MEDICARE CONTRACTING REFORM

2. Breakout Session # Karen Jackson Director, Medicare Contractor Management Group, CMS Daniel Kane Acting Director, Office of Acquisition & Grants Management, CMS MEDICARE CONTRACTING REFORM Date Time

3. What is Medicare • Part A – Hospital Insurance (covers inpatient care in hospitals) • Part B – Medical Insurance (covers physicians services) • Part C – Medicare Advantage Plans (also known as Medicare +Choice) Private health insurance plan similar to HMO • Part D – Prescription Drug Plan

4. Medicare Statistics • Medicare serves over 45 million beneficiaries • Medicaid serves over 51 million individuals • The Medicare Administrative Contractors process over 1 billion claims per year and pay out over $305 billion in benefit dollars from the Trust Fund • In 2011, total net Federal outlays for CMS programs are expected to be $828.1 Billion

5. History of Medicare • President Lyndon B. Johnson signed the Social Security Act on July 30, 1965, establishing Medicare and Medicaid • Contracting Authority - Section 1816 of SSA for Medicare Part A and Section 1842 of SSA for Medicare Part B • Fiscal Intermediaries (FI) were awarded through a nomination process • Carriers were selected based on meeting the definition as described in Section 1842 of SSA. Contracts could be entered into without regard to competition. • FI agreements and carrier contracts were awarded for 1 year term and contained renewal clauses • Annual contract amount was negotiated each year with one year funding. Notice of Budget Action (NOBA) issued specifying quarterly apportionment of funds. Contractor draws down on funds • Contractor may submit notice of termination to Government.

6. Established by Section 911 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 Medicare Part A and Part B claims processing is integrated into a single entity to increase efficiency, accuracy and the program’s responsiveness to Medicare stakeholders Medicare Contracting Reform

7. Brings changes to CMS and the fee-for-service (FFS) program intended to improve Medicare services to beneficiaries and healthcare providers Medicare Administrative Contractors (MACs) to perform work formerly administered by fiscal intermediaries (FIs) and carriers Competitive award of performance-based contracts with award fees; MACs rewarded when CMS operational and policy objectives met Medicare Contracting Reform

8. Provide flexibility to CMS and its contractors to work together more effectively and better adapt to changes in the Medicare program Promote competition, leading to more efficiency and greater accountability Establish better coordination and communication between CMS, contractors and providers Promote CMS’s ability to negotiate incentives to reward Medicare contractors that perform well Goals of Contracting Reform

9. MACs - The Cornerstone of CMS’s Medicare Claims Administration Contract Network

10. Complex Contracts • Contract Type - Cost Plus Award Fee due to ever changing program requirements • In FY 2010, CMs issued 431 Medicare Fee for Service Change Requests (CRs) , 427 Joint signature Memorandums/Technical Direction Letters (JSM/TDLs), and 182 contract modifications • CR – Form instruction from CMS to the Claims Administration Contractors, shared system maintainers (SSMs), HIGLAS Maintenance Contractor, and CWF Maintenance Contractor in the form of Business Requirements • JSM/TDL – formal CMS communication vehicled used to provide technical direction and/or clarification to existing instructions that does not add cost to a contract, administrative announcements, emergency alerts, and one-time informational requestes that do not involve shared system changes

11. Fiscal Intermediaries (FY 2002) Premera BC Anthem NH AHS MT BC Noridian Regence BC of Oregon WI BC (UGS) AL BC (Cahaba) Empire BC WY BC RI BC Highmark TN BC (Riverbend) NE BC WI BC (UGS) Anthem Ins. Companies Empire BC WI BC (UGS) KS BC BC MD SC BC TN BC (Riverbend) AZ BC OK BC AR BC AL BC (Cahaba) GA BC MS BC TrailBlazer Premera BC FL BC WI BC (UGS) Cooperativa * Mutual of Omaha serves as a Fiscal Intermediary to providers in all but two states (Alaska and New York)

12. Carriers - FY 2002 Noridian Empire BCBS BCBS MT Noridian Wisconsin Physicians Service BS WNY (HealthNow) NHIC CIGNA BS WNY BCBS RI Highmark BCBS FL (First Coast) Regence BS UT Nationwide GHI Noridian BCBS KS NHIC AdminaStar TrailBlazer CIGNA BCBS AR Noridian BCBS AR BCBS SC BCBS AL TrailBlazer BCBS FL (First Coast) Noridian Guam SSS Hawaii Puerto Rico and Virgin Islands

13. 2 14 6 13 3 8 12 1 5 15 11 10 4 7 2 9 1 A/B MAC Jurisdictions (15)

14. D A B C Durable Medical Equipment MAC Jurisdictions (4)

15. The four Durable Medical Equipment Medicare Administrative Contractors (MACs) are fully implemented and operational Nine A/B MACs are fully implemented and operational (65 percent of national claims volume) Two A/B MACs are recently awarded and in process of being implemented (15 percent of national claims volume) Four A/B MAC jurisdictions remain delayed due to bid protests (20 percent of national claims volume) Status of Implementation

16. Protest Summary • CMS has awarded 19 MAC Contracts (4 DME and 15 A/B) • Protests received - 22 (2 at competitive range and 20 at award) • GAO sustained – 4 • GAO denied – 8 • GAO/ADR & adverse agency decision resulted in corrective action – 9 • Protest withdrew - 1

17. In instances where MACs are operational Medicare’s administrative costs have gone down Provider satisfaction survey scores have increased CMS identified and eliminated operational inconsistencies as contracts were consolidated Performance improvements in system security, provider customer service, beneficiary inquiry support, appeals processing and resolution Reduction in variation in local medical coverage determinations Consolidation of regional processing has enabled better coordination of provider outreach activities Many Positive Results

18. Trends in Selected Medicare FFS Operating Costs FYs 2003-2009

19. The competitive process is time-consuming and subject to external scrutiny (multiple GAO reviews of protest allegations) Three procurement cycles (start-up, Cycles 1 & 2) No new entrants to Medicare claims administration as a result of competitive process Some companies outside of existing pool attempted to bid, in partnership with current Medicare claims contractors CMS adapted competitive selection process throughout cycles of procurement CMS Observations

20. Improved efficiency in program administration Reduced Medicare payment error rate Sets platform for information technology improvements Better able to meet future programmatic challenges and changes Benefits to the Medicare Program

21. Competitive process promotes strong customer service Improved provider education and training. Increased payment accuracy and consistency in payment decisions Interfacing needs for claims processing are simplified because a single A/B MAC will serve as point-of-contact for both Part A and Part B claims Providers will have input in evaluation of MACs’ performance through satisfaction surveys Providers Will Benefit from New Operational Structure

22. Contract Administration Structure • Contracting Officer (CO) • Contracting Officer Technical Representative (COTR) • Business Function Leads (BFLs) • Technical Monitors (TMs) • Contract Administration Team (CAT)

23. ROLES AND RESPONSIBILITIES • Contracting Officer • Authorized to commit/bind the Government by contract for supplies or services • Authority to accept nonconforming work or waive any requirement of the contract • Authorize reimbursement to the contractor for any costs incurred during the performance of the contract • Modify any term or condition of the contract • Make any changes in the SOW • Modify/extend the period of performance • Change the delivery schedule

24. ROLES AND RESPONSIBILITIES Contracting Officer Technical Representative (COTR) The COTR is housed in theCMM/MCMG program office Authorized to provide technical direction in accordance with the AB MAC contract Monitors the Contractor’s technical progress, including interpreting the Statement of Work and any other technical performance requirements Assists in the resolution of technical problems encountered during performance Reviews invoices/vouchers/deliverables

25. ROLES AND RESPONSIBILITIES • CMS Business Function Leads (BFLs) • Subject matter expert for policy/operational area • Provides support to the COTR by performing the following: • Monitors the contractor’s technical progress • Provides interpretation of the SOW and other • technical requirements • Assists in the performance evaluation of the • contractor • Assists in the resolution of technical problems • Assists in the review of invoices/ vouchers/ • and deliverables

26. ROLES AND RESPONSIBILITIES • CMS Technical Monitors (TMs) • Monitors the contractor’s performance in the “field” • Provides support to the COTR by performing the following: • Monitors the contractor’s technical progress • Provides interpretation of the SOW and other • technical requirements • Assists in the performance evaluation of the • contractor particularly with regard to assigned • technical reviews • Assists in the resolution of technical problems • Assists in the technical evaluation inspection

27. ROLES AND RESPONSIBILITIES • Contract Administration Team (CAT) • The CAT is housed in the CMM/MCMG • program office • Provides support to the COTR by performing the following: • Day to day oversight of contract • Administer changes to the MAC SOW • Coordinate with the BFLs and TMs to resolve • any contractor performance issues