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.) 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. SS 1728 (emergency care generally for service-connected conditions) or 38 U.S.C. SS 1725 (Veterans Millennium Health Care and Benefits Act emergency care for non-service-connected conditions). A total of 11,750 unique veterans received such reimbursement from fiscal year 2008 through fiscal year 2012. To determine the fee basis utilization numbers in this figure, we counted each individual veteran once per fiscal year by identifying the number of unique Social Security numbers present in each fiscal year's fee basis data. Utilization totals in this figure have been rounded to the nearest thousand veterans. In addition, fee basis care spending and utilization also varied by fee basis care category. (See app. I for more information.) VA spent about $11.22 billion on outpatient fee basis care and about $9.07 billion on inpatient fee basis care from fiscal year 2008 through fiscal year 2012. During this 5-year period, inpatient fee basis care spending increased steadily from about $1.41 billion in fiscal year 2008 to about $2.15 billion in fiscal year 2012, while outpatient fee basis care spending declined in fiscal year 2012. As a result, by fiscal year 2012, the difference in inpatient and outpatient fee basis care spending was only about $180 million, compared to a $590 million disparity in fiscal year 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.) 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

Summary:
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. 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. 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.