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HCFA's evolving role.

The Health Care Financing Administration (HCFA) has assumed, within healthcare electronic data interchange (EDI) standardization, the mantle worn by the Federal Reserve in guiding the initial shift in commercial banking systems toward standards-based, reducedpaper transaction processing.

HCFA's role in developing healthcare transaction set standards is immense. In 1993, HCFA made:

* 41 percent of all payments to hospitals,

* 28 percent of all payments to physicians,

* 61 percent of all payments to nursing homes, and

* 54 percent of all payments to home healthcare providers.

By volume, Medicare reported processing 815 million healthcare claims in fiscal year 1993. Claim volume increased 34 percent from 1990. In the same period, Medicare increased the percentage of all claims processed by EDI. Gains achieved were 18 percent for Part A (hospital) claims and 69 percent for Part B (physician) claims.

As the largest payer, HCFA is well positioned to set healthcare EDI transaction standards. Most software companies will write code for the most frequently used transaction set (e.g. HCFA standard). This factor is critically important to the EDI industry's further growth. Lack of standard transactions is the one item that has most slowed EDI's proliferation and artificially elevated its costs. It has caused national transaction processors to retain approximately 450 proprietary payer EDI transaction-set formats in libraries. Staffs were required to change and test each format up to three times annually, in order, to maintain them in compliance with the latest payer release. This was the transactions processor's single greatest cost.

National Economic Drivers

For 1993, the last full year for which data is available, Medicare was receiving 88 percent of all Part A claims and 61 percent of all Part B claims electronically by EDI. These EDI claims in aggregate amounted to 65 percent of all claims, vs. 42 percent for 1990.

These are significant gains in sourcing EDI claims from a fragmented private sector healthcare industry. They speak to HCFA's diligence in striving to eliminate the burden of a paper-rich beneficiary administrative process. These processes are commonly estimated to absorb from 20 percent to 30 percent of the overall cost of healthcare benefits.

If all sectors of healthcare were as efficient as HCFA, a range of potential administrative cost savings from $177 billion to $265.3 billion might have been realized in 1993, when national healthcare expenditures were $884.2 billion.

Unpublished 1993 studies indicated a maximum of 40 percent of the private sector's claims were being processed through EDI, vs. 65 percent of Medicare's claims. This quantifies HCFA's 1993 lead on the private sector for the year. It has not evaporated.

According to highly placed sources, HCFA is now focusing its efforts on achieving industry standardization in EDI transactions. It perceives achieving greater gains through this avenue than by focusing solely on increasing Medicare's EDI claims volume. HCFA has ceased setting annual goals for EDI claims. HCFA's expectations are that by 1997, 98 percent of all Part A claims, and 85 percent to 95 percent of Part B claims will be submitted electronically.

HCFA's motivation

These goals will be attained using a combination of incentives, from the development of a single-claims processing system to setting a deadline for the adoption of standardized electronic-claim submission formats. The incentives are the distribution of free ASC X12 transaction-set implementation guides, decreased payment time for claims submitted by EDI and free EDI submission software to providers through contractors. The critical EDI deadline is that after July 1, 1996, HCFA will only accept claims submitted in one of three electronic formats: the ASC #837, UB-92 flat file and HCFA-1500 NSF (national standard format).

HCFA is distributing free ASC X12 implementation guides. Guides are available for the ASC X12 #835 (ERA) and #837. HCFA will have guides available for the ASC X12 #270 (eligibility inquiry, @271/272 (eligibility inquiry/response) and the #276/277 (claim status request/response). Implementation guides will be for batch pending ASC X12 approval of OLTP standards.


The Medicare Transaction System (MTS) is a major HCFA initiative to simplify claim-transaction processing by adopting one claim-processing system, reducing the number of claim-transaction processing sites and simplifying the tasks of each processing site. MTS will replace the current six shared Part A systems and eight shared Part B systems with a single standard Medicare transaction-processing system.

MTS will lead to the replacement of the 62 Medicare transaction processing sites--owned by 80 Medicare contractors--with 11 contractors (three Part A and eight Part B). HCFA estimates that MTS may take two years to be fully implemented. MTS will process Medicare claim transactions and automatically make payment determinations. After full MTS implementation, HCFA expects annual savings to be approximately $200 million. MTS is scheduled to become operational on Sept. 2, 1997. In the first quarter of 1996, HCFA intends to issue an RFP for bidders on the MTS operating sites.

Long-term MTS impact

One MTS feature in particular is bound to have long-term impact. This feature is the creation of a Medicare claim-transaction information warehouse. The data repository probably will be used to measure quality, cost and outcomes among Medicare's providers and possibly among managed-care contractors.

It is expected that the data warehouse will accept and retain a HCFA managed-care encounter set. However, this data set has yet to be finalized or approved. No approval date is currently scheduled. A good guess for this important step would be before the end of the 1997 fiscal year.

Measuring competing managed-care plans

A Medicaid/Medicare Common Data Initiative Steering Committee is serving as HCFA's focal point for coordinating managed-care data issues. This Steering Committee (Mc-Data) issued a report titled "A Core Data Set for States and Medicaid Care Plans" in draft form on Dec. 15, 1994. Its goals coincide with goals three, four and five in HCFA's strategic plan:

3. Promote the improved health status of our beneficiaries.

4. Translate available health data into useful information.

5. Promote the fiscal integrity of our program.

The administrator of HCFA will either accept the interim work product or terminate the committee's activities. The committee reported the absence of national program data requirements for managed-care plans (Medicare and Medicaid). It notes, "This multiplicity of approaches has been at the expense of accurate, meaningful and truly comparable data across plans remains a significant challenge." The report states that "several states are pursuing diverse approaches to collecting data from managed-care plans serving their eligible populations. Additionally, some states are interested in collecting plan-level data in order to develop rate-setting tools, as well as comparative measures of access and quality."

Why collect comparable data, if you have no intention of using it to compare the sources of the data? Managed-care plans may expect measurement by HCFA standards when HCFA has finished developing, testing and has collected sufficient managed-care encounter set data. An acceptable expectation is that this data set may become a variant of the ASC #837 EDI claim-transaction set. It is possible that HCFA may require all managed-care contractor encounters to be reported electronically. The encounter data could be in HCFA's MTS data warehouse, so results of comparative data such as hospital mortality statisitcs could be published.

Adopting HCFA standards

When done, HCFA will have moved forward in bringing transaction standards to the healthcare EDI industry. Most managed-care companies will adopt the new HCFA managed-care encounter and its EDI transaction set for reporting data to HCFA and for internal collection of member encounters. Another result will be an increase in managed-care transactions as the need to report standard transaction sets to HCFA creates market demand.

HCFA does not have the authority to compel private payers to adopt their implementation guides. By the year 2000, the HCFA EDI implementation guides have the potential to become the nation's single standard. HCFA's development of standard transaction sets favors no payer over another. All have the same opportunity to use EDI effectively.

The only losers may be the vendors of healthcare EDI transaction translator software as the requirement for their product wanes. There will still be a need for provider EDI transaction products, but they will be sold more on their value-added features than on translation capabilities. Claims clearinghouses will survive. The continued existence of credit card transaction processors demonstrates that clearinghouses can survive the adoption of transaction standards.

The national policy goal is to lower the proportion of the country's Gross Domestic Product being spent on healthcare. EDI adoption and standardization assists in this without impacting negatively on either care provision or allocation.

RELATED ARTICLE: The real-time transaction processors

Currently, there are three companies that are the best healthcare electronic data interchange (EDI) dark horse picks with a commitment to online transaction processing (OLTP).

OLTP will be the second wave of healthcare transaction processing. The three OLTP-oriented companies are Athena, S2 Systems, Inc., and National Electronic Information Corporation (NEIC), Secaucus, N.J.


Athena is a newly formed healthcare information services company of the associated companies Blue Cross and Blue Shield of Indiana. Blue Cross and Blue Shield of Indiana is one of the wealthiest and most dynamic of the 60 to 65 remaining Blue Cross and Blue Shield plans. Athena was formed by taking all of the health information operations of the associated companies and placing them in one business unit. Its objective is to take advantage of the growing healthcare information technology market.

Athena is organized into four product groups:

* Information--offers clearinghouse and EDI capabilities.

* Advanced Healthcare Solutions--offers medical data analysis, provider profiling, credentialing and account analysis.

* Demand-Management--offers provider demographics and preventive care-management services.

* Print-Mail--offers computerized printing, mailing, document and distribution-management services.

Medical Management Resources (MMR), which is the core of the information group, provides nationwide transaction processing and networking services to EDI-USA--Blue Cross and Blue Shield's claims gateway rival to NEIC. MMR has long been an advocate of healthcare transactions processing provided by an OLTP network.

S2 Systems

S2 Systems, Inc., is a merger of two wholly owned Stratus Computer subsidiaries, Shared Financial Systems and Softcom Systems. Softcom brought the telecommunications and network linking technology to the company and Shared brought the OLTP application software.

Applications for the insurance and managed-care market segments are structured solely for the OLTP environment, one of few OLTP healthcare EDI software vendors.

National Electronic Information Corporation

NEIC, the gateway to large commercial carriers, offered the first OLTP healthcare transaction processing network (e.g., Health Care Information Network) allowing online eligibility and benefit validation. By 2000, NEIC will be a more nimble, aggressive, independent operating company. It will continue to be the principal electronic gateway to major carriers and their managed-care networks.
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Title Annotation:includes related article on OLTP-oriented companies; Health Care Financing Administration
Author:Kadas, Richard
Publication:Health Management Technology
Date:Jul 1, 1995
Previous Article:HL7 picks up momentum.
Next Article:Telemedicine and interconnection services reduce costs at several facilities.

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