oversight

Inappropriate Billing by the Veterans Administration for Electron Microscopy Services to Non-Veterans

Published by the Government Accountability Office on 1977-09-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          DOCUMENT RESUtIE
03496 - [A26'3833)

[Inappropriate Billing by the Veterans Administration for
Electron icroscopy Services to Non-Veterans]. HED-77-148;
E-133044o September 16, 1977. 5 pp.
Report to P-tt Cleland, Administrator of Veteran Affairs,
Veterans Adlinistiati,    by Gregory J. Ahart, Director, Human
Resources Div.
Issue Area: Health Programs: Federal Government Control of Costs
    Through irect Delivery Programs (1216).
Contact: Human Resources Div.
Budget Fulnction: Veterans Benefits and Services: Hospital and
    Medical Care for Veterans (703).
Crganization Concerned: Veterarz Administration: VA Hospital,
    Gainesville, FL; Veterans dministration: VA Hospital,
    Miami, F'; Veterans Administration: VA Hospital, Tampa, FL.
Congressional Relevance: House Committee on Veterans' Affairs;
    Senate Ccmmittee on Veterans' Affairs.
Authority: 8 U.S.C. 5C53. VA epaitment of Medicine and Surgery
    Manual G-12, M-1, part I.

          Three Veterans Administration (VA) hospitals in Florida
were evaluated to determine how much of the electron microscopy
services were performed on non-veteran patient specimens in
calendar year 1976 and whether fees were collected for the
services. Findings/Conclusions: About 55 percent of the
electron microscopy services performed in calendar year 1976 by
the diagnostic units at the Miami, Tampa, and Gainesville VA
hospitals were on specimens frcm non-VA patients in community
hospitals. he VA hospitals had written agreements for sharing
services with some of the non--VA hospitals, but were performing
most of the electron microscopy services without benefit of a
sharing agreement. The three VA hospitals lost about $102,000 in
revenue in 1976 because they either did not bill community
hospitals or they billed at rates less than those required by VA
regulations. In some instances, billing- were not made even
though sharing agreements establishing reimbursement procedures
and rates had been negotiated. In addition, some community
hospitals that had received free services from VP had billed
either Medicare or their patient's private insurance companies
for the studies. Reccmmendations: The Administrator of Veteran
Affairs should reemphasize tc all VA medical facilities the need
to fcllow established statutory and regulatory requirements for
recovering the cost of all medical services furnished to non-VA
patients. He should also direct all VA medical facilities which
furnished electron microscopy cr any other services to or on
behalf of non-VA patients in 1976 to establish the appropriate
unit costs and to bill the patients or medical facilities for
those services. (SW)
    LX   )       S).                     UNITED STATES GENERAL ACCOUNTING OFFI.E
                                                  WASHINGTON, D.C. 20548


             HUMAN RSOUPtRcS
1            4    DIV1tS1ON                                           'SEP   16   1977
                  B-133044



                  The  oiorable Max Cleland
                  Administrator of Veterans Affairs
                  Veterans Administration

                   Dear Mr. Cleland:

                        During a General Accounting Office review of the utilization
                   and distribution of electron microscopes (EMs) in selected Veterans
                   Administration (VA) hospitals, we observed that three hospitals in VA
                   Medical District 12--Miami, Tampa, and Gainesville, Florida--lost
                   about $102,000 in revenue during calendar year 1976 because they
                   either did not bill or did not bill at the appropriate rate. for EM
                   diagnostic services furnished to non-Federal hospitals. Although we
                   did not develop information on billing practices and procedures of
                   VA hospitals in other VA medical districts, we believe that this
                   problem may not be limited just to District 12 hospitals, nor to
                   just EM services.   Thus, because of the possibility that the
                   Government could be losing substantial amounts of revenue, we are
                   bringing this situation to your attention for corrective action. A
                   separate report is being prepared on the overall results of cur
                   review of electron microscopes.

                   AUTHORITY FOR PROVIDING SERVICES
                   O0 NON-VA MEDICAL FACILITIES

                             Statutory authority for VA hospitals to enter into agreements
                       for sharing services and facilities with ther hospitals, medical
                       schools, or medical facilities is contained in 38 U.S.C. 5053.    The
                       statute  requires that VA be reimbursed for service  provrided under
                       such sharing agreements.   Specifically, 38 U.S.C. 5053(b) states
                       that:

                                 "Arrangements entered into * * * shall provide
                                  for reciprocal reimbursement based on a charge
                                  which covers the full cost of services rendered,
                                  supplies used, and including normal depreciation
                                   nmd amortization costs of equipment."

                            ~v.              '-sharing specialized medical resources are
                       discussea             ations (VA's Departmnt of Medicine and
                       Surgery Manua,         M-l, Part I), which state that VA may join
                       with non-VA hc         in a coopei~tive effort by establishing



                                                                                         HRD-77-148
                                                                                         (40130)
B-133044



mutual use and exchange of use agreements. These regulations
require also that VA charge for the resources used for rendering
specialized umedical services to non-VA medical facilities.

     Furthermore, VA regulations (Part V, VA Controller Policy
hanual) describe how costs are to be developed for billing non-VA
facilities receiving specialized medical services.      Specifically,
the regulations state that the costs will be those shown on the
hospital's Report of Medical Care Distribution Accounts (RCS 14-4).
This quarterly relort includes all direct and indirect cost
elements for each laboratory service, including EM services.
Local VA hospital and VA central office overhead charges also are
included in the total costs shown on the report.     The unit cost
for each of the specialized medical services   is  then  determined
by dividing the  total costs  by the number of units  produced  by
the service  (i.e., number of  specimens studied  by  he  E  unit).

EXTENT OF PROVIDING EM SERVICES
TC ON-VA MDICAL FACILITIES

     About 5 percent of th;ne electron microscopy services performed
in calendar year 1976 by the diagnostic units at the Miami, Tampa,
and Gainesville VA hospitals were on specimens from non-VA patients
in community hospitals. The VA hospitals had written sharing
agreements with some of the non-VA hospitals, but were performing
most of the electron microscopy services with!out benefit of a
sharing agreement.

     In calendar yea 1976, the Miami VA hospital had written sharing
agreements with 19 medical facilities, but it provided electron
microscopy services to 19 other facilities with which it had no
sharing agreements.  During 1976, the Tampa VA hospital furnished
electron microscopy services to 12 community hospital and laboratories,
but had no sharing agreements before December 1976 when it entered
into an agreement with a large community hospital.  The Gainesville
VA hospital provided electron microscopy services to five community
hospitals, all under sharing agreements.

LOST REVENUE TO THREE VA HOSPITALS

     The Miami, Tampa, and Gainesville VA hospitals lost about $102,000
in revenue in 1976 because they either did not bill    ommunity hospitals
for EM services performed on non-VA specimens  or they  billed at rates
less than tnose required y VA regulations.    In some instances,
billings were not made even though sharing agreements establishing
reimbursement procedures and rates had been negotiated.

     The following table summarizes the number of non-VA patient
specimens studied at eacn hospital, the amount of revenue received
and te amount of revenue lost by the Federal Government due to
iacK of illings and/or underbillings for electron microscopy
services.


                                  --
B-133044




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B-133044




     Of the 285 studies not billed by the Miami hospital, 277 were
of specimens received from community medical facilities which had no
sharing agreements with VA. The E Program Director at the Miami
hospital said he was unaware that VA could bill for services that
were not performed under a formal sharing agreement. Be added tat
the eight remw;.ning specimens were from hospitals with a sharing
agreement but were not billed through oversight. Billings for 43
additional studies were understated by about $53 each because the
hospital used inaccurate personnel costs and workload data in
computing the sharing agreement unit cost.

     The Tampa VA hospital's E Progrim Director said that he, too,
was naware that VA could bill for services provided without a
sharing agreement, and that this was the reason he did not bill
community hospitals for the 106 specimens studied by his unit.

      Tne Gainesville EM Program Director said that billings were
made for studies of all specimens received from non-Federal
hospitals except for 96 that he used in teaching or research. He
said he believed it was inappropriate for him to bill for specimens
used for these purposes. Be added, however, that a diagnosis was
re.questeC  y and prepared for tne patient's physician on each of
these 96 specimens.

     '.u addition, we found that some community hospitals that had
received "free" E studies from VA had billed either Medicare or
their patient's private insurance companies for the studies. We
traced a limited sample of 20 VA-provided EM studies to patient
records at the community hospitals and found that the hospitals
had submitted bills for 5 of the 20 studies-Medicare had been
billed for two studies and private insurance companies had been
billed for the other three.

     Weaknesses in VA billing procedures were discussed with the
hospital directors and fiscal officers at all three hospitals.
These officials agreed that billings should have been prepared for
all h services provided to non-VA beneficiaries.    They said that
action would be taken by the hospitals  to (1) bill for EN services
already provided but not yet billed and  (2) establish  procedures
                                   c                  future.
to assure that appropriate billing are made in the

     We also obtained informal comments on our findings from VA
central office officials. These officials generally agreed with
our findings. we were also advised that, on July 7, 1977, the
Regionalization and Sharing staff, through the Associate Deputy
Cnief Medical Director for Operations, notified the Mi-mi VA
nospital that no authority exists to provice EM services to




                               -4
B-133044



community hospitals in the absence of a sharing agreement except
for humanitarian reasons. Howeve., since such services were provided,
an implied contract exists, and is sufficient basis for billing those
community hospitals hat received such services.

CONCLUSIONS AfND RECOMIENDATIONS

     The iami, Tampa, and Gainesville VA hospitals were not following
thc governing regulations which require that they recover the cost of
Eh services furnished to non-Federal facilities. If these hospitals
had billed for all E      ervices at the appropriate rates, the
Crvernment  would  have  realized  bout $102,000 in additional revenue
in 19'/6.  Because   of these weaknesses-in billing procedures, we
recommend  t:hat you

     -r- ,phasize to all VA medical facilities the need to
       ft :.o; established statutory and regulatory requirements
       fcz rcovering the cost of all medical services furnished
           uc:t-VA patients, and
           ns

           :'fC all V medical facilities which furnished EM or
        -.. other services to or on behalf of non-VA patients
       .n .!76 to establish the appropriate unit costs and
       t::     l the recipient patients/medical facilities for
       ~isc services.



     As vov know, section 236 if the Legislative Reorgnization Act
of 1970 r-,ires the head of a Federal agcn.y to send a written
statement. explaining what he has done about our recommendations to
the Souse Committee on Government Operations and the Senate Committee
on Goveznmental Affairs not later than 60 days after the date of the
report and to the House and Senate Committees on Appropriations with
the agency's first request for appropriations made more than 60 days
after the date of the report.

     we axe sending copies of this report to the Chairmen, house
Committeas .n Appropriations, the Fudget, Government Operations,
and Veterats' Affairs; the Senate Committees on the Budget,
Governmental Affairs, and Veterans' affairs; the Senate Appropria-
tions Suscommittee on HUD-Independent Agencies; and to the
Director, Office of rManagement and Budget.

     We would appreciate being informed on any actions :aken or
planned on the matters discussed in this report.

                                    Sincerely yours,



                                    Gregor'      ;
                                    Director    '

                                   -5-