Section Review

Medicare electronic claims submissions rule took effect in October

Michael R. Costa is a senior associate in the Health Business Practice Group of the law firm of Greenberg, Traurig, LLP in Boston. He also is chair of the MBA Health Law Section Council.
On Aug. 15, 2003, the Department of Health and Human Services (HHS) published the Final Rule for Electronic Submission of Medicare Claims. For those attorneys representing health care providers, billing clearinghouses and software providers of electronic claims submission products, knowledge of this new mandatory requirement is critical.

This rule implements the statutory requirement found in the Administrative Simplification Compliance Act ("ASCA"). ASCA requires all claims sent to the Medicare Program be submitted electronically starting Oct. 16, 2003. ASCA was enacted by Congress to improve the administration of the Medicare program by increasing efficiencies gained through additional electronic claims submission.

Although 86.1 percent of Medicare claims are submitted electronically, the volume of paper claims is substantial, and moving from paper to electronic submissions has the potential for significant savings for Medicare physicians, practitioners, suppliers and other health care providers, as well as for the program itself. HHS currently estimates that approximately 205,409 providers and suppliers will be affected by the rule and will have to change the format for the claims they submit at a compliance cost of nearly $19.3 million.

This rule sets forth the details for implementation of the Medicare electronic claims submission requirement and who may be exempt from these requirements.

Compliance date

All claims for services provided to Medicare recipients submitted on or after Oct. 16, 2003, must be submitted electronically.

Entities required to comply with electronic claims submission requirement

Medicare physicians, practitioners, suppliers and other health care providers who submit initial claims under Part A or Part B of Medicare must comply with the Medicare electronic claims submission requirement, with some limited exceptions.

Exceptions to the electronic claims submission requirement

Entities waived from this requirement include "small providers," those who have no method available for the submission of an electronic claim, and those with certain "unusual circumstances."

Origin of the electronic submissions of Medicare claims interim final rule with comment period

HIPAA required HHS to adopt standards for certain health care transactions, code sets, unique identifiers as well as standards for the security and privacy of individually identifiable health information.

Those required to comply with HIPAA are termed "covered entities" and they include: 1) health care providers who currently conduct any transactions electronically that are standardized by HIPAA; 2) most health plans; and 3) all health care clearinghouses.

Medicare, by law, is a covered entity under HIPAA and as a covered health plan is required to transmit and receive claims according to HIPAA electronic standards. ASCA takes HIPAA one step further with the Medicare program and requires physicians, practitioners, suppliers and other health care providers to submit all claims in the HIPAA electronic format, with some limited exceptions.

Key features

Initial Claims. The Medicare electronic claims submission requirement applies to the submission of initial Medicare claims, including initial claims with paper attachments and claims where Medicare is the secondary payer, submitted for processing by the Medicare fiscal intermediary (FI) or carrier that serves the physician, practitioner, facility, supplier or other health care provider. No other transactions, including changes, adjustments or appeals to the initial claim are required to be submitted electronically.

Exemptions. Certain entities may be waived from the requirement to bill Medicare electronically. These entities include:

•  No method available - This applies:

A. To Medicare beneficiaries, since they cannot be expected to have the capability to submit Medicare claims electronically; and

B. When the electronic transactions standards adopted by the Secretary do not support all of the information necessary to pay the claim. Three situations meet this category:

1. Roster billing of vaccinations covered by Medicare;

2. Claims for payment under Medicare demonstration projects; and

3. Claims where Medicare is the secondary payer to two or more primary payers.

Medicare will issue further instructions in the future informing entities if these exceptions no longer apply.

•  Small providers - Those defined as a provider of services with fewer than 25 full-time equivalent employees; or a physician, practitioner, facility or supplier (other than a provider of services) with fewer than 10 full-time equivalent employees. A provider of services includes hospitals, critical access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, home health agencies, hospice programs or others as defined in ß1861(u) of the Social Security Act.

•  Entities with certain unusual circumstances - The Secretary may waive the Medicare claims submission requirement in certain situations. Three situations meet the definition of "unusual circumstances" and they are:

1. Submission of dental claims;

2. A service interruption, e.g., providers with breakdowns or interruptions in their telephone or communications service, are excluded; and

3. Upon demonstration to the Secretary of other extraordinary circumstances that preclude an entity from submitting Medicare claims electronically.

Those entities that feel they meet one of the following outlined exceptions to the electronic claims submission requirement exception should NOT make any special request to receive a waiver, except in extraordinary circumstances.

Enforcement. Absent an applicable exception, paper claims submitted to Medicare will not be paid.


As managed care, Medicare and Medicaid reimbursements rates continue to put downward pressure on cash flow, the ability to increase the efficiency of office operations and maximize payments on billed charges becomes even more important.

In fact, most health care providers total operations depend entirely upon timely receipt of their Medicare payments. Accordingly, attorneys providing services to such clients should immediately begin taking steps to convert the billing processes to the required electronic format or engage the services of a billing clearinghouse to take over such functions beginning on or after Oct. 16, 2003.

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