you
issue them — say it is a small provider and a 25,000-dollar check gets sent.
Maybe another one. By that point, they have hopefully worked out the kink that
is blocking the ability to get the claims through. It is not something in
perpetuity.

We made some recommendations in a letter that we sent to Medicare last week
that outlines some parameters like if you have not been paid for 90 days, if
you are in good standing. I would be happy to share that with — I think I
actually have a copy right here. I could rattle off. We did not make a
recommendation on the timing. It is certainly not in perpetuity. But, again, it
is sort of like a last case resort and it is not going to solve the underlying
problem that I hear no delay though there has never been a single HIPAA
deadline that did not go off without a hitch.

A lot of times too is we are the smallest, with the least clout cog in a
wheel unfortunately. We are. We are just going to do whatever it takes.

DR. SUAREZ: I think it is important that this date of October 1 has already
been a year delayed. Ultimately, it had been pushed out for a year.

MS. SAVICKIS: Another thing to keep in mind is that since that date was
enacted by CMS and regulation, a lot of things happened after that. This year,
for example, meaningful use. If you have started the meaningful use program for
the first time, granted — here is the other thing. In theory, it is a Medicare
and Medicaid program. But your data in your system. You do not use one EHR for
Medicare and then another EHR for Humana private payer. It does not work that
way. All the patients in your EHR got counted towards meaningful use. September
30 is the last date by which you can report for meaningful use for 90 days. It
is the day before ICD-10. If you do not have a vendor who has delivered your
certified 2014 product, what are you supposed to do? They do not have them yet.
That is not something in control of the doctor.

DR. SUAREZ: That is probably by the way should be ICD-10 capable.

MS. SAVICKIS: The version 2014 is supposed to have that because the version
2011 did not have the ability to handle ICD-10. It doesn’t.

DR. SUAERZ: It was not required.

MS. SAVICKIS: It was not required. It did not have it. Now, you are waiting
for your new software and if you do not get your new software, I guess at some
point in theory then a vendor would say I disengage from this program. I am not
doing it. I will have to buy a whole new system or potentially maybe they will
create some kind of patch. It is not clear. A lot of doctors do not have
certified systems. What are you supposed to do right now?

MR. TENNANT: Let me just interject some more irony to the conversation. It
is great to hear from Jim and Sid that diagnosis codes do not matter. It is
great. Put anything in there. We have argued for ten years that maybe that
should be the case that we do not worry about the diagnosis code on the
outpatient side like all the other countries.

It is interesting, but I disagree because if you are a physician sending in
a claim because you treated a patient with sinusitis, there are 14 codes under
ICD-10 for sinusitis. One of them is unspecified. But unless we know what the
payment policies are, the Blue of South Carolina might say no problem.
Unspecified is fine. Sid may say no. If we are going to move to ICD-10, I do
not want to get unspecified. We are going to require a more granular code. It
is not as simple as saying we pay on the CPT because the codes are linked. That
is what we need to know as providers.

The other comment is and all due respect to my good colleagues at CMS, I do
not think anything should be off the table. The only thing that should be off
the table is not being able to see patients because that is the bottom line
here. Everything else is yes, it may be a hardship for poor Sid to redevelop
his policies under ICD-9, but that pales in comparison to a wide scale access
issue for patients.

I think everything should be on the table, but the key is, as we all know,
is good data. We have to know what is happening in the industry. If the
industry including the payers, clearinghouses, vendors, if they are not ready,
how can you just make the switch and say no dual coding, no extension? Just too
bad for everybody.

DR. SUAREZ: I do want to quickly ask a question that Linda pointed to. I do
not know if Linda is on the phone if she was able to — I know she was joining
the WebEx, but there have been some problems with WebEx. This is an interesting
point that she raises. In reality, there are two elements converging. Mari, you
mentioned the meaningful use program requirements this year to move to the 2014
addition certification of EHRs — move there and are already moving there to
meet the meaningful use requirement, which includes ICD-10 compliance or at
least AHR(?)38:52 being capable to do ICD-10. And then the ICD-10 requirement
on the payer or on the administrative side of the business.

The question that she raised was whether the cost of associated — there has
been a lot of argument about the cost of upgrading the systems to be ICD-10
compliant. Whether that cost was purely ICD-10 effect or whether the cost was
really a combination of I need to upgrade for ICD-10 for meaningful use for all
these elements. In reality, the actual cost of the upgrades that have been
mentioned and attributed to ICD-10 represent really an upgrade cost for more
than just ICD-10.

MS. SAVICKIS: I was involved in looking at this report. I think if you are
talking about just the software, if you are isolating the cost of the software
out from the range that Nachimson Advisors provided, I think my understanding
is that it is associated with ICD-10. You know what. That does not really
matter because you still have to do it. I do not think it really matters
because you still have to do it. No matter what the reason is for what you have
to pay for, what you do not have pay for, the reality is at the end of the day
there is going to be a big cost.

The other thing too is I just want to note that if it came down to
meaningful use or ICD-10, doctors would choose complying with ICD-10. They have
to. An incentive is nice. It would be awful to get a penalty, but it pales in
comparison to your cash flow stopping and your inability to continue to see
patients. You have to do ICD-10.

These are all bad things because when you start adding up 2 percent here for
sequestration and 2 percent here for not doing meaningful use or e-Prescribing.
Before you know, it cuts into your ability to purchase the technology and the
upgrades you need to do these things, not to mention improve patient care.

DR. SUAREZ: Thank you and thank you again so much for the time, the
testimony. This has been a really rich and very important critical panel. Thank
you again.

We are going to move very quickly to the next panel, panel 3, where we are
going to talk about ICD-10 from the perspective of non-covered entities. If we
can move to that panel quickly. We are going to try to really limit the
testimonies to five minutes and then have at least a few more time for
questions.

Panel 3: ICD-10 Implementation Beyond Covered Entities

DR. SUAREZ: We are going to start this panel. I think we are going to go
down the list of testifiers in the order. Sherry, if you want to go ahead.

Agenda Item: WEDI P&C eBilling Workgroup

MS. WILSON: Good afternoon members of the subcommittee. I am Sherry Wilson,
the co-chair of the WEDI Property and Casualty Electronic Medical Bill Sub
Workgroup and the executive vice president of Jopari Solutions. With me today
is Tina Greene, who is also co-chair, is a senior regulatory affairs consultant
from Mitchell International. We would like to thank you for the opportunity to
testify today on behalf of WEDI concerning the matter of ICD-10 implementation
beyond covered entities.

This testimony will address the following two questions. What is the current
status of property and casualty ICD-10 state readiness? And what are the key
issues of non-covered entities not adopting ICD-10 after October 1, 2014?

First, I would like to quickly provide the subcommittee with some background
for level setting of this discussion. Many stakeholders in the property and
casualty industry realize the adoption of national standard transactions across
all lines of health care business. It will enable all stakeholders to realize
the benefit of administrative simplification. That is why the property and
casualty industry is increasingly aligning with the national standards by
taking into account state-specific requirements. It is the only way for
HIPAA-covered and non-covered entities to gain administrative simplification
efficiencies that were intended to be delivered by HIPAA and the Affordable
Care Act.

This is evident by the 19 states that have aligned with the federal ICD-10
mandate showing it is possible for this industry to adopt ICD-10. Additional
outreach is imperative for the 31 remaining states to raise awareness of the
effect of not moving to ICD-10.

While the P&C industry is increasingly aligning with HIPAA, there are
differences that need to be recognized. Property and casualty is exempt from
the HIPAA regulations governed by state law rather than federal regulations,
required to follow rule-making requirements as appropriate in order to adopt
new code sets such as ICD-10.

While there are differences, there are also similarities. Many of these
property and casualty providers are the same providers that process government
and commercial claims today. And many of the P&C providers use the same or
some of the same to HIPAA transaction sets and code sets and operating rules as
used in the commercial and business.

Our first question to address is what is the current status of property and
casualty ICD-10 state readiness? For workers compensation only, the
International Association of Industrial Accident Boards and Commissions, the
IAIABC, has conducted an annual survey and to date 21 states have responded. As
you can see, one state was not aware of the ICD-10 October 1, 2014 date. Eleven
states have not formally evaluated how this transition will impact the workers
compensation agency and/or administrative rules. More concerning, 12 states
have reported no engagement with stakeholders in ICD-10 discussions.

As of February 2014, the Department of Labor as well as the following 19
states are aligning with the CMS ICD-10 requirements. These findings indicate a
need to better understand the other 31 states’ plans to continue with ICD-9 or
move to ICD-10.

As spoken today, we are also very concerned. This leaves less than eight
months for effective transition planning especially since stakeholders will
either need to transition fully to ICD-10 or do reporting in order to comply
with federal and state regulations simultaneously.

In summary, as stated, the adoption of ICD-10 across all lines of health
care will enable to stakeholders to realize the benefits of administrative
simplification. Some examples are eliminate conflicting coding requirements,
eliminates the need to maintain and store two different code sets for all
stakeholders. Also, this aligns with the national standard implementation
approach adopted by states that have enacted eBill regulations.

That concludes our comment on the first question. Tine Greene will now
address question two.

Agenda Item: Property/Property/Casualty
Representative

MS. GREENE: What are the key issues for non-covered entities? Potential
non-alignment of state and federal mandates will have a significant impact on
the industry at large. Some systems may not be designed to capture and maintain
both ICD-9 and ICD-10 versions simultaneously. Additionally, Medicare’s
mandatory insurer reporting for non-group health, which is section 111,
requires non-group health to report ICD-10 on claims paid after October 1, 2014
with such reporting made mandatory as of April 1, 2015, and may conflict with
states that remain on ICD-9.

One of the greatest impacts that needs to be considered is the disruption of
business continuity that would lead to a negative impact to the injured workers
and the potential for reduced provider participation to care for these injured
workers.

Unknown state ICD-10 readiness has a significant impact on stakeholder
contingency plans and will result in a lack of business continuity. Some
unresolved ICD-10 readiness questions are will a state require new rule making
to adopt an ICD-10. If so, what is the expected timeline and state transition
contingency plan? If ICD-10 is not adopted, what is the state’s contingency
plan for business continuity? If ICD-10 is adopted, what is the state’s
contingency plan for stakeholders that will not be ICD-10 ready? Will
stakeholders be allowed to process ICD-9 during the transition period and still
be compliant?

Additional unanswered questions are will states align with the CMS
requirement to split bills that span the ICD-10 implementation date. Will state
rules include the adoption of the CMS 1500-paper form that accommodates ICD-10?

To address these unresolved questions, WEDI, CMS, and the IAIABC and others
have had ongoing outreach efforts to raise state awareness of stakeholder
impact if ICD-10 is not adopted. In an effort to escalate the urgency of ICD-10
awareness, WEDI is considering writing a letter including a survey to send to
the states, workers compensation, and auto-regulatory agencies.

To engage state participation, WEDI has waived membership fees for states to
provide industry support and resources to enable the transition from paper to
align with the HIPAA transaction sets and operating rules as appropriate.

In conclusion, WEDI would like to partner with the Department of Health and
Human Services in assessing the status of the states’ ICD-10 readiness in order
to help all stakeholders in determining an appropriate contingency action plan
to comply with state implementation state timelines.

We urge the subcommittee to recommend to the secretary of HHS to make a
strong statement to the states regarding the urgency to the industry at large
to move to ICD-10 regardless of organization or HIPAA-covered entities.
Ensuring that all entities are implementing ICD-10 will help further industry’s
movement towards streamlining and automating end-to-end workflow process in
order to improve efficiencies and lower cost for all stakeholders. Thank you.

DR. SUAREZ: Thank you to both. I really appreciate that. I think we are
going next to Don.

Agenda Item: Payer/Property/Casualty

MR. ST. JACQUES: Members of the subcommittee, I want to thank you for the
opportunity to be able to present to you this afternoon. My name is Don St.
Jacques. I am the senior vice president of Business Development and Client
Services for Jopari Solutions. I am going to be presenting on behalf of the
stakeholders, which are the providers and payers who service the property and
casualty and workers compensation marketplace.

For those of you who are not familiar with Jopari Solutions, we provide
connectivity services in the property and casualty space between medical
providers and payers. In essence, we specialize in that connectivity similar to
what our larger peers in the clearinghouse industry for a group and commercial
world supplied. We have a very extensive already existing connectivity network
on a nationwide basis between providers and payers.

One of the things that I think a lot of folks do not realize is that the
property and casualty marketplace represents about 3 to 5 percent of the
medical spend. But if you go into the provider community, we are in fact a
service property and casualty. We are usually a very significant percentage of
their accounts receivable and/or administrative issues. We contribute
significantly to the administrative simplification issues that we are all
trying to face right now.

The medical specialties even though property and casualty does not span the
entire spectrum of specialties do include a number of different folks. But what
we really have is that we again are a cross section of both providers and
claims payment, claims payment being from small individual employers on a
localized basis to large national firms who are represented in every
jurisdiction.

We also are a very significant contributor in the property and casualty
space to promoting the administrative simplification concepts. As a matter of
fact, the last time we were in front of NCVHS in 2011, at that point in time,
we made a commitment to continue to assist the voluntary adoption of the X12
standards in this industry. Since then we have had some tremendous progress and
added additional jurisdictions as well continue to expand the network.

The current state of property and casualty industry adoption of ICD-10 is as
varied as what you heard earlier from the panelists in the group and commercial
world. As already has been stated in the WEDI testimony, state regulations
define what happens on a localized basis for the provider and the payer. With
that, there are only at this point in time 19 states that have said ICD-10 is
something we have to do. The rest at this point in time is still a big question
mark.

We are anticipating that we are going to see that as states bring on more
and more requirements for EDI adoption, what we call in our world eBill that
the ICD-10 regulations will be molded in at that time. Or there may be some
other special initiatives that happen. But with that though it brings a lot of
questions as to what is going to happen between now and then as it relates to
those states that are not yet saying ICD-9 or ICD-10 or actually having a clear
plan.

It is going to be that the stakeholders have to transition or there is going
to have to be some kind of dual processes because again in this instance and
again that is not making a really radical statement. It is just the fact that
at this point in time for them to be compliant, they are going to have to be
able to support both ICD-9 and ICD-10.

The P&C marketplace so that you are aware includes workers compensation,
auto, medical and other business insurance coverages, which always have been as
far as the percentage of their impact to the industry always viewed somewhat as
a small percentage. But I think as we are beginning to see that we really have
a much larger impact than has been expected.

Payer adoption. Again, it ranges. There are a lot of the national payers
right now who are into ICD-10 testing. They do anticipate they are going to
have to do some dual processing at least in this point in time until they get
some guidance because again on a state-by-state basis, they are going to have
to be able to support what the state regulations require them.

Those payers that we are also going to be talking about here in a few
moments when we talk about from the TPA side that support both property and
casualty and the group and commercial world also are going to be facing that
same dilemma.

Many of the payers in our space have not yet kept up with their project
plans. There has been confusion as to whether it is in or it is out. With that,
the overall testing has not progressed probably as to the level that we would
like to see.

Many of the IT technologies will be the very specialized systems and the
adjudication area are in that situation right now where they are not yet ready.

And then also a high percentage of our payers are partnering for compliance.
The providers and the vendors are reporting some of the same exact issues that
we heard earlier as payers and then the group and commercial world.

There are a lot of key issues. We can talk about that without getting into a
lot of detail, but the dual processing, the fact that there may be
non-supportive ICD-9 after October 1, which is going to impact some of the
state reporting that they have to do. And the fact that there is a concern that
providers may abandon the property and casualty business because it is just too
expensive to support two systems.

As far as handling claims with ICD-10 after October 1, really the states are
going to have to help us determine that because that is at this point in time
the people who we are upholding to.

We have a state aligns. We should expect that there is probably going to be
requirements to reject, again, without right now being able to quantify the
consequences.

Payers are very concerned from a business continuity standpoint. What does
this mean? Do transactions stop flowing? Do providers turn patients away from
the property and casualty arena? And also from a state standpoint as far as
compliance of payment, timeliness of payment, what does that mean when they
cannot process?

Our recommendations are very simple. We encourage industry dialogue. We know
it is important. It has to be non-covered technologies like what we represent.
We have to be part of this conversation, but we also have to step to the plate
and come up with real solutions.

We need to partner with WEDI and be able to work with them as far as the
state readiness goes and help us devise a plan that will make sense because
again from a contingency standpoint, we have to be ready.

And last but not least, there does need to be a coordinated approach that
involves the property and casualty and workers compensation marketplace. If
not, it could result in extremely costly issues across the board for both the
medical community and the payer community.

I thank you for the time this afternoon.

DR. SUAREZ: Thank you so much. I think we are going to hear next from
Robert.

Agenda Item: Third Party Administrators

MR. HOLDEN: I would like to thank the committee for the opportunity to speak
with you this afternoon. I will say at the outset that in the interest of time
and also because I agree with almost everything that has gone before me, we are
going to go through these slides quickly. You should have my written testimony,
which will get into some of this more detail and obviously, I will be able to
answer your questions.

But just to get into this. I would like to tell you who we are, why we have
a perspective on ICD-10 implementation in the states we think needs attention
and why we think that. I am here on behalf of AAPAN, which is the American
Association of Payers, Administrators and Networks. There are two divisions
within that: AAPPO, which is our PPO association and TPAAA, which deals
specifically with third party administrations. Both AAPPO and TPAAA our members
service both group health and workers’ comp networks or property and casualty
workers comp or self-insured plans. As Don mentioned, all of our members have
interest both in the covered and non-covered side of this issue.

As a result, we have a lot of perspective on some of the things he mentioned
including in some states the absolute necessity of dual processing after the
October 1 deadline unless we can get the states motivated and part of that is
why I am going to get to our recommendations next year. The states really have
to be encouraged to assess the impact of ICD-10 implementation on non-covered
entities. They have to be encouraged to plan and incorporate real guidelines
for us to get into compliance. That process has to be transparent and we need
to be invited to the table. I will get into some examples about why we are
concerned about that. As this is not the main focus of this process as in many
of the other health care programs that we have been very in-depth, very
integrally involved with implementing on the self-insured side, things seem to
slip through the cracks. We want to make sure that this is not one of those.

And then third that really you need to provide that guidance to the state
and really push them to conduct some outreach so that they can get educated on
this. We do a lot of outreach on our own, but it would be incredibly beneficial
to have you do that as well.

Looking at my next point, I want to tell you why again we are so concerned
with this. The experience we have had with ACA implementation has been not the
main thrust of health care reform. It has been a lot of the emanations from
that policy that either was not contemplated when the law was enacted or
implementation was not immediately apparent.

One of those issues is addressing the adverse selection issue in terms of
state exchanges. Our TPAs have really been faced with having to educate state
policy makers on why self-insured plans are valuable, what they present to the
market. And we have seen a tremendous amount of pressure on state policy makers
to make changes, for example, on stop loss policy, which is a problem for us
and it is just not understood what the impact of that is.

This is just an example of an issue that if there had been some
contemplation about this, if there had been a transparent policy-making process
on the front end, we could have come up with other solutions and have come up
with other solutions that would have mitigated this. We want to make sure we do
not make the same mistake here and we have time to do that. It is going to be
tight, but we need to get working now on that.

The other is the TPA Administered Contraceptive Coverage program through the
ACA. Again, we comment on the federal rules, but we are lacking in guidance on
how to execute. We have requirements. We have upfront compliance, reporting
requirements. We have payment requirements for the first time because TPAs are
not risk-bearing entities. They have not been paying claims. But now we are in
the process of being responsible for paying claims. We need some guidance on
how to get that done. In this instance, we need the guidance from the states.
We need you to help us put pressure on them to develop those plans.

Again, states are increasingly combining their regulatory programs for group
health and workers’ comp, putting some of the reporting requirements,
integrating pieces of their regulatory components one into the other. That is
helpful in the sense that states that do that will increasingly look to taking
on board on ICD-10. It is not helpful if they do not think about that. We are
then in a position where there is no guidance on how we are to react to this
integration of our networks. Right now, almost all of our members at some level
are working in two systems: workers comp and group health, as I mentioned.
Again, that is something we have had to deal with.

And then finally, as I mentioned before, dual reporting is going to be a
necessity. I do not see how we get around that if we have to meet both state
and federal requirements. We are going to have to have some way to work through
that. And at the moment in a number of states, we just do not know what the
case is.

I would like to tell you about some surveys that we have done and some of
the feedback that we have gotten from our members. Fifty percent of our members
have identified themselves as being regional. As you can see, 40 percent have
identified themselves as being nationwide. We have a lot of folks that are
involved in multiple states. The balance there just involved in maybe one or
two states so very small. But you can see that they are getting a perception of
what is happening between states to states. There are a lot of differences
there.

As to where they are right now, 50 percent have already completed their
planning process and have gone into assessment. Sixty percent of those have
already completed their internal assessments and working with vendors on some
of that internal work. But we are still looking at over 35 percent who are
uncertain of their states’ positions on how they are going to address in ICD-10
in particularly in these issues. That coupled with almost 30 percent still
being uncertain with where their vendors are going to be are primary concerns.
But you can see how getting guidance from the state governments and direction
would be beneficial here. Again, in assessing if your vendors are going to be
ready, which is hard to do if you do not know where your state is.

With the conclusions, I just want to restate what we are looking for here.
The remaining time we have really needs to include state action to assure that
there is state planning and guidelines for compliance so that we can be in
compliance with ICD-10 and really limit the extremely costly both for us and
for our providers need to dual report.

The implementation has to be transparent. We need to be involved. This
cannot be something that is done very quickly without some thought and some buy
in and input from the stakeholders. Again, we really need you to provide some
guidance to the states on how to get this done. Thank you.

Agenda Item: Q&A Session

DR. SUAREZ: Thank you so much for the testimony. I think we are going to
have a good time for some Q&A. I will start with Suzie.

MS. BURKE-BEBEE: I have a couple of questions. I have a disconnect with the
information that you have given about 19 states that voluntarily are going
forward with ICD-10. When I think of the P&C market, I think of companies
that write multi-line and multi-states so many states. I was somewhat surprised
that there is a low number of those states volunteering when in fact the
P&C companies might be in the other 31 states. Is there something that you
can help me understand a little bit better?

MS. WILSON: The payers are not driving this market. It is the states that
are determining the regulations and what the payers and providers’ ICD-10
readiness will be. That is a real challenge with national payers, vendors, and
providers that they are waiting to get direction on what the other states are
going to be doing. It is not up to the payer in the property and casualty to
make that decision.

MS. BURKE-BEBEE: Was it regulated before with ICD-9? If you are saying help
in getting the stats to recognize ICD-10, did the states recognize the ICD-9?

MS. WILSON: Yes. There are states that have it within their fee schedule on
ICD-9 and others may by rule address it by saying the current rule set. It has
been addressed. There is a big concern. We are aware that some states may be
staying on ICD-9 and I think part of the educational awareness — I know WEDI,
the IBC, and the CMS have definitely been outreaching. But I really do not
think necessarily people are totally aware of the implication of the medical
impact of not being on the same code set.

MS. BURKE-BEBEE: My last question is the automation of the P&C market.
Do you know a percentage of those that are automated and adjudicate
electronically?

MR. ST. JACQUES: The adjudication percentage electronically just
adjudication is pretty close to 100 percent, but being able to receive
transactions actually moving them from providers to payers again is a heavy
reliance on paper. Right now, it is somewhere about 30 percent and growing.

DR. SUAREZ: You said 30 percent.

MR. ST. JACQUES: Right now, about 30 percent is being moved from providers
to payers electronically. That has grown considerably over the last year and a
half. Again, that was one the concerns we had. If we do this, does it now
disassemble or make it discontinued the fact that we already had this progress
of being able to move towards full use of electronic transactions.

MS. BURKE-BEBEE: My point in those three questions is there is already in
place the recognition of the ICD. It is not as though it is a new concept to
them. It is just getting education out there and convincing of the 10. The
mechanism electronically is growing so that is in place.

DR. SUAREZ: There is an interesting issue. When we say the electronic
mechanism is in place, are we talking about the adoption of the 837 and if so,
which version? The 4010 or the 5010?

MS. WILSON: We are talking about the 5010. We have been actually working
very diligently over the last eight years with the property and casualty and
with the standard setting organizations, X12 and WEDI because property and
casualty we do have unique business needs. We have been working with the
standard organizations to address our business needs. In that from eight years
ago, we had a barrier to using the standard electronic transactions. Today, I
can happily report that you can use, again, the same 837 is being used in the
transactions as well as the acknowledgements and even the 275 and the 835 and
EFT. We also have states that have mandated electronic and we call it
e-Billing. California, Minnesota, Texas. We have Georgia, North Carolina. North
Carolina, by the way, is coming on with EFT as part of the payer mandate. And
Illinois. We have about 15 other stats coming on with adoption of the X12
standard set.

Most importantly is that these providers are pretty much the same providers.
They have the same systems. Everything you have heard today from the AMA, from
MGMA and all the collective comments, these are the same issues. Now, what is
this provider going to do? We are going to lose impact in taking care of
property and casualty business. They are going to leave if we do not address
this. But they are all the same issues, same providers, and same hospitals.

MR. SOONTHORNSIMA: Even though the electronic adoption is still low, but
they can still submit. You said they still submit paper. As of October 1, they
will just be submitting ICD-10 on paper. Is that true? No. Only 19 states.

MS. GREENE: There are only 19 states currently.

MR. SOONTHORNSIMA: Those other states — that is the concern.

MS. GREENE: There’s our concern. Again, with only eight months to go, we
have 31 states that we really need to know the status. When we talk about
contingency planning, significant impact on all of us in this room.

DR. SUAREZ: What is interesting is that in order for the other 31 states to
change, they need to change the state law or it is not regulation.

MS. GREENE: Possibly. Not all states have ICD-9 written in either
administrative ruling or statute. There is one state that looks and found ICD-9
listed in their statute. We all know what that takes. Not just administrative
rule making, which is a long process.

DR. SUAREZ: What I was thinking is if it is in the statute, the legislation
process is already underway this year for whatever it is going to start. July 1
is really the first day of the state fiscal year. That probably is already not
there. But if it is not in the statute in regulation, the administrative rules,
then there is still of course only eight months to try to do anything about it.

MS. WILSON: And Walter, just to address that issue, again, the concern. If
they are going to new rule making, what is the estimated time period? And then
the state also needs to provide guidance on what is the contingency plan for
the stakeholders during that time? And the same thing on the ICD-10. We have
states. California will be coming out this week that they are adopting ICD-10
for property and casualty. But again, the question is for those payers and
providers or stakeholders that are not ready, we need to know from the state
what is the contingency plan going to be.

MR. ST. JACQUES: We can add one more layer of complexity on top of that,
which is in some jurisdictions the payers are responsible for reporting to the
state how well they did on their adjudication, which may require them to report
an ICD-9 diagnosis code. But at the very same time, that claim may be eligible
under the Medicare program for Medicare set asides. They have to now start
reporting on ICD-10. Now which one do you keep?

DR. SUAREZ: We say states need to provide guidance. This is the state agency
responsible for overseeing this sector of the insurance market. It is an
insurance — it is not really the department of health in many states.

PARTICIPANT: Correct.

DR. SUAREZ: The challenge is which federal — CMS and other federal agencies
can try to ask or provide some — but really is there any —

MR. ODIA: — as we go (?)1:14:44 states given the guidance and training them
on ICD-10, we have been advising them to (?) and the so-called (?) entities
(?). Many of the states have doing so. As I listen to the presenter, I do not
know (?) but I believe (?) that number should increase from 19 to whatever
number. (?)

(He interrupted in the middle of conversation)

DR. SUAREZ: Thank you so much for that.

MR. SOONTHORNSIMA: Can I just make a point of clarification? Thank you for
helping me understand the other 32 states. I am not trivializing this at all.
This is a very significant issue. Is this a showstopper for going forward with
ICD-10 with a medical side? In other words, medical insurance.

MS. WILSON: I heard Matthew very clearly over here. But I would say that
there is an opportunity again. We all want administrative simplification. That
is the goal of HIPAA and the Affordable Care Act. There is an opportunity to
really bring together the — and the only way we are going to get that is
working together for the non-covered and covered entities to come together and
to look at how we are going to achieve administrative simplification. Again,
same providers, same hospitals in most of the cases, same transactions in most
of the cases. How are we going to make this work?

And the other concern is if we do have states and we do know of a few that
may not move to ICD-10. That is a very big concern. But I think part of that is
education. And again, CMS has done a great job reaching out and WEDI and IBC
and even X12 as well in trying to do this. But I think we have an opportunity
even to do a better job being able to reach them. I do not think it is
necessarily a showstopper.

MR. HOLDEN: I do not think it is a showstopper, but I think we need to — a
lot of work to do.

MR. SOONTHORNSIMA: The reality is you have to stagger out.

MR. ST. JACQUES: There is no doubt. This is a real issue that is going to
impact a lot of cross section of providers and again it is something that we
have to get on the table. Up to now, it has been one of those struggles to get
it on the table.

DR. SUAREZ: One interesting point that just came up to my attention here is
a lot of the states for purposes of these programs base their fee schedule on
the Medicare fee schedule. What is going to happen when Medicare moves to
ICD-10 and its fee schedule moves to ICD-10? How is that going to be affecting
or how are the states that their fee schedules on Medicare is going to be able
to downgrade? I do not know how to call it.

MS. WILSON: That is a very good point. We are seeing some states that in
strategy to move to ICD-10 are addressing the fee schedules. We are seeing a
lot of that being done. I think California is in the middle of doing that
currently. Again, they realize that we need to align again as much with the
HIPAA transactions and the national standards in order to get stakeholder
adoption and to facilitate that.

PARTICIPANT: It just makes sense.

MR. HOLDEN: Just to add on to that quickly, there are a whole lot of issues
with what you are talking about in terms of integrating Medicare into workers
comp and states are moving on that in a lot of different ways. It is an issue
that is going to play out on its own. There may not be a high level of
anticipating this issue like you have just done in terms of what each
individual state is going to need to do that from the state itself.

MS. WILSON: Just one last comment is that again the opportunity for
education and heightened awareness is really key to helping remedy this issue.
I think that we know that some people may not think because we are non-covered
entity, this does not impact them. We think that sometimes in the insurance
area that we are not necessarily understanding the impact of this ICD-10, the
impact on business continuity that could have a significant disastrous effect,
not only on P&C, but also for the covered.

DR. SUAREZ: This sounds like education in a word is it is really not just to
the health plans and providers, but to the states.

MS. WILSON: And again, Walter, I really do not think necessarily that
everyone clearly understands or it has been clearly articulated the impact if
you do not go to ICD-10. I think once people understand that impact, it seems
pretty clear and concise why you need to go that direction.

MS. BURKE-BEBEE: Along those lines of showstoppers, we heard earlier from
other people giving testimony about I believe the AMA said that providers would
stand on their head to get paid. What is the stance of the P&C industry,
workers comp about the revenue stream? Do you see it being something that would
allow them to stand on their head in order to get paid?

MS. GREENE: And allow them to pull out.

MR. HOLDEN: It is a completely different regulatory constraint at the state
level to make it happen or you are in violation.

PARTICIPANT: So they pull out.

PARTICIPANT: That is a big concern.

MR. ST. JACQUES: It is a double edge sword too because there is also the
issues on timeliness of payment. They are faced with that at both sides of that
fence that if it is presented, they must process and therefore but if they do
not process — wins here. I would say nobody at that point.

DR. SUAREZ: All right. Well, thank you so much for these testimonies. It was
very helpful. This was a really critical point to bring up.

Agenda Item: Panel 4: Prior Authorization Between
Prescribers and Processors for the Pharmacy Benefit

DR. SUAREZ: We are going to move our panel 4, which is prior authorization.
I know one of our testifiers is going to be doing it by phone. Margaret, are
you on the phone? Margaret, can you hear me? People on the phone, can anybody
hear me? We were going to start with the DSMO recommendation and overview of
the DSMO recommendation with respect to this area, the prior authorization
transaction between prescribers and processors.

MS. WEIKER: This is Margaret.

DR. SUAREZ: Hi Margaret. As you can see, we were actually waiting for your
voice to come up. Thank you.

MS. WEIKER: Yes, I know. I redialed.

DR. SUAREZ: We are very glad that you are joining us. Thank you so much for
doing so. We are ready for your testimony. Everybody else is ready. Could you
go ahead?

Agenda Item: DSMO Recommendations

MS. WEIKER: Okay. Thank you, Walter. I am Margaret Weiker. I am currently at
the DSMO. I am the Designated Standards Maintenance Organization chair. I was
asked to speak today in regards to change request 1189.

NCPDP or the National Council for Prescription Drug Program entered the
change request to have the strict standard version 2013071, which contains
electronic prior authorization transaction functionality for the pharmacy
benefit environment. They entered the change request to have that standard
recognized for the health care services referral certification and
authorization. The request was entered in August of 2013. It was in the
September DSMO batch. And the DSMO adjuciated a batch in December and a letter
was also sent from the DSMO to NCVHS in December.

The DSMO recommendation was to name the NCPDP SCRIPT Standard Version
2013101. It did differ from what was originally requested, but that is because
often changes were made. For the prior authorization transactions only, for the
exchange of the prior authorization information between prescribers and
processors for the pharmacy benefit. That is what the DSMO recommendation was.

At this point, the DSMO requests a recommendation letter be sent from NCVHS
to the Secretary of HHS for the adoption of the NCPDP SCRIPT prior
authorization transactions under HIPAA. The NCPDP SCRIPT Standard version in
the original request submitted by NCPDP and the original DSMO recommendation be
modified to include the 2013101, which was based on some change requests that
were entered after the original version was voted on and ballotted.

It is also very important that the recommendation does not name all of the
NCPDP SCRIPT Standard. The NCPDP SCRIPT Standard has a lot of functionality and
it is built for different business purposes — e-Prescribing. It is very
important that only the prior authorization information on transactions are
actually what is named and not the entire SCRIPT standard. That concludes the
DSMO testimony.

DR. SUAREZ: Thank you so much, Margaret. I think we are going to go next to
Tony.

Agenda Item: Industry Work Perspective

MR. SCHUETH: Thank you. Thank you, Walter. I appreciate it. I appreciate
this opportunity to come back to NCVHS. My name is Tony Schueth. I am and have
been since 2004 the leader of the NCPDP Prior Authorization
Workflow-to-Transactions Task Group. By way of credentials, I also in 2006 was
the project lead for one of the MMA e-Prescribing pilots, one of the four that
tested prior authorization, specifically the one where the RAND Corporation was
the primary contractor. I also facilitated an expert panel that was pulled
together by AHRQ by John White and the Agency for Research and Quality in 2008.
I had a contract directly with AHRQ or indirectly through AHRQ where I worked
on electronic prioritization with another hat on and that is as a consultant
with my consulting firm point of care partners where I am the CEO and managing
partner.

With that as my background, I am here on my own, but I am presenting with
Lynne with my task group hat on. What I am here to do is just give you a little
bit of background and a little bit of context for the rest of the testimony
from the rest of the panel.

When the task group was first formed, we made an assumption. We set a goal.
We provided a vision. That assumption was that there would be a need for prior
authorization in the future. There are some stakeholders of course that would
like it to go away. The assumption was that is not going to happen.

The second thing that we decided or the goal that we set was that we wanted
to have prior authorization be as efficient and effective as possible. We
wanted to leverage standards to do that. What we did was we created a vision.
We looked at the existing workflow. And then we said how do we improve this
process? How do we make it better?

We set forth that vision. And the vision is what I am going to walk through
here. The other thing that we did once we had that vision was that we overlaid
where existing standards were because we did not want to recreate the wheel. We
wanted to have something that leveraged existing standards.

Our vision was if you look at this particular slide, the patient visits
their physician. The physician goes to write a prescription. I am going to use
the example Celebrex. They see immediately that prior authorization is required
for Celebrex. They either request the criteria at that point or it is maybe
resident on the electronic health record. Information is extracted out of that
electronic health record and pre-populated into that form. The prior
authorization request is sent electronically to the payer where the rule runs.
A response then is sent back either approving, denying, or asking for
additional information. Preferably, in some cases, it would have an
authorization number. That authorization number would be included in the NCPDP
SCRIPT transaction, which it exists. We have had the field for the
authorization numbers since day one. That would be transmitted then to the
pharmacy where the claim would be submitted. And either that number would allow
it to go through or the payer has already tripped something on the back end and
it would automatically go through. That is the division.

The information would be provided to the doctor upfront during the encounter
with the patient. They could have a dialogue, a discussion. Is this truly the
right medication for that patient? They can proceed with that process. That is
our vision.

And the missing piece of all this was that transaction between the payer and
provider. Let me clarify. HIPAA, I will get into that in a second, did name the
X12 278 as a prior authorization standard. There is a standard for that. And in
fact, the task group the very first thing that we did and we spent a lot of
time trying to modify that standard so that it would accommodate the prior
authorization for medication transaction. We spent a bit of time doing that.
That is what was pilot tested in 2006.

I have gotten into a little bit of the history and the context. But again,
HIPAA named the 278. Our task group was formed in 2004. The pilots were in
2006. I think what is important to mention here is coming out of 2006, those
pilots, the recommendation was instead of using the 278 that instead we maybe
think about creating one standard. Why? There were a couple of shortcomings
that we had with the 278 that the pilots observed were potential problems.

The biggest one is that the 278 was really built or designed for DME or
procedure, not necessarily for medication. The biggest shortcoming was it just
did not have the ability to transmit all the information necessary for the
payer to make an informed decision as to whether they should approve or deny
that prior authorization request.

We tried to do a work around very candidly. We decided as a task group that
we would create an attachment. You cannot have an attachment to a 278 we
learned because we were NCPDP based. We had a 275 with this attachment. And
what the piloters found is that there was redundant information. That it was
just a little bit awkward. The recommendation coming from that was we should
create one standard.

I mentioned John White and I mentioned an expert panel. AHRQ pulled that
group together. I facilitated that meeting. We put together a five-year plan.
That five-year plan — then I was retained to execute sort of year one of all
that. And a big part of executing year one was going through the process of
reviewing HIPAA to see if we could go in a different direction and if so, how
we would do that. It was talking to and having dialogue with X12 because — we
had created a multi-standard development organization task group, but there was
a little bit of — there was agreement between the organizations, but anyway.
We needed to talk it through. We also went to OESS. We went to OESS and told
them about the recommendation and how we wanted to proceed. They had full
knowledge of how we decided to proceed.

Then in 2009, we created our own standard. We created a new standard in
NCPDP or it sort of evolved a little bit now since then to be an adaption of
the SCRIPT standard. That is what we created in 2009.

And then where we are today is there is kind of a renewed interest in all of
this in 2010. A large payer stepped forward to pilot test that standard and
gave us feedback. We made modifications. Where we are today is that we
published the SCRIPT Standard use for electronic prior authorization in 2013.
We had some education sessions. Implementation continued with that large payer
and also a number of other stakeholders. It was not just the payer. There were
EHRs that were involved in that as well and intermediaries and other
implementation began.

We have kept OESS apprised of all of this throughout the whole process. I
have testified to NCVHS at different times over the years. Margaret talked
about the DSMO change of request.

I think I will really mention and in the interest of time, I am not going to
go through all of this. I think I have really mentioned most of these things.
We had a webinar. The SCRIPT Standard version that accommodated electronic
prior authorization was past published in July of last year. We have been
working with OESS.

The one other thing that I would mention and I think deserves mention is the
second to last bullet point. And that is that stats are publishing their own
regulatory requirements for electronic prior authorization. Specifically, there
are nine states that have mandated ePA or uniform ePA. The first one of which
is March of 2014 Vermont. In 2015, 112015 Minnesota and Colorado. Later that
year we have North Dakota, Georgia, Kentucky, New Mexico, and Maryland. And
then 11 of 2016 is Michigan. Five other states have mandated studies and at
least one state has a pilot. There is some activity going on around electronic
prior authorization as well. There is very much of a need for prior
authorization for medications in the marketplace as I think that really
underscores. Margaret talked about —

DR. SUAREZ: Just a quick clarification. These are state regulations on ePA
for pharmacy transactions. Only for pharmacy.

MS. GILBERTSON: For medications.

DR. SUAREZ: That is what I mean.

MS. GILBERTSON: They are not generated by a pharmacy, but generated by the
prescriber. Pharmacies do prior authorization as well, but that is —

MR. SCHUETH: Okay. Thank you.

Agenda Item: NCPDP Perspective

MS. GILBERTSON: The “ask” of today’s session, the DSMO reported as
part of the process that the change request come forward and any request for
new transactions or new standards follow the process of requesting the change
request, the DSMO recommendation. We followed up as NCPDP with a letter to
NCVHS in January that once again provided the status of where the electronic
prior authorization transactions are.

We followed this process because all along we thought that the HIPAA
regulatory requirements would need to be met and the steps with that because
this is what it appeared the transactions would have to follow. However, it is
confusing to the industry that we have the SCRIPT transactions, which some of
them are named in the Medicare Modernization Act and now some would be named in
HIPAA. But if that is the way this plays out, that is the way it has to play
out.

The goal though is what is in the highlight in the middle there. It is
really to be able to use the NCPDP SCRIPT Standard transactions for electronic
prior authorization in compliance with the HIPAA regulations. It has been shown
over the years that the method for maintaining and modifying standards that are
in the electronic prescribing environment have been very successful, very
efficient and how the industry has kept apprised of the dates and works with
OESS on the dates of implementation.

We would recommend to take the DSMO recommendation just a little bit further
and allow for OESS that in the use of the NCPDP SCRIPT Standard prior
authorization transactions the method for maintaining and modifying the
standard be kept as intact as possible and allow OESS to proceed as they think
best.

The HIPAA process thus far has not really provided any regulatory
flexibility. We thought with the administrative simplification section of ACA
that this might allow us something in the future. But it appears that that
section applies to just the first operating rules that were named and not to
operating rules or standards in the future. That was an aha.

The specific “ask” we took the recommendation and clarified what
is in italics. It is to name the NCPDP SCRIPT Standard version 2013101, that is
it version number, the prior authorization transactions only for the exchange
of prior authorization information between prescribers and processors for the
pharmacy benefit and to do so under the appropriate regulatory process that
would provide flexibility for industry support to allow OESS the ability to
look as they see fit under which regulatory process and functionality. That is
the “ask” to the committee.

If there is time, I will be very glad to go over what the ePA transactions
are all about. It is really up to the committee whether you would like me to go
into that detail or not. I would do it very quickly, but it is just if that
helps answer questions.

DR. SUAREZ: Why don’t we go through the other testimony? This might come
into the question and answer. We will be able to go back to this part if we
need to. Thank you. Thanks so much for the testimony.

I think we are going to go next to Heather.

Agenda Item: Provider/Prescriber Perspective

MS. MCCOMAS: I am Heather from the American Medical Association. I am going
to start off my testimony on pharmacy prior authorization with a quote from a
recent issue of Medical Economics that basically summarizes every conversation
I have ever had with a position about prior authorization. It reads few words
arouse more frustration among primary care physicians than prior authorization.
I think if you broaden that across specialties, you basically have summed it
up. That is how doctors feel about prior authorization.

I need to start off by being clear about overarching concerns that the AMA
has about prior authorization. We feel that it can be disruptive and costly for
physicians and their patients. We feel it is overly inclusive. It should not
apply to every single physician, for every single use of a particular kind of
service. It should be restricted to outliers.

We really believe that it restricts and delays patient access to optimal
drug therapy. It adds overhead costs of practices that are already financially
strapped by all the other demands on them currently.

However, as was alluded to earlier, prior authorization is being used. We do
not foresee it going away any time soon. And given that, the AMA urges public
and private payers who use prior authorization for prescription drugs to
minimize the administrative burdens on prescribing physicians.

We believe that these burdens can be reduced through simplification and
standardization. We do support a uniform, electronic process that is available
to physicians at nor or minimal cost.

The literature clearly shows that prior authorization is very burdensome in
terms of time and dollars on physician practices. In the interest of time, I am
not going to read all these numbers, but it affects physicians, their nursing
staff, and their clerical staff and then all those hours of work obviously
translate into actual dollars. We strongly believe that all those hours and all
those dollars could be far better spent on actually taking care of patients.

The AMA did a prior authorization experience study a few years ago, which
again underscores the very time consuming nature of this process for
physicians. Nearly 50 percent of our survey respondents indicated that they and
their staff spent 11 hours or more a week on prior authorization for
medications. And nearly 70 percent indicated that they wait several days to
receive a response on those prior authorizations. Some wait about 10 percent
wait a week or more. That is time that patients are not getting the medication
that they need to be well. This is very concerning to us.

Our survey results also underscore the current manual nature of the process.
Eighty-three percent of our survey respondents indicated they are using the fax
machine for prior authorization. I do not know about you all, but there is
nothing in my personal — I do not know about anything in my personal
professional life that I do that I use a fax machine 83 percent of the time.
That is so antiquated. That is not how we do business these days. We should not
be relying on the fax machine. Paper forms are also used quite extensively.
There are payer portals and websites and then a small percentage of our
respondents indicated they are in fact using electronic transactions for prior
authorization.

The AMA, of course, has been very active on this issue throughout the years
because our membership is very concerned about it. We previously advocated for
the use of the ASC X12 278 transaction for all types of prior authorization
including pharmacy prior authorization. There are good reasons for that. As we
have heard said already, the X12 278 transaction is the HIPAA-mandated
transaction for all types of prior authorization including pharmacy. There is
an appeal for physicians of having a single, end-to-end prior authorization
workflow, rather than using different systems depending on service type.

However, as you have heard today, the industry has moved in a different
direction for pharmacy prior authorization. The AMA does acknowledge the
extensive work that has been done by NCPDP in creating these electronic prior
authorization transactions that are being housed within the SCRIPT
e-Prescribing standard.

However, action is needed for these transactions to be used for pharmacy
prior authorization. Obviously, clarification is separately needed in order for
pharmacy prior authorization to move ahead with automation. We urge the
government to provide swift guidance in order for those automations to move
forward. We desperately need relief on this issue.

And then putting aside — once we get this clarification, we do have some
remaining concerns regarding pharmacy prior authorization. And actually, I
heard Tony mention a few of these elements in his ideal vision for pharmacy
prior authorizations. I think we are all on the same page and agree about what
needs to happen, the first of which is physicians need to have accurate
patient-specific detailed formulary information at the point of prescribing.
They currently do not have that.

The first critical step in prior authorization is knowing whether or not you
need one for a particular medication for a particular drug. Physicians do not
have that right now. That information is available in pharmacies. When you go
to a pharmacy, within a matter of seconds the claim runs through and it tells
you whether or not a prior authorization is needed. The claim bounces back. We
are just asking for that information to be available to providers.

We really feel that this formulary issue has to be fixed for the overall
process to really be automated. Until we fix this, the process is going to
remain reactive versus proactive, which is what we all want.

And the second issue is that we believe the overall process needs to be made
more efficient. Shifting from systems that are manual data entry on paper to
data entry in a computer is really not helping physicians all that much. It is
better, but it is not ideal. It is still a lot of time. We are really urging
the industry to move towards systems that will support auto population of these
prior authorization request with data from the EMRs that involve as few
position touches as possible.

To sum up, three big “asks” here. Again, we desperately need
clarification on this for things to move forward. There is a lot of confusion,
I think, right now. You get to solve so that physicians have fewer time burdens
and the solution needs to be cost effective for them as well.

Secondly, we need this accurate, real-time formulary data at the point of
prescribing for physicians. And thirdly, we do urge the industry to move
towards systems that are more efficient and involve less data entry for
physicians. Thank you.

DR. SUAREZ: Thank you very much. Andrew.

Agenda Item: CMS Perspective

MR. MORGAN: Good afternoon. My name is Andrew Morgan. I appreciate you
having me here today to talk about what OESS has been doing since 2005 in a way
of updating e-Prescribing standards. I am actually sitting next to some of my
cohorts here. I have been working with Lynne and Tony for many years on this.
The ePA process is something that has been a long time coming.

My objectives today is I am going to talk about our commitment to adopting
e-Prescribing transactions and the standards and how the process and the
timelines of updating these standards that we have done throughout the years.
e-Prescribing is much more than Medicare Part D Program nowadays as you know
with meaningful use and through the MIPPA and e-Prescribing incentive programs.
There are also some future standards that we still need to adopt going forward.

On November 25, we published a 2005 final rule. I came to CMS right at the
end part of writing that rule. I was hired on as e-Prescribing subject matter
expert. I worked with the folks at OESS to get this final rule out. And in that
final rule, we published three foundation standards, the NCPDP SCRIPT 5.0, the
X12 270/271 for eligibility, and also the NCPDP Telecom 5.1 for eligibility in
a pharmacy.

Moving on from there, we did a 2006 pilot. I was one of the co-pilot project
officers along with Dr. White at AHRQ. I worked with the pilotees. In 2006, we
had six pilots that encompassed all around the country. To test these
foundation standards that we had just adopted and also to test what we call
initial standards such standards as medication history, RX fill. We did test
e-Prescribing. We did test an ePA process. We also tested the workflow in
long-term care industry.

In June 2006, we published an IFC where we adopted SCRIPT version 8.1 on a
voluntary basis. This was a direct result of some of the work that was taking
place in the pilots. There were some changes that were made that industry felt
it would be beneficial for us to adopt it so we adopted it as a voluntary
basis. As long as folks who went to an 8.1 platform, it was backwards
compatible with 5.0.

In 2008, we adopted the second final rule where we adopted what we called
initial standards. We adopted med history, RX fill, and some others. In 2009,
the physician fee schedule final rule. We lifted the exemption for computer
generated fax. At the time, some physicians were using the antiquated facsimile
to send electronic prescriptions if the pharmacies were not capable of
receiving the SCRIPT Standard transaction. In 2009 schedule, we lifted that and
we gave them three years to update that. On 1/1/2012, the e-Prescribing flow
should be all electronic and we took the fax process out of it.

On January 2009, this was not really — it relates to e-Prescribing. CMS
published a HIPAA modification final rule. In that rule, two e-Prescribing
foundation standards were updated. We moved to the NCPDP Telecom D.0 and we
also moved to the 5010 270/271 health care benefit inquiry.

On July 2010, we published another IFC. This time we said for voluntary you
could choose NCPDP SCRIPT 10.6. The reason for this is that the long-term care
industry had been working very diligently over the last few years in order for
them to participate in e-Prescribing. Actually, from 10.2 on allowed them to do
this. We adopted a voluntary basis of 10.6.

In 2012, in the physician fee, we adopted version 10.6. That was effective
on 10/1 of last year and we retired version 8.1. We lifted long-term care
exemption, which basically says long-term care to e-Prescribing under Part D,
they are to use the standards that we have adopted and that takes effect on
October 1 of this year. Listening to all the ICD-10 folks, that is another
thing that the doctors are run up against.

In 2014 for this year’s physician fee, we adopted a newer version of
formulary and benefits transaction version 3.0. That is effective on February
28, 2015. It also retired version 1.0.

Just like I said, e-Prescribing is not just for Part D anymore. Section 132
of the Medicare improvements act, it created MIPPA incentive programs that
started in 2009 and it ended last year. It provided incentive payments for
physicians who put down their paper prescribing pads and picked up some type of
electronic prescribing solution.

We found through a SureScripts study that adoption greatly increased because
of this incentive program. It has increased greatly since then.

In 2009, HITECH established incentive payments under Medicare and Medicaid
programs for EPs. This has taken over from the incentive programs. And part of
that EHR certification for meaningful use. e-Prescribing is a core measure. And
what I mean by core measure is there are 15 measures, a core set that the
physicians have to use. And what we are seeing is 40 percent or greater than 40
percent of the e-Prescribing transactions that takes place in the EP’s office
have to be e-Prescribed. Now a physician can claim an exemption if they
prescribe less than 100 prescriptions in the reporting period or they do not
have a pharmacy within ten miles of their practice that accepts electronic
prescriptions.

What is next? OESS is much interested in adopting the remaining
e-Prescribing transactions that we named in 2005 as initial standards, but that
we were not ready for primetime when we adopted them in 2008. One that we are
talking about today is NCPDP SCRIPT version 2013071 and the ePA transactions.
We are also interested in moving forward with structured and codified SIG. That
workgroup at NCPDP — reformed. They are looking at how to make it better into
the workflow. And also, our RxNorm. We did some work with RxNorm in 2009 with
another pilot study we did CMS with Dr. Belagrand(?) and we had great success
with it. We are just looking from industry, the nod from them that they are
ready to adopt these things.

As you can see, we can adopt them fairly quickly with the way we have been
doing it over the last few years through the physician fee schedule and through
ISCs. We can update a standard within probably a 12 month period this way.

Thank you again for having me today.

DR. SUAREZ: Thank you so much for that testimony. I think we are going to
move to Q&A part of it. Suzie, do you have a question?

Agenda Item: Q&A Session

MS. BURKE-BEBEE: You talked about core measures. We were talking here about
meaningful use. Where does ePA fall within meaningful use? Do you know?

MR. MORGAN: Currently, it does not fall.

MS. BURKE-BEBEE: Stage one or stage two, but stage three.

MR. MORGAN: That would be up to ONC because they do the standards for the
software.

MS. BURKE-BEBEE: Is NCPDP or anyone in conversation or is there any comments
coming in from the industry or organizations about meaningful use?

MR. MORGAN: I have not had conversations with ONC about — time, formulating
benefit checks, but nothing on the way of — or stage three. I have not heard
anything prior auth.

MR. SORACE: — electronic prescriber. Would the formulary be available to
physicians under stage one or stage two meaningful use as opposed to
authorization —

MR. MORGAN: They are using the e-Prescribing standards that have been
adopted. However, the payer sends that information back, I am not sure it is
sent back. It used to be sent back in smiley faces or frowning or dollar signs.
It is just the way the payer sends that information back.

MR. SORACE: I think we heard it from AMA. As a point of contact with a
patient, do we currently have a mechanism in the pipeline for insuring that the
provider can see what medications are on the patient’s formulary so that they
can write a prescription to begin with?

MS. GILBERTSON: As Drew was saying, the NCPDP formulary and benefits
standard has been named under the Medicare Modernization Act. It is actively
being used by the industry as part of the prescribing function. The prescriber
upon the patient encounter or even previously might check the patient’s
eligibility. Upon the choice of a medication based on that encounter, the
electronic system can then check against the formulary that has already been
loaded using the standard and can see if there is a step therapy or a prior
authorization or some other alternative information that is exchanged. Does
that answer your question? It is already in use in the prescribing realm.

MR. SORACE: I am just trying to figure out if the meaningful use criteria
actually make that functionality part of the EHR or whether it is going to have
to be a secondary system and an e-Prescribing system that is secondary.

MR. MORGAN: For meaningful use, the e-Prescribing measure is talking about
new prescriptions that are sent electronically from the payer to the pharmacy.
Whether the physician wants to use all the background tools of e-Prescribing
has offered formulary benefit and history. That is all voluntary and that is up
to the physician whether he wants to incorporate that in his workflow.
Meaningful use does not mandate that right now.

DR. SUAREZ: But there is a question because Heather’s comments were and the
question is really about can today providers see real time accurate formulary
data at the point of care. There is an NCPDP standard that has been adopted for
e-Prescribing under MMA to allow providers to access formulary data and prior
to the visit or at the visit. Is that functionality being used by prescribers
in their e-Prescribing system?

MS. GILBERTSON: Correct. The nuance to be specific is currently the
information that is exchanged is at the benefit and the coverage level. What
Heather was bringing forward is something we have been chipping away at the
industry of can you get at it at the specific patient level and get it down to
as far deep as you can drill in that encounter and that is still to be worked
on.

MS. MCCOMAS: There is this transaction that can be used for that, but the
issue is if it is not patient specific, it might be a more general national
level. And then it is hard to convince physicians to check if it might be right
or it might not be right. It is a huge issue. I liken it to trying to drive a
car without turning the keys in the ignition. It is the first step in this
process that has to be fixed.

MR. SOONTHORNSIMA: I am glad you spoke up because I was going to ask you
whether you were supportive of the change that was around the standard, the
2013101. That was very specific. But I listened to your point about prior auth
becoming cumbersome today so I can appreciate that. But I am not sure in your
testimony whether you were supportive of that particular language.

MS. MCCOMAS: Honestly and you can probably tell this from our testimony. We
had a prior position where we were advocating for the X12 standard. Obviously,
the industry has gone in a different direction and ultimately we want something
that works for physicians that it does not cost anything or a little. We are
kind of neutral on which standard should be adoptive. But we think clarity
needs to be provided very quickly because otherwise we are going to be stuck in
this holding zone forever.

MR. SOONTHORNSIMA: But it sounds like what you are looking for is basically
what Jim was asking and what Lynne was clarifying. The formulary — if the data
are provided by the PBMs or the payers, it should be readily available in an
e-Prescribing platform. And patient history and all that stuff should —
eligibility should already be there.

MS. MCCOMAS: That is an additional piece of this puzzle. The standard is one
piece of it, but the formulary is the step before that, but you need to get
this whole thing started.

DR. SUAREZ: Here is an interesting point because what I see is we have the
EHR systems that we have, which are now “regulated” if you will or by
meaningful use and the standards process there. We have e-Prescribing tools or
modules or applications, which are significantly regulated MMA and others. We
have the administrative functions or practice management systems that are
regulated by HIPAA. We have three systems, if you will, in a clinic, the EHR,
the e-Prescribing, and the practice management system regulated by three
different lines. I am very as I think everybody is and Lynne pointed it to is
really very concerned about what is the right place to add this piece into. My
sense is there is clear advantage of really having a standardized, simplified,
close to real time way to conduct the prior authorization of a pharmacy or
medication whenever it is needed because I think your argument is an MMA
argument about over requiring prior authorizations is a concern. We are not
about forcing prior authorization. We are about whenever it is needed
establishing a standard. Where does the standard?

Right now, the standard seems to be regulated under the administrative side
under HIPAA. It seems like the right move towards the direction the industry is
going is really adopting or using the standard under the e-Prescribing side.

I have two questions. One is are the e-Prescribing modules or tools that we
currently have in the industry capable of performing this e-Prescribing using
SCRIPT. In other words, if this were allowed to be done or required or whatever
appropriate procedure is in a regulation process, would there be a need to
upgrade systems or to change the systems that e-Prescribers are using today in
order to meet the standard? Is this already something that —

MR. SCHUETH: Yes, they would have to make modifications to their product. It
could be as simple as a call to a web service or something like that or it
could be a deeper dive and a deeper set of recoding. They are going to have to
do something on the e-Prescribing side.

To the question about where it belongs, I just kind of have a comment and
that is if you go back to our vision — another concern about having it in the
administrative flow is that the idea is in 2006 when we did those pilots and
Dr. Bell and I did these focus groups, the doctors said what I really want is
if I am going to have a conversation with the patient, I want to have that
information with me while I am interacting with that patient. That is when I
want to have it. If it is after the fact, then I have to have a process in
place to call them. I have to pay somebody to do that. It may or may not be
reimbursed. There is a whole bunch of other concerns.

Our vision from the very beginning is to put it in the e-Prescribing
process, not to have a separate administrative function. That is why I walk
through — the doctor goes to pick Celebrex. He or she sees that the prior
authorization is required. Then they can have that conversation. Have you ever
had a situation where it was indicated that you should not take NSAIDs and if
the answer is yes, then maybe we should try Celebrex. If not, let’s try an
NSAID first. It is less expensive. We do not have to go through the process of
requesting prior authorization.

The vision from the beginning was that it be part of the prior authorization
process. We tried to use the 278 and what we found is that it just didn’t quite
work for all us. That would be my comment to you in terms of which one of those
three it falls into.

DR. SUAREZ: And maybe a quick follow up is — right now, we are limited by
the fact that HIPAA does establish the requirement of 278. It would in some
ways almost require an exception or a change certainly to allow that. But as I
recall and maybe I am recalling wrong, but as I recall, there was a — because
what we are facing is a conflict between regulations potentially. If the
e-Prescribing regulations are in MMA were to establish the SCRIPT 2013101 to be
the standard then there would be a conflict because HIPAA regulations say for
prior authorization is 278 and then the e-Prescribing regulation would say
perhaps for e-Prescribing prior authorization is the standard. The question is
really — it would need to be — I guess my sense is it would need to be done
in two places. One is taking it away or accepting it from the HIPAA regulations
because right now it is written there. And then either adding it in the
e-Prescribing regulations or somehow allowing it to happen if it was not
necessarily within the regulations with some other mechanism. It would need to
happen in at least one place, which is in HIPAA because right now HIPAA has
that regulation.

And then whatever happens with respect adopting it as a standard whether it
is under again HIPAA regulation, which does not seem to be maybe the right
place or whether it is in the e-Prescribing type regulations. Then that is a
second point.

MS. GILBERTSON: And hence that is why the “ask”. As part of the
process, the NCVHS would recommend to the secretary and the suggested verbiage
includes rather than telling OESS/HSS where to put it, allow them the
flexibility to figure out where it should belong and to work with the industry
if they need to.

The other point I wanted to bring up. It may not have been apparent, but in
2009 when the draft transactions were first available, we stuck them out on the
website and said anybody who wants to play with them, go right ahead. Since
that point when the states started regulating prior authorization, the industry
got much more interested in what was going on again in this topic. We have some
national vendors in the prescribing environment or in the electronic health
record environment who either actively are participating in I do not want to
say pilot because they are actively doing it right now using the standards or
they are looking to do that within this year. There are some that are either in
pilot or in production or got it on their plans.

DR. SUAREZ: I do not want to ask about whether there might be some conflict
because HIPAA says you should do this, but I would say that. One quick question
about this I have is some states already have adopted some regulations about
this. Are all those states consistently adopting it so that if there was a
national standard then the states will be preempted in some ways? Is that the
expectation?

MS. GILBERTSON: Fifty different ways, right? There are some that have said
when NCPDP brings forth a standard, we will adopt that. There are some that say
when there is a national standard. There are some that are saying a paper form.
It is 50 different ways.

MR. SCHUETH: And like I said, five that are studying.

DR. SUAREZ: Any other questions from members? Any comments from the phone?
Margaret, you don’t have any comments?

MR. SCHUETH: Can I just underscore one last thing? I am sorry for repeating
ourselves. Lynne and I — and the whole reason we brought up the states is
there is a huge sense of urgency in the industry right now. I mentioned the
1/1/2015 deadline. We need for the government to move as fast as they moved on
anything to get to clarity as Heather has requested.

MR. SOONTHORNSIMA: Tony, to your point, I think perhaps one of the things we
have to think about is not only just the language itself, but understand the
rationale why we would approve an exception. For example, a rationale might be
innovations have already taken place. It is really driving all these
capabilities independently. That is one.

The second might be yes, there are standards in place. There are laws that
exist. How do we harmonize those things without giving up the ultimate goals, a
vision that you came up with? We do not want these regulations to slow down the
progression of all these things. Those have to come into play so that we can
recommend appropriately.

MR. SCHUETH: I think that is well said. I think innovation has happened. It
is interesting. A little anecdote. There was a point where before meaningful
use for OESS, they did — AHRQ and OESS was moving forward these standards that
were not ready for prime time. They came to us and said we might be willing to
fund some sort of pilot around electronic prior authorization, but you have to
have a payer that steps up because we have done these things. There are so many
transactions that have so many different stakeholders that are involved. If you
get one or two of the stakeholders that are really passionate about it, but the
other one is not, you do not have anything. In prior authorization, when they
came forward, we did not really have a payer that stepped up, but then one did.

When I talk about the drivers of electronic prior authorization, it is that
payer stepping up and moving forward with not just a pilot, but a live
situation. Right now, 14 percent of doctors that are electronically doing prior
authorization, moving forward with that.

The second is those states. And the third thing is really the pipeline right
now of new drugs that are coming out are almost all specialty. These specialty
medications really need to have prior authorization. They are just so complex.
Or some sort of attractive justification. There needs to be justification for
why prescribed these really expensive medications.

DR. SUAREZ: Thank you very much for the testimonies. We are going to move
very quickly to our next panel. We are going to have a break. Actually, we want
to do no more than a five-minute break if everybody is okay with it. We really
appreciate that. We will be back at 4:05.

(Break)

Agenda Item: Panel 5: Health Plan ID Planning and
Implementation Issues

DR. SUAREZ: We are going to start with some introductory remarks from
Matthew and Chevell.

Agenda Item: HPID Introduction

MR. ALBRIGHT: Thank you, again, for allowing us to come speak to you. I just
want to say in case I do not get to say this again that the panels we have seen
so far have been extremely valuable. We have been surprised. We have been
excited. We have been shocked and awed. This has absolutely been a fabulous day
so far in terms of learning and so we value this very much.

I do want to turn it over to Chevell Thomas to say a few things about the
HPID and where we have from a regulatory perspective and where we have seen —
how we are seeing industry questions coming in.

MR. THOMAS: Thank you. My name is Chevell Thomas. I am a new addition to
OESS. I have been around CMS for a while though. I have worked in Medicare
Advantage Part D and Medicaid. I guess it is my task to introduce HPID to you.
Going back to 1996, CMS received direction from Congress to establish national
standards for electronic health care transactions and health identifiers. Both
the Social Security Act and the Affordable Care Act require the adoption of a
standard unique health plan identifier. Towards that end, CMS published in 2012
the final regulation adopting the health plan identifier that we know as the
HPID.

Also, in our eHealth roadmap, CMS articulates a vision of safe, secure, easy
data exchange. We feel that the HPID is part of the foundation upon which we
build in order to realize that vision.

Moving up to today, most of the industry stakeholders including CMS are
going through a process of analyzing their business structure, evaluating their
systems, conferring with their legal teams all with the goal of meeting the
regulatory deadlines that are spelled out in the regulation.

As we are going through this process, naturally people are getting a better
understanding and questions are starting to percolate. People are getting
together and discussing. As things are brought to our attention, we think about
them in the attempt to address them.

Most recently, the questions that have been coming in I would say could be
grouped into two themes. In particular, these we are concerned about because we
think that maybe some misperceptions of the regulations or maybe some
assumptions that were made that are not explicitly stated in the regulations
have led different stakeholders to believe that there are some more restrictive
provisions than actually are there. I am going to talk about two of those very
briefly.

One is the regulations require enumeration and they also require use of the
HPID and transactions. Many people have linked these two together, but
actually, they are separate because all covered entities, all health plans that
meet the definition of health plan have to get an HPID. But only the covered
entities that identify health plans in their transactions have to actually use
the HPID. Somehow, there has been assumption if I get an HPID, I have to use it
and that is not the case for every individual entity.

Now that we have recognized that this perception is out here, we are talking
with our partners and preparing our communication materials to spell that out a
little more clearly, so that people are not panicking and thinking that there
is this overwhelming burden that is going to accompany the enumeration process.

The second theme that has come up is the idea that the payer ID and the HPID
are the same thing and they are not. We have come to inform that a lot of times
in industry the terms are used synonymously or used interchangeably. As people
read the regulations, they are not really seeing the distinction that we
thought was very clearly made. Again, our intention was never to replace the
payer ID. We do not have the authority to do it even if we had intended to. We
do see this as part of our next task to make sure that people clearly
understand that the payer ID will be there in November 2016 in addition to the
HPID. This angst about having to reprogram all these systems to make this
change is not really what is in the regulation.

With that, I will turn it over.

MR. ALBRIGHT: If I could just say a few things just to top that off and
frame it a little differently. What is both exciting and rather confusing about
both the HPID and the certification of compliance rule, which we published just
this last month is that we are talking about a whole new kind of set of
applicability here. As Chevell alluded to, there is a difference between health
plan and payers. For years, we have only been worrying about the payers.
Payers, of course, are the ones conducting the transactions. They have to do a
5010. They have to do 4010. They have to use this code set. The statutes are
very clear that we are now putting requirements on all health plans, which is a
much broader group of entities than we have ever put requirements before. That
is both exciting because we are going to have a lot more knowledge about what
is in that health plan world, but it is also very confusing because we are
talking about perhaps tens of thousands of entities that we have never put
requirements on and that have not stood up and have been counted yet.

With that, I will turn it over to Laurie.

Agenda Item: WEDI Recommendations

MS. DARST: I am Laurie Darst, Revenue Cycle Regulatory Advisor at Mayo
Clinic and also a member of the WEDI Board of Directors. I also currently serve
as a health plan ID co-chair for WEDI. I would like to thank you all for the
opportunity for us to present today.

As you know, WEDI represents a broad industry perspective of providers,
clearinghouses, payers, vendors, public and private entities. We are one of the
percolators that you just heard about as far as bringing up a number of the
issues that are associated with Health Plan ID.

WEDI has been seeking feedback from our members on Health Plan ID since the
subcommittee hearings back in July 2010 and has held a number of policy
advisory group meetings in addition to some technical advisory committee
meetings also.

In addition, WEDI has established a Health Plan ID Workgroup in addition to
four other subworkgroups to look at business impacts of Health Plan ID.

A recurring theme and I think this goes to Chevell and Matthew’s point is
that we have heard the continued confusion within the indusry as to what Health
Plan ID is intended to solve with respect to our current health care industry.
The industry understands the intent from the original HIPAA regulation was to
resolve routing issues, but these issues have been long solved.

As the industry has further delved into the final rule provisions and
started evaluation of health plan enumeration and implementation issues,
further confusion has evolved. This confusion is evidence as we address the
questions from the subcommittee.

The response to the first two questions that you asked are relatively the
same in that we see the work on both adopting and using Health Plan ID within
the transactions to be minimal at this point. Health plans are still struggling
with the enumeration schema or granularity that is required to be in compliance
with the final rule and how those schemas or that granularity translates to
other standard transactions creates an impact across all stakeholders, which is
difficult to address at this time.

For your next question, I will cover this over the next five slides. I will
first address Health Plan ID and then OEID. What are the key issues and
challenges with adoption of Health Plan ID and other entity identifier and how
can they be addressed? Enumeration under the regulation continues to be a
challenge for many of the health plans specifically with respect to the
definition of controlling health plan and to a lesser degree subhealth plan.
Initial review of the final rule language against the current payer identifier
enumeration leaves many of the health plans to believe that the rule requires a
much greater level of granularity than what is used today.

Trading partners of health plans are increasingly concerned that greater
enumeration will result in a disruption of the current well-functioning
transction flows potentially resulting in payment disruptions and accounts
receivable impacts as well as privacy and security breaches due to misrouted
transactions.

There is great concern that by introducing a new, not equivalently mapped
enumeration into the transactions may reintroduce past issues that have long
been resolved. There is also concern that simply to reintroduce a new
enumeration that is equivalently mapped only replaces one number with another
which spends unnecessary resources.

Other points that cause the industry angst are around the enumeration
requirements for, and I will quote Chevell, health plans, which does not equate
to enumerating all payers.

Adding to this, the final rule preamble text, which Chevell kind of
indicated, there is not a new requirement to identify a health plan in
transactions, but rather only to use their Health Plan ID where they are
identified within a transaction.

Finally, there is concern over the required enumeration of self-insured
group health plans, which I will talk about in a later slide and also the lack
of initial data dissemination from a Health Plan ID database.

How can these issues be addressed from a Health Plan ID perspective. Clear
and unambiguous definition of the intent of Health Plan ID is really needed for
the industry. What business issue is Health Plan ID trying to solve? What is
the cost benefit of implmenting Health Plan ID? Once this purpose is clearly
defined then the required and allowed uses could be clarified. We would suggest
this occurs through discussion with all industry stakeholders to ensure a
thorough understanding of the concerns and barriers the industry is facing.

Onto OEID, there is even more confusion in the industry around the full
purpose and scope of the other entity identifier. Many questions arise
including whether the OEID is used to be similar to how it is to be used with
Health Plan ID. Can OEID be used for atypical providers? Can OEID be used
within the enveloping structures of the transaction? Keep in mind that OEID was
not a concept when the transactions were developed. Therefore, reporting of
OEID in the transaction is not clearly addressed.

Without clarification, WEDI members have concerns that appropriate review of
the standards for accommodation of this new identifier cannot be conducted by
the standard organizations, which is critical for the success and
implementation.

How can these issues be addressed for OEID? We need, again, a clear
understanding of the intended use and purpose of OEID. Given that obtaining an
OEID is optional at this point, we would recommend that we first focus on
Health Plan ID since this is required under the rule. By focusing our attention
on Health Plan ID, it would increase the chances of a smooth implementation
while allowing time for CMS to work with WEDI and the standards development
organizations to further clarify OEID, including the ability to be put and
accommodating within the transactions.

Finally, your question on what is the impact on TPAs and ASOs of Health Plan
ID and certification of compliance? Many self-insured group health plans do not
directly administer their health plan operations. They instaed employ a
third-party administrator today.

Under this business model, these plans do not conduct electronic
transactions within the provisions of the Health Plan ID final rule. These
health plans that are conducting the standard transactions are usually
third-party administrators. There is confusion on why the self-insured health
plans would be required to be enumerated.

WEDI members have expressed that these entities may not realize that Health
Plan ID final rule applies to them and sees educating them as a significant
need moving forward. WEDI is willing to partner with CMS on education and
collection of feedback from the self-funded entities. The impacts of
enumeration of self-funded entities pass Health Plan ID itself are yet unknown.

WEDI only recently held a policy advisory group meeting on the certification
of compliance NPRM and is still in the process of finalizing our comments to
the secretary. As a result, we do not have a comment at this point in time.

In conclusion, WEDI supports the continued effort of all stakeholders
towards meeting the compliance state, but continue the collaboration and
communication among industry participants as needed and must be accelerated in
order to assist those lagging behind and achieving this end goal.

DR. SUAREZ: Thank you. I think next we are going to have Gail.

Agenda Item: Health Plan Perspective

MS. KOCHER: Good afternoon. My name is Gail Kocher. I am the director of
Industry Standards and eHealth for the Blue Cross Blue Shield Association.
BCBSA is a national federation of 37 independent community-based and locally
operated Blue Cross and Blue Shield companies or plans that collectively
provide health care coverage for a hundred million members, one in three
Americans.

I will also be sure to disclose that I am actually Laurie’s co-chair on the
WEDI HPID workgroup at WEDI, but my comments here today at this time are from
BCBSA.

On behalf of the association and our member plans, I would like to thank you
for the opportunity to respond to the subcommittee’s question and provide our
perspective on unique health plan identifier. While HPID is ultimately a local
plan business decision, our comments provided below do reflect collection of
feedback from all of our plans.

Regarding the current status of preparation and health plan strategies for
adopting the new Health Plan ID, all of our plans are aware of the HPID final
rule and are at least in the process of conducting their analyses to determine
their enumeration schemas. Some plans have already obtained at a minimum their
controlling health plan HPID or HPIDs. There are several factors that have held
some plans back from enumerating or enumerating to a full complement of
Controlling Health Plan and sub health plan HPIDs.

Some of these barriers would include the continued industry confusion as to
the business issue that HPID is intended to solve. The definitions in the final
rule to the plans as they have done their legal review do appear to require
greater enumeration than that they currently use.

There has been some lack of clarity on the cost benefit impacts due to the
potential for greater enumeration. Lack of information on other potential uses
and requirements of HPID. Obviously, the certification of compliance proposed
rule. That is still under the comment period. And then some lack of clarity on
the applicability of HPID to self-insured and fully insured group health plans
when those groups do not conduct standard transactions adopted under HIPAA.

What is the current status of preparation and plan strategies for using the
new Health Plan ID? Clarification of the language related to the HPID in the
standards is still being conducted by the standard organization, as the
association currently understands it. We believe that until the SDO completes
that process and the enumeration challenges are resolved, it is really
difficult for the health plans and their trading partners to really begin to
prepare for use of HPID within the transactions.

Once the clarifications are resolved, plans will still need to complete
their strategy planning and begin implementation both for their own system
impacts within their infrastructure as well as communication to their trading
partners of their implementation plans. The longer the clarifications take, the
less time there is available for plan internal efforts as well as communication
to providers and other trading partners to aid their preparation and
implementation.

What are the key issues and challenges with the adoption of Health Plan ID?
You asked us to try and identify how we might suggest some of these issues
would be addressed.

The key issues that our plans continue to face as they work on their
enumeration revolve primarily around the interpretations of the granularity to
which they are required to do that enumeration under the final rule. For some
plans, there appears to be a requirement to enumerate to a much greater level
than that which they use in their current business practice. This creates
concern not just on the part of our plans for their own business practices, but
also a concern for the impacts that greater granulation may have on their
provider and other trading partner customers.

Transaction flows function well overall in the current environment and
collectively all stakeholders in the transaction flows have concerns that a
greater enumeration may result in disruptions to this flow. In the event this
occurs, there is the potential for payment disruption and accounts receivable
impacts as well as privacy and security breaches due to the misrouted
transactions.

We still see the need for further clarification on the intent and definition
of HPID with respect to a health plan and the impact to a health plan that is
not conducting standard transactions under HIPAA. This is especially critical
as related to self-insured and fully insured group health plans.

With respect to the other entity identifier, we support the voluntary
approach to its use under the final rule. Allowing entities that have a
business need to obtain one while not requiring enumeration reduces the burden
to entities that have no business need to obtain one and allows the business
needs to drive the use of OEIDs. After some experience, the industry may choose
to refine OEID requirements, which is much easier to accomplish based on a
voluntary approach.

We do not plan feedback for the fourth question. We are not planning to
specifically address that today. What is the impact on the TPAs and ASOs of
HPID and certification of compliance? Ultimately, the impacts on third-party
administrators and ASOs are unclear. But the potential for these impacts to be
a reality is of great concern to our plans that act in these roles. BCBSA sees
the need to resolve the questions around self-insured and fully insured group
health plans under the HPID final rule before any assessment of the impact of
HPID and certification of compliance can be fully conducted.

We have solicited feedback from our plans on the certification of compliance
NPRM and are in the process of compiling that information in order to comment
as part of the NPRM comment period. Until that process is completed, it is
premature to comment here of any potential impacts.

BCBSA strongly supports the goal of HIPAA administrative simplification to
promote efficiencies and reduce the cost of administrative transaction. The
HPID has a potentially important role to play. The value comes with a narrow
scope and focus on the enumeration and use of the HPID in support of
administrative simplification objectives and as long as there are no adverse
impacts to existing contractual agreements between trading partners.

We believe the final rule supports these principles and we recommend that
further clarification continue to align with these principles. Given the number
of mandates with implementation dates in 2014 through 2016, we encourage CMS to
consult the National Committee on Vital and Health Statistics to develop a
strategic roadmap for administrative simplification and provision
implementations.

This roadmap should balance all mandates from the ACA, not just
administrative simplification provisions along with other RN-HITECH mandates to
work towards avoiding bottlenecks and overlapping resource commitments.

We would also request that the NCVHS work with industry stakeholders in
developing this roadmap. We appreciate the opportunity to testify and I would
be happy to answer any questions. Thank you.

DR. SUAREZ: Thanks Gail. Rob, you are next.

Agenda Item: Provider Perspectives

MR. TENNANT: I appreciate the opportunity to speak to you again. I know it
has been a long day for the subcommittee, listening to very arcane discussions
of code sets, transactions, and operating rules. In fact, it is so challenging
I do believe it is being considered as an Olympic sport.

(Laughter)

MR. TENNANT: I wanted to add my voice to the health plan identifier
discussion. I can tell you that when you look back at the original statute of
HIPAA back in ’96, you look at the ACA Section 1104. My read of it does not
suggest that this number would be used to identify health plans so CMS could
create a certification process, which appears to be the only reason why we are
going ahead with this.

I believe that the goal articulated by the folks that actually wrote the law
back in ’96 was to produce a transparent system. Providers and others would
have the opportunity to know exactly what was happening with the transaction.

Our thought was in order to make that as transparent as possible, you would
need to enumerate right down to the product level because that is whom the
provider contracts with. They do not contract with United. They contract with
the United plan product that is used in the practice.

Our expectations were that we would have this transparency, the final rule
of course that did not produce that type of transparency. You can see here the
compliance date. Now we are looking at 2016 so 20 years after HIPAA.

We certainly anticipated. We were hoping to see some efficiencies, workflow
automation, obviously decreased administrated time spent interacting with
health plans especially on the remittance because it is amazing that providers
will get a check in the mail, unfortunately not EFT, and it will be from a
health plan that they have no contract with. Now they are left trying to figure
out why did I get this check. Is it for the right amount? What patients are
they for? It means somebody has to pick up the phone and call the health plan
and figure out it turns out that one health plan contracted with another to
provide those benefits. It is yet another cost that really could be eliminated.

Again, the idea was that these health plans perhaps down to the product
level would be on a publicly accessible database, easy to look up so you would
know exactly what was happening.

What did we get? We got no enumeration at the plan product level. There is
not a requirement for the most part to identify plans and transactions. Only
when they are currently identified. We are hearing that the health plan
identifier database will not be publicly accessible.

As you have heard very eloquently from Laurie and Gail, what we are left
with is a lot of confusion who should, must, and will be enumerated. There is
little, no, or inconsistent use on transactions. There is no access of course
to the database. What does this lead to? It leads to additional cost and not
just for health plans, but for everybody in the food chain so clearinghouses,
software vendors if they have to accommodate these changes and ultimately those
costs will be passed onto the provider. Again, the value appears to be that CMS
will produce some sort of internal database, which will help them in their
certification efforts.

I did want to quote from the final rule because it was very interesting and
you can tell that they were responding to provider concerns or requests for
granularity. But they basically said we understand that some folks wanted more.
Well, we did not give you that. But we are working with the industry to explore
next steps of enumeration that may include patient-specific benefit plan
information. They open the door. But when you look at the timeframe, we are
probably looking at 2021 to get to that point, 25 years after the mandate. It
is a little bit out of scope for us here because we will all be out of the
business by then. I hope at least.

Recommendations. Clearly, you have heard from the panel that we really need
to rethink what we are doing here. If the only purpose is for certification, so
be it. Let CMS do that and take it off the table. I think, Alex, you said it
best earlier this morning when you said there has to be an ROI to this. Why
move forward with something unless there is an ROI. And physicians have a
saying. First, do no harm. I think that is a very apropos quote for health plan
identifier. First, do no harm. Reconsider. Talk to the industry. Find out what
we need, what is possible, and then move forward. Thank you.

DR. SUAREZ: Thank you, Rob. Margaret, are you on the phone?

MS. WEIKER: Yes, I am and Laurie Burckhardt should also be on the phone.

DR. SUAREZ: You both are on the phone. Go ahead please.

Agenda Item: SDO Perspective

MS. BURCKHARDT: Thank you everyone, Walter, the subcommittee for allowing us
to present. My name is Laurie Burckhardt — but today I am representing from an
X12 perspective on HPID clarifications. And then Margaret will be available to
help answer questions as well.

Welcome to the first — I believe this is the first presentation under our
new X12 template so hope you enjoy it.

DR. SUAREZ: Please let us know when we need to advance the slides.

MS. BURCKHARDT: Yes, not a problem. We are going to go ahead and go to slide
three. The second slide is just a disclaimer. Some of the items we considered
during our review process. As part of X12, Margaret had assigned. I had
volunteered or Margaret assigned. I am not sure which one came first. I had the
privilege of leading the entity workgroup that was developed to address the
very first task was to look across all of our transactions and see about what
is the impact of health plan identifier within the transactions. We have been
working on that for just almost 18 months here. It has been a process, a very
interesting process.

During our process review, we did some of the things that we considered.
HPID and OEID in the same database. We considered the rulemaking timeline.
Other industry initiatives as you can go down the line. I think the most
important part is we considered from an operational perspective. We wanted to
make sure that any change that we needed to do would be carried forward into
the next version so that they would minimize any impact to the industry as a
whole.

Some of the other items that were considered and that we found to be
challenges during a review process was when 5010 was developed three years ago,
actually it was more than that, five years ago, the ID name changed from the
HIPAA National Plan Identifier to the Health Plan Identifier. The name was
wrong and it was in our transactions.

The addition of OEID under the rule making process was also interesting. The
definition of health plan that you have already heard was an issue.

One of the things that we did look at when we considered the changes is that
the changes that were necessary to our transactions were really note
clarifications and in our opinion would not require any additional testing by
the industry. It would be a business decision that they would be making.

The dual use period. One of the things we found in the NPI implementation,
duel use did serve a valid purpose. We wanted to make sure that that could go
forward under the Health Plan ID implementation.

It was going to be a trading partner discussion that had to follow. They had
to talk about the dual use, when to start and end, some of the impacts and just
make it very clear and have that two-way communication. The dual use process
would have to be like I said trading partner agreement and no one could force
anyone to go early.

Slide six and seven just talks about which TR3s we reviewed first. The first
part of the transactions we looked at was the nine HIPAA main transactions. But
we knew that attachments were coming up. Slide seven is the four transactions
that X12 had recommended to go forth as under the attachment rules. We wanted
to make sure that we looked at those transactions to determine whether any
changes were necessary for note clarification on the use of HPID.

One of the items that I should note is that of the 13 — there is a total of
13 transactions. All of them, the nine HIPAA transactions would be a type 2
errata because it is just clarification note clean up. The 837 transactions,
the professional, institutional, and dental would be a type 1 under the X12
language because of a change that we had to make with the element SPR09. In the
SPR09, it is a required element today. When we looked at the HPID and how
everything flushed out under the definition of it did not affect payer, it just
affected health plans, the value of SPR09 was still going to be needed after
the implementation.

Slide eight just gives you an overview. We went out in the month of November
for — we made changes to the guide. We clarified the notes in the 13
transactions. We had a public comment period during the month of November. And
then we had our informational forum at our Birmingham standing meeting on
Monday January 27. This just shows what the comments that we received. I am not
going to go through that.

During the public comment period and the most importantly through the
informational forum that we had, we received the message pretty loud and clear
that there is a really big difference between payer ID and health plans as far
as the transactions were concerned. It is very important that these really do
separate because they do serve two different functions.

One of the items that came out of the standing meeting in Birmingham was
that we were going to remain really silent on all the transactions about when
HPID is required. What we have done in our note clarification is just to say if
you are reporting in HPIDs, this is how you do it. If you are reporting a payer
ID, this is how you do it. If you want to report both to the 837 and the 835
transactions can report both. This is how you report both. Again, we remain
silent on when anything regarding as far as the implementation date itself.

We do have a few note clarifications. We are going out for a second public
comment period. We are hoping to begin in the month of April and we are pretty
much on target. The plan is to have another informational forum at our June
standing meeting and then have the transactions approved coming out of that
meeting.

The next slide shows what — this is an example of the 837. It shows what
the current note reads for the 837 transaction and the current version.

Slide 11 shows what came out during the public comment period. What is
interesting about this is as always our industry is always changing. We had an
entity workgroup meeting on Monday. We have changed this note slightly. Here,
we are removing the dates. If you look at the bullets, one and two we say prior
to the mandated date and then in bullet three we say on or after the mandated
implementation date. What we are doing is we have actually modified these notes
slightly and we removed and we have remained silent, as I have already stated
on the implementation date. We are just going to talk about how to report the
appropriate identifiers.

Just to give time, Walter, for — and members of the subcommittee just to
give time for the Q&A it is just the next slides just show what the current
transactions have for the 837 REF segment and then we actually showed on slide
14 what the eligibility transaction has today.

And then slide 15 — this is where the note — all we are saying here is in
the NM108 value of the 2100 loop you can report payers, providers, PPAs. It is
an element that can report multiple different types of entities. All we are
saying is you are going to use the XV when reporting Health Plan ID or OEID,
otherwise, use one of the appropriate code values. We are just putting it out
there and we are going to remain silent on the when to use it.

That is it. I kind of went through that fast just to try and allow you guys
to get back on track and get to the Q&A. Thanks so much. I look forward to
any questions you may have.

DR. SUAREZ: Thank you. We are going to go to Lynne and then we will go to
the Q&A. Lynne.

MS. GILBERTSON: Thank you. The NCPDP Strategic National Implementation
Process Committee or SNIP, which is a sister committee to the WEDI SNIP
committee submitted a letter in 2011 to the secretary with recommendations. I
have included the link in case you are interested. That was way back when it
sounds like.

The NCPDP Work Group 3 Standard Identifiers went through all the NCPDP
standards where we had given a placeholder to the National Health Plan ID. They
brought forward all the changes. We are undergoing the ballot process to
clarify the language to what the new terms are today.

The SNIP Committee has been meeting to review their 2011 recommendations and
make updates and review the final regs to see what they would need to look
forward to in changes going forward. But unfortunately, the analysis has been a
bit of a struggle and my overarching theme unfortunately is more guidance is
needed.

The HPID will not be used for routing in the pharmacy industry transactions.
If a transaction data element is used to identify a health plan, it would
require the use of an HPID. But so far, there has been confusion in the
industry since the standards often deal with payers and if there is a
relationship between a controlling health plan and a payer. Some clarification
would be really helpful. It almost sounds like from testimony that it is black
and white. If we can get that out to the industry, black and white, then maybe
that will help the question and answers going on.

More analysis would be used once the guidance could come out. We created as
X12 — placeholders for this ID when it would come out so that the standards
affected would not need to actually go through a regulatory process. It is
called an external code list change. We are just modifying the value of that
external code list.

NCPDP is collaborating with X12 for the pharmacy business use of the 835.

Some of the challenges and the issues that have come up during discussion. A
key function for the pharmacy industry is real time access to the HPID
database. When you have a patient standing there who wants their prescription
filled and you cannot because there is an ID problem, it does not make for
happy campers. We have heard that there would not be access. We do not know if
that is something that is a massive little story going around or if it is real.
It would be helpful to have some guidance on that.

The HPID might be used in Coordination of Benefits transactions to identify
a previous health plan in the chain of the claim, for example, but without
public access to the HPID database, you do not know what that number means. It
is just an ID. You cannot perform any validation on it.

The other thing the industry has brought up is that Medicaid uses
proprietary plan IDs for other plans. It is their IDs of these plans. Those are
currently exchanged today. Without access to the HPID database, you do not know
what that crosswalk would be.

Until more guidance is available from HHS, it is unclear when an HPID should
be requested and whether it should be used for payer identification. We may
have a black and white answer to that.

Some entities from reading the regs believe they need more than one
controlling health plan ID to maybe some clarification on that.

Again, back to the database itself, it does not appear that the database is
containing any reference information for the industry. The pharmacy industry
uses the BIN and the processor control number as two very important identifiers
for claim processing. It does not appear those are collected for plans that
would be appropriate.

The other thing they brought forward is the need for a taxonomy of the
business of the plan so that that could be verified as well.

Without these key components, it would be difficult for the industry to
really use the HPID. We want to be supportive and be effective on what the
correct use of the ID should be, but we do not want to steer the industry down
the wrong path or make the wrong assumptions and have this information
available real time for the industry.

One of the other concerns that was brought up was in many of the
transactions the payer or the processor is identified. If that is off the table
that is just fine. We can analyze that and go forward. But what happens when
the payer is a health plan? What should we do then? If we could get some more
guidance on these types of topics and work through the questions and get the
same message out to the industry that would be extremely helpful. Thank you.

Agenda Item: Q&A Session

DR. SUAREZ: Thanks Lynn. Thank you for the testimony. I think we are in the
final steps here. We have the opportunity to have some questions. I see Larry
has some questions. I will start with Larry.

DR. GREEN: Thank you all very much. This abiding request for more guidance.
I would like to ask your help with packing up. Every one of you spoke the words
health plan. One of you mentioned that there was a definition of that. Could
someone remind us of the necessary and sufficient definition of a health plan?
And having done that, one of you sort of talking about a controlling health
plan and another one of you talked about a health plan product. Could you also
define what you mean by health plan product and what you mean by controlling
health plan?

DR. SUAREZ: Can I add to that? If we can define also payer.

DR. GREEN: No. Don’t confuse that. That was her last point. Could we just do
one of them and then if you would like, let’s ask what a payer is?

MR. ALBRIGHT: Larry, that is an excellent question. There is a very specific
definition for health plans in HIPAA. I would love to be able to whip it off
for you. It is very specific, but here it is bubbled down into bullets. Group
health plan, health insurance issuer, HMO, Part A and Part B of Medicare,
Medicaid, Part D, Medicare supplement, LTC, long-term care, employee welfare
benefit plan, health care program for uniformed services, veterans health care,
Indian Health Service, FEHB, that is the federal employees, CHIP, Medicare
Advantage, state high-risk pools, any other individual or group plan that
provides, pays for Medicare that is a health plan.

I will not attempt to answer what a payer is, but that which is not a health
plan would be TPAs, third-party administrators, ASOs, administrative services
only contracts. I think health plan products and I will use quotes with that
because we will not try and define that, but certainly, a product is not a
health plan because it is not identified here.

That was probably not helpful to you at all.

DR. GREEN: Any of those entities you just read off. I guess product is
something that comes from the verb produce. Anything that the Veterans
Administration does is a health plan product.

MR. ALBRIGHT: I assume that is right, but if you say health plan product and
you want to use our definition of health plan product then it has to be a
product from one of those entities we listed. If you are a TPA and you have a
product, that is not a health plan product.

DR. SUAREZ: Maybe Larry just a simple way of thinking of products within
health plans is a health plan has a Medicare product and a Medicaid product, a
commercial product. That is one level. That is a categorization of the products
that a health plan offers in terms of —

PARTICIPANT: It is a line of business.

DR. SUAREZ: There is another term that I think you mentioned and Rob
mentioned and that is contract. There is another level. In the health plan
commercial product, the health plan has many contracts based on a specific
relationship with groups of providers. That is yet another level. The contract
level is even more refined than the product level or line of business level.

DR. GREEN: Rob emphasized the implications of that. Controlling health plan.
What do you mean by that?

MR. ALBRIGHT: A CHIP. A controlling health plan is a health plan, which
controls its own business policy or operations.

DR. SUAREZ: This is all defined actually in the regulations, in the health
plan ID regulations.

DR. GREEN: It is interesting to me that no one in the room knows what it
means.

DR. SUAREZ: You are testing our ability —

DR. GREEN: I am not doing that at all. I am really just working on — the
message from all of you is this requires further guidance. Knowing what this is
would be very helpful. You may or may not recall. My initial question was what
is the necessary and sufficient definition of a health plan about which we
might try to offer some guidance about its identifier? I find that last
exchange neither — basically not answering what is the necessary and
sufficient definition of it, which just as a working hypothesis may be the
reason there needs to be some more guidance. We don’t know what the heck we are
talking about.

MR. SOONTHORNSIMA: If we do not know what we are talking about, it might not
be useful.

MS. BURKE-BEBEE: Once we find it, what is the purpose? There was a slide
that had that like it was assumed. I do not understand the purpose. I can
guess. I can think of, but I have not read the reg to know the purpose.

DR. SUAREZ: The purpose of the Health Plan ID.

MR. TENNANT: I think that is the point that the panel is making. When you
think of an analogy, it is not easy to find one here, but I came up with one.
That is, the National Provider Identifier, which was established under HIPAA,
it set out that each individual provider of services would be issued a number.
But imagine if the number was all graduates from Stanford Medical School, which
is essentially what they are doing here. It really tells you nothing about
their taxonomy, about what they do, where they are located. All it is is a
Stanford medical graduate. That is essentially what we are doing here. It is
really adding very little value to the process and regardless of the
definition. The definition is the problem.

MR. ALBRIGHT: If I May and I think — Dr. Green, I think your questions are
putting it right on the head. We have had 20 years of requirements, which apply
to this thing called health plans. Congress from industry asking for health
plan identifiers said you have to put in a health plan identifier. You have to
identify these health plans. We are now saying every health plan out there,
controlling health plan, the shorthand of that is every parent organization,
which considers itself a health plan. Every health plan out there has to raise
their hand and be counted.

There is a tremendous amount of confusion because the people who have been
doing HIPAA for the last 20 years have not had to think whether they are a
health plan or not or whether they are a payer or not. This is what I was
saying at the beginning. Under congressional mandate, we are asking this group,
which is Stanford graduates because that is defined in statute and that is
defined as what we need to identify.

And then we have a further rule, the certification of compliance, which says
all health plans must certify compliance. Congress is saying everybody who does
a 5010, go do it. No. They said health plans and in statute has a very specific
meaning. I think this group and I throw us in there is having a very hard time
reflecting and having to actually go back to that definition of what is a
health plan. Am I health plan? I think one of these major health plans and
Aetna would say of course I am a health plan. Everybody calls me a health plan.
But if you go through the definition, it could be that only 10 to 20 percent of
their business function is actually a health plan. I think it is a bit of an
identity crisis where we are thinking. We asked for a health plan identifier.
Congress told us to get a health identifier. The regulator told us — now we
are like what is a health plan. I think that is a new thing for everyone in
this room.

MS. KOCHER: I would add to what Matthew said. We have actually had an
opportunity to chat about this on more than one occasion. I think as the health
plans — because traditionally HIPAA requirements have been on the covered
entities that conduct the standard transactions. We have many entities that are
a health plan, that is a covered entity, but they do not do the HIPAA
transactions and that is really part of what is really throwing not only my
plans, but their self-funded and ASO accounts are coming to them and saying do
we need this. What do we need to do? I think it is a combination of where the
requirements have been focused prior to now and just when you — I think I said
it yesterday. You put three layers in the room and ask them to interpret that
definition against the business model and you are going to get at least three
different interpretations. My colleague back at the office told me probably you
would get nine. That is reality. I think you couple all of that together and
that is why we are faced with this conundrum. You start to apply that to do I
have to use it in a transaction or not and that is where all the other trading
partners are starting to go what about us, what happens, what are the impacts.

DR. SUAREZ: I think part of the issue too, Larry, and then I am sure others
is it might take an act of Congress in order to step back from that reality of
having to have a health plan ID just like it would take an act of Congress in
order to change the requirements of health plan compliance certification. I
think from that standpoint that is where a lot of things started really. We can
question the validity, the value, the purpose, the benefit, and all the
implications of having to go through the plan ID process. We are faced with
that and we have to find a way to make it work the best way.

I do have a quick question actually about this because I think there is a
difference between requiring to numerate, which we all can innumerate and then
using the number in a transaction. And the question to me has always been, who
decides when and where do I need to use that number. And to me the answer has
always been it is not at CMS.

CMS said you need to get enumerated and you need to use the number in a
transaction that requires it. Who controls that is the SDOs that develop the
transaction and says in a section thou shalt use a health plan ID. At the end
of the day the question becomes what is the opportunity really that the SDO has
to shape in the appropriate way the places where the plan ID gets used and if
it even gets used because it might end up being that the decision is to be
silent as has been said. I want to ask that question to the SDOs. Laurie and
Margaret, I do not know if you have any reactions or comments to that. I think
that is a very important point in my mind.

DR. BURCKHARDT: Just to answer the question. It is the payer ID or the
values that are used in the elements today are really training partner
specific. When we talk about training partner specific, it really comes down to
if a provider uses a clearinghouse, it could be one, two, three between
provider to clearinghouse. The clearinghouse then sends it to the actual
payer/health plan and it could be A, B, C, one, two, three type of thing. It is
really training partner specific.

One of the things that we are looking at is because health plan and payer as
Matthew and Chevell had indicated earlier is that they are used
interchangeably. Sometimes it can apply to just an entity and sometimes an
entity falls under depending on what hat they are wearing at that particular
time. It really comes down to the payer. If they get an HPID, they could
determine that they want everybody to use that HPID. That is what is so nice
about the direction that X12 is going with our transactions.

MS. WEIKER: Now to talk about who should drive that perspective, should it
be the SDO with what is in the transaction versus OESS or some other entity.
Ultimately, it should be the SDO, I think, which should not be a surprise to
anybody. We gather the business requirements from any entity and then
incorporate them into our transactions. One of those entities is OESS to say
here is a mandate for a national provider identifier, for a national health
plan identifier or a national employer ID or a code set, ICD-10. And then we
need to take that and incorporate it appropriately.

As Laurie and several others have said, in many instances, payer and health
plan are used interchangeably. We cannot use those interchangeably anymore. We
have to think about are we really talking about the health plans or are we
talking about the payer. And depending on what we are talking about, that is
what we need to put in the transactions.

As X12 is going through their transactions and looking at that, we have
noted that it said we need to allow both and in the next version, we need to be
a little bit of clean up. In NCPDP, Lynne mentioned the same thing. A lot of
the times, the payers and the health plan are used interchangeably. And the
pharmacy industry, you have that pharmacy benefit manager. I do not believe
that would fall in the definition of a health plan. But yet our PCN, et cetera
is used for the routing and we do have fields for payer IDs, not health plan
IDs. It is a little bit of a conundrum. To be honest, we probably all have
gotten a little bit sloppy in our verbiage.

DR. SUAREZ: Thank you. Thanks for that comment. I think we are getting very
close to ending. I do not know if there are any questions or any other comments
from anyone here in the membership.

DR. GREEN: Very quick one. I want to go back to Susie’s question about what
is it for and what were we thinking. It is a paraphrase of your question. What
the heck were we thinking that this was going to do?

PARTICIPANT: And for whom.

DR. GREEN: I have been sitting here trying to reconstruct my memory, which I
failed at. I cannot remember well enough to remember. It may have just come out
of conversations with one of your guys or Bill Scanlon or someone. But when I
picked up on this conversation, a key idea about the purpose of this came down
to the word accountability.

DR. SUAREZ: I think in some context, it does. In terms of the original —
part of the original goal really was routing. That was what was said. It was
really the ability to route the transactions to the appropriate place. That is
independent of today’s potential benefit, which I think is where CMS and not
just looking at the use of this for the routing purposes, but for a larger view
of how this relates to health reform, how this relates to C-SILS(?) activities
and monitoring performance of plans and all those things. This now gets a much
larger view and probably purpose, beyond what we have thought originally back
in 1996 of what this was supposed to be used for. I think there is a balance
that —

MR. TALGALICOD: Actually, you said one piece, which is the marketplace. For
CMS, I think it is more than just Medicare and Medicaid. It is now the
marketplaces and for whatever reason we inherited the marketplaces. The
question did come up as we were marching to another October 1 deadline of how
do we use that. Of course, that question is still begged because we were not
really clear how we were going to use it and the intent of it and where we were
going to use it in anticipation of additional rule making. The question begs
for us.

It is a long way of saying what is the intent? But again, 20 years has
passed and now we have a very different reality. For plans out there as well as
for CMS per se is to how does this make sense for us. It is about
accountability. In order to get to accountability is transparency, a word that
Rob Tennant used. I think we just need to look back at what the original intent
was, but not get stuck there because 20 years have passed. What is our current
need knowing that we have health care reform? This is not new. I am just taking
people’s ideas and my brain is now synthesizing. The question still begs. I
said if you get clear on that, then I am hoping that we do not spend another 20
years.

DR. SUAREZ: Well, with that actually thank you, Rob, so much. I think we are
going to end this panel. Thank you again to our panelists. I just want to
express on behalf of the subcommittee and the national committee our
appreciation to all the panelists today. I think this has been one of the
really most incredible hearings we have had with a variety of topics. We had 35
testifiers today. It was a marathon to talk about Olympics. We really
appreciate it. We know how important these topics are, how much time it takes
for each of you to prepare the testimony. We are really acknowledge and
appreciate and thank you so much for your time and your sharing of your
experiences.

I also want to acknowledge Terry’s role in helping us organize all this now
that she is coming in. I think it was incredible to be able to organize it in
six or ten or eight weeks or less than that. I really appreciate that. I think
it was a terrific work of the team. Thank you everybody. Now we are going to go
to public comments. Any public comments?

Agenda Item: Public Comments

MS. KLOSS: Walter?

DR. SUAREZ: Yes.

MS. KLOSS: Walter, this is Linda Kloss.

DR. SUAREZ: Thank you for joining us.

MS. KLOSS: I finally got the right number and I have been on all day. I
missed the first panel due to technical difficulties. I feel every bit as
exhausted as if I were in the room. Congratulations to all those who testified.
I will submit my comments and questions to the subcommittee as we deliberate on
what we have learned today.

DR. SUAREZ: Thank you. Thanks so much Linda. We are on public comment time.
Steve, go ahead.

MR. LAZARUS: Thank you, Walter. This is Steve Lazarus from the Boundary
Information Group. What I am saying now is representative of CAQH CORE, but as
an independent business person who has been in this field for a long time.

I want to back into first Larry’s comment about what is a health plan. If
you were sitting here as the chair of NCVHS in 2002 or 2003, you would not have
asked that question because that issue was heavily debated at that time. I am
just pointing that out because many of the folks that have been debating this
issue recently were not in this business at that time or in the positions that
they are in now. And they are speaking without the knowledge of that debate. We
need to go back to that debate and what the regulations actually say. The
definitions in the HIPAA law and the privacy rule is where the vetting took
place for what is a health plan. It is part of federal regulation. Some of the
other things may not be so clear, but that is and we walked away from that
debate with — and what we learned from it as fact and regulation from a
privacy perspective within the scope of the transactions.

It was very clear that large employers, their self-insured plans were
responsible as health plans for certain responsibilities. We even had
conferences with senior vice presidents from some of the major corporations of
this country speaking as to how they are rolling out HIPAA in their
corporations.

But what also has happened is that we find that when we look at their TPA
contracts or their ASO contracts, there is no specification as to what services
are being provided for the transactions. Nothing. Which ones are covered, what
they are paying for them, what the penalties are for not doing them? I have
looked at many of them. They do not exist.

We have a bad business process going on and implementing the privacy rule
and the transaction rule from the relationship of those employers to their
business associate, TPAs, and ASOs. I won’t go into details of how muddy this
can be, but HITECH sort of turned the tables on the privacy and security side
of this by making the BAs directly responsible for breaches in privacy and
security, but they did not account for transactions and code sets. We have an
issue there.

A lot of this means that the people that are doing the debate now need to
learn from what was discovered and resolved 12 years ago and not go through
that exercise all over again and not start from scratch.

I was in the WEDI peg. I have been listening to the CORE calls on this. Many
of the people asking questions or raising comments are new to this field. They
do not know that this issue was resolved 12 years ago at least in part. We need
to take that into — it was a very insightful question. I am glad you raised
it.

MR. GREEN: Send us an answer.

MR. LAZARUS: They actually read the answer. It is in the law. It is in the
HIPAA legislation. In the privacy rule, it articulates what the rationale is
for ruling it out. We have a privacy subcommittee on this committee. They have
dealt with this. There is an answer. Some people may not like the answer, but
there is an answer. That was one issue I wanted to raise.

The second is dealing with the NCPDP’s proposal for e-Prior Auth, I have
great respect for the organization. I have worked with them before and I think
they have done a great job in vetting this within your standards group. But I
noticed today in the panel there were no health plans directly represented or
their association. And the health plan becomes the recipient of the SCRIPT
transaction from the provider. As I understand it, they could be one of the
processors involved, as Lynne spoke to them. They do not deal with the SCRIPT
transaction today.

The question that should be garnered from them is what is the cost going to
be to them. Can they do it? Do they want to do it? What is the burden on them
from this perspective? We did not hear any testimony on that today. We heard
illusions from one health plan that participate in a pilot. Lynne is going to
say something, which is fine. The panel needs to hear directly from the health
plan industry about this issue. I do not even know how they feel about it.

I know how they felt about it in Colorado. When the law came up for
discussion, which the third point I want to talk about. There is legislation in
Colorado that passed requiring the use of an e-Prior Auth for prescribing. But
there is a little clause that got stuck in that law before it passed that says
not to conflict with federal law. Those of you who are concerned about that law
and that state being in conflict with federal law, it won’t be. If federal law
does not change, then the X12 prior auth is the federal law and that is what
will stay and there will not be any conflict in Colorado. I believe it is stuck
in the final legislation.

That may be true of some of the other state laws that were passed. It may
not be quite as horrific as some have portrayed it to be in terms of fast
action. I do understand we should be looking at it. I am not saying we should
not. I think it is a good idea as long as all the parties are willing to play.
I do not know how Matthew is going to resolve this issue of how we do it. But
if it is good for the industry, we have heard some good things about it today
and there is a way to resolve it, move on. But I wanted to clarify about
Colorado.

And then the last thing is I wanted to point out for personal experience how
this formulary down to the patient-specific issue is very important. Steve has
lived in Colorado most of his life. He has no hair on his head. Larry will tell
you what happens with people with baldheads who do not wear hats and live in
Colorado. They develop skin cancer. If you do not deal with it early, you get
basal cell cancer and you have Mohs surgery done in your head, which I have
done three times. I have not had one in over two years because there is a cream
that is applied to my head every night that keeps the cells from growing. But
that cream has to be prior authed because if you are over a certain age, they
do not like to cover it. The dermatologist or internist has to justify why.

The age is the trigger here. It is not that it is Steve Lazarus. When you
get down to age specific or patient-specific characteristics, that needs to be
known by the prescriber, it is the age. And of course, it got kicked out. None
of the diagrams showed how the patient gets involved in this loop, but they do
more than once in getting through that process. We do not do X12 or NCPDP
transactions. We do phone calls. There is a patient in the loop one or two or
three times when a prior auth takes place on a refill where there is no
face-to-face contact with the provider.

It kicked out this time for me because my wife’s former employer, she is
retired, changed drug plans the first of January. The new drug plan did not
have prior auth given by the last drug plan. The last drug plan required it
every six months anyway. There are patients involved in this process who also
could have a burden ease if we could figure out a way of automating it and
better communicating it as well, which is another benefit that nobody talked
about today. As a citizen, I wanted to bring that up.

DR. SUAREZ: Thank you, Steve, very much. Very insightful as always. Any
other public comments?

MS. GILBERTSON: This is Lynn. Just as a clarification. On the SCRIPT
transactions, this is not a blanket statement, but the medication history can
be exchanged between the prescriber or the pharmacy and the payer. I am going
to use that term loosely. Whoever has the medication history. Those three
entities are using the SCRIPT standard. The ePA, which builds its foundation on
the SCRIPT syntax, would be able to use from the medication history to do the
prior authorization. There is a little — we tried to do as much overlap as
possible.

The other is in the diagram, we glossed over because obviously in a matter
of time, the very first box is the patient. That was the whole point. We are
even working on enhancements to engage other routes into the PA, but we have to
start somewhere. We will continue to grow and develop version X, Y, and Z.

DR. SUAREZ: Thank you. Thanks for that clarification. Any other comments?
Any other public comments at all? Anyone from the phone? Hearing none, we are
going to declare this hearing adjourned. Thank you very much.

(Whereupon, at 5:25 p.m., the meeting adjourned.)