Collections Have Increased in the Past Year, but Underlying Problems Continue

If VA’s current pattern of third-party collections continues into the last months of fiscal year 2001, VA will significantly increase its third-party collections for the first time since fiscal year 1995. Not only do long-standing problems in revenue operations appear to persist—which have been heightened with the implementation of reasonable charges—when compared to private sector benchmarks, VA’s collections performance is poor. VA expected its collections to increase as a result of its reasonable charges billing system, which was implemented in September 1999. Efforts to Improve Collections Provide Little Basis to Select the Best Alternative for Optimizing Net Revenue

The various efforts VA has undertaken to improve its revenue operations fall short of providing a basis to select among the two major alternatives— contracting out or using VA staff. For example, contractors identified the need to establish an interface with VA’s data systems. Current Improvement Plan Focuses on Enhancing In- House Operations, Not Net Revenues

VA’s Revenue Cycle Improvement Plan, finalized in September 2001, does not position the Department to choose between the two major alternatives for optimizing its third-party collections because the plan does not call for a comprehensive comparison of these two options nor does it focus on net revenues—collections minus operations costs.
What GAO Found

The Department of Veterans Affairs (VA) has reversed the general decline in its third-party collections for the first time since fiscal year 1995. The fiscal year 2001 increase appears to be largely the result of VA's implementation of a new system, known as the reasonable charges billing system, which allowed VA to move from a flat-rate billing system to one that itemizes charges. However, long-standing problems in VA's revenue operations persist, and VA's collections performance is poor when compared to that of the private sector. VA's attempts at consolidation using either in-house or contractor staff have provided little basis for selecting the best alternative to VA's collections problems. Also, VA's recent 2001 Revenue Cycle Improvement Plan does not call for a comprehensive comparison of alternatives, nor does it focus on net revenues--collections minus operations costs. To collect the most funds for veterans' medical care at the lowest cost, VA needs to develop a business plan and detailed implementation approach that will provide useful data for optimizing net revenues from third-party payments.