Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MONITORING MEDICARE CONTRACTOR


PERFORMANCE


A NEW APPROACH 

#i4 SERVICE$ 

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JUNE GIBBS BROWN g

4 Inspector General 2

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% Jg @-- %@a AUGUST 1995 

> OEI-01-93-00160 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statuto~ mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs 

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in 

carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG’S Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. 

This report was prepared under the direction of Mark R. Yessian, Ph.D., Regional Inspector 

General, and Martha B. Kvaal, Deputy Regional Inspector General, Boston Region. Project 

staff included: 

BOSTONREGION HEADQUARTERS 

Russell W. Hereford, Ph.D., ProjectLeader Jennifer Antico, ProgramSpecialist 

For additional copies of this report,please contact the Boston Regional Ojfice 

by telephone at 617-565-1050or by fax at 617-565-3751. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MONITORING MEDICARE CONTRACTOR 

PERFORMANCE 

A NEW APPROACH 

AUGUST 1995 

OEI-01-93-00160 
EXECUTIVE SUMMARY 

PURPOSE 

To provide an early, preliminary assessment of the new approach that the Health Care 

Financing Administration usedin 1994 toevaluate Medicare contractor performance 

in medical review and in fraud and abuse activities. 

BACKGROUND 

The Health Care Financing Administration (HCFA) contracts with 33 carriers to 

process Medicare claims for physicians and supplies, and with 46 fiscal intermediaries 

to process claims for institutional providers. The FY 1995 appropriation for these 

contractors is $1.6 billion. In 1995, they are expected to process 785 million claims. 

In 1994 HCFA instituted a new approach for reviewing contractor performance in two 

important areas of payment safeguards: fraud and abuse, and medical review. This 

approach had two basic features. First, the review used a qualitative assessment of 

contractor performance, rather than a standardized numerical scoring system. Second, 

HCFA used teams comprised of staff from different regional offices to conduct the 

reviews, rather than rely on a single staff member from the local regional office. 

Our methodology relies on three data sources: a review of the narrative reports 

submitted to contractors following their review; interviews with HCFA staff from five 

regional offices and the central office; and interviews with staff from 15 contractors, 

including 10 contractors that were reviewed under the new approach and 5 that were 

not reviewed using this approach. 

FINDINGS 

-Y EXPERIENCE INDICATES THAT THE NEW APPROACH HAS IMPROVED HCFA’S 

ABILITY TO ASSESS CONTRACTOR PERFORMANCE IN MEDICAL REVIEW AND IN 

FRAUD AND ABUSE. 

Z4e qualitative assessment used in the new approach gave HCFA a way of gathering 

useful information that it had not obtained before. 

.	 The flexible protocol enabled the review team to target its inquiry on areas of 

each contractor’s performance that the team identified as problematic. 

Examples of problems identified: 

no system for prioritizing fraud cases . inadequate data analysis system to identify aberrant billing patterns 

- lack of system to evaluate success of provider corrective actions 

i 
�� Thenewapproach encouraged theretiew teams to identify strengths and 

weaknesses that cut across different operating units at individual contractors. 

Examples of strengths identified: . standardized format for referrals 

. fraud unit staff conducts fraud detection training for all contractor staff 

Examples of weaknesses identified: . referral of non-fraud cases to fraud unit . inadequate contractor wide training on fraud detection and prevention 

Using teams from outside the local regional office to conduct the reviews enhanced the 

review for both HCFA and contractors. 

.	 The external teams brought new information about contractor operations to 

both HCFA and the contractors. 

Information brought to HCFA . impact of requirements on contractor operations 

. central office involvement in contractor assessment 

Information brought to contractors: . improved understanding of HCFA policies and expectations . improved ways of using data systems 

� The use of external teams added an element of objectivity to the reviews. 

Contractor perspectives on objectivity: . “You are more challenged to really walk an outside team through your 

processes, to be sure you explain your operation to them.” . “If YOU deal with someone daily, they have more trouble finding fault. 

If they don’t know us, they’re not so concerned about future 

dealings with us.” 

OUR EARLY ASSESSMENT AMO SUGGESTS THAT HCFA HAS NOT YET MADE FULL 

USE OF THE INFORMATION GATHERED IN THESE REVIEWS TO FURTHER 

CONTRMXORS’ ABILITY TO SAFEGUARD MEDICARE PAYMENTS 

HCFA regional staff are using the written reports @om these reviews in their ongoing 

assessment of contractor performance. Howeve~ regional staff may not be taking jidl 

advantage of these reports to provide more effective oversight of contractor activities. 

The written reports varied widely in four significant ways: 

Criteria for imposing corrective action plans;


Differing interpretations of similar facts;


No prioritization of recommendations; and


Different levels of detail reported,


ii 
In the course of the reviews, HCFA gathered national information on effective contractor 

practices, as well as practices to avoid. Howeve~ the agency has not yet conveyed this 

inforrnah”onto contractors as a way of strengthening overall operation of the Medicare 

program. 

RECOMMENDATIONS 

The real measure of the success of this new approach will be determining whether 

contractors in the years ahead are doing a better job of preventing inappropriate 

payments under the Medicare program. In order to build upon the process initiated 

this past year, we recommend that HCFA take the following steps: 

THE HCFA CENTRAL OFFICE SHOULD BE SURE TO OBTAIN INFORMATION FROM 

THE REGIONAL OFFICES TO SEE HOW THEY ARE MONITORING CONTRACI’OR 

IMPROVEMENT PLANS THAT AROSE FROM THESE REVIEWS OF FRAUD AND ABUSE 

ACHWTIES AND MEDICAL REVIEW. 

Obtaining this information is important for three reasons: 

HCFA needs to assess the results of this new approach over time; 

HCFA should have a mechanism for determining how the regional offices are 

accepting findings of reviews conducted by outside teams; and 

HCFA should have a central source for assessing the practical usefulness of the 

reports. 

THE HCFA SHOULD DEVELOP A GENERAL FORMAT FOR KEY INFORMATION TO BE 

CONTAINED IN THE WRITTEN REPOR’13. 

At a minimum, we believe that this information should include: 

the basis for imposing corrective action plans;


the supporting data needed to portray accurately the results of the reviews; and


prioritization of recommendations for improvement.


THE HCFA SHOULD TAKE IMMEDIATE STEPS K) PREPARE AN ANALYSIS OF 

EFFECI’IVE PRACIKES, AND PRACTICES TO AVOID, BASED ON FJNDINGS FROM THE 

1994 REVIEW PROCESS. ‘l_’HEHCFA SHOULD SHARE THESE ANALYSES WITH ALL 

FISCAL INTERMEDIARIES AND CARRIERS. 

The HCFA should evaluate the success of this effort, perhaps through conducting user 

feedback surveys. If the approach is meaningful for the contractors, we would urge 

HCFA to continue to conduct and share similar analyses in the future. 

COMMENTS ON THE DRAFT’ REPORT 

We sought comments on the draft report from HCFA and from the Assistant 

Secretary for Planning and Evaluation (ASPE). The HCFA concurred with our 

... 

m 
recommendations and summarized steps that the agency is taking to implement those 

recommendations. The ASPE also concurred with our recommendations, but offered 

no additional comments. We include HCFA’S full comments as Appendix A. 

In response to our first recommendation, HCFA indicates that regional offices are 

submitting copies of Contractor Performance Improvement Plans to the central office. 

Central office and the regions are working to develop a mechanism for continuous 

monitoring of these Performance Improvement Plans. 

In response to our second recommendation, HCFA notes that it is providing general 

guidelines for review teams concerning key information to be communicated in written 

reports. The actual report format will be determined by the review teams, as is 

currently being done for the national review in the Medicare Secondary Payer area. 

In response to our third recommendation, HCFA states that it already has 

disseminated best practices to carriers and intermediaries, 

We appreciate HCFA’s positive response. We would be pleased to work with the agency 

in the future to evaluate the effectiveness of its actions in these areas. 

iv 
INTRODUCTION�

. 

PURPOSE 

To provide an early, preliminary assessment of the new approach that the Health Care 

Financing Administration used in 1994 to evaluate Medicare contractor performance 

in medical review andin fraud and abuse activities. 

BACKGROUND 

The Health Care Financing Administration (HCFA) contracts with 46 fiscal 

intermediaries to process claims for institutional providers, and with 33 carriers to 

process claims for physicians and supplies. The FY 1995 appropriation for Medicare 

contractors is $1.6 billion. In 1995, these contractors are expected to process nearly 

785 million Medicare claims.1 

Contractor Performance Evaluation Prior to 1994 

Historically, HCFA used the Contractor Performance Evaluation Program (CPEP) to 

monitor contractor performance. The CPEP used a tightly defined numerical scoring 

system on a wide range of performance criteria. 2 Beginning in FY 1993, HCFA 

began to incorporate some major changes in CPEP. These changes were driven in 

part by budgetary considerations. More significant, however, was dissatisfaction with 

the effectiveness of the annual CPEP review process. These dissatisfactions included: 

1) Concerns were raised that CPEP was not measuring the most important aspects of 

contractor performance. The General Accounting Office criticized CPEP because “it 

has focused more on process rather than outcome. Therefore, CPEP does not 

sufficiently emphasize efforts to save program benefit payments, particularly through 

its measurement of the effect of payment safeguards.”3 For example, CPEP assessed 

the timeliness of contractor responses to complaints, or the ability of the contractor to 

process claims within mandated time frames. 

2) Because contractors knew exactly what they were being measured on, and had 

even helped to develop the evaluation protocol, they managed their contracts in a way 

that would maximize their score. The CPEP did not assess other areas of contractor 

performance. 

3) The potential also existed for regional office staff involved in the CPEP reviews to 

become too close to contractors, threatening their objectivity. For example, because 

the regional office staff member knew the contractor staff, he or she might not be 

unbiased when it came to reviewing the organization. Or, the regional office staff 

member might not subject the contractor to rigorous scrutiny because of an 

assumption that the contractor would continue to perform adequately, as it had done 

in the past. 

1

TABLE OF CONTENTS 

EXECUTIVE SUMMARY 

INTRODUCHON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


HCFA’sImproved Abilityto Assess Contractor Performance . . . . . . . . . . . . . . . .


Qualitative assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


External review teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


4 

4 

4 

6 

HCFANot MakingFull Useof Information . . . . . . . . . . . . . . . . . . . . . . . . . . ...9


Ongoingmonitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9


Variation in written reports.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Effective practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Monitoring Contractor Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


General Format for Written Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Analysis of Effective Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


10 

12 

13 

13 

14 

14 

16 

APPENDIX A HCFAComments on the Draft Report . . . . . . . . . . . . . . . . . ..A-1


APPENDIX B: Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

HCFA’S New Approach to Contractor Performance Review 

In 1994HCFA instituted asignificantly retised approach for reviewing contractor 

performance in the areas of fraud and abuse and medical review. The 1994 CPEP 

was designed “to determine the degree to which contractors are ensuring effective 

management of these program areas and whether the trust funds are being 

protected.”4 

This new approach had two fundamental features: 

� Qualitative Assessment of Contractor Pe~ormance 

The new approach turned from a numeric scoring system to a qualitative assessment 

of contractors’ strengths and weaknesses. The review considered the consequences of 

any weaknesses and-provided recommendations for improvement. Rather than 

provide a single numeric score for the contractor, the new review process produced a 

written narrative. These reviews addressed two areas related to safeguarding the 

Medicare Trust Fund: Contractors’ detection of fraud and abuse and their medical 

review practices. 

� External Team Reviews 

Rather than rely on review by a single staff member from the local regional office, 

HCFA used re~iew teams m~de up-of staff from different regions to c&duct the 1994 

reviews. Each review team comprised at least two of these external staff. For some 

reviews, a third individual from the HCFA central office joined the team. The review 

team communicated its findings in a report directly to the contractor, rather than 

through the local regional office. 

The HCFA used one set of six teams to examine fraud and abuse detection for both 

intermediaries and carriers. Another set of four teams examined medical review for 

intermediaries, and a different set of four teams examined medical review for carriers. 

The HCFA teams reviewed 34 contractors for fraud and abuse detection (16 Part A, 

18 Part B), 20 for Part A medical review, and 19 for Part B medical review.5 

METHODOLOGY 

Our methodology relied on three data sources: 

First, we reviewed each of HCFA’S narrative reports submitted to contractors 

following their review. 

Second, we used a semi-structured guide to interview HCFA staff from the central 

office and from the following five regional offices: Region 1 (Boston), Region 3 

(Philadelphia), Region 4 (Atlanta), Region 5 (Chicago), and Region 6 (Dallas). We 

selected these regions after reviewing the narrative reports, to provide a distribution 

2

among the regions in terms of their participation in the review process and the 

findings with respect to different contractors. 

Third, we used a semi-structured guide to interview staff from the following 15 

contractors. We selected three contractors from each region, two that had been 

reviewed under the new approach and one that had not. We chose these contractors 

based on our review of the narrative reports and discussions with the HCFA regional 

office staffi 

Region 1: Blue Cross and Blue Shield of Massachusetts; Blue Cross of Maine; 

MetraHealth, Connecticut. 

Region 3: Xact Medicare Services, Pennsylvania; Blue Cross of Virginia; Blue Cross 

of Maryland. 

Region 4: Blue Cross of North Carolina; Blue Shield of Florida; Blue Cross of 

Georgia. 

Region 5: AdminaStar Federal, Indiana; MetraHealth, Minnesota; Wisconsin 

Physician Services. 

Region 6: Blue Cross and Blue Shield of Texas; New Mexico Blue Cross; Aetna Life 

Insurance, Oklahoma. 

AU told, the ten contractors that had been reviewed under the new approach comprise 

six Part A and seven Part B contractors (three hold both A & B contracts). They 

received reviews as follows: five Part A medical review, six Part B medical review, four 

Part A fraud and abuse; and six Part B fraud and abuse. The five contractors that did 

not participate in the 1994 reviews hold three Part A contracts and two Part B 

contracts. 

We conducted this study in accordance with the Quali~ Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

.J 
FINDINGS


EARLY EXPERIENCE INDICATES THAT THE NEW APPROACH HAS IMPROVED HCFA’S 

ABILITY TO ASSESS CONTRACIXIR PERFORMANCE IN MEDICAL REVIEW AND IN 

FRAUD AND ABUSE. 

The qualitativeassessment usedin thenew approachgaveHCFA a way of gathering 

usefidinforrnatk-mthatit had not obtainedbefore. 

We compared the narrative reports submitted by the review teams for the 1994 review 

with the 1993 Reports of Contractor Performance provided by HCFA for these same 

52 contractors. The outcomes of the reports--the strengths, weaknesses, and 

recommendations for improvement identified in 1994 versus the numerical scores 

issued in 1993--provide clear evidence that the new approach gave a greater level of 

information about contractor performance in fraud and abuse and medical review. 

In 1994, the review teams found weaknesses and areas for improvement in every 

contractor reviewed. The most serious problems, requiring contractors to submit 

formal corrective action plans (CAPS) to their regional office, were found at 

contractors in 22 out of 73 reviews conducted (30 percent). These 22 contractors 

included 14 that had received perfect scores in the prior year. 

In 1993, in comparison, 28 of the 52 contractors (54 percent) reviewed in 1994 had 

perfect scores of 100; 46 (88 percent) contractors received a total score of 95 or 

higher, and only one contractor scored below 90. We recognize that the actual criteria 

on which they were judged varied between the two years. However, the weaknesses 

found in the 1994 review provide solid evidence that contractors, which had been 

judged to be performing at a high level in 1993, were weak in some areas in 1994. 

The clear implication is that the 1994 protocol was more sensitive to contractor 

operations in fraud and abuse and/or medical review than the 1993 version. 

One important accomplishment of the 1994 reviews was to provide information for 

HCFA on how far contractors had come, and how much further they need to go, to 

meet HCFA’S expectations for performance in fraud and abuse and in medical review. 

A regional HCFA official summarized this issue when he said that, “The old CPEP 

was a scorecard, and as long as you did what the protocol dictated, you’d get an “A”. 

With this new approach, we were looking at no matter what you were doing, how 

could you do it better.” These expectations, and the focus of the 1994 reviews, 

addressed issues such as contractors’ capacity to: 

- develop a strategy for prioritizing high cost, high incidence, high dollar claims. 

- conduct large scale data analysis and statistical work to identify significant 

local aberrances; 

4

- establish methods to evaluate contractors’ success in correcting inappropriate 

provider billing; and 

- proactively deter fraud. 

�	 The J?exibleprotocol enabled the review team to target its inquiry on areas of each 

contractor’s pe~ormance that the team identified as problematic. 

Our interviews with HCFA and contractor staff confirmed that the 1994 protocols 

provided HCFA with information that was more useful for contractor evaluation. The 

new evaluation protocols did not use a scoring system, but focused on identifying 

strengths and weaknesses, with recommendations for improvement. A key feature of 

the protocols was the intention to let the review team delve into areas that the team 

identified as important while they were on site at the contractor. The highlighted 

examples, typical of those we heard from several participants, show that these 

protocols seem to have accomplished those goals. 

Contractors we interviewed, both those who had been reviewed and those who had 

not been reviewed, saw this new approach as a positive step. Several contractors used 

the term “trivia” to describe the measures in the prior review. One contractor staff 

member summarized the positive benefit of the changes as follows: “We are no longer 

worrying about timelines--arguing over whether a letter was answered in 30 days or 31 

days--but on whether we are doing what we should, like referring good cases to OIG.” 

�	 Xhe new approach encouraged the review teams to identify strengths and 

weaknesses that cut across different operating units at individual contractors. 

The new approach focused on the processes that contractors use to carry out their 

work. Areas of inquiry included the way that different operating units interact with 

each other, the flow of information across units, and the entire organization’s 

commitment to payment safeguards. To obtain this information, review teams 

assessed how other operating units of the contractor interacted with the one under 

review. 
One review team member capsulized how this process worked. “We had a lot more 

leeway in conducting reviews. Rather than just talk to the manager or the fraud staff, 

we interviewed everyone in the fraud unit, plus people in other units--medical review, 

claims processing, even the receptionists. In the past we’d found a lack of 

communication between fraud and abuse and other units; now we could factor that in 

to the report.” 

Through these intemiews, the teams were able to identify issues of concern that went 

beyond the specific area at hand. Examples from four reviews illustrate these points. 

Uiingteamsfrom outsidethe kxal regiimalo~e to conductthe reviewsenhancedthe 

reviewfor both HCFA and contractor 

�	 The external teams brought new information about contractor operations to both 

HCFA and the contractors. 

Information brought to HCFA 

The HCFA received new information from these reviews in three principal ways.


First, HCFA central office staff participated on the review teams. In 32 of the 73


reviews (44 percent), central office staff were members of the review teams. For the


regional office staff, the benefit of this participation was best characterized by the staff


member who said that, “It would have been beneficial if we had fully experienced


people from central on eve~ review--not so much for conducting the review, but for


6 
training them so that central office understands that there are multiple ways to do 

something.” A central office staff person verified this when she said that “Instructions 

for performance originate in Baltimore, and it was good for us to see how things work 

out there where they really hit the road.” 

Second, office staff from other regional offices learned how their counterparts 

elsewhere operated and the impact of their policies. The benefit of this crossfertilization was best characterized by the contractor who told us, “Sharing best 

practices from the other regions prompted our local regional office to look at things 

differently as well. I’m sure that regional offices exchange information at some level, 

but the team review gave them a very specific framework to do this.” 

Third, HCFA staff received input from the contractors regarding problems that they 

faced with HCFA and suggestions for improvement. This input was most formal in 

the reviews conducted for Part B medical review, where the narrative reports included 

the carriers’ recommendations for HCFA. Every carrier reviewed in this area had 

some recommendations for HCFA. This section was not included in the reports for 

Part A medical review, nor for the fraud and abuse reviews. 

A typical contractor comment about this opportunity was, “The open discussion helped 

us. We were able to bring issues to light to them to communicate with central office. 

Our manual has changed so much over the last three years that this was a good 

discussion.” 

Information brou~ht to contractors 

Contractors received new information through two primary mechanisms. First, the


process brought contractors a better understanding of HCFA policies and


expectations. These policies had been conveyed in contractor manuals, but the


reviews reinforced HCFA’S emphasis cm specific items, such as fraud prevention and


detection. The importance of the external review teams in conveying this message was


best characterized by the regional official who told us that, “The review team and this


approach really were instrumental in giving a wake up alarm that these problems were


not just local regional office concerns, but HCFA speaking from a national


perspective.”


7

Second, contractors found it particularly beneficial to learn more about how others 

dealt with similar problems. Several people we interviewed considered this to be the 

strongest benefit of using the external teams. 

� The use of external teams added an element of objectivity to the reviews. 

In our interviews, contractors and HCFA staff identified three ways in which the use 

of external teams added objectivity to the review process. First, all agreed that the 

external teams placed some new demands on the contractors. One HCFA staff 

member explained this as, “They didn’t know us and we didn’t know them. So they 

had to show us something new, not the same old thing that they would dust off for the 

regional office reviewers.” One aspect of this fresh look was that in most cases the 

review teams went to the contractors with no advance contact with the local HCFA 

regional office. Although this lack of contact may have meant that the team was not 

fully informed on local issues, those we spoke with thought that this “lack of contact 

didn’t really matter. If there was a problem we found it in our review, and didn’t need 

someone to point it out ahead of time.” 

Second, contractors felt the need to justify and explain their operations to the new 

team--and to themselves--as part of this process. One contractor explained this as 

follows: “If you deal with someone on a daily basis, they may have trouble coming in 

and finding fault. If they don’t know us, they can be more objective, not as concerned 

about our feelings or their future dealings with us.” Another contractor told us that 

“The regional office is good, because you know them; but with an outside team, you 

are more challenged to really walk them through your processes, to be sure you 

explain them.” 

8

Finally, the use of teams themselves appears to have brought a sense of balance to the 

review. One contractor characterized this as, “Each regional office has its strengths 

and weaknesses; each team brings different perspective.” Another noted that, “YOU 

can run into problems in the individual philosophies of different reviewers that may 

disagree with us. Teams tend to overcome that perspective, because the group tends 

to moderate the extremes.” 

The potential exists that external reviewers might not be knowledgeable about unique 

local situations affecting contractors. However, our intemiews with contractors 

suggested that this was not the case. One contractor explained that “The team did not 

have all of our history, but that wasn’t a problem. You’d probably have to walk the 

local regional office team through the process also to bring them up to speed.” 

Another told us, “We had an initial concern about the external teams. But they were 

up to speed. This was clear once we found that they wanted to talk rather than just 

lock themselves in a room with documents! They talked, listened, were very open. If 

there was a question, we could explain it to them.” 

OUR EARLY ASSESSMENT ALSO SUGGESTS THAT HCFA HAS NOT YET MADE FULL 

USE OF THE INFORMATION GATHERED IN THESE REVIEWS TO FURTHER 

CONTRACTORS’ ABILITY TO SAFEGUARD MEDICARE PAYMENTS. 

HCFA regionalstaffareusingthe writtenreportsfrom thesereviewsin theirongoing 

assessmentof contractorperfomumce. Howeveq reg”onalstaflmay not be takzkg@l 

advantageof theserepr@ toprovidemore ejfectiveovernightof contractoractivitkx 

After issuing its written report, the review team’s role in contractor monitoring ended. 

When it had recommended a corrective action plan (CAP), review team members 

received a copy of the contractor’s response. But approval of the CAP and oversight 

of its implementation are the responsibility of the contractor’s local regional office. In 

reviews in which the team did not impose a CAP, even if other weaknesses were 

identified, no specific action is required of the regional office. 

The written reports contain a substantial amount of information that would be useful 

to a regional office in its ongoing monitoring of contractor performance--whether or 

not a formal corrective action plan was required. Our interviews with HCFA staff 

indicated that the way in which the reports are actually used to monitor contractors is 

up to the individual regional offices. The HCFA central office has apparently adopted 

a hands-off approach. As individuals there told us, “We don’t know how the follow-up 

worked. It’s up to the home region to do and we haven’t done any real follow-up with 

them. Contractor evaluation is really their job.” 

9

The contractors we interviewed shared different experiences with follow-up. 

One apparent reason for this inconsistency is that the primary audience for these 

reports is not clear. According to those we interviewed, at HCFA and the contractors, 

the primary audience for the report was not the regional office. During the course of 

our interviews, we asked individuals from the regional offices, central office, and 

contractors who they thought was the focus of the written rep~rts. Four responded 

that the primary audience was the HCFA central office, while nine said that the 

audience was the contractor. None indicated that the primary audience was the 

regional office. We recognize that this is not a statistically valid sample, but believe 

that it does provide a strong indication that those involved did not really view these 

reports as a way of enhancing contractor monitoring by the local regional office. 

The writtenreportsvariedwiddj infour significant 

� Cn”teriafor imposing corrective action plans 

The criteria for imposing a formal corrective action plan were not clear. A review 

team could require a CAP if it determined that the contractor did not comply with the 

requirements of the Medicare manual. In some reports, the findings were tied directly 

to individual sections of the manual; in other reports, the findings were more broadly 

constructed, along with details about how the team thought the contractor should 

come into compliance with the manual. At still other contractors, it was not even 

clear from reading the report whether a formal CAP was required, or whether the 

10 
team was merely identifying weaknesses and making recommendations for 

improvement. 

It is also worth noting that the teams reviewing focused medical review at fiscal 

intermediaries were much more likely to impose CAPS, doing so on at least 15 of the 

20 intermediaries reviewed. In contrast, the review teams required a CAP for only 4 

of 19 carriers in medical review, and 2 of 16 intermediaries and 1 of 18 carriers in 

fraud and abuse. 

� Differing interpretations of similar facts 

We found instances in which differing interpretations were attached to similar 

situations, impacting on recommendations, strengths and weaknesses. The following 

boxes provide examples of two such apparent conflicts. 

� No prioritization of recommendations 

The reports did not indicate which recommendations offered to contractors were the 

most important. The reports listed recommendations for improvement or corrective 

actions in the sequence in which they had appeared in the written report. In fact, it 

appears that some weaknesses are more consequential than others and probably 

should be corrected first, whereas others appear to be less significant. 

� Different levels of detail reported 

The reports varied among teams in the detail that was provided. For example, when 

describing a contractor’s data analysis capabilities, some reports described only the 

software that the contractor used in a brief paragraph. Other teams provided 

11

extensive information on the type of hardware, software, reports issued, and how the 

data were analyzed. We raise this as a concern because it reflects on the audience for 

these reports. The contractor will already know this information; the level of detail 

may be more than HCFA central office needs (unless some type of standardization is 

being considered); and the regional office is likely to already be familiar with the 

contractor. 

In the come of the rm”ews,HCFA gatherednutionalreformationon #ective contractor 

practices,as wellaspracticesto avoid Howeve~ the agencyhas not yet conveyedthk 

informationto contractoras a wayof strengtheningoveraUoperationof the Medicare 

program 

Nine of the fifteen contractors we interviewed told us that they wanted information on 

effective practices of other contractors that HCFA learned from the reviews. These 

contractors told us this in unsolicited discussion, i.e., not in response to a particular 

question we asked. 

The interest in this information was particularly noticeable among the contractors we 

interviewed that had not been reviewed under the new approach. All five of those we 

spoke with requested this information. But four of the ten contractors that were 

reviewed also wanted to receive such information. 

Four of these contractors told us that they had received from HCFA a general listing 

of strengths and weaknesses in fraud and abuse at a December 1994 meeting of 

contractors. Even those contractors who did obtain that summary told us that they 

wanted a more formalized analysis of what the 1994 reviews showed to be effective 

practices and practices to avoid. They indicated that they would use the material to 

examine ways of improving their own operations. 

12

RECOMMENDATIONS


We recognize that this approach marked a new direction for HCFA. This new


approach clearly involved a learning curve--for the reviewers, for the contractors, and


for HCFA administrators. We also recognize that the subjective nature of the reviews


leaves substantial discretion to the individual review teams. By its nature as an


evolving process, the HCFA staff learned lessons as they pursued the reviews,


including development of additional questions to guide the review and their


subsequent reflection in the report.


The real measure of the success of this new approach will be determining whether 

contractors in the years ahead are doing a better job of preventing inappropriate 

payments under the Medicare program. 

In order to build upon the process initiated in 1994, we believe that HCFA could 

strengthen that process and its intended outcomes through the following steps: 

THE HCFA CENTRAL OFFICE SHOULD BE SURE TO OBTAIN INFORMATION FROM 

THE REGIONAL OFFICES X) SEE HOW THEY ARE MONITORING CONTRACTOR 

IMPROVEMENT PLANS THAT AROSE FROM THESE REVIEWS OF FRAUD AND ABUSE 

ACIWITEH AND MEDICAL REWEW. 

We recognize that contractor evaluation and monitoring remain the primary purview 

of the regional offices. At the same time, we believe that it behooves the agency to 

continue to have central knowledge about contractors’ progress in implementing 

corrective actions and recommendations made by the review teams. We believe that 

obtaining this information is important for three reasons. 

First, because this was a dramatically new approach to contractor evaluation, HCFA 

needs to assess its impact over time. Because this evaluative approach was designed 

to change contractor behavior and improve their performance, HCFA needs to know 

how and to what extent the new approach has been successful in achieving these goals. 

Second, the regional offices were not involved in reviewing contractors within their 

own region. To the extent that the regional office staff may feel somewhat 

disenfranchised or left out of these reviews, it is important that HCFA have some 

mechanism to determine whether the regional offices have accepted the findings of the 

reviews, particularly when the reviews were done by teams from outside of the region. 

Third, as we note in our findings, there appear to be different ways of approaching 

and using the reports among the regions. To be sure that the goals of this review are 

realized, HCFA needs to have some central source for assessing the practical 

usefulness of the reports. 

13

- HCFA SHOULD PROVIDE GUIDANCE FOR REVIEW TEAMS REGARDING KEY 

INFORMATION TO BE CONTAINED IN THE WRITTEN REPORIS. 

In our findings, we note that there are discrepancies in the format and supporting data 

contained in the written reports. At a minimum, we believe that this information 

should include: 

� the basis for imposing corrective action plans; 

� the supporting data needed to portray accurately the results of the reviews; and 

. prioritization of recommendations for improvement. 

We believe that HCFA should ensure that the reports contain this minimum 

information for two important reasons. 

First, having this information will let the agency compare and understand performance 

from a broad national perspective. Even though HCFA is no longer ranking 

contractors, the agency still needs to have information that lets it assess performance 

across the different organizations with which it contracts. 

Second, having a solid base of information would be particularly important in the 

event that the agency must take adverse action against a contractor. The HCFA 

needs to be sure that the evaluation of that contractor will stand up under scrutiny. 

In developing a format for this information, we urge HCFA to be cautious not to lose 

the vibrancy and creativity contained in the team reviews. The ability of the teams to 

identi~ important issues at each contractor, and to examine different levels and depths 

of information is one of the significant benefits of the new approach. 

~ HCFA SHOULD TAKE IMMEDIATE STEPS TO PREPARE AN ANALYSIS OF 

EFFECTIVE PRACIKES, AND PRACI’ICES TO AVOID, BASED ON FINDINGS FROM THE 

1994 REVIEW PROCESS. ~ HCFA SHOULD SHARE THESE ANALYSES WITH ALL 

FISCAL mrmRMEDrARIEs AND CARRIERS. 

In the spirit of continuous quality improvement, HCFA could help all contractors meet 

its expectations for performance in fraud and abuse and in medical review. We found 

a strong demand for this type of information among contractors, to help strengthen 

their practices and to help them avoid “reinventing the wheel.” By providing 

information on practices that are successful in achieving these outcomes, HCFA would 

benefit the contractors, while also helping to safeguard the Medicare trust funds. 

To be effective and useful, this product must be more than just a listing of what 

individual teams found on site. The analysis needs to be a short term, but thorough, 

appraisal of what actions and approaches work, their potential to achieve program 

goals, ways of measuring success, and other pertinent information. This review would 

14

result in HCFA’S constructive assessment of what contractors should be doing to 

safeguard Medicare payments. 

We urge that HCFA evaluate the success of this effort, perhaps through conducting 

surveys to gain feedback from the contractors who receive this information. If the 

approach is successful and meaningful for the contractors, we would urge HCFA to 

continue to conduct and share similar analyses in the future. 
AGENCY COMMENTS


We sought comments on the draft report from HCFA and from the Assistant 

Secretary for Planning and Evaluation (ASPE). The HCFA concurred with our 

recommendations and summarized steps that the agency is taking to implement those 

recommendations. The ASPE also concurred with our recommendations, but offered 

no additional comments. We include HCFA’S full comments as Appendix A. 

In response to our first recommendation, HCFA indicates that regional offices are 

submitting copies of Contractor Performance Improvement Plans to the central office. 

Central office and the regions are working to develop a mechanism for continuous 

monitoring of these Performance Improvement Plans. 

In response to our second recommendation, HCFA notes that it is providing general 

guidelines for review teams concerning key information to be communicated in written 

reports. The actual report format will be determined by the review teams, as is 

currently being done for the national review in the Medicare Secondary Payer area. 

In response to our third recommendation, HCFA states that it already has 

disseminated best practices to carriers and intermediaries. 

We appreciate HCFA’s positive response. We would be pleased to work with the agency 

in the jhture to evaluate the effectiveness of its actions in these areas. 

16

APPENDIX A 

HCFA COMMENTS ON DRAFI’REPORT 

A-1 
� 

* $:AV’C’J *.,+’ ,.,, 

:’ DEPARTMENT OF HEALTH & HUMAN SERVICES Health Care Financing Adminlstratlon
 .


-=


-0 # “+%%d,a > The Administrator 

Washington, D.C. 20201 

DATE JIJL 29 1995 

FROM	 Bruce Vladeck.. 

Administrator 

SUBJECT	 office of Inspector General Draft Report “Monitoring Medicare 

Contractor Performance: A New Approach,” (OEI-01-93-O0160) 

TO	 June Gibbs Brown 

Inspector General 

This draft report institutes a new approach for reviewing contractor performance in two 

areas of payment safeguards: medical review and fraud and abuse activities. 

We concur with the report recommendations. Our specific comments are attached. 

Thank you for the opportunity to review and comment on this report. 

Attachment 

A-2

Health Care Financin~ Administration (HCFA) Comments on 

Office of Inspector General Draft Report: “Monitoring Medicare 

Contractor Performance: 

A New Approach,” (OEI-01-93-00160) 

Recommendation 1 

HCFA Central Office (CO) should be sure to obtain information from the regional 

offices (RO) to see how they are monitoring contractor improvement plans that arose 

from these reviews of fraud and abuse activities and medical review. 

,, 

HCFA Res~onse 

We concur. Currently, ROS are submitting copies of their Contractor Performance 

Improvement Plans and CO will be working with the regions to develop a mechanism for 

continuous monitoring of the Performance Improvement Plans. 

OIG Recommendation 2 

HCFA should provide guidance for review teams regarding key information to be 

contained in the written reports. 

HCFA Response 

We concur. HCFA wdl provide general guidelines for review teams concerning key 

information to be communicated in written reports. However, the review teams will 

determine their own formats for the reports. This is currently being done for the 

natiohal review of the Medicare Secondary Payer area. 

OIG Recommendation 3 

HCFA should take immediate steps to prepare an analysis of effective practices and 

practices to avoid based on findings from the 1994 review process. HCFA should share 

these analyses with all fiscal intermediaries and carriers. 

HCFA Response 

We concur. HCFA has already disseminated “best practices” to all carriers and 

intermediaries. The fraud and abuse “best practices” were shared during the 1994 

national meeting. In FebmaV 1995, the medical review “best practices” was distributed 

to all Medicare contractors. We have not gathered information on practices to avoid. 

A-3

APPENDIX B


ENDNOTES


1. Conference Report 103-73, to accompany H.R. 4606; Public Law 103-333. 

2. The standards and criteria on which contractors are evaluated are published 

annually in the Federal Re@ter. 

3. U.S. General Accounting Office, Medicare: HCFA’s Contacting Authori~ for 

Processing Medicare Claims, GAO/HEHS-94-171, 2 August, 1994, p. 7. 

4. Letter to All Medicare Contractors, from Carol J. Walton, Director, HCFA Bureau 

of Program Operations, May 20, 1994. 

5. Of the 79 Medicare contractors, 52 were actually reviewed using the new approach. 

These comprised 28 intermediaries and 24 carriers. Eight intermediaries and carriers 

were units of single overall organization, eg, a Blue Cross-Blue Shield plan that held a 

contract for both Parts A and B. 

The HCFA teams conducted a total of 73 reviews. The teams reviewed 20 

intermediaries in only 1 area, and 8 in both areas. The teams reviewed 11 carriers in 

only 1 area, and 13 in both areas. 

B-1