Summary: Several years ago the Department of Defense (DOD) converted its contracts with fiscal intermediaries (FI) under the Civilian Health and Medical Program of the Uniform Services (CHAMPUS) from a cost-reimbursable to a fixed-price basis, in which a set fee is paid for each claim processed. While administrative savings have been achieved under these competitively bid, fixed-price contracts, performance has been less than satisfactory. GAO reviewed the performance under competitively bid, fixed-price contracts of five intermediaries that process over 80 percent of CHAMPUS claims.
The review showed that FI were not fulfilling many of their contractual responsibilities. In addition, the Office of the Civilian Health and Medical Program (OCHAMPUS), which administers the program, did not have adequate means to measure performance and enforce requirements. Improvements were needed in: (1) the accuracy of administering benefits in order to comply more fully with CHAMPUS regulations, instructions, and policies; (2) the systems established for controlling and containing costs; (3) the services to beneficiaries and providers in processing claims, correspondence, and appeals; and (4) the management of funds covering benefit and administrative costs.
