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Prospective Offerors Conference. Arizona Health Care Cost Containment System. February 11, 2008. Contracting Process. Michael Veit Contracts Administrator Division of Business and Finance. February 11, 2008. Contracting Process. Purpose Materials Timetable

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Prospective offerors conference

Prospective Offerors Conference

Arizona Health Care Cost Containment System

February 11, 2008

Contracting process

Contracting Process

Michael Veit

Contracts Administrator

Division of Business and Finance

February 11, 2008

Contracting process1
Contracting Process

  • Purpose

  • Materials

  • Timetable

    • Submission deadline March 28, 2008,

      3:00 PM

  • Website navigation

  • Questions/Answers

February 11, 2008

Contracts to be awarded
Contracts To Be Awarded

February 11, 2008

Rfp milestone dates
RFP Milestone Dates

February 11, 2008

Response specifications
Response Specifications

  • Original plus seven copies

  • Three copies of Network Development Disk/CD

  • Sturdy 3-ring, 3-inch binders

  • All pages numbered sequentially

February 11, 2008

Specifications cont
Specifications (cont.)

  • 3 pages maximum per submission requirement unless otherwise specified in the submission

  • 8½ by 11 inch paper

  • 1 side of paper = 1 page

  • Single spaced, typewritten in at least 11 point font

  • Borders no less than ½ inch

February 11, 2008


  • Capitation and Network Development scored by Geographic Service Area

  • Network Management, Program and Organization will receive a statewide score

February 11, 2008

Ahcccs strategic vision

AHCCCS Strategic Vision

Anthony Rodgers


Arizona Health Care Cost Containment System

February 11, 2008

Managing health system transformation in arizona



for Service



  • Patient Care Centered

    • Personalized Health Care

    • Productive and informed interactions between Patient and Provider

    • Cost and Quality Transparency

    • Accessible/Affordable Choices

    • Aligned Incentives for wellness

  • Multiple integrated network and community resources

  • Aligned cost management processes

  • Rapid deployment of new knowledge and best practices in quality care

  • Patient and provider interaction

    • Information focus

    • Aligned care management

    • E-health capable

Managing Health System Transformation in Arizona





  • Prepaid healthcare

    • More comprehensive benefits

    • More choice and coverage

  • Contracted Network

  • Focus on cost control

  • and preventive care

    • Gatekeeper

    • Utilization management

    • Medical Management

  • Fee For Service

    • Inpatient focus

    • O/P clinic care

    • Low Reimbursement

    • Poor Access and Quality

    • Little oversight

  • No organized networks

  • Focus on paying claims

  • Little Medical Management

February 11, 2008

2008 Strategic Issues

The Agency’s Five–Year Strategic Plan serves as a framework for ongoing planning, prioritizing and budgeting. AHCCCS is addressing four strategic issues:

February 11, 2008



Goal: Maintain annual capitation rate increases at or below 6%(per member per month).

“…overall national health care expenditures are expected to grow at an average rate of 7.3% per year through 2012.”

Centers for Medicare and Medicaid

February 11, 2008

Note: Projected General Fund revenues are based on a ten-year average of annual increases

February 11, 2008

Ahcccs strategies for controlling costs
AHCCCS Strategies for Controlling Costs

  • Continue efforts toward more equitable and manageable provider rate structures and payment methodology

  • Maintain membership management practices that ensure members are enrolled in the most appropriate AHCCCS programs

  • Maximize use of non-state funding sources (e.g. Grants)

  • Use Executive Utilization Management reports for ongoing health plan comparison and benchmarking

  • Continue to explore cost-effective purchasing options for key Medicaid services

February 11, 2008



Goal: Ensure AHCCCS members have the right care, in the right place, at the right time, every time.

“Quality driven health care results in fewer medical complications, better outcomes, and lower costs”

February 11, 2008

Ahcccs strategies for improving quality and access to care
AHCCCS Strategies for Improving Quality and Access to Care

  • Improve incentives to promote health plan quality outcomes

  • Promote evidence based treatment guidelines and best practices

  • Conduct satisfaction surveys of members

  • Developing a web-based information exchange that allows providers access to diagnosis, treatment, and other information that supports care coordination

  • Improve members’ understanding of how to access needed medical care

  • Promoting cultural competence throughout the healthcare delivery system

  • Evaluate the networks of contracted health plans to determine their adequacy in meeting the needs of members

February 11, 2008

Ahcccs expectations and budget reality
AHCCCS Expectations and Budget Reality

  • Health plans are partners in delivery of care to Medicaid members; members that require special attention

  • The agency expects health plans to be sophisticated enough to show how they self monitor and can self improve their operations; particularly those that support quality operational fundamentals, such as:

    • Timely and accurate claims payment

    • User friendly prior authorization system

    • Responsiveness to providers and members

  • Plans have to be able to achieve and document higher clinical performance measures, i.e. National HEDIS Measures Comparisons

  • Due to size of program at federal and state level, Medicaid is seen as a budget buster and the target of cost cutting strategies

  • Either we control spending and improve outcome using our methods and approaches, or they will do it for us and chances are ……

  • We won’t like it!!

February 11, 2008

Ahcccs overview

AHCCCS Overview

Tom Betlach

Deputy Director

February 11, 2008

Introduction to ahcccs





Acute Health Plans

LTC Program Contractors


State Agencies




Eligibility (Special Populations)



Behavioral Health & CRS





Contract for Care

Monitor Care and Financial Viability

Information Services


Budget and Claims Processing


Native Americans




Non-Qualified Persons



Intergovernmental Relations

Introduction to AHCCCS

Product Lines


-Acute Care (Medicaid & KidsCare)

- Long Term Care

- Healthcare Group

February 11, 2008

Ahcccs organizational structure

Division of Fee

For Service



Office of Intergovern-

mental Relations (OIR)

Division of Health




Office of the Director (OOD)

Information Service Division (ISD)

Division of Business and Finance (DBF)

Division of




Office of Administrative Legal Services (OALS)

AHCCCS Organizational Structure

February 11, 2008

Coverage events in ahcccs history
Coverage Events in AHCCCS History

1982 - AHCCCS Acute Care Program

1988 - SOBRA pregnant women and children under 6 - ALTCS DD

1989 - ALTCS EPD

1993 - HealthCare Group expanded

1998 - KidsCare begins

2001 - Arizona Proposition 204 implemented

2003 - KidsCare Parents

February 11, 2008

100% Federal Poverty Level(2008)

February 11, 2008

Eligibility Levels




KidsCare/HIFA Parents


Proposition 204 Expansion

If the HIFA parent program ends on 6/30/08, adults with income above Medicaid eligibility levels will lose coverage for a federally funded AHCCCS acute care program. While these adults would become eligible for Medical Expense Deduction (MED) when their spend-down reached 40% FPL, the state would have a lower federal match rate.

Note – This chart excludes income levels for optional programs like Freedom to Work and Breast and Cervical Cancer.

Who Does AHCCCS Serve?*

* January 2008

Geographic service areas acute enrollment as of february 1 2008

Health Plan Enrollment

GSA Number















Total Health Plan Enrollment = 878,317

Geographic Service AreasAcute Enrollment As of February 1, 2008














































February 11, 2008



Health plan enrollment
Health Plan Enrollment

  • Members select a plan prior to being made eligible

  • Members assigned to a plan on date of eligibility determination

  • Plans notified one day after assignment

  • Members retroactively eligible to first of month of application- prior period coverage (PPC)

  • Plans responsible for retroactive eligibility period

February 11, 2008

Source of enrollment members with choice only 6 months ending 12 31 07
Source of EnrollmentMembers with Choice Only6 months ending 12/31/07

February 11, 2008

Out of 351,715 members

Members exercising choice percent by risk group 6 months ending 12 31 07
Members Exercising ChoicePercent by Risk Group (6 months ending 12/31/07)

February 11, 2008

Ahcccs member churn
AHCCCS Member “Churn”

  • On average every month the “new” membership consists of

    • 22% with no prior enrollment in the AHCCCS program

    • 56% re-enrolling in 6 months or less

    • 8% re-enrolling in 7 to 12 months

    • 14% re-enrolling after 1 year

February 11, 2008

Total enrollment january 2000 2008

Source: AHCCCS Eligibility & Enrollment Reports (excludes SLMBs, QI-1s, and HealthCare Group).

Total Enrollment January 2000 -2008

February 11, 2008

Ahcccs total funds fy 01 fy 08
AHCCCS Total Funds SLMBs, QI-1s, and HealthCare Group).FY 01-FY 08

February 11, 2008

Ahcccs funding sources
AHCCCS Funding Sources SLMBs, QI-1s, and HealthCare Group).

February 11, 2008

Ahcccs service distribution
AHCCCS Service Distribution SLMBs, QI-1s, and HealthCare Group).

February 11, 2008

Ahcccs and cms
AHCCCS and CMS SLMBs, QI-1s, and HealthCare Group).

  • Arizona has been operating under an 1115 Demonstration Waiver for the past 25 years

  • Arizona is in the second year of the current 1115 Waiver which currently expires on September 30, 2011

  • Waiver requires State to Operate a Budget Neutral Demonstration for the entire program – $40 billion over 5 years

  • 1115 Waiver from CMS provides flexibility

    • Authority to mandate managed care for all populations (exceptions are Native Americans and FES)

    • Waiver from Administrative requirements like Drug Rebate program and UPL

    • Ability to have greater flexibility with Long Term Care

February 11, 2008

Ahcccs and the state budget process
AHCCCS and the State Budget Process SLMBs, QI-1s, and HealthCare Group).

  • State Budget Process

  • Voter Protection

  • State Revenue Sources and Trends

  • Funding by Agencies and Growth

  • FY 2008 and FY 2009 Challenges

February 11, 2008

State budget process
State Budget Process SLMBs, QI-1s, and HealthCare Group).

  • July - Sept – AHCCCS Develops State Budget Submittal

  • Sept – Dec – Governor’s Office and Legislature develop Budget Recommendations

  • Jan – June – Legislature and Governor work on Budget Development

  • July – June – AHCCCS works on Implementation of Budget Issues

February 11, 2008

Proposition 204 funding fy 2002 fy 2007
Proposition 204 Funding SLMBs, QI-1s, and HealthCare Group).(FY 2002 – FY 2007)

Dollars in


Members: 18,900 180,200 (6-Year Avg.)

NOTE: Pre-Prop 204 MNMI costs were grown by maintaining constant population and a 6% medical inflation factor.

Ahcccs compared to other agencies
AHCCCS Compared to Other Agencies Population Growth

February 11, 2008

Ahcccs finance and rate development

AHCCCS Finance and Rate Development Population Growth

Shelli Silver, Assistant Director, Finance and Rate Development

Kathy Rodham, Finance Manager

Division of Health Care Management

February 11, 2008

Compensation overview
Compensation - Overview Population Growth

  • Capitation

    • Prospective

    • Prior Period Coverage

    • Premium Tax

  • Supplemental Payments

    • Delivery

  • Reinsurance (self-funded)

  • Reconciliations

    • PPC

    • SSDI-TMC

  • Compensation policies detailed in ACOM

February 11, 2008

Capitation new
Capitation – New Population Growth

  • Risk Adjustment

    • Prospective risk adjustment based on demographic data, member diagnosis and pharmacy data

    • National Model

    • Expect to apply to CYE 09 cap rates effective on or after April 1, 2009 (using phase-in provision)

  • State-Only Transplants (Options 1 & 2)

    • Different benefit package for each Option

    • Administrative cap rate only

February 11, 2008

Supplemental payments new
Supplemental Payments – New Population Growth

  • Eliminated:

    • Hospital Supplemental Payment

      • rolled into cap rates – majority in PPC

    • HIV/AIDS Supplement Payment

      • rolled into Prospective cap rates

February 11, 2008

Reinsurance new
Reinsurance - New Population Growth

  • Inpatient

    • Eliminated unique TWG threshold

    • All thresholds will be raised $5,000 annually

    • Same-day admit/discharge claims excluded

  • Catastrophic

    • Contractor is responsible for coverage of biotech drugs except when used by a CRS member (with certain conditions)

      • Only drugs covered under Reinsurance

  • Transplants

    • Invoices/Claims and encounters required for payment

  • State-Only Transplants (Options 1 & 2)

    • Reinsurance coverage paid 100% (with limitations and SOC)

February 11, 2008

Reconciliations new
Reconciliations – New Population Growth

  • Eliminated TWG reconciliation

  • PPC reconciliation

    • Based on date of service (formerly date of payment)

    • TWG PPC expenditures rolled into PPC recon

  • SSDI-TMC – reconciled to 2%, based on date of service, utilizing encounters

February 11, 2008

Auto assignment algorithm new
Auto Assignment Algorithm - New Population Growth

  • Unique formula will be used prior to start of CYE 09 if there are any Exiting Contractors

    • Conversion Group: Conversion Auto-Assignment

  • Unique formula may be used for part of CYE 09

    • Post Conversion Group: Enhanced Auto-Assignment

  • Following application of above, formula for 1st year based on:

    • Awarded capitation rate (50%)

    • Program component score (50%)

  • Formula for subsequent years based on:

    • Awarded capitation rate (50%)

    • Clinical performance measure results

February 11, 2008

Conversion auto assignment
Conversion Auto Assignment Population Growth

  • Members enrolled in any Exiting Contractor make up the “Conversion Group” (CG)

  • CG members will be auto-assigned only to new & small Contractors:

    • New: new to the Acute Program or new to the GSA

    • Small: based on enrollment as of May 1, 2008

February 11, 2008

Conversion auto assignment cont
Conversion Auto Assignment (cont.) Population Growth

  • Enough CG members to bring new & small Contractors to thresholds?

    • If yes, then once all at threshold, Conversion AA ends and 1st yr AA model implemented for rest of CG

    • If no, bring all new & small Contractors as equal as possible, and implement Enhanced AA effective October 1, 2008, for at least 3 months

    • In Rural GSA, as equal as possible for new and/or small

  • CG members provided two opportunities to choose a different Contractor after notification of conversion auto-assignment – no limitations on choice

February 11, 2008

Enhanced auto assignment
Enhanced Auto Assignment Population Growth

  • New/Continuing Contractors still below the thresholds on September 1, 2008 will receive members under the enhanced auto-assign algorithm beginning October 1, 2008

  • Enhanced Algorithm for minimum three months, maximum six months

  • Contractors not qualifying for enhanced algorithm will not receive auto-assigned members during the three to six month period

  • After enhanced algorithm period ends, algorithm will be based on 50/50 awarded capitation rate and program component score – all Contractors included

February 11, 2008

Financial oversight
Financial Oversight Population Growth

  • AHCCCS monitors Contractors’ financial performance to ensure their ability to perform the contract and serve AHCCCS members.

    • Quarterly financial statements

    • Annual financial audits

    • Financial viability ratios

    • Operational and Financial Reviews

    • Approval authority on equity distributions

    • Performance Bond monitoring monthly

    • Approval authority on provider and affiliate advances and recoupments (in limited circumstances)

February 11, 2008

Data supplement
Data Supplement Population Growth

  • Description of each Section in Bidders’ Library

  • Public data in Bidders’ Library

  • Data containing PHI, and large files, available only on CD

  • See Data Supplement, Section B for descriptions of recent and future program changes and how those changes should be considered when reviewing historical data

February 11, 2008

Capitation rate submission
Capitation Rate Submission Population Growth

  • Web-based tool

    • Need User ID and password

    • In case of conflict between required hard copy and web-based tool submission, hard copy prevails

    • Must fax attestation – see Section A of Data Supplement

  • Bid rates for all risk groups, for all GSAs desired, except the following that will be set by AHCCCS:

    • Prior Period Coverage (PPC)

    • Delivery Supplement

    • SOBRA Family Planning

    • SSDI-TMC

    • State Only Transplants

    • Reinsurance Offsets – set at $20,000 threshold

February 11, 2008

Ahcccs policy operations and contractor oversight

AHCCCS Policy, Operations and Contractor Oversight Population Growth

Kate Aurelius

Assistant Director

Division of Health Care Management

February 11, 2008

Ahcccs partnership strategy
AHCCCS Partnership Strategy Population Growth

The Success of Arizona’s Medicaid Program is dependent on the success of our Contractors…therefore, partnership is vital.

  • Set clear and reasonable expectations for Contractor performance

  • Respect for each other

  • Understanding each other’s challenges

  • Feedback/Listening

  • Ongoing communication

  • Mutual accountability

  • Flexibility

  • Striving for a long-term relationship

February 11, 2008

Operational expectations of contractors
Operational Expectations of Contractors Population Growth

  • Contractor Performance is Managed

    • Self-monitor operations and clinical performance, using multiple data points (data driven)

    • Develop and implement interventions designed to improve operational or clinical performance

    • Evaluate effectiveness of interventions and adjust as necessary to achieve excellence

    • Contractor must staff to meet AHCCCS performance expectations

  • Contractor is a partner in the AHCCCS program

    • Recognize that members and providers are valued partners in the AHCCCS program

    • Administrative subcontractors must be managed

    • Eliminate inefficient/burdensome Contractor policies/processes

  • Sharing of best practices

February 11, 2008

Contractor oversight ongoing
Contractor Oversight - Ongoing Population Growth

AHCCCS monitors Contractors’ performance to ensure Contractor is able to perform under the contract via:

  • On-site Operational and Financial Review (OFR)

  • Deliverable review

  • Clinical performance measures

  • Quality improvement projects

  • Provider network monitoring

  • Claims payment timeliness and accuracy

  • Grievance and appeal monitoring

February 11, 2008

Contractor oversight focused
Contractor Oversight - Focused Population Growth

Conducted by DHCM due to:

  • Non-compliance with any contract requirements

  • Litigation or settlement agreement

  • Stakeholder complaints

  • New program requirements

  • Changes in ownership, new Contractor, new GSA, new management

February 11, 2008

Policy changes
Policy Changes Population Growth

Including but not limited to:

  • AHCCCS Contractor Operations Manual:

    • Member Information Policy

    • Provider Network Information Policy

    • Network Development and Management Plan Policy

    • Appointment Availability and Reporting Policy

    • Recoupment Policy

    • Provider and Affiliate Advances Policy

  • AHCCCS Medical Policy Manual

    • Chapter 400

    • Chapter 900

    • Chapter 1000

February 11, 2008

Operations overview
Operations - Overview Population Growth

  • Medical Management

    • Utilization data analysis and intervention

    • Utilization management tools (PA, concurrent/retrospective review, chronic illness management, case/care coordination)

  • Quality Management

    • Tracking, trending, intervening as necessary

    • Clinical performance measures

    • Performance improvement projects

    • Credentialing and Peer Review

February 11, 2008

Operations overview1
Operations - Overview Population Growth


    • Ensure receipt of EPSDT services including physical, oral, developmental, and behavioral health

    • Ensure receipt of maternal and postpartum care

    • Educate members on the availability of family planning services

    • Promote preventive health strategies for all age groups

  • Behavioral Health

    • Educate members on how to access behavioral health services

    • Coordinate care for members in the behavioral health system

    • Cover some behavioral health services via PCP network

February 11, 2008

Operations overview2
Operations - Overview Population Growth

  • Provider Network Development and Management

    • Network development considers membership

    • Network designed to be accessible and avoid unnecessary ED use

    • Network design considers geography and physician referral patterns

    • Network management strategies are provider friendly and multi-pronged

    • On going improvement and resolution of service gaps

February 11, 2008

Medical management new
Medical Management - New Population Growth

  • Contractor required to review and provide rationale for prior authorization requirements

  • Reliable transportation for members with chronic health issues

  • Processes to actively reduce the no-show rate

  • Medical Home

February 11, 2008

Quality management new
Quality Management - New Population Growth

  • New performance measures and new minimum performance standards

  • Limited adoption of HEDIS hybrid methodology

  • Potential for sanctions for failure to meet minimum performance standards

  • Rapid cycle improvement for PMs and PIPs

  • Value-based purchasing/pay-for-performance

  • Formal training for all staff on quality of care identification and referral

  • Community involvement

  • Challenging member assistance

February 11, 2008

Epsdt mch new
EPSDT/MCH - New Population Growth

  • Payment of AzEIP providers for covered services

  • Developmental assessments

  • Community involvement expectations

  • Coordination of care needs for Family Planning Extension participants

  • Increased coordination with other systems of care such as CRS, RBHA, AzEIP

February 11, 2008

Behavioral health new
Behavioral Health - New Population Growth

  • Coordination of AzSH discharges, including coverage of same pharmacy and supplies

  • Ensuring acute-care needs covered in behavioral health placements

  • Workgroup participation and quarterly meetings

  • Identification, sharing and training PCP network regarding behavioral health practice guidelines and best practices

February 11, 2008

Network new
Network – New Population Growth

  • Non Emergency Department after hours (including weekends) physician coverage required

  • Requirement to contract with GME programs, restrictions on moving members if contract terminates

  • Requirement to direct members to GME programs

  • Requirement to contract with physicians relocating to the state if serving medically underserved area and physician can be credentialed

  • Provider communication via multiple methodologies

February 11, 2008

Claims encounters technology

Claims, Encounters, Technology Population Growth

Lori Petre

Data Analysis and Research Manager

Division of Health Care Management

February 11, 2008

What is an encounter
What Is An Encounter? Population Growth

  • A record of a medically related service rendered by a registered AHCCCS provider to an AHCCCS member enrolled with a capitated contractor (MCO), which has been adjudicated by the MCO.

    • Submitted electronically by MCO to AHCCCS

    • Includes capitated services and fee-for-service payments

February 11, 2008

Encounter data uses
Encounter Data Uses Population Growth

  • MCO capitation/fee-for-service rate setting

  • Reconciliations

  • Reinsurance calculation and payment

  • HEDIS reporting and clinical performance measurements

  • Identification of centers of excellence

  • Supplemental payments to hospitals

  • Medical record audits

  • CMS reports

  • Fraud and abuse analysis & reporting

  • General information management

  • Decision support and “what-if” analysis

February 11, 2008

Encounter submission standards
Encounter Submission Standards Population Growth

  • Encounter files must be submitted to the AHCCCS server in appropriate HIPAA compliant formats and include HIPAA compliant data such as National Provider Identifiers (NPI)

  • Each Encounter file must pass validation including assessment of appropriate file structures, validity of code sets, and financial balancing

  • Each file must contain a required BBA related data attestation

  • Each file undergoes translation and syntax checks

February 11, 2008

Encounter processing
Encounter Processing Population Growth

  • Encounter cycles run twice monthly:

    • One full cycle

    • One limited cycle

    • Contractors can submit encounters for processing for one or both cycles

  • Processing includes claims-type edits

  • Results are produced and communicated to the MCOs after each cycle

  • Detailed Information on encounter processing can be found in the Encounter Reporting User Guide and in the Encounter Keys newsletter published regularly on the AHCCCS Website

February 11, 2008

Encounter data validation
Encounter Data Validation Population Growth

  • CMS requires that AHCCCS collect complete, accurate and timely encounter data from MCOs

  • AHCCCS data validation studies evaluate the completeness, accuracy and timeliness of collected encounter data

  • AHCCCS also conducts ongoing review of encounter submission trends and data quality

February 11, 2008

Technological advancement
Technological Advancement Population Growth

  • Contractor must have the ability to conduct the following functions electronically:

    • Provide enrollment verification (HIPAA 270/271)

    • Allow claims inquiry and response (HIPAA 276/277)

    • Accept HIPAA compliant electronic claims (HIPAA 837)

    • Make claim payment via electronic funds transfer

    • Accept prior authorization requests (HIPAA 278), no later than October 1, 2009

  • Participate in AHCCCS E-Health initiatives, including E-prescribing

  • February 11, 2008

    Technological advancement1
    Technological Advancement Population Growth

    • Contractor must have a website with links to the following:

      • Formulary

      • Provider Manual

      • Member Handbook

      • Provider listing

      • When available, Member and Provider Survey Results

      • Performance Measure Results

      • Prior Authorization criteria

      • Evidence Based Medicine Guidelines

      • Other links as identified in the ACOM Member Information and Provider Information Policies

    February 11, 2008

    Claims and encounters new
    Claims and Encounters - New Population Growth

    • Claims processing systems are expected to include specific clinical and data related editing

    • Must participate in a workgroup to develop uniform guidelines for standardizing outpatient claims requirements for hospitals and professional providers

    • Must subject Claims Payment/Health Information System to required independent audit, to be completed within two years of the initiation of the contract, or by September 30, 2010

    • Must develop and implement internal claims audit functions

    • Must conduct a self-assessment related to hospital claims documentation requirements

    • New Staffing: Claims Educator

    February 11, 2008