HHS to unify Medicare accounting

In an effort to untangle Medicare's antiquated and multiple accounting systems, the Department of Health and Human Services has awarded a $328.4 million contract to create a single system that will help ensure the program makes the correct payments.

PricewaterhouseCoopers won the contract for the Healthcare Integrated General Ledger Accounting System, which will eventually replace the 53 systems insurance companies use to process and pay nearly 3 million Medicare claims daily.

PricewaterhouseCoopers is the lead vendor for the project, with Oracle Corp. and Electronic Data Systems Corp. as subcontractors. The contract work will begin with developing and pilot-testing the new system, then HHS will make a decision on whether to proceed.

The total value of the contract is $328.4 million across 10 years, and full implementation is projected for October 2007.

"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," HHS Secretary Tommy Thompson said.

The project's participants face the difficult task of integrating the new system with Medicare's three standard computer systems and replacing the current mainframe-based financial system with a modern, Web-based accounting system.

The General Accounting Office has produced a series of reports about problems with Medicare systems.

Morris Zwick, a partner with PricewaterhouseCoopers' management consulting division, acknowledged that the program is daunting. "This is a very unique challenge," he said. But the company and the agency are "well-positioned to take this on."

Currently, most Medicare contractors do not use double-entry accounting methods and lack general ledger capabilities. Therefore, the accuracy of their books must be verified manually. Despite those limitations, HHS' Centers for Medicare & Medicaid Services (formerly the Health Care Financing Administration) has maintained clean audit opinions in recent years.

The pilot program will begin with one Medicare contractor that processes primarily hospitals and other institutional claims, and another that processes primarily physician and supplier claims, HHS officials said.

HHS officials could not be reached for details on the deal.