In order to improve the efficiency and effectiveness of Medicare operations and better address fraud and abuse, HCFA planned to develop one unified computer system to replace the existing systems. The MTS project encountered problems from the very beginning. Ongoing HCFA Technology Initiatives to Combat Fraud and Abuse

While the MTS termination delays one means of possibly combatting fraud and abuse, HCFA has two other independent information technology initiatives in this area that are continuing. These separate initiatives are analyzing the potential for using existing commercial software and exploring the possibilities for developing antifraud software. Although senior HCFA officials voiced their support for our recommendation to use modern information technology to strengthen payment controls, they did not begin to test the feasibility of using commercial code manipulation-detection software to process Medicare claims until about a year after we reported on its potential. Furthermore, any positive results from this testing are not expected to be implemented nationally for at least several years. Rather than trying to adopt the commercially available software, HCFA chose to enter into an agreement that allowed it to explore the possibility of developing such software. Specifically, HCFA signed a 2-year, $6-million interagency agreement with the Los Alamos National Laboratory to assess the potential for identifying patterns of fraud. Usable results from this effort appear to be years away because, once the system’s design is complete, HCFA would have to award another contract to a software developer to create software from the Los Alamos design. Further, according to laboratory officials, HCFA will have to acquire separate computers to implement any Los Alamos-based fraud detection system because its approaches, which were originally to become part of MTS, are not designed to be integrated with the standard part A and part B Medicare claims-processing systems to which HCFA is now transitioning. Strong Management Essential Regardless of Project Direction

HCFA’s negative experience with its automation projects represents a pattern we see throughout the federal sector: it is weaknesses in management, not technology itself, that stymie effective systems development and implementation. Together, Clinger-Cohen and these other laws provide a powerful framework under which federal agencies have the best opportunity to improve the management and acquisition of information technology. HCFA has recognized the need to more effectively manage its information technology acquisitions and has taken several important steps. However, much remains to be done to ensure that HCFA’s initiatives—or those of any agency—are cost-effective and serve its mission. HCFA has not yet implemented our recommendations in establishing investment processes that will allow it to maximize the value and manage the risks of its information technology acquisitions, and tightly control spending.
Why GAO Did This Study

GAO discussed: (1) the Health Care Financing Administration's (HCFA) Medicare Transaction System (MTS) and the recommendations GAO made to correct serious weaknesses in its management identified as part of a GAO review; (2) two continuing HCFA initiatives to combat fraud and abuse; and (3) underlying information technology management issues.

What GAO Found

GAO noted that: (1) to improve the efficiency and effectiveness of Medicare operations and better address fraud and abuse, HCFA planned to develop one unified computer system to replace the existing system, but the project encountered problems from the beginning; (2) HCFA assessed the project's viability and decided to terminate both the request for proposals for the MTS sites and the entire software-development contract; (3) HCFA has two other independent information technology initiatives in the areas of fraud and abuse that are continuing--analyzing the potential for using existing commercial software and exploring the possibilities for developing antifraud software; (4) HCFA did not begin to test the feasibility of using commercial code-manipulation software to process Medicare claims until about 1 year after GAO reported on its potential; (5) any positive results from this testing are not expected to be implemented nationally for at least several years; (6) HCFA chose to enter an agreement with Los Alamos National Laboratory that allowed it to explore developing such software; (7) results from this program appear to be years away because once the system's design is complete, HCFA would have to award another contract to a software developer to create from the Los Alamos design; (8) HCFA would have to acquire new computers to implement any Los Alamos-based fraud detection system because its approaches, which were originally to become part of MTS, are not designed to be integrated with the Medicare claims processing systems to which HCFA is transitioning; (9) HCFA's negative experience with its automation projects represents a pattern of weaknesses GAO sees throughout the federal sector; weaknesses in management that stymie effective systems development and implementation; (10) the Clinger-Cohen Act of 1996, the Paperwork Reduction Act of 1995, the Chief Financial Officers Act of 1990, and the 1993 Government Performance and Results Act, provide a powerful framework under which federal agencies have the best opportunity to improve the management and acquisition of information technology; (11) HCFA has recognized the need to more effectively manage its information technology acquisitions, and has taken several important steps, but much remains to be done to ensure that HCFA's initiatives are cost-effective and serve its mission; and (12) HCFA has not yet implemented GAO's recommendations in establishing investment processes that will allow it to maximize the value, manage the risks of its information technology acquisitions, and tightly control spending.