HCFA officials said last week the agency will move forward in smaller steps to modernize its Medicare claims processing system after canceling a contract to develop a new system in one fell swoop.
HCFA in August terminated a contract with GTE Government Systems, a division of Stamford, Conn.-based GTE, to consolidate Medicare claims processing from 70 sites to just a few regional centers in an initiative called the Medicare Transaction System. The MTS would have taken over some of the functions now performed by Medicare intermediaries and carriers.
Medicare's 71 intermediaries and carriers, 58 of them Blue Cross and Blue Shield plans, handled nearly 780 million claims in federal fiscal 1995.
HCFA estimated MTS would cost $36.6 million, but $101.9 million actually has been spent.
The computer modernization had been proposed as a way to hasten claims processing and combat fraud. It was projected to save $200 million a year when fully operational.
But HCFA officials said GTE was behind schedule and over budget, which prompted HCFA to order a stop to work on the project in April and Congress to question its high cost and sluggish progress.
A General Accounting Office report in May said the project could cost as much as $1 billion (June 2, p. 24). Last week the House approved HHS spending legislation that suspended all funding for the project in federal fiscal 1998, which begins Oct. 1.
HCFA spokesman Chris Peacock said modernization "is something we want to proceed with."
But he added, "We decided to proceed with computer modernization more incrementally."
"It's clear that they've decided to pursue a much different strategy," said Robert Doolittle, a GTE Government Systems spokesman.
HCFA asked GTE to submit new bids for three of the components of the MTS on which it already had been working. One of them is a managed-care processing application that is necessary to implement parts of Medicare reform called for in the balanced-budget law. That application must be completed by Dec. 31.
Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee and a critic of the MTS, urged HCFA to closely monitor the progress of that component if GTE is selected for the managed-care application or any other work.