GAO report validates physician complaints on Medicare claims contractors

While CMS has made progress in overhauling the old carrier system, new contractors have not been fully up to speed, according to the GAO.

By Chris Silva — Posted May 10, 2010

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In the federal government's rush to overhaul the system of contractors that process Medicare claims, payment delays to physicians and other administrative problems have cropped up, according to a new oversight report.

The Centers for Medicare & Medicaid Services is finalizing a nationwide initiative to replace the old patchwork system of Medicare carriers and fiscal intermediaries with the Medicare administrative contractor system, which will be divided into 15 distinct jurisdictions. When the effort is complete by Oct. 1, 2011, all physicians and hospitals in a given multistate region will have one MAC to handle all of their Part A and Part B claims. In many cases, physicians will have an entirely new outfit with whom they file their claims.

But according to a new report from the Government Accountability Office, CMS has followed an accelerated schedule in an attempt to beat the 2011 implementation deadline. The faster rollout has led to some problems in the new system.

GAO interviewed six of the contractors that already are doing claims-processing work. The watchdog agency concluded that some of the MACs were overwhelmed during the transition phase because they were given incomplete information from the legacy carriers. When transition glitches were relayed to CMS, the agency did not always take action to resolve the issues, GAO said.

"CMS sometimes, but not always, used lessons learned from MACs and legacy contractors to make midcourse adjustments to decisions that initially led to challenges," the report concluded.

Payments grind to a halt

Contractor implementation problems can lead to administrative nightmares for physicians. In addition to processing and paying claims, MACs also are responsible for handling the first level of claims denial appeals, serving as physicians' primary contract with Medicare, conducting doctor outreach and education, and responding to physician inquiries.

Physicians have been complaining since the start of the overhaul that their new contractors have struggled with a backlog of claims and physician enrollment glitches. The problems in some cases meant that Medicare payments to practices simply stopped coming.

Joseph J. Tartaglia, MD, a cardiologist in White Plains, N.Y., stopped receiving Medicare checks for a six-month period in 2008 after a problem arose with his Medicare enrollment. The payment delays forced him to tap into a large credit line to pay his practice's bills, and he said he could not get any information from his new contractor, National Government Services.

"There's no transparency. Nobody could tell me what the problems were," Dr. Tartaglia said. "NGS was very unhelpful. They could not pinpoint the problem."

Dr. Tartaglia said he finally managed to detect a licensing renewal problem thanks to help from the Medical Society of the State of New York.

Arthur D. Snow Jr., MD, a family physician in Shawnee Mission, Kan., said there were some rough patches in his state during the transition period as Wisconsin Physicians Service Insurance Corp. took over for longtime carrier BlueCross BlueShield of Kansas. But he suspected that the problems were not so much the operations at WPS as it was management at CMS. "The problem was clearly the transition, which I don't think was very well planned for. But they got those problems fixed, and things seem to be going much better from a claims payment standpoint."

Dr. Snow noted, however, that physicians sometimes still have trouble when trying to communicate with WPS.

The MAC for New York did not return calls by this article's deadline and the MAC for Kansas referred all questions to CMS.

GAO noted that the task of shifting claims processing to the new system is monumental. "Medicare contracting reform represents the largest transition of claims administration workload since the inception of the Medicare program," the report said.

Before the MAC transition, GAO said, CMS did not adequately monitor legacy contractors' implementation of mandated claims payment policy changes, which generated unanticipated work for the new contractors and adversely affected physician relations. Correspondingly, CMS underestimated the volume of appeals the MACs would inherit, which led to claims payment delays for physicians.

A work in progress

CMS said it generally considers the GAO report a fair assessment of its efforts to reform the claims processor system. The agency noted that the transition has become smoother over time.

"The GAO report looked at early MAC implementations, and later implementations were completed with fewer operational problems," said Peter Ashkenaz, a CMS spokesperson. "CMS has used industry standards to implement contracting reform and responded quickly to operational issues that came up during the implementation process and applied that experience to later implementations."

CMS has finalized nine of the 15 contracts for processing Medicare Part A and B claims. The contracts for the remaining six regions are under protest by firms that lost in the bidding process. Legacy carriers are still servicing the areas that have not transitioned. Ashkenaz said CMS has moved 65% of claims administration responsibilities to MACs since 2006, and it expects to finalize the remaining contracts by October 2011.

Some lawmakers hope that CMS can meet its deadline without inconveniencing physician practices.

"More work needs to be done by CMS to implement these reforms with minimal disruption to beneficiaries and providers while ensuring the goals of reducing backlogs and cutting fraud and costs," said Senate Finance Committee Ranking Republican Charles Grassley (Iowa), who commissioned the study along with Sen. Max Baucus (D, Mont.), the panel's chair.

In 2005, GAO reported that CMS expected contracting reform to generate savings totaling more than $1.9 billion through reduced spending on Medicare administration and from reduced improper payments. As of April 2009, however, CMS was unable to quantify the actual savings.

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Regionalizing Medicare contractors

CMS is in the process of replacing the patchwork of Medicare carriers and fiscal intermediaries with a jurisdiction-based system of Medicare administrative contractors that will handle both physician and hospital claims. So far CMS has finalized contracts for 9 out of the 15 regions.

Region 1: Palmetto Government Benefits Administrators (California, Hawaii, Nevada)

Region 2: National Heritage Insurance Corp. (Alaska, Idaho, Oregon, Washington); contracts have been awarded but are under protest.

Region 3: Noridian Administrative Services (Arizona, Montana, North Dakota, South Dakota, Utah, Wyoming)

Region 4: Trailblazer Health Enterprises (Colorado, New Mexico, Oklahoma, Texas)

Region 5: Wisconsin Physicians Service Insurance Corp. (Iowa, Kansas, Missouri, Nebraska)

Region 6: Noridian Administrative Services (Illinois, Minnesota, Wisconsin); contracts have been awarded but are under protest.

Region 7: To be determined (Arkansas, Louisiana, Mississippi)

Region 8: National Government Services (Indiana, Michigan); contracts have been awarded but are under protest.

Region 9: First Coast Service Options (Florida)

Region 10: Cahaba Government Benefit Administrators (Alabama, Georgia, Tennessee)

Region 11: Palmetto Government Benefits Administrators (North Carolina, South Carolina, Virginia, West Virginia); contracts have been awarded but are under protest.

Region 12: Highmark Medicare Services (Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania)

Region 13: National Government Services (Connecticut, New York)

Region 14: National Heritage Insurance Corp. (Maine, Massachusetts, New Hampshire, Rhode Island, Vermont)

Region 15: Highmark Medicare Services (Kentucky, Ohio); Contracts have been awarded but are under protest.

Sources: CMS; "Medicare Contracting Reform," Government Accountability Office, March (link)

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