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Rule2024-29138

Administrative Simplification: Modifications of Health Insurance Portability and Accountability Act of 1996 (HIPAA) National Council for Prescription Drug Programs (NCPDP) Retail Pharmacy Standards; and Modification of the Medicaid Pharmacy Subrogation Standard

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Published

December 13, 2024

Effective

February 11, 2025

Issuing agencies

Health and Human Services Department

Abstract

This final rule adopts updated versions of the retail pharmacy standards for electronic transactions adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). These updated versions are modifications to the currently adopted standards for the following retail pharmacy transactions: health care claims or equivalent encounter information; eligibility for a health plan; referral certification and authorization; and coordination of benefits. This final rule also adopts a modification to the standard for the Medicaid pharmacy subrogation transaction.

Full Text

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<title>Federal Register, Volume 89 Issue 240 (Friday, December 13, 2024)</title>
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[Federal Register Volume 89, Number 240 (Friday, December 13, 2024)]
[Rules and Regulations]
[Pages 100763-100789]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29138]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 162

[CMS-0056-F]
RIN 0938-AU19

Administrative Simplification: Modifications of Health Insurance
Portability and Accountability Act of 1996 (HIPAA) National Council for
Prescription Drug Programs (NCPDP) Retail Pharmacy Standards; and
Modification of the Medicaid Pharmacy Subrogation Standard

AGENCY: Office of the Secretary, Department of Health and Human
Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule adopts updated versions of the retail pharmacy
standards for electronic transactions adopted under the Administrative
Simplification subtitle of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA). These updated versions are
modifications to the currently adopted standards for the following
retail pharmacy transactions: health care claims or equivalent
encounter information; eligibility for a health plan; referral
certification and authorization; and coordination of benefits. This
final rule also adopts a modification to the standard for the Medicaid
pharmacy subrogation transaction.

DATES:
Effective Date: This final rule is effective on February 11, 2025.
The incorporation by reference of certain publications listed in the
rule is approved by the Director of the Federal Register beginning
February 11, 2025. The incorporation by reference of certain other
publications listed in the rule was approved by the Director as of
March 17, 2009.
Compliance Date: Compliance with this final rule is required
beginning February 11, 2028.

FOR FURTHER INFORMATION CONTACT:
Geanelle G. Herring, (410) 786-4466.
Christopher S. Wilson, (410) 786-3178.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Severability

A. Purpose

We published a proposed rule titled ``Administrative
Simplification: Modifications of Health Insurance Portability and
Accountability Act of 1996 (HIPAA) National Council for Prescription
Drug Programs (NCPDP) Retail Pharmacy Standards; and Adoption of
Pharmacy Subrogation Standard'' (hereafter referred to as the November
2022 proposed rule) that appeared in the November 9, 2022, Federal
Register (87 FR 67634). In that rule, we proposed to adopt
modifications to the retail pharmacy and Medicaid subrogation
standards. This final rule adopts modifications to standards for
electronic retail pharmacy transactions and the Medicaid pharmacy
subrogation transaction adopted under the Administrative Simplification
subtitle of the Health Insurance Portability and Accountability Act of
1996 (HIPAA).
1. Need for the Regulatory Action
The modified standards adopted in this rule will benefit the health
care industry by offering more robust data exchange and workflow
automation, enhanced patient safety, improved coordination of benefits,
and expanded financial fields, so that entities may not have to
manually enter free text, split claims, or prepare and submit a paper
Universal Claim Form. The current retail pharmacy standards adopted in
2009 remain unchanged. In 2018, the National Committee on Vital and
Health Statistics (NCVHS) recommended that HHS adopt more recent
standards to address evolving industry business needs. Consistent with
the NCVHS recommendations and collaborative industry and stakeholder
input, we believe the updated retail pharmacy standards we are adopting
are sufficiently mature for adoption and that covered entities are
ready to implement them.
2. Legal Authority for the Regulatory Action
Through subtitle F of title II of HIPAA, Congress added to title XI
of the Social Security Act (the Act) a new Part C, titled
``Administrative Simplification,'' which requires the Secretary of the
Department of Health and Human Services (the Secretary) to adopt
standards for certain transactions to enable health information to be
exchanged more efficiently and to achieve greater uniformity in the
transmission of health information. More specifically, section 1174 of
the Act requires the Secretary to review the adopted standards and
adopt modifications to them, including additions to the standards, as
appropriate, but not more frequently than once every 12 months, unless
the Secretary determines that the modification is necessary in order to
permit compliance with the standard, thus providing the legal authority
for this regulatory action.

B. Summary of the Major Provisions

The provisions in this final rule adopt the following
modifications: the NCPDP Telecommunication Standard Implementation
Guide, Version F6 (Version F6) and equivalent NCPDP Batch Standard
Implementation Guide, Version 15 (Version 15) and NCPDP Batch Standard
Subrogation Implementation Guide, Version 10 (Version 10). These
updated standards will replace the currently adopted NCPDP
Telecommunication Standard Implementation Guide, Version D, Release 0
(Version D.0) and the equivalent NCPDP Batch Standard Implementation
Guide, Version 1, Release 2 (Version 1.2), and NCPDP Batch Standard
Medicaid Subrogation Implementation Guide, Version 3, Release 0
(Version 3.0).
Version 3.0 was adopted to support Federal and State requirements
for State Medicaid agencies to seek reimbursement from the health plan
responsible for paying the pharmacy claim after the State Medicaid
agency has paid the claim on behalf of the Medicaid recipient.
In the November 2022 proposed rule, we proposed to broaden the
scope of the subrogation transaction to apply not only to State
Medicaid agencies but to

[[Page 100764]]

all health plans, such as Medicare Part D, State assistance programs,
and commercial health plans, attempting to recover reimbursement from
the responsible payer, and to rename the transaction the Pharmacy
subrogation transaction. At Sec. 162.1902(b), we proposed to adopt
Version 10 to replace Version 3.0 as the standard for the subrogation
transaction. This would have been a modification for State Medicaid
agencies, and for non-Medicaid health plans this would have been the
adoption of an initial standard.
However, compelling comments to the November 2022 proposed rule
persuaded us to adopt Version 10 solely for State Medicaid agencies.
While we are not adopting Version 10 for non-Medicaid health plans in
this final rule, they are permitted to use the standard

C. Summary of Effective and Compliance Dates

The policies adopted in this final rule are effective 60 days after
publication of the final rule in the Federal Register.
In the November 2022, proposed rule, we proposed that all covered
entities would need to comply with Version F6, Version 15, and Version
10 beginning 24 months after the effective date of the final rule. For
Version F6 and Version 15, we are adopting a later compliance date than
we had proposed, and are including an 8-month transition period:
<bullet> Starting August 11, 2027, all covered entities, as agreed
to by trading partners, may use either Version D.0 and Version 1.2 or
Version F6 and Version 15 for 8 months as a transition period prior to
full compliance, which begins 36 months after the effective date of the
final rule.
<bullet> All covered entities must be in compliance with Version F6
and Version 15 beginning February 11, 2028.
As noted previously and discussed in section III. of this final
rule, we are adopting Version 10 to apply solely to State Medicaid
agencies. This final rule adopts a compliance date for State Medicaid
agencies to comply with Version 10 that aligns with the compliance date
for Version F6 and Version 15:
<bullet> Starting August 11, 2027, State Medicaid agencies, as
agreed to by trading partners, may use Version 3.0 or Version 10 for 8
months as a transition period prior to full compliance, which begins 36
months after the effective date of the final rule.
<bullet> State Medicaid agencies must be in compliance with Version
10 beginning February 11, 2028.

D. Summary of Costs and Benefits

The overall cost for affected HIPAA covered entities--independent
and non-independent pharmacies, pharmacy benefit plans, and State
Medicaid agencies--to move to the updated versions of the retail
pharmacy transaction standards and the Medicaid pharmacy subrogation
transaction standard will be approximately $386.3 million. The cost is
based on the need for such entities to engage in technical development,
implementation, testing, and initial training to be prepared to meet a
compliance date beginning February 11, 2028. As discussed in the
November 2022, proposed rule, we believe that HIPAA covered entities,
or their contracted vendors, have already largely invested in the
hardware, software, and connectivity necessary to conduct the
transactions with the updated versions of the retail pharmacy standards
and the Medicaid pharmacy subrogation standard.

E. Severability

This final rule adopts updated versions of currently adopted
standards for numerous provisions under aspects of the Administrative
Simplification subtitle of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA). Subtitle F of Title II of HIPAA
added a new Part C to Title XI of the Social Security Act (sections
1171 through 1179 of the Act, 42 U.S.C. 1320d through 1320d-8). These
updated versions are modifications to the currently adopted standards
for the following retail pharmacy transactions: health care claims or
equivalent encounter information; eligibility for a health plan;
referral certification and authorization; and coordination of benefits.
This final rule also adopts a modification to the standard for the
Medicaid pharmacy subrogation transaction. The provisions adopted would
be distinct provisions. We believe these distinct processes may
function independently of each other. To the extent a court may enjoin
any part of a final rule, the Department of Health and Human Services
(HHS) intends that other provisions or parts of provisions should
remain in effect, ensuring the continuity of the regulations. We intend
that any provision of the requirements described in this section or in
another section held to be invalid or unenforceable by its terms or as
applied to any person or circumstance would be construed so as to
continue to give maximum effect to the provision permitted by law
unless such holding is one of utter invalidity or unenforceability, in
which event we intend that the provision would be severable from the
other finalized provisions described in this section and in other
sections and would not affect the remainder thereof or the application
of the provision to persons not similarly situated or to dissimilar
circumstances.

II. Background

A. Legislative Authority for Administrative Simplification

This background discussion presents a history of statutory and
regulatory provisions that are relevant for the purposes of this final
rule.
Congress addressed the need for a consistent framework for
electronic transactions and other administrative simplification issues
in HIPAA (Pub. L. 104-191, enacted on August 21, 1996). Through
subtitle F of title II of HIPAA, Congress added to title XI of the Act
a new Part C, titled ``Administrative Simplification,'' which required
the Secretary of the Department of Health and Human Services (the
Secretary) to adopt standards for certain transactions to enable health
information to be exchanged more efficiently and to achieve greater
uniformity in the transmission of health information. For purposes of
this and later discussion in this final rule, we sometimes refer to
this statute as the ``original'' HIPAA.
Section 1172(a) of the Act states that ``[a]ny standard adopted
under [HIPAA] shall apply, in whole or in part, to . . . (1) A health
plan. (2) A health care clearinghouse. (3) A health care provider who
transmits any health information in electronic form in connection with
a [HIPAA transaction],'' which are collectively referred to as
``covered entities.'' Generally, section 1172 of the Act requires any
standard adopted under HIPAA to be developed, adopted, or modified by a
standard setting organization (SSO). In adopting a standard, the
Secretary must rely upon recommendations of the NCVHS, in consultation
with the organizations referred to in section 1172(c)(3)(B) of the Act,
and appropriate Federal and State agencies and private organizations.
Section 1172(b) of the Act requires that a standard adopted under
HIPAA be consistent with the objective of reducing the administrative
costs of providing and paying for health care. The transaction
standards adopted under HIPAA enable financial and administrative
electronic data interchange (EDI) using a common structure, as opposed
to the many varied, often proprietary, transaction formats on which
industry had previously relied and that, due to lack

[[Page 100765]]

of uniformity, engendered administrative burden.
Section 1173(g)(1) of the Act, which was added by section 1104(b)
of the Patient Protection and Affordable Care Act (Affordable Care
Act), Pub. L. 111-148), further addresses the goal of uniformity by
requiring the Secretary to adopt a single set of operating rules for
each HIPAA transaction. Section 1171(9) of the Act defines operating
rules as ``the necessary business rules and guidelines for the
electronic exchange of information that are not defined by a standard
or its implementation specifications.'' Section 1173(g)(1) of the Act
requires operating rules to be consensus-based and reflect the
necessary business rules that affect health plans and health care
providers and the manner in which they operate in accordance with HIPAA
standards.
Section 1173(a) of the Act requires that the Secretary adopt
standards for financial and administrative transactions, and data
elements for those transactions, to enable health information to be
exchanged electronically. The original HIPAA provisions require the
Secretary to adopt standards for the following transactions: health
claims or equivalent encounter information; health claims attachments;
enrollment and disenrollment in a health plan; eligibility for a health
plan; health care payment and remittance advice; health plan premium
payments; first report of injury; health claim status; and referral
certification and authorization. The Affordable Care Act additionally
required the Secretary to adopt standards for electronic funds
transfers transactions. Section 1173(a)(1)(B) of the Act requires the
Secretary to adopt standards for any other financial and administrative
transactions the Secretary determines appropriate. Section 1173(a)(4)
of the Act requires that the standards and operating rules, to the
extent feasible and appropriate: enable determination of an
individual's eligibility and financial responsibility for specific
services prior to or at the point of care; be comprehensive, requiring
minimal augmentation by paper or other communications; provide for
timely acknowledgment, response, and status reporting that supports a
transparent claims and denial management process; describe all data
elements in unambiguous terms, require that such data elements be
required or conditioned upon set terms in other fields, and generally
prohibit additional conditions; and reduce clerical burden on patients
and providers.
Section 1174 of the Act requires the Secretary to review the
adopted standards and adopt modifications to them, including additions
to the standards, as appropriate, but not more frequently than once
every 12 months, unless the Secretary determines that the modification
is necessary in order to permit compliance with the standard.
Section 1175(a)(1)(A) of the Act prohibits health plans from
refusing to conduct a transaction as a standard transaction. Section
1175(a)(1)(B) of the Act also prohibits health plans from delaying the
transaction or adversely affecting or attempting to adversely affect a
person or the transaction itself on the grounds that the transaction is
in standard format. Section 1175(b) of the Act provides for a
compliance date not later than 24 months after the date on which an
initial standard or implementation specification is adopted for all
covered entities except small health plans, which must comply not later
than 36 months after such adoption. If the Secretary adopts a
modification to a HIPAA standard or implementation specification, the
compliance date for the modification may not be earlier than 180 days
following the date of the adoption of the modification. The Secretary
must consider the time needed to comply due to the nature and extent of
the modification when determining compliance dates and may extend the
time for compliance for small health plans if he deems it appropriate.
Sections 1176 and 1177 of the Act establish civil money penalties
(CMPs) and criminal penalties to which covered entities may be subject
for violations of HIPAA Administrative Simplification provisions. HHS
administers the CMPs under section 1176 of the Act and the U.S.
Department of Justice administers the criminal penalties under section
1177 of the Act. Section 1176(b) of the Act sets out limitations on the
Secretary's authority and provides the Secretary certain discretion
with respect to imposing CMPs. This section provides that no CMPs may
be imposed with respect to an act if a penalty has been imposed under
section 1177 of the Act with respect to such act. This section also
generally precludes the Secretary from imposing a CMP for a violation
corrected during the 30-day period beginning when an individual knew
or, by exercising reasonable diligence would have known, that the
failure to comply occurred.

B. Prior Rulemaking

We published a final rule entitled ``Health Insurance Reform:
Standards for Electronic Transactions'' that appeared in the August 17,
2000, Federal Register (65 FR 50312) (hereinafter referred to as the
Transactions and Code Sets final rule). That rule implemented some of
the HIPAA Administrative Simplification requirements by adopting
standards for electronic health care transactions developed by SSOs,
and medical code sets to be used in those transactions. We adopted X12
Version 4010 standards for administrative transactions, and the
National Council for Prescription Drug Programs (NCPDP)
Telecommunication Standard Version 5.1 for retail pharmacy transactions
at 45 CFR part 162, subparts K through R.
Since initially adopting the HIPAA standards in the Transactions
and Code Sets final rule, we have adopted a number of modifications to
them. The most extensive modifications were adopted in a final rule
titled ``Health Insurance Reform; Modifications to the Health Insurance
Portability and Accountability Act (HIPAA) Electronic Transaction
Standards'' that appeared in the January 16, 2009, Federal Register (74
FR 3296) (hereinafter referred to as the 2009 Modifications final
rule). Among other things, that rule adopted updated X12 and NCPDP
standards, moving from X12 Version 4010 to X12 Version 5010, and
Telecommunication Standard Version 5.1 and equivalent Batch Standard
Implementation Guide Version 1, Release 1, to Telecommunication
Standard Version D.0 and Version 1.2. In that rule, we also adopted
Version 3.0 for the Medicaid pharmacy subrogation transaction. Covered
entities were required to comply with these standards beginning on and
after January 1, 2012, with the exception of small health plans, which
were required to comply on and after January 1, 2013.
In the Transactions and Code Sets final rule, we defined the terms
``modification'' and ``maintenance.'' We explained that when a change
is substantial enough to justify publication of a new version of an
implementation specification, such change is considered a modification
and must be adopted by the Secretary through regulation (65 FR 50322).
Conversely, maintenance describes the activities necessary to support
the use of a standard, including technical corrections to an
implementation specification (65 FR 50322). Maintenance changes are
typically corrections that are obvious to readers of the implementation
guides, not controversial, and essential to implementation as such, in
the February 20, 2003 final rule (68 FR 8334) titled, ``Health
Insurance Reform: Security Standards''.
Maintenance changes to Telecommunication Standard Version

[[Page 100766]]

D.0 were identified by the industry, balloted and approved through the
NCPDP, and are contained in a document titled ``Telecommunication
Version D and Above Questions, Answers and Editorial Updates,'' that
can be accessed free of charge from the NCPDP website's HIPAA
Information Section, at <a href="https://member.ncpdp.org/Member/media/pdf/VersionDQuestions.pdf">https://member.ncpdp.org/Member/media/pdf/VersionDQuestions.pdf</a>. In an October 13, 2010, Federal Register notice
titled ``Health Insurance Reform; Announcement of Maintenance Changes
to Electronic Data Transaction Standards Adopted Under the Health
Insurance Portability and Accountability Act of 1996'' (75 FR 62684),
the Secretary announced the maintenance changes and the availability of
the Telecommunication Standard Version D.0 Editorial and how it then
could be obtained. The document is a consolidated reference for
questions that have been posed based on the review and implementation
of Version D.0.
In a final rule titled ``Administrative Simplification:
Modification of the Requirements for the Use of Health Insurance
Portability and Accountability Act of 1996 (HIPAA) National Council for
Prescription Drug Programs (NCPDP) D.0 Standard,'' that appeared in the
January 24, 2020 Federal Register (85 FR 4236) (hereafter referred to
as the Modification of Version D.0 Requirements final rule), the
Secretary adopted a modification of the requirements for the use of the
Quantity Prescribed (460-ET) field Version D.0. The modification
required covered entities to treat the Quantity Prescribed (460-ET)
field as required where a transmission uses Version D.0 for a Schedule
II drug for the following transactions: (1) health care claims or
equivalent encounter information; (2) referral certification and
authorization; and (3) coordination of benefits.
In that rulemaking, the Secretary noted that the NCPDP had
published an updated telecommunication standard implementation guide,
the October 2017 Telecommunication Standard Implementation Guide,
Version F2 (Version F2), that, among other changes, revised the
situational use of a not used field to specify an even broader use of
the Quantity Prescribed (460-ET) field. The change described the
Quantity Prescribed (460-ET) field as ``required only if the claim is
for a controlled substance or for other products as required by law;
otherwise, not available for use.'' We explained that we chose not to
adopt Version F2 at that time because, given the public health
emergency caused by the opioid crisis and the urgent need to find ways
to yield data and information to help combat it, we believed it was
more appropriate to take a narrow, targeted approach while taking
additional time to evaluate the impact of a new version on covered
entities.

C. Standards Adoption and Modification

The law generally requires at section 1172(c) of the Act that any
standard adopted under HIPAA be developed, adopted, or modified by an
SSO. Section 1171 of the Act defines an SSO as an SSO accredited by the
American National Standards Institute (ANSI), and specifically mentions
the NCPDP (the SSO associated with this final rule), that develops
standards for information transactions, data, or any standard that is
necessary to, or will facilitate the implementation of, Administrative
Simplification. Information about the NCPDP's balloting process, the
process by which it vets and approves the standards it develops and any
changes thereto, is available on its website, <a href="http://www.ncpdp.org">http://www.ncpdp.org</a>.
1. Designated Standards Maintenance Organizations (DSMOs)
In the Transactions and Code Sets final rule, the Secretary adopted
procedures to maintain and modify existing, and adopt new, HIPAA
standards and established a new organization type called the
``Designated Standard Maintenance Organization'' (DSMO). Regulations at
45 CFR 162.910 provide that the Secretary may designate as a DSMO an
organization that agrees to conduct, to the satisfaction of the
Secretary, the functions of maintaining the adopted standard, and
receiving and processing requests for adopting a new standard or
modifying an adopted standard. In a notice titled ``Health Insurance
Reform: Announcement of Designated Standard Maintenance Organizations''
(65 FR 50373), which appeared in the August 17, 2000 Federal Register
concurrently with the Transactions and Code sets final rule, the
Secretary designated the following six DSMOs: X12, NCPDP, Health Level
Seven, the National Uniform Billing Committee (NUBC), the National
Uniform Claim Committee (NUCC), and the Dental Content Committee (DCC)
of the American Dental Association.
2. Process for Adopting Initial Standards, Maintenance to Standards,
and Modifications to Standards
As noted previously, in general, HIPAA requires the Secretary to
adopt standards that have been developed by an SSO. The process for
adopting a new standard or a modification to an existing standard is
described in the Transactions and Code Sets final rule (65 FR 50344)
and implemented at Sec. 162.910. Under Sec. 162.910, the Secretary
considers recommendations for proposed modifications to existing
standards, or a proposed new standard, if the recommendations are
developed through a process that provides for: open public access;
coordination with other DSMOs; an appeals process for the requestor of
the proposal or the DSMO that participated in the review and analysis
if either of the preceding were dissatisfied with the decision on the
request; an expedited process to address HIPAA content needs identified
within the industry; and submission of the recommendation to the NCVHS.
Any entity may submit change requests with a documented business
case to support its recommendation to the DSMO. The DSMO receives and
manages those change requests, including reviewing them and notifying
the SSO of its recommendation for approval or rejection. If the changes
are recommended for approval, the DSMO also notifies the NCVHS and
suggests that a recommendation for adoption be made to the Secretary.
The foregoing processes were followed with respect to the standards
modifications finalized in this rule, which stemmed from the following
change requests the NCPDP submitted to NCVHS: (1) DSMO request 1201
that requested replacing Version D.0 and Version 1.2 with the Version
F2 and Version 15; (2) DSMO request 1202 that requested replacing
Version 3.0 with Version 10 to be used by Medicaid plans only; and (3)
DSMO request 1208 that updated DSMO request 1201, and requested
adopting Version F6, instead of Version F2.
3. NCVHS Recommendations
The NCVHS, which was established by statute in 1949, serves as an
advisory committee to the Secretary and is statutorily conferred a
significant role in the Secretary's adoption and modification of HIPAA
standards. In 2018, the NCVHS conducted 2 days of hearings seeking the
input of health care providers, health plans, clearinghouses, vendors,
and interested stakeholders regarding Version F2 as a potential
replacement for Version D.0, and Version 15 as a potential replacement
for Version 1.2. Testimony was also presented in support of replacing
Version 3.0 with Version 10. In addition to the NCPDP, organizations
submitting testimony included the Centers for Medicare & Medicaid
Services on behalf of the Medicare Part D program, the

[[Page 100767]]

National Association of Chain Drug Stores (NACDS), Ohio Medicaid,
Pharmerica, CVS Health, and an independent pharmacy, Sam's Health
Mart.\1\
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\1\ <a href="https://ncvhs.hhs.gov/meetings/agenda-of-the-march-26-2018-hearing-on-ncpdp-standards-updates/">https://ncvhs.hhs.gov/meetings/agenda-of-the-march-26-2018-hearing-on-ncpdp-standards-updates/</a>.
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In a letter dated May 17, 2018, the NCVHS recommended that the
Secretary adopt Version F2 to replace Version D.0, Version 15 to
replace Version 1.2, and Version 10 to replace Version 3.0.\2\ As
discussed in section III.B. of this final rule, we did not propose to
adopt Version F2 based on that NCVHS recommendation in our proposed
rule titled ``Administrative Simplification: Modification of the
Requirements for the Use of Health Insurance Portability and
Accountability Act of 1996 (HIPAA) National Council for Prescription
Drug Programs (NCPDP) D.0 Standard'' that appeared in the Federal
Register on January 31, 2019 (84 FR 633) because we believed that
proposing a modification to the retail pharmacy standards required
further evaluation, including an assessment of the impact of
implementing the modification, given the many significant changes a
version change would require covered entities to undertake.
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\2\ <a href="https://ncvhs.hhs.gov/wp-content/uploads/2018/08/Letter-to-Secretary-NCVHS-Recommendations-on-NCPDP-Pharmacy-Standards-Update.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2018/08/Letter-to-Secretary-NCVHS-Recommendations-on-NCPDP-Pharmacy-Standards-Update.pdf</a>.
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The NCVHS held a later hearing, on March 24, 2020, to discuss
Change Request 1208 that recommended that Version F6 supplant Version
F2, in regard to the NCVHS's prior recommendation that the Secretary
adopt Version F2. During the hearing, the NCPDP noted that Version F6
had resolved several key limitations of Version F2. Significantly, with
respect to the number of digits in the dollar field, Version F2 did not
support dollar fields of $1 million or more. Since the NCVHS's May 17,
2018, recommendation, several new drugs priced at, or in excess of, $1
million have entered the market, and researchers and analysts
anticipate that over the next several years, dozens of new drugs priced
similarly or higher may enter the market, while hundreds of likely
high-priced therapies, including gene therapies that target certain
cancers and rare diseases, are under development. To meet emerging
business needs, the NCPDP updated the Telecommunication Standard to
support dollar fields equal to, or more than, $1 million and made other
updates including enhancements to improve coordination of benefits
processes, prescriber validation fields, plan benefit transparency,
codification of clinical and patient data, harmonization with related
standards, and controlled substance reporting, that necessitated the
new Version F6. The March 24, 2020, NCVHS meeting transcript and
testimony is available at <a href="https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/">https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/</a>.
In a letter dated April 22, 2020,\3\ the NCVHS recommended that the
Secretary adopt Version F6 to replace Version D.0, provide a 3-year
pre-implementation window allowing, but not requiring, covered entities
to use Version F6 beginning at the end of the 3 years, and allowing
both Versions F6 and D.0 to be used for an 8-month period until a
compliance date of May 1, 2025, when only Version F6 and Version 15
could be used. The recommendation letter stated that allowing the
industry to use either Version D.0 or Version F6 would enable an
effective live-testing and transition period. The NCVHS recommended
that the Secretary adopt Batch Standard Versions 15 and 10, as it had
previously recommended in May 2018. The NCVHS has not, as of
publication of this final rule, recommended that the Secretary adopt
any other version of the NCPDP Telecommunication Standard, such as
Version F7, which is discussed in section III. A. of this final rule.
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\3\ <a href="https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf</a>.
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III. Provisions of the Final Rule and the Analysis of and Responses to
Public Comments

In response to the November 2022 proposed rule, we received 25
timely pieces of correspondence, which resulted in over 47 unique
comments from a variety of commenters, including a pharmacy standards
development organization, data content committees, health plans, health
care companies, professional associations, technology companies, and
individuals.
In this section of this final rule, we present our proposals, a
summary of the comments received, and our responses to the comments.
Some of the public comments received in response to the November 2022
proposed rule were outside of the scope of the proposed rule and are
not addressed in this final rule.

A. Adoption of the NCPDP Telecommunication Standard Implementation
Guide Version F6 (Version F6) and Equivalent Batch Standard
Implementation Guide, Version 15 (Version 15) for Retail Pharmacy
Transactions

In the November 2022 proposed rule, we proposed to adopt a
modification to the current HIPAA retail pharmacy standards for the
following transactions: (1) health care claims or equivalent encounter
information; (2) eligibility for a health plan; (3) referral
certification and authorization; and (4) coordination of benefits. We
indicated that moving to Version F6 and Version 15 would: allow for the
accommodation of drug therapies priced at or in excess of $1 million;
include information needed for prior authorizations and enhancements to
the drug utilization review (DUR) fields; include new coordination of
benefits segment fields that would improve the identification of the
previous payer and its program type, such as Medicare, Medicaid,
workers compensation, or self-pay programs, which would eliminate the
need to use manual processes to identify this information; and
accommodate business needs to comply with other industry requirements,
among other benefits. For the full discussion, we refer readers to the
November 2022 proposed rule (87 FR 67638 and 67639).
We proposed that covered entities conducting the following HIPAA
transactions would be required to use Version F6:
<bullet> Health care claims or equivalent encounter information
(Sec. 162.1101).
++ Retail pharmacy drug claims.
++ Retail pharmacy supplies and professional claims.
<bullet> Eligibility for a health plan (Sec. 162.1201)--Retail
pharmacy drugs.
<bullet> Referral certification and authorization (Sec.
162.1301)--Retail pharmacy drugs.
<bullet> Coordination of benefits (Sec. 162.1801)--Retail pharmacy
drugs.
We note that, as is the case with Version D.0, Version F6 is
specifically designed for communication between retail pharmacies and
health plans, as described in the NCPDP Version F6 Telecommunication
Standard Implementation Guide \4\ and equivalent NCPDP Version 15 Batch
Standard Implementation Guide. Specifically, the implementation guides
for Version F6

[[Page 100768]]

and Version 15 specify that those standards support transmissions to
and from ``providers'' and indicate that a provider ``may be a retail
pharmacy, mail order pharmacy, doctor's office, clinic, hospital, long-
term care facility, or any other entity, which dispenses prescription
drugs.'' This means the use cases for the retail pharmacy drugs
transactions addressed in this Final Rule, including the HIPAA
requirements for the use of Version F6 and Version 15 we are finalizing
here, apply only to providers that dispense prescription drugs. That
is, they do not apply to providers that do not dispense prescription
drugs.
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\4\ The Telecommunication Standard Implementation Guide Version
F6 (Version F6), January 2020 and equivalent Batch Standard
Implementation Guide, Version 15 (Version 15) October 2017, National
Council for Prescription Drug Programs.
---------------------------------------------------------------------------

Comment: A number of commenters supported HHS's proposal to modify
the currently adopted retail pharmacy standards from Version D.0 and
Version 1.2 to Version F6 and Version 15. Commenters remarked that it
has been over 10 years since Version D.0 was adopted for retail
pharmacy transactions and agreed that the enhancements in the updated
standards will better meet the present business needs of pharmacies and
payers, thereby reducing administrative burden. While most commenters
agreed that adopting Version F6 is appropriate, several suggested that
HHS instead adopt an even more recently updated NCPDP Telecommunication
Standard, Version F7 (Version F7). Commenters remarked that the only
difference between Version F6 and Version F7 is the addition of a field
that distinguishes between administrative gender (used to indicate the
sex a person has listed with their insurance company) and clinical sex
at birth. Commenters noted that the Patient Gender Code field (305-C5)
in Version F6 includes ``Non-Binary'' as an optional value. While the
``Non-Binary'' value can be used to support various eligibility and
enrollment business functions, it does not support gender-specific
coverage rules or clinical patient safety functions. To address this
clinical concern, the NCPDP updated Version F6 to Version F7 by adding
a new field called Sex Assigned at Birth (F32-W8). Commenters urged HHS
to consider the need for this field and adopt Version F7 in this final
rule.
Response: We thank the commenters for their support of our proposal
to adopt Version F6. While we appreciate comments urging us to adopt
Version F7 instead of Version F6, as of the publication date of this
final rule there is no DSMO recommendation to adopt Version F7 in
accordance with the processes specified in Sec. 162.910(c), nor has
the NCVHS been asked to consider updating its prior recommendation to
adopt Version F6. While we did not discuss adopting Version F7 in the
November 2022 proposed rule, we may address it in future rulemaking.
therefore, covered entities will be required to use Version F6 only.
Comment: A commenter acknowledged that adoption of Version F6 would
reduce industry burden by replacing several free text fields with
discrete data fields, thus allowing the industry to automate additional
pharmacy workflows. However, another commenter expressed concern that
the replacement of free text fields with discrete data fields in
Version F6 would result in the permitted information being too limited
or not well-defined. The commenter noted that poorly designed discrete
data fields potentially lead to unclear communication and confusion,
which has patient-safety implications. The commenter said that before
deploying the discrete data fields, the standard should be broadly
tested by both physicians and pharmacists to ensure clear
communication.
Response: HHS consulted with the NCPDP, the SSO associated with
this rulemaking, and was advised that the free text fields were not
removed from Version F6. Rather, the free text fields still exist in
Version F6 and can be used when additional text is needed for
clarification or detail or when a discrete data field does not exist.
But, Version F6 provides a format to convey situational plan benefit
information, previously sent using free text fields, in discrete data
fields. The discrete data fields, which are on the claim response from
the payer or PBM to the pharmacy, enable the plan benefit information
to be better communicated to the pharmacy, which in turn enables the
pharmacy to better communicate to the patient and the prescriber. The
use of discrete data fields improves communication of the plan benefit
information because it does not rely on the pharmacist reading and
interpreting free text. The types of plan benefit information that are
communicated via free text fields in Version D.0 and that will be sent
in discrete data fields in Version F6 are dates (for example, next
available fill date and prior authorization date), minimum/maximum
ages, minimum/maximum quantity, minimum/maximum day supply, minimum/
maximum dollar amounts, and maximum or remaining fills. Additional
detail about formulary alternatives, if applicable, will be
communicated via the new discrete data fields rather than via free
text. Such detail includes the required duration of therapy and plan
benefit tiers.
It is also important to note that since the new discrete data
fields are not codified, the information conveyed is not limited to, or
defined by, a set of values. A codified field is one that that requires
a value that is defined either in NCPDP's External Code List (ECL) or a
code set maintained by a non-NCPDP organization (for example SNOMED CT
values or ICD-10 code values), where only those values may be included
in the data field. The new discrete data fields do not require a
defined set of values--they are date fields or fields for a number
representing, for example, an age, quantity, or dollar amount.
In light of these updates, we continue to agree with the NCPDP's
assessment that replacing free text fields with discrete data fields
for clinical and non-clinical information will enhance patient safety
processes because there will be less room for interpretation, and,
therefore, likely less room for the error and confusion that can occur
with free text fields. By ensuring standardization and enabling
pharmacy and prescriber system automation and interoperability of
clinical information, critical pharmacy information will thus be more
readily identifiable and actionable. Lastly, we believe that adopting a
later compliance date, including an 8-month transition period, than
what we had proposed, will allow for the standard to be broadly tested
by health plans, pharmacies, and pharmacy benefit managers (PBM) to
ensure clear communication. We discuss the compliance dates in section
III.C. of this final rule.

B. Modification of the Pharmacy Subrogation Transaction Standard for
State Medicaid Agencies

In the November 2022 proposed rule (87 FR 67640), we discussed that
the 2009 Modifications final rule adopted Version 3.0 as the standard
for the Medicaid pharmacy subrogation transactions. We discussed how
State Medicaid agencies sometimes pay claims for which a third party
may be legally responsible, and where the State is required to seek
recovery. For the full 2009 Modifications final rule discussion, please
refer to 74 FR 3296.
1. Modification to the Definition of the Medicaid Pharmacy Subrogation
Transaction
The November 2022 proposed rule (87 FR 67640) proposed to broaden
the scope of the pharmacy subrogation transaction to apply to all
health plans, not just State Medicaid agencies. In doing so, we
proposed to modify the name and definition of the transaction to
reflect the proposed amended requirements. The transaction at 45 CFR
162.1901 is presently known as the

[[Page 100769]]

Medicaid pharmacy subrogation transaction and is described as the
transmission of a claim from a Medicaid agency to a payer for the
purpose of seeking reimbursement from the responsible health plan for a
pharmacy claim the State has paid on behalf of a Medicaid recipient.
The proposal would have changed the name of the transaction to the
Pharmacy subrogation transaction and defined it as the transmission of
a request for reimbursement of a pharmacy claim from a health plan that
paid the claim, for which it did not have payment responsibility, to
the health plan responsible for the claim.
Comment: Several commenters responded to our proposal to require
all health plans, not just State Medicaid agencies to use the HIPAA
standard for pharmacy subrogation transactions. Most of those
commenters disagreed with the proposal, but a few supported it and
specifically expressed support for our proposal to change the name and
definition of the transaction.
Response: We appreciate the commenters' input. As discussed in
section III. B.2. of this final rule, we are not finalizing our
proposal to require all health plans to use the HIPAA standard for
pharmacy subrogation transactions, and, therefore, we are not
finalizing our proposal to change the name and definition of the
transaction at Sec. 162.1901.
2. Application of NCPDP Batch Standard Subrogation Implementation
Guide, Version 10 to Non-Medicaid Health Plans
As discussed previously, the current HIPAA standard, Version 3.0,
only applies to State Medicaid agencies seeking reimbursement from
health plans responsible for paying pharmacy claims. In the November
2022 proposed rule (87 FR 67640), we stated that Version 3.0 does not
address business needs for other payers and that adopting a more
broadly applicable subrogation transaction standard would facilitate
the efficiency and effectiveness of data exchange and transaction
processes for all payers involved in post-payment of pharmacy claims
and support greater payment accuracy across the industry.
Comment: The majority of those who commented on our proposal to
adopt Version 10 for all health plans expressed support for the
adoption of Version 10 to replace Version 3.0 for State Medicaid
agencies but opposed our proposal to adopt the standard to apply to all
health plans. Commenters believe there are differences between Medicaid
subrogation and non-Medicaid subrogation that Version 10 does not
address, such as the different payer order rules that are required for
non-Medicaid subrogation. They asserted that making Version 10
available, but not required, for non-Medicaid subrogation transactions
would allow the pharmacy industry to determine if there are additional
data elements, use cases, payer order rules, and other guidance needed
for different subrogation transactions.
Response: We thank the commenters for their input. As noted in the
November 2022 proposed rule (87 FR 67640 and 67641), during the March
2018 NCVHS hearing, several testifiers noted that there was a need to
expand the use of the subrogation transaction beyond State Medicaid
agencies based on other payers'--such as Medicare Part D, State
assistance programs, or private health plans--business needs to seek
similar reimbursement that could not be accommodated by Version 3.0. A
testifier noted that a subrogation standard that addresses all payers
would allow the industry to have a standardized approach to
subrogation, which ultimately would reduce the manual processes that
health plans and pharmacies currently use. The testifier added that
requiring use of a subrogation standard by all health plans would allow
for better tracking of subrogation efforts, which would improve payment
accuracy and support cost containment efforts. Another testifier
advised that expanding the requirement for non-Medicaid health plans to
use the transaction standard would allow for any PBM to use the
standard. For these reasons, we proposed that all health plans would be
required to use Version 10 for pharmacy subrogation transactions.
Nonetheless, we have decided to adopt Version 10 for State Medicaid
agencies only and are not requiring non-Medicaid health plans to use a
subrogation standard for pharmacy subrogation transactions. While
reviewing commenters' concerns and suggestions, we consulted with the
NCPDP, the SSO associated with the rulemaking, and found that Version
10 does not address requirements for all non-Medicaid subrogation
situations, especially when these situations involve multiple
commercial health plans. In the ``Health Insurance Reform;
Modifications to the Health Insurance Portability and Accountability
Act (HIPAA) Electronic Transaction Standards'' August 2008 proposed
rule (73 FR 49751), we explained that Federal law requires, with some
exceptions, that Medicaid be the payer of last resort, which means that
health plans that are legally required to pay for health care services
received by Medicaid recipients are required to pay for services
primary to Medicaid. However, Medicaid agencies will sometimes pay
claims for which a third party is legally responsible. This occurs when
the Medicaid agency is not aware of the existence of another coverage,
and there are also specific circumstances for which State Medicaid
agencies are required by Federal law to pay claims and then seek
reimbursement afterward.
Payer order rules are critical in subrogation transactions since
they determine the primary or secondary insurer, and, in the case of
subrogation, a payer needs to know which insurer to bill for the
payment it incorrectly made. In retrospect, since payer order rules
aside from Medicaid are not well developed, we believe that Version 10
is not ready for adoption beyond State Medicaid agency subrogation
transactions. Although we are not adopting Version 10 for all health
plans in this rule, we note that the standard is available for use,
meaning covered entities may use it for non-Medicaid subrogation
transactions between willing trading partners.
3. Modification of the NCPDP Batch Standard Subrogation Implementation
Guide, Version 10 Transaction Standard for State Medicaid Agencies
In the November 2022 proposed rule (87 FR 67641), we proposed to
replace Version 3.0 with Version 10 as the standard for Pharmacy
subrogation transactions at Sec. 162.1902(b).
Comment: As noted previously, commenters agreed that Version 10
should replace Version 3.0 for Medicaid subrogation transactions but
opposed requiring its use by non-Medicaid health plans.
Response: We thank commenters for their input and suggestions. As
previously discussed, we are adopting the NCPDP Batch Standard
Subrogation Implementation Guide, Version 10 as the standard for
Medicaid pharmacy subrogation transactions at Sec. 162.1902(b) to
apply only to Medicaid pharmacy subrogation transactions.

C. Compliance and Effective Dates

1. Compliance Date for Version F6 and Version 15
Section 1175(b)(2) of the Act addresses the timeframe for
compliance with modified standards. The section provides that the
Secretary must set the compliance date for a modification at such time
as the Secretary determines appropriate, taking into account the time
needed to comply due to the nature and extent of the modification,
though

[[Page 100770]]

the compliance date may not be sooner than 180 days after the effective
date of the final rule. In the November 2022 proposed rule, we proposed
that covered entities would need to be in compliance with Version F6
and Version 15 for retail pharmacy transactions 24 months after the
effective date of the final rule, which we would reflect in Sec. Sec.
162.1102, 162.1202, 162.1302, and 162.1802.
In the November 2022 proposed rule (87 FR 67641), we acknowledged
that in its April 22, 2020, recommendation letter to the Secretary, the
NCVHS recommended the following implementation timelines and dates for
Version F6 and Version 15: \5\
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\5\ <a href="https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf</a>.
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<bullet> A 3-year pre-implementation window following publication
of the final rule, allowing (but not requiring) industry use beginning
at the end of the 3 years (or 36 months).
<bullet> Allow both Versions D.0 and F6 and their equivalent batch
standards, Version 1.2 and Version 15, to be used for an 8-month period
after the 36-month pre-implementation window, which the NCVHS suggested
would enable an effective live-testing and transition period.
<bullet> Require full compliance, that is, exclusive use of Version
F6, after the 8-month transition period, following the 36-month pre-
implementation window.
The NCVHS also recommended a compliance date in May, as opposed to
January, due to: seasonal organizational burdens associated with the
end-of-year timeframe, such as processing burden for annual benefit
plan changes, which are typically effective January 1; unavailability
of full staff during the holiday season preceding January 1; competing
administrative obligations requiring information technology (IT)/
operations and corporate resources such as closing out annual books and
compiling reports; and annual flu season peaks affecting both providers
and IT/operations staff.
After carefully considering the NCVHS's recommendation and industry
testimony on implementation timelines and dates, as well as the
potential benefits that would be derived from implementing Version F6
and Version 15 (discussed in section III.A.1. of the November 2022
proposed rule and section III. of this final rule) as soon as possible,
we chose not to propose a 3-year pre-implementation compliance window
or an 8-month transition period. Instead, we proposed a 24-month
compliance date. We believed that the industry was capable of
implementing the changes necessary to comply with the updated standards
by 24 months from the effective date of the final rule, in light of:
(1) limited industry testimony on any barriers specific to the
implementation of Version F6; (2) industry testimony on the
similarities between the level of effort necessary to implement Version
F2 and Version F6, as discussed in the NCVHS's 2018 recommendation; (3)
and the limited scope of the modification to only retail pharmacy
transactions.
Comment: The majority of commenters opposed the proposed 24-month
compliance date requirement for Version F6 and Version 15. In response
to our solicitation for information on barriers the industry may face
that would require additional time for implementation, commenters noted
that there were fewer than 100 data element changes between Version 5.1
and Version D.0, but more than 300 data element changes between Version
D.0 and Version F6 and their equivalent batch standards, a greater than
300-percent increase when comparing the two standards. Commenters
described that the volume of changes affect multiple business
functions, including, for example, transaction routing, pricing,
controlled substance billing, Medicare Part D long term care dispensing
frequencies, coordination of benefits, Medicare eligibility response,
and reversals, which require expansion of internal databases and system
updates to build the new data elements into automated claims
adjudication processes. Commenters noted the updates will require
extensive internal IT development and testing and external trading
partner testing across multiple databases and systems before covered
entities can conduct real-time exchanges in compliance with the
requirements.
In addition to the volume of required data element changes, several
commenters provided detailed information about the complexity of the
changes. For example, as discussed in section III. of the November 2022
proposed rule, Version F6 supports drugs priced at and in excess of $1
million. This change is specific to Version F6 and, therefore, was not
accounted for in any of the earlier industry testimony regarding
appropriate timeframes for moving from Version D.0 to Version F2.
Commenters noted that, to accommodate drugs priced at $1 million and
up, Version F6 includes 31 expanded pricing fields. To comply with
these changes, covered entities must ensure that their own systems and/
or their business associates' systems increase database capacity to
store the expanded field length and have the ability to recognize when
a ninth digit may be missing across all 31 expanded pricing fields.
Additionally, Version F6 eliminated 13 distinct patient pay fields
in Version D.0 and combined them into one qualified, repeating field.
Commenters suggested that changes necessary to move 13 distinct patient
pay fields into one pose complex implementation challenges. As a result
of these financial field changes, commenters believe that the coding
tasks required to ensure that accurate pricing data is included within
Version F6 and Version 15-compliant transactions will require
additional time. Further, commenters noted that should pricing fields
associated with coordination of benefits transactions not be coded
correctly as a result of rushed attempts to comply with Version F6 and
Version 15, it could result in communicating incorrect patient co-
insurance and out-of-pocket calculations to pharmacy providers.
Some commenters also raised concerns regarding the required changes
necessary for moving from Version 3.0 to Version 10. Version 10 uses an
8-digit Issuer Identifier Number (IIN) in place of the 6-digit Bank
Identification Number (BIN) required by Version 3.0.\6\ As discussed in
section III. of the November 2022 proposed rule (87 FR 67639), within a
pharmacy transaction the BIN is a field in the Telecommunication
Standard that is used for the routing and identification in pharmacy
claims. These commenters believed that there will need to be system
updates in order to recognize and process 8-digit IINs, and systems
will also need to be updated to map all 8-digit IINs to the former 6-
digit BINs. At one time, both Version 5.1 and Version D.0 required the
use of the BIN in a 6-digit, mandatory, fixed-length field located in
the header section of the transaction. However, since the adoption of
Version D.0, the International Organization for Standardization (ISO)
created the IIN, which was expanded to 8 digits (as opposed to the 6-
digit BIN) to increase the pool of possible identifiers. Version F6
includes an 8-digit, mandatory, fixed-length field to accommodate 8-
digit IINs and represents the first change to the header section of the
NCPDP Telecommunication standard since the adoption of Version 5.1 in
2002. However, commenters were concerned that, should system changes to
accommodate the new header

[[Page 100771]]

information not be implemented properly, it could result in
transactions being routed to the wrong PBMs, delaying patient access to
care.
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\6\ <a href="https://www.ncpdp.org/NCPDP/media/pdf/Resources/NCPDP-Processor-ID-">https://www.ncpdp.org/NCPDP/media/pdf/Resources/NCPDP-Processor-ID-</a>(BIN).pdf?ext=.pdf.
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Several commenters also suggested that additional time to comply
with Version F6 and Version 15 is needed to accommodate competing
regulatory demands on stakeholder resources. Specifically, commenters
identified the need to implement updated electronic prescribing
standards as proposed in the Medicare Program; Contract Year 2024
Policy and Technical Changes proposed rule,\7\ to develop Application
Programming Interfaces to support prior authorization transactions as
proposed in CMS's Advancing Interoperability and Improving Prior
Authorization Processes proposed rule,\8\ and to implement pharmacy
changes required under the Inflation Reduction Act of 2022.
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\7\ <a href="https://www.federalregister.gov/documents/2022/12/27/2022-26956/medicare-program-contract-year-2024-policy-and-technical-changes-to-the-medicare-advantage-program">https://www.federalregister.gov/documents/2022/12/27/2022-26956/medicare-program-contract-year-2024-policy-and-technical-changes-to-the-medicare-advantage-program</a>.
\8\ <a href="https://www.federalregister.gov/documents/2022/12/13/2022-26479/medicare-and-medicaid-programs-patient-protection-and-affordable-care-act-advancing-interoperability">https://www.federalregister.gov/documents/2022/12/13/2022-26479/medicare-and-medicaid-programs-patient-protection-and-affordable-care-act-advancing-interoperability</a>.
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Finally, most commenters suggested that the Secretary re-consider
and adopt the NCVHS's recommended implementation timeline, which
included an additional 8-month period after a 36-month compliance
timeframe, during which use of both Version D.0 and Version F6 and
their equivalent batch standards would be allowed. Ultimately, this
suggestion would result in a 44-month compliance timeframe. Commenters
explained that this type of flexibility would allow trading partners to
revert to Version D.0 should initial attempts to comply with Version F6
reveal gaps within specific use cases that require recoding and testing
efforts prior to a final compliance date. A commenter stated that
before finalizing the modification, HHS should consider permitting more
testing time between physicians and pharmacists to ensure clear
communication. Another commenter identified that the additional 8-month
period would be especially beneficial to small, independent pharmacies
and State health programs, which have traditionally had the most
difficulty in achieving compliance with new standards.
Response: We continue to believe that it is prudent to expedite
compliance with the updated standards to ensure that the industry can
realize value as soon as possible. However, commenters' detailed
explanation of the increased level of complexity in moving from Version
D.0 and Version 1.2 to Version F6 and Version 15, as compared to moving
from Version 5.1 and Version 1.1 to Version to D.0 and Version 1.2,
offered in response to the compliance timeframe proposals, persuaded us
to reconsider whether we were allowing sufficient time for covered
entities to make system and process updates to accommodate the changes
in the standards.
After carefully considering the public comments and reconsidering
the NCVHS's recommended implementation timelines and dates, we are
attempting to strike a balance by finalizing a longer compliance
timeline than we proposed, though not as long as that advocated by some
commenters, and also including a transition period. We are finalizing a
36-month compliance date, which includes an 8-month transition period
during which covered entities may use both Version D.0 and Version F6.
We premised our decision on the fact that most commenters echoed the
NCVHS's recommendations and suggested that HHS should provide a 3-year
pre-implementation window following publication of the final rule,
allowing (but not requiring) industry use beginning at the end of the 3
years and allowing both Versions D.0 and F6 to be used for an 8-month
period after the 3-year pre-implementation window, which would enable
an effective live testing and transition period. We anticipate that, in
order to enable covered entities to use both standards during the
permitted 8-month transition period, trading partner agreements will
have to be implemented so health plans, processors, PBMs and
pharmacies, and software vendors can set up the appropriate editing and
formatting of the transactions. With the exception of the requirements
set forth in Sec. 162.915, regarding certain specifics that may not be
included in them, we do not dictate the terms of trading partner
agreements but expect that health plans and pharmacies will continue to
collaborate on processes to adjudicate these claims during the
permitted 8-month transition.
Finally, it is important to note that HHS received comments
stressing the importance of covered entities taking steps as soon as
possible to become prepared to move to the updated versions of the
Telecommunication and Batch Standards so as to be ready soon to take
advantage of their significant improvements.
The 2009 Modifications final rule provided covered entities
approximately 36 months from the final rule's effective date to comply
with Version D.0 and Version 1.2, though the proposed rule had proposed
a 24-month compliance date. In support of the increased compliance
timeframe that we finalized, we stated that the competition for
resources to make system and business process changes necessary to
comply with both the modified pharmacy transactions standard and
Version 5010 at the same time necessitated the additional 12 months.
While we acknowledge that the level of complexity and volume of changes
between Version D.0 and Version F6 and their equivalent batch standards
far exceed those between Version 5.1 and Version D.0 and their
equivalent batch standards, they do not far exceed the volume and
complexity of changes necessary to concurrently comply with updated
pharmacy and X12 standards. As such, we do not believe these changes
necessitate a compliance timeframe exceeding 36 months. Therefore, we
disagree with commenters that a total of 44 months is necessary to
comply with the modified pharmacy transaction standards finalized in
this rule. Additionally, we are persuaded by commenters, and now agree
with the April 22, 2020, NCVHS recommendation letter, which was based
on consideration of industry feedback, that advised the Secretary to
consider an 8-month transition period. The NCVHS suggested that an 8-
month transition period is necessary and sufficient to support a
successful and timely transition, stating in its recommendation letter
that, should covered entities identify errors in their systems and
processes after moving Version F6 and Version 15 into production, the
transition period would allow them, if needed, to revert to Version D.0
and Version 1.2 to avoid stops in business functions and delays in
patient access to care.
As stated at the beginning of this preamble, this final rule is
effective 60 days after publication in the Federal Register. The
effective date is the date on which the policies set forth in this
final rule take effect. The compliance date is the date on which
covered entities are required to implement the policies adopted in this
rule. The final transition and compliance dates for Version F6 and
Version 15 at Sec. Sec. 162.1102, 162.1202, 162.1302 and 162.1802 are
as follows:
<bullet> All covered entities may, as agreed to by trading
partners, use either Version D.0 and Version 1.2 or Version F6 and
Version 15 beginning August 11, 2027.
<bullet> All covered entities must comply with only Version F6 and
Version 15 beginning February 11, 2028.

[[Page 100772]]

2. Compliance Dates for Version 10
As discussed in section III.B. of this final rule, we are not
finalizing our proposal to broaden the scope of the Medicaid pharmacy
subrogation transaction to apply to all health plans. Therefore, we
discuss here only the compliance date for State Medicaid agencies to
comply with Version 10.
As previously noted, with respect to State Medicaid agencies,
Version 10 is a modification of the currently adopted standard, Version
3.0. Section 1175(b)(2) of the Act requires the Secretary to set the
compliance date for a modification to a standard at such time as the
Secretary determines appropriate, but no sooner than 180 days after the
effective date of the final rule in which we adopt that modification.
We proposed to align the compliance date for Version 10 with the
compliance date for Version F6 and Version 15 to reduce confusion and
administrative burden. Therefore, we proposed to reflect at Sec.
162.1902(b) that State Medicaid agencies would be required to comply
with Version 10 beginning 24 months after the effective date of the
final rule.
Comment: A majority of commenters agreed that the implementation
timeline for Version 10 needs to align with the implementation timeline
for the NCPDP Telecommunication Standard. Commenters suggested a longer
implementation timeframe for Version F6 and Version 15 (described
earlier), they suggested the Secretary implement a 36-month compliance
timeframe, followed by an 8-month period where both Version 3.0 and
Version 10 could be used as agreed to by trading partners.
Response: HHS agrees that it is important to align the transition
period and compliance date for Version 10 and for the NCPDP
Telecommunication standard. We understand that without employing
burdensome workarounds it would be difficult for State Medicaid
agencies to comply with Version 10 for Medicaid subrogation
transactions prior to complying with F6 and Version 15. As such, we
believe that aligning the compliance timeframes will reduce confusion
for, and burden on, State Medicaid agencies. This includes establishing
an 8-month transition period where State Medicaid agencies may, as
agreed to by trading partners, use either Version 3.0 or Version 10.
The changes required for State Medicaid agencies to comply with Version
10 are minimal, as discussed in section III.B.3. of the November 2022
proposed rule.
After careful consideration of the comments received, at Sec.
162.1902, we are finalizing the compliance date for Version 10 as
beginning February 11, 2028, which aligns with the timeline we are
adopting for Version F6 and Version 15. In addition, at Sec. 162.1902,
we are finalizing that beginning August 11, 2027, which is 8 months
before the compliance date, State Medicaid agencies may, as agreed to
by trading partners, use either Version 3.0 or Version 10 for Medicaid
pharmacy subrogation transactions.

D. Incorporation by Reference

This final rule incorporates by reference the following
implementation guides at 45 CFR 162.920: (1) the Telecommunication
Standard Implementation Guide Version F6, January 2020, National
Council for Prescription Drug Programs; (2) the Batch Standard
Implementation Guide, Version 15, October 2017, National Council for
Prescription Drug Programs; and (3) the Batch Standard Subrogation
Implementation Guide, Version 10, September 2019, National Council for
Prescription Drug Programs.
The Telecommunication Standard Implementation Guide Version F6
provides a standard format that addresses data format and content,
transmission protocol, and other applicable requirements, for the
electronic submission between pharmacy providers, insurance carriers,
third-party administrators, and other responsible parties of the
following transactions, eligibility verification, claim and service
billing, prior authorization, predetermination of benefits, and
information reporting (the latter two categories are not HIPAA
transactions).
The Batch Standard Implementation Guide Version 15 provides
practical guidelines and ensures consistent implementation throughout
the industry of a file submission standard to be used between
pharmacies and processors, or pharmacies, switches, and processors,
when using the Telecommunication Standard framework.
The Batch Standard Subrogation Implementation Guide Version 10
provides the guidelines and process for payers and PBMs to communicate
to other payers' reimbursement requests for covered services paid to
pharmacy providers for which the other payers are responsible.\9\ This
implementation guide uses the Telecommunication Standard and the Batch
Standard as frameworks for exchange.
---------------------------------------------------------------------------

\9\ The September 2019 version is a republication to correct a
field name--433-DX Patient Paid Amount Reported field name corrected
to Patient Pay Amount Reported. We will make a reference to this
information in the ``incorporate by reference'' section.
---------------------------------------------------------------------------

The materials we incorporate by reference are available to
interested parties and can be inspected at the CMS Information Resource
Center, 7500 Security Boulevard, Baltimore, MD 21244-1850. The
implementation specifications for the retail pharmacy standards, and
for the batch standard for the Medicaid pharmacy subrogation
transaction, may be obtained from the NCPDP, 9240 East Raintree Drive,
Scottsdale, AZ 85260. Telephone (480) 477-1000; FAX (480) 767-1042.
They are also available through the internet at <a href="http://www.ncpdp.org">http://www.ncpdp.org</a>.
NCPDP charges a fee for all of its Implementation Guides. Charging for
such publications is consistent with the policies of other publishers
of standards.

IV. Out of Scope Comments

We received several comments on subjects that were outside the
scope of the November 2022 proposed rule. We do not directly respond to
those types of comments, but we acknowledge them. They are summarized
in the following list:
<bullet> A commenter suggested that HHS consider expanding the
Referral Certification and Authorization transaction (Sec. 162.1301)
in order to provide a clear breakdown of the contractual cost of
medication before a rebate or the patient cost (copay or deductible) is
paid by the health plan. Another commenter expressed that, in order to
address these costs, pharmacies should be able to disclose to the
patient the lowest cost option for the prescribed medication at the
pharmacy, which should include available discounted prescription drug
programs resulting in reduced patient cost that is sometimes lower than
when using the consumer's health insurance prescription drug benefit.
Another comment suggested that HHS should review drug costs first and
then consider streamlining drug dispensing.
<bullet> A commenter encouraged HHS to work with Congress to allow
Medicare beneficiaries to use pharmaceutical discount cards and coupons
the same way commercially insured consumers may.
<bullet> A few commenters expressed concern that retail pharmacies
and health plans may pass the cost of implementing Version F6 to
consumers by increasing the costs consumers pay for prescription drugs,
thereby increasing the cost of health insurance premiums.
<bullet> A commenter was concerned that the costs associated with
the proposals

[[Page 100773]]

will raise taxes at a time when inflation is at an all-time high.
<bullet> A commenter requested that the cost to update electronic
health records and e-prescribing platforms to reflect these changes not
be passed on to physicians.
<bullet> A commenter expressed concern that if the updated pharmacy
standards are adopted, it will limit the use of paper that some retail
pharmacies continue to utilize. The commenter explained that pharmacies
that do not have access to ample technology, or those that are
unfamiliar with the use of technology, would be disadvantaged by these
proposals. Therefore, the commenter recommended that the best solution
would be to allow pharmacies the flexibility to choose whether to use
Version F6 or paper-based claims based on their business practice or
customer base.

V. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 required that we solicit comment on the following issues:
<bullet> The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
<bullet> The accuracy of our estimate of the information collection
burden.
<bullet> The quality, utility, and clarity of the information to be
collected.
<bullet> Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.

A. Submission of Paperwork Reduction Act (PRA)-Related Comments

In this rule, we are finalizing the sections that contain proposed
``collection of information'' requirements as defined under 5 CFR
1320.3(c) of the PRA's implementing regulations. If regulations impose
administrative costs on reviewers, such as the time needed to read and
interpret this final rule, then we should estimate the cost associated
with regulatory review. We estimate there are currently 104 affected
entities (which also includes PBMs and vendors). In the November 2022
proposed rule, we assumed each entity will have four designated staff
members who will review the entire final rule, meaning there would be
416 total reviewers. The particular staff members involved in this
review will vary from entity to entity but will generally consist of
lawyers responsible for compliance activities and individuals familiar
with the NCPDP standards at the level of a computer and information
systems manager. We did not receive any comments and are finalizing
this rule based on our assumptions.
Using the wage information from the Bureau of Labor Statistics
(BLS) for computer and information systems managers (code 11-3021), we
estimate that the labor cost of having two computer and information
systems managers reviewing this final rule is $99.93 per hour,
including fringe benefits and overhead costs (<a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>). Assuming an average reading speed, we estimate
that it would take each such individual approximately 4 hours to review
this final rule. The estimated cost per entity would therefore be
$799.44 (4 hours x $99.93 x 2 staff), and), and the total cost borne by
the 104 affected entities would be $83,142 ($799.44 x 104 entities).
We are also assuming that an entity would have two lawyers
reviewing this final rule. Using the wage information from the BLS for
lawyers (code 23-1011), we estimate that their cost of reviewing this
final rule would be $100.47 per hour per lawyer, including fringe
benefits and overhead costs (<a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>). Assuming an average reading speed, we estimate that it
will take approximately 4 hours each for two lawyers to review this
final rule. The estimated cost per entity would therefore be $803.76 (4
hours x $100.47 x 2 staff), and the total cost borne by the 104
affected entities would be $83,592 ($803.76 x 104 entities).

B. Modification to Retail Pharmacy Standards (Information Collection
Requirement (ICR))

The following requirements and burden associated with the
information collection requirements contained in Sec. Sec. 162.1102,
162.1202, 162.1302, 162.1802, and 162.1902 of this final rule are
subject to the PRA. However, this one-time burden was previously
approved and accounted for in the information collection request
previously approved under OMB control number 0938-0866 and titled
``CMS-R-218: HIPAA Standards for Coding Electronic Transactions.''
OMB has determined that the establishment of standards for
electronic transactions under HIPAA (which mandate that the private
sector disclose information and do so in a particular format)
constitutes an agency-sponsored third-party disclosure as defined under
the PRA (44 U.S.C. 3501 et seq.) (see 65 FR 50350 (August 17, 2000)).
With respect to the scope of its review under the PRA, however, OMB has
concluded that its review will be limited to the review and approval of
initial standards and to changes in industry standards that will
substantially reduce administrative costs (see 65 FR 50350 (August 17,
2000)). This document, which finalizes updates to adopted electronic
transaction standards that are being used, will constitute an
information collection requirement because it will require third-party
disclosures. However, because of OMB's determination, as previously
noted, there is no need for OMB review under the PRA.
Should our assumptions be incorrect, this information collection
request will be revised and reinstated to incorporate any additional
transaction standards and modifications to transaction standards that
were previously covered in the PRA package associated with OMB approval
number 0938-0866.

VI. Regulatory Impact Analysis

A. Statement of Need

This rule finalizes modifications to standards for electronic
retail pharmacy transactions and the Medicaid pharmacy subrogation
transaction adopted under the Administrative Simplification subtitle of
HIPAA. Under HIPAA, the NCVHS recommends standards to the Secretary
following review and approval of standards or updates to standards from
the applicable SSO--in this case, the NCPDP. The Secretary must
generally promulgate notice-and-comment rulemaking to adopt new or
updated standards before they can be utilized to improve industry
processes. On May 17, 2018, the NCVHS recommended that the Secretary
adopt Version F2 to replace Version D.0, Version 15 to replace Version
1.2, and Version 10 to replace Version 3.0. On April 22, 2020, the
NCVHS recommended that the Secretary adopt Version F6 in lieu of
Version F2, as well as the two batch standard recommendations set forth
in the May 2018 letter. These standards have been developed through
consensus-based processes and subjected to public comment which
indicated, without opposition, that the updates are required for
current and future business processes. Based on informal communication
with industry, should the updates to the standards not

[[Page 100774]]

be adopted, industry will need to continue using Version D.0 and
associated workarounds, including manual claims processing and claims
splitting for drugs priced at, or in excess of, $1 million.

B. Overall Impact

We have examined the financial impacts of this rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 14094 on Modernizing Regulatory Review (April 6,
2023), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (September
19, 1980; Pub. L. 96-354), section 1102(b) of the Act, section 202 of
the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-
4), Executive Order 13132 on Federalism (August 4, 1999), and the
Congressional Review Act (CRA) (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 14094 amends section 3(f) of Executive Order 12866 to define a
``significant regulatory action'' as an action that is likely to result
in a rule: (1) that may have an annual effect on the economy of $200
million or more in any one year, or adversely affecting in a material
way the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, territorial, or tribal
governments or communities; (2) creating a serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising legal or policy issues for which
centralized review would meaningfully further the President's
priorities or the principles set forth in the Executive order.
Based on our estimates, OMB's Office of Information and Regulatory
Affairs (OIRA) has determined this rulemaking is 3(f)(1) significant as
measured by the $200 million or more in any 1 year and meets the
criteria under 5 U.S.C. 804(2) (Subtitle E of the Small Business
Regulatory Enforcement Fairness Act of 1996, also known as the
Congressional Review Act). Accordingly, we have prepared an RIA and
Regulatory Flexibility Analysis (RFA) that, to the best of our ability,
presents the revised costs and benefits from the November 2022 proposed
rule and the impact it will have on small entities.
We did not receive any comments on the RIA or RFA presented in the
proposed rule. We adjusted our previous calculations to accommodate a
3-year implementation timeframe and updated our summary of the RFA
using updated business data. OMB has reviewed these final regulations
and provided an assessment of their impact. For details, we refer
readers to the discussion provided as follows.

C. Detailed Economic Analysis

While significant efforts were taken to ensure that the cost and
benefits captured for this rule were accurate, there are a few key
uncertainty factors that should be considered in reviewing the
regulatory impact analysis:
1. Data Sources
The analysis is based in part on industry research conducted in
2019 and 2020 by the CMS Alliance to Modernize Healthcare (CAMH), a
Federally Funded Research and Development Center, to assess the costs
and benefits associated with the potential adoption of Versions F2 and
F6. As part of this effort, CAMH did the following: identified the
relevant stakeholders that will be affected by the adoption of a new
HIPAA standard for retail pharmacy drug transactions; obtained expert
opinion, expressed qualitatively and quantitatively, on impacts on
affected stakeholders of moving from the current version to the updated
standards; and developed a high-level aggregate estimate of stakeholder
impacts, based on available information from public sources and
interviews. References to conversations with industry stakeholders in
the RFA and RIA are based on the interviews conducted by CAMH, unless
otherwise noted.
Because the industry has not conducted entity-specific financial
impact analyses for the adoption of the modified standards in this
rulemaking, the analysis relies on preliminary assessments from
industry stakeholders that the conversion to Version F6 will entail
between two to four times the level of effort as the previous HIPAA
pharmacy standard conversion from Version 5.1 to Version D.0. Moreover,
as discussed in connection with comments received on the 2009
Modifications proposed rule generally, many commenters mentioned
underestimated costs or overestimated benefits of transitioning to the
new versions, but few provided substantive data to improve the
regulatory estimates. In addition, we did not receive any comments on
assumptions in the November 2022 proposed rule. We are finalizing this
RIA using the estimates provided in public comments reported in the
2009 Modifications final rule to develop estimates of the true baseline
Version D.0 conversion costs applying a Version F6 multiplier.
With respect to benefits, we are not aware of any available
information or testimony specifically quantifying cost savings or other
benefits, although there is ample testimony supporting the business
need and benefits of the modified standards subject to this rulemaking.
2. Interpreting Cost
To implement Version F6, pharmacies and vendors will likely hire
coders, software development and testing specialists, and/or
consultants to modify their production code and will likely conduct
employee training to facilitate the use of the new version. These one-
time, out-of-pocket expenditures constitute a cost attributable to the
final rule. Costs to transmit transactions using the Version F6
standard after business systems have been modified to implement the
adopted standard, as well as costs to maintain those systems for
compliance with the standard, were not factored into the RIA. These
ongoing costs are currently incurred by affected entities that are
required to use the current standard and are attributable to conducting
electronic transactions in general. Therefore, we do not anticipate any
costs attributable to this final rule after the completion of the final
3-year compliance timeframe.
Based on oral and written NCVHS testimony by the retail pharmacy
industry and pharmacy management system vendors, it was suggested that
their software development process for a HIPAA standard conversion
would represent an opportunity cost. We believe Version F6
implementation will shift the priorities of technical staff at large
pharmacy firms, potentially delaying other improvements or projects. In
this scenario, the opportunity cost consists of the time-value of
delayed projects. Other pharmacies have an ongoing relationship with
their pharmacy management software vendors. The purchaser generally
obtains a hardware and software package with an ongoing agreement that
includes periodic payments for maintenance, updates, upgrades,
training, installation, financing, etc. Thus, the software is expected
to evolve, rather than being

[[Page 100775]]

just a one-time installation. The balance between upfront charges and
monthly maintenance fees more closely resembles a multiyear lease than
the one-time sale of an off-the-shelf application to a consumer. Thus,
the parties often contemplate an ongoing supplier relationship in which
maintenance and upgrades represent an opportunity cost.
Further, the RIA in the November 2022 proposed rule used average
costs to assess costs to each industry stakeholder because of their
availability and verifiability. We did not receive any responses to our
solicitation for comments related to these assumptions and cost
interpretations.
3. Anticipated Effects
The RIA summarizes the costs and benefits of adopting the following
standards:
<bullet> Telecommunications Standard Version F6, replacing Version
D.0, including equivalent Batch Standard Version 15 for health care
claims or equivalent encounter information; eligibility for a health
plan; referral certification and authorization; and coordination of
benefits transactions.
<bullet> Batch Standard Subrogation Implementation Guide, Version
10 replacing Batch Standard Medicaid Subrogation Implementation Guide,
Version 3, for Medicaid Pharmacy Subrogation Transactions.
This RIA amends the RIA from the November 2022 proposed rule, while
acknowledging any changes made in this final rule, to reflect a 3-year
compliance date following the effective date of this final rule. All
other information regarding the details supporting the cost-benefit
analysis for each of the standards listed previously remains unchanged.
Table 1 is the compilation of the estimated costs for all of the
standards adopted in this final rule. To allocate costs over the 3-year
implementation period, we use a 30-40-20-10 percent allocation of IT
upgrades and training expenses across the 3-year implementation period.
We believe that since the effective date of this final rule will be in
the latter part of 2024, costs will start at that time and go into
2027.

Table 1--Estimated Costs ($ millions) for Years 2024 Through 2033 for Implementation of Versions F6 and Version 10 (V10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost type Industry 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
F6................... Non-Independent Pharmacy 2,828.68 3,838.24 1,919.12 9.56 ....... ....... ....... ....... ....... ....... 95.6
Independent Pharmacy.... 18.3 24.4 1,212.2 6.1 ....... ....... ....... ....... ....... ....... 61.0
Health Plan............. ......... ......... ......... ....... ....... ....... ....... ....... ....... ....... .......
PBM..................... 3,838.4 5,151.2 2,525.6 12.8 ....... ....... ....... ....... ....... ....... 128.0
Vendors *............... 2,929.91 3,939.88 1,919.94 9.97 ....... ....... ....... ....... ....... ....... 99.7
SV10................. Health Plan............. ......... ......... ......... ....... ....... ....... ....... ....... ....... ....... .......
Medicaid Agency......... ......... ......... ......... ....... ....... ....... ....... ....... ....... ....... .......
PBM..................... ......... ......... ......... ....... ....... ....... ....... ....... ....... ....... .......
Vendors................. 0.66 0.8 0.4 0.2 ....... ....... ....... ....... ....... ....... 2.0
--------------------------------------------------------------------------------------------------------
Annual Total......... 115.89 154.52 77.26 38.63 ....... ....... ....... ....... ....... ....... 386.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Vendors'' as used in Table 1 refers to pharmacy management system and telecommunication system vendors.

4. Adoption of Version F6 (Including Equivalent Batch Standard Version
15)
The objective of this portion of the RIA is to summarize the costs
and benefits of implementing Version F6.
a. Affected Entities
Almost all pharmacies and all intermediaries that transfer and
process pharmacy claim-related information already use Version D.0 for
eligibility verification, claim and service billing, prior
authorization, predetermination of benefits, and information reporting
transaction exchanges (the latter two categories are not HIPAA-standard
transactions). Pharmacies utilize technology referred to as pharmacy
management systems that encode Version D.0 to submit these transactions
for reimbursement on behalf of patients who have prescription drug
benefits through health and/or drug plan insurance coverage (health
plans). These submissions are generally routed through two
intermediaries: a telecommunication switching vendor (switch) and a
specialized third-party administrator for the health plan, generally a
PBM.
Based on the business data from the CAMH, pharmacies have a bimodal
size distribution. About 99 percent of firms have a single location,
predominantly the traditional independent, owner-operated storefront,
and the remainder of fewer than 200 large firms operate an average of
approximately 150 establishments (locations) each. According to other
industry data, the largest five pharmacy corporations represent over
28,000 locations, and the two largest corporations each exceed 9,000
locations.\10\ However, the business data from the Pharmacy and Drug
Store segment (NAICS code 456110) may not capture all pharmacy firms
affected by this final rule.
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\10\ 2021 ``U.S. National Pharmacy Market Summary.'' IQVIA.
<a href="https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf">https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf</a>.
---------------------------------------------------------------------------

Pharmacies are typically classified by ownership as either not-
independent or independents. Health data analytics company IQVIA
estimated \11\ in 2021 that there were 66,083 pharmacies, of which 70
percent (46,964) were not-independent and 30 percent (19,119) were
independents. Retail pharmacies, which provide access to the general
public, comprised the clear majority of pharmacy facility types at 91
percent (59,395). The five largest pharmacy corporations owned about 40
percent (close to 29,000) of retail locations. The remaining 8 percent
of facility types included closed-door pharmacies, which provide
pharmaceutical care to a defined or exclusive group of patients because
they are treated or have an affiliation with a special entity such as a
long-term care facility, as well as central fill, compounding,
internet, mail service, hospital-based nuclear, and outpatient
pharmacies. Most of these pharmacy types may be included in Medicare
Part D sponsor networks. We are aware that the largest pharmacy
corporations are increasingly likely to operate multiple pharmacy
business segments (channels), such as retail, mail, specialty, and
long-term care. We did not receive any responses to our solicitation
for comments on whether there are meaningful distinctions in cost
structures or data sources to assist in quantifying entities in these
segments.
---------------------------------------------------------------------------

\11\ 2021 ``U.S. National Pharmacy Market Summary.'' IQVIA.
<a href="https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf">https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf</a>.

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[[Page 100776]]

As noted, pharmacies utilize pharmacy management systems to encode
Version D.0 for claim-related data exchanges via telecommunication
switches. Pharmacies that do not internally develop and maintain their
pharmacy management systems will contract with technology vendors for
these services. Based in part on communications with industry
representatives, such as the American Society for Automation in
Pharmacy, we identified approximately 30 technology firms providing
computer system design, hosting, and maintenance services in this
market. Based on testimony provided to the NCVHS, in 2018 this market
represented approximately 180 different software products.\12\
---------------------------------------------------------------------------

\12\ NCVHS Hearing on NCPDP Standards and Updates--March 26,
2018 Virtual Meeting. <a href="https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/">https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/</a>.
---------------------------------------------------------------------------

Pharmacies also contract with telecommunication switches for
transaction routing. In addition to routing, switches validate the
format of pharmacy transactions prior to transmission to the payer and
then check the payer response to make sure it is formatted correctly
for the pharmacy to interpret. Based on conversations with industry
representatives, we identified three telecommunication switches in this
segment of the market for consideration in the RIA.
Some healthcare providers that dispense medications directly to
their patients, known as dispensing physicians, may use Version D.0 to
submit these outpatient prescription drug claims on behalf of their
patients to health plans via health plans' PBMs. However, we do not
believe this practice to be widespread, and, therefore, do not account
for it in the RIA.
Health plans generally provide some coverage for outpatient
prescription drugs, but do not generally contract and transact with
pharmacies directly. Instead, health plans typically contract with PBM
firms to receive and process pharmacy claim transactions for their
enrollees. We believe even the relatively few health plans that
directly purchase prescription drugs for their own pharmacies utilize
PBMs, either owned or contracted, to manage billing for drugs and
pharmacy supplies. Likewise, the Department of Veterans Affairs (VA)
Pharmacy Benefits Management Services (VA PBM) runs its own PBM unit
for VA prescription drug operations.
In the CAMH report, there were 745 Direct Health and Medical
Insurance Carriers and 27 HMO Medical Centers--a total of 772 health
plan firms. Comparable data limited specifically to PBMs is not
available, but, based on Part D experience, we estimated that
approximately 40 firms conduct some PBM functions involved with
processing some pharmacy claim transactions. For the RIA, we assumed
that the VA PBM is in addition to these numbers, but that Medicaid
claim processing PBMs are included in the 40 firms. Industry trends
include significant consolidation of firms in these sectors and
vertical integration among health plans, PBMs, and pharmacies.
b. Costs
(1) Not-Independent Pharmacies
Pharmacies either internally develop or externally purchase
pharmacy management information systems to bill and communicate with
PBMs. Generally, the largest chain pharmacy firms internally develop
and manage their own pharmacy management system upgrades and
transaction standard conversion development, implementation, testing,
and training. However, based on public comments related to Version F6
submitted to the NCHVS, available at <a href="https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf</a>, we
are aware that some chain pharmacy firms (with as many as 1,800
pharmacies) utilize systems managed by third-party technology vendors.
The RIA identified the top 25 firms, based on 2021 IQVIA data, as well
as the VA and the Indian Health Service (IHS), as financing and
managing their pharmacy system conversion requirements internally, and
the remainder of chain pharmacy firms relying on their technology
vendor for technical development, implementation, testing, and initial
training.
Although they are not legally considered ``not-independent
pharmacies,'' we grouped IHS, tribal, and urban facilities with them
based on conversations with representatives from IHS that suggested
their costs would be roughly similar to those of not-independent
pharmacies. IHS manages a significant Federal health information
technology (HIT) system with a suite of modules, including pharmacy
dispensing and billing, that supports IHS pharmacies, as well as at
least 16 urban entities and 114 tribal entities. However, not all of
these entities include pharmacies. In contrast to other pharmacy
entities treated as chain pharmacies, we understand that additional
budget funding may be required for IHS to implement Version F6 within
the 3-year implementation timeframe. We estimated that IHS would incur
implementation costs at a level roughly equivalent to the VA system,
and that this expense will be a marginal cost for the IHS. We also
understand that approximately another 60 tribal entities and another 25
urban entities do not utilize the Federal system, but, rather, contract
with commercial vendors for HIT; although again, not all of these
entities operate their own pharmacies. As a result, we believe that
about 60 percent of these smaller IHS, tribal, and urban entities (51)
will rely on existing maintenance agreements with commercial vendors
for implementation and, like smaller not-independent pharmacies, will
incur direct implementation costs to support user training costs. We
solicited comments on our assumptions and did not receive any to the
contrary.
Based on the data from the CAMH report, there were 190 firms
classified as Pharmacies and Drug Stores with more than 500 employees,
representing 27,123 establishments. This classification does not
include grocery store pharmacies, which were elsewhere reported to
number 9,026 in 2017, and to be decreasingly offered by smaller grocery
chains in 2020.\13\ The business data from the CAMH report includes 72
firms classified as Supermarkets and Other Grocery (except Convenience)
Stores with more than 5,000 employees, which we assumed is a proxy for
the number of such firms still offering grocery store pharmacies in
2020. (The Census Bureau and Bureau of Labor Statistics [BLS] include
``big box'' department stores in this category.) Thus, the RIA assumed
a total of 262 (190+72) chain pharmacy firms based on this data. Since
we assume 25 firms would manage their Version F6 conversion costs
internally, we estimated the remainder of 237 (262-25) would rely upon
their technology vendor.
---------------------------------------------------------------------------

\13\ The Pharmacist Is Out: Supermarkets Close Pharmacy
Counters: Regional grocery chains get squeezed by consolidation,
shrinking profits in prescription drugs. By Sharon Terlep and Jaewon
Kang. Wall Street Journal. Updated Jan. 27, 2020 6:18 p.m. ET.
Accessed 10/13/2020 at: <a href="https://www.wsj.com/articles/the-pharmacist-is-out-supermarkets-close-pharmacy-">https://www.wsj.com/articles/the-pharmacist-is-out-supermarkets-close-pharmacy-</a>.
---------------------------------------------------------------------------

Based on conversations with a variety of industry representatives,
we understand that these larger firms retain the technical staff and/or
contractors that will undertake the Version F6 conversion efforts as an
ongoing business expense. Consequently, in

[[Page 100777]]

practice, the cost estimates developed in this section do not represent
new additional expenditures for these firms, but, rather, opportunity
costs for these resources that would otherwise be deployed on other
maintenance or enhancement projects.
As previously noted, industry estimates of the costs of conversion
from current Version D.0 to Version F6 have been in the form of
multiples of the costs for the Version 5.1 to Version D.0 conversion.
As a technical matter, we assumed these informal multiples account for
inflation. In a presentation to the NCVHS,\14\ the NCPDP indicated that
stakeholders' input indicated the level of effort and cost for Version
F6 to be at least double that of implementing NCPDP D.0. In public
comments to the NCVHS, a retail pharmacy association stated that
implementation costs would vary significantly among different pharmacy
corporations based on size, scope of services provided, and business
models, and that hardware, software, and maintenance costs allocated
specifically to Version F6 are estimated to be in the tens of millions
of dollars. One of the largest pharmacy corporations estimated costs
associated with Version F6 implementation to be three to four times
higher than the implementation of Version D.0, also in the tens of
millions of dollars. This commenter explained that much of these higher
costs is related to the expanded dollar fields, the structure of new
fields that require database expansion, and updates to many integrated
systems. Another of the largest pharmacy corporations with integrated
PBM functions offered preliminary estimates in the range of two to
three times greater than the Version D.0 conversion and noted that the
expanded dollar fields would impact all of the following systems: point
of service claim adjudication, all associated financial systems,
internal and external reporting programs, help desk programs, member/
client portals, and integrated data feeds. This same stakeholder stated
that the size of the transactions has also increased considerably due
to the inclusion of new segments and repeating fields and would require
new database storage hardware.
---------------------------------------------------------------------------

\14\ NCVHS Full Committee Hearing, March 24-25, 2020. <a href="https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/p">https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/p</a>.
---------------------------------------------------------------------------

The 2009 Modifications final rule discussed receiving estimates of
$1.5 million and $2 million from two large national pharmacy
corporations and elected to use an estimate of $1 million for large
pharmacy corporations and $100,000 for small pharmacy corporations in
the first implementation year. That rule also discussed a few public
comments disputing these large chain estimates,\15\ suggesting in one
case an alternative $2 million estimate inclusive of Version 5010
costs, and, in another, a 2-year cost of $4.9 million without
specification of which costs were included. Another retail pharmacy
commenter that self-identified as neither a not-independent nor an
independent estimated a cost of implementation of both standards of
$250,000, with 90 percent of the cost attributable to Version 5010 and,
thus, $25,000 attributable to Version D.0. Using these estimates, we
developed a rough estimate of the true baseline Version D.0 conversion
costs and then applied a Version F6 multiplier. Comments were not
received on our approach.
---------------------------------------------------------------------------

\15\ 74 FR 3319 (January 16, 2009).
---------------------------------------------------------------------------

We believe that Version F6 conversion costs for pharmacies
corporations will be differentiated in three general categories: (1)
the largest retail pharmacies operating in multiple pharmacy channels;
(2) other midsize retail pharmacies operating primarily in either the
open-door retail and/or another single pharmacy channel; and (3)
smaller retail pharmacies. Starting with the point estimates discussed
in the Version D.0 rulemaking and making some upward adjustments to
address potential underestimation, we estimate that--
<bullet> The two largest retail pharmacy corporations incurred a
baseline (Version D.0) cost of $2 million;
<bullet> The 23 midsize retail pharmacy corporations, the VA, and
IHS pharmacy operations incurred a baseline cost of $1 million; and
<bullet> The 237 smaller retail pharmacy corporations incurred a
baseline cost of $25,000.
Based on the 2x-4x multiplier estimates described previously, we
assumed a midpoint 3x multiplier for the estimated 25 larger retail
pharmacies corporations and the VA that will finance and manage their
system conversion requirements internally; consequently, we estimate
that over the 3-year implementation period--
<bullet> Two retail pharmacy corporations will incur all internal
Version F6 conversion costs of (3*$2 million), or $6 million each; and
<bullet> The 25 retail pharmacy-corporations (23 midsized chains,
the VA, and IHS) will incur all internal Version F6 conversion costs of
(3*$1 million), or $3 million each.
Based on a CAMH environmental scan conducted with industry
representatives, we understand that most pharmacy firms rely on their
pharmacy management system vendor for conversion planning, development,
implementation, testing, and initial (primary) training. CAMH's
environmental scan suggested that pharmacies would likely need to make
some investments in staff training but will likely not have an increase
in direct upfront software costs because system software updates are
usually factored into the ongoing contractual fees for operating and
maintenance costs of their pharmacy systems. Thus, we understand that
HIPAA modification efforts are generally already priced into vendor
maintenance agreements and fee structures, and we assume there will be
no increases specifically due to the Version F6 conversion in these
ongoing costs to pharmacies. We believe that primary training is
developed or purchased at the firm level and may be deployed at the
establishment level in secondary employee in-service training slots. We
believe that this training does not scale along with the conversion
costs, but, rather, with the size of the organization in terms of
locations and employees. As summarized in Table 2, using the generally
uncontested estimates from the Version D.0 rulemaking adjusted for
inflation,\16\ we estimate that: 237 smaller retail pharmacies and 51
urban and tribal entity pharmacies (a total of 288 pharmacies) would
incur Version F6 conversion training costs of ($25,000 x 1.20) or
$30,000 each on average, generally in the second year of the 3-year
implementation period.
---------------------------------------------------------------------------

\16\ Based on inflation from January 2010 to September 2020:
<a href="https://www.bls.gov/data/inflation_calculator.htm">https://www.bls.gov/data/inflation_calculator.htm</a>.

[[Page 100778]]

Table 2--Pharmacy Corporations' Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
D.0 Cost Inflation Adjusted D.0 D.0 Cost Conversion cost Number of Total F6
Version F6 conversion cost category baseline ($ in adjustment baseline ($ in multiplier for per entity ($ in affected conversion costs
by chain size millions) to baseline millions) Version F6 millions) entities ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All (largest)....................... 2.0 N/A 2.0 3 6.0 2 12.0
All (midsize)....................... 1.0 N/A 1.0 3 3.0 25 75.0
User Training (smaller)............. 0.025 1.2 0.03 N/A 0.03 288 8.6
-------------------------------------------------------------------------------------------------------------------
Total........................... ................ ........... ................ ................ ................ 315 95.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

(2) Independent Pharmacies
As noted previously, the 2021 IQVIA data included 66,083
pharmacies, of which 30 percent (19,119) were independently owned. We
recognize that this classification is not identical to the use of the
term independent community pharmacy; however, we are not aware of
publicly available data to help us segment this market further. We know
from the data in the CAMH environmental scan there were 19,044 pharmacy
firms with fewer than 500 employees, representing 20,901
establishments. Since we did not receive any comments on our
assumptions, for the purposes of this final rule, firms with more than
500 employees represent chains, and those with fewer than 500 employees
represent independently owned open- or closed-door pharmacies.
We understand that these smaller pharmacies predominantly rely on
their pharmacy system vendors for upgrades, including HIPAA standard
version conversion planning, development, implementation, testing, and
primary training. In return, they pay ongoing maintenance and
transaction fees. As discussed previously with respect to some chain
pharmacies, we understand that Version F6 conversion efforts will
already be priced into existing maintenance agreements and fee
structures. Therefore, we do not believe there will be increases in
these ongoing costs to independent pharmacies as the result of the
Version F6 conversion, and we believe pharmacy direct costs would
generally be comprised of training and other miscellaneous expenses. As
with retail pharmacies, we believe that primary training is developed
or purchased at the firm level and deployed at the establishment level
in secondary employee in-service training slots. We further assumed
that this training does not scale along with the conversion costs, but,
rather, with the size of the organization in terms of locations and
employees. For this reason, we believe that the few system users in
very small pharmacies would be trained directly by the pharmacy
management system vendor, and no secondary training costs will be
required for such small firms.
As noted previously, a commenter on the 2009 Modification proposed
rule \17\ that self-identified as neither a chain nor an independent
pharmacy estimated implementation costs of both Version 5010 and
Version D.0 standards of $250,000, with 90 percent of the costs
attributable to Version 5010. Thus, one non-chain pharmacy estimated
conversion costs for Version D.0 of about $25,000. Although we do not
know the size or complexity of this organization, this level would not
be inconsistent with our understanding that the costs of an NCPDP
Telecommunication Standard conversion will be borne by the pharmacy
management system vendors and that smaller pharmacy conversion costs
will consist primarily of user training expense. Referring to the 2017
Census business data, almost 90 percent (17,016 out of 19,044) of these
pharmacy firms had fewer than 20 employees, while the remainder (2,028)
had between 20 and 499. Therefore, we believe that 17,016 small
pharmacy firms will incur opportunity costs for employee time spent in
training and 2,028 pharmacy firms will incur secondary training
expenses. As summarized in Table 3, assuming baseline training costs
per independent pharmacy with 20 or more employees of $25,000, and a
cumulative inflation adjustment of 20 percent,\18\ we estimate that
2,028 independently owned pharmacies will incur Version F6 conversion
training costs of ($25,000 x 1.20) or $30,000 each on average, in the
first and second year of the 3-year implementation period.
---------------------------------------------------------------------------

\17\ 74 FR 3317 (January 16, 2009).
\18\ Based on inflation from January 2010 to September 2020
<a href="https://www.bls.gov/data/inflation_calculator.htm">https://www.bls.gov/data/inflation_calculator.htm</a>.

Table 3--Independent Pharmacy Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inflation Adjusted D.0 D.0 Cost Conversion cost Number of Total F6
Version F6 conversion cost D.0 Cost baseline adjustment baseline ($ in multiplier for per entity ($ in affected conversion costs
category ($ in millions) to baseline millions) Version F6 millions) entities ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
User Training................ 0.025 1.2 0.03 N/A 0.03 2,028 61
--------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Health Plans and PBMs
We believe that health plans should see minimal changes in their
operations and workflows between Version D.0 and Version F6. Health
plans contract with processors/PBMs for conducting online eligibility
verification, claim and service billing, predetermination of benefits,
prior authorization, and information reporting transaction exchange
types and transaction record storage. While health plans (or their
other vendors) supply PBMs with eligibility records and receive data
from PBMs containing data derived from claims, they are not typically
parties to the exchange of the HIPAA pharmacy transactions. Based on
NCVHS testimony with stakeholders and in the development of an
environmental scan on the impact of this update to the pharmacy
standards, we understand that HIPAA standard conversion costs are
already priced into ongoing contractual payment arrangements between
health plans and PBMs and will not be increased specifically in
response to the Version F6 conversion.

[[Page 100779]]

All PBMs will experience some impacts from the Version F6
conversion, involving IT systems planning and analysis, development,
and external testing with switches and trading partners. A PBM
commented to the NCVHS that the most significant impact will be the
expansion of the financial fields to accommodate very expensive drug
products with charges greater than $999,999.99. Another PBM processor
representative indicated in a conversation that the impact on payers/
processors would depend on the lines of business they support--that
entities supporting Medicare Part D processing will have the most work
to do but will also get the most value from the transition. The extent
to which these activities will be handled by in-house resources or
contracted out may vary by organization. Based on other conversations,
we understand that, from the PBM perspective, the Version F6 conversion
adds fields that increase precision and machine readability; rearranges
some things to make processing more efficient and flexible in the long
run; implements more efficient ways to accomplish workarounds that
payers already have in place (so the changes in the transactions would
map to back-end system fields and logic already in place); and involves
relatively few structural changes.
PBMs may manage prescription drug coverage for a variety of lines
of business, including commercial health plans, self-insured employer
plans, union plans, Medicare Part D plans, the Federal Employees Health
Benefits Program, State government employee plans, State Medicaid
agencies, and other \19\ fee-for-service entities. While details on
internal operating systems are proprietary, we believe that the three
largest PBMs that controlled 75 percent of 2018 market share \20\ (not
including the VA) have contractual agreements supporting all or most
drug coverage lines of business and host the most variants in legacy
operating platforms, customer-specific processing requirements, and
scope of customer service requirements--involving all the information
exchange types supported by the NCPDP Telecommunications Standard. In
the November 2022 proposed rule, we assumed that the remaining three of
the top six PBMs, responsible for another 20 percent of market share,
have lesser operating system complexity, but also provide services for
multiple lines of business and a full scope of information exchange
types. We also assumed that the VA PBM is comparable to these midsize
PBMs. We assumed that the remainder of the PBM market is comprised of
approximately 33 (40-7) smaller PBMs supporting one or more lines of
business and information exchange types. Since we did not receive
comments, we are moving forward with our assumptions.
---------------------------------------------------------------------------

\19\ Pharmacy Benefit Managers (PBMs): Generating Savings for
Plan Sponsors and Consumers. Prepared for the Pharmaceutical Care
Management Association (PCMA). February 2020. <a href="https://www.pcmanet.org/wp-content/uploads/2020/02/Pharmacy-Benefit-Managers-Generating-Savings-for-Plan-Sponsors-and-Consumers-2020-1.pdf">https://www.pcmanet.org/wp-content/uploads/2020/02/Pharmacy-Benefit-Managers-Generating-Savings-for-Plan-Sponsors-and-Consumers-2020-1.pdf</a>.
\20\ CVS, Express Scripts, and the Evolution of the PBM Business
Model. Drug Channels. May 29, 2019. <a href="https://www.drugchannels.net/2019/05/cvs-express-scripts-and-evolution-of.html">https://www.drugchannels.net/2019/05/cvs-express-scripts-and-evolution-of.html</a>.
---------------------------------------------------------------------------

Public commenters to the 2009 Modifications proposed rule regarding
the D.0 conversion, self-identifying as large PBMs, estimated that
costs for their upgrades would be more than $10 million and $11
million, respectively. As a result of these comments, we revised our
estimates up to $10.5 million for each large PBM company and maintained
the original assumption of $100,000 in conversion costs for smaller
specialty PBMs,\21\ as we received no comments critical of that
estimate. Based on updated data on market share, we believe more
segments in the PBM industry will account for the consolidation and
growth of midsize entities that comprise the second tier of market
share and assume their costs to be less than half those of the largest
PBMs due to lesser complexity of structure and operations. Therefore,
using the Version D.0 revised estimates as anchors, we believe the
following:
---------------------------------------------------------------------------

\21\ 74 FR 3320 (January 16, 2009).
---------------------------------------------------------------------------

<bullet> The largest three PBMs incurred baseline (Version D.0)
conversion costs of $10.5 million.
<bullet> The 3 next-largest PBMs and the VA PBM incurred baseline
conversion costs of $4 million.
<bullet> The remaining 33 PBMs incurred baseline costs of $500,000.
As previously noted, industry estimates of the costs of conversion
from Version D.0 to Version F6 have been expressed as multiples of two
to four times the costs for the Version 5.1 to Version D.0 conversion.
However, several PBM commenters to the NCVHS suggested the lower end of
this range. This would be consistent with our understanding that many
of the changes involve mapping current back-end work-around systems to
newly codified data, as opposed to building substantial new
functionality from scratch. However, expansion of all existing
financial fields to accommodate larger numbers will involve changes to
many interrelated systems. As summarized in Table 4, using a 2x
multiplier, we estimate that over the 3-year implementation period--
<bullet> The largest 3 PBMs would incur Version F6 conversion costs
of (2*$10.5 mil), or $21 million each;
<bullet> The next 3 midsize PBMs and the VA PBM or four firms,
would incur Version F6 conversion costs of (2*$4 mil), or $8 million
each; and
<bullet> The remaining 33 PBMs would incur Version F6 conversion
costs of (2*$500,000), or $1 million each.
The following comments were received on the subject, followed by
our responses to those comments.
Comment: A commenter noted that the assumption about lesser
operating system complexity is not valid for all smaller PBMs. The
commenter noted that many mid-sized and smaller PBMs support multiple
lines of business--commercial, health plan, Medicare Part D, Medicaid,
labor, etc. and have complexity on par with larger PBMs, such that the
assumptions that mid-size PBMs' cost would be 38 percent less than that
of a large PBM and that smaller PBMs' cost would be only 4.7 percent of
the cost of the largest PBMs is not valid. These changes represent a
similar burden for midsize and smaller PBMs and, the commenter noted,
was the main rationale for its requesting that HHS consider an extended
implementation timeframe.
Response: We recognize that some mid-size and smaller PBMs do
support multiple lines of business and may incur costs above those
estimated in the RIA. As the commenter recommends, we have finalized a
compliance date beyond the proposed compliance timeline. However, the
commenter did not provide cost estimates that would justify amending
the estimates within the RIA.
Comment: A commenter asserted that the assumption that HIPAA
standard conversion costs are already priced into ongoing contractual
arrangements between health plans and PBMs and SaaS vendors is also not
valid. The commenter indicated that a set of changes as significant as
Version F6 presents is not a business-as-usual change that can easily
be absorbed into mid-size or small PBM or SaaS routine operations.
Response: While we recognize that, outside of pre-existing contract
rates, nothing prevents a mid-size or small PBM from charging
pharmacies for conversion to Version F6, this does not contradict
information that CAMH gathered from industry representatives confirming
that generally these costs are factored into ongoing contractual fees
and will likely not result in an increase

[[Page 100780]]

in direct, upfront software costs to pharmacies.

Table 4--PBM Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
D.0 Cost Inflation Adjusted D.0 D.0 Cost Conversion cost Number of Total F6
Version F6 conversion cost category baseline ($ in adjustment baseline ($ in multiplier for per entity ($ in affected conversion costs
by PBM size millions) to baseline millions) Version F6 millions) entities ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All (largest)....................... 10.5 N/A 10.5 2 21 3 63
All (midsize)....................... 4.0 N/A 4.0 2 8 4 32
All (smaller)....................... 0.5 N/A 0.5 2 1 33 33
-------------------------------------------------------------------------------------------------------------------
Totals.......................... ................ ........... ................ ................ ................ 40 128
--------------------------------------------------------------------------------------------------------------------------------------------------------

(4) Vendors
As previously discussed, pharmacies that do not internally develop
and maintain their pharmacy management systems contract with technology
vendors for these services. We believe there are approximately 30
technology firms providing computer system design, hosting, and
maintenance services in this market, with different companies serving
one or more market segments, such as retail, mail, long-term care, or
specialty pharmacy. Software vendors often have commitments to their
clients to maintain compliance with the latest adopted pharmacy
transaction standards. They must incorporate these standards into their
software systems; otherwise, they would not be able to sell their
products competitively in the marketplace. These systems cannot
properly support their users using outdated standards or missing key
functionalities which the industry has identified as essential to
business operations. We understand that vendors anticipate upgrades to
these standards, and the cost of updating the software is incorporated
into the vendor's routine cost of doing business and product support
pricing. As discussed in the context of independent pharmacies, based
on conversations with a variety of industry representatives, we
understand that future HIPAA standard conversion efforts are often
already priced into existing maintenance agreements and fee structures
for their customers. However, the marginal costs of the conversion will
be borne by these vendor entities.
We understand from conversations with industry representatives that
system update costs are usually embedded into operating costs, where
they represent opportunity costs for vendors that offset the resources
to add new features (system enhancements) that their clients may
request. Updating systems will take some, but not all, resources
currently doing system enhancements and improvements and move them over
to ensuring compliance with the new standards. In the 2009
Modifications final rule,\22\ we explained that we received no comments
from pharmacy software vendors in response to the solicitation of
comments on expected Version D.0 conversion costs, actual costs for
vendor software upgrades, and any downstream impact on covered
entities. In addition, we did not receive comments on the November 2022
proposed rule. Therefore, we believe it is likely that firms will
continue to decline to share this type of proprietary and market-
sensitive data. Thus, we continue to not have comparable anchors from
prior impact analyses for cost estimates. However, in the public
comments submitted to the NCVHS, one pharmacy software vendor with
multiple product lines provided a preliminary estimate of approximately
50,000 man-hours to make the Version F6 changes. We are not aware of
publicly available data segmenting this industry, so we assume this one
estimate is representative of the industry on average. Using this
estimate and a mean hourly wage rate of $54 from BLS data \23\ and
rounding to the nearest million, we estimate that over the 3-year
implementation period: 30 pharmacy management system firms will incur
Version F6 conversion costs of approximately $3 million each for
software planning, development, and testing.
---------------------------------------------------------------------------

\22\ 74 FR 3320 (January 16, 2009).
\23\ Bureau of Labor Statistics. May 2019 National Occupational
Employment and Wage Estimates United States. Mean hourly rates for
Computer Network Architects, Software Developers and Software
Quality Assurance Analysts and Testers, and Computer Support
Specialists. <a href="https://www.bls.gov/oes/current/oes_nat.htm#15-0000">https://www.bls.gov/oes/current/oes_nat.htm#15-0000</a>.
---------------------------------------------------------------------------

We further believe that these pharmacy system vendor firms will
incur 80 hours of training costs for each pharmacy client firm at a
mean hourly wage rate of $28.51 (also from the BLS data), the product
rounded to $2,300. Thus, we believe that in the fourth year of the 3-
year implementation period: 30 pharmacy management system firms will
incur Version F6 training costs of $2,300 for 2,265 clients (237 small
pharmacies and 2,028 independent pharmacy corporations), or $5,210,000
in total for this industry segment.
In addition, both pharmacies and PBMs contract with
telecommunication switches for transaction validation and routing.
Based on conversations with industry representatives, we believe there
are three switches in this segment of the market. We are not aware of
any data to help us estimate their costs of system upgrades, but
believe their costs are less than those of chain pharmacies and PBMs.
We estimate that over the 3-year implementation period, three
telecommunication switching vendors would incur Version F6 conversion
costs of $1.5 million each. These other vendor costs are summarized in
table 5.

Table 5--Other Vendor Costs of Conversion to Version F6
----------------------------------------------------------------------------------------------------------------
Number of
Conversion cost affected Total F6
Version F6 conversion cost category per entity ($ in entities or conversion costs
millions) sites ($ in millions)
----------------------------------------------------------------------------------------------------------------
Pharmacy Management System IT Implementation................... 3.0 30 90.0
Pharmacy Management System User Training....................... 0.0023 2,265 5.2
------------------------------------------------

[[Page 100781]]

Subtotal................................................... ................ ........... 95.2
----------------------------------------------------------------------------------------------------------------
Telecommunication Switches..................................... 1.5 3 4.5
------------------------------------------------
Total...................................................... ................ ........... 99.7
----------------------------------------------------------------------------------------------------------------

In summary, total estimated Version F6 conversion costs are
summarized in Table 6.

Table 6--Total Industry Costs for Conversion to Version F6
------------------------------------------------------------------------
Number of Total F6 conversion
Conversion cost category affected entity costs ($ in
(firms) millions)
------------------------------------------------------------------------
Chain Pharmacies............... 315 95.6
Independent Pharmacies......... 19,044 61.0
Health Plans................... 772 ....................
PBMs........................... 40 128.0
Pharmacy Management System 30 95.2
Vendors.......................
Telecommunication Switches..... 3 4.5
----------------------------------------
Total...................... ................. 384.3
------------------------------------------------------------------------

c. Benefits
Industry commentary on benefits related to the Version F6
conversion is available in two segments: first, the 2018 NCVHS
testimony and industry representative interviews related to the then-
proposed Version D.0 to Version F2 conversion, and second, the 2020
NCVHS testimony and public comments related to the revised Version F6
proposal. Both sets of evidence portray industry consensus that
updating the HIPAA pharmacy standards is necessary for current and
future business needs at a significant, but unavoidable, cost.
Commentaries describe numerous non-quantifiable benefits, such as
enabling compliance with regulatory requirements, facilitating the
transmittal of additional codified and interoperable information
between stakeholders that would benefit patient care and care
coordination, and powering advanced data analytics and transparency.
Some changes will result in operational efficiencies over manual
processes, but will also entail greater manual effort to collect
information and input data at an offsetting cost. We are not aware of
any assertions or estimates of industry cost savings attributable to
the Version F6 conversion and did not receive any comments on our
assumptions. For pharmacy management system vendors and switches, we
believe upgrading existing systems for the Version F6 conversion is a
cost of doing business and retaining customers and does not involve
cost savings.
(1) Pharmacies
Initial automation of pharmacy coordination of benefits
transactions was a large part of the previous Version 5.1 to Version
D.0 conversion. Further refinement of this type of information is
included in the Version F6 conversion. Additional fields are expected
to improve the flow of information between pharmacies and payers and
allow for more accurate billing to the correct entity. However, better
information does not translate into savings as directly as the initial
transition from manual to fully electronic processes. Moreover,
commenters to the 2009 Modifications final rule suggested that even
those minor levels of savings (1.1 percent of pharmacist time) may have
been overestimated.\24\ Some of the less quantifiable benefits include
enabling more integration with back-office systems, more informative
data analytics, better forecasting, and stronger internal controls over
both proper payments and compliance with contractual requirements. For
instance, better information on adjudicated payer types allows
pharmacies to identify and apply insurance program-specific coverage
requirements more accurately.
---------------------------------------------------------------------------

\24\ 74 FR 3320 (January 16, 2009).
---------------------------------------------------------------------------

Other changes, such as more structured communication between
pharmacies and payers to resolve prescriber-identifier validation
activities at the point of sale, or to better enable compliance with
Federal and State limitations on filling and refilling controlled
substance prescriptions, would enable better compliance with Drug
Enforcement Administration and CMS rules without PBMs having to resort
to claim rejections. In general, many of these changes are expected to
support pharmacy efficiency improvements, reduce some manual workflow
processes related to Food and Drug Administration-mandated Risk
Evaluation and Mitigation Strategy (REMS) data collection and use,
reduce the time required to resolve claim rejections and transaction
attempts, and reduce recoupment risk on audits.\25\ However, these
efficiencies may not necessarily translate directly to cost savings for
pharmacies, as other changes require more data collection, greater
pharmacy staff communication with prescribers, and inputting more
coding than required previously. We did not receive any comments on our
estimates

[[Page 100782]]

of quantifiable savings related to these efficiencies. Improvements
like the expanded financial fields would avoid future manual processes
needed to enter free text, split claims, or prepare and submit a paper
Universal Claim Form; however, million-dollar claims are quite rare
today, and, thus, it seems this change may not represent significant
cost savings over current processes. But, as noted earlier, their
numbers are expected to increase, and, without this functionality, the
risk of billing errors could potentially increase. Moreover, these
types of drugs will likely be dispensed by a small percentage of
pharmacies, so the benefits will likely not be generally applicable to
all pharmacies.
---------------------------------------------------------------------------

\25\ S. Gruttadauria. (March 26, 2018). ``NCPDP
Telecommunications Standard vF2 Written Testimony.'' Available:
<a href="https://ncvhs.hhs.gov/wp-content/uploads/2018/05/Session-A-Gruttadauria-Written.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2018/05/Session-A-Gruttadauria-Written.pdf</a>.
---------------------------------------------------------------------------

Pharmacy and pharmacy vendor commenters to the NCVHS noted that
other types of changes will benefit patients by enhancing pharmacy and
payer patient care workflows through the replacement of many clinical
free text fields with discrete codified fields. This will enable
automation that can trigger real-time workflows that could aid in goals
such as combatting the opioid crisis or communicating relevant therapy-
related information for at-risk patients. Improvements will support
better patient care and safety through more accurate patient
identification and enhanced availability and routing of benefit and DUR
information. For instance, new response fields for DUR messaging and
Formulary Benefit Detail help to convey clinical information such as
disease, medical condition, and formulary information on covered drugs.
This will enable pharmacists to have more informative discussions with
patients and provide valuable information about alternative drug or
therapy solutions. We believe that some of this data exchange will
eliminate manual processes and interruptions and will also enable
additional required pharmacist interventions to be added contractually,
which could not occur previously. Thus, we conclude that the changes
available through the Version F6 conversion will allow pharmacies to
improve the accuracy and quality of their services but may not generate
significant cost savings from a budgeting perspective.
(2) Health Plans and PBMs
The benefits that could accrue to health plans and PBMs mirror the
improvements that could accrue to pharmacy efficiencies discussed
previously. Better information flows and interoperability could enable
more efficient benefit adjudication, enhanced communications with
trading partners and patients, and better data. Better data could
improve payment accuracy, regulatory compliance, and advanced analytics
for forecasting, coordination of care, and patient safety. For
instance, better information on adjudicated payer types could support
more accurately identifying other payers involved in the transaction.
Improved information on other payers could result in cost avoidance by
avoiding duplication of payment and by preventing Medicare from paying
primary when it is the secondary payer. However, improved patient and
alternative payer identification could also increase the transparency
of the identification of payers secondary to Medicare and increase
costs from other payers' subrogation in some circumstances. The ability
to automate the processing of very expensive drug claims would avoid
more cumbersome processes, but the absolute volume of such claims may
not be enough to generate significant savings. We are not aware of any
studies or estimates of cost savings for health plans or PBMs
attributable to the Version F6 conversion, nor are we aware of public
comments describing any such cost savings. Furthermore, in testimony to
the NCVHS, the NCPDP noted the importance of Version F6 for achieving
broader (but difficult to quantify) healthcare transformation goals: it
improves the structure to support the clinical evaluation of
prescription products and planned benefit transparency, which are key
components for achieving expected healthcare outcomes related to value-
based care, digital therapeutics, social determinants of health, and
other areas of health innovation.\26\ Thus, we conclude that while the
benefits of adopting Version F6 are necessary for meeting current and
future business needs and policy goals, we are unable to monetize these
benefits in the form of cost savings. We solicited comments on whether
there were significant quantifiable benefits or cost savings that
should be included in our analysis and did not receive any feedback on
our assumptions.
---------------------------------------------------------------------------

\26\ National Committee on Vital and Health Statistics
Transcript March 24, 2020, 10:00 a.m.-5:30 p.m. ET. <a href="https://ncvhs.hhs.gov/wp-content/uploads/2020/05/Transcript-Full-Committee-Meeting-March-24-2020.pdf">https://ncvhs.hhs.gov/wp-content/uploads/2020/05/Transcript-Full-Committee-Meeting-March-24-2020.pdf</a>.
---------------------------------------------------------------------------

5. Adoption of Batch Standard Subrogation Implementation Guide, Version
10
a. Introduction
As mentioned earlier, Version 3.0 was adopted to support Federal
and State requirements for State Medicaid agencies to seek
reimbursement, when they had made payment first, from the correct
responsible health plan. We proposed to replace Version 3.0 with
Version 10 as the standard for Pharmacy subrogation transactions at
Sec. 162.1902(b). We indicated that, for State Medicaid agencies,
adopting Version 10 would be a modification from Version 3.0. We
proposed to adopt Version 10 for all health plans based on industry
stakeholders' reports that there was a need to expand the use of the
subrogation transaction because the adopted standard only applied to
State Medicaid agencies and did not address the business needs for non-
Medicaid agencies such as Medicare Part D, State assistance programs,
or private health plans that would seek similar reimbursement.
Stakeholders also stated that a broader subrogation transaction would
facilitate the efficiency and effectiveness of data exchange and
transaction processes for all payers involved in post-payment of
pharmacy claims and would support greater payment accuracy across the
industry.
However, in this final rule we have decided that we will adopt
Version 10 but will only require State Medicaid agencies, not all
health plans, to use it.
b. Affected Entities
Medicare Part D requires real-time coordination of benefits, and we
understand that these processes, as well as responsibility for managing
subrogation (primarily for Medicaid retroactivity), are generally
contracted through PBMs. Other payers, such as State Medicaid agencies
and commercial insurers, are more likely to contract with payment
integrity/financial recovery vendors. As of March 2018, there was
evidence that some state Medicaid agencies managed this activity
directly,\27\ but we are not aware of publicly available information on
whether this is, or would still be, the case for the Version 10
implementation timeframe. Likewise, we understand the VA PBM does not
coordinate benefits in real time, but contracts with a payment
integrity/financial recovery firm for retrospective subrogation in some
circumstances. We believe there are four firms in the specialized
pharmacy benefit payment integrity/financial recovery industry, with
most of the business volume concentrated in one firm.
---------------------------------------------------------------------------

\27\ NCVHS Hearing on NCPDP Standards and Updates--March 26,
2018 Virtual Meeting. <a href="https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/">https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/</a>.
---------------------------------------------------------------------------

Based on a CAMH environmental scan conducted with industry
representatives, we understand that the

[[Page 100783]]

demand for subrogation today differs by third-party line of business.
Third-party commercial payer contracts are less likely to have a
comparable retroactivity-of-coverage issue and, due to the rising cost
of health insurance, are increasingly less likely to have enrollees
covered under more than one insurance program or policy. For these
reasons, we understand that third-party commercial payers are more
likely to subrogate with workers' compensation, auto insurance, or
other non-healthcare insurance-related parties, rather than with other
healthcare payers.
While pharmacies are not users of the subrogation standard, they
are potentially affected by any further expansion of the standard from
Medicaid to all third-party payers. This is because one alternative to
subrogation involves the payer that paid in error recouping funds from
pharmacies and transferring the effort and risk of rebilling the
appropriate payer to the pharmacy.
c. Costs
(1) Third-Party Payers (Includes Plan Sponsors and PBMs)
The bulk of the work to implement Version 10 for many third-party
payers has been previously addressed in costs associated with
implementing Version F6, specifically its equivalent batch standard,
Version 15. Based on conversations with industry representatives
familiar with the subrogation standards, we understand that the changes
in Batch Standard Subrogation Version 10 have been undertaken to
preserve the integrity of the standard for Medicaid purposes while
allowing for the collection of a limited number of new data elements to
assist with other payer subrogation, particularly for Part D sponsors.
The changes between Version 3.0 and Version 10 are not extensive, so we
believe this change will not have significant effects on State Medicaid
agencies or their vendors.
We also believe that health plans that desire to pursue
prescription drug claim subrogation have already contracted with PBMs
or other contractors that have implemented Version 3.0, or some
variation on this standard, on a voluntary basis. However, testimony
provided at the March 2018 NCVHS hearing indicated that some payers had
not yet implemented the batch processing software, and would have
additional IT system, administrative, and training costs to convert to
Version 10. We are not aware of the specific payers to which this
remark referred, and, thus, several years later, we have no basis on
which to estimate the number of additional payers or State Medicaid
agencies that could potentially adopt the standard for the first time
with Version 10, nor do we know if any such payers might instead
contract with a vendor to manage this function on their behalf while
implementing Version 10. As with PBM and vendor contractual
arrangements discussed previously, we assume that HIPAA standard
conversions have been priced into ongoing contractual payment
arrangements and will not increase costs to third-party payers as a
result of converting to Version 10. We solicited comments to help us
understand the impacts of converting to Version 10 on State Medicaid
agencies or any health plans that have not previously implemented NCPDP
batch standards and/or Subrogation Version 3.0. We also solicited
comments on our assumptions on the impacts on State Medicaid agency
vendors in general, as well as data with which to quantify any
additional impacts beyond the Version F6 conversion estimates provided
previously and did not receive any comments.
Based on conversations with industry representatives, we further
understand that health plans already engaged in subrogation,
particularly Part D PBMs. Version 10 provides more requirements for use
of the standard and how to populate the fields to increase
standardization.
(2) Vendors
As noted previously, State Medicaid agencies, commercial third-
party payers, and the VA generally contract with four payment
integrity/financial recovery firms for subrogation. We believe, based
on conversations with industry representatives, that these firms
generally utilize Version 3.0 today, and will have to invest in Version
F6 batch standard upgrades to implement Version 10 and prepare to
potentially accept subrogation from other third-party payers. These
firms were not included in the previous vendor estimates. We are not
aware of studies or public comments that describe costs related to
their activities and requirements. We believe these vendors will incur
a minority of the costs associated with the Version F6 conversion and
some internal data remapping expense. Table 7 summarizes the other
vendor costs of conversion over the 3-year implementation period. In
the November 2022 proposed rule, we estimated that four payment
integrity/financial recovery vendors would incur Version F6, equivalent
Batch Standard, Version 15, and other Version 10 conversion costs of
$500,000 each. We did not receive any comments based on our
assumptions; and therefore, we are finalizing the other vendor costs.

Table 7--Other Vendor Costs of Conversion to Version 10
----------------------------------------------------------------------------------------------------------------
Total F6
Conversion cost Number of conversion
Conversion cost category per entity ($ affected costs ($
millions) entities millions)
----------------------------------------------------------------------------------------------------------------
Payment Integrity/Financial Recovery Vendors................. 0.5 4 2.0
----------------------------------------------------------------------------------------------------------------

d. Benefits
(1) Third-Party Payers
The primary benefits for third-party payers are the opportunity to
reduce claims costs when another party is also responsible for the
claims, and the avoidance of cumbersome manual processes. However, we
are not aware of studies or public comments that help us estimate the
frequency and size of this benefit. Prescription drug claims tend, on
average, to be for much smaller amounts than medical claims, such as
those for hospital admissions, and we believe many payers may pursue
subrogation only on the more expensive claims. Discussion at the March
2018 NCVHS hearing indicated that about 5 percent of health care
memberships across the country have multiple insurance coverage. By
using national drug expenditures, the volume of claim reconciliation
and savings opportunities could easily exceed a billion dollars and the
need for this subrogation standard is critical for effective processing
(as the subrogation transaction standard proposal was not revised in
2020, we do not have more recent testimony

[[Page 100784]]

updating this estimate). However, additional testimony at that same
hearing \28\ suggested there is not a huge cost savings opportunity
left for commercial subrogation but, instead, an occasional need that
will be facilitated by a standardized approach. We did not receive
comments to quantify the incremental benefits of extending Version 10.
---------------------------------------------------------------------------

\28\ Transcript-Standards Subcommittee Hearing-NCPDP Standards
Updates-March 26, 2018. Accessed 05/14/2021 at: <a href="https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/">https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/</a>.
---------------------------------------------------------------------------

(2) Pharmacies
As noted previously, while pharmacies are not users of the
subrogation transactions standard, they could potentially benefit from
further expansion of the standard from State Medicaid agencies to all
third-party payers if additional payers that are currently recouping
overpayments from pharmacies instead were to transition to a
subrogation approach. However, we are not aware of any studies or
public comments that would help us estimate the likelihood or size of a
potential change of this nature. We solicited but did not receive any
comments to help us understand the extent to which the adoption of
Version 10 may affect pharmacies.

E. Regulatory Review Cost Estimate

One of the costs of compliance with a final rule is the necessity
for affected entities to review the rule in order to understand what it
requires and what changes the entity will have to make to come into
compliance. We believe that 104 affected entities will incur these
costs, as they are the entities that will have to implement the adopted
changes, that is, those entities that are pharmacy organizations that
manage their own systems (27), pharmacy management system vendors (30),
PBMs (40), telecommunication switch vendors (3), and payment integrity/
financial recovery vendors (4). The staff involved in such a review
will vary from entity to entity but will generally consist of lawyers
responsible for compliance activities and individuals familiar with the
NCPDP standards. Using the Occupational Employment and Wages for May
2022 from the BLS for lawyers (Code 23-1011) and computer and
information system managers (Code 11-3021),\29\ we believe that the
national average labor costs of reviewing this rule are $100.47 and
$99.93 per hour, respectively, including other indirect costs and
fringe benefits. We believe that it will take approximately 4 hours to
review this rule. The estimated costs per entity would therefore be
$1,603.20 (4 hours each x 2 staff x $100.47 plus 4 hours x 2 staff x
$99.93), and the total cost borne by the 104 affected entities would be
$166,733 ($1,603.20 x 104 affected entities), which sums to $1
different from the identical math at section V.A. because the two
calculations are rounded separately.
---------------------------------------------------------------------------

\29\ Bureau of Labor Statistics. May 2022 National Occupational
Employment and Wage Estimates United States. Mean hourly rates for
Computer Network Architects, Software Developers and Software
Quality Assurance Analysts and Testers, and Computer Support
Specialists. Accessed 9/12/2023 at: <a href="https://www.bls.gov/oes/current/oes113021.htm#top">https://www.bls.gov/oes/current/oes113021.htm#top</a>.
---------------------------------------------------------------------------

F. Accounting Statement and Tables

As required by OMB Circular A-4 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf</a>), in
Table 8 we present an accounting statement showing the classification
of the annualized costs associated with the provisions of this final
rule. Monetary annualized non-budgetary costs are presented at the 2
percent discount rate.

Table 8--Accounting Statement
[Classification of estimate costs and benefits from FY 2024 to FY 2033 ($ in millions)]
----------------------------------------------------------------------------------------------------------------
Category Primary estimate Source
----------------------------------------------------------------------------------------------------------------
Qualitative (un-quantified benefits).. Wider adoption of standards; increased RIA.
productivity due to decrease in manual
processing; reduced delays in patient care.
Annualized monetized costs: * 2% $97.............................................. RIA.
Discount.
----------------------------------------------------------------------------------------------------------------
* Opportunity costs will be borne by the entities that will have to implement the proposed changes, that is,
those entities that are pharmacy organizations that manage their own systems, pharmacy management system
vendors, PBMs, telecommunication switch vendors, and payment integrity/financial recovery vendors. Some
marginal user training costs will be borne by other pharmacies.

G. Regulatory Flexibility Analysis (RFA)

The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Individuals and States are not included in
the definition of a small entity. Furthermore, the economic impact
assessment of small entities is based on HHS's practice in interpreting
the RFA to consider effects economically ``significant'' only if
greater than 5 percent of providers reach a threshold of 3 to 5 percent
or more of total revenue or total costs.
The North American Industry Classification System (NAICS) was
adopted in 1997 and is the current standard used by the Federal
statistical agencies related to the U.S. business economy. Using the
2022 SBA small business size regulations and Small Business Size
Standards by NAICS Industry tables at 13 CFR 121.201, we have presented
in Table 9 the covered entities and their vendors affected by this
final rule.

Table 9--SBA Size Standards for Applicable NAICS Industry Codes
------------------------------------------------------------------------
NAICS U.S. industry SBA size standard
NAICS code title ($ in millions)
------------------------------------------------------------------------
456110................... Pharmacies and Drug 37.5
Stores.
524114................... Direct Health and 47.0
Medical Insurance
Carriers (Health Plans).
621491................... HMO Medical Centers 44.5
(Health Plans).
524292................... Third Party 45.5
Administration of
Insurance and Pension
Funds (PBMs).
541512................... Computer Systems Design 34.0
Services (Pharmacy
Management System
Vendors).

[[Page 100785]]

518210................... Data Processing, 40.0
Hosting, and Related
Services
(Telecommunication
Switches).
524298................... All Other Insurance 30.5
Related Activities
(Payment Integrity/
Financial Recovery).
------------------------------------------------------------------------

This change in retail pharmacy transaction standards will apply to
many small, covered entities in the Pharmacy and Drug Store segment
(NAICS code 456110). However, based on information obtained by CAMH
during its conversations with industry experts, we understand that
small pharmacies generally rely on ongoing arrangements with certain
specialized computer system design services vendors (a subset of NAICS
code 541512) to integrate the standards into their pharmacy management
software and systems as a routine cost of doing business. Therefore,
these covered entities may not bear the bulk of the costs attributable
to the adopted changes. Instead, as detailed later in this RIA,
generally the costs applicable to small pharmacies are expected to be a
portion of the costs for user training for some firms. The pharmacy
management system vendors are not covered entities, and we are not
aware of publicly available data to comprehensively identify these
entities and, where applicable, parent firm size. Other types of
covered entities providing pharmacy services, such as the subset of
grocery stores with pharmacies, cannot be clearly identified within
NAICS data, as such data are not collected in this detail, but are
included in our estimates for larger entities. Conversely, institutions
with outpatient pharmacies (for example, hospitals) also cannot be
clearly identified by NAICS data but are not included in our analysis,
since we believe such institutions are generally part of larger
organizations that do not meet the SBA definition. One exception to
this belief is the IHS, urban, and tribal facilities with pharmacies
that bill prescription drug plans, which we address later in this
analysis.
For purposes of this RIA, the definition of an entity most closely
resembles the Federal statistical agencies' concept of a firm.\30\ A
firm consists of one or more establishments under common ownership. An
establishment consists of a single physical location or permanent
structure.\31\ Thus, a chain drug store or chain grocery store
constitutes a single firm operating multiple establishments. Using the
2017 Census Bureau Annual Business Survey estimates of firms, sales,
and receipts by NAICS sector (available at <a href="https://www.census.gov/programs-surveys/abs.html">https://www.census.gov/programs-surveys/abs.html</a>, and hereafter referred to as Census business
data), we have attempted to estimate the number of small pharmacy
entity firms and provide a general discussion of the effects of the
proposed regulation. We solicited industry comments on these
assumptions and did not receive any.
---------------------------------------------------------------------------

\30\ <a href="http://www.bls.gov/opub/mlr/2016/article/establishment-firm-or-enterprise.htm">www.bls.gov/opub/mlr/2016/article/establishment-firm-or-enterprise.htm</a>.
\31\ <a href="http://www.census.gov/programs-surveys/susb/technical-documentation/methodology.html">www.census.gov/programs-surveys/susb/technical-documentation/methodology.html</a>.
---------------------------------------------------------------------------

1. Number of Small Entities
Based on the CAMH environmental scan that found a total of 19,234
total pharmacy firms, we believe that just over 19,000 pharmacy firms
qualify as small entities, though communications with industry
representatives suggest that figure may overestimate the current
industry small entity landscape. Available data do not permit us to
clearly distinguish small pharmacy firms from firms that are part of
larger parent organizations, but we use employee size as a proxy for
the firm size subject to the SBA size standard. For purposes of this
analysis, we believe the firms with more than 500 employees (190)
represent chain pharmacies, and those with fewer than 500 (19,044)
employees represent independently owned open- or closed-door
pharmacies. The 19,044 firms with fewer than 500 employees represented
20,901 establishments and accounted for total annual receipts of $70.69
billion and average annual receipts of $3.7 million per firm. This is
well below the SBA standard of $37.5 million. By contrast, the 190
firms with 500 or more employees represented 27,123 establishments and
accounted for over $210.97 billion in annual receipts, and thus,
average annual receipts of $1.1 billion. Therefore, we believe 19,044
pharmacy firms qualify as small entities for this analysis.
In 2017, the Census Bureau counts 745 entities designated as Direct
Health and Medical Insurance Carriers and 27 as Health Maintenance
Organization (HMO) Medical Centers. We believe that these 772 firms
represent health plans that sponsor prescription drug benefits. Of the
745 Carriers, those with fewer than 500 employees (564) accounted for
$35 billion in total and over $62 million in average annual receipts,
exceeding the SBA size standard of $44.5 million. Comparable data on
the eight smaller HMO Medical Centers is not available due to small
cell size suppression. Although health plan firms may not qualify as
small entities under the SBA receipts size standard, they may under
non-profit status. However, we are not aware of data that would help us
understand the relationship between health plan firm and ownership tax
status to quantify the number of such firms. In any case, as explained
in more detail later in this RIA, we do not estimate that health plans
will generally bear costs associated with the changes in this final
rule, as their contracted transaction processing vendors (generally
PBMs) will be responsible for implementing the changes, and, generally,
based on conversations with the industry, we do not believe their
contractual terms will change as the result. Therefore, although we
cannot estimate the number of health plan firms that may meet the small
entity definition using non-profit status, generally we do not believe
such entities will bear costs attributable to the changes.
In addition to the covered entities, we estimate 30 pharmacy
management system vendors, 40 PBM vendors, three telecommunications
switching vendors, and four payment integrity/financial recovery firms
would be affected by the proposed changes to their clients. We are not
aware of comprehensive publicly available data detailed enough to
quantify the size of these remaining entities, but we believe that the
affected firms are, generally, part of larger organizations. We
solicited comments with respect to our assumptions and did not receive
any feedback.
2. Cost to Small Entities
To determine the impact on small pharmacies, we used data obtained
in the development of the CAMH environmental scan on the number of
firms with fewer than 500 employees and user training cost estimates
developed using public comments on prior rulemaking and updated for
inflation. As discussed earlier in this RIA, we assumed that the clear
majority of pharmacy firms are small entities that

[[Page 100786]]

rely on their contracted pharmacy management system vendors to absorb
HIPAA standard version conversion costs in return for ongoing
maintenance and transaction fees. We believe that pharmacy firms will
have direct costs related to Version F6 user training and that it will
vary in relation to employee size; that the vast majority (89 percent)
of small pharmacy firms with fewer than 20 employees will receive all
necessary user training from vendors; and that the remaining 10 percent
of small pharmacy firms (2,028) with 20 or more employees will have
additional staff user training expense totaling $30,000 on average in
the second year of the implementation period. As shown in Table 10, the
overall impact on small covered entity pharmacies and drugstores (NAICS
446110) with less than 500 employees reflects an estimated cost
percentage of revenue per firm of 0.81 percent. Pharmacies and drug
stores with less than 500 employees represent approximately 99 percent
of all pharmacies and drug stores, including large pharmacies and drug
stores with greater than 500 employees. Further analysis shows that
pharmacies and drugstores with less than 100 employees represent 98
percent of all pharmacies and drugstores. These pharmacies and
drugstores, with less than 100 employees, are estimated to have a cost
percentage of revenue per firm of 0.86 percent. Also, pharmacies and
drugstores with less than 20 employees represent 89 percent of all
pharmacies and drugstores. These pharmacies and drugstores, with less
than 20 employees, are estimated to have a cost percentage of revenue
per firm of 1.10 percent. The highest cost percentage of revenue per
firm of 2.25 percent is estimated to impact pharmacies and drugstores
with less than 5 employees, which represents 36 percent of all
pharmacies and drugstores. All other small entity pharmacy and
drugstore enterprise sizes show a cost percentage of revenue per firm
below 1 percent. Therefore, as shown in Table 10, the implementation
cost of this final rule on small, covered entity pharmacies and
drugstores falls below HHS's practice in interpreting the RFA to be
economically ``significant,'' since it does not reach the threshold of
3 to 5 percent or more of total revenues.

Table 10--Analysis of the Implementation Cost on Small Covered Entity Pharmacies and Drug Stores
[NAICS 446110]
----------------------------------------------------------------------------------------------------------------
Cost percentage
Enterprise size Firms Receipts of revenue per
($1,000) firm
----------------------------------------------------------------------------------------------------------------
<5 employees................................................. 6,940 9,232,985 2.25
5-9 employees................................................ 5,776 16,700,443 1.04
10-14 employees.............................................. 2,963 12,978,849 0.68
15-19 employees.............................................. 1,337 7,599,680 0.53
<20 employees (separate category)............................ 17,016 46,511,957 1.10
20-24 employees.............................................. 661 4,673,350 0.42
25-29 employees.............................................. 380 3,464,669 0.33
30-34 employees.............................................. 224 2,324,169 0.29
35-39 employees.............................................. 151 1,759,613 0.26
40-49 employees.............................................. 204 2,610,831 0.23
50-74 employees.............................................. 185 2,942,040 0.19
75-99 employees.............................................. 77 1,509,958 0.15
<100 employees (separate category)........................... 18,898 65,796,587 0.86
100-149 employees............................................ 59 2,060,372 0.09
150-199 employees............................................ 28 806,821 0.10
200-299 employees............................................ 33 1,190,264 0.08
300-399 employees............................................ 15 480,045 0.09
400-499 employees............................................ 11 353,254 0.09
<500 employees (separate category)........................... 19,044 70,687,343 0.81
----------------------------------------------------------------------------------------------------------------
Source: Census Bureau. 2017 Economic Census.

As stated in section V.F. of the November 2022, proposed rule, we
outlined the various alternative policy considerations to adopting
Version F6. Specific to reducing costs to small entities, we considered
staggering the implementation dates for Version F6 among the affected
entities that utilize the NCPDP transaction standard. But we chose not
to propose that alternative because pharmacies, PBMs, and health plans
all rely on the information transmitted through the retail pharmacy
transactions, and if any one of these three entities will not be using
the same standard version at the same time, the information needed to
process claims and check eligibility would be deficient. Pharmacies
need the most current eligibility data from the plans to determine
correct coverage and payment information. Plans and PBMs would suffer
because they would not have the most current information reflected
through the claims data to maintain the beneficiaries' most current
benefits.
3. Conclusion
As referenced earlier in this section, the RFA is considered
economically significant only if greater than 5 percent of providers
reach a threshold of 3 to 5 percent or more of total revenue or total
costs. We conclude that the cost impact from this final rule on small
pharmacy entities does not exceed this threshold. In Table 10, we
illustrate that small covered entity pharmacies and drugstores with
less than 500 employees may experience a cost percentage of revenue per
firm of 0.81 percent, pharmacies and drugstores with less than 100
employees may experience a cost percentage of revenue per firm of 0.86
percent, pharmacies and drugstores with less than 20 employees may
experience a cost percentage of revenue per firm of 1.10 percent, and
finally pharmacies and drugstores with less than 5 employees may
experience a cost percentage of 2.25 percent. Based on the foregoing
analysis, we invited public comments on the analysis and requested any
additional data that would help us determine more accurately the impact
on the various categories of entities affected by this final rule but
did not receive any. Therefore, the Secretary has certified that this
final rule will not

[[Page 100787]]

have a significant economic impact on a substantial number of small
entities.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule will have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a metropolitan statistical area and has fewer
than 100 beds. This final rule will not affect the operations of a
substantial number of small rural hospitals because these entities are
not involved in the exchange of retail pharmacy transactions.
Therefore, the Secretary has certified that this final rule will not
have a significant impact on the operations of a substantial number of
small rural hospitals.

H. Unfunded Mandates Reform Act of 1995 (UMRA)

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates would require spending more in any 1
year than threshold amounts in 1995 dollars, updated annually for
inflation. In 2024, that threshold is approximately $183 million. This
final rule does not contain unfunded mandates that will impose spending
costs on State, local, or tribal governments in the aggregate, or by
the private sector, in excess of more than $183 million in any 1 year.
In general, each State Medicaid agency and other government entity that
is considered a covered entity will be required to ensure that its
contracted claim processors and payment integrity/financial recovery
contractors update software and conduct testing and training to
implement the adoption of the modified versions of the previously
adopted standards. However, information obtained by CAMH during its
conversations with industry experts supports that the costs for these
services will not increase as a result of the proposed changes. Our
understanding is that HIPAA standard conversion costs are already
priced into ongoing contractual payment arrangements between health
plans, contracted claim processors, and payment integrity/financial
recovery contractors.

I. Federalism

Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. This final rule will not have a substantial direct effect
on State or local governments, preempt State law, or otherwise have a
Federalism implication because, even though State Medicaid agency
contractors will be converting to a modified version of an existing
standard with which they are already familiar, we believe that any
conversion costs, will, generally, be priced into the current level of
ongoing contractual payments. State Medicaid agencies, in accordance
with this final rule, will have to ensure that their contracted claim
processors or PBMs successfully convert to Version F6 and that their
payment integrity/financial recovery contractors make relatively minor
updates to subrogation systems to collect and convey some new fields to
conduct subrogation initiated by other payers using Version 10. With
respect to subrogation for pharmacy claims, this final rule will not
add a new business requirement for States, but rather will update a
version of the standard to use for this purpose that will be used
consistently by all health plans.

J. Alternatives Considered

As stated in the November 2022 proposed rule (87 FR 67643), we
considered a number of alternatives to adopting Version F6 and Version
10 and chose to proceed with the provisions in this rule after
identifying significant shortcomings with each of the alternatives.
One alternative we considered was to not propose to adopt Version
F6 and continue to require the use of Version D.0. We also considered
waiting to adopt Version F6 at a later date since we recently published
a final rule in 2020 modifying the requirements for the use of Version
D.0 by requiring covered entities to use the 460-ET field for retail
pharmacy transactions denoting partial fill of Schedule II drugs. We
did not proceed with either alternative because we believe that, were
we to do so, the industry would continue to use a number of workarounds
that increase burden and are contrary to standardization. We also
believe that the number of, and use of, these workarounds will continue
to increase if we do not adopt Version F6. Therefore, we choose not to
proceed with these alternatives because we believe the adoption of
Version F6 would support interoperability and improve patient outcomes.
In the November 2022 proposed rule, we considered proposing a
compliance date longer than 24 months for covered entities to comply
with Version F6. However, we chose to propose a 24-month compliance
date with an 8-month transition period based on industry suggestions
for implementing Version F6 as soon as possible in a manner that would
be more feasible. We also considered proposing staggered implementation
dates for Version F6, whereby covered entities using the retail
pharmacy transactions would have different compliance dates.
We believe this alternative would not support standardization since
pharmacies, PBMs, and health plans all rely on the information
transmitted in the retail pic in pharmacy subrogation transactions to
continue using the proprietary electronic and paper formats currently
in use. We chose not to proceed with this alternative due to industry
concerns regarding uniformity among all payers.
Finally, based on industry feedback, in this final rule, we decided
to adopt the standards proposed in the November 2022 proposed rule with
a compliance date of 3 years after the effective date. The compliance
timeframe will include an 8-month transition. However, we are not
requiring the use of Version 10 (Medicaid subrogation) for all health
plans.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on November 7, 2024.

List of Subjects in 45 CFR Part 162

Administrative practice and procedures, Electronic transactions,
Health facilities, Health insurance, Hospitals, Incorporation by
reference, Medicaid, Medicare, Reporting and recordkeeping
requirements.

For the reasons set forth in the preamble, the Department of Health
and Human Services amends 45 CFR part 162 as set forth below:

PART 162--ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 162 continues to read as follows:

Authority: 42 U.S.C. 1320d--1320d-9 and secs. 1104 and 10109 of
Pub. L. 111-148, 124 Stat. 146-154 and 915-917.

0
2. Section 162.920 is amended by--
0
a. Revising the introductory text and paragraph (b) introductory text;
and
0
b. Adding paragraphs (b)(7) through (b)(9).
The revision and additions read as follows:

[[Page 100788]]

Sec. 162.920 Availability of implementation specifications and
operating rules.

Certain material is incorporated by reference into this subpart
with the approval of the Director of the Federal Register under 5
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that
specified in this section, the Department of Health and Human Services
(the Department) must publish a document in the Federal Register and
the material must be available to the public. All approved
incorporation by reference (IBR) material is available for inspection
at the Centers for Medicare & Medicaid Services (CMS) and at the
National Archives and Records Administration (NARA). Contact CMS at:
7500 Security Boulevard, Baltimore, Maryland 21244; phone: (410) 786-
6597; email: <a href="/cdn-cgi/l/email-protection#d6b7b2bbbfb8bfa5a2a4b7a2bfa0b3a5bfbba6babfb0bfb5b7a2bfb9b896b5bba5f8bebea5f8b1b9a0"><span class="__cf_email__" data-cfemail="1677727b7f787f65626477627f6073657f7b667a7f707f7577627f797856757b65387e7e6538717960">[email&#160;protected]</span></a>. For information
on the availability of this material at NARA, visit <a href="http://www.archives.gov/federal-register/cfr/ibr-locations">www.archives.gov/federal-register/cfr/ibr-locations</a> or email <a href="/cdn-cgi/l/email-protection#365044185f5845465355425f5958765857445718515940"><span class="__cf_email__" data-cfemail="c8aebae6a1a6bbb8adabbca1a7a688a6a9baa9e6afa7be">[email&#160;protected]</span></a>. The
material may be obtained from the following sources:
* * * * *
(b) Retail pharmacy specifications and Medicaid pharmacy
subrogation implementation guides. The implementation specifications
for the retail pharmacy standards and the implementation specifications
for the batch standard for the Medicaid pharmacy subrogation
transaction may be obtained from the National Council for Prescription
Drug Programs, 9240 East Raintree Drive, Scottsdale, AZ 85260.
Telephone (480) 477-1000; FAX (480) 767-1042. They are also available
through the internet at <a href="http://www.ncpdp.org">www.ncpdp.org</a>. A fee is charged for all NCPDP
Implementation Guides. Charging for such publications is consistent
with the policies of other publishers of standards. The transaction
implementation specifications are as follows:
* * * * *
(7) The Telecommunication Standard Implementation Guide Version F6
published January 2020; as referenced in Sec. Sec. 162.1102; 162.1202;
162.1302; 162.1802.
(8) The Batch Standard Implementation Guide, Version 15, published
October 2017; as referenced in Sec. Sec. 162.1102; 162.1202; 162.1302;
162.1802.
(9) The Subrogation Implementation Guide for Batch Standard,
Version 10, republished September 2019; as referenced in Sec.
162.1902.

0
3. Section 162.1102 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and
after the January 1, 2012,'' and adding in its place the phrase ``For
the period from January 1, 2012 through August 11, 2027,'';
0
b. In paragraph (d), by removing the phrase ``For the period on and
after September 21, 2020,'' and adding in its place the phrase, ``For
the period on and after September 21, 2020 through August 11, 2027,'';
and
0
c. Adding paragraphs (e) and (f).
The additions read as follows:

Sec. 162.1102 Standards for health care claims or equivalent
encounter information transaction.

* * * * *
(e) For the period from August 11, 2027 through February 11, 2028,
both of the following:
(1) The standards identified in paragraphs (c) and (d) of this
section.
(2) The following standards:
(i) Retail pharmacy drug claims. The NCPDP Telecommunication
Standard Implementation Guide Version F6, January 2020 and equivalent
NCPDP Batch Standard Implementation Guide, Version 15, October 2017
(both incorporated by reference in Sec. 162.920).
(ii) Dental health care claims. The ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Health Care Claim:
Dental (837), May 2006, ASC X12N/005010X224, and Type 1 Errata to
Health Care Claim: Dental (837) ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X224A1 (both incorporated by reference in Sec. 162.920).
(iii) Professional health care claims. The ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Health Care Claim:
Professional (837), May 2006, ASC X12N/005010X222 (incorporated by
reference in Sec. 162.920).
(iv) Institutional health care claims. The ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Health Care Claim:
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata
to Health Care Claim: Institutional (837) ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3, October 2007, ASC
X12N/005010X223A1 (both incorporated by reference in Sec. 162.920).
(3) Retail pharmacy supplies and professional services claims. (i)
The NCPDP Telecommunication Standard Implementation Guide Version F6,
January 2020 and equivalent NCPDP Batch Standard Implementation Guide,
Version 15, October 2017 (both incorporated by reference in Sec.
162.920).
(ii) The ASC X12 Standards for Electronic Data Interchange
Technical Report Type 3-Health Care Claim: Professional (837), May
2006, ASC X12N/005010X222 (incorporated by reference in Sec. 162.920).
(f) For the period on and after February 11, 2028, the standards
identified in paragraph (e)(2) of this section.

0
4. Section 162.1202 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and
after the January 1, 2012,'' and adding in its place the phrase ``For
the period from January 1, 2012 through August 11, 2027,''; and
0
b. Adding paragraphs (d) and (e).
The additions read as follows:

Sec. 162.1202 Standards for eligibility for a health plan
transaction.

* * * * *
(d) For the period from August 11, 2027 through February 11, 2028,
both of the following:
(1) The standards identified in paragraph (c) of this section.
(2) The following standards:
(i) Retail pharmacy drugs. The NCPDP Telecommunication Standard
Implementation Guide Version F6, January 2020 and equivalent NCPDP
Batch Standard Implementation Guide, Version 15, October 2017 (both
incorporated by reference in Sec. 162.920).
(ii) Dental, professional, and institutional health care
eligibility benefit inquiry and response. The ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Health Care
Eligibility Benefit Inquiry and Response (270/271), April 2008, ASC
X12N/005010X279 (incorporated by reference in Sec. 162.920).
(e) For the period on and after February 11, 2028, the standards
identified in paragraph (d)(2) of this section.

0
5. Section 162.1302 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and
after the January 1, 2012,'' and adding in its place the phrase ``For
the period from January 1, 2012 through August 11, 2027,'';
0
b. In paragraph (d), by removing the phrase ``For the period on and
after September 21, 2020, ``and adding in its place the phrase, ``For
the period on and after September 21, 2020 through August 11, 2027'';
and
0
c. Adding paragraphs (e) and (f).
The additions read as follows:

Sec. 162.1302 Standards for referral certification and authorization
transaction.

* * * * *
(e) For the period from August 11, 2027 through February 11, 2028,
both of the following:

[[Page 100789]]

(1) The standards identified in paragraph (c) and (d) of this
section.
(2) The following standards:
(i) Retail pharmacy drugs. The NCPDP Telecommunication Standard
Implementation Guide Version F6, January 2020 and equivalent NCPDP
Batch Standard Implementation Guide, Version 15, October 2017 (both
incorporated by reference in Sec. 162.920).
(ii) Dental, professional, and institutional request for review and
response. The ASC X12 Standards for Electronic Data Interchange
Technical Report Type 3--Health Care Services Review--Request for
Review and Response (278), May 2006, ASC X12N/005010X217, and Errata to
Health Care Services Review--Request for Review and Response (278), ASC
X12 Standards for Electronic Data Interchange Technical Report Type 3,
April 2008, ASC X12N/005010X217E1 (both incorporated by reference in
Sec. 162.920).
(f) For the period on and after February 11, 2028, the standards
identified in paragraph (e)(2) of this section.

0
6. Section 162.1802 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and
after the January 1, 2012,'' and adding in its place the phrase ``For
the period from January 1, 2012 through August 11, 2027'';
0
b. In paragraph (d), by removing the phrase ``For the period on and
after September 21, 2020,'' and adding in its place the phrase ``For
the period on and after September 21, 2020 through August 11, 2027'';
and
0
c. Adding paragraphs (e) and (f).
The additions read as follows:

Sec. 162.1802 Standards for coordination of benefits information
transaction.

[…truncated; see source link]

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Indexed from Federal Register on December 13, 2024.

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