Defense Health Care
TRICARE Claims Processing Has Improved but Inefficiencies Remain Gao ID: GAO-04-69 October 15, 2003Testifying before Congress in 2002, military beneficiary groups and civilian managed care support contractors described problems with the processing of TRICARE claims for civilian-provided care. These problems included slow payments and procedures that made claims processing inefficient. The Bob Stump National Defense Authorization Act of 2003 required GAO to review improvements to TRICARE claims processing and continuing impediments to claims processing efficiency. Specifically, GAO describes (1) efforts to improve claims processing and changes in processing timeliness and (2) Department of Defense (DOD) procedures and data that continue to affect claims processing efficiency. To identify improvements to claims processing and impediments to processing efficiency, GAO analyzed 1999 and 2002 claims data for changes in processing timeliness. GAO also interviewed and analyzed claims processing documentation from DOD officials, managed care support contractors, and claims processors.
In an effort to improve TRICARE claims processing, DOD and its managed care support (MCS) contractors have made changes that are designed to make it more efficient. First, they have jointly identified--and then eliminated or changed--certain DOD requirements they deemed inefficient and nonessential to accurate claims processing. For example, contractors are no longer required to hold claims with incomplete information and request the missing information from the provider or beneficiary. Instead, contractors may now return some claims with missing information. In another change, DOD eliminated preauthorization requirements for certain procedures and gave the MCS contractors more latitude for determining when preauthorizations are appropriate. To encourage providers to submit their claims electronically, DOD gave MCS contractors the authority to decide whether to adjudicate electronically submitted claims sooner than those submitted on paper. Further, MCS contractors have worked with their claims processors to implement new technologies for data input, claims routing, customer service, and claims submission. Finally, MCS contractors and their claims processors have improved the timeliness with which they process claims. In fiscal year 2002, claims processors processed over 97 percent of claims in 30 days or less--an improvement over fiscal year 1999, when 91 percent of claims were processed in 30 days or less. Although DOD and its MCS contractors have made changes to improve claims processing, some DOD procedures and inaccuracies in its data continue to create inefficiencies in TRICARE claims processing. Some DOD procedures may create inefficiencies by inadvertently increasing the demand for customer service, which claims processors are required to provide. Additionally, inaccuracies in DOD eligibility data--data that are needed to process TRICARE claims--can contribute to claims processing delays or rework if, for example, claims must be reprocessed when errors are identified. Finally, some DOD procedures lead to rework for claims processors, either in the form of reprocessing claims or reprogramming processing software. For example, when DOD makes program changes to TRICARE to alter or create a health benefit, it does not adhere to any schedule. In 2002, DOD made 123 program changes on 19 different dates throughout the year. Given the fact that implementing these changes often involves reprogramming and testing processing software, this approach can create rework for claims processors when DOD issues similar or related changes on separate occasions.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-69, Defense Health Care: TRICARE Claims Processing Has Improved but Inefficiencies Remain
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Report to the Committees on Armed Services, U.S. Senate and House of
Representatives:
United States General Accounting Office:
GAO:
October 2003:
Defense Health Care:
TRICARE Claims Processing Has Improved but Inefficiencies Remain:
GAO-04-69:
GAO Highlights:
Highlights of GAO-04-69, a report to the Committees on Armed Services,
U.S. Senate and House of Representatives
Why GAO Did This Study:
Testifying before Congress in 2002, military beneficiary groups and
civilian managed care support contractors described problems with the
processing of TRICARE claims for civilian-provided care. These
problems included slow payments and procedures that made claims
processing inefficient.
The Bob Stump National Defense Authorization Act of 2003 required GAO
to review improvements to TRICARE claims processing and continuing
impediments to claims processing efficiency. Specifically, GAO
describes (1) efforts to improve claims processing and changes in
processing timeliness and (2) Department of Defense (DOD) procedures
and data that continue to affect claims processing efficiency.
To identify improvements to claims processing and impediments to
processing efficiency, GAO analyzed 1999 and 2002 claims data for
changes in processing timeliness. GAO also interviewed and analyzed
claims processing documentation from DOD officials, managed care
support contractors, and claims processors.
What GAO Found:
In an effort to improve TRICARE claims processing, DOD and its managed
care support (MCS) contractors have made changes that are designed to
make it more efficient. First, they have jointly identified”and then
eliminated or changed”certain DOD requirements they deemed inefficient
and nonessential to accurate claims processing. For example,
contractors are no longer required to hold claims with incomplete
information and request the missing information from the provider or
beneficiary. Instead, contractors may now return some claims with
missing information. In another change, DOD eliminated
preauthorization requirements for certain procedures and gave the MCS
contractors more latitude for determining when preauthorizations are
appropriate. To encourage providers to submit their claims
electronically, DOD gave MCS contractors the authority to decide
whether to adjudicate electronically submitted claims sooner than
those submitted on paper. Further, MCS contractors have worked with
their claims processors to implement new technologies for data input,
claims routing, customer service, and claims submission. Finally, MCS
contractors and their claims processors have improved the timeliness
with which they process claims. In fiscal year 2002, claims processors
processed over 97 percent of claims in 30 days or less”an improvement
over fiscal year 1999, when 91 percent of claims were processed in 30
days or less.
Although DOD and its MCS contractors have made changes to improve
claims processing, some DOD procedures and inaccuracies in its data
continue to create inefficiencies in TRICARE claims processing. Some
DOD procedures may create inefficiencies by inadvertently increasing
the demand for customer service, which claims processors are required
to provide. Additionally, inaccuracies in DOD eligibility data”data
that are needed to process TRICARE claims”can contribute to claims
processing delays or rework if, for example, claims must be
reprocessed when errors are identified. Finally, some DOD procedures
lead to rework for claims processors, either in the form of
reprocessing claims or reprogramming processing software. For example,
when DOD makes program changes to TRICARE to alter or create a health
benefit, it does not adhere to any schedule. In 2002, DOD made 123
program changes on 19 different dates throughout the year. Given the
fact that implementing these changes often involves reprogramming and
testing processing software, this approach can create rework for
claims processors when DOD issues similar or related changes on
separate occasions.
What GAO Recommends:
To improve the efficiency of TRICARE claims processing, GAO recommends
that DOD evaluate how it issues program changes and identify ways to
improve the consolidation and scheduling of such changes. DOD
concurred with the recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-69.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Majorie E. Kanof at
(202) 512-7101.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD, MCS Contractors, and Claims Processors Have Made Changes to
Improve Claims Processing Efficiency, and Timeliness Has Improved:
DOD's Procedures and Inaccurate Data Continue to Create Some
Inefficiencies in Claims Processing:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Comparison of Current and Future TRICARE Regions:
Appendix III: TRICARE Claims Flow:
Appendix IV: Health Care Service Records:
Appendix V: Comments from the Department of Defense:
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Related GAO Products:
Tables:
Table 1: Regions, Managed Care Support Contractors, and Claims
Processors:
Table 2: Percentage of TRICARE Claims Processed in 30 Days or Less in
Fiscal Years 1999 and 2002:
Figures:
Figure 1: Current TRICARE Regions:
Figure 2: Future TRICARE Regions After TNEX Implementation:
Figure 3: TRICARE Claims Flow:
Abbreviations:
CDCF: central deductible catastrophic cap file:
CMS: Centers for Medicare & Medicaid Services:
DEERS: Defense Enrollment Eligibility Reporting System:
DMDC: Defense Manpower Data Center:
DOD: Department of Defense:
DRG: diagnosis-related group:
EMC: electronic media claims:
HCSR: health care service record:
HIPAA: Health Insurance Portability and Accountability Act of 1996:
MCS: managed care support:
MTF: military treatment facility:
OCR: optical character recognition:
PGBA: Palmetto Government Benefits Administrators:
TED: TRICARE encounter data:
TFL: TRICARE for Life:
TMA: TRICARE Management Activity:
TMAC: TRICARE maximum allowable charges
WPS: Wisconsin Physician Services:
United States General Accounting Office:
Washington, DC 20548:
October 15, 2003:
The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate:
The Honorable Duncan L. Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives:
In 2003, more than 8.7 million active duty personnel, their dependents,
and retirees are eligible to receive health care through TRICARE, the
military's $26.4 billion-per-year health care system. Medical care
under TRICARE is provided by Department of Defense (DOD) personnel in
military treatment facilities (MTF) or through civilian providers in
civilian facilities. Civilian-provided care requires that providers or
beneficiaries submit claims to DOD managed care support (MCS)
contractors who, on behalf of TRICARE, are responsible for adjudicating
and paying the claims according to established policies and procedures.
The MCS contractors have each hired subcontractors, referred to as
claims processors, to perform these functions. During fiscal year 2002,
DOD's MCS contractors were responsible for processing approximately 42
million TRICARE claims worth approximately $4.6 billion
dollars.[Footnote 1]
Since its inception in 1995, TRICARE has garnered criticism over its
claims processing performance. During 2002, for example, testimony
before the House Armed Services Committee, Subcommittee on Military
Personnel, discussed problems with the timeliness of claims
payments.[Footnote 2] This testimony also identified DOD policies and
procedures for claims processing that confuse beneficiaries and
providers and create disincentives for electronic claims submission,
which is more efficient than paper claims submission.
In response to concerns over claims processing, the Bob Stump National
Defense Authorization Act of 2003[Footnote 3] directed us to report on
improvements to TRICARE claims processing and continuing impediments to
claims processing efficiency. Specifically, as agreed with the
committees of jurisdiction, this report describes (1) DOD, MCS
contractor, and claims processor efforts to improve TRICARE claims
processing and changes in processing timeliness and (2) DOD procedures
and data that continue to affect claims processing efficiency.
To identify improvements in TRICARE claims processing, we compared the
timeliness with which DOD processed its claims between fiscal years
1999 and 2002. To make this comparison, we obtained and analyzed data
from health care service records (HCSR), which are the final records of
TRICARE claims. To identify efforts to improve TRICARE claims
processing, we interviewed and obtained documentation from officials
and representatives from the TRICARE Management Activity (TMA), the DOD
agency responsible for managing TRICARE; DOD's MCS contractors; and
claims processors. To obtain information on TRICARE requirements that
affect claims processing efficiency, we interviewed the same officials
and representatives, along with beneficiary and provider
representatives. We reviewed DOD's request for proposals for the new
health care contracts that DOD awarded in August 2003, and we
interviewed DOD and MCS contractor officials to determine how the new
contracts might affect claims processing efficiency.[Footnote 4] We
also reviewed our prior work on TRICARE and Medicare claims processing.
Our review did not include claims processed under DOD's TFL program for
Medicare-eligible beneficiaries because TFL is a separate program that
follows different program rules and uses different claims processing
procedures. We conducted our work from June 2002 through October 2003
in accordance with generally accepted government auditing standards.
For more on our scope and methodology, see appendix I.
Results in Brief:
In an effort to improve TRICARE claims processing, DOD and its MCS
contractors have made changes that are designed to make it more
efficient. First, they have jointly identified--and then eliminated or
changed--certain DOD requirements they deemed inefficient and
nonessential to accurate claims processing. For example, contractors
are no longer required to hold claims with incomplete information and
request the missing information from the provider or beneficiary.
Instead, contractors may now return claims with missing information, as
long as the necessary information cannot be supplied from in-house
sources. In another change, DOD eliminated preauthorization
requirements for certain procedures and gave the MCS contractors more
latitude for determining when preauthorizations are appropriate. In an
effort to encourage providers to submit their claims electronically,
DOD gave MCS contractors the authority to decide whether to adjudicate
electronically submitted claims sooner than those submitted on paper.
Further, MCS contractors have worked with their claims processors to
implement new technologies for data input, claims routing, customer
service, and claims submission. Finally, MCS contractors and their
claims processors have improved the timeliness with which they process
claims. In fiscal year 2002, claims processors processed over 97
percent of claims in 30 days or less--an improvement over fiscal year
1999, when 91 percent of claims were processed in 30 days or less.
Although DOD and its MCS contractors have made changes to improve
claims processing and MCS contractors have exceeded DOD's standard for
processing timeliness, some DOD procedures and inaccuracies in its data
continue to create inefficiencies in TRICARE claims processing. Some
DOD procedures lead to rework for claims processors, either in the form
of reprocessing claims or reprogramming processing software. For
example, when DOD makes program changes to TRICARE to alter or create a
health benefit, it does not adhere to any schedule. In 2002, DOD made
123 program changes on 19 different dates throughout the year. Given
the fact that implementing these changes often involves reprogramming
and testing processing software, this approach can create rework for
claims processors when DOD issues similar or related changes on
separate occasions. Some DOD procedures may create inefficiencies by
inadvertently increasing the demand for customer service, which claims
processors are required to provide. For example, the method used for
calculating TRICARE's liability when beneficiaries have other health
insurance can lead to claim outcomes that are not understood by
providers and beneficiaries. When providers and beneficiaries question
such outcomes, claims processors must explain the benefit calculation.
Finally, inaccuracies in DOD eligibility data--data that are needed to
process TRICARE claims--can contribute to claims processing delays or
rework if, for example, claims must be reprocessed when errors are
identified.
We are recommending that the Secretary of Defense direct the Assistant
Secretary of Defense for Health Affairs to evaluate DOD's process for
issuing program changes and to identify ways to improve the
consolidation and scheduling of such changes. In commenting on a draft
of this report, DOD concurred with the report's findings and
recommendation.
Background:
Under TRICARE, MTFs provide the majority of health care for
beneficiaries. However, civilian providers supplement this care, and
claims must be submitted by providers or beneficiaries to MCS
contractors' claims processors for this civilian-provided care. There
are three options under which TRICARE beneficiaries may obtain
civilian-provided care:
* TRICARE Prime, a program in which beneficiaries enroll and receive
care in a managed network similar to a health maintenance organization;
* TRICARE Extra, a program in which beneficiaries receive care from a
network of preferred providers; and:
* TRICARE Standard, a fee-for-service benefit that requires no network
use.
The Office of the Assistant Secretary of Defense for Health Affairs
establishes TRICARE policies and procedures and has overall
responsibility for the program. TMA, under Health Affairs, is
responsible for awarding and administering contracts to MCS contractors
that manage the delivery of care to beneficiaries in 11 regions. While
the MCS contractors are ultimately responsible for claims processing
activities, all of them have subcontracted with one of two claims
processors that process the claims and handle beneficiary and provider
inquiries associated with them. (Table 1 contains a list of regions,
their MCS contractors, and their claims processors.):
Table 1: Regions, Managed Care Support Contractors, and Claims
Processors:
Region: Northeast; MCS contractor: Sierra Military Health Services;
Claims processor: Palmetto Government Benefits Administrators.
Region: Mid-Atlantic and Heartland; MCS contractor: Humana Military
Healthcare Services; Claims processor: Palmetto Government Benefits
Administrators.
Region: Southeast and Gulfsouth; MCS contractor: Humana Military
Healthcare Services; Claims processor: Palmetto Government Benefits
Administrators.
Region: Southwest; MCS contractor: Health Net Federal Services; Claims
processor: Wisconsin Physicians Service.
Region: Central; MCS contractor: TriWest Healthcare Alliance, Inc.;
Claims processor: Palmetto Government Benefits Administrators.
Region: Southern California, Golden Gate, and Hawaii-Pacific; MCS
contractor: Health Net Federal Services; Claims processor: Palmetto
Government Benefits Administrators.
Region: Northwest; MCS contractor: Health Net Federal Services; Claims
processor: Wisconsin Physicians Service.
Source: DOD:
[End of table]
In August 2003, DOD awarded new civilian health care contracts, known
as TNEX that will reorganize the 11 regions into 3--North, South, and
West--with a single contract for each region.[Footnote 5]
Implementation of these new contracts is expected to begin in June
2004. See appendix II for maps depicting the current and future TRICARE
regions.
Claims processing begins with the receipt of claims--either paper or
electronic--and any supporting documentation that is submitted by
providers and beneficiaries.[Footnote 6] Information from paper claims
must be scanned or manually entered into the processing system used by
the claims processor. Data from electronic claims automatically enter
the system after the system verifies that each entry or field on the
form contains appropriate data. Compared to paper claims,
electronically submitted claims can be processed more efficiently
because they do not require handling in the mailroom, document
preparation, imaging, data entry, and storage of the original document.
Furthermore, claims processors told us that because each field in an
electronic claim must be completed before it is accepted into the
processing system, electronic claims generally are more complete and
have fewer errors from imaging and data entry than paper claims. As a
result, they are more likely to be processed without manual
intervention.
Once claims data enter the system, they are subject to automatic edits
designed to ensure their accuracy and to determine how the claim will
be adjudicated. For instance, one edit cross-checks the Defense
Enrollment Eligibility Reporting System (DEERS) to verify
beneficiaries' eligibility.[Footnote 7] At any time during this
automated process, a claim can require manual intervention by claims
processing employees to correct errors, supply missing data, or verify
that the provided care was properly authorized, medically necessary,
and appropriate. After adjudication, the claim is either paid or denied
and the beneficiary and provider are notified of the outcome. The final
record of the claim is sent to DOD in the form of a HCSR. HCSRs do not
affect the amount of beneficiary or provider reimbursement, nor do they
delay claims processing timeliness. (Appendix III contains a more
detailed description of the claims processing flow. See app. IV for a
more detailed description of the HCSR.):
DOD requires its MCS contractors to meet certain standards for claims
processing timeliness. Specifically, DOD requires them to process 95
percent of retained claims within 30 calendar days of receipt, 100
percent of retained claims within 60 days, and 100 percent of all
excluded claims within 120 days, unless DOD specifically directs a MCS
contractor to continue holding for processing a claim or group of
claims.[Footnote 8] DOD verifies whether MCS contractors are meeting
timeliness standards by monitoring its database of HCSRs.
DOD, like other entities that offer health plans and are providers of
health services, is required by the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) to use uniform standards for data
code sets and electronic transactions, including claims
filing.[Footnote 9] HIPAA was enacted to combat waste, fraud, and
abuse; to improve the portability of health insurance coverage; and to
simplify the administration of health care.[Footnote 10] Uniform
standards for electronic filing will allow providers to use the same
software to submit claims to all insurance plans, including TRICARE.
However, providers retain the option of submitting claims on paper if
they so choose.[Footnote 11] The compliance date for this requirement
is October 15, 2003.[Footnote 12]
DOD, MCS Contractors, and Claims Processors Have Made Changes to
Improve Claims Processing Efficiency, and Timeliness Has Improved:
DOD and its MCS contractors have made a number of changes to TRICARE
claims processing since the beginning of 1999 that are designed to
improve its efficiency. They have jointly identified certain procedural
and adjudication requirements as nonessential to claims processing.
These requirements have been eliminated or changed in an effort to
reduce the need for manual intervention during processing and to
encourage the electronic submission of claims. Furthermore, MCS
contractors have worked with their claims processors to implement best
industry practices designed to improve claims processing efficiency.
These practices include the use of new technologies for data input,
claims routing, customer service, and claims submission. Finally, MCS
contractors, working with their claims processors, have improved the
timeliness with which they adjudicate and pay claims.
DOD and the MCS Contractors Have Made Changes Designed to Improve
Claims Processing Efficiency:
In July 1999, DOD and the MCS contractors instituted a joint initiative
to improve claims processing efficiency that eliminated an existing
requirement that claims processors hold claims submitted with
incomplete information and obtain, if possible, the information needed
to process the claim. Before July 1999, claims processors had been
required to retain all claims with missing information, request this
information from providers and beneficiaries if the information was not
available from in-house sources--such as the DEERS database--and
ultimately deny the claim if the information was not received within 35
days. The claims processors reported that managing these claims and
matching them with additional information when it was received
increased their workload. Also, according to claims processors, the
information was frequently received after the 35-day period elapsed.
The claims processors would then have already denied the claim, and it
would have to be resubmitted. With the elimination of the requirement,
MCS contractors return claims with missing information, as long as the
necessary information cannot be supplied from in-house sources. For
example, a claim missing a required signature would be returned to the
submitter. In contrast, a claim missing a beneficiary's date of birth
would not be returned because this information could be found in the
DEERS database.
DOD and the MCS contractors also jointly identified certain
requirements that they determined were unlikely to alter payment or
care decisions and that, if eliminated, would make claims processing
more efficient. One joint DOD and MCS contractor initiative decreased
the number of DOD-required preauthorizations and gave the MCS
contractors more latitude to determine when preauthorizations are
necessary.[Footnote 13] DOD eliminated preauthorization requirements
for 21 procedures, including cataract removal, hernia repair, caesarian
section, and tonsillectomy. Although preauthorizations are used to
ensure the medical necessity of and appropriate access to health care
before the care is provided, they also can delay claims processing
because they often require manual intervention by claims processing
staff to ensure the care was properly ordered. By giving MCS
contractors the authority to eliminate preauthorization requirements
that were not essential to accurate claims adjudication, certain
categories of claims could be processed and reimbursed with less manual
intervention.
Further, a joint initiative intended to create an incentive for
providers to submit claims electronically resulted in DOD giving MCS
contractors the authority to decide whether to adjudicate
electronically submitted claims at a faster rate than those submitted
on paper.[Footnote 14] Electronically submitted claims can be processed
more efficiently than paper claims. However, prior to this initiative,
MCS contractors paid claims as they were received and adjudicated with
no distinction between paper or electronic submission. In January 2000,
DOD gave MCS contractors the authority to decide to pay electronically
submitted claims as soon as they were processed and to delay payment of
paper-submitted claims, as long as the contractors met the basic
overall standards for claims processing timeliness. In fiscal year
2003, two MCS contractors responsible for 5 of the 11 TRICARE regions
decided to delay payment on some types of provider-submitted paper
claims.[Footnote 15] However, MCS contractors told us it was too soon
to determine whether this change has resulted in providers submitting
more claims electronically.
DOD also adopted another initiative intended to increase the number of
electronically submitted claims. As of July 1, 2003, it changed the
requirements for provider identification on claims forms, making it
easier for providers to submit their claims electronically.[Footnote
16] The change allows providers to submit claims using their Medicare
identification number or another alternate provider identifier. Before
this change, the provider identification number required for TRICARE
claims was not compatible with the software used by many providers to
submit claims. As a result, many providers had to modify their claim
systems and retrain staff if they wanted to submit TRICARE claims
electronically. Because TRICARE is generally a small portion of their
business, providers had little incentive to make these
changes.[Footnote 17]
In addition to their collaborative efforts with DOD, claims processors,
since the beginning of 1999, have implemented best industry practices,
including new technologies designed to increase the efficiency of
claims processing. These technologies include:
* using optical character recognition (OCR) technology, which enables
the efficient, cost-effective, and high-quality capturing of claims
data without any manual data entry;
* providing claims processing staff with the capability to immediately
resolve and adjust claim errors when responding to provider and
beneficiary inquiries, instead of requiring them to hold corrections
for resolution at a later date; and:
* employing electronic routing systems to send simpler claims to less
experienced processors and more complex ones to those who have been
trained to adjudicate them.[Footnote 18]
Claims processors have also adopted best industry practices by
providing customer service via the Internet and by providing the
capability for Internet claim submission. To do this, both claims
processors have created Web sites that providers and beneficiaries can
use to inquire about the status of submitted claims and to obtain
patient and benefit information. In addition, one claims processor
gives physicians the option of submitting claims via the Internet. In
general, claims submitted via the Internet can be immediately processed
without human intervention. According to this claims processor, the
current number of Internet claim submissions is small[Footnote 19] but
is likely to grow because of the ease of submission and the speed at
which these claims are processed. MCS contractors told us that they
have plans for additional Web-based enhancements that will further
simplify TRICARE claims processing and provide additional services for
both providers and beneficiaries, such as allowing institutions to
submit claims via the Internet and providing additional self-help
features.
MCS Contractors' Claims Processors Have Improved Claims Processing
Timeliness:
In fiscal year 2002, MCS contractors' claims processors processed over
97 percent of claims in 30 days or less--exceeding DOD's standard that
95 percent of retained claims be processed within 30 calendar
days.[Footnote 20] This is an improvement over fiscal year 1999, when
they processed 91 percent of all claims within 30 days.[Footnote 21]
(See table 2.) During this time period, the number of claims processed
increased 43 percent, from 29.2 million in fiscal year 1999 to 41.7
million in fiscal year 2002.[Footnote 22]
Table 2: Percentage of TRICARE Claims Processed in 30 Days or Less in
Fiscal Years 1999 and 2002:
All claims[A]; 1999: Percent: 91.4; 1999: Number (in thousands):
28,413; 2002: Percent: 97.2; 2002: Number (in thousands):
38,965.
Method of claim submission:
Electronic; 1999: Percent: 97.7; 1999: Number (in thousands): 11,968;
2002: Percent: 99.0; 2002: Number (in thousands): 19,533.
Paper; 1999: Percent: 86.8; 1999: Number (in thousands): 16,445;
2002: Percent: 95.4; 2002: Number (in thousands): 19,432.
Type of provider[B]:
Professional; 1999: Percent: 88.5; 1999: Number (in thousands): 18,770;
2002: Percent: 96.0; 2002: Number (in thousands): 24,923.
Pharmacy; 1999: Percent: 97.9; 1999: Number (in thousands): 9,327;
2002: Percent: 99.6; 2002: Number (in thousands): 13,660.
Institutional; 1999: Percent: 69.7; 1999: Number (in thousands): 316;
2002: Percent: 86.5; 2002: Number (in thousands): 382.
Dollar amount paid by DOD:
Less than $100; 1999: Percent: 92.5; 1999: Number (in thousands):
24,832; 2002: Percent: 97.5; 2002: Number (in thousands):
32,469.
$100 to $999; 1999: Percent: 84.9; 1999: Number (in thousands): 3,205;
2002: Percent: 96.2; 2002: Number (in thousands): 5,991.
$1,000 or more; 1999: Percent: 72.3; 1999: Number (in thousands): 376;
2002: Percent: 89.1; 2002: Number (in thousands): 505.
Source: DOD.
Note: GAO analysis of DOD claims data.
[A] These calculations include only claims for health care provided
inside the United States. They do not include Senior Pharmacy claims
and Medicare claims. In addition, they do not include claims if the
final record of a claim was modified due to reprocessing.
[B] Professional claims represent care rendered by physicians and other
health care providers, such as physical therapists. Pharmacy claims are
claims for prescription drugs. Most institutional claims represent care
provided by hospitals.
[End of table]
Even though MCS contractors' processing timeliness increased in all
categories of claims from fiscal year 1999 to fiscal year 2002,
timeliness in each category varied. For instance, pharmacy claims,
which in fiscal year 2002 constituted about 35 percent of all claims,
were almost always processed within 30 days because they were submitted
electronically in nearly all cases. On the other hand, in fiscal year
2002, 86.5 percent of institutional claims and 89.1 percent of claims
with government liability of $1,000 or more were processed within 30
days or less. Institutional and high-dollar claims are usually more
complicated and often require medical review, adding to processing
time. However, MCS contractors still met DOD's standard for overall
processing timeliness because institutional claims comprised only about
1 percent of overall claims, and claims with liability over $1,000
comprised only 1.3 percent of contractors' claims. Therefore, these
claims had little effect on MCS contractors' ability to meet DOD's
standard.
DOD's Procedures and Inaccurate Data Continue to Create Some
Inefficiencies in Claims Processing:
Although DOD and MSC contractors have made changes to make claims
processing more efficient, some of DOD's procedures, as well as
inaccuracies in its data, continue to create inefficiencies in TRICARE
claims processing. In some cases, DOD's procedures lead to rework for
claims processors, either in the form of reprocessing claims or
reprogramming processing software. Other DOD procedures, such as the
method for calculating TRICARE's liability when beneficiaries have
other health insurance, lead to claim outcomes that are not understood
by providers and beneficiaries. This confusion may increase claims
processors' workload when there is additional demand for them to
provide customer service. Finally, inaccuracies in DOD eligibility data
contribute to claims processing delays and rework, which create
inefficiencies in TRICARE claims processing.
DOD's Procedures for Making Program Changes to TRICARE Lead to Rework
and Increased Demand for Customer Service:
DOD's procedures for making program changes to TRICARE create
inefficiencies in claims processing. Program changes include the
introduction of new exclusions or inclusions in coverage, the creation
of new benefit packages for special populations, revisions to billing
procedures, changes in reporting requirements, or other administrative
changes. DOD does not adhere to a set schedule for making health
benefit or other program changes. In 2002, DOD made 123 program changes
on 19 different dates throughout the year.[Footnote 23] For example, in
May 2002, DOD made 41 changes on 4 different days. DOD officials told
us they had limited control over scheduling some program changes
because approximately one-third of changes result from new laws or
regulations.
Implementing program changes often involves reprogramming and testing
processing software, and not adhering to a schedule for issuing changes
can create extra work for claims processors. When unscheduled changes
give claims processors little or no time to anticipate, implement, and
test the changes, claims processors said they are more likely to make
errors in their programming. These programming errors must be corrected
and create additional work when incorrectly processed claims must be
reprocessed.
In addition, when DOD has issued similar or related changes on separate
occasions, claims processors have needed to reprogram their software on
multiple occasions for a single benefit area. While DOD has made some
attempts to issue changes at the same time, three of the four MCS
contractors said these attempts to consolidate changes have, in some
cases, delayed the implementation of some changes. They said that such
delays result either in beneficiaries not receiving the benefits of a
change as soon as possible or in claims processing rework if
adjudicated claims are retroactively affected and must be reprocessed.
Unscheduled changes also make it difficult for providers and
beneficiaries to account for or learn about recent changes. When these
changes result in claims outcomes that providers and beneficiaries do
not understand, claims processors experience demands for customer
service to explain the outcomes, even if the claims in question have
been properly adjudicated. For example, according to a claims
processor, providers often require customer service when program
changes have added to or deleted codes that they use to bill for
procedures. When this happens, providers become confused when the
amounts on recently adjudicated claims differ from the amounts they
previously were reimbursed for identical services.
MCS contractors are required to educate providers and beneficiaries
about policies and procedures that have an impact on claims processing-
-such as new benefits or changes in billing requirements.[Footnote 24]
However, because TRICARE is often a relatively small portion of most
providers' business, providers have little incentive to participate in
educational seminars or to read the many bulletins and updates to stay
current on the frequent program changes. Therefore, MCS contractors
told us that they also maintain relationships with provider
associations and provide one-on-one education through phone
conversations or on-site visits to individual providers. Most
educational efforts are directed at providers because beneficiaries
submit few claims. However, MCS contractors publish periodic
newsletters for beneficiaries and provide beneficiary briefings.
DOD's Procedures for the Coordination of the TRICARE Benefit with Other
Insurers May Increase Demand for Customer Service:
According to DOD officials, MCS contractors, and claims processors,
DOD's procedures for calculating TRICARE liability when beneficiaries
have other health insurance is the claims processing area that causes
the most confusion for providers and beneficiaries.[Footnote 25]
Officials told us that providers and beneficiaries frequently
misunderstand the outcomes of claims involving other health insurance.
Officials told us that TRICARE providers and beneficiaries are often
confused because in many cases TRICARE does not provide any payment
when a beneficiary has other health insurance.[Footnote 26] In these
cases, there is no TRICARE cost share because the other health
insurance reimbursement is equal to or greater than the reimbursement
that TRICARE allows. When providers and beneficiaries question such
decisions, claims processors must explain TRICARE's benefit
calculation. This increases the demand for customer service, which
creates inefficiencies in TRICARE claims processing. One MCS contractor
told us that about 10 percent of its priority inquiries during
September and October 2002 were related to questions about other health
insurance.[Footnote 27]
Although DOD officials, MCS contractors, and claims processors all told
us that the procedures for calculating TRICARE liability when
beneficiaries have other health insurance result in inefficiencies in
claims processing, the extent of this problem has not been determined.
MCS contractors and claims processors could provide very little data
demonstrating the impact of these procedures on the efficiency of
claims processing. Furthermore, DOD officials told us that when the new
contracts for civilian-provided care are implemented, the procedures
for calculating TRICARE liability when beneficiaries have other health
insurance will be simplified.
DOD's Procedure for Determining Responsibility for Processing
Beneficiaries' Claims Contributes to Rework:
DOD's procedure for determining which contractor is responsible for
beneficiaries' claims creates inefficiencies in TRICARE claims
processing. Confusion over this responsibility can lead to MCS
contractors receiving--and in some cases beginning to process--claims
over which they have no jurisdiction. These improperly submitted claims
must eventually be reprocessed by another MCS contractor. Under TRICARE
rules, an MCS contractor is responsible for processing all the claims
of beneficiaries who live or are enrolled in its region regardless of
the region of the country where care was received. As a result, when
beneficiaries receive care in regions where they do not live, some
providers incorrectly submit claims to the MCS contractor responsible
for the region.[Footnote 28] When providers submit claims to the
incorrect MCS contractor, the claims processor must then notify the
provider and forward these claims to the MCS contractor with proper
jurisdiction. According to claims processors, out-of-jurisdiction
submission is the main reason for returned claims.[Footnote 29] In
fiscal year 2002, officials from one claims processor told us they
returned nearly 1 million of the claims they received, and officials
from the other claims processor said they returned over 400,000
received claims.[Footnote 30] Under the terms of TNEX, jurisdictional
problems are likely to be reduced when the 11 current regions will be
replaced by 3 larger ones.
Inaccuracy of DOD Data Used to Verify Eligibility Creates Processing
Delays and Rework:
Inaccuracies in DOD's DEERS data create delays in the processing of
claims. Processors are required to use the DEERS database to verify the
eligibility of TRICARE beneficiaries, but when these data are
inaccurate, the related claims cannot always be processed or they may
be processed incorrectly. There are two main reasons why DEERS
eligibility data are incorrect. First, TRICARE beneficiaries, who are
responsible for keeping their personnel data current, do not always
report changes--such as marriage, divorce, or the birth of a child--
that may affect their dependents' eligibility status. Second, when the
military status of TRICARE beneficiaries changes, the services may not
report these changes to update the database on time--even though these
changes in status can affect TRICARE eligibility. As a result, DEERS
may not always indicate whether beneficiaries have moved from inactive
reserve to active status or if they have changed the TRICARE option
through which they are receiving their health care. Moreover, when
beneficiaries retire or change their branch of service, these changes
may not be correctly reflected in DEERS on time.
According to DOD officials, MCS contractors are currently only allowed
to access and change information related to TRICARE enrollments that
are less than 289 days old.[Footnote 31] All other changes needed to
update the database are handled by DMDC, the contractor who maintains
DEERS for DOD. Without timely and accurate eligibility data, MCS
contractors must delay processing some claims whose outcomes are
contingent on changes to DEERS until DMDC makes the necessary
corrections. According to a DOD contractor, as of June 2003, about
1,000 military sponsors and their dependents had claims that could not
be immediately processed because of problems stemming from DEERS.
In other cases, claims are processed with inaccurate data from DEERS,
leading to claim outcomes that are incorrect. For example, when
reservists are mobilized to active duty, their DEERS file must reflect
this or their dependents will appear to be ineligible for services and
denied care. Further, if DEERS does not indicate the correct enrollment
status for a dependent, his or her claim might be denied or if it is
paid, may result in copayment charges that might not have been
required. Claims with incorrect outcomes decrease claims processing
efficiency because they must be reprocessed when errors are identified
and often require additional customer service. According to MCS
contractors and claims processors, inaccuracies in DOD's DEERS are
responsible for increased demands for customer service and claims
processing rework. However, MCS contractors told us they have no
specific data that demonstrate increased demands for customer service
or record how much rework is related to problems in DEERS.
With the implementation of TNEX contracts, DOD will be upgrading the
existing DEERS system to New DEERS. According to a DOD official, New
DEERS will be easier to program than the existing DEERS and will help
ensure that some beneficiary changes--such as address and
jurisdictional changes--are immediately reflected in the system.
However, problems related to beneficiaries' failure to notify the
system of changes may continue. In addition, with the implementation of
TNEX, MCS contractors will not be allowed to access and change
enrollment information that is more than 60--rather than 289--days old.
Conclusions:
Since fiscal year 1999, the timeliness of TRICARE claims processing has
improved, and it currently exceeds DOD's timeliness standards. During
this time, DOD and its MCS contractors have also made a number of
changes, both procedural and technological, to TRICARE claims
processing that are intended to improve its efficiency. However, some
DOD procedures result in inefficiencies in TRICARE claims processing.
Specifically, DOD's procedures for introducing program changes continue
to create additional work and increased levels of provider and
beneficiary inquiries, even though DOD has taken some steps to improve
the process for scheduling program changes. DOD clearly faces a number
of considerations when determining how to schedule program changes and
cannot always control when legislative changes must be implemented.
However, because MSC contractors have raised significant concerns about
the scheduling process, it appears that further consolidation of
program changes and improvements in scheduling may be warranted.
Other inefficiencies may result from procedures for calculating the
TRICARE liability when beneficiaries have other health insurance, from
confusion over DOD's procedure for determining which contractor is
responsible for beneficiaries' claims, and from inaccuracies in DOD
data used to verify TRICARE eligibility. Inefficiencies resulting from
these procedures and inaccurate data may be reduced once the new
contracts for civilian-provided health care are implemented. However,
at this time it is not possible to determine the extent to which these
inefficiencies may be affected by the implementation of the new
contracts.
Recommendation for Executive Action:
To improve the efficiency of TRICARE claims processing, we recommend
that the Secretary of Defense direct the Assistant Secretary of Defense
for Health Affairs to evaluate DOD's process for issuing program
changes and to identify ways to improve the consolidation and
scheduling of such changes.
Agency Comments:
DOD provided written comments on a draft of this report. (See app. V.)
DOD concurred with the report's findings and recommendation.
In its written comments, DOD noted that one of the constraints in
consolidating changes to TRICARE contracts is the variation in
effective revisions and other program enhancements, sometimes arising
from statutory effective dates for new provisions. However, DOD said it
would work to improve consolidations and scheduling of changes as it
transitions to the new TRICARE contracts over the next 18 months.
We are sending copies of this report to the Secretary of Defense,
appropriate congressional committees, and other interested parties.
Copies will also be made available to others upon request. In addition,
the report is available at no charge on the GAO Web site at http://
www.gao.gov. If you or your staff have questions about this report,
please contact me at (202) 512-7101. Other contacts and staff
acknowledgments are listed in appendix VI.
Marjorie E. Kanof
Director, Health Care--Clinical and Military Health Care Issues:
Signed by Marjorie E. Kanof:
[End of section]
Appendix I: Scope and Methodology:
To identify improvements in claims processing timeliness, we compared
the timeliness with which the Department of Defense (DOD) processed its
claims between fiscal years 1999 and 2002. To do this we asked DOD to
prepare two spreadsheets using the database of health care service
records (HCSR). The first spreadsheet provided information on claims
processing time and included only initial[Footnote 32] claim
submissions that had been processed to completion for each year,
stratified by type of claim (professional, pharmacy, and
institutional), processing time (less than or equal to 15 days, 16-30
days, 31-60 days, 61-120 days, and greater than 120 days), submission
method (electronic or paper), and the dollar amount paid by DOD (less
than or equal to $0, greater than $0 and less than $100, $100 to $999,
$1,000 to $4,999, $5,000 to $9,999, $10,000 to $99,999, and $100,000
and more). The second spreadsheet included all claims processed to
completion for each year, stratified by type of claim (professional,
pharmacy, and institutional), submission method (electronic or paper),
the dollar amount paid by DOD (less than or equal to $0 and greater
than $0), the presence or absence of other health insurance, and denied
claims. Both of these spreadsheets excluded claims for health care
provided outside the United States as well as Senior Pharmacy claims,
TRICARE for Life (TFL) claims, and Medicare claims from Base
Realignment and Closure sites. These types of claims were excluded
because they follow different program rules and use different claims
processing procedures. We evaluated the reliability of the HCSR
database by obtaining information about DOD's efforts to ensure its
reliability and by assessing the consistency of the resulting data by
comparing it with internal DOD reports that were produced using another
database. Through this evaluation we determined that the data were
sufficiently reliable to provide information on the timeliness of
claims processing. However, we did not independently review the
computer programs DOD used to prepare these spreadsheets.
To identify DOD efforts to improve TRICARE claims processing, we
interviewed and obtained documentation from officials at (1) the
TRICARE Management Activity (TMA) in Aurora, Colo., (2) the four
managed care support (MSC) contractors--Sierra Military Health
Services, Inc. in Baltimore, Md.; Humana Military Healthcare Services
in Louisville, Ky.; TriWest Healthcare Alliance in Phoenix, Ariz.; and
Health Net Federal Services in Rancho Cordova, Calif., and (3) the two
claims processing subcontractors, Palmetto Government Benefits
Administrators (PGBA) in Surfside Beach, S.C., and Wisconsin Physician
Services (WPS) in Madison, Wis.
To describe how DOD procedures and data affect claims processing
efficiency, we interviewed and obtained documentation from officials at
TMA, the four MSC contractors, and claims processing subcontractors. We
reviewed TRICARE's process for creating a final record of a processed
claim, looking for inefficiencies in the process of creating HCSRs and
comparing the process with one that will be used to create data records
for TNEX. We obtained beneficiaries' views on claims efficiencies by
interviewing and obtaining documentation from officials from the
Military Coalition, an organization representing the members of the
uniformed services. We also reviewed our prior work on TRICARE and
Medicare claims processing. In addition, we obtained data from DOD's
Change Order Tracking System to identify the number of program changes
DOD made in 1999, 2000, 2001, and 2002. We evaluated the reliability of
the 1999 and 2000 database by comparing it with lists of change orders
obtained from the MCS contractors, who were charged with implementing
those change orders. This comparison indicated that the data were
sufficiently reliable for us to use and, therefore, we did not do a
similar comparison for data from 2001 and 2002.
To identify areas where DOD procedures and data might have affected
claims processing efficiency, we identified the major differences
between processing TRICARE claims and processing commercial or Medicare
claims. We confirmed this information in meetings with officials from
the Centers for Medicare & Medicaid Services (CMS) and with two of its
claims processing subcontractors--PGBA and WPS--who also process
commercial healthcare claims. We also obtained comparison information
on claims processing from officials from the American Medical
Association and the Health Insurance Association of America.
Finally, we obtained information from DOD on its next generation of
TRICARE contracts, TNEX, to identify how claims processing may change
in the future. We also interviewed and obtained documentation from DOD
and CMS experts on the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) to determine how it may affect claims processing
efficiency.
Our review did not include claims processed under DOD's TFL program
because TFL is a supplemental insurance program that pays second to
Medicare and follows some different claims processing procedures. We
performed our work from June 2002 through October 2003 in accordance
with generally accepted government accounting standards.
[End of section]
Appendix II: Comparison of Current and Future TRICARE Regions:
The shaded areas in figure 1 represent the 11 current TRICARE
geographic regions. The shaded areas in figure 2 represent the 3
planned TRICARE geographic regions under the TNEX contracts that were
awarded in August 2003.
Figure 1: Current TRICARE Regions:
[See PDF for image]
[End of figure]
Figure 2: Future TRICARE Regions After TNEX Implementation:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: TRICARE Claims Flow:
TRICARE claims processing begins when claims processors receive claims
in one of three ways--on paper, electronically, or via the
Internet.[Footnote 33] Paper claims are sent to a unique post office
box for each TRICARE contract. Optical character recognition (OCR)
technology is used to enter paper claims directly into the processing
system whenever possible. If this is not possible, claims are manually
entered into the system through interactive data entry. The claims
processing system preedits electronic media claims (EMC) and Internet-
submitted claims before accepting them into the system to ensure that
the required fields contain appropriate data. For instance, system
edits ensure that the fields identifying who is submitting the claim
are complete.
Once claims enter the processing system, paper and electronic claims
are processed similarly. The processing system either automatically
finalizes claims[Footnote 34] or identifies that they require manual
intervention, deferring finalization. Some manual intervention results
from incorrect or missing claims data, in which case claims processors
obtain the needed information from MCS contractor-maintained files or
request additional information from providers or beneficiaries before
claims processing is resumed. Other manual reviews, resulting from
claim edits that stop the process, ensure care was medically necessary
and properly authorized.
As claims flow through the processing system, computer edits are
applied to each claim to ensure the precision and reliability of claim
data and to determine how the claim will be adjudicated. Among these
edits are:
* validity and consistency edits that confirm the data are accurate and
uniform;[Footnote 35]
* provider edits that ensure only credentialed providers are reimbursed
for care and that identify the specific location services were
rendered, in order to apply the correct payment, including any
discounts agreed to by contracted providers;
* Defense Enrollment Eligibility Reporting System (DEERS) edits that
verify beneficiaries' eligibility for TRICARE and whether they are
enrolled in Prime;
* historical edits that confirm services rendered to a beneficiary are
in accordance with past utilization of care--such as examining any
dramatic changes in a beneficiary's use of health care services;
* edits that determine the benefits that TRICARE will pay and that
validate physician preauthorizations and referrals when they are
required;
* ClaimCheck edits that help prevent overpayment by analyzing
relationships between medical procedure codes;
* duplicate logic reviews that ensure claims are not paid twice by
inspecting dates of service, provider numbers, types of service, and
procedure codes; edits that access pricing files to determine the
amount TRICARE can pay for provided services;[Footnote 36] and:
* edits that access the central deductible catastrophic cap file (CDCF)
to determine the payment after deductibles are applied.[Footnote 37]
Once claims are finalized, the system mails payments and explanations
of benefits to providers and beneficiaries and updates provider file
information and beneficiaries' claim histories.
After claims processing is complete, claims processors send Health Care
Service Records (HCSR) electronically to the Department of Defense
(DOD), where HCSRs are subjected to an additional set of validity and
consistency edits. DOD maintains and archives HCSRs, which are the
final documentation of each claim's adjudication. DOD uses HCSRs for
monitoring contractor performance, financial oversight, audit
accountability, and fraud and abuse detection. See appendix IV for
additional information on HCSRs. See figure 3 for an overview of EMC,
Internet-submitted, and paper claim processing flow.
Figure 3: TRICARE Claims Flow:
[See PDF for image]
Note: The following is a list of the abbreviations used in this figure.
Auth/Ref: preauthorizations and referrals:
CDCF: central deductible catastrophic cap file:
DEERS: Defense Enrollment Eligibility Reporting System:
DOD: Department of Defense:
DRG: diagnosis-related group:
EMC: electronic media claims:
HCSR: health care service record:
OCR: optical character recognition:
TMAC: TRICARE maximum allowable charges:
[A] At any point between Interactive Data Entry and Pricing, processing
can be deferred and the claim can loop back to obtain additional
information, usually requiring manual intervention.
[End of figure]
[End of section]
Appendix IV: Health Care Service Records:
The Department of Defense (DOD) requires claims processors to create an
electronic record of each claim called a Health Care Service Record
(HCSR). DOD uses HCSRs to ensure compliance with TRICARE requirements
and provide standardized information on medical services provided to
TRICARE beneficiaries. Claims processors create HCSRs either during
claims processing or after claim adjudication, depending on the system
they have developed. Claims processors then submit the HCSRs to DOD.
Before HCSRs are accepted into DOD's database, they are subject to many
edits designed to ensure that the data are correct and in a standard
format. HCSRs do not affect the amount of beneficiary or provider
reimbursement, nor does creating them delay claims processing.
When a HCSR fails an edit, claims processors must resolve the problem
before the data can be added to the HCSR database.[Footnote 38] Most
HCSRs are correctly rejected because they do not conform to DOD's
specifications, such as when a required data element is not present.
However, according to claims processors and DOD officials, in a very
small percentage of cases HCSRs are rejected because inaccuracies in
DOD's editing programs incorrectly reject them. For example, HCSRs were
erroneously rejected when DOD changed the codes used by claims
processors to identify services and procedures but did not modify its
own edits to reflect these changes. This error was subsequently
corrected when claims processors identified the problem.
HCSRs are useful to DOD. By requiring that claims processors produce
data in a format amenable to its edits, DOD attempts to ensure that MCS
contractors are following TRICARE requirements. In addition, DOD uses
the HCSR database for other purposes, including financial oversight and
fraud and abuse detection. HCSR data are also used in fraud
investigations conducted by other departments and agencies, including
the Department of Justice, Federal Bureau of Investigation, and Defense
Criminal Investigative Service.
Under the terms of the TNEX contracts, DOD will require claims
processors to submit TRICARE encounter data (TED) records instead of
HCSRs.[Footnote 39] DOD, MCS contractors, and claims processors agree
that TEDs is a simpler format for claims records. DOD estimates that
the number of records submitted may be reduced by about 1 million
annually under TNEX.
[End of section]
Appendix V: Comments from the Department of Defense:
THE ASSISTANT SECRETARY OF DEFENSE:
1200 DEFENSE PENTAGON WASHINGTON, DC 20301-1200:
HEALTH AFFAIRS:
OCT 9 2003:
Ms. Marjorie E. Kanof:
Director, Health Care-Clinical and Military Health Care Issues U.S.
General Accounting Office:
Washington, DC 20548:
Dear Ms. Kanof:
This is the Department of Defense (DoD) response to the General
Accounting Office (GAO) draft report, "DEFENSE HEALTH CARE: TRICARE
Claims Processing Has Improved but Inefficiencies Remain," dated
September 12, 2003 (GAO Code 290191, GAO-04-69).
Thank you for the opportunity to review and comment on the draft
report. Overall, I concur with the findings of the audit. As you noted
in the draft report, substantial efforts to improve TRICARE claims
processing have been undertaken, and claims processing timeliness has
improved dramatically.
The GAO recommended that Assistant Secretary of Defense for Health
Affairs evaluate the process for issuing program changes and to
identify ways to improve the consolidation and scheduling of changes.
We concur with this recommendation, and will work to implement it as we
transition to the new TRICARE contracts over the next 18 months. We
note that one of the constraints on consolidation of changes to TRICARE
contracts is the variation in effective dates for benefit revisions and
other program enhancements, sometimes arising from the statutory
effective dates for new provisions.
Please feel free to address any questions to my project officers on
this matter, Mr. Thomas Osoba/ TRICARE Management Activity Operations
at (303) 676-3492 or Mr. Gunther J. Zimmerman (GAO/IG Liaison) at (703)
681-3492.
Sincerely,
Signed by E.P. Wyatt for William Winkenwerder, Jr. MD
GAO DRAFT REPORT DATED SEPTEMBER 12, 2003 GAO-04-69 (GAO CODE 290191):
"DEFENSE HEALTH CARE: TRICARE Claims Processing Has Improved but
Inefficiencies Remain":
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATION:
RECOMMENDATION 1: The General Accounting Office (GAO) recommended that,
the Secretary of Defense direct the Assistant Secretary of Defense for
Health Affairs to evaluate their process for issuing program changes
and to identify ways to improve the consolidation and scheduling of
changes. (p.26/GAO Draft Report):
DoD RESPONSE: We concur with this recommendation, and will work to
implement it as we transition to the new TRICARE contracts over the
next IS months. We note that one of the constraints on consolidation of
changes to TRICARE contracts is the variation in effective dales for
benefit revisions and other program enhancements, sometimes arising
from the statutory effective dates for new provisions.
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Kristi Peterson, (202) 512-7951 Lois Shoemaker, (404) 679-1806:
Acknowledgments:
In addition to those named above, key contributors to this report were
Cynthia Forbes, Krister Friday, and John Oh.
[End of section]
Related GAO Products:
Defense Health Care: Oversight of the TRICARE Civilian Provider Network
Should Be Improved. GAO-03-928. Washington, D.C.: July 31, 2003.
Defense Health Care: Oversight of the Adequacy of TRICARE's Civilian
Provider Network Has Weaknesses. GAO-03-592T. Washington, D.C.: March
27, 2003.
Defense Health Care: Most Reservists Have Civilian Health Coverage but
More Assistance Is Needed When TRICARE Is Used. GAO-02-829. Washington,
D.C.: September 6, 2002.
Medicare: Recent CMS Reforms Address Carrier Scrutiny of Physicians'
Claims for Payment. GAO-02-693. Washington, D.C.: May 28, 2002.
Defense Health Care: Across-the-Board Physician Rate Increases Would be
Costly and Unnecessary. GAO-01-620. Washington, D.C.: May 24, 2001.
Defense Health Care: Continued Management Focus Key to Settling TRICARE
Change Orders Quickly. GAO-01-513. Washington, D.C.: April 30, 2001.
Defense Health Care: Tri-Service Strategy Needed to Justify Medical
Resources for Readiness and Peacetime Care. GAO/HEHS-00-10. Washington,
D.C.: November 3, 1999.
Defense Health Care: Claims Processing Improvements Are Under Way but
Further Enhancements Are Needed. GAO/HEHS-99-128. Washington, D.C.:
August 23, 1999.
Defense Health Care: DOD Needs to Improve Its Monitoring of Claims
Processing Activities. GAO/T-HEHS-99-78. Washington, D.C.: March 10,
1999.
Defense Health Care: Reimbursement Rates Appropriately Set; Other
Problems Concern Physicians. GAO/HEHS-98-80. Washington, D.C.:
February 26, 1998.
Defense Health Care: Actions Under Way to Address Many TRICARE Contract
Change Order Problems. GAO/HEHS-97-141. Washington, D.C.: July 14,
1997.
FOOTNOTES
[1] Claims that were subsequently adjusted after their addition to the
HCSR database were excluded from this spreadsheet because the processing
time, which included adjustments, was not wholly under the control of
the claims processor. If these claims were included, the processing
time would have been artificially lengthened since submitters could
take weeks before providing the information that made the adjustment
necessary.
[2] These numbers do not include claims from TRICARE for Life (TFL), a
separate program from TRICARE. TFL is a program for Medicare-eligible
beneficiaries enrolled in Medicare Part B, which covers charges from
licensed practitioners, as well as clinical laboratory and diagnostic
services, surgical supplies and durable medical equipment, and
ambulance services. TFL pays expenses remaining after Medicare has paid
its share of claims.
[3] Hearings on the National Defense Authorization Act for Fiscal Year
2003--H.R. 4546 and Oversight of Previously Authorized Programs Before
the Subcomm. on Military Personnel of the House Comm. on Armed
Services, 107th Cong. 297-318 and 318-334 (2002) (statements of MCS
contractors and beneficiary representatives, respectively).
[4] Pub. L. No. 107-314, § 711(c), 116 Stat. 2458, 2588 (2002).
[5] DOD issued a request for proposals in August 2002 because the
current health care contracts will be expiring.
[6] DOD has awarded TNEX contracts to Health Net Federal Services for
the TRICARE North region, to Humana Military Healthcare Services for
the TRICARE South region, and to TriWest Healthcare Alliance Corp. for
the TRICARE West region. Palmetto Government Benefits Administrators
will process claims for the North and South regions, and Wisconsin
Physicians Service will process claims for the West region.
[7] According to TRICARE claims processors, providers submit about 99
percent of the claims, with beneficiaries submitting the rest.
[8] DEERS is a DOD database maintained by the Defense Manpower Data
Center (DMDC), a DOD contractor. DEERS contains service-related
eligibility and demographic data used to determine eligibility for
military benefits, including health care, commissary, and exchange
privileges for all service members, retirees, and their family members.
As individuals enter the military, the services add information to
DEERS. The services are responsible for updating information as service
members' military status changes. Individual service personnel are
responsible for enrolling their dependents in DEERS at local military
installations and for notifying DEERS when an eligible dependent's
status changes.
[9] Before processing, DOD classifies submitted claims as either
retained, excluded, or returned. Retained claims are those held in the
MCS contractor's possession, which contain sufficient information to
allow processing to completion, and all claims for which missing
information may be developed from in-house sources. Excluded claims are
claims held at the discretion of the contractor for external
development of information necessary to process the claim to
completion, claims requiring development for possible third-party
liability, or claims requiring intervention by another MCS contractor
or DOD. Returned claims are claims with missing, incomplete, or
discrepant information that cannot be resolved using all in-house
methods; are not held by the contractor as excluded claims; and are
subsequently returned to the sender.
[10] Pub. L. No. 104-191, sec. 262, § 1175(a), 110 Stat. 1936, 2027
(codified at 42 U.S.C. § 1320d-2(a) (2000)).
[11] H.R. Rep. No. 104-496, pt. 1, at 174 (1996).
[12] 65 Fed. Reg. 50,312, 50,314 (Aug. 17, 2000).
[13] Administrative Simplification Compliance Act, Pub. L. No. 107-105,
§ 2 (a)(1), 115 Stat. 1004 (2001).
[14] Preauthorizations are a standard of managed health care that
require a physician or other medical provider to certify, before a
procedure is performed, that the procedure being considered is
medically necessary and the proposed location for delivery of care is
appropriate. If required preauthorizations for care are not obtained,
the associated services rendered may not be reimbursed or
reimbursements may be reduced when claims are processed.
[15] The Centers for Medicare & Medicaid Services (CMS) has encouraged
providers to submit claims electronically by requiring its claims
processing contractors to delay payment of Medicare claims submitted on
paper.
[16] The remaining two MCS contractors told us they decided to
reimburse paper claims and electronic claims in the order in which they
were processed.
[17] HIPAA required that the Secretary of Health and Human Services
adopt standard unique provider identifier numbers. Pub. L. No. 104-191,
sec. 262, § 1173(b)(1), 110 Stat. 1936, 2025. The regulations to
implement this provision were not expected until October 2003 at the
earliest, according to CMS officials responsible for these regulations.
Providers will be required to comply with the regulation beginning 2
years after its effective date, which will be included in the
regulation when it is published.
[18] For example, one claims processor estimated that TRICARE is
frequently about 3 percent of a provider's business.
[19] For example, if a multifaceted surgery claim needed clinical
review, the electronic routing system would send the claim segments
needing review to a nurse with appropriate surgery expertise instead of
the claim being initially reviewed by an individual without the
required expertise.
[20] In June 2003, 2 percent of this processor's claims were submitted
via the Internet.
[21] We also found that in fiscal year 2002, 82 percent of all claims
were processed in 15 days or less, while in fiscal year 1999, 76
percent were processed in 15 days or less.
[22] A portion of this improvement may be due to the DOD and MCS
contractor initiative that started late in fiscal year 1999 and
permitted MCS contractors to return claims submitted with insufficient
or missing information. About 2 percent of claims were returned in
fiscal year 2002. However, according to claims processors, many of
these claims would have been returned even before this initiative.
[23] In addition, claims processors processed 41.7 million TFL claims
in fiscal year 2002.
[24] In 1999, DOD made 310 program changes, in 2000 it made 194, and in
2001 it made 172.
[25] MCS contractors disseminate information on program changes through
Web sites, monthly or quarterly newsletters, and periodic bulletins.
[26] One claims processor told us that 25 percent of the TRICARE claims
it processed involved other health insurance. The other processor could
not provide these data for TRICARE claims.
[27] 10 U.S.C. § 1079(j)(1) (2000).
[28] Priority inquiries are those received from members of Congress,
the Office of the Assistant Secretary of Defense (Health Affairs), TMA
officials, Surgeons General, flag officers, state officials, and
others.
[29] In contrast, the jurisdiction for processing Medicare fee-for-
service physician claims is determined by the location where the
service is provided.
[30] Claims processors told us their statistics on returned claims
include those claims forwarded to another MCS contractor as well as
those returned to the submitter.
[31] The 400,000 claims include TFL claims submitted to the wrong
contractor.
[32] According to DOD officials, this period was temporarily extended
to 289 days when a July 2001 change in the system created many
enrollment errors. However, DOD specifications only allow contractors
to change enrollment data that are less than 60 days old.
[33] Providers generally use forms that they use to submit Medicare
claims--HCFA-1500 and UB-92. Beneficiaries submit claims on DD 2642
forms. To obtain reimbursement for civilian care outside the United
States, providers and beneficiaries use DD form 2520.
[34] When a claim is finalized, the adjudication process is complete--
a decision has been made about whether DOD has a liability on the claim
and the amount that will be paid.
[35] Validity edits check for the presence of an expected value in the
data field, such as a number in an age field. Consistency edits check
for the accuracy of an expected data value relative to another, known
data value, such as relating 'female' to 'hysterectomy'.
[36] The claims system accesses diagnosis-related group (DRG) and
TRICARE maximum allowable charge (TMAC) files to determine the maximum
amount that DOD can pay for the specific services that have been
provided.
[37] The CDCF also maintains information on the amount to be applied to
beneficiaries' catastrophic cap coverage for each fiscal year.
[38] About 4 percent of submitted HCSRs--including TRICARE for Life and
Basic TRICARE claims--initially fail HCSR edits.
[39] The Floyd D. Spence National Defense Authorization Act for Fiscal
Year 2001 required use of the TRICARE encounter data information system
rather than the health care service record for maintaining information
on covered beneficiaries. Pub. L. No. 106-398, § 727(1), 114 Stat.
1654, 1654A-188 (2000).
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