HCFA moves cautiously toward financial fix

In a critique that could be directed at any number of federal agencies,

General Accounting Office officials said that an inadequate and outdated

financial management system is hindering the Health Care Financing Administration's

ability to manage one of its key programs. Like a growing number of other

agencies, HCFA is looking to an off-the-shelf enterprise resource planning

(ERP) system as a solution.

Although the agency recently received a "clean" audit of its financial

statements from GAO, "HCFA has not yet established an adequate foundation

for control and accountability over the Medicare program's financial operations,"

said Gloria Jarmon, GAO's director for health, education and human services,

at a recent hearing of the House Government Management, Information and

Technology Subcommittee.

The tough assessment didn't come as news to HCFA officials. Last year,

they began work on the HCFA Integrated General Ledger Accounting System

(HIGLAS), which will be used internally and by all Medicare contractors,

said Mike Hash, HCFA's deputy administrator, at the hearing.

"The project, which will make it easier to coordinate and reconcile

data, is scheduled for completion by 2004, pending the results of the assessment

phase currently under way," Hash said. President Clinton's fiscal 2001 budget

proposal includes a $7 million request for the system.

The HIGLAS project team includes personnel from the chief information

officer and chief financial officer staffs. Michelle Snyder, HCFA's CFO,

said she will head the business side of system development, and CIO Gary

Christoph will lead the technical portion of the operation.

Snyder said the team is still in the "very beginning phases of developing

business requirements and performing cost-benefit analysis" and that it

was too early to estimate the overall cost of the system.

Christoph said the agency's transition from a cash accounting basis

to an accrual system, coupled with the immense size of the legacy system,

are forcing a slow but deliberate pace for implementing the new system.

"We're currently on an all-cash basis for accounting and have a large

legacy system with millions of lines of code — mostly Cobol," Christoph

said. "It's difficult to change and proceed quickly with new [program] demands.

And when you're dealing with $200 billion a year, you need good control

of financial information."

Christoph said the new ERP system will incorporate commercial off-the-shelf

applications that have been tested and approved by the federal Joint Financial

Management Improvement Program. JFMIP sets requirements that commercial

software must meet to be used for federal government financial management

systems.

ERP systems are a collection of software applications used to manage

myri-ad administrative functions, including human resources and accounting.

Christoph said one of the reasons the agency is proceeding so deliberately

is that ERP implementations have traditionally been difficult.

"Integrating ERP is a very challenging task, and it doesn't matter what

vendor [you use]," Christoph said. "[ERP projects] typically come in over

budget and [late]."

Christoph said the agency will pilot the new system internally before

rolling it out to its more than 60 contractors. He said he doesn't expect

the first pilot to be implemented for at least another 18 months.

John Moeller, financial systems adviser for HCFA's chief financial officer

and the HIGLAS project manager, said the agency's financial responsibilities

are distinctive in federal government and therefore the system must be methodically

planned out and tested.

"We're unique to most other agencies because the Medicare contractors

are our financial agents, and we have a heavier financial responsibility

to them," Moeller said. "As our financial agents, they process claims and

pay the hospital and doctors on HCFA's behalf and are then reimbursed. And

that makes [the system's] scalability a big issue."

HCFA processes 1 billion claims annually for Medicare alone.

JFMIP has approved seven commercial software packages through its Core

Federal Financial System Software Qualification Test, including offerings

from American Management Systems Inc., PeopleSoft Inc., SAP America Inc.

and Oracle Corp. Moeller said he's looking forward to working with one of

the approved contractors. But more time is needed for planning and developing

a suitable request for proposals, he added.

"The planning phases are the most important part of this in order to

implement an ERP in a good, sound manner that will support our environment

to the best degree possible," Moeller said.

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