VA Medical Centers
Further Operational Improvements Could Enhance Third-Party Collections Gao ID: GAO-04-739 July 19, 2004In the face of growing demand for veterans' health care, GAO and the Department of Veterans Affairs Office of Inspector General (OIG) have raised concerns about the Veterans Health Administration's (VHA) ability to maximize its third-party collections to supplement its medical care appropriation. GAO has testified that inadequate patient intake procedures, insufficient documentation by physicians, a shortage of qualified billing coders, and insufficient automation diminished VA's collections. In turn, the OIG reported that VA missed opportunities to bill, had billing backlogs, and did inadequate follow-up on bills. While VA has made improvements in these areas, GAO was asked to review internal control activities over third-party billings and collections at selected medical centers to assess whether they were designed and implemented effectively.
VA has continued to take actions to reduce billing times and increase third-party collections. Collections of third-party payments have increased from $540 million in fiscal year 2001 to $804 million in fiscal year 2003. However, at the three medical centers visited, GAO found continuing weaknesses in the billings and collections processes that impair VA's ability to maximize the amount of dollars paid by third-party insurance companies. For example, the three medical centers did not always bill insurance companies in a timely manner. Medical center officials stated that inability to verify and update patients' third-party insurance, inadequate documentation to support billings, manual processes and workload continued to affect billing timeliness. The detailed audit work at the three facilities GAO visited also revealed inconsistent compliance with follow-up procedures for collections. For example, collections were not always pursued in a timely manner and partial payments were accepted as payments in full, particularly for Medicare secondary insurance companies, rather than pursuing additional collections. VA's current Revenue Action Plan (Plan) includes 16 actions designed to increase collections by improving and standardizing collections processes. Several of these actions are aimed at reducing billing times and backlogs. Specifically, medical centers are updating and verifying patients' insurance information and improving health care provider documentation. Further, hiring contractors to code and bill old cases is reducing backlogs. In addition to actions taken, VA has several other initiatives underway. For example, VA is taking action to enable Medicare secondary insurance companies to determine the correct reimbursement amount, which will strengthen VA's position to follow up on partial payments that it deems incorrect. Although implementation of the Plan could improve VA's operations and increase collections, many of its actions will not be completed until at least fiscal year 2005. As a result, it is too early to determine the extent to which actions in the Plan will address operational problems and increase collections.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-739, VA Medical Centers: Further Operational Improvements Could Enhance Third-Party Collections
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Report to the Chairman,
Subcommittee on Oversight and Investigations,
Committee on Veterans' Affairs,
House of Representatives:
July 2004:
VA MEDICAL CENTERS:
Further Operational Improvements Could Enhance Third-Party
Collections:
GAO-04-739:
GAO Highlights:
Highlights of GAO-04-739, a report to the Chairman, Subcommittee on
Oversight and Investigations, Committee on Veterans‘ Affairs, House of
Representatives:
Why GAO Did This Study:
In the face of growing demand for veterans‘ health care, GAO and the
Department of Veterans Affairs Office of Inspector General (OIG) have
raised concerns about the Veterans Health Administration‘s (VHA)
ability to maximize its third-party collections to supplement its
medical care appropriation. GAO has testified that inadequate patient
intake procedures, insufficient documentation by physicians, a shortage
of qualified billing coders, and insufficient automation diminished
VA‘s collections. In turn, the OIG reported that VA missed
opportunities to bill, had billing backlogs, and did inadequate
follow-up on bills. While VA has made improvements in these areas, GAO
was asked to review internal control activities over third-party
billings and collections at selected medical centers to assess whether
they were designed and implemented effectively.
What GAO Found:
VA has continued to take actions to reduce billing times and increase
third- party collections. Collections of third-party payments have
increased from $540 million in fiscal year 2001 to $804 million in
fiscal year 2003. However, at the three medical centers visited, GAO
found continuing weaknesses in the billings and collections processes
that impair VA‘s ability to maximize the amount of dollars paid by
third-party insurance companies. For example, the three medical
centers did not always bill insurance companies in a timely manner.
Medical center officials stated that inability to verify and update
patients‘ third-party insurance, inadequate documentation to support
billings, manual processes and workload continued to affect billing
timeliness.
The detailed audit work at the three facilities GAO visited also
revealed inconsistent compliance with follow-up procedures for
collections. For example, collections were not always pursued in a
timely manner and partial payments were accepted as payments in full,
particularly for Medicare secondary insurance companies, rather than
pursuing additional collections.
VA‘s current Revenue Action Plan (Plan) includes 16 actions designed to
increase collections by improving and standardizing collections
processes. Several of these actions are aimed at reducing billing
times and backlogs. Specifically, medical centers are updating and
verifying patients‘ insurance information and improving health care
provider documentation. Further, hiring contractors to code and bill
old cases is reducing backlogs. In addition to actions taken, VA has
several other initiatives underway. For example, VA is taking action to
enable Medicare secondary insurance companies to determine the correct
reimbursement amount, which will strengthen VA‘s position to follow up
on partial payments that it deems incorrect. Although implementation
of the Plan could improve VA‘s operations and increase collections,
many of its actions will not be completed until at least fiscal year
2005. As a result, it is too early to determine the extent to which
actions in the Plan will address operational problems and increase
collections.
What GAO Recommends:
GAO is making five recommendations to augment actions already underway
to facilitate more timely billings and improve collection operations.
In responding to our draft report, VA agreed with our conclusions and
expressly concurred with the recommendations and reported that it is
developing an action plan to implement them.
www.gao.gov/cgi-bin/getrpt?GAO-04-739.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact McCoy Williams at (202)
512-6906 or williamsm1@gao.gov.
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
Opportunities Exist for Improving Timeliness of Billings and Collection
Activities:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Comments from the Department of Veterans Affairs:
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Third Party Billing Timeliness for Selected Transactions:
Table 2: Ratio of Bills Issued to the Number of Coders Per Day January-
March, 2004:
Figures:
Figure 1: VA's MCCF Revenue Cycle for Third-Party Collections:
Figure 2: Third-Party Collections in Millions:
Figure 3: Four Functional Areas of Billing:
Letter July 19, 2004:
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 through medical facilities managed by its Veterans
Health Administration (VHA). Under certain circumstances, VA is
authorized to collect reasonable charges from veterans' health
insurance companies to offset the cost of medical care and medications
for treatment of nonservice-connected conditions. Specifically, VA may
bill insurance companies for treatment of conditions that are not a
result of injuries or illnesses incurred or aggravated during military
service. VA is not authorized to bill for health care conditions that
result from military service, nor is it generally authorized to collect
from Medicare and Medicaid. In fiscal year 2003, VA collected $804
million in insurance payments, also known as third-party collections.
These collections provided VA the largest source of revenue to
supplement its $25 billion medical care appropriation in fiscal year
2003, and they helped pay for costs associated with growing health care
demands for veterans.
Over the past several years, we and the VA Office of the Inspector
General (OIG) have raised concerns about VA's ability to maximize its
third-party collections to enhance revenue. In September 2001, we
testified that problems in VA's collection operations--such as
inadequate patient intake procedures to gather insurance information,
insufficient physician documentation of the specific care provided, a
shortage of qualified coders, and insufficient automation--diminished
VA's collections.[Footnote 1] In February 2002, the VA OIG reported
that VA missed billing opportunities, had billing backlogs, and did
inadequate follow-up on accounts receivable in fiscal years 2000 and
2001.[Footnote 2] In May 2003 we testified that VA had made
improvements in these areas but that operational problems, such as
unpaid accounts receivable, missed billing opportunities, and billing
backlogs continued to limit the amount VA collects.[Footnote 3]
In conjunction with this revenue-enhancing responsibility, you asked us
to review internal control activities over third-party billings and
collections at selected VHA medical centers to assess whether internal
controls are now designed and implemented effectively.
To gain an understanding of VHA's policies and procedures and the
related internal controls and to assess the design effectiveness of
those controls, we obtained and reviewed VA and VHA directives,
handbooks, and other policy guidance, and previous reports issued by
VA's OIG. We also conducted interviews and walkthroughs with VHA
personnel and reviewed our previous reports. To assess whether key
control activities for billings and collections were effectively
implemented, we used a case study approach, reviewing transaction
documentation at three VA medical centers. We conducted our review from
March 2004 through June 2004 in accordance with U.S. generally accepted
government auditing standards.
Results in Brief:
VA has continued to take actions to reduce billing times and increase
third-party collections. Collections of third-party payments have
increased 49 percent from $540 million in fiscal year 2001 to $804
million in fiscal year 2003. At the same time, at the three medical
centers we visited, we found continuing weaknesses in the billings and
collections processes that impair VA's ability to maximize the amount
of dollars paid by third-party insurance companies. For example, the
three medical centers did not always bill insurance companies in a
timely manner. Medical center officials told us that inability to
verify and update patients' third-party insurance, inadequate
documentation to support billings, manual processes and workload
continued to affect billing timeliness. For instance, we were told that
insufficient treatment documentation by physicians and other health
care providers continued to cause delays in coding bills. The
cumulative effect of this intertwined set of issues results in late or
incomplete bills and lost revenue.
The detailed audit work at the three facilities we visited also
revealed inconsistent compliance with follow-up procedures for
collections. For example, collections were not always pursued in a
timely manner and partial payments were accepted as payments in full,
particularly for Medicare secondary insurance companies, rather than
pursuing additional collections.
VA's current Revenue Action Plan (Plan) includes 16 actions designed to
increase collections by improving and standardizing collections
processes. Several of these actions are aimed at reducing billing times
and backlogs. Specifically, medical centers are updating and verifying
patients' insurance information and improving health care provider
documentation. Further, hiring contractors to code and bill old cases
is reducing backlogs. In addition to actions already taken, VA has
several other initiatives underway. For example, VA is taking action to
enable Medicare secondary insurance companies to determine the correct
reimbursement amount, which will strengthen VA's position to follow-up
on partial payments that it deems incorrect. However, the Plan has not
yet been fully implemented. Therefore, it is too early to determine the
extent to which actions in the Plan will address operational problems
and increase collections.
Because the Plan does not address all facets of the operational issues,
we are making five recommendations to augment those actions currently
underway. In commenting on a draft of this report the Secretary of
Veterans Affairs concurred with our conclusions and recommendations and
reported that the department is developing an action plan to implement
them. For additional information see the Agency Comments and Our
Evaluation section of this report and appendix I.
Background:
The Veterans' Health Care Eligibility Reform Act of 1996[Footnote 4]
authorized VA to provide certain medical services not previously
available to veterans with non-service connected conditions. The
Balanced Budget Act of 1997[Footnote 5] authorized VA to use third-
party health insurance payments to supplement its medical care
appropriations. As part of VA's 1997 strategic plan, VA expected that
collections from third-party payments and co-payments would cover the
majority of costs of care for these veterans, some of which VA has
determined to have higher incomes. For fiscal year 2002, about a
quarter of VA's user population were higher income veterans.
In September 1999, VA adopted a new fee schedule, called "reasonable
charges," which are itemized fees based on diagnoses and
procedures.[Footnote 6] This schedule allows VA to more accurately bill
for the care provided. By linking charges to the care provided, VA
created new bill-processing demands--particularly in the areas of
documenting care, coding that care, and processing bills per episode of
care. First, VA must be prepared to provide the insurance company with
supporting medical documentation for itemized charges. Second, VA must
accurately assign medical diagnoses and procedure codes to set
appropriate charges, a task that requires coders to search through
medical documentation and various databases to identify all billable
care. Third, VA must prepare a separate bill for each health care
provider involved in the patient's care and an additional bill when a
hospital facility charge applies.
To collect from health insurance companies, VA uses a four function
process to manage the information needed to bill and collect third-
party payments--also known as the Medical Care Collection Fund (MCCF)
Revenue Cycle (see fig. 1). First, the patient intake function involves
gathering insurance information and verifying that information with the
insurance company as well as collecting demographic data on the
veteran. Second, utilization review involves precertification of care
in compliance with the veteran's insurance policy, including continued
stay reviews to determine medical necessity. Third, billing functions
involve properly documenting the health care provided to patients by
physicians and other health care providers. Based on the physician
documentation, the diagnoses and medical procedures performed are
coded. VA then creates and sends bills to insurance companies based on
the insurance and coding information obtained. And fourth, the
collections or accounts receivable function includes processing
payments from insurance companies and following up on outstanding or
denied bills.
Figure 1: VA's MCCF Revenue Cycle for Third-Party Collections:
[See PDF for image]
[End of figure]
As discussed in prior OIG and GAO reports, reasons for untimely third-
party billings were heavy caseloads and backlogs for cases to be coded.
VA was unprepared to bill under reasonable charges initially in fiscal
year 2000, 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 of its medical centers
developed billing backlogs.
In January 2003, we reported[Footnote 7] that after initially being
unprepared in fiscal year 2000 to bill reasonable charges, VA began
improving its implementation of the processes necessary to increase its
third-party billings and collections. In fiscal year 2002, VA submitted
over 8 million third-party insurance bills that constituted a 54
percent increase over the number in fiscal year 2001. VA officials
attributed increased third-party billings to, among other reasons,
reductions in billing backlogs and an increasing number of patients
with billable insurance. We also reported that collections could be
increased by addressing operational problems such as unpaid accounts
receivable and missed billing opportunities due to insufficient
identification of insured patients, inadequate documentation to support
billings, coding problems, and billing backlogs.
To address these issues and further increase collections, VA has
several initiatives under way and is continuing to develop additional
ones. In September 2001, VA introduced its Veterans Health
Administration Revenue Cycle Improvement Plan. This plan initially
included 24 actions to improve revenue performance. After the
establishment of the Chief Business Office (CBO) in May 2002, VA issued
the Revenue Action Plan (Plan) that superceded the 2001 plan and
includes 16 objectives. With the implementation of several actions in
the Plan, VA has reported increases in the number of billings. For
example, in fiscal year 2003, VA submitted 10 million bills, a 25
percent increase over the number of bills in fiscal year 2002 and a 160
percent increase over fiscal year 2000. VA also reported that its
collections of third-party payments over the past few years continue to
increase as shown in figure 2. For fiscal year 2003, VA reported that
it collected third-party payments of $804 million, a 6 percent increase
over the $760 million collected in 2002 and a 49 percent increase over
the $540 million collected in fiscal year 2001.
Figure 2: Third-Party Collections (in millions):
[See PDF for image]
[End of figure]
Scope and Methodology:
To gain an understanding of VHA's policies and procedures and the
related internal controls for the billings and collections, to identify
key control activities, and to assess the design effectiveness of those
controls, we obtained and reviewed VA and VHA directives, handbooks,
and other policy guidance, and previous reports issued by VA's OIG. We
also conducted interviews and walkthroughs with VHA personnel and
reviewed previous GAO reports. To assess whether key control activities
for the two areas of operation were effectively implemented, we used a
case study approach, reviewing transaction documentation at three VA
medical centers. We selected medical centers with varying success in
meeting established performance goals and other factors. Because we
used a case study approach the results of our study cannot be projected
beyond the transactions we reviewed.
To determine whether key internal controls for billings were
effectively implemented, we discussed billing requirements and
procedures with VHA headquarters and medical center personnel. Because
billing records were not in a usable format and time constraints did
not permit us to put them in a usable format, we could not select a
statistical sample. Instead, we made a non-statistical selection of 30
patients from each of the three medical center's inpatient and
outpatient billing records to perform tests to assess compliance with
policies and procedures and to determine the number of days to bill
third-party insurance companies.
To determine whether key internal controls for collections were
effectively implemented, we discussed requirements and procedures with
VHA headquarters and medical center personnel. At each medical center
we visited, we used the same 30 patients chosen for our billing tests
to also assess compliance with accounts receivable policies and
procedures, including VA Handbook 4800.14, Medical Care Debts
(Handbook) and the Accounts Receivable Third-Party Guidebook.
We reviewed and used as guides, the Standards for Internal Control in
the Federal Government [Footnote 8] and the Internal Control Management
and Evaluation Tool.[Footnote 9] The Comptroller General issued these
internal control standards to provide the overall framework for
establishing and maintaining internal control. According to these
standards, internal control, also referred to as management control,
comprises the plans, methods and procedures used to meet the missions,
goals, and objectives of an organization. Internal control also serves
as the first line of defense in safeguarding assets and preventing and
detecting errors and fraud.
We performed our work at VA medical centers in Cincinnati, Ohio; Tampa,
Florida; and Washington, D.C., and at the VHA's Chief Business Office
in Washington, D.C. We conducted our review from March 2004 through
June 2004 in accordance with U.S. generally accepted government
auditing standards.
We requested comments on a draft of this report from the Secretary of
Veterans Affairs or his designee. Written comments were received from
the Secretary of Veterans Affairs and are reprinted in appendix I.
Opportunities Exist for Improving Timeliness of Billings and Collection
Activities:
Although VA has decreased the number of days it takes to bill for
patient services and has increased its collections from third-party
insurance companies since 2000, problems remain. At the three medical
centers we visited, we found continuing weaknesses in the billings and
collections processes that impair VA's ability to maximize the amount
of dollars paid by third-party insurance companies. For example,
medical centers did not always bill insurance companies in a timely
manner. According to medical center officials, timeliness of billing is
affected by, among other things, (1) VA's ability to verify and update
a patient's third-party insurance information, (2) whether physicians
and other health care providers properly document the patient's
treatment so a bill can be coded appropriately, (3) the extent of
manual intervention to process the bill, and (4) workload. We believe
that improvements could be made in each of these areas.
Further, the three medical centers we visited did not always pursue
collections of accounts receivable in a timely manner or follow up on
certain partially paid claims. Weaknesses in VA's collection activities
hamper its ability to collect all monies due to the agency from third-
party insurance companies to pay for veterans' growing demand for care.
VA's current Plan to implement and sustain effective collections
operations is in process. However, the Plan has not been fully
implemented. Therefore, it is too early to determine the extent to
which it will address operational problems and increase collections.
Operational Enhancements Could Improve Timeliness of Billings:
While VA reported that it has decreased the average number of days it
takes to bill for patient services, we found that medical centers could
further improve billing timeliness by continuing to address operational
problems that slow down the process. These operational problems
include, among other things, delays in verifying and updating patient
insurance information, incomplete or inaccurate documentation of
patient care by health care providers, manual intervention, and
workload. VA's billing process cuts across four functional areas, as
shown in figure 3. Each phase of the billing process is dependent on
the completeness and accuracy of information collected in the prior
phases. Breakdowns occurring during any part of the process can affect
the timeliness of billings.
Figure 3: Four Functional Areas of Billing:
[See PDF for image]
Source: GAO analysis.
[End of figure]
VA's policies and procedures do not specify the number of days for a
bill to be issued once health care services are rendered. In fiscal
year 2003, VA's Business Oversight Board established performance
goals[Footnote 10] that were incorporated into the network and medical
directors' performance contracts. The goal for sending a bill within a
set number of days was reduced periodically during fiscal year 2004.
During the time of our review, the performance goal for billing third
party insurance companies was an average of 50 days from the date of
patient discharge. As of the end of the first quarter of fiscal year
2004, the cumulative average days to bill third parties for Tampa,
Washington, D.C. and Cincinnati were 73, 69, and 44 respectively.
At each of the three medical centers visited, we made a non-
representative selection of 30 patients billed during the first quarter
of fiscal year 2004. In evaluating the timeliness of billing, we used
the then-in-effect performance standard of 50 days after patient
discharge. We recognize that the cumulative billing times for the 90
cases selected do not represent the average days to bill, which VHA
uses to measure each medical center's performance. However, cases
billed more than 50 days after patient discharge are illustrative of
problematic issues that can delay billings. For the 90 cases selected,
the number of days to bill at the three medical centers we visited
ranged from 5 to 332 days, with almost 30 percent billed after 50 days.
A summary of our results is shown in table 1.
Table 1: Third Party Billing Timeliness for Selected Transactions:
Medical Center: Cincinnati;
Billed within 50 days: 23;
Billed > 50 days: 7;
Total bills tested: 30.
Medical Center: Tampa;
Billed within 50 days: 22;
Billed > 50 days: 8;
Total bills tested: 30.
Medical Center: Washington, D.C;
Billed within 50 days: 19;
Billed > 50 days: 11;
Total bills tested: 30.
Total;
Billed within 50 days: 64;
Billed > 50 days: 26;
Total bills tested: 90.
Source: GAO analysis.
[End of table]
Promptly invoicing insurance companies for care provided is a sound
business practice and should result in improved cash flow for VA.
Officials at each of the three medical centers cited verifying and
updating patients' third-party insurance information as a continuing
impediment to billing third-party insurance companies in a timely
manner. They told us that this occurs because, among other reasons,
some patients are reluctant to provide insurance information for fear
that their insurance premiums will increase. Patients delay providing
insurance information until well after commencement of treatment, and
patients do not always provide current insurance information. Thus,
additional time is required to research and verify the patients'
insurance coverage.
Medical center officials also told us that incomplete or inaccurate
documentation from health care providers continues to cause delays in
billing third parties. If the coders do not have sufficient data from
the provider to support a bill, the coding process can be delayed, thus
hampering timely billing of third-party insurance companies. Further,
without complete data on the actual health care services provided, the
coders may also miscode the treatment, which could result in lost
revenue.
Another impediment to timely billing is that the billing process is not
fully automated and manual intervention is required. For example, in
certain cases, the medical diagnosis is transcribed onto a worksheet to
be used for coding rather than being electronically transmitted.
Additionally, before the coders can begin the coding process, they must
first electronically download the listing of potential billable
patients. Then the coders review the electronic medical records and
assign diagnostic and procedure codes before a bill is generated.
Further, due to system limitations, bills that exceed a certain dollar
amount or number of medical procedure codes must be printed and mailed
rather than transmitted electronically. For example, in Cincinnati
bills greater than $100,000 or that have six or more medical procedure
codes must be processed in this manner.
Another contributing factor may be the workload levels at the medical
centers. During the second quarter of fiscal year 2004, Cincinnati
submitted 45,883 bills and had a staff of 13 coders. Concurrently,
Tampa submitted 192,407 bills and had 16 coders and Washington D.C.
issued 64,474 bills and had 8 coders. VHA data indicated that
Cincinnati's average billing time was under 50 days for the quarter and
had the lowest bill to coder ratio. Conversely, Tampa and Washington,
D.C. exceeded the 50-day performance goal and had a much higher bill to
coder ratio. Assuming 60 workdays per quarter, we calculated the ratio
of bills issued per day to the number of coders as shown in table 2.
Table 2: Ratio of Bills Issued to the Number of Coders Per Day January-
March, 2004:
Medical Center: Cincinnati;
Number of Bills/Per Day: 765;
Number of Coders: 13;
Ratio of Bills to Coders: 59:1.
Medical Center: Washington, D.C;
Number of Bills/Per Day: 1,075;
Number of Coders: 8;
Ratio of Bills to Coders: 134:1.
Medical Center: Tampa;
Number of Bills/Per Day: 3,207;
Number of Coders: 16;
Ratio of Bills to Coders: 200:1.
Source: GAO analysis.
[End of table]
We recognize that other factors such as the number of billable
encounters per bill and coder productivity may affect the billing
workload. However, given the wide diversity of the bill to coder
ratios, staffing may also be a contributing factor affecting days to
code and issue bills.
VA's Controls over Collections Need Strengthening:
Weaknesses in collection activities hamper VA's ability to collect all
monies due to the agency from third-party insurance companies for
veterans' care. We found that the three medical centers we visited did
not always pursue collections of accounts receivable in a timely manner
or follow up on certain partially paid insurance claims. These two
factors could negatively affect third-party collections.
Accounts Receivable Not Pursued in a Timely Manner:
VA's Handbook sets forth the requirements for collection of third-party
accounts receivables.[Footnote 11] Also, in 2003, the VHA's Chief
Business Office issued the Accounts Receivable Third-Party Guidebook
that lays out more detailed procedures.[Footnote 12] Both documents
require that once a claim has been sent to the insurance company, staff
should follow up on unpaid reimbursable insurance cases as follows:
* The first telephone follow-up is to be initiated within 30 days after
the initial bill is generated. All telephone follow-ups are to be
documented to include, at a minimum, the name, position, title and
telephone number of the person contacted, the date of contact,
appropriate second follow-up date if payment is not received, and a
brief summary of the conversation.
* A second telephone follow-up on unresolved outstanding receivables is
to be made on an appropriate (but unspecified) date and documented.
* A third follow-up call is to be made within 14 days of the second
contact and documented with a summary of the conversation and an
appropriate, but not specified, follow-up date.
* If no payment has been received by the next follow-up date, the case
may be referred by the MCCF Coordinator to regional counsel for further
action.
We tested compliance with these policies for the same 30 cases selected
for our billing tests at each of the three medical centers we visited.
Regarding the first follow-up procedure, initial follow-up calls were
made within 30 days for only 14, or about 22 percent, of the 64 cases
for which billings had not been collected within 30 days.
Second follow-up phone calls were not made in a timely manner either.
We considered 15 days after the initial follow-up of 30 days to be an
appropriate time frame since the third follow-up is to be made within
14 days after the second follow-up and cases are to be referred to
collection agencies after 60 days. Delays in making second follow-up
calls increase the risk that payments will not be collected. Within our
selected cases, four second follow-up calls were either made more than
15 days after the first follow-up call or not at all. These bills had
not been paid within 120 days after the bill was sent to the insurance
company.
Both the first and second follow-up calls require that staff document
the contact's name, title, telephone number, and expected follow-up
date in the official records. However, we found that staff did not
consistently do so. For example, for the 14 cases where a follow-up
call was made during the first 30 days after the initial billing, only
seven specified a follow-up date. Entering a follow-up date would serve
as a reminder to make the second follow-up call. Further, we found that
an unclear collection policy may have contributed to VA's untimely
second follow-up efforts. Specifically, VA's Handbook requires that
second follow-up telephone calls on unresolved outstanding receivables
be made on an "appropriate date," but that date is not specified (i.e.,
the number of days elapsed since the first contact). Specifying a
follow-up date (i.e., 15 days after the first follow-up) or providing
criteria for selecting an appropriate follow-up date would clarify this
requirement and provide a benchmark on which compliance could be
measured.
Medical center officials at the three sites we visited told us that
staff shortages and a heavy workload contributed to noncompliance with
follow-up procedures. For example, Tampa officials told us that the
accounts receivable staff typically have over 1,000 cases needing
follow-up at any one time. The Cincinnati Medical Care Collection Fund
(MCCF) supervisor told us that if two additional staff were available,
they would be dedicated to following up on delinquent payments.
Not Following Up on Partially Paid Claims Reduces the Possibility of
Collecting Additional Revenue:
During our review of the 90 selected cases, we noted wide variances
between the amounts billed and amounts received for patients who were
eligible for Medicare benefits. For example, in one of our selected
cases, VA billed the secondary insurance company for $60,994 but
received only $5,205, or about 9 percent.
In non-Medicare cases, when the patient has primary and secondary
insurance, VHA bills the primary insurance company and, depending on
the amount collected, bills the secondary insurer for the residual
amount. For Medicare patients who have secondary insurance (i.e.,
Medigap or Medicare Supplemental insurance), VA is generally entitled
to receive payment only from the secondary insurance company. Thus far,
VA has not been able to provide post-Medicare payment information
(i.e., deductible and co-insurance amounts) to other insurance
companies because Medicare is generally not required to pay and thus
does not pay VA. Lacking information on what Medicare would pay if
required to do so, VA does not know what amount to bill the secondary
insurance companies because it does not know the residual amount. In
such cases, VA bills the secondary insurance company for the full
amount associated with the care provided--the amount that would be
reimbursable by Medicare as well as the amount not covered by Medicare.
The secondary insurance companies have been using a variety of
methodologies for reimbursing VA and some do not pay because they are
unable to determine the proper amount of reimbursement. As a result, in
certain cases, VA receives very little, if any, reimbursement from the
secondary insurance companies for such billings.
The Handbook describes procedures for following up on partial payments
from insurance companies. It states that payment by a third-party
insurance company of an amount which is claimed to be the full amount
payable under the terms of the applicable insurance policy or other
agreement will normally be accepted as payment in full. The unpaid
balance is to be written down to zero. However, if there is a
considerable difference between the amount collected and the amount
billed, the Handbook directs staff to take various actions to pursue
potential additional revenue. At each of the three medical centers, we
found that accounts receivable staff typically accepted partial
payments from secondary insurance companies as payment in full and
adjust the unpaid balance to zero. Because the medical centers do not
have the post-Medicare information needed to pursue collection of the
unpaid amounts, there may be failure to collect millions of dollars
because partial payments are accepted as payment in full.
VA reported that as of September 2003, the median age of all living
veterans was 58 years, with the number of veterans 85 years of age and
older totaling nearly 764,000. As these veterans age, the demand for
care will increase as will the number of veterans eligible for
Medicare. To be able to offset the cost of care through third-party
collections, it will become even more imperative in the coming years
for VA to collect the maximum amount possible from secondary insurance
companies.
VA Initiatives Are Under Way to Address Operational Problems:
VA's current Revenue Action Plan includes 16 actions designed to
increase collections by improving and standardizing the collections
processes. Several of these actions are aimed at reducing billing times
and backlogs, many of which have already been implemented.
Specifically, medical centers are updating and verifying patients'
insurance information and improving health care provider documentation.
In addition, hiring contractors to code and bill old cases is reducing
backlogs. Further, the introduction of performance measures into
managers' performance contracts has provided an incentive for increased
billings and collections. In addition to those actions already taken,
VA has other initiatives under way such as automating the billing
process by implementing the Patient Financial Services System (PFSS)
and determining the amounts billable to Medicare secondary insurance
companies through the use of an electronic Medicare Remittance Advice.
To assist in updating and verifying patients' insurance information, a
problematic issue discussed earlier in our report, each site now has
staff dedicated to (1) verify that insurance reported by the veteran is
current, (2) determine insurance coverage if the patient does not
declare any, (3) acquire pre-certifications of patient admissions, and
(4) obtain authorization of procedures from the patient's insurance
company. Additionally, medical centers have taken actions to update
demographic information on file, including insurance. These efforts
help to reduce insurance denials, produce more accurate bills, and
ensure that VA receives reimbursement for services provided.
To assist in improving medical documentation, which we reported as a
continuing operational issue, VA mandated physician use of the
Computerized Patient Record System in December 2001 and reinforced its
use through a VHA Directive in May 2003. The coders use the electronic
medical records to determine what treatment each patient received and
to document the diagnostic codes. In addition, the medical centers have
been educating the physicians about the importance of completing the
records.
To reduce billing backlogs, VHA entered into an agreement with four
vendors to code and assist with backlogs. The Washington, D.C. medical
center hired a contractor to handle a backlog of 15,000
encounters.[Footnote 13] The contractor has certified staff for coding
and billing and must meet 12 performance measures. The revenue officer
told us that the backlog was eliminated in May 2004. In addition, in
December 2003, VHA was given authority by the Office of Personnel
Management to directly hire credentialed coders at industry-compatible
salaries.
In fiscal year 2003, VHA's Chief Business Officer implemented industry-
based performance metrics and reporting capabilities to identify and
compare overall VA revenue program performance. Metrics were introduced
to measure collections, days to bill, gross days revenue outstanding,
and accounts receivable over 90 days. For both network and medical
center directors, the metrics and associated performance targets were
incorporated into annual performance contracts effective fiscal year
2003. VHA officials attribute much of the decrease in days to bill and
increased billings and collections to these performance measures. For
example, VA reported that nationally the average days to bill insurance
companies for the first half of fiscal year 2004 was about 74 days,
which is an improvement from their fiscal year 2000 average days to
bill of 117 days. However, VHA's average days to bill for that period
exceeded the performance goals of 50 days and 47 days for the first and
second quarters of fiscal year 2004, respectively. The industry
standard is 10 days.[Footnote 14]
In addition to actions already taken, VA's Plan has several other
initiatives under way for improving billing times and increasing
collections. For example, the PFSS is designed to integrate the health
care billing and accounts receivable software systems to replace VA's
current legacy system. The system is intended to increase staff
efficiency through a streamlined, standardized, re-engineered process;
create more accurate bills; and shorten bill lag times through
automation. VA officials believe that this initiative, when
implemented, will reduce manual intervention noted earlier in our
report as a reason for delayed billings. However, implementation is
behind schedule.
Another effort under way, the electronic Medicare Remittance Advice
project, helps to address obtaining allowable payments from secondary
insurance companies, rather than accepting partial payments that are
significantly lower than billed amounts as full payment. This project
involves the electronic submission of claims to a fiscal
intermediary[Footnote 15] to receive remittance advice on how Medicare
would have paid the claim if it were legally bound to pay VA for care.
The remittance advice, which will be attached to VA health care claims,
will enable secondary insurance companies to determine the correct
amount to reimburse VA. Further, VA believes it will be able to more
accurately reflect the amount of its outstanding receivables and be in
a strengthened position to follow up on partial payments, which it
deems incorrect. The completion date for this project was November 2003
but has been delayed due to software issues. VA officials told us they
plan to roll out the new system beginning in August 2004.
Although the Plan provides another step forward in potentially
improving operations and increasing collections, it is still in
progress and many of the actions are not scheduled for implementation
until at least fiscal year 2005. Therefore, it is too early to
determine whether the Plan will successfully address operational
problems and increase collections when fully implemented.
Conclusions:
The growing demands for veterans' health care increase VA's
responsibility to supplement, as much as possible, its medical care
appropriations with collections from insurance companies for treatment
of non-service-connected conditions. VA is making progress in
developing and implementing procedures to identify patients who can be
billed for services, to bill for services correctly and in a timely
manner, and to pursue collections. VA's Plan to further improve billing
and collection operations, however, is still a work in progress and
could benefit from the performance of a workload analysis. In the
interim, strengthening internal controls such as clarifying billing and
claims follow-up procedures and consistently implementing policies and
procedures could help reduce billing times and increase collections.
Even assuming that its Plan works as contemplated, these additional
controls are needed to maximize VA revenues to enhance its medical care
budget.
Recommendations:
We are making five recommendations to facilitate more timely billings
and improve collection operations. The Secretary of Veterans Affairs
should direct the Under Secretary for Health to:
* Perform a workload analysis of the medical centers' coding and
billing staff, and:
* Based on the workload analysis, consider making the necessary
resource adjustments.
* Reinforce to accounts receivable staff that they should perform the
first follow-up on unpaid claims within 30 days of the billing date, as
directed by VA Handbook 4800.14, Medical Care Debts, and establish
procedures for monitoring compliance.
* Reinforce the requirement for accounts receivable staff to enter the
insurance company contact's name, title and phone number and the
follow-up date when making follow-up phone calls.
* Augment VA Handbook 4800.14, Medical Care Debts, by either specifying
a date or providing instructions for determining an appropriate date
for conducting second follow-up calls to insurance companies.
Agency Comments and Our Evaluation:
VA provided written comments on a draft of this report. In its
response, VA agreed with our conclusions and recommendations and
reported that it is developing an action plan to implement them.
Additionally, VA's response stated that VHA is pursuing a number of
strategies to improve overall performance toward achieving industry
benchmarks. VA believes that the development of the Patient Financial
Services System will address current billing system limitations and
manual intervention and that the Medicare Remittance Advice project
will assist VHA in pursuing partially paid claims.
Also, in its response letter, VA included some technical comments that
we have addressed in finalizing our report where appropriate. VA's
written comments are presented in appendix I.
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, the Under Secretary for Health,
interested congressional committees, and other interested parties. We
will also make copies available to others upon request. In addition,
the report will be available at no charge on GAO's Web site at
[Hyperlink, http://www.gao.gov]. Should you or your staff have any
questions on matters discussed in this report, please contact me at
(202) 512-6906 or [Hyperlink, williamsm1@gao.gov]; or Alana Stanfield,
Assistant Director, at (202) 512-3197 or
[Hyperlink, stanfielda@gao.gov]. Major contributors to this report are
acknowledged in appendix II.
Sincerely yours,
Signed by:
McCoy Williams
Director, Financial Management and Assurance:
Appendixes:
Appendix I: Comments from the Department of Veterans Affairs:
THE SECRETARY OF VETERANS AFFAIRS
WASHINGTON:
July 14, 2004:
Mr. McCoy Williams:
Director:
Financial Management and Assurance:
U.S. General Accounting Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Williams:
The Department of Veterans Affairs (VA) has reviewed the General
Accounting Office's (GAO) draft report, VA MEDICAL CENTERS: Further
Operational Improvements Could Enhance Third-Party Collections (GAO-
04-739), and agrees with GAO's conclusions. The Department concurs with
GAO's recommendations. Technical comments are being sent to GAO for
clarification under separate cover.
GAO recognizes the distinctions between VA and private sector billing
processes. For example, unlike the private sector, VA is required to
determine whether or not an episode of care is service connected, which
is not third-party billable. Currently, VA accepts third-party partial
payments that may be significantly lower than full payment while the
private sector does not and while VA is required to bill for both
physician and facility charges, the private sector only bills for
facility charges. These distinctions make it difficult for meaningful
comparisons of VA with the private sector to be made on industry
benchmarks.
The Veterans Health Administration (VHA) is pursuing a number of
strategies to improve its overall performance as VHA focuses on
achieving industry benchmarks. VA believes the system limitations
related to billed amounts and procedure codes cited in GAO's report
will be resolved as VA continues to develop the Patient Financial
Services System (PFSS) and implement the Health Insurance Portability
and Accountability Act (HIPPA). The PFSS will streamline the billing
process and reduce manual interventions. The Medicare Remittance Advice
(MRA) project will assist VHA in following-up on partially paid claims.
VHA is testing the MRA and expects to begin national rollout in August
2004 with a projected completion date of October/November 2004.
Due to the limited amount of time to comment on GAO's draft report, VHA
is still developing an action plan to implement GAO's recommendations.
VA will provide the action plan in its comments to GAO's final report.
Thank you for the opportunity to review your draft report.
Sincerely yours,
Signed by:
Anthony J. Principi:
[End of section]
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
McCoy Williams, (202) 512-6906 Alana Stanfield, (202) 512-3197:
Acknowledgments:
In addition to those named above, the following individuals made
important contributions to this report: Teressa Broadie-Gardner, Lisa
Crye, Jeffrey Isaacs, Sharon Loftin, Donell Ries, and Patricia Summers.
(195014):
FOOTNOTES
[1] 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).
[2] VA Office of Inspector General, Audit of the Medical Care
Collection Fund Program, Report No. 01-00046-65 (Washington, D.C.: Feb.
26, 2002).
[3] U.S. General Accounting Office, VA Health Care: VA Increases Third-
Party Collections as It Addresses Problems in Its Collections
Operations, GAO-03-740T (Washington, D.C.: May 7, 2003).
[4] Pub. L. No. 104-262, § 101, 110 Stat. 3177, 3178 (Oct. 1996),
codified at 38 U.S.C. § 1710.
[5] Pub. L. No. 105-33, § 8023, 111 Stat. 251, 665 (Aug. 5, 1997),
codified at 38 U.S.C. § 1729A.
[6] Reasonable charges are defined as amounts that insurance companies
would pay private sector health care providers in the same geographic
area for the same services.
[7] U.S. General Accounting Office, VA Health Care: Third-Party
Collections Rising as VA Continues to Address Problems in Its
Collections Operations, GAO-03-145 (Washington, D.C.: January 31,
2003).
[8] U.S. General Accounting Office, Standards for Internal Control in
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[9] U.S. General Accounting Office, Internal Control Management and
Evaluation Tool, GAO-01-1008G (Washington, D.C.: August 2001).
[10] Billing performance goals (e.g. 50 days from the date of patient
discharge) are computed as averages for designated time frames. Days to
bill are calculated from the billing date back to the date when the
patient was discharged.
[11] VA Handbook 4800.14, Medical Care Debts, Department of Veterans
Affairs, (Washington, D.C.: Dec. 8, 2003).
[12] Accounts Receivable Third-Party Guidebook, Department of Veterans
Affairs, 2003.
[13] An encounter is defined as a single medical treatment.
[14] As we noted in our 2003 report, 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. By comparison, private sector hospitals may only
bill for facility charges.
[15] A private company that contracts with Medicare to pay Medicare
Part A and some Part B bills.
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