oversight

Defense Health Care: Improvements Needed to Reduce Vulnerability to Fraud and Abuse

Published by the Government Accountability Office on 1999-07-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Committees on Armed
                  Services, U.S. Senate and House of
                  Representatives


July 1999
                  DEFENSE HEALTH
                  CARE
                  Improvements Needed
                  to Reduce Vulnerability
                  to Fraud and Abuse




GAO/HEHS-99-142
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-282038

      July 30, 1999

      The Honorable John W. Warner
      Chairman
      The Honorable Carl Levin
      Ranking Minority Member
      Committee on Armed Services
      United States Senate

      The Honorable Floyd D. Spence
      Chairman
      The Honorable Ike Skelton
      Ranking Minority Member
      Committee on Armed Services
      House of Representatives

      In fiscal year 1998, the Department of Defense (DOD) spent about $2.5
      billion through contracts to provide health care in civilian settings to about
      1.5 million beneficiaries, including dependents of active duty personnel,
      military retirees, and their dependents. As with other health care systems,
      fraud and abuse threaten DOD with significant financial loss and may
      adversely affect the quality of care delivered if beneficiaries are exposed
      to unnecessary care or not treated at all.

      The military health care system is administered by the military services in
      partnership with civilian contractors (see app. I). TRICARE, DOD’s
      managed health care program, was established to improve beneficiaries’
      access to health care while maintaining quality and controlling costs in a
      time of military downsizing and budgetary concerns. DOD, including its
      Office of Inspector General, and its civilian contractors work together to
      prevent and detect TRICARE fraud and abuse.

      Senate Report 105-189, accompanying the National Defense Authorization
      Act for fiscal year 1999, expressed congressional concerns regarding the
      impact of fraud on military health care and directed that we evaluate DOD
      efforts to combat it. In response, we (1) analyzed DOD estimates of the
      extent of health care fraud and abuse, (2) evaluated DOD efforts to reduce
      health care fraud and abuse in civilian settings, and (3) identified
      initiatives and incentives that could improve DOD’s antifraud efforts. We
      conducted our work between August 1998 and June 1999 in accordance
      with generally accepted government auditing standards (see app. II for
      details on our scope and methodology).




      Page 1                                 GAO/HEHS-99-142 Defense Health Care Fraud
                   B-282038




                   It is impossible to precisely quantify the amount lost to health care fraud
Results in Brief   and abuse given the nature of such activities, but there is general
                   consensus in DOD and the health care industry that fraud and abuse could
                   account for 10 to 20 percent of all health care costs. Given TRICARE
                   managed care contract expenditures of $5.7 billion between 1996 and
                   1998, DOD could have lost over $1 billion to fraud and abuse during this
                   period. In addition to the financial loss, health care fraud and abuse can
                   also adversely affect the quality of care provided and may cause serious
                   harm to patients’ health. For instance, when a provider fabricates test
                   results instead of actually conducting the tests for which it bills DOD,
                   patients can receive incorrect diagnoses and inadequate medical
                   treatment.

                   DOD and its contractors have had limited success in identifying TRICARE
                   fraud and abuse. For example, contractors have identified a negligible
                   number of potential fraud cases: of the approximately 50 million claims
                   that contractors processed between 1996 and 1998, they referred only
                   about 100 potential fraud cases to DOD for further investigation. This low
                   level of fraud identification has occurred, in part, because DOD contracts
                   do not require contractors to aggressively identify and prevent fraud and
                   abuse. During this same period, DOD recovered about $14 million in
                   fraudulent payments out of the $5.7 billion spent.

                   To its credit, DOD recognizes the need to reduce its vulnerability to fraud
                   and abuse and has identified a number of revisions it could make to its
                   antifraud policies and requirements. However, it has been slow to
                   implement these policy revisions, which collectively would require
                   contractors to put into place a more aggressive fraud and abuse
                   identification program. Once these revisions are implemented, existing
                   contracts can be modified to include specific results-oriented goals and
                   performance measures, thus putting DOD in a better position to evaluate
                   contractors’ progress in identifying and reducing fraud and abuse. Given
                   the magnitude of potential financial loss and harm to patients’ health, it is
                   important that DOD place a high priority on, and establish a concerted
                   strategy for, reining in health care fraud. DOD’s strategic plan for the
                   military health system, prepared in response to the Government
                   Performance and Results Act of 1993, provides an appropriate vehicle for
                   articulating DOD’s strategy and establishing how the agency will identify
                   and prevent TRICARE fraud and abuse. This report makes
                   recommendations to the Secretary of Defense for reducing TRICARE’s
                   vulnerability to fraud and abuse.




                   Page 2                                 GAO/HEHS-99-142 Defense Health Care Fraud
             B-282038




             The mission of the military health care system is to maintain the health of
Background   active duty service personnel and provide health care during military
             operations. The system also offers health care to non-active duty
             beneficiaries, including dependents of active duty personnel and military
             retirees and their dependents, through various military-operated hospitals
             and clinics worldwide; the system is supplemented through contracts with
             civilian health care providers. TRICARE, the name given to the program
             providing this care, is a triple-option benefit program designed to give
             beneficiaries a choice among a health maintenance organization, a
             preferred provider organization, and a fee-for-service benefit. Five
             managed care support contractors create networks of civilian health care
             providers. These providers submit claims, either individually or as part of
             a group practice, to contractors for payment of medical care they have
             provided to DOD beneficiaries. Fraud occurs when health care providers
             knowingly submit claims containing false information. Common types of
             provider fraud and abuse include billing for services not rendered,
             misrepresentation of services, and conducting unwarranted medical
             procedures.

             Multiple players support DOD’s health care fraud identification and
             prevention efforts. DOD’s TRICARE Management Activity’s (TMA) Program
             Integrity Branch serves as the centralized administrative hub for TRICARE
             fraud and abuse activity worldwide. Its primary responsibilities include
             (1) developing policies and procedures for the prevention, detection,
             investigation, and control of TRICARE fraud and abuse; (2) educating
             beneficiaries, health care providers, and others about various health care
             fraud and abuse issues; (3) initiating administrative remedies, such as
             sanctioning fraudulent providers; and (4) coordinating with other DOD and
             external investigative agencies, such as the Federal Bureau of
             Investigation, to assist in investigations of health care fraud and abuse. TMA
             staff are also responsible for overseeing and ensuring that the five
             contractors comply with contractual antifraud requirements.

             Each DOD TRICARE contractor is responsible for establishing a program
             for identifying and reporting potential health care fraud and abuse to DOD.
             To help with this effort, the contractors have subcontracted with one of
             two companies to process TRICARE claims. In conjunction with their
             claims processing duties, the subcontractors provide various prepayment
             controls and perform postpayment reviews that are designed, among other
             things, to identify erroneous billings, duplicate claims, and unusual or
             excessive patterns of care.




             Page 3                                 GAO/HEHS-99-142 Defense Health Care Fraud
                           B-282038




                           DOD’s health care fraud identification and prevention efforts are further
                           supported by investigators from the Defense Criminal Investigative Service
                           (DCIS), the investigative unit of DOD’s Office of Inspector General. While
                           DCIS is involved in some efforts to identify fraudulent activity through
                           undercover operations, the vast majority of cases it investigates are
                           referred from other sources, such as TMA and whistleblowers.


                           While the exact extent of health care fraud and abuse can never be
DOD Could Be Losing        precisely quantified, the general consensus, based on the experience of
Hundreds of Millions       public and private sector organizations such as DOD, the Health Care
of Dollars to Fraud        Financing Administration (HCFA), the U.S. Chamber of Commerce, the
                           Health Insurance Association of America, and the National Health Care
and Abuse                  Anti-Fraud Association, is that fraud and abuse could account for 10 to 20
                           percent of all health care costs. Applying this percentage to TRICARE
                           contract expenditures of about $5.7 billion between 1996 and 1998, DOD
                           could have lost between $570 million and $1.14 billion to fraud and abuse
                           over the last 3 years. As health care costs increase over time, fraud and
                           abuse can be expected to increase proportionally.

                           Health care fraud and abuse also affect the quality of care provided and
                           may cause serious harm to patients’ health. For example, illegal practices
                           such as “sink testing,” which involves throwing out patients’ blood and
                           urine specimens and fabricating test results, rather than actually
                           performing the necessary tests, can result in improper diagnoses and
                           either no medical treatment or unnecessary treatment. Another health care
                           fraud scheme that may affect patients’ health involves individuals who
                           provide unauthorized care by falsely representing themselves as licensed
                           medical providers.


                           DOD and its contractors have had limited success in identifying TRICARE
DOD Has Had Limited        fraud and abuse. To date, contractors have referred relatively few cases to
Success in Identifying     TMA for further investigation and development, in part, because DOD’s

Fraud and Abuse            contracts do not require contractors to establish a focused, aggressive
                           antifraud program. Furthermore, DOD has recovered only a relatively small
                           portion of its estimated losses to fraud and abuse.


DOD Contractors Have       DOD depends on its contractors to help it combat fraud and abuse. Up to
Referred Few Fraud Cases   this point, however, contractors have identified and referred relatively few
to TMA                     potential fraud cases to TMA. Table 1 shows that, of approximately



                           Page 4                                GAO/HEHS-99-142 Defense Health Care Fraud
                                        B-282038




                                        50 million claims processed between 1996 and 1998, contractors referred
                                        only about 100 potential fraud cases to TMA for further investigation, 92 of
                                        which were referred by the contractor with the most TRICARE
                                        experience. Although DOD has not established a specific number of cases
                                        its contractors should refer, DOD officials acknowledge that its contractors
                                        could be more aggressive in their efforts to identify potentially fraudulent
                                        activity. According to DOD officials, this lack of aggressiveness is due, in
                                        part, to the fact that DOD contracts do not specify to what extent
                                        contractors should be identifying and referring potential fraud cases.
                                        Moreover, some contractor program integrity staff told us that they were
                                        unclear about the types of potential fraud cases to refer to TMA and that
                                        they were not adequately trained to identify fraud and abuse. In addition,
                                        DOD officials told us that, because two of the five contractors were
                                        relatively new to the TRICARE program, they had not yet compiled
                                        sufficient data to identify fraudulent behavior.

Table 1: Claims Processed and
Potentially Fraudulent Cases Referred                                                                                    Referrals of
by TRICARE Contractors, 1996-98                                                                                        potential fraud
                                        Contractor                                               Claims processed              casesa
                                        Foundation Health Federal Services, Inc.                        25,700,000                 92
                                        Humana Military Healthcare Services, Inc.                       14,500,000                  4
                                        TriWest Healthcare Alliance, Inc.                                6,100,000                  3
                                        Anthem Alliance for Health, Inc.                                 2,700,000                  2
                                        Sierra Military Health Services                                  1,000,000                  0
                                        Total                                                           50,000,000                101
                                        a
                                        Potential fraud cases may involve multiple claims.

                                        Source: TMA.



                                        In addition to their modest efforts specifically associated with identifying
                                        and referring potential fraud cases, contractors use claims editing
                                        software and other approaches to ensure that accurate payments are made
                                        to authorized providers and eligible beneficiaries. Such software and
                                        prepayment screens could also serve to deter fraudulent and abusive
                                        behavior. While TRICARE contractors prevented various types of
                                        erroneous payments totaling about $73 million in 1998 through the use of
                                        claims editing software and other prepayment screens and edits, neither
                                        TMA nor contractors could quantify what portion of this amount might be
                                        associated with fraud and abuse. TMA officials acknowledged that while
                                        some of this amount could have been related to fraud and abuse, they
                                        believe the vast majority represented payments generated by clerical and



                                        Page 5                                               GAO/HEHS-99-142 Defense Health Care Fraud
                                    B-282038




                                    other types of errors. They told us, however, that prepayment screens and
                                    edits are likely to deter fraudulent and abusive behavior on the part of
                                    some health care providers.


DOD Has Recovered a                 DOD and its contractors’ antifraud efforts have resulted in the recovery of a
Small Amount of Its                 tiny fraction of DOD’s estimated losses from fraud and abuse. For example,
Estimated Losses to Fraud           as table 2 shows, between 1996 and 1998, DOD recovered only about
                                    $14 million in fraudulent payments. This amount is negligible when
and Abuse                           compared with estimated losses of between $570 million and $1.14 billion
                                    during the same period. Even though the exact extent of TRICARE fraud
                                    and abuse is unknown, the small amount of recoveries indicates that DOD
                                    efforts have considerable room for improvement and that DOD’s
                                    vulnerability to fraud and abuse is still high.

Table 2: Results of TMA Antifraud
Efforts, 1996-98                                                          DOD estimates of fraud            Fraudulent payments
                                    Year                                  and abuse (in millions)         recovereda (in millions)
                                    1996                                                    $130-260                         $1.2
                                    1997                                                     190-380                          7.1
                                    1998                                                     250-500                          6.1
                                    Total                                                 $570-1,140                        $14.4
                                    a
                                    These figures may be related to cases identified in previous years.



                                    In addition to recovering fraudulent payments, between 1996 and 1998 DOD
                                    participated with other organizations in investigations of TRICARE and
                                    other government health care programs, such as Medicare and Medicaid,
                                    which resulted in penalties, fines, and other assessments totaling
                                    approximately $804 million, 199 criminal charges, and 150 civil
                                    settlements. TMA officials told us, however, that they could not identify the
                                    portion of these penalties, fines, and other assessments associated with
                                    the TRICARE program or its funds.


                                    While DOD recognizes that it needs to reduce its vulnerability to fraud and
Opportunities Exist to              abuse, it has been slow to implement revised policies and requirements
Improve TRICARE’s                   directing its contractors to put into place a much more aggressive fraud
Antifraud Efforts                   and abuse identification program. Once these revisions are implemented,
                                    DOD’s efforts could also be strengthened by establishing results-oriented
                                    goals and performance measures in its managed care contracts and by
                                    overseeing contractors to assess their performance against these goals and




                                    Page 6                                            GAO/HEHS-99-142 Defense Health Care Fraud
                               B-282038




                               measures. In addition, given the potential magnitude of fraud and abuse
                               within TRICARE, DOD top management could better focus and otherwise
                               improve DOD’s antifraud efforts by committing itself to, and developing a
                               concerted strategy for, addressing the problem in its military health
                               system strategic plan. Such plans are mandated by the Government
                               Performance and Results Act of 1993 (also known as the Results Act).1
                               These steps should improve DOD’s antifraud activities and help reduce the
                               adverse impact fraud and abuse currently have on TRICARE and its
                               beneficiaries.


TMA Is in the Process of       According to the Chief of TMA’s Program Integrity Branch, DOD’s antifraud
Implementing Revised           policies and procedures are vague concerning contractors’
Antifraud Requirements         responsibilities. She told us that DOD policies do not direct contractors to
                               provide their antifraud staff with training in fraud detection and
                               prevention methods, nor do the policies guide contractors as to the level
                               of emphasis they should place on such activities. In an effort to improve
                               the effectiveness of its antifraud efforts, TMA is in the process of
                               implementing revised program integrity policies and procedures to require
                               more aggressive fraud identification activities by its contractors. Although
                               TMA originally intended that its contractors implement these revisions by
                               October 1, 1998, TMA and the contractors have been negotiating for over 8
                               months to formally implement these changes. As of June 1, 1999, DOD and
                               its contractors had not yet agreed to contract terms. If and when
                               implemented, these changes would include the following requirements of
                               TRICARE contractors:

                           •   Develop and publish a corporate antifraud strategy. This strategy,
                               developed and endorsed by corporate management to underscore its
                               commitment to health care fraud detection and prevention, includes plans
                               for (1) maintaining a focus on increased health care fraud awareness,
                               (2) developing processes that identify fraud, (3) aggressively referring
                               health care fraud cases to TMA, (4) assisting in the prosecution of cases,
                               and (5) developing deterrents to health care fraud. TMA officials told us
                               that having a published corporate antifraud strategy would better enable
                               its contractors to focus their fraud prevention and detection activities, as
                               well as generate companywide support for these efforts.
                           •   Use new antifraud software. Antifraud software will be used to analyze
                               health care data associated with the type, frequency, duration, and extent
                               of services to identify patterns of probable fraudulent or abusive practices


                               1
                                The Results Act (P.L. 103-62) requires agencies to clearly define their missions, set goals, measure
                               performance, and report on their accomplishments.



                               Page 7                                               GAO/HEHS-99-142 Defense Health Care Fraud
    B-282038




    by providers and beneficiaries. TMA officials told us that using artificial
    intelligence software would allow contractors to be more effective in
    identifying fraud and would likely increase the number of fraud cases they
    referred to TMA.
•   Establish and maintain an antifraud training program. Specifically,
    contractors will train their staff to identify abnormal patterns of care, over-
    or underutilization of services, and other practices that may indicate
    fraudulent or abusive behavior. According to TMA officials, with new
    developments in information technology and frequent contractor staff
    turnover, structured training would help institutionalize contractors’
    antifraud activities. Some contractor and subcontractor staff told us they
    were not adequately trained to effectively identify fraud and abuse and
    would benefit from a structured, continuously updated antifraud
    education program.

    In addition, in an effort to increase beneficiary awareness of health care
    fraud and abuse, TMA has directed its contractors to include a fraud hot
    line telephone number and mailing address on beneficiaries’ “explanation
    of benefits” statement. This information provides beneficiaries with a
    contact in the event fraudulent activity is suspected or observed. As of
    April 1999, all five contractors had included an antifraud contact on their
    explanation of benefits statements.

    Although TRICARE policy requires that claims be denied when submitted
    under a clinic or group practice subidentifier, TMA waived this requirement
    in 1996 in an effort to improve claims processing timeliness. However, our
    March 1999 testimony raised a concern that TRICARE claims did not
    always identify the individual provider rendering care, potentially masking
    fraudulent or abusive activity. In response, as of June 1, 1999, TMA directed
    all of its contractors to pay only those claims that identify providers
    individually, rather than their group or clinic affiliation.2 TMA officials told
    us that information on individual providers is also needed to monitor
    quality of care.

    TMA  has not established results-oriented goals or performance measures
    for its managed care contracts, although doing so would help it assess
    contractors’ performance as well as enable contractors to track their own
    progress in combating fraud and abuse.3 Comparing contractor

    2
    Defense Health Care: Management Attention Needed to Make TRICARE More Effective and
    User-Friendly (GAO/T-HEHS-99-81, Mar. 11, 1999).
    3
     In 1994, DOD’s Office of Inspector General recommended that DOD establish performance measures
    related to its health care fraud detection activities.



    Page 8                                          GAO/HEHS-99-142 Defense Health Care Fraud
                             B-282038




                             performance with established goals and measures would enable TMA to
                             identify program deficiencies and help contractors focus their efforts on
                             needed improvements.


DOD’s Military Health        As required by the Results Act, agencies must articulate, in a strategic
System Strategic Plan Does   plan, how they will address issues that significantly affect their ability to
Not Address TRICARE          manage program operations. Given the potential magnitude of health care
                             fraud and abuse within TRICARE, it is important for DOD to address this
Fraud and Abuse              concern in such a plan. DOD’s current military health system strategic plan,
                             however, does not specify how the agency will combat TRICARE fraud
                             and abuse. A more complete plan would provide better direction and
                             guidance by including an antifraud mission statement, identifying
                             long-term antifraud objectives and describing how DOD would achieve
                             them, and explaining key external factors that could affect achievement of
                             those objectives.

                             In addition, taking a more strategic approach would help TMA establish
                             annual performance goals and measures related to its long-term objectives
                             and determine how it will assess its progress in achieving them. Specific
                             performance measures could include calculating the cost-effectiveness of
                             TMA’s antifraud efforts. By benchmarking and periodically assessing its
                             progress in combating TRICARE fraud and abuse, TMA would be in a better
                             position to measure its vulnerability to such activity, focus its antifraud
                             efforts on the most prevalent types of fraud and abuse, and allocate an
                             appropriate level of resources to combat this problem.


                             Health care fraud and abuse within TRICARE potentially result in the loss
Conclusions                  of hundreds of millions of dollars and adversely affect the health of untold
                             numbers of beneficiaries. Despite TRICARE’s known vulnerability, DOD’s
                             activities thus far have not been very successful in identifying fraud and
                             abuse. Furthermore, as health care costs increase over time, fraud and
                             abuse can be expected to increase proportionally. While DOD recognizes
                             the importance of its contractors’ role in combating fraud and abuse and
                             has been negotiating with them to implement new antifraud requirements,
                             it has been slow in doing so. If effectively implemented, these
                             requirements would help DOD and its contractors increase the
                             effectiveness of their antifraud efforts; in our view, immediate attention
                             should be focused on getting these requirements in place. In addition, by
                             establishing results-oriented goals and performance measures for its
                             contractors, TMA would be in a better position to identify program



                             Page 9                                 GAO/HEHS-99-142 Defense Health Care Fraud
                         B-282038




                         deficiencies and help its contractors more effectively target their efforts to
                         reduce fraud and abuse. Given the relatively few dollars DOD has recovered
                         and the magnitude of potential fraudulent activity, DOD would also benefit
                         from adopting a more strategic approach. We believe DOD’s military health
                         system strategic plan provides an appropriate mechanism for articulating
                         this approach and for setting forth the specific goals, objectives, and
                         strategies for reducing DOD’s vulnerability to TRICARE fraud and abuse.
                         Ultimately, the success of DOD’s antifraud efforts will depend on the
                         priority it places on fraud prevention and detection and how effectively it
                         oversees its contractors’ antifraud activities.


                         To reduce TRICARE’s vulnerability to fraud and abuse, we recommend
Recommendations          that the Secretary of Defense direct the Assistant Secretary of Defense
                         (Health Affairs) to

                     •   expedite implementation of TMA’s revised antifraud requirements,
                         including the requirements that contractors develop a corporate antifraud
                         strategy, utilize new antifraud software, and develop an antifraud training
                         program;
                     •   modify current contracts to establish specific results-oriented goals and
                         performance measures for contractors; and
                     •   include in DOD’s military health system strategic plan how DOD will combat
                         health care fraud and abuse and an assessment of DOD’s performance in
                         combating such activity.


                         In commenting on a draft of this report, the Assistant Secretary of Defense
Agency Comments          (Health Affairs) stated that the report will provide DOD with invaluable
and Our Evaluation       assistance as it begins to do more in the area of reducing fraud and abuse
                         in its health care program. In response to our recommendations, DOD
                         agreed to expedite implementation of revised antifraud requirements by
                         requiring contractors to develop a corporate antifraud strategy, utilize
                         antifraud software, and develop an antifraud training program. In addition,
                         DOD agreed to include in the TMA strategic plan how DOD will combat health
                         care fraud and abuse.

                         However, DOD is concerned about establishing specific results-oriented
                         goals and performance measures for its contractors. While DOD agrees that
                         establishing goals and measures is desirable, it states it is unaware of a
                         methodology that would enable it to do so. We recognize that finding the
                         right methodology is challenging, but establishing program-specific goals



                         Page 10                                GAO/HEHS-99-142 Defense Health Care Fraud
B-282038




and performance measures for key program activities is a fundamental
responsibility placed on all agencies by the Results Act. In our view,
combating fraud and abuse is a key management activity; therefore, DOD
needs to establish goals and measures to assess contractors’ performance,
identify program deficiencies, and enable contractors to track their own
progress in combating fraud and abuse.

DOD also raised concerns about data presentation in two areas. First, it was
concerned that a comparison between the number of claims processed
and the number of fraud cases identified presupposes a correlation
between the two sets of data. DOD stated that no industry standard based
on such a correlation exists. We do not dispute that there is no industry
standard. However, by virtually any standard, DOD contractor referrals of
101 potential fraud cases out of about 50,000,000 processed claims
represent a minimal level of activity. In this context, it seems clear that
there is room for the contractors to be more aggressive in their efforts to
identify fraudulent activity. Further, DOD concurred with our
recommendation to expedite the implementation of revised antifraud
policies and requirements that place greater demands on contractors to
identify and prevent fraud.

Second, DOD raised a concern that the report compares gross estimates of
potential amounts lost to fraud and abuse with only the amounts
recovered in fraud cases. Our report clearly states that DOD was unable to
estimate recoveries for abuse but reported that contractors prevented
erroneous payments totaling about $73 million. Moreover, most of this
$73 million was not attributable to abuse but rather to payments resulting
from clerical and other types of errors.

DOD’s   comments are included as appendix III.




Page 11                               GAO/HEHS-99-142 Defense Health Care Fraud
B-282038




We are sending copies of this report to the Honorable William S. Cohen,
Secretary of Defense, and other interested parties. We will also make
copies available to others upon request.

If you or your staffs have any questions about this report, please contact
me at (202) 512-7101 or Michael T. Blair, Jr., Assistant Director, at
(404) 679-1944. Jeffrey L. Pounds, Steve D. Morris, and Michael Tropauer
also made key contributions to this report.




Stephen P. Backhus
Director, Veterans’ Affairs and
  Military Health Care Issues




Page 12                               GAO/HEHS-99-142 Defense Health Care Fraud
Page 13   GAO/HEHS-99-142 Defense Health Care Fraud
Contents



Letter                                                                                           1


Appendix I                                                                                      16

TRICARE Contractors
and Subcontractors
Responsible for
Antifraud Efforts
Appendix II                                                                                     17

Scope and
Methodology
Appendix III                                                                                    18

Comments From the
Department of
Defense
Tables                Table 1: Claims Processed and Potentially Fraudulent Cases                 5
                        Referred by TRICARE Contractors, 1996-98
                      Table 2: Results of TMA Antifraud Efforts, 1996-98                         6




                      Abbreviations

                      DCIS      Defense Criminal Investigative Service
                      DOD       Department of Defense
                      HCFA      Health Care Financing Administration
                      TMA       TRICARE Management Activity


                      Page 14                             GAO/HEHS-99-142 Defense Health Care Fraud
Page 15   GAO/HEHS-99-142 Defense Health Care Fraud
Appendix I

TRICARE Contractors and Subcontractors
Responsible for Antifraud Efforts


              TRICARE regions               TRICARE contractors           Subcontractors
              Northwest                     Foundation Health Federal     Wisconsin Physicians
                                            Services, Inc.                Service
              Southwest                     Foundation Health Federal     Wisconsin Physicians
                                            Services, Inc.                Service
              Southern California, Golden   Foundation Health Federal     Palmetto Government
              Gate, and Hawaii-Pacific      Services, Inc.                Benefits Administrators
              Southeast and Gulf South      Humana Military Healthcare Palmetto Government
                                            Services, Inc.             Benefits Administrators
              Central                       TriWest Healthcare Alliance, Palmetto Government
                                            Inc.                         Benefits Administrators
              Northeast                     Sierra Military Health        Palmetto Government
                                            Services                      Benefits Administrators
              Mid-Atlantic and Heartland    Anthem Alliance for Health,   Palmetto Government
                                            Inc.                          Benefits Administrators




              Page 16                                     GAO/HEHS-99-142 Defense Health Care Fraud
Appendix II

Scope and Methodology


              To evaluate DOD’s antifraud efforts, we met with DOD officials responsible
              for planning, managing, and implementing TRICARE’s antifraud program.
              We reviewed DOD regulations, policies, and requirements pertaining to its
              program integrity functions, as well as strategic plans developed by DOD.
              We also reviewed antifraud requirements outlined in contracts with
              managed care support contractors hired by DOD to administer the
              TRICARE program regionally. In addition, we visited DOD’s five contractors
              and their two subcontractors to obtain information on their antifraud
              efforts. We also interviewed representatives of public and private sector
              organizations involved in health care fraud issues, including the Health
              Care Financing Administration; the Federal Bureau of Investigation; and
              the National Health Care Anti-Fraud Association, whose mission is to
              improve the private and public sectors’ detection, investigation, and
              prevention of health care fraud.




              Page 17                              GAO/HEHS-99-142 Defense Health Care Fraud
Appendix III

Comments From the Department of Defense




               Page 18     GAO/HEHS-99-142 Defense Health Care Fraud
                Appendix III
                Comments From the Department of Defense




Now on p. 10.




                Page 19                                   GAO/HEHS-99-142 Defense Health Care Fraud
                  Appendix III
                  Comments From the Department of Defense




Now on pp. 5-6.




(101621)          Page 20                                   GAO/HEHS-99-142 Defense Health Care Fraud
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested