Strategic Timetables

The Health Security Act outlines several time periods conditioned on other portions of reform. This may result in too much flexibility and may inhibit total uniformity. As mentioned earlier in this analysis, any apparent flexibility in the establishment of a strategic timetable could create problems if administrative simplification is left to various councils and perhaps state government.

The Health Care Modernization Act includes some very detailed, short initial time frames, especially considering the voluntary/part time nature of the panel and the commission and the extended requirements related to quality. The timetable for implementation of the Act's quality data requirements is more in keeping with a reliable strategic plan. In both cases, however, the existing timetable may not meet the healthcare community's current capabilities given the current environment.

The Association is concerned about the inclusion of waivers in the Health Care Modernization Act. We recognize, however, that there are fair safeguards to ensure that any waivers do not affect the uniformity standard.

ACTIVITIES OF THE INDUSTRY TO ACHIEVE UNIFORMITY

Over the past 25 years, HFMA participated on the National Uniform Billing Committee (NUBC), working closely with other healthcare representatives and the government. The NUBC established the UB-82, a uniform bill form and accompanying data set. The UB-82 was designed to provide a uniform format for the submission of hospital-based claims. Although the UB-82 satisfied the goals of a uniform bill, due to a variety of factors, some payers began requiring additional information that was not contained on the uniform bill.

There were about 50 different versions of the UB-82, representing the variances of each State Uniform Billing Committee. There were also as many as 420 different electronic versions of the UB-82, representing various payer versions of this data set. Hence, the uniform bill has not been used uniformly.

The voluntary UB-82 provided an official data set and format. Official formats, data sets, and standards are important, but without uniformity, there are no savings. Our members find themselves faced with hundreds of modifications to their systems each year to meet the different versions of this "uniform bill."

The UB-82, approved by the Office of Management and Budget for use in the Medicare program, has now been replaced by the UB-92. This conversion represents two and a half years of work by the NUBC. Medicare providers were given three months to initiate final conversion to this form.

In addition to the UB-92, the HCFA 1500 form also is used generally by providers for ambulatory and physician billing. Initially it was only used for Medicare, but recently others in the healthcare community have broadened its use. Since the Medicare program requires all physicians and clinics to bill using the HCFA 1500, many have found it easier to perform all of their billing on the HCFA 1500 rather than use other forms.

It should be noted that the HCFA 1500 and the UB-92 share approximately 95 percent of the same data elements. However, even with the availability of the HCFA 1500 and the implementation of the UB-92, the use of these forms is, and will continue to be, inconsistent. HCFA and other payers may require supplemental claims forms for certain healthcare services. They may also require multiple forms to satisfy the need for additional requisite information. State laws do not necessarily prevent this

situation since, in many cases, the transactions are either regulated by the Federal government or are required by out-of-state payers or administrators. Additionally, ERISA based self-insurance plans are exempt from any state legislative initiatives attempting to alleviate a state-specific problem.

A provider's economic health is dependent upon the prompt payment of claims. Therefore, providers will continue to respond to payer demands for additional data in different formats. This increases the provider's administrative costs, resulting in higher overall healthcare costs.

RELATIONSHIP OF THE INDUSTRY WITH ANSI AND WEDI

In 1989, representatives of several of the nation's larger insurance companies and banks sought to eliminate the use of checks to pay for healthcare claims. Healthcare payers, including HCFA, and providers, specifically HFMA and the American Hospital Association, concerned about the problems and limitations previously noted, joined forces with the insurers and banks to form ANSI's Insurance Subcommittee of the Accredited Standards Committee X12. ANSI directed the X12 to develop standard data transmissions between business partners.

Through the X12 and other subgroups, payers and providers have suggested EDI and electronic funds transmission standards to allow for the electronic transmission of large amounts of data and funds. To date, draft standards have been developed for enrollment, eligibility, claims, claim status, payment and remittance, and first report of injury. Task groups have also undertaken projects addressing issues such as utilization review data, crossover or coordination of benefits billing, and other healthcare related data exchanges.

In late 1991, the HHS Secretary convened a summit with the leaders of several of the nation's health insurance companies. The Workgroup on Electronic Data Interchange, or WEDI, was a by-product of this summit. The WEDI group, which included a small representation of healthcare providers, was directed to evaluate the use of X12 standards in the healthcare industry. After several months of deliberating, a report was presented to HHS in July 1992. That report contained an ambitious time table to implement, with government assistance, many of the current and proposed X12 standards for all healthcare providers and payers by the fourth quarter of 1996. The report also recommended potential legislation if providers do not meet the implementation schedule.

In late 1993, WEDI released its blueprint for streamlined administration of the U.S. health care system. The report continues to support WEDI's original concepts, but calls for a tighter implementation timetable than what was originally projected. For example, WEDI recommended that the adoption and implementation of approved X12 standards be completed by the fourth quarter of 1994 for all payors with 50,000 or more claims or encounters per year, hospitals, nursing home and group practices with 20 or more physicians, and employers with 100 or more employees. All other payors, providers and employers would be required to adopt the standards by the fourth quarter of 1996. Incentives, such as higher tax credits and accelerated depreciation, should be developed to facilitate timely implementation.

While not minimizing the work of the WEDI group, it is HFMA's opinion that the group did not fully represent all necessary participants of the healthcare community. Consequently, the report's recommendations do not reflect the essential elements to establish a strategic plan for implementation of a standardized system. Furthermore, the report recommends legislative action only after it becomes apparent that voluntary compliance is not effective. HFMA contends that given the past experiences with

voluntary efforts and the need to accelerate the process toward administrative simplification, Congress must enact legislation to mandate compliance now.

CONCLUSION

Mr. Chairman, HFMA recognizes the need for comprehensive healthcare reform. We remain convinced, however, that certain key elements of healthcare reform can be enacted quickly. Administrative simplification is one of those key elements. We therefore urge you and the members of your Subcommittee to enact legislation now to simplify and standardize the healthcare administrative processes and not wait for a complete reform package. The concept we have outlined for you today can be effectively integrated into the current system, yet it will also function within any new system. The time to begin moving toward change is now.

On behalf of HFMA, I appreciate the opportunity to appear before you today and present the organization's views on healthcare administrative costs. With more than 31,500 members engaged in the management of healthcare financial operations, we are available to provide guidance to you as decisions are made on simplifying the system. We look forward to working with you, as well as other members of the Congress and the Clinton Administration and, of course, our partners in the healthcare community. Together we must plan the steps necessary to create a national standard, thereby improving our industry, lowering the administrative burdens of health care, and controlling the unnecessary costs brought about by duplication of efforts and paper processing. Thank you.

ABOUT HFMA

• HFMA is the nation's leading personal membership organization for more than 31,500 financial management professionals involved in the financial management of various types of healthcare institutions, including hospitals and clinics, managed care providers, public accountants, consultants, insurance companies, governmental agencies and other organizations.

• Members' positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant.

• Given the geographic and professional diversity of its members, HFMA is in a unique position to identify the problems associated with the current healthcare claims and patient accounting processes.

Chairman STARK. Thank you.

Mr. Houtz.

STATEMENT OF JIM H. HOUTZ, CHAIRMAN OF THE BOARD, ASSOCIATION FOR ELECTRONIC HEALTH CARE TRANSACTIONS, AND PRESIDENT, CYDATA SYSTEMS, INC., SCOTTSDALE, ARIZ.

Mr. HOUTZ. Mr. Chairman, my name is Jim Houtz and I chair the Association for Electronic Health Care Transactions. Thank you for inviting us, and per your request, I will summarize my comments.

AFEHCT is an association comprised of companies who are engaged in building that portion of the electronic highway that will be used to transmit and process health care data, both financial and clinical, and a list of our member companies has been attached to our testimony. The companies that comprise AFEHCT believe that they have and are in the process of developing the tools and the systems that will enable the health care industry to better manage the delivery of care, reduce redundant and unnecessary or ineffective services, and eliminate much of the paperwork hassle that today comprises a significant portion of the system. Without the tools and the systems being developed by AFEHCT members, meaningful health care reform will be virtually impossible to accomplish.

Our association mission is to promote innovation, cooperation, and open competition within the EDI health care industry, and to improve the quality of health care and to achieve administrative cost savings. We have several principles which we would hope would be included in any health care reform legislation. One pertains to the networks and data systems that is covered in several of the bills.

We believe that any legislation in this area should avoid dictating any single system or proposing a limit on the size or number of competing data systems. AFEHCT believes that the Nation and the health care delivery system will be best served by open competition among vendors and suppliers of such services.

Chairman STARK. Excuse me.

Mr. HOUTZ. Yes, sir.

Chairman STARK. You say system. Are you suggesting that the standards shouldn't be such that all of the systems are completely compatible, one with the other?

Mr. HOUTZ. We are suggesting in a subsequent position, position on standards, and we do believe that standards should be utilized and standards should be mandated throughout the industry to expedite the EDI process throughout health care. Yes, we are. Chairman STARK. Well, let me state it another way.

Mr. HOUTZ. Yes.

Chairman STARK. There are standards now for banking transactions.

Mr. HOUTZ. Yes, sir.

Chairman STARK. So that there is, for all practical purposes, no terminal in the world which won't accept and use my Visa card, if in fact they are on the Visa system, and the same thing is true with Dr. McDermott's American Express card. I mean, the system

is absolutely transparent. And approvals are uniform and transactions are automatically transmitted and updated.

Is there anything in what you are suggesting that would prevent that same interchange of information from happening?

Mr. HOUTZ. None whatsoever. We advocate very strongly the usage of standards, the ANSI standards within the industry so that the transmission protocol

Chairman STARK. So nobody is precluded from being in the system because they bought system A rather than system B.

Mr. HOUTZ. Absolutely not. But when they transmit from system A to system B, we are asking that they use a same type of transmission and industry protocols which is consistent with

Chairman STARK. Wouldn't that be best accomplished by having the Federal Government just pick one and say this is what everybody would use?

Mr. HOUTZ. Yes, it would. It would expedite it by about 4 or 5 years.

Chairman STARK. Thank you. I didn't quite understand what you meant by dictating-I mean, the technical words here between standards. So go ahead.

Mr. HOUTZ. In some of the legislative proposals we have read, they have talked about regional data centers or so many centers per State, and we are concerned about that really adversely impacting what you are trying to accomplish.

We support universal identification of

Chairman STARK. Social Security number?

Mr. HOUTZ. That would be adequate we feel for patients, but we need universal numbers for payers and providers.

We support the use of electronic cards if used as an identification card as opposed to the smart card approach. We support the development of an open network access system with all payers and employers participating, and we also

Mr. MCDERMOTT. Please clarify for me the difference between a smart card and any other kind of card?

Mr. HOUTZ. I think the position of AFEHCT and the position of WEDI is that if identification cards are to be used

Mr. MCDERMOTT. That is a card with a picture?

Mr. HOUTZ. Whatever is on it, like a bank card.

Chairman STARK. Let me try this one. The card identifies you in the machine and therefore, if somebody has the code to get your record someplace else, but it doesn't carry your own record in the card itself, all right?

Mr. MCDERMOTT. All right.

Chairman STARK. Is that a fair characterization?

Mr. HOUTZ. Right.

Mr. MCDERMOTT. You favor the former; that is, that you put that card in and you could get the data right then.

Mr. HOUTZ. We feel that the only thing the industry could handle right now is the identification card, because before you can use smart cards you need identification systems installed in all physicians' offices, and we are a decade away from that happening, or maybe two decades.

We support the privacy and confidentiality aspects of the system, and probably, if I left here with one thought that I could share with