managing the risk beyond rebates...segregating, allocating and apportioning each cost element that...
TRANSCRIPT
Managing The Risk Beyond RebatesManaging The Risk Beyond RebatesJanuary 14, 2011
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Today’s SpeakersToday s Speakers EpsteinBeckerGreen
www.ebglaw.comHealthScape Advisors
www.healthscapeadvisors.comwww.ebglaw.com www.healthscapeadvisors.com
Steve Young(312) 256‐8612
Mark Lutes(202) 861‐1824
Lynn Shapiro Snyder(202) 861‐1806
[email protected] [email protected]@ebglaw.com
Chris RohnClayton NixShawn Gilman
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(312) 256‐8614 [email protected]
(202) 861‐[email protected]
(202) 861‐[email protected]
Today’s ObjectivesToday s Objectives• Review the risks associated with MLR compliance activities• Walk through Subpart D Enforcement; Subpart E• Walk through Subpart D Enforcement; Subpart E Additional Information Requirements; and Subpart F Federal Civil PenaltiesFederal Civil Penalties
• Identify key requirements, HHS enforcement and civil penalties p
• Discuss the role of counsel, compliance, finance and others to address requirements and risks
• Identify best practices that health plans should implement to mitigate these risks
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MinimumMLR Impacts All Aspects of Health Plan OperationsMinimum MLR Impacts All Aspects of Health Plan Operations
Accounting & Finance
Medical Management
Other Administrative
Provider Relations/ Contracting
• Need to develop a justifiable and traceable documentation process in support of audit
• MLR presents an opportunity to revisit medical management activities and processes
• QI activities may be embedded in administrative functions
• Preparing for risk
• Activities related to provider relations and contracting strategies may count towards QI
requirements
• Process must be flexible to incorporate and reflect year‐over‐year changes
so that they more closely meet Quality Improvement (“QI”) definitions and d t t d
• Preparing for risk adjustment will require enhanced collaboration between departments impacted by MLR (Med
y
• Opportunity to shift administrative costs (both QI and non‐QI) to providers by rewarding
to departmental processes
• MLR (and other reform issues) create an
demonstrate and maximize true Return on Investment
p y (Affairs, provider, etc) and other administrative functions
• Vendor compliance and
p y gachievement of quality outcomes and cost savings
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imperative to revisit cost accounting systems
prequirement pass through
MLR ApproachMLR ApproachHealth plans should address critical areas impacted by MLR.
FINANCIAL / COMPLIANCEIntegration with
Organization StrategyAccounting ReadinessRules Assessment Compliance
Implementation
• Review of current cost center descriptions for QI capture and reporting
• Development of auditable QI databases
• Development of
• Identification of key areas of focus based on impact of MLR:
‒Medical
• Medical management re‐alignment and Return on Investment analysis
• Product diversification• Establish an allocation methodology for cost centers with partial QI
• Review of cost
standard and audit‐ready reporting packages
ed camanagement
‒HIT‒ Cost accounting
• Integration with risk adjustment strategy
• Integration with rate setting process
accounting systems and methodology
setting process
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Our Perspectiveh d l f k d hThe Pendulum of Risk Associated with MLR Decisions
*PPACA Noncompliance Also Risks Exchange
Participation
MLR Position Decreases the
MLR Position Increases the
Likelihood of Rebate
Likelihood of Rebate
Potential Liabilities If Position Is
Potential Liabilities If Position Is
Clear Guidance
Incorrect Include:
• Amount of Refund Due• SEC Actions• Civil Monetary Penalties (CMPs)
St t d F d l C i i l/Ci il Li bilit
Incorrect Include:• SEC Actions• Corporate Waste Claims
of Shareholders (for profit) or State Attorneys
Compliance with MLR Regulations
• State and Federal Criminal/Civil Liability• Post‐2014 Impacts on Federally
Subsidized Premiums
General (nonprofit)
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Our PerspectiveTh Ri k i M Th h Lik lih d f R bThe Risk is More Than the Likelihood of Rebates
Regardless of a health plan’s current MLR, new minimum MLR i t t d i i t ti ti d lirequirements create administrative, operating and compliance
risks that insurers must address.
MLR Status
Risks
RebatesUnsustainable Cost of Care
Transparency/ Consumer Perception
Premium Increases
Higher State MLR
Threshold vs. F d l
HHS Civil Penalties SEC
ActionsCorporate WastePerception Federal
High MLR
Low MLR
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MLR Regulation: Detailed Walk Through of Key SubpartsMLR Regulation: Detailed Walk Through of Key Subparts Subpart D – HHS Enforcement
E f t f MLR ti d b t i t• Enforcement of MLR reporting and rebate requirements– Audits conducted by HHS
» Rebates – accuracy of calculations and timeliness of payments» MLR data – validity of reported expense and premium data, including validity of allocations of expenses and reported QI activities
» Actions include order to pay rebates and corrective action
– HHS may accept a State’s audit if it meets HHS’ requirements– No explicit appeal rights after “final audit findings” – Public release of audit findingsg
• Unknown variables:– Who will conduct the audits (state vs. OIG vs. CCIIO vs. contractor)
P i i i i d f– Prioritization, scope and frequency– Audit approach for multi‐state plans
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MLR Regulation: Detailed Walk Through of Key SubpartsMLR Regulation: Detailed Walk Through of Key SubpartsSubpart E – Additional Information Requirements
HHS d St t i ht f t f iliti d d• HHS and State right of access to facilities and records– Purpose of access is to “evaluate, through inspection, audit or other means,
compliance with requirements for reporting and calculation of data submitted d h l d f b ”. . . and the timeliness and accuracy of rebate payments”
– All administrative and financial books and records used in» Compiling data reported and providing rebates» Determining what data to report and rebates to provide
– Electronically stored information– Evidence of accounting procedures and practices g p p– Includes related entities and consultants/contractors/agents
• Maintenance of recordsC d i i– Current year and six prior years
– May be extended under specified circumstances (e.g., fraud or similar fault)9
MLR Regulation: Detailed Walk Through of Key SubpartsMLR Regulation: Detailed Walk Through of Key SubpartsSubpart F – Federal Civil Penalties• Civil penalties exposure not limited to rebates (e.g., accurately and truthfully p p ( g , y y
represent data, maintain records)– Civil penalties not exclusive remedy
• No scienter – liability occurs when company “fails to comply” with the specified• No scienter liability occurs when company fails to comply with the specified duties
• Penalty amount not to exceed $100 per day, per entity, per individual affected by the violationby the violation
• Factors HHS uses to determine amount of penalty– Record of prior compliance
f h l ( f l l f f l )– Gravity of the violation (e.g., frequency, level of financial impact)• Other Considerations – Potential FCA risk when Federal funds become available
in 2014
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Risk Management Perspective: Prepare for Government AuditsRisk Management Perspective: Prepare for Government Audits
• What should be included in the full documentation k b id d di ?package to be provided to government auditors?
• How often should documentation be updated?• What documentation should occur during the government audit as to all information provided?Wh h ld b h li i i d ibili f• Who should be the liaison assigned responsibility for continuous support during the audit?
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MLR Compliance K R l Withi th H lth PlKey Roles Within the Health Plan
Preparation Review AuditPreparation Review Audit
Finance/Accounting
MedicalManagement
Compliance
Counsel Counsel
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PrimarySupport
Key Process PointsKey Process Points• Accumulating & Characterizing MLR DataD ti A l i & D i i• Documenting Analysis & Decisions
• Calculating & Paying Rebates Owedl• Internal Monitoring & Review
• Preparing for & Completing Government Audits
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Key MLR Process QuestionsKey MLR Process Questions• Who is in charge of implementation?
• How are decisions made?How are decisions made?
– When is it sufficient to rely on internal guidance only? When is advice from outside counsel and/or consultants a best practice?
– Who is responsible for monitoring compliance with pre‐established decision tollgates?
Wh k li i h i l li ?• What are key policies to have in place to assure compliance?
• Who needs to be educated?
Wh i ibl f d t t ti d hi i ?• Who is responsible for document retention and archiving?
• Who is in charge of responding to the government’s audit inquiry?
Wh i i h f i th t th i ti f ll• Who is in charge of ensuring that the organization successfully completes the government audit?
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Overriding ConcernsOverriding Concerns
• Beware of inherent conflicts of interest that may exist inside the health plan
• Beware of shortcuts in:Beware of shortcuts in:– Decision‐making;– Documentation; andDocumentation; and– Resources
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Compliance Framework to Manage CMP Risk ExposureActivity Subject to
Civil Monetary Penalties(CMP)
Key Process Points Actions to Ensure Compliance
Compliance Framework to Manage CMP Risk Exposure
(CMP)a. Timely file a report
concerning the required data by the deadline established by HHS
Internal Monitoring & Review Assign filing and tracking responsibilities in Finance/ Accounting
Calendar remindersestablished by HHS Calendar remindersb. Ensure this report is
“substantially complete or accurate”
Proper process design Proper implementation Internal monitoring & review
Document policy and process Validate actual process and results Update underlying organizational
changeschangesc. Timely and accurately pay
rebates owed Calculating & paying rebates
owed Documenting analysis &
decisions
Reconcile payments Review group contract flow
through Review process for non‐currentdecisions Review process for non current
membersd. Respond to HHS inquiries as
part of an investigation of issuer noncompliance
Preparing for & completing government audits
Implement compliance policy and structured process for handling and responding to HHS inquiriesissuer noncompliance responding to HHS inquiries
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Compliance Framework to Manage CMP Risk ExposureActivity Subject to
Civil Monetary Penalties(CMP)
Key Process Points Actions to Ensure Compliance
Compliance Framework to Manage CMP Risk Exposure
(CMP)e. Maintain records for periodic
auditing of books and records used in compiling data reported to HHS and in calculating and
Accumulating and characterizing MLR data
Documenting analysis & decisions Internal monitoring & review
Perform record retention audits
paying rebates Preparing for & completing government audits
f. Allow access to premises, facilities and records pertaining
d d b
Preparing for & completing government audits
Conduct a mock audit
to data reported or rebates calculated and paid
g. Comply with corrective actions resulting from audit findings
Preparing for & completing government audits
Active CAP project management
Post implementation testing Post implementation testingh. Accurately and truthfully
represent data, reports or other information that it furnishes to a State or HHS
Accumulating and characterizing MLR data
Documenting analysis & decisions Internal monitoring & review
Document policy and process Validate actual process and
results Update underlying g
Preparing for & completing government audits
p y gorganizational changes
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Best Practices for Successful DocumentationBest Practices for Successful Documentation• Narrative that documents all aspects of identifying, segregating allocating and apportioning each cost elementsegregating, allocating and apportioning each cost element that is used in the MLR calculation, with particular focus on QI activitiesQ
• Detailed audit trail of elements from source accounting records
• Validation that actual approach agrees with documentation on a recurring basis
• Appropriate archiving of such critical documentation, including redundancy
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Best Practices for Third Party Vendors Reporting RequirementsBest Practices for Third Party Vendors Reporting RequirementsKey Issues• Vendors generally not included in incurred claims (PBM, behavioral, chiropractic,
and imaging specifically noted)– Amounts paid to third party vendors for network development, administrative fees,
claims processing, and utilization management are expressly not allowed to be included in the incurred claims category for MLR reporting
• Plan is ultimately responsible for any vendor cost categorized as QI activities• Capitated vendor payments remain a “grey area” in the MLR regulationImplications• Vendors should become familiar with the HHS’ criteria for QI activities• Delegated vendors may need to segregate their fees to help their health planDelegated vendors may need to segregate their fees to help their health plan
clients with MLR requirements• Vendors should be prepared to retain their records in a manner consistent with the
record‐keeping requirements of their health plan clientsrecord keeping requirements of their health plan clients
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A Closer Look at Allocation and ApportionmentA Closer Look at Allocation and Apportionment
Product Line Allocation Apportionment QI AllocationProduct Line Allocation
• MLR eligible product line vs. non‐eligible product
Apportionment
• Shared expenses must be apportioned pro rata
h
QI Allocation
• QI vs. non‐QI segregation (including
line (e.g., ASO, government, limited benefit, etc)
to the entities incurring the expense
• Basis for apportionment may include time studies
vendor expenses)• “Specific identification of an expense with an activity will generally beof employee activities,
salary ratios, premium ratios § 158.70(b)(3)
activity…will generally be the most accurate method” § 158.70(b)(1)
• Cost centers that have comingled administration and quality are particularly challenging
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challenging
Other Contexts for Allocation/ApportionmentOther Contexts for Allocation/Apportionment• Other contexts in which allocation and apportionment principles are used include:
– Medicare Part A cost reporting principles for hospitals » 42 C.F.R. Parts 412 and 413 (see, e.g., § 413.53)» Chapter 23 of the Medicare Provider Reimbursement Manual, Part I
– Medicare Advantage (MA) cost plans» 42 C.F.R. § 417.536 specifies that MA cost plans are subject to the “principles” delineated in 42 C.F.R. Parts 412 and 413
– Medicare/HHS Government Contractors (FAR, CAS)St t d HHS d t ti bli ti i il t th d i• Stay tuned – HHS may adopt reporting obligations similar to those used in Medicare Part A cost reporting – Any changes in statistical allocation basis for a particular cost center and/or
the order in which the cost centers are allocated must be reported to thethe order in which the cost centers are allocated must be reported to the Medicare contractor 90 days prior to the end of the relevant cost reporting period.
– Medicare contractor has 60 days from receipt to make a decision. Otherwise, the change in the statistical allocation basis automatically goes into effect
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Stay Tuned for Additional GuidanceStay Tuned for Additional Guidance• NAIC updates and new NAIC advisory process for recommending new QI activities to the Secretary forrecommending new QI activities to the Secretary for certification as a QI activity
• May be a similar process for data analysis questions thatMay be a similar process for data analysis questions that might be handled by CCIIO, States, or CCIIO contractor
• Movement of CCIIO to CMS could lead to greater OIGMovement of CCIIO to CMS could lead to greater OIG involvement
• May be a process for reopening and amending reports y p p g g ppreviously filed to correct errors in data, apportionment or allocation
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A Closer Look at Documentation Requirements: QI ActivitiesA Closer Look at Documentation Requirements: QI Activities
A “non‐claims expense” can be accounted for as QI activity if it meets all of the following requirements:
• Designed to improve health quality• Designed to increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producingthat are capable of being objectively measured and of producing verifiable results and achievements
• Directed towards individuals enrollees or incurred for the benefit of f f llspecified segments of enrollees
• Grounded in evidence‐based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical societies, p y g paccreditation bodies, government agencies or other nationally recognized health care quality organizations
• Not be designed primarily to control or contain cost although they may
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Not be designed primarily to control or contain cost, although they may have cost reducing or cost neutral benefits
Example of QI Activity Documentation for the AuditExample of QI Activity Documentation for the AuditThe following snapshot is an example of how health plans can document their QI activities and associated expenses in a manner than is consistent with HHS’ requirements.
Cost Cost Center Activity QI? QI% HHS QI Activity Definition External Supporting MeasurementCenter Code
Description Standard DocumentationCategory Sub‐Category
0001 UM Prospective review for medical
Yes 38% ImproveHealth Outcomes
Effective Case management,care
URAC Level of effort adjusted ratio of prospective vs
# of reviews conducted
medical necessity against evidence based medicine
Outcomes care management
prospective vs. retrospective reviews serves as basis of apportionment; Document reference
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Other Risks/IssuesOther Risks/Issues• Transparency and Exchanges• States enacting higher MLR thresholds (e g Massachusetts)• States enacting higher MLR thresholds (e.g., Massachusetts)• Treatment of broker compensation
– Reports of up to 50% cuts to broker commissionsReports of up to 50% cuts to broker commissions• Congressional challenge to the MLR regulation under the
Congressional Review Act• State applications for adjustment to MLR requirements in the
individual market (e.g., Maine)• Rebates related to Federally subsidized premiums• Rebates related to Federally subsidized premiums• Capitation payments to providers: Full direct claim expense or does
some portion of such payments include administrative expenses?p p y p• PPACA noncompliance also risks exchange participation
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MLR Relationship to Rate Setting and Risk AdjustmentMLR Relationship to Rate Setting and Risk Adjustment•Minimum MLR serves as a “floor” for health plan profit,
Minimum while rate setting limitations create a “ceiling” for future profitability
Minimum MLR
•Current and projected MLR are part of HHS reporting requirements to justify
i t iPremium and
premium rate increases•Complete and accurate actuarial data and
ti i d tRisk
Net Revenue Determination
assumptions are required to not only justify rate increases but also to properly risk adjust
Risk Adjustment
Premium Rate Setting
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adjust
Questions and AnswersHealthScape Advisors
33 W. Monroe StSuite 2100
Chicago, IL 60603
Epstein Becker & Green, P.C.1227 25th St., NW
Suite 700Washington, DC 20037Chicago, IL 60603
312.256.8600
Washington, DC 20037
202.861.0900
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