NRPM: Standard Health Care Provider Identifier. D. Implementation Costs

05/07/1998

The costs of implementing the standards specified in the statute are primarily one-time or short-term costs related to conversion. They can be characterized as follows:

  1. System Conversion/Upgrade -- Health care providers and health plans will incur costs to convert existing software to utilize the standards. Health plans and large health care providers generally have their own information systems, which they maintain with in-house or contract support. Small health care providers are more likely to use off-the-shelf software developed and maintained by a vendor. Examples of software changes include the ability to generate and accept transactions using the standard (for example, claims, remittance advices) and converting or crosswalking current provider files and medical code sets to chosen standards. However, health care providers have considerable flexibility in determining how and when to accomplish these changes. One alternative to a complete system redesign would be to purchase a translator that reformats existing system outputs into standard transaction formats. A health plan or health care provider could also decide to implement two or more related standards at once or to implement one or more standards during a software upgrade. We expect that each health care provider’s and health plan’s situation will differ and that each will select a cost-effective implementation scheme. Many health care providers use billing agents or claims clearinghouses to facilitate EDI. (Although we discuss billing agents and claims clearinghouses as separate entities in this impact analysis, billing agents are considered to be the same as clearinghouses for purposes of administrative simplification). Those entities would also have to reprogram to accommodate standards. We would expect these costs to be passed on to health care providers in the form of fee increases or to be absorbed as a cost of doing business.
  2. Start-up Cost of Automation -- The legislation does not require health care providers to conduct transactions electronically. Those who do not currently have electronic capabilities would have to purchase and implement hardware and software and train staff to use it in order to benefit from EDI. However, this is likely to be less costly once standards are in place, because there will be more vendors supporting the standard.
  3. Training -- Health care provider and health plan personnel will require training on use of the various standard identifiers, formats, and code sets. For the most part this will be directed toward administrative personnel, but training in new code sets would be required for clinical staff as well.
  4. Implementation problems -- The implementation of any industry-wide standards will inevitably introduce additional complexity as health plans and health care providers struggle to re-establish communication and process transactions using the new formats, identifiers, and code sets. This is likely to result in a temporary increase in rejected transactions, manual exception processing, payment delays, and requests for additional information.

While the majority of costs are one-time costs related to implementation, there are also on-going costs associated with administrative simplification. Health care providers and health plans may incur on-going costs to subscribe to or purchase documentation and implementation guides related to code sets and standard formats as well as health plan and provider identifier directories or data files. These entities may already be incurring some of these costs, and the costs under HIPAA would be incremental. We will be pursuing low-cost distribution options to keep these costs as low as possible.

In addition, EDI could affect cash flow throughout the health insurance industry. Electronic claims reach the health plan faster and can be processed faster. This has the potential to improve health care providers’ cash flow situations while decreasing health plans’ earnings on cash reserves.

The only known impact on individuals and employers (other than those that function as health plans) is the need to obtain an identifier.