Managing The Risk Beyond Rebates January 14,

Transcription

1 Managing TheRisk Beyond Rebates January 14,

2 Today s Speakers EpsteinBeckerGreen HealthScape Advisors Lynn Shapiro Snyder (202) lsnyder@ebglaw.com Mark Lutes (202) mlutes@ebglaw.com Steve Young (312) syoung@healthscapeadvisors.com Shawn Gilman (202) sgilman@ebglaw.com Clayton Nix (202) cnix@ebglaw.com Chris Rohn (312) crohn@healthscapeadvisors.com 2

3 Today s Objectives Review the risks associated with MLR compliance activities Walk through Subpart D Enforcement; Subpart E Additional Information Requirements; and Subpart F Federal Civil Penalties Identify key requirements, HHS enforcement and civil penalties 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 3

4 Minimum 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 requirements Process must be flexible to incorporate and reflect year over year changes to departmental processes MLR (and other reform issues) create an imperative to revisit cost accounting systems MLR presents an opportunity to revisit medical management activities and processes so that they more closely meet Quality Improvement ( QI ) definitions and demonstrate t and maximize true Return on Investment QI activities may be embedded in administrative functions Preparing for risk adjustment will require enhanced collaboration between departments impacted by MLR (Med Affairs, provider, etc) and other administrative functions Vendor compliance and requirement pass through Activities related to provider relations and contracting strategies may count towards QI Opportunity to shift administrative costs (both QI and non QI) to providers by rewarding achievement of quality outcomes and cost savings 4

5 MLR Approach Health plans should address critical areas impacted by MLR. Rules Assessment FINANCIAL / COMPLIANCE Accounting Readiness Compliance Implementation Integration with Organization Strategy Identification of key areas of focus based on impact of MLR: Medical management HIT Cost accounting Review of current cost center descriptions for QI capture and reporting Establish an allocation methodology for cost centers with partial QI Review of cost accounting systems and methodology Development of auditable QI databases Development of standard and auditready reporting packages Medical management realignment and Return on Investment analysis Product diversification Integration with risk adjustment strategy Integration with rate setting process 5

6 Our Perspective The Pendulum of Risk Associated with MLR Decisions *PPACA Noncompliance Also Risks Exchange Participation MLR Position Decreases the Likelihood of Rebate Potential Liabilities If Position Is Incorrect Include: Amount of Refund Due SEC Actions Civil Monetary Penalties (CMPs) State t and Fd Federal lci Criminal/Civil i l/ciilliability Post 2014 Impacts on Federally Subsidized Premiums Clear Guidance Compliance with MLR Regulations MLR Position Increases the Likelihood of Rebate Potential Liabilities If Position Is Incorrect Include: SEC Actions Corporate Waste Claims of Shareholders (for profit) or State Attorneys General (nonprofit) 6

7 Our Perspective The Risk is More Than the Likelihood of Rb Rebates Regardless of a health plan s current MLR, new minimum MLR requirements create administrative, i ti operating and compliance risks that insurers must address. Risks MLR Status Rebates Unsustainable Cost of Care Transparency/ Consumer Perception Premium Increases Higher State MLR Threshold vs. Fd Federal HHS Civil Penalties SEC Actions Corporate Waste High MLR Low MLR 7

8 MLR Regulation: Detailed Walk Through of Key Subparts Subpart D HHS Enforcement 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 findings Unknown variables: Who will conduct the audits (state vs. OIG vs. CCIIO vs. contractor) Pi Prioritization, ii i scope and frequency Audit approach for multi state plans 8

9 MLR Regulation: Detailed Walk Through of Key Subparts Subpart E Additional Information Requirements HHS and State t right ihtof 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... 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 Includes related entities and consultants/contractors/agents Maintenance of records Current year and six prior years May be extended under specified circumstances (e.g., fraud or similar fault) 9

10 MLR Regulation: Detailed Walk Through of Key Subparts Subpart F Federal Civil Penalties Civil penalties exposure not limited to rebates (e.g., accurately and truthfully represent data, maintain records) Civil penalties not exclusive remedy 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 violation Factors HHS uses to determine amount of penalty Record of prior compliance Gravity of the violation (e.g., frequency, level lof financial impact) Other Considerations Potential FCA risk when Federal funds become available in

11 Risk Management Perspective: Prepare for Government Audits What should be included in the full documentation package to be provided d to government auditors? How often should documentation be updated? What documentation should occur during the government audit as to all information provided? Who should ldbe the liaison i assigned responsibility for continuous support during the audit? 11

12 MLR Compliance Key Roles Within the Health lthplan Preparation Review Audit Finance/Accounting Medical Management Compliance Counsel Primary Support 12

13 Key Process Points Accumulating & Characterizing MLR Data Documenting Analysis & Decisions i Calculating& Paying Rebates Owed Internal Monitoring & Review Preparing for & Completing Government Audits 13

14 Key MLR Process Questions Who is in charge of implementation? 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 preestablished decision tollgates? What are key policies i to have in place to assure compliance? Who needs to be educated? Who is responsible for document retention ti and archiving? i Who is in charge of responding to the government s audit inquiry? Who is in charge of ensuring that t the organization successfully completes the government audit? 14

15 Overriding Concerns Beware of inherent conflicts of interest that may exist inside the health plan Beware of shortcuts in: Decision making; Documentation; and Resources 15

16 Compliance Frameworkto ManageCMP Risk Exposure Activity Subject to Civil Monetary Penalties (CMP) a. Timely file a report concerning the required data by the deadline established by HHS b. Ensure this report is substantially complete or accurate c. Timely and accurately pay rebates owed d. Respond to HHS inquiries as part of an investigation of issuer noncompliance Key Process Points Internal Monitoring & Review Proper process design Proper implementation Internal monitoring & review Calculating & paying rebates owed Documenting analysis & decisions Preparing for & completing government audits Actions to Ensure Compliance Assign filing and tracking responsibilities in Finance/ Accounting Calendar reminders Document policy and process Validate actual process and results Update underlying organizational changes Reconcile payments Review group contract flow through Review process for non current members Implement compliance policy and structured process for handling and responding to HHS inquiries 16

17 Compliance Frameworkto ManageCMP Risk Exposure Activity Subject to Civil Monetary Penalties (CMP) e. Maintain records for periodic auditing of books and records used in compiling data reported to HHS and in calculating and paying rebates f. Allow access to premises, facilities and records pertaining to data reported or rebates calculated and paid g. Comply with corrective actions resulting from audit findings h. Accurately and truthfully represent data, reports or other information that it furnishes to a State or HHS Key Process Points Accumulating and characterizing MLR data Documenting analysis & decisions Internal monitoring & review Preparing for & completing government audits Preparing for & completing government audits Preparing for & completing government audits Accumulating and characterizing MLR data Documenting analysis & decisions Internal monitoring & review Preparing for & completing government audits Actions to Ensure Compliance Perform record retention audits Conduct a mock audit Active CAP project management Post implementation testing Document policy and process Validate actual process and results Update underlying organizational changes 17

18 Best Practices forsuccessful Documentation Narrative that documents all aspects of identifying, segregating, allocating and apportioning each cost element that is used in the MLR calculation, with particular focus on QI activities 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 18

19 Best Practices for Third Party Vendors Reporting Requirements Key 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 regulation Implications Vendors should become familiar with the HHS criteria for QI activities Delegated 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 clients 19

20 A Closer Look at Allocation and Apportionment Product Line Allocation Apportionment QI Allocation MLR eligible product line vs. non eligible product line (e.g., ASO, government, limited benefit, etc) Shared expenses must be apportioned pro rata to the entities incurring the expense Basis for apportionment may include time studies of employee activities, salary ratios, premium ratios (b)(3) QI vs. non QI segregation (including vendor expenses) Specific identification of an expense with an activity will generally be the most accurate method (b)(1) Cost centers that have comingled administration and quality are particularly challenging 20

21 Other 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., )» Chapter 23 of the Medicare Provider Reimbursement Manual, Part I Medicare Advantage (MA) cost plans» 42 C.F.R 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) Stay tuned HHS may adopt reporting obligations similar il 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 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 21

22 Stay Tuned for Additional Guidance NAIC updates and new NAIC advisory process for recommending new QI activities to the Secretary for certification as a QI activity May 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 OIG involvement May be a process for reopening and amending reports previously filed to correct errors in data, apportionment or allocation 22

23 A 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 producing verifiable results and achievements Directed towards individuals enrollees or incurred for the benefit of specified segments of enrollees Grounded in evidence based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical societies, accreditation bodies, government agencies or other nationally recognized health care quality organizations Not be designed primarily to control or contain cost, although they may have cost reducing or cost neutral benefits 23

24 Example of QI Activity Documentation forthe Audit The 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 Measurement Center Description Standard Documentation Code Category Sub Category 0001 UM Prospective review for medical necessity against evidence based medicine Yes 38% Improve Health Outcomes Effective Case management, care management URAC Level of effort adjusted ratio of prospective vs. retrospective reviews serves as basis of apportionment; Document reference # of reviews conducted 24

25 Transparency and Exchanges Other Risks/Issues Statesenacting enacting higher MLR thresholds (e.g., Massachusetts) Treatment of broker compensation Reports 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 Capitation payments to providers: Full direct claim expense or does some portion of such py payments include administrative expenses? PPACA noncompliance also risks exchange participation 25

26 MLR Relationship to Rate Setting and Risk Adjustment Premium Rate Setting Minimum MLR Premium and Net Revenue Determination Risk Adjustment Minimum MLR serves as a floor for health plan profit, while rate setting limitations create a ceiling for future profitability Current and projected MLR are part of HHS reporting requirements to justify premium rate increases Complete and accurate actuarial data and assumptions are required dto not only justify rate increases but also to properly risk adjust 26

27 Questions and Answers HealthScape Advisors 33 W. Monroe St Suite 2100 Chicago, IL Epstein Becker & Green, P.C th St., NW Suite 700 Washington, DC