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. 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. 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. In fiscal year 2007, the  eight CPAC centers accounted for over $508.7 million in unbilled amounts. 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. 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. 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. 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. Revenue Cycle Enhancement Reviews. Consolidated Patient Account Centers (CPAC). 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. 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. 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. 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.
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. 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.