The medical mission of DOD is to provide and maintain readiness, medical services, and support to the armed forces during military operations and to provide medical services and support to members of the armed forces, their family members, retirees and their families, and eligible survivors of deceased active and retired military personnel. DOD’s health care program provides medical services such as surgery and inpatient care, pharmacy services, and mental health care to eligible beneficiaries. This care is delivered through its military hospitals and clinics, known as MTFs, or from contracted civilian-provided care. However, if an eligible beneficiary has commercial insurance and care is provided by the MTF, the government is authorized to bill the insurance company under the Third Party Collections Program established in Public Law 99-272, as amended by Public Law 101-510 (10 U.S.C. 1095). Currently, according to DOD records, over 8 million active duty and retired military personnel along with their dependents and survivors are eligible for health care benefits from the military health care system. The three medical facilities in our engagement are also DOD medical teaching facilities. Eisenhower trains residents in both surgical and primary care specialties with emphasis on research and state-of-the-art specialty care. Portsmouth is the oldest hospital in the U.S. Navy having provided continuous care since July 1830. It has a medical education program offering internships and residency training programs in medicine, dentistry, psychology, and pastoral care. It is one of three teaching hospitals in the Navy with residency programs in 13 specialty areas. Wilford Hall is the Air Force’s largest medical facility. It focuses on military readiness, provides a worldwide referral center for military personnel and their dependents, and provides trauma and emergency medical care for the San Antonio and south Texas civilian communities. It is also the Air Force’s foremost provider of medical education, providing the Air Force with 65 percent of its physician specialists and 85 percent of its dental specialists. Appendix II provides more background information about the military facilities. The following five subsections of this report outline opportunities for the three MTFs covered by this review to improve their financial or operating controls and to, in the process, reduce federal costs. DOD auditors’ and our work has also reported on a number of these issues at some of the same facilities and recommended improvements. As discussed in appendix I and under the following sections, our work, while not designed to ascertain the extent of each problem, indicates the existence of systemic problems for each of the five areas we reviewed. Although the MTFs are authorized to bill insurance companies under the Third Party Collections program, millions of dollars are not being collected each year because patient medical records are incomplete, as is the identification and billing of reimbursable care. Patients were not systematically asked to provide current insurance information, thereby hindering the ability to identify all billable care. Even when patient insurance information was obtained, the staff often failed to send a bill to the third party insurer or sent the bill late. Once a bill is successfully processed, collections from third party insurance companies represent 2 percent to 5 percent of the facilities’ operating costs each year. The MTF Uniform Business Office Manual, DOD 6010.15-M, dated April 1997, prescribes procedures for third party collection activities such as the identification of beneficiaries who have other health insurance. It also states that the staff shall obtain written certification from beneficiaries at the time of each inpatient admission or outpatient visit if a certification is not on file or if it has not been updated within 12 months. However, our observations of patient reception at several clinics at the three medical facilities showed that staffs were not systematically obtaining and updating patient insurance information and rarely asked outpatients about third party insurance coverage. In addition, the required DOD Form 2569 used to document third party insurance coverage was often not completed and maintained for either inpatients or outpatients in hospital files or databases. Having a completed form is important because it (1) documents the existence and type of coverage, (2) is used to update insurance data in the automated medical management information system, and (3) authorizes the medical facility to bill insurance companies on behalf of the beneficiary. Our tests of third party insurance documentation for 1 day during each quarter of fiscal year 2001 showed the following results. At Eisenhower, only 9 of 60 patients, primarily inpatients, selected had a current completed DOD Form 2569. After our visit, Eisenhower’s staff began monitoring the admissions process in an effort to improve the completions of DOD Form 2569 by all non-active-duty inpatients and assigned staff members to ask about insurance while patients wait to receive pharmaceuticals. Portsmouth uses an internally developed form to document if patients have private health insurance. For 40 of 60 inpatients selected, Portsmouth had insurance information in the patient billing files. Wilford Hall had a completed, current DOD Form 2569 for 41 of the 69 patients selected. Wilford Hall has for some time dedicated personnel on a part-time basis to assist patients in completing the DOD Form 2569 at one of its clinics. Without completed insurance information forms, recording and maintaining accurate, complete, up-to-date, and verifiable insurance information in facilities’ billing systems is not possible. We found instances where the patient record in the automated medical information system contained out-of-date or no insurance coverage information, making system reports incomplete and inaccurate. Reasons given by facility officials for these problems were mostly attributed to staffing constraints and shortages. Consequently, there was little assurance that all reimbursable care was being identified for billing. In a recent report, the Air Force Audit Agency reported the same condition—insurance information for inpatients was not being obtained and entered into the automated medical information system. For over 70 percent of the non-active-duty inpatient population at 14 MTFs they reviewed, no insurance data were recorded in the system, resulting in lost collections. Air Force auditors sampled the inpatients shown in the system as not having insurance data and determined that those who actually had unrecorded third party coverage had received care valued at $113,330. Projected to the entire population over a 6-year period, Air Force auditors estimated that $14.4 million could have been billed to third party insurers at the 14 Air Force MTFs. Our tests of billings at the three facilities revealed that even when patient insurance information was available, the staff often did not send a bill. As shown in table 1, about one-third of our nonrepresentative selection of 240 instances of treatment that should have been billed to a third party insurer were not billed. Billings were generally better for inpatient admissions, while the billing rates for outpatient visits and pharmacy benefits were much lower. More specifically, our testing of 48 inpatient admissions identified only 3 instances when insurers were not billed. In addition to the 38 outpatient visits not billed, our selection also disclosed patients with third party insurance who used the facilities frequently, but whose insurance had never been billed for any care provided during fiscal year 2001. While all facilities had pharmacy billing problems, the situation was most serious at Wilford Hall, which reported only billing for about $158,000 in pharmacy charges during fiscal year 2001. After we brought this to the attention of Wilford Hall’s management, it hired a contractor to supplement its billing staff. As a result, by June 30, 2002, Wilford Hall had billed almost $800,000 in pharmacy charges during the first 9 months of fiscal year 2002, of which $650,000 was billed during the third quarter of the year. Lost forms, clinical data coding or input problems, lack of staff to handle high workloads, missed billings due to clerical oversight, and a complicated multistep billing process were explanations provided for not billing for reimbursable care. The Air Force Audit Agency also recently reported that military facilities were not effectively recovering the cost of pharmaceuticals provided to patients with private health insurance. Thirteen facilities were not adequately identifying patients with third party insurance, and even when sufficient data were available, billing was not always done. Air Force auditors projected that increased management emphasis in this area would generate increased billings of about $114 million for the 13 Air Force MTFs over a 6-year period. Wilford Hall was one of the facilities included in the Air Force Audit Agency review. When billing for third party insurance occurred, it was often delayed. DOD standard criteria call for facilities to bill for admissions within 10 business days following completion of the medical record and within 7 business days for outpatient visits. In evaluating the timeliness of billing, we used a more liberal standard of 30 days after treatment for billing admissions and 90 days for outpatients and pharmaceuticals dispensed. Even then, the military facilities still did not bill within those extended time frames in about half the cases, as shown in table 2. Promptly invoicing insurers for care provided is a sound business practice and should result in improved cash flow for the government. Reasons for delayed billings provided by personnel were staffing shortages, high workloads, and coding delays. Also, officials at all three MTFs cited the current cumbersome billing process, which requires a high degree of manual intervention, as a cause for not billing promptly. Compared to appropriated funds, third party collections represented a relatively small revenue source for the MTFs but could actually be larger. In fiscal year 2001, Eisenhower collected $4.6 million for current and past years’ billings, which was about 5 percent of its facility costs, and Portsmouth and Wilford Hall collected about $5.1 million and $4.2 million, respectively, or about 2 percent of their respective facility costs. Collections were derived primarily from admissions and, to a lesser extent, from outpatient care, which includes recoveries for prescription drugs, emergency medical care, and clinical visits.