HCFA unveils Medicare RFP

The Health Care Financing Administration late last month released a request for proposals for a $127 million computer system intended to give the agency closer control over the huge Medicare health program for the elderly.

The Medicare Transaction System (MTS), which will consolidate nine processing systems now operating at 40 sites nationwide, will be developed and maintained through three five-year contracts.

HCFA will award contracts to develop two processing centers, where day-to-day eligibility and an estimated 1 billion claims annually will be processed by 2000. Under the contracts, HCFA also would establish a Data Operations and Analysis Center (DOAC), which will be the repository of historical data used in Medicare research.

HCFA has the option to build a fourth operating site if the need arises.

Proposals are due July 22, and awards are scheduled for March 1997.

Likely favorites for the awards will be vendors with health care experience, such as Science Applications International Corp., Electronic Data Systems Corp., Cordant Inc. and PRC Inc., industry sources said. Also mentioned as possible bidders were Lockheed Martin Corp. and Computer Sciences Corp.

Officials with these companies either declined to comment or could not be reached for comment.

HCFA estimates MTS will save $200 million a year in reduced administrative expenses and will also help to reduce the estimated $28 billion in annual fraud and abuse in Medicare.

The agency has hired Los Alamos National Laboratory to develop software to identify patterns in claims that detect fraud.

The General Accounting Office testified to Congress last year that MTS was a high-risk project because HCFA officials had not determined how the system would measure such a reduction in fraud as well as identify quality standards, improve customer service and bring down administrative costs.

HCFA officials said they have made changes in response to GAO's criticisms. A GAO official said the agency has just begun studying the changes and will have a report out this fall.

The two processing centers that will result from the awards will help HCFA implement electronic data interchange, which, in turn, will make it easier for the agency to manage Medicare's estimated growth from 36 million beneficiaries today to 48 million by 2011, when the first baby boomers will become eligible.

For beneficiaries, MTS will create a one-stop shopping center, eliminating the need to call up to four phone numbers to get answers to various questions.

DOAC will allow HCFA to have greater control over how it buys medical services. Information on utilization and pricing will be easily accessible, allowing HCFA to swiftly set policy and determine rates it will pay for medical services.

"In our headquarters in Baltimore, we have silos full of tapes with the greatest depository of health care data in the world, but we can't use it" because the system utilizes batch processing, said Bruce Vladeck, HCFA's administrator. With MTS, "we can really modernize the way we manage Medicare."

Bidders will be required to base their bids on an architecture designed by GTE Government Systems Corp., which is precluded from bidding on the contract. Under a $19 million contract awarded by HCFA in 1994, GTE developed a catalog of off-the-shelf hardware and software components.

The MTS Component Catalog is included in the RFP, which was released on HCFA's Web site at http://www.hcfa.gov.

The design calls for a client/server approach, with mainframes handling transaction processing; enterprise and departmental servers performing communications, security, correspondence, printing and financial processing; and desktop computers to easily locate information.

HCFA will evaluate bids based on technical quality, with price being a secondary factor.