Blues mull future with Medicare — outpatient payment errors may result

New intermediary could pose tough readjustment for providers

After enjoying strong relationships with their Medicare fiscal intermediaries, thousands of outpatient providers now face the distinct possibility that their Blue Cross and Blue Shield plans will head south for the winter — permanently.

For freestanding clinics and ambulatory surgery centers (ASCs), the departures could touch off a temporary claims-processing nightmare, as many of these providers are only now beginning to upgrade their billing systems and convert from paper to on-line claims processing.

Faced with years of mounting financial losses from contracts with the federal government to process Medicare fee-for-service claims, Blue Cross and Blue Shield plans throughout the country are weighing whether to end their agreements, according to a Blue Cross official.

For many Blues, "Medicare fee-for-service has been getting tougher and tougher to maintain," says Harvey W. Friedman, vice president of Medicare administration with the Blue Cross Blue Shield Association in Chicago.

Some in the outpatient industry are trying to minimize the potential threat of payment mishaps, but even the most optimistic are concerned about possible errors and delays. "I would anticipate several claims denials and delays, especially during the initial stages," says Steven Pimental, business manager at Same Day SurgiClinic in Fall River, MA.

Already, two major Blues plans — Boston-based Blue Cross Blue Shield of Massachusetts and Independence Blue Cross in Philadelphia — have announced that as of Sept. 30, they will not renew their contracts with the Health Care Financing Administration (HCFA).

Officially, Independence cited recent mergers and realignments in the Pennsylvania insurance market for its decision. But many local providers blame continued financial losses from Medicare and worsening bureaucratic demands from HCFA for the pull-out.

"HCFA has just been getting extremely demanding about claims edits and fraud and abuse, and it’s costing the FI’s money," says Jane R. Knox, CPAM, director of patient accounts at St. Mary Medical Center in Langhorne, PA.

Departures will affect millions

Together the departures of these large regional plans are expected to affect an estimated 5 million Medicare beneficiaries and thousands of hospitals, freestanding ambulatory care centers, and physician offices, which fall under Part B, in a five-state region, including Maine, Massachusetts, New Hampshire, Pennsylvania, and Vermont. Aetna, another major insurer based in Hartford, CT, also is pulling out of Medicare in September.

In all cases, however, the burgeoning risk-based Medicare managed care business, which these plans also have with HCFA, will not be affected.

What will be affected are the strong relationships between the intermediaries and providers that have been built up over time, says Knox of St. Mary. The hospital operates busy outpatient rehab and kidney dialysis facilities and has a high Medicare patient load with 40% of annual revenue coming from Medicare fee-for-service.

The effects also may be felt in the following ways:

The new FI may be located in another state, and its claims processing system might require a major adjustment.

With electronic claims processing, distance is not likely to be a big factor, most providers say. Already, a great deal of on-line claims adjudication occurs in processing centers located thousands of miles away from both the health plan and the provider. And even if the technology between the new FI and the facility differs, it should only be in small ways, Knox says.

In any case, providers should urge their information software vendors immediately to contact the new FI and sort out differences in their technology, Knox recommends.

But for small under-capitalized clinics and ASCs, which process paper claims manually, a major change-over among FIs portends long payment delays. "For a small business like ours where cash flow is extremely important, the idea can be quite frightening," says Pimental of Same Day SurgiClinic.

ASCs will feel financial pinch

Unless the ASC is operated by a large hospital, its claims processing technology is usually years behind most providers in efficiency. Delays waiting for paper claims to be paid could take weeks longer than usual, and there’s really nothing a facility can do, Pimental says. Any short-term reduction in finances could seriously hurt a center’s viability, he adds.

A change in the way claims get processed could increase costs.

Knox, whose hospital will be affected by the departure of Independence Blue Cross in September, anticipates that her labor costs will grow by an unspecified amount. One reason is that the hospital normally bills the FI for not only the Medicare fee-for-service claim but also its Medicare supplemental claims on the same UB-92.

The simultaneous secondary billing has worked extremely well for years with Independence Blue Cross. But now all that may change depending on whether the new contractor is willing to follow suit, Knox says. HCFA has yet to name a new Part A contractor for the region. If the new plan does not accept the Medicare supplemental on the same claims form, the business office will have to submit an additional 500 Medigap claims per month on a separate UB-92.

Other delays may occur.

Providers differ on whether a change in intermediaries will necessarily result in tougher claims appeals or delays in medical necessity reviews. But they are certain that if you have a strong relationship with your present FI, its replacement will undoubtedly perform some tasks differently.

Knox says providers in Pennsylvania that already have switched from Aetna to Mutual of Omaha (NE), found few reasons to complain regarding these issues. But Pimental believes delays involving appeals and reviews will be felt in small ways beginning with differences in routine telephone calls or the contents of Explanation-of-Benefits forms.

State insurance laws may vary

Medicare and other payer policies may conflict under the new FI.

Finally, a new intermediary may have difficulties at first working with state-specific laws that set out policies regarding Medicare as a secondary payer. For example, under a recently enacted Pennsylvania law, Medicare is assigned secondary-payer status when car accident victims are covered by automobile insurance. Subsequently, payment rates are set at 110% of the Medicare rate.

"Overall, we would feel a lot better if we knew how these things will be handled. It’s like being in the dark," Knox says.