For fiscal year 2003, VA reported that it  collected third-party payments of $804 million, a 6 percent increase over  the $760 million collected in 2002 and a 49 percent increase over the $540  million collected in fiscal year 2001. At the three medical centers we  visited, we 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, medical centers did not  always bill insurance companies in a timely manner. According to medical  center officials, timeliness of billing is affected by, among other things,   (1) VA’s ability to verify and update a patient’s third-party insurance  information, (2) whether physicians and other health care providers  properly document the patient’s treatment so a bill can be coded  appropriately, (3) the extent of manual intervention to process the bill, and  (4) workload. However, the Plan has not been fully implemented. Therefore, it is too early to determine the extent to which it will address  operational problems and increase collections. Promptly invoicing insurance companies for care provided is a sound  business practice and should result in improved cash flow for VA.   Officials  at each of the three medical centers cited verifying and updating patients’  third-party insurance information as a continuing impediment to billing  third-party insurance companies in a timely manner. These two factors could negatively  affect third-party collections. Medical center officials at the three sites we visited told us that staff  shortages and a heavy workload contributed to noncompliance with  follow-up procedures. The Handbook describes procedures for following up on partial payments  from insurance companies. VA Initiatives Are Under Way to Address Operational Problems

VA’s current Revenue Action Plan includes 16 actions designed to increase  collections by improving and standardizing the collections processes. Several of these actions are aimed at reducing billing times and backlogs,  many of which have already been implemented. Specifically, medical  centers are updating and verifying patients’ insurance information and  improving health care provider documentation. In addition, hiring  contractors to code and bill old cases is reducing backlogs. In addition to actions already taken, VA’s Plan has several other initiatives  under way for improving billing times and increasing collections. The remittance advice, which will  be attached to VA health care claims, will enable secondary insurance  companies to determine the correct amount to reimburse VA.  Further, VA  believes it will be able to more accurately reflect the amount of its  outstanding receivables and be in a strengthened position to follow up on  partial payments, which it deems incorrect. Although the Plan provides another step forward in potentially improving  operations and increasing collections, it is still in progress and many of the  actions are not scheduled for  implementation until at least fiscal year 2005.
Why GAO Did This Study

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.

What GAO Found

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.