December 8, 2012

Administrative Simplification: Standard Unique Identifier for Health Plans

Proposed Rule
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Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0938-AQ13
Rule Publication Date
04/17/2012
Comment Closing Date
05/17/2012
Dollar Year
2012 (mill)
Time Horizon (Years)
2013 - 2023

RULE SUMMARY

This rule proposes adoptions of a standard unique health plan identifier (HPID) and of a data element that will serve as an other entity identifier (OEID). This rule also proposes an addition to the National Provider Identifier (NPI) requirements. Finally, this rule proposes to change the compliance date for the ICD-10-CM and ICD-10-PCS medical data code sets (hereinafter ‘‘code sets’’) from October 1, 2013 to October 1, 2014.

COMMENTARY

Costs and benefits of three major rules are changed, but there is little to no discussion of alternatives, thus calling into question whether or not HHS has actually proposed changes consistent with "optimal" rules. Costs and benefits are estimated and listed separately, but there is no attempt to maximize total net benefit in an analysis that focuses on net savings/cost avoidance, which is a proxy for net benefits. The regulatory analysis of the HPID proposal is heavily based on a prior HHS final rule, referenced as the "Modifications rule." The uncertainty in the estimates is emphasized, and it is explained that the range of values in the Modifications rule addresses this uncertainty. However, the uncertainties extend beyond those addressed in the Modifications rule analysis; specifically, HHS assumes values for various parameters, such as the percent of the costs from the Modifications rule that are relevant to the current rule. The uncertainty associated with these parameters is not addressed in the analysis, and this is a major drawback in this analysis.

MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)

Dollar Year
2012 (mill)
 
Time Horizon (Years)
2013 - 2023
 
Discount Rates
3%
7%
Expected Costs (Annualized)
572
677
Expected Benefits (Annualized)
960
1069
Expected Costs (Total)
Not Reported by Agency
Not Reported by Agency
Expected Benefits (Total)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Annualized)
388
392
Net Benefits (Total)
Not Reported by Agency
Not Reported by Agency

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
Keyword and RIN search on HHS webpage did not lead to the proposed rule (with the RIN search producing no search results). The link to "All HHS Rules" led to regulations.gov, where both keyword and RIN searches lead to the rule.
4/5
2. How verifiable are the data used in the analysis?
Data is generally well-cited. A primary source of data is FR 49742 (the "Modifications rule"). This document is easily found on the HHS website via a keyword search.
4/5
3. How verifiable are the models and assumptions used in the analysis?
The assumptions are given but often with little justification and generally requesting industry comments. A large percentage of assumptions are derived from research reports and other proposed rules in the Federal Register. However, each assumption is supported by only one report. Given that each study relies on a random sample of data, it is dangerous to assume truth from a single study. Further, the outcome may be driven solely by the modeling chosen in that single study. For robustness of these assumptions, multiple studies should be cited.
3/5
4. Was the analysis comprehensible to an informed layperson?
While only 56 pages, the document is very difficult to follow as it addresses three different issues, but never really sums up entire analysis into one clear summary. Numerous abbreviations are used throughout in a way that makes it difficult reading for an interested and informed layperson.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The desired outcome for the HPID and NPI rule is to ameliorate routing issues—and the related delays—in the medical payment process through an environment encouraging automation. The analysis appears to have ignored the impact on consumers and the possibility of more frequent billing due to an environment in which it is easier to bill. The delayed in implementation of ICD-10 is to allow a significant minority of health care entities claiming not to be prepared for the planned implementation date, who may otherwise shut down or be adversely financially impacted by the adoption.
3/5
Does the analysis identify how these outcomes are to be measured?
One could measure the percentage of delayed medical payments due to routing issues and compare to past data on payment delays. But the claimed greater benefit is the automation environment created, easing strains of other unidentified issues and future regulation and ultimately resulting in cost savings. Measurement of outcomes for the delay of implementation of ICD-10 requires knowledge of the counterfactual—how many shut down and how much additional cost is truly experienced by the minority of health care entities?
3/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Standardization of NPI and HPID will allow for lower costs and greater ease of transition to a fully automated payment system, reducing the number of manual entries and the manual resolution of routing issues. One could track the reduction in manual reviews to test HHS's theory. In the case of the delay of ICD-10, no testable theory is possible because it requires knowledge of the counterfactual. But the theory sounds reasonable: a significant minority of health care entities are not able to meet the established deadline, causing potentially long delays in payment, high cost of borrowing money, and in some cases the shutdown of practices.
3/5
Does the analysis present credible empirical support for the theory?
The empirical analysis is primarily based on the empirical results of other studies and rule proposals. For instance, the results from the "Modifications rule" (FR 49742) serves as the foundation analysis related to HPID. A number of other parameters assumed in the analysis are borrowed from other studies. However, much of the support is anecdotal with little to no direct evidence from past research studies. Discussion of most benefits from HPID are predicted to be "realized mostly downstream" when it is used in coordination with other regulatory and industrial administrative simplification initiatives that are hoped to occur. These benefits are not monetized but simply assumed to be forthcoming at levels higher than those of the present regulation.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
HSS admits to a large degree of uncertainty in the accuracy of their assumptions. It deals with this uncertainty by deriving low- and high-end estimates of costs and benefits that are effectively a percentage of the estimates from the Modifications rule. However, the range provided addresses only the uncertainties present in the Modifications rule; it does not, for instance, address the uncertainty associated with the 25 percent of costs assumption, among other similar assumed parameters.
2/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
3/5
Does the analysis identify a market failure or other systemic problem?
The routing issues currently present are explained to be a result of use of numerous identifiers for the same division of the same health plan, creating confusion and inconsistencies. It is unclear as to whether these issues are assumed to be a market failure or the result of prior inadequate regulation requirements. In the case of the delaying of ICD-10, the argument is essentially that the initial regulation did not provide for sufficient time for select health entities to prepare for the coding change. The agency seems to admit there is a problem, but it fails to address the source of that problem.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
‘Theory’ is likely too strong of a term here; it is more of a logical story. It is never explained why health care entities lack sufficient incentive to deal with supposed lack of standardization. It would appear that past government regulations are to blame for at least part of the problem, but this issue is not developed. Nor is the possibility developed that these new regulations might cause unintended harm, which would appear to be a valid concern to the degree that past regulations have caused some of today's problems. As is, the agency argues that the prescribed standardization can ameliorate routing issues and allow for greater automation and reduce costs. In the ICD-10 related rule, the observance of a significant minority of health entities (many of whom are smaller entities with fewer resources) claiming to not be ready for transition by October 1, 2013 is argument for the existence and size of the problem.
3/5
Does the analysis present credible empirical support for the theory?
Empirical evidence mostly comes from accounting of affected entities—largely through survey results—and then estimating cost savings based on various assumptions concerning compliance costs and time. Empirical evidence relating to other industries is lacking.
3/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
To an extent, yes. In the ICD-10 proposal, the extent of the problem is handled via a high and low estimate of those not ready for compliance. While HHS regularly admits to uncertainty in the HPID proposal, the extent of the relevant problem is not directly addressed.
2/5
7. How well does the analysis assess the effectiveness of alternative approaches?
2/5
Does the analysis enumerate other alternatives to address the problem?
In the HPID proposal, HHS describes three other possibilities to use for other codes: NAIC Company Code, Federal Tax Identification Number, and IRS Identifier. While this is a fair number of alternative codes, the agency does not consider any alternatives to the primary policy of a mandated unique identifier. The alternative codes are different options for enacting the mandate, not alternative policies, per se. Four alternatives were considered in the ICD-10 delaying proposal: maintain current due date, maintain current compliance for ICD-10-PCS but delay compliance for ICD-10-CM, forgo ICD-10 altogether, and mandate uniform delay in compliance (with different lengths of that delay).
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
While a several alternatives are considered in each proposal, they are all narrow command-and-control policies and offer little variation to the approach.
1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
No formal analysis of the alternative approaches is conducted; however, reasonably detailed explanations of why the other alternatives were eliminated from further consideration is provided.
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
In the HPID proposal, the assumption is that the use of electronic health care transactions will rise over the next 10–15 years. This is supported with three arguments, and HHS proceeds to project usage numbers based on these assumptions. HHS admits, "Due to a lack of baseline data, we use the cost estimate calculations provided in the impact analysis for the Modifications proposed rule and the clarifications of that impact analysis contained in the Modifications final rule." The baseline for the ICD-10 proposal need not project far into the future, as the proposal deals with next year and these figures are derived from survey results.
3/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
No analysis of the other alternatives is considered, although the expected costs associated with the proposed rule were provided.
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
In both proposals, HHS does a fair job of considering the numerous costs of the rules, including costs of equipment and time, and it briefly discusses those which are not explicitly included in the empirical analysis.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Indirectly, at best. In the case of the ICD-10 proposal, there is discussion of how the small health care entities not prepared for transition will experience long delays in payment, necessitating borrowing costs, and in some cases causing some to shut down, resulting in regional reductions in available care. Presumably, regional care prices would rise for care at these small health care entities. Otherwise, without any discussion, the implicit assumption is that prices will not be increased.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
Costs of delay on part of health entities due to uncertainty of regulatory changes is discussed. HHS discusses that the time between when a provider originally submits a claim and when it gets paid will be considerably longer than with electronically submitted "clean" claims—that is, a claim for which no additional information or intervention is needed. During this time, providers such as small physician practices will need to have cash on hand in order to "keep the doors open" by paying salaries, staying current with contract and lease obligations, purchasing equipment and medicines, and maintaining the physical plant. In some cases, in order to continue as a health care provider, this will require a business loan or a line of credit with interest. A discussion of consumer behavior is lacking altogether.
3/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Since the Modifications rule presents minimum and maximum estimates, so too does the HPID analysis. However, there is no sensitivity analysis performed with respect to its assumed parameters (i.e., "applied percentage" of 25 percent). High and low cost estimates are also provided for the ICD-10 proposal. Further, both a 3 percent and a 7 percent discount rate are applied to estimated annualized monetary costs and benefits.
2/5
Does the analysis identify the alternative that maximizes net benefits?
The focus is on net savings/cost avoidance, which is a proxy for net benefits. However, no empirical analysis of the alternatives is provided. This is addressed to a small degree in the discussion of the elimination of the other alternatives.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Without the empirical analysis of the alternatives, this is not possible.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The agency includes discussion of those experiencing costs, but they are not included in the empirical analysis. Costs on small health care entities are identified but are not considered to be differentially harmed. Unclear if owners, customers, taxpayers and/or employees bear costs. A "great number" of patients are believed to be adversely affected if the rule fosters payment delays upon its early implementation. It essentially assumes a constant cost industry in clearinghouses, as it assumes all costs will be passed onto the health plan. This likely does not represent reality well in terms of the distribution of the costs, but it should not impact the total cost figures.
3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Again, it includes some discussion of those experiencing benefits, but they are not included in the empirical analysis. Health care providers are assumed to receive the most benefits, but these are not broken down into different groups. Consumers and taxpayers are once again left out of the discussion.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
It appears that the decision was made in each of the proposals prior to the analysis, given that no analysis of the alternatives was included in the RIA. Given the lack of sensitivity analysis in relation to the assumed parameters (or additional evidence supporting the parameter choice from additional peer reviewed studies), it is possible these parameters were chosen to support the already-decided-on rule.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
There is no discussion of net benefits; the RIA simply lists costs and benefits separately and focuses on net savings/cost avoidance with no estimates for alternatives. Net savings/cost avoidance is a proxy for net benefits, but the analysis does not present these estimates for the alternatives. However, discussion is provided as to why the other alternatives were eliminated from further consideration.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
This is not addressed explicitly, but in the case of the HPID proposal, one could reasonably assume HHS could track the rate of manual reviews. HHS asks for comments that might be used for future consideration.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Again, this is not addressed explicitly, but surveys concerning the rate of manual reviews and associated costs could be collected, presumably. The analysis appears to assume full compliance eventually.
1/5
 
Total 28 / 60