oversight

VA Health Care: Better Procedures Needed to Maximize Collections From Health Insurers

Published by the Government Accountability Office on 1990-04-06.

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

        I      1
                           United.States    General    Accounting      Office
                           Report to the Ranking Minority
G;AO                       Member, Committee on Veterans’
                           Affairs, U.S. Senate


Aplill990
                           VA HEALTH CARE
                           Better Procedures
                           Needed to Maximize
                           Collections From
                           Health Insurers




                   RESTRICTED--       Not to be released outside     the
                   General Accounting   Office unless specifically
                   approved by the Office of Congressional
                   Relations.



GAO/HID90-64
Human Resources    Division

B-237001

April 6,199O

The Honorable Frank H. Murkowski
Ranking Minority Member
Committee on Veterans’ Affairs
United States Senate

Dear Senator Murkowski:

In response to your request, this report addresses the Department of Veterans Affairs’
collections from health insurers for the cost of care provided to certain insured veterans.

Basically, we found that collections from insurers greatly exceeded the cost of collection. But
we estimated that the Department had collected from insurers only about one-third of the
possible collections for medical services provided to insured veterans.

Unless you publicly announce its contents earlier, we plan no further distribution of this
report for 30 days. At that time we will send copies to the Secretary of Veterans Affairs and
other interested parties. The report was prepared under the direction of David P. Baine,
Director, Federal Health Care Delivery Issues. If you have any questions, you may call him
on (202) 275-6207. Other major contributors are listed in appendix XI.

Sincerely yours,




Lawrence H. Thompson
Assistant Comptroller General
Executive Summ~


             The Department of Veterans Affairs (VA) spends about $10 billion annu-
Purpose      ally providing health care to veterans, including those who have private
             health insurance coverage. To help reduce the federal budget deficit, in
             1986, the Congress established the right of the United States to collect
             from health insurers the cost of care provided to certain insured
             veterans.

             The Ranking Minority Member of the Senate Committee on Veterans’
             Affairs asked GAO to determine whether VA'S collections from health
             insurers exceeded its collection costs. He also asked whether VA had
             effective procedures to (1) identify insured veterans, (2) bill insurers,
             and (3) collect amounts owed.


             VA, with 159 medical centers, operates the largest health care delivery
Background   system in the United States. In response to the 1986 legislation, VA
             directed its medical centers to bill insurers for inpatient care costs. But
             VA allowed medical centers to decide whether to bill insurers for outpa-
             tient care.

             To assess VA'S billing and collection procedures, GAO visited six centers
             and reviewed records of randomly selected insured veterans who
             received care during 6 months of fiscal year 1988. GAO also sent a ques-
             tionnaire to all VA medical centers to obtain information on their identifi-
             cation, billing, and collection procedures, as well as costs.




             $96 million of these collections was attributable to inpatient health care;
             the remainder, to outpatient care.

             GAO estimates that VA collected from insurers only about one-third of the
             possible collections for medical services provided to insured veterans, VA
             centers could increase collections significantly if they (1) employed more
             effective methods to identify insured veterans and bill insurers and (2)
             committed additional resources to collection efforts. Centers are reluc-
             tant to make such a commitment because (1) all amounts collected must,
             by law, be returned to the U.S. Treasury and (2) additional collection
             costs centers incur are paid from their existing medical care budgets.




             Page2                                   GAO/IiRBSO-64 VA Cdlection~ From Insurers
                           Executive!%unmmy




Principal Findings

GAO Estimates VA’s         GAO estimates that VA could have collected an additional $223 million
                           from insurers in fiscal year 1988, about $180 million for inpatient care
Collections Potential      and about $43 million for outpatient care.

                           Data limitations introduce considerable uncertainty into the $223 mil-
                           lion estimate, but GAO believes that additional collections could have
                           been at least $55 million and perhaps as much as $392 million. (See
                           ch. 2.)


Insured Veterans Not       In four of the six centers visited, GAO found veterans admitted for inpa-
                           tient care who had private insurance policies not identified by VA. These
Always Identified          veterans made up 15 percent of the total identified by both VA and GAO
                           during the periods GAO sampled. VA could have billed insurers about
                           $318,000 for these veterans’ care. Center officials offered several expla-
                           nations for these missed billings, including (1) center admissions staffs’
                           failing to ask the right questions or (2) veterans being confused or afraid
                           that disclosures about insurance would jeopardize their admittance to
                           the centers.

                           The centers could have identified these veterans if their processes had
                           included steps to verify the information the veterans provided, such as
                           reviewing administrative and medical records or contacting employers.
                           Nationwide, about two-thirds of VA'S medical centers reported that they
                           did not verify veterans’ statements about insurance coverage. (See
                           ch. 3.)


Inpatient Care Costs Not   Even when centers identified insured veterans, they did not always bill
                           insurers, Five medical centers GAO visited did not bill $1.8 million of the
Always Billed              $7 million in inpatient care costs during the first 6 months of fiscal year
                           1988; GAO did not assess inpatient billings at one center visited. Billings
                           were missed because the centers relied on manual systems that were
                           flawed. For example, billing staffs were not notified when insured veter-
                           ans were discharged, and internal controls were inadequate to detect the
                           missed billings. (See ch. 4.)




                           Page3
                              Executive Sumnuuy




Outpatient Care Costs         Three medical centers GAO visited did not bill for any outpatient care,
Rarely Billed                 and the other three billed for such care only under certain conditions.
                              GAO estimates the six centers did not bill insurers for about $1.6 million
                              during the first 6 months of fiscal year 1988; an estimated $200,000 was
                              billed. Nationwide, 66 centers reported they did not bill insurers for out-
                              patient care, and 46 billed them for less than half of the outpatient care
                              provided in fiscal year 1988. (See ch. 6.)


Medical Centers Did Not       Of the 159 centers, 122 reported that adequate resources were not avail-
                              able to collect all health care costs from insurers in fiscal year 1988.
Commit Resources Needed       Officials at the centers GAO visited said that they would not commit
                              additional resources to the recovery effort until they received additional
                              resources from headquarters or were allowed to keep a portion of the
                              collections. (See ch. 7.)


                              GAO recommends that the Secretary of Veterans Affairs ensure that all
Recommendations               medical centers to bill for outpatient care. In addition, GAO recommends
                              that the Secretary ensure that each medical center has

                          l   effective procedures for (1) identifying all veterans with insurance and
                              (2) billing insurers for all inpatient and outpatient care provided to
                              insured veterans and
                          l   sufficient resources to fully implement identification, billing, and collec-
                              tion procedures. (See ch. 7.)


                              Given the substantial benefit to the government possible through maxi-
Matter for                    mizing insurance collections, the Congress should ensure VA has ade-
Consideration by the          quate resources to fully implement its recovery efforts. If adequate
Congress                      resources are not available through the budget process, the Congress
                              should consider amending 38 U.S.C. 629 to allow VA to keep a portion of
                              the amounts collected from insurers to pay its collection costs.
                              (See ch. 7.)


                              VA agreed with GAO'S recommendations and pointed out a number of
Agency Comments               actions it was taking to increase collections from health insurers, includ-
                              ing establishing a recovery task force for medical care costs. The task
                              force would be charged with developing a strategy to improve identifi-
                              cation, billing, and collection procedures as quickly as possible.



                              Page4                                  GAO/HRDSO-64VAcOllections FromInsurers
JZxecutlveSummary




VA recognized that additional funding is needed to properly carry out the
billing and collection effort; it proposed legislation in its fiscal year 1991
budget request to provide that funding (see app. X).




Page 6                                  GAO/XiRD-90-64VA Collectiona From Insurers
Contents


Executive Summary                                                                                    2

Chapter 1                                                                                           10
Introduction             VA’s Health Care Delivery System                                           10
                         VA’s Authority to Recover Health Care Costs                                10
                         VA’s Insurance Recovery Process                                            11
                         Objectives, Scope, and Methodology                                         12

Chapter 2                                                                                           16
VA   Ha   Not   Mawed    VA’s Collections Exceeded Costs                                            16
                         GAO Estimates Additional Collection Potential                              18
Its Insurance            Policy Decisions and Ineffective Procedures Limited VA’s                   18
Collections                   Collections

Chapter 3                                                                                           19
Need to Improve          Medical Centers Visited Not Identifying All Insured                        19
                             Veterans
Identification           Other Medical Centers Using Special Reviews                                21
Procedures at the
Medical Centers
Chapter 4                                                                                           23
Centers Need Better      Medical Centers Missing Substantial Billing Opportunities                  23
                         Internal Controls Lacking to Prevent Missed Billings                       25
Billing Procedures to    Bills Not Sent Promptly                                                    26
Recover the Costs of
Inpatient Care
Chapter 5                                                                                           29
VA Can Substantially     Billing for Outpatient Care Optional                                       29
                         Opportunities Exist for Substantial Collections                            31
Increase Recoveries of   Existing Procedures Hamper Outpatient Billing                              32
Outpatient Care Costs




                         Page 6                                GAO/HRD9O84 VA Collections From Insurers
                      Contents




Chapter 6
Medical Centers Did   Medical Center Collection Rates Vary Widely
                      Many Reductions in Payments Due to Policy Limitations
Not Collect All       Collections Reduced Because Insurers’ Requirements Not
Amounts Billed to          Met
                      Some Insurers Deny Payment Because Medicare Not                           38
Insurers                   Billed First

Chapter 7                                                                                       41
Stronger Management   VA Headquarters Guidance Inadequate                                       41
                      Medical Centers Did Not Commit Staff Needed                               41
Actions Needed to     Conclusions                                                               42
Maximize Insurance    Recommendations to the Secretary of Veterans Affairs                      43
                      Matter for Consideration by the Congress                                  44
Collections           Agency Comments                                                           44

Appendixes            Appendix I: VA’s Daily Rates Used to Prepare Bills to                     46
                          Health Insurers
                      Appendix II: Total Insurance Collections and Collections                  47
                          Per Average Daily Occupied Bed by Medical Center
                          (Fiscal Year 1988)
                      Appendix III: When Medical Centers Began Billing                          52
                          Insurers
                      Appendix IV: Estimating VA’s Potential Collections From                   53
                          Insurers
                      Appendix V: Methodology and Results for Our Review of                     56
                          Samples of Insured Veterans Receiving Inpatient
                          Care
                      Appendix VI: Methodology and Results for Our Review of                    59
                          Samples of Insured Veterans Receiving Outpatient
                          Care
                      Appendix VII: Projected Value of Amounts Collected and                    62
                          Reasons for Less Than Full Payment for Inpatient
                          Care Billed at Five Centers
                      Appendix VIII: Reasons for Denial or Partial Payment of                   63
                          Bills
                      Appendix IX: Factors Affecting Recoveries                                 65
                      Appendix X: Comments From the Department of Veterans                      66
                          Affairs
                      Appendix XI: Major Contributors to This Report                            69




                      Page 7                              GAO/IUtD9064 VA collections From insurers
          Contents




Tables    Table 3.1: Insured Veterans Identified During GAO Visits                20
              to Medical Centers
          Table III. 1: Center Responses                                          52
          Table V. 1: Projected Value of Inpatient Care Provided to               57
              Insured Veterans, October 1,1987, Through March
              31, 1988, and Not Billed to Insurers
          Table V.2: Projected Value of Inpatient Care Provided to                57
              Insured Veterans, October 1,1987, Through March
              3 1, 1988, and Billed to Insurers
          Table V.3: Centers’ Projected Collection Rates for                      58
              Inpatient Care Provided, October 1, 1987, Through
              March 31, 1988, and Billed to Insurers
          Table VI. 1: Projected Value of Outpatient Care Provided                60
              to Insured Veterans, October 1,1987, Through March
              31, 1988, and Not Billed to Insurers
          Table VI.2: Projected Value of Outpatient Care Provided                 60
              to Insured Veterans, October 1,1987, Through March
              3 1, 1988, and Billed to Insurers
          Table VI.3: Centers’ Collection Rates for Outpatient Care               61
               Provided, October 1, 1987, Through March 31, 1988,
               and Billed to Insurers
          Table VII. 1: Projected Values Billed to Insurers for                   62
               Inpatient Care, October 1,1987, Through March 3 1,
               1988, Collected and Not Collected From Insurers

Figures   Figure 1.1: Average Collection per Bed From Private                     13
               Health Insurers at VA Medical Centers GAO Reviewed
               (Fiscal Year 1988)
          Figure 2.1: VA’s Collections From Health Insurers by                    16
               Quarter (Oct. 1986-Mar. 1989)
          Figure 4.1: Projected Value of Inpatient Care Provided to               24
               Insured Veterans (Oct. 1987-Mar. 1988)
          Figure 4.2: Average Time Taken to Prepare Bills                         27
               (Oct. 1987-Mar. 1988)
          Figure 5.1: Percentage of Medical Centers That Billed for               30
               Outpatient Care (Fiscal Year 1988)
          Figure 5.2: Projected Value of Outpatient Care Provided                 31
               to Insured Veterans (Oct. 1987-Mar. 1988)
          Figure 6.1: Projected Value of Inpatient Care Billed                    35
               (Oct. 1987-Mar. 1988)




          Page 8                               GAO/HRD9O44 VA Cdlection~ From Ixwrem
Figure 6.2: Projected Value of Inpatient Care Billed at                     36
     Five Centers-Proportions    Collected and Not
     Collected (Oct. 1987-Mar. 1988)




Abbreviations

GAO       General Accounting Office
HCFA      Health Care Financing Administration
HMO       Health Maintenance Organizations
OMB       Office of Management and Budget
VA        Department of Veterans Affairs


Page9                                  GAO/HID-90-64 VACollections From Incurers
                      The Department of Veterans Affairs (VA) operates the largest health
                      care delivery system in the United States. The Veterans’ Health-Care
                      Amendments of 1986 established the right of the United States to
                      recover the costs of health care provided to certain veterans covered by
                      private health insurance. The Ranking Minority Member of the Senate
                      Committee on Veterans’ Affairs requested that we evaluate VA’S recov-
                      ery efforts.


VA’s Health Care      Most of these medical facilities are organized into 159 medical centers
Delivery System       throughout the United States. In fiscal year 1988, VA spent about
                      $10 billion providing medical care to veterans, including about 1.1 mil-
                      lion inpatient hospital stays and over 20 million outpatient visits.

                      Veterans eligible for medical care are classified into two broad catego-
                      ries: those with disabilities resulting from their military service and
                      those without such disabilities. Veterans with service-connected disabili-
                      ties are afforded the highest priority when seeking care at VA medical
                      centers.


                      Before 1986, in specified circumstances, VA could recover the reasonable
VA’s Authority to     costs of care for treatment of nonservice-connected disabilities covered
Recover Health Care   under a workers’ compensation law, a state law concerning no-fault
costs                 insurance, or a state or local program of compensation for victims of
                      personal violence. In emergency cases, VA could also charge for hospital
                      care or medical services provided to people otherwise ineligible for VA
                      care.

                      VA   could not recover from health insurers the cost of care provided to
                      many privately insured veterans because most insurance policies had
                      clauses barring reimbursement to VA facilities. In 1985, we recommended
                      that VA be permitted to recover from health insurers the costs of care
                      provided to privately insured veterans, except care related to service-
                      connected disabilities.’ The Veterans’ Health-Care Amendments of 1986
                      (title XIX of P.L. 99-272), which became law in April 1986, authorized
                      VA to recover the reasonable costs of care for the treatment of insured
                      veterans who do not have service-connected disabilities (hereafter
                      referred to as insured veterans). The cost of care provided to veterans

                      ‘L@slation to Authorize VA Recoveries From Private Health Insurance Would Result in Substantial
                      savings (GAO~-85-24,      Feb. 26,1985X



                      Page 10                                           GAO/HRD9@64VA Collections From Insmwa
                   Chapter 1
                   Introduction




                   who had service-connected disabilities could not be recovered, regard-
                   less of whether the care was related to a nonservice-connected condi-
                   tion.2 The law specified that all funds collected by VA be returned to the
                   U.S. Treasury.

                   The 1986 amendments authorized VA to receive payments from health
                   insurers just as non-v.4 health care providers do, except that VA is prohib-
                   ited from receiving Medicare or Medicaid payments. Insurers’ payments
                   to VA can vary considerably depending on the type of insurance. A
                   health insurer generally pays the covered health care costs less the
                   patient’s coinsurance (percentage of expenses the patient must pay )
                   and deductible amounts. The law prohibits VA from seeking reimburse-
                   ment for any coinsurance or deductible amounts required by health plan
                   contracts from insured veterans. Other types of insurers, such as health
                   maintenance organizations, would pay VA for care in limited situations,
                   for example, a medical emergency. Still other insurers pay the policy-
                   holders (with indemnity policies) fixed amounts per day of
                   hospitalization.


                   Recovering from health insurers is a three-step process-identifying
VA’s Insurance     veterans with health insurance, billing insurers for care, and collecting
Recovery Process   amounts owed. Within each medical center, the medical administration
                   service has responsibility for identifying insured veterans and billing for
                   their care, and the fiscal service has responsibility for collecting unpaid
                   bills and recording collected amounts. Counterpart units at headquarters
                   give technical assistance and general guidance. Medical centers were
                   given latitude to develop many of their own specific procedures for
                   identifying insured veterans, billing insurers for care, and collecting
                   amounts owed.

                   Each year, VA develops national daily billing rates, which cover all
                   related costs of care, including room and board, physicians’ costs, ancil-
                   lary services, and all interest and support costs. VA calculates the
                   amount to bill insurers for inpatient care by multiplying the number of
                   days of care by the daily rate. Different inpatient rates are developed
                   for specific types of care, for example, surgery or psychiatry. For out-
                   patient care, VA charges a fixed rate. VA fiscal year 1988 and 1989 billing
                   rates for most types of care are listed in appendix I.

                   *In March 1989, the Ranking Minority Member of the Senate Veterans’ Affairs Committee introduced
                   a bill (S. 573) that would authorize VA to recover the cost of care for nonservice-connected disabilities
                   of insured veterans who also have service-connected disabilities. This change would be in conformity
                   with GAO’s 1985 recommendation to recover for such care.



                   Page 11                                               GAO/HBD9064 VACdlectio~ Prom Insurers
                         Chapter 1
                         introduction




                         Senator Frank H. Murkowski, Ranking Minority Member of the Senate
Objectives, Scope, and   Committee on Veterans’ Affairs, asked us to determine whether VA'S col-
Methodology              lections from insurers were exceeding its costs to collect. In addition, he
                         asked us to evaluate whether VA had implemented effective procedures
                         to (1) identify veterans with health insurance coverage, (2) bill insurers
                         for all care provided to these veterans, and (3) collect amounts owed. In
                         addition, we estimated VA’S potential collections from health insurers
                         nationwide in fiscal year 1988.

                          To accomplish our objectives, we (1) reviewed relevant policies, proce-
                          dures, and studies and (2) interviewed VA officials at headquarters,
                          regional offices, and medical centers. We also visited six medical centers
                         to assess the effectiveness of VA’S recovery process. The centers were
                         judgmentally selected to gain a wide mix for several key factors, such as
                          (1) size (number of beds), (2) settings (for example, rural or urban), and
                          (3) collections per average daily occupied bed.3 Appendix II contains fis-
                          cal year 1988 information on the factors considered for each medical
                          center. As shown in figure 1.1, the centers were located in five of the
                          seven VA medical regions.




                         3We used collections per average daily occupied bed rather than total cokctions because the average
                         daily collection incorporated the size of the center into the assessments.



                         Page 12                                            GA0/HlW90-64VA(l!d.lectiona FromInsurers
--
                                              Chapter 1
                                              Introduction




Figure 1.1: Average Collection per Bed From Private Health insurers at VA Medical Centers GAO Reviewed (Fiscal Year 1988)


                      Seattle, WA
r~                    Region 6                                                                                                 Minneapolis, MN
         A                                                                                                                     Region 5
             1                                                                                                                 w3521

                                          I                  I   Lb-                      ,                                    ,       Region 4




                                                                                                                           L’      Albanv. NY


                                                                                                                                   Martinsbura. WV
                                                                                                                                   Region 2 -
                                                                                                                                   ($10,378)




                                                                                                                                   Bay Pines, FL
                                                                                                                                   Region 3
                                                                                                                                   ($1,039)




     L

                                                Note. The average collect!on amount is the total received from pnvate health Insurers dlvlded by the
                                                average number of occupied beds. The average collection amount for all medical centers was $1,910.


                                                At each of the six medical centers, we interviewed officials in the office
                                                of the director, medical administration service, and fiscal service to dis-
                                                cuss the internal control procedures for identifying insured veterans,
                                                billing insurers for care, and collecting from insurers. We also discussed
                                                factors that aided or impeded the centers’ recovery efforts.

                                                To test the effectiveness of each center’s procedures for identifying
                                                insured veterans, we worked with staff at five of the centers to conduct
                                                a special record review for veterans (1) without service-connected disa-
                                                bilities and (2) admitted to the centers but not identified as having


                                                 Page 13                                             GAO/HRD90-64VA Cdkctions From Insurers
  Chapter 1
  Introduction




  insurance.4 The review focused on identifying key indicators of insur-
  ance, such as employment, income, or previous insurance coverage. If
  possible insurance coverage was indicated, we asked the VA reviewer to
  interview the veterans before they were discharged to determine
  whether they had insurance. The test period at the five centers ranged
  from 14 to 35 days, depending in part on the availability of center staff
  to conduct the review.

  To assess each center’s billing and collection procedures, we reviewed
  medical and administrative records for a random sample of about 30
  insured veterans from each of two universes:5

9 veterans discharged from inpatient care between October 1,1987, and
  March 31,1988,6 and
. veterans provided outpatient care between October 1, 1987, and March
  31, 1988.

  For those patients sampled, we documented (1) whether the medical
  center billed for all episodes of care provided to insured veterans and
  sent the bills promptly, (2) how much the center collected, and (3) the
  reasons for collecting less than the full amount. We contacted the staff
  of VA’S district counsel, which served several of the medical centers, to
  discuss the policies and procedures for dealing with insurance cases
  referred to them.

  We used our sample results to project the value of inpatient and outpa-
  tient care not billed by the medical centers. For our projections, which
  are for the first 6 months of fiscal year 1988, we used a 95-percent con-
  fidence level. Because our estimates are based on samples, sampling
  errors are associated with them.

  To assess whether VA’S collections from insurers exceeded its costs to
  collect, we used a questionnaire for information on (1) the medical cen-
  ters’ estimated staffing costs and (2) the amount of collections attrib-
  uted to inpatient and outpatient care. We asked each of the 159 centers
  to complete a questionnaire because VAdoes not routinely collect these

  4The sixth center, Martinsburg, was already using this special record review to identify insured
  veterans.
  5We did not include veterans with indemnity policies or health maintenance organization coverage as
  insured veterans because of the limitations in reimbursement.
  “At the Albany Medical Center in New York, we limited our review of veterans’ records to veterans
  who received outpatient care.



  Page 14                                              GAO/HRD90-64 VAcOUectionsProm Insurers
Chapter 1
Introduction




data. All centers (1) identified by grade the staff resljonsible for billing
and collecting from insurers and (2) estimated the average amount of
time spent on recovery efforts for inpatient and outpatient care during a
typical week in fiscal year 1988. We used the government salary rates to
compute the staffing costs for this typical week and multiplied the costs
for each center by 52 weeks to estimate the annual staff costs of VA med-
ical centers in fiscal year 1988. The centers also estimated the percent-
age of their total collections that were related to outpatient care. Using
these percentages, for each center, we estimated the amount of collec-
tions attributed to inpatient and outpatient care.

We also used the questionnaire to collect a broad range of information
on each center’s identification, billing, and collection policies and proce-
dures. To gather information on industry norms and standards for bill-
ing and collection procedures, we contacted the Healthcare Financial
Management Association, a professional society of health care financial
executives, and visited a private hospital in Seattle.

To estimate VA’S potential collections from insurers nationwide in fiscal
year 1988, we obtained data from VA’S 1987 Survey of Veterans.’ On the
basis of survey respondents’ reported health insurance coverage and use
of VA health care facilities, we estimated the total number of episodes of
inpatient care and outpatient visits made by veterans with health insur-
ance coverage. By applying to these estimates VA’S reported average
length of inpatient stays and daily rates for inpatient and outpatient
care, we estimated the total amounts potentially billable by VA for this
care. We reduced the total amounts potentially billable to allow for
uncollectible amounts because of insurance policy limitations, such as
deductibles and copayments.

Our review was carried out from December 1987 through June 1989 in
accordance with generally accepted government auditing standards.




7A national survey of veterans conducted for VA by the U.S. Bureau of the Census to assessveterans’
status and well-being.



Page 16                                             GAO/IlRD90-64 VA C~llestions Prom Insurer6
ChaI”““   2


VA Has Not M aximized Its Insurance Collections


                                            VA'S collections from health insurers exceeded its costs in fiscal year
                                            1988. But GAO estimates that the medical centers’ collections should
                                            have been significantly higher. Policy decisions and ineffective collec-
                                            tion procedures at the centers contributed to missed collection opportu-
                                            nities. To maximize collections, medical centers should (1) begin billing
                                            insurers for all outpatient visits and (2) develop better procedures to
                                            identify veterans with insurance and to ensure that all episodes of care
                                            are billed.


                                            The 159 medical centers spent about $8 million to collect $100 million in
VA’s Collections                            fiscal year 1988. VA medical centers reported insurance collections of
Exceeded Costs                              $24 million in fiscal year 1987, the first full year in which VA collected
                                            from insurers. The reported collections increased to $100 million in fis-
                                            cal year 1988, and collections started to level off during the last quarter
                                            of the fiscal year. Compared with fiscal year 1988, collections have
                                            remained relatively constant during the first 2 quarters of fiscal year
                                            1989, as shown in figure 2.1.


Figure 2.1: VA’s Collections From Health
Insurers by Quarter (Oct. 1986-Mar. 1989)
                                            40     Ddhrs in Yfflia~~




                                            20




                                            10




                                             0

                                            Dvz. ‘86    Mar. ‘87       Jun.37   Sapt.‘87   Dac.‘87   hr.‘88   Jun. ‘80   Sopt.‘88   Doc.%B    Mar. ‘89

                                            Qartots    Ending



                                            Note VA collected $302,000 In the quarter endmg Dee ‘86




                                            Page16                                                   GAO/IiEMW64VAColl~ona           FromInsurers
Chapter 2
VAHasNotM ’ * dIte
IMurance collectl0M




The medical centers have spent a relatively small amount of money to
collect from insurers. On the basis of the information that centers sub-
mitted, we estimate that during fiscal year 1988, they spent about
$8 million in staffing costs to bill insurers and to collect amounts owed.
Although some centers reported other costs, such as for postage, the
staffing costs were the vast majority of the reported costs. Given these
reported collections and costs, on a nationwide basis, VA collected about
$12 for every $1 spent on medical center staff .l

Most of the collections-$96    million of the $100 million-came     from
inpatient care. This represents a return of $16 collected for each $1
spent on medical center staff. By comparison, centers’ collections for
outpatient care were an estimated $4 million because VA did not direct
centers to bill insurers for such care. Most centers reported that in fiscal
year 1988, they either billed insurers for outpatient care on a limited
basis only or did not bill. Nonetheless, the centers collected, on average,
about $2 for each $1 spent on staff costs for billing. The years when
centers began billing insurers for outpatient and inpatient care is shown
in appendix III.

VA has conducted a pilot study at the Martinsburg    Medical Center that
may provide a more accurate indication of the payback potential of bill-
ing for outpatient care. VA headquarters authorized three staff positions
for this study,2 which began on August 22, 1988. Through March 31,
 1989, Martinsburg had collected about $74,000 from insurers and spent
about $18,000 on personnel costs, a return of over $4 for each $1 spent.
Like most other medical centers, Martinsburg has not billed for all out-
patient care provided, but the collections-to-cost ratio at Martinsburg
has been increasing as the center has gained experience in billing insur-
ers for such care.




‘VA’s reported collections for fiscal year 1988 could include some receipts for bills sent in fii   year
1987. In addition, collections for some bills sent in foal year 1988 may be included in VA’s fiscal year
1989 reported collections. We believe that this will not materially affect the results of our analysis
because the amounts involved would tend to offset each other.

‘These staff, the chief of insurance billing said, also spent time preparing other types of bills. The
cost amounts shown here are the costs associated with the portion of staff time spent on billing
insurers for outpatient care.




Page 17                                                GAO/HIUMOW VA Collection Prom Insurers
                           chapter 2
                           VAHasNotMaxhizdIt
                           Inmlmnce coIlectlone




                           On the basis of our work at six centers, we could not estimate potential
GAO Estimates              collections from insurers nationwide. We, therefore, estimated VA’S
Additional Collection      potential collections from insurers on the basis of veterans’ responses to
Potential                  VA’S 1987 Survey of Veterans. The survey asked veterans about their
                           insurance coverage and the extent to which they received inpatient and
                           outpatient care at VA facilities.

                           Using veterans’ responses to these questions, as well as average length
                           of inpatient stays reported by VA and VA’s daily rates, we estimate that
                           VA could have collected about $323 million from insurers in fiscal year
                           1988. Of this amount, about $276 million was attributable to inpatient
                           care and $47 million to outpatient care. Given VA’S collections of
                           $100 million, we estimate that VA could have collected an additional
                           $223 million-$180    million for inpatient care and $43 million for outpa-
                           tient care.

                           Limitations in the available data cause considerable uncertainty in esti-
                           mates of potential collections. Nevertheless, we believe VA could have
                           increased collections by at least $55 million and perhaps as much as
                           $392 million. Our method for estimating VA’S potential collections from
                           insurers is discussed in appendix IV.


                           VA did not bill insurers for millions of dollars because of (1) weaknesses
Policy Decisions and       in procedures at the medical centers or (2) policy decisions not to bill
Ineffective Procedures     insurers for all outpatient care provided. The weaknesses in procedures
                           at the centers we visited resulted in centers not
Limited VA’s
Collections            .   identifying all veterans who had insurance coverage,
                       .   billing insurers for all episodes of inpatient care provided to insured vet-
                           erans, and
                       .   collecting all that they should have even when the care was billed.

                           We believe, on the basis of centers’ responses to our questionnaire, that
                           these six centers are not unique. In response to our questionnaire, many
                           other centers reported procedures similar to those used at the centers
                           visited. In the following chapters, we discuss in more detail the proce-
                           dures used.




                           Page 18                                GAO/IiRDW     VA Collections From Insurers
Need to Improve Identification Procedures at
the Medical Centers

                          Of five medical centers visited during our test period of 14 to 35 days,
                          four did not identify all veterans with insurance. We reviewed available
                          data and found that the centers had not identified many insured veter-
                          ans during the initial admissions screening. As a result, the centers
                          missed billing insurers for over $300,000 in care provided to these veter-
                          ans during that period. This problem may be widespread since many
                          other medical centers, in responding to our questionnaire, said they did
                          not review available data after the initial admission screening to iden-
                          tify insured veterans.


                          During the initial admission screening, each veteran requesting medical
Medical Centers           care must complete an application for care.’ This application contains a
Visited Not               number of questions designed to gather basic data about the veteran,
Identifying All Insured   including whether he or she has health insurance. In identifying veter-
                          ans with insurance, of the six medical centers we visited, five relied
Veterans                  mainly on information that the veterans gave during the initial screen-
                          ing process.

                          To test the effectiveness of each center’s procedures for identifying
                          insured veterans, we did a special review, during our site visits, of the
                          records of veterans admitted to the five centers, but not identified as
                          having insurance. The review focused on identifying key indicators of
                          insurance, such as employment, income, or previous insurance coverage.
                          When we found these indicators, we asked the VA reviewer to interview
                          the veterans before they were discharged to determine whether they
                          had insurance.

                          We did not do a special review at the Martinsburg Medical Center, in
                          West Virginia, because this center routinely did such a review. Our ran-
                          dom sample of 32 insured veterans admitted to Martinsburg included 6
                          identified by the center’s special review as having insurance. If Martins-
                          burg relied solely on the initial screening process, these veterans would
                          have been missed. On the basis of these sample results, we estimate that
                          the insured veterans identified through this review received an esti-
                          mated $864,000 of the medical care billed during only the first half of
                          fiscal year 1988. Martinsburg officials have found that this review con-
                          tinues to be an effective way to identify insured veterans. The chief of
                          insurance and billing, whom we asked to record the results of this

                          ‘At some medical centers, veterans complete the applications and the medical center staff later enter
                          the information into the center’s computer system. At other centers, medical administration service
                          staff interview veterans and enter the information obtained directly into the computer system.



                          Page 19                                             GAO/HBD9064 VAcOllections From Insurers
                                         Chapter 3
                                         Need to Improve Identifkation procedurea at
                                         the Medical Centers




                                         review during a $-month period in fiscal year 1989, reported that she
                                         identified 27 insured veterans. These veterans received almost $225,000
                                         of care that the center billed to insurers.

                                         The other centers we visited identified 30 insured veterans during the
                                         test period; these veterans had not been identified as having insurance
                                         during the initial screening process. They received about $3 18,000 of
                                         inpatient and outpatient care that the centers should have billed to
                                         insurers. Although the centers would probably not have collected the
                                         total amount billed because of insurance deductibles and coinsurance
                                         requirements, we believe that the results indicate significant additional
                                         collection opportunities, especially given the limited test period. Our test
                                         results are shown in table 3.1.

Table 3.1: Insured Veterans Identified
During GAO Visits to Medical Centers                                                         insured      Additional
                                                                                            veterans         insured      Value of
                                                                                           identified       veterans    additional
                                                                                             through       identified   veterans’
                                                                           Days test         existing   through test      medical
                                         Center                           conducted      procedures      procedures            care
                                         Minneapolis                               23              43              16     $121,317
                                         Bay Pines                                 27              57               2       77,597
                                         Albanv                                    14              18               6       76.809
                                         West Los Angeles                          35              30               6       42,656
                                         Seattle                                   19              22               0             0
                                         Total                                    118             170              30    $318,379


                                         Supervisors and managers at the centers could not tell us conclusively
                                         why veterans with insurance were slipping through the initial screening
                                         process, but they offered two potential reasons. Not all clerks, said the
                                         processing unit (admitting area) supervisor at one center, ask veterans
                                         about their insurance coverage each time they are admitted to the
                                         center, even though the clerks should; if the veterans have applied for
                                         care in the past and previously indicated no insurance, the clerks do not
                                         always ask whether the veterans currently have insurance coverage. As
                                         a result, the information obtained may not be complete and accurate. In
                                         addition, center staff have suggested, veterans may not answer ques-
                                         tions about their insurance accurately, even if asked, because they (1)
                                         are confused or (2) fear that disclosure of insurance will affect their
                                         access to free health care at VA medical centers.




                                         Page 20                                        GAO/HlUHM4 VA CMlection~ From Insurers
                        chapter 3
                        Need to Improve Identification Proceduresat
                        the Medical Centers




                        We believe our test understates additional collection opportunities at the
                        centers because veterans’ applications were often incomplete. For exam-
                        ple, at the medical center in Seattle, the employer was shown as
                        “unknown” in 81 percent of the applications we reviewed during an
                        8-day period.2 The lack of employment information reduced our chances
                        of identifying additional veterans with insurance.

                        We also found missing data at other centers we visited. For example, at
                        three centers, from 50 to 69 percent of the applications for our sample
                        of veterans were missing employment information. This information is
                        useful because many employers or former employers provide health
                        insurance coverage, and employment information can serve as an indica-
                        tor of insurance. At the West Los Angeles Center, the insurance coordi-
                        nator did a special review of applications to evaluate the effectiveness
                        of the initial screening process as a method of gathering information. In
                        reviewing applications for a 32-day period, he found that 56 percent
                        were missing employment information.

                        After we did our test at the West Los Angeles Medical Center, the center
                        successfully used the special review to identify additional insured veter-
                        ans. The insurance coordinator reported that in December 1988, several
                        months after the test period, 24 insured veterans were admitted to the
                        center. The admissions staff identified 11 of these veterans. The insur-
                        ance coordinator said that he identified the other 13 veterans by con-
                        ducting a special review of veterans’ records and interviewing veterans,
                        employers, and insurance companies.


Other Medical Centers   cial review. We contacted several of the medical centers that had
Using Special Reviews   reported, in their responses to our questionnaire, that they reviewed
                        veterans’ records for indicators of insurance coverage. The medical
                        center in Bonham, Texas, according to a center official, using this special
                        review, identified 25 percent of all veterans with insurance. By using
                        this review, an official at the medical center in Chilicothe, Ohio, said, the
                        center significantly increased its collections. However, the center did not
                        record the number of insured veterans identified using this special
                        review.



                         2For 8 days during our 19-day test period, we reviewed the records to determine how many contained
                         employer data.



                         Page 21                                           GAO/HID-90-64 VA Collections From Insurers
chapter 3
Need to Improve Identification Proceduresat
the Medical Centers




Despite the usefulness of the special review, VA had not required centers
to use it, at the time of our review, and most centers were not doing so.
On the basis of responses to our questionnaire and follow-up conversa-
tions with medical center officials, we estimate that about two-thirds of
the centers were not reviewing the records of “uninsured” veterans to
check for indicators of possible insurance.




Page 22                                       GAO/HBB9044 VA Collection From Insurers
Chapter 4

Centers Need Better Billing Procedures to
Recover the Costs of Inpatient Care

                        The VA medical centers we visited were often not billing insurers for care
                        because of ineffective procedures. During the first half of fiscal year
                        1988, we reviewed inpatient billing for five centers; these centers missed
                        billing insurers for about $1.8 mil1ion.l In addition, bills, when sent, were
                        rarely processed promptly, resulting in additional lost revenue to the
                        government.


                        Even when medical centers identified veterans as insured, the centers
Medical Centers         did not always bill insurers for all episodes of care provided. At five
Missing Substantial     centers, we reviewed random samples of insured veterans who were dis-
Billing Opportunities   charged from inpatient care during the first 6 months of fiscal year
                        1988. On the basis of this review, we estimate that these centers should
                        have billed insurers for approximately $7 million of inpatient care
                        instead of the $5.2 million we projected they billed. Our projections for
                        each center of the billed and unbilled amounts for insured veterans are
                        shown in figure 4.1. Appendix V contains more detailed information on
                        our methodology.




                        ‘There is a 95-percent chance that the true value for the population lies between
                        $1.2 and $2.3 million.



                        Page 23                                              GAO/HBDM          VA Collections From Insurers
                                           Chapter 4
                                           Centers Need Better Billing Procedures to
                                           Recover the Cost8 of Inpatient Care




Figure 4.1: Projected Value of Inpatient
C&e Provided to Insured Veterans (Oct.
1987.Mar 1988)                             2500   Dolhnhllhouan&
                                           2250

                                           Zwo

                                           1750

                                           1500

                                           1260

                                           1000

                                            750

                                            so0

                                            250

                                              0




                                              VA Ysdksl Csntws

                                                  I
                                                  I
                                                        1 Amount Billed
                                                        I

                                                            Amount Not Billed


                                           We cannot project how much the five centers would have collected had
                                           they billed insurers for these additional amounts; however, the centers
                                           could collect about $850,000 if, for the veterans in our samples, the col-
                                           lection rates for the unbilled care were the same as for the billed care.
                                           As discussed in chapter 6, we believe these collection rates and the cor-
                                           responding dollar recoveries could be increased with improved
                                           procedures.

                                           Nationwide, we estimate that medical centers could have collected
                                           another $29 million to $332 million from insurers for inpatient care in
                                           fiscal year 1988 (see ch. 2).




                                           Page 24                                     GAO/lHUMNM VA Cdlections FkomInsurers
                         chapter 4
                         Centers Need Better Billing Proceduresto
                         Recover the Costs of Inpatient Care




                         Four of the five centers had problems with inpatient billing procedures,
Internal Controls        as indicated by the amount of missed billings we found. The centers
Lacking to Prevent       used varying procedures to notify billing staffs about care provided to
Missed Billings          insured veterans. However, three centers with high missed billings
                         relied mainly on admissions or insurance clerks to notify billing staff
                         when insured veterans were admitted. These centers lacked basic inter-
                         nal controls as a backup system to help ensure that all cases were billed.
                         Hence, when admissions or insurance clerks, for whatever reasons, did
                         not carry out their responsibilities to notify billing clerks, care was not
                         billed, for example:

                     .   At the West Los Angeles Medical Center, an insurance coordinator was
                         expected to (1) verify insurance coverage for veterans identified as hav-
                         ing insurance and (2) then send a notification to the billing staff.
                         Because the applications and insurance information forms were often
                         not available, the coordinator said he was unable to notify the billing
                         staff that some insured veterans were receiving care. For example, dur-
                         ing a 26-day period, the administrative folders or insurance forms were
                         unavailable for 65 percent of the insured veterans admitted to the
                         center. The center’s quality assurance staff, who previously carried out
                         some of the insurance coordinator’s functions, agreed that the inability
                         to locate veterans’ medical records promptly directly contributed to
                         missed billings.
                         At the Minneapolis Medical Center, the admitting staff were supposed to
                         send a notification to the insurance clerk when insured veterans were
                         admitted, and the clerk was then to notify the billing staff. For 4 veter-
                         ans in our sample of 36, insurers were not billed using these procedures,
                         even though the veterans’ insurance coverage was identified when they
                         were admitted.

                         Although we could not determine where the specific breakdown
                         occurred for each case that was not billed, we did find that the centers
                         could use their existing computer data more effectively to identify care
                         that should be billed. For example, at the Seattle Medical Center, from
                         computer information, the billing clerk periodically obtained a list of
                         care provided to veterans that the center had identified as insured. Even
                         though, the clerk said, this allowed her to identify care that should be
                         billed, not all care was billed because she did not have enough time to
                         keep up with the billing workload.

                         Medical centers could use such lists, not only to facilitate billing, but also
                         as an internal control to help ensure that all care was billed. When we



                         Page 26                                    GAO/HRW3OM VACdlections From insurers
                 Chapter 4
                 Centers Need Better Bii     Proceduresto
                 Beeover the Costa of Inpatient Care




                 used similar lists to review records for a random sample of insured vet-
                 erans, we found that significant amounts of inpatient care had not been
                 billed.


                 The Federal Claims Collection Act and implementing regulations require
Bills Not Sent   that agency collection efforts be prompt and aggressive. Centers should
Promptly         bill insurers, VA’S manual states, at the end of the first month when med-
                 ical care was provided, which would be, at most, 30 days after the care
                 was provided. Guidelines from the Healthcare Financial Management
                 Association, which publishes bench marks for prompt billing and dis-
                 seminates the data to hospitals nationwide, suggest billing within 7 days
                 after providing care.

                 Of the five centers we reviewed, only one billed insurers for veterans in
                 our sample within 30 days, on average, of providing inpatient care.2 The
                 other centers took an average of 64 to 175 days after the veteran’s dis-
                 charge date to prepare and send bills to insurers. (See fig. 4.2.) Three of
                 the centers-Bay Pines, Seattle, and West Los Angeles-did not send
                 any of the bills within 30 days of discharge for the veterans we sampled
                 who received inpatient care.




                 2The number of bills in our sample ranged from 12 bills sent by the West Los Angeles Medical Center
                 to 53 sent by the Martinsburg Medical Center.



                 Page 26                                            GAO/‘HRDM         VACollections From Insurers
                                      Chapter 4
                                      Centers Need Better Billing Proceduresto
                                      Eecover the Casts of Inpatient Care




Figure 4.2: Average lime Taken to
Prepare Billa (Oct. 1987-Mar. 1988)
                                      200        Avorags Chys Fmm Dbthrge   to Bllllng

                                      175
                                            l-
                                      150

                                      125

                                      100

                                       75




                                                                            ---l-h
                                       54

                                       25

                                        0



                                            8
                                       s+

                                        VA Medical Cenlom


                                      When billing is not prompt, the government loses the use of the money
                                      during the time it is owed.3 To estimate the loss to the government due
                                      to delayed billing, we used the January 1988 U.S. Treasury Bill interest
                                      rate of 6.74 percent. We calculated the interest lost from 30 days after
                                      the date of discharge to the date the bill was sent. On the basis of this
                                      standard, we estimate that the four centers that billed, on average, more
                                      than 30 days after the veterans were discharged lost about $38,000 for
                                      fiscal year 1988 inpatient collections.4 In other words, we estimate that
                                      the government lost almost $31 per episode of inpatient care billed at
                                      these centers.5

                                      According to center officials, one problem contributing to the delays in
                                      bill preparation was the completion of the medical discharge summary,
                                      which billing staff use to prepare the insurance bill. VA’S manual

                                      3cOkctions may also be reduced because an insurer sometimes refuses to pay the amount owed if the
                                      time between the date of care and the date the insurer receives the bill exceeds the insurer’s accepta-
                                      ble time frame. This problem is discussed in more detail in chapter 6.

                                      4There is a 95-percent chance that the true value of the population lies between $19,000 and 858,000.

                                      “There is a 95-percent chance that the true value of the population lies between $15 and $46.



                                      Page 27                                              GAO/HRD90-64 VA Cdlectiona From Insurers
    Chapter 4
    Centers Need Better Billing Procedureato
    Eeeover the Costa of Inpatient Cure




    requires billing staff to include a copy of the discharge summary with
    bills to insurers. A discharge summary, prepared by a physician, records
    the patient’s medical condition, admission and discharge dates, and
    types of treatment provided. VA criteria state that these summaries
    should be completed within 6 working days after the patient’s dis-
    charge. But at five of the centers we visited, medical administration ser-
    vice staff sometimes had to wait from several weeks to several months,
    they said, for the summaries to be completed.

    At the Martinsburg Medical Center, which had the lowest average
    number of days between veterans’ discharges and preparing the bills,
    officials were able to minimize the number of days needed to prepare
    the bills, they said, by

l notifying staff in departments, such as ward administration and tran-
  scription, which patients have insurance so that the paperwork for
  these veterans can be expedited and
. emphasizing the importance of billing insurers, setting an informal goal
  of 10 days from the discharge date to the date the bill is sent.




    Page 28                                    GAO/HED9084 VA Collections From Insurers
Chap tlr .5

VA Can Substantially Increase Recoveriesof
Outpatient Care Costs

                         VA headquarters did not direct medical centers to bill insurers for outpa-
                         tient care during fiscal year 1988. In the absence of such direction, most
                         centers reported that in fiscal year 1988, they limited the extent of their
                         outpatient billing or did not bill insurers for outpatient care at all. We
                         estimate that the six centers we visited did not bill insurers for about
                         $1.6 million of outpatient care provided during the first half of fiscal
                         year 1988.


                         The Veterans’ Health-Care Amendments of 1986,38 U.S.C. 629(a)(l),
Billing for Outpatient   established the right of the United States to recover health care costs
Care Optional            provided to certain insured veterans. Although headquarters directed
                         medical centers to bill insurers for inpatient care, each medical center
                         was permitted to decide whether to bill insurers for outpatient care.

                         Of the six centers we reviewed, three did not bill insurers for any outpa-
                         tient visits and three billed insurers for some of the outpatient care pro-
                         vided.’ The Martinsburg Medical Center billed insurers for some
                         outpatient care on a limited test basis, according to the chief of the med-
                         ical administration service at the center. We found that Martinsburg
                         billed insurers for 2 percent of outpatient costs for insured veterans in
                         our sample.2 The center has now established procedures, the chief of
                         insurance billing told us, to bill insurers for all outpatient care.

                         The Albany Medical Center billed insurers for outpatient care, according
                         to the billing staff, when (1) the veteran had received inpatient care, (2)
                         the veteran came to the center for outpatient care without an appoint-
                         ment, or (3) the veteran’s income exceeded an income threshold and the
                         veteran agreed to make a payment to VA for such care. We found that
                         Albany billed insurers for about 22 percent of the outpatient care pro-
                         vided to insured veterans in our sample.3

                         The Seattle Medical Center had procedures to bill for all outpatient care,
                         but the center’s billing clerk did not, she said, have time to bill every
                         case. Hence, she gave first priority to billing outpatient care provided to

                         ‘VA defines an outpatient visit as all diagnostic and therapeutic services provided to a veteran during
                         a single 24hour period. The appearance of a veteran at the facility solely for a prescription refill is
                         not a visit. In fiscal year 1988, VA charged insurers $127 per outpatient visit.
                         2There is a 95-percent chance that the true value for the Martinsburg population lies between 0 and 5
                         percent.
                         3There is a 95-percent chance that the true value for the Albany population lies between 7 and 40
                         percent.



                         Page 29                                              GAO/liRBW         VA Collectiona From Insurers
                                          chapter5
                                          VA Can Substantially Increase Recoveriesof
                                          Outpatient Care Cod8




                                          insured veterans under the age of 65, which she believed had higher
                                          collection potential4 We found that Seattle billed insurers for 34 percent
                                          of the outpatient costs provided to insured veterans in our sample.6

                                          In response to our questionnaire, most medical centers said they billed
                                          only for a limited amount of outpatient care or did not bill for any out-
                                          patient care during fiscal year 1988. For example, 29 centers said they
                                          limited outpatient billing to veterans who had also received inpatient
                                          care that had been billed to their insurers. The centers’ responses con-
                                          cerning the extent to which they billed for outpatient care in fiscal year
                                          1988 are summarized in figure 5.1.


Figure 5.1: Percentage of Medical
Centers That Billed for Outpatient Care                                                         Dii Not Bill for Any Visits
(Fiscal   Year 1988)




                                                                                                Billed Lees Than Half of the Tatal Visits




                                                                                       -        Billed Half or More of the Total Viila




                                          Total of 159 MedicalCenters
                                          Note: The total number of medical centers is 159.




                                          4A veteran under the age of 65, unless disabled, would not have both Medim and privatehealth
                                          insurance. As discussed in chapter 6, medical centers have experiencedproblems collecting from some
                                          insurers when the veterans were also covered by Medicare.

                                          5There is a 95-percent chance that the true value for the Seattle population lies between 13 and 63
                                          percent.



                                          Page 30                                             GAO/HRB9O84 VA Cdlection~ From Ineurem
-.
                                            chapter 5
                                            VA Can Substantially increase Recoverie6of
                                            Outpatient      Care Chstz3




                                            We project that the six centers could have billed almost $1.8 million for
Opportunities Exist                         outpatient care instead of the $200,000 that was billed during the first
for Substantial                             half of fiscal year 1988 (see app. VI for more detailed information about
Collections                                 our methodology and projections).” Cur projected outpatient care costs
                                            provided to insured veterans and the projected amounts not billed at
                                            each center are shown in figure 6.2.


Figure 5.2: Projected Value of Outpatient   1
Care Provided to Insured Veterans
(Ott   1987.Mar 1988)                       DdlamInlhounnd6




                                            400




                                            200
                                                                                       --b
                                            100




                                                  VA Ydkd     Conlors

                                                               Amount Billed
                                                               Amount Not Billed


                                            It is difficult to estimate the amounts that the six centers could expect to
                                            collect from the insurers for this care because of the centers’ limited col-
                                            lection experience. Centers would not collect the entire amount billed
                                            because of insurance deductibles and coinsurance amounts. If the six
                                            centers had billed for all outpatient care and were able to collect at the
                                            same rate as the Albany Medical Center did for our sample of veterans

                                            6There is a 95-percent chance that the true value for the population lies between
                                            $1.1 and $2.0 million.



                                             Page 31                                             GAO/HRDW64 VA CMlectiona From hsurers
                      Chapter 5
                      VA Can Substantially Increase Recoveriesof
                      Outpatient Care Costa




                      (37 percent), these centers could collect over $575,000 of the projected
                      amount not billed during a 6-month period. If the six centers expe-
                      rienced the same collection rate as the Seattle Medical Center did for our
                      sample of veterans (60 percent), these centers could collect almost
                      $934,000 of the projected amount not billed. Appendix VI contains
                      information on the amounts collected at the three centers that billed
                      insurers for outpatient care.

                      Nationwide, we estimate medical centers could have collected another
                      $26 million to $60 million from insurers for outpatient care in fiscal year
                      1988 (see ch. 2).


                      The three centers we visited that were billing for outpatient care relied
Existing Procedures   on labor-intensive procedures to verify and document care provided.
Hamper Outpatient     Basically, billing personnel at these centers were reviewing each insured
Billing               veteran’s medical records to (1) verify the date(s) of care, since person-
                      nel had no other means to assure that veterans actually received care
                      for which they were scheduled, and (2) document for the insurer the
                      type(s) of services provided, as shown on the medical notes written by
                      health care providers. Detailed chart reviews are time-consuming, said
                      center personnel who did them, and ultimately limit the amount of out-
                      patient care center personnel can bill.

                      The elimination of labor-intensive chart reviews would give center per-
                      sonnel more time to bill outpatient care. The private sector uses a
                      preprinted treatment form that documents the date of care, diagnoses,
                      tests, and treatments performed by the health care provider. If VA used
                      such treatment forms in outpatient clinics to document the care pro-
                      vided to insured veterans, it could eliminate the time-consuming chart
                      reviews it now uses. At the conclusion of the insured veteran’s clinic
                      visit, the health care professional would check the appropriate boxes on
                      the form. Ultimately, clinic staff would return the form to the billing
                      staff, who could use it to bill the insurer. The use of this form would not
                      add significantly to the clinics’ workload because it (1) includes a simple
                      check-the-box approach and (2) would only need to be completed for
                      insured veterans. The chief of the medical administration service at the
                      Martinsburg Medical Center thought that implementing this step would
                      streamline the outpatient billing process.

                      To make it easier for centers to bill outpatient care provided to insured
                      veterans, VAheadquarters officials are spearheading another effort-



                      Page 32                                      GAO/llRD90-64 VACdlectione Prom Insurers
chapter 6
VACan Subetantidly Increase Recoveries3of
C)lrtpfitlent Care costs




developing an automated billing system -which it hopes will allow cen-
ters to handle a larger volume of bills. When the automated billing sys-
tem becomes operational, said the former chief of the policies and
procedures division in headquarters, headquarters will expect medical
centers to bill for all outpatient care. The first phase of the system,
installed in October 1988, allows billing clerks to use some data already
in the computer, such as the insurer’s address, to prepare a bill. The
clerk must manually enter information on the dates and costs of inpa-
tient or outpatient care. The accounts receivable system will help staff
track bills and generate follow-up letters for overdue bills. We question
whether the automated system will significantly reduce the staff time
needed to prepare outpatient bills because the billing staff will continue
its labor-intensive procedures to verify and document the care provided.




 Page 33                                    GAO/HRD9O84 VA Collections Prom IMWWE
Medical Centers Did Not Collect All Amounts
Billed to Insurers

                        In part because of insurance policy limitations applicable to all provid-
                        ers, the centers did not always collect the full amounts billed. However,
                        we found a small percentage of cases in which centers did not collect as
                        much as they should have because they did not meet specific policy pro-
                        visions, for example, submitting bills promptly. In addition, some insur-
                        ers denied payment for veterans covered by both Medicare and private
                        health insurance because Medicare was not billed first. VA plans to liti-
                        gate cases denied by these insurers to clarify VA'S legal authority to
                        recover the cost of care in such instances.


                        At the five centers we visited, the collection rates varied widely for our
Medical Center          samples of veterans. The rates for inpatient care ranged from 25 percent
Collection Rates Vary   to 87 percent for the veterans who received inpatient care between
Widely                  October 1987 and March 1988.’ These rates may be somewhat conserva-
                        tive because centers had outstanding bills that they were still trying to
                        collect when our field work was completed. For example, some centers
                        had referred uncollected bills to their district counsels’ offices. If the
                        centers ultimately collect some or all of the amounts owed on outstand-
                        ing bills, the collection rates would increase. The projected amounts
                        billed and collected for inpatient care at the five centers are shown in
                        figure 6.1.




                        ‘Appendix V contains more detailed information about the collections per veteran and cokction
                        rates.



                        Page 34                                            GAO/HBD9064 VA Collections F’romInsurers
                                           Chapter 6
                                           Medical Centers Did Not Collect All Amounts
                                           Billed tu Insurers




Figure 6.1: Projected Value of Inpatient
Care Billed (Oct. 1987-Mar. 1988)
                                           DollaraIn lhounnh




                                              VAMdkal Ceders

                                                  I       Amount Collected
                                                          Amount Not cOllected


                                           To determine the reasons that the centers did not collect the full
                                           amounts billed, we reviewed the inpatient amounts billed and collected
                                           for our sample of veterans. The proportions collected and the primary
                                           reasons for reductions in payment at the centers we visited are shown in
                                           figure 6.2.




                                           Page 36                                       GAO/HBD9084 VACollections Prom Imsurers
                                           chapter”
                                           Medicai Centers Did Not Collect All Amounts
                                           Billed to Insurers




Figure 6.2: Projected Value of Inpatient
Care Billed at Five Centers-Proportions
Collected and Not Collected (Oct. 1987-                                                   Policy Limitations
Mar. 1988)




                                                                                          3%
                                                                                          Insurers’ Requirements Not Met




                                                     F                                    Collected From lnsurets

                                           For about 13 percent of the amounts billed, we were not able to deter-
                                           mine the reasons for the reductions in payment. This is because (1) the
                                           insurers’ responses did not always state the reasons for less than full
                                           payment, (2) VA could not readily provide the insurers’ explanations of
                                           the amounts paid, or (3) the insurers had not yet responded. For cases in
                                           which we did not have an explanation for the payments from insurers
                                           and the centers collected at least 70 percent of the amounts billed, we
                                           assumed the unpaid portions were for policy limitations related to
                                           deductibles and coinsurance. More information about figure 6.2 is given
                                           in appendix VII.

                                           We also reviewed the projected amounts billed and collected to deter-
                                           mine if there were differences between the centers that would explain
                                           the differing collection rates. At the Martinsburg Medical Center, we
                                           found that insurance policy limitations accounted for the majority of the
                                           amounts not collected. In contrast, the Bay Pines Medical Center had
                                           large projected amounts denied because Medicare was not billed first.
                                           The reasons for -reductions in payments are discussed in the following
                                           sections.




                                           Page 36                                       GAO/ERLh9084 VACollections From Insurers
                           Chapter 6
                           Medical Centers Did Not Collect All Amounts
                           Billed to Insurers




                           The Veterans’ Health-Care Amendments of 1986 established the right of
Many Reductions in         the United States to recover payments from insurers for health services
Payments Due to            provided to veterans to the same extent as insurers paid to non-VA
Policy Limitations         health care providers. VA would not collect the entire amount billed if a
                           veteran’s insurance policy contained (1) restrictions on the types of ser-
                           vices covered or amounts the insurer will pay or (2) requirements that
                           the beneficiary pay a deductible or coinsurance.

                           The five centers we visited did not collect an estimated 15 percent of the
                           amounts billed because of policy limitations, and many other medical
                           centers reported in our questionnaire that insurers paid less than the
                           billed amounts for the same reason (see app. VIII). The three most fre-
                           quently cited reasons insurers gave, as reported by centers in our ques-
                           tionnaire, are these:

                       l Eighty-three centers reported that insurers often paid only a portion of
                         the amount billed because the insurer offset a portion of the charges
                         against the veteran’s insurance deductible or coinsurance or both. Forty
                         centers reported that they often received no payment for this reason.
                       . Forty-eight centers reported that insurers often paid only a portion of
                         the amount billed because a portion of the charges for services provided
                         exceeded the limitations of the insurance policy.
                       . Thirty-seven centers reported that insurers often paid only a portion of
                         the amounts billed because the policy did not cover some of the services
                         provided. Twenty-eight centers reported that they often received no
                         payment because the policy did not cover the services provided. Sev-
                         enty-six others reported that this sometimes occurred.

                           These reasons do not indicate that VA was treated differently from other
                           medical care providers. These providers, however, can bill some benefi-
                           ciaries for any difference between the amounts billed and the insurance
                           payments, but the amendments do not authorize VA to bill the veteran
                           for this difference. Further, the amendments prohibit VA from collecting
                           deductible or coinsurance amounts under health plan contracts between
                           veterans and insurers. In these cases, VA cannot expect to collect the full
                           amounts billed.


                           Some insurance policies require that the medical care provider take cer-
Collections Reduced        tam steps in order to collect the maximum amounts allowed under the
Because Insurers’          policies. We found that insurers sometimes paid only portions of the
Requirements Not Met       amounts owed because VA did not comply with all of the insurers’
                           requirements.


                           Page 37                                       GAO/HRD9044 VA Collections From Insurers
                      Chapter 6
                      Medical Centers Did Not Collect All Amounts
                      Billed to Insurers




                      Some insurers require that within 24 hours of a veteran’s admission or
                      on the next working day after admission, the centers notify the insurers
                      of, and obtain authorization for, admissions. If centers do not obtain
                      such authorization, they may collect only a portion or none of the billed
                      amounts.

                      A VA circular issued in September 1986 required the medical centers to
                      establish procedures for complying with insurers preadmission certifica-
                      tion requirements. Although the centers we visited had established pro-
                      cedures, we found that the centers did not always obtain the needed
                      certifications from insurers, but in only a few instances had bills for vet-
                      erans in our sample been specifically denied for this reason. A district
                      counsel legal technician for one center, however, showed that the
                      amounts denied by insurers can be large. She cited a case, not in our
                      sample, of a $41,591 bill that was written off because the center did not
                      obtain authorization, even though the center had knowledge of the
                      insurer’s authorization requirement.

                      Twenty-three of the medical centers reported, in response to our ques-
                      tionnaire, that insurers often paid only a portion of the amounts billed
                      because the centers did not obtain preadmission authorization from the
                      insurers. Sixty other centers reported that this sometimes occurred. We
                      also found that some collections were reduced because VA did not submit
                      bills to insurers within insurance policy time frames. For example, the
                      Seattle Medical Center failed to collect any of a $26,539 bill for a vet-
                      eran in our sample. The insurer refused to pay because it received the
                      bill more than 6 months after the last day of care. In responding to our
                      questionnaire, 23 centers said they were sometimes denied payment
                      because the insurers did not receive bills within insurers’ required time
                      frames.


                      Many veterans are covered by both Medicare and private health insur-
Some Insurers Deny    ance. Although some of the insurers have paid VA for care provided to
Payment Because       these veterans, others have denied payment because Medicare was not
Medicare Not Billed   billed first. We estimate, on the basis of our review of a sample of inpa-
                      tient veteran records at five centers, that about 18 percent of the care
First                 billed to insurers was denied because Medicare was not billed first. This
                      was also the most frequent reason for denial of payment that centers
                      reported in our questionnaire. One hundred centers reported that insur-
                      ers often refused to pay any of the amounts billed because Medicare was
                      not billed first. Twenty-six other centers reported that this reason was
                      given sometimes.


                      Page 38                                       GAO/HBD9061 VA CMkctiona From Insurers
                             Chapter 6
                             Medical CentersDidNotColleetAllAmounta
                             BilledtoInsurem




Many Veterans Eligible for   Many veterans treated in VA medical centers are eligible for Medicare, a
Medicare Coverage            federal health insurance program for people aged 65 and older and some
                             categories of disabled people. Medicare, which is administered by the
                             Health Care Financing Administration (HCFA), is composed of two parts.
                             Part A, hospital insurance, covers inpatient hospital, skilled nursing
                             facility, hospice, and home health care. Part B, supplementary medical
                             insurance, covers many types of noninstitutional services, such as phy-
                             sicians, clinical laboratory, x-ray, and physical therapy services. Both
                             parts require beneficiaries to share in the cost of their care through
                             deductibles and coinsurance.


Many Veterans With           Many Medicare beneficiaries, including veterans, have private insurance
Medicare Also Have           to cover some or all of their medical costs not paid by Medicare. This
                             insurance can be group insurance sponsored by former employers or
Private Health Insurance     individual policies purchased by beneficiaries. The National Center for
                             Health Services Research and Health Care Technology Assessment Sur-
                             vey found that in 1987, almost 45 percent of the Medicare population
                             aged 65 to 69 had private health insurance that was employment-
                             related; almost 33 percent had other private health insurance.

                             Assuming no special limitations in a veteran’s policy, it appears that VA
                             has the legal authority to recover the cost of care from insurance
                             designed to supplement Medicare. Section 629(a), title 38, authorizes VA,
                             in specified circumstances, to recover the reasonable costs of care under
                             veterans’ health-plan contracts. Subsection (i)( 1) defines a “health-plan
                             contract” as “an insurance policy . . . or similar arrangement under
                             which health services for individuals are provided or the expenses of
                             such services are paid.” The definition provides no exclusions that could
                             be relevant to a Medicare supplemental policy. The Senate Budget Com-
                             mittee intended, it stated, that the definition “. . . be construed broadly
                             so as to achieve broad coverage under this section with respect to the
                             types of health plans under which recoveries and collections may be
                             sought.” Consequently, a private insurance policy supplementing Medi-
                             care benefits appears to fall within this definition. General counsel offi-
                             cials in VA and HCFA also believe, they stated, that VA has the legal
                             authority to recover health care costs from these policies.


VA’s Actions to Resolve      VA requested assistance from HCFA in 1988 to resolve the problem of col-
                             letting from insurers that denied payment because Medicare had not
Collection Problem           been billed first. Specifically, VA asked HCFA to provide either (1) an
                             explanation of Medicare benefits for the services provided by VA when


                             Page 39                                  GAO/HRD-99.64VA Collections From Inmuer~
Chapter 6
Medical Centers Did Not Cdlect AU Amounta
Billed to Insurers




the insurer requires such a statement or (2) a general statement, in a
form that VA could share with insurers, about Medicare payments for VA-
provided services.

In July 1988, HCFA responded in writing that complying with the first
option would not be possible. In addition to being administratively
impractical and costly, HCFA stated that it understood that 38 U.S.C.
629(i)(l)(B) precludes VA from billing Medicare, a prerequisite to issuing
an explanation of Medicare benefits. However, HCFA did comply with the
second option, issuing a general statement in a letter, as follows:

“Because the Medicare law prohibits payment for services provided in a VA facility,
the Medicare payment for any such services would always be zero, except under the
limited circumstances         . regarding services provided to Medicare beneficiaries not
eligible for VA benefits . . . . Thus, even if VA were authorized to bill Medicare the
EOMB [explanation of Medicare benefits] would state that the Medicare payment is
zero.”

In September 1988, VA instructed each medical center as follows: when
veterans had Medicare, the center should include, with bills sent to
insurers, copies of HcFA’s letter.

The inclusion of HCFA’S letter has not completely overcome the collection
problem. For example, in a request for advice from its district counsel,
the Albany Medical Center reported that the insurers were continuing to
reject the bills in spite of the HCFA denial letter. At 10 of 15 other centers
we contacted, staff that used the letter reported that including it with
the bills sent to the insurers had not resolved the collection problems.

Since the HCFA letter has not resolved the collection problems with some
insurers, VA plans to litigate cases to clarify its right to reimbursement.
VA referred two cases, the VA deputy assistant general counsel said, con-
cerning one insurer to the Department of Justice. This insurer denied
payment for care in a VA medical center because the medical center did
not bill Medicare first. VA subsequently advised us that the cases have
been resolved and the insurer is now honoring VA'S claims. In addition,
VA advised us, several claims against other insurers’ Medicare supple-
mental policies have been referred to the Department of Justice for
litigation.’

lPresumably such collection problems will tend to decrease as a result of the passage of the Omnibus
Budget Reconciliation Act of 1989 (P.L. lOl-239), which, effective December 19, 1989, explicitly
establishes Medicare as a secondary payer on all claims for beneficiaries also covered by an employer
health plan This law undercuts the basic argument used by many insurers who reject bills for Medi-
care-eligible beneficiaries.



Page 40                                             GAO/HR.D9064 VACoUectio~ From Insurers
Chl
-.-   IIf,!’ 7 _

Stronger Management Actions Neededto
Maximize Insurmce Collections

                        Managers at VA headquarters must make a commitment to (1) establish-
                        ing effective recovery procedures and (2) assuring that centers have
                        adequate resources to carry out their recovery efforts. Inadequate guid-
                        ance hindered the ability of medical centers to establish effective proce-
                        dures; inadequate resources caused centers not to bill insurers for all
                        outpatient care.


VA Headquarters         The chief medical director gave medical centers general guidance on the
Guidance Irladeq uate   recovery effort along with some basic forms to use, but delegated
                        responsibility for establishing recovery procedures to the centers. Con-
                        sequently, each center established its own procedures for identifying
                        veterans with insurance, billing insurers, and collecting amounts owed.
                        In response to our questionnaire, about one-third of the centers said that
                        guidance from headquarters was inadequate. As a result, centers missed
                        opportunities to collect more from insurers.


Medical Centers Did     health insurers. VA headquarters left staffing decisions up to the discre-
Not Commit Staff        tion of the centers. VA’S fiscal year 1987 appropriation included 199 full-
Needed                  time equivalent positions for two recovery efforts or, on average, about
                        1 position for each center.’ Information given by centers for fiscal year
                        1988 showed that about 370 full-time equivalent positions were working
                        on the insurance recovery effort or, on average, about 2 full-time equiv-
                        alent positions per center.2 However, 122 of the 159 centers responded
                        that the number of available staff was less than adequate to effectively
                        recover costs from insurers (see app. IX).

                        To obtain the staffing and other resources needed to fully implement
                        recovery from insurers, managers at five of the medical centers we vis-
                        ited told us that they would like to keep a portion of the insurance col-
                        lections instead of transferring them to the U.S. Treasury. One center
                        director said he would provide the resources necessary to increase bill-
                        ing and collections if he could get some funds to supplement his budget.
                        Another director said that he would not devote additional staff for
                        insurance billing purposes without receiving some benefit. He said that

                        ‘These positions were for VA’s efforts to recover from certain veterans. who were required to make
                        copayments toward the cost of their care, as well as from insurers.
                        2This estimate was calculated using the centers’ responses to our questionnaire for the hours spent on
                        the recovery effort during a typical week in fiscal year 1988.



                        Page 41                                             GAO/HRD90-64 VA Cdections From Insurers
              Chapter 7
              Stronger Management Actions Neededto
              MarlmizeInaumncecollectlona




              he would have to absorb the staff for the insurance billing out of his
              current budget at a time when there were other unmet, medically
              related staffing needs at the center.

              VA headquarters   is considering contracting out its health insurance bill-
              ing and collecting activities. Currently, VAsays, it has limited statutory
              authority to pay, out of amounts collected, for the billing and collection
              services of a contractor. Allowing VAto do this would enable VAto use its
              appropriated funds to provide health care to veterans.

              The Congress recently considered, but did not authorize, allowing VA to
              keep some of the funds collected from insurers to pay for its administra-
              tive costs. A bill (H.R. 901), passed by the House of Representatives,
              would require VA to develop an automated program to carry out the bill-
              ing and collection of amounts owed to the United States. It would also
              require VA to pay for the costs of administering the automated program,
              including the costs of any contracts for billing and collection under this
              program, from the amounts received through the program. Of the
              amounts that remain after paying for administrative costs, the bill
              would require VA to transfer funds as follows: to the general fund of the
              Treasury, an amount equal to the Congressional Budget Office’s esti-
              mate of collections that would have been made, in fiscal year 1OfQ
              without the automated program. After the administrative costs have
              been paid and the Treasury has received its specified amount, VA would
              allocate the remaining amounts to its medical care account and nursing
              home revolving fund. The bill would also require that VAsubmit a
              report, by January 1992, to the Senate and House Committees on Veter-
               ans’ Affairs comparing the experience of carrying out the program
              through the use of (1) VA employees at not more than 20 medical centers
              with (2) contractor services at not more than 20 medical centers. How-
              ever, these requirements were dropped from the bill in the Senate and
              not included in the version adopted by the Congress.


              VA medical centers had the potential to collect  substantially more, per-
Conclusions   haps another $223 million, from private health insurers in fiscal year
              1988. First, over 70 percent of the centers did not bill for outpatient care
              or billed for less than half of the outpatient care provided. Second, the
              centers struggled to establish efficient and effective billing and collec-
              tion procedures- over 30 percent of the potentially colhxtible costs
              were not billed by the six centers we visited. Third, center directors
              have not committed the staffing needed to do the job right-additional



              Page 42
                         Chapter 7
                         Stronger Management Actions Neededto
                         Ikximhe Insurance Collections




                         staffing is needed to handle insurance recoveries at two-thirds of the
                         159 medical centers, according to responses to our survey questionnaire.

                         VA headquarters    should take a more active role helping medical centers
                         to maximize collections from private insurers. First, it should work
                         closely with the centers to improve their procedures, especially those
                         used to (1) identify veterans with insurance and (2) bill insurers for all
                         episodes of inpatient and outpatient care provided. Although some
                         improvements should save money through greater efficiencies of opera-
                         tions, most will require medical centers to spend additional funds, a
                         financial commitment that center directors appear reluctant to make.

                         Sufficient resources must be dedicated to VA’S insurance recovery effort
                         if collections are to be maximized. VA should act quickly because insur-
                         ance policies have time limitations that could prevent VA from collecting
                         for some care if it takes too long to bill for that care. To obtain adequate
                         resources, VA should determine the additional resources necessary to
                         maximize insurance collections. If these resources can not be found in its
                         existing budget, VA should seek (1) the funds through the budget process
                         or (2) legislative authority to pay its collection costs by using some of
                         the funds collected from insurers.


                         We recommend that the Secretary of Veterans Affairs ensure that all
Recommendations to       medical centers bill insurers for outpatient care they provide to insured
the Secretary of         veterans. In addition, we recommend that the Secretary ensure that
Veterans Affairs         each medical center has

                       . effective procedures for (1) identifying all veterans with health insur-
                         ance and (2) billing insurers for all episodes of inpatient and outpatient
                         care provided to insured veterans and
                       . sufficient resources to fully implement its identification, billing, and col-
                         lection procedures.


Matter for               mizing insurance collections, the Congress should ensure that VA has the
Consideration by the     resources necessary to fully implement its recovery efforts. If adequate
Congress                 resources are not available through the budget process, the Congress
                         should consider amending 38 U.S.C. 629 to allow VA tokeep a portion of
                         the amounts collected from insurers to defray its administrative costs.




                          Page 43                                GAO/HBDsoscl VA Cdlections From Insurera
     -
                      chaptm7
                      Stronger Management Actions Neededto
                      htarhh    Insurance fIk&ctiona




                      VA commented on a draft of this report on February 26, 1990 (see app.
Agency Comments       X). The Department agreed with our recommendations and pointed out a
                      number of actions being taken to improve the process and increase col-
                      lections from health insurers. Actions the Department said were being
                      taken include

                  l convening a task force for medical care cost recovery, charged with
                    developing a strategy to improve identification, billing, and collection
                    procedures as quickly as possible;
                  . developing an administrative order, which is currently being reviewed
                    in the Department, that would require all facilities to bill for outpatient
                    care;
                  l citing the insurance collection system as a material weakness in its 1989
                    Federal Managers’ Financial Integrity Act report; and
                  l requesting input from field stations to ensure that debt collection proce-
                    dures are effective after a new accounts receivable system is installed at
                    all stations, which VA expects to be in 1990.

                      VA also recognized that additional resources are necessary to properly
                      carry out the billing and collection procedures; it presented such a pro-
                      posal, it said, as part of its fiscal year 1991 budget request.

                      After receiving VA'S comments, we reviewed VA'S fiscal year 1991 budget
                      justification. It shows that this proposal would include establishing a
                      third-party medical recovery account to bill and collect from third-par-
                      ties. The fund would consist of (1) $18.6 million and 500 full-time equiv-
                       alent staff transferred from the medical care account and (2) the
                       appropriation of an additional $6.4 million and 300 full-time equivalent
                       staff. All collections would be deposited into this account; amounts in
                       excess of the billing and collection costs would be forwarded to the U.S.
                       Treasury. VA estimates that this proposal will result in a $359 million
                       increase in net receipts for Treasury in fiscal year 1991.




                      Page 44                                GAO/HRD90-64 VA Collections From Insurera
Page 46
VA’s Daily Rates Used to Prepare Billsto                                            I
Health Insurers

                                                                           Fiscal year
                Type   of care                                             1988           1989
                Outpatient care                                             $127          $110
                Inpatient medicine:                                          473           483
                   Room, board. and nursina                                  266           271
                   Physician                                                   91            93
                   Ancillary                                                 116           119
                Inpatient surgery:                                           611           681
                   Room. board. and nursina                                  337           375
                   Physician                                                 114           128
                   Ancillary                                                 160           178
                Inpatient spinal cord injury:                                524           539
                   Room. board. and nursina                                  306           317
                   Physician                                                   62            64
                   Ancillary                                                 154           158
                Inpatient psychiatry:                                        236           232
                    Room. board. and nursina                                 166           164
                   Physician                                                   32            32
                   Ancillary                                                   36            36
                Inpatient neurology:                                         393           426
                    Room. board. and nursina                                 219           237
                    Physician                                                  49            53
                   Ancillary                                                 125           136
                Inpatient alcohol/drug:                                       197          213
                    Room. board. and nursina                                  119           129
                    Physician                                                  37            40
                    Ancillary                                                  41            44
                 Inpatient rehabilitation medicine:                          372           374
                    Room. board. and nursina                                 215           216
                  Physician                                                    44            44
                  Ancillary                                                  113            114




                Page 46                               GAO/HRD96-64 VA Collections From Insurers
Appendix II

Total hsurance Collections and Collections Per
Average Daily Occupied Bed by Medical Center
@iscal Year 1988)
                                                                Collections
                                                                         Per average
                                                                                daily
                            Medical center location                         occupied
               Rank’      City                  State           Total            bed
               1          Martinsburg             WV       $2,978,554        $10,378
               2          White River
                          Junction                VT           890,972           7.551
               3          Ene                     PA           628,214           7,391
               4          Salt Lake City          UT         1,756,649           7,083
               5          Charleston              SC         1,480.095           6.435
               6          Iowa City               IA         1,119,172           6,218
               7          Saginaw                 MI           595,366           6,075
               8          Boise                   ID           513,751           5,974
               9          Columbra                MO         1,069.550           5.243
               10         Dublin                  GA         1,161,128           5,027
               11         Fargo                   ND           580,724           4,921
               12         Wichtta                 KS           528,621           4,895
               13         SIOUXFalls              SD           753,524           4.739
               14         Marion                  IL           590,983           4,728
               15         Madison                 WI           949,159           4,722
               16         Fayetteville            NC         1,108,635           4,718
               17         Kerrville               TX           866,860           4,636
               18         Durham                  NC         1,317,622           4,544
               19         San Antonio             TX         1,976,689           4.288
               20         Lincoln                 NE           472,854           4,185
               21         Omaha                   NE           980,859           4,156
               22         Fayetteville            AR           441,298           4,086
               23         Poplar Bluff            MO           469,582           4,083
               24         Altoona                 PA           332,684           4,057
               25         Grand Island            NE           297,626           3,865
               26         Alexandna               LA           595,916           3,845
               27         Columbia                SC         1.221,791           3,842
               28         Richmond                VA         1.868.382           3,790
                29        Wilmtngton              DE           567,348           3,782
                30        Amarillo                TX           352,057           3,745
                31        Cheyenne                WV           209,200           3,670
                32        Albanv                  NY         1.304,243           3.603
                33        Garnesville             FL         1,233,373           3,554
                34        Manchester               NH          337.200           3,476
                35         Louisville              KY          856.932           3.469
                36         Prescott               AZ           354,452           3,408
                                                                          (continued)




                Page 47                    GAO/HRD-90-64VA Collections From Insurers
Appendix II
Total Insurance Collections and Collections
Per Average Daily Occupied Bed by Medical
Center (Pii   Year 1988)




                                                                       Collections
                                                                                Per average
                                                                                       daily
                                   Medical center location                         occupied
Rank’                            Citv                  State           Total            bed
37                               Nashville              TN         $928,521          $3,389
38                               Des Moines             IA           393,678          3,365
39                               Shreveport             LA           748,864          3,358
40                               Minneapolis            MN         1,622.489          3.352
41                               Fort Wayne             IN           339,812          3.331
42                               West Haven             CT         1,000,300   -      3,323
43                               Washrngton             DC         1,359,846          3,269
44                               lndranapolis           IN           984,406          3.249
45                               Wood                   WI         1,292,654          3,208
46                               Lake City              FL           808,704          3,196
47                               Clarksburg             WV           394,615          3.157
48                               Mountarn
                                 Home                   TN         1,062,136          3,152
49                               Butler                 PA           588,898          3,116
50                               Roseburg               OR           577,472          3,088
51                               Providence             RI           588,087          3,063
52                               Fort Howard            MD           517,710          3,045
53                               Iron Mountain          Ml           291,622          3,038
54                               Leavenworth            KS           803,018          3,019
55                               Walla Walla            WA           243,352          2,932
56                               Bonham                 TX           175,540          2,926
57                               Oklahoma
                                 Citv                   OK          776,262           2.897
58                               Pittsburgh/
                                 Unrv. Dr               PA         1,153,162           2,883
59                               Denver                 co           670,981           2,880
60                               Hampton                VA           722,011           2,735
61                               Ann Arbor              MI           563,301           2,695
62                               Birmrngham             AL           599,682   -2,642
63                               East Orange            NJ         1,376,306           2,597
64                               Portland               OR           950.014           2,561
65                               Beckley                WV           303,308           2,549
66                               Temple                 TX           870,834           2,495
67                               Fresno                 CA           311,842    -      2.417
68                               Livermore              CA           202,695           2,413
69
~~                               Little Rock            AR         1,804,612           2,335
70                                Hones                 IL         1,695,397
                                                                       --________- ~~ 2,304
71                                Syracuse              NY           410.472           2,255
72                               Cinclnnatl             OH           433,648           2,179
                                                                                (contlnuedj




Page 48                                          GAO/HRD90-64 VA Collections From Insurers
Appendix II
Total Insurance Collections and Collections
Per Average Daily Occupied Bed by Medical
Center @iscal Year 1989)




                                                                     Collections
                                                                              Per average
                                                                                     daily
                                   Medical center location                       occupied
Rank’                            Citv                  State         Total            bed
73                               Tucson                 AZ       $394,863          $2,170
74                               Memphis                TN       1,152.075          2,137
75                               Seattle                WA         609,045          2,100
76                               B&on                   MA         717,416          2,092
77                               Dallas                 TX       1,016,173          2,091
78                               Augusta                GA       1,611,030          2,079
79                               Wilkes Barre           PA         616,485          2,062
80                               Atlanta                GA         696,689          2,049
81                               Miles City             MT         124,235          2,037
82                               St Cloud               MN         769,342          1.938
83                               Phoenrx                AZ         612,031          1,895
84                               Tows                   ME-        543,867          1,888
85                               Chicago/
                                 West Side              IL         630,239           1,887
86                               Ashevrlle              NC         593,346           1,884
87                               Albuquerque            NM         581,263           1,869
88                               Marlin                 TX         282,812           1,861
89                               Grand
                                 Junction               co          118,042          1,844
90                               Perry Point            MD        1,096,392          1,794
91                               Fort Meade             SD          462,888          1,794
92                               Bath                   NY          326,128          1,782
93                               Chrllrcothe            OH          999,995          1,718
94                               Spokane                WA          172,852          1,695
95                               Huntrngton             WV          218,776          1,683
96                               Prttsburgh/
                                 Hrghland               PA         844,311            1,682
97                               Muskoqee               OK         214,464            1,663
98                               Brg Spring             TX         226,033            1,615
99                               Hot Sprinas            SD         156,909            1,569
100                              St LOUIS               MO         889,791            1.561
101                              Marion                 IN         686,587            1,506
102                              Jackson                MS         447,793            1,503
103                              Loma Linda             CA         355,769            1,429
104                               Dayton                OH         563,196            1,394
105                               Knoxvrlle             IA         474.430            1.375
106                               Kansas City           MO         383,755            1,356
107                               Fort Harrison         MT         142,083            1,353
                                                                               (continued)




Page 49                                           GAO/~90-64   VACollections Prom Insurers
Appendix II
Total Insurance Collection and CMktiona
Per Average Daily Occupied Bed by Medical
Center (Fi8cal Year 1988)




                                                                    Collections
                                                                             Per average
                                                                                    dally
                                 Medical center location                        occupied
Ranka                          City                  State          Total            bed
108                            San
                               Francisco              CA         $27 1,662        $1,352
109                            Baltimore              MD          209,511          1,343
110                            Topeka                 KS          691,176          1,329
111                            Sheridan               WY          342,588          1,328
112                            Lebanon                PA          640,721          1.321
113                            Danville               IL          816,497          1,298
114                            Lexington              KY          805,392          1,272
115                            San Diego              CA          366,052          1,262
116                            Reno                   NV          143,332          1.246
117                            Brockton               MA          838,269          1,231
118                            Salem                  VA          726,978          1,224
119                            Montaomerv
                                    ”       I
                                                      AL          164.365          1.209
120                            Northampton            MA          481,313          1,188
121                            Allen Park             MI          430,410          1,151
122                            Newington              CT          131,447          1,143
123                            Long Beach             CA          714,352          1,069
124                            Bav Pines              FL          491,587          1,039
125                            Waco                   TX          618,055          1,030
126                            Salisbury              NC          703,988          1,029
127                            Houston                TX          716.466          1.021
128                            Tampa                  FL          425,383            976
129                            Northport              NY          598,708            972
130                            Tuscaloosa             AL          453,294            940
131                            Buffalo                NY          519,709            930
132                            Chicago/
                               Lakeside               IL          222,723             928
133                            Palo Alto              CA          880,655             928
134                            Murfreesboro           TN          440,202             837
135                            North
                               Chicago                IL          556,493              778
136                            Tomah                  WI          375.728              764
137                            Batavia                NY           87,067              757
138                            Biloxi                 MS          421,293              738
139                            Sepulveda              CA          202,665              729
140                            Battle Creek           Ml          411,645              644
141                            Castle Point           NY          110,960              638
142                            Cleveland              OH          361,979              624
143                            New Orleans            LA          181,160              596
                                                                              (continued)




Page 60                                         GAO/EIRD9044 VACMlectio~ From Insurers
Appendix II
Total Insurance Collections and Collections
Per Average Daily Occupied Bed by Medical
Center (Fiscal Year 1999)




                                                                    Collections
                                                                             Per average
                                                                                    dally
                                   Medical center location                      occupied
Rank0                            City                  State        Total            bed
144                              Martinez              CA        $153,107           $565
145                              Miami                 FL         262,597            564
146                              Bronx                 NY         211,983            558
147                              American
                                 Lake                  WA         121,636            553
148                              Tuskegee              AL         323,821            546
149                              Fort Lyon             co         135,015            511
150                              West Los
                                 Angeles               CA         330,448            401
151                              Canandaigua           NY         239,371            401
152                              Lyons                 NJ         330,724            398
153                              San Juan              PR         214,353            388
154                              Brooklyn              NY         146,261            266
155                              Philadelphia          PA          74,023            244
156                              New York              NY         107,441            216
157                              Bedford               MA         118,513            215
158                              Coatesville           PA         146,075            209
159                              Montrose              NY          84,414            117
% order of collectlons per bed




Page 61                                         GAO/IUUHO& VA Collections From Insurers
Appendix III

When Medical Centers Began Billing Insurers -


                               In our questionnaire, we asked centers when they began routinely billing
                               insurers for inpatient and outpatient care. Responses are summarized in
                               table III. 1.

Table 111.1:Center Responses
                                                                                      Medical centers
                               Fiscal year                                         Outpatient     Inpatient
                               1986 or earlier [before   Oct. 1986)                        10            32
                               1987 (Oct. 1986~Sept.     1987)                             29           119
                               1988 (Oct. 1987~Sept.     1988)                             36             8
                               1989 (Oct. 1988~Sept.     1989)                              6             0
                               Start date unknown                                           1             0
                               Not started as of Oct.    1988                              77             0
                               Total                                                      159           159




                               Page 52                                GAO/MUM064 VA Cokctio~    From Inmuers
Estimating VA’s Potential Collections
From Insurers

                            We used three steps to estimate VA’S potential collections from health
                            insurers nationwide in fiscal year 1988. First, from data reported in VA’S
                            1987 Survey of Veterarql we estimated the total number of episodes of
                            inpatient care or outpatient visits for insured veterans. Second, we esti-
                            mated the total cost of this care using VA’S data. Third, we reduced the
                            total cost of care (potential collections) to allow for health insurance
                            policy limitations. Described below is our methodology for estimating
                            potential collections for inpatient and outpatient care.


Estimating Total Cost       veterans in fiscal year 1988, we calculated the number of VA inpatient
for Inpatient Care          episodes, reported in VA’S 1987 Survey of Veterans, by veterans who

                        . were without service-connected disabilities,
                        l had been patients overnight in VA hospitals in the previous 12 months,
                        l had health insurance plans that pay the providers directly for the ser-
                          vices, and
                        . were either (1) under the age of 65 or (2) the age of 65 or older and had
                          health insurance through their employers.

                            On the basis of the survey responses, we estimated that nationwide,
                            about 80,000 episodes of inpatient care were provided to these insured
                            veterans during the 12-month period covered by the survey. At the 95-
                            percent confidence level, we calculated the resulting sampling error was
                            44,000 episodes.?

                            To estimate the total number of inpatient days of care, we multiplied the
                            number of inpatient episodes by VA’S average lengths of stay for fiscal
                            year 1988. In the survey, the 80,000 episodes of inpatient care were
                            placed in two categories: “surgical” or “medical,” with “examination/
                            diagnostic” episodes included in the medical category. None of the
                            insured veterans reported receiving inpatient psychiatric care. We
                            assumed that nearly all of the insured veterans would be under the age
                            of 65. Therefore, we used VA’S average lengths of stay for veterans



                            ‘Department of Veterans Affairs, 1987 Survey of Veterans,IM&S-M 70-89-l (Washington, D.C.,
                            July 1989).

                            “We calculated the sampling error at the 95-percent confidence level on the basis of a formula used by
                            the Census Bureau for the 1987 Survey of Veterans, which it did for VA. This confidence level means
                            that the chances are about 19 out of 20 that the actual number being estimated falls within the range
                            defined by our estimate, 80,000 episodes, plus or minus the sampling error, 44,000 episodes.



                            Page 53                                             GAO/HRD90-64 VA Collections From Insurers
                             Appendix IV
                             Estimathg VA’sPotential Cdkctions
                             FromInsurer




                             under the age of 65,3 which were 10.4 days for medical care episodes
                             and 8.6 days for surgical care episodes. To estimate VA'S total cost for
                             this inpatient care, we multiplied the total number of inpatient days of
                             care by VA'S reported daily rates for fiscal year 1988. These daily rates
                             were $611 for surgical and $473 for medical care. We estimated the total
                             cost of inpatient care for insured veterans to be $395 million, with a
                             sampling error of plus or minus $217 million. Since our cost estimate is
                             based on the estimated number of episodes of care, the sampling error
                             for the costs is proportional to the sampling error for the number of
                             episodes of care.


                             To estimate the total number of outpatient visits for insured veterans in
Estimating Total Costs       fiscal year 1988, we calculated the total number of outpatient visits,
for Outpatient Care          reported in VA'S 1987 Survey of Veterans, by veterans who

                         l were without service-connected disabilities,
                         l had made visits for medical treatment to VA clinics or VA hospitals on an
                           outpatient basis in the previous 12 months,
                         l had insurance plans that pay the providers directly for the services, and
                         . were either (1) under the age of 65 or (2) the age of 65 or older and had
                           health insurance through their employers.

                             On the basis of the survey responses, we estimated that nationwide,
                             180,000 insured veterans made one or more outpatient visits to VA
                             health care facilities during the 12-month period covered by the survey.
                             The survey asked veterans to estimate the number of VA outpatient vis-
                             its they had made during the preceding 12 months, that is, 1 visit, 2 to 5
                             visits, 6 to 10 visits, 11 or more visits. To estimate the number of visits
                             nationwide, we used the lower value of each range. This resulted in an
                             estimate of 850,000 visits.

                             To allow for insurance deductibles, we assumed the first 2 visits by a
                             veteran would be used to meet the insurance deductible. Thus, we sub-
                             tracted 37,000 visits from the total estimated visits to adjust for veter-
                             ans who reported only 1 visit; we subtracted 284,000 visits for veterans
                             who reported 2 or more outpatient visits. This left an estimated total of
                             529,000 outpatient visits for which recovery from insurers seemed
                             possible.


                             3We used VA’s reported average lengths of stay for short-term discharges, which are defined as stays
                             of 99 days or less.



                             Page 64                                             GAO/HRB9O-64VACollections From Insurers
                       Appendix IV
                       Estimafing VA’sPotential Cdledions
                       FromJnsurers




                       To estimate VA’S total cost for these outpatient visits, we multiplied the
                       number of outpatient visits by VA’S reported daily rate for fiscal year
                       1988, which was $127. Thus, we estimate the total cost of 529,000 out-
                       patient visits to be $67 million. At the 95-percent confidence level, this
                       estimate has a sampling error of plus or minus $24 million.


                       We recognized that many health insurance policies have provisions for
Estimating Potential   deductibles and copayments. To allow for insurance deductibles and
Collections From       copayments for inpatient care, we reduced the estimated total costs by
Insurers               30 percent. Thus, we assumed, on average, insurers would be liable for
                       70 percent of the total VA cost of providing inpatient health care. For
                       outpatient care, as discussed above, we allowed for deductibles by
                       reducing the number of outpatient visits. We allowed for outpatient care
                       coinsurance by reducing the total costs for the remaining visits by 30
                       percent. At the 95-percent confidence level, we estimate potential collec-
                       tions of $125 to $428 million from insurers for inpatient care in fiscal
                       year 1988. For outpatient care, we estimate potential collections of
                       $30 to $64 million.




                       Page 56                                 GAO/HBD90-64 VA Collections From Insurers
Methodology and Results for Our Review of
Samplesof Insured Veterans Receiving
Inpatient Care
                  At the five medical centers whose inpatient records we reviewed, we
                  asked center officials to give us a list of the veterans without service-
                  connected disabilities who were (1) identified as insured and (2) dis-
                  charged from inpatient care between October 1,1987, and March 31,
                  1988. From this list we randomly selected a sample of approximately 30
                  veterans at each medical center.

                  We did not include a veteran in our samples if

              . we could not find sufficient evidence that the veteran was actually cov-
                ered by insurance during the 6-month period of our review,
              l the veteran had Health Maintenance Organization (HMO) coverage or was
                covered by an indemnity policy,
              . the veteran’s records indicated he or she had a service-connected disa-
                bility, or
              l we could not verify that the veteran received inpatient care during the
                period reviewed.

                  For each veteran sampled, we reviewed the veteran’s administrative and
                  medical records to determine (1) the value of care provided, (2) the
                  amount of care that could have been billed but was not, (3) the amount
                  of care that was billed to insurers, and (4) the amount that was
                  collected.

                  For each center visited, we projected our findings to the universe of
                  insured veterans without service-connected disabilities who were dis-
                  charged between October 1,1987, and March 31,1988. We also pro-
                  jected the associated precision of our estimates for the 95-percent
                  confidence level. The projected amounts that could have been billed to
                  insurers but were not are summarized in table V.l.




                  Page 56                               GAO/HRD!40-64VA Cdlection~ From insurers
                                            Appendix V
                                            Methodology and Results for Our Review of
                                            Samplesof Insured Veterans Receiving
                                            Inpatient Care




Table V.1: Projected Value of Inpatient Care Provided to Insured Veterans, October 1, 1987, Through March 31,1988, and Not
Billed to Insurers
                                  Average                                         Projected to medical center population
                               amount not     Range    for 95-percent                                  Range for 95-percent
                                 billed per      confidence level               Estimated value           confidence level
Medical center                      veteran          Low             High      of care not billed            Low               High
Bav Pines                             $3,746       $2,051          $5,441               $782,837         $428,660        $1,137,014
MartInsburg                            74              12               207                           14,560               2,365                40,676
Mmneapolis                          1,617             219             3,015                          252,317              58,227               470,447
Seattle                             1,910             317             3,503                          227,262              57,293               416,784
West Los Angeles                    9,305           3,474            15,136                          502,472             297,761               817,350
Total                              $2,421         $1,665’           93,177a                     $1,779,448           $1,223,776’           $2,335,120’


                                            These figures are the range for our projections, not the average or sum
                                            of the values listed for the individual medical centers.

                                            We also reviewed the records for the veterans sampled to determine the
                                            amounts that the centers billed to insurers and the amounts recovered.
                                            The amounts of care the centers billed to insurers are summarized in
                                            table V.2.


Table V.2: Projected Value of Inpatient Care Provided to Insured Veterans, October 1,1987, Through March 31, 1988, and Billed to
Insurers
                                  Average                                        Projected to medical center population
                                    amount    Range for 95-percent                                    Range for 95-percent
                                 billed per      confidence level               Estimated value          confidence level
Medical center                      veteran         Low           high             of care billed           Low             High
Bay Pines                          $6,143         $1,494           $10,793                       $1,283,943             $312,215           $2,255,671
Martmsburg                          8,643          4,862            12,424                        2,333,590            i ,312,aoa           3,354,372
MmneaDohs                           6,136           3,885             a,357                          957,203              606,045           1,308,361
Seattle                             4,659           2,551             6,767                          554,425              303,524              805,326
West Los Angeles                    1,617              958            2,356                           87,291               51,728              136,953
Total                              $6,456         $4.631"           $8.281'                     $5,216,452           $3,741,6718           $6,691,233”
                                            aThese figures are the range for our prolectlons.   not the average or sum of the values Ned   for the
                                            rndwdual medical centers


                                            In many cases, we were unable to determine the amount that YAcould
                                            expect to collect from insurers for the care provided; this is because the
                                            medical and administrative records we reviewed did not contain ade-
                                            quate information on the veterans’ insurance coverage. The collection
                                            rates shown in table V-3 were calculated by dividing the average amount
                                            collected per veteran by the average amount billed per veteran.


                                             Page 67                                                 GAO/IiRD-90-64VA CNlectio~ From Lnsurers
                                            Appendix V
                                            Methodology and Results for Our Review of
                                            !Sampleaof Insured Veterans Receiving
                                            Inpatient Care




                                            For various reasons, centers had not closed all cases for sampled veter-
                                            ans at the time or our review. For example, the Seattle Medical Center
                                            had referred some cases to the VA district counsel for assistance. We
                                            assumed that the centers would not collect any additional funds from
                                            open cases. If the centers did collect more money, the collection rates
                                            would increase.


Table V.3: Centers’ Projected Collection Rates for Inpatient Care Provided, October 1,1987, Through March 31, 1988, and Billed
to Insurers
                                   Average                                        Projected to medical center population
                                    amount    Range for 95percent                                      Range for 9bpercent
                             collected per      confidence level            Estimated collection         confidence level
Medical center                      veteran          Low          high             rate (percent)            Low’           Highb
Bay Prnes                          $1,513           $217           $3,356                              25                     4                   55
Martrnsburq                         5,758          2,991            8,525                              67                   35                   99
Mrnneapolts                         3,376          2,043             4,709                             55                   33                    77
Seattle                             1,455             556            2,354                             31                   12                    51
West Los Angeles                    1,414             838            2,321                             87                   52                   100
Total                             $3.278         $2,195            $4,358
                                            aThis was calculated by drviding the projected amount collected per veteran at the low end of the range
                                            by the projected average amount per veteran.
                                            bThrs was calculated by dividing the projected amount collected per veteran at the high end of the
                                            range by the projected average amount per veteran.




                                            Page 58                                              GAO/HRD9064 VACollections From Insurers
Methodology and Results for Our Review of
Samplesof Insured Veterans Receiving
Outpatient Care
                  At the six medical centers whose outpatient records we reviewed, we
                  asked center officials to give us a list of the veterans without service-
                  connected disabilities who (1) were identified as insured and (2)
                  received outpatient care between October 1, 1987, and March 31, 1988.
                  From this list, we randomly selected a sample of approximately 30 vet-
                  erans at each medical center.

                  We did not include a veteran in our samples if

              . we could not find sufficient evidence that the veteran was actually cov-
                ered by insurance during the 6-month period of our review,
              l the veteran had Health Maintenance Organization (HMO) coverage or was
                covered by an indemnity policy,
              . the veteran’s records indicated he or she had a service-connected disa-
                bility, or
              l we could not verify that the veteran received outpatient care during the
                period reviewed.

                  For each veteran sampled, we reviewed the veteran’s administrative and
                  medical records to determine (1) the value of care provided, (2) the
                  amount of care that could have been billed but was not, (3) the amount
                  of care that was billed to insurers, and (4) the amount that was
                  collected.

                  We projected our findings to the universes of insured veterans without
                   service-connected disabilities who received outpatient care between
                   October 1, 1987, and March 31, 1988, at the centers visited. We also pro-
                  jected the associated precision of our estimates for the 95-percent confi-
                   dence level. The projected amounts that could have been billed to
                   insurers but were not are summarized in table V1.1.




                  Page 69                               GAO/HID-90-64 VACollections From Insurers
                                           Appendix VI
                                           Methodology and Resulte for Our Review of
                                           Sampleaof Insured Veterans lbcelvlng
                                           Outpatient Care




Table VI.l: Projected Value of Outpatient Care Provided to Insured Vetemrw, October 1,1987, Through March 31, 1988, and Not
Billed to Insurer8
                                 Average                                        Prolected to medical center population
                               amount not     Range for 95-percent                                   Range for 95percent
                                billed per      confidence level              Estimated value          confidence level
Medical center                     veteran          Low           high       of care not btlled            Low           High
Albany                              $533           $116              $950                        $468,981             $101,749              $836,213
Bav Prnes                            479            270               666                         245,497              138.269               352.725
Martmsburg                           385            293               477                         325,888              248,108               403.668
Minneapolis                          506             277               735                        336,468              184,055               488,881
Seattle                              300             179               421                        128.371               76.751
                                                                                                                          ~.                 179.991
                                                                                                                                               _,_-
West Los Angeles                     504             308               700                          50,901               31,084               70,718
Total                               $453           s330a             $578’                    $1,558,106           $1,133.383’           $1.978.829’
                                           aThese figures are the range for our projections, not the average or sum of the values llsted for the
                                           individual medtcal centers.

                                           We also reviewed the records for the veterans sampled to determine the
                                           amounts that the centers billed to insurers (see table VI.2) and the
                                           amounts recovered.


Table Vl.2: Projected Value of Outpatient Care Provided to Insured Vetemnr, October 1,1987, Through March 31,1988, and Billed
to Insurers
                                                                                Projected to medical center population
                                  Average     Range for 95-percent                                   Range for 95-percent
                            amount billed       confidence level              Estimated value          confidence level
Medical center                 per veteran          Low           high           of care billed            Low              High
Albany                                $149           $39          $260                $131,355          $34,165         $228,545
Bay Pines                              0               0                 0                               0                    0                    0
Martinsburg                            6               1                14                           5,465                  508               12,187
Mmneaoolrs                             0               0                 0                               0                    0                    0
Seattle                              157              42               272                          67,039               17,859              116,219
West Los Angeles                       0               0                 0                                                    0                    0
Total                                $59             828O             $91’                      $203,85:               $94,7270            $312,991’
                                           aThese figures are the range for our projections, not the average or sum of the values llsted for the
                                           indwrdual medical centers.

                                           In many cases, we were unable to determine the amount that VA could
                                           expect to collect from insurers for the care provided; this is because the
                                           medical and a.dministrative records we reviewed did not contain ade-
                                           quate information on the veterans’ insurance coverage. The collection
                                           rates shown in table VI.3 were calculated by dividing the average
                                           amount collected per veteran by the average amount billed per veteran.



                                           Page 60                                                GAO/HID-90-64 VA Collections Prom Insurers
                                                 Appendix VI
                                                 Methodology and Results for Our Review of
                                                 Samplesof Insured Veterans Receiving
                                                 Outpatient Care




                                                 For various reasons, centers had not closed all cases for these veterans
                                                 at the time or our review. We assumed that the centers would not collect
                                                 any additional funds from open cases. If the centers did collect more, the
                                                 collection rates would increase.


Table Vl.3: Centers’   Collection   Rates for Outpatient Care Provided, October 1,1987, Through March 31,1988, and Billed to
Insurers
                                      Average                                               Projected to medical center population
                                       amount     Range for 95-percent                                           Range for 95-percent
                                collected per       confidence level                  Estimated collection          confidence level
Medical center                         veteran         Low           high                    rate (percent)           LOW             Hiahb
Albany
____~~--                                                                                                    37                     1                   85
Bay Pmes
~~                                          0                0               0                               0                    0                     0
Martmsbura                                   1               0               2                              11                    0                    31
Mmneapolis                                  0                0               0                               0                    0                     0
Seattle                                    95               23             166                              60                   15                   100
West
~.. Los Angeles                             0                0               0                               0                    0                     0
Total                                     $28               $5             $47
                                                 aThts was calculated by dividing the projected amount collected per veteran at the low end of the range
                                                 by the projected average amount per veteran.

                                                 bThis was calculated by dividing the projected amount collected per veteran at the high end of the
                                                 range by the projected average amount per veteran.




                                                 Page 61                                              GAO/HRIH@64 VA Collections From Insurers
AppendIs VII

Projected Value of Amounts W.kcted and
Reasonsfor Less Than F’ull Payment for
Inpatient Care Billed at Five Centers
                                          To determine the amounts collected and the reasons for less than full
                                          collection for our five samples of insured veterans who received inpa-
                                          tient care (see app. V), we reviewed care that was billed to insurers. We
                                          projected these findings to the population of similar veterans at the five
                                          centers. The projected amounts and associated range for the g&percent
                                          confidence level are summarized in table VII.1.

Table VII.1: Projected Values Billed to
Insurers for Inpatient Care, October 1,                                                            Range for 9bpercent confidence level
1987, Through March 31,1988, Collected                                Estimated                                                   Percent
and Not Collected From Insurers                                     Amount      Percent                  Low           High    (low-high)
                                          Collected              $2,646,176                  51      $1,787,156        $3,505,196            34-67
                                          Not collected:
                                          Policy
                                             limitations            773,094                  15         266,305         1.279.883              5-25
                                          VA did not bill
                                             Medicare
                                             first                  936,478                  18         149,638         1.7828520              3-34
                                          Insurers’
                                             requirements
                                             not met                 154,898                  3           34.125          345.885                l-7
                                          Unknown/
                                             othera                 707,683                  13         346,079         1,069,287              7-21
                                          aThese were cases (1) that were not closed at the time of our review or (2) for which the center collected
                                          less than 70 percent of the amount billed and we could not determine the reason for less than full
                                          payment.




                                          Page 62                                                 GAO/IiRD-!I084 VACdectio~          From Insurers
Appendlh 1.11I

Reasonsfor Denial or Partial Payment of Bills


                 I. Our questionnaire listed possible reasons why an insurer did not pay
                 any of the amount billed. The centers indicated how often, during fiscal
                 year 1988, insurers gave each of these reasons for not paying any of the
                 amount billed:


                 Reason for denial                         Very often   Often Sometimes      Rarely   Never
                 Insurer offset the total amount
                 charged against the veteran’s
                 insurance deductible                              13      27           53       41      23
                 Policy does not cover any of the
                 services provided                                  5      23           76       48       5
                 Bill was not received within the
                 insurer’s reauired time frame                      0       2           21       48      85
                 VA did not bill Medicare first                    61      39           26       11      18
                 Policy was not in effect-veteran    was
                 not insured when care was provided                 8      16          80        49       4
                 Care billed to an HMO was neither for
                 emergency nor preauthorized                       22      18          42        41      31
                 Care billed to an insurer other than an
                 HMO was not oreauthorized                          7      10           50       65      25
                 Services provided were not medically
                 necessary                                          3      12          40        64      37
                 VA has no contract with the insurer               15       9          31        55      47
                 Insurer does not pay for care provided
                 at a VA medical center                            12      23           58       45      19
                 Charges for the services provided
                 exceeded the lrmitations of the
                 insurance policy                                   4      23           56       45      28
                 Health insurance (excluding indemnity
                 policies) payment made directly to
                 veteran                                            0      16           59       63      19


                 II. The questionnaire listed possible reasons why an insurer pays only a
                 portion of the amount billed. The centers indicated how often, during
                 fiscal year 1988, insurers gave each of these reasons for paying only a
                 portion of the total amount billed:


                 Reason for partial payment                Very often   Often   Sometimes    Rarely   Never
                 Insurer offset a portion of the charges
                 agarnst the veteran’s insurance
                 deductible and/or coinsurance                     36      47          55        10       9
                 A portron of the charges for services
                 provtded exceeded the limitations of
                 the insurance poltcy                              19      29          63        36       10
                                                                                                (contrnued)




                 Page 63                                         GAO/HRD-m      VACdlection~ From Insurers
Appendix VIII
Reasonafor Denial or Partial Payment
of Bills




Reason for partial payment               Very often   Often Sometimes   Rarely   Never
Policy does not cover some of the
services provided                                 8     29         08       24       8
Services billed were not preauthorized            6     17         60       58      16
Length of stay exceeded the insurer’s
allowable lenqth of stav                          3      9         58       61      26
Some of the services provided were
not medically necessary                           2     15         44       59      37
Charaes were not reasonable                       0      9         31       53      64




Page 64                                        GAO/HRD-9M4 VA CMkctio~ Prom Insurers
Appendix IS

Factors Affecting Recoveries


               Our questionnaire asked medical centers to consider various factors that
               may influence how effectively the center was able to recover health care
               costs from insurers. For each factor, the center indicated whether it was
               more than, about, or less than adequate to enable the center to effec-
               tively recover costs from insurers.


                                                                 More than         About      Less than
               Factor                                            adequate       adequate      adequate
               Number of available staff                                  2            35           122
               Staff’s skills/exberience                                 28           102            29
               Training you are able to provide staff                     7            90            62
               Computer hardware                                          7            70            80
               Computer software                                          6            63            84
               Guidance from VA headquarters                              2           100            56
               Veterans’ cooperation with your efforts                    9           104            44
               Insurers’ cooperation with your efforts                    5            84            70
               District counsel’s efforts to pursue referred
               cases                                                     31            87            28




               Page 66                                         GAO/HED96-64 VA Collections From Insurers
Comments From the Department of
Veterans Affairs


                                            THE SECRETARY    OF VETERANS   AFFAIRS
                                                          WASHINGTON




            Hr.     David
                        P. Baine
            Director,   Federal Health           Care
              Delivery   Issues
            U. S. General Accounting             Office
            Washington,    DC 20548

            Dear Mr.         Baine:
                   I am pleased to respond to your January. . 2, 1990, report              m
                     CARE: Better Procedures Needed To Maxlmlze Collections            From
            Health     Insurers    (GAO/BBD-90-64).       Since 1986 when the Congress
            authorized      the Department of Veterans Affairs       (VA) to collect   from
            health      insurers    for  medical    care,     we have strived     to fully
            implement this mandate.         We believe     the GAO report   documents that
            the Department       has made significant       progress with the collection
            of about $100 million       in Fiscal     Year 1988.
                    We      also      recognize     that  more can be done to improve           the
            collection            process.        We agree with      your recommendations,      and
            actions         are already       underway that should improve the process and
            increase         collections       from health insurers.     The actions   being taken
            as well          as other       comments on your report        are outlined     in the
            enclosure.
                        Thank you for    the opportunity        to comment on this     report.




            Enclosure
            EJD/jev




                        Page66                                         GAO/HBD~VACollectio~FromI~~rs
        Appendirx
        Comment.aFromtheDeprutment of
        VetemnsAfTaim




                                                                                          Enclosure
              DEPARTMENT OF VETERANS AFFAIRS COMMENTSON THE
                JANUARY 2, 1990, GAO REPORT w            .

                                  CTIONS p

GAO rOCOmOnd8     that   I require                 all  mdiaal          contars      to bill        for
outpatient  aara.     In addition,                 GAO reaomands          that     I ensure       that
oath medical oantar has:
               l fiaative   proomduraa    tor (1) identifying        all veterans
               vith in8urmae     and (2) billing  in8urars    for   all inpatient
               and outpatient     uare provided  to inwred       veterans.
         We concur          with     the recommendation.                  The Department             has
convened a Medical                Care Cost Recovery Task Force                        charged with
developing           a strategy         to improve        identification,              billing,       and
collection          procedures        as quickly        as possible.           In addition,           the
Veterans Health Services                  and Research Administration                   (VRS&RA) has
in the concurrence               process an administrative                 issue that requires
all     facilities         to incorporate         billing      procedures           for outpatient
visits.           VHS6tR.A is also establishing                 procedures           for a billing
training          guide.     In addition,        they have planned                 changes to the
Decentralized            Hospital      Computer Program          system      that will          automate
additional          portions      of the billing          process.          These changes will
provide         additional       management reports           to assist           in the complete
and timely          capturing      of billing       information.            Finally,         the VIiS&RA
has scheduled            a monthly national           conference        call for all involved
services         to assist      with any problems they encounter.

                Bufficient           resources           to     fully           implement           its
                identification,         billing,        and collection           procedures.
       We concur        with      the recommendation       and have proposed     a
multifaceted      plan to correct          the situation.      The Department  has
listed    this finding       as a material     weakness in the VA's 1989 Federal
Manager's     Financial       Integrity     Act (FMFIA) Report that tasks the
VHS&RA to identify          deficiencies      and follow  through with an action
plan.     We anticipate       that the first      results  of this action will  be
completed by Uarch 1990.
         An internal  review of the third   party billing and collection
activity      within VA was completed in September 1989.    As a result,
a number of recommendations      were proposed and are being considered
for implementation.
       We plan to request          input from field        stations   to insure that
our debt collection          procedures      are effective      at the field   station
level     once an accounts           receivable     module is installed         at all
stations.       Installation       is expected this calendar          year.    We will
enhance      our accounts         receivable     module      as permitted      by our
resources.




         Page67                                                 GAO/HRD9M4VACoUections FromInsurers
                        Appanihxx
                        Cemments~mtheDeparcmentof
                        VeteransAffair




              2.

                      We recognize       that     additional      resources     are necessary     to
              properly      perform    the billing         and collection       efforts     and have
              presented     a proposal     in the 1991 budget legislation.              Moreover,  if
              Congress can provide            additional      resources     for this    program,  as
              suggested      in the audit        report,     we will    be able to continue       to
              significantly       improve billings        and collections.

                        The following   comments are offered          to specific      parts    of the
              report:
Now on p 40           - At page 50 of the draft          report,       our referral      of two cases
              to the Department of Justice         for    litigation       against     one insurer    is
              discussed.      This matter has since been resolved,                  and the insurer
              is now honoring       VA's claims        against       them.     Recently,       however,
              several    claims    against     other      insurers'        Medicare      supplemental
              policies   were referred     to the Department of Justice              for litigation.

Now on p 42           - On page 52, the report            discusses     the need for legislation
              to permit     VA to pay contractors               out of amounts collected            for
              billing    and collection       activities.          Currently,      there   is limited
              statutory    authority      to pay for collection           services     out of amounts
              collected.       Authority    is lacking,       however, to pay a contractor          out
              of amounts        collected     for      services     in identifying          cases and
              preparing    bills.
Now on p 21        - On page 26, the official                name for the medical   center            in
              Bonham, Texas, is 'the Sam Rayburn             Memorial Veterans'  Center.




                        Page68                                       GAO/HRDW-64VACollectionsPromI~urers
pppendls XI

Major contributms to This Report


Human Resources           Walter P. Gembacz, Assignment Manager
Division,
Washington, DC.

Seattle Regional Office   Janet E. F’risch, Evaluator-in-Charge
                          Peter J. Bylsma, Evaluator
                          Patricia K. Yamane, Evaluator


                    1
Atlanta Regional
Office

                          Mark J. Huber, Evaluator
Chicago Regional
Office




 (401973)                 Page 69                                 GAO,4JRDso&I VACollections From Insurers
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