CATEGORIES I. Issues which appear to be resolved in principle-Need work on contract drafting. (1) Checks Paid Method of Financing. (2) Cost Accounting Standards issued by the CASB. (3) Provision for PSRO. (4) Fidelity Bond. (5) Examination of Records. (6) Article VIII-Furnishing Information to the Secretary. (7) Budget approval process. (8) Contractor Cost Limitations. (9) Final Settlement of Administrative Costs. (10) Provision requiring the Secretary to approve a supplemental budget for cost items found to be allowable after appeal of a final cost determination. (11) Automatic Termination Clause. II. Issues unresolved but are subject to resolution following further discussion and negotiation with BHI. (1) Appendix A-required clauses. (2) Appendix B-Reasonable Allocation of Space to Medicare. (3) Determination of Allowable Costs through budget Negotiations. Authority to set limits on direct cost but not on indirect costs. (4) Disputes clause. ÌII. Issues unresolved and apparently not subject to future negotiation with BHI, (1) Proposals relating to the prime contract. Responsibility for Plan Performance; Provider Reimbursement Review Board Activity; BCA budget review process; Direct Draw Down of Administrative Funds by the Plans; Consolidated Quarterly Reporting of Administrative expenses; and BCA Prior review and Approval of Plan Subcontracts and Data processing changes. (2) Subcontracting-Prior Approval and Prior Approval and Data Processing Articles. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, Mr. BERNARD R. TRESNOWSKI, DEAR MR. TRESNOWSKI: Reference is made to our meeting in Baltimore on April 2, 1975. We are forwarding a copy of a revised draft contract reflecting the language changes discussed. The changes are in the following areas: 1. Article II, paragraph I-(new) dealing with the intermediary's responsibility for evaluating Plan performance. 2. Article III, paragraph G-provides for the Secretary's responsibility to evaluate Plans. 3. Article VI Paragraph B-reflects the fact that after the budget negotiations, the Secretary will notify BCA of the approved budget amount. It also provides for a limit on budget expenditures of the intermediary. Paragraph B also has been modified to provide that the "checks paid" method of financing will be effected when the Secretary determines that it is advantageous to the Government. Paragraph C-provides that the intermediary may stop work if budgeted funds have been exhausted. Paragraph E-has been changed to more adequately reflect the process by which the intermediary may be reimbursed for cost overruns. The changes in this paragraph eliminate the need for paragraph F. Paragraph F has been deleted. Paragraph N-(new) provides for final determination of costs within 1 year after audit, otherwise costs at issue are deemed disallowed. 4. Article VIII, paragraph A-deletes the word "discreet" and substitutes the words "confidential administrative." 5. Article XIII, paragraph B-provides that the cost accounting standards in effect as of the date of the agreement will be incorporated into the agreement. 6. Appendix A-A revised Appendix A is forwarded for your review. We look forward to seeing you on April 16. Sincerely yours, THOMAS M. TIERNEY, Director, Bureau of Health Insurance. JUNE 12, 1975. Mr. BERNARD R. TRESNOWSKI, Senior Vice President, Federal Programs, DEAR BARNEY: I am enclosing a copy of the final draft of the BCA and Plan agreements along with Appendices A and B for your review. These drafts represent the agreements reached during our negotiation sessions, and several other changes that have occurred during telephone conversations. The items I would like to call to your attention are: (1) Direct Drawdown of Plan Administrative Expenses-We have changed our position to continue the practice of Plans drawing down their administrative expenses through the Blue Cross Association. (2) Automatic Renewal-We have included a provision for the automatic renewal of the contracts for a period of 2 years. However, the initial contract term remains July 1, 1975, through September 30, 1976. (3) Advance of Funds and Transfer of Funds through Letter of Credit-Article V has been rewritten to account for the concerns during our last negotiation session. These concerns involve the complexity and duplication contained in this Article. (4) Articles XIV and XV-Minor changes have been incorporated into these Articles to account for our concerns in the prior approval and subcontracting areas. Additionally, we have revised the threshold amount figures for the Prior Approval Article in the contract. There will be four categories for determining the amounts to be inserted in the article. The categories are based on approved fiscal year 1975 administrative budgets, including audit costs. The amounts are: These new thresholds were designed to allow for an increase in each contractor's threshold amount. Your prompt comments are requested in order for us to meet the July 1, 1975, printing and duplicating date. We have set aside June 18 for a meeting to discuss any of the contract provisions contained in the enclosures. Sincerely yours, Mr. THOMAS M. TIERNEY, Director, Bureau of Health Insurance, DEAR MR. TIERNEY: Attached is a listing of Blue Cross Plans with which Blue Cross Association has entered into subcontracts as provided in Article II of the BCA Intermediary Contract. This list is provided in accordance with Paragraph C of Article II of that contract. Very truly yours, Enclosure. BERNARD R. TRESNOWSKI. Canton.. Cincinnati. Cleveland 290 New Mexico Blue Cross & Blue Shield, Inc. 300 Blue Cross of Northeastern New York, Inc. 301 Blue Cross of Western New York, Inc. 302 Chautauqua Region Hospital Service Corp. 305 Blue Cross of Central New York, Inc. 306 Hospital Plan, Inc. 331 Blue Cross Hospital Plan, Inc. 332 Hospital Care Corp. 333 Blue Cross of Northeast Ohio. 334 Blue Cross of Central Ohio. 335 Blue Cross of Lima, Ohio. 337 Blue Cross of Northwest Ohio. 338 Blue Cross of Eastern Ohio, Inc. 340 Blue Cross & Blue Shield of Oklahoma. 350 Northwest Hospital Service. 360 Hospital Service Plan of the Lehigh Valley. 361 Capital Blue Cross. 362 Blue Cross of Greater Philadelphia. 363 Blue Cross of Western Pennsylvania. 364 Hospital Service Association of Northeastern Pennsylvania. 370 Blue Cross of Rhode Island. 380 Blue Cross & Blue Shield of South Carolina. JUNE 30, 1975. Mr. WALTER J. NCNERNEY, DEAR MR. MCNERNEY: I am transmitting herewith an original and four copies of the revised 1975 Medicare agreement between the Blue Cross Association and the Secretary of Health, Education, and Welfare. We ask that you sign all copies and return the original and three copies, as soon as possible to the Division of Contractor Operations, Room 203 East Building. Baltimore, Maryland 21235. A fully executed copy will be returned to you. We are in receipt of the listing of Blue Cross Plans forwarded by Mr. Tresnowski on June 25, 1975. The 72 Blue Cross Plans with which you propose to subcontract are acceptable as listed and, pursuant to Article II C of our agreement, you are hereby authorized to proceed with execution of these subcontracts. Relative thereto, we have forwarded under separate cover to Mr. Jacoby of your organization, five subcontracts for each of the Blue Cross Plans listed plus 150 extra copies of the Blue Cross agreement and 75 extra copies of the Blue Cross Plan subcontracts. When the Plan subcontracts are signed, please return the original and three copies to the address furnished above and we will return an approved copy for your records. Sincerely yours, Enclosures ITEM 4 THOMAS M. TIERNEY, Director, Bureau of Health Insurance. 1975 CONTRACT NEGOTIATIONS CORRESPONDENCE-NON BCA -1975 CONTRACT NEGOTIATIONS CORRESPONDENCE-NON BCA [Material available in subcommittee files] 1. Letter from Pennsylvania Blue Shield to BHI, June 17, 1975, Subject: Contract Amendment, Freedom of Information Act. 2. Letter to Pennsylvania Blue Shield from BHI, June 6, 1975, transmitting draft Part B Contract. 3. Letter from Travelers to BHI, May 23, 1975, Subject: Contract Negotiation Session of May 20. 4. Letter to BHI from Travelers, April 25, 1975, Subject: Contract Negotiation Session, April 22-23. 5. Letter from BHI to Travelers, May 9, 1975, transmitting smooth draft of Part B Contract. 6. Letter from BHI to Pennsylvania Blue Shield, May 9, 1975, transmitting smooth draft of Part B Contract. 7. Letter from BHI to Pennsylvania Blue Shield, April 3, 1975, Subject Arrangements for Negotiations Meeting. 8. Letter from BHI to Travelers, April 3, 1975, Subject: Arrangements for Negotiations Meeting. 9. Letter from Howard Hassard to Melvin Blumenthal, March 14, 1975, Subject: Part B Contract Changes. 10. Letter from BHI to Travelers, March 11, 1975, transmitting Contract Changes. 11. Letter from BHI to Pennsylvania Blue Shield, March 11, 1975, transmitting Contract Changes. 12. Letter from Aetna to BHI dated March 5, 1975, Subject: Contract Changes. 13. Letter from Travelers to BHI, March 4, 1975, Subject: 1975 Contract Changes. 14. Letter from BHI to Travelers, February 7, 1975, Subject: Contract Negotiations. 15. Letter from BHI to Aetna, December 23, 1974: Letter of non-renewal sent to all contractors. 16. General contract changes proposed for 1975. 17. General summary of contract changes negotiated in 1975. Attachment 3 MEASURES OF EFFICIENCY Answer 7. We currently utilize a number of performance indicators which help identify the least efficient contractors in areas of cost, timeliness, and quality. Attached are copies of six recurring reports (Exhibits 1 thorugh 6) presenting performance indicators, as well as some summary workload data, most commonly used by BHI for statistically detecting those contractors which need to improve their operations. In measuring the efficiency of Part B carriers, the four performance indicators described in the attached Part B Performance Indicators Report (Exhibit 1) are designed for purposes of comparing carriers with respect to their major function processing claims. Elements of two of the performance indicators-adjusted unit cost per claim processed and adjusted claims productivity per 100 hours-are collected from two separate reports submitted by the carriers. Information on carrier administrative cost and productive hours are picked up from the carrier's quarterly Interim Expenditure Report. Claims processed are extracted from the carrier's monthly Carrier Performance Report, Form SSA-1565. Also collected from the carrier's monthly Carrier Performance Report are data on time distribution of processed and pending claims. This information is used to calculate the workload processing and pending index by applying selected weighting factors for type of claim distribution and timeliness of processing. The value of the index score indicates the relative position of the carrier's timeliness of claims processing performance in relation to the mean program performance (100). Performance above the mean program performance are assigned scores higher than 100 while performance below the mean program performance are assigned scores lower than 100. The last remaining performance indicator shown in the report is the query reply reject rate. This indicator is derived from data collected centrally in SSA on replies to carriers' queries to the health insurance computerized data files maintained at Social Security Headquarters for information on beneficiary's Part B eligibility and deductible status. Certain responses to these queries are considered rejects in that they are usually associated with carrier procedural problems. These rejects are divided by the total number of query replies to obtain the query reply reject rate. We have developed and are in the process of finally testing an end-of-line quality assurance program in Part B. This system is based on a scientific sample of claims processed which is reviewed by carrier staff to identify procedure and actual dollar errors. There is a subsample review by the BHI Regional Offices of each carrier's sample review which serves to validate and adjust any significant errors in the carrier's sample review. This system when fully operational will provide a valid comparative measure of the quality of the claims processing by Part B carriers. It does not address the professional medical judgments with respect to the physician services and utilization which is performed on an individual basis by the carrier's medical consultant staff through addressing aberrancies in the physicians' profiles and cases identified through prepayment screens. This is an area in which the PSRO's will eventually exercise primary responsibility. We expect the system to be fully operational in 1977. On the Part A intermediary side, we are currently developing a report similar in many respects to the Part B Performance Indicator Report. This new report will include the pertinent performance indicators currently published in a series of separate reports (Exhibits 2 and 6). Two of these performance indicators are very similar to two of the Part B performance indicators on unit cost and productivity and are published quarterly in the Analysis of Intermediaries' and Carriers' Administrative Costs Report (page 22 of Exhibit 2). They are "adjusted unit cost per bill" and "adjusted production per 100 man-hours." Data are extracted from the Intermediary Workload Report, SSA-1566, for purposes of presenting an indicator form the status of the intermediary's pending bill workload. These performance indicators-weeks' work on hand and percent of bills pending over 30 days by type of bill-are published monthly in the Intermediary Workload Report (Exhibit 3). See table 10 and the appendix of the report for a monthly summary of these indicators and for a definition of the terms, respectively. Timeliness of intermediary bill processing are measured by comparing selected dates on the billing forms submitted by intermediaries to SSA. This information collected centrally in SSA is summarized in our quarterly HI Intermediary Bill Processing Times Report (Exhibit 4). Both the average and median processing |