Health Insurance Reform: Standards for Electronic Transactions. a. Affected Entities


The ASC X12N 278 may be used by a health care provider to electronically request and receive approval from a health plan prior to providing a health care service. Prior approvals have become standard operating procedure for most hospitals, physicians and other health care providers due to the rapid growth of managed care. Health care providers secure most of their prior approvals through telephone calls, paper forms or proprietary electronic formats that differ from health plan to health plan. Since many health care providers participate in multiple managed care health plans, they must devote redundant software, hardware, and human resources to obtaining prior authorization; this process is often untimely and inefficient.

The lack of a health care industry standard may have imposed a cost barrier to the widespread use of electronic data interchange. The ASC X12N 278 is not widely used by health plans and health care providers, which may be due, in part, to the lack of an industry-wide implementation specification for it. The adoption of the ASC X12N 278 and its implementation specification will lower the cost of using electronic prior authorizations. This will benefit health care providers that can move to a single standard format; the standard transaction will also make electronic data interchange feasible for the first time for smaller health plans and health care providers that perform these transactions almost exclusively using the telephone or paper.

At some point, an organization’s size and complexity will require it to consider switching its business transactions from paper to electronic form, due to the savings and efficiencies conversion would produce. The ASC X12N 278 will facilitate that by eliminating duplicative proprietary formats that are certain to arise when there are no widely accepted standards. By eliminating the software, hardware, and human resources associated with redundancy, a business may reach the point where it becomes cost beneficial to convert from paper to electronic transactions. Health plans and health care providers that already support more than one proprietary format will incur some additional expense in converting to the standard, but will enjoy longer term savings that result from eliminating the redundancies.