VA Medical Centers:

Further Operational Improvements Could Enhance Third-Party Collections

GAO-04-739: Published: Jul 19, 2004. Publicly Released: Jul 21, 2004.

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In the face of growing demand for veterans' health care, GAO and the Department of Veterans Affairs Office of Inspector General (OIG) have raised concerns about the Veterans Health Administration's (VHA) ability to maximize its third-party collections to supplement its medical care appropriation. GAO has testified that inadequate patient intake procedures, insufficient documentation by physicians, a shortage of qualified billing coders, and insufficient automation diminished VA's collections. In turn, the OIG reported that VA missed opportunities to bill, had billing backlogs, and did inadequate follow-up on bills. While VA has made improvements in these areas, GAO was asked to review internal control activities over third-party billings and collections at selected medical centers to assess whether they were designed and implemented effectively.

VA has continued to take actions to reduce billing times and increase third-party collections. Collections of third-party payments have increased from $540 million in fiscal year 2001 to $804 million in fiscal year 2003. However, at the three medical centers visited, GAO found continuing weaknesses in the billings and collections processes that impair VA's ability to maximize the amount of dollars paid by third-party insurance companies. For example, the three medical centers did not always bill insurance companies in a timely manner. Medical center officials stated that inability to verify and update patients' third-party insurance, inadequate documentation to support billings, manual processes and workload continued to affect billing timeliness. The detailed audit work at the three facilities GAO visited also revealed inconsistent compliance with follow-up procedures for collections. For example, collections were not always pursued in a timely manner and partial payments were accepted as payments in full, particularly for Medicare secondary insurance companies, rather than pursuing additional collections. VA's current Revenue Action Plan (Plan) includes 16 actions designed to increase collections by improving and standardizing collections processes. Several of these actions are aimed at reducing billing times and backlogs. Specifically, medical centers are updating and verifying patients' insurance information and improving health care provider documentation. Further, hiring contractors to code and bill old cases is reducing backlogs. In addition to actions taken, VA has several other initiatives underway. For example, VA is taking action to enable Medicare secondary insurance companies to determine the correct reimbursement amount, which will strengthen VA's position to follow up on partial payments that it deems incorrect. Although implementation of the Plan could improve VA's operations and increase collections, many of its actions will not be completed until at least fiscal year 2005. As a result, it is too early to determine the extent to which actions in the Plan will address operational problems and increase collections.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On January 3, 2007, VA modified and reissued VA Handbook 4800.14, Medical Care Debt, to explain requirements for performing and documenting the first, second, and third follow-ups with third-party insurers, including the need to document the insurance company contact's name, title, and phone number and provide a brief summary of the discussion with third-party insurer contact.

    Recommendation: To facilitate more timely billings and improve collection operations, the Secretary of Veterans Affairs should direct the Under Secretary for Health to reinforce the requirement for accounts receivable staff to enter the insurance company contact's name, title and phone number and the follow-up date when making follow-up phone calls.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: Following issuance of our report, VA took a number of corrective actions. On July 19, 2004, VHA's Weekly National Conference call emphasized the findings in this report and reiterated to staff the importance of complying with the handbook. In addition, the VHA Chief Business Office began working with the Management Quality Assurance Service to assess accounts receivable balances every six months with the next report being completed in March 2005. On December 28, 2006, VHA issued revised procedures in VHA Handbook 4800.14 to identify roles and responsibilities for staff that perform third-party revenue functions, including responsibilities for compliance monitoring. An earlier Handbook revision included the 30-day follow-up. However, with implementation of the Medicare Remittance Advice (MRA) process, and an evaluation of the third party accounts receivable portfolio, VA determined that 45 days provided a more reasonable time for payment processing as addressed in the December 2006 Handbook revision. In addition, on April 11, 2007, VHA provided training to a broad group of staff on policies for third-party collections, including follow-up documentation requirements. VHA also issued a Financial Management and Accounting Alert on May 22, 2007, to reinforce applicable VA policies.

    Recommendation: To facilitate more timely billings and improve collection operations, the Secretary of Veterans Affairs should direct the Under Secretary for Health to reinforce to accounts receivable staff that they should perform the first follow-up on unpaid claims within 30 days of the billing date, as directed by VA Handbook 4800.14, Medical Care Debts, and establish procedures for monitoring compliance.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: Based on the June 28, 2006, survey results, the workgroup made several recommendations directed at maximizing coding productivity and assuring data quality. For example, the workgroup recommended that only qualified, competent coders be utilized and that non-coding 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 addition, the workgroup established a minimum accuracy standard of 95 percent, which was implemented through the revisions to VA Handbook 1907.03, issued on November 2, 2007, established the 95-percent accuracy standard.

    Recommendation: To facilitate more timely billings and improve collection operations, the Secretary of Veterans Affairs should direct the Under Secretary for Health to, based on the workload analysis, consider making the necessary resource adjustments.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: In response to this recommendation, VA formed a workgroup and performed in-depth surveys at 148 medical facilities to determine whether the medical facilities had established and implemented productivity and accuracy standards. On June 28, 2006, VA issued a report on the workgroup's survey results, entitled Scope of Work and Performance Levels for Coders. Survey results, which were based on a 100-percent response rate by Health Information Managers or Coding Supervisors, showed a disparity in productivity rates among both sites and individual coders. The workgroup reported that the majority of facilities surveyed had implemented coding productivity standards and these standards are fairly consistent.

    Recommendation: To facilitate more timely billings and improve collection operations, the Secretary of Veterans Affairs should direct the Under Secretary for Health to perform a workload analysis of the medical centers' coding and billing staff.

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Implemented

    Comments: On December 28, 2006, VHA issued revised procedures in VHA Handbook 4800.14 to identify roles and responsibilities for staff that perform third-party revenue functions, including responsibilities for compliance monitoring. On January 3, 2007, VA modified and reissued VA Handbook 4800.14, Medical Care Debt, to explain requirements for performing and documenting the first, second, and third follow-ups with third-party insurers. The Handbook established a requirement that the first follow-up be performed 45 days from the date the initial bill was generated. The Handbook requires the second follow-up to be made 21 days after the first follow-up contact, and the third follow-up to be made 14 days after the second follow-up contact, as appropriate.

    Recommendation: To facilitate more timely billings and improve collection operations, the Secretary of Veterans Affairs should direct the Under Secretary for Health to augment VA Handbook 4800.14, Medical Care Debts, by either specifying a date or providing instructions for determining an appropriate date for conducting second follow-up calls to insurance companies.

    Agency Affected: Department of Veterans Affairs

 

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