But the number and complexity of the BBA’s requirements and the urgency of systems changes, coupled with a backlog of decades-old problems associated with HCFA’s routine operations, make it clear that much more needs to be accomplished. HCFA Made a Concerted Effort on Y2K, but Critical Tasks Are Incomplete

Over the past year, HCFA has made a concerted effort to deal with its most pressing priority—the Year 2000 computer systems problem—commonly referred to as Y2K. For example, HCFA has taken steps to allocate HIPAA funding and to implement authorities to combat waste and abuse in the Medicare program. studying HCFA’s and the states’ efforts to implement the Children’s Health Insurance Program and will report on the results later this year. HCFA’s Handling of Ongoing Responsibilities for Financial Management and Routine Oversight Raises Serious Concerns

Over the last several years, HCFA has been lax in managing critical ongoing program responsibilities, such as financial management—particularly by Medicare claims administration contractors—and oversight of nursing home compliance. HCFA Has Made Changes to Enhance Its Management Capacity, but Problems Persist

Because its mission has been rapidly growing and changing, HCFA officials have worked hard to strengthen the agency’s management capabilities. It hired more staff with needed skills in 1998, but it has not completed a long-term strategic approach to meet its future human resource needs. These types of problems are found in other agencies, but HCFA still must be diligent in addressing them. The President’s budget for fiscal year 2000 proposes a reform initiative for HCFA that is designed to increase its flexibility in the human resources area and to increase the agency’s accountability. In our January 1998 testimony, we noted that the agency’s staff had not yet moved to the actual location of their new organizational units, which tended to exacerbate problems with internal communication and coordination. Performance System, Awards Program, and Flexible Work Hours Affect Agency Productivity

HCFA managers and staff discussed a variety of factors that hamper agency operations and limit effective management. Although we believe that HCFA is not unique in experiencing these problems, mitigating them could improve agency performance. HCFA’s senior management has identified management and other training as an area where HCFA must improve. HCFA Has New Proposals to Strengthen Management

its accountability to the Congress by providing biannual reports on its progress. More effective planning, new staff with needed skills, and better accountability could help HCFA address these challenges and better ensure quality health care for the elderly, poor, and disabled. Medicare Home Health: Success of Balanced Budget Act Cost Controls Depends on Effective and Timely Implementation (GAO/T-HEHS-98-41, Oct. 29, 1997).
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Health Care Financing Administration's (HCFA) progress in: (1) addressing its most immediate priorities; and (2) strengthening its internal management to effectively discharge its major implementation and oversight responsibilities.

What GAO Found

GAO noted that: (1) HCFA is facing an unprecedented set of challenges; (2) the immediacy and resource demands associated with meeting the year 2000 computer system challenges--coupled with HCFA's late start in addressing them--have put a tremendous burden on the agency this past year and have affected the timing and quality of its work on many other projects; (3) it has also slowed efforts to improve the oversight of ongoing operations, such as financial management and Medicare fee-for-service claims administration, which desperately need attention; (4) even where HCFA has made progress--such as in implementing a number of the mandated Health Insurance Portability and Accountability Act of 1996 and the Balanced Budget Act of 1997 requirements--GAO believes that more work, and many refinements, are still needed; (5) HCFA must meet these challenges with an aging workforce; (6) HCFA has taken a number of steps internally to capitalize on its staff's strengths to deal with a rapidly changing health care marketplace and growing responsibilities; (7) for example, HCFA has developed a strategic plan that better articulates its future direction, has progressed in its customer-focused reorganization by moving staff to their new organizational units, and has hired more staff with needed skills; (8) on the other hand, in focus groups GAO conducted, HCFA managers and staff discussed issues that continue to hamper effective agency operations; (9) to further strengthen HCFA's ability to effectively manage its employees and programs, the administration has proposed new authorities for contracting and new flexibility in hiring in the President's budget for fiscal year 2000; (10) it also proposes new mechanisms to enhance agency accountability, with biannual reports to Congress and an advisory board to help the agency streamline internal and program management; (11) HCFA senior officials have taken concrete steps to improve agency management this year but will need to maintain the momentum over the next several years to overcome the agency's current and future challenges; and (12) this will be especially difficult in an agency that for years has been plagued by external pressures and management problems.