Health Insurance Reform: Standards for Electronic Transactions. a. Health Care Clearinghouses and Billing Companies


As noted above, health care clearinghouses are entities that take health care transactions, convert them into standardized formats, and forward them to the insurer. Billing companies take on the administrative functions of a physician’s office. The market for health care clearinghouse and billing company services will definitely be affected by the HIPAA administrative simplification provisions; however, there appears to be some debate on how the market for these services will be affected.

It is likely that competition among health care clearinghouses and billing companies will increase over time as standards reduce some of the technical limitations that currently inhibit health care providers from conducting their own EDI. For example, by eliminating the requirement to maintain several different claims standards for different trading partners, health care providers will be able to more easily link themselves directly to health plans. This could negatively affect the market for health care clearinghouses and system vendors that do translation services; however, standards should increase the efficiency in which health care clearinghouses operate by allowing them to more easily link to multiple health plans. The increased efficiency in operations resulting from standards could, in effect, lower their overhead costs as well as attract new health care clearinghouse customers to offset any loss in market share that they might experience.

Another potential area of change is that brought about through standardized code sets. Standard code sets will lower costs and break down logistical barriers that discouraged some health care providers from doing their own coding and billing. As a result, some health care providers may choose an in-house transaction system rather than using a billing company as a means of exercising more control over information. Conversely, health care clearinghouses may acquire some short-term increase in business from those health care providers that are automated but do not use the selected standards. These health care providers will hire health care clearinghouses to take data from the nonstandard formats they are using and convert them into the appropriate standards. Generally, health care clearinghouses can also be expected to identify opportunities in which they could add value to transaction processing and to find new business opportunities, such as in training health care providers on the new transaction sets. Standards will increase the efficiency of health care clearinghouses, which could in turn drive costs for these services down. Health care clearinghouses may be able to operate more efficiently or at a lower cost based on their ability to gain market share. Some small billing companies may be consumed by health care clearinghouses that may begin offering billing services to augment their health care clearinghouse activities. However, most health care providers that use billing companies will probably continue to do so because of the comprehensive and personalized services these companies offer.

Value added networks transmit data over telecommunication lines. We anticipate that the demand for value added network services will increase as additional health care providers and health plans move to electronic data exchange. Standards will eliminate the need for data to be reformatted, which will allow health care providers to purchase value added network services individually rather than as a component of the full range of health care clearinghouse services.