Subscribe to eTOC


We have all experienced frustrations with payer claim adjudication software that denies neurological services because of the built-in computer claim processing rules. The electronic tools that insurers use to make automatic payment decisions do not always conform to correct coding policies. Trying to rectify claim failures often creates big headaches for our staff and adds additional expense to our overhead.

But as the new electronic standards for claim submissions go into effect on October 16 as part of the Health Insurance Portability and Accountability Act (HIPAA), experts predict that neurologists and other physicians will experience an all-time high rate of claim rejections.

The law requires that all practices – except those with fewer than 10 full-time employees – submit Medicare claims electronically.

According to Robert Tennant, Senior Policy Advisor for the Medical Group Management Association, the new Transaction and Code Sets Standards (TCS) mandate a new format, as well as required and situational data content for all claims submitted electronically. Failure to submit claims in this new format could result in claims being rejected by health plans.

“Small practices with fewer than 10 full-time equivalents may continue to use paper claims,” he said. “While there is no waiver or form to fill out, the Centers for Medicare and Medicaid Services has indicated that they will conduct post-payment reviews on a random basis to determine if a practice qualifies for the exception. If a practice does not quality, they will have to immediately begin submitting Medicare claims electronically. If they do not submit electronically, they risk having their paper claims rejected.”


Dr. Orly Avitzur is a neurologist in private practice in Tarrytown, NY. She holds joint academic appointments at Yale University School of Medicine and New York Medical College.


Dr. Joseph C. Nichols


Among changes, the old claim form, the HCFA or CMS 1500 – with less than 50 required fields – is being replaced with a new 837 claim format that has over 900 data elements. There are new data fields and changes in former codes; for example, HIPAA replaces the current four relationship codes – “self,” “spouse,” “child,” or “other” – with 25 codes.

Joseph C. Nichols, MD, Chief Medical Information Officer for Paladin Data Systems, a professional services firm in Seattle, WA, said: “Transactions are so complex and technical-looking that most physicians have not thought of the business implications of these changes and probably won't until they reach the red flag stage.”

Dr. Nichols, who wrote a policy paper, HIPAA Transactions: The Coming Crash, noted that HIPAA introduces new content, removes older codes, and provides new business rules. “There are multiple points of potential failure in the chain of transaction from the provider to the billing system, to the clearinghouse and on to the payer, through the claims processing system, back through the clearinghouse and back to the provider system,” he wrote.


Mr. Tennant also predicts delays and confusion over the new HIPAA codes. “The 837 form divides a long list of data elements into two categories: required and situational. For example, a birth weight may be required for a newborn, but not an adult patient. The problem for medical practices is who gets to decide which ones are situational: the health plans. And with each health plan making its own decisions, and offices participating in numerous plans, claims denials will be inevitable.”

Tom Hanks, Director of Health Care Practice at PricewaterhouseCoopers, agrees that the 700 situational elements are likely to pose the most problems. He believes that what is done with those will vary with each claim. “The issue is not only can we get the right data, but what if we send situational information that is not required?”


Dr. Nichols believes that there has been a frightening misperception that “translators” – software that converts old formats to new HIPAA-compliant forms – will resolve these problems. But translators need specific information and guidance, both of which are currently missing in the process. And even if we assume the best – that the provider submits a HIPAA-compliant form with all fields completed correctly – Dr. Nichols warned that there may still be problems with the rules engines and algorithms needed to ensure proper payment.

Mr. Hanks predicts that for the process to work, it will require repeat testing for each and every payer. “We already know from reviewing the payer companion guides that there will be some variability from payer to payer,” he said. “What we have is the most complex, most convoluted, non-standard standard known to man.”


Just what are the touted benefits of the new process? The new standards are supposed to speed up payment; improve staff productivity through real-time access to eligibility, referral, and coordination of benefits; eliminate the cost of mailing statements to patients; and reduce denials due to late filing or lack of pre-approval. But until the system has been tested end-to-end, our offices may experience a variety of difficulties.

And what about the HIPAA privacy regulations, which were developed to protect patient confidentiality? At least one neurologist questions the overall effect. J. Michael Powers, MD, former President of the Arizona Medical Association, has been in practice in Phoenix for 26 years. He estimated he has invested $10,000 to ensure compliance, including the installation of glass partitions and hiring personnel to handle the additional administrative issues.

“The work flow of the office has slowed significantly,” Dr. Powers said. “It takes more time to check patients in and out, paper charts are larger, and storage is getting to be an even bigger problem due to extra forms and paperwork. It is frustrating that the ultimate effect is that things are less efficient and more expensive.”

As the new rules take effect this month (October), experts advise physicians to be prepared to make some adjustments in their administrative practices. Read the sidebar, Contingency Planning for Electronic Claims (page 48), for some helpful strategies.


The following Web sites offer guidance on HIPAA compliance: