Review of Fraud Management for the Non-VA Fee Care Program

Our review determined that VHA had not assessed the risk of Fee Program fraud and had not established controls designed to prevent and detect fraud in the Fee Program. The Veterans Health Administration's (VHA's) Non-VA Fee Care Program pays non-VA medical providers to treat eligible veterans when medical services are not available at VA facilities or in emergencies when delays are hazardous to life or health. Annual fee care payments in this program have grown from about $1.6 billion in FY 2005 to about $3.8 billion in FY 2009. This review continues our assessment of non-VA fee care by evaluating the effectiveness of Fee Program fraud management. We found that thought federal law requires agencies to maintain controls that safeguard their assets against fraud; VHA has not established controls designed to prevent and detect fraud for its Fee Program. VHA had not established fraud management controls primarily because it had not identified fraud as a significant risk to the Fee Program. Yet VHA’s Fee Program is not significantly different from other health care programs that have identified numerous cases of fraud. More important, VHA lacks a system for determining the risk of Fee Program fraud. Yet, health care industry experts have estimated that 3 to 10 percent of all health care claims involve fraud and the Fee Program faces risks similar to other health care payment programs. In effect, the VHA Fee Program could be paying between $114 million and $380 million annually for fraudulent claims. We recommended that the Under Secretary for Health establish a fraud management program that includes such fraud controls as data analysis and high-risk payment reviews, system software edits, employee fraud training, and fraud awareness and reporting.