Preparing for the conversion to 5010 does not end with the ability to create a valid and compliant 837 transaction--it’s only the beginning.

CMS requires Level II compliance for all covered entities by the end of 2011. Level II compliance is defined as “that a covered entity has completed end-to-end testing with each of its trading partners, and is able to operate in production mode with the new versions of the standards (5010).”

Covered entity means all payers and providers subject to HIPAA requirements. The term end-to-end testing means that in situations where claims are sent through clearinghouses or other third parties, that the ability to verify that a claim can be adjudicated by the payer is verified, regardless of the path it takes to get from the provider to its final destination.

If you get nothing else from this article, understand this. You cannot afford to wait. There are only four months left for these organizations to certify providers as in production. As the deadline nears, the EDI staff available now to assist you will see their availability reduced as they contend with the many providers and vendors that have waited until the last minute to prepare. 

I know that many of you have not completed or maybe even started the process. This article should help you understand what's required and what to expect.

As part of the services we provide for our customers, we are required to assist them in the testing required to achieve Level II Compliance with all trading partners. Without achieving production status, your claims will not be accepted, regardless of whether they are compliant or not.

The experience described in this article is with the Wisconsin Physician Service Insurance Corp (WPS). Of all the Medicare contractors we work with, it was the first to be prepared for testing. The company is the Medicare Administrative Contractor, Part A and Part B, for Iowa, Missouri, Kansas and Nebraska. If you have not yet begun testing with any payer or clearinghouse, we highly recommend that you begin with your MAC first since it will help you identify any flaws in your transactions and provide experience in the compliance process. Even if WPS is not your Medicare contractor, work with your MAC first. For most of you, it's your most important trading partner and will have the largest impact on your operations and cash if production status is not obtained in time.

The process begins with a compliant transaction. Your vendor should have demonstrated the ability to create a valid 5010 837. There are two different formats for the institutional and professional claims (837i and 837p).  Each will have to be tested separately.

You can verify these transactions are compliant one of two ways. The vendor can provide evidence that these transactions can be processed successfully by one of many commercial translators designed to verify the format of these HIPAA transactions (such as Claredi or HipaaEdiViewer). Preferably, the vendor can validate that another customer has passed testing, better yet, with your same Medicare contractor. 

One important thing: The file created for this process must be created by the provider using the current software available to them for this purpose. You cannot move forward by simply accepting a test file from your vendor. This does not verify that your application can create valid HIPAA transactions, only that your vendor was able to create a valid file for you. The ultimate purpose of this exercise is to prove to yourself and your payer that you are ready for the 5010 deadline. You don’t want to waste your opportunity to test with your payer if the process does not reflect your current status and capabilities. Even if you pass testing, if you send invalid data after the deadline, your production status may be revoked.

Next, contact your Medicare EDI department and ask them if there are any special procedures you should be aware of. In our experience, this is not the case and was not the case with WPS. The Medicare systems have been designed to accept test claims for 5010 while you're in production on 4010 and they will know the difference by the content of the file.

This link will get you access to your Part A and Part B Medicare contractors and their contact phone numbers for the EDI department:

You will need to know how your Medicare claims get to your contractor. It could be through a clearinghouse, directly through a modem, or through a third party, value-added network such as Ability or Ivans. Your test claims will take the same path. If you don’t communicate directly with Medicare by modem, you will need to contact your vendor to see if there are special instructions for claims testing via their transfer service.

You will need to prepare test claims. Twenty five claims are necessary for each line of business, Part A and Part B. The best claims are claims that have already been paid. The reason is that you don’t want your test results affected by errors in your claims that would have been present in either 4010 or 5010 format. If your system gives you the ability to select and re-bill claims already sent (and paid) in 4010 format as 5010 claims, that's the best approach. If not, you'll need to take whatever steps you can to make sure your test claims contain no errors in content.

Your software should provide you with the ability to create claims in 5010 format.  In addition, you should be able to designate the file as “test” or “production”. You will need to create the 837i and 837p files as 5010 files flagged as “test” using your 25 test claims for each type.

You send each file to your Medicare contractor in the same manner as you would send live claims. The Medicare system may or may not send you a message or e-mail acknowledging that the test file was received, depending on their procedure.

The first step is the translation process. This is a current process for all claims sent to most payer systems that validates the file received is a HIPAA-compliant file. The result of this step is a file called the 999.  It's created when the file is processed.  If you're sending claims directly, you can wait for this file to be created--it only takes a minute or so. 

This 999 tells you if there were any batch level errors and what they are. If errors exist, the entire batch is rejected and the errors must be fixed before the file can be submitted successfully.

Make sure your system can read the 999 files and display or print the results. Any errors at this stage must be addressed by your vendor since they have nothing to do with the content of the claims, only the format of the file.

If the claims pass the translator phase and your 999 file is OK, the claims are then passed to the claims edit manager. This is the process where business rules are applied to each claim to make sure it’s valid for payment. This is another reason to use paid claims in the test; in theory, they should never fail at this stage.

This step results in a HIPAA transaction file called the 277CA.  It’s a confirmation report that shows your claim status for all the submitted claims. It’s usually provided the day after submission. Your vendor should have provided software that enables you to view and/or print this file. It will show the status of each claim. If too many claims failed due to error, even if the file is HIPAA-compliant, you will have to test again. Medicare requires that 95 percent of claims are “clean”.

Since the testing process is fully automated with Medicare, you can repeat it as often as it takes.  There is no paperwork required and no personal communication unless you experience errors you do not understand.

If your 277CA file shows that all claims are pending and at least 95 percent are clean, then you should have passed the test. The Medicare contractor should send an e-mail to the provider contact stating that the test is good. You will then get a separate email stating that the provider is “in production”.  You are now ready, but not required, to send 5010 claims.

The Medicare contractor should send an e-mail to the provider contact stating that the test is good.  You will then get a separate email stating that the provider is “in production”. You're now ready, but not required, to send 5010 claims.

Now that you're in production, set a date to convert to production claims. The date should be well before the year-end. It's not a good idea to send your first 5010 claims on Jan. 1, 2012, since many other providers will take this approach and your contractor will have all the support calls they can handle for some time. Medicare will accept, and encourages, any provider in production to send 5010 claims as soon as possible.

I would recommend that you send a day’s worth of claims for all lines of business in 5010 format well ahead of the deadline. Follow these claims until they're paid.  If there are no issues, move to production as soon as you can.

Working with other payers will not be as easy and many of them have not progressed as far as CMS in developing their systems. Even CMS has issues, including the fact that they are not yet capable of sending 5010 835s as electronic payment files. I will be writing subsequent articles on the status of other payers including the various Medicaid programs and the major commercial payers and clearinghouses.  For more information on 5010 and CMS, click here

Kalon Mitchell is president of MedTranDirect.  He has 27 years experience in healthcare IT and has a bachelor degree in information systems from Missouri State University.  He started MedTranDirect in 1986. He can be reached at



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