American College of Physicians: Internal Medicine — Doctors for Adults ®


HIPAA requires more than a new format for claims

If you don't start collecting and reporting certain information by Oct. 16, payers might reject your claims

From the July-August ACP Observer, copyright 2003 by the American College of Physicians.

By Margo Williams

By now, you've probably read enough about the Health Insurance Portability and Accountability Act (HIPAA) regulations to know that you need to update your office's computer systems to send and receive electronic health information.

What you may not know, however, is that the regulations also require physicians to provide information in claims that many practitioners do not currently collect. Even worse, if you don't update your office systems to make sure you're collecting and reporting this information by Oct. 16, payers are likely to reject your claims.

The HIPAA regulation that is driving these requirements, known as the transactions and code sets rule, has a simple—if ambitious—goal. All computer systems should speak the same language to avoid glitches in processing data like claims and remittance information.

To accomplish that, the rule focuses on two areas. First, anyone transmitting electronic claims will have to use the same format. Second, your practice management system will need to collect all information required by the rule.

With everyone on the same page, the thinking goes, claims should be paid faster, more accurately, and—because all payers are using the same standard format—more cost effectively.

Meeting the rule

To begin with, you need to work with your vendor to make sure your office system is updated to send claims in the new format. You then need to send test claims to your payers to ensure that the update works.

Even if you have worked with your vendor to make sure your office system meets the format requirements of the transaction rule and you are sending claims using the new format, payers could still reject your claims if they do not contain all the necessary information.

That's because the rule also requires health care systems to include certain information in their claims. Some data elements, like those needed to complete claims for accidents or workers' compensation, are "situationally required," or only required if applicable. Others, however, are required on every claim.

Many of the situational elements apply only to certain specialties. For example, patient weight is required only on claims related to newborns less than 29 days old. Mammography certification numbers are needed only on claims for mammograms.

Although determining exactly which data elements your practice will need to collect is complex, here are some examples of data elements that you may not currently collect:

  • name and identification numbers (such as social security numbers, employee identification numbers or universal provider identification numbers, along with relevant provider numbers) of the rendering provider (locum tenens physician or laboratory), as well as billing provider and pay-to provider (for instance, a corporation or billing service);

  • taxonomy codes of the billing, rendering and referring providers (10-digit specialty codes);

  • date last seen (in the case of routine foot care for diabetic patients, for example);

  • patient account number and unique claim number (these identifiers will carry over to the remittance advice or explanation of benefits, called an 835 transaction);

  • facility type code (office, home, emergency room, outpatient facility, nursing home, etc.);

  • up to eight diagnoses per claim;

  • state license number;

  • "mother" or "father" to indicate the subscriber's relationship to the patient (replaces the current "parent" code);

  • oxygen certification type code (for home oxygen therapy claims); and

  • workers' compensation claim number.


How will you know if you're including all the necessary types of information-and that payers won't reject your claims? You have to send test claims and hear back from each payer to know whether they will accept your claims after Oct. 16. Until you do, you may not know for sure which new data elements you are missing.

When it comes to testing, there are two basic types: internal and external. Vendors test software internally when they install a new system on your office's computers and make sure the software works on site.

External testing, on the other hand, takes place when you send test claims and other data to a health plan, either directly or through a clearinghouse. This is the most important type of testing you can perform, because it will show you whether payers will accept or reject your claims.

Before you determine exactly what new information you'll need to collect, contact your vendor to upgrade your office software so they can add the fields you'll need to collect the new data elements. You want to make sure your staff can't skip required information.

Once you have added these fields, you should send test claims to health plans, Medicare and other payers. Only then will you be able to identify data elements that your practice might be missing.

Schedule a test with each of your payers. If any say they are not ready, insist that they contact you as soon as they know when they will be ready. If that date is too close to the Oct. 16 deadline or they give you vague answers, consider looking for a new vendor.

If you have not already begun testing, you need to do so now. Testing takes time, and some physicians have already reported that health plans put them on waiting lists to send test claims. Don't wait and let a testing bottleneck prevent you from meeting the deadline.

And give your practice enough lead time to make needed changes in internal procedures, databases, registration forms and computer systems. Otherwise, your payments could be interrupted on Oct. 16.

Vendors' reaction

Your vendor may tell you that its products have been certified. Third-party companies like Claredi independently certify that a vendor's product can process HIPAA-compliant transactions. Even that certification, however, does not necessarily mean that your practice will meet all the HIPAA requirements just because you use that software.

Certification means only that the software itself has been modified and is ready to be used to meet HIPAA requirements. You must input the required data elements and externally test the software to make sure that payers will be able to receive and process the claims you send.

Keep in mind that for a variety of reasons, some vendors and health plans have been delayed in getting ready to conduct external testing. While vendors may upgrade software to submit claims in the right format (or use a clearinghouse to do so) and may even be able to conduct internal testing or testing with payers using "dummy" data, they might encounter snags with real transactions.

External testing from your office using real data is the only way to really understand what kinds of changes your practice needs to make, whether it's staff training or redesigning patient registration forms. Make sure that your payers give you the opportunity to submit test claims with information you supply.

Vendors are approaching this problem in several ways. Some will go out of business because they will not be able to upgrade or support software for life after HIPAA. Some vendors will only support claims, but none of the other transactions.

Some vendors will require you to use a clearinghouse, either permanently or until they can fully upgrade their systems. And some vendors will give you the ability to both capture the required information, translate it into standard HIPAA format, and send claims directly to payers.

Because software vendors are responding to the HIPAA regulations in so many different ways, physicians may end up taking a "mix and match" approach. They will send some transactions through a clearinghouse and others directly to the health plan (or the health plan's clearinghouse).

Finally, the College is asking HHS officials for some payment flexibility following Oct. 16, 2003. The College has testified in support of proposals that would allow payers to continue paying physicians and other providers who are still completing their testing when the deadline hits. (See "ACP calls for flexibility in upcoming HIPAA deadline.)

But beware: If HHS does decide to give payers flexibility in paying physicians, it may not compel them to do so. And it will likely grant a small amount of time only to practices that have already started external testing with payers before Oct. 16. If you haven't started testing before the deadline, payers are likely to reject your claims.

Margo Williams is a Practice Management Associate in the College's Washington office.


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