HHS Adoption of Standards for Health Care Electronic Funds

The U.S. Department of Health & Human Services (HHS) released a rule that adopts streamlined standards for the format and data content of the transmission a health plan sends to its bank when it wants to pay a claim to a provider through electronic funds transfers (EFT) and to issue a Remittance Advice notice, which may or may not accompany the payment itself.  The regulation became effective January 1, 2012 and any organization covered by HIPAA must comply with the new rule by Jan. 1, 2014. 

According to a press release from HHS, these efforts will save the healthcare system–including individual doctors, hospitals, and payers–billions of dollars over the next 10 years.  Specifically, the new standards for EFT required by the Affordable Care Act, will reduce up to $4.5 billion off administrative costs for doctors and hospitals, private health plans, states, and other government health plans, over the next ten years. 

For example, currently when a provider submits a claim electronically for payment, a health plan often sends a Remittance Advice separately from the Electronic Funds Transfers payment.  The disconnect between the two makes it difficult or sometimes impossible for the provider to match up the bill and the corresponding payment.  The new rule addresses this by requiring the use of a trace number that automatically matches the two.  The new tracking system will allow health care providers to eliminate costly manual reconciliation that must currently be done. 

The standards build upon regulations published earlier this year that set industry-wide standards for how health providers use electronic systems to quickly and easily determine a patient’s eligibility for health coverage and check on the status of a health claim.  

HHS noted that Together, the two regulations implementing the Administrative Simplification provisions of the Affordable Care Act and the Health Insurance Portability and Accountability Act (HIPAA) are projected to save the health care industry more than $16 billion over the next 10 years.  These savings come from the adoption of electronic standards that will help eliminate inefficient manual processes and reduce costs.

The American Medical Association (AMA) and other groups have been calling for these improvements for years. In 2010, AMA wrote a white paper calling on the government to “eliminate significant administrative waste from the healthcare system by simplifying and standardizing the current healthcare billing and payment process.”  

The study, published in the journal of Health Affairs, found that nearly 12 percent of every dollar physicians receive from patients goes to fund paperwork and administrative tasks. The study also found that simplifying these systems could save four hours per physician and five hours of support staff time every week. 

“As a nurse, I know the importance of giving health care professionals time to focus on patient care,” said Centers for Medicare and Medicaid (CMS) Acting Administrator Marilyn Tavenner.  “The less time a physician has to spend on paperwork is that much more time that can be devoted to patient care. Having standardized procedures across the health care industry can only lead to lower costs and greater efficiencies all around.”

The government promises similar actions to come.   

According to the press release, future simplification rules will call for: 

–          Adoption of standard unique identifiers for health plans,

–          A standard for claims attachments and

–          Will require health plans certify compliance with all HIPAA standards and operating rules,