09/29/00

TO: Medicare+Choice Physicians and Non-Physician Practitioners

SUBJECT: Medicare+Choice Physician Encounter Data

I am writing to alert you to the physician encounter data requirements for Medicare+Choice Organizations (M+CO) beginning October 1, 2000. Each M+CO is required to begin submitting physician encounter data to the Health Care Financing Administration (HCFA) for dates of service beginning on October 1. October 1, 2000 through June 30, 2001 is a start-up period. During this period, M+COs and physicians are expected to identify and resolve any difficulties in obtaining and submitting encounter data to HCFA. The M+COs with which you contract may be contacting you soon, if they haven’t already, about these encounter data requirements. If you contract with more than one M+CO, you may receive duplicate copies of this letter.

HCFA was required under the Balanced Budget Act of 1997 to implement a risk-adjustment methodology by January 1, 2000. Risk adjustment, which incorporates health status factors into the Medicare+Choice payment system, benefits M+COs, physicians and beneficiaries. First, risk adjustment improves the accuracy and fairness of payments. M+COs with sicker enrollees receive higher payments than those with a healthier population. Second, risk adjusted payments provide health status information that can be used to match beneficiaries health care needs with the appropriate level of health care services.

HCFA has taken the first step in implementing a risk-adjustment payment system in which the M+COs are collecting and submitting inpatient hospital data only. Under the current risk-adjustment model (the Principal Inpatient Diagnostic Cost Group or PIP-DCG model), M+C enrollees who have had an inpatient hospital diagnosis in a year are assigned a risk factor based on demographic and health status risk factors. The M+CO is paid an amount based on these factors in the subsequent year. This risk-adjustment model has required M+COs to collect and report inpatient encounter data for the past 3 years.

The next step in implementing risk adjustment will be to move to a comprehensive risk- adjustment model beginning in 2004. HCFA will make payments to M+COs based on diagnoses from physician and hospital outpatient encounters in addition to inpatient data. Including these additional sites of care will identify more people with health status factors.

In order to move to a comprehensive risk adjustment payment system, HCFA will need data from these additional sites, thus the requirement for M+COs to submit physician and hospital outpatient data along with inpatient data. M+COs in turn will ask physicians for their encounter data beginning on October 1, 2000.

From a physician perspective, there are no new HCFA forms to complete. In fact, the format that the M+COs will be required to submit to HCFA is similar to the HCFA 1500 form with which physicians who now bill under Medicare fee-for-service are familiar. Physicians will document or code the visit as they would under Medicare fee-for-service. M+COs may be contacting physicians with more specific information, including any other provider-specific reporting requirements they may have.

To assist you in understanding the new M+CO requirements, we are sponsoring training sessions on risk adjustment, encounter data coding, and editing and the implications for physicians. HCFA has already held five regional training sessions for physicians. Several additional training sessions will be offered in November 2000. For further information on the training sessions, contact the HCFA website at www.HCFA.gov/events/events.htm.

Sincerely,

/s/

Robert A. Berenson, M.D.

Director

Center for Health Plans and Providers