ACA Sec. 1104 - Administrative Simplification

Administrative Simplification: From compliance to competitive advantage


Administrative Simplification, part of the Patient Protection and Affordable Care Act of 2010 (ACA) signed into law on March 23, 2010, has an overarching goal of streamlining administrative interactions between health plans and providers to improve the patient experience and reduce costs throughout the health care system. Administrative Simplification provisions build on the electronic standards first defined in 1996 with HIPAA 4010 and accelerated in 2009 with passage of HIPAA 5010. While HIPAA addresses the technical structure of transactions, Administrative Simplification addresses how they are used.


• Standardized business and operating rules to eliminate variability in transaction implementation, moving the industry toward commoditization of “back-end” transaction processing
• Standardized benefit coverage information to drive consistency of eligibility content, enabling providers to better understand financial liability
• Provision of patient financial liability at or before the point of care, enabling providers to improve the collections process
• Real-time electronic auto-adjudication and claims status, providing for automated reconciliation
• Automation of health plan utilization management and care management decision processes required to support real-time referrals and pre-authorizations

Key dates and scope:

• Wave 1 (January 1, 2013): Automation of point-of-care eligibility and claims status
• Wave 2 (January 1, 2014): Automation of claims payment remittance advice and electronic funds transfer
• Wave 3 (January 1, 2016): Automation of claims and encounters, enrollment/disenrollment, referral authorization, premium payments, and claim attachments

Deloitte - Administrative Simplification:

CMS - Administrative Simplification Provisions in the Patient Protection and Affordable Care Act of 2010 (ACA) (6 page pdf):


By Don McCanne, MD

It has long been recognized that profound administrative waste is a unique feature of the U.S. health care system - waste that contributes to our unparalleled, sky-high health care spending. During the reform process, the subject of administrative waste was brought up repeatedly. In response, Congress included in the Affordable Care Act "Sec. 1104 Administrative Simplification." What is that?

You can read either Sec. 1104 in ACA, or, better, you can read the six page summary by CMS (link above). However, easiest would be to read the excerpts above from the Deloitte report on Administrative Simplification. There is enough there to let you know what it is.

It will not take long for people who understand the administrative advantages of the single payer model to realize that Sec. 1104 has nothing to do with the administrative waste that is a result of our highly fragmented, dysfunctional health care financing infrastructure. Sec. 1104 is primarily revising the information technology systems of the insurers and then requiring the providers to become compliant.

An idea of what Sec. 1104 is really about can be gleaned from Deloitte's discussion of a revolutionary scenario for administrative simplification:

"This scenario assumes that all stakeholders adopt real-time, end-to-end transaction processing, and that product standardization emerges. Implementation costs would be significant for both health plans and providers. Commercial health plans, in particular, would face a new strategic reality as claims transactions become a commodity, and health plan differentiation shifts to other areas, such as provider network and member experience. Such revolutionary change is possible if existing industry players and/or new entrants look for innovative ways to capitalize on market opportunities to affect health care cost and quality and make meaningful improvements to our health care system."

Do not be misled when ACA supporters talk about "administrative simplification." That's their code language for "commoditization" and "innovative ways to capitalize on market opportunities."

"Administrative simplification" is another term that they have stolen from the single payer community, and then bastardized it. Don't let them get away with it. That's our policy science.