VA can bill insurers for treatment of conditions that are not a result of  injuries or illnesses incurred or aggravated during military service. The medical documentation process involves properly  documenting the health care provided to patients by physicians and other  health care providers. In September 1999, VA adopted a fee schedule, called “reasonable  charges.” Reasonable charges are itemized fees based on diagnoses and  procedures. This schedule allows VA to more accurately bill for the care  provided. Third-Party Collections Increased

For fiscal year 2002, VA collected $687 million in insurance payments, up  32 percent compared to the $521 million collected during fiscal year 2001. Collections through the first half of fiscal year 2003 total $386 million in  third-party payments. Operational Problems Limit Collections, but VA Lacks an Estimate of Uncollected Dollars

Studies have suggested that operational problems—missed billing  opportunities, billing backlogs, and inadequate pursuit of accounts  receivable—limited VA’s collections in the years following the  implementation of reasonable charges. 2001 Plan to Improve Collections Is Partially Implemented; Other Initiatives Being Developed

VA continues to implement its 2001 Improvement Plan, which is designed  to increase collections by improving and standardizing VA’s collections  processes. These problems include  unidentified insurance for some patients, insufficient documentation for  billing, coding staff shortages, gaps in the automated capture of billing  data, and insufficient pursuit of accounts receivable. When fully implemented, the plan’s actions are intended to improve  collections by reducing operational problems, such as missed billing  opportunities. Information obtained from CBO in April  2003 indicates that 10 are complete and 7 are scheduled for  implementation by the end of 2003. Implementation of the remaining  actions will begin in 2004 as part of a financial system pilot with full  implementation expected in 2005 or 2006. Officials in the office told us that they have  developed a new approach for improving third-party collections that can  help increase revenue collections by further revising processes and  providing a new business focus on collections. Concluding Observations

As VA faces increased demand for medical care, particularly from higher- income veterans, third-party collections for nonservice-connected  conditions remain an important source of revenue to supplement VA’s  appropriations. VA has been improving its billing and collecting under a  reasonable-charges fee schedule it established in 1999, but VA has not  completed its efforts to address problems in collections operations. In  this regard, it is important that VA develop a reliable estimate of  uncollected dollars. VA also does not have a complete measure of its full  collections costs. Consequently, VA cannot determine how effectively it  supplements its medical care appropriation with third-party collections. Related GAO Products

VA Health Care: Third Party Collections Rising as VA Continues to  Address Problems in Its Collections Operations. GAO-03-145. Washington,  D.C.: January 31, 2003.
Why GAO Did This Study

The Department of Veterans Affairs (VA) collects health insurance payments, known as third-party collections, for veterans' health care conditions it treats that are not a result of injuries or illnesses incurred or aggravated during military service. In September 1999, VA adopted a new fee schedule, called "reasonable charges," that it anticipated would increase revenues from third-party collections. In January 2003, GAO reported on VA's third-party collection efforts and problems in collections operations for fiscal year 2002 as well as VA's initiatives to improve collections (VA Health Care: Third-Party Collections Rising as VA Continues to Address Problems in Its Collections Operations, ( GAO-03-145 , Jan. 31, 2003)). GAO was asked to discuss its findings and update third-party collection amounts and agency plans to improve collections.

What GAO Found

VA's fiscal year 2002 third-party collections rose by 32 percent over fiscal year 2001 collections, to $687 million, and available data for the first half of fiscal year 2003 show that $386 million has been collected so far. The increase in collections reflects VA's improved ability to manage the larger billing volume and more itemized bills required under its new fee schedule. VA managers in three regional health care networks attributed billings increases to a reduction of billing backlogs and improved collections processes, such as better medical documentation prepared by physicians, more complete identification of billable care by coders, and more bills prepared per biller. Although collections are increasing, operational problems, such as missed billing opportunities, persist and continue to limit the amount VA collects. VA has been implementing the action items in its Revenue Cycle Improvement Plan of September 2001 that are designed to address operational problems, such as unidentified insurance for some patients, insufficient documentation of services for billing, shortages of billing staff, and insufficient pursuit of accounts receivable. VA reported in April 2003 that 10 of 24 action items are complete; 7 are scheduled for implementation by the end of 2003; and the remaining actions will begin in 2004 with full implementation expected in 2005 or 2006. These dates are behind VA's original schedule. In addition, the Chief Business Office, established in May 2002, has developed a new approach that combines the action items with additional initiatives. Given the growing demand for care, especially from higher-income veterans, it is important that VA resolve its operational problems and sustain its commitment to maximizing third-party collections. It is also important for VA to develop a reliable estimate of uncollected dollars and a complete measure of its collections costs. Without this information, VA cannot evaluate its effectiveness in supplementing its medical care appropriation with third-party dollars.