VA’s Disjointed Accounting System Likely Misses Out on Billions

by Matt Townsend

The Department of Veterans Affairs covers care connected to military service, but if a veteran has private health insurance that can pay for care not connected to a service disability, the VA can bill the insurer. Although the VA has more than doubled its collections from insurers since the mid-1990s, a little-noticed Government Accountability Office report recently found that the VA likely missed out on billions of dollars from insurers because of a disorganized, disjointed accounting system.

The GAO audited 18 of the 153 medical centers in the VA system and found $290 million in unbilled services from documentation, coding and billing errors and other reasons. The GAO also cited more than $1 billion in medical costs that the VA couldn’t give valid reasons for why they weren’t billed. And in a random sampling of 260 bills from across the entire system to third-party insurers, the GAO found that the VA collected only 47 percent of the money. (The GAO also probed VA’s collection methods in 1999 and 2004.)

“In the private sector, billing is their lifeblood," said Christopher Needham, senior legislative associate for the Veterans of Foreign Wars. "At the VA, there are no standardized procedures [for billing and collecting]."

Since a law in 1996 increased eligibility and access to VA services, the number of patients the VA serves has grown by nearly 50 percent, to 5.6 million last year. That growth has brought in higher-income veterans who have private health insurance and the potential for a lot more collections. But because VA facilities have their own billing methods, no one can estimate how much money could be collected.

"That’s a collection question that we get asked a lot," said Stephanie Mardon, the deputy at the VA’s chief business office for revenue operations. "It’s a challenge to determine the upper threshold."

A major hurdle for the VA has been that it was never created with a complex billing system in mind. The VA only began billing insurance companies in 1986 and that was on a small scale.

"It’s not something we’ve been at for 30 years," added Mardon. "That’s certainly why we strive to continue to improve businesses’ processes."

One of the bright spots for the VA in the report was the performance of eight medical centers in the audited group that had their billing done at a consolidated patient account center (CPAC), which employed a contractor to train government employees to use private sector business practices. The CPAC, a pilot program started in 2005, does the billing for the eight centers at one location and had better collection rates and more accountability for the billing process.

A bill now being considered in the House of Representatives would create seven more CPACs in the next five years. The bill passed the Veterans Affairs committee last week. It has yet to be introduced in the Senate. As it stands, the CPAC audited by the GAO is the only one in operation.

• GAO report here… http://www.gao.gov/docsearch/locate?to=http%3A%2F%2Fwww.gao.gov%2Fnew.items%2Fd08675.pdf
• Report summary is here… http://www.gao.gov/docsearch/abstract.php?rptno=GAO-08-675

Report Summary below: 

VA Health Care: Ineffective Controls over Medical Center Billings and Collections Limit Revenue from Third-Party Insurance Companies

GAO-08-675

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.

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.

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