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. BCA successfully tested a Plan utilization subsystem in conjunction with the Model A system at the Cincinnati Plan. BCA and BHI have worked together to test the SSA-ORS medical coding dictionary process. The results of this effort have resulted in the approval for BCA to amend both Model A and tape-to-tape SSA bill submittal capabilities to handle narrative diagnosis and procedural codes eliminating hard copy sample bills. BCA is trying to eliminate submission of hard copy bills altogether to SSA. COST The direct and indirect costs (including overhead) of these activities in FY 1975 were $314,976 or 4 percent of total BCA Medicare expenditures. COST The direct and indirect costs (including overhead) of total claims activitysystems activities in FY 1975 were $2,823,985 or 38 percent of total BCA Medicare expenditures. Allowable Cost RESULTS BCA's percentage of allowed administrative cost, following HEW audits has, increased from 97.2 percent of claimed cost in fiscal 1967 to 99.1 percent in fiscal 1975. Overall, the closing agreements executed for all years reflected an allowance of 99.0 percent as of June 30, 1976. ACTIONS BCA's responsibilities as prime contractor for establishing costing standards and furnishing guidance to the Plan are discharged through a 13-point program: Medicare contract costing standards. Technical councils. Accounting manuals and administrative bulletins. Accounting systems-development, implementation and maintenance. Review of program financial reports. Field staff consultation and assistance to Plans. Feedback process-cost and productivitiy analysis-administrative bulle tins. Medicare reviews of Plans-operational and financial. Field audits-DHEWAA-GAO. Feedback processes-results of audits. Accounting standards-ASBCA-case library. Legal counsel-legal affairs bulletins. Our program is designed to ensure control of administrative costs by improving Plans' capability and capacity in: (1) Cost accounting, (2) budgeting, (3) reporting to management, (4) monitoring performance, and (5) analyzing variances. The success of BCA's financial management programs is documented by the data presented at the beginning of this section. BCA's program is designed to provide Plans with cost accounting standards and operating manuals. The program provides for compliance with the established costing standards through a series of cost accounting systems. BCA has developed and centrally maintains a computerized Standard National Accounting Program (SNAP) which has been adopted by 33 Plans and is being considered by 9 others. BCA has adopted and made available a computerized payroll and labor costing system (Pay II) which has been adopted by 7 Plans and is being considered by several others. BCA has also gained BHI's formal acceptance of the Value Computing System for costing computer operations. BCA's efforts to ensure accurate costing have also resulted in the adoption of new cost systems in many Plans. In addition, many Plans have installed other recognized systems (Johnson, Boole & Babbage, Cybernetics, etc.) for costing of computer operations. Other Plans have upgraded their payroll/labor costing systems through installation of MSA or self-developed packages. Equally important, other computerized systems for purchases, supply requisitions, service center operations, word processing centers, inventory control and property control have been added to ensure accurate and timely costing. We have also developed a technique to make other computerized systems available to Plans. BCA also employs an audit and feedback mechanism for all program financial reports. This system provides for professional review of reports and statistical analyses to identify any aberrant data. The system also provides BCA and Plan management with cost and productivity analyses for directing and controlling operations. BCA provides technical services to Plans through its seven regional offices. These services include staff training and workshops for cost, budget and audit personnel. These offices conduct problem-solving activities with Plans as identified by (1) desk reviews and financial analyses or by (2) Plan's requests for assistance. BCA further provides in-depth reviews of selected Plans' Medicare operations and costing systems by its Medicare staff. An important part of BCA effort is a monitoring and feedback system that is based upon the results of DHEWAA audits. This system provides for the identification of audit exceptions and causative factors. A number of communication systems and forums are used to communicate the audit exceptions to Plans for corrective action. Before describing other details in these areas, the following table places a quantitative and statistical analysis of administrative costs into the record. This analysis will provide the subcommittee with data on the costs incurred and the materiality of costs. BLUE CROSS ASSOCIATION PLANS' ADMINISTRATIVE EXPENSES, CALENDAR YEAR 1975 Note: Similar cost data for all intermediaries and carriers can be secured from the Bureau of Health Insurance. BCA provides the prerequisite cost accounting standards to Plans through its negotiation of mutually acceptable standards with BHI. In general, the Federal Procurement Regulations for cost reimbursement type contracts form the primary standards. These basic standards are slightly modified by contract. BCA provides for the concurrent review by legal counsel and the Blue Cross and Blue Shield Associations' joint accounting of proposed standards. It is our intent to determine appropriate cost accounting standards and it recognize generally acceptable accounting principles and standards of other controlling entities. Accordingly Plans receive appropriate accounting standards for each line of business. We also provide guidance to Plans through the BHI manuals. BCA is a member of the technical advisory committee which works closely with the bureau on costing and reporting problems. BCA also contributes through Plans to the prior consultation process of BHI. BCA's program for guidance and directions to Plans includes extensive use of Administrative Bulletins, Legal Affairs Bulletins and some operating manuals. These documents communicate directions, changes in policies or prescribe acceptable cost accounting procedures. BCA's program also provides appropriate training for Plans in the contractual standards through regional and national meetings. BCA maintains complete histories of prior audits, Armed Services Board of Contract Appeals decisions, and relevant BHI decisions. These facts provide the basis for directions to Plans. Under the subject of allowable cost, the subcommittee requested specific information regarding our space or occupancy costs. That information is detailed in Appendix A of this statement. COST The direct and indirect costs (including overhead) for these activities in FY 1975 were $775,453 or 11 percent of total BCA Medicare expenditure. An additional $62,597 was expended on internal BCA accounting. Benefit Cost Containment-Utilization RESULTS To assure payment only for reasonable and necessary care, programs were instituted that resulted in: A decrease in benefit payment per bill of 5 percent from 1973 to 1975, adjusted to 1967 dollars. An increase in the denial rate of SNF claims from 5.5 percent in 1970 to 26 percent in 1974, with an estimated return rate on dollars spent of 10 to 1. The HHA denial rate and the outpatient denial rate primarily physical therapy also rose. A slight increase in inpatient denial rates has also been experienced because of reviews. ACTIONS Efforts to assure proper expenditure of money for Medicare benefits have been among the BCA's major thrusts, Support of Plan medical review has included: (1) Providing medical review manuals and systems. (2) Providing information about national trends in review. (3) Conducting on-site reviews. (4) Issuing ABs clarifying procedures and policy. Through prior consultation and formal comment, BCA has helped BHI and other HEW agencies-particularly the Office of Quality Standards and Bureau of Quality Assurance-to formulate policies and procedures related to medical review. In helping Plans, BCA has often combined its privately funded support activities with those directed toward Medicare. That assured consistent application of benefit concepts; allowed sharing of administrative costs for all parties; and made the best talent available. Some of the most pertinent ABs covered new utilization review requirements, UHDA, claims processing interfact with PSROS, and intermediary monitoring of PSRO decisions. Policy decisions regarding various treatments and services for which claims have not been processed uniformly are now being developed by BCA and BHI. For example: 24-hour EKG, routine pathology gases, psychiatric programs, mobile heart team, alcoholic detoxification, hyperbaric oxygen, ostomy therapy, routine versus ancillary services, radioactive isotope, ultrasound scanning, prosthetic devices, biofeedback therapy, self-care units, cycle therapy, and psychiatric social services. Model Medical Review Manuals and Systems for Plans Model medical review manuals and systems have been developed by BCA to improve: Plan claims medical review activity. Provider medical review. Plan feedback to providers on the effectiveness of their review activities. Tools created by BCA to help Plan claims medical review include the computerized Plan Utilization Claims Screening System (versions 1 and 2); Plan Utilization Review Parameter Generation System; BCA Medical Terminology and Coding Training Program, Psychiatric Čare Manual; and Level II Claims Review Manual. Feedback to Providers In 1972, BCA bought rights to the Hospital Utilization Program health data system. With it, Plans can furnish extensive profiles to their providers. Eight Plans are using it. An additional six Plans employ either the Blue Cross Association Data System or the QUEST data system as well as Plan BCA developed systems. |