It might further be noted that in formal response to the original BHI criticism, the Maryland Plan pointed out that ". . . over half of our aged inventory (claims over 30 days) is pending final query reply . . . from Woodlawn (SSA). We have been working with our on-site representatives to identify ways to minimize such claims, but to date (March 2, 1973) we have not found problems which can be positively affected."

In February 1973, for example, the referenced delay in Maryland's case exceeded the national average by almost five days.

Mr. WOODCOCK. "The Carrier's duplicate payment screens did not achieve maximum effectiveness in identifying duplicate claims prior to payment.'

REPLY. In formal response to this contract evaluation comment, the carrier advised BHI that it had conducted a comparative test of its computerized duplicate payment screens against the exact SSA Model B format. The Plan's system detected the same claims the Model B system did. More significantly, the carrier's system produced a lesser volume of potentially duplicate claims, thus eliminating considerable, non-productive manhour review time. As noted in the text of the carrier response:

"The results of these two tests were made available to SSA representatives and to date (March 2, 1973) we have not been offered any additional criticism or direction. Obviously our intent is not to avoid responsibility in this area, but instead to perform in the most efficient manner. We would like to again review the two edit systems with your representatives to determine what action is appropriate.

The carrier further pointed out that it had misinterpreted certain instructions in the Part B Medicare Manual with regard to reporting actual postpayment duplicate detections, resulting in BHI's finding that ". . . for the first six months of calendar year 1972, duplicate payments made by Maryland Blue Shield were 1.4% of the total of actual duplicates discovered from prepayment screens, compared with the national average of 1.0% . . ." Upon correcting its reporting methodology, the carrier found that for the period quoted in the evaluation report the percentage of duplicate payments was .68, rather than 1.4. compared to the national average of 1.0. This revision was properly construed by the Plan as "satisfactory performance", and was not subsequently challenged by BHI. Mr. WOODCOCK. "This carrier has submitted requests for supplemental funding for both fiscal years 1972 and 1973. In addition, expenses exceeded allocated funds by a minimum of six percent during fiscal year 1972, a trend apparently continuing into fiscal 1973. This indicates an inability to accurately estimate costs or to effectively control these costs, or both.''

REPLY. During the period cited, the carrier had not instituted a cost accounting system equivalent to the high standards recommended by SSA. The Plan readily acknowledged this concern, however, and responded positively and constructively:

"We are presently conducting a review of our budgeting and costing operations. Specifically, we hope to accomplish the following in the area of cost allocation: 1. Review of the functional areas contributing to the cost of the program. 2. Review of our costing methodology,

3. Comparative analysis of our costs with peer group costs.

4. Determination of corrective action.

Further, our budget forcasting system will be completely overhauled during

1973."

WASHINGTON PHYSICIANS SERVICE

Mr. WOODCOCK. “Performance varies significantly through the system... from excellent to barely adequate, or occasionally to unsatisfactory ... WPS faces an inherent obstacle to completely effective management of the bureau sub-contracts. This is due to the fact that on non-Medicare matters, WPS is governed by the bureaus rather than vice versa... The Thurston County Bureau, as an example, has traditionally rebelled at any attempts to achieve a uniformity of operations. For many months, this Bureau refused to comply with instructions relating to reimbursement for multiple nursing home visits."

REPLY. 1. Unlike the typical carrier which receives, adjudicates and pays claims at a single location, Washington Physicians Service fulfills the major portion of its contractual responsibilities through subcontracts with twenty medical service bureau organizations. Washington Physicians Service, itself. is the central organization sponsored by the Washington State Medical Association. Its purpose is to coordinate the activities of the county bureaus.

As pointed out by the Bureau of Health Insurance, Region X, Washington Physicians Service accessibility to the population it services is its greatest strength. Claims are processed on a local level; therefore, the beneficiaries have easy access to the "system" whenever questions or complaints arise. Region X pointed out there is no way to assign a "dollar value" to this aspect of WPS performance. A by-product of the WPS 20-bureau structure is that it fosters a significantly high rate of assignment of Medicare claims.

2. With the 20-bureau structure, there are occasions when deviations from regulations do occur, but these, if taken out of context, appear much more significant than they are, in fact. These deviations must be related to the State as a whole if they are to be meaningful and show their true impact.

3. There is an occasional variance by individual bureaus with reference to Medicare Part B regulations. In the case of nursing home fees in Thurston County, one needs to examine the total scope of the situation. By authority of the Bureau of Health Insurance, the bureaus in Washington used their particular private fee schedules as the allowable fee until July 1, 1971. Washington Physician Service and the bureaus had demonstrated the fees paid on the private business was actually the usual and customary fee in the areas.

Thurston County began paying $9.00 for nursing home visits on March 1, 1968 and the practice and charge was well established by the time instructions were issued to change the payment of these visits. The instructions required carriers to pay no more for a nursing home call than for a follow-up office visit. The Thurston bureau objected to this reduction of fees on the basis that the charge was an established accepted fee in the community and to change the fee to $6.00 or $6.50 was improper and an unfair burden to put on the beneficiary or physician, if he took assignment. They subsequently wrote to Mr. Tierney. Director of the Bureau of Health Insurance, requesting a reconsideration of the issue. Mr. Tierney quickly responded and did not agree with the bureau's stand. The bureau then immediately complied.

MEDICAL SOCIETY OF MILWAUKEE COUNTY

Mr. WOODCOCK. "Another factor affecting (lack of) productivity is the high Medicare employee turnover of 52 percent in 1972."

REPLY. In assessing employee turnover in relation to productivity, it is equally true that low productivity arising from EDP inefficiencies contributes, in turn, to personnel dissatisfaction, frustration, and high turnover.

In this respect, Milwaukee's turnover problem was seriously compounded by SSA's refusal in 1970, and 1972 to approve the carrier's request to change its EDP subcontractor. During the same period SSA also eliminated, through the budgetary process, many of the Plan's project proposals for improvements to its existing EDP system.

While Milwaukee later concurred with SSA's decision not to spend added monies for in-house systems improvements, in view of the Plan's desire to convert to a regionalized approach, it was noted that in the meantime the carrier was severely limited in its capabilities to improve its overall efficiency.

Now, the Milwaukee Plan is part of a multi-carrier regional computer network using the SSA Model B system as the base. All projections indicate that this arrangement will significantly improve the carriers operational efficiency and, at the same time, reduce its administrative costs.

As for the employee turnover per se, it was mostly at the critical level and was somewhat attributable to the salary structure within the Plan. On a nationwide comparative basis, for example, using an SSA cost comparison for JulyDecember fiscal year 1974, the carrier ranked third lowest in average salary/man year. Even so, in 1973, personnel turnover was reduced by 23 percent, and by another 46 percent in the first five months of 1974.

BLUE CROSS-BLUE SHIELD MINNESOTA

Mr. WOODCOCK. “In 1972, the EDP unit cost per claim was $1.61 compared to the national average of 93 cents. The carrier's high unit cost results primarily from the subcontract EDP services. Data processing services are rendered under subcontract by the Electronic Data Services Corporation of Dallas, Texas." REPLY. Any fair comparison of carrier costs must include all processing com

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ponents, both EDP and non-EDP. During the July-December 1972 reporting period, for example, Minnesota's cumulative cost per claim was $3.58, compared to the national average of $3.36. In the first quarter of 1973, the carrier's cumulative costs were reduced to $3.08, largely as the result of improved management skills plus increasing workload volumes which placed the cost per claim in a lower subcontracting price category.

It should also be noted that in terms of service to Medicare beneficiaries and providers, the Minnesota EDP system is especially extensive and sophisticated. permitting speedier claims processing, greater productivity and faster inquiry replies than the corresponding national averages. And too, the Minnesota system includes computerized pre- and post-payment utilization review mechanisms, producing tangible dollar savings not otherwise obtainable. At the same time, the non-EDP (personnel) costs to operate the system were, in 1972, 22% lower than the national average non-EDP component.

Finally, we should point out that in compiling 1972 comparative EDP unit claim costs, substantial SSA subsidies to the Model B system were not included.

Appendix B

National Health Insurance-Brief Outline of Pending Bills, Prepared by the Staff of the Committee on Finance

(509)