VA HEALTH CARE

Management and 

Oversight of Fee Basis 

Care Need 

Improvement

Report to Congressional Requesters

May 2013

GAO-13-441

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-441, a report to 

congressional requesters

May 2013

VA HEALTH CARE

Management and Oversight of Fee Basis Care Need 

Improvement

Why GAO Did This Study

While VA treats the majority of 

veterans in VA-operated facilities, in 

some instances it must obtain the 

services of non-VA providers to ensure 

that veterans are provided timely and 

accessible care. These non-VA 

providers are commonly reimbursed by 

VA using a fee-for-service 

arrangement known as fee basis care. 

VA’s fee basis care program has 

grown rapidly in recent years—rising 

from about 8 percent of VA’s total 

health care services budget in fiscal 

year 2005 to about 11 percent in fiscal 

year 2012. GAO was asked to review 

fee basis care program spending and 

utilization and factors that influence 

VAMC fee basis utilization. This report 

examines how fee basis care spending 

and utilization changed from fiscal year 

2008 to fiscal year 2012, factors that 

contribute to the use of fee basis care, 

and VA’s oversight of fee basis care 

program spending and utilization.

GAO reviewed relevant laws and 

regulations, VA policies, and fee basis 

spending and utilization data from 

fiscal year 2008 through fiscal year 

2012. In addition, GAO reviewed the 

fee basis care operations of six 

selected VAMCs that varied in size, 

services offered, and geographic 

location.

What GAO Recommends

GAO recommends that VA revise its 

beneficiary travel regulations to allow 

reimbursement for veterans seeking 

similar care from a fee basis provider, 

apply the same wait time goals to fee 

basis care as VAMC-based care, and 

ensure fee basis data includes a claim 

number. VA generally concurred with 

GAO’s conclusions and five 

recommendations.

What GAO Found

The Department of Veterans Affairs’ (VA) fee basis care spending increased from 

about $3.04 billion in fiscal year 2008 to about $4.48 billion in fiscal year 2012. 

The slight decrease in fiscal year 2012 spending from the fiscal year 2011 level 

was due to VA’s adoption of Medicare rates as its primary payment method for 

fee basis providers. VA’s fee basis care utilization also increased from about 

821,000 veterans in fiscal year 2008 to about 976,000 veterans in fiscal year 

2012.

Total VA Fee Basis Care Spending, Fiscal Years 2008 through 2012

GAO found that several factors affect VA medical centers’ (VAMC) utilization of 

fee basis care—including veteran travel distances to VAMCs and goals for the 

maximum amount of time veterans should wait for VAMC-based appointments. 

VAMCs that GAO reviewed reported that they often use fee basis care to provide 

veterans with treatment closer to their homes—particularly for veterans who are 

not eligible for travel reimbursement. In addition, VAMC officials reported that 

veterans are often referred to fee basis providers to ensure that VAMC-based 

clinics that would otherwise treat them can meet established VA wait time goals 

for how long veterans wait for an appointment. However, GAO found that VA has 

not established goals for and does not track how long veterans wait to be seen 

by fee basis providers. 

VA’s monitoring of fee basis care spending is limited because fee basis data do 

not currently include a claim number or other identifier that allows all charges 

from a single office visit with a fee basis provider or an inpatient hospital stay to 

be analyzed together. GAO found that without the ability to analyze spending in 

this way, VA is limited in its ability to assess the cost of fee basis care and verify 

that fee basis providers were paid appropriately.

View GAO-13-441. For more information, 

contact Randall Williamson at (202) 512-7114 

or williamsonr@gao.gov.
Page i GAO-13-441 VA Fee Basis Program

Letter 1 

Background 4

VA Fee Basis Care Spending and Utilization Increased from Fiscal 

Year 2008 to Fiscal Year 2012, with the Majority of Spending and 

Utilization in Outpatient Care 10

Three Main Factors Influence Fee Basis Care Utilization, and 

VAMCs Reviewed Used Several Methods to Reduce Fee Basis 

Spending and Utilization 16

VA’s Processes for Overseeing the Fee Basis Care Program Lack 

Critical Data Needed to Effectively Track and Monitor Fee Basis 

Spending and Utilization 27

VA Is Currently Implementing a Short-Term Corrective Action Plan 

for the Fee Basis Care Program, but Longer-Term Strategy Is 

Still in Development 30

Conclusions 32

Recommendations for Executive Action 33

Agency Comments and Our Evaluation 34

Appendix I VA Spending and Utilization by Fee Basis Care Category 38

Appendix II VA Outpatient and Inpatient Spending and Utilization by 

Fee Basis Care Category 39

Appendix III Comments from the Department of Veterans Affairs 41

Appendix IV GAO Contact and Staff Acknowledgments 44

Tables

Table 1: Status of Short-Term Improvement Goals, March 2013 31

Table 2: VA Spending and Utilization by Fee Basis Care Category, 

Fiscal Years 2008 through 2012 38

Table 3: Outpatient Spending and Utilization by VA Fee Basis Care 

Category, Fiscal Years 2008 through 2012 39

Contents 
Page ii GAO-13-441 VA Fee Basis Program

Table 4: Inpatient Spending and Utilization by VA Fee Basis Care 

Category, Fiscal Years 2008 through 2012 40

Figures

Figure 1: VA Medical Center (VAMC) Fee Basis Preauthorization 

Process Steps 5

Figure 2: Veterans Integrated Service Network (VISN) or VA 

Medical Center (VAMC) Fee Basis Claims Processing 

Steps 7

Figure 3: Veterans Health Administration (VHA) Chief Business 

Office (CBO) Oversight of Fee Basis Care 9

Figure 4: Total VA Fee Basis Care Spending in Dollars, Fiscal Years 

2008 through 2012 11

Figure 5: Number of Unique Veterans Who Received Care from Fee 

Basis Providers, Fiscal Years 2008 through 2012 13

Figure 6: VA Fee Basis Care Spending by Inpatient and Outpatient 

Care in Dollars, Fiscal Years 2008 through 2012 14

Figure 7: Number of Unique Veterans Who Received Care from 

Inpatient and Outpatient Fee Basis Providers, Fiscal Years 

2008 through 2012 15

Abbreviations

CBO Chief Business Office

DOD Department of Defense

HCPCS Healthcare Common Procedure Coding System

MS-DRG Medicare Severity Diagnosis Related Group

OIG Office of Inspector General

VA Department of Veterans Affairs

VAMC VA medical center

VHA Veterans Health Administration

VISN Veterans Integrated Service Network

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Page 1 GAO-13-441 VA Fee Basis Program

441 G St. N.W.

Washington, DC 20548

May 31, 2013

Congressional Requesters

The Department of Veterans Affairs (VA) treats the majority of eligible 

veterans it serves in VA-operated facilities, such as VA medical centers 

(VAMC).1 However, in some instances, VA must obtain the services of 

non-VA providers to help ensure that veterans are provided timely and 

accessible care. These non-VA providers treat veterans in non-VA 

facilities, such as physicians’ offices or hospitals in the community.2

 

Non-VA providers are commonly paid by VA using a fee-for-service 

arrangement—known as fee basis care.3 VA’s fee basis care program 

has grown rapidly—in fiscal year 2005 VA’s total spending on fee basis 

care was about $1.6 billion and represented about 8 percent of VA’s total 

health care services budget, while in fiscal year 2012 VA’s total spending 

on fee basis care was about $4.5 billion and represented about 

11 percent of VA’s total health care services budget.4

Although VA would prefer to deliver care to veterans within its own health 

care system operated by the Veterans Health Administration (VHA), 

officials recognize that it is necessary to use fee basis providers to help 

ensure that veterans are provided timely and accessible care.5

 

1

VA’s health care system includes 152 VAMCs. VA also provides care to veterans in VAoperated community-based outpatient clinics, community living centers (nursing homes), 

residential rehabilitation treatment programs, and comprehensive home care programs.

For 

example, VA utilizes fee basis care when a VAMC is unable to provide 

certain specialty care services, such as cardiology or orthopedics, or 

2

VA obtains the services of non-VA providers in non-VA facilities under the following 

statutory authorities: 38 U.S.C. §§ 1703, 1725, 1728, 8111, and 8153. VA also has 

authority to employ providers on a fee basis to provide care in VA-operated facilities. See 

38 U.S.C. § 7405(a)(2). This type of fee basis care is outside the scope of our report.

3

While we refer to this program as fee basis care in this report, VA has renamed it non-VA 

medical care.

4

These fee basis spending figures include all fee basis care for veterans provided by 

non-VA providers in non-VA facilities.

5

Fee basis care can be delivered by different types of health care providers—including 

physicians, chiropractors, physical therapists, and psychologists. This care is often 

preapproved by the VAMC the veteran most frequently visits; however in certain 

circumstances, fee basis care can be used to provide emergency care to veterans.

 
 

Page 2 GAO-13-441 VA Fee Basis Program

when veterans must travel long distances to obtain specialty care from 

VA providers.

Congressional requesters have raised questions about the rising costs of 

fee basis care and issues with VA’s management and oversight of its fee 

basis care program as highlighted in reports by the VA Office of Inspector 

General (OIG) and the National Academy of Public Administration.6

To examine how fee basis care spending and utilization have changed 

from fiscal year 2008 through fiscal year 2012, we reviewed fee basis 

data and interviewed officials from VA Central Office. Specifically, we 

reviewed four separate files of fee basis program data—inpatient records, 

inpatient ancillary records, outpatient records, and pharmacy-only 

records—for each fiscal year from 2008 through 2012. We analyzed 

these files separately and together to be able to report fee basis utilization 

and spending by fiscal year and across all 5 fiscal years.

These issues include a lack of internal controls for payment of fee basis 

providers and ineffective management and oversight of the fee basis care 

program by local and VA Central Office officials. VA has also 

acknowledged that while the fee basis program has seen marked growth 

in the number of veterans it serves, the management and support 

systems used to administer the program have not matured in a similar 

manner. In this report we examine: (1) how fee basis care spending and 

utilization have changed from fiscal year 2008 through fiscal year 2012; 

(2) factors that contribute to the use of fee basis care and steps some 

VAMCs are taking to reduce fee basis care; (3) VA’s oversight of fee 

basis care program spending and utilization; and (4) VA’s plans and 

strategies to improve the fee basis care program.

7

 

6

See Department of Veterans Affairs Office of Inspector General, Audit of Veterans Health 

Administration’s Non-VA Outpatient Fee Care Program, 08-02901-185 (Washington D.C.: 

Aug. 3, 2009). This report found that in fiscal year 2008 VA made a significant number of 

improper payments—approximately 37 percent of paid claims. These improper payments 

included duplicate payments and payments processed for incorrect amounts. The VA OIG 

also concluded that VA needed to take immediate action to strengthen controls over the 

fee basis care program to ensure that payments were accurate and proper. See also 

National Academy of Public Administration, Veterans Health Administration Fee Care 

Program (Washington, D.C.: September 2011). This report was completed at VA’s request 

and found that there were several challenges associated with the fee basis care program. 

We analyzed 

fee basis data for fiscal years 2008 through 2012 to determine: (1) the 

7

In addition, we combined inpatient records and inpatient ancillary records together in 

order to conduct analyses on all inpatient data.
 

Page 3 GAO-13-441 VA Fee Basis Program

spending associated with inpatient and outpatient fee basis care, (2) how 

many veterans received inpatient and outpatient care from fee basis 

providers, and (3) the breakdown of fee basis care spending and 

utilization by fee basis category. Our final analysis of fee basis data 

included all records of fee basis care except those for pharmacy-only fee 

basis payments. We excluded pharmacy-only fee basis care because: 

it (1) represents a very small portion of fee basis care spending 

($0.002 billion for fiscal years 2008 through 2012), (2) represents a very 

small portion of fee basis care utilization (11,750 unique veterans for 

fiscal years 2008 through 2012),8 (3) applies only to reimbursements of 

veterans for medications that they paid for as part of emergency care that 

was reimbursed by VA, and (4) could not be separated out into serviceconnected and non-service-connected emergency care categories.9

To examine the factors that contribute to the use of fee basis care and the 

steps some VAMCs are taking to reduce fee basis care, we spoke with 

VAMC officials at selected VAMCs about the factors that influence fee 

basis care usage at these facilities and how officials at these facilities 

have reduced fee basis care spending and utilization. We selected six 

VAMCs that varied in terms of size, services offered, and geographic 

location, given that all VAMCs offer veterans fee basis care. These six 

VAMCs were located in Durham and Salisbury, North Carolina; 

To 

ensure the reliability of these data, we interviewed VA Central Office 

officials responsible for maintaining and analyzing fee basis data and 

conducted automated checks of data fields to ensure that they contained 

complete information. Following these actions, we found information in 

this dataset to be sufficiently reliable for the purposes of this report.

 

8

Unique veterans refers to individual veterans treated by fee basis providers during the 

period of analysis.

9

VA pays for emergency care provided by non-VA facilities under 38 U.S.C. § 1728 

(emergency care generally for service-connected conditions) or 38 U.S.C. § 1725 

(Veterans Millennium Health Care and Benefits Act emergency care for non-serviceconnected conditions). Separating fee basis care emergency spending under each of 

these separate authorities was a necessary component of our analysis. VA can also 

authorize and pay for emergency care provided by non-VA facilities under 38 U.S.C. 

§ 1703. However, in our report emergency care paid for under this authority is accounted 

for under categories such as preauthorized inpatient and outpatient care rather than 

emergency care categories. Emergency care provided by fee basis providers is deemed 

preauthorized if the providers provide notification of a veteran’s admission within 72 hours, 

and this care can be paid under 38 U.S.C. § 1703. VA does not categorize payments for 

emergency care made under 38 U.S.C. § 1703 separately from other types of fee basis 

care paid under this authority in its fee basis data.
 

Page 4 GAO-13-441 VA Fee Basis Program

Alexandria, Louisiana; Biloxi, Mississippi; Las Vegas, Nevada; and Loma 

Linda, California. We also spoke with officials in the three Veterans 

Integrated Service Networks (VISN) responsible for managing these six 

selected VAMCs.10

To examine VA’s oversight of fee basis care program spending and 

utilization, we spoke with VA Central Office staff responsible for 

monitoring the program. In addition, we assessed the content and 

structure of VA Central Office databases used to monitor the fee basis 

care program.

Information obtained from these VISNs and VAMCs 

cannot be generalized to all VISNs and VAMCs. Finally, we reviewed 

relevant VA policies and procedures related to methods discussed by 

VAMC officials during these interviews.

To examine VA’s plans and strategies to improve the fee basis care 

program, we spoke with VA Central Office staff responsible for developing 

planned improvements. We also reviewed documentation of these 

planned improvements.

We conducted our performance audit from September 2012 to May 2013 

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.

The two main fee basis care delivery methods—preauthorized care and 

emergency care—are approved using two different processes.11

 

10VISNs oversee the day-to-day functions of VAMCs that are within their network. Each 

VAMC is assigned to a single VISN.

Preauthorizing fee basis care involves a multistep process conducted by 

11Preauthorized fee basis care comprises the majority, about 60 percent, of fee basis 

care. 

Background 

Fee Basis Care 

Authorization Process
 

Page 5 GAO-13-441 VA Fee Basis Program

the VAMC that regularly serves a veteran.12 The preauthorization process 

is initiated by a VA provider who submits a request for fee basis care to 

the VAMC’s fee basis care unit, which is an administrative department 

within each VAMC that processes VA providers’ fee basis care requests 

and verifies that fee basis care is necessary.13 Once approved by the 

VAMC Chief of Staff or his or her designee, the veteran is notified of the 

approval and can choose any fee basis provider willing to accept VA 

payment at predetermined rates.14

Figure 1: VA Medical Center (VAMC) Fee Basis Preauthorization Process Steps

(See fig. 1.)

a

In addition to preauthorizing fee basis care, VA also pays for fee basis 

care in certain emergency situations. For veterans with service-connected 

conditions, VA is required to pay for emergency care provided by non-VA 

facilities for service-connected conditions, medical conditions associated 

with or aggravating a service-connected condition, or for any condition if 

VA classifies the veteran as permanently and totally disabled due to their 

In some VAMCs, the fee basis care unit may assist veterans in setting up their appointments with the 

fee basis provider of their choice.

 

12VA uses this same preauthorization process for nonemergency inpatient and outpatient 

care, dental care, nursing home care, compensation and pension exams, and most 

pharmacy expenses paid for through the fee basis care program. 

13Most inpatient, outpatient, nursing home, dental, and pharmacy services provided 

through the fee basis care program are preauthorized. 

14VA uses this process to preauthorize fee basis care from a number of different types of 

fee basis providers, including community-based hospitals and Department of Defense 

(DOD) medical facilities that collaborate with VAMCs to provide some veterans’ care.
 

Page 6 GAO-13-441 VA Fee Basis Program

service-connected condition.15 For veterans without service-connected

conditions, VA must pay for emergency fee basis care if the veteran is 

enrolled in the VA healthcare system and has received VA care within the 

last 2 years, has no other health coverage, and satisfies certain other 

requirements.16,17

Regardless of whether a veteran’s fee basis care was preauthorized or 

the result of an emergency, the steps for processing payments to fee 

basis providers are the same. Specifically, the fee basis provider submits 

a bill with a list of charges—commonly referred to as a claim—to either 

the VISN or VAMC for payment following the veteran’s treatment. In some 

VISNs, claims processing activities are centralized in a VISN-level fee 

 

15Under 38 U.S.C. § 1728, VA is required to pay for emergency care provided by non-VA 

facilities for service-connected conditions, non-service-connected conditions associated 

with and aggravating a service-connected condition, any condition if VA classifies the 

veteran as permanently and totally disabled due to a service-connected condition, and any 

condition for veterans participating in a vocational rehabilitation program who need care to 

participate in a course of training. 

16Under 38 U.S.C. § 1725, as added by the 1999 Veterans Millennium Health Care and 

Benefits Act, VA is required to pay for emergency care provided by non-VA facilities for 

certain veterans that are not eligible for non-VA emergency care under section 1728. In 

order for a veteran’s non-service-connected emergency conditions to be covered, 

veterans must be personally liable for the emergency care and must be active VA health 

care participants. To be an active VA health care participant, a veteran must be enrolled in 

the VA health care system and must have received VA care within the 2 years prior to 

receiving the emergency care. To be personally liable, a veteran must (1) be financially 

liable for the emergency care he or she receives; (2) have no entitlement or health care 

coverage under another health plan, such as Medicare or private health insurance; 

(3) have no other contractual or legal recourse against a third party that would in whole 

extinguish liability to the emergency care provider, such as insurance claims for car 

accidents; and (4) not be eligible under section 1728. The emergency care provided must 

be in response to a medical emergency, be provided when a VA or other federal facility 

was not feasibly available to provide the emergency care, and is limited to the services 

needed until transfer to a VA facility could be arranged. In addition, VA’s regulations under 

the statute provide that the veteran must be treated in a hospital emergency department 

or similar facility; and the provider or the veteran must file a claim with VA within 90 days 

of providing the veteran’s treatment, date of death, or the date the veteran exhausted, 

without success, action to obtain third-party payment. See 38 C.F.R. §§ 17.1000-17.1008.

17VA can also authorize and pay for emergency care provided by non-VA facilities under 

38 U.S.C § 1703. However, in our report emergency care paid for under this authority is 

accounted for under categories such as preauthorized inpatient and outpatient care rather 

than emergency care categories. Emergency care provided by fee basis providers is 

deemed preauthorized if the providers provide notification of a veteran’s admission within 

72 hours, and this care can be paid under 38 U.S.C. § 1703. VA does not categorize 

payments for emergency care made under 38 U.S.C. § 1703 separately from other types 

of fee basis care paid under this authority in its fee basis data.

Fee Basis Care Payment 

Process
 

Page 7 GAO-13-441 VA Fee Basis Program

basis claims processing unit that is responsible for reviewing fee basis

provider claims, obtaining copies of medical records for veterans’ fee 

basis care, and approving payment to fee basis providers. In other VISNs, 

these claims-processing activities are decentralized and are the 

responsibility of individual VAMCs. After VAMC or VISN officials review 

the claims for accuracy, fee basis providers are reimbursed by VA. (See 

fig. 2.)

Figure 2: Veterans Integrated Service Network (VISN) or VA Medical Center (VAMC) Fee Basis Claims Processing Steps

Prior to 2011, VA paid fee basis providers’ claims using its own internally 

developed fee schedule or other local agreements.18 In February 2011, 

VA began using applicable Medicare rates as its basis for reimbursing fee 

basis providers for all inpatient and outpatient services.19

 

18According to VA officials, prior to 2011, some VISNs and VAMCs had agreements with 

fee basis providers to pay claims at either applicable Medicare rates or other negotiated 

rates and fee basis hospital services were already paid at rates similar to Medicare rates. 

See 38 C.F.R. § 17.55.

Medicare rates 

are generally lower than rates VA previously used to reimburse fee basis 

19See 75 Fed. Reg. 78.901 (Dec. 17, 2010) (amending 38 C.F.R. §§ 17.52, 17.56). In 

December 2010, VA amended its regulations to apply Medicare rates, set by the Centers 

for Medicare & Medicaid Services, to all inpatient and outpatient care delivered by fee 

basis providers under 38 U.S.C. § 1703 and 38 U.S.C. § 1728. Emergency treatment 

provided under 38 U.S.C. § 1725 (Millennium Act) is reimbursed according to 

38 C.F.R. § 17.1005, which specifies that reimbursement for care provided under the 

Millennium Act is reimbursed at the lesser of two payment options: (1) the amount for 

which the veteran is personally liable or (2) 70 percent of the amount specified in the

applicable Medicare fee schedule for such treatment. 

Fee Basis Payment Rates
 

Page 8 GAO-13-441 VA Fee Basis Program

providers.20 However, with the move to Medicare rates, some fee basis 

claims are paid at non-Medicare rates; specifically, if VA has a sharing or 

negotiated agreement with a fee basis provider that includes a nonMedicare rate, VA will pay that amount instead of the Medicare rate.21

These rates are specific to each individual agreement and can be higher 

or lower than the Medicare rate. For example, some VAMCs currently 

provide dialysis treatments to veterans through preauthorized fee basis 

care using a multi-VISN negotiated rate that exceeds the Medicare 

reimbursement rate. Some VAMCs pay these higher reimbursement rates 

for fee basis dialysis care because the major fee basis dialysis providers 

did not agree to provide dialysis treatment to veterans at the Medicare 

reimbursement rate. In addition, many sharing agreements between 

VAMCs and DOD medical facilities allow VA to reimburse DOD for care it 

provides to veterans at a lower rate than Medicare.

VA Central Office has primary responsibility for overseeing VISNs’ and 

VAMCs’ fee basis care operations and manages the fee basis care 

program through the Veterans Health Administration (VHA) Chief 

Business Office (CBO).22

• Reports from VISNs and VAMCs. VISNs and VAMCs submit 

monthly reports that include information on their progress meeting 

several performance measures related to claims processing—

including the total number of claims processed by each fee basis unit, 

the number of claims processed in 30 days or less, the number of 

claims processed in more than 30 days, and the number of appeals 

for payment of denied fee basis claims submitted by veterans.

According to VHA CBO officials, VHA CBO 

relies on three main methods for overseeing fee basis spending and 

utilization:

23

 

20Medicare pays for services such as those provided by physicians, inpatient hospitals, 

and dialysis facilities based on predetermined rates that are adjusted based on provider 

characteristics, geographical differences in market conditions, and other factors. 

21See 38 C.F.R. § 17.56(a)(1). 

22Within VA, VHA is the organization responsible for providing health care to veterans at 

medical facilities across the country.

23According to VHA CBO officials, VA Central Office set a goal for all VISN and VAMC fee 

basis units to process fee basis provider claims within 30 days of receipt.

VA Oversight of Fee Basis 

Care
 

Page 9 GAO-13-441 VA Fee Basis Program

• Management reviews of VISN and VAMC operations. VHA CBO 

staff conduct periodic site visits to examine a VISN or VAMC fee basis 

unit’s claims processing functions and program monitoring to identify 

areas where the facility could improve. At the conclusion of these site 

visits, the VHA CBO staff that conducted the site visit prepares a 

formal report on the findings of the visit, including recommendations to 

improve processes, and provides training to the facility if needed.

• Analysis of fee basis data. VHA CBO staff regularly analyze fee 

basis claims data to gain a system-wide view of the fee basis care 

program. Specifically, they conduct retroactive reviews of fee basis 

data to identify cases of fraud, waste, and abuse; provide updates to 

VA stakeholders, including other key officials within VA Central Office, 

on the status of the fee basis care program; and independently verify 

findings from external reviews, including VA OIG audits.

According to VHA CBO officials, the Program Oversight and Informatics 

division is responsible for analyzing fee basis data to review overall 

trends and identify outliers in payments made to fee basis providers and 

the Program Administration division is responsible for conducting periodic 

reviews of VISN and VAMC fee basis operations and reviewing reports 

from VISNs and VAMCs on fee basis utilization. (See fig. 3.)

Figure 3: Veterans Health Administration (VHA) Chief Business Office (CBO) 

Oversight of Fee Basis Care
 

Page 10 GAO-13-441 VA Fee Basis Program

VA’s fee basis care spending increased from about $3.04 billion in fiscal 

year 2008 to about $4.48 billion in fiscal year 2012.24

 

24Fee basis spending in this report does not include pharmacy-only fee basis care. 

Pharmacy-only fee basis care consists of reimbursements to veterans for medications 

that they paid for as part of emergency care that was reimbursed by VA under 

38 U.S.C. § 1728 (emergency care generally for service-connected conditions) or 

38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits Act emergency care for 

non-service-connected conditions). Total spending for pharmacy-only fee basis care was 

$0.002 billion for fiscal years 2008 through 2012.

VA’s fee basis care 

spending hit its highest level of about $4.56 billion in fiscal year 2011. 

Across the 5 fiscal years we reviewed, VA spent a total of about 

$20.29 billion on fee basis care. (See fig. 4.)

VA Fee Basis Care 

Spending and 

Utilization Increased 

from Fiscal Year 2008 

to Fiscal Year 2012, 

with the Majority of 

Spending and 

Utilization in 

Outpatient Care

VA Fee Basis Care 

Spending and Utilization

Increased from Fiscal Year 

2008 to Fiscal Year 2012
 

Page 11 GAO-13-441 VA Fee Basis Program

Figure 4: Total VA Fee Basis Care Spending in Dollars, Fiscal Years 2008 through 

2012

Notes: Fee basis spending in this figure does not include pharmacy-only fee basis care. Pharmacyonly fee basis care consists of reimbursements to veterans for medications that they paid for as part 

of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care generally for 

service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits 

Act emergency care for non-service-connected conditions). Total spending for pharmacy-only fee 

basis care was $0.002 billion for fiscal years 2008 through 2012.

Spending totals in this figure have been rounded.

The overall increase in fee basis care spending from fiscal year 2008 to 

fiscal year 2012 can be attributed to increases in the number of veterans 

who received fee basis care. The slight decline in fee basis care spending 

between fiscal year 2011 and fiscal year 2012 is likely due to VA’s 

adoption of Medicare rates for its fee basis care program. Medicare 
 

Page 12 GAO-13-441 VA Fee Basis Program

reimbursement rates are typically lower for most health care services than 

VA’s previous fee basis care reimbursement rates.25

VA’s fee basis care utilization also increased from fiscal year 2008 to 

fiscal year 2012—although the number of unique veterans receiving care 

from fee basis providers has increased less rapidly for the last 3 fiscal 

years.26 A total of about 2.45 million unique veterans received care from 

fee basis providers from fiscal year 2008 to fiscal year 2012.27

 

25See GAO, VA Health Care: Methodology for Estimating and Process for Tracking 

Savings Need Improvement, 

Total fee 

basis care utilization hit its highest point of the 5-year period in fiscal year 

2012 when about 976,000 unique veterans received care from fee basis 

providers, about 155,000 more veterans than in fiscal year 2008. (See 

fig. 5.) According to VA officials, the increase in the number of unique 

veterans receiving care from fee basis providers from fiscal year 2008 to 

fiscal year 2012 was likely due to VA’s use of fee basis care to meet 

goals for the maximum amount of time veterans wait for VAMC-based 

appointments.

GAO-12-305 (Washington, D.C.: Feb. 27, 2012). VA began 

using Medicare reimbursement rates for its fee basis program in February 2011. By 

reimbursing fee basis providers at the Medicare rate for the care they provide veterans, 

VA estimated that it would be able to save $315 million in fiscal year 2012 and 

$362 million in fiscal year 2013. In addition, some savings would have been achieved 

during fiscal year 2011 as a result of these rates being used for 7 months of fiscal year 

2011.

26Fee basis utilization in this report does not include pharmacy-only fee basis care. 

Pharmacy-only fee basis care consists of reimbursements to veterans for medications 

that they paid for as part of emergency care that was reimbursed by VA under 

38 U.S.C. § 1728 (emergency care generally for service-connected conditions) or 

38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits Act emergency care for 

non-service-connected conditions). A total of 11,750 unique veterans received such 

reimbursement from fiscal year 2008 through fiscal year 2012.

27Unique veterans refers to individual veterans treated during the period of analysis and 

ensures that the number of veterans served by the fee basis care program is not 

overstated due to some veterans being treated by fee basis providers more than once. To 

determine the total number of unique veterans who received care from fee basis providers 

(about 2.45 million), we counted each individual veteran only once for the 5-year period by 

identifying the number of unique Social Security numbers present in fee basis data. 
 

Page 13 GAO-13-441 VA Fee Basis Program

Figure 5: Number of Unique Veterans Who Received Care from Fee Basis Providers, 

Fiscal Years 2008 through 2012

Notes: Fee basis utilization in this figure does not include pharmacy-only fee basis care. Pharmacyonly fee basis care consists of reimbursements to veterans for medications that they paid for as part 

of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care generally for 

service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits

Act emergency care for non-service-connected conditions). A total of 11,750 unique veterans 

received such reimbursement from fiscal year 2008 through fiscal year 2012.

To determine the fee basis utilization numbers in this figure, we counted each individual veteran once 

per fiscal year by identifying the number of unique Social Security numbers present in each fiscal 

year’s fee basis data. Utilization totals in this figure have been rounded to the nearest thousand 

veterans.

In addition, fee basis care spending and utilization also varied by fee 

basis care category. (See app. I for more information.)

VA spent about $11.22 billion on outpatient fee basis care and about 

$9.07 billion on inpatient fee basis care from fiscal year 2008 through 

fiscal year 2012. During this 5-year period, inpatient fee basis care 

spending increased steadily from about $1.41 billion in fiscal year 2008 to 

about $2.15 billion in fiscal year 2012, while outpatient fee basis care 

spending declined in fiscal year 2012. As a result, by fiscal year 2012, the 

difference in inpatient and outpatient fee basis care spending was only 

about $180 million, compared to a $590 million disparity in fiscal year 

Outpatient Services

Accounted for the Majority 

of VA Fee Basis Care 

Spending and Utilization 

from Fiscal Year 2008 

through Fiscal Year 2012
 

Page 14 GAO-13-441 VA Fee Basis Program

2011 when outpatient fee basis care spending was at its highest level. 

(See fig. 6.)

Figure 6: VA Fee Basis Care Spending by Inpatient and Outpatient Care in Dollars, 

Fiscal Years 2008 through 2012

Notes: Fee basis spending in this figure does not include pharmacy-only fee basis care. Pharmacyonly fee basis care consists of reimbursements to veterans for medications that they paid for as part 

of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care generally for 

service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits 

Act emergency care for non-service-connected conditions). Total spending for pharmacy-only fee 

basis care was $0.002 billion for fiscal years 2008 through 2012.

Spending totals in this figure have been rounded.

Significantly more veterans received care from outpatient fee basis care 

providers than from inpatient fee basis care providers. Specifically, from 

fiscal year 2008 through fiscal year 2012, a total of about 2.35 million 

unique veterans received care from outpatient fee basis providers and a 
 

Page 15 GAO-13-441 VA Fee Basis Program

total of about 472,000 unique veterans received care from inpatient fee 

basis providers.28

Figure 7: Number of Unique Veterans Who Received Care from Inpatient and 

Outpatient Fee Basis Providers, Fiscal Years 2008 through 2012

(See fig. 7.)

Notes: Fee basis utilization in this figure does not include pharmacy-only fee basis care. Pharmacyonly fee basis care consists of reimbursements to veterans for medications that they paid for as part 

of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care generally for 

service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits 

Act emergency care for non-service-connected conditions). A total of 11,750 unique veterans 

received such reimbursement from fiscal year 2008 through fiscal year 2012.

Utilization amounts in this figure may not match utilization totals cited previously in text, as some 

veterans may have received both inpatient and outpatient fee basis care during the same fiscal year. 

To determine the inpatient fee basis utilization numbers in this figure, we counted each individual 

 

28To determine the number of unique veterans who received care from outpatient fee 

basis providers (2.35 million), we counted each individual veteran only once for the 5-year 

period by identifying the number of unique Social Security numbers present in outpatient 

fee basis data. To determine the number of unique veterans who received care from 

inpatient fee basis providers (472,000), we counted each individual veteran only once for 

the 5-year period by identifying the number of unique Social Security numbers present in 

inpatient fee basis data. These fee basis utilization figures have been rounded.
 

Page 16 GAO-13-441 VA Fee Basis Program

veteran once per fiscal year by identifying the number of unique Social Security numbers present in 

inpatient fee basis data. To determine the outpatient fee basis utilization numbers in this figure, we 

counted each individual veteran once per fiscal year by identifying the number or unique Social 

Security numbers present in outpatient fee basis data. These fee basis utilization totals have been 

rounded.

Preauthorized fee basis care accounted for the majority of outpatient fee 

basis spending and utilization from fiscal year 2008 through fiscal year 

2012—about $7.36 billion and about 80 percent of unique veterans 

receiving outpatient fee basis care. VA spent the least on outpatient fee 

basis care for compensation and pension exams and emergency care for 

service-connected veterans.29 In addition, preauthorized fee basis care 

accounted for the majority of inpatient fee basis care spending from fiscal 

year 2008 through fiscal year 2012. Preauthorized inpatient fee basis 

care accounted for about $4.60 billion and about 57 percent of unique 

veterans receiving inpatient fee basis care. VA spent the least on 

inpatient fee basis care associated with emergency care for serviceconnected veterans. (See App. II.)

During our review of six VAMCs, we identified three common factors that 

affected these facilities’ utilization of fee basis care—clinical service 

availability, veteran travel distances, and VA wait time goals. In addition, 

officials from the six VAMCs reported several methods they use to reduce 

either the cost of referring veterans to fee basis providers or the number 

of veterans their facilities refer to fee basis providers.

 

29Emergency care for service-connected veterans refers to fee basis care that meets the 

eligibility requirements for emergency care under 38 U.S.C. § 1728. Under this statute, VA 

is required to pay for emergency care provided by non-VA facilities for service-connected 

conditions, non-service-connected conditions associated with and aggravating a serviceconnected condition, any condition if the veteran is classified by VA as permanently and 

totally disabled from a service-connected condition, and any condition for veterans 

participating in a vocational rehabilitation program who need care to participate in a 

course of training.

Three Main Factors 

Influence Fee Basis 

Care Utilization, and 

VAMCs Reviewed 

Used Several Methods 

to Reduce Fee Basis 

Spending and 

Utilization
 

Page 17 GAO-13-441 VA Fee Basis Program

VAMCs have limitations on the services they can offer due to a variety of 

factors, including the size of their facilities and the types of providers they 

can recruit, which can affect fee basis care utilization. VA officials from 

the six VAMCs we examined reported that the types of clinical services 

offered at their facilities affected veterans’ utilization of fee basis care. For 

example, officials from the Alexandria VAMC explained that their facility 

does not meet VA’s requirements for providing orthopedic surgery 

services to veterans and does not provide these services. As a result, 

they refer veterans who need these services to fee basis providers. 

Similarly, officials from the Biloxi VAMC explained that they do not have 

the ability to offer radiation therapy for cancer treatment at their medical 

center. As a result, they refer veterans who need radiation therapy to fee 

basis providers and reported that their VAMC has little control over 

increases in fee basis spending for these services. 

In some cases, a VAMC may not be able to provide some services to 

veterans because they do not have the right mix of clinical specialists to 

accommodate complications that may arise during surgery. For example, 

for a VAMC to offer joint replacement surgery, the facility must be 

equipped with an orthopedic specialist capable of performing the surgery 

and a number of additional providers to assist in the event of an 

emergency complication during surgery. For joint replacement surgeries, 

these additional providers include a thoracic surgeon and a neurologist 

who both must be available within 15 minutes by phone or 60 minutes in 

person, if needed. If these criteria for additional providers are not met, the 

VAMC is not authorized to perform joint replacement surgeries even if the 

VAMC has an orthopedic specialist capable of performing the surgery. 

When VAMCs are unable to provide services due to these requirements, 

they may rely on fee basis care to obtain these services for veterans.

In other cases, VAMCs are unable to recruit specialists and as a result 

cannot offer some clinical services to veterans. When such recruiting 

challenges arise, VAMCs may rely on fee basis care to ensure veterans 

can receive medical services. For example, officials from the Las Vegas 

VAMC explained that they have difficulty recruiting several types of 

specialists—including vascular surgeons, pulmonologists, and 

Limited Availability of 

Clinical Services, Veteran 

Travel Distances, and Wait 

Times Goals Influence Fee 

Basis Care Utilization

Limited Availability of Clinical 

Services 
 

Page 18 GAO-13-441 VA Fee Basis Program

gastroenterologists. These officials explained that they are exploring ways 

to provide relocation incentives to help recruit specialists; however, they 

noted recruiting is difficult because recent medical school graduates often 

want the opportunity to conduct medical research in addition to patient 

care and the Las Vegas VAMC does not have a research program.

The distance that veterans have to travel to receive medical care is also a 

critical factor influencing whether they are treated in VAMCs or referred to 

fee basis providers. Traveling long distances for medical care is often 

impractical for veterans, particularly those receiving ongoing outpatient 

medical care, such as dialysis or radiation therapy for cancer. The 

decision about whether a veteran can physically tolerate the travel to a 

VAMC or should be referred to a fee basis provider in the community is a 

clinical judgment VA providers make in consultation with VAMC fee basis 

care unit staff. Officials from all six of the VAMCs we reviewed reported 

that utilization of fee basis care was affected by the distance that veterans 

must travel to receive VAMC-based care. For example, the Biloxi VAMC 

serves veterans from four states along the Gulf Coast, including many 

who live more than 300 miles from the facility. Officials from the Biloxi 

VAMC explained that the significant travel distance that some veterans 

face when traveling from their homes to the VAMC for care is 

burdensome and may not be appropriate for all veterans. As a result, 

these officials said that their VAMC frequently refers veterans to fee basis 

providers within the veterans’ own communities to reduce this burden. 

Similarly, officials from the Alexandria VAMC explained that many times 

they also refer veterans to fee basis providers in veterans’ own 

communities to lessen the travel burden.

Another related factor that can increase fee basis utilization involves 

whether veterans referred to fee basis providers are eligible for 

reimbursement for travel costs through VA’s beneficiary travel program. 

VA’s beneficiary travel program reimburses eligible veterans for travel 

from their home to either their primary VAMC, another VAMC, or to a fee 

basis provider that can provide the care they need.30

 

30See Veterans Health Administration, Beneficiary Travel, Handbook 1601B.05 

(July 23, 2010). Through VA’s beneficiary travel program eligible veterans may receive 

reimbursement for travel expenses for any distance if it is financially favorable to the 

government. 

Under VA’s 

beneficiary travel program regulations, veterans are eligible for travel 

reimbursement only if they meet one of several criteria—including having 

Veteran Travel Distances to 

VAMCs
 

Page 19 GAO-13-441 VA Fee Basis Program

a service-connected disability rating of 30 percent or more, or an annual 

income below a specified threshold.31 Therefore, veterans who do not 

meet these criteria cannot receive reimbursement for travel costs to 

another VAMC for treatment. Under these circumstances, veterans may 

see a fee basis provider closer to their residences, according to VA 

officials, even though fee basis care may cost VA considerably more than 

the cost of treatment in a VAMC. The Secretary of Veterans Affairs has 

authority under the beneficiary travel authorizing statute to provide travel 

reimbursement to additional categories of veterans. However, VAMCs 

only have the authority to reimburse veterans who meet the eligibility 

requirements of the beneficiary travel program as outlined in VA 

regulations.32

Officials from one VAMC and a few VISNs we reviewed told us they often 

send veterans who are not eligible for travel reimbursement to fee basis 

providers instead of referring them to other VAMCs that can provide the 

care because VA cannot compensate them for their travel to another VA 

facility. For example, officials from the Biloxi VAMC explained that the 

Houston VAMC is able to provide veterans with high-quality interventional 

cardiology services, such as cardiac catheterization and cardiothoracic 

In order to allow VAMCs to reimburse additional veterans 

for travel, VA would need to revise its regulations to include additional 

categories of veterans.

 

31Under 38 U.S.C. § 111, VA is authorized but not required to pay travel expenses for 

veterans. However, if VA exercises its authority to reimburse travel expenses, VA must 

pay travel expenses for specified categories of veterans and may reimburse travel 

expenses for any other veterans receiving medical care. Currently, VA’s regulations for 

the beneficiary travel program designate as eligible the categories of veterans specifically 

mentioned in 38 U.S.C. § 111. See 38 C.F.R. § 70.10. Specifically, veterans must meet at 

least one of the following criteria: (1) have a service-connected disability rating of 

30 percent or more; (2) be receiving care related to their service-connected disability if 

their service-connected disability rating is less than 30 percent; (3) be receiving VA

pension benefits; (4) have an annual income below the maximum applicable annual rate 

of pension for all conditions ($12,465 for a veteran with no dependents in fiscal year 

2013); (5) present clear evidence that they are unable to defray the cost of travel; or (6) be 

traveling to receive an exam to qualify them for VA compensation and pension. Veterans 

traveling for certain emergency situations may be eligible for transportation expenses 

under separate authority. See 38 U.S.C. § 1725; 38 C.F.R. §§ 17.1000–17.1008. Persons 

specifically mentioned in other VA statutes as eligible for payment for beneficiary travel 

are also eligible, such as certain family members of veterans. See 38 C.F.R. § 70.10. Not 

all veterans eligible for fee basis care are eligible for beneficiary travel benefits at VA.

32Currently, VA’s beneficiary travel regulations limit eligibility for beneficiary travel to only 

those categories of veterans specifically mentioned in the beneficiary travel statute. See 

38 U.S.C. § 111; 38 C.F.R. § 70.10.
 

Page 20 GAO-13-441 VA Fee Basis Program

surgery, which are not available at the Biloxi VAMC. However, if a veteran 

is not eligible for beneficiary travel, the Biloxi VAMC will refer them to a 

fee basis provider to lessen the financial burden on the veteran even 

though, in some cases, care from a fee basis provider may cost the Biloxi 

VAMC $30,000 to $40,000 more than if the veteran were treated at the 

Houston VAMC. Biloxi VAMC officials said that they have asked their 

VISN to allow them to reimburse additional veterans for travel to the 

Houston VAMC for services that facility can provide, but they were 

informed that VA’s beneficiary travel regulations do not permit them to 

offer travel reimbursements to veterans not eligible for beneficiary travel 

benefits.

As part of the fee basis preauthorization process, VAMC or VISN officials 

do not evaluate whether it would be less expensive to send veterans to 

another VAMC for treatment rather than sending them to a fee basis 

provider. In requesting authorization for a veteran to see a fee basis 

provider, VAMC providers do not currently include information on the 

likely costs of the fee basis care.33

The amount of time veterans wait for VAMC-based appointments for 

health care also may be a significant factor that increases VA’s utilization 

of fee basis care. In fiscal year 2012, VA performance goals for VAMCbased care wait times called for VAMCs to complete veterans’ primary 

care appointments within 7 days of their desired appointment date and 

schedule veterans’ specialty care appointments within 14 days of their 

desired appointment date.34

 

33VA does require VA providers referring a veteran to a fee basis provider to enter one of 

five preprogrammed justifications in the request for fee basis care. These justifications 

include: (1) the VA facility does not provide the required service, (2) the veteran cannot 

safely travel to a VA facility due to a medical reason which must be specified, (3) the 

veteran cannot travel to a VA facility due to geographical inaccessibility, (4) the VA facility 

cannot provide the required service in a timely manner, or (5) “other” reasons, which must 

be specified. VA fee basis care units processing these referrals will not approve the 

veteran’s fee basis care without one of these justifications from the VA provider. 

These performance goals are included in 

VISN and VAMC directors’ annual performance contracts and are a part 

of the scores used to determine the amount of performance pay they are 

34VA’s policy for determining the desired appointment date is unclear. A veteran’s desired 

appointment date is the date on which the patient or provider wants the patient to be seen. 

In the case of a veteran new to the system, the desired appointment date should be 

determined based on the veteran’s preferred appointment date. See GAO, VA Health 

Care: Reliability of Reported Outpatient Medical Appointment Wait Times and Scheduling 

Oversight Need Improvement, GAO-13-130 (Washington, D.C.: Dec. 21, 2012).

VA Wait Time Goals 
 

Page 21 GAO-13-441 VA Fee Basis Program

awarded each fiscal year.35

VA officials from all six VAMCs we reviewed reported that they routinely 

refer veterans to fee basis providers to help ensure that veterans receive 

timely care and that their facilities meet performance goals for wait times 

for VAMC-based care. For example, Biloxi VAMC officials said they refer 

veterans to fee basis providers to avoid having longer wait times for 

veterans in VAMC-based clinics that would cause the Biloxi VAMC to fall 

short of its performance goal for VAMC-based care wait times. Similarly, 

officials from the Alexandria VAMC explained that their medical center 

sends veterans to fee basis providers solely to meet the wait time goals 

for the VAMC. They said that veterans needing treatment in several 

specialties—including audiology, cardiology, and ophthalmology—are 

referred to fee basis providers to help the Alexandria VAMC meet its 

goals for VAMC-based clinic wait times.

According to VA officials responsible for 

developing these performance contracts, wait times for care received 

from fee basis providers are excluded from these performance measures 

and VISN and VAMC directors’ performance contracts do not include 

specific goals for wait times for fee basis care.

While serving veterans in a timely way is important and sending them to 

fee basis providers may provide veterans more timely service, VA does 

not track how long it takes veterans to be seen by fee basis providers at 

all VAMCs.36

 

35Performance contracts for VISN directors are referred to as Network Director 

Performance Plans and performance contracts for VAMC directors are referred to as 

Facility Director Performance Plans. These documents include a number of performance 

measures with goals that VISN and VAMC directors are responsible for assuring their 

VISN or VAMC obtain. Performance pay for VISN and VAMC directors is determined 

based on their performance against these performance measures.

For example, officials from the Alexandria VAMC explained 

that they often refer veterans to fee basis providers when the Alexandria 

VAMC’s wait times are too long, but fee basis providers in their 

community also face capacity limitations and may not be able to schedule 

appointments for veterans any sooner than the VAMC-based provider. 

Since VA does not require all VAMCs to track wait times for fee basis 

36VAMCs that have already transitioned to VA’s new fee basis care administration model, 

referred to as Non-VA Care Coordination, are required to track the average number of 

days between when the VA provider entered a request for fee basis care into a veteran’s 

medical record and the date the veteran is seen by a fee basis provider. VA set a goal for 

VAMCs to average 25 days or less for this to occur. However, according to VA officials, 

not all VAMCs are currently participating in Non-VA Care Coordination.
 

Page 22 GAO-13-441 VA Fee Basis Program

providers, little is known about how often veterans’ wait times for fee 

basis care appointments exceed VAMC-based appointment wait time 

goals. Because VA has no data on wait times for veterans treated by fee 

basis providers, it is not possible to determine if veterans are receiving 

comparable access to fee basis providers as veterans receiving care from 

VAMC-based providers.37

Efforts to provide either increased capacity or additional VAMC-based 

health care services have helped VAMCs reduce their utilization of fee 

basis care, according to officials from all six VAMCs we reviewed. For 

example, Durham VAMC officials explained that they recently completed 

an operating room expansion at their facility, which has allowed them to 

bring more surgical services back into the VAMC and reduce their 

reliance on fee basis surgical services. These officials also said that the 

Durham VAMC is preparing to expand its inpatient psychiatric unit by 

adding six additional inpatient beds, which will reduce their reliance on 

fee basis providers for treating veterans when VAMC-based psychiatric 

beds are at capacity. Durham VAMC officials reported that the operating 

room expansion saves an estimated $18 million annually and the 

additional six VAMC-based psychiatric unit beds saves the facility an 

estimated $3.4 million annually. In another case, Biloxi VAMC officials 

reported that in 2010 they reduced their reliance on fee basis providers 

for pulmonary function tests by purchasing additional equipment and 

hiring an additional technician to increase the VAMC-based capacity to 

provide these tests. As a result, officials have seen a drop in the number 

of veterans referred to fee basis providers for this service and fee basis 

costs for pulmonary function tests decreased by about $112,000 between 

fiscal years 2010 and 2012.

 

37See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). Standards for internal 

control in the federal government state that agencies should design internal controls 

that assure ongoing monitoring occurs in the course of normal operations, is continually 

performed, and is ingrained in agency operations.

VAMC Officials Reported 

Three Areas with the 

Potential to Reduce Fee 

Basis Spending and 

Utilization

Expanding VAMC Capacity
 

Page 23 GAO-13-441 VA Fee Basis Program

Such expansions require a careful analysis of the benefits and costs of 

the expansion. Before a VAMC expands its capacity, VA requires VAMCs 

to develop a business case for the expansion as part of VA’s annual 

consideration of capital investments.38

However, some VAMC officials noted that it may not always be more cost 

effective for VAMCs to provide these services. For example, officials from 

the Salisbury VAMC explained that they planned to build a VAMC-based 

dialysis unit to reduce the number of veterans they referred to fee basis 

providers for dialysis treatments. However, when they compared the cost 

of building a dialysis unit to the cost of providing veterans dialysis 

treatments through fee basis providers, they determined that fee basis 

care was as cost-effective as building a dialysis unit.

These business cases must 

address several elements—including a financial analysis and safety 

issues. For example, Durham VAMC officials explained that to make 

these decisions about expanding its operating room and inpatient 

psychiatric bed capacity they reviewed weekly fee basis reports that 

included cost and volume information on the most common services that 

their VAMC provided through fee basis care and used these reports to 

make decisions about which Durham VAMC-based services should be 

expanded.

DOD medical facilities colocated with nearby VAMCs offer an alternative 

to veterans receiving care from more costly community-based fee basis 

providers. Currently, VA and DOD have a policy that allows the 

departments to charge one another at least 10 percent less for clinical 

 

38See Department of Veterans Affairs, Strategic Capital Investment Planning Process, VA 

Handbook 0011 (Aug. 8, 2011). If a VAMC-based service expansion involves major or 

minor construction, VA requires VAMC officials to make a business case for the 

construction during VA’s annual strategic capital investment process. Business cases 

must address a series of VA-wide criteria that address priorities such as safety, financial 

analysis, and client and customer access—in order to be considered for funding. VA 

reevaluates these criteria on a yearly basis to ensure it continually adapts to changes in 

demographics and health care delivery. After business cases are submitted, VA evaluates 

and prioritizes them for funding based on how well the suggested expansion addresses 

the criteria.

Sharing Agreements with DOD 
 

Page 24 GAO-13-441 VA Fee Basis Program

services than they would in locations without sharing agreements.39 As of 

June 2012, there are nearly 200 active sharing agreements in place 

between VA and DOD that range in complexity and scope from sharing a 

single service to agreements that govern the sharing of multiple 

services.40

Two of the six VAMCs we reviewed—located in Las Vegas and Biloxi—

share resources with neighboring DOD health care facilities to provide 

lower-cost care to veterans.41

 

39In fiscal year 2003, a memorandum of understanding between VA and DOD established 

a policy for reimbursement for health care services that they share. This memorandum of 

understanding allows VA and DOD collaborating facilities to use at least a 10 percent 

discount from the standard allowable charge for clinical services and certain specialty 

services. VA uses the fee basis care claims process to reimburse DOD medical facilities 

for the care they provide veterans through sharing agreements. DOD is reimbursed for 

services provided to veterans using the same process as fee basis providers, but their 

services are reimbursed at rates specified in each individual sharing agreement.

The Las Vegas VAMC has a sharing 

agreement with Nellis Air Force Base for some health care services, 

including cardiac and radiation oncology services. Similarly, the Biloxi 

VAMC has several sharing agreements with Air Force and Navy medical 

facilities along the Gulf Coast for some health care services. Officials from 

both these VAMCs reported that they refer veterans to these DOD 

facilities before sending them to fee basis providers in the community 

because the reimbursement rate for services provided in DOD medical 

facilities is lower than the Medicare rates used to reimburse fee basis 

providers. Officials from both the Las Vegas and Biloxi VAMCs explained 

that they first explore whether care is available through sharing 

agreements with nearby DOD medical facilities before referring the 

veterans to fee basis providers.

40For more information, see GAO, VA and DOD Health Care: Department-Level Actions 

Needed to Assess Collaboration Performance, Address Barriers, and Identify 

Opportunities, GAO-12-992 (Washington, D.C.: Sept. 28, 2012). In September 2012, we 

recommended that the Secretaries of Veterans Affairs and Defense further develop a 

systematic process for identifying and furthering collaboration opportunities, such as 

sharing agreements. Both VA and DOD generally concurred with this recommendation but 

stressed the importance of local leaders in the development of collaboration because 

these local officials have the best sense of their health care markets.

41Both the Las Vegas and Biloxi VAMCs participate in 2 of 10 joint ventures with DOD 

facilities in place throughout the country. Joint ventures allow VA and DOD to share 

multiple health care services and sometimes share facilities and give VA and DOD 

increased flexibility to determine reimbursement rates than with sharing agreements 

alone.
 

Page 25 GAO-13-441 VA Fee Basis Program

Another critical factor affecting fee basis care spending and utilization is 

the timely transfer of veterans receiving inpatient care from fee basis 

providers back to VAMC-based care. This is particularly relevant 

because, as we discussed earlier, VA has spent almost $1.3 billion over 

the last 5 years on emergency inpatient services for veterans through the 

Millennium Act and about $4.6 billion on preauthorized inpatient fee basis 

care. (See app. II.) As a result, it is important that VAMC staff closely 

monitor the conditions of veterans receiving inpatient care from fee basis 

providers to ensure that they are transferred to VAMCs once their 

conditions stabilize. Officials from all six VAMCs we examined reported 

that transferring veterans being treated by fee basis providers back to 

VAMC-based care when appropriate can be a way of reducing the cost of 

inpatient fee basis care. According to officials at two VAMCs, this is 

because VAMC inpatient bed capacity limitations that required a veteran 

to be referred to an inpatient fee basis provider can change during the 

course of a veteran’s hospital stay in non-VA facilities.

While officials from all six VAMCs we reviewed noted that transferring 

veterans back to inpatient VAMC-based care can help reduce fee basis 

utilization and spending, we found some VAMCs have more robust 

monitoring methods than other VAMCs for tracking veterans being treated 

by fee basis providers through their utilization management programs.42

• Three of the VAMCs we reviewed had a more formal approach that 

was integrated with their utilization management programs to actively 

identify circumstances when veterans being treated as inpatients by 

fee basis providers could return to the VAMC to complete their 

inpatient care. For example, the Salisbury VAMC has a transfer 

coordinator program specifically designated to actively identify such 

circumstances. The Salisbury VAMC employs a nurse case manager 

who visits veterans during their inpatient stays with fee basis 

Specifically, we found the following:

 

42See Veterans Health Administration, Utilization Management Program, VHA Directive 

2010-021 (May 14, 2010). VA policy requires that all VAMCs have a utilization 

management program in place. These programs are a key tool for managing the daily 

inpatient flow of a VAMC and ensuring that veterans receiving care at the VAMC are 

receiving the appropriate services based on their clinical needs; that information is 

gathered to inform decision making related to patient care management and discharge 

coordination; and that delays in services are identified. Utilization management often 

results in improved operational efficiencies, such as decreased lengths-of-stay at the 

VAMC and enhanced access for veterans.

Transferring Veterans Back to 

VAMC-based Inpatient Care
 

Page 26 GAO-13-441 VA Fee Basis Program

providers and identifies changes in veterans’ conditions that will allow 

them to return to the VAMC, and coordinates veterans’ transitions 

back into VAMC-based care. According to Salisbury VAMC officials, 

this program has allowed them to transfer veterans back to the VAMC 

to complete their care once the veterans’ conditions have stabilized.

• In contrast, the other three VAMCs we reviewed had a more passive 

approach that was limited to tracking veterans’ progress through 

information given to them by the veterans’ inpatient fee basis 

providers. For example, the Alexandria VAMC’s transfer coordinator 

monitors veterans’ inpatient fee basis care; however, this information 

is rarely used to transfer veterans back to the VAMC to complete their 

treatment.

Although ensuring that VAMCs are incorporating fee basis care into their 

utilization management programs would enable VA to more efficiently 

identify when opportunities exist for some veterans to be transferred back 

to lower-cost VAMC-based care, VA does not currently require all VAMCs 

to conduct such review.43 Specifically, VA’s current utilization 

management policy does not require VAMCs to incorporate reviews of 

inpatient fee basis care into their VAMC-based utilization management 

programs.44

 

43VAMCs that have already transitioned to VA’s new fee basis care administration model, 

referred to as Non-VA Care Coordination, have processes in place to coordinate with nonVA facilities and gather information needed to determine if transferring veterans back to 

the VAMC for continued treatment is possible and place this information in the fee basis 

care coordination system and veterans’ medical records. These processes include 

documenting VA bed availability, the medical necessity of the treatment veterans are 

receiving in a non-VA facility, and when the veteran is stable enough for transfer. 

However, these VAMCs follow local transfer procedures to determine whether or not 

veterans receiving care from inpatient fee basis providers in the community will be 

transferred back to the VAMC and not all VAMCs are currently participating in Non-VA 

Care Coordination.

VA Central Office has not provided guidance to all VAMCs on 

how to most effectively track veterans receiving inpatient care from fee 

basis providers, which has allowed VAMC programs to take a variety of 

forms. Ultimately, without guidance and standardized procedures 

provided by VA Central Office, some VAMCs may not be monitoring 

veterans receiving inpatient care from fee basis providers in the 

44See GAO/AIMD-00-21.3.1. Standards for internal control in the federal government state 

that management and employees should establish and maintain an environment 

throughout the organization that sets a positive and supportive attitude toward internal 

control and conscientious management.
 

Page 27 GAO-13-441 VA Fee Basis Program

community closely enough to prevent prolonged and unnecessary stays 

for veterans in inpatient fee basis care and may be missing other 

opportunities to reduce fee basis care spending.

One of VHA CBO’s three primary methods for monitoring fee basis care 

spending and utilization is its review of fee basis data. According to VHA 

CBO officials, these reviews are primarily focused on examining fee basis 

care utilization and spending—including VISN fee basis care utilization 

and significant high-cost areas, such as dialysis treatment. Analysis of fee 

basis data is an important aspect of monitoring that allows VHA CBO staff 

to look for outliers in spending and utilization, mistakes in fee basis claims 

data, potential lost opportunities to reduce spending and utilization, and to 

assess more long-term considerations—such as adjusting the level of fee 

basis care services or assessing potential areas for VAMC-based service 

expansion. However, the usefulness of this monitoring method as an 

oversight tool is significantly limited due to the way fee basis data are 

collected and reported to the VHA CBO.

Currently, VA’s data system collects claims data for each individual 

service provided by a fee basis provider—such as the physician’s time, 

surgical procedures, hospital rooms, and laboratory tests—rather than the 

total cost of a veteran’s office visit or inpatient stay. VA’s current data 

system cannot group these individual services by episode of care—a 

combined total of all care provided to a veteran during a single office visit 

or inpatient stay.45,46

 

45See GAO, Medicare: Private Sector Initiatives to Bundle Hospital and Physician 

Payments for an Episode of Care, 

For example, during an office visit to an orthopedic 

surgeon for a joint replacement evaluation, an X-ray for the affected joint 

may be ordered, the veteran may be given a blood test, and the veteran 

may receive a physical evaluation from the orthopedic surgeon. The fee 

basis provider would submit a bill to VA for the office visit and separate 

bills would be submitted by the radiologist that X-rayed the affected joint 

GAO-11-126R (Washington, D.C.: Jan. 31, 2011). 

46In March 2013, VHA CBO officials told us that for inpatient claims they could construct a 

program to group inpatient and inpatient ancillary claims together by linking all the records 

of individual services provided to veterans during a particular date range. However, this 

method relies on correct local VISN and VAMC data entry into VA’s fee basis data system 

and correct information to be provided by providers. VHA CBO officials acknowledged that 

there is no way to link outpatient services together to create a record of a single outpatient 

episode of care. 

VA’s Processes for 

Overseeing the Fee 

Basis Care Program 

Lack Critical Data 

Needed to Effectively 

Track and Monitor 

Fee Basis Spending 

and Utilization
 

Page 28 GAO-13-441 VA Fee Basis Program

and the lab that performed the veteran’s blood test. Each of these bills 

would include charges under different medical billing codes.47

Not being able to group charges from fee basis providers by episode of 

care has the following disadvantages in terms of monitoring fee basis 

care and potentially reducing costs:

The VISN 

or VAMC-based fee basis clerk processing this claim would record these 

charges in VA’s basis claims processing software and request payment 

for these fee basis providers. However, the fee basis data system used 

by VHA CBO to review these payments would not be able to link the 

charges for these three treatments together as a single episode of care 

for this veteran’s office visit with an orthopedic surgeon.

• Monitoring challenges. From a monitoring perspective, not having 

data by episode of care prevents VA from efficiently identifying areas 

of utilization growth or unusually high spending. For example, VAwide episode of care monitoring would allow VHA CBO to assess 

whether opportunities for strategic expansion of VAMC-based 

services—such as the Durham VAMC operating room expansion and 

the Biloxi VAMC addition of pulmonary function test equipment 

mentioned earlier—would be possible in more VAMCs. Episode of 

care monitoring would more effectively allow VA to make more 

consistent strategic decisions about such service expansions.

• Cost analysis limitations. From a cost perspective, not having fee 

basis data on an episode of care basis prevents VA from efficiently 

assessing whether fee basis providers were reimbursed appropriately. 

Without the ability to monitor fee basis spending by episodes of care, 

VHA CBO cannot conduct retrospective reviews of VISN and VAMC 

claims to determine if the appropriate rate was applied for the care 

provided by fee basis providers. For example, VHA CBO staff cannot 

verify that fee basis care that should be paid using Medicare 

 

47Fee basis providers bill for their services using individual Healthcare Common 

Procedure Coding System (HCPCS) codes or Medicare-Severity Diagnosis-Related 

Group (MS-DRG) codes, which are the standard medical billing codes for outpatient and 

inpatient medical care, to account for various treatments that are provided during the 

same office or clinic visit or inpatient stay. HCPCS is a collection of standardized codes 

that represent medical procedures, supplies, products, and services. The system contains

two types of codes—level I codes (also referred to as current procedural terminology 

codes) that consist of five numeric digits, and level II codes that consist of a letter followed 

by four numeric digits. MS-DRG codes classify inpatient stays according to both patients’ 

clinical conditions and the services patients receive.
 

Page 29 GAO-13-441 VA Fee Basis Program

“bundled” reimbursement rates were in fact paid using these bundled 

rates because all individual charges from a veteran’s episode of care 

cannot be reliably linked. Since VA uses Medicare rates to reimburse 

fee basis providers for most services, VAMCs and VISNs, like 

Medicare, use bundled reimbursement rates for some procedures that 

provide a single payment for closely related services in some cases. 

Bundled rates are designed to give providers an incentive to furnish 

care more efficiently as providers retain the difference if the bundled 

payment exceeds the cost of care.48

To effectively conduct these retrospective reviews, VHA CBO would need 

to change its claims processing methods and ensure that the VISN or 

VAMC fee basis clerks processing each provider’s claims assign a claim 

number to each payment made to a fee basis provider for an episode of 

care. This claim number would serve as a linkage among the individual 

service line items in VA’s fee basis data system and allow VHA CBO to 

group together all payments made for a single episode of care and 

assess the total cost of that episode of care.

Bundled rates provide a financial 

incentive for delivering care more efficiently by making providers 

accountable if a patient’s treatment costs exceeded the bundled rate.

49

 

48See GAO-11-126R. 

49VHA CBO staff use data extracted from the fee basis claims processing software and 

other databases to monitor the fee basis care program. The fee basis claims processing 

software includes many data fields that are not transferred to VHA CBO for analysis. In 

September 2012, VHA CBO fee basis data management officials reported that VA plans 

to incorporate a claim number into its fee basis claims processing software package used 

by VISN and VAMC-based fee basis claims processing clerks to review and authorize 

payments to fee basis providers. Without ensuring VHA CBO staff have access to this 

claim number, these officials said they will not be able to analyze and track fee basis care 

spending and utilization by episodes of care.
 

Page 30 GAO-13-441 VA Fee Basis Program

In September 2012, VA outlined both short- and long-term plans for 

improving the fee basis care program following problems highlighted by 

several OIG audits and a recent congressional hearing. The short-term 

corrective action plan is made up of a series of tasks to be completed in 

fiscal year 2013 across six key areas—(1) foundational activities, 

(2) achieving a sustainable decrease in fee basis care improper 

payments, (3) recovery and recapture of fee basis care overpayments, 

(4) building a culture of accountability within the fee basis care program, 

(5) enhancing internal controls and data integrity, and (6) training and 

educating VISNs and VAMCs.

We found that VA has taken a number of steps to better ensure the 

completion of its short-term corrective action plan in fiscal year 2013.50

Specifically, VA has identified clear leadership for tasks, created teams to 

accomplish tasks that include representatives from across VA operations, 

sought the input of internal stakeholders—such as VISN and VAMC fee 

basis unit staff—and external stakeholders—including the VA OIG, set 

clear target dates for the completion of tasks, and identified methods for 

assessing whether or not tasks had the desired effect on the fee basis 

care program. While it is still too early to determine if the efforts included 

in the short-term corrective action plan will produce meaningful 

improvements in the fee basis care program, it represents an important 

first step in increasing accountability for the outcomes of the fee basis 

care program. (See table 1.)

 

50GAO, Executive Guide: Effectively Implementing the Government Performance and 

Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996). When other leading 

public-sector organizations are engaged in efforts to improve their performance and help 

their organizations become more effective—similar to VA’s goals for the short-term 

corrective action plan—we found that these organizations commonly take three steps: 

(1) define a clear mission and goals, (2) measure performance to gauge progress toward 

achieving goals, and (3) use performance information as a basis for decision making.

VA Is Currently 

Implementing a ShortTerm Corrective 

Action Plan for the 

Fee Basis Care 

Program, but LongerTerm Strategy Is Still 

in Development
 

Page 31 GAO-13-441 VA Fee Basis Program

Table 1: Status of Short-Term Improvement Goals, March 2013

Short-term improvement goals

Estimated 

completion date

Completion 

progress

Foundational activities

• Complete realignment of regulations to applicable statutes and revise applicable 

handbooks and directives

December 2013 ◓

• Implement a national contracting strategy June 2013 ◓

Achieve a sustainable decrease in improper payments

• Implement new care coordination initiative September 2013 ◓

• Implement cost estimation process improvements March 2013 ◓

• Evaluate the effectiveness of fee basis provider outreach efforts September 2013 ◓

• Validate the effectiveness of new Medicare-based fee schedule and software 

updates to help fee basis claims processing clerks identify the appropriate 

payment rate for claims

March 2013 ●

Recover and recapture overpayments

• Initiate recapture activities as appropriate with a former contract service 

provider found to overpay fee basis providers

March 2013 ◓

• Assess recapture management approach and create a stronger partnership with 

VISN and VAMC Chief Financial Officers

June 2013 ◓

Build a culture of accountability

• Initiate communication with senior leaders—including VA Central Office officials, 

VISN leadership, and VAMC-based fee basis unit managers

December 2012 ●

• Define roles and responsibilities for the fee basis care program June 2013 ◓

Enhance internal controls and data integrity

• Visit the 30 lowest-performing fee basis care units and develop action plans for 

improvement

September 2013 ◓

• Assess fee basis care web-based performance management tools and ensure 

these tools provide a clear picture of the program’s performance

March 2013 ◓

• Increase communication to VISN and VAMC fee basis care units December 2012 ●

• Implement predictive auditing to provide near-real time projections of fee basis 

care improper payments

March 2013 ◓

Train and educate the field

• Create a high performing education initiative that promotes learning and training 

on improper payment risks and control issues

March 2013 ◓

• Mandate appropriate training courses No date specified ◓ a

• Update fee basis training courses to reflect the content of a new competency 

model developed for fee basis staff

September 2013 ◓

Key: ●= completed; ◓= in progress

Source: GAO. 

a

In February 2013, VHA CBO informed us that these training mandates are currently being discussed 

with VA’s labor relations partners and they did not have an estimated completion date for these 

discussions.
 

Page 32 GAO-13-441 VA Fee Basis Program

VA is also in the process of developing a long-term strategy for improving 

its fee basis care program. This long-term strategy includes efforts to 

develop and implement a new organizational structure for the fee basis 

care program, consolidate claims processing functions in fewer locations, 

develop comprehensive guidance for the fee basis care program, 

implement a new competency-based personnel model, and implement 

new claims processing software efforts. To date, progress on the 

development of this long-term strategy has been limited to the 

development of new claims processing software and initial discussions of 

the new organizational structure. In February 2013, VA officials told us 

that the long-term strategy is still in development.

VA’s fee basis care program is a critical means for providing accessible 

health care to veterans. VA has acknowledged that fee basis care is a 

necessary tool for veterans when a VAMC does not have an available 

clinical specialist or when veterans face long travel distances to obtain 

care from VAMC-based providers. VA has also made concerted efforts in 

recent years to improve the fee basis care program by implementing a 

number of initiatives designed to improve the program—including new 

software packages for VISN and VAMC fee basis claims processing units, 

a new care coordination program, and initiating a program to better 

coordinate with fee basis providers.

Moving forward, we believe it is critical that VA address four areas as 

potential ways to more effectively manage and monitor the fee basis care 

program. First, veterans’ eligibility for travel reimbursement may affect 

whether they are referred to fee basis care or to another VAMC. Some 

veterans who qualify for travel reimbursement under VA’s beneficiary 

travel program might elect to seek care at another VAMC without 

incurring personal travel expenses in lieu of being treated by a fee basis 

provider. In some cases, this could result in VA paying less for their care 

than it would if the veteran were treated through the fee basis care 

program. Should the Secretary of Veterans Affairs exercise his ability to 

revise the beneficiary travel eligibility requirements to allow for the use of 

beneficiary travel in cases where it is both more cost-effective for VA and 

in the veteran’s best interest to receive care at another VAMC instead of 

a fee basis provider, it could be possible to lower overall fee basis care 

utilization and spending. In addition, VA does not currently require 

VAMCs to assess either the cost-effectiveness of reimbursing veterans 

for travel to another VAMC when determining whether to preauthorize fee 

basis care in veterans’ local communities.

Conclusions 
 

Page 33 GAO-13-441 VA Fee Basis Program

Second, VA should better manage fee basis care wait times and costs. 

VA currently does not include fee basis care wait times in the measures it 

uses to assess VISN and VAMC directors’ performance and does not 

track the amount of time veterans wait to see a fee basis provider. As a 

result, the VAMCs we reviewed are referring veterans to fee basis 

providers to ensure they meet the wait time performance goals for VAMCbased clinics. Having data on wait times for veterans referred to fee basis 

providers would help VA better determine if veterans are receiving 

comparable access to fee basis providers and VAMC-based providers.

Third, VA may be missing an opportunity to reduce the cost of inpatient 

fee basis care by not requiring VAMC-based utilization management 

programs designed to regularly assess VAMC capacity to consider 

veterans being treated by non-VA inpatient fee basis providers. 

Incorporating veterans treated by non-VA inpatient fee basis providers 

into ongoing VAMC utilization management programs would allow 

VAMCs to identify situations when they no longer have capacity 

limitations and can complete a veteran’s treatment in-house at a lower 

cost than the fee basis provider.

Finally, VA can also improve its capability to more effectively monitor the 

fee basis care program. VA Central Office’s monitoring efforts are limited 

by the inability to analyze fee basis care data by episode of care. 

Because information that would allow VA to pull together all services with 

a single office visit or inpatient stay is not available, VA Central Office 

cannot effectively monitor the payments made by fee basis care units or 

ensure that fee basis providers are billing VA appropriately for care.

To effectively manage fee basis care spending, we recommend that the 

Secretary of Veterans Affairs take the following action:

• Revise the beneficiary travel eligibility regulations to allow for the 

reimbursement of travel expenses for veterans to another VAMC to 

receive needed medical care when it is more cost-effective and 

appropriate for the veteran than seeking similar care from a fee basis 

provider.

To effectively manage fee basis care wait times and spending, we 

recommend that the Secretary of Veterans Affairs direct the Under 

Secretary for Health to take the following three actions:

Recommendations for 

Executive Action
 

Page 34 GAO-13-441 VA Fee Basis Program

• Require during the fee basis authorization process that VA providers 

and fee basis officials determine the cost-effectiveness of reimbursing 

medically stable veterans eligible for beneficiary travel for travel to 

another VAMC rather than referring them to a fee basis provider for 

similar care.

• Analyze the amount of time veterans wait to see fee basis providers 

and apply the same wait time goals to fee basis care that are used as 

VAMC-based wait time performance measures.

• Establish guidance for VAMCs that specifies how fee basis care 

should be incorporated with other VAMC utilization management 

efforts.

To ensure that VA Central Office effectively monitors fee basis care, we 

recommend that the Secretary of Veterans Affairs direct the Under 

Secretary for Health to take the following action:

• Ensure that fee basis data include a claim number that will allow for 

VA Central Office to analyze the episode of care costs for fee basis 

care.

VA provided written comments on a draft of this report, which we have 

reprinted in appendix III. In its comments, VA generally agreed with our 

conclusions, concurred with our five recommendations, and described the 

agency’s plans to implement each of our recommendations. VA also 

provided technical comments, which we have incorporated as 

appropriate. 

In its plan, VA stated that to address our first recommendation, VHA CBO 

will consider including provisions related to veterans’ travel 

reimbursement to another VAMC to receive needed medical care when it 

is more cost-effective and appropriate during a planned upcoming 

revision to the agency’s beneficiary travel regulations. 

To address our second recommendation, VA noted that it is working to 

revise procedures for both its new fee basis care administration model, 

referred to as Non-VA Care Coordination, and the beneficiary travel 

program to ensure that the cost-effectiveness of a veterans’ travel to 

another VAMC or to a non-VA care provider is reviewed as part of the 

authorization of fee basis care and is included in standard operating 

procedures and training.

Agency Comments 

and Our Evaluation
 

Page 35 GAO-13-441 VA Fee Basis Program

To address our third recommendation, VA noted that VHA CBO is 

completing requirements for a national consolidated monthly wait time 

indicator to measure performance for fee basis care referrals. However, 

VA did not acknowledge whether or not the wait time indicators used in 

this monthly indicator would be the same as those used for VAMC-based 

care, as we recommended. We support VA’s decision to set wait time 

goals for fee basis care, but we believe the agency should ensure that 

wait time goals used for fee basis care are the same as those applied to 

VAMC-based care.

To address our fourth recommendation, VA stated that the new fee basis 

care administration model, Non-VA Care Coordination, includes a 

template for managing information transfers from non-VA providers to VA 

staff that will support the utilization management practices of VAMCs. We 

support VA’s efforts to standardize this information exchange in its fee 

basis care administration practices, but encourage the agency to also 

clarify its utilization management policies to ensure that VAMC utilization 

management staff regularly coordinate with VAMC fee basis management 

staff to receive this information from non-VA providers.

Finally, to address our fifth recommendation, VA noted that the agency 

agrees that analyzing episode of care costs is an important part of the 

agency’s fee basis monitoring activities. VA outlined its plan to analyze 

existing data systems and determine the most cost-effective method for 

monitoring episode of care costs.

We are sending copies of this report to the Secretary of Veterans Affairs, 

the Under Secretary for Health, appropriate congressional committees, 

and other interested parties. In addition, the report is available at no 

charge on the GAO website at http://www.gao.gov. 
 

Page 36 GAO-13-441 VA Fee Basis Program

If you or your staffs have any questions about this report, please contact 

me at (202) 512-7114 or at williamsonr@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix IV. 

Randall B. Williamson

Director, Health Care
Page 37 GAO-13-441 VA Fee Basis Program

List of Requesters

The Honorable Patty Murray

Chairman

Committee on the Budget

United States Senate

The Honorable Bernie Sanders

Chairman

The Honorable Richard Burr

Ranking Member

Committee on Veterans’ Affairs

United States Senate

The Honorable Jeff Miller

Chairman

The Honorable Michael Michaud

Ranking Member

Committee on Veterans’ Affairs

House of Representatives

The Honorable Mike Coffman

Chairman

Subcommittee on Oversight and Investigations

Committee on Veterans’ Affairs

House of Representatives

The Honorable Bill Johnson

House of Representatives
Appendix I: VA Spending and Utilization by 

Fee Basis Care Category

Page 38 GAO-13-441 VA Fee Basis Program

This appendix provides additional results from our analysis of Department 

of Veterans Affairs (VA) fee basis data from fiscal years 2008 through 

2012. Specifically, the table below provides additional information on how 

much VA spent on fee basis care and how many unique veterans 

received care from fee basis providers by fee basis care categories.

Table 2: VA Spending and Utilization by Fee Basis Care Category, Fiscal Years 2008 through 2012

VA fee basis care category

Spending,

dollars in billions

Percentage of 

total fee 

basis spending a

Utilization 

(by number of 

unique veterans)

Percentage 

of total fee 

basis utilization b

Preauthorized outpatient

c

7.36 36.28 1,871,984 76.50

Preauthorized inpatient 4.60 22.68 268,763 10.98

Home health 2.69 13.28 327,514 13.38

Community nursing home 2.50 12.33 63,714 2.60

Millennium Act 1.79 d 8.83 373,738 15.27

Emergency care for veterans with 

service-connected conditions 0.91 e 4.50 161,359 6.59

Dental 0.36 1.77 151,419 6.19

Compensation and pension exams 0.07 0.33 142,212 5.81

Source: GAO (analysis); VA (data).

Notes: Fee basis spending and utilization in this table does not include pharmacy-only fee basis care. 

Pharmacy-only fee basis care consists of reimbursements to veterans for medications that they paid 

for as part of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care 

generally for service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care 

and Benefits Act emergency care for non-service-connected conditions). Total spending for 

pharmacy-only fee basis care was $0.002 billion for fiscal years 2008 through 2012. A total of 11,750 

unique veterans received such reimbursement from fiscal year 2008 through fiscal year 2012.

a

Spending amounts may not sum to spending totals cited previously in text due to rounding.

b

Utilization amounts may not match utilization totals cited previously in text, as veterans may have 

received care in multiple categories during fiscal years 2008 through 2012. To determine the fee 

basis utilization numbers in this table, we counted each individual veteran once per fee basis care 

category by identifying the number of unique Social Security numbers present in fee basis data for 

fiscal years 2008 through 2012.

c

Utilization percentages may not add to 100 percent due to rounding and because some veterans 

may have received fee basis care in multiple categories.

d

Millennium Act care refers to services provided to veterans under the 1999 Veterans Millennium 

Health Care and Benefits Act. Under this act, VA is authorized to pay emergency care costs for some 

veterans’ non-service-connected conditions, among other things. See 38 U.S.C. § 1725.

e

Emergency care for veterans with service-connected conditions refers to fee basis care that meets 

the eligibility requirements for emergency care under 38 U.S.C. § 1728. Under this statute, VA is 

required to pay for emergency care provided by non-VA facilities for service-connected conditions, 

non-service-connected conditions associated with and aggravating a service-connected condition, 

any condition if the veteran is classified by VA as permanently and totally disabled from a serviceconnected condition, and any condition for veterans participating in a vocational rehabilitation 

program who need care to participate in a course of training.

Appendix I: VA Spending and Utilization by 

Fee Basis Care Category
Appendix II: VA Outpatient and Inpatient 

Spending and Utilization by Fee Basis Care 

Category

Page 39 GAO-13-441 VA Fee Basis Program

This appendix provides additional results from our analysis of Department 

of Veterans Affairs (VA) fee basis data from fiscal years 2008 through 

2012.

• Table 3 provides additional information on how much VA spent on 

outpatient fee basis care and how many unique veterans received 

care from outpatient fee basis providers by fee basis care categories.

• Table 4 provides additional information on how much VA spent on 

inpatient fee basis care and how many unique veterans received care 

from inpatient fee basis providers by fee basis care categories.

Table 3: Outpatient Spending and Utilization by VA Fee Basis Care Category, Fiscal Years 2008 through 2012

VA fee basis care category

Outpatient 

spending, 

dollars in billions 

Percentage of 

total outpatient 

spending

Outpatient utilization 

(by number of 

unique veterans) a

Percentage of 

total outpatient 

utilization b

Preauthorized

c

7.36 65.59 1,871,984 79.57

Home health 2.69 24.01 327,514 13.92

Millennium Act 0.49 d 4.41 311,199 13.23

Dental 0.36 3.20 151,419 6.44

Emergency care for veterans with 

service-connected conditions 0.25 e 2.20 126,896 5.39

Compensation and pension exams 0.07 0.60 142,212 6.04

Source: GAO (analysis); VA (data).

Notes: Fee basis spending and utilization in this table does not include pharmacy-only fee basis care. 

Pharmacy-only fee basis care consists of reimbursements to veterans for medications that they paid 

for as part of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care 

generally for service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care 

and Benefits Act emergency care for non-service-connected conditions). Total spending for 

pharmacy-only fee basis care was $0.002 billion for fiscal years 2008 through 2012. A total of 11,750 

unique veterans received such reimbursement from fiscal year 2008 through fiscal year 2012.

a

Spending percentages may not sum to 100 percent due to rounding.

b

Utilization amounts may not match utilization totals cited previously in text, as veterans may have 

received care in multiple categories during fiscal years 2008 through 2012. To determine the fee 

basis utilization numbers in this table, we counted each individual veteran once per fee basis care 

category by identifying the number of unique Social Security numbers present in outpatient fee basis 

data for fiscal years 2008 through 2012.

c

Utilization percentages may not add to 100 percent due to rounding and because some veterans 

may have received fee basis care in multiple categories.

d

Millennium Act care refers to services provided to veterans under the 1999 Veterans Millennium 

Health Care and Benefits Act. Under this act, VA is authorized to pay emergency care costs for some 

veterans’ non-service-connected conditions, among other things. See 38 U.S.C. § 1725.

e

Appendix II: VA Outpatient and Inpatient 

Spending and Utilization by Fee Basis Care 

Category

Emergency care for veterans with service-connected conditions refers to fee basis care that meets 

the eligibility requirements for emergency care under 38 U.S.C. § 1728. Under this statute, VA is 

required to pay for emergency care provided by non-VA facilities for service-connected conditions, 

non-service-connected conditions associated with and aggravating a service-connected condition, 

any condition if the veteran is classified by VA as permanently and totally disabled from a service-
Appendix II: VA Outpatient and Inpatient 

Spending and Utilization by Fee Basis Care 

Category

Page 40 GAO-13-441 VA Fee Basis Program

connected condition, and any condition for veterans participating in a vocational rehabilitation 

program who need care to participate in a course of training.

Table 4: Inpatient Spending and Utilization by VA Fee Basis Care Category, Fiscal Years 2008 through 2012

VA fee basis care category

Inpatient spending,

dollars in billions

Percentage of total 

inpatient spending

Inpatient utilization 

(by number of 

unique veterans)

Percentage of total 

inpatient utilization a

Preauthorized

b

4.60 50.76 268,763 56.96

Community nursing home 2.50 27.58 63,714 13.50

Millennium Act 1.30 c 14.30 163,647 34.68

Emergency care for veterans with 

service-connected conditions 0.67 d 7.36 65,309 13.84

Source: GAO (analysis); VA (data).

Notes: Fee basis spending and utilization in this table does not include pharmacy-only fee basis care. 

Pharmacy-only fee basis care consists of reimbursements to veterans for medications that they paid 

for as part of emergency care that was reimbursed by VA under 38 U.S.C. § 1728 (emergency care 

generally for service-connected conditions) or 38 U.S.C. § 1725 (Veterans Millennium Health Care 

and Benefits Act emergency care for non-service-connected conditions). Total spending for 

pharmacy-only fee basis care was $0.002 billion for fiscal years 2008 through 2012. A total of 11,750 

unique veterans received such reimbursement from fiscal year 2008 through fiscal year 2012.

a

Utilization amounts may not match utilization totals cited previously in text, as veterans may have 

received care in multiple categories during fiscal years 2008 through 2012. To determine the fee 

basis utilization numbers in this table, we counted each individual veteran once per fee basis care 

category by identifying the number of unique Social Security numbers present in inpatient fee basis 

data for fiscal years 2008 through 2012.

b

Utilization percentages may not add to 100 percent due to rounding and because some veterans 

may have received fee basis care in multiple categories.

c

Millennium Act care refers to services provided to veterans under the 1999 Veterans Millennium 

Health Care and Benefits Act. Under this act, VA is authorized to pay emergency care costs for some 

veterans’ non-service-connected conditions, among other things. See 38 U.S.C. § 1725.

d

Emergency care for veterans with service-connected conditions refers to fee basis care that meets 

the eligibility requirements for emergency care under 38 U.S.C. § 1728. Under this statute, VA is 

required to pay for emergency care provided by non-VA facilities for service-connected conditions, 

non-service-connected conditions associated with and aggravating a service-connected condition, 

any condition if the veteran is classified by VA as permanently and totally disabled from a serviceconnected condition, and any condition for veterans participating in a vocational rehabilitation 

program who need care to participate in a course of training.
Appendix III: Comments from the Department 

of Veterans Affairs

Page 41 GAO-13-441 VA Fee Basis Program

Appendix III: Comments from the 

Department of Veterans Affairs
Appendix III: Comments from the Department 

of Veterans Affairs

Page 42 GAO-13-441 VA Fee Basis Program
Appendix III: Comments from the Department 

of Veterans Affairs

Page 43 GAO-13-441 VA Fee Basis Program
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 44 GAO-13-441 VA Fee Basis Program

Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov

In addition to the contact named above, Marcia A. Mann, Assistant 

Director; Kathleen Diamond; Krister Friday; Katherine Nicole Laubacher; 

Daniel K. Lee; Lisa Motley; Rebecca Rust Williamson; and Malissa G. 

Winograd made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(291005)
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