Medicare:

Shared System Conversion Led to Disruptions in Processing Maryland Claims

HEHS-94-66: Published: May 23, 1994. Publicly Released: May 23, 1994.

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Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) efforts to reduce administrative costs by promoting state Medicare contractors' use of shared system conversions, focusing on: (1) the claims processing and payment problems experienced by the Maryland Medicare contractor; and (2) other states' experiences with shared system conversions.

GAO found that: (1) poor contractor management, HCFA planning, and system testing have contributed to claims processing problems and administrative cost increases; (2) disruptions in Medicare claims processing and the rise in erroneous payments have increased the contractor's unanticipated costs by more than $5 million and weakened its payment controls; (3) the contractor was required to pay interest to providers receiving late payments and claims that should have been paid by other insurers; (4) the Maryland Medicare contractor has not realized any of the anticipated annual savings from its reduced administrative costs; and (5) HCFA needs to ensure that sufficient planning and testing for major system changes are provided so that shared system conversion problems are not repeated.

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