Missing HIPAA Deadline Won't Cut Off Medicaid PaymentsMissing HIPAA Deadline Won't Cut Off Medicaid Payments

Message from the feds to all health-care companies that will meet its Oct. 16 deadline to have their electronic transactions comply with new government rules: Great job.

Message from the feds to companies that won't be compliant with the Health Insurance Portability and Accountability Act rules by Oct. 16: Stop sweating. You'll still get paid from Medicare and Medicaid, as long as you're making a good-faith effort to become compliant.

That's the word from the Centers of Medicare and Medicaid Services, which has issued a "contingency plan" for thousands of health providers CMS expects won't meet HIPAA's deadline for electronic transactions.

Among the processes covered by HIPAA's electronic transactions regulations are claim-status tracking, remittance, and coverage eligibility. However, the most significant transaction is claims processing for Medicare and Medicaid patients. Originally, CMS had said Medicare and Medicaid wouldn't pay claims that were sent in electronic formats not compliant with HIPAA after Oct. 16.

However, as of last week, less than 20% of claims being sent electronically to CMS were HIPAA compliant. That was an ominous sign of trouble. "If 80% of the claims coming in on Oct. 16 are compliant, we'll throw a party. But if only 14% are compliant, it could be devastating to the health industry," a CMS spokesman says.

The federal government didn't want to cause major disruptions in the health-care industry by impacting the cash flow of hospitals, doctors, and others because of a CMS refusal to pay claims that were not compliant.

This contingency plan give providers and their trading partners (including clearinghouses, health plans, insurance companies, and labs) some extra time to complete their HIPAA work and testing, says Karen Turdel, the CMS acting director of HIPAA standards. However, it hasn't yet been decided when the contingency plan would end and when CMS would stop accepting noncompliant claims. Turdel says CMS will continue to monitor progress, based on companies testing their systems or claims against CMS's systems, as well as the volume of actual HIPAA-compliant claims that are sent to CMS for "adjudication."

However, companies won't be allowed to ease up. "The further you get away from Oct. 16, the more difficult it is to prove good-faith" effort to become compliant, a CMS spokesman says. In the meantime, CMS will continue to run its "parallel" computer systems, allowing the processing of both HIPAA-compliant and noncompliant claims.

HIPAA legislation doesn't allow CMS to change the Oct. 16 deadline date; however, it does allow CMS to accept noncompliant transactions if companies can show they're trying in good faith to become compliant. Besides a fear of cash-flow problems within the health-care industry if CMS were to begin refusing noncompliant electronic claims after Oct. 16, CMS also didn't want to suddenly face a mountain of paper-based claims that companies would try to submit in lieu of noncompliant electronic ones, Turdel says.

In addition to CMS, the nation's 42 Blue Cross Blue Shield companies also said they will continue to accept noncompliant electronic transactions. Other health plans and insurance companies will likely follow that lead, says D'Arcy Guerin Gue, an executive VP at Phoenix Health Systems, a health-care IT services firm.

Randa Upham, a principal at Phoenix Health, which conducts periodic surveys of health companies to check their HIPAA compliance status, says the organization's last survey during the summer showed that more than 70% of companies--particularly smaller health plans and providers such as physician practices--hadn't yet reached HIPAA electronic-transaction compliance.

That's in part because many companies procrastinated in starting their HIPAA work, Gue says. And others "still don't understand what they need to do," Upham says. One reason for the confusion, especially among smaller companies, is that the implementation guide used by CMS for HIPAA specification is very complex, Upham says. The implementation guide's information just for claims-processing transactions is 700 pages long, giving details such as formats for data, size of data strings, and required codes.

David Muntz, CIO at Texas Health Resources Inc., which serves 5.4 million patients in 29 counties in Texas, says his company is compliant with HIPAA's electronic-transaction codes and that there are "only a couple small issues" that need to be finished--including testing the company's electronic transactions against the state's own Medicaid systems. However, the state of Texas' Medicaid systems aren't expected to be ready for testing until after Oct. 16, Muntz says. Texas Health Resources has been preparing for this date since 1999. Says Muntz, "We've taken the same attitude with HIPAA as we did with Y2K."