Defense Health Care

During 1998, contractors processed about 28 million health care claims under TRICARE--the military's managed health care program. In eight of its 11 regions, TRICARE's contractors met the Defense Department's (DOD) standard by processing at least 75 percent of the claims on time. Even so, providers are concerned because millions of claims are not being paid promptly. The overall timeliness of contractors' performance masks weaker performance in processing certain specific claims, including those submitted by hospitals. It appears that most of the claims processing problems stem from poor DOD monitoring of and communication with its contractors. Furthermore, DOD's methodology for its payment accuracy audits is statistically unsound and does not accurately measure payment errors. Although the extent of error is unknown, contractors told GAO that TRICARE's inherent complexity also impedes claims processing accuracy. In addition, inappropriate denials are sometimes made because of DOD's poor communication and slowness to make changes that affect the outcomes of ClaimCheck, DOD's software for performing prepayment reviews of claims and preventing overpayments by analyzing the appropriateness of billing on professional claims. Providers are further frustrated because they mistakenly believe that they have no recourse for ClaimCheck denials. DOD and its contractors are trying to address some of these problems.

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.