VA Health Care: Management and Oversight of Fee Basis Care Need Improvement
Published: 2013-05-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: While VA treats the majority of veterans in VA-operated facilities, in some instances it must obtain the services of non-VA providers to ensure that veterans are provided timely and accessible care. These non-VA providers are commonly reimbursed by VA using a fee-for-service arrangement known as fee basis care. VA's fee basis care program has grown rapidly in recent years--rising from about 8 percent of VA's total health care services budget in fiscal year 2005 to about 11 percent in fiscal year 2012. GAO was asked to review fee basis care program spending and utilization and factors that influence VAMC fee basis utilization. This report examines how fee basis care spending and utilization changed from fiscal year 2008 to fiscal year 2012, factors that contribute to the use of fee basis care, and VA's oversight of fee basis care program spending and utilization.
GAO reviewed relevant laws and regulations, VA policies, and fee basis spending and utilization data from fiscal year 2008 through fiscal year 2012. In addition, GAO reviewed the fee basis care operations of six selected VAMCs that varied in size, services offered, and geographic location.
section_title: What GAO Found
paragraphs: The Department of Veterans Affairs' (VA) fee basis care spending increased from about $3.04 billion in fiscal year 2008 to about $4.48 billion in fiscal year 2012. The slight decrease in fiscal year 2012 spending from the fiscal year 2011 level was due to VA's adoption of Medicare rates as its primary payment method for fee basis providers. VA's fee basis care utilization also increased from about 821,000 veterans in fiscal year 2008 to about 976,000 veterans in fiscal year 2012.
GAO found that several factors affect VA medical centers' (VAMC) utilization of fee basis care--including veteran travel distances to VAMCs and goals for the maximum amount of time veterans should wait for VAMC-based appointments. VAMCs that GAO reviewed reported that they often use fee basis care to provide veterans with treatment closer to their homes--particularly for veterans who are not eligible for travel reimbursement. In addition, VAMC officials reported that veterans are often referred to fee basis providers to ensure that VAMC-based clinics that would otherwise treat them can meet established VA wait time goals for how long veterans wait for an appointment. However, GAO found that VA has not established goals for and does not track how long veterans wait to be seen by fee basis providers.
VA's monitoring of fee basis care spending is limited because fee basis data do not currently include a claim number or other identifier that allows all charges from a single office visit with a fee basis provider or an inpatient hospital stay to be analyzed together. GAO found that without the ability to analyze spending in this way, VA is limited in its ability to assess the cost of fee basis care and verify that fee basis providers were paid appropriately.
section_title: What GAO Recommends
paragraphs: GAO recommends that VA revise its beneficiary travel regulations to allow reimbursement for veterans seeking similar care from a fee basis provider, apply the same wait time goals to fee basis care as VAMC-based care, and ensure fee basis data includes a claim number. VA generally concurred with GAO's conclusions and five recommendations.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) treats the majority of eligible  veterans it serves in VA-operated facilities, such as VA medical centers  (VAMC). However, in some instances, VA must obtain the services of  non-VA providers to help ensure that veterans are provided timely and  accessible care. These non-VA providers treat veterans in non-VA  facilities, such as physicians’ offices or hospitals in the community.   Non-VA providers are commonly paid by VA using a fee-for-service  arrangement—known as fee basis care. VA’s fee basis care program  has grown rapidly—in fiscal year 2005 VA’s total spending on fee basis  care was about $1.6 billion and represented about 8 percent of VA’s total  health care services budget, while in fiscal year 2012 VA’s total spending  on fee basis care was about $4.5 billion and represented about   11 percent of VA’s total health care services budget.
Fee basis care can be delivered by different types of health care providers—including  physicians, chiropractors, physical therapists, and psychologists. This care is often  preapproved by the VAMC the veteran most frequently visits; however in certain  circumstances, fee basis care can be used to provide emergency care to veterans. when veterans must travel long distances to obtain specialty care from  VA providers.
Congressional requesters have raised questions about the rising costs of  fee basis care and issues with VA’s management and oversight of its fee  basis care program as highlighted in reports by the VA Office of Inspector  General (OIG) and the National Academy of Public Administration.  These issues include a lack of internal controls for payment of fee basis  providers and ineffective management and oversight of the fee basis care  program by local and VA Central Office officials. VA has also  acknowledged that while the fee basis program has seen marked growth  in the number of veterans it serves, the management and support  systems used to administer the program have not matured in a similar  manner. In this report we examine: (1) how fee basis care spending and  utilization have changed from fiscal year 2008 through fiscal year 2012;  (2) factors that contribute to the use of fee basis care and steps some  VAMCs are taking to reduce fee basis care; (3) VA’s oversight of fee  basis care program spending and utilization; and (4) VA’s plans and  strategies to improve the fee basis care program.
In addition, we combined inpatient records and inpatient ancillary records together in  order to conduct analyses on all inpatient data. spending associated with inpatient and outpatient fee basis care, (2) how  many veterans received inpatient and outpatient care from fee basis  providers, and (3) the breakdown of fee basis care spending and  utilization by fee basis category. Our final analysis of fee basis data  included all records of fee basis care except those for pharmacy-only fee  basis payments. We excluded pharmacy-only fee basis care because:   it (1) represents a very small portion of fee basis care spending   ($0.002 billion for fiscal years 2008 through 2012), (2) represents a very  small portion of fee basis care utilization (11,750 unique veterans for  fiscal years 2008 through 2012), (3) applies only to reimbursements of  veterans for medications that they paid for as part of emergency care that  was reimbursed by VA, and (4) could not be separated out into service- connected and non-service-connected emergency care categories. To  ensure the reliability of these data, we interviewed VA Central Office  officials responsible for maintaining and analyzing fee basis data and  conducted automated checks of data fields to ensure that they contained  complete information. Following these actions, we found information in  this dataset to be sufficiently reliable for the purposes of this report.
To examine the factors that contribute to the use of fee basis care and the  steps some VAMCs are taking to reduce fee basis care, we spoke with  VAMC officials at selected VAMCs about the factors that influence fee  basis care usage at these facilities and how officials at these facilities  have reduced fee basis care spending and utilization. We selected six  VAMCs that varied in terms of size, services offered, and geographic  location, given that all VAMCs offer veterans fee basis care. These six  VAMCs were located in Durham and Salisbury, North Carolina;  Alexandria, Louisiana; Biloxi, Mississippi; Las Vegas, Nevada; and Loma  Linda, California. We also spoke with officials in the three Veterans  Integrated Service Networks (VISN) responsible for managing these six  selected VAMCs. Information obtained from these VISNs and VAMCs  cannot be generalized to all VISNs and VAMCs. Finally, we reviewed  relevant VA policies and procedures related to methods discussed by  VAMC officials during these interviews.
To examine VA’s oversight of fee basis care program spending and  utilization, we spoke with VA Central Office staff responsible for  monitoring the program. In addition, we assessed the content and  structure of VA Central Office databases used to monitor the fee basis  care program.
To examine VA’s plans and strategies to improve the fee basis care  program, we spoke with VA Central Office staff responsible for developing  planned improvements. We also reviewed documentation of these  planned improvements.
We conducted our performance audit from September 2012 to May 2013  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Fee Basis Care Authorization Process
paragraphs: The two main fee basis care delivery methods—preauthorized care and  emergency care—are approved using two different processes.Preauthorizing fee basis care involves a multistep process conducted by  the VAMC that regularly serves a veteran. The preauthorization process  is initiated by a VA provider who submits a request for fee basis care to  the VAMC’s fee basis care unit, which is an administrative department  within each VAMC that processes VA providers’ fee basis care requests  and verifies that fee basis care is necessary. Once approved by the  VAMC Chief of Staff or his or her designee, the veteran is notified of the  approval and can choose any fee basis provider willing to accept VA  payment at predetermined rates. (See fig. 1.)
section_title: VA Fee Basis Care Spending and Utilization Increased from Fiscal Year 2008 to Fiscal Year 2012, with the Majority of Spending and Utilization in Outpatient Care
subsections: section_title: VA Fee Basis Care Spending and Utilization Increased from Fiscal Year 2008 to Fiscal Year 2012
paragraphs: VA’s fee basis care spending increased from about $3.04 billion in fiscal  year 2008 to about $4.48 billion in fiscal year 2012. VA’s fee basis care  spending hit its highest level of about $4.56 billion in fiscal year 2011.  Across the 5 fiscal years we reviewed, VA spent a total of about   $20.29 billion on fee basis care. (See fig. 4.)
The overall increase in fee basis care spending from fiscal year 2008 to  fiscal year 2012 can be attributed to increases in the number of veterans  who received fee basis care. The slight decline in fee basis care spending  between fiscal year 2011 and fiscal year 2012 is likely due to VA’s  adoption of Medicare rates for its fee basis care program. Medicare  reimbursement rates are typically lower for most health care services than  VA’s previous fee basis care reimbursement rates.
VA’s fee basis care utilization also increased from fiscal year 2008 to  fiscal year 2012—although the number of unique veterans receiving care  from fee basis providers has increased less rapidly for the last 3 fiscal  years. fee basis providers from fiscal year 2008 to fiscal year 2012.basis care utilization hit its highest point of the 5-year period in fiscal year  2012 when about 976,000 unique veterans received care from fee basis  providers, about 155,000 more veterans than in fiscal year 2008. (See   fig. 5.) According to VA officials, the increase in the number of unique  veterans receiving care from fee basis providers from fiscal year 2008 to  fiscal year 2012 was likely due to VA’s use of fee basis care to meet  goals for the maximum amount of time veterans wait for VAMC-based  appointments.
Fee basis utilization in this report does not include pharmacy-only fee basis care.  Pharmacy-only fee basis care consists of reimbursements to veterans for medications   that they paid for as part of emergency care that was reimbursed by VA under   38 U.S.C. § 1728 (emergency care generally for service-connected conditions) or   38 U.S.C. § 1725 (Veterans Millennium Health Care and Benefits Act emergency care for  non-service-connected conditions). A total of 11,750 unique veterans received such  reimbursement from fiscal year 2008 through fiscal year 2012.
To determine the fee basis utilization numbers in this figure, we counted each individual veteran once  per fiscal year by identifying the number of unique Social Security numbers present in each fiscal  year’s fee basis data. Utilization totals in this figure have been rounded to the nearest thousand  veterans.
In addition, fee basis care spending and utilization also varied by fee  basis care category. (See app. I for more information.)
section_title: Outpatient Services Accounted for the Majority of VA Fee Basis Care Spending and Utilization from Fiscal Year 2008 through Fiscal Year 2012
paragraphs: VA spent about $11.22 billion on outpatient fee basis care and about  $9.07 billion on inpatient fee basis care from fiscal year 2008 through  fiscal year 2012. During this 5-year period, inpatient fee basis care  spending increased steadily from about $1.41 billion in fiscal year 2008 to  about $2.15 billion in fiscal year 2012, while outpatient fee basis care  spending declined in fiscal year 2012. As a result, by fiscal year 2012, the  difference in inpatient and outpatient fee basis care spending was only  about $180 million, compared to a $590 million disparity in fiscal year  2011 when outpatient fee basis care spending was at its highest level.  (See fig. 6.)
Significantly more veterans received care from outpatient fee basis care  providers than from inpatient fee basis care providers. Specifically, from  fiscal year 2008 through fiscal year 2012, a total of about 2.35 million  unique veterans received care from outpatient fee basis providers and a  total of about 472,000 unique veterans received care from inpatient fee  basis providers. (See fig. 7.)
Preauthorized fee basis care accounted for the majority of outpatient fee  basis spending and utilization from fiscal year 2008 through fiscal year  2012—about $7.36 billion and about 80 percent of unique veterans  receiving outpatient fee basis care. VA spent the least on outpatient fee  basis care for compensation and pension exams and emergency care for  service-connected veterans. In addition, preauthorized fee basis care  accounted for the majority of inpatient fee basis care spending from fiscal  year 2008 through fiscal year 2012. Preauthorized inpatient fee basis  care accounted for about $4.60 billion and about 57 percent of unique  veterans receiving inpatient fee basis care. VA spent the least on  inpatient fee basis care associated with emergency care for service- connected veterans. (See App. II.)
section_title: Three Main Factors Influence Fee Basis Care Utilization, and VAMCs Reviewed Used Several Methods to Reduce Fee Basis Spending and Utilization
paragraphs: During our review of six VAMCs, we identified three common factors that  affected these facilities’ utilization of fee basis care—clinical service  availability, veteran travel distances, and VA wait time goals. In addition,  officials from the six VAMCs reported several methods they use to reduce  either the cost of referring veterans to fee basis providers or the number  of veterans their facilities refer to fee basis providers.
subsections: section_title: Limited Availability of Clinical Services, Veteran Travel Distances, and Wait Times Goals Influence Fee Basis Care Utilization
subsections: section_title: Limited Availability of Clinical Services
paragraphs: VAMCs have limitations on the services they can offer due to a variety of  factors, including the size of their facilities and the types of providers they  can recruit, which can affect fee basis care utilization. VA officials from  the six VAMCs we examined reported that the types of clinical services  offered at their facilities affected veterans’ utilization of fee basis care. For  example, officials from the Alexandria VAMC explained that their facility  does not meet VA’s requirements for providing orthopedic surgery  services to veterans and does not provide these services. As a result,  they refer veterans who need these services to fee basis providers.  Similarly, officials from the Biloxi VAMC explained that they do not have  the ability to offer radiation therapy for cancer treatment at their medical  center. As a result, they refer veterans who need radiation therapy to fee  basis providers and reported that their VAMC has little control over  increases in fee basis spending for these services.
In some cases, a VAMC may not be able to provide some services to  veterans because they do not have the right mix of clinical specialists to  accommodate complications that may arise during surgery. For example,  for a VAMC to offer joint replacement surgery, the facility must be  equipped with an orthopedic specialist capable of performing the surgery  and a number of additional providers to assist in the event of an  emergency complication during surgery. For joint replacement surgeries,  these additional providers include a thoracic surgeon and a neurologist  who both must be available within 15 minutes by phone or 60 minutes in  person, if needed. If these criteria for additional providers are not met, the  VAMC is not authorized to perform joint replacement surgeries even if the  VAMC has an orthopedic specialist capable of performing the surgery.  When VAMCs are unable to provide services due to these requirements,  they may rely on fee basis care to obtain these services for veterans.
In other cases, VAMCs are unable to recruit specialists and as a result  cannot offer some clinical services to veterans. When such recruiting  challenges arise, VAMCs may rely on fee basis care to ensure veterans  can receive medical services. For example, officials from the Las Vegas  VAMC explained that they have difficulty recruiting several types of  specialists—including vascular surgeons, pulmonologists, and  gastroenterologists. These officials explained that they are exploring ways  to provide relocation incentives to help recruit specialists; however, they  noted recruiting is difficult because recent medical school graduates often  want the opportunity to conduct medical research in addition to patient  care and the Las Vegas VAMC does not have a research program.
The distance that veterans have to travel to receive medical care is also a  critical factor influencing whether they are treated in VAMCs or referred to  fee basis providers. Traveling long distances for medical care is often  impractical for veterans, particularly those receiving ongoing outpatient  medical care, such as dialysis or radiation therapy for cancer. The  decision about whether a veteran can physically tolerate the travel to a  VAMC or should be referred to a fee basis provider in the community is a  clinical judgment VA providers make in consultation with VAMC fee basis  care unit staff. Officials from all six of the VAMCs we reviewed reported  that utilization of fee basis care was affected by the distance that veterans  must travel to receive VAMC-based care. For example, the Biloxi VAMC  serves veterans from four states along the Gulf Coast, including many  who live more than 300 miles from the facility. Officials from the Biloxi  VAMC explained that the significant travel distance that some veterans  face when traveling from their homes to the VAMC for care is  burdensome and may not be appropriate for all veterans. As a result,  these officials said that their VAMC frequently refers veterans to fee basis  providers within the veterans’ own communities to reduce this burden.  Similarly, officials from the Alexandria VAMC explained that many times  they also refer veterans to fee basis providers in veterans’ own  communities to lessen the travel burden.
Another related factor that can increase fee basis utilization involves  whether veterans referred to fee basis providers are eligible for  reimbursement for travel costs through VA’s beneficiary travel program.  VA’s beneficiary travel program reimburses eligible veterans for travel  from their home to either their primary VAMC, another VAMC, or to a fee  basis provider that can provide the care they need. Under VA’s  beneficiary travel program regulations, veterans are eligible for travel  reimbursement only if they meet one of several criteria—including having  a service-connected disability rating of 30 percent or more, or an annual  income below a specified threshold. Therefore, veterans who do not  meet these criteria cannot receive reimbursement for travel costs to  another VAMC for treatment. Under these circumstances, veterans may  see a fee basis provider closer to their residences, according to VA  officials, even though fee basis care may cost VA considerably more than  the cost of treatment in a VAMC. The Secretary of Veterans Affairs has  authority under the beneficiary travel authorizing statute to provide travel  reimbursement to additional categories of veterans. However, VAMCs  only have the authority to reimburse veterans who meet the eligibility  requirements of the beneficiary travel program as outlined in VA  regulations. In order to allow VAMCs to reimburse additional veterans  for travel, VA would need to revise its regulations to include additional  categories of veterans.
Officials from one VAMC and a few VISNs we reviewed told us they often  send veterans who are not eligible for travel reimbursement to fee basis  providers instead of referring them to other VAMCs that can provide the  care because VA cannot compensate them for their travel to another VA  facility. For example, officials from the Biloxi VAMC explained that the  Houston VAMC is able to provide veterans with high-quality interventional  cardiology services, such as cardiac catheterization and cardiothoracic  surgery, which are not available at the Biloxi VAMC. However, if a veteran  is not eligible for beneficiary travel, the Biloxi VAMC will refer them to a  fee basis provider to lessen the financial burden on the veteran even  though, in some cases, care from a fee basis provider may cost the Biloxi  VAMC $30,000 to $40,000 more than if the veteran were treated at the  Houston VAMC. Biloxi VAMC officials said that they have asked their  VISN to allow them to reimburse additional veterans for travel to the  Houston VAMC for services that facility can provide, but they were  informed that VA’s beneficiary travel regulations do not permit them to  offer travel reimbursements to veterans not eligible for beneficiary travel  benefits.
As part of the fee basis preauthorization process, VAMC or VISN officials  do not evaluate whether it would be less expensive to send veterans to  another VAMC for treatment rather than sending them to a fee basis  provider. In requesting authorization for a veteran to see a fee basis  provider, VAMC providers do not currently include information on the  likely costs of the fee basis care.
VA’s policy for determining the desired appointment date is unclear. A veteran’s desired  appointment date is the date on which the patient or provider wants the patient to be seen.  In the case of a veteran new to the system, the desired appointment date should be  determined based on the veteran’s preferred appointment date. See GAO, VA Health  Care: Reliability of Reported Outpatient Medical Appointment Wait Times and Scheduling  Oversight Need Improvement, GAO-13-130 (Washington, D.C.: Dec. 21, 2012). awarded each fiscal year.developing these performance contracts, wait times for care received  from fee basis providers are excluded from these performance measures  and VISN and VAMC directors’ performance contracts do not include  specific goals for wait times for fee basis care.
According to VA officials responsible for  VA officials from all six VAMCs we reviewed reported that they routinely  refer veterans to fee basis providers to help ensure that veterans receive  timely care and that their facilities meet performance goals for wait times  for VAMC-based care. For example, Biloxi VAMC officials said they refer  veterans to fee basis providers to avoid having longer wait times for  veterans in VAMC-based clinics that would cause the Biloxi VAMC to fall  short of its performance goal for VAMC-based care wait times. Similarly,  officials from the Alexandria VAMC explained that their medical center  sends veterans to fee basis providers solely to meet the wait time goals  for the VAMC. They said that veterans needing treatment in several  specialties—including audiology, cardiology, and ophthalmology—are  referred to fee basis providers to help the Alexandria VAMC meet its  goals for VAMC-based clinic wait times.
While serving veterans in a timely way is important and sending them to  fee basis providers may provide veterans more timely service, VA does  not track how long it takes veterans to be seen by fee basis providers at   For example, officials from the Alexandria VAMC explained  all VAMCs.that they often refer veterans to fee basis providers when the Alexandria  VAMC’s wait times are too long, but fee basis providers in their  community also face capacity limitations and may not be able to schedule  appointments for veterans any sooner than the VAMC-based provider.  Since VA does not require all VAMCs to track wait times for fee basis  providers, little is known about how often veterans’ wait times for fee  basis care appointments exceed VAMC-based appointment wait time  goals. Because VA has no data on wait times for veterans treated by fee  basis providers, it is not possible to determine if veterans are receiving  comparable access to fee basis providers as veterans receiving care from  VAMC-based providers.
section_title: VAMC Officials Reported Three Areas with the Potential to Reduce Fee Basis Spending and Utilization
subsections: section_title: Expanding VAMC Capacity
paragraphs: Efforts to provide either increased capacity or additional VAMC-based  health care services have helped VAMCs reduce their utilization of fee  basis care, according to officials from all six VAMCs we reviewed. For  example, Durham VAMC officials explained that they recently completed  an operating room expansion at their facility, which has allowed them to  bring more surgical services back into the VAMC and reduce their  reliance on fee basis surgical services. These officials also said that the  Durham VAMC is preparing to expand its inpatient psychiatric unit by  adding six additional inpatient beds, which will reduce their reliance on  fee basis providers for treating veterans when VAMC-based psychiatric  beds are at capacity. Durham VAMC officials reported that the operating  room expansion saves an estimated $18 million annually and the  additional six VAMC-based psychiatric unit beds saves the facility an  estimated $3.4 million annually. In another case, Biloxi VAMC officials  reported that in 2010 they reduced their reliance on fee basis providers  for pulmonary function tests by purchasing additional equipment and  hiring an additional technician to increase the VAMC-based capacity to  provide these tests. As a result, officials have seen a drop in the number  of veterans referred to fee basis providers for this service and fee basis  costs for pulmonary function tests decreased by about $112,000 between  fiscal years 2010 and 2012.
Such expansions require a careful analysis of the benefits and costs of  the expansion. Before a VAMC expands its capacity, VA requires VAMCs  to develop a business case for the expansion as part of VA’s annual  consideration of capital investments. These business cases must  address several elements—including a financial analysis and safety  issues. For example, Durham VAMC officials explained that to make  these decisions about expanding its operating room and inpatient  psychiatric bed capacity they reviewed weekly fee basis reports that  included cost and volume information on the most common services that  their VAMC provided through fee basis care and used these reports to  make decisions about which Durham VAMC-based services should be  expanded.
However, some VAMC officials noted that it may not always be more cost  effective for VAMCs to provide these services. For example, officials from  the Salisbury VAMC explained that they planned to build a VAMC-based  dialysis unit to reduce the number of veterans they referred to fee basis  providers for dialysis treatments. However, when they compared the cost  of building a dialysis unit to the cost of providing veterans dialysis  treatments through fee basis providers, they determined that fee basis  care was as cost-effective as building a dialysis unit.
DOD medical facilities colocated with nearby VAMCs offer an alternative  to veterans receiving care from more costly community-based fee basis  providers. Currently, VA and DOD have a policy that allows the  departments to charge one another at least 10 percent less for clinical  services than they would in locations without sharing agreements. As of  June 2012, there are nearly 200 active sharing agreements in place  between VA and DOD that range in complexity and scope from sharing a  single service to agreements that govern the sharing of multiple  services.
Two of the six VAMCs we reviewed—located in Las Vegas and Biloxi— share resources with neighboring DOD health care facilities to provide  lower-cost care to veterans. The Las Vegas VAMC has a sharing  agreement with Nellis Air Force Base for some health care services,  including cardiac and radiation oncology services. Similarly, the Biloxi  VAMC has several sharing agreements with Air Force and Navy medical  facilities along the Gulf Coast for some health care services. Officials from  both these VAMCs reported that they refer veterans to these DOD  facilities before sending them to fee basis providers in the community  because the reimbursement rate for services provided in DOD medical  facilities is lower than the Medicare rates used to reimburse fee basis  providers. Officials from both the Las Vegas and Biloxi VAMCs explained  that they first explore whether care is available through sharing  agreements with nearby DOD medical facilities before referring the  veterans to fee basis providers.
Another critical factor affecting fee basis care spending and utilization is  the timely transfer of veterans receiving inpatient care from fee basis  providers back to VAMC-based care. This is particularly relevant  because, as we discussed earlier, VA has spent almost $1.3 billion over  the last 5 years on emergency inpatient services for veterans through the  Millennium Act and about $4.6 billion on preauthorized inpatient fee basis  care. (See app. II.) As a result, it is important that VAMC staff closely  monitor the conditions of veterans receiving inpatient care from fee basis  providers to ensure that they are transferred to VAMCs once their  conditions stabilize. Officials from all six VAMCs we examined reported  that transferring veterans being treated by fee basis providers back to  VAMC-based care when appropriate can be a way of reducing the cost of  inpatient fee basis care. According to officials at two VAMCs, this is  because VAMC inpatient bed capacity limitations that required a veteran  to be referred to an inpatient fee basis provider can change during the  course of a veteran’s hospital stay in non-VA facilities.
While officials from all six VAMCs we reviewed noted that transferring  veterans back to inpatient VAMC-based care can help reduce fee basis  utilization and spending, we found some VAMCs have more robust  monitoring methods than other VAMCs for tracking veterans being treated  by fee basis providers through their utilization management programs.  Specifically, we found the following:
Three of the VAMCs we reviewed had a more formal approach that  was integrated with their utilization management programs to actively  identify circumstances when veterans being treated as inpatients by  fee basis providers could return to the VAMC to complete their  inpatient care. For example, the Salisbury VAMC has a transfer  coordinator program specifically designated to actively identify such  circumstances. The Salisbury VAMC employs a nurse case manager  who visits veterans during their inpatient stays with fee basis  providers and identifies changes in veterans’ conditions that will allow  them to return to the VAMC, and coordinates veterans’ transitions  back into VAMC-based care. According to Salisbury VAMC officials,  this program has allowed them to transfer veterans back to the VAMC  to complete their care once the veterans’ conditions have stabilized.
In contrast, the other three VAMCs we reviewed had a more passive  approach that was limited to tracking veterans’ progress through  information given to them by the veterans’ inpatient fee basis  providers. For example, the Alexandria VAMC’s transfer coordinator  monitors veterans’ inpatient fee basis care; however, this information  is rarely used to transfer veterans back to the VAMC to complete their  treatment.
Although ensuring that VAMCs are incorporating fee basis care into their  utilization management programs would enable VA to more efficiently  identify when opportunities exist for some veterans to be transferred back  to lower-cost VAMC-based care, VA does not currently require all VAMCs  to conduct such review. Specifically, VA’s current utilization  management policy does not require VAMCs to incorporate reviews of  inpatient fee basis care into their VAMC-based utilization management  programs.how to most effectively track veterans receiving inpatient care from fee  basis providers, which has allowed VAMC programs to take a variety of  forms. Ultimately, without guidance and standardized procedures  provided by VA Central Office, some VAMCs may not be monitoring  veterans receiving inpatient care from fee basis providers in the   VA Central Office has not provided guidance to all VAMCs on  community closely enough to prevent prolonged and unnecessary stays  for veterans in inpatient fee basis care and may be missing other  opportunities to reduce fee basis care spending.
section_title: VA’s Processes for Overseeing the Fee Basis Care Program Lack Critical Data Needed to Effectively Track and Monitor Fee Basis Spending and Utilization
paragraphs: One of VHA CBO’s three primary methods for monitoring fee basis care  spending and utilization is its review of fee basis data. According to VHA  CBO officials, these reviews are primarily focused on examining fee basis  care utilization and spending—including VISN fee basis care utilization  and significant high-cost areas, such as dialysis treatment. Analysis of fee  basis data is an important aspect of monitoring that allows VHA CBO staff  to look for outliers in spending and utilization, mistakes in fee basis claims  data, potential lost opportunities to reduce spending and utilization, and to  assess more long-term considerations—such as adjusting the level of fee  basis care services or assessing potential areas for VAMC-based service  expansion. However, the usefulness of this monitoring method as an  oversight tool is significantly limited due to the way fee basis data are  collected and reported to the VHA CBO.
Currently, VA’s data system collects claims data for each individual  service provided by a fee basis provider—such as the physician’s time,  surgical procedures, hospital rooms, and laboratory tests—rather than the  total cost of a veteran’s office visit or inpatient stay. VA’s current data  system cannot group these individual services by episode of care—a  combined total of all care provided to a veteran during a single office visit  or inpatient stay. For example, during an office visit to an orthopedic  surgeon for a joint replacement evaluation, an X-ray for the affected joint  may be ordered, the veteran may be given a blood test, and the veteran  may receive a physical evaluation from the orthopedic surgeon. The fee  basis provider would submit a bill to VA for the office visit and separate  bills would be submitted by the radiologist that X-rayed the affected joint  and the lab that performed the veteran’s blood test. Each of these bills  would include charges under different medical billing codes. The VISN  or VAMC-based fee basis clerk processing this claim would record these  charges in VA’s basis claims processing software and request payment  for these fee basis providers. However, the fee basis data system used  by VHA CBO to review these payments would not be able to link the  charges for these three treatments together as a single episode of care  for this veteran’s office visit with an orthopedic surgeon.
Not being able to group charges from fee basis providers by episode of  care has the following disadvantages in terms of monitoring fee basis  care and potentially reducing costs:
Monitoring challenges. From a monitoring perspective, not having  data by episode of care prevents VA from efficiently identifying areas  of utilization growth or unusually high spending. For example, VA- wide episode of care monitoring would allow VHA CBO to assess  whether opportunities for strategic expansion of VAMC-based  services—such as the Durham VAMC operating room expansion and  the Biloxi VAMC addition of pulmonary function test equipment  mentioned earlier—would be possible in more VAMCs. Episode of  care monitoring would more effectively allow VA to make more  consistent strategic decisions about such service expansions.
Cost analysis limitations. From a cost perspective, not having fee  basis data on an episode of care basis prevents VA from efficiently  assessing whether fee basis providers were reimbursed appropriately.  Without the ability to monitor fee basis spending by episodes of care,  VHA CBO cannot conduct retrospective reviews of VISN and VAMC  claims to determine if the appropriate rate was applied for the care  provided by fee basis providers. For example, VHA CBO staff cannot  verify that fee basis care that should be paid using Medicare  “bundled” reimbursement rates were in fact paid using these bundled  rates because all individual charges from a veteran’s episode of care  cannot be reliably linked. Since VA uses Medicare rates to reimburse  fee basis providers for most services, VAMCs and VISNs, like  Medicare, use bundled reimbursement rates for some procedures that  provide a single payment for closely related services in some cases.  Bundled rates are designed to give providers an incentive to furnish  care more efficiently as providers retain the difference if the bundled  payment exceeds the cost of care.incentive for delivering care more efficiently by making providers  accountable if a patient’s treatment costs exceeded the bundled rate.
Bundled rates provide a financial  To effectively conduct these retrospective reviews, VHA CBO would need  to change its claims processing methods and ensure that the VISN or  VAMC fee basis clerks processing each provider’s claims assign a claim  number to each payment made to a fee basis provider for an episode of  care. This claim number would serve as a linkage among the individual  service line items in VA’s fee basis data system and allow VHA CBO to  group together all payments made for a single episode of care and  assess the total cost of that episode of care.
section_title: VA Is Currently Implementing a Short- Term Corrective Action Plan for the Fee Basis Care Program, but Longer- Term Strategy Is Still in Development
paragraphs: In September 2012, VA outlined both short- and long-term plans for  improving the fee basis care program following problems highlighted by  several OIG audits and a recent congressional hearing. The short-term  corrective action plan is made up of a series of tasks to be completed in  fiscal year 2013 across six key areas—(1) foundational activities,   (2) achieving a sustainable decrease in fee basis care improper  payments, (3) recovery and recapture of fee basis care overpayments,   (4) building a culture of accountability within the fee basis care program,  (5) enhancing internal controls and data integrity, and (6) training and  educating VISNs and VAMCs.
We found that VA has taken a number of steps to better ensure the  completion of its short-term corrective action plan in fiscal year 2013.  Specifically, VA has identified clear leadership for tasks, created teams to  accomplish tasks that include representatives from across VA operations,  sought the input of internal stakeholders—such as VISN and VAMC fee  basis unit staff—and external stakeholders—including the VA OIG, set  clear target dates for the completion of tasks, and identified methods for  assessing whether or not tasks had the desired effect on the fee basis  care program. While it is still too early to determine if the efforts included  in the short-term corrective action plan will produce meaningful  improvements in the fee basis care program, it represents an important  first step in increasing accountability for the outcomes of the fee basis  care program. (See table 1.)
VA is also in the process of developing a long-term strategy for improving  its fee basis care program. This long-term strategy includes efforts to  develop and implement a new organizational structure for the fee basis  care program, consolidate claims processing functions in fewer locations,  develop comprehensive guidance for the fee basis care program,  implement a new competency-based personnel model, and implement  new claims processing software efforts. To date, progress on the  development of this long-term strategy has been limited to the  development of new claims processing software and initial discussions of  the new organizational structure. In February 2013, VA officials told us  that the long-term strategy is still in development.
section_title: Conclusions
paragraphs: VA’s fee basis care program is a critical means for providing accessible  health care to veterans. VA has acknowledged that fee basis care is a  necessary tool for veterans when a VAMC does not have an available  clinical specialist or when veterans face long travel distances to obtain  care from VAMC-based providers. VA has also made concerted efforts in  recent years to improve the fee basis care program by implementing a  number of initiatives designed to improve the program—including new  software packages for VISN and VAMC fee basis claims processing units,  a new care coordination program, and initiating a program to better  coordinate with fee basis providers.
Moving forward, we believe it is critical that VA address four areas as  potential ways to more effectively manage and monitor the fee basis care  program. First, veterans’ eligibility for travel reimbursement may affect  whether they are referred to fee basis care or to another VAMC. Some  veterans who qualify for travel reimbursement under VA’s beneficiary  travel program might elect to seek care at another VAMC without  incurring personal travel expenses in lieu of being treated by a fee basis  provider. In some cases, this could result in VA paying less for their care  than it would if the veteran were treated through the fee basis care  program. Should the Secretary of Veterans Affairs exercise his ability to  revise the beneficiary travel eligibility requirements to allow for the use of  beneficiary travel in cases where it is both more cost-effective for VA and  in the veteran’s best interest to receive care at another VAMC instead of  a fee basis provider, it could be possible to lower overall fee basis care  utilization and spending. In addition, VA does not currently require  VAMCs to assess either the cost-effectiveness of reimbursing veterans  for travel to another VAMC when determining whether to preauthorize fee  basis care in veterans’ local communities.
Second, VA should better manage fee basis care wait times and costs.  VA currently does not include fee basis care wait times in the measures it  uses to assess VISN and VAMC directors’ performance and does not  track the amount of time veterans wait to see a fee basis provider. As a  result, the VAMCs we reviewed are referring veterans to fee basis  providers to ensure they meet the wait time performance goals for VAMC- based clinics. Having data on wait times for veterans referred to fee basis  providers would help VA better determine if veterans are receiving  comparable access to fee basis providers and VAMC-based providers.
Third, VA may be missing an opportunity to reduce the cost of inpatient  fee basis care by not requiring VAMC-based utilization management  programs designed to regularly assess VAMC capacity to consider  veterans being treated by non-VA inpatient fee basis providers.  Incorporating veterans treated by non-VA inpatient fee basis providers  into ongoing VAMC utilization management programs would allow  VAMCs to identify situations when they no longer have capacity  limitations and can complete a veteran’s treatment in-house at a lower  cost than the fee basis provider.
Finally, VA can also improve its capability to more effectively monitor the  fee basis care program. VA Central Office’s monitoring efforts are limited  by the inability to analyze fee basis care data by episode of care.  Because information that would allow VA to pull together all services with  a single office visit or inpatient stay is not available, VA Central Office  cannot effectively monitor the payments made by fee basis care units or  ensure that fee basis providers are billing VA appropriately for care.
section_title: Recommendations for Executive Action
paragraphs: To effectively manage fee basis care spending, we recommend that the  Secretary of Veterans Affairs take the following action:
Revise the beneficiary travel eligibility regulations to allow for the  reimbursement of travel expenses for veterans to another VAMC to  receive needed medical care when it is more cost-effective and  appropriate for the veteran than seeking similar care from a fee basis  provider.
To effectively manage fee basis care wait times and spending, we  recommend that the Secretary of Veterans Affairs direct the Under  Secretary for Health to take the following three actions:
Require during the fee basis authorization process that VA providers  and fee basis officials determine the cost-effectiveness of reimbursing  medically stable veterans eligible for beneficiary travel for travel to  another VAMC rather than referring them to a fee basis provider for  similar care.
Analyze the amount of time veterans wait to see fee basis providers  and apply the same wait time goals to fee basis care that are used as  VAMC-based wait time performance measures.
Establish guidance for VAMCs that specifies how fee basis care  should be incorporated with other VAMC utilization management  efforts.
To ensure that VA Central Office effectively monitors fee basis care, we  recommend that the Secretary of Veterans Affairs direct the Under  Secretary for Health to take the following action:
Ensure that fee basis data include a claim number that will allow for  VA Central Office to analyze the episode of care costs for fee basis  care.
section_title: Agency Comments and Our Evaluation
paragraphs: VA provided written comments on a draft of this report, which we have  reprinted in appendix III. In its comments, VA generally agreed with our  conclusions, concurred with our five recommendations, and described the  agency’s plans to implement each of our recommendations. VA also  provided technical comments, which we have incorporated as  appropriate.
In its plan, VA stated that to address our first recommendation, VHA CBO  will consider including provisions related to veterans’ travel  reimbursement to another VAMC to receive needed medical care when it  is more cost-effective and appropriate during a planned upcoming  revision to the agency’s beneficiary travel regulations.
To address our second recommendation, VA noted that it is working to  revise procedures for both its new fee basis care administration model,  referred to as Non-VA Care Coordination, and the beneficiary travel  program to ensure that the cost-effectiveness of a veterans’ travel to  another VAMC or to a non-VA care provider is reviewed as part of the  authorization of fee basis care and is included in standard operating  procedures and training.
To address our third recommendation, VA noted that VHA CBO is  completing requirements for a national consolidated monthly wait time  indicator to measure performance for fee basis care referrals. However,  VA did not acknowledge whether or not the wait time indicators used in  this monthly indicator would be the same as those used for VAMC-based  care, as we recommended. We support VA’s decision to set wait time  goals for fee basis care, but we believe the agency should ensure that  wait time goals used for fee basis care are the same as those applied to  VAMC-based care.
To address our fourth recommendation, VA stated that the new fee basis  care administration model, Non-VA Care Coordination, includes a  template for managing information transfers from non-VA providers to VA  staff that will support the utilization management practices of VAMCs. We  support VA’s efforts to standardize this information exchange in its fee  basis care administration practices, but encourage the agency to also  clarify its utilization management policies to ensure that VAMC utilization  management staff regularly coordinate with VAMC fee basis management  staff to receive this information from non-VA providers.
Finally, to address our fifth recommendation, VA noted that the agency  agrees that analyzing episode of care costs is an important part of the  agency’s fee basis monitoring activities. VA outlined its plan to analyze  existing data systems and determine the most cost-effective method for  monitoring episode of care costs.
We are sending copies of this report to the Secretary of Veterans Affairs,  the Under Secretary for Health, appropriate congressional committees,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or at williamsonr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV.
section_title: Appendix I: VA Spending and Utilization by Fee Basis Care Category
paragraphs: This appendix provides additional results from our analysis of Department  of Veterans Affairs (VA) fee basis data from fiscal years 2008 through  2012. Specifically, the table below provides additional information on how  much VA spent on fee basis care and how many unique veterans  received care from fee basis providers by fee basis care categories.
section_title: Appendix II: VA Outpatient and Inpatient Spending and Utilization by Fee Basis Care Category
paragraphs: This appendix provides additional results from our analysis of Department  of Veterans Affairs (VA) fee basis data from fiscal years 2008 through  2012.
Table 3 provides additional information on how much VA spent on  outpatient fee basis care and how many unique veterans received  care from outpatient fee basis providers by fee basis care categories.
Table 4 provides additional information on how much VA spent on  inpatient fee basis care and how many unique veterans received care  from inpatient fee basis providers by fee basis care categories.
section_title: Appendix III: Comments from the Department of Veterans Affairs
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Marcia A. Mann, Assistant  Director; Kathleen Diamond; Krister Friday; Katherine Nicole Laubacher;  Daniel K. Lee; Lisa Motley; Rebecca Rust Williamson; and Malissa G.  Winograd made key contributions to this report.