Audit of Veterans Health Administration's Non-VA Outpatient Fee Care Program

The audit determined that Veterans Health Administration (VHA) needs to take immediate action to strengthen the controls over the Non-VA Outpatient Fee Care Program to ensure that payments are accurate and proper. In FY 2008, VA medical centers (VAMCs) made a significant number of improper payments (37 percent of paid claims), such as duplicate payments and payments for incorrect amounts. As a result, we estimate that in FY 2008 VHA overpaid $225 million and underpaid $52 million to fee providers, or about $1.126 billion overpayments and $260 million underpayments over 5 years. We also identified serious weaknesses in the controls needed to ensure that outpatient fee care is properly justified and authorized. We concluded that VHA lacks reasonable assurance that Fee Program funds were used as intended and in an effective and economical manner for 80 percent of outpatient care payments because VAMCs did not properly justify and authorize fee services as required by VHA policy. These errors occurred because VHA has not established an adequate organizational structure to support and control the complex, highly decentralized, and rapidly growing Fee Program. The magnitude of the program’s payment errors indicates VHA faces significant challenges to address these vulnerabilities and has an immediate need to improve controls over claims processing and the justification and authorization of fee services. In addition, VHA needs to obtain regulatory changes in the outpatient fee care program to ensure payments are consistent, reasonable, and proper. The audit report made eight recommendations for the Under Secretary for Health to require that management provide sufficient policy guidance, mandatory training, and routine oversight of the program. In addition, the audit report recommended that VHA needs to immediately address regulatory constraints affecting the Fee Program and consider implementing interim guidance for how it will pay outpatient facility charges until a new regulation is implemented. The Acting Under Secretary for Health agreed with the audit findings, recommendations, and monetary benefits and provided acceptable corrective action plans.