Department of Veterans Affairs 

Office of Inspector General 

Review of Selected Financial and 

Administrative Operations at 

VISN 1 Medical Facilities 

Report No. 05-01978-226 September 27, 2006

VA Office of Inspector General 

Washington, DC 20420 
To Report Suspected Wrongdoing in VA Programs and Operations 

Call the OIG Hotline – (800) 488-8244 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Contents 

Page 

Executive Summary .................................................................................................... i 

Introduction...................................................................................................................... 1 

Purpose............................................................................................................................. 1 

Background...................................................................................................................... 1

Scope and Methodology .................................................................................................. 1 

Results and Conclusions ....................................................................................2

Issue 1: Medical Care Collections Fund......................................................................... 2 

Issue 2: Radiology Services Productivity and Costs...................................................... 5 

Issue 3: Equipment Accountability................................................................................. 9 

Issue 4: Service Contracts............................................................................................. 17 

Issue 5: Procurement of Prosthetic Supplies ................................................................ 22 

Issue 6: Information Technology Security ................................................................... 24 

Issue 7: Pharmaceutical Accountability........................................................................ 25 

Appendixes 

A. CAP Review Locations, Dates, and Report Numbers............................................ 29 

B. Facility MCCF Projections Over a 12-Month Period ............................................ 30 

C. Radiologist Staffing, Productivity, and Costs 

Table 1 VA Radiologists .................................................................................... 31 

Table 2 Contract Radiologists ............................................................................ 31 

Table 3 Opportunities to Reduce Contract Services and Costs by Increasing 

 VA Productivity..................................................................................... 31 

D. Universe of Contracts, Sampled Contracts, Estimated Savings, Questioned 

 Costs, and Overpayments....................................................................................... 32 

E. Preaward Contracting Deficiencies........................................................................ 33 

F. Postaward Contracting Deficiencies ...................................................................... 34 

G. Information Technology Security Deficiencies ..................................................... 35 

H. VISN Director Comments...................................................................................... 36 

I. OIG Contact and Staff Acknowledgments............................................................. 53 

J. Report Distribution................................................................................................. 54 

VA Office of Inspector General 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Executive Summary 

Introduction 

The Office of Inspector General (OIG) conducted a review of the Veterans Integrated 

Service Network (VISN) 1, in collaboration with VISN 1 management, to identify VISNwide opportunities to promote cost-effectiveness and efficiency, increase revenues, and 

ensure compliance with Federal regulations and VA policies. This review, which focused 

on financial and administrative activities, was initiated with the intent of engaging VISN 

management in resolving deficiencies found on past Combined Assessment Program 

(CAP) reviews throughout the Department and identifying issues that needed to be

addressed on a VISN-wide basis. 

In order to obtain a VISN-wide perspective, CAP reviews were performed at all eight 

VISN facilities during fiscal year (FY) 2005, beginning on December 6, 2004, and ending 

on September 30, 2005. Conducting reviews at all VISN facilities within such a short 

time period was a new approach, different from the typical coverage cycle of 3 to 4 years. 

The more comprehensive reviews were broader and deeper than routine CAP reviews. 

Results 

The review focused on seven financial and administrative activities which included 

Medical Care Collections Fund (MCCF) operations, radiology services productivity and 

costs, equipment accountability, service contracts, procurement of prosthetic supplies, 

information technology (IT) security, and pharmaceutical accountability. To improve 

operations, we made the following recommendations: 

• Enhance revenues and prevent inaccurate billings by strengthening controls and 

increasing oversight of facility MCCF operations. 

• Improve the cost-efficiency of radiology services by utilizing relative value units 

(RVUs) as a tool for monitoring and measuring productivity, maximizing radiologist 

productivity, and minimizing the need for contract services. Implement teleradiology 

to optimally distribute the VISN’s radiology workload and further enhance staff 

productivity. 

• Improve equipment accountability by strengthening controls, clarifying procedures, 

enhancing oversight, and improving training.

• Improve oversight of the contracting program by establishing a formal organizational 

structure, developing and implementing management performance tools and operating 

policies, and improving communication among contracting personnel. 

VA Office of Inspector General i 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

• Provide better oversight to ensure that Government purchase cardholders buy 

prosthetic supplies in accordance with VA’s procurement policies and the Federal 

Acquisition Regulation (FAR). 

• Strengthen IT security by correcting access and physical security deficiencies and 

requesting appropriate background investigations for employees with access to 

sensitive data and information. 

• Improve accountability for pharmaceuticals and compliance with VHA policies by 

strengthening controls and providing closer management oversight of the controlled

substances inspection program and pharmaceutical activities. 

Comments 

The VISN 1 Director agreed with the findings and recommendations and provided 

acceptable implementation plans. (See Appendix H, pages 36–52, for the complete text 

of the VISN Director’s comments.) We will follow up on the planned actions until they

are completed. 

 (original signed by:) 

 JON A. WOODITCH 

 Deputy Inspector General 

VA Office of Inspector General ii 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Introduction 

Purpose

The purpose of the VISN 1 review was to conduct broader and more in-depth reviews of 

CAP issues to identify VISN-wide opportunities to promote cost effectiveness and 

efficiency, increase revenues, and ensure compliance with Federal regulations and VA

policies. This type of CAP review had not been conducted before and was initiated with

the intent of engaging VISN management in resolving deficiencies found on past CAP

reviews throughout VA and identifying issues that needed to be addressed VISN-wide.

Background 

VISN 1 consists of 8 facilities—6 medical centers and 2 health care systems (HCS)—and 

38 community-based outpatient clinics (CBOCs) located throughout the 6 New England 

states.1

 VISN 1 serves more than 233,000 veterans, has a budget of about $1.5 billion, 

and 9,023 employees. Annually, the VISN has 26,000 admissions and over 2.3 million 

outpatient visits. 

In September 2005, VISN 1 was awarded the VHA Kizer Quality Achievement 

Recognition Grant. This prestigious award, which recognizes performance excellence, is 

VHA’s highest award for quality of patient care services. During FYs 2004 and 2005, 

VISN 1 consistently ranked as one of the top five VISNs in delivering quality patient care 

services. To further confirm the VISN’s noteworthy quality improvement program, OIG

healthcare inspectors concluded during their CAP reviews at all VISN 1 facilities that

each facility’s quality management program was operating effectively. 

Scope and Methodology 

The review evaluated seven administrative and financial activities which included MCCF 

operations, radiology services productivity and costs, equipment accountability, service 

contracts, procurement of prosthetic supplies, IT security, and pharmaceutical

accountability. The review covered activities occurring during FYs 2004 and 2005. In 

conducting the review, we visited all eight VISN facilities in FY 2005 rather than over a 

3-year period. (See Appendix A, page 29, for site visit dates and CAP review report 

numbers.) At each facility, we reviewed medical records and health insurance billing 

information; analyzed data on radiologist productivity and the cost of radiology services; 

conducted equipment inventories; reviewed contracts and assessed the risk of conflicts of

interest; analyzed purchase card transactions; assessed IT security; and reviewed 

controlled substances inspections and pharmaceutical activities. We also interviewed 

managers and employees. The review was conducted in accordance with OIG standard

operating procedures for CAP reviews. 

 

1

 The six New England states are Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. 

VA Office of Inspector General 1 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Results and Conclusions 

Issue 1: Medical Care Collections Fund — Stronger Controls 

Would Enhance Revenues and Prevent Underbilling and 

Overbilling 

Findings

Our review of outpatient and fee basis episodes of care identified billing, coding, and 

collection issues that needed VISN management attention. These issues included 

underbilling and overbilling for outpatient care and not consistently billing for fee basis 

care. Underbilling occurred because provider documentation was missing, incomplete, or 

untimely and because some procedures were not coded and billed. Overbilling generally 

involved billing for care provided by medical students who were not licensed and 

therefore not billable providers. We also identified instances of billing for serviceconnected care. The VISN facilities did not consistently bill insurers for fee basis care 

because documentation of the care was not readily available and because the facilities 

found the process to be too time consuming for the presumed inadequate revenue. (See 

Appendix B, page 30, for VISN 1 individual facility projections of underbilling, 

overbilling, and additional collections over the variable 12-month periods of the CAP 

reviews.) 

To enhance revenues and prevent underbilling and overbilling, VISN management 

needed to strengthen management controls and provide greater oversight of facility 

MCCF programs. As reported in the individual facility CAP review reports, we 

estimated that during the period covered by our reviews, an additional $7.5 million 

(7 percent) of the FY 2004 and FY 2005 average total annual outpatient billing 

($107 million) could have been billed, which would have resulted in increased MCCF 

collections of about $2.4 million (6 percent of the average annual outpatient collections 

of $40 million). We estimated that $774,000 (0.72 percent) was overbilled, resulting in 

about $217,000 (0.54 percent) in excess collections. We also estimated that the VISN

facilities missed opportunities to bill $1.7 million for patient care encounters previously 

deemed not billable and $4.5 million for care given by non-VA providers, which would 

have resulted in increased MCCF collections of about $472,000 and $1.5 million, 

respectively. In total, VISN facilities could have billed an additional $13.7 million and 

collected about $4.3 million during the period covered by our reviews. 

Background. VA can bill insurance carriers for medical care provided to patients treated

for nonservice-connected conditions at VA expense. In FY 2004, the eight VISN

facilities collected $81.8 million, missing the VISN collections goal of $86.4 million by 

$4.6 million. In FY 2005, they collected $95.8 million, exceeding the $91.5 million goal 

by about $4.3 million. 

VA Office of Inspector General 2 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Scope and Methodology. Our reviews covered medical care encounters that occurred

between October 1, 2003, and June 30, 2005. To determine whether facilities were 

billing for all billable episodes of care, we analyzed medical care coding and bills from 

samples of outpatient encounters, encounters listed in three segments of the “Reasons Not 

Billable Report” (“RNB Report”), and samples of bills for fee basis care provided to 

insured patients. The VISN Health Information Management Service (HIMS) 

Coordinator, Compliance Officer, and Patient Accounts Manager took an active role in 

the process. They helped facility coding and billing staff plan for our reviews and 

participated in the discussions of the coding and billing review findings that we 

conducted with staff at each facility. 

Review Results

Outpatient Billing Reviews. We identified instances of underbilling at six of the eight 

facilities. At five facilities, most pathology examinations were overlooked and not coded 

and billed, a common cause of underbilling. Underbilling also occurred because 

providers did not promptly document patient care. Coders should be trained to identify 

pathology examinations when coding surgical procedures and should ensure that these 

examinations are coded. VISN management should develop a documentation timeliness 

standard for providers and monitor the facilities to ensure providers meet the standard. 

There were instances of overbilling at five of the eight facilities. The most common type 

of overbilling was billing for services provided by medical students. Because medical 

students are not licensed, care provided by them is not billable. To prevent overbilling, 

VISN management needed to provide additional training to ensure that attending 

physicians who supervise medical students meet the requirement that the physician must 

examine the patient and document the examination in order for VA to bill for this care. 

Coders and billers should be trained to recognize progress notes written by medical 

students and to ensure these notes are not coded or used for billing purposes. In some

cases, the facilities also issued bills for service-connected care. Providers needed 

additional training on documenting service-connected care and coders and billers needed 

training to ensure that care provided for service-connected treatment is not billed. 

As reported in the facility CAP review reports, we estimated that about $7.5 million was 

underbilled and that an additional $2.4 million could have been collected. We also 

estimated that $774,000 of outpatient care should not have been billed and that an excess 

of about $217,000 may have been collected. 

“Reasons Not Billable Report.” At each facility, we reviewed documentation of patient 

care encounters listed on three segments of the “RNB Report”—Nonbillable Provider 

(Resident), Insufficient Documentation, and No Documentation—to determine whether 

the report was accurate and to determine if encounters would have been billable if they 

had been fully documented by the providers. The “RNB Reports” were not accurate 

because for some encounters on the reports there was sufficient documentation for billing 

purposes. Most encounters listed on the three segments would have been billable if 

VA Office of Inspector General 3 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

providers had completed their documentation or if the reports were used for follow-up to 

obtain the documentation needed to bill. 

These three segments of the “RNB Report” represent missed billing opportunities 

primarily caused by medical care provider documentation issues. As previously reported 

in projections of our sample results at the VISN facilities, we estimated that the VISN 

could have billed an additional $1.7 million and collected an additional $472,000. This

loss of revenue could have been prevented if the “RNB Reports” had been used to 

properly monitor and follow up on the documentation needed for billing purposes. 

Fee Basis Care. To determine if fee basis care was accurately billed to insurance carriers, 

we reviewed samples of outpatient, inpatient, and ancillary claims at each of the eight 

facilities. Most of these claims were not billable to health insurance carriers because the 

treatments were for service-connected disabilities or the services provided were not 

covered by insurance. Facility fee basis staff did not always submit billable claims to 

MCCF for coding and billing and often the fee basis providers did not submit 

documentation of the care. The consensus among management at the facilities was that 

they lacked sufficient staff, that billing for fee basis care was too time consuming, and

that anticipated revenues did not make billing worthwhile. VISN management should 

establish a cost-effective billing system for fee basis services to increase fee basis 

revenues and ensure that all eligible claims are billed to insurance carriers. 

As reported in the facility CAP review reports, we estimated that an additional $4.5 

million could have been billed for fee basis care and that an additional $1.5 million could 

have been collected. 

Conclusion 

VISN management could increase MCCF billings and collections by increasing oversight 

of VISN facilities. This would include expanding internal controls and establishing a 

timeliness standard for medical care documentation. To prevent overbilling, providers, 

particularly those who supervise medical students, should receive additional training on 

documentation requirements, and coders and billers should receive additional training to 

ensure they do not code medical student documentation or use it for billing purposes. 

Providers also needed to determine and document whether the care provided was serviceconnected. Management needed to ensure that documentation and billing errors are 

detected, corrected, and minimized. The “RNB Reports” should be used for follow-up to

identify and correct documentation deficiencies and to take actions on billable 

encounters. Management should establish a cost-effective billing system for fee basis 

services to increase revenues and ensure that eligible claims are billed. 

Recommended Improvement Action 1. We recommended that the VISN 1 Director 

improve oversight of MCCF activities and that actions be taken to: 

a. Establish internal controls and expand compliance reviews to help facilities identify 

missed billing opportunities and prevent underbilling and overbilling. 

VA Office of Inspector General 4 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

b. Develop a VISN-wide medical care documentation timeliness standard. 

c. Ensure that health care providers receive additional training to improve compliance 

with documentation requirements. 

d. Provide additional training to coders and billers on issues such as medical student 

documentation, pathological examinations, and service-connected care. 

e. Establish a monitoring system to review the “RNB Reports” to ensure the reports are 

used as a management tool to follow up and obtain the documentation needed to 

accurately bill insurance carriers. 

f. Establish a cost-effective billing system for fee basis services. 

The VISN 1 Director agreed with the findings and recommendations and provided a plan 

for facility Compliance Officers to conduct monthly audits and refer problems to HIMS 

and MCCF program managers for corrections. The plan also stated that by 

September 1, 2006, medical documentation timeliness standards would be established 

VISN-wide. In addition, guidance would be provided on the issue of medical student 

documentation and a standardized training program would be developed VISN-wide for

training providers and residents on documentation requirements. Training would also be

provided to coders and billers on issues such as medical student documentation, 

pathological examinations, and service-connected care. As of April 2005, a system for 

monitoring the “RNB Reports” focusing on documentation issues had been implemented. 

To improve the fee basis billing process, VISN 1 Memorandum No. 10N1-102

“Administration of Fee Basis Program,” dated January 2006, identified roles and 

responsibilities for fee basis co-payments for the MCCF program. Lists of veterans with 

no identified insurance are being provided to the VISN insurance 

identification/verification contractor. When insurance plans are identified, coverage is 

cross-matched to the time of service provided, and bills for care that meet the filing

period requirements are submitted to the carriers. The improvement plans are acceptable, 

and we will follow up on the implementation of improvement actions until they are 

completed. 

Issue 2: Radiology Services Productivity and Costs — 

Radiologist Productivity Could Be Improved and Contract 

Costs Reduced

Findings

By monitoring radiologist productivity and costs on both a VISN-wide and facility basis, 

VISN management could enhance productivity and reduce the costs of radiologist

services. Contracts for radiologist services could be better negotiated and managed by 

using productivity and cost efficiency performance measures. Productivity and costs

were not always optimally monitored because VISN and facility management did not 

have a measurement tool for workload analysis and resource allocation decisions, and 

because VHA had not established productivity standards for radiologists. The VISN did 

VA Office of Inspector General 5 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

not have the technology to perform VISN-wide teleradiology, which would leverage 

VISN resources by enabling radiologists to read films remotely. Implementing 

teleradiology would integrate radiology services throughout the VISN and allow 

workload to be distributed more efficiently. Increasing staff radiologist productivity 

would decrease costs by reducing the need to contract for radiologist services. Our 

review identified opportunities to improve radiologist productivity and reduce contract 

costs by about $2.66 million. (See Appendix C, Table 3, page 31, for calculation of the 

reduced costs.) 

Background. In January 2002, Public Law 107-135 mandated that VA establish 

appropriate staffing standards for operations of medical facilities. At the time of our 

review, VHA had not yet established such standards for radiologists. RVUs which we 

used for this review, are used as a productivity measurement tool in private industry and 

within VA. VISN 1’s Chief Medical Officer supports the use of RVUs as a productivity 

measurement tool. The Director of VHA’s Radiology Program has previously indicated 

to the OIG that 5,000 RVUs per year would be a reasonable norm for full-time 

radiologists who have other nonclinical duties. In the written summary of the 

January 14, 2005, National Monthly Radiology Conference Call, the Director of VHA’s

Radiology Program stated that the pay and RVU structure in the academic and private 

sector was as follows: 

• academic sector salary: $271,000/5,500 RVUs = $49.00 per RVU 

• private sector salary: $345,000/7,100 RVUs = $49.00 per RVU 

Scope and Methodology. During CAP reviews conducted at VISN 1 facilities, we 

reviewed radiologist productivity and the costs associated with providing diagnostic 

radiologist services. At seven of the eight facilities2

 radiologist services were provided

by VA staff and/or contract physicians. For the purpose of the VISN review, we used 

FY 2004 productivity and cost data for each individual facility. (The productivity and 

cost data for each facility and the combined totals are shown in Appendix C, page 31.) 

We collected productivity data using a Veterans Health Information Systems and 

Technology Architecture (VistA) software program that calculates radiology RVUs by 

applying Medicare weighting factors to completed workload. 

We used 5,000 RVUs per clinical full-time equivalent employee (FTE) and $49 per RVU 

as benchmarks to assess radiologist productivity and costs. The VA Decision Support 

System (DSS) Labor Mapping tool was used to adjust VA staff radiologist productivity 

levels according to time spent on clinical services. This method is utilized by the VHA

Advisory Group on Physician Productivity, as well as by various private sector 

productivity survey groups. For radiologists, nonclinical time consists of administrative, 

research, and training duties—or time spent on duties for which radiologists cannot

 

2

 The Edith Nourse Rogers Memorial Veterans Hospital (MVH) at Bedford, MA, did not provide radiology services.

The VA Boston HCS provided radiology services coverage for the Edith Nourse Rogers MVH.

VA Office of Inspector General 6 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

accumulate RVU credits. Time spent supervising residents is considered clinical time 

because radiologists can still accumulate RVU credits. In FY 2004, there were 27 FTE 

staff radiologists in VISN 1 facilities. (See Appendix C, Table 1, page 31, for VA staff, 

productivity, and costs at individual facilities). We used current DSS Labor Mapping 

data to determine that VISN facilities have 2.84 FTE radiologists allocated to nonclinical 

duties. We also adjusted staff radiologist costs by deducting the costs associated with the 

2.84 nonclinical FTE. 

In addition to evaluating productivity, we evaluated cost efficiency by calculating the 

“cost per RVU” for radiologist services. We compared the costs per RVU at VISN 1 

facilities with the academic and private sector benchmarks shown on the previous page to 

evaluate how efficiently radiologist costs were being managed. We presented detailed 

results of our RVU productivity and associated costs analyses in the individual facility

CAP review reports. 

Review Results 

In FY 2004, staff and contract radiologists at VISN 1 facilities completed 151,884 RVUs. 

VISN facilities spent $5,702,978 for 24.16 clinical FTE staff radiologists and $5,366,547 

for 11.23 FTE3

 contract radiologists—a total cost of $11,069,525 for 35.39 FTE. 

The total production for the staff radiologists was 90,182 RVUs, which equated to an

average productivity of 3,733 RVUs per FTE (90,182 RVUs/24.16 FTE). The average 

productivity among VISN facilities ranged from 3,059 RVUs per clinical FTE at 

VA Boston HCS to 5,439 at VA Medical Center (VAMC) Manchester—a 2,380 RVU 

difference. The average cost per RVU for staff radiologists was $63.24 and ranged from

$79.38 (VA Boston HCS) to $37.67 per RVU (VAMC Manchester)—a difference of 

$41.71. The VISN’s average cost per RVU was also $14.24 higher than the academic 

and private sector benchmark of $49 per RVU. (See Appendix C, Table 1, page 31.) 

The total production for the 11.23 contract radiologists was 61,702 RVUs. The average

productivity was 5,494 RVUs per FTE, which is 1,761 RVUs higher than the staff 

radiologist average of 3,733 RVUs per FTE. The average VISN cost per RVU for

contract radiologists was $87, which is almost $24 higher than the VA staff radiologists’ 

cost and $38 higher than the academic and private sector cost. (See Appendix C, Table 2, 

page 31.) 

Increasing Staff Productivity. As illustrated in Appendix C, Table 3, page 31, at a 

productivity level of 5,000 RVUs per clinical FTE, the 24.16 clinical FTE staff 

radiologists could produce 120,800 RVUs. This increase in productivity would increase

their total production by 30,618 RVUs. Increasing VA staff radiologist productivity 

would reduce the remaining work that needed to be contracted out from 61,702 to 31,084 

 

3 Number of hours of service by contract providers/2000 (approximate hours per work year) = Number of contract 

FTE. 

VA Office of Inspector General 7 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

RVUs (151,884 total RVUs – 120,800 VA staff RVUs). Increasing productivity to 5,000 

RVUs per FTE would subsequently reduce the staff radiologist cost per RVU from $63 to 

$47 ($5,702,978/120,800 RVUs), $2 below the academic and private sector benchmarks. 

By reducing contract radiologist services needed from 61,702 to 31,084 RVUs, the VISN

could reduce contract costs by as much as $2.66 million. Eliminating 30,618 RVUs that 

need to be outsourced would reduce contract costs from $5.36 million to $2.70 million. 

(See Appendix C, Table 3, page 31.) 

Effectively Managing Contract Costs. The VISN needed to manage RVU costs for 

contract services to be more in line with the academic and private sector costs. In

FY 2004, the VISN facilities paid an average of $87 per outsourced RVU, $38 more than 

the academic and private sector costs. As shown in Appendix C, Table 3, page 31, costs 

per RVU can be lower as a result of higher productivity. For example, VAMC White 

River Junction paid approximately $46 per RVU for outsourced services because the 

contract radiologists produced at a high level of 8,905 RVUs per FTE. The VISN’s 

average contract cost per RVU could be reduced by increasing the average productivity 

of contract radiologists (5,494 RVUs per FTE) and/or by reducing the average cost paid 

for radiologist services ($477,876 per FTE). Although the average productivity for

contract radiologists was higher than for staff radiologists and comparable with the 

academic sector’s productivity (5,500 RVUs per FTE), it was still 1,606 RVUs per FTE 

below the private sector’s productivity of 7,100 RVUs per FTE. The average VISN cost

for contract radiologists was $206,876 per FTE more than the academic sector’s cost per 

FTE and was $132,876 more than the private sector’s cost. 

Integrating Radiology Services. The VISN did not have a standardized Picture Archive 

Communication System (PACS) to allow for teleradiology among facilities. The 

acquisition of a centralized PACS would provide VISN facilities with the capability to 

capture, store, view, and share radiology images VISN-wide. The VISN is in the process 

of pursuing a centralized VISN PACS and hopes to implement PACS during FY 2007. 

The implementation of PACS will help integrate the VISN’s radiology services and allow 

for radiology examinations to be digitally available for reading by any radiologist in the 

VISN, regardless of their location. PACS will also allow facilities to share workload 

when shortages or surpluses of radiologists exist at facilities. PACS will allow workload 

to be optimally distributed and further help radiologists perform at or above productivity 

levels of 5,000 RVUs per clinical FTE. 

Conclusion 

VISN management should work with Radiology Service managers to utilize RVUs as a 

tool to monitor and measure productivity, maximize staff radiologist productivity, and 

make sure that contract services are needed. The VISN can use this tool to effectively

manage radiologist resources and make sure services are being provided cost efficiently. 

Outsourcing costs can be reduced by identifying opportunities where staff radiologists 

can improve productivity to bring the workload in-house. Contract services can be more 

VA Office of Inspector General 8 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

effectively established and managed by using RVUs and cost per RVU as measures for

productivity and cost efficiency. Implementing PACS to integrate radiology services can 

also further help increase staff productivity by using teleradiology to optimally distribute

the VISN’s workload. 

Recommended Improvement Action 2. We recommended that the VISN 1 Director 

take action to establish procedures and assign responsibilities to: 

a. Require diagnostic service line managers to create quarterly reports of the 

department’s total workload and the productivity of VA staff and contract

radiologists. 

b. Include productivity and/or cost efficiency measures in the negotiation and 

establishment of radiologist service contracts. 

c. Conduct VISN-wide reviews of radiologist costs and productivity to identify 

opportunities to leverage radiologist resources. 

d. Implement an information technology solution (PACS) that allows for the 

transmission of diagnostic radiology images between VISN 1 facilities. 

The VISN 1 Director agreed with the findings and recommendations and reported that 

quarterly reports of workload and productivity were to be generated by each facility 

beginning March 1, 2006. By September 30, 2006, the VISN will require facilities to use 

productivity and/or cost efficiency measures in contract negotiations or provide written 

justification to the VISN Chief Medical Officer and Chief Logistical Officer (CLO) and 

receive written approval prior to awarding the contract. As of June 30, 2006, biannual 

reviews of radiologist productivity were to be conducted and reported to VISN leadership 

staff. The VISN PACS is expected to be phased in by the end of calendar year 2007 with

the exception of the VA Connecticut HCS which uses a commercial PACS that has

recently been upgraded. The VA Connecticut HCS system will be compatible with the 

VISN PACS in the interim and will be fully integrated approximately 3–4 years after the 

deployment of the VISN PACS. The improvement plans are acceptable, and we will 

follow up on the implementation of improvement actions until they are completed. 

Issue 3: Equipment Accountability — Oversight, Guidance, 

and Training Will Improve Equipment Accountability 

Findings

Controls over nonexpendable property at the eight VISN medical facilities were not 

sufficient to ensure that VA property, including sensitive IT equipment, was fully 

accounted for and safeguarded. Information in property databases was not accurate or 

complete. Equipment accountability policies and procedures were not always followed 

or understood by personnel responsible for accounting for VA property. VISN

management could strengthen equipment accountability and enhance the VISN’s

property management program by providing guidance, oversight, and training to ensure 

compliance with VA policy. Strengthening accountability would provide management 

VA Office of Inspector General 9 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

greater assurance that the VISN’s reported 141,231 items of equipment are properly 

managed and safeguarded. 

Background. To safeguard VA property, VA policy requires that nonexpendable 

property valued over $5,000 and all sensitive equipment regardless of cost must be 

inventoried and accounted for. Periodic inventories are required to ensure that equipment 

is properly accounted for and recorded in accountability records called equipment

inventory lists (EILs). Acquisition & Materiel Management Service (A&MMS) staff are 

responsible for coordinating the EIL inventories, which includes notifying all services 

when inventories are due and following up on incomplete or delinquent inventories. The 

Automated Engineering Management System/Medical Equipment Reporting System

(AEMS/MERS) is a software package that is used to record capitalized nonexpendable 

equipment. A&MMS staff is responsible for maintaining the accuracy and integrity of 

AEMS/MERS. 

The VISN CLO is responsible for providing guidance, advice, and leadership to the 

facility logistics managers. The VISN filled this position for the first time in 

November 2004. The CLO is the accountable official for all of the VISN’s logistics 

activities and must ensure compliance with policies and regulations. 

Scope and Methodology. Our objective was to assess accountability controls over 

nonexpendable property. To determine if equipment inventory controls were effective, 

we conducted tests of each facility’s nonexpendable property records to assess their 

accuracy. We tested samples to verify the existence and accuracy of equipment items 

(with acquisition values over $5,000) listed in each facility’s property database. We 

analyzed property data and records covering FYs 2004 and 2005, with the exception of 

VAMC Manchester at which we also included FY 2003 records. 

Review Results

AEMS/MERS Property Database. The facility nonexpendable property databases in 

AEMS/MERS were unreliable because key inventory data was incomplete and because 

audit tests determined data was inaccurate. We asked that all facilities provide current 

copies of their property databases, which included serial numbers, property descriptions, 

manufacturers’ names, acquisition dates and costs, replacement dates, and property 

locations. As illustrated in Table 1 on the following page, 12.4 percent of inventory 

information was missing from the facility databases. 

VA Office of Inspector General 10 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Table 1 – Incomplete Property Data 

Incomplete Data in VISN 1 Facilities AEMS/MERS Property Databases

Universe = 141,231 Items with a Total Reported 

Acquisition Value of $1,137,255,143 

• 2,257 (1.6 percent) missing item descriptions 

• 14,936 (10.6 percent) missing manufacturers’ names 

• 17,848 (12.6 percent) missing serial numbers 

• 7,376 (5.2 percent) missing acquisition values 

• 12,204 (8.6 percent) missing acquisition dates 

• 18,722 (13.3 percent) missing replacement dates 

• 49,094 (34.8 percent) missing locations 

Total Blank Data Fields for the Above Categories = 122,437 (12.4 percent) 

(141,231 items x 7 fields = 988,617) (122,437/988,617 = 12.4 percent) 

When inventories of EILs and sensitive equipment are conducted, the responsible

officials designated to perform the inventories, along with A&MMS staff, need to correct 

and update inaccurate or missing data. Responsible officials need to complete required 

inventories thoroughly and accurately and take appropriate actions to correct incomplete 

or inaccurate data in AEMS/MERS. 

EIL Equipment Inventories. There were 12,732 items, with acquisition values over 

$5,000, listed on 801 EILs of VISN 1 facilities. We selected 716 of these items with a 

total acquisition value of $15.5 million to determine whether the equipment could be 

located. As summarized in Table 2 below, we could not locate 93 (13 percent) of the 716 

items. The acquisition value of these 93 items was $1.8 million (11.6 percent of the total 

value of all sample items). 

Table 2 – Analysis of Equipment Accountability Test Findings 

Facility Name 

# of 

Items 

in 

Sample

Acquisition 

Value 

# of 

Items 

Not 

Located

% Not

Located 

Acquisition 

Value of Items 

Not Located

VAMC Manchester 30 $803,198 1 3% $18,893

VA Boston HCS 98 $1,917,720 45 46% $951,149

VA Connecticut HCS 98 $1,719,513 27 28% $589,396

VAMC Providence 98 $3,501,139 5 5% $37,011

VAMC Togus 98 $1,540,729 2 2% $25,000

Edith Nourse Rogers MVH 98 $2,264,913 7 7% $117,855

VAMC White River Junction 98 $1,800,000 1 1% $7,612

VAMC Northampton 98 $2,019,435 5 5% $24,760

 TOTALS 716 $15,533,900 93 13% $1,771,676

VA Office of Inspector General 11 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

According to A&MMS staff, some of the items had been turned in (disposed of), but 

there was no documentation supporting the disposal transactions. Additional 

accountability discrepancies pertaining to the 716 items included 122 with no locations

listed, 99 with missing or incorrect serial numbers, and 52 with incorrect locations listed. 

Facility A&MMS staff have overall responsibility for ensuring that inventory procedures 

are effectively followed. The results of our inventory tests indicated that the physical 

inventories were not conducted accurately and that equipment assets were not adequately 

controlled. 

Sensitive IT Equipment. VA policy requires that certain sensitive equipment items be

accounted for regardless of cost, life expectancy, or maintenance requirements. Sensitive 

items are those, such as computer equipment, that are subject to theft, loss, or conversion 

to personal use. To evaluate accountability controls over sensitive equipment, we 

selected 237 items of IT equipment to determine if we could locate the items and to

assess whether they were accurately recorded in the property databases. We could not 

locate 18 (7.6 percent), with a total acquisition value of $55,495, of the sensitive IT 

equipment items listed on the current inventories. Our IT accountability tests identified 

49 other discrepancies, including 16 items with missing or incorrect serial numbers, 

11 items missing property bar code labels and not recorded in the databases, 14 items

with incorrect locations, 1 item loaned to a VA employee having incomplete 

documentation, and 7 items with incomplete documentation for disposal. 

Not all the facility Information Resource Management (IRM) Services had participated in 

the mandatory inventories coordinated by the A&MMS staffs. Although AEMS/MERS 

is the official property database in which all sensitive IT equipment should be recorded, 

IRM Services maintained their own separate inventory databases. As a result, there was 

an overall lack of coordination of efforts to account for sensitive IT items. For example, 

VISN IRM officials had not conducted physical inventories of IT equipment in prior

years as required. As a result, a “Report of Survey” was prepared in March 2005 that 

listed 115 IT equipment items as missing, with acquisition values totaling $309,929. 

We estimated that about 33 percent of the equipment listed as “out-of-service” (described 

in the paragraph below) was computer equipment, most of which had not been accounted 

for. We concluded that VISN 1’s sensitive IT equipment was vulnerable to theft or 

misuse because overall accountability controls needed to be strengthened. The VISN 

CLO and the VISN Chief Information Officer (CIO) needed to work together to establish

procedures and issue guidance to strengthen accountability controls over sensitive IT 

equipment and to improve coordination of accountability efforts between A&MMS and 

IRM staff throughout the VISN. 

“Out-of-Service” Equipment. We determined that 9,632 equipment items, with a total 

estimated acquisition value of $29.2 million, were listed on the current property 

inventories for the VISN’s facilities, as “out-of-service,” and were generally not 

physically inventoried during the inventory process. This inventory category is primarily 

VA Office of Inspector General 12 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

designated for use by Engineering Service staff to identify equipment that may be 

temporarily “out-of-service,” out for repairs, or in storage. Property officials used this 

category inappropriately, resulting in equipment being excluded from the inventory 

process. Table 3 shows the number of items that were listed as “out-of-service” at each

facility. 

Table 3 – “Out-of-Service” Equipment 

Facility Name “Out-of-Service”

Equipment 

Acquisition Value 

of “Out-of-Service” 

Equipment 

VAMC Manchester 64 $ 233,050 

VA Boston HCS 4,883 $ 15,630,835

VA Connecticut HCS 540 $ 3,470,285 

VAMC Providence 117 $ 1,726,437 

Edith Nourse Rogers MVH 1,997 $ 3,541,095 

VAMC Togus 1,410 $ 3,110,145 

VAMC White River Junction 299 $ 558,744 

VAMC Northampton 322 $ 971,746 

VISN 1 Totals 9,632 $ 29,242,337

This problem occurred primarily because A&MMS staff and responsible property 

officials did not validate whether equipment in the “out-of-service” category was

properly categorized when conducting periodic inventories. Based on discussions with

A&MMS staff, a significant amount of equipment listed as “out-of-service” will likely be 

unaccounted for and will need to be “written off” via “Reports of Survey.” The VISN 

CLO needed to establish controls over the use of the “out-of-service” category and ensure 

that supporting transactions and documents (including “Reports of Survey”) are accurate 

and complete. 

Equipment Inventory Timeliness and Accuracy. VA policy requires that property 

inventories be conducted and completed between 10 to 20 days from the time A&MMS 

provides the equipment listings to responsible officials. To determine if the inventories

were conducted within the 10 to 20 day periods, we requested that each facility provide 

us with records indicating when responsible officials were notified to conduct their most 

recent property inventories and when they completed them. VAMCs Northampton and 

Providence completed their inventories on time, but as Table 4 on the following page 

shows, the other six facilities did not. The number of untimely inventories ranged from 

21 (28 percent) at the Edith Nourse Rogers MVH to 154 (74 percent) at the VA Boston 

HCS. 

VA Office of Inspector General 13 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Table 4 – Timeliness of Equipment Inventories 

Facility Name # of EILs # Untimely

Inventories 

% 

Untimely

VAMC Manchester 38 33 87% 

VA Boston HCS 209 154 74% 

VA Connecticut HCS 213 130 61% 

Edith Nourse Rogers MVH 75 21 28% 

VAMC Togus 89 73 82% 

VAMC White River Junction 49 26 53% 

Totals 673 437 65%

Additions to, or deletions from, the EILs must be supported by relevant signed 

documentation. A&MMS staff is responsible for entering the information into

AEMS/MERS. We saw evidence that changes annotated on completed inventories were 

not fully updated; supporting documentation was not provided for items annotated as 

“turned-in,” missing, or transferred; and inventories with missing items were signed by 

responsible officials certifying that assigned equipment was accounted for. We 

concluded that not all individuals responsible for conducting the inventories were 

performing their tasks in a thorough manner. A&MMS staff was not ensuring that the 

inventories were conducted in a complete and accurate manner. As a consequence, the

overall accuracy and accountability of facility equipment inventories was compromised 

resulting in an unreliable database. 

Disposed Equipment Procedures. VA policy requires that excess equipment be

advertised to other facilities for 10 days. If no VA facility is interested in acquiring the 

equipment, the Code of Federal Regulations requires VA to submit the information to the 

General Services Administration (GSA) for mandatory utilization and donation 

screening. If GSA is unsuccessful in locating any interested parties, GSA may authorize 

VA to dispose of the property. VA Form 90-2237, “Request, Turn-In, and Receipt for 

Property or Services” is used to document property disposal transactions. 

To assess the adequacy of controls over property disposals, at each facility we selected 10 

to 21 items listed in the equipment databases as “turned-in” and requested documentation 

to ensure compliance with property disposal procedures. For the 91 items in our total 

sample (total acquisition value of $754,945), documentation for 35 items (39 percent) 

was either unavailable or insufficient to explain the disposals. Also, 2 of the 91 items

were in use at the facilities but were inaccurately listed as “turned-in.” 

At all eight facilities, accountable equipment was at risk for loss, damage, 

misappropriation, or theft because equipment was being disposed of without the

paperwork required for adjusting the inventory records. Too many individuals had the 

capability to enter transactions in the property database, with no controls in place to 

detect or question the accuracy of items placed in the “disposed” category. 

VA Office of Inspector General 14 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

IRM Service officials could not readily identify which employees entered transactions 

placing equipment in “disposed” status in AEMS/MERS. For example, there was no way 

to identify who placed a laptop, which had been acquired less than 2 years ago, into the

“disposed” status. There was no audit trail for an accountability transaction and various 

employees had the capability to enter an item as “disposed” into the database, when they 

had no need to have such access to the system. 

Staff involved with nonexpendable property disposals needed training on required 

disposal procedures. VISN management needed to develop VISN-wide guidance that 

would standardize and clearly delineate proper procedures for excess property 

transactions. 

Access to Property Menu Options. VHA policy requires facilities to establish personnel 

security policies that ensure access privileges to VA automated information systems 

(AIS) are based on a legitimate and demonstrated need related to job assignments. This 

policy further requires that “...all user access and privilege must be reviewed at least 

every 90 days for appropriate level of access or continued need.” 

To determine if the capability of entering property transactions into AEMS/MERS was 

restricted to employees who had need for such access, we asked each facility to identify 

all employees who had the capability to add, edit, or delete (that is, place equipment into 

the “disposed” category) nonexpendable property data in the database. We also asked 

them to specify which options (add, edit, or delete) were given to each employee. With

the exception of VAMC Togus, all facilities had difficulty responding to this request. 

None of the eight facilities readily knew who had access to input transactions into the 

property database. User access and privileges had not been reviewed in compliance with 

the VHA policy. The number of employees at each facility with access to the property 

transaction option ranged from 5 to 240. 

None of the facilities had evaluated or questioned who had access to perform transactions 

affecting the property data. The entire database was at risk for manipulation, and assets

were at risk for loss or theft, because IT security controls were not established to ensure 

that access for changing property data was restricted to employees with justified need. 

Conclusion 

By strengthening controls, clarifying procedures, enhancing oversight, and improving

training, VISN management can improve equipment accountability. Management needed 

to ensure that responsible officials completed required inventories thoroughly, accurately, 

and on time and took action to correct AEMS/MERS data that was incomplete or 

inaccurate. Management needed to ensure A&MMS and IRM Service staff coordinated 

efforts to strengthen accountability over sensitive IT equipment. Management needed to 

develop policies and procedures to better account for “out-of-service” equipment and for

the disposal of excess or obsolete equipment. In addition, management needed to limit

VA Office of Inspector General 15 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

the number of employees who could add, change, or edit property records in the 

AEMS/MERS database. 

Recommended Improvement Action 3. We recommended that the VISN 1 Director 

improve equipment accountability by taking action to: 

a. Correct and update inaccurate and incomplete equipment data in AEMS/MERS. 

b. Strengthen controls to ensure that equipment inventories are conducted accurately,

completely, and on time and that equipment transaction changes are supported by 

documentation. 

c. Improve procedures to ensure that A&MMS staff coordinate IT equipment additions, 

transfers, removals, and turn-ins with IRM Service. 

d. Develop policy and procedures for accounting for “out-of-service” equipment and 

establish an oversight mechanism to ensure that reconciliations of “out-of-service” 

equipment are accurate and complete. 

e. Require A&MMS staff to comply with property disposal procedures and ensure that 

turn-in documentation for excess or obsolete equipment is properly completed. 

f. Restrict and monitor the number of employees who can access and change data in 

AEMS/MERS. 

g. Provide training for staff responsible for managing and accounting for nonexpendable

property. 

The VISN 1 Director agreed with the findings and recommendations and reported that 

equipment data in AEMS/MERS was to be corrected and updated by June 30, 2006. A

mechanism was established in December 2005 to track the accurate and timely 

completion of the equipment inventories, notify the VISN CLO when scheduled 

inventories and required spot checks have been conducted, and ensure that all changes on

EILs are properly documented. IRM Service and A&MMS management were to develop 

and implement a procedure to improve IT equipment issues by June 30, 2006. As of 

December 31, 2005, “out-of-service” items are reviewed quarterly and status is reported 

along with the quarterly EIL reports. Actions taken to remove any equipment listed in 

the “out-of-service” category must have supporting documentation on file such as 

“Reports of Survey” or property disposal documents. Turned-in equipment will be 

tracked separately to ensure proper documentation and appropriate removal from active 

inventory status. All user access and privileges will be reviewed at least every 90 days 

and changes will be made as necessary for appropriate levels of access or continued need 

for the AEMS/MERS property menu as of April 30, 2006. A training program developed 

by the VHA Prosthetics and Clinical Logistics Office will be available by the third 

quarter of FY 2006. All staff in the VISN with responsibility for nonexpendable property 

will complete this training by December 31, 2006, and documentation of the training will 

be maintained. The improvement plans are acceptable, and we will follow up on the 

implementation of improvement actions until they are completed. 

VA Office of Inspector General 16 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Issue 4: Service Contracts — Strengthening VISN 

Management Controls and Oversight Will Improve 

Compliance and Performance of Contracting Activities 

Findings

By more closely monitoring contracting activities and strengthening controls to ensure 

compliance with acquisition regulations and policies, VISN management can improve 

medical care facility contract management and administration. VISN-wide management 

controls were needed to detect and prevent common recurring contract administrative 

deficiencies and provide greater assurance that prices paid for contract services are fair 

and reasonable, and that services received meet contract requirements. 

During the period of our review, October 2004 through September 2005, VISN

management had not established a formal organizational structure, performance 

measurement tools, or operating policies to manage the VISN contracting program. Our 

review of 92 service contracts, sharing agreements, and leases valued at $102 million 

awarded and administered by the 8 VISN facilities identified opportunities to prevent 

contract management and administration deficiencies, reduce the costs and improve the 

quality of contract services, and ensure that services received met contract requirements. 

Background. The VISN CLO is the official accountable for VISN contracting activities 

and for ensuring compliance with acquisition regulations and policies. The CLO

provides guidance, advice, and leadership to all VISN facility managers, including 

standardization of business processes, practices, and reporting in the VISN. The CLO’s 

primary responsibility is to supervise the Network Contracting Manager (NCM) and to 

coordinate the VISN’s contracting activities. The NCM position was filled in November 

2005. The NCM assumes the leadership role in contracting activities, and advises the 

CLO about contracting performance, particularly performance related to cost saving 

initiatives. The NCM is responsible for managing the contracting activities of each VISN 

facility and for ensuring that acquisition planning complies with competition and other 

requirements set by Federal regulations and VA policies. Additionally, the NCM is 

responsible for coordinating training for all acquisition staff, overseeing the Contracting 

Officer’s Technical Representative (COTR) program, and ensuring communication 

among medical facilities, the VISN, and VA Central Office. 

Scope and Methodology. To evaluate the effectiveness of the 8 contracting activities in

VISN 1, we reviewed 92 service contracts, sharing agreements, and leases valued at $102 

million from a universe of 491 valued at $249 million. Our evaluation was based on a 

review of contracts, sharing agreements, and leases each valued at $50,000 or more. (See 

Appendix D, page 32, for the number of contracts and values by facility.) We

interviewed contracting officials and reviewed billings and payments, patient medical 

records, and clinical reports. We conducted a survey of facility contracting managers 

(CMs) to determine applicable staffing, workload, and reporting requirements. 

VA Office of Inspector General 17 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Review Results 

VISN Management Oversight. At the time of our review, VISN management had not 

established a formal organizational structure delineating lines of authority and 

responsibility, performance measurement tools, or operating policies to manage the VISN 

contracting program. CMs for seven (88 percent) of the eight facilities reported that 

VISN management had not required formal communication or reporting on the

performance of contracting activities. One manager was able to provide an example of 

formal communication, which was limited to submitting quarterly reports showing the 

number of contracts the facility was administering. Each facility CM reported using 

limited and varied measures to monitor contract operations, staff performance, and 

productivity. Better communication and closer management, including VISN-wide

measures to monitor contract operations, staff performance, and productivity can prevent 

the recurring contract management and administration deficiencies discussed below. 

Contract Management Deficiencies. Facility CMs are responsible for implementing 

effective and efficient contracting programs and for establishing controls to ensure 

compliance with acquisition regulations and policies. CMs generally could not readily 

provide accurate and complete lists of contracts, sharing agreements, and leases and had 

not fully implemented required controls such as conducting contract reviews.

(Appendixes E and F, pages 33–34, show the contract management issues by facility.) 

• Contract Accountability. We requested that each facility provide us a list of current 

contracts, sharing agreements, and leases, including the vendor names, contract

numbers, types of contracts and services, dates of awards, periods of performance, 

estimated values, and names and telephone numbers of the contracting officers (COs)

and COTRs for all contracts. Facility CMs for six (75 percent) of the eight 

contracting activities could not readily provide complete and accurate lists of the 

information requested. The VISN needed to establish a centralized database 

containing required contract data. Without this data, VISN management cannot 

effectively oversee VISN activity and manage the contracting program. 

• Contract Reviews. CMs had not reviewed 56 (61 percent) of the 92 contracts to 

ensure compliance with acquisition regulations and policies. Contract reviews help

ensure the completeness and accuracy of solicitations, contract documentation

packages, and adherence to the FAR and VA policies. By conducting these reviews, 

facility CMs would identify contract administration deficiencies and help reduce the 

frequency of preaward and postaward administrative deficiencies. 

Preaward Administrative Deficiencies. COs generally could not provide evidence of

their performance of preaward actions required by the FAR and VA policies, including 

workload analyses, market research, price analyses, preaward audits, and legal/technical 

reviews. For example, for approximately 33 percent of the contracts, COs did not have 

records showing that workload analyses, market research, and price analyses had been 

VA Office of Inspector General 18 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

performed, all of which effect the prices facilities pay for services. Workload analyses 

establish the need and the basis for the acquisitions. To ensure full and open competition, 

the FAR and VA policy require that market research be conducted to identify potential 

suppliers, and preaward audits and price analyses should be conducted to determine 

whether prices are fair and reasonable. For legal/technical reviews, VA A&MMS staff 

provide both the legal expertise to ensure that the contract contains appropriate wording 

and clauses and the technical expertise to evaluate the technical aspects of the particular 

subject matter. (Appendix E, page 33, shows preaward deficiencies by facility.) 

By increasing management oversight and preventing and correcting preaward contracting 

deficiencies, tangible benefits are achievable. As previously reported in our facility CAP 

review reports, we estimated that VISN facilities could have saved $814,599 by

forwarding four sole-source contracts with affiliated medical schools (for perfusion, 

radiology, nephrology, and radiation therapy services) to the VA OIG Contract Review 

and Evaluation Division for preaward audits as required by VA policy. Because COs did 

not conduct market research to ensure full and open competition, use Medicare rates as a 

basis for negotiating procedure-based contracts, or perform price analyses such as

examining physician compensation surveys to determine if proposed prices were fair and 

reasonable, we questioned the appropriateness of about $267,000 in costs associated with 

two contracts for attending physician and radiology services. (See Appendix D, page 32,

for estimated contract savings and questioned costs by facility.) 

Postaward Administrative Deficiencies. COs generally did not conduct postaward 

actions required by the FAR, including preparing price negotiation memorandums to 

document the negotiation process and initiating background investigations of contract 

personnel with access to VA computer systems and sensitive information. To illustrate, 

background investigations were required by the FAR for contractor personnel involved in

48 contracts that were reviewed. For 33 (69 percent) of the 48 contracts, COs did not

initiate the required background investigations prior to award as required. (See Appendix 

F, page 34, for postaward deficiencies by facility.) 

Contract Administration Deficiencies. For 42 (46 percent) of the 92 contracts, COs did 

not ensure that COTRs received training on their duties and responsibilities before 

assuming responsibility for monitoring contractor performance. For 28 (31 percent) of 

the 92 contracts, monitoring deficiencies occurred because COTRs were not familiar with 

contract terms or the methodology to be used for validating services and certifying 

payments. 

Strengthening controls to prevent contract monitoring deficiencies could result in 

monetary benefits. Because COTRs at one facility did not ensure that contractors 

complied with contract requirements, we questioned $253,827 in costs associated with 

two contracts for perfusion and anesthesia services. Another facility overpaid an 

oncology services contractor $47,164 because a COTR did not adjust payments to reflect 

VA Office of Inspector General 19 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

actual performance. (See Appendix D, page 32, for questioned costs and overpayments 

by facility.) 

We found opportunities to improve the quality of contract patient care services and to 

provide greater assurance that services received met contract requirements. The 

following examples illustrate the need to improve contract administration. 

• A facility should have taken action to ensure that only qualified contract employees 

provided perfusion services for VA patients undergoing high-risk operations such as 

open-heart surgery. Perfusionists operate special equipment that temporarily takes

over a patient’s respiratory and/or circulatory functions during surgery, and they

provide auto-transfusion, which is a method of collecting, filtering, concentrating, 

washing, and returning to the patient blood that is lost during or after surgery. At this 

facility, three contract employees, whose qualifications did not meet contract 

requirements, performed perfusion and auto-transfusion procedures. The facility paid 

$194,837 for services provided by these individuals. 

• Another facility should have ensured that a VISN home oxygen contractor provided 

the results of follow-up visits and overnight oximetry studies4

 to ensure ordered 

services were provided in accordance with the contract. As of August 2005, the 

facility had not received 104 (80 percent) of 130 reports showing that licensed 

respiratory therapists had seen patients within 96 hours of initial visits. The purposes 

of the follow-up visits and reports were to determine if oxygen set-ups, done by lay 

caregivers, were correct and to ensure that patients understood their prescriptions, 

safety considerations, and medical care plans. The facility also had not received 

approximately 1,800 90-day follow-up reports that were supposed to be used to 

determine whether patients were complying with therapy and to obtain vital signs and 

oximetry data from patients. The contractor had not provided 40 overnight oximetry 

studies that were supposed to be used to determine whether patients still qualified for 

oxygen treatment or whether current oxygen levels administered to patients were 

sufficient. 

• One facility did not ensure that a contractor that transported patients and provided 

inter-facility transport for facility employees, medical supplies, and laboratory 

specimens complied with contract terms. We found that the contractor did not 

maintain adequate liability insurance, and drivers did not possess required public 

passenger endorsements and commercial driver licenses as required by the contract. 

Conclusion 

In November 2005, VISN 1 management appointed an NCM. This appointment should 

help facility managers implement an effective and efficient contracting program, 

establish a formal organizational structure, develop management performance tools and

 

4

 Oximetry is the measurement of the degree of oxygen saturation of circulating blood. 

VA Office of Inspector General 20 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

operating policies, and improve inter-facility communications, including regular meetings 

and dissemination of information and contracting policy. To improve contracting 

accountability, VISN management needed to establish a centralized database containing 

essential contract data for effectively managing the contracting program. Internal control 

procedures such as periodic contract reviews should be conducted at contracting 

milestones to ensure compliance with the FAR and VA policies. Facility CMs needed to 

ensure that COTRs understand their duties, responsibilities, and contract requirements. 

Periodic meetings between COs and COTRs should be conducted to ensure that contract 

requirements are being met. By more closely monitoring contracting activities and by 

strengthening controls, VISN management could improve compliance with regulations 

and policies, reduce costs and improve the quality of contract services, and ensure that 

services received meet contract requirements. 

Recommended Improvement Action 4. We recommended that the VISN 1 Director 

develop a plan of action to: 

a. Formalize an organizational structure for contracting activities delineating lines of 

authority, responsibility, and communication with facility management and staff. 

b. Develop and implement performance tools to provide closer management oversight of 

facility CMs, COs, and COTRs to ensure compliance with regulations and policies. 

c. Establish and deploy a centralized database containing essential contract data needed

to improve contract accountability and to effectively manage the contracting program. 

d. Ensure that contract reviews are conducted at contracting milestones to ensure

compliance with regulations and policies. 

e. Develop and implement a training program to ensure COTRs understand their duties,

responsibilities, and the methodology used to validate services and certify payments. 

f. Ensure COs and COTRs conduct periodic meetings to ensure contractors are adhering 

to contract requirements. 

The VISN Director agreed with the findings and recommendations and reported that a 

contracting activities plan is being drafted to establish the relationship between VISN

leadership and the field activities which will open lines of communication. The expected

date of completion is September 30, 2006. Several management tools to provide closer

oversight of facility personnel are under development at the national level. The 

Electronic Contract Management System was implemented in the VISN on 

March 27, 2006. This centralized database will contain essential contract data and help to 

manage workload. The NCM is working on several standard operating procedures to 

ensure VISN-wide compliance with applicable acquisition regulations and will also audit 

each facility for compliance annually. The NCM also established a VISN 1 acquisition 

folder on the VISN shared drive which provides a central repository for essential 

contracting information that will improve contract accountability. The VISN 22 COTR 

Training Program was implemented VA-wide in February 2006. VISN 1 COTRs will 

attend the training. A master list of certified COTRs will be developed and all COs will 

be required to consult the list before assigning a COTR. Periodic meetings between COs 

and COTRs will be held and these meetings will be documented in the contract files. All 

VA Office of Inspector General 21 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

actions will be completed by September 30, 2006. The improvement plans are 

acceptable, and we will follow up on the implementation of improvement actions until 

they are completed. 

Issue 5: Procurement of Prosthetic Supplies — Closer

Management Oversight Is Needed 

Findings

Our review of 445 open market purchases of prosthetic supplies valued at $2.7 million 

identified opportunities to prevent common procurement deficiencies, improve 

compliance with VA’s purchasing hierarchy and the FAR, and reduce the costs of 

prosthetic supplies. 

Background. VA policy requires medical facilities to purchase supplies according to

VA’s purchasing hierarchy, which organizes vendors from most to least preferred sources 

as follows: national contracts, Blanket Purchase Agreements (BPAs), local BPAs, 

Federal Supply Schedule (FSS) contracts, local non-FSS contracts, and open market 

purchases. The FAR requires procurement personnel to use competition to obtain 

supplies at the best prices. Government purchase cardholders must consider three

sources for competition or document the justification for using a sole source. VA policy 

also allows clinicians to request a waiver from the facility Chief of Staff to allow them to 

prescribe a prosthetic device not on a national contract if the similar device on the

contract does not meet the particular needs of a patient. On June 7, 2004, a national 

contract was awarded to two vendors for the purchase of hip and knee prosthetic

components in order to provide VA better pricing. 

Scope and Methodology. We reviewed purchases that occurred between 

October 1, 2003, and July 31, 2005. The universe of purchase card transactions for the 

8 VISN 1 facilities totaled approximately 236,000 transactions valued at $99.8 million

during this period. We analyzed 445 open market prosthetic supply purchases (greater 

than $2,500) valued at $2.7 million to determine whether purchases over $2,500 were 

made from preferred purchasing sources and in accordance with the FAR. The 

445 purchases consisted of 281 open market purchases of hip and knee prosthetics 

components, 77 of which were purchased after the national contract was awarded and 

204 of which were purchased prior to the national contract award, and 164 open market 

purchases of other prosthetic items.

Review Results 

Preferred Purchasing Source. We identified 77 purchases valued at $405,166, for hip and 

knee components that were purchased from open market sources after June 7, 2004, when 

the national contract was awarded. Twenty-seven (35 percent) of these purchases valued 

at $178,384 did not have the required clinical waiver documentation. Fifty (65 percent) 

purchases valued at $226,782 had required clinical waivers. Although the clinical waiver 

VA Office of Inspector General 22 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

documentation had improved since the national contract was established, VISN

management needed to continue monitoring the purchases of hip and knee components to 

ensure clinicians request a waiver from the facility Chief of Staff when prescribing a 

prosthetic device not on a national contract. 

Competitive Procurements. We reviewed 204 open market purchases of hip and knee 

prosthetic components valued at $1.3 million and found procurement personnel at 4 of 

the 8 VISN facilities did not follow VA’s required purchasing hierarchy in purchasing 

prosthetic supplies. Cardholders at these facilities purchased prosthetic supplies on the

open market, the least preferred source, without documentation supporting competition or 

showing the sole source justification required by the FAR. Data obtained from the VA

National Acquisition Center showed that an FSS vendor offered comparable items at 

lower prices. 

The remaining 164 open market purchases were made by 6 VISN facilities and consisted 

of other prosthetic items valued at $967,914. We found that 67 purchases valued at 

$310,215 did not have documentation to support that competition was sought or to justify 

the use of sole source vendors. These purchases were for prosthetic items such as scooter 

and wheelchair lifts, porch ramps, and stair-glides. The FAR requires purchase 

cardholders to use competition to obtain supplies and services at the best prices. Because 

cardholders did not comply with the FAR, VISN management did not have reasonable 

assurance that the best prices were obtained or that procurements were made in VA’s best

interest. 

Conclusion 

VISN management needed to provide closer oversight to ensure that cardholders 

purchase prosthetic supplies in accordance with VA’s purchasing hierarchy or document 

a clinical waiver justifying the medical necessity for the VA patient. Management also 

needed to improve oversight to ensure that cardholders document three sources of 

competition or the justifications for using sole source vendors. By providing closer 

oversight of local procurement activities, management could improve compliance with 

acquisition regulations and policies and reduce the cost of prosthetic supplies. 

Recommended Improvement Action 5. We recommended that the VISN 1 Director 

develop and implement a plan of action to ensure: (a) cardholders purchase prosthetic 

supplies in accordance with VA’s purchasing hierarchy or obtain clinical waiver 

documentation from clinicians and (b) cardholders consider three sources of competition 

for purchases over $2,500 or document the justifications for using sole source vendors. 

The VISN Director agreed with the findings and recommendations. Facility managers 

will monitor prosthetic staff on a quarterly or more frequent basis as needed to ensure 

that prosthetic purchases are made in accordance with VA’s purchasing hierarchy and 

that competitive bidding documentation is available for prosthetic purchases over $2,500. 

VISN management, along with the VISN Health System Specialist, will review a random 

VA Office of Inspector General 23 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

sample of orders on a quarterly basis and monitor for compliance. The improvement

plans are acceptable, and we will follow up on the completion of the planned actions. 

Issue 6: Information Technology Security — VISN 

Management Needs To Strengthen Security 

Findings

We evaluated IT security to determine whether controls and procedures were adequate to 

protect AIS resources from unauthorized access, disclosure, modification, destruction, 

and misuse. Management needed to limit access to AIS resources, strengthen physical

security over AIS equipment, and ensure that required background investigations were

conducted on IRM Service personnel. (See Appendix G, page 35, for the listing of

specific sites where issues were identified.) 

Background. VHA policies define responsibilities for the establishment, 

implementation, maintenance, and oversight of the AIS security program within VHA. 

VA policy details the designation of appropriate risk levels and the scope of background 

investigations required for all VA positions. 

At VHA facilities, facility ISOs are the principal officers responsible for managing and 

coordinating information security programs. The VISN CIO is responsible for providing 

ISOs guidance on implementing and monitoring safeguards to maintain AIS security. 

Scope and Methodology. We conducted reviews at all eight VISN facilities. We 

assessed IT security and physical controls in place at the time of our onsite reviews. 

Review Results 

Access to AIS Resources. VA policy requires that access to AIS resources be limited to

personnel who have a legitimate need for access. At four of the eight VISN facilities, 

individuals without a need for access to computer rooms and/or communication closets 

had access. For example, at 1 facility 29 people (including 3 former employees) without 

a need for access to the facility computer room had key cards that allowed them access. 

At this and one other facility, management took corrective actions during our reviews. 

VISN management needed to ensure that corrective actions were completed at the other 

two facilities and that facility ISOs periodically review and monitor access to AIS 

resources to ensure access is limited to those with a legitimate need. 

Physical Security. VA policy requires that proper safeguards be in place to protect each 

facility’s AIS resources, including physical security of the computer room and all 

communication closets. Five of the eight VISN facilities had physical security

weaknesses. For example, at one facility both the door leading into the computer room 

area from outside the building and the interior door leading into the computer room had 

glass windows, which allowed the room contents to be viewed. The computer room, 

VA Office of Inspector General 24 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

which is on the ground level, contained several windows that potentially could be 

accessed by an intruder. The facility’s CIO stated that a work order had been initiated to

correct these security vulnerabilities. VISN management needed to ensure that all the 

identified physical security vulnerabilities were corrected and that facility ISOs

periodically conducted physical security reviews or assessments to detect and prevent 

security vulnerabilities. 

Background Investigations. VA policy requires background investigations for all

personnel who have access to sensitive data and information. At three of the eight VISN 

facilities, minimum background investigations rather than full background investigations 

were requested for employees, who because of their duties and access to sensitive data, 

held positions requiring full background investigations (CIO, ISO, and IRM Service 

staff). VISN management needed to ensure that responsible facility officials request 

appropriate level background investigations. 

Conclusion 

VISN management needed to strengthen IT security by ensuring that the VISN CIO and 

facility ISOs take action to correct the access and physical security issues we identified 

and to institute appropriate controls to lessen the risk of these conditions recurring. IT 

security could also be strengthened by identifying employees with access to sensitive data 

and ensuring that appropriate level background investigations are requested for them. 

Recommended Improvement Action 6. We recommended that the VISN 1 Director 

implement controls to: (a) prevent recurrence of access and physical security deficiencies 

and (b) ensure employees with access to sensitive resources and data receive appropriate 

level background investigations. 

The VISN Director agreed with the findings and recommendations. All access and 

physical security issues will be corrected, and facility ISOs will continually monitor 

access, controls, and physical security issues. Facility ISOs will be responsible for 

verifying that appropriate background investigations are requested. VISN ISO staff will 

verify that all necessary investigations have been submitted and that full background 

investigations will be requested when appropriate. The improvement plans are 

acceptable, and we will follow up on the completion of the planned actions. 

Issue 7: Pharmaceutical Accountability — Strengthening 

VISN Management Oversight Will Improve Compliance with 

VHA Policy 

Findings

By more closely monitoring the controlled substances inspection program and 

strengthening pharmacy controls to ensure compliance with VHA policy, VISN 

management can improve pharmaceutical accountability. VISN-wide management

VA Office of Inspector General 25 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

controls were needed to detect and prevent recurring deficiencies and improve

compliance with VHA policy. At five of the eight facilities, our reviews of 

pharmaceutical accountability identified opportunities to strengthen controlled substances

inspection programs; maintain minimum inventory stock levels; improve controls over 

ordering, receiving, and posting of controlled substances; use the required inventory 

management system; and update local pharmacy policies. 

Background. VHA provides three key policies related to pharmacy accountability, 

including one that outlines requirements for managing pharmacy stocks of controlled 

substances, another that requires facilities to implement and maintain a Controlled

Substances Inspection Program, and a third that requires pharmacies to employ formal 

methods for controlling pharmaceutical inventories. 

Scope and Methodology. We analyzed controlled substances inspections and drug 

procurements that occurred between October 2004 and September 2005. We compared

local policies to VHA policies, interviewed inspectors and procurement technicians, 

analyzed procurement patterns, and observed unannounced inspections of selected areas 

where controlled substances were stored and dispensed. 

Review Results 

Controlled Substances Inspections. VHA policy requires medical facilities to conduct

monthly unannounced inspections of all controlled substances storage and dispensing 

locations. We identified controlled substances inspection deficiencies at five of the eight 

facilities. Inspectors at four facilities did not inspect drugs held for destruction by either 

verifying that the drugs were turned over quarterly to a destruction company or by 

reviewing them monthly as required. Inspectors at three facilities were not performing 

the required number of sample counts of all controlled substances. Inspectors at two 

facilities did not verify that there were hard copy signed prescriptions for 10 percent (or a 

maximum of 50) of the Schedule II prescriptions dispensed by the outpatient pharmacy. 

At one facility, inspectors did not inventory Schedule III-V drugs or count all drugs in the 

Pyxis dispensing machine. 

Inspector Training. VHA policy requires the Controlled Substances Coordinator to 

conduct the training program for controlled substances inspectors. At two facilities, the 

coordinators did not conduct inspector training but instead Pharmacy Service staff 

conducted the training. At one facility refresher training was not conducted for 12 (43

percent) of the 28 inspectors. At another facility, documentation of inspector training 

was not maintained for 13 (33 percent) of the 39 inspectors. 

Inventory Stock Levels. VHA policy requires the use of the Prime Vendor Inventory 

Management (PVIM) system to assist medical facilities in minimizing the inventory 

replenishment costs by calculating reorder points and minimum stock levels. To 

determine compliance with this policy, we tested a sample of 20 drugs, including both

controlled and noncontrolled substances at 4 of the 8 VISN facilities. Pharmacy Service 

VA Office of Inspector General 26 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

staff was not effectively using the PVIM system at three facilities. Using a PVIM 

inventory analysis method and each facility’s records, we calculated the average amount

of a drug used based on a 3-month period and then compared the ending balance on-hand 

to the average use. Our review found that stock levels for 17 (85 percent) of the 20 

sampled drugs exceeded PVIM minimum levels. The total value of the excess stock of 

the 17 items was $26,411. 

Segregation of Duties. Pharmacy Service staff at three facilities had not implemented 

adequate procedures to ensure that responsibilities for ordering and receiving controlled 

substances were properly segregated in accordance with recognized internal controls 

procedures. At one CBOC, a pharmacy supervisor was the only employee ordering and 

receiving controlled substances. At two facilities, pharmacy technicians were both 

ordering and receiving noncontrolled substances. 

Receipt of Controlled Substances. At two facilities, a Pharmacy Service employee and 

an Accountable Officer were not witnessing and signing for the receipt and posting of 

controlled substances into inventory records, as required by VHA policy. The 

Accountable Officer at one facility did not annotate on the invoices that controlled 

substances had been posted to the electronic inventory and did not reconcile Schedule II 

drugs against the Drug Enforcement Administration (DEA) Form 222 entitled “US 

Official Order Forms– Schedule I and II.” 

Pharmacy Electronic Records. Pharmacy Service staff at two facilities did not use the 

required PVIM system or did not use the system timely for recording receipt of drugs. 

VA software, which includes the Controlled Substances Package and Drug 

Accountability Package, was not always used to maintain electronic inventories. At one 

facility, staff maintained manual records for receipts and inventories as well as for 

controlled substances held for destruction. Pharmacy Service staff at another facility

recorded 12 (86 percent) of 14 controlled substances 1 to 46 days (average of 19 days) 

after receipt. 

Pharmacy Policies. At four facilities, local policies did not comply with VHA policy. At

three of these facilities, local policies did not specify which employees had been assigned 

the authority to order, receive, post, and verify controlled substances orders. Local policy 

at the fourth facility did not include the requirement to notify the OIG Office of 

Investigations of any suspected theft, diversion, or suspicious loss of drugs, although it 

included the requirement to notify DEA. 

Conclusion 

By strengthening controls and providing closer management oversight of the controlled 

substances inspection program and pharmaceutical activities, VISN management could 

improve pharmaceutical accountability and compliance with VHA policies. 

Accountability for controlled and noncontrolled substances receipts and inventories could 

be improved by ensuring use of the PVIM system and by ensuring that responsibilities for 

VA Office of Inspector General 27 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

ordering and receiving are segregated. The controlled substances inspection program 

could be improved by more closely monitoring facility performance and establishing 

standard VISN-wide policies and procedures to ensure compliance with VHA policies. 

Recommended Improvement Action 7. We recommended that the VISN 1 Director 

develop and implement a plan of action to provide closer oversight of facility pharmacy 

activities in order to enhance accountability of pharmaceuticals, improve the controlled 

substances inspection program, and ensure compliance with VHA policies. 

The VISN Director agreed with the findings and recommendation and reported that a 

VISN memorandum describing policies and procedures for oversight of pharmacy 

activities would be published. The policies and procedures will include a requirement for 

facility Directors to report to VISN management that Controlled Substances Coordinators 

have complied with VHA policies on inspections and inspector training. VISN

management will provide pharmacy managers with VISN-wide standard operating

procedures and monitor local sites for compliance. The VISN Pharmacy Benefits 

Manager will conduct semiannual site visits to facilities to validate compliance with these

procedures. At all facilities, Pharmacy Service management will be directed to maintain 

inventory stocks at minimum levels. The improvement plans are acceptable, and we will 

follow up on the completion of the planned actions. 

VA Office of Inspector General 28 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Appendix A 

CAP Review Locations, Dates, and Report Numbers 

Facility Name Dates of Site Visit Report Number 

VAMC Manchester December 6–10, 2004 05-00313-176

VA Boston HCS February 7–11, 2005 05-00734-67

VA Connecticut HCS March 21–25, 2005 05-00859-216

VAMC Providence May 2–6, 2005 05-01607-68

Edith Nourse Rogers MVH June 13–17, 2005 05-01508-114

VAMC Togus July 18–22, 2005 05-01608-85

VAMC White River Junction August 22–26, 2005 05-01514-96

VAMC Northampton September 26–30, 2005 05-01606-134

VA Office of Inspector General 29 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Appendix B 

Facility MCCF Projections Over a 12-Month Period5

Facility Name 

Projected

Additional 

Billable 

Amounts*

Projected

Additional 

Collectible 

Amounts**

Projected

Overbillings*

Projected

Resulting 

Overcollections**

Edith Nourse Rogers MVH $ 0 $ 0 $113,494 $ 30,473

VA Boston HCS 2,965,599 996,441 39,541 65

VA Connecticut HCS 1,692,537 409,953 201 0

VAMC Manchester 0 0 0 0

VAMC Northampton 20,522 6,577 6,630 2,125

VAMC Providence 619,853 185,894 613,823 184,086

VAMC Togus 1,852,589 666,191 0 0

VAMC White River Junction 389,596 105,892 0 0

Total Outpatient $7,540,696 $2,370,948 $773,689 $216,749

“Reasons Not Billable Report”*** 

Edith Nourse Rogers MVH $ 25,293 $ 6,818

VA Boston HCS 374,146 125,714

VA Connecticut HCS 767,044 185,625

VAMC Manchester 0 0

VAMC Northampton 24,198 7,755

VAMC Providence 294,130 88,210

VAMC Togus 54,009 19,422

VAMC White River Junction 140,958 38,312

Total “Reasons Not Billable Report” $1,679,778 $471,856

Fee Basis 

Edith Nourse Rogers MVH $ 53,802 $ 14,446

VA Boston HCS 800,170 268,857

VA Connecticut HCS 458,735 111,014

VAMC Manchester 1,227,011 406,877

VAMC Northampton 318,173 101,974

VAMC Providence 250,553 75,141

VAMC Togus 1,344,579 483,511

VAMC White River Junction 50,856 13,823

Total Fee Basis $4,503,879 $1,475,643

Totals $13,724,353 $4,318,447 $773,689 $216,749

*Projected billable amounts and overbillings were determined during the facility CAP reviews.

**Projected collectible amounts and overcollections are based on collection rates provided by the facilities.

***Includes three segments of the “RNB Report.” Insufficient Documentation, No Documentation, and 

Nonbillable Provider (Resident). 

 

5

 The 12–month period of review varied at each site, depending on the dates we were onsite. Generally, we

subtracted 15 months from the date of our on-site review and reviewed data related to care provided over the 

subsequent 12-month period. 

VA Office of Inspector General 30 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Appendix C 

VA Office of Inspector General 31 

Radiologist Staffing, Productivity, and Costs 

 TABLE 1 VA Radiologists 

Facility Name FTE 

Clinical 

FTE 

RVU 

Output 

RVUs per 

Clinical FTE 

Clinical 

Costs 

Clinical 

Cost per 

RVU 

VA Boston HCS 6 5.32 16,272 3,059 $1,291,689 $79.38

VA Connecticut HCS 9.35 8.82 30,263 3,431 1,969,661 65.08

VAMC Providence 3.9 3.52 14,640 4,159 825,695 56.40

Edith Nourse Rogers MVH 0 0 0 0 0 0.00

VAMC White River Junction 2.75 2.05 9,483 4,626 535,306 56.45

VAMC Togus 3 2.45 8,646 3,529 681,757 78.85

VAMC Manchester 2 2 10,878 5,439 398,869 36.67

VAMC Northampton 0 0 0 0 0 0.00

Totals 27 24.16 90,182 3,733 $5,702,977 $63.24

 TABLE 2 Contract Radiologists

Facility Name FTE 

RVU 

Output 

RVU per 

FTE Costs 

Cost per 

FTE 

Cost per 

RVU 

VA Boston HCS6 6.91 38,189 5,527 $3,586,331 $519,006 $93.91

VA Connecticut HCS 1.31 7,247 5,532 653,219 498,640 90.14

VAMC Providence 0.53 1,982 3,740 164,353 310,100 82.92

Edith Nourse Rogers MVH 0 0 0 0 0 0.00

VAMC White River Junction 0.73 6,501 8,905 300,236 411,282 46.18

VAMC Togus 1.2 4,701 3,918 452,439 377,033 96.24

VAMC Manchester 0 0 0 0 0 0.00

VAMC Northampton 0.55 3,082 5,604 209,969 381,762 68.13

Totals 11.23 61,702 5,494 $5,366,547 $477,876 $86.98

Opportunities to Reduce Contract Services and Costs by Increasing 

TABLE 3 VA Productivity 

 RVU Output FTE 

RVUs 

per FTE 

Cost 

per RVU Total Cost 

FY 2004 Staff 90,182 24.16 3,733 $63.24 $5,702,978

Projected Staff 120,800 24.16 5,000 47.21 5,702,978

Projected Staff Changes 30,618 0 1,267 ($16.03) $0

FY 2004 Contract 61,702 11.23 5,494 $86.98 $5,366,547

Projected Contract 31,084 5.66 5,492 86.98 2,703,686

Projected Contract Changes (30,618) (5.57) 0 $0 ($2,662,861)

 

6

 Five VA Boson HCS radiologists’ employment was terminated during June and July 2003. This resulted in the 

need for expensive radiologists service contracts. 
Review of Selected Financial and Administrative Operations at V

Universe of Contracts, Sampled Contracts, Estimated Savings, 

Costs, and Overpayments 

Universe of 

Contracts, Sharing 

Agreements, 

Leases 

Sampled Contracts, 

Sharing Agreements, 

Leases 

Estimated Saving

Questioned Costs, and Ove

Facility Name Number 

Value 

(millions) Number 

Value 

(millions)

Estimated 

Savings 

(Preaward 

Audits) 

Questioned 

Costs 

(Medicare 

Rates)

Quest

Cos

(Cont

Monito

VAMC Manchester 24 $16.0 15 $14.8 $115,957VA Boston HCS 69 $68.9 12 36.8 $VA Connecticut HCS 158 $66.3 15 14.8 $332,531 VAMC Providence 59 $15.7 14 6.2 482,068 151,286Edith Nourse Rogers MVH 38 $10.1 6 4.4VAMC Togus 69 $29.0 12 19.0 VAMC White River Junction 57 $28.0 10 3.4VAMC Northampton 17 $15.2 8 2.4Totals 491 $249.2 92 $101.8 $814,599 $267,243 $

VA Office of Inspector General 
Review of Selected Financial and Administrative Operations at V

Preaward Contracting Deficiencies 

Preaward Requirement 

Facility CM 

Contract Reviews Workload Analyses Price Analys

Facility Name 

Number 

Applicable 

Number 

Deficient 

Number 

Applicable 

Number 

Deficient 

Number 

Applicable 

Nu

De

VAMC Manchester 15 15 9 3 15 VA Boston HCS 12 12 11 1 9 VA Connecticut HCS 15 3 12 7 12 VAMC Providence 14 7 13 6 13 Edith Nourse Rogers MVH 6 1 6 3 5 VAMC Togus 12 6 11 3 3 VAMC White River Junction 10 4 4 0 7 VAMC Northampton 8 8 4 0 4 Totals 92 56 70 23 68 VISN Non-Compliance Rate 61% 33% 34%

Preaward Requirement 

Market Research Legal/ Technical Reviews

Facility Name 

Number 

Applicable 

Number 

Deficient 

Number 

Applicable 

Number 

Deficient 

VAMC Manchester 13 6 3 2 VA Boston HCS 11 1 7 1 VA Connecticut HCS 12 2 7 3 VAMC Providence 10 2 2 2 Edith Nourse Rogers MVH 6 5 2 1 VAMC Togus 6 2 3 0VAMC White River Junction 0 0 2 1 VAMC Northampton 5 0 1 0Totals 63 18 27 10VISN Non-Compliance Rate 29% 37%

VA Office of Inspector General 
Review of Selected Financial and Administrative Operations at V

VA Office of Inspector General 

Postaward Contracting Deficiencies 

Postaward Requirement 

Price Negotiation 

Memoranda 

Background 

Investigations COTR Training CO

Facility Name 

Number 

Applicable

Number 

Deficient 

Number 

Applicable

Number 

Deficient 

Number 

Applicable

Number 

Deficient 

Nu

App

VAMC Manchester 15 4 11 10 15 3 VA Boston HCS 8 3 7 7 12 5 VA Connecticut HCS 12 2 8 7 15 15 VAMC Providence 12 3 7 5 14 5 Edith Nourse Rogers MVH 6 0 0 0 6 5 VAMC Togus 1 1 7 3 12 9 VAMC White River Junction 7 0 4 0 10 2 VAMC Northampton 8 0 4 1 8 0 Totals 69 13 48 33 92 44 VISN Non-Compliance Rate 19% 69% 48% 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities

Appendix G 

Information Technology Security Deficiencies 

Facility Name 

Access to 

AIS 

Resources

Physical 

Security

Background 

Investigations 

VA Boston HCS X X X

VA Connecticut HCS X X X

VAMC Manchester 

Edith Nourse Rogers MVH

VAMC Northampton X X

VAMC Providence X X

VAMC White River Junction X

VAMC Togus X

VA Office of Inspector General 35 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Appendix H 

VISN Director Comments

Department of 

Veterans Affairs Memorandum 

Date: June 15, 2006 

From: Director VISN 1 (10N1) 

Subject:Review of Selected Financial and Administrative

Operations at VISN 1 Medical Facilities 

To: Assistant Inspector General for Auditing (52) 

Please find comments for VISN 1 IG/CAP review on the 

following pages. VISN 1 appreciates the professional and 

constructive approach exhibited by the team and the

opportunity to work with the Office of Inspector General to 

continuously improve the quality of patient care for United 

States Veterans. 

You will find we have concurred with all of the 

recommendations and findings, and have provided specific 

corrective actions that have been implemented and/or will be 

implemented within a specified time frame. 

Should you have any questions or concerns, please contact 

Allan Shirks, MD, VISN 1 Quality Management Officer, at 

781 687 3450. 

(original signed by) 

Jeannette A. Chirico-Post, MD 

Network Director 

VA Office of Inspector General 36 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

VISN Director Comments 

to Office of Inspector General Report 

The following VISN Director’s comments are submitted in response to the 

recommendations in the Office of Inspector General’s Report: 

OIG Recommendations

Recommended Improvement Action 1. We recommend that the VISN Director 

improve MCCF activities and that action be taken to: 

a. Establish internal controls and expand compliance reviews to help facilities identify

missed billing opportunities and prevent underbilling and overbilling. 

b. Develop a VISN-wide medical care documentation timeliness standard. 

c. Ensure that healthcare providers receive additional training to improve compliance 

with documentation requirements. 

d. Provide additional training to coders and billers on issues such as medical student 

documentation, pathological examinations, and service-connected care. 

e. Establish a monitoring system to review the “RNB Reports” to ensure the reports are 

used as a management tool to follow-up and obtain the documentation needed to

accurately bill insurance carriers. 

f. Establish a cost effective billing system for fee basis services. 

Concur Target Completion Date: Various 

a. Establish internal controls and expand compliance reviews to help facilities 

identify missed billing opportunities and prevent underbilling and overbilling. 

Concur Target Completion Date: June 1, 2006 

VA Office of Inspector General 37 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Each month a sample of 15 veterans will be selected from the Compliance/Business 

Integrity (CBI) outpatient “Professional Fee Report” to ensure that all billable episodes of 

care for the veterans’ visits have been coded and billed. Compliance Officers will

perform these monthly audits in conjunction with the CBI data integrity review. The 

local CBI Committee will review the audit findings on a monthly basis. When gaps 

within the process for coding and billing have been identified, HIMS and MCCF program

managers will be notified of the problem and corrective action will be taken. Action 

Plans will be sent to the CBI committee for review and discussion. The monthly audit 

reports will be sent to the VISN CBIO in their quarterly CBI program report to the 

Network Office. This process will be in place until a threshold of 95 percent is met. 

b. Develop a VISN-wide medical care documentation timeliness standard. 

Concur Target Completion Date: September 1, 2006 

The Business Office in conjunction with the Clinical Leadership Council will establish

timeliness standards for medical staff documentation. Effective September 1, 2006. 

The Business Office will work with the Chief Logistics Officer to include language in the 

contracts for locum tenens and scarce medical providers that will require timeliness of 

medical documentation. In addition, remote access will be provided by IT, as 

appropriate, for contract providers to sign notes once dictated. Effective September 1, 

2006 

c. Ensure that healthcare providers receive additional training to improve 

compliance with documentation requirements. 

Concur Target Completion Date: Various 

A standardized training program will be developed for deployment across the VISN for 

the training of providers and residents regarding documentation requirements, including 

timeliness, to meet both VERA and MCCF requirements. This will be a collaborative 

effort between Service Line Staff, Education, the Compliance Office, and the Business 

Office. Effective July 1, 2006

The VISN 1 Chief Medical Officer and the Business Office will provide guidance to all 

VISN 1 medical centers on documentation rules and responsibilities for providers who 

supervise medical students. Effective September 1, 2006 

VA Office of Inspector General 38 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

d. Provide additional training to coders and billers on issues such as medical student

documentation, pathological examinations, and service-connected care. 

Concur Target Completion Date: April 1, 2005 

Training will be provided to coders and billers regarding medical student documentation, 

pathological examinations, and service-connected care. Effective April 1, 2005 

e. Establish a monitoring system to review the “RNB Reports” to ensure the reports 

are used as a management tool to follow-up and obtain the documentation needed to 

accurately bill insurance carriers. 

Concur Target Completion Date: April 1, 2005 

The VISN 1 Compliance Officer has implemented a monitoring system using the “RNB

Reports” focusing on the three segments—insufficient documentation, no documentation

and nonbillable provider (Resident). Those cases which require additional follow-up are 

given to HIMS management who then contact the providers and request additional 

documentation. If documentation is not completed within seven days of notification, 

HIMS management will refer those cases to the Service Chief/ Service Line Manager for 

appropriate action. Completed April 1, 2005 

f. Establish a cost effective billing system for fee basis services. 

Concur Target Completion Date: Various 

VISN 1 Memorandum No. 10N1-102 “Administration of Fee Basis Program” dated 

January 2006, identified roles and responsibilities for fee basis co-payment for the MCCF 

program. Completed January 2006 

Each month the local Patient Services Manager provides the local Patient Accounts

Manager a list of names of those veterans with no identified insurance who have received 

fee basis care. The Billing Office then provides this list to the VISN 1 insurance 

identification/verification contractor. If insurance plans are identified, coverage is crossmatched to the time of service provided, and bills are submitted to the carriers as

appropriate. Completed October 2005 

VA Office of Inspector General 39 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

MCCF billing rate types (a field in the billing program) will be standardized at all 

medical centers to include the rate types “fee care” and “prosthetics”. This will provide 

consistency in reporting the number of bills that are produced for fee basis services and 

prosthetics. If these rate types are not separately identified, bills for fee basis and 

prosthetics are included in the rate type “reimbursable insurance” and therefore cannot be

extracted to demonstrate that we are billing and collecting for these services. Effective 

February 28, 2005 

Recommended Improvement Action 2. We recommend that the VISN 1 Director take 

action to establish procedures and assign responsibilities to: 

a. Require diagnostic service line managers to create quarterly reports of the department’s 

total workload and the productivity of VA staff and contract radiologists. 

b. Include productivity and/or cost efficiency measures in the negotiation and

establishment of radiologist service contracts. 

c. Conduct reviews of radiologist costs and productivity to identify opportunities to 

leverage radiologist resources. 

d. Implement an information technology solution (PACS) that allows for the transmission 

of diagnostic radiology images between VISN 1 facilitates. 

Concur Target Completion Date: Various 

a. Require diagnostic service line managers to create quarterly reports of the 

department’s total workload and the productivity of VA staff and contract 

radiologists. 

Concur Target Completion Date: March 1, 2006 

Quarterly reports will be generated by each facility beginning March 1, 2006. The 

reports include RVUs generated by the Radiology Service for the reporting period and 

the projected RVUs for the fiscal year. The report is collated by the Specialty & Acute 

Care (SAC) Service Line staff (COO and/or HSS), reviewed by the Network Service Line 

Director, forwarded to the VISN Chief Medical Officer and presented to the VISN

Clinical Leadership Council. The SAC Network Service Line Director may initiate 

action based on the results of the quarterly reports which may include review of

departmental procedures or consideration of re-allocation of work within the VISN. 

b. Include productivity and/or cost efficiency measures in the negotiation and 

establishment of radiologists’ service contracts. 

Concur Target Completion Date: September 30, 2006 

VA Office of Inspector General 40 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

The VISN will require facilities to use measures (RVUs per FTE and/or cost per RVU) in 

the negotiation and establishment of contract radiologists’ services. Statements of Work 

will include estimated quantities of interpretations, procedures and/or services as required 

in billable unit pricing to monitor performance and productivity. When measures cannot 

be included or used as a basis in a radiologist service contract, facilities must provide 

written justification to the VISN Chief Medical Officer and Chief Logistics Officer and 

receive a written approval prior to awarding the contract. 

As another alternative for negotiating radiologist service contracts VISN 1 will consider 

using Medicare rates for negotiating prices. The OIG had noted that this practice had 

been implemented in another VISN and it had successfully reduced RVU costs. 

c. Conduct reviews of radiologist costs and productivity to identify opportunities to

leverage radiologist resources. 

Concur Target Completion Date: June 30, 2006 

VISN 1 facilities have already reduced contract radiologist services and will continue to 

look for opportunities where VA staff radiologist productivity can be improved and/or 

resources can be better leveraged to eliminate contract costs. 

The SAC Network Service Line Director has met with the VISN 1 Chiefs of Radiology 

and reviewed RVU data and national physician productivity data. Opportunities for

reducing contract staff and increasing the productivity of VA salaried staff were 

discussed, and this issue will to be on pertinent meeting agendas on a continual basis. 

The VISN Health System Specialist will lead a team that will conduct bi-annual reviews 

which will analyze radiologist productivity and evaluate costs, including related 

contracts, to identify opportunities for improvement. A written report will be provided to

the SAC Network Service Line Director and other VISN leadership staff. 

d. Implement an information technology solution (PACS) that allows for the 

transmission of diagnostic radiology images between VISN 1 facilitates. 

Concur Target Completion Date: September 30, 2007 

VISN 1 is committed to increasing the productivity of its radiologists and will install 

PACS throughout the network. This will involve several millions of dollars to purchase 

and maintain the necessary teleradiology and facilities’ equipment. 

VA Office of Inspector General 41 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

VISN 1 began the planning process for a standardized VISN PACS several months ago. 

A planning group was formed to research the various options available and identify the

specific needs of the VISN. This planning group is a subgroup of the VISN Chiefs of 

Radiology Services workgroup and consists of representatives from the SAC Service 

Line, VISN and Facility Information Technology staff, Clinical Engineering, 

Contracting, radiology administrative staff, and facility radiologists. This group has met 

weekly via conference call, visited other VISNs who have implemented PACS, and 

conducted significant research concerning the technical requirements of PACS. 

The objective of this group is to develop a Request for Proposal (RFP) for a VISN 1 

standardized PACS that will allow for remote readings of images from any facility in 

VISN 1. However, of the eight VISN 1 facilities, two facilities, Boston and Connecticut, 

currently use commercial PACS. 

The Boston Healthcare System is expected to integrate to this VISN PACS in lieu of their 

current commercial PACS concurrently with other facilities. The Connecticut Healthcare 

System, however, recently updated their commercial PACS and will therefore be 

integrated into the VISN PACS in subsequent years when an upgrade to their system is 

needed. This decision recognizes that there would be a negative financial impact on the

Connecticut HCS and the VISN to replace a newly implemented commercial PACS. 

To ensure VISN compatibility during the time between the VISN PACS deployment and

the opportunity to integrate Connecticut, the PACS RFP specifies that the vendor must 

have a solution that allows access/transfer of images from the Connecticut facility via 

their commercial PACS. This will serve as an interim solution. We anticipate the VISN

PACS to be phased in completely by the end of calendar year 2007, and Connecticut

integration to occur approximately 3-4 years after the deployment of the VISN PACS. 

The integration of the Connecticut system will be the final step in achieving a fully 

standardized PACS in VISN 1. 

Recommended Improvement Action 3. We recommend that the VISN 1 Director 

improve equipment accountability by taking action to: 

a. Correct and update inaccurate and incomplete equipment data in AEMS/MERS. 

b. Strengthen controls to ensure that equipment inventories are conducted accurately, 

completely, and on time and that equipment transaction changes are supported by 

documentation. 

c. Improve procedures to ensure that A&MMS staff coordinate IT equipment additions, 

transfers, removals, and turn-ins with IRM Service. 

VA Office of Inspector General 42 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

d. Develop policy and procedures for accounting for “out-of-service” equipment, and 

establish an oversight mechanism to ensure that reconciliations of “out-of-service” 

equipment are accurate and complete. 

e. Require A&MMS staff to comply with property disposal procedures and ensure that

turn-in documentation for excess or obsolete equipment is properly completed. 

f. Restrict and monitor the number of employees who can access and change data in

AEMS/MERS. 

g. Provide training for staff responsible for managing and accounting for nonexpendable 

property. 

Concur Target Completion Date: various 

a. Correct and update inaccurate and incomplete equipment data in AEMS/MERS. 

Concur Target Completion Date: June 30, 2006 

The A&MMS Chiefs have been submitting quarterly status reports to the CLO on their 

facilities’ progress in correcting their equipment databases since March 2005. 

All facilities are required to verify, with the Accountable Officer and facility Director 

signatures, that the information generated on EILs, including sensitive items, is accurate 

and as complete as possible. Although purchasing data on older items may no longer be 

available for input, complete descriptions, serial numbers and locations can be edited and 

will be included on EILs, including sensitive items. This will not occur on the non-EIL 

items included in the AEMS/MERS system since they are not inventoried after 

deployment. Corrections and updates will be made on an exceptional basis if unique 

inventories are necessary. Correcting and updating inaccurate and incomplete equipment 

data in AEMS/MERS has become a standing agenda item of the VISN CIO Council since 

November 2004. Using a database tool (developed near the end of 2004) that extracts 

information from all EILs owned by the Information Management Resources (IRM) 

Service, information on missing and inaccurate AEMS/MERS entries can be tracked for 

all items and the information used for updating in the system. Information is presented to

each facility Director at quarterly meetings and distributed to the facility Chiefs of 

Logistics afterwards. Since November 2004, the number of problem inventory issues has 

been reduced. 

b. Strengthen controls to ensure that equipment inventories are conducted 

accurately, completely, and on time and that equipment transaction changes are

supported by documentation. 

Concur Target Completion Date: December 31, 2005 

VA Office of Inspector General 43 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

A mechanism has been established to track the accurate and timely completion of the 

physical property inventories. The A&MMS Chiefs are required to notify the VISN CLO

quarterly, via e-mail, that scheduled inventories and required spot checks were conducted 

and the dates on which they were conducted. The report includes the number of

discrepancies, the dollar value of discrepancies, and the number of Reports of Survey. 

All the facilities have been submitting the updated listing following the quarter and these 

are consolidated for forwarding to Headquarters. 

The property clerks at each facility will work with the responsible official on each EIL to 

ensure their inventories are conducted accurately and timely. All changes will be 

properly documented and filed with the Service’s EIL. The submitted quarterly reports 

have been indicating completion dates and any discrepancies and/or Reports of Survey as 

appropriate. 

Since November 2004, all transfers of equipment in EILs owned by IRM have been 

documented by memo submitted to A&MMS at the parent facility. Equipment issued for 

personal use has been issued with a property letter signed by the facility CIO in every

case. Chiefs of A&MMS and facility CIOs have been submitting the date of EIL receipt 

and EIL completion semiannually and will continue until VA standards are met. 

c. Improve procedures to ensure that A&MMS staff coordinate IT equipment

additions, transfers, removals, and turn-ins with IRM Service. 

Concur Target Completion Date: June 30, 2006 

IRM and A&MMS management will jointly develop and implement a procedure to 

improve IT equipment issues, including equipment additions, transfers, removals, and 

turn-ins. The procedure will be subject to review and approval by the VISN CLO and 

CIO prior to implementation. 

d. Develop policy and procedures for accounting for “out-of-service” equipment and 

establish an oversight mechanism to ensure that reconciliations of “out-of-service”

equipment are accurate and complete. 

Concur Target Completion Date: December 31, 2005 

All “out-of-service” items will be reviewed by A&MMS Property Clerks quarterly with 

Clinical Engineering and IT personnel to update status to ensure current information. 

“Out-of-service” equipment will be analyzed separately and targeted for turn-in or 

Reports of Survey as appropriate. A target reduction of 25 percent per quarter of 

inaccuracies in this equipment status will be set. 

VA Office of Inspector General 44 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

“Out-of-service” items are being reviewed quarterly and status will be reported along 

with the quarterly EIL report. Actions taken to remove any equipment listed in the “outof-service” category must have supporting documentation on file such as Reports of 

Survey, transfer paperwork, memorandums to the file, or property disposal documents. 

This is in compliance with VA handbook 7127 that requires spot checks quarterly with no 

minimum requirement or reporting. Enforcing this requirement with an appropriate

statement along with the quarterly EIL report will ensure compliance with the Handbook 

requirements. 

The quarterly reviews of the “Out-of-Service” items since December 31, 2005 has shown 

that all items in this category are valid, appropriate and current. 

e. Require A&MMS staff to comply with property disposal procedures and ensure

that turn-in documentation for excess or obsolete equipment is properly completed. 

Concur Target Completion Date: December 31, 2005 

Turned in equipment is being tracked separately by the A&MMS NX (nonexpendable) 

Technician to assure proper documentation and appropriate removal from active 

inventory status. Appropriate disposal procedures are followed in compliance with GSA 

regulations. All turn in documents are kept on file by the Asset Manager and for IT 

equipment by the facility CIO and forwarded for archiving to the VISN CIO shared drive. 

The formal training and program oversight by the CLO and facility Chiefs will monitor 

compliance during the quarterly reporting. These spot checks will be conducted at the 

same time the mandatory quarterly spot check reviews are done to verify the accuracy of

EIL inventory records. 

Although the formal training of all personnel will not be completed until October 31, 

2006 (see 3g below), the current monitoring by management indicates that the proper

procedures are being followed. 

f. Restrict and monitor the number of employees who can access and change data in 

AEMS/MERS. 

Concur Target Completion Date: May 31, 2006 

VA Office of Inspector General 45 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

The current list of personnel having access to the AEMS/MERS system was reviewed to

ensure that only the appropriate personnel have editing capability. Reviews indicate that 

the majority have a read-only capability and the number with editing ability will vary by 

facility depending on location. Per VHA Directive 6210, all user access and privilege will

be reviewed at least every 90 days and changes will be made as necessary for appropriate 

level of access or continued need for the AEMS/MERS property menu. 

IRM service will provide a report to the A&MMS Chief on a quarterly basis listing all 

individuals who have the options assigned to them that enable them to add/edit/turn-in 

property in AEMS/MERS. 

g. Provide training for staff responsible for managing and accounting for 

nonexpendable property 

Concur Target Completion Date: October 31, 2006 

The VHA Prosthetics and Clinical Logistics Office (10FL) has developed a training 

program for Asset Management that will be available for formal training by the 4th 

quarter of FY 2006. This training will provide reminders on the importance of managing 

and accounting for nonexpendable property and ensure standardization of VA policies. 

All A&MMS staff within VISN 1 with responsibility for nonexpendable property will 

take this training. This training program will be provided annually and the appropriate 

staff will be assigned for first time and refresher training as needed. Ongoing compliance 

with the Equipment Program will be monitored by the facilities, reported quarterly, and 

the CLO will provide oversight. 

The training will cover all the appropriate requirements to maintain a proper equipment 

inventory. The training, along with CLO and local Chiefs oversight, will ensure ongoing

compliance to the established program. Documentation of this training will be 

maintained. 

Recommended Improvement Action 4. We recommend that the VISN 1 Director 

develop a plan of action to: 

a. Formalize an organizational structure for contracting activities delineating lines of 

authority, responsibility, and communication with facility management and staff. 

b. Develop and implement performance tools to provide closer management oversight of

facility CMs, COs, and COTRs to ensure compliance with regulations and policy. 

c. Establish and deploy a centralized database containing essential contract data needed to 

improve contract accountability and to effectively manage the contracting program. 

VA Office of Inspector General 46 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

d. Ensure that contract reviews are conducted at contracting milestones to ensure

compliance with regulations and policies. 

e. Develop and implement a training program to ensure COTRs understand their duties, 

responsibilities, and the methodology used to validate services and certify payments. 

f. Ensure COs and COTRs conduct periodic meetings to ensure contractors are adhering 

to contract requirements. 

g. Ensure and document that VA employees who participate in contract solicitations, 

negotiations, awards, and administration are free of conflicts of interest. 

Concur Target Completion Date: Various 

(a) Formalize an organizational structure for contracting activities delineating 

lines of authority, responsibility, and communication with facility management and

staff. 

Concur Target Completion Date: July 31, 2006 

The VISN 1 CFO Reorganization Plan has been submitted for and is pending final 

approval and implementation. In accordance with this overall plan for VISN 1, the NCM 

has begun drafting a supplemental “VISN 1 Contracting Activities Realignment Plan” 

which will describe how the VISN 1 CLO and NCM will be integrated into each of the 

New England facility contracting units. 

The primary goal of the contracting activities plan is to establish in writing the 

relationship between VISN leadership and the field activities. Clear lines of authority 

will be established, individual responsibilities for all personnel will be defined and both 

formal and informal lines of communication will be opened. 

(b) Develop and implement performance tools to provide closer management 

oversight of facility CMs, COs, and COTRs to ensure compliance with regulations

and policy.

Concur Target Completion Date: September 30, 2006 

Several new management tools to provide closer management oversight of facility 

personnel are already under development at the National level. VA-wide solicitation and 

contract logs are being created to help management better assign, distribute, and monitor 

workload. The Electronic Contract Management System (eCMS) was implemented in 

VISN 1 on March 27, 2006. This system will provide for preaward, award, and 

postaward functionality and will provide management with another tool to manage 

workload. 

VA Office of Inspector General 47 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

The NCM is also working on several SOPs to standardize policy and procedures across 

the VISN and ensure compliance with all applicable acquisition regulations. SOP titles 

will include: ”Requirements Documents Package”, Solicitation/Contract Reviews”, 

“Solicitation/Contract Checklists”, “Written Acquisition Plan”, “Proposal Evaluation 

Guide”, “Submission of the VA Form 2268”, “Bond Checklist”, “Requesting Warrants,

and “Distribution of VISN-Wide Contracts”. 

In the future, as relevant data is collected through eCMS and the solicitation and contract

logs, performance metrics can be developed to better monitor and enforce compliance. 

The NCM will also audit each facility for compliance annually. 

(c) Establish and deploy a centralized database containing essential contract data 

needed to improve contract accountability and to effectively manage the contracting 

program. 

Concur Target Completion Date: May 31, 2006 

As stated above, VA Headquarters has established a central database, eCMS, that will 

contain essential contract data. The solicitation and contract logs will also provide 

similar data. IN VISN 1, these logs will enable the CLO and NCM to better assign and

monitor workload while looking for opportunities to consolidate requirements and more

equitably distribute contracts. 

Within the VISN, the NCM has established a “VISN 1 Acquisition Folder” on the VISN 

1 shared drive. This folder, which includes the SOP, Training, Templates, and Contract 

subfolders, provides a central repository for essential contracting information that will 

improve contract accountability. The NCM will periodically review the Contract 

subfolder for completeness and accuracy. 

(d) Ensure that contract reviews are conducted at contracting milestones to 

ensure compliance with regulations and policies. 

Concur Target Completion Date: June 30, 2006 

A formal process to enforce and document contract reviews will be developed as an SOP. 

The SOP for solicitation and contract reviews will provide templates to document that all 

required reviews have taken place. 

(e) Develop and implement a training program to ensure COTRs understand 

their duties, responsibilities, and the methodology used to validate services and 

certify payments. 

Concur Target Completion Date: September 30, 2006

VA Office of Inspector General 48 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

VISN 22’s COTR Training program was implemented VA-Wide in February 2006. In

addition to the program itself, VISN 1 will develop a master list of certified COTRs. The 

list will be kept in the VISN 1 Acquisition folder on the shared drive and all COs will be 

required to consult the list before assigning a COTR. If the proposed COTRs are not on 

the list, they cannot be designated until training requirements have been fulfilled. 

(f) Ensure COs and COTRs conduct periodic meetings to ensure contractors are 

adhering to contract requirements. 

Concur Target Completion Date: June 30, 2006 

Periodic meetings between COs and COTRs will be held and documented in the contract 

file to ensure contractor compliance. Discrepancies, when noted, will be addressed as 

appropriate with all correspondence contained in the contract file. 

(g) Ensure and document that VA employees who participate in contract 

solicitations, negotiations, awards, and administration are free of conflicts of 

interest. 

Concur Target Completion Date: June 30, 2006 

All individuals who participate in the solicitation, negotiation, award, and administration 

of a contract will sign both a Certificate of Procurement Integrity and a Conflict of 

Interest form to ensure these individuals are free of conflicts of interest. In those cases 

where it is difficult to utilize personnel in the contract process because of local 

affiliations, the NCM will attempt to utilize personnel from other facilities. In those

cases where it is not clear if a conflict of interest is present, the NCM will refer the matter 

to VA Regional Counsel for consideration. 

Recommended Improvement Action 5. We recommend that the VISN 1 Director 

develop and implement a plan of action to ensure: (a) cardholders purchase prosthetic 

supplies in accordance with VA’s purchasing hierarchy or obtain clinical waiver 

documentation from clinicians and (b) cardholders consider three sources of competition 

for purchases over $2,500 or document the justifications for using sole source vendors. 

Concur Target Completion Date: March 1, 2006 

a. Ensure cardholders purchase prosthetic supplies in accordance with VA’s 

purchasing hierarchy or obtain clinical waiver documentation from clinicians. 

VA Office of Inspector General 49 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

The VISN 1 local facility prosthetic managers will monitor their prosthetic purchasing 

staff on a quarterly or more frequent basis to ensure these cardholders purchase prosthetic 

supplies in accordance with VA’s purchasing hierarchy. The VISN 1 Prosthetic Manager 

and the VISN 1 Prosthetic Health System Specialist will review a random sample of these 

orders to monitor compliance quarterly. 

Prosthetics holds a monthly conference call with the VISN 1 Prosthetics Manager and 

Health Systems Specialist and all of the local facility managers. We have discussed these 

issues and emphasized their importance on the conference calls over the last several 

months. We will be reviewing the documentation at our face-to-face meeting on 

June 27-28, 2006, at the VAMC White River Junction, VT. 

b. Ensure cardholders consider three sources of competition for purchases over 

$2,500 or document the justifications for using sole source vendors. 

The VISN 1 local facility prosthetic managers will oversee this process and ensure that 

documentation is kept readily available for review. The VISN 1 Prosthetic Manager and 

the VISN 1 Health System Specialist will review a random sample of these orders to 

check on compliance quarterly. 

We are requesting our local facility managers bring their documentation showing their

compliance with the requirements at our face-to-face meeting on June 27-28, 2006, at the

VAMC White River Junction, VT.

Recommended Improvement Action 6. We recommend that the VISN Director 

implement controls to: (a) prevent recurrence of access and physical security deficiencies 

and (b) ensure that employees with access to sensitive resources and data receive the 

appropriate level background investigations. 

Concur Target Completion Date: Ongoing 

a. Prevent recurrence of access and physical security deficiencies. 

Concur Target Completion Date: September 30, 2006 

Each of the four VISN 1 facilities identified deficient in access control to AIS resources

have taken corrective actions. VISN and facility ISOs will monitor this on a quarterly 

basis and take action, as necessary. The need to review the access to AIS resources is 

being included in the VA Office of Cyber and Information Security (OCIS) Program

Guide on a quarterly basis. 

VA Office of Inspector General 50 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

b. Ensure employees with access to sensitive resources and data are subject to 

the appropriate level of background investigation. 

Concur Target Completion Date: July 9, 2006 

Facility ISOs are responsible for verifying that appropriate background checks are 

requested. It is understood that the backlog of requested security checks in OCIS

headquarters is significant. The VISN 1 ISO will verify (and take action, as necessary) 

quarterly that all necessary checks are submitted and that full (versus moderate) 

background investigations are requested when appropriate. 

Recommended Improvement Action 7. We recommend that the VISN 1 Director 

develop and implement a plan of action to provide closer oversight of the facility 

pharmacy activities in order to enhance accountability of pharmaceuticals, improve the 

controlled substances inspection program, and ensure compliance with VHA policies. 

Concur Target Completion Date: July 1, 2006 

The VISN Pharmacy Benefits Manager (PBM) will write a Network Policy that will 

include the following procedures: 

The VISN Medical Center Directors will quarterly (December 31, March 31, June 30 and 

September 30) notify the VISN PBM in writing that Controlled Substances Coordinators

have randomly spot-checked monthly local facility inspections for compliance with VHA

policy and those inspections have been conducted timely. 

The VISN Medical Center Directors will annually notify the VISN PBM in writing that 

Controlled Substances Coordinators have conducted, at minimum, one annual local

training (September 30) for controlled substances inspectors and that all training 

documentation has been maintained. 

All VISN local facility Pharmacy Service Managers will be directed by the VISN PBM to 

comply with tools provided in the VHA Handbook 1761.2, VHA Inventory Management, 

to maintain minimum drug inventory stock levels. The VISN PBM will conduct random 

verification testing of inventory stock levels at each pharmacy site annually and records

of those will be kept at the VISN. The PBM Manager during site visits will assess for 

compliance and report in writing to the Medical Center director any deficiencies and 

request, support, and consult on actions, as needed. 

VA Office of Inspector General 51 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

All VISN local facility Pharmacy Service Managers will confirm in writing to the PBM 

by June 30, 2006 that adequate procedures have been implemented to ensure that 

responsibilities for the ordering and receiving of drugs are properly segregated as 

evidenced in their local MCM or SOP. The VISN PBM will conduct site visits on a 

semiannual basis to validate compliance with these procedures. 

All VISN local facility Pharmacy Service Managers will confirm in writing to the PBM 

by June 30, 2006 that the local MCM or SOP indicates that a pharmacy employee and an

Accountable Officer (AO) witness and sign for the receipt of controlled substances. 

Notification will include a statement that the AO will annotate that he or she witnessed 

the posting of controlled substances into inventory records and reconciled the receipt of 

Schedule II drugs to DEA Form 222. The VISN PBM will conduct site visits on a 

semiannual basis to validate compliance with these procedures. 

All VISN local facility Pharmacy Service Managers will confirm in writing to the PBM 

by June 30, 2006 that the recording of the receipt of controlled substances from the 

vendors are entered electronically as referenced in the local MCM or SOP. Furthermore, 

ordering of the controlled substances from the clinical areas and the distribution from the 

Pharmacy are performed utilizing the electronic controlled substances package. The 

VISN PBM will conduct site visits on a semiannual basis to validate compliance with 

these procedures. 

All VISN local facility Pharmacy Service Managers will notify the PBM of the existence 

of a local MCM or SOP by June 30, 2006 that identifies job titles of employees who have 

the authority to order, receive, post and verify controlled substances orders. The 

procedure must include a list of all parties that need to be notified in the event of any

suspected theft, diversion or suspicious loss of drugs. The VISN PBM will conduct site 

visits on a semiannual basis to validate compliance with these procedures. 

This policy will be in effect after concurrence from the Clinical Leadership Committee 

and approval from the Executive Leadership Board. 

VA Office of Inspector General 52 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities 

Appendix I 

OIG Contact and Staff Acknowledgments 

OIG Contact Nicholas H. Dahl 

(781) 687-3141 

Acknowledgments Maureen Barry

Stephen Bracci 

Michael Cannata 

John Cintolo 

David Irwin 

Matthew Kidd 

James McCarthy 

Philip McDonald 

Patricia McGauley 

Amy Mosman 

Steven Rosenthal 

Jacqueline Stumbris 

Joseph Vivolo 

VA Office of Inspector General 53 
Review of Selected Financial and Administrative Operations at VISN 1 Medical Facilities

Appendix J 

Report Distribution 

VA Distribution

Office of the Secretary 

Veterans Health Administration 

Assistant Secretaries 

General Counsel 

Director, Veterans Integrated Service Network 1 (10N1)

Non-VA Distribution

House Committee on Veterans’ Affairs 

House Appropriations Subcommittee on Military Quality of Life and Veterans Affairs, 

 and Related Agencies 

House Committee on Government Reform

Senate Committee on Veterans’ Affairs 

Senate Appropriations Subcommittee on Military Construction and Veterans Affairs, and 

 Related Agencies 

Senate Committee on Homeland Security & Governmental Affairs 

National Veterans Service Organizations 

Government Accountability Office 

Office of Management and Budget 

U.S. Senate: Edward M. Kennedy, John F. Kerry, Christopher Dodd, Joseph Lieberman, 

Lincoln Chafee, Jack Reed, Olympia Snowe, Susan Collins, Judd Gregg, John Sununu, 

James M. Jeffords, Patrick J. Leahy 

U.S. House of Representatives: John F. Tierney, John W. Olver, Richard E. Neal, 

James P. McGovern, Barney Frank, Martin T. Meehan, Edward J. Markey, 

Michael E. Capuano, Stephen F. Lynch, William D. Delahunt, Rosa DeLauro, 

John B. Larson, Rob Simmons, Christopher Shays, Nancy L. Johnson, 

Patrick J. Kennedy, James R. Langevin, Thomas H. Allen, Michael H. Michaud, 

Jeb Bradley, Charles F. Bass, Bernie Sanders 

This report will be available in the near future on the OIG’s Web site at 

http://www.va.gov/oig/52/reports/mainlist.htm. This report will remain on the OIG Web 

site for at least 2 fiscal years after it is issued. 

VA Office of Inspector General 54