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In response to questions by the Chairman, Mr. Tierney also indicated the following:

The Bureau does not establish rates but if rates are deemed unreasonable or excessive then the Bureau can review those rates and question the amounts;

Thirty percent of the claims in Florida are being transferred to another carrier;

A new fee adjustment is being made and put into existence this year;

The Bureau does not establish nor impose a "reasonable” time limitation for processing claims which are assigned or "unassigned." The Bureau does compile such figures.

Senator Chiles responded to the fact that many reports indicate that a company is doing good work when in fact it might not be so in reality. He stated :

Senator CHILES. We have tons of reports in the government and we have a lot of them in the Congress, even, and reports can be a lot of paperwork or they can be used as a means of really getting into something. I want you to kind of understand from where I sit this GAO report does not just reflect on Blue CrossBlue Shield now showing what we have kind of realized in Florida—not the exact numbers but just from the cries of the people, a quarter of a million people, I think it also reflects that we have not been policing Blue Cross-Blue Shield the way we should. It is interesting to note now they have put a vice president in charge of management as of June. Maybe that is the result of your taking 33 percent of the things away from them, but I wonder if it is as a result na GAO going in there.

It seems to me again the prime responsibility under the mandate of the Congress is the operation of this program rests with the Government. We have set up the carrier. We seem to think that is the best way of delivering the services. But I don't think we can sit back and say to those people, to our citizens, “Well, it is the carrier's fault and it is all their fault.” They are looking to the Govern. ment. So, I think part of the fault really is perhaps with the Congress, that we have not moved quicker to determine, to oversight, to determine whether it is being carried out and certainly with Social Security that they have allowed this to happen and go on as long as they have.

THE QUESTION OF COMPETITION Senator Chiles also raised the issue of providing competition in the area so that one carrier would not have a monopoly on any given locality.

Mr. Tierney resisted that suggestion by stating that complex administrative problems might evolve from such a system. He also asserted that companies operate on a no-cost, non-profit basis and that basis would eliminate opportunities for competition. Mr. Tierney confirmed that the Bureau had received several proposals for carrier service for the Miami area.

The subcommittee maintained that the acceptance and submission of the proposals represented competition, Mr. Tierney insisted it did not.

THE BLUE SHIELD CORPORATION-A RESPONSE The Blue Shield Corp. of Florida in reply to the GAO report addressed itself to several possible solutions to the immediate problem,

First, Mr. W. J. Stansell, Sr. Vice President of the Blue Shield stated that the company had substantially reduced its turnover in

personnel from a high of 77 percent to a current rate of 28 percent.

Mr. Stansell further maintained that the long list of Federal requirements also added to the delays. It is also apparent that the 900 or more employees did not have a feeling that their work was of a high priority. Mr. Stansell affirms that the company does stress the urgency of immediate compliance with the regulations.

The Part B Medicare section pays over $200 million in claims per year.

The formal statement by the Blue Shield Corp. stressed other important factors, including the following:


The problems on which GAO reported have concerned the management of Florida Blue Shield for some time, and we have initiated several reviews of our operations by consultants and outside groups with experience in the processing of Medicare Part B claims. As a result of their recommendations Medicare Part B operations have undergone a major reorganization within the past several months:

A Vice-President has been appointed for Medicare Part B, in order to ensure that Medicare Part B matters receive full-time attention at the corporate officer level.

Virtually every manager within the operation has been reassigned, in order to make better use of available talent, and new managers have been or are being brought in from other departments.

New managerial positions have been created and staffed, in order to assure a sufficient depth of management that planning and control functions are not shunted aside due to the press of everyday problems that large and rapidly increasing volumes generate.

Preliminary goals have been established that commit the Part B management team to a level of performance, by the end of FY 1976, that is as good as the national average on available indices. (Our ability to match the national average cost per claim, however, will depend to a rather large extent on the assignment rate and the percentage of claims requiring additional development.)

In order to achieve those goals, detailed management planning, incorporating significant accountabilities for and measurements of results, is currently underway.

The goal-setting and planning process just described will encompass plans and goals not only in the areas of claims processing times and quality of performance, but also in those areas of personnel utilization that are the keys to improved performance: employee turnover, quality of supervision, working conditions, job design.


While the GAO testimony recognized that 94 percent of the nearly 4 million claims we processed in 1974 were paid within 60 days, the auditors were critical of the number of claims—237,000, or about 6 percent—that required more than 60 days to process. We recognize this as a key concern. By way of explanation, though not excuse, we would point out that extraordinarily large yearly increases in claims volumes

(which have regularly exceeded both our estimates and the estimates made by the Bureau of Health Insurance), and seasonal fluctuations in claims volumes, have both led Florida Blue Shield to stress timely payment of the vast bulk of claims and have diverted management attention from those claims that are delayed an excessive length of time.

Recognizing the validity of the comments by GAO, and the problems created for beneficiaries whose payments are delayed, we will deal more effectively with those claims that are delayed either through error or because of missing or incorrect information on the claim. Procedures now being developed will, when implemented, identify every claim that has not completed processing within 50 days of receipt. Once identified, these claims will receive whatever attention is needed to ensure that processing is completed as rapidly as possible-generally in less than 10 days after they are identified.

One of the elements that leads to delayed payment of claims is the number of claims pending at any given time. Obviously, when there is a heavy inventory of claims to be processed, newly-received claims may be delayed. Due to the very large seasonal fluctuation in claims received by Florida Blue Shield (GAð noted that the 1974 monthly low was 258,821 in September and monthly high 526,642 in December), the inventory typically rises during the winter months and is reduced gradually thereafter. It is possible to increase staff in order to deal with the larger volume of claims that ordinarily begins in about November; but since personnel must be added sufficiently far ahead to permit training and some on-the-job experience, cost per claim is inflated above the level necessary simply to process the relatively stable volume of claims that is received in August, September, and October.

Since December 1, 1974, however, Florida Blue Shield has steadily reduced its pending claims count.


Both in GAO's testimony and during subsequent questioning, it was noted that Medicare B claims examiners have been in a lower salary classification than other claims examiners. At the request of Part B management, the relative classifications have been reviewed on a number of occasions by a company-wide salary administration committee. As a result of the most recent such review, in May 1975, the classification of Medicare Part B claims examiners was raised to parity with other claims examiners. Resulting salary increases will be received by the examiners shortly, and will be retroactive to May. (It should be noted that actual salaries, as opposed to salary ranges, for all personnel will depend on performance and length of service.)

It was felt by GÃO that salary considerations may have played a large role in the high turnover rate within Medicare B as a whole and particularly in the claims examining area. During 1974, however, Florida Blue Shield made two general salary increases, which applied to all emplovees. Careful monitoring of the results of those increaseswhich would have come earlier had it not been for the Economic Stabilization Program-did not reveal any significant effect on turnover.

At present, however, turnover has been sharply reduced throughout Florida Blue Shield. Specifically, turnover among Medicare B claims

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examiners from January through May 1975 was at an annualized rate of 28 percent-well under one-half the 77 percent rate that existed in 1974. While some of this reduction is unquestionably due to general economic conditions, we are convinced that a large part of it is attributable to improvements in supervision and management practices, and to the fact that in the past 6 months claims examiners have been achieving a higher level of performance than in the past, which in itself increases job satisfaction.

Another factor impacting on turnover in 1974 and previous years has been the historically low unemployment rate in Jacksonville, Florida. While comparative figures from other large employers with similar types of operations are not easily obtained,

our contacts with such employers have indicated to us that they, too, have experienced a relatively high rate of turnover. Where there is little unemployment, job mobility is high; and a workforce composed largely of younger persons is peculiarly subject to turnover for many reasons.

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In connnection with the improved performance level of Medicare berl, Part B employees, the productivity figures for 1974 cited by GAO

may be compared to current productivity figures. Figures for the last

half of 1974 showed that the number of claims processed per 100 manbout hours was 155 for Florida Blue Shield and 256 for all carriers. Our

most recent data from the Bureau of Health Insurance indicated that Florida Blue Shield's productivity per 100 man-hours in April was 196. While this is not yet the level of performance we expect or desire to reach, it does represent a 26.5-percent increase.

A similar improvement has occurred as regards cost per claim processed. The figures for the last half of 1974 showed a cost per claim of $4.57 for Florida Blue Shield, as compared to $3.36 for all carriers. For the period July 1974 to April 1975, however, the cost per claim at Florida Blue Shield was down to $4.13, and for April 1975 alone the cost per claim was $3.60 as compared to a national average (as of December 1974) of $3.36. Again, this is not satisfactory to Florida Blue Shield management, but it does indicate a trend that we are committed to seeing continue.

In regard to the cost of processing claims, one significant measurement has, so far as we know, escaped notice. This is known, technically, as the cost per payment record. Usually, when physicians submit Medicare claims on an assigned basis (meaning that the physician accepts payment directly from Medicare), the claims involve one service and/ or one physician, and therefore one payment record is involved. When beneficiaries themselves submit claims on an unassigned basis, they generally accumulate several bills and submit them as part of a single claim. (One claim may include as many as 32 separate items under our processing system; others do not allow this many items on a single claim.) Processing a claim that involves several different services and suppliers obviously requires more time than processing one that involves a single service or single physician.

Because Florida has a low rate of assigned claims, the majority of claims processed by Florida Blue Shield involve more than one

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service and more than one physician or supplier. Most other carriers : generally have a higher assignment rate, and therefore a higher number of claims for only a single service and physician. When costs of processing are allocated, not on a per-claim basis but on the basis of the number of different doctors or suppliers or bills paid (i.e., on a payment record basis), the gap between the cost at Florida Blue Shield and the cost at other major carriers is considerably smaller than the difference in cost per claim.


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Recognizing that one key to improving claims processing time was an improvement in the condition of the claims being received, Florida Blue Shield began during the summer of 1974 an intensive program to teach beneficiaries how to file complete, correct claim forms and to encourage physicians to assist beneficiaries by completing claim forms for them on unassigned claims. In cooperation with local organizations, over 60 workshops have been presented for beneficiaries, particularly in those portions of the State with heavy concentrations of older citizens. Presentations have been made to over thirty medical societies and over 50 groups of medical assistants. Well over a million brochures detailing the correct procedure for filing a Medicare claim have been distributed through direct mail, at workshops, and through physicians' offices. A taped television presentation is also in preparation.

We are not yet sure whether this communications effort has been successful. We are sure that if the condition of the claims we receive cannot be improved, a certain number of claims will continue to be delayed. We also recognize that the beneficiary who files his or her own claim incorrectly is almost never made aware of the error or omission involved, in an educational way, and we think that if carriers were allowed to return such claims to beneficiaries or physicians, along with a statement of the problem, the educational effect would be highly beneficial to all concerned. As a simple example of a common error that leads to delay, we receive thousands of claims that include receipted bills.

SPECIFIC BLUE SHIELD RECOMMENDATIONS 1. We recommend that carriers be permitted to return claims with incomplete information on them to the beneficiaries or physicians who submit them, along with a notation indicating the information that is needed, and that these claims be deleted from the carrier's inventory.

The reason for this recommendation is simple: when carriers are not permitted to return such claims, those who submitted them never learn how to submit correct and complete claims. Carriers may obtain the necessary information through letters or telephone calls, of course, but this accomplishes little toward the end of correcting the problem at its source.

There will obviously be some claims that should not and would not be returned: multiple surgery claims, for example, would best be completed through obtaining a copy of the operative report. Claims that have been returned once and that again come in in incomplete fashion would probably best be developed by the carrier. But in most cases, we

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