Md. Blues' computer ills cited in caution to HCFA

May 27, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

Federal auditors are warning that as the federal Health Care Financing Administration consolidates all its claims payments in a single nationwide computer system, the agency should learn from a fiasco it helped create when it prodded Blue Cross and Blue Shield of Maryland to convert its software too quickly in 1991.

The General Accounting Office, in a letter to Sen. William S. Cohen, told the Maine Republican that "poor decision-making by HCFA contributed" to a "costly and turbulent" conversion that left Blue Cross/Blue Shield with $5 million in unanticipated costs and led to a yearlong plague of late and erroneous payments.

Continuing problems with the Blues' claims-processing system led to the announcement Monday that the Maryland company would abdicate its role as a contractor under the federal Medicare program. Under the contract, Blue Cross/Blue Shield processed claims and paid health care bills for elderly patients in Maryland.

Since 1989, HCFA has been trying to cut costs by urging its 79 claims-payment contractors to share their computer systems with other contractors. The agency, which has the bulk of its operations in Woodlawn, is trying to consolidate the 14 systems being used by its various contractors into a single standard.

The GAO report to Senator Cohen says poor management by Blue Cross/Blue Shield contributed to the problems with the conversion to a system devised by General American, a Missouri Medicare contractor. Because of mounting foul-ups, the insurer's performance rating declined from 95 on a 100-point scale, near the top in the United States, to a national low of 65 between 1991 and 1992.

GAO auditors criticized HCFA for allotting only five months for the conversion process, charging that the agency set an unrealistic time frame in response to budgetary pressures.

Blue Cross met its Sept. 30, 1991, deadline for installing the system, auditors said, but only by skimping on its testing of the new software and training of the employees who would use it.

The GAO found that during the first year the new system was implemented, the volume of backlogged claims swelled to 200,000 -- almost twice the insurer's normal rate. As a result, Blue Cross ended up paying an extra $3 million for overtime and subcontractors and $478,000 in interest payments to physicians whose payments were late, the auditors said.

Gary Kavanagh, deputy director of HCFA's Bureau of Program Operations, put the brunt of the blame on Blue Shield for dragging its feet in making the conversion, then making a poor choice of system.

He said the agency has already learned from its experience in Maryland and was making sure that adequate time is left for testing and training in future conversions.

"The report was a little bit too critical, but we'll admit there were mistakes made," Mr. Kavanagh said.

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