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53–435 2010

IDENTIFYING THE CAUSES OF INAPPROPRIATE 

BILLING PRACTICES BY THE U.S. 

DEPARTMENT OF VETERANS AFFAIRS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

OCTOBER 15, 2009 

Serial No. 111–50 

Printed for the use of the Committee on Veterans’ Affairs 

( 


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COMMITTEE ON VETERANS’ AFFAIRS 

BOB FILNER, California, Chairman 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

MICHAEL H. MICHAUD, Maine 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HARRY E. MITCHELL, Arizona 

JOHN J. HALL, New York 

DEBORAH L. HALVORSON, Illinois 

THOMAS S.P. PERRIELLO, Virginia 

HARRY TEAGUE, New Mexico 

CIRO D. RODRIGUEZ, Texas 

JOE DONNELLY, Indiana 

JERRY MCNERNEY, California 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

JOHN H. ADLER, New Jersey 

ANN KIRKPATRICK, Arizona 

GLENN C. NYE, Virginia 

STEVE BUYER, Indiana, Ranking 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

HENRY E. BROWN, JR., South Carolina 

JEFF MILLER, Florida 

JOHN BOOZMAN, Arkansas 

BRIAN P. BILBRAY, California 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida 

VERN BUCHANAN, Florida 

DAVID P. ROE, Tennessee 

MALCOM A. SHORTER, Staff Director 

SUBCOMMITTEE ON HEALTH 

MICHAEL H. MICHAUD, Maine, Chairman 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

HARRY TEAGUE, New Mexico 

CIRO D. RODRIGUEZ, Texas 

JOE DONNELLY, Indiana 

JERRY MCNERNEY, California 

GLENN C. NYE, Virginia 

DEBORAH L. HALVORSON, Illinois 

THOMAS S.P. PERRIELLO, Virginia 

HENRY E. BROWN, JR., South Carolina, 

Ranking 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

JOHN BOOZMAN, Arkansas 

GUS M. BILIRAKIS, Florida 

VERN BUCHANAN, Florida 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

October 15, 2009 

Page 

Identifying the Causes of Inappropriate Billing Practices by the U.S. Department of Veterans Affairs ..................................................................................... 1 

OPENING STATEMENTS 

Hon. Glenn C. Nye ................................................................................................... 1 

Chairman Michaud, prepared statement of .......................................................... 26 

Hon. Henry E. Brown, Jr., Ranking Republican Member .................................... 2 

Prepared statement of Congressman Brown .................................................. 26 

WITNESSES 

U.S. Government Accountability Office, Kay L. Daly, Director, Financial Management and Assurance ....................................................................................... 12 

Prepared statement of Ms. Daly ..................................................................... 35 

U.S. Department of Veterans Affairs, Gary M. Baker, MA, Chief Business 

Officer, Veterans Health Administration ........................................................... 16 

Prepared statement of Mr. Baker ................................................................... 43 

American Legion, Denise A. Williams, Assistant Director for Health Policy, 

Veterans Affairs and Rehabilitation Commission ............................................. 6 

Prepared statement of Ms. Williams .............................................................. 34 

Disabled American Veterans, Adrian Atizado, Assistant National Legislative 

Director ................................................................................................................. 5 

Prepared statement of Mr. Atizado ................................................................. 29 

Paralyzed Veterans of America, Fred Cowell, Senior Health Policy Analyst ..... 3 

Prepared statement of Mr. Cowell .................................................................. 27 

MATERIAL SUBMITTED FOR THE RECORD 

Post-Hearing Questions and Responses for the Record: 

Hon. Michael Michaud, Chairman, Subcommittee on Health, Committee 

on Veterans’ Affairs to Ms. Kay Daly, Director, Financial Management 

and Assurance, U.S. Government Accountability Office, letter dated 

October 20, 2009, and response letter dated November 23, 2009 ............. 50 

Hon. Michael Michaud, Chairman, Subcommittee on Health, Committee 

on Veterans’ Affairs to Hon. Eric K. Shinseki, Secretary, U.S. Department of Veterans Affairs, letter dated October 20, 2009, and VA responses ........................................................................................................... 52 


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IDENTIFYING THE CAUSES OF INAPPROPRIATE 

BILLING PRACTICES BY THE U.S. 

DEPARTMENT OF VETERANS AFFAIRS 

THURSDAY, OCTOBER 15, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON VETERANS’ AFFAIRS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:09 a.m., in 

Room 334, Cannon House Office Building, Hon. Glenn C. Nye presiding. 

Present: Representatives Michaud, Snyder, Nye, Perriello, and 

Brown of South Carolina. 

OPENING STATEMENT OF HON. GLENN C. NYE 

Mr. NYE [presiding]. Good morning. I would like to bring the 

Subcommittee on Health hearing to order and apologize for the late 

start. Chairman Michaud will be with us a little bit later and 

asked me to Chair for him in the meantime so thank you all for 

being here. Before we get started, I would like to ask for unanimous consent that all Members may have 5 legislative days in 

which to revise and extend their remarks. Hearing no objections, 

so ordered. 

Again, I would like to thank everyone for attending this important hearing. Today’s hearing will focus on the inappropriate billing practices of the U.S. Department of Veterans Affairs (VA), 

where veterans receive a bill for the wrong amount or get a bill 

that they should not have received in the first place. Unfortunately, 

inappropriate billing affects both service-connected veterans and 

non-service-connected veterans. For example, a veteran with a 

service-related spinal cord injury may be billed for the treatment 

of a urinary tract infection. Now, the urinary tract infection may 

clearly be linked to, and a result of, the service-connected injury. 

However, veterans are still receiving bills for the treatment of such 

secondary conditions. As a result, these veterans may be forced to 

seek a time consuming and burdensome readjudication of their 

claim indicating the original service-connected ratings. 

It is my understanding that one of the reasons for inappropriate 

billing of secondary conditions is that the VA cannot store more 

than six service-connected conditions in their information technology (IT) system. It is also my understanding that the VA is taking steps to correct the deficiency but the problem has not been 

fully resolved and our veterans continue to receive inaccurate bills. 


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Non-service-connected veterans also encounter overbilling and inappropriate charges for copayments. One issue that I have been 

made aware of repeatedly is that some non-service-connected veterans receive multiple bills for a single medical treatment or health 

care visit. 

It is evident that inefficiencies in the billing system exist where 

something is inappropriately triggering the multiple billing episodes. It may be simple human error, or IT error, but this has the 

potential of imposing an unnecessary burden on our veterans. Just 

imagine all the time that our veterans spend and the stress that 

they experience in trying to resolve improper bills. 

One thing is clear: inappropriate billing is not acceptable and we 

must do better by our veterans. Today I hope to get to the bottom 

of this issue. We will examine why veterans and their insurers are 

receiving inaccurate bills, learn what the VA is doing to address 

this problem, and explore how we can fully remedy the problem. 

We have brought together witnesses who can shed light on the 

problem and I look forward to their testimonies. 

I would now like to yield to and recognize Ranking Member 

Brown for any opening comments he may have. 

[The prepared statement of Chairman Michaud appears on 

p. 26.] 

OPENING STATEMENT OF HON. HENRY E. BROWN, JR. 

Mr. BROWN OF SOUTH CAROLINA. Thank you, Mr. Chairman. 

Thanks to the witnesses for coming. I am looking forward to the 

dialogue today. 

It is the solemn mission of the Department of Veterans Affairs 

and the Federal Government to care for the men and women in 

uniform who sustain injuries and illnesses as a result of their service to our Nation. Therefore, I find it deeply troubling to hear about 

veterans being inappropriately billed for copayments for medical 

care and the medications to treat service-connected conditions. 

A similar issue arose earlier this year when the Obama Administration was considering a plan to bill veterans’ private insurance 

for service-connected care. Fortunately, this ill-conceived proposal 

never saw the light of day, given the fierce opposition of Members 

from both sides of the aisle and the veterans service organizations 

(VSOs). As I said then, this flies in the face of our moral obligation 

as a grateful Nation to care for those wounded heroes. 

Thanks, and I yield back. 

[The prepared statement of Congressman Brown appears on 

p. 26.] 

Mr. NYE. Thank you, Mr. Brown. Do any other Members wish to 

make an opening statement? Great. I would like to go ahead and 

introduce the first panel. The first panel includes Mr. Fred Cowell, 

the Senior Health Policy Analyst from Paralyzed Veterans of America (PVA); Mr. Adrian Atizado, Assistant National Legislative Director from Disabled American Veterans (DAV); and Denise Williams, Assistant Director for Health Policy, Veterans Affairs and 

Rehabilitation Commission at the American Legion. Mr. Cowell, I 

would like to recognize you for your opening statement. Thank you 

for being here. 


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STATEMENTS OF FRED COWELL, SENIOR HEALTH POLICY ANALYST, PARALYZED VETERANS OF AMERICA; ADRIAN 

ATIZADO, ASSISTANT NATIONAL LEGISLATIVE DIRECTOR, 

DISABLED AMERICAN VETERANS; AND DENISE A. WILLIAMS, 

ASSISTANT DIRECTOR FOR HEALTH POLICY, VETERANS AFFAIRS AND REHABILITATION COMMISSION, AMERICAN LEGION 

STATEMENT OF FRED COWELL 

Mr. COWELL. Chairman Michaud, Ranking Member Brown, Congressman Nye, Members of the Subcommittee, the Paralyzed Veterans of America appreciates this opportunity to present current 

information and its ongoing concerns regarding VA’s inappropriate 

billing practices for medical care services delivered to America’s 

veterans. 

Mr. Chairman, as you know The Independent Budget has identified problems with the billing process in its 2009 and 2010 editions. 

Inappropriate billing for medical services is a VA systemwide problem and affects both service-connected and non-service-connected 

veterans. Inappropriate charges for VA medical services places unnecessary financial stress on individual veterans and their families. 

These inaccurate charges are not easily remedied and their occurrence places a burden for correction directly on the veteran, their 

families, or their caregivers. Additionally, PVA believes that many 

veterans are not aware of these billing mistakes and simply submit 

full payment to VA when a billing statement arrives at their home. 

Veterans who are astute enough to scrutinize their VA billing 

statements to identify erroneous charges have just begun a cumbersome process to actually correct the problem and receive a credit 

for the error on a subsequent VA billing statement. It has become 

the veteran’s responsibility to seek VA assistance wherever possible. 

If the veteran contacts the VA Health Resource Center in Topeka, Kansas, concerning questions about their account, they must 

work through a telephone maze before reaching a representative to 

discuss the billing issue. The Health Resource Center representative cannot remove charges that are in dispute and can only email 

the reported error to the proper VA facility for consideration. The 

local facility then has 30 days to respond to the veteran if the veteran requests such contact. In the meantime, subsequent billing 

statements continue to arrive at the veteran’s home and penalty 

charges continue to accrue. Because of extensive delays, many PVA 

members have foregone assistance from the Resource Center and 

seek assistance from their local providers who may or may not intervene on their behalf. 

Mr. Chairman, the process to correct inappropriate billing is not 

an easy path for veterans as VA billing statements are often received months after an actual medical care encounter, and subsequent credit corrections only appear months after corrective intervention has taken place. It is often difficult for veterans to remember health care treatment dates and match billing statements that 

arrive months after treatment to search for billing errors. PVA’s 

experience, as mentioned earlier, has shown that both service-connected and non-service-connected veterans are being erroneously 


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billed for their VA care. PVA members who are 100-percent service-connected for their spinal cord injuries report that they receive 

VA bills related to their service-connected condition. VA is billing 

these veterans for secondary medical conditions directly related to 

their service-connected condition. Some VA billing offices explain 

that because a veteran is not rated for these secondary conditions 

that they can freely bill for this care. This issue is amplified in our 

written statement to the record. 

These veterans also report that their private insurance providers 

are often billed for VA care they receive for their service-connected 

conditions. PVA non-service-connected veterans report that they 

consistently receive multiple copayment charges for a single VA 

medical care service. Again, the veteran has identified a billing 

error the corrective process just begins. If the error is discovered 

by the veteran finding proper assistance is difficult and corrective 

action takes months to achieve. Corrective action and follow 

through is the veteran’s responsibility because the veteran receives 

no acknowledgment letter from the VA that an error has actually 

happened. The veteran is forced to review subsequent billing statements to see if he or she actually receives a credit entry for the 

previous error. 

Mr. Chairman, I personally have been experiencing billing errors 

for years concerning the services I receive from the Washington, 

DC, Medical Center. The quality of care I have received is of the 

highest caliber. But almost every billing statement I receive has 

several charges that are incorrect. For several years I simply paid 

these charges because I did not realize they were erroneous. For at 

least the past 3 years, I now work with my visiting nurse to review 

my bills for incorrect charges. She then contacts the social worker 

on my team and they work with the DC business office to remove 

incorrect charges. This is a monthly process because somehow the 

problem cannot be fixed on the local level and these errors continue 

to happen. This means that important frontline health care workers are spending their valuable time on correcting billing issues 

rather than caring for veterans. 

Because VA has been experiencing reports from veterans across 

America that inappropriate billing is happening, we conducted a 

survey of our membership to understand the scope of the problem. 

In September of 2009, PVA sent an email survey to approximately 

4,000 of our members regarding the issue. Within 2 weeks, we had 

received 449 responses to the survey. Of the 449 respondents, approximately 9 percent report receiving more than one bill for the 

same treatment episode; approximately 17 percent claim to have 

been billed directly for a service-connected condition; and another 

22 percent claim that their insurance company is being billed for 

treatment of a service-connected condition. 

Mr. Chairman, we are asking the Subcommittee to take action on 

the issue of inappropriate billing and to intervene on behalf of PVA 

members and on behalf of all veterans who are experiencing incorrect VA billing problems. PVA knows this is a national problem, as 

evidenced by our survey. 

The stress of living with a catastrophic disability is burden 

enough, Mr. Chairman, without experiencing continued billing 

problems associated with the care we receive from the VA. Mr. 


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Chairman, this concludes my remarks and I will be happy to attempt to answer any questions you may have. 

[The prepared statement of Mr. Cowell appears on p. 27.] 

Mr. NYE. Thank you very much for your opening statement, Mr. 

Cowell. I would like to recognize you, Mr. Atizado, for your opening 

statement. 

STATEMENT OF ADRIAN ATIZADO 

Mr. ATIZADO. Mr. Chairman, Ranking Member Brown, Members 

of the Subcommittee. I would like to thank you first and foremost 

for inviting the DAV to present our views on inappropriate billing 

practices by the VA. Like my colleague here, there are numerous 

concerns about inappropriate billing. But we do bring two points of 

concern: the effects of inappropriate billing on VA’s financial resources, as well as the veteran/patient, both of which affect patient 

care and patient satisfaction. 

The efficient and the timely collection of reimbursable costs is a 

tremendous driver at local facilities that adds to their resources toward meeting the growing health care demands of sick and disabled veterans. However, when we compare fiscal year 2009 and 

the 2010 budget estimates to those of prior years, we see a dramatic increase in estimated collections for third party as well as 

first party and other copayments. This is concerning in light of the 

overall actual expected collections that have been below budget estimates, that is with the exception of fiscal year 2008 when VA actually exceed estimated collections. 

If you compare, however, the fiscal year 2008 and 2010 budget 

estimates for medical care fund subaccounts, there is an expected 

increase of 50 percent for third-party collections or collections to insurance companies of veterans, and a 30-percent increase in first 

party and other copayments, collections from veteran/patients 

themselves. 

The DAV is concerned that ever-increasing budget estimates and 

the need of local VA facilities to meet them to ensure they have 

adequate resources may encourage or contribute to inappropriate 

billing. And although it is mitigated to some extent by designating 

these collections as no-year funds, the exceedingly dramatic shift in 

gains and losses in these subaccounts can have a detrimental effect. Without facility by facility performance and trend data on collections, we are concerned that VA’s ability to effectively manage 

the Medical Care Collections Fund (MCCF) program to enhance 

revenue and avoid inappropriate billing is severely impaired. 

Despite efforts prompted by reports from the U.S. Government 

Accountability Office (GAO) and VA’s Office of Inspector General 

(OIG) to enhance revenue collections and protect against erroneous 

billing, the DAV continues to receive reports from our members 

that inappropriate billing continues. To supplement the anecdotal 

evidence we have collected over the years, DAV recently conducted 

a survey, much like PVA, of our DAV Commander’s Action Network. We asked survey recipients to participate if they believe VA 

has inappropriately billed them or their insurance companies. 

There is also the survey of 402 respondents from across the Nation, 

show about 43 percent receive bills for their care from VA and apVerDate Nov 24 2008 13:04 May 11, 2010 Jkt 053435 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 I:\VA\53435.XXX GPO1 PsN: 53435

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proximately 62 percent had other insurance coverage being billed 

for VA care. 

And we also asked if they had received more than one bill for the 

same treatment, and about 18 percent affirmed. We then asked if 

they are billed for treatment at the VA for a service-connected condition, 42 percent, or 167 veterans, said they are. And about 55 

percent confirmed that their insurance company is being billed for 

a service-connected related treatment. 

We understand that under the law, VA must bill veterans and 

their insurers for providing treatment for non-service-connected 

conditions. However, inappropriate billing causes undue financial 

and emotional stress on veterans and their families. The four vignettes included in my written testimony from veterans who are 

being inappropriately billed goes to the heart of being a veterancentric health care system. What is most troubling is the perception these veterans carry about VA being indiscriminating in their 

billing and collections, and VA being unresponsive when veterans 

bring their concerns to the local facility for corrective action. 

Now, VA is not supposed to be a for-profit health care provider, 

but it is perceived as such by our veterans. And this is because in 

the private sector it is up to the patient to catch mistakes when 

they or their insurance are being inappropriately billed. We believe 

VA should be held to a higher standard than the private sector provider. 

Mr. Chairman, as I remain in the audience for the remainder of 

this hearing I will listen with the ear of these four veterans and 

others like them about what VA is proactively doing to address 

their actions and ensure no future inappropriate billing occurs. 

Again, we appreciate the Subcommittee’s interest in this issue 

and we thank you for the opportunity to present our views. We will 

appreciate your consideration of our testimony in pressing this important matter for America’s sick and disabled veterans. I will be 

pleased to answer any questions that you or other Subcommittee 

Members may have. Thank you. 

[The prepared statement of Mr. Atizado appears on p. 29.] 

Mr. NYE. Thank you very much, Mr. Atizado. I would now like 

to recognize Ms. Williams for an opening statement. 

STATEMENT OF DENISE A. WILLIAMS 

Ms. WILLIAMS. Mr. Chairman and Members of the Subcommittee. 

The American Legion appreciates the opportunity to offer our views 

on this very important issue. The American Legion has a long history of advocating on behalf of veterans. A very notable instance 

where this is evident was in March 2009 when Past National Commander David Rehbein met with President Obama and learned 

that the Administration planned to move forward on a proposal to 

charge veterans’ private insurance for the treatment of service-connected injuries and illnesses at VA medical facilities. Under the 

proposed change, VA would bill the veteran’s private insurance 

company for treatment of their service-connected disability. After 

fierce opposition from the American Legion and other veterans 

service organizations, the Administration dropped their plan to bill 

private insurance companies for treatment of service-connected 

medical conditions. 


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In June 2004, the GAO released a report which stated that VA 

had inadequate patient intake procedures, insufficient documentation by physicians, a shortage of qualified billing coders, and insufficient automation, all of which diminished MCCF collections. GAO 

conducted a followup audit in 2008 and echoed similar findings, 

that VA has ineffective controls over their medical center billings 

and collections which limits revenue from third-party insurance 

companies. The report also concluded that VA lacks policies, procedures, and reporting mechanisms for oversight of third-party billings and collections. 

The Department of VA Inspector General’s Office conducted an 

evaluation of the MCCF first party billings and collections practices 

in 2004. The report found that the veterans were inappropriately 

billed because of inaccurate medical facility veterans health information systems and technology architecture. In 2007, the VA OIG 

carried out another evaluation of 10 facilities and ascertained that 

there were missed billing opportunities at 10 facilities due to insufficient documentation of resident supervision. Additionally, there 

were cases where episodes of care were not billed due to coding 

staff’s lack of experience and insurance companies denying payment because of billing staff placing incorrect information in the 

system. 

In light of these findings, we recommend that VA implement continuing education of all coders and their supervisors. The American 

Legion urges VA OIG and GAO to conduct followup evaluations of 

their latest reports to determined whether VA has complied with 

these recommendations. 

Mr. Chairman, although VA has made great strides in rectifying 

these issues surrounding their billing and collection practices, it is 

apparent that there is still room for improvement. As recent as 

April 2009, the American Legion compiled a total of 10 documented 

cases where VA erroneously billed service-connected veterans’ private insurance for their service-connected medical care. In one 

case, an 80-percent service-connected veteran reported that his 

wife’s private insurance had been billed repeatedly for his treatment of service-connected illness. The veteran inquired about it 

through the VA primary care team and was told that they will continue to be billed as long as they have private insurance. The veteran explained that he was being billed for service-connected disabilities. However, the inappropriate billing continues. 

The American Legion is deeply concerned about this critical situation and contends that VA work jointly with us to investigate 

these and other cases, as well as collect pertinent records from affected veterans and take the necessary corrective measures. Additionally, we recommend that the VA create a means to alert coders 

of service-connected conditions in their system and increase efforts 

and focus on monitoring accounts receivable. 

Finally, we would like to take this opportunity to express our 

thanks to Chairman Filner for the introduction of H.R. 3365, the 

‘‘Medicare VA Reimbursement Act of 2009.’’ The American Legion 

strongly supports this bill and would like to encourage your colleagues to follow suit. 


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On behalf of the American Legion, I appreciate the invitation to 

present our views on this very important topic. This concludes my 

testimony. 

[The prepared statement of Ms. Williams appears on p. 34.] 

Mr. NYE. Thank you very much, Ms. Williams. I would like to 

take the opportunity to ask a couple of question of our panel members. First of all, I would just like to say I appreciate Mr. Brown, 

the Ranking Member’s opening comments, when he mentioned 

something that a number of our panelists also mentioned, about 

the notion that the Administration was kicking around earlier in 

the year about potentially charging veterans’ private insurance for 

service-connected injuries. I want to say I was also proud to be part 

of that bipartisan effort along with our VSOs to raise the issue 

quickly to the White House. Fortunately, we were able to resolve 

that and get that taken off the table early. 

It is clear to me that despite some of our victories, we have still 

got some problems in execution at the VA. I would like to ask if 

all of the panelists might tell me what they are hearing from their 

membership in terms of the amount of time that it typically takes 

for these inappropriate billing episodes to be resolved? If I could 

start with Mr. Cowell. 

Mr. COWELL. In my personal experience, I generally receive a VA 

billing statement 3 or 4 months from the actual date of treatment. 

At that point, I have to go through the bill, match it. I have 

learned over time to match it to a home calendar that I keep so 

that I can track actual visit dates from my home care nurse. If I 

notice more than one billing in that particular month, and generally I get a single visit in a month from my home care nurse. 

Sometimes I am billed as often as three or four times in that 

month for that single service. I then have to wait for the following 

visit, which is the following month, to talk with her about the 

issue. She checks her calendar, verifies that there is erroneous billing going on. And then she goes back to the DC hospital and contacts the social worker on that team, who then reviews the chart. 

And they go up to the business office. 

So sometimes it can take 6 to 8 months to get a correction for 

a billing error. And most months there is more than one billing 

error on my statement. And we are hearing the same thing from 

veterans across the country, PVA members, that it takes 6 to 8 

months, if they even know that there is a billing error, to get it corrected. 

Mr. NYE. Did you say that most months there is a billing error 

on your statement? 

Mr. COWELL. That is correct. 

Mr. NYE. All right, thank you. Mr. Atizado. 

Mr. ATIZADO. Well, thank you for that question. The veterans 

that I ended up calling from our survey who said that it was okay 

for us to contact them, the time runs the gamut from having it corrected within a few weeks, to not being corrected at all, to being 

corrected for one bill and having a recurring bill; I should say recurring inappropriate bill, happen the following treatment episode 

or the following month. So I can certainly tell you that there is no 

consistency in the corrective actions. There just is not. 


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Some veterans have given up. Some veterans will pay. And some 

veterans will hold themselves in debt, and end up having an offset 

put on either their compensation or pension, despite the fact that 

it is an inappropriate bill. 

Mr. NYE. Okay, thank you. 

Ms. Williams. 

Ms. WILLIAMS. Mr. Chairman, I believe it varies based on the 

case. But those 10 cases that we compiled in April, one of our Assistant Directors did follow up with the veterans and I believe 

there were some cases that were not resolved, and this was last 

week. I must say that our Executive Director did meet with our VA 

liaison last week and I believe that they are working on resolving 

those cases. So it does vary. We do not have an exact time for when 

they are resolved, but there are still some cases out there that have 

not been rectified. 

Mr. NYE. Okay. Mr. Cowell, just a followup for you. You suggested that your home care nurse had been helping you go back 

and follow up on the inaccuracies, and I just wanted to make sure 

that I understood that correctly. Is that typical of your membership, to have that kind of assistance when going back and checking 

your bill? 

Mr. COWELL. I cannot speak for our membership on this issue. 

But I am rather trying to bring the firsthand account of my experience. And I am astute enough, and have been coached enough, to 

know how to look for these errors now that I realize they are happening. I think many of our members do not even know that there 

is inappropriate billing going on. They receive, our non-service-connected members that would receive a copayment bill, just simply 

pay the bill. If they neglect to pay the bill then they receive a series of uncomfortable letters about possible penalties and other actions that can result if they do not submit payment. 

If you submit payment for an inappropriate bill, there is never 

any followup from the VA, who then double checks to see if their 

billing statements are even correct. So the veteran can be out of 

pocket if he chooses to go ahead and pay the bill. If you delay payment then you incur penalties and charges on your account that 

are added on until the situation is corrected. 

Mr. NYE. Okay. Thank you. I also wanted to follow up on your 

surveys, between you and Mr. Atizado. Did both of your organizations use the same survey? Or did you use separate surveys? 

Mr. COWELL. We did not collaborate with DAV on our survey. We 

knew the personal situations that our members were experiencing 

and we phrased the questions of our survey depending on the experiences that we knew about. 

Mr. NYE. Okay. Well, then I would like to ask both of you if you 

would be willing to share your survey questions so that we might 

better inform the VA to do some similar outreach on their side? 

Mr. COWELL. I cannot imagine that we would not. I think we 

would need to look at some confidentiality issues with the individual veteran. But maybe there is a way we can scrub that so that 

the reports are not identifiable. 

Mr. NYE. That is fine. I think it is more important that we have 

the questions and the survey methodology rather than the indiVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 I:\VA\53435.XXX GPO1 PsN: 53435

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vidual names. Mr. Atizado, are you satisfied with that idea as well? 

With sharing the questions? 

Mr. ATIZADO. On the issue about personally identifiable information, I do not see a reason to, I would have to confer with our legal, 

of course. 

Mr. NYE. Okay. Then we will have to follow up with you on that. 

One more question for Ms. Williams, you had talked during your 

testimony about erroneous billing for service-connected veterans. 

Did you also find that there were similar problems with erroneous 

billing among veterans with non-service-connected injuries. 

Ms. WILLIAMS. Yes, we did. With the cases that we followed up, 

there were cases where they were billed for more than once. And 

also they were billed for their service-connected disabilities. 

Mr. NYE. Great. At this time I would like to yield to the Ranking 

Member Mr. Brown for any questions he might have. 

Mr. BROWN OF SOUTH CAROLINA. Thank you very much. This is 

kind of a general question, just listening to some of the answers 

previously. If you are erroneously billed, then you try to correct it. 

But during the correction stages, they will add penalties on to the 

bill? And finally, they will actually assess your pension check to be 

able to make the payment? 

Mr. COWELL. That is correct, Congressman Brown. 

Mr. BROWN OF SOUTH CAROLINA. They will take it out of your 

check if you do not pay? 

Mr. COWELL. Or they will withhold the amount of money that 

you may owe the VA for charges being billed. 

Mr. ATIZADO. There is a specific process for that, Ranking Member Brown. There is, I believe within so many days, I believe it is 

90 days, a certain debt goes to, I believe, the Debt Management 

Center in—— 

Mr. BROWN OF SOUTH CAROLINA. Collections center. 

Mr. ATIZADO. Well, it actually goes to a debt management, Debt 

Management Center in Minneapolis. If it is over 180 days it can 

actually get referred to the offset program that VA has with the 

Treasury more—— 

Mr. BROWN OF SOUTH CAROLINA. Do they charge you a fee? 

Mr. ATIZADO. I am sorry. 

Mr. BROWN OF SOUTH CAROLINA. Do they add a fee on after it 

is late a certain number of days? 

Mr. ATIZADO. I could not speak to that, sir. I do not believe so, 

but—— 

Mr. BROWN OF SOUTH CAROLINA. Do they charge you an add on 

fee if you pay late? 

Mr. COWELL. Yes. There is a late penalty and charge for late payment. 

Mr. BROWN OF SOUTH CAROLINA. How much does that normally 

run? 

Mr. COWELL. I do not know the—— 

Mr. BROWN OF SOUTH CAROLINA. It is a percent of the—— 

Mr. COWELL [continuing]. Percentage, sir, but I could get that information for you. 

[Mr. Cowell subsequently provided the following information:] 

PVA does not know the methodology that VA used to set the amount of the 

late penalty fee that has been determined by VA to be an appropriate 


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amount to be charged. Additionally, PVA does not know just how much 

lapsed time has been determined by VA to trigger a late payment penalty. 

Whatever the methodology that VA applied it seems that a case could be 

made that it was an arbitrary decision by VA and PVA wonders why Congress was not involved in the decision. 

Recommendation: PVA suggests that Congressman Brown request information from VA’s business office to clarify this question. 

Mr. BROWN OF SOUTH CAROLINA. And they will charge you even 

though that—— 

Mr. COWELL. Even though the bill is in dispute. 

Mr. BROWN OF SOUTH CAROLINA [continuing]. The veteran reports that? 

Mr. COWELL. Even though the bill is in dispute, until it is resolved—— 

Mr. BROWN OF SOUTH CAROLINA. Is that right? 

Mr. COWELL [continuing]. The charge continues to accrue. 

Mr. BROWN OF SOUTH CAROLINA. And finally, will they just write 

it off? Of what is the conclusion? 

Mr. COWELL. Well, one of the situations that we have heard from 

our non-service-connected members is if they are not in receipt of 

a VA pension, so there is not an offset available through withholding compensation or pension, they turn it over to the IRS, who 

then can, if they have a refund coming on their next year’s taxes, 

they will withhold that refund until that amount is paid. 

Mr. BROWN OF SOUTH CAROLINA. If you paid it anyway under 

protest, will they reimburse it? 

Mr. COWELL. I have never known of a case where VA reimbursed 

for overpayment. I do not think they have a method of even understanding if they are incorrectly billing. 

Mr. ATIZADO. They do. Ranking Member, they do. In fact, one of 

our Members who is the fourth vignette, I believe, in my testimony, 

did ask for an audit; I believe it was back in March of this year. 

It was not only until 2 or 3 weeks ago that he received a refund 

check back. But there is a process, I believe, part of a business integrity policy, a handbook that VA has. 

Mr. BROWN OF SOUTH CAROLINA. Okay. Mr. Cowell, let me—— 

Mr. COWELL. I would just like to add that that burden is on the 

veteran to even know that he has incorrectly been billed—— 

Mr. BROWN OF SOUTH CAROLINA. Right. 

Mr. COWELL [continuing]. Before he can pursue the remedy for 

refund. 

Mr. BROWN OF SOUTH CAROLINA. Let me ask you a question. You 

called for VA to take immediate action to change this regulation so 

that a veteran who is rated permanently and totally can never be 

erroneously billed. Specifically, what is your recommendation to fix 

the problem? 

Mr. COWELL. You are asking me, Mr. Ranking Member? 

Mr. BROWN OF SOUTH CAROLINA. Yes, sir. 

Mr. COWELL. Yes. Well, the situation is just so widespread, and 

we think that each facility, there are liberties being taken with actually the regulation and the statute. If VA cannot clarify the regulation then we would call on Members of Congress to do a statutory 

change to make it very clear to VA that this is inappropriate. 


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Mr. BROWN OF SOUTH CAROLINA. Do you think the Administration could do it administratively? Or do you think we would have 

to take legislative action? 

Mr. COWELL. Well, I want to believe that we do not need statutory change. But this has been an ongoing problem. We have mentioned it in The Independent Budget for over 2 years. I think because of the language change that happened, and local facilities are 

able to collect the collections and keep that money, I believe that 

that has caused a perverse incentive for them to really aggressively 

go after billing practices. It may take a statutory change to make 

it absolutely clear so that the VA knows that their boundaries are. 

Mr. BROWN OF SOUTH CAROLINA. Okay, thank you. Mr. Cowell, 

if you could, would you send us a copy of your legislative proposal 

so that we could then, you know, take some action on it? 

Mr. COWELL. I will confer with our legislative director, Mr. 

Brown, and we will be happy to put some language together for 

you. 

[Mr. Cowell subsequently provided the proposal to the Committee staff.] 

PVA is currently working on a draft proposal to submit to the Committee 

on Veterans’ Affairs regarding billing of veterans with 100 percent a service-connected disability rated Permanent and Total. As we stated in our testimony for the hearing, it makes no sense whatsoever that the VA be permitted to bill a veteran for any care if they have a Permanent and Total 

rating. 

A Total rating suggests that any health condition that requires treatment 

is secondary to the original service-connected condition without the need for 

consideration as a second condition. In our opinion, this should mean that 

100 percent Total and Permanent service-connected disabled veterans 

should not be billed, nor should his/her insurance company be billed, for 

any treatment these veterans receive. Correcting this problem is one of 

PVA’s top legislative priorities for this year. As such, we will be presenting 

a point paper on the issue of how this change can be implemented either 

by statute or through regulation. 

If veterans who are now rated 100 percent permanent and total are forced 

to seek adjudication for secondary conditions related to their service-connected condition the VBA claims process will certainly be further swamped 

by the volume of claims necessary to rectify this situation. 

Mr. BROWN OF SOUTH CAROLINA. Very good. Thank you so much. 

Mr. NYE. Thank you, Mr. Brown. And thank you to the first panelists. I would like to go ahead and invite the second panel, Ms. 

Kay Daly, to come up to the table and join us for her testimony. 

I would like now to yield to the Subcommittee Chairman, Mr. 

Michaud. 

Mr. MICHAUD [presiding]. First of all, I would like to thank Mr. 

Nye for taking over and running the Subcommittee hearing for the 

first panel. I really appreciate it. And I appreciate your advocacy 

for our veterans. So thank you very much. Ms. Daly. 

STATEMENT OF KAY L. DALY, DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. DALY. Mr. Chairman, and Ranking Member Brown, and the 

other Members of the Subcommittee, I am very pleased to be here 

today to discuss our prior work on the Department of Veterans Affairs controls over medical center billings and collections. 


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VA is authorized to provide certain medical services to veterans 

with non-service-related conditions and to recover some of the costs 

of providing these additional benefits through billing and collecting 

payments through veterans’ private health insurers. These are 

commonly referred to as third-party insurers. VA can also use 

these third-party health insurance collections to supplement its 

medical care appropriations. 

Today, my testimony will summarize the findings from our June 

2008 report that are most relevant to the subject of today’s hearing. 

Specifically, I will focus on our findings concerning one, the effectiveness of VA medical center billing practices at selected locations 

we visited; and two, VA-wide controls for performing timely followup on amounts that were due from third-party insurers; and 

third, the adequacy of VA’s oversight of the billing and collection 

process. 

Regarding the effectiveness of the billing processes, our analysis 

of unbilled patient services at 18 case study locations found excessive average days to bill, coding and billing errors, and a lack of 

management oversight that raised questions about $1.7 billion that 

was not billed to third-party insurers at the 18 locations we reviewed. Now, it is important that coding for the medical services 

is accurate and timely because insurers will not accept improperly 

coded bills or bills that are considered late, which is usually 1 year, 

or sometimes as little as 6 months, after the services were provided. 

At the 10 non-Consolidated Patient Account Center (CPAC) medical centers we reviewed, we found the average days to bill ranged 

from 109 days to 146 days in fiscal year 2007. That compares to 

VA’s goal of 60 days. We also found these centers had significant 

problems that accounted for over $254 million, that is 21 percent, 

of the total unbilled medical services cost at those 10 centers. 

Now, our case study analysis of the eight medical centers that 

were under the CPAC initiative found that CPAC officials performed a more thorough review of the billing function. The CPAC 

centers average days to bill ranged from 39 days to 68 days, and 

their billing errors accounted for about $37.5 million, or about 7 

percent of the medical center costs that were not billed to thirdparty insurers. Managers at the locations we visited did not perform adequate reviews of the services assigned to the various categories, including whether it was service- or non-service-connected, 

to ensure that the bills were appropriately coded and classified. 

Our June 2008 report also identified significant problems related 

to timely followup with third-party insurers on their actions to collect amounts that had been billed. Our statistically valid tests for 

the required initial followup showed a failure rate of 69 percent 

VA-wide, 36 percent for the CPAC centers and 71 percent for nonCPAC centers. The failure to make timely followup contacts and 

delays in initiating those contacts with the third-party insurance 

companies increases the risks that the payments will not be collected, or that payments will be substantially delayed. Management officials at several of the medical centers tested in our statistical sample attributed their high followup failure rate to inadequate staffing. However, we found that a lack of management 


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oversight at the medical centers, as well as at the VA management 

level, contribute to the control weaknesses we identified. 

In addition, we found that VA and medical centers have few 

standardized management reports to facilitate the oversight. Limitations in management reporting were because VA’s health care 

billing and collections systems operate as stand alone systems at 

each medical center. Therefore, VA-wide reporting was dependent 

on numerous individual queries and data calls. Enhanced oversight 

would permit VA headquarters and medical center management to 

monitor trends and performance metrics, such as increases or decreases in unbillable amounts. 

In summary, until VA addresses its significant continuing weaknesses in controls over coding, billing, and collections followup, it 

will continue to be at risk for millions in erroneous billings and not 

maximize revenue that can provide medical care to our Nation’s 

veterans. 

Mr. Chairman, Ranking Member Brown, and the other Members 

of the Subcommittee, this concludes my prepared statement and I 

would be happy to respond to any questions you may have at this 

time. 

[The prepared statement of Ms. Daly appears on p. 35.] 

Mr. MICHAUD. Thank you very much, Ms. Daly, for your testimony this morning. Are the internal control issues you identified 

related to VA billing and collection practices the result of a lack of 

oversight at the local medical centers? Or is this a VA-wide problem? What can officials at both levels do to fix these problems? 

What should Congress do? 

Ms. DALY. That is a very good question. I think we found there 

were problems at both the local medical centers in doing adequate 

oversight over how the bills were being coded and classified, and 

whether they were being classified correctly so they could be billed 

correctly. Then VA-wide, we found that they lacked good policies 

and procedures. There was a significant lack of policies and procedures in place, and they also did not get information in order to 

provide good oversight over the process, too, at the VA-wide level. 

Regarding what Congress could do, I think that Congress has 

taken some important steps already. Providing hearings such as 

this today help raise awareness of the issue and helps you in providing oversight. And, of course, GAO always stands ready to help 

you in performing that oversight in any way you wish. 

Mr. MICHAUD. Thank you. And I would like to thank you and all 

the staff at GAO for the tremendous job that you do in helping 

Congress, not only this Committee but all the Committees of Congress, do its job. So thank you very much. Mr. Brown. 

Mr. BROWN OF SOUTH CAROLINA. And I also want to echo that, 

Ms. Daly. I just have one quick question. Given today’s testimony, 

do you see a need for a followup GAO review to determine how 

multiple and inappropriate billing errors continue to occur, and 

what action must be taken to prevent future problems? 

Ms. DALY. Well, Congressman Brown, I think it would be important, if it is important to the Congress to help you explore these 

issues further, we would be glad to assist in any way we can. I 

think there were certain issues that were discussed at today’s hearVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 I:\VA\53435.XXX GPO1 PsN: 53435

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ing earlier that was outside of our review’s scope. So I, if there is 

any way we can assist we would be glad to do so. 

Mr. BROWN OF SOUTH CAROLINA. Do you see any change in the, 

I guess, whether it is becoming more errors or less errors? Or what 

is your handle on that? 

Ms. DALY. Well, from our review of June 2008 we have not had 

the opportunity to follow up on the impact of that yet, and the actions that VA has taken. VA informed us last week that they had 

issued new policies and procedures and a handbook, but I am not 

sure how effectively that has been implemented at the medical centers at this time. 

Mr. BROWN OF SOUTH CAROLINA. What percentage of billings are 

third party? 

Ms. DALY. I do not have that answer readily available for you, 

sir, but I would be glad to get back to you with that. 

[The GAO subsequently provided the following information:] 

According to VHA’s Chief Business Officer, 83 percent of its billings in fiscal year 2009 stem from veterans’ private health insurers, commonly referred to as third-party insurers. 

Mr. BROWN OF SOUTH CAROLINA. It is a significant number, I assume? 

Ms. DALY. I think so. The amounts that we saw at just the 10 

medical centers, the way they were classified it looked as though, 

there were $1.7 billion in total at all of the 18 centers. But I cannot 

say how much of that was third party or not. 

Mr. BROWN OF SOUTH CAROLINA. And what do you do with those 

funds? 

Ms. DALY. I am sorry? 

Mr. BROWN OF SOUTH CAROLINA. What do you do with those 

funds? 

Ms. DALY. Those funds can be used, that is, anything recovered 

from the third-party medical insurers, can be used toward medical 

care for VA, you know, our veterans. 

Mr. BROWN OF SOUTH CAROLINA. Do you all decide that? Or is 

that decided legislatively? 

Ms. DALY. The Congress passed a law permitting that back in, 

I believe, 1996. 

Mr. BROWN OF SOUTH CAROLINA. So that gives you all the flexibility to spend them under different categories? Or do you have a 

specific purpose to spend it on? Like, could you spend it on buildings? Or equipment? Or is it just for paying employees? Or, you 

know, how much freedom do you have to use those funds? 

Ms. DALY. Well sir, I believe it is supposed to be focused on just 

the medical care. But I am not certain if it cannot extend to facilities related to medical care or not, so if you would like, I could get 

back to you with that information. 

[The GAO subsequently provided the following information:] 

In our June 2008 report (GAO–08–675), we reported that the Veterans Reconciliation Act 1997, which was enacted as part of the Balanced Budget Act 

1997, authorized VA to collect and deposit third-party health insurance 

payments in its Medical Care Collections Fund, which VA could then use 

to supplement its medical care appropriations. 

Specifically, amounts in that fund can be used for furnishing medical care 

and services and for VA expenses related to the identification, billing, auditing, and collection of amounts owed. 


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Mr. BROWN OF SOUTH CAROLINA. Okay. It could be $2 billion or $3 billion, it seems like. 

Ms. DALY. That was roughly how much was collected last year from third-party insurers. It was over $2 billion. 

Mr. BROWN OF SOUTH CAROLINA. Right. Okay. Thank you very 

much. 

Ms. DALY. Thank you. 

Mr. MICHAUD. Mr. Snyder. 

Mr. SNYDER. I do not have any questions. 

Mr. MICHAUD. Well, once again thank you very much, Ms. Daly, 

for your testimony this morning. We look forward to working with 

you as we move forward to get further into this issue. So thank you 

very much. 

Ms. DALY. You are very welcome. 

Mr. MICHAUD. I would like to call the third and last panel. It is 

Mr. Gary Baker, who is the Chief Business Officer of the Veterans 

Health Administration of the VA, who is accompanied by Ms. 

Stephanie Mardon and Ms. Kristin Cunningham. I would like to 

thank you, Mr. Baker, for coming here this morning. We look forward to your testimony, and thank you for all that you do for our 

veterans. 

STATEMENT OF GARY M. BAKER, MA, CHIEF BUSINESS OFFICER, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY STEPHANIE MARDON, DEPUTY CHIEF BUSINESS OFFICER FOR 

REVENUE OPERATIONS, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND KRISTIN CUNNINGHAM, DIRECTOR OF BUSINESS OPERATIONS, 

VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 

VETERANS AFFAIRS 

Mr. BAKER. Thank you, Mr. Chairman, and Mr. Ranking Member. Thank you for providing me this opportunity to discuss the Department of Veterans Affairs’ billing practices. I am accompanied 

today by Ms. Stephanie Mardon, Deputy Chief Business Officer for 

Revenue Operations, and Ms. Kristin Cunningham, Director of 

Business Operations. I would like to request that my written statement be submitted for the record. 

Mr. MICHAUD. Without objection, so ordered. 

Mr. BAKER. Thank you. VA is required by law to charge copayments to certain veterans who meet income requirements and who 

receive care for non-service-connected conditions. VA must also bill 

health insurance carriers for services provided to veterans treated 

for their non-service-connected conditions. VA currently has four 

types of non-service-connected copayments for which veterans may 

be charged: outpatient and inpatient medical services, extended 

care services, and medication copays. Veterans who are unable to 

pay VA’s copayment charges are encouraged to complete requests 

for assistance at their local facility. VA earlier embarked on a program this year to improve communication of these options for assistance through posters and other materials posted on VA’s Web 

site and available at local medical centers. Veterans and their families can also call VA’s first party call center, as was referenced earlier at the Topeka Health Resource Center, using a toll-free numVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 I:\VA\53435.XXX GPO1 PsN: 53435

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ber for assistance in understanding their copayment charges and 

payment alternative options. 

VA bills health care insurers for non-service-connected conditions. Veterans are not responsible for paying any of the remaining 

balance of VA’s insurance claims that are not paid or covered by 

their health insurance. Any payment received by VA is used to offset, dollar for dollar, the veteran’s copayment responsibility. I 

might add that it is this dollar for dollar copay offset that delays 

VA’s copay billing as was mentioned earlier in a previous panel. 

Veterans and their health insurers are not to be charged for care 

provided for their service-connected conditions. VA has a number 

of mechanisms in place to ensure that charges are appropriate. 

VA’s health information system identifies veterans who are serviceconnected, flags their record, and lists all rated service-connected 

disabilities. During each treatment encounter the VA provider determines whether the medical care or prescriptions provided are related to the veteran’s service-connected disabilities. This prevents 

bills from being generated automatically. In addition, when VA is 

notified that a veteran is rated as service-connected retroactively 

through a service-connected adjudication award, VA automatically 

reviews the account and refunds are generated back to the effective 

date of the service-connected decision. If the veteran has not paid 

the copay then the copay is wiped off the books. 

We thank the VSOs for their suggestions on improvements and 

note the VA has already addressed many of them. As an example, 

VA has enhanced our VistA information system to facilitate data 

exchange between Veterans Benefits Administration (VBA) and 

Veterans Health Administration (VHA) so that medical personnel 

now have access to up to 150 service-connected conditions, if there 

are that many rated by VBA. Additionally, medical center staff 

have access to other computer applications that provide more detailed information on service-connected rated disabilities when that 

is required. Moreover, VA has already put in place extensive training for staff to appropriately determine service connection and 

other special authority relationships for billing purposes. I brought 

with me today an example of our crib cards that are available on 

the computer terminals for billing staff and providers that provides 

information on billing activity, appropriate service-connected information, and other issues that relate to the providers’ responsibilities as veterans are billed. In addition, business compliance staff 

at each facility also perform a variety of first and third-party billing compliance reviews that are routinely reported to VHA leadership at local, regional, and national levels. 

Over the past 5 years, VHA has also developed many other initiatives to improve billing practices, including publication of a 

handbook that establishes policies and procedures for monitoring 

possible inappropriate referrals to the debt management center and 

Treasury offset program, as were mentioned earlier. Additionally, 

VA installed software in all systems in 2008 to ensure that these 

debts were not referred automatically for offset. That is that they 

require review by billing staff before they are sent to make sure 

that the offset is appropriate based on the veteran’s eligibility status. This has resulted in a dramatic reduction in inappropriate referrals. VA also now requires staff to perform monthly reviews of 


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medical care billing and report results to local compliance officers. 

In order to accurately classify care as not billable, VA implemented 

a software enhancement in July of 2009 in followup to the GAO report that was mentioned earlier. VA also implemented a mechanism to monitor and periodically audit these determinations. Finally, VA strengthened controls over accounts receivable by implementing monitors by Veterans Integrated Service Network quality 

assurance staff. 

Mr. Chairman, we appreciate the opportunity to respond to the 

concerns about VA’s billing practices raised by veterans and oversight bodies, and to describe our efforts to improve these processes. 

Should a veteran receive a bill that appears to be in error, VA encourages the veteran to contact their local medical center revenue 

staff who will review the bill with the veteran and help reconcile 

the issue. 

Thank you again for this opportunity. My colleagues and I are 

available for your questions, sir. 

[The prepared statement of Mr. Baker appears on p. 43.] 

Mr. MICHAUD. Thank you very much, Mr. Baker, for your testimony. I appreciate what VA has been trying to do to solve this 

problem. However, as you heard from the first panel, there seems 

to be a disconnect in looking at billing for a service-connected disability. That is a big concern that I have. At the beginning of the 

year, we heard through the grapevine that this Administration was 

going to go after third-party collections for veterans with serviceconnected disabilities. So I am wondering whether or not there is 

someone in the VA who still believes that is a good policy and is 

doing it even though they are not supposed to. There are veterans 

who will fight this. But unfortunately, then there will be veterans 

who will not fight it, and will actually pay. That is the big concern 

that I have. I know that the GAO made seven recommendations on 

how the VA can correct this. Has the VA adopted all seven of those 

recommendations? 

Mr. BAKER. Yes, Mr. Chairman. VA has provided information to 

GAO, as we mentioned, at a meeting that was held earlier last 

week. But we had provided a written response some time ago indicating our actions on all seven activities. And we have incorporated 

their recommendations into our policies and practice, issued new 

handbooks, new policy guidelines, and training and followup. 

If I might address the service-connected issue, it has never been 

VA’s authority to bill for service-connected conditions. While I understand that there was earlier this year some discussion of changing that practice, that was never communicated to our field facilities and providers as a change in policy. And our information systems, as I indicated earlier, automatically exempt service-connected 

veterans who are compensably service-connected from copay billing 

for inpatient and outpatient care, and other exemptions as they relate to eligibility. And our providers received no change in instructions in terms of exempting veterans for treatment of their serviceconnected conditions. In terms of the concerns that were addressed 

by the first panel in terms of billing for service-connected conditions, I would not sit here and say that VA is perfect in its billing 

practices. Certainly there are times when we make errors and we 

stand ready and willing to correct those errors. And if there are inVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 I:\VA\53435.XXX GPO1 PsN: 53435

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stances where we are not being timely in terms of followup on that, 

we certainly want to hear about that so that we can improve them 

not only on an individual situation, but if we have a systemic problem we are more than happy to address that. 

However, there was a concern expressed about our billing for 

conditions that are related to a service-connected condition, whether for 100-percent service-connected veteran who is permanent and 

total, or any veteran who has a condition that is either secondary 

to or adjunct to their service-connected condition. The authority for 

VA to bill for third-party insurance states that VA will bill for nonservice-connected conditions. It does not state that VA health care 

providers are in the business of adjudicating what is or is not a 

service-connected condition. And it is the legal interpretation that 

VHA has received from our General Counsel and our policy that we 

will bill third-party insurers for non-service-connected conditions. 

As such a veteran, as was indicated, who is permanently and totally disabled who is service-connected for a particular condition 

but who has a secondary condition that, while related to that, is 

not actually adjudicated as service-connected, we at this time have 

an obligation to bill third-party insurers for that care. Now, obviously, as we indicated earlier, if that veteran is exempt from copays 

based on their eligibility status, and obviously a 100-percent service-connected veteran is exempt from all copay bills, no copy bills 

are generated in that situation. 

Mr. MICHAUD. Do you view improper billing as a problem? Or do 

you feel that what you heard from the first panel are just isolated 

cases? 

Mr. BAKER. In terms of improper billing? I think VA billed almost $16 million, or $13 million copay bills last year total. I think 

that there is a possibility that VA makes errors in making copay 

bills, or in the millions of third-party bills that we make. I do not 

believe that we have a large scale systemic problem in terms of 

identification of service-connected conditions. But it is related to 

the frontline provider who delivers service, identifying that the 

care is related or not related to the veteran’s service-connected condition. We recognize that there can be occasionally be errors made 

in that situation, and that there are interpretation issues that can 

arise particularly related to the issues related to adjunct and secondary conditions, where the veteran clearly thinks that it is related to their service-connected condition. But within a strict interpretation of the law, we are required to bill for non-service-connected care to third-party payers. 

Mr. MICHAUD. Are there any regions doing a worse job than others in their improper billing practices? Or is it equalized across the 

VA system? Or are there some regions that are bad? Or worse, I 

should say. 

Mr. BAKER. In terms of the kind of information that was provided earlier by the first panel, basically we are dependent on the 

anecdotal information of individual reports that we follow up on 

when we receive that information. We have not seen a pattern particularly related to geography or individual locations to my knowledge, sir. 

Mr. MICHAUD. But you keep a record of the improper billing? 


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Mr. BAKER. Well, when we are made aware of an improper billing at a national level we do. We do not have a mechanism of aggregating individual requests for reclaim at local facilities. So we 

do not have a mechanism that aggregates that nationally for review on a regular basis. 

Mr. MICHAUD. Do the local facilities keep a record? 

Mr. BAKER. I cannot answer that, sir. I do not know whether any 

of the other panel members know or not. We will take that for the 

record, sir, and answer that question. 

Mr. MICHAUD. Yes, but I would like to see what the error rate 

has been at the local area, and if you can break that out. I am concerned that there might be some areas that are interpreting the 

statutes differently. And if so, then billing errors may be really focused in those particular areas. I would assume that since this is 

an issue that has been raised and with which VSOs have been concerned about, that central office would have taken a more proactive 

approach in asking, ‘‘Well, is this a problem? And if so, is it systemic throughout the VA? Or are there different regions where it 

is concentrated?’’ Since it appears that you have not done that, I 

am just concerned about how much weight you are really putting 

on the errors out here. Because I can tell you, having heard from 

veterans who have been billed improperly, that is definitely an 

emotional and stressful time for those individuals who served this 

country. So I would like to know whether or not it is a systemic 

issue, and if you can give a break out of where those cases are 

throughout the VA system. And if the VSOs have any information 

on that as well, hopefully the VSOs would be able to bring that to 

the Committee, also. 

[The VA subsequently provided the following information:] 

Brief Statement of Issue: On October 15, 2009, the House Veterans’ Affairs Committee (HVAC), Subcommittee on Health held a hearing entitled 

‘‘Inappropriate Billing Practices of the VA: Identifying the Causes and Exploring Potential Solutions.’’ During the hearing, representatives from veterans service organizations expressed concerns on behalf of their members 

regarding VA’s billing for service-connected care. As a followup action item, 

HVAC Health Chairman Michaud tasked VA with identifying the number 

of first and third party bills that were issued in error when providing care 

to service-connected veterans or those with special treatment authorities. 

Response: Since the information necessary to respond to this tasker was 

not available nationally, the Veterans Health Administration (VHA) Chief 

Business Office (CBO) conducted a data call with field facilities to obtain 

the information for fiscal year 2009. The results of the data call showed approximately 0.13 percent of all charges for first party billing and 0.08 percent of all third party health insurance claims were canceled due to serviceconnected or special authority relationship (Attachment 1). In terms of 

unique veterans, VA estimates that 3,899 had charges canceled for first 

party bills and 1,182 had bills canceled that were sent to third party health 

insurance. 

Conclusion: VA strives to ensure that all veterans are billed correctly and 

will provide education to all appropriate VHA staff regarding proper identification of service connected and special authority treatment to ensure bills 

are not issued in error. 


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Attachment 1 

First Party Charge Information for FY 2009 Related to Cancelled Charges Due to Service Connection or Special Authorities 

First Party 

Total No. 

Charges 

Billed 

Total 

$$ 

Billed 

Total No. 

Charges. 

Cancelled 

for SC/SA 

Total 

$$. 

Cancelled 

for SC/SA 

% 

Charges 

Cancelled 

for SC/SA 

Compared 

to National 

Unique 

1st Party 

Veterans 

impacted 

by VISN 

% 

Charges. 

Cancelled 

for SC/SA 

Compared 

to Total 

Billed 

% of 

Dollars 

Cancelled 

for SC/SA 

Compared 

to Total 

Billed 

National 

Data 58,123,612 $1,098,640,563 75,756 $1,617,598 100.00% 3899 0.13% 0.15% 

VISN 1 2,688,063 $53,328,682 2,303 $46,995 3.04% 119 0.09% 0.09% VISN 2 1,459,129 $27,625,709 3,629 $80,553 4.79% 187 0.25% 0.29% VISN 3 2,099,330 $39,912,620 2,703 $40,294 3.57% 139 0.13% 0.10% VISN 4 3,424,203 $66,292,937 2,499 $74,896 3.30% 129 0.07% 0.11% VISN 5 1,254,997 $23,978,122 431 $7,885 0.57% 22 0.03% 0.03% VISN 6 3,035,771 $57,577,576 2,972 $69,837 3.92% 153 0.10% 0.12% VISN 7 3,361,357 $60,447,896 2,342 $44,290 3.09% 121 0.07% 0.07% VISN 8 5,440,431 $104,456,086 10,148 $170,557 13.40% 522 0.19% 0.16% VISN 9 2,725,788 $54,098,602 4,256 $111,304 5.62% 219 0.16% 0.21% 

VISN 10 2,214,198 $42,735,574 1,672 $30,914 2.21% 86 0.08% 0.07% VISN 11 2,719,451 $52,282,501 3,685 $90,682 4.86% 190 0.14% 0.17% VISN 12 3,350,670 $60,497,329 3,089 $62,125 4.08% 159 0.09% 0.10% VISN 15 2,598,516 $52,952,044 3,640 $72,326 4.80% 187 0.14% 0.14% VISN 16 5,168,865 $89,658,986 12,951 $238,408 17.10% 667 0.25% 0.27% VISN 17 2,351,779 $43,216,067 2,266 $38,291 2.99% 117 0.10% 0.09% VISN 18 2,484,447 $44,879,226 4,371 $138,507 5.77% 225 0.18% 0.31% VISN 19 1,706,080 $32,857,659 4,176 $88,895 5.51% 215 0.24% 0.27% VISN 20 1,952,795 $38,959,407 1,984 $52,225 2.62% 102 0.10% 0.13% VISN 21 2,259,813 $41,638,891 1,732 $26,307 2.29% 89 0.08% 0.06% VISN 22 2,240,935 $43,783,321 2,265 $57,288 2.99% 117 0.10% 0.13% VISN 23 3,586,994 $67,461,328 2,642 $75,020 3.49% 136 0.07% 0.11% 


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Third Party Bill Information for FY 2009 Related to Cancelled Charges Due to Service Connection or Special Authorities 

Third Party 

Total No. 

Bills 

Total $$ 

Billed 

Total No. 

Bills 

Cancelled 

for SC/SA 

Total $$. 

Cancelled 

for SC/SA 

% Bills 

Cancelled 

for 

SC/SA 

vs. 

National 

Total 

Unique 

3rd 

Party 

Veterans 

impacted 

by VISN 

% Bills 

Cancelled 

for SC/SA 

Compared 

to Total 

Billed 

% of 

Dollars 

Cancelled 

for SC/SA 

Compared 

to Total 

Billed 

National 

Data 15,996,559 $5,262,640,851 13,247 $17,978,532 100.00% 1182 0.08% 0.34% 

VISN 1 916,315 $237,694,722 751 $339,155 5.67% 67 0.08% 0.14% VISN 2 337,687 $64,513,751 43 $116,401 0.32% 4 0.01% 0.18% VISN 3 761,149 $280,054,567 430 $878,711 3.25% 38 0.06% 0.31% VISN 4 681,663 $198,947,474 508 $264,083 3.83% 45 0.07% 0.13% VISN 5 449,432 $99,607,402 209 $265,212 1.58% 19 0.05% 0.27% VISN 6 1,173,067 $390,049,591 1,197 $1,797,072 9.04% 107 0.10% 0.46% VISN 7 1,108,811 $324,126,450 1,212 $3,208,808 9.15% 108 0.11% 0.99% VISN 8 1,479,890 $551,943,794 575 $1,501,974 4.34% 51 0.04% 0.27% VISN 9 981,260 $327,630,840 624 $577,341 4.71% 56 0.06% 0.18% 

VISN 10 650,447 $207,057,364 540 $289,590 4.08% 48 0.08% 0.14% VISN 11 747,082 $196,937,482 35 $1,932 0.26% 3 0.00% 0.00% VISN 12 635,279 $264,870,793 429 $3,023,688 3.24% 38 0.07% 1.14% VISN 15 597,016 $160,827,421 750 $992,605 5.66% 67 0.13% 0.62% VISN 16 1,300,072 $411,264,979 2,701 $650,849 20.39% 241 0.21% 0.16% VISN 17 611,718 $195,039,564 244 $89,430 1.84% 22 0.04% 0.05% VISN 18 642,145 $246,543,368 523 $1,094,209 3.95% 47 0.08% 0.44% VISN 19 490,095 $155,538,544 804 $932,032 6.07% 72 0.16% 0.60% VISN 20 524,931 $203,956,161 756 $833,731 5.71% 67 0.14% 0.41% VISN 21 420,452 $217,609,364 278 $523,269 2.10% 25 0.07% 0.24% VISN 22 348,832 $186,329,272 192 $228,661 1.45% 17 0.06% 0.12% VISN 23 1,139,216 $342,097,949 446 $369,782 3.37% 40 0.04% 0.11% 


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Mr. BAKER. Yes, sir. I would mention that within the past year 

we have had three, what we call table topic training sessions, for 

nationally, on the issue of service-connected billing, both copay and 

third party, to provide training to our staff in the field on what is 

sometimes a difficult situation. So certainly we are aware of the 

concern, and we have tried to take action both in terms of training 

and policy to address this issue. 

Mr. MICHAUD. Because the only way I would see improper billing 

would be if you decided to bill Medicare for their services—— 

Mr. BAKER. As you know, we are precluded from doing that, sir. 

Mr. MICHAUD. I know. But if you have to do improper billing—— 

Mr. BAKER. That is where we should—— 

Mr. MICHAUD. That is the way you should do the improper billing versus the improper billing for our veterans. Mr. Brown? 

Mr. BROWN OF SOUTH CAROLINA. Thank you, Mr. Chairman. 

Thank you, Mr. Baker, for your service. I know those 16 million 

claims that you pay a year, we probably never hear from all the 

millions that it works okay. But, you know, that is the way the system works, right? You hear from those that it is not connecting. My 

question would be is that, we heard from the veterans service organizations that say they do not receive their billing statements from 

VA until several months after the service. Could you address that 

timeline? 

Mr. BAKER. Yes. We have—— 

Mr. BROWN OF SOUTH CAROLINA. They said it could be as much 

as 3 months. 

Mr. BAKER. Right. We have a mechanism that we hold the first 

party copay bills if a veteran has third-party insurance. 

Mr. BROWN OF SOUTH CAROLINA. To be sure you collect it? 

Mr. BAKER. To allow us to submit the bill to the third-party insurer and give them an opportunity to pay. So that if there is a 

payment from the third-party insurance that covers the entire 

copay or portion of it, that we would only bill that remainder. That 

does delay our release of the copay bill to the individual veteran 

for 90 days. If we have not received payment or receive only partial 

payment, then the copay bill is released after that 90-day period. 

And it is an issue, also, that we do process those insurance claims 

and apply them to our copay bills through a manual process rather 

than an automated process. So it does take some time to do that. 

And there are potentials for error based on that manual process. 

But certainly we have worked hard to educate and improve our 

processes in that area. It is part of our response to concerns that 

were expressed by an OIG report back in 2004 that identified some 

problems in this area. 

Mr. BROWN OF SOUTH CAROLINA. Do you have just a normal 

chain of command to these guys that really have a problem addressing the bills? Do we have some kind of an organization set up 

so they do not fall through the loops? I know that sometimes they 

said that even under the protest, you know, they get some kind of 

add on service charge because they are late. 

Mr. BAKER. Well to address the service charge, there is an administration and interest charge that occurs for copays that remain 

on the books over a certain period of time and they do aggregate 

every 30 days. We have a number of mechanisms that are available 


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to assist the veterans who have questions or concerns. We certainly 

have revenue staff at individual facilities that are available. We 

have patient advocate staff that are available to assist the veterans. We have our national First Party Call Center that was established specifically because when copay bills are sent we often receive a flurry of calls based on those copay bills. And that was creating difficulties at local sites. So we created our Health Resource 

Center in Topeka, Kansas, which focuses specifically on that. They 

have the copay bills available and they have information that allows them access to each individual VistA system across the system 

so they can review the copay bill with the veteran, look at what 

care was provided, and help explain to the veteran what the conditions may be. 

As was indicated during the first panel, there are situations 

where it cannot be resolved through the First Party Call Center 

and it requires a review by the local facility. But we have worked 

hard to improve our handoff process for that to make sure that 

there is followup on that and our call center does follow up periodically to make sure that the condition has been addressed and the 

veteran has received a response to his inquiry. 

Mr. BROWN OF SOUTH CAROLINA. Do you have, like, a special person designated at each one of the service centers to address delinquent accounts? 

Mr. BAKER. We have accounts receivable technicians who are responsible for followup on third-party claims, as was identified during the GAO testimony. But they also followup on first party claims 

as well. 

Mr. BROWN OF SOUTH CAROLINA. I guess you heard from the gentleman from the PVA who calls for the VA to take immediate action to change its regulation so that veterans rated permanently 

and totally could never have been erroneously billed. Specifically, 

what can be done to fix the problem? And do we need legislation 

to address it? 

Mr. BAKER. My understanding of the current law as written is 

that VA is responsible for billing for non-service-connected conditions. Permanent and total veterans can receive care for both their 

service-connected and for non-service-connected conditions that 

have not been adjudicated. It was an important point, I think, that 

was made by the first panel that this policy requires that in those 

circumstances that the veteran wants to avoid that billing to their 

third-party insurance company that they be required to submit a 

claim for service-connection. And if that does not provide a particular value to the veteran, other than avoiding third-party billing, 

it certainly does create additional work for VA. So my assessment 

would be that if this is a concern to Congress and the veteran community, that it require legislation for VA to change its practices. 

Mr. BROWN OF SOUTH CAROLINA. But let me ask you a question, 

Mr. Baker. If they do not want you to bill the third party, why are 

they giving you the third-party information? 

Mr. BAKER. We ask veterans to provide us with third-party information so that we can meet our requirement to bill for non-serviceconnected—— 

Mr. BROWN OF SOUTH CAROLINA. But if it is 100-percent disabled, why would you even need it? 


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Mr. BAKER. Well, this is a supposition on my part, sir. It is hard 

for me to know specifically what happens in every circumstance. 

But I think even in cases where veterans are 100-percent serviceconnected and permanently and totally disabled, there is a recognition of a difference between a condition that has no relationship to 

their service-connected disabilities, and one that they think is secondary or adjunct to that condition. And it is in those situations 

where they believe that it is secondary to or caused by their service-connected condition that the veterans are asserting that it is inappropriate for VA to bill for that care. 

Mr. BROWN OF SOUTH CAROLINA. Okay, just one further question. 

I know that we are going to have to go vote, and thank you for your 

patience, Mr. Chairman. But do you feel like you have a pretty 

good cross sharing of information between the VBA and the VHA? 

Mr. BAKER. We have worked hard to improve our situation in 

sharing information with VBA and VHA. VHA has always had the 

ability to store a virtually unlimited number of service-connected 

conditions. However, the information system used by VBA in the 

past could only store six conditions. As VBA has moved to its 

VETSNET system, the corporate information system, they are now 

able to store an unlimited number of service-connected conditions 

as well. It is my understanding that for any condition that, or any 

veteran who has had a rating decision since 2002, that their new 

corporate information system has all service-connected disabilities. 

We have linked our VHA information system with them. And when 

we established that initial link we also went back for all known 

service-connected veterans who were in the VHA information system at that time and queried VBA to get that full range of serviceconnected information rather than just the six that we might have 

previously. For any new adjudication actions, either new or updated, we automatically receive the full range of service-connected 

conditions at this time. It flows through our enrollment information 

system and goes to each individual VistA system. So it is available 

to providers, billing staff, and eligibility staff at every medical center. 

Mr. BROWN OF SOUTH CAROLINA. Just for curiosity, how large is 

that data file? 

Mr. BAKER. The data file has information on approximately 9 

million veterans, 7.6 million of which are active enrolled veterans 

at this time. 

Mr. BROWN OF SOUTH CAROLINA. Thank you very much. 

Mr. MICHAUD. Thank you very much, Mr. Brown. Once again, 

Mr. Baker, I want to thank you, and Ms. Mardon, and Ms. 

Cunningham for coming here this morning. I look forward to working with you as we move forward to try to take care of some of the 

problems that we heard from the first panel. And I also want to 

thank all the VA staff. I know it is not an easy job and all too often 

we tend to forget to thank those who are actually administering 

and doing what they have to do to make sure the veterans are 

served. So thank you and your staff for what you are doing. 

Mr. BAKER. Thank you, sir. 

Mr. MICHAUD. The hearing is adjourned. 

[Whereupon, at 11:17 a.m., the Subcommittee was adjourned.] 


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(26) 

A P P E N D I X 

Prepared Statement of Hon. Michael H. Michaud, Chairman, 

Subcommittee on Health 

The Subcommittee on Health will now come to order. I would like to thank everyone for attending this hearing. 

Today’s hearing will focus on the inappropriate billing practices of the VA where 

veterans receive a bill for the wrong amount or get a bill that they should not have 

received in the first place. Unfortunately, inappropriate billing affects both serviceconnected veterans and non-service connected veterans. 

For example, a veteran with a service-related spinal cord injury may be billed for 

the treatment of urinary tract infections. Urinary tract infection is clearly linked to 

and is a result of the service-connected injury; however, these veterans are receiving 

bills for the treatment of such secondary conditions. As a result, these veterans may 

be forced to seek a time-consuming and burdensome readjudication of their claims 

indicating the original service-connected ratings. 

It is my understanding that one of the reasons for inappropriate billing of secondary conditions is that the VA cannot store more than six service connected conditions in their IT system. It is also my understanding that the VA is taking steps 

to correct this deficiency, but the problem has not been fully resolved and our veterans continue to receive the inaccurate bills. 

Non-service connected veterans also encounter overbilling and inappropriate 

charges for copayments. One issue that I’ve been made aware of repeatedly is that 

some non-service connected veterans receive multiple bills for a single medical treatment or health care visit. It is evident that inefficiencies in the billing system exist 

where something is inappropriately triggering the multiple billing episodes. 

It may be simple human error or IT error, but this has the potential of imposing 

an unnecessary burden on our veterans. Just imagine all the time that our veterans 

spend and the stress that they experience in trying to resolve the improper bills. 

One thing is clear. Inappropriate billing is not acceptable and we must do better 

by our veterans. 

Today, I hope to get to the bottom of this issue. We will examine why veterans 

and their insurers are receiving inaccurate bills, learn what the VA is doing to address this problem, and explore how we can fully remedy this problem. 

We have brought together witnesses who can shed light on this problem, and I 

look forward to their testimonies. 

f 

Statement of Hon. Henry E. Brown, Jr., Ranking Republican Member, 

Subcommittee on Health 

Thank you Mr. Chairman. I appreciate your holding this hearing today. 

It is the solemn mission of the Department of Veterans Affairs (VA) and the Federal Government to care for the men and women in uniform who sustain injuries 

and illnesses as a result of their service to our Nation. 

Therefore, I find it deeply troubling to hear about veterans being inappropriately 

billed for copayments for medical care and medications to treat service connected 

conditions. 

A similar issue arose earlier this year when the Obama Administration was considering a plan to bill veterans’ private insurance for service-connected care. Fortunately, this ill-conceived proposal never saw the light of day, given the fierce opposition of members from both sides of the aisle and Veterans Service Organizations. 

As I said then, this flies in the face of our moral obligation as a grateful nation 

to care for these wounded heroes. 


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I continue to strongly oppose any attempt to allow VA to shirk this obligation and 

will ensure that we uphold our responsibility to provide resources to protect and 

honor the service of our highest priority veterans. 

It is unacceptable for VA not to have and put in force policies and procedures to 

ensure that veterans are not frustrated and burdened by receiving inappropriate 

and multiple billing statements. 

I look forward to hearing from our witnesses today to gain a better understanding 

of the depth of the problem and what actions must be taken to prevent future inappropriate billing errors. 

Thank you Mr. Chairman. I yield back the balance of my time. 

f 

Prepared Statement of Fred Cowell, Senior Health Policy Analyst, 

Paralyzed Veterans of America 

Chairman Michaud, Ranking Member Brown, and Members of the Subcommittee, 

Paralyzed Veterans of America (PVA) would like to thank you for the opportunity 

to provide testimony on an issue that has had a critical impact on the lives of our 

members, veterans with spinal cord injury or dysfunction. In recent years, as we 

have seen significant increases in both medical care collections estimates as well as 

the actual dollars collected, we have received an increasing number of reports from 

veterans who are being inappropriately billed by the Veterans Health Administration (VHA) for their care. Moreover, this is not a problem being experienced by just 

service-connected disabled veterans, but non-service connected disabled veterans as 

well. 

The Independent Budget (IB)—co-authored by PVA, AMVETS, Disabled American 

Veterans, and Veterans of Foreign Wars—has repeatedly focused our attention on 

this issue. Unfortunately, until now, little attention has been paid to this problem 

while medical care collections continue to grow at an alarming rate. We are very 

pleased that the Subcommittee has chosen to investigate this issue in light of recent 

budget increases that have included billions of dollars in collections. 

Inappropriate charges for VA medical services places unnecessary financial stress 

on individual veterans and their families. These inaccurate charges are not easily 

remedied and their occurrence places the burden for correction directly on the veteran, their families or caregivers. PVA believes that many veterans are not aware 

of these mistakes and simply submit full payment to VA when a billing statement 

arrives at their home. 

Veterans who are astute enough to scrutinize their VA billing statements to identify erroneous charges have just begun a cumbersome process to actually correct the 

problem and receive a credit for the error on a VA subsequent billing statement. 

It has become the veteran’s responsibility to seek VA assistance wherever possible. 

This is not an easy task for veterans as VA billing statements are often received 

months after an actual medical care encounter and subsequent credit corrections 

only appear months after corrective intervention has taken place. It is often difficult 

for veterans to remember medical care treatment dates and match billing statements that arrive months after treatment to search for billing errors. 

In order to understand inappropriate billing, it is important to emphasize that 

service-connected and non-service connected veterans have experienced this problem. However, the problems that these two populations of veterans have faced are 

uniquely different. Service-connected veterans are faced with a scenario where they, 

or their insurance company, may be billed for treatment of a service-connected condition. Meanwhile, non-service connected disabled veterans are usually billed multiple times for the same treatment episode or have difficulty getting their insurance 

companies to pay for treatment provided by the VA. 

In preparation for this hearing, PVA conducted an email survey of our members. 

We sent a questionnaire to approximately 4,000 PVA members. Of that number, approximately 10 percent (449 members) of the survey recipients responded. The survey included only a few questions to attempt to gauge the prevalence of billing 

issues faced by our members. Approximately 30 percent of respondents are either 

billed directly by the VA for care that they receive or have their insurance companies billed for their care. 

After establishing this baseline of information, we directed our questions toward 

the billing issues that these individuals face. Of the 449 respondents, approximately 

9 percent claim to receive more than one bill for the same treatment episode, approximately 17 percent claim to be billed directly for treatment of a service-connected condition, and approximately 22 percent claim that their insurance company 

is being billed for treatment of a service-connected condition. 


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Subsequent to this survey, we reached out to our National service officers to help 

us identify why these issues may be occurring. First, it is important to note that 

the vast majority of PVA members who are service-connected are rated as 100 percent TOTAL and PERMANENT. To be clear, TOTAL and PERMANENT suggests 

to us that any condition that a veteran experiences is related to his or her serviceconnected condition. In our opinion, this should mean that 100 percent TOTAL and 

PERMANENT service-connected disabled veterans should not be billed, nor should 

their insurance company be billed, for any treatment they receive. However, this is 

not how the VHA sees it. 

In order to illustrate what we identified as the single biggest billing problem facing our service-connected members, I would like to provide an example. A PVA national service officer is assisting a 100 percent TOTAL and PERMANENT veteran 

who was injured while serving in Operation Iraqi Freedom (OIF). The veteran also 

served in Operation Enduring Freedom (OEF). According to the VA medical center 

where he is receiving care, he has service-connected rating determinations for loss 

of use of both feet (100 percent), impairment of sphincter control (100 percent), neurogenic bladder (60 percent), traumatic chest wall defect (10 percent), and deformity 

of the penis (0 percent). 

The veteran developed a pressure ulcer on his buttocks. He received bills from the 

VA on more than one occasion for treatments of the pressure ulcer. The PVA service 

officer discussed this issue with the Chief of Spinal Cord Medicine at the VA medical center. The doctor then inquired with the billing office at that VA medical center as to why the veteran was being billed for these treatments. He explained that 

pressure ulcer is the number 1 secondary condition that veterans with spinal cord 

injury face. The billing office then informed him that he was not rated for that secondary condition; therefore, the facility was permitted to bill for that treatment. 

More troublesome is that the billing office advised the doctor that if the veteran 

does not want to be billed for that treatment in the future, he should re-file his compensation claim for consideration of his currently non-rated secondary conditions. 

This scenario is unbelievable in so many ways. First and foremost, I go back to 

my point that veterans who are rated TOTAL and PERMANENT should not be 

billed for any treatment since TOTAL suggests that any secondary condition is related to the service-connected condition. Second, it is incredible that the VA would 

suggest that veterans who are being rated for well-known, but non-rated, secondary 

conditions should re-file or reopen their claims. This is something that we have 

heard from many of our members and service officers. If the VA thinks it has a 

problem with the claims backlog now, we can only imagine what the backlog will 

look like if all veterans experiencing this problem go back to the Veterans Benefits 

Administration (VBA) for consideration of something that will almost certainly be 

granted months later. 

We would like to recommend that either the VA immediately change its regulations to reflect the fact that a TOTAL and PERMANENT rating means exactly that. 

If the VA is unwilling to make this absolutely necessary change, then we call on 

Congress to fix this statutorily. 

It is time that the VA stops playing this game. The obvious disconnect between 

rated service-connected conditions and coding for the purposes of medical care billing is appalling. More astounding is the fact that veterans with more than six service-connected disability ratings are frequently billed improperly due to VA’s inability 

to electronically store more than six service-connected conditions in the Compensation and Pension (C&P) Benefits Delivery Network (BDN) master record. Moreover, 

the lack of timely and/or complete information exchange about service-connected 

conditions between the VBA and VHA places an additional burden on the veteran 

to sort out this disconnect. 

VA has undertaken a five-step approach to change the process by which it electronically shares C&P eligibility and benefits data with VHA, particularly information about service-connected conditions that exceed the six stored in the C&P BDN. 

According to VA, because of difficulties in the development and implementation of 

the first two steps, the plan for improving VBA/VHA sharing of information about 

veterans’ service-connected conditions has been delayed. Furthermore, VA acknowledges that not all these cases, with six service-connected conditions, have been identified under the new plan; however, it will determine the best course of action to 

take to further address the cases with incomplete service-connected disability information. 

While it is shameful that VHA takes advantage of veterans with service-connected 

conditions like this, it is equally disappointing that veterans who depend on the VA 

for their care but who are not rated for service-connected conditions are also being 

taken advantage of. Non-service connected veterans are also constantly frustrated 

with VA’s billing process. Over-billing and inappropriate charging for copayments is 


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1P.L. 105–65 

becoming the norm rather than the exception. Frequently, veterans are experiencing 

multiple billing episodes for a single medical treatment or health care visit. 

Inappropriate bill coding is causing major problems for veterans subject to VA copayments. Veterans using VA specialized services, outpatient services and VA’s 

Home Based Primary Care programs are reporting multiple billings for a single 

visit. Often these multiple billing instances are the result of followup medical team 

meetings where a veteran’s condition and treatment plan is discussed. Somehow 

these discussions and subsequent entries into the veteran’s medical chart trigger additional billing. In other instances simple phone calls from VA health care professionals to individual veterans to discuss their treatment plan or medication usage 

can also result in copayment charges when no actual medical visit has even occurred. 

Once the veteran has identified a billing error the corrective process just begins. 

If the error is discovered by the veteran, finding proper assistance is difficult and 

corrective action takes months to achieve. Corrective action follow thru is the veteran’s responsibility because the veteran receives no acknowledgement letter from 

VA that an error has happened. The veteran is forced to review subsequent billing 

statements to see if he or she actually receives a credit entry for the previous error. 

This is a problem that I have personally experienced. Very often, I receive bills 

from the Washington, DC, VA medical center that reflect multiple charges for the 

same treatment episode. On more than one occasion I have even paid out of my own 

pocket for bills due to the extensive delay in correcting this problem and due to the 

fact that I have received threatening letters from the VHA about my non-payment. 

Fortunately, with the help of my direct health care providers and staff at the DC 

VA, I have been able to eventually resolve these problems. Unfortunately, due to 

the delays in receiving bills in the first place—usually 3 to 4 months—and the time 

it takes to remedy this problem—usually an additional 2 to 3 months—I am typically not reimbursed for any payments that I make for that treatment episode for 

quite some time. 

Mr. Chairman and Members of the Subcommittee, it is time that the VA really 

be taken to task for its billing practices. If Congress and the Administration are 

going to continue to rely on massive collections estimates and dollars actually collected to support the VA health care budget, then serious examination of how the 

VA is achieving these numbers is necessary. As long as we know that the VA is 

taking advantage of veterans and inappropriately billing them, both service-connected and non-service connected, we will continue to express opposition to building 

VA budgets on collections. 

Mr. Chairman, we thank you again for conducting this extremely important hearing. Hopefully through the information provided here, the VA will take corrective 

action to ensure that veterans are not being burdened with paying medical treatment bills that they should not be paying. We look forward to working with you and 

the Subcommittee to ensure that these problems get corrected. 

Thank you again, and I would be happy to answer any questions that you might 

have. 

f 

Prepared Statement of Adrian Atizado, Assistant National 

Legislative Director, Disabled American Veterans 

Mr. Chairman and Members of the Subcommittee: 

Thank you for inviting the Disabled American Veterans (DAV) to present our 

views before the Subcommittee on Health on inappropriate billing practices by the 

Department of Veterans Affairs (VA). DAV is an organization of 1.2 million servicedisabled veterans, and devotes its energies to building better lives for disabled veterans and their families. We appreciate your leadership in enhancing VA health 

care programs on which many service-connected disabled veterans must rely. 

As this Subcommittee is aware, the VA has the authority to retain in the Medical 

Care Collections Fund (MCCF), all collections from health insurers of veterans who 

receive VA care for non-service-connected conditions, as well as other revenues such 

as veterans’ copayments and deductibles. However, the funds collected may only be 

used for providing VA medical care and services, and for paying Departmental expenses from the collections. MCCF funds are transferred to a no-year Medical Care 

service account 1 and allocated to the medical centers that collect them one month 

in arrears. 


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Legislative Authority 

Authority for the Department to seek reimbursement from third-party health insurers for the cost of medical care furnished to insured non-service-connected veterans, was provided in Public Law 99–272. This law also authorized the VA to assess a means test, based on a veteran’s income and assets, for assessing copayment 

requirements for certain non-service-connected veterans. In 1990, Public Law 101– 

508 expanded the VA’s recovery program by providing authority to seek reimbursement from third-party payers for the cost of medical care provided to insured service-connected veterans who are treated for non-service-connected conditions. The law 

also authorized the outpatient per diem copayment and medication copayment programs. 

In 1997, Public Law 105–33 established the MCCF, and authorized the VA to retain collections from health insurers and veterans’ copayments at the local medical 

center, rather than returned to the Department of Treasury. This law also granted 

the VA authority to begin billing a veteran’s health insurer reasonable charges, 

which are based on amounts that health insurers pay private sector health care providers for services. Public Law 106–117, enacted in 1999, authorized the VA to set 

outpatient and medication copayments rates and to establish a maximum cap on 

medication copayments for a calendar year. This law also authorized the Secretary 

to establish extended care copayment amounts, a maximum monthly copayment cap 

and a process to determine an individual veteran’s copayment responsibilities based 

on a veteran’s available resources. Public Law 108–7, Public Law 108–422, and Public Law 108–447, consolidated balances and future receipts from other sources into 

the MCCF and became effective beginning in fiscal year (FY) 2004. 

Medical Care Collections 

The Veterans Health Administration (VHA) is funded through multiple appropriations accounts that are supplemented by other sources of revenue. The Committees 

on Veterans’ Affairs, in their views and estimates, and the Committees on Appropriations, include MCCF collections when considering the amount of needed funding 

for the VA’s medical care accounts. Consequently, the efficient and timely collection 

of reimbursable costs is a tremendous driver at local VA facilities that greatly benefits them in meeting growing health care demands. The issue we raise here is the 

unintended consequences this financial incentive may be having on veterans who 

seek care from the VA. 

Looking at collection estimates from the VA’s budget submissions, it should be 

noted from the table below, that both the adjustment for FY 2006 and slower rate 

of increase for estimated collections, has contributed to the VA’s meeting and exceeding expected collections. However, more than doubling collection estimates from 

FY 2009 to 2010 may be overly optimistic. 

Increase/(Decrease) from Previous Fiscal Year 

MCCF Budget Estimate 

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 

$1,616,619 $2,144,409 $2,418,700 $2,164,004 $2,247,353 $2,320,069 $2,466,860 $2,833,762 

33% 13% (12%) 4% 3% 6% 15% 

Four MCCF subaccounts relevant to this hearing make up over 97 percent of total 

collections: Third Party; Pharmacy Copayments; First-Party and Other Copayments; 

and Long-Term Care Copayments. As previously mentioned, the FY 2009 and 2010 

budget estimates showing the dramatic increase in estimated collections are to come 

from Third Party and First Party and Other Copayments. 

Increase/(Decrease) from Previous Fiscal Year 

MCCF Budget Estimate by Subaccount 

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 

Third Party $349,018 $(72,347) $138,625 $128,803 $(49,835) $184,154 $443,738 

Pharmacy 

Copays $(42,377) $311,610 $(147,210) $34,500 $107,125 $(95,714) $(64,435) 

First-Party & 

Other Copays $229,249 $46,100 $(269,948) $(16,176) $18,201 $16,688 $26,445 

Long-Term 

Care Copays $(12,151) $(12,153) $(8,500) $5,704 $(1,857) $— $(456) 

Total $523,739 $273,210 $(287,033) $152,831 $73,634 $105,128 $405,292 


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2http://www.va.gov/oig/52/reports/2005/VAOIG-03-00940-38.pdf 

Such expectations in increased collections translate to financial pressure at local 

facilities to increase their collection efforts. However, the actual-to-expected collections have historically been below the estimated amount, except for FY 2008 when 

the VA exceeded estimated collections. 

Actual vs. Budget Estimate: Gain/(Loss) 

(in thousands) 

2004 2005 2006 2007 2008 

MCCF Budget Estimate $2,144,409 $2,418,700 $2,133,744 $2,247,353 $2,320,069 

MCCF Actual Collections: $1,747,276 $1,897,089 $2,007,377 $2,226,653 $2,477,880 

Total $(397,133) $(521,611) $(126,367) $(20,700) $157,811 

For the four relevant sources of revenue, the VA’s actual collections substantially 

exceeded estimates in Third-Party and First-Party and Other Copays, but with substantial losses in other accounts. 

Actual vs. Budget Estimate: Gain/(Loss) 

(in thousands) 

MCCF Accounts 2004 2005 2006 2007 2008 

Third Party $(149,171) $ 18,597 $(79,815) $(43,082) $ 242,856 

Pharmacy Copayments $ 14,615 $(272,006) $(49,973) $(46,884) $(164,940) 

First-Party & Other 

Copays $(246,022) $(287,374) $(477) $31,088 $30,197 

Long-Term Care 

Copays $(16,076) $(3,589) $3,847 $(2,505) $(596) 

Total $(396,654) $ (544,372) $(126,418) $ (61,383) $107,517 

Although it is mitigated to some extent by designating collections as no-year 

funds, such an exceedingly dramatic shift in gains and losses from which VA medical centers project, plan, and manage health delivery until actual appropriations 

are received, can have a detrimental effect on meeting the medical care needs of veterans. We are also concerned with the need of local VA facilities to meet ever-increasing budget estimates to ensure adequate funding, may encourage or contribute 

to inappropriate billing. Hence, the question remains, as to the extent of any cause 

and effect inappropriate billing and collections may have on the delivery of high 

quality health care to disabled veterans. 

First-Party Billing and Collection 

VA’s authority for first-party billing under title 38, United States Code, Sections 

1710, 1710B, 1722, and 1722A, is in this instance, for first-party copayments assessed against veterans for pharmacy, long-term care, inpatient and outpatient services. MCCF program staff at VA medical facilities establish first-party debts, and 

to do so accurately, must have valid compensation and pension (C&P) benefit award 

status information for each veteran receiving medical services to ensure only appropriate billings and collections are made. Disputed bills are normally resolved locally 

or are otherwise considered delinquent after 3 monthly collection letters are sent by 

the medical facility to the veteran. Delinquent first-party debts can be sent to a collection agency, or automatically collected under the Treasury Offset Program (TOP), 

where veterans’ Federal payments such as Social Security, VA Compensation, VA 

Pension, and Internal Revenue Service tax refunds can be offset to collect unpaid 

delinquent first party debts. 

The VA Office of Inspector General (OIG) issued a report 2 on December 1, 2004, 

evaluating first-party billings and collections only for veterans service-connected 50 

percent or higher or in receipt of pension. Four recommendations were made as a 

consequence of this report. Part of VA’s response is an action plan requiring the OfVerDate Nov 24 2008 08:41 May 05, 2010 Jkt 053435 PO 00000 Frm 00035 Fmt 6604 Sfmt 6621 I:\VA\53435.XXX GPO1 PsN: 53435

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3Department of Veterans Affairs, VHA Handbook 1030.03, October 16, 2006. 

4 VA Handbook 4800.7, Treasury Offset Program and Treasury Cross Servicing, December 8, 

2003. 

fice of Compliance and Business Integrity (CBI) to monitor copayment charges 

issued to certain veterans3 and for facility revenue and the associated business office staff to take corrective action when inappropriate bills are identified. Unfortunately, these corrective measures only apply to those veterans whose compensation 

and pension have been offset by the inappropriately billed amount—a necessary but 

high threshold for action by the VA for a problem the Department itself has created. 

Despite VA efforts, we receive recurring reports from our members that inappropriate billing continues. Inappropriate billing of veterans for VA medical care occurs 

due to incorrect C&P status of a veteran, such as the limited number of serviceconnected disabilities available for MCCF staff to view in their information system, 

and the effective date of claims for service connection, which were pending when the 

veteran sought treatment, and thus was made subject to copayments. Clearly, information management is crucial in avoiding inappropriate first-party billing, where 

such simple information is readily available in the Veterans Benefits Administration 

(VBA) information system, but may not be readily accessible by the MCCF staff of 

a local VHA facility. The VA has made little progress linking these two systems for 

more accurate results. 

Third-Party Billing and Collection 

Although the VA has attempted to implement more effective billing practices and 

systems, it has historically been unable to meet its collection goals. Similar to the 

need to have accurate information on C&P status of veterans, third-party insurance 

information is also needed to avert inappropriate third-party billing. The type of 

policies and the types of services covered by the insurers, patient copayments and 

deductibles, and preadmission certification requirements are vital to the VA’s MCCF 

program. The Department’s ability to accurately document the non-service-connected care provided to insured veterans, and assign the appropriate codes for billing purposes, is essential to accurate third-party collections. 

Failure to properly document care can lead to missed opportunities to bill for care, 

billing backlogs, overpayments by insurers, or denials of VA invoices. More importantly, although the VA is authorized to bill third parties only for non-service-connected care, we continue to hear reports from service-connected disabled veterans, 

their spouses, or caregivers, that the VA is billing their insurance companies for 

treatment of service-connected conditions. At times, notification of the billing departments of their local VA medical centers is sufficient. In other instances however, 

the inappropriate billing continues for the same condition or treatment, the inappropriate invoice has been outstanding for such a period of time that the veteran’s credit history is adversely impacted through collection agency action, or debt considered 

180 days delinquent from inappropriate billing is recovered by automatically offsetting a veteran’s compensation or pension benefit 4 causing undue stress on veterans 

and their families. 

To supplement the anecdotal evidence we have collected over the years, DAV recently conducted a survey by email of our DAV Commander’s Action Network. We 

asked survey recipients to participate if they believe VA has inappropriately billed 

them or their insurance companies. The results of the survey of 402 respondents 

from across the nation show 43 percent (172 veterans) receive bills for their care 

from the VA and approximately 62 percent (246) had other insurance coverage being 

billed for their care at the VA. We also asked if they had received more than one 

bill for the same treatment for which 18 percent (74) affirmed. 

In addition, 42 percent (167) said they are being billed for treatment at the VA 

for a service-connected condition and 55 percent (220) acknowledged that their insurance companies are being billed for treatment from VA of a service-connected 

condition. 

Of the 281 respondents who provided information for any followup we may have, 

we selected and contacted four veterans who gladly shared their experiences: 

Veteran from Massachusetts: Service-connected for spinal cord injury (SCI) 

and was referred to a VA Podiatrist by his primary care physician for a secondary condition related to his SCI. After completing the referral, the veteran’s insurance was billed. He spoke to a VA financial officer about this 

situation. He took no corrective action, but rather responded to the veteran, 

‘‘your injury is for your back, not your feet! What does it matter to you? 

You are not paying it, your insurance company is.’’ 


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Veteran from Wisconsin: Service-connected for degenerative joint disease 

for which he received care from orthopedics at his local VA medical center. 

His insurance was billed and subsequently paid a portion for this care. The 

veteran also paid for his portion of the bill. According to the veteran, inappropriate billings for these treatments have been going on for the past 3 

years, despite earlier attempts to correct the situation. The veteran has 

since decided to let it go unaddressed. According to him, ‘‘there is very little 

discrimination from VA to bill my insurance.’’ 

Veteran from North Dakota: Service-connected for hypertension and has an 

ongoing VA prescription for this condition. He indicates that on and off for 

well over 2 years, the VA has on more than one occasion billed his insurance for his hypertension medication. Although he has spoken to the business office of his local VA facility, the situation remains unresolved and has 

left him with the impression that, ‘‘they just don’t seem to take any corrective action whatsoever.’’ 

Veteran from South Carolina: Service-connected for migraine headaches, 

depression, and orthopedic conditions for which he takes prescription medications from the VA. He had been billed for medication copayments as well 

as his insurance for medications and treatments for his service-connected 

disabilities. The veteran would routinely call the toll-free number listed on 

the bill for medication copayments three to four times a year for corrective 

action, to no avail. He faxed a copy of his most recent VBA decision, but 

the inappropriate billing still continued. Consequently, the veteran went to 

the VA facility in person and handed a copy of his VBA decision to the 

clerk. Although they were apologetic as the veteran watched the billing 

staff input the pertinent information, the veteran continues to this day, to 

receive bills for treatment of his service-connected conditions. He subsequently called to have these bills stopped and asked for an audit in March 

2009 for all inappropriate bills that VA has received payment. He finally 

received his refund early this month. Since then however, the veteran has 

sporadically received inappropriate bills and has not had the inclination to 

see if his insurance has paid any inappropriate billing from the VA. His 

final thought was that, ‘‘there are not enough protections in place in the 

front end and veterans have to pay for their mistakes in the back end.’’ 

Mr. Chairman, it should be noted that for those veterans whose inappropriate billing issues were not properly addressed locally, and thus have risen to my office for 

assistance, the Chief Business Office staff in VA Central Office have been accommodating and expeditious in their assistance on every case. However, this should not 

be the process for properly addressing all inappropriate billing cases. 

Our members believe asking veterans to pay for part of the benefits a grateful 

nation provides for them is fundamentally contrary to the spirit and principles underlying the provision of benefits to veterans. Accordingly, the delegates of our most 

recent national convention held in Denver, Colorado August 22–25, 2009, passed 

two pertinent resolutions: Resolution No. 234, which calls for legislation to repeal 

all copayments for military retirees’ and veterans’ medical services and prescriptions; and Resolution No. 184, which opposes any legislation that would require the 

VA to recover third-party payments for the care and treatment of a veteran’s service-connected disabilities. 

The VA should be credited for actions it has taken for collecting accurate firstand third-party information, strengthening coding procedures and medical record 

documentation, which is aimed at enhancing revenue collections and protecting 

against inappropriate billing. However, the current revenue process requires extensive manual and subjective intervention, causing significant delays in collections 

and diminished revenue for the VHA. It also results in inappropriate billing to veterans and their insurers, and places undue burden and stress of veterans and their 

families. While under the law, VA must bill veterans and their insurers for providing treatment for non-service-connected conditions. Causing harm in the process 

requires the Department to be more proactive to redress such actions and ensure 

no repetition occurs. As our survey reveals, whatever system or process the VA is 

using to address inappropriate billing, much work still needs to be done. 

We look forward to hearing from VA today on what it is proactively doing to find 

and correct inappropriate bills and to eliminate future inappropriate billing to veterans and their insurers. In addition, we are interested to hear more about how the 

VHA’s Revenue Improvement and Systems Enhancements (RISE) program and Consolidated Patient Account Centers (CPACs), which together we understand will implement a regionally based industry model end-to-end revenue system, will fully address the concerns we and the individual veterans have raised in this testimony. 


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Mr. Chairman, we appreciate the Subcommittee’s interest in this issue and we 

again thank you for the opportunity to present our views. We will appreciate your 

consideration of our views on this pressing and important matter to America’s sick 

and disabled veterans. I would be pleased to address your questions, or those of 

other Subcommittee Members. 

f 

Statement of Denise A. Williams, Assistant Director for Health Policy, 

Veterans Affairs and Rehabilitation Commission, American Legion 

Mr. Chairman and Members of the Subcommittee: 

The American Legion appreciates the opportunity to offer our views on this very 

important issue. 

Background 

In 1986 Public Law (P.L.) 99–272, the Consolidated Omnibus Budget Reconciliation Act of 1985, gave the Department of Veterans Affairs (VA) authority to bill 

health insurance companies for health care provided to non-service-connected veterans who have private health insurance. This legislation also authorized VA to collect co-payments from non-service-connected veterans based on their income. Veterans that are service-connected at a 50 percent or higher rating are eligible for cost 

free care and medication for their service-connected treatment. 

As an expansion to that authority, in 1990 P.L. 101–508 established the Medical 

Care Cost Recovery (MCCR) revolving fund. This gave VA authority to seek reimbursement from third-party payers for the cost of medical care provided to insured 

service-connected veterans treated for NSC conditions. The law also authorized the 

per diem copayment and medication copayment programs. In 1997, P.L. 105–33 established VA’s current Medical Care Collections Fund (MCCF) and authorized VA 

to retain collections from health insurers and veterans’ copayments at the local medical center/Veterans Integrated Service Network (VISN) level. 

In 2006, VA implemented a pilot project which created their Consolidated Patient 

Account Center. This was to address all operational areas contributing to the establishment and management of patient accounts and related billing and collections 

processes. 

The American Legion has a long history of advocating on behalf of veterans. A 

very notable instance where this was evident was in March 2009, when Past National Commander David Rehbein met with President Obama and learned that the 

Administration planned to move forward on a proposal to charge veterans with private insurance for the treatment of service-connected injuries and illnesses at VA 

medical facilities. Under the proposed changes, VA would bill the veterans’ private 

insurance company for treatment of their service-connected disabilities. 

After fierce opposition from The American Legion and other Veterans’ Service Organizations (VSOs), the Administration dropped their plan to bill private insurance 

companies for treatment of service-connected medical conditions. 

Discussion 

In June 2004, the Government Accountability Office (GAO) released a report, ‘‘Internal Control Weaknesses Impair Third-Party Collections,’’ which stated that VA 

had inadequate patient intake procedures, insufficient documentation by physicians, 

a shortage of qualified billing coders, and insufficient automation, all which diminished VA’s Medical Care Collection Fund (MCCF) collections. GAO conducted a followup audit in 2008 and echoed similar findings that VA has ineffective controls 

over their medical center billings and collections which limit revenue from thirdparty insurance companies. The report also concluded that VA lacks policies, procedures and reporting mechanism for oversight of third-party billings and collections. 

The Department of Veterans Affairs Office of Inspector General (VAOIG) conducted an evaluation of the MCCF first-party billings and collections practices in 

2004. The report found that veterans were inappropriately billed because of inaccurate medical facility Veterans Health Information Systems and Technology Architecture (VistA). In 2007, VAOIG carried out another evaluation of 10 facilities and 

ascertained that there were missed billing opportunities at all 10 facilities due to 

insufficient documentation of resident supervision. 

Additionally, there were cases where episodes of care were not billed due to coding 

staff’s lack of experience and insurance companies denying payment because billing 

staff placed incorrect information in the system. In light of these findings, we recommend that VA implement continuing education of all coders and their superVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00038 Fmt 6604 Sfmt 6621 I:\VA\53435.XXX GPO1 PsN: 53435

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visors. The American Legion urges VAOIG and GAO to conduct followup evaluations 

on their latest reports to determine whether VA has complied with their recommendations. 

Mr. Chairman, although VA has made great strides in rectifying the issues surrounding their billing and collections practices, it is apparent that there is still room 

for improvement. As recent as April 2009, The American Legion compiled a total 

of 10 documented cases where VA erroneously billed service-connected veterans’ private insurances for their service-connected medical care. 

In one case, a veteran passed away in the Tampa VA Medical Center November 

27, 2008. He was 100 percent service-connected for several conditions, and was also 

a military retiree enrolled in TRICARE for Life. Under the provisions of VHA Handbook 1660.06, dated May 16, 2008, the veteran’s medical care was billed to 

TRICARE for Life. According to the Handbook since the VA cannot bill Medicaid, 

TRICARE for Life becomes the first payee. The Tampa VA Medical Center billed 

TRICARE for $1,017,019.81 and TRICARE paid $304,092.58. Again, the veteran 

was 100 percent service-connected and the Medical Center did have the correct information at the time they billed TRICARE. 

According to the Handbook, the veteran is responsible for any and all TRICARE 

co-payments; in this case, the veteran was billed by TRICARE for a number of copayments up to his catastrophic gap of $3000.00. There is no difference between this 

and billing private medical insurance. 

In a second case, an 80 percent service-connected veteran reported that his wife’s 

private insurance has been billed repeatedly for his treatment of service-connected 

illness. The veteran inquired about it through the VA Primary Care Team and was 

told they will continue to be billed as long as they have private insurance. The veteran explained that he was being billed for service-connected disabilities; however, 

the inappropriate billing continues. The American Legion is deeply concerned about 

this critical situation and contends VA work jointly with us to investigate these and 

any other cases, as well as collect pertinent records from affected veterans and take 

the necessary corrective measures. Additionally, we recommend that VA create a 

means to alert coders of service-connected conditions in their system and increase 

efforts and focus on monitoring accounts receivable. 

In May 2009 The American Legion National Executive Committee adopted a resolution, which calls for GAO and VAOIG to conduct individual investigations into the 

allegations VA is billing service-connected veterans for their cost-free health care. 

In addition, the resolution urges VA to implement a third-party reimbursement and 

diagnostic team comprised of an individual within each VISN to review compliance 

and ensure veterans will not continue to be billed for their service-connected medical conditions. 

Finally, we would like to take this opportunity to express our thanks to Chairman 

Filner for the introduction of H.R. 3365, The Medicare VA Reimbursement Act of 

2009. The American Legion strongly supports this bill and would like to encourage 

your colleagues to follow suit. On behalf of The American Legion, I appreciate the 

invitation to present our views on this very important topic. This concludes my testimony. 

f 

Statement of Kay L. Daly, Director, Financial Management and Assurance, 

U.S. Government Accountability Office 

VA Health Care: Ineffective Medical Center Controls Resulted in 

Inappropriate Billing and Collection Practices 

GAO Highlights 

Why GAO Did This Study 

GAO was asked to testify on billing practices of the Department of Veterans Affairs (VA). GAO previously reported that continuing problems in billing and collection processes at VA impaired its ability to maximize revenue from private insurance companies (third-party insurers). In June 2008, GAO reported on this followup 

review that (1) evaluated VA billing controls, (2) assessed VA-wide controls for collections, and (3) determined the effectiveness of VA oversight over third-party billings and collections. 

What GAO Recommends 

In its June 2008 report, GAO made seven recommendations to improve VA’s 

third-party billing and collection processes, including actions to improve (1) thirdparty billings (2) followup on unpaid amounts, and (3) management oversight of billVerDate Nov 24 2008 13:59 May 04, 2010 Jkt 053435 PO 00000 Frm 00039 Fmt 6604 Sfmt 6621 I:\VA\53435.XXX GPO1 PsN: 53435

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ing and collections. VA concurred with all seven recommendations and noted steps 

it was taking to address them. GAO will follow up to determine whether, and if so, 

to what extent, VA has taken action to address our recommendations. 

What GAO Found 

In June 2008, GAO reported that its case-study analysis of unbilled patient services at 18 medical centers, including 10 medical centers with low billing performance and 8 medical centers under VA’s Consolidated Patient Account Centers 

(CPAC) initiative considered to be high performers, found documentation, coding, 

and billing errors and inadequate management oversight that resulted in unbilled 

amounts. The total amount that VA had categorized as unbillable in fiscal year 2007 

for these 18 case-study medical centers was approximately $1.7 billion. Although 

some medical services are not billable, such as service-connected treatment, management had not validated reasons for related unbilled amounts of about $1.4 billion 

to assure that all billable costs are charged to third-party insurers. 

GAO also found excessive time to bill and coding errors. The 10 non-CPAC medical centers reported average days to bill ranging from 109 days to 146 days in fiscal 

year 2007, compared to VA’s goal of 60 days, and significant coding and billing errors and other problems that totaled over $254 million or 21 percent of the total 

in unbilled medical services costs at those centers. Although GAO determined that 

CPAC officials performed a more thorough review of billings, GAO’s analysis of 

unbilled amounts for the 8 CPAC centers found problems that accounted for $37.5 

million, or about 7 percent, of the total unbilled medical services costs. 

GAO’s June 2008 report identified significant percentages of cases where required 

followup was not done. These are considered to be control failures. VA guidance requires medical center accounts receivable staff to make up to three followup contacts, as necessary, on outstanding third-party insurer unpaid bills, which were 

$600 million as of September 2007. As shown in the table below, GAO’s statistical 

tests of a random sample of fiscal year 2007 third-party bills identified high controlfailure rates related to the requirement for initial, second, and third followups with 

third-party insurers on unpaid amounts. 

Estimated Control Failures on Timely Followup on Unpaid Bills 

Required 

followup VA-wide centers CPAC centers Non-CPAC centers 

Initial 69% 36% 71% 

Second 44% 23% 45% 

Third 20% 22% 17% 

Source: GAO analysis of VA data. 

Notes: Tests are of a VA-wide random-probability sample of third-party accounts-receivable data. Failure 

rates are based on the lower bound of GAO’s two-sided, 95 percent confidence interval. 

GAO also reported in June 2008 that VA lacked policies and procedures and a 

full range of standardized reports for effective management oversight of VA-wide 

third-party billing and collection operations. Further, although VA management has 

undertaken several initiatives to strengthen processes and controls and enhance 

third-party revenue, many of these initiatives are open-ended or will not be implemented for several years. 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our prior work on the Department of Veterans Affairs’ (VA) controls over medical center billings and collections. The department provides health care to eligible veterans through a system of Veterans Health 

Administration (VHA) medical facilities that constitute one of the largest health 


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1The Veterans’ Health Care Eligibility Reform Act of 1996, Pub. L. No. 104–262, § 101, 110 

Stat. 3177, 3178 (Oct. 9, 1996) (codified at 38 U.S.C. § 1710) and the Veterans Reconciliation 

Act of 1997, Pub. L. No. 105–33, tit. VIII, § 8023, 111 Stat. 251, 665 (Aug. 5, 1997) (codified 

at 38 U.S.C. § 1729A). 2 VA does not bill for health care services provided to veterans who have Medicare coverage 

only or veterans who have no private health insurance. 3 VA collections for health care services include third-party collections as well as patient copayments for medical services. 4GAO, VA Health Care: VA Has Not Sufficiently Explored Alternatives for Optimizing ThirdParty Collections, GAO–01–1157T (Washington, D.C.: Sept. 20, 2001); GAO, VA Health Care: VA 

Increases Third-Party Collections as It Addresses Problems in Its Collections Operations, GAO– 

03–740T (Washington, D.C.: May 7, 2003); and GAO, VA Medical Centers: Further Operational 

Improvements Could Enhance Third-Party Collections, GAO–04–739 (Washington, D.C.: July 19, 

2004). 5GAO, VA Health Care: Ineffective Controls over Medical Center Billings and Collections Limit 

Revenue from Third-Party Insurance Companies, GAO–08–675 (Washington, D.C.: June 10, 

2008). 6One of VA’s initiatives to improve billing and collection functions was the establishment of 

a CPAC pilot program covering 8 medical centers. The CPAC model, based on the private-sector 

approach, consists of a stand-alone regionalized billing and collections activity supported by data 

validation, customer service, and other functions. 

care systems in the world. VA is authorized 1 to provide certain medical services to 

veterans with non-service-related conditions and to recover some of the cost of providing these additional benefits through billing and collecting payments from veterans’ private health insurers, commonly referred to as third-party insurers.2 VA 

can also use these third-party health insurance collections to supplement its medical 

care appropriations. VA third-party billing and collection operations are carried out 

through a nationwide network of 153 medical centers, 801 outpatient clinics, and 

135 nursing homes, residential rehabilitation treatment programs, and readjustment counseling centers. VA reported in its fiscal year 2008 performance and accountability report that about 51⁄2 million people received treatment in VA health care facilities, and VA collections for health care services totaled nearly $2.4 billion.3

Since 2001 we have reported that continuing weaknesses in VA billing processes 

and controls have impaired VA’s ability to maximize the collections received from 

third-party insurers.4 Most recently, in June 2008 we reported5 on VA’s ineffective 

controls over medical center billings and collections. My testimony today summarizes the findings of our June 2008 report that are most relevant to the subject of 

today’s hearing. Specifically, I will focus on our findings concerning (1) the effectiveness of VA medical center billing processes at selected locations, (2) VA controls for 

performing timely followup on outstanding third-party receivables, and (3) the adequacy of VA oversight of billing and collection processes. 

To achieve our first objective, we used a case study approach to assess billing controls because VA did not have centralized data on third-party billings. For our case 

studies, we selected the 10 medical centers with the highest numbers of days to bill 

(lowest billing performance) and the 8 medical centers under the Consolidated Patient Account Center (CPAC)6 management initiative for regionalized billing and 

collection activity that were expected to be high performers. To achieve the second 

objective, we tested controls for timely collection followup and documentation of contacts on third-party bills using a VA-wide statistical sample, and stratified subsets 

of our VA-wide sample for CPAC medical centers and medical centers that were not 

under the CPAC initiative. To address our third objective on VA management oversight capability, we reviewed management reports generated by key VA systems 

and interviewed medical center and VHA officials about their oversight procedures. 

We conducted the work for the June 2008 report on which this testimony was 

based from January 2007 through May 2008 in accordance with generally accepted 

Government auditing standards. Those standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe that the evidence obtained provided a reasonable basis for our findings and conclusions based 

on our audit objectives. 

Case Study Medical Centers’ Weaknesses Resulted in Underbillings of 

Third-Party Insurers 

Our 2008 report found significant internal control weaknesses and inadequate 

management oversight that limited VA’s ability to maximize collections from thirdparty insurers. Our 18 case studies included 10 medical centers with reported low 

billing performance and the 8 medical centers under the CPAC management initiative for regionalized billing and collection activity that were expected to be high performers. Our case study analysis of unbilled patient services at 18 case study medVerDate Nov 24 2008 13:04 May 11, 2010 Jkt 053435 PO 00000 Frm 00041 Fmt 6604 Sfmt 6621 I:\VA\53435.XXX GPO1 PsN: 53435

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7 Under 38 U.S.C. § 1729, VA is not authorized to collect these amounts from third-party insurers. 

ical centers found excessive average days to bill, coding and billing errors, and a 

lack of management oversight, which raised questions about why $1.7 billion was 

not billed to third-party insurers at the 18 locations we reviewed. It is important 

that coding for medical services is accurate and timely because insurers will not accept improperly coded bills. Moreover, many insurers have national or regional contracts with VA that bar insurer liability for payment of bills received after a specified period of time after the date that medical services were provided, usually 1 

year, but sometimes as little as 6 months. 

There are valid reasons why some medical services are not billable, including 

service-connected treatment, Medicare coverage, and the lack of private health insurance coverage.7 In fiscal year 2007, the 18 medical centers we reviewed had $1.4 

billion in unbilled amounts in these categories. We found that medical center management at all 18 of our case study locations did not always validate the reasons 

these amounts were unbilled. 

At the 10 non-CPAC medical centers we reviewed, we identified low billing performance including average days to bill ranging from 109 days to 146 days in fiscal 

year 2007, compared to VA’s goal of 60 days. We also found these centers had significant documentation, coding, and billing errors and performed little or no management oversight of the billing function. As illustrated in figure 1, omissions in 

documentation ($10.4 million), the use of inaccurate clinical service codes ($48.3 million), and other undefined reasons ($195.4 million) accounted for over $254 million, 

or 21 percent, of the $1.2 billion in total unbilled medical services costs at the 10 

non-CPAC medical centers. The largest group of billing errors included $25 million 

for which the billing time frame had expired. Managers at the 10 non-CPAC medical 

centers did not perform adequate reviews of the services assigned to these categories 

to ensure that billing clerks appropriately classified them. While not the focus of our 

audit, such reviews are also critical for effectively identifying and addressing any 

overbillings. 


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Figure 1: Fiscal Year 2007 Unbilled Amounts by Reason for 10 Medical 

Centers with the Largest Elapsed Days to Bill 

Source: GAO analysis of 10 case study medical centers’ Reasons Not Billable data. 

Our case study analysis of the eight medical centers under the CPAC initiative, 

with $508.7 million in unbilled amounts, found that CPAC officials performed a 

more thorough review of the billing function. Our analysis of fiscal year 2007 

unbilled amounts for the eight CPAC centers showed that these centers’ average 

days to bill ranged from 39 days to 68 days, compared to VA’s 2007 goal of 60 days. 

As illustrated in figure 2, CPAC centers’ documentation errors ($4.2 million), coding 


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and billing errors ($21.4 million), and other undefined reasons ($11.9 million) accounted for $37.5 million or about 7 percent of medical services costs that were not 

billed to third-party insurers. 

Figure 2: Fiscal Year 2007 Unbilled Amounts by Reason for Eight Medical 

Centers under CPAC 

Source: GAO analysis of 8 CPAC case study medical centers’ Reasons Not Billable 

data. 


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8 VA Handbook 4800.14, Medical Care Debts, Section 4(b)(1). 9Our statistical tests were based on a 95 percent, 2-sided confidence interval. Because confidence intervals varied widely for our various control tests, we used a conservative estimate 

of our test results that is based on the lower bound of our confidence intervals. Our sample included bills over $250. 10The stratified random sample population was valued at $547.8 million and VA had collected about $260.1 million as of September 25, 2007. 11Specifically, $37.5 million of the total $600 million in receivables as of the end of fiscal year 

2007 was over 1 year old. 12 Accounts receivable staff reduce third-party receivables for a variety of reasons including, 

but not limited to, partial payments when the amount received is the full amount expected from 

the insurance carrier, the amount of payment received is the usual and customary amount received from the insurance company, or medical services are not covered under the insurance policy. 

Medical Centers Have Not Followed VA Policy for Timely Followup and 

Documentation on Unpaid Third-Party Receivables 

Our June 2008 report identified significant problems related to timely followup 

and documentation of contacts with third-party insurers on actions to collect outstanding receivables. VA policy8 requires medical center accounts receivable staff to 

make up to three followup contacts, as necessary, on outstanding third-party receivables, which were $600 million as of September 25, 2007. 

Our statistical tests9 of a stratified random sample of 260 fiscal year 2007 thirdparty bills identified high percentages of cases where required followup was not 

done, which is considered to be a control failure. These high control failure rates 

occurred VA-wide, in CPAC and non-CPAC medical centers, as shown in table 1. 

For example, our tests for the required initial followup showed a failure rate of 69 

percent VA-wide, 36 percent for CPAC centers, and 71 percent for non-CPAC centers. 

Table 1: Estimated Failure Rates for Controls on Timely Followup on Unpaid Third Party Insurer Receivables 

Required 

followup 

VA-wide medical 

centers 

CPAC medical 

centers 

Non-CPAC medical 

centers 

Initial, 45 days 69% 36% 71% 

Second, 21 days 

after first contact 44% 23% 45% 

Third, 14 days 

after second contact 20% 22% 17% 

Source: GAO analysis of VA data. 

Notes: Tests are of a VA-wide random-probability sample of third-party accounts-receivable data. 

Failure rates are based on the lower bound of our two-sided, 95 percent confidence 

interval. Our sample included bills over $250. 

The failure to make timely followup contacts and delays in initiating contacts with 

third-party insurance companies on unpaid amounts increase the risk that payments will not be collected, or that payments will be substantially delayed. Of the 

population of fiscal year 2007 billings that were used for our stratified random sample, VA had collected about 47 percent as of September 25, 2007.10 Our analysis of 

accounts receivable aging data showed that 6.25 percent of the receivables balance 

as of the end of fiscal year 2007 was over 1 year old.11

VA policy requires that accounts receivable staff include a comment for any adjustments12 to decrease outstanding third-party bills. The policy requires that the 

explanation be clear and unambiguous and state the particular reason for the adjustment. Our tests of whether accounts receivable personnel adequately documented reasons for adjustments to decrease a bill found a failure rate of 38 percent 

VA-wide. Without clear documentation of the reasons for billing adjustments, VA 

management lacks the ability to monitor the validity of the adjustments. Further, 

the lack of followup documentation undermines the reliability of trend information 

needed to effectively manage third-party receivables. 


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Management officials at several of the medical centers tested in our statistical 

sample attributed their high followup failure rate to inadequate staffing. However, 

we found that a lack of management oversight at the medical centers as well as at 

the VHA management level contribute to the control weaknesses we identified. In 

addition, we found that VHA and medical centers have few standardized management reports to facilitate oversight. Similar to the billings process, we found that 

the case study medical centers have limited procedures in place to monitor the collections process. Moreover, uncollected third-party receivables place an added burden on taxpayers because additional amounts would need to be covered by annual 

appropriations to support the same level of service to veterans. 

VA Lacks Policies and Procedures for Assuring Adequate Oversight of 

Third-Party Billings and Collections 

In June 2008 we reported that there were no formal policies and procedures for 

oversight of the third-party insurer billing and collection processes by medical centers or VHA. As a result, we found little or no monitoring and oversight of the thirdparty billing and collection processes. This raises concerns about the adequacy of 

oversight over the $1.7 billion in unbilled amounts at the 18 case study medical centers, including the hundreds of millions of dollars in unbilled amounts related to 

coding, billing, and documentation errors, and other undefined reasons. The lack of 

formal VA policies for management oversight of third-party billings and collections 

also raises VA-wide concerns. 

In addition, we found that medical centers and VHA had few standardized management reports to facilitate oversight. For example, our review of VHA’s Chief 

Business Office (CBO) reports found that these reports generally consisted of data 

on VA-wide days to bill, accounts receivable, and collections. VHA CBO did not generate detailed performance reports by medical center, and it did not review data on 

the status of unbilled amounts. We noted that limitations in management reporting 

related to VHA systems design. Specifically, VA’s health care billing and collection 

systems operated as stand-alone systems at each medical center. As such, VA-wide 

reporting was dependent on numerous individual queries and data calls. Enhanced 

oversight would permit VHA and medical center management to monitor trends and 

performance metrics, such as increases or decreases in unbillable amounts. 

In summary, while our 2008 report focused on VA underbillings and related control weaknesses, the weaknesses we identified could also result in VA overbillings 

to third-party insurance companies or veterans. For example, inaccurate data entry 

could result in bills for services to veterans for service-connected illnesses or conditions. Nonetheless, VA has made some progress in improving policy guidance and 

processes for billing and collecting medical care receivables from third-party insurers. In our 2008 report, we noted, but did not assess, that VA management had undertaken several initiatives to strengthen processes and controls over third-party 

billings and collections. For example, VA had completed initiatives for (1) recruitment and retention of coders and health information managers and (2) updating 

VHA policy guidance related to third-party revenue. In addition, VA had six key 

strategic initiatives, including CPAC, under way to enhance revenue from thirdparty insurers. Until VA addresses its significant, continuing weaknesses in controls 

over coding, billing, and collections followup that prevent it from maximizing revenue from third-party insurance companies, it will continue to be at risk of millions 

in erroneous billings. These errors negatively affect VA’s ability to provide medical 

care to the Nation’s veterans. 

Our June 2008 report included seven recommendations to VA aimed at strengthening key internal control activities over third-party billings and collections and improving management oversight. In comments on a draft of that report, VA concurred 

with all seven of our recommendations and provided information on steps it is taking to address them. We will follow up to determine whether, and if so, to what extent VA has taken action to address our recommendations. 

Mr. Chairman and Ranking Member Brown, this concludes my prepared statement. I would be happy to respond to any questions you or other Members of the 

Subcommittee may have at this time. 

Contact and Acknowledgments 

For further information about this testimony, please contact Kay L. Daly, Director, Financial Management and Assurance at (202) 512–9095, or dalykl@gao.gov. 

Contact points for our offices of Congressional Relations and Public Affairs may be 

found on the last page of this testimony. Major contributors to this testimony included Gayle L. Fischer, Assistant Director; Carla J. Lewis, Assistant Director; F. 

Abe Dymond, Assistant General Counsel; Carl S. Barden; Deyanna J. Beeler; 


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Francine DelVecchio; Lauren S. Fassler; Patrick T. Frey; Jason Kelly; Amanda K. 

Miller; Meg Mills; Matthew L. Wood; and Matthew P. Zaun. 

f 

Statement of Gary M. Baker, MA, Chief Business Officer, Veterans Health 

Administration, U.S. Department of Veterans Affairs 

Mr. Chairman and Mr. Ranking Member: thank you for providing me this opportunity to discuss the Department of Veterans Affairs’ (VA) billing practices. I am 

accompanied today by Ms. Stephanie Mardon, Deputy Chief Business Officer for 

Revenue Operations, and Ms. Kristin Cunningham, Director of Business Operations. 

VA is required by law to charge copayments to certain Veterans who meet income 

requirements and receive care for non-service-connected treatment. VA must also 

bill health insurance carriers for services provided to Veterans treated for their nonservice-connected conditions. My testimony today will focus on VA’s response to concerns expressed by Veterans and oversight bodies regarding VA’s billing practices 

and the mechanisms VA has put in place to ensure charges are appropriate. 

VA’s Billing Guidelines 

Veterans in Priority Group 1 (service connected 50 percent or more) are never 

charged a copayment. For other Veterans, VA currently has four types of non-service-connected copayments for which may be charged: outpatient, inpatient, extended 

care services and medication. Veterans are not charged copayments for a number 

of outpatient services including: publicly announced VA health fairs; screenings and 

immunizations; smoking and weight loss counseling; telephone care and laboratory; 

flat film radiology; and electrocardiograms. For primary care outpatient visits there 

is a $15 copayment charge and for specialty care outpatient visits a $50 copayment. 

Veterans do not receive more than one outpatient copayment charge per day. 

For Veterans required to pay an inpatient copayment charge, rates vary based 

upon whether the Veteran is enrolled in Priority Group 7 or not. Veterans enrolled 

in Priority Group 8 and certain other Veterans are responsible for VA’s full inpatient copayment and Veterans enrolled in Priority Group 7 and certain other Veterans are responsible for paying 20 percent of VA’s inpatient copayment. Veterans 

in Priority Groups 1, 2 3 and 5 do not have to pay inpatient or outpatient copays. 

Veterans in Priority Groups 4 and 6 may be exempt due to income or special eligibility for treatment of certain conditions. 

For Veterans required to pay extended care service copayments these are based 

on three levels of non-service-connected care including: inpatient, non-institutional 

and adult day health care. Actual copayments vary depending on the Veteran’s financial situation. 

For medication copayments, Veterans are not billed if they have a service-connected disability rated 50 percent or greater, they are former Prisoners of War, or 

if their medications are related to certain eligibility exceptions. Veterans enrolled 

in Priority Groups 2 thru 6 have a $960 calendar year cap on the amount that they 

can be charged for these copayments. 

Veterans who are unable to pay VA’s copayment charges are encouraged to complete requests for assistance including waivers, hardships, compromises and repayment plans. VA embarked on a program earlier this year to improve communication 

of these options to Veterans and their families through developing posters and other 

materials for local facilities and VA’s Web site (see Appendices A through E). VA 

staff members are encouraged to ensure that Veterans and their families are aware 

of these options. In addition, Veterans and their families can call VA’s First Party 

Call Center at the Health Resource Center in Topeka, KS using a toll-free number 

for assistance in understanding their copayment charges and payment alternative 

options. 

VA bills private health insurers for medical care, supplies and prescriptions provided to Veterans for their non-service-connected conditions. VA cannot bill Medicare, but it can bill Medicare supplemental health insurance carriers for covered 

services. (Reference 38 USC § 1729.) Veterans are not responsible for paying any remaining balance of VA’s insurance claim not paid or covered by their health insurance. Any payment received by VA is used to offset ‘‘dollar for dollar’’ a Veteran’s 

VA copayment responsibility. 

Ensuring Billing Accuracy 

In VA’s billing program, Veterans and their health insurers are not to be charged 

for care provided for their service-connected conditions. VA has a number of mechanisms that have been put in place to ensure Veterans and their third party health 


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insurers are charged appropriately. VA’s health information system identifies Veterans who are service-connected, flags their record, and lists all rated service-connected disabilities. During each treatment encounter, the VA provider determines 

whether the medical care or prescriptions provided are related to the Veteran’s 

rated service-connected conditions. This determination prevents bills from being 

generated automatically. In addition, when VA is notified that a Veteran is rated 

as service-connected retroactively, VA reviews the Veteran’s account to ensure any 

bills that have may been generated for the newly rated conditions are cancelled or 

that refunds are generated back to the effective date of the service-connected decision. As an example, the 2008 National Defense Authorization Act exempted combat 

Veterans who were discharged from active duty on or after January 2003, from copayments for conditions possibly related to their combat service for a 5-year period. 

VA is now generating refunds for any copayments Veterans may have been required 

to make when their copayment exemption expired after 2 years under the previous 

authority. VA hopes this will assist those Veterans who served in the combat theater of operations. 

The Veterans Service Organizations 2010 Independent Budget made recommendations to help VA improve billing practices: VA has already addressed many of these. 

In response to the recommendation regarding improved data exchange between the 

Veterans Benefits Administration (VBA) and the Veterans Health Administration 

(VHA), VHA has made significant progress through enhancements to VHA’s Veterans Health Information Systems Technology Architecture (VistA). This now contains information that provides medical staff data for more than 150 service-connected conditions. Additionally, medical center staff has access to other applications 

that provide more detailed information on rated disabilities. VHA staff has been 

participating in a pilot of the Virtual VA application which provides Web-based access to view rating decisions. This provides more detailed information concerning 

Veterans’ service-connected disabilities. The pilot has proven very successful in providing clear, reliable information for use in service-connected determinations. 

In response to the VSO recommendations that VA review our billing procedures 

and intensify training, VA has already put in place extensive training for clinical, 

coding and billing staff to appropriately determine service-connection and other special authority relationships for billing purposes. All providers receive a pocket card 

that outlines protocols for determining service-connected care for billing purposes. 

Business compliance staff at each level of VHA also perform a variety of first and 

third party billing compliance reviews that are routinely reported to VHA leadership. 

Over the last 5 years, VA has also developed many other initiatives to improve 

billing practices in response to VA Office of Inspector General (OIG) Report No. 03– 

00940–38, ‘‘Evaluation of Selected Medical Care Collection Fund First Party Billings 

and Collections’’ published on December 1, 2004. In this report, OIG identified that 

Priority Groups 1 and 5 Veterans were receiving compensation and pension benefits 

and their debts were being referred inappropriately to VA’s Debt Management Center (DMC). In response to this report, VA published VHA Handbook 1030.03, ‘‘First 

Party Co-payment Monitoring Policy’’ (dated October 16, 2006) which established 

policies and procedures for monitoring possible inappropriate referral of debts to 

DMC. This handbook requires staff to conduct a full account review for any copayments charged to these Veterans to determine billing accuracy. Additionally, VA installed software in all VistA systems in August 2008 to ensure that these debts are 

not referred automatically for offset. This has resulted in dramatic reductions reducing inappropriate referrals from 89 percent at the time of the OIG report to 16 percent in Fiscal Year 2009. 

VA also put in place several enhancements to strengthen its billing program in 

response to the July 2008 Government Accountability Office (GAO) Report 08–675, 

‘‘Ineffective Controls over Medical Center Billings and Collections Limit Revenue 

from Third-Party Insurance Companies.’’ To increase oversight and monitoring of 

the billing program, VA now requires staff to perform monthly reviews and report 

results to local compliances officers. In order to accurately classify care as not 

billable, VA implemented a software enhancement in July 2009 and provided training to staff. VA also implemented a mechanism to monitor and periodically audit 

these determinations. Finally, VA strengthened controls over accounts receivable by 

implementing monitors by VISN financial quality assurance staff. 

Conclusion 

Mr. Chairman, we appreciate the opportunity to respond to the concerns about 

VHA billing practices raised by Veterans and oversight bodies and to describe our 

efforts to improve the process. VA prides itself on ensuring that Veterans and their 

health insurers are appropriately charged for non-service-connected care. We are 


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equally committed to ensuring that Veterans are not billed inappropriately for treatment of service-connected conditions. To that end, VHA has instituted billing protocols, training, monitoring, and oversight systems. Should a Veteran receive a bill 

that appears to be in error, VA encourages Veterans to contact their local medical 

center revenue staff, who will review the bill with the Veteran and help to reconcile 

the issue. Thank you, again, for this opportunity. My colleagues and I are available 

for your questions. 


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1GAO, VA Health Care: Ineffective Medical Center Controls Resulted in Inappropriate Billing 

and Collection Practices, GAO–10–152T (Washington, D.C.: Oct. 15, 2009). 2GAO, VA Health Care: Ineffective Controls over Medical Center Billings and Collections Limit 

Revenue from Third-Party Insurance Companies, GAO–08–675 (Washington, D.C.: June 10, 

2008). 

MATERIAL SUBMITTED FOR THE RECORD 

Committee on Veterans’ Affairs 

Washington, DC. 

October 20, 2009 

Ms. Kay Daly 

Director 

Financial Management and Assurance 

U.S. Government Accountability Office 

441 G Street, NW 

Washington, DC 20548 

Dear Ms. Daly: 

Thank you for your testimony at the U.S. House of Representatives Committee 

on Veterans’ Affairs Subcommittee on Health oversight hearing on ‘‘Identifying the 

Causes of Inappropriate Billing Practices by the VA’’ that took place on October 15, 

2009. 

Please provide answers to the following questions by December 2, 2009, to Jeff 

Burdette, Legislative Assistant to the Subcommittee on Health. 

1. Although the June 2008 GAO report focused on under-billing, is it possible to 

infer that the VA may have issues with over-billing because the VA has internal control weaknesses and problems with omissions in documentation and use 

of inaccurate clinical service codes? 

2. There are valid reasons that VA does not bill third-parties for medical care, 

such as medical care provided for service-connected conditions and when services are covered by Medicare. Is VA ensuring that patient medical services provided that are placed into non-billable categories are correctly placed there? 

Thank you again for taking the time to answer these questions. The Committee 

looks forward to receiving your answers by December 2, 2009. 

Sincerely, 

Michael H. Michaud 

Chairman 

U.S. Government Accountability Office 

Washington, DC. 

November 23, 2009 

The Honorable Michael H. Michaud 

Chairman 

Subcommittee on Health 

Committee on Veterans’ Affairs 

House of Representatives 

Subject: The Department of Veterans Affairs (VA) Health Care: Response to Hearing Questions Related to Controls over VA’s Medical Center Billings and 

Collections 

Dear Mr. Chairman: 

On October 15, 2009, we testified before your Subcommittee at a hearing entitled, 

Inappropriate Billing Practices of the VA: Identifying the Causes and Exploring Potential Solutions.1 Our testimony was primarily based on our June 2008 report 2 on 

(1) the effectiveness of VA medical center billing processes at selected locations, (2) 

VA controls for performing timely followup on outstanding third-party receivables, 

and (3) the adequacy of VA oversight of billing and collection processes. 


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3GAO–10–152T. 

4 Under 38 U.S.C. § 1729, VA is not authorized to collect these amounts from third-party insurers. 5 VistA is a comprehensive medical records system. VistA includes an accounts receivable module that supports third-party billings and collections. 

This letter responds to your October 20, 2009, request to provide answers to followup questions relating to our October 15, 2009, testimony. Your questions, along 

with our responses, based primarily on our June 2008 report, follow. 

1. Although the June 2008 GAO report focused on under-billing, is it possible to 

infer that the VA may have issues with over-billing because the VA has internal control weaknesses and problems with omissions in documentation and use of inaccurate 

clinical service codes? 

As we testified before your Subcommittee in October 2009,3 while our June 2008 

report focused on VA underbillings and related control weaknesses, the weaknesses 

we identified could also result in VA overbillings to third-party insurers or veterans. 

For example, weak controls permitting billing errors could result in overbilling for 

services to veterans for service-connected illnesses or conditions. Until VA addresses 

its significant, continuing weaknesses in controls over coding, billing, and collections 

followup, it will continue to be at risk of millions of dollars in erroneous billings, 

including both over- and underbilling for veterans’ medical-connected services. 

These errors can negatively affect VA’s ability to provide medical care to the Nation’s veterans. 

2. There are valid reasons that VA does not bill third-parties for medical care, such 

as medical care provided for service-connected conditions and when services are covered by Medicare. Is VA ensuring that patient medical services provided that are 

placed into non-billable categories are correctly placed there? 

Our case study analysis of unbilled patient services at 18 VA medical centers 

found, among other things, that coding and billing errors as well as a lack of management oversight raised questions about whether $1.7 billion was correctly not 

billed to third-party insurers. While $1.4 billion of this amount appeared to relate 

to services for which VA does not have a cost recovery right, such as medical care 

for service-connected conditions and services covered by Medicare and was therefore 

nonbillable,4 we found that medical center management did not always validate the 

cited reasons these amounts were unbilled. For example, managers at 10 case study 

medical centers did not perform adequate reviews of cited treatment classifications 

to ensure billings were appropriately nonbillable. 

VA advised us in November 2009 it has taken the following steps to help ensure 

that patient medical services provided are correctly placed into the nonbillable categories. 

• In December 2008, VA issued a fact sheet that detailed new procedures for 

monitoring ‘‘reasons not billable’’ codes for accuracy and timeliness. 

• In February 2009, VA issued Veterans Health Administration Directive 2009– 

010, Monitoring ‘‘Reasons Not Billable’’ to formalize the monitoring process for 

coding and billing accuracy related to nonbillable encounters. 

• In July 2009, VA deployed a software enhancement to its Veterans Health Information Systems and Technology Architecture (VistA) system5 to standardize 

the ‘‘reasons not billable’’ codes used to track why a specific medical treatment 

is not billable. 

• In July and August 2009, VA provided national training to staff on the system 

enhancement. 

Although we have not independently assessed the adequacy of these actions, if 

fully and effectively implemented, they appear to have merit in better ensuring VA 

patients’ medical care service billings are correctly classified as nonbillable. 

If you or your staff have questions about the responses to the questions, please 

contact me at (202) 512–9095 or by e-mail at dalykl@gao.gov. A key contributor to 

this correspondence was Carla Lewis, Assistant Director. 

Sincerely yours, 

Kay L. Daly 

Director 

f 

Financial Management and Assurance 


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Committee on Veterans’ Affairs 

Washington, DC. 

October 20, 2009 

Honorable Eric K. Shinseki 

Secretary 

U.S. Department of Veterans Affairs 

810 Vermont Avenue, NW 

Washington, DC 20240 

Dear Secretary Shinseki: 

Thank you for the testimony of Gary M. Baker, Chief Business Officer for the Veterans Health Administration, at the U.S. House of Representatives Committee on 

Veterans’ Affairs Subcommittee on Health oversight hearing on ‘‘Identifying the 

Causes of Inappropriate Billing Practices by the VA’’ that took place on October 15, 

2009. 

Please provide answers to the following questions by December 2, 2009, to Jeff 

Burdette, Legislative Assistant to the Subcommittee on Health. 

1. Does the VA collect data to assess the prevalence of their inappropriate billing 

practices? Is this linked to a performance measure to track VA’s progress in 

decreasing the number of inappropriate billings? 

2. How does the VA minimize improper billing? For example, are there directives 

or requirements for standardized procedures to limit coding errors and to address other issues leading to erroneous billing? 

3. The witnesses speaking on behalf of veterans service organizations testified 

that non-service connected veterans may be billed multiple times for a single 

episode of treatment. What do you think are some potential reasons for this 

error? Is it a human processing error and/or an IT coding error? 

4. What is the VA doing to improve the communication between VHA and VBA 

so that information about service-connected conditions is complete and timely? 

5. In their testimony, the Paralyzed Veterans of America cited a case where the 

VA bills veterans who are rated with 100 percent total and permanent disability. Why is the VA billing these individuals? Is this practice allowed in statute or regulations, or do these cases reflect unintended billings? 

Thank you again for taking the time to answer these questions. The Committee 

looks forward to receiving your answers by December 2, 2009. 

Sincerely, 

Michael H. Michaud 

Chairman 

Questions for the Record 

The Honorable Michael H. Michaud, Chairman 

House Committee on Veterans’ Affairs 

Subcommittee on Health 

Identifying the Causes of Inappropriate Billing Practices by the VA 

October 15, 2009 

Question 1: Does the VA collect data to assess the prevalence of their inappropriate billing practices? Is this linked to a performance measure to track VA’s 

progress in decreasing the number of inappropriate billings? 

Response: Data on bills created in error is currently collected on a local basis 

at each facility. However, VA is currently developing procedures to collect this data 

at a national level, so that trends can be analyzed to better drive system-wide improvements in billing practices. 

The VHA’s Office of Compliance and Business Integrity (CBI), which oversees 

VHA’s revenue operations, implemented a series of metrics that monitor high risk 

activities impacting the revenue cycle, to include billings. CBI continuously reviews 

revenue cycle activities and identifies areas of high risk that may need a focused 

review. 


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Question 2: How does the VA minimize improper billing? For example, are there 

directives or requirements for standardized procedures to limit coding errors to address other issues leading to erroneous billing? 

Response: VHA has implemented a number of standardized procedures and 

training initiatives in order to minimize bills created in error. In November 2007, 

VHA published Handbook 1907.03, Health Information Management Clinical Coding 

Program Procedures, to establish minimum bill coding accuracy standards and provide procedures for conducting coding reviews for many different purposes, including 

third-party billing. In December 2008, VHA developed and issued to the field, new 

procedures specifically for monitoring reasons not billable codes for accuracy and 

timeliness. This process was formalized via a directive (VHA 2009–010). VHA also 

implemented a system enhancement along with training modules to standardize 

‘‘reasons not billable’’ codes, which allows for better oversight of this process. 

VHA has implemented a number of training programs on specific billing topics including billing associated with Combat Veteran special authority to ensure staff understands the authorities and billing requirements for these topics. VHA also presented a training program to field staff on Service/Non-service-Connected care and 

Special Treatment Authorities in September 2009. VHA has focused targeted training efforts tailored to clinicians through issuance in August 2009, of Physician Documentation FlipCards, which provide quick reference resources including tips on documentation, evaluation and management coding, medication copayments, and service-connected/special treatment authorities. 

Finally, VHA has used hybrid title 38 hiring authority to increase the number of 

qualified coders and provided opportunities for special advancement for professional 

achievement while in VA service. A national Health Information Management 

(HIM) inventory conducted in October 2008, reported 1,282 coders at VA facilities 

which represent an increase of 394 coders since 2007. Eighty-two percent (1,048) of 

coders hold HIM credentials, an increase of 255 coders since 2007. In order to assure this staff receives ongoing training, educational programs are provided both via 

satellite and web-based modalities. Also, a tool kit containing coding and documentation improvement strategies is posted on the HIM Web site along with a 

Metrics Dashboard which includes coding indicators. 

Question 3: The witnesses speaking on behalf of Veterans Service Organizations 

(VSOs) testified that non-service connected Veterans may be billed multiple times 

for a single episode of treatment. What do you think are some potential reasons for 

this error? Is it a human processing error and/or an IT coding? 

Response: It is important to note that Veterans receive a separate prescription 

copayment charge for each individual prescription that may have been issued during 

a single treatment episode. These individual prescription copayment billings for 

non-service connected prescriptions may be interpreted as multiple billings for the 

same episode of care by the Veteran. VA’s billing system is designed to provide 

monthly statements so the Veteran has an opportunity to either pay the charges or 

request administrative relief through waiver or compromise. If the charges are not 

paid after three statements are issued, and no new charges have been incurred, no 

further statements are issued for those charges. If the Veteran incurs additional 

charges after the initial charges are reported on a statement, the balance of unpaid 

charges will continue to be shown on each subsequent statement. VHA believes that 

the billing system is working as designed but more education is needed on the patient statements for Veterans. 

Question 4: What is VA doing to improve the communications between VHA and 

VBA so that information about service-connected conditions is complete and timely? 

Response: VA has made significant progress in the exchange of data between 

VBA and VHA. The information contained in the VistA system for medical staff now 

allows for more than 150 service connected conditions. As VBA has transitioned to 

its VETSNET application, VHA has gained access to more detailed listings of service-connected conditions without the limitation to six service-connected conditions, 

as had been the case with the Benefits Delivery Network system. In addition, medical center staff has access to other applications which provide more detailed information on rated disabilities such as the web-based Hospital INQuiry(HINQ) application. VHA staff has been participating in a pilot of the Virtual VA application which 

provides web-based access to view rating decisions. This provides more detailed information concerning Veterans’ service-connected disabilities. This pilot has proven 

to be very successful in providing clear and reliable information for use in serviceconnection determinations. The pilot is expected to be expanded to more staff when 

technical infrastructure capability is expanded. 


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Question 5: In their testimony, the Paralyzed Veterans of America cited a case 

where the VA bills Veterans who are rated with 100 percent total and permanent 

disability. Why is the VA billing these individuals? Is this practice allowed in statute or regulations, or do these cases reflect unintended billings? 

Response: Veterans rated 100 percent total and permanent should not receive copayment bills for any services. However, by statute, their third party insurance may 

be billed for care provided for conditions not adjudicated as service-connected by 

VBA. VA clinical staff is required to identify such non-service-connected care for 

billing to third party insurers. Also, if a Veteran had a lesser percentage disability 

and was recently determined to be 100 percent total and permanent, he/she may 

still receive bills from treatment provided at the lower rated disability or for nonservice connected disabilities while rated less than 100 percent. Although VA strives 

for zero errors in our billing practices, we know there are situations where Veterans 

or third party insurers may have received bills in error. If this situation occurs, Veterans are encouraged to contact their local medical center revenue staff who will 

review the bill and cancel it as appropriate. 

Æ 


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