Title of Regulation: 12VAC30-20. Administration of Medical Assistance Services (amending 12VAC30-20-180).

Statutory Authority: § 32.1-325 of the Code of Virginia; Title XIX, 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 6, 2014.

Agency Contact: Tom Edicola, Director, Program Operations Division, Department of Medical Assistance Services, 600 East Broad Street, Richmond, VA 23219, telephone (804) 786-8098, FAX (804) 786-1680, or email tom.edicola@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Section 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902(a) of the Social Security Act (42 USC § 1396a) provides governing authority for payments for services. Item 300 H of Chapter 890 of the 2011 Acts of Assembly directs DMAS as follows:

The Department of Medical Assistance Services shall mandate the electronic submission of claims for covered services rendered by participating providers in the fee-for-service program under the State Plans for Title XIX and XXI of the Social Security Act, and any waivers thereof, as well as the use of electronic funds transfer for the payment of such claims to providers. The department shall implement this requirement in a phased approach beginning with providers enrolling on or after October 1, 2011, with expansion to all existing providers by July 1, 2012. The department shall develop a process by which the individual circumstance of a provider may allow for exclusion from the electronic claims mandate without impact on participation, at the sole discretion of the department. The department shall have authority to promulgate emergency regulations to implement this amendment within 280 days from the enactment of this act.

Purpose: This action is not essential to protect the health, safety, or welfare of citizens. It is, however, mandated by law as cited above. It also promotes improved administrative efficiencies for DMAS, which will reduce some of its operating costs. These regulations are clearly written and easily understandable by the regulated community.

Approximately 84% of all Medicaid claims are currently filed electronically with DMAS. A survey of participating Medicaid providers who submit claims on paper was performed to better understand why claims are filed on paper when electronic filing is available, and to understand any barriers that may exist to filing electronically. The survey found that the main barriers to electronic filing were cost and inadequate technology.

However, a majority of providers indicated that they transact business electronically with commercial carriers and would welcome the change if these barriers could be addressed for Medicaid. In response, DMAS implemented a web-based direct data entry mechanism during the 2nd Quarter of FY 2011 that has allowed for electronic claim submission at no cost to the provider and at a lower cost for the Commonwealth to process these claims. The Appropriations Act of 2011 language mandating the participation of providers via electronic funds transfer and electronic claims submissions is part of an overall strategy to simplify the claims submission process, increase processing efficiency, lower costs for both the Commonwealth and the Virginia Medicaid provider community, and support collaboration and consistency in business practices with other commercial carriers and Medicare.

It costs DMAS $0.475 to process a hard copy paper claim but only $0.192 to process an electronically submitted claim. If a claim is not completed properly and must be returned to the provider for correction, these costs double. During FY 2011, DMAS spent $ 3.7 million to process electronic claims: $ 1.3 to process paper claims and $155,000 to process direct data entry claims.

Substance: The amendments to 12VAC30-20-180 require providers to file claims electronically and make payments via electronic funds transfer. Currently, the State Plan for Medical Assistance (Plan) has no requirements that providers must submit their claims electronically. It is permitted that providers can file claims electronically, but not required. The current Plan also does not provide for providers' payments to be made via electronic funds transfer.

The amendments to 12VAC30-20-180 (Definition of a claim by service) require (i) health care providers that enroll with Medicaid on or after October 1, 2011, to submit electronically all claims for covered services they render in the fee-for-service program under the State Plans for Title XIX and XXI of the Social Security Act; (ii) DMAS to use electronic funds transfer for the payment of such claims to providers; and (iii) all other providers to comply with this electronic submission requirement by July 1, 2012. Amendments also include a provision to permit providers to request exemption from this requirement when they can demonstrate good cause. DMAS has granted exemptions to fewer than 15 providers who have requested exemption from the electronic funds transfer requirement. The reasons for these exemptions have been due to the lack of infrastructure to accommodate electronic claims submission and receipt of payments.

Issues: The primary advantage to the public and the Commonwealth is expected to be the reduction of administrative costs for the processing of providers' claims for Medicaid and FAMIS. There are no disadvantages of this action to the agency or to individual private citizens.

For health care businesses that already electronically file Medicare and other health insurance claims, this action will make it easier for them to file Medicaid claims. For businesses that are not capable of electronically filing (due to lack of infrastructure to support electronic claims submission, for example), provision is made for good cause exceptions to this requirement.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Item 300 H of the 2011 Virginia Appropriations Act, the proposed changes require 1) that fee-for-service Medicaid providers submit their claims electronically for services rendered and 2) that providers participate in electronic funds transfer for the payment of their claims. These changes are already in effect as of July 1, 2012, under the emergency regulations.

Result of Analysis. The benefits exceed the costs for one or more proposed changes. There is insufficient data to accurately compare the magnitude of the benefits versus the costs for at least one change.

Estimated Economic Impact. Pursuant to Item 300 H of the 2011 Virginia Appropriations Act, one of the proposed changes requires that fee-for-service Medicaid providers submit their claims electronically for services rendered. However, the proposed changes allow the Department of Medical Assistance Services (DMAS) to grant a variance for providers having a hardship with electronic filing.

Prior to this change, electronic claim filing was optional. In Fiscal Year (FY) 2011, 19 million or 84% of approximately 22.6 million total claims had been voluntarily filed by electronic means. DMAS anticipates that once the transition is completed, approximately 95% of all claims will be filed electronically while 5.0% will continue to be filed on paper due to variances that may be issued. Thus, the proposed requirement is ultimately estimated to decrease paper claims by 2.5 million and increase electronic claims by the same amount. The FY 2013 costs for paper and electronic claims processing are $0.483 and $0.195 per claim, respectively. In other words, electronic claims are $0.288 cheaper per claim to process. Thus, DMAS can expect to save approximately $711,930 per year in costs for claims processing. One half of this amount represents savings in state funds as 50% of Virginia Medicaid expenditures are funded by the federal government. The magnitude of the expected savings is subject to change depending on the number of claims filed which is driven by various factors such as increases in member enrollment, decreases in fee-for-service population as a result of Managed Care expansion, and utilization of services.

To facilitate the transition, DMAS, through its claims processing contractor, created a web-based direct data entry mechanism in 2011. The cost of creating this mechanism was fully borne by the contractor without an increase in the contract price. Also, this claims submission mechanism is available to providers at no cost. However, any required modifications to this mechanism will require additional expenditures. DMAS has paid $276,600 for four system enhancements since its inception.

The impact of this change on administrative compliance costs of providers appears to be mixed. According to DMAS, providers with small claims volume and simple procedures may find it easier to file their claims electronically while large volume providers and providers with complicated procedures may experience the opposite effect.

Another proposed change requires participation of providers in electronic funds transfer for the payment of their claims except for good cause shown. In FY 2011, of the approximately 400,000 fund transfers, about 170,000, or 42%, were accomplished by paper checks. In January of 2013, only 9.0% of funds transfers were accomplished by paper checks. DMAS will continue to mail claim detail to its providers in most cases. Thus, only about $5,000 is estimated to be saved in mailing costs by this change. Due to federal funding, only one half of these savings would accrue to the Commonwealth. Providers are also likely to realize some administrative savings due to reduction in time and possible travel involved in depositing paper checks.

Businesses and Entities Affected. The electronic filing and electronic fund transfer requirements apply to approximately 47,000 providers participating in Virginia Medicaid.

Localities Particularly Affected. The proposed regulations do not affect any locality more than others.

Projected Impact on Employment. The proposed changes may reduce demand for labor at small medical providers with simple procedures due to increased efficiencies from electronic filing and to produce savings in provider time and travel costs associated with depositing paper checks. However, large providers with complex procedures may need additional labor to file claims electronically.

Effects on the Use and Value of Private Property. No significant effect on the use and value of private property is expected. The asset value of the payment processing contractor may be negatively impacted as it will experience reduction in its revenues. However, this negative impact may be offset by additional revenues from system enhancements.

Small Businesses: Costs and Other Effects. Most of the approximately 47,000 providers are estimated to be small businesses. The main impact on small businesses is an expected reduction in their administrative costs due to efficiencies expected from electronic claims filing and electronic funds transfer. However, large providers and providers with complex procedures are anticipated to experience inefficiencies due to the proposed electronic claims processing requirement.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed regulations allow variances from the proposed requirements for good cause shown. There is no known alternative that minimizes the adverse impact while accomplishing the same results.

Real Estate Development Costs. No significant impact on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, a determination of the public benefit, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The department has reviewed the economic impact analysis prepared by the Department of Planning and Budget regarding the regulations concerning the electronic claims submission requirements in 12VAC30-20-180. The department raises no issues with this analysis.

Summary:

Pursuant to Item 300 H of Chapter 890 of the 2011 Acts of Assembly, the proposed amendments require (i) the 46,957 fee-for-service Medicaid providers to electronically submit their claims for services rendered to Medicaid and FAMIS individuals and (ii) providers' payments to be provided by electronic funds transfers. Proposed amendments allow for exceptions to these electronic filing/payment requirements when certain specified standards are met and do not affect the eight Medicaid managed care organizations because they do not file individual claims for services but already file electronic encounter data.

12VAC30-20-180. Definition of a claim by service.

A. Claims:

SERVICE	CLAIM
A) Inpatient Hospital	A Bill for Service
B) Outpatient Hospital	A Bill for Service
C) Rural Health Clinic	A Line Item for Service
D) Laboratory and X-Ray	A Line Item of Service
E) Skilled Nursing	A Bill for Service
F) EPSDT	A Bill for Service
G) Family Planning	A Bill for Service or Line Item depending on provider type
H) Physician	A Line Item of Service
I) Other Medical	A Bill for Service or Line Item depending on provider type
J) Home Health	A Bill for Service
K) Clinic	A Line for Service Item
L) Dental	A Line Item of Service
M) Pharmacy	A Line Item of Service
N) Intermediate Care	A Bill for Service
O) Transportation	A Line Item of Service
P) Physical Therapy	A Bill for Service or Line Item depending on provider type
Q) Nurse Midwife	A Line Item of Service
R) Eyeglasses	A Line Item of Service

B. All providers that enroll with Medicaid on or after October 1, 2011, shall submit electronically all claims for covered services they render in the fee-for-service program under the State Plans for Title XIX and XXI of the Social Security Act, and any waivers thereof, and enroll to receive electronic funds transfer (EFT) for payment of those services. All other providers shall comply with this electronic submission requirement by July 1, 2012.

1. Any provider who cannot comply with this electronic claims submission or EFT requirement may request an exception from DMAS for good cause shown.

2. Good cause may include, but is not limited to, (i) the unavailability of the infrastructure necessary to support electronic claims submission in the provider's geographic region; (ii) the absence of a mechanism for electronic submission for the particular claim type, such as in the case of a temporary detention order; (iii) the provider's inability to transact business through a banking institution capable of EFT; or (iv) financial hardship.