Tennessee has finalized rules and will join North Carolina, Minnesota and Texas as the only states to require workers’ compensation payers and providers to invoice and pay medical bills electronically.

Abbie Hudgens

The only exceptions to the initiative, which will be implemented July 1, 2018, are medical providers with 10 or fewer employees or those who submit fewer than 120 bills for workers’ compensation treatment in the previous year, and payers who process fewer than 250 workers’ compensation medical bills in the previous calendar year.

The Bureau of Workers’ Compensation also may grant exemptions on a case-by-case basis for both providers and payers if they can establish that e-billing would result in an “unreasonable financial burden,” the new rules state.

Tennessee brings to four the number of states that mandate e-billing for both providers and payers, according to the International Association of Industrial Accident Boards and Commissions. Oregon, California, Louisiana and Illinois make e-billing mandatory for payers and voluntary for providers, while Georgia makes it voluntary for both, the IAIABC says.

BWC Administrator Abbie Hudgens said the e-billing project was part of the Tennessee Workers’ Compensation Reform Act of 2013, passed as Senate Bill 200/House Bill 194.

The agency waited until late last year to undertake the e-billing project because it had to deal with many other changes mandated in the legislation, Hudgens said. Those included adoption of a drug formulary and medical treatment guidelines, and a revamp of the entire dispute-resolution process by moving it from civil courts to a purely administrative system and creating the Court of Workers’ Compensation Claims.

In the years since the reforms were implemented, Tennessee has reduced its workers’ compensation rates by a cumulative 36%.

The Department of Commerce and Insurance recently approved a 12.6% rate reduction that will be effective March 1. It was the seventh consecutive loss-cost reduction recommended by the National Council on Compensation Insurance and approved by Commerce and Insurance Commissioner Julie Mix McPeak.

Hudgens lauded the e-billing project as a way to help providers and carriers.

“The idea was to get medical providers their payments more rapidly,” Hudgens said. “The projections for advantages for payers and medical providers are pretty impressive. With e-billing, the system just runs more smoothly, there are less errors, and payments are much quicker.”

Richard Murrell, the BWC’s director of quality assurance and project director, said at least eight other states have begun to consider adopting e-billing.

“This is the future world for processing these medical bills, and we certainly wanted to be at the forefront of it,” Murrell said.

“This should make the process more cost efficient for both the carriers and the provider,” he added. “And it should collapse the revenue cycles for the providers, giving them an immense benefit.”

The BWC worked with the implementation team at the IAIABC, said Gregg Lutz, the association’s director of standards development and outreach. The agency will use the X12 Standards for Electronic Data Interchange, which the IAIABC endorses and has adopted for workers’ compensation, Lutz said.

The American National Standards Institute chartered X12 more than 35 years ago as a consensus-based nonprofit that focuses on implementation and ongoing use of EDI standards, according to the X12 website.

“The state of Tennessee has been very proactive with implementation and came to us more than a year ago,” Lutz said. “Most doctors’ offices already have the same software for Medicare reporting. It definitely can speed up the process of getting payment back to providers from the payers quicker. It will definitely improve the accuracy of billings.

“And since medical offices already are using e-billing for other lines of insurance, it definitely could be a big cost savings if they are folding in workers’ comp bills as well,” he said.

Under the new rules, payers and providers can exchange electronic data in a non-prescribed format by mutual agreement as long as all required data elements are present.

Unless exempted from the process, payers would have to accept electronic medical bills, transmit acknowledgments and remittance advice, and support methods to receive electronic documents required to adjudicate bills.

Providers or their third-party vendors must implement software systems capable of exchanging medical bill data, submit medical bills to payers or to their outside clearinghouse, and receive and process any acceptance or rejection acknowledgment from the payer, the rules state.

Payers would have to acknowledge receipt of an electronic medical bill by returning an “implementation acknowledgment” (X12 9999) within one business day of receipt of the electronic submission. Payers would also have to acknowledge receipt of a bill by returning a “health care claim acknowledgment” (X12 277CA) transaction within two business days of receipt.

Any electronically submitted bill determined to be complete but not paid within 15 calendar days or not objected to within 15 business days will be subject to penalties ranging from $50 to $5,000, the rules state.

The BWC also can impose civil penalties of up to $500 per violation, up to a maximum of $5,000 during any calendar year.

The Tennessee Hospital Association said in its public comments to the rules that the move was a “generally positive step,” but the THA expressed concerns over the two-business-day payment time frame and suggested it be extended to five days.

The BWC disagreed.

“After consultation with the IAIABC implementation committee, it was determined that the two-business day time frame is successfully utilized in other states adopting the e-billing model rules,” the agency wrote.

The American Insurance Association commented that it “supports an eventual move to electronic billing” but asked for implementation to be delayed until “relevant technology is proven both capable and affordable for payers and health care providers alike.”

The BWC disagreed with AIA’s concerns over technology, but agreed that the original Jan. 1 implementation date for payers was too tight and moved it to July 1, when providers will be mandated to climb aboard the e-billing train.

The Tennessee Medical Association alerted its members to the e-billing initiative on Oct. 24 and warned them about the need to use electronic funds transfers (EFTs) instead of virtual credit cards (VCCs), which come with fees of up to 5% per transaction.

EFTs take place over computerized networks among accounts at the same bank or to different accounts at separate financial institutions. They include direct-debit transactions, wire transfers, direct deposits, ATM withdrawals and online bill pay services.

EFTs are processed through the Automated Clearing House (ACH) network, the secure transfer system of the Federal Reserve Bank that connects all U.S. banks, credit unions and other financial institutions.

A virtual credit card has a randomly generated number and is associated with a regular credit card account. Once a VCC with a unique number has been used, the number becomes obsolete and unusable by fraudsters, according to cashmoneyforlife.com.

The Tennessee Medical Association told members that physicians can elect to not be paid by VCC, but carriers “will not inform them of this fact” and can be “sneaky and just default to the payments by VCC, which are cheaper for the payer.”

“We are suggesting every medical practice and health care organization treating workers’ comp patients spend the next several weeks thoroughly investigating available resources, implementing new processes and testing claims,” TMA Vice President Dave Chaney emailed WorkCompCentral on Monday.

“Using electronic funds transfers instead of virtual credit cards, for instance, will help doctors avoid unnecessary fees and administrative burden,” he said. “Practices should beware of misleading marketing from some vendors offering ‘value-added’ products or services.” 

The BWC responded to the medical association’s concerns by noting that the new rules require payments for service to be through EFTs unless an “alternate electronic method is agreed upon by the payer and provider.”

The Property Casualty Insurers Association of America said via emailed statement Monday that it is important for state workers’ compensation systems to keep up with technological advances to create “new efficiencies and reduce process friction.”

“The recently adopted Tennessee e-billing rules include some potential flexibility for payers and health care providers by allowing the use of non-prescribed formats, alternative electronic payment methods, and allowing direct data entry methodology,” said Hilary Segura, PCI counsel for state government relations.