VA Health Care:

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

GAO-08-675: Published: Jun 10, 2008. Publicly Released: Jul 10, 2008.

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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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established a formal review process and developed standardized reports for managing and overseeing medical center billing performance. VA's policy requires each Facility Director to establish appropriate controls related to reasons not billable (RNB) standard operating procedures, ensure there is a monthly review process for the Reasons Not Billable Reports and Encoder Case Comments Reports, and take corrective actions as necessary. The policy also requires each facility's Compliance and Business Integrity Officer and Compliance Committee to review the results of the supervisors' review of monthly Reasons Not Billable Reports and analyze and document related corrective actions. Further, VA standardized the list of "reasons not billable" (RNB) codes which facilitated the monitoring of staff compliance with third-party billing requirements.

    Recommendation: To assure effective VA-wide oversight of billings and collections with regard to third-party insurers, the Secretary of Veterans Affairs should 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, to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established a review process to confirm that accounts receivable staff are adhering to the requirement to provide specific explanations for any adjustments to decrease accounts receivables owed from third-party insurers. In 2009, VA Financial Quality Assurance Managers began audits of accounts receivable adjustments and terminations at each facility, based on a sample of accounts receivable, and they provide this information to facility management to track compliance with requirements related to third-party follow-up.

    Recommendation: To assure timely follow-up and documentation of unpaid thirdparty billings, the Secretary of Veterans Affairs should establish a process requiring medical centers to confirm that accounts receivable staff are following the requirement in Veterans Health Administration (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 to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established a mechanism requiring medical centers to review and monitor their accounts receivable staffs' adherence to requirements regarding documenting a summary of follow-up contacts on unpaid third-party billings. In fiscal year 2008, quality assurance staff in each VHA facility began monthly reviews to determine whether staff at the facilities are entering appropriate comments in the payment system when following up on third-party accounts receivables, in accordance with VA policy. Each month, quality assurance staff select random samples of third-party receivables from every medical center and determine whether follow-up on each sampled receivable was done in accordance with VA requirements. The results of these reviews are provided to facility management to track compliance and take corrective actions as needed.

    Recommendation: To assure timely follow-up and documentation of unpaid thirdparty billings, the Secretary of Veterans Affairs should 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, to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established a process requiring medical centers to review and monitor their accounts receivable staffs' adherence to requirements regarding timelines for following up on unpaid third-party billings. In fiscal year 2008, quality assurance staff in each facility instituted monthly reviews to determine accounts receivable staffs' compliance with the required timelines. The results of these monthly reviews are provided to facility management so they can track compliance and take corrective actions as needed.

    Recommendation: To assure timely follow-up and documentation of unpaid thirdparty billings, the Secretary of Veterans Affairs should 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 to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established procedures requiring medical center management to use management reports to monitor the accuracy and timeliness of third party billing determinations and take corrective action as needed. In December 2008, VA issued guidance titled Reviewing Reasons Not Billable Report Data which states that VHA facility supervisors (Revenue Coordinators or Billing Supervisors) are to review Reasons Not Billable Reports for their facility on a monthly basis. The purpose of this report is to validate the accuracy and timeliness of the reasons not billable (RNB) determinations entered into VA's billing system by VA coding staff and to take corrective actions as needed. VA formalized this review process when it issued the policy in a VHA Directive. The policy requires each Facility Director to establish appropriate controls related to RNB standard operating procedures, ensure there is a monthly review process for the Reasons Not Billable Reports, and take corrective actions as necessary. The policy also requires each facility's Compliance and Business Integrity Officer and Compliance Committee to review the results of the supervisors? review of monthly Reasons Not Billable Reports and analyze and document related corrective actions. In addition to the Reasons Not Billable Report, management at VHA facilities monitor billing timeliness using Days to Bill metric.

    Recommendation: To assure that all amounts that should be billed to third-party insurers are billed in an accurate and timely manner, the Secretary of Veterans Affairs should 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 to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  6. Status: Closed - Implemented

    Comments: The Department of Veterans Affairs (VA) established policies and procedures for reviewing and monitoring patient encounters determined to be nonbillable, which coding staff enter in VA's billing system as "reasons not billable" (RNB). Specifically, in December 2008, VA issued guidance for VHA facility supervisors to review Reasons Not Billable Reports for their facilities on a monthly basis to validate the accuracy of the RNBs entered into VA's billing system. The guidance establishes procedures for performing the monthly reviews. VA formalized the RNB review process when it issued its policy in a VHA Directive. The policy requires each Facility Director to establish appropriate controls related to RNB standard operating procedures, ensure there is a monthly review process for the Reasons Not Billable Report, and take corrective actions as necessary. The policy also requires each facility's Compliance and Business Integrity Officer, in conjunction with the facility?s Compliance Committee, to review the outcome of the monthly management reviews and analyze and document related corrective actions.

    Recommendation: To assure that all amounts that should be billed to third-party insurers are billed in an accurate and timely manner, the Secretary of Veterans Affairs should 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 to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

  7. Status: Closed - Implemented

    Comments: In fiscal year 2008, quality assurance staff in each VHA facility began monthly reviews to determine whether staff in individual medical facilities are (1) following up on third-party accounts receivables in accordance with established timelines and (2) entering appropriate comments in the payment system when following up on third-party accounts receivables. The results of the reviews are forwarded to VHA's Chief Business Office for analysis on a VHA-wide basis. Further, according to VA, facility Internal Control Departments test adherence to the policy regarding third-party follow-up during their annual monitoring of facilities' Accounts Management Departments.

    Recommendation: To assure effective VA-wide oversight of billings and collections with regard to third-party insurers, the Secretary of Veterans Affairs should 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, to maximize revenue from third-party insurer billings and collections.

    Agency Affected: Department of Veterans Affairs

 

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