In light of this guidance, plan sponsors should assure that they can document their efforts to test transactions with health care providers and facilities. Sponsors should also be able to demonstrate active outreach and testing efforts with providers. Finally, health plans should consider whether a contingency plan is necessary to allow health claims to continue to be processed without interruption as of October 16, 2003.

Enforcement Approach Announced

When the EDI standards take effect, CMS will focus on voluntary compliance and will use a complaint-driven approach for enforcement of the EDI standards. (This is the same approach taken by the Office for Civil Rights for privacy enforcement, as discussed in a May 8, 2003 issue of The Segal Company's Capital Checkup.)

While civil monetary penalties may be imposed for failure to comply ($100 per standard per violation, up to $25,000 per year for each standard), CMS will not impose them where the failure to comply is based on reasonable cause and is not due to willful neglect, if the failure is cured within 30 days. The 30-day cure period may be extended on a case-by-case basis.

When a complaint is received, CMS will notify the subject of the complaint in writing. The "covered entity" will then have the opportunity to:

• Demonstrate compliance,
• Document its good faith efforts to comply with the standards and/or
• Submit a Corrective Action Plan (CAP).

Health Plans Must Facilitate Compliance with Providers

CMS recognizes that transmissions will often involve one compliant and one non-compliant entity. For example, a health plan would be compliant and a health care provider non-compliant if a transmission from the provider does not contain required data. This has raised concerns among health care providers that their bills will not be processed and paid if a transmission is non-compliant.

CMS states it will not impose a penalty on a health plan that adopts a contingency plan so that it can keep paying providers, as long as the plan has made reasonable and diligent efforts to become compliant and to facilitate the compliance of their trading partners. CMS will place a strong emphasis on sustained actions and demonstrable progress. Although CMS does not give examples of contingency plans, the Workgroup on Electronic Data Interchange (WEDI) has suggested several. For example, a health plan could adopt a contingency plan that states that it will accept transactions without all of the required data content elements for a brief time, as long as the transactions can otherwise be processed. Or a health plan might establish a brief transition period in which it will continue to accept proprietary formats. This would allow the parties to transactions to work out some of the possible glitches in the system that may not have been fully explored during testing.

Consequently, health plans should assess the readiness of their provider community and determine whether a contingency plan is necessary to assure that cash flow remains steady.

Corrective Action Plans

CMS announced that after October 16, 2003, it expects non-compliant covered entities to submit plans to achieve compliance in a manner and time acceptable to the Secretary. More detailed information on CAPs will be forthcoming.

What Plan Sponsors Should Be Doing Now

Plan sponsors that conduct EDI transactions should review the status of both their internal testing and external testing with trading partners (e.g., doctors, physician groups and hospitals). External testing programs should be well underway and contact should be made with providers to determine whether contingency plans need to be adopted. Plan sponsors should communicate with trading partners or assure that trading partner agreements are in place detailing how transmissions should be submitted. High-volume trading partners (e.g., hospitals, physician groups and ambulatory care centers) should be identified and contacted.

Plan sponsors that rely on service providers to conduct EDI transactions on their behalf should contact the service provider to determine what actions they are taking. Although the service providers are conducting the transmissions, the penalty for violation of the EDI rules would fall on the group health plan not on a third party administrator, because the plan is the covered entity.

Back to Top