It’s about time!

It’s taken nearly two years, but CMS finally is going to stop accepting Medicare claims that are not in HIPAA-standard format.

Administrator Mark McClellan, M.D., announced yesterday that, starting Oct. 1, CMS will no longer process fee-for-service electronic claims that do not conform to the HIPAA transaction standards that took effect on Oct. 16, 2003.

For 21 months now, CMS has been operating under a contingency plan to give covered entities more time to comply with the HIPAA rules, and was to end the leniency as soon as the healthcare industry reached an unspecified threshold of compliance. (For most of that time, however, CMS has treated nonstandard electronic claims the same as paper claims, meaning that providers have had to wait an extra two weeks for their money.)

Apparently, the CMS threshold was 99.5 percent, since the agency says that only 0.5 percent of claims from Medicare fee-for-service providers had not been in standard format as of June. Interestingly, physicians, with a 0.45 percent rate of noncompliant claims, were doing better than hospitals, for which 1.45 percent of electronic claims were submitted in a nonstandard format.

This most recent development does not affect Medicare managed care, nor does it account for the fact that individual payers in the private sector are allowed to have their own special addenda to HIPAA code sets, all but defeating the purpose of standardization in the first place.

The HIPAA transaction rule eventually may actually accomplish what it was intended to — namely, increase the efficiency of healthcare administration and reduce costs for all — if and when private-sector payers follow Medicare’s lead and refuse to pay nonstandard claims.

And people wonder why nearly a quarter of all U.S. healthcare spending goes to administrative expenses.