Performance of CHAMPUS Fiscal Intermediaries Needs Improvements

HRD-81-38: Published: Feb 2, 1981. Publicly Released: Feb 2, 1981.

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Several years ago the Department of Defense (DOD) converted its contracts with fiscal intermediaries (FI) under the Civilian Health and Medical Program of the Uniform Services (CHAMPUS) from a cost-reimbursable to a fixed-price basis, in which a set fee is paid for each claim processed. While administrative savings have been achieved under these competitively bid, fixed-price contracts, performance has been less than satisfactory. GAO reviewed the performance under competitively bid, fixed-price contracts of five intermediaries that process over 80 percent of CHAMPUS claims.

The review showed that FI were not fulfilling many of their contractual responsibilities. In addition, the Office of the Civilian Health and Medical Program (OCHAMPUS), which administers the program, did not have adequate means to measure performance and enforce requirements. Improvements were needed in: (1) the accuracy of administering benefits in order to comply more fully with CHAMPUS regulations, instructions, and policies; (2) the systems established for controlling and containing costs; (3) the services to beneficiaries and providers in processing claims, correspondence, and appeals; and (4) the management of funds covering benefit and administrative costs.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should enact legislation requiring that no benefits be payable for dependents of active-duty members when the benefit claimed is payable under another insurance plan, obtained by employment or law, in which the beneficiary is covered.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by determining the types of claims each FI splits and examining a sampling of split claims to verify that reasons for the splits comply with program regulations.

    Agency Affected: Department of Defense

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require OCHAMPUS to develop methods for testing whether FI systems are appropriately identifying claims requiring rejection and to more closely review FI systems for rejecting claims.

    Agency Affected: Department of Defense

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require OCHAMPUS to closely monitor FI implementation of utilization and peer review systems and to assess penalites when systems required either by the contract or by OCHAMPUS regulations are not implemented within specified time periods.

    Agency Affected: Department of Defense

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should obtain more uniform administration of reasonable charges by requiring all FIs to use similar charge data in establishing reasonable charges.

    Agency Affected: Department of Defense

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require FI to adopt OCHAMPUS contract requirements within specified time limits and follow up on these requirements to assure that they have been implemented and are being administered uniformly.

    Agency Affected: Department of Defense

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should fully integrate the claims examination function with system reviews in performing OCHAMPUS visits to FI sites in order to achieve optimum benefits from this function.

    Agency Affected: Department of Defense

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require OCHAMPUS to give FI guidelines for reviewing claims for medical necessity and monitor the implementation of these guidelines.

    Agency Affected: Department of Defense

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS by adopting the letter-of-credit method for providing funds.

    Agency Affected: Department of Defense

  9. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should adopt the 1971 GAO recommendation to limit CHAMPUS payments, when combined with other insurance, to reasonable charges.

    Agency Affected: Department of Defense

  10. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should explore the possibility of permitting FI to accept sponsors' signatures in lieu of patients' signatures on claims, thereby significantly reducing the number of claims returned to beneficiaries.

    Agency Affected: Department of Defense

  11. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should revise contracts to increase FI role in educating beneficiaries in regard to the CHAMPUS program provisions and claim submission requirements.

    Agency Affected: Department of Defense

  12. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require FI to prepare periodic reports in the detail and format necessary for OCHAMPUS to compare performance to standards and require OCHAMPUS to verify the accuracy of the reports during periodic visits to FI's.

    Agency Affected: Department of Defense

  13. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should revise contracts to: (1) increase penalties for failure to meet performance standards; and/or (2) provide positive incentives for meeting standards, if the penalties assessed under the liquidated damage provisions of current contracts do not result in acceptable performance.

    Agency Affected: Department of Defense

  14. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by developing guidelines for internal controls over the safeguarding of checks and separation of duties in handling and processing checks.

    Agency Affected: Department of Defense

  15. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by recovering overpayments and rectifying underpayments from the incorrect counting of claims by OCHAMPUS.

    Agency Affected: Department of Defense

  16. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by developing specific procedures for FI to follow in identifying and collecting erroneous payments.

    Agency Affected: Department of Defense

  17. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by establishing minimum time requirements for processing audit adjustments and monitoring the processing of these adjustments more closely.

    Agency Affected: Department of Defense

  18. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by issuing clarifying instruction on types of claims entitled to administrative reimbursement.

    Agency Affected: Department of Defense

  19. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve specific program areas of claim processing benefit administration by: (1) discontinuing the use of old claim forms and adopting new forms that contain clear instructions on supplying information on other insurance in which beneficiaries are enrolled; (2) requiring FI's to adopt procedures that result in investigating claims where other insurance has made payments in the past; (3) issuing clarifying instructions to FIs on cases requiring further development because of possible third-party liability, automobile insurance, or workmen's compensation; (4) requiring the FIs submit for OCHAMPUS approval their procedures and system description for assuring that nonavailability statements are obtained as required; and (5) issuing guidelines requiring confirmation of eligibility of dependents without identification cards when their last names are different from that of service members.

    Agency Affected: Department of Defense

  20. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should establish standards for accuracy of claim processing and benefit administration, and that the standard for payment errors be about 2 percent of billed charges, rather than 4 percent as proposed by OCHAMPUS. This standard should be evaluated periodically and adjusted downward as FI become more proficient in processing CHAMPUS claims.

    Agency Affected: Department of Defense

  21. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should improve the financial management of CHAMPUS funds by adopting procedures that assure that FI routinely and promptly return excess benefit funds to OCHAMPUS.

    Agency Affected: Department of Defense

  22. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should revise contracts to provide for penalties and/or incentives relating to performance in such areas as implementation of systems to determine the location and status of inquiries, responsiveness to inquiries, and provision of adequate telephone service.

    Agency Affected: Department of Defense

 

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