Psychiatrists who transmit health care information electronically will soon have to use a standard format for eight financial and administrative transactions. The health insurance reform rules, which were issued last month by the Department of Health and Human Services (HHS), will also apply to health care plans and health care data clearinghouses.

HHS was charged by Congress under the administrative simplification provisions of the 1996 Health Insurance Portability and Accountability ACT (HIPAA), sometimes referred to as the Kassebaum-Kennedy law, with developing standards for the electronic transmission of health care information. The rationale for the provision was that uniform standards would encourage the exchange of electronic health care information and thus eliminate paperwork and produce greater efficiency and ultimately cost savings.

Congress has until October 16 to revise the final rules published in the August 17 Federal Register. Health care providers have two years from the October date to implement them.

The new rules apply to the following eight health-insurance-related transactions: health care claims or equivalent information, health care claims status, coordination of benefits, health plan premiums, eligibility, enrollments and disenrollments, health care payment and remittance, and referral certification and authorization, according to the rules.

Physicians and other clinicians will be required to use a standard electronic format for each transaction. They will have the option of purchasing conversion software through vendors or using a health care clearinghouse that will convert the relevant information into the standard format.

The law also requires HHS to issue standards for electronic transactions involving health care claims attachments, reporting of injury, and enforcement including fines. HHS is expected to issue these rules this year as well as indicate the final privacy protections for the transmission of electronic health care information.

The agency has stated that the compliance deadline for the privacy rules will coincide with the October 2002 deadline for complying with the rules on electronic transactions and codes.

HHS estimates that the costs of compliance with the HIPAA standards for 10 years (2002 to 2011) will average $1,500 per solo or two-physician practice. Physicians in group practices (those with three or more physicians) can expect their average costs to be $4,000 for the 10-year period.

Residential mental health and substance abuse facilities can expect to incur substantially higher costs, averaging $10,000 for the 10-year period.

However, converting to the HIPAA standards for electronic transactions is estimated to save health care providers $19 billion between 2002 and 2011. HHS defines health care providers as physicians, allied health professionals, hospitals, medical and dental laboratories, hospices, nursing homes, home-health agencies, pharmacies, and residential facilities.

APA President-elect Richard Harding, M.D., who has testified on medical privacy bills before Congress, said he was pleased that HHS accepted some of APA’s recommendations for ammending the proposed rules. For example, HHS adopted the AMA’s Current Procedural Terminology (CPT) as the standard codes for physician services and agreed with APA that the "ICD-10-CM has great potential as a replacement for the ICD-9-CM" and promised to evaluate the system after it has been tested, according to Harding.

"However, the rules place an undue burden on physicians, especially those in private practice, who would bear the greatest costs of converting to the new formats," noted Harding, who also serves on the National Committee on Vital and Health Statistics, which is charged with making recommendations to HHS about protecting medical records privacy. "HHS also rejected our recommendation that civil fines not apply to physicians."

The rules call for penalties of $100 for each violation of a standard with an annual ceiling of $25,000 per individual. In its comment letter APA strongly objected to the proposed civil fines and recommended that they apply only to "payers or others who might misuse the unique health identifier or individually identifiable health information," according to Nancy Trenti, an associate director in the APA Division of Government Relations.

APA Vice President Paul Appelbaum, M.D., who also has testified before Congress on medical privacy bills on behalf of APA, commented, "The new standards for electronic transmission of health care information may be a useful and welcome addition to the American health care scene. However, in the absence of privacy protections, the standards could become the first step in the process of stripping privacy protections from patients who use health care services."