Concerns About the Cost, Duration, and Quality of Community Residential Substance Use Disorder Treatment for Veterans

The OIG issued this memorandum to help VHA determine whether additional actions are needed to address significant cost concerns and potential issues about patients’ length of stay and quality of care for residential substance use disorder treatment provided under community care contracts with two third-party administrators (TPAs). The OIG found the contracts do not require community providers to use designated billing codes, which could lead to VHA overpaying providers for these services. Though VHA has amended the contract for one TPA, negotiations are ongoing with the other; until this occurs, overpayments to the second TPA—which were over $268 million for FYs 2023 and 2024—will continue.

The OIG is also concerned that lax oversight of the TPAs could lead to VHA overpaying for these services because TPAs may bill for unnecessary treatment that could needlessly lengthen the time a veteran receives care. Further, the OIG is concerned about the quality of residential substance use disorder treatment veterans receive in the community and suggests greater oversight could mitigate financial risk as well as safeguard the care veterans receive.

The OIG notes that while VHA has taken steps to create a new payment policy and has completed a contract modification with the first TPA to clarify the use of billing codes, VHA should apply those changes to current and future contracts and monitor whether these changes control costs. The OIG also suggests VHA consider consulting with mental health staff at authorizing VA facilities for feedback on improving the care veterans receive in the community for these services.