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Statement of Need: The Health Insurance Portability and Accountability Act of 1996(HIPAA) (P.L. 104-191) creates a new part C, entitled "Administrative Simplification," to title XI of the Social Security Act. One of the standards for health identifiers that is mandated by part C is a standard unique health care provider identifier, to be used in the health care system. This final regulation announces the adoption of the National Provider Identifier (NPI) as the standard unique health care provider identifier. It also provides information on how health care providers will be assigned NPIs and defines the requirements of health plans, health care providers, and health care clearinghouses with respect to obtaining and using this standard. Implementation of the NPI and the other Administrative Simplification standards will increase the efficiency of the processing of standard transactions within the health care system.

Summary of the Legal Basis: Currently, health plans assign identification numbers to their member health care providers. Different health plans assign different numbers to the same health care providers. The identifiers are frequently not standard within a health plan or across health plans. This results in health care providers having different identification numbers for different health programs, often having multiple billing numbers issued within a single health program. This complicates the health care providers' claims submissions and other transactions and increases the costs incurred by health care providers in conducting those transactions. The Administrative Simplification provisions of HIPAA were designed to improve the efficiency and effectiveness of the health care system by encouraging the development of a health information system through the establishment of the standard unique health care provider identifier and other standards and requirements to facilitate the electronic transmission of certain health information.

Alternatives: This final regulation announces the NPI as the standard unique health care provider identifier. The NPI is a 10-position all numeric identifier, with a check-digit in the tenth position. There is no intelligence in the number. This design and our assignment strategy will allow more than 200 million NPIs to be issued. The NPI meets the principles established by the Department of Health and Human Services (HHS) for designation as a national standard. This final regulation defines "health care provider" in terms of the entities that will receive NPIs. Health care providers will be enumerated by a Federally-directed registry (the enumeration contractor). The enumeration contractor will use the National Provider System (NPS) to uniquely identify a health care provider and issue it an NPI. The NPS will be developed by HCFA. Health care providers must supply updates to their NPS data to the enumeration contractor within 30 days of the effective dates of the changes. The NPS will establish the National Provider File (NPF), which will contain information collected from health care providers in order to assign them NPIs. The NPS will assign a single, unique NPI to a health care provider. Upon the dissolution of an organization health care provider or the death of a individual health care provider, the NPS will deactivate the NPI that had been issued to that health care provider and will not assign a deactivated NPI to any other health care provider. The NPS will disseminate information from the NPF to users in accordance with the Privacy Act and the NPS System of Records.

Anticipated Costs and Benefits: Our analysis of the costs and savings of the HIPAA Administrative Simplification standards is an aggregate impact of all the standards. Assessing the impact of each standard independently would inflate the costs and would yield inaccurate results. While each individual standard is beneficial, the standards as a whole have a synergistic effect on savings. A difficulty in this analysis was the fact that we have no historical experience in assessing the costs and benefits of such a sweeping change. The costs of implementing the standards specified in HIPAA are primarily one-time or short-term costs related to conversion. These costs will be incurred during the first 3 years of implementation. Benefits will accrue almost immediately, but will not exceed costs for health care providers until after the third year of implementation. After the third year, the benefits will continue to accrue into the fourth year and beyond. The impact analysis for the costs and benefits associated with all the Administrative Simplification standards indicates that the combined net savings for health plans and health care providers would amount to $1.5 billion dollars after 5 years.

Risks: This rule will formally establish the standard for the unique health care provider identifier and will communicate the requirements for health plans, health care providers, and health care clearinghouses in implementing this standard. Failure to publish this rule would jeopardize the benefits of administrative simplification. Payers would continue to maintain their own system of enumerating providers, and providers would need to maintain systems to store the different identifiers. Additional costs would thus be incurred.