Medicare: Improvements Needed in Provider Communications and Contracting Procedures

Statement of Leslie G. Aronovitz
Director, Health Care Program
Administration and Integrity Issues

Madam Chairman and Members of the Subcommittee:

I am pleased to be here today as you discuss modifications to the Medicare program proposed in the Medicare Regulatory and Contracting Reform Act (MRCRA) of 2001. Providers have raised concerns that while the Medicare program has become increasingly complex, the education and outreach services needed to comply with Medicare coverage and billing policies are inadequate. Others have raised questions about whether the program could benefit from changes to the way Medicare's claims processing contractors are selected and paid for the functions they perform. To address some of these issues, Members of this Subcommittee and others in the Congress have introduced legislation, and the Administration has proposed several new initiatives.

We are currently conducting, or have recently completed, work on several operational and structural elements of the Medicare program that frustrate providers and hamper effective management. Specifically, we are reviewing how the Centers for Medicare and Medicaid Services (CMS) works with its contractors to facilitate communications with Medicare providers. We have also evaluated ways in which CMS contracting for claims payment and provider and beneficiary service activities could be modified to promote better performance. Accordingly, you asked us to focus our remarks today on our findings related to (1) Medicare provider education and communications, and (2) Medicare contracting for claims administration services. Several of the reforms outlined in the MRCRA proposal address aspects of both issues.

In summary, our ongoing work for the Subcommittee shows that physicians often do not receive complete, accurate, clear, and timely guidance on Medicare billing and payment policies. We found shortcomings in print, electronic, and telephone communications that Medicare contractors use to provide information to physicians and respond to their questions. To substantially improve Medicare contractors' provider communications, we believe that CMS needs to develop a more centralized and coordinated approach. This is consistent with several provisions in MRCRA, which require CMS to centrally coordinate contractors' provider education activities, establish communications performance standards, appoint a Medicare Provider Ombudsman, and create a demonstration program to offer technical assistance to small providers. MRCRA would also require contractors to monitor the accuracy, consistency, and timeliness of the information they provide.

Further, our analysis of Medicare contracting reform issues has found that the rules governing CMS contracts with its claims processors lack incentives for efficient operations. Medicare contractors are chosen without full and open competition from among health insurance companies, rather than from a broad universe of potentially qualified entities. In addition, CMS almost always uses cost-only contracts, which pay contractors for costs incurred but generally do not offer any type of performance incentives. MRCRA would broaden CMS authority so that entities of various types would be able to compete for claims administration contracts and their payment would reflect the quality of the services they provide.