Improper Payments: TRICARE Measurement and Reduction Efforts Could Benefit from Adopting Medical Record Reviews
Published: 2015-02-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Improper payments—payments that were made in an incorrect amount or should not have been made at all—are a contributor to excess health care costs. For programs identified as susceptible to significant improper payments, federal agencies are required to annually report estimates of improper payments, their root causes, and corrective actions to address them. In fiscal year 2013, DOD spent about $21 billion for TRICARE and estimated improper payments of $68 million, or an error rate of 0.3 percent. That year, HHS estimated that $36 billion, or 10.1 percent, of the total $357 billion in Medicare payments were improper.
GAO was mandated to examine improper payments in TRICARE and Medicare. This report addresses (1) TRICARE and Medicare improper payment measurement comparability; and (2) the extent to which each program identifies root causes of, and develops corrective actions to address, improper payments. GAO examined DHA and CMS documentation related to improper payment measurement and corrective actions, reviewed relevant laws and guidance, and interviewed agency officials and contractors.
section_title: What GAO Found
paragraphs: The Defense Health Agency (DHA), the agency within the Department of Defense (DOD) responsible for administering the military health program known as TRICARE, uses a methodology for measuring TRICARE improper payments that is less comprehensive than the methodology used to measure improper payments in Medicare, the federal health care program for the elderly and certain disabled individuals. Both methodologies evaluate a sample of health care claims paid or denied by the contractors that process the programs' claims. However, DHA's methodology only examines the claims processing performance of the contractors that process TRICARE's purchased care claims. Unlike Medicare, DHA does not examine the underlying medical record documentation to discern whether each sampled payment was supported. Without examining the medical record, DHA does not verify the medical necessity of services provided. The agency also does not validate that the diagnostic and procedural information reported on the claim matches the care and services documented in the medical record. Comparatively, the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services' (CMS) approach to measuring Medicare improper payments examines medical records associated with a sample of claims to verify support for the payment. This methodology more completely identifies improper payments beyond those resulting from claim processing errors, such as those related to provider noncompliance with coding, billing, and payment rules. By not examining medical record documentation to discern if payments are proper, TRICARE's reported improper payment estimates are not comparable to Medicare's estimates, and likely understate the amount of improper payments relative to the estimates produced by Medicare's more comprehensive methodology.
The root causes of TRICARE improper payments and related corrective actions that DHA has identified are limited to addressing issues of contractor noncompliance with claims processing requirements, and are less comprehensive than the corrective actions identified by CMS. For example, DHA has identified the same single corrective action for each of the last three fiscal years to promote contractor compliance, but it only addresses improper payments caused by contractors' claims processing errors. CMS, by comparison, reports more comprehensive information about root causes of improper Medicare payments, develops corrective actions that more directly address root causes, and uses the information to address the agency's goal of reducing future improper payments. For example, for fiscal year 2013, CMS determined that some payments were improper because the services could have been provided in less intensive settings and CMS subsequently implemented two policies to address the problem. In contrast, DHA's less comprehensive approach limits its ability to address the causes of improper payments in the TRICARE program.
section_title: What GAO Recommends
paragraphs: DOD should implement more comprehensive TRICARE improper payment measurement methods that include medical record reviews, and develop more robust corrective action plans. DOD concurred with GAO's recommendations and identified steps the department will need to take for implementation. HHS had no comments on the report.

section_title: Letter
paragraphs: Improper payments—payments that were made in an incorrect amount or  should not have been made at all—contribute to excess health care  costs. In fiscal year 2013, the Department of Defense (DOD) spent about  $21 billion for the purchased care portion of the military health program  known as TRICARE. The Defense Health Agency (DHA), which  administers TRICARE, reported improper payments of $68 million, or an  error rate of 0.3 percent in 2013. That same year, the Centers for  Medicare & Medicaid Services (CMS), the agency within the Department  of Health and Human Services (HHS) that administers the Medicare   fee-for-service (FFS) program, estimated that $36 billion, or about   10.1 percent, of the total $357 billion in Medicare FFS payments were  improper. Federal agencies annually report improper payment estimates  and error rates for certain programs as a requirement of the Improper  Payments Information Act of 2002 (IPIA), as amended. These laws also  require agencies to report the root causes of improper payments and  identify corrective actions to address them.
The National Defense Authorization Act for Fiscal Year 2014 required that  we examine the similarities and differences between TRICARE and  Medicare improper payments. While Medicare is a much larger program  than the TRICARE purchased care system, the programs are served by  many of the same health care providers, and TRICARE uses some of  Medicare’s coverage and payment policies.extent to which TRICARE’s and Medicare’s measurement of improper  payments are comparable; and (2) the extent to which TRICARE and  Medicare identify root causes of improper payments, and develop  effective corrective action plans to reduce them.
This report addresses (1) the  To examine the extent to which TRICARE’s and Medicare’s measurement  of improper payments are comparable, we reviewed relevant laws related  to federal improper payment reporting and related Office of Management  and Budget (OMB) guidance to understand improper payment error rate  requirements. We also reviewed DOD and HHS fiscal year 2013 improper  payments and measurement methodologies, as reported in their agency  financial reports (AFR). Further, we reviewed improper payment error rate  methodological documentation that is internal to the DHA and the CMS,  as well as policy manuals and other guidance in effect during fiscal year  2013. In addition, we conducted interviews with officials from DHA and its  contractor responsible for conducting the TRICARE claims reviews used  to produce the TRICARE improper payment estimates. We also  interviewed CMS officials and two of the four contractors responsible for  the Comprehensive Error Rate Testing (CERT) program, which calculates  the Medicare improper payment estimates. In addition, to understand how  TRICARE and Medicare measurement methodologies relate to other  claims-based programs, we interviewed representatives and reviewed  documentation from four organizations with knowledge of the claims  review practices of private health insurance plans. We also reviewed the improper payment measurement methodologies of eight other federal  claims-based payment programs, as reported in their respective fiscal  year 2013 AFRs, as well as improper payment reviews conducted by  HHS’s Office of Inspector General (OIG).
To examine the extent to which TRICARE and Medicare identify root  causes of improper payments, and develop effective corrective action  plans to reduce them, we reviewed DOD’s and HHS’s AFRs for fiscal  years 2011, 2012, and 2013; reviewed internal control standards for the  federal government, and findings from our prior reports; and interviewed  officials from DHA and CMS about their roles and responsibilities.
We conducted this performance audit from July 2014 to February 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Fiscal year 2013 marked the 10th year of the implementation of IPIA,  which, as amended, requires executive agencies to identify programs and  activities susceptible to significant improper payments, estimate the  amount of improper payments in susceptible programs and activities, and  report these improper payment estimates, including root causes, and the  actions taken to reduce them. In response to these requirements,  executive agencies, including DOD and HHS, annually report improper  payment estimates and improper payment rates for certain programs in  their AFRs. (See fig.1.)
subsections: section_title: TRICARE Purchased Care Payment Process
paragraphs: DHA uses private sector contractors—referred to as TRICARE purchased  care contractors (TPCC)—to develop and maintain the private health care  provider networks that make up the purchased care system, as well as  process and pay claims. The TPCCs include three Managed Care  Support Contractors (MCSC) that manage health care networks for most  TRICARE benefits in the United States, one contractor to manage  overseas claims, one contractor to manage TRICARE’s supplemental  Medicare coverage program, one contractor to manage the pharmacy  benefit, and three contractors to manage dental benefits.
Under TRICARE, private providers or TRICARE enrollees submit claims  to TPCCs who, on behalf of TRICARE, are responsible for adjudicating  and paying the claims according to established policies and procedures.  TPCCs subject claims to automatic edits to ensure accuracy and  determine how the claims will be adjudicated—either paid or denied. For  example, automated edits compare claim information to TRICARE  requirements in order to approve or deny claims or to flag them for  additional review. TPCCs also conduct more in-depth reviews of certain  claims prior to payment.in fiscal year 2013.
section_title: Medicare Payment Process
paragraphs: Medicare providers submit claims to Medicare Administrative Contractors  (MAC), which are responsible for processing and paying these claims,  among other activities. MACs subject claims to automatic prepayment  edits to ensure accuracy, much like the automated edits in the TRICARE  purchased care program. For example, some prepayment edits are  related to service coverage and payment, while others verify that the  claim submissions contain needed information, that providers are enrolled  in Medicare, and that patients are eligible Medicare beneficiaries. The  MACs processed 1.2 billion Medicare claims in 2013.
section_title: Postpayment Claims Reviews
paragraphs: DHA and CMS also subject a portion of TRICARE and Medicare claims to  postpayment review by contractors to identify and recoup improperly paid  claims. Most private health insurers also conduct postpayment reviews to  identify improper payments, according to organizations we spoke to with  knowledge of claims review practices. Multiple review methodologies  exist depending on the objective of the review, but many require  examination of the underlying medical record. For example, reviews  examine the underlying patient medical record to validate that accurate  codes were used, that services were rendered as the physician  directed, were medically necessary, and were properly documented.  The HHS-OIG, which carries out Medicare program integrity activities,  uses medical record reviews to determine the scope of improper  payments in targeted reviews of specific service types. HHS-OIG officials  have stated that by reviewing medical records and other documentation  associated with a claim, they can identify services that are  undocumented, medically unnecessary, or incorrectly coded, as well as  duplicate payments and payments for services that were not provided.  For example, the HHS-OIG found that 61 percent of power wheelchairs  provided to Medicare beneficiaries in the first half of 2007 were medically  unnecessary or had claims that lacked sufficient documentation to  determine medical necessity, which accounted for $95 million in improper  Medicare payments.
section_title: Improper Payment Reporting Requirements
paragraphs: IPIA, as amended, requires federal executive branch agencies to   (1) review all programs and activities, (2) identify those that may be  susceptible to significant improper payments, (3) estimate the annual  amount of improper payments for those programs and activities,   (4) implement actions to reduce the root causes of improper payments  and set reduction targets, and (5) report on the results of addressing the  foregoing requirements. In response to these requirements and OMB  implementing guidance, agencies generally publicly report their improper  payment estimates each November in their AFRs.
An improper payment is defined by statute as any payment that should  not have been made or that was made in an incorrect amount (including  overpayments and underpayments) under statutory, contractual,  administrative, or other legally applicable requirements. It includes  duplicate payments, and any payment made for an ineligible recipient, an  ineligible good or service, a good or service not received (except for such  payments where authorized by law), and any payment that does not  account for credit for applicable discounts. agencies to report as improper payments any payments for which  insufficient or no documentation is found.
IPIA, § 2(g)(2) (codified, as amended, at 31 U.S.C. § 3321 note). for improper payments.guidance is because of the variation in how federal programs operate.
According to OMB officials, the latitude in the  Although OMB’s implementation guidance allows such variation, several  federal programs which pay for services based on claims submitted by  beneficiaries or providers, including Medicare, examined the underlying  documentation for each of a sample of claims to determine the validity of  payments as part of their efforts to estimate improper payments in fiscal   For example, CMS’s method for testing payments for errors  year 2013. in Medicaid fee-for-service and Children’s Health Insurance Program fee- for-service includes both a claims processing review and medical record  review.improper payments were identified through the medical record reviews in  fiscal year 2013.
Most Medicaid and Children’s Health Insurance Program  With respect to IPIA’s required root cause analysis and corrective action  reporting, the corrective actions agencies develop depend, in part, on  the improper payments identified by their measurement methodology.  OMB guidance on corrective actions states that agencies should  continuously use their improper payment measurement results to identify  new and innovative corrective actions to prevent and reduce improper  payments. Internal control standards for the federal government also  state that federal agencies should establish policies and procedures to  ensure that the findings of audits and other reviews—including the  improper payment measurement results—are promptly addressed and  corrected.
section_title: TRICARE Improper Payment Measurement Methodology Was Less Comprehensive than Medicare’s, Which Led to Improper Payment Rates That Were Not Comparable
paragraphs: DHA’s approach to measuring improper payments in TRICARE was less  comprehensive than that used by CMS for Medicare. Both methodologies  evaluate a sample of health care claims paid or denied by the contractors  that process program claims. However, while CMS’s methodology  examined underlying patient medical records supporting each of the  sampled claims, DHA did not evaluate comparable medical record  documentation to discern whether each payment was supported.  Consequently, TRICARE’s reported improper payment estimates were  not comparable to Medicare’s estimates, and likely understated the  amount of improper payments in the TRICARE program relative to the  estimates produced by Medicare’s more comprehensive measurement  methodology.
subsections: section_title: TRICARE’s Improper Payment Measurement Methodology Was Less Comprehensive than Medicare’s Methodology
paragraphs: The improper payment measurement methodology that DHA used to  estimate the TRICARE improper payments reported in DOD’s fiscal year  2013 AFR was less comprehensive than the measurement methodology  CMS used to estimate Medicare improper payments. Specifically, the  supporting documentation that DHA’s methodology examined to test  whether sampled health care claims were paid properly was less  comprehensive than Medicare’s methodology, which examined medical  record documentation for each sampled claim. According to DHA and  CMS guidance, the agencies also developed their measurement  methodologies for different purposes.
TRICARE: DHA’s approach to measuring TRICARE improper payments  examined whether the TPCCs processed and paid submitted claims  according to TRICARE policies. Since 1994, DHA has employed a  contractor to conduct postpayment claims reviews for the primary  purpose of determining the accuracy of TPCCs’ claims processing and  compliance with TRICARE policy, according to DHA’s claims review  contractor guidance, and contractor and DHA officials. DHA officials  reported that DHA has also aggregated these TPCC-specific compliance  reviews to report the national TRICARE improper payment rate, as  required by IPIA since 2003. While DHA has changed aspects of the  compliance review methodology to meet reporting requirements for  statistically significant estimates, and, according to DHA, to reflect legal  and contractual changes impacting TRICARE, the basic process of  reviewing claims has not changed in 20 years. As a result, DHA continues  to only identify improper payments due to contractor compliance  problems.
To determine the TPCCs’ claims processing performance, the TRICARE  claims review contractor examines a sample of paid and denied claim  records, including any documentation used by the TPCC to adjudicate the  claim. For each of the claims the DHA samples, the TPCC is required to  send to the TRICARE claims review contractor copies of the processed  claim, the beneficiary’s claim history, and any documentation it used to  process the claim. According to DHA and claims review contractor  officials, the documentation varies by claim and can include information  from the DHA eligibility database or prior authorization and referral forms.  DHA and claims review contractor officials reported that medical record  documentation is only included in the improper payment claims review if  the TPCC conducted a medical review as part of its original claim  processing. According to the TRICARE claims review contractor, DHA officials, and the agency’s claims review guidance, the contractor  conducts automated and manual reviews of the claim and supporting  documentation to verify that the TPCC processed the claim according to  TRICARE policy and contract requirements. For example, the claims  review contractor uses automated auditing tools to verify the clinical  accuracy of procedure codes listed on the claim. It also verifies that the  beneficiary and provider were eligible, the claimed services were covered  TRICARE benefits, the TPCC calculated correct pricing and cost sharing,  and prior authorization and medical necessity were documented when  necessary, among other things. If a medical review was conducted by the  TPCC, DHA and the TRICARE claims review contractor told us that the  contractor does not typically re-evaluate the TPCC’s decision, but only  ensures that the documentation exists. Based on a review of DHA’s  claims review guidance and statements from DHA and claims review  contractor officials, DHA’s improper payment measurement methodology  also does not independently validate that the medical records support the  diagnosis or procedure codes submitted on the claim.
According to DHA guidance, if the TPCC did not provide a copy of the  claim or processed the claim incorrectly based on the documentation  provided, the claims review contractor will consider some or all of the  payment as an error and action is taken to adjust the payments  accordingly. DHA guidance provides TPCCs the opportunity to submit  additional documentation to support their processing decisions and  remove certain errors. After the audit results are finalized, DHA uses the  information to calculate improper payment rates for each TPCC and to  estimate its national improper payment rate.
Medicare: CMS developed the Comprehensive Error Rate Testing  (CERT) program to estimate the national Medicare improper payment  rate to comply with IPIA, and to monitor payment decisions made by the  MACs, according to CMS’s CERT guidance. CMS’s CERT program  methodology focuses on compliance with conditions of Medicare’s  payment policies by both the provider and MAC. The CERT program  targets high-risk aspects of the Medicare program. Specifically, CMS  officials told us that because Medicare maintains common shared  systems that determine for all MACs whether a provider is enrolled in  Medicare, and what the payment rate should be, CMS has deemed these  aspects of the claims payment process to be at low risk of improper  payments, and they are not examined through CERT. Instead, the  CERT program focuses on problems that MACs cannot otherwise identify  using automated means, according to CMS officials. CMS has employed  contractors to carry out the CERT program since 2003. CMS has  reported that the agency has modified the CERT measurement  methodology to address identified trends and improve accuracy.
CMS’s approach to measuring improper payments involves examining the  medical record associated with a stratified random sample of processed  Medicare claims to determine whether there is support for the payment,  and to assess whether the payment followed Medicare’s coverage,  coding, and billing rules. CMS’s CERT guidance specifies that, for each  sampled claim, the CERT documentation contractor obtain the medical  record and other pertinent documentation from the provider that  submitted the claim. If the provider does not provide the medical record and other requested information, the CERT review contractor identifies  the payment amount as an error. According to CMS’s CERT guidance  and contractor officials, when medical records are received, the  contractor’s clinical and coding specialists review the claim and the  supporting medical records to assess whether the claim followed  Medicare’s payment rules. Claims that do not follow Medicare’s payment  rules or claims for which the provider submitted insufficient  documentation to determine that the services were provided or medically  necessary are classified as an error by the CERT reviewer and action is  taken to adjust the payments accordingly. Medicare allows providers  whose claims were denied by the CERT review contractor to appeal  those claims, and if the error determination for a claim is overturned  through the appeals process, the CERT review contractor adjusts the  error accordingly. Once all the errors are finalized, the CERT statistical  contractor calculates the national error rates. Table 1 compares the  purpose of and documentation reviewed by the TRICARE and Medicare  improper payment measurement methodologies.
section_title: TRICARE’s Methodology Is Likely to Understate Its Improper Payment Rate Compared to Medicare’s Methodology
paragraphs: Compared to DHA’s methodology, CMS’s CERT methodology of  examining underlying medical records to independently verify Medicare  claims and payments more completely identifies potential improper  payments, such as those caused by provider noncompliance with coding,  billing, and payment rules. While DHA’s methodology is designed to  identify improper payments resulting from TPCC claims processing  compliance errors, it does not comprehensively capture errors that occur  at the provider level or errors that can only be identified through an  examination of underlying medical record documentation. Table 2  compares examples of the information verified by the TRICARE and  Medicare improper payment measurement methodologies.
CMS’s CERT methodology identifies certain improper payments that  DHA’s TRICARE claims review methodology would not fully identify. Such  improper payments accounted for nearly all of the 10.1 percent improper  payment rate that CMS reported in fiscal year 2013. For example,  differences include:
Evidence of medical necessity: As noted, the TRICARE claims review  contractor’s medical necessity review is limited to confirming that the  TPCC completed a medical review when required and the claim  passed certain edits. Consequently, the review contractor may not  identify payments for medically unnecessary services for the claims  that a TPCC did not previously review. The claims review contractor  would also fail to identify if the TPCC made an improper medical  necessity determination for those claims that it was required to review  because the claims review contractor does not re-review the TPCC’s  determination. Conversely, CMS’s CERT methodology identifies such  errors. Through the CERT program’s independent medical record  review for each sampled claim, CMS has estimated that improper  payments related to medically unnecessary services accounted for  2.8 percent of total Medicare payments and 26.6 percent of total  improper payments in fiscal year 2013.
Verification of correct coding: The TRICARE claims review contractor  confirms that the codes used for reimbursement matches the  diagnosis claimed and passed coding edits, but does not verify that  the medical documentation validates the codes that were billed or  diagnosis claimed. As a result, the TRICARE claims review  methodology could fail to identify if a provider used, and the TPCC  paid for, services based on an incorrect code. CMS’s CERT program  identifies such errors and estimated that 1.5 percent of Medicare  payments in fiscal year 2013 were improper because of incorrect  coding. Such errors accounted for 13.7 percent of total estimated  improper payments that year.
Documentation of provider services: Since DHA’s claims review  methodology does not request documentation from providers, it is  unclear whether TRICARE providers maintain the required  documentation to support the services they claim. In contrast, CMS  estimated that 6.1 percent of Medicare payments were improper in  fiscal year 2013 because of insufficient documentation, which  accounted for 56.8 percent of total estimated improper payments.
That is, the provider submitted some documentation, but the CERT  reviewer could not conclude that some of the allowed services were  actually provided at the level billed or were medically necessary. In  addition, “no documentation” errors—where the provider submitted  none of the requested medical records—accounted for 0.2 percent of  Medicare payments or 1.4 percent of total improper payments in fiscal  year 2013.
DHA officials reported that TRICARE has other postpayment mechanisms  in place to examine medical records and thus identify the types of  improper payments that the TRICARE claims review program does not.  However, the results of the other mechanisms are not reflected in the  estimated improper payment rates that DHA reports. For example, DHA  conducts quality monitoring reviews that analyze medical record  documentation and identify problems such as paid services that were not  medically necessary. DHA policy also requires the TPCCs to conduct  quarterly internal reviews of a sample of medical records to determine the  medical necessity of care provided, and determine if the diagnostic and  procedural information of the patient—as reported on the claim—matches  the physician’s description of care and services documented in the  medical record. However, the potential problems identified by these  reviews are not considered or publicly reported as improper payments in  the DOD’s AFR.
Due to the fundamental differences in DHA’s and CMS’s approaches to  measuring improper payments, reported improper payment rates for  TRICARE and Medicare are not comparable. By not examining  underlying medical record documentation to discern if payments for  claims are proper, DHA is likely not identifying all types of improper  payments in TRICARE, and thus understating the rate of improper  payments. OMB’s IPIA implementation guidance does not specifically  dictate how agencies should test for improper payments. However,  Medicare and certain other federal claims-based programs conduct more  comprehensive reviews that include examination of the underlying  documentation for each sampled claim to determine the validity of  payment as part of their efforts to estimate improper payments under  IPIA. The HHS-OIG and most of the organizations with knowledge of  health care claims review practices that we spoke with also acknowledge  that reviewing the underlying medical records is needed to verify  appropriate payment.
section_title: TRICARE’s Root Cause Analysis and Corrective Action Plans for Improper Payments Only Addressed Contractor Compliance and Were Less Comprehensive Than Medicare’s
paragraphs: The root causes and related corrective actions that DHA reported in  DOD’s fiscal year 2013 AFR are limited to addressing issues of contractor  noncompliance with claims processing requirements. For example,   DHA reported the following root causes for the 0.3 percent errors it found  to be improper: incorrect pricing for medical procedures and equipment  (47 percent), missing authorization or pre-authorization (14 percent), and  cost sharing or deductible miscalculations (11 percent). These  categories are largely processing errors that reflect DHA’s approach to  identifying errors, and do not address underlying causes of improper  payments not related to contractor compliance, such as errors made by  providers who may not fully understand or comply with DHA policies.  DHA cannot fully identify provider-level improper payment errors without  reviews of the paperwork submitted by providers, including reviews of  underlying medical records.
DHA’s one corrective action for TRICARE for the past three fiscal years— to incentivize payment accuracy through contract bonuses and penalties  based on audit results—may be a good method to promote contractor  compliance, but it will not address providers’ noncompliance with billing  rules. DHA officials said that they have not changed or added to the  corrective action plan in at least three fiscal years because contract  requirements are still in place to financially incentivize contractors to  process health care claims correctly. Although DHA could include other  corrective actions, the current approach only addresses improper  payments caused by contractors’ claims processing errors.
Under the IPIA, as amended, and implementing guidance, agencies are  to identify program weaknesses, make improvements, and reduce future  improper payments. Our prior work has found that DHA missed  opportunities to prevent future improper payments; for example, in a May  2013 report examining IPIA compliance throughout DOD, we found that  DOD did not adequately implement key IPIA provisions and OMB  requirements for fiscal year 2011. We recommended that DOD’s  corrective action plans be developed using best practices to ensure that  root causes are addressed, improper payments reduced, and federal  dollars protected. A senior DOD official told us that the agency planned  to implement this recommendation by November 15, 2014; however, DHA  cannot address these recommendations with respect to TRICARE until it  has identified improper payments using a measurement methodology that  goes beyond contractor compliance issues.
CMS, by comparison, reported more detailed and constructive information  about the 10.1 percent of Medicare payments it reported as improper in  HHS’s fiscal year 2013 AFR. In addition to describing the types of errors  that most frequently led to improper payments, CMS also provided  contextual information about specific factors that contributed to the errors.  For example, CMS reported that some improper payments were made for  services that, while clinically appropriate, could be provided in less  intensive settings and therefore did not meet Medicare’s medical  necessity requirements. CMS also identified the provider types that  contributed most substantially to each type of improper payment. For  example, hospitals contributed substantially to medical necessity errors.
CMS’s multiple corrective actions are more detailed and clearly tied to  reported root causes of Medicare improper payments than TRICARE’s.  For example, CMS is expanding the Medicare Recovery Audit Contractor program to allow  prepayment reviews of certain types of claims with historically high  amounts of improper payments, therefore preventing improper  payments from being made in the first place; and  implementing two policies pertaining to inpatient hospital claims that  will specifically address the identified root cause of care being  provided in inappropriately intensive settings.
CMS provides MACs with contract-specific root causes of improper  payment data on a quarterly basis. These data are used by MACs to  update their corrective actions quarterly.actions allow CMS and its contractors to tailor efforts to address specific  root causes of errors, and review its plans for reducing errors using   Quarterly updates to corrective  measurable targets, which help the agency know when it has made  progress in addressing program weaknesses.
In addition to reporting root causes and corrective actions in the AFR,  CMS uses its Medicare improper payment results to address the agency’s  stated goal of reducing Medicare improper payments due to  programmatic weaknesses. For example, CMS annually develops and reports a more detailed analysis of improper  payment findings than is provided in the AFR by providing specific  examples of areas identified as particularly vulnerable to improper  payments, analysis of root causes of those errors, and detailed error  information by service and provider; and undertakes program-wide action to address improper payment  findings. For example, after finding that durable medical equipment  suppliers contributed substantially to insufficient documentation  errors, CMS began a prior authorization demonstration in seven  states to reduce improper payments for power mobility devices.
In comparison with DHA, CMS has a more comprehensive approach to  identifying Medicare improper payments and root causes, and addresses  those weaknesses through its corrective actions. Without a more  comprehensive approach, DHA will be limited in its ability to address the  causes of improper payments in the TRICARE program.
section_title: Conclusions
paragraphs: The extent of improper payments identified by agencies depends, in part,  on how they test their program components for errors. TRICARE and  Medicare are at similar risk for improper payments because both health  care programs pay providers on a fee-for-service basis, the programs’  providers overlap, both programs depend on contractors to process and  pay claims, and TRICARE uses some of Medicare’s coverage and  payment policies. However, DHA does not have as robust an approach to  measuring improper payments in the TRICARE program as CMS has for  the Medicare program. Specifically, DHA does not routinely examine  medical record documentation in its approach to measuring TRICARE  improper payments. While DHA has other reviews in place that analyze  medical record documentation and could be leveraged to more  comprehensively identify improper payments, the results of those reviews  are not considered or reported as improper payments. This may account  for why the reported improper payment rate for TRICARE is less than   1 percent while the reported rate for Medicare is 10 percent. Although  TRICARE is a smaller program compared to Medicare, it still costs the  government a significant amount of money—about $21 billion in fiscal  year 2013 for the purchased care portion of TRICARE—and DOD has  determined TRICARE to be susceptible to significant improper payments  under IPIA, as amended. Without a robust measure of improper payment  rates in the TRICARE program, DHA cannot effectively identify root  causes and take steps to address practices that contribute to improper  payments and excess spending.
section_title: Recommendations for Executive Action
paragraphs: To better assess and address the full extent of improper payments in the  TRICARE program, we recommend that the Secretary of Defense direct  the Assistant Secretary of Defense (Health Affairs) to take the following  two actions:  1.  implement a more comprehensive TRICARE improper payment  measurement methodology that includes medical record reviews, as  done in other parts of its existing postpayment claims review  programs; and  2.  once a more comprehensive improper payment methodology is  implemented, develop more robust corrective action plans that  address underlying causes of improper payments, as determined by  the medical record reviews.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOD and HHS for comment. In its  written comments, reproduced in appendix I, DOD concurred with our  recommendations. DOD also outlined the steps the department will take  prior to implementation, including conducting discussions within the  department; developing implementation plans; and hiring or contracting  for the needed workforce to begin implementing the recommendations.  DOD noted that taking these steps would take time. Given the potentially  high cost of improper payments, we believe DOD should move  expeditiously. HHS had no comments on the report.
We are sending copies of this report to appropriate congressional  committees, the Secretary of Defense, the Assistant Secretary of Defense  (Health Affairs), the Secretary of Health and Human Services, the  Administrator of CMS, and other interested parties. The report also will be  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or dsouzav@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II.
section_title: Appendix I: Comments from the Department of Defense
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Lori Achman, Assistant Director;  Rebecca Abela; Drew Long; Dawn Nelson; and Jennifer Whitworth made  key contributions to this work.
section_title: Related GAO Products
paragraphs: Improper Payments: Government-Wide Estimates and Reduction  Strategies. GAO-14-737T. Washington, D.C.: July 9, 2014.
Medicare: Further Action Could Improve Improper Payment Prevention  and Recoupment Efforts. GAO-14-619T. Washington, D.C.: May 20,  2014.
Medicare Program Integrity: Contractors Reported Generating Savings,  but CMS Could Improve Its Oversight. GAO-14-111. Washington, D.C.:  October 25, 2013.
Medicare Program Integrity: Increasing Consistency of Contractor  Requirements May Improve Administrative Efficiency. GAO-13-522.  Washington, D.C.: July 23, 2013.
DOD Financial Management: Significant Improvements Needed in Efforts  to Address Improper Payment Requirements. GAO-13-227. Washington,  D.C.: May 13, 2013.
Medicare Program Integrity: Few Payments in 2011 Exceeded Limits  under One Kind of Prepayment Control, but Reassessing Limits Could Be  Helpful. GAO-13-430. Washington, D.C.: May 9, 2013.
Medicaid: Enhancements Needed for Improper Payments Reporting and  Related Corrective Action Monitoring. GAO-13-229. Washington, D.C.:  March 29, 2013.
Medicare Program Integrity: Greater Prepayment Control Efforts Could  Increase Savings and Better Ensure Proper Payment. GAO-13-102.  Washington, D.C.: November 13, 2012.
Program Integrity: Further Action Needed to Address Vulnerabilities in  Medicaid and Medicare Programs. GAO-12-803T. Washington, D.C.:  June 7, 2012.
Improper Payments: Remaining Challenges and Strategies for  Governmentwide Reduction Efforts. GAO-12-573T. Washington, D.C.:  March 28, 2012.
Improper Payments: Moving Forward with Governmentwide Reduction  Strategies. GAO-12-405T. Washington, D.C.: February 7, 2012.
Medicare Integrity Program: CMS Used Increased Funding for New  Activities but Could Improve Measurement of Program Effectiveness.  GAO-11-592. Washington, D.C.: July 29, 2011.
Improper Payments: Reported Medicare Estimates and Key Remediation  Strategies. GAO-11-842T. Washington, D.C.: July 28, 2011.
Improper Payments: Progress Made but Challenges Remain in  Estimating and Reducing Improper Payments. GAO-09-628T.  Washington, D.C.: April 22, 2009.
Improper Payments: Status of Agencies’ Efforts to Address Improper  Payment and Recovery Auditing Requirements. GAO-08-438T.  Washington, D.C.: January 31, 2008.
Improper Payments: Federal Executive Branch Agencies’ Fiscal Year  2007 Improper Payment Estimate Reporting. GAO-08-377R. Washington,  D.C.: January 23, 2008.
Medicare: Improvements Needed to Address Improper Payments for  Medical Equipment and Supplies. GAO-07-59. Washington, D.C.:  January 31, 2007.
Strategies to Manage Improper Payments: Learning From Public and  Private Sector Organizations. GAO-02-69G. Washington, D.C.: October  2001.