ADP Systems:

HCFA's Failure to Follow Guidelines Makes Systems Effectiveness Uncertain

IMTEC-90-53: Published: Jul 26, 1990. Publicly Released: Jul 26, 1990.

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Pursuant to a congressional request, GAO reviewed the development, progress, performance, and cost of the Common Working File (CWF), which the Health Care Financing Administration (HCFA) implemented to improve Medicare claims processing.

GAO found that: (1) in developing CWF, HCFA believed that it did not have to prepare a required plan, since it employed contractors to process claims, rather than operating its own claims-processing facility; (2) HCFA also did not follow federal guidelines during CWF development; (3) HCFA did not estimate project development costs before initiating CWF, and instead budgeted for CWF as a productivity improvement item within a contractor section of its annual budget; (4) CWF is expected to cost about $103.8 million upon completion; (5) although HCFA justified CWF on the basis of expected savings, resulting primarily from the reduction of payment errors, HCFA could not provide documentation supporting those savings; (6) HCFA did not document actual savings during pilot testing; and (7) HCFA estimated that the annual cost of operating CWF would be about $30 million, negating the $20 million in administrative savings HCFA expected from CWF implementation.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department partially concurred with this recommendation and stated that HCFA conducts ongoing cost-effectiveness reviews and that the Inspector General is studying future alternatives.

    Recommendation: In order to ensure that CWF is cost-effective and to limit the risks inherent in developing information systems, the Secretary of Health and Human Services should direct the Administrator, HCFA, to evaluate the cost-effectiveness of continuing to operate the CWF system, and if the system is found not to be cost-effective, to determine what, if any, alternatives exist.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HCFA agreed to base the future development of CWF on established formal procedures, including federal information system development standards.

    Recommendation: In order to ensure that CWF is cost-effective and to limit the risks inherent in developing information systems, the Secretary of Health and Human Services should direct the Administrator, HCFA, to follow federal information system development standards in all future system modifications and acquisitions, seeing to it that: (1) all phases of a project's development are adequately documented; and (2) system costs and benefits are fully identified and justified;

    Agency Affected: Department of Health and Human Services

 

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