oversight

Military Health Care: Recovery of Medical Costs From Liable Third Parties Can Be Improved

Published by the Government Accountability Office on 1990-04-19.

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

                 United   States   General   Accounting   Office

                 Report to the Chairman, Subcommittee
GAO              on Readiness, Committee on Armed
                 Services, House of Representatives


April   1990
                 MILITARY HEALTH
                 CARE
                 Recovery of Medical
                 Costs From Liable
                 Third Parties Can Be
                 Improved




                                                             --.
GAO/NSIAD-9049
@&I!0 z.tztE;~~lgce
            , a*
       National Security and
       Internati0nal  AfYairs Division

       B-237224
       April 19,199O
       The Honorable Earl Hutto
       Chairman, Subcommittee on Readiness
       Committee on Armed Services
       House of Representatives
       Dear Mr. Chairman:
      This report responds to the former Chairman’s request that we evaluate the effectiveness of
      the Department of Defense’smedical cost recovery in third party liability cases.

      As arranged with your office, unless you publicly announceits contents earlier, we plan no
      further distribution of this report until 15 days from its date. At that time, we will send
      copies to the Chairmen of the House and SenateGxumittees on Armed Servicesand on
      Appropriations and the Secretaries of Defense,the Army, the Air Force, and the Navy. We
      will also make copies available to others upon request.

      This report was prepared under the direction of Richard Davis, Director, Army Issues,who
      may be reached on (202) 275-4141 if you or your staff have any questions. Other major
      contributors are listed in appendix I.

      Sincerely yours,




      Frank C. Conahan
      Assistant Comptroller General
Executive Summ~


                       The Department of Defense’s(DOD) military health care system provides
Purpose                medical care to active duty and retired military personnel and their
                       dependents. DOD is entitled to recover the cost of medical care provided
                       or paid for by the military services from liable third parties in accident,
                       negligence,and wrongful act cases.Recovery activities associatedwith
                       these casesprovide the potential for millions of dollars in annual sav-
                       ings to the government.
                       The former Chairman of the Subcommittee on Readiness,House
                       Committee on Armed Services,asked GAO to examine the systems used
                       by the Army, the Navy, and the Air Force to recover these costs.Specifi-
                       cally, GAO sought to determine whether

                   l military medical activities are effectively identifying and reporting
                     potential third party liability casesand
                   . the Judge Advocates General are performing effective recovery efforts
                     on casesdetermined to have third party liability potential.


                       Active duty personnel are entitled to receive health care at military
Background             medical facilities and at civilian facilities in an emergency. Nonactive
                       beneficiaries are eligible to receive care at military facilities when space
                       and professional services are available. When care is not available, they
                       may use the Civilian Health and Medical Program of the Uniformed
                       Services (CHAAPUS).   private organizations are under contract to CHAMPUS
                       to pay claims submitted by civilian health care providers for services
                       provided to beneficiaries under this program.
                       Military regulations require military service medical facilities, private
                       organizations under contract to CHAMPUS,     and military offices authoriz-
                       ing payment for care in civilian facilities to identify and report to Judge
                       Advocates General legal offices those casesthat have potential for third
                       party liability recovery. Military service regulations require that all
                       inpatient caseswith this potential be reported, but service requirements
                       for reporting outpatient casesvary. After determining which casesactu-
                       ally have recovery potential, the services’ legal offices are responsible
                       for asserting claims and recovering medical costs. Approximately
                       90 percent of all third party liability recoveries involve injuries sus-
                       tained as the result of motor vehicle accidents.


                       GAO believes that third party liability cost recovery could be doubled. In
Results in Brief       fiial year 1987, this would have resulted in recoveries totaling about


                       Pyre2                                       GAO/NSIADM49 Milituy Hedth Care
                               $50 million. Recoveriescould be increased through (1) better identifica-
                               tion and reporting of potential casesby medical facilities, (2) improve-
                               ments in service legal office effectiveness, and (3) better internal
                               controls over third party liability cases.


Principal Findings

Many Third Party               At 8 of the 13 medical facilities GAO visited, more than half of the poten-
Liability CasesAre Not         tial third party liability casesGAO reviewed had not been identified and
                               reported to service legal offices for the following reasons:
Identified and Reported
                           . Army and Navy medical facilities do not have standard procedures for
                               identifying and reporting third party liability cases,causing wide varia-
                               tion in their identification and reporting effectiveness.
                           .   Military service regulations set minimum cost thresholds for reporting
                               outpatient casesas high as $670. Many lower cost casestherefore go
                               unreported, and someArmy and Navy medical facilities report few out-
                               patient casesunless they also involve inpatient care.

                               Someof the Air Force and Navy installations GAO visited also failed to
                               identify and report casesinvolving treatments at civilian facilities.

                               Potentially significant CHAMPUS    medical costs are not being reported to
                               service legal offices for the following reasons:

                               The ~HAMP~S cost threshold for reporting outpatient casesis $500,
                               which excludes many caseswith potential for cost recovery.
                               Private organizations under contract to CHAMPUS   are allowed to exclude
                               caseswith certain diagnostic codesfrom review for third party liability
                               potential. However, GAO found that someexcluded diagnostic codesare
                               for injuries that can occur as the result of automobile accidents and
                               therefore have potential for cost recovery.


Inconsistent Regulations       The service legal offices GAO visited appeared to be conducting third
                               party liability recoveries in accordancewith regulations. However, mili-
and No-Fault Insurance         tary service regulations regarding the minimum cost threshold for
Laws Hamper Recovery           attempting recovery on outpatient treatments are inconsistent, causing
                               someservices to pursue casesthat are discarded in others.



                               P8ge3                                       GAO-            Military Health Care
                         The Federal Medical Care Recovery Act (42 USC. 2651-53) requires
                         that fault be established in order to conduct third party liability recov-
                         ery. However, somestates have subsequently passedno-fault insurance
                         laws that generally allow for recovery by individuals from their own
                         insurance companies irrespective of fault. Since no-fault laws by defini-
                         tion do not establish an at-fault or liable party, DOD’s legal ability to con-
                         duct recoveries under this statute varies according to the no-fault
                         statutes in these states.


Limited Incentive to     Service legal offices and military medical facilities have little incentive
                         to devote scarceresourcesto third party liability activities. Recovered
Recover Costs            funds are deposited into the general fund of the U.S. Treasury. Third
                         party liability activities thus receive limited command emphasis and are
                         often inadequately staffed.


Weak Internal Controls   Six of the 13 facilities GAO visited had inadequate or incomplete records
                         for indicating which potential third party caseshad been sent to service
                         legal offices. Private organizations under contract to CHAMPUS are not
                         required to record whether the potential third party casesthey identify
                         have been forwarded to service legal offices. The Army and Navy legal
                         offices GAO visited also did not maintain records of the potential third
                         party casesreported to them, and none of the service legal offices were
                         adequately recording the reasonsthat potential caseshad been dis-
                         carded without asserting claims. This lack of internal controls prevents
                         accurate overall evaluation of service legal office recovery
                         effectiveness.

                         We recommend that the Congressenact legislation to allow DOD to retain
Recommendations to       a portion of the recovered third party liability medical care costs in cir-
the Congress             cumstancescreating a tort liability. This should both provide DOD with
                         the incentive and funding to increase recoveries and result in increased
                         Treasury receipts. However, these funds should be restricted to support-
                         ing third party liability activities at military medical facilities and Judge
                         Advocates General claims offices.

                         GAO furtherrecommendsthat the Congressenact legislation to enable
                         recovery by the government in states with no-fault automobile insur-
                         ance laws.




                         Pyre 4                                        GAO/NS~M       Military Health Care
                    Exesutive Summary




                    GAO recommendsthat     the Secretariesof the Army, the Navy, and the Air
Recommendations     Force take the following actions:
                  . Modify military service regulations to set a consistent, cost-effective
                    minimum cost threshold for reporting outpatient caseswith potential
                    third party liability to service legal offices.
                  . Direct the service Judge Advocates General to establish better internal
                    controls for third party liability cases.Specifically, in addition to main-
                    taining current records, service legal offices need to record the potential
                    third party liability casesthey receive, the casesthey discard, and the
                    reasonsthey are discarded.
                    GAO recommendsthat    the Secretariesof the Army and the Navy develop
                    and implement standard procedures for medical facilities to identify and
                    quickly report potential third party liability cases.

                    GAO recommendsthat   the Secretary of Defensedirect the Assistant
                    Secretary of Defense(Health Affairs) to take the following actions:

                  . Determine at what cost CHAMPUS outpatient casesare economical for the
                    government to recover and reach an agreement with the service Judge
                    Advocates General regarding the minimum cost of outpatient casesthat
                    private organizations under contract to CHAMPUS should be required to
                    report to service legal offices.
                  . Determine which diagnostic codesthese private organizations should be
                    allowed to exclude in determining which claims should be reviewed for
                    third party liability potential.

                    Other recommendations, including recommendations to improve internal
                    controls, are contained in chapters 2,3, and 4.


                     DOD orally concurred with the findings and recommendations contained
Agency Comments      in this report. The Department acknowledged that the administrative
                     improvements and legislative changesrecommendedby GAO should
                     result an estimated $26 million annual savings to the government.




                     Page 5
Contents


Executive Summary
Chapter 1
Introduction             Sourcesof Medical Care                                                 8
                         Certain Medical Care Costs May Be RecoverableFrom                      9
                             Liable Third Parties
                         Objective, Scope,and Methodology                                      10

Chapter 2                                                                                      13
Weaknessesin             Many Potential Third Party CasesAre Not Being                         13
                              Reported by Medical Treatment Facilities
Identifying CasesWith    Civilian Treatment CasesNot Reported                                  21
Recovery Potential       The Effectiveness of CHAMPUS Third Party Liability                    23
                              Activities Is Unclear
                         Conclusions and Recommendations                                       26
                         Agency Comments                                                       27

Chapter 3                                                                                      28
JAG Recovery             JAG Regulations Differ on Outpatient Claims Recovery                  28
                         RecoveriesAre Hindered by Insufficient Staff-                         29
Effectiveness Can   Be   RecoveriesAre Limited in States With NeFault Insurance                31
Improved                     Laws
                         Conclusions and Recommendations                                       31
                         Agency Comments                                                       32
                     -
Chapter 4                                                                                       33
Third Party Liability    Army and Navy Medical Facilities Need Better Third                     33
                            Party Liability Records
Activities Need Better   Recordsof CHAMPUS CasesSent to JAGSAre Incomplete                      34
Internal Controls           orLacking
                         JAG RecordsPreclude a Detailed Evaluation of Potential                -34
                            Third Party Liability Cases
                         Conclusions and Recommendations                                        35
                         Agency Comments                                                        36

Appendix                 Appendix I: Major Contributors to This Report                          38

Tables                   Table 2.1: Motor Vehicle Accident Inpatient Admissions                 15
                             During Fiscal Year 1987


                         P8ge 8                                   GAo/wam@o4      Milituy Be&h cue
Contents




Table 2.2: Treatment Costsof Inpatient Motor Vehicle         16
    Accident CasesDuring F’iscalYear 1987
Table 2.3: Completenessof Office of Medical Affairs          22
    Questionnaires




Abbreviations

AWESS Automated Quality of Care Evaluation Support System
CHAMPUS
      Civilian Health and Medical Program of the Uniformed
         Services
DOD   Department of Defense
GAO   General Accounting Office
JAG   Judge Advocate General


p-7
Chapter 1

Introduction


                    The Department of Defense(DOD) health care system provides medical
                    care to active duty military personnel and to nonactive duty benefi-
                    ciaries, such as dependentsof active duty personnel and military retir-
                    eesand their dependents.Annual expenditures for military medical
                    activities have risen from $4.1 billion in 1979 to $11.5 billion in 1987, a~
                    increase of 180 percent.


                    Military medical care is provided either directly through the military’s
Sourcesof Medical   own treatment facilities or indirectly through civilian facilities. Active
Care                duty personnel are entitled to receive health care at military medical
                    facilities and in some instances at civilian facilities. Nonactive duty ben-
                    eficiaries are eligible to receive health care at military facilities when
                    spaceand professional services are available. When care is not availa-
                    ble, nonactive duty beneficiaries under age 66 may use the Civilian
                    Health and Medical Program of the Uniformed Services(CHAMPUS),          a
                    separate program administered by DOD that helps pay for medical care
                    at civilian facilities.
                    The military’s direct care system consists of over 500 medical treatment
                    facilities, These range in size from small clinics with limited capabilities
                    to large hospitals with extensive capabilities and medical teaching pro-
                    grams. The medical facilities include 168 military hospitals, 129 of
                    which are located in the United States.

                    According to DOD, approximately 9.1 million people are eligible for care
                    in military medical facilities: 2.4 million active duty members, 2.9 mil-
                    lion dependentsof active duty members, and over 3.8 million retirees
                    and dependents of retired or deceasedmembers. Active duty members
                    do not pay for care obtained in military facilities. Nonactive duty benefi-
                    ciaries pay a small daily fee for inpatient care received at military facili-
                    ties but pay nothing for outpatient care.

                    When nonactive duty beneficiaries under age 66 cannot obtain needed
                    medical care from a military medical facility or do not live within
                    40 miles of one, they may obtain medical care from civilian providers
                    under CHAMPUS. Beneficiaries older than 66 years are eligible for Medi-
                    care and therefore ineligible for CHAMPUS. CHAMPUS   pays for a substantial
                    portion of the medical care provided by hospitals, physicians, and other
                    civilian providers. Private organizations called “fiscal intermediaries”
                    are under contract to DOD to pay claims submitted by hospitals, physi-
                    cians, and other health care providers for services provided to benefi-
                    ciaries under CHAMPUS.  The Office of CHAMPUS,  located at Fitzsimmons


                    Page 8                                       GAo/Iw3IADw    Military Health care
                       Chapter 1
                       Introduction




                       Army Medical Center near Denver, Colorado, is responsible for adminis-
                       tering CHAMPUS. The Office of CHAMPUS is under the policy direction of
                       the Office of the Assistant Secretary of Defense(Health Affairs).
                       According to a CongressionalBudget Office study, annual CHAMPCS out-
                       lays for health care have risen even faster than expenditures for the
                       overall military health care system: from $485 million in 1979 to $2.3
                       billion in 1987. This represents an increase of 374 percent versus 180
                       percent for the overall system.

                       In certain circumstances,the federal government is entitled by law to
Certain Medical Care   recover the cost of the medical care it provides. First, under the Federal
Costs May Be           Medical Care Recovery Act,* DOD may bring tort actions against liable
Recoverable From       third parties to recover the cost of medical care provided or paid for by
                       DOD in accident, negligence,and wrongful act cases.Recovery of such
Liable Third Parties   costs is called “third party liability recovery.” When service membersor
                       other beneficiaries are injured as the result of the actions of others, the
                       military service Judge Advocates General (JAG) normally attempt to
                       recover medical treatment costs from liable persons or their insurance
                       companies.Amounts recovered are deposited in the Treasury. If these
                       efforts are unsuccessful or the accident was causedby the service mem-
                       ber, the JAGS may recover costs through the medical payment and per-
                       sonal injury protection provisions of automobile insurance policies held
                       by service members. The JAGS processthese casesas a part of third
                       party liability recovery.
                       Under the Consolidated Omnibus Budget Reconciliation Act of 1985,’
                       DOD may  also require beneficiaries who carry health or other insurance
                       to pay for the care covered by their policies. This type of recovery is
                       called “coordination of benefits.” Finally, when eligible beneficiaries are
                       injured at private sector places of employment, DOD may sometimes
                       recover the cost of the medical care it provides from state workers’ com-
                       pensation insurance. A recent amendment to this law provides that
                       recovered funds be returned to the appropriation for maintenance and
                       operation of the medical facility.3
                       Military regulations or contracts require service medical commands,
                       CHAMPUS  fiscal intermediaries, and military service offices that authorize

                       ‘42u.s.c. 2661-63(1982).
                       2wfied   at 10 U.S.C.1096(Supp.
                                                    iv, 1986).
                       aPublicLaw 101-189,November29, 1989.



                       Page 9                                      GAO/NSIALMO~   Mllitar~   Health Care
                         ch&pterl
                         Introdmtion




                         payment for care in civilian facilities to identify and report to JAG
                         offices those casesthat may have potential for third party recovery.
                         The JAGS are responsible for determining which of these caseshave
                         potential for recovery, asserting claims, and recovering costs.JAG offi-
                         cials told us that approximately 90 percent of all third party liability
                         recoveries involve injuries sustained as a result of motor vehicle
                         accidents.
                         Identifying and reporting potential third party liability casesare essen-
                         tial to the medical cost recovery process.The JAGS cannot effectively
                         initiate medical recovery claims unless the service medical treatment
                         facilities, CHAMPUS fiscal intermediaries, and military payment offices
                         inform them of casesthat might have recovery potential. Effective JAG
                         recovery efforts are equally important to the recovery process.Medical
                         cost recovery is becoming increasingly important due to the rapidly ris-
                         ing levels of DOD health expenditures.

                         The former Chairman of the Subcommittee on Readiness,House
Objective, Scope,and     Committee on Armed Services,requested that we evaluate the effective
Methodology              nessof DOD'S recovery efforts in third party liability cases.To do this we

                       9 evaluated CHAMPUS  and military service procedures and activities for
                         identifying medical treatment caseswith third party liability potential
                         and reporting them to the service JAGS,
                       . evaluated JAG procedures and activities for conducting third party liabil-
                         ity recovery, and
                       . identified changesneededto make third party liability recovery efforts
                         more effective.
                         We limited our audit to an evaluation of third party liability recovery
                         because(1) DOD'S coordination of benefits recovery efforts had not been
                         under way long enough when we began this review to produce sufficient
                         reliable data for evaluation and (2) the potential amounts that can be
                         recovered under workers’ compensation appear to be relatively minor
                         compared to those that can be recovered through third party liability or
                         coordination of benefits.

                         We interviewed officials and reviewed records associatedwith third
                         party liability identification and recovery activities at Headquarters,
                         U.S. Air Force, U.S. Army, and U.S. Navy; the Army Health Services
                         Command; the Offices of the Army, the Navy, and the Air Force Judge



                         P8gelO                                      GAO/NSLADgOagMilltaryHealthCare
chapter 1
Introduction




Advocates General; and the Office of CHAMPUS. We also interviewed offi-
cials from DOD’S
               Office of Health Affairs and the American Hospital
Association.
We collected and analyzed selectedthird party liability medical and
claims data and reviewed military medical facility, CHAMPUS, and JAG
organization and procedures for third party liability caseidentification
and recovery. To evaluate the effectiveness of potential third party lia-
bility caseidentification and recovery efforts, we obtained listings of
motor vehicle accident casesthat occurred in fiscal year 1987 and
resulted in inpatient admissions.These listings were provided by the
Automated Quality of Care Evaluation Support System or other systems
for the medical facilities we visited. We then tested how well military
medical facilities were reporting potential third party liability casesby
comparing fiscal year 1987 motor vehicle accident inpatient admission
records to medical facility third party liability records and/or reports
and JAG records.
We selected fiscal year 1987 data for this analysis so that adequate time
would have passedfor the reviewed casesto be identified by military
medical facilities or CHAMPUS fiscal intermediaries and to be processed
by the responsible JAG offices. We also reviewed some aspectsof motor
vehicle accidents occurring between 1987 and 1989 that involved outpa-
tient treatment at military facilities and noDpaid inpatient treatment at
civilian facilities.
Although potential third party liability casescan result from other
causes,we limited our analysis to motor vehicle accidents becauseJAG
officials told us that these accident cases(1) make up about 90 percent
of all third party liability recoveries and (2) have greater potential for
recovery than other types of cases.Both JAG and military hospital offi-
cials concurred that motor vehicle accident casesshould always be con-
sidered as potentially recoverable and therefore should be reported to
the JAGS.
We reviewed the identification and reporting of potential third party lia-
bility casesat the following 13 military medical facilities: the Naval
Hospital Portsmouth, Portsmouth, Virginia; the Naval Hospital
Charleston, Charleston, South Carolina; the Naval Hospital Beaufort,
Beaufort, South Carolina; the Naval Hospital Patuxent River, Patuxent
River, Maryland; the National Naval Medical Center, Bethesda,
Maryland; Kimbrough Army Community Hospital, Ft. Meade,Maryland;
Dewitt Army Community Hospital, Ft. Eklvoir, Virginia; Darnall Army


Page 11                                    GAO/NSuD~      Military   Health Care
Chapter 1
Introduction




Community Hospital, Ft. Hood, Texas; Madigan Army Medical Center,
Ft. Lewis, Washington; Walter ReedArmy Medical Center, Washington,
D.C.; Wilford Hall Medical Center, Lackland Air Force Base,Texas;
Robert L. Thompson Hospital, Carswell Air Force Base,Texas; and the
96th Strategic Hospital, DyessAir Force Base,Texas. We also reviewed
CHAMPUS   third party liability identification and reporting at Blue Cross/
Blue Shield of South Carolina, Columbia, South Carolina, and Wisconsin
Physicians Service, Madison, Wisconsin.

We reviewed JAG third party liability recovery activities at Naval Legal
Service Offices at Charleston Navy Base,Charleston, South Carolina;
Washington Navy Yard, Washington, D.C., and Norfolk Navy Base,
Norfolk, Virginia; and at the Offices of the Staff Judge Advocate at Ft.
Meade,Maryland; Ft. Belvoir, Virginia; Ft. Hood, Texas; Ft. Lewis,
Washington; Ft. Stewart, Georgia; Walter ReedArmy Medical Center,
Washington, DC.; Lackland Air Force Base,Texas; Carswell Air Force
Base,Texas; and DyessAir Force Base,Texas. We conducted this review
from July 1988 to July 1989 in accordancewith generally acceptedgov-
ernment auditing standards.




Pyle 12                                     GAO/NSIADBMB   Military   Health Care
Weaknessesin Identifying CasesWith
Recovery Potential

                           Many potential third party liability casesare not being identified and
                           reported to the JAGS. For example, most of the military treatment facili-
                           ties we visited were identifying fewer than half of the inpatient cases
                           most likely to have recovery potential. We noted similar problems with
                           third party liability casesinvolving payments to civilian hospitals by
                           military payment offices. With respect to CHAMPUS, we found that one of
                           the fiscal intermediaries we visited was not submitting many potential
                           third party casesto the JAGS becauseits selection criteria excluded cer-
                           tain types of casesfrom consideration. Also, the minimum dollar
                           amounts established by CHAMPUS     for reporting outpatient potential third
                           party casesare too high, causing underreporting of these cases.

                           By not effectively identifying third party liability cases,DOD has lost the
                           opportunity to recover millions of dollars annually. We were unable to
                           project the total value of DOD third party liability casesthat had not
                           been identified and reported to the JAGS for recovery action becauseof
                           the varying work loads and variety of services rendered by military
                           treatment facilities, the wide disparity in the effectiveness of third
                           party liability activities, and internal control weaknesses(these are dis-
                           cussedin chapter 4). However, the consensusamong the JAGS we visited
                           was that improvements in third party liability recovery activities could
                           double the approximately $25 million recovered annually from these
                           cases.our analysis tends to support the JAG estimate.


                           Army, Navy, and Air Force regulations require medical treatment facili-
Many Potential Third       ties to identify caseswith potential for cost recovery and to report them
Party CasesAre Not         to designated JAG offices. However, during fiscal year 1987,8 of the 13
Being Reported by          military hospitals we visited appeared to have identified and reported
                           only about half or fewer of their inpatient caseswith third party recov-
Medical Treatment          ery potential. Many outpatient motor vehicle accident caseswere also
Facilities                 not reported. Caseswere not identified and reported for the following
                           reasons:
                       l Third party liability activities often receive little command emphasis.
                       . Military service regulations differ on requirements for reporting outpa-
                         tient potential third party cases.
                       . Many military medical facilities lack a systemized approach and do not
                         effectively use computerized data in identifying potential third party
                         cases.




                           Page 13                                     GAo/NfmDma     Mllltary   Herlth   care
Chapter 2
Weaknessesin Identifying CasesWith
Recovery PotenthI




Army, Navy, and Air Force regulations require that all inpatient cases
involving potential third party liability be reported to the JAGS. Report-
ing requirements for outpatient casesinvolving potential third party lia-
bility vary among the services, depending on cost and other factors. Our
review focused on inpatient motor vehicle accident casesbecause
(1) about 90 percent of all third party liability casesinvolve motor vehi-
cle accidents and (2) both JAG and medical facility officials agreedthat
all inpatient motor vehicle accident casesare potential third party liabil-
ity casesand should be reported to the JAGS.

DOD currently uses the Automated Quality of Care Evaluation Support
System (AQCESS) for hospital administrative purposes. We found that for
most locations DOD could program AQCESSto identify and list fiscal year
1987 inpatient admissions to military medical facilities that involved
motor vehicle accidents. With assistancefrom the services, we devel-
oped computer programs to extract this information. We developed the
same information manually at some military medical facilities. We eval-
uated how well individual medical facilities were reporting these cases
to the JAGS by comparing our AQCEE and manual lists of inpatient admis-
sions involving motor vehicle accidents with medical facility and JAG
records of the casesactually reported.

The identification and reporting of inpatient motor vehicle accident
casesappeared generally adequate at the three Air Force medical facili-
ties we visited. Air Force regulations require individual clinics within
these facilities to report daily to the JAGS all casestreated (both inpa-
tient and outpatient) and to identify which ones might have third party
potential. However, we found that 29 inpatient potential third party
casesinvolving $107,940 had been omitted from these reports by the
Robert L. Thompson Hospital at Carswell Air Force Baseduring
April 1987 through February 1989. We also found that sometimes these
reports had not been submitted. For example, the 96th Strategic
Hospital at Dyess Air Force Base did not submit them for 32 days from
November 1988 to January 1989. The Robert L. Thompson Hospital also
did not submit these reports for 6 days during fiscal years 1987 through
1988. We did not determine how many potential inpatient and outpa-
tient caseshad not been reported due to these omitted reports because
of the time and resourcessuch an evaluation would have required. Air
Force officials could not explain why these reports had not been
submitted.

The reporting of inpatient motor vehicle accident caseswas less effec-
tive at most of the Army and Navy medical facilities we visited. As a


Page 14                                     GAO/lVS~9O-49   Military Health Care
                                          Chapter 2
                                          W-illIdcn~~With
                                          Becovery Potendal




                                          result, many potential third party caseshad not been detected or
                                          reported. Army and Navy regulations do not specify how their facilities
                                          should identify potential third party cases.Consequently, individual
                                          medical facilities in these services had designedtheir own third party
                                          identification procedures.
                                          Tables 2.1 and 2.2 show the numbers and costs of the motor vehicle acci-
                                          dent inpatient admissions we reviewed and the numbers and costs of
                                          those that had been identified and reported during fiscal year 1987 by
                                          the Army and Navy medical facilities we visited.
Table 2.1: Motor Vehicle Accident
Inpatient Admission8 During Fiscal Year                                                                  Number of case8              Percentage of
1967                                                                           Number of cases                   aervker             case8 senficw
                                          gervkelfacilitv                         we reviewed                  idenuned                   identified
                                          Navy
                                                    Portsmouth                                   203                       199                        98
                                                    Charleston                                   136                        39                        29
                                                    Beaufort                                      43                        15                        35
                                                    Bethesda                                     124                        58                        47
                                                    Patuxent                                       9                           3                      33
                                          Armv
                                           -----I


                                                    Ft. Belvoir                                   50                Unknowna                 Unknowna
                                                    Ft. Lewis                                    253                        85                        34
                                                    Ft. Meade                                    115                        35                        30
                                                    Ft. Hood                                     143                       l16b                       81
                                                    IA/alter ReedC                               141                        34                        23
                                          %ewitt Hospital did not have any records indicating the number and amount of third party liability cases
                                          forwarded to the JAG during fiscal year 1987.

                                          bwe could not determine whether Darnall Hospital had identified an additional 26 cases because hospi-
                                          tal records for these cases were missing.
                                          Third party recovery activities at Walter Reed Army Medical Center have bean revised and improved
                                          over those in effect during fiscal year 1987. ldentiition rates for this facility are therefore likely to have
                                          changed since fiscal year 1987.




                                          Page 16
                                          Chapter 2
                                          Wealmessesin Ident@ing CsaeaWith
                                          l&covery Potential




Table 2.2: Treatment Costs or Inpatient
Motor Vehicle Accident Cases During                                                                       Cost ot cases          Percentage ot
Fiscal Year 1987                                                             Cost of cases we                  services          costs services
                                          Service/facility                           reviewed                 identified              identified
                                          Navy
                                                   Portsmouth                         $1,068,685              $1047,730                         98
                                                   Charleston                            600,920                  155,135                       26
                                                   Beaufort                              174,530                   46,366                       27
                                                   Bethesda                            1.043.473                  592.087                       57
                                                   Patuxent                                12,476                    1,451                       12
                                          Armv
                                           -“‘.,


                                                   Ft. Belvoir                           192,888                Unknowna                 Unknowna
                                                   Ft. Lewis                           1,185,592                  368,676                        31
                                                   Ft. Meade                             603,692                   76,780                        13
                                                   Ft. Hood                              755,874                  638,127                        84
                                                   Walter Reed                         2,460,051                  474,601                        19

                                          Note: We determlned case costs by multiplying the number of patient days in the hospital by the fiscal
                                          year 1987 inpatient rate of $441 per day.
                                          aDewitt Hospital did not have any records lndicatrng the number and amount of third party Ilability cases
                                          forwarded to the JAG during fiscal year 1987.


                                          Although military medical facilities had primary responsibility for iden-
                                          tifying and reporting these casesto the JAGS, some of the casesnot
                                          reported were subsequently identified by the JAGS through other means.
                                          For example, casesinvolving civilian as well as military treatment costs
                                          were sometimes identified as a result of reports submitted by CHAMFTJS
                                          fiscal intermediaries or military payment offices, and somecaseswere
                                          reported to the JAGS by civilian attorneys, individual service members,
                                          and other sources.
                                          The effectiveness of these other efforts varied by installation. Our
                                          review of JAG files revealed that from 0 to 28 percent of total reviewed
                                          casecosts had subsequently been identified as a result of these efforts.
                                          For example, at Fort Lewis, Washington, JAG staff identified unreported
                                          potential third party liability casesinvolving $196,430, about 17 percent
                                          of the $1,186,592 in inpatient costs for motor vehicle accident cases
                                          treated by Madigan Army Medical Center in fiscal year 1987. However,
                                          medical facility and JAG records together still could not account for
                                          many of the caseswe reviewed. Combined JAG and medical facility
                                          efforts accounted for more than 75 percent of total casecost at only 2 of
                                          the 10 medical facilities and for only 19 percent or less of total casecost
                                          at 3 locations.




                                          P8ge 16                                                       GAO/MLUHM9           Military Health Care
                           W&emeAl &I Identifying caaea with
                           RecoveryPotentid




Third Party Liability      Officials at nearly all the medical facilities we visited said that third
CasesAre Given Little      party activities received little command emphasis and consequently
                           were assigneda low priority. These officials said that their resources
Emphasis at Military       were barely adequate for carrying out their primary mission of provid-
Medical Facilities         ing health care and that therefore only limited support could be given to
                           third party activities. Somemilitary hospital officials also said that they
                           had little incentive to devote scarceresourcesto third party activities
                           becausenone of the costs recovered were returned to the medical facili-
                           ties incurring these costs.
                           We did not study the adequacy of the staffing and other resources
                           assignedto third party liability activities at the medical facilities we vis-
                           ited. However, officials at 6 of the 13 facilities we visited told us that
                           staffing shortages were hindering third party liability activities. We
                           noted that 6 medical facilities were experiencing casereporting backlogs
                           or difficulty in processingcaseloadsand that only 4 of the 13 had any
                           staff assignedto third party liability activities on a full-time basis.

                           We also noted that military medical facilities and JAG offices that place
                           only modest emphasis on third party liability activities tend to have
                           much more effective recovery. For example, at the Naval Hospital
                           Portsmouth, Portsmouth, Virginia, the hospital commander had placed
                           the third party liability clerk in charge of a separate office with one
                           additional full-time and one part-time staff member. This office coordi-
                           nated closely with the local JAG legal office, was using computers to rec-
                           ord third party liability information, and identified and reported about
                           98 percent of the fiial year 1987 potential inpatient third party liabil-
                           ity caseswe reviewed. However, at the National Naval Medical Center,
                           Bethesda, Maryland, where little command emphasis was placed on
                           third party liability activities, the third party clerk was part of the
                           Patient Administration Office staff, worked alone under minimal super-
                           vision, was not using computerized records, maintained poor coordina-
                           tion with the JAGS, and identified and reported only 47 percent of the
                           third party liability caseswe reviewed.


Systemized Methods and     The Army and Navy medical facilities we visited did not have common,
                           systemized methods for identifying third party casesand reporting them
Better Use of              to the JAGS. Conditions varied by service and by installation, but medical
Computerized Data Would    facility procedures and the use of computerized information systems for
Improve Recovery Efforts   identifying and reporting potential third party caseswere limited at
                           many of the installations we visited.



                           Page17                                       GAO/NfUD4&48 Military Health Care
Chpter2
Waessea in Identifying   Casea   With
RecoveryPotential




Air Force regulations require treatment clinics within Air Force medical
facilities to complete a standard form, which requires that each patient
treated be listed and that potential third party liability casesbe identi-
fied. These regulations also require that these forms be forwarded to the
JAG daily. The three Air Force medical facilities we visited were gener-
ally complying with the regulations. They were therefore using a timely,
consistent, and documented method for identifying, recording, and
reporting potential third party cases.This method involved the direct
participation of all clinics performing treatments as well as of the third
party liability clerk.

Army and Navy regulations do not specify how their medical facilities
should identify potential third party cases.The third party liability
clerks at Army and Navy medical facilities had designedtheir own
methods of doing this. The effectiveness of third party identification
and reporting at these medical facilities was therefore largely dependent
on the effectiveness of the third party liability clerk. Individual clinics
in Army and Navy medical facilities often did not help identify third
party cases,although clinic personnel such as doctors, nurses, and their
assistants were in direct contact with patients and therefore often in
positions to know whether third party liability was likely to be involved.
Instead, Army and Navy third party liability clerks usually identified
potential third party casesthrough their own subsequentreview of indi-
vidual clinic records. They often did not attempt to identify potential
third party casesin clinics other than the emergency room becauseof
their work loads, the part-time nature of this work, and the low empha-
sis placed on third party liability. We believe that the identification of
potential third party casesis more effective when clinic personnel iden-
tify these casesat the time the treatment is provided.

Army and Navy third party liability clerks also often did not identify
and report third party liability casesin a timely fashion. While Air
Force potential third party caseswere being reported to the JAG on a
daily basis, the caseswe reviewed at five of the Army and Navy instal-
lations required an average of 138 days to reach the JAG. JAG officials
told us that delays in processingpotential casesoften result in reduced
recoveries. They said that locating service members and obtaining
detailed information from them becomesmore difficult with the passage
of time and that delays increase the potential for casesettlement by the
service member and other parties prior to the JAG'S involvement in the
case.We therefore found that the systemized approach used by the Air
Force is generally more effective in identifying and reporting potential
third party liability cases.


Pyle18                                      GAO/NSLALjW    Military Health Care
                             chpt-2
                             wednemes in Identlfying~   with
                             Beeovvy Potentid




                             We also found that most of the medical facilities we visited were making
                             only limited, if any, use of computerized information systems to help
                             identify third party liability cases.Third party clerks usually reviewed
                             clinic treatment records manually. We believe that the failure to use
                             computerized data results in the identification of fewer cases.The large
                             volume of treatments involved and the part-time nature of most third
                             party clerk efforts make manual identification of casesextremely diffi-
                             cult. Even when computerized third party liability information was
                             available, it sometimes was unusable. For example, at one location, med-
                             ical facility staff had been erroneously entering data into computerized
                             patient information systems in ways that causedthe computer to indi-
                             cate that third party liability was never involved. We believe that more
                             potential third party caseswould be identified if procedures were stan-
                             dardized, computerized, and initiated at the clinics.

                             We believe that DODcould use the AQCESs    program we developed or a
                             similar program to help identify potential third party liability casesand
                             to verify whether they are being reported to the JAGS.We provided cop
                             ies of this program to JAGand medical facility officials. Use of this or a
                             similar program could simplify and improve military medical facilities’
                             efforts to identify and report potential third party liability caseswhile
                             at the same time reducing third party liability staffing requirements.

                             DODofficials told us that DODmay replace AQCESS    with a new patient
                             information system called the ‘Composite Health Care System.” They
                             believe that one of the functions this system could perform is to identify
                             potential third party casesand serve as an internal control for recovery
                             activities. DODis currently testing this system at 12 military medical
                             facilities and plans to decide on whether to implement it worldwide in
                             August 1990.


Service Regulations Differ   Our review focused primarily on inpatient third party liability cases.
on Requirements for          However, we also found that military medical facilities were not consist-
                             ently reporting potential outpatient third party casesto the JAGS.Outpa-
Reporting Outpatient         tient casereporting is limited by variances among the services’ reporting
G;aseS                       regulations as well as by the limited emphasis and lack of systemized
                             and computerized identification and reporting methods that affect third
                             party liability activities in general. Army, Navy, and Air Force regula-
                             tions establish selection criteria to be used by medical facilities and mili-
                             tary payment offices in deter-mining which potential third party cases
                             will be reported to the JAGS.While the services’ regulations generally



                             P4e 19                                       GAO/3ISIADW    Military   He&h   Care
mpter2
We&n-InIdentifyingCasea Witb
EecoveryPot.ential




require all inpatient potential third party liability casesto be reported
regardless of cost, they differ on reporting outpatient cases.
For example, Air Force regulations require medical facilities to report all
outpatient treatments that result from motor vehicle accidents,faulty
products, or the actions of another person. Navy regulations are contra-
dictory. Navy Medical Command regulations do not require medical
facilities to report outpatient injuries unless it appears that the patient
plans legal action or it appears that 10 or more outpatient treatments
(costing $670 or more at the 1989 DOD rate) will result. However, Navy
JAG regulations state that outpatient caseswill not be reported unless
more than seven treatments will result. Army regulations do not address
outpatient reporting requirements.
We believe that the overall degreeto which medical facilities report out-
patient caseshas been significantly reduced becauseof these differences
in service regulations. The Air Force facilities we visited were attempt-
ing to report all outpatient potential third party casesto the JAGS. The
third party clerks at 8 of the 10 Army and Navy facilities we visited told
us that they reported few outpatient casesto the JAGS from clinics other
than the emergency room. Often, outpatient treatments were reported
only if they were known to be associatedwith inpatient cases.However,
someJAG officials told us that recovery attempts on small-dollar-value
casessuch as those often associatedwith outpatient care were very suc-
cessful becauseinsurance companiestended not to resist paying on
these cases.
We did not determine the extent to which medical facilities had identi-
fied and reported outpatient treatment caseswith potential for third
party recovery. Outpatient treatment records were far more voluminous
and more difficult to evaluate for third party potential than inpatient
records, and the time and resourcessuch an evaluation would have
required made it impractical. However, the recovery of third party costs
associatedwith outpatient treatments could have a major impact
becauseof the large number of outpatient treatments performed by
medical facilities (32.2 million treatments costing over $1.8 billion were
performed in fiial year 1987). DOD therefore needsto set a standard,
costeffective threshold for reporting outpatient third party caseswith
recovery potential.




P8ge20
                     Chapter 2
                     Weaknesaeain Identifying CasesWith
                     Recovery Potential




                     Problems in identifying and reporting casesin which treatment was
Civilian Treatment   received in civilian medical facilities are also hindering third party lia-
CasesNot Reported    bility recovery activities. Navy procedures for reporting civilian treat-
                     ment casesto the JAGS are weak and likely to result in missed recoveries,
                     and two of the Air Force baseswe visited were not reporting significant
                     numbers of these casesto the JAGS.

                     Active duty service membersoccasionally receive treatment from civil-
                     ian health care providers. For example, when emergencycare is needed,
                     a service member may be treated at a civilian hospital. Civilian hospitals
                     or other health care providers may also be asked to render treatment or
                     conduct tests a military medical facility is unable to perform. The ser-
                     vice member’s bill for such services is usually paid by a medical facility
                     payment office in the Army and the Air Force and by the Office of
                     Medical Affairs in the Navy. Often these casesinvolve large dollar
                     amounts.
                     Officials at the Navy Legal Service Offices (the JAG offices) we visited
                     said that they depend on the Navy Medical Command’sOffice of Medical
                     Affairs to notify them of civilian treatment caseswith third party
                     potential. However, this office’s procedures for identifying and report-
                     ing potential third party casesto the JAGS are weak and likely to result
                     in missed recoveries.

                     Upon receipt of civilian care billings from service members, the Office of
                     Medical Affairs sendsthe service member a questionnaire that requests
                     only limited information, such as the causeof the injury, and-if the
                     care is related to a motor vehicle accident-the name of the driver(s)
                     involved, the insurance company, and the policy number. Upon receiv-
                     ing this information, the office forwards the casesidentified as involv-
                     ing motor vehicle accidents to the appropriate JAG office with a copy of
                     the questionnaire attached. However, while the Navy encouragesservice
                     members to complete and return this questionnaire, it cannot legally
                     require them to do so as a condition of paying their claim. JAG officials
                     also told us that this questionnaire does not provide enough informa-
                     tion; it needsto be redesignedor replaced with a more detailed JAG
                     questionnaire.

                     The lack of sufficient information submitted with casesby the Office of
                     Medical Affairs usually requires the legal services offices to send out
                     their own questionnaires to obtain the information they need to decide
                     whether to pursue these cases.However, JAG officials told us that, by
                     this time, it is often difficult to contact the service members concerned


                     Page 21                                    GAO/NSL4BBO4   Military Health Care
                                       Chapter 2
                                       We&n-      in Identifying Caae~With
                                       Recovery Potential




                                       becausethey have been reassigned,deployed, or separated from the
                                       service.
                                       We reviewed the motor vehicle accident casesthat had beenreferred by
                                       the Office of Medical Affairs and were awaiting processingat the three
                                       Navy JAG offices we visited. At one JAG office, 32 percent of these cases
                                       did not have questionnaires attached. Also, many of the questionnaires
                                       submitted to all three JAG offices were missing neededinsurance infor-
                                       mation such as the name of the other insurance company involved and
                                       the policy number. Table 2.3 shows data on the number of question-
                                       naires sent and the completenessof the information provided.
Tablo 2.3: Completenerr of Office of
Medlcal Attain Quertlonnaires                                                                      Insumnce        Policy
                                       NavyL       al      Cases we     Amount        Ca8ea wlth                 number
                                       SOWiCe    Ytt ice   reviewed    involved   questionnaires   I%#3        identlfled
                                       Norfolk                   124   $262,996               84          53           28
                                       Washington                 45     70,790               45          28           20
                                       Charleston                 22     15,447               21          11            7


                                       We believe that recovery for these types of caseswould be more effec-
                                       tive if service members were asked to submit more detailed JAG ques-
                                       tionnaires with their initial claim packages,rather than being sent
                                       questionnaires after claims are filed.
                                       Air Force regulations require medical facility payment offices to report
                                       to third party liability clerks all injury casesfor which medical treat-
                                       ment payments are made to civilian health care facilities. Third party
                                       liability clerks are required to forward these casesto the JAGS for deter-
                                       mination of third party liability recovery potential.

                                       At two of the three Air Force facilities we visited, these payment offices
                                       were not identifying and reporting to third party liability clerks or to
                                       the JAGS all potential third party liability casesinvolving treatment at
                                       civilian health care facilities. For example, at the Air Force’s Wilford
                                       Hall Medical Center at Lackland Air Force Base, Texas, 86 motor vehicle
                                       accident injury casesinvolving $75,683 in civilian health care reim-
                                       bursements had not been identified or reported to the JAG during fiscal
                                       years 1987 to 1988 becauseof poor procedures and becausemedical
                                       facility officials were not familiar with the applicable regulations. Dur-
                                       ing the same period, the Robert L. Thompson Hospital at Carswell Air
                                       Force Base,Texas, had not identified or reported 103 potential third



                                       Page 22
                            Chapter   2
                            WeaknemesinIdentEj4ngCasesWitb
                            RecoveryPotential




                            party casescosting $124,307 becauseofficials at this hospital were una-
                            ware that Air Force regulations required them to do so.

                            We did not review Civilian Payment Office activities at most of the
                            Army facilities we visited becausevariances in their procedures made
                            comparison difficult and becauseof the time and resourcessuch an eval-
                            uation would have required.

                        A
                            Potentially significant medical costs paid by CHAMPUS are not being iden-
The Effectiveness of        tified and reported to the JAGS for collection primarily becausethe
CHAMPUS Third               CHAMPUS  cost threshold for reporting outpatient caseswith potential
Party Liability             third party liability precludes recovery in many cases.Also, one fiscal
                            intermediary’s exclusion of certain types of inpatient casesfrom third
Activities Is Unclear       party review precluded recoveries.


CHAMPUS and How It          A substantial portion of DOD'S military health care is provided through
                            CHAMPUS. In fiscal year 1987, CHAMPUS paid over $2 billion for medical
Works                       care provided to beneficiaries. Of this, about $130 million was for claims
                            having the potential for third party liability.

                            Private organizations called “fiscal intermediaries” are under contract
                            to DOD to pay claims submitted by hospitals, physicians, and other
                            health care providers for services provided to beneficiaries under
                            CHMFJUS   and to report to the JAGS those claims that might have potential
                            for third party liability.

                            JAG officials at nearly all the installations we visited told us that they
                            believed that many CHAMPUS caseswith potential for third party liability
                            were not being identified and reported. We reviewed third party identifi-
                            cation and reporting at the Office of CHAMPUS and at two of the five
                            CHAMPUS   fiscal intermediaries-Blue Cross/Blue Shield of South
                            Carolina and Wisconsin Physicians Service.


     a u.sp” tient
                Cost        The Office of CHAMFYJS does not require fiscal intermediaries to submit
      hold CausesLimited    outpatient third party liability claims to JAGS if the amount is less than
                            $600, unless requested by JAG officials. We asked Office of CHAMPUS offi-
Heporting of Potential      cials why the threshold had been established at $500 compared to the
Third Party Cases           lower thresholds used by service medical treatment facilities. They told




                            Page23
                           Chapter2
                           WeaknesseeinIdentifyingCa8esWit.b
                           RecoveryPotential




                           us that this level had evolved as the result of discussionswith repre-
                           sentatives of the service JAGS. However, neither CHAMPUS nor JAG offi-
                           cials could provide documentation concerning this agreement,nor could
                           they recall why the threshold had been set at $500. JAG officials told us
                           that they conduct cost-effective recoveries at far lower casecost levels.
                           They believe that the $500 threshold is too high and that potential third
                           party casesare therefore underreported. We agree that the $500 thresh-
                           old is probably too high becausethe JAGS are conducting effective recov-
                           eries at much lower cost levels for casestreated in military medical
                           facilities and in civilian hospitals when CHAMPUS is not involved. How-
                           ever, we could not determine at what level the CHAMPUS threshold should
                           be set.
                           A reduction in the $500 threshold could substantially increase CHAMPUS
                           third party liability recoveries. According to CHAMPUS officials, they
                           received 250,000 potential third party claims that were under the $500
                           threshold during the first 6 months of fiscal year 1988. The value of
                           these claims totaled $18.2 million. CHAMPUS officials believe that most of
                           these claims involve less than $100 each and indicated that the cost-
                           effectiveness of recovering them is questionable. At the time of our
                           review, CHAMPUS was unable to determine accurately the total value of
                           casesfalling below $100 or any other dollar breakout below $500.

                           We believe that CHAMPUS   needsto review the cost threshold for reporting
                           potential outpatient third party casesand set it at a level that the JAGS
                           agree is economical for the government to pursue.


Potential Recovery Cases   We evaluated the two fiial intermediaries’ reviews of injury casesto
Were Excluded From         determine whether those with third party potential were being identi-
                           fied. We found that both fiscal intermediaries were accurately identify-
Review
-      _ for
          _ Third Party    ing potential third party casesin accordancewith their established
Potential                  criteria. However, Blue Cross/Blue Shield of South Carolina’s third
                           party identification criteria excluded many caseswith third party
                           potential.

                           Both fiial intermediaries determine which CHAMPUS       claims to review for
                           third party liability by reviewing the diagnostic codesassignedto cases.
                           Third party review is normally done for claims with codes800 through
                           999. These codesrepresent various types of traumatic injuries. How-
                           ever, the Office of CHAMPUS allows fiscal intermediaries to exclude cer-
                           tain codeswithin this range that the fiscal intermediaries consider as
                           having limited potential for third party liability. For example, insect


                           Page24                                      GAO/NSLUb@&S Military Health Care
                  Chapter 2
                  Weakneageain Identifying CaseaWith
                  Recovery Potential




                  bites are coded within this range but do not normally have potential for
                  third party liability.
                  Wisconsin Physicians Service excluded 14 diagnostic codesin the 800 to
                  999 range. We concurred that these codeshad little third party poten-
                  tial. However, Blue Cross/Blue Shield of South Carolina was excluding a
                  total of 79 codes,or about 42 percent of the 188 diagnostic codesused in
                  the 800 to 999 range. We believe that many of the excluded codeshave
                  high third party potential. For example, one of the excluded codeswas
                  for sprains and strains. A JAG official said that automobile accidents not
                  involving broken bonesusually resulted in sometype of sprain or strain
                  injury. During fiscal year 1987, the government paid $10.9 million on
                  potential third party liability claims processedby Blue Cross/Blue
                  Shield with these excluded diagnostic codes.These unreported claims
                  constituted about 32 percent of the total amount paid on potential third
                  party liability claims processedby this fiscal intermediary.

                  JAG officialssaid that they were conducting successfulrecoveries on
                  casessubmitted by Wisconsin Physicians Service that involved the diag-
                  nostic codesexcluded by Blue Cross/Blue Shield. Of 367 claims we sam-
                  pled at Wisconsin Physicians, 94, or 26 percent, had the diagnostic codes
                  that were excluded by Blue Cross/Blue Shield. Wisconsin Physicians
                  determined that 40 of the 94 had third party potential and referred
                  them to the JAGS.

                  We were unable to determine the monetary impact of excluding these
                  diagnostic codesbecauseit is unclear how successfulthe JAGS might
                  have been in recovering government costs for these claims. We did not
                  review whether similar exclusions were occurring at other fiscal
                  intermediaries, After we informed the Office of CHAMPUS    of these exclu-
                  sions, they instructed all fiscal intermediaries to review all claims with
                  diagnostic codesin the 800 to 999 range pending a change in the
                  CHAMPUS   Operations Manual for Fiscal Intermediaries.


                  The weaknesseswe found in the identification and reporting of potential
Conclusions and   third party liability casesat medical treatment facilities, military pay-
Recommendations   ment offices, and CHAMPUS resulted in many cases’not being identified
                  and reported to the JAGS. The JAGS cannot conduct effective recovery
                  activities unless they are informed of which caseshave potential for
                  third party liability. Improvements in these areas are therefore critical
                  to DOD medical cost recovery efforts.



                  Page 25                                     GAO/NSIAD8O4   Military   Health Care
        Chapter 2
        Wm         in Identifyin   chea Wttb
        Recovery Potential




        We recommend that the Secretariesof the Army, the Navy, and the Air
        Force take the following actions:
l Modify military service regulations to set a consistent, cost-effective
  minimum cost threshold for reporting outpatient caseswith potential
  third party liability to the JAGS.
. Instruct medical treatment facilities to make maximum use of computer-
  ized patient information systems to help identify potential third party
  casesand to ensure that these casesare reported to the JAGS.The
  Automated Quality of Care and Evaluation Support System could be
  used for this purpose for inpatient motor vehicle accidents until better
  systems becomeavailable.
        We recommend that the Secretary of the Navy take the following
        actions:
9 Instruct the Naval Medical Command to develop and implement proce
  dures for medical facilities to identify and report potential third party
  cases.These procedures should require hospital clinic participation in
  the identification process.
= Instruct the Naval Medical Command to review the adequacy of Office
  of Medical Affairs questionnaires and encourageservice members to
  submit them to the Office of Medical Affairs at the sametime that they
  request payment of civilian health care provider charges.

        We recommend that the Secretary of the Air Force ensure that regula-
        tions are followed regarding the reporting to JAGSof injury casesinvolv-
        ing payment for treatment in civilian health care facilities.
        We recommend that the Secretary of the Army direct the Health
        ServicesCommand to develop and implement procedures for medical
        facilities to use in identifying and reporting potential third party liabil-
        ity cases.These procedures should require hospital clinic participation
        in the identification process.

        We recommend that the Secretary of Defensedirect the Assistant
        Secretary of Defense(Health Affairs) to take the following actions:
    l   Determine at what cost CIUMPUS   outpatient casesare economical for the
        government to recover and reach an agreement with the JAGSregarding
        the minimum cost of outpatient casesthat CHAMPUS   fiscal intermediaries
        should be required to report to JAGclaims offices.



        Page 26                                      GA0/TvsIAD80-4@Military Health care
                      chapter 2
                      Wenkneaeeein IdenMying CaseeWith
                      Becovery Potential




                  l   Determine which diagnostic codesfiscal intermediaries should be
                      allowed to exclude in determining which claims should be reviewed for
                      third party potential.

                      DOD generally concurred with the recommendationscontained in this
Agency Comments       chapter. In orally commenting on a draft of this report, it stated that the
                      military services have agreed to eliminate arbitrary minimum cost
                      thresholds for reporting outpatient caseswith third party liability
                      potential to JAG offices. New service regulations will require that service
                      medical facilities report all such casesregardless of the monetary
                      amount involved. WD also agreed that a.neffective cost level neededto
                      be determined for reporting CHAMPUS outpatient claims with third party
                      potential. DOD suggestedthat it could perform a cost-benefit analysis to
                      determine this cost level, since a decreasein the cost threshold for
                      reporting these claims will increase the time and cost required for
                      processing and increase the number of casesreported to the Judge
                      Advocates General.

                      In its comments, DOD also stated that the exclusion criteria used by Blue
                      Cross/Blue Shield of South Carolina for reporting potential third party
                      caseshad been established without the knowledge or approval of the
                      Office of CHAMPUS. According to DOD, all fiscal intermediaries have been
                      directed to ceaseany automated exclusions of procedure codes,and the
                      Program Operations Division of the Office of CHAMPUS has been tasked
                      with monitoring this requirement on an ongoing basis. A review of diag-
                      nostic codesthat need not be reported is being performed and will be
                      included in the CHAMPUS Operations Manual for Fiscal Intermediaries
                      within 6 months.




                      Page 27                                    GAO/NSLUMO-49MilitaryHealthCare
JAG
Chapter 3
            Recovery Effectiveness Can Be Improved


                       JAG offices  at the installations we visited appeared to be pursuing third
                       party liability casesin accordancewith regulations. However, we found
                       that JAG third party recovery efforts were adversely affected by incon-
                       sistencies in military service regulations, a lack of staff, and a legal
                       problem affecting recovery in states with no-fault automobile insurance.

                       In chapter 2, we discussedthe necessity of the proper identification and
                       timely reporting of potential third party claims to the JAGS. Of equal
                       importance to the third party liability recovery processis how well the
                       JAG claims offices assert and recover claims once they becomeaware of
                       them. Overall, the JAGS recover about half or less of the amounts they
                       assert on third party liability claims they decide to pursue. From fiscal
                       years 1985 through 1988, on average the Air Force recovered 52 per-
                       cent, the Army 47 percent, and the Navy 37 percent of the amounts
                       asserted on these claims. We could not fully evaluate the JAG'S recovery
                       effectiveness due to internal control conditions at the JAGS (see
                       chapter 4). However, JAG officials acknowledged that many medical
                       costs involving third party liability are not being recovered by DOD. They
                       estimated that the resolution of these problems and those affecting the
                       reporting of potential third party casesby medical facilities and
                       CHAMPUS   should increase annual recovery from the current level of $25
                       million to $50 million.


                       The services’ JAG regulations require that all inpatient caseswith poten-
JAG Regulations        tial for third party liability be pursued, regardless of cost. However, on
Differ on Outpatient   outpatient cases,the regulations are not consistent. For example, Navy
Claims Recovery        JAG regulations state that claims involving seven or fewer outpatient
                       treatments (costing $469 or less at the 1989 rate) need not be reported
                       or pursued. Army JAG regulations state that outpatient casesamounting
                       to less than $250 need not be pursued unless collection is economically
                       feasible. Air Force JAG regulations state that outpatient casesunder
                       $100 should not be pursued unless there is clear liability and minimal
                       collection efforts will be involved, Chapter 2 identifies similar inconsis-
                       tencies regarding which potential third party casesshould be reported
                       to the JAGS by medical facilities and CHAMPUS   fiscal intermediaries.

                       Someof the JAG offices we visited were pursuing third party claims
                       regardless of the amounts involved. For example, JAG officials at Fort
                       Meade and Walter ReedArmy Medical Center told us that recovery was
                       usually economically effective regardless of the amount involved and
                       that many of their recoveries were associatedwith small-dollar-value
                       cases.JAG officials told us that they believed that the time and cost


                       Page 28                                     GAO/NSL4D9O-49MUitm-yHeakhCare
                        Chapter 3
                        JAG Recovery Effectiveness Can
                        Be Improved




                        involved in asserting claims for the smaller caseswere nominal, particu-
                        larly if form letter assertions were used. JAG officials also said that lia-
                        ble third parties tended to be less resistant to paying small claims than
                        to paying large ones.
                        We could not determine a minimum cost at which third party recovery
                        efforts would becomecost-effective. However, the levels established by
                        service JAG regulations for pursuing third party casesshould be both
                        consistent and coordinated with the cost levels used by CHAMPUS and
                        medical facilities for reporting potential third party cases.We believe
                        that, becauseof the current variety of levels used for identifying,
                        reporting, and attempting recovery on third party liability cases,sub-
                        stantial opportunities for recoveries are as yet unrealized.


                        JAG staff  at the installations we visited appeared to be conducting third
Recoveries Are          party recovery in accordancewith regulations. However, JAG officials
Hindered by             told us that their staff resourceswere limited and that other areas,such
Insufficient Staffing   as military justice, had a higher priority than third party liability. They
                        also said that there was little incentive to emphasizethird party recov-
                        ery since all recovered costs are deposited into the general fund of the
                        U.S. Treasury. Therefore, JAG officials sometimes make consciousdeci-
                        sions to de-emphasizethird party recovery in order to devote adequate
                        resourcesto activities with higher priorities.


Limited Staffing        At eight of the JAG offices we visited, only one or two people were
                        processingthird party claims. Often, these individuals were performing
                        third party duties on a part-time basis. Staffing shortages and caseload
                        levels causedsomeof the JAG offices we visited to increase the minimum
                        claim amount they would attempt to recover or to curtail recovery
                        efforts. For example, one JAG office that had not previously employed a
                        minimum dollar amount for pursuing third party liability casesrecently
                        had established a minimum claim value of $150 for pursuing these
                        cases.Officials at another JAG office told us that they no longer
                        attempted to follow up on unpaid initial assertions against insurance
                        companies or liable parties unless the government’s claim involved at
                        least $500. A third JAG office was abandoning recovery attempts on
                        third party casesif difficulties were encountered in obtaining insurance
                        information on the liable third party. As a result, current third party
                        liability recovery levels appeared to have more to do with staff availa-
                        bility and caseloadthan they did with the cost level at which it was
                        economical for the government to attempt recovery.


                        Page 29                                      GAO/NSIAD-W    Military Health Care
                             Chapter 3
                             JAG Recovery Effectivenese Can
                             Be Lmproved




                             JAG officials believe that assigning additional personnel to third party
                             liability would result in significant increasesin the amounts recovered.
                             For example, at one installation they estimated that assigningonly one
                             additional clerical staff member to third party liability caseswould
                             increase that office’s annual third party recovery from approximately
                             $1.7 million to $3 million. At another installation, JAG officials estimated
                             that the addition of one additional clerical staff member would double
                             the $374,000 being recovered annually.


Using Recovered Funds to     As previously discussed,third party recovery activities are hindered by
Bolster Third Party          a lack of resourcesand incentive at both the medical facilities and the
                             JAGS. These hindrances occur largely because,in accordancewith
Activities. Could Increase   31 U.S.C.3302(b)(1982), JAG third party recoveries are deposited into
Kecoveries                   the general fund of the U.S. Treasury rather than a military account.

                             We believe that medical cost recoveries could best be increased if the
                             Congressenacted legislation to allow DOD to retain a portion of the
                             recovered funds and earmark them for providing the resourcesneeded
                             to perform effective medical cost recovery activities. These funds would
                             then provide the resourcesand incentives neededby military medical
                             facilities and JAGS to conduct effective recovery activities.

                             Alternatively, DOD could contract out medical recovery activities to pri-
                             vate contractors. Section 3718(d) of title 31 of the U.S. Code allows gov-
                             ernment agenciesto use a portion of the funds recovered to compensate
                             the contractor. DOD officials told us that DOD has already contracted out
                             workers’ compensation recovery activities in one state since 1983 and
                             has recently expanded this effort to include two additional states.

                             Either method should result in increased deposits to the Treasury. JAG
                             officials estimated that the resolution of problems with staffing recov-
                             ery efforts and with CHAMPUS   and medical facility reporting of potential
                             third party casesshould double annual JAG medical cost recoveries. This
                             increase should be sufficient to fund an enhancedmilitary recovery
                             effort or to pay private contractors while still increasing third party lia-
                             bility deposits to the Treasury well above current levels.




                             Page 30
                         chapter3
                         JAG Recovery Ef?ectiveneaaCm
                         Bermproved




                         The Federal Medical Care Recovery Act allows recovery for medical
Recoveries Are           expensesincurred by DOD for the treatment of service members,retirees,
Limited in States With   and dependents. However, the statute requires the establishment of
No-Fault Insurance       third party tort liability for conducting recovery actions. This statute
                         was passedbefore the advent of nofault insurance laws affecting auto-
Laws                     mobile accidents. Since no-fault laws by definition do not establish an at-
                         fault, or liable, party, recoveries cannot legally be conducted under this
                         statute in some states with nofault laws.

                         For example, if a person operated an automobile in a manner that
                         caused a collision with another automobile and both parties received
                         injuries, in a no-fault state each could recover medical costs associated
                         with the accident from his or her own insurance company regardless of
                         which party was at fault. However, if one of the parties involved was a
                         service member, the member’s insurance company could refuse to pay
                         the cost of care received in a military hospital on the grounds that the
                         Federal Medical Care Recovery Act entitles the government to recover
                         only when third party tort liability has been established. JAG officials
                         told us that someinsurance companies had denied payment on these
                         grOl.lNiS.

                         According to Army JAG officials, a total of 21 states, the District of
                         Columbia, and Puerto Rico all have versions of no-fault insurance laws.
                         The impact of these laws on third party recovery varies but particularly
                         inhibits DOD third party liability recovery efforts in six states. In 1985, a
                         bill (H.R. 441) was submitted in the Houseof Representativesto remove
                         the tort requirement from the Medical Care Recovery Act, but it was not
                         enacted.

                         We believe that the government should have the same right to recover
                         medical care costs that anyone else has in such situations. A legislative
                         change to remove the tort requirement for recovery in states with no-
                         fault automobile insurance laws would provide the government that
                         right. We believe that this could be best accomplished by enacting legis-
                         lation that would give DOD separate third party collections authority,
                         which would include no-fault automobile insurance policies and other
                         appropriate payers.

                         The JAGS we visited appeared to be conducting third party liability
Conclusions and          activities according to regulations. However, overall JAG effectiveness is
Recommendations          limited by inadequate staffing, inconsistent regulations regarding mini-
                         mum claim cost thresholds for attempting recovery, and the relatively


                         Page 31                                      GAO/NSIAb904   Military Health Cue
                  Chapter3
                  JAG Recovery Efktivenese Can
                  Be Improved




                  low priority and incentive often associatedwith third party liability
                  claims. Amendments to existing statutes are also neededto improve
                  recovery effectiveness. Improvements in these areas are essential to
                  ensuring the maximum recovery of DOD’S medical costs.

                  We recommend that the Secretariesof the Army, the Navy, and the Air
                  Force direct the service Judge Advocates General to modify JAG regula-
                  tions governing third party recovery so as to establish consistent and
                  cost-effective minimum amounts for claims assertions.

                  We recommend that the Secretary of Defenseeither direct the military
                  services to increase the resources(personnel and/or equipment)
                  assignedto conducting third party liability recovery activities at mili-
                  tary medical facilities and JAG offices or explore the feasibility of con-
                  tracting out third party liability recovery activities.
                  We also recommend that the Congressenact legislation to allow DOD to
                  retain a portion of the recovered medical care costs. This should both
                  provide DOD with the incentive and funding to increase recoveries and
                  result in increased Treasury receipts. However, these funds should be
                  restricted to supporting third party liability activities at military medi-
                  cal facilities and JAG claims offices.

                  We further recommend that the Congressenact legislation to enable
                  recovery by the government in states with no-fault automobile insur-
                  ance laws.


                  DOD agreed to modify Judge Advocate General regulations so as to estab-
Agency Comments   lish consistent and cost-effective minimum amounts for claims
                  asSertiOIlS.

                  DOD also agreed that  the principles embodied in the Federal Medical Care
                  Recovery Act need to be updated to accommodatethird party liability
                  recovery involving no-fault automobile insurance and to allow DOD to
                  retain a portion of third party liability recoveries. In commenting on this
                  report, DOD suggestedthat the neededchangescould be accomplished by
                  revising 10 U.S.C. 1095 so as to make DOD'S statutory authorities com-
                  parable to those of other government agencies.It also suggestedthat
                  this recovery activity be added to other DOD recovery activities now cov-
                  ered by procedures in place for collecting from third parties.




                  Page 32
Chapter 4

Third Party Liability Activities Need Better
Internal Controls

                     Internal control weaknessesin both the identification and reporting
                     processes for potential third party liability cases preclude an accurate
                     overall evaluation of the performance of the various offices and activi-
                     ties involved in these activities. Military treatment facilities, payment
                     offices, and fiscal intermediaries often did not keep adequate records of
                     which cases had been identified and which ones had been referred to the
                     JAGS. We also could not fully evaluate JAG recovery effectiveness
                     becausethe JAGS did not keep records indicating why many potential
                     third party caseshad been discarded.

                     Establishing and maintaining internal controls are important manage-
                     ment responsibilities. Good internal controls are essential to proper cost
                     recovery with full accountability for the funds involved. They also
                     serve as checks and balancesagainst undesired actions and provide
                     information neededto make good managementdecisions.The Federal
                     Managers’ Financial Integrity Act of 1982 requires the heads of federal
                     executive agencies annually to evaluate their agencies’internal control
                     systems and submit statements on the status of these systems to the
                     President and the Congress.

                     Many of the Army and Navy facilities we visited could not readily deter-
Army and Navy        mine which potential third party casesthey had identified and sent to
Medical Facilities   the JAGS. However, the casesidentified and reported by medical facili-
Need Better Third    ties were well documented at all the Air Force installations we visited.
                     Caseswere welI documented becauseAir Force regulations require indi-
Party Liability      vidual military treatment facilities and specialty clinics to log in all
Records              treatments on a standard form (AF 1488), indicate on the form whether
                     third party liability might be involved, and submit copies of these forms
                     to the JAGS daily through the third party liability clerk. By retaining
                     copies of these logs, Air Force medical facilities had good records and
                     internal controls over which caseshad been identified and reported.
                     As discussedin chapter 2, Army and Navy regulations do not specify
                     how their medical facilities should identify third party cases.Third
                     party liability clerks at Army and Navy medical facilities consequently
                     had designed their own procedures. The quality and effectiveness of
                     medical facility internal controls for ensuring the adequacy of third
                     party liability caseidentification and reporting therefore also varied
                     widely. For example, of the 10 Army and Navy facilities we visited, only

                     l31 U.S.C. 3512 (1982), as implemented   by Office of Management and Budget Circular   10 .I-123.
                     August 4,19&Y




                     Page 33                                                    GAO/NSIAD9049 Military Health Care
                        Chapter4
                        ThirdPartyLirbilityActivitiesNeedEktter
                        Internal Ckmtrols




                        7 had sometype of log or record for fiscal year 1987 showing which
                        potential third party caseshad been sent to the JAGS, and 3 of these
                        either were incomplete, contained omissions, or had other design prob-
                        lems. Six of these facilities therefore could not readily determine which
                        third party caseshad been identified or whether they had been reported
                        to the JAGS.

                        Internal control weaknessesalso limited our evaluation of the perform-
Records of CHAMPUS      ante of CHAMPUS fiscal intermediaries. The fiscal intermediaries we vis-
CasesSent to JAGS       ited did not have complete or accurate records to show that the
Are Incomplete or       potential recovery casesthey identified had actually been sent to the
                        JAGS.
Lacking
                        CHAMPUS  regulations do not require fiscal intermediaries to keep records
                        showing which potential third party casesare referred to the JAGS for
                        recovery. The fiscal intermediaries we visited could determine which
                        third party caseshad been identified by reviewing their files. However,
                        we were unable to determine whether the fiscal intermediaries were
                        actually reporting all identified casesbecausethey had not maintained
                        adequate records of which casesthey actually sent to the JAGS.

                        For example, Wisconsin Physicians does not keep any log of third party
                        casesreported, making it impossible to determine whether this fiscal
                        intermediary actua.Uysent all of its potential third party casesto the
                        JAGS. Blue Cross/Blue Shield maintains a manual log of potential third
                        party casessent to the JAGS. We reviewed this log for 148 claims for
                        fiscal year 1987: all 148 involved diagnostic codes800 through 999 and
                        had billed amounts in excessof $600. We determined that 29 of these
                        claims (20 percent) were potential third party cases.Of the 29, we were
                        able to locate only 14 in the Blue Cross/Blue Shield log. We could not
                        determine whether the log was being improperly maintained or whether
                        the missing caseswere never forwarded.

                        We attempted to evaluate JAG recovery effectiveness for the inpatient
JAG Records Preclude    motor vehicle accident caseswe reviewed at medical facilities. However,
a Detailed Evaluation   JAG offices normally do not keep records on all the potential third party
of Potential Third      casesreferred to them by medical facilities, CHAMPUS, or other sources.
                        Instead, the JAGS usually opened casefiles only for casesin which they
Party Liability Cases   expected to assert claims. Therefore, we could not determine how many
                        of the caseswe reviewed had been received by the JAGS or why they had



                        page34                                     GA0/NSLAD9049MilitaryHealthCarr
                  Clmpter4
                  ThirdPartyLinbilityActivitie~NeedBetter
                  Intend   Catrole




                  not pursued many of these cases.JAG officials told us that many poten-
                  tial third party caseshad been discarded because,in their judgment,
                  these caseshad little or no potential for recovery. As previously dis-
                  cussed,overall, the JAGS recover about half or less of the amounts they
                  assert on third party liability claims they decide to pursue.
                  At someJAG offices, casedocumentation was insufficient to explain
                  important facets of claims resolution, such as why someopened claims
                  had been later discarded or settled for less than the full amount of the
                  medical costs involved. For example, Navy JAG headquarters officials
                  told us that each casefile should have a summary or chronology indicat-
                  ing what recovery actions had been taken to resolve the claim. However,
                  many of the files we reviewed at Navy JAG offices did not have adequate
                  summaries. We also found somecasesin which all medical costs had not
                  been included in the claim amount asserted. Documentation of what
                  actions JAG officials had taken regarding these caseswas often either
                  absent or in the form of informal notes. Determination of what actions
                  the JAGS had taken and the reasonsfor those actions at these locations
                  was therefore often dependent on the recollection of the JAG officials
                  involved and sometimescould not be determined.


                  The absenceof adequate internal controls at the Army and Navy medi-
Conclusions and   cal facilities, the CHAMFYJSfiscal intermediaries, and the JAG offices we
Recommendations   visited prevented an accurate determination of the resolution of many
                  potential third party liability cases.Internal control problems also pre
                  vented an accurate determination of the extent to which the government
                  had lost the opportunity to recover medical costs associatedwith these
                  cases.DOD therefore needsto improve the internal controls associated
                  with third party liability recovery activities.

                  We recommend that the Secretary of the Army instruct the Health
                  ServicesCommand to establish effective internal controls for monitoring
                  the identification and timely reporting of potential third party liability
                  cases.These controls should include a requirement for medical treat-
                  ment facilities (including civilian payment offices) to keep standardized
                  logs of all casesidentified and reported to the JAGS.
                  We recommend that the Secretary of the Navy instruct the Navy Medical
                  Command to establish similar internal controls for third party liability
                  identification and reporting to the JAGS by Navy medical activities.




                  P8ge36                                     GAO/NW         Military   lhkb   Care
                  Chapter 4
                  ThirdPartyLiabilityActivitie~NeedBetter
                  Internal Controls




                  We recommend that the Secretary of Defensedirect the Assistant
                  Secretary of Defense(Health Affairs) to require that CHAMPUS fiscal
                  intermediaries maintain logs of potential third party liability casesactu-
                  ally reported to the JAGS.

                  We recommend that the Secretariesof the Army, the Navy, and the Air
                  Force direct the service Judge Advocates General to establish better
                  internal controls for the evaluation of claims resolution effectiveness.
                  Specifically, JAG claims offices need to record the potential third party
                  liability casesthey receive, the casesthey discard, and the reasonsfor
                  discarding them.


                  DOD generally  agreed with our recommendations. It stated that CHAMPUS
Agency Comments   fiscal intermediaries will be required to maintain logs of the casesand
                  claims they refer to the Judge Advocates General. Also, the
                  Departments of the Army and the Navy will ensure that standard proce-
                  dures for medical facility identification and reporting of potential third
                  party casesare implemented and that effective internal controls are
                  established for monitoring these activities. DOD also said that the Secre-
                  taries of the Army, the Navy, and the Air Force will ensure that the
                  internal controls we recommend for evaluating claims resolution effec-
                  tiveness are made operational. We originally recommendedthat the Sec-
                  retary of Defensedirect these actions. However, DOD stated that the
                  Secretary of Defenseneed not do so, since the Secretariesof the Army,
                  the Navy, and the Air Force and the service Judge Advocates General
                  would ensure that these procedures and internal controls are made oper-
                  ational. We have modified our recommendations accordingly.

                  The draft of this report that was submitted to DOD for comment also
                  contained a recommendation that the Secretary of Defensedirect the
                  Secretaries of the Army, the Navy, and the Air Force to include reviews
                  of the internal control weaknessesdiscussedin this report in their next
                  Federal Managers’ Financial Integrity Act Assessment.In commenting
                  on this report, DOD stated that these internal control weaknesseswould
                  be corrected without resorting to the act. We have consequently with-
                  drawn this recommendation.




                  Page 36                                     GAO/NSIABBO-49MilituyHealthCare
P8ge 37   GAO/NW   Mllitmy Health Care
Appendix I

Major Contributors to This Report


                           Edward M. Balderson, Assistant Director
National Security and      William W. Cawood, Evaluator-in-Charge
International Affairs      Edward A. Waytel, Evaluator
Division,    Washington,   Patricia A. Grove, Evaluator
DC.



                           Robert P. Pickering, Evaluator
Denver Regional            Alan J. Dominicci, Evaluator
Office




(393307)                   Page 38                                   GAO/NSIAD9&49 Military Health Care
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