2001.0.27:HHS Launches Project to Integrate Medicare Accounting System

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FOR IMMEDIATE RELEASE
Thursday, Sept. 27, 2001

Contact:

CMS Press Office
(202) 690-6145

HHS LAUNCHES PROJECT TO INTEGRATE MEDICARE ACCOUNTING SYSTEMS

HHS Secretary Tommy G. Thompson today launched a long-term project to combine Medicare's many outdated accounting systems into a single, unified system that will better ensure that the program pays correctly for the care Medicare beneficiaries need. HHS' Centers for Medicare & Medicaid Services (CMS) this week awarded a contract to begin developing and pilot-testing the new system.

"For too long, Medicare has relied on outdated systems to track the nearly 1 billion health insurance claims it pays each year," Secretary Thompson said. "This project will make it far easier for Medicare to track and pay claims quickly and accurately on behalf of the 40 million Medicare beneficiaries and all American taxpayers."

The Healthcare Integrated General Ledger Accounting System (HIGLAS) will eventually replace the 53 different systems now in use by the private insurance companies that process and pay nearly 3 million Medicare claims every day.

The project will integrate the new system with Medicare's three standard computer systems and replace the current mainframe-based financial system with a modern, Web-based accounting system. Most Medicare contractors do not use double entry accounting methods or have general ledger capabilities. As a result, accuracy of reported activities must be verified manually. Despite these weaknesses, CMS has maintained clean audit opinions in recent years.

The HIGLAS system will improve accountability for Medicare's outlays to providers serving Medicare beneficiaries. The system will result in estimated benefits of approximately $1.2 billion through fiscal year 2010 by allowing CMS to better record, track and collect receivables. In fiscal year 2002, Medicare will pay an estimated $252 billion on behalf of its 40 million beneficiaries.

The project will be implemented in phases ultimately creating a seamless modern accounting system for Medicare.

Secretary Thompson has made modernizing Medicare's accounting systems a priority in order to improve the program's fiscal accountability to beneficiaries and taxpayers. Independent audit findings conducted by the General Accounting Office and HHS' Office of Inspector General revealed weaknesses in the accounting of Medicare claims. CMS evaluated these weaknesses and created an approach to use a commercial off-the-shelf financial accounting system for both Medicare contractors and CMS administrative accounting functions.

To assist CMS in implementing the new accounting system, the agency is contracting with PricewaterhouseCoopers, whose major teaming partners include Oracle Corp. and Electronic Data Systems (EDS). PricewaterhouseCoopers will act as the systems integrator, Oracle Corp. will provide the financial accounting software and EDS will provide Application Service Provider services. The potential value of the contract is about $328.4 million over the entire period of the contract.

"It is up to us to protect Medicare, the trust funds and the American taxpayers," said Ruben J. King-Shaw Jr., CMS chief operating officer and deputy administrator. "HIGLAS will help us achieve that goal."

Implementing an integrated general ledger program will give CMS enhanced oversight of contractor accounting systems and provide high quality, timely data for decision-making and performance measurement.

The project will begin with a pilot program with one Medicare contractor that processes primarily hospitals and other institutional claims, Palmetto Government Benefit Administrators, and another that processes primarily physician and supplier claims, Empire Blue Cross & Blue Shield. The pilot phase will reengineer the accounting business process of the Medicare contractors to support the accounting software.

Once completed, the system will be thoroughly tested to ensure it works correctly and can handle the large volume of financial transactions generated by the Medicare program before a final decision is made to install the accounting system for Medicare and all its contractors. Full implementation is projected for the end of fiscal year 2006.

The new system will also strengthen Medicare's management of its accounts receivable and allow more timely and effective collection activities on outstanding debts. These improvements in financial reporting by CMS and its contractors are essential to retaining an unqualified opinion on CMS' financial statements, meeting the requirements of key federal legislation and safeguarding government assets.

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Note: All HHS press releases, fact sheets and other press materials are available at www.hhs.gov/news.