Medicare Transaction System:

Success Depends Upon Correcting Critical Managerial and Technical Weaknesses

AIMD-97-78: Published: May 16, 1997. Publicly Released: May 16, 1997.

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Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) acquisition of its Medicare Transaction System (MTS), focusing on the extent to which HCFA is: (1) effectively managing its interim Medicare processing environment; (2) using required practices to manage MTS as an investment; and (3) applying sound system development processes to reduce risk.

GAO noted that: (1) HCFA recognizes that the multiple Medicare claims-processing systems are difficult to administer, and is looking to MTS to achieve substantial administrative savings, increase claims control, and improve customer service; (2) to its credit, HCFA is using a phased development approach to reduce risks and is beginning to apply investment practices in its management of the MTS project; (3) however, the benefits of modernizing Medicare claims processing at an estimated cost of $1 billion will not succeed unless HCFA overcomes serious management and technical weaknesses in three major areas that place the modernization at great risk; (4) HCFA needs to greatly improve its management of the essential interim Medicare processing environment and the changes necessary for operating beyond 2000; (5) to successfully process the claims workload, consolidate existing processing sites, address year 2000-related systems problems, and convert from nine systems to two, careful planning is necessary; (6) however, such planning has not yet been done; (7) HCFA intends to develop these plans, but has not specified when; (8) the risks associated with concurrently converting major systems while at the same time managing ongoing development of MTS is magnified by the fact that changing from the existing claims processing environment to MTS is a larger, more complex systems-conversion challenge than anything HCFA has previously faced; (9) a schedule and estimate of needed resources for each major stage of the transition to the interim processing environment would ensure the availability of needed resources and help HCFA better manage and coordinate transition activities; (10) MTS is not being adequately managed as an investment; (11) HCFA has not followed practices that are essential if management is to make informed technology investment decisions, including preparing a valid cost-benefit analysis, considering viable alternatives, and fully evaluating how the proposed technology benefits will contribute to improvements in mission performance; (12) HCFA has not applied all the sound systems-development practices necessary to reduce the risk and assist management in controlling development of system requirements and software; and (13) along with not developing plans critical to the project's success, HCFA has not adequately overseen its contractors' software development strategy, adequately managed the project's schedule, or implemented a program to effectively address risk.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA has no plans to obtain an independent assessment using the Capability Maturity Model. However, in response to the GAO report, in March 2000 they initiated a Software Process Improvement plan that uses the Capability Maturity Model as a framework.

    Recommendation: To help HCFA improve its ability to use effective systems development practices and improve its software acquisition capability, the Secretary of Health and Human Services should direct the Administrator, HCFA, to: (1) obtain an independent assessment of its software acquisition capabilities using the Software Engineering Institute's software acquisition capability maturity model, and implement improvements to correct any identified weaknesses; and (2) report its findings to both HHS and the Office of Management and Budget.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: The Secretary of Health and Human Services should assist HCFA in its modernization effort by providing oversight in accordance with provisions in the Clinger-Cohen, Paperwork Reduction, and Federal Acquisition and Streamlining Acts. This should include requiring the Department's Chief Information Officer to: (1) review the MTS project at predetermined project milestones to measure its progress in terms of cost, capability of meeting specified requirements, timeliness and quality; and (2) identify suitable actions to be taken, including termination, if the project falls significantly behind schedule, over budget, or is not in compliance with performance or capability requirements.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: In commenting on a draft of this report, HHS agreed with the recommendations to help ensure the success of MTS. Although the MTS contract was subsequently terminated, HCFA has established an investment technology investment process that ensures that it plans for and effectively manages IT investments. It has developed a guide that describes a four-phase investment management process, which will require analyses (such as risk and return on investment analyses) for all high-priority investments, and includes investment planning, review, and management components that support the requirements of the Clinger-Cohen Act and OMB guidance on investment management. HCFA plans to move incrementally toward full implementation of the process into the fiscal year 1999-2000 investment cycle.

    Recommendation: The Secretary of Health and Human Services should better ensure the success of MTS by requiring the Administrator, HCFA, to establish an investment management approach for MTS by explicitly linking the roles and responsibilities of the Chief Information Officer and the Investment Review Board to relevant legislative mandates and requirements, which include: (1) designing and implementing a process for maximizing the value and assessing and managing the risks of information technology acquisitions, and integrating that process with the budget, financial and program management decisions of the agency; (2) utilizing specific quantitative and qualitative criteria for comparing and prioritizing alternative information systems investment projects; (3) providing the means for senior management to obtain timely information regarding the progress of an investment, including a system of milestones for measuring progress, in terms of cost, capability of the system to meet specified requirements, timeliness, and quality; and (4) ensuring that performance measures are applied to measure how well the information technology supports the goals and missions of the agency.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  4. Status: Closed - Implemented

    Comments: Due to the magnitude of problems GAO identified with the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project. Accordingly, HCFA/HHS have completed action on this recommendation.

    Recommendation: The Secretary of Health and Human Services should better ensure the success of MTS by requiring the Administrator, HCFA, to justify the continuation of MTS by producing a valid cost-benefit and alternatives analysis that includes goals for reaching programmatic savings and links estimated savings to specific improvements in Medicare claims processing and take appropriate action based on the results of the analysis.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: Due to the magnitude of problems GAO identified with the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project. Accordingly, HHS/HCFA has completed action on this recommendation.

    Recommendation: The Secretary of Health and Human Services should better ensure the success of MTS by withholding funding for the MTS operating site contracts until an approach has been selected on the basis of an alternatives analysis; alternatives are ranked on the basis of cost, benefit, performance, risk, and technical factors, and are justified with valid cost-benefit analyses; and supported with a thorough risk assessment, which includes a realistic workload analysis, formal capacity analysis, and a sound security risk analysis.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: In GAO's recent review of HCFA's efforts to complete Y2K remediation of its Part A and Part B Medicare systems, it found that HCFA initiated actions to address this recommendation. For example, HCFA has prepared a contract amendment that directed its contractors to develop and submit for review their Y2K project and test plans, and to certify that their mission-critical systems would be millennium compliant. HCFA has also awarded independent verification and validation, and test contracts for its Y2K program, and asked its contractors to complete data exchange agreements. In addition, HCFA has asked its contractors to prepare contingency plans, and is preparing its own Medicare-wide contingency plans. Finally, HCFA's CIO has been directed to make Y2K his top priority, and he has established a Y2K organization within HCFA to address the problem.

    Recommendation: To better ensure the success of claims processing during the interim before MTS implementation, the Secretary of Health and Human Services should direct that the Administrator, HCFA, manage and be accountable for helping ensure the reliable operation of its systems through the year 2000 by identifying responsibilities for managing and monitoring year-2000 actions, preparing an assessment of the severity and timing of potential year-2000 impact, and developing contingency plans for critical systems in the event of failure. Further, HCFA should require its contractors to submit for review and approval: (1) plans for identifying and correcting potential problems, including a certification that their changes will correct the problem; (2) validation strategies and test plans for systems; and (3) plans for addressing interface and data exchange issues. Finally, HCFA should regularly report to the Department of Health and Human Services (HHS) on its progress in addressing the year 2000 issue, including the amount of funds spent on this effort.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Implemented

    Comments: Due to the magnitude of the problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of claims processing during the interim before MTS implementation, the Secretary of Health and Human Services should direct that the Administrator, HCFA, manage and be accountable for establishing a means of assessing performance in the crucial early stages of the transition, and applying any lessons learned to planning for MTS. The performance measures should include elements that allow HCFA to determine: (1) whether Medicare systems will continue to provide reliable processing and adequate service throughout the transition period; (2) whether expected administrative savings are being achieved; and (3) how the design and configuration of MTS might be refined on the basis of results of the interim systems performance.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of claims processing during the interim before MTS implementation, the Secretary of Health and Human Services should direct that the Administrator, HCFA, manage and be accountable for preparing plans for conducting thorough testing before converting part A and part B systems. These plans should, at a minimum: (1) define HCFA's role in planning or overseeing the testing; (2) assign responsibility for overseeing and approving the part A and part B conversion or approving the contractors' acceptance testing and results; (3) develop criteria for evaluating the contractors' test plans to ensure that the systems can adequately handle the combined increased workload and that the systems will operate properly in the year 2000 and beyond; (4) identify how it will provide resources to manage the testing; (5) provide for an independent validation and verification of whether test results meet requirements; and (6) determine how it will ensure that problems uncovered in testing are corrected promptly.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Implemented

    Comments: HCFA selected Florida Blue Cross and Blue Shield (BCBSF) to provide its Medicare fiscal intermediaries with a standard part A claims processing system and, on September 30, 1997, signed a contract with BCBSF. The contract requires BCBSF to provide software maintenance, system conversion, and migration support for the transition of Medicare fiscal intermediaries to the selected standard part A system. Accordingly, this recommendation is closed, action completed.

    Recommendation: To better ensure the success of claims processing during the interim before MTS implementation, the Secretary of Health and Human Services should direct that the Administrator, HCFA, manage and be accountable for obtaining a legally binding agreement with the part A contractor, which identifies all responsibilities for conversion and maintenance of the part A system, before providing any additional funds for this effort.

    Agency Affected: Department of Health and Human Services

  10. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: The Director, Office of Management and Budget, should utilize the enforcement authority provided by section 5113(b)(5) of the Clinger-Cohen Act to ensure that HCFA complies with the act's provisions, including the requirement to justify major information technology projects such as MTS with sound cost-benefit and alternatives analyses.

    Agency Affected: Department of Health and Human Services

  11. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for completing a requirements management plan to assist in identifying, approving, managing and controlling the requirements development process before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  12. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for supporting the development of MTS software with an integrated software development plan, which includes a description of such critical elements as software development library standards and metrics. All critical elements should be in a single document to facilitate the review, approval, and use by involved individuals before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  13. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for requiring the independent verification and validation contractor to assist HCFA in mitigating risks by quantifying the impacts of identified risks on program cost and schedule. HCFA should also reflect these in its program status reports before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  14. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for mitigating critical risks by designating an accountable official for risk management and ensuring that this individual implements a process, which will: (1) identify all significant risks; (2) quantify the impact of identified risks; (3) establish time frames for assessing risk status and specifying target dates for risk mitigation; (4) develop metrics that will compare progress in assessing the effectiveness of risk mitigation efforts; (5) provide a mechanism for alerting management early of risks that are becoming imminent; (6) provide resource estimates of staff, schedule needs, and funding to address identified risks; (7) ensure that the MTS risk management database incorporates all identified risks; and (8) document interdependencies among risks. Further, this accountable official should: (1) ensure that mitigation plans are developed to address identified risks; (2) hold individuals in authority accountable for prompt completion and implementation of risk mitigation plans; and (3) periodically evaluate the adequacy of HCFA's progress in mitigating risks and identify new risks before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  15. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for completing a new, integrated MTS program schedule that includes a critical path for the entire initiative, including the interim Medicare processing environment, and resources and costs for each task before proceeding further with MTS development. The schedule should also minimize overlap in the phases of the system development process.

    Agency Affected: Department of Health and Human Services

  16. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for directing the MTS developer to rerun the software life cycle management model using appropriate assumptions and constraints, and use the results in reassessing the cost and time required to develop MTS before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  17. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for improving software development oversight by requiring the MTS developer to include measures of the quality of software in the software development metrics before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  18. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for requiring an independent evaluation of the MTS contractor's software development capability prior to beginning the software development phase. To ensure that the contractor's MTS development team has the capability required for reasonable assurance of success, it should achieve a rating of at least level 2 before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  19. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for completing a comprehensive systems integration plan to ensure that all MTS-related interfaces are identified, developed, managed, and controlled before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  20. Status: Closed - Implemented

    Comments: Due to the magnitude of problems and the validity of the recommendations GAO made in reference to the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project.

    Recommendation: To better ensure the success of MTS, the Secretary of Health and Human Services should require the Administrator, HCFA, to direct and remain accountable for implementing a configuration management process that includes change controls for requirements as well as all other related MTS issues, such as hardware changes, to the planned operation sites before proceeding further with MTS development.

    Agency Affected: Department of Health and Human Services

  21. Status: Closed - Implemented

    Comments: Due to the magnitude of problems GAO identified with the MTS project, HHS/HCFA made a decision, 3 months after the report was issued in May 1997, that it would be in the best interest of the government to terminate the MTS project. Although HCFA has terminated the MTS contract, it continued with its transitions to single part A and part B standard systems for Medicare claims processing. These transitions continued until mid-1998 when its work to address the year 2000 problem required that they be suspended so that resources could be completely devoted to that work. As part of the year 2000 work, HCFA implemented computer systems configuration management and developed plans to transition contractors' workload should they withdraw from the claims processing system.

    Recommendation: To better ensure the success of claims processing during the interim before MTS implementation, the Secretary of Health and Human Services should direct that the Administrator, HCFA, manage and be accountable for preparing a detailed transition plan, which includes sections that: (1) provide a schedule and estimate of resources needed for each major stage of the transition to the interim processing environment; (2) define how software changes to the part A and part B systems will be controlled and managed; (3) identify how HCFA will ensure reliable processing while reducing the number of processing centers and shifting the workloads of local Medicare contractors who decide not to renew their Medicare claims processing contracts; and (4) define how systems will be converted to address potential year-2000 problems.

    Agency Affected: Department of Health and Human Services

 

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