An update on Medicare consolidated billing.

What we know so far about this new financial management challenge

According to the Balanced Budget Act of 1997 (BBA 97), Consolidated Billing in nursing homes must be implemented on July 1,1998. The BBA '97 Consolidated Billing provision applies to all skilled nursing facilities (SNFs) and nursing facilities (NFs) with a distinct part that is certified for Medicare. If the facility participates only in Medicaid, or in neither Medicare nor Medicaid, then it will not be affected by Consolidated Billing.

Under Consolidated Billing the facility must submit all Medicare claims for the Part B services and supplies that all its Medicare residents receive, except for certain services specifically excluded by the BBA '97. Medicare will pay the facility, which will then reimburse any external providers or suppliers according to contractual arrangements. The exclusions in the legislation are services and supplies provided by: physicians, physician assistants, nurse practitioners, certified nurse-midwives, qualified psychologists and certified registered nurse anesthetists, as well as home dialysis supplies and services. During 1998 only, the temporarily restored transportation costs of electrocardiogram equipment and test services will be excluded. Everything else, including laboratory services provided to the SNF/NF resident under Medicare Part B, is subject to Consolidated Billing.

Healthcare providers and suppliers have filed comments on the Health Care Financing Administration's draft Program Memorandum published in February. The draft indicates the parameters of the legislation and some of HCFA's preliminary policy decisions and procedural choices. Those positions could change based on HCFA's analysis of the comments. Final policy decisions will be included in the Interim Final Regulation on prospective payment that is due at the end of this month, although a final Program Memorandum could be released earlier.

It is known that a controversial point in the draft Program Memorandum was the inclusion in Consolidated Billing of all hospital outpatient services provided to a SNF/NF Medicare resident. The nursing home industry, as well as the American Hospital Association, opposed this responsibility and argued for a defined list of services in the SNF purview and the limitation of billing to services provided within the SNF.

Consolidated Billing starts on July 1 for all facilities concerned, regardless of their cost-reporting year schedule. It would be wise to work on the assumption that it will start on time. In contrast, the Prospective Payment System (PPS) will start at the beginning of the facility's cost-reporting year starting on or after July 1, 1998. This means that there may be a period when the facility must do Consolidated Billing before PPS kicks in.

The details of how the facility will bill for ancillary services provided to Part A patients during that period are as yet not clear.

Under PPS, payment for Part A patients will be all-inclusive for a patient day, covering all ancillary services the Part A patient may use. For that Part A patient under PPS, there are no ancillary services under Part B for which the facility can bill separately. Since the full PPS payment goes directly to the SNF, it is the SNF's responsibility to pass on payment to the ancillary service suppliers. This function is similar to that of SNFs currently providing ancillary services "under arrangement." The Medicare PPS will not cover Medicare beneficiaries in NFs that do not qualify for a Medicare Part A SNF benefit, but Medicare beneficiaries using Part B benefits would be covered by Consolidated Billing.

The SNF or NF does not have to do the actual billing. It may either contract with a billing service or use its own staff to process the bills for Medicare. The responsibility does remain with the facility, however, to assure that the billing is accurate and complete; service codes are accurate; claims are for the correct amount of money; and services were actually delivered, medically necessary and justified on patient records. In other words, the NF bears full responsibility for fraud and abuse, even if another organization processes the bills.

Medicare's payment for the claimed services will be to the facility only; it will be the facility's responsibility to pass on the money to its Part B suppliers.

HCFA seems to be leaning toward using the Fiscal Intermediary (FI) rather than the Durable Medical Equipment Regional Carrier (DMERC) to process the consolidated bills, but, at press time, there was still debate on that choice. There is concern in the industry that the FIs are not staffed, equipped or experienced enough with Part B benefits to handle the huge increase in claims processing that could hit them in July, and that some phase-in of processing responsibilities might be necessary to avoid claims log jams and cash flow problems among the providers and suppliers.

Payments to the NF will be made according to official fee schedules established by HCFA for each item or service supplied. As noted, it will be the responsibility of the NF to make the payments to the Part B suppliers and the billing service, if one is used. Therefore, the contract arrangements between the SNF/NF and suppliers will be critical, since Medicare's payments to the facility will be limited by the official fee schedules, regardless of actual costs to the providers.

Even at this "late date," many of the details of how Consolidated Billing will be handled are still to be settled. However, there are some things a facility can do to get ready:

* Get to know the Part B suppliers in your area - their reputations for quality, reliability and flexibility. Which provide most of the care to your residents currently? Start thinking about which suppliers you would want to contract with.

* Consider whether you have the staff and data processing capabilities to handle the billing internally or could readily add the capacity. What businesses offering billing services are ones you might want to contract with if you decide not to do the billing internally? Get an idea of the costs of billing internally or going with a commercial vendor.

* Examine existing fee schedules for Part B items and services, as well as the HCFA Common Procedure Coding System (HCPCS) code book to see what details will be required on the claims forms.

* Besides the costs of processing the bills and payments, are there other costs to the facility for providing Part B services and supplies "under arrangement," such as capital expenditures for ancillary services and supplies, that the facility would need to retain from the Medicare fee schedule payments before the facility could pay the suppliers?

* Review patient records to be sure that they adequately document medical necessity for Part B services and their provision. If you haven't tracked the provision of Part B supplies and services to your residents in the past, consider various methods for doing so now.

Dianne Miller Wolman is reimbursement policy specialist for the American Association of Homes and Services for the Aging, Washington, DC.