The Department of Health and Human Services (HHS) published on January 16, in 74 Federal Register 3295 and 74 Federal Register 3328, amendments to the HIPAA Transactions and Code Sets Rule at 45 C.F.R. Part 162 to adopt the “X12 5010” transaction standards and the “ICD-10” code sets. The amendments extend the compliance dates for all covered entities (including small health plans) to implement X12 5010 to January 1, 2012 and to implement ICD-10 to October 1, 2013—extensions of 21 months and 24 months beyond the compliance dates proposed in the “HIPAA 2” proposed rule issued on August 22, 2008 in 73 Federal Register 49741.[1]

These compliance dates may change. On January 20, 2009, the Obama Administration White House Chief of Staff issued a directive to the heads of all executive departments and agencies to, inter alia, “[c]onsider extending for 60 days the effective date of regulations that have been published in the Federal Register but not yet taken effect.” See 74 Fed. Reg. 4435 (Jan. 26, 2009). The directive can impact these “HIPAA 2” amendments because their effective date is not until March 17, 2009. Consequently, the effective and compliance dates for these amendments, as set out in this Alert, may change.

X12 5010 Transaction Format (January 1, 2012 Compliance Date)

The amendments adopt ASC X12 Technical Reports Type 3 Version 005010 (X12 5010) for each of eight HIPAA standard transactions to replace the current X12N 4010/4010A on January 1, 2012. To facilitate implementation, the amendments permit covered entities to phase in X12 5010. Specifically, starting March 17, 2009, trading partners may agree to use either X12N 4010/4010A or X12 5010. This transition period ends on December 31, 2011. Beginning with the January 1, 2012 compliance date, only X12 5010 may be used for these eight HIPAA standard transactions.

NCPDP D.0 Retail Pharmacy Transaction Format (January 1, 2012 Compliance Date)

On January 1, 2012, NCPDP Telecommunication Standard Implementation Guide, Version D, Release 0 and NCPDP Batch Standard Implementation Guide, Version 1, Release 2 (collectively, NCPDP D.0) will become the standard format for four retail pharmacy transactions: (1) health care claims or equivalent encounter information; (2) eligibility for a health plan; (3) referral certification and authorization; and (4) coordination of benefits. NCPDP D.0 will replace the current standard format for these transactions—NCPDP 5.1.

The amendments require covered entities to implement NCPDP D.0 under the same timeline as X12 5010. Covered entities will, thus, have a transition period from March 17, 2009 through December 31, 2011 during which trading partners may agree to use either NCPDP 5.1 or NCPDP D.0. Beginning with the January 1, 2012 compliance date, covered entities must use only NCPDP D.0.

ICD-10 Code Sets (October 1, 2013 Compliance Date)

On October 1, 2013—twenty-one months after the compliance date for use of X12 5010 and NCPDP D.0—the International Classification of Diseases, Tenth Revision (ICD-10) code sets will replace the ICD-9 code sets. ICD-10-CM will replace ICD-9-CM Volumes 1 and 2 (for diagnostic coding), and ICD-10-PCS will replace ICD-9-CM Volume 3 (for hospital inpatient procedure coding). The CPT-4 and HCPCS code sets, used for coding all other procedures, are not affected by the amendments.

There is no transition period for conversion from ICD-9 to ICD-10. Instead, covered entities are required to use only the ICD-9-CM code sets through September 30, 2013, then switch to using only the ICD-10 code sets on October 1, 2013.

New Transaction for Medicaid Pharmacy Subrogation (January 1, 2012 Compliance Date; with Small Health Plans’ Compliance Date of January 1, 2013)

The amendments require health plans to accept State Medicaid agencies’ electronic transmission of the new Medicaid pharmacy subrogation standard transaction starting January 1, 2012 (with a compliance date of January 1, 2013 for small health plans—those with not more than $5 million in annual receipts). This standard transaction is defined as “the transmission of a claim from a Medicaid agency to a payer for the purpose of seeking reimbursement from the responsible health plan for a pharmacy claim the State has paid on behalf of a Medicaid recipient.”

The standard format for this transaction will be NCPDP Batch Standard Medicaid Subrogation Implementation Guide Version 3, Release 0. After the applicable compliance date, a health plan from which a State Medicaid agency is seeking payment for a subrogated pharmacy claim must be capable of conducting this transaction using the standard format. Because health care providers are not involved in Medicaid pharmacy subrogation activities, they will not need to conduct this standard transaction.

Retail Pharmacy Claims for Supplies and Professional Services (March 17, 2009 Compliance Date)

Currently, retail pharmacies must use the NCPDP standard format to submit claims for prescription drugs and the ASC X12N 837 standard format to submit claims for pharmacy supplies and professional services, even if the two transactions are for the same patient. Beginning March 17, 2009, the amendments will allow retail pharmacies to submit claims for pharmacy supplies and professional services using either NCPDP or ASC X12N 837 standard formats. As a result, from March 17, 2009 through December 31, 2011, retail pharmacies may submit claims for supplies and professional services using any of the following standard formats, depending on their agreements with their trading partners: NCPDP 5.1, NCPDP D.0, X12N 837 4010/4010A or X12 837 5010. Starting January 1, 2012, retail pharmacies may use either, but only, X12 837 5010 or NCPDP D.0 for pharmacy supplies and professional services claims.

Transactions Implementation Transition Period and Timeline

The amendments allow a health plan to accept a transaction that complies with any adopted standard during the transition period from March 17, 2009 through December 31, 2011. This provision is designed to allow (though not require) health plans to accept X12 5010 and NCPDP D.0 transactions from providers willing to send them prior to the January 1, 2012 compliance date, while prohibiting health plans from requiring providers, unwilling to agree as trading partners, to use X12 5010 or NCDPD D.0 before January 1, 2012.

HHS expects covered entities to undertake implementation activities early, including transaction testing between trading partners, to ensure smooth adoption of the new standard formats and code sets by their compliance dates. HHS stresses that it does not intend to issue “contingency plans,” as it did for the original compliance dates for the Transactions and Code Sets Rule and the National Provider Identifier Rule. HHS warns that it has the “authority to invoke civil money penalties against covered entities who do not comply with the standards,” observing that the “industry” has “encouraged” it to do so.

HHS recommends that covered entities implement X12 5010 and NCPDP D.0 in accordance with a timeline endorsed by the National Committee on Vital and Health Statistics (NCVHS), a government advisory committee designated by statute to guide HHS on HIPAA standard transactions. The NCVHS timeline features two levels of compliance:

  • Level 1 compliance, which means that a covered entity has completed “all design/build activities and internal testing” necessary to be able to “demonstrably create and receive compliant transactions.”
  • Level 2 compliance, which signifies that a covered entity “has completed end-to-end testing with each of its trading partners, and is able to . . . successfully exchange (accept and/or send) standard transactions and . . . process them successfully.”

HHS states that covered entities should complete Level 1 compliance by December 31, 2010 and must complete Level 2 compliance by January 1, 2012, the compliance deadline for the new standard formats.

Small Health Plans

Compliance Dates for Small Health Plans. Because HHS believes “all covered entities”—including small health plans—have “implemented the standards, identified and resolved business process issues, trained staff and incorporated the use of standards . . . into their existing infrastructure,” HHS concludes that small health plans do not need an extra year to comply with X12 5010, NCPDP D.0 and ICD-10 requirements. Consequently, small health plans are not being accorded an extra year to implement X12 5010, NCPDP D.0 and ICD-10, but rather must use only these standard formats and code sets starting January 1, 2012 and October 1, 2013, respectively, just like every other covered entity.

Effect of Different Compliance Dates for Small Health Plans. The amendments revise 45 C.F.R. § 162.923(a) to address issues arising when small health plans have different compliance dates than other covered entities. Small health plans usually have a compliance date for implementing HIPAA Administrative Simplification Rules requirements that is one year later than the compliance date applicable to other covered entities. The amendments, accordingly, clarify that a covered entity must conduct standard transactions only when both parties to the transaction are required to use the standard format. That means, for the new Medicaid pharmacy subrogation standard transaction, a Medicaid agency will not be required to conduct that transaction with a small health plan during 2012, because small health plans are not required to use the standard format for that transaction before January 1, 2013.

Revised Standard Transactions Definitions

The amendments modify the definitions of three standard transactions “to clearly specify [their] senders and receivers.” In each case, the new definition narrows the scope of the defined standard transaction, limiting the circumstances under which the Transactions and Code Sets Rule applies to transmissions between trading partners. The “referral certification and authorization” and “health care claims status” standard transactions will be limited to those between health plans and health care providers (or between their respective business associates). The “enrollment and disenrollment in a health plan” standard transaction will be limited to those between the sponsor of a health plan (or its agent)—neither of which is a covered entity—and the covered entity health plan (or its business associate). These definitional changes are effective March 17, 2009.