	Background

Traditionally, HCFA’s claims administration contractors performed most of Medicare’s program safeguard functions. In May 1999, HCFA selected 12 entities to act as PSCs, using a competitive bidding process. Also, HCFA has not yet developed clear, measurable criteria to evaluate PSCs’ performance on the individual task orders. HCFA’s Implementation of the PSC Task Orders Lacks a Strategic Direction

HCFA lacks a strategy for determining how best to use the PSCs in the long term. While an incremental, experimental approach for implementing its new contracting authority may be prudent in the short term, a long term strategy would help HCFA to better target its PSC resources and provide a basis for deciding where and how to use the PSCs to promote program integrity. This ad hoc approach has provided HCFA significant flexibility in targeting its task orders on known problem areas and in using the PSCs in different ways. However, it does not represent a strategy for systematically testing different PSC options and for building upon the results of one task order to issue future task orders—a strategy we believe would provide HCFA with a sound basis for deciding how best to use its PSC resources. We believe it is important for HCFA to now define its goals for the PSCs and determine how it will evaluate different options for PSC integration into Medicare’s program safeguard efforts. Appendix I: Comments From the Health Care Financing Administration

Appendix II: GAO Contact and Acknowledgments

	GAO Contact

	Staff Acknowledgments
Why GAO Did This Study

The Health Care Financing Administration (HCFA) chose 12 claims administration contractors in 1999 to act as program safeguard contractors (PSC) for Medicare. This report examines (1) HCFA's progress in implementing its PSC contracting authority and (2) whether HCFA could better manage the PSCs to ensure their most effective use.

What GAO Found

GAO found that HCFA is experimenting with different options for integrating the PSCs into Medicare's program safeguard activities. Between September 1999 and March 2001, HCFA issued 15 task orders that include different ways of using PSC services. HCFA lacks a long-term strategy to determine how best to use the PSCs. Instead, it has issued task orders in an ad-hoc manner, which has afforded HCFA certain flexibilities, such as targeting its task orders on known problem areas. Although this experimental approach may be prudent in the short-term, it does not represent a process for systematically testing different options for using PSC services in the long-term. Also, HCFA has not set formal criteria and timeframes for determining how the PSCs should be integrated into Medicare's existing program integrity efforts. Finally, HCFA has not established clear, measurable performance criteria to assess the PSCs' performance on individual task orders.