Also, because of problems in automating its bill processing in fiscal year 1974, DDR's fiscal year 1975 workload included an unusually high number of the preceding year's bills. DDR processed about 45,000 more bills than it receved in fiscal year 1975. According to the Blue Cross Association, the Secretary of HEW already has area. We do not agree with this position. If the Secretary determines that it is the power to redesignate an intermediary when efficient administration is impeded because the intermediary selected serves few providers in the geographical inconsistent with efficient administration of the program for intermediaries to serve small numbers of providers within a given geographical area, he will have substantial difficulty proving, in the hearing required by section 1816 (e) of the Social Security Act, that the arrangement is disadvantageous so that the relationship can be terminated. Moreover, even assuming the Secretary has this authority, he cannot designate a substitute intermediary. Rather, he must service the providers directly until a group or association of providers nominate, and he approves, an acceptable substitute intermediary. He has no authority at the present time to require providers to deal with any particular organization. Travelers (see app. VI) concurred with our report as far as it concerned that company. Mutual (see app. VII) said that its fiscal year 1975 cost per bill was $8.24-a decrease from its cost per bill of $10.44 for 1973. Mutual attributed this cost reduction in large part to an increase in the number of hospitals serviced whose bills are considered easier to process than skilled-nursing facility or home health agency bills. Hon. ELMER B. STAATS, APPENDIX I COMMITTEE ON WAYS AND MEANS, Comptroller General of the United States, U.S. HOUSE OF REPRESENTATIVES, DEAR MR. STAATS: Among the information which will be helpful in considering the various national health insurance plans, as well as evaluation of medicare operations as such, the Committee on Ways and Means is interested in obtaining data about the performance of the Federal Government in dealing directly with institutional providers of health care compared with the performance of fiscal intermediaries. As you know, the major program which the Federal Government is involved in dealing directly with health care institutions, such as hospitals and skilled nursing homes, is under the medicare program. The Division of Direct Reimbursement of the Social Security Administration serves as the fiscal intermediary for about 650 institutions, or about 3 percent of the institutions providing health services under the medicare program. The remaining institutions deal with other organizations acting in the capacity of intermediaries, such as Blue Cross and commercial insurance companies. These organizations are under contract with the Social Security Administration to function as fiscal intermediaries under the medicare program. Therefore, I am asking the Government Accounting Office to make a comparative analysis of the performance of the Division of Direct Reimbursement in the Social Security Administration and selected contract intermediaries including, but not necessarily limited to, the following elements: Compare the workload and operational cost of the Division of Direct Reimbursement against selected contract intermediaries. In selecting these intermediaries, consider (1) the type of providers services, (2) geographic dispersion of those providers, and (3) the type of workload. Analyze a sample of quantitative data that indicates performance characteristics such as: (1) error rates in bills, (2) bill processing time and workload inventories, (3) rate of denial and reversals upon reconsideration, (4) workload data, including production per many-year, (5) bill processing costs including ratio of administrative expense to benefit payments and unit cost per bill, and (6) staffing levels, including salary data. In addition, analyze the cost report activity to determine the number of cost reports (1) due but not received, (2) received, (3) audited and not audited, (4) that have been settled, and (5) that have not been settled. Finally, for each intermediary included in the review, as well as the Division of Direct Reimbursement, a description of its bill processing system, including production standards, and other pertinent data. In conducting this study, we would like your office to follow your usual practices of securing advance comments from the organizations involved in the study. Your cooperation in this matter would be greatly appreciated. Please keep me advised of developments as the study progresses. Sincerely yours, WILBUR D. MILLS, APPENDIX II AS OF SEPT. 30, 1973 Chairman. HOSPITALS, SKILLED-NURSING FACILITIES, AND HOME HEALTH AGENCIES SERVICED BY ALL INTERMEDIARIES 1 Numbers in parentheses are included in Blue Cross Association totals. 2 About 300 home health agencies in 4 States go through State offices and file consolidated cost reports. Therefore, DDR's total workload for the provider audit and settlement function is about 320 providers. APPENDIX III DDR's administrative costs as a direct-dealing intermediary during 1973 (excluding nonintermediary functions) Administrative costs: Total DDR salaries and benefits.. Add: SSA central office and Treasury support costs.. Regional office costs (intermediary function only). Contracts with public accounting firms____ Processing) Travel.... Computer costs (intermediary function only) (Bureau of Data Physician consultant fees___ Non-DDR costs relating to comprehensive health centers. Less: Subtotal.. $3, 319, 300 Estimated contracts with public accounting firms for auditing group practice prepayment plans. Estimated costs for servicing direct-dealing group practice Estimated DDR cost for processing hospital-based physician 447, 700 79, 000 53, 500 20, 700 Contracting with public accounting firms (net of contracts for Salaries and benefits for DDR's accounting and negotiations branch... 812, 600 337, 700 77, 600 26, 600 6, 100 1, 260, 600 141, 100 128, 000 991, 500 3, 610, 400 62-090 0-76-19 APPENDIX V BLUE CROSS ASSOCIATION, Mr. GREGORY J. AHART, Director, Manpower and Welfare Division, General Accounting Office, Washington, D.C. DEAR MR. AHART: We appreciate the opportunity to review and comment on the draft report, "The Performance of the Social Security Administration in Dealing Directly with Institutional Providers of Medicare Services Compared with the Performance of Private Fiscal Intermediaries." The Maryland and Chicago Blue Cross Plans, which were a part of the study, were provided with copies of the draft report and have presented their comments to us for incorporation into this letter. We will observe the limitations on use of the draft report, as stated on the report cover. Both involved Blue Cross Plans are also aware of and will observe the limitations. There are several comments on the draft report which we feel may be useful in preparing the final report. First, near the bottom of page 9, reference is made to a surcharge by the Blue Cross Association to each Plan, through which the Association recovers its administrative costs. The reference is not correct in that the Association's administrative costs are not reimbursed through a surcharge on the Plans. Blue Cross Association is the Intermediary contracting with the Secretary of HEW. The Association's administrative costs, which are incurred in carrying out its performance supervision of the subcontracting Plans as well as certain operational functions including telecommunications, maintenance of an EDP system for processing Medicare claims, provider audit, financial management, etc., are reimbursed through its own budget which is directly funded by the government. However the basic point intended to be made in the draft report is correct. The Association's administrative costs are sometimes converted to a per-claim amount when comparisons are made with other Intermediaries, on a Plan by Plan basis. In such instances, the per-claim cost of the Association is added to the individual Plan's per-claim cost for purposes of the comparison. A minor language change in the draft report would serve to correct the information as to how the Association is funded. Second, on page 11 reference is made to weighting factors used by Travelers to equate the relative difficulties in processing the several types of Medicare claims. For your information, we support the need to apply appropriate weighting factors to statistical and operational measurements of components of the Intermediary functions where such factors can be identified and applied with reasonable confidence. The Association has identified and weighted for a number of economic and operational noncontrollable variables. These weights are used in the Plan performance analyses done by the Association in its performance improvement activities with Plans. For example, regression analysis of our statistical base supports the Travelers' ranking of outpatient claims and we have incorporated a weighting factor for it in our comparative performance indicators for the Plans. We were not able to discover and adopt a factor for the other claims. In the case of the inpatient skilled nursing facility bills, current indications are that the percentage of these bills in each subcontracting Plan, of the total of the total of all bills processed, is too low to produce a significant and therefore a usable weighting factor. Third, the essential nature of the report is that of a comparative statistical analysis of the operations reviewed. As such, the report appears not to have and may in fact not have taken into account the effect on such a statistical analysis, of variations of a significant nature in the quality of the opertions reviewed. For example, the workload (claims) statistics shown on pages 17 and 18 may be, to a significant degree, affected by variations in the commitment to careful attention and follow-up on questions of medical necessity of services provided and appropriateness of the level of care provided to the type of institution in which it was provided. To state it another way, should the care have been provided in a hospital, or in a skilled nursing facility? An unreasonably low commitment to such quality aspects will result in very low pending workload statistics. Conversely, an unreasonably high commitment will generally evidence itself by very high pending workload statistics. Another facet of the same quality-impact question can be found in an organization that staffs for very high-quality operations so that the impact is not found in the pending workload statistics, but rather in a noticeably high per-claim administrative cost as well as a lower productivity per |