ANSI 278 – Services Authorization – The Lost HIPAA Transaction

In 1996, HIPAA introduced new required electronic formats for some of the common transactions used today for the processing of insurance claims and related activities. As I discussed in my last article, these transactions have had disappointing adoption rates considering how long they have been available and the benefit they would bring the industry if they were universally adopted.


When these standards were introduced with the initial HIPAA legislation, another electronic transaction standard was also included, the ANSI 278 – Request for Review and Response. This is also referred to as the “Prior Authorization” transaction. The intent of this standard was to create a uniform automated process for requesting the authorization of a specific service from a health plan prior to the delivery of the service. In the absence of the adoption of this standard, providers and health plans must participate in many different unique processes of obtaining this authorization that cause delays in the processing of claims and the frequent delivery of services that are never paid for by insurance.

When HIPAA was introduced, the transaction standards referenced in the legislation were not prioritized. They were considered to be equal to each other in that each must be used when conducting the transactions electronically. The savings promoted by this legislation for the healthcare industry assumed that all of these transactions would be implemented. Although the adoption rates I discussed in my previous article are disappointingly low, the adoption rate of this transaction (ANSI 278) is practically non-existent.

Unlike the other transactions, CMS has not implemented the ANSI 278 as a process for verifying authorization of treatment, or any other intended use for this transaction. Like the rest of the industry, they provide inefficient processes for obtaining service authorizations. According to the CAQH index for 2014, only 7% of health plans allow for the two way transfer of these transactions between provider and health plan systems. In this case, instead of CMS enhancing this statistic when looking at the industry as a whole, they actually further minimize the availability of this transaction to providers by having a zero participation rate.

From a provider perspective, it is easy to see why this transaction would be beneficial. In theory, automated authorization could be obtained as early as the preadmission and admission process after eligibility is verified and when the potential services have been determined. CAQH CORE is currently developing standards that would require the implementation of this transaction standard by health plans at some future date, however, without CMS participation, the actual development of provider solutions for this service will always be significantly behind the other more common transactions.

By Kalon Mitchell – President, MEDTranDirect