Medicare:

New Claims Processing System Benefits and Acquisition Risks

HEHS/AIMD-94-79: Published: Jan 25, 1994. Publicly Released: Feb 25, 1994.

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Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) process for procuring the Medicare Transaction System (MTS), a single automated system intended to replace claims processing functions performed by multiple automated systems, focusing on: (1) anticipated MTS benefits; (2) whether procurement safeguards ensure adequate system development; and (3) MTS role under a reformed health care system.

GAO found that: (1) the single MTS automated system could significantly reduce Medicare administrative costs and enhance HCFA ability to compare data on contractors' workloads and adopt money-saving technologies that would be too expensive for multiple systems; (2) HCFA cost and savings estimates may be inaccurate because of differences among contractor procedures and because HCFA has not fully defined MTS capabilities; (3) by storing consistent data in one system, HCFA could improve payment comparisons, contractor oversight, and access to all claims, billing, and beneficiary information necessary to respond to inquiries; (4) HCFA actions to reduce the risks of procurement cost overruns and schedule delays include identifying and eliminating unnecessary concurrency in MTS development, and requiring top-management reviews and approvals at several key points in MTS development; (5) HCFA needs to ensure that MTS has the capabilities needed to support overall Medicare improvement plans; and (6) although there are many uncertainties regarding how the health care system will change, HCFA believes that the MTS acquisition and development approach provides the flexibility to accommodate most changes.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: GAO is closing this recommendation because, in AIMD-97-78, it provided much more detailed recommendations on actions the HCFA Administrator should take. That is, GAO identifies specific actions which the HHS Secretary should require the HCFA Administrator to take to reduce the risks associated with MTS by ensuring that MTS is managed as an investment and by ensuring that critical systems-development practices are followed. GAO will monitor HCFA's actions to ensure top management involvement by examining its progress on these more detailed recommendations.

    Recommendation: The Secretary of Health and Human Services should ensure that the agency's intended actions to address the planning and acquisition issues identified in this report are implemented immediately. Among other things, the Secretary should ensure that HCFA top management is continuously involved in the MTS project.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: In his May 16, 1997 testimony, HCFA's Administrator noted that for major information technology efforts such as MTS, recent legislation (the Clinger-Cohen Act of 1996) gives specific oversight responsibility to HHS' Chief Information Officer (CIO). The Administrator said that in reassessing MTS development strategy, HCFA will obtain appropriate assistance and oversight from the CIO and other oversight bodies. The HHS CIO told GAO, at an October 1996 GAO briefing to HCFA on MTS problems, that he will be more closely involved in overseeing MTS. In addition, HCFA has appointed an acting CIO who is responsible for planning and overseeing MTS and other technology efforts. Further, the HCFA Administrator stated in his May 1997 testimony that HCFA is working with the Information Technology Resources Board, a group of federal employees who are expert in systems design and project management. This group is helping HCFA reassess the MTS design and implementation.

    Recommendation: The Secretary of Health and Human Services should ensure that the agency's intended actions to address the planning and acquisition issues identified in this report are implemented immediately. Among other things, the Secretary should ensure that Department of Health and Human Services information resources management officials participate in the MTS project and that experts from other department components are available to assist HCFA.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: HCFA's actions are only partly responsive in that it has provided a limited amount of information to Congress, including: (1) providing general information in June 1995 to appropriations and other committees on MTS progress; (2) notifying the Senate Appropriations Committee in February 1997 that its MTS system development contract would require an additional $52 million in funding for new work included in the renegotiated MTS contract; and (3) testifying before House Government Reform and Oversight subcommittees in May 1997 that the MTS contractor's work was increasingly behind schedule, that HCFA had ordered the contractor to stop work on all but one of the functional areas on which it was working, and that HCFA would prepare a revised strategy for MTS by July. These actions do not provide the annual reporting or provide all of the information GAO recommended. GAO will monitor HCFA's actions in this area by examining its progress on the more detailed recommendations in AIMD-97-78.

    Recommendation: The Secretary of Health and Human Services should ensure that the agency's intended actions to address the planning and acquisition issues identified in this report are implemented immediately. Among other things, the Secretary should ensure that HCFA provide progress updates each January to congressional appropriations and oversight committees describing the status of MTS, including progress, problems, milestones, and costs in designing, developing, and deploying the system.

    Agency Affected: Department of Health and Human Services

 

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