[Federal Register Volume 59, Number 134 (Thursday, July 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17010]


[[Page Unknown]]

[Federal Register: July 14, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[BPO-116-FN]

 

Medicare Program: Data, Standards, and Methodology Used To 
Establish Fiscal Year 1994 Budgets for Fiscal Intermediaries and 
Carriers

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final notice.

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SUMMARY: This notice is published in accordance with sections 
1816(c)(1) and 1842(c)(1) of the Social Security Act which require us 
to publish the final data, standards, and methodology used to establish 
budgets for Medicare intermediaries and carriers. In this notice, we 
respond to the comments received in response to our notice of October 
5, 1993 and we announce the adoption of the proposed data, standards, 
and methodology that we used to establish the Medicare fiscal 
intermediary and carrier budgets for fiscal year (FY) 1994, beginning 
October 1, 1993, as final and without revision.

EFFECTIVE DATE: This final notice is effective on July 14, 1994.

FOR FURTHER INFORMATION CONTACT: Phyllis Mosmiller, (410) 966-7528.

SUPPLEMENTARY INFORMATION:

I. Background

    Fiscal intermediaries and carriers are public or private entities 
that participate in the administration of the Medicare program by 
performing benefit payment and claims processing functions. On October 
5, 1993, we published in the Federal Register (58 FR 51827) a proposed 
notice that described the data, standards, and methodology we intended 
to use to establish budgets for Medicare program carriers and fiscal 
intermediaries, referred to as Medicare contractors, for the Federal 
fiscal year (FY) 1994, beginning October 1, 1993. The notice was 
published in accordance with sections 1816(c)(1) and 1842(c)(1) of the 
Social Security Act (the Act), which require us to publish for public 
comments the data, standards, and methodology we propose to use to 
establish budgets for these Medicare contractors.

II. Provisions of the Proposed Notice

    Following the same format we have used in prior notices, the 
October 5, 1993 proposed notice described the budget development 
process in general and gave an overview of how we intend to use the 
contractor budget data, standards, and methodology to establish the FY 
1994 budgets.
    We indicated in the notice that the contractor budget would be 
structured to coincide with the seven functional areas of 
responsibilities performed by fiscal intermediaries for Part A and nine 
functional areas of responsibilities performed by carriers for Part B 
of the Medicare program. The intermediary functional area 
responsibilities for Part A are: (1) Bill Payment, (2) Reconsideration 
and Hearings; (3) Medicare Secondary Payer; (4) Medical Review and 
Utilization Review; (5) Provider Audit (Desk Review, Field Audit, and 
Provider Settlement); (6) Provider Reimbursement; and (7) Productivity 
Investments. The carrier functional area responsibilities for Part B 
are: (1) Claim Payment; (2) Review and Hearing; (3) Beneficiary/
Physician Inquiry; (4) Medical Review and Utilization Review; (5) 
Benefit Integrity (formerly Fraud and Abuse); (6) Medicare Secondary 
Payer; (7) Participating Physicians; (8) Provider Education and 
Training; and (9) Productivity Investments. These functions are funded 
from the Hospital Insurance Trust Fund (HI) and the Supplementary 
Medical Insurance Trust Fund (SMI).
    We proposed that final funding for the contractor functions listed 
above would be allocated in accordance with the current claims 
processing trends, legislative mandates, administrative initiatives, 
current year performance standards and criteria, and the availability 
of funds appropriated by the Congress.
    The FY 1994 Budget and Performance Requirements (BPRs) gave the 
contractors the authority to manage their budgets on a bottom line 
basis. Once funding is issued, each contractor will have the 
flexibility to optimally manage the budget in accordance with the 
statement of work contained in the BPRs. With the exception of the line 
item for Payment Safeguards, Productivity Investments, and ``Other'' 
line items, contractors have total flexibility in the use of funds. 
There is a 5 percent limitation on the amount of funds that may be 
shifted out of individual Payment Safeguards, with unlimited shifting 
into Payment Safeguards. Shifting into or out of Productivity 
Investments and ``Other'' line item funding, not governed by contract 
modifications, may not exceed 5 percent. Each ``Other'' line item is 
treated separately. The Productivity Investment line item is treated as 
a whole and not by a separate project. Funding that is governed by 
contract modifications may not be shifted to other functions or line 
items.
    Final BPRs were sent to each contractor in June 1993 to assist in 
the preparation of their FY 1994 budget requests. The contractors are 
expected to perform the work as described in the BPR package and in 
accordance with the standards contained in the Contractor Performance 
Evaluation Program for FY 1994 that was published in the Federal 
Register (58 FR 51085) on September 30, 1993. While the contractors 
were preparing their budget requests, we developed preliminary budget 
allocations for the 16 functional areas that were based on historical 
patterns, workload growth, inflation assumptions, statistical 
forecasting reports, and any other available information.
    A key step in this budget process is the development of contractor 
unit costs for processing Part A bills and Part B claims. As in FY 
1993, the FY 1994 budget process incorporates a bottom line unit cost 
approach that encompasses all budget line items except Provider Audit, 
Productivity Investments, and Other. For funding the bills/claims 
processing function, the Complexity Index (CI) was continued in FY 
1994. In the FY 1993 budget process, we arrayed the contractors' unit 
costs and identified the contractor at the 60th Percentile. Each 
contractor with a unit cost higher than the 60th Percentile was held to 
the 60th Percentile unit cost multiplied by the contractor's CI. Each 
contractor at or below the 60th Percentile retained its own unit cost 
multiplied by its CI. The only difference in the unit cost calculation 
in FY 1994 was the use of the 70th Percentile instead of the 60th 
Percentile.
    It was also noted that limitations on the FY 1994 budget could 
require across-the-board cost cutting measures. Should this occur, each 
of HCFA's Regional Offices will determine the amount of budget 
reduction for its contractors.

III. Analysis of and Responses to Public Comments

    In response to our request for public comment in the October 5, 
1993 proposed notice, we received four timely items of correspondence. 
Comments were received from a national specialty association, a 
beneficiary advocacy association, and two national health insurance 
associations. Several issues that were raised by the commenters are 
outside the scope of the proposed notice and are not addressed in this 
final notice. However, those comments have been referred to the 
appropriate HCFA components for review and analysis to determine if 
operational adjustments are required or warranted. In this final 
notice, we are responding to the comments that are related to the 
proposed notice.
    Comment: Three commenters reflected the concern that the proposed 
notice was published after the beginning of FY 1994. It was felt that 
untimely publication of the proposed notice denied interested parties 
the opportunity to comment before implementation of the budget.
    Response: We have taken steps to publish these proposed notices as 
timely as possible. Although we did not publish the proposed notice 
before the beginning of the fiscal year (due to considerations in 
reviewing data and developing a budget), we did provide adequate 
opportunity for all affected parties to comment on the data, standards, 
and methodology. We were fully prepared to issue revised Budget and 
Performance Requirements (BPRs) to intermediaries and carriers based on 
the comments received. If necessary, we were prepared to renegotiate 
any affected areas of intermediary and carrier budgets within the 
levels of funding made available by the Congress.
    Comment: Two commenters indicated that the contractor unit cost 
calculations are derived from a Complexity Index (CI) formula which is 
methodologically incorrect.
    Response: The CI includes full consideration of each individual 
contractor's workload mix and its actual costs as reported on the Final 
Administrative Cost Proposals. Therefore, we believe that the CI 
methodology is an equitable and efficient method of formulating 
contractor unit cost targets.
    Comment: One commenter expressed the opinion that the notice lacks 
specificity about the development of the contractor budgets that the 
Omnibus Budget Reconciliation Act of 1987 was intended to elicit. The 
commenter also stated that most of the methodology described in the 
notice is general and could apply to any contractor budget year.
    Response: The intent of the Congress requires that we provide 
sufficient description of the data, standards, and methodology used in 
determining the annual budgets. We believe the notice complies with 
that intent. The commenter is correct that some methodologies are 
retained from year to year. However, we always publish the most recent 
data. Additionally, legislative changes and budget priorities or 
constraints affect the standards.
    Our notices are intended to include only the data, standards, and 
methodology to be used to establish budgets for fiscal intermediaries 
and carriers for a given fiscal year. Specific instructions on how to 
implement and monitor certain initiatives, for example, beneficiary 
inquiries, participating physician, physician payment reform, etc., are 
presented through program memoranda, manual instructions, BPRs, etc.
    Comment: One commenter stated that HCFA has not provided adequate 
data, thus preventing the reader from reaching an informed opinion 
regarding the accuracy of the resulting budgets and unit costs.
    Response: As we believe the Congress intended, our proposed notice 
provides a general description of the budget development process. 
Specific guidelines and data for the development of individual 
contractor budgets are found in the current year BPRs.
    Comment: There was no mention of the Medicare Transaction System 
(MTS) in the proposed notice, as stated by another commenter.
    Response: We believe that a discussion of MTS is not relevant to 
the development of the FY 1994 contractor budget.
    Comment: One commenter stated that there were no ``true budget 
negotiations'' with the contractors in FY 1994.
    Response: We disagree. The Regional Offices (ROs) held discussions 
with the intermediaries and carriers to develop their FY 1994 budgets. 
A constant effort was made by all ROs to work out any differences with 
the intermediaries and carriers. The resulting FY 1994 contractor 
budgets reflect the efforts made during these negotiations.
    Comment: One commenter would like a policy to be established in 
situations where the budget appropriation is not passed by the Congress 
at the beginning of the fiscal year.
    Response: If the budget appropriation is not passed at the 
beginning of a fiscal year, we inform all carriers and intermediaries 
through correspondence of the appropriate actions to take until the 
appropriation is passed. Therefore, we believe it is not necessary to 
describe these procedures in a notice whose only purpose is to provide 
a general description of the process to develop the budget.
    Comment: Another commenter stated there is a lack of both 
description and assumptions for savings in every Medicare budget line 
item identified, including the savings identified by increasing goals 
for receiving Electric Means Claims (EMC) claims.
    Response: The proposed notice is intended to be a general 
description of the budget process. Contractors receive more detailed 
information on savings descriptions and assumptions in the BPRs and 
during contract negotiations with ROs.
    Comment: A commenter wanted to know whether the contract or the 
BPRs controls the contractor's ability to shift funds.
    Response: Contractor budget flexibility refers to each contractor's 
authority to shift funds within its Notice of Budget Approval, once 
issued. The same rules apply in FY 1994 as in FY 1993. With the 
exception of the Payment Safeguards, Productivity Investments, and 
``Other'' line items, contractors have complete flexibility with regard 
to the use of funds for ``bottom line'' functions/line items. As stated 
in the BPRs, ``Funding governed by contract modifications may not be 
shifted.'' Existing HCFA policy ensures that adequate funds always will 
be available to fund Payment Safeguards, an area that is vitally 
important to the protection of HI and SMI Trust Fund dollars.
    Comment: A final commenter stated that, in the Benefits Integrity 
line, staff increases could improve the quality of claims processed and 
help eliminate problems which could appear to be fraud and abuse.
    Response: We agree that proper staffing for the initial processing 
of fraud complaints/claims is important to the successful operation of 
the fraud units. HCFA will continue to fund this area so as to respond 
to fraud complaints in a timely and accurate manner.

IV. Provisions of the Final Notice

    Based on our review of the comments submitted, we are making no 
changes to the data, standards, and methodology as published in our 
notice on October 5, 1993. Therefore, we are adopting as final the 
notice as proposed.
    In accordance with Executive Order 12866, this final notice was not 
reviewed by the Office of Management and Budget.

V. Information Collection Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

    Authority: Sections 1816(c)(1) and 1842(c)(1) of the Social 
Security Act (42 U.S.C. 1395h(c)(1) and 1395u(c)(1)).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program.)

    Dated: April 12, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 94-17010 Filed 7-13-94; 8:45 am]
BILLING CODE 4120-01-P