Medicare Fraud and Abuse: Summary and Analysis of Reforms in the Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act of 1997

Published by the Government Accountability Office on 1997-10-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

.United States
General Accounting Office
Washington, D.C. 20648

Health, Education and Human Setices Division


October 9, 1997

The Honorable Will&m M. Thomas
Chairman, Subcommittee on Health
Committee on Ways and Means
House of Representatives

Subject:   Medicare Fraud and Abuse: Sununarv and Analvsis of Reforms in
           the Health Insurance Portabilitv and Accountabitv Act of 1996 and
           the Balanced Budget Act of 1997

Dear Mr. Chairman:

In enacting recent legislation, the Congress has responded to major concerns
regarding the problem of waste, fraud, and abuse in the Medicare program.
The Health Insurance Portability and Accountability Act of 1996 (EEPAA) (P-L.
 104-191) and the Balanced Budget Act of 1997 (BBA) (P.L. 105-33) contain
signEcant anti-fraud-and-abuse reforms, including program restructuring, that
address issues raised by the Inspector General of the Department of Health and
.Human Services (HHS) and by us. Therefore, you asked us to (1) summarize
the anti-tiaud-and-abuse reforms enacted in HIP&I and BBA &d (2) determine
whether and how the legislation responds to our recommendations and those
of the Inspector General.

To respond to your request, we are enclosing (I) a summary of the anti-fiaud-
and-abuse provisions contained in HIP&I and BBA and (2) a brief description
of GAO and HHS Inspector General recommendations a.ud relevant le@slation.
Our analysis is based largely on the contents of our annual Status of Onen
Recommendations and the Inspector General’s Red B&         both of which are
compilations of key recommendations that heretofore had not been fully

                                  GAOEfEHS-98-18R   HIP&l   and BBA Reform
implemented.’ These documents contain most of the recommendations ffom
which we derived this synopsis2

In summary, the provisions in HIPAA and BBA offer the potential to improve
program management signiscantly. Together they address Medicare’s
enforcement tools, payment safeguards, and pricing and payment method
problems. In addressing several aspects of waste, fraud, and abuse, the acts
incorporate a substantial proportion of recommendations to the Congress and
matters for congressional consideration In many instances, the acts also
address recommendations that we and the HHS Inspector General have made
directly to the Department, by either emphasizing priorities or dispelling
ambiguities about authority.

Enclosure I summarizes the provisions of HIPAA and BBA that address fraud
and abuse. Many contain the authority for deploying new enforcement tools
that will enable Medicare to pursue offenders more aggressively. For example,
HIPAA makes health care fraud a separate criminal offense and establishes new
fines and other penalties for federal health care offenses. BBA substantially
stiffens the exclusion penalties for individuals convicted of health care fraud.
It also establishes civil monetary penalties for such offenses as contracting
with an excluded provider, failing to report adverse actions under the new
health care data collection program, and violating the anwckback statute.

Enclosure I also summties HIPA. and BBA provisions that shore up payment
safeguard and oversight authority. HIPAA sets aside funding specifically for
anti-fraud-and-abuse activities and authorizes HCFA to contract with entities
specialbing in claim review activities. Addressing oversight of Medicare’s
health maintenance organizations (HMO), HIPAA and BBA clari@ and extend
the conditions under which HCFA can impose intermediate sanctions against
plans that deviate Tom Medicare regulations. BBA’s Medicare+Choice

%tatus of hen Recommendations: Imnroving Onerations of Federal
Denartments and Agencies (GAO/OP-97-1,Jan. .24,1997);Office of Inspector
General, The 1996 Red Book, Cost-Saver Handbook (Washington, DC.:
Department of Health and Human Services, nd.).
2We also inclu ded recommendations contained in Inspector General reports
that we identied in the course of our audit and evaluation work. However,
because some relevant recommendations may exist that were not available
through the Red Book or the reports we identified, our list of relevant
Inspector General recommendations should not be considered exhaustive.

2                               GAOIHEHS-9%18R        HIPAA   and BBA Reform

program-which broadens beyond HMOs the private health plans available to
Medicare beneficiaries-includes several provisions addressing Medicare HMO
marketing, enrollment, and quality of care issues.

Enclosure II lists recommendations that we and the .HHS Inspector General
have made related to HIPAA and BBA provisions. These include many of the
anti-&a.ud-and-abuse provisions discussed above as well as certain pricing and
payment method reforms addressing program policies OF practices that
generate unnecessary expenditures. For example, BBA’s provisions mandating
that prospective payment systems replace cost-based reimbursement methods
respond to the overutilization and billing abuse problems reflected in
Medicare’s expenditures for home health and skilled nursing facility services.
By eliminating certain payments and other payment revisions-including rate
reductions, benefit restructuring, and new authority to determine inherent
reasonableness-BBA addresses problems associated with wasteful payments.
BBA a3so changes the method for calculating payment rates for HMOs and
other Medicare-tChoice plans to avoid paying more for enrolled beneficiaries
than if the enrollees had remained in traditional fee-for-service.

In conclusion, we believe that the Congress has gone a long way toward
providing the legislative tools necessary to combat Medicare waste, fraud, and
abuse. However, HHS, and HCFA primarily, have a major challenge ahead in
effectively employing these tools and in acting on program management
recommendations made directly to the Department Secretary and HCFA
Administrator. Our testimony to be presented to the Subcommittee today
elaborates on key implementation issues3

3Medicare: Recent Legislation to Minimize Fraud and Abuse Reauires Effective
Imnlementation (GAO/T-HEHS-9&9, Oct. 9, 199’7).

3                              GAOIHEHS-9%18R        HIPAA   and BBA Reform

If you have any questions about this letter, please contact me at 202-512-7114
or Leslie Aronovitz, Associate Director, at 312-220-7767. Lisanne Bradley,
Hannah Fein, Richard New-tan, and Don Walthall also contributed to this

Sincerely yours,

William J. Scanlon
Director, Health Financing and Systems

Enclosures - 2

                                GAOIHEHS-9%18R       HIP&A    and BBA Reform
ENCLOSURE I                                                          ENCLOSURE I
                         IN THE HEALTH INSURANCE
                                Ip.L. 104191)
                  AND THE BALANCED BUDGET ACT OF 1997
                                 (P.L. 10533)

This enclosure summarizes anti-fkaud-and-abuse-related provisions enacted in the Health
lksurance Portability and Accountability Act of 1996 @HPAA.)and the Balanced Budget Act of
1997 (BBA). The provisions in this enclosure are presented in the following tables:

Table Ll: Fraud and Abuse Funding and Contracting

Table 1.2: Fraud Prevention and Detection

Table r-3: Criminal Penalties

Table L4: Civil Penalties

Table 1.5: Sanctions for Managed Care and Medicare+Choice Organizations

                                     GAO/HEHS-9%18R       HIPAA   and BBA Reform
ENCLOSURE I                                                            ENCLOSURE I

Table 1.1: Fraud and Abuse Funding     and Contracting

    Legislative                                     Description
HIPLU $201;       Fraud and Abuse Control Program: Directs HHS and the Department of
BBA 54318         Justice to establish a Fraud and Abuse Conu!ol Program to fight health
                  care fraud in the public and private sectors. Appropriates funds from the
                  Health Insurance @ IQ ‘Rust Fund that are not to exceed $104 million in
                  tical year 1997, with &percent annul! increases until 2003. For each
                  fwal year after 2003, the limit is to be $241 million, with no annual
                  percentage increases; the provision directs that criminal ties and civil
                  monetary penalties in health care cases be deposited to the HI Trust Fund.
                  A GAO report on the operation of the Fraud and Abuse Control Program
                  will be submitted to the Congress by June 1, 1998.
 HPAA             Funds for the Medicare    IntegrityProgram: Appropriates funds Tom
 92Olcb)(4)       the Fraud and Abuse Cont;rol Fund for the Medicare Integrity Program not
                  to exceed

                  Fiscal vear       $kt-ln-dlions

                      1997              $440
                      1998               500
                      1999               560
                      2000               630
                      2001               680
                      2002               700
                      2003+              720

6                                    GAOEEEHS-9%18R          HIPAA   and BBA Reform

ENCLOSUI$E I                                                           ENCLOSURE I

    HIPAA $202   Medicare   Integrity     Program:  Establishes the Medicare Integrity Program
                 and directs the HIiS Secretary to enter into contracts for the performance
                 of payment safeguard activities, as follows: (1) medical, utilization, and
                 fraud review; (2) cost report audits; (3)overpayment determinations and
                 recoveries; (4) payment integrity educational activities for providers,
                 beneficiaries, and others; and (5) development of a list of medical
                 equipment for prior authorization. The Secretary must determine what
                 constitutes a conflict of interest situation that wduld preclude an entity
                 from becoming a payment safeguard contractor. Fiscal intermediaries and
                 carriers cannot be paid to perform the activities being performed by
                 payment safeguard contractors.

7                                       GAOLEEIHS-98-18R   HIPAA   and BBA Reform
ENCLOSURE I                                                                ENCLOSURE I

I Table
          1.2: Fraud Prevention      and Detection

      Legislative                                       Description
    HIPAA $203(a);   Explanations      of Medicare   Benefits:  Requires the HHS Secretary to
    BBA $4311(b)     provide Explanations of Medicare Benefits (EOMB) for all Medicare benefit
                     items and services that (1) list the item or service for which payment has
                     been made and the amount of such payment‘for each item or service and
                     (2) include a notice of the individual’s right to request an itemized
                     statement. After review of an EOMB or a bill for Medicare-covered
                     services, each beneficiary has the right to request an itemized billing
                     statement for Medicare-covered items and services Tom the provider
                     furnishing the care. Within 90 days after the receipt of a furnished itemized
                     statement, a beneficiary may submit a written request for a review of the
                     itemized statement to the Secretary, if there are spetic allegations that
                     items or services were not provided as claimed or if there are other billing
                     irregularities, such as duplicate billing. The Secretary must then determine
                     whether Medicare payments were proper and recover any improperly paid

    HPAA $203(b)     Program to Collect Information    on Fraud and Abuse From
    and (c); BBA     Beneficiaries: Establishes a program to encourage beneficiaries to report
    $4311(a)         f?aud, waste, and abuse in the Medicare program, with payments to
                     reporting beneficiaries in certain cases; requires the HHS Secretary to send
                     an annual notice to all beneficiaries regarding Medicare waste, fraud, and
                     abuse, indicating “that because errors do occur and because Medicare
                     fraud, waste, and abuse is a signi&ant problem, beneficiaries should
                     carefully check any explanation of benefits or itemized statement . . . for
                     accuracy and report any errors or questionable charges by calling the
                     toll-free phone number . . . “; establishes the beneficiary’s right to request
                     an itemized statement for Medicare items and services and a description of
                     the program to collect information on Medicare fraud and abuse; and
                     mandates a toll-free telephone number to report complaints and
                     information about fraud, waste, and abuse in Medicare.

                                           GAOLEEHS-98-18R       HIPAA   and BBA Reform

ENCLOSURE I                                                                  ENCLOSURE I

HP&l    $205;     Safeharbors    and Advisory   Opinions:   Requires the solicitation of
BBA $94314,       proposals for new and modified safe harbors (that is, types of situations
4331(a)           that the HHS Inspector General does not consider in violation of the
                  antikickback provisions), requires the issuance of advisory opinions
                  regarding the antikickback statute and whether physician referrals for
                  health services to be performed by entities owned or controlled by the
                  referring physician are prohibited, and encourages requests to the BBS
                  Inspector General to issue special fraud alerts. .
HIP&i   $216      New Safeharbor     to the A&Kickback       Statute       for Risk-Sharing
                  Arrangements:   Creates a new exception to the antikickback statute for
                  managed care organizations.
EIIPAA $221(a),   Health   Care Fraud and Abuse Data Collection                    Establishes
BBA $4331(b)      an adverse action database of health care providers, suppliers, or
                  practitioners that would coordinate with and not duplicate the National
                  Practitioner Data Bank; defines final adverse actions as not including
                  settlements in which no findings of liability have been made but as
                  including all types of convictions, including those resulting from “no
                  contest” pleas; and requires that those subjected to a final adverse action
                  would report their tax identification numbers t0.thi.s database.
HIPAA 9221(b)     Imposition    of Fees for Issuance   of Identification       Numbers:       Avows
                  the imposition of fees on physicians to cover the costs of investigation and
                  recertification activities for the issuance of program identifiers.
BBA $4312(a) .    Disclosure of Ownership Information    for Suppliers of Durable
                  Medical Equipment:   Provides that the BHS Secretary cannot issue or
                  renew a provider number for a supplier of durable medical equipment
                  unless the supplier provides the Secretary on a contiuing basis with full
                  and complete information as to the identity of each person with an
                  ownership or control interest in the supplier or in any subcontractor in
                  which the supplier directly or indirectly has a 5percent or more ownership

                                      GAO/HEHS-98-18R        HIPAA     and BBA Reform
ENCLOSURE I                                                          ENCLOSURE I

 BBA 94313      Reqtiements    to Disclose Employer Identification  Numbers and
                Social Security Account Numbers:    Requires providers, suppliers,
                carriers, and intermediaries to supply the HHS Secretary with both the
                employer identification number and Social Security account number of the
                disclosing entity, each person with an ownership or control interest, and
                any subcontractor in which the entity directly or indirectIy.has a 5-percent
                or more ownership interest. Such numbers are to be vetied, or corrected,
                by the Social Security Administration and the Department of the Treasury
                and reported to HHS.
 BBA &I317      Requirement   to Furnish Diagnostic Information:      Includes
                nonphysician practitioners in the requirement to provide diagnostic codes
                when ordering items or services to be furnished by another health care
 BBA $432l(a)   Nondiscrimination   in Posthospital  Referral to Home Health Agencies
                and Other Entities:   Requires hospitals to explain as part of the
                discharge planning process the availability of all home health services that
                participate in Medicare in the area in which the patient resides and that
                request the hospitals to list them.
 BBA $4321(b)   Maintenance and Disclosure of Information   on Posthospital Home
                Health Agencies and Other Entities:  Requires that a hospital that has a
                fkmcial interest in a home health agency or other health care entity to
                which it refers Medicare beneficiaries disclose to the HHS Secretary, who
                shall make the information public, the nature of the Gnancial interest, the
                number of individuals who were discharged from the hospital identified as
                requiring home health services, and the percentages of the individuals who
                received home he&h care from the related provider and from other
 BBA $4507      Disclosure of Program Exclusion by Health Care Entities That Enter
                Into Private Contracts with Medicare Beneficiaries:  Requires that a
                physician or practitioner who enters into a private contract with a
                Medicare beneficiary for any item or service for which no cKrr.~ for
                payment is to be submitted to the Medicare program, and for which the
                physician or practitioner receives no reimbursement from Medicare
                directly or on a capitated basis, clearly indicate in the contract, among
                other things, whether the physician or practitioner is excluded from
                participation in the Medicare program.

10                                 GAOAEHS-9%18R          E&P&    and BBA Reform
ENCLOSURE I                                                        ENCLOSURE I

 BBA $4001    AnuuaI Audit to Protect Against Fraud in the Medicare+Choice
 G 18WdXW     Program: Requires the annual audit of the financial records (including
              data relaling to Medicare utilization, costs, and computation of the
              adjusted community rate) of at least one-third of the Medicare+Choice
              organizations offering Medicare+Choice plans and requires GAO to monitor
              each audit
 BBA 94001    Right to Inspect, Audit,   and Evaluate   Medicare+Choice    Contractors
 (6 18WdW)    and Access to Records:       Provides that each contract must provide that
              the BHS Secretary, or any person or organization designated by the
              Secretary, will have the right to inspect or otherwise evaluate the quality,
              appropriateness, and timeliness of services performed under the contract,
              and the facilities of the organization when there is reasonable evidence of
              some need for inspection, and the right to audit and inspect any books and
              records of the Medicare+Choice organization that indicate whether the
              organization can bear the risk of potential %xuxial losses, can perform the
              services, or should be paid under the contract.
 BBA $4312    Surety Bond Requirements:        Provides that home health agencies,
              comprehensive outpatient rehabilitation facilities, and rehabilitation
              agencies must provide the HHS Secretary on a continuing basis with a
              surety bond of not less than $50,000 and authorizes the Secretary to
              require surem bonds of some or all providers of items or services, other
              than physicians or other practitioners.

11                              GAOIHEHS-9%18R          HIPAA   and BBA Reform

ENCLOSTJ$EI                                                             ENCLOSURE I

 Fable 1.3: Criminals Penalties

     Legislative                                   Description
 EUPAA $204        Application of Some Medicare and Medicaid Crimina    Penalties to
                   Other Health Care Programs: Extends criminal penalties for acts
                   involving Medicare or state health care programs to all federal and state
                   health care programs, defined as (1) any plan or program that provides
                   health benefits, whether directly, through insurance, or otherwise, that is
                   funded directly in whole or in part by the U.S. government, other than the
                   Federal Employees He&h Benefit Program, or (2) any state health care
 EXPAA !$241       Definitions   Relating to Federal Health Care Offenses: Amends title
                   18 of the U.S. Code to define a “federal health care offense” as including
                   violations of specific criminal provisions if related to health care. The
                   definition of “federal health care offense” does not apply to the offenses
                   listed in 51128B of the Social Security Act. Enactment of specific health
                   care-related criminal authorities does not prohibit the use of more general
                   criminal authorities in cases in which those statutes may be more
                   appropriately used; amends title 18 of the U.S. Code to de5ne a “health
                   care benefit program” as a public or private plan or contract, affecting
                   commerce, under which any medical benefit, item, or service is provided tc
                   any individual, and includes any individual or entity that is providing a
                   medical benefit, item, or service for which payment may be made under
                   the plan or contract.
 HIPAA $242        Criminal Offense of Health Care Fraud: Defines “health care fraud” as
                   the knowing and willful execution of or attempt to execute a scheme or
                   artifice to defraud any health care benefit program or to obtain by means
                   of false or fraudulent pretenses, representations, or promises any of the
                   money or property owned by, or under the custody or control of, any
                   health care benefit program; authorizes criminal fines or imprisonment of
                   up to 10 years or both, unless the violation results in serious bodily injury
                   or death, in which cases, respectively, imprisonment may be up to 20 years
                   or for life. Criminal fines are to be deposited into the HI Trust Fund.
 HIPAA $243        Health Care Theft or Embezzlement:       Provides for ties or
                   imprisonment of up to 10 years or both for theft or embezzlement relating
                   to health care programs.

12                                    GAOEJEHS-9%18R        HIP&I     and BBA Reform

ENCLOSUE$EI                                                                              ENCLOSURE I

 HrPAA $244         False Statements        Related     to Health            Provides for ties
                                                                     Care Matters:
                    or imprisonm ent of up to 5 years or both for false statem ents relating to
                    health care m atters.
 HIPAA $245         Obsimction       of Crim inal     Investigations.of         Health    Care Offenses:
                    Provides for fines or imprisonm ent of up to 5 years or both for obstruction
                    of crim inal health care investigations.
 ?IIJ?AA $246       Laundering  of Monetary Insfxnments:     Explicitly m akes it a crim e to
                    launder m oney that com es from the com m ission of a federal health care
 HPAA   $247        Injunctive     Relief Relating      to Health               Authorizes
                                                                     Care Offenses:
                    injunctive relief and freezing of assets in cases involving federal health
                    care offenses.
 HIF’AA $248        Authorized      Investigative     Demand          Authorizes the issuance
                    and enforcem ent of subpoenas of records and testim ony of the custodians
                    of those records by the Attorney General or her designee for investigations
                    relating to health care offenses.
 BIPAA $249         Forfeitures   for Federal Health Care Offenses: Authorizes forfeiture of
                    property that constitutes or is derived &om proceeds traceable to the
                    com n-ksion of a he&h care offense. The amount of the forfeiture of
                    property is to be deposited into the HI Trust Fund.
 HlPAA $262     -   W rongful     Disclosure   of Individually       Identif5able        HeaIth   Information:
 (§1177)            Provides that obtaining, disclosing, or using individually identifiable health
                    inform ation is punishable‘by fines of up to $50,000 or imprisonm ent of up
                    to 1 year or both, unless the offense was under false pretenses. The fine
                    m ay be up to $100,000, imprisonm ent up to 5 years; with intent to sell,
                    transfer, and so on for com m ercial advantage, personal gain, or m alicious
                    harm , the fine m ay be up to $250,000; imprisonm ent, up to 10 years.

13                                        GAOLEEHS-9%18R              EIIPAA and BBA Reform
ENCLOSURE I                                                             ENCLOSURE I

 I’able 1.4: Civil Penalties

     Legislative                                    Description
 Program exclnsions

 EaPAA $211         Mandatory %xclusion From Participation’in Medicare and State
                    Health Care Programs: Adds new mandatory exclusions from Medicare
                    and Medicaid for felony convictions related to health care fkud or
                    controlled substances.
 KIPAA 9211         Permissive Exclusion from Participation in Medicare and State
                    Health Care Programs: Allows permissive exclusions from Medicare and
                    Medicaid for misdemeanor convictions related to health care fraud or
                    controlled substances.
 EXIPAA $212        Minimum Periods of Exclusion:       Establishes a minimum exclusionary
                    period of 3 years for criminal misdemeanors related to health care fraud or
                    controlled substances or conviction of obstruction of a health care
                    investigation; exclusions because of license revocation or suspension are to
                    be the length of revocation or suspension.
 HIPAA $213         Permissive Exclusion of Individuals   With Ownership or Control
                    Interest in Sanctioned Entities:   Adds new permissive exclusion from
                    Medicare and Medicaid for individuals who have an ownership or control
                    interest in or are managing employees of a sanctioned entity.
 EiIPAA $214        Sanctions Against   Practitioners     and Persons for Failure to Comply
                    With Statutory   Obligations:     Establishes a minimum exclusionary period
                    of 1 year for a practitioner who has failed to successfully complete a Peer
                    Review Organization corrective action plan or who has grossly failed to
                    meet quality standards.
 BBA $4001          Penalties for Improper Billing for Medicare+Choice    Enrollees      by
 (0 18520)          Physicians and Entities Who Are Not Employees of the
                    Medicare+Choice    Organization:  Allows the same sanctions for
                    physicians or entities improperly billing beneficiaries enrolled in
                    Medicare+Choice organizations as would be applied if the beneficiary were
                    not enrolled with a Medicare+Choice organization.

14                                      GAO/HEHS-9%18R       HIPAA   and BBA Reform

ENCLOSURE I                                                               ENCLOSURE I

BBA $4301          Permanent Exclusion for Those Convicted of Three Health Care
                   Related Crimes: Provides that if an individual has been convicted on one
                   previous occasion of one or more offenses for which an exclusion may be
                   imposed, the period of the exclusion will be not less than 10 years and, if
                   on 2 or more previous occasions, the exclusion will be permanent.
BBA $4302          Anthority  to Refuse to Enter Into Medicare Agreements With
                   IndividuaJs or Entities Convicted of Felonies: Allows the HHS
                   Secretary to refuse to enter into, terminate, or renew an agreement with a
                   provider, physician, or supplier who has been convicted of a felony under
                   federal or state law that the Secretary determines is detrimental to the best
                   interests of the program or program beneficiaiies.
BBA $4303          Exclusion    of Entity Controlled   by Family Member of a Sanctioned
                   Inditiduak     Allows the exclusion of an entity that was owned or
                   controlled by a sanctioned individual who has transferred ownership or
                   control interest in anticipation of, or following, a conviction, penalty
                   assessment, or exclusion to an immediate family member or a member of
                   the household.
BBA $4331(c)       Exclmsiom    Applicable   to All Federal   Health   Care Programs:   Expands
                   the scope of Medicare exclusions to include exclusion corn aU other
                   federal and state health care programs, other than the Federal Employees
                   Health Benefit Program.
BBA                Sanctions Related to Payments for Upgraded Durable Medical
§455w(w)       -   Eqnipment:  Allows the HKS Secretary to establish sanctions, by
                   regultion, including exclusions of suppliers that have engaged in coercive
                   or abusive practices.

                                       GAOIIXEHS-9%1SR        HIP&4    and BBA Reform

ENCLOSURE I                                                                     ENCLOSURE I
    iCivil monetary     penalties

    13IPA.A $231(a)       Civil Monetary   Penalties   (CMP):   Extends many current Medicare-
    ia-d Cc>              Medicaid CM& to all health care programs; Inspectors General of
                          departments with federal health care programs can initiate CMPs with
                          respect to their own programs and, in certain cases, with respect to other
                          federal health care programs; increases the amount of authorized penalties
                          from $2,000 per false item or service claimed.to $10,000; CMF!s and
                          assessments are to be used to pay back Medicare and Medicaid loss;
                          remaining dollars are to go to the Health Care Fraud and Abuse account.
    1KLPAA $231(b)        Civil Monetary Penalties for Excluded Persons Who Retain
                          Ownership of a Health Care Entity    Provides that persons excluded
                          from Medicare or a state health care program and who maintain a direct or
                          indirect ownership or control interest of 5 percent or more in an entity or
                          who is an officer or managmg employee of a Medicare or state health care
                          program entity are to be subject to CMPs.
    1EiIPAA §231(e)       Civil Monetary Penalties for Patterns of Incorrect Coding or
                          Medica3ly Unnecessary Services: Allows CMPs to be assessed against
                          persons who claim payment for codes that they know will result in greater
                          payment than is applicable and against persons who claim payment for
                          services #at they know are not medically necessary. .
        mAA   $231(h)     Civil Monetary Penalties for Offering Inducements to Beneficiaries
                          to Influence the Health Care They Use: Allows CMPs to be assessed
                          against persons offering remuneration, including    waiving coinsurance and
                          deductible amounts, except when those waivers      are exempted Tom the
                          z&kickback provisions, to induce an in&vidual      to order from a particular
                          provider or supplier receiving Medicare or state   health care funds.
        HIPAA $232        Civil Monetary   Penalty for False CertiIicati&      for Home Health
                          Services: Provides a new CMP of the greater of $5,000 or three times the
                          amount incorrectly paid for a physician’s false certification of the need for
                          home health services.
        HU?,!U $261       Penalty for Failure to Comply With Administrative   Simplification
        WW                Requirements   and Standards: Allows the imposition of a $100 penalty
                          for each violation, up to $25,000,for violation of any single requirement or

    16                                       GAOIHEHS-98-18R        HIPAA    and BBA Reform
ENCLOSURE I                                                              ENCLOSURE I

 BBA $4304(a)   Civil Money Penalties for Persons Who Contract With Excluded
                Inditiduals: Allows penalties to be imposed on individuals or entities that
                contract, by employment or otherwise, with an individual or entify that
                they know or should know is excluded from participation in the Medicare
                program to provide health care services for which Medicare payment may
                be made.
 BBA $4304(b)   Civil Money Penalties for Kickbacks:        Allows penalties of $50,000 for
                each act and damages of not more than three times the remuneration
                offered, paid, solicited, or received to be imposed on persons guilty of
                violating the antikickback statute.
 BBA $4311(b)   Civil Money Penalty       for Failure   to Furnish   an Itemized   Statement:
                Allows the HEIS Secretary to impose a civil money penalty of not more
                than $100 for each failure to furnish an itemized statement on the request
                of a Medicare beneficiary.
 BBA @331(d)    Sanctions   for Failure    to Report Adverse Actions:  Authorizes the
                imposition of a civil penalty of not more than $25,000 on any health plan
                for each adverse action not reported to the Health Integrity and Protection
                Data Bank.

17                                  GAOLHEHS-9%1SR           HIPAA    and BBA Reform
ENCLOSURE I                                                              ENCLOSURE I

 Table 1.5: Sanctions   for Managed Care and Medicare+Choice          Organizations

     Legislative                                    Description

 BBA $4001          Sanctions for Medicare Managed Care and Medicare+Choice
 W5VgXU)            Organizations: Provides for, in addition to any other sanctions
                    applicable, intermediate sanctions when the Medicare+Choice organization
                    (1) fajls substantially to provide legally required, medically necessary items
                    and services, if the failure would affect the individual adversely; (2)
                    imposes premiums in excess of the monthly basic and supplemental
                    beneficiary premiums; (3) expels or refuses to reenroll an individual who is
                    in violation of law; (4) engages in any practice that has the effect of
                    denying or discouraging enrollment by beneficiaries whose medical
                    conditions indicate a need for substantial future medical services; (5)
                    misrepresents or falsifies information furnished to the HEiS Secretary or to
                    beneficiaries or to health care providers; (6) fails to comply with the anti-
                    “gag-rule”and balance billing provisions; and (7) employs or contracts for
                    health care, utilization review, medical social work, or admmistrative
                    services with a provider that is excluded from participation in the
                    Medicare program.
 BBA $4001          Intermediate     Sanctions: Authorizes several types of sanctions for
 (0 185W9   (2) >   managed care and Med.icare+Choice organizations: (1) generally, civil
                    penalties of not more than $25,000for each incident, except that, (a) for
                    incidents of discouraging or denying enrollment to a beneficiary who could
                    be expected to have a need for substantial medical services or false or
                    fraudulent statements to the HHS Secretary, penalties of not more than
                    $100,000for each such determination; (b) for incidents in which a
                    beneficiary was charged excessive premiums, double the excess amount
                    charged, with the excess amount charged to be deducted from the penalty
                    and returned to the beneficiary; and (c) for incidents in which the
                    organization has been discouraging or denying enrollment to beneficiaries
                    with a need for substantial medical services, $15,000 for each individual
                    not enrolled as a result of the practice involved; (2) suspension of
                    enrollment until the Secretary is satisfied that the basis for the suspension
                    has been corrected and is not likely to recur; or (3) suspension of payment
                    to the organization for individuals enrolled after the date the Secretary
                     notifies the organization of the suspension and until the Secretary is
                     satisfied that the basis for the suspension has been corrected and is not
                     likely to recm,

18                                     GAOLKEHS-9S-ISR        H3PA.A and BBA Reform
ENCLOSURE I                                                              ENCLOSURE I

 BBA 94001       Other Intermediate      Sanctions:   Provides for the following intermediate
 i”iFH(c)(2) and sanctions when the BBS Secretary terminates a contract with a
  g              Medicare+Choice organization because of the organization’s (1) substantial
                 failure to carry out the contract, (2) carrying out the contract in a manner
                 inconsistent with the efficient and effective administration of the Medicare
                 program, or (3) no longer substantiazly meeting the conditions for
                 participation in the program: (1) civil money penalties of not more than
                 $25,000for each determination, if the deficiency that is the basis of the
                 determination has directly adversely affected, or has the substantial
                 likelihood of adversely affecting, an individual covered under the
                 organization’s contract; (2) civil money penalties of not more than $10,000
                 for each week beginning after the initiation of civil money penalty
                 procedures by the Secretary during which the deficiency continues; and (3)
                 suspension of enrollment of individuals after the date the Secretary notifies
                 the organization of a determination and until the Secretary is satisfied that
                 the deficiency that is the basis for the determination has been corrected
                 and is not likely to recur.
 BBA $4001         Termination   of Medicare+Choice     Contracts:    Avows for the
 (8 18570)         termination of a contract with a Medicare+Choice organization in
                   accordance with formal investigation and compliance procedures
                   established by the HHS Secretary under which the Secretary provides the
                   organization with the reasonable opportunity to develop and implement a
                   corrective action plan to correct the deficiencies that were the basis of the
                   Secretary’s determination to terminate and the Secretary provides the
                   organization with reasonable notice and opportunity for hearing before
                   terminating the contract, except when the Secretary determines that a
                   delay in termination would pose a threat of imminent and serious risk to
                   enrolled individuals.

19                                    GAOECEHS-9S-18R       HE..&% and BBA Reform
ENCLOSUQE II                                                            ENCLOSURE IT

                    THE BALANCED   BUDGET ACT OF 1997

This enclosure provides recommendations against %ud, waste, and abuse made by the
General Accounting Office (GAO) and the Deparbnent of Health and Human Services
(HHS) Office of the Inspector General that were open when either the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) or the Balanced Budget Act of 1997
(BBA) were passed. The Congress has responded to virtually all these recommendations
with provisions in HIPAA and BBA designed to address the underlying problems or to
mandate actions by the Health Care Financing Administration (HCFA). The
recommendations in this enclosure are organized in the following manner:

Table IU: Fee-for-Service: Payment Safeguards and Beneficiary Protections

Table H-2: Fee-for-Service: Pricing and Payment Methods

Table II.3 Managed Care and Medicare+Choice: Payment Safe,aUars and Benekiary

Table II.4 Managed Care and Medicare+Choice: Pricing and Payment Methods

20                                       GAO/HEHS-9S-18R      HI3?AA and BBA Reform

ENCLOSURE II                                                                             ENCLOSURE II

 Table II.1:   Fee-for-Service:       Payment          Safeguards    and Beneficiary    Protectiok
         Provision                                                  Documentation
 Payment safeguard                Recommendation:      The Congress should consider appropriating
 funding                          additional funds for contractor safeguard activities to prevent
                                  inappropriate program payments, espedally medical review, audit,
                                  and Medicare Secondary Payer monitoring and recovery.

                                  Relevant    legislation:     HIP&I     9201(b)

                                  Ensures funding for payment safeguard activities at payment
                                  safeguard contractors (Medicare Integrity Program contractors), as
                                  well as new earmarked funding for thud investigations and

                                  Related          GAO/HEHS9616; GAO/HRD-91-67; HHS-OIG-A-
                                  149400391; HJB-OIGA-149400392; HHS-OIG-A-09-91-00103;HHS-
                                  00100; HHS-OIG-A-10-86-62016
 Alternative funding              Recommendation:       The Congress may wish to consider enacting
 proposal                         legislation directing the Health Care Financing Administration
                                  (HCFA) to carry out a pilot demonstration in which, once
                                  improper billing by a home health agency has been detected, the
                                  cost of follow-up audit work would be assessed against the
                                  provider and the money from such assessments would be
                                  earmarked for HCFA’s payment safeguard activities.

                                  Relevant    legislation:     None

                                  Related    report:      GAO/HEHS-97-108

21                                                GAOIEEHS-9S-18R           HIPAA      and BBA Reform
ENCLOSURE II                                                          ENCLOSURE II

 Provider ownership   Recommendation:      HCFA should refuse to enter into agreements
 information          with providers whose owners or principals have criminal records
                      or who are the relatives of the owner of a provider that had
                      defrauded the Medicare program’

                      Relevant legislation:   ETIPAA $§213,23l(b);    BEA @4302,4303,          1

                      Provides authority to exclude individuals who have an ownership          i
                      or control interest (that is, owner of a mortgage, deed of trust, or     i
                      other security interest secured by the entity) in sanctioned entities;   i
                      provides civil monetary penalties for entities owned or controlled
                      by an excluded person; authorizes the HEIS Secretary to refuse to
                      enter into agreements that the Secretary determines are
                      detrimental to the best interests of the program or program
                      beneficiaries with providers, physicians, or suppliers that have
                      been convicted of felonies; allows the Secretary to exclude entities
                      that were owned or controlled by a sanctioned person but
                      transferred to a family or household member; and prohibits’
                      providers Tom contracting with or employing excluded persons.            I

                      Related reports:    GAO/HEHS-95210; GAO/HRD-92-76;BHS-OIG-

22                                  GAO/HEHS-98-18R        HIP&i     and BBA Reform
                                                                 .   .

ENCLOSTJREII                                                               ENCLOSURE II

 Better identikation   of   Recommendation:      HCFA should develop procedures and provide
 those who own or           policy guidance to Medicare contractors concerning the use of
 control providers          available information on ownership and to identify and review
                            individuals who have been involved in fraudulent or abusive
                            activity or have an ownership interest in entities to which they
                            refer patients. Durable medical equipmentsuppliers and home
                            health agencies should be required to provide Social Security
                            numbers and employer identjfkation nurnbers when they are
                            supplying required ownership information.

                            Relevant    legislation:   BBA @4312,4313

                            Authorizes the refusal of a billing number to a provider that does
                            not provide complete ownership and control information; requires
                            entities participating in the Medicare and Medicaid programs to
                            provide Social Security numbers and employer identification
                            numbers to the HHS Secretary for their businesses, persons with
                            an ownership or control interest in the businesses, and managing
                            employees and subcontractors of the businesses.

                            Related    reports:    GAO/HEWS95210; GAO/HBD-92-76;HHSOIG
 Surety bonds               Recominendation:      Durable medical equipment @ME) suppliers
                            and home health agencies (HHA) should post surety bonds as a
                            condition of participation in the Medicare program.
                        .   Relevant    legislation:   BBA @4312(a), 4724(g)

                            Requires DME suppliers, HIUs, and others that participate in the
                            Medicare program to post a surety bond of a minimum of $50,000.

                            Related    report:    HHSOIGOEI-09-96-00110

23                                          GAWHEHS-98-18R       EIPAA   and BBA Reform
ENCLOSURE II                                                            ENCLOSURE II

 l&xility of care for   Recommendation:   There should be sufficient patient monitoring
 patients receiving     by oxygen companies.
 oxygen services
                        Relevant    legislation:   BBA $4552(c)

                        Mandates that the BHS Secrekzy develop service standards for
                        oxygen provided in the home.    -

                        Related    report:    HHS-OIG-OEI-03-91-01710
 Rural health clinic    Recommendation:      HCFA should modify the certification process
 SHC) certification     to increase state involvement; recertilkation should be required of
                        RHCs within a specific time limit-for example, 5 years-applying
                        new criteria to document the need for the RHC and the RHC’s
                        effect on access to care.

                        Relevant    legislation:   BBA $4205(d)

                        Stipulates that the shortage area reqtiements   designation for each
                        RHC will be reviewed triennially.

                        Related    report:    HHS-OIG-OEI-05-94-00040
 Carrier audit and      Recommendation:       HCFA should identi@ legal issues that
 recovery-procedures    constrain carriers’ audit and recovery efforts and make
                        recommendations to the Congress to eliminate such constraints. It
                        should also amend Medicare procedures, such as those involving
                        the projection of sample results, to enhance carriers’ audit and
                        recovery efforts.

                        Relevant    legislation:   HIPhi   $231(e)

                        Authorizes a new civil monetary penalty for upcoding and patterns
                        of claims for medically unnecessary services.

                        Related    report:    GAOiHEHS94-42

24                                      GAWHEHS-98-18R        EIPAA   and BBA Reform
ENCLOSURE It                                                                     ENCLOSURE II

 Antifraud systems       Recommendation:     HCFA should develop a plan for implementing
 technology              antiaud systems technology, including the conduct of a pilot or
                         demonstration program using systems, such as those used to
                         detect code manipulation, in use by commercial plans.

                         Relevant    legislation:      HP.&i   $202 ($1893(b))

                         Provides that payment safeguard contractors (Medicare Integrity
                         Program contractors) must perform medical and utilization review
                         and fraud review, employing similar standards, processes, and
                         technologies used by private health plans-including equipment and
                         technologies used in the review of claims,

                         Related    reports:    GAO/HEHS95210; GAO/AIMD-9577;
 Medicare secondary      Recommendation:      The Congress should require the HHS
 payer reporting         Secretary to report annually on the status of HCFA’s ongoing and
                         planned efforts to improve identification and recovery of claims
                         from other insurers.

                         Relevant    legislation:     None

                         Related    report:    GAOBIEHS-94147
 Medicaid and Medicare   Recommendation:            The Congress should amend Medicaid law by
 crossover claims        authorizing HCFA to withhold federal matching funds when states
                         do not comply with federal re@irements for identification and
                         recovery of claims from other insurers, including Medicare.

                         Relevant    legislation:     None

                         Related    report:    GAO/HEHS94-147

25                                       GAWHEHS-98-18R           HIP&I    and BBA Reform
ENCLOSURE II                                                                    ENCLOSURE II

 Medicare secondary          Recommendation:            The Congress should extend the Medicare
 payer statutory authority   secondary payer (MSP) provisions for end-stage renal disease
                             (ESRD) beneficiaries.

                             Relevant    legislation:      BBA $4631

                             Extends permanently current MSP policies, including disabled
                             beneficiaries in large group health plans and beneficiaries with

                             Related    repork     HHSOIGA-10-86-62016
 Medigap insurance           Recommendation:            The Congress should consider amending
                             federal Medigap law to require insurers to offer Medicare
                             beneficiaries who have been continuously covered by Medigap
                             msurance guaranteed-issue policies with benefit packages
                             comparable to those of the policies they currently hold.
                             Consideration should also be given to extending this protection to
                             beneficiaries whose employer-sponsored retiee health plans are
                             terminated or curtailed and who must, or choose to, leave their
                             managed care plans.

                             Relevant    legislation:      BBA 34031

                             Guarantees issuance of specified Medigap policies for certain
                             continuously enrolled individuals, inchxling those who were
                             previously covered by Medigap policies with an insurer that
                             becomes bankrupt and those who had been enrolled in a managed
                             care organization.

                             Related    report:    GAO/HEHS-96-180

26                                            GAO/HEHS-98-18R          HIPAA   and BBA Reform
ENCLOSURE II                                                                 ENCLOSURE II

     Contractor performance   Recommendation:       HCFA should develop precise measures of
     standards for payment    carrier performance in such key medical review areas as (1)
     safeguard activities     effectiveness of canjer data analysis capabilities, (2) adequacy of
                              carrier medical policies, (3) scope and effectiveness of prepayment
                              screens, (4) significance of carrier medical review savings, and (5)
                              postpayment review performance. HCFA should hold the
                              contractors accountable for implementing local policies;
                              prepayment screens, including autoadjudicated screens; or other
                              corrective actions to control payments for ,procedures that are
                              highly overused on a nationwide basis.

                              Relevant   legislation:   HP&I   $202 ($1893(d))

                              Provides that payment safeguard contracts (Medicare Integrity
                              Program contracts) can be renewed only if the current contractor
                              has met or exceeded the performance standards in the contract.

                              Related reports:      GAOBIEHS9649; GAO/HEHS9442;

27                                          GAOMEIHS-98-18R       HIPAA   and BBA Reform
ENCLOSURE II                                                                            ENCLOSURE II

 Table Il.2:   Fee-for-Service:       Pricing     and Payment        Methods
         Provision                                                  Documentation
 Disproportionate share           Recommendation:    The Congress ‘should consider whether
 hospital adjustments             disproportionate share hospital adjustments should be reduced, if
                                  not eliminated.

                                  Relevant    legislation:        BBA $4403

                                  Makes a reduction in the disproportionate share payment for a
                                  hospital of 1 percent in fiscal year 1998, 2 percent in fiscal year
                                  1999,3 percent in tical year 2000,4 percent in fiscal year 2001,
                                  and 5 percent in fiscal year 2002.

                                  Related report:        HHS-OIGA-04-87-00111
 Hospital capital                 Recommendation:   The Congress should consider whether capital
 payments                         payments should be reduced and whether excess capacity or
                                  unused beds should be considered in the capital cost policy.

                                  Relevant      legislation:      BBA $4402

                                  Rebases capital payments with an additional reduction of 2.1

                                  Related         HHS-OIG-A-07-95-01121;HHSOIGA-1493-0380;
 Hospital sale basis              Recommendation:              The Congress should consider whether the
                                  requirement that Medicare make adjustments for gains and losses
                                  when hospitals undergo changes of ownership should be

                                  Relevant      legislation:      BBA $4404

                                  Eliminates the requirement that Medicare make adjustments for
                                  gains and losses for a hospital that is changing ownership by
                                  setting the Medicare capital asset sales price equal to the book

                                  Related    report:      HHS-OIG-OEI-03-96-00170

28                                                  GAO/HEHS-98-18R            HIPAA   and BBA Reform

ENCLOSURE II                                                                ENCLOSURE II

 Hospital                   Recommendation:    Payments for outpatient services should be
 outpatient departments     comparable to the applicable ambulatory surgical center rate.

                            Relevant    legislation:   BBA $54521-4523

                            Eliminates formula-driven overpayments in kcal year 1998,
                            extends capital and noncapital cost limits, and establishes a
                            prospective payment system for outpatient services for fiscal year

                            Related reports: HHS-OIGA-1489-00221; HHS-OIG-OEI-09-88-
                            01003; HHS-OIGOAI-85-09-0046
 Skilled nursing facility   Recommendation:      The Congress should consider bundling
 payments                   payment for ail medical equipment, supplies, and services into a
                            per diem rate, paid to nursing facilities under Medicare and
                            Medicaid. HCFA should clarify that billings for ‘dietary services”
                            in nursing homes specikally include the costs for parenteral and
                            enteral nutrition.

                            Relevant    legislation:   BBA $4432

                            Establishes a prospective payment system for Medicare skilIed
                            nursing facility stays that includes payment for alI ancillary items
                            and services.

                            Related reports: GAOHEHS-95-23; HHS-OIGOEI-03-9400790;
                            HHS-OIGOEI-O3-9400791; HHSOIGOEI-O3-9400792; HHS-OIG
                            OEI-03-9400770; HHSOIGOEI-039400772; HHS-OIG-OEI-06-92-
                            00861; HHSOIGOEI-O6-92-00863;HHS-OIG-OEI-0692-00864.
 Hospices                   Recommendation:    HCFA should restructure the fourth benefit
                            period under the hospice benefit.

                            Relevant    legislation:   BBA $4443

                            Replaces the current unlimited fourth benefit period with an
                            unlimited number of 6O-daybenefit periods, each requiring

                            Related    report:   HHS-OIG-OEI-0595-00250

29                                          GAOIHEHS-98-18R     HIPAA    and BBA Reform
ENCLOSU&EII                                                                ENCLOSUREII

 Home health agency     Recommendation:     The Congress should mandate a prospective
 payment system         payment system for home health agencies, with an accurate
                        baseline that does not include umation patterns of the higher-
                        reimbursement agencies in its base, so that program payments for
                        home health care are not inappropriately inflated.

                        Relevant   legislation:      BBA $4603 .

                        Mandates that a prospective payment system be adopted for which
                        the total payments in fiscal year 2000 would be equal to those of
                        the current system if the cost limits were reduced by 15 percent,
                        which will be adjusted annually for any increases in the home
                        health market basket, and provides for interim payment reductions
                        until a new system is in place.

                        Related report:      ISIS-OIG-OEI-O4-93-00260
 Home health agency     Recommendation:           The Congress should consider eliminating
 payments               periodic interim payments to home health agencies.

                        Relevant   legislation:      BBA $4603(b)

                        Eliminates the periodic interim payment method.

                        Related reportz      HBSOIG-OEI-09-96-00110
 Costs not associated   Recommendation:           The differences between costs for employee
 with patient care      benefits and costs for entertainment should be clarified; costs of
                        entertainment, goods or services for personal use,, alcohol, all
                        fines, penalties and associated interest, dues, and membership
                        costs associated with civic and community hospitals should be

                        Relevant   legislation:       BBA $4320

                        Prohibits “reasonable cost” payments for items such as
                        entertainment, gifts, donations, educational expenses, and the
                        personal use of automobiles.

                        Related reports:          HI-IS-OIGA-049302067; HHS-OIGA-039200017

30                                     GAOAEHS-98-18R             HIPAA   and BBA Reform

ENCLCSUl$E It                                                             ENCLOSURE 11

 Indirect Medicare    Recommendation:            The Congress should reduce the indirect
 education payments   teaching adjustment factor, which is designed to compensate
                      teaching hospitals for their relatively higher costs.

                      Relevant    legislation:      BBA $4621(a)

                      Gradually lowers the indirect medical education adjustment factor
                      through 5sx.l year 2001.

                      Related    reports:    GAOHRD-89-33; HHS-OIG-A-07-88-00111
 Graduate medical     Recommendation:      HCFA should revise the regulations to remove
 education (GME)      from a hospital’s allowable GME base year costs any cost center
 payments             with little or no Medicare utilization.

                      Relevant    legislation:      BBA $$4623,4626

                      Limits the number of residents and rolling average full-tjme-
                      equivalent count of residents and offers incentive payments for
                      voluntary reductions in the number of residents.

                      Related    report:    HHS-OIGA-06-92-00020
 Bad debt payments    Recommendation:    The Congress should consider legislation to
                      modify the bad debt payment methodology.

                      Relevant    legislation:      BBA $4451

                      Prohibits providers from counting reductions in copayments as bad
                      debt and reduces bad debt payments to providers by 25 percent
                      during f&al year 1998, by 40 percent for fiscal year 1999, and by
                      45 percent during subsequent tical years.

                      Related    report:    HHS-OIG-A-14-90-00339

31                                    GAOLEEHS-9%18R            HIPhi   and BBA Reform

ENCLOSURE II                                                           ENCLOSURE II

 Competitive bidding     Recommendation:     The Congress should consider directing HCFA
                         to participate more fully in the competitive health car&
                         marketplace. Competitive bidding should be authorized as a
                         means of purchasing Medicare services, so that lower prices for
                         commonly furnished health care items and services can be

                         Relevant   legislation:   BBA Ej§4011,4319

                         Provides authority to do competitive bidding demonstrations in
                         both the Medicxre+Choice and fee-for-service programs; authorizes
                         up to five competitive bidding demonstrations in the fee-for-service
                         program, one of which must purchase oxygen and each of which
                         can have multiple sites. (Demonstrations must be completed by
                         December 31,2002.)

                         Relatedreports:  GAO/HEHS-95210; HHSOIGOEI-03-96-00230;
 Adjustment of payment   Recommendation:     The Congress should give HHS the flexibility
 amounts to those        to make prompt adjustments to fee schedules when overpriced
 “inherently             services and supplies are iden%ed.
                         Relevant   legislation:   BBA $4316

                         Applies the ‘inherent reasonableness”process to all part B services
                         other than physicians’ services.

                         Related reports: GAO/T-HEHs-96-138;GAOkHEHS-95-171;HHS-

32                                      GAO/HEHS-9%18R         HXPAA and BBA Reform

ENCLOSURE II                                                              ENCLOSURE II

 Coordinated billing for   Recommendation:      Tne Congress should consider whether part B
 part B-Reimbursable       billings for nursing home patients ought to be consolidated and
 items and                 bilIed by the nursing home; payments for enteral nutrition were
 services for nursing      especially noted as needing inclusion in the sklled nursing facility
 home patients             benefit.

                           Relevant    legislation:   BBA @432(b)-

                           Requires consoIidated bilhng-that is, that payment be made to the
                           nursing facility for aII part B items and services.

                           Related         HEZ$OIG-OEI-O3-9400790;HHS-OIGOEI-06-92-
                           00861; HHSOIG-OEI-06-92-00865;HHSOIGOEI-06-92-00864; HHS-
 Therapy in nursing        Recommendation:    HCFA should set expIicit Iimits to ensure that
 homes                     Medicare pays no more for therapy services than would any
                           prudent purchaser.

                           Relevant    legislation:   BBA $4541(a)

                           Establishes a fee schedule for therapy services provided by an
                           outpatient rehabiitation facility in nursing homes and other

                           Related    report:    GAOHEHS-9523
 EnteraI and parenteraI    Recommendation:    Payments for enteral nutrition should be
 nutrition pricing         reduced or competitive acquisition strategies should be employed.

                           Relevant    legislation:   BBA $@316,45510>)

                           Freezes payments for enteral and parenteral nutrition, equipment,
                           and supplies for 1998 through 2002 and simplifies the process used
                           to reduce inherently unreasonable prices by 15 percent; provides
                           authority to do competitive bidding demonstrations in the fee-for-
                           service program.

                           Related reports: HHS-OIG-OEI-039600230; HHS-OIGOEI-03-94
                           00021; HHSOIG-OEI-06-92-00866; HHS-OIG-OEI-06-92-00861

33                                         GAOBEHS-9%18R        HIP&4   and BBA Reform
                                                                -   .

ENCLOSURE II                                                             ENCLOSURE II

 Medicare payments for   Recommendation:    HCFA should lower the amounts paid for
 oxygen                  oxygen, since Medicare allowed, on average, 174 percent more
                         than the VA for oxygen concentrators.

                         Relevant    legislation:   BBA $4552(a)

                         Reduces Medicare reimbursement for oxygen 25 percent until 1999
                         and 30 percent for each subsequent year.

                         Related    report:    HHSOIG-OEI-03-91-00711
 Pharmaceutical          Recommendation:    HCFA should reduce payments for drugs
 payments                reimbursable by the Medicare program.

                         Relevant    legislation:   BBA 54556

                         Reduces by 5 percent Medicare payments for drugs whose
                         payments are based on the average wholesale price.

                         Related    reports:    HHS-OIG-OEI-03-9500420;HHS-OIGOEI-03-94
 Physician payment-      Recommendation:     HCFA should test whether Internal Revenue
 geographic adjusters    Service data provide a superior basis for setting or updating the
                         geographic adjusters for physician payments and, if so, obtain and
                         use these data

                         Relevant    legislation:   BBA @4501-4503

                         Although geographic adjusters were not addressed, changes the
                         single practice-type conversion factor for 1998, requires a new
                         resource-based relative value system to be developed, and replaces
                         the volume performance standard with a sustainable growth rate

                         Related    report:    GAO/HRD-93-93

34                                        GAOAEHS-9%18R         HIP&i   and BBA Reform
ENCLOSURE II                                                              ENCLOSURE II

 Physical therapy in      Recommendation:     HCFA should apply the physical therapy
 physician offices        coverage ,tidelines for skilled nursing facilities to other settings
                          such as physician offices.

                          Relevant    legislation:   BBA $4541(b)

                          Extends the guidelines to physical therapy provided in physicians’

                          Related    report:    HHS-OIG-OEI-02-90-00590
 Technical component      Recommendation:      HCFA should survey the technical component
 payments for radiation   costs incurred by facilities providing radiology services and revise
 services                 the fee schedule to more accurately reflect the unit costs incurred
                          by high-volume, efficient providers.

                          Relevant    legislation:   BBA $4521

                          Ehminates formuIa&iven       overpayments for outpatient hospital
                          radiology services.

                          Related    report:    GAO/HRD-92-59
 Payments for clinical    Recommendation:      The Congress should give HCFA the authority
 laboratory tests         to adjust the cap or maximum rates for individual test procedures
                          where relative rate inequities are apparent and not in line with the
                          prices charged physicians.

                          Relevant    legislation:   BBA $4553

                          Provides for reducing fee schedule payments by lowering the cap
                          to 74 percent of median for payment amounts after 1997, with no
                          inflation update for 1998 through 2002.

                          Related reports: GAO/HRD-91-59;HEISOIG-A-09-93-00056;HHS-

35                                        GAOLHEHS-98-18R       HIPAA   and BBA Reform
ENCLOSURE II                                                              ENCLOSURE II

 Ambulance services for    Recommendation:      HCFA should ensure fairer payment for              I
 end-stage renal disease   services rendered and may consider combining two or more of the
 (ESRD) patients           following strategies: (I) establish a payment schedule for
                           ambulance transport to maintenance dialysis and set the fee lower       i
                           than what is paid for unscheduled, emergency transports; (2)
                           negotiate preferred provider agreements with ambulance                  I
                           companies to provide scheduled transportation for ESRD                  II
                           beneficiaries; (3) undertake competitive bidding to establish a         .
                           price for scheduled transports for ESRD beneficiaries or to select
                           companies that agree to provide such services; (4) establish a          ,I
                           rebate program for companies that routinely uansport ESRD
                           beneficiaries; and (5) provide an add-on to the composite rate          -
                           Medicare pays dialysis facilities and allow the facility to negotiate   ”
                           agreements with ambulance companies.

                           Relevant   legislation:   BBA @4531,4532

                           Establishes a prospective fee schedule, effective January 1,2000,
                           for ambulance services provided directly by a supplier or provider
                           or under an arrangement with a provider that is to establish
                           definitions for ambulance services that link payments to the type
                           of services provided and provides for a capitated payment to up to
                           three demonstration projects with units of local government to
                           provide ambulance services to Medicare beneficiaries.

                           Related report:      HHS-OIGOEI-03-90-02131
 Provider-based Rural      Recommendation:   Caps should be placed on Medicare provider-
 Health Clinic (RHC)       based RHCs and states should be encouraged to find other ways to
 payment                   make reimbursement between provider-based and independent
                           RHCs more equitable.

                           Relevant   legislation:   BBA $4205(a)

                           Extends the per-visit payment limits to provider-based clinics.

                           Related report:      HHS-OIG-OEI-059400040

36                                        GAOAEHS-9%18R         HIPAA   and BBA Reform

ENCLOSURE II                                                           ENCLOSURE II

 Managed care             Recommendation:    HCFA should examine the feasibility.of
 techniques in the fee-   allowing Medicare’s commercial contractors to adopt for their
 for-service program      Medicare business such managed care features as preferred
                          provider networks, case management, and enhanced utilization

                          Relevant    legislation:   BBA $4016

                          Authorizes a Medicare Coordinated Care Demonstration to explore
                          some of these options.

                          Related    reDor&      GAO/T-HEHS-96-138:GAO/HEHS-95-210

37                                       GAOIHEHS-9%18R      HIP.&% and BBA Reform

ENCLOSURE II                                                                     ENCLOSURE II

 Fable II.3:   Managed   Care and Medicare+Choice:         Payment        Safeguards   and Beneficiary
         provision                                        Documentation
 Health status screening     Recommendation:      Medicare risk health maintenance
 of beneficiary applicants   organizations should be monitored for inappropriate screening of
                             beneficiaries’health status at application.

                             Relevant legislation:      BBA $4001 ($1852(b))

                             Provides that a Medicare+Choice organization may not deny, limit,
                             or place conditions on the coverage or provision of benefits based
                             on any health status-related factor; provides for civil money
                             penalties for either expelling or refusing to reenrolI a beneficiary
                             or engaging in any practice that could reasonably be expected to
                             have the effect of denying or discouraging enrollment

                             Related reports:      HHSOIG-OEI-0691-00736 HHSOIG-OEI-O&91-
 Standards for managed       Recommendation:     HCFA should establish standards for sales               !
 care marketing              force training and monitoring and hold health maintenance
                             organizations accountable for maintaining those standards.                  !
                             Relevant    legislations   BBA $4001 ($1856(b))                             I

                             Authorizes the Secretary to establish standards other than those            !
                             related to solvency for Medicare+Choice organizations.

                             Related    report:   HHSOIG-OEI-04-61-00630                                     I

38                                           GAO/HEHS-9%18R           HIP&I     and BBA Reform

ENCLOSURE II                                                                  ENCLOSURE II

 Better quality assurance   Recommendation:        HCFA should routinely monitor managed care
 for managed care           qualily assurance and utilization management practices and
                            integrate its findings into compliance monitoring reports. HCFA
                            should examine beneficiary perceptions of problems with making
                            routine appointments, declining health caused by health
                            maintenance organization care, and an HMO’s refusal to provide
                            certain services. HCFA should establish an on-line system to
                            identify and review cases of frequent enrollment change. Persons
                            who disenroIl kom their managed care plans should be
                            encouraged to communicate as many reasons for leaving the HMO
                            as are applicable to their situation, and HCFA should consider
                            conducting etit surveys by mail with computer-generated forms.

                            Relevant   legislation:   BBA $4001 ($1852(e))

                            Requires that Medicare+Choice plans have both an internal quality
                            assurance program, which includes measures of beneficiary
                            satisfaction, and review by an independent quality assurance
                            review and improvement organization.

                            Related reports:   GAO/HEHS-95155; HHS-OIG-OEI-06-9l-OC7’30;
                            OEI-049 l-00630; HHS-OIGOEI-04-9 l-00640

 Beneficiary service        Recommendation:     Service access problems reported by disabled
 access                     or end-stage renal disease beneficiaries should be carefully
                            examined, as they are an especially vulnerable group.

                            Relevant   legislation:   BBA $4001 (8 1852(d))

                            Medicare+Choice organizations must make benefits available and
                            accessible to each individual electing the plan.

                            Related reports:      HHS-OIG-OEI-06-91-00736;HHSOIGOEI-06-91-

39                                        GAOLEJEHS-9%18R       ElIPA       and BBA Reform
ENCLOSURE II                                                            ENCLOSURE II

 Retroactive          Recommendation:     HCFA should issue regulations specifying the
 tienrollment         purpose of retroactive disenrollments and the circumstances,
                      xiteria, and procedures that must be met in authorizing such
                      actions. HCFA should aIso establish a policy Limiting enrollment
                      ;o one “open season”(opportunity to enroll) per year.

                      Relevant   legislation:      BBA $4001 ($1851)

                      Provides for annual coordinated enrollment periods beginning in
                      !OOZ,one change in coverage per enrollment period, changes in
                      coverage cannot be retroactive beginning with the first
                      tiedicare+Choice enrolhnents.

                                     GAOMRD-8873; HHS-OIGOEI-O491-00630;
                      Related reports:
 Better comparative   Recommendation:           HCFA should continue its efforts to educate   1
 information for      Medicare beneficiaries about managed care options and should            i
 beneficiaries        routinely publish (1) comparative data it collects on health
                      maintenance organizations such as complaint rates, disenrollment ii
                      rates, disQ+.ishing between administrative and nonadministiative !
                      disenroIlments, and rates and outcomes of appeals; (2) the results
                      of its investigations or any findings of noncompliance by HMOs;       i
                      and (3) benefit and cost comparison charts with all Medicare          .
                      options available for each market area It should widely publicize b
                      the availability of the charts to all beneficiaries in markets served
                      by Medicare managed care plans.                                       I’
                      Relevant    legislation:     BBA 94001 ($1851(d))
                      Requires HCFA to publish comparative information on                     ..
                      Medicare+Choice plans, including d&enrollment rates, information
                      on enrollee satisfaction, information on health outcomes, and the
                      plan’s comphance record with Medicare requirements.

                      Related          GAOHEHS-97-23; GAO/HEHS-95155; HHSOIG-
                      OEI-0493-00142; HHS-OIG-OEI-04-93-00151;HHS-OIG-OEI-06-91-
                      00736: HHS-OIGOEI-06-91-00’730

40                                    GAOLEIEHS-9%18R          HlPAA   and BBA Reform
ENCLOSURE II                                                               ENCLOSURE II

 Better managed care      Recommendation:       HCFA should require standard formats and
 plan information for     terminology for managed care informational materials for
 beneficiaries            beneficiaries, including benefits descriptions.

                          Relevant   legislation:   BBA $4001 ($1852(c))

                          Requires that each Medicare+Choice plan disclose essential
                          information, inchniing information on benefits offered, in a
                          standardized format.

                          Related reports: GAOMEHS-97-23; GAOHEHS-95155; HHS-OIG-
                          OEI-07-94-00280;HHS-OIGOEI-7-94-00281; HHS-OIGOEI-07-94
                          00282; HHS-OIG-OEI-07-9400283
 Payment of providers     Recommendation:     HCFA should develop standards that will
 employed by managed      require managed care organizations to pay their providers
 care organizations       accurately and in a timely manner.

                          Relevant   legislation:   BBA $4001 (@1856, 1857(f))

                          Requires the Secretary to establish financial and other standards
                          by June 1, 1998, and requires managed care organizations to make
                          prompt payment of ckns submitted for services and items
                          provided to enrollees.

                        . Related report:      GAO/HRD-92-11

41                                      GAO/HEHS-9%18R         HIP&I   and BBA Reform
ENCLOSURE II                                                               ENCLOSURE II

 Streamlined appeals for   Recommendation:      HCFA should’explore options to. streamline
 managed care              the managed care appeals process and ensure that health
                           maintenance organizations properly distin,auish and process
                           appeals and grievances and beneficiaries should receive better
                           information on their appeal rights.

                           Relevant    legislation:   BBA $4001 (81852(c) and (g))

                           Requires Medicare+Choice organizations to disclose in clear,
                           accurate, and standardized form information about the plan,
                           including plan appeal or grievance rights and procedures, and to
                           offer an expedited review process when the life or health of an
                           enrollee could be seriously jeopardized by the normal time periods
                           For review.                    ,

                           Related          GAO/HEHS-995155;HHS-OIGOEI-07-9400280;
                           HHS-OIG-OEI-7-9400281;HHS-OIGOEI-O7-9400282; HHS-OIGOEI-
                           07-9400283; HHS-OIGOEI-06-91-00736;HHS-OIG-OEI-06-91-00730
 Medicare Health           Recommendation:    HCFA should more actively monitor HMOs,
 Maintenance               targeting HMOs based on disenrolhnent data; require HMOs to
 Organization (HMO)        report minimum statistical information; and establish minimum
 monitoring                requirements for case file documentation.

                           Relevant    legislation:   BBA 94001 (0s 1856, 1857(d))

                           Requires the Secretary to establish ijnancidl and other standards      1
                           by June 1, 1998; provides for the annual auditing of the financial     i
                           records of at least one-third of all Medicare+Choice orgmons;          :
                           gives the Secretary the right to audit, inspect, and evaluate the
                           quality, appropriateness, and timeliness of services and the ability   .
                           of the organization to bear the risk of potential financial losses.    ;

                           Related reports: HHSOIG-OEI-07-9400280; HHSOIGOEI-7-94     ’
                           00281; HHSOIG-OEI-07-9400282; KEZSOIGOEI-07-94002283;JXHS-
                           OIG-OEI-06-91-00734                                        II..

42                                         GAOLEEHS-9%18R        EUPAA and BBA Reform
ENCLOSU$E It                                                                ENCLOSURE II

 Intermediate sanctions   Recommendation:     HCFA should establish policies that specify the
 for managed care         circumstances under which it will impose sanctions on managed
 organizations            care organizations that are violating Medicare requirements.

                          Relevant    legislation:   BBA $4001 ($1857(g))

                          Provides for intermediate sanctions that apply to seven types of
                          situations, including failing to provide medically necessary items
                          and services; imposing excessive premiums; refusing to enroll an
                          eligible beneficiary; engaging in practices that would discourage
                          enrollment by persons with the need for intensive health care;
                          making false statements; failing to comply with balance biLLingand
                          “gag rule” provisions; and employing or contracting with an
                          individual or entity for the provision of health care, utilization
                          review, medical social work, or administrative services that have
                          been excluded from the Medicare program.

                          Related    report:    GAO/HFZD-92-11

43                                        GAOLEEHS-9%18R       HIPAA   and BBA Reform
ENCLOSURE It                                                                ENCLOSURE II

 Table II.4:   Managed   Care and Medica.re+Choice:      Pricing   and Payment   Methods
         Provision                                      Documentation

 Managed care risk          Recommendation:   HCFA should sponsor further research and
 adjusters                  demonstration work on the risk adjusters used for deternxinmg
                            managed care payments.

                            Relevant   legislation:   BBA $4001 ($1853(a)(3))

                            Requires HHS to establish risk adjusters, such as age, disability
                            status, gender, and institutional status, for Medicare&home
                            payments; study risk adjusters and determine their actnarial
                            soundness and establish adjusters for health status and other
                            demographic factors based on this study, effective January 1, 2000;   ;
                            and report to the Congress the results of an evaluation of the        I
                            actuarial soundness of the various adjusters by an independent        i
                            actuary.                                                              I

                            Related report:      GAO/HEH.S-94119
 Adjustment of managed      Recommendation:     The Congress should consider giving HCFA          i
 care rates                 authority to reduce Medicare managed care payment rates in
                            selected market areas, including the ability to conduct               I
                            demonstration projects on alternative payment methods.

                            Relevant   legislation:   BBA 94011
                            Authorizes seven demonstrations (four of which must be
                            conducted) in which payments to M&Ware-i-Choice organizations
                            are determined by competitive pricing.

                             Related reports:     GAOHEHS-97-16; GAOHEHS-96-21                    ..

44                                         GAO/EEHS-9%18R          HIPAA   and BBA Reform

ENCLOSIJBE TI                                                                ENCLOSURE II

 Non-fee-for-service basis   Recommendation:  HCFA should conduct research on bases for’
 for managed care            managed care payments other than fee-for-service reimbursement.
                             Relevant   legislation:   BBA $4001 ($1853)

                             Provides that although the new rates will be based on the 1997
                             average adjusted per capita cost, which is based on the Secretary’s
                             estimate for a geographic area of what will be paid for fee-for-
                             service beneficiaries, updates will be based on increases in the
                             nationdl per capita growth percentage.

                             Related report:     GAOMEHS-94-119


45                                         GAO/HEHS-9%18R       HIP&4      and BBA Reform

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