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ADDITIONAL DEVELOPMENT

Reports prepared by BHI show that in calendar year 1974 about 19.7 percent of all Medicare Part B claims handled by Blue Shield or Florida required additional information before they could be processed. This is almost double the national average of 10.2 percent.

SSA guidelines prohibit a carrier from returning claims to the claimants, in most instances, requiring instead that the carrier develop the needed information. The carrier attempts to develop the required information by telephone whenever feasible. Otherwise, it is requested by mail.

Within our sample of 183 claims which took over 30 days to process, 69 claims, or 38 percent, required additional information-obtaining the information took an average of about 23 days.

For these 69 claims, an average of nearly 15 days elapsed between the date the claims examiner requested the additional information and the date the telephone call was made or a request letter was sent. Based on observations made during May 1975, we believe that a similar delay is still being experienced at this point in the claims processing cycle.

To gain a better understanding of the type of information being requested when claims are forwarded to the additional development section, we sampled an additional 250 claims which were being processed during our review and which needed additional information. Our analysis of the 250 claims and the 69 claims discussed above showed that the additional information requested in about 60 percent of these 319 cases was either an itemized breakdown of the services performed and the charges for the services, or a statement of the diagnosis of the medical condition which necessitated the service. Further testimony by Mr. Ahart also revealed that:

Fifty-seven percent of all edit error kick-outs are attributed to errors made by claim examiners or the person who processes the claim before it went to the examiners;

GAO believed that a substantial reduction in edit error kick-out could be achieved by a stable work force;

A preliminary finding that the lack of adequate management attention at all levels, is the most significant factor in causing the time delay problem;

An appearance that management has not acted to alleviate back-logs until they have reached crisis proportion.

Under questioning by the subcommittee Chairman, Senator Lawton Chiles, Mr. Ahart stated in response to a query concerning cost on case processing, thusly:

Our source is a statistical report comparing the average cost as well as the productivity of different carriers which BHI pulls together

Senator CHILES. So it is because they are producing fewer cases per man-hour that the average cost per case is higher?

Mr. AHART. I think that we can relate this to the fact their personnel turnover is so high, 77 percent in the claims examining function and with each new examiner coming in, it will be less efficient than the typical operation.

Senator CHILES. Would you concur, then, judging from the error rate in the processing time for claims that Blue Shield of Florida because of its inefficiency is the reason for its costs being 30 percent higher than average?

Mr. AHART. Yes, it would be a matter of inefficiency in its operations.

Senator CHILES. The 10 largest Medicare B carriers in Florida is eight from the bottom of that, 10 states?

Mr. AHART. That is right.

Senator CHILES. Florida has been receiving a doubling of cases from the year 1970?

Mr. AHART. That is correct.

Senator CHILES. And also has been receiving a seasonal variation. Those are factors that I should understand by now if it has been happening since 1970. It is not a surprise it just happened in 1974.

Mr. AHART. There has been a lot of growth and the seasonal fluctuation would be an annual occurrence, during the tourist season and one that should be anticipated.

Senator CHILES. Did you determine anything about the high turn-over rate, this 77 percent; do you think that was primarily because of wages paid or were there other factors?

Mr. Ahart affirmed that the low salary paid to workers is probably an inhibiting factor in worker performance. Further, the General Accounting Office indicated that a full review would be forthcoming which would present a more detailed study of the situation in Florida. Government Participation and Supervision/Bureau of Health Insurance.

Mr. Thomas M. Tierney gave testimony for the BHI supervision on the Florida situation.

Mr. Tierney stated the overall situation thusly:

Let me start out by saying, Mr. Chairman, from what you have already heard and I know from your own interest and background in the past Medicare is a very complicated program. I think it has been a tremendously successful program in many ways, but it was probably the first massive effort to enter into whole new areas of health care and the mechanisms of paying for health care that had ever been undertaken in this country, and certainly in the beginning there were a lot of headaches. Things are improving and things I would dare say even in Florida are improving.

Senator CHILES. No, sir, don't dare say that. Don't dare say that because I don't believe you can dare say that in Florida yet.

Mr. TIERNEY. I would only add I think things in Florida, and I think Mr. Ahart would agree, have for the first time the potential for improving, and that is presumably because, I believe, because of the things he stressed but the one factor perhaps he did not put sufficient stress on is that 30 percent of the entire Florida Part B Medicare claim load will be transferred to a new carrier on July 1. That is about a million claims in perhaps the most difficult area of Florida from the standpoint of securing assignment and this type of thing; so if I said improved I misspoke myself. I think there is a real promise that things will improve in Florida.

Let me make it clear, Mr. Chairman, we have been probably the greatest critics Blue Shield has had and I am not here in any way to defend them.

I think there are one or two things you would want to know about their performance and costs and particular problems as we have viewed them.

You raised a question for example about the hospital claim. I think the one element left out of the GAO response to that was this assignment situation. Assigned claims are very much easier as the figures indicate, the processed claims. They are prepared by doctors' secretaries and they are well done with few errors and they go through fairly well. Those prepared by hospital bookkeeping departments are perhaps the best and they go through very well. An unassigned claim is usually one prepared by himself or herself, usually it contains a large number of errors so there is a correlation between the overall figure of claims processing and the assignment ratio.

Mr. Tierney stated that the Government paid private carriers on a prenegotiated rate and that audit power over the carriers is exercised by both GAO and the Department of Health, Education, and Welfare.

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 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 Government. 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:

MANAGEMENT AND ORGANIZATION

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.

DELAYED CLAIMS

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 (GAO 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.

SALARIES AND TURNOVER

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 GAO 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 employees. 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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