1). 2.) CMS Has Taken Steps to Facilitate the Complex Implementation of Medicare Contracting Reform, but Certain Decisions Have Led to Challenges

While CMS officials took numerous steps to facilitate Medicare  contracting reform, we identified several CMS decisions that led to  challenges. In some cases, CMS was able  to make midcourse adjustments by incorporating lessons learned. Some of these  decisions, for example, caused delays in payments to providers. Despite regular workload monitoring during the MAC  transitions, CMS underestimated the appeals and provider call volumes. The  agency also reported having revised workload estimates for subsequent  MAC transitions. 3.) In four of the six MAC  jurisdictions we studied, CMS or the MAC told us that the MACs  discovered and corrected claims-processing errors made by legacy  contractors, which, in some cases, had generated improper payments to  providers and added additional work for the MACs in order to make the  corrections themselves during the transition. As of March 2009, CMS had completed all three reviews for three  of the MACs in our sample. According to CMS, if a MAC does not meet a performance standard,  the agency requires an action plan to address the deficiency. CMS’s QASP Reviews Found the MACs Improved Their Performance but Did Not Meet All Standards

CMS’s QASP reviews for the three MACs showed that they had improved  their performance from the first review period to the most recent review  period we reviewed but did not meet all standards in any one review  period. While all three MACs received a portion of the award fees for which they  were eligible as a result of the incentive metrics they met in their Award  Fee Plan reviews, they did not meet some incentive metrics, particularly  metrics in areas related to beneficiary and provider service. All three of  the MACs consistently met or partially met the Contract Administration  metric—a measure that assessed the contractors’ service to CMS in  contract management, such as providing quality deliverables on time. CMS’s Total Costs and Savings to Date for Medicare Contracting Reform Are Uncertain

CMS has not tracked and provided information on all of its costs and  savings related to Medicare contracting reform, and so the total costs and  savings for Medicare contracting reform are uncertain. The agency provided information on some savings due  to reductions in operational spending that it attributes to contracting  reform and other activities related to claims payment; however, it has not  provided information on what it had previously estimated would be the  major source of savings, reduced improper payments to providers  resulting from contracting reform. CMS Routinely Tracks Some, but Not All, Costs Associated with Contracting Reform, Leading to Uncertainty about Total Costs

CMS tracked and provided information on contracting reform costs of  about $300 million from fiscal year 2004 through fiscal year 2008, but could  not readily account for certain internal administrative costs for  implementing the MAC program, such as agency staff salaries and  overhead. CMS Did Not Provide Information on Total Savings, and the Extent to Which Identified Savings Can Be Attributed to Contracting Reform Is Uncertain

Although CMS estimated that it would achieve savings from two sources— reduced spending on administrative functions and savings from the  Medicare trust funds related to better claims review leading to reduced  improper payments—the agency has provided information only on  administrative savings, making the total amount of any savings and the  extent to which they are due to contracting reform uncertain. In 2005, we  reported that CMS expected contracting reform to generate savings  totaling over $1.9 billion from reduced spending on Medicare  administration and from reduced improper payments. However, as of April  2009, CMS was unable to quantify and provide information on total savings  realized. HHS also generally agreed with our finding  regarding CMS’s performance assessments of three MACs whose reviews  we examined. In addition, they elaborated on the challenges created by CMS’s  concurrent implementation of the MAC transition with other Medicare  initiatives, such as NPI and HIGLAS. Our criteria for selecting the 6 MAC  jurisdictions were designed to ensure diversity in geographic region, in the  volume of claims workload, in the complexity of transition (such as the  number of legacy contractors in the region whose workloads had to be  transitioned to a single MAC), bid protest experience, and CMS’s  assessment of a jurisdiction’s risk for fraud. MACs; however, we did analyze the results of CMS’s reviews that h conducted for DME and A/B MACs as of March 2009. Appendix VIII: Three Medicare Administrative Contractors’ Award Fees Earned

The Centers for Medicare & Medicaid Services’s (CMS) Award Fee Plan  reviews for three Medicare Administrative Contractors (MAC) showed that  they had improved their performance from the first review period to the  most recent review period we reviewed, but because the MACs did not meet all incentive metrics, they did not receive full award fees.
Why GAO Did This Study

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 significantly reformed contracting for payment of Medicare's $310 billion per year in fee-for-service claims. The Centers for Medicare & Medicaid Services (CMS) is transitioning claims administration to 19 new entities known as Medicare Administrative Contractors (MAC) and plans to complete the process ahead of October 1, 2011, the date required by law. In 2005, GAO reported that CMS's plan to accelerate the transition could create challenges and was based on estimated costs and savings that were uncertain. In this report GAO examined (1) how CMS has implemented Medicare contracting reform; (2) how CMS assessed the performance of the MACs and what the results of its assessments have been; and (3) what CMS's costs and savings have been for Medicare contracting reform. GAO selected a sample of 6 transitions to review from among the 10 MAC contracts awarded as of June 2008, based on factors such as geographic diversity, volume of claims workload, and transition complexity. GAO analyzed CMS documents related to the MAC transitions, including performance assessments for 3 of the 6 MACs in the sample that had results available for three types of reviews as of March 2009, and interviewed CMS officials, contractors, and provider groups.

What GAO Found

CMS took numerous steps to facilitate the complex implementation of Medicare contracting reform, but certain decisions led to challenges during the six MAC transitions we reviewed, such as payment delays to providers. For example, CMS's accelerated implementation schedule overlapped with other Medicare initiatives that affected claims processing, such as requiring that providers re-enroll in order to be paid, which resulted in claims payment delays. In addition, despite regular workload monitoring of the former contractors during the MAC transitions, CMS gave the MACs inaccurate workload estimates. For example, one MAC originally planned on receiving 15,000 appeals cases but actually inherited 46,500 cases, which led to processing backlogs and delayed payments to providers. However, CMS also incorporated lessons learned and made midcourse adjustments to address some of these challenges. CMS has assessed the MACs using a program it developed, and in the reviews we examined the MACs did not meet all standards and metrics. CMS's assessment program includes an initial review of each MAC's internal controls and two subsequent reviews to assess performance. One of these reviews compares a MAC's performance to standards in accordance with its contract and the other provides an incentive award fee if the MAC meets selected metrics that are designed to reflect high performance. Results available as of March 2009 from the assessments of three of the six MACs in GAO's sample show that the three MACs improved their performance over time but did not meet all metrics. For example, while the three MACs consistently met or partially met a metric that assesses contract management, they did not meet some beneficiary and provider service metrics. In addition, because they did not meet all incentive metrics, they did not receive full award fees. CMS's total costs and savings to date for Medicare contracting reform are uncertain because CMS does not track and provide information on all related costs and savings. The agency provided information on costs associated with contracts, which totaled a little over $300 million for fiscal years 2004 through 2008. It also provided information on some internal agency costs for conducting contracting reform, but did not track others, such as agency staff salaries. Although CMS expected contracting reform to generate substantial savings from reduced spending on administrative functions and savings to the Medicare trust funds due to improved claims review to detect payments that should not be made, as of April 2009, CMS was unable to provide information on total savings. CMSprovided some information on savings due to reductions in operational spending, but the extent to which these savings were attributable to contracting reform is uncertain. CMS did not track or provide information on savings to the Medicare trust funds due to reduced improper payments related to contracting reform activities. CMS reviewed a draft of this report and generally agreed with GAO's findings.