Understanding The Benefits Improvement & Protection Act

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Mike StiglerThe Benefits Improvement and Protection Act of 2000 (BIPA) Understanding the Opportunities Created
Presented by Mike Stigler, CPA, FHFMA
Director, Blue & Co., LLC.
Contact Mike at [email protected]

May 10, 2001

Visit the AccountingWEB Workshop Calendar for upcoming sessions.


The Benefits Improvement and Protection Act of 2000 (BIPA) is the second round of relief passed by Congress to counter the severe cutbacks in payments resulting from the Balanced Budget Act of 1997. This workshop focused on the technical provisions of BIPA and the implication on Healthcare Provider payments. In addition, the discussion covered many of the opportunities created by this legislation for Healthcare Providers.

Topics of this workshop included:

  • Understand how Medicare will give back $11.5 Billion to Providers over 5 years.
  • Learn about the opportunities BIPA creates for services in Rural areas.
  • Understand how Critical Access Hospitals will be affected by the regulatory changes.
  • Determine how BIPA will impact payments to Home Health, Skilled Nursing, Acute Care, Medical Education and other payment programs for Medicare.
  • Understand the implementation timing for the BIPA provisions.

You can read the complete transcript of this workshop. Also, a PowerPoint presentation of this material is available for download in .pdf format. You must have Adobe Acrobat software to view this presentation.

May 10, 2001 Session Sponsored by: International Group of Accounting Firms

Complete Transcript

Session Moderator: Welcome everyone, and thank you for joining us today! I am happy to introduce Mike Stigler, who is going to provide us with a presentation on the Benefits Improvement and Protection Act of 2000 and, specifically, the opportunities created by that act.

Mike Stigler is a Director with Blue & Co., LLC, and has been providing services to healthcare clients for over seventeen years. His experience includes performing feasibility analysis for new and expanding services, modeling of the financial implications of facilities strategic plans, analysis of debt capacity and assistance with issuance of over $220 million in tax-exempt and private placement financing, developing cost and staffing controls and development of budget and reimbursement models for healthcare clients. He is a frequent speaker on topics related to healthcare reimbursement and payment systems including analysis of the strategic opportunities created by the Medicare and Medicaid payment systems.

Before we begin, I'd like to take a moment to thank our sponsor, the International Group of Accounting Firms. You can find out more about our sponsor by clicking the banner above this workshop.

Welcome Mike, and thank you for joining us today!

Mike Stigler: It is my pleasure

I want to thank the Accounting WEB organization for inviting me make this presentation. As a brief history, the Benefits Improvement and Protection Act of 2000 (BIPA) represents the second attempt by Congress to restore the funding reductions of the Balanced Budget Act of 1997 (BBA) for providers and insurers.

The BBA was intended to reduce reimbursements to healthcare providers by $116 Billion over 5 years. However, due to errors in actuarial assumptions, the actual effect is an estimated reduction closer to $200 B. and has resulted in severe reductions in provider's income and access to capital for investment in new technology and services.

The Balanced Budget Relief Act of 1999 and the BIPA 2000 represent the congressional intent to increase payments to providers and insurers by approximately $50 B over 5 years. What a deal, take $200 B and give back $50 B.

I will present today; opportunities that I believe are available to healthcare Providers from the passage of the Act. I welcome any discussion as I present or if you have specific comments please send them to me at [email protected]. Due to the comprehensive nature of this Act and limited time, I will only be discussing a small number of the 141 provisions in the Act

To view a complete listing of the provisions, I have prepared a Matrix of the various provisions and their implementation dates that can be found on AccountingWEB's site, along with a Power Point presentation that discusses several of the provisions further.

Disproportionate Share Payments (DSH):

BIPA has lowered the threshold for ALL providers- to qualify for DSH. Effective 4/1/01, a hospital needs 15% Medicaid days and Medicare patients with Supplemental Security Income (SSI) days starting 4/1/01. For Rural hospitals and small urban hospitals, this is a significant reduction in the threshold from the respective 45% and 40% requirements.

Session Moderator: This material will accompany the story about this workshop, once we post the workshop transcript

Mike Stigler: The opportunity for providers is to ensure that they are calculating their DSH percentage appropriately to maximize their opportunity. This includes making sure that they are capturing all their Medicaid Acute Stay days, Medicaid HMO days and Medicaid Crossover days. Many providers have not been including their Crossover days historically and this can have a significant impact on the DSH %.

Providers should also make sure their denominator is accurate as well. You should ensure that you have excluded your labor room days and observation room days. If you are self-insured for health insurance, you should investigate using the alternative reporting method, which allows you to exclude the days, cost and charges from your Medicare cost report.

Using a denominator that excludes the self-insured days is an issue that HCFA has not given guidance on in the regulations. Intermediaries have not been consistent in their treatment and I would recommend that if you do this, you should disclose it and utilize your appeal rights to pursue the issue if the Intermediary denies it.

Another potential opportunity to impact the DSH % is if you are a fiscal year end provider other than 9/30/xx. HCFA reports the SSI % for your hospital on a Federal Fiscal Year end basis. You can use a weighted SSI % in your calculation. Once you do this however, you must continue to use this method in subsequent years.

Medicare Dependant Hospitals (MDH):

BIPA expanded the MDH program to allow hospitals that are not currently MDH's to qualify for this program. For a hospital to qualify, they must be a rural hospital 100 beds and have Medicare days or discharges: 60% (Acute) of their total occupancy.

Hospitals that have costs greater than their DRG, Outlier and DSH payment could benefit from conversion to this program. To determine if you qualify, you must have had 60% Medicare days or discharges during any 2 of the last three years audited cost reports.

Tip: If your hospital is just under the qualification threshold for days or discharges, you may want to ensure that you have reported total days correctly look at the alternative self-insurance method reporting previously mentioned. Also, you may want to run new PS & R reports to determine if additional claims were paid after the settlement of the cost reports. The effective date for this provision is cost reports beginning on and after 4/1/01.

Home Health Services (HHA):

Home Health has gone through significant change over the last 3 years and many agencies have closed due to restrictions and reductions in reimbursement. With the implementation of the HHRG prospective payment system in October 2000, providers can now adjust their management for this program.

BIPA provides incremental relief in sections 501 through 508 of the Act and provides some clarification of what constitutes "homebound" status. The opportunity I see developing is that providers for the first time in Medicare history can make a "profit" providing this service if it is managed properly. For-profit home health providers had the largest increase in market appreciation of their stock values among all the healthcare industry groups.

Another developing opportunity is for consolidation in the HHA market. This service requires that you minimize your administrative costs and manage the patient cases appropriately. To do this, providers will need to emphasize management controls and reporting. To attract the best managers, your agency will need to be the outstanding agency in its market in both volume and quality of workforce.

I have worked with multiple providers who have formed joint ventures to consolidate agencies and improve their service capabilities while reducing their per episode administrative costs. As a benchmark, the agencies that struggle under HHRG's are those that have 300 patients or less per year and are not managing they're average visits per episode at 20 or less. Typically there just isn't enough volume to support the administrative costs for agencies smaller than this.

Federally Qualified Health Centers (FQHC) and Rural Health Clinics (RHC):

Section 702 of BIPA creates a new Medicaid PPS for FQHC's and RHC's. Beginning 1/1/01, existing FQHC's and RHC's will be paid a per-visit payment equal to 100% of the average costs incurred during 1999 and 2000. These costs will be adjusted to take into account an increase or decrease in the scope of services furnished.

For subsequent years, the rate will be adjusted for an inflation adjustment and can be adjusted for the addition or deletion of services. If the Clinic is new, the rate will be the average for its geographic region and in the absence of any in the region, the Secretary for HHS will establish criteria for establishing the rate.

Currently hospitals are experiencing more and more patients utilizing the Emergency room with Medicare and Medicaid coverage that are not really Emergency status patients. When this happens, hospitals experience either denials or significantly reduced payment for their claims.

I have several hospitals that have set up RHC's near their ER departments to provide for appropriate treatment of these patients. With the provision to set a rate that approximates cost for Medicaid reimbursement, I think that both urban and rural hospitals could benefit significantly by utilizing this program.

Another opportunity with this program is the issue of how providers are paid for their cost of staffing Emergency Room Physicians. Many providers pay an hourly amount to the physicians regardless of their seeing a patient or just waiting for one to come into the ER. By staffing the FQHC or RHC with physicians that can float to the ER, the hospital better utilizes this standby time

Ambulance Providers:

Ambulance service is very costly to provide in rural settings due to the fact that they have low volume to spread their costs over. Since Medicare converted to a fee schedule for reimbursement, many rural ambulance providers have struggled to provide service at a cost that equals reimbursement levels

To provide a safety net for geographic areas that may have difficulty with adequate access to service, Section 205 of BIPA provides for cost based reimbursement to ambulance services that are provided by Critical Access Hospital (CAH) providers that do not have another ambulance service within a 35-mile drive to the CAH.

Critical Access Hospitals are hospitals that have converted their licensure from an acute care PPS provider to a cost based payment. They are hospitals that have less than 15 licensed beds for acute and are licensed under special provisions that were established in the BBA

The opportunity exists for other providers that may be within the 35-miles of the CAH. Non-CAH providers could form relationships for coverage by the CAH and eliminate the other ambulance service that is within the 35-mile distance. In other words, allow the CAH to provide the sole service within its 35-mile radius, including your coverage area, and allow it to be reimbursed its costs from Medicare

There are numerous issues that would need to be addressed including provider based status qualifications and adequacy of coverage issues. There is a grant program available to provide funding for analysis of these types of issues. The BBA established an annual $25M grant program to be used to study the conversion issues surrounding CAH and coordination of Emergency Medical Services in rural communities.

Critical Access Hospitals (CAH):

BIPA, sections 201 through 206, provided several clarifications related to the CAH program and also provided some enhancements for payment to these facilities. The most significant of these is section 203, which provides for Medicare swing beds to be excluded from PPS and for Medicare payment on a reasonable cost basis.

Currently swing bed patients are paid cost for their ancillary services and a per-diem rate for routine room and board services. Of significance is that most hospitals room and board costs run from $300 - $500 per day due to the high cost of nursing salaries and all the support services. The per-diem rates paid historically have only been in the $125 - $180 range, depending on geo region, and have not covered the costs of care.

HCFA needs to provide clarification on this matter as BIPA section 203 refers to Medicare Law section 1861 (v) as the basis for defining reasonable cost. This section does not address swing-bed specifically. If the intent is to pay full cost for routine services, this is a significant improvement in payment. The effective date of this provision is for cost report periods beginning on or after enactment of BIPA (December 15, 2000).

TEFRA Hospitals:

There are several changes forthcoming related to Rehabilitation, Psychiatric and Long Term Care (LTC) Hospitals (Medicare cost based, subject to a TEFRA Target Limit Cap). Sections 305 through 307 provide for some enhanced payments to these provider types and discuss Medicare's handling of the conversion of Rehab and LTC to a PPS system.

The opportunity I see in these programs is that several providers are not getting adequate reimbursement for Skilled Nursing Services (SNF) under the new Resource Utilization Group payment system (RUG's). I have found that several hospitals are seeing a mix of patients in a SNF unit that qualifies for service as a Rehab. Provider.

To get adequate reimbursement for the intensity of rehabilitation services provided, the hospitals have converted portions of SNF units to Rehab units and in many cases have increased allowable reimbursement from PPS payments of $275 - $350 per day under RUG's to actual costs under the TEFRA limit of $500 - $700 per day.

I would encourage providers to analyze their patient service acuity in their SNF units to determine if a TEFRA based unit may be financially beneficial. Section 311 - 315 of BIPA also made significant changes to the payment rates for some categories of RUG's payments, so please conduct a through analysis before considering conversion.


Section 223 of BIPA provides for an expansion of Medicare payment for telehealth services. Effective 10/1/01, physicians or practitioner will receive the full payment they would have received had the service been provided to the beneficiary without the use of the equipment. Payment is for services to beneficiaries in a rural area.

The facility that is the originating site will receive a $20 payment. Originating sites may be a physician or practitioner office, a CAH, a RHC, a FQHC or a hospital. The opportunity is evident for any specialist that is looking to expand outreach into rural communities and can conduct examinations or patient follow-up remotely. This is also an area where grant funding has been made available through a variety of Federal and philanthropic organizations for purchase of equipment. Also, with the improvements in telecommunications lines, the capability to transmit both more quickly and less expensively are starting to make Telemedicine more feasible.

One last consideration is the HIPPA privacy rules that muddy this issue. Any Telemedicine program should also incorporate the privacy protection standards that will be required in 2002

We have covered a lot very quickly, are there any questions about the material covered thus far?

Session Moderator: Mike, has Congress made any indication that they plan to make a correction for the inaccurate actuarial reports they relied on?

Mike Stigler: Not at this time. They continue to make incremental adjustments. I expect that they will continue to target specific relief. Rural hospitals are a favorite for relief.

Session Moderator: Do they acknowledge that there is a problem with the provisions of this plan? Or at least that the end results are not what was originally intended?

Mike Stigler: I think that until we have a national consensus on healthcare policy that we will continue to have incremental changes. We seem to apply band-aids to problems rather than fixing the cause of the problem.

The BIPA Act includes several provisions related to studies that have been funded. I would encourage people to watch for the results of these studies as they will point to potential areas that congress will target.

There are several other provisions that present potential opportunities that we have not discussed. Due to time limitations, we just cannot cover them all. I would encourage you to download the Power Point presentation off the AccountingWEB.com site for additional information. I also advise that providers thoroughly research each of the recommendations provided here today to understand the implications on their facility or practice and to understand the regulatory implications fully

Thank you to AccountingWEB for the opportunity to present. Are there any questions before we wrap up?

Session Moderator: Thank you so much, Mike - there is a wealth of information here. Are there any other questions for Mike?

Kelly McRae: Thanks, Mike...Good job!

Session Moderator: Also I want to thank you again to our sponsor, the International Group of Accounting Firms

Session Moderator: Mike has some additional information, in the form of a PowerPoint presentation and some Excel material, which will be available later in the story about this workshop.

Kelly McRae: We will get all the information up on the site tomorrow.

Mike Stigler: Thank you, I enjoyed presenting in this format.


Mike Stigler is a Director with Blue & Co., LLC, providing services to healthcare clients for over seventeen years. His experience includes performing feasibility analysis for new and expanding services, modeling of the financial implications of facilities strategic plans, analysis of debt capacity and assistance with issuance of over $220 million in tax-exempt and private placement financing, developing cost and staffing controls and development of budget and reimbursement models for healthcare clients.

He is a frequent speaker on topics related to healthcare reimbursement and payment systems including analysis of the strategic opportunities created by the Medicare and Medicaid payment systems.

E-mail: [email protected]
Web site: www.blueandco.com

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