Summary of Fiscal Year 2022 Preaward Reviews and Audits of Healthcare Resource Proposals from Affiliates

VA is authorized by statute to procure healthcare resources from affiliates on a sole-source basis without regard to laws or regulations that require competition. VA policy requires that contracting officers request an Office of Inspector General (OIG) review or audit for any sole source healthcare proposal that has an anticipated annual value of at least $400,000. The OIG examines such proposals and provides information that contracting officers have the discretion to use as they negotiate fair and reasonable prices. In fiscal year 2022, the OIG completed nine preaward reviews and 15 audits of sole source healthcare contract proposals. The combined estimated contract value of the 24 preaward reviews and audits was $389.6 million; the OIG teams identified a total of $166.9 million in potential cost savings. The OIG examined hourly rate pricing for 18 proposals with full-time-equivalent pricing and determined that the prices offered to the government were higher than the supported amounts. The most common issue was unsupported provider salaries. Other frequently occurring issues were unsupported administrative expenses, fringe benefit amounts, incentives, or malpractice insurance premiums. The OIG recommended contracting officers obtain lower prices than those offered to the government. The OIG also examined seven proposals with per procedure pricing and determined that they all offered prices higher than the properly calculated Medicare rates. The OIG recommended contracting officers obtain lower prices than those offered. Finally, for 12 of the 24 contract proposals examined, the OIG found potential conflicts of interest for VA personnel who may have been involved in the acquisition process and who also held a position with the affiliate. The OIG recommended the contracting officer request an opinion from VA’s Office of General Counsel as to whether these individuals would have a financial interest in the proposal.