VA Medical Centers: Further Operational Improvements Could Enhance Third-Party Collections
Published: 2004-07-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In the face of growing demand for veterans' health care, GAO and the Department of Veterans Affairs Office of Inspector General (OIG) have raised concerns about the Veterans Health Administration's (VHA) ability to maximize its third-party collections to supplement its medical care appropriation. GAO has testified that inadequate patient intake procedures, insufficient documentation by physicians, a shortage of qualified billing coders, and insufficient automation diminished VA's collections. In turn, the OIG reported that VA missed opportunities to bill, had billing backlogs, and did inadequate follow-up on bills. While VA has made improvements in these areas, GAO was asked to review internal control activities over third-party billings and collections at selected medical centers to assess whether they were designed and implemented effectively.
section_title: What GAO Found
paragraphs: VA has continued to take actions to reduce billing times and increase third-party collections. Collections of third-party payments have increased from $540 million in fiscal year 2001 to $804 million in fiscal year 2003. However, at the three medical centers visited, GAO found continuing weaknesses in the billings and collections processes that impair VA's ability to maximize the amount of dollars paid by third-party insurance companies. For example, the three medical centers did not always bill insurance companies in a timely manner. Medical center officials stated that inability to verify and update patients' third-party insurance, inadequate documentation to support billings, manual processes and workload continued to affect billing timeliness. The detailed audit work at the three facilities GAO visited also revealed inconsistent compliance with follow-up procedures for collections. For example, collections were not always pursued in a timely manner and partial payments were accepted as payments in full, particularly for Medicare secondary insurance companies, rather than pursuing additional collections. VA's current Revenue Action Plan (Plan) includes 16 actions designed to increase collections by improving and standardizing collections processes. Several of these actions are aimed at reducing billing times and backlogs. Specifically, medical centers are updating and verifying patients' insurance information and improving health care provider documentation. Further, hiring contractors to code and bill old cases is reducing backlogs. In addition to actions taken, VA has several other initiatives underway. For example, VA is taking action to enable Medicare secondary insurance companies to determine the correct reimbursement amount, which will strengthen VA's position to follow up on partial payments that it deems incorrect. Although implementation of the Plan could improve VA's operations and increase collections, many of its actions will not be completed until at least fiscal year 2005. As a result, it is too early to determine the extent to which actions in the Plan will address operational problems and increase collections.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) provides health care to eligible  veterans through medical facilities managed by its Veterans Health  Administration (VHA).  Under certain circumstances, VA is authorized to  collect reasonable charges from veterans’ health insurance companies to  offset the cost of medical care and medications for treatment of  nonservice-connected conditions.  Specifically, VA may bill insurance  companies for treatment of conditions that are not a result of injuries or  illnesses incurred or aggravated during military service. VA is not  authorized to bill for health care conditions that result from military  service, nor is it generally authorized to collect from Medicare and  Medicaid.  In fiscal year 2003, VA collected $804 million in insurance  payments, also known as third-party collections.  These collections  provided VA the largest source of revenue to supplement its $25 billion  medical care appropriation in fiscal year 2003, and they helped pay for  costs associated with growing health care demands for veterans.
Over the past several years, we and the VA Office of the Inspector General  (OIG) have raised concerns about VA’s ability to maximize its third-party  collections to enhance revenue.  In September 2001, we testified that  problems in VA’s collection operations—such as inadequate patient intake  procedures to gather insurance information, insufficient physician  documentation of the specific care provided, a shortage of qualified coders,  and insufficient automation—diminished VA’s collections.  In February  2002, the VA OIG reported that VA missed billing opportunities, had billing  backlogs, and did inadequate follow-up on accounts receivable in fiscal  years 2000 and 2001.  In May 2003 we testified that VA had made  improvements in these areas but that operational problems, such as unpaid  accounts receivable, missed billing opportunities, and billing backlogs  continued to limit the amount VA collects.
In conjunction with this revenue-enhancing responsibility, you asked us to  review internal control activities over third-party billings and collections at  selected VHA medical centers to assess whether internal controls are now  designed and implemented effectively.
To gain an understanding of VHA’s policies and procedures and the related  internal controls and to assess the design effectiveness of those controls,  we obtained and reviewed VA and VHA directives, handbooks, and other  policy guidance, and previous reports issued by VA’s OIG.  We also  conducted interviews and walkthroughs with VHA personnel and reviewed  our previous reports.  To assess whether key control activities for billings  and collections were effectively implemented, we used a case study  approach, reviewing transaction documentation at three VA medical  centers.  We conducted our review from March 2004 through June 2004 in  accordance with U.S. generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: The Veterans’ Health Care Eligibility Reform Act of 1996 authorized VA to  provide certain medical services not previously available to veterans with  non-service connected conditions.  The Balanced Budget Act of 1997  authorized VA to use third-party health insurance payments to supplement  its medical care appropriations. As part of VA’s 1997 strategic plan, VA  expected that collections from third-party payments and co-payments  would cover the majority of costs of care for these veterans, some of which  VA has determined to have higher incomes. For fiscal year 2002, about a  quarter of VA’s user population were higher income veterans.
In September 1999, VA adopted a new fee schedule, called “reasonable  charges,” which are itemized fees based on diagnoses and procedures.   This schedule allows VA to more accurately bill for the care provided.  By  linking charges to the care provided, VA created new bill-processing  demands—particularly in the areas of documenting care, coding that care,  and processing bills per episode of care.  First, VA must be prepared to  provide the insurance company with supporting medical documentation  for itemized charges. Second, VA must accurately assign medical diagnoses  and procedure codes to set appropriate charges, a task that requires coders  to search through medical documentation and various databases to identify  all billable care.  Third, VA must prepare a separate bill for each health care  provider involved in the patient’s care and an additional bill when a hospital  facility charge applies.
To collect from health insurance companies, VA uses a four function  process to manage the information needed to bill and collect third-party  payments—also known as the Medical Care Collection Fund (MCCF)  Revenue Cycle (see fig. 1).  First, the patient intake function involves  gathering insurance information and verifying that information with the  insurance company as well as collecting demographic data on the veteran.   Second, utilization review involves precertification of care in compliance  with the veteran’s insurance policy, including continued stay reviews to  determine medical necessity.  Third, billing functions involve properly  documenting the health care provided to patients by physicians and other  health care providers.  Based on the physician documentation, the  diagnoses and medical procedures performed are coded. VA then creates  and sends bills to insurance companies based on the insurance and coding  information obtained.  And fourth, the collections or accounts receivable  function includes processing payments from insurance companies and  following up on outstanding or denied bills.
As discussed in prior OIG and GAO reports, reasons for untimely third- party billings were heavy caseloads and backlogs for cases to be coded.  VA  was unprepared to bill under reasonable charges initially in fiscal year  2000, particularly because of its lack of proficiency in developing medical  documentation and coding to appropriately support a bill.  As a result, VA  reported that many of its medical centers developed billing backlogs.
In January 2003, we reported that after initially being unprepared in fiscal  year 2000 to bill reasonable charges, VA began improving its  implementation of the processes necessary to increase its third-party  billings and collections.  In fiscal year 2002, VA submitted over 8 million  third-party insurance bills that constituted a 54 percent increase over the  number in fiscal year 2001. VA officials attributed increased third-party  billings to, among other reasons, reductions in billing backlogs and an  increasing number of patients with billable insurance.  We also reported  that collections could be increased by addressing operational problems  such as unpaid accounts receivable and missed billing opportunities due to  insufficient identification of insured patients, inadequate documentation to  support billings, coding problems, and billing backlogs.
To address these issues and further increase collections, VA has several  initiatives under way and is continuing to develop additional ones.  In  September 2001, VA introduced its Veterans Health Administration  Revenue Cycle Improvement Plan. This plan initially included 24 actions to  improve revenue performance.  After the establishment of the Chief  Business Office (CBO) in May 2002, VA issued the Revenue Action Plan  (Plan) that superceded the 2001 plan and includes 16 objectives.   With the  implementation of several actions in the Plan, VA has reported increases in  the number of billings.  For example, in fiscal year 2003, VA submitted 10  million bills, a 25 percent increase over the number of bills in fiscal year  2002 and a 160 percent increase over fiscal year 2000.  VA also reported that  its collections of third-party payments over the past few years continue to  increase as shown in figure 2.  For fiscal year 2003, VA reported that it  collected third-party payments of $804 million, a 6 percent increase over  the $760 million collected in 2002 and a 49 percent increase over the $540  million collected in fiscal year 2001.
section_title: Scope and Methodology
paragraphs: To gain an understanding of VHA’s policies and procedures and the related  internal controls for the billings and collections, to identify key control  activities, and to assess the design effectiveness of those controls, we  obtained and reviewed VA and VHA directives, handbooks, and other policy  guidance, and previous reports issued by VA’s OIG.  We also conducted  interviews and walkthroughs with VHA personnel and reviewed previous  GAO reports.  To assess whether key control activities for the two areas of  operation were effectively implemented, we used a case study approach,  reviewing transaction documentation at three VA medical centers. We  selected medical centers with varying success in meeting established  performance goals and other factors.  Because we used a case study  approach the results of our study cannot be projected beyond the  transactions we reviewed.
To determine whether key internal controls for billings were effectively  implemented, we discussed billing requirements and procedures with VHA  headquarters and medical center personnel.  Because billing records were  not in a usable format and time constraints did not permit us to put them in  a usable format, we could not select a statistical sample.  Instead, we made  a non-statistical selection of 30 patients from each of the three medical  center’s inpatient and outpatient billing records to perform tests to assess  compliance with policies and procedures and to determine the number of  days to bill third-party insurance companies.
To determine whether key internal controls for collections were effectively  implemented, we discussed requirements and procedures with VHA  headquarters and medical center personnel.  At each medical center we  visited, we used the same 30 patients chosen for our billing tests to also  assess compliance with accounts receivable policies and procedures,  including VA Handbook 4800.14, Medical Care Debts (Handbook) and the  Accounts Receivable Third-Party Guidebook.
We reviewed and used as guides, the Standards for Internal Control in the  Federal Government  and the Internal Control Management and  Evaluation Tool.  The Comptroller General issued these internal control  standards to provide the overall framework for establishing and  maintaining internal control. According to these standards, internal  control, also referred to as management control, comprises the plans,  methods and procedures used to meet the missions, goals, and objectives  of an organization. Internal control also serves as the first line of defense in  safeguarding assets and preventing and detecting errors and fraud.
We performed our work at VA medical centers in Cincinnati, Ohio; Tampa,  Florida; and Washington, D.C., and at the VHA’s Chief Business Office in  Washington, D.C.  We conducted our review from March 2004 through June  2004 in accordance with U.S. generally accepted government auditing  standards.
We requested comments on a draft of this report from the Secretary of  Veterans Affairs or his designee.  Written comments were received from the  Secretary of Veterans Affairs and are reprinted in appendix I.
section_title: Opportunities Exist for Improving Timeliness of Billings and Collection Activities
paragraphs: Although VA has decreased the number of days it takes to bill for patient  services and has increased its collections from third-party insurance  companies since 2000, problems remain.  At the three medical centers we  visited, we found continuing weaknesses in the billings and collections  processes that impair VA’s ability to maximize the amount of dollars paid by  third-party insurance companies.   For example, medical centers did not  always bill insurance companies in a timely manner.   According to medical  center officials, timeliness of billing is affected by, among other things,   (1) VA’s ability to verify and update a patient’s third-party insurance  information, (2) whether physicians and other health care providers  properly document the patient’s treatment so a bill can be coded  appropriately, (3) the extent of manual intervention to process the bill, and  (4) workload.  We believe that improvements could be made in each of  these areas.
Further, the three medical centers we visited did not always pursue  collections of accounts receivable in a timely manner or follow up on  certain partially paid claims.  Weaknesses in VA’s collection activities  hamper its ability to collect all monies due to the agency from third-party  insurance companies to pay for veterans’ growing demand for care.
VA’s current Plan to implement and sustain effective collections operations  is in process.  However, the Plan has not been fully implemented.  Therefore, it is too early to determine the extent to which it will address  operational problems and increase collections.
subsections: section_title: Operational Enhancements Could Improve Timeliness of Billings
paragraphs: While VA reported that it has decreased the average number of days it takes  to bill for patient services, we found that medical centers could further  improve billing timeliness by continuing to address operational problems  that slow down the process.  These operational problems include, among  other things, delays in verifying and updating patient insurance  information, incomplete or inaccurate documentation of patient care by  health care providers, manual intervention, and workload.  VA’s billing  process cuts across four functional areas, as shown in figure 3. Each phase  of the billing process is dependent on the completeness and accuracy of  information collected in the prior phases.  Breakdowns occurring during  any part of the process can affect the timeliness of billings.
VA’s policies and procedures do not specify the number of days for a bill to  be issued once health care services are rendered.  In fiscal year 2003, VA’s  Business Oversight Board established performance goals that were  incorporated into the network and medical directors’ performance  contracts.  The goal for sending a bill within a set number of days was  reduced periodically during fiscal year 2004.  During the time of our review,  the performance goal for billing third party insurance companies was an  average of 50 days from the date of patient discharge.  As of the end of the  first quarter of fiscal year 2004, the cumulative average days to bill third  parties for Tampa, Washington, D.C. and Cincinnati were 73, 69, and 44  respectively.
At each of the three medical centers visited, we made a non-representative  selection of 30 patients billed during the first quarter of fiscal year 2004.  In  evaluating the timeliness of billing, we used the then-in-effect performance  standard of 50 days after patient discharge.  We recognize that the  cumulative billing times for the 90 cases selected do not represent the  average days to bill, which VHA uses to measure each medical center’s  performance.  However, cases billed more than 50 days after patient  discharge are illustrative of problematic issues that can delay billings. For  the 90 cases selected, the number of days to bill at the three medical  centers we visited ranged from 5 to 332 days, with almost 30 percent billed  after 50 days.  A summary of our results is shown in table 1.
Promptly invoicing insurance companies for care provided is a sound  business practice and should result in improved cash flow for VA.   Officials  at each of the three medical centers cited verifying and updating patients’  third-party insurance information as a continuing impediment to billing  third-party insurance companies in a timely manner.  They told us that this  occurs because, among other reasons, some patients are reluctant to  provide insurance information for fear that their insurance premiums will  increase. Patients delay providing insurance information until well after  commencement of treatment, and patients do not always provide current  insurance information.  Thus, additional time is required to research and  verify the patients’ insurance coverage.
Medical center officials also told us that incomplete or inaccurate  documentation from health care providers continues to cause delays in  billing third parties.  If the coders do not have sufficient data from the  provider to support a bill, the coding process can be delayed, thus  hampering timely billing of third-party insurance companies.  Further,  without complete data on the actual health care services provided, the  coders may also miscode the treatment, which could result in lost revenue.
Another impediment to timely billing is that the billing process is not fully  automated and manual intervention is required.  For example, in certain  cases, the medical diagnosis is transcribed onto a worksheet to be used for  coding rather than being electronically transmitted.  Additionally, before  the coders can begin the coding process, they must first electronically  download the listing of potential billable patients. Then the coders review  the electronic medical records and assign diagnostic and procedure codes  before a bill is generated.  Further, due to system limitations, bills that  exceed a certain dollar amount or number of medical procedure codes  must be printed and mailed rather than transmitted electronically.  For  example, in Cincinnati bills greater than $100,000 or that have six or more  medical procedure codes must be processed in this manner.
Another contributing factor may be the workload levels at the medical  centers.  During the second quarter of fiscal year 2004, Cincinnati  submitted 45,883 bills and had a staff of 13 coders.  Concurrently, Tampa  submitted 192,407 bills and had 16 coders and Washington D.C.  issued  64,474 bills and had 8 coders.  VHA data indicated that Cincinnati’s average  billing time was under 50 days for the quarter and had the lowest bill to  coder ratio.  Conversely, Tampa and Washington, D.C. exceeded the 50-day  performance goal and had a much higher bill to coder ratio.  Assuming 60  workdays per quarter, we calculated the ratio of bills issued per day to the  number of coders as shown in table 2.
We recognize that other factors such as the number of billable encounters  per bill and coder productivity may affect the billing workload.  However,  given the wide diversity of the bill to coder ratios, staffing may also be a  contributing factor affecting days to code and issue bills.
section_title: VA’s Controls over Collections Need Strengthening
paragraphs: Weaknesses in collection activities hamper VA’s ability to collect all monies  due to the agency from third-party insurance companies for veterans’ care.   We found that the three medical centers we visited did not always pursue  collections of accounts receivable in a timely manner or follow up on  certain partially paid insurance claims.  These two factors could negatively  affect third-party collections.
subsections: section_title: Accounts Receivable Not Pursued in a Timely Manner
paragraphs: VA’s Handbook sets forth the requirements for collection of third-party  accounts receivables.  Also, in 2003, the VHA’s Chief Business Office  issued the Accounts Receivable Third-Party Guidebook that lays out more  detailed procedures.  Both documents require that once a claim has been  sent to the insurance company, staff should follow up on unpaid  reimbursable insurance cases as follows:  The first telephone follow-up is to be initiated within 30 days after the  initial bill is generated.  All telephone follow-ups are to be documented  to include, at a minimum, the name, position, title and telephone  number of the person contacted, the date of contact, appropriate second  follow-up date if payment is not received, and a brief summary of the  conversation.
A second telephone follow-up on unresolved outstanding receivables is  to be made on an appropriate (but unspecified) date and documented.
A third follow-up call is to be made within 14 days of the second contact  and documented with a summary of the conversation and an  appropriate, but not specified, follow-up date.
If no payment has been received by the next follow-up date, the case  may be referred by the MCCF Coordinator to regional counsel for  further action.
We tested compliance with these policies for the same 30 cases selected for  our billing tests at each of the three medical centers we visited.  Regarding  the first follow-up procedure, initial follow-up calls were made within 30  days for only 14, or about 22 percent, of the 64 cases for which billings had  not been collected within 30 days.
Second follow-up phone calls were not made in a timely manner either. We  considered 15 days after the initial follow-up of 30 days to be an  appropriate time frame since the third follow-up is to be made within 14  days after the second follow-up and cases are to be referred to collection  agencies after 60 days.  Delays in making second follow-up calls increase  the risk that payments will not be collected.  Within our selected cases, four  second follow-up calls were either made more than 15 days after the first  follow-up call or not at all.  These bills had not been paid within 120 days  after the bill was sent to the insurance company.
Both the first and second follow-up calls require that staff document the  contact’s name, title, telephone number, and expected follow-up date in the  official records.  However, we found that staff did not consistently do so.  For example, for the 14 cases where a follow-up call was made during the  first 30 days after the initial billing, only seven specified a follow-up date.   Entering a follow-up date would serve as a reminder to make the second  follow-up call. Further, we found that an unclear collection policy may have  contributed to VA’s untimely second follow-up efforts.  Specifically, VA’s  Handbook requires that second follow-up telephone calls on unresolved  outstanding receivables be made on an “appropriate date,” but that date is  not specified (i.e., the number of days elapsed since the first contact).   Specifying a follow-up date (i.e., 15 days after the first follow-up) or  providing criteria for selecting an appropriate follow-up date would clarify  this requirement and provide a benchmark on which compliance could be  measured.
Medical center officials at the three sites we visited told us that staff  shortages and a heavy workload contributed to noncompliance with  follow-up procedures.  For example, Tampa officials told us that the  accounts receivable staff typically have over 1,000 cases needing follow-up  at any one time.  The Cincinnati Medical Care Collection Fund (MCCF)  supervisor told us that if two additional staff were available, they would be  dedicated to following up on delinquent payments.
section_title: Not Following Up on Partially Paid Claims Reduces the Possibility of Collecting Additional Revenue
paragraphs: During our review of the 90 selected cases, we noted wide variances  between the amounts billed and amounts received for patients who were  eligible for Medicare benefits.  For example, in one of our selected cases,  VA billed the secondary insurance company for  $60,994 but received only  $5,205, or about 9 percent.
In non-Medicare cases, when the patient has primary and secondary  insurance, VHA bills the primary insurance company and, depending on the  amount collected, bills the secondary insurer for the residual amount.  For  Medicare patients who have secondary insurance (i.e., Medigap or  Medicare Supplemental insurance), VA is generally entitled to receive  payment only from the secondary insurance company.  Thus far, VA has not  been able to provide post-Medicare payment information (i.e., deductible  and co-insurance amounts) to other insurance companies because  Medicare is generally not required to pay and thus does not pay VA.   Lacking information on what Medicare would pay if required to do so, VA  does not know what amount to bill the secondary insurance companies  because it does not know the residual amount. In such cases, VA bills the  secondary insurance company for the full amount associated with the care  provided—the amount that would be reimbursable by Medicare as well as  the amount not covered by Medicare.
The secondary insurance companies have been using a variety of  methodologies for reimbursing VA and some do not pay because they are  unable to determine the proper amount of reimbursement.  As a result, in  certain cases, VA receives very little, if any, reimbursement from the  secondary insurance companies for such billings.
The Handbook describes procedures for following up on partial payments  from insurance companies.   It states that payment by a third-party  insurance company of an amount which is claimed to be the full amount  payable under the terms of the applicable insurance policy or other  agreement will normally be accepted as payment in full.  The unpaid  balance is to be written down to zero.  However, if there is a considerable  difference between the amount collected and the amount billed, the  Handbook directs staff to take various actions to pursue potential  additional revenue.  At each of the three medical centers, we found that  accounts receivable staff typically accepted partial payments from  secondary insurance companies as payment in full and adjust the unpaid  balance to zero. Because the medical centers do not have the post- Medicare information needed to pursue collection of the unpaid amounts,  there may be failure to collect millions of dollars because partial payments  are accepted as payment in full.
VA reported that as of September 2003, the median age of all living veterans  was 58 years, with the number of veterans 85 years of age and older totaling  nearly 764,000.  As these veterans age, the demand for care will increase as  will the number of veterans eligible for Medicare.  To be able to offset the  cost of care through third-party collections, it will become even more  imperative in the coming years for VA to collect the maximum amount  possible from secondary insurance companies.
section_title: VA Initiatives Are Under Way to Address Operational Problems
paragraphs: VA’s current Revenue Action Plan includes 16 actions designed to increase  collections by improving and standardizing the collections processes.    Several of these actions are aimed at reducing billing times and backlogs,  many of which have already been implemented. Specifically, medical  centers are updating and verifying patients’ insurance information and  improving health care provider documentation.  In addition, hiring  contractors to code and bill old cases is reducing backlogs.  Further, the  introduction of performance measures into managers’ performance  contracts has provided an incentive for increased billings and collections.   In addition to those actions already taken, VA has other initiatives under  way such as automating the billing process by implementing the Patient  Financial Services System (PFSS) and determining the amounts billable to  Medicare secondary insurance companies through the use of an electronic  Medicare Remittance Advice.
To assist in updating and verifying patients’ insurance information, a  problematic issue discussed earlier in our report, each site now has staff  dedicated to (1) verify that insurance reported by the veteran is current,   (2) determine insurance coverage if the patient does not declare any,   (3) acquire pre-certifications of patient admissions, and (4) obtain  authorization of procedures from the patient’s insurance company.  Additionally, medical centers have taken actions to update demographic  information on file, including insurance.  These efforts help to reduce  insurance denials, produce more accurate bills, and ensure that VA receives  reimbursement for services provided.
To assist in improving medical documentation, which we reported as a  continuing operational issue, VA mandated physician use of the  Computerized Patient Record System in December 2001 and reinforced its  use through a VHA Directive in May 2003.  The coders use the electronic  medical records to determine what treatment each patient received and to  document the diagnostic codes.  In addition, the medical centers have been  educating the physicians about the importance of completing the records.
To reduce billing backlogs, VHA entered into an agreement with four  vendors to code and assist with backlogs.  The Washington, D.C. medical  center hired a contractor to handle a backlog of 15,000 encounters.  The  contractor has certified staff for coding and billing and must meet 12  performance measures.  The revenue officer told us that the backlog was  eliminated in May 2004. In addition, in December 2003, VHA was given  authority by the Office of Personnel Management to directly hire  credentialed coders at industry-compatible salaries.
In fiscal year 2003, VHA’s Chief Business Officer implemented industry- based performance metrics and reporting capabilities to identify and  compare overall VA revenue program performance.  Metrics were  introduced to measure collections, days to bill, gross days revenue  outstanding, and accounts receivable over 90 days. For both network and  medical center directors, the metrics and associated performance targets  were incorporated into annual performance contracts effective fiscal year  2003.  VHA officials attribute much of the decrease in days to bill and  increased billings and collections to these performance measures.  For  example, VA reported that nationally the average days to bill insurance  companies for the first half of fiscal year 2004 was about 74 days, which is  an improvement from their fiscal year 2000 average days to bill of 117 days.    However, VHA’s average days to bill for that period exceeded the  performance goals of 50 days and 47 days for the first and second quarters  of fiscal year 2004, respectively. The industry standard is 10 days.
In addition to actions already taken, VA’s Plan has several other initiatives  under way for improving billing times and increasing collections.  For  example, the PFSS is designed to integrate the health care billing and  accounts receivable software systems to replace VA’s current legacy  system.  The system is intended to increase staff efficiency through a  streamlined, standardized, re-engineered process; create more accurate  bills; and shorten bill lag times through automation.  VA officials believe  that this initiative, when implemented, will reduce manual intervention  noted earlier in our report as a reason for delayed billings. However,  implementation is behind schedule.
Another effort under way, the electronic Medicare Remittance Advice  project, helps to address obtaining allowable payments from secondary  insurance companies, rather than accepting partial payments that are  significantly lower than billed amounts as full payment.  This project  involves the electronic submission of claims to a fiscal intermediary to  receive remittance advice on how Medicare would have paid the claim if it  were legally bound to pay VA for care.  The remittance advice, which will  be attached to VA health care claims, will enable secondary insurance  companies to determine the correct amount to reimburse VA.  Further, VA  believes it will be able to more accurately reflect the amount of its  outstanding receivables and be in a strengthened position to follow up on  partial payments, which it deems incorrect.  The completion date for this  project was November 2003 but has been delayed due to software issues.  VA officials told us they plan to roll out the new system beginning in August  2004.
Although the Plan provides another step forward in potentially improving  operations and increasing collections, it is still in progress and many of the  actions are not scheduled for  implementation until at least fiscal year 2005.   Therefore, it is too early to determine whether the Plan will successfully  address operational problems and increase collections when fully  implemented.
section_title: Conclusions
paragraphs: The growing demands for veterans’ health care increase VA’s responsibility  to supplement, as much as possible, its medical care appropriations with  collections from insurance companies for treatment of non-service- connected conditions.  VA is making progress in developing and  implementing procedures to identify patients who can be billed for  services, to bill for services correctly and in a timely manner, and to pursue  collections.  VA’s Plan to further improve billing and collection operations,  however, is still a work in progress and could benefit from the performance  of a workload analysis. In the interim, strengthening internal controls such  as clarifying billing and claims follow-up procedures and consistently  implementing policies and procedures could help reduce billing times and  increase collections.   Even assuming that its Plan works as contemplated,  these additional controls are needed to maximize VA revenues to enhance   its medical care budget.
section_title: Recommendations
paragraphs: We are making five recommendations to facilitate more timely billings and  improve collection operations.  The Secretary of Veterans Affairs should  direct the Under Secretary for Health to:  Perform a workload analysis of the medical centers’ coding and billing   Based on the workload analysis, consider making the necessary  resource adjustments.
Reinforce to accounts receivable staff that they should perform the first  follow-up on unpaid claims within 30 days of the billing date, as directed  by VA Handbook 4800.14, Medical Care Debts, and establish procedures  for monitoring compliance.
Reinforce the requirement for accounts receivable staff to enter the  insurance company contact’s name, title and phone number and the  follow-up date when making follow-up phone calls.
Augment VA Handbook 4800.14, Medical Care Debts, by either  specifying a date or providing instructions for determining an  appropriate date for conducting second follow-up calls to insurance  companies.
section_title: Agency Comments and Our Evaluation
paragraphs: VA provided written comments on a draft of this report.  In its response, VA  agreed with our conclusions and recommendations and reported that it is  developing an action plan to implement them.  Additionally, VA’s response  stated that VHA is pursuing a number of strategies to improve overall  performance toward achieving industry benchmarks.  VA believes that the  development of the Patient Financial Services System will address current  billing system limitations and manual intervention and that the Medicare  Remittance Advice project will assist VHA in pursuing partially paid claims.
Also, in its response letter, VA included some technical comments that we  have addressed in finalizing our report where appropriate.  VA’s written  comments are presented in appendix I.
As arranged with your office, unless you release its contents earlier, we  plan no further distribution of this report until 30 days after its issuance  date.  At that time, we will send copies of this report to the Secretary of  Veterans Affairs, the Under Secretary for Health, interested congressional  committees, and other interested parties.  We will also make copies  available to others upon request.  In addition, the report will be available at  no charge on GAO’s Web site at http://www.gao.gov.  Should you or your  staff have any questions on matters discussed in this report, please contact  me at (202) 512-6906 or williamsm1@gao.gov; or Alana Stanfield, Assistant  Director, at (202) 512-3197 or stanfielda@gao.gov.  Major contributors to  this report are acknowledged in appendix II.
section_title: Comments from the Department of Veterans Affairs
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
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