National Provider Identifier: Leveraging regulation to improve health plan operational efficiencies

February 1, 2007

The administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) require the Department of Health and Human Services (HHS) to establish national standards for electronic healthcare transactions. This includes assigning healthcare providers a National Provider Identifier (NPI), a 10-digit numeric provider identifier that will be used in standard electronic transactions, such as healthcare claims. As of a legislated date of May 23, 2007, each participating provider will have one and only one NPI, regardless of practice locations or settings.

As of a legislated date of May 23, 2007, each participating provider will have one and only one National Provider Identifier (NPI), regardless of practice locations or settings.

Consequently, accommodating NPIs should be viewed by health plans as both a regulatory compliance effort and an opportunity to achieve long-term and strategic administrative gains through enhanced operational efficiencies based on standardization and simplification.

NPI overview















An NPI is intelligence free (containing no specific information about a provider's address, specialty, type of service rendered or the state in which the provider is licensed) and will be issued in two categories for healthcare providers: Type 1 for individual healthcare providers/practitioners (i.e., people) such as chiropractors, dentists, dental assistants, medical technicians, radiologists, nurses and doctors; and Type 2 for healthcare organizations (i.e., legal inanimate entities) such as hospitals, nursing homes, and home healthcare agencies. Of course, there are nuances within both NPI types, and the Centers for Medicare and Medicaid Services (CMS) provide guidance to determine whether a business is eligible for an organization NPI.

Health plan executives should ask themselves the following key questions to determine if they are prepared to manage the technical and business impact of NPI compliance:

Here are some common NPI implementation pitfalls that health plans should try to avoid:

Most health plans agree that a crosswalk is necessary to accept an NPI and "translate" it to its legacy counterpart. However, health plan executives who simply assign this task to IT personnel will not produce a holistic and balanced business process. Implementing NPI is more a business implementation issue than a systems fix. Efforts should start with a holistic, cross-organizational assessment of the transactions that use provider identifiers as well as the ways these identifiers are used to adjudicate claims, answer provider and member inquiries, and generate internal and external reports.

Many health plans already struggle with maintaining accurate provider data, from the correct spelling of a name to correct address and license number. Moreover, due to data entry errors, it is possible for a single provider to have multiple records within a health plan's system. A crosswalk built atop a foundation of inaccurate provider data may lead to poor "mapping," which in turn may produce inaccurate claims adjudication and payment and lead to increased provider and member dissatisfaction and increased administrative costs. Clean provider data is a critical aspect to crosswalk effectiveness and sustained administrative efficiency after the compliance date.

Failing to engage business partners that rely on data containing provider identifiers or provider files can produce an administrative disconnect. Health plans should communicate with their business and trading partners throughout the transactional assessment about how they intend to implement NPI. Similarly, omitting robust provider education and communication from an NPI implementation plan could lead to increased provider confusion and administrative breakdowns.

Focusing solely on impacted transactions and translation may allow a health plan to accept standard electronic transactions with NPI, but it may not necessarily support other health plan operations. Effective NPI compliance is based on an organization's ability to accept as well as remit NPI on standard electronic transactions for which the Secretary of HHS has adopted a mandate and to effectively apply NPIs to the administration of health plan operations.

Crosswalks rigidly designed and driven from one data element or field (i.e., ZIP code) can limit a health plan's ability to effectively map transactions to its appropriate legacy identifier. A crosswalk's effectiveness should be based upon its ability to address one-to-many and many-to-one enumeration scenarios and to allow real-time cross referencing of old and new identifiers. Additionally, exception processing should be well planned and designed, as there inevitably will be implementation defects and issues that should be addressed. Identifying and mitigating these potential problems can be critical to achieving a smooth transition.

Steps to effective compliance

Effective NPI compliance can be more than just mandated compliance-it can be the foundation for health plans to help reduce NPI disruptions and realize short- and long-term strategic and tactical objectives. Here are some steps to prepare for the May 23, 2007, compliance date:

1. Mimic Medicare's implementation timeline.

2. Focus on provider education.

3. Collect and cleanse provider data immediately.

4. Verify that claims processing can accept NPI.

5. Discuss timelines and needs with trading partners.

6. Determine downstream data requirements.

7. Educate customer service representatives.

8. Update Web portals.

9. Plan how to adjudicate paper claims.

10. Understand state laws on use of NPI.

Near- and long-term opportunities

The transition to and use of NPI within the delivery of medical care will have a ripple effect throughout the medical delivery system for years to come-from providers to health plans, clearinghouses, billing companies and pharmacies. Health plans that develop an NPI solution that is flexible and easily adaptable will be in a better position to address short-term environmental, technical and operational challenges and achieve long-term gains through enhanced operational efficiencies.

Near-term opportunities include:

In addition, health plans can use NPI compliance as an opportunity to set the foundation for addressing impending legislation and other long-term strategic objectives. Additional long-term benefits include increased standardization, efficiency, organizational readiness and flexibility.

While there is no canned solution to NPI implementation, attaining compliance should start with avoiding the pitfalls and incorporating some or all of the steps outlined above. With the effective date just months away, health plans should immediately begin developing an NPI solution.

James Brock is principal, Albert Ghafari is senior manager and Yvette Schmitter is senior consultant for Deloitte Consulting LLP, Life Sciences & Healthcare Industry.