4 

Department of HeaIth and Human Services 

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 HCFA’S 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 HCFA’S 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 HCFA’s 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 Medicare’s role 

management, very early started planning to migrate 

into an era of electronic commerce. 

Building upon its experiences at meetings of the 

Workgroup for Electronic Data Interchange 

(wEDIl.’ in late 1992 HCFA set goals for all 

contractors in the rates of provider acceptance of 

paperless claims.b By 1994, for example, a solid 

73-percent majority of assigned physician claims 

were paperless (figure 1), up from 40 percent in 

1991.7 

as a leader in health care information 

its enormous volume of paper claims 

Figure1 

ASSIGNED PHYSICIAN CLAIMS 

1994 

TYPE OF CIAIM 

332 yimiir= 

(7 %) � p1 � p- r 

Ilion 

) 

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 

Figure 2 use paperless claims (figure 2.) One carrier 

PHYSICIAN PROVIDERS presents an extreme example, reporting more than 

December 1994 80 percent of its physician claims paperless, with 

~AP&~;&M these coming from just 16 percent of the physician 

m, providers in the service area. The HCFA’S efforts 

f--j Paperless to encourage physician use of paperless claims 

� m= have succeeded to a much greater extent on a 

claim basis than on a provider basis. But, on 

either basis, the rate of increase in physician use of 

~ SOURCE: OIG Survey of Canlers, Mar-Apr 1995 paperless claims appears to have slowed or stopped 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 physician’s 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 HCFA’s 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 HCFA’s 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


I 
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 HCFA’S suggestion we included questions about the


respondent’s 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 HCFA’s central and Boston regional offices for carrier reports,


HCFA policy statements. and a sense of the agency’s 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 physician’s concerns and interest.


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


by the President’s 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 

physician’s 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% 

SOUI’IX OIG Mail <Wy, 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% 

nu..i_L ~
 —

m-AP8”-’-?~L 

Sourw: OIQ Mail Surfev. JUIV.AUOUSi19S5. 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


compared with 64 percent in the low interest category. JfD,.:K~~~;~,


,.. 

Medicare Policies. Sixty-seven percent of the physicians indicate 

concerns about the administrative rules and regulations that govern 

use of paperless claims for Medicare. Many of these concerns lack 

a firm basis in Medicare policy. Physicians can mistakenly assume 

that Medicare puts limitations on use of paperless claims by certain 

types of physician, where no limits exist. Or physicians can 

misunderstand their capability for making edits to a paperless 

claim. Seventy-one percent of physicians with high or moderate 

interest mentioned policy concerns, as did 59 percent of those with 

Medicare does 

make a lot of 

changes in 

policy and 

procedure. 

MD, Minnesota 

low or no interest. 

Personal Preferences. Finally, 62 percent of the physicians note 

various personal factors as inhibiting their interest in paperless 

claims. ‘They invoke factors such as their age, discomfort with the 

computer, satisfaction with things as they are, difficulties with 

carrier and vendor staffs, or preference for different computer 

systems. Fifty-six percent of physicians expressing a high or 

moderate interest in paperless claims note their personal preference 

as a concern, compared with 74 percent of those expressing low 

interest. 

9 

Computers 

have a way of 

changing the 

information, 

somehow. 

OD, Indiana 
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 systems—for 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 

physician’s context in a direct way that can effectively supplement the carrier’s 

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 HCFA’s 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 HCFA’s 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 twostage 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: Concernabout the cost of paperlessclaims.


TOTALANSWERS= 295


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


MAJOR(J) = 0970 MINOR(R) = 32% NOT A CONCERN(N) = 19%


QUESTION2B: Concernabout technicalcomplexitiesassociatedwith 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) = 28°A 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 of”hardware,sotiare, or phone tolls. 

TOTAL ANSWERS = 296


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


YES(Y) =82’XO 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


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: 

to pool costs with other physicians. 

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 practice’s income is attributable to Medicare? 

NUMBER OF ANSWERS = 259 

HIGH = 90 % LOW = O“k


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) = 70’70


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 

(Note) 

NONRESPONDENTS TOTAL PERCENT 

RESPONDING 

Number Percent Number Percent Number Percent 

GROUP 143 39 % 146 35 % 289 37 ?40 49 Yo 

NON- 222 61 ‘%0 267 65 % 489 63 % 45 % 

GROUP 

TOTAL 365 I 00 ‘MO 413 1009’0 778 100 % 47 % 

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 NONRESPONDENTS TOTAL PERCENT 

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 

PARTICIPATING 

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 provider’s 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 provider’s 

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 

DATE: 

TO: ..-. 

FROM: 

SUBJECT 

Wc reviewed 

The Admhristratur 

Washington, O.C. 20201 

MAU15M?6 

June Gibbs Brown 

Inspector General 

%uce C. Vladeck 

Administrator 

OffIce of Jnspector (3encrd Draft Repo@ “Encoura@g Physicians to Usc 

Paperless Claims,” (OE?-01-94-00230) 

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.” 

(OEI -01-94-00230) 

91G Rccommcndation 1 

HCFA should 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, and national 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 Nafiond st~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 ChimsCommhee,theNational UniformEMng Committee,andthe 

XJZNInsuranceSubcotitiec. J~cme ako studytilgdlefeasibilityandcost 

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 forextiadocumntatiowHCFA has begun to create a 

~cw series of codes andur specific fields w tie papcriessclaims 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). TheseCodesWIII beeffectivein 1997.WehaveEISO formeda

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 paperlessciahnsmoreefficient and cam speeific. 

physiciansare also 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 

become mommdily avaikbkandlCSSexpcnsivtiWCariticiptat$ thc switchwpqwrkss 

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 incentivesforpmtiders~0abandonpaperchimswherever 

possibIc. 

/additional Co= en~ . 

As in the Medicare program here is much ~tcrcst k tie use of electronic means to 

exchangedata and transmit claims in the Medicaid pro-. HCFA’SMedicaid 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 guide in 

detenn.iring comparability mo~g ~fedic~id ~ge~cies dealing with ED1activities. We 

wiilbe giad to provide the OIG ~~iti a COPYof the @OII or answer any questions 

conc~.tig this s~~t 

D-4

1. 

2. 

3. 

4. 

, 

5. 

6. 

7. 

8. 

9. 

10 

APPENDIX E 

ENDNOTES 

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. 

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. 

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 1996–2000), Chapter H, Section B. “Strategic Planning Assumptions,” page 7. 

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. 

Workgroup for Electronic Data Interchange, Report, Washington DC, October 1993. 

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.” 

Based on Carrier Monthly Workload Reports, Form HCFA-1 565. 

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. 

American Medical Association, personal communication. 

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 HCFA’S 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. 

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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. 

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