Medicare Claims Processing:

HCFA Can Reduce the Disruptions Caused by Replacing Contractors

HRD-91-44: Published: Apr 4, 1991. Publicly Released: Apr 4, 1991.

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Pursuant to a congressional request, GAO reviewed the changes in the Medicare carrier in Georgia and the data-processing subcontractor in Florida, focusing on: (1) the effect of those changes on beneficiaries and providers; and (2) actions the Health Care Financing Administration (HCFA) could take to reduce service disruptions.

GAO found that: (1) after the carrier and subcontractor changes, the percentage of claims that required over 30 days to process rose from 4.6 percent to 25 percent in Georgia and from 3.9 percent to 28 percent in Florida; (2) the interest the new contractor and the Florida carrier paid on delayed claims increased from $375,000 in 1988 to $6.3 million in 1989; (3) in Georgia, overpayment errors jumped from 0.65 percent to 13 percent, resulting in an estimated $19.2-million increase; (4) Georgia beneficiaries expressed frustration with telephone service and contradictory claim notices and Florida beneficiaries experienced payment delays; (5) time constraints compounded the Georgia carrier's difficulties in preparing for operations, and the Florida carrier had to accept a less efficient system after its new subcontractor's system failed to meet specifications; (6) HCFA regional offices could benefit from improved guidance concerning carrier changes; and (7) the incoming carrier's failure to develop a full understanding of the outgoing carrier's systems, procedures, and policies, and the shortcuts taken by the outgoing carrier while winding down operations, magnified the disruption that followed the Georgia carrier change.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Acquisitions Handbook and Transition Handbook have been modified to include a shut down plan. There has not yet been any occasion to put them in use.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to require that a new carrier: (1) process a sample of the outgoing carrier's claims through the new carrier's system; and (2) compare how its system handles the claims with how the outgoing carrier's system handled them, so that processing differences between the two systems can be identified and addressed before the new carrier begins operation.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HCFA now requires such provisions be included in every systems and facilities management subcontract.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to determine what subcontract provisions would best enable carriers to address situations where a data-processing subcontractor's system does not function as agreed. After having done so, HCFA should revise its carrier instructions concerning data-processing subcontracts to require them to include such provisions.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: The Acquisition Handbook and a new formal notice for the ongoing contractor have been prepared.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop guidance concerning carrier transitions that: (1) identifies areas that warrant special attention because they pose a high risk of causing disruption; and (2) describes strategies that are effective in addressing problems in those areas. The Administrator should periodically update this guidance to incorporate the experience gained from future transitions.

    Agency Affected: Department of Health and Human Services

 

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