The long-term project announced by the HHS will combine Medicare's many outdated accounting systems into a single, unified system that will better ensure that the program pays correctly for the care Medicare beneficiaries need. HHS' Centers for Medicare & Medicaid Services (CMS) awarded a contract to begin developing and pilot-testing the new system.

PwC, whose major teaming partners include Oracle Corp. and Electronic Data Systems (EDS), will act as the systems integrator. Oracle Corp. will provide the financial accounting software and EDS will provide Application Service Provider services. The potential value of the contract is about $328.4 million over the entire period of the contract.

The Healthcare Integrated General Ledger Accounting System (HIGLAS) will eventually replace the 53 different systems now in use by the private insurance companies that process and pay nearly 3 million Medicare claims every day.

The project will integrate the new system with Medicare's three standard computer systems and replace the current mainframe-based financial system with a modern, Web-based accounting system. Most Medicare contractors do not use double entry accounting methods or have general ledger capabilities. As a result, accuracy of reported activities must be verified manually.

"For too long, Medicare has relied on outdated systems to track the nearly 1 billion health insurance claims it pays each year," said HHS Secretary Tommy G. Thompson. "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."

In fiscal year 2002, Medicare will pay an estimated $252 billion on behalf of its 40 million beneficiaries.

Secretary Thompson has made modernizing Medicare's accounting systems a priority in order to improve the program's fiscal accountability to beneficiaries and taxpayers. Independent audit findings conducted by the General Accounting Office and HHS' Office of Inspector General revealed weaknesses in the accounting of Medicare claims. CMS evaluated these weaknesses and created an approach to use a commercial off-the-shelf financial accounting system for both Medicare contractors and CMS administrative accounting functions.

Once completed, the system will be thoroughly tested to ensure it works correctly and can handle the large volume of financial transactions generated by the Medicare program before a final decision is made to install the accounting system for Medicare and all its contractors. Full implementation is projected for the end of fiscal year 2006.

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