Comments on PRN 2012

June 13, 2012 Categories: Comments and Letters, Regulatory Issues


June 13, 2012

Robert Melillo, Chief
Legislation and Regulation
New Jersey Department of Banking and Insurance
20 West State Street
P.O. Box 325
Trenton, New Jersey 08625-0325


Sent via e-mail to:
RE: PRN 2012-066, Proposed Amendments: N.J.A.C. 11:22-1.1, 1.2, and 1.4


Dear Mr. Melillo,


The American Clinical Laboratory Association (“ACLA”) appreciates the opportunity to comment on the above-referenced rule proposed by the New Jersey Department of Banking and Insurance (“the Department”) and published at 44 N.J.R. 1179(a) in the April 16, 2012 issue of the New Jersey Register, Volume 44, Issue 8 (“the Proposed Rule”). ACLA is an association representing clinical laboratories located both in New Jersey and throughout the country, including local, regional, and national laboratories that submit claims to carriers licensed to issue health benefit plans in New Jersey, and would be affected directly by the Proposed Rule. Each year, ACLA member laboratories transmit millions of test results and HIPAA standard electronic transactions, including claims for reimbursement, for patients covered by New Jersey carriers.


For the reasons stated below, ACLA disagrees with many aspects of the Proposed Rule and urges the Department to withdraw it. ACLA has been an active participant in the development and implementation of national standards for the electronic transmission of laboratory test results and administrative transactions such as health care claims and supports their utilization. However, ACLA disagrees in principle with using the claims process as an enforcement mechanism for laboratory test reporting requirements and believes that the Proposed Rule presents several legal and administrative  problems.


The Proposed Rule is in conflict with a number of regulations implementing the Health Insurance Portability and Accountability Act, Pub. L. 104-191 (“HIPAA”) and could expose a laboratory to a federal transaction standard violation. As you know, HIPAA standard transaction regulations preempt state laws to the contrary unless an exception applies; to the extent that the Proposed Rule would be contrary to certain HIPAA regulations, no such exception is applicable here. Furthermore, the Proposed Rule’s  promulgation is premature in light of standards for electronic claim-related supplemental information currently under development by the U.S. Department of Health and Human Services (“HHS”). NTIS has stated that it is not ready to promulgate such standards at this time, rendering the Proposed Rule premature at best.


In addition to the legal problems presented by the Proposed Rule, the Proposed Rule would not be an effective way to implement the New Jersey Health Information Technology Act (“the NJHIT Act”).  The burden of complying with a requirement to provide “proof’ of electronic and non-electronic test result transmission as part of claim for reimbursement — if possible — would severely hamper efficient claim submission and adjudication. In the comments below, we provide more details about why the claims process is not an appropriate way to encourage electronic test result submission, how the Proposed Rule contravenes certain HIPAA regulations, and how aspects of the Proposed Rule would impede the primary objectives of the New Jersey legislature in passing the NJHIT Act.


A.   Laboratory test reporting requirements should not be enforced through the claims process.

ACLA strongly disagrees that the claims process is an appropriate mechanism for enforcing laboratory test reporting requirements. The Proposed Rule would amend the definition of “clean claim” found at N.J.A.C. 11:22-1.2(a) to add a sixth element: “for claims submitted for reimbursement of laboratory tests, that all test results have been submitted as required by N.J.A.C. 11:22-1.4(b).” That proposed provision, in turn, would require:


“All claims for reimbursement of laboratory tests shall include proof of electronic submission of the results of the tests to the carrier providing coverage for the tests. All such claims should also include either proof of electronic submission of the test results to the medical provider who ordered the tests if that medical provider has the capability to receive such results electronically, or proof of non- electronic submission of the test results to the medical provider who ordered the tests if that provider is not capable of receiving the data electronically.”


The Department has not given any justification rooted in the NJHIT Act for requiring that a laboratory provide a carrier with results for all laboratory tests for which reimbursement is sought, and the NJHIT Act does not include any requirement for the implementation of standards for the collection or reporting of laboratory claims — in fact, it does not mention claims or medical laboratories at all. The Department also has failed to explain how providing a carrier with proof of a non-electronic transmission to a medical provider would further the goals of the NJHIT.


Based on well-established principles of statutory construction,1 it appears that the Proposed Rule, as written, would require that the carrier receive laboratory test results electronically but that electronic submission to the medical provider is encouraged but not necessary. According to the Proposed Rule, claims “shall” include proof of submission of test results to the carrier, but claims “should” also include proof of electronic submission to the health care provider. This defies logic, and it underscores that the claims process is not an appropriate method to ensure that laboratories are transmitting laboratory results, when possible, to relevant health care providers.


B.   The Proposed  Rule does not conform to IUPAA administrative  requirements  and would be premature.

The Proposed Rule does not conform to certain HIPAA administrative requirements and would be preempted by some HIPAA regulations. HIPAA’s general transaction standards require the following: “[I]f a covered entity conducts, with another covered entity that is required to comply with a transaction standard adopted under this part (or within the same covered entity), using electronic media, a transaction for which the Secretary has adopted a standard under this part, the covered entity must conduct the transaction as a standard transaction.”2 Laboratories that conduct electronic transactions for which a standard has been adopted by HHS are “covered entities” under HIPAA.3


Laboratories are required to adhere to the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: Professional (837) transactions (“Xl2 837”) for electronic health care claims.4 This Federal standard for electronic health care claims, which is used by ACLA member laboratories who submit claims to New Jersey carriers, does not contemplate the inclusion of “proof’ of electronic and non-electronic test result transmission as part of the claim. In fact, there is no adopted standard for providing proof of a result transmission as part of a standard health care claim. The requirements of the Proposed Rule are not encompassed by the Xl2 837 transaction, and therefore, we are concerned that claims submitted with proof of test results transmission to a medical provider would not be standard transactions.


A standard adopted under HIPAA that is contrary to a state  law preempts  the  state  law unless an exception applies, but no such exception is applicable here.5 A H1PAA “standard” is a rule, condition, or requirement. A HIPAA standard is “contrary” to  state  law when  “a covered entity would find it impossible to comply with both the state and federal  requirements.”6  The standard transaction for health care claims  is the X12 837, which does not include proof of test result transmission, and therefore it would not be possible to comply  both  with  the  Xl2  837 standard and with the Proposed Rule. Further, none of the following exceptions would apply: the Secretary of HHS (“the Secretary”) makes a determination  about the necessity  of the state law or that it pertains to controlled substances; the state has a privacy standard more stringent than HIPAA privacy standards; the state law pertains to reporting for public health surveillance, investigation, or intervention; or state law requires a health plan to report certain information for an audit.7 Because none of the exceptions applies in this case, and because it would not be possible to comply both with the HIPAA standard and with the state law, the H1PAA transaction standard would preempt the application of the Proposed Rule as it pertains to claims submission. Moreover, the Proposed Rule would have the unintended consequence of subjecting the transacting covered entities (i.e., the laboratory and the carrier) to monetary penalties for failure to comply with the required Xl2 837 standard.


HHS is in the midst of proposing standards to govern health care claims attachments. HIPAA established the National Committee on Vital and Health Statistics (“NCVHS”) as the statutory committee to advise the Secretary on the adoption of standards and code sets for electronic transactions. Further, Section 1104 of the Patient Protection and Affordable Care Act, Pub. L. 111- 148, as amended by the Healthcare Education and Reconciliation Act, Pub. L 111-152 (collectively, “the Affordable Care Act”) called upon the Secretary to promulgate a standard transaction for health claims attachments and to ensure that such standard is effective no later than January 1, 2016. On November 17, 2011, the NCVHS Subcommittee on Standards held a hearing with industry on health claims attachments that included the Office of the National Coordinator for Health Information Technology (“ONC”). On March 2, 2012, NCVHS observed that “it is too early at this point to make a formal recommendation” on the adoption, implementation, and specification or operating rule of a health claim attachment.8 New Jersey’s claim submission requirements should be consistent with the additional standardization of transactions and the compliance date required under the Affordable Care Act to avoid duplicative and burdensome compliance standards.


C. The Proposed Rule includes provisions that are in conflict with HIPAA’s “minimum necessary” standard and with customary laboratory practice.

The Proposed Rule’s requirement that “all claims for reimbursement of laboratory tests shall include proof of transmission of the results of the test to the carrier providing coverage for the tests” is in conflict with the HIPAA’s “minimum necessary” standard and could cause laboratories as covered entities under HIPAA to violate HIPAA privacy regulations. The “minimum necessary” standard states: “When using or disclosing protected health information.. a covered entity must make reasonable efforts to limit protected health information to  the minimum necessary to accomplish the intended purpose of the use, disclosure, or request.”9 To the extent that the Proposed Rule requires delivery of all covered test  results to carriers,  without regard to (or identification of) the purpose of the disclosure, it effectively would mandate disclosure of protected health information (“PHI”) under circumstances in which it is impossible to determine whether the minimum necessary PHI is being disclosed. For that reason, such disclosure could be viewed by a patient or by the Department of Health and Human Services Office of Civil Rights as impermissible under HIPAA.


We note also that the NJHIT Act also states that “it is desirable to implement an electronic health  information  infrastructure.. .that  includes  standards  and  protocols  designed   to promote.. .patient privacy.” 10 Sharing PHI with carriers to effectuate unstated goals that may not be permissible purposes for disclosure of PHI under H1PAA without patient authorization would contradict this stated goal.


In principle, ACLA does not object to the electronic transmission of laboratory test results to the carrier providing coverage for the tests, to the extent that the test results are being sent for a purpose for which the patient’s authorization is not required under the HIPAA Privacy Rule (e.g., for payment or health care operations purposes of the recipient carrier.)  Where permitted by law, and subject to mutually acceptable interface and financial arrangements with the carrier, ACLA member laboratories provide such electronic test result transmissions to carriers already. ACLA’s objection is to the automatic inclusion of proof of transmission of the results as part of a claim and to the obligation to transmit electronically to the carrier all test results covered by the carrier, regardiless of whether the test results are to be used by the carrier in a way that is permissible under H1PAA, whether the carrier is capable of accepting test results electronically, and whether the carrier and the laboratory have established mutually acceptable interface and financial arrangements.


D.  The  Proposed   Rule  would   cause  serious  disruptions   to  current  laboratory  claims submission processes and would be extremely expensive for laboratories to implement.

Where laboratory test results currently are being sent by laboratories to carriers, they are sent after the submission of the claim for reimbursement; in many cases, the result transmission occurs 30 days or more after claim submission in a data transmission that covers many patients (not on a patient-by-patient basis, which would be inefficient both for the laboratory to send and for the carrier to receive). Obviously, it would be impossible for a laboratory to include proof of test result transmission in a claim when the test results are not sent to the carrier until the after the claim has been submitted. The proposed requirement therefore is inconsistent with customary industry practices that are acceptable to both laboratories and carriers.


The existing industry practice of providing laboratory test results to carriers after claim submission is more than merely the result of business preferences memorialized in contracts; it is designed also to help  ensure that test results are sent only to intended, authorized recipients. Occasional data entry errors are discovered and corrected during the billing process, which helps to ensure that test results are not sent to the wrong carrier. If a laboratory was forced to send test results to a carrier before submitting a claim — merely so that it could include proof of such delivery with the claim — the risk of test result disclosure to the wrong carrier would be increased and potentially could trigger breach notification requirements for both the laboratory and the carrier for the inadvertent disclosures of PHI.


Further, assuming that laboratories were forced to send test results to carriers before claims submission, it would be unnecessarily duplicative to require laboratories to provide proof that the test results were sent electronically to the carrier. A carrier should know without separate proof from a laboratory whether or not it had received test results from a laboratory for a particular claim.


Laboratory test result interfaces typically are custom-built to enable connectivity between very different laboratory information systems and carriers, and they can be quite expensive. Since laboratory reimbursement typically is based solely on performance of tests, allocation of the costs of the test result interfaces often is negotiated separately between laboratories and carriers. Likewise, the content, design, and functionality of interfaces also typically are subject to negotiation. In addition, they usually are subject to negotiated terms governing the transmission of clinical results to ensure privacy of PHI consistent with applicable laws, including the carrier’s authority to receive PHI, safeguards for maintaining the PHI, obligations in the event of a  security breach, and limitations on the carrier’s use of the PHI.


Laboratory data usually is maintained in laboratory information systems that are distinct from billing systems. Presumably, to comply with the Proposed Rule, laboratory information systems would have to be reprogrammed to notify laboratory billing systems not only that a test has been performed and therefore is ready to be billed to the carrier, but also that the test result has been transmitted electronically to the carrier and the ordering provider (or, if the ordering provider is incapable of receiving the results electronically, that the result has been transmitted to the provider by non-electronic means). The laboratory billing system also would have to be reprogrammed to include in claims whatever “proof’ of result transmission is deemed acceptable.’1 These reprogramming costs would be added to the costs of interface development and implementation.


The Department acknowledges that the initial costs of compliance with the proposed Rule may have a negative economic impact on laboratories and other stakeholders, but it argues that these costs may be recoverable under the Medicare and Medicaid incentives for “meaningful use” of electronic health record (“EHR”) technology provided for in the Health Information Technology for Economic and Clinical Health Act (“ITITECH Act”), which was part of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5. The Department further argues that any costs not recovered are outweighed by the ensuing savings and the increase in efficiency and accuracy that will result from the use of the proposed systems. However, the costs of compliance would not be offset for clinical laboratories, which are ineligible for HITECH “meaningful use” incentive payments. Further, the Department has offered no evidence that requiring proof of test result transmission in claims will produce any savings or increases in efficiency or accuracy. The opposite is likely to be true.


Just as laboratory information systems interface with carriers’ systems in a variety of ways, so too do they interface with health care providers’ EHRs in a variety of ways. There are many EHR vendors, and many of them require a laboratory to pay an interface fee to connect with an ordering provider through the vendor’s EHR solution. The Proposed Rule would require laboratories to enter into arrangements with every EHR vendor transacting with a physician who orders testing for a patient covered by a New Jersey carrier, regardless of whether the ordering provider is in New Jersey. The substantial initial and ongoing costs of compliance would be borne by laboratories with none of the economic benefit.


E.    It is unclear what “proof” of electronic submission must be included with a claim or who would make that determination.

It is not clear what would suffice as “proof’ of electronic submission of test results because the Proposed Rule does not explain this and gives no examples of such proof. Without knowing what kind of proof would be required, it is virtually impossible to assess the full impact of the Proposed Rule. There currently is no adopted HIPAA standard for providing proof of test result transmission as part of a standard health care claim. Instead of transmitting health care claims electronically, as is customary now, it is possible that laboratories would instead switch back to paper claims in order to include such proof, defeating the purpose of the NJHIT Act and HIPAA administrative simplification.   Without further clarification, there also will be as many different kinds of proof of test result transmission as there are laboratories submitting claims to New Jersey carriers, virtually assuring the proliferation of non-standard claims.


Finally, the Proposed Rule does not explain which entity or entities would bear responsibility for determining whether or not proof has been submitted with a claim and what would be the standard for judging whether the proof was adequate. It appears as though the Department may be contemplating that each carrier and/or its agents would be responsible for setting such standards pursuant to theft responsibility to “noti&…participating health care providers at least annually. ..a listing of the type of information and documentation that must be submitted with a claim, including a standardized claim form and any other claim submission requirements utilized by the carrier for both manually and electronically submitted claims.”12 This is problematic on many levels. First, carriers, like laboratories, have no direction from the Department as to what constitutes “proof” of electronic laboratory test result submission. Second, each carrier could establish different requirements and standards for proof. Third, the same regulation permits carriers to change required information and documentation with just 30 days’ notice.13  This would result in a far more fragmented, complicated, and expensive claim submission process for laboratories and for carriers.


F.  It is premature to require the use of SNOMED-CT and LOINC to report laboratory results to carriers and ordering providers.

ACLA believes it is premature to mandate the use of SNOMED-CT in reporting laboratory results to carriers or ordering providers, as the Department proposes  in N.J.A.C.  11:22-1.4(b)(2).’4 In July of 2010, the ONC said, “We do not believe that the industry and public health departments are currently able to support the use of SNOMED-CT..for reporting on a widespread basis,” and ACLA agrees the same is true today)5 SNOMED-CT should be used  only for the purposes  for which it is well-suited, such as reporting laboratory results to public health entities,  not to health plans or ordering providers. Many ordering providers are unfamiliar with SNOMED-CT,  so reporting laboratory results this way would be pointless. Furthermore, most laboratory test results cannot be reported using SNOMED-CT, and public health reporting is limited to a small subset of laboratory test results.


Likewise, while many laboratories currently have the capability to transmit LOINC codes electronically, the ability of carriers and ordering provider systems to receive LOINC codes still is quite limited. How would laboratories be able to comply with a requirement to submit LOINC codes if the receiving systems are unable to accommodate them? What purpose would such a requirement serve?


G.    It is unclear how some aspects of the Proposed Rule would apply to non-electronic test result transmission.

Proposed N.J.A.C. 11:22-1.4(b)(2) states that “All laboratory test results shall either  be reported electronically [using HL7 and SNOMED-CT and LO1NC codes, when applicable) .or be reported in compliance with the standards propounded by the Direct Project.” It is unclear how this statement would apply to laboratory test results transmitted non-electronically. Such non-electronic transmission clearly is contemplated in proposed N.J.A.C. 11:22-1.4(b). If the Department does not withdraw this rule in its entirety, ft should amend proposed N.J.A.C. I 1:22-1.4(b)(2) to clarify that all laboratory test results reported electronically shall be reported in accordance with  applicable Federal  standards.


If the Proposed Rule were fmalized as written and an ordering provider did not have the ability to receive test results electronically, would SNOMED-CT and LO]NC codes have to be displayed on the hard copy test result report to ensure compliance? If so, ft would add a layer of complexity to the report that would be neither useful nor desired by the ordering provider. Not only are those codes unnecessary for  providing treatment to a patient, but they could hinder the provider’s ability to read the laboratory test report.


The Direct Project, which uses a transport protocol similar to secure email, is still in pilot testing and has not been adopted fornially for laboratory test result exchange. To the extent that the Direct Project propounds standards, the Proposed Rule appears to require their use in the event that test results are not reported electronically. Again, it is not clear how standards that may be developed as part of a project designed to promote an alternative method of electronic test result reporting would apply to the non-electronic test result reporting that the Proposed Rule contemplates for certain ordering providers.


H.   The  Department  should  align its  administrative  changes with  the  substance  and effective dates of final changes to Federal standards.

Proposed N.J.A.C. 11:22-1.4(b)(3) would establish a process for changes to the New Jersey standards for electronic submission of laboratory test results upon the “publication of changes to the standards for electronic submission made by the [ONCI or by [CMS]…” that would consist of a notice of  administrative changes published in the New Jersey Register and posted on the Department’s website. The Proposed Rule is not clear whether the Department would issue such a notice upon publication of an ONC or CMS proposed rule or only upon publication  of a final rule by one of the Federal agencies. ACLA  believes  the  Department  should publish  such a change notice only after publication of a relevant ONC or CMS final rule. Moreover, the effective date of any such changes in New Jersey law would have to be on or after the effective date of the change in Federal law on which ft is based.


I. The Proposed Rule does not include an effective date.

The Proposed Rule does not include an effective date. However, it is clear that if the Proposed Rule were to be implemented as proposed, a significant transition period following the publication of a final rule would be necessary for laboratories to comply (if compliance were possible at all).


J. Conclusion

For the foregoing reasons, ACLA urges the Department to withdraw the Proposed Rule in its entirety. ACLA shares the Department’s goal of achieving more widespread adoption and utilization of standardized electronic laboratory test result transmission, but the Proposed Rule would not advance that goal effectively or efficiently.


JoAnne Glisson

Senior Vice President, ACLA


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