Audit of Veterans Health Administration Noncompetitive Clinical Sharing Agreements

The Veterans Health Administration (VHA) lacks reasonable assurance it received the services it paid for because performance monitoring controls over noncompetitive clinical sharing agreements are not effective. Strengthening controls over performance monitoring of noncompetitive clinical sharing agreements could save VHA about $9.5 million annually or $47.4 million over 5 years. Of the estimated savings, only about $96,000 in charges resulting from calculation errors may be recoverable because the terms of most of the sharing agreements we reviewed did not include provisions for adjusting payments. We found performance monitoring weaknesses for all 58 surgical and anesthesiology sharing agreements we reviewed at 8 VA medical facilities. As a result, for 30 (52 percent) of the 58 agreements, the medical facilities overpaid contractors because contracting officers’ technical representatives (COTRs) did not verify that medical facilities received the services required at the prices specified. In addition to performance monitoring issues, we also found that during negotiations of per-procedure sharing agreements, Veterans Integrated Service Network (VISN) contracting officers agreed to pay at least full Medicare rates. However, the full Medicare rates include a practice component for overhead charges that contractors do not incur when they provide services at VA medical facilities. Excluding the Medicare practice component, as required by VA policy, could have saved VHA about $2.5 million annually or $12.4 million over 5 years. The audit report makes five recommendations to improve clinical sharing agreement monitoring and two recommendations to ensure that onsite clinical service sharing agreement rates are not based on the Medicare practice component.