HIPAA: Transactions Standard

HIPAA transactions and code set standards rules are important to consider when evaluating your practice management systems. If you intend to submit claims and conduct other HIPAA transactions electronically, it is essential that you understand the costs involved in complying with the standard formats. As you begin to construct your HIPAA compliance strategy, we want to emphasize the importance of maintaining flexibility in your electronic transaction options regardless of whether you intend to use a clearinghouse service, submit the transactions directly to a payer, or some combination of both.


Providers must understand their practice management systems vendors' approaches to HIPAA compliance, which generally fall into 2 categories:

1. Selling an add-on module that creates compliant transactions at final bill, which allows for direct submission to payers or to a clearinghouse you choose.

An add-on module, while requiring an initial investment in software and configuration services, provides you with substantially greater business flexibility.  Further, it gives you a higher degree of control over the ongoing costs of submitting claims and conducting other HIPAA transactions electronically.

2. Providing external mapping services via a clearinghouse, which is typically also be owned by the same vendor.

Vendors in this category are not required to, and may not, support HIPAA compliant modules. These vendors are approaching their clients with "all-payer" HIPAA transaction solutions that require translation at the vendors' clearinghouse. In this arrangement, the provider effectively turns over control of the transaction. Since the transaction must be translated by the vendor to become compliant, you forfeit the option of sending the transaction to another clearinghouse or directly to the payer, both of which may be less expensive options. In addition, such an exclusive relationship may put you at a disadvantage when negotiating the transaction fee structure with your practice management system vendor.

Questions for Practice Management System Vendors

In light of the circumstances described above, it is essential that you become acutely aware of the cost implications of HIPAA compliance. We encourage you to initiate candid discussions with your practice management systems vendors about these issues. The following questions are meant as a guide: 

  • When will the HIPAA software upgrade be ready?
  • Will there be any additional cost for this software upgrade?
  • Will I be able to submit HIPAA compliant transactions directly to payers if I choose to do so?
  • Will I be able to use the clearinghouse service of my choice?
  • When are you going to start the necessary testing of the software, and who will be certifying the results of the testing?
  • Will you be working directly with any insurers or clearinghouses to ease the transition to HIPAA standards and to test the messaging systems?
  • Will you be notifying physician clients of your progress?
  • Can you assure me that all transactions and data transmitted will be handled according to the HIPAA privacy and security regulations?
  • Will the HIPAA software update include all of the standard transactions and edits for the required data content? i.e. claim status, eligibility, electronic remittance, etc.

Connectivity Options for Providers

If your practice management system vendor will not provide the requisite transaction flexibility, there are alternatives available that do not require switching to a new office management system. Several vendors offer software packages that will extract claims from practice management systems and (1) perform the necessary ANSI translation, edit, and route the claim directly to a payer or (2) create an expanded national standard format, edit, and route the claim directly to the clearinghouse of your choice for translation.

If you have any questions, please contact the THIN EDI Helpline (972) 766-5480 or visit the THIN Web site for frequently asked questions and more. 


  • HIPAA Complaint Form : HIPAA transaction code set complaint form (November 2003) 
  • Health Care Provider Taxonomy Code Set
  • The National Uniform Claim Committee (NUCC) and the Washington Publishing Company (WPC) created a system for accessing and requesting codes for the Health Care Provider Taxonomy Code Set. This updated version will be effective October 1, 2003. For more information or go directly to HIPAA Health Care EDI .  
  • HIPAA EDI Practice Management System (PDS) Directory
  • The purpose of this directory is to greatly simplify the process for medical practices of becoming educated about and planning for HIPAA TCS compliance.
  • CMS HIPAA Toll Free Numbers: CMS now has a toll free number to call for HIPAA questions relating to electronic transactions and code sets: (866) 282-0659. For questions on HIPAA privacy regulations, contact the Office for Civil Rights at (866) 627-7748.


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