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Health tests the market for interest in Medicare payments processing

by Michael Read •
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The Department of Health (Health) has issued an Expression of Interest (EOI) to determine options available to it with regard to the provision of claims and payment services for Medicare, Veterans’ Health and the Pharmaceutical Benefits Scheme (PBS).

The decision to approach the market follows a recommendation by the National Commission of Audit (NCOA) in April that the Government consider outsourcing the entire payments system if the market was capable of delivering the service “more efficiently and effectively and at a lesser cost than is the case now.”

A month later in the 2014-15 Federal Budget, Health was allocated $500,000 to “develop a proposal in consultation with the Department of Human Services (DHS) to market test the delivery of a commercially integrated health payment system.”

“The current IT systems that manage the claims and payments processes are dated and in need of a substantial upgrade. In these circumstances it is good process to review and test existing and alternative systems”, said a statement from Health Minister Peter Dutton.

“The market test will determine the level of private sector interest and capability in providing those IT services for both the Department of Health and the Department of Veteran’s Affairs.”

The scope of the project will not be determined until after Health has reviewed the offerings contained in suppliers’ responses. However, the media release indicates that any outsourcing will not include “face-to-face services”.

The Department of Health had not responded by the time of publication to Intermedium’senquiry as to why it did not seek to advertise the EOI on Austender. However, it is possible to infer that by advertising through media outlets, the Department is seeking a broader base of respondents than is currently available through Austender.

However, a cursory investigation reveals an abundance of claims processing systems on offer in the Australian market.

Any new system would be required to process over half a billion claims annually. In 2012-13, DHS processed 344 million Medicare claims worth $18.6 billion, 211.1 million PBS claims worth $9.5 billion, and 20.6 million DVA claims worth $2.1 billion, according to the Department’s 2012-13 Annual Report.

DHS became responsible for these payment systems following the integration of Medicare Australia into DHS in 2011.

DHS’s Income Security Integrated System (ISIS) is also slated for market testing.

DHS received $16.2 million in business case funding to determine the best options for the upgrade or replacement of ISIS, which was recently labeled by Treasurer Joe Hockey as being in “bad shape”. According to the National Commission of Audit (NCOA), a replacement system will cost between $1.2 and $1.5 billion.

Despite the fact that it admitted there was “merit” in testing the market for the delivery of payment processing for the income security programs supported by ISIS, the NCOA conceded that any outsourcing would be “a substantial and potentially high risk undertaking."

Prime Minister Tony Abbott was quick to stress that the EOI does not signal a definite decision to outsource, following a question at a doorstop interview.

“Well we're not doing what you say we're doing [outsourcing Medicare and PBS claims and services]. We are exploring various avenues of delivering these services more effectively. This was something that we pledged to do on Budget night, we’re putting into effect what we said we would do on Budget night. That is to explore the best possible ways of ensuring that Australians get swift and effective access to services and that's what you'd expect a good government to do.”

Suppliers must submit their expressions of interest by 22 August 2014.


Related Articles:

BCG and EY both assisting with ISIS Business Case

Long road to replacement for three core DHS systems

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  • Federal
  • Software
  • IT Services
  • Health
  • Human Services
  • 2014-15 Federal Budget
  • commercially integrated health payment system
  • Department of Health
  • Department of Human Services
  • Department of Veterans' Affairs (DVA)
  • DHS 2012-13 Annual Report
  • Expression of Interest (EOI)
  • Income Security Integrated System (ISIS)
  • joe hockey
  • Medicare
  • National Commission of Audit
  • ICT Outsourcing
  • payment services
  • PBS
  • Peter Dutton
  • Pharmaceutical Benefits Scheme
  • tony abbott