Medicare: Shared System Conversion Led to Disruptions in Processing
Maryland Claims (Letter Report, 05/23/94, GAO/HEHS-94-66).

Since 1989, the Health Care Financing Administration (HCFA) has tried to
reduce administrative costs by urging Medicare contractors to share
claims processing system software and hardware with other contractors.
In October 1991, Blue Cross and Blue Shield of Maryland began using
claims processing software developed by another contractor.  For more
than a year after the system conversion, Medicare payments to Maryland
physicians were frequently late and often contained errors, resulting in
unanticipated costs of more than $5 million.  The Maryland contractor
has yet to realize any of the anticipated annual savings of more than
$600,000 in administrative costs. Poor management by Blue Cross and Blue
Shield of Maryland and poor decisions by HCFA contributed to the
contractor's costly and turbulent shared system conversion. In
particular, HCFA and the Maryland contractors did not allow enough time
to plan the effort and scheduled the conversion during a period of
Medicare program changes requiring major computer system modifications.
The Maryland contractor's experience provides valuable lessons for the
future, especially given HCFA's plan to convert the 14 systems that the
contractor now uses to a single automated claims processing system.
HCFA needs to ensure that planning and testing time for major system
changes are adequate and not compromised by its desire to achieve
administrative savings.

--------------------------- Indexing Terms -----------------------------

     TITLE:  Medicare: Shared System Conversion Led to Disruptions in 
             Processing Maryland Claims
      DATE:  05/23/94
   SUBJECT:  Claims processing
             Health care cost control
             Systems conversions
             Medical expense claims
             State-administered programs
             Contractor performance
             Medical information systems
             Administrative costs
             Computer networks
             Systems management
IDENTIFIER:  Medicare Program

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