Medicare carrier switch: Who will pay you next?
■ Contractor reform could mean that physicians will see big changes beginning next year in the companies processing their Medicare claims.
By Markian Hawryluk — Posted June 7, 2004
Change is never easy, as physicians in Rhode Island can attest. Late last year, the Medicare Part B carrier for the state, Blue Cross & Blue Shield of Rhode Island, announced that it no longer would process claims for the government. By February 2004, all Medicare claims would have to go to Arkansas Blue Cross and Blue Shield.
At the same time, a problem arose with non-Medicare claims processing. Rhode Island Blues lost its license to provide technical support for some 250 physician practices using WebMD's billing software, Medical Manager.
"It created a big, big mess because [the plan] had a large client base that was essentially left high and dry needing programming changes for the Medicare claims, as well as for all their billing related to HIPAA," said Yul Ejnes, MD, an internist from Cranston, R.I. "It created a major cash flow problem that people are still digging out of."
Eventually WebMD agreed to extend the license for 90 days to help with the transition. But another software snafu left thousands of Medicare claims undelivered to the Arkansas Blues plan. Many practices suddenly saw revenue streams dry up. Some physicians had to forgo paychecks or dip into lines of credit until payments resumed.
"We were stuck for a month and a half, two months, with no Medicare dollars coming in," said Scott Hanson, MD, an internist in Narragansett, R.I. About 20% of his practice's revenues come from Medicare.
Rhode Island Blues had been with the program since 1966, the year after Medicare's passage. And while the shift to another carrier alone might not have caused the disruption that occurred, the timing could not have been worse.
In coming years, more carriers could be leaving the market. Last year, Congress granted the Centers for Medicare & Medicaid Services greater flexibility in contracting. The changes will go into effect in October 2005. By 2011, CMS will rebid contracts for paying both Part A and Part B claims in each state.
That means many more physicians will have to brace for change and potential delays in payment. But the reforms also hold the promise of smoother interactions with Medicare down the road.
CMS officials say their primary goal throughout the rebidding process will be to minimize disruptions for physicians and patients. The agency has overseen at least 30 contractor changes over the last 30 years, said Herb Kuhn, director of CMS' Center for Medicare Management.
"Going through transitions is nothing new to us, and we've been able to make those pretty seamlessly," Kuhn said. "We need to make sure there's no interruption whatsoever, not only in terms of their payment but their ability to serve beneficiaries."
But Kuhn admits that upcoming changes won't be as simple as those in the past. For one, lawmakers eliminated the distinction between fiscal intermediaries, which process hospital claims, and carriers, which process physician claims. The government will replace them with Medicare administrative contractors that can be assigned a variety of claims processing or program integrity tasks.
CMS ultimately could award these contracts to many of the companies currently providing claims processing services. But although in the past the agency was limited to contracting with insurance companies, it soon will be able to sign up any organization that has the skills for the tasks.
Because CMS actively sought the ability to expand beyond insurance companies, it is likely that some physicians could be assigned to contractors that have never processed Medicare claims before.
Congress also mandated that CMS rebid contracts at least every five years. During debate on the bill, the General Accounting Office said the five-year cycle might be too burdensome, and CMS officials said the transition from the current arrangement to competitive selection would be "difficult and potentially disruptive to providers and beneficiaries."
Physician groups, including the American Medical Association, have urged the agency to pay particular attention to transition issues. Blue Cross of Arkansas visited with physicians in Rhode Island well in advance of the switch and even discussed the possibility of cash advances when it became clear that payment disruptions would occur.
"Growing pains are inevitable," said Paul Spidell, government affairs representative for the Medical Group Management Assn. "You hope and trust that the government will put forth a very sound, good-faith effort to monitor the situation closely to keep an eye out for those hiccups."
A bright side
The carrier reforms could actually improve contractor relations with physicians in the long run, Spidell said. There will be greater accountability, including the real threat of losing Medicare's business. "Some contractors out there have performed pretty well, and some not as well," he said. "Hopefully we're raising performance up to that higher level."
Indeed, a recent GAO report found that carriers provided accurate and complete guidance to physicians and others only about 15% of the time. Under the federal competitive bidding rules, CMS will start evaluating contractors next year using objective standards and be able to offer financial incentives or penalties to improve performance. For example, CMS might require contractors to pay a certain percentage of claims within 30 days. And contractors will be evaluated based on practitioner satisfaction.
CMS already has begun to gauge contractors' payment error rates and is requiring them to improve claims processing accuracy. CMS Acting Deputy Administrator Leslie Norwalk said the error rate calculation also included a measure of how many claims are submitted to each contractor with mistakes.
"That tells me how the carrier did in educating the provider community prior to submitting the claim, and it really will help us focus on whether a particular carrier needs to do a better job with an educational campaign," Norwalk said.
CMS had pushed for contractor reform in part because termination of poor performers' contracts was so difficult. Beginning in 2005, contractors that meet standards can be automatically renewed for up to five years, while those that fall short can be replaced earlier.
For the first time, the agency also will be able to use financial incentives for all contractors. Carriers and fiscal intermediaries now are reimbursed their costs for the claims processing functions and are not allowed to make a profit from their Medicare functions, said Alissa Fox, executive director of policy for the BlueCross BlueShield Assn.
"You can spread your overhead costs, which is a benefit, but the real reason to stay in is public service," she said. "These plans have been partnering with the federal government since 1965, when the program began."
Under the carrier reforms, many of the plans that have served Medicare for nearly 40 years could be replaced just as the business could become profitable, she said.
In fiscal 2003, CMS experimented with financial incentives with one fiscal intermediary and two durable medical equipment regional carriers. All showed improvements in timeliness, accuracy and responsiveness and earned a combined $1.6 million out of a possible $3.5 million in incentives. The project also gave the agency valuable experience with performance-based standards in anticipation of contractor reform.
Physician education, input essential
Although physician groups are eager for improved communication with contractors, they are concerned about a general trend toward consolidation. The AMA has urged CMS to ensure that there is no disruption in claims processing but also to maintain current educational efforts, even if there are fewer contractors nationwide.
"Physician education functions of carriers are equally important," said AMA Immediate Past President Yank D. Coble Jr., MD. "Carrier advisory committees and carrier medical directors must continue at the state level."
Dr. Coble said adequate funding for these positions is essential to keep physicians educated about Medicare regulations and to allow doctors to have input into coverage decisions in each state. Blue Cross of Arkansas, for example, retained the previous medical director and advisory committee in Rhode Island when it took over. The bulk of Medicare coverage decisions are made by local carriers.
The AMA is also concerned about fragmentation of carrier functions. In addition to processing claims, carriers handle medical reviews, physician enrollment, physician education, appeals of denied claims and collection of overpayments. But CMS is considering breaking out some of these roles to separate contractors. It already uses program safeguard contractors to help track down fraud and abuse. Physicians are worried that contracting by function could force them to deal with multiple parties.
"Activities such as claims processing, payment safeguards and provider education are all highly interrelated," said Roslyne Schulman, American Hospital Assn. senior associate director for health policy. "To pull them apart and assign them to different contractors could seriously disrupt timely and accurate claims payments."
She said current contractors are often unresponsive and unwilling to provide the resources necessary to develop productive relationships. "We're concerned that fragmenting functions could magnify the problem by forcing providers to use scarce resources to now deal with multiple contractors.
The AHA also worries that contractors could submit unrealistically low bids to win contracts and then be unable to meet the required standards.
"In Medicaid, where competitive bidding is often used to select contractors, hospitals have had personal experiences with contractors that submit lowball bids and then can't do the job adequately," Schulman said.
In a report to Congress, the GAO said contracting by function could create greater efficiency and lower costs. But it also warned that experience with program safeguard contractors showed that such specialized roles take time to develop.
When CMS contracted with a new company to conduct carrier error rate testing, many physician practices did not recognize the contractor as a Medicare representative and refused to submit the requested materials. Greater fragmentation of contractors could result in similar problems.
CMS is now developing its vision for the contractor landscape in the coming years. The agency must submit by October a report to Congress with its recommendations on restructuring the contractor lineup. At press time, the agency's leaders were reviewing a draft of the report and declined to offer specific details. Kuhn said no decision had been made on whether to rebid the contracts all at once or to stagger the process over several years.
The October 2005 start for the contractor reforms "sounds like a lot of time to get this thing rolling, but it's really not," Kuhn said. "We need to be a very good business partner with these providers out there. It's something we're taking very, very seriously."