Defense Health Care:

DOD Needs to Improve Its Monitoring of Claims Processing Activities

T-HEHS-99-78: Published: Mar 10, 1999. Publicly Released: Mar 10, 1999.

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Stephen P. Backhus
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Pursuant to a congressional request, GAO discussed the Department of Defense's (DOD) monitoring of health care claims processing activities, focusing on: (1) GAO's preliminary findings on claims processing timeliness and accuracy; and (2) the effectiveness of a commercially available software program to edit TRICARE claims.

GAO noted that: (1) GAO's work to date for the 1-year period included in its review has shown that TRICARE's contractors in 8 of the 11 regions processed 86 percent (or 16 million) of the claims on time overall, exceeding DOD's timeliness standard of processing 75 percent of claims within 21 days; (2) however, only 66 percent of hospital or institutional claims were processed on time, while 97 percent of pharmacy claims were processed on time, and 81 percent of professional claims were processed on time; (3) the nearly 3 million claims that did not meet the timeliness standards were mostly from physicians and other providers; (4) moreover, DOD does not know whether contractors are paying claims accurately because fewer than half of the claims are subject to the audit, and the methodology used to calculate payment error is statistically unsound; (5) according to contractors, the principal reasons for claims processing problems are the complexity of the TRICARE program and frequent program changes, requiring modifications to claims processing software and procedures; (6) specifically, at the time of GAO's review, DOD had instructed contractors to implement about 650 changes, or about 130 changes on average for each contract; (7) DOD's claims editing software, designed to ensure that providers are accurately reimbursed for services, affected 3.5 percent of claims and saved more than $53 million in fiscal year 1998; (8) GAO found, however, that inappropriate denials were sometimes made because DOD's software did not always comply with industry standards; (9) this resulted from DOD's poor communication and slowness to make program changes that affected editing outcomes; (10) in addition, providers were frustrated because they mistakenly believed that they had no recourse for claims denied by the editing software; and (11) if not resolved, these kinds of problems as well as the volume of claims processed late, despite meeting the timeliness standard overall, could cause problems in attracting the number of civilian providers necessary to ensure that beneficiaries have adequate access to health care.

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