DEPARTMENT OF HEALTH & HUMAN SERVICES



Department of Health & Human Services

Centers for Medicare & Medicaid Services

7500 Security Boulevard

Baltimore, Maryland 21244-1850

MEMORANDUM

DATE: February 18, 2004

FROM: Director

Financial Services Group

Office of Financial Management

Director

Medicare Contractor Management Group

Center for Medicare Management

SUBJECT: Development of the Fiscal Year (FY) 2005 Medicare Operations Budget and Performance Requirements (BPRs) - Program Management (PM) and Medicare Integrity Program (MIP)--ACTION

TO: Center and Office Directors

Consortium Administrators

REPLY REQUESTED BY MARCH 10, 2004

This memo is to request your preparation and submission of the draft Medicare contractor Budget and Performance Requirements (BPRs) for Medicare contractor ongoing PM and MIP functions.

At this time, we are not asking for your FY 2005 Operating Plan requests for non-ongoing and Investment Technology (IT) projects that should be funded out of the PM and MIP budgets. The request for these projects will be part of the Agency-Wide Operating Plan call letter issued later this year.

Funding Levels

Prepare your draft BPRs using the following funding levels for ongoing PM and MIP functions. Funding levels for the PM functions are held to the FY 2004 funding levels.

FY 2005

Function Funding Levels

Bills/Claims Payment-Ongoing $ 859,065,500

Provider Enrollment $ 57,209,300

Appeals $ 148,639,600

Beneficiary Inquiries $ 146,939,700

Provider Inquires $ 125,326,000

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Consortium Administrators

Provider Reimbursement $ 47,183,600

Provider Communication $ 8,185,700

Participating Physicians $ 5,270,900

Total $1,397,820,300

The total for MIP activities is $720 million, the same level as last year. Base the FY 2005 BPRs using the following ongoing funding levels.

FY 2005

Function Funding Levels

Medical Review $ 136,300,000

Benefit Integrity $ 12,400,000

Payment Safeguard Contractors (MR/BI/LPET) $ 102,089,000

Medicare Secondary Payer $ 99,468,900

Audit $ 182,901,600

Local Provider Education and Training $ 33,625,500

MIP-Provider Communications $ 33,820,000

Total $ 605,305,000

Each Center/Office must use the PM and MIP amounts listed above as the base for requesting any additional funding for ongoing functions. Any requests for an increase in ongoing funding over the FY 2005 funding levels must be accompanied with a justification, the cost estimate of the new requirement, the assumptions used to develop your estimate, and any impact on other ongoing functional areas that may occur because of this new requirement. An example of a new requirement in one area affecting another function may be that an increase in the number of comprehensive medical reviews a contractor is required to perform may result in an increase in the appeals and inquiries areas.

Each Center and Office is responsible for supporting the BPRs and the underlying funding needs to the Financial Management Investment Board (FMIB). You will need to develop the methodology for distributing funding to the Medicare contractors and preparing an allocation for each contractor. The Division of Contractor Budget Management, OFM, will support Center/Office efforts through the development of historical cost/workload data as needed. The funding targets for each contractor are not required with the submission of the draft BPRs, however, they will be required with the submission of the final BPRs in May.

Activity Based Costing (ABC) Initiative

Through the issuance of the FY 2004 BPRs, CMS fully incorporated the principles of ABC into the entire Medicare contractor budget and cost reporting process. ABC is a management system that focuses on the cost of the work activities associated with operating a business in lieu of the standard accounts (e.g., salaries and fringe benefits) in the traditional cost accounting system. Last year, OFM worked closely with the contractor community and other CMS staff to create activity codes for the new functions impacted by ABC in FY 2004, which included Audit,

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Consortium Administrators

Provider Reimbursement, Medicare Secondary Payer, Participating Physicians and Benefit Integrity. We concurrently developed activity dictionaries for each of these new functions, which define each CAFM code and include a description of each activity and the tasks associated with it. We also refined the existing activity dictionaries for the functions that had been rolled out in FY 2003, which included Bills/Claims Payment, Appeals, Inquiries, Local Provider Education and Training, Provider Communications and Provider Enrollment. As such, all Medicare contractor functions are now included under ABC.

When drafting your FY 2005 BPRs, do not add any new ABC activity codes or workload reporting requirements. The CMS required implementation of the ABC costing methodologies has resulted in significant changes in the Medicare contractors’ accounting reporting practices. Continued changes in ABC activity cost reporting codes will be costly to the contractors and hinder their ability to fully assimilate and operationalize the ABC requirements. Also, if the codes remain in a state of flux, it will seriously impact our ability to validate the budget and cost data submitted by the contractors. While changes to reporting codes are not allowed, refining the BPR language and the ABC activity dictionaries’ definitions and tasks is acceptable. We also ask that program leads not direct the contractors in their dictionaries or BPRs narrative to charge costs to another CMS functional area.

Phase 2 of the ABC implementation requires us to analyze the contractor budget and cost data generated through ABC. As such, we have been providing continuous feedback on these analyses to CMS program leads and RO staff to assist in their work with the contractors, and we will do so throughout FY 2005. Questions on any aspect of the continued rollout of ABC project may be directed to Ian Hendricks, the ABC Coordinator, at 410-786-9158.

Narrative Requirements

The BPRs are intended for use primarily as a budget planning document, and not as a substitute for comprehensive instructions (i.e., manual instructions/program memoranda) concerning new and existing technical work requirements. All requirements included in the BPRs must be issued as either a manual instruction or a change request. All components responsible for writing BPRs instructions have received guidance on this effort.

The FY 2005 BPRs must not include any existing or new requirements that have not been issued either as a manual instruction or a change request. If the instructions are currently making their way through the Change Management process and are expected to be released by the time the final BPRs are released in June, the instructions may be included in the draft BPRs as long as you indicate that instructions are forthcoming and the proposed effective date is provided. For these instructions, provide adequate detail to allow each contractor to prepare its budget request.

The draft BPRs should not include operational level detail, but should provide references to manuals or program memoranda. The BPRs should include the required level-of-effort for an

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Consortium Administrators

area of work where the base work is already described in manual instructions or program memoranda and should correspond to the activity codes in the attached 2004cafmcodes.doc file. This file shows the current FY 2004 core Activity Codes for the Medicare contractors.

The narrative for each functional area should also set forth CMS’ goals and priorities for that function for FY 2005.

Executive Summary (Changes from the FY 2004 BPRs)

If you make any significant changes in the FY 2005 BPRs from FY 2004, you will need to provide a brief narrative explanation which will be included in the BPRs Executive Summary document we will send to the contractors.

Also, please remember that any new initiatives that require standard system maintainers to make systems changes must be included on the FY 2005 Model Release Schedule. If standard system changes are needed, please indicate that the change has been included on the FY 2005 Model Release Schedule in your narrative describing new items.

Other Items

As in FY 2004, the Durable Medical Equipment Regional Carriers (DMERC) statement of work will be incorporated by reference in these BPRs.

Contact Person

Please provide the name and telephone number of a contact person within your Office/Center for each functional area (i.e., Appeals, MSP, etc).

BPR Timeline

A copy of the timeline detailing all significant dates in this new process is attached (file 2005bprtimeline.xls).

Submission of Responses

The response to the above should be signed by a Center or Office Director and forwarded simultaneously to Greg Carson through Louis Polise and to Gerald Walters through Jackie Burkindine.

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Consortium Administrators

If you or your staff have any questions, please call Jackie Burkindine on 65737 or Ken Frank on 65659.

___________/s/____________ _____LP for___________

Gerald Walters Gregory G. Carson

Attachments:

2004cafmcodes.xls

2005bprtimeline.xls

| | | | |

|FY 2005 BUDGET AND PERFORMANCE REQUIREMENTS TIMELINE | | | |

| | | | |

|BPR ACTIVITY | |DATE |# of Days |

| | | |

|Issue Call Letter Requesting Draft BPRs from Components |2/18/2004 | |

|Draft BPRs Due to OFM |3/10/2004 |21 |

|OFM Consolidates Draft BPRs Narrative |3/31/2004 |21 |

|Draft BPRs Submitted to MCOB for Review |4/2/2004 |2 |

|MCOB Briefing on Draft BPRs |4/8/2004 |6 |

|Draft BPRs Forwarded to Regional Offices for Review |4/13/2004 |5 |

|RO and/or Contractor Comments on Draft Due to OFM |5/4/2004 |21 |

|BPRs Workgroup Convenes |4/22/2004-5/6/2004 |

|Final BPRs and Components' Responses to RO/Contractor Comments on Draft BPRs Due to OFM | |5/27/2004 |23 |

|Final BPRs Submitted to FMIB for Approval and CMM/OFM Signature | |6/10/2004 |14 |

|Medicare Contractors Receive Final BPRs/Regional Offices Receive Final BPRs and Funding Targets | |6/16/2004 |6 |

|Contractors Submit Budget Requests |7/28/2004 |42 |

|Regional Offices Submit Recommendations |8/25/2004 |28 |

|RO Recommendations Submitted to Components and to FMIB for Approval as Part of the FY 2005 Operating | |9/1/2004 |7 |

|Plan | | | |

|CMS Components Submit CO Funding Distributions to OFM |9/17/2004 |16 |

|Issue FOPs/NOBAs or Continuing Resolution Funding if Necessary | |10/1/2004 |14 |

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