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Could Benefit from Adopting Medical Record Reviews' which was released 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

February 2015: 

Improper Payments: 

TRICARE Measurement and Reduction Efforts Could Benefit from Adopting 
Medical Record Reviews: 

GAO-15-269: 

GAO Highlights: 

Highlights of GAO-15-269, a report to congressional committees. 

Why GAO Did This Study: 

Improper payments-—payments that were made in an incorrect amount or 
should not have been made at all-—are a contributor to excess health 
care costs. For programs identified as susceptible to significant 
improper payments, federal agencies are required to annually report 
estimates of improper payments, their root causes, and corrective 
actions to address them. In fiscal year 2013, DOD spent about $21 
billion for TRICARE and estimated improper payments of $68 million, or 
an error rate of 0.3 percent. That year, HHS estimated that $36 
billion, or 10.1 percent, of the total $357 billion in Medicare 
payments were improper. 

GAO was mandated to examine improper payments in TRICARE and Medicare. 
This report addresses (1) TRICARE and Medicare improper payment 
measurement comparability; and (2) the extent to which each program 
identifies root causes of, and develops corrective actions to address 
improper payments. GAO examined DHA and CMS documentation related to 
improper payment measurement and corrective actions, reviewed relevant 
laws and guidance, and interviewed agency officials and contractors. 

What GAO Found: 

The Defense Health Agency (DHA), the agency within the Department of 
Defense (DOD) responsible for administering the military health 
program known as TRICARE, uses a methodology for measuring TRICARE 
improper payments that is less comprehensive than the methodology used 
to measure improper payments in Medicare, the federal health care 
program for the elderly and certain disabled individuals. Both 
methodologies evaluate a sample of health care claims paid or denied 
by the contractors that process the programs' claims. However, DHA's 
methodology only examines the claims processing performance of the 
contractors that process TRICARE's purchased care claims. Unlike 
Medicare, DHA does not examine the underlying medical record 
documentation to discern whether each sampled payment was supported. 
Without examining the medical record, DHA does not verify the medical 
necessity of services provided. The agency also does not validate that 
the diagnostic and procedural information reported on the claim 
matches the care and services documented in the medical record. 
Comparatively, the Department of Health and Human Services' (HHS) 
Centers for Medicare & Medicaid Services' (CMS) approach to measuring 
Medicare improper payments examines medical records associated with a 
sample of claims to verify support for the payment. This methodology 
more completely identifies improper payments beyond those resulting 
from claim processing errors, such as those related to provider 
noncompliance with coding, billing, and payment rules. By not 
examining medical record documentation to discern if payments are 
proper, TRICARE's reported improper payment estimates are not 
comparable to Medicare's estimates, and likely understate the amount 
of improper payments relative to the estimates produced by Medicare's 
more comprehensive methodology. 

The root causes of TRICARE improper payments and related corrective 
actions that DHA has identified are limited to addressing issues of 
contractor noncompliance with claims processing requirements, and are 
less comprehensive than the corrective actions identified by CMS. For 
example, DHA has identified the same single corrective action for each 
of the last three fiscal years to promote contractor compliance, but 
it only addresses improper payments caused by contractors' claims 
processing errors. CMS, by comparison, reports more comprehensive 
information about root causes of improper Medicare payments, develops 
corrective actions that more directly address root causes, and uses 
the information to address the agency's goal of reducing future 
improper payments. For example, for fiscal year 2013, CMS determined 
that some payments were improper because the services could have been 
provided in less intensive settings and CMS subsequently implemented 
two policies to address the problem. In contrast, DHA's less 
comprehensive approach limits its ability to address the causes of 
improper payments in the TRICARE program. 

What GAO Recommends: 

DOD should implement more comprehensive TRICARE improper payment 
measurement methods that include medical record reviews, and develop 
more robust corrective action plans. DOD concurred with GAO’s
recommendations and identified steps the department will need to 
take for implementation. HHS had no comments on the report. 

View [hyperlink, http://www.gao.gov/products/GAO-15-269]. For more 
information, contact Vijay D'Souza at (202) 512-7114 or 
dsouzav@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

TRICARE Improper Payment Measurement Methodology Was Comprehensive 
than Medicare's, Which Led to Improper Payment Rates That Were Not 
Comparable: 

TRICARE's Root Cause Analysis and Corrective Action Plans for Improper 
Payments Only Addressed Contractor Compliance and Were Less Comprehensive 
Than Medicare's: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Department of Defense: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Characteristics of TRICARE and Medicare Improper Payment 
Measurement Methodologies: 

Table 2: Examples of Information Verified by TRICARE and Medicare 
Improper Payment Measurement Methodologies: 

Figure: 

Figure 1: TRICARE and Medicare Outlays and Estimated Improper 
Payments, Fiscal Year 2013: 

Abbreviations: 

AFR: agency financial report: 

CERT: Comprehensive Error Rate Testing: 

CMS: Centers for Medicare & Medicaid Services: 

DHA: Defense Health Agency: 

DME: durable medical equipment: 

DOD: Department of Defense: 

FFS: fee-for-service: 

HHS: Department of Health and Human Services: 

IPIA: Improper Payments Information Act of 2002: 

MAC: Medicare Administrative Contractor: 

MCSC: managed care support contracts: 

OIG: Office of Inspector General: 

OMB: Office of Management and Budget: 

TPCC: TRICARE purchased care contractors: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

February 18, 2015: 

Congressional Committees: 

Improper payments--payments that were made in an incorrect amount or 
should not have been made at all--contribute to excess health care 
costs. In fiscal year 2013, the Department of Defense (DOD) spent 
about $21 billion for the purchased care portion of the military 
health program known as TRICARE.[Footnote 1] The Defense Health Agency 
(DHA), which administers TRICARE, reported improper payments of $68 
million, or an error rate of 0.3 percent in 2013. That same year, the 
Centers for Medicare & Medicaid Services (CMS), the agency within the 
Department of Health and Human Services (HHS) that administers the 
Medicare fee-for-service (FFS) program, estimated that $36 billion, or 
about 10.1 percent, of the total $357 billion in Medicare FFS payments 
were improper.[Footnote 2] Federal agencies annually report improper 
payment estimates and error rates for certain programs as a 
requirement of the Improper Payments Information Act of 2002 (IPIA), as 
amended.[Footnote 3] These laws also require agencies to report the 
root causes of improper payments and identify corrective actions to 
address them. 

The National Defense Authorization Act for Fiscal Year 2014 required 
that we examine the similarities and differences between TRICARE and 
Medicare improper payments.[Footnote 4] While Medicare is a much 
larger program than the TRICARE purchased care system, the programs 
are served by many of the same health care providers, and TRICARE uses 
some of Medicare's coverage and payment policies.[Footnote 5] This 
report addresses (1) the extent to which TRICARE's and Medicare's 
measurement of improper payments are comparable; and (2) the extent to 
which TRICARE and Medicare identify root causes of improper payments, 
and develop effective corrective action plans to reduce them. 

To examine the extent to which TRICARE's and Medicare's measurement of 
improper payments are comparable, we reviewed relevant laws related to 
federal improper payment reporting and related Office of Management 
and Budget (OMB) guidance to understand improper payment error rate 
requirements. We also reviewed DOD and HHS fiscal year 2013 improper 
payments and measurement methodologies, as reported in their agency 
financial reports (AFR). Further, we reviewed improper payment error 
rate methodological documentation that is internal to the DHA and the 
CMS, as well as policy manuals and other guidance in effect during 
fiscal year 2013. In addition, we conducted interviews with officials 
from DHA and its contractor responsible for conducting the TRICARE 
claims reviews used to produce the TRICARE improper payment estimates. 
We also interviewed CMS officials and two of the four contractors 
responsible for the Comprehensive Error Rate Testing (CERT) program, 
which calculates the Medicare improper payment estimates. In addition, 
to understand how TRICARE and Medicare measurement methodologies 
relate to other claims-based programs, we interviewed representatives 
and reviewed documentation from four organizations with knowledge of 
the claims review practices of private health insurance plans. 
[Footnote 6] We also reviewed the improper payment measurement 
methodologies of eight other federal claims-based payment programs, as 
reported in their respective fiscal year 2013 AFRs,[Footnote 7] as 
well as improper payment reviews conducted by HHS's Office of 
Inspector General (OIG). 

To examine the extent to which TRICARE and Medicare identify root 
causes of improper payments, and develop effective corrective action 
plans to reduce them, we reviewed DOD's and HHS's AFRs for fiscal 
years 2011, 2012, and 2013; reviewed internal control standards for 
the federal government, and findings from our prior reports; and 
interviewed officials from DHA and CMS about their roles and 
responsibilities. 

We conducted this performance audit from July 2014 to February 2015 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Fiscal year 2013 marked the 10th year of the implementation of IPIA, 
which, as amended, requires executive agencies to identify programs 
and activities susceptible to significant improper payments, estimate 
the amount of improper payments in susceptible programs and 
activities, and report these improper payment estimates, including 
root causes, and the actions taken to reduce them. In response to 
these requirements, executive agencies, including DOD and HHS, 
annually report improper payment estimates and improper payment rates 
for certain programs in their AFRs.[Footnote 8] (See figure 1.) 

Figure 1: TRICARE and Medicare Outlays and Estimated Improper 
Payments, Fiscal Year 2013: 

[Refer to PDF for image: horizontal bar graph with two pie-charts] 

Total Outlays: 
TRICARE:[A] $20.5 billion; 
* Proper payments: 99.7% ($20.432 billion); 
* Improper payments: 0.3% ($0.068 billion). 
Medicare[B]: $357.4 billion; 
* Proper payments: 89.9% ($321.364 billion); 
* Improper payments: 10.1% ($36.033 billion). 

Source: GAO analysis of Department of Defense and Department of Health 
and Human Services' fiscal year 2013 agency financial reports. GAO-15-
269. 

Notes: 

The TRICARE and Medicare improper payment estimates represent payments 
from the prior fiscal year. Fiscal year 2013 estimates were the most 
recently available at the time we did our work. 

[A] TRICARE outlays and improper payment estimates include payments 
made through the TRICARE purchased care system. DOD refers to TRICARE 
purchased care payments as military health benefits in its agency 
financial report. 

[B] Medicare outlays and improper payment estimates are for the 
Medicare fee-for-service program. 

[End of figure] 

TRICARE Purchased Care Payment Process: 

DHA uses private sector contractors--referred to as TRICARE purchased 
care contractors (TPCC)--to develop and maintain the private health 
care provider networks that make up the purchased care system, as well 
as process and pay claims. The TPCCs include three Managed Care 
Support Contractors (MCSC) that manage health care networks for most 
TRICARE benefits in the United States, one contractor to manage 
overseas claims, one contractor to manage TRICARE's supplemental 
Medicare coverage program, one contractor to manage the pharmacy 
benefit, and three contractors to manage dental benefits. 

Under TRICARE, private providers or TRICARE enrollees submit claims to 
TPCCs who, on behalf of TRICARE, are responsible for adjudicating and 
paying the claims according to established policies and 
procedures.[Footnote 9] TPCCs subject claims to automatic edits to 
ensure accuracy and determine how the claims will be adjudicated--
either paid or denied. For example, automated edits compare claim 
information to TRICARE requirements in order to approve or deny claims 
or to flag them for additional review. TPCCs also conduct more in-
depth reviews of certain claims prior to payment.[Footnote 10] The 
TPCCs processed about 200 million claims in fiscal year 2013. 

Medicare Payment Process: 

Medicare providers submit claims to Medicare Administrative 
Contractors (MAC), which are responsible for processing and paying 
these claims, among other activities.[Footnote 11] MACs subject claims 
to automatic prepayment edits to ensure accuracy, much like the 
automated edits in the TRICARE purchased care program.[Footnote 12] 
For example, some prepayment edits are related to service coverage and 
payment, while others verify that the claim submissions contain needed 
information, that providers are enrolled in Medicare, and that 
patients are eligible Medicare beneficiaries. The MACs processed 1.2 
billion Medicare claims in 2013. 

Postpayment Claims Reviews: 

DHA and CMS also subject a portion of TRICARE and Medicare claims to 
postpayment review by contractors to identify and recoup improperly 
paid claims. Most private health insurers also conduct postpayment 
reviews to identify improper payments, according to organizations we 
spoke to with knowledge of claims review practices. Multiple review 
methodologies exist depending on the objective of the review, but many 
require examination of the underlying medical record. For example, 
reviews examine the underlying patient medical record to validate that 
accurate codes were used,[Footnote 13] that services were rendered as 
the physician directed, were medically necessary,[Footnote 14] and 
were properly documented. The HHS-OIG, which carries out Medicare 
program integrity activities, uses medical record reviews to determine 
the scope of improper payments in targeted reviews of specific service 
types. HHS-OIG officials have stated that by reviewing medical records 
and other documentation associated with a claim, they can identify 
services that are undocumented, medically unnecessary, or incorrectly 
coded, as well as duplicate payments and payments for services that 
were not provided. For example, the HHS-OIG found that 61 percent of 
power wheelchairs provided to Medicare beneficiaries in the first half 
of 2007 were medically unnecessary or had claims that lacked 
sufficient documentation to determine medical necessity, which 
accounted for $95 million in improper Medicare payments.[Footnote 15] 

Improper Payment Reporting Requirements: 

IPIA, as amended, requires federal executive branch agencies to (1) 
review all programs and activities, (2) identify those that may be 
susceptible to significant improper payments, (3) estimate the annual 
amount of improper payments for those programs and activities, (4) 
implement actions to reduce the root causes of improper payments and 
set reduction targets, and (5) report on the results of addressing the 
foregoing requirements. In response to these requirements and OMB 
implementing guidance, agencies generally publicly report their 
improper payment estimates each November in their AFRs. [Footnote 16] 

An improper payment is defined by statute as any payment that should 
not have been made or that was made in an incorrect amount (including 
overpayments and underpayments) under statutory, contractual, 
administrative, or other legally applicable requirements. It includes 
duplicate payments, and any payment made for an ineligible recipient, 
an ineligible good or service, a good or service not received (except 
for such payments where authorized by law), and any payment that does 
not account for credit for applicable discounts. [Footnote 17] OMB 
guidance also instructs agencies to report as improper payments any 
payments for which insufficient or no documentation is found. 
[Footnote 18] 

The extent of agencies' reported improper payments depends, in part, 
on how they test program components for errors. While OMB's 
implementation guidance provides parameters for developing 
statistically valid estimates, it does not specifically dictate how 
agencies should test for improper payments.[Footnote 19] According to 
OMB officials, the latitude in the guidance is because of the 
variation in how federal programs operate. 

Although OMB's implementation guidance allows such variation, several 
federal programs which pay for services based on claims submitted by 
beneficiaries or providers, including Medicare, examined the 
underlying documentation for each of a sample of claims to determine 
the validity of payments as part of their efforts to estimate improper 
payments in fiscal year 2013.[Footnote 20] For example, CMS's method 
for testing payments for errors in Medicaid fee-for-service and 
Children's Health Insurance Program fee-for-service includes both a 
claims processing review and medical record review.[Footnote 21] Most 
Medicaid and Children's Health Insurance Program improper payments 
were identified through the medical record reviews in fiscal year 2013. 

With respect to IPIA's required root cause analysis and corrective 
action reporting,[Footnote 22] the corrective actions agencies develop 
depend, in part, on the improper payments identified by their 
measurement methodology. OMB guidance on corrective actions states 
that agencies should continuously use their improper payment 
measurement results to identify new and innovative corrective actions 
to prevent and reduce improper payments. Internal control standards 
for the federal government also state that federal agencies should 
establish policies and procedures to ensure that the findings of 
audits and other reviews--including the improper payment measurement 
results--are promptly addressed and corrected.[Footnote 23] 

TRICARE Improper Payment Measurement Methodology Was Less Comprehensive 
than Medicare's, Which Led to Improper Payment Rates That Were Not 
Comparable: 

DHA's approach to measuring improper payments in TRICARE was less 
comprehensive than that used by CMS for Medicare. Both methodologies 
evaluate a sample of health care claims paid or denied by the 
contractors that process program claims. However, while CMS's 
methodology examined underlying patient medical records supporting 
each of the sampled claims, DHA did not evaluate comparable medical 
record documentation to discern whether each payment was supported. 
Consequently, TRICARE's reported improper payment estimates were not 
comparable to Medicare's estimates, and likely understated the amount 
of improper payments in the TRICARE program relative to the estimates 
produced by Medicare's more comprehensive measurement methodology. 

TRICARE's Improper Payment Measurement Methodology Was Less 
Comprehensive than Medicare's Methodology: 

The improper payment measurement methodology that DHA used to estimate 
the TRICARE improper payments reported in DOD's fiscal year 2013 AFR 
was less comprehensive than the measurement methodology CMS used to 
estimate Medicare improper payments. Specifically, the supporting 
documentation that DHA's methodology examined to test whether sampled 
health care claims were paid properly was less comprehensive than 
Medicare's methodology, which examined medical record documentation 
for each sampled claim. According to DHA and CMS guidance, the 
agencies also developed their measurement methodologies for different 
purposes. 

TRICARE: DHA's approach to measuring TRICARE improper payments 
examined whether the TPCCs processed and paid submitted claims 
according to TRICARE policies. Since 1994, DHA has employed a 
contractor to conduct postpayment claims reviews for the primary 
purpose of determining the accuracy of TPCCs' claims processing and 
compliance with TRICARE policy, according to DHA's claims review 
contractor guidance, and contractor and DHA officials.[Footnote 24] 
DHA officials reported that DHA has also aggregated these TPCC-
specific compliance reviews to report the national TRICARE improper 
payment rate, as required by IPIA since 2003. While DHA has changed 
aspects of the compliance review methodology to meet reporting 
requirements for statistically significant estimates,[Footnote 25] 
and, according to DHA, to reflect legal and contractual changes 
impacting TRICARE, the basic process of reviewing claims has not 
changed in 20 years. As a result, DHA continues to only identify 
improper payments due to contractor compliance problems. 

To determine the TPCCs' claims processing performance, the TRICARE 
claims review contractor examines a sample of paid and denied claim 
records, including any documentation used by the TPCC to adjudicate 
the claim. For each of the claims the DHA samples, the TPCC is 
required to send to the TRICARE claims review contractor copies of the 
processed claim, the beneficiary's claim history, and any 
documentation it used to process the claim. According to DHA and 
claims review contractor officials, the documentation varies by claim 
and can include information from the DHA eligibility database or prior 
authorization and referral forms. DHA and claims review contractor 
officials reported that medical record documentation is only included 
in the improper payment claims review if the TPCC conducted a medical 
review as part of its original claim processing.[Footnote 26] 
According to the TRICARE claims review contractor, DHA officials, and 
the agency's claims review guidance, the contractor conducts automated 
and manual reviews of the claim and supporting documentation to verify 
that the TPCC processed the claim according to TRICARE policy and 
contract requirements. For example, the claims review contractor uses 
automated auditing tools to verify the clinical accuracy of procedure 
codes listed on the claim. It also verifies that the beneficiary and 
provider were eligible, the claimed services were covered TRICARE 
benefits, the TPCC calculated correct pricing and cost sharing, and 
prior authorization and medical necessity were documented when 
necessary, among other things. If a medical review was conducted by 
the TPCC, DHA and the TRICARE claims review contractor told us that 
the contractor does not typically re-evaluate the TPCC's decision, but 
only ensures that the documentation exists.[Footnote 27] Based on a 
review of DHA's claims review guidance and statements from DHA and 
claims review contractor officials, DHA's improper payment measurement 
methodology also does not independently validate that the medical 
records support the diagnosis or procedure codes submitted on the 
claim. 

According to DHA guidance, if the TPCC did not provide a copy of the 
claim or processed the claim incorrectly based on the documentation 
provided, the claims review contractor will consider some or all of 
the payment as an error and action is taken to adjust the payments 
accordingly. DHA guidance provides TPCCs the opportunity to submit 
additional documentation to support their processing decisions and 
remove certain errors. After the audit results are finalized, DHA uses 
the information to calculate improper payment rates for each TPCC and 
to estimate its national improper payment rate. 

Medicare: CMS developed the Comprehensive Error Rate Testing (CERT) 
program to estimate the national Medicare improper payment rate to 
comply with IPIA, and to monitor payment decisions made by the MACs, 
according to CMS's CERT guidance.[Footnote 28] CMS's CERT program 
methodology focuses on compliance with conditions of Medicare's 
payment policies by both the provider and MAC.[Footnote 29] The CERT 
program targets high-risk aspects of the Medicare program. 
Specifically, CMS officials told us that because Medicare maintains 
common shared systems that determine for all MACs whether a provider 
is enrolled in Medicare, and what the payment rate should be, CMS has 
deemed these aspects of the claims payment process to be at low risk 
of improper payments, and they are not examined through CERT.[Footnote 
30] Instead, the CERT program focuses on problems that MACs cannot 
otherwise identify using automated means, according to CMS officials. 
CMS has employed contractors to carry out the CERT program since 2003. 
[Footnote 31] CMS has reported that the agency has modified the CERT 
measurement methodology to address identified trends and improve 
accuracy. 

CMS's approach to measuring improper payments involves examining the 
medical record associated with a stratified random sample of processed 
Medicare claims to determine whether there is support for the payment, 
and to assess whether the payment followed Medicare's coverage, 
coding, and billing rules. CMS's CERT guidance specifies that, for 
each sampled claim, the CERT documentation contractor obtain the 
medical record and other pertinent documentation from the provider 
that submitted the claim.[Footnote 32] If the provider does not 
provide the medical record and other requested information, the CERT 
review contractor identifies the payment amount as an error. According 
to CMS's CERT guidance and contractor officials, when medical records 
are received, the contractor's clinical and coding specialists review 
the claim and the supporting medical records to assess whether the 
claim followed Medicare's payment rules. Claims that do not follow 
Medicare's payment rules or claims for which the provider submitted 
insufficient documentation to determine that the services were 
provided or medically necessary are classified as an error by the CERT 
reviewer and action is taken to adjust the payments accordingly. 
Medicare allows providers whose claims were denied by the CERT review 
contractor to appeal those claims, and if the error determination for 
a claim is overturned through the appeals process, the CERT review 
contractor adjusts the error accordingly.[Footnote 33] Once all the 
errors are finalized, the CERT statistical contractor calculates the 
national error rates. Table 1 compares the purpose of and 
documentation reviewed by the TRICARE and Medicare improper payment 
measurement methodologies. 

Table 1: Characteristics of TRICARE and Medicare Improper Payment 
Measurement Methodologies: 

Claims review program used to measure improper payments: 
TRICARE: TRICARE claims review; 
Medicare: Comprehensive Error Rate Testing. 

Primary purpose of claims review program: 
TRICARE: To determine the accuracy of TRICARE purchased care 
contractors' (TPCC) claims processing procedures and compliance with 
TRICARE policies; 
Medicare: To estimate the national Medicare fee-for-service improper 
payment rate and a rate for each Medicare Administrative Contractor. 

Documentation examined: 
TRICARE: Varies by claim, support for claim processing decisions 
obtained from TPCC. Processing documentation reviewed for claim 
processing accuracy. Medical record obtained for certain claims, but 
not reviewed by clinical staff for validity of claimed information; 
Medicare: Medical record and other pertinent information obtained from 
provider or supplier that submitted claim. Medical record reviewed by 
clinical staff and certified medical coders for validity of claimed 
information. 

Source: GAO analysis of Defense Health Agency and Centers for Medicare 
& Medicaid Services information. GAO-15-269. 

[End of table] 

TRICARE's Methodology Is Likely to Understate Its Improper Payment 
Rate Compared to Medicare's Methodology: 

Compared to DHA's methodology, CMS's CERT methodology of examining 
underlying medical records to independently verify Medicare claims and 
payments more completely identifies potential improper payments, such 
as those caused by provider noncompliance with coding, billing, and 
payment rules. While DHA's methodology is designed to identify 
improper payments resulting from TPCC claims processing compliance 
errors, it does not comprehensively capture errors that occur at the 
provider level or errors that can only be identified through an 
examination of underlying medical record documentation. Table 2 
compares examples of the information verified by the TRICARE and 
Medicare improper payment measurement methodologies. 

Table 2: Examples of Information Verified by TRICARE and Medicare 
Improper Payment Measurement Methodologies: 

Contractor claims processing review: 

Type of information reviewed: Beneficiary eligibility for services; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Claim was properly executed (e.g., 
appropriate provider or beneficiary signatures on the claim); 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Services indicated on claim were an 
appropriate program benefit; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Procedure code reflects diagnosis and 
information on claim; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Other insurance liability reflected in 
payment; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: No duplicate payments in claim history; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Correct pricing and cost sharing used to 
calculate payment; 
Verified by measurement methodology: 
TRICARE: Measurement methodology verifies; 
Medicare: Measurement methodology does not verify. 

Medical record review: 

Type of information reviewed: Evidence of medical necessity--medical 
record supports that services paid were medically necessary; 
Verified by measurement methodology: 
TRICARE: Measurement methodology does not verify; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Verification of correct coding--medical 
record supports that correct procedure and diagnosis codes were used; 
Verified by measurement methodology: 
TRICARE: Measurement methodology does not verify; 
Medicare: Measurement methodology verifies. 

Type of information reviewed: Documentation of provider services--
provider has documentation to support the services claimed; 
Verified by measurement methodology: 
TRICARE: Measurement methodology does not verify; 
Medicare: Measurement methodology verifies. 

Source: GAO analysis of Defense Health Agency and Centers for Medicare 
& Medicaid Services information. GAO-15-269. 

[End of table] 

CMS's CERT methodology identifies certain improper payments that DHA's 
TRICARE claims review methodology would not fully identify. Such 
improper payments accounted for nearly all of the 10.1 percent 
improper payment rate that CMS reported in fiscal year 2013. For 
example, differences include: 

* Evidence of medical necessity: As noted, the TRICARE claims review 
contractor's medical necessity review is limited to confirming that 
the TPCC completed a medical review when required and the claim passed 
certain edits. Consequently, the review contractor may not identify 
payments for medically unnecessary services for the claims that a TPCC 
did not previously review. The claims review contractor would also 
fail to identify if the TPCC made an improper medical necessity 
determination for those claims that it was required to review because 
the claims review contractor does not re-review the TPCC's 
determination. Conversely, CMS's CERT methodology identifies such 
errors. Through the CERT program's independent medical record review 
for each sampled claim, CMS has estimated that improper payments 
related to medically unnecessary services accounted for 2.8 percent of 
total Medicare payments and 26.6 percent of total improper payments in 
fiscal year 2013. 

* Verification of correct coding: The TRICARE claims review contractor 
confirms that the codes used for reimbursement matches the diagnosis 
claimed and passed coding edits,[Footnote 34] but does not verify that 
the medical documentation validates the codes that were billed or 
diagnosis claimed. As a result, the TRICARE claims review methodology 
could fail to identify if a provider used, and the TPCC paid for, 
services based on an incorrect code. CMS's CERT program identifies 
such errors and estimated that 1.5 percent of Medicare payments in 
fiscal year 2013 were improper because of incorrect coding. Such 
errors accounted for 13.7 percent of total estimated improper payments 
that year. 

* Documentation of provider services: Since DHA's claims review 
methodology does not request documentation from providers, it is 
unclear whether TRICARE providers maintain the required documentation 
to support the services they claim.[Footnote 35] In contrast, CMS 
estimated that 6.1 percent of Medicare payments were improper in 
fiscal year 2013 because of insufficient documentation, which 
accounted for 56.8 percent of total estimated improper 
payments.[Footnote 36] That is, the provider submitted some 
documentation, but the CERT reviewer could not conclude that some of 
the allowed services were actually provided at the level billed or 
were medically necessary. In addition, "no documentation" errors--
where the provider submitted none of the requested medical records--
accounted for 0.2 percent of Medicare payments or 1.4 percent of total 
improper payments in fiscal year 2013. 

DHA officials reported that TRICARE has other postpayment mechanisms 
in place to examine medical records and thus identify the types of 
improper payments that the TRICARE claims review program does not. 
However, the results of the other mechanisms are not reflected in the 
estimated improper payment rates that DHA reports. For example, DHA 
conducts quality monitoring reviews that analyze medical record 
documentation and identify problems such as paid services that were 
not medically necessary. DHA policy also requires the TPCCs to conduct 
quarterly internal reviews of a sample of medical records to determine 
the medical necessity of care provided, and determine if the 
diagnostic and procedural information of the patient--as reported on 
the claim--matches the physician's description of care and services 
documented in the medical record. However, the potential problems 
identified by these reviews are not considered or publicly reported as 
improper payments in the DOD's AFR. 

Due to the fundamental differences in DHA's and CMS's approaches to 
measuring improper payments, reported improper payment rates for 
TRICARE and Medicare are not comparable. By not examining underlying 
medical record documentation to discern if payments for claims are 
proper, DHA is likely not identifying all types of improper payments 
in TRICARE, and thus understating the rate of improper payments. OMB's 
IPIA implementation guidance does not specifically dictate how 
agencies should test for improper payments. However, Medicare and 
certain other federal claims-based programs conduct more comprehensive 
reviews that include examination of the underlying documentation for 
each sampled claim to determine the validity of payment as part of 
their efforts to estimate improper payments under IPIA. The HHS-OIG 
and most of the organizations with knowledge of health care claims 
review practices that we spoke with also acknowledge that reviewing 
the underlying medical records is needed to verify appropriate payment. 

TRICARE's Root Cause Analysis and Corrective Action Plans for Improper 
Payments Only Addressed Contractor Compliance and Were Less Comprehensive 
Than Medicare's: 

The root causes and related corrective actions that DHA reported in 
DOD's fiscal year 2013 AFR are limited to addressing issues of 
contractor noncompliance with claims processing requirements. For 
example, DHA reported the following root causes for the 0.3 percent 
errors it found to be improper: incorrect pricing for medical 
procedures and equipment (47 percent), missing authorization or pre-
authorization (14 percent), and cost sharing or deductible 
miscalculations (11 percent).[Footnote 37] These categories are 
largely processing errors that reflect DHA's approach to identifying 
errors, and do not address underlying causes of improper payments not 
related to contractor compliance, such as errors made by providers who 
may not fully understand or comply with DHA policies. DHA cannot fully 
identify provider-level improper payment errors without reviews of the 
paperwork submitted by providers, including reviews of underlying 
medical records. 

DHA's one corrective action for TRICARE for the past three fiscal 
years--to incentivize payment accuracy through contract bonuses and 
penalties based on audit results--may be a good method to promote 
contractor compliance, but it will not address providers' 
noncompliance with billing rules. DHA officials said that they have 
not changed or added to the corrective action plan in at least three 
fiscal years because contract requirements are still in place to 
financially incentivize contractors to process health care claims 
correctly. Although DHA could include other corrective actions, the 
current approach only addresses improper payments caused by 
contractors' claims processing errors. 

Under the IPIA, as amended, and implementing guidance, agencies are to 
identify program weaknesses, make improvements, and reduce future 
improper payments. Our prior work has found that DHA missed 
opportunities to prevent future improper payments; for example, in a 
May 2013 report examining IPIA compliance throughout DOD, we found 
that DOD did not adequately implement key IPIA provisions and OMB 
requirements for fiscal year 2011. We recommended that DOD's 
corrective action plans be developed using best practices to ensure 
that root causes are addressed, improper payments reduced, and federal 
dollars protected.[Footnote 38] A senior DOD official told us that the 
agency planned to implement this recommendation by November 15, 2014; 
however, DHA cannot address these recommendations with respect to 
TRICARE until it has identified improper payments using a measurement 
methodology that goes beyond contractor compliance issues. 

CMS, by comparison, reported more detailed and constructive 
information about the 10.1 percent of Medicare payments it reported as 
improper in HHS's fiscal year 2013 AFR. In addition to describing the 
types of errors that most frequently led to improper payments, CMS 
also provided contextual information about specific factors that 
contributed to the errors. For example, CMS reported that some 
improper payments were made for services that, while clinically 
appropriate, could be provided in less intensive settings and 
therefore did not meet Medicare's medical necessity requirements. CMS 
also identified the provider types that contributed most substantially 
to each type of improper payment. For example, hospitals contributed 
substantially to medical necessity errors. 

CMS's multiple corrective actions are more detailed and clearly tied 
to reported root causes of Medicare improper payments than TRICARE's. 
For example, CMS is: 

* expanding the Medicare Recovery Audit Contractor program to allow 
prepayment reviews of certain types of claims with historically high 
amounts of improper payments, therefore preventing improper payments 
from being made in the first place;[Footnote 39] and: 

* implementing two policies pertaining to inpatient hospital claims 
that will specifically address the identified root cause of care being 
provided in inappropriately intensive settings. 

CMS provides MACs with contract-specific root causes of improper 
payment data on a quarterly basis. These data are used by MACs to 
update their corrective actions quarterly.[Footnote 40] Quarterly 
updates to corrective actions allow CMS and its contractors to tailor 
efforts to address specific root causes of errors, and review its 
plans for reducing errors using measurable targets, which help the 
agency know when it has made progress in addressing program weaknesses. 

In addition to reporting root causes and corrective actions in the 
AFR, CMS uses its Medicare improper payment results to address the 
agency's stated goal of reducing Medicare improper payments due to 
programmatic weaknesses. For example, CMS: 

* annually develops and reports a more detailed analysis of improper 
payment findings than is provided in the AFR by providing specific 
examples of areas identified as particularly vulnerable to improper 
payments, analysis of root causes of those errors, and detailed error 
information by service and provider;[Footnote 41] and: 

* undertakes program-wide action to address improper payment findings. 
For example, after finding that durable medical equipment suppliers 
contributed substantially to insufficient documentation errors, CMS 
began a prior authorization demonstration in seven states to reduce 
improper payments for power mobility devices. 

In comparison with DHA, CMS has a more comprehensive approach to 
identifying Medicare improper payments and root causes, and addresses 
those weaknesses through its corrective actions. Without a more 
comprehensive approach, DHA will be limited in its ability to address 
the causes of improper payments in the TRICARE program. 

Conclusions: 

The extent of improper payments identified by agencies depends, in 
part, on how they test their program components for errors. TRICARE 
and Medicare are at similar risk for improper payments because both 
health care programs pay providers on a fee-for-service basis, the 
programs' providers overlap, both programs depend on contractors to 
process and pay claims, and TRICARE uses some of Medicare's coverage 
and payment policies. However, DHA does not have as robust an approach 
to measuring improper payments in the TRICARE program as CMS has for 
the Medicare program. Specifically, DHA does not routinely examine 
medical record documentation in its approach to measuring TRICARE 
improper payments. While DHA has other reviews in place that analyze 
medical record documentation and could be leveraged to more 
comprehensively identify improper payments, the results of those 
reviews are not considered or reported as improper payments. This may 
account for why the reported improper payment rate for TRICARE is less 
than 1 percent while the reported rate for Medicare is 10 percent. 
Although TRICARE is a smaller program compared to Medicare, it still 
costs the government a significant amount of money--about $21 billion 
in fiscal year 2013 for the purchased care portion of TRICARE--and DOD 
has determined TRICARE to be susceptible to significant improper 
payments under IPIA, as amended. Without a robust measure of improper 
payment rates in the TRICARE program, DHA cannot effectively identify 
root causes and take steps to address practices that contribute to 
improper payments and excess spending. 

Recommendations for Executive Action: 

To better assess and address the full extent of improper payments in 
the TRICARE program, we recommend that the Secretary of Defense direct 
the Assistant Secretary of Defense (Health Affairs) to take the 
following two actions: 

1. implement a more comprehensive TRICARE improper payment measurement 
methodology that includes medical record reviews, as done in other 
parts of its existing postpayment claims review programs; and: 

2. once a more comprehensive improper payment methodology is 
implemented, develop more robust corrective action plans that address 
underlying causes of improper payments, as determined by the medical 
record reviews. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOD and HHS for comment. In its 
written comments, reproduced in appendix I, DOD concurred with our 
recommendations. DOD also outlined the steps the department will take 
prior to implementation, including conducting discussions within the 
department; developing implementation plans; and hiring or contracting 
for the needed workforce to begin implementing the recommendations. 
DOD noted that takingthese steps would take time. Given the 
potentially high cost of improper payments, we believe DOD should move 
expeditiously. HHS had no comments on the report. 

We are sending copies of this report to appropriate congressional 
committees, the Secretary of Defense, the Assistant Secretary of 
Defense (Health Affairs), the Secretary of Health and Human Services, 
the Administrator of CMS, and other interested parties. The report 
also will be available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or dsouzav@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix II. 

Signed by: 

Vijay A. D'Souza: 
Director, Health Care: 

List of Committees: 

The Honorable John McCain: 
Chairman: 
The Honorable Jack Reed: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Thad Cochran: 
Chairman: 
The Honorable Richard J. Durbin: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Mac Thornberry: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Rodney Frelinghuysen: 
Chairman: 
The Honorable Pete Visclosky: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

Office of The Assistant Secretary Of Defense: 
Health Affairs: 
Defense Health Agency: 
7700 Arlington Boulevard, Suite 5101: 
Falls Church, Virginia 22042-5101: 

January 22, 2015: 

Mr. Vijay D'Souza: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington DC 20548: 

Dear Mr. D'Souza: 

This is the Department of Defense response to the Government 
Accountability Office (GAO) Draft Report GA0-15-269, "Improper 
Payments: TRICARE Measurement and Reduction Efforts Could Benefit from 
Adopting Medical Record Reviews." dated December 23, 2014 (GAO Code 
291216). 

Thank you for the opportunity to review and provide comments on the 
Draft Report. Overall, I concur with the report's findings and 
conclusions and provide responses to the two recommendations. 

My specific comments to Recommendations 1 and 2 are enclosed for your 
consideration to incorporate into the Final Report. The Defense Health 
Agency continues to strive for achieving appropriateness in the 
identification and reporting of improper payments under the TRICARE 
Program. The Agency welcomes the findings as a method for identifying 
areas of potential weakness and a means for improving operational 
procedures. 

My points of contact for this issue is Ms. Karla Johnson-Griffith 
(Functional) who may be reached at (303) 676-3726, or Karla.Johnson-
Griffith@dha.mil and Mr. Gunther Zimmerman (Audit Liaison) who may be 
reached at (703) 681-4360, or Gunther.Zimmerman@dha.mil. 

Sincerely, 

Signed by: 

Joseph B. Marshall, Jr. 
Director, Business Support Directorate: 

Enclosures: As stated. 

GAO Draft Report Dated December 23, 2014: 
GAO-15-269 (GAO Code 291216): 

"Improper Payments: TRICARE Measurement And Reduction Efforts Could 
Benefit Form Adopting Medical Record Reviews" 

Department Of Defense Comments To The GAO Recommendation: 

To better assess and address the full extent of improper payments in 
the TRICARE program, we recommend that the Secretary of Defense direct 
the Assistant Secretary of Defense (Health Affairs) to take the 
following two actions: 

Recommendation 1: Implement a more comprehensive TRICARE improper 
payment measurement methodology that includes medical record reviews, 
as done in other parts of its existing post payment claims review 
programs; and; 

Department of Defense Response: Concur. Defense Health Agency's 
policy, procedures and contractual requirements for identifying 
improper payments include the review of TRICARE purchased care 
contractors' claims processing procedures by an independent 
contractor, and the statistically valid sampling of medical, pharmacy, 
and active duty dental claims. As noted, reviews have been performed 
to ensure that purchased care contractors' claims are processed in 
accordance with TRICARE policy and contract requirements. 

Implementing a more comprehensive improper payment measurement 
methodology that includes medical record reviews is possible, but will 
require time to: 

1. Conduct in-depth discussions with agency components;
2. Develop an enterprise-wide implementation plans; and
3. Hire or contract for the workforce required to achieve the proposed 
recommendation. 

Recommendation 2: Once a more comprehensive improper payment 
methodology is implemented, develop more robust corrective action 
plans that address underlying causes of improper payments, as 
determined by the medical record reviews. 

Department of Defense Response: Concur with no comment. 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Vijay D'Souza, (202) 512-7114 or dsouzav@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Lori Achman, Assistant 
Director; Rebecca Abela; Drew Long; Dawn Nelson; and Jennifer 
Whitworth made key contributions to this work. 

[End of section] 

Related GAO Products: 

Improper Payments: Government-Wide Estimates and Reduction Strategies. 
[hyperlink, http://www.gao.gov/products/GAO-14-737T]. Washington, 
D.C.: July 9, 2014. 

Medicare: Further Action Could Improve Improper Payment Prevention and 
Recoupment Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-14-619T]. Washington, D.C.: May 20, 
2014. 

Medicare Program Integrity: Contractors Reported Generating Savings, 
but CMS Could Improve Its Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-14-111]. Washington, D.C.: October 25, 
2013. 

Medicare Program Integrity: Increasing Consistency of Contractor 
Requirements May Improve Administrative Efficiency. [hyperlink, 
http://www.gao.gov/products/GAO-13-522]. Washington, D.C.: July 23, 
2013. 

DOD Financial Management: Significant Improvements Needed in Efforts 
to Address Improper Payment Requirements. [hyperlink, 
http://www.gao.gov/products/GAO-13-227]. Washington, D.C.: May 13, 
2013. 

Medicare Program Integrity: Few Payments in 2011 Exceeded Limits under 
One Kind of Prepayment Control, but Reassessing Limits Could Be 
Helpful. [hyperlink, http://www.gao.gov/products/GAO-13-430]. 
Washington, D.C.: May 9, 2013. 

Medicaid: Enhancements Needed for Improper Payments Reporting and 
Related Corrective Action Monitoring. [hyperlink, 
http://www.gao.gov/products/GAO-13-229]. Washington, D.C.: March 29, 
2013. 

Medicare Program Integrity: Greater Prepayment Control Efforts Could 
Increase Savings and Better Ensure Proper Payment. [hyperlink, 
http://www.gao.gov/products/GAO-13-102]. Washington, D.C.: November 
13, 2012. 

Program Integrity: Further Action Needed to Address Vulnerabilities in 
Medicaid and Medicare Programs. [hyperlink, 
http://www.gao.gov/products/GAO-12-803T]. Washington, D.C.: June 7, 
2012. 

Improper Payments: Remaining Challenges and Strategies for 
Governmentwide Reduction Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-12-573T]. Washington, D.C.: March 28, 
2012. 

Improper Payments: Moving Forward with Governmentwide Reduction 
Strategies. [hyperlink, http://www.gao.gov/products/GAO-12-405T]. 
Washington, D.C.: February 7, 2012. 

Medicare Integrity Program: CMS Used Increased Funding for New 
Activities but Could Improve Measurement of Program Effectiveness. 
[hyperlink, http://www.gao.gov/products/GAO-11-592]. Washington, D.C.: 
July 29, 2011. 

Improper Payments: Reported Medicare Estimates and Key Remediation 
Strategies. [hyperlink, http://www.gao.gov/products/GAO-11-842T]. 
Washington, D.C.: July 28, 2011. 

Improper Payments: Progress Made but Challenges Remain in Estimating 
and Reducing Improper Payments. [hyperlink, 
http://www.gao.gov/products/GAO-09-628T]. Washington, D.C.: April 22, 
2009. 

Improper Payments: Status of Agencies' Efforts to Address Improper 
Payment and Recovery Auditing Requirements. [hyperlink, 
http://www.gao.gov/products/GAO-08-438T]. Washington, D.C.: January 
31, 2008. 

Improper Payments: Federal Executive Branch Agencies' Fiscal Year 2007 
Improper Payment Estimate Reporting. [hyperlink, 
http://www.gao.gov/products/GAO-08-377R]. Washington, D.C.: January 
23, 2008. 

Medicare: Improvements Needed to Address Improper Payments for Medical 
Equipment and Supplies. [hyperlink, 
http://www.gao.gov/products/GAO-07-59]. Washington, D.C.: January 31, 
2007. 

Strategies to Manage Improper Payments: Learning From Public and 
Private Sector Organizations. [hyperlink, 
http://www.gao.gov/products/GAO-02-69G]. Washington, D.C.: October 
2001. 

[End of section] 

Footnotes: 

[1] TRICARE includes several benefit options to provide health care to 
military service members, retirees, and their families. Medical care 
under TRICARE is provided by DOD personnel in military treatment 
facilities, or through civilian providers in civilian facilities, 
which is known as TRICARE's purchased care system. 

[2] Medicare is the federally financed health insurance program for 
persons age 65 or over, certain individuals with disabilities, and 
individuals with end-stage renal disease. Medicare consists of four 
parts. Parts A and B are known as Medicare FFS. Part A covers hospital 
and other inpatient stays; and Part B covers hospital outpatient, 
physician, and other services. Part C, also known as Medicare 
Advantage, is the private plan alternative to Medicare FFS under which 
beneficiaries receive benefits through private health plans. Part D is 
the outpatient prescription drug benefit. Separate error rates are 
reported for Part C and Part D. 

[3] Pub. L. No. 107-300, 116 Stat. 2350 (2002), as amended by the 
Improper Payments Elimination and Recovery Act of 2010, Pub. L. No. 
111-204, 124 Stat. 2224 (2010) and the Improper Payments Elimination 
and Recovery Improvement Act of 2012, Pub. L. No. 112-248, 126 Stat. 
2390 (2013) (codified, as amended, at 31 U.S.C. § 3321 note). TRICARE 
and Medicare fiscal year improper payment estimates represent payments 
from the prior year. Fiscal year 2013 estimates were the most recently 
available at the time we did our work. 

[4] Pub. L. No. 113-66, § 725(a), 127 Stat. 672, 800-801 (2013). Our 
review focused on Medicare FFS because both Medicare FFS and TRICARE 
purchased care operate as fee-for-service. That is, they do not employ 
capitated payment arrangements. Throughout this report, we refer to 
Medicare FFS as Medicare and refer to TRICARE purchased care as 
TRICARE. 

[5] Most providers that participate in the TRICARE purchased care 
system, including hospitals, must also be Medicare participating 
providers. In addition, many of TRICARE's covered benefits mirror 
Medicare's coverage. 

[6] We interviewed representatives from the American Association of 
Medical Audit Specialists, the American Association of Professional 
Coders, the America's Health Insurance Plans, and the National 
Association of Insurance Commissioners. 

[7] We reviewed the methodologies of the Social Security 
Administration's Supplemental Security Income, Disability Insurance, 
and Old-Age and Survivors Insurance; HHS's Child Care Development 
Fund, Medicaid, and the Children's Health Insurance Program; the 
Office of Personnel Management's Federal Employee Health Benefit 
Program; and the Veterans Health Administration's Non-VA Care Fee 
program. 

[8] In November 2014, after we completed the majority of the work for 
this review, DOD published its fiscal year 2014 AFR, which included an 
estimated TRICARE improper payment rate of 0.87 percent. For fiscal 
year 2014, DHA modified its TRICARE improper payment calculation 
formula in response to our prior findings and those of the DOD-OIG, 
which we do not consider material for this review. Fiscal year 2014 
improper payment reporting is outside the scope of this review. HHS 
also published its fiscal year 2014 AFR in November 2014, including an 
estimated Medicare improper payment rate of 12.7 percent. CMS 
attributed some of the improper payment increase to documentation 
requirement changes for certain services. Although fiscal year 2014 
improper payment reporting is outside the scope of this review, the 
fiscal year 2014 rates reported did not change the key findings of our 
review. 

[9] TRICARE benefits managed by TPCCs are not paid through capitation 
arrangements--fixed amounts per member per time period--as may be used 
for other managed care programs. The MCSCs, a subset of the TPCCs, are 
held liable for payment errors for certain claims. 

[10] TPCCs are required to conduct medical reviews for certain 
services, such as for experimental services. Medical reviews verify 
the medical necessity of services and involve interpretation of 
medical records by a registered nurse. 

[11] There were 12 MACs responsible for Medicare Parts A and B claims 
and 4 MACs responsible for durable medical equipment (DME) claims in 
fiscal year 2014. 

[12] MACs review medical record documentation of certain claims prior 
to payment, such as those submitted by providers with identified 
problems submitting correct claims. 

[13] Claim reimbursement is based on the procedure codes and diagnosis 
codes included on each claim. Procedure codes describe what service, 
or bundle of services, were provided to the patient. Diagnosis codes 
establish why the visit and services provided during the visit were 
needed. Some portion of coding verification can be automated, but 
validation that the accurate diagnosis code was used requires medical 
record review by trained coders. 

[14] Medical necessity means the health care services or supplies 
needed to prevent, diagnose, or treat an illness, injury, condition, 
disease, or its symptoms meet accepted standards of medicine. Both 
TRICARE and Medicare, as well as private health plans, define the 
medical necessity requirements in which they will pay for claims. 

[15] See for example, HHS-OIG, Most Power Wheelchairs in the Medicare 
Program Did Not Meet Medical Necessity Guidelines, OEI-04-09-00260, 
July 2011. 

[16] For programs with improper payment estimates greater than $10 
million, agencies must report the gross estimates of the annual amount 
of improper payments (i.e., overpayments plus underpayments) made in 
the program and a description of the methodology used to derive those 
estimates in their AFRs. 

[17] IPIA, § 2(g)(2) (codified, as amended, at 31 U.S.C. § 3321 note). 

[18] OMB, Memorandum M-11-16, Issuance of Revised Parts I and II to 
Appendix C of OMB Circular A-123 (Apr. 14, 2011); OMB, Memorandum M-15-
02, Appendix C of OMB Circular A-123, Requirements for Effective 
Estimation and Remediation of Improper Payments (Oct. 20, 2014). 

[19] For the purposes of this review, we examined improper payment 
testing methodology, which refers to how the agency reviews payments 
to identify whether they were improper. By comparison, the agency's 
sampling methodology--how it determines which payments to sample to 
provide a statistically significant error rate--and the statistical 
methods used to calculate improper payment rates are outside the scope 
of this review. Additionally, DOD-OIG recently issued a review of 
DHA's sampling and estimating methodologies. See DOD-OIG, DoD 
Methodologies to Identify Improper Payments in the Military Health 
Benefits and Commercial Pay Programs Need Improvement, DODIG-2015-068, 
January 15, 2015. 

[20] In addition to Medicare, the following six federal programs 
reviewed the underlying documentation from providers or beneficiaries: 
Medicaid, Children's Health Insurance Program, Child Care Development 
Fund, Disability Insurance, Old-Age and Survivor's Insurance, and 
Supplemental Security Income. 

[21] Medicaid and the Children's Health Insurance Program are the 
joint federal-state programs administered by the states that provide 
health insurance to certain low-income individuals and children. CMS 
also reports separate beneficiary eligibility improper payment rates 
for Medicaid and the Children's Health Insurance Program. 

[22] IPIA, § 2(d) (codified, as amended, at 31 U.S.C. § 3321 note). 

[23] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[24] In this report, we refer to this contractor as the TRICARE claims 
review contractor. 

[25] DHA has developed sample sizes to comply with OMB precision 
standards and has added active duty dental claims and pharmacy claims, 
in addition to medical claims, to its improper payment estimates. For 
fiscal year 2014, DHA also changed its improper payment calculation so 
that it is based on the paid amount, rather than billed amount, in 
response to past GAO and DOD-OIG findings. Though these changes 
improve the accuracy of estimates related to TPCC claims processing 
errors--the sampling methodology and statistical methods, they do not 
address the underlying method of testing claims--the testing 
methodology. 

[26] TPCCs are required to conduct prepayment medical reviews for 
certain services, such as for experimental services. Medical reviews 
verify the medical necessity of services and involve interpretation of 
medical records by a registered nurse. DHA could not provide the 
percentage of claims that TPCCs review for medical necessity prior to 
payment. 

[27] The TRICARE claims review contractor is required to have clinical 
staff (e.g. registered nurse and physician) accessible to conduct a 
medical review. Although the claims review contractor has such staff 
available, DHA and review contractor officials we spoke to said the 
review contractor had not completed an independent medical review for 
any claims in at least the last four years. 

[28] CMS originally established two programs to monitor the payment 
accuracy of the Medicare FFS program: the Hospital Payment Monitoring 
Program and the CERT program. The Hospital Payment Monitoring Program 
measured the improper payment rate only for Part A inpatient hospital 
claims, while the CERT program measured the improper payment rate for 
all other Part A and Part B Medicare FFS claim types. Beginning with 
the 2009 reporting period, the Hospital Payment Monitoring Program was 
dissolved and the CERT program became fully responsible for sampling 
and reviewing all Medicare claim types for improper payments. 

[29] For the purposes of this report we refer to providers and 
suppliers--those that provide DME supplies--collectively as providers. 

[30] According to CMS officials, the agency has other checks in place 
to ensure the correct functionality of the Medicare provider 
enrollment and shared claims processing systems. 

[31] There are four CERT contractors--statistical, claims review, 
documentation, and electronic support--that work together to carry out 
the CERT program. This report focuses on the work of the CERT 
documentation and claims review contractors. 

[32] Other pertinent documentation varies by type of claim, but in 
nearly all circumstances includes the medical record. For example, for 
DME claims, the contractor could request a certificate of medical 
necessity or model device number in addition to the medical records 
that support the medical necessity of the device. If the MAC fully 
denied the sampled claim for a reason other than medical review, then 
the CERT reviewer would only validate proper processing of the claim 
and not review the medical record. 

[33] The Medicare appeals process provides beneficiaries, providers, 
and suppliers the ability to dispute Medicare coverage and payment 
decisions. 

[34] Automated edits are programmed to verify the accuracy of 
procedure code billing on claims. For example, edits identify 
situations in which the beneficiary's age or gender does not correlate 
with the procedure code. 

[35] If the TPCC did not provide required documentation to the review 
contractor to support its adjudication decision, then the TRICARE 
claims review contractor will consider the payment improper. While 
this verifies that the TPCC reviewed documentation when needed, it 
does not verify that the provider maintained the required 
documentation for every sampled claim. 

[36] CERT categorizes errors into five types--(1) medical necessity, 
(2) incorrect coding, (3) insufficient documentation, (4) no 
documentation, and (5) other. Other errors, such as duplicate 
payments, accounted for 0.2 percent of total Medicare payments and 1.4 
percent of total improper payments that year. 

[37] The remaining 28 percent of TRICARE errors were not categorized 
in DOD's fiscal year 2013 AFR root cause analysis. 

[38] GAO, DOD Financial Management: Significant Improvements Needed in 
Efforts to Address Improper Payment Requirements, [hyperlink, 
http://www.gao.gov/products/GAO-13-227] (Washington, D.C.: May 2013). 

[39] Medicare Recovery Audit Contractors identify underpayments and 
overpayments, and recoup overpayments in the Medicare program. 

[40] In their plans, contractors must describe the corrective actions 
(that is, medical review and provider outreach and education actions) 
that they plan to take to lower their error rates. 

[41] HHS, The Supplementary Appendices for the Medicare Fee-for-
Service 2013 Improper Payments Report (January 2014); HHS, Medicare 
Fee-for-Service 2013 Improper Payments Report (July 2014). 

[End of section] 

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