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.) 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. 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. 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. 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. 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. 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.