VA Health Care
Ineffective Controls over Medical Center Billings and Collections Limit Revenue from Third-Party Insurance Companies Gao ID: GAO-08-675 June 10, 2008GAO previously reported that continuing problems in billing and collection processes at the Department of Veterans Affairs (VA) impaired VA's ability to maximize revenue from private (third-party) insurance companies. VA has undertaken several initiatives to address these weaknesses. GAO was asked to perform a follow-up audit to (1) evaluate VA billing controls, (2) assess VA-wide controls for collections, (3) determine the effectiveness of VA-wide oversight, and (4) provide information on the status of key VA improvement initiatives. GAO performed case study analyses of the third-party billing function, statistically tested controls over collections, and reviewed current oversight policies and procedures. GAO also reviewed and summarized VA information on the status of key management initiatives to enhance third-party revenue.
GAO's case study analysis of unbilled patient encounters at 18 medical centers, including 10 medical centers with low billing performance and 8 medical centers under VA's Consolidated Patient Account Centers (CPAC) initiative considered to be high performers, found documentation, coding, and billing errors and inadequate management oversight for approximately $1.7 billion deemed unbillable in fiscal year 2007. Although some medical services are unbillable, such as service-connected treatment, management has not validated reasons for related unbilled amounts of about $1.4 billion to assure that all billable costs are charged to third-party insurers. Because insurers will not accept improperly coded bills and they generally will not pay bills received more than 1 year after the date that medical services were provided, it is important that coding for medical services is accurate and timely. The 10 case study medical centers reported average days to bill ranging from 109 days to 146 days in fiscal year 2007 and significant coding and billing errors and other problems that accounted for over $254 million, or 21 percent, of the $1.2 billion in unbilled medical services costs. Although GAO determined that CPAC officials performed a more thorough review of billings, GAO's analysis of unbilled amounts for the 8 CPAC centers found problems that accounted for $37.5 million, or about 7 percent, of the $508.7 million in unbilled medical services costs. In addition, GAO's VA-wide statistical tests of collections follow-up on unpaid third-party bills of $250 or more identified significant control failures related to timely follow-up and documentation of contacts with third-party insurers on outstanding receivables. VA guidance requires medical center accounts receivable staff to make up to three follow-up contacts, as necessary, on outstanding third-party receivables. GAO's tests identified high failure rates VA-wide as well as for CPAC and non-CPAC medical centers related to the requirement for timely follow up with third-party insurers on unpaid amounts. GAO's tests also found high failure rates associated with the lack of documentation of follow-up contacts. VA lacks policies and procedures and a full range of standardized reports for effective management oversight of VA-wide third-party billing and collection operations. Further, although VA management has undertaken several initiatives to enhance third-party revenue, many of these initiatives are open-ended or will not be implemented for several years. Until these shortcomings are addressed, VA will continue to fall short of its goal to maximize third-party revenue, thereby placing a higher burden on taxpayers.
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-08-675, VA Health Care: Ineffective Controls over Medical Center Billings and Collections Limit Revenue from Third-Party Insurance Companies
This is the accessible text file for GAO report number GAO-08-714
entitled 'VA HEALTH CARE: Ineffective Controls over Medical Center
Billings and Collections Limit Revenue from Third-Party Insurance
Companies' which was released on July 11, 2008.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
GAO Highlights:
Highlights of GAO-08-675, a report to congressional requesters.
Why GAO Did This Study:
GAO previously reported that continuing problems in billing and
collection processes at the Department of Veterans Affairs (VA)
impaired VA‘s ability to maximize revenue from private (third-party)
insurance companies. VA has undertaken several initiatives to address
these weaknesses. GAO was asked to perform a follow-up audit to (1)
evaluate VA billing controls, (2) assess VA-wide controls for
collections, (3) determine the effectiveness of VA-wide oversight, and
(4) provide information on the status of key VA improvement
initiatives. GAO performed case study analyses of the third-party
billing function, statistically tested controls over collections, and
reviewed current oversight policies and procedures. GAO also reviewed
and summarized VA information on the status of key management
initiatives to enhance third-party revenue.
What GAO Found:
GAO‘s case study analysis of unbilled patient encounters at 18 medical
centers, including 10 medical centers with low billing performance and
8 medical centers under VA‘s Consolidated Patient Account Centers
(CPAC) initiative considered to be high performers, found
documentation, coding, and billing errors and inadequate management
oversight for approximately $1.7 billion deemed unbillable in fiscal
year 2007. Although some medical services are unbillable, such as
service-connected treatment, management has not validated reasons for
related unbilled amounts of about $1.4 billion to assure that all
billable costs are charged to third-party insurers. Because insurers
will not accept improperly coded bills and they generally will not pay
bills received more than 1 year after the date that medical services
were provided, it is important that coding for medical services is
accurate and timely. The 10 case study medical centers reported average
days to bill ranging from 109 days to 146 days in fiscal year 2007 and
significant coding and billing errors and other problems that accounted
for over $254 million, or 21 percent, of the $1.2 billion in unbilled
medical services costs. Although GAO determined that CPAC officials
performed a more thorough review of billings, GAO‘s analysis of
unbilled amounts for the 8 CPAC centers found problems that accounted
for $37.5 million, or about 7 percent, of the $508.7 million in
unbilled medical services costs.
In addition, GAO‘s VA-wide statistical tests of collections follow-up
on unpaid third-party bills of $250 or more identified significant
control failures related to timely follow-up and documentation of
contacts with third-party insurers on outstanding receivables. VA
guidance requires medical center accounts receivable staff to make up
to three follow-up contacts, as necessary, on outstanding third-party
receivables. As shown in the table, GAO‘s tests identified high failure
rates VA-wide as well as for CPAC and non-CPAC medical centers related
to the requirement for timely follow up with third-party insurers on
unpaid amounts. GAO‘s tests also found high failure rates associated
with the lack of documentation of follow-up contacts.
Table: Estimated Control Failures on Timely Follow-up on Unpaid Bills
of $250 or More:
Required follow up: Initial;
VA-wide centers: 69%;
CPAC centers: 36%;
Non-CPAC centers: 71%.
Required follow up: Second;
VA-wide centers: 44%;
CPAC centers: 23%;
Non-CPAC centers: 45%.
Required follow up: Third;
VA-wide centers: 20%;
CPAC centers: 22%;
Non-CPAC centers: 17%.
Source: GAO tests of a VA-wide random probability sample.
[End of table]
VA lacks policies and procedures and a full range of standardized
reports for effective management oversight of VA-wide third-party
billing and collection operations. Further, although VA management has
undertaken several initiatives to enhance third-party revenue, many of
these initiatives are open-ended or will not be implemented for several
years. Until these shortcomings are addressed, VA will continue to fall
short of its goal to maximize third-party revenue, thereby placing a
higher burden on taxpayers.
What GAO Recommends:
GAO makes seven recommendations to improve VA‘s third-party billing and
collection processes, including actions to improve (1) third-party
billings, (2) follow up on unpaid amounts, and (3) management oversight
of billing and collections. VA concurred with all seven recommendations
and noted steps it is taking to address them. VA also expressed
concerns with how GAO characterized its revenue enhancement and
management oversight. GAO continues to believe its report overall
fairly characterizes VA‘s actions to date.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-675]. For more
information, contact Kay Daly, Acting Director, at (202) 512-9095 or
dalykl@gao.gov.
[End of section]
Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2008:
Va Health Care:
Ineffective Controls over Medical Center Billings and Collections Limit
Revenue from Third-Party Insurance Companies:
VA Health Care:
GAO-08-675:
Contents:
Letter:
Results in Brief:
Background:
Case Study Medical Centers Had Billing Errors and Inadequate Oversight
and Accountability:
Medical Centers Have Not Followed VA Policy for Timely Follow-up and
Documentation on Unpaid Third-Party Receivables:
VA Lacks Policies and Procedures for Assuring Adequate Oversight of
Third-Party Billings and Collections:
VHA Has Undertaken Several Initiatives to Increase Third-Party Revenue:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Veterans Affairs:
Appendix III: Actual Test Results for Timely First Follow-up on Unpaid
Bills with Third-Party Insurers:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Estimated Failure Rates for Controls on Timely Follow-up on
Unpaid Third-Party Insurer Receivables Totaling $250 or More:
Table 2: Estimated Failure Rates for Documenting Details of Follow-up
Contacts on Unpaid Third-Party for Bills of $250 or More:
Table 3: Estimated Failure Rates for Controls over Decreases in Billed
Amounts of $250 or More with No Explanation or an Ambiguous
Explanation:
Table 4: Medical Centers Covered in Examination of Third-Party Billing
Processes:
Table 5: Estimated Failure Rates for Controls on Timely Follow-up on
Unpaid Third-Party Insurer Receivables Totaling $250 or More:
Table 6: Estimated Failure Rates for Documenting Details of Follow-up
Contacts on Unpaid Third-Party Bills of $250 or More:
Table 7: Failure Rates for Controls over Decrease Adjustments with No
Explanation or an Ambiguous Explanation:
Table 8: Actual Control Test Results Related to the Requirement for
Initial Collections Follow-up:
Figures:
Figure 1: Overview of VA's Third-Party Billing Process:
Figure 2: VA Third-Party Billing and Collection Process:
Figure 3: Fiscal Year 2007 Unbilled Amounts by Reason for Ten Medical
Centers with the Largest Elapsed Days to Bill:
Figure 4: Fiscal Year 2007 Unbilled Amounts by Reason for Eight Medical
Centers under CPAC:
Figure 5: Analysis of VA's Third-Party Accounts Receivable as of
September 25, 2007:
Abbreviations:
AR: accounts receivable:
BPA: blanket purchase agreement:
CBOVHA Chief Business Office:
CDE: Clinical Data Entry:
CIDC: Clinical Indicators Data Capture:
CPAC: Consolidated Patient Account Center:
CPRS: Computerized Patient Record System:
CPRS-R: Computerized Patient Record System- Reengineering:
DOJ: Department of Justice:
IT: information technology:
NPRO: National Payer Relations Office:
PFSS: Patient Financial Services System:
POWER: Performance and Operations Web-Enabled Reports:
RAP: Revenue Action Plan:
RCET: Revenue Cycle Enhancement Team:
RIDP: Revenue Improvement Demonstration Project:
RISE: Revenue Improvements and Systems Enhancement:
ROPE: Revenue Optimization Plan Enhancement:
USC: United States Code:
VA: Department of Veterans Affairs:
VHA: Veterans Health Administration:
VISN: Veterans Integrated Service Network:
VistA: Veterans Health Information Systems and Technology Architecture:
United States Government Accountability Office:
Washington, DC 20548:
June 10, 2008:
The Honorable Bob Filner:
Chairman:
The Honorable Steve Buyer:
Ranking Member:
Committee on Veterans' Affairs:
House of Representatives:
The Honorable Harry E. Mitchell:
Chairman:
The Honorable Ginny Brown- Waite:
Ranking Member:
Subcommittee on Oversight and Investigations:
Committee on Veterans' Affairs:
House of Representatives:
The Department of Veterans Affairs (VA) provides health care to
eligible veterans through a system of Veterans Health Administration
(VHA) medical facilities that comprise one of the largest health care
systems in the world. Over the past several years, we have reported
that continuing weaknesses in VA billing processes and controls have
impaired VA's ability to maximize the amount of dollars received by
private insurance companies, commonly referred to as third-party
insurers. VA third-party billing and collection operations are carried
out through a nationwide network of 153 medical centers, 877 outpatient
clinics, and 135 nursing homes, residential rehabilitation treatment
programs, and readjustment counseling centers. During fiscal year 2007,
about 5.6 million people received treatment in VA health care
facilities for service-related as well as nonservice-related conditions
and VA collections for health care services totaled nearly $2.2
billion.
In September 2001, we testified that problems in VA's collection
operations, including inadequate patient intake procedures for
gathering insurance information, insufficient physician documentation
of specific medical care provided, a shortage of qualified coders, and
a lack of automated information, diminished VA's collections.[Footnote
1] In May 2003, we testified that VA had made improvements in these
areas but operational problems, such as unpaid accounts receivable,
missed billing opportunities, and billing backlogs, continued to limit
the amount VA collects.[Footnote 2] In July 2004, we reported that VA
had increased collections of third-party insurer payments by 49 percent
from $540 million in fiscal year 2001 to $804 million in fiscal year
2003.[Footnote 3] However, we also found continuing weaknesses in the
billing and collection processes at the three medical centers we
visited that impaired VA's ability to maximize the amount of dollars
paid by third-party insurance companies.
Over the past several years, Congress has provided funding for VHA
medical information management system improvements. In fiscal year
2006, Congress directed VA to allocate $10 million from its Medical
Administration lump-sum appropriation of about $2.86 billion to
initiate a pilot program for comprehensive restructuring of the medical
revenue cycle, including cash management and accounts receivable
related to third-party billing and collection functions.[Footnote 4]
One of VA's initiatives to improve billing and collection functions was
the establishment of a Consolidated Patient Account Center (CPAC) pilot
program covering eight medical centers in Veterans Integrated Service
Network (VISN) 6.[Footnote 5]
This report responds to your request that we perform a follow-up audit
of controls over VA's third-party billing and collection processes,
including (1) an evaluation of the effectiveness of VA medical center
billing processes at selected locations, (2) an assessment of VA
controls for performing timely follow-up on outstanding third-party
receivables, and (3) a determination of the adequacy of VA oversight of
billing and collection processes. You also asked us to summarize the
status of management initiatives currently underway at VA to improve
third-party billing and collection processes.
To achieve our first objective, we used a case study approach to assess
billing controls because VA does not have centralized data on third-
party billings. For our case studies, we selected the 10 medical
centers with the highest numbers of days to bill (lowest billing
performance) and the 8 medical centers under the CPAC management
initiative for regionalized billing and collection activity that were
expected to be high performers. To achieve the second objective, we
tested controls for timely collection follow-up and documentation of
contacts on third-party bills using a VA-wide statistical sample, and
stratified subsets of our VA-wide sample for CPAC medical centers and
medical centers that were not under the CPAC initiative. Because you
were interested in learning whether medical centers under CPAC had more
effective controls over third-party billings and collections, we
separately analyzed CPAC billing controls and separately tested third-
party collection controls for CPAC medical centers. To address our
third objective on VA management oversight capability, we reviewed
management reports generated by key VA systems and interviewed medical
center and VHA officials about their oversight procedures. We also
obtained information on the status and targeted implementation dates of
key management improvement initiatives, including two initiatives that
were recently completed and six initiatives that were under way at the
end of our field work.
In conducting our work, we interviewed management officials and
reviewed applicable laws, regulations, and VA policies and procedures.
We performed appropriate procedures to assure the reliability of data
used in our work including data analysis, interviews of key officials,
and review of VA procedures for assuring the reliability of data
generated by key automated systems. We conducted our work from January
2007 through May 2008 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives. A
detailed discussion of our objectives, scope, and methodology is
included in appendix I.
Results in Brief:
Although VA has made some progress in improving third-party billings
and collections since our 2004 report, our audit of VA fiscal year 2007
controls over third-party billings and collections found significant
internal control weaknesses and inadequate management oversight that
limited VA's ability to maximize third-party revenue. Our case study
analysis of unbilled patient encounters at 18 case study medical
centers found excessive average days to bill, coding and billing
errors, and a lack of management oversight which raise questions about
$1.7 billion in unbilled amounts at the 18 locations. Although there
are valid reasons why some medical services are not billable, including
$1.4 billion related to service-connected treatment, Medicare coverage,
and the lack of private health insurance coverage,[Footnote 6] medical
center management did not always validate the reasons for these
unbilled amounts. Further, because insurers will not accept improperly
coded amounts and in many cases have national or regional contracts
with VA that bar insurer liability for payment of bills received after
a specified period of time, usually 1 year, but sometimes as little as
6 months, after the date that medical services were provided, it is
important that coding for medical services is accurate and timely. The
10 medical centers we identified as having low billing performance
reported average days to bill ranging from 109 days to 146 days in
fiscal year 2007, compared to VA's goal of 60 days. We also found these
centers had significant documentation, coding, and billing errors and
performed little or no management oversight of the billing function.
The use of inaccurate clinical service codes, late filing of claims,
omissions in documentation, and other undefined reasons accounted for
over $254 million, or 21 percent, of the $1.2 billion in total unbilled
medical services costs at the 10 medical centers. The largest group of
billing errors included $25 million for which the billing time frame
had expired. Our case study analysis of the eight medical centers under
the CPAC initiative found that CPAC officials performed a more thorough
review of the billing function. Our analysis of fiscal year 2007
unbilled amounts for the eight CPAC centers showed that CPAC centers'
average days to bill ranged from 39 days to 68 days, compared to VA's
2007 goal of 60 days. CPAC centers' coding and billing errors,
documentation errors, and other undefined reasons accounted for $37.5
million, or about 7 percent, of medical services costs that were not
billed to third-party insurance companies.
In addition, our VA-wide statistical tests of collection follow-up on
unpaid third-party bills of $250 or more identified significant
problems related to timely follow-up and documentation of contacts with
third-party insurance companies on actions to collect outstanding
receivables. VA policy[Footnote 7] requires medical center accounts
receivable staff to make up to three follow-up contacts, as necessary,
on outstanding third-party receivables. Our statistical tests[Footnote
8] of a stratified random sample of 260 fiscal year 2007 third-party
bills identified a 69 percent failure rate VA-wide related to the
requirement that accounts receivable staff perform the first follow-up
on unpaid amounts within 45 days after the initial bill is generated.
VA-wide failure rates for bills meeting the requirements for the second
and third follow-ups were 44 percent and 20 percent, respectively. CPAC
centers had a 36 percent failure rate for the required first follow-up,
and a 23 percent and 22 percent failure rate for bills meeting the
requirements for second and third follow-ups, respectively. The failure
to make timely follow-up contacts and delays in initiating contacts
with third-party insurance companies on unpaid amounts increase the
risk that payments will not be collected, or that payments will be
substantially delayed. Of the population of fiscal year 2007 billings
valued at $547.8 million that were used for our stratified random
sample, VA collected $260.1 million, or about 47 percent. Our analysis
of accounts receivable aging data showed that $37.5 million of the
total $600 million in receivables as of the end of fiscal year 2007 was
over 1 year old. Further, VA policy[Footnote 9] requires that accounts
receivable staff include a comment for any adjustments[Footnote 10] to
decrease outstanding third-party bills. The policy requires that the
explanation be clear and unambiguous and state the particular reason
for the adjustment. Our tests of whether accounts receivable personnel
adequately documented reasons for adjustments to decrease a bill found
a failure rate of 38 percent VA-wide. Without clear documentation of
the reasons for billing adjustments, VA management lacks the ability to
monitor the validity of the adjustments. Further, documentation quality
concerns undermine the reliability of trend information that is
critical for effective management of third-party receivables.
Our review of VA and VHA policies and procedures, process walk-
throughs, and interviews with VHA Chief Business Office (CBO)[Footnote
11] officials and management officials at our case study medical
centers determined that there were no formal VA policies and procedures
for oversight of the third-party billing and collection processes. In
addition, we found that VHA and medical centers have few standardized
management reports to facilitate oversight. Because VA's health care
billing and collection systems operate as stand-alone systems at each
medical center, VA-wide reporting is dependent on numerous individual
queries and data calls. These conditions contributed to inadequate
monitoring and oversight of the third-party billing and collection
processes. This raises concerns about adequacy of oversight over the
$1.7 billion in unbilled amounts at the 18 case study medical centers,
including the hundreds of millions of dollars in unbilled amounts
related to coding, billing, and documentation errors, and other
reasons. The lack of formal VA policies for management oversight of
third-party billings and collections also raises VA-wide concerns.
Enhanced oversight would permit VA and medical center management to
monitor trends and performance metrics, such as increases or decreases
in unbillable amounts, and take appropriate management actions to help
ensure that revenue from third-party insurers is maximized.
Since our July 2004 report, VA management has undertaken several
initiatives to strengthen processes and controls over third-party
billings and collections. For example, VA recently completed
initiatives for (1) recruitment and retention of coders and health
information managers and (2) updating VHA policy guidance related to
third-party revenue. In addition, VA has six key strategic initiatives
under way to enhance revenue from third-party insurers, including CPAC,
a private-sector approach to revenue management that included
consolidation of billing, collections, and payer analysis for eight
medical centers in VISN 6. VA also initiated development of systems
enhancements to improve medical procedure coding by capturing clinical
data as a byproduct of the medical service encounter rather than
capturing this information in a separate step. Further, VA has an
effort under way to define current and end-to-end business processes in
the revenue cycle as a basis for improving related systems and
processes. VA also is attempting to negotiate national contracts with
major insurance companies to standardize billing information to
facilitate collections. For example, VA established national blanket
purchase agreements (BPA) for both coding and insurance identification
and verification products and services. According to VA officials, the
Revenue Contracts Program is currently working to establish BPAs for
third-party billing and accounts receivable follow-up. Many of these
initiatives are not yet fully implemented and others are open-ended
without targeted implementation dates to help ensure that actions are
completed and intended goals are met. Effective management oversight
and implementation will be key to the success of these initiatives.
This report contains seven recommendations to VA aimed at strengthening
key internal control activities over third-party billings and
collections and improving management oversight. In comments on a draft
of this report, VA concurred with all seven of our recommendations and
provided information on steps it is taking to address them. VA also
expressed concerns with how we characterized key findings related to
revenue enhancement and emphasized significant progress it has made on
third-party collections since 2004 as well as progress from management
improvement initiatives. We believe our overall characterization of the
potential for lost revenue as a result of our findings is accurate.
However, we added clarifying language to indicate that $1.4 billion of
the $1.7 billion in unbilled medical services at the 18 case study
medical centers was classified as service-connected, Medicare coverage,
or lack of private health insurance coverage. As discussed in our
report, VA management has not validated whether the cited reasons for
these unbilled amounts are properly supported to assure that all
billable costs are charged to third-party insurers. In addition, VA
stated that it has established significant levels of management
oversight. Our report recognizes that VA has agency reporting
requirements and data on days to bill, accounts receivable, and
collections. However, we found that VA has not established policies and
procedures for management oversight actions related to unbilled amounts
and compliance with follow-up requirements for outstanding third-party
receivables. We clarified issues raised by VA in its letter and
addressed VA technical comments, as appropriate. VA's comments and our
analysis are discussed in the Agency Comments and Our Evaluation
section of this report. VA's comments are reprinted in appendix II.
Background:
VA's mission is to serve America's veterans and their families and to
be their principal advocate in ensuring that they receive medical care,
benefits, and social support in recognition of their service to our
nation. VA, headquartered in Washington, D.C., is the second largest
federal department and operates the largest health care system in the
United States. VA reported that as of September 30, 2007, it employed
approximately 230,000 staff nationwide, including physicians, nurses,
counselors, statisticians, computer specialists, architects, and
attorneys. VA carries out its mission through three major line
organizations -Veterans Health Administration (VHA), Veterans Benefits
Administration, and National Cemetery Administration-and field
facilities throughout the United States. During fiscal year 2007, VA
provided health care services and benefits through a nationwide network
of 153 medical centers, 877 outpatient clinics, and 135 nursing homes.
Third-Party Collections Authorized for Medical Care Related to
Nonservice-related Conditions:
The Veterans' Health Care Eligibility Reform Act of 1996[Footnote 12]
authorized VA to provide certain medical services not previously
available to veterans with nonservice-related conditions. While VA in
1996 had authority to recover some of the cost of providing these
additional benefits through billing and collecting payments from
veterans' private health insurers (third-party collections), it was not
authorized to keep these collections.[Footnote 13] The Veterans
Reconciliation Act of 1997, which was enacted as part of the Balanced
Budget Act of 1997,[Footnote 14] changed this by authorizing VA to
collect and deposit third-party health insurance payments in its
Medical Care Collections Fund, which VA could then use to supplement
its medical care appropriations. As part of VA's 1997 strategic plan,
VA predicted that collections of payments from third-party insurance
companies, along with veteran copayments for medications, would cover
the majority of costs of care for veterans with nonservice-related
conditions. During fiscal year 2007, almost 5.6 million people received
care in VA health care facilities, and VA collections for health care
services totaled nearly $2.2 billion.[Footnote 15]
As illustrated in figure 1, VA does not bill for health care services
provided to veterans who have Medicare coverage only or veterans who
have no private health insurance.[Footnote 16] For veterans who are
covered by both Medicare and private health insurance, VA prepares
claims according to Medicare guidelines and sends the bill to a
Medicare fiscal intermediary (contractor) who calculates the Medicare/
patient responsibility and sends the bill to the private insurer for
adjudication and payment. If the veteran is not eligible for health
benefits under Medicare, but has private health insurance coverage, VA
bills the third-party insurance company. In some situations, VA may not
recognize that a veteran is eligible for Medicare benefits and sends
the bill directly to the third-party insurance company. In these
situations, the third-party insurer would determine that the veteran is
eligible for Medicare coverage and would reject the bill and send it
back to VA. VA updates the patient's file and then sends the bill to
the Medicare contractor.
Figure 1: Overview of VA's Third-Party Billing Process:
This figure is a flowchart of an overview of VA's third-part billing
process.
[See PDF for image]
Source: GAO analysis of VA policies, procedures, processes, and related
law.
[End of figure]
VA Third-Party Revenue Cycle:
Similar to most health care providers, VA uses a fee schedule
consisting of "reasonable charges" for medical services based on
diagnoses and procedures.[Footnote 17] The fee schedule allows VA to
more accurately bill for care provided. Documenting and coding the care
provided and processing bills for each episode of care are critical to
preparing accurate bills for submission to third-party insurers. As
illustrated in figure 2, VA uses a process consisting of four key
functions to collect from third-party insurance companies. The four
functions cover the following actions.
* Patient intake, which involves gathering insurance information and
verifying that information with the insurance company as well as
collecting demographic data on the veteran.
* Utilization review, which involves precertification of care in
compliance with the veteran's insurance policy, including continued
stay reviews to determine medical necessity.
* Billing functions include properly documenting the health care
services provided to patients by physicians and other health care
providers. Based on 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.
* Accounts receivable and collections, which involves processing
payments from insurance companies and following up on outstanding or
denied bills. In accordance with VA Handbook 4800.14, Medical Care
Debts, VA accounts receivable staff at each medical center or other
health care facility are required to follow up on unpaid reimbursable
insurance cases.[Footnote 18] For bills of $250 or more, the first
telephone or online follow-up is to be made within 45 days after the
initial bill was generated. If necessary, a second follow-up should be
initiated within 21 days of the first follow-up. If a third follow-up
is necessary, it should be initiated within 14 days of the second
follow-up. When a telephone or online follow-up is made, a comment
briefly summarizing the contact with an appropriate follow-up date
should be entered in the third-party joint inquiry menu in VHA's
Veterans Health Information Systems and Technology Architecture (VistA)
system.[Footnote 19]
If no payment is received within 7 days of the third follow-up,
accounts receivable personnel are to refer the bill to the VA medical
center senior management official responsible for collection of the
bill, generally the facility revenue manager. This official will
determine the next appropriate action, including, after exhausting all
required recovery efforts, possible referral to the VA regional counsel
of jurisdiction for review and advice as to how to handle collection
procedures. The regional counsel may forward problem cases to VA's
General Counsel to review for possible litigation. Under guidance
issued to VA by the Department of Justice (DOJ), VA may refer cases to
DOJ for possible litigation.
Figure 2: VA Third-Party Billing and Collection Process:
This figure is a flowchart of VA third-party billing and collection
processes.
[See PDF for image]
Source: GAO walkthroughs of medical center billing and collection
processes and review of related policies and procedures.
[End of figure]
VA Actions on Previously Reported Weaknesses in Third-Party Billings
and Collections:
Our July 2004[Footnote 20] report documented continuing weaknesses in
billing processes at the three medical centers tested that impaired
VA's ability to maximize the amount of dollars paid by third-party
insurance companies. For example, the medical centers did not always
bill insurance companies in a timely manner and they did not always
perform follow-up on unpaid receivables in accordance with VA policy.
We identified insufficient resources and a lack of performance
standards as major causes of these problems. Our 2004 report included
several recommendations directed at improving billing and collection
functions.
To improve the third-party billing function, we recommended that VA (1)
perform a workload analysis of the medical center's coding and billing
staff and (2) based on the workload analysis, consider making necessary
resource adjustments. To address these recommendations, VA formed a
work group and performed in-depth surveys at 148 medical facilities to
determine whether the medical facilities had established and
implemented productivity and accuracy standards that were recommended
by VHA in 2002. The work group reported that the majority of the 148
facilities surveyed had implemented coding productivity standards and
these standards were fairly consistent. In addition, the work group
made several recommendations directed at maximizing coding productivity
and assuring data quality. For example, the work group recommended that
only qualified, competent coders be used and that noncoding duties
related to assembly, analysis, preparation of coding records, and
release of information be assigned to other staff. The work group also
recommended that all coding must be completed through the national
encoder software. In November 2007, VA issued Handbook, 1907.03, Health
Information Management, Clinical Coding Program Procedures, which
established a minimum bill coding accuracy standard of 95 percent and
minimum standards (time frames) for coding productivity.[Footnote 21]
Our 2004 report also made three recommendations directed at improving
the third-party collection function. Specifically, we recommended that
VA (1) reinforce to accounts receivable staff that they should perform
the first follow-up on unpaid claims within 30 days of the billing
date, as required by VA Handbook 4800.14, Medical Care Debts, and
establish procedures for monitoring compliance; (2) reinforce the
requirement for accounts receivable staff to enter insurance company
contact information and follow-up dates to better document follow-up
actions; and (3) augment VA Handbook 4800.14 by specifying a date or
providing instructions for determining an appropriate date for
conducting second follow-up calls to insurance companies on unpaid
amounts. To address these recommendations, VA modified and reissued VA
Handbook 4800.14 to explain requirements for performing and documenting
the first, second, and third follow-ups with third-party insurers. For
example, for third-party accounts receivable greater than $250, the
reissued Handbook now requires the first follow-up to be made within 45
days[Footnote 22] after the initial bill is generated. The second
follow-up is to be made within 21 days after the first follow-up and
the third follow-up is to be made within 14 days of the second follow-
up. VA also provided training to staff on the policies included in VA
Handbook 4800.14, which included the need for timely follow-up on
outstanding third-party receivables as well as follow-up documentation
requirements.
Case Study Medical Centers Had Billing Errors and Inadequate Oversight
and Accountability:
Our case study analysis of unbilled patient encounters at 18 medical
centers, including 10 medical centers with low billing performance
(based on reported days to bill) and 8 centers under VA's CPAC
initiative that were expected to have high billing performance, found
billing delays; coding, billing, and documentation errors; and a lack
of adequate management oversight and accountability over approximately
$1.7 billion deemed to be unbillable in fiscal year 2007 by coding and
billing staff. Although there are valid reasons why some medical
services are not billable, including $1.4 billion in service-connected
treatment, Medicare coverage, and the lack of private health insurance
coverage,[Footnote 23] medical center management did not validate the
reasons for the related unbilled amounts. Further, because third-party
insurers will not accept improperly coded amounts and in many cases
have national and regional contracts with VA that bar insurer liability
for payment of bills received after more than a specified period of
time, usually 1 year, after the date that medical services were
provided, it is important that coding for medical services is accurate
and timely. Our analysis of VA billing data showed that VA has improved
its average overall days to bill third-party insurance companies from
93 days in fiscal year 2003 to 64 days in fiscal year 2007. However,
most of the 18 case study medical centers we audited exceeded VA's
fiscal year 2007 goal of 60 average days to bill. In addition, our
analysis found that coding and billing errors, omissions in
documentation, and other undefined reasons for unbilled amounts
accounted for hundreds of millions of dollars that were not billed to
third-party insurance companies. Moreover, case study medical centers
did not effectively use available management reports to monitor trends
and performance metrics, such as increases or decreases in unbilled
amounts.
Ten Medical Centers Had Billing Delays and Errors and Little or No
Oversight of Their Billing Functions:
The 10 medical centers with low billing performance included in our
case study analysis reported average days to bill ranging from 109 days
to 146 days in fiscal year 2007, compared to VA's goal of 60 days. The
10 centers also had a total of $1.2 billion in unbilled medical
services costs. To analyze case study medical center billing data by
unbilled reason codes, we obtained medical center Reasons Not Billable
reports and grouped unbillable reasons by major categories. Medical
center Reasons Not Billable reports included over 100 reason codes and
inconsistent reporting of other, undefined reasons. We discussed our
groupings by category with VHA managers and obtained their agreement on
our assignment of unbillable reasons by category. As illustrated in
figure 3, our analysis of reasons not billable data for the 10 case
study medical centers identified significant unbilled amounts for
fiscal year 2007.
Figure 3: Fiscal Year 2007 Unbilled Amounts by Reason for Ten Medical
Centers with the Largest Elapsed Days to Bill:
This figure is a flowchart showing fiscal year 2007 unbilled amounts by
reason for ten medical centers with the largest elapsed days to bill.
Nonservice-related not billable: 69%: $835.3 million;
Service-connected: 10%: $115.8 million;
Coding and billing errors: 4%: $48.3 million;
Documentation errors: 1%: $10.4 million;
Other: 16%: $195.4 million.
[See PDF for image]
Source: GAO analysis of 10 case study medical centers' Reasons Not
Billable data.
[End of figure]
There are valid reasons why VA does not bill for all medical services
it provides. For example, VA's legal authority to seek reimbursement
from third-party insurers for the cost of medical services does not
extend to services provided to veterans who have medical conditions
that are (1) service-connected, (2) covered only by Medicare, or (3)
not covered under a private or other applicable health insurance
plan.[Footnote 24] Of the total $1.2 billion in unbilled medical
services costs at the 10 medical centers, service-connected
(nonbillable) medical care accounted for nearly $116 million, or 10
percent, and nonservice- related not billable amounts totaled $835.3
million, or 69 percent, including $170 million recorded as medical
procedures performed for uninsured veterans and $433 million recorded
as attributable to medical services that were not covered by veterans'
private health insurance. Managers at the 10 case study medical centers
did not perform adequate reviews of the encounters assigned to these
categories to ensure that billing clerks appropriately classified them.
Coding and billing errors ($48.3 million), documentation errors ($10.4
million), and undefined other reasons ($195.4 million) accounted over
$254 million, or 21 percent, of the $1.2 billion in total unbilled
medical services costs at the 10 medical centers. Coding and billing
errors include incorrect clinical service codes and late filing of
claims. The largest group of billing errors included $25 million for
which the billing time frame had expired. According to a VA official,
VA has entered into national and regional contracts with many third-
party insurance companies that bar insurer liability for payment of
bills received after a specified period of time, usually 1 year, but
sometimes as little as 6 months, after medical services were
provided.[Footnote 25] In addition, documentation errors accounted for
more than $10 million in unbilled amounts at the 10 medical centers.
Documentation errors include the failure of certification personnel to
provide documentation of physician and other health care provider
certifications; health care provider errors, such as physicians failing
to submit documentation of their services for coding; and veterans
refusing to sign Authorization for Release of Protected Health
Information forms.[Footnote 26] Insurance companies will not pay for
services unless they receive documentation that the physicians and
health care providers are certified. The largest groups of
documentation errors related to veterans not signing Release of
Information forms due to privacy concerns ($2.0 million) and
insufficient or missing medical services documentation ($6.4 million).
Eight Medical Centers under CPAC Had Better Billing Performance and
Performed More Oversight of Unbilled Amounts:
The CPAC centers' fiscal year 2007 average days to bill ranged from 39
days to 68 days, compared to VA's goal of 60 days. In fiscal year 2007,
the eight CPAC centers accounted for over $508.7 million in unbilled
amounts. As illustrated in figure 4, service-connected reasons
accounted for about $65 million, or 13 percent, and nonservice-related,
unbillable reason codes accounted for the largest portion--about $406.2
million, or 80 percent, of the total $508.7 million unbilled third-
party amounts for the 8 medical centers under CPAC. Coding and billing
errors, documentation errors, and other reasons accounted for $37.5
million, or about 7 percent, of medical services costs that were not
billed to third-party insurance companies. CPAC officials told us they
perform some analysis of unbillable amounts. For example, CPAC
officials stated that they review unbillable codes they consider to be
at high risk of error. If a particular unbillable code increased from
month-to-month, they investigated the cause of the increase and took
appropriate action to mitigate the problem. A detailed discussion of
CPAC management oversight is presented later in this report.
Figure 4: Fiscal Year 2007 Unbilled Amounts by Reason for Eight Medical
Centers under CPAC:
This figure is a pie chart showing fiscal year 2007 unbilled amounts by
reason for eight medical centers under CPAC.
Nonservice-related not billable: 80%: $406.2 million;
Service-connected: 13%: $65.0 million;
Coding and billing errors: 4%: $21.4 million;
Documentation errors: 1%: $4.2 million;
Other: 2%: $11.9 million.
[See PDF for image]
Source: GAO analysis of 10 case study medical centers' Reasons Not
Billable data.
[End of figure]
Medical Centers Have Not Followed VA Policy for Timely Follow-up and
Documentation on Unpaid Third-Party Receivables:
Our analysis of VA's accounts receivable aging data as of September 25,
2007, showed that VA had approximately $600 million in outstanding
third-party receivables of which over $148 million, or about 25
percent, was more than 120 days old. It is important that VA actively
pursue unpaid amounts by making timely follow-up contacts with third-
party insurance companies because the older a receivable, the less
likely it is to be collected. Moreover, uncollected third-party
receivables place an added burden on taxpayers because additional
amounts would need to be covered by annual appropriations to support
the same level of service to veterans. In addition, our statistical
tests found high internal control failure rates related to medical
centers' lack of adherence to VHA requirements for timely, properly
documented follow-up on unpaid bills that had been sent to third-party
insurance companies. Management officials at several of the medical
centers tested in our statistical sample attributed their high follow-
up failure rate to inadequate staffing. However, we found that a lack
of management oversight at the medical centers as well as at the VHA
management level contributed to the control weaknesses we identified.
VA Has Hundreds of Millions of Dollars in Uncollected Receivables from
Third-Party Insurers:
Our analysis of VA's accounts receivable aging data as of September 25,
2007, identified approximately $600 million in outstanding third-party
receivables. As shown in figure 5, about $295 million of this total was
less than 45 days old. Of the remaining $305 million, over $148
million, or 49 percent, was more than 120 days old. We focused our
analysis on bills of $250 or more--the largest category of third-party
receivables. For example, uncollected receivables related to bills of
$250 or more represented over $426 million, or 71 percent, of the
approximately $600 million in outstanding receivables at the end of
fiscal year 2007. Although about $227 million of the over $426 million
in receivables related to bills of $250 or more were less than 45 days
old and did not yet require initial follow-up, the remaining $199
million, or 47 percent, was subject to VA follow-up action on unpaid
amounts, and nearly $84 million had remained uncollected for 120 days
from the date of the initial bill. Timely follow-up is critical because
the older a receivable, the less likely it is to be collected. As was
the case with billings, we found that the case study medical centers
had limited procedures in place to monitor the collections process.
Further, the lack of follow-up documentation undermines the reliability
of trend information needed to effectively manage third-party
receivables.
Figure 5: Analysis of VA's Third-Party Accounts Receivable as of
September 25, 2007:
This figure is a flowchart of analysis of VA's third-party accounts
receivable as of September 25, 2007.
[See PDF for image]
Source: GAO analysis of VA third-party accounts receivable aging data
maintained in VistA.
[End of figure]
Our analysis of accounts receivable aging data showed that $37.5
million of the total $600 million in receivables as of the end of
fiscal year 2007 was over 1 year old, including $17 million related to
bills of $250 or more.
VA Medical Centers Failed Control Tests for Timely Follow-up on Unpaid
Receivables:
Our statistical tests of VA-wide data on controls for follow-up by
accounts receivable personnel on unpaid amounts of $250 or more billed
to third-party insurers found significantly high failure rates. VA
Handbook 4800.14, Medical Care Debts, requires follow-up on unpaid
accounts receivable, as necessary, to collect unpaid third-party
receivables.[Footnote 27] The first follow-up for debts of $250 or more
is required within 45 days after the initial bill was generated. If
necessary, the second follow-up is to be made within 21 days of the
initial follow-up and the third follow-up is required within 14 days of
the second follow-up. The follow-up requirement does not apply once a
receivable is either collected in full, partially paid and
contractually adjusted to a zero balance, or contractually adjusted to
zero with no payment. Our test of timely follow-ups considered a bill
to be closed and no longer subject to follow-up on the date the bill
was paid in full or decreased to zero. We randomly selected a sample of
260 third-party insurer bills from a population of $547.8 million in
fiscal year 2007 billings for medical services. Of the $547.8 million,
our analysis showed that VA collected $260.1 million, or about 47
percent.
We generally report our statistical results as point estimates that
fall within confidence intervals. Our 95 percent confidence interval
means that if you were to determine an estimate for 100 different
random samples, 95 out of 100 times, the estimate would fall within the
confidence interval. In other words, the true value is between the
lower and upper limits of the confidence interval 95 percent of the
time. Point estimates provide a useful indicator of the effectiveness
of controls for our VA-wide tests, which included a total of 260 bills.
However, our tests of CPAC and non-CPAC medical subsets of our sample
involved fewer bills and the confidence intervals were much wider. When
this is the case, we generally focus on the lower bound of our
confidence interval as a more conservative estimate of the
effectiveness of controls. Our point estimates for each of our tests
and the upper and lower bounds of our confidence intervals are included
in appendix I. The following discussion focuses on conservative
estimates of our test results based on the lower bound of our 95
percent confidence intervals.
For example, table 1 shows that conservative estimates, based on the
lower bound of our confidence intervals, indicate that VA controls for
timely follow-up were ineffective. For example, the conservative
approach for our VA-wide tests shows that medical center collections
staff failed the control for timely initial follow-up after 45 days
from the bill date at least 69 percent of the time. Similarly, our
conservative estimate indicates that CPAC medical center personnel
failed this control test for timely initial follow-up based on 60 bills
in our sample subset at least 36 percent of the time and non-CPAC
medical center personnel failed this control test based on 200 bills in
this subset at least 71 percent of the time.
Because the universe of unpaid bills subject to requirements for second
and third follow-ups was smaller, the confidence intervals for these
tests were greater. However, the same conservative approach for our
estimates of control failures for the second and third follow-ups
continues to show significant failure rates. For example, based on our
tests, we estimate that VA-wide control failures related to required
second and third follow-ups on unpaid third-party bills were at least
44 percent (based on a subset of 109 bills) and 20 percent (based on a
subset of 55 bills), respectively. We estimate that CPAC medical center
control failures related to required second and third follow-ups on
unpaid third-party bills were at least 23 percent (based on a subset of
40 bills) and 22 percent (based on a subset of 21 bills), respectively.
In addition, we estimate that non-CPAC medical center control failures
related to required second and third follow-ups on unpaid third-party
bills were at least 45 percent (based on a subset of 69 bills) and 17
percent (based on a subset of 34 bills), respectively.
Table 1: Estimated Failure Rates for Controls on Timely Follow-up on
Unpaid Third-Party Insurer Receivables Totaling $250 or More:
Required follow-up: Initial, 45 days;
VA-wide medical centers: 69%;
CPAC medical centers: 36%;
Non-CPAC medical centers: 71%.
Required follow-up: Second, 21 days after 1st contact;
VA-wide medical centers: 44%;
CPAC medical centers: 23%;
Non-CPAC medical centers: 45%.
Required follow-up: Third, 14 days after 2nd contact;
VA-wide medical centers: 20%;
CPAC medical centers: 22%;
Non-CPAC medical centers: 17%.
Source: GAO tests of VA-wide random probability sample of third-party
accounts receivable data.
Note: Failure rates are based on the lower bound of our two-sided, 95
percent confidence interval.
[End of table]
Our analysis of our actual test results for the third-party insurer
bills included in our statistical sample showed that results varied by
medical center. For example, for several medical centers all, or nearly
all, of the bills in our statistical sample failed control tests for
timely first follow-up on unpaid amounts within 45 days. Conversely,
there were several medical centers in our sample that performed timely
first follow-up on all of the bills we tested. The actual test results
for the first follow-up for all of the bills in our statistical sample
are presented by VISN in appendix III.
In our interviews of management officials at several of the medical
centers included in our statistical sample, the officials attributed
their high follow-up failure rate to inadequate staffing. As noted
previously, in response to recommendations in our 2004 report, VA
shifted nonrevenue functions from billing and collections staff to
other medical center personnel to provide greater focus on the revenue
function.
VA Medical Centers Failed Control Tests for Recording Details of Follow-
up Contacts:
Our statistical tests of VA-wide data on controls for documenting
details of follow-up contacts on unpaid amounts billed to third-party
insurers also found significantly high failure rates. VA Handbook
4800.14, Medical Care Debts, requires medical center accounts
receivable staff to document a summary of their contacts with third-
party insurance companies as well as the first and last name of the
insurance company representative and the representative's title,
position, and phone number.[Footnote 28] Documentation of contact
detail is important because it enables VA to quickly identify billing
problems and take appropriate action to resolve them. However, for
several of the bills in our sample, accounts receivable personnel just
noted "AR follow-up," or they left this data field blank.
As shown in table 2, our test results based on the lower bound of our
confidence intervals indicate that controls for proper documentation of
follow-up contacts on unpaid amounts with third-party insurers were
ineffective. For example, using this conservative approach for our VA-
wide tests, we estimate that medical center collections staff failed
the control test for proper documentation of first follow-up contacts
at least 72 percent of the time based on a sample of 97 bills.
Similarly, our conservative estimate indicates that CPAC medical center
personnel failed this control at least 38 percent of the time (based on
36 bills in this subset) and non-CPAC medical center personnel failed
this control test at least 74 percent of the time (based on 61 bills in
this subset). Table 2 shows that conservative estimates of contact
documentation failures related to the second and third follow-ups are
also significantly high, indicating that controls for all of our
related tests were ineffective. Our tests of the requirement for
documenting the second follow-up contact were based on 41 bills VA-
wide, 14 bills for CPAC medical centers, and 27 bills for non-CPAC
medical centers. Our tests of the documentation requirement for the
third follow-up were based on 18 bills VA-wide, 8 bills for CPAC
medical centers, and 10 bills for non-CPAC medical centers.
Table 2: Estimated Failure Rates for Documenting Details of Follow-up
Contacts on Unpaid Third-Party for Bills of $250 or More:
Required comment: Initial, 45 days;
VA-wide medical centers: 72%;
CPAC medical centers: 38%;
Non-CPAC medical centers: 74%.
Required comment: Second, 21 days after 1st contact;
VA-wide medical centers: 59%;
CPAC medical centers: 42%;
Non-CPAC medical centers: 58%.
Required comment: Third, 14 days after 2nd contact;
VA-wide medical centers: 35%;
CPAC medical centers: 47%;
Non-CPAC medical centers: 26%.
Source: GAO tests of VA-wide random probability sample of third-party
accounts receivable data.
Note: Failure rates are based on the lower bound of our two-sided, 95
percent confidence interval.
[End of table]
In addition to documenting the details of follow-up contacts,
collections personnel are required to adequately document the reasons
for adjustments to decrease billed amounts in order to perform proper
monitoring and oversight of accounts receivable personnel and to assess
whether these adjustments were appropriate. Specifically, VHA Handbook
4800.14, Write-Offs, Decreases, And Termination of Medical Care
Collections Fund Accounts Third-Party Receivable Balances, requires
that accounts receivable staff provide an explanation for adjustments
made to decrease third-party bills.[Footnote 29] The Handbook requires
that the explanation provide clear and unambiguous reasons for the
decrease adjustment and provides several suggested comments that are
considered adequate explanations for the adjustments.
Our tests of whether accounts receivable personnel adequately
documented reasons for adjustments to decrease billed amounts found a
VA-wide failure rate of 44 percent, as shown in table 3. Although the
upper bound of our 95 percent, 2-sided confidence interval indicates
that VA-wide estimated control failures could be over 50 percent, a
conservative analysis based on the lower bound of our 2-sided
confidence interval indicates that controls were ineffective for all
categories of our tests in this area. Our tests for this control
included a sample of 260 bills VA-wide, 60 bills for CPAC medical
centers, and 200 bills for non-CPAC medical centers. Decreases made
without appropriate explanations leave no audit trail or explanation of
the reasons why an account receivable was decreased to zero. As a
result, VA medical center management has limited data available to
determine whether the adjustment was appropriate or if further
collection action is needed. Moreover, without this information,
medical center management cannot perform necessary oversight to assure
that third-party revenues are maximized.
Table 3: Estimated Failure Rates for Controls over Decreases in Billed
Amounts of $250 or More with No Explanation or an Ambiguous
Explanation:
Test results: Estimated failure rates;
VA-wide medical centers: 38%;
CPAC medical centers: 16%;
Other medical centers: 39%.
Source: GAO tests of VA-wide random probability sample of third-party
accounts receivable data.
Note: Failure rates are based on the lower bound of our two-sided, 95
percent confidence interval.
[End of table]
VA Lacks Policies and Procedures for Assuring Adequate Oversight of
Third-Party Billings and Collections:
Our review of VA and VHA policies and procedures, process walk-
throughs, and interviews of VHA Chief Business Office (CBO)[Footnote
30] officials and management officials at our case study medical
centers determined that there are no formal policies and procedures for
oversight of the third-party insurer billing and collection processes
by medical centers or VHA. In addition, we found that medical centers
and VHA have few standardized management reports to facilitate
oversight. Because VA's health care billing and collection systems
operate as stand-alone systems at each medical center, VA-wide
reporting is dependent on numerous individual queries and data calls.
As a result, we found little or no monitoring and oversight of the
third-party billing and collection processes. This raises concerns
about adequacy of oversight over the $1.7 billion in unbilled amounts
at the 18 case study medical centers, including the hundreds of
millions of dollars in unbilled amounts related to coding, billing, and
documentation errors, and other undefined reasons. The lack of formal
VA policies for management oversight of third-party billings and
collections also raises VA-wide concerns.
Enhanced oversight would permit VHA and medical center management to
monitor trends and performance metrics, such as increases or decreases
in unbillable amounts.
Case Study Medical Centers Performed Little or No Monitoring of Third-
Party Insurer Billing and Collection Activity:
Although VA has not established formal policies and procedures for
oversight of third-party insurer billings and collections, officials at
the 18 case study medical centers told us they perform some oversight.
For example, officials at all 10 of the case study medical centers with
low billing performance indicated that they perform limited oversight
of unbilled amounts with no documentation and insufficient
documentation reason codes. None of the officials we interviewed
provided us documentation of their monitoring or oversight procedures.
According to our interviews, oversight procedures varied by medical
center. For example, one medical center official told us that she
performs a monthly review of the insufficient documentation and no
documentation reason codes. A second medical center official told us
that a review of the codes had not yet been performed in fiscal year
2008, but that quarterly reviews usually have been performed. Another
medical center official told us that she randomly selects between three
and six bills per coder that were designated as unbillable for
documentation reasons and reviews them for accuracy. Further, an
official at a fourth medical center told us that she sees a potential
risk that a billing clerk could clear out a billing backlog by
inappropriately assigning reasons not billable codes to medical
procedures waiting to be billed. While it is unlikely that this would
occur, such a problem would only be detected if proper reviews were
being performed by medical center management. None of the officials at
the 10 medical centers indicated that their reviews included any of the
other reasons not billable, such as service-connected medical services
or medical services not covered by third-party insurance companies. As
illustrated previously in figure 3, documentation errors, the focus of
the 10 medical centers we reviewed, made up only 1 percent of the total
amount not billed by the 10 medical centers during fiscal year 2007.
Without reviewing all of the patient services deemed to be unbillable,
the 10 medical centers do not have reasonable assurance that their
unbilled amounts are accurate and appropriate. Further, officials at
three case study medical centers that were also in our VA-wide sample
for testing collection follow-up told us they performed little or no
monitoring of collection follow-up activity because existing management
reports did not facilitate their oversight.
Although CPAC also lacked formalized policies and procedures for
management oversight of unbilled amounts, CPAC officials told us that
they reviewed unbilled amounts assigned to reason codes they consider
to have a high risk of error. However, CPAC officials did not provide
us any documentation of their oversight and monitoring procedures. For
example, CPAC officials told us that they perform weekly reviews of
unbilled amounts assigned to the service-connected reason not billable
code. If doubt exists as to whether the patient's condition is actually
service-connected, quality assurance personnel send the medical
services record to the facility where the bill was generated for
further review. This provides management assurance that the encounters
not billed for that reason are appropriately classified. The officials
said they also prepare trend analyses for three types of documentation
errors--no documentation, insufficient documentation, and not a
billable provider. The officials said they also do some review of
coding and billing errors. CPAC officials stated that if a particular
unbillable code is increasing from month-to-month, they investigated
the cause of the increase and took appropriate action to mitigate the
problem. According to CPAC officials, experienced medical coders in
their Quality Assurance Division review the diagnosis codes for service-
connected patient encounters for reasonableness and documentation of
the medical condition.
At the eight CPAC medical centers, oversight of the collection process
consists of supervisory reviews. For example, supervisors in the
collections follow-up department perform quality reviews of clerks. A
clerk is tested every 2 weeks until the clerk receives two consecutive
reviews with no exceptions. The clerk is then reviewed monthly. The
reviews involve testing five claims for proper follow-up.
We found that medical centers have few standardized management reports
to facilitate oversight. Our analysis of medical center Reasons Not
Billable reports found that these reports consist of a list of over 100
reason codes for unbillable amounts that are not summarized by major
categories, such as the five categories we identified, to facilitate
management review and decision making.
VA Lacks Policies and Procedures and Reporting Mechanisms for Oversight
of Third-Party Billings and Collections:
Our review of VA and VHA policies and procedures and our interviews
with CBO officials determined that VA lacked formal policies and
procedures for oversight of the billing and collections processes
related to third-party insurers. In addition, we found that VA and VHA
have few standardized management reports to facilitate oversight. For
example, our review of CBO reports found that these reports generally
consist of data on VA-wide days to bill, accounts receivable, and
collections. VHA CBO does not generate detailed performance reports by
medical center, and it does not review unbilled amounts.
Limitations in management reporting relate to VHA systems design. For
example, VistA operates as a stand-alone system at each medical center.
As a result, VHA's CBO does not have direct access to medical center
data, and it would need to use data calls to obtain medical center data
for monitoring and oversight. Consequently, VHA developed the
Performance and Operations Web-Enabled Reports (POWER) system as a data
warehouse for VistA data and information to provide some additional
management information capability. However, as a data warehouse POWER
does not provide a full range of standard management reports needed for
oversight, and obtaining management information from POWER for
oversight and monitoring purposes would necessitate numerous individual
management queries and data compilations.
VHA Has Undertaken Several Initiatives to Increase Third-Party Revenue:
In response to long-standing weaknesses in third-party billing and
collection processes, VA undertook several initiatives aimed at
increasing revenue from third-party billings and collections. According
to VA documentation, the improvement initiatives were developed by
engaging key VHA leaders and other stakeholders in a comprehensive
review of revenue cycle business process activities, from patient
intake and insurance verification through billing and collection as
well as planning and implementation efforts. As discussed previously,
we assessed controls for coding and billing accuracy and collection
follow-up for medical centers under the CPAC pilot initiative. However,
we did not evaluate the six ongoing initiatives, some of which are open
ended or will not be completed for several years. Effective management
oversight and implementation will be key to the success of these
initiatives. The following section summarizes recently completed VA
initiatives, including improvements in recruitment and retention of
coders and updates of key VHA policy guidance. Ongoing initiatives
include six key strategic initiatives for increasing third-party
revenue.
Recently Completed Revenue Enhancement Initiatives:
The following two VHA initiatives to enhance third-party revenue were
completed in 2006 and 2007.
Recruitment and Retention of Coders and Health Information Managers.
Over the past several years, VHA has pursued improvements in the
capture of medical charges and clinical documentation to enhance third-
party collections. The first of three improvements, completed in
December 2006, resulted in implementation of a plan to improve
recruitment and retention of coders and health information managers
within VHA through reclassification of employee positions in Office of
Personnel Management occupation series 675, medical record technicians,
and series 669, medical record administrators, from regular civil
service positions to unique hybrid health-care civil service positions.
The position reclassifications, which were effective on December 6,
2006, removed many hiring delays and provided opportunities for
employee special advancement for professional achievement while in VA
service. As of October 2007, VHA had 2,024 employees in the 675 medical
record technician job series and 430 employees in the 669 medical
record administrator job series.
Updated VHA Policy Guidance. VHA updated its policy guidance on coding
staff qualifications, accurate coding and documentation of medical
services, and closing dates for reporting these data for performance
measures and corporate management reporting. The updated guidance was
incorporated in the following VHA policy documents during 2006 and
2007.
* VHA Directive 2006-026, Patient Care Data Capture, dated May 5, 2006,
contains requirements for capture of all outpatient encounters,
inpatient appointments in outpatient clinics, and inpatient billable
services. This directive also requires that each clinic is set up with
appropriate Decision Support System identifiers to help ensure the
accuracy of coding for patient care encounters.[Footnote 31]
* VHA Directive 2006-035, Surgical Case Coding, dated May 30, 2006,
provides policy for surgical code assignments based on International
Classification of Diseases (9th Revision) Clinical Modification and
Current Procedural Terminology (4th Edition). The policy also notes
recent software changes and reiterates VHA policy on accurate capture
of coded data within the surgical package, including requirements for
qualified coding staff, accurate source documentation, and timely and
accurate entry of codes. In addition, the directive makes VISN
directors responsible for ensuring that the Surgery Version 3.0
software patch is installed on all medical centers' VistA systems in
accordance with nationally distributed software packages. The directive
also makes medical center directors responsible for ensuring that
surgical coding is conducted by qualified staff using the Update/Verify
Procedure/Diagnosis Codes option within the surgery package or using an
encoder that is interfaced with the surgery package for entry of coded
procedures and diagnoses for all surgeries.[Footnote 32]
* VHA Directive 2007-030, Closeout of Veterans Health Administration
Corporate Patient Data Files, Including Quarterly Inpatient Census,
dated September 27, 2007, changed the close out date to ensure that all
corporate data are available when extracted for performance measures
and other corporate reporting needs. Accordingly, this directive
requires inpatient coding to be completed no later than the 14th day
following patient discharge and outpatient coding to be completed no
later than 14 days after the outpatient visit.[Footnote 33]
VHA Handbook 1907.03, Health Information Management, Clinical Coding
Program Procedures, dated November 2, 2007, as previously discussed,
establishes minimum standards for coding productivity, including
specific time frames for completing bill coding for various medical
services, and a minimum 95 percent coding accuracy standard. The
Handbook also includes suggested coding staffing requirements, coding
staff qualifications, coding contract services, and coding function
efficiencies.[Footnote 34]
VA Has Six Key Strategic Initiatives Under Way To Enhance Third-Party
Revenue:
In October 2005, VHA's Revenue Optimization Plan Enhancement (ROPE)
work group identified six key strategic initiatives for improving
revenue performance. Many of these initiatives represented continuing
actions that were previously initiated under VHA's Revenue Action Plan
(RAP)--the predecessor to ROPE. The first initiative is targeted for
completion in May 2008. As of the end of our field work in April 2008,
VA had not provided target dates for full implementation of the other
five initiatives. A brief overview of the six initiatives and their
current status follow.
Revenue Improvement Demonstration Project (RIDP). The RIDP (outlined in
congressional reports discussing the fiscal year 2006 appropriation for
VHA's medical administration account)[Footnote 35] was established to
further advance revenue performance within a single VISN and develop a
comprehensive national revenue model by integrating contractor-
supported process modeling and business reengineering efforts.
According to VA documents, CPAC was selected to be the host of this
demonstration project because the objective was seen as a complimentary
effort to the CPAC initiative that was already under way. The RIDP
initiative was divided into two major phases. The first phase was an
operational assessment of revenue cycle functions in order to create
additional cash flow and to assist with the development of a model that
could be replicated nationally. The second phase of RIDP has two parts
- Parts A and B. Part A, which was completed during fiscal year 2007,
covered phase 1 implementation and benefit realization. Under Part A, a
revenue cycle processing environment was established, staff and
leadership received training in new processes and techniques, and
transition and permanence activities were completed. Part B, which was
scheduled to be completed in May 2008, covers transition monitoring and
sustainability.
Clinical Data Entry(CDE). According to VA officials, CDE was developed
to improve the currently existing Clinical Indicators Data Capture
(CIDC) VistA software. CIDC was not implemented nationally because of
concerns related to the provider-patient interaction and provider
productivity. However, functional requirements and software design were
to be revisited so that expanded clinician involvement could be
included. According to VA, the expected outcome of CDE is twofold--
first, to recommend software that can be designed to automatically
capture clinical data as a by-product of the clinical encounter instead
of as an extra step, and second, to accommodate revenue capture of high-
volume/dollar procedures that are being performed, but not billed in
VistA. CDE was targeted for completion in May 2007. However, upon
extensive work with clinicians, the project team concluded that a
fundamental change was required in the Computerized Patient Record
System (CPRS) in order to effectively accomplish the project goal.
According to VA information technology officials, the CDE design
recommendations and accompanying business flow diagrams will be
included as a part of Computerized Patient Record System Reengineering,
referred to as CPRS-R. An implementation date for this initiative has
not yet been determined.
National Revenue Contracts Office. According to VA, the National
Revenue Contracts Office initiative is designed to leverage VHA's size
and financial purchasing power to develop national relationships for
both payer agreements and contracts for vendors who provide support for
revenue cycle activities. The National Payer Relations Office (NPRO) is
currently pursuing strategies to effectively manage relationships with
third-party insurance companies. VHA's first national payer agreement,
with Aetna, was completed in 2007 and a second national agreement with
United Healthcare is expected to be effective May 2008. According to VA
officials, the National Payer Relations Office has completed 78
regional agreements and is currently working on negotiating an
additional 10 agreements.
According to VA officials, a Revenue Contracts Program component was
established under NPRO to improve management of vendors used to support
VHA revenue cycle activities by developing better rates and consistency
in payment terms, expectations, and performance standards. VA hopes
that this Program will ensure more consistent terms and conditions for
frequently used revenue cycle contracts. For example, VA established
national Blanket Purchase Agreements (BPA) for both coding and
insurance identification/verification products and services. According
to VA officials, the Revenue Contracts Program is currently working on
establishing BPAs for third-party billing and accounts receivable
follow-up. As of the end of our field work in April 2008, VA had not
provided us with a target date for completing BPAs for third-party
billing and accounts receivable follow-up.
Revenue Improvements and Systems Enhancement (RISE) Plan. A major
driver in VA's revenue optimization strategy is a Patient Financial
Services System (PFSS) project directed by Congress, which seeks to
remedy significant business process and technology issues in VA's
revenue-related financial systems.[Footnote 36] Building on the initial
PFSS project and to continue ongoing improvement efforts, the VHA CBO
chartered a RISE project team. RISE is part of the VistA modernization
action program. The primary objective of RISE is to provide
comprehensive tools for seamless sharing of required administrative and
clinical information to support billing and related revenue activities
across the enterprise. The four goals of the RISE plan are (1) defining
a clear vision for revenue cycle activities across VHA, (2) replacing
or enhancing aspects of current integrated billing and accounts
receivable systems, (3) improving all related business processes by
implementing structured IT support systems while delivering automated
tools to improve revenue cycle efficiency, and (4) identifying process
improvements for VHA that drive improvement in revenue cycle activities
while leveraging enhanced IT support systems.
According to VA officials, the RISE team is currently developing
detailed short-and long-term business process and technology strategies
in all areas of the revenue program. The RISE team is also developing
accompanying documentation that defines end-to-end processes and that
will form the requirements for the framework of the overall system
improvement initiative. This document will include (1) a vision and
scope document which defines services and capabilities required from
the future state revenue system and (2) a business case, which
incorporates process definitions; a program governance structure to
oversee operations; a communications plan for the business program; and
definitions to identify requirements for a new end-to-end revenue
system. As of the end of our field work in April 2008, VA had not
provided us with a targeted implementation date for this initiative.
Revenue Cycle Enhancement Reviews. VHA has implemented an initiative to
identify opportunities to further enhance revenue potential using
Revenue Cycle Enhancement Teams (RCET). On-site reviews and development
of corrective action plans are ongoing. The objective of this
initiative is to identify available operational opportunities and
provide recommendations to improve overall cash flow. A review team
consists of VHA subject matter experts who are deployed to lower
performing facilities to assess core revenue cycle functions, including
patient intake and insurance verification, utilization review, coding,
billing, and accounts receivable. The methodology employed by the team
in completing reviews includes a combination of data analysis and on-
site observation of activities.
Following the on-site review, the team provides an action plan to the
facility that outlines tasks that need to be completed within the next
90 days and participates in conference calls to ensure completion of
all identified action items. VHA CBO reported that it had completed
reviews at 30 facilities (through January 2008) and that those
facilities have generally increased revenue collections following these
reviews. As of the end of our field work in April 2008, VA did not have
a list of planned visits, and it had not provided us with a targeted
implementation date for this initiative.
Consolidated Patient Account Centers (CPAC). CPAC is based on a private
sector model that is tailored for VHA's specific requirements. The CPAC
model consists of a stand-alone, regionalized billing and collection
activity supported by remote utilization review, data validation, and
customer service functions that are organizationally aligned with the
consolidated center. CPAC is being developed in three phases. Phase I,
which focused on designing a work flow model and new organizational
structure within a pilot VISN-VISN 6, operating as CPAC-was completed
September 30, 2006. In fiscal year 2006, CPAC reported that it achieved
99 percent of its targeted collections, increasing total VISN 6
collections by:
approximately $10 million over fiscal year 2005. In fiscal year 2007,
CPAC reported that it achieved 110 percent of its targeted collection,
increasing total VISN 6 collections by $23 million over fiscal year
2006.
Phases II and III address expansion of the CPAC pilot program. Phase
II, which includes moving the consolidated center into a new physical
plant to support workflow models developed in Phase I as well as
expansion of existing operations to service an additional VISN and is
scheduled for completion by the end of fiscal year 2008. Phase III
addresses national expansion. VHA is currently working on a VA-wide
implementation strategy based on experiences from the CPAC pilot in
VISN 6. As of the end of our field work in April 2008, VA had not
provided us with targeted implementation dates for Phase III.
Conclusions:
Although VA has made some progress in improving policy guidance and
processes for billing and collecting medical care receivables from
third-party insurers, medical centers have significant, continuing
weaknesses in controls over coding, billing, and collections follow-up
that prevent VA from maximizing hundreds of millions of dollars in
potential revenue from third-party insurance companies. The fundamental
weaknesses are a lack of proper processing of billing information,
inadequate follow-up on unpaid third-party accounts receivable, and
inadequate management oversight by medical center and VA management.
Unless VA effectively addresses these weaknesses, it will continue to
use higher amounts of appropriations from the General Fund of Treasury
to provide medical care to the nation's veterans than otherwise would
be necessary, thereby placing a higher burden on taxpayers.
Recommendations:
We recommend that the Secretary of Veterans Affairs require the medical
centers to take the following seven actions to maximize revenue from
third-party insurer billings and collections.
First, to assure that all amounts that should be billed to third-party
insurers are billed in an accurate and timely manner, we recommend that
the Secretary take the following two actions.
* Establish procedures requiring medical center management to perform
and document detailed monthly reviews of patient encounters determined
to be nonbillable by coding staff to ensure they are properly coded.
* Establish procedures requiring medical center management to develop
and use management reports on medical center performance with respect
to accuracy and timeliness of billing performance and take appropriate
corrective action.
Second, to assure timely follow-up and documentation of unpaid third-
party billings, we recommend that the Secretary take the following
three actions.
* Establish a process requiring medical centers to monitor their
accounts receivable staffs' adherence to the requirement in VA Handbook
4800.14, Medical Care Debts, to follow-up on outstanding third-party
accounts receivable within specified time frames.
* Establish a mechanism requiring medical centers to monitor their
accounts receivable staff adherence to VA Handbook 4800.14, Medical
Care Debts, which requires documenting a brief summary of all follow-up
contacts, including information on when a payment will be made or why a
payment was not made.
* Establish a process requiring medical centers to confirm that
accounts receivable staff are following the requirement in VHA Handbook
4800.14, Write-Offs, Decreases, And Termination of Medical Care
Collections Fund Accounts Third-Party Receivable Balances, to provide a
specific explanation for any adjustments to decrease third party
accounts receivable from third-party insurers.
Third, to assure effective VA-wide oversight of billings and
collections with regard to third-party insurers, we recommend that the
Secretary take the following two actions.
* Require VHA to establish a formal VA-wide process for managing and
overseeing medical center billing performance, including development of
standardized reports on unbilled amounts by category.
* Establish procedures requiring periodic VHA-wide assessments by the
Chief Business Office to document whether medical center staff are
performing timely and accurately documented follow-up on outstanding
third-party accounts receivable, as required in VHA Handbook 4800.14.
Agency Comments and Our Evaluation:
On May 22, 2008, the Secretary of Veterans Affairs provided written
comments on a draft of this report. VA officials concurred with all
seven of our recommendations and provided information on steps it is
taking to address them. However, VA's letter stated that our report
overstated findings related to the potential for lost revenue to the
government and inadequate levels of oversight. VA's letter also stated
that our conclusion on collections improvement minimizes the
significant gains VA has made and that several improvement initiatives
were so successful that they have been designated as ongoing.
With regard to VA's comment that we overstated findings related to the
potential for lost revenue to the government, we added language to our
report to indicate that $1.4 billion of the $1.7 billion in unbilled
medical services at the 18 case study medical centers were classified
as service-connected, Medicare coverage, or lack of private health
insurance coverage. However, as noted in our report, although certain
medical services are not billable, such as service-connected treatment,
VA management has not validated reasons for these unbilled amounts to
assure that all billable costs are charged to third-party insurers.
Further, we focused on unbilled amounts related to coding, billing, and
documentation errors and other undefined problems as a basis for making
recommendations for increasing third-party revenues. In this regard, we
identified $291.5 million in unbilled amounts due to errors at the 18
case study medical centers.
With regard to VA's statement that it has established significant
levels of oversight, our report noted that VA has agencywide data on
days to bill, accounts receivable, and collections. However, we found
that VA has not established policies and procedures for management
oversight of unbilled amounts or compliance with follow-up requirements
for outstanding third-party receivables. Further, although POWER
generates metrics for several performance indicators, these metrics do
not provide VA with the full range of management reports needed to
adequately monitor unbilled amounts and compliance with follow-up
procedures. VA concurred with our recommendation to establish oversight
of unbilled amounts and compliance with follow-up procedures and
described systems enhancements and improved monitoring activities that
it expects will address the problems related to billings, collections,
and oversight we identified.
With regard to VA's comment that it made significant gains in
collecting third-party revenue since fiscal year 2004, there are a
number of factors that need to be considered to measure the extent of
VA's success. For example, VA also experienced an increase of 500,000
patients that were treated at VA medical centers during the 4-year
period. In addition, the rate of inflation for medical care over the
last 4 fiscal years and changes in inpatient and outpatient mix would
need to be considered. Further, VA's efforts to address billing
backlogs over the 4-year period could have also contributed to the
increased revenue. This type of analysis was outside the scope of our
audit and would require further study to determine the impact of these
factors on VA's collection gains. Despite VA's increased third-party
collections, our work showed there is a significant opportunity to
increase revenue from third-party insurers by (1) correcting errors
that have prevented appropriate billings to third-party insurers and
(2) performing timely and effective follow-up on unpaid receivables.
VA's statement that several initiatives to enhance third-party revenue
were so successful that they have been designated as ongoing implies
that target dates for completion are not necessary. We support the
concept of ongoing efforts for continuous improvement in operations.
However, three of the six initiatives were begun in 2002 and have
encountered significant slippage and refocusing under revised
management plans. For example, initiatives related to Clinical Data
Entry, the National Revenue Contracts Office, and CPAC began under the
Revenue Action Plan (RAP), which was approved in July 2002. These
initiatives were later incorporated under the Revenue Optimization Plan
Enhancement (ROPE) plan in 2005. In addition, the RISE plan for revenue-
related system enhancements was initiated under ROPE. Targeted
implementation dates and milestones will be key to assisting management
in overseeing these initiatives to assure that intended goals are
accomplished within reasonable time frames.
Finally, VA officials informed us at the conclusion of our audit that
they revised their follow-up requirements for third-party receivables
to require increased focus on unpaid high-dollar amounts and provide
more flexibility in follow-up time frames for smaller dollar amounts.
For example, VA's revised policy will focus on collection follow-up for
amounts of $1,500 and above within 45 days of the billing date.
However, the revised policy would extend the date for the first follow-
up for bills from $250 to $1,500 to be within 60 days of the initial
bill. Going forward, it will be important for VA to oversee and monitor
the implementation of the new policy as part of its management
oversight process in order to determine if the new policy is achieving
intended results and, if not, to perform additional analysis and make
appropriate policy changes to assure effective follow-up on unpaid
third-party bills.
VA also provided technical comments and corrections which we have
addressed in our report, as appropriate. VA's comments are reprinted in
appendix II.
As agreed with your offices, unless you announce its contents earlier,
we will not distribute this report until 30 days from its date. At that
time we will send copies of this report to interested congressional
committees; the Secretary of Veterans Affairs; the Acting Secretary of
Health, Veterans Health Administration; the VHA Chief Business Officer;
and the Director of the Office of Management and Budget. We will make
copies available to others upon request. In addition, this report will
be available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Please contact me at (202) 512-9095 or dalykl@gao.gov, if you or your
staff have any questions concerning this report. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Major contributors to this report are
acknowledged in appendix IV.
Signed by:
Kay L. Daly:
Acting Director Financial Management and Assurance:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Pursuant to requests from the Chairman and Ranking Minority Member of
the House Committee on Veterans' Affairs and the Chairman and Ranking
Minority Member of the Subcommittee on Oversight and Investigations, we
performed a follow-up audit of controls over VA's third-party billing
and collection processes, including (1) an evaluation of the
effectiveness of VA medical center billing processes at selected
locations, (2) an assessment of medical centers' adherence to VA
policies for performing timely follow-up on unpaid accounts receivable
and proper documentation of follow-up contacts, and (3) a determination
of the adequacy of VA oversight of billing and collection processes. In
addition, we summarized the status of management initiatives undertaken
to improve third-party billing and collection processes.
We used as our criteria applicable law and VA policy, as well as our
Standards for Internal Control in the Federal Government[Footnote 37]
and our Internal Control Management and Evaluation Tool.[Footnote 38]
To assess the control environment at our test locations, we obtained an
understanding of VA processes and controls over the third-party revenue
cycle. We performed walk-throughs of these processes at several medical
centers. We interviewed management officials at selected medical
centers about their management oversight and accountability procedures
over third-party billings and collections. We also reviewed applicable
VA program guidance and local policies and procedures at selected test
locations and interviewed officials about their billing and collection
processes and controls. In addition, to assure the reliability of data
and information used in this report, we reviewed VA documentation and
interviewed key officials. We also reviewed VA procedures for assuring
the reliability of data and information generated by key VA systems
used in the third-party billing and collection processes, including
VHA's Veterans Health Information Systems and Technology Architecture
(VistA) and Performance and Operations Web-Enabled Reports (POWER)
systems.
To determine if the third-party revenue offices at our 18 case study
locations had adequate management oversight and accountability for
assuring timely and accurate billings, we obtained and reviewed
management reports , including (1) Reasons Not Billable Summary and
Detailed reports and (2) Elapsed Days to Bill performance reports. We
compiled data from the Reasons Not Billable reports into a database and
established categories of reasons not billed for further analysis. We
coordinated with VHA officials on the identification of reasons not
billed categories. We interviewed medical center revenue officials at
the 10 case study medical centers with low billing performance and at
CPAC, for the 8 CPAC case study medical centers, about their management
oversight and accountability procedures. Table 4 shows the two groups
of case study medical centers we examined and performance data on days
to bill and unbilled amounts for each location.
Table 4: Medical Centers Covered in Examination of Third-Party Billing
Processes:
Medical center location: Ten medical centers with largest number of
days to bill: North Texas Health Care System;
Average number of days to bill as of September 30, 2007: 109;
Unbilled: amount as of: September 30, 2007 (in millions): $ 233.3.
Medical center location: Ten medical centers with largest number of
days to bill: West Los Angeles, California;
Average number of days to bill as of September 30, 2007: 110;
Unbilled: amount as of: September 30, 2007 (in millions): 139.4.
Medical center location: Ten medical centers with largest number of
days to bill: Washington, D.C;
Average number of days to bill as of September 30, 2007: 110;
Unbilled: amount as of: September 30, 2007 (in millions): 167.0.
Medical center location: Ten medical centers with largest number of
days to bill: San Francisco, California;
Average number of days to bill as of September 30, 2007: 116;
Unbilled: amount as of: September 30, 2007 (in millions): 123.4.
Medical center location: Ten medical centers with largest number of
days to bill: South Texas Health Care System;
Average number of days to bill as of September 30, 2007: 121;
Unbilled: amount as of: September 30, 2007 (in millions): 156.8.
Medical center location: Ten medical centers with largest number of
days to bill: Columbus, Ohio;
Average number of days to bill as of September 30, 2007: 122;
Unbilled: amount as of: September 30, 2007 (in millions): 34.7.
Medical center location: Ten medical centers with largest number of
days to bill: Marion, Indiana;
Average number of days to bill as of September 30, 2007: 122;
Unbilled: amount as of: September 30, 2007 (in millions): 56.2.
Medical center location: Ten medical centers with largest number of
days to bill: Northern California Health Care System;
Average number of days to bill as of September 30, 2007: 123;
Unbilled: amount as of: September 30, 2007 (in millions): 151.2.
Medical center location: Ten medical centers with largest number of
days to bill: Lebanon, Pennsylvania;
Average number of days to bill as of September 30, 2007: 134;
Unbilled: amount as of: September 30, 2007 (in millions): 119.2.
Medical center location: Ten medical centers with largest number of
days to bill: Pacific Islands;
Average number of days to bill as of September 30, 2007: 146;
Unbilled: amount as of: September 30, 2007 (in millions): 23.4.
Medical center location: Subtotal;
Average number of days to bill as of September 30, 2007: [Empty];
Unbilled: amount as of: September 30, 2007 (in millions): $1,205.3.
Medical center location: Eight medical centers under CPAC: Asheville,
North Carolina;
Average number of days to bill as of September 30, 2007: 46;
Unbilled: amount as of: September 30, 2007 (in millions): $ 39.8.
Medical center location: Eight medical centers under CPAC: Beckley,
West Virginia;
Average number of days to bill as of September 30, 2007: 37;
Unbilled: amount as of: September 30, 2007 (in millions): 16.3.
Medical center location: Eight medical centers under CPAC: Durham,
North Carolina;
Average number of days to bill as of September 30, 2007: 68;
Unbilled: amount as of: September 30, 2007 (in millions): 66.5.
Medical center location: Eight medical centers under CPAC:
Fayetteville, North Carolina;
Average number of days to bill as of September 30, 2007: 47;
Unbilled: amount as of: September 30, 2007 (in millions): 24.4.
Medical center location: Eight medical centers under CPAC: Hampton,
Virginia;
Average number of days to bill as of September 30, 2007: 49;
Unbilled: amount as of: September 30, 2007 (in millions): 39.4.
Medical center location: Eight medical centers under CPAC: Richmond,
Virginia;
Average number of days to bill as of September 30, 2007: 54;
Unbilled: amount as of: September 30, 2007 (in millions): 175.9.
Medical center location: Eight medical centers under CPAC: Salem,
Virginia;
Average number of days to bill as of September 30, 2007: 49;
Unbilled: amount as of: September 30, 2007 (in millions): 81.3.
Medical center location: Eight medical centers under CPAC: Salisbury,
North Carolina;
Average number of days to bill as of September 30, 2007: 55;
Unbilled: amount as of: September 30, 2007 (in millions): 65.0.
Medical center location: Subtotal;
Average number of days to bill as of September 30, 2007: [Empty];
Unbilled: amount as of: September 30, 2007 (in millions): $508.7.
Medical center location: Total;
Average number of days to bill as of September 30, 2007: [Empty];
Unbilled: amount as of: September 30, 2007 (in millions): $1,714.0.
Source: GAO analysis of medical center billing performance data.
[End of table]
We selected a VA-wide statistical sample of billing records to assess
whether medical center accounts receivable personnel were adhering to
VA policy for timely follow-up with private insurance companies on
unpaid third-party receivables. From the universe of fiscal year 2007
collections activity, we stratified the billing records into one
stratum for bills from CPAC and one stratum from all other VA medical
centers. We randomly selected 60 bills from the CPAC stratum and 200
from the stratum for the rest of VA. We designed this sample for
control testing with a 5 percent tolerable error rate so that if there
were no errors in one of the strata, we would be able to conclude with
95 percent confidence that the billing records for that stratum were
statistically compliant.
Our random sample of 260 bills included medical centers from each of
the 21 VISNs. We used our statistical sample to assess the population
of follow-up contacts for receivables greater than $250 that were
outstanding for at least 45 days at any point during fiscal year 2007.
We explain the results of our statistical sample in terms of control
attributes related to adherence to VA policy guidance for (1)
performing timely initial and subsequent follow-up, as appropriate, on
unpaid amounts, (2) whether accounts receivable personnel properly
documented follow-up contacts, and (3) whether accounts receivable
staff properly documented reasons why adjustments to decrease billed
amounts were made. We present our statistical results as (1) our
projection of the estimated error overall (failure rate) and for each
control attribute as point estimates and (2) the 95 percent, two-sided,
confidence intervals for control failure rates. Our 95 percent
confidence interval means that if you were to determine an estimate for
100 different random samples, 95 out of 100 times, the estimate would
fall within the confidence interval. In other words, the true value is
between the lower and upper limits of the confidence interval 95
percent of the time. We generally report our statistical results as
point estimates that fall within confidence intervals. However, because
confidence intervals varied widely for our various control tests, we
focused on the lower bound of our confidence intervals as a
conservative estimate of our test results. As additional information,
we present our detailed test results below, including the point
estimate and the upper and lower bound of our 95 percent confidence
intervals. Table 5 shows our detailed test results for timely follow-up
on unpaid third-party bills totaling $250 or more.
Table 5: Estimated Failure Rates for Controls on Timely Follow-up on
Unpaid Third-Party Insurer Receivables Totaling $250 or More:
Required: follow-up: Initial, 45 days;
VA-Wide: Estimated failure rate and 95%, 2-sided confidence interval:
75%; (69% to 80%);
CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 48%;
(36% to 61%);
Non-CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 77%; (71% to 83%).
Required: follow-up: Second, 21 days after 1st contact;
VA-Wide: Estimated failure rate and 95%, 2-sided confidence interval:
54%; (44% to 64%);
CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 38%; (23% to 54%);
Non-CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 57%; (45% to 68%).
Required: follow-up: Third, 14 days after 2nd contact;
VA-Wide: Estimated failure rate and 95%, 2-sided confidence interval:
34%; (20% to 50%);
CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 43%; (22% to 66%);
Non-CPAC medical centers: Estimated failure rate and 95%, 2-sided
confidence interval: 32%; (17% to 51%).
Source: GAO tests of a VA-wide random probability sample of third-party
accounts receivable data.
Notes: Failure rates for the second and third follow-up contacts
exclude bills that were paid before the dates required for these follow-
up contacts. These follow-up contacts represent subsets of our sample;
thus, the confidence interval (margin of statistical error) is wider.
Similarly, CPAC and non-CPAC medical center results represent subsets
of our VA-wide sample and also have wider margins of statistical error.
[End of table]
Table 6 shows the detailed results of our tests of VA-wide controls for
documenting the details of follow-up contacts made with third-party
insurers.
Table 6: Estimated Failure Rates for Documenting Details of Follow-up
Contacts on Unpaid Third-Party Bills of $250 or More:
Required comment: Initial, 45 days;
VA-wide: Estimated failure rate and 95 percent, 2-sided confidence
interval: 81%; (72% to 89%);
CPAC medical centers: Estimated failure rate and 95 percent, 2-sided
confidence interval: 56%; (38% to 72%);
Non-CPAC medical center: Estimated failure rate and 95 percent, 2-sided
confidence interval: 85%; (74% to 93%).
Required comment: Second, 21 days after 1st contact;
VA-wide: Estimated failure rate and 95 percent, 2-sided confidence
interval: 77%; (59% to 90%);
CPAC medical centers: Estimated failure rate and 95 percent, 2- sided
confidence interval: 71%; (42% to 92%);
Non-CPAC medical center: Estimated failure rate and 95 percent, 2-sided
confidence interval: 78%; (58% to 91%).
Required comment: Third, 14 days after 2nd contact;
VA-wide: Estimated failure rate and 95 percent, 2-sided confidence
interval: 65%; (35% to 88%);
CPAC medical centers: Estimated failure rate and 95 percent, 2- sided
confidence interval: 88%; (47% to 99.7%);
Non-CPAC medical center: Estimated failure rate and 95 percent, 2-sided
confidence interval: 60%; (26% to 88%).
Source: GAO tests of a VA-wide random probability sample of third-party
accounts receivable data.
Notes: Failure rates for the second and third follow-up contacts
exclude bills that were paid before the dates required for these follow-
up contacts. These follow-up contacts represent subsets of our sample;
thus, the confidence interval (margin of statistical error) is wider.
Similarly, CPAC and non-CPAC medical center results represent subsets
of our VA-wide sample and also have wider margins of statistical error.
[End of table]
Our tests of whether accounts receivable personnel adequately
documented reasons for adjustments to decrease billed amounts found a
VA-wide failure rate of 44 percent, as shown in table 7.
Table 7: Failure Rates for Controls over Decrease Adjustments with No
Explanation or an Ambiguous Explanation:
Test results: Estimated failure rate;
VA-wide: 44%;
CPAC medical centers: 25%;
Other medical centers: 46%.
Test results: 95 percent, 2-sided confidence interval;
VA-wide: (38% to 51%);
CPAC medical centers: (15% to 38%);
Other medical centers: (39% to 52%).
Source: GAO tests of VA-wide random probability sample of third-party
accounts receivable data.
Notes: Tests for CPAC and non-CPAC medical center results represent
subsets of our VA-wide sample and, therefore, have wider margins of
statistical error in our confidence intervals:
[End of table]
To assess VA management oversight of third-party billing and collection
processes, we interviewed medical center and CPAC management officials
at our case study locations and reviewed available data and reports
used by these managers. Three of our 10 case study locations with low
billing performance and CPAC were also included in our statistical
tests of collection follow-up procedures. We also reviewed related VA
and VHA policies and available VHA CBO management reports. In addition,
we interviewed VHA officials about their oversight procedures,
including limitations in systems reporting capabilities.
To follow up on management initiatives undertaken to improve third-
party billings and collections, we obtained and reviewed information
and interviewed VA managers on the objectives, status, and targeted
completion dates for eight major initiatives. We did not evaluate the
initiatives or independently assess the information provided by VA
officials. However, we evaluated billing controls and tested compliance
with controls for accounts receivable follow-up for the medical centers
under the CPAC pilot initiative.
We briefed VA managers at our test locations and VA headquarters,
including VA medical center directors, VA headquarters information
resource management and property management officials, and VHA's Chief
Business Officer on the details of our audit, including our findings
and their implications. On April 30, 2008, we requested comments on a
draft of this report. We received comments on May 22, 2008, and have
summarized those comments in the Agency Comments and Our Evaluation
section of this report. We conducted our audit work from January 2007
through May 2008 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of Veterans Affairs:
The Secretary Of Veterans Affairs:
Washington:
May 22, 2008:
Ms. Kay L. Daly:
Acting Director:
Financial Management and Assurance Team:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Daly:
The Department of Veterans Affairs has reviewed your draft report, VA
Health Care: Ineffective Controls over Medical Center Billings and
Collections Limit Revenue from Third-Party Insurance Companies (GAO-08-
675) and concurs with your recommendations.
We believe the report's "Highlights" page does not adequately explain
to the reader that 83 percent ($1.42B) of the $1.7B reviewed as
unbillable for these 18 medical centers is for care that is either
service-connected or cannot be billed because of the type of insurance
policy (HMO, Medicare) or type of visit. For the 10 test sites aside
from the Consolidated Patient Accounts Center (CPAC), 79 percent
($951.1M) of the $1.2B reviewed as unbillable is for care that is
either service-connected or cannot be billed to an insurance because of
the type of insurance policy (HMO, Medicare) or type of visit. For the
CPAC, 93 percent ($471.2M) of the $508.7M reviewed as unbillable is for
care that is either service- connected or cannot be billed to an
insurance carrier because of the type of insurance policy or visit. We
believe this lack of information leads to the overstated conclusion
about potential lost revenue to the government.
Contrary to GAO's determination that "VA has not yet established
effective management oversight of VA-wide third-party billing and
collection operations," VA has established significant levels of such
oversight operations. Specifically, VA has established industry
standard performance metrics for senior level oversight (Gross Days
Revenue Outstanding, Days to Bill, Accounts Receivable over 90 Days and
Total Collections), which are reported on a monthly basis to VA's
senior managers during the Monthly Performance Review. Additionally, VA
facility and network directors have performance standards they must
meet for revenue cycle metrics. Facility Compliance and Business
Integrity Office (CBI) programs complement oversight monitoring by
providing independent validation of existing controls. VHA Directive
1030, Compliance and Business Integrity (CBI) Program, requires CBI to
evaluate and assess policies, procedures, systems, and control
environments the VHA Chief Business Office has established.
GAO's conclusion regarding collections improvement minimizes the
significant gains VA has made. Specifically, since fiscal year (FY)
2004, VA's Medical Care Cost Fund (MCCF) total collections increased
from $1.7B to $2.2B in FY 2007 (a 29.4 percent increase), and the third-
party component of these collections increased from $960,000 to $1.26M
(a 31.3 percent increase). During this same time period, VA's national
third-party average days to bill improved from 68.7 to 63.9 days.
Finally, VA has continued to improve its management of accounts
receivable as evidenced by the fact that only 28 percent of accounts
receivable are over 90 days compared to 31.2 percent at the end of FY
2007.
Several initiatives to enhance third-party revenue were so successful
that they have been designated as ongoing; however, GAO's report
summarizes these efforts as open-ended or not to be implemented for
several years. In particular, revenue assist team visits and national
payer relations efforts have dramatically improved revenues and,
therefore, VA will continue them for subsequent years. Other
initiatives such as the Revenue Improvements and Systems Enhancement
project and Consolidated Patients Accounts Centers are longer term
initiatives due to their large scope involving funding, systems changes
and organizational impact.
The enclosure provides more detailed comments to your draft report,
action plans to implement the recommendations, and needed technical
corrections. Thank you for the opportunity to comment on your draft
report.
Sincerely yours,
Signed by:
James B. Peake, M.D.:
Enclosure:
Department Of Veterans Affairs (VA) Comments To Government
Accountability Office (Gao) Draft Report:
VA Health Care: Ineffective Controls over Medical Center Billings and
Collections Limit Revenue from Third-Party Insurance Companies GAO-08-
675:
To assure that all amounts that should be billed to third-party
insurers are billed in an accurate and timely manner, GAO recommends
that the Secretary take the following two actions:
* Establish procedures requiring medical center management to perform
and document detailed monthly reviews of patient encounters determined
to be non-billable by coding staff to ensure they are properly coded.
* Establish procedures requiring medical center management to develop
and use management reports on medical center performance with respect
to accuracy and timeliness of billing performance and take appropriate
corrective action.
Concur: Amounts billed to third-party payers should be performed in an
accurate and timely manner including reviewing patient accounts
determined to be non- billable and using reports to monitor accuracy
and timeliness of billing performance.
* Review of Encounters Determined to Be Non-Billable In November 2007,
the Veterans Health Administration (VHA) issued VHA Handbook 1907.03,
Health Information Management, Clinical Coding Program Procedures that
established minimum bill coding accuracy standards and provided
procedures for conducting coding reviews for many different purposes
including coding for third-party billing. VA will supplement this
guidance by developing new procedures for specifically monitoring
reasons not billable codes due to documentation and coding that are
entered into the billing system.
* Timeliness and Accuracy of Billing Performance With regard to the
accuracy of billing, VA has a systems enhancement in progress to
standardize reason not billable codes that staff uses when reviewing
episodes of care. When complete, this systems enhancement will prohibit
facilities from adding locally developed reason codes, which make
monitoring billing compliance difficult for managers. To monitor more
effectively medical center management's accuracy of billing, VA will
also publish guidance for supervisors to review the reasons not
billable report on a monthly basis and take appropriate actions to
ensure accurate use of the reasons not billable codes.
To assure timely follow-up and documentation of unpaid third-party
billings, GAO recommends that the Secretary take the following three
actions:
* Establish a process requiring medical centers to monitor their
accounts receivable staffs' adherence to the requirement in VA Handbook
4800.14, Medical Care Debts, to make follow-ups on outstanding third-
party accounts receivable within specified timeframes.
* Establish a mechanism requiring medical centers to monitor their
accounts receivable staff adherence to VA Handbook 4800.14, Medical
Care Debts, which requires documenting a brief summary of all follow-up
contacts, including information on when a payment will be made or why a
payment was not made.
* Establish a process requiring medical centers to confirm that
accounts receivable staff are following the requirement in VHA Handbook
4800.14, Write-Offs, Decreases, And Termination of Medical Care
Collections Fund Accounts Third-Party Receivable Balances, to provide a
specific explanation for any adjustments to decrease accounts
receivable from third-party insurers.
Concur: In an effort to understand low compliance rates with follow-up
standards, VA researched industry norms and conducted a review of its
current third-party accounts receivable portfolio, including
stratification by age and dollar amount of the receivable, to determine
the average age at time of first collection as well as average dollar
amount collected. This analysis, plus the estimated cost to generate a
bill and perform the necessary follow-up activities to collect
outstanding receivables indicated that changes were necessary to
current follow- up guidelines to ensure they are both reasonable and
consistent with industry practice. Moreover, VA believes it is
important to focus efforts on higher-dollar, more collectible claims.
As a result of the above analysis, VA proposed new guidelines that
include more stringent follow-up standards on the highest-dollar
claims, which are the smallest number of outstanding receivables, but
represent the largest dollar amount of outstanding receivables.
Additionally, these new standards provide more flexibility relative to
follow-up for low-dollar claims, which represent the highest number of
outstanding receivables. The rationale for this stratification is to
ensure claims that normally process within a certain period of time are
not targeted for follow-up prior to normal processing cycles and that
follow-up resources are spent on receivables that will produce the
maximum return on the time invested. Based on this review and with
approval of senior management, VA issued revised guidance for third-
party follow-up to the field on April 28, 2008. VA believes this
revised guidance, which we shared with GAO prior to publication of its
report, should assist facilities in meeting follow-up standards based
on prioritizing follow-up first on higher dollar receivables and then
on those accounts with lower values.
* Monitoring of Accounts Receivable Follow-up:
VA agrees that a standard process and mechanism to monitor staff
adherence to accounts receivable follow-up requirements is necessary.
Therefore, VA has developed several system enhancements, which when
complete, will assist field staff in thoroughly monitoring both the
timeliness and accuracy of accounts receivable follow-up according to
published guidelines. As part of these systems enhancements, reports
will be generated on follow-up actions to determine staff compliance
with requirements. In FY 2008, Financial Quality Assurance Managers
located in each Veterans Integrated Service Network (VISN) began
monthly audits of follow-up based on a sample of accounts receivable
and provide this information to facility management in an effort to
track compliance and take corrective actions as needed.
* Monitoring of Account Adjustments:
VA agrees it is critical to ensure processes are in place to monitor
staff adherence with guidelines to performing adjustments on accounts
receivable. VA recently published instructions to field supervisors
requiring them to conduct monthly reviews in order to ensure these
transactions are accurate and appropriately documented. Supervisors are
required to share the review with facility Compliance Officers for
monitoring and appropriate action.
To help assure effective VA-wide oversight of billings and collections
with regard to third-party insurers, GAO recommends the Secretary take
the following two actions:
* Require VHA to establish a formal VA-wide process for managing and
overseeing medical center billing performance, including development of
standardized reports on unbilled amounts by category.
* Establish procedures requiring periodic VHA-wide assessments by the
Chief Business Office to document whether medical center staff are
performing timely, accurately documented follow-up on outstanding third-
party accounts receivable, as required in VHA Handbook 4800.14.
Concur: VA agrees with the need to ensure oversight of third-party
billings and collections and has several activities already in-
progress. As described in the response to recommendation number one
above, VA is developing a systems enhancement to implement a standard
list of reasons not billable for staff to use when reviewing and
processing potentially billable episodes of care. Additionally, this
systems enhancement will prohibit facilities from adding locally
developed reason codes, which make monitoring billing compliance
difficult for managers. Second, VA will publish guidance for
supervisors to review the reasons not billable report on a monthly
basis and take appropriate actions to ensure accurate use of the
reasons not billable codes. Finally, VA will implement a periodic data
call to review the use of the reasons not billable at a national level
in order to take necessary corrective actions.
With regard to compliance with published follow-up guidelines for
accounts receivable, as noted under recommendation 2 above, VA
Financial Quality Assurance Managers located in each VISN conduct
monthly audits of follow-up based on a sample of accounts receivable
and provide this information to VA- wide management in an effort to
track compliance and take corrective actions as needed.
A joint work group of the VHA business program offices, comprised of
the Chief Business Office (CBO), Chief Finance Office, Chief Compliance
and Business Integrity Office (CBI), and Health Information Management
was established in January 2007 and meets routinely to address jointly
business quality improvement, business integrity, and strengthening of
internal control environments. Further, these offices all participate
in national level business improvement activities through the National
Leadership Board Business Performance Improvement Committee (NLB BPIC)
established in 2007 by the VHA Under Secretary for Health. Through
these forums and others, CBI and CBO continue to collaborate to enhance
the control environment for business operations.
[End of section]
Appendix III: Actual Test Results for Timely First Follow-up on Unpaid
Bills with Third-Party Insurers:
Table 8 lists our actual test results for timely first follow-up on
unpaid third-party billings by medical centers within each VISN. As
noted at the end of the table, 183 of the 260 bills in our stratified
random sample failed this control test.
Table 8: Actual Control Test Results Related to the Requirement for
Initial Collections Follow-up:
[See PDF for image]
Source: GAO tests of VA-wide data on the requirement for medical center
accounts receivable personnel to perform initial follow-up on unpaid
third-party receivables.
[End of table]
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kay Daly, (202) 512-9095, or dalykl@gao.gov:
Acknowledgments:
In addition to the contact named above, Gayle L. Fischer, Assistant
Director; F. Abe Dymond, Assistant General Counsel; Carl S. Barden;
Deyanna J. Beeler; Francine DelVecchio; Lauren S. Fassler; Jason Kelly;
Amanda K. Miller; Matthew L. Wood; and Matthew P. Zaun made key
contributions to this report.
[End of section]
Footnotes:
[1] GAO, VA Health Care: VA Has Not Sufficiently Explored Alternatives
for Optimizing Third-Party Collections, GAO-01-1157T (Washington, D.C.:
Sept. 20, 2001).
[2] GAO, 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.)
[3] GAO, VA Medical Centers: Further Operational Improvements Could
Enhance Third-Party Collections, GAO-04-739 (Washington, D.C.: July 19,
2004).
[4] H.R. Rep. No. 109-95, at 56 (May 23, 2005). See also H.R. Conf.
Rep. No. 109-305, at 43 (Nov. 18, 2005); Military Quality of Life and
Veterans Affairs Appropriations Act, 2006, Pub. L. No. 109-114, tit.
II, 110 Stat. 2372, 2384-85 (Nov. 30, 2005).
[5] VHA has 21 VISNs that oversee medical center activities within
their area, which may cover one or more states. VISN 6 covers North
Carolina, parts of southern Virginia, and eastern West Virginia.
[6] Under 38 U.S.C. § 1729, VA is not authorized to collect these
amounts from third-party insurers.
[7] VA Handbook 4800.14, Medical Care Debts, Section 4 (b) (1).
[8] Our statistical tests were based on a 95 percent, 2-sided
confidence interval. Because confidence intervals varied widely for our
various control tests, we used a conservative estimate of our test
results that is based on the lower bound of our confidence intervals.
[9] VHA Handbook 4800.14, Write-Offs, Decreases, and Termination of
Medical Care Collections Fund Accounts Third-Party Receivable Balances,
Appendix B.
[10] Accounts receivable staff reduce third-party receivables for a
variety of reasons including, but not limited to, partial payments when
the amount received is the full amount expected from the insurance
carrier, the amount of payment received is the usual and customary
amount received from the insurance company, or medical services are not
covered under the insurance policy.
[11] VHA's CBO was established in April 2002 as the single accountable
authority for the development of administrative processes, policy,
regulations, and directives associated with the delivery of VA health
benefit programs. VHA's CBO is composed of independent offices in the
field that are dedicated to health benefits administration and revenue-
related programs.
[12] Pub. L. No. 104-262, § 101, 110 Stat. 3177, 3178 (Oct.
9,1996)(codified at 38 U.S.C. § 1710).
[13] See Veterans' Health-Care Amendments of 1986, Pub. L. No. 99-272,
tit. XI, § 19013, 100 Stat. 372, 382 (Apr. 7, 1986)(codified, as
amended, at 38 U.S.C. § 1729). The 1986 statute authorized VA to seek
reimbursement from third-party health insurance companies for the cost
it incurred in providing medical care to insured veterans with
nonservice-related conditions. Without specific authority to retain the
third-party insurance payments it collected, however, VA was required
to deposit these third-party collections in the General Fund of the
U.S. Treasury.
[14] Pub. L. No. 105-33, tit. VIII, § 8023, 111 Stat. 251, 665 (Aug. 5,
1997)(codified at 38 U.S.C. §1729A).
[15] VA collections for health care services include third-party
collections as well as patient copayments for medical services.
[16] 38 U.S.C. § 1729. VA is subrogated to the rights of veterans for
payments from third-party payers who are obligated to provide for (or
pay the expenses of) the veterans' health services under a health plan
contract. In addition to excluding uninsured veterans, this authority
excludes veterans covered only by Medicare because the statutory
definition for third-party payers specifically excludes Medicare, but
does not exclude Medicare supplemental insurance policies obtained from
private insurers.
[17] 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.
[18] VA Handbook 4800.14, Section 4b, "Third-Party Receivables, Claims
Follow-up."
[19] VistA is a comprehensive medical records system. VistA includes an
accounts receivable module that supports third-party billings and
collections.
[20] GAO, VA Medical Centers: Further Operational Improvements Could
Enhance Third-Party Collections, GAO-04-739 (Washington, D.C.: July 19,
2004).
[21] VA Handbook 1907.03, Sections 3 and 12.
[22] According to VA officials, the initial VA Handbook revision
included the 30-day follow-up. However, with implementation of the
Medicare verification process, and an evaluation of the third-party
accounts receivable portfolio, VA determined that 45 days provided a
more reasonable time for payment processing.
[23] Under 38 U.S.C. § 1729, VA is not authorized to collect these
amounts from third-party insurers.
[24] 38 U.S.C. § 1729.
[25] By law, VA has a right to seek reimbursement from third-party
insurance companies for up to 6 years after it provided medical
services to veterans with nonservice-connected conditions. 38 U.S.C. §
1729(b)(2)(C). However, according to a VA official, VA has entered into
contracts with many insurers agreeing to a shorter recovery period in
return for other health care provider contractual benefits, such as a
higher reimbursement level. We did not independently verify the
contractually limited billing periods for particular services provided
or whether the billing periods had expired for the billable amounts
associated with those services.
[26] The Health Insurance Portability and Accountability Act of 1996
(HIPAA), as implemented by the HIPAA Privacy Rule, establishes federal
privacy standards for the use and disclosure of an individual's
protected health information. See Pub. L. No. 104-191,
§ 264, 110 Stat. 1936, 2033-34 (Aug. 21, 1996); 45 C.F.R. pt. 164
subpt. E ("privacy of individually identifiable health information").
To comply with HIPAA, health care providers and health insurance
companies often require patients to sign release forms authorizing
limited use and disclosure of the protected health information for
specified purposes, such as payment for health care.
[27] VA Handbook, 4800.14, Section 4, "Third-Party Receivables Under
Fiscal Activity Jurisdiction."
[28] VHA Handbook, 4800.14, Section 4 (b) (2).
[29] VHA Handbook 4800.14, Appendix B.
[30] CBO was established in April 2002 as the single accountable
authority for the development of administrative processes, policy,
regulations, and directives associated with the delivery of VA health
benefit programs. CBO is composed of independent offices in the field
that are dedicated to health benefits administration and revenue-
related programs.
[31] VHA Directive 2006-026, Sections 1 and 2.
[32] VHA Directive 2006-035, Sections 1 through 4.
[33] VHA Directive 2007-030, Sections 2 and 4.
[34] VA Handbook 1907.03, Sections 12, 13, and 5, respectively.
[35] See H.R. Conf. Rep. No. 109-305, at 43 (Nov. 18, 2005); H.R. Rep.
No. 109-95, at 56 (May 23, 2005); Military Quality of Life and Veterans
Affairs Appropriations Act, 2006, Pub. L. No. 109-114, tit. II, 110
Stat. 2372, 2384-85 (Nov. 30, 2005).
[36] In the conference report accompanying its fiscal year 2002
appropriation, VA was directed to begin a demonstration project of a
patient financial services system installed and operated by a
contractor. H.R. Conf. Rep. No. 107-272, at 56 (Nov. 6, 2001); see also
H.R. Rep. No 107-159, at 11 (July 25, 2001).
[37] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). This document was
prepared to fulfill our statutory requirement under 31 U.S.C. 3512 (c),
(d), commonly known as the Federal Managers' Financial Integrity Act of
1982, to issue standards that provide the overall framework for
establishing and maintaining internal control.
[38] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G
(Washington, D.C.: August 2001). This document was prepared to assist
agencies in maintaining or implementing effective internal control and,
when needed, to help determine what, where, and how improvements can be
implemented. Although this tool is not required to be used, it is
intended to provide a systematic, organized, and structured approach to
assessing the internal control structure.
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, 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 of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
