2: Payments
Accurate and Predictable Payments Other Information:
CMS must make sure that the more than $650 billion we make in payments each year is accurate and timely. By developing and
executing effective oversight and aggressive provider education and outreach, CMS can achieve strong financial performance
for its programs and operations. Oversight will include expanded modernized program integrity for Medicare and Medicaid and
preventing improper payments. The modernization programs will better facilitate CMS’ preparedness and response in emergencies
and planning for a pandemic. Finally, CMS’ strategies for cost and quality transparency and “value incentives” for consumers
have the potential to help reduce costs, which would improve both long-term sustainability and solvency for our programs.
In addition to strengthening the Medicare Integrity Program to encompass the new prescription drug benefit and Medicare Advantage
plans, CMS is also improving Medicaid integrity through the new Medicaid Integrity Program. Several modernization initiatives
currently under way will support efforts to strengthen CMS’ financial management and program integrity. Implementing IT (HIGLAS),
ICD-10, upgraded electronic claims processing, and reforming the Prospective Payment Systems will strengthen financial management
of the Medicare Program. Also, part of the New Orleans Health System initiative will support accurate and predictable payments.
These systems and structural changes will allow more effective financial oversight and reporting of the programs, and will
result in lower error rates and improper payments. Two ways that we are supporting accurate and predictable Medicare payments
are expanding the Performance Assessment of Medicare Advantage plans to include Part D plans and managing Medicare Secondary
Payer (MSP) recoveries. We’re also focused on Medicaid payments by processing and overseeing Federal Medicaid grants and demonstrations,
which reimburse states a percentage of their expenditures in providing health care for individuals whose income and resources
fall below specified levels. Accurate and Predictable Payment initiatives through 2009 include: Measuring and Reducing Payment
Errors through Improper Payments Information Act (IPIA) Compliance CMS is working diligently to measure and reduce improper
payments in our programs and to comply with the Improper Payments Information Act of 2002 (IPIA). Since FY 2003, CMS has reported
a Medicare fee-for-service error rate as part of our Comprehensive Error Rate Testing (CERT) program and Hospital Payment
Monitoring Program. Over the past several years, CMS proactively tested the methods to estimate improper payments in Medicaid
and the State Children’s Health Insurance Program (SCHIP) through Payment Accuracy Measurement (PAM) and Payment Error Rate
Measurement pilots. These pilot projects led to the development of a national program called Payment Error Rate Measurement
(PERM) to measure improper payments in Medicaid and SCHIP. CMS is working to achieve compliance with the IPIA and reduce improper
payments by: • Reducing the Medicare fee-for-service claims payment error rate to 4.7 percent by the end of FY 2008; • Continuing
to support a comprehensive provider education and outreach program so that providers know the rules and can bill appropriately;
• Reporting error rates for Medicaid and SCHIP for FY 2007 in the FY 2008 Performance and Accountability Report (PAR); and
• Completing the Risk Assessments for Medicare Advantage and Part D and finalizing our measurement strategies and reporting
schedule. Expanding a Data-Driven Approach to the Medicare Integrity Program (Medicare MIP) The Medicare Integrity Program
(MIP) established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) provided CMS with dedicated funding
to identify and combat improper payments and fraud and abuse. CMS uses MIP funds to support program integrity contractor performance
of the following activities: audits of cost reports, medical review of claims, identification of potential fraud cases, and
education to inform providers about appropriate billing procedures. As required by statute, MIP funding rose from $440 million
in FY1997 to a steady rate of $720 million since FY2003. In addition, the Deficit Reduction Act of 2005 (DRA) provided additional
funding for this activity in FY2006. We continually review our Medicare program integrity activities to make sure we’re using
our resources effectively and performing well. Based on our experience gained from the Medicare MIP, CMS has moved ahead with
efforts to expand and strengthen our work to protect the Medicare Trust Funds; increase our oversight capacity; and focus
more on identifying, responding and resolving problems. CMS recently expanded our program integrity oversight to include the
new Medicare prescription drug benefit (Part D) and the Medicare Advantage plans. We contracted with Medicare Drug Integrity
Contractors (MEDICS) to support CMS’ anti-fraud and abuse efforts associated with Part D. CMS is also expanding the use of
electronic data to more efficiently detect improper payments and program vulnerabilities. CMS will continue the expansion
of the Medicare Integrity Program by: • Implementing the Medicare Drug Integrity Contractor (MEDICS) contracting strategy
to find trends that may indicate fraud and abuse, investigate potential fraudulent activities, conduct fraud complaint investigations
and refer cases to the appropriate law enforcement agency as needed; • Developing and validating new and existing methods
to detect and prevent abusive use of services, as well as possible fraud and abuse schemes; • Leveraging CMS data systems
and repositories to implement the One Program Integrity (One PI) System Integrator and modernizing our data analysis capability
for program integrity efforts. Medicaid and Medicare Part D data are the initial focuses of the One PI System Integrator.
• Continuing the evolution of the Program Safeguard Contractors (PSCs) toward a more outcome-oriented and performance-based
approach in identifying and combating fraud and abuse; • Expanding the Medicare/Medicaid (“Medi-Medi”) data match programs
beyond the current 10 states with the funding outlined in the Deficit Reduction Act. These projects use fraud and abuse mining
tools to query across data from both programs to detect fraudulent patterns that may not be evident when billings for either
program are viewed in isolation; • Redesigning CMS audit processes and desk review programs by using payment and savings data
analysis to focus audit activities. Our efforts will be targeted to areas of higher risk; and • Continuing to consolidate
the activities at the Coordination of Benefits Contractor (COBC) and our use of Voluntary Data Sharing Agreements (VDSAs)
with employers and insurers to enhance the way we manage beneficiaries’ insurance coverage information. Implementing the Medicaid
Integrity Program (Medicaid MIP) The Medicaid Integrity Program (MIP), created through the Deficit Reduction Act (DRA) of
2005, dramatically increases both CMS’ obligations and resources to combat fraud and abuse. Five million dollars has been
appropriated in FY2006, with an additional $50 million in each of FY07 and 08, and $75 million annually in FY09 and each year
thereafter. The DRA mandated CMS to hire 100 new employees, whose duties will consist solely of protecting the integrity of
the Medicaid program. By 2009, CMS will fully implement the Medicaid Integrity Program by: • Creating a comprehensive integrity
plan, in consultation with internal and external partners; • Procuring and overseeing Medicaid Integrity Contractors (MICs)
who will conduct reviews, audits, and education; • Developing field operations to provide State program integrity oversight
reviews and support in the form of technical assistance and fraud and abuse training; and • Developing fraud research and
detection activities to provide statistical and data support, identifying emerging fraud trends and conducting special studies
as appropriate. Enhancing CMS’ Financial Management Systems--HIGLAS CMS is replacing its legacy Medicare accounting systems,
maintained by both CMS and its current Medicare FFS contractors, with the new HIGLAS – a State-of-the art electronic, integrated
financial accounting system. Full implementation of HIGLAS by 2011 will allow CMS to track Medicare payments. It will also
allow us to accurately pay claims for over 43 million Medicare beneficiaries (the FY07 count), and will strengthen the overall
financial management of CMS’ financial operations. CMS has already implemented HIGLAS in six of our Medicare contractors,
with positive results. CMS is currently transitioning from the legacy claims processors (FIs and carriers) to the new Medicare
Administrative Contractors (MACs), who will use HIGLAS as they take over the claims processing responsibilities from the FIs
and carriers. The immediate results are that claims have been processed more accurately and improper payments have been reduced.
HIGLAS processes have resulted in an additional $9 million of interest earned in the Medicare trust funds. HIGLAS is also
a component of the Department-wide Unified Financial Management System (UFMS) initiative. HIGLAS continues its coordination
efforts with HHS to ensure that internal CMS administrative accounting/financial data can be interfaced with UFMS. Unifying
the systems improves the Department’s data consolidation and financial reporting capabilities. When fully implemented by 2011,
HIGLAS will: • Strengthen how we manage our accounts receivable and allow us to collect outstanding debts faster and more
effectively; • Enhance CMS’ oversight of contractor financial operations, including data entry, transaction processing, and
reporting; • Produce automated financial statements and other required reports quickly, leading to fewer errors in financial
reporting and a reduction in manual labor; • Eliminate redundant accounting processes; • Interface with the Recovery Management
and Accounting System (ReMAS), which reconciles claims and payments to providers and beneficiaries when Medicare is the secondary
payer, further ensuring that claims are paid appropriately; • Be used by all Medicare Administrative Contractors; • Assess
Part C (managed care) and Part D (prescription drug) system requirements; and • Save millions of benefit dollars each year
for the Medicare program. Updating Outmoded Coding Systems—ICD-10 ICD-10 is the modernized update to ICD-9, the current code
set for recording diagnoses and inpatient hospital procedures. ICD-10 provides a more robust, more granular, more modern and
more accurate code set. ICD-10 will improve the quality of information reported on claims. This information will provide for
more accurate payments and will improve quality monitoring, payment, coverage, risk adjustment, research, and statistical
reporting. Requiring the industry to move from ICD-9 to ICD-10 needs input from both Congress and the Department. Because
the codes impact so many parts of CMS, the implementation process is expected to be a 4-5 year effort, starting well before
the implementation date and lasting several years after. This will be a significant, agency-wide effort, impacting virtually
every part of CMS and all of our partners. Implementing Private Sector Recovery Techniques As part of the effort to strengthen
and improve our financial management performance, and protect the Medicare Trust Funds, we considered and adopted proven private
sector approaches in our program operations. For example, using innovative financial management strategies allows CMS the
opportunity to integrate more efficient and effective processes into our operations and demonstrate the potential value of
these approaches to other programs within HHS. Our current Medicare recovery initiatives include the use of new contracting
authority provided by the Medicare Modernization Act and the consolidation of functions and workloads to maximize financial
performance and ensure accurate payments. The Medicare Modernization Act provided for a three-year demonstration project to
allow CMS the ability to use recovery audit contractors (RACs) to identify underpayments and overpayments in Medicare claims,
and to reimburse the contractor a percentage of the recoveries. The law also requires CMS to evaluate this project and report
on savings to the Medicare program and recommendations for extending or expanding the project. Our current experience under
the demonstration has resulted in a significant increase in Medicare overpayments collected without using increasing current
program funding. CMS is actively pursuing improvements in Medicare Secondary Payer (MSP) operations. To do this, CMS now has
one MSP recovery contract that consists of MSP post-payment recovery work and Group Health Plan (GHP) MSP debts. Consolidating
this work will improve our administration and operations, improve consistency of processes, and enhance customer service.
Over the next few years, CMS will: • Complete the three-year Recovery Audit Contractor (RAC) demonstration, in three states
(CA, NY, FL), to identify and recover Medicare overpayments, use the findings to further reduce improper payments and pay
the RACs on a contingency basis; • Submit the report to Congress on the impact of the RAC demonstration and recommendations
for extending or expanding the approach; • Award the Medicare Secondary Payer Recovery Contract (MSPRC) and begin implementation
of the consolidation by October 2006; and • Oversee the MSPRC operations to ensure efficiencies in the post-payment aspects
of the MSP program improve recoveries and enhance customer service. Implementing the National Provider Identifier (NPI) As
we continue to upgrade our systems to ensure accurate payments, high quality health care, and to reduce improper payments,
CMS is implementing the HIPAA requirement for health care providers to adopt a standard unique health identifier. The NPI
was adopted in 2004 as the standard unique health identifier for all health care providers. In May 2005, CMS announced the
availability of the new identifier for use in the standard electronic health care transactions. One year later, CMS announced
the availability of electronic file interchange (EFI), also referred to as "bulk enumeration," functionally. The EFI enumeration
process allows organizations to apply for NPIs for a large number of individuals or organizations by submitting an electronic
file rather than submitting a paper application or web-based application for each individual or organization. Because a file
can contain thousands, even tens of thousands, of providers' applications, the administrative burden on both the provider
community and CMS is greatly reduced when this process is used. By implementing the NPI requirements as noted below, we can
facilitate more accurate payments, strengthen quality assurance, and reduce improper payments. • May 23, 2007: All HIPAA-covered
entities such as providers completing electronic transactions, health care clearinghouses, and large health plans, must implement
NPI. • May 23, 2008: All small health plans must implement NPI. Ensuring Effective Grants Management We use the Grants Administration,
Tracking and Evaluation System (GATES) to efficiently manage administrative grants. The system streamlines the work processes
within the agency. It also gives the grantee community improved services, full disclosure of all grant opportunities within
the Federal government, and streamlines the application process. We are currently transitioning the processing, paying, and
accounting of the Medicaid grants into the Healthcare Intergraded General Ledger Accounting System (HIGLAS). Once completed,
the HIGLAS system will enhance CMS’ capability to oversee and monitor Medicaid grants by providing timelier and more comprehensive
data. Transitioning to Medicare Administrative Contracting In Section 911 of the MMA, the Congress mandates that the Secretary
of Health and Human Services replace the current Fee-for-Service (FFS) contracting authority under Title XVIII of the Social
Security Act (the Act) with the new Medicare Administrative Contractor (MAC) authority. Referred to as Medicare contracting
reform, it will improve Medicare’s administrative services to beneficiaries and health care providers and will bring standard
contracting principles, such as competition and performance incentives, to Medicare. Using competitive procedures, Medicare
has begun to replace its current claims payment contractors, fiscal intermediaries (FIs) and carriers with new contract entities
called MACs. The MMA requires that CMS compete and transition all work to MACs by October 2011. CMS expects to complete the
transition by 2009, thereby realizing additional Trust Fund savings sooner. CMS is meeting the needs of its growing beneficiary
population through this initiative by: • Improving customer service by establishing a single point-of-contact so Medicare
beneficiaries and providers can get information. The MACs will serve as the point of contact for all Medicare providers and
physicians in their respective jurisdictions, while beneficiary claims questions go to a Beneficiary Contact Center; • Continuing
operation of efficient provider call centers that respond to over 55M calls annually; • Competing and awarding 23 MACs during
the initial implementation phase (2005-2011); • Making advances toward the delivery of comprehensive, patient-centered care;
and • Emphasizing the MAC role in provider education and outreach. Although Medicare contracting reform requires a significant
up-front investment, this initiative will also generate significant Trust Fund and administrative savings over time. Assuming
that our proposed transition schedule is maintained, the Office of the Actuary estimates that the savings resulting from Medicare
contracting reform will start in FY 2008 and will accumulate rapidly to nearly $1.5 billion through FY 2011. Beyond FY 2011,
CMS projects that administrative savings, in the form of contractor cost reductions from the competitive contracting environment,
could exceed $180 million annually. The transition to the MACs will occur in three cycles as follows: • The Start-Up Cycle:
Will transition a small discrete workload (approximately 8.8 percent of the national workload). This cycle will allow CMS
to analyze lessons learned from the acquisition and transition process prior to implementing the bulk of the transfer. This
cycle is already under way. • Cycle One: Will complete and transition half of the balance of the workload. Lasts one year.
Will subject more than 40 percent of the national workload to competition and transition at a single time. • Cycle Two: Will
complete and transition the balance of the workload. Lasts one year. Will subject more than 40 percent of the national workload
to competition and transition at a single time. Improving Electronic Claims Processing This initiative supports the Secretary’s
priority of increased use of Health Information Technology. CMS is initiating a number of projects to support more accurate
and efficient electronic claims processing. It has three major parts as described below: Electronic Data Interchange (EDI)
is the automated transfer of data in a specific format following specific data content rules between a health care provider
and CMS or between CMS and another health care plan. The EDI transactions allow a provider to submit transactions faster and
be paid for claims faster. Doing this generally costs less than paper or manual transactions. This option has already been
implemented for Medicare FFS providers and contractors. By the end of 2007, CMS expects the following results from these efforts:
• Electronic Media Claim rates will increase to 98% for intermediaries and 90% for carriers. • Electronic Remittance Advice
rates will increase to 55% for intermediaries and 35% for carriers. • Electronic claims status volume will increase by 5%
from FY 2006 level. • Standard Paper Remittance Advice volume will be reduced by 30% as compared to FY 2005 baseline volume
for both intermediaries and carriers. CMS will develop the initial goal for eligibility query based on data collected in FY
2006 by the end of 2007. Electronic Claims Filing (ECF) is required to be used for all Medicare claims except those from small
providers and several other rare instances. Medicare provides free software to providers to enable them to use ECF. Claims
may be submitted electronically to a Medicare carrier, durable medical equipment regional carrier (DMERC), or a fiscal intermediary
(FI) from a provider’s office using a computer with software that meets electronic filing requirements as established by the
HIPAA claim standard and by meeting CMS requirements. The Standard Front End (SFE) Project is a critical component of the
modernization initiative to increase electronic claims processing. This system will be fully implemented by 2009, and it will
support Medicare Administrative Contractors (MACs) operations. Establishing a SFE can reduce the problems associated with
the current Medicare claim submission process by implementing common specifications for the front-end claim editing and by
standardizing and simplifying the process. Reforming Payment Systems—Inpatient Prospective Payment System (IPPS), Ambulatory
Surgical Centers (ASC), and Outpatient Prospective Payment System (OPPS) The Medicare Payment Advisory Commission (MedPAC)
and further agency analysis resulted in recommendations to change the Inpatient Prospective Payment System (IPPS). CMS’ analysis
suggests that the current, charge-based weights and the current diagnosis related groups (DRG) classifications result in notable
distortions between payments and the relative costs of care. The revisions will improve the accuracy of payments, leading
to better incentives for hospital quality More specifically, these changes are expected to reduce incentives for hospitals
to “cherry pick” or treat only the most profitable patients. To improve the accuracy of payments to Ambulatory Surgical Centers
(ASCs) and in accordance with section 626 of the MMA, CMS proposed and will finalize a new payment system for ASCs, effective
January 1, 2008. The proposal expands the list of covered surgical procedures, while increasing the number of payment groups
for ASC procedures in order to improve accuracy. The proposed system is based on the relative weights used in the outpatient
hospital prospective payment system. The system will also contain safeguards to prevent overpayment for procedures currently
provided predominantly in physician offices. To improve the accuracy of the hospital outpatient prospective payment system
(OPPS) and to create better incentives for hospitals to improve quality and efficiency, CMS proposed to base the 2007 OPPS
payment rates on 2005 claims data and the most current available cost report data. CMS continues to explore means of addressing
hospital and other stakeholder concerns about payment for clinic and emergency department visits, procedures that require
expensive devices, and use of multiple procedure claims to set payment weights. CMS will take action to address these concerns
by: • Publishing the proposed rule with comment explaining the changes we will make for CY 2007 payment under OPPS; • Conducting
biannual meetings of the Ambulatory Payment Classification (APC) Panel. APC is a Federal advisory committee chartered by the
Secretary of HHS, composed of hospital industry representatives who advise CMS on many aspects of the OPPS from the hospital
perspective; and • Enhancing OPPS claims to ensure that the charges for all items and services are included in the claims
so that the payment rates will fully reflect the total cost of the services and the claims data can be used to efficiently
monitor quality of care. Improving the Accuracy of Payment and Quality Measurement To improve the accuracy of quality measurements
and the comparability of results across Post Acute Care (PAC) facility types and to improve the accuracy of payment for post
acute care, CMS is developing a Post Acute Care Payment Reform Demonstration based on a Congressional mandate (Deficit Reduction
Act Section 5008). CMS’ analysis suggests that the separate payment systems, patient assessment forms, and requirements lead
to problems with care continuity, the inability to compare quality results across settings and inappropriate incentives for
transfer and care provision. CMS will take action to address these concerns by: • Developing a patient assessment tool to
be used in acute care hospitals and in PAC settings including Long-Term Care Hospitals (LTCHs), Independent Rehabilitation
Facilities (IRFs), Skilled Nursing Facilities (SNFs), and Home Health Agencies (HHAs); • Developing a cost collection tool
to access resource use in the four PAC settings; and, • Designing a large-scale implementation of the new patient assessment
tool and cost collection tool with the intent to reform payment across the four sites based on the information collected.
Part C and Part D Payment Validation CMS has implemented a new beneficiary level monthly payment validation process prior
to payment authorization in order to confirm that the MARx calculated payments for the Medicare Advantage (MA), Part D and
demonstration plans are accurate. This validation process is used to identify any potential payment issues and to track their
resolution. Generally, the types of payment issues identified will originate as systems processing issues. The focus of the
beneficiary payment validation is on independently replicating the monthly payment calculations to check the validity of the
MARx payment calculations starting with beneficiary level payments and then rolling these payments up to the plan and national
levels. In addition, the input data sources for these payment calculations are also analyzed to validate the accurate transfer
of data across different CMS data systems to the MARx system. By the end of 2008, CMS will refine the process of validating
payments made to Medicare Advantage organizations, Prescriptions Drug Plans and other organizations paid through the Medicare
Advantage Prescription Drug System (MARx). We will continue to confirm that MARx calculated payments are accurate using the
new beneficiary level monthly payment validation process, and will add a routine validation analysis to evaluate retrospective
monthly payment adjustments. In addition, we will further automate procedures to more rapidly generate validation reports
for the monthly payment decisions. As part of this payment validation initiative, CMS will continue to document in detail
the complete payment transaction process and identify existing and needed controls. Documentation will include cycle memos
and standard operating procedures. New controls will be defined in detail and initiated as part of the routine payment validation
process. Ensuring Provision of Services During Emergencies and Disasters CMS must assure that Medicare and Medicaid providers
and CMS employees are paid, even in the event of an emergency or disaster. The CMS Continuity of Operations Plan (COOP) addresses
policies and procedures that enable CMS and its contractors to continue these services. The COOP, which is updated annually,
encompasses evacuation, assessment, decision-making, and relocation of designated personnel to conduct the following essential
functions at an alternate site: • Managed care organizations payments; • Medicare Fee-for-Service special payments by fiscal
intermediaries, carriers, and/or MACs; • Medicaid/State Children’s Insurance Plan budget and expenditure reporting; • Critical
payments and authorizations; • Payroll; and • Travel authorization. All essential functions except travel authorization are
fiscal in nature and can be delayed for at least 48 hours. The actual priority of one essential function over another depends
upon when a disruptive event occurs in the CMS payment schedule. CMS staff has been designated to assist in determining which
essential functions have priority during a disruptive event, and all the plans have failsafe backups.
Objective(s):
|
