VETERANS' HEALTH 

CARE

Proper Plan Needed 

to Modernize System 

for Paying Community 

Providers

Report to Congressional Committees

May 2016

GAO-16-353

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-353, a report to 

Congressional Committees

May 2016

VETERANS' HEALTH CARE

Proper Plan Needed to Modernize System for Paying 

Community Providers

Why GAO Did This Study

Due to recent increases in utilization of 

VA care in the community, VHA has 

had difficulty processing claims in a 

timely manner.

Congress included a provision in law 

for GAO to review VHA’s payment

timeliness and to compare it to that of 

Medicare and TRICARE. This report 

examines, among other objectives, (1) 

VHA’s, Medicare’s, and TRICARE’s

claims processing timeliness; (2) 

factors that have impeded VHA’s

claims processing timeliness and 

community providers’ experiences; and 

(3) VHA’s recent actions and plans to 

improve its claims processing

timeliness. GAO obtained fiscal year 

2015 data on VHA’s, Medicare’s, and 

TRICARE’s claims processing

timeliness. GAO also visited 4 of 95 

VHA claims processing locations 

(selected based on variation in 

geographic location, performance, and 

workload); reviewed VHA documents 

and 156 claims from the 4 locations; 

and interviewed officials from VHA, 

Medicare, TRICARE, and selected 

community providers and state hospital 

associations. Results from GAO’s

analysis cannot be generalized to all 

VHA claims processing locations or 

community providers.

What GAO Recommends

GAO recommends that VA develop a 

written plan for modernizing its claims 

processing system that includes a 

detailed schedule, costs, and 

performance measures. VA concurred 

with this recommendation and plans to 

address it through the planned 

consolidation of its VA care in the 

community programs.

What GAO Found

To help ensure that veterans are provided timely and accessible health care 

services, the Veterans Health Administration (VHA) of the Department of 

Veterans Affairs (VA) has purchased care from non-VA community providers 

through its care in the community programs since as early as 1945. VHA’s 

agency-wide data show that in fiscal year 2015, it processed about 66 percent of 

claims within the agency's required time frame of 30 days or less, whereas data 

from Medicare and TRICARE (the Department of Defense’s health care system) 

show that their contractors processed about 99 percent of claims within 30 days 

or less. However, VHA’s data likely overstate its performance because they do 

not account for delays in scanning paper claims, which officials say account for 

approximately 60 percent of claims. GAO’s analysis of 156 claims from four VHA 

claims processing locations indicated that it took an average of 2 weeks for VHA 

staff to scan paper claims into VHA’s claims processing system, and GAO 

observed multiple bins of paper claims that had been awaiting scanning at one 

site for over a month. In a 2014 report, GAO recommended that VHA take action 

to ensure that all of its claims processing locations comply with its policy of 

scanning claims into VHA’s claims processing system upon receipt. While VHA 

agreed with this recommendation and attempted to reiterate the policy through 

various means, GAO’s more recent findings suggest that VHA did not monitor the 

operational effectiveness of these corrective actions. VHA officials said that they 

have since begun requiring managers at their claims processing locations to 

periodically certify in writing that all incoming paper claims have been datestamped and scanned on the day of receipt.

VHA officials and claims processing staff from the four locations GAO visited 

indicated that technology limitations, manual processes, and staffing shortages 

have delayed VHA’s claims processing. For example, VHA’s claims processing 

system lacks the capacity to automatically adjudicate claims. VHA staff instead 

must rely on manual processes, which they say delay payments to community 

providers. In addition, community providers and state hospital association 

respondents who participated in GAO’s review said they had experienced various 

issues with VHA’s claims processing system. For example, almost all providers 

described the administrative burden of submitting claims and related medical 

documentation to VHA and a lack of responsiveness from VHA’s claims 

processing locations when the providers contacted them to follow up on claims. 

While VHA has recently implemented interim measures to address challenges 

that have delayed claims processing—such as eliminating certain medical 

documentation requirements and filling staff vacancies—the agency does not 

expect to deploy solutions to address all challenges until fiscal year 2018 or later. 

VHA is currently examining options for modernizing its claims processing system 

but has not yet communicated to Congress or other external stakeholders a 

sound plan that clearly addresses the components identified in past GAO work 

(such as a detailed schedule, estimated costs, and measures of progress). This 

is concerning, given VA’s past failed attempts to modernize key information 

technology systems. While the agency expects to significantly increase its 

reliance on community providers to deliver care to veterans in the future, it risks 

losing their cooperation if it does not improve its payment timeliness.

View GAO-16-353. For more information, 

contact Randall B. Williamson at (202) 512-

7114 or williamsonr@gao.gov.
Page i GAO-16-353 Timeliness of Payments for VA Care in the Community

Letter 1

Background 8

While Steps for Processing Claims are Similar, VHA’s Claims 

Processing System Is Considerably Less Automated than 

Medicare’s and TRICARE’s Systems 16

VHA’s Fiscal Year 2015 Claims Processing Was Significantly Less 

Timely Than Medicare’s and TRICARE’s, and VHA Has 

Generally Not Paid Interest Penalties on Late Payments 20

Technology Limitations and Related Staffing Challenges Have 

Delayed VHA’s Claims Processing 25

VA Care in the Community Providers Cite Administrative Burden, 

Lack of Notification, and Problems with Poor Customer Service 30

While VHA Has Implemented Interim Measures, the Agency Does 

Not Expect to Address All Claims Processing Challenges until 

Fiscal Year 2018 or Later 33

Conclusions 39

Recommendation for Executive Action 40

Agency Comments and Our Evaluation 41

Appendix I Characteristics of Selected Care in the Community Programs of the 

Department of Veterans Affairs (VA) 42

Appendix II Requirements for the Department of Veterans Affairs’ (VA) Payment of 

Emergency Claims from Community Providers 46

Appendix III Veterans Health Administration’s (VHA) Steps for Processing 

Claims for the Department of Veterans Affairs’ (VA) Care in the 

Community Services as of March 2016 47

Appendix IV Comparison of the Veterans Health Administration’s (VHA), 

Medicare’s, and TRICARE’s Systems for Processing Claims 

for Health Care Purchased in the Community 49

Contents
Page ii GAO-16-353 Timeliness of Payments for VA Care in the Community

Appendix V Comments from the Department of Veterans Affairs 53

Appendix VI GAO Contact and Staff Acknowledgments 56

Related GAO Products 57

Tables

Table 1: Veterans Health Administration (VHA) Claims Processing 

Locations GAO Visited 6

Table 2: Veterans Health Administration’s (VHA) Steps for 

Processing Claims for Care in the Community, as of 

March 2016 14

Table 3: Agencies’ Claims Processing Timeliness Requirements 15

Table 4: Reported Expenditures for the Department of Veterans 

Affairs’ (VA) Care in the Community Services, Medicare, 

and TRICARE and Sum of Interest Penalties Paid on Late 

Payments in Fiscal Year 2014 25

Figures

Figure 1: Number of Claims for VA Care in the Community 

Processed by the Veterans Health Administration (VHA), 

Fiscal Years 2012 – 2015 30
Page iii GAO-16-353 Timeliness of Payments for VA Care in the Community

Abbreviations

CMS Centers for Medicare & Medicaid Services

DHA Defense Health Agency

DOD Department of Defense

FBCS Fee Basis Claims System

HHS Department of Health and Human Services

MAC Medicare Administrative Contractor

MCSC managed care support contractor

PC3 Patient-Centered Community Care

TPA third party administrator

VA Department of Veterans Affairs

VHA Veterans Health Administration

VISN Veterans Integrated Service Network

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Page 1 GAO-16-353 Timeliness of Payments for VA Care in the Community

441 G St. N.W.

Washington, DC 20548

May 11, 2016

The Honorable Johnny Isakson

Chairman

The Honorable Richard Blumenthal

Ranking Member

Committee on Veterans’ Affairs

United States Senate

The Honorable Jeff Miller

Chairman

The Honorable Corrine Brown

Ranking Member

Committee on Veterans’ Affairs

House of Representatives

The majority of veterans utilizing health care services delivered by the 

Veterans Health Administration (VHA) of the Department of Veterans 

Affairs (VA) receive care in VHA-operated medical facilities, such as VA 

medical centers or community-based outpatient clinics. However, some 

VA medical facilities have faced problems with long wait times for 

providing care to veterans, and others may be unable to provide certain 

specialty care services. To help ensure that veterans are provided timely 

and accessible care, the agency has purchased health care services from 

non-VA community providers through its care in the community programs 

since as early as 1945.1 While the eligibility requirements and types of 

care purchased through the programs currently vary, in general VA 

purchases community care when (1) wait times for appointments at VA 

medical facilities exceed VA standards; (2) a VA medical facility is unable 

to provide certain specialty care services, such as cardiology or 

orthopedics; or (3) a veteran would have to travel long distances to obtain 

 1

For the purposes of this report, the terms “VA care in the community” and “community 

providers” refer, respectively, to the services the Department purchases outside VA 

medical facilities and the community providers who deliver the services under the 

following statutory authorities: 38 U.S.C. §§ 1703, 1725, 1728, 8111, and 8153. Before 

2015, VHA referred to “community providers” as “non-VA providers” or “fee basis 

providers” and to “VA care in the community” as “non-VA medical care” or “fee basis 

care.” The agency began using the terms “community providers” and “VA care in the 

community” in the spring of 2015.

Letter
Page 2 GAO-16-353 Timeliness of Payments for VA Care in the Community

care at a VA medical facility. Under certain circumstances, VA is also 

authorized to reimburse community providers for emergency care they 

deliver to veterans.

2 When veterans obtain care from community 

providers, these providers submit claims to VA for reimbursement on a 

fee-for-service basis. VHA staff at 95 claims processing locations 

throughout the country are responsible for processing and paying these 

claims.3

VA’s expenditures for its care in the community programs, the number of 

veterans for whom VA has purchased care, and the number of claims 

processed by VHA have all grown considerably in recent years. In fiscal 

year 2015, VA obligated about $10.1 billion for care in the community for 

about 1.5 million veterans.4 Three years earlier, in fiscal year 2012, VA 

spent about $4.5 billion on care in the community for about 983,000 

veterans—about 50 percent fewer veterans than were served in fiscal 

year 2015. From fiscal year 2012 through fiscal year 2015, the number of 

processed claims for VA care in the community programs increased by 

about 81 percent.

The substantial increase in utilization of VA care in the community 

programs poses challenges for VHA, which has had ongoing difficulty 

processing claims from community providers in a timely manner. A 2010 

report by the VA Office of the Inspector General found that VHA needed 

 2

All emergency care purchased from community providers must meet the prudent 

layperson standard of an emergency, which means that the veteran’s condition is of such 

a nature that a prudent layperson would reasonably expect that a delay in seeking 

immediate medical attention would result in placing the health of the individual in serious 

jeopardy, serious impairment to bodily functions, or serious dysfunction of any bodily 

organ or part. See 38 C.F.R. § 17.1002(b). There are additional criteria that must be met 

for VA to purchase emergency care from community providers, and these criteria vary 

depending on whether the care is related to the veteran’s service-connected disability.

3

As of November 2015, there were 141 VA medical facilities responsible for authorizing 

VA care in the community services and 95 VHA claims processing locations responsible 

for processing claims from community providers.

4

Final figures for expenditures on VA care in the community in fiscal year 2015 will not be 

available until VHA’s claims processing locations finish processing all fiscal year 2015 

claims. As of October 29, 2015, VA had paid about $6.65 billion for VA care in the 

community that was delivered in fiscal year 2015, but VHA’s claims processing locations 

also had a backlog of about 453,000 claims awaiting processing as of that date. Total 

fiscal year 2015 expenditures for VA care in the community are expected to be closer to 

$10.1 billion. 
Page 3 GAO-16-353 Timeliness of Payments for VA Care in the Community

to take action to address the timeliness of its claims processing.5 In 2011, 

the National Academy for Public Administration described numerous 

weaknesses in VHA’s claims processing system, which delayed 

payments to community providers.6 In 2014 and 2015, we reported that 

some providers delivering services through VA care in the community 

experienced lengthy delays (i.e., in some cases, months or years) 

receiving payment on their claims. 7 During a June 3, 2015 hearing of the 

House Committee on Veterans’ Affairs’ Subcommittee on Health, several 

witnesses testified about VHA’s continued lack of timeliness in paying 

claims for VA care in the community services. The VA Budget and Choice 

Improvement Act required VHA to develop a plan for consolidating its VA 

care in the community programs (of which there are currently about 10), 

and VHA submitted this plan to Congress on October 30, 2015.8 As part 

of this plan, VHA said it would examine potential strategies for improving 

the timeliness and accuracy of its payments to community providers.

The Veterans Access, Choice, and Accountability Act of 2014 (Choice 

Act) included a provision for us to report to Congress about the timeliness 

of VA’s payments for claims submitted by community providers when 

veterans access care outside the VA health care system, and to compare 

the timeliness of VA’s payments to community providers to the timeliness 

of payments providers receive from Medicare and TRICARE, the 

Department of Defense’s (DOD) health care system.9 In February 2016, 

 5

Department of Veterans Affairs Office of Inspector General, Veterans Health 

Administration: Audit of Non-VA Inpatient Fee Care Program, 09-03408-227 (Washington, 

D.C.: Aug. 18, 2010). 

6

National Academy of Public Administration, Veterans Health Administration Fee Care 

Program (Washington, D.C.: Sept. 2011). 

7

See GAO, VA Health Care: Actions Needed to Improve Administration and Oversight of 

Veterans’ Millennium Act Emergency Care Benefit, GAO-14-175 (Washington, D.C.: 

March 6, 2014) and GAO, VA Mental Health: Clearer Guidance on Access Policies and 

Wait-Time Data Needed, GAO-16-24 (Washington, D.C.: Oct. 28, 2015). A list of other 

related GAO products can be found at the end of this report. 

8

Pub. L. No. 114-41, Tit. IV, § 4002, 129 Stat. 443, 461 (2015).

9

Pub. L. No. 113-146, § 105(c), 128 Stat. 1754, 1767 (2014). TRICARE is a regionally 

structured health care program for military service members, retirees, and their 

dependents and survivors. Under TRICARE, beneficiaries obtain health care either 

through DOD’s direct care system of military hospitals and clinics (referred to as military 

treatment facilities), or they receive care through DOD’s purchased care system of civilian 

providers and civilian facilities. In this report, we focus on the purchased care component 

of TRICARE.
Page 4 GAO-16-353 Timeliness of Payments for VA Care in the Community

we presented preliminary observations from this work at a hearing of the 

House Committee on Veterans’ Affairs’ Subcommittee on Health.10 This 

report examines:

1. similarities and differences between VHA’s, Medicare’s, and 

TRICARE’s systems for processing health care claims;

2. how VHA’s claims processing timeliness in fiscal year 2015 compared 

to Medicare’s and TRICARE’s, and whether these entities pay interest 

penalties on late payments;

3. the factors that have impeded the timeliness of VHA’s claims 

processing and payment;

4. providers’ experiences with VHA’s claims processing; and

5. VHA’s recent actions and plans to improve the timeliness of claims 

processing and payments for VA care in the community.

To describe the similarities and differences between VHA’s, Medicare’s, 

and TRICARE’s systems for processing health care claims, we reviewed 

applicable policies and other documentation and interviewed officials from 

VHA; the Centers for Medicare & Medicaid Services (CMS), the 

Department of Health and Human Services (HHS) agency that 

administers Medicare; and the Defense Health Agency (DHA), the DOD 

agency that administers TRICARE. We also interviewed officials from the 

contractor that is responsible for processing all TRICARE claims and

officials from 1 of the 16 contractors that are responsible for processing 

Medicare claims.11

 10See GAO, Veterans’ Health Care: Preliminary Observations on VHA’s Claims 

Processing Delays and Efforts to Improve the Timeliness of Payments to Community 

Providers, GAO-16-380T (Washington, D.C.: Feb. 11, 2016). 

11As of 2015, the Medicare contractor we interviewed was responsible for processing 

about 9 percent of all Part A and Part B Medicare claims and 50 percent of all fee-forservice Medicare home health and hospice claims. The Medicare program consists of four 

parts. Parts A and B are known as original Medicare or Medicare fee-for-service. Medicare 

Part A covers inpatient hospital care, skilled nursing facility care, some home health 

services, and hospice care. Part B services include physician and outpatient hospital 

services, diagnostic tests, mental health services, outpatient physical and occupational 

therapy, ambulance services, some home health services, prosthetics, orthotics, and 

supplies. Part C is the private health plan alternative to Medicare fee-for-service and 

primarily consists of plans that are offered under the Medicare Advantage Program. Part D 

is the outpatient prescription drug benefit, which is provided through private plans. 
Page 5 GAO-16-353 Timeliness of Payments for VA Care in the Community

To examine how VHA’s claims processing timeliness compared to 

Medicare’s and TRICARE’s, and whether these entities pay interest on 

late claims, we reviewed applicable policies, interviewed agency officials, 

and obtained fiscal year 2015 data on claims processing timeliness.12

Agency officials reported to us the amounts that VHA, CMS, and DHA 

spent in fiscal year 2014 for interest penalties paid on late payments to 

providers. The claims processing timeliness data we obtained provided 

information on the percentage of paid and denied claims in fiscal year 

2015 that met each agency’s claims processing timeliness requirements. 

To assess the reliability of these data, we interviewed knowledgeable 

agency officials about their respective data sources and methods for 

collecting data. We found CMS’s and DHA’s data to be sufficiently reliable 

for reporting Medicare’s and TRICARE’s claims processing timeliness in 

fiscal year 2015. However, as we discuss in this report, we determined 

that VHA’s timeliness data had limitations. As there were no other data 

available from VHA, we used these data for making comparisons to 

Medicare’s and TRICARE’s claims processing timeliness in fiscal year 

2015, but we also note the limitations of VHA’s data in making the 

comparisons.

To examine factors that have impeded the timeliness of VHA’s claims 

processing and payment, we used VHA data on the timeliness of 

payments for claims that were processed between February 2014 and 

February 2015—the most recent data that were available when we began 

our study—to select a non-random sample of four VHA claims processing 

locations where we conducted site visits in May and June 2015.13 (See 

table 1.)

 12From VHA, we interviewed officials from the Chief Business Office for Purchased Care; 

from CMS, we interviewed officials from the Medicare Contractor Management Group; and 

from DHA, we interviewed the Chief of TRICARE Contract Resource Management. 

13The claims processing locations in our sample represented different regions in the 

United States, a range in timeliness performance, and a range in claims processing 

workload (i.e., the number of VA medical facilities for which the claims processing location 

processed claims).
Page 6 GAO-16-353 Timeliness of Payments for VA Care in the Community

Table 1: Veterans Health Administration (VHA) Claims Processing Locations GAO Visited

VHA claims processing 

location 

Geographic location of the 

claims processing location

Number of VA medical facilities for which the location processes 

claims 

St. Louis, MO Midwest 1 VA medical facility in St. Louis, MO

Helena, MT West 13 VA medical facilities located in Veterans Integrated Service Networks 

(VISN) 18 and 19a

Columbia, SC South 1 VA medical facility located in Columbia, SC

Pearl, MS South 10 VA medical facilities located in VISN 16

Source: GAO | GAO-16-353

a

VHA’s health care system is divided into areas called VISNs, each responsible for managing and 

overseeing medical facilities within a defined geographic area. VISNs oversee the day-to-day 

functions of VA medical facilities that are within their boundaries. Each VA medical facility is assigned 

to a single VISN. At the start of fiscal year 2016, there were 21 VISNs, but VA is in the process of 

consolidating some networks so that by the end of fiscal year 2018, there will be 18 networks.

At each of these four sites, we interviewed managers and staff 

responsible for claims processing and reviewed documentation 

associated with a non-random sample of approximately 20 inpatient 

claims and 20 outpatient claims that were paid between February 2014 

and February 2015.14 We reviewed documentation for 156 claims in all 

and interviewed managers or staff at the four VHA claims processing 

locations to identify factors affecting the timeliness of payments for these 

claims.15 To assess the reliability of VHA’s data on claims that were paid 

between February 2014 and February 2015, we interviewed 

knowledgeable agency officials, manually reviewed the content of the 

claims data, and electronically tested the data for missing values, outliers, 

and obvious errors. We concluded that the data were sufficiently reliable 

 14We selected our claims sample on the basis of variation in the number of days elapsed 

between the date of service and the date of payment for each claim.

15We initially selected and received documentation for 40 claims—20 inpatient and 20 

outpatient claims—from each of the four VHA claims processing locations we visited, for a 

total of 160 claims. However, we excluded 4 claims from our sample, resulting in a sample 

of 156 claims. We excluded 1 claim because the documentation we received was not for 

the claim we had originally selected as part of our sample, and we excluded 3 other claims 

because they were claims for home health services, which are processed using a different 

system than the one that is used to process other claims for VA care in the community.
Page 7 GAO-16-353 Timeliness of Payments for VA Care in the Community

for selecting the samples of VHA claims we reviewed. Because the claims 

processing locations and samples of claims we reviewed at each location 

were not selected to be representative, we cannot generalize our findings 

to all VHA claims processing locations or to all claims for VA care in the 

community programs.

To gather information about community providers’ experiences with 

obtaining payments for their VA care in the community claims, we (1) 

interviewed officials from a non-random sample of 12 community 

providers that had submitted claims to the four VHA claims processing 

locations we visited and (2) collected written statements from 12 state 

hospital associations, which collectively represent the views of at least 

117 different hospitals or health care systems.16 We selected the nonrandom sample of community providers we interviewed from among the 

providers that had submitted the most claims between February 2014 and 

February 2015 to the four VHA claims processing locations we visited. 

Because the community providers and state hospital associations that 

participated in our review were not selected to be representative, we 

cannot generalize our findings to all providers participating in VA care in 

the community programs.

To examine VHA’s recent actions and plans to improve its claims 

processing and payment timeliness for VA care in the community, we 

reviewed relevant VA and VHA documentation and interviewed VHA 

officials. We also assessed VHA’s plans in the context of (1) best 

practices for planning, as reported in our prior work and (2) federal 

 16To collect statements from the state hospital associations about their experiences with 

VHA’s claims processing, we obtained the assistance of the American Hospital 

Association, which solicited written responses to our questions from its member hospitals 

and health care systems.
Page 8 GAO-16-353 Timeliness of Payments for VA Care in the Community

standards for internal control for information and communication.17 The 

internal control standard for information and communication relates to an 

agency’s ability to internally and externally communicate the necessary 

quality information to achieve the entity’s objectives.

We conducted this performance audit from January 2015 to April 2016 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 provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In response to a provision of the Choice Act, on October 1, 2014, VA 

transferred funds and the responsibility for managing and overseeing the 

processing of claims for VA care in the community from its Veterans 

Integrated Service Networks (VISN) and VA medical centers to VHA’s 

Chief Business Office for Purchased Care.18 Previously, VISNs and 

medical facilities were responsible for managing both their own budgets 

 17In past reports, we have identified best practices in planning. For example, see GAO, 

Combating Terrorism: Evaluation of Selected Characteristics in National Strategies 

Related to Terrorism, GAO-04-408T (Washington, D.C.: Feb. 3, 2004) and GAO, Social 

Security Disability: Additional Performance Measures and Better Cost Estimates Could 

Help Improve SSA’s Efforts to Eliminate Its Hearings Backlog, GAO-09-398 (Washington, 

D.C.: Sept. 9, 2009). To identify these best practices, we consulted numerous sources, 

including the Government Performance and Results Act of 1993, general literature on 

strategic planning and performance, and guidance from the Office of Management and 

Budget. Internal control is a process effected by an entity’s oversight body, management, 

and other personnel that provides reasonable assurance that the objectives of an entity 

will be achieved. See GAO, Standards for Internal Control in the Federal Government, 

GAO-14-704G (Washington, D.C.: Sept. 2014) and GAO, Standards for Internal Control in 

the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999).

18Pub. L. No. 113-146, § 106, 128 Stat.1754, 1768-69 (2014). VHA’s health care system 

is divided into areas called Veterans Integrated Service Networks (VISN), each 

responsible for managing and overseeing medical facilities within a defined geographic 

area. VISNs oversee the day-to-day functions of VA medical facilities that are within their 

boundaries. Each VA medical facility is assigned to a single VISN. At the start of fiscal 

year 2016, there were 21 VISNs, but VA is in the process of consolidating some VISNs so 

that by the end of fiscal year 2018, there will be 18 VISNs. 

Background

Choice Act Provisions 

Related to Oversight of VA 

Care in the Community 

and Payment for

Community Providers
Page 9 GAO-16-353 Timeliness of Payments for VA Care in the Community

for VA care in the community and the staff who processed these claims. 

After this transition, VHA’s Chief Business Office for Purchased Care 

became responsible for overseeing VA’s budget for care in the 

community programs and more than 2,000 staff working at 95 claims 

processing locations nationwide.

The Choice Act also expressed the sense of Congress that VA shall 

comply with the Prompt Payment Act’s implementing regulations (or any 

corresponding similar regulation or ruling) when paying for health care 

pursuant to contracts entered into with community providers.19 Generally, 

these regulations require executive branch agencies to add interest 

penalties to payments made to vendors after the contractually established 

payment date, or 30 days after the date the agencies receive a proper 

invoice, if the contract specifies no due date.20

VHA has numerous programs through which it purchases VA care in the 

community services. As described in a recent independent assessment of 

VHA’s health care system, which was mandated by the Choice Act, these 

programs offer different types of services, have varying eligibility criteria 

for veterans and community providers, and establish different rules 

governing payment rates.21 In addition, for all types of VA care in the 

community services except individually authorized outpatient care, 

community providers must include medical documentation with the claims 

they submit to VHA or its third party administrators (TPA). (See appendix 

I for a side-by-side comparison of various features of these VA care in the 

community programs.) In what follows we describe the primary ways VHA 

purchases care in the community services, the applicable payment rates, 

 19Id., § 105(a), 128 Stat. at 1767, referring to 5 C.F.R., part 1315, the regulations 

implementing the statutory provisions commonly referred to as the Prompt Payment Act, 

31 U.S.C. §§ 3901-3907.

205 C.F.R. §§ 1315.1(a)-(b), 1315.4(g)(1) (2016).

21See CMS Alliance to Modernize Healthcare, Independent Assessment of the Health 

Care Delivery Systems and Management Processes of the Department of Veterans 

Affairs, Assessment C (Care Authorities) and Assessment I (Business Processes) (Sept. 

1, 2015).

Types of VA Care in the 

Community Services, 

Reimbursement Rates, 

and Medical 

Documentation 

Requirements
Page 10 GAO-16-353 Timeliness of Payments for VA Care in the Community

and the extent to which VHA requires community providers to submit 

medical documentation as a condition of claims payment.22

• Individually authorized care. The primary means by which VHA has 

traditionally purchased care from community providers is through 

individual authorizations. When a veteran cannot access a particular 

specialty care service from a VA medical facility—either because the 

service is not offered or the veteran would have to travel a long 

distance to obtain it from a VA medical facility—the veteran’s VA 

clinician may request an individual authorization for the veteran to 

obtain the service from a community provider. If this request is 

approved and the veteran is able to find a community provider who is 

willing to accept VA payment, VA will pay the provider on a fee-forservice basis. Generally, VA pays Medicare’s applicable rates for 

these services, unless the community provider has an existing 

contract and negotiated rates with a VA medical facility. For 

individually authorized inpatient care, VHA requires community 

providers to submit discharge summaries, at a minimum, as a 

condition of payment. For individually authorized outpatient care, the 

authorization itself states whether the community provider must 

submit any medical documentation as a condition of payment.

• Emergency care. When care in the community is not preauthorized, 

VA may reimburse community providers for two different types of 

emergency care: 1) emergency care for a condition related to a 

veteran’s service-connected disability and 2) emergency care for a 

condition not related to a veteran’s service-connected disability.

23 The 

latter care is commonly referred to as Millennium Act emergency 

care.24

For service-connected emergency care, VA generally pays applicable 

Medicare rates, unless the community provider has an existing 

 22In addition to the programs described here, VA is also authorized to purchase care from 

DOD and Indian Health Service facilities, community nursing homes, and communitybased home health providers. 38 U.S.C. §§ 1710, 1720, 8111, and 8153.

23See 38 U.S.C. § 1728(a)(1)-(4), which lists the circumstances under which VA may 

reimburse community providers for emergency care related to a service-connected 

disability. See 38 U.S.C. § 1725, which sets forth VA’s authority to reimburse community 

providers for emergency care not related to a service-connected disability.

24See Veterans Millennium Health Care and Benefits Act, Pub. L. No. 106-117, § 111(a) 

113 Stat.1545, 1553-55 (1999) (codified, as amended, at 38 U.S.C. § 1725).
Page 11 GAO-16-353 Timeliness of Payments for VA Care in the Community

contract and negotiated rates with a VA medical facility. For 

Millennium Act emergency care, VA generally pays the lesser of the 

amount for which the veteran is personally liable (if a third party such 

as motor vehicle insurance or workers’ compensation insurance first 

paid for some portion of the care) or 70 percent of applicable 

Medicare rates. For claims for both types of emergency care, 

community providers are required to submit accompanying medical 

documentation, so that clinicians at VHA’s claims processing locations 

can determine whether or not the condition treated is related to the 

veteran’s service-connected disability and whether it meets the

prudent layperson standard of an emergency.25 (See appendix II for a 

more detailed description of the criteria that must be met before VHA 

will pay claims for these two types of emergency care.)

• Patient-Centered Community Care (PC3). In September 2013, VA 

awarded contracts to two TPAs to develop regional networks of 

community providers of specialty care, mental health care, limited 

emergency care, and maternity and limited newborn care when such 

care is not feasibly available from a VA medical facility. VA and the 

TPAs began implementing the PC3 program in October 2013, and it 

was fully implemented nationwide as of April 2014.26 In August 2014, 

VA expanded the PC3 program to allow community providers of 

primary care to join the networks. PC3 is a program VA created under 

existing statutory authorities, not a program specifically enacted by 

law. To be eligible to obtain care from PC3 providers, veterans must 

meet the same criteria that are required for individually authorized VA 

care in the community services.

 25A medical emergency exists when the condition is of such a nature that a prudent 

layperson would reasonably expect that delay in seeking immediate medical attention 

would be hazardous to life or health. The standard would be met if there was an 

emergency medical condition manifesting itself by acute symptoms of sufficient severity 

(including severe pain) that a prudent layperson who possesses an average knowledge of 

health and medicine could reasonably expect the absence of immediate medical attention 

to result in placing the health of the individual in serious jeopardy, serious impairment to 

bodily functions, or serious dysfunction of any bodily organ or part. See 38 C.F.R. § 

17.1002(b) (2015). The prudent layperson standard emphasizes the patient’s presenting 

symptoms, rather than the final diagnosis, when determining whether to pay emergency 

medical claims.

26The two TPAs that currently hold these contracts are TriWest Healthcare Alliance and 

Health Net Federal Services.
Page 12 GAO-16-353 Timeliness of Payments for VA Care in the Community

When they join the PC3 networks, community providers agree to be 

reimbursed at rates they negotiate with the TPAs, which are 

reportedly a percentage of applicable Medicare rates. As a condition 

of their contracts with VA, the two TPAs are required to collect 

medical documentation from the community providers and return it to 

VA in a timely manner. Upon receipt, staff at VA facilities are 

responsible for scanning the associated medical documentation and 

entering it into the veteran’s VA electronic health record so that it is 

available for VA clinicians to view.

• Veterans Choice Program. The Choice Act provides, among other 

things, temporary authority and funding for veterans to obtain health 

care services from community providers to address long wait times, 

lengthy travel distances, or other challenges accessing care at a VA 

medical facility.27 Under this authority, VHA introduced the Veterans 

Choice Program in November 2014. As stated in VA’s December 

2015 guidance, the program currently allows eligible veterans to 

obtain health care services from community providers if the veteran 

meets any of the following criteria:28

• the next available medical appointment with a VA provider is more 

than 30 days from the veteran’s preferred date or the date the 

veteran’s physician determines he or she should be seen;

• the veteran lives more than 40 miles driving distance from the 

nearest VA facility with a full-time primary care physician;

• the veteran needs to travel by air, boat, or ferry to the VA facility 

that is closest to his or her home;

 27Pub. L. No. 113-146, § 101, 128 Stat. 1754, 1755-1765 (2014).

28Veterans Health Administration, Veterans Choice Program Eligibility Details

(Washington, D.C.: U.S. Department of Veterans Affairs, 2015). In its technical comments 

on a draft of this report, VA officials suggested that our report should track the statutory 

language in describing Choice Act requirements. However, we chose to present the 

statutory summaries VA published in its guidance in order to reflect VA’s implementation 

of applicable statutory requirements.
Page 13 GAO-16-353 Timeliness of Payments for VA Care in the Community

• the veteran faces an unusual or excessive burden in traveling to a 

VA facility based on geographic challenges, environmental 

factors, or a medical condition;29

• the veteran’s specific health care needs, including the nature and 

frequency of care needed, warrants participation in the program;30

or

• the veteran lives in a state or territory without a full-service VA 

medical facility.31

To administer the Veterans Choice Program, VHA modified its contracts 

with the two TPAs it selected to administer the PC3 program. These 

contractors are responsible for enrolling community providers in their 

networks or establishing Choice Provider Agreements with the providers. 

Veterans Choice Program providers are generally paid Medicare rates.

Community providers who are not part of the PC3 or Veterans Choice 

Program networks submit claims for preauthorized and emergency care 

to one of VHA’s 95 claims processing locations.32 For PC3 and Veterans 

Choice Program care, community providers submit their claims to the 

TPAs, and the TPAs process the claims and pay the community 

providers. Subsequently, the TPAs submit claims to one of VHA’s claims 

processing locations—either the one that authorized the care, in the case 

of PC3 claims, or the one that VHA has designated to receive Veterans 

Choice Program claims. VHA staff at these locations process these 

 29Staff at the veteran’s local VA medical facility will work with the veteran to determine if 

he or she meets this criterion. 

30A determination about whether the veteran meets this criterion will be made in 

conjunction with staff at the veteran’s local VA medical facility.

31Specifically, veterans who reside in Alaska, Hawaii, New Hampshire, or a U.S. territory 

would be eligible for the program under this criterion. Veterans residing in New Hampshire 

are only eligible if they reside more than 20 miles away from the White River Junction VA 

medical center, which is located in Vermont.

32If the claim is for individually authorized care, the community provider submits it to the 

VHA claims processing location that processes claims for the VA medical facility that 

authorized the veteran’s care. If the claim is for emergency care, the community provider 

submits it to the VHA claims processing location that processes claims for the VA medical 

facility that is located nearest to where the community provider rendered the emergency 

services.

VHA’s System for 

Processing Claims from 

Community Providers
Page 14 GAO-16-353 Timeliness of Payments for VA Care in the Community

claims using the same systems used to process other claims for VA care 

in the community programs, and VA reimburses the TPAs for the care.

To process claims for VA care in the community programs, staff at VHA’s 

claims processing locations use the Fee Basis Claims System (FBCS). 

FBCS does not automatically apply relevant criteria and determine 

whether claims are eligible for payment. Rather, staff at VHA’s claims 

processing locations must make determinations about which payment 

authority applies to each claim and which claims meet applicable 

administrative and clinical criteria for payment. (See table 2 for a 

description of these steps.) In addition to processing claims for VA care in 

the community programs, staff at VHA’s claims processing locations are 

also responsible for responding to telephone inquiries from community 

providers who call to check the status of their claims or inquire about 

claims that have been rejected.

Table 2: Veterans Health Administration’s (VHA) Steps for Processing Claims for Care in the Community, as of March 2016

Processing step Description

Receipt and scanning of claims 

and medical documentation

VHA policy requires that paper claims be manually date-stamped and scanned into the Fee 

Basis Claims System (FBCS) upon receipt. Electronic claims are imported into FBCS.

If the community provider is required to submit medical documentation for the claim to be 

processed—which is the case for most types of the Department of Veterans Affairs’ (VA) care in 

the community services—VA can only accept it in paper form, and the medical documentation 

must also be scanned into FBCS.

Verification Once paper claims are scanned, staff at VHA’s claims processing locations visually compare the 

scanned image of the claim to the text in FBCS to verify that the system accurately captured 

information from the claim and then manually enter any information that is missing or not 

accurately captured. They also determine whether claims should be rejected as duplicates of 

other claims that have already been processed.

Distribution After electronic and paper claims are entered into FBCS, staff at the VHA claims processing 

location electronically route the claims to staff with the appropriate processing expertise.

Processing Staff at VHA’s claims processing locations use FBCS to review claims for VA care in the 

community and determine whether the claims meet administrative and clinical criteria for 

payment.

Approval or rejection In FBCS, VHA’s claims processing staff manually check off each line item that is approved for 

payment on a claim and enter into FBCS reasons for rejecting any items not approved for 

payment.

After determining which line items should be paid, the staff use FBCS to calculate payment 

amounts for each approved line item.
Page 15 GAO-16-353 Timeliness of Payments for VA Care in the Community

Processing step Description

Payment After approving claims for payment, staff at VHA’s claims processing locations route the claims 

to VA’s “program integrity tool,” which electronically checks claims for potential improper 

payments before any payments are made.

Claims are then released for payment; VA’s financial services center issues an electronic 

payment to the community provider or the third party administrator (TPA), and claims processing 

staff mark the claims as paid in FBCS.

Notification to community

provider

After claims have been paid or rejected, FBCS generates preliminary fee remittance advice 

reports, which staff at VHA’s claims processing locations must print and mail to the community 

providers and TPAs. These documents include a listing of claim dates and services, the reasons 

why payments for any services were rejected, and the payment amounts for approved services.

Source: GAO analysis of VHA documents. | GAO-16-353

For an illustration of the steps VHA staff must take to process claims from 

community providers and the TPAs, including which steps require manual 

intervention from staff, see appendix III.

VHA, CMS, and DHA all have requirements for claims processing 

timeliness. See table 3.

Table 3: Agencies’ Claims Processing Timeliness Requirements

Agency Requirement

Veterans Health Administration

(VHA)

A VHA directive states that 90 percent of all claims for the Department of Veterans Affairs’ (VA) 

care in the community services must be processed (either paid or rejected) within 30 days of 

receipt.a

Centers for Medicare & Medicaid 

Services (CMS)

For Medicare claims, the standards were set by law and require that 95 percent of clean 

claims—those claims with sufficient information to be processed (either paid or denied)—must 

be processed within 30 days of receipt.b In accordance with statute, CMS’s manual for 

processing Medicare claims states that the remaining claims must be processed within 45 days 

of receipt.c

Defense Health Agency (DHA) TRICARE Managed Care Support Contractors are subject to claims processing timeliness 

requirements outlined in law and in DHA’s TRICARE Operations Manual. The requirements in 

the Operations Manual are more stringent than in the law. The manual states that 98 percent of 

claims with sufficient information to be processed must be paid or denied within 30 days of 

receipt and that all claims must be processed to completion within 90 days of receipt.d

Source: GAO analysis of VHA, CMS, and DHA policies. | GAO-16-353

a

VHA Directive 2010-005, Timeliness Standards for Processing Non-VA Provider Claims (Jan. 27, 

2010).

b

A “clean claim” has no defect or impropriety (including a lack of required substantiating 

documentation) or particular circumstance requiring special treatment that prevents timely payment of 

the claim. 42 U.S.C. § 1395h(c)(2)(B). Other claims require additional investigation or development 

before they can be paid. CMS, Medicare Claims Processing Manual, Publication 100-04 (Baltimore, 

MD: May 15, 2015).

c

42 U.S.C. § 1395ff(a)(2).

VHA, Medicare, and 

TRICARE Claims 

Processing Timeliness 

Requirements
Page 16 GAO-16-353 Timeliness of Payments for VA Care in the Community

d

By law, 95 percent of clean TRICARE claims must be processed within 30 days of submission to the 

claims processor, and all clean claims must be processed within 100 days of submission to the claims 

processor. 10 U.S.C. § 1095c(a).

VHA, Medicare, and TRICARE follow similar steps to process claims for 

care they purchase on behalf of their beneficiaries. For example—even 

though paper claims account for a relatively small proportion of the overall 

number of claims submitted by Medicare and TRICARE providers—

Medicare’s and TRICARE’s claims processors must scan incoming paper 

claims and verify that information from the claims was captured 

accurately when the claims were scanned, just as staff at VHA’s claims 

processing locations must do. In addition, like VHA, Medicare’s and 

TRICARE’s claims processors send notifications to providers after claims 

have been processed, to inform them of whether payments were 

approved or denied for each service listed on the claim.

Even though these three agencies follow similar steps to process claims, 

the volume of claims that the agencies process varies widely, and the 

actual systems they use to carry out these steps differ markedly in 

several key respects.33 (For a summary of selected similarities and 

differences between VHA’s, Medicare’s, and TRICARE’s systems for 

processing health care claims, see appendix IV.) Based on our review of 

applicable documentation and interviews with officials from CMS, DHA, 

and two contractors that process Medicare and TRICARE claims, we 

identified the following key differences between VHA’s claims processing 

system and those of Medicare and TRICARE.34 These key differences 

are described below.

• Use of contractors. Unlike VHA, which employs its own staff to 

process claims for VA care in the community services, both Medicare 

 33In fiscal year 2014, VHA processed about 13.3 million claims, Medicare Administrative 

Contractors (MAC) processed over 1.2 billion claims, and TRICARE contractors 

processed over 55.7 million claims.

34In addition to the differences we describe between VHA’s claims processing system and 

those of Medicare and TRICARE, it is also important to note that there are differences in 

the number of beneficiaries served by these three programs and the amounts they spend 

to purchase health care services. In addition, as we have described previously in this 

report, the eligibility criteria and payment amounts for each type of VA care in the 

community vary (for example, depending on whether the veteran has a service-connected 

disability and whether care was authorized in advance), whereas for Medicare and 

TRICARE, eligibility criteria and payment rates are more standardized. 

While Steps for 

Processing Claims 

are Similar, VHA’s 

Claims Processing 

System Is 

Considerably Less 

Automated than 

Medicare’s and 

TRICARE’s Systems
Page 17 GAO-16-353 Timeliness of Payments for VA Care in the Community

and TRICARE use contractors to process claims for care purchased 

from community providers. CMS uses contractors called Medicare 

Administrative Contractors (MAC) to process claims for health care 

items and services. For TRICARE, DHA contracts with three managed 

care support contractors (MCSC), which are responsible for 

establishing regional networks of civilian providers, managing 

referrals, and providing customer service, among other things. To pay 

claims submitted by TRICARE’s network providers, the three MCSCs 

have each subcontracted with a single claims processing contractor.35

• Number of claims processing locations. Contractors responsible 

for processing Medicare and TRICARE claims operate in fewer 

locations than do staff at VHA’s claims processing locations. Most 

Medicare Part A and Part B claims are processed by one of 12 

jurisdiction-based MACs or 4 MACs that specialize in processing 

durable medical equipment claims, and all TRICARE claims are 

processed by a single contractor.36 In contrast, VHA employed claims 

processing staff in 95 different locations as of November 2015, and 

community providers in a given state may submit claims to multiple 

VHA claims processing locations depending on the type of VA care in 

the community and where they render services. As we have reported 

previously, CMS established its current regional model for MACs in 

2006 to improve services to beneficiaries and providers and achieve 

operational efficiencies and cost savings by better balancing claims 

processing workloads among fewer contractors than it had used in the 

past.37 Prior to that time, there were 51 contractors responsible for 

processing Medicare claims.

• Rate of electronic claim submission and the capacity to accept 

medical documentation electronically. While VHA’s, Medicare’s, 

and TRICARE’s claims processing systems can all accept claims 

submitted by providers electronically, the rate of electronic submission 

 35According to DHA officials, DHA does not require the three MCSCs to contract with the 

same entity for claims processing; however, all three MCSCs have selected the same 

contractor to perform this function.

36Some MACs have more than one contract. CMS reported that it had a total of nine 

contractors as of March 2016.

37See GAO, Medicare Contracting Reform: Agency Has Made Progress with 

Implementation, but Contractors Have Not Met All Performance Standards, GAO-10-71 

(Washington, D.C.: Mar. 25, 2010). 
Page 18 GAO-16-353 Timeliness of Payments for VA Care in the Community

is much higher in Medicare and TRICARE. According to CMS and 

DHA officials, the vast majority of Medicare and TRICARE claims are 

submitted electronically. The officials said that providers submit about 

99 percent of Medicare Part A claims, 98 percent of Medicare Part B 

claims, and between 91 and 95 percent of TRICARE claims 

electronically. In contrast, according to VHA officials, about 40 percent 

of claims from providers participating in VA care in the community are 

submitted electronically. In addition, Medicare and TRICARE 

contractors’ systems can accept medical documentation 

electronically, unlike VHA’s claims processing system. VHA’s inability 

to accept medical documentation electronically discourages 

community providers from submitting claims electronically because 

VHA cannot process many types of VA care in the community claims 

until medical documentation is received. Given the high rates of 

electronic submission of claims and medical documentation among 

Medicare and TRICARE providers, the Medicare and TRICARE 

contractors do not need to devote as many staff resources to 

scanning paper claims and medical documentation and verifying that 

information was captured accurately as do VHA’s claims processing 

locations.

• Prior authorization. Unless services delivered by community 

providers meet the coverage criteria for one of VHA’s two emergency 

care programs, all VA care in the community services must be 

authorized in advance of when veterans access the care in order for 

claims to be paid. Medicare, on the other hand, generally does not 

require prior authorization for the services it covers, and TRICARE 

generally only requires prior authorization for specialty care 

services.38

• Automatic claim adjudication. Compared to VHA’s system, the 

claims processing systems used in Medicare and TRICARE are more 

automated. While staff at VHA’s claims processing locations must 

manually apply administrative and clinical criteria to every claim to 

determine whether the claims should be paid, officials from the 

Medicare and TRICARE contractors we interviewed described their 

organizations’ high degrees of automatic claim adjudication. Medicare 

officials estimated that the MACs process about 95 percent of claims 

 38In selected states, CMS is currently testing prior authorization for certain equipment and 

services, such as power mobility devices, hyperbaric oxygen therapy, and scheduled 

ambulance transport.
Page 19 GAO-16-353 Timeliness of Payments for VA Care in the Community

with no manual intervention, while officials from the contractor 

responsible for processing TRICARE claims estimated that their 

organization has automated about 75 percent of the claims 

adjudication process.

• Medical documentation as a condition of payment. While VHA 

requires providers to submit medical documentation for most types of 

claims for VA care in the community services, Medicare and 

TRICARE do not. According to CMS and DHA officials, Medicare and 

TRICARE providers are only required to submit medical 

documentation for a small percentage of claims, such as those 

flagged during a prepayment review for an examination of medical 

necessity.

• Web-based provider self-service portals. Unlike VHA, Medicare 

and TRICARE contractors both offer Web-based provider self-service 

portals. Officials from both of the Medicare and TRICARE contractors 

we interviewed said that their organizations had established Webbased provider self-service portals, which officials told us have 

decreased providers’ reliance on telephone-based customer service. 

With these portals, providers are able to access information about the 

status of their claims 24 hours a day, 7 days a week. In contrast, 

VHA’s claims processing locations only offer telephone-based 

provider customer service.

• Dedicated customer service staff. Unlike VHA, Medicare and 

TRICARE have dedicated customer service staff. The two Medicare 

and TRICARE contractors each maintain units with dedicated 

customer service staff, while staff in other units focus on claims 

processing. Officials from the two contractors said that within their 

customer service units, certain individuals are designated to handle 

calls from providers with more specialized, complex inquiries, while 

others focus on calls from providers who are inquiring about more 

routine issues. In contrast, at VHA’s claims processing locations, staff 

who process claims are also responsible for delivering telephonebased provider customer service.
Page 20 GAO-16-353 Timeliness of Payments for VA Care in the Community

In fiscal year 2015, VHA’s processing of claims for VA care in the 

community services was significantly less timely than Medicare’s and 

TRICARE’s claims processing. VHA officials told us that the agency’s 

fiscal year 2015 data show that VHA processed about 66 percent of 

claims within the agency’s required timeframe of 30 days or less.39 In 

contrast, CMS and DHA data show that in fiscal year 2015, Medicare’s 

and TRICARE’s claims processing contractors processed about 99 

percent of claims within 30 or fewer days of receipt.40 According to CMS 

 39VHA’s claims processing timeliness data do not account for the time it takes the TPAs to 

pay the community providers’ PC3 or Veterans’ Choice Program claims; however, VHA’s 

data do account for the time it takes VHA’s claims processing locations to process and 

reimburse the TPAs for these claims.

40The percentages reported here are for VHA, Medicare, and TRICARE claims that were 

processed within 30 days of receipt when they had sufficient information to be processed. 

Both Medicare and TRICARE have separate measures of claims processing timeliness for 

claims that require additional information to be processed. VHA has only one measure of 

claims processing timeliness, but if additional information is needed to process claims 

after they are initially received, VHA excludes from its calculation of timeliness any 

calendar days that elapse while it is awaiting this information.

VHA’s Fiscal Year 

2015 Claims 

Processing Was 

Significantly Less 

Timely Than 

Medicare’s and 

TRICARE’s, and VHA 

Has Generally Not 

Paid Interest 

Penalties on Late 

Payments

VHA’s Claims Processing 

and Payments Were 

Significantly Less Timely 

Than Medicare’s and 

TRICARE’s in Fiscal Year 

2015, and VHA’s Data 

Likely Overstate VHA’s

Performance
Page 21 GAO-16-353 Timeliness of Payments for VA Care in the Community

and DHA officials, the vast majority of Medicare and TRICARE claims are 

submitted electronically.41

However, the difference between VHA’s claims processing timeliness and 

that of Medicare and TRICARE is likely greater than what VHA’s available 

data indicate. Specifically, VHA’s data likely overstate the agency’s claims 

processing timeliness because they do not account for delays in scanning 

paper claims, and VHA officials told us that paper claims account for 

approximately 60 percent of claims for VA care in the community 

services. VHA’s policy states that determinations of claims processing 

timeliness should be based upon the date the claim is received, but 

VHA’s systems can only calculate timeliness on the basis of the date the 

claim is entered into FBCS.42 When community providers submit paper 

claims, VHA policy requires claims processing staff to manually datestamp them and scan the paper claims into FBCS on the date of receipt.43

Because FBCS cannot electronically read the dates that are manually 

stamped on paper claims, the scan date becomes the date used to 

calculate claims processing timeliness. To the extent that paper claims 

are not scanned into FBCS upon receipt, this elapsed time is not reflected 

in VHA’s timeliness calculations.

 41Officials from CMS and DHA told us that their data on claims processing timeliness are 

reliable because the majority of Medicare and TRICARE claims are submitted 

electronically, their contractors’ claims processing systems are highly automated, and 

agency officials can independently validate the contractors’ performance data. 

42VHA officials told us that they intend to revise their current policy for claims processing 

timeliness because it does not account for the fact that it takes more time, on average, for 

VHA to process emergency care claims than it does to process claims for preauthorized 

VA care in the community services. According to VHA officials, in fiscal year 2015, staff at 

their claims processing locations took an average of 32 days to process claims for 

emergency care, compared to an average of 16 days for claims for care that was 

preauthorized. VHA officials said future VHA policy would require claims for preauthorized 

care to be processed in 30 days or less and claims for emergency care be processed in 

45 days or less, and that these new metrics would be more closely aligned with 

Medicare’s and TRICARE’s standards, which permit more time for claims processing 

when additional information must be requested from providers. However, VHA’s systems 

will still measure claims processing timeliness on the basis of the dates claims are entered 

into FBCS, which may not be the actual date of receipt for paper claims, so it is unlikely 

that VHA’s new metrics will result in more reliable estimates of the agency’s claims 

processing timeliness.

43In contrast, electronic claims automatically receive an electronic date-stamp when they 

are imported into FBCS.
Page 22 GAO-16-353 Timeliness of Payments for VA Care in the Community

Our review raises questions about whether staff at VHA’s claims 

processing locations are following the agency’s policy for scanning paper 

claims into FBCS upon receipt. We do not know the extent of delays in 

scanning paper claims at all of VHA’s claims processing locations. 

However, our analysis of the non-generalizable sample of 156 claims for 

VA care in the community services from the four VHA claims processing 

locations we visited suggests that it may have taken about 2 weeks, on 

average, for staff to scan the paper claims in our sample into FBCS. This 

estimate is based on the number of days that elapsed between the dates 

that community providers created 86 of the 94 paper claims in our sample

and the dates the claims were scanned into FBCS.44 Based on this 

analysis, we found that the number of days between the creation date 

and the scanned date for the paper claims in our sample ranged from 2 

days to 90 days.

Our observations at one claims processing location we visited were 

consistent with our analysis of the sampled claims. For example, we 

observed about a dozen bins of paper claims and medical documentation 

waiting to be scanned, and some of these bins were labeled with dates 

indicating they were received by the claims processing location about a 

month before our visit. Additionally, this claims processing location was 

the only one of the four claims processing locations we visited that 

manually date-stamped all of its paper claims upon receipt. Staff at 

another claims processing location told us that they only date-stamp 

paper claims for emergency care upon receipt because these claims are 

only eligible for payment if they have been received within a certain 

amount of time after the date of service.45 However, the staff said they do 

 44VHA policy states that when the date of receipt is unknown, VHA will use the date of the 

invoice to measure timeliness. Consistent with that policy, our estimate of the 2-week 

delay in scanning paper claims also factored in 2 days for the paper claims to be mailed to 

VHA by the community providers. Our analysis also excluded eight paper claims that 

appeared to be duplicates of claims that the community providers had previously 

submitted, based on the number of calendar days that had elapsed between the creation 

dates and the scan dates. At least one community provider told us that they do not change 

the creation date when they reprint and resubmit claims that VA has previously rejected.

45Claims for Millennium Act emergency care must be received by VHA within 90 days of 

the latest of the following: the date of discharge; the date of the patient’s death, provided 

death occurred during transport to or stay in an emergency treatment facility; or the date 

that the veteran exhausted, without success, actions to obtain payment or reimbursement 

from a third party. VHA can deny these emergency care claims if they are submitted by 

community providers after 90 days. Claims for emergency care related to a veteran’s 

service-connected disability must be received within 2 years.
Page 23 GAO-16-353 Timeliness of Payments for VA Care in the Community

not date-stamp non-emergency care claims because to do so would be 

too time-consuming. Staff at the other two claims processing locations 

told us that they did not date-stamp any claims.

These findings from the four claims processing locations we visited for 

this review are consistent with the claims processing deficiencies we 

identified in our 2014 report on the implementation of the Millennium Act 

emergency care benefit.46 Specifically, we found that the VHA claims 

processing locations we reviewed for the 2014 report were rarely datestamping incoming paper claims and were not promptly scanning a 

significant percentage of the paper claims we reviewed into FBCS. In our 

report, we recommended that VHA implement measures to ensure that all 

incoming claims are date-stamped and scanned into FBCS on the date of 

receipt, and VA agreed with our recommendations. Soon after we issued 

our 2014 report, VHA reiterated its date-stamping and scanning policies 

on national calls with managers responsible for claims processing, posted 

articles in its biweekly bulletin for managers and staff, and conducted 

online training for staff that communicated the importance of datestamping and promptly scanning claims. However, the observations from 

our most recent review of a new sample of claims at four other claims 

processing locations suggest that VHA had not monitored the operational 

effectiveness of their corrective actions to address our recommendation. 

VHA officials said that when they became aware of our more recent 

findings, they began requiring managers at their claims processing 

locations to periodically certify in writing that all incoming paper claims 

have been date-stamped and scanned on the day of receipt.

Prior to October 2015, VHA did not pay interest penalties on most late 

payments to community providers, while Medicare and TRICARE have 

done so. Specifically, until October 2015, VHA paid no interest on claims 

it paid late for community care delivered by non-contract providers 

through individual authorizations. According to VHA officials, the agency 

had not paid interest penalties on these individually authorized services 

because VA did not interpret the Prompt Payment Act as applying to 

these payments. However, in October 2015, VA’s Office of General 

Counsel issued a new legal opinion specifying that the Prompt Payment 

Act does apply to claims for VA care in the community services that were 

 46See GAO-14-175.

Unlike Medicare and 

TRICARE, VHA Has 

Historically Not Paid 

Interest Penalties on Most 

Late Payments to 

Community Providers but 

Recently Changed This 

Policy
Page 24 GAO-16-353 Timeliness of Payments for VA Care in the Community

(1) individually authorized in advance, or (2) delivered by community 

providers who have contracted with the TPAs to participate in Veterans 

Choice Program networks.47 Since then, from October 2, 2015 through 

November 21, 2015, VHA paid approximately $409,000 in interest 

penalties on claims for this care, according to VHA officials.

To facilitate interest penalty payments on claims for individually 

authorized VA care in the community services, VHA established a 

process to automatically pay the penalties when these claims are paid 

more than 30 days after receipt. However, as we noted earlier in this 

report, paper claims that officially meet VHA’s timeliness standard could 

have been in VHA’s possession weeks before being scanned into FCBS, 

so VHA may not be paying interest on all claims that are paid more than 

30 days after the claims were actually received. This issue will likely 

persist until VHA ensures that all incoming paper claims are datestamped and scanned into FBCS on the date of receipt, as we 

recommended in 2014.

While VHA has not historically paid interest penalties on claims that are 

paid late, Medicare and TRICARE officials said their agencies have for 

many years considered the care provided under their programs to be 

subject to the Prompt Payment Act. In fiscal year 2014, CMS reported it 

paid about $3.3 million in interest penalties to Medicare providers (with 

overall payments for fee-for-service Medicare services totaling $357.3 

billion), and DHA reported it paid about $386,000 in interest penalties to 

TRICARE providers (with overall payments for TRICARE services totaling 

about $10.5 billion).48 For both Medicare and TRICARE, the sum of 

interest penalties—relative to overall expenditures for services—was 

relatively low in fiscal year 2014 because these programs generally paid 

providers in a timely manner. See table 4.

 47The decision also specified that the Prompt Payment Act does not apply to care 

authorized by the Choice Act pursuant to interagency or provider agreements.

48The MACs only process Medicare fee-for-service claims, so the amounts of interest 

penalties and overall payments for Medicare services listed here do not include spending 

for claims or interest penalties paid by Medicare Part C (Medicare Advantage) and 

Medicare Part D (Medicare’s outpatient prescription drug benefit). 
Page 25 GAO-16-353 Timeliness of Payments for VA Care in the Community

Table 4: Reported Expenditures for the Department of Veterans Affairs’ (VA) Care in the Community Services, Medicare, and 

TRICARE and Sum of Interest Penalties Paid on Late Payments in Fiscal Year 2014

Expenditures and Interest Penalties VA care in the community Medicare TRICARE

Overall expenditures for care, fiscal year 2014 $5.6 billion $357.3 billiona $10.5 billion

Sum of payments that were subject to the Prompt Payment Act, 

fiscal year 2014

$1.7 billion $357.3 billion $10.5 billion

Sum of interest penalties on late payments for care, fiscal year 2014 $290,000 $3.3 million $386,000

Source: Veterans Health Administration, Centers for Medicare & Medicaid Services, and Defense Health Agency. | GAO-16-353

a

This includes only payments for Medicare fee-for-service claims and excludes payments for 

Medicare Advantage (the private health plan alternative to Medicare fee-for-service) and Medicare 

Part D (the outpatient prescription drug benefit provided through private plans).

During the course of our work, VHA officials and staff at three of the four 

claims processing locations we visited told us that the limitations of the 

existing information technology systems VHA uses for claims 

processing—and related workload challenges—have delayed processing 

and payment of claims for VA care in the community services. These 

identified limitations are described in more detail below.

• VHA cannot accept medical documentation electronically. While 

VHA has the capacity to accept claims from community providers and 

the TPAs electronically, it does not have the capacity to accept 

medical documentation electronically from the providers and TPAs.49

As a result, this documentation must be scanned into FBCS, which 

delays claims processing, according to VHA staff. Although VHA 

policy requires VHA staff to promptly scan paper claims into FBCS 

when received, delays can occur because staff do not have time to 

scan the high volume of claims and medical documentation received 

each day, and the capacity of scanning equipment is limited. For 

example, VHA staff at one claims processing location we visited told 

us that on Mondays (their heaviest day for mail since they do not 

 49For all types of VA care in the community services except individually authorized 

outpatient care, community providers must include medical documentation with the claims 

they submit to VHA or the TPAs. According to VHA officials, VHA cannot accept any 

medical documentation electronically because of (1) a lack of interoperability between 

VHA’s systems and the providers’ and TPAs’ systems and (2) concerns about 

safeguarding the security of veterans’ health information, among other things. However, 

according to VHA officials, selected claims processing locations have made arrangements 

with certain community providers that enable VHA’s claims processing staff to remotely 

access the community providers’ medical records electronically. 

Technology 

Limitations and 

Related Staffing 

Challenges Have 

Delayed VHA’s 

Claims Processing
Page 26 GAO-16-353 Timeliness of Payments for VA Care in the Community

receive mail on weekends), they do not scan any incoming claims with 

accompanying medical documentation. Instead, they generally scan 

only claims that do not have accompanying medical documentation on 

Mondays and then scan claims with accompanying medical 

documentation into FBCS on Tuesdays and Wednesdays. In some 

cases, the medical documentation community providers must submit 

can be extensive, which may further delay its entry into FBCS. 

Officials from one community health care system told us that the 

medical documentation they submit with claims can be between 25 to 

75 pages for each patient. With most types of claims requiring medical 

documentation, staff at VHA’s claims processing locations may need 

to scan a significant number of pages of incoming medical 

documentation each day.

• Authorizations for VA care in the community services are not 

always readily available in FBCS. Staff at three of the four VHA 

claims processing locations we visited told us that processing and 

payment can also be delayed when authorizations for VA care in the 

community services are unavailable in FBCS. Before a veteran 

obtains services from a community provider, staff at a VA medical 

facility must indicate in the veteran’s VA electronic health record (a 

system separate from FBCS) that the services have been authorized, 

and then these staff must manually create an authorization in FBCS. 

However, VHA officials and staff told us that these authorizations are 

sometimes unavailable in FBCS at the time claims are processed, 

which delays processing and payment. The authorizations are 

unavailable because either (1) they have been electronically 

suspended in FBCS, and as a result staff at the VA medical facility 

that authorized the care must release them before any associated 

claims can be paid, or (2) the estimated date of service on the 

authorization does not match the date that services were actually 
Page 27 GAO-16-353 Timeliness of Payments for VA Care in the Community

rendered, and new authorizations must be entered by staff at the 

authorizing VA medical facility before the claims can be paid.50

In our non-generalizable sample of 156 claims, 25 claims were 

delayed in being processed because an authorization was not initially 

available in FBCS, resulting in an average delay of approximately 42 

days in claims processing. Additionally, 8 of the 12 community 

providers we interviewed said they were aware that some of their 

payments had been delayed because authorizations were not 

available in FBCS when their claims arrived at the VHA claims 

processing location.

• FBCS cannot automatically adjudicate claims. FBCS cannot 

automatically adjudicate claims, and as a result, VHA staff must do so 

manually, which VHA staff told us can slow claims processing, make 

errors more likely, and delay claims payment. After information from 

claims and supporting medical documentation has been scanned and 

entered into FBCS, the system cannot fully adjudicate the claims 

without manual intervention. For example, FBCS lacks the capability 

to electronically apply relevant administrative and clinical criteria for 

Millennium Act emergency care claims, such as automatically 

determining whether a veteran is enrolled in the VHA health care 

system and whether they had received services from a VA clinician in 

the 24 months prior to accessing the emergency care. Instead, staff 

processing these claims perform searches within FBCS and manually 

select rejection reasons for any claims that do not meet VHA’s 

administrative or clinical criteria for payment.

 50A VA official provided additional detail on why the authorizations may be electronically 

suspended in FBCS and why the dates of service on the authorization and claim may not 

match. According to this official, when authorizations for inpatient care in the community 

services are entered into FBCS, they must include a discharge date. Because this date is 

generally not known until after the claim is received, staff at VA medical facilities may 

electronically suspend the authorization until they are alerted by staff from the VHA claims 

processing location that the claim has been received. No claims can be paid against an 

authorization while it is suspended, causing it to seem as though it is not available in 

FBCS. In cases where authorizations are not suspended, estimated discharge dates are 

entered. If VHA receives any claims with dates of service occurring after the date that was 

originally estimated for that inpatient episode of care, staff at the VA medical facility must 

create new authorizations in FBCS before staff at the VHA claims processing location can 

pay the claims.
Page 28 GAO-16-353 Timeliness of Payments for VA Care in the Community

Among the 156 claims we reviewed at four claims processing 

locations, it took an average of 47 days for claims processing staff to 

determine that the claims met the administrative and clinical criteria 

for payment. In addition, even after claims are approved for payment, 

they require additional manual intervention before the community 

providers can be paid. For example, in cases where FBCS cannot 

automatically determine correct payment rates for VA care in the 

community services, VHA staff manually calculate VHA’s payment 

rates and enter this information into FBCS. Staff we interviewed also 

told us that it usually takes about 2 days for claims to return from VA’s 

program integrity tool, which is a system outside FBCS where claims 

are routed for prepayment review of potential improper payments. If 

corrections must be made after the claims return from this 

prepayment review, payments can be delayed further.

• Weaknesses in FBCS and VHA’s financial management systems 

have also delayed claims payments. According to staff at three of 

the four claims processing locations we visited, payments on some 

VA care in the community claims are delayed because FBCS and 

VHA’s financial management systems do not permit officials to 

efficiently monitor the availability of funds for VA care in the 

community services. To centralize its oversight of VA care in the 

community, the Choice Act directed VA to transfer the authority for 

processing payments for VA care in the community from its VISNs 

and VA medical centers to VHA’s Chief Business Office for Purchased 

Care, a change VA implemented in October 2014. However, 

according to VHA officials from that office, monitoring the use of 

funds—at a national level—has remained largely a manual process 

due to limitations of FBCS and the use of separate systems to track 

obligations and expenditures. According to VHA officials, VHA uses 

historical data from FBCS to estimate obligations in VHA’s financial 

management systems on a monthly basis, and these estimates have 

been unreasonably low for some services, given the unexpected 

increase in utilization of VA care in the community services over the 

course of fiscal year 2015. In addition, these officials said that FBCS 

does not fully interface with VHA’s financial management systems 

used to track the availability of funds, which results in staff having to 

manually record the obligations for outpatient VA care in the 

community services in these systems on a monthly basis. Together, 

these two issues have impeded the ability of VHA to ensure that funds 

are available to pay claims for VA care in the community as they are 

approved, according to VHA officials responsible for monitoring the 

use of funds. We found that payments for 5 of the 156 claims we 
Page 29 GAO-16-353 Timeliness of Payments for VA Care in the Community

reviewed from four claims processing locations were delayed because 

of these issues, resulting in payment delays that ranged from 1 to 215 

days.51

• Inadequate equipment delays scanning of both paper claims and 

medical documentation. VHA officials also told us that inadequate 

scanning equipment delayed claims processing and adversely 

affected VHA’s claims payment timeliness. At the time of our review, 

staff responsible for scanning paper claims and medical 

documentation at one of the four claims processing locations we 

visited told us that they did not have adequate scanning equipment. At 

this location, the scanners that staff showed us were small enough to 

be placed on desktops, while the trays for feeding documents into the 

scanners could only handle a limited number of pages at one time. 

With an estimated 60 percent of claims and 100 percent of medical 

documentation requiring scanning, these staff said that they struggled 

to keep up with the volume of paper coming in to their claims 

processing location.

• Staffing shortages adversely affect claims processing timeliness.

In addition to the technological issues described above, VHA officials 

and staff also told us that staffing shortages have adversely affected 

VHA’s claims processing timeliness. According to VHA officials, the 

overall number of authorized positions for claims processing staff did 

not change after the October 2014 organizational realignment that 

transferred claims processing management and oversight 

responsibilities to the Chief Business Office for Purchased Care. 

However, VHA officials said that VHA’s claims processing workload 

increased considerably over the course of fiscal years 2014 and 2015. 

(See figure 1 for an illustration of the increase in VHA’s claims 

processing workload from fiscal year 2012 through fiscal year 2015.)

 51For more information on how VA tracks its obligations and projects utilization for care in 

the community programs, see GAO, VA’s Health Care Budget: Preliminary Observations 

on Efforts to Improve Tracking of Obligations and Projected Utilization, GAO-16-374T 

(Washington, D.C.: Feb. 10, 2016). This statement sets forth GAO’s preliminary 

observations on actions VA is taking to better track obligations and project future 

budgetary needs, which will be addressed in a forthcoming report.
Page 30 GAO-16-353 Timeliness of Payments for VA Care in the Community

Figure 1: Number of Claims for VA Care in the Community Processed by the 

Veterans Health Administration (VHA), Fiscal Years 2012 – 2015

According to VHA officials and staff, the increase in workload 

contributed to poor staff morale, attrition, and staff shortages—all 

of which contributed to delays in processing and impeded VHA’s 

claims processing timeliness. VHA officials told us that in early 

fiscal year 2015, there were about 300 vacancies among the 

estimated 2,000 authorized positions for claims processing staff.

The 12 community providers and 12 state hospital association 

respondents who participated in our review told us about various issues 

they had experienced with VHA’s claims processing system. These 

issues are described in more detail below.

• Administrative burden of submitting claims and medical 

documentation to VHA. Almost all of the community providers we 

interviewed (11 out of 12) and all of the state hospital association 

respondents that participated in our review described the 

administrative burden of submitting claims and medical 

documentation to their respective VHA claims processing locations. 

For example, one community provider told us that VHA claims only 

accounted for about five percent of their business, but the provider 

told us it employed one full-time staff member who was dedicated to 

VA Care in the

Community Providers 

Cite Administrative 

Burden, Lack of 

Notification, and 

Problems with Poor 

Customer Service
Page 31 GAO-16-353 Timeliness of Payments for VA Care in the Community

submitting claims to VHA and following up on unpaid ones. This same 

provider employed a second full-time staff member to handle 

Medicaid claims, but these accounted for about 85 percent of the 

provider’s business.

According to many of the community providers that participated in our 

review, obtaining payment from VHA often requires repeated 

submission of claims and medical documentation. Officials from one 

community provider we interviewed said that at one point, they had 

been hand delivering paper medical documentation with paper copies 

of the related claims to their VHA claims processing location, but VHA 

staff at this location still routinely rejected their claims for a lack of 

medical documentation. Similarly, six state hospital association 

respondents also reported that their members’ claims were often 

rejected, even though they always sent medical documentation to 

their VHA claims processing location by certified mail. Some of the 

community health care system and hospital officials who participated 

in our review explained that they often must submit medical 

documentation to their VHA claims processing location twice—once 

for the claim related to hospital services and again for claims related 

to physician services.

• Lack of notification about claims decisions. Community providers 

who participated in our review also explained that they rarely received 

written notifications from VHA about claims decisions. To inform 

community providers and the TPAs about whether their claims have 

been approved or rejected, staff at VHA’s claims processing locations 

print notices, known as preliminary fee remittance advice reports, and 

mail them to the providers and TPAs.52 However, community 

providers who participated in our study stated that they rarely received 

these paper reports in the mail, and even though they received VA 

payments electronically, it was not clear without the remittance advice 

reports which claims the payments applied to or whether VHA denied 

payment for certain line items on some claims. Unlike Medicare and 

TRICARE, VHA has no online portal where community providers can 

electronically check the status of their claims to find out if the claims 

are awaiting processing or if VHA needs additional information to 

 52The preliminary fee remittance advice reports include a listing of claim dates and 

services, the reasons why payments for any services were disapproved, and payment 

amounts for services that were approved. 
Page 32 GAO-16-353 Timeliness of Payments for VA Care in the Community

process them. Several of the community providers who participated in 

our study told us that they would appreciate VHA establishing such a 

portal.

• Issues with telephone-based provider customer service. Almost 

all of the community providers and state hospital associations that 

participated in our review (9 out of 12 providers and 11 out of 12 

associations) experienced issues with the telephone-based provider 

customer service at VHA’s claims processing locations. For example,

• officials from three of the community providers we interviewed 

reported that they routinely wait on hold for an hour or more while 

trying to follow up on unpaid claims.

• Officials from a community health care system that operates 46 

hospitals and submits claims to 5 different VHA claims processing 

locations said that 3 of these locations will not accept any phone 

calls and instead require providers to fax any questions about 

claim status.

• According to officials from another community health care system, 

their VHA claims processing location has limited them to inquiring 

about only three claims per VHA staff member, per day. The 

officials explained that if they call twice on the same day and 

reach the same individual who has already checked the status of 

three claims, that person will refuse to check the status of 

additional claims; however, if they connect with a different VHA 

staff member, they may be able to inquire about additional 

claims.

53

 53VHA officials said that once they became aware of this practice in the summer of 2015, 

they contacted managers at their claims processing locations to advise them that they 

should not be limiting the number of claims each community provider could call and 

inquire about each day.
Page 33 GAO-16-353 Timeliness of Payments for VA Care in the Community

In the course of our work, VHA officials reported that they implemented 

several measures in fiscal year 2015 and early fiscal year 2016 that were 

intended to improve the timeliness of VHA’s payments to community 

providers and the TPAs. The following are the key steps that VHA officials 

have reported taking.

• Elimination of certain medical documentation requirements. On 

March 1, 2016, VA announced that it had modified its contracts with 

the TPAs so that community providers participating in the Choice 

Program will no longer be required to submit medical documentation 

before their VA care in the community claims can be paid. VA expects 

this will expedite the processing of claims from Choice Program 

providers. VHA’s data indicate that the number of VA care in the 

community authorizations routed to the Choice Program first 

exceeded the number of authorizations for other types of VA care in 

the community in November 2015, and in January 2016 (the most 

recent month for which data were available) about 56 percent of VA 

care in the community authorizations were routed to the Choice 

Program. VHA has not eliminated the medical documentation 

requirement for all other types of VA care in the community, requiring 

community providers to submit medical documentation before VHA 

will pay claims for (1) individually authorized inpatient VA care in the 

community, (2) PC3 care, (3) Millennium Act emergency care, and (4) 

service-connected emergency care. As discussed earlier in this 

report, VHA’s inability to electronically accept medical documentation 

from most community providers and the administrative burden of 

scanning a high volume of paper medical documentation have caused 

delays in VHA’s processing of claims for VA care in the community.

While VHA Has 

Implemented Interim 

Measures, the 

Agency Does Not 

Expect to Address All 

Claims Processing 

Challenges until 

Fiscal Year 2018 or 

Later

VHA Has Recently 

Eliminated Certain Medical 

Documentation 

Requirements, Filled Staff 

Vacancies, and Taken 

Other Steps to Improve 

Claims Processing 

Timeliness
Page 34 GAO-16-353 Timeliness of Payments for VA Care in the Community

• Staffing increases. VHA officials said that they have recently filled 

the approximately 300 staff vacancies that resulted from attrition 

shortly after the October 2014 realignment of claims processing under 

VHA’s Chief Business Office for Purchased Care. The officials also 

told us that they have supplemented the existing workforce at VHA’s 

claims processing locations by hiring temporary staff and contractors 

to help address VHA’s backlog of claims awaiting processing. In 

addition, for 2 months in fiscal year 2015, VHA required its claims 

processing staff to work mandatory overtime, and according to VHA 

officials, staff are still working overtime on a voluntary basis. At some 

locations, VHA added second shifts for claims processing staff. As a 

result, VHA officials told us that VHA was able to decrease its backlog 

of unprocessed claims for VA care in the community from an all-time 

high of 736,000 claims in August 2015 to about 453,000 claims as of 

October 29, 2015.54

• Deployment of nationwide productivity standards. On October 1, 

2015, VHA introduced new performance plans with nationwide 

productivity standards for its claims processing staff, and officials 

estimated that these standards would lead staff to process more 

claims each day, resulting in a 6.53 percent increase in claims 

processing productivity over the course of fiscal year 2016.

• Improved access to data needed to monitor claims processing 

performance. VHA has implemented a new, real-time data tracking 

system to monitor claims processing productivity and other aspects of 

performance at its claims processing locations. This tool, which VHA 

officials refer to as the “command center,” permits VHA officials and 

managers at VHA’s claims processing locations to view claims data 

related to the timeliness of payments and other metrics at the 

national, claims processing location, and the individual staff level. 

Previously, many data were self-reported by the claims processing 

locations. The VHA officials we interviewed said that they monitor 

these data daily.

 54VHA defines “backlogged” claims to be those that VHA has received but not processed 

for 30 days or more. However, VHA’s data do not account for paper claims that have been 

received by VHA claims processing locations but not yet scanned into FBCS. Therefore, 

VHA’s data likely underestimate the number of claims that have been awaiting processing 

for more than 30 days.
Page 35 GAO-16-353 Timeliness of Payments for VA Care in the Community

• New scanning equipment. VHA recently purchased new scanning 

equipment for 73 of its 95 claims processing locations, including the 

claims processing location we visited with the small, desktop 

scanners. The agency awarded a contract in November 2015, and 

officials said that VHA had installed this new equipment at almost all 

sites as of January 15, 2016. They expected that installation would be 

completed at the few remaining sites by the end of January 2016.

• Improvement of cost estimation tools. In January 2016, VHA 

deployed an FBCS enhancement that is intended to improve VHA’s 

ability to estimate obligations for VA care in the community within 

FBCS. VHA officials said this should help them better estimate costs 

to help ensure that adequate funds are available to pay claims for VA 

care in the community services at the time the claims are processed. 

However, staff at VA medical facilities still must manually enter 

estimated obligations into VHA’s systems for tracking the availability 

of funds on a monthly basis, because this information cannot be 

automatically transferred from FBCS.

VHA officials we interviewed in the course of our work acknowledged that 

the recent steps they have taken to improve claims processing 

timeliness—such as hiring temporary staff and contractors and mandating 

that claims processing staff work overtime—are not sustainable in the 

long term. The officials said that if the agency is to dramatically improve 

its claims processing timeliness, comprehensive and technologically 

advanced solutions must be developed and implemented, such as 

modernizing and upgrading VHA’s existing claims processing system or 

contracting out the claims processing function. On October 30, 2015, 

VHA reported to Congress that it has plans to address these issues as 

part of a broader effort to consolidate VA care in the community 

programs.55 However, the agency estimates that it will take at least 2 

years to implement solutions that will fully address all of the challenges 

now faced by its claims processing staff and by providers of VA care in 

the community services. According to VHA officials, the success of this 

 55Department of Veterans Affairs, Plan to Consolidate Programs of Department of 

Veterans Affairs to Improve Access to Care, (Washington, D.C.: Oct. 30, 2015). The VA 

Budget and Choice Improvement Act required VA to develop a plan for consolidating its 

existing VA care in the community programs. The plan was due to Congress no later than 

November 1, 2015. Pub. L. No. 114-41, § 4002, 129 Stat. 443, 461 (2015).

VHA is Examining Options 

for Modernizing Its Claims 

Processing System and 

Estimates Implementing 

New Technology and 

Other Solutions Will Take 

At Least 2 Years
Page 36 GAO-16-353 Timeliness of Payments for VA Care in the Community

long-term modernization plan will also hinge on significant investments in 

the development and deployment of new technology.

In its October 2015 plan, VHA stated that it expects it will significantly 

increase its reliance on community providers to deliver care to veterans in 

the coming years. In addition, VHA plans to adopt many features or 

capabilities for its claims processing system that are similar to Medicare’s 

and TRICARE’s claims processing systems, including (1) greater 

automatic adjudication of claims, (2) automating the entry of 

authorizations, (3) establishing a mechanism by which community 

providers can electronically submit medical records, (4) creating a Webbased portal for community providers to check the status of their claims, 

and (5) establishing a nationwide provider customer service system with 

dedicated staff so that other staff can focus on claims processing. 

According to this plan, in fiscal year 2016 VHA will examine potential 

strategies for developing these capabilities—including the possibilities of 

contracting for (1) the development of the claims processing system only 

or (2) all claims processing services, so that contractors, rather than VHA 

staff, would be responsible for processing claims (similar to Medicare and 

TRICARE).

Based on statements made by community providers that participated in 

our review, it is critical for VA to succeed in achieving its goal of deploying 

a modernized claims processing system. Without (1) significantly 

improving the timeliness of its payments and (2) addressing community 

providers’ concerns about the administrative burden of obtaining VHA 

payments and the agency’s lack of responsiveness when they inquire 

about unpaid claims, VHA risks losing the cooperation of these providers 

as it attempts to transition to a future care delivery model that would 

heavily rely on them to deliver care to veterans.

Since the release of its October 2015 plan for consolidating VA care in 

the community programs, VHA has done some of the preliminary work 

needed to modernize its claims processing system. After issuing a 

request for interested parties to share information, VHA held an industry 

day in December 2015, where about 80 participants discussed with VHA 

the extent to which contractors could help support core functions—

including claims processing—for the consolidated VA care in the 

community program VHA plans to establish. VHA officials said they used 

information gathered from this industry day to inform the development of 

a draft performance work statement and a draft operations manual for a 

consolidated VA care in the community program. VA publicly posted 

these documents in February 2016 and accepted written comments, 
Page 37 GAO-16-353 Timeliness of Payments for VA Care in the Community

questions, and other feedback from industry for about two weeks. VA 

plans to use these responses to help inform any future requests for 

proposals related to the consolidation of VA care in the community 

programs and the improvement of claims processing timeliness.

VA’s plan for consolidating its care in the community programs outlines its 

approach to addressing deficiencies in VHA’s claims processing system. 

VA’s consolidation plan represents a major undertaking that depends, in 

part, on obtaining congressional approval for legislative changes and 

budget requests and revamping VA’s information technology systems. 

Leading practices call for careful planning and for developing an 

implementation strategy to help ensure that needed changes are made in 

a timely and cost-effective manner. When facing major challenges similar 

to the ones VHA faces to modernize its claims processing system, 

leading practices call for results-oriented organizations to focus on 

developing robust, comprehensive plans that (1) define the goals the 

organization is seeking to accomplish, (2) identify specific activities to 

obtain desired results, and (3) provide tools to help ensure accountability 

and mitigate risks. In prior work, we have determined that sound plans 

include the following components (among others):

• Goals, objectives, activities, and performance measures. This 

component addresses what the plan is trying to achieve and how it 

will achieve those results, as well as the priorities, milestones, and 

performance measures to monitor and gauge results.

• Resources, investments, and risks. This component addresses 

what the plan will cost, the sources and types of resources and 

investments needed, and where resources and investments should be 

targeted while assessing and managing risks.56

To date, VHA has not communicated to Congress or other external 

stakeholders a plan for modernizing its claims processing system that 

clearly addresses the components of a sound plan identified above. In 

particular, VHA has not communicated (1) a detailed schedule for 

developing and implementing each aspect of its new claims processing 

 56The remaining components of sound plans include (1) purpose, scope, and 

methodology; (2) problem definition, causes, and operating environment; (3) roles, 

responsibilities, and coordination; and (4) integration among and with other entities. See 

GAO-04-408T and GAO-09-398.
Page 38 GAO-16-353 Timeliness of Payments for VA Care in the Community

system; (2) the estimated costs for developing and implementing each 

aspect of the system; and (3) performance goals, measures, and interim 

milestones that VHA will use to evaluate progress, hold staff accountable 

for achieving desired results, and report to stakeholders the agency’s

progress in modernizing its claims processing system. The 

communication of such a plan is also consistent with federal internal 

control standards for information and communication, which call for 

agencies to internally and externally communicate the necessary quality 

information to achieve the entity’s objectives.57

That VHA has not yet communicated a detailed plan but has stated that it 

expects to deploy a modernized claims processing system as early as 

fiscal year 2018 is cause for concern, especially given VA’s past failed 

attempts to modernize key information technology systems. Our prior 

work has shown that VHA’s past attempts to achieve goals of a similar 

magnitude—such as modernizing its systems for (1) scheduling 

outpatient appointments in VA medical facilities, (2) financial 

management, and (3) inventory and asset management—have been 

derailed by weaknesses in project management, a lack of effective 

oversight, and the failure of pilot systems to support agency operations.58

For example, we found:

• VA undertook an initiative in 2000 to replace the outpatient scheduling 

system but terminated the project after spending $127 million over 9 

years.

• VA has been trying for many years to modernize or replace its 

financial management and inventory and asset management systems 

but has faced hurdles in carrying out these plans. In 2010, VA 

canceled a broad information technology improvement effort that 

would have improved both of these systems and at the time was 

 57See GAO-14-704G and GAO/AIMD-00-21.3.1.

58See GAO, Information Technology: Management Improvements Are Essential to VA’s 

Second Effort to Replace its Outpatient Scheduling System, GAO-10-579 (Washington, 

D.C.: May 27, 2010); GAO, Information Technology: Actions Needed to Fully Establish 

Program Management Capability for VA’s Financial and Logistics Initiative, GAO-10-40 

(Washington, D.C.: Oct. 26, 2009); and GAO, Veterans Health Care: VHA Has Taken 

Steps to Address Deficiencies in its Logistics Program, but Significant Concerns Remain, 

GAO-13-336 (Washington, D.C.: April 17, 2013).
Page 39 GAO-16-353 Timeliness of Payments for VA Care in the Community

estimated to cost between $300 million and $400 million.59 By 

September 2, 2009 (just before the project’s cancellation) VA had 

already spent almost $91 million of the $300 million to $400 million 

that was originally estimated. A previous initiative to modernize these 

systems was underway between 1998 and 2004, but after reportedly 

having spent more than $249 million on development of the 

replacement system, VA discontinued the project because the pilot 

system failed to support VHA’s operations.

According to VHA officials, instead of investing in administrative systems 

such as the claims processing system, outpatient scheduling system, 

financial management systems, or the inventory and asset management 

system, VA has prioritized investments in information technology 

enhancements that more directly relate to patient care. As such, VHA 

officials said they have had little success in gaining approval and funding 

for information technology improvements for these administrative 

systems.

VHA’s average claims processing timeliness in fiscal year 2015 was 

significantly lower than Medicare’s and TRICARE’s timeliness and far 

below its own standard of paying 90 percent of claims within 30 days. If 

this situation persists, it could have very real consequences on veterans’

access to care. Presently, VHA (through its TPAs), is attempting to 

improve veterans’ access to care by establishing a robust network of 

community health providers under its VA care in the community 

programs. However, absent a responsive provider customer service 

component and timely payment of claims, many community providers 

may opt not to participate in VA’s network, thereby narrowing the choices 

veterans have for seeking care from community providers. In turn, this 

could lead to longer wait times for veterans to receive care and a greater 

reliance on VA medical centers, some of which have already experienced 

long wait times for veterans seeking care. Moreover, millions of dollars in 

interest penalties resulting from the late payment of claims by VHA could 

dilute the funding available for the direct delivery of care to veterans.

 59The portion of the broad information technology improvement effort that VA canceled in 

2010 pertaining to the update of VHA’s inventory and asset management system was not 

officially terminated until 2011.

Conclusions
Page 40 GAO-16-353 Timeliness of Payments for VA Care in the Community

To its credit, VHA has implemented several short-term initiatives intended 

to address ongoing challenges and improve its timeliness in paying 

community providers. These initiatives include increasing the number of 

staff processing claims, purchasing new scanning equipment, holding 

claims processing staff accountable through new productivity standards, 

and developing a tracking system to monitor claims processing 

performance. By VHA’s own admission, however, these short-term 

initiatives will not resolve all challenges that have long impeded its claims 

processing timeliness, and many of these initiatives are not sustainable 

over the longer term. VHA plans to address the remaining challenges 

through its longer term effort to implement a consolidated VA care in the 

community program in fiscal year 2018 or later.

VHA’s sweeping changes are likely to be costly, and to achieve the goals 

of this initiative it will be important to have a high level of planning and 

effective project management, and communication with multiple 

stakeholders. As we have reported in prior work, VHA’s plans to achieve 

goals of a similar magnitude—such as the modernization of its systems 

for outpatient appointment scheduling, financial management, and 

inventory and asset management—have been derailed by weaknesses in 

project management and a lack of effective oversight. Therefore, if VHA’s 

current initiative is to be successful, it is essential that VHA develop a 

sound implementation plan and an effective project management strategy 

as it proceeds. Otherwise, the agency risks spending valuable resources 

on new systems and processes that may not significantly improve VHA’s 

claims processing timeliness. As part of its implementation plan, it is 

critical that VHA identify implementation steps and develop the ability to 

measure and externally communicate its progress to the Congress and 

other stakeholders. It is also important that VHA be held accountable for 

achieving major components of the initiative and adhering to its timeline, 

as stated in its 2015 plan for consolidating VA care in the community 

programs.

To help provide reasonable assurance that VHA achieves its long-term 

goal of modernizing its claims processing system, the Secretary of 

Veterans Affairs should direct the Under Secretary for Health to ensure 

that the agency develops a sound written plan that includes the following 

elements:

• a detailed schedule for when VHA intends to complete development 

and implementation of each major aspect of its new claims processing 

system;

Recommendation for 

Executive Action
Page 41 GAO-16-353 Timeliness of Payments for VA Care in the Community

• the estimated costs for implementing each major aspect of the 

system; and

• the performance goals, measures, and interim milestones that VHA 

will use to evaluate progress, hold staff accountable for achieving 

desired results, and report to stakeholders the agency’s progress in 

modernizing its claims processing system.

We provided a draft of this report to VA, HHS, and DOD for comment. VA

provided written comments on the draft report, and we have reprinted

these comments in Appendix V. In its comments, VA concurred with our 

recommendation and said that VHA plans to address it when the agency 

develops an implementation strategy for the future consolidation of its VA 

care in the community programs. VA also provided technical comments, 

which we have incorporated as appropriate. HHS had no general 

comments on the draft report but provided technical comments, which we 

have addressed as appropriate. DOD had no general or technical 

comments on the draft report. 

We are sending copies of this report to the Secretary of Veterans Affairs, 

the Secretary of Health and Human Services, the Secretary of Defense, 

appropriate congressional committees, and other interested parties. This 

report is also available at no charge on the GAO Web site at 

http://www.gao.gov.

If you or your staffs have any questions about this report, please contact 

Randall B. Williamson at (202) 512-7114 or williamsonr@gao.gov.

Contact points for our Offices of Congressional Relations and Public 

Affairs are on the last page of this report. GAO staff who made major 

contributions to this report are listed in appendix VI.

Randall B. Williamson

Director, Health Care

Agency Comments 

and Our Evaluation
Appendix I: Characteristics of Selected Care in 

the Community Programs of the Department of 

Veterans Affairs (VA)

Page 42 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristics of 

program

Selected Types of VA Care in the Communitya

Individually authorized 

care Emergency care 

Patient-Centered 

Community Care (PC3)

Veterans Choice 

Program

When did the 

Veterans Health 

Administration (VHA) 

begin offering this 

type of care in the 

community?

VHA was first authorized 

to grant veterans 

individual authorizations to 

receive care in the 

community in 1945, and 

the current statutory 

authority was codified in 

1986.b This is the primary 

means by which VHA has 

traditionally purchased 

care from community 

providers.

VA may purchase 

emergency care from 

community providers under 

two different authorities:c

1. Emergency care 

related to a veteran’s 

service-connected 

disability. This program 

was established in 

1973.

2. Emergency care not 

related to a veteran’s 

service-connected 

disability. This program 

was established by the 

Veterans Millennium 

Health Care and 

Benefits Act in 1999 

and is commonly 

referred to as 

Millennium Act 

emergency care.

VA created PC3 in 2013 

under existing statutory 

authority, and fully 

implemented the 

program in April 2014. 

Under PC3, two third 

party administrators 

(TPA) developed regional 

networks of community 

providers to deliver care 

to veterans.d

The Veterans Choice 

Program was created by 

the Veterans Access, 

Choice, and 

Accountability Act of 

2014.e VHA introduced 

the program in November 

2014 and expanded it in 

April 2015 and December 

2015. To administer this 

program, VHA modified its 

contracts with the two 

TPAs it selected to 

administer the PC3 

program. These 

contractors are 

responsible for enrolling 

community providers in 

their networks or 

establishing Choice 

Provider Agreements with 

the providers. 

Appendix I: Characteristics of Selected Care 

in the Community Programs of the 

Department of Veterans Affairs (VA)
Appendix I: Characteristics of Selected Care in 

the Community Programs of the Department of 

Veterans Affairs (VA)

Page 43 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristics of 

program

Selected Types of VA Care in the Communitya

Individually authorized 

care Emergency care 

Patient-Centered 

Community Care (PC3)

Veterans Choice 

Program

When can a veteran 

access this type of 

VA care in the 

community?

A veteran may be 

individually authorized to 

receive care when they 

cannot access a particular 

specialty care service 

from a VA medical center 

(because the service is 

not offered), they would 

have to wait too long for 

an appointment, or they 

would have to travel a 

long distance to a VA 

medical center.

A veteran may access 

emergency care for a 

condition related to a 

service-connected disability 

when a prudent layperson

• would classify the 

condition as an 

emergency, and

• would have deemed it 

unreasonable for the 

veteran to access the 

care at a VA or other 

federal facility.f

In addition to meeting the 

above criteria, a veteran 

may access Millennium Act 

emergency care (for a 

condition not related to a 

service-connected 

disability) if services were 

rendered before they were 

stable for transfer to a VA 

or other federal facility, and 

when the veteran:

• was enrolled in and 

accessed care from a 

VA clinician in the 24 

months preceding the 

emergency care,

• is financially liable to 

the community 

provider,

• has no entitlement 

under another health 

plan contract (such as 

Medicare), and

• has no recourse 

against a third party 

that would wholly 

extinguish liability to 

the community 

provider.

The criteria for a veteran 

to be eligible to access 

the PC3 program are the 

same as those for 

individually authorized 

care.

A veteran is eligible for 

this program when they:g

• cannot get a VA 

appointment within 30 

days from the 

veteran’s or 

physician’s preferred 

date; or

• live more than 40 

miles driving distance 

from the nearest VA 

medical center with a 

full-time primary care 

physician; or

• would have to travel 

by air, boat, or ferry to 

the VA medical center 

closest to their home; 

or

• face unusual or 

excessive burden 

(such as geographic 

challenges) in 

traveling to a VA 

medical center; or

• have specific health 

care needs that 

warrant participation 

(including the nature 

and frequency of 

care); or

• live in a state or 

territory without a fullservice VA medical 

center.

h
Appendix I: Characteristics of Selected Care in 

the Community Programs of the Department of 

Veterans Affairs (VA)

Page 44 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristics of 

program

Selected Types of VA Care in the Communitya

Individually authorized 

care Emergency care 

Patient-Centered 

Community Care (PC3)

Veterans Choice 

Program

Is there a timely filing 

requirement for 

community 

providers?

Providers have 6 years 

after the date of service to 

submit a claim to VHA.

• For emergency care 

related to a veteran’s 

service-connected 

disability, providers 

must submit claims 

within 2 years of the 

date of service.

• For care unrelated to a 

veteran’s serviceconnected disability, 

providers must submit 

claims within 90 days 

of the date of service.

i

Providers must submit 

claims electronically 

within 180 business days 

of the end of the episode 

of care. 

Providers must submit 

claims electronically within 

180 business days of the 

end of the episode of 

care.

Generally, what are 

the payment rates 

for community 

providers delivering 

services under this 

program?

Medicare rates, unless the 

provider has an existing 

contract and negotiated 

rates with an individual VA 

medical facility

• Medicare rates for 

emergency care 

related to a veteran’s 

service-connected 

disability

• 70 percent of Medicare 

rates for emergency 

care unrelated to a 

veteran’s serviceconnected disability

Rates are negotiated 

between community 

providers and VA’s 

TPAs. These are 

reportedly a negotiated 

percentage of local 

Medicare rates.

Medicare rates

Are community 

providers required to 

submit medical 

documentation as a 

condition of claims 

payment? 

Sometimes.

• For individually 

authorized outpatient 

care: the 

authorization will 

indicate whether 

documentation is 

required.

• For individually 

authorized inpatient 

care: at a minimum, 

providers must submit 

the discharge 

summary to VA. 

Yes.

Community providers must 

submit medical 

documentation so that VA 

clinicians can determine 

whether the care was 

related to the veteran’s 

service-connected disability 

and whether the condition 

for which the veteran 

sought treatment meets the 

prudent layperson standard 

of an emergency. 

Yes.

Under their contracts with 

VA, the TPAs must 

collect medical 

documentation from 

community providers and 

return it to VA in a timely 

manner.

No.j

Source: GAO analysis of VA policies and documents. | GAO-16-353

a

In addition to the programs described in this table, VA is also authorized to purchase care from 

Department of Defense and Indian Health Service facilities, community nursing homes, and 

community-based home health providers. 38 U.S.C. §§ 1710, 1720, 8111, and 8153.

b

38 U.S.C. § 1703.

c

38 U.S.C. § 1728 and 38 U.S.C. § 1725.

d

The two TPAs that currently hold these contracts are TriWest Healthcare Alliance and Health Net 

Federal Services.

e

Pub. L. No. 113-146, 128 Stat. 1754 (2014).

f

A medical emergency exists when the condition is of such a nature that a prudent layperson would 

reasonably expect that delay in seeking immediate medical attention would be hazardous to life or 
Appendix I: Characteristics of Selected Care in 

the Community Programs of the Department of 

Veterans Affairs (VA)

Page 45 GAO-16-353 Timeliness of Payments for VA Care in the Community

health. The standard would be met if there was an emergency medical condition manifesting itself by 

acute symptoms of sufficient severity (including severe pain) that a prudent layperson who possesses 

an average knowledge of health and medicine could reasonably expect the absence of immediate 

medical attention to result in placing the health of the individual in serious jeopardy, serious 

impairment to bodily functions, or serious dysfunction of any bodily organ or part. See 38 C.F.R. § 

17.1002(b). The prudent layperson standard emphasizes the patient’s presenting symptoms, rather 

than the final diagnosis, when determining whether to pay emergency medical claims.

g

Veterans Health Administration, Veterans Choice Program Eligibility Details (Washington, D.C.: U.S. 

Department of Veterans Affairs, 2015).

h

Specifically, veterans who reside in Alaska, Hawaii, New Hampshire, or a U.S. territory would be 

eligible for the program under this criterion. Veterans residing in New Hampshire are only eligible if 

they reside more than 20 miles away from the White River Junction VA medical center, which is 

located in Vermont.

i

The claim must be filed within 90 days of the latest of the following: the date of discharge; date of 

death, provided death occurred during transport to or stay in an emergency treatment facility; or the 

date that the veteran exhausted, without success, action to obtain payment or reimbursement from a 

third party. 38 C.F.R. § 17.1004(d).

j

On March 1, 2016, VHA stopped requiring community providers to submit medical documentation as 

a condition of payment for claims for Veterans Choice Program services.
Appendix II: Requirements for the Department 

of Veterans Affairs’ (VA) Payment of 

Emergency Claims from Community Providers

Page 46 GAO-16-353 Timeliness of Payments for VA Care in the Community

Criterion

Service-connected 

emergency carea

Nonservice-connected 

emergency care 

(Millennium Act care)b

Claim was filed in a timely manner Claim must be filed within 

2 years of the date 

services were rendered.

Claim must be filed within 

90 days of the date 

services were rendered.c

Condition meets the prudent layperson standard of an emergencyd  

A VA or other federal medical facility was not feasibly available to provide the 

needed care, and an attempt to use either would not have been considered 

reasonable by a prudent layperson

 

The services were rendered before the veteran was stable enough for 

transfer to a VA or other federal medical facility and before the VA or other 

federal medical facility agreed to accept the transfer

 

Veteran was enrolled in the VA health care system 

Veteran had received care from a VA clinician within the 24 months preceding 

the emergency care episode



Veteran is financially liable to the community provider of the emergency care 

Veteran has no entitlement under another health plan contract (such as 

Medicare or a private health insurance plan)



Veteran has no recourse against a third party that would wholly extinguish his 

or her liability to the community provider (e.g., motor vehicle insurance or 

workers’ compensation)



Services were rendered in a hospital emergency department or a similar 

facility providing emergency care to the public



Source: GAO analysis of VA documents. | GAO-16-353

a

Service-connected emergency care is for treatment of conditions related to a veteran’s serviceconnected disability. See 38 U.S.C. § 1728.

b

38 U.S.C. § 1725.

cThe claim must be filed within 90 days of the latest of the following: the date of discharge; the date of 

death, provided death occurred during transport to or stay in an emergency treatment facility; or the 

date that the veteran exhausted, without success, action to obtain payment or reimbursement from a 

third party. 38 C.F.R. § 17.1004(d) (2015).

d

A medical emergency exists when the condition is of such a nature that a prudent layperson would 

reasonably expect that delay in seeking immediate medical attention would be hazardous to life or 

health. The standard would be met if there was an emergency medical condition manifesting itself by 

acute symptoms of sufficient severity (including severe pain) that a prudent layperson who possesses 

an average knowledge of health and medicine could reasonably expect the absence of immediate 

medical attention to result in placing the health of the individual in serious jeopardy, serious 

impairment to bodily functions, or serious dysfunction of any bodily organ or part. See 38 C.F.R. § 

17.1002(b) (2015). The prudent layperson standard emphasizes the patient’s presenting symptoms, 

rather than the final diagnosis, when determining whether to pay emergency medical claims.

Appendix II: Requirements for the 

Department of Veterans Affairs’ (VA) 

Payment of Emergency Claims from 

Community Providers
Appendix III: Veterans Health Administration’s 

(VHA) Steps for Processing Claims for the 

Department of Veterans Affairs’ (VA) Care in 

the Community Services as of March 2016

Page 47 GAO-16-353 Timeliness of Payments for VA Care in the Community

a

VHA has numerous programs through which it purchases VA care in the community services, and

these programs have varying rules governing payment rates and requirements for claims processing. 

The primary means by which VHA has traditionally purchased care from community providers is 

through individual authorizations. When a veteran cannot access a particular specialty care service 

Appendix III: Veterans Health 

Administration’s (VHA) Steps for Processing 

Claims for the Department of Veterans 

Affairs’ (VA) Care in the Community Services 

as of March 2016
Appendix III: Veterans Health Administration’s 

(VHA) Steps for Processing Claims for the 

Department of Veterans Affairs’ (VA) Care in 

the Community Services as of March 2016

Page 48 GAO-16-353 Timeliness of Payments for VA Care in the Community

from a VA medical facility, the veteran’s VA clinician may request an individual authorization for the 

veteran to obtain the service from a community provider. In addition, when care in the community is 

not preauthorized, VA may purchase two different types of emergency care from community 

providers: 1) emergency care for a condition that was related to a veteran’s service-connected 

disability and 2) emergency care for a condition not related to a veteran’s service-connected 

disability. The latter care is commonly referred to as Millennium Act emergency care. See Veterans 

Millennium Health Care and Benefits Act, Pub. L. No. 106-117, 113 Stat.1545 (1999) (codified, as 

amended at 38 U.S.C. § 1725) for emergency care not related to a service-connected disability. See 

38 U.S.C. § 1728 for emergency care related to a service-connected disability.

b

Medical documentation may not be in the Fee Basis Claims System (FBCS) because either (1) the 

community provider has not yet submitted the documentation or because (2) staff at the VHA claims 

processing location have not yet scanned it into FBCS. According to VHA officials, if a claim has been 

submitted electronically and a community provider does not submit medical documentation within 45 

days of the claim being suspended, FBCS will automatically reject the claim. In these cases, the 

community provider must resubmit both the claim and medical documentation.

c

VHA requires community providers to submit medical documentation with all claims for individually 

authorized inpatient care and all emergency care claims. Community providers also may be required 

to submit documentation with some claims for individually authorized outpatient care.

d

Examples of relevant administrative and clinical criteria include whether the claim met VA’s timely 

filing requirement, whether the veteran has other insurance or legal recourse against a third party, 

and whether services were rendered beyond the point at which the veteran was stable enough to be 

transferred to a VA or other federal facility.

e

VHA staff use FBCS to generate notifications for the community provider and veteran about whether 

the claim was paid or rejected. These notifications are called preliminary fee remittance advice 

reports and include a listing of claim dates and services, the reasons why payments for any services 

were rejected, and the payment amounts for approved services.
Appendix IV: Comparison of the Veterans 

Health Administration’s (VHA), Medicare’s, and 

TRICARE’s Systems for Processing Claims for 

Health Care Purchased in the Community

Page 49 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristic of 

claims processing VHA Medicare TRICARE

Approximately how 

many individuals were 

enrolled to receive 

health care services in 

fiscal year 2014?

9.1 million veterans 37.5 million elderly and disabled 

beneficiariesa 9.6 million military service members, retirees, and 

dependents and survivors

What entity processes 

the agency’s claims for 

care purchased in the 

community?

Approximately 2,000 VHA staff at 

95 claims processing locationsb Most Medicare Part A and Part B claims are processed by one of 12 

jurisdiction-based Medicare 

Administrative Contractors (MAC) 

or four MACs that specialize in 

processing durable medical 

equipment claims (some MACs 

have more than one contract).

One of these contractors reported 

that they employ about 65 claims 

processors, managers, and 

support staff in 3 locations.

One contractor subcontracted by 

the three managed care support 

contractors (MCSC).c

According to officials from this 

contractor, they employ about 650 

staff in 3 locations who are 

responsible for processing claims 

from the 3 MCSCs. 

What was the reported 

total sum of payments 

for health care services 

purchased from 

community providers by 

this agency in fiscal year 

2014?

$5.6 billion $357.3 billiond $10.5 billion

About how many health 

care claims were 

processed in fiscal year 

2014?

13.3 million claims Over 1.2 billion claims 55.7 million claims 

Does the agency have 

requirements for claims 

processing timeliness?

Yes.

A VHA directive states that 90 

percent of all claims must be 

processed within 30 days of 

receipt.e

Yes.

By law, 95 percent of clean claims 

must be processed (either paid or 

denied) within 30 days of receipt.f

In accordance with statute, the 

Centers for Medicare & Medicaid 

Services’ (CMS) manual for 

processing Medicare claims states 

that the remaining claims must be 

processed within 45 days of 

receipt.g

Yes.

The TRICARE Operations Manual 

states that 98 percent of claims 

with sufficient information to be 

processed must be paid or denied 

within 30 days of receipt. All 

claims must be processed to 

completion within 90 days of 

receipt.h

Appendix IV: Comparison of the Veterans 

Health Administration’s (VHA), Medicare’s, 

and TRICARE’s Systems for Processing 

Claims for Health Care Purchased in the 

Community
Appendix IV: Comparison of the Veterans 

Health Administration’s (VHA), Medicare’s, and 

TRICARE’s Systems for Processing Claims for 

Health Care Purchased in the Community

Page 50 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristic of 

claims processing VHA Medicare TRICARE

Does the Prompt 

Payment Act apply to 

claims processed for this 

agency?

Yes. On October 2, 2015, the 

Department of Veterans Affairs’

(VA) Office of General Counsel 

concluded that the Prompt 

Payment Act applies to claims for 

care in the community services 

that were (1) individually 

authorized in advance, or (2) 

delivered by community providers 

who have contracted with the third 

party administrators (TPA) to 

participate in Veterans Choice 

Program networksi

Yes. Yes.

How does the agency 

monitor the timeliness of 

claims processing? 

VHA’s Chief Business Office for 

Purchased Care monitors the 

timeliness of processing for claims 

from community providers using 

the following performance metrics:

a. the percentage of all 

claims that have been 

processed—either paid, 

rejected, or denied—in 30 

days or less;

b. the percentage of claims 

awaiting processing that 

were received less than 30 

days ago;

j

c. the percentage of claims 

for individually authorized 

VA care in the community 

that were processed in 30 

days or less; and

d. the percentage of claims 

for other-than-individually 

authorized care that were 

processed in 45 days or 

less.k

According to Chief Business Office 

for Purchased Care officials, they 

have a real-time data tracking 

system that allows them to monitor 

claims processing productivity and 

other aspects of claims processing 

performance at a national level, for 

individual claims processing 

locations, and for individual claims 

processing staff members.

CMS monitors two key 

performance metrics:

a. the percentage of clean 

claims processed within 30 

days of receipt, and

b. the percentage of otherthan-clean claims 

processed within 45 days 

of receipt.l

According to CMS officials, the 

MACs submit monthly reports to 

CMS, which include data on 

claims processing timeliness. 

These reports are generated by a 

module within CMS’s claims 

processing software and can be 

independently verified by CMS.

The Defense Health Agency 

(DHA) monitors two key 

performance metrics:

a. the percentage of claims 

with sufficient information to 

be processed that were 

processed within 30 days of 

receipt, and

b. the percentage of claims 

that initially lacked sufficient 

information to be processed 

that were processed within 

90 days of receipt.

According to DHA officials, 

MCSCs submit monthly reports to 

DHA that include data on the 

subcontractor’s timeliness of 

claims processing. These data can 

be independently verified by DHA.
Appendix IV: Comparison of the Veterans 

Health Administration’s (VHA), Medicare’s, and 

TRICARE’s Systems for Processing Claims for 

Health Care Purchased in the Community

Page 51 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristic of 

claims processing VHA Medicare TRICARE

Does the agency have 

staff productivity 

standards or 

performance incentives 

for processing claims in 

a timely manner?

Officials from VHA’s Chief 

Business Office for Purchased 

Care told GAO that they 

introduced nationwide staff 

productivity standards on October 

1, 2015. 

CMS officials said that they 

previously included financial 

incentives in the MACs’ contracts 

to encourage the MACs to meet 

requirements for claims 

processing timeliness. After all 

MACs demonstrated that they 

were easily meeting these 

requirements, these financial 

incentives were removed from the 

MACs’ contracts and replaced by 

financial incentives to meet other 

requirements.

Officials from one MAC GAO

visited reported that they have 

productivity standards in place for 

their claims processing staff.

DHA officials said that the MCSCs 

are penalized $1 for every claim 

that the subcontractor does not 

process in a timely manner.

The subcontractor that processes 

TRICARE claims reported that it 

has productivity standards in place 

for its claims processing staff. 

Does the agency permit 

providers to submit both 

paper-based and 

electronic claims?

Yes, and less than half of claims 

are submitted electronically.

Officials from VHA’s Chief 

Business Office for Purchased 

Care reported that community 

providers submit about 40 percent 

of claims electronically.

Yes, and nearly all claims are 

submitted electronically.

CMS officials said that as of fiscal 

year 2014, more than 99 percent 

of institutional providers and more 

than 98 percent of practitioners 

and suppliers submitted claims 

electronically.

Yes, and nearly all claims are 

submitted electronically.

DHA officials estimate that 

between 91 and 95 percent of 

claims are submitted 

electronically.

Are providers required to 

submit medical 

documentation in order 

for their claims to be 

processed? 

Yes, according to VA policy, 

providers are required to submit 

medical documentation for some 

specific types of claims.

• Individually authorized 

outpatient care: the 

authorization will indicate 

whether documentation is 

required.

• Individually authorized 

inpatient care: at a minimum, 

providers must submit the 

discharge summary to VA.

• Emergency care: medical 

documentation must be 

submitted so that the claim 

can be clinically reviewed to 

determine whether it meets 

eligibility criteria for payment.m

• Patient-Centered Community 

Care (PC3): As a condition of 

their contracts, VA’s third 

party administrators are 

required to submit medical 

documentation for all claims.

No.

According to CMS officials, 

providers only submit medical 

documentation when requested to 

do so by a MAC, which would only 

request the documents if claims 

were flagged for prepayment 

review (e.g., a clinical review to 

determine the medical necessity of 

the services).

No.

According to DHA officials, 

providers are not required to 

submit medical documentation in 

order for claims to be processed, 

unless a claim is flagged for a 

prepayment review (such as a 

claim for an experimental 

treatment).
Appendix IV: Comparison of the Veterans 

Health Administration’s (VHA), Medicare’s, and 

TRICARE’s Systems for Processing Claims for 

Health Care Purchased in the Community

Page 52 GAO-16-353 Timeliness of Payments for VA Care in the Community

Characteristic of 

claims processing VHA Medicare TRICARE

Does the agency permit 

providers to submit 

medical documentation 

electronically?

No.

According to VA officials, the 

agency does not have the capacity 

to receive medical documentation 

electronically from community 

providers.

Yes.

According to CMS officials, when 

medical documentation is 

requested, the MACs can receive 

the information electronically via a 

Web-based portal.

Yes.

According to DHA officials, when 

medical documentation is 

requested, the TRICARE 

contractor can receive the 

information electronically via a 

Web-based portal. 

Source: GAO analysis of documents and interviews with officials from VA, CMS, DHA, one Medicare Administrative Contractor, and the contractor responsible for processing TRICARE claims. |

GAO-16-353

a

There are about 37.5 million beneficiaries enrolled in original Medicare (or Medicare fee-for-service) 

and 54 million total Medicare enrollees. Those not enrolled in original Medicare are enrolled in 

Medicare Advantage, the private health plan alternative to original Medicare.

b

Claims processing for multiple VA medical facilities may be processed by staff in a single location.

c

According to DHA officials, DHA does not require the three MCSCs to contract with the same entity 

for claims processing; however, all three MCSCs have selected the same contractor to perform this 

function.

d

This includes only payments for Medicare fee-for-service claims and excludes payments for 

Medicare Advantage (the private health plan alternative to Medicare fee-for-service) and Medicare 

Part D (the outpatient prescription drug benefit provided through private plans).

e

Veterans Health Administration, Timeliness Standards for Processing Non-VA Provider Claims, VHA 

Directive 2010-005 (Washington, D.C.: Jan. 27, 2010).

f

A “clean claim” has no defect or impropriety (including a lack of required substantiating 

documentation) or particular circumstance requiring special treatment that prevents timely payment of 

the claim. 42 U.S.C. § 1395h(c)(2)(B). Other claims require additional investigation or development 

before they can be paid. Centers for Medicare & Medicaid Services, Medicare Claims Processing 

Manual, Publication 100-04 (Baltimore, MD: May 15, 2015).

g

42 U.S.C. § 1395ff(a)(2).

h

TRICARE MCSCs are subject to claims processing timeliness requirements outlined in law and in 

the TRICARE Operations Manual. The requirements listed in the Operations Manual are more 

stringent than in the law, which states that 95 percent of clean claims must be processed within 30 

days of submission to the claims processor and that all clean claims must be processed within 100 

days of submission to the claims processor. 10 U.S.C. § 1095c(a).

i

The decision also specified that the Prompt Payment Act does not apply to care authorized by the 

Choice Act pursuant to interagency or provider agreements. 

j

VHA’s goal is that 80 percent of claims awaiting processing were received for processing within the 

last 30 days.

k

VHA officials refer to these claims as “unauthorized claims.” These are claims for care that was not 

individually authorized in advance of the veteran receiving care, including claims for serviceconnected emergency care and claims for Millennium Act emergency care.

l

CMS monitors numerous metrics, including ones related to (1) the amount of interest penalties for 

late payments, (2) the percentage of paper claims processed in 29 to 30 days, and (3) the percentage 

of electronic claims processed in 14 to 30 days.

mIn a May 2013 report that analyzed spending and utilization of VA care in the community between 

fiscal years 2008 and 2012, GAO found that preauthorized outpatient care accounted for about 36 

percent of spending, preauthorized inpatient care accounted for about 23 percent of spending, and 

inpatient and outpatient emergency care accounted for about 13 percent of spending on VA care in 

the community between fiscal years 2008 and 2012. The remaining spending on VA care in the 

community was for home health care, community nursing home care, dental care, and VA 

compensation and pension exams. GAO, VA Health Care: Management and Oversight of Fee Basis 

Care Need Improvement, GAO-13-441 (Washington, D.C.: May 31, 2013).
Appendix V: Comments from the Department 

of Veterans Affairs

Page 53 GAO-16-353 Timeliness of Payments for VA Care in the Community

Appendix V: Comments from the Department 

of Veterans Affairs
Appendix V: Comments from the Department 

of Veterans Affairs

Page 54 GAO-16-353 Timeliness of Payments for VA Care in the Community
Appendix V: Comments from the Department 

of Veterans Affairs

Page 55 GAO-16-353 Timeliness of Payments for VA Care in the Community
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 56 GAO-16-353 Timeliness of Payments for VA Care in the Commu

Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov

In addition to the contact named above, Marcia A. Mann, Assistant 

Director; Elizabeth Conklin; Christine Davis; Krister Friday; Jacquelyn 

Hamilton; Alexis C. MacDonald, and Vikki Porter were major contributors 

to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 57 GAO-16-353 Timeliness of Payments for VA Care in the Commu

Veterans’ Health Care: Preliminary Observations on VHA’s Claims 

Processing Delays and Efforts to Improve the Timeliness of Payments to 

Community Providers. GAO-16-380T. (Washington, D.C.: Feb. 11, 2016).

VA’s Health Care Budget: Preliminary Observations on Efforts to Improve 

Tracking of Obligations and Projected Utilization, GAO-16-374T 

(Washington, D.C.: Feb. 10, 2016).

VA Health Care: Actions Needed to Improve Monitoring and Oversight of 

Non-VA and Contract Care. GAO-15-654T. (Washington, D.C.: June 1, 

2015).

VA Health Care: Further Action Needed to Address Weaknesses in 

Management and Oversight of Non-VA Medical Care. GAO-14-696T. 

(Washington, D.C.: June 18, 2014).

VA Health Care: Actions Needed to Improve Administration and Oversight 

of Veterans’ Millennium Act Emergency Care Benefit, GAO-14-175. 

(Washington, D.C.: March 6, 2014).

VA Health Care: Management and Oversight of Fee Basis Care Need 

Improvement. GAO-13-441. (Washington, D.C.: May 31, 2013).

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