Volume43 Issue5 Summer,2010 OUR NEW LEADERS · Volume43 Issue5 Summer,2010 OUR NEW LEADERS...

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Volume 43 Issue 5 Summer, 2010

OUR NEW LEADERS

PresidentEDMUND P. SCHMIDT, III

President-ElectJOHN I. COSTER

Vice PresidentPALMIRA M. CATALIOTTI,

FHFMA, CPA

TreasurerDAVID EVANGELISTA

SecretaryWENDY LEO, CHFP

Immediate Past PresidentCYNTHIA A. STRAIN, FHFMA

2010-2011 CORPORATE SPONSORS

PLATINUM

GOLD

Silver

BDO USA, LLPBluemark, LLCDeloitte & Touche LLPEmdeonErnst & Young LLPGrant Thornton LLPInformation Builders, Inc.Jzanus, Ltd.KPMG LLPMcBee Associates, Inc. / HCE

Meta Health TechnologyMiller & Milone, P.C.Navigant Consulting, Inc.New York Life/Pinnacle Strategies, Inc.POM Recoveries, Inc.PricewaterhouseCoopers LLPRTR Financial Services, Inc.Siemens Medical SolutionsTritech Healthcare Management, LLCWeiserMazars LLP

Allegiance Billing & Consulting, LLCApollo Health Street, Inc.ARMDSBetz-Mitchell Associates, Inc.Cirius Group, Inc.Dell ServicesE-Management Associates, LLCFinancial Medical SystemsGroup JHANYS Solutions, Inc.Healthcare Management Solutions LLCHealth/ROIKaufman, Hall & AssociatesKeane, Inc. - Healthcare Solutions Division

LYNX Medical SystemsMBI Associates, Inc.Medical Data Systems (MDS)Mullooly, Jeffrey, Rooney & Flynn LLPMultiPlan, Inc.The Outsource GroupPhysicians’ Reciprocal InsurersProfessional Claims Bureau, Inc.Provider Consulting Solutions, Inc.Smart Solutions for Health CareTD Bank - Healthcare Lending DivisionTransUnion LLCWashington & West, LLC

CareMedic Systems, Inc.CBIZ KA Consulting Services, LLCCollection Bureau of Hudson Valley - CBHVGarfunkel Wild, P.C.HCCS - Health Care Compliance Strategies

MCS Claim Services, Inc.NCO Financial Systems, Inc.The SSI Group, Inc.WithumSmith+Brown, P.C.

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PAST PRESIDENT2008-2009 Mary Kinsella, FHFMA2007-2008 Gordon Sanit, CPA, FHFMA2006-2007 Elizabeth Carnevale2005-2006 Jane C. Florek, CPA2004-2005 John M. Scanlan, FHFMA

EX-OFFICIOAll Past Presidents of the

Metropolitan New York Chapter, HFMADaniel Sisto,

President, Healthcare Association of New York StateKenneth E. Raske,

President, Greater New York Hospital AssociationKevin W. Dahill,

President & CEO, Nassau-Suffolk Hospital Council

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Chapter Officers and Board of Directors

Metro NY HFMA Newscast Schedule

Electronic Publication Date 10/24/10 1/24/11

Article Deadline for Receipt by Editor 9/19/10 12/20/10

Newscast Committee

EDITORS:Susan Montana, CPC-H, Editor

Marty Abschutz, CPA, Assistant Editor

COMMITTEE MEMBERS:

Kiran Batheja, FHFMA

Paulette DiNapoli

James G. Fouassier, Esquire

Artie Katz, CPA, FHFMA

Mary Kinsella, FHFMA

Wendy Leo, FHFMA

Mike McGrath, FHFMA

Andrew Natkin

Josephine Ross

Edmund P. Schmidt, III

Ken Sheridan

John Scanlan, FHFMA

Cynthia Strain, FHFMA

Newscast CommitteeKiran Batheja, FHFMA, Cindy Strain, FHFMA, Edmund P.

Schmidt, III, Susan Montana, CPC-H, Editor, Marty Abschutz,CPA, Assistant Editor, Ken Sheridan, Mary Kinsella, FHFMA,

Wendy Leo, FHFMA, John Scanlan, FHFMA

(Committee members not pictured – Paulette DiNapoli, James G.Fouassier, Esquire, Arnie Katz, CPA, FHFMA, Mike McGrath,

FHFMA, Andrew Natkin, Josephine Ross)

OFFICERS 2010-2011President Edmund P. Schmidt, IIIPresident-Elect John I. CosterVice President Palmira M. Cataliotti, FHFMA, CPATreasurer David EvangelistaSecretary Wendy Leo, CHFPImmediate Past President Cynthia A. Strain, FHFMA

BOARD OF DIRECTORSClass of 2010

Paulette DiNapoli Richard Nagy, FHFMARobert Jacobs David WoodsStacey Levitt

Class of 2011James G. Fouassier, JD, Esq. Donna SkuraJames Petty, FHFMA Gail SpiroMeredith Simonetti, FHFMA

President’s MessageEdmund P. Schmidt, III ............................................................................................................Page 5

Editor’s MessageSue Montana ...........................................................................................................................Page 7

Calendar of Events/Metro NY HFMA Planning Meeting......................................................Page 8

New MembersPaulette DiNapoli....................................................................................................................Page 9

Committee Listings 2010-2011...........................................................................................Page 10

“A Dime Or A Dollar”, Or “A Miss Is As Good As A Mile”James G. Fouassier, Esq. ........................................................................................................Page 12

HFMA Metro NY Annual Business Meeting .........................................................................Page 15

A Compliance Officer’s Perspective on the Fraud and Abuse Provisions of thePatient Protection and Affordable Care ActLaurie Radler ..........................................................................................................................Page 17

HFMA Region 2 Annual Fall Institute..................................................................................Page 19

What’s in the Middle of the Revenue Cycle?Ed Kerner................................................................................................................................Page 20


Health Law – Insurers, Hospital Face Audits For Health Care Reform Act SurchargesFrancis J. Serbaroli.................................................................................................................Page 24


Graduate Medical Education Reimbursement SeminarChristine Apicella and Tracey Roland ......................................................................................Page 30

The Six Stages of Fiscal RuinationCharles J. Pendola, CPA, ESQ., CFF, CFE, FHFMA, FACHE, CMC ............................................Page 32

HFMA Region 2 Mini-LTC......................................................................................................Page 34

Top 10 Ways to Maximize Collections Through Efficient Billing ProcessesLee Matricaria ........................................................................................................................Page 36

What is Long Term Care?Mark G. Heinemann ................................................................................................................Page 38

HFMC LTC - Phoenix, AZ .......................................................................................................Page 39

The Proportional Value of VolumeJames G. Fouassier, Esq. ........................................................................................................1

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I am honored to have been elected as the 2010-2011 President of the Metropolitan New York Chapter ofthe Healthcare Financial Management Association. Together with a great team of Officers and BoardMembers, we will continue to build on the achievements of the past while moving into the future.

The Chapter’s leadership team attended Leadership Training in April where we gathered more knowledgeand insight into HFMA and ideas to help our Chapter to meet the standards and achieve the goals thathave been set for us for the upcoming year. Many of our Board Members and Committee Chairs had theopportunity to attend the Region 2 Mini Leadership Conference and our Chapter Planning meeting inearly June.

While it may seem quiet in the HFMA world right now, there is much work and planning going on so thatwe will be ready to offer quality educational and social events for our members to participate in this year.

The General Education Committee is working to assemble a calendar of seminars and workshops for ourmembers and their organizations. The committee chairs will soon be having their individual committeekick-off meetings.

This year’s National theme is “Step-Up”. With healthcare reform all around us, we are challenged withoffering timely and informational seminars to our members. I encourage everyone to participate insetting up a seminar and to join a committee. Information on our committees can be found on ourwebsite at http://www.hfmametrony.org/ChapterInformation/BecomeInvolved/tabid/250/Default.aspx.

This year’s Annual Institute, our premiere educational event, will be held on March 10 and 11, 2011 atthe LaGuardia Marriott. Our Annual Institute Committee started planning after last year’s very successfulevent and has been working throughout the summer on this year’s program.

Social events are a good way to network with other members and to take a break from the busy office.We will be holding our Annual Golf Outing at the North Hempstead Country Club on Monday September20th and our HFMA Day at the Races will be held at Belmont Park on Friday October 22nd. Our SpecialEvents Program Committee will be planning many other events throughout the year.

Once again the Chapter Leadership is challenging all members to take the “Certification Challenge.”Whether you pass or fail the certification test, the Chapter will reimburse you for the cost. All you need

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to do is to submit a copy of the invoice that you paid for the test and you will bereimbursed. The Chapter also has a set of study guides that we will lend out to helpyou study. Please contact the Certification Committee for information on thelending library or the exams.

National HFMA will once again be conducting a survey of the membership towardsthe end of the year. Members will be randomly selected to participate in the surveyand they will not include the chapter leadership. The survey will reflect the responses of the membershipand it will be used as a planning tool. Our goal as a chapter is to receive only extremely satisfiedresponses. If you have any questions or problems that need to be addressed in order for you to respondextremely satisfied, please contact me directly at [email protected] so that I may work onresolving such issues.

For more information on HFMA, seminars, social events, job postings, sponsorship or volunteering fora committee, please visit our Chapter’s website at www.hfmametrony.org. The website is a valuable tooland it will help you stay connected with timely information and news.

Please feel free to contact me at [email protected] with any question or concern.

I look forward to serving as your President for the upcoming year.

Edmund P. Schmidt, III

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By Sue Montana

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I always feel like the summer is a time for recharging, learning new things and meeting new people - be it at work,home or with my HFMA colleagues. This summer is no different.

In this issue of Newscast I would like to congratulate all the 2010 – 2011 Metro NY HFMA newly elected ChapterOfficers and Directors, and welcome all my fellow volunteer Committee Chairs, Co-Chairs, Vice Chairs andCommittee members to another exciting year.

You will find a list of all the Chapter and Committee Leaders in the following pages. Please print out these pagesand use them as a reference tool for their names and contact information. These Chapter volunteers will bebringing you the quality, professional, educational and social events and programs you have grown to expectduring this Chapter year.

I would like to thank everyone who provided us with both complimentary and constructive feedback on the lastissue. It is with your continued input that we can work to make this a valuable publication that not only providesuseful information, but is fun to read.

In this issue we attempt to bring you a wide variety of material, including – yes, more pictures! HFMA has workwith photographer Dennis Hodge for many years and he does a wonderful job capturing important Chapter eventsand faces. Next time you see him, be sure to smile for the camera!

I would like to thank all our contributors. We received more articles than we were able to print for this issue!Hopefully we’ve got something for everyone, including information on compliance, healthcare law, physicianbilling and collections, long term care, and more pictures!

The purpose of this publication is to serve the membership. Towards that end, we encourage you to provide uswith your feedback – both positive and constructive. What would you like to see more of? Less of? New ideas?Please send them to me and I will share them with the Committee. You can either phone me at 631-244-5661,or email me at [email protected].

You can also email me, or any of the other Chapter and Committee Leaders, by going to the Contact Us tab onthe Chapter website www.hfmametrony.org.

2010 – 2011 IMPORTANT DATES

September 20, 2010 Golf Outing North Hempstead Country Club

October 13-15, 2010 Region 2 Institute Buffalo, NY

October 16, 2010 Past President’s Dinner Dance North Hempstead Country ClubCindy Strain

October 22, 2010 HFMA Day At The Races Belmont Park, NY

March 10-11, 2011 Annual Institute LaGuardia Marriott

May 15-17, 2011 2011 Leadership Training Conference New Orleans, LA

June 26-29, 2011 2011 ANI Orlando, FL

June 25-28, 2012 2012 ANI Las Vegas, NV

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Photos selected by Marty Abschutz Photographs by Marty Abschutz?

The Metropolitan New York Chapter of HFMAProudly Welcomes the Following New Members!

By Paulette DiNapoli, Membership Committee Chair

MetroNY HFMA is pleased to welcome the following new members to our Chapter. We ask our current membership to rollout the red carpet to these new members and help them see for themselves the benefits of HFMA membership. Encouragethem to attend seminars and other Chapter events. We ask these new members to consider joining a Committee to not onlyhelp the Chapter accomplish its work, but to expand their networks of top notch personal and professional relationships.See the list of MetroNY HFMA Committee Chairs, along with their contact information, listed in this eNewsletter. .

Kathleen AudaSr. VP/ Commercial Banking Executive,Bank of AmericaLaurie SimowitzChief Recovery Officer, NYC HHC JacobiMedical Center / NCBMichael LamotheFund Coordinator, MSKCCTina ThiaraMgr, Financial Ops, Long Island Jewish MedicalCenterRebecca L JohnsonHealthcare Management Analyst, Milliman, Inc.Michael BurgerAssociate Director - Credit Analyst, FitchRatingsLindcy Mariel LadraTricia L. ScheurerDirector of Finance, Royal Health Care LLCCristin LavelleVera UkpabiInessa SableBilling Administrator, Pier 17 ProfessionalMedical MgmtBaxter WassonVincent P. PipiaChief Finance Officer, Ivolution MedicalSystemsKaren S. PolignaniTariq HalepotaVijay M. KumarDeutsche BankKeith BernardCredit Analyst, BC Ziegler And CompanyAndrea SmithMedical Biller, Island Pulmonary Associates, P.C.Christina SantulloAccount Manager, Quality Billing Service, IncCarolyn SommerIsland Pulmonary Associates

William A. HechtPartner, William A. Hecht, PCConcetta M. TepeDirector of Revenue Finance & Compliance,Concorde Medical GroupTammy LawlorPartner, Miller & Milone, P.C.Connie DeckerDirector of Patient Accounts, Miller & Milone, P.C.Ashraf MalikSenior AssociateJose L. CornielleRevenue Cycle Manager, Columbia PresbyterianPathologistAndrew WeingartnerConsultant, Jzanus Consulting, Inc.Jeanette BrownDirector, Client Development, SomniaAnesthesiaHarold GartnerChief Executive Officer, US Healthcare FinancialGroup, LLCDaniel S. GreenInternal Audit, Memorial Sloan KetteringCancer CenterSarani BanerjiAssociate Director of Financial Planning,Visiting Nurse Service of New YorkMary EnquistRevenue Cycle Management Analyst, NYULangone Medical CenterBrian MallonConsultant, Jzanus Consulting, Inc.Collin T. IvoryController, All Metro Health CareThomas B. ShawDirector, CBLPath, Inc.Colin C. KasperAsst Director of Managed Care, MediSys HealthNetwork

Roseann IovinoMedical Biller, Island Pulmonary Associates, P.C.Patricia MarquitMedical Billing, Island Pulmonary Associates, P.C.Waseem AkhtarProject Analyst - Patient Accounts, MemorialSloan-Kettering Cancer CenterPik Shen MuiDirector of Budget, New York Eye & EarInfirmaryStephanie AxmanProject Manager, North Shore-LIJ Health SystemBrett RudinAnalyst, North Shore - LIJ Health SystemMichelle AlbaneseFinancial Analyst, North Shore - LIJ HealthSystemLeandra OsborneSenior Accountant, North Shore - LIJ HealthSystemDan ChumskyPresident, CompuMED Billing SolutionsPeter CostalasCPA, Supervisor, Supply Chain AnalyticsAliceanne DrosihnSr. Accountant, Winthrop University HospitalEdward SmithDorothy SliszNetwork Contract ManagerLaura L. CatlettTax Senior Mgr., Deloitte Tax LLPMary D MalcolmVP, Senior Marketing Manager, JPMorganLinda O'TooleCollection Manager, MBI Associates Inc.Christopher HammondDirector, Internal Audit, HealthFirst

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Advisory CouncilCindy Strain

[email protected](516) 796-3700

Mary Long [email protected]

(212) 297-5445

Gordon [email protected](516) 918-7065

Kiran [email protected]

(718) 604-5578

52nd AnnualInstitute

Wendy [email protected]

(516) 454-0700

David [email protected](212) 979-4566

Bob [email protected](516) 616-0200 x201

Jim [email protected](631) 761-1028

AuditingGordon Sanit


Al [email protected](914)365-3500

BylawsWendy Leo


Fred [email protected]

(516) 393-2250

Ed [email protected]

516-633-1003

Cindy [email protected](516) 796-3700

CentralRegistration

Robin [email protected](516) 338-1100 x314

Diane [email protected]

(516) 391-8003

CertificationCoaching


John [email protected]

(718) 283-3911


(718) 604-5578

Art [email protected](212) 226-8866

Certified MembersKiran Batheja


Michael [email protected]

(516) 656-5374

CommunityOutreach

Josephine [email protected]

(516) 248-2422

Continuing CareGary Carpenter


Corp. Compliance/Internal Audit

Laurie [email protected] 646-227-4475

Roger [email protected]

646-458-5601

CPE’sJohn Scanlan


DCMS/BalancedScorecard

Diane [email protected]

(516) 391-8003

Robin [email protected](516) 338-1100 x314


516-633-1003

John [email protected](516) 240-8147

Exec. Comm. &Planning



516-633-1003

Finance/Reimbursement/

Audit

Rich [email protected]

Mario [email protected]

516-705-1936

Kwok [email protected](212) 979-4324

Rachele [email protected](646) 227-3156

Founders AwardsPaulette DiNapoli


GeneralEducation

Meredith [email protected]

(631) 465-6877

Stacey [email protected](646) 732-5052

Rachele [email protected](646) 227-3156

Maryann [email protected]

(516) 576-5601

HIM/URAnnie Lemoine

[email protected](516) 326-0808 x3312

HistorianMichael McGrath


Peter [email protected](718) 670-1951

Committee Name Chair Co-Chair Vice Chair 1 Vice Chair 2

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Legal AffairsFred Miller


Managed CareDonna Skura


James [email protected]

(631)638-4012

MSPMichael McGrath



(718) 604-5578

MembershipMarketing

Paulette [email protected]

(917) 418-5911

Stacey [email protected](646) 732-5052

Megan [email protected]

(718) 702-3405

Medical Grp. Mgt.Jackie Namwila


Josephine [email protected]

(516) 766-0521

MISNicole Terrenzio

[email protected](212)710-2215 x 329

NewscastSue Montana


Marty [email protected](732) 906-8700 x 109

Paulette [email protected]

(917) 418-5911

Wendy [email protected]

(516) 454-0700

NominatingCindy Strain


Patient FinancialServices

Gail [email protected]

(718) 283-6774


Maryann [email protected]

(516) 576-5601

Jason [email protected](212) 297-4549

PPDDWendy Leo


Roe Vella [email protected]

(516) 454-0700


Webmaster andPersonnelPlacement

Mary Long [email protected]

(212) 297-5445




516-633-1003

Public Relations &Communications

Megan [email protected]

(718) 702-3405

Annie [email protected](516) 326-0808 x3312

Zach [email protected] x441

Region 2Mary Long Kinsella


Ryan AwardCindy Strain



516-633-1003

SocialEvents


(718) 604-5578



SponsorshipMichael McGrath



516-633-1003


Yerger AwardDana Keefer


Julia [email protected]

(718) 589-2232

Committee Name Chair Co-Chair Vice Chair 1 Vice Chair 2

“A Dime Or A Dollar”, Or“A Miss Is As Good As A Mile”By James G. Fouassier, Esq.

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In the companion to this article, “The Proportional Value ofVolume,” I posed the rhetorical question of whether you everthink about the “value” of the volume you anticipate receivingfrom a particular participating network contract. In thisarticle I also ask a rhetorical question (today is “RhetoricalQuestions Day”): do you ever think about the “value” ofcollecting most (if not all) of your negotiated contract ratefrom the third party payor, and how much the value of thatrate is diminished when you bear the risk that a larger andlarger piece of it may have to be collected from the member-patients themselves? In other words, do you think about how“high deductible” products will cut into your margin?

“Volume and prompt payment”; that’s what the managed careplan folks say it’s all about. Yet everything we read tells usthat managed care organizations will be offering more “highdeductible” products as times get tougher; it’s one of the fewways that a plan can appear to offer a full menu of serviceswhile keeping premiums “affordable” (that is, at premiumsthat the market will bear). These products may includehealth savings accounts but, remember, they don’t have to;by law an HSA must be linked with a “high deductible”consumer directed product, but not vice versa. This meansthat more and more of your rate will have to be collectedfrom the member-patient and not the plan or institutionalpayor. When you contract to go par with a plan that offers(or will offer) a “high deductible” product, remember whatyou really are doing: discounting a rate to the member andnot just to the plan. “What’s the beef,” says the plan rep, “itsjust like the old indemnity days.” No; it’s not. In those goodold days, if you had to chase the member, at least you werechasing after full charges, not some deeply discounted rategiving you a margin of only a few points. Nowadays providersare pushed to the limit to agree to deeply discounted ratescombined with a variety of technical denial pitfalls that neverexisted in the old indemnity days, and then are expected togo after patients for significant parts of those alreadyinadequate rates. A great deal for someone but not for aprovider.

Even with an HSA, which the plans promote as a panacea,the whole scheme is still pretty “iffy”. The mechanics of the

administration of an HSA itself arevague and vary from plan to plan.Maybe the plan will set up anelectronic verification of balances, maybe not (and even if itdoes, guess who has to pay for all the new technology?).Maybe the plan will piggyback with a bank and set up a debitcard management arrangement; then again, maybe not.Maybe the member or his employer just sets up a statementsavings account at the local bank branch. Who knows?Then, to add insult to injury, after all your efforts to collectthat ever growing member share your finance people tell youthat you can’t include the bad debt as “uncompensated care”for “pool” purposes because the patient had insurance!!

How about an example; something we sometimes used to seein the good old indemnity days? The payor participates in amanaged care agreement with your facility via your contractwith the PPO. The member-patient’s account incurs $15,000in actual charges for a four day stay. Your hospital bills thePPO, which reprices out the claim at $3000, as per thecontracted rate in your participating provider agreement.The PPO advises the payor of the amount due. As per theparticular benefit design which the member’s employerelected for the employees (either by paying premiums or bypaying into a fund), the payor applies the $3000 costagainst the member’s $10,000 deductible, reduces thedeductible balance to $7000 for future claims, and advisesthe member to pay your hospital $3000. Now, contemplatefor a moment the effect of the application of the contractedrate to the member’s deductible. The member could beadmitted to your hospital on three separate occasions, eachfor a four day stay, without the payor ever paying one centof its money to the hospital. Each time the hospital mustlook to the member to pay for the stay. Remember – the legallimit on the amount of the deductible applies only if the highdeductible plan is linked to a “qualified” health savingsaccount, meaning an HSA that qualifies for the tax benefit.There is no legal requirement that a high deductible planhave an HSA component, or that the HSA component actually“qualifies” for the tax deduction. This hypothetical is notonly possible; its already happening.

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Forgetting for a moment the time and staff needed for all ofthis aggravation, just how much of your rate’s “value” isdiminished by all of this?

Can you simply exclude a high deductible product from yourcontracts? Yes; in theory and if you can afford to lose theHMO. If you contract with a PPO, TPA or ASO, however, thedirect payers (not the PPO itself) may have a variety of highdeductible options included among many different limitedbenefit designs they offer to their members and that theywant the PPO to administer. Consequently, it isn’t possiblefor the PPO to exclude high deductible / HSA products fromthe scope of your participation agreement because the PPOcannot agree to exclude access by every constituent payorthat has any high deductible product among its many benefitoptions. Any PPO doing this effectively contracts itself outof the market. So, in reality, your choice is simple: youeither refuse to contract with a managed care entity thatdoes not bear risk (which usually means you contract onlywith HMOs) or else you figure out a better way toaccommodate the risk and live with the high deductibleproducts as they come in the door.

The Kaiser Commission Report on Medicaid and theUninsured, issued several years ago but every bit as relevanttoday, was a harbinger of the issues we now are starting tosee. It identified a number of significant concerns about theshift into HSA-qualified high deductible health plans. Thereport in its entirety is still worth reading.http://www.kff.org/uninsured/upload/7568.pdf Germane tothe discussion at hand is the following:

“The potential out-of-pocket costs in HSA-qualified highdeductible plans could be much higher than those intraditional insurance. For example, looking just at low-income, privately insured adults who had any medicalexpenses in the year prior to the introduction of HSAs(2003)—half of them had total medical expenses of atleast $1,079 with $265 of these costs paid out-of-pocket.If these individuals enrolled in an HSA-qualified HDHP in2006 (and used health services as they had before, at thesame cost) their out-of-pocket liability with the minimumdeductible could potentially increase several fold. By law,the minimum individual deductible in 2006 is now $1,050,however, average deductibles are about two to three timeshigher than the required minimum, depending on whetherthe plan is in the group or nongroup market.

“Premiums and out-of-pocket costs for HSA-qualifiedhealth plans would consume a substantial portion of a low-income family’s budget. Low-income is commonly definedas a family income less than twice the poverty level (equalto $30,134 for a family of three in 2004). For purpose ofexample here, we use the average income for families withincomes between $20,000 and $30,000, which was$24,767 in 2004, to portray a household budget. Afterbasic housing, food, and transportation expenses for anaverage family in this income range, only about $6,000remains for other household expenses, such as child care,clothing, educational costs, taxes, various kinds ofinsurance, and out-of-pocket health care costs.” KaiserCommission Report, id., page 9.

It’s pretty evident that, in many more cases that we wouldcare to anticipate, a provider will have pursue a patient tocollect anything more than a few dollars.

The best offense, obviously, is improved methods tomaximize “up front” collections in non-emergency situations.That will require significant redesign in policy and procedureas well as expensive improvements in technology.Suggestions include:

- 100% collection of copayments and deductibles;- Accurate determination of remaining balances based on“real time” access to contracted rates and plan benefitterms;- Preparation and presentation of “estimate”; and- Demand for payment in advance of procedure or service.

No one can argue with these recommendations. Doing all ofit, doing all of it well and collecting all of it up front certainlyare goals to which all providers aspire. None of the expertstakes the discussion to the next level, however: what to dowhen we can’t reach these goals? What do we do when aprovider, due to the nature of the contemplated treatment,simply cannot generate an accurate estimate? What aboutif the patient is unable or unwilling to pay the estimate upfront? Do you cancel his scheduled procedure (and bear thewrath of the admitting physician)?

At the end of the day, what does this all mean ? In two words,“greater risk”. Plans will sell more product that employergroups can purchase and self funded groups can join at lessexpense. These customer groups will push back ever largershares of health care costs onto their members to keep their

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own costs down. Members have greater out of pocketexposure and, as a consequence, providers have a greaterrisk of not collecting those amounts.

If we conclude that we really can’t opt out of these productlines, how to we manage some of this risk? One answer isto get the plans to agree to share some of it with us. Whyshould the plan share the risk ? Because the managed careorganization is selling a lot more product (or signing up lotsmore payors) by offering lower rates as it shifts morefinancial exposure to the member and the provider (all thewhile maintaining levels of profit, shareholder dividends andexorbitant executive compensation packages). Why shouldthe MCO benefit from a “windfall” by not having to pay, ornot having its constituent payor pay, a large part of the claimif, at the same time, the provider cannot collect from themember? This strategy may work with an HMO or otherrisk-bearing payor. The big issue with PPOs, however, is thestandard lament that the PPO is not risking its own moneybut only “administering” claims processing and makingpayment from the funds of its constituent payors. So workingout some way to invest the plan in the “risk” without riskingits own money will require some pretty fancy dancing.

Another way to go is to insist that the plan put some teethinto the duties the payor assumes when it signs up with theplan and the member assumes when he or she joins thegroup. Two suggestions come to mind. First; when themember signs up he or she is agreeing to all of the termsand conditions of the program’s benefit design, including theobligation to pay the copayments and deductibles. In effect,the failure of the member to pay is a breach of the member’senrollment agreement and allows the plan or the group todrop the member – if it wants to. A clause in the provideragreement requiring the plan to do just that - drop thedefaulting member - and to obligate its payors to do thesame, would work wonders. The language could require theplan to notify the member that his or her failure to pay thecopayment or deductible required by the enrollmentagreement with the health plan may result in his or herdisenrollment. (This is legally quite complex and a providershould not attempt to implement any such strategy withoutthe assistance of experienced legal counsel.) Second;consider trying to incorporate a contract clause holding thatthe failure of the member to pay any member responsibleshare will allow the provider to seek payment from themember at full charges. How can this be structured? A

percentage basis presents the most practical solution. Thepercentage of the total member responsible share as againstthe contracted rate which remains unpaid as of the date theaccount goes to collection is converted into a percentage ofactual charges, and that percentage is what the provider isentitled to pursue. This does not preclude consideration ofthe member’s circumstances for financial hardship or evencharity care (depending on what your facility’s policies maybe), which can be worked off a balance based on fullcharges, but instead is a “starting point” that will discouragethose who can afford to pay, reflecting the economic realitythat the provider is being denied the benefit of its bargain(prompt payment of its full rate) when the member does nothonor his or her obligations. (Again, consult your legalcounsel to be sure that no “hold harmless” laws or contractclauses are being implicated, especially with regard to HMOmembers.)

The sad part in all of this is that managed care organizations,while protesting that they want to work with their providersin addressing the issues, are not likely to budge on either ofthese suggestions. Plans do not want to expose any revenueto risk, not even the amount generated by one monthlypremium for one member. Even if a suggestion does notexpose the plan to any direct financial risk it may makecertain products less attractive to a potential customer. Thistrifling difference may be enough to discourage agreement.Perhaps, at the end of the day, the only real remedy will comevia legislation. That way, no plan is under any competitivedisadvantage and every plan and payor group knows justwhat is required in the context of “high deductible” products.

PS – By the way, just what is a “high deductible” product?Putting it another way, what is a “traditional” copayment ordeductible? Picking an arbitrary dollar amount may workfor an inpatient encounter but be way off base for anoutpatient encounter, or vice versa. A percentage, with orwithout a dollar amount as a “floor”, may be one way to go.It’s a good idea to think about this in the overall context offashioning a proposal before the issue comes up in yourdiscussions with your plan partners.

James Fouassier, Esq. is the Associate Administrator ofthe Department of Managed Care at Stony Brook UniversityHospital, Stony Brook, New York. His opinions are his own.He may be reached at: [email protected]

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Photos selected by Marty Abschutz Photos by Dennis Hodge

A Compliance Officer’s Perspective on theFraud and Abuse Provisions of the PatientProtection and Affordable Care Act(PPACA) and Health Care and EducationAffordability Reconciliation Act of 2010By Laurie Radler

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As compliance professionals sift through the varioussections of the PPACA and the Reconciliation Act, one thingis clear – reform will mean more responsibilities, moreoversight, more scrutiny from regulatory and private sourcesand more opportunities for financial settlements, fines andpenalties. In a climate of shrinking state and federalreimbursement, these new responsibilities will notnecessarily translate to new resources for the compliancedepartment. Whether the compliance officer sits at a payer,provider, medical device company or pharmaceuticalmanufacturer, there will be many challenges in the yearsahead.

Think of reform as program integrity… on steroids.Compliance programs are now mandatory, for everyone. Thedefinition of criminal health care fraud is amended in law towhere now the Government does not need to prove intent toviolate the Health Care Fraud Statute or even prove that anentity or individuals had knowledge of its provisions. Also,A False Claims Act violation has now been expanded toinclude violations of the Anti-Kickback Statute, the Food,Drug and Cosmetic Act and even certain provisions of theEmployee Retirement Income Security Act (ERISA). And ifthe increased activity in the realm of criminal violationswasn’t enough cause for concern, civil enforcement has beenstepped up as well. This “new world” is not just aboutbilling accuracy as much of the government efforts andemphasis have been in the past; rather the focus is expandedto include relationships, reporting and transparency thatmay not have any direct financial impact to a state or federalprogram.

The May 2009 Fraud Enforcement and Recovery Act (FERA)expanded the definition of the False Claims Act to includeretention of overpayments. PPACA requires that once anoverpayment is identified, it must be returned within 60 days(or by the date that the corresponding cost report is due)and the entity must notify the Secretary (of the Department

of Health and Human Services), the State, the contractor,intermediary or carrier in writing regarding the reason forthe overpayment. This will be a major challenge for theentire industry just to implement for overpayments on claims– add in payments for services in violation of the Stark law(with certain exceptions), payments for services where theorder for the service was induced by a kickback, creditbalances (time to revisit your entities procedures here), orservices that are provided by excluded persons or byexcluded ordering providers – this will not be easy.

What is more interesting is that reform will requireorganizations and compliance officers to become moreoperationally focused with respect to the definition andunderstanding of what constitutes compliance andpotentially less “independent”. For example, it is imperativethat the compliance program and compliance professional(s)thoroughly understand and contemplate within the entity’scompliance activity the patient accounts department and theprocesses related to posting payments, identifyingoverpayments, credit balances, reconciliation of accounts,etc. It is also imperative that the compliance program andprofessional(s) take an active role in understanding theentity’s responses and trends regarding Medicare AdditionalDevelopment Requests (ADRs) and other pre-and post-payment audit requests and findings.

Compliance officers hear about and often preach theimportance of ensuring the entity has a thorugh andinformed understanding of its data; specifically, how doesmy organization look and compare with peers to an outsideobserver and being prepared to address and defendvariances and trends. However, the expertise to dosophisticated data analysis is often limited to one or a fewpeople who many know sophisticated software programs, ifany, and who have limited time to focus on such activity. Inthis “new world” the ability for an organization toconsistently and contemporaneously mine its data and have

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organizational awareness of what is the very core of thebusiness activity within the entity has never been moreimportant. The Centers for Medicare and Medicaid Services(CMS) is bring just such a capability to bear for all providersacross the country developing an “Integrated DataRepository” to bring all Medicare and Medicaid claims datainto one central place. This will enable all federal agenciessuch as the OIG, DOJ, CMS, etc to perform proactive datamining to seek to identify trends, outliers, clinicallyinconsistent and high volume billings and the like. Anyonein a state like New York understands that data mining is amajor activity for the state regulatory enforcementdepartment of the Office of the Medicaid Inspector General’s(OMIG’s). Staying ahead of the curve is key.

Here are some specific new issues that which companyexecutives, board members and compliance professionalsneed to be intimately familiar:

Compliance programs are mandatory. For nursing homes, acompliance program with timeframes for implementation isset forth in the Act itself. Criminal background checking forenrollment as a Medicare or Medicaid provider will berequired.

OIG subpoena authority is expanded. The OIG has beengiven the authority to obtain “any supporting documentationnecessary” if it is for program integrity. Even withoutsubpoenas, a Civil Investigative Demand (CID) notice whichallows requests for documents, interrogatories, the takingof sworn testimony, etc. can be issued by all US AttorneysGeneral. The use of CIDs has already begun.

The RAC program is going strong and will be expanded againby December 31, 2010 to include Medicaid and MedicareParts C&D.

Had enough? Not so fast. Let’s now focus on transparency– the buzz word of this new chapter in healthcare.

Beginning March 31, 2013, manufacturers of drugs, medicaldevices and biologicals will be required to report paymentsor other “transfers of value” made to “covered recipients”(including physicians and teaching hospitals” duringcalendar year 2010. Manufacturers and GPOs must reportany ownership of investment interests that a physician ormember of the physician’s immediate family holds in thatentity, exclusive of publically traded securities or mutualfunds.

Fines and penalties for failure to report can range from$1,000 - $10,000 for each arrangement not reported with a$150,000 cap per annum; knowingly failing to report canresult in penalties of $10,000 - $100,000 per eacharrangement or relationship with a $1M maximum perannum.

PBMs and health plans also have reporting requirementsthat begin on or before April 2012. These are aggregatereports not intended to give away trade secrets, but the datais still extensive (% mail vs retail; chain vs independentpharmacy; generic utilization; price differentials orconcessions, rebates, discounts, etc.)

Fines and penalties for failure to provide this informationtimely are $10,000/day or up to $100,000/day for knowinglywithholding the information.

*****

In summary, for a compliance officer, a very difficult job hasnow been made infinitely more difficult. There is much toknow, much to digest in these new Acts and how CMS willultimately translate Congress’ intent into regulation.Compliance officers are now auditors, policy makers,trainers, sometimes document managers, listeners,reporters, and liaisons to other departments with regulatoryresponsibility (e.g., quality). However, post passage ofhealthcare reform, compliance officers are first andforemost, TEACHERS. Teachers to their executives andboards about the implications of specific reform Act issuesthat directly impact your organization and a voice for theneed to develop/advance compliance activity to ensureorganizational stability in the wake of an inevitableregulatory agency inquiry.

Laurie Radler is a director in Navigant's healthcarepractice. Laurie has over 30 years of broad-basedexperience within the healthcare and health insuranceindustries. Laurie is a registered nurse and received herBSN at Columbia University School of Nursing, and herMPA in healthcare finance at the Wagner School of PublicAdministration at New York University. Laurie may bereached at 646.227.4475 [email protected]

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hfma region 2 annual fall institute:“Step Up” to the Future: Healthcare Reform Opportunities

october 13 - 15, 2010DDOONN’’TT MMIISSSS TTHHEE PPRREEMMIIEERR HHFFMMAA RREEGGIIOONN 22 EEVVEENNTT,,

TTHHEE AANNNNUUAALL FFAALLLL IINNSSTTIITTUUTTEE.. CCOOMMIINNGG TTOO TTHHEE AADDAAMM’’SS MMAARRkk HHOOTTEELL--BBUUFFFFAALLOO!!

Partake in the Preconference reception – ‘buffalo style’. (includes chicken Wings, beef on Weck, and a “meet & greet” with steve tasker).

”step up” with Debora Kuchka-craig, national hfma chairman

enjoy a health care reform Panel Discussion, moderated by richard l. clarke, hfma President & ceo.

select from 9 great breakout sessions

features tWo outstanDing Keynote sPeaKers that you Will not Want to miss!

michael leaVitt – U.S. Secreta of Health and Human Services (2005-2009), and Administrator,Environmental Protection Agen (2003-2005).Mr. Leavi is a powerful voice for global health diplomacy, and will share his insights into howthe public and private sectors should join together to solve the health care crisis.

steVe tasKer – Former Buffalo Bills football player and currently NFL Color Analyst and SidelineReporter for the CBS Television Network.Steve is widely considered to be the National Football League’s greatest special teams player of all-time. He is the only true special teams player to be selected as the NFL Pro Bowl’s Most ValuablePlayer. Together with his family, Steve makes numerous appearances on behalf of charities.

refer to conference brochure for more information!www.hfma.org/site/emeetreg/main/mtginfo.cfm?mtgcode=10reg2

What’s in the Middle of the Revenue Cycle?By Ed Kerner

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Like any good movie, book, play, TV show, a truly successful plot usually has a great beginning, and climatic finish. Thereis no better experience, than becoming engrossed in a story that immediately grabs your interest, and gets you excited tosee what happens next. However, after a promising start, a common viewer experience is that “it really dragged in themiddle”, which detracts from the full product offering. As much as a director might attempt to try alternative endings,different camera shots, add exciting special effects spectacular to give the end some “oomph”, the middle, not pulling itsweight, did have an overall impact on the quality of the experience and the end result.

Similarly, a health care organization which strives for excellence in Revenue Cycle processing, might indeed have a strongfront end process, where it excels in accurate data capture, insurance verification, thoroughness in obtaining all requiredauthorizations, referrals, pre-certifications, and does exemplary work around the collection of co-pays. It has equally strongback end processes, producing error free bills and invoking best practice in follow up and collections. However, if not allcharges are collected, or incorrect charges are selected and or invalid billing codes assigned, or bills are delayed frombeing submitted as they were never coded, the ability to get paid quickly and accurately will be jeopardized: End of story!

What Revenue Cycle Operations DoMontefiore Medical Center is a 1500+ bed tertiary teaching facility in the Bronx, NY. With in excess of $2.7 billion dollarsin net patient revenue per year, it ranks as one of the largest not-for profit facilities in New York. In a facility as large asMontefiore’s, the need was identified to create a department who could effectively manage and facilitate projects with a focuson key components in the middle of the Revenue Cycle:

• Charge captureo Ensure that departments have system and processes in place, where they perform daily, weekly and month endreconciliations to reconcile daily visits and tests to charge capture for billing. If charges are not captured, this willaffect revenue generation, accurate reimbursement and claims submission.

• CDM maintenance and pricing strategieso The charge master must be kept current to conform to regulatory requirements, so that new, revised or deletedcodes are correctly reported and assigned to the services performed. Prices for items on the CDM must be basedon a defensible model and be reviewed and updated regularly to ensure that charges are comparable to establishedfee schedules.

• Encounter form revisions and reconciliation processo Encounter forms must reflect the actual services being rendered in a distinct location, and are used by cliniciansto select the specific codes that match the treatment. The level of specificity of these codes in the reimbursementarena additionally translates to accurate reimbursement. Additionally, do routine checks to ensure that the mostcurrent codes are reflected on the encounter form, is the best defense to prevent claim denials.

• Coding reviewso Continually auditing and sampling coding to ensure accuracy of assigned codes from a compliance perspective,helps mitigate risks associated the external audits. Additional focus on medical necessity support and training witha goal of reducing incorrectly coded tests which inflate write offs.

• Monitoring and assisting with focused reductions to unbilled A/Ro Build a bridge between the billing and medical record departments to review work flows and reporting to focuson expediting claim submission.

• Project Management support for documentation initiatives throughout the organization

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o Many of the documentation integrity projects are so interdisciplinary in their complexity and interactions withnursing, physicians medical records, requires staff with a good knowledge of all the component parts, and whocan assist in identifying process flow revisions and building the meaningful metric reporting for tracking.

• Assume lead role in major Revenue Cycle Initiatives o Since majority of operational areas are focused on their daily jobs, pushing through many of these initiativerequires a dedicated Team that can assist with the projects and also assess and correct when necessary.

Most crucial was the need to have a department that could serve as a liaison to the “front end” and “back end” revenue cycleareas, facilitating issue resolution, and enhanced communication between the affected Teams. Staff in this area have builtsolid relationships with many of the clinical sites, and are counted on to communicate issues or changes that have atremendous impact on the revenue cycle processing. Additionally, through the creation of a formal tracking of servicerequests with billing, we are able to affectively identify root cause issues and either update systems, process or offer trainingto assist in identifying additional resources available to fix a claim.

The EpilogueIn the movie “Field of Dreams”, who can forget the angelic-like distant voice Kevin Costner heard encouraging him to “Buildit and they will come”, meaning the ball field will create an opportunity for legends of the past to relive their dreams.Unfortunately, in the Revenue Cycle arena, to “Bill it and they will Pay”, will not come to fruition when you don’t have thecorrect CPT code for Venipuncture, and what a nightmare that could be.

Ed Kerner is Director of Revenue Cycle Operations at Montefiore Medical Center. He can be reached [email protected].

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Health Law – Insurers, Hospitals Face Audits ForHealth Care Reform Act SurchargesBy Francis J. Serbaroli

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September 30, 2009

In its continuing efforts to maximize revenue collection,New York State has been aggressively auditing insurers todetermine if they have accurately paid statutorysurcharges on bills for medical services provided topatients by licensed facilities such as hospitals, clinics,ambulatory surgery centers, and other providers. Thesesurcharges were mandated by the Health Care Reform Actof 1996 (HCRA), and they apply not just to traditionalhealth insurers and managed care plans, but to all insurersthat provide coverage for medical services provided inhealth care facilities. These include property and casualtyinsurers, Workers' Compensation carriers, automobile no-fault insurers, and others. They also apply to hospitals andother licensed facilities. We offer here a primer on theHCRA surcharges, how these audits are being carried out,and pitfalls to avoid.

HISTORYFrom 1983 to 1997, the State of New York strictly regulatedinpatient hospital reimbursement rates under what wasknown as New York's Prospective Hospital ReimbursementMethodology (NYPHRM). Under NYPHRM, the statesubsidized losses incurred by hospitals that wereattributable to uncompensated care, known as Bad Debt andCharity Care (BDCC), for those hospitals that had higherrates of charity services. The program also subsidizedapproximately 40 percent of the costs of graduate medicaleducation (GME) residency programs in New York. NYPHRMfinanced both BDCC and GME by setting fixed rates thathospitals could charge for in-patient procedures. There wasno competitive rate negotiation.1

In 1997, NYPHRM was abolished in favor of the HealthCare Reform Act, or HCRA. HCRA deregulated the hospitalreimbursement system, allowing rates to be negotiatedbetween hospitals and payors. However, in order tocontinue funding BDCC and GME, HCRA imposed asurcharge on most in-patient hospital procedures, as wellas medical services provided in licensed clinics and otherfacilities.

PAYMENTSPayors, such as insurance carriers, managed care plansand third-party administrators (TPAs) of employer self-insurance plans have a choice as to how they remit thesesurcharges. They may choose to pay the surchargesdirectly to the hospital or other provider. Alternatively,payors may elect to pay the surcharges directly to an HCRApool administrator designated by the Department of Health(DOH).2

Payors (including self-insured entities) that choose toremit payments to the provider, instead of directly to thepool, must pay a surcharge of 9.63 percent on the cost ofpatient services to fund BDCC.3 They must also pay asurcharge to fund GME, the percentage of which varies byregion based on the number of GME programs that eachregion supports. Finally, payors who do not elect to remittheir surcharges directly to the pool administrator mustpay an additional 28.27 percent on each provider claim.The provider must then remit these surcharges to the DOH-designated pool administrator, but the provider is allowedto keep 2 percent of the 28.27 percent hospital claimsurcharge.4

If payors elect to pay the pool directly, the 28.27 percentper claim hospital surcharge is waived. Moreover, the basisof the calculation for the GME surcharge converts to aCovered Lives Assessment (CLA), based on the number ofnon-Medicare eligible covered persons or families residingin a particular region, as well as the number and size ofteaching hospitals in that region. These payments aremade per member, per month. Electing payors are subjectto DOH's reporting and auditing requirements to verify thatthe HCRA surcharges have been fully paid.5

SURCHARGED SERVICESComplicating things further, some medical services aresurchargeable, while others are excluded from thesurcharge. Surchargeable services include both inpatientand outpatient hospital services, emergency services,ambulatory surgery, and other health-related services.Excluded from surcharges are payments for services

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provided in residential health care facilities, adult day careservices, hospice and home care services, and physician orfaculty practice services.6 Any services provided topatients covered by the Medicare program are also exemptfrom surcharges.

Services provided by diagnostic and treatment centers andambulatory surgery centers are generally surchargeable.Exceptions include services to Medicare beneficiaries,services to HMO members but only if the HMO operatesthe center, and all private physician services that areseparately billed.7

Laboratory services are surchargeable for inpatient andemergency room admissions (including pre-admissionlaboratory testing), as well as scheduled outpatient clinicservices when ordered either by hospital employees orcontracted providers who are providing direct patient careat the hospital or diagnostic and treatment center.Excluded from HCRA surcharges are laboratory services toMedicare beneficiaries, services to HMO members (if theHMO operates the laboratory), and laboratory testsperformed on samples drawn or collected outside of NewYork State.8

AUDITSThose payors who elect to remit HCRA surcharges directlyto DOH's HCRA pool administrator (thereby waiving theadditional 28.27 percent surcharge) must submit to theDOH's auditing requirements. The DOH's objective inmandating HCRA compliance audits is to determinewhether payors have reliable information technologysystems, processes and controls in place to ensure theaccurate calculation and payment of HCRA surcharges. Ifthey do not, DOH will assess any underpayments so thatthey can be corrected.9

The audits usually, but not always, cover a six-year period.DOH does not conduct these audits itself, but contractswith outside auditing firms, such as KPMG, to performpayor as well as provider compliance audits.10

The protocol for assessing whether HCRA surcharges haveaccurately been applied and paid begins with a review bythe auditing firm of the payor's processes and proceduresfor determining its direct surcharge obligations. Eachaudited payor is required to complete a questionnaire—created by the auditing firm and approved byDOH—describing the payor's internal process fordetermining its surcharge obligations.11

After receiving the completed questionnaire, the auditing

firm reviews the responses for accuracy by examining alldata and documentation provided by the payor for the yearunder review. If the data and documentation providedcannot be used for compliance audit testing, the auditingfirm must notify DOH. In addition, the auditing firm mustthen describe to DOH the alternate procedure it plans touse to verify the accuracy of the payor's surchargepayments, as well as quantify any underpayments ofsurcharges.12

The auditing firm conducts interviews with payor personnelat various levels within the organization for the purpose ofreviewing the policies and procedures that the payor has inplace for completing monthly surcharge reports for theapplicable audit period. The auditing firm examines thesepolicies and procedures to determine how the payorprocesses claims, applies the surcharges, and remits themto the HCRA pool. Additionally, the auditing firm reviewsthe manner in which the payor identified non-claims basedpayments (such as CLA payments), and payments madepursuant to advance payment, capitation and/or financialrisk-sharing arrangements for surcharge paymentpurposes.13

CHECKING ACCURACYThe payor must also provide the auditing firm with itscertified financial statements for the year under review.The auditing firm then reconciles the certified financialstatements (or those from the previous year, if thestatements from the current year are unavailable) with thepayor's books and records. These books and records musttie out to the payor's HCRA reports in order to be deemedreliable by the auditors.14

The auditing firm then performs a test of the payment datathat is reflective of the total mix of surchargeable services,and inclusive enough to draw a valid conclusion. This testis intended to identify services for which the payor did notcollect surcharges, or did not collect them at the properrate. For services where a surcharge was appropriate butnot applied, the payor is asked to explain the error, as wellas to disclose all underpayments. Similarly, in instanceswhere a surcharge was not applied, the payor is asked toprovide proof that the claim was not surchargeable—sometimes in a format that the payor did not foresee priorto audit. Based upon the payor's explanation, the auditingfirm then calculates any necessary adjustments, startingfrom the presumption that all hospital claims, ordiagnostic and treatment center claims, aresurchargeable.15

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If, for some reason, calculation of the actual surchargeunderpayment is not possible, the auditing firm identifiesthe totality of services that were not surcharged at the fullrate. Then, using a statistical sampling, the auditing firmfinds the number of sample errors and extrapolates theseerrors to the total group of services, identifying the low,mean and high point in surcharge underpayments.16 In theordinary course, the payor is allowed one opportunity tocomment upon the auditor's findings and provide additionalinformation.

INTEREST/PENALTIESAny actual underpayment of HCRA surcharges is just thebeginning of the problem. If an audit determines that apayor has paid less than 90 percent of what the DOHestimates should have been paid in any given month, thepayor must pay interest on the difference. Interest iscalculated at the federal short term rate plus 3 percent, or12 percent, whichever is greater. If the audit determinesthat the payor has paid less than 70 percent of what DOHestimates should have been paid in any given month, thepayor must pay an additional penalty of 5 percent on thedifference for each month overdue, capping at 25 percent.Because audits invariably occur more than five monthsafter the payment was made, penalties (when applicable)are virtually always capped at 25 percent. Given thataudits generally cover a six-year period, sizableunderpayments can result in the assessment of significantinterest and penalties, even up to doubling the totalunderpayment.

Payors can face problems in defending themselves duringthe course of an HCRA surcharge audit due to a number offactors, including a lack of familiarity with the HCRAstatutes and the audit process, poor communication withoutside auditors, and record-keeping issues (lack ofhistorical source data). Moreover, outside auditors havemade significant errors in applying HCRA surcharges toservices that are not surchargeable, such as separatelybilled private physician services.

These audits are also taking place under relatively tighttimeframes, thereby putting strains on the internalresources that a payor must devote to retrieving andgathering data, running reports, and responding to auditordemands. DOH has little or no tolerance for extensions oftime, and any extensions granted at a particular phase ofan audit may result in an acceleration of the audit's laterstages to make up time and keep the audit on schedule.

AVOIDING PITFALLSPayors facing these audits have repeatedly expressedfrustration over the fact that they didn't understand whatwas happening during their audit until it was too late andthey faced a huge liability. Sometimes this problem is duemore to the failure to interpret auditor communicationsthan to a failure to comply with HCRA statutes. To put itanother way, it's often not that the payor or provider didanything wrong, but that it didn't clearly prove to theoutside auditor that it had done everything right.

Currently, most HCRA audits are taking place at healthinsurers, managed care plans, auto insurers, and otherpayors of medical benefit claims. However, DOH has nowbegun audits of hospitals to verify whether they properlybilled, collected and paid over HCRA surcharges onservices to patients covered by payors that elected not toremit HCRA surcharges, but to pay them to the provider.How can an organization avoid the pitfalls of an HCRAaudit? Here are some steps to consider, whether or not theorganization is currently being audited:

1. Understand the Rules. It is important to understandhow HCRA works and what medical services are or arenot subject to surcharge. Consulting with experiencedcounsel can help entities find weaknesses in theirclaims payment and IT infrastructures before theauditors do, thereby allowing them to remedyunderpayments earlier, and lessening the associatedinterest and penalties.

2. Keep Accurate Records. As noted above, much of anaudit involves providing proof in a format acceptableto DOH of what has and has not been paid.

3. Develop and Document HCRA Policies and Procedures.Many payors and hospitals had their HCRA policies,procedures and IT codes developed years ago by staffwho are no longer working for them. As a result,during an audit, they may not be able to explain to theauditors why certain claims were or were notsurcharged. Thus, the payor or hospital should developaccurate HCRA policies and procedures, adequatelydocument them, keep them readily accessible, andmake them part of the training for new staff.

4. Perform Regular Self-Audits. Appointing staff orengaging an outside auditor or consultant to performself-audits of HCRA processes can be an importantstep in identifying and remedying potential problems.

5. Don't Wait to Seek Counsel. If faced with an audit,seek immediate help. Certain HCRA auditors, forinstance, are under the erroneous impression that allhospital bills are surchargeable. Experienced HCRA

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counsel can guide a payor or hospital through the very real complexities of the audit process, and assist them inobtaining a more accurate audit result.

HCRA surcharges are here to stay for the foreseeable future, and so unfortunately are widespread HCRA surchargeaudits. In this context, as the old saying goes: "An ounce of prevention is worth a pound of cure."

Francis J. Serbaroli is a shareholder at Greenberg Traurig and the author of "The Corporate Practice of MedicineProhibition in the Modern Era of Health Care," published by BNA. Erin Kate Calicchia, an associate at the firm, andsummer associate Brandie Lustbader assisted in the preparation of this article.

Endnotes:1. Elizabeth Benjamin and Kat Gabriesheski, "The Case for Reform: How New York State's Secret Hospital Charity Pool Funds Fail toHelp Uninsured and Underinsured New Yorkers." N.Y. Journal of Legislation and Public Policy. Vol. 8:5, 2004. Page 8.

2. New York State Health Care Reform Act (HCRA)—Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools,http://www.health.state.ny.us/nysdoh/hcra/overview.htm.

3. New York State Department of Health—Health Care Reform Act—Public Goods Pool Indigent Care and Health Care InitiativesSurcharges by Payor for Services Rendered, 4/1/09-12/31/11,http://www.health.state.ny.us/nysdoh/hcra/docs/04-01-09_through_12-31-11_payor_surcharge_rates.pdf.4. New York State Health Care Reform Act (HCRA)—Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools,http://www.health.state.ny.us/nysdoh/hcra/overview.htm.5. The Tax New Yorkers Pay to Train Other States' Doctors: A Fresh Look at the $2.7 Billion in Subsidies Given to New York's MedicalInstitutions, The Public Policy Institute of New York State, Inc., http://www.ppinys.org/reports/hcra99rp.htm.6. New York State Health Care Reform Act (HCRA)—Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools,http://www.health.state.ny.us/nysdoh/hcra/overview.htm.7. New York State Health Care Reform Act (HCRA)—Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools,http://www.health.state.ny.us/nysdoh/hcra/overview.htm.8. New York State Health Care Reform Act (HCRA)—Overview of Payor Obligations: Indigent Care and Health Care Initiatives Pools,http://www.health.state.ny.us/nysdoh/hcra/overview.htm.9. Attachment 4—Electing Payor Audit Report. Objectives and Auditing Standards,http://www.health.state.ny.us/funding/rfp/0608040357/attachments1-15.10. Attachment 1--Electing Payor Audit Protocols. Payor Surcharges/Assessments. ¶1a--Questionnaires,http://www.health.state.ny.us/funding/rfp/0608040357/attachments1-15.11. Id.12. Id. at ¶1b--Documentation Review.13. Id at ¶1c--Interviews.14. Id. at ¶2--Accounting Records Review.15. Id. at ¶3b-c.16. Id. at ¶3d-e.

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Graduate Medical Education ReimbursementSeminarBy Christine Apicella and Tracey Roland

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On April 30, 2010, an all day education seminar called the “The Basics of Medicare Graduate Medical Education (GME)Reimbursement” was given by Ms. Karen S. Fisher, J.D., Senior Policy Counsel, Association of American Medical Colleges(AAMC) and Mr. Tim Johnson, Senior Vice President, Greater New York Hospital Association (GNYHA) at the LaGuardiaMarriott in East Elmhurst, NY.

GME Seminar: The Morning Session

Direct Graduate Medical Education (DME) and Indirect Medical Education (IME)

The seminar began with Karen and Tim explaining the differences between Direct GME (DGME) payments and IndirectMedical Education (IME) payments. DGME payments are intended to reimburse teaching hospitals for Medicare’s share ofthe costs directly related to educating residents that are in approved programs. For DGME, residents that are in theirinitial residency period (IRP) are counted as one full time equivalent (FTE). However, if the resident’s training goes beyondthe IRP, his or her time will be weighted and counted as half (.5) an FTE.

What is the basic methodology for DGME payments? There are four steps to follow:

Step 1: Determine the hospital-specific “per resident” base year cost amount (generally 1984).

Step 2: Update the per resident amount (PRA) every year for inflation.

Step 3: Multiply the PRA by the current year “allowable” number of residents.

Step 4: Multiply the hospital’s Medicare utilization by the amount that was calculated in Step 3.

IME payments are intended to compensate teaching hospitals for their higher inpatient operating costs that may be due tounmeasured patient complexity that is not captured by the Diagnostic Related Group (DRG) system and for additionaloperating costs associated with being a teaching hospital. The IME payment is an “add-on” to a hospital’s Medicare DRGpayments. Hospitals are typically entitled to a 5.5 percent increase in DRG payments for every 10 resident increases per100 beds.

What is the methodology for calculating an IME payment? First, an IME adjustment factor has to be determined. Thereare three steps to follow:

Step 1: Determine the intern-to-bed (IRB) ratio by dividing the number of residents by the number of hospital beds.

Note: Unlike DGME payments, the number of residents for determining IME payments is not weighted if theresidents exceed their IRP.

Step 2: Use the following statistical formula to calculate the IME percentage:

IME multiplier*(((1+IRB)) ^0.405-1)

Note: The IME multiplier for Federal FY 2010 is 1.35.Step 3: Calculate the IME payment by multiplying the DRG payments by the IME percentage that was calculated in Step 2.

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Today, teaching hospitals are also entitled to receive DGME and IME payments related to their Managed Medicare utilizationand they are entitled to IME Capital payments.

Resident Caps…Under the provisions of the Balanced Budget Act of 1997 (BBA), a hospital is limited to their 1996 resident count for theirallopathic and osteopathic programs. Dental and podiatry programs are excluded from these limits. The 1996 cap appliesto the total residents for a hospital (there are no limits applied to specific programs). These limits or caps may be differentfor DGME and IME purposes. For example, if the resident exceeds his or her IRP, the count is weighted for DGME but notfor IME. Also, programs that are considered “excluded area” programs (e.g., inpatient psychiatric) are included in theDGME counts; however, they are not included in the IME counts.

In 2003, the Medicare Modernization Act (MMA) allowed for a resident limit redistribution program. This served as a “one-time” program that reduced the resident caps (both DGME and IME) for hospitals that were below their limits during 2002.In turn, these caps became “available” and were redistributed to teaching hospitals in the following statutory order: 1)Rural teaching hospitals; 2) Teaching hospitals in small urban areas; 3) Hospitals where the residency training program isthe only resident program in the state; and 4) Hospitals in large urban areas.

Displaced Residents…Towards the latter part of the morning, Karen and Tim discussed “displaced residents.” Flexibility is intended to addressspecial needs of the residents in the middle of their training if they are displaced. These are temporary adjustments forhospitals. There are two principal reasons for displaced residents – a “closed hospital” or a “closed program.” For displacedresidents in both situations, the receiving hospital is entitled to a temporary cap increase (if they are below their cap) forthe time that the resident needs to complete the specific program he or she was training in when displaced. For displacedresidents in the situation of a “closed program,” when the resident finishes his or her training, the “slot” goes back to thehospital where the program was closed.

GME Seminar: The Afternoon Session

New Teaching Hospitals…Karen and Tim began the afternoon discussing new teaching hospitals. They explained that there is a three year transitionperiod for new teaching hospitals to establish their base year resident cap. During this period, the hospital will receive aPRA that is the lesser of their actual graduate medical costs or the average of the teaching hospitals’ PRA in their samegeographic area.

Federal Health Reform Bill: GME update

A Second Wave of Resident “Cap” Redistributions…As part of the health care reform bill that was recently signed by President O’Bama, there is a going to be a second resident“cap” redistribution program where Medicare Fiscal Intermediaries (FIs) will be using the last three years of cost reports(settled or submitted before March 23, 2010). For hospitals who have unused slots, their resident cap will be reduced by65 percent by July 1, 2011. These unused slots will be redistributed to hospitals that are above their caps. The prioritystates where the redistributions will be made are states with the lowest resident-to-population ratios and states with thehighest proportion of population living in health professional shortage areas (e.g., Montana, Wyoming, South Dakota;Arizona; etc).

Rotations to Non-Hospital Sites…Under the new health care reform bill, beginning on July 1, 2010, a hospital may count the time that their resident trainsat a non-hospital setting (e.g., physician private clinic) if they (the hospital) incurs the resident’s stipends and benefits forthe time while he or she trains at the non-hospital site. However, there must still be a contract between the Hospital andNon-Hospital site in order for this time to be reimbursable.

Didactic or Scholarly Activities, Research and Vacation or Sick Time…Beginning on July 1, 2009, didactic or scholarly activities will be allowable, whether they are conducted on-site at thehospital or at an off-site location. In addition, the reform bill clarified that research is allowable if conducted on-site at thehospital for DME purposes only. The reform bill also confirmed that the residents’ time related to vacation, sick and otherapproved leave is allowable.

The Six Stages Of Fiscal Ruination By Charles J. Pendola, CPA, ESQ, CFF, CFE, FHFMA, FACHE, CMC

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Many of us are familiar with the 1969 book, On Death and Dying by Elisabeth Kübler-Ross, whichdescribes her model of the five stages of grief or dying:

1. Denial … evidenced by … but, I feel fine.

2. Anger … evidenced by … but, why me?

3. Bargaining … evidenced by … but, if I could have more time.

4. Depression … evidenced by … so, what’s the point?

5. Acceptance … evidenced by … It’s going to be alright.

All organizations regardless of their size, industry, sponsorship, revenue levels, mission or vision, go through four CorporateLife Cycles, namely, Development, Growth, Maturity and Decline. This is especially true for health care entities that are nowconfronting the most dramatic changes in the way they do business since the advent of Medicare in 1966. However, doesa model similar to Kübler-Ross’s exist for organizations that are succumbing to fiscal ruination? I think there is. Let’s callthis model the Six Stages of Fiscal Ruination.

Each stage, much like the stages written about by Kübler-Ross, can be identified clearly by the independent fiscal analystor fiscal historian. But what if we could detect these stages before they reached their ultimate conclusion? In order toachieve that goal we must first identify the stages and their telltale signals.

Six Stages of Fiscal Ruin 1. Random Unwarranted Success 2. Undetected Erosion of Core Business 3. Denial of Inability to Right Organization 4. Blame Avoidance 5. Bargaining for Time 6. Acceptance of Inevitability

To better understand each stage, let’s distinguish their origins and consequences.

1. Random Unwarranted SuccessThis seemingly positive situation is underscored by a period of great financial success. However, it is an “irrationaland unwarranted” success story built on luck or reasons unrelated to management’s efforts or talents. Success isnot based on quality of product or service, nor on a detailed plan, nor on a series of processes and proceduresaimed at achieving a stated goal or goals. It is simply a case of being in the right place at the right time; in otherwords, anyone would have achieved the same results or better.

2. Undetected Erosion of Core Business This classic occurrence results from management’s failure to timely identify changes in the fiscal trends thatunderpin the organization. The most obvious is the failure to identify the erosion of the organization’s historicalconstituent/client/customer base. This is particularly true for healthcare providers.

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3. Denial of Inability to Right the OrganizationThis is evidenced by management’s presumption that all fiscal shortfalls can be remedied in a short time period. Itis compounded further by the failure to recognize the systemic decline in management’s attentiveness to everydayevents and inaction in the face of obvious negative variances in volumes or costs. The death knell is thinking thatsuch changes are routine and will be self-correcting.

4. Blame AvoidanceThis stage is evidenced by the organizational belief that all fiscal problems emanate from outside forcesunattributable to internal management, e.g., the decline in the general economy, the troubled specific industry, andgovernmental interference and over regulation.

5. Bargaining for TimeThe notion that, if given enough time, management will be able to work through these brief fiscal blips on the screen.This is evidenced by negotiating with labor and/or creditors/vendors. Some of the provisions sought include:

• Temporary wage concessions • Benefit reductions • Payment extensions • Increased loan capacity or • Requests for waivers of fiscal benchmark covenants.

6. Acceptance of Inevitability This is evidenced by the view that:

• “We tried, but we were destined to fail”• “It’s a tough business” or• “Losing is an acceptable outcome in the game of business”

If we pause periodically to view the organization in a critical fashion, we may detect some or all of these issues in enoughtime to take corrective actions.

Charles J. Pendola, CPA, ESQ, CFF, CFE, FHFMA, FACHE, CMC is the Managing Member of Hidden Assets, LLC. andis of Counsel to the law firm of Rivkin Radler, LLP. Mr. Pendola presently serves as a member of the Faculty at St. Joseph'sCollege. He has received numerous awards for his professional accomplishments as well as his community involvement.His publications include the book: Hospital Budgeting: A Case Study Approach, as well as more than sixty technical articlesin an array of professional journals. He can be contacted at either [email protected] or [email protected]

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Photos selected by Marty Abschutz Photographs by Marty Abschutz

Top 10 Ways to Maximize CollectionsThrough Efficient Billing ProcessesBy Lee Matricaria

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Efficient billing and collections processes are criticalcomponents to a successful and profitable medical practice.Any efforts you make to improve efficiencies can help bettercapture the money you earn. Most practices leave anywherefrom 5 to 30% of their reimbursement on the table becausethey either lack the proper processes, staffing, training ortechnologies. By following this Top 10 list, you can regaincontrol of your billing operations and be on the road toincreased revenues.

1. Verification of Benefits and Patient Registration. Astep frequently overlooked in establishing best practicesin billing is verification of benefits. It is increasinglyimportant to take the time to verify the patient’s benefitsprior to the date of service. Determining if the patienthas coverage for the upcoming procedure can decreasethe cost of collections, as well as minimize the risk ofhaving to write-off a balance. This is also when apractice should address outstanding patient balancesand co-pays. An efficient registration process cansignificantly improve your cash flow.

2. Medical Coding. Insist that AAPC CertifiedProfessional Coders perform your coding. This step iscritical in ensuring that all codes are billed correctly thefirst time. Missed or improper codes could equate tothousands of unbilled dollars, as well as expose you topotential liability and compliance issues. Considerhiring an auditing consultant or firm annually to ensurethat claims are being coded correctly and completely.This can either confirm that your coding processes arecorrect or serve to help rectify any problems.

3. Charge Validation. Prior to submission, claims shouldbe scrubbed via an industry specific tool which utilizesboth standard and custom edits. This system shouldautomatically detect coding combinations related tounbundling, modifier appropriateness, and mutuallyexclusive procedures. Medical necessity concerns canbe discovered, and proper channels are exercised toimprove or amend documentation.

4. Remittance Management & Payment Posting. Theretrieval and processing of claims should be done withelectronic remittances from government and largecommercial payers whenever possible. Automating thisprocess reduces human error and highlights claims thatneed additional follow-up. The ERA/EFT combinationputs money into your account quicker, and allows fortimely billing of secondary claims.

5. Denials Management. Understanding the issuessurrounding a denial is critical to know what course ofaction to take to rectify the situation and obtainpayment. Denials management is often a neglected areaof the billing cycle due the labor involved and intrinsicknowledge needed to work outstanding claims. Adedicated team should be assigned to the posting andfollow-up of denials. Trends in payer reimbursementcan be identified and addressed. Appeals and reviews tocombat payer tactics should be submitted and followedthrough to conclusion. Try and target problem areasthat affect the bottom line in order to obtain themaximum reimbursement for all the services youprovide. Managing the process can be time consumingand sometimes difficult, but it is essential in optimizingcash collections. Having a team of individuals whounderstand this process is the number one factor inmaximizing cash collections.

6. Insurance Follow Up. An essential element to help youmaximize collections is to have a timely, effective follow-up process in place. You should initiate follow-up effortswith insurance payers on unresolved claims at the righttime based on their payment patterns. Your follow-upspecialists can use a variety of tools including claimstatus websites and phone calls to achieve results in theshortest amount of time. Diligence in this area keepspatients out of the loop until the patient responsibilityamount is fully determined.

7. Reporting Capabilities. Your end of month reportsshould be customized to provide you with the specificmetrics that are most valuable to your practice. They

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should provide a comprehensive view of your practice’sfinancial performance and give you the insight to makesmart business decisions. If you can’t measure it, youcan’t manage it. Understanding these details and howthey affect your business are the foundation of effectivepractice financial management.

8. Hold the Collection Agency Accountable. Yourcollection agency handles many accounts, so it can beeasy for mistakes to occur. While the occasional errormay not significantly harm the practice, if it happensrepeatedly and is not detected in a timely manner, theimpact could be significant.

9. Technology. To do medical billing right, yourtechnology platform needs to be state-of-the-art. Youshould invest in the right billing platform, claimscrubber software, have the ability to submit claimselectronically, have a robust document imaging systemand use electronic remittance for posting. The use ofoutdated technology may prevent the practice fromrunning its billing operations to maximum efficiency.The long-term benefits and savings of investing in theright technology can often easily surpass the costs.

10. Choosing a Billing Company. It is important tounderstand that not all billing companies are the same.Some items to consider are experience in yourspecialty, technology platform, service offerings andthe willingness to customize their services to yourrequirements. Be aware of the benchmarks and rangesfor what billing companies charge for your specialty,and understand that not all operations are equal.

Sometimes, a low price option can undercut thecompetition because the services offered may neglectsome of the labor intensive practices that are requiredto capture every dollar. Make sure there are no hiddencosts for items like billing secondary payers, patientstatements, and postage fees that you will need tofactor in. Saving a little money on the rate charged bythe billing company is shortsighted if they skimp on thesteps addressed above.

To collect all of the money you have worked for requires fullyoptimizing each of these billing functions to realizeefficiencies. Each area might only be responsible for a smallpercentage of collections, but taken together you can quicklyfind your practice leaving a large amount of revenue on thetable. The first 80% of your payments are relatively easy tocollect, it’s the next 20% that is harder to obtain and moreexpensive for an office or a billing company to properly staffthe functions that are required to collect your money. Youneed to efficiently manage each of these billing functions soas to not leave any money on the table. This is money youhave earned, so it’s important that you have a team or apartner that is willing to go out and fight for every dollar.

Lee Matricaria is president of Data Management, Inc.(www.dmimd.com), a leading provider of hospital basedphysician billing services since 1976. Data Managementdelivers revenue cycle management solutions designed tomeet the strategic business objectives of your practice.Should you have questions or comments about this article,please e-mail [email protected] or call (309) 693-2636

What is Long-Term Care?By Mark G. Heinemann

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You probably know someone who has needed long-term care. Maybe you have witnessed a family member, friend orcolleague struggle with the emotional and financial issues that can come with a long-term care experience. The truth is,no matter when the need arises, because of age, disability, or because of an unexpected illness or accident, long-term carecan affect any age group, any social strata, and any geographic location. But what is it and how can you plan for it?

What is Long-Term Care?Long-term care is help you may need due to a lengthy illness, an unexpected injury or accident, or a severe cognitivedisorder such as Alzheimer’s disease. It’s assistance with the everyday tasks, or the activities of daily living (bathing,eating, dressing, toileting, transferring, and continence). Long-term care may be provided in a variety of locations, fromnursing homes and assisted living facilities to adult day care centers and even your own home.

Who needs Long-Term Care?Most of us strive to live active, healthy lives well into our later years, and indeed as a society, Americans are living longerthan ever before. This extended longevity is one of the things that drives the growing need for long-term care – the longerwe live, the better the odds that we may need long-term care services. It is predicted that in the year 2020, some 12 millionolder Americans are expected to need long-term care¹.

While the majority of long-term care services is provided for seniors, a surprising amount of long-term care services areprovided to younger people. In fact, the U.S. Government Accountability Office estimates that 40% of the 13 million peoplereceiving long-term care services are between 18 and 64².

Who pays for Long-Term Care?Long-term care can be expensive, financially and emotionally. An unexpected need for long-term care can have a significantimpact on a family’s assets and lifestyles. Close to one-fourth of all nursing home costs are paid out-of-pocket by individualsand their families³.

Many people mistakenly believe that their health insurance will cover the cost of long-term care. Others believe thatMedicare or Medicaid will cover long-term care expenses. While Medicare does provide health coverage for seniors, it islimited in the coverage it provides for long-term care. Medicaid will pay for the cost of long-term care, but you must qualifyby meeting strict income and asset eligibility requirements.

Long-term care insurance could be a solution.Long-term care insurance can be a very smart way to address the challenges from a long-term care need. Long-term careinsurance can help pay for nursing home care, as well as, a variety of home and community based care services. Long-term care insurance may not be for everybody,

¹ Health Insurance Association of America. A Guide to Long-Term Care Insurance. 2007. Page 2² Health Insurance Association of America. A Guide to Long-Term Care Insurance. 2007. Page 2³ Health Insurance Association of America. A Guide to Long-Term Care Insurance. 2007. Page 4

So if you are considering a policy, read it carefully and be sure to work with an insurance agent who understands long-termcare issues.

With long life comes long-term planning. Make a plan for you and your family today.

Mark G. Heinemann is with Pinnacle Strategies, Should you have questions or comments about this article, please call(631) 391-2990.

Photos selected by Marty Abschutz Photographs by Marty Abschutz

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The Proportional Value Of VolumeBy James G. Fouassier, Esq.

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The experts tell you that you should not go into a negotiationwithout knowing what your “bottom line” position will be.When do you decide to walk away because the numbers justdon’t work? Is there some institutional reason to forge aheadanyway? How can you be sure that you correctly evaluatedall the variables and really know where you stand?

One factor that needs to be considered is volume. After all,there are only two basic reasons for entering into a contractfor discounted rates: prompt payment and volume. (Keepthat “prompt payment” part in mind for the companionarticle in this edition, “A Dime or a Dollar”.) You expect thatby joining the plan’s network of participating providers youwill enjoy some level of access that is better than it would bewere you to remain “non-par”. You made a conscious choiceas to how much that theoretical increase in volume wasworth as against a reduced rate of payment per service, sothat your number puts you ahead, at least on paper.1

OK; so now you have done your “due diligence” and are ascomfortable as possible that the numbers will cover yourcosts and generate a modest margin. You make the deal.The contract gets signed and operationalized. Time passes.When you do your periodic review you are surprised to learnthat the revenue for “bread and butter” services does notcover the costs, and you’re losing money every time youperform those routine service for the rates to which youagreed. In drilling down you identify one cause: the volumesfor those services are significantly lower than youanticipated. What’s going on?

Well, its pretty hard to figure out who is not coming to yourfacility. It may not be so hard to figure out why. One reasonmay be that the plan is steering members away from yousimply because the plan pays less to some otherparticipating provider. You even may find that the plan has“carved out” certain services from you contract: you stillremain a “par” provider but the plan establishes financialincentives to its members to use the services of the lessexpensive carve-out.

How does a plan steer members away from a provider?Several techniques seem to be prevalent. As I justmentioned, if a plan is administering its own fully insured

benefit designs, it may develop asubnetwork of specialty carveouts(radiology, labs, etc.) whichprovide only one or a few “coveredservices’ at much lower cost tothe plan than a “traditionalprovider”, meaning you. Even without pressure frominstitutional customers like employer groups or unionwelfare funds who always push to keep their costs down, theplan will offer all of its insured or administered members afinancial “incentive” (this means lower or no copayments)to use the carveout instead of the “traditional” provider..

Sometimes a plan will contract to administer a group payer(such as a union welfare fund) which has already establisheda limited benefit design which requires its members to useonly the lowest cost carveout providers for some of those“bread and butter” services. Even though your “par”agreement contains rates for the covered service in question,when someone calls for authorization for one of thosemembers the plan advises that the service is not “covered”by that group payer’s benefit schedule. (Less frequently, butmore and more often nowadays, a plan may sign up a grouppayer that already made a deal with a specialty provider, sothe group doesn’t even need the plan’s carveout subnetwork;it only wants the plan to administer the benefits.)

A twist on this is when a plan delegates the administrationof a covered service to the “carveout” company. Obviously,unless the provider has agreed to a separate contract withthe carveout under which the provider now agrees to acceptthe carveout’s lower rates, the carveout must entertain andpay the provider’s claims at the original rate contracted withthe plan. However, the provider finds that it has to deal witha new set of administrative requirements in securingauthorizations and submitting claims, new UR and QM“guidelines”, and also is experiencing a larger than normalvolume of short payments on claims administered by thecarveout (usually because the payments are made at thecarveout’s “par provider” rate rather than the contractedrate in your direct contract with the plan itself. “Oops;sorry!!”)

What’s a provider to do? Well, even if your facility has the

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muscle (read “market strength”) to insist that the contractprohibit steering differentials and limit carveouts, there areseveral practical problems which defy contract solutions. 1)Can the plan even market a managed care product thatexcludes these types of benefit designs without becoming sononcompetitive that it loses its market altogether? 2) If itcan, it will be a hard enough sell to get it to agree to theexclusions in its own risk products but another matteraltogether for a plan administering benefits for a fee (suchas the typical PPO, ASO or TPA) to turn away business if acustomer group wants the plan to administer limited orrestricted benefits which limit payments or do not providefor certain “covered services” to be performed at atraditional provider’s facility. The plan will argue, with somemerit, that it has no control over any one of the severalbenefit designs the local union employee welfare fund maychoose to implement and cannot be expected to enter into aprovider contract which requires it to walk away from sucha significant book of business. The plan would rather walkaway from you.

There is no easy answer. Perhaps the best approach is tokeep your contract terms short (especially your PPO deals),know your market and be sure that the rate schedules towhich you agree have taken into account the added risk thatthe anticipated volume for “bread and butter” services maynot happen. This is especially true today, when there is newpressure on health insurers and plans to reduce coveragecosts and make products more affordable for the health careconsumer. When added to the ever current plan pressure toincrease shareholder dividends and maintain exorbitantexecutive compensation providers can almost guarantee thatthis problem will keep growing.

1 A provider anticipates that a contact rate schedule will return

a certain margin based upon the volume the contract will generate.

The skill of the provider in evaluating the principal factors which

allow an accurate estimate of volume (such as the number of

covered lives, the demographics of the population covered by the

payer’s membership and perhaps most importantly the cost of

providing the services covered by the managed care contract)

should result in an accurate estimate of the revenue to be

generated from the agreement. Secondary considerations then will

be based on these primary determinations, such as anticipated

levels of claims denials (both for substantive clinical reasons and

for technical claims submission problems) and the risks inherent

in collecting patient balances, a growing concern as more plans

offer high deductible products that may be coupled with health

savings accounts (whether “qualified” or unqualified for tax

purposes). A “bottom line” rate schedule is developed and

advanced by the provider in its negotiations with the payer. Most

commercial payers (as well as government regulators) require a

full menu of acute care services, because the plans must offer the

same full menu to their customers and covered members.

Consequently, it is not possible for the parties simply to eliminate

any particular service upon which a compensation amount may not

be agreed. This requires flexibility and significant compromise on

rates for a variety of services. (The plan invariably is heard to

argue that the provider should establish lower rates for specialty

services because the plan’s members will be using that provider for

many “routine” services that afford relatively higher margins, the

so called “bread and butter” services.) At the end of the process

some rates may be expected to generate greater net revenue and

others even a possible loss. The reasonable understanding of the

parties, however, is that the rate schedule in its entirety is intended

to yield an acceptable margin of profit for the provider.

James Fouassier, Esq. is the Associate Administrator ofthe Department of Managed Care at Stony Brook UniversityHospital, Stony Brook, New York. His opinions are his own.He may be reached at: [email protected]

Volume43 Issue5 Summer,2010 OUR NEW LEADERS · Volume43 Issue5 Summer,2010 OUR NEW LEADERS...

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