Do you manually apply the 2% Medicare Sequestration?

Are you manually applying the 2% Medicare Sequestration?

The Budget Control Act of 2011 required mandatory, across the board reductions in federal spending, which has been more commonly referred to as sequestration.

CMS Announces FFS Payment Reductions – March 8, 2013

Due to the sequestration, CMS announced mandatory 2% payment reductions in the Medicare Fee-for-Service (Part A and Part B) Program and would begin directly reducing provider payments for all Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013. The claims payment adjustment is applied to all claims after determining coinsurance, deductibles, and Medicare Secondary Payment adjustments.
Read the Memorandum >>

CMS Announces Medicare Program Payment Reductions – March 22, 2013

Due to the sequestration, CMS announced mandatory 2% premium payment reductions in the Medicare (Part C and D) Program, including payments made to Medicare Advantage Organizations (MAOs), effective April 1, 2013.

Sequestration Effective Date – April 1, 2013

CMS began reducing claims payments to Part A and Part B FFS providers and to Part C and Part D Medicare programs and MAOs. Because the first announcement applied to providers and the second announcement applied to health plans, many Medicare programs erroneously assumed that the March 8 FFS memorandum applied to all their contracted and non-contracted providers as well.

CMS Clarifies Sequestration Payment Reductions – May 1, 2013

CMS issued a memorandum to clarify that the Medicare fee schedule will not be reduced automatically by the 2% sequestration reduction in payments and that they were not imposing sequestration on the MAOs’ reimbursement arrangements with their contracted providers. Furthermore, CMS asserted that the 2% sequestration reduction is not an automatic reduction for an MAO’s providers and that MAOs can only pass along the 2% payment reduction to contracted providers if their reimbursement contracts allow it:

Section 1854(a)(6)(B)(iii) of the Social Security Act prohibits CMS from interfering in the payment arrangements between MAOs and contract providers. The statute specifies that CMS ‘may not require any MA organization to…require a particular price structure for payment under such a contract…’ Thus, whether and how sequestration might affect an MAO’s payments to its contracted providers are governed by the terms of the contract between the MAO and the provider.

However, CMS indicated that there was a possibility for an MAO to pass along the sequestration reduction to their non-contracted providers:

Pursuant to the Medicare regulations at 42 CFR § 422.214, a non-contract provider must accept, as payment in full, the amount that it could collect if the beneficiary were enrolled in the Medicare Fee-for-Service program…MAOs may apply a similar process (as with the FFS payment reductions) to determine the amount owed to a non-contract provider…The minimum payment amount due to the non-contract provider would be equal to the net payment amount reduced by 2 percent due to sequestration.

CMS also noted that:

The requirement for a non-contract provider to accept FFS payment amounts as payment in full serves as a floor on MAOs’ payments to these providers. As a result, it is at the MAOs’ discretion as to whether to impose a reduction due to sequestration for these payments.

Read the Memorandum >>

Most MAOs that we have spoken with have decided not to pass down the sequestration reduction to their providers because their provider contractual agreements are based on the Medicare fee schedule, which hasn’t been reduced. For the MAOs that have passed along the reduction in their provider payments, this has turned into a very cumbersome process.

HCIM has worked with their clients to develop and implement automated workflows that will allow the automated SymKey® application to apply the 2% reduction at final payment processing, which will eliminate this time consuming manual process.

For more information, contact Laurie Kirkland at lkirkland@hcim.com.

About HCIM

Since 2000, HealthCare Information Management, Inc. (HCIM) has delivered expert consulting services and robotic automation tools for small to mid-sized healthcare payer and managed care organizations. Our concierge consulting services include everything from core claims system procurement to go live, including configuration, migration, upgrades, reporting, benefits and fee schedules, user training, and project resourcing. We also offer strategic consulting in the areas of value based payments, population health, medical management, medical loss analysis and recovery, care management, provider contract modeling, data analytics, and business process reengineering/analysis.