Department  of HeaIth  and  Human  Services  4 
OFFICE  OF 
INSPECTOR  GENERAL 
ENCOURAGING  PHYSICIANS  TO  USE 
PAPERLESS  CLAIMS 
I 
I  OEI-01-94-00230 
___  EXECUTIVE  SUMMARY 
PURPOSE 
To  help  the  Health  Care  Financing  Administration  (HCFA)  increase  acceptance  of 
paperless  claims  among  physicians. 
BACKGROUND 
From  1991  to  1994  the percent  of assigned  claims  submitted  by physicians  to  Medicare  in 
paperIess  formats  rose  from  40 to  73 percent,  the highest  rate  among  major  payers.  During 
the  same  time,  the percent  of physicians  authorized  to submit  paperless  claims  rose  from 
29 to 41 percent.  The  HCFAS  leadership  drove  much  of this  increase,  but  market  forces 
fostering  consolidation  of physician  practices  in managed  care  settings  contributed. 
In this  inspection  we  focus  on physicians  still  submitting  paper  claims  for  Medicare 
reimbursement.  Through  a mail  survey  of a random  sample  of such  physicians,  we 
examined  the  extent  of their  interest  in converting  to paperless  claims  and  the  kind  of 
concerns  they  have  about  converting. 
FINDINGS 
SMy-jive  percent  of physicians  who  now  submit  Medicare  c[aims  on paper  indicate  a 
high  or moderate  level  of interest  in  using  paperless  claims. 
Physicians  with  a high  or moderate  level  of interest,  as compared  with  those  expressing  a 
low  level  or no  interest  in paperless  claims,  are significantly  more  likely  to: 
  be younger  (44.9  years  of age on average  v. 50.9):  and 
  receive  contacts  from  sales  or professional  relations  staffs,  including  Medicare, 
offering  a system  for paperless  claims  (an average  2.83  in the past  year  v.  1.59). 
Physicians  who  responded  to our  survey  with  a high  or moderate  level  of interest,  as 
compared  with  those  expressing  a low  level  or no interest.  were  notably  more  likely  to: 
  use  a computer  in the office  (74 v. 43 percent);  and 
  be Medicare  participating  providers  (69 v. 51 percent), 
but  these  last  two  differences  are not  statistically  significant  for  our sample  size  and  design. 
Physicians  with  a high  or moderate  level  of interest  in using  paperless  claims  do  not  differ 
significantly  from  their  low  or no  interest  peers  with  regard  to  the  percent  of their  income 
derived  from  Medicare,  the  average  number  of claims  submitted  to Medicare,  or their 
specialty  practice. 
1  Eighty-three  percent  of physicians  who  submit  Medicare  c[aims  on paper  cite three  or 
more  concerns  about  using  paperless  ciaims. 
Technical  Complexity.  Major  examples  noted  were:  customizing  data  systems  to 
individual  practice;  obtaining  compatible  billing  software;  and  developing  the  capacity  to 
include  special  narratives  on claims.  Cited  by  89 percent  of physicians  with  high  to 
moderate  interest  in paperless  claims,  and  by  87 percent  of those  with  low  or no interest. 
Costs.  Includes  hardware  or software  costs  and  training  staff  to process  claims  by 
computer.  Indicated  by  78 percent  of physicians  with  high  or moderate  interest  in 
paperless  claims;  by  82 percent  of those  with  low  or no  interest. 
Information  Gaps.  Centers  around  two  matters:  difficulties  in checking  status  of paperless 
claims  and  access  to documentation  for the  paperless  claim  process.  Noted  by  83 percent 
of physicians  in the  high  or moderate  interest  category,  and  by  64 percent  in the  low  or no 
interest  category. 
Medicare  Policies.  Reflects  misunderstandings  about  limitations  on use of paperless 
claims  by some  physicians,  and  about  capability  for making  edits.  Mentioned  by 
71 percent  of physicians  with  high  or moderate  interest  and  by  59 percent  of those  with 
low  or no interest. 
Personal  Preferences.  Includes  factors  such  as age,  discomfort  with  the  computer, 
satisfaction  with  things  as they  are,  difficulties  with  carrier  and  vendor  staffs,  or preference 
for different  computer  systems.  Cited  by  56 percent  of physicians  expressing  a high  or 
moderate  interest  in paperless  claims;  by  74 percent  of those  expressing  low  or no  interest. 
RECOMMENDATIONS 
We conclude  that,  through  extended  outreach,  HCFA  could  influence  many  of the 
physicians  still  filing  paper  claims  to  switch  voluntarily  to paperless  systems.  At the  same 
time,  we recognize  that  not  ail of these  physicians  are likely  to accept  paperless  claims  and 
that  HCFA  needs  to begin  developing  a policy  framework  that  goes  beyond  expanded 
outreach,  as a way  of preparing  for the  day  when  paperless  claims  become  the  norm. 
In addition,  we recognize  that  physicians  will  have  increased  incentive  to  switch  to 
paperless  claims  as formats  for electronic  billing  become  increasingly  standardized 
throughout  the  health  care  industry.  A similar  impact  will  follow  from  increased  use  of 
one-stop  shopping,  where  insurers  electronically  route  claims  to other  payers,  and  other 
techniques  that  serve  to make  the  payment  process  more  transparent  to physicians. 
The HCFA  silouid  lead  a targeted  outreach  effort  to encourage  vo[untary  conversion  to 
paperless  Medicare  claim j71ing  by physicians  who  now  submit  claims  on paper  and  who 
have  a moderate  to high  level  of interest  in making  the  switch. 
ii  If the  physicians  who  express  a high  or moderate  level  of interest  in using  paperless  claims 
actually  made  the  switch: 
  the Medicare  administrative  cost  savings  would  be in a range  between  $22  million- 
and  $81  million  annually;  and 
  the volume  of assigned  paper  claims  Medicare  receives  from  physicians  would  be 
reduced  from  126 million  to 45 million  annually. 
As part  of its  extended  outreach  effort  HCFA  could: 
  Send  informational  brochures  with  a return  card  to request  additional  information.

  Establish  a  1-800  number  for  information  concerning  paperless  claims.

F  Conduct  targeted  mailings  to Medicare  participating  physicians.

  Furnish  information  with  every  new  provider  number  or address  change.

Physicians  who,  through  these  contacts,  express  interest  in making  the  switch  to 
paperless  claims  can  be further  persuaded  by such  efforts  as: 
  Convene  target  physicians  (and/or  their  office  representatives)  in groups  with  their 
peers  (and/or  their  representatives)  who  have  alreacFy switched  to paperless  claims. 
  Send  informational  materials  specifically  addressing  concerns  about  technical 
complexity,  costs,  information  gaps,  and  Medicare  policies. 
  Propose  paperless  claim  submission  as the  normal  choice  with  each  new  provider 
number  assignment  or change. 
The HCFA  should  begin  to plan  now for  the policy  changes  that  will  become  necessary 
to achieve  an  almost  completely  paperless  environment  for  processing  Medicare  claims. 
The  HCFA  also  must  address  how  in the years  ahead  it will  approach  those  physicians  who 
continue  to have  little  or no interest  in paperless  claims.  Here,  again,  to reflect  the  scope 
of the  opportunity,  we note  that  if the  physicians  who  express  little  or no  interest  all made 
the  switch,  then: 
	 the additional  Medicare  administrative  cost  savings  would  be in a range  between 
$12  million  and  $45  million  annually,  for a combined  savings  range  between 
$34  million  and  $126  million  annually;  and 
  paper  claims  volume  would  fall to zero. 
Among  the  options  available  are: 
  Target  a date  when  paperless  claims  submission  will  become  a condition  for 
Medicare  participating  physician  status. 
b  Target  a somewhat  later  date  when  all physicians  will  be  mandated  to submit 
paperless  claims. 
F  Continue  to accept  paper  claims  directly  into  Medicare,  but  impose  a filing  fee to 
cover  the  incremental  cost  of doing  so. 
... 
111  AGENCY  COIWMENTS 
We sought  comments  on the  draft  report  from  HCFA.  The  HCFA  concurred  with  both  of 
our  recommendations.  We include  the  fill  text  of HCFAS  comments  as appendix  D. 
In comments  on  our  first  recommendation,  that  it lead  a targeted  outreach  effort  to 
encourage  voluntary  conversion  to electronic  billing,  HCFA  noted  that  it offers  positive 
incentives  such  as faster  payments  and  free software.  It has  created  a national  standard 
enrollment  form,  and  proactively  participates  in groups  developing  industry-wide  standards. 
It also  described  ongoing  efforts  to streamline  coding  and  data  collection. 
In comments  on  our  second  recommendation,  that  it plan  now  for policy  changes  necessary 
in a paperless  environment,  HCFA  stated  that  it will  look  to  create  incentives  for providers 
to abandon  paper  claims  whenever  possible. 
We appreciate  HCFAs  concurrence  with  our recommendations  and  its continuing 
initiatives  to achieve  the benejts  of paperless  claims. 
iv  TABLE  OF  CONTENTS 
PAGE

EXECUTIVE  SUMMARY

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .  . . . .  ...5

  Reservoir  of Physician  Interest  in Paperless  Claims  . . . . . .  . . .  . .  . .  . . . .  .  .  5

  Widespread  Physician  Concern  About  Paperless  Claims  .  . . .  . . . . .  .  . . . .  . .  7

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

  HCFA  Should  Reach  Out to  Encourage  Voluntary  Conversion  . . . .  . .  . . . .  . .  10

  HCFAShould  Plan Now for A Paperless  Future..  . . . . . . . . . . . . . . . . . ..11

AGENCY  COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..13

APPENDICES

A:  Sampling  and Analysis  Methods.  . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  A-1

B:  Survey  Questions  and Answers  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  B-l

C:  Nonresponse  Analysis  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  C-1

D:  Agency  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  D-l

E:  Endnotes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  E-1
 INTRODUCTION 
PURPOSE 
To  help  the  Health  Care  Financing  Administration  increase  acceptance  of paperless  claims 
among  physicians. 
BACKGROUND 
Medicine  is a health  insurance  program  for people  age 65 or older  and  for certain  disabled 
people.  Since  it was  enacted  in  1965 Medicare  has  helped  to pay  for hospital  (Part  A) 
and  for physician  and  other  medical  (Part  B) services  and  supplies  used  by enrollees,  who 
number  about  38  milIion  today.2 
The  Medicare  program  is run  by the  Health  Care  Financing  Administration  (HCFA),  an 
operating  division  of the  U.S.  Department  of Health  and Human  Services  (HHS.)  For 
most  people  Medicare  pays  for  covered  health  care  after  the  enrollee  incurs  an expense,  in 
response  to a bill  or claim  submitted  by the provider  to one  of the  insurance  companies 
that  contract  to process  Medicare  claims.  By  1997,  HCFA  expects,  Medicare  contractors 
will  process  over  700  million  Part  B claims  annually.s 
The  cormactors  who  process  claims  submitted  to  Medicare  by physicians  are called 
carriers.  Since  only  a minority  of enrollees  are  in capitated  plans  today,  most  physicians 
must  submit  a separate  claim  for  each  enrollee  and  often  for  each  patient  encounter. 
Following  the  conventional  business  practice  at the  time  Medicare  was  enacted,  these 
claims  were  traditionally  written  (or typewritten)  on paper  and  submitted  through  the  mails. 
But  mo~ing,  processing,  and  storing  billions  of pieces  of paper  is costly  and  slow.  With 
the  coming  of  standardized  business  computer  systems  and  widespread  efficient 
telecommunications,  cheaper  and  more  effective  alternatives  to paper  claims  became 
availabie.d  The  HCFA,  recognizing  Medicares  role  as a leader  in health  care  information 
management,  very  early  started  planning  to migrate  its enormous  volume  of paper  claims 
into  an era of electronic  commerce. 
Figure1 
Building  upon  its experiences  at meetings  of the  ASSIGNED  PHYSICIAN CLAIMS 
1994 
Workgroup  for  Electronic  Data  Interchange 
TYPE OF CIAIM 
(wEDIl.  in late  1992  HCFA  set goals  for  all  332 yimiir=   
p-
(7  %)   
contractors  in the  rates  of provider  acceptance  of 
p-
paperless  claims.b  By  1994,  for  example,  a solid  r  1 
73-percent  majority  of assigned  physician  claims 
were  paperless  (figure  1), up from  40 percent  in  Ilion 
) 
1991.7 
SOURCE  Carrier Workload Raports, HCFA-158S 
1
 The  carriers  achieved  this  substantial  degree  of usage  of paperless  claims  in a relatively 
short  time  by  focusing  their  efforts  on larger  and  more  technically  sophisticated  submitters 
of claims.  Medicare  participating  physicians  accounted  for  85  percent  of the  assigned 
physician  claims  submitted  on paper  during  1994,  and  for  72 percent  of all assigned  claims 
submitted  on  paper  during  1994 by  all providers. 
h  December  1994,  by  contrast,  only  a minority  of physician  providers  were  authorized  to 
use  paperless  claims  (figure  2.)  One  carrier 
Figure  2 
PHYSICIAN  PROVIDERS  presents  an extreme  example,  reporting  more  than 
December 1994  80 percent  of its physician  claims  paperless,  with 
these  coming  from  just  16 percent  of the  physician 
m,  ~AP&~;&M 
providers  in the  service  area.  The  HCFAS  efforts 
f--j  Paperless  to  encourage  physician  use  of paperless  claims 
 
have  succeeded  to a much  greater  extent  on  a 
m= 
claim  basis  than  on  a provider  basis.  But,  on 
either  basis,  the  rate  of  increase  in physician  use  of 
paperless  claims  appears  to  have  slowed  or  stopped 
~ SOURCE:  OIG Survey of Canlers,  Mar-Apr 1995 
I  1  in  1995,  following  substantial  gains  from  1992 
through  1994.7 
Paperless  or  electronic  media  claims  (EMC)  make  the  most  sense  as a coherent  part  of  a 
unified  process  for  electronic  data  interchange  (EDI)  between  physicians  (as providers  of 
health  care  service)  on  the  one  hand  and  Medicare  or other  insurers  (as third  party  payers 
for health  care  services)  on  the other.  Typically  such  a process  provides  electronic 
remittance  advice  and  electronic  funds  transfer  (EFT).  Optionally  it may  provide  payment 
integration  across  many  payers  and  data  integration  with  the  physicians  office  records 
management  systems,  for  both  accounting  and  professional  information. 
Two  recent  reports  by  the  HHS  Office  of Inspector  General  (OIG)  consider  physician  use 
of paperless  claims  for  billing  Medicare  within  the  larger  context  of HCFAs  efforts  to 
promote  all  the  features  of  EDI. 
In the  March  1994  report.  Electronic  Data  Interchange  and  Paperless  Processing:  issues 
and  Challenges.  OEI- 12-93-00080.  the  OIG  discussed  at length  emerging  issues  related  to 
expansion  of  HCFAs  use  of  various  aspects  of electronic  data  interchange.  With  regard  to 
incentives  and  barriers  for getting  providers  (especially  small  providers)  to buy  into  a 
paperless  processing  system,  the  OIG  noted  simple  resistance  to  change,  additional  costs  of 
converting,  and  lack  of standard  data  sets. 
[n a final  report  being  issued  simultaneously  with  this  one,  Review  qf Medicare  Providers 
and  Electronic  Claims  Processing,  .4-05 -94-00039,  among  the  issues  discussed  by the  OIG 
is conversion  of  hard  copy  providers  to paperless  claims.  The  OIG  found  that  many  paper 
billers  in that  sample  had  a great  deal  of  interest  in converting  (43  out  of 95  were 
interested).  Others  continued  to resist  because  of  costs  or  objections  to the  technology. 
That  study  included  Part  A and  Part  B providers.  It was  based  on  field  work  conducted  in 
Illinois,  Indiana.  and  Ohio.  In that  study  the  OIG  found,  as we  do  in this  report,  that 
2
 physician  concerns  about  paperless  claims  can reflect  misunderstandings  of Medicare 
policies  and  of the  capabilities  of paperless  claims  systems. 
In this  study  we  focus  narrowly  on paperless  claims  submittal  as the  necess~  first  step  in 
migration  to  a fully  electronic  system.  More  specifically,  we focus  on the  concerns  of 
physicians  who  do  not  now  use  paperless  claims  and  on their  level  of interest  in switching. 
Physicians  submitted  87 percent  of all the  paper  claims  carriers  received  in  1994.  As  a 
group,  physicians  are  likely  to  share  a common  set of concerns  about  paperless  claims  that 
may  differ  from  the  concerns  of nonphysician  practitioners  and  other  suppliers  of medical 
items  and  services. 
The  time  may  be here  when  HCFA  needs  to reach  out  to physicians  who  do not  yet  submit 
paperless  claims  and  encourage  them  to do so even  more  strongly  than  ithas  in the  past. 
The  HCFA  intends  that  the  Medicare  Transaction  System  (MTS),  which  it is now  building 
and  expects  to  implement  fufly  by  1999,  will  include  a single,  unified.  paperless  claims 
processing  systems  If 59 percent  of physicians  continue  to  submit  27 percent  of Medicare 
claims  on  paper,  many  of  the  efficiencies  planned  for  MTS  will  be put  in jeopardy. 
METHODOLOGY 
We  surveyed  by  mail  a random  sample  of physicians  who  do  not  now  use paperless  claims

for Medicare.  We  selected  the  sample  in two  stages,  first  by selecting  a random  sample  of

8 of the  29  geographic  carriers  that  process  physicians  Medicare  claims,  then  by selecting

a random  sample  of  about  100 physician  provider  numbers  for  each  of the  8 carriers.  In

evaluating  the  survey  results,  we applied  standard  statistical  formulas  to account  for  the

two-stage  sampling.  We give  a more  detailed  description  of sample  selection  and  analysis

in appendix  A.

After  eliminating  duplicates,  we  mailed  each  selected  physician  a four-page  questionnaire

designed  to  measure  the  breadth  and  depth  of their  concerns  about  paperless  claims  and

their  level  of  interest  in switching.  At  HCFAS  suggestion  we  included  questions  about  the

respondents  use  of  a computer  for Medicare  billing.  We  tabulated  the results  in a

database  file,  which  we  used  to develop  response  counts  and  frequencies.  We tested  the

data  for nonresponse  bias,  and  found  none  for the  characteristics  we analyzed.  In appendix

B we  give  the  survey  questions  and  results.  Appendix  C contains  the  nonresponse  analysis.

When  we contacted  the  carriers  for  information  about  the  population  of physicians  who  do

not  use  paperless  claims,  we collected  summary  data  about  their  collective  Medicare  claims

activity.  credentials,  (primary-care)  specialty,  and  group  association.  In addition  we

interviewed  by  telephone  a number  of carrier  staff  who  are  involved  in promoting  paperless

claims  and  a number  of  knowledgeable  observers  outside  the  carriers.  Finally,  we drew

heavily  on  the  staff  at  HCFAs  central  and  Boston  regional  offices  for carrier  reports,

HCFA  policy  statements.  and  a sense  of the  agencys  experience  with  and  plans  for

paperless  claims.

3
 Some  of the  data  we collected  comes  from  databases  maintained  by  HCFA  and  the  carriers.

We did  not  independently  veri~  the  integrity  of these  data.  The  HCFA  continually

monitors  carrier  performance  and the  quality  of its own  data  center.  We  have  no  evidence

to  question  the  essential  integrity  of the  data.

We  conducted  a mail  survey,  so we  are not  able  to say with  certainty  who  responded  to the

questionnaire.  We  assume  that,  if some  physicians  delegated  the  response  to an associate

or employee,  the  respondent  spoke  for the  selected  physician  and  that  the  survey  answers

fairly  represent  the  physicians  concerns  and  interest.

We  completed  our  review  in accordance  with  the  Quality  Standar&  jior Inspections  issued

by the  Presidents  Council  on Integrity  and  Efficiency

4
 FINDINGS

Sirty-jive  percent  of physicians  who  now  submit  Medicare  ciairns  on paper  indicate  a 
high  or moderate  level  of interest  in  using  paperless  claims. 
A physician  who  indicates  a high  level  of interest  in using  paperless  claims  is,  according  to

the wording  of our  survey  question,  actively  pkmning  to start  using  them.  Some

respondents  are  involved  in the  transition  process  right  now,  while  others  indicate  a fm

intention  to use  paperless  claims  by the  end  of the  survey  year  (1995).  One  physician

included  with  the  returned  questionnaire  a copy  of a communication  from  his  service

vendor  discussing  tests  of paperless  claims  they  carried  out  on  the  same  day  of the

response.

About  a dozen  respondents  included  with  their  answers  to the  survey  explicit  requests  for

additional  information  about  paperless  claims.  Even  some  of the  physicians  with  moderate

interest  indicated  active  shopping  for paperless  billing  systems.  Figure  3 gives  a more

detailed  picture  of the  levels  of interest  indicated  by responding  physicians.

Figure 3 
LEVEL OF INTEREST  IN PAPERLESS  CLAIMS 
1  Percent of Physidans  by Level of Interest 
Low

Inwesl or

None

H~h or

Moderate  (65%)

Interest

k%  lU%  zo?i am  a%  m%  m%  m 
Source: OIG Mail Swvey, July-August 1995  N -294 
Physicians  with  a high  or moderate  level  of  interest,  as compared  with  those  expressing  a 
low  level  or no  interest  in paperless  claims,  are sign~jicantly  more  likely  to: 
  be younger  (44.9  years of age on average  v. 50.9); 
The  average  age  of physicians  (medical  doctors)  in the  US  is 45  years,9 and  the  average 
age of all 294  physicians  (with  any  one  of six professional  credentials)  who  responded  to 
our  survey  questions  is 48  years.  But  our  sample  is limited  to physicians  who  use  paper 
claims.  It seems  intuitive  that  younger  physicians  would  be more  receptive  to 
technologically  advanced  practices  such  as use  of paperless  claims. 
	 receive  contacts  from  sales  or professional  relations  staffs,  including  Medicare, 
offering  a system  for paperless  ciaims  (an average  2.83  in the past  year  v.  1.59). 
5  It appears  that  physicians  are not  swamped  with  contacts  offering  systems  for paperless 
claims.  In answering  this  question  the  physicians  seem  to have  ignored  mail  advertising 
and  credited  only  direct  contacts  with  the  physician  (as contrasted  to office  staff.)  About 
half  the respondents  reported  no contacts;  most  reported  10 or fewer.  Four  (out  of 246)  - 
reported  from  20 to 30 contacts  each. 
Physicians  who  responded  to our  survey  with  a high  or moderate  level  of  interest,  as 
compared  with  those  expressing  a low  level  or no  interest,  were  notably  more  likely  to: 
	 use  a computer  in the  office  (74  v. 43 percent),  but  the  difference  is not 
statistically  significant  for  our  sample  size and  design. 
The  office  computer  is widespread,  even  among  physicians  with  little  or no  interest  in 
paperless  claims.  A majority  of respondents,  53 percent,  at all levels  of interest  use  a 
computer  to  prepare  their  Medicare  claims,  and  55 percent  actually  use the  computer  to 
print  paper  claims  for  mailing. 
	 be Medicare  participating  providers  (69  v. 51 percent),  but  the  difference  is not 
statistically  significant  for  our  sample  size and  design. 
The  rate of paperless  claims  for participating  physicians  in  1994  was  74.2  percent,  just 
slightly  more  than  the  72.5  percent  for  all claims.  Participating  physicians  submitted 
85 percent  of all  126 million  paper  claims  submitted  by physicians  on assignment  in  1994, 
and  72 percent  of all  149 million  assigned  paper  claims  from  all  submitters. 
Physicians  with  a high  or moderate  level  of interest  in using paperless  claims  do not  dl~er 
signljlcantly  @om  their  low  or no  interest  level peers  with  regard  to. 
  Medicare  as a percent  of practice  income; 
Medicare  represents  19.62  percent  of practice  income  for  the  physicians  with  high  or 
moderate  interest  in paperless  claims,  and  an almost  identical  20.76  percent  for  those  with 
little  or no interest. 
  average  number  of Medicare  claims; 
The  Medicare  carriers  processed  an average  of 47 claims  in December  1994  for physicians 
expressing  high  or moderate  interest  in paperless  claims,  compared  to an average  of 40  for 
those  \\ith  low  or no  interest. 
  professional  credentials; 
Among  physicians  with  a high  or moderate  level  of interest  in paperless  claims.  a projected 
56 percent  hold  the  degree  of medical  doctor,  while  57 percent  of those  with  lo~r or no 
interest  are so credentialed. 
6
   practice  specialty. 
Twenty-six  percent  of physicians  with  high  or moderate  interest  in paperless  claims  have 
primary  care  specialties,10  as compared  with  15 percent  of those  with  low  or no  interest. 
Eighty-three  percent  of physicians  who submit  Medicare  claims  on paper  cite  three  or 
more  concerns  about  using  paperless  c[aims. 
Almost  all (95  percent)  of the physicians  responding  to  our  survey  indicate  some  concern 
in at least  one  of the  areas  listed  on the  questionnaire.  And  eight  percent  of them  indicate 
concerns  in all  six categories  we presented.  Figure  4 shows  the  depth  of physician 
concerns  about  paperless  claims.  Depth  of concern  is not  critically  sensitive  to the 
physicians  level  of interest  in using  paperless  claims. 
Figlfe4

DEPTH OF PHYSICIAN CONCERNS ABOUT PAPERLESS CIAIMS

Pefc8ntaf Physidan$with Alkist  AGlwINutnberc4  @nmms 
ml G%  w 
m% 
40% 
SOUIIX OIG Mail &ltWy, JIdy-AuIJusi1995.  N -294 
For  those  physicians  with  a high  or moderate  level  of interest  in paperless  claims, 
86 percent  cite  three  or more  concerns  about  using  paperless  claims.  Among  these 
physicians  95  percent  indicate  concern  in at least  one  area,  and  6 percent  in all  six  areas. 
By  comparison,  for those  physicians  with  a low  or moderate  interest  in paperless  claims, 
78 percent  cite  three  or more  concerns  about  using  paperless  claims.  And  95 percent  of 
these  physicians  indicate  concern  in at least  one  area while  and  13 percent  indicate  concern 
in all  six  areas. 
7
 The  two  concerns  mentioned  most  often  in responses  to our  survey,  technical  complexity 
and  cost,  apply  about  equally  often  to physicians  with  high  or moderate  interest  in 
paperless  claims  and to those  with  low  or no interest  (see figure  5.)  By  contrast,  the 
former  group  (more  interested  physicians)  is significantly  more  often  concerned  about 
information  gaps  and  Medicare  policies  and  less ofien  concerned  about  the  impact  of 
paperless  claims  on their  personal  preferences. 
Figure5 
BRE4DTH  OF PHYSICIAN  CONCERNS  ASOtJT PAPERLESS  CtAlhlf 
100%1  *  ~  Percent ofPhysidamwithEach Type of Cormsrn 
83 
so% 
Level of 
Interest 
00%  ~ 
40% 
20% 
n.u.i_L  ~
 
m-AP8--?~L 
Sourw: OIQ Mail Surfev. JUIV.AUOUS1i9S5. N Vades from227 to 2S4. 
The  types  of concern  cited  by physicians  are closely  related  to those  previously  recognized

by  HCFA  and  the  carriers  and  identified  in earlier  reports  from  the  OIG.  They  include:

Technical  Complexity.  Eighty-eight  percent  of the  physicians  note

concerns  about  technical  matters  such  as customizing  data  systems  I would  use  it

to individual  practice,  obtaining  compatible  billing  software,  or  ~~itworked

developing  the  capacity  to include  special  narratives  on claims.  easily.

Among  the  physicians  expressing  a high  or moderate  level  of

interest  in paperless  claims.  89 percent  cite  technical  concerns,  as do  MD,  New  York

87 percent  of those  having  a low  interest  in paperless  claims.

The  expense  Costs.  Seventy-nine  percent  of the  physicians  raise  concerns  about 
involved  is not  costs.  In the  great  majority  of cases  these  concerns  focus  on 
cost-effective  hardware  or software  costs.  Many  physicians  also  cite  concerns 
since  we do  associated  with  training  staff  to process  claims  by computer. 
not  accept  Seventy-eight  percent  of physicians  with  high  or moderate  interest  in 
assignment.  paperless  claims  raise  such  cost-related  concerns,  compared  with 
82 percent  of those  with  low  or no interest. 
DC,  Minnesota 
8
 Information  Gaps.  Seventy-seven  percent  of the physicians  point  ~,.,:::..

to informational  uncertainties  associated  with  use  of paperless  J4y  o@e  ~~

claims.  These  center  around  two  particular  matters:  (1)  possible  cu?npuh?+*wjs@&::.

difficulties  involved  in checking  the  status  of paperless  claims,  and    $etw$:ti$i=  ,,.,..

(2) potential  access  to documentation  for the paperless  claim  .... receiv@~.j&;.::j~

process.  Eighty-three  percent  of the physicians  in the high  or  .  directiOti..$  .:!

moderate  interest  category  refer  to such  information  gaps,  as

JfD,.:K~~~;~,

compared  with  64 percent  in the  low  interest  category. 
,.. 
Medicare  Policies.  Sixty-seven  percent  of the physicians  indicate 
Medicare  does  concerns  about  the  administrative  rules  and  regulations  that  govern 
make  a lot  of  use of paperless  claims  for Medicare.  Many  of these  concerns lack 
changes  in  a firm  basis  in Medicare  policy.  Physicians  can mistakenly  assume 
policy  and  that  Medicare  puts  limitations  on use of paperless  claims  by  certain 
procedure.  types  of physician,  where  no limits  exist.  Or physicians  can 
misunderstand  their  capability  for  making  edits  to a paperless 
MD,  Minnesota  claim.  Seventy-one  percent  of physicians  with  high  or moderate 
interest  mentioned  policy  concerns,  as did  59 percent  of those  with 
low  or no  interest. 
Personal  Preferences.  Finally,  62 percent  of the  physicians  note  Computers 
various  personal  factors  as inhibiting  their  interest  in paperless  have  a way  of 
claims.  They  invoke  factors  such  as their  age,  discomfort  with  the  changing  the 
computer,  satisfaction  with  things  as they  are,  difficulties  with  information, 
somehow. 
carrier  and  vendor  staffs,  or preference  for different  computer 
systems.  Fifty-six  percent  of physicians  expressing  a high  or 
OD, Indiana 
moderate  interest  in paperless  claims  note  their  personal  preference 
as a concern,  compared  with  74 percent  of those  expressing  low 
interest. 
9  RECOMMENDATIONS 
Our  findings  reveal  a considerable  reservoir  of interest  in the  possibility  of switching  to  

paperless  claims  among  the majority  of physicians  who  are still  using  paper  claims.  This

situation  presents  HCFA  and the  carriers  a notable  opportunity  to foster  additional

voluntary  conversions  to paperless  claims.

To take  advantage  of this  opportunity,  however,  HCFA  and the  carriers  will  need  to

respond  more  completely  to the  concerns  expressed  by  physicians  who  have  been  reluctant

to make  the  switch  thus  far.  Many  of their  concerns,  it appears,  could  be addressed  with

clearer  and  more  explicit  explanations  about  the particulars  and  implications  of paperless

claims  processing  systems.  Such  explanations  may  be  somewhat  less  responsive  to

concerns  that  center  around  costs,  but  even  here,  fuller  information  could  help  illustrate  the

potential  cost  effectiveness  of paperless  systemsfor  the physician  as well  as for  Medicare

and  other  payers.

We conclude  that,  through  extended  outreach,  HCFA  could  influence  many  of the

physicians  still  filing  paper  claims  to switch  voluntarily  to paperless  systems.  At the  same

time.  we recognize  that  not  all of these  physicians  are  likely  to  accept  paperiess  claims  and

that  HCFA  needs  to begin  developing  a policy  framework  that  goes  beyond  expanded

outreach,  as a way  of preparing  for the  day  when  the  internally  paperless  Medicare

Transaction  System  becomes  fully  operational.

In addition,  we recognize  that physicians  will  have  increased  incentive  to switch  to

paperless  claims  as formats  for electronic  billing  become  increasingly  standardized

throughout  the  health  care  industry.  A similar  impact  will  follow  from  increased  use  of

one-stop  shopping,  where  insurers  electronically  route  claims  to  other  payers,  and  other

techniques  that  serve  to make  the  payment  process  more  transparent  to physicians.

Our  two  recommendations  follow.  The  first  (multi-part)  recommendation  focuses  on

measures  that  HCFA  can take  to reach  out  to that  substantial  group  of physicians  who

seem  reasonably  open  to switching  to paperless  claim  submission  for Medicare.  The

second  recommendation  addresses  those  who  are less  open  to  such  a conversion.

The HCFA  should  lead  a targeted  outreach  effort  to encourage  voluntary  conversion  to 
paperless  Medicare  claim fding  by physicians  who  now  submit  claims  on paper  and  who 
have  a moderate  to high  [evei of interest  in  making  the switch. 
The  HCFA  and  the  Medicare  carriers,  as we  have  noted,  have  already  undertaken 
considerable  outreach  efforts  to encourage  paperless  claims  processing.  A second  wave  of 
outreach,  targeted  to those  physicians  who  seem  most  inclined  to make  the  change,  could 
add  significantly  to prior  successes.  As an indication  of the  scope  of the  opportunity  that 
exists.  we note  that  if the  physicians  who  expressed  a high  or moderate  level  of interest  in 
using  paperless  claims  actually  made  the switch: 
10
 	 the  Medicare  administrative  cost  savings  would  be in a range  between  $22  million 
and  $81  million  annually;]  1 and 
	 the  volume  of assigned  paper  claims  Medicare  receives  from  physicians  would  be 
reduced  from  126 million  to 45 million  annually.  12 
Options  for  implementing  this  recommendation  include: 
	 Enclose  with  claim  payments  to the  targeted  physicians  a separate  informational 
brochure  on the  advantages  of paperless  claims  processing  and  a tear-off  card  that 
the  physician  could  return  to the  carrier  to learn  more  about  paperless  claims. 
F	 Establish  a  1-800  number  which  physicians  could  call to obtain  information 
concerning  paperless  claims  and  which  could  be presented  in informational 
advertisements  in professional  journals  and  in promotional  materials. 
	 Conduct  targeted  mailings  to Medicare  participating  physicians,  since  they  are 
especially  likely  to be interested  in using  paperless  claims.  The  mailing  could 
include  informational  material  and  a tear-off  ctard to return  by those  wishing  to 
know  more. 
b	 Assume  that  any  (probably  younger  and  more  mobile)  physician  applying  for  a new 
provider  number  wants  to use paperless  claims.  Furnish  information  and  transition 
support  in setting  up the  paperless  billing  system.  Provide  the  same  service  to  a 
physician  ~vho notifies  the  carrier  of an address  change  or new  group  affiliation. 
Physicians  who,  through  these  contacts,  express  interested  in making  the  switch  to 
paperless  claims  can be further  persuaded  by  such  efforts  as: 
	 Convene  physicians  (and/or  their  office  representatives)  in groups  with  their  peers 
(and/or  their  representatives)  who  have  already  switched  to paperless  claims.  Peers 
can convey  the  usefulness  of paperless  claims  and  address  real  concerns  in the 
physicians  context  in a direct  way  that  can effectively  supplement  the  carriers 
factual  presentations. 
k	 Send  tightl>  focused  informational  materials  to these  physicians,  specifically 
addressing  concerns  about  technical  complexity,  costs,  information  gaps,  and 
Medicare  policies. 
	 Propose  paperless  claim  submission  as the  normal  choice  with  each  new  provider 
number  assignment  or change. 
The HCFA  should  begin  to plan  now for  the policy  changes  that  will  become  necessary 
to achieve  an  almost  completely  paper!ess  environment  for  processing  Medicare  claims. 
11
 The  HCFA  also  must  address  how  in the  years  ahead  it will  approach  those  physicians  who 
continue  to have  little  or no interest  in paperless  claims.  It must  do so in a way  that 
reflects  concerns  not  only  for administrative  efficiency,  but  also  for the  access  to and 
quality  of services  for  Medicare  beneficiaries.  Here,  again,  to reflect  the  scope  of the 
opportunity,  we note  that  if the  physicians  who  express  little  or no  interest  made  the 
switch,  then: 
  the  additional  Medicare  administrative  cost  savings  would  be in a range  between 
$12  million  and  $45  million  annually,  for a combined  savings  range  betsveen  $34 
million  and  $126  million  annually;13  and 
  paper  claims  volume  would  fall  to zero. 
Among  the  policy  options  available  to HCFA  in addressing  those  physicians  who  have  not 
converted  voluntarily  to paperless  claims  are the  following: 
F	 Target  a date  when  all paperless  claims  submission  will  become  a condition  for 
Medicare  participating  physician  status.  Carrier  representatives  indicated  that 
contractual  requirements  to use payers  paperless  claim  systems  are  becoming  more 
common  in managed  care  settings,  even  for affiliation  of an independent  physician 
office  with  a payer  in a prefemed  provider  arrangement. 
	 Target  a somewhat  later  date  when  all physicians  will  be mandated  to  submit 
paperless  claims.  A  1994  amendment  to the New  York  State  public  health  law 
requires  use  of electronic  (paperless)  claims  by physicians,  but  has  yet  to be 
implemented. 
F	 Continue  to accept  paper  claims  directly  into  Medicare,  but  impose  a filing  fee  to 
cover  the  incremental  cost  of doing  so. 
12
 AGENCY  COMMENTS 
We  sought  comments  on the  draft  report  from  HCFA.  The  HCFA  concurred  with  both  of 
our  recommendations.  We include  the  full  text  of HCFAs  comments  as appendix  D. 
In comments  on  our  first  recommendation,  that  it lead  a targeted  outreach  effort  to 
encourage  voluntary  conversion  to electronic  billing,  HCFA  noted  that  it offers  positive 
incentives  such  as faster  payments  and  free  software.  It has  created  a national  standard 
enrollment  form,  and proactively  participates  in groups  developing  industry-wide  standards. 
It also  described  ongoing  efforts  to streamline  coding  and  data  collection. 
In comments  on  our  second  recommendation,  that  it plan  now  for policy  changes  necessary 
in a paperless  environment,  HCFA  stated  that  it will  look  to create  incentives  for providers 
to abandon  paper  claims  whenever  possible. 
We appreciate  HCFAs  concurrence  with  our  recommendations  and  its continuing 
initiatives  to achieve  the benefits  of paperless  claims. 
13
 APPENDIX  A 
SAMPLING  AND  ANALYSIS  METHODS 
SAMPLING 
We used  a two-stage  cluster, sample  to draw  the  sample  of physicians  for  our  mail  survey.

In the  first  stage  we selected  8 of the  29 geographic  carriers  that  process  claims  for

Medicare  using  simple  random  sampling.  Since  we were  interested  in physician  use  of

paperless  claims,  we ignored  the  specialized  carriers  such  as those  which  process  cIaims  for

durable  medical  equipment.  And  since  most  physicians  who  bill  the  Railroad  carrier  also

bill  the  geographic  carriers,  we  ignored  the  Railroad  carrier  also.

In the  second  stage  we obtained  from  each  of the  8 selected  carriers  the  number  of

physician  providers  in their  files  not  authorized  to submit  paperless  claims  to Medicare.

We then  selected  100 random  numbers  for each  carrier,  and  requested  the  carrier  to  send  us

identifying  and  claims  information  for the  provider  corresponding  to each  random

selection.

It was  our  intent,  in this  way,  to have  a sample  of 800 physicians  for the  mail  survey.  We

based  the  mail  survey  sample  size  of 800 physicians  upon  an anticipated  25 percent

response  rate  experienced  in earlier  physician  surveys.  When  we reviewed  the  information

fhrnished  by the  8 carriers,  we noted  that  a majority  of the  provider  numbers  we  originally

selected  were  not  used--no  claims  were  processed  during  the  time  sampled.

Accordingly,  to  have  approximately  800 mailings  and  expect  about  200  responses,  we

inflated  the  sample  by keeping  the  original  100 random  numbers  and  generating  the

appropriate  number  of random  spares.  After  we struck  out  the  unused  provider  numbers,

we were  left with  approximately  100 selected  physician  providers  per  carrier,

Some  of the  selections  were  numbers  for billing  groups,  and  we wanted  to  survey

physicians.  We  asked  the  carriers  to select  at random  one  physician  member  of each  such

group,  and  used  that  person  as the  addressee  on our mailing.  In addition,  we struck  out  of

the  selection  multiple  provider  numbers  corresponding  to multiple  practice  locations  or

multiple  members  of a group  practice.

As  indicated  here,  we selected  the  sample  from  a population  of billing  numbers  that  is not

in strict  one-to-one  correspondence  with  the population  of physicians.  Because  we

eliminated  duplicates  and  inactive  provider  numbers,  we believe  the  physician  responses

accurately  reflect  the concerns  and  interests  of the physician  population  that  continues  to

submit  claims  to  Medicare  on paper.

A-1
 ANALYSIS 
We coded  the  answers  to the  closed-end  questions  in the  survey  questionnaire  for  the  366 
responses  we  received  to the  779  surveys  we mailed-a  gross  response  rate  of 47 percent. 
However,  54 respondents  answered  the  first  screening  question  in the  affirmative,  thereby 
indicating  that  they  do now  use  paperless  claims  for Medicare  and  hence  are  ineligible 
respondents  in a survey  of physicians  who  still  use paper. 
For  the  312  eligible  respondents  we used  standard  computer  programs  to develop 
frequencies  and  percentages  for their  answers  to the closed-end  questions.  Since  ours  was 
a two-stage  cluster  sample,  we used  standard  statistical  formulas  to take  the  sample 
selection  process  into  account  in calculating  results.  Generally,  the  correction  for the  two-
stage  sample  selection  amounts  to one  or two  percentage  points. 
For  certain  analyses  it was  appropriate  to compare  the  set of answers  to one  question  in the 
survey  with  those  for a second  question,  or with  some  information  provided  by the  carrier. 
Among  the  categories  of information  we  looked  at were  age,  group  association,  Medicare 
participating  physician  status,  and  number  of claims  processed.  In the  instance  of a 
categorical  variable  (Medicare  participation,  for  example),  we used  the  chi-square  test  of 
statistics  and  assessed  its significance  at the  95 percent  level  of confidence.  For  continuous 
variables  (age),  we used  the  z test  statistic,  again  assessing  significance  at the  95 percent 
Ievel  of confidence. 
In order  to  expedite  issuance  of the draft  report,  we included  only  preliminary  estimates  of 
the  percentages  for  survey  responses.  For  example,  with  regard  to  Question  10 in the 
survey  (the  answers  for which  form  the  basis  for the first  finding): 
294 physicians  answered  this  question; 
55 of  the  294  indicated  high  interest  in paperless  claims  (19%);  and 
132 of the  294  indicated  moderate  interest  in paperless  claims  (45-!4o). 
The  simple  percentage  of respondents  with  high  or moderate  interest  in paperless 
claims  is 64/0. 
Because  we  selected  a two-stage  cluster  sample,  we corrected  this  simple  percentage  in 
order  to project  the  survey  result  to the  entire  population  of physicians  who  submit  paper 
claims  to Medicare. 
We estimated  responses  and  comparisons  using  the  Survey  Data  Analysis  (SUDAAN) 
software  package  for multi-stage  sample  designs.  In the body  of this  final  report,  we  give 
percentages  corrected  for the  sample  size  and design.  Appendix  B,  however,  gives  the 
actual  response  numbers  and  uncorrected  percentages. 
A-2
 APPENDIX  B 
SURVEY  QUESTIONS  AND  ANSWERS 
We give  here  the  frequencies  and  distributions  of the  answers  to the  closed  ended  questions 
in our mail  survey.  Questions  2F2,  3E2,  4E2,  5D2,  6D2,  7, 8F2,  9, and  11H2  invited  open 
ended  comments.  All  the  percentages  in appendix  B refer  to the  raw  dat~  and  are  not 
corrected  for  sample  size  or design. 
QUESTION1  SCREENING:  Please  tell  us whether  you  now  use paperless  claims for  Medicare. 
TOTALANSWERS=  366

YES (Y) =54  NO(N) =312

YES(Y) =15%  NO(N) =85%

QUESTION2  CONCERNS:	 We ve listed  below  a number  of concerns  that physiciam  express  about 
using paperless  claims.  Please  indicate  the degree  to which you  share 
each of them. 
QUESTION2A: Concernaboutthe costof paperlessclaims.

TOTALANSWERS= 295

MAJOR(J) = 146  MINOR(R) = 94  NOT A CONCERN(?J)= 55

MAJOR(J) =  MINOR(R) = 32% NOT A CONCERN(N) = 19%

0970 
QUESTION2B: Concernabouttechnicalcomplexitiesassociatedwith convertingto paperlessclaims.

TOTALANSWERS=  294

MAJOR(J) = 162  MINOR(R) =94  NOT A CONCERN(N) = 38

MAJOR(J) = 55%  MmOR (R) = 32%0NOT A CONCERN (N) = 13%

QUESTION 2C: Concern about certain Medicare policies associated with use of paperless claims.

TOTAL ANSWERS  =  291

MAJOR (J) = 71  MINOR (R) = 131  NOT A CONCERN (N) = 89

MAJOR (J) = 24%  MINOR (R) = 45%  NOT A CONCERN (N) = 31%

QUESTION 2D: Concern about getting sufficient  information relating to use of paperless claims.

TOTAL ANSWERS  =  291

MAJOR (J) = 99  MINOR (R) = 120  NOT A CONCERN (N) = 72

MAJOR (J) = 34%  MINOR (R) = 41%  NOT A CONCERN (N) = 25%

QUESTION 2E:  Concern about paperless claims just not fitting in with my personal preference.

TOTAL ANSWERS  =  293

MAJOR (J) = 81  MINOR (R) = 88  NOT A CONCERN (N) = 124

MAJOR (J) = 28A MINOR (R) = 30%  NOT A CONCERN (N) = 42%

B-1
 QUESTION  2F1 :  Concern about something else. 
TOTALANSWERS=  115

MAJOR(J) =66  MINOR(R) = 6  NOT A CONCERN(N)= 43

MAJOR(J) = 57%  MINOR(R) = 5%0NOT A CONCERN(N) = 37%

QUESTION3  COST CONCERNS:  P[ease  indicate  with a X or check mark which  are concerns. 
[For  Questions  3 through  6 an answer  coded  Yes means  the respondent  marked  the box labeled  Concern 
and  No means  the box labeled  Not A Concern  was marked.] 
QUESTION3A:  Cost ofhardware,sotiare,  or phone tolls. 
TOTAL ANSWERS  =  296

YES (Y) = 244  NO (N) = 52

YES(Y)  =82XO  NO(N)=  18%

QUESTION  3B:  Cash flow during the transition to paperless claims.

TOTAL ANSWERS =  290

YES (Y) = 106  NO (N) = 184

YES(Y)  =37%  NO@J) =63%

QUESTION  3C:  Cost of training and retraining staff.

TOTAL ANSWERS  =  292

YES (Y)=  170  NO(N)=  122

YES(Y)  =58%  NO(N)  =42%

QUESTION  3D:  Lack of opportunity
 to pool costs with other physicians. 
TOTAL ANSWERS =  281

YES (Y) = 107  NO (N) = 174

YES (Y) = 38 ?40 NO (N) = 62 %0

QUESTION  3E 1:  Something else.

TOTAL ANSWERS =  38

YES (Y) = 19  NO(N)=  19

YES (Y) = 50 VO NO (N) = 50 %0

QUESTION 4  TECHNICAL  CONCERNS: 
QUESTION 4A:  Incompatibility  with other billing software or general office operations.

TOTAL ANSWERS  =  281

YES(Y)=  174  NO(N)=  107

YES (Y) = 62 Yo  NO (N) = 38 ?0

QUESTION 4B:  Limited ability to handle special narratives.

TOTAL ANSWERS  =  276

YES (Y) = 124  NO (N) = 152

YES (Y) = 45 ?40 NO (N) = 55 Yo

B-2  QUESTION  4C:  Threats to privacy or integrity of data.

TOTAL  ANSWERS =  277

YES (Y) = 72  NO (N) = 205

YES(Y)  =26%  NO(N)  =74%

QUESTION  4D:  Difficulty customizing data systems to individual  practice.

TOTAL ANSWERS  =  284

YES(Y)=  184  NO(N)=  100

YES(Y)  =65%  NO(N)  =35%

QUESTION  4E1 :  Something else.

TOTAL ANSWERS  =  34

YES (Y) = 14  NO (N) =20

YES(Y)  =41%  NO(N)  =59%

QUESTION  5  POLICY CONCERNS:

QUESTION  5A:  Prohibition of reassignment.

TOTAL ANSWERS  =  250

YES (Y) = 90  NO (N) = 160

YES(Y)  =36%  NO(N)  =64%

QUESTION  5B:  Tie-in between paperless claims and Direct Deposit of Medicare payment.

TOTAL ANSWERS  =  266

YES (Y) = 106  NO (N) = 160

YES(Y)  =40%  NO(N)  =60%

QUESTION  5C:  Possibility of tiling fees for Medicare claims.

TOTAL ANSWERS =  274

YES (Y) = 173  NO(N)=  101

YES(Y)  =63%  NO(N)  =37%

QUESTION  5D1:  Something else.

TOTAL  ANSWERS  =  25

YES (Y) = 7  NO(N)=  IS

YES (Y) = 28 %  NO (N) = 72 YO

QUESTION  6  INFORMATION CONCERNS

QUESTION  6A:  Difficulty checking status of a paperless claim.

TOTAL ANSWERS  =  282

YES (Y) = 172  NO (N) = 110

YES(Y)  =61%  NO(N)  =39%

B-3
 QUESTION  6B:  Quality of Medicare carrier efforts to publicize paperless claims.

TOTAL ANSWERS  =  268

YES (Y) = 96  NO (N) = 172

YES(Y)  =36%  NO(N)  =64%

QUESTION  6C:  Accessible documentation  for the paperless claim process.

TOTAL ANSWERS  =  275

YES (Y) = 167  NO (N) = 108

YES(Y)  =61%  NO(N)  =39%

QUESTION  6D1:  Something else.

TOTAL ANSWERS  =  24

YES (Y) = 8  NO(N)=  16

YES (Y) = 33 %  NO (N) = 67 %

QUESTION  8  ADDRESSING  CONCERNS:	 Please  indicate  wilh an X or check  mark any concerns 
Medicare  could  effectively  address,  and  by doing  so 
might  help you  start  using paperless  claims. 
[An  answer  coded  Yes means  the respondent  indicated  that type  of concern,  a  No Answer  means  no mark 
was  made.] 
QUESTION  8A:	 COST--Provide  financial incentives, such as higher payment for paperless claims or 
waiver of fees. 
TOTAL  RESPONSES  =  312

YES (Y) = 199  NO ANSWER (Z) = 113

YES (Y) = 64 ?40  NO  ANSWER (Z) = 36 %

QUESTION  8B:	 TECHNICAL  COMPLEXITY--Simpl ify the electronic billing process, such as 
developing wider coordination  of benefits or more user-friendly  interfaces. 
TOTAL  RESPONSES  =  312

YES(Y)=  181  NO ANSWER (Z) = 131

YES (Y) = 58 ?4.  NO  ANSWER (Z) = 42 %

QUESTION  8C:	 MEDICARE POLICIES--Change  Medicare policies, such as eliminating  the 90-
percent rule or ensuring tighter data security. 
TOTAL  RESPONSES  =  312

YES (Y) = 94  NO ANSWER (Z) = 218

YES (Y) = 30 ?40  NO  ANSWER (Z) = 70 %

QUESTION  8D:	 INSUFFICIENT  INFORMATION--Open  access, such as making available online 
checking of claim status. or a phone-in information  line. 
TOTAL  RESPONSES  =  312

YES (Y) = 158  NO ANSWER (Z) = 154

YES (Y) = 51 ?4.  NO  ANSWER (Z) = 49 %

B-4
 QUESTION  SE:  PERSONAL  FACTORS--Demonstrate  that paperless claims can benefit me. 
TOTAL  RESPONSES  =  312

YES (Y) = 156  NO ANSWER (Z) = 156

YES (Y) = 50 YO NO ANSWER (Z)  = 50  %
QUESTION  8F1 :  SOMETHING  ELSE---
TOTAL  RESPONSES  =  312

YES (Y) =25  NO ANSWER (Z) = 287

YES (Y) = 8 %o NO ANSWER (Z) = 92 
~0

QUESTION  10  INTEREST:	 PIease  indicate  your  overall  level  of interest  in using paperless  claims for 
Medicare. 
TOTAL  ANSWERS =  294

HIGH (H) =55  MODERATE  (M) = 132  LOW (L) =68  NONE (N)=  39

HIGH (H) = 19%  MODERATE  (M) = 45%  LOW (L) = 23%  NONE (N) = 13%

QUESTION  11  ABOUT YOUR OFFICE:	 Please  answer  some  questions  about  your  Medicare 
billing. 
QUESTION  11A:  Do you use a computer in your office?

TOTAL ANSWERS  =  303

YES (Y)=  195  NO (N) = 108

YES (Y) = 64 %  NO (N) = 36 ?ko

QUESTION  11B:  Do you use a computer to prepare Medicare claims?

TOTAL ANSWERS  =  303

YES (Y)=  162  NO (N) = 141

YES (Y) = 53 /o  NO (N) = 47 %

QUESTION  11C:	 Do you use a computer to print paper claims to be mailed in to the Medicare 
carrier? 
TOTAL ANSWERS  =  301

YES (Y) = 165  NO(N)=  136

YES(Y)  =55%  NO(N)  =45%

QUESTION  11D:  Does your office bill directly, or do you use a billing service?

TOTAL  ANSWERS  =  290

OFFICE (0)  = 275  SERVICE (S) = 15

OFFICE (0)  = 95 %  SERVICE (S) = 5 Y.
QUESTION  I lE:  Do you use paperless claims for any payer?

TOTAL ANSWERS  =  299

YES (Y) = 17  NO (N) = 282

YES(Y)  =6Y0  NO(N)  =94%

B-5
 QUESTION  11F:  Roughly what percent of your practices income is attributable to Medicare? 
NUMBER OF ANSWERS = 259 
. 
HIGH = 90 %  LOW = Ok

AVERAGE (MEAN) = 20.98 %  STANDARD DEVIATION  = 19.75 %

QUESTION  1IG:	 Including Medicare, approximately  how many contacts have you had in the past 
year, offering a system for paperless claims? 
NUMBER OF ANSWERS = 252 
HIGH = 30  LOW = O 
AVERAGE  (MEAN) =  2.33  STANDARD DEVIATION  = 3.27 
QUESTION  11HI :	 Do these contacts serve to increase your concern about paperless billing for 
Medicare? 
TOTAL ANSWERS =  217

YES (Y) =65  NO(N)=  152

YES (Y) = 30  NO (N) = 7070

~, 
B-6  APPENDIX  C 
NONRESPONSE  ANALYSIS 
In a survey based on a random sample we need to consider the possibility that bias may be introduced 
through self-selection by the respondents.  To determine whether significant differences exist in this survey 
we compared the two groups, respondents and nonrespondents,  by age, group association, Medicare 
participation,  number of Medicare claims, and amount allowed by Medicare. 
Analysis  by Age 
The average age for the 366 physicians who responded to the survey is 47.7 years.  We calculated age on 
July 1, 1995 by subtracting the date of birth given in carrier records.  For the age of a group practice, we 
substituted the date of birth of one physician member selected at random by the carrier.  We use the age of 
the subject physician for analysis, although we recognize that the survey may have been completed by an 
associate or employee. 
By comparison,  the average age for414  nonrespondent  physicians is 48.5 years.  For the nonrespondent 
analyses we count as respondents the 54 physicians who answered the first screening question in the 
affirmative.  These physicians responded substantively to the survey, although they excluded themselves from 
additional analyses by identi~ing  themselves as ineligibles--they  do use paperless claims now. 
We tested the significance of the age difference between respondents and nonrespondents  by applying the 
standard z-test procedure to the data.  The calculated z value is 0.969, which is not statistically significant  at 
the 95 percent confidence level.  We conclude that there is no difference between respondents and 
nonrespondents  by age at the 95 percent confidence level. 
Analysis  by Group  Association 
We define group association as it is coded in carrier records, which they maintain for Uniform Provider 
Identification Number (UPIN) purposes.  The percentages of respondents and nonrespondents  by group 
affiliation are: 
COMPARISON  BY GROUP  ASSOCIATION 
~SPONDENTS  NON- PERCENT 
TOTAL 
(Note)  RESPONDENTS  RESPONDING 
Number  Percent  Number  Percent  Number  Percent 
GROUP  143  39 %  146  35 %  289  37 ?40  49 Yo 
NON- 222  61  267  65 %  489  63 %  45 % 
%0 
GROUP 
TOTAL  365  I 413  10090  778  100 %  47 % 
00  MO 
Note:  One respondent physician was not coded for group association in data supplied by the carrier. 
We used the chi-square test to look for a difference between respondents and nonrespondents  by group 
association.  The computed chi-square value of 1.22 is not statistically significant at the 95 percent confidence 
level.  We conclude that there is no difference between respondents and nonrespondents  by group association 
at the 95 percent confidence level. 
c-1  Analysis  by Medicare  Participation 
We use the Medicare participation  indicator coded in carrier records, which they maintain  for Uniform 
Provider  Identification  Number (UPIN) purposes.  The percentages of respondents and nonrespondents  by 
Medicare participating  status is: 
COMPARISON  BY MEDICARE  PARTICIPATION 
RESPONDENTS  NON- PERCENT 
TOTAL 
RESPONDENTS  RESPONDING 
Number  Percent  Number  Percent  Number  Percent 
PARTICI- 244  67 ~,  257  62 ~,  501  64 %  49  %0 
PATING 
NOT  122  33 %  156  38 Y.  278  36 ~0  44 %0 
PARTICI-
PATING 
TOTAL  366  100 ?/0  413  100 ?40  779  100 ?40  47 Y. 
We used the chi-square test to look for a difference between respondents and nonrespondents  by Medicare 
participation.  The computed chi-square value of 1.67 is not statistically significant at the 95 percent 
confidence  level.  We conclude that there is no difference between respondents and nonrespondents  by 
Medicare participating  physician status at the 95 percent confidence level. 
Analysis  by Number  of Medicare  Claims 
We asked the carriers to include among the data they supplied for each of the sample physicians  the number 
of Medicare claims processed during December 1994, as one measure of that providers  level of Medicare 
activity.  The average number of claims for physicians who responded to the survey is 53, and the average 
for nonrespondents  is 45. 
We tested the significance  of the difference  in numbers of claims between respondents and nonrespondents  by 
applying the standard z-test procedure to the data.  The calculated z value is 1.324, which is not statistically 
significant  at the 95 percent confidence level.  We conclude that there is no difference  between respondents 
and nonrespondents  by Medicare activity, as measured by number of claims, at the 95 percent confidence 
level. 
Analysis  by Amounts  Allowed 
We also asked the carriers to include among the data they supplied for each of the sample physicians  the total 
amount allowed for Medicare claims processed during December 1994, as one measure of that providers 
level of Medicare activity.  The average amount allowed for physicians who responded to the survey is 
$3535 and the average for nonrespondents  is $2908. 
We tested the significance  of the difference in allowed amounts between respondents and nonrespondents  by 
applying the standard z-test procedure to the data.  The calculated z value is 1.230, which is not statistically 
significant at the 95 percent confidence level.  We conclude that there is no difference  between respondents 
and nonrespondents  by Medicare activity, as measured amount allowed, at the 95 percent confidence  level. 
c-2  APPENDIX  D 
AGENCY  COMMENTS  ON  THE  DRAFT  REPORT 
D-1  *sdml 
/ 
<a $ DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Health  Cars Fmanche Administration
t 
* 
-. 
  **7 *   The  Admhristratur 
Washington,  O.C.  20201 
MAU15M?6 
DATE: 
TO:  June Gibbs Brown 
..-.  Inspector General 
FROM:  %uce  C. Vladeck 
Administrator 
SUBJECT  OffIce  of Jnspector  (3encrd  Draft  Repo@  Encoura@g  Physicians to Usc 
Paperless Claims, (OE?-01-94-00230) 
Wc reviewed  the above-referenced  repolt  on encoum@/1  phy;icim  to usc  paperless 
chins  for filing  Medicare  reimbursement  forms.  AUached  are our cormnents  on the 
reportrcconmmdation. 
Thankyou  for the  oppoti~  to review  and  comment  on this  draft  report, 
Attachrncnt  -ents  of the Health  Care  Financ~titi~ 
on Office of Insuedor Generd (OIG) 
D@  ReIIorc Encoura!dmrP hysichns to Use  PauerIess  CIaims. 
-01-94-00230) 
(OEI 
91G Rccommcndation 1 
HCFAshould lead a targetedoutreach effort to encourage vcduntary conversion to 
 paperlessMcdieare  claim  filing  by physicia  who now submit claims on paper and who  .... 
have a moderate to high level of interest in making the switoh 
I-lCFA I@suonse 
We concur.  HCFA continues to lead the health care industry in promoting the switch to 
electronic claims through many avenues, inciutig  some of the methods recommended in 
the IeporL  . 
. 
We have offered  positive  incentives  to elcctronic  billers inchdng  fmter payments, fice 
billing and remitta.nce-edtice-reccitig  SOMWC,eIeefronic chdrns status chec~ 
electronic eligibility inquiry  and response,  andnational standard e~ectronicremittance 
advice with which a provider may automate in-house posting. We have also created a 
nationally  standardized  Medicare ekcvonic  dats interchmge enroUmcnt form for 
providers which rcpiaces the many contracts formerly required for the separate camiers. 
Six times  annuaily, we attendtheAnericm Nafiondst~du~  Institute meetings to work 
with and influence payers, providers,insunmcecompanies, and other hetdth care entities 
in developing  industry-wide standards. In addition, we are pro-active participants in the 
NationalUniform ChimsCommheet,heNational  UniformEMng Committeea,ndthe 
XJZNInsuranceSubcotitiec.  J~cme ako studytildglefeasibilityandcost 
effectiwwss  of other outreach opporttities  available to us so that we may continue  to 
lead  in outreach  effofis~  We would  l~e  tO PO~~ ouc  howevu,thattherepom 
rccornmendatiom presume a fully funded atishative  and contractor budget and that 
with  reduced  budgets  there  will be some  tradeoflk. 
Many of the physicians  sumeyed  wow  Bbout  fio~tion  gaps and the inabiIity of 
electronic  ciairns to capture  case  specific doc~entation  which periodically accompanies 
a paper  claim  To reduce theneed forextidaocumntatiowHCFA has begun to create a 
~cw series of codes andur  specific fields w  tie  papcriescslaims that describes:  patient 
information  that cumendy  cm.not be communicated  in the iCD-9 codes;  item/semice 
lnforma[ion  required  by the cstier;  and administrative information  (such as the date ofa 
specificprocedure). TheseCodeWs IIbIe  effectivein 1997.WehaveEISOfo rmeda
workgroup  lo develop  methods to de~re~se r~e amount  of unsolicited documentation that 
D-3
  
Piigc  2 
accompanies ciairns.  We hope physicians m  be encouraged by these technical 
improvemcntawhi~  wiii  make  paperlessciahnsmoreefficientand camspeeific. 
physiciansarealso reluctant to adopt a co-d  atiosph=e  due to the costs 
incurred in-g  persormcl and in O- comp~ble  cxfid  software.  We 
believe thatwith increased participation in cl*onic  billing  software  packages will 
becomme ommdilyavaikbkandlCSeSxpcnsivtWi C switchwpqwrkss 
ariticiptat$thc 
ckdmswiil require initiaI training; however, the time and rxorq  sawd in the long term 
. ..  ~  compematc for the initial outlay.  ..  ..  ----- ------- -. 
OIG Recommendation 2 
HCFA should begin to plan now for the poiicYchanges that will become necessary to 
achieve  an rtlmost  complciely paperless environmentfor processing Medicare ciaims. 
HCFAResuonse 
WC COnCur. HCFA is preparing for the necess~  policy ch~ges  through many of the 
waysrecomsncnded by the OIG.  We plan on mgcbg  a date to move to e~ecrronicbilling 
andwilllooktomate incentivefsorpmtiders~0abandonpaperchimswherever 
possibIc. 
/additional Co=  en~  . 
As in the Medicare program  here is much ~tcrcst k  tie use of electronic means to 
exchangedata and transmit claimsin the Medicaidpro-.  HCFASMedicaid Bureau 
(,YIB)rc~cn[ly conduc[cd a SMYCYof the E!eCRO~CData Interchange (EDI) capabilities 
ana the electronic  media claims actlti~ies fcr each State Medicaid agency.  They are in 
the process of putting together a rcpofi of ~le~ f~d~gs  that till  be available to interested 
parries. llc  results will be bcncfici~j tObo~ tie public Md private sectors as a guidein 
detenn.iring  comparability  mo~g  ~fedic~id  ~ge~cies  dealing  with  ED1activities.  We 
wiilbegiad to provide the OIG~~itia COPYof the @OII  or answer  any  questions 
conc~.tig  this  s~~t 
D-4
 APPENDIX  E 
ENDNOTES 
1.  The  statutory  basis  for Medicare  is contained  in Title  XVIII  of the  Social  Security 
Act,  as amended,  42 U.S.C.  1395ff.  For a popular  summary  of Medicare  see  Your 
Medicare  Handbook  1995,  Publication  No.  10050,  U.S.  Department  of Health  and 
Human  Services,  Health  Care  Financing  Administration,  Baltimore,  MD. 
2.  U.S. Department  of Health  and  Human  Services,  Health  Care  Financing 
Administration,  private  communication  from  Office  of Financial  and  Human 
Resources.  See  also  Social  Security  Administration,  Social  Seczmi~  Bulle/in, 
Annual  Statistical  Supplement  1995,  Tables  8.B4  and  8.B5,  pages  327  and  328. 
3.  U.S.  Department  of Health  and  Human  Services,  Health  Care  Financing 
Administration,  private  communication  from  Office  of Financial  and  Human 
Resources.  See  also  U.S.  Department  of Health  and Human  Services,  Health  Care 
Financing  Administration,  Strategic  Plan for  Information  Resources  Management 
(FY  19962000),  Chapter  H, Section  B. Strategic  Planning  Assumptions,  page  7. 
4.  For  an indication  of current  trends  see, for example,  the  agenda  for  the Automated 
, 
Medical  Payments  Conference  VI, held  in Boston,  MA,  May  11-12,  1995. 
5.  Workgroup  for  Electronic  Data  Interchange,  Report,  Washington  DC,  October  1993. 
6.  U.S.  Department  of Health  and  Human  Services,  Health  Care  Financing 
Administration,  Memorandum  dated  November  16,  1992  from  Director,  Bureau  of 
Program  Operations  to All  Regional  Administrators,  Electronic  Media  Claims 
(EMC)  Goals  for Fiscal  Year  1993;  and Memorandum  dated  November  4,  1993, 
Electronic  Media  Claims  (EMC)  Goals  for Fiscal  Year  1994. 
7.  Based  on  Carrier  Monthly  Workload  Reports,  Form  HCFA-1 565. 
8.  Mary  E.  Warren  et al.,  Medicare  Transaction  System:  Platform  for  Change, 
Health  Care  Financing  Review  16 (Winter  1994)  2:191-200.  For  a popular 
summary  see  Spencer  Rich,  Medicare  Billing  to Join  Electronic  Superhighway 
One  National  System  to Handle  All  Payments,  The  Washington  Post,  January  24, 
1994. 
9.  American  Medical  Association,  personal  communication. 
10  We  took  general  practice,  family  practice,  internal  medicine,  pediatrics,  and 
obstetrics/gynecology  as the  primary  care specialties.  This  classification  follows 
E-1
 that  used  by  Medicare  for  incentive  payments  to physicians  in Health  Professional 
Shortage  Areas. 
11.	 We  used  a range  of estimates  for the  savings  to the  payer  (Medicare)  for  each  claim 
switched  from  paper  to paperless.  The  range  of estimates  comes  from  the  following 
sources: 
The  Workgroup  on  Electronic  Data  Interchange  (Endnote  5,  1993)  estimated 
that  savings  to the  payer  would  range  from  approximately  $0.50  to  $1.50. 
The  HCFAS  own  operating  assumption,  based  on  their  informal  canvas  of 
carriers  in  1989,  that  savings  would  approximate  $0.50. 
Another  OIG  report,  Review  of Medicare  Providers  and  Electronic  Claims 
Processing,  (A-05 -94-OO039),  found  an  analysis  prepared  by one  Medicare 
contractor  which  indicated  savings  of  $0.27  per  Part  B claim. 
Based  on  the  estimates  cited  above,  we  believe  that  it is reasonable  to expect 
savings  in the  range  of $0.27  to $1.00  per  part  B claim. 
According  to reports  submitted  by the  carriers  to HCFA,  approximately  126 million 
assigned  physician  claims  were  submitted  on  paper  and  processed  during  calendar 
year  1994.  Based  on  the  findings  of our  survey,  about  65  percent  of these,  or  81 
million  claims.  were  submitted  by physicians  with  a high  or moderate  interest  in 
using  paperless  claims.  Applying  the  $0.27  to  $1.00  per  claim  unit  savings  figures 
described  above,  we estimated  a potential  savings  of  $22  million  to $81  miilion. 
In making  these  estimates,  we  assumed  that  physicians  with  high  or moderate 
interest  in using  paperless  ciaims  submit,  on  average,  the  same  number  of claims  as 
those  with  low  or  no  interest.  In our  sample,  the  former  submitted  an average  48 
claims  in December  1994.  and  the  later  averaged  35.  If we  took  this  assumption 
into  account,  our  estimates  would  be made  larger. 
On the  other  hand,  we also  assumed  that  we  could  ignore  the  submission  of paper 
claims  by  physicians  already  authorized  to  submit  paperless  claims.  If we took  this 
assumption  into  account.  our  estimates  would  be made  smaller.  On balance.  we 
assume  that  these  two  simplifying  assumptions  approximately  offset  each  other. 
1~.	 In  1994  physicians  submitted  126 million  assigned  Medicare  claims  on paper. 
Applying  the  survey  result  that  65 percent  of  physicians  have  high  or moderate 
interest  in switching: 
0.65  x  126 million  = 81 million  claims  would  be switched  from  paper  to paperless. 
or  126 - 81 = 45  million  claims  would  remain  as paper  submissions. 
E-2
 As before,  we assume  equal  average  claims  volumes  for  both  classes  of physician 
interest,  and  ignore  paper  claims  coming  from  physicians  already  authorized 
paperless  billing. 
13.	 We  found  that  35 percent  of the  physicians  in our  survey  indicated  low  or no 
interest  in using  paperless  claims.  Using  the  same  assumptions  as before,  we 
applied  this  percentage  to the  126 million  assigned  physician  claims  processed  by 
the  carriers  during  calendar  year  1994.  We  expect  that  these  physicians  submitted 
45 million  paper  claims  in that  year. 
With  unit  savings  figures  of $0.27  to $1.00,  we estimated  potential  savings  of 
$12  million  to $45  million,  if all the  physicians  who  indicated  low  or no  interest  in 
paperless  claims  made  the  switch. 
By  adding  these  estimates  to those  for the  physicians  with  high  or moderate  interest 
in using  paperless  claims,  we derived  a range  of combined  savings  estimates  of $34 
million  to $126  million. 
In the  contemporaneous  OIG  report,  the  two  unit  savings  figures  were  applied  to a 
hard  copy  (paper)  claims  volume  of  134.6  million  estimated  for  providers  who 
submitted  50 or more  claims  per  month.  The  range  of combined  savings  estimates 
derived  in this  way  would  be between  $36.3  million  and  $134.6  million. 
E-3