Medicare to Purchase New Claims Processing System

August 1, 1998

The fact that the Health Care Financing Administration (HCFA) canceled the July 1 start date for implementation of the much-maligned new evaluation and management (E/M) documentation guidelines does not mean that Medicare is relaxing its efforts to root out erroneous physician billing of Medicare.

The fact that the Health Care Financing Administration (HCFA) canceled the July 1 start date for implementation of the much-maligned new evaluation and management (E/M) documentation guidelines does not mean that Medicare is relaxing its efforts to root out erroneous physician billing of Medicare.

Evidence of Medicare's intensifying "hold-their-feet-to-the-fire" attitude toward physicians is reflected in the announcement that Medicare has reversed the field and decided to purchase an expanded claims processing system from a commercial vendor, rather than expanding its own proprietary system, the Correct Coding Initiative (CCI), which was put in place in 1996.

That decision, announced formally by HCFA Administrator Nancy-Ann Min DeParle in May, means two things. First, Medicare will be utilizing many more "edits" in its claim processing system. Edits are performed by a claims processing system to make sure physicians are paid only for Medicare-sanctioned procedures and at Medicare-sanctioned rates. Second, Medicare will not allow physicians to review those edits before they are deployed, reversing a position DeParle had previously held.

"We may not be able to release commercial edits themselves for public review because of ownership issues and the need to stay ahead of unscrupulous providers," DeParle told a House subcommittee in May. "There may be advantages to nondisclosure, in that it could help deter physicians from gaming the Medicare anti-fraud and abuse system.

"At the very least, we will make the underlying coverage policy available to anyone, and provide the coverage policy rationale when any claims denial is based on a commercial edit," she added.

Using the CCI, which contains 93,000 computer edits, Medicare saved $260 million in fiscal 1997. But an Iowa test of a system called "ClaimCheck," owned by GMIS Product Group, demonstrated that Medicare could have saved an additional $465 million nationally. However, the software used by ClaimCheck was found to be inadequate, so there is no chance the system could be used nationally by Medicare.

After the Iowa test, DeParle initially decided that Medicare should develop its own new edits, based on what it learned from ClaimCheck, and have those edits reviewed by the medical community, as they did with the CCI edits. The General Accounting Office, in a report released in May, criticized DeParle for that approach, saying that considering the fact that the government could be saving $465 million a year, the time that it may take to develop new edits is unacceptable. DeParle then decided to put out a bid for a commercial system, whose edits cannot be reviewed by physicians.

The new edits, when deployed, will undoubtedly add a new level of scrutiny to E/M claims. DeParle said in April that she was postponing the July 1 deadline for implementation of the new documentation guidelines until those guidelines could be revised to satisfy medical groups- SB