The Myth of the Trading Partner Agreement

Still reeling from the April 14th rush to enter into "business associate" agreements to comply with the HIPAA privacy rule, health care providers and payors are being urged to turn their attention to so-called "trading partner" agreements to comply with the October 16th HIPAA transactions and code set ("TCS") rule compliance date. However, the logic of this advice is questionable. Such agreements are not mandated by the TCS rule. Moreover, a push to negotiate them is likely to add nothing useful to these parties' existing contractual relationships but will divert resources from the important tasks at hand related to TCS testing.

Contrary to popular belief, the TCS rule's only mention of "trading partner" agreements is not analogous to the privacy rule's business associate provisions. Unlike the privacy rule, the TCS rule does not require covered entities to enter into such agreements nor does the rule specify their contents. Instead, the rule simply states that covered entities may not enter into contracts to subvert the requirements of the rule. Why then are covered entities being urged to enter into agreements with the "trading partner" title if the rule's only concern is that certain covenants not be entered into?

One theory is that such agreements are necessary for parties to agree on such aspects of the TCS rule standardized transactions that permit choices. Yet all parties likely to enter into an agreement with "trading partner" characteristics already have managed care participation agreements in place which deal directly or incorporate by reference payor requirements for claim submission. As a practical matter, these so-called "companion guide" issues will be established as a matter of payor policy. They will not be the subject of negotiation by payors with institutional or professional providers.

A second theory behind such agreements is that, in the course of settling companion guide issues, they might establish a testing schedule. Testing is, of course, a laudable goal. In fact, testing, not the negotiation of new contracts, should be at the front of covered entity concerns.

Are we really likely to test more quickly by seeking to negotiate an agreement around the format of the transactions? That seems doubtful. It is much more likely that a payor will respond favorably to a phone request from a provider asking to work out a testing schedule, then a several page agreement purporting to constrain the manner in which the parties will conduct electronic transactions while including a testing schedule as an appendix.

Payors and providers will continue to update their participation agreements and provider manuals to address variables that are permitted under the rule. While it is contrary to many of our pecuniary interests to admit, the "trading partner" agreement concept is not where covered entities should currently be focusing their scarce resources. In the short period left until October, discussion and testing, not negotiation of trading partner covenants are most likely to advance TCS compliance goals.


Please feel free to contact Mark E. Lutes at 202/861-1824 in the firm's Washington, D.C. office if you have any questions or comments. Mr. Lutes' e-mail address is [email protected].

This publication is provided by Epstein Becker & Green, P.C. for general information purposes; it is not and should not be used as a substitute for legal advice.