Inadequate Oversight of the Medical/Surgical Prime Vendor Program’s Distribution Fee Invoicing

Report Information

Issue Date
Closure Date
Report Number
19-06147-50
VA Office
Acquisitions, Logistics, and Construction (OALC)
Veterans Health Administration (VHA)
Report Author
Office of Audits and Evaluations
Report Type
Audit
Report Topic
Supplies and Equipment
Financial Management
Major Management Challenges
Stewardship of Taxpayer Dollars
Recommendations
10
Questioned Costs
$0
Better Use of Funds
$0
Congressionally Mandated
No

Summary

Summary
The VA Office of Inspector General (OIG) assessed VA’s oversight of the Medical/Surgical Prime Vendor-Next Generation (MSPV-NG) Program, under which prime vendors maintain inventories of medical and surgical supplies and restock medical facilities when needed. Specifically, the OIG examined whether medical facility-level staff verified the accuracy of distribution fees invoiced by the prime vendors, and national- and Veterans Integrated Service Network-level staff provided proper oversight of this activity. In February 2016, VA’s Strategic Acquisition Center awarded four MSPV-NG contracts with a cumulative value of about $4.6 billion to prime vendors for medical and surgical supplies. VA pays prime vendors for requested products plus a distribution fee to cover the costs associated with managing medical facilities’ inventories. Medical facilities paid approximately $25.4 million in MSPV-NG distribution fees during fiscal year 2018, according to an official from VHA’s Procurement and Logistics Office. The OIG found VA controls were not sufficient to ensure VA medical facility staff accurately reviewed, verified, or certified distribution fee invoices for the MSPV-NG program. VA also did not ensure staff at medical facilities accurately established and applied the on-site representative rates and paid fees based on annual facility purchases. The MSPV-NG pricing schedule establishes fee rates for on-site representatives based on annual facility purchase amounts. VA establishing a flat fee rate will help mitigate on-site representative fee rate disparities, but in the interim VA still needs to ensure facilities reconcile rate disparities that have occurred and continue to occur. The OIG made 10 recommendations designed to improve oversight of verification and certification of distribution fee invoices and ensure the accuracy of on-site representative fees.

Open Recommendation Image, SquareOpenClosed and Implemented Recommendation Image, CheckmarkClosed-ImplementedNot Implemented Recommendation Image, X character'Closed-Not Implemented
No. 1
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 10/23/2024

Direct the Medical Supplies Program Office to implement procedures requiring chief logistics officers at Veterans Integrated Service Networks to monitor facility processes for verification and certification of distribution fee invoices to ensure invoice accuracy prior to payment by the Financial Services Center.

No. 2
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 2/11/2025

Require Veterans Integrated Service Network directors to ensure their chief logistics officers develop distribution fee monitoring and review procedures for facility logistics audits and compliance reviews to ensure invoices are adequately reviewed, verified, and certified.

No. 3
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 7/31/2023
Require Veterans Integrated Service Network directors to ensure facility chief logistics officers and contracting officer’s representatives review and update the election forms according to contract requirements and provide copies to the Medical/Surgical Prime Vendors for acknowledgment.
No. 4
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 2/11/2025

Require Veterans Integrated Service Network directors to ensure facility contracting officer’s representatives verify that distribution fee rates match with those on the election forms and pricing schedule by comparing transaction data from the vendors to VHA-maintained transaction data, and reconcile payments as appropriate.

No. 5
Closed and Implemented Recommendation Image, Checkmark
to Acquisitions, Logistics, and Construction (OALC)
Closure Date: 3/25/2022
Require the Strategic Acquisition Center to develop and add modifications to the Medical/ Surgical Prime Vendor-Next Generation contract requiring prime vendors to provide reports to VA medical facilities with detailed medical and surgical transaction data, fee amounts, and fee percentage rates applied to each transaction on distribution fee invoices.
No. 6
Closed and Implemented Recommendation Image, Checkmark
to Acquisitions, Logistics, and Construction (OALC)
Closure Date: 3/25/2022
Require the Strategic Acquisition Center contracting officer to work with the Medical Supplies Program Office to ensure that Medical/Surgical Prime Vendor contracting officer’s representatives are assigned to each VA medical facility.
No. 7
Closed and Implemented Recommendation Image, Checkmark
to Acquisitions, Logistics, and Construction (OALC)
Closure Date: 5/2/2022
Require the Strategic Acquisition Center to appropriately modify the Medical/Surgical Prime Vendor contract to define annual facility purchase as well as adding a provision for paying the annual facility purchase amount based on the estimated total spend until year-end reconciliation.
No. 8
Closed and Implemented Recommendation Image, Checkmark
to Acquisitions, Logistics, and Construction (OALC)
Closure Date: 5/2/2022
Require the Strategic Acquisition Center to also appropriately modify the Medical/ Surgical Prime Vendor contract to require the prime vendors—rather than the facility—to reconcile to annual facility purchases at the end of the year.
No. 9
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 7/31/2023
Require the Medical Supplies Program Office to establish policy that clearly defines the source VA medical facilities should use to estimate their annual facility purchase amounts and determine the year-end amounts.
No. 10
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Closure Date: 9/3/2024

Require VA medical facilities to review their on-site representative fees paid during fiscal year 2018 and future years to ensure they were paid based on the actual annual facility purchase amounts, consistent with the Medical/Surgical Prime Vendor-Next Generation contract, and reconcile payment discrepancies as appropriate.

Total Monetary Impact of All Recommendations
Open: $ 0.00
Closed: $ 3,700,000.00