Carrier and Intermediary Medical Review Conclusions and free-standing skilled nursing facilities, home health and outpatient bills, and the timeliness and accuracy of intermediaries' calculation of scores to rank home health agencies using cost report data (used for selecting agencies for review). The rating of performance levels is clear-cut for those standards focusing on cost-effectiveness and timely and accurate submission of reports to HCFA. In 1987, a benefit savings of $15.00 for every dollar expended in administrative costs qualified an intermediary for a top score of 10; all reports on benefit savings (payments denied or recovered) had to be no more than 4 days late for a top score on that standard. Evaluation of skilled nursing facility, home health, and outpatient medi- Like the performance evaluation system for carriers, the intermediary system does not explicitly address any issues related directly to the identification of quality of care problems. Carrier and intermediary medical review could be improved in two ways. First, assessments are needed of the effectiveness of the current screening and review methods used by carriers and intermediaries in identifying possible quality of care problems. For carriers, for example, it would be useful to determine whether screens and profiles that currently focus on physicians with aberrant billing patterns also effectively identify physicians providing substandard care. For intermediaries, it would be useful to determine the relative effectiveness of different screens or review protocols in identifying Carrier and Intermediary Medical Review Recommendation inappropriate care placements or premature discharges. This is particularly important given the wide variation in the numbers and kinds of screens being used and the lack of attention to quality of care issues in the performance appraisal of carriers and intermediaries. Once HCFA established the validity and usefulness of current review methods it could then identify and adopt effective methods of focusing on quality and quality-related problems and drop ineffective ones. Developing the capacity to systematically assess alternative methods for screening and profiling would also increase the credibility of the medical review system as a whole. We have previously recommended that HCFA evaluate the costs and benefits of carrier postpayment utilization review operations.26 Evaluations of intermediary and carrier activities focusing on quality of care are also important. We recommend that the Secretary of HHS direct the Administrator of HCFA to assess the comparative effectiveness of carrier and intermediary screens and profiles as means to identify inappropriate and substandard quality care, as well as recover Medicare overpayments. The second way in which carrier and intermediary medical review can be improved relates to the coordination of Medicare review activities. While carrier, intermediary, and PRO reviews are carried out independently, program requirements increasingly necessitate the development of systems for coordinating review findings. Currently, coordination focuses largely on decisions about coverage and eligibility for Medicare reimbursement to ensure coordinated determinations regarding denials of payment. There is, however, little coordination among these three sets of contractors on issues related to quality of care. HCFA has developed a system called the "A/B Data Exchange," which allows intermediaries to notify carriers of hospital payments so that carriers can make sure that they do not pay for ancillary services included in Medicare hospital payment. This system also allows intermediaries to refer to carriers by computer link all hospital and skilled nursing facility denials based on medical necessity, appropriate 26 See General Accounting Office, Improving Medicare and Medicaid Systems to Control Payments for Unnecessary Physicians' Services. GAO/HRD-83-16 (Washington, D.C.: February 8, 1983), pp. 37-8. Carrier and Intermediary Medical Review ness, or reasonableness. This enables carriers to determine whether physician services billed for these inpatient stays should be denied payment. When PROS determine that hospital payments should be denied (see chapter 4), the intermediary billing data are revised. PROS also inform carriers of inpatient payment denials, and of all partial or full reversals of denials.27 When carriers receive a PRO denial notice for invasive surgical procedures found to be medically unnecessary, they automatically deny claims submitted by the surgeon and assistant surgeon. Carriers also automatically deny physician bills associated with nonmedically necessary "cost outlier" hospital stays (or portions of stays) denied by PROS. 28 Carriers review physician claims for visits to beneficiaries in skilled nursing facilities if such stays have been totally or partially denied by the intermediary. The implementation of the 1985 Consolidated Omnibus Reconciliation Act provisions calling for mandatory prior approval by PROS for certain elective surgical procedures also requires direct coordination between PROS and carriers. As was noted in the discussion of medical review activities, however, findings regarding quality of care per se are loosely coordinated, if at all. Neither information about quality-related problems found in carriers' reviews of physician bills for surgical or postoperative care, nor possible quality problems found by intermediaries in reviews of posthospital care are automatically forwarded to PROS. Rather, summarized review findings are reported to HCFA (generally to the regional office), or the survey and certification authorities. Carriers are required to notify PROS about severe or longstanding problems with providers which have led to formal reviews or sanctions, but carrier-PRO relationships are generally informal. In short, direct communication among claims processors about potential quality of care problems that do not involve denials of payment is essentially an issue of professional responsibility or discretion. Further, there are no formal guidelines specifying how HCFA regional offices coordinate the flow of quality-related information from intermediaries and carriers to PROS. 27 Carriers are required to execute written agreements with PROS clarifying the administrative details regarding coordination of denial information. Systems for coordinating information—in hard copy or through electronic data exchange-are worked out by the PROS and carriers. 28 Cost outlier cases are unusually high-cost cases, which may qualify for additional payment. (See chapter 4.) Carrier and Intermediary Medical Review Recommendation We recommend that the Secretary of HHS direct the Administrator of HCFA to develop formal guidelines to coordinate the systematic and timely reporting by carriers and intermediaries to PROS of possible problems with the quality of care provided in ambulatory and posthospital care settings identified in medical reviews. These guidelines should ensure (1) that intermediaries report directly to PROS as well as to HCFA all cases where possible problems of premature or inappropriate hospital discharge may exist, including cases where Medicare coverage for skilled nursing facility or home health services has been denied to patients who may nevertheless have extensive care needs, and (2) that information about possible quality of care problems uncovered by carriers is routinely shared with PROS. It should be noted that one phrase in the recommendation was revised in response to comments received from HHS. (See appendix VII.) Specifically, we have clarified the part of the recommendation relating to possible quality of care problems in cases not meeting Medicare coverage criteria for posthospital care. Medicare does not deny coverage for posthospital care because patients require higher levels of care. Nevertheless, patients requiring extensive posthospital care may not meet Medicare coverage criteria for home health or nursing home services. If intermediaries are aware of quality of care problems in cases ultimately denied Medicare posthospital coverage, we believe they should notify PROS about them. The cost of implementing guidelines for following up on suspected quality of care problems found in intermediary or carrier medical reviews would depend on the amount of additional review activity they generate. Given that only a small proportion of Medicare patients are discharged to home health or skilled nursing facility care, and that only a small percentage of these cases are denied by fiscal intermediaries, the increase in review volume due to intermediary referrals to PROS is likely to be small.29 Coordination of carrier medical review with PRO review could potentially involve more cases. But coordinating mechanisms will be required in any case for the proposed expansion of PRO review to physician and ambulatory care services discussed in chapter 2. Our recommendation addresses a current need and will also be useful in facilitating the anticipated expansion of PRO review. 29 As noted above, some intermediaries are already routinely reporting possible premature hospital discharge placements directly to PROS; for these, there would be no additional cost. Chapter 4 Peer Review Organizations Peer review organizations, working with data provided by claims pro- Table 4.1: Overview of Peer Review Organizations' Quality-Related Review Activities |