[Federal Register Volume 60, Number 172 (Wednesday, September 6, 1995)]
[Notices]
[Pages 46288-46296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22029]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[BPO-133-PN]
Medicare Program; Data, Standards, and Methodology Used to
Establish Fiscal Year 1996 Budgets for Fiscal Intermediaries and
Carriers
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed notice.
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SUMMARY: This notice describes the data, standards, and methodology
that would be used to establish fiscal intermediary and carrier budgets
for the Federal fiscal year (FY) 1996, that begins October 1, 1995.
Fiscal intermediaries and carriers are public or private entities that
participate in the administration of the Medicare program by performing
claims processing and benefit payment functions. 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 for public comment the
data, standards, and methodology we intend to use to establish budgets
for Medicare fiscal intermediaries and carriers.
In addition, we respond to the single public comment we received in
response to our proposed notice of October 21, 1994, and we announce
the data, standards, and methodology we proposed to use to establish
the Medicare fiscal intermediary and carrier budgets for FY 1995,
beginning October 1, 1994, as final.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on
November 6, 1995.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPO-133-PN, P.O. Box 26676,
Baltimore, MD 21207.
If you prefer, you may deliver your comments (1 original and 3
copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPO-133-PN. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document,
[[Page 46289]]
in Room 309-G of the Department's offices at 200 Independence Avenue,
SW, Washington, DC, on Monday through Friday of each week from 8:30
a.m. to 5 p.m. (phone: (202) 690-7890).
FOR FURTHER INFORMATION CONTACT: Leslie Trazzi, (410) 786-7544
SUPPLEMENTAL INFORMATION:
I. Background
Preparation of Contractor Budgets--Under sections 1816(a) and
1842(a) of the Social Security Act (the Act), public or private
organizations and agencies may participate in the administration of the
Medicare program under agreements or contracts entered into with the
Secretary. These Medicare contractors are known as fiscal
intermediaries (section 1816(a) of the Act) and carriers (section
1842(a) of the Act). Fiscal intermediaries perform bill processing and
benefit payment functions for Part A of the program (Hospital
Insurance), and carriers perform claim processing and benefit payment
functions for Part B of the program (Supplementary Medical Insurance).
When bills are submitted by providers, and claims by beneficiaries,
physicians, and suppliers of services, fiscal intermediaries and
carriers are responsible for--
Determining the eligibility status of a beneficiary;
Determining whether the services on the submitted claims
or bills are covered under Medicare and, if so, the correct payment
amounts; and
Making appropriate payments to the provider, beneficiary,
physician, and/or other supplier of services.
Fiscal intermediary and carrier performance is monitored by us at
the central office staff and regional office levels. In general, the
central office staff address issues that affect policies on a national
level, and the regional office staff address issues dealing with
regional and local policies, as well as those of an operational nature.
Continuous communication between us and the fiscal intermediaries and
carriers is maintained through consultation workgroups that meet on a
regular basis and are comprised of representatives from the central
office, regional offices, and Medicare contractors.
HCFA's central office is responsible for developing a national
contractor budget for Part A and Part B of the Medicare program. The
budget is formulated over an 18-month period, beginning in March of the
calendar year preceding the fiscal year to which it applies. The
central office receives input from the contractor community, our
regional offices, the Department of Health and Human Services, and the
Office of Management and Budget (OMB) before the budget is submitted to
the President for approval and forwarding to the Congress. Once the
national contractor budget has been approved, we issue Budget and
Performance Requirements (BPRs). BPRs specify the level of effort
required for contractor functions and serve as the statement of work
for contractor use in preparing their individual budgets for submission
to us.
The regional offices review the budgets submitted by contractors
during a budget level determination process that is based on current
claims processing trends, legislative mandates, administrative
initiatives, current year performance standards and criteria, and the
availability of funds appropriated by the Congress. Subsequently, we
allocate funding within these constraints.
Requirements to Publish Contractor Budget Information--Sections
1816(c)(1) and 1842(c)(1)(A) of the Act require us to publish for
public comment the data, standards, and methodology we intend to use to
establish budgets for Medicare fiscal intermediaries and carriers at
least 90 days before September 1. The statute further requires that we
publish the final data, standards, and methodology no later than
September 1. In the past, when preparing the Medicare contractor budget
for each fiscal year, every attempt was made to publish the proposed
and final notices as timely as possible. However, because of the time
involved in developing the budget and the lengthy review and clearance
process, we have been unable to publish both proposed and final notices
before the beginning of the fiscal year. (See, for example, the notices
for FYs 1993 and 1994 published in the Federal Register at 59 FR 13491
and 35933.) However, because of our continuous communications with
contractors, we do not believe that the publication date of the Federal
Register document has any negative effect on the fiscal intermediaries
or carriers. The BPRs issued to all intermediaries and carriers discuss
in detail the work, level of effort, and activities we expect them to
perform in the coming fiscal year. Further, we provide a discussion and
explanation of the bottom-line unit cost target established for each
intermediary and carrier at the time the BPRs are issued.
Sections II and III of this notice contain proposed data,
standards, and methodology we intend to use to establish budgets for
Medicare fiscal intermediaries and carriers for FY 1996. If comments
are received during the comment period, we will address those comments
in a final notice and, if necessary, make revisions to the FY 1996
data, standards, and methodology. If no comments are received, the
data, standards, and methodology proposed for FY 1996 will become
final, effective October 1, 1995.
FY 1995 Budget Information--A proposed notice describing the data,
standards, and methodology we proposed to use to establish contractor
budgets for FY 1995 was published in the Federal Register (59 53187) on
October 21, 1994. In response to our request for public comment in the
proposed notice, we received one timely item of correspondence. Based
on our review of the comment submitted, we are making no changes to the
data, standards, and methodology we proposed to use. As noted earlier,
it has been our practice to issue separate notices dealing with
proposed and final budget data. Because no changes are being made to
the proposed budget data included in the October 21 notice, we believe
it appropriate to combine in this document the final notice announcing
the contractor budget for FY 1995, and the proposed contractor budget
elements for FY 1996. Therefore, through this notice, we announce that
the data, standards, and methodology we proposed to use to establish
the contractor budget for FY 1995 are final.
A discussion of the October 21, 1994, proposed notice and our
response to the public comment received appears in section IV. of this
document.
II. Overview of FY 1996 National Medicare Contractor Budget
A. Data, Standards, and Methodology
We submitted the FY 1996 national Medicare contractor budget
proposal to the Congress in February 1995. The workload for the FY 1996
request is expressed in terms of work processed. For Part A, the FY
1996 estimated workload (140.6 million bills) is 8.8 percent more than
the FY 1995 estimate. For Part B, the FY 1996 estimated workload (681.4
million claims) is a 3.9 percent increase over the FY 1995 estimate.
Our estimates involved the use of a regression model that uses the
last 36 months of actual contractor workload data. For the FY 1996
projections, we used November 1994 data, which were the latest
available to us at the time. We will continue to update the resulting
projections monthly to ensure that the most timely data are available
for budgeting purposes.
The FY 1996 unit costs for processing bills and claims were
calculated based
[[Page 46290]]
on the FY 1995 level adjusted for savings achieved due to productivity,
electronic media claims, and reduced funding for incremental workload.
This calculation resulted in a new unit cost, which, when multiplied by
the Part A or Part B workloads, determines the total amount required
for bill or claim processing in FY 1996.
Feedback received from contractors and regional offices during the
past several years has led us to believe that contractors can make
major improvements in performance if given the authority to manage
their budgets. The FY 1994 BPRs gave the regional offices the authority
to set a budget and the contractors the authority to manage their
budgets on a bottom-line basis. Once funding was issued, each
contractor had the flexibility to optimally manage the budget
consistent with the statement of work contained in the BPRs. Before FY
1993, contractors were not allowed to ``shift'' more than 5 percent of
funds from one line item to another in their budget, as determined by
the lesser of the two line items. That restriction was intended to
allow us to maintain control over the national budget, but still give
contractors some latitude with regard to reporting their costs. With
the exception of the ``Payment Safeguards,'' ``Productivity
Investments,'' and ``Other'' line items, contractors now 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 as
separate projects. Funding that is governed by contract modifications
may not be shifted to other functions or line items.
B. Medicare Contractor Functional Areas
The Medicare contractor budget consists of functional areas of
responsibility that are performed by the fiscal intermediaries for Part
A and the carriers for Part B. The eight functional areas of
responsibility for fiscal intermediaries under Part A are--
Bill Payment;
Reconsideration and Hearing;
Medicare Secondary Payer;
Medical Review and Utilization Review;
Provider Audit (Desk Review, Field Audit, and Provider
Settlement);
Provider Payment;
Productivity Investments; and
Benefits Integrity.
The nine functional areas of responsibility for carriers under Part
B are--
Claim Payment;
Review and Hearing;
Beneficiary or Physician Inquiry;
Provider (physician/supplier) Education and Training;
Medicare Review and Utilization Review;
Medicare Secondary Payer;
Participating Physicians;
Productivity Investments; and
Benefits Integrity.
The Hospital Insurance and Supplementary Medical Insurance Trust
Funds and appropriations provide funding for these functions.
Discussions concerning the data, standards, and methodology for these
functional areas are in section III of this notice. In the following
national budget summary, we combine the discussion of functional areas
that are common to fiscal intermediaries and carriers. However, we list
specific data for Part A or Part B under each heading. In developing
the budget, we provide workload estimates for all functional areas that
are predominantly workload driven. We do not provide workload estimates
for those functional areas that are not predominantly workload driven
or for an uncertain workload until final negotiations with the Medicare
contractors are complete.
1. Bill and Claim Payment (Parts A and B)
We currently estimate the Part A processed workload to be 140.6
million bills in FY 1996. The Part B processed workload is currently
projected at 681.4 million claims.
2. Reconsideration (Part A), Review (Part B), and Hearing (Parts A and
B)
Beneficiaries, providers, physicians, and other suppliers are
entitled by law to appeal, through reconsiderations, formal reviews, or
hearings, as appropriate, the various payment determinations made by
Medicare contractors. We project that Part B reviews and hearings
workloads for FY 1996 will not exceed FY 1995 levels, while workload
for Part A reconsiderations and hearings will have a moderate increase.
We expect contractors to control and respond to requests for appeal and
to control receipt of Administrative Law Judge hearing requests.
We continue to maintain efficiencies achieved in prior years
through the use of shorter decision letters and the experimental use of
the telephone to conduct reviews and reconsiderations.
3. Medicare Secondary Payer (Parts A and B)
The Medicare secondary payer function is the first of four
initiatives (Medicare secondary payer, medical review and utilization
review, benefits integrity, and provider audit) we developed as
``payment safeguards'' for the Medicare program. Our continuing
Medicare secondary payer program is designed to identify situations in
which other insurers are the primary payers, to pay all claims
correctly the first time, and to recover Medicare dollars in instances
in which mistaken conditional payments have occurred.
We aggressively pursue the identification of secondary payer
situations through the collection and matching of beneficiary-specific
health care data through the Internal Revenue Service/Social Security
Administration/HCFA (IRS/SSA/HCFA) data match authorized by section
1862(b)(5) of the Act. The FY 1996 budget includes funding to process
the workloads based on the IRS/SSA/HCFA data match project. We allocate
the funds based on the number of report identification numbers we
expect a contractor to process.
In addition to the IRS/SSA/HCFA data match, we continue to pursue
other data matches with State Motor Vehicle Administrations, Workers'
Compensation, Medicaid Agencies, and the Departments of Defense, Labor,
and Veterans Affairs. Further, our use of the initial enrollment
questionnaire is an important part of our commitment to capturing vital
health care coverage data on beneficiaries and their spouses at the
time of Medicare enrollment and before any claims are filed.
4. Medical Review and Utilization Review (Parts A and B)
In addition to processing and paying claims from providers of
services and Medicare beneficiaries, contractors perform medical and
utilization reviews of claims to determine whether services are covered
under the program and are medically necessary. The distribution of
Medicare contractor funding is based on each contractor's proportion of
the workload and individual contractor medical review/utilization
review projects.
Specifically, our contractors are required to work with the medical
community to develop clear medical review policies and communicate
those policies to the providers of services. Moreover, we also
emphasize the need for systematic and ongoing analysis of
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claims data to focus prepayment and postpayment medical review. To meet
this requirement, intermediaries and carriers currently analyze local
and national data to identify practice patterns, trends, and
aberrancies that may reflect areas of potential abuse, inappropriate
care, and overutilization. This data-driven approach allows us to
target and direct our efforts to our greatest risk of inappropriate
program payment.
Part A medical reviews by fiscal intermediaries focus on preventing
inappropriate billing through provider education and on targeting
reviews of providers who fail to change inappropriate behavior. Through
analysis of national and local data, areas of abuse and overutilization
are identified and payment is denied for services that are not covered
under the Medicare program. Reviews are targeted where they will be
most effective in protecting the program.
Part B medical reviews by carriers identify areas of abuse and
overutilization and focus on preventing Medicare payment for medically
unnecessary or noncovered services. Carriers use computerized methods
of analyzing utilization, epidemiologic, and demographic data to detect
trends in physician and other supplier activities and the delivery of
health care. This is accomplished through prepayment and postpayment
analysis of Medicare Part B claims.
In FY 1996, we will continue to support the medical review
activities of the four Durable Medical Equipment Regional Carriers
(DMERCs). The DMERCs will conduct prepayment and postpayment review of
durable medical equipment, prosthetics, orthotics, and supplies
(DMEPOS) claims to identify areas of potential abuse and
overutilization and prevent payment for noncovered items and services.
The DMERCs will identify aberrancies from an analysis of national
and local databases. The DMERCs will initiate corrective action for
overpayment recoupment, target supplier claims for services most
frequently billed, and continue to revise regional medical review
policies and screens for referral to the Office of the Inspector
General (OIG). This targeting principle will assist in developing
regional medical review policies to address identified problem areas or
trends in new technologies. In addition to educating suppliers, DMERCs
need to educate the referring/ordering physicians responsible for
prescribing DMEPOS items and include them in the medical policy
development process.
5. Provider Audit (Part A only)
The audit of provider cost reports is our primary instrument to
help ensure the integrity of Part A Medicare payments. Funding
priorities are directed toward the use of limited desk reviews where
low cost/low utilization providers are involved and toward the use of
onsite focused reviews to expand the overall examination of high cost/
high payment issues. Program savings remain relatively flat, while the
FY 1996 funding level remains constant.
In FY 1996, budget estimates allow for a relatively consistent
level of reviews and audits for all types of providers, although an
increasing number of providers require both desk review and settlement.
Full desk reviews and field audits are directed toward high cost/high
utilization providers and past poor performers. Contractors will retain
a knowledgeable audit staff and provide training in accordance with
government auditing standards.
Contractors will also respond to provider appeals by conducting
intermediary hearings and by filing position papers and attending
hearings at the Provider Reimbursement Review Board (PRRB). Contractors
will also reopen and revise prior period settlements based on provider
requests, as well as PRRB and HCFA directives and resolve problems
identified on provider cost reports.
6. Provider Payment (Part A only)
In FY 1996, Medicare contractors will provide payment services to
approximately 31,500 health care providers. These payment services
include establishing and adjusting interim rates, recouping provider
overpayments, and providing consultative services to providers for
maintaining and adjusting their accounting systems to ensure accurate
data for preparing Part A bills and cost reports.
We will distribute funds in proportion to workload by provider
type.
7. Productivity Investments (Parts A and B)
We refer to the costs of implementing legislation and new
initiatives that are designed to improve the effectiveness of Medicare
program administration as productivity investments. Productivity
investments generally provide start-up funds for new or revised
contractor activities. Once these projects are operational, their
funding becomes part of the contractor's ongoing costs. The criteria
for selecting productivity investments vary. For example, the statute
or regulations require some productivity investments. We also fund
projects that will improve administrative cost efficiency, such as
administrative simplification.
There is no single distribution methodology for the allocation of
productivity investment funds. After we determine the national cost of
a productivity investment, we distribute funds among the contractors.
These funds are based on the contractors' cost estimates or through
formulas that we derive based on project specifications. Other
productivity investment initiatives require equal effort by all
contractors regardless of size and, therefore, funds are distributed
equally among contractors. Finally, some productivity investments, such
as administrative simplification and the Medicare Transaction System,
are given only to contractors that are involved in the specific
projects.
8. Beneficiary or Physician Inquiry (Part B only)
The Medicare contractors are the direct link between beneficiaries,
providers, physicians and other suppliers, and the Medicare program. It
is the responsibility of HCFA and the contractors to provide the most
effective and efficient service to beneficiaries, providers,
physicians, and other suppliers, and to continue to expand their
awareness and understanding of the Medicare program.
We are currently revising all benefit notices into a single, easy
to read summary format. Carriers will begin using the new notice format
in FY 1996. Beneficiary and provider feedback is used to modify the
format, as necessary, to ensure maximum beneficiary comprehension. We
and our contractors will conduct extensive outreach to ensure a smooth
transition to the new format.
Our Carrier Customer Service Plan initiative is expanded to
include--
Tone/clarity self-assessment;
Initiatives to improve service to blind, deaf, and
disabled beneficiaries;
An automated inquiries analysis program;
Improvements to the internal review process;
Partnerships with local beneficiary counseling and
assistance organizations;
The expansion of beneficiary advisory committees; and
Initiatives designed to improve service to Spanish
speaking individuals.
Also, carriers use Audio Response Units as the initial contact for
providers, and a beneficiary Audio Response Unit script is offered to
all carriers. In FY 1996, carriers will expand the use of Audio
Response Units. The Audio
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Response Units will provide improved service, accuracy, and consistency
through the use of expanded standardized scripts and equipment
enhancements.
In FY 1996, carriers will receive an estimated 40.1 million
inquiries by telephone, in writing, or through direct contact, an
increase of 1 percent over the current FY 1995 projection of 39.6
million inquiries.
9. Participating Physicians/Suppliers (Part B only)
Participating physicians and suppliers are those who agree to
accept assignment on all Medicare claims in return for certain
incentives or benefits. All physicians are given an opportunity to
enroll or disenroll in the program annually.
Carriers must perform several activities including: (1) Conducting
annual participation enrollment; (2) Distributing the Medicare
Participating Physician/Supplier Directories; (3) Upgrading and
maintaining direct electronic media claim lines for participants; and
(4) Monitoring and enforcing the program requirements for participants
and nonparticipants, which includes the comprehensive limiting charge
compliance program.
10. Physician/Supplier Education and Training (Part B only)
Increasing numbers of physicians, nonphysician practitioners, and
other suppliers who furnish health care services rely on information
gained through communications with carriers about Medicare program
provisions. To respond to this need, we have fostered interaction
between suppliers of health care services and carriers to promote
efficient, economic claims activities. For example, these activities
include: (1) Communicating with suppliers of health care services; (2)
Educating suppliers to eliminate the submission of erroneous or
underdocumented claims; (3) Distributing newsletters to all suppliers
of services detailing changes in coverage, payment, or billing policy;
and (4) Educating carrier staff members, on a regularly scheduled
basis, to ensure compliance with legislative and policy changes
affecting the coding and submission of claims.
11. Benefits Integrity (Parts A and B)
We will continue to deter and detect Medicare fraud and abuse
activities through concerted efforts with the OIG, the Federal Bureau
of Investigation, Medicaid Fraud Control Units, the Department of
Justice, and other HCFA partners. As in FY 1995, we will continue to
improve the quality of referrals to the OIG by increasing our fraud
detection capabilities through expanded data analysis and improvements
in fraud detection by the carriers and intermediaries.
In addition, the National Claims History Database continues to be
available to focus postpayment review on practitioners and suppliers
that appear to be billing fraudulently or that are misrepresenting to
Medicare the services or items they are furnishing.
In FY 1996, Medicare carriers will focus their detection activities
on medical laboratory, radiology, anesthesia, physician services, and
ambulance claims. Also, in FY 1996, Medicare carriers will upgrade
their fraud detection capabilities by making better use of available
databases and expanded relationships with other fraud detection
organizations.
12. Printing Claim Forms (Parts A and B)
Although this activity is not among the nine Part A and eight Part
B contractor functional areas, it is a part of the national Medicare
contractor budget. In the interest of maintaining standard formats and
quality of Medicare entitlement and report forms, we supply beneficiary
enrollment and provider cost reporting forms. The use of these forms is
essential for beneficiary notification and for effective and efficient
contractor operations. We will print 50 million copies of these forms
for FY 1996.
C. Contractor Unit Cost Calculations
A key step in the contractor budget process is the development of
contractor unit costs for processing Part A bills and Part B claims.
These bottom-line unit costs encompass all budget line items except
``Provider Audit,'' ``Provider Reimbursement,'' ``Productivity
Investments,'' and, ``Other.''
As first implemented in FY 1992, the complexity index was designed
to improve efficiency and reduce contractor-by-contractor cost
inequities and was based on the application of the Industrial
Engineering study commissioned by us. The Industrial Engineering study
provided us with an actual weighted unit cost for each claim type; that
is, inpatient or outpatient, and method of submission of a bill or a
claim. After adjustment for changes in program emphasis, these unit
costs were applied to each contractor's individual workload mix to
develop a weighted unit cost that reflects the complexity of its
workload mix. We published an explanation of the complexity index in a
Federal Register notice published on January 2, 1992 (57 FR 57). After
adjusting for various savings and increases associated with
initiatives, we then arrayed the contractors' unit costs and identified
the high cost contractors.
We believe that the use of the complexity index has enabled us to
successfully achieve the goals of improving efficiency in contractor
operations and reducing contractor-by-contractor cost inequities. Since
we have achieved these goals, and believe that costs can be controlled,
we will base each contractor's FY 1996 unit cost on the FY 1995 level,
adjusted for inflation and for savings achieved as a result of
increased productivity, and on reduced funding for incremental
workload.
D. Overall Budget Considerations
We note that limitations on the FY 1996 budget could require
across-the-board cost cutting measures. In that case, each regional
office will determine the amount of budget reduction for its
contractors.
III. FY 1996 National Medicare Contractor Budget: Data, Standards,
and Methodology
Since the submission of the President's FY 1996 Medicare contractor
budget request to the Congress in February 1995, we have developed and
issued BPRs to the contractors. These requirements outline the
statement of work and level of effort that fiscal intermediaries and
carriers are expected to perform during the upcoming fiscal year in
each of the functional areas for which they are responsible.
Our schedule is that draft BPRs are released to the regional
offices in April, and the final BPRs are released in June 1995. At the
time of release, each fiscal intermediary and carrier is given the
individual requirements to be used in preparing their FY 1996 budget
request. The regional offices will send any additional information that
is pertinent to the fiscal intermediaries and carriers within their
region. Fiscal intermediaries and carriers must submit their budget
requests to us no later than 6 weeks after the issuance of the BPRs.
After the fiscal intermediaries and carriers review the BPRs, they
prepare their budget requests. The central office and regional office
staff review the fiscal intermediary and carrier budget requests as
they are submitted. The regional office staff negotiates a final and
mutually-acceptable budget, within the limits of the funding available
to us, with each fiscal intermediary and carrier. The central office
prepares a financial operating plan for each regional office that
provides total regional funding authority for each
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functional area. The regional offices, in turn, prepare a Notice of
Budget Approval for each fiscal intermediary and carrier that provides
a full year budget plan subject to quarterly cash draw limitations.
A. Standards
The basic statement of work, along with new and special activities
that fiscal intermediaries and carriers are expected to perform, is
described in the BPR package. Fiscal intermediaries and carriers are
expected to perform the work as described in the BPR package and in
accordance with the standards included in the Contractor Performance
Evaluation for FY 1996. For consideration in developing their initial
budget requests, a copy of the draft Contractor Performance Evaluation
standards will be sent to contractors. Final FY 1996 Contractor
Performance Evaluation standards will be published in the Federal
Register.
B. Data
The following data contain various workload volumes, functional
costs, and manpower information that are used in developing the
individual fiscal intermediary and carrier budgets for FY 1996:
Forms HCFA-1523/1524 (a multipurpose form that serves as
the Budget Request, Notice of Budget Approval, and Interim Expenditure
Report).
Forms HCFA-1523A/1524A (Schedule of Productivity
Investments and Other).
Forms HCFA-1523B/1524B (Schedule of Credits, Electronic
Data Processing, and Overhead).
Forms HCFA-1523C/1524C (Schedule of Appeals).
Forms HCFA-1523D/1524D (Schedule of Medicare Secondary
Payer Costs).
Forms HCFA-1523E/1524E (Schedule of Medical Review Costs).
Forms HCFA-1523G/1524G (Schedule of Fraud and Abuse).
Form HCFA-1525A/1525A (Contractor Audit Settlement
Report).
Schedules A, B, & C.
Provider Payment Profile.
Schedule of Providers Serviced.
Medicare Secondary Payer Savings Report.
Medical Review/Utilization Review Savings Report.
Form HCFA-2580 (Cost Classification Report).
Forms HCFA-1565/1566 (Carrier Performance Report/
Intermediary Monthly Workload Report).
OMB's economic assumptions of 3.2 Percent.
Savings from prior productivity investments.
New legislation costs.
Regional Office recommendations.
Contract provisions.
C. Methodology
The Medicare contractor budget is organized around the previously
listed functional areas that are performed by the fiscal intermediaries
for Part A and the carriers for Part B. In 1992, we developed a bottom-
line unit cost for each individual contractor. The following narrative
describes the methodology used to calculate individual line-item costs.
This methodology will be considered as general reference for
contractors as they develop their FY 1996 budgets and also provides
additional explanation in determining how certain costs and savings
were determined. The regional offices will negotiate with the fiscal
intermediaries and carriers to resolve any differences within the
limits of the funding available to us.
1. Bill and Claim Payment
A statistical forecasting model determines the individual fiscal
intermediary and carrier workload levels for FY 1996. Using the same
data, we are also projecting the number of bills or claims a fiscal
intermediary and carrier may expect to have pending at the end of FY
1995. We will then combine the FY 1996 receipt estimate with the
anticipated end of FY 1995 pending level, and subtract the estimated FY
1996 pending for each fiscal intermediary and carrier to establish a
processed workload; that is, Estimated FY 1996 receipts + Estimated end
of FY 1995 pending - Estimated end of FY 1996 pending = Estimated FY
1996 Processed Workload.
In order to price individual contractor bill and claim workload, we
develop a unit cost that is the cost of processing a single bill or
claim. The individual fiscal intermediary and carrier unit costs for FY
1996 are calculated from the unit costs in the FY 1995 Notice of Budget
Approvals. Savings achieved from operating efficiencies also are part
of the formula employed in computing FY 1996 target unit costs.
2. Reconsiderations (Part A), Reviews (Part B), and Hearings (Parts A
and B)
We will allocate funding based on the dollar amount spent (line 2
of Forms HCFA-1523/1524) in the prior years, adjusted for inflation and
changes in volume. Specifically, we will adjust the previous year's
costs for reconsiderations and hearings by the estimated percentage
change in workload.
We estimate the individual fiscal intermediary and carrier budget
allocations for reconsiderations, reviews, and hearings by multiplying
forecast workloads by the adjusted unit costs.
3. Beneficiary and Provider Inquiries (Part B only)
To establish a budgeted amount for beneficiary and provider
inquiries, we increase the prior year's cost by the projected workload
change. We also consider special conditions unique to specific carriers
in negotiating the budget. We will use the data to develop a budgeted
cost for beneficiary and provider inquiries by multiplying forecasted
processed volume by the unit cost.
4. Provider Payment (Part A only)
In determining individual fiscal intermediary budgets for
reimbursement activities, we took into consideration the FY 1995
budgeted figures, the projected funding for FY 1996, and the projected
workload based on the workload reported on the Schedule of Providers
Serviced. The Schedule of Providers Serviced is a listing of all the
facilities serviced by the fiscal intermediary. The Schedule of
Providers Serviced is submitted with each initial budget request so
that a part of the analysis is the comparison of the composition of the
provider community serviced by the fiscal intermediary and any change
reported between fiscal years.
5. Provider Audit (Part A only)
For FY 1996, the provider audit function is divided into three
major activities: field audits, desk reviews, and settlements. The
Contractor Auditing and Settlement Report (Form HCFA-1525/1525A)
provides a breakout of audit activities and costs by type of provider
and documents the savings incurred as a result of audit activity. Using
this as a base, we develop the desk review costs by projecting the
number of providers serviced by the unit cost per desk review
(developed for the latest Contractor Auditing and Settlement Report for
FY 1994) to determine the cost of handling the FY 1996 workload at the
FY 1994 unit cost. We base the settlement costs on the workload
projected in the fiscal intermediary's budget request, multiplied by
the unit cost for settlements found in the most recent Contractor
Auditing and Settlement Report for FY 1994.
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The first priority of all audit efforts is the completion of any
special activities required by legislation. The second priority is that
all cost reports be reviewed and, to the extent possible, settled.
6. Medicare Secondary Payer
We will review the estimated workload data, reported backlog data,
and any other items, for example, proposed Medicare secondary payer
systems enhancements, to determine Medicare secondary payer funding
allocations. Each contractor's case mix will be analyzed to adjust for
specialized workloads such as home health claims or durable medical
equipment (DME). In FY 1996, we will allocate the budget based on the
above considerations, adjustments created by shifts in the DME workload
from all carriers to the four specialty carriers, and other shifts in
workload that may require adjustments.
7. Medical Review/Utilization Review
The individual fiscal intermediary and carrier medical review/
utilization review budgets for FY 1996 will be calculated in three
segments: (1) Prepayment medical review; (2) Postpayment medical review
activities; and (3) Data analysis and screen development. The BPR
describes the activities and workload requirements that the fiscal
intermediaries and carriers are expected to meet. As part of the BPRs,
we will ask the fiscal intermediaries and carriers to estimate the
level of funding that will be necessary to meet such requirements. We
will allocate prepayment and postpayment medical review funding to
contractors based upon the workload that a fiscal intermediary or
carrier projects for FY 1996.
8. Participating Physicians/Suppliers (Part B only)
In determining the individual carrier funding levels for the
participating physician/supplier program for FY 1996, we considered the
following factors:
The number of physicians/suppliers in the carrier's
service area.
The carrier's current participation rate.
The carrier's recent performance in increasing its
participation rate.
The statement of work to be performed as outlined in the
BPRs.
FY 1995 cost experience.
Since participating physicians/suppliers are eligible for toll-free
telephone lines for electronic billing, allowance will be made for
these expenses. Carriers with lower participation rates will receive
greater funding for the limiting charge violation monitoring. We have
discontinued carrier monitoring of the elective surgery disclosure
requirement. We now require carriers to investigate beneficiary
complaints on a case-by-case basis.
We allocate carrier monitoring funds based on the national
percentage of nonparticipating physicians/suppliers. All carriers will
receive the same funding amount for reporting participation statistics.
9. Productivity Investments
We refer to the costs of implementing legislation and new
initiatives that are designed to improve the effectiveness of Medicare
program administration as productivity investments. Several allocation
methodologies will be employed in calculating the productivity
investment budgets for individual fiscal intermediaries and carriers.
For those projects involving only single contractors or small groups of
contractors, we will allocate funds based upon the specifications of
the particular project. For those projects involving all fiscal
intermediaries or carriers, if the costs are driven by bill or claim
volume, we will distribute the funding based upon our workload
projections for each contractor. Finally, for those projects involving
all fiscal intermediaries or carriers that require equal effort,
regardless of the contractor's size, we derive a standard allocation to
be given to all contractors.
10. Physician/Supplier Education and Training (Part B only)
Distribution of funds made available to HCFA for physician/supplier
education and training is based upon the ratio of physicians and
suppliers in each carrier's service area to the national total of
physicians and suppliers.
11. Benefits Integrity
In allocating the FY 1996 benefits integrity budget to individual
fiscal intermediaries and carriers, we will consider the following:
The prior year's effectiveness in initiating fraud
referrals to the OIG.
Initiating overpayment recoveries when appropriate.
Prioritizing workload to concentrate on high dollar and
multi-state fraud.
The extracted workload and cost data from the Schedule of
Fraud and Abuse (Forms HCFA-1523G/1524G).
The Medicare Fraud Unit Workload Report.
The fraud unit's level of sophistication to determine
benefits integrity funding allocations.
The completion of any special activity required by
legislation which will be an overriding priority.
The networking costs, which will be determined by the
personnel cost to support the Medicare Fraud and Abuse Information
Coordinator, travel costs, and the other expenses needed to conduct
networking for the area assigned.
IV. Data, Standards, and Methodology Used to Establish the Medicare
Contractor Budgets for FY 1995
The October 21, 1994, notice described the budget development
process in general and gave an overview of how we intended to use the
contractor budget data, standards, and methodology to establish the FY
1995 budgets.
Based on our review of the comments submitted, we are making no
changes to the proposed data, standards, and methodology as published
on October 21, 1994. Therefore, we announce provisions of the proposed
notice as final.
Provisions of the Proposed Notice
We indicated in the proposed notice that the contractor budget
would be structured to coincide with the eight 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. We proposed that final funding for the
contractor functions 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. While the
contractors were preparing their budget requests, we developed
preliminary budget allocations for the 17 functional areas that were
based on historical patterns, workload growth, inflation assumptions,
statistical forecasting reports, and any other available information.
A key step in the contractor's budget process is the development of
contractor unit costs for processing Part A bills and Part A claims. As
in FY 1994, the FY 1995 budget process used a bottom line unit cost
approach. All budget line items except Provider Audit, Productivity
Investments, Other, and in FY 1995, Provider Payment, are part of the
bottom line unit cost calculation. In FY 1995, the complexity index was
not used as it was in prior years. We believe that the use of the
complexity index
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over the last 3 fiscal years has enabled us to successfully achieve the
goals of improving efficiency in contractor operations and reducing
contractor-by-contractor cost inequities. Since we have achieved these
goals, and believe that costs can be controlled, we based each
contractor's unit cost on their FY 1994 level, adjusted for savings
achieved due to increased productivity, electronic media claims, and
reduced funding for incremental workload. Because of reduced funding in
FY 1995 inflation was not given.
The Medicare secondary payer function is the first of four
initiatives we developed as ``Payment Safeguards'' for the Medicare
program. The focus of the Medicare secondary payer initiative is to
ensure that the Medicare program pays for covered care only to the
extent required after payment by the primary insurer. We proposed that
the standard for determining the amount of Medicare secondary payer
funding a contractor would receive in FY 1995 would be based on
workload volumes, required systems changes, and any special projects
that may be assigned to contractors.
Based on actuarial analysis, we developed specific savings goals
for each contractor. The goals were developed on estimates of savings
to be achieved by contractors for the Medicare secondary payer
categories of working aged, disabled, workers' compensation, end-stage
renal disease, and liability or no-fault insurance. After assigning
goals to contractors, funds were allocated based on the various
Medicare secondary payer activities a contractor must perform such as
processing prepayment claims, postpayment claims, inquiries, outreach,
and hospital reviews.
We proposed that in FY 1995, the Initial Enrollment Questionnaire
would be operational. The Initial Enrollment Questionnaire eliminates
the need for first claim development on approximately 85 percent of new
enrollees. This initiative improves service to beneficiaries on a
national basis by providing detailed information on the Medicare
secondary payer program at the time a beneficiary enrolls in Medicare.
We proposed to include funding to process the workloads based on
the IRS/SSA/HCFA data match project. The funds would be allocated on
the basis of the number of report identification numbers a contractor
will process. We would review the estimated workload data, reported
backlog data, and proposed Medicare secondary payer systems
enhancements to determine Medicare secondary payer funding allocations.
Each contractor's case mix would be analyzed to adjust for specialized
workloads such as home health claims or DME.
In FY 1995, we proposed the budget be allocated based on
adjustments created by shifts in the DME workload from all carriers to
the four specialty carriers and by other shifts in workload that may
require adjustments. The regional offices would negotiate with the
fiscal intermediaries and carriers to resolve any differences between
our allocations and their requests within the limits of the funding
available to us.
Analysis of and Response to Public Comment
In response to our request for public comment in the October 21,
1994 notice, we received one timely item of correspondence from a
health insurance company. Several issues that were raised by the
commenter are outside the scope of the proposed notice and are not
addressed in this notice. The proposed notices are intended to address
only the data, standards, and methodology to be used to establish
budgets for fiscal intermediaries and carriers for a particular fiscal
year. Specific instructions on how to implement and monitor certain
initiatives (for example, beneficiary inquiries, participating
physician and benefits integrity) are presented through program
memoranda, manual instructions, BPR, and other means.
Comment: The commenter was concerned that the proposed notice was
published after the beginning of FY 1995. The commenter believed that
untimely publication of the proposed notice denied interested parties
the opportunity to comment before implementation of the budget.
Response: In the preparation of the Medicare contractor budget each
fiscal year, we attempt to publish the proposed and final notices
timely. However, because of the time involved in reviewing data and
developing the budget and the lengthy review and clearance process, we
were not able to publish the proposed and final notices before the
beginning of the 1995 fiscal year. We regret that we were unable to
publish the proposed notice timely, but we do not believe that our
actions substantively penalized or prejudiced the fiscal intermediaries
or carriers. The BPRs issued to all intermediaries and carriers discuss
in detail the work, level of effort, and activities we expect them to
perform in the coming fiscal year. Further, we provide a discussion and
explanation of the bottom-line unit cost target established for each
intermediary and carrier at the time the BPRs are issued. The
intermediaries and carriers have ample time to identify and resolve any
problems before they finalize their budget requests for the fiscal
year.
Comment: The commenter indicated that the use of the complexity
index in prior years provided a methodologically flawed basis for
calculating the contractor unit costs in FY 1995.
Response: We do not agree. As stated in the proposed notice, we
believe that the complexity index is useful in helping to control
contractor costs by providing funding on the basis of workload
complexity. The use of the complexity index over the last 3 fiscal
years has enabled us to successfully achieve the goals of improving
efficiency in contractor operations and reducing contractor-by-
contractor cost inequities. Since we have achieved the above goals, we
believe it is reasonable for FY 1995 contractor unit costs to be based
on each contractor's FY 1994 level.
Comment: The commenter expressed concern about the process used to
develop specific Medicare secondary payer savings goals for each
contractor for FY 1995 as well as how funding was determined for each
contractor for Medicare secondary payer activities. The commenter
believed that Medicare secondary payer funds are allocated after
assigning Medicare secondary payer savings goals.
Response: The President's budget estimate that was published in
February 1994 covers the entire Medicare contractor budget. Although
the budget estimate mentions Medicare secondary payer savings, it does
not define specific savings per contractor. Further, we have not
assigned savings goals to intermediaries and carriers since FY 1993.
Therefore, Medicare secondary payer funds are not allocated after
assigning Medicare secondary payer savings goals to contractors.
The factors that affect Medicare secondary payer funding for
individual contractors are: the national Medicare secondary payer
budget; the priority of the Medicare secondary payer activities;
individual contractor Medicare secondary payer budget requests and
workload estimates (a contractor's estimated Medicare secondary payer
workload and budget request is compared to its previous workload and
expenditures for Medicare secondary payer activities); an analysis of a
contractor's Medicare secondary payer budget request and that of
similar contractors with similar workloads (intermediaries and carriers
are compared separately); the ability of a contractor to justify and
document its request for additional funding, or for
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funding we believe is out of its peer grouping; and negotiations
between the regional offices and the individual contractors.
V. Response to Comments
Because of the large number of items of correspondence we normally
receive on documents published for comment, we are not able to
acknowledge or respond to them individually. We will consider all
comments we receive by the date specified in the DATES section of this
notice, and we will respond to the comments in a subsequent published
notice. To the extent that we receive comments during the comment
period, we will address those comments in a final notice and, if
necessary, make revisions to the proposed data, standards, and
methodology for FY 1996. If no comments are received, we will simply
adopt the proposed data, standards, and methodology for FY 1996 as
final, effective October 1, 1995.
In accordance with the provisions of Executive Order 12866, this
proposed rule was not reviewed by the Office of Management and Budget.
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: August 16, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-22029 Filed 9-5-95; 8:45 am]
BILLING CODE 4120-01-P