Performance of CHAMPUS Fiscal Intermediaries Needs Improvements

Highlights

Several years ago the Department of Defense (DOD) converted its contracts with fiscal intermediaries (FI) under the Civilian Health and Medical Program of the Uniform Services (CHAMPUS) from a cost-reimbursable to a fixed-price basis, in which a set fee is paid for each claim processed. While administrative savings have been achieved under these competitively bid, fixed-price contracts, performance has been less than satisfactory. GAO reviewed the performance under competitively bid, fixed-price contracts of five intermediaries that process over 80 percent of CHAMPUS claims.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
Congress should enact legislation requiring that no benefits be payable for dependents of active-duty members when the benefit claimed is payable under another insurance plan, obtained by employment or law, in which the beneficiary is covered.	Closed	Please call 202/512-6100 for additional information.

Recommendations for Executive Action

Agency Affected Sort descending	Recommendation	Status
Department of Defense	The Secretary of Defense should adopt the 1971 GAO recommendation to limit CHAMPUS payments, when combined with other insurance, to reasonable charges.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by establishing minimum time requirements for processing audit adjustments and monitoring the processing of these adjustments more closely.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS by adopting the letter-of-credit method for providing funds.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by developing specific procedures for FI to follow in identifying and collecting erroneous payments.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should require OCHAMPUS to give FI guidelines for reviewing claims for medical necessity and monitor the implementation of these guidelines.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by recovering overpayments and rectifying underpayments from the incorrect counting of claims by OCHAMPUS.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should fully integrate the claims examination function with system reviews in performing OCHAMPUS visits to FI sites in order to achieve optimum benefits from this function.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by developing guidelines for internal controls over the safeguarding of checks and separation of duties in handling and processing checks.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should require FI to adopt OCHAMPUS contract requirements within specified time limits and follow up on these requirements to assure that they have been implemented and are being administered uniformly.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by determining the types of claims each FI splits and examining a sampling of split claims to verify that reasons for the splits comply with program regulations.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should obtain more uniform administration of reasonable charges by requiring all FIs to use similar charge data in establishing reasonable charges.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should require OCHAMPUS to closely monitor FI implementation of utilization and peer review systems and to assess penalites when systems required either by the contract or by OCHAMPUS regulations are not implemented within specified time periods.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should require OCHAMPUS to develop methods for testing whether FI systems are appropriately identifying claims requiring rejection and to more closely review FI systems for rejecting claims.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should revise contracts to increase FI role in educating beneficiaries in regard to the CHAMPUS program provisions and claim submission requirements.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should require FI to prepare periodic reports in the detail and format necessary for OCHAMPUS to compare performance to standards and require OCHAMPUS to verify the accuracy of the reports during periodic visits to FI's.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should revise contracts to: (1) increase penalties for failure to meet performance standards; and/or (2) provide positive incentives for meeting standards, if the penalties assessed under the liquidated damage provisions of current contracts do not result in acceptable performance.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should revise contracts to provide for penalties and/or incentives relating to performance in such areas as implementation of systems to determine the location and status of inquiries, responsiveness to inquiries, and provision of adequate telephone service.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by adopting procedures that assure that FI routinely and promptly return excess benefit funds to OCHAMPUS.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should establish standards for accuracy of claim processing and benefit administration, and that the standard for payment errors be about 2 percent of billed charges, rather than 4 percent as proposed by OCHAMPUS. This standard should be evaluated periodically and adjusted downward as FI become more proficient in processing CHAMPUS claims.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve specific program areas of claim processing benefit administration by: (1) discontinuing the use of old claim forms and adopting new forms that contain clear instructions on supplying information on other insurance in which beneficiaries are enrolled; (2) requiring FI's to adopt procedures that result in investigating claims where other insurance has made payments in the past; (3) issuing clarifying instructions to FIs on cases requiring further development because of possible third-party liability, automobile insurance, or workmen's compensation; (4) requiring the FIs submit for OCHAMPUS approval their procedures and system description for assuring that nonavailability statements are obtained as required; and (5) issuing guidelines requiring confirmation of eligibility of dependents without identification cards when their last names are different from that of service members.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should explore the possibility of permitting FI to accept sponsors' signatures in lieu of patients' signatures on claims, thereby significantly reducing the number of claims returned to beneficiaries.	Closed Please call 202/512-6100 for additional information.
Department of Defense	The Secretary of Defense should improve the financial management of CHAMPUS funds by issuing clarifying instruction on types of claims entitled to administrative reimbursement.	Closed Please call 202/512-6100 for additional information.

See All 22 Recommendations

Full Report

Full Report (182 pages)

Office of Public Affairs

Chuck Young

Managing Director

youngc1@gao.gov

(202) 512-4800

Topics

Health Care

Administrative costsClaims processing costsContract performanceCost reimbursement contractsFinancial managementFixed price contractsHealth care cost controlHealth care programsMilitary benefits claimsService contracts