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HIPAA Transaction Codes Processing Changes

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03/18/2013
An article by Robert Burleigh, CHBME, from the January/February issue of HBMA Billing.

A compliance article about HIPAA transaction codes might seem a bit odd. In fact, it is! Fortunately, as it turns out, it also makes sense.

On January 1, 2013, the processing of two sets of HIPAA transaction codes will become mandatory:

Eligibility for a health plan (270/271)
Health claim status (276/277)

Effective January 1, all insurers conducting claims business utilizing HIPAA electronic formats (essentially, all insurers, the VA, Medicare, and the Medicaid programs), are required to accept requests for coverage eligibility and/or claims status via the applicable HIPAA transaction codes and return the appropriate response transaction codes. As in the past, insurers failing to accept and/or return these transaction codes are subject to sanctions by CMS, based on a complaint filed by (or on behalf of) a covered entity.

However, unlike prior complaint-based investigations, CMS now has the responsibility to actively enforce compliance: violators are subject to a "per-day, per covered subscriber" penalty until they achieve compliance. Consequently, insurers will be extremely motivated to comply with the new requirements, as the ongoing daily penalties will quickly exceed the cost of implementing and supporting the transaction codes.

The 270/271 eligibility transaction codes are designed to inquire about a patient's eligibility and coverage. Individuals can submit this transaction in advance of, concurrently, or after a service has been rendered. The amount of information provided is not imposed by the regulations: a plan may merely confirm that the patient is or is not covered. Insurers are, however, allowed to provide additional information, such as deductible status, covered/non-covered services (provided the planned/rendered services are identified), and the like. The eligibility request may be made in "real-time" or batch mode. If requested in real-time, the insurer is required to respond within 20 seconds, although it is unclear what the penalty would be for exceeding the time limit.

Now that insurers are required to respond to eligibility inquiries, I believe that it creates a new compliance dynamic: before you submit claim information that includes CPT and ICD-9 CM codes, you are able to know whether the patient is insured by the payor. A negative response further protects the patient's privacy and accelerates your opportunity to determine whether the patient has (newer) billable coverage or none at all. This capability increases a provider's – and their billing company's – compliance with HIPAA (minimum necessary), and it can simultaneously diminish the risk of a "non-timely filing" denial by an insurer that is identified too late.

Note that the insurers are obligated to comply and are subject to penalties for non-compliance, but providers are not. There is no penalty imposed by CMS on a provider or billing company if these transactions are never submitted. However, I believe there is considerable legal risk to billing companies that fail to utilize all of the most current billing tools, particularly if their clients' cash flow is delayed, diminished, or forfeited.

I also believe that once insurers' support of these transaction codes is mandated, it will become a standard industry practice for billing companies to submit both transaction code sets on behalf of their clients. That is because the use of these codes implies that the billing company is operating in the most efficient manner, thereby benefiting their clients and themselves. In addition, it is predictable that not too long into 2013, insurers will begin to refuse to accept, or will drastically reduce, both telephone and written queries associated with eligibility and claims status. These changes offer a significant labor and cost reduction for insurers that they will predictably embrace.

If you are just learning of these new requirements via this article, do the following:

  • Determine whether and when your software vendor will begin to support (or began to support) both transaction code sets.
  • If your billing software is proprietary, get your answer from your IT department or programmer.
  • Determine whether and when your clearinghouse vendor(s) will begin to support both transaction code sets.
  • Determine whether and when the top 25–40 insurers to which you submit electronic claims will begin to support both transaction code sets.
  • Prepare a table or spreadsheet to track the status of each, particularly those who are not yet ready, and those that will not be ready on January 1.
  • Establish contact with the compliance officer of any insurer who indicates that they will not be ready by January 1, 2013 or, even worse, states they will not attempt to be ready by that date. Expect that you will have to file a complaint with CMS.
  • Develop an implementation plan to manage your ability to submit and receive both transaction code sets by January 1, 2013.
  • Establish and follow a testing schedule with the insurer(s) and/or clearinghouses to test the successful use of 270/271 and 276/277 transaction codes.
  • Evaluate how these changes will affect your staffing of these functions, which are probably mostly manual now. Prepare a forecast and plan for labor reductions over the first six months of 2013 as you begin to automate these functions.
  • Be prepared to file HIPAA complaints with CMS' OCR if insurers are non-compliant after January 15, 2013.

Some billing companies currently use their clients' practice management systems instead of their own. These responsibilities will apply equally to the provider and the insurers they bill, and this will necessitate additional effort to coordinate your work with those system(s).
Going forward, a billing company's compliance officer should become actively involved in ensuring that the company remains current in utilizing all of the available HIPAA transaction codes, particularly those that are mandated. In 2014, there will be further changes and additional requirements associated with ERA and EFT transactions – stay tuned to Billing for those updates, too.


Robert Burleigh, CHBME is president of Brandywine Healthcare Services in West Chester, PA. He is a past president of HBMA and a presenter at the HBMA Owners & Managers conferences.

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