Administrative Simplification: Modifications of Health Insurance Portability and Accountability Act of 1996 (HIPAA) National Council for Prescription Drug Programs (NCPDP) Retail Pharmacy Standards; and Adoption of Pharmacy Subrogation Standard
Proposed rule.
CFR Part: "45 CFR Part 162"
RIN Number: "RIN 0938-AT38"
Citation: "87 FR 67634"
Document Number: "CMS-0056-P"
Page Number: "67634"
"Proposed Rules"
Agency: "
SUMMARY: This proposed rule would adopt updated versions of the retail pharmacy standards for electronic transactions adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). These updated versions would be modifications to the currently adopted standards for the following retail pharmacy transactions: health care claims or equivalent encounter information; eligibility for a health plan; referral certification and authorization; and coordination of benefits. The proposed rule would also broaden the applicability of the Medicaid pharmacy subrogation transaction to all health plans. To that end, the rule would rename and revise the definition of the transaction and adopt an updated standard, which would be a modification for state Medicaid agencies and an initial standard for all other health plans.
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I. Executive Summary
A. Purpose
This rule proposes to adopt modifications to standards for electronic retail pharmacy transactions and a subrogation standard adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and to broaden the applicability of the HIPAA subrogation transaction.
a. Need for the Regulatory Action
The rule proposes to modify the currently adopted retail pharmacy standards and adopt a new standard. These proposals would provide improvements such as more robust data exchange, improved coordination of benefits, and expanded financial fields that would avoid the need to manually enter free text, split claims, or prepare and submit a paper Universal Claim Form.
But for a small modification to the requirement for the use of a particular data field, adopted in 2020, the presently adopted pharmacy standards were finalized in 2009. Since then, the
b.
Sections 1171 et seq. of the Social Security Act (the Act) are the legal authority for this regulatory action.
B. Summary of the Major Provisions
The provisions in this proposed ruled would adopt the NCPDP Telecommunication Standard Implementation Guide, Version F6 (Version F6) and equivalent NCPDP Batch Standard Implementation Guide, Version 15 (Version 15); and NCPDP Batch Standard Pharmacy Subrogation Implementation Guide, Version 10, for non-Medicaid health plans. These updated standards would replace the currently adopted NCPDP Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0) and the equivalent NCPDP Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2); and NCPDP Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, Release 0.
Industry stakeholders report that Version F6 would bring much needed upgrades over Version D.0, such as improvements to the information attached to controlled substance claims, including refinement to the quantity prescribed field. This change would enable refills to be distinguished from multiple dispensing events for a single fill, which would increase patient safety. Version F6 provides more specific fields to differentiate various types of fees, including taxes, regulatory fees, and medication administration fees. Finally, Version F6 increases the dollar amount field length and would simplify coverage under prescription benefits of new innovative drug therapies priced at, or in excess of,
The current Medicaid Subrogation Implementation Guide Version 3.0 (Version 3.0) was adopted to support federal and state requirements for state Medicaid agencies to seek reimbursement from the correct responsible health plan. However, industry stakeholders reported that there is a need to expand the use of the subrogation transaction beyond Medicaid agencies, and noted that the use of a subrogation standard that would apply to other payers would be a positive step for the industry. Whereas HIPAA regulations currently require only Medicaid agencies to use Version 3.0 in conducting the Medicaid pharmacy subrogation transaction, all health plans would be required to use the Pharmacy Subrogation Implementation Guide for Batch Standard, Version 10, to transmit pharmacy subrogation transactions, which would allow better tracking of subrogation efforts and results across all health plans, and support cost containment efforts.
Should these proposals be adopted as proposed, it would require covered entities to comply 24 months after the effective date of the final rule. Small health plans would have 36 months after the effective date of the final rule to comply.
C. Summary of Costs and Benefits
We estimate that the overall cost for pharmacies, pharmacy benefit plans, and chain drug stores to move to the updated versions of the pharmacy standards and the initial adoption of the pharmacy subrogation transaction standard would be approximately
II. Background
A.
This background discussion presents a history of statutory provisions and regulations that are relevant for purposes of this proposed rule.
Section 1172(a) of the Act states that "[a]ny standard adopted under [HIPAA] shall apply, in whole or in part, to . . . (1) A health plan. (2) A health care clearinghouse. (3) A health care provider who transmits any health information in electronic form in connection with a [HIPAA transaction]," which are collectively referred to as "covered entities." Generally, section 1172 of the Act requires any standard adopted under HIPAA to be developed, adopted, or modified by a standard setting organization (SSO). In adopting a standard, the Secretary must rely upon recommendations of the NCVHS, in consultation with the organizations referred to in section 1172(c)(3)(B) of the Act, and appropriate federal and state agencies and private organizations.
Section 1172(b) of the Act requires that a standard adopted under HIPAA be consistent with the objective of reducing the administrative costs of providing and paying for health care. The transaction standards adopted under HIPAA enable financial and administrative electronic data interchange (EDI) using a common structure, as opposed to the many varied, often proprietary, transaction formats on which industry had previously relied and that, due to lack of uniformity, engendered administrative burden. Section 1173(g)(1) of the Act, which was added by section 1104(b) of the Patient Protection and Affordable Care Act, further addresses the goal of uniformity by requiring the Secretary to adopt a single set of operating rules for each HIPAA transaction. These operating rules are required to be consensus-based and reflect the necessary business rules that affect health plans and health care providers and the manner in which they operate pursuant to HIPAA standards.
Section 1173(a) of the Act requires that the Secretary adopt standards for financial and administrative transactions, and data elements for those transactions, to enable health information to be exchanged electronically. The original HIPAA provisions require the Secretary to adopt standards for the following transactions: health claims or equivalent encounter information; health claims attachments; enrollment and disenrollment in a health plan; eligibility for a health plan; health care payment and remittance advice; health plan premium payments; first report of injury; health claim status; and referral certification and authorization. The Patient Protection and Affordable Care Act (Pub. L. 111-148) additionally required the Secretary to develop standards for electronic funds transfers transactions. Section 1173(a)(1)(B) of the Act requires the Secretary to adopt standards for any other financial and administrative transactions the Secretary determines appropriate. Section 1173(a)(4) of the Act requires that the standards and operating rules, to the extent feasible and appropriate: enable determination of an individual's eligibility and financial responsibility for specific services prior to or at the point of care; be comprehensive, requiring minimal augmentation by paper or other communications; provide for timely acknowledgment, response, and status reporting that supports a transparent claims and denial management process; describe all data elements in unambiguous terms, require that such data elements be required or conditioned upon set terms in other fields, and generally prohibit additional conditions; and reduce clerical burden on patients and providers.
Section 1174 of the Act requires the Secretary to review the adopted standards and adopt modifications to them, including additions to the standards, as appropriate, but not more frequently than once every 12 months, unless the Secretary determines that the modification is necessary in order to permit compliance with the standard.
Section 1175(a) of the Act prohibits health plans from refusing to conduct a transaction as a standard transaction. Section 1175(a)(3) of the Act also prohibits health plans from delaying the transaction or adversely affecting or attempting to adversely affect a person or the transaction itself on the grounds that the transaction is in standard format. Section 1175(b) of the Act provides for a compliance date not later than 24 months after the date on which an initial standard or implementation specification is adopted for all covered entities except small health plans, which must comply not later than 36 months after such adoption. If the Secretary adopts a modification to a HIPAA standard or implementation specification, the compliance date for the modification may not be earlier than 180 days following the date of the adoption of the modification. The Secretary must consider the time needed to comply due to the nature and extent of the modification when determining compliance dates, and may extend the time for compliance for small health plans if he deems it appropriate.
Sections 1176 and 1177 of the Act establish civil money penalties (CMPs) and criminal penalties to which covered entities may be subject for violations of HIPAA Administrative Simplification rules. HHS administers the CMPs under section 1176 of the Act and the
B. Prior Rulemaking
In the
Since initially adopting the HIPAA standards in the Transactions and Code Sets final rule, we have adopted a number of modifications to them. The most extensive modifications were adopted in a final rule titled "Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards" in the
In the Transactions and Code Sets final rule, we defined the terms "modification" and "maintenance." We explained that when a change is substantial enough to justify publication of a new version of an implementation specification, such change is considered a modification and must be adopted by the Secretary through regulation (65 FR 50322). Conversely, maintenance describes the activities necessary to support the use of a standard, including technical corrections to an implementation specification. Maintenance changes are typically corrections that are obvious to readers of the implementation guides, not controversial, and essential to implementation (68 FR 8388,
In a final rule titled "Administrative Simplification: Modification of the Requirements for the Use of Health Insurance Portability and Accountability Act of 1996 (HIPAA)
In that rulemaking, the Secretary noted that the NCPDP had issued a subsequent publication, the
C. Standards Adoption and Modification
The law generally requires at section 1172(c) that any standard adopted under HIPAA be developed, adopted, or modified by an SSO. Section 1171 of the Act defines an SSO as an SSO accredited by the
a. Designated Standards Maintenance Organizations (DSMO)
In the Transactions and Code Sets final rule, the Secretary adopted procedures to maintain and modify existing, and adopt new, HIPAA standards and established a new organization type called the "
b. Process for Adopting Initial Standards, Maintenance to Standards, and Modifications to Standards
In general, HIPAA requires the Secretary to adopt standards that have been developed by an SSO. The process for adopting a new standard or a modification to an existing standard is described in the Transactions and Code Sets final rule (65 FR 50344) and implemented at
Any entity may submit change requests with a documented business case to support its recommendation to the DSMO. The DSMO receives and manages those change requests, including reviewing them and notifying the SSO of its recommendation for approval or rejection. If the changes are recommended for approval, the DSMO also notifies the NCVHS and suggests that a recommendation for adoption be made to the Secretary.
The foregoing processes were followed with respect to the modifications and new standard proposed in this rule, and stemmed from the following change requests the NCPDP submitted to the DSMO: (1) DSMO request 1201 requested replacing the adopted NCPDP Telecommunication Standard Implementation Guide, Version D.0 and the equivalent Batch Standard Implementation Guide Version 1.2 with updated versions, the NCPDP Telecommunication Standard Implementation Guide, Version F2 and the equivalent Batch Standard Implementation Guide, Version 15; (2) DSMO request 1202 requested replacing the adopted NCPDP Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, for use by Medicaid agencies, with the NCPDP Batch Standard Subrogation Implementation Guide, Version 10, for use by all health plans; and (3) DSMO request 1208 updated DSMO request 1201 requested adopting an updated version of the NCPDP Telecommunication Standard Implementation Guide, Version F6 instead of Version F2.
c. NCVHS Recommendations
The NCVHS was established by statute in 1949; it serves as an advisory committee to the Secretary and is statutorily conferred a significant role in the Secretary's adoption and modification of HIPAA standards. In 2018, the NCVHS conducted two days of hearings seeking the input of health care providers, health plans, clearinghouses, vendors, and interested stakeholders regarding the NCPDP Telecommunication Standard, Version F2, as a potential replacement for NCPDP Version D.0, and the equivalent Batch Standard Implementation Guide, Version 15, as a potential replacement for Version 1.2. Testimony was also presented in support of replacing the NCPDP Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, with the Batch Standard Subrogation Implementation Guide, Version 10. In addition to the NCPDP, organizations submitting testimony included the
FOOTNOTE 1 https://ncvhs.hhs.gov/meetings/agenda-of-the-march-26-2018-hearing-on-ncpdp-standards-updates/. END FOOTNOTE
In a letter /2/ dated
FOOTNOTE 2 https://ncvhs.hhs.gov/wp-content/uploads/2018/08/Letter-to-Secretary-NCVHS-Recommendations-on-NCPDP-Pharmacy-Standards-Update.pdf. END FOOTNOTE
During the
In a letter dated
FOOTNOTE 3 https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf. END FOOTNOTE
III. Provisions of the Proposed Rule
A. Proposed Modifications to NCPDP Telecommunication Standard Implementation Guide Version F6 (Version F6) and Equivalent Batch Standard, Version 15 (Version 15) for Retail Pharmacy Transactions
1. Overview
Should they be finalized as proposed herein, the NCPDP Telecommunication Standard Implementation Guide, Version F6 (Version F6) and equivalent NCPDP Batch Standard Implementation Guide, Version 15 (Version 15) would replace the currently adopted NCPDP Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0) and the equivalent NCPDP Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2). Version F6 includes a number of changes from Version D.0 that alter the use or structure of data fields, insert new data segments, and add new functionality. Adopting Version F6 to replace Version D.0 would constitute a HIPAA modification.
We are proposing to adopt modifications to the current HIPAA retail pharmacy standards for the following transactions: health care claims or equivalent encounter information; eligibility for a health plan; referral certification and authorization; and coordination of benefits. Covered entities conducting the following HIPAA transactions would be required to use Version F6:
* Health care claims or equivalent encounter information (
++ Retail pharmacy drug claims.
++ Retail pharmacy supplies and professional claims.
* Eligibility for a health plan (
++ Retail pharmacy drugs.
* Referral certification and authorization (
++ Retail pharmacy drugs.
* Coordination of benefits (
In its
* Accommodation of very expensive drug therapies--Version F6 accommodates the expansion of financial fields needed for drug products priced at, or in excess of,
* More robust data exchange between long-term care providers and payers--Version F6 includes information needed for prior authorizations and enhancements to the drug utilization review (DUR) fields in the claim response transaction. This change can improve communication from the payer to the pharmacy, thus enabling the pharmacy to act more quickly to the benefit of the patient. /4/
FOOTNOTE 4 https://ncvhs.hhs.gov/wp-content/uploads/2018/05/Session-A-Schoettmer-Written-508.pdf. END FOOTNOTE
* Coordination of benefits (COB)--Version F6 includes new COB segment fields that would improve the identification of the previous payer and its program type, such as Medicare, Medicaid, workers compensation, or self-pay program, eliminating the need to use manual processes to identify this information. Pharmacy providers and payers that engage in COB must identify the previous payer and its program type in order to process the claim in accordance with applicable requirements, including requirements related to primary payment responsibility and payer order. For example, the new data segment fields would support compliance with the payer processing order with Medicaid as the payer of last resort, as well as prevent inappropriate access to pharmaceutical manufacturer copay coupons for drugs paid under federal programs, including Medicare Part D.
* Prescriber Validation--Medicare Part D program requirements to improve the validity of prescriber identifiers and improve program integrity controls have driven the need for new prescriber segment fields in Version F6 to enhance prescriber validation, such as the ability to capture a
* Controlled Substances Reporting--Version F6 makes a number of updates to controlled substances reporting that would permit the exchange of more information for better monitoring and documentation of compliance with state and federal requirements. Changes to the Claim Billing and Response Claim segments provide additional information to enhance patient safety controls for controlled substance prescriptions. For instance, Version F6 would enable claims processors, including, for example, pharmacy benefit managers (PBMs) and health plans that process their pharmacy claims in-house, to be informed of the exact prescription quantity and fill information, improve edits from the processor, and reduce confusion that can occur today and that sometimes requires patients to obtain a new prescription. Other specific enhancements include adding a Do Not Dispense Before Date field to support providers writing multiple, 1-month prescriptions for controlled substances. This field also supports compliance with requirements certain states have on the number of days a patient has to fill a controlled substance from the date written.
* Harmonization with Related Standards--Version F6 accommodates business needs to comply with other industry standard requirements, such as the ability to comply with ANSI expanded field-length requirements for the Issuer Identification Number (IIN), formerly known as the Bank Identification Number. The IIN is used to identify and route the transaction to the appropriate PBM. ANSI expanded the IIN field length to accommodate more unique numbers. Version F6 also accommodates FDA-required Unique Device Identifiers (UDI) that are now up to 40 characters in length, whereas Version D.0 only allows for 11 characters.
* Codification of Clinical and Patient Data--Pharmacy and payer workflows are enhanced in Version F6 by replacing many clinical and non-clinical free-text fields in Pharmacy Claim and Payer Claim Response segments with discrete codified fields. The computable data in discrete fields can then be utilized to automatically trigger workflows, such as those to help combat opioid misuse or to communicate relevant information to enhance patient safety.
* Plan Benefit Transparency--Interoperability between the payer and pharmacy is improved in Version F6 with the ability to exchange more actionable plan-specific information. New Payer Response fields enhance the ability to target plan benefit package detail associated with the specific patient. The availability of this information may avoid prior authorization interruptions, as well as allow pharmacists to have more informative discussions with patients and provide valuable information about alternative drug or therapy solutions, which can reduce delays in therapy and improve patient adherence.
2. Partial Fill of Controlled Substances--Quantity Prescribed (460-ET) Field
As discussed in section I. of this proposed rule, in the Modification of Version D.0 Requirements final rule (85 FR 4236), we adopted the requirements that the Quantity Prescribed (460-ET) field in Version D.0 must be treated as a required field where the transmission is for a Schedule II drug in any of the following three HIPAA transactions: (1) health care claims or equivalent encounter information; (2) referral certification and authorization; and (3) coordination of benefits. Version F6 requires the use of the 460-ET field for all controlled substances. Therefore, we would no longer need to explicitly require its situational use, and we would revise the regulation text at [Sec.]
3. Batch Standard, Version 15 (Version 15) for Retail Pharmacy Transactions
Batch mode can be used for processing large volumes of transactions. For example, a retail pharmacy that has several locations can send one batch mode transaction, containing multiple claims collected over time from the various locations, to an entity with which it has contracted, or otherwise to a centralized entity, that will route each claim in the transaction to the appropriate payer. The NCPDP Batch Standard, Version 15, better supports retail pharmacy batch mode transactions than the currently adopted Version 1.2 because it was developed in coordination with F6 and includes the same benefits as Version F6, but in batch mode, including the updates that improve coordination of benefits processes, prescriber validation fields, plan benefit transparency, codification of clinical and patient data, harmonization with related standards, and controlled substance reporting.
In sum, we believe adopting Version F6 and its equivalent Batch Standard, Version 15 to replace Version D.0 and Version 1.2 would result in greater interoperability for entities exchanging prescription information, improve patient care, provide better data for drug utilization monitoring, and reduce provider burden. Because Version F6 and Version 15 would better support the business needs of the industry than Version D.0 and Version 1.2, we propose to adopt them as the standards for the following retail pharmacy transactions: health care claims or equivalent encounter information; eligibility for a health plan; referral certification and authorization; and coordination of benefits. We would revise [Sec.]
We solicit comments regarding our proposal to adopt Version F6 to replace Version D.0 and Version 15 to replace Version 1.2.
B. Proposed Modification of the Pharmacy Subrogation Transaction Standard for State Medicaid Agencies and Initial Adoption of the Pharmacy Subrogation Standard for Non-Medicaid Health Plans
In the 2009 Modifications final rule, we adopted the Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, Release 0 (Version 3.0) as the standard for the Medicaid pharmacy subrogation transaction. In that rule, we discussed that state Medicaid agencies sometimes pay claims for which a third party may be legally responsible, and where the state is required to seek recovery. This can occur when the Medicaid agency is not aware of the existence of other coverage, though there are also specific circumstances in which states are required by federal law to pay claims and then seek reimbursement afterward. For the full discussion, refer to 74 FR 3296.
1. Proposed Modification to the Definition of Medicaid Subrogation Transaction
Because we are proposing to broaden the scope of the subrogation transaction to apply to all health plans, not just state Medicaid agencies, we are proposing to revise the definition of the transaction. The Medicaid pharmacy subrogation transaction is defined at
There are a few notable differences between the current and proposed transaction definitions. First, the current definition defines the transaction such that it only applies to state Medicaid agencies, in their role as health plans, as the sender of the transaction. Because we are proposing to broaden the scope of the transaction to apply to all health plans, not just state Medicaid agencies, the Pharmacy subrogation transaction definition would specify that the sender of the transaction is "a health plan that paid the claim" instead of a "Medicaid agency." In addition, the current definition identifies that the sender of the transaction is requesting "reimbursement for a pharmacy claim the state has paid on behalf of a Medicaid recipient." To align this aspect of the current definition with the broadened scope that would apply to all health plans, the proposed definition identifies that the sender health plan has paid a claim "for which it did not have payment responsibility."
Second, the current definition identifies a pharmacy subrogation transaction as the "transmission of a claim." The proposed definition would specify that a pharmacy subrogation transaction is the transmission of a "request for reimbursement of a pharmacy claim." We use the term "claim" in a specific way with regard to the HIPAA transaction defined at 45 CFR 162.1101 to describe a provider's request to obtain payment from a health plan. We never intended that the subrogation transaction be defined as a "claim" in the strict sense of the word. We believe replacing "claim" with "request for reimbursement" would clarify that the purpose of a pharmacy subrogation transaction is to transmit request to be reimbursed for a claim rather than to transmit a claim.
We are proposing that the current definition of the Medicaid pharmacy subrogation transaction would remain in the regulatory text at
2. Proposed Initial Adoption of the NCPDP Batch Standard Pharmacy Subrogation Implementation Guide, Version 10, for Non-Medicaid Health Plans
As discussed previously, the current HIPAA standard, Version 3.0, for the Medicaid pharmacy subrogation transaction, only applies to state Medicaid agencies seeking reimbursement from health plans responsible for paying pharmacy claims. The standard does not address business needs for other payers, such as Medicare Part D, state assistance programs, or private health plans that would seek similar reimbursement. Section 1173(a)(2) of the Act lists financial and administrative transactions for which the Secretary is required to adopt standards. The Pharmacy subrogation transaction is not a named transaction in section 1173(a)(2) of the Act, but section 1172(a)(1)(B) of the Act authorizes the Secretary to adopt standards for other financial and administrative transactions as the Secretary determines appropriate, consistent with the goals of improving the operation of the health care system and reducing administrative costs. Adopting a standard for a broader subrogation transaction that would apply to all health plans, not just Medicaid agencies, would facilitate the efficiency and effectiveness of data exchange and transaction processes for all payers involved in post-payment of pharmacy claims and would support greater payment accuracy across the industry.
At the NCVHS
FOOTNOTE 5 https://ncvhs.hhs.gov/meetings/agenda-of-the-march-26-2018-hearing-on-ncpdp-standards-updates/. END FOOTNOTE
3. Proposed Modification of the Pharmacy Subrogation Transaction Standard for State Medicaid Agencies
We are proposing to replace the NCPDP Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, Release 0, with the NCPDP Batch Standard Pharmacy Subrogation Implementation Guide, Version 10 as the standard for Pharmacy subrogation transactions at
* The Medicaid Agency Number definition is changed to accommodate use of the field by Medicaid and non-Medicaid health plans.
* The Medicaid Subrogation Internal Control Number/Transaction Control Number field, which is designated as "not used" in Version 3.0. is replaced with the required use of the Reconciliation ID field.
* The Medicaid Paid Amount field, which is designated as "not used" in Version 3.0, is replaced with the required use of the Subrogation Amount Requested field.
* The Medicaid ID Number field, which is a required field in Version 3.0, is changed to a situational field that is only required when one of the health plans involved in the transaction is a Medicaid agency.
While state Medicaid agencies would be required to implement these changes in order to comply with Version 10, the changes would be de minimis and state Medicaid agencies' use of the modified standard would essentially be the same as their use of the current standard.
We solicit comments on our proposal related to the adoption of Version 10.
C. Proposed Compliance and Effective Dates
1. Proposed Compliance Date for Version F6 and Version 15
Section 1175(b)(2) of the Act addresses the timeframe for compliance with modified standards. The section provides that the Secretary must set the compliance date for a modification at such time as the Secretary determines appropriate, taking into account the time needed to comply due to the nature and extent of the modification. However, the compliance date may not be sooner than 180 days after the effective date of the final rule. In the discussion later in this rule, we explain why we are proposing that all covered entities would need to be in compliance with Version F6 and its equivalent Batch Standard Version 15 for retail pharmacy transactions 24 months after the effective date of the final rule, which we would reflect in [Sec.]
In its
FOOTNOTE 6 https://ncvhs.hhs.gov/wp-content/uploads/20s20/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf. NCVHS
* Provide a 3-year pre-implementation window following publication of the final rule, allowing (but not requiring) industry use beginning at the end of the three years.
* Allow both Versions D.0 and F6 to be used for an 8-month period after the 3-year pre-implementation window, which the NCVHS suggested would enable an effective live-testing and transition period.
* Require full compliance by the end of the third year, that is, exclusive use of Version F6, after the 8-month period.
After carefully considering the NCVHS's recommended implementation timelines and dates, for the following reasons we are not proposing a 3-year pre-implementation compliance window or an 8-month transition period. While industry feedback on which the NCVHS relied to make its recommendations did include some discussion on specific changes necessary to implement Version F6 (for example, the expansion of the financial fields), the majority of feedback was not specific to Version F6, but, rather, concerned general challenges that would be associated with implementing any standard modification. For example, feedback related to concerns about general budget constraints, as well as compliance dates that conflict with other pharmacy industry priorities such as the immunization season or times of year where prescription benefits plans typically experience heavy new member enrollment. In addition, several industry stakeholders, including the NCPDP, stated that they were not aware of any significant implementation barriers specific to Version F6. In its
FOOTNOTE 7 https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf. END FOOTNOTE
FOOTNOTE 8 https://ncvhs.hhs.gov/wp-content/uploads/2018/08/Letter-to-Secretary-NCVHS-Recommendations-on-NCPDP-Pharmacy-Standards-Update.pdf. END FOOTNOTE
Additionally, the proposed modification, to move from Version D.0 to Version F6, pertains only to retail pharmacy transactions. That is different in scope, for example, from the modifications finalized in the 2009 Modifications final rule (74 FR 3296), which affected all of the then-current HIPAA transactions. There, we implemented an extended compliance date for the modified standards in response to the numerous comments advocating for it given the extensive changes in Versions 5010 and D.0 from Versions 4010 and 5.1, which commenters asserted necessitated a coordinated implementation and testing schedule. Given that the scope of the modification in this proposed rule is limited to just retail pharmacy transactions, we believe the industry has the capability of implementing the modification within a 24-month period after the effective date of the final rule.
Further, we believe the benefits that would be derived from implementing Version F6 and Version 15 (discussed in section III.A.1. of this proposed rule) as soon as possible are significant. Those benefits include mitigating existing inefficient work-arounds, allowing for more robust data exchanges between long-term care providers and payers, improving coordination of benefits information, improving controlled substances reporting, codifying clinical and patient data, harmonizing with related standards, and improving plan benefit transparency. We solicit industry comment on the proposed 24-month compliance date for F6 and Version 15, including any barriers specific to compliance with Version F6 and Version 15 that would require additional time for compliance.
2. Proposed Compliance Dates for the Batch Standard Subrogation Implementation Guide, Version 10 (Version 10),
As discussed previously, we are proposing to adopt a Pharmacy subrogation transaction standard that would apply to all health plans, not just state Medicaid agencies. As we discuss in section III.B. of this proposed rule, Version 10 would be a modification for state Medicaid agencies, which would be moving to Version 10 from Version 3.0. For all other health plans, Version 10 would be an initial standard. As previously noted, section 1175(b)(2) of the Act addresses the timeframe for compliance with modified standards. That section requires the Secretary to set the compliance date for a modification at such time as the Secretary determines appropriate, taking into account the time needed to comply due to the nature and extent of the modification, but no sooner than 180 days after the effective date of the final rule in which we adopt that modification. Section 1175(b)(1) of the Act requires that the compliance date for initial standards--which Version 10 would be for covered entities that are not state Medicaid agencies--is no later than 24 months after the date of adoption for all covered entities, except small health plans, which must comply no later than 36 months after adoption.
We are proposing to align the compliance dates for state Medicaid agencies and all other health plans (except small health plans) to comply with Version 10. Should we not to do this, some health plans would need to use Version 10 at the same time as state Medicaid agencies in order to conduct Pharmacy subrogation transactions with those state Medicaid agencies, while other health plans could use different standards. Aligning the compliance timeframes would reduce confusion and administrative burden that would arise were there concurrent standards in effect. Thus, we propose to require all health plans (except small health plans) to comply at the same time. The alignment of compliance dates also makes it more feasible for state Medicaid agencies and non-Medicaid health plans to invest in system upgrades to accommodate one specific standard rather than divide resources to maintain two concurrent transaction standards. Therefore, we propose to revise
Small health plans, as defined in 45 CFR 160.103, are those health plans with annual receipts of
We solicit industry and other stakeholder comments on our proposed compliance dates.
D. Proposed Incorporation by Reference
This proposed rule proposes to incorporate by reference: (1) the Telecommunication Standard Implementation Guide Version F6 (Version F6),
The Telecommunication Standard Implementation Guide, Version 6 contains the formats, billing units, and operating rules used for real-time pharmacy claims submission. The equivalent Batch Standard Implementation Guide, Version 15, provides instructions on the batch file submission standard that is to be used between pharmacies and processors or among pharmacies and processors. Both implementation guides contain the data dictionary, which provides a full reference to fields and values used in telecommunication and its equivalent batch standard.
The Batch Subrogation Implementation Guide, Version 10, is intended to meet business needs when a health plan has paid a claim that is subsequently determined to be the responsibility of another health plan within the pharmacy services sector. This guide provides practical guidelines for software developers throughout the industry as they begin to implement the subrogation transaction, and to ensure a consistent implementation throughout the pharmacy industry.
The materials we propose to incorporate by reference are available to interested parties and can be inspected at the
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the
* The need for the information collection and its usefulness in carrying out the proper functions of our agency.
* The accuracy of our estimate of the information collection burden.
* The quality, utility, and clarity of the information to be collected.
* Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
A. Submission of Paperwork Reduction Act (PRA)-Related Comments
In this proposed rule we are soliciting public comment on each of these issues for the following sections of the rule that contain proposed "collection of information" requirements as defined under 5 CFR 1320.3(c) of the PRA's implementing regulations. If regulations impose administrative costs on reviewers, such as the time needed to read and interpret this proposed rule, then we should estimate the cost associated with regulatory review. We estimate there are currently 104 affected entities (which also includes PBMs and vendors), (416 reviewers total). We assume each entity will have four designated staff members who will review the entire proposed rule. The particular staff members involved in this review will vary from entity to entity, but will generally consist of lawyers responsible for compliance activities and individuals familiar with the NCPDP standards at the level of a computer and information systems manager.
In this proposed rule we are soliciting public comment on each of these issues for the following sections of the rule that contain proposed "collection of information" requirements as defined under 5 CFR 1320.3(c) of the PRA's implementing regulations. If regulations impose administrative costs on reviewers, such as the time needed to read and interpret this proposed, then we should estimate the cost associated with regulatory review. We estimate there are 104 affected entities (which also includes PBMs and vendors). We assume each entity will have four designated staff member who would review the entire rule, for a total of 416 reviewers. The particular staff involved in this review will vary from entity to entity, but will generally consist individuals familiar with the NCPDP standards at the level of a computer and information systems manager and lawyers responsible for compliance activities.
Using the wage information from the
We are also assuming that an entity would have two lawyers reviewing this proposed rule. Using the wage information from the BLS for lawyers (code 23-1011), we estimate that their cost of reviewing this proposed rule is
We solicit comments on our assumptions and calculations.
B. Modification to Retail Pharmacy Standards (Information Collection Requirement (ICR))
The following requirements and burden associated with the information collection requirements contained in [Sec.]
OMB has determined that the establishment of standards for electronic transactions under HIPAA (which mandate that the private sector disclose information and do so in a particular format) constitutes an agency-sponsored third-party disclosure as defined under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). (See 65 FR 50350 (
Should our assumptions be incorrect, this information collection request will be revised and reinstated to incorporate any proposed additional transaction standards and proposed modifications to transaction standards that were previously covered in the PRA package associated with OMB approval number 0938-0866.
V. Regulatory Impact Analysis
A. Statement of Need
This rule proposes modifications and an initial adoption to standards for electronic retail pharmacy transactions adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Under HIPAA, the
On
B. Overall Impact
We have examined the proposed impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a "significant regulatory action" as an action that is likely to result in a rule: (1) having an annual effect on the economy of
A Regulatory Impact Analysis (RIA) must be prepared for major rules with economically significant effects (
We have prepared an RIA that, to the best of our ability, presents the costs and benefits of this proposed rulemaking. We anticipate that the adoption of these new versions of the retail pharmacy standard would result in costs that would be outweighed by the benefits.
C. Limitations of the Analysis
1. Data Sources
This portion of the analysis is based in part on industry research conducted in 2019 and 2020 by the
In conversations with industry stakeholders, we have been informed that entity-specific financial impact analyses of modifications to HIPAA transaction standards are not initiated until formal HHS rulemaking has been initiated, since proposed timing is a critical variable in cost development. For instance, in public comments submitted to the NCVHS, /9/ the NCPDP urged that a timeline be communicated as soon as possible to allow stakeholders to begin budgeting, planning, development work, and coordinating the necessary trading partner agreements. Another commenter noted that corporate information technology (IT) budgets and timelines are dependent on the rulemaking process. We further understand that stakeholders likely would choose to implement only components of standards relevant to their business use cases, such that irrelevant components (and any additional expense they might require) may simply be disregarded.
FOOTNOTE 9 NCVHS Subcommittee on Standards Comments Received in Response to Request for Comment Federal Register Notice 85 FR 11375. https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf. END FOOTNOTE
In lieu of financial cost estimates, industry stakeholders have provided preliminary assessments that the conversion to Version F6 would entail between two to four times the level of effort as the previous HIPAA pharmacy standard conversion from Version 5.1 to Version D.0. But, we do not have reliable baseline data on the actual costs of that previous conversion to which to apply the multipliers because we: (1) are not aware of any available information on the final costs of the conversion to Version D.0; (2) have been told that stakeholders do not track expenditures in this way; and (3) our previous regulatory estimates combined the Version D.0 implementation with the concurrent X12 Version 5010 conversion, and so would be ambiguous at best. Moreover, as discussed in connection with comments received on the 2009 Modifications proposed rule generally, many commenters mentioned underestimated costs or overestimated benefits of transitioning to the new versions, but few provided substantive data to improve the regulatory estimates. /10/ Therefore, we use certain estimates provided in public comments reported in the 2009 Modifications final rule as the starting point for our cost estimates. Our general approach is to develop estimates of the true baseline D.0 conversion costs and then apply a Version F6 multiplier.
FOOTNOTE 10 74 FR 3314 (
With respect to benefits, we are not aware of any available information or testimony specifically quantifying cost savings or other benefits, although there is ample testimony supporting the business need and benefits of the proposed changes.
2. Interpreting Cost
Standard economics recognizes cost in several different ways. Marginal cost describes the resources needed to produce one additional unit of a good. Rule-induced costs may include new inputs of labor, materials, capital, etc.; but exclude sunk costs (already invested). The recommended methodology for a RIA considers government intervention to impose costs. /11/ It assumes that stakeholders must make new expenditures to change their business systems. Under this interpretation, pharmacies and vendors would hire coders and other software development and testing specialists or consultants to modify their production code to accommodate Version F6. This one-time, out-of-pocket expenditure would constitute a cost attributable to the proposed rule. Costs to transmit transactions using the F6 standard after business systems have been modified to implement the proposed standard, as well as costs to maintain those systems for compliance with the standard, were not factored into this RIA. These ongoing costs are currently incurred by affected entities that are required to use the current standard and are attributable to conducting electronic transactions in general. Therefore, in this RIA, we do not anticipate any costs attributable to the proposed rule after completion of the proposed 2-year compliance timeframe. We solicit comment, including industry comment, on our cost interpretations.
FOOTNOTE 11 aspe.hhs.gov/pdf-report/guidelines-regulatory-impact-analysis. END FOOTNOTE
Opportunity cost refers to the benefits forgone by choosing one course of action instead of an alternative. A business that invests in venture X loses the opportunity to use those same funds for venture Y. Based on oral and written NCVHS testimony by the retail pharmacy industry and pharmacy management system vendors, it was suggested that their software development process for a HIPAA standard conversion would represent an opportunity cost. For instance, some large pharmacy chains maintain permanent technical staff to make day-to-day changes in their pharmacy management systems and management adjusts staff assignments according to the organization's needs. HIPAA standard transaction version changes like the proposed Version F6 implementation, would, we believe, shift priorities for these staff, potentially delaying other improvements or projects. In this scenario, the opportunity cost consists of the time-value of delayed projects. Other pharmacy firms have an ongoing relationship with their pharmacy management software vendors. The purchaser generally obtains a hardware and software package with an ongoing agreement that includes periodic payments for maintenance, updates, upgrades, training, installation, financing, etc. Thus, the software is expected to evolve, rather than being just a one-time installation. The balance between upfront charges and monthly maintenance fees more closely resembles a multiyear lease than the one-time sale of an off-the-shelf application to a consumer. Thus, the parties often contemplate an ongoing supplier relationship in which maintenance and upgrades represent an opportunity cost.
Average cost equals total cost divided by the total units of production. Average costs for goods and labor come from industry surveys and public reports. Researchers can determine average cost relatively easily, whereas marginal cost would require complex analyses of a particular industry, firm, or production volume. This RIA uses average costs because of their availability and verifiability.
However, the proposed changes to adopt Version F6 and Version 10 generally do not require new out-of-pocket expenditures, so average cost may not describe the realities of actual budget impacts to firms. We seek comment on these assumptions.
D. Anticipated Effects
The objective of this RIA is to summarize the costs and benefits of the following proposals:
* Adopting modified real time and batch standards for retail pharmacy transactions for health care claims or equivalent encounter information; eligibility for a health plan; referral certification and authorization; and coordination of benefits, transitioning from Telecommunications Standard Version D.0 to Version F6.
* Adopting a new pharmacy subrogation transaction standard, replacing the Batch Standard Medicaid Subrogation Implementation Guide, Version 3, with the Batch Standard Subrogation Implementation Guide, Version 10, applicable to all prescription drug payers.
Consistent with statutory and regulatory requirements, the NCVHS recommends HIPAA standards, which are developed by Standard Setting Organizations (SSOs), in this case the NCPDP, through an extensive consensus-driven process that is open to all interested stakeholders. The standards development process involves direct participatory input from representatives of the industry stakeholders required to utilize the transactions, including pharmacies (chain and independent), health plans and other payers, PBMs, and other vendors that support related services. We are not aware of any opposition to moving forward with these updates.
We are proposing a 2-year compliance date following the effective date of the final rule. For purposes of this analysis, we assume a 2-year implementation period. The remainder of this section provides details supporting the cost-benefit analysis for each of the proposals referenced previously.
Table 1 is the compilation of the estimated costs for all of the standards being proposed in this rule. To allocate costs over the proposed 2-year implementation period, we assumed a 50-50 percent allocation of IT expenses across the 2-year implementation period and all training expenses in the second year. However, this is just an informed guess, as we did not locate any source information on this assumption. We note again that we are not aware of any data or testimony describing quantifiable benefits or cost savings attributable to these proposals, and have solicited comments on whether there are significant quantifiable benefits or cost savings that should be included in our analysis.
See illustration in Original Document.
1. Adoption of Version F6 (Including Equivalent Batch Standard Version 15)
The objective of this portion of the RIA is to summarize the costs and benefits of implementing Version F6. We invite the industry or other interested entities or individuals to comment on all of our assumptions and projected cost estimates, and to provide current data to support alternative theories or viewpoints throughout.
a. Affected Entities
Almost all pharmacies and all intermediaries that transfer and process pharmacy claim-related information already use Version D.0 for eligibility verification, claim and service billing, prior authorization, predetermination of benefits, and information reporting transaction exchanges (the latter two categories are not HIPAA-adopted pharmacy standards). Pharmacies utilize technology referred to as pharmacy management systems that encode Version D.0 to submit these transactions for reimbursement on behalf of patients who have prescription drug benefits through health and/or drug plan insurance coverage (health plans). These submissions are generally routed through two intermediaries: a telecommunication switching vendor (switch) and a specialized third-party administrator for the health plan, generally a PBM. Billing transactions may occur in one of two modes: real time or batch. Pharmacy claims are generally transacted in real time as a prerequisite to dispensing prescription medications. For instance, Medicare Part D rules generally require each claim to be submitted online in real time to permit accumulator balances to be updated after every claim so cost sharing on each subsequent claim will accurately reflect changes in benefit phases. The equivalent batch standard enables transmission of non-real-time transactions. For instance, a batch submission could be sent following a period when real-time response systems were unavailable or following a retrospective change in coverage. Technically, the batch standard uses the same syntax, formatting, data set, and rules as the telecommunications standard, "wraps" the telecommunication standard around a detail record, and then adds a batch header and trailer to form a batch file. The claims processor may then process the batch file either within a real-time system or in a batch-scheduling environment.
Based on the 2017 Census business data, pharmacies have a bimodal size distribution. About 99 percent of firms have a single location, predominantly the traditional independent, owner-operated storefront and the remainder of fewer than 200 large firms operate an average of approximately 150 establishments (locations) each. According to other industry data, the largest five chain pharmacy firms represent over 28,000 locations, and the two largest chains each exceed 9,000 locations. /12/ However, the Census business data's Pharmacy and
FOOTNOTE 12 2019 "
Pharmacies are typically classified by ownership as either chain or independents. Health data analytics company IQVIA estimated /13/ in 2019 that there were 88,181 pharmacies, of which 55 percent (48,196) were part of chains and 45 percent (39,985) were independents. Open-door retail pharmacies, which provide access to the general public, comprised the clear majority of pharmacy facility types at 91 percent (80,057). The five largest pharmacy chains owned about 35 percent (close to 28,000) of retail locations. The remaining 8 percent of facility types included closed-door pharmacies, which provide pharmaceutical care to a defined or exclusive group of patients because they are treated or have an affiliation with a special entity such as a long-term-care facility, as well as central fill, compounding, internet, mail service, and hospital-based nuclear and outpatient pharmacies. Most of these pharmacy types may be included in Medicare Part D sponsor networks. We are aware that the largest pharmacy chains are increasingly likely to operate multiple pharmacy business segments (channels), such as retail, mail, specialty, and long-term care. However, we are not aware of information that would allow us to treat these non-open-door retail pharmacy firm types any more granularly than our usual chain and independent categories. We welcome comments on whether there are meaningful distinctions in cost structures that should be considered, as well as on any publicly available data sources to assist in quantifying entities in these segments and any potential differential impacts.
FOOTNOTE 13 2019 "
As noted, pharmacies utilize pharmacy management systems to encode Version D.0 for claim-related data exchanges via telecommunication switches. Pharmacies that do not internally develop and maintain their pharmacy management systems will contract with technology vendors for these services. Based in part on communications with industry representatives, such as the
FOOTNOTE 14 NCVHS Hearing on NCPDP Standards and Updates--
Pharmacies also contract with telecommunication switches for transaction routing. In addition to routing, switches validate the format of pharmacy transactions prior to transmission to the payer and then check the payer response to make sure it is formatted correctly for the pharmacy to interpret. Based on conversations with industry representatives, we believe there are three telecommunication switches in this segment of the market.
Some healthcare providers that dispense medications directly to their patients, known as dispensing physicians, may use Version D.0 to submit these outpatient prescription drug claims on behalf of their patients to health plans via health plans' PBMs. However, we do not believe this practice to be widespread and therefore do not account for it in this RIA.
Health plans generally provide some coverage for outpatient prescription drugs, but do not generally contract and transact with pharmacies directly. Instead, health plans typically contract with PBM firms to receive and process pharmacy claim transactions for their enrollees. We assume even the relatively few health plans that directly purchase prescription drugs for their own pharmacies utilize PBMs, either owned or contracted, to manage billing for drugs and pharmacy supplies. Likewise, the
As previously noted, in 2017 there were 745 Direct Health and Medical Insurance Carriers and 27
FOOTNOTE 15 NCVHS Hearing on NCPDP Standards and Updates--
FOOTNOTE 16 CVS, Express Scripts, and the Evolution of the PBM Business Model. Drug Channels.
b. Costs
(1) Chain Pharmacies
Pharmacies either internally develop or externally purchase pharmacy management information systems to bill and communicate with PBMs. Based on public comments related to Version F6 submitted to the NCHVS, available at https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf, we are aware that some chain pharmacy firms (with as many as 1,800 pharmacies) utilize systems managed by third-party technology vendors. For purposes of this RIA, we assume that, generally, the largest chain pharmacy firms internally develop and manage their own pharmacy management system upgrades and transaction standard conversion development, implementation, testing, and training. We further assume that these costs are generally incurred at the firm level. Based on the 2019 IQVIA data, the top 25 pharmacy firms accounted for 38,464 stores. If these top 25 firms represented chain-owned entities, they represented almost 80 percent (38,464/48,196) of total chain pharmacy stores in 2019. We assume these 25 firms, as well as the
To determine whether our assumptions were reasonable, we met with representatives from IHS. Based on those conversations, we understand that IHS, tribal, and urban (
In the 2017 Census business data there were 190 firms classified as Pharmacies and Drug Stores with more than 500 employees, representing 27,123 establishments. This classification does not include grocery store pharmacies, which were elsewhere reported to number 9,026 in 2017, and to be decreasingly offered by smaller grocery chains in 2020. /17/ The 2017 Census business data includes 72 firms classified as
FOOTNOTE 17 The Pharmacist Is Out: Supermarkets Close Pharmacy Counters: Regional grocery chains get squeezed by consolidation, shrinking profits in prescription drugs. By
FOOTNOTE 18 The Top 15 U.S. Pharmacies of 2019:
Based on conversations with a variety of industry representatives, we understand that these larger firms retain the technical staff and/or contractors that would undertake the Version F6 conversion efforts as an ongoing business expense. Consequently, in practice the cost estimates developed in this section do not represent new additional expenditures for these firms, but rather opportunity costs for these resources that would otherwise be deployed on other maintenance or enhancement projects.
As previously noted, industry estimates of the costs of a conversion from current Version D.0 to Version F6 have been in the form of multiples of the costs for the Version 5.1 to Version D.0 conversion. As a technical matter, we assume these informal multiples account for inflation. In a presentation to the NCVHS, /19/ the NCPDP indicated that stakeholders' input indicated the level of effort and cost for Version F6 to be at least double that of implementing NCPDP D.0. In public comments to the NCVHS, a chain pharmacy association stated that implementation costs would vary significantly among different pharmacy chains based on size, scope of services provided, and business models, and that hardware, software, and maintenance costs allocated specifically to Version F6 are estimated to be in the tens of millions of dollars. One of the largest pharmacy chains estimated costs associated with Version F6 implementation to be three to four times higher than the implementation of Version D.0, also in the tens of millions of dollars. This commenter explained that much of these higher costs is related to the expanded dollar fields, the structure of new fields that require database expansion, and updates to many integrated systems. Another of the largest pharmacy chains with integrated PBM functions offered preliminary estimates in the range of two to three times greater than the Version D.0 conversion, and noted that the expanded dollar fields would impact all of the following systems: point of service claim adjudication, all associated financial systems, internal and external reporting programs, help desk programs, member/client portals, and integrated data feeds. This same stakeholder stated that the size of the transactions has also increased considerably due to the inclusion of new segments and repeating fields and would require new database storage hardware.
FOOTNOTE 19 NCVHS Full Committee Hearing,
The 2009 Modifications final rule discussed receiving estimates of
FOOTNOTE 20 74 FR 3319 (
We believe that Version F6 conversion costs for chain pharmacies would be differentiated in three general categories: (1) the largest firms operating in multiple pharmacy channels; (2) other midsize retail pharmacy chain firms operating primarily in either the open-door retail and/or another single pharmacy channel; and (3) smaller chain pharmacy firms. Starting with the point estimates discussed in the Version D.0 rulemaking and making some upward adjustments to address potential underestimation, we estimate that--
* The two largest chain pharmacy firms incurred a baseline (D.0) cost of
* The 23 midsize chain pharmacy firms, the
* The 237 smaller chain pharmacy firms incurred a baseline cost of
Based on the 2x-4x multiplier estimates described previously, we assume a midpoint 3x multiplier for the estimated 25 larger chain pharmacies and the
* Two chain pharmacy firms would incur all internal Version F6 conversion costs of (3*2 million), or
* The 25 chain pharmacy-sized firms (23 midsized chains, the
Based on a CAMH environmental scan conducted with industry representatives, we understand that most pharmacy firms rely on their pharmacy management system vendor for conversion planning, development, implementation, testing, and initial (primary) training. CAMH suggested that pharmacies would likely need to make some investments in staff training, but would likely not have an increase in direct upfront software costs because system software updates are usually factored into the ongoing contractual fees for operating and maintenance costs of their pharmacy systems. Thus, we understand that HIPAA modification efforts are generally already priced into vendor maintenance agreements and fee structures, and we assume there would be no increases specifically due to the Version F6 conversion in these ongoing costs to pharmacies. We assume that primary training is developed or purchased at the firm level and may deploy at the establishment level in secondary employee in-service training slots. We assume that this training does not scale along with the conversion costs, but rather with the size of the organization in terms of locations and employees. As summarized in Table 2, using the generally uncontested estimates from the Version D.0 rulemaking adjusted for inflation, /21/ we estimate that: 237 smaller chain pharmacy firms and 51 urban and tribal entity pharmacies (a total of 288 pharmacies) would incur Version F6 conversion training costs of (
FOOTNOTE 21 Based on inflation from
We invite public comments on our general assumptions and request any additional data that would help us determine more accurately the impact on the pricing structures of entities affected by this proposed rule.
See illustration in Original Document.
(2) Independent Pharmacies
As noted previously, the 2019 IQVIA data included 88,181 pharmacies, of which 45 percent (39,985) were independently owned. We recognize that this classification is not identical to the use of the term independent community pharmacy; however, we are not aware of publicly available data to help us segment this market further. We know from Census business data that in 2017 there were 19,044 pharmacy firms with fewer than 500 employees, representing 20,901 establishments. Just as we assume that the firms with more than 500 employees represent chains, we assume that those with fewer than 500 employees represent independently owned open- or closed-door pharmacies.
We understand that these smaller pharmacies predominantly rely on their pharmacy system vendors for upgrades, including HIPAA standard version conversion planning, development, implementation, testing, and primary training. In return, they pay ongoing maintenance and transaction fees. As discussed previously with respect to some chain pharmacies, we understand that Version F6 conversion efforts would already be priced into existing maintenance agreements and fee structures. Therefore, we do not assume increases in these ongoing costs to independent pharmacies as the result of the Version F6 conversion, and we estimate pharmacy direct costs would generally be comprised of training and other miscellaneous expenses. As with chain pharmacies, we assume that primary training is developed or purchased at the firm level and deployed at the establishment level in secondary employee in-service training slots. We further assume that this training does not scale along with the conversion costs, but, rather, with the size of the organization in terms of locations and employees. For this reason, we assume that the few system users in very small pharmacies would be trained directly by the pharmacy management system vendor, and no secondary training costs would be required for such small firms.
FOOTNOTE 22 74 FR 3317 (
FOOTNOTE 23 Based on inflation from
As noted previously, a commenter on the 2009 Modification proposed rule 22 that self-identified as neither a chain nor an independent pharmacy estimated implementation costs of both Version 5010 and Version D.0 standards of
See illustration in Original Document.
(3) Health Plans and PBMs
We anticipate that health plans should see minimal changes in their operations and workflows between Version D.0 and Version F6. Health plans contract with processors/PBMs for conducting online eligibility verification, claim and service billing, predetermination of benefits, prior authorization, and information reporting transaction exchange types and transaction record storage. While health plans (or their other vendors) supply PBMs with eligibility records and receive data from PBMs containing data derived from claims, they are not typically parties to the exchange of the HIPAA pharmacy transactions. Based on NCVHS testimony with stakeholders and in development of an environmental scan on the impact of this update to the pharmacy standards, we understand that HIPAA standard conversion costs are already priced into ongoing contractual payment arrangements between health plans and PBMs and would not be increased specifically in response to the Version F6 conversion.
All PBMs would experience some impacts from the Version F6 conversion, involving IT systems planning and analysis, development, and external testing with switches and trading partners. One PBM commented to the NCVHS that the most significant impact would be the expansion of the financial fields to accommodate very expensive drug products with charges greater than
PBMs may manage prescription drug coverage for a variety of lines of business, including commercial health plans, self-insured employer plans, union plans, Medicare Part D plans, the Federal Employees Health Benefits Program, state government employee plans, managed Medicaid plans, and others, /24/ such as state Medicaid programs. While details on internal operating systems are proprietary, we assume that the three largest PBMs that controlled 75 percent of 2018 market share /25/ (not including the
FOOTNOTE 24 Pharmacy Benefit Managers (PBMs): Generating Savings for Plan Sponsors and Consumers. Prepared for the
FOOTNOTE 25 CVS, Express Scripts, and the Evolution of the PBM Business Model. Drug Channels.
Public commenters to the 2009 Modifications proposed rule regarding the D.0 conversion, self-identifying as large PBMs, estimated that costs for their upgrades would be more than
FOOTNOTE 26 74 FR 3320 (
* The largest three PBMs incurred baseline (Version D.0) conversion costs of
* The 3 next-largest PBMs and the VA PBM incurred baseline conversion costs of
* The remaining 33 PBMs incurred baseline costs of
As previously noted, industry estimates of the costs of a conversion from Version D.0 to Version F6 have been expressed as multiples of two to four times the costs for the Version 5.1 to Version D.0 conversion. However, several PBM commenters to the NCVHS suggested the lower end of this range. This would be consistent with our understanding that many of the changes involve mapping current back-end work-around systems to newly codified data, as opposed to building substantial new functionality from scratch. However, expansion of all existing financial fields to accommodate larger numbers would involve changes to many interrelated systems. As summarized in Table 4, using a 2x multiplier, we estimate that over the 2-year implementation period:
* The largest 3 PBMs would incur Version F6 conversion costs of (2*10.5 mil), or
* The next 3 midsize PBMs and the VA PBM or four firms, would incur Version F6 conversion costs of (2*4 mil), or
* The remaining 33 PBMs would incur Version F6 conversion costs of (2*500,000), or
See illustration in Original Document.
(4) Vendors
As previously discussed, pharmacies that do not internally develop and maintain their pharmacy management systems contract with technology vendors for these services. We believe there are approximately 30 technology firms providing computer system design, hosting, and maintenance services in this market, with different companies serving one or more market segments, such as retail, mail, long-term care, or specialty pharmacy. Software vendors often have commitments to their clients to maintain compliance with the latest adopted pharmacy transaction standards. They must incorporate these standards into their software systems; otherwise, they would not be able to sell their products competitively in the marketplace. These systems cannot properly support their users using outdated standards or missing key functionalities which the industry has identified as essential to business operations. We understand that vendors anticipate upgrades to these standards, and the cost of updating the software is incorporated into the vendor's routine cost of doing business and product support pricing. As discussed in the context of independent pharmacies, based on conversations with a variety of industry representatives, we understand that future HIPAA standard conversion efforts are often already priced into existing maintenance agreements and fee structures for their customers. However, the marginal costs of the conversion would be borne by these vendor entities.
We understand from conversations with industry representatives that system update costs are usually embedded into operating costs, where they represent opportunity costs for vendors that offset the resources to add new features (system enhancements) that their clients may request. Updating systems would take some, but not all, resources currently doing system enhancements and improvements and move them over to ensuring compliance with the new standards. In the 2009 Modifications final rule, /27/ we explained that we received no comments from pharmacy software vendors in response to the solicitation of comments on expected Version D.0 conversion costs, actual costs for vendor software upgrades, and any downstream impact on covered entities. We believe it is likely that firms would continue to decline to share this type of proprietary and market-sensitive data. Thus, we do not have comparable anchors from prior impact analyses for cost estimates. However, in the public comments submitted to the NCVHS, one pharmacy software vendor with multiple product lines provided a preliminary estimate of approximately 50,000 man-hours to make the Version F6 changes. We are not aware of publicly available data segmenting this industry, so we assume this one estimate is representative of the industry on average. Using this estimate and a mean hourly wage rate of
FOOTNOTE 27 74 FR 3320 (
FOOTNOTE 28
We further estimate that these pharmacy system vendor firms would incur 80 hours of training costs for each pharmacy client firm at a mean hourly wage rate of
In addition, both pharmacies and PBMs contract with telecommunication switches for transaction validation and routing. Based on conversations with industry representatives, we believe there are three switches in this segment of the market. We are not aware of any data to help us estimate their costs of system upgrades, but believe their costs are less than those of chain pharmacies and PBMs. We estimate that over the 2-year implementation period three telecommunication switching vendors would incur Version F6 conversion costs of
See illustration in Original Document.
In summary, total estimated Version F6 conversion costs are summarized in Table 6.
See illustration in Original Document.
c. Benefits
Industry commentary on benefits related to the Version F6 conversion is available in two segments: first, the 2018 NCVHS testimony and industry representative interviews related to the proposed intermediate Version D.0 to Version F2 conversion, and second, the 2020 NCVHS testimony and public comments related to the revised Version F6 proposal. Both sets of evidence portray industry consensus that updating the HIPAA pharmacy standards is necessary for current and future business needs at a significant, but unavoidable, cost. Commentaries describe numerous non-quantifiable benefits, such as to enable compliance with regulatory requirements, to facilitate the transmittal of additional codified and interoperable information between stakeholders that would benefit patient care and care coordination, and to power advanced data analytics and transparency. Some changes would result in operational efficiencies over manual processes, but would also entail greater manual effort to collect information and input data at an offsetting cost. We are not aware of any assertions or estimates of industry cost savings attributable to the Version F6 conversion, and we solicit comment on whether there are significant savings that should be accounted for in our analysis. For pharmacy management system vendors and switches, we assume upgrading existing systems for the Version F6 conversion is a cost of doing business and retaining customers and does not involve cost savings.
(1) Pharmacies
Initial automation of pharmacy coordination of benefits transactions was a large part of the previous Version 5.1 to D.0 conversion. Further refinement of this type of information is included in the Version F6 conversion. Additional fields are expected to improve the flow of information between pharmacies and payers and allow for more accurate billing to the correct entity. However, better information does not translate into savings as directly as the initial transition from manual to fully electronic processes. Moreover, commenters to the 2009 Modifications proposed rule suggested that even those minor levels of savings (1.1 percent of pharmacist time) may have been overestimated. /29/ Some of the less quantifiable benefits include enabling more integration with back-office systems, more informative data analytics, better forecasting, and stronger internal controls over both proper payments and compliance with contractual requirements. For instance, better information on adjudicated payer types allows pharmacies to identify and apply insurance program-specific coverage requirements more accurately.
FOOTNOTE 29 74 FR 3320 (
Other changes, such as more structured communication between pharmacies and payers to resolve prescriber-identifier validation activities at the point of sale, or to better enable compliance with federal and state limitations on filling and refilling controlled substance prescriptions, would enable better compliance with
FOOTNOTE 30 S. Gruttadauria. (
Pharmacy and pharmacy vendor commenters to the NCVHS noted that other types of changes would benefit patients by enhancing pharmacy and payer patient care workflows through the replacement of many clinical free text fields with discrete codified fields. This would enable automation that can trigger real-time workflows that could aid in goals such as combatting the opioid crisis or communicating relevant therapy-related information for at-risk patients. Improvements would support better patient care and safety through more accurate patient identification and enhanced availability and routing of benefit and drug utilization review information. For instance, new response fields for drug utilization review messaging and Formulary Benefit Detail help to convey clinical information such as disease, medical condition, and formulary information on covered drugs. This would enable the pharmacist to have more informative discussions with patients and provide valuable information about alternative drug or therapy solutions. We assume that some of this data exchange would eliminate manual processes and interruptions, and would also enable additional required pharmacist interventions to be added contractually which could not occur previously. Thus, we conclude that the changes available through the Version F6 conversion would allow pharmacies to improve the accuracy and quality of services they provide but may not generate significant cost savings from a budgeting perspective.
(2) Health Plans and PBMs
The benefits that could accrue to health plans and PBMs mirror the improvements that could accrue to pharmacy efficiencies discussed previously. Better information flows and interoperability could enable more efficient benefit adjudication, enhanced communications with trading partners and patients, and better data. Better data could improve payment accuracy, regulatory compliance, and advanced analytics for forecasting, coordination of care, and patient safety. For instance, better information on adjudicated payer types could support more accurately identifying other payers involved in the transaction. Improved information on other payers could result in cost avoidance by avoiding duplication of payment and/or by preventing Medicare from paying primary when it is the secondary payer. However, improved patient and alternative payer identification could also increase the transparency of the identification of payers secondary to Medicare and increase costs from other payers' subrogation in some circumstances. The ability to automate the processing of very expensive drug claims would avoid more cumbersome processes, but the absolute volume of such claims may not be enough to generate significant savings. We are not aware of any studies or estimates of cost savings for health plans or PBMs attributable to the Version F6 conversion, nor are we aware of public comments describing any such cost savings. Furthermore, in testimony to the NCVHS, the NCPDP noted the importance of Version F6 for achieving broader (but difficult-to-quantify) healthcare transformation goals: it improves the structure to support the clinical evaluation of prescription products and planned benefit transparency, which are key components for achieving expected healthcare outcomes related to value-based care, digital therapeutics, social determinants of health, and other areas of health innovation. /31/ Thus, we conclude that while the benefits of adopting Version F6 are necessary for meeting current and future business needs and policy goals, we are unable to monetize these benefits in the form of cost savings. We solicit comments on whether there are significant quantifiable benefits or cost savings that should be included in our analysis.
FOOTNOTE 31
2. Adoption of Version 10
a. Introduction
Subrogation occurs when one payer has paid a claim that is subsequently determined to be the responsibility of another payer, and the first payer seeks to recover the overpayment directly from the proper payer. Such erroneous payments may occur as the result of retroactive changes in patient coverage or because of the lack of information on other payers or correct payer order at the point of sale. Subrogation avoids putting the pharmacy in the middle of the corrective action by avoiding the alternative burdensome process of the first payer recovering the overpayment from the pharmacy and, thus, forcing the pharmacy to attempt reversing the claim and rebilling the proper payer.
The current HIPAA subrogation transaction standard addresses federal and state requirements for state Medicaid agencies to recover reimbursement from responsible health plans but does not address similar requirements for other payers, such as Medicare Part D, State Pharmaceutical Assistance Programs (SPAPs), state AIDS Drug Assistance Programs (ADAPs), or other private insurers. Replacing this standard with initial adoption of Version 10 would extend the standard to all third-party payers. Insurers, employers, and managed care entities are generally referred to as health and/or drug plan sponsors, or, more generally, as third-party payers. Their health plans generally provide some coverage for outpatient prescription drugs, but do not generally directly manage coordination of pharmacy benefits and subrogation (also known as third-party liability services). Instead, health plans and other third-party payers generally contract with PBMs or with specialized payment integrity/financial recovery vendors for these services. The subrogation technical standard is based on the batch telecommunications standard and may utilize any field in an approved standard.
b. Affected Entities
Medicare Part D requires real-time coordination of benefits, and we understand that these processes, as well as responsibility for managing subrogation (primarily for Medicaid retroactivity), are generally contracted through PBMs. Other payers, such as state Medicaid agencies and commercial insurers, are more likely to contract with payment integrity/financial recovery vendors. As of
FOOTNOTE 32 NCVHS Hearing on NCPDP Standards and Updates--
Based on a CAMH environmental scan conducted with industry representatives, we understand that the demand for subrogation today differs by third-party line of business. Third-party payers for governmental programs (Medicaid, Medicare Part D, and SPAPs/ADAPs) drive most of the subrogation demand. This is in large part due to their retroactive eligibility rules and potential overlaps in enrollment. Third-party commercial payer contracts are less likely to have a comparable retroactivity-of-coverage issue and, due to the rising cost of health insurance, are increasingly less likely to have enrollees covered under more than one insurance program or policy. For these reasons, we understand that third-party commercial payers are more likely to subrogate with workers' compensation, auto insurance, or other non-healthcare insurance-related parties, rather than with other healthcare payers.
While pharmacies are not users of the subrogation standard, they are potentially affected by any further expansion of the standard from Medicaid to all third-party payers. This is because one alternative to subrogation involves the payer that paid in error recouping funds from pharmacies and transferring the effort and risk of rebilling the appropriate payer to the pharmacy.
c. Costs
(1) Third-Party Payers (Includes Plan Sponsors and PBMs)
The bulk of the work to implement Version 10 for many third-party payers has been previously addressed in costs associated with implementing Version F6, specifically its equivalent batch standard. Based on conversations with industry representatives familiar with the subrogation standards, we understand that the changes in Version 10 have been undertaken to preserve the integrity of the standard for Medicaid purposes while allowing for the collection of a limited number of new data elements to assist with other payer subrogation, particularly for Part D payers. We understand that the changes between Version 3.0 and Version 10 are not extensive, so we believe this change would not have significant effects on state Medicaid agencies or their vendors. However, we are not aware of data or public comments to help us confirm this assumption.
We also assume that payers that desire to pursue prescription drug claim subrogation have already contracted with PBMs or other contractors that have implemented the Batch Standard Medicaid Subrogation Implementation Guide, Version 3.0, or some variation on this standard, on a voluntary basis. However, testimony provided in the
Based on conversations with industry representatives, we further understand that payers already engaged in subrogation, particularly Part D PBMs, have already, albeit inconsistently, implemented Version 3.0 for other payers. Version 10 provides more requirements for use of the standard and how to populate the fields to increase standardization. Thus, we assume that the incremental effort required to transition to Version 10 largely consists of a mapping exercise from current PBM or vendor operating systems, rather than an initial build and migration from manual to automated processes. We are not aware of any studies or public comments to help us quantify these incremental costs.
(2) Vendors
As noted previously, state Medicaid agencies, commercial third-party payers, and the
Four payment integrity/financial recovery vendors would incur Version F6, equivalent Batch Standard, Version 15 and other Version 10 conversion costs of
See illustration in Original Document.
d. Benefits
(1) Third-Party Payers
The primary benefits for third-party payers are the opportunity to reduce claims costs when another party is also responsible for the claims and the avoidance of cumbersome manual processes. However, we are not aware of studies or public comments that help us estimate the frequency and size of this benefit. Prescription drug claims tend, on average, to be for much smaller amounts than medical claims, such as those for hospital admissions, and we believe many payers may pursue subrogation only on the more expensive claims. Discussion at the
FOOTNOTE 33 Transcript-Standards Subcommittee Hearing--NCPDP Standards Updates--
(2) Pharmacies
As noted previously, while pharmacies are not users of the subrogation transactions standard, they could potentially benefit from further expansion of the standard from state Medicaid agencies to all third-party payers if additional payers that are currently recouping overpayments from pharmacies instead were to transition to a subrogation approach. However, we are not aware of any studies or public comments that would help us estimate the likelihood or size of a potential change of this nature. We solicit comments to help us understand the extent to which the adoption of Version 10 may have an effect on pharmacies.
E. Alternatives Considered
We considered a number of alternatives to adopting Version F6 and Version 10, but chose to proceed with the proposals in this in this rule after identifying significant shortcomings with each of the alternatives.
One alternative we considered was to not propose to adopt Version F6 and continue to require the use of Version D.0. We also considered waiting to adopt Version F6 at a later date since we recently published a final rule in 2020 modifying the requirements for the use of Version D.0 by requiring covered entities to use the 460-ET field for retail pharmacy transactions denoting partial fill of Schedule II drugs. We did not proceed with either alternative because we believe that, were we to do so, the industry would continue to use a number of work arounds that increase burden and are contrary to standardization. We also believe that the number of these work arounds, as well as use of the work arounds, would continue to increase if we were not to propose adoption of Version F6 at this time. For example, NCPDP has advised that several new drugs priced at, or in excess of,
We invite public comments on these assumptions and request any additional data that would help us to more accurately quantify the time and resource burdens associated with the existing, and, potentially, future work arounds should Version F6 not be adopted. We also chose not to proceed with these alternatives because, as discussed in section III.A. of this proposed rule, we believe adoption of Version F6 would support interoperability and improve patient outcomes.
We considered proposing a compliance date longer than 24 months for covered entities to comply with Version F6. However, as discussed in section III.C. of this proposed rule, we chose to propose a 24-month compliance date because we believe the benefits to be derived from implementing Version F6 as soon as possible are significant. We also considered proposing staggered implementation dates for Version F6, whereby covered entities using the retail pharmacy transactions would have different compliance dates. We believe this alternative would not support standardization since pharmacies, PBMs, and health plans all rely on the information transmitted in the retail pharmacy transactions, and if any one of these three entities would not be using the same standard version at the same time, the information needed to process claims and check eligibility would be deficient. Pharmacies need the most current eligibility data from the plans to determine correct coverage and payment information, and health plans and PBMs need the most current information to be reflected in the claims data to maintain the beneficiaries' most current benefits.
Concerning the proposed adoption of Version 10, we considered not adopting that updated version and continuing to require the use of Version 3.0. Such alternative would continue to permit non-Medicaid health plans that engage in pharmacy subrogation transactions to continue using the proprietary electronic and paper formats currently in use. We chose not to proceed with this alternative because we believe it is important to adopt standards that move the industry toward uniformity among all payers.
F. Regulatory Review Cost Estimate
One of the costs of compliance with a final rule is the necessity for affected entities to review the rule in order to understand what it requires and what changes the entity will have to make to come into compliance. We assume that 104 affected entities will incur these costs, as they are the entities that will have to implement the proposed changes, that is, those entities that are pharmacy organizations that manage their own systems (27), pharmacy management system vendors (30), PBMs (40), telecommunication switch vendors (3), and payment integrity/financial recovery vendors (4). The particular staff involved in such a review will vary from entity to entity, but will generally consist of lawyers responsible for compliance activities and individuals familiar with the NCPDP standards at the level of a computer and information systems manager. Using the Occupational Employment and Wages for
FOOTNOTE 34
G. Accounting Statement and Tables
As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table 8 we present an accounting statement showing the classification of the annualized costs associated with the provisions of this final rule. Whenever a rule is considered a significant rule under Executive Order 12866, we are required to develop an Accounting Statement. This statement must state that we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule. Monetary annualized benefits and non-budgetary costs are presented as discounted flows using 3 percent and 7 percent factors.
See illustration in Original Document.
H. Regulatory Flexibility Analysis (RFA)
The RFA requires agencies to prepare an initial regulatory flexibility analysis that describes the impact of a proposed change on small entities, unless the head of the agency can certify that the rule will not have a significant economic impact on a substantial number of small entities. The RFA generally defines a small entity as (1) a proprietary firm meeting the size standards of the
SBA size standards have been established for types of economic activity or industry, generally under the North American Industry Classification System (NAICS). Using the 2019 SBA small business size regulations and Small Business Size Standards by NAICS Industry tables at 13 CFR 121.201, we have determined that the covered entities and their vendors affected by this proposed rule fall primarily in the following industry standards:
See illustration in Original Document.
This change in retail pharmacy transaction standards would apply to many small covered entities in the Pharmacy and
For purposes of this RIA, the definition of an entity most closely resembles the federal statistical agencies' concept of a firm. /35/ A firm consists of one or more establishments under common ownership. An establishment consists of a single physical location or permanent structure. /36/ Thus, a chain drug store or chain grocery store constitutes a single firm operating multiple establishments. Using the 2017 Census Bureau Annual
FOOTNOTE 35 www.bls.gov/opub/mlr/2016/article/establishment-firm-or-enterprise.htm. END FOOTNOTE
FOOTNOTE 36 www.census.gov/programs-surveys/susb/technical-documentation/methodology.html. END FOOTNOTE
1. Initial Regulatory Flexibility Analysis (IRFA)
a. Number of Small Entities
Based on Census business data records indicating that in 2017 there were a total of 19,234 total pharmacy firms, we estimate that just over 19,000 pharmacy firms qualify as small entities, though communications with industry representatives suggest that figure may overestimate the current industry small entity landscape. Available data does not permit us to clearly distinguish small pharmacy firms from firms that are part of larger parent organizations, but we use employee size as a proxy for the firm size subject to the SBA size standard. For purposes of this analysis, we assume the firms with more than 500 employees (190) represent chain pharmacies and those with fewer than 500 (19,044) employees represent independently owned open- or closed-door pharmacies. The 19,044 firms with fewer than 500 employees represented 20,901 establishments and accounted for total annual receipts of
For 2017, the
In addition to the covered entities, we estimate 30 pharmacy management system vendors, 40 PBM vendors, three telecommunications switching vendors, and four payment integrity/financial recovery firms would be affected by the proposed changes to their clients. We are not aware of comprehensive publicly available data detailed enough to quantify the size of these remaining entities, but we believe that the affected firms are, generally, part of larger organizations. We solicit comments with respect to our assumptions.
b. Cost to Small Entities
To determine the impact on small pharmacies, we used Census business data on the number of firms with fewer than 500 employees and user training cost estimates developed using public comments on prior rulemaking and updated for inflation. As discussed earlier in this RIA, we assume that the clear majority of pharmacy firms are small entities that rely on their contracted pharmacy management system vendors to absorb HIPAA standard version conversion costs in return for ongoing maintenance and transaction fees. We assume that pharmacy firms would have direct costs related to Version F6 user training that would vary in relation to employee size; that the vast majority (90 percent) of small pharmacy firms with fewer than 20 employees would receive all necessary user training from vendors; and that the remaining 10 percent of small pharmacy firms (2,028) with 20 or more employees would have additional staff user training expense totaling
See illustration in Original Document.
As stated in section V.F. of this proposed rule, we considered various policy alternatives to adopting Version F6. Specific to reducing costs to small entities, we considered staggering the implementation dates for Version F6 among the affected entities that utilize the NCPDP transaction standard. But we chose not to propose this alternative because pharmacies, PBMs, and health plans all rely on the information transmitted though the retail pharmacy transactions, and if any one of these three entities would not be using the same standard version at the same time, the information needed to process claims and check eligibility would be deficient. Pharmacies need the most current eligibility data from the plans to determine correct coverage and payment information. Plans and PBMs would suffer because they would not have the most current information reflected though the claims data to maintain the beneficiaries' most current benefits.
2. Conclusion
As referenced earlier in this section, we use a baseline threshold of 3 percent to 5 percent of revenues to determine if a rule would have a significant economic impact on affected small entities. The small pharmacy entities do not come close to this threshold. Therefore, the Secretary has certified that this proposed will not have a significant economic impact on a substantial number of small entities. Based on the foregoing analysis, we invite public comments on the analysis and request any additional data that would help us determine more accurately the impact on the various categories of entities affected by the proposed rule.
In addition, section 1102(b) of the Act requires us to prepare a RIA if a rule would have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. This proposed rule would not affect the operations of a substantial number of small rural hospitals because these entities are not involved in the exchange of retail pharmacy transactions. Therefore, the Secretary has certified that this proposed rule would not have a significant impact on the operations of a substantial number of small rural hospitals.
I. Unfunded Mandates Reform Act of 1995 (UMRA)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates would require spending more in any 1 year than threshold amounts in 1995 dollars, updated annually for inflation. In 2022, that threshold is approximately
J. Federalism
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. This proposed rule would not have a substantial direct effect on state or local governments, preempt state law, or otherwise have a federalism implication because, even though state Medicaid agency contractors would be converting to a modified version of an existing standard with which they are already familiar, we believe that any conversion costs, would, generally, be priced into the current level of ongoing contractual payments. State Medicaid agencies, in accordance with this proposed rule, would have to ensure that their contracted claim processors or PBMs successfully convert to Version F6 and that their payment integrity/financial recovery contractors make relatively minor updates to subrogation systems to collect and convey some new fields to conduct subrogation initiated by other payers using Version 10. With respect to subrogation for pharmacy claims, this proposed rule would not add a new business requirement for states, but rather would replace a standard to use for this purpose that would be used consistently by all health plans.
In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the
VI. Response to Comments
Because of the large number of public comments, we normally receive on
List of Subjects in 45 CFR Part 162 Administrative practice and procedures, Electronic transactions, Health facilities, Health insurance, Hospitals, Incorporation by reference, Medicaid, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the
PART 162--ADMINISTRATIVE REQUIREMENTS
1. The authority citation for part 162 continues to read as follows:
Authority: 42 U.S.C. 1320d-1320d-9 and secs. 1104 and 10109 of Public Law 111-148, 124 Stat. 146-154 and 915-917.
2. Section 162.920 is amended by--
a. Revising the introductory text of the section and the introductory text of paragraph (b).
b. Adding paragraphs (b)(7) through (9).
The revisions and additions read as follows:
Certain material is incorporated by reference into this subpart with the approval of the Director of the
*****
(b)
*****
(7) The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(8) The Batch Standard Implementation Guide, Version 15 (Version 15),
(9) The Batch Standard Subrogation Implementation Guide, Version 10 (Version 10),
*****
3. Section 162.1102 is amended by--
a. In paragraph (c), removing the phrase "For the period on and after the
b. In paragraph (d) introductory text, removing the phrase "For the period on and after
c. Adding paragraph (e).
The addition reads as follows:
*****
(e) For the period on and after [date TBD], the following standards:
(1) Retail pharmacy drug claims. The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(2) Dental health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Dental (837),
(3) Professional health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Professional (837),
(4) Institutional health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Institutional (837),
(5) Retail pharmacy supplies and professional services claims. (i) The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(ii) The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3-Health Care Claim: Professional (837),
4. Section 162.1202 is amended by--
a. In paragraph (c), removing the phrase "For the period on and after
b. Adding paragraph (d).
The addition reads as follows:
*****
(d) For the period on and after [date TBD], the following standards:
(1) Retail pharmacy drugs. The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(2) Dental, professional, and institutional health care eligibility benefit inquiry and response. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Eligibility Benefit Inquiry and Response (270/271),
5. Section 162.1302 is amended by--
a. In paragraph (c), removing the phrase "For the period on and after
b. In paragraph (d) introductory text, removing the phrase "For the period on and after
c. Adding paragraph (e).
The addition reads as follows:
*****
(e) For the period on and after [date TBD], the following standards:
(1) Retail pharmacy drugs. The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(2) Dental, professional, and institutional request for review and response. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Services Review--Request for Review and Response (278),
6. Section 162.1802 is amended by--
a. In paragraph (c), removing the phrase "For the period on and after
b. In paragraph (d) introductory text, removing the phrase "For the period on and after
c. Adding paragraph (e).
The addition reads as follows:
*****
(e) For the period on and after [date TBD], the following standards:
(1) Retail pharmacy drug claims. The Telecommunication Standard Implementation Guide Version F6 (Version F6),
(2) Dental health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Dental (837),
(3) Professional health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Professional (837),
(4) Institutional health care claims. The ASC X12 Standards for Electronic Data Interchange Technical Report Type 3--Health Care Claim: Institutional (837),
7. Revise the heading of subpart S to read as follows:
Subpart S--Pharmacy Subrogation
8. Section 162.1901 is amended by--
a. Revising the section heading.
b. Designating the text of the section as paragraph (a) and adding paragraph (b).
The revision and addition read as follows:
*****
(b) The pharmacy subrogation transaction is the transmission of a request for reimbursement of a pharmacy claim from a health plan that paid the claim, for which it did not have payment responsibility, to the health plan responsible for the claim.
9. Section 162.1902 is revised to read as follows:
(a) The Secretary adopts the following standards for the Medicaid pharmacy subrogation transaction, described in
(b) The Secretary adopts the following standard for the pharmacy subrogation transaction, described in
(1) For the period on and after [date TBD], for covered entities that are not small health plans.
(2) For the period on and after [date TBD], for small health plans.
Dated:
Secretary,
[FR Doc. 2022-24114 Filed 11-7-22;
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