measurements are a key to assessment and control of performance and help assure a high level of performance. Early efforts to design these management tools have been refined and revised and in January, 1975, a new, more effective method for establishing statistical performance ranges was introduced by BCA. It was further refined in fiscal 1976. The use and application of these BCA materials and documents are providing the only management-oriented performance reports that exist in the Medicare program today. These standards are used by BCA to focus its limited resources on Plans most clearly demonstrating a need for improved performance. By studying the key indicators of cost and productivity, BCA has been able to improve the performance of several Plans, thereby saving the government and taxpayers a great deal of money. The emphasis on management skills will continue to be a prime factor in BCA's work with Plans to bring the organization to an even greater sense of public accountability and service in fulfilling Medicare responsibilities, documented through continually impriving performance. Those are the highlights of our performance in the Medicare program. They would perhaps be enough in themselves to establish the quality of the job we have done. However, for the full information of the Subcommittee, I would now like to elaborate on the various aspects of our Medicare performance. For each project or activity, I will show "results;" followed by "actions" taken to achieve those results; and "cost." Audit and Settlement Administrative Cost RESULTS Variance in audit costs per Blue Cross Plan decreased 13 percent from 1972 to 1975, with the entire range from high to low moving downward 13 percent. Audit cost per bill decreased 34 percent from FY 1972 through FY 1975. The cost reduction was 48 percent when adjusted to reflect inflation (CPI 1967=100.0). Provider audit cost per bill remains 53 percent higher for commercials than for Blue Cross Plans. Audit cost variance per bill among Plans dropped from $3.08 to $1.56 (49 percent) from 1972 to the second quarter of 1976. Adjusted for 1967 dollars, total audit costs were reduced 18 percent from 1972 to 1975. Provider cost settlements (cost reports settled as a percentage of those to be settled) rose from 43 percent in 1970 to 91 percent in 1974, an improvement of 112 percent. Currently cost reports due for the first 7 years of the program are 99.8 percent settled; cost reports for FY 1974 and 1975 are 89 percent settled, thus reflecting a high degree of currency. Considering the 18 percent reduction in total audit cost and a 33 percent reduction in the actual number of audits peformed, there was a net increase in audit cost of only 15 percent-notably efficient when seen in the light of major program developments that tended to increase the complexity of audits: The economic stabilization program; inclusion of coverage for kidney dialysis; 1972 amendments to the Medicare law; increased proportion of hospital providers compared with SNF's; cost reporting form changes; nursing cost differential adjustment; and, increasing emphasis on quality of the cost report audit process. Training ACTIONS BCA has made a major effort to train quality staff members and place them in Plans, keeping the audit process internal and reducing its cost. As a result, the number of in-house audits has risen from approximately 70 percent in 1972 to 80.5 percent in 1974. BCA's reimbursement and audit training program has been a vital part of building toward a totally internal audit process in the Plans. Procedures In 1970, BCA presented to Plans a way of establishing priorities for selection and scope determination for audits, to increase the efficiency of the audit program and to develop desk review. The techniques enabled Plans to (1) make initial settlement determinations (and settlement procedures were further simplified 76-614-766 later); (2) determine the scope of the audit; and (3) establish time and cost estimates and conserve program funds (AB 225, 227 and 354).2 It is particularly significant that in the year following those ABs, Blue Cross Plan audit productivity increased 24 percent. Budget In 1972, BCA refined and expanded required budget data, reporting and procedures for audit and reimbursement, increasing BCA's control over Plan reimbursement and audit activity. The budgeting concept was adopted by BHI and is now part of the government's required process. (AB 617) BCA has continued to offer extensive counseling and guidance to Plans on specific budget issues and has been successful in materially reducing some individual Plan budgets. BCA developed new budget forms to increase the uniformity of computing and reporting audit costs to enhance the accuracy of budgets. Plan Visits and Personnel In 1972, BCA began a series of Plan visits with the specific objective of improving Plan productivity in the cost report process. More than 50 such visits have been conducted, covering such things as desk reviews, audit and settlement procedures, organization, staffing, subcontracts, appeals and budget. BCA has also supplied Plans with trained personnel, either on a permanent or loan basis. Through visits and placing personnel, BCA has helped resolve backlogs of certain types of cost reports or misunderstanding of procedures. COST The direct and indirect costs (including overhead) of this activity in FY 1975 were $1,364,594 or 18 percent of total BCA Medicare expenditures. Other Administrative Cost Control RESULTS Actual Plan and BCA net administrative costs have changed little through 1973, 1974 and 1975 and reflect a reduction of 18 percent when adjusted for inflation. Adjusted for 1967 dollars, recurring net administrative cost per bill (excluding BCA) for the first six months of FY 1976 is 11 percent lower than in the first six months of FY 1967 ($2.64 vs. $2.96). This, however, is a reduction of 21 percent from the high point of $3.35 in FY 1971. Plan productivity, having improved year by year in all areas, shows better performance than the commercials or SSA/DDR. Overall productivity increased each year from 1970 to 1975 for a total improvement of 31 percent. Claims Department productivity increased 44 percent. Plan variance between highest total cost and lowest total cost decreased from $11.15 in 1973 to $10.04 in FY 1975, or 10 percent. Actual total cost per bill decreased 8 percent from FY 1973 through FY 1975; and 23 percent when adjusted for inflation. Commercials' total cost per bill remains 24 percent higher than the Plans'. The number of Plans above average in net administrative cost in 1967 was 31. In 1975 the number had been reduced to 22. ACTIONS Procedures Analysis The BCA systems office was transferred from Baltimore to Chicago to support Plan services. For example: AB 300 series to identify, analyze and help solve Plan problems in telecommunications and claims processing. Consulting and solving problems on claims systems bill and batch processing in connection with the SSA/BHI Bureau of Data Processing (including the telecommunications system). Resolving difficulties involving interpretation and reconciliation of SSA operating reports dealing with blocking open items, orbit bills, bill errors, workload, items returned to intermediaries, batch status and telecommunications. 2 "AB" notes refer to BCA Administrative Bulletins sent to all Plans. They are the BCA's mechanism for transmitting directions, information, etc., to all Plans simultaneously. Initiating actions in 1972 between BHI and Plans having more than 4,000 blocking open items each. Because of that effort, blocking open items are no longer a major problem. BCA is working to test a uniform bill in three primary state test sites to replace the many forms that now exist for public and private programs, the Federal Employee Program, Medicare, Medicaid, CHAMPUS and private contracts. The development is tied to the compatibility of such a form with Medicare claims processing and program requirements, and is being accomplished in cooperation with the American Hospital Association and SSA/BHI systems staff. Policy Development and Clarification Since Medicare began, there has been a continuing need for policy clarification on all aspects of the Medicare program such as coverage, billing, claim processing and medical review. Although P.L. 92-603 was enacted October 31, 1972, many of the provisions contained in the legislation have not been fully implemented due to the lack of final policies. The need for precise instructions has necessitated ongoing Plan assistance and efforts to secure clarification and operational procedures from BHI. In addition, there are various program areas not related to legislated modifications which continue to need clarification, amplification or refinement. Some examples follow. Waiver of Liability—(ABs 878, 905, 956, 971, 985 and 1056) BCA has expended an extensive amount of effort to clarify waiver of liability procedures and to ensure that program payment for services not covered under the program are restricted to the legislative intent. The lack of BHI operating policies and problems with that policy have necessitated ongoing communications with Plans and BHI to seek resolution and formulation of policies necessary for proper implementation of this provision. Program Integrity-(AB 973) Due to fraud and abuse identified in the Medicaid program, BCA developed guidelines for fraud and abuse procedures in each Plan to ensure proper identification of potential fraud and abuse situations and appropriate resulting actions Privacy Act (ABs 947 and 1028) With the enactment of the Privacy Act there were many questions that had to be clarified in regard to intermediary responsibilities. To meet these needs, BCA formulated a question and answer series and also drew problems to the attention of BHI to affect the formulation of SSA regulations. Physician Certification (ABs 787 and 787-A) Although application of waiver, where physicians failed to certify or re-certify, had been required since 1973, there were differing opinions as to how it should be applied. BCA's first bulletin provided instructions and the second focused them to the point that they would apply under any circumstances. Renal Diseases—(AB 759) Many questions and delays resulted from the provision to add kidney dialysis to Medicare coverage. BCA issued its AB to answer Plans' questions while awaiting BHI development of necessary policies. Physical Therapy—(AB 819) BCA has worked to make sure physical therapy coverage was not abused and that published guidelines were applied uniformly. Numerous meetings with BHI resulted in the AB concerning physical therapy aides and assistants under the home health benefit. Budget Development-(AB 760) This AB expressed BCA's intent to tie costs to claim performance measures, a step toward achieving uniform and acceptable performance goals with identifiable costs. Through an analytical method of budget preparation, desired program results could be met at small cost. Medical Review-(AB 769) There was no published instruction concerning the extent to which outpatient cases should be reviewed. The claims volume was large, but the dollar volume was small, raising questions about the effort justified. The AB outlined a minimum amount of expected activity to (1) make sure providers were not abusing the program and (2) keep the costs of the activity to a minimum. The underlying principle for all instructions to Plans has been proper application of Medicare benefits at lowest cost, as in these examples: Physical Therapy Certain services, not considered physical therapy, were being covered by the program at a higher cost than if they had been properly designated. BCA brought that to the attention of BHI and claim and reimbursement guidelines were changed to reflect more closely the intent of the program. Bill Control BHI instituted procedures preventing Plans from returning bills to providers to get necessary information. BCA identified inefficiences in the procedures and BHI revised its instructions to allow bill returns. Periodic Interim Payment—(PIP) Existing instructions for PIP reimbursement went against claim department efforts to analyze provider bills fully; and raised the cost of reviewing the bills. The discrepancy between reimbursement instructions and claim requirements led to instructions allowing review of a PIP bill like any other. Utilization Review Plans were using a wide variety of applications of claims guidelines. BCA established three levels of review, calling for medical information forms from providers on a prospective basis to avoid retroactive denials; to develop provider instructional bulletins to reduce benefit cost; and to reduce Plan cost in applying guidelines. Training In 1974, BCA established a Part A Claims Systems workshop to help Plans maintain acceptable claim processing performance through education, self-audit and use of existing SSA operating reports. Four workshops were held, covering 71 Plans and 132 people, including SSA staff from Balitmore and regional offices. Each Plan was required to review its own operations and submit a corrective plan of action to receive a certificate of completion. BCA has been actively working to reduce the volume of Plan returned-tointermediary bills through the increased usage of Model A and tape-to-tape software. In addition, non-Model A Plan sites are being audited to determine alternatives to reduce RTI volumes. COST The direct and indirect costs (including overhead) for these activities in FY 1975 were $344,739 or 4 percent of total BCA Medicare expenditures. Claims Activity-Systems RESULTS Overall productivity increased each year form 1970 to 1975 for a total improvement of 31 percent. Claims Department productivity increased 44 percent. In 1976 only 1.8 percent of all claims processed were in error, a 28 percent improvement over 1971 and a record substantially better than that of the SSA or the commercials. 98.2 percent of all queries are transmitted accurately. BCA's telecommunications system can transmit a 100-word telegram coast to coast for 22 cents; Western Union's commercial charge is more than $16.51 for the same service. BCA has experienced over a 99 percent uptime (operational) performance record for network users. BCA's tape-to-tape program has saved the Federal Government $4,000,000 a year since 1968 by eliminating the necessity for BHI to handle "hard copy" bills and reducing bill errors. BCA designed the tape-to-tape system in 1968 and currently more than 94 percent of Plan Medicare claims are transmitted to the BHI via this method with 99.9 percent accuracy. All applications of tape-to-tape mean more rapid payments to beneficiaries. Model A ACTIONS The Model A computerized claims processing system development program began in 1970 with prototype installations in Jacksonville and Seattle. Since that time it has grown to installations in 24 Plans (3rd quarter, 1976) and more than 50 percent of all Plan Medicare claims are processed by Model A Release 5. In 1974, the BCA board reaffirmed its intent to improve service through internal systems development and management. AB 772, developed jointly by BCA and BHI, gave Plans guidelines, criteria and procedures for requesting major systems changes. BCA and BHI systems staffs have worked together to increase Model A productivity through these enhancements: 950 character tape billing record transmitted to SSA; return-to-intermediary/batch audit subsystem/Himbex listing (tape-to-tape users also); home health A/B claim processing capability; SSA 1566/1522 reporting capability; and P.S. & R. reporting capability. BCA developed systems procedures for handling claims under the Medicare amendments (PL 92-613) without creating claims backlogs which otherwise could have been expected. BCA continues to amend system procedures as required by SSA-BHI administrative directives. COST The direct and indirect costs relative to Model A in FY 1975 were $1,061,366 or 15 percent of total BCA Medicare expenditures. Tape-to-Tape Early in 1968 (seeing the need to process bills faster and more accurately and to close open items, remove orbit bills and clear SSA-2181 batch notices more quickly) a pilot program conducted in Michigan into the BCA tape-to-tape program. Today, more than 94 percent of Medicare claims are submitted to BHI from 59 Plans under this program. By eliminating BHI's handling of hard copy bills and by reducing bill errors, the program saves the government $4,000,000 a year. The Model A and tape-to-tape systems have assured consistently accurate submission of claims to BHI, along with better compliance with billing instructions, rapid and efficient update of beneficiary records at BHI and better service to the beneficiary. The two systems, working through the BCA telecommunications network, have held down administrative cost and have made possible fast response to providers and beneficiaries concerning eligibility. COST The direct and indirect costs of these activities in FY 1975 were $115,000 or 1 percent of total BCA Medicare expenditures. Telecommunications BCA designed and installed a sophisticated telecommunications system to aid eligibility verification in the Medicare program; and the system is a vital link in providing rapid payment to beneficiaries and providers. The system serves not only Part A Blue Cross Plans, but other intermediaries both in Part A and B. BCA performance to all its network users has been more than 99 percent. Down time has been less than 1 percent to all network users. The cost of duplicating the network would be significant. COST The direct and indirect costs of these activities in FY 1975 were $1,200,000 or 15 percent of total BCA Medicare expenditures. Miscellaneous BCA has now installed magnetic tape terminals in 61 Plans to improve telecommunications traffic flow. Some units have been replaced with newer terminals to provide more processing capabilities and more capacity in the high-volume Plans. BCA has worked with BHI to develop a uniform billing format which is now being prepared for testing in three primary test states to help reduce overall Medicare program administrative costs. BCA and BHI have worked together since 1970 to assess the level of Plan data processing security and to develop security guidelines to comply with SSA directives and with recent legislation. A uniform set of guidelines and self-check list have been provided to all Plans. |