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1992.07.09 :  Medicare Payment Systems

Contact: Bob Hardy (202) 690-6145
July 9, 1992

       HHS Secretary Louis W. Sullivan, M.D., announced today
that an electronic format developed by the American National
Standards Institute will be used to notify hospitals and other
institutional providers of Medicare payment decisions.
       The electronically transmitted notices will replace paper
remittance forms that are currently used to tell providers how
much Medicare has paid for services they have rendered to
beneficiaries. The information received by paper remittances must
be entered manually into the financial records systems of
providers.
       Secretary Sullivan said that when providers receive
Medicare remittance notices electronically they will be able to
achieve substantial administrative savings by posting the
information electronically.  These savings for the providers will
be even more substantial when all insurers use the ANSI format to
report payments.
       Secretary Sullivan stressed that the president's
comprehensive health reform program promotes greater use of
standardized electronic processes in the health care industry "to
achieve substantial cost savings and increase information-sharing
for the better care of patients." 
       The electronic remittance standard was adopted as an
incentive for the more than 20,000 Medicare providers, including 

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nearly 6,000 hospitals, to submit claims electronically.  Only
those providers submitting electronic claims will be able to
receive electronic remittance advices. 
       The new remittance notices will be used for institutional
providers, which include skilled nursing facilities, home health
agencies and hospices as well as hospitals. Electronic claims for
physicians' services to Medicare beneficiaries are processed
under a different system. 
       "The acceptance of the ANSI electronic remittance advice
for Medicare is a significant step toward national
standardization of electronic processes for all phases of claims
processing," according to William Toby Jr., who directs the
Medicare program as acting administrator of the Health Care
Financing Administration.
       Toby said that Medicare, the nation's largest health
insurer with 35 million elderly and disabled beneficiaries, "has
a major responsibility for leadership in automation of the health
care industry."
       Approximately 80 percent of claims from Medicare Part A
providers, such as hospitals and skilled nursing facilities, are
submitted electronically.  Nearly 50 percent of Medicare Part B
claims from physicians and suppliers are submitted
electronically.
       "Our goal is to achieve a total electronic environment for

Medicare claims by the year 2000.  Electronic processes will be
used for all eligibility verification, billing, claims processing
and payments," Toby said.

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       The ANSI format for electronic payment notices was tested
by HCFA in four states before the decision was made to adopt it
nationally for Medicare.  Toby said the trials "demonstrated
administrative cost savings for the receiving hospitals as well
as for the sending intermediaries.  The results show the mutual
benefits that can be achieved when insurers and providers work
together."
       Intermediaries are insurance companies that work under
contract with HCFA to process Medicare claims from hospitals and
other institutional providers.  By August 1992, intermediaries
will distribute the specifications for the standard remittance
advice to hospitals and other Medicare-certified providers.  The
new format will be available to Medicare providers starting in
October. 

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