III. CURRENT SITUATION Presently, Release 5 is now operational in 24 Blue Cross Plans. (Exhibit I) The claims currently being processed by the system represents over 50 percent of all of the Medicare Part A claims handled by Blue Cross Plans for the 3rd Qtr fiscal year 1976. The Model A/R5 System is currently being run in IBM OS environments and BCA therefore centrally maintains only an OS version for USER Plans. The system can be run in a multiple Plan claim processing environment. At present, two different multi-Plan processing environments are operational (Columbus/ Atlanta, Ga. and Oklahoma/New Mexico). The Batch Audit/RTI Subsystem is now approved for operation in 22 of the 24 Model A Sites. Full compliance is projected by October, 1976. The Home Health System feature has been approved (December 1976) for operation in South Carolina which served as the Alpha Site. The System was Beta tested in the Florida Plan. Ultimate implementation of this feature in all 24 USER Plan sites will bring Model A claim bill processed volume up to between 53-55 percent of all Medicare claim bills processed in the Blue Cross System during fiscal year 1977. Three (3) other Model A implementation opportunities, namely, the Cincinnati Merger (Lima, Canton, Youngstown), Topeka, and Chattanooga will bring the Model A claim bill processed volume up to between 55-60 percent during fiscal year 1977. Other pending fiscal year 1977 projects that could impact Model USER performance are: SDR Backlog Plan of Action; Entitlement Year Decade Change; 950 Character Record, Manual sample eliminated, Diagnosis/procedure narrative become input data; HIMBEX Listings on SSA/Clear Tape; HEW_Audit Findings; Uniform Billing; On-Line Data Entry; Batch Audit-Tape To Tape Sites; and SSA 100% Tape submittal mandate in place of hardcopy. IV. BCA ADMINISTRATIVE COST ANALYSIS A breakdown of administrative costs incurred or budgeted by BCA for Model A and Tape To Tape activity from fiscal year 1970 thru fiscal year 1977 is presented in Exhibit II. Direct costs are displayed which include such items as salaries, travel, consulting, outside service agencies, leased lines and telegraph, equipment rental and repair, printing or periodicals, conferences/conventions, computer and vendor and supplies. Staffing levels have gone from 13 manyears of effort during fiscal year 1970 to a high of 38 manyears of effort during fiscal year 1975. Present fiscal year 1977 manyears are proposed at a level of 26.2. Several releases of the Model A System have been developed since fiscal year 1970. Some of these releases required concurrent and ongoing maintenance support thru several fiscal years. As the Model A System stabilized at the Release 5 level, additional demands for enhancement were made by both SSA-BHI and Users of the system. Constraints were imposed on the budget process which precluded BCA from budgeting for any developmental activity during fiscal year 1976, although several maintenance changes were quite large. This developmental constraint was part of the fiscal year 1977 budget process again with several known large scale 'developmental" systems projects given higher priority by BHI-Systems. A breakdown of approximate developmental and implementation direct cost incurred since fiscal year 1970 are as follows: All developmental dollars were expanded from approved fiscal budgets. With the exception of the Release 6 expenditure of $340,630, all other developmental cost incurred between fiscal year 1970 and fiscal year 1975 resulted in the evolution and refinement of Release 1 thru to the enhancement stabilization of Release 5. Developmental costs normally include all aspects of feasibility, needs analysis, general design, detail design, coding, program testing, system testing, on-site user testing and general distribution of software and supporting documentation. Implementation costs peaked during fiscal year 1974 when BCA staff was at the height of its field support activity. It is important to note that as new Model A releases were developed and distributed, Plans operating prior releases required on-site assistance to upgrade their Medicare Systems operation. This was required as each new release brought with it additional operating capabilities that directly impacted on the Plan's functional capacity to process claims, as well as new software and hardware requirements. As more Plans were implemented on Release 5, the technique for installation was streamlined, on-site staff time reduced and over implementation costs decreased. Staff on-site time has been reduced to approximately 5 calendar months depending on the level of complexity to install. Current fiscal year 1977 implementation activity centers around Kansas Blue Cross and Tennessee Blue Cross. Extensive activity is also underway to assist current Model A users to become operational utilizing the Home Health claims processing feature of the Model A System. Attachment 9 1975 PRIME CONTRACT CHANGES In December, 1974, the Bureau of Health Insurance announced its decision to renegotiate the BCA prime Medicare contract to address these general issues: "1. Restructuring of the agreement to reflect more precisely the distinction between functions to be performed by BCA and those to be subcontracted to the Blue Cross Plans. "2. Provisions which more clearly define the working relationship and flow of communications between the Bureau of Health Insurance and the Blue Cross Plans." In February, 1975, the Bureau proposed specific contract changes including limiting the contract term to one year. During the one year term, the Bureau committed that it would conduct ". an evaluation with the objective of determining what responsibilities BCA as an organization can best provide the Medicare program.' In its specific proposal, the Bureau suggested these changes to the BCA prime contract: 1. Responsibility for plan performance.-Eliminate BCA responsibility for monitoring and evaluating Plan performance. Primary responsibility would be shifted to the Bureau of Health Insurance Regional Offices. BCA would evaluate its subcontractors' performance only as directed or approved by the Bureau. 2. Budget review.-Eliminate the BCA role in the budget process between Plans and the Bureau of Health Insurance Regional Offices. BCA would have no role in reviewing, approving or negotiating the budgets of its subcontracting Plans. 3. Direct draw down of administrative funds by plans.-Eliminate BCA's function of reimbursing Plans their costs of administering the Medicare agreement. 4. Consolidated quarterly reporting of administrative expenses.-Eliminate the BCA Consolidated Quarterly Report of Plan and BCA Administrative Expenses. 5. Prior approval of plan subcontracts and data processing changes.—Eliminate the BCA role in reviewing and approving those procurement subcontracts and data processing changes which required the Bureau's prior approval. BCA would have no role in reviewing or approving its subcontractors' further subcontracting any of their Medicare activities. 6. Provider reimbursement review board activity.—Eliminate BCA representation at the Provider Reimbursement Review Board and shifting to the Plan the responsibility of presenting the intermediary position. This change would have effectively eliminated the intermediary, whose decision was appealed, from appearing before the Board to defend its decision. BCA considered each of these proposed changes major attempts by the Bureau to exclude BCA from a meaningful role in the Medicare program by reducing or ignoring appropriate prime contractor responsibilities. The BCA reply to the Bureau's contract proposal expressed BCA's concern that "The net effect of the changes you propose in our contract in your February 27, 1975 letter would effectively eliminate BCA as the intermediary." The BCA position was based on the role of BCA as the intermediary nominated by providers under Section 1816 of Public Law 89-97. BCA believed it should maintain its management role over activities subcontracted to Plans because, as intermediary, BCA had the ultimate responsibility for Plan performance. The Bureau's proposals removed BCA's ability to monitor and manage Plan performance in operational and financial aspects of planned Medicare activities. As a result of discussions with the Bureau and the Commissioner, the prime contract was changed to reflect Plan representation at the Provider Review Board with assistance from BCA as requested by the Plan. To be consistent with other carrier and intermediary contracts, the BCA prime and subcontracts were also changed to a one-year term. 1975 CONTRACT CHANGES FOR ALI CONTRACTORS In addition to the prime contract items, the Bureau of Health Insurance proposed changes in contract items which were common to all contractors. The majority of these items were either technical changes or items where the Bureau and the contractors reached early agreement. The major proposed contract change which concerned BCA and Blue Cross Plans was the Bureau's proposal for further restrictions on Plan procurement subcontracts and data processing activities. The Bureau's proposals would have required formal advertising and adherence to Federal procurement regulations and procedures for any subcontracting activity in excess of $10,000. Although the Blue Cross organization fully supports the principle of competitive procurement, BCA, Plans, and other contractors objected to the Government's desire to dictate specific procurement methods and treat the contractors as Government agencies or bureaus, rather than independent contractors. Explicit in the contractors' objections was the need for the Bureau and its contractors to reach agreement on acceptable performance standards. The contractors believed the Bureau should measure performance results, not dictate specific management procedures. As a result of the negotiations, the Bureau did not change the contracts to include the full Federal procurement regulations for subcontracting activity. At the urging of the contractors, the Bureau increased the dollar thresholds which determine when the Bureau's prior approval of subcontracting activity is necessary. The 1975 contract also established rules for determining when prior approval was needed for data processing or systems changes. Under the terms of the 1975 contract, prior approval is required: For procurement subcontracts: Where the estimated cost to Medicare over the term of the subcontract exceeds a certain dollar threshold. 1 For Automated Data Processing systems or operations changes involving the Medicare Claims Process: When either (1) the conversion and implementation of the Plan change or (2) the increase in operating cost for the first year of operation exceeds a certain threshold amount 1 Administrative cost: Less than $250,000 $250,000 to $2,000,000 $2,000,000 to $5,000,000. Over $5,000,000 Prior approval threshold amounts $35, 000 75,000 100, 000 $150, 000 Although the contractors generally believed that the requirements for prior approval of data processing changes were those indicated specifically for data processing changes, the Bureau has continued to require prior approval for any subcontract, such as computer acquisition, without regard to these specific requirements for data processing approval. This contract language, therefore, sometimes requires prior approval of those data processing changes which result in program savings. The contractors have been generally concerned about the Bureau's requiring prior approval based only on dollar thresholds. Medicare contractors do not usually have separate legal entities for their Medicare operations. The contractors perform their Medicare business along with other business and use facilities, personnel and equipment which are common to both Medicare and non-Medicare business. With prior approval related only to dollar levels, the smaller business interest Medicare-often delays necessary changes for the contractor's majority or non-Medicare business. The contractors believe the Bureau's prior approval should be required when more than 50 percent of the subcontract or data-process 1 Dollar threshold varies with the level of contractor administrator expense as follows: ing cost is to be charged to Medicare and that 50 percent exceeds certain threshold amounts. 1976 PRIME CONTRACT PROPOSALS In March, 1976, the Commissioner gave BCA Notice of Intent to modify the BCA prime contract .. particularly as it relates to those functions that are peculiar to the BCA National Organization in its oversight of Plan activities." In May, 1976, the Bureau proposed six changes to the BCA prime contract: 1. Provider nomination.-Add a specific requirement for BCA to obtain the Secretary's approval if BCA wishes to change a provider's local Medicare service from one subcontracting Plan to another subcontracting Plan. The Bureau views such a switch between Blue Cross Plans as a change of intermediary. 2. Prior approval of plan subcontracts and EDP changes.—Eliminate the BCA role in reviewing and approving those procurements, subcontracts and data processing changes which require the Bureau's prior approval. BCA would have no role in reviewing or approving its subcontractors' further subcontracting any of their Medicare activities. This is the same proposal as in 1975. 3. Telecommunications.—Eliminate BCA's right to use its private wire system in administering Medicare for subcontracting Blue Cross Plans and, upon request, Blue Shield Plans. The Bureau's proposal would require specific approval of the Secretary for the use of the private wire system for each Blue Cross or Blue Shield Plan. 4. Budget review.-Eliminate the BCA role in the budget process between Plans and the Bureau of Health Insurance Regional Offices. BCA would have no role in reviewing, approving or negotiating the budgets of its subcontracting Plans. Additionally, there would be no consolidated budget of BCA and subcontracting Plans submitted to the Bureau. This is the same proposal as in 1975. 5. Direct draw down of administrative funds by plans. Eliminate BCA's function of reimbursing Plans their cost of administering Medicare. This is the same proposal as in 1975. 6. Final settlement of plan administrative expenses.—Eliminate BCA from the negotiation and final settlement process for determining and paying Plan Medicare administrative expenses. The Bureau's 1976 proposed contract changes give further evidence of the Bureau's expressed desired to eliminate BCA as the intermediary and ignore the prime contractor's responsibility for performance under a prime-subcontract relationship. Although three of the Bureau's proposals are the same as the 1975 proposals, they are not the result of the evaluation of BCA which the Bureau promised. The Bureau did not conduct an evaluation. BCA has reached tentative agreement with the Bureau on proposed changes (1) and (2) above, which BCA considers relatively minor. Provider nomination BCA does not agree with the Bureau's position that a provider switch between Blue Cross Plans is a change of intermediary. BCA, not the local subcontracting Plan, is the intermediary nominated by the provider. However, BCA has agreed to the Bureau's proposal because BCA has always coordinated such changes with the Bureau. Prior approval of plan subcontracts and data processing changes BCA's activities in prior approval of Plan procurement subcontracts and EDP changes are performance monitoring and contract-compliance activities. BCA does not attempt to evaluate each instance of Plan management decisions in placing procurement subcontracts or making EDP changes. BCA, the Bureau, and others should evaluate a Plan's total performance by reference to specific performance standards, rather than through detailed reviews and direction in internal management methods. The Bureau has withdrawn this proposal. BCA believes these four remaining contract porposals would have a major, detrimental effect on BCA's ability to fulfill its accountability for Blue Cross Plan Medicare performance: Telecommunications BCA is concerned about the Bureau's Telecommunication proposal because the proposal would deny the private sector the right to use its own capability. BCA also questions the cost effectiveness of the Bureau's proposal because reliable cost figures are not available to compare the BCA Telecommunications System with the proposed Government system. Budget review Direct drawn down of administrative funds by plans These three items, considered together, would remove BCA's ability to monitor and evaluate Plan Medicare financial planning and results. Additionally, the proposals ignore the reality of a prime-subcontract relationship-namely, it is axiomatic that a prime contractor provides interim and final funding to subcontractors. 1976 CHANGES PROPOSED FOR ALL CONTRACTORS As with the 1975 contract changes, the majority of items proposed by the Bureau to affect all contractors are technical contract changes. The three items listed below, however, are of major concern to the contractors. 1. Travel costs.-The Bureau has proposed a flat cents-per-mile limitation on reimbursement of automobile cost. The contractors believe this limitation is not necessary because the Bureau must regularly audit to determine that costs are reasonable. Further, the Medicare contracts are cost-reimbursement contracts, and a flat cost limitation is not appropriate in such a contract. The Bureau's proposal of 16¢ per mile may not cover actual operating cost. The contractors believe that automobile cost must be reasonable, and the Bureau should audit to determine reasonableness, rather than set a flat limit. 2. Billing services.—The Bureau has proposed a contract change to prohibit the contractor from providing computerized Medicare billing services for physicians and other suppliers of medical services. The Bureau believes these billing services constitute a conflict of interest for the contractors. The contractors do not believe the services represent a conflict of interest because the contractors are simply supplying a mechanical, computerized function to reduce the volume of physician paperwork, which has been so widely criticized. The Bureau's proposal would prohibit a contractor from providing these services even if the contractor did not subsequently process the Medicare bill or payment. The practical effect of this prohibition is the contractor could not effectively offer any billing services to physicians because the Medicare bills are only a portion of the total billing-service package physicians are seeking. 3. Consultative services and other computerized services for providers.-The Bureau has proposed to prohibit contractors from furnishing any service to Medicare providers for preparation of Medicare cost reports or the compilation or maintenance of statistical and financial data which might be used for the preparation of Medicare cost reports. The Bureau's proposal does allow the contractor to perform general accounting services for providers, but the distinction between general accounting services, such as payroll, and compilation of statistical records which are later used for the Medicare cost report, is sufficiently vague to cause major concern among contractors. The contractors strongly believe the presently provided shared-hospital-accounting systems are of benefit to the providers and serve as effective means of administrative cost control in the provider setting. Further, many contractors are presently supplying these services, not just for Medicare, but for the providers' complete accounting and computer needs. These shared hospital services can be documented to be effective cost containment mechanisms. As with the billing services, a Bureau prohibition against furnishing these services for Medicare would also mean the contractor could not furnish these services in his other lines of business. Here again, the contractors do not believe these services represent a conflict of interest because the contractors are performing a mechanical, computerized process. All input to both billing and other types of provider account systems is under the control of the provider, not the Medicare contractor. |