Defense Health Care:

Claims Processing Improvements Are Underway but Further Enhancements Are Needed

HEHS-99-128: Published: Aug 23, 1999. Publicly Released: Aug 23, 1999.

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Pursuant to a congressional request, GAO reviewed the timeliness and accuracy of the Department of Defense's (DOD) health care claims processing procedures.

GAO noted that: (1) between July 1, 1997, and June 30, 1998, DOD's contractors processed 86 percent of claims within 21 days; (2) this met DOD's timeliness standard of processing 75 percent of claims within 21 days; (3) even so, nearly 3 million claims took more than 21 days to process, which prompted complaints from some providers and beneficiaries about what they considered to be payment delays; (4) DOD has several initiatives under way to improve timeliness, including adopting payment and penalty standards used by the Medicare program; (5) if these standards are properly implemented and met by contractors, they should help reduce providers' complaints; (6) while DOD adequately measures contractors' performance in claims processing timeliness, it does not know the extent to which contractors are accurately paying claims; (7) less than half the claims are subject to its payment accuracy audit, and the methodology used to calculate the payment error rate is statistically invalid; (8) all contractors experienced problems with payment accuracy when they began processing TRICARE claims, often because they did not have enough time to adequately prepare to administer the program; (9) although contractors addressed these problems, they acknowledged that many factors affect the accuracy of claims processing--primarily the complexity of the program, compounded by numerous program changes; (10) GAO also found that some claims processing problems were due to mistakes made by providers and beneficiaries when filing their claims; (11) furthermore, because they do not always understand the program, sometimes providers and beneficiaries complain about adjudication decisions on claims that had actually been processed correctly; (12) to help ensure payment accuracy, DOD requires its contractors to use ClaimCheck, a commercial software program designed to ensure that professional providers are appropriately paid for services rendered; (13) ClaimCheck's use resulted in changes to only 3.5 percent of claims in fiscal year 1998 and saved about $53 million; (14) nonetheless, some providers complain about its use because ClaimCheck's review criteria are not published and available to them; (15) without this information, they expressed doubt that the criteria comply with industry claims review standards; (16) GAO found that, although ClaimCheck's review criteria are based on industry standards, its use has resulted in some inappropriate denials to TRICARE claims; and (17) these errors occurred because DOD was slow to direct contractors to incorporate TRICARE policy changes into their claims processing systems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GAO recommended that DOD restructure the methodology used for claims processing accuracy audits so that the performance measures more accurately and completely reflect contractors' performance and are more comparable to those generally used in industry. DOD agreed with the recommendation and conducted four separate payment audits of 903 claims that included claims with billed amounts under $100. While DOD was responsive to the recommendation, its analysis showed that the average error amount per audited claim equaled about $.83. Thus, DOD concluded this audit would not recoup enough to cover the costs of auditing these claims.

    Recommendation: In order to better measure and improve claims processing accuracy, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to restructure the methodology used for claims processing accuracy audits so that performance measures more accurately and completely reflect managed care support contractors' (MCSC) performance and are more comparable to those generally used in the industry. This restructuring should include: (1) ensuring that claims of all dollar amounts are subject to the payment accuracy audit; (2) ensuring that error rate computations are statistically accurate and meaningful; and (3) adding additional measures of program performance, such as the percentage of claims processed with errors.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The program change process and change management board action identified for implementation in January 2000 has occurred. The change management board meets quarterly to approve proposed changes to benefits and/or contract modifications for the Tricare managed care support contracts.

    Recommendation: To ensure that needed program changes are made in a timely manner, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to expedite the process used to direct the MCSCs to implement program changes.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Department continues to support consolidating changes, and is in the process of determining the most advantageous interval for issuing such changes. The Department will be considering the impact consolidation will cause on DOD's beneficiaries, and the implication associated with directing the implementation of multiple changes concurrently.

    Recommendation: To help eliminate confusion resulting from frequent program changes, the Secretary of Defense should consolidate contract modifications and direct MCSCs to implement them on a quarterly basis.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Department has recognized for some time that the "transition" period available to start-up new MCSCs should be longer. Throughout GAO's planning process for the procurement of the next generation of MCSCs, the transition period will allow new MCSCs to successfully implement the purchased care segment of the TRICARE program. This transition period has been incorporated into DOD's long term acquisition schedule and corresponds with the GAO recommendation.

    Recommendation: In order to better measure and improve claims processing accuracy, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to grant MCSCs a longer transition period--9 to 12 months--between contract award and the start of health care delivery.

    Agency Affected: Department of Defense

 

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