Medicare Billing:

Commercial System Will Allow HCFA to Save Money, Combat Fraud and Abuse

T-AIMD-98-166: Published: May 19, 1998. Publicly Released: May 19, 1998.

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Pursuant to a congressional request, GAO discussed: (1) the Health Care Financing Administration's (HCFA) progress in testing and acquiring a commercial system for identifying inappropriate Medicare bills; (2) how HCFA tested this commercial system; (3) HCFA's initial management decisions and their consequences; and (4) HCFA's plans for immediate implementation.

GAO noted that: (1) from contract award on September 30, 1996, through its conclusion at the end of December 1997, both HCFA and contractor staff made significant progress in integrating the test commercial system and evaluating its potential for Medicare use nationwide; (2) HCFA used both a policy evaluation team and a technical team to concentrate separately on aspects of the test; (3) a detailed comparison of the commercial system's payment policies with those of Medicare identified conflicting edits--inconsistencies that in some cases would increase and in others decrease the amount of the Medicare payments; (4) the technical team: (a) developed the design specifications and related computer code necessary for integrating the commercial system into Medicare claims-processing software; (b) integrated the claims-auditing system into the system that processes Medicare part B claims; and (c) conducted numerous tests of the integrated system to determine its effect both on processing speed and accuracy; (5) HCFA management was kept apprised of the status of the test through regular reports and frequent contact with the project management team; (6) HCFA's contract limited the use of the test system to its Iowa site and did not include a provision for implementation throughout the Medicare program if the test proved successful; (7) additional time will be needed to award another contract to implement the test system's claims-auditing software; (8) HCFA representatives recommended that the HCFA Administrator award a contract to develop HCFA-owned claims-auditing edits to supplement the correct coding initiative, rather than acquire these edits commercially; (9) GAO found serious flaws in terms of cost, overall effectiveness, and underlying assumptions; (10) HCFA's plan to develop its own edits was also inconsistent with Office of Management and Budget policy in acquiring information resources; (11) HCFA has not demonstrated the cost-effectiveness of its plan to develop edits internally; (12) HCFA plans to begin immediately to acquire and implement commercial claims-auditing software in as expedient a manner as possible; and (13) HCFA now plans to move quickly to take advantage of the comprehensive claims-auditing capability that is available.

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