Administrative Simplification Urgently Needed

By Jim Hall, CPA, and Mary Daulong, PT, CHC, CHP

The Health Insurance Portability and Accountability Act (HIPAA), enacted in 1996, is primarily known for its Privacy and Security Rules but these rules, while paramount, are just the tip of the iceberg.

Public Law 104-191 (HIPAA) amended the Internal Revenue Code of 1986 to improve portability and continuity of health insurance coverage in the group and individual markets; to combat waste, fraud, and abuse in health insurance and health care delivery; to promote the use of medical savings accounts; to improve access to long-term care services and coverage; to simplify the administration of health insurance, and for other purposes.

This article focuses on the Administrative Simplification provision of HIPAA and specifically standardized transactions and code sets. Under this law, the federal government mandates that all covered entities (providers, health plans, and clearinghouses) must use standardized electronic transactions and code sets if they engage in any health care transactions electronically.

HIPAA and Administrative Simplification appear, on the surface, to be oxymoronic. But they are not! If all stakeholders complied with the standardization of electronic transaction and transparency requirements, major administrative burdens could be lifted and significant proficiency gained by all parties.

Two student projects, the Marquette Project I and the Marquette Project II (TMPI and TMPII), were initiated in December of 2015 and 2016, respectively. These projects rated payers on provider-specific payment and/or coverage policies and ready access to them. Both projects demonstrated how difficult it is in real life for a therapist and/or a designee to locate, read, and understand payment and coverage policy maintained by payers. These projects were the catalyst for the Private Practice Section’s creation of its Administrative Simplification Work Group. Its purpose is to exercise due diligence relating to access simplification and the employment of Standardization of Electronic Transactions (SET) as mandated by federal law.

One of the purposes for this article is to educate readers on what is on the books (HIPAA’s Administrative Simplification) and why there is a disconnect/failure in the implementation of the transaction sets, along with my thoughts on a direction we could collectively take to push this out.

Let’s start with a 3-minute YouTube video put out by the Centers for Medicare & Medicaid Services (CMS) in 2014:

These are the standard forms mandated by HIPAA:

CMS1500 (electronic equivalent 837P): Medical Claim form for Provider billing (NUCC)
UB04 (electronic equivalent 837I): Medical Claim form for Institutional billing (NUCC)
270: Patient eligibility request from Provider (WEDI)
271: Patient eligibility response from Insurance (WEDI)
276: Health care claim status request from Provider (WEDI)
277: Health care claim response from Insurance (WEDI)
278: Prior authorization request and response from Provider and Insurance (WEDI)

These standard forms all have standard fields. HIPAA established the electronic data interchange (EDI) standard transactions, and CMS oversees them while the Office of Civil Rights (OCR) enforces them. Interestingly, the claim forms (CMS1500/UB04 and their electronic equivalents 837P and 837I) have published instructions from the National Uniform Claims Committee (NUCC).1 The other forms (270/271, 276/277, and 278) have published instructions from the Washington Publishing Company, which has input from the Workgroup for Electronic Data Interchange (WEDI). Both NUCC and WEDI are organizations made up of both providers and payers, and other interested parties. I think it is safe to say that the entire village is involved in making sure these forms are getting input from all the appropriate parties to make sure everyone agrees on the content necessary to execute the transaction.

With the introduction of the standardized forms, both providers and insurance companies could administratively simplify operations to a degree. In my opinion, one side has simplified their operation, the other, not as much. The better part of the health care savings would come if the instructions for these forms (NUCC and Washington Publishing Company/WEDI) were legislatively adopted and implemented across the board. As it stands now, even though these forms are standardized, the fields within the forms are not. The instructions are very detailed and clear, but the insurance industry is not forced to adopt/implement NUCC and Washington Publishing Company/WEDI instructions. When I asked the NUCC why payers are allowed to modify their instructions, I was told: “The NUCC has no regulatory authority to impose these general instructions as mandatory.”

Per the American Medical Association (AMA),2 the insurance industry has over 1,200 companion guides for the CMS1500 form/837P and is directing companies to choose and use a guide to deliver that data to them. In other words, the companion guide is necessary because they do not follow those NUCC Instructions. The same goes for the other forms under the direction of WEDI; although I do not know how many companion guides there are, I assume the numbers would be similar.

Since a stated goal of the federal government is to reduce the cost of health care, one of the ways to do this would be strict enforcement of the NUCC and Washington Publishing Company Instructions for each of these forms. It would remove a great deal of administrative burden from our practice management, electronic medical record, and clearinghouse vendors, who are charged with wiring up these standard forms to comply with all the varying companion guides. By mandating standardization of forms and transactions, covered entities could reduce provider human resource requirements and decompress their administrative staff and free up their time for other tasks.

HIPAA’s goal of providing standardized transactions between providers and insurance companies has only been partially fulfilled. Since January 2013, providers could have been sending out patient eligibility verifications and checking claim status from insurance companies, but this rarely occurs. For many of you reading this, you might be thinking you have that capability, but you might only be partially correct, and that’s where the problem lies. Let’s look at a pragmatic example of how these transactions are working today with the following illustration:

Currently, providers have options when verifying patient information for the following procedures:

  • Patient eligibility (270/271 forms)
  • Prior authorization (278 form)
  • Claim status (276/277 forms)

Here are some of the alternatives:

  1. Do not verify the patient’s coverage/benefits.
  2. Call to verify via phone. Depending on which form is being used, this may take 5 minutes to an hour.
  3. Log in to a clearinghouse or directly with the insurance carrier, which can take 3-5 minutes and is subject to data entry errors.
  4. Launch those requests directly from the Electronic Medical Record (EMR) or Practice Management System (PMS), which may take 15-30 seconds.

Item 1 is clearly not an option. Items 2 and 3 require staff to enter/reenter information into a platform or across multiple platforms. Item 4 launches directly from the EMR/PMS and requires little effort for what ultimately is going to be the best result. I also believe that item 4 will yield more relevant statistical data that will allow us to report information to our legislators if the insurance industry is resisting the implementation of those standards. The majority of therapy practices around the country are doing things via steps 1-3. The best method for Administrative Simplification is Step 4. While I am not 100 percent certain, I believe providers, EMR, PMS, and clearinghouses could press this issue by filing a complaint with OCR3. While NUCC and WEDI might not have the authority to enforce one standard and do away with 1,200 different companion guides, OCR does. I do not believe they have fielded any complaints that would require them to intercede. Additionally, if the goal is to reduce the high cost of health care, there is merit in the idea of the professional associations and organizations coming together; we might find common ground that would yield a successful result, the idea being strength in data and numbers.


1. National Uniform Claim Committee. 1500 Health Insurance Claim Form Reference Instruction Manual for Form Version 02/12, July 2016 Version 4.0 July 2016.

2. American Medical Association. Understanding the HIPAA Standard Transactions: The HIPAA Transactions and Code Set Rule, page 6.

3. American Medical Association. Understanding the HIPAA Standard Transactions: The HIPAA Transactions and Code Set Rule, page 7.

Jim Hall, CPA, owns Rehab Management Services in Cedar Rapids, Iowa. He is a member of the PPS Payment Policy Committee and can be reached at

Mary R. Daulong, PT, CHC, CHP, is a PPS member and the owner of Business & Clinical Management Services, Inc., a consulting firm specializing in outpatient therapy compliance, including documentation, coding and billing, enrollment and credentialing, and Health Insurance Portability and Accountability Act and Occupational Safety and Health Administration regulation education. She is also the author of both The Private Practice Compliance Manual and The Third-Party Biller Compliance Manual. She can be reached at

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