Healthcare leaders suddenly reacquainted with the reality of HIPAA may wonder who started this expansive, expensive and forced retooling of their entire business.
It's not really the brainchild of the federal government, despite the final regulations cascading down from HHS in Washington. Rather, it's mainly the work of forces within healthcare that campaigned tirelessly to require information standards that weren't catching on voluntarily.
Those standards, the products of painstaking consensus on the content of electronic insurance transactions, had the potential to greatly thin the thicket of work and rework standing between healthcare services and their reimbursement. And the industry's biggest stakeholders were represented in the effort to convert to an electronic norm for business.
But after a half-dozen years of developing and promoting the standards, nothing much was happening. Payers and providers, even those that were instrumental in getting the movement off the ground, generally were sticking with a routine of using more than 400 different formats, depending on the insurer, for submitting and paying claims.
"We saw the benefit of these (standard) transactions, but there wasn't a lot of mass implementation going on," says Gary Beatty, a leader of the development effort who was then an electronic commerce specialist for the Mayo Foundation, Rochester, Minn.
"We tried very aggressively to get the industry to start adopting these transactions voluntarily," says Lee Barrett, who chaired the original panel that directed the standards effort. "It just wasn't going to happen."
With backing from HHS and some key political leaders in Congress, advocates of industry standards looked to Capitol Hill for an adoption mechanism with teeth.
"It had to be the government that was going to say, `The benefits are there, it outweighs the industry wanting to stay with all the different formats,' " Barrett says.
But he adds, "The government is not the heavy hand here. The industry coalition put it together and said, `This is a good thing for healthcare.' "
The eventual inclusion of standard transaction sets in HIPAA was the culmination of several years of trying to break through the political process and put the force of law behind adoption of the standards. But that political process added a whole new layer of requirements for security and confidentiality in response to public expressions of alarm about putting sensitive medical details in electronic form.
Though industry advocates recognized that safeguards such as encryption of patient data were going to be necessary, "We didn't ever think to take it to the lengths that the political process took it," says Dan Rode, who worked on behalf of the legislation as a Washington representative for the Healthcare Financial Management Association.
The champions of administrative simplification also never bargained for the pains that the regulatory process took to hammer out a path of compliance with the new law's provisions on standard transactions and protection of information.
The passage of HIPAA was to mark the end of the journey, but instead it has delayed the adoption of electronic message standards until final regulations were posted just a few months ago.
"I'm not sure we're any further along than we would have been if we had done it on our own and the government never got involved," says Rode, who now is a Washington-based vice president with the American Health Information Management Association, Chicago.
"HIPAA basically froze the industry for five years," says Beatty, who succeeded Barrett last year as chairman of the standards subcommittee, known as ANSI X12N.
War on "administrative waste." The standards effort got its start more than a decade ago during a period in which rising healthcare costs and concerns about millions of uninsured Americans drew attention to the industry's high administrative overhead. The partisan debates of that period focused on the extent to which the nation's employer-based provision of health insurance and the multiplicity of private insurers contributed to high costs and uninsured masses.
One popular movement envisioned universal health coverage by requiring employers either to provide a minimum level of insurance benefits or pay into a government program for the have-nots. But a competing movement called for doing away with the insurance industry and setting up the government as the "single payer" of claims for healthcare services and capital investments, using Canada as a model.
The forces behind the single-payer solution supported their case by railing against the "administrative waste and bureaucracy" built into healthcare. "Private U.S. insurers keep 12 cents of every premium dollar for overhead and profits," contended a trio of single-payer advocates in a May 13, 1991, issue of MODERN HEALTHCARE. "Canada's provincial health insurance programs report that they operate for 1 cent on the dollar."
The commentary further contended that U.S. hospitals spent 20% of total revenues for billing and administrative costs because of the complexity of dealing with hundreds of insurers.
Though the single-payer push was short-lived, it highlighted healthcare's paper-based, arcane methods of paying claims and led to efforts to examine the obstacles to automating the process.
Facilitated first by the administration of President Bush and then by Hillary Rodham Clinton's plunge into healthcare reform, the standards development effort was nursed along by a Who's Who of the industry, from the Blue Cross and Blue Shield Association to the American Hospital Association.
Late in 1991, HHS Secretary Louis Sullivan, M.D., convened a "summit" of industry leaders that resulted in the launch of the Workgroup for Electronic Data Interchange (See chart). Sullivan challenged the WEDI task force "to increase the number of claims moved electronically by at least 10% each year" and "to evaluate electronic claims and standardized billing issues for the purpose of advancing electronic data interchange."
Earlier that same year, the American National Standards Institute, a nongovernmental organization that coordinates standards-setting efforts in all industries, established the health insurance subcommittee to arrive at an industry consensus on billing standards.
A principal goal of WEDI's charter was to encourage implementation of the anticipated ANSI standards. But also among the 16 assigned activities was a call for recommendations "on what the federal government . . . can or should do to facilitate the goals."
We'll take it from here. The industry mood in 1992 was in favor of avoiding federal intervention. That's what Joseph Brophy, co-chairman of WEDI, said when an influential Democratic congressman proposed legislation calling for HHS to establish electronic standards and run all claims through regional clearinghouses. The "business reasons for moving to a paperless system" were so compelling, said Brophy, that legislation would not be necessary.
Rep. Fortney "Pete" Stark, then-chairman of the House Ways and Means health subcommittee, said the legislation was needed because he was skeptical that such a network could be developed voluntarily and because skyrocketing healthcare costs demanded quick action.
But Brophy, president of The Travelers Insurance Co., said ill-advised legislation "could derail a very promising opportunity for private-public partnership." He called on legislators not to pass any bills on the subject until WEDI could finish its work.
HHS weighed in as an ally in June 1992 with proposed legislation giving the ANSI initiative until 1994 to come up with industry standards. Even then, the government committed to consulting with ANSI's health subcommittee as well as payers and providers before promulgating any standards.
WEDI in July 1992 published an inch-thick bound volume of 15 recommendations including the anointing of ANSI as the source of standards. HCFA announced it would begin adopting ANSI standards for Medicare claims beginning with the first minted standard, for remittance advice -- the explanation of what is covered by a payment.
By 1993, ANSI had enough of the transaction sets in place that it discouraged any movement to have government take on the development itself, Rode says.
Meanwhile, WEDI's work on the larger issue of electronic health information became the foundation for many of the administrative simplification precepts that started making the rounds in Congress, says Barrett, who began working for WEDI as a staff member on loan from Travelers. Barrett also chaired the ANSI panel while one transaction set after another was created.
The precepts became part of the raging reformation battle that followed President Clinton into office. Eventually the proposals found their way into HIPAA, Rode says, but only after a three-year span of inaction within the healthcare industry and in Washington.
Turning to government. The promising private-public partnership described earlier by healthcare industry leaders wasn't materializing.
"Implementation of a number of these standards was sporadic," Barrett says. Even leaders of the movement couldn't break away from the vested interests and capital tied up in the proprietary ways their organizations were set up to exchange information, he says. "No one wanted to go first; they said, `We'll follow.' "
Barrett says a few insurers such as United HealthCare and Aetna had made some strides, but early support from Travelers ended when the insurer sold its healthcare business. And though the early adopters were producing evidence of savings and better-quality data by not having to support scads of formats, case studies were not turning the tide, he says.
The same went for providers, already distressed about financial woes including waits of 90 to 120 days for accounts receivable, Barrett says. Despite arguments that standards could help trim days in accounts receivable and ease the financial pinch, providers saw the project not as a potential benefit but as another burden they couldn't afford, he says.
Government saw otherwise. HCFA's conversion to a standard remittance-advice transaction whetted its appetite for additional transactions and made HCFA a testing ground for development and pilot projects, Barrett says.
The Clinton administration bought into the idea in 1993 and included administrative simplification in the elaborate blueprint produced by Hillary Clinton's reform committee, Rode says.
HFMA drafted uniform claim legislation that made its way into several healthcare bills, but the take-it-all-on nature of the Clinton reform issue favored consolidation of healthcare-related legislation instead of piecemeal approval of smaller reform elements, he says.
Three attempts to pass transaction-standards legislation in 1993 failed, and by 1994 Congress had grown so tired of healthcare that the campaign for standards didn't get very far, Rode says. Because it was tied up with the larger discussion of healthcare reform, it "got trashed along with everything else," he says.
"The balloon went up and floated around for a while and then came back down and nothing happened," Beatty says.
But with the new Congress in 1995, several congressmen started picking up the ball and promoting the goal of increasing the percentage of electronic transactions in healthcare, Barrett says. Chief among them, he says, were Rep. David Hobson of Ohio and James Jeffords of Vermont, both Republicans.
The issue also caught the attention of their party's leader, Georgia Rep. Newt Gingrich, who wrote about it in 1994 before he became speaker of the House and then supported industry advocates in attempts to introduce legislation, Rode says. Though permanently associated with HIPAA today, the language on transactions and data protection "could have been integrated into a number of different bills," Barrett says.
Hailing a passing vehicle. The big break came when political momentum got behind two health benefits issues: the risks of losing health insurance coverage when changing jobs, and the laundry list of "pre-existing conditions" responsible for denial of coverage at a new job. Bipartisan legislation to make healthcare insurance "portable," sponsored by Sen. Edward Kennedy (D-Mass.) and Sen. Nancy Kassebaum (R-Kan.), was given good odds of passage in 1996.
Standards advocates got to work, but the heightened prospects of passage also brought sobering political observations about the risks of endorsing easier transmission of patient-identifiable medical details.
"It didn't take too long for people to discover what we were going to send in these transactions," Rode says. "It just became a hot issue."
Magazine articles and news items about breaches in confidentiality of medical records raised consciousness about who was looking at people's data.
"Some congressmen started to say, `Wait a minute, this is a big deal,' " Barrett says.
At the same time, security-conscious industry groups such as AHIMA were reporting that healthcare organizations generally consigned the confidentiality issue to the second tier of information-related objectives as they locked their sights on making data easier to access and distribute (MODERN HEALTHCARE, Sept. 30, 1996, p. 32).
Data security was a component in the package of electronic improvements promoted by standards advocates, but mainly as a technical issue in electronic exchanges. From that initial perspective, concerns from Congress and the White House expanded the issue into a quest for security of medical data in all its forms and uses, Rode says.
Both the administrative simplification and the security and confidentiality issues converged in the same legislation and were included in the House version of the HIPAA bill with Hobson as sponsor. With extensive industry support, the provisions weathered a Senate/House conference committee and became law in August 1996.
Back to obscurity. But instead of providing the proverbial kick in the pants, the new HIPAA law made administrative simplification a secondary priority for policymakers, advocates say.
Legislators were thinking about all the cost savings to be enjoyed, but they didn't foresee the complexity of putting the law's provisions into practice through regulations, Rode says. In addition, HIPAA's provisions for insurance portability were more politically acute than administrative savings and thus received regulatory attention first, he says.
And at HHS, the information-related HIPAA workload had to compete not only with the insurance portability provisions but also with deadlines represented by the Balanced Budget Act of 1997, outpatient prospective payment systems and the Y2K threat to electronic processing of Medicare claims, Rode says.
Though most of the administrative simplification mandates were scheduled to be implemented by February 1998 and compliance required by February 2000, HHS did not begin issuing proposed regulations until May 1998, and some rules have yet to be proposed. Published for public comment, the proposals attracted comments by the thousands, each of which required a response, Beatty says. The proposed transaction sets drew nearly 16,000 comments alone.
Consequently, awareness of HIPAA's concepts and basic business-altering requirements faded until earlier this year when the final regulations on transactions and codes became imminent. Other final rules on privacy and security will get on a faster track now that the labor involved in producing the first set of regulations is over, says Barrett, who now chairs the WEDI group.
"The industry needs to realize this is going to happen and plan for what this means for their organizations," he says.