VA Health Care
Third-Party Collections Rising as VA Continues to Address Problems in Its Collections Operations Gao ID: GAO-03-145 January 31, 2003The Department of Veterans Affairs (VA) collects health insurance payments, known as third-party collections, for veterans' health care conditions it treats that are not a result of injuries or illnesses incurred or aggravated during military service. In September 1999, VA adopted a new fee schedule, called "reasonable charges," that it anticipated would increase revenues from third-party collections. In 2001, GAO testified that problems in VA's collections operations diminished VA's collections. For this report, GAO was asked to examine VA's third-party collections and problems in collections operations for fiscal year 2002 as well as its initiatives to improve collections.
VA's fiscal year 2002 third-party collections rose by 32 percent, continuing an upward trend that began in fiscal year 2001. The increase in collections reflected VA's improved ability to manage the larger billing volume and more itemized bills required under its new fee schedule. Billings increased mainly due to a reduction of billing backlogs and improved collections processes--such as better medical documentation prepared by physicians, more complete identification of billable care by coders, and more bills prepared per biller--according to VA managers in three regional health care networks. However, VA continues to address operational problems, such as missed billing opportunities, that limit the amount VA collects. To address operational problems and further increase collections, VA has several initiatives under way and is developing additional ones. VA has been implementing initiatives in its 2001 improvement plan that was designed to address operational problems, such as unidentified insurance for some patients, insufficient documentation of services for billing, shortages of coding staff, and insufficient pursuit of accounts receivable. VA's last formal status report in May 2002 designated only 8 of the plan's 15 initiatives scheduled for completion by that time as having been completed. VA continues implementation of this plan and is also developing new initiatives, such as an automated financial system to better serve billing needs. It is too early to evaluate the extent to which VA's full implementation of its 2001 plan and new initiatives will be able to address operational problems and further increase third-party collections. In commenting on a draft of this report, VA generally agreed with our findings.
GAO-03-145, VA Health Care: Third-Party Collections Rising as VA Continues to Address Problems in Its Collections Operations
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Report to the Chairman, Subcommittee on Oversight and Investigations,
Committee on Veterans‘ Affairs, House of Representatives:
United States General Accounting Office:
GAO:
January 2003:
VA Health Care:
Third-Party Collections Rising as VA Continues to Address Problems in
Its Collections Operations:
GAO-03-145:
GAO Highlights:
Highlights of GAO-03-145, a report to the Chairman, Subcommittee on
Oversight and Investigations, Committee on Veterans‘ Affairs, House
of Representatives
Why GAO Did This Study:
The Department of Veterans Affairs (VA) collects health insurance
payments, known as third-party collections, for veterans‘ health
care conditions it treats that are not a result of injuries or
illnesses incurred or aggravated during military service. In September
1999, VA adopted a new fee schedule, called ’reasonable charges,“ that
it anticipated would increase revenues from third-party collections.
In 2001, GAO testified that problems in VA‘s collections operations
diminished VA‘s collections. For this report, GAO was asked to examine
VA‘s third-party collections and problems in collections operations for
fiscal year 2002 as well as its initiatives to improve collections.
What GAO Found:
VA‘s fiscal year 2002 third-party collections rose by 32 percent,
continuing an upward trend that began in fiscal year 2001. The
increase
in collections reflected VA‘s improved ability to manage the larger
billing volume and more itemized bills required under its new fee
schedule. Billings increased mainly due to a reduction of billing
backlogs and improved collections processes”such as better medical
documentation prepared by physicians, more complete identification of
billable care by coders, and more bills prepared per biller”according
to VA managers in three regional health care networks. However, VA
continues to address operational problems, such as missed billing
opportunities, that limit the amount VA collects.
To address operational problems and further increase collections, VA
has
several initiatives under way and is developing additional ones. VA
has
been implementing initiatives in its 2001 improvement plan that was
designed to address operational problems, such as unidentified
insurance
for some patients, insufficient documentation of services for billing,
shortages of coding staff, and insufficient pursuit of accounts
receivable. VA‘s last formal status report in May 2002 designated only
8
of the plan‘s 15 initiatives scheduled for completion by that time as
having been completed. VA continues implementation of this plan and
is also developing new initiatives, such as an automated financial
system to better serve billing needs. It is too early to evaluate the
extent to which VA‘s full implementation of its 2001 plan and new
initiatives will be able to address operational problems and further
increase third-party collections. In commenting on a draft of this
report, VA generally agreed with our findings
VA‘s Third-Party Collections, Fiscal Years 1997 through 2002
[See PDF for image]
[End of figure]
www.gao.gov/cgi-bin/getrpt?GAO-03-145. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Cynthia A. Bascetta at (202) 512-7101.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Collections Are Increasing, but Operational Problems Limit Insurance
Payments:
VA Is Implementing Planned Actions and Developing Other Initiatives to
Address Problems in Collections Operations:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Veterans
Affairs:
Table:
Table 1: Percentage Increases in Collections for Networks Selected for
Study, October 2000 through February 2001 Compared to October 2001
through February 2002:
Figures:
Figure 1: VA‘s Third-Party Collections Processes:
Figure 2: VA‘s Third-Party Collections, Fiscal Years 1997 through 2002:
Figure 3: Improvement Plan‘s Actions Designated as Completed by VA, as
of May 25, 2002:
Abbreviations:
HMO: health maintenance organization
PFSS: Patient Financial Services System
VA: Department of Veterans Affairs
VHA: Veterans Health Administration:
United States General Accounting Office:
Washington, DC 20548:
January 31, 2003:
The Honorable Steve Buyer
Chairman
Subcommittee on Oversight and Investigations
Committee on Veterans‘ Affairs
House of Representatives:
Dear Mr. Chairman:
The Department of Veterans Affairs (VA) provides health care to
eligible veterans and, under certain circumstances, VA is authorized to
collect reasonable charges from their health insurers. Specifically, VA
can bill insurers for treatment of conditions that are not a result of
injuries or illnesses incurred or aggravated during military
service.[Footnote 1] VA cannot bill for health care conditions that
result from military service, nor is it generally authorized to collect
from Medicare and Medicaid. In fiscal year 2002, VA collected $687
million in insurance payments, which are known as third-party
collections. These collections were VA‘s largest source of revenue to
supplement its $21 billion medical care appropriation, and they helped
pay for veterans‘ growing demand for care. The total number of veterans
VA treated has increased from 2.6 million in fiscal year 1996 to 3.8
million in fiscal year 2001, and VA predicts continuing growth in its
patient workload.[Footnote 2]
Over the past several years, we and others have raised concerns about
VA‘s ability to maximize its third-party collections to enhance
revenue. For example, a VA Inspector General report stated that VA
missed billing opportunities, had billing backlogs, and did inadequate
follow-up on accounts receivable in fiscal years 2000 and
2001.[Footnote 3] We testified in September 2001 that problems in VA‘s
collections operations--such as inadequate patient intake procedures to
gather insurance information, insufficient physician documentation, a
shortage of qualified coders, and insufficient automation--diminished
VA‘s collections.[Footnote 4]
At your request, we have examined VA‘s progress with third-party
collections since September 2001. In this report, we are providing an
update on (1) VA‘s third-party collections and problems in collections
operations for fiscal year 2002 and (2) VA‘s initiatives to improve
collections. To conduct our review, we examined VA‘s collections data
for fiscal years 2001 and 2002; reviewed relevant VA documents, such as
its 2001 collections improvement plan; and interviewed officials in VA
headquarters and in 3 of VA‘s 21 health care networks[Footnote 5]--
Network 2 (Albany), Network 9 (Nashville), and Network 22 (Long Beach)-
-to better understand the reasons for increased collections. Our work
was performed from February 2002 through January 2003 in accordance
with generally accepted government auditing standards. For more details
on our scope and methodology, see appendix I.
Results in Brief:
VA‘s third-party collections for fiscal year 2002 totaled $687 million,
32 percent more than for fiscal year 2001. VA‘s increased collections
have resulted from VA‘s submitting more insurance bills and receiving
more payments than in the prior year. Billings increased mainly due to
a reduction of billing backlogs and improved collections processes--
such as better medical documentation prepared by physicians, more
complete identification of billable care by coders, and more bills
prepared per biller--according to VA managers in three health care
networks. Although VA reported improvements, we found that operational
problems, such as missed billing opportunities, continued to limit
collections. As a result, VA lacks a reliable estimate of uncollected
dollars and therefore does not have the basis to assess its systemwide
operational effectiveness.
To further improve collections, VA has several initiatives under way
and is developing additional ones. In September 2001, VA produced its
Veterans Health Administration Revenue Cycle Improvement Plan that
included 24 actions to improve collections by addressing problems, such
as unidentified insurance for some patients and gaps in the automated
capture of billing data. However, VA‘s last formal status report in May
2002 designated only 8 of these actions as completed, although 15 were
scheduled for completion by that time. The plan is scheduled for full
implementation by the end of 2003. In May 2002 VA also established the
Chief Business Office in its Veterans Health Administration (VHA) to
direct VHA‘s Revenue Office and to develop a new approach for VA‘s
collections activity. VA officials told us that the new approach will
combine the improvement plan‘s actions with additional initiatives,
such as the development of an automated financial system that better
serves billing needs. The new approach is also intended to establish
additional performance measures and standards for oversight of
collections units‘ performance and to strengthen VA‘s understanding of
how to improve collections. However, it is too early to evaluate the
extent to which VA will be able to address operational problems and
further increase collections by fully implementing its 2001 plan and
new approach.
In commenting on a draft of this report, VA generally agreed with our
findings. VA suggested that our title should emphasize its effort to
build infrastructure for effective collections operations rather than
its continuing effort to address problems in collections operations. We
believe that our title is accurate because VA continues to address
problems that we and others have identified in VA‘s collections
operations.
Background:
Although VA has been authorized to collect third-party health insurance
payments since 1986, it was not allowed to use these funds to
supplement its medical care appropriations until enactment of the
Balanced Budget Act of 1997. Part of VA‘s 1997 strategic plan was to
increase health insurance payments and other collections to help fund
an increased health care workload. The potential for increased workload
occurred in part because the Veterans‘ Health Care Eligibility Reform
Act of 1996 authorized VA to provide certain medical care services not
previously available to veterans without service-connected
disabilities or low incomes. VA expected that collections from third-
party payments, copayments, and deductibles would cover the majority of
costs for higher-income veterans without service-connected
disabilities. These veterans increased from about 4 percent of all
veterans treated in fiscal year 1996 to about 20 percent in fiscal year
2001.
To collect from health insurers, as shown in figure 1, VA uses five
related processes to manage the information needed to bill and collect.
The patient intake process involves gathering insurance information and
verifying that information with the insurer. The medical documentation
process involves properly documenting the health care provided to
patients by physicians and other health care providers. The coding
process involves assigning correct codes for the diagnoses and medical
procedures based on the documentation. Next the billing process serves
to create and send bills to insurers based on the insurance and coding
information. Finally, the accounts receivable process includes
processing payments from insurers and following up with insurers on
outstanding or denied bills.
Figure 1: VA‘s Third-Party Collections Processes:
[See PDF for image]
[End of figure]
In 1999, VA adopted a new fee schedule, called ’reasonable charges,“
which are itemized fees based on diagnoses and procedures, and the new
schedule allows VA to bill in a way that more accurately captures the
care provided. Previously, VA had nine charges for inpatient care and
one charge for outpatient care. These charges were not specific to the
care provided. For example, VA had charged the same per diem rate for
any patient in a surgical bed section regardless of the care provided.
In addition, before adopting the new fee schedule, VA had billed all
outpatient visits, including surgery, based on VA‘s average outpatient
cost of $229, a single rate that had limited VA‘s ability to collect
higher amounts for more expensive care. In contrast, when the
reasonable charges fee schedule was adopted in September 1999, an
outpatient hernia surgery charge increased to about $6,500; and an
office visit charge for an established patient decreased to a range of
about $22 to $149, depending on the care given.[Footnote 6]
By linking charges to the care provided, VA created new bill-processing
demands--particularly in the three areas of documenting care, coding
that care, and processing bills per episode of care. First, VA must be
prepared to provide an insurer supporting medical documentation for the
itemized charges. Second, VA must accurately assign medical diagnoses
and procedure codes to set appropriate charges, a task which requires
coders to search through medical documentation and various databases to
identify all billable care. Third, in contrast to a single bill for an
episode of care under the previous fee schedule, under reasonable
charges VA must prepare a separate bill for each provider involved in
the care and an additional bill if a hospital facility charge applies.
Collections Are Increasing, but Operational Problems Limit Insurance
Payments:
For fiscal year 2002, VA collected third-party payments of $687
million, a 32 percent increase over its fiscal year 2001 collections.
The increased collections in fiscal year 2002 resulted from VA‘s
submitting and collecting for more bills than previously. According to
three network revenue managers we interviewed, billings increased
mainly because of a reduction of billing backlogs and improvements in
the processes necessary to collect under the new reasonable charges fee
schedule. Nevertheless, VA‘s ability to collect was limited by problems
such as missed billing opportunities. VA does not know how many dollars
remain uncollected because of such limitations.
Third-Party Collections Increased:
For fiscal year 2002, VA collected $687 million, up 32 percent compared
to the $521 million collected during fiscal year 2001. The increased
collections reflected VA‘s processing a higher volume of bills than it
did in the prior fiscal year. VA processed and received payments for
over 50 percent more bills in fiscal year 2002 than in fiscal year
2001. VA‘s collections grew at a lower percentage rate than the number
of paid bills because the average payment per paid bill dropped 18
percent compared to the prior fiscal year. Average payments dropped
primarily because a rising proportion of VA‘s paid bills were for
outpatient care rather than inpatient care. Since the charges for
outpatient care were much lower on average, the payment amounts were
typically lower as well.
VA had difficulties establishing the collections processes to bill
under a new fee schedule, processes which were necessary to achieve the
increased billing and collections in fiscal year 2002. Although VA
anticipated that the shift to reasonable charges would yield higher
collections, collections dropped in fiscal year 2000 after implementing
the new fee schedule in September 1999. VA attributed that drop to its
being unprepared to bill under reasonable charges, particularly because
of its lack of proficiency in developing medical documentation and
coding to appropriately support a bill. As a result, VA reported that
many VA medical centers developed billing backlogs after initially
suspending billing for some care.
As shown in figure 2, VA‘s third-party collections increased in fiscal
year 2001--reversing fiscal year 2000‘s drop in collections--and
increased again in fiscal year 2002. After initially being unprepared
in fiscal year 2000 to bill reasonable charges, VA began improving its
implementation of the processes necessary to bill and increase its
collections. According to VA, by the summer of 2000, facilities had
sufficiently implemented processes to move forward with billing under
reasonable charges. By the end of fiscal year 2001, VA had submitted 37
percent more bills to insurers than in fiscal year 2000. VA submitted
even more in fiscal year 2002, over 8 million bills that constituted a
54 percent increase over the number in fiscal year 2001.
Figure 2: VA‘s Third-Party Collections, Fiscal Years 1997 through 2002:
[See PDF for image]
[End of figure]
VA officials cited various sources for an increased number of bills in
fiscal year 2002. Managers we spoke with in three networks--Network 2
(Albany), Network 9 (Nashville), and Network 22 (Long Beach)--mainly
attributed the increased billing to reductions in billing backlogs.
They also cited an increased number of patients with billable insurance
as a factor for the increased billing. In addition, a May 2001 change
in the reasonable-charges fee schedule for medical evaluations allowed
billing for a facility charge in addition to billing for the
professional service charges, a change that contributed to the higher
volume of bills in fiscal year 2002.
Increased collections for fiscal year 2002 reflected VA‘s improved
ability to manage the volume and billing processes required to produce
multiple bills under reasonable charges, according to three network
revenue managers. Networks 2 (Albany) and 9 (Nashville) reduced
backlogs, in part by hiring more staff, contracting for staff, or using
overtime to process bills and accounts receivable. Network 2 (Albany),
for instance, managed an increased billing volume through mandatory
overtime for billers. Managers we interviewed in all three networks
noted better medical documentation provided by physicians to support
billing. In Network 22 (Long Beach) and Network 9 (Nashville), revenue
managers reported coders were getting better at identifying all
professional services that can be billed under reasonable
charges.[Footnote 7] In addition, the revenue manager in Network 2
(Albany) said that billers‘ productivity had risen from 700 to 2,500
bills per month over a 3-year period, as a result of gradually
increasing productivity standards and a streamlining of their jobs to
focus solely on billing.
Operational Problems Limit Collections, but VA Lacks an Estimate of
Uncollected Dollars:
Studies have suggested that operational problems--missed billing
opportunities, billing backlogs, and inadequate pursuit of accounts
receivable--limited VA‘s collections in the years following the
implementation of reasonable charges. After examining activities in
fiscal years 2000 and 2001, a VA Inspector General report estimated
that VA could have collected over $500 million more than it
did.[Footnote 8] About 73 percent of this uncollected amount was
attributed to a backlog of unbilled medical care; most of the rest was
attributed to insufficient pursuit of delinquent bills. Another study,
examining only professional-service charges in a single network,
estimated that $4.1 million out of $4.7 million of potential
collections was unbilled for fiscal year 2001.[Footnote 9] Of that
unbilled amount, 63 percent was estimated to be unbillable primarily
because of insufficient documentation. In addition, the study found
coders often missed services that should have been coded for billing.
According to the Director of the Revenue Office, VA could increase
collections by working on operational problems. These problems included
unpaid accounts receivable and missed billing opportunities due to
insufficient identification of insured patients, inadequate
documentation to support billing, and coding problems that result in
unidentified care. During April through June 2002, three network
revenue managers told us about backlogs and processing issues that
persisted into fiscal year 2002. For example, although Network 9
(Nashville) had above average increases in collections for both
inpatient and outpatient care, it still had coding backlogs in four of
six medical centers. According to Network 9‘s (Nashville) revenue
manager, eliminating the backlogs for outpatient care would increase
collections by an estimated $4 million for fiscal year 2002, or 9
percent.[Footnote 10] Additional increases might come from coding all
inpatient professional services, but the revenue manager did not have
an estimate because the extent to which coders are capturing all
billable services was unknown. Moreover, although all three networks
reported that physicians‘ documentation was improving for billing, they
reported a continuing need to improve physicians‘ documentation. In
addition, Network 22 (Long Beach) reported that accounts receivable
staff had difficulties keeping up with the increased volume of bills
because it had not hired additional staff or contracted help for
accounts receivable.
As a result of these operational limitations, VA lacks a reliable
estimate of uncollected dollars, and therefore does not have the basis
to assess its systemwide operational effectiveness.[Footnote 11] Some
uncollected dollars resulting from currently missed billing
opportunities--such as billable care missed in coding--are not readily
quantified. Other uncollected dollars--such as those from backlogged
bills and uncollected accounts receivable--are either only partially
quantifiable or their potential contribution to total collections is
uncertain. For example, even though the uncollected dollars in older
accounts receivable can be totaled, the yield in payments through more
aggressive pursuit of accounts receivable is uncertain. This is
because, according to VA officials, some portion of the billed dollars
is not collectable due to VA inappropriately billing for services not
covered by the insurance policy, billing against a terminated policy,
or not closing out the accounts receivable after an insurer paid the
bill.[Footnote 12]
VA Is Implementing Planned Actions and Developing Other Initiatives to
Address Problems in Collections Operations:
VA continues to implement its 2001 improvement plan and is planning
more improvements. Although the improvement plan could potentially
improve operations and increase collections, it is not scheduled for
full implementation until December 2003. In May 2002, VA created a new
office in VHA, the Chief Business Office, in part to address
collections issues. According to VA officials, this office is
developing a new approach to improvements, which will include
initiatives beyond those in the improvement plan.
2001 Plan to Improve Collections Is Partially Implemented:
VA‘s improvement plan was designed to increase collections by improving
and standardizing its collections processes. The plan‘s 24 actions are
to address known operational problems affecting revenue performance.
These problems include unidentified insurance for some patients,
insufficient documentation for billing, shortages of coding staff, gaps
in the automated capture of billing data, insufficient pursuit of
accounts receivable, and uneven performance across collections sites.
The plan seeks increased collections through standardization of policy
and processes in the context of decentralized management, in which VA‘s
21 network directors and their respective medical center directors have
responsibility for the collections process. Since management is
decentralized, collections procedures can vary across sites. For
example, sites‘ procedures can specify a different number of days
waited until first contacting insurers about unpaid bills and can vary
on whether to contact by letter, telephone, or both. The plan intends
to create greater process standardization, in part, by requiring
certain collections processes, such as the use of electronic medical
records to provide coders better access to documentation and legible
records.
When fully implemented, the plan‘s actions can improve collections to
the extent that they can reduce operational problems such as missed
billing opportunities. For example, two of the plan‘s actions--
requiring patient contacts prior to scheduled appointments to gather
insurance information and electronically linking VA to major insurers
to identify patients‘ insurance--are intended to increase the number of
patients identified with insurance. A recent study estimated that 23.8
percent of VA patients in fiscal year 2001 had billable care, but VA
actually billed for the care of only 18.3 percent of patients.[Footnote
13] This finding suggests that VA could have billed for 30 percent more
patients than it actually billed.
VA has implemented some of the improvement plan‘s 24 actions, which
were scheduled for completion at various times through 2003, but is
behind the plan‘s original schedule. The plan had scheduled 15 of the
24 actions for completion through May 25, 2002, but, as shown in figure
3, VA had designated only 8 as completed, as of the last formal status
report on the plan in May 2002.[Footnote 14]
Figure 3: Improvement Plan‘s Actions Designated as Completed by VA, as
of May 25, 2002:
[See PDF for image]
[A] Certain actions are mandated in the plan, that is, are required,
but these actions are not legal or regulatory mandates.
[B] VA designated the electronic billing project, shown here as ’17a,“
as completed. However, this indicated only partial completion of action
17, which includes an additional project.
[End of figure]
Some of the plan‘s actions that VA has designated as completed needed
additional work. For example, although VA designated electronic billing
as completed in the May 2002 report, in August 2002 a VA official
indicated that 20 hospitals were still working on a step required to
transmit bills to all payers. In other cases, VA has designated an
action completed by mandating it in a memorandum or directive. However,
mandating an action in the past has not necessarily ensured its full
implementation. For example, although an earlier 1998 directive
required patient preregistration, the 2001 improvement plan reported
that preregistration was not implemented consistently across VA and
thus mandated its use.[Footnote 15]
VA Is Developing Other Improvement Initiatives:
Officials in VHA‘s new Chief Business Office told us that this office
is developing a new approach for improving third-party collections.
According to the Chief Business Officer, the Under Secretary of Health
proposed, and the Secretary approved, the establishment of the Chief
Business Office to underscore the importance of revenue, patient
eligibility, and enrollment functions; and to give strategic focus to
improving these functions. He said the new approach can help increase
revenue collections by further revising processes and providing a new
business focus on collections.
Officials in this office told us that the new approach will combine
these and other actions with the actions in the improvement plan. For
example, the Chief Business Office‘s improvement strategy incorporates
electronic transmission of bills and of third-party payments, which are
part of the 2001 improvement plan. The new approach also encompasses
initiatives beyond the improvement plan, such as the one in the Under
Secretary of Health‘s May 2002 memorandum that directed all facilities
to refer accounts receivable older than 60 days to a collection agency,
unless a facility can document a better in-house process. According to
the Deputy Chief Business Officer, this initiative has shown some sign
of success--with outstanding accounts receivables dropping from $1,378
million to $1,317 million from the end of May to the end of July 2002,
a reduction of about $61 million or 4 percent.
Another initiative in the new approach is the Patient Financial
Services System (PFSS). PFSS is an automated financial system focused
on patient accounts, which is intended to overcome operational problems
in VA‘s current automated billing system. For example, VA‘s automated
system for clinical information was not designed to provide all of the
episode-of-care information, such as the health care provider and
diagnoses, that are required for billing. The development of PFSS is
tied to a demonstration project of a financial system, which is now
being designed for Network 10 (Cincinnati).[Footnote 16] According to
the Deputy Chief Business Officer, VA anticipates awarding a PFSS
contract by April 1, 2003. The Chief Business Office‘s plan is to
install this financial system in other facilities and networks if it is
successfully implemented in the Network 10 (Cincinnati) demonstration.
The Chief Business Office also intends to improve collections by
developing better performance measures, which will be similar to those
used in the private sector.[Footnote 17] For example, the office
intends to use the measure of gross days revenue outstanding, which
indicates the pace of collections relative to the amount of accounts
receivable. During fiscal year 2003, the office plans to hold network
and facility directors accountable for collections through standards
that are tied to these performance measures. In addition, the Chief
Business Officer said that tracking performance with these measures
could help identify further opportunities for collections improvements.
The Chief Business Office is developing the new initiatives, which it
had not formalized into a planning document as of August 2002. Certain
key decisions were under consideration. For example, the Chief Business
Officer was considering whether to centralize some processes at the
network or national level and was developing the performance standards
that would be required for holding network and facility directors
accountable. Moreover, according to the Chief Business Officer,
implementing PFSS will require the office to resolve some issues,
including making its existing systems provide sufficient data to
support the new financial system.
Concluding Observations:
As VA faces increased demand for medical care, third-party collections
for nonservice-connected conditions remain an important source of
alternative revenue to supplement VA‘s resources. Our work and VA‘s
continuing initiatives to improve collections suggest that VA could
collect additional supplemental revenues because it has not collected
all third-party payments that it could in fiscal year 2002. However, VA
does not have an estimate of the amount of uncollected dollars, which
it needs to assess the effectiveness of its current processes.
VA has been improving its billing and collecting under the new fee
schedule established in 1999, but VA has not completed its efforts to
address problems in collections operations. In this regard, fully
implementing VA‘s 2001 improvement plan could help VA maximize future
collections by addressing problems such as missed billing
opportunities. However, the plan‘s reliance on directives, in some
cases, to achieve increased collections is not enough to ensure full
implementation and optimal performance. The Chief Business Office‘s new
approach could also enhance collections. VA‘s new Chief Business
Office‘s challenge is to ensure such performance by identifying root
causes of problems in collections operations, providing a focused
approach to addressing the root causes, establishing performance
measures, and holding responsible parties accountable for achieving the
performance standards. However, it is too early to evaluate the extent
to which VA will be able to address operational problems and further
increase collections by fully implementing its 2001 plan and new
approach.
Agency Comments and Our Evaluation:
The Department of Veterans Affairs provided written comments on a draft
of this report, which are found in appendix II. VA generally agreed
with our findings that it continues to make improvements in increased
collections and VHA‘s Business Office is developing new initiatives to
further enhance collections. In addition, VA clarified that it may,
under limited circumstances, collect from Medicare although generally
it may not do so. We changed our report accordingly.
VA also suggested that our title was misleading because it stated that
VA continues to address problems in its collections operations rather
than stating that VA is building infrastructure to implement effective
collections operations. We believe that our title is accurate because
VA continues to address problems that we and others have identified in
VA‘s collections operations. VA has acknowledged such problems in the
past, including unidentified insurance for some patients, insufficient
documentation for billing, and shortages of coding staff. VA continues
to implement the 2001 improvement plan that it developed to address
these and other problems. VA‘s new initiatives also address problems,
such as gaps in automated capture of billing data, that have been
previously identified.
As arranged with your office, unless you release its contents earlier,
we plan no further distribution of this report until 30 days after its
issuance date. At that time, we will send copies of this report to the
Secretary of Veterans Affairs, interested congressional committees, and
other interested parties. We will also make copies available to others
upon request. In addition, this report will be available at no charge
on GAO‘s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please call
me at (202) 512-7101. James Musselwhite and Terry Hanford also
contributed to this report.
Sincerely yours,
Cynthia A. Bascetta
Director, Health Care--Veterans‘ Health and Benefits Issues:
Signed by Cynthia A. Bascetta
[End of section]
Appendix I: Scope and Methodology:
To assess the Department of Veterans Affairs‘ (VA‘s) progress with
collections in fiscal year 2002, we obtained and examined data on VA‘s
third-party bills and collections. We also interviewed officials in VA
headquarters and in three VA health care networks to understand the
reasons for the increased collections compared to fiscal year 2001 as
well as any operational problems. To provide information on VA‘s 2001
improvement plan and its emerging new approach to improvements, we
reviewed relevant VA documents and interviewed VA officials.
We conducted interviews from April through June 2002 with managers in
three networks concerning collections.[Footnote 18] In addition, we
gathered data on third-party bills and collections for fiscal years
2001 and 2002. Our review of the improvement plan‘s implementation
started with its completion status in March 2002 and ended with its
status through May 2002, which was the date of VA‘s last formal report
on the plan‘s status. An official in the Chief Business Office told us
in September 2002 that a new status report for the 2001 plan was
planned but not yet available. During August through October 2002, we
gathered information from officials in the Chief Business Office about
additional improvement initiatives.
To better understand the increased collections in fiscal year 2002 and
any limitations to those collections, we judgmentally selected three
networks for more detailed study. These networks provided different
examples of above-and below-average growth in collections, considered
separately for inpatient care and outpatient care. (See table 1.) Based
on available data at the time of selection, Network 9 (Nashville) had
above-average collections increases for both inpatient care and
outpatient care bills. Network 2 (Albany) exceeded average collections
increases for only outpatient care bills, whereas Network 22 (Long
Beach) had above-average collections increases for only inpatient care
bills.
Table 1: Percentage Increases in Collections for Networks Selected for
Study, October 2000 through February 2001 Compared to October 2001
through February 2002:
Systemwide averages; Collections: Inpatient care: Percentage increase:
20; Collections: Inpatient care: Relation to average: Not applicable;
Collections: Outpatient care: Percentage increase: 54; Collections:
Outpatient care: Relation to average: Not applicable; Collections:
Total: Percentage increase: 35; Collections: Total: Relation to
average: Not applicable.
Network 2 (Albany); Collections: Inpatient care: Percentage increase:
3; Collections: Inpatient care: Relation to average: Below;
Collections: Outpatient care: Percentage increase: 79; Collections:
Outpatient care: Relation to average: Above; Collections: Total:
Percentage increase: 32; Collections: Total: Relation to average:
Below.
Network 9 (Nashville); Collections: Inpatient care: Percentage
increase: 43; Collections: Inpatient care: Relation to average: Above;
Collections: Outpatient care: Percentage increase: 102; Collections:
Outpatient care: Relation to average: Above; Collections: Total:
Percentage increase: 71; Collections: Total: Relation to average:
Above.
Network 22 (Long Beach); Collections: Inpatient care: Percentage
increase: 60; Collections: Inpatient care: Relation to average: Above;
Collections: Outpatient care: Percentage increase: 34; Collections:
Outpatient care: Relation to average: Below; Collections: Total:
Percentage increase: 50; Collections: Total: Relation to average:
Above.
Source: VA Monthly Revenue Office Report: February 2002 Data.
[End of table]
Although we did not verify VA data on collections and bills, we used
the data reported by VA‘s Revenue Office in its analyses of third-party
collections. The data source is VA‘s Veterans Health Information
Systems and Technology Architecture National Database. This database
includes data for collections from various sources--including third-
party payments, patient copayments, and proceeds from sharing
agreements in which VA sells services to the Department of Defense and
other providers.
[End of section]
Appendix II: Comments from the Department of Veterans Affairs:
THE SECRETARY OF VETERANS AFFAIRS, WASHINGTON:
December 23, 2002:
Ms. Cynthia A. Bascetta Director, Health Care-Veterans‘ Health and
Benefits Issues:
U. S. General Accounting Office 441 G Street, NW Washington, DC 20548:
Dear Ms. Bascetta:
The Department of Veterans Affairs (VA) has reviewed your draft report,
VA HEALTH CARE: Third-Party Collections Rising as VA Continues to
Address Problems in the Collections Operations (GAO-03-145). As the
General Accounting Office (GAO) acknowledged, the Veterans Health
Administration (VHA) continues to make improvements in increased
collections. As GAO reports, VHA‘s Business Office is developing new
initiatives that will further enhance collections. VA suggests that the
title is somewhat misleading. Rather than addressing problems in
collections operations, VA has actively engaged in building the basic
infrastructure (effective management oversight, personnel, information
technology systems, processes, etc.) needed to implement and sustain
effective collection operations.
VA has one suggested edit to page 1 of the report, third sentence,
which states: ’VA cannot bill for health care conditions that result
from military service, nor is it authorized to collect from Medicare or
Medicaid for any conditions.“ Currently, there are at least two
situations in which VA may be reimbursed by the Medicare program: 1)
treatment for end-stage renal disease and 2) when VA treats someone
believed to be eligible for VA medical care, but turns out to be
ineligible for VA care, but covered by Medicare. It is recommended that
the word ’generally“ be inserted before ’authorized.“:
Thank you for the opportunity to comment on your draft report.
Sincerely yours,
Anthony J. Principi
Signed by Anthony J. Principi
[End of section]
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exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
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FOOTNOTES
[1] VA cannot collect payments from certain insurers. For example, VA
cannot collect payments from health maintenance organizations (HMOs)
when VA is not a participating provider.
[2] According to VA‘s estimate, there were about 25 million veterans in
2001.
[3] VA Office of Inspector General, Audit of the Medical Care
Collection Fund Program, Report No. 01-00046-65 (Washington, D.C.: Feb.
26, 2002).
[4] U.S. General Accounting Office, VA Health Care: VA Has Not
Sufficiently Explored Alternatives for Optimizing Third-Party
Collections, GAO-01-1157T (Washington, D.C.: Sept. 20, 2001).
[5] The management of VA‘s hospitals and other health care facilities
is decentralized to 21 regional networks.
[6] These amounts reflected the national average charges in September
1999 for the services specified. To reflect the amounts charged by
other local providers, the charges that VA actually bills vary by the
locality in which VA services are provided.
[7] The revenue manager in Network 9 (Nashville) said that coders were
getting better at the manual searching that is required to find
billable professional services and laboratory tests. During fiscal year
2001, coders missed some billable care because of inadequate searches
through the various sources of information that document services and
tests.
[8] VA Office of Inspector General, Report No. 01-00046-65.
[9] Economic Systems, Inc. and AdvanceMed, Professional Fee Backlog
Assistance: Final Technical Report, a report prepared for the
Department of Veterans Affairs, March 5, 2002.
[10] In September 2002, the revenue manager anticipated that the
backlog would be reduced to $2 million by the end of fiscal year 2002
because the medical centers had hired new coders and the network had
created a central pool of seven coders.
[11] In addition, VA does not know the net impact of actual third-party
collections on supplementing its annual appropriation for medical care.
This is because, according to VA officials, VA does not have a way to
routinely capture its full collections costs.
[12] VA‘s accounts receivable totals are larger than what is
collectible, in part, because VA includes the entire amount of charges
for veterans covered by Medicare, when those veterans have Medicare
supplemental insurance. Although VA cannot generally collect from
Medicare, it includes the total as part of its billing process to the
supplemental insurers to determine the proportion of charges the
supplemental insurers will pay.
[13] T. Michael Kashner, Ph.D., J.D., et al., Final Report: Veterans
Affairs Patient Health Insurance Survey (VAPHIS), a survey funded by
the Department of Veterans Affairs, February 16, 2002. The Chief
Business Officer told us that his office plans to do another survey to
confirm its results.
[14] A Chief Business Office official stated in September 2002 that the
office plans to develop a status report that includes the improvement
plan as well as other actions in its new approach.
[15] VA issued a 2002 directive to reemphasize the administrative
mandate.
[16] In the conference report accompanying its fiscal year 2002
appropriation, VA was directed to begin a demonstration project of a
contractor-installed and operated patient financial services system.
H.R. Conf. Rep. No. 107-272, at 56 (2001).
[17] As we noted in our 2001 testimony, VA‘s performance does not
compare favorably to some industry benchmarks, such as the number of
days required to bill. However, comparisons between VA and the private
sector should take into account how VA‘s processes differ from those in
the private sector. For instance, VA has the additional step of
determining whether the care is service-connected, and VA bills for
both facility and physician charges whereas private sector hospitals
may only bill for facility charges. To make comparisons with industry
benchmarks more relevant, VA is considering adjustments to its new
measures.
[18] We spoke with revenue managers in the three networks. At the
suggestion of the revenue manager in Network 22 (Long Beach), we also
spoke with the facility‘s business manager, who headed the network‘s
collections committee. Moreover, we had limited follow-up discussions
during September 2002 with the Network 9 (Nashville) revenue manager.
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analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO‘s commitment to
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