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INTRODUCTION

The Medicare Part B, program has been and still is, a vital part of the daily livelihood of millions of elderly Americans. The unique manner in which the Federal Government has worked with private carriers to aid beneficiaries, projects the carriers as "representatives" of the Government.

The legislation (Public Law 92-603) which spelled out the Government's concern involved with efficiency in the system is stated thusly: (b) (1) Section 402 (a) of the Social Security Amendments of 1967 is amended to read as follows:

*(a) (1) The Secretary of Health, Education, and Welfare is authorized, either directly or through grants to public or nonprofit private agencies, institutions, and organizations or contracts with public or private agencies, institutions, and organizations, to develop and engage in experiments and demonstration projects for the following purposes:

“(A) to determine whether, and if so which, changes in methods of payment or reimbursement (other than those dealt with in section 222 (a) of the Social Security Amendments of 1972) for health care and services under health programs established by the Social Security Act, including a change to methods based on negotiated rates, would have the effect of increasing the efficiency and economy of health services under such programs through the creation of additional incentives to these ends without adversely affecting the quality of such services;

"(B) to determine whether payments for services other than those for which payments may be made under such programs (and which are incidental to services for which payment may be made under such programs) would, in the judgment of the Secretary, result in more economical provision and more effective utilization of services for which payment may be made under such program, where such services are furnished by organizations and institutions which have the capability of providing

"(i) comprehensive health care services,

"(ii) mental health care services (as defined by section 401 (c) of the mental Retardation Facilities and Community Health Centers Construction Act of 1963),

"(iii) ambulatory health care services (including surgical services provided on an outpatient basis), or

“(iv) institutional services which may substitute, a lower cost for hospital care;

The investigation by the Government Operations Subcommittee on Federal Spending Practices was initiated in response to the abnormal number of complaints received in Florida because of delays by the Blue Shield organization, the Florida Carrier.

Senator Lawton Chiles requested an investigation by the General Accounting Office to discover the reasons for the delays and to determine whether or not they were avoidable. This type of information could be of general importance because the Senator indicated that the incidents in Florida were representative of many from throughout the country.

In his opening statement Senator Chiles said:

The aim of this committee is to improve the efficiency of the system. By using Florida as a focal point, it is our hope that reforms will be instituted that will eliminate costly and cruel delays that are too often purely unnecessary.

This is one system, one program where every error, every delay, every inefficient action is immediately translated into human misery.

In requesting the General Accounting Office investigation of Florida's carrier problems, I carefully considered the timeliness of the request.

It is time to demand an investigation when less than 40 percent of the doctors in a state accept "assignment" for Medicare benefits.

It is time to demand an investigation when a state that's in the top eight in population is in the bottom two of average claim processing time.

It is past time for demanding an investigation when your office staff spends three times as much time on claims benefits as any other single item.

The many reasons for unreasonable delays cannot erase the justifiable concern of those who suffer the hardships that are caused by such delays.

Nine months is an uncommon delay to be informed that insufficient information has been provided on the form for a legitimate reimbursable item.

Seven and a half months is an uncommon delay to wait in suspense because a check has been lying on someone's desk forgotten or misplaced.

These occurrences are far too many in number to be lightly brushed aside. But because they involve the elderly who are often living on fixed incomes during these inflation-ridden times, the tragedy is unduly compounded.

The subcommittee's investigation will continue in the desirable avenue of providing information which will lead to ultimate efficiency of the Medicare program.

The prospects that the Senate Finance Committee and the House Ways and Means Committee will spur reform legislation are very good. The two Committees have instituted hearings and are actively investigating allegations by clients that delays and errors are abnormally high. A STATEMENT OF CONDITIONS

GENERAL ACCOUNTING OFFICE REPORT

(From the hearings held on June 13, 1975)

Significant factors brought out by Senator Chiles' questions on the General Accounting Office's investigation:

The average cost per case for processing claims was higher in Florida than the national average;

The high turnover rate in the Medicare, Part B section led in part to the inefficiency of claim payments;

Previous lack of management interest and supervision also played an important part in contributing to the uncommonly high errors rate;

There was no definitive correlation between the volume of claims and the average length of processing time;

Seasonal variation had no direct correlation on average processing time; and

Inadequate management attention to claim processing lead to improper delays.

Mr. Gregory Ahart, Director, Manpower and Welfare Division, U.S. Accounting Office stated:

In addition to the problems caused by a rapidly expanding workload and high seasonal fluctuations in workload, Blue Shield of Florida has been plagued with a high personnel turnover rate. During calendar year 1974, Blue Cross and Blue Shield of Florida experienced a corporate annualized turnover rate of 48.4 percent, while the organizational units directly associated with Medicare Part B experienced a turnover rate of 65.1 percent. Even more disturbing, the turnover rate for Medicare Part B claims examining sections was 77 percent.

One apparent reason for the high turnover of Medicare Part B claims examiners has been the fact that they have been paid at a lower rate than have claims examiners in other parts of the carirer's operations. In May 1975, the carrier approved raising the pay of Medicare Part B claims examiners to that of other claims examiners in the organization, but this raise has not yet been put into effect.

One result of the high turnover rate is an excessively high error rate being experienced by Blue Shield of Florida in its processing of Medicare Part B claims. As the direction of SSA, Medicare Part B carriers each week perform an "end. of-line review" of a sample of claims processed that week to identify errors which remain uncorrected at completion of initial processing. The results of the end-ofline review provide an indication of the quality of work being done during the "routine manual processing" portion of claims processing.

The end-of-line review was initiated on January 1, 1974. Results are expressed as the ratio between the number of errors detected and the number of line items examined. For the period February 1974 (first reporting month) through December 1974, the error ratio reported by Blue Shield of Florida ranged from a low of .20 in February to a high of .42 in July. In other words, for every 100 line items processed during July, 42 errors were made and remained undetected throughout the claims processing cycle.

The most recent report showed an error rate of .33 for the month of April, during which the average claim reviewed contained about 1.5 errors. Blue Shield of Florida's error rate was among the highest of all the carriers.

This error rate affects the program in three ways. First, errors cause significant processing delays. Second, errors which slip through the processing cycle undetected may result in underpayments to claimants who must write in to request a review of their claim and who will experience another long delay before resolution of their complaint and ultimate payment of amounts to which they are entitled. Finally, they may result in overpayments which in all probability will remain undetected.

Mr. Ahart informed the subcommittee that the Blue Shield Corp. did not have an unduly complicated system of claim processing:

Upon receipt in the mailroom, claims are sorted and batched according to the nature of the claim-such as routine claims by physicians or other suppliers of health services (called assigned claims), routine claims by beneficiaries (called unassigned claims), claims for the cost of purchase or rental of durable medical equipment, or claims submitted on behalf of deceased beneficiaries. At the present time there are 18 categories being used to group claims into batches.

After the claims are sorted and batched, each claim is stamped with a control number which includes the year, Julian date, batch number and the number of the claim within that batch.

Next, certain information from each claim is entered into the computer and compared with information relating to the particular beneficiary which is already in the computer's address file.

The claims are then delivered to claims examiners who have responsibility for the particular type of claims included in each batch. About 80 percent of the claims go to the routine claims examining section with the remainder going to the special claims examining section.

Information from the simpler claims reviewed is entered directly into the computer by the claims examiners. For the more complicated claims, the examiners prepare work sheets from which information is entered into the computer.

If the claims examiner finds that all information necessary to process a claim has not been submitted, he notes on the claim that additional information is required.

During processing by the computer, each claim is subjected to five "screens." Failure to pass any one of the screens will cause an error suspense sheet to be generated and the claim to be placed in suspense until the question is satisfactorily resolved.

The first screen, which is really two screens in one, tests for "edit errors" and "reasonable charges." In addition, any claims preivously identified by the claims examiners as being in need of additional information will kick-out during the first screen and be held in suspense until the additional information is obtainedeither through telephone calls or correspondence with the beneficiary or provider. Other computer screens test the claim for correctness of basic data (claims failing

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to pass this series are called transaction rejects), possible duplicate payments and cases of suspected over-utilization (prepayment screens). We will discuss these screens in greater detail as we go on.

When these computer screens have been successfully passed, SSA records in Baltimore must be queried, for certain claims, to ascertain the eligibility of the beneficiary and/or the status of his deductible. This is needed because beneficiaries might be filing claims with two or more carriers, information concerning charges incurred and applied against the $60 annual deductible must be accumulated at a central location.

After the claim has been fully developed, all computer screens have been satisfied, and the necessary information obtained from Baltimore, an Explanation of Medicare Benefits (EOMB) and a payment check (if appropriate) are generated to be mailed to the claimant.

After the initial rejection or payment of his claim, a beneficiary dissatisfied with the determination may request that Blue Shield of Florida review the claim. If the beneficiary is still dissatisfied and the amount in dispute is $100 or more he may request a hearing.

Findings-Reported processing time:

Reports prepared by Blue Shield of Florida show that in calendar year 1974 the carrier processed 3,858,535 Medicare Part B claims; and that 80 percent of these were processed in 30 days or less; 14 percent in 31 days to 60 days; three percent in 61 to 90 days, and three percent in more than 90 days. Thus, although serious delays occurred in the processing of a small percentage of total claims— 94 percent were processed within 60 days-the number of claims encountering long delays involves thousands of people-236,613 claims took over 60 days to process, and 103,400 of these took over 90 days.

Fifty-nine percent of the claims were unassigned—that is, the claim was submitted by the Medicare beneficiary. Thirty-five percent were assigned claims submitted by providers, and six percent were for the services of hospital-based physicians. Using information in monthly reports prepared by the carrier, we computed the average processing time for each of these types of claims.

Our analysis showed that claims for hospital-based physicians were processed in an average of 12.5 days, more quickly than were the other two types. The average processing time fluctuated from a low of nine days during August when 19,814 claims were processed to a high of 16 days during February when 20,403 claims were processed.

Assigned claims took a little longer, averaging 17.8 days. Again there was a fluctuation in the average processing time from month to month ranging from a low of 11 days during August when 115,760 assigned claims were processed to a high of 26 days in December when 118,695 claims were processed.

Later in his testimony, Mr. Ahart commented on the delays within the carrier's processing system:

We noted, however, that claims normally are in the carrier's office for some period before control numbers are assigned and that some period elapses between preparation of checks and EOMB forms and their mailing to claimants. Based on our tests and information available at the carrier, we estimate that a total of about seven (7) days elapse at these two stages.

Further testimony follows:

Senator CHILES. Do you mean you could add seven days onto all of these times? Mr. AHART. Approximately 7 days, Mr. Chairman, based on our studies. We also found that two types of claims processed through the payment cycle distorted the computation of processing time to some degree. These are referred to as "set-ups" and "deletions."

A set-up occurs when a single claim is divided into two or more claims for processing purposes. The following situations necessitate set-ups:

The claim includes services performed in more than one calendar year;
The claim includes charges incurred by both husband and wife;
The claim contains more than 32 line items, or

The claim contains both routine items and complicated procedures such as multiple surgery.

Set-ups are not prepared until the original claim reaches a claims examiner. They are then sent back through the front-end control procedures and routed to

the proper claims examiner for processing. The distortion occurs because a new control number (including Julian date) is stamped on the set-up and is used in computing processing time when in fact the original claim will have been on hand for some time.

In calendar year 1974, Blue Shield of Florida processed 247,600 set-ups. A deletion occurs when a claim is initially received, stamped and routed to a claims examining section that does not have responsibility for that type of claim. In these instances, the claim is returned to the mailroom, deleted from the computer, resorted, given a new control number and started through the system again. As in the case of set-ups, these claims will have been on hand for some period before they are routed to the correct claims examining area.

The carrier could provide us with records showing number of deletions only for a 12 month period from December 23, 1974, to February 8, 1975. During that period, there were 10,094 deletions. It should be noted, however, that the volume of deletions may not have been as high before October 1974, when current procedures for sorting and batching claims were put into effect.

Our verification of the processing time reported by Blue Shield of Florida was based upon analysis of a random sample of 1,961 Medicare Part B claims processed during calendar year 1974 which was extracted for us by the carrier's Electronic Data Processing Department.

MEDICARE HEARINGS AND FINDINGS

The GAO team was completely satisfied with the process used for extracting samples to study.

A detailed analysis of the 1,961 claims revealed the following: 377 required over 30 days to process. A further analysis of one half of those-189-showed that:

3 of the cases did not present sufficient data to make a determination as to the disposition of the cases;

3 other cases were delayed for an extended period by the Social Security Administration;

183 remaining cases required a total of 9,925 days to process an average of about 54 days.

76 percent of the 183 cases were processed in 31 to 90 days;

An additional 16 percent were processed in 61 to 90 days.

Actual time and location of claims were as follows:

41 percent in routine manual processing which includes receiving, sorting, stamping, microfilming, and examining and entering the claim into the computer for further processing;

16 percent in "additional development" which involves obtaining from the beneficiary or the provider additional information required to properly process the claim;

28 percent in "edit kickouts" resulting from computer screens of such items as reasonable charges, possible duplicate charges, and the accuracy of the data entered; and

15 percent in "queries" of SSA central files to determine the beneficiary's eligibility and the status of the deductible.

Additional work in selected areas where delays occur:

Since the procedures followed during "routine manual processing" have been altered recently as a result of the installation of direct data entry equipment, GAO did no additional review work in that area. Also, since queries to the central files are necessary and required, and delays in this area generally are outside the control of Blue Shield of Florida, we did no additional work in that area.

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