Obamacare and HIPAA Transactions



 HIPAA legislation introduced the current standards for certain electronic transactions now familiar in the healthcare industry.  These included the healthcare claim (837i and 837p), ERA (835), claim status transaction (276/277) and health plan eligibility (270/271).  These standards were finalized in 2000 and finally enforced by CMS in 2003 (837 and 835).  The intent of this legislation was to improve the efficiency of transaction processing in the healthcare industry by mandating a specific standard whenever these transactions were used.  However, there was one gaping loophole in the legislation that prevented the industry from receiving the full benefit of these standards.  Although HIPAA covered entities, providers and payers, had to use these formats when conducting electronic transactions, they could avoid HIPAA implementation and the associated cost by simply conducting these transactions on paper. 

This was especially true for payers.  Providers, most of whom depend on Medicare for a substantial part of their revenue, were forced to develop or purchase solutions as early adopters that could, at a minimum, create the 837 electronic claim since Medicare would only accept their claims electronically and HIPAA required the 837 format for this transaction.  Many other payers, large and small, continued to accept claims on paper in order to avoid the substantial cost of implementing new technology to read the 837 format.  Although many payers over the last 10 years have upgraded to systems capable of receiving 837 claim data, it is still true that this capability is not a requirement.

The Affordable Care Act (ACA) includes legislation to help level the playing field for providers and finally allow them to benefit from the standardized implementation of these transactions among all payers, not just CMS.  This aspect of the legislation has the potential to revolutionize revenue cycle management for providers and their software vendors by creating a universal source for vital transaction data that was formerly only available through CMS and other major payers.  These new rules are called the “Operating Rules for HIPAA Transactions”.  They take HIPAA a step further by requiring all payers to support certain transactions by deadlines set by this legislation or pay fines if they do not.

This CMS site provides details on the deadlines set for payer compliance for the associated transactions:


The deadline for compliance for the eligibility and claim status transactions was 1/1/2013.  This deadline has dramatically improved the availability of these transactions.  In addition, many payers have unique procedures and processes for enrollment to allow providers to conduct these transactions with them.  Others depend on contracts with clearinghouse organizations to conduct these transactions for them through customized interfaces to legacy data systems.  However, this legislation has definitely had a positive impact on compliance and the capability of providers to conduct these transactions with a wide range of payers using a standardized process.

The next deadline is 1/1/14 when the 835 and Electronic Funds Transfer (EFT) must be available for all payer/provider relationships.  This should have a dramatic impact for providers who have implemented automatic posting processes for 835s to their patient accounting systems.  In addition, the 835 contains a wealth of information regarding the profitability of departments and even specific services.  Not only does the 835 contain all the account level payments and adjustments associated with a specific check, it also includes the original charges.  This means that if you can archive this data for all payers for a given period of time, and you can add the missing ingredients of overhead, fixed departmental expenses, and self pay reimbursement, you have everything you need to calculate profit for healthcare services in many different ways.  This has long been the holy grail of revenue cycle management.

With this information, systems can be developed that can reliably perform tasks that are either unavailable or unreliable with existing information and processes.  When payments are posted automatically, providers can be immediately alerted if actual payment data differs from contractual agreements and deal with the exceptions through an automated process as payments are posted.

Providers may be able to model this data with increased reliability to accurately determine and predict total payment by all payers as soon as a claim is created and match actual payments with these predictions or eventually even send multiple payer claims at once.

Detailed departmental profitability reporting can assist CFOs in determining which services to expand and which to eliminate and predict the future impact of price or contract changes accurately and immediately.

As with development around other changes in administrative simplification standards, these new software features will be adopted slowly and the ability of vendors and providers to take advantage of the new information environment will depend largely on their creativity, innovation and their ability to understand and take advantage of these changes.   But these changes will come, and the providers and vendors that prepare for them and take advantage of them early will have a significant advantage over their competition.

Other details on the ACA and operating rules can be found on these sites:



If you need a tool to capture and analyze the data included in the 835, check out 835Direct by MEDTranDirect(www.medtrandirect.com). It works for all payers and provides reports and spreadsheets to assist you in revenue and profitability analysis using this data.

By Kalon Mitchell, President, MEDTranDirect, Inc.

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