[This Transcript is Unedited]



March 31, 2004

Hubert H. Humphrey Building
200 Independence Avenue, SW
Room 505A
Washington, D.C.

Proceedings by:
CASET Associates, Ltd.
10201 Lee Highway
Fairfax, Virginia 22030


Call to Order – Welcome and Introductions – Simon Cohn, M.D.

HIPAA Update – Maria Friedman, CMS

WEDI Update on HIPAA – Ed Jones; Steve Lazarus ; Jim Schuping

AMA/AHA Vendor Coalition Report on Implementation Issues – Jack Emory; Gary Cavanaugh

DSMO Annual Report – Frank Pokorny; Gary Beatty

Followup on DSMO Request on Transaction Standards for Billing for Supplies – Lynne Gilbertson, DSMOs; Tom Wilder, AAHP-HIAA; Katherine Kuhn

Subcommittee Discussion – Simon Cohn, M.D.

P R O C E E D I N G S (8:40 a.m.)

Agenda Item: Call to Order. Welcome and Introductions

DR. COHN: I’m going to call this meeting to order. This is the second day of
two days of hearings of the Subcommittee on Standards and Security of the
National Committee on Vital and Health Statistics. The committee is the main
public advisory body to HHS on national health information policy.

I am Simon Cohn, Chairman of the Subcommittee and the National Director for
Health Information Policy for Kaiser Permanente.

I want to welcome fellow subcommittee members, HHS staff and others here in
person, and, of course, we also want to welcome – extend a special welcome to
those listening in on the internet.

I want to remind everyone, as we do for every session, to speak clearly and
into the microphone, so those on the internet can hear our discussions and

The focus of discussions today is on HIPAA administrative transactions and
the status of implementation. Also, we’ll be talking about requests for
modifications to the rules and have various conversations about some of the
specific issues coming up.

We begin with a HIPAA update from Maria Friedman, after introductions and
other housekeeping.

Following that will be a presentation by Jim Schuping and other leaders from
the WEDI Board on their recent hearings held on the status of implementation of
the administrative and financial transactions rule. This will be followed by
further testimony and discussion of implementation issues.

After the break, we welcome the Designated Standards Maintenance
Organizations for their annual report and recommendations for modifications to
the administrative and financial transactions final rule and other comments
about process.

Following that, we will have a session where we will be having a
presentation and discussion of a specific DSMO request related to standards for
billing of supplies for pharmacies.

I want to emphasize, as always, that this is an open session. Those in
attendance are welcome to make brief remarks if you have information pertinent
to the subjects being discussed.

We will also have time for brief comments by those in attendance in sort of
an open mike towards the end of the morning.

Finally, for those on the internet, we welcome email and letter comments on
issues coming before the subcommittee.

With that, let’s have introductions around the table and then around the
room. For those on the National Committee, I would ask if you have any
conflicts of interest related to any issues coming before us today would you
please so publicly indicate during your introduction?


DR. HUFF: I’m Stan Huff with Intermountain Health Care in the University of
Utah in Salt Lake City, member of the committee.

If subjects come up relative to HL7, I am a cochair there in the Vocabulary
Technical Committee and have a potential conflict.

Also, with LOINK(?). I’m a cochair with the LOINK Committee, and also with –
if we happen to discuss, for some reason, ICD10 PCS, I have been, in the past,
a consultant to 3M. So I would have to recuse myself from those issues.


MR. REYNOLDS: Harry Reynolds, Blue Cross and Blue Shield of North Carolina
and member of the committee.

MS. PICKETT: Donna Pickett, National Center for Health Statistics, CDC, and
staff to the subcommittee.

MS. GRAHAM: Gail Graham, Department of Veterans Affairs.

DR. FITZMAURICE: Michael Fitzmaurice, Agency for Healthcare Research and
Quality, Liaison to the National Committee and staff to the subcommittee.

DR. WARREN: Judith Warren, University of Kansas, member of the subcommittee.

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

MR. BLAIR: Jeff Blair, Medical Records Institute, member of AMIA(?), ASTM,
HIMS(?) and HL7, and I am not aware of anything that I have a conflict of
interest on that is pertinent to what we would be discussing today.

MS. FRIEDMAN: Maria Friedman, Centers for Medicare and Medicaid Services and
lead staff to the subcommittee.

MS. GILFOY: Elaine Gilfoy(?), independent consultant, Gilfoy Consulting.

MR. SCHUPING: Jim Schuping, Chief Staff Executive with WEDI.

MR. JONES: Ed Jones, Chair of WEDI.

MR. LAZARUS: Steve Lazarus, Past Chair of WEDI and President of Bounty
Information Group.

MR. LOVANO: Bill Lovano(?), Blue Cross/Blue Shield Association.

MS. KUHN: Katherine Kuhn, National Community Pharmacists Association.

MR. BOSOWITZ: Roy Bosowitz(?), NACDS.

MS. GRECO: Kim Greco, Hogan and Hartson.

MS. MC KINEN: Barbara McKinen(?), Astrocinica(?) Pharmaceuticals.

MR. EMERY: Jack Emery with the American Medical Association.

MS. BICKFORD: Carol Bickford, American Nurses Association.

MS. WILLIAMS: Daria(?) Williams, Kaiser.

MS. BARTEEN: Gloria Barteen(?) with Wexler and Walker Public Policy.

MR. KYLE: Frank Kyle, American Dental Association.

MS. GILBERTSON: Lynne Gilbertson, National Council for Prescription Drug

MR. AMONDSON: Todd Amondson, National Uniform Billing Committee.

MS. WILLIAMSON: Michelle Williamson, National Center for Health Statistics,

MS. ECKERT: Karen Eckert, Medispan, part of Walters – Health.

DR. COHN: Shall we let Marjorie introduce herself?

DR. GREENBERG: Marjorie Greenberg, National Center for Health Statistics,
CDC and Executive Secretary to the Committee. Good morning.

DR. COHN: Good morning. Yes.

And before moving to the HIPAA update, I should just disclose publically,
since we are having DSMO and WEDI presentations, that I actually sit on the
National Uniform Claims Committee, representing America’s health insurance
plans, the group that used to be called AHP, HIA(?). I don’t believe, as a
result of that, that there is any specific conflicts of interest, but – unless
there is anything that comes up specifically related to NUCC.

I also was recently elected to sit on the board of WEDI, and I’ll have to
apologize publically to WEDI, since I have yet to attend a meeting B (laughter)
– but I intend to, sometime soon.

But, obviously, if there are specific issues that come before us related
specifically to WEDI or WEDI interests, I will have to recuse myself from that.
Though I haven’t reviewed the testimony, they seem to be more general issues
related to industry preparedness.

Obviously, if there is anything coming before us that relates to the CPT
Editorial Panel, however, I will be publicly recusing myself from those

With that, Maria, would you like to start with the update.


MS. FRIEDMAN: Good morning everybody.

This is going to be a very short update, because not a whole lot has changed
since we gave you an update a little less than a month ago. The numbers –
HIPAA-compliant claims coming into Medicare are now up to about 75 percent.
That is a change. We keep trending upward, and we are very pleased about that.

As I mentioned last time – or Karen mentioned last time – they are
instituting our slow-pay policy starting in July, and our regulatory agenda is
pretty much where it was when we spoke last time. We issued our MPI rule at the
end of January, and we have a couple of regs in process. One has to do with
claims attachment. The other has to do with some modifications to the
standards, and we expect those out probably late summer, early fall.

And that’s all I have.

DR. FITZMAURICE: I hear an awful lot of questions about identifiers, and,
boy, identifiers would really be good to have. Do we have plans for the
health-plan identifier?

MS. FRIEDMAN: I believe that is in the works.

DR. FITZMAURICE: It’s gotta be. Legislation mandates it. (Laughter).

MS. FRIEDMAN: But I can’t – but it’s not – (laughter). Thank you so much,

DR. FITZMAURICE: Do we expect to have a notice of proposed rule making out
by August 31st?

MS. FRIEDMAN: I don’t know. I didn’t bring the regs agenda with me. Sorry.

DR. COHN: Any other questions?

Agenda Item: WEDI Update on HIPAA

DR. COHN: Okay. With that, we would like to welcome Jim. Ed, Steve, are you
all joining for the presentation, please?

Yes, Jim, would you like to grab one of the microphones, so that you have
one also?

MR. JONES: I’m Ed Jones, the Chair of WEDI, and to my left is Jim Schuping,
who is the Executive Director, CEO; and the Past Chair, Steve Lazarus.

Steve, in a moment or two, will go through the findings and detailed
recommendations from our January 27, 2004, hearing that was held in Tampa to
look at challenges and successes with regard to implementation of the
administrative simplification, transaction and code set standards.

What I would like to do, before he does is to give you a little context of
why we did this.

In November of 2002, we heard from our board members and other members that
there was a likelihood of a large proportion of covered entities not ready to
implement the standards and be in compliance in October of 2003.

You may recall that we testified before this group in March of last year and
indicated that it would be worthwhile for this group and recommended to the
Secretary and CMS to consider a contingency plan, and we followed that up with
a letter to the Secretary in April of last year, and, as everyone knows, in
July, CMS came out with its contingency plan.

We also had, last September, a strategic planning meeting of the board in
Savannah, Georgia, that went on for several days, and it included a spectrum of
the stakeholders in healthcare, board members and so forth, and a lot of what
we are now doing with a broadened focus of WEDI came out of that meeting, and,
in particular, we are now having two objectives that focus much more on the
clinical side, particularly the electronic health record, for a couple of

One, the federal initiatives last year dictated that we look at this as
looking forward as an area that was going to be of interest to our members,
and, certainly, to the board and to the industry.

Secondly, a number of the provider and payer groups who were at the
strategic planning meeting felt that there was a very close correspondence
between the ability of providers, in particular, to implement electronic health
records, and the success of the administrative simplification transactions,
mainly because a lot of the data that are collected as part of the clinical
process really populate and drive the administrative side.

As a result of that, we created a new initiative – certainly new for WEDI –
and we call it 4C, and it is really an acronym for foreseeing, looking into the
future. What we have tried to do strategically is to look at three to five
years out and kind of back up and see what we need to do.

This became, really, the context of the hearing that we discussed at that
meeting holding in January, and CMS was very interested in that as well.

Steve is going to go into detail, but there are four very general
recommendations that I wanted to just highlight that came out of that meeting,
and the process was we had, I believe, 51 people who provided written or oral
testimony, and I think we had 26 or 27 who provided oral testimony in Tampa,
provided us with written testimony, which is available out on the WEDI.org

We then had a committee go through the testimony and come up with a draft of
findings and recommendations. We had several meetings to discuss this. We had
concurrence and agreement. It went to the board, and then we subsequently sent
a letter B I believe there are copies here – that was, with attachments, about
25 pages that went to the Secretary in early March. We generally had four areas
of recommendation coming from that.

The first was continue the HHS policy of allowing continency plans as we
move through this transitional period towards compliance with the transaction
and code sets.

There are a number of areas – and Steve will get into this. We really need
to enhance the implementation process, focusing on data content and sequencing.
We need to – for the longer term – revise and enhance the standards development
process to accord more with business practices in the industry.

And then, fourth, and I believe this is very important, is we need to do a
much better job of validating the costs and benefits of transaction and code
set standards.

I addressed this issue – Michael Fitzmaurice asked a question at the ANCI
HISBEE(?) meeting last week, and we addressed this, and our feeling on ROI is
we spent quite a bit of attention looking at kind of the national accounts
basis of cost and benefits, but we haven’t done a very good job, either as the
government or the industry, in conveying to stakeholders, in terms that they
can easily understand – and I am focusing primarily on the provider side,
physician side and dental side – but providing calculus and ways to interpret
return on investment that they are going to make to implement these standards.
So this is also a very important component. We need to focus much more on the
micro side than on the macro side.

One other area that I wanted to mention briefly was – in accord with this
broadened objective – is what the WEDI Foundation is doing, and we are focusing
on implementing these transactions in the rural arena, and both the 4C
Initiative and the WEDI Foundation Rural Health Initiative, we have
documentation here, and I think Steve may cover that a little bit as well.


MR. LAZARUS: Thank you.

Good morning, everyone.

I am going to highlight through this letter to Secretary Thompson several of
the key points, starting first with the findings, and then go back to the
recommendations which are in the first part of the letter.

I think it is important for this committee to understand what the findings
are, so they can understand the basis for the recommendations.

I might also comment that, with regard to Ed’s discussion of the 4C
Initiative, several of these findings and recommendations may have value with
regard to planned implementation of other similar types of electronic data
implementations throughout the industry, particularly those that involve
multiple trading partners. They may not be unique to HIPAA at all.

So moving to page 14 of the document, which is Exhibit B attached to the
letter, is a summary of the findings from the testimony, and one of the
comments that I would like to make is that the findings were very easy to
summarize for the committee. There was a lot of consistency among the
organizations testifying as to what the basis for these findings are. Our job
was to categorize them in some meaningful way and then base recommendations off
of them.

The findings group into five categories, which relate to trading-partner
compliance – the regulatory issues, communication issues, data-content issues
and cost-and-benefit issues. I want to highlight these as we go through,
starting on page 15.

The first set of issues are the trading-partner compliance issues. These
are, for the most part, issues between providers and payers or health plans,
but they can also involve – trading partners could be providers to
clearinghouses or other agents and then to health plans and back in the other

Unlike privacy and unlike most of security implementation, to implement the
transactions and code sets, the trading partners have to cooperate. They have
to be defining things the same way, and a lot of testing needs to take place,
because both parties have to interact with each other. It is not something that
you can do by yourself. So the trading-partner dependency is a critical-path
issue. We have to communicate and collaborate to get this job done.

The volume and complexity of multiple testing partners was a constant theme
in the testimony. Most of the providers and vendors and clearinghouses that
testified have done testing with Medicare as a first step, and we heard today
that Medicare’s claims volume keeps growing, and that’s as they started, so one
of the cautionary items that is not here in the document is that Medicare may
have a higher transition rate on the claims transactions than almost everybody
else, because that is where most of the vendors and providers started, and
others will follow or have followed.

We have software vendors that were not prepared, and you’ll hear in other
findings and in the recommendations that the software vendors are not covered
entities – we know that – but they play a key role in implementing the
transactions and code sets, and we need to find ways to reach out to them and
incorporate them more aggressively into this process, so that the covered
entities can perform their functions.

Related to this is an issue which will come up again and again in the
findings and recommendations, that it doesn’t seem best to have one deadline
for everyone for every transaction in the code set, that everybody had this
October 16, 2002 and then 2003 deadline, and we are racing towards that
deadline all at the same time, when, in fact, there are lots of things that
have to happen after the first player gets their ducks in order, and we’ll talk
about that in the recommendations.

The addenda delay delayed testing. WEDI knew this. WEDI aggressively
communicated with the Office of HIPAA standards to – and the government – to
release the addenda after it had been approved and ready to go, back in October
or November of 2002, and it was delayed until February, and those few months,
while they seem like few, were crucial to where we are today and where we were
at the end of the October 16, 2003 period, in part, because the delay in
getting it out caused a lot of people to think it was never going to happen.

Most vendors didn’t start sending out their software and begin testing
>til the addenda was published, because they didn’t want to do the work
twice, and many of the capital investments and labor investments for 2003 were
set in budgets during November and December of 2002, while this addenda wasn’t

So I think it bears on some of our recommendations that we need to have a
more reliable, predictable process for getting these regulations out the door,
because they have a significant impact on the industry with regard to their
timing as well as content, and this came out with regard to the addenda being a
good example.

Test data. We don’t have standard test data to be used in this testing
process, and if we had that capability or resource, many of the people who
testified thought the testing process would still be complex, but less complex
than it is today, and it’s something we’ll look at at the recommendation level.

We have a lack of coordination between trading partners. You know, I’m
ready, you’re not. We heard a lot of that before the contingency plan got put
in place, and there is a daisy chain of fact which was one of the constant
themes that we heard, where a provider will send a transaction to a
clearinghouse who sends it to another clearinghouse who sends it to another
clearinghouse before it gets to the health plan, and the same thing happens
when we come back, and this daisy-chain effect and the lack of coordination of
knowing exactly what the chain looks like contributes – as we heard and we’ll
talk about later – to the problems of not even knowing where the errors occur
in the chain when they occur. So we’ll talk about that in a little more detail
in a few minutes.

And then we have issues relating to Medicare crossover. Medicare contractors
have not completed the transition to a new standard for Medicare crossover
claims, and this is slowing down the crossover process for Medicare to others,
and while that is not the only crossover process that occurs, it is a very
large piece of the overall crossover business.

Next, I want to turn to the findings related to the regulatory issues. There
were concerns addressed regarding the transactions and code sets regulation in
the following areas:

The complexity of the transition. All of the items I have just talked about
and the report we just heard from CMS on status relates to the claims
transactions and not to anything else. We have a whole set of other
transactions that are a part of the regulation that, as you’ll hear, are
largely unimplemented at this point, and we need to work on those. It is not
enough to implement the electronic claims. To get the value and benefits out of
this process, the other transaction sets need to be implemented, and while we
focused on claims as an industry appropriately, because that is where the
cash-flow dependency is to preserve what we have, to get to the meaningful
benefits of administrative simplification, we need to implement the rest of the
transactions and code-set standards.

The impact of the addenda and ASCA(?) was also significant. I am not going
to go into detail here about that, but we also have interpretation of technical
requirements which continues to be an issue, that people working in good faith
look at the regulation, they look at the implementation guides, they make their
own interpretation, they look at the white papers, then they say, this is how I
view this. The trading partner views it a different way, doing the same
good-faith effort, and we don’t have a process that is timely or a good place
to go for resolution of some of these good-faith differences of opinion, if you
will, as opposed to those who are doing little or nothing, and so we’ll see in
the findings some recommendation about how to proceed with that issue, but
there are a number of these interpretation differences of technical
requirements that cause us to either delay the implementation process or to
just stall it, because we don’t have an authority to go to to resolve the issue
that everyone will buy into.

Moving on to page 18, the standards development process has some issues. We
found that there’s a lack of participation of providers in the X12 end process,
and there is a general concern that the content standards were not piloted in
the real world prior to adoption; that is, we developed all these standards and
put them out there as standards, and then they were adopted through regulation
as being required, and there never was a thorough pilot test from end to end
with real users in a variety of environments to know if they would really work,
and failing that pilot, a lot of the problems that we have experienced have
occurred, and because this is a regulatory process with compliance, we don’t
have as much wiggle room to make it work or adopt it on the fly, so to speak,
because of the regulatory process involved as well.

WEDI has tried to foster at least a partial solution to these issues in
trying to speed up the changes through the regulatory process and through the
standards-development process, and, quite frankly, we are interested in moving
forward under the recommendations on these issues, but we have not been very
successful in either side of having the parties involved come up with their own
solution to the problem, and we are going to have to foster some other
methodology to resolve these issues.

System vendor compliance is something that I have already mentioned,
continues to be an issue. It is a mixed bag. Not all vendors are bad. Many, in
fact, have done a lot of good work to implement capabilities in their systems
for providers and health plans and clearinghouses to do their job.

However, most waited for the addenda to be published before they delivered
their upgrades. Most ran into resource problems, in terms of everyone having to
do all of these things at once. Many are only supporting the
regulatory-required transactions and code sets, and that presents some issues
with regard to – we’ll hear later about acknowledgments are not a standard that
is recognized currently under the HIPAA regulations, and, yet, it is a piece
that could be important to resolving a number of these issues, and many of the
vendors have chosen not to implement those standards, because they are not
required, and so we’ve got those issues as well.

We have code-set concerns that were raised during testimony. Number one
issue on here is the adjustment reason codes, which are part of the 835
remittance advice transaction, although their standard are a much smaller set
of codes than what providers – payers used to use to provide reasons for
adjustments, and they are not adequate to allow the provider community to know
what the reason is for the adjustment, so the phone calls and faxes occurred to
the health plans anyway, so that they can process the transaction on the
provider’s side, and so we haven’t saved anything in administrative
simplification with regard to how to handle that material on the provider or
health-plan side, and we need to come up with a different way, and, again,
because we are in a regulatory process with compliance, we can’t revert back to
the old proprietary codes which are not standard.

No one really wants that as the end game anyway. We need to fast track a
solution to this, and it particularly effects the larger providers, the
academic medical centers and more complex organizations, more than the smaller
providers, but it is a constant theme that we have heard of before we heard
this testimony, and at the testimony.

We also heard that although the WEDI – the CPT code set was specified in the
HIPAA medical code set. The CPT guidelines and instructions for defining those
codes and how they are used is not included in the implementation guides, and
so there is a lot of different interpretation going on as to what those codes
actually mean, as opposed to have a standard interpretation of what they mean,
and that should be fixed, and that was the recommendation of the findings.

Trading-partner agreements. A lot of issues regarding implementation of
trading-partner agreements where they didn’t exist before or creating new
trading-partner agreements because of HIPAA slowed down the testing and
implementation process, and a lot of folks thought they had to have
trading-partner agreements where they didn’t have them before. Maybe they did
and maybe they didn’t, but the process of going through that just made it more
complex than we imagined it would be.

The next finding in this area is the acknowledgment and error-reporting
issue. We have standards under X12N to use for electronically reporting
acknowledgment and error reporting. They are not part of the HIPAA transaction
and code set, a family of regulations at this point, and so they are not –
first of all, they are not being uniformly used, and even the standards
themselves, people choose which one to use. There’s some choices, and so we
need to deal with this issue in terms of standardizing the use of
acknowledgments and reporting of errors in some meaningful way.

Contingency-plan impact. The impact was good, in some regards, because it
allowed people the time period to implement we were working in good faith and
those who were ready to start in good faith, but we also heard testimony that,
in the future, contingency plans may need to be considered on a
transaction-by-transaction basis. So, for instance, we are now, for Medicare,
hearing a report of a high percentage of claims being submitted in the correct
format, but we don’t hear anything about the rest of the – the other

Other health plans, we know, are increasing their volumes in the claim
format. At some point, the claims volume format and acceptable content will be
someplace where we can say, okay, we’re there or close to being there. That
doesn’t mean the other transactions are ready, and so we may need to consider a
staged-by transaction or transaction-pair contingency plan in terms of when we
end contingencies or do new contingencies in the future, if we take on
something as complex as this.

And then, lastly, the compliant process, we heard testimony the covered
entities were reluctant – primarily providers – to file complaints with their
names associated with them, because they were concerned about actions being
taken by their trading partner that might be adverse because they raised a
complaint. They also testified that they expected that the first thing that CMS
would do if they raised a compliant was to tell the parties to try to work it
out between themselves, so many organizations are trying to do that before even
raising the complaint – again, trying in good faith to resolve the problem and
do their best effort to resolve it before a complaint is filed – and those are
the processes that are going on.

So we don’t see as many complaints being filed as some would like to file or
think should be filed, because of those and the related issues.

Now, on the communications-issues side, the findings were that there is poor
communication between covered entities. The communications often are changing
because we find out more as we implement these, so, sometimes, things get

We heard testimony, in some cases, that health plans have their companion
guides and their testing process on their website for all to use, but if they
don’t work, there is nobody to talk to on the phone to get the problems
resolved. It is assumed that that happens, and if it doesn’t work, there is no
way of dealing with it. There are communications issues. We need to increase
communication among the covered entities.

We need an authoritative source for information. There are issues that have
come up that we just don’t have an authoritative source to go to that can
respond quickly in resolving the issue as to what the right way to go is, and
this is after organizations have done a good-faith effort on communicating what
they think is a reasonable interpretation of the regulation, the implementation
guides, the white papers, their own experience. We still have differences of
opinion on technical issues, and either through the X12 process or through the
CMS FAQ process, we don’t seem to be getting quick action to resolve a number
of these issues.

Instructions in the implementation guides. We heard testimony that the
implementation guides are an issue, the companion guides. WEDI and CAQH took on
a project in 2003 to help with this issue, and we did two things. We created a
website which we share. It is going to be hosted on the WEDI site, but it is
shared with the resources of the two organizations, and we had developed and
published a model companion guide, which organizations could follow, which at
least would standardize the format in which these specific covered entities’
information would be published, and many covered entities followed that model,
but not everyone did, and so that – but the model is available for adoption and
use, voluntarily, at no cost.

Secondly, on that same site, we offered, at our own resource expense, to
publish the testing and production schedules by transaction for each health
plan that was willing to post that information publicly on our site, and 25 to
30 or so health plans did so early on, and revised it as things changed, but we
don’t have hundreds or thousands of health plans publishing that information on
site, and there is no central resource – even though we have made it available
at no cost to health plans – nationally to publish that information, so that
providers, clearinghouses and vendors have information about who is ready to
test, in production and when, and hot link to their sites for detailed

We continue to support that resource and hope that there is a way of dealing
with this issue, because there is a need for it, and we’re heard through the

Next, communication limitations is a barrier to completing the testing and
production. This has slowed the progress towards implementation.

And, lastly, we have the data-content issues. We have incomplete data
content. We have difficulty in collecting data. It may take a long time to
resolve some of these data-content issues. It goes back to the earlier
recommendation, in part, of not having sufficient provider participation in the
standards development. There are data items that are part of the data content
that are not easily collected in the provider community, and that is presenting
part of the problem.

We have data standard maintenance organization process. There are
accusations that some payers continue to establish or interpret data
requirements in the companion documents that are not consistent with the
majority of the payer community, and that is presenting, again, inconsistencies
for everyone.

And then we have the last finding in this area is the lack of unique
identifiers. Since the testimony was taken, we have had published the final
rule on the provider identifier. We still don’t have – and Michael asked the
question about the health-plan identifier. We don’t even have an NPRM on the
health-plan identifier, and the findings of the testimony and the
recommendations – this is probably the most important new regulation or NPRM
that CMS should be addressing within the HIPAA family right now is to get this
national payer identifier out for comment so we can move down the path of using
that national payer identifier as we move forward in achieving the cost
benefits of administrative simplification.

The cost-and-benefit issues, I have already talked about this. The
transactions are not fully applied, and we will not achieve the full
realization of the cost benefits of administrative simplification until they
are. That was the vision that WEDI created in 1993. We are not there, and,
quite frankly, we are not close to getting there within the next year or so at
the pace we are moving, because of the complexity of all of this.

The expensive implementation exceeded expectations. There are a variety of
details in the findings about this.

We also – so I am going to move now to the recommendations, but these
findings provide the basis for those recommendations, and they are summarized
on page 3 or Exhibit A, on the front page. We are going to talk to the
underlying section, starting on page 4, and the recommendations fall into
several categories, the first of which is to continue HHS policy of allowing
for contingency plans. We think this is important.

We recommend a continuance of this process with emphasis on moving health
plans and clearinghouses into full compliance while providers complete the
testing and implementation.

The reason for this goes back to my earlier comments on the findings we have
to stage, to some degree, the priority or the implementation process, so
someone gets done first and then the rest of the folks can test with them, and,
in general, when you get beyond the claims issue, you can generalize this to
say that the receiver should implement first, and then the clearinghouses, so
that the submitters have something to test against that is real, and that is a
general principle that you heard throughout the findings, and it should be part
of the recommendations for the implementation, and that means for the
remittance advice, the providers have to be ready first, because the payers are
submitting it to them. So don’t take this as being payers always first. It
depends on who the receiver is in the process.

Second, focus efforts on implementation of non-claim transactions. We have
already indicated this and why. WEDI may initiate a policy advisory group to
determine the effective measures to accelerate the use of the transactions that
we are very interested in helping the industry understand where the benefits
are and how to best achieve them, and that ought to – we think WEDI’s focus is
part of encouraging this process of using the other transactions.

Continue the efforts of outreach. WEDI recommends the SNIP(?) Forum and
regional SNIP affiliates utilized to facilitate this effort in addition to CMS
continuing its roundtables, and we note that there hasn’t been a roundtable
since the first of the year. We hope that CMS pursues those discussions again.
They were very widely attended, especially by the provider community in
understanding what is going on and getting the message out that these are for

Item number two, enhance the implementation process. Do less at one time to
– in a more realistic time frame. That is probably one of the very big lessons
learned, and we should carry that forward. This was very complex and too much
at once, and we need to bite off smaller pieces in the future.

WEDI recommends that future rules consider and establish realistic time
lines for completing all the required actions for successful implementation.

If it appears that implementation cannot be accomplished in a reasonable
period, WEDI recommends that the implementation be subdivided into component
parts that can be completed separately.

The WEDI-SNIP transactions and codes, that work group attempted to do this
with these transactions and code sets in its sequencing white paper, but the
industry largely did not adopt the sequencing until the last minute. So this
principle has been known for a long time, and the reality of its importance has
now surfaced, and we think that that is an important recommendation to move
forward with.

The phased implementation by entity and transaction, I have already talked
about a little bit. This should be importantly considered as part of any new
implementation effort.

We should establish standard communication protocols. WEDI recommends a
review of the communication and transmission process currently being used, and
definition of acceptable communication and transmission methods. We need to
have some more detail associated with this, but that was a theme of a barrier
that came up in the findings we need to move forward on.

We should develop standard test data, and that would make the testing
process much easier if we had standard test data.

WEDI recommends a feasibility study to develop national test data. We need
to figure out how to do that and then implement it.

Pilot standards prior to issuance of final rule. Strong recommendation for
this. This will identify the flaws in the standard that can be corrected before
the final rule is issued. We shouldn’t be starting doing pilots after we have
final rules, and, as a side note, one of the places we could start this with is
the claims attachment, which seems to be the next transaction-like standard
coming down the road. We should have significant pilots on what is proposed for
the claims attachment from end to end before we have a final rule on claims
attachment, so we understand what the implementation issues are and the most
cost-effective way to get to the benefits. There may be others that are
applicable as well. I just used that as an example.

Next, we should establish an authoritative technical interpretation of the
implementation guides. The process we have today isn’t very helpful to the
industry. We recommend that an authoritative industry forum be established to
answer questions, and that we in the SMO organizations should be part of the
effort to develop the frequently-asked questions utilized by CMS.

When we talk about authoritative, people are looking – the industry is
looking to CMS as the authority, and we need to find some way of them either
delegating that authority or implementing the other components into their
process for that authoritative recognition.

Education system vendors on needs to adhere to TCS regulations, both from a
compliance perspective and from a cost-benefit perspective to their customers,
we need to do more of that. We recommend continued outreach to covered entities
to ensure their systems vendors and those servicing as business associates
understand the responsibilities under the regulations.

The third area – is standards. We need to enhance the outreach for provider
input into standards development. WEDI recommends the CMS, the SMOs, WEDI and
the standards development organizations collectively generate provider
outreach, examine this issue and develop recommendations to resolve the issue.
We have to do it together. No one party can do it on their own.

Next item is encourage business decision makers to participate in the
standards development. We have had too much standards development by technical
people and we need to get the business process management involved in the
standards development process.

WEDI recommends that CMS, the SMOs, WEDI and the DSSDOS examine this
situation and determine what, if any, changes in the standards process might be
warranted. Again, it’s something we need to do collaboratively and together to
solve this problem. We need to expedite the process for correcting errors in
the standards. WEDI recommends the CMS, WEDI and DSMOs address this matter and
determine whether an expedient change process can be developed or should be
developed, but it takes too long, when there are obvious errors in the process.

We need to develop solutions for addressing data issues with coordination of
benefits. There is a lengthy discussion in here about coordination of benefits,
and you should not take that to mean it was more important than the other
recommendations. It just took a lot of words to explain what the issue is so
everyone will understand it, and there are multidimensional aspects to this,
but it starts with the process today is broken, even with the standard,
partially because the 835 is not widely used yet, but we have different
interpretations by health plans as to what is required if they are the
secondary payer to receive enough information to get coordination of benefits.

The other issue which WEDI actually has been struggling with for over a year
now and will try a new effort to resolve or help resolve is – we have started
this a couple of months ago – we have situations where the first payer requires
an institutional transaction to be filed, and the second payer requires a
professional transaction to be filed, and the provider is stuck with not having
the data to file the second claim based on remittance advice from the first
claim, and this comes up not only in home care, but in DME, and there is a long
list of other areas which we are trying to assemble where there are different
requirements among health plans as to what type of transaction they require for
payment, and we are starting by inventorying the issue, and, from there, we’ll
try to make a recommendation as to how to resolve the problem, but it’s fairly
widespread, and a big part of what this COB issue is all about. It is not the
only issue. There are other issues described here, but it is one that is not
just a slam dunk, somebody does something and it is resolved. It’s an
industry-wide problem.

We recommend, that the industry workgroup be established to determine
options for resolving these issues and research the matter of COB data
requirements, and we are working on pieces of that now.

On the issue of Medicare crossover problems, we recommend that CMS review
crossover requirements and determine whether use of the NCPDP standard and the
adopted version is still appropriate. We also recommend that CMS provide clear
instructions to Medicare contractors on how to populate crossover data items in
a standard manner. We have differences of interpretation among the contractors,
which is causing problems in this area as well.

Turning to page 11, we have a need to address, in a timely manner, data
content coding, assignment, assessment and revision issues, and there are four
recommendations listed here. We believe they should all be dealt with
appropriately, and they deal with more consistent use of data and a more
predictable process for updating and maintaining the codes.

Next, we require the use of standard acknowledgment and error reporting. I
have already talked about this among the findings, but we need to implement
that process in a standard way, and we recommend this be done as quickly as
possible, because the lack of a standard process for acknowledgment and error
reporting is bogging down the whole implementation process.

We recommend conducting an assessment of new technologies and encourage
that. The regulations seem rather restrictive, and there is some flexibility to
do this, but perhaps more restrictive than it needs to be, in terms of moving
towards new technologies, particularly important because of the need for
real-time technology to resolve issues around some of the transactions,
especially eligibility, claim-status inquiry and others where the answer is
needed fairly promptly.

We recommend also that we expedite the implementation of the unique
identifiers. We have already discussed that. It is here as a recommendation as

On page 13, we have discussion to validate the cost of benefits for the
transactions and – implementation.

I might point out, while many in the industry view HIPAA transactions in
code sets as a compliance issue, many of us started this process because of the
benefits that could be achieved through administrative simplification, and we
should take both views as we look at the recommendations and how we move
forward, and we believe that conducting realistic cost-and-benefit studies are
important. We recommend that realistic cost-and-benefit studies be conducted to
validate the proposed savings and to encourage industry movement towards
cost-effective solutions.

Don’t forget, the providers, for the most part, for most of the
transactions, are voluntary participants in the process, and the best tool we
think we can have to encourage them to use the non-claims transactions is to
demonstrate that they have cost-benefit savings for everyone in the process.

Next recommendation deals with scheduling a review of such studies to ensure
realization of the benefits. We think followup studies should be done on the
effectiveness of the implementation.

And, then, finally, we should identify further opportunities to achieve
administrative simplification. This didn’t stop with the implementation of this
current set of transactions and code sets. We need to continue to identify
ongoing opportunities to drive costs from the system and to simplify the
administration of the healthcare system, and that was the goal that was
articulated in 1992 and 1993, and we still need to keep focused on that goal as
part of this process.

And Ed and I and Jim are available to take questions.

I do want to thank the 51 organizations that submitted testimony and the
committee members who spent a lot of time in putting together these findings
and recommendations.

DR. COHN: Well, Steve, thank you.

I think what we are going to do – now, first of all, I understand that these
recommendations have also been directly communicated to the Secretary, also, as
I understand. So –

MR. LAZARUS: Yes. That’s correct.

DR. COHN: So, now, we actually have our two other pieces of testimony, and
then I think what we’ll do is to figure out whether we take a break and then go
into general discussion or exactly how we handle this, but I understand that
there’s some testimony from – a statement of the HIPAA implementation working
group, and I think maybe we would ask they come forward with that statement,
and then I understand CMS wants to make a comment also, and, as I said, then
we’ll sort of figure out – we’ll take a break and then have discussion or what
at that point. Obviously, we’d like you to stay where you are, please.

Agenda Item: AMA/AHA Vendor Coalition Report on
Implementation Issues

MR. EMORY: Dr. Cohn, members of the subcommittee, good morning.

My name is Jack Emory. I’m Assistant Director for Federal Affairs and
Outreach at the American Medical Association. I’m presenting testimony today on
behalf of the HIPAA Implementation Working Group or Working Group, a healthcare
provider and vendor coalition.

The Working Group is pleased to have this opportunity to share our
recommendations on implementation of the HIPAA electronic transactions and code
set standards.

The Working Group includes the American Medical Association, the American
Hospital Association, Laboratory Corporation of American Holdings, Web MD and
AFFECT(?) and collectively represents many of the nation’s physicians,
hospitals, health systems, one of the nation’s largest clinical laboratories,
other healthcare providers, clearinghouses and vendors.

The Working Group was formed to help providers and vendors better understand
the standards modification process and to increase provider and vendor
representation in that process.

We offer the following suggestions to further the objectives of reducing
cost and increasing efficiency in healthcare administration. HHS must act if
administrative simplification is to achieve its goal of reducing healthcare

The HIPAA statute requires that standards be, quote, Abe consistent with the
objective of reducing the administrative cost of providing and paying for

The current haphazard migration process has increased transaction cost and
continues to be a risk of disrupting healthcare payments, and, therefore,
healthcare services.

AFFECT, AMA, AHA and Web MD have met with Medicare and Office of HIPAA
Standards about the obstacles to HIPAA compliance faced by providers and
vendors. WEDI, through its hearing process, has identified many of the barriers
to current transition efforts, as you have just heard. We applaud them for
their comprehensive work in this area.

However, without HHS leadership, the standardization process will falter.
The Working Group recommends a strategy of rational migration and offers the
following specific suggestions for implementing administrative simplification.

HIPAA Principles. HHS actions with regard to implementing administrative
simplification should be guided by the following principles:

First, in order to comport with the intent of administrative simplification
under HIPAA, including cost containment and increased efficiency, a) payments
of claims should not be disrupted during the transition; and b) claims should
not be rejected because they are missing data that payers do not need to
process the claim.

Second, standards should impose proportional burdens on the payer and
provider communities with regard to data collection.

Third, the standards process change must be made more efficient, effective
and fair to the provider and vendor communities.

Modification of the CMS contingency plan. The recent modification of the CMS
contingency plan delays payments for providers that do not submit claims in the
HIPAA standard format. However, there is no indication or representation that
all CMS carriers and fiscal intermediaries will be able to accept
HIPAA-formatted transactions by the July 1, 2004 deadline.

The modification is unfair in that it imposes penalties exclusively on
providers and fails to require payers to offer standard electronic remittance
advice, eligibility and claim status transactions prior to terminating their
contingency plans for claims.

We urge CMS to take the following steps immediately:

One, continue the contingency period. Continued use of contingency plans is
vital to maintaining provider cash flow. Widespread use of contingency plans
has prevented the administrative train wreck predicted in the fall, and CMS
should not jeopardize the progress made to date by terminating the contingency
period under which providers are submitting and clearinghouses and payers are
accepting claims.

Before considering contingency plan termination, it is essential that HHS
develop an accurate understanding of the health field’s readiness. Medicare’s
experience with the readiness of trading partners is not necessarily
representative of the field as a whole, because submitters have typically
focused initial migration efforts on their largest payer, Medicare.

CMS, as the largest healthcare payer in the country, should demonstrate
leadership in preventing disruption of cash flow by maintaining the Medicare
contingency plan and urging other payers to do the same. To these ends, CMS
should specify that the recent modification to its contingency plan, scheduled
to take effect in July, applies only to submitters not actively testing or
requesting to test with CMS. Providers must not be penalized where CMS carriers
or fiscal intermediaries are not able to accept HIPAA-formatted transactions or
accommodate submitter requests to test.

Furthermore, CMS should make clear to commercial payers that modification of
the CMS contingency plan is an example of the need for staged implementation
and significant advanced notification of trading partners prior to the
implementation of any change in HIPAA contingency practices.

We request that CMS, as the agency responsible for HIPAA enforcement, issue
guidance that payers must not end the use of their contingency plans until they
are conducting HIPAA-standard electronic remittance advice, eligibility and
claim status transactions. This will assure that the benefits and burdens of
administrative simplification are more fairly distributed.

Two, coordinate a rational migration. CMS should coordinate the development
and implementation of a rational systemwide migration plan. It was unrealistic
to expect that the complex system that grew over two decades could be turned
around in a short period. Realizing the promise of administrative
simplification will require the cooperation of government, payers,
clearinghouses, physician office management and medical information system
vendors, physicians and/or providers acting under a rational transition plan.
The DSMO and the federal rule-making process is currently too slow to serve as
an effective mechanism for identifying and illuminating barriers on a timely
basis to systemwide migration to the HIPAA standards.

Practical implementation specifications. CMS should adopt a practical
implementation specification in two phases. The current specifications are
rigid, overly complex, impossible to satisfy and costly. HHS should immediately
adopt a modification to current implementation specifications to specify that
payers should not reject or delay claims because data that is not needed for
adjudication is missing.

Subsequently, subsequent modifications to the implementation specifications,
including changes approved through the DSMO process, if appropriate, should be
adopted to make the specifications consistent with the HIPAA principles of cost
containment, increased efficiency and balanced data-collection burdens.

Sequence the implementation. Implementation of the HIPAA standards should be
sequenced, rather than attempting everywhere, all-at-once compliance. HHS
should prioritize implementation efforts. The health field should focus first
on a universal adoption of the HIPAA standard claim format. After achieving
system-wide implementation of HIPAA format claims, prioritize implementation of
the transactions that will provide the greatest systemwide efficiencies.

HHS should phase in compliance by covered entities based upon their role in
the system – first payers, then clearinghouses and vendors and finally
providers – and ability to achieve compliance – large and then small entities.

Finally, advanced implementation efforts should build on initial success.
HHS has acknowledged that compliance is an evolutionary process, not a one-time
event. Enforcement efforts should focus on achieving a base level of systemwide
compliance upon which standardization can be built over time, rather than
require perfection from the start.

Promote uniformity. HHS should establish or identify a mechanism for
resolving differences of interpretation of standards and implementation
specifications in order to achieve real uniformity and thus administrative

Currently, there are hundreds of companion documents, each with a different
set of specifications for conducting standard transactions. The divergent
requirements and definitions of what makes up a standard threatens to defeat
the goal of administrative simplification.

Provider and vendor access to the modification process must be increased,
and we certainly were pleased to hear, in the WEDI recommendations, recognition
of that concern of our working group.

Many transition issues can be attributed, in part, to the lack of meaningful
provider and vendor representation in the standard-setting process. All sectors
of the healthcare field are not equal in their capacity to participate.
Effective participation requires a sophisticated understanding of electronic
communications, substantial personnel and financial resources dedicated to
participation, a vested interest in the outcome and sector-wide awareness of
that interest.

The perspectives of the provider and vendor communities have not been and
will not be heard in the standard-setting process until the means by which each
health sector may participate are changed.

We urge CMS to support and lead a rigorous analysis of the standards-change
process to identify and help correct any imbalance in the sector

On behalf of our HIPAA Implementation Working Group, we appreciate this
opportunity to share our views and concerns with you. Thank you.

DR. COHN: Okay. Jack, thank you for the testimony. I think we’ll hear now
from Gary Cavanaugh.

MR. CAVANAUGH: Morning. I appreciate the opportunity to be here. My name is
Gary Cavanaugh. I’m the Director of the Business Standards and Systems
Operations Group in the Center for Medicare and Medicaid Services.

I wanted to comment on the testimony presented by the HIPAA Working Group
Coalition, and I want to comment on it from a perspective as a Medicare payer.

My organization is the organization in CMS that is responsible for actually
implementing the HIPAA standards for Medicare, and so we look at this from a
payer perspective, and looking at it from a payer perspective, we are 5-1/2
months beyond the deadline that we were supposed to have implemented these
transactions across the entire industry, and we have been working very closely
with payers, providers and submitters, clearinghouses, to make sure that the
implementation goes as smoothly as possible, and we think we have tried to be
considerate of cash-flow issues and other issues as we move forward in the

Our contingency plan – I wanted to comment on the contingency plan
modification that we recently announced of changing the payment floor for
non-HIPAA-compliant claims in July to the standard for paper claims, which is
27 days after payment. We believe this is a measured step toward compliance and
actually encourages the industry to move forward to actually implementing the
claim standard for incoming claims, which we think – as everyone has commented
this morning – is extremely important, and really the first step toward
compliance of all the transactions, and we think it is a step toward ending of
the contingency, and that, really, without something like this, without
incentives, without pushing people toward compliance, we don’t think that’ll

I mean, I have been working in this industry now for over 25 years and for a
lot of different transaction transitions, and, to be honest, when you get to
the end of the road, get close to the end on any transition, you need to have a
deadline set or something to push people toward the final completion of that
transaction, and, without that, I really don’t think it’ll happen. So we have
been trying to do it in measured phases.

We certainly agree that Medicare is not – I mean, Medicare is a trendsetter,
but not the only entity in this industry, and, certainly, we are trying to do
this in a measured way, moving people toward, encouraging people, not cutting
off payments to providers, but certainly trying to encourage people, encourage
clearinghouses, providers and vendors to move toward compliance.

I keep hearing in this testimony that Medicare contractors are not ready,
well, I would like – one of the things that we have been facing with and
dealing with that was brought out by the WEDI testimony was that people won’t
bring these issues forward to us. Who are these contractors that aren’t ready?
Because we would like to know who they are, because, in our view, contractors
are ready to accept claims transactions, are actively testing, are able to
accommodate the testing that clearinghouses and providers and vendors want them
to deal with. So if there are issues, we want to deal with them. We want to
correct those, but we are not aware that there are issues.

Certainly, there are some issues with some of the other transactions we are
aware of, but they are not issues with the claims transactions. They are not
issues with the remittance-advice transactions that we are aware of.

We are at 74-percent today of claims coming into Medicare. In a HIPAA
format, that represents about 55-56 percent of all submitters to Medicare. In
terms of intermediaries and carriers, it is about 82 percent of intermediary
claims are coming in in HIPAA formats, and about 68 percent of carrier claims
are coming in in HIPAA format.

We are trying to develop more discrete data, in terms of provider type, in
terms of rural. Urban splits between the submitters and providers. We don’t
have that data today, but, hopefully, we’ll have that over the next several

In terms of this issue of passing data to the COB part – and I think that is
one of the most difficult dilemmas that we have dealt with, and the issue of we
shouldn’t reject claims if we don’t need the data, the problem we have run into
– one of the major difficulties we have run into with the COB transaction is
that our training partners – and we cross over or send COB claims
electronically, hundreds of millions of claims. Probably somewhere between 60
and 70 percent of our claims in Medicare actually cross over – are sent COB
electronically to other partners. They are demanding that we follow the
standard, and they are demanding that the data that they receive is a compliant

We have been sending them, up to this point, a – really, a noncompliant
transaction. So starting in July, we are making changes to be able to send a
compliant transaction for COB.

Now, part of that is we are going to have to start editing for data that we
don’t use. I mean, to be frank, we don’t use that data in Medicare, but in
order to be able to facilitate a smooth electronic transaction between the
provider and submitter all the way to the COB transaction, we are going to have
to start editing for data that Medicare doesn’t use, and we think, without
that, you are not going to create standardization across the industry.

I guess it is easy to say don’t edit for things that you don’t need or use,
but if you are going to pass that data to other people and you are going to
have a seamless electronic universe or world, I don’t know how it’ll work if we
don’t have that.

Certainly, we agree, as a payer in Medicare – we have two different parts of
us in CMS. We’ve got an enforcement part and a regulatory part and then an
implementation part. As an implementer in the Medicare program, we certainly
agree the change process needs to be improved and there needs to be some
authoritative source to go to to answer questions, because that is one of the
big issues we have been having ourselves. Who do you go to find out what is the
right answer? Because there is no entity at the moment to do that.

I guess the last comment I wanted to make is in terms of – you know, we can
argue about whose role this is or whatever, but I think that is really the
principal issue that we’ve got to get to as a community, whose role is it to
resolve all these issues? It sounds like, today, the testimony that I’ve heard,
wants to make the role of the government to solve all these issues. I don’t
think that was the way the law was initially set up, and, certainly, my
personal view is that the industry has to take a bigger role in this as well.
It’s not just a government issue, and say, Government, solve this problem,
because you may not like the answers when you get –

So thank you for giving me the opportunity to speak in front of this group.

DR. COHN: Gary, thank you very much.

Now, I think I am going to suggest a couple of things. Now, number one, I
think I’ve heard that people could use a break. So I think it may make some
sense for a break before we go into discussion.

There have been, obviously, a number of issues that have been brought up,
some of which relate to sort of how implementation is going, needs for future
activities for the remaining transactions, and then there are some issues that
relate, seemingly specifically, to the world of the DSMOs and the standards
processes and all of that.

Now, I guess my view is that after the break what we should do is probably
have a conversation on things that probably don’t relate specifically to the
standards process, recognizing that the DSMOs are going to be presenting, and
we probably ought to include them in – let them present, and then we can have a
conversation of how that is working, as opposed to have a conversation of how
that is working beforehand, and so I am not going to ask those of you who are
willing to stick around, let’s keep the conversation going through much of the
morning, but I think, obviously, there is a variety of issues coming from the
consortium, coming from WEDI, responded to by CFS – and, Gary, thank you for
being here – that probably deserve some public comment.

Now, I have been informed by our Executive Secretary that, given I am on the
WEDI Board, I will be recusing myself from conversations related to their
recommendations. It is one of the problems of the world we live in, and we will
find one of our other members to sort of chair that particular part of the
discussion, but, anyway, we will take about a 10-minute break, let everybody
sort of stretch and all that, and then come back for that other discussion.

Agenda Item: DSMO Annual Report

DR. COHN: I think I have been persuaded to further modify the agenda a
little bit, and what we are going to do is to hear from the DSMO with their
report, recognizing that – as I said, that this all appears to be part and
parcel, sort of the same conversation, and then we’ll have a conversation

So, Frank, are you leading – please.

MR. POKORNY: That was an auspicious start.

Thank you very much.

My name is Frank Pokorny. I’m with the American Dental Association, and I am
before the subcommittee as the 2003 Chair of the DSMO Steering Committee, and I
am here with my colleague, Gary Beatty, who is the 2004 Chair of the DSMO
Steering Committee, and, for two reasons, one to present the 2003 DSMO Steering
Committee annual report and also to pass the baton to Gary who will be sharing
some of the new initiatives that the steering committee is involved with of
some immediate interest, and I think direct relevance to some of the
discussions before the committee today.

I would like to say my purpose today is really to highlight some of the
material in the report that was presented to the committee.

Looking back at 2003, I would like to say, in my opinion, and I think the
report conveys, that 2003 was, in some respect, a year of revisiting some past
issues, but more so, I think, of seeing many, many newer requests.

Overall, I would say the healthcare community has continued to express
interest in our requesting change to the HIPAA standards as they exist today,
though not at the rate of prior years.

As noted in the Executive Summary, the average monthly volume of change
request has dropped from 14.3 to 11.3. The question is what is the reasons, and
the reasons for the changes in these statistics is, frankly, not clear. It is
possibly a sign of maturing of the DSMO process or it could be that the
healthcare community was, frankly, consumed with the HIPAA implementation
process. 2003 was clearly the year of – October 16th, we are working
towards the deadline for implementing the standard transactions.

But whatever the reason or reasons for this decline – It could be a blip. We
don’t know. 2004 may be the telling year. The DSMO change-request protocol does
remain responsive, we believe, and appropriate to the needs of the community
being served, and the DSMO Steering Committee does stand ready to maintain its
role, and the process will be responsive to the needs of the community.

Indeed, DSMO has undertaken means to improve the overall change, management
and development process. I think the most public improvement has been a major
change in the HIPAA-DSMO website known to the community at large as
www.hipaa-dsmo.org or hipaa-dsmo.com, which supports the change-request system.
For example, the site now requires a more robust change request submission, and
all requests no longer must proceed in lock step. All of this information is
explained in more detail, not only in the report, but by visiting the website –
and I do not want to go into detail during the course of this testimony – and
among the other changes to the website will be support of codes that change

Another area where the process is going under continual refinement is work
at facilitating implementation. The DSMO continues to work with CMS on ways to
facilitate implementation of existing HIPAA standards and arriving at processes
to expedite changes arising from regulatory requirements, and, frankly, there
are some issue areas that DSMO continues to address in order to expedite

One of those issue areas – and I think we’ll be touching on that a little
bit later in Gary’s comments – is the regulatory requirements for
public-comment periods falling outside the SDO area accreditation requirements
for balloting. You know, there is often a disconnect in the public-comment
period, the 60-day public-comment period, and the timing for the NPRM process
and the SDO balloting periods for various standards – periods.

Another example is, frankly, the pace of healthcare industry changes often
outpace the regulatory requirements. The industry, oftentimes, is ahead of the
government. Oftentimes, the regulatory process may be going in directions that
the industry may not be going. There is oftentimes a disconnect. I think it is
just a fact of life and we have to find ways to meld the two.

Initial DSMO Steering Committee discussion on these sorts of issues actually
began back in June of 2003, the special meeting that was convened at the June
X12 meeting with representatives of CMS staff. We got together to try and get a
sense of the breadth and depth of this disconnect, to try and find ways to get
together to try and meld the processes, we did not have this sort of
disconnect, so we could try and find ways to get the processes in synch and
make the whole mechanism be more responsive and timely, and the matter has
really come to a force.

A special steering committee meeting was convened in January 2004, and, in
fact, the discussions continue with another conference call at nine o’clock
tomorrow morning, and I’ll defer to Gary in his testimony to talk a little bit
more about that.

I would like to move to another portion of the committee report and refer to
the comments on the bottom of page 7 on the annual report, and there is an
extract in that memorandum of understanding citation on paragraph 5.6, which
notes, in simple terms, that a change approved by the DSMO Steering Committee
is expected to be incorporated into the appropriate documentation, and one of
the issues is that the most recent full suite(?) of the – implementation guides
is that version 4050, and some member organizations of the DSMO Steering
Committee are aware of instructions in certain of these guides at the 4050
level are in conflict with decisions made to the DSMO process.

One of the unresolved matters that we need to address is that these guides,
in their current form, are expected to serve as a foundation for the next
generation of HIPAA standard administrative simplification transactions, and
with this disconnect, we now have, chance requests have been submitted through
the DSMO process to bring these guys into compliance with former DSMO
decisions, and I like to assume and believe that such discrepancies will be
resolved by each DSMO acting individually and the DSMO Steering Committee
collectively by doing its best to resolve these discrepancies in accordance
with the principles and protocols agreed upon by the MOU in accordance with the
objective of HIPAA. I think we have a process that can work, has worked and
will work.

To close, I would like to say that all the items addressed in the report
reflect the ongoing efforts and no doubt will be the subject of reports at
future NCVHS meetings.

The DSMO Steering Committee does wish to express its greatest appreciation
to Washington Publishing Company for its continuing outstanding support of the
HIPAA-DSMO website and its ability to support the entire change requests, and
we also want to recognize the individuals and the organizations that constitute
the standards development organizations and the data-content committees. Their
volunteer time and knowledge furthers the cause of administrative

I want to thank you, again, very much, and I look forward to addressing the
questions and topics that you may wish to discuss during the course of the day.

MR. BEATTY: Good morning. My name is Gary Beatty, the 2004 Chair of the
DSMOs. And I do use DSMOs. I don’t use DSMO.

What I would like to talk to you about this morning is looking ahead towards
the future, and one of the aspects that we are looking at within the DSMO this
year is looking at process improvement from two perspectives. One is the
short-term perspective and the second being the long-term perspective on an
ongoing modification process as we move from one version to the next of the
implementation guides.

When we look at the short-term process right now within the DSMO, one of the
things we are talking about, which is the phone call that was mentioned a
second ago, is we are looking at some process where we can address what we deem
as emergency situations within the healthcare industry where there are issues
within the implementation specifications that are causing significant barriers
towards the implementation, and I believe you have heard some of those this
morning from some of the parties, and so we are looking at how can we address
those situations on a very timely basis, so we are working through a process of
defining what is an emergency, the criteria to measure what is an emergency and
then the process to address that.

Each of the respective DSMO organizations are currently working on their own
internal processes to try and determine a mechanism to meet the needs of the
healthcare industry in a very timely fashion, and we hope to have that
completed as soon as possible, as the Department of Health and Human Services
is working on a new regulation they are hoping to publish later this year. So
our time to complete this process is fairly short.

From a long-term process, we are looking at how do we manage the ongoing
version control, moving from one version to the next version.

One of the things that you did not hear out of Frank’s testimony was any
recommendations from the DSMO relative to should we adopt a new version or not.
You did hear Frank mention that within the X12 committee, we have produced
version 4050 implementation guides, which – X12 uses a stepping-stone version
to whatever the next version could be that could possibly be adopted under
HIPAA, and we are trying to work through a process to figure out what kind of
time frame can we – as DSMO organizations work through to be able to move from
one version to the next, so that we can manage this, so we don’t cause the
challenges that we have had going through the first versions of this
implementation process.

The biggest challenge that we are trying to work through – especially with
the emergency processes – are there things that we can do to alleviate some of
these emergencies without having to go through a two-to-three-plus-year
regulatory process that we are all bound by as we change from one version to
the next? We still always have to remember that even within HIPAA we still have
the one-change-per-year requirement within the law itself.

So we are continuously working on right now looking at process improvement
and looking towards your questions within the committee.

Thank you.

DR. COHN: Actually, I want to thank the DSMOs for their presentation.
Obviously, one of the issues for this year is really improving the HIPAA
process, and there certainly is – a pregnant question on the table about
improvements to the current version of the HIPAA standards versus moving to the
next generation. I don’t know whether we are going to solve that question
today, but it is something that, as we look at issues and all of that, I think,
is in the back of all of our minds.

I am also delighted to hear that there is a suggestion for a more rapid
improvement process that you are describing would likely be showing up in new
regs or whatever as you identified – you are hopeful that it might?

MR. BEATTY: Well, there’s two things that – the process in design is one,
what type of changes to the implementation specifications are allowed where we
do not have to go through the regulatory – the whole regulation process. Once
we have that defined, then we’ll have a better idea of what is in the box as
far as what we can address in a short-term expeditious process versus what we
have to address through the modifications process, where there is a much longer
turnaround time.

DR. COHN: Sure. And I would imagine any process change like that would have
to be vetted through –


DR. COHN: – public relations – (laughter) – for a thorough process.

MR. POKORNY: On that note, too, it is interesting, within the DSMOs, if I
could pick up on your usage, it seems that the – there are two sides of the
DSMOs. There are the SDOs, which have a more structured, if you will, process
for coming up with changes and – through their work products, and you have your
content committees, if you will, and the content committees, by and large, by
their nature, I think, tend to be more responsive to emergencies and other

For example, the ADA has a dental-content committee, and we have looked at
this entire issue as a DSMO, and we can, and we are working on a revision to
our protocol to be able to adopt through requests for emergency actions, if you
will, and by our very nature, since it is not the same sort of structured,
accredited standards committee, such as X12 is, we can find ways to become more
responsive. So, in some respects, the content committees can be more
responsive, because they don’t have the accreditation structure that DSMO has.

DR. COHN: By accreditation, you mean the ANSI accreditation.

MR. POKORNY: Right. The ANSI accreditation process.

So that is another little piece of the stew that has to be considered by
CMS, when it comes up, in developing a proposed regulation to deal with the
emergencies and the regulatory requirements.

DR. COHN: Hum. And, certainly, the HIPAA legislation actually does,
obviously, talk about ANSI accreditation. So sometimes these things have
untoward outcomes and effects.

Harry, I’m going to pass the gavel over to you to sort of lead sort of the
general conversation. I did want to get a first question or two in on the DSMO

MR. REYNOLDS: Okay. We are going to open the floor for any questions from
the committee.

First, I would like to start off, having been in the process where you are a
number of times, if you listen to the testimony that was given today, what do
each of you think is new? I didn’t necessarily hear anything new that came out
that hasn’t been discussed for almost three years. So what is different? And
then once you decide what is different, what do you recommend doing about it? I
mean, there’s a whole slew of recommendations, but what is really – what really
needs to happen?

MR. JONES: I take a kind of a different approach to that question. I have
said this before before this body, and we are talking about an enormously large
and complex set of healthcare relationships.

Look at what the UK is trying to do in the NHS right now, and with an
$11-billion, five-year project, a smaller population. The key ingredient in the
UK is there are three primary payers there, and we have millions and millions
of these bilateral relationships.

I think what we – there were a couple of things that came out in the hearing
in the oral testimony. One was everyone who testified alleged that they were
ready. It was their trading partners that were not ready B (laughter) – and I’m
sure a number of the people who testified had trading-partner relationships
with other testifiers. So I don’t know how much credence to give to that, but I
think a lot of the problems we are experiencing are due to the complexity.

I think a lot of the – I do not think we have done a very good job – and I
have said this before – either the industry or the government in conveying to
covered entities, on the one hand – those who really fall under the regulations
– and then providing an educational basis for them to convey it to their
vendors, really what the – in understandable terms, kind of lay English – what
we are trying to accomplish here, what the benefits are.

I am doing a book on electronic health records, and I have accumulated well
over 100 case studies now where there are rapid returns on investment and – in
the provider communities, not individual providers, but practice-management
groups, hospital environments and so forth – and, obviously, there are things
going on in health care that are having a positive benefit in terms of
economics. I think what we have to do on the administrative side is coney that
same type of education.

If you look at the results that came out, I agree with you. I don’t think
there was a lot that was new there. I think there is a lot of angst in the
transition process as we move towards compliance, and I think we are moving
towards compliance. Everyone indicated, to the best of my recollection, that
progress was being made, both by the testifier and by their trading partner.
They just were not getting there.

I think one thing that would be very valuable – I had not heard it before –
but having a common set of test data, both with positives and negatives that
people could use as kind of a common denominator in testing, rather than having
a lot of variability in the data. I think that would be very important.

MR. LAZARUS: I have some new thoughts, things I thought were new. Some of
this maybe some of us knew, but I think the body of people that now understand
it better have grown, especially those that were at the Tampa hearings or have
read the testimony.

The first is that the covered entity is responsible for getting this process
done, not their vendor, not their clearinghouse, but they themselves are
responsible for it, and if you read the testimony from Tampa General, you’ll
find a hospital that started working with its vendors and clearinghouses, and
it wasn’t working, and they decided to take a different approach to get the
transactions and code sets implemented that would benefit them, and I think
that is a revelation that if what you are trying to do isn’t working because
someone else isn’t supporting you in a way in which you need to accomplish the
business case, you have the responsibility and the ability to do something
different, instead of just keeping on that path, and I think that is an
important message that we don’t hear very often.

Second, I think that a lot of people walked out of the hearings in Tampa
understanding this is a very complex process and beginning to understand how
other parts of the industry view this complex process, instead of just the way
they themselves view it from their perspective, and that understanding is not
necessarily in detail embodied in the WEDI report, because it is based on – of
the findings and so on, but most of the industry views this process from their

Those of us that are consultants or policymakers may view it differently,
because we work with a number of different kinds of components, see the value
in understanding how the other party is viewing this and help work out a
process that’ll work for everyone, but that is not a common view. Most
providers view this as a provider part of the process. Most payers view it as a
payer part of the process. Most vendors view this as a technical customer
support process and so on, and we need to understand – to find the resolution
middle ground we need to understand how this effects everyone, and, at least
for those who were in attendance, several corridor conversations where I never
realized how complex this was for my trading partner to do their part of the
deal or how important the communications were. I think that is something we
haven’t heard a lot of in the past.

We also heard today, probably from the WEDI testimony, more of a specific
articulation of who should deal with the recommendations that we made, and
we’ll see that sometimes it’s CMS, sometimes it’s WEDI, sometimes it’s a group
of organizations to try to work things out together, as opposed to counting on
the government to do it all for us or assume it is all just going to happen
without anybody taking a leadership role. I don’t think we have heard that much
specificity in that area before.

And, last, I would like to comment on something that is not new, but is a
problem, and it is this perception – particularly by vendors, clearinghouses
and payers – that somehow the submitter count is important, and the issue is
that submitters could be an end party, a provider. It could be a clearinghouse
that is getting lots of providers together. It could be a vendor. It could be
an aggregator.

The number of submitters may grow significantly as a result of implementing
these transactions, either because more entities come into the field to act in
these roles or more providers decide to do direct transactions, and so this
notion of submitters being important, in terms of counts, that how many – what
percentage is kind of irrelevant. What is really relevant, from an
implementation perspective, is how many of the initiators are implemented, not
how many of the submitters are implemented, and often we don’t know how many
initiators there are out there.

I think it is symptomatic of the fact that just because a clearinghouse can
successfully test and go into production with one customer doesn’t mean the
other thousand customers with different vendor systems are there as well or
will be within two weeks. I think we heard that some of the things that have
happened with some things that Medicare tried to implement – and I don’t think
that is understood very well by many of the folks that measure statistically
what is going on in terms of submitters – that it is really – the important
thing is the number of people that are at the other end of the tunnel, if you
will, not the people that are in the middle that measures how successful we are
in terms of moving from trading partner to trading partner.

MR. CAVANAUGH: From the working-group perspective, I think this is not
something that is necessarily new, other than it probably reinforced our
perception and our concern that the provider community and, to an extent, the
vendor community didn’t really understand all of the transactions, all of the
standards that were being developed by these various other groups and how
important it was to have a provider perspective, especially in the development
of those standards.

We have come to understand that. We have come to recognize that now, and we
are pleased that the WEDI testimony, and heard at their Tampa hearing anyway,
indicated the need for the physician, hospital, laboratory community to be
involved in the development of these standards, because I think it is important
that as these new standards and modifications are being made, they are being
made in the context and understanding of what the impact will be on those that
are going to be providing the information and what difficulty, what challenges,
what problems there exist for those that are providing the information to
almost insatiable demand for new information, different information.

So I think it is important that we understand now how important it is that
the provider perspective be brought into the development of new standards, new

I also would hope that – and I am speaking now as a representative of the
AMA – that of the percentage of submitters who are not yet compliant, probably
the vast majority of those are going to be small. They are, in fact, our
membership. They are not the big groups and they are not the big hospitals.
They are not the big plans. They are the small providers who have to cope with
the myriad rules and requirements that the transaction standards involve, and I
think people need to keep that in mind, that it is not just big payers, it is
not just big providers who have to cope with this. It is the small, two-,
three-, four-person practice that has to figure out what is new, what is
required and how am I going to comply, and that before we go to new
requirements, this idea of testing standards and making sure that they actually
work is – before they are required nationwide, is something that would be, I
think, a very great asset to – especially to the small provider.

I think also part of our working group are concerned, as we hear about all
of these new requirements that ANSI X12 and the DSMOs are thinking about, the
requirement of constant change and constant new revisions to how we submit our
data and how we submit information to the payer community is something that
concerns us, because we can’t always be more, more, more, change, change,
change. It is not – especially if we get to the issue of return on investment,
there’s got to be some response that physicians and other provider groups can
look at and say, yes, but, now, I’ve got better remittance data. Now, I’ve got
better enrollment data, whatever it might be. There’s got to be some quid pro
quo for all of these changes that are apparently in store for the provider

MR. BEATTY: I have a question and then a followup observation, back to the
comments here.

Did the group talk about, at all, how we can engage the provider community?
Because I know one of the other hats I wear is I am also the Chair of the
Insurance Subcommittee with NX12, and we are continuously struggling to get
more provider input into the process, and – I say we want the providers to come
to the meeting, that somehow we need provider representatives looking at what
we develop because these standards are not X12’s standards. These are the
healthcare industry standards, and you are the customers, if you will. We need
to find ways to engage the provider community.

The same is true for organizations like WEDI. I mean, WEDI needs more
provider participation. Other organizations need more provider information. How
can we leverage that knowledge that is out there in the provider community into
these standards, so that they can meet your business needs? So that is the
question, and I’ll let you answer that in a second.

The other thing is – going back to your question, what is different? B just
looking at some other statistics out of the report was that the number of
change requests that are going through the – process that are getting actually
approved has actually increased, but, also, at the same time, so has the
doubling of the appeals that we receive relative to the decisions. The
challenges – most of the change requests we are receiving, which is an
indication of the industry’s implementation, is mostly to the healthcare claim
transactions and very, very few other changes to any of the other seven
transactions that are currently mandated under HIPAA. So it’s a first step at
looking at where is the industry relative to the implementation, not only just
with those little blinders on looking at claims, but nobody is asking for
changes – you know, not to a great extent to the other transactions. So it
gives some sense of maturity, but the big thing out there, I think, is how do
we engage providers? How do we get them involved in this process?

MR. CAVANAUGH: I don’t have a direct answer for you. It was the reason why
we formed our group to begin with, out of concern that we didn’t have that
input or didn’t have adequate input. We have had these discussions with CMS. We
have had the discussions with you, as Chair of ANSI. We clearly are involved
through the DSMOs processes that we are involved in, but it is still a process
that we are trying to understand – understand from the standpoint of who makes
the decisions, when do you comment, where does the input go, who has final say
– and part of our problem is that we are so fragmented as a community, whether
or not it is the for-profit hospitals or the non-profit hospitals or it’s big
physician groups or medical-specialty societies, it is difficulty in our own
organization, because we are somewhat fragmented, but we clearly want to engage
you all and to be more involved in the process than we have been.

SPEAKER: So are we looking at a lot of education awareness? I know CMS has
done just through their efforts – wonderful efforts, but, I mean – other
opportunities that I think other organizations have been participating in.

MR. SCHUPING: One thought, Gary, I think there is a resource that a number
of associations have. WEDI has, over the last two years, for example, developed
26 regional affiliates. There are other associations in this room that also
have regional entities, whether they are state societies or local communities.
We use those as a conduit to get information out and education out, and I don’t
see why we couldn’t use them to also bring input in. In other words, we could
have programs targeted at gathering information and get them out as close to
where the providers are based locally, because they don’t come to the national
programs, we know that, and – in any great numbers, in any event.

This has been a constant challenge for all of us, but, if we could use those
regional networks to go out there and gather information and then bring that
back into the process, either through in-person meetings or through audio
casts, those types of forums, I think that we could get probably more
information than you might think, but you’ve gotta ask the questions and you’ve
gotta create the environment for them to provide the input.

MR. POKORNY: I’d like to offer comments from two perspectives. One, putting
on a – sharing experience from different hats – I work with the American Dental
Association and a couple of other committees that do have quite a bit of
provider input, if you will.

In some respects, practitioners, don’t like change, and when changes are
made, they say, Why? I don’t like it. Don’t do it, and that may very well be
why there isn’t a lot of interest in making changes and no participation in the
process, if you will, and why we don’t see change requests coming through the
DSMO process with a provider’s name behind them or providers in X12, if you
will, and another thought may be is the fact that the monthly average
decreasing from 14-point-whatever to 11-point-whatever. Maybe that is a good
thing, considering that we do not have a mass implementation of the existing
standards. Should we be looking for a growth and changes? Should we be looking
for stability right now? Should we be trying to promote a level of confidence
within the healthcare community at large, saying that we are trying to have
some stable standards out there that are not going to be tweaked, that are not
going to be subject to any sort of change, that you can have some confidence
that they are going to be out there and reliable, that you are going to have
some kind of return on investment – a term I have heard bandied about this
morning – that they are going to have some value before any changes are made?

Maybe – now, I am talking completely off the top of my head, and I shouldn’t
have ADA behind my name, but maybe a moratorium on changes might be

MR. JONES: I want to comment on something Frank said earlier, but I think
one of the reasons, one of the findings we came out of the hearing was – and
this may explain why there are very few change requests on the other standards
– a lot of people haven’t implemented those standards, because they have
concentrated on the claim. I think, very simply, that is what is happening

But I really want to focus on two things.

One, you said earlier about this regulation market disconnect – and we are
coming up on eight years in August of the HIPAA anniversary, and we are coming
up in November with the eight-year anniversary of Bill Gates’ epiphany in
Newsweek Magazine, in the last week in November, when he said, ah, yes, the
internet is important after all, and if you look at the amount of market
development that has occurred in IT, in the internet, in terms of business
processes and so forth, it has run way ahead of our pace on developing the
HIPAA regulations.

When you go to – as I used to participate in X12, I was always struck how
few business decision makers are involved in that process, talking about people
who have responsibility for budgets, for process and procedures in business
environments and people who make decisions on work close and so forth, when you
get down to the small provider – I mean, we have been able to engage, over the
last couple of years, interests from academic medical centers. So we are
bringing in providers that way, these big organizations where we are dealing
with people who have that input, but I have been struck with the small
physician office which may have a spouse who is doing the business work in the
office, and that is particularly true in the dental market.

I was just struck at our hearing in the dental testimony – and I know about
88 to 92 percent of all dental practices are single practitioner. They
generally have a spouse who is doing the business, and aside from having a
hygienist, they are only doing about eight to 10 transactions a day. So are
they going to make an investment in the apparatus to do EDI types of
transactions, particularly when you have two major dental insurers who have
Gateways? And that is what I meant earlier about really focusing down on these
ROI issues. This is very micro-oriented in terms of getting to them and to
convey to them the value of doing these things.

I agree with you. I think the real hits are going to come on eligibility and
on remittance. When we move beyond what we are doing now on the claims side, I
think we are going to get a lot of interest in moving towards greater
compliance, but I think we gotta get the business people involved, and,
certainly, the providers, in helping us to define this, if they are going to
adopt these standards.

MS. TRUDEL: Actually, I had three questions, and I guess the first one I
would direct to Jack, and that is that the notion of trying to get providers B
especially small providers – into the mix everyone agrees is problematic.

I think that one thing that might be considered as a model similar to the
National Health Data Standards Consortium which Marjorie has been involved in,
which brings together a number of the players who have health data needs,
research needs, whatever, and brings them to the table in a way that makes them
much more effective as an organization than they could have ever been as a
group of individuals is a model that really bears some looking at, because
there are any number of specialty societies that are interested in HIPAA and
are beginning to get a sense of what it means to their constituents, and so I
wanted to ask Jack what his thought was about that.

MR. CAVANAUGH: I don’t have enough experience with it to know. It is not
something that, as a coordinator of the National Medical Specialty Societies,
that we hear much discussion about. So I’m not sure that I would use that as a

MS. TRUDEL: Is there a possibility that there could be some information
exchanged there?

DR. GREENBERG: Sure. The only thing I would say is that I thank Karen for
recognizing this fledgling effort we have made to try to bring the public
health into this process more, but I think the analogy would be that most
people in public health – just like most providers – do not have a) the time or
b) the knowledge or – you know, technical knowledge or the experience to go to
participate in the standards processes. They are in states. They are in
localities. In some ways, they are like small providers, and they are
providers, in some cases, of actually providing care in public health clinics
and all that. So it is really not possible to try to get them to go to X12 and
go to – participate in HL7, for the most part.

So what we have tried to do is to create an organization that will try to
represent their interests and needs, and try to educate them in the process,
and, occasionally, someone actually gets the bug and gets involved, but, for
the most part, we just have tried to like feed back to them things that are
happening and to get input from them, and then to have just a few people, like
our representatives on the NUBC and the NUCC, X12 and HL7, who try to bring
their perspectives forward, and I think that – you know, it’s hard, and we are
just working at it, but I do think that that is a much more promising approach
than thinking that we are ever going to get a lot of these constituents
actually participating in these standards organizations. It’s too technical.
It’s too resource intensive, and – I mean, just –

Let me give you an example. We are working with the Vital Registration folks
– Michelle Williamson is working with them – and trying to migrate them to
actual HL7 messages, and these are bright, able people who will tell you they
wouldn’t know an HL7 message if they tripped over it, but there’s a reason why
– you know, there’s a business case for it, and we are trying to make that with
them. So, I mean, that is just an example of a whole constituency that may have
to get on board, but needs the whole educational process and everything else
before, and then needs some people who will be at the table for them and then
can go back to them and keep – it’s just iterative. It goes back and forth. So,
anyway, that is probably more than you wanted to hear.

MS. TRUDEL: I had two more. One is there seemed to be a thought at one time
that the independent certification services would take a lot of that burden,
and I guess I’m asking did that promise not occur or were we a little naive to
think that it could handle as much of the burden?

And my other question is as far as return on investment for the non-claim
transactions, do we have a sense of whether the practice management service
vendors have even thought to incorporate those technologies and those – have
those technologies been enabled in current practice management software or are
we, again, at a point where, until there are changes in the vendor community,
this return on investment can’t be achieved?

MR. JONES: I would like to comment on the last one.

There is an enormous amount of innovation going on particularly related to
the clinical side, and I think a lot of that is driven by what I would say were
very encouraging non-administrative procedure act initiatives last year,
because the innovation is going so quickly, as we are seeing in what is going
on with HL7 and the EHR under ballot right now.

I have collected – and this is all out of one source, out of
healthbeat.org(?), which is a terrific resource. I have collected about 120 ROI
studies on the clinical side. I am beginning to see some of the administrative
standards, particularly eligibility and remittance, beginning to come into
that, as we are seeing integration. I mean, these systems mainly have been – if
they have been linked at all, they have been linked through interface. Now, we
are seeing the development of – and these are small companies that have been
out there doing this, developing these integrated types of systems that are now
going to market. I think it is going to have an enormous impact over the next
several years.

I think – one of the things I wanted to say earlier, so I’ll drop it in here
is under the components of the EHR that is under ballot are some administrative
components on transactions in terms of data content.

One of the things that came up repeatedly in the testimony was we have
substituted 400 claim types, and, now, we have ended up with one standard on
format and maybe 400 different variations based on data content.

What we need to do, and what we are trying to do with this 4C initiative in
WEDI – in fact, one of the objectives is to – we have a lot of provider input
into this, because it really gets right down to the heart of the business
issues that they are dealing with. What is the minimum data set that they need
to do adjudication of claims or handle other transactions? And the only way we
are going to be able to get that is to get all the parties together at the
table and really have an epiphany of what is needed to conduct business and
distinguish that from these competitive aspects that continually crop up.

People think some of these variables have competitive value, but that is
really not what the basis of competition is. It is trying to get down to that
common denominator, and I think this two-year process we have, assuming this
ballot goes through, focusing on those administrative aspects, I think, gives
us a venue to pull together the various stakeholders to focus on narrowing that
set. It is in a clinical context, but, ultimately, the clinical and
administrative are going to be integrated, and I think it would be very hard,
de novo, to pull those people together, but this gives us an opportunity. This
gives us a shell to do that over this two-year period, if we collaborate, both
government and industry, in doing that, and there is considerable interest,
just based by the participation we have in this 4C strategic focus, that we
have of doing that. So I would lay that out as an opportunity we really ought
to move forward on.

DR. COHN: Yes, I think – knowing what is going on with the HL7 ballot, I
think you are overselling the functionality there. (Laughter). Though,
certainly, at the end of the day, I think we would like to see everything sort
of come together.

I actually had a couple of questions. I was trying to move us back to maybe
a more concrete conversation.

Number one, I heard there was an outreach issue for an education, and I
don’t know whether I am hearing that from you, Gary, and others, and I guess –
and I am also hearing it from Jack, in terms of his testimony, and I am
actually just wondering whether or not one of the – part of the work of this
year for the DSMOs – and by the DSMOs, I don’t mean just the DSMO organization,
but the standards organizations that are behind the DSMO organization, because
there seems to be a bit of a disconnect, in my view, you know, that eight
people or six people who are together and have meetings and go through these
processes, and then you complain, well, the 1,000 members of X12 are not being
responsive or whatever, and, to me, there’s sort of a – to me, you are one
organization, at least as I look it – or not one organization, but one activity
that all needs to work together in some sort of a well-coordinated fashion,
but, certainly, there is an education and outreach activity – and I don’t know
what it is. I do know that I sure wouldn’t want to sit through a bunch of X12
meetings personally. I’ve been there before, and I – you know – the reason
technical people go there is you send technical people there representing the
business side is sort of what happens, but I think that there really does need
to be some outreach, and I would be curious if maybe you could all take it back
as an activity to sort of come back with a proposed plan that we could talk

And I have one other – one other point. Did you want to make a comment about

MR. BEATTY: Well, from an X12 perspective, we have actually taken that as an
initiative over the last year or so, in that we have established a group called
the Convergence Outreach Task Group within the X12 Steering Committee, that its
focus is outreach and trying to get more input from not only the healthcare
industry, but all industries, because X12 spans all industries.

And when I made the comment about providers, I didn’t really intend having
Dr. Jones and all the clinicians in, but of going back to more Ed’s comment,
the real people who are administering the clinical process to participate in
the process and try and find out what is the appropriate way to work with those

DR. COHN: Sure. And, really, what I am talking about is some sort of a plan
that we could all talk about that is – I mean, isn’t just X12-centric, isn’t
NUCC-centric, isn’t DECC-centric or whatever, but really represents the HIPAA
standards activities as we have talked about them. I would find that personally
to be very helpful, and it might be something that we could all talk about and
sort of – if there are ways at CMS or whatever could help make that all happen.
Now, that’s piece number one.

Now, piece number two is in all of this testimony – and I am looking at
Jack’s comments, and I think Karen’s comments also, to a certain point – it
appears to me that we are running sort of on two different tracks right now.
There is the claims standard, and I guess I am sort of hearing that that is
actually – I mean, there are really complaints(?), but that actually seems like
it’s maybe getting implemented actually.

I actually have much greater concern about making sure – given that there’s
a lot of – I mean, I believe that there’s a lot of ROI in the other
transactions. I’m sort of wondering what we need to do to get that more fully
implemented, and I would ask – maybe Karen may actually have some view on that
also. I expect it is public and private. I’m curious about what CNS needs to do
to help the industry implement those better, because I think we all didn’t
think that this was just going to be a claims implementation. I think we all
thought that this was a full set of standards. So, anyway, that’s really the
other question of what we can do about that, and, Harry, you probably have a
comment, too.

MR. CAVANAUGH: I just want to say I would hope that you would take away from
what we have been saying that our testimony was to caution CMS and, more
importantly, the other payers who aren’t anywhere near 75 percent to not
prematurely change the way that they handle – process the claims that we are
submitting – claims and bills that we are submitting, and I think CMS, in
adopting a contingency plan back when you did took a very responsible position
– that is back in August or September B took a very responsible position, and
the rest of the community – the rest of the payer community and plan community
recognized that and, fortunately, followed in their footstep, but what we are
concerned about here is that the rest of the community, the rest of the payer
community, I don’t believe, is having the same level of success that CMS is at
this point, and so we need to be careful not to – in our zeal to move everybody
to compliant – not only format but data – cut off contingency plans and end up
having us suffering from the cash flow that we all fear.

DR. COHN: Inject this for the record, I was not stating that we were fully
implemented. I was not, in any way, stating that there didn’t need to be
contingencies. It was just that that seems to be moving along.


MS. TRUDEL: You had your hand up.

MR. REYNOLDS: No, you go ahead, and then I’ll –

MS. TRUDEL: No, I was pointing to you, because I don’t think Simon saw you.

MR. REYNOLDS: Oh, no, no. He asked you to make a comment on the earlier one
about implementation, and then I’ll comment –

MS. TRUDEL: I think about all I can say is that I think, as Jack mentioned,
by CMS’ action in establishing the contingency in the first place and the fact
that when we did put out the modification, we provided ample warning to the
provider community, I think we have demonstrated our commitment to being very
careful and thoughtful in how we address the completion of the contingency, but
I would go back to what Gary Cavanaugh said, and his point is very well taken,
having gone through any number of changes of format, just for Medicare, were
things like Y2K for outpatient PPS, there is absolutely no question in my mind
that unless you establish a deadline, and at the point of that deadline
people’s claims are not going to get processed, that last percentage of people
– of submitters, whether it’s 25 percent, 15 percent, 10 percent, 5 percent, I
won’t comment on, will not – simply will not make the change.

So unless you put some sort of a deadline on, at some point in time – and I
agree that we should continue our record of making sure that there’s a great
deal of advanced time, but human nature being what it is, there is absolutely
no way to get to where we are trying to go without taking that step at some
point in time.

MR. REYNOLDS: I’ll comment. Give you a little local flavor of this just for
a moment, concur exactly with what Jack had to say. We are – I would say most
of the Blue plans are probably looking between 20 and 75 percent readiness.

In our case, we had 76,000 837s in October. We expect 500,000 this month,
against the goal of about a million-seven a month. Okay. So we are starting –
it’s ramping fast. Out of our top 23 submitters, 12 are in production and 11
are tested.

Now, those same submitters that I am talking about are big clearinghouses,
but they are already compliant somewhere else, and they have had to move around
the country with the numbers, because a number of our large clearinghouses have
1,200 – as Jack said, 1,200 faces behind the billboard, and they have to
implement all 1,200 of those office practice management systems and providers.
So once they are ready with us, then they have to do that, but in our
INCHIKA(?) meetings, which you are all familiar with, it was clearly stated by
the providers, Medicare is one, Medicaid is two, and the rest of you are three,
and there was no apology for that statement, nor should there be, because there
is no question that Medicare has got the ball, no question that Medicaid falls
in the next category, and then the rest of us fall in the third.

So, Jack, to your point, I don’t believe you will find any payers who are
anxious to go back to paper. I don’t think you will find – for example, we have
a report here, which is – I’m using facts. I’m not conjecturing anything. I’m
using facts here. We have not seen any blip in paper. It has not gone up at
all. I mean, I get a tracking report every day. Every day, I know exactly the
amount of paper we get in our place, because we can’t afford to have that
happen, nor can any insurer. They can’t do it.

So the other thing I think that we have all had to take a position of now
that – when somebody states publicly that that’s the pecking order, we also
can’t necessarily have this ultimate fear that because Medicare pulls the
contingency off somebody could complain about us. We are on record in North
Carolina. We are not afraid of that. The reason is we have a right – that if it
is stated in open forum that we are third on the list, we have a right to
protect our business. We have a right to protect our cash flow with the people
that are going on.

So when you look at the reality of the situation that is going on, the
industry has to play this out. The industry has to play it out a right way, but
we can’t turn our heads. That’s the point on the compliance. You can’t turn
your head, and if our numbers start not continuing to go up and the players are
supposed to be going on going there, then, obviously, we all have to make a
business decision on what we do. So as long as everybody’s eye’s on the ball,
as long as everybody’s –

One other comment. We only have seven of our providers who have signed up
for any of the 27 transactions, 7271, 276, 277, 278, that have even started
testing. Now, that is not a negative statement. The entire eye is on the 837,
as it needs to be right now, because that is the cash flow, that is the deal
for the moment, and so, in North Carolina, we are going to make sure we – we
had 92 percent hospital claims automated in 79 right now. We gotta get there
before HIPAA starts being okay.

So that’s local numbers. That’s local reality. Steve, a little bit different
what we’re seeing. The industry is consolidating dramatically. Rather than
growing on the number of submitters, it is consolidating dramatically.

I have testified in front of this committee that we have 545 people that
were directly submitting to us, representing our 15,000 providers. That is now
down to probably less than 200. That has created – one of the new testimonies I
would add to you – give back to all of you is there are many providers out
there that have brand new arrangements. They used to submit directly to
someone. We have had 40 small software companies in North Carolina go out of
business that used to be practice management and/or submitters. That has
created a dramatic uproar, because those provides that used to submit directly
to us for many, many years – 20 some years – no longer had a pipeline at the
same time HIPAA was coming out. They now have to create a whole new
relationship, whole new contracting, whole new understanding of information,
whole new implementation, and so you are going to see different numbers; and
I’m sure Medicare is seeing some of the same thing, but that – you know, so the
reality is out there that we not just taking a stagnant environment and
implementing it. There’s business relationships that are moving and shaking,
and that is why this whole contingency has allowed everybody to shake into
where they are going to end up. Then once they end up and we get the claims in,
then I think we start moving on to the next case, because there is no question
that that’s – they are much easier transactions to deal with by 50 times than
dealing with the 837, as far as how you prepare it, as far as your software
vendor deals with it. They can deal with it on a more real-time basis. It’s a
much easier –

So, again, these are just local – and these are working with INCHIKA, which
you mentioned the regionals. We now have everybody at the table. It took us
until last month to get all the payers, all the clearinghouses. Our department
of insurance is at the table, the hospital association – so you got a lot –
it’s coming, and I think that is key.

MR. BEATTY: Just a question maybe back to Karen’s comment and Simon’s
question, and then possibly even back from a WEDI perspective from both the
results of the hearing, as well as the sequencing white paper we need to start
looking towards the future to start setting – you know, what is the logical
progression of transactions as we decrease the contingencies maybe by
transaction, in setting – maybe rewriting and looking at the sequencing white
paper from today’s perspective, rather than what it was written on a few years
ago, and setting up maybe time lines, maybe deadlines, you know, or target
dates for the decrease in moving beyond – taking the blinders off beyond
claims, to what is the next logical transaction the industry should focus on,
to the next one and so forth from today’s perspective, so that we can have a
more manageable and predictable process for the completion of the elimination
of contingency plans in achieving the goals of HIPAA.

DR. COHN: I may have a question for you, Gary, on that one, because I – you
know – clearly, in the commercial sector, everybody has done claims
electronically. In your experience, are there things that would be replacing
when we move to a next 12 eligibility claim or a referrals claim or whatever? I
thought most of these things were done over the phone or via faxes or whatever.
So it isn’t really an issue of removing the contingency. It’s more implementing
the process –

MR. BEATTY: Right.

DR. COHN: – but maybe I – I mean, I am only speaking of where I live on
this. I know people are on the phone a lot for most of these.

MR. BEATTY: Well, people have contingency plans beyond just claims – doing
claims back and forth. You know, in my background, I have been on both the
payer and provider side of the healthcare industry, and a lot of those other
transactions don’t have an equivalent paper forum, and when you look at
eligibility, a lot of those transactions are done over the phone. Some are
consumer driven to figure out whether the people are eligible for benefits or
not in certain cases, as more consumers take over some of the responsibilities
of their healthcare. So there is no equivalent. It is an implementation process
people are using right now. The contingency plan is why they are not doing
eligibility or referrals or preserts or any of the other transactions, but as
we heard in the hearing, we need to have a very predictable managed process to
move forward within the industry.

DR. COHN: Oh, yes. I was thinking more as an implementation, because –
getting rid of the contingency isn’t going to make any difference for those was
really the point I was making.

MR. LAZARUS: Well, it is maybe – this partially ties to Karen’s earlier
question about the other transactions and practice management system vendors’

Had almost 20 years experience consulting with physician practices in vendor
selection, and it’s been five years with the Medical Group Management
Association as an executive, and speaking from that experience, on the
remittance advice, most of the practice management system vendors can support
electronic remittance advice acceptance, and, in fact, many of the mid-sized to
larger practices have been doing remittance advice posting for Medicare for a
long time, because that is the high volume, big payoff from labor effort, and
because things were not standardized, they didn’t want to make the financial
investment to support the smaller payer transactions.

But, remember, this is a voluntary issue on the part of the providers,
whether they are going to execute that remittance or not, and, usually, there
is a setup and an ongoing maintenance fee that they have to pay in order to
enable that capability within that system. So we get back to the WEDI
recommendation to develop business cases to help people understand what the
payoff is to do the implementation.

For this particular transaction, it is less of an issue of capability –
undoubtedly, there are practice management systems that don’t do this, but a
vast majority of them have the capability for a known price –

On the eligibility transactions, in particular, it has been pretty well
established in the last several months, as we have tried to launch forward,
that there are two issues that are barriers to implementing these transactions,
which, in part, relate to the PMS vendor, perhaps, but one is that to be
useful, these are real-time transactions, that the batch processing that we
used for other transactions don’t work very well when you are trying to find
out what the person is eligible for, how much money to collect from them now,
and this is an important issue, which is largely done by phone and fax or
proprietary eligibility electronic systems or web systems.

The electronic ones work well, when you’ve got a large part of your business
with a payer. So if you are a provider – I have a hospital client that does
almost all Medicaid and Medicare, and that’s it. They use a web-based
eligibility, because they’ve only got two payers to worry about and only two
ways to learn how to do it.

For most of us, though, in the provider community, there are hundreds if not
thousands of payers, and there are all different ways of doing this process,
and it’s not standard at all, unless we use the transaction to make them real
time in some way it is effective.

And the other piece is the option payers have of just providing yes/no
response, instead of the full-blown eligibility detail which means if the
person is eligible, you find out through the transaction, then you wind up
making a phone call to find out what they are eligible for. So you really
haven’t saved very much.

We need to address those two issues as well as the practice management
system support for that data, and I will say that, different than five to ten
years ago, most of the practice management systems and the hospital information
systems have the capability of storing the eligibility response. You may have
to key it in, but if there is a verification number or whatever – that wasn’t
necessarily true five to ten years ago, but it is true today that the place to
store the data is there.

The other piece related – I want to speak on something that Ed spoke of
earlier when he talked about electronic medical record. As we move forward with
the practice management system of vendors as well, they have moved, to a
degree, from a batch-oriented accounting-based process to a real-time database
process in the way they do everything, and so the positioning from a technology
perspective to deal more with these real-time transactions has moved in that
direction. I think it is there for everybody, but that has been the trend over
the last five years, and so a much better position to move into the real-time
processing for other things than they would have been five years ago.

MR. POKORNY: One other point. Several themes have come up in the comments.
The business model that I think that HIPAA was created in, the healthcare model
has changed. Gary points out now that people are getting involved in their
healthcare decisions, determining their own eligibility. That really wasn’t the
world back in 1996 and before, when HIPAA was first created.

Steve is pointing out some of the issues concerned with interactive
transactions. It really wasn’t the world that we were thinking about back then.

Ed, in his testimony, was talking about realization that the small
practitioner – the testimony about the dentist and the small practitioner.
These are the conditions I think we have to be very cognizant when we think
about these other transactions and how do we get them implemented, in addition
to the claim transaction.

We are now living in a different world than originally envisioned when HIPAA
was implemented in 1996, and I think that – you asked about what has changed.
That’s what has changed. The whole world is different now than what we
originally envisioned in 1996 or even 2000 and 2002.

MR. JONES: I’ll give you a perfect example, and this goes to Simon’s point
about going out to these other transactions, and I am speaking – an industry I
know best, self-funding, third-party administrator market and the claim status

There is enormous consolidation going on in the third PPA market right now,
and most of the big PPAs have developed websites. If you look at the benefit
card, they used to have a phone number and address if you want a claim status.
Now, they have the URL, and you go on and you register and you have instant
access into a database, after you have registered, to check on claim status.

And going back to the small practitioner again, they are not dealing in huge
volumes. It is much more cost effective for them to get on the web for two or
three of these, and when we move down the road to those types of transactions,
we are going to find resistance to change, because they are used to using the
internet now. That has really become rote, and to have to adopt other
technologies or have to adopt potentially volume technologies that they don’t
reflect in their business, I think is going to be difficult.


DR. FITZMAURICE: Well, I want to say, first of all, that we hadn’t heard
from the Medicare program as a health plan in a long time, particularly with
regard to the issues that arise from HIPAA implementation. So I want to
compliment Gary Cavanaugh for having been here and responding to the HIPAA
working group testimony.

During the testimony, I heard Jim Emory, representing the HIPAA Working
Group, implied that some Medicare carriers and intermediaries may not be able
to accept HIPAA-formatted transactions today, and perhaps not by the July
1st deadline. I think that’s the pay-delay start deadline, and then
I heard Gary say, this is news to me. Nobody is complaining.

Well, I guess I am a little concerned about the disconnect to ask – to Jack,
I would say, what is the story here? Are provider views not being addressed in
the right place? And to Gary I would ask, where is the proper place in the
Medicare program for these discussions of implementation problems to take
place, instead of having the provider lodge a complaint under HIPAA?

But both Gary and Jack weren’t able to stay through the full
question-and-answer session. So I just want to raise that as a disconnect, that
it seems that maybe there is still an inability for communication, which
emphasizes the point that WEDI also emphasized, that we need to keep open the
channels of communication.

Secondly, and lastly, we have all gotten smarter through these processes. I
am impressed with the energy and the brilliance of some of the descriptions of
the problems and proposed solutions.

Is there a better model for adopting the HIPAA standards to change and still
seeking enforcement of the implementation than we have through the regulatory
process? We want speed and we want to be able to adopt a technical change and
changes in business needs.

But I haven’t heard anybody in the testimony today say we ought to give up
the current model. What I have heard them say is make it work better and
faster. Am I hearing that right? Is there another model you would propose?

MR. JONES: I think that is a fair statement. I think what we have to do,
within the constraints of that model, given the way technology is evolving, is
to look how that fits. Are we dealing with a square and a round hole, we’re
going to try and jam something in as technology runs ahead or are they
compatible and we can – and this would go to your faster comment – can we amend
mid-1990s expectations of technology to technology, not today’s technology, but
I really think we need to look out three, five, end of this decade, what we
anticipate the technology to be; and the really interesting thing, if you look
back a couple of years ago, there was expectation that 2003 was going to be the
advent of enormous capacity in broadband, and that is beginning to occur, and
you are beginning to see some changes there, one example being hotels are now
giving this away for free. It is becoming a public good, and I think what we
are going to have is this incredible capacity down the road. How do we use it?
How do we use the existing model and get the benefits of that real time that
Steve was talking about?

DR. FITZMAURICE: Given this change, and given the things that Frank had also
mentioned earlier describing how the change has taken place, would you focus
more on the data content than on how the message is transmitted in the future,
if you were giving guidance?

MR. JONES: I think on the content issue, we have to pare that down. We have
to create a standard. We don’t have a standard in content. There is too much
variability. I think those messages are going to come out of the standards
group. I think you have to work in tandem together.

There is no doubt in my mind – and I haven’t commented on this, but all of a
sudden, the last year, the banks have gotten into the healthcare business big
time. They are coming in, because they handle all the money. So they’ve got the
remittance-advice capacities. They have payment clearinghouses. They don’t
understand healthcare, but they are beginning, and that is a whole >nother
variable in here that hasn’t been discussed heretofore. A lot of change coming.

MR. BEATTY: Just back to, I think, Steve’s comment relative to eligibility
and going back to one of the twos(?), if you will, not all providers are
looking to move to – in an interactive eligibility – My experience in the past
with providers looking to be able to – say, for example, especially when you
have inpatient stays, where, you know, generally, the hospitals will know two
or three days in advance who is coming in and so forth, and they’ll do a batch
eligibility and – response, and then maybe there’s a certain population that
may be – especially when you look at certain Medicaid plans and so forth.

A couple of weeks ago, I was visiting a clearinghouse that was moving
eligibility transactions between payers and providers. They were priding
themselves because they were doing 270, 271s, inquiry and response, within a
three-or-four second turnaround time. I think that is pretty responsible out
there within the industry. So there are initiatives out there to use these
transactions, based upon the current syntax and structure, in both the batch
and in interactive environment.

X12, not only – beyond just our old legacy – you know – syntax and format,
we are also moving into the future, looking at using what we call our contacts
– architecture, which is used to represent our transactions based upon XML in
more web-friendly environments, and many of these transactions – especially the
interactive transactions we have currently under HIPAA – we are looking to move
those transactions forward and already started those initiatives to represent
transactions like eligibility, referrals, presert authorization-types of
transactions, claims-status transactions and others into – to be able to be
more supportive in a web-based, browser-based environment based upon the CICA
within the X12 environment.

MR. REYNOLDS: Okay. I would like to thank everybody for their participation.
I need to stay on time or Simon will never let me be – (laughter). I think we
are absolutely right on time. Good shape – everybody’s input. One thing that
was good to me is we need to continue to have open, honorable dialogue. This
can’t be everybody defending their own fort. It can’t be everybody arguing over
who is ready or not. We ought to all get there. So I appreciate that level of

Thank you.

DR. COHN: Well, Harry, thank you very much for helping us with this last

You know, obviously, towards the end of the session, we’ll be talking about
next steps, just for the subcommittee, but one would observe, at least from my
view, that there’s a couple of things that I think came out of all of this.

I mean, one was this issue of outreach, and I think the committee would
welcome more thinking from the DSMOs as an integrated activity, as opposed to a
separate DSMO committee versus X12 or whatever about how you’re – you know –
how that should happen, and I think that maybe part of that outreach may
include some conversations about technology and technologies that support
healthcare. Hence, that last conversation about the world of XML and the web,
because that is certainly something want to get wider comment from the
customers and all of that about.

I guess I am hearing that there is this sort of duel – I’m not saying it’s a
dual track, but it is sort of this world of our responsibilities being sort of
the track, the 837, and how that is doing and all that’s riding on that, but,
also, I think, having continued conversations to figure out how in the heck we
move the industry along on these other transactions, knowing that there is sort
of a dance there. I mean, the 837 is critical of the day-to-day funds and
making sure that the money is there to do everything else, but that, obviously,
the value is in these other pieces.

So I think these will be sort of ongoing issues as we sort of move through
the year. One of the interesting questions for the subcommittee will be – as we
think about it towards the end of the day – will be how to juggle all of these
things, though it has been suggested that I buy a big house in Washington, so
we can all live there. (Laughter). I could do this in a responsible fashion to
make sure that we really do sort of move forward with this.

Elaine, do you have a comment?

MS. GILFOY: Yes. This is Elaine Gilfoy(?). I just had a couple of comments.
One – and I’m sorry that Jack left, but in his presentation, he quoted that
there needed to be something that – I’m trying to find the actual quote now,
but, at any rate, the implication was that payers should not delay claims
because the data not needed for adjudication is missing.

According to the regulation – and I went back and referenced the regulation
– according to the regulation, paragraph 162.925, subparagraph 3, says that a
health plan may not reject a standard transaction on the basis that it contains
data elements not needed or used by the health plan.

So while his point is well taken and I do understand that some health plans
are rejecting claims because it is coming across with data that they don’t
need, the regulation is pretty explicit that as long as a provider sends a
fully-compliant standardized claim, that they can’t be rejected.

I know some of the payers are massaging that data and putting it into a data
warehouse, so that they are stripping off information that they need, but I
just wanted to correct the record, that the information was presented

And, Gary, no offense intended, but I submitted, as a part of my role as the
Transaction and Co-Set Chairman for e-Pennsylvania – which is a WEDI SNIP(?)
RSA – I submitted a critical change to the DSMO on March of >03. We needed
to do this because it was a legitimate request that our payers were asking us
to send us information, but because of the way the addenda had effected the
transaction, we couldn’t send it.

So, at any rate, my point is is that I submitted a valid request on the
third of March. It was approved, finally, through the appeal process on
November of last year. So it was almost a year’s time that it had sat trying to
get approved.

Now, I find out, when I go in and look at the website, it says, appeal
remanded, and I am not sure what that means, whether you are going to look at
it again – yet again, a second time. I hadn’t even noticed that until just now,
but my point is is that this is what users are up against, and this is why we
are not using the process.

When I did get the approval back, I asked – understanding that nothing was
set in concrete – was there any expectation of when this change would be
implemented – because our payer, who happens to be a Medicaid agency, had said
they would go along with it as long as we encouraged the change in the IG.
There’s no date on when this change would ever be effected, and I think part of
it is hung up in which version of the IG is going to be the next release.

And you don’t have any answer, and I’m not expecting an answer. I only point
out the problem.

MR. BEATTY: Two things. One is – you’re right. I don’t want to get into
details. We do have it here, but the challenge of when is the big question. It
is part of why we are addressing the short- and long-term process right now,
because, regardless of whether it got approved or not, we are still bound by
the two-to-three year regulatory process to be able to be allowed to use – I
mean, even if we incorporate that in the 4050 or – I’m not quite sure what the
timing was on that one – even though we have done all the things. We’ve done it
– regardless how much time – how long it takes at these standard-setting
organizations, it doesn’t matter –

MS. GILFOY: Right.

MR. BEATTY: – because – I mean, we can do it in four months. We can do it in
eight months. It still doesn’t matter. If we are bound by the regulatory
process, you gotta wait two to three years.

MS. GILFOY: Yes, I understand.

MR. BEATTY: That’s why, right now, within the DSMO, we are working so
closely with the Department of Health and Human Services to find are there ways
we can address those issues.

MS. GILFOY: I guess my question really was which one of the IG’s, which ones
are the versions? Is it going to be 4050 or 5010 or whatever we are looking at
that we could even expect it, so that we can get Medicaid off our back is
basically what I am asking.

MR. POKORNY: Yes, and off the top of my head, I don’t remember which one it
was, but, again, it’s almost immaterial, because whichever IG winds up being
promoted as the next HIPAA standard still has to go through the whole –

MS. GILFOY: No, I understand.

MR. POKORNY: B rule-making process, and, again, that goes back to those
issues that were noted in the annual report. It’s that disconnect –

MS. GILFOY: Yes, I guess I –

MR. POKORNY: – discontinuity –

MS. GILFOY: I guess I just wanted to get this on the record is part of my
impetus in standing up here.

The other thing is – and I am not trying to belabor this point, but, as most
of you know, I have been in the trenches with HIPAA since >96, and I have
been doing – fondly called gap analysis. The earlier ones, I would discount,
and not to contradict Steve, but, as I look at the HIS systems, only 51 percent
of the 837 data is collected, the institutional 837. Only 33 percent of the 835
data is collected, and this is just one particular vendor of HIS software, but
it is pretty consistent across the board.

As far as PMS software goes, 74 percent of the 837 is collected and 51
percent of the 835 is collected.

Interestingly, of the other transactions, most of the vendors are collecting
more of that information than they are with the – with the claims and the
remittance advices. So it’s kind of a dichotomy. If we could just move on to
that, we may know what we are doing, but the data is just – the boxes are not
there, if you will, to put the data in.

DR. COHN: You remember we all, back in >96, thought that HIPAA would be
in by 2000, 1999, 1998. I think we have all learned a little bit, but, I mean,
what Elaine was just commenting on is really what caused us to request to the
DSMOs that they do the addendum, the fast-track process to look for unnecessary
data elements. So I just want to remind everyone that that was really why we –
These discussions were – the genesis of that original addenda were to look for
unnecessary things, things that obviously must not need to be there. Maybe that
all needs to be looked at again, but I think we found last time that there was
a lot of data that came in through other systems that filled out the standard
and all of that.

MR. POKORNY: And there were some 400 fast-track items, I think, that were –

DR. COHN: Yes. You guys did great work, even though it’s –

MR. POKORNY: Volunteer work?

DR. COHN: Volunteer work, yes. (Laughter). We really appreciate it.

Now, I am going to give everybody about a 10-minute break. I really want to
thank everyone for being here for this conversation. I think it was very

Harry, thank you for running it.

I don’t think we have answers, but I think it’s been very interesting to see
the commonality of views, as well as I think the intent to solve some of the
more vexing problems. So I think we’ll be talking, once again, towards the end
of the day about what sort of next steps, but it really is going to be a
balancing act of what we put focus on.

The good news, obviously, CMS already has the WEDI information. We now have
the DSMO recommendations, and, obviously, this year will be – a lot of the
focus will be on improving the process, streamlining things, making things more

MR. JONES: Can I make a – I was mentioning to Jim, maybe we ought to follow
our own recommendations and – I’m speaking of WEDI’s recommendations – and have
another hearing next January where we use kind of the same finding and
recommendation categories and invite people to comment on – I mean, it’s a kind
of qualitative/quantitative metric, but it would certainly probably give us
some benchmark to look at the progress we have made over the year.

DR. COHN: Very good idea. Thank you.

Okay. Well, why don’t we take 10 minutes, and we’ll come back for the last

Thank you.

DR. COHN: As I understand, the genesis of this issue was actually based on a
request from the DSMOs in 2001 related to sort of what transaction and what
code sets to use for the billing of supplies in pharmacies, and I think back in
2001, the subcommittee heard this as a recommendation, chose not to act on it
for a variety of reasons, and it was brought back to our attention recently, as
well as also was noted on the DSMO annual report as sort of one of the critical
issues that was identified by the DSMOs.

I think the good news, as I understand, for the moment, that, because of
contingency plans, this is an issue that has not become critical, but, at some
point, obviously, the contingency plans will be removed, and I think the –
there has to be a decision about how all this should be occurring.

Agenda Item: Followup on DSMO Request on

Standards for Billing for Supplies

DR. COHN: Now, Lynne, I think we were asking you to start out, sort of
describe this or talk about it, and I know Tom Wilder is representing the
consortium and wanted to, I think, make a couple of comments, plus we asked him
a particular question or two at the last meeting we had.

So, Lynne, would you like to start out representing NCPDP and the DSMO view
on this?

MS. GILBERTSON: Okay. What I have provided is a summary – Executive Summary
to the committee that tries to show you the request, the genesis of what has
happened in the last four years, and tries to summarize what the recommendation

There have been copies of what’s listed up on the desk as the
Billing-for-Supplies White Paper. I would prefer you set that aside, because it
was written a long time ago, and, as all documents, when you go back, hindsight
would clarify things much more clearly and state things a little differently,
and all that. So I hope the Executive Summary that you have been provided is
much more on track in trying to define things a little bit more succinctly.

DR. COHN: Lynne, can you identify the Executive Summary? I’m looking for it.

MS. GILBERTSON: It is called Billing for Supplies, Executive Summary, in the
lefthand –

DR. COHN: Oh, I see. Okay. Thank you very much. Okay.

MS. GILBERTSON: The request is that when supplies are billed by a dispensing
retail pharmacy, that the NCPDP standards should be designated as
HIPAA-compliant standards for the billing and the authorization of supplies.
The NCPDP standards have been used successfully for over 20 years.

It also requests that the National Drug Code or the NDC be designated as a
standard code set when there is an NDC available. When there is not an NDC
available for that supply, the HRI, or the Health-Related Item Code, or, the
Uniform Product Code, UPC, or, worse case or the last example is the HIKPIX(?),
where non-specific codes could be used that would not lead to potential for
problems in patient care, fraud or abuse.

This request for the code sets is similar to the treatment of billing for
drugs and supplies in the non-retail setting, where no standard is currently
applied under HIPAA. Basically, the industry is asking, in this change request,
to do what is being done today and has been done for quite a while.

The outline Executive Summary offers you a definition of supplies, delivery
devices used in the administration, consumption or application of drug products
to or by the patient or consumable medical supply or assistance device or in
the protection of the patient from additional harm by providing a barrier to
contamination or harm. One of the long definitions.

What the industry has been asking for is in conjunction with a medication or
the prescribing event, the prescription, that the supply be continued to be
billed using the standards they have been using.

Some history on this. When the regulations came out, there was
interpretation by CMS that when retail pharmacies bill supplies, they should
use the X12 837. Representatives of the industry did not agree with this
interpretation, and, as Simon said, the industry was using contingency plans

The use of the NCPDP standards is the predominant method currently used to
bill for supplies in the retail pharmacy’s context today. It continues to offer
online, real-time drug utilization review. Benefit, copayment and other
essential processes are in place, especially when you have a drug and a supply
together, supporting claims processing as well as the prior authorizations for
claims for supplies and drugs in one transaction, which is a common practice,
and the modification would cause cost disruption and delays converting to a new
standard that really doesn’t purport any different functionality better or
worse than what they are currently doing today.

More than 14 million pharmacy claims for these types of supplies are
processed through pharmacies each year, using the NCPDP standards, representing
about $447 million worth of claims, and, as an addition, the continued use of
the NCD were available and the use of the UPC and HRI were agreeable, as they
have for years.

This is not trying to draw any – cause any contention with the medical
claims that are being processed today under medical benefits that pharmacies
submit or anything like that. That is not part of this request.

For many patients with chronic diseases, such as diabetes, retail pharmacies
provide critical supplies, such as insulin syringes, lancets and test strips.
Mandating only the 837 for the billing of these type of supplies will interrupt
the current supply chain for these individuals. They currently receive
real-time responses for the billing of the supply, and it contains the payment,
the copayment information and the drug utilization review, as I mentioned. By
implementing separate transactions, one for the drug and another one for the
supply, you cause disruption to the patient and disruption to the billing

Number one, one is a real-time transaction. One is a batch, and, in some
cases, the claims have to be married together, so that both the drug and the
supply are known together.

Pharmacies provide supplies such as I mentioned, the insulin syringes, test
strips, aero-chambers. There is another example in your Executive Summary of an
empty gelatin capsule that is considered a supply, and claims for these
supplies are processed by the same industry participants that process the
claims for the drug component.

It is not the intent to ask for the mandate to be modified to the NCPDP
standards for DME providers or the D-Merks(?) who currently use the 837 for the
covered medical. We are not touching that. This is for the products consumed or
used during or as a consequence of the administration of a drug therapy
commonly dispensed by the retail pharmacy.

The NCPDP standards have been developed with the pharmacy industry
consensus, and that means pharmacies, providers of service, vendors, payers,
PBMs, health plans, you name it. So denying the use of the NCPDP standards for
this common business practice is denying the use of the standard that they

On the use of the code sets B because I understood there was some questions
from March 3rd about the codes – NDC is the standard code, when
there is an NDC available. HIKPIX might be used in situations where there is
non-specific codes that wouldn’t lead to problems in patient care, fraud and

When there is no NDC available, the HRI and the UPC are commonly used to
identify that item. Some supplies have NDCs, but no longer have NDCs, but they
are still in use. So, therefore, if you deny the use of the NDC for supplies,
for example, you would cut off those items that still have NDCs. If you do not
support the use of the HRI, then you might cut off the use of supplies that
have moved from NDCs to HRIs.

Some drug supplies, including many insulin syringes, don’t have NDCs, and it
is kind of hard to separate the drug and the syringe sometimes when they are

The manufacturers must identify these supplies with UPCs and/or HRI numbers.
The UPC and the HRI number identify both the manufacturer and the individual
product distributed by that manufacturer. Important information about tagging
by an NDC, a UPC or an HRI versus a HIKPIX is that product recalls are
extremely important to this industry, and it is very, very difficult to recall
something by a category. You need to know what product is being recalled, and,
so, therefore, the NDC, the UPC and the HRI are very important for that use.

As far as updates to these code sets, the NDCs, the UPCs and the HRIs are
updated as often as daily to pharmacies and processors or payers.

The code sets named do not reflect the current industry practice, improve
efficiency or promote the standardization for supplies. Supplies that are
currently built using primarily the NDC numbers, the UPC and the HRI is what
the request is for.

All major pharmacy database companies identify products via the NDC, the
UPC, the HRI, and just as an example, one the major published databases
contains 85,000 active items, 71,000 of these are identified by NDC, 4,300 by
HRI and 9,600 by UPC.

Active means the product is available from the manufacturer. The entire drug
file, which would contain active and inactive, has 254,000 total items on file,
202,000 are identified by NDC, 6,200 by HRI and 15,000 are by UPC. This
information is useable, available to all pharmacies and processors.

Specifying the NDC as the code set to be used when an NDC number is
available will create the greater uniformity while allowing the parties to
continue to use the UPC, the HRI, and, if need be, the HIKPIX, when there is no
NDC available.

A couple of notes I thought to add here, in case there was any confusion, in
the Notice of Proposed Rule Making a while back, it was noted the issue of
billing of supplies by retail pharmacies and then the issue of professional
services, and for the purposes of this discussion, these are totally separate
issues, and they are not to be confused. So just to make that one clear.

One of the things I also noted yesterday during Karen Trudel’s presentation
on the Medicare D, she noted on one of her slides that Part D is going to
include smoking-cessation agents, vaccines and insulin, insulin-related
supplies, such as syringe needles, alcohol swabs and gauze, but not lancets and
test strips.

I thought that was an interesting statement, because she also mentioned that
this is in – Medicare D is for the outpatient, the ambulatory setting, which I
guess if A follows B follows C, we have retail pharmacies who are submitting
Part D claims for drugs and supplies that are related that would be using the
HIPAA NCPDP standards, and so, therefore, I think it is a sign that these are
common things that are billed as part of the retail pharmacy environment and
are billed when they are part of the drug and the supply as part of the common
transaction sets that are used by retail pharmacies.

A little bit of the history – and this is a tiny bit. I have probably a
10-page document, if anyone is interested in all the different things the
industry has been working on since 2001, when the issue first came up as just
an incidental question. Pharmacies had been billing the drugs and supplies
using the NCPDP standards for many, many years, so when HIPAA came out, it was
– there wasn’t even a question asked, because you just continued to do what you
had been doing today since they were already administrative simplification by
using current standards.

So the question came up. There were a lot of discussions with CMS in 2001.
That white paper I mentioned was started, and CRS 492 was filed with the DSMO.

In 2002, there was testimony given to NCVHS on this issue. The DSMO approved
CRS 492. CMS issued the modifications NPRM, which did not include supplies, and
in the DSMO annual testimony to NCVHS, they included Change Request 492 as

In 2003, the final rule was published with incorrect information mixing the
supplies and the professional services issue, and it noted CMS would issue

NCPDP, as well as other organizations, requested of CMS when that guidance
would be issued. There were further discussions with CMS in 2003 and at the
latter part of 2003, an FAQ was published that basically said, use your
contingency plans >til this issue is resolved.

In 2004, the DSMO then requested to NCVHS for a status on moving 492

As we heard this morning, we have been told that the modifications rule that
was mentioned would probably address questions about the supply, and, as it
turns out, it is now sounding like it is late 2004 before even that will be
issued. So this issue has been open in different phases since 2001.

DR. COHN: Okay. Lynne, thank you.

Tom, did you have a statement you wanted to make?

MR. WILDER: Sure. I’ll just be very brief, because Lynne has laid this out a
lot more eloquently than I could, and she is a technical expert, so you can
direct all the questions to her.

I am Tom Wilder with America’s Health Insurance Plans and also representing
a number of groups representing pharmacists and retail pharmacies and
prescription-benefit managers.

We do appreciate you putting us on your rather crowded agenda today, and I
know this, as Simon indicated, is a followup from your last meeting when you
had some questions for us.

Lynne, I think, again, has laid this issue out pretty well. What we would
like is that you favorably recommend this change request to the department, so
that they can get the process moving.

I know that they have indicated it is going to be in the NPRM, but, again, I
think there is some uncertainty as when that is going to come out, and we think
there is no need to wait for that question to be asked in the NPRM for this
committee to make a recommendation.

I just want to touch on a couple of points, again, to pick up on a couple of
things that Lynne said.

We want to be very clear. We are not asking that the 837 go away. There are
a number of cases where, in fact, the 837 is being used as the claim submission
for supplies, particularly in those instances where it does involve durable
medical equipment or in cases where this benefit is paid on the medical side,
as opposed to as a pharmacy claim.

We are not asking that this transaction be used for services. Again, as
Lynne indicated, that is a separate issue, and so that should not be confused
with our request for supplies.

I think the point about Medicare Part D now coming on line in a year or so
where they are going to be billing for supplies, I think it is critical that
they be allowed to continue to use the systems that we are using now.

As Lynne mentioned, the real benefit to not only the payers and the
providers, but, quite frankly, to the patients is the fact that this is
real-time transaction. That is why folks are using the telecommunications
standard is because they can get an instantaneous response back. So we need to
continue that.

And just to close – and, again, something that Lynne had in her paper, more
than 14 million pharmacy claims for supplies are processed through pharmacies
each year by the NCPDP standards, representing approximately $447 million worth
of claims.

I am, by no means, a technical expert, as I have expressed to all of you in
the past, and I guess my question back to you is if we have a system now that
is processing that volume and dollar amount of claims that is working so
successfully, we should continue with that and not have to go to something that
is not going to work for everybody.

DR. COHN: Okay. Tom, thank you.

There are actually two other comments I would like to hear form before we
sort of jump in to discussion on this one. I think one is – Donna, are you
prepared to make any comments about the code sets or anything?

MS. PICKETT: Lynne and I had a conversation the other day. We were trying to
amass information about the code sets, the updating process, overlap of codes,
how frequently it is updated. We have heard sometimes almost daily, but there
were a list of other things that we were going to work on gathering to provide
information to the subcommittee.

DR. COHN: Okay.

MS. PICKETT: That we could not do in time for this meeting, but agreed that
we would have something ready for the May meeting.

DR. COHN: Oh, okay.

I just want to remind the subcommittee that there were sort of two issues.
One was the standard, and then there were these code sets that – I mean, were,
really, I think, a lot of the sticking issue back in 2001 – just because there
appeared to be a lot of redundancy and overlap, and there really was not any
information really brought forward specifically about those code sets which –
at least as I read the request, are really a request for these code sets to
become HIPAA standard code sets, HIPAA medical code sets. So it caused me to
think of this as sort of two separate issues.

So I guess the answer to our – to the question we had last time, which was
what about these code sets, is that still we – it is still being investigated
and all of that.

Now –

MS. GILBERTSON: But of interest, Simon, in all the letters I have sent and
the testimony, we have never been asked further to ascertain more information
on the code sets >til just recently. So I’m not sure what held things up in
the past, but this is the first time I was asked to provide any kind of
information about the code sets, since the request was filed.

DR. COHN: You mean in 2001 or –


DR. COHN: Okay. Did the DSMOs ask about the code sets?

MS. GILBERTSON: No, they were in agreement –

DR. COHN: Well –

MS. GILBERTSON: – that the continued use of how the industry was doing it
was what they approved.

DR. COHN: Okay. Well, I guess, Lynne, I’m asking –

MS. GILBERTSON: Yes, understand.

DR. COHN: – and I asked a month ago, and I think that really a lot of the
intent here was to try to get to the – to understand better the code sets,
because – once again, as I have read this, this appears to me to be two
separate requests, one for the standard and then also a request for use of
these code sets for supplies. So I think we just needed to understand more
about the code sets. Since there was little information in the white paper, I
was actually asking Donna, as I said, to look around, recognizing that at one
point she was part of the HIPAA code set team, and it just sounds like we just
don’t have the information.

Now, I guess I was going to ask, in the process of this meeting, the
subcommittee did receive a letter from the National Community Pharmacists
Association, and I actually – this reminded me that we actually received a
similar letter, I think, back in 2001 or 2002. Maybe I was being somewhat
simpleminded, but I had sort of, in my own mind, sort of said, well, of course,
you should use the NCPDP standard for all this, and, really, the question what
code sets you use, and, of course, this letter sort of says use the code sets,
but don’t use the standard.

So I actually was going to ask if you could maybe come to the microphone and
introduce yourself and explain – either you could read the letter or explain it
or answer questions. I just – since you are here, I apologize for the – but I’m
confused, but maybe you can tell us a little more about this, as well as your

MS. KUHN: Certainly. My name is Katherine Kuhn, and I am with the National
Community Pharmacists Association.

We represent 24,000-plus pharmacies in this country which roughly represents
approximately 42 percent of all fo the retail pharmacy outlets in the U.S.

We – not to confuse everyone with the comments that I submitted this morning
to the subcommittee, but we do agree with everything that Lynne says in her
recommendation for the subcommittee today, but just to put a fine point and
just to clarify where we are coming from and our concerns about this whole
issue is that we would not want the decision to be made that there would be an
either/or decision for the use of billing for supplies on the NCPDP Version 5.1
or the X12 and 837.

MR. BLAIR: You mean, you don’t want the either. It could be one or the

MS. KUHN: Right. The either/or is a problem for us. We feel like that that
gets us right back to where we were prior to HIPAA, and, you know, relying,
once again, on the trading-partner-specific agreements.

So we would like to continue to bill for supplies as we are today, but I
think Lynne’s recommendation here, she defines how we would like for that to
occur, which is a supply could billed using the NCPDP 5.1 standard, if it was
intrinsically related to a prescription drug, and I think her recommendation
speaks to that. So what we are really talking about is really a limited group
of these supplies, but not all supplies being billed through NCPDP 5.1.

DR. COHN: Okay. Just make sure I understand, so you are saying you are
agreeing with her recommendations and you would like to see those – that group
of supplies, as they are defined, solely billed to the NCPDP transaction, as
opposed to having an option, or, for that limited amount, you would be happy to
have it either, as long as it is well defined?

MS. KUHN: Well, for those supplies today that are intrinsically linked to a
prescription drug product, we would like to see those continued to be billed
using the NCPDP 5.1, and, as Lynne pointed out, there are millions of those
transactions occurring today.

There are similar types of transactions that are being billed on an X12 and
837, but just to open, our only concern, where we are coming from, is that we
open – we don’t want to see the floodgates entirely open where providers are,
once again – and our vendors are in the position of relying on
trading-partner-specific agreements, where when it boils down to submitting a
supply claim, which transaction standard do you use, but I think Lynne’s
definition here does define carefully, I think, what we are all talking about,
that there is this special group of supplies that are linked to a
prescription-drug product and that we should be able to continue to bill for
those using the NCPDP Version 5.1 standard.

MR. BLAIR: For my benefit, would you mind rereading that specific definition

MS. KUHN: Certainly. What is provided here in this Executive Summary on
billing for supplies is to allow the continued use of the NCPDP standards for
billing of supplies that are consumed or used during or as a consequence of the
administration of a drug therapy or commonly-dispensed via the retail pharmacy.

So I just wanted to clarify that and not to confuse everyone with our views,
but, also, to express our concerns to the subcommittee about this particular

DR. HUFF: So are retail pharmacies today routinely submitting claims via the
837, as well as via NCPDP.

MS. KUHN: Yes –

DR. HUFF: So their systems are set up so that they can send either type of

MS. KUHN: Retail pharmacies today, yes. Not all retail pharmacies are using
both claim standards, but, yes, there are many pharmacies that are using both
the X12 and 837 and the NCPDP version 5.1, but the majority of – the typical
transaction that is used to bill for the majority of supplies claims for these
types of supplies that we are talking about that are intrinsically related to
the drug product, those type of claims supplies transactions are being billed
for using the NCPDP standard.

DR. HUFF: Just so I get a clear picture in my mind, what sorts of things
that retail pharmacies submit claims for routinely would not be intrinsically
related to drugs? So just for some examples.

MS. KUHN: It’s a lot of times, the 837 is used – just to kind of answer your
question in a roundabout way – a lot of times, when a retail pharmacy chooses
to use the X12 standard, the 837 to submit a supply claim, it is to communicate
with the medical benefit payer, because the medical payers are not set up to
communicate using the NCPDP standard.

MS. GILBERTSON: And those might be for wheelchairs and crutches and durable
medical equipment –

MS. KUHN: Well, even incontinence supplies, wearing a little different hat
than what you might think of a drug dispenser.

DR. HUFF: And I guess just – I mean, because I – you know, that is the
question that came to me in reading this is there’s got to be – if I was the
pharmacy, I would want an exact line to know what I sent on which form and
which one I sent on the other one, and so – I mean, you know, again going back
to Karen’s – you know, she’s paying for insulin syringes, but she’s not paying
for – you know, I mean, she was saying that they wouldn’t do lancets and other
stuff. I mean, so are lancets intrinsically – I would have thought naively that
lancets were, in fact, intrinsic to the use of insulin and – but that’s the
kind of –

DR. COHN: Yes, but they may choose not to pay for it though.

MS. GILBERTSON: Right. Right. That may not be a benefit.

DR. HUFF: I guess that is true, but –

DR. COHN: You wouldn’t get it if you –

DR. HUFF: Whichever form I sent it in on. (Laughter).

MS. GILBERTSON: No, I think what Karen was – at least what I am interpreting
from how she stated that, it is something that Medicare Part D is not even
going to cover. So you aren’t going to bill for that, I guess.

DR. HUFF: So, yes, okay. So – okay – but I guess that is the point is that –
my question is still the same even ignoring that other confusing part. I mean,
it seems to me that there would still be confusion about whether I should send
– you know, if I were going to submit a claim for lancets, whether I would send
it in on an 837 or I would send it in on NCPDP 5.1. I mean, what is the rule?
How do I know?

MR. BLAIR(?): Who is going to pay for it?

MS. KUHN: Yes, it boils down to the payer, and some payers pay for some
benefits and others don’t.

DR. FITZMAURICE: So you’ve got a bunch of trading-partner agreements again
to rule all of this, which is what we are trying to get away from.

MS. GILBERTSON: The other example is an oral surgeon. We billing the 837 D,
the P? Which one? And it’s usually the same thing, determined by payer. So we
don’t cut – you know, there aren’t cut-and-dry lines in healthcare benefits yet
as well.

MR. BLAIR: You need the flexibility to use whichever standard or code set
will enable you to get paid.

MS. KUHN: Yes, that’s correct.

MR. WILDER: I hate to throw some cold water on this. We actually discussed
this issue about linking supplies to drugs and drug therapy early on, and I
would want to go back to my group and talk through it with them in more detail.
I recall that a couple, at least – and, again, I’m talking about the
health-plan members – said, no, there are, in fact, a number of supplies that
are dispensed at a retail pharmacy that you would not think were necessarily
linked to a particular drug or drug therapy that they are paying claims now on
the NCP pay. I would want to go back and confirm that.

DR. COHN: Does that apply in this definition where it says or commonly
dispensed by the retail pharmacy – It sounds like everything.

MR. WILDER: Well, again, I can only tell you from talking to our – and I’ll
put on my – hat – in talking to our – members, that they do, in fact, use the
837 as a claim transaction – and, in general, EME or where it is a benefit that
is covered through the medical part of the plan, as opposed to as a pharmacy

MR. BLAIR: Could I get a little clarification here, because does it matter?
I don’t understand. It sounds to me as if Lynne and Karen have been saying they
need the flexibility, because there’s different health plans or dental plans or
other payment plans that will use one rather than another, and they are just
asking for the flexibility. So why do we need to drill down for a precise
definition of what is covered under one or the other? Because, apparently, when
new health plans come out or Medicare Prescription D comes out, that changes
it, and every time these things get changed, they simply need the flexibility.
So why do we need to refine the issue further?

MS. GILBERTSON: During one of the initial discussions a while back with CMS,
we tried to see if there was some kind of definition by saying what benefit was
being paid, and that was an unacceptable demarcation line to CMS.

Now, you know, that was a couple of years ago, so maybe things have changed,
but, you know, I mean, I agree with Katherine. We want some standards of
practice. I think there are standards of practice being used for how billing is
taking place. It just – you know, a) if the rule stands without the contingency
plans, it appears to – from CMS’s interpretation, it removed the ability to do
these supply claims that are even associated with a drug. So we are just trying
to get to a point where we can get a definition, and I am very concerned about
what could be in the NPRM, because how it is stated could bring back a myriad
of 55 different kinds of answers that may not be what the question was even

MR. BLAIR: But the way you stated it, you know, I think is one where you
could accommodate any changes in new health plans that come out without
obviating the use of the – either the standard or the codes.

MR. WILDER: I mean, again, we are comfortable with the way it is stated

DR. COHN: Okay. And it sounds like Katherine and the community pharmacists
are – I think you’re – I guess I’m trying to think of whether you are
comfortable with the way – It sounds to me like you are comfortable with this,
though what you would like is not and/or. You would like a –

MS. KUHN: Right.

DR. COHN: – line drawn, which is really what – and you don’t really care
which, as long as there is a line and people understand what goes on in 837 and
what goes on in an NCPDP transaction, as opposed to everything being able to be
used for both.

MS. KUHN: Exactly.

DR. COHN: Is that right?

MR. BLAIR: Oh, I’m confused. I didn’t realize that. So you want a clear
definition of which goes on which, as opposed to saying that the pharmacist can
use whichever one the payer requires?

MS. KUHN: Well, I think that, again, our concern is just to have – like I
said before, just have the floodgates open and we are back to where we were
prior to HIPAA, where we are relying on trading-partner-specific agreements,
but if we could all arrive to some definition about what exactly is going to be
transacted on NCPDP, which supplies are going to be billed for using that
telecommunication standard versus X12 and 837, but, at the same time, allowing
us the flexibility that we need in the marketplace to use both claims

MR. BLAIR: Are you saying you need a definition beyond what Lynne has

MS. KUHN: I think that that speaks to what we would be comfortable with, but
if further discussion would be needed amongst the parties here, we would be
happy to take that back and try to move this forward –

MR. WILDER: We were comfortable with this statement.

DR. HUFF: Ask one more question?

DR. COHN: You can ask one more question. There’s also somebody else who
wanted to make a statement, too. So –

DR. HUFF: I mean, I am trying to make sure I understand what the problem is.
I mean, one problem could be that people don’t know whether to submit it, given
a claim is an NCPDP or an 837, but, I mean, is the other situation that if you
make the wrong choice, then payment is denied? Is that the underlying problem,
that, I mean, if you send it in as NCPDP, they say, no, you should have sent
that as an 837, and you deny claim, and then you’d have to resubmit using other
– Is that a real issue?

MS. KUHN: Yes. It is, and as Lynne pointed out, it really boils down to the
payer and what is paid for under the pharmacy benefit versus the medical

DR. HUFF: Okay.

DR. GREENBERG: Maybe I am missing something, but it doesn’t seem that there
is any way to get around the fact that this is going to be payer specific then.

DR. HUFF: Unless we make a rule.

DR. COHN: Well, I mean, I don’t think you can make a rule about what is a
pharmacy benefit versus what is a medical benefit.

DR. GREENBERG: Yes, I mean, that is beyond what we can –

DR. COHN: Yes.

DR. GREENBERG: – make a rule on.

DR. COHN: Yes. Okay. We need to think – we need to think about it. I
appreciate your desire – reminded of the claims attachment standard, where –

DR. GREENBERG: What is an inpatient claim and what is an outpatient claim?
You know, there are some issues. What should be submitted –

DR. COHN: Yes, exactly –

DR. GREENBERG: These are business-rule things that we still have questions –

DR. COHN: Yes. Katherine, thank you very much. (Laughter).

MR. ALFOND: My name is Bill Alfond. I’m with the Blue Cross/Blue Shield
Association, and most of what they presented we are okay with. The way things
work today seems to be fine and we are okay with that, but there are two
concerns we have that may be cleared up with some clarification comments.

One is the issue of multiple standards, and if two parties dispute which
standard is to be used and they are both valid, how does that get resolved, and
that goes to our disputes-resolution concerns, that they are pervasive
throughout all of this. So that is one thing we would like considered as we
move forward.

The second thing is for those types of claims that are billed to medical
systems today, either on an 837 or an NSF under contingency plan, they come
into medical systems and I believe get processed based on HIKPIX’s codes, and
most of these medical systems do not adjudicate or process these claims that we
are talking about, using – they don’t even have NDC code as an input field. So
that would be a concern to us if we are required on those claims to use NDC
codes, and I am not sure if that is the case here or not, but if we are
required to use that in medical systems, that would cause a great deal of
change for those medical systems. It wouldn’t be an easy thing to do.

MS. GILBERTSON: That is not something we were suggesting. I mean, the
medical billing – you have to decide how you do that.

MR. ALFOND: Well, I mean, these are claims that come from pharmacies. We are
talking about two different formats. Do they have to use the HIKPIX code in one
format and an NDC on the other? I’m not sure what the rule is, and the reason I
express it as a concern is plans have expressed it to me as a concern. I’m not
an expert in this area, nor do I profess to be, but if I am getting a claim
today with HIKPIX and I work off of that, sounds to me like you wanted the NDC
code to be the required coding element to these types of claims for everything.

MS. GILBERTSON: No, it was more that if there is an NDC for this item that
is being billed out of a retail pharmacy, that the NDC be used. If there isn’t
an NDC, that the UPC HRI or the HIKPIX could be used.

MR. ALFOND: Well, what I am saying is a claim being billed today with an 837
using HIKPIX, but there is an NDC code, would you require that NDC code would
have been used on the 837?

MS. GILBERTSON: No, because the 837 wouldn’t be part of this environment. It
would only be for the retail pharmacy, which has to bill using the –

MR. ALFOND: – medical systems do not have to use NDC, I don’t have a

MR. REYNOLDS: I’m trying to understand. I’m trying to learn from Stan. He
hasn’t got me quite there yet.

If it goes to PBM, it usually is paid under the drug benefit. If it goes to
a health plan, it is paid under the health benefits. The PBM would be the –
well, in many – in most –

MS. GILBERTSON: I mean, it is just a definition of a health plan versus a

MR. REYNOLDS: Yes, right, but I’m saying usually what is processed by PBM
benefits is usually what you are talking about for the –

MR. WILDER: No, it’s the – the correct term is pharmacy benefits –


MR. WILDER: Because there are plans that, in fact, in house –

MR. REYNOLDS: Have their own PBMs. I understand. Yes, I understand that.

MR. WILDER: B either have their own PBM. or, in house, they have kind of
administratively set aside a separate unit – go ahead administer these drug
claims as a – quote – Apharmacy benefit.@

MR. REYNOLDS: Okay. So asking it again, NCPDP with NDC or pharmacy benefits.


MR. REYNOLDS: 837, HIKPIX or NDC or whatever – HIKPIX or medical benefits.
Is that what – Okay.

MS. KUHN: You know, the addenda to the 837 did include transaction segments
to allow processing of NDC numbers to provide more specificity in the claim. So
that is possible –

DR. COHN: There, obviously, are going to be a couple of issues hanging out
on this particular piece. I mean, we know that we need to hear more about the
code sets, and it sounds like Donna will be coming – and, Lynne, obviously, you
are welcome to join her, whatever, to a hopefully combined response about the
code sets that we are talking about here.

Now, I think, really, the question that we have on the table – I mean, we
obviously – it’s like we have a two-by-two table and we can almost pick any
part that we want to, but I think it is probably not realistic to not have
NCPDP standards used on this at all, everything going on 837 and throw the UPCs
and the HRIs on the 837 is the only way to do it, which is really what the
letter was from Katherine, but even they have, I think, identified that,
really, what they are looking for is more of a line being drawn about what is
an NCPDP transaction versus what is an 837 transaction.

Now, I think the committee needs to probably give the chair and lead staff a
little bit of direction. I mean, I think we are going to come up with a letter
on this, but, clearly, we need to get the other piece, so this is going to have
to be deferred >til May, but we sort of have two options. I mean, we can
sort of say – recommend to the Secretary that supplies be billed using the 837
or the NCPDP standard with the recommendation that the NCPDP standard includes
these other code sets, if we agree to that, or we could say, for this
particular set of things, you’re using NCPDP standard, and there is a line
here, and everything else is at 837. Am I –

MR. BLAIR: Let me see if I understand this right. I may be paraphrasing what
you said a little bit.

DR. COHN: Yes –

MR. BLAIR: It sounds to me as if we have been asked to do two things, and
they can fit, they can be okay. One is to provide – you know, recognize the
flexibility that Lynne has set forth in her document, and I am afraid that I
can’t read the appropriate stages, but it seems like everybody seems to feel
like her recommendation is needed from a pharmacy standpoint, and then Karen’s
is to wind up maybe supplementing that with a clear definition of where the
boundaries are. Can we do both? Would that address the needs? No? Yes?

DR. COHN: Well, the question is is can somebody come up with a clear line –

MR. BLAIR: Can somebody come up with a –

DR. COHN: Yes.

MR. BLAIR: Other than what – the way Lynne is dividing –

MS. GILBERTSON: I just have a puzzlement, I guess, on the statement. Did you
say Karen can define –

DR. COHN: Katherine or –

MR. BLAIR: Katherine. I’m sorry.

DR. COHN: Katherine. Okay.

MR. BLAIR: What else can I do to confuse it? (Laughter).

MS. FRIEDMAN: I’m confused because – back to Marjorie’s comment, if it is so
payer-specific, can you ever draw a line?

MR. BLAIR: Right.

MS. FRIEDMAN: And this is such an emerging – we have heard earlier testimony
today on other issues, but the industry is moving fast, in some ways, and
merging and consolidating in others, and would you want the government to try
and give you that line? I just – I am having real heartburn about that. I can
understand the need for flexibility, but I don’t see how you can have it both
ways. You can be flexible or you have the line.

DR. COHN: Okay. So I think – so you are suggesting that the wording that
Lynne has described here for use of NCPDP is probably an appropriate way to
describe things and really not make comment about the 837.


DR. COHN: Okay. Now, this, once again, is – we are not voting on this today,
but is that the way you would like to see a letter begin to be framed,
recognizing we still don’t have the code-set issue –

DR. GREENBERG: Excuse me. You said you would not make a comment about what?

DR. COHN: The 837.


DR. COHN: I mean, about – the 837 for these transactions specifically.

DR. FITZMAURICE: Then do you really have a standard – I mean, or you have
just – you’re roughly getting a bunch of trading-partner agreements by saying
do however the payer and the pharmacy agree. If you don’t have the bright line
or if you don’t say one or the other, do you have a standard? I mean, every
other case, we decided on a standard.

MR. BLAIR: Well, the other piece there, though, was I thought Lynne was
saying she needs the flexibility to use either the NDC, the HRI or the UPN as –
the pharmacist needs that flexibility, depending on the payer. So it’s the
code-set area where they needed the flexibility, where that is not recognized
by HIPAA, to date. Do I understand that correctly? Did I say that correctly,

MS. GILBERTSON: The payers don’t determine the code sets. It’s what that
item is identified as, whether it is identified because the FDA has assigned an
NDC number to it or has assigned an HRI number to it or it has a UPC code to
it. So the payer doesn’t identify what code set that item is classified as,
but, other than that, I am not sure I answered your question.

DR. COHN: Judy, and then I think we have somebody who wants to testify.

DR. WARREN: Yes, I’m getting real confused here.

DR. COHN: You should be. (Laughter).

DR. WARREN: Because when I read the document, one, I like your distinction
between the standard and the code sets. That helps, but I am now confused about
the standards, because I thought what Katherine was saying is tell us where the
standard is. Are we going to have these materials build on the NCPDP or is it
going to be on the other one, the 837? I don’t have these numbers down yet. And
that, to me, seems to be a legitimate request.

When I am thinking about the business practices, if these people are out
there and they don’t know which form to use, then they are having to do all
kinds of things and delaying reimbursement and have problems, and I am thinking
about it from a patient perspective. If I have to wait to have materials
approved so I can use the medication that I have already had approved and
purchased, then that is going to delay me getting care and just create more
problems along that way or else I am going to have to really kind of plan this
and go – I don’t know – days, weeks or months in advance to get my
prescription, so that I can get everything together in the same place, and when
I think about some of the patients I have worked with, they are not that
sophisticated to manage that. So I would like for us to answer – not worry
about the code sets so much right now, but is what we are asking, are we saying
that it’s okay to have two standards and somebody chooses which one they want
to work with?

DR. COHN: That is exactly the question, because we don’t have the
information on the code set right now. So we are just asking whether or not we
create a bright line or we leave things sort of vague on this one.

DR. WARREN: Okay –

DR. COHN: So that is exactly what the question is.

MS. GILBERTSON: Well, one of the – I want to speak to that. This is common
practice that is being done. This is not confusion. You go to a pharmacy with
your prescription for your diabetes insulin and your supply, the pharmacist
does not throw up his hands and say, I don’t know how to bill this. I don’t
know when you are going to get payment, things like that. A few seconds later,
they have a real-time claim paid for their drug and the supply, and you walk
out the door with your prescription. So that part – I would like to eliminate
the confusion of. Yes, it’s important to have demarcation from the industry. I
don’t think the government needs to decide what any kind of demarcation is, but
the industry practices should tell what you use, but this is common practice.
It is not confusion of today.

DR. WARREN: I thought one of your examples was exactly the one that I gave.
If you had to bill for these separately, on separate forms, there could be this

MS. GILBERTSON: Yes, that can happen. If you take the current practice and
separate the two items that are being prescribed and force them to be billed in
separate standards and separate cycles of payment, that is what will result.


MS. ECKERT: I’m Karen Eckert from Medispan.

Just want to talk a little bit about the code-set issue, and to realize – I
agree with separating the two different scenarios, which standards you use and
which code-set do you use.

However, if it is then decided you can use the NCPDP 5.1 to do these
supplies that are associated with a drug, but do not increase the code set to
use a UPC and HRI, I am not sure you are solving much, because most of these
supplies are not defined by an NDC now, and earlier – we have heard much
testimony from Randy Levin of the changes they want to make to the NDC and make
it strictly be drug based and put all these supplies to – back to the
manufacturers to put a different type of code on them, which is currently a UPC
or an HRI.

So I just want to make sure that – I understand you want to separate the
two. That’s great, but you can’t let the code-set discussion lag behind,
because they are so integral to make it work.

DR. COHN: Yes, agreed. And I think we are going to be talking about the
code-set stuff in May. We thought we were going to talk about it today, but we
just don’t have the information.

MS. ECKERT: Okay. Just want to make sure that you understand how closely
related they are.

DR. COHN: Yes –

MS. GILBERTSON: I can bill, but I can’t bill the item, because I don’t have
a code set for it, and if you ask a pharmacist what do they bill, you’ll get an
answer similar to Kleenex, because, you know, that is the brand name of a
tissue. They bill NDCs. Well, no, it’s the number that pops up from their
inventory, which has been loaded from the drug database companies, which is –
who cares which one it really is. It is one of the items they have in stock.

DR. COHN: Okay. Lynne, let me just ask, because – we are obviously, not
talking about – we are talking about code sets in May. I’m just talking about
sort of the standard use, and maybe this is my confusion, but I’m looking at
your recommendation. Is your proposal – may not have been exactly the DSMO
proposal, but is what you are coming forward with that for this particular
definition of supplies that those supplies are exclusively billed using the
NCPDP standard or were you coming forward saying NCPDP should be allowed for
this one, but there is nothing to preclude somebody using an 837?

MS. GILBERTSON: What the intent was is to provide some kind of definition
that, one, CMS could probably use in the NPRM, and, two, to show that there
could be industry consensus on how to define which standard you use.

Now, if I can add language in here that says something about the benefit,
whether it is pharmacy or medical, you know, we could back and try to reword
that again, but – and I am just dealing with what we have seen over the past
four years and how we have come to this point, and that definition seems to be
the comfort level of – the industry could go forward with.

DR. COHN: Okay. So what you might say is that you might suggest that CMS
might go forward with this definition, elicit industry comment to see if this
is the appropriate line to use, and this would be – for things that fall into
this definition, you would exclusively use the NCPDP. Tom, is that what you
were – I just want to make sure that I have this one right.

Okay. So, Judy, I think that sort of meets your needs about trying to create
sort of a line. You know, there is certainly some grayness in this definition,
but this is the healthcare system, as we know it.


MS. GILFOY: Yes. This is Elaine Gilfoy again.

A red flag just went up in front of me. As long as the definition includes
the originator of the request, such that an NCPDP would only be used by a
retail pharmacy. Otherwise, if you leave it open ended, a home-health agency, a
hospice, for instance, which bills – well, hospices don’t, but home-health
agencies will bill for supplies as well as medications, and one thing that you
don’t want to do is to say to a home-health agency who is already in problems
with they gotta submit an 837I to one payer and an 837P to another payer, now,
you’re going to say to them when you bill a supply, you gotta do an NCPDP. They
are going to throw their hands up.

And this goes back to something that WEDI brought up as one of their major
issues of this whole thing of which data transaction to use based on the entity
that is submitting the transaction.

If NCVHS wants to tackle this issue, I would suggest that you look to the
Minnesota law which specifically identifies the type of transaction based on
the originator. In other words, if you are an institution defined as what we
know of as an institution, then you will submit using the 837I. If you are a
professional provider and we provide a definition to that, then you submit the
837P. If you are a retail pharmacy, you submit an NCPDP. That would eliminate
some of the problems that WEDI has talked about and I have talked about in the

WEDI mentioned a couple of instances, but I will tell you that standalone
ambulatory surgery centers are defined by Medicare as having to submit an 837P,
and they are not going to change that, but in other commercial insurances, the
standalone ambulatory surgery center is required to submit an 837I.

So if NCVHS wants to tackle this issue, then tackle it at its base and
define who the submitter is and what type of a submission they should make.

MS. GILBERTSON: And just as a followup, WEDI has taken that recommendation
and turned it into a group, because the white paper was written that says we
are all over the board, and a lot of – especially the medical environment, and
so there is now a work group trying to tackle that very issue. That’ll get
NCVHS off the hook.

DR. COHN: Look forward to recommendations that have industry consensus
behind them on this.

MS. GILFOY: Well, but the – they have raised the issue, and what they are
saying is we are going to do an inventory. Well, we did an inventory about a
year ago which was relatively inconclusive, because it said, what are you doing
now? Before HIPAA went into place.

I guess I am just saying that this is a longstanding problem. It has been
reported in the past. It appears to be now effecting retail pharmacies as it
will anybody that does medical supplies, and most of us within the industry
bill for medical supplies, especially on the professional side.

MS. GILBERTSON: And that is, hence, why that paragraph that Katherine read a
few minutes ago uses what – HIPAA terminology as a retail pharmacy.

DR. COHN: Yes.

MS. GILBERTSON: Even though there isn’t a definition of a retail pharmacy.

DR. COHN: But that’s okay.

MS. GILBERTSON: We supplied one to CMS, but it has never shown up anywhere.

DR. COHN: Okay. Well, I am just looking at the subcommittee members. Now,
once again, there is not a letter to vote on today, but we will – and we’ll
talk about this, might need to revisit this for May, but I think what I am –
and maybe this is the chairman trying to put this together, and I am just
looking to see if there is general agreement that we’ll prepare a draft letter
that includes language similar to this about the uses of the NCPDP standard for
the billing of supplies, and we will all have a chance to look at it.
Hopefully, at that point, we will have appropriate individuals from CMS around
the table to provide input or whatever as we talk about this again, and we will
have information that may give us some comfort in terms of the issues relating
to the code sets, and that will be – we’ll be basically dealing with that in
May. Is there general agreement on that approach from the subcommittee?

MR. REYNOLDS: As part of preparing that letter, will – you know, we
obviously had some expert panelists here today. Will they be helping draft that
or will we?

DR. COHN: No, actually, our lead staff, with the assistance of the chair,
will start coming up with draft to be reviewed by subcommittee members with
probably big holes in them – (laughter) – big holes – not in them, in the
letter, based on the fact that we are going to have to determine what to do –
okay. There will be, at that point, a public letter that others can look at and
comment on.

MS. GILBERTSON: One of the things – it is just hard to get the timing, since
we have been discussing this for such a while. I am trying to think in terms of
– if this is going to be put forth by CMS and NPRM, we have a letter, which
could go out in the next month or so, let’s say, from the committee – no?

DR. COHN: May. Because we still need the code-set issue.

MS. GILBERTSON: Okay. So the letter will be held until code set? Okay.

DR. COHN: But I can guarantee you that the letter will be – I actually can’t
guarantee you, but I would suspect that the letter will be completed before the
NPRM is published.

MS. GILBERTSON: Well, what I am concerned about is will the letter even make
it into the NPRM, any of that information, because that is a timing issue, and
so we could really have a mess on our hands if an NPRM goes out without the
sufficient information, because there is going to be public comments all over
the place then, and not like I’m trying to direct public comment. It’s just you
have to be very careful what you are asking.

MS. FRIEDMAN: From a timing point of view, if we do the letter in May, and
the full committee votes on it in June, that is still in advance of when – not
that I have a date on when this NPRM is coming out, but it is not going to be
in June. That I can tell you.

MS. GILBERTSON: No, but it was suggested that this NPRM has been moved a
bunch of times, but, now, it is being tied to the modifications NPRM, which
sounds like it is going to be late summer.

MS. FRIEDMAN: Sounds like late summer.

MS. GILBERTSON: And I didn’t know if – but, you know, if this is not done
until, say, June, will their process even have gone too far?

DR. COHN: Yes, Lynne, I think you need to let CMS handle that or let us
handle that. I mean, I think the bigger issue is coming to the right answer,
and I think I would devote my energies and concerns to that first. So – and I
think that is what we need to do, and I think that CMS, obviously, is also, I
presume, looking for the right answer on this particular area, and I think
these discussions help inform that.

Now, anybody want to talk anything more about this particular issue for the
moment? (Laughter).

Okay. We’ll have our chance back in May.

Agenda Item: Subcommittee Discussion

DR. COHN: Now, let’s talk a little bit about sort of next steps and all of

Now, I think Jeff – and, Jeff, again, thank you very much for creating such
a wonderful work plan. We know that we have a fair amount to do in May relating
to e-prescribing as we wade into it again, and I think we’ll be – those next
sessions are the 25th and 26th. We’ll obviously be hoping
to include, in addition to everything else that we had there, at least one
short session related specifically to patient safety as it relates to
ambulatory e-prescribing.

Now, I think you have also heard that we are going to need to find some time
somehow in those couple of days to revisit and finalize this letter relating to
the pharmacy-supply piece. So, once again, there’ll be additional information
that, hopefully, Donna and Lynne will develop for us. If we need to have
additional testifiers on the topics, we will. The intent here is to not have a
three-day meeting. We are just going to have to sort of make sure everything
sort of fits. Hopefully, everyone is in agreement with that general approach.


MS. FRIEDMAN: It seems to me, normally, on the second day, we adjourn
somewhat earlier than we do on the first day, general practice, and I’m
thinking ahead on the process side. I’m not so sure, with such a full plate, we
are going to be able to do that, but we’ll see.

DR. COHN: The chair will strive to get you out in the evening for flights.
As we work on this a little further, we’ll come up with it. Now, obviously,
adjournment times are driven by the agenda that we have to deal with.

Now, the next question I have for you all is what – you know, we obviously
had conversations, round robins today in relationship to HIPAA implementation,
and there were a couple of issues that are sort of there and we sort of need to
decide how we want to track them, tackle them or whatever. Certainly, we have
asked the DSMOs to think about outreach activities and come back and share them
with us. Now, I don’t expect that we’ll get that back in May, but there is the
other issue which involves sort of tracking the industry on implementation of
the 837, and then there is the other piece of discussion about how one assists
the industry in terms of moving forward with the other transactions, which I
sort of listed as sort of items from our conversation. Is that something that
anything needs to be done in May? Do you want to hold off >til later in the
summer? Comments, preferences or otherwise?

MR. REYNOLDS: My feeling out of today is I think we had good discussion, but
when we walk out of here today, we still leave an industry in turmoil. I mean,
we still don’t know what is going to happen. We still don’t know how we are
going to group up and fix the things that were discussed here. I mean, one of
the things – I don’t know whether the DSMO is going to – I mean, because there
are three levels of things, and I think you hit two of them.

The first one, though, is the immediate things that are, in my opinion,
incredible – there is an incredible amount of misconception in the industry. I
continue to hear in testimony class-action comments, and I’ll tell you what I
term class-action comments.

DR. COHN: Oh, please –

MR. REYNOLDS: No, I do. No, I mean –

DR. COHN: I try to avoid those whenever possible –

MR. REYNOLDS: No, but there is. The payers, clearinghouses. That’s a
class-action comment. That is not anything that says here is what the problem
is, CMS. I mean, everybody kind of throws a – shoots at some class of somebody,
and I hope, whether it’s a WEDI, whether it’s a DSMO, whether it’s CMS, whether
somebody takes these initial things, which I don’t think the list is nearly as
long as everybody thinks it is, and somehow pulls a group of people together
that can do something about it and make some recommendations about it – as you
said, the addenda and other things moved along quickly when it needed to, but
right now, if we go out of here or if it goes like it is, no matter when we
meet again, there’s kind of nobody dealing with right now what is the rest of
this implementation of what we already – let’s just stay with 837. We won’t
even go to other stuff.

DR. COHN: Okay.

MR. REYNOLDS: Because there are some things – I know that Medicare or CMS is
going to make a definition of what they think they are editing is. That is a
huge first step, because they are kind of – as we said, they are the big dog in
the race. Once they do that, then that kind of says, hey, gang, this is what
everybody is going to minimally have to do. Then people can start gathering
around it.

So I worry – I don’t have a problem if the contingency continues. I don’t
have a problem if we keep moving on like we are, as long as there’s still some
way, because you can still feel a lot of defensiveness, a lot of protection, a
lot of concern about what is going on, instead of everybody grouping up and
saying, look, let’s go, because then we are going to have exactly the same
thing that is going to happen on the next set of transactions and the next set
and so – The thing that scared me when I heard the DSMO process two or three
years, just about made me – you know – that kind of sets you back with where we

So I think we are on a good track, but I think something could happen, and
there is enough money spent in this industry right now grouping up people that
if there was a way to more – to group them up through one of the groups that’s
already got everybody on it and come back with some things and get away from
some of the class-action comments – as I say, I know payers do this and
companion guides do that, and this does that and other things – and really come
up is there something that can be done now to help clear some things up for
this implementation.

Frequently-asked questions took us to a point. Then, I don’t – moving on to
the other transactions whenever, that’s fine, but this is the heart and soul –
the claims transaction and a little bit in the discussion of the pharmacies,
that is the heart and soul of everything we do. That is the heart and soul of
every person in the United States that is covered by Medicare, Medicaid, some
kind of other insurance, every provider that wants their money, every payer
that wants to take care of both of them, and so I am just worried that I don’t
see – I can’t even recommend a direction, but I’m worried that when we go out
of here, the DSMOs go back to what they are doing and WEDI goes back to what
they’re doing and the associations go back – and I’m just not sure what the
next – or what do we recommend.

DR. COHN: Well, actually – maybe I don’t have to give an answer. Sounds like
Jim Schuping – (laughter) –

MR. SCHUPING: No, just as an FYI, I think some of us are already trying to
run with some of these issues. For example, we have appointed a task group to
come up with this all-important definition of what compliance is, and they are
already working and taking a first shot at that, and we should have something
to look at there very quickly.

Number two, we are collaborating with AFFECT the week of June
21st to put on a vendor forum with a focus on claim attachments,
where they are with this thing in resolving some of these – pardon?

MR. REYNOLDS: Claim attachments?

MR. SCHUPING: Claim attachments, yes.

MR. REYNOLDS: Okay. But that’s a next step. I’m talking about –

MR. SCHUPING: Okay. I guess what I am trying to imply here is that I think
some of these things, the community, the industry community can take some of
these issues and questions and start to move forward with them to find
consensus, to resolve some of the questions that are out there. Other things
are probably going to have to be taken by CMS.

If you look through some of the recommendations that we have there and
everything, we’ve got to get some kind of input or some response coming from
the department in order to go to the next step. Other things fall naturally
into the domain that the industry can run with them. So –

MR. REYNOLDS: Simon, my point is when you asked what we would do in May –

DR. COHN: Yes.

MR. REYNOLDS: – devoid of any further input, devoid of any meetings,
sessions, grouping up of people or doing anything, I would have a hard time
recommending what we could or couldn’t do, other than continue to watch the
progress. That’s –

DR. COHN: Okay. Well, that’s –

MR. REYNOLDS: To answer your question –

DR. COHN: Okay.

MR. BLAIR: Well, in a sense – if I may – Harry, in a sense, that is an
action. That is saying that we are not recommending an intervention at this
time. We understand that there are problems, but we are not recommending a
specific intervention, and so that is an action.

MR. REYNOLDS: And if that is the position of the committee, good. Let’s go –

MR. BLAIR: I can’t say it is something I’m especially comfortable with. It
is just that of the alternatives that – or recommendations that were made to us
– you know, somebody – gosh, I hate to use that word. I’m not going to use that
word. All I’m going to just simply say is there wasn’t a particular
recommendation that was put before us which we chose to take action on at this
time. It doesn’t mean we are comfortable with the situation as it is.

MR. JONES: You know, WEDI laid out a set of recommendations in four areas
that have certain time parameters on them. What we could do, going back to what
Harry was saying, is take those that have great immediacy and then look at
potential action steps, and then bring that forth in May, kind of taking the
recommendations as objectives and then drilling down from a strategic or
tactical sense with some – what could be done by the industry, what assistance
would we need.

MR. BLAIR: Well, one of the things I know you observed that I was rather
quiet. This may be a little bit different as a procedure. Usually, we hear
testimony and we make recommendations to Health and Human Services.

One of the reasons that I was a little bit cautious is I am so aware of the
fact that at this particular time there is so much on the plate for Health and
Human Services with respect to standards, and they are here and they heard this
– the testimony – as well. I wouldn’t mind, in this case, giving Health and
Human Services and CMS the opportunity to think through what they heard today
and maybe come back to us in May and indicate where they might have flexibility
to address certain things, rather than us make the recommendations going to
them. That is a little unusual, but maybe that’s –

DR. COHN: Jeff, I actually think what you are saying is – that is a very
wise set of comments, and I’m actually hearing a number of things. I mean,
number one, let’s talk about reality here. Now, first of all, we are not
implementing HIPAA for the country. I mean, we are advising, we are overseeing,
we are doing all of those things, but we don’t meet here every day. None of us
have Karen Trudel’s job, and so I think we need to realize our role here.

Plus, no matter what we came up with will still not be acted by the full
committee until June. So we could come up with the greatest ideas of the world
and we are still waiting >til June to sort of have something to make it all
the way through the committee as an approval.

Now, I think the comments that we heard was one – I mean, and thank you for
commenting about your recommendations from WEDI, because, I mean, one of the
views I had as I had listened to all of this was I thought they were all good
recommendations, but any of you, if you were sitting listening to someone who
came up with 80 recommendations, you’d go, well, gee, something’s more
important than the other and something is more time definite than the other,
and these were just all of the recommendations, and I think what you are
offering to do, which I think we would welcome, would be taking those and sort
of say, really, what are the critical few? What are the time-definite critical
few? What are the time-definite critical few to help make us – help us through
the 837 implementation safely and successfully? And I think the committee would
really appreciate that work, if you are willing to do it. I know it is not as
easy as taking all the recommendations, but it, I think, would be very helpful
and probably not that much more work than what you have already done.

Jeff, I actually agree with you that I think CMS has been listening very
carefully, and I think – I think they heard issues, and I can’t see why they
wouldn’t be hearing issues, and the question gets to be what can CMS come
forward with in terms of recommendations about increased responsiveness,
reacting to certain industry needs and all of that, and I think we ought to
give CMS a little time to do that.

I’m not sure what more we can do. We can certainly invite others from the
industry or we could hold the DSMOs to – and sort of say to them, hey, we would
like to understand your outreach and ideas about making things work faster and
have that back by May.

MR. REYNOLDS: No, I think it’s great.

DR. COHN: I don’t know if they can respond that quickly.

MR. REYNOLDS: I think it’s great, what came out of the discussion –

DR. COHN: Okay.

MR. REYNOLDS: – because, obviously, CMS heard it, and we would like them to
say something.

DR. COHN: Yes.

MR. REYNOLDS: And we also would welcome that the industry ought to try to do
some work to fix itself, too, and that’s – all I was looking for was that we
had a position, so that when we come back in May we at least understand who’s
got the ball, because having the ball just laying on the floor when we walk out
of here was what was my concern –

DR. COHN: Okay. Okay. Good. Well, is everyone okay with that so far?

Obviously, this issue of HIPAA implementation is going to – I mean, this is
– this is not a one-time activity, as we know.

Now, are there any other issues, items that we are missing? Any other next
steps that we are missing? You’ve got the NCPDP. You’ve got the discussion
about HIPAA, and – I mean, I don’t know whether it will be the first day or
second day. We’ll have to see how the rest of the agenda works out, and then
we’ve obviously got e-prescribing that is a big part of our plates right now.

Are we okay – I mean, anything else for our May meeting? No?

Okay. Well, I want to thank you all for your forbearance for the last day
and a half.

Harry, thank you for jumping in and facilitating and chairing the earlier
session today.

MR. REYNOLDS: I’ll wait >til I see the minutes –

DR. COHN: That’s right.

And, Jeff, thank you so much for your leadership on the e-prescribing work.

MR. BLAIR: Thank you.

DR. COHN: Okay. With that, the meeting is adjourned. Thank you.

(1:15 p.m.)

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