Published 9/1/2008
Steve Gillies; Sarah Gretch

Coping with Medicare Advantage fee-for-service plans

By Steve Gillies and Sarah Gretch

From enrollment to reimbursement: Tips you can use

Medicare Advantage (MA) plans are second-generation “Medicare + Choice” plans, which were created under the Balanced Budget Act of 1997. This act gave Medicare beneficiaries the option to receive their Medicare benefits through private health insurance plans (Part C), instead of through the original Medicare plan (Parts A and B).

Passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 changed the compensation and business practices for insurers that offer these plans, resulting in three types of MA plans—health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee-for-service (PFFS) plans.

Medical practices must make a conscious decision and sign a contract to join a Medicare HMO or PPO plan. MA-PFFS plans, however, do not require executed contracts, which has given rise to numerous claim processing challenges. Furthermore, these plans have experienced considerable and very rapid growth—from 23,000 enrollees in 2003 to about 2,250,000 enrollees today (Fig. 1).

For these reasons, orthopaedic practices must take steps now to reduce confusion, operational costs, and payment delays. In particular, they should focus on the following four areas of concern: participation, patient confusion, administrative issues, and reimbursement issues.

Participation issues: You’re in before you know it
Many orthopaedic practices may be surprised to discover that they participate in an MA-PFFS plan. Under current regulations, providers are considered as “deemed” to participate if they render services to a patient and are aware at the time of service that the patient is covered by an MA-PFFS plan. The concept of deeming allows a sponsoring plan to treat physicians or hospitals that provide service to PFFS enrollees as though they have a contract—even though no document was signed.

A physician is considered “nondeemed” when the provider has no knowledge prior to rendering service that the patient belongs to a PFFS plan. “Nondeeming” commonly occurs in emergency situations when checking a patient’s insurance is of secondary importance to providing care. After the emergency has passed, the sponsoring organization (that is, the MA-PFFS plan) is responsible for reimbursing the provider or hospital the full amount that would have been payable under traditional Medicare—less any deductible, copayment, or coinsurance costs.

Another way practices can unknowingly be drawn into PFFS plans is through “all-products” clauses, which require providers to accept all of the products offered by the insurer. A practice that contracts with an MA-HMO plan offered by such a carrier would be required to participate in the carrier’s PFFS offerings as well. Many states have regulations about whether insurers can include “all-products” clauses in contracts; check with your state’s medical association for advice.

Patients are confused—Don’t you be as well
Many companies use aggressive tactics to sell MA-PFFS plans. According to AARP, insurance commissioners in at least 37 states reported that Medicare beneficiaries have been victims of illegal or unethical hard-sell tactics. In a recent survey by the American Medical Association, 84 percent of physicians reported that patients had difficulty understanding how their Medicare Advantage plans work.

What many enrollees may not realize is that in signing up for Medicare Advantage, they’re actually opting out of traditional Medicare. Patients may think that Medicare Part C is a supplemental plan or drug coverage (Medicare Part D). Additionally, many MA enrollees may not realize that Medigap coverage does not apply to patients with PFFS plans.

Of the 118 orthopaedic practices that responded to a July 2008 survey conducted by KarenZupko & Associates (KZA), 48 percent reported difficulty in determining type of coverage by looking at the patient’s benefit card. Nearly 9 out of 10 reported that patients continue to present their Medicare Part B benefit cards even after they’ve enrolled in an MA-PFFS plan (Fig. 2).

“Frequently patients will present either their traditional Medicare card or both cards. Our front desk then has to determine if the benefit card is for a Medicare Advantage plan or a Medicare supplementary plan,” says Brian Asmussen, director of the Spine Center and University of Texas Southwestern Medical Center.

To complicate matters further, standardized benefit cards are not required for MA plans, making enrollees difficult to identify. Because MA-PFFS copayments and coinsurance provisions differ from traditional Medicare Part B provisions—and from other MA-PFFS plans—a practice may not be able to collect at the time of service.

The administrative burden
In addition to these difficulties, MA-PFFS plans present other administrative burdens. Although they are supposed to pay according to the participating fee schedule or the limiting charge, many practices report receiving payments that do not adhere to Medicare rates (
Fig. 3).

The differences in copayments and coinsurance rates mean that the practice must manage multiple sets of terms and conditions for each plan. To handle these increased responsibilities, a practice may need additional human resources, resulting in increased overhead expenses. One orthopaedic practice in Indiana has had to hire two additional employees just to manage the multiplicity of MA plans. Another practice in Arizona quit accepting MA-PFFS enrollees as patients when they had to track 300 different PFFS plans.

MA-PFFS plans may request medical records from a practice for risk adjustment purposes. Manag­ing “risk adjustment” is seemingly one reason why PFFS plans receive—on average—119 percent of the Medicare allowable payment from the Centers for Medicare and Medicaid Services (CMS). In the KZA survey, 15 percent of practices reported receiving requests for medical records from MA organizations and had to copy large portions of patient charts. Although this practice, mandated by CMS, was established to validate the plan’s risk adjustment data and ensure proper payments, it places significant administrative burden on practice staffs.

Payments—neither timely nor accurate?
If a practice fails to identify a PFFS payor and submits the claim to Medicare Part B, the claim will be subjected to a lengthy review process, and payment will ultimately be denied. The claim will need to be resubmitted to the appropriate plan, which results in a significant delay in reimbursement. Practices also complain that MA PFFS plans frequently delay and underpay even claims that are submitted correctly.

Unlike traditional Medicare, Medicare Advantage plans do not have a prompt payment guideline. Although nondeemed providers for a PFFS plan must receive payment according to the traditional Medicare guidelines—95 percent of all clean claims must be paid within 30 days—all other Medicare Advantage plans only require that a payment timeframe be specified in the contract. In the KZA survey, 55 percent of orthopaedic practices that had experience with MA-PFFS plans reported that these plans reimburse slower than traditional Medicare (Fig. 4). Practices noted payments as late as 120 days after claims submission and expressed frustration at the difficulty they experienced in trying to find out the status of their claims.

In a recent survey by the Medical Group Management Association, more than half of the respondents reported receiving less from Medicare Advantage organizations than they would have received under traditional Medicare. Additionally, even though all types of Medicare Advantage plans—PFFS plans included—are required to cover all services covered by traditional Medicare, 14 percent of KZA survey respondents reported that a PFFS plan denied payment for a Medicare-covered service.

What you should do
To manage MA-PFFS plans in your practice, first make sure that your staff is properly identifying PFFS plan enrollees before you see them. Your front desk staff should ask questions that will cut through patient confusion.

If the response to “Are you enrolled in a Medicare Advantage plan?” is “No,” train your staff to ask, “Have you recently enrolled in any new medical insurance plans?” or “Can you tell me all of the medical insurance plans you are enrolled in?” These two alternative questions will help your staff obtain accurate information and alert them of a patient’s PFFS plan status.

You should treat PFFS patients on a case-by-case, visit-by-visit basis. Providing services to a PFFS enrollee one time does not mean you must provide services in subsequent visits or for other patients enrolled in the same plan.

If you choose not to accept PFFS plans, make sure that physicians and staff members inform “coming-of-age” patients of the policy. Also teach your front desk staff how to deal with patients covered by these plans. For example, they could suggest that the patient switch back to traditional Medicare or join a Medicare Advantage HMO or PPO plan that you do accept.

If your practice decides to accept PFFS enrollees, take the following four steps to properly manage the plans:

Track each PFFS plan on your payor mix report. Separate MA-PFFS plans so they appear as unique payors on payor mix reports. Tracking enables you to identify any trends or divergences in payment and coverage of services and to address them promptly. For example, you should know what percentage of your accounts receivables relate to Medicare Advantage and MA-PFFS plans, whether the number is growing, and which payor is the main culprit of untimely payment.

Establish a relationship with each Medicare Advantage organization. Knowing who to contact and how to reach him or her is important, especially for an MA-PFFS plan. Familiarity with each company’s contacts and procedures will enable you to get information quickly, improve practice efficiency, and let staff spend more time tending to patients.

Be familiar with the rules of traditional Medicare. Keep current with the rules of traditional Medicare and any changes that have been adopted. You can rely on Code-X from the AAOS to keep you up-to-date. Most coverage changes start with traditional Medicare and trickle down to Medicare Advantage plans. If you notice changes in traditional Medicare, find out whether they have been adopted by Medicare Advantage programs.

Know the appeals process for each PFFS plan. Each Medicare Advantage plan has its own protocol for filing an appeal. Whom to call, what appeals will be accepted, and why claims are typically denied will differ from carrier to carrier. Make sure your staff is familiar with each plan’s procedures for submitting and tracking appeals.

In summary, orthopaedic surgeons should pay careful attention to Medicare Advantage plans by monitoring which patients are participating in which plans as well as which plans are paying claims correctly and in a timely manner. If an office determines that plans are not complying with federal and state laws, it should proactively file a complaint with the appropriate agency.

Steve Gillies is a research analyst, and Sarah Gretch is a marketing and research intern with KarenZupko&Associates.

The problems with Medicare Advantage
In July 2008, KarenZupko & Associates surveyed a range of physician practices on the administrative problems they face with Medicare Advantage physician fee-for-service (MA-PFFS) plans. Of the 239 respondents, 118 were orthopaedic practices; more than one third of these were small (2 to 3 physicians) practices. The survey’s respondents reported the following problems:

  • 17 percent did not know how many MA-PFFS plans they had encountered among patients.
  • 48 percent thought that their staff members were not well-trained to distinguish between different types of Medicare coverage.
  • 80 percent identified PFFS beneficiaries by checking their insurance cards.
  • 88 percent encountered patients that continue to present their traditional Medicare card after being enrolled in a Medicare Advantage PFFS plan.
  • 20 percent were denied payment for a Medicare-covered service by an MA-PFFS plan.
  • 31 percent did not know what percent of their Medicare accounts receivable were composed of patients covered by MA-PFFS plans.