Note 1 – HFS exchanges remittance advice information only with the designated Payee. Please check directly with your designated Payee for information related to the 835 - Remittance Advice. Regardless of the 835, it should be noted that HFS intends to continue to exchange the current paper remittance advice with the designated Payee for an indefinite amount of time.

Note 2 – HFS plans to exchange 837I and 837P transactions (encounter) with the MCOs listed for 820 and 834 transactions.

Note 3 – The testing and implementation of Paper Attachments with Electronic Claims will follow successful testing and implementation of the HIPAA formatted claims (837s).

Note 4 - The status of each trading partner should progress through various sequential categories of testing and ultimately reach the category of 'Production - Full'. Status tracking will consist of the following categories and they are listed in sequence from least 'ready' to most 'ready' or in full production.

Not Testing: The trading partner has yet to engage in any category of testing with HFS.

Testing - Category 1: The trading partner is engaged in the most basic and/or elementary syntactical type HIPAA/X12 testing with HFS.

Testing - Category 2: The trading partner is demonstrating consistent HIPAA/X12 compliance in testing a significant volume of transactions with HFS as well as successfully demonstrating that all transmission communication links are functioning.

Testing - Category 3: The trading partner is engaged in end-to-end testing whereby their X12 compliant transactions are being tested within HFS's MMIS.

Testing - Category 4: The trading partner is demonstrating consistent end-to-end testing whereby their X12 compliant transactions are entering HFS's MMIS.

Testing - Category 5: The trading partner is engaged in volume/performance testing with HFS.

Production: The trading partner is in production submitting HIPAA mandated format(s). They also continue to support legacy format(s) but this will terminate on or before December 1, 2004.

Production - Full: The trading partner is in full production and is not utilizing legacy formats.

Contingency Plan for the Billing of Pharmaceutical Supplies

General Background Information

In August 2000, the HIPAA Transactions and Code Set (TCS) rule was published to adopt uniform standards and code sets for electronic health care financial and administrative transactions and to provide administrative simplification and the concomitant cost savings for health care providers, health plans, and health care clearinghouses. These include the adoption of NCPDP standards for the EDI transactions related to pharmacy business, including prior authorization requests, eligibility inquiries and claim submittals. The code set requirements specify that the NDC is the only acceptable code set for use in the NCPDP format, and that use of this code set is restricted to drugs and biologics.

This is inconsistent with current policy followed by HFS and most other Medicaid Agencies and private payers. Pharmacies are allowed to use NDCs to bill supplies that have been assigned such codes, for example syringes and other diabetic supplies, in the point of sale pharmacy system. Moving to the formats required by the HIPAA TCS regulations will require pharmacies to implement a system capable of submitting these supplies in the ANSI X12 837 Professional standard using HCPCS codes.

CMS Guidance on Contingency Planning

In September 2003, NCPDP released the following statement related to CMS communication on acceptable contingency plans:

"Billing of Supplies Industry representatives met on September 4, 2003, with Centers for Medicare and Medicaid (CMS) representatives. The topic was to discuss that retail pharmacy continue to be able to use NCPDP standards to bill supplies rather than the ASC X12 837 batch standard that CMS currently believes retail pharmacy must use after the October 16, 2003, HIPAA transaction implementation deadline.

Important Points:

* CMS said that they would open up the billing of supplies issue for public comment by publishing a proposed rule next spring.

* CMS said that retail pharmacy could continue to use NCPDP standards to bill supplies until CMS published a final ruling on this issue, but only if pharmacies and their business partner payors/PBMs and processors developed a contingency plan that described why continuing to use the NCPDP standards was in their best interest.

* CMS also will require that these business partners must be able to demonstrate good faith efforts in trying to comply with HIPAA standards... for example, communications that try to convince CMS to allow retail pharmacy to use NCPDP standards to bill supplies.

* CMS said they would publish a statement in the form of Frequently Asked Questions (FAQ) next week that will clarify the guidance CMS published on July 24, 2003, about the requirements of both the contingency plan and the good faith efforts.

CMS plans to use the FAQ and the July 24 guidance in meetings with state Medicaid agencies so that Medicaid can continue to accept NCPDP standard supply claims."

HFS Contingency Plan: Supply Billing by Pharmacy Providers

The department has determined, based on the guidance from CMS and NCPDP, to allow pharmacy providers to continue to bill these supplies in the NCPDP format through the point of sale system. This will have many benefits, including:

• Pharmacies will continue to receive real time adjudication for these supplies, as they do today. This will minimize the risk that a pharmacy would dispense the drug without the associated supply as they await adjudication information from the payer (i.e., insulin dispensed without syringes).
  
• Pharmacies will continue to use their existing system (upgraded to the HIPAA compliant versions 5.1 and/or 1.1), while they pursue implementation of the ANSI X12 837 Professional transaction.
  
• Pharmacies will be able to submit a single prior authorization request for both the drug and the supply.

Compliance Planning

As CMS reviews the current requirements for the billing of supplies, the department will work with the pharmacy providers to insure that the HIPAA requirements are met. The department will be able to process and pay supply claims submitted by pharmacy providers in the ANSI X12 837 Professional format when billed with a HCPCS code.