Department. of Health and Human Servces 

OFFICE OF 

INSP TOR GENERAL 

MEDICAI HASSLE: STATE RESPONSES 

TO PHYSICIA COMPLAS 

0. stRVlq' 

ff 

'0 

'f3a 

Richard P. Kusserow 

INSPECfOR GENERA 

MACH 199 
OFFCE OF INSPECfOR GENERA 

The mision of the Offce of Inpector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrty of the Department of Health and Human Servce' (HHS)

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

statutory mission is carred out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Offce of Audit Servce, the 

Offce of Investigations, and the Offce of Evaluation and Inspections. The OIG also inform 

the Secretary of HHS of program, and management problems, and recmmends courses to 

correct them. 

OFFCE OF AUDIT SERVICE 

The OIG's Offce of Audit Servce (OAS) provides all auditing servce for HHS, either by conducting audits with its own audit resource or by overseeing audit work done by others. 

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

carryng out their respective responsibilties 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 effciency throughout the Department. 

OFFCE OF INTIGATIONS 

The OIG's Offce 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 criinal convictions 

adminitrative 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. 

OFFCE OF EVALUATION AN INSPECfONS 

The OIG's Offce of Evaluation and Inspections (OEI) conducts short-term management and 

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

the Congress, and the public. The findings and recmmendations contained in these inpection 

report generate rapid, accurate, and up-to-date information on the effciency, vulnerabilty, 

and effectiveness of departmental programs. 

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

General, Offce of Evaluation and Inspections, and Martha B. Kvaal, Deputy Regional 

Inspector General, Offce of Evaluation and Inspections, Region 1. Participating in thi project 

were the following people: 

Boton Region Headquars 

Rusell W. Hereford, Ph. Project Leader Vicki Greene 

David Schrag 

David R. Veroff 
Department of Health and Human Servces 

OFFICE OF 

INSPECTOR GENERAL 

MEDICAI HASSLE: STATE RESPONSES 

TO PHYSICIA COMPLAS 

StRVtCl :0' . 

4lf'cf3'O 

Richard P. Kusserow 

INSPECfOR GENERA 

OEI-OI-92-O100 
EXECUTIVE SUMMAR Y


PUROSE 

This study describes approaches that States have taken in response to concerns about 

Medicaid' s admistrative burden on physicians. 

BACKGROUN 

Physicians contend that the "hassle factor --administrative red tape associated with 

participating in Medicaid--discourages many doctors from treating patients who are 

covered by Medicaid. The perceived hassle compounds other factors contributing to 

low physician partcipation, most notably low fees relative to other payers. When 

physicians refer to the adminstrative burden, they generally mean such problems as 

Slow payments; 

Rejection of claims because the biling form was completed incorrectly; 

Difculties in correcting claims that contain errors; 

Inabilty to veri recipients' Medicaid eligibilty, leading to claim denials; 

Frequent changes in policies, covered procedures, and required documentation; 

Obtuse provider manuals that do not meet the needs of program providers. 

We identifed States that are working to reduce Medicaid hassle through intervews 

with offcials of national and State medical societies, staff of the Health Care 

Financing Adminstration, policy analysts familiar with State health issues, and a 

review of the literature on Medicaid physician participation. We then intervewed staff 

from the Medicaid program, fiscal agent, and medical society in these States, and 

reviewed avaiable wrtten material. We also examied data from an DIG survey of State Medicaid electronic claims management capacity, conducted in sprig 1991. 

FIINGS 

We id ni approache tht State have foun to be response to physin complain about Medaid's adtratie bur 1. resnd to cr about 

claim presg, commatin between physins and Medaid agen, and provi manuls. 

Improvg Oai Procing 

At least 28 States accept electronic claims for physician servces.


At least 21 States use automated systems to answer physician inquiries about 

claims status, recipient eligibility, and other routine matters. 
Maryland and Florida give physicians wrtten guides that provide clear 

instructions on how to correct problem claims. 

Michigan and Florida use specialized programs and instructors to train 

physician offce staff about Medicaid billng and policy. 

Improvg Communcation between Physician and Medicad 

Washigton, Alabama, and Missouri established joint Medicaid-physician task 

forces to identify and resolve administrative obstacles to physician participation. 

Florida uses its district Medicaid offices as provider relations units and 

participates in activities of State and local medical societies. 

Maryland employs a team of consultant nurses to enroll physicians for pediatric 

care and to assist them with administrative issues. 

SimpIig Provder Manua 

Michigan is revising its provider manuals to make them more understandable to 

physicians and their staffs. 

Maryland distributes manuals for pediatric screening servces that simplif the biIg process and explain recommended screening schedules and tests. 

CONCLUSIONS 

On the basis of the reports from State government and State medical society offcials 

each of these approaches appears to have potential as a constructive response to 

physician complaints about Medicaid hassle. In weighing the potential impact of these 

approaches and their applicability elsewhere, it is important to take the following three 

considerations into account:


State and Federal requirements for financial accountabilty mean that some 

tension between Medicaid's administrative requirements and what providers 

perceive as hassle is unavoidable. 

Other policy initiatives, such as higher fees and development of managed care 

systems, often accompany efforts to reduce Medicaid's administrative burden. 

Fiscal constraints facing State governments limit the extent to which Medicaid 

programs can implement strategies to reduce the administrative burden. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. 

TABLE OF CONTENTS


PAGE 

EXECUTIV SUMY 

INODUCTION 

FININGS ..................................................... 4 

Improvig Claims Processing 

Improvig Co=unication ....................................... 8 

Simplifg Provider Manuals 

CONCLUSIONS 

APPENDIX A: Methodology....................................... AAPPENDIX B: Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. B-
INTRODUCTION


PUROSE 

Ths study describes strategies that States have adopted in response to concerns about 

Medicaid' s administrative burden on physicians. It responds to a request from the 

House Energy and Commerce Subcommittee on Oversight and Investigations, which 

asked that the Offce of Inspector General provide inormation on State efforts to 

streamle Medicaid administrative processes for physicians. 

BACKGROUN 

Deg Medaid' Admtie Bur 

Physicians contend that the "hassle factor --adminstrative red tape associated with 

participating in Medicaid--discourages many doctors from treating patients who are 

covered by Medicaid. When providers refer to the adminstrative burden, they 

generally mean such problems as: 

Slow payments; 

Rejection of claims because the biling form was completed incorrectly; 

Difculties in correcting claims that contain errors; 

Inabilty to verify recipients' Medicaid eligibility, leading to claim denials; 

Frequent changes in policies, covered procedures, and required documentation; 

Obtuse provider manuals that do not meet the needs of program providers. 

Pediatricians reasons for limiting participation include (1) unpredictable payments 

(2) complex Medicaid program regulations, (3) payment delays, and (4) restrictions on 

health care servces covered by Medicaid."! Priary care physicians have concluded 

that "coverig more optional servces and reducing complicated benefit limitations and 

requirements for prior authorization might encourage more participation. 

Is in Medaid Physin Partpatin 

Although the admistrative burden appears to be an important factor in physician 

dissatisfaction with Medicaid, it is critical to recognize that easing that burden alone wi not necessarily lead to higher participation rates. Other factors--most notably a 

low level of reimbursement relative to Medicare or private insurance--also contribute 

to low Medicaid provider participation rates. 

The Physician Payment Review Commission (PPRC) found that 38 State Medicaid 

agencies ranked low fees as one of the two most important factors for physician 

nonparticipation in Medicaid, while 14 agencies cited complex biIg, and 6 ranked 

payment delays as one of the two most important factors. Indeed, the PPRC cautions 

that simply reducing Medicaid's administrative hassle without also increasing fees is 
, 

unlely to induce more physician participation.4 The National Governors


Association has found that low fee levels and malpractice costs outpace admiistrative€

problems as explanations for low partcipation among periatal providers in


Medicaid.€

Some physician complaints about Medicaid hassle may be due to misconceptions. The 

American College of Obstetricians and Gynecologists (ACOG) cites examples from 

two States. A New Hampshire physician task force concluded that Medicaid "biIg pretty much like it is for other third-part payers." In North Carolia, perceptions of 

the "problems with claims processing. . . carried over from the 1970' , before the state 

had intiated automated claims processing."6 Florida s Medicaid director explains the 

consequences of these perceptions: "We sometimes fid an entire practice that wi 

not accept Medicaid, because the senior partners didn t get paid in 1978. They told the 

new partners in 1983 Don t bil Medicaid because you won t get paid at all and if you 

do get paid, it's a pittance.' Then they told the next group the same thig, and we 

find three generations of physicians biased against us for things that happened more 

than a decade ago. It s very hard to get these people back in our system. 

Fedl Effort to Rede th Admtratie Bur on Physins 

The Secretary of Health and Human Servces has committed to reducing "the 

admistrative burden of Federal health care programs on patients and providers. 

The Health Care Financing Administration (HCFA) has engaged the issue of 

administrative burden on physicians who participate in Medicare. In February 1991 

HCFA announced the establishment of an Advisory Committee on Medicare-Physician 

Relationships. That committee s role is to advise the Secretary on Medicare policies 

that directly relate to physicians' provision of servces to Medicare beneficiaries and 

the "cost and admistrative burden the Medicare program places on physicians. 

The scope of that advisory committee does not extend to Medicaid. Nevertheless 

senior staff in HCFA' s Medicaid Bureau have expressed support for State efforts to 

reduce the admistrative burden on physicians. 
SCOPE AN METHODOLOY 

We designed this study to provide inormation on approaches that a limited number of 

States have taken to address Medicaid's administrative burden on physicians. Ths 

study does not comprehensively review and evaluate these State initiatives. Rather, we 

highlight what some States are doing to address complaints from physicians about the 

admistrative hassle that Medicaid participation imposes. 

We identifed States that are working to reduce Medicaid hassle on physicians through 

intervews with offcials of State medical societies, the American Medical Association 

staff of the Health Care Financing Administration, and policy analysts famiar with 

State health issues. 

Our intervews with medical association staff members in 13 States provided additional 

inormation on physician complaints about Medicaid hassle. In this report, we include 

quotations from these intervews to give examples of their complaints. 

We obtained inormation on a particular State s approach to reducing the 

administrative burden from intervews with Medicaid, fiscal agent, and medical society 

staff, and by reviewing wrtten material provided by the Medicaid agency. 

We also examined data gathered between May and July 1991, for a prior Offce of 

Inspector General study of State Medicaid electronic claims management capacity. 

Our review was conducted in accordance with the 
 Interim Standards for Inspections


issued by the President s Council on Integrity and Effciency. 

Appendix A provides additional information on our methodology. 
FINDINGS€

WE IDEN NI APPROACH TIT STATE HAVE FOUN TO 

REPONSIV TO PHYSICI COMPLA ABOUT MEICAI' ADMllRTI BUREN. TIY REPOND TO CRCIMS ABOUT Cl PROCING, COMMCATION BET PHYSICIS AN 

MEICAI AGENCI, AN PROVIER MAAL. 

IMPROVIG CLAS PROCESSING 

At let 28 State accept electrni claim for physin seres. 

The development of biling softare for personal computers means that even physician 

practices with a small volume of Medicaid patients can submit their bils electronically. 

In our prior survey of Medicaid programs' electronic claims management capacity, 28 

States reported the proportion of physician claims that are submitted electronically, 

ranging from 3 percent in North Dakota to 66 percent in Georgia,u 

Florida is one State that has made a significant commitment to increasing electronic 

claims processing among physicians. In conjunction with its fiscal agent, Florida 

Medicaid has developed softare that enables any provider to submit claims


electronically. The softare is available free of charge to providers. They may also 

submit claims through private firms that offer electronic claims submission servces for 

a per-claim fee. Fiscal agent staff report that in 1991, 47 percent of physician claims 

were submitted on electronic media. 
, 

Florida s electronic billng softare, entitled ASAP (Accelerated Submission and 

Processing), is based on the HCFA-1500 physician billing formP Physicians can

tailor the softare to meet their particular needs when it is installed. For example 

some inormation, such as the physician s name and address and the date of the claim 

may be automatically inserted each time a claim is prepared. In addition, physicians 

can defie up to 10 common diagnoses and procedures which, with their billig codes 

can be inserted with single keystrokes. Automated insertion of ths routine 

inormation is liely to reduce errors, with a commensurate decrease in problem€

claims.€

Staff at other State Medicaid agencies we spoke with stressed their commitment to€

electronic claims submission. As one person said We are really pushing electronic 

claims submission as havig great benefit. . .. It speeds processing, eliinates keying 

errors, and claims come in cleaner." Our 1991 survey of Medicaid agencies also 

suggests that electronic claims submission is less expensive.14 Additional advantages 

cited for using electronic claims submission include:€

Faster payment compared to submission of paper claimsY The claim 

can be read directly by the Medicaid computer and, if no errors are 

found, can be paid in the next batch of payments. 

Decreased likelihood of errors:€

o Built-in safeguards and edits in the computer software identif 

errors prior to actually filing the claim 

o Paper claims do not have to be reentered into electronic 

format by fiscal agent staff, thereby reducing keypunch 

errors€

Reduced cost to the provider for clerical servces, as paperwork is 

decreased and the physician s signature is not required on each claim. 

Despite the advantages of electronic claims processing, most physician claims are stil 

submitted on paper. Some of the reasons relate to Medicaid system requirements. 

For example, Medicaid may require paper documentation that is not easily sent€

electronically, such as prior authorization or steriization consent forms . Other 

barrers to electronic processing of physician claims relate to slow developments in the 

state of the art. The most widely used physician claim form--the HCFA 1500--did not have a standard electronic format until July 1991.1€

In addition to these barrers, many physicians' offces simply do not have available the 

computer hardware necessary for electronic submission of claims. In fact, medical 

society staff in one State estimated that fewer than 20 percent of physicians in private 

practice have the computer capability necessary for computer submission of claims. 
At least 21 State use autmated system to anser physin in about claim sttu recie eligiiJ, an othe rout matt. 

Determing whether a patient is eligible on a given day may well mean the difference 

between a physician s being paid for providing a servce and havig that claim 

rejected. At other times a physician simply may need information on the status of bils 

that had been submitted durig the prior month. In at least 21 States, Medicaid 

programs have established automated systems that can help providers address these 

questions. IS


Alabama s fiscal agent estimates that 75 percent of telephone calls to the Medicaid 

inormation number were questions about recipient benefit limits or eligibilty, or the 

status of submitted claims. To address this situation, Alabama established an 

automated voice response system (A VRS) in June 1991. This system, which operates 

7 days per week for 18 hours per day, allows physicians to obtain information on these 

routine tyes of questions using a touch-tone phone.


In Nort Caolia, where a similar system operates, the fiscal agent estimates that the 

A VRS handles 1 000 calIs per day, even without an eligibilty verification component. 

By establishing an automated voice response system to answer these routine telephone 

inquires, Medicaid staff are able to deal with more complex calls. 

Maland updated its eligibility verification system in November 1991. That system 

which operates 24 hours per day, 7 days a week, was enhanced to permit providers to 

veri past dates of eligibilty for servces rendered up to 1 year previously. In 

addition, even if a recipient does not have his or her Medicaid card, the physician can 

use the recipient's Social Security number to obtain the current Medicaid identifcation 

number. 

Marland and Flri gie physins wren gu tht provi clear intrtins on how 

to co"ect prble claim. 

Marland sends all providers, including physicians, a Turn-Around Document (TAD) 

whenever a claim is delayed. The TAD includes an error code, a description of the 

error, and an explanation of how to correct that error. Providers must resubmit the 

corrected TAD to Medicaid within 45 days. At that point, Medicaid wil enter the 

changes and corrections into the computer system, and the claim wil be processed. 

The TAD and corrective explanations were created with input from the various 

provider groups.


Florida has developed a "Trouble Shooting Guide for Medicaid Physician Providers" to 

help physicians understand and correct the most common billig errors.I9 Physicians 

receive this guide upon enrollng as a Medicaid provider, as well as periodic updates 

when needed. 
When a physician receives a remittance voucher listing claims that are not being paid€

the voucher contains a code explaining the reason for the delay. Although the 

remittance voucher translates each code, it does not specif how to correct the 

problem. For each problem, the Trouble Shooting Guide explains why the error 

occurred and how to correct it. In addition, the guide references the appropriate page 

of the Medicaid provider handbook in case the physician wants more information. 

Milhian and Flri use spcilied programs and intrtors to trin physin offe st about Medaid bilg an poli. 

Michiga s four-person seminar unit holds training sessions throughout the State on 

Medicaid policy issues, coverage, and biling procedures. The semiar instructors 

spend more than half their time in the field; the balance is spent preparig, editing, and updating traing materials. In 1990, the training staff sponsored 152 semiars 

reaching more than 4 000 providers. Medicaid staff estimate that more than half of 

those attending were from physicians' offces. 

In addition, two field representatives visit providers in their offces to help resolve

biling problems, policy interpretations, and simiar issues. In 1990, according to 

Medicaid staf, the field representatives visited over 1,700 providers on-site. 

Florida conducts traing through a joint effort that involves the regional and central 

Medicaid offces and the fiscal agent. Each plays a different role in the trainng 

program. The district offce establishes district-specific guidelines for contacts with 

providers. The central offce provides information on policy issues, such as eligibilty 

criteria. The fiscal agent conducts training on billig procedures, problems, and 

solutions; remittance vouchers; and electronic biling. During the fist six months of 

1991, Florida conducted training seminars in 17 cities for more than 2 600 individuals. 
IMPROVIG COMMNICA110NS BE1WEN PHYSICIAS AN MEDICA€

Washigtn, Alabama and Misour establihe join Medaid-physin tak foTCes to id and resolve adtratie obstacle to physin parttin. 

Involving the physician co=unity in solvig Medicaid red-tape problems can yield 

mutual benefits. Medicaid program staff can gain a better understanding of the "real 

world" in which physicians practice. This should enhance the staffs appreciation of 

the impact that admistrative processes have on provider views of the program. 

the same time, the State can use such an effort to educate the physician co=unity about the constraints under which the Medicaid program operates. These constraints 

may include inerent aspects of the program (e. the need to verify recipient 

eligibilty), State fiscal problems that limit the availabilty of funds, or Federal 

requirements over which States have no control. 

We intervewed offcials in three States--Washigton, Alabama, and Miour--that had 

established physician task forces to try to increase physician participation in Medicaid. 

They described concrete steps that emerged from these task forces. As the director of 

one State Medical Society told us, the task force "is the best thing to come out of 

Medicaid in years. It has really been a boon. 

As a result of Washigton s "Red Tape Task Force " established in 1989, Medicaid 

claried definitions of emergency and non emergency procedures and 

distributed their corresponding procedure and diagnosis codes to 

physicians and hospitals; 

established field units to give technical assistance to physicians; and 

identified acceptable documents to confirm that a recipient lacks private 

third part coverage.€

Alabama s Physician Task Force, established in 1990, led to 

an automated voice response system; 
, 

increased time limits for claims submission from 180 to 365 days; 

assigrent of Medicaid eligibilty numbers to infants before birth, to 

make them eligible for Medicaid at birth; and 

shortened screening forms for the Early Periodic Screenig, Diagnosis 

and Testing (EPSDT) program. 

Miour' s physician task force, established in 1989, implemented 

a toll-free telephone number for eligibility verification and provider€

information (previously, a toll call paid for by the physician); and 

an increase in the number of errors that can be identified durig the 

initial claims processing run, so that the same claim is not rejected 

multiple times. 

Flri uses Us dit Medaid offes as provi relatins un and partpates in acti of State and loal meal socti 

Florida has restructured its 11 district Medicaid offices. Previously, these local offces 

had been providers of health servces such as transportation and EPSDT. In their new 

confguration, the district offces are an information and access point for consumers 

and providers. Provider-focused activities include: 

recruiting new providers to the program; 

resolving some claims payment problems, such as filing limts and 

eligibilty issues; and 

maintainng and updating provider records. 

In addition, Florida Medicaid has begun to participate actively in State and local 

medical society activities. This participation includes attending meetings of physicians 

and their biling admiistrators. The director of the program notes We staff a booth 

at the annual medical society conventions, and try to sell ourselves, just like any other 

vendor. 

Florida Medicaid and the State medical and osteopathic societies mailed recruitment 

material to every nonparticipating physician in the state. These materials included a€

new pamphlet entitled "Medicaid Now Pays " explaining improvements in program fees 

and operations. 

Maryla emplos a team of consnt nues to elUoll physins for petr care and 

to ast th wi adtrtie is. 

Maryland combines active recruitment and administrative simplification to attract 

providers to Medicaid's EPSDT program, Healthy Kids. Seven nurse consultants 
, 

recruit providers for Healthy Kids, maintain ongoing relations with them--including assistance with Medicaid biling and administrative issues--and conduct annual quality 

assurance visits. Each nurse consultant covers a different area of the State. 

Recruitment efforts focus on physicians who treat children--pediatricians, famiy 

practitioners, and general practitioners. When a physician agrees to enroll, the nurse 

consultant helps obtain a Medicaid provider number, addresses programmatic issues 

and answers questions about working with Medicaid. 

One key nurse consultant role is explaining admiistrative and biling processes 

focusing on exactly what an EPSDT provider must do in order to be paid. According to the director of the program The payment system is very comprehensive--it is just not very useful. We go in and tell the providers exactly what they need to do to make 

the (biling) forms work for them. . . what boxes to fil in, what doesn t need to be 

completed, what doesn t apply to them.€

The nurse consultant also provides an ongoing contact for EPSDT providers who have 

questions or problems with Medicaid biling or other issues. Ths continuing 

relationship between health care professionals appears to be an important element of 

provider satisfaction. Providers apparently prefer to deal with a professional colleague 

whom they know rather than a "faceless entity at the other end of the telephone. 

Program staff estimate that the number of EPSDT providers has grown from 375 in 

early 1990 to more than 900 today, as a result of these outreach and recruitment 

efforts.€
SIMPLIG PROVIER MAAL€

Michigan is revg it provir manuls to make th mare untandble 

physins an th sta. 

Michiga has begu to simpli its Medicaid manuals with an emphasis on graphics€

reference indexes, and simple language. The revisions are based on surveys and€

discussions with biling staff in physicians' offces. In addition to makig the manual€

simpler to understand and use, staff hope that the revised format wil make it easier to€

distribute policy changes to providers.€

Another objective of the Manual Makeover Project is improving Medicaid's image 

among providers. Medicaid staff told us that their revisions have been widely€ accepted withi the department, and "every doc on our Medical Society liaison 

commttee loved it." In a pretest of the draft manual, providers particularly lied its 

simplicity. They were not sure, however, that the claims processing system would 

actually work as the new manual describes. To address this concern, project staff continue to work with the claims payment component of the Medicaid agency to€

coordinate necessary changes.


Budget constraints have slowed the manual makeover process. A new manual has 

been fialied for durable medical equipment suppliers only. Medicaid staff note that 

although the revised physician manual is temporarily on hold, they are committed to 

proceeding.€
Maryland ditrutes manuls for petr screeng seres tht sipli th bilg 

pres an exlain reomm screeg schedules and tets. 

Marland has developed two manuals for providers in its Healthy Kids initiative. A 

biIg manual ilustrates exactly how to complete the biling form. The document also 

contains procedure, immunization, and laboratory servce codes and explains how to 

refer chidren for additional treatment under EPSDT.€

The Screenig Provider Manual contains information on current preventive child 

health standards and practices, as well as State and Federal regulations. Based on 

recommendations of the American Academy of Pediatrics, the manual includes 

optional gudelines for pediatric interval screening. These guidelines include forms€

that can be used to document screening results for each age interval. 
, 

CONCLUSIONS


Based on reports from State Medicaid agencies and medical society staff, each of the 

approaches described in this report appears to have potential as a constructive 

response to physician complaints about Medicaid hassle. Other States may wish to€

examine these intiatives in more detail to determine if they might work in their 

situation. 

In weighing the potential impact of these approaches and their applicability elsewhere 

it is important to take into account three considerations: 

Fedl and State req for fincl accounbil mean th some ten 

between Medaid' adtie reqem and what provi peeie as hale is unvoidble 

To some degree, the burden that physicians and other providers perceive as a hassle is 

a function of Medicaid's public nature and the need to monitor the expenditure of 

public funds. As the director of one Medicaid program told us If Medicaid receives 

a clai that is wrong, it goes back to the doctor. Every claim is considered a bil 

against the State and it's ilegal for us to fi it on our own. Just because other payers 

give away money doesn t mean that we do. 

Medicaid pays for servces for eligible individuals only. Yet Medicaid eligibilty is 

much less stable than for persons with Medicare or private insurance coverage. 

Whether or not someone is actually eligible for Medicaid coverage depends on such factors as income, marital status, and family makeup. Changes in any of these factors 

may affect a recipient's status. Although verig whether someone is eligible for 

coverage on the date of treatment is a hassle, it is necessary to ensure payment. 

Several States also informed us that some of the hassle results from Federal 

requirements. For example, physicians and patients must complete and maintain 

special documentation for sterizations, hysterectomies, and abortions. 

Although empirical evidence is limited, hassle is not unique to Medicaid or public 

payers. The Texas Medical Association (TM) has been keeping a "hassle factor log

to compile complaints from members. As of October 1991, TM had received fewer 

complaints for Medicaid (17 complaints) than for Workers' Compensation (52),

Medicare (44), or Aetna Insurance (22). 

Oth poli inties suh as higher fees 

oft accompa efort to rede Medaid' adtrtie bur an deelopme of maged care syst

State efforts to decrease Medicaid hassle for physicians do not take place in isolation. 

Florida, for example, raised physician fees over a four-year period to at least the 50th 
percentile of Medicare fees. Maryland and Missouri increased fees for obstetricians to€

improve prenatal care.€

Many of the efforts to reduce Medicaid hassle focus on traditional fee-for-servce€

medicine. At the same time, many State Medicaid programs are encouraging the€

development of managed care systems for Medicaid recipients. Although we did not€

gather data on managed care programs, Maryland, Florida, and Michigan informed us€

that they are actively working toward this goal.€

In addition, hassle factor reduction may affect providers other than physicians. For€

example, pharmacists and hospitals are more likely to submit claims electronically than€

are physicians. Manuals can be simplified and made easier to understand for all€

Medicaid providers.€

Fiscal constrin facig State gover li th ex €

can imple stteg to rede th adtrtie bur€to whih Medaid proms€

Although some States have raised physician fees as part of their strategy to improve€

physician participation, the fiscal climate surrounding State budgets makes it unlely€

that fee increases will be widespread. State fiscal diffculties also may affect efforts to€

reduce the admistrative burden of Medicaid. We discovered two specific examples€

of how these fiscal problems can affect attempts to reduce Medicaid hassle. In€

Michigan, the Medicaid Manual Makeover project has been delayed, because of the€

resources required to design, publish, and coordinate a new set of manuals. Likewise€

in Missouri, we were told that the physician task force has been inactive over the past€

year because of the State s fiscal problems.€

Even in light of these fiscal constraints, the State responses to Medicaid's hassle€

appear to reflect an awareness that physician concerns have some legitimacy and€

should be addressed. A staff person from one program summaried the comments of€

several others when she told us that "Medicaid has changed its philosophy to improve€

customer servce. If we can t increase fees, at least we can make it as easy as possible€

to do business with us.

, 

€

APPENDIX A€

METIODOWGY 

We conducted this study in two stages: 

1. To identify State intiatives, we reviewed available literature and intervewed staf 

from: 

Physician organiations: The American Medical Association, the American 

College of Obstetricians and Gyecologists, and the American Academy of 

Pediatricians. We intervewed State medical society staff in Alabama 

Arkansas, California, Georgia, Florida, llinois, Iowa, Michigan, Missouri, New 

York, Ohio, Pennsylvania, and Texas. 

State organizations: National Governors' Association , National Conference of 

State Legislatures, American Public Welfare Association, and 

Intergovernental Health Policy Project. 

Health Care Financing Administration, Medicaid Bureau. 

Physician Payment Review Commssion. 

2. To obtain inormation on a particular State s approach to reducing the 

admistrative burden we intervewed staff from the Medicaid program, the fiscal 

agent, and medical society in these States. We also reviewed wrtten material 

provided by the Medicaid agency.€

We examied data gathered in two surveys for an OIG study of State Medicaid 

electronic claims management capacity (OEI-OI-91-00820 Point-of-Servce Claims 

Management Systems for Medicaid " Draft Report, January 1992; OEI-Ol-91-00821 

Electronic Funds Transfer for Medicaid Providers " Draft Report, January 1992). 

These surveys were: 

A mail survey of Medicaid programs, conducted from May to July 1991, to 

which 45 States responded. We received at least partial responses from every 

State except Alaska , Arzona, Arkansas, Delaware, and Ohio. 

Telephone intervews with Medicaid claims management staff in 49 States (all 

except West Virginia) and the District of Columbia. 
, , , 

APPENDIX B€

NOTE 

1. Beth K. Yudkowsky, Jenifer D. C. Cartland, and Samuel S. Flint Pediatrician 

Partcipation in Medicaid: 1978 to 1989 Pediatrcs 85 no. 4 (April 1990): 567-77. 

2. Janet D. Perloff, Phillp R. KJetke, and Kathr M. Neckerman Physicians

Decisions to Lit Medicaid Participation: Determants and Policy Implications 

Joumal of Health Politics, Policy and Law , no. 2 (Summer 1987): 221-35. 

3. Anne Schwartz, David C. Colby, and Anne Lenhard Reisinger Variation in 

Medicaid Physician Fees Health Affairs , no. 1 (Spring 1991): 131-39. 

4. Physician Payment Review Commission Annual Report to Congress 1991, p. 308. 

5. Deborah Lewis-Idema Increasing Provider Partcipation: Strategies for Improving 

State Perinatal Programs The National Governors' Association, 1988. This study 

addresses provider participation in both Medicaid and Maternal-Child Health 

Programs. The author notes that Medicaid agencies tend to place more emphasis on 

low reimbursement as the priary reason for low participation. 

6. American College of Obstetricians and Gynecologists Improving Access to Maternity 

Care: Obstetrc Provider Partcipation in Medicaid Washington, D. , 1991, pp. 14-15. 

7. "Makig Florida s Medicaid Program 'Provider Friendly, State Health Notes 

October 21, 1991. 

8. Statement by Louis W. Sullvan, Secretary of Health and Human Servces on behalf 

of the Forum on Administrative Costs, November 5, 1991. 

9. 56 FR 8353, February 28, 1991. 

10. These surveys provide information for two Office of Inspector General studies: 

Point-of-Servce Claims Management Systems for Medicaid " OEI-01-91-00820, Draft 

Report, January 1992, and "Electronic Funds Transfer for Medicaid Providers " OEI01-91-00821, Draft Report, January 1992. In the notes to this study, we refer to the 

survey documents as "OIG Telephone Survey" for the telephone intervews conducted 

with Medicaid claims management staff, and "OIG mail survey" to describe the mail 

survey of Medicaid programs. 
, 




11. OIG mail survey. The followig States were able to provide data on the 

percentage of physicians' claims that was submitted electronically: Alabama 

Californa, Colorado, Connecticut, District of Columbia, Florida, Georgia, Idaho 

Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maryland, Minnesota 

Mississippi, Montana, North Carolina, North Dakota, New Jersey, Oklahoma, Oregon South Carolina, Tennessee, Texas, Utah, Washington , and Wisconsin. It is liely that 

some other States also accept physician claims electronically, but were unable to break 

out the proportion. Only four States--Nevada, Rhode Island, South Dakota, and 

Wyomig--indicated affrmatively that they did not receive electronically submitted 

physician claims. 

12. Ths figure compares with 87 percent of pharmacy claims, 81 percent of hospital 

claims, and 41 percent of dental claims. The 47 percent figure for physician clais 

does not mean that 47 percent of Medicaid physician providers are using electronic 

media. One would expect that large-volume Medicaid providers account for a 

disproportionate share of electronically submitted claims. 

13. The HCFA-1500 is identical to the American Medical Society's Universal Biling Form. According to the American Public Welfare Association, 33 States use this form for physician claims submitted on paper. (Medicaid Management Information Systems--

Provider Partcipation, Cost Containment Initiatives: State Characteritics Summer 1991.) 

14. OIG mail survey. Twenty States provided usable information on the cost per 

claim and the percent submitted electronically. The mean cost per physician claim 

was $. 83. The cost and percent were highly negatively correlated (r = - 57), that is the

higher the percent of claims submitted electronically, the lower the cost per claim. 

15. Offce of Inspector General Point-of-Servce Claims Management Systems for 

Medicaid " Draft Report, OEI-01-91-00820, January 1992. In 47 States responding to 

this question, the mean payment time for electronic claims is 10 days, compared to 17 days for paper claims. 

16. In our telephone survey, we found that three States--Kansas, Montana, and New 

York--are workig on ways to automate prior authorization, although none is 

operational yet. 

17. "Point-of-Servce Claims Management Systems for Medicaid " p. 11. 

18. . OIG telephone survey. Nineteen States indicated in that survey that they had 

telephone automated voice response systems to veri eligibility: Alaska, Californa 

District of Columbia, Florida, Georgia, Iowa, Kansas, Louisiana, Maryland 

Massachusetts, Minnesota, Missouri, Nebraska, New York, North Dakota, Ohio 

Oregon, Texas, and Wisconsin. In addition, we learned through subsequent intervews 

that Alabama implemented such a system in June 1991, and North Carolina has an 

automated voice response system for general questions, but not eligibilty verication. 
19. Florida has prepared similar guides for other Medicaid providers, including 

hospitals, durable medical equipment and hearing aid suppliers, and nursing homes.