Medicare Transaction System: platform for change - Medicare Payment Systems: Moving Toward the Future

Health Care Financing Review, Winter, 1994 by Mary E. Warren, Karen E. Jackson, Eric L. Veiel

INTRODUCTION

HCFA is in the midst of a bold initiative to meet the claims processing challenges confronting Medicare over the next 2 decades. On January 19, 1994, HCFA awarded a 6-year, $19-million contract to GTE Government Systems Corporation (GTE) to create a Medicare claims processing system-the MTS-that will use state-of-the-art computer technology to process more than a billion claims a year by the turn of the century at a savings of $200 million per year in administrative costs. The MTS will be a national, standard, integrated, government-owned, contractor-operated Medicare claims processing system which will consolidate in one system the automated claims processing functions currently performed by 79 contractors (i.e., carriers and intermediaries) using 10 independent systems to process Medicare claims at 62 sites around the country. HCFA will begin live processing of Medicare claims through the MTS in September 1997, with full implementation expected by 1999.

The MTS will provide data for internal and external analysis of benefit utilization, allowing HCFA and the health service delivery community to ensure that Medicare beneficiaries are receiving appropriate care and that program dollars are being used efficiently. The expertise of all components of the agency is being called on to ensure that the MTS meets this goal.

In announcing the award of the MTS design contract, Secretary of Health and Human Services Donna E. Shalala stated, "The new system will constitute a total overhaul of Medicare's means for paying health care providers. The new system will provide for more consistent payment decisions across the Medicare program and help identify problems, including fraudulent billing, more easily. It will improve and simplify services for beneficiaries. It will dramatically reduce the complexity of the Medicare program." (U.S. Department of Health and Human Services, 1994) The MTS will allow HCFA to:

* Improve the level of service it provides to its customers--the beneficiaries and providers.

* Achieve greater efficiency in administration.

* Achieve greater uniformity in operations.

* Improve its control of program expenditures.

The MTS will be supported by other changes to the Medicare environment. HCFA has an ambitious agenda for standardization of several key elements of Medicare claims processing, with piloting or implementation of the various initiatives expected to take place prior to or coincident with MTS implementation.

EVOLUTION OF THE MEDICARE TRANSACTION SYSTEM

Part of HCFA's basic mission is to ensure that Medicare claims are processed in a timely, accurate, and cost-efficient manner by the carriers and intermediaries under contract with HCFA to make payments to providers of services and beneficiaries. In the 1980s, HCFA launched the shared system and Common Working File (CWF) initiatives--the precursors to MTS-to deal with the lack of uniformity in carrier and intermediary operations and the high cost of implementing changes to numerous processing systems.

The shared system initiative reduced the number of claims processing systems used by requiring contractors to create, participate in, and/or share common arrangements for claims processing. There are two shared system models--shared maintenance and shared processing. Shared maintenance is an arrangement whereby two or more contractors utilize the same claims processing software operated at their own individual computer facilities. However many processing sites are involved, all software maintenance and enhancement activity is performed by a single maintenance contractor. Shared processing is an arrangement whereby several contractors use a single data processing center to process Medicare claims, with one contractor maintaining the claims processing software. These different shared arrangements all led to reduced costs and shortened the lead time needed to make system changes.

In 1990, HCFA proceeded with the national implementation of the CMF, the first use of a single, national, standard software system. The CWF is a national prepayment benefit authorization and eligibility verification system. Under the CWF, Medicare claims are still processed by carriers and intermediaries, but then data are transmitted to one of nine CWF sites to ensure that Medicare's basic eligibility requirements are met along with other program requirements. Appropriate responses are returned to the carriers and intermediaries, and the data are then integrated into a National Claims History File maintained by HCFA's Bureau of Data Management and Strategy.

Despite the successful implementation of the shared system and CWF initiatives, the opportunity still existed to reduce the fragmentation caused by the still-numerous claims processing systems. This fragmentation led to inconsistencies in processing, variations in methods and approach, duplication and redundancy in operations, and high costs for maintenance and for conversion to utilize new technologies (Walton, 1993).

In October 1991, HCFA began to plan for the development of the MTS so as to move toward central control of data administration in accordance with good enterprise standards. Through MTS, HCFA will achieve many of its strategic goals for taking the Medicare program into the Twenty-first Century. For example, HCFA expects that the MTS will create an environment to improve services to beneficiaries and providers, increase administrative efficiency, and facilitate the management of program expenditures (Health Care Financing Administration, 1992a).