VETERANS HEALTH ADMINISTRATION FEE CARE PROGRAM

Transcription

1 NATIONAL ACADEMY OF PUBLIC ADMINISTRATION For the U.S. Department of Veterans Affairs September 2011 VETERANS HEALTH ADMINISTRATION FEE CARE PROGRAM WHITE PAPER PANEL Gregg A. Pane, Chair* Kenneth W. Kizer* Mrya Howze Shiplett* James R. Getter *ACADEMY FELLOW

2 Officers of the Academy Kenneth S. Apfel, Chair of the Board Timothy B. Clark, Vice Chair Dan Blair, President and Chief Executive Officer Diane M. Disney, Secretary John J. Callahan, Treasurer Project Staff Team Joseph P. Mitchell, III, Director of Project Development Joe Thompson, Project Director George Kettner, Senior Advisor Max Lewis, Senior Advisor Anna Tkachenko, Research Associate Chloe Yang, Senior Research Associate The views expressed in this document are those of the Panel. They do not necessarily reflect the views of the Academy as an institution. National Academy of Public Administration 900 7th Street, N.W. Suite 600 Washington, DC Academy Project Number: 2165

3 TABLE OF CONTENTS EXECUTIVE SUMMARY... 5 PANEL COMMENT... 6 PANEL FINDINGS... 6 PANEL RECOMMENDATIONS... 8 CHAPTER 1 INTRODUCTION AND OVERVIEW BACKGROUND METHODOLOGY CURRENT SITUATION FOCUS OF THIS REVIEW CHAPTER 2 ALTERNATIVE FEE MODELS OVERVIEW ORGANIZATIONAL CONSOLIDATION OPTIONS TRICARE AND MEDICARE MODELS FEE PROGRAM FUNCTIONS CHAPTER 3 IMPACT ANALYSIS AND RETURN ON INVESTMENT OVERVIEW MEASURES FOR EVALUATION OF ALTERNATIVE FEE MODELS ANALYSIS OF THE FEE CARE PROGRAM ORGANIZATIONAL CONSOLIDATION OPTIONS VIRTUAL CONSOLIDATION OPTIONS COST ANALYSIS AND ROI CONCLUSIONS - IMPACT ANALYSIS AND ROI MANAGEMENT OF THE FEE CARE PROGRAM CHAPTER 4 FINDINGS, CONCLUSIONS AND RECOMMENDATIONS PANEL FINDINGS PANEL RECOMMENDATIONS IMPLEMENTATION APPENDICES APPENDIX A COMPARISON OF FEDERAL HEALTH CARE PROGRAM CHARACTERISTICS APPENDIX B COMPARISON OF FEDERAL HEALTH CARE PROGRAM METRICS APPENDIX C INTERVIEWEES... 71

4 List of Figures Figure 1 Veterans Served by Fee Care Figure 2 Fee Care Expenses Figure 3 Chain of Command for the Fee Care Program Figure 4 FBCS Claims Processing Overview Figure 5 Claims per FTE by VISN and Fiscal Year Figure 6 Claims Processed within 30 Days by VISN and Fiscal Year Figure 7. FY 2010 Claims per FTE versus Total Claims Figure 8. FY 2011 Claims per FTE versus Total Claims List of Tables Table 1. Program Characteristics, Measures, and Data Sources Table 2. FY 2010 Claims per FTE Table 3. FY 2011 Projected Claims per FTE Table 4. Claim Line Items and Disbursed Amounts Table 5. VISN 19 Productivity and Costs Table 6. CPAC Acquisition Costs Table 7. Projected Set-Up Costs for Fee Care Program Consolidation Table 8. Staffing Requirement Estimates by Consolidation Model Table 9. Projected Claims Processed per FTE by Consolidation Scenario Table 10. Projected Cost per Claims Processed by Consolidation Scenario Table 11. Example of Error Rate and Cost Calculations Table 12. Schedule of Error Rates for Consolidation Scenarios Table 13. Return on Investment Summary for Consolidation Scenarios Table 14. ROI Analysis with Varying Assumptions... 53

5 EXECUTIVE SUMMARY The Veterans Health Administration (VHA) provides the majority of medical care services to eligible veterans with Department of Veterans Affairs (VA) assets. In some instances, however, VHA procures the services of health care providers outside of the VA health care system. These services are usually referred to as Fee Basis Care or Fee Care and the program through which these services are managed is called the Fee Care Program. Fee Care is typically utilized when a clinical service cannot be provided by a VA medical center, when a veteran is unable to access VA health care facilities due to geographic inaccessibility, or in emergencies when delays could lead to life-threatening situations. In recent years, Fee Care has been increasingly used to meet patient wait-time standards. That is, when a medical service cannot be provided at a VA facility within wait-time performance standards, VA Medical Centers (VAMCs) often use the Fee Care Program. VA s Fee Care Program expenditures have grown 275% since Fiscal Year (FY) There are now approximately 2400 Full Time Employees (FTEs) working in the program. Paid claims rose from $3 billion in FY 2008 to $4.4 billion in FY 2010 (46% increase), while the number of unique patients served increased from 820,000 to 952,000 (16%) in the same period. In 2009 and 2010, the VA Office of Inspector General (OIG) reported on significant problems with the accuracy and efficiency of claims paid in the Fee Care Program. The VA OIG reported that VAMCs made hundreds of millions of dollars in improper payments including duplicate payments and incorrect amounts, both under- and over-payments because VHA had not established adequate organizational management structures and processes. 1 The Fee Care Program is managed by VHA s Chief Business Office (CBO). In March 2011, the CBO contracted with the National Academy of Public Administration (the Academy) to conduct an independent organizational assessment of the program. The CBO asked that this assessment include an evaluation of other federal and commercial health care claims payment programs, a comparison of their structures with VA s current structure, and an assessment of other models that might improve VA s outcomes by decreasing improper payments, improving client services, and assuring effective use of government funds. The Academy s organizational assessment leads the Panel to issue several recommendations for organizational change and for improving operations of the program. The Panel believes that organizational change and operational change are intertwined and are both essential elements for improving the Fee Care Program. 1 The OIG has actually conducted three audits over the last several years regarding the Fee Care Program: Audit of the Medical Care Collection Fund Billings for Non-VA Care Audit of Non-VA Inpatient Fee Care Program Audit of Veterans Health Administration's Non-VA Outpatient Fee Care Program 5

6 PANEL COMMENT The Panel believes that in considering its findings and recommendations it is important to keep in mind that VA is different from most health care systems in that it is both a provider of health care and a payer of health care claims. The Department of Defense health care system shares this characteristic, but has divided the activities into two separately managed organizations. The Panel also believes that the Fee Care Program cannot be considered in isolation. Its requirements, priorities, and solutions to its problems must be considered within the context of multiple other needs and competing priorities. PANEL FINDINGS Over the last decade, VA s Fee Care Program has grown from being a small, relatively infrequently used adjunct to traditional VA health care services into a critical element of clinical care delivery. While the program has markedly grown in the numbers of patients using it and expenditures, the management, administrative and other support systems have not matured in a commensurate manner. While the corporate management of the Fee Care Program has improved significantly over the last several years, it has not been sufficient to keep pace with the rapid growth of the program. With projected expenditures of $5.1 billion in FY 2012, the VA Fee Care Program is a large and rapidly growing program that warrants comparable VA management attention. The quality of care provided through the Fee Care Program and the return on investment (ROI) of this program is indeterminate. Information to ascertain the value of this program is not readily accessible. The Fee Care Program uses antiquated administrative systems and technology, and its claims payment processes are very different from other federal or private sector payers who provide much more efficient and accurate claims processing. However, many actions to improve program performance are now underway, including (but not limited to) claims processing software improvements, organizational changes, regulation improvements, policy standardization, training initiatives, fraud, waste and abuse prevention activities, informatics improvements, and referral/authorization pilots. All of these areas are relatively new, and therefore it will take some period of time to see improvements. Substantial changes should be made in the Fee Care Program and a strategic change management plan should be developed as quickly as possible. The Panel finds that there are a number of important factors that need to be better understood when considering the Fee Care Program s current functional status and possible improvements: 1. Given the significant organizational and productivity challenges within the Fee Care Program, VHA has a limited understanding of the services it is procuring through this program and their cost. The Fee Care Program does not appear to have been well managed at any level of VA. VHA provides limited VISN-wide executive oversight of its purchased care program, and the program lacks clearly defined operational objectives or goals, and it is not guided by a coherent strategy for managing program expenditures. 2. The Fee Care Program is significantly more inefficient and has higher error rates than benchmarked organizations and productivity across operating sites varies considerably. 6

7 The Chief Business Office estimates the error rates (that is, erroneous payments 2 ) at 12 percent per year, which equates to approximately $500 million in FY By contrast, TRICARE has a reported error rate of 0.42 percent. 3 Productivity varies across operating sites by nearly ten folds between the most and least efficient sites. The Fee Care Program s highly decentralized mode of operation across VA hospitals and networks is a primary factor in the program s inefficient operations and high payment error rates. Fee Care s organizational alignment, staffing, grade profiles, education, training, proficiency certification, performance standards and performance expectations vary significantly across the VA health care system. Interpretation and application of rules vary across operating sites. Fee Care claims technology, while improving, still falls well short of benchmarked organizations and what is needed for satisfactory performance. There is no coordinated effort to effectively capitalize on the expertise, resources and economies of scale of the VISN management structure. 3. The Fee Care Program has grown haphazardly and the technology and administration of Fee care claims have been neglected. As VA s Fee Care Program has grown, the Department has been playing catch-up in its attempts to modernize and improve its decentralized and inefficient claims processing system. Despite a number of initiatives currently underway, the Chief Business Office has limited influence or control over performance despite being assigned responsibility for the program: The staff actually processing claims work for local medical centers or VISNs and are not necessarily responsive to CBO business requirements. CBO does not have the traditional tools for strong headquarters program management of field operations e.g., validated performance metrics, accurate and timely data reporting systems, and strong program integrity mechanisms. Acquiring new claims processing technologies is critically important for making significant improvements in the system but is very challenging in the current IT environment that exists within the VA. The Panel believes that given the importance of the Fee Care Program and the significant financial losses it suffers because of inadequate technology, VA leadership should increase the priority of efforts to obtain needed new technologies. 4. VA has an opportunity to create a markedly improved Fee claims processing system, but faces major challenges in doing so. In addition to the significant changes recommended for VHA field operations outlined below, and the needed technology enhancements, the Panel also believes that CBO should make organizational changes within the Fee office to refocus the organization, strengthen its leadership, and establish appropriate lines of authority and accountability. Other organizations within VA and VHA particularly IT, 2 Erroneous payments are net of overpayments and underpayments. 3 Information provided by TRICARE officials for FY TRICARE has service level agreements mandating that payment errors shall not exceed 2 percent of the total billed charges for the first two option period. In all remaining option periods, the absolute value of the payment errors cannot exceed 1.75 percent of the total billed charges. This reported error rate of.42 percent is based on billed charges, as opposed to actual paid amounts used in calculating the error rate for the Fee program. Actual amounts paid are typically less than billed amounts. For example, if most payers pay at a rate of $1 in payment for every $3 to $5 in billed charges, a comparable error rate for the TRICARE program might be in the range of 1.26 percent to 2.1 percent 7

8 HR and procurement also have key roles in improving the current situation. However, there is a widespread perception among interviewees that these organizations will be an impediment toward improving the current system. The Panel believes that strong leadership support from top VA and VHA officials will be required to enable the institutional support required to bring about needed improvements. PANEL RECOMMENDATIONS Consolidation of Fee Care claims payment functions is necessary to improve their efficiency and effectiveness. After analyzing the costs and ROI, the Panel has concluded that consolidating the Fee Care Program into three to five operating centers while modifying its claim processing structure to become a more standardized system is the appropriate course of action. Standardization of the IT infrastructure along with consolidation will allow fewer employees to work more efficiently and effectively. A more structured rule-based environment would lead to fewer payment errors and greater program value. The Panel believes that VHA should take the following specific steps to strengthen the Fee Care Program: Organizational Consolidation and Management Changes 1. Consolidate its Fee Care Program from the current 100+operating sites to the smallest number possible that will provide necessary redundancy and workload surge capabilities. This should result in no more than 3 to 5 strategically located regional sites. Organizational consolidations should take place within the existing VISN alignment. VISN directors at the consolidated sites would have line authority over the sites. VHA should undertake a competitive process to select the regional claims processing sites. Consolidation should include the administrative aspects of the authorization function in addition to claims processing. Clinical decision-making to authorize the purchase of non-va care would remain at the local facilities but reviewed at the consolidated centers. Fee Care Program funding would remain with the local facilities to ensure accountability and buy-in using a governance model similar to the one used by the Consolidated Mail Outpatient Pharmacy (CMOP) program which includes both national and local advisory boards. 2. High level VA management should provide clear policy direction about performance goals and expectations for VA purchased care, including the allocation of resources between VA-provided and purchased care to best meet strategic goals. 3. VHA should build greater program management competence and capacity for overseeing the Fee Care Program and supporting the consolidated claims processing sites. VHA should look both within and external to VA for expertise in this effort. 8

9 The Chief Business Office should create and manage a program integrity component in each of the consolidated claims processing sites, as well as at its headquarters. The Chief Business Office should establish a more effective performance management system, including a portfolio of performance metrics to assess productivity, accuracy, timeliness and customer satisfaction, among other things. Accountability for data accuracy and management must be improved. Accountability and responsibility for Fee Care management and outcomes need to be better defined, communicated, understood and executed by all involved in the Fee Care process. Staffing standards, business rules, and standard operating procedures should be enacted and enforced. Clear lines of authority should span the office of the Deputy Under Secretary for Health for Operations and Management, the Chief Business Office, the VISNs, and the consolidated claims processing sites. Technology and Virtual Consolidation 4. VHA should procure and implement an enterprise-wide technology solution to facilitate virtual consolidation. Other Considerations VA has struggled with large scale IT implementation efforts, as recently noted by the Government Accountability Office. 4 To ensure the success of this recommendation, careful planning, the provision of sufficient resources, and support from senior leaders of both VHA and Office of Information & Technology (OI&T) are minimum requirements. The Chief Business Office should specify business rules in greater detail and incorporate them into the technology platform to significantly reduce interpretation or judgment by individual claims processors. The Chief Business Office should allocate more resources and accord greater priority to facilitating standardization in processing claims through templates, standard operating procedures, training, and technology tools. CBO should continue to create a single national database for Fee Care Program operations. VHA leadership should work closely with leadership of the VA OI&T to find resources to develop a new claims tracking and processing technology platform. CBO should host an appropriate event to get the process underway. 5. Conduct a cost-benefit analysis of contracting out the processing of claims as with other payer models (TRICARE, Medicare, Medicaid, Blue Cross Blue Shield, etc.) and their applicability for VA 4 VA has, however, experienced challenges in managing its IT. Information Technology: Department Of Veterans Affairs Faces Ongoing Management Challenges. GAO T. May 11,

10 While outside the scope of this study, the Panel believes that an independent analysis of the costs and benefits for contracting out similar to TRICARE or Medicare would provide important information for VA policymakers to consider when evaluating the Fee Care Program. If the above recommendations are effectively implemented, the Panel believes that VA will improve service to Fee Care providers as well as the long-term viability of the Fee Care Program. 10

11 CHAPTER 1 INTRODUCTION AND OVERVIEW BACKGROUND Through the Veterans Health Administration (VHA), the Department of Veterans Affairs (VA) provides a majority of medical services to veterans within its health care system. However, in some instances, such as when a clinical service cannot be provided by a VA medical center (VAMC), when a veteran is unable to access VA health care facilities due to geographic inaccessibility, or in emergencies when delays could lead to life-threatening situations, VHA is authorized by law to send the veteran outside of VA s health care system to receive Fee basis care services. In 2010, the VA Office of Inspector General (OIG) conducted an audit 5 to assess the accuracy of payments made for pre-authorized inpatient Fee service and to assess the efficiency of processing Fee service claims. The audit found that VAMCs improperly paid some inpatient Fee claims because VHA s policies for determining eligibility for inpatient Fee care did not provide adequate guidance on how to determine eligibility for inpatient Fee care or were not understood by Fee staff. Other payment errors occurred because Fee staff did not have accurate and timely information to determine correct payments, and the VAMC did not have sufficient controls to detect clerical errors. The audit offered several recommendations to the Under Secretary for Health who agreed and concurred with the OIG s estimate of questioned costs in net overpayments and cost savings associated with consolidating the Fee Care Program s claims processing system. The Under Secretary agreed to establish guidance and mandate training for VHA staff, develop an audit tool to reduce improper payments, initiate recovery of overpayments and reimbursement of underpayments, and develop a pilot program to improve payment processing efficiencies. The OIG audit report also noted that in order to improve the efficiency of the Fee Care Program, VHA needed to evaluate alternative organizational models and payment processing options. The report included a recommendation that VHA evaluate alternative organizational models and payment processing options to identify mechanisms to improve payment processing costs and timeliness. This recommendation provided a primary impetus for this study. As part of its strategy to improve payments in this Non-VA Care (Fee) Program, VA contracted with the National Academy of Public Administration (the Academy) to conduct an independent 5 The OIG has actually conducted three audits over the last several years regarding the Fee Care Program: Audit of the Medical Care Collection Fund Billings for Non-VA Care Audit of Non-VA Inpatient Fee Care Program Audit of Veterans Health Administration's Non-VA Outpatient Fee Care Program 11

12 assessment of the program, with the intent of providing VHA with options on the most efficient model(s) for its future state. This assessment considered the following factors: Organizational models in the federal health care payer market; Organizational models in the commercial health care payer market; Options to implement the most efficient models to support VHA s health care payer programs; and, Impact analyses for each model assessed, including its relative impact on staffing, cost to implement, and ROI. METHODOLOGY The Academy s assessment focused on promoting active participation and direct engagement by all parties involved. The primary methods for collecting information as well as verifying the Academy s understanding of VA s internal and external dynamics approach were to: Conduct targeted interviews with VA staff and stakeholders, including senior leaders and program staff. All interviews were conducted either in-person or by phone, with the explicit understanding that interviews were not for attribution, and that all information gathered would be aggregated. 6 Review all existing reports, studies, and audits of the current program. Collect and analyze data and metrics regarding the current performance of the existing program from all available sources. Interview staff and research the performance of other federal and commercial health care payer programs to gain their perspectives and experiences with Fee basis programs. Prepare an analysis of findings based on the above collection methods for review by the Academy s expert Panel. Draft proposals were sent to VA for consideration and comment prior to finalization. Given the short duration of the study, the Academy s study team relied heavily on existing reports and other documents provided by VA and from previous studies. Previous studies include several VA OIG reports. The study team also met with some of the OIG authors to gain additional insights into the studies. Another recent, highly relevant study was the Indiana University/Purdue University Fee Service Evaluation Project, which examined best practices within thirteen (13) VHA claims processing sites and evaluated overall efficiency, operations management, and cost metrics. The Academy study team also interviewed the Indiana University/Purdue University researchers. In addition to existing reports and studies, another important source of information was site visits. The Academy study team visited the VHA Chief Business Office Field Office and the National Fee Care Program Office in Denver, Colorado, VISNs with consolidated centers, and VISNs that still process claims in individual VAMCs. The study team also visited Medicare and TRICARE program officials in Falls Church, VA and Denver, CO. Interviews were conducted with officials from some of the major contractors used by Medicare, Medicaid, and TRICARE to 6 See Appendix C for a list of interviewees. 12

13 process claims, including TriWest, Health Net, Affiliated Computer Services (ACS), and Humana. CURRENT SITUATION VA s Fee Care Program has grown by 275% since Fiscal Year (FY) 2005 with approximately 2400 FTEs working in the program throughout the U.S. A total of $4.4 billion in claims were paid in FY Approximately $3 billion was paid in FY The number of unique patients receiving Fee care in FY 2010 was about 952,000. In FY 2008 the number of unique patients was approximately 820,000. Figure 1 Veterans Served by Fee Care Figure 2 Fee Care Expenses 13

14 This rapid growth has brought increased scrutiny, highlighting numerous areas requiring improvement. The three aforementioned VA OIG reports issued over the last three years noted hundreds of millions of dollars in erroneous payments or missed revenue collection opportunities. VHA recently calculated a payment error rate of 12%, which if applied to the projected outlays for FY 2011, indicates erroneous payments of $500,000, Improving the Fee Care Program s performance is one of Secretary of Veterans Affairs Shinseki s major initiatives in the VA Strategic Plan. 8 The current Fee Care Program operates on both a partially centralized (at the VISN level) and decentralized (at the VAMC level) basis. The studies by the VA OIG and an Indiana University/Purdue University study recommended consolidation or centralization of Fee claims processing. A clear majority of interviewees both inside the VHA and outside (Medicare and TRICARE officials, Congressional staff) also recommend some type of consolidation or centralization although there is no consensus as to the specifics of this new type of organization/business process. Several VISNs have already consolidated Fee processing centers or are in the process of consolidating. (A more complete discussion of this ongoing process is found in the Consolidation under VISN Alignment section in this report.) The Fee Care Program is managed by the Chief Business Office, which is under the office of the Deputy Under Secretary for Health for Operations and Management, which also has line authority over VISN directors. 7 This measure of error rate is the net of under and over charges on the billing. It does not include procedural errors or errors that do not result in inaccurate billing. 8 Improve the quality of health care while reducing cost. p

15 Figure 3. Chain of Command for the Fee Care Program FOCUS OF THIS REVIEW The Academy was asked to develop alternative organizational models for VHA to consider for the Fee Care Program. The study focused on three broad deliverables that align with the subsequent chapters in this study: Alternative Fee Models (Chapter 2) discusses the results of the Panels initial research into the structure and operations of the Fee Care Program and some potential models that were considered. Impact Analysis and ROI (Chapter 3) assesses the costs and potential benefits for each of the models identified in the previous chapter. Findings and Recommendations (Chapter 4) summarizes the perspective of the Panel regarding the overall environments in which the Fee Care Program operates as well as steps recommended for improving the program. Although most of the focus on the Fee Care Program has centered on operations and program efficiency, the Panel believes that the final determination about changing the existing model should rest on assumptions about larger issues including whether the model results in overall improvement in veterans healthcare and fits within VA and VHA's strategic goals. 15

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17 CHAPTER 2 ALTERNATIVE FEE MODELS OVERVIEW The Panel has considered several approaches to structuring the Fee Care Program in VA. Each of these approaches, summarized below, is described in more detail in Chapter 3. Given the extensive problems (found by previous studies) with the current model for processing claims which is a blend of centralized (the VISN level) and decentralized (the VAMC level) operations as well as the research conducted by the Academy study team, the Panel does not believe this is an acceptable model for VHA to employ in the future, and it is not being further analyzed in this study. The three approaches being considered include: Consolidation under VISN Alignment Consolidation under Regional Alignment Virtual (Technological) Consolidation This section also discusses the TRICARE and Medicare program models and their approaches to claims payments. The concluding section in this Chapter is an overview of VA s Fee Care Program functions. ORGANIZATIONAL CONSOLIDATION OPTIONS Several options were considered in this study: (1) VISN alignment consolidation; (2) national/regional alignment consolidation; and, (3) virtual (technological) consolidation. The Panel believes this technological option must be pursued, but it can also be used in combination with either of the other two (VISN or regional alignment) consolidation options. Each of these options is described in more detail in Chapter 3 of this study, Impact Analysis and ROI. Additionally, although it was not included in the cost analysis done in Chapter 3, VA should consider an option of conducting further analyses of the contracted-out models used by other Federal health care providers such as Medicare, Medicaid and TRICARE. 9 Option 1: Consolidation under VISN Alignment Centralization with VISN alignment would work within the current VISN organizational structure. Consolidation would occur not only within VISNs, but VISNs would collaborate with 9 Title 38, 810(a)(5) prohibits: the conduct of any study comparing the cost of the provision by private contractors with the cost of the provision by the Department of commercial or industrial products and services for the Veterans Health Administration unless such funds have been specifically appropriated for that purpose. Since this study was not specifically funded for that purpose, the Panel was unable to do a cost comparison between the VA Fee Care Program and TRICARE, Medicare and Medicaid but was able to evaluate a number of TRICARE and Medicare program features. The Panel does believe these programs have excellent business practices which can be of significant importance to the Fee Care Program and that VA should consider requesting an appropriation to conduct a cost benefits study. 17

18 each other to consolidate beyond the individual VISN. For example, smaller networks would collaborate with other VISNs in seeking out opportunities to merge with each other or with a larger VISN. Larger networks may seek out partnerships with other VISNs as well. VISN Directors offices would plan for the consolidation within the VISN and in partnership with other VISNs. The Panel believes that under this model, VHA could reduce to approximately 3-5, the number of VISNs that actually process claims. A key premise of the VISN alignment model is to build upon consolidation centers or operational sites that exist already rather than start new centers. A key advantage of this option is lower start-up or transition costs compared to the establishment of new centers. Certain steps could be taken by CBO to accelerate the current momentum that VISNs have to consolidate and form partnerships with each other. It is expected that consolidation would be phased-in such that lay-offs would not occur. Option 2: Consolidation under National/Regional Alignment For the national/regional alignment model, a limited number of regional claims processing centers handle all claims. New operating centers would be started with the CBO managing both policy and operations of the program without VISN alignment.. A similar effort is currently under way in VHA with the creation of seven regional Consolidated Patient Account Centers (CPACs). The transition is reportedly about halfway through completion, and although the perception as to the success of the consolidation have been mixed, the CPAC consolidation experiences can provide valuable lessons learned for any potential consolidation of the Fee Care Program. In following the CPAC model, consolidation of the Fee Care Program with regional alignment would be planned for and managed at the national level. The set-up costs are estimated to be greater with regional alignment compared with the VISN alignment model. An additional consideration for a regional model would be to create a single national claims processing center. However, for back-up purposes, a minimum of two centers would be recommended and possibly three centers would still be advisable as well. The Medicare and TRICARE programs and private insurance organizations all have regional set-ups rather than relying on a single processing center. The CHAMPVA program, with its single processing center in Denver, CO, offers the closest representation of this approach. Similar to the regional alignment model with more locations, this model requires building a new organization. Set-up costs can be expected to be substantial. Savings will require a longer period of time to achieve than VISN alignment. Over the long term (10 years), a central model may achieve lower operating costs due to greater standardization and consistency. Option 3: Virtual Consolidation Information technology (IT) systems can have a significant effect on claims processing and other outcomes. Greater automation in the processing of claims payments can be expected to increase both efficiency and accuracy. Less manual data entry and management result in faster processing and fewer errors being made. The lack of standardization and uniformity across Fee operating 18

19 sites is a major driver of errors and processing delays. Implementation of optimal IT systems, with or without physical consolidation, in effect constitutes virtual consolidation. The current system in place, Fee Basis Claims System (FBCS), is viewed by CBO as an interim solution to address current system limitations. The Panel also believes that while FBCS is a significant improvement over previous processes, it is still a far cry from state-of-the-practice claims systems. Virtual consolidation can achieve a number of important objectives and can be combined with any of the organizational consolidation options described above. Virtual consolidation enables telework, facilitates standardization and centralized management of field operations, and makes the physical location of operating sites less important. TRICARE AND MEDICARE MODELS 10 Both Medicare and TRICARE contract out all of their claims work and spend a majority of their staff time on overseeing the contractors and contracts. Several large commercial vendors specialize in providing large volume processing of these health services claims. Medicare provides approximately $400 billion in health insurance coverage to people who are aged 65 and over, those who are under 65 with certain disabilities, and people of all ages with end-stage renal disease. The Medicare Program offers an alternative to current VHA organizational structures because all administrative (back-office) functions have been contracted out. Each of five Medicare Regional Offices oversees various activities of the Medicare Administrative Contractors (MAC), which in turn are responsible for providing services to Medicare s enrolled population. Medicare has its own difficulties in ensuring that program money is spent appropriately. 11 However, program officials interviewed by the study team strongly supported the model they use for paying claims claims are contracted out to private vendors with federal employee oversight of the contractors as being efficient and effective. As with Medicare, TRICARE s $40 billion a year program has outsourced its administrative office functions, dividing the United Stated into three (3) regions, each awarded to a separate contractor. Contractors are responsible for ensuring that TRICARE s enrolled population receives care, developing and maintaining a network of providers, and maintaining an information system based on guidance established by TRICARE. Taken a step further than Medicare, TRICARE has tried to create contracts that push some program risks to the contractors and has created a robust Program Integrity Office with clearly-defined criteria and staff consisting of lawyers, statisticians, physicians and nurses (RNs). This office directs contractors in identifying and limiting fraud and abuse throughout the program. 10 Appendix A presents a table comparing VA s Fee Care Program s Characteristics and metrics against those of TRICARE and Medicare. 11 Squandering Medicare s Money. NY Times, May 25,

20 FEE PROGRAM FUNCTIONS When considering possible alternative organizational models for the Fee Care Program, it is useful to describe the Fee Care Program by functional area or component. Each functional area can be viewed as having a different set of pertinent options and associated cost-benefit outcomes. The functional areas discussed in this section are: Information technology; Authorization; Referral; and Claims processing. Information Technology Over the past few years a new claims processing software system FBCS has been established at all operating sites except for the consolidated center for VISN 6 in Salem, VA. VISN 6 is piloting a different Fee software system, developed by the 3M Corporation. As of the time of this writing, only one module of this new system which handles Medicare pricing, was operational at the VISN 6 operating center. FBCS features include electronic data capture and processing, automated claims review for accuracy, integrated claims scrubbing tools, automated workload assignments, and management reports. FBCS was first developed in 2006 for the new consolidated Fee claims center for VISN 16 in Jackson, MS, as a basic automation tool and has been greatly enhanced since then. VISN 16 has played a key role in affecting the design and enhancements of FBCS. FBCS was in production at 34 sites prior to the national roll-out of FBCS in VISNs with the most experience using FBCS are: 16, 19, 18, 7, and 8. The consolidated Fee center in Albany, New York, was the last site to obtain FBCS and started FBCS in production in October The 3M program was started in VISN 6 in June Hosting of FBCS is done either at the VISN level or the VAMC level so there not yet one central database. The Fee Care Program has been using an older system, VistA Fee, which is part of the Veterans Health Information Systems and Technology Architecture (VistA). VistA is an enterprise-wide information system used throughout the VA medical system. VistA Fee provides little automation, requiring staff to enter data manually, understand all the business rules, and calculate the correct payment. VistA Fee was developed over 20 years ago and is not suited for the volume and complexity of claims now being processed by VHA. FBCS is viewed by CBO as an interim solution to address a portion of the VistA Fee limitations. Current limitations of FBCS, for example, include a direct link to the VistA Fee software (FBCS is a GUI to VistA Fee), resulting in VA maintaining some of the limitations of VistA Fee, decentralized databases, limitations in interfacing with other systems, lack of Medicare pricing, and lack of integration with telephone customer support. FBCS is currently being enhanced to include Medicare pricing and is expected to be implemented before mid-year Claims processors need to simultaneously access both the VistA and FBCS systems to do their jobs. 20

21 Over the last decade, VA has centralized its IT operations. Previously, each of the major administrations health care, benefits, and cemeteries controlled their own IT resources and infrastructure. This structure appears to be a source of some frustration for a number of VHA officials who noted during the interviews how difficult it was to get IT initiatives approved and underway, or once underway, successfully implemented. Authorization Authorization of non-va health care for veterans entails a review of the use of medical resources at a non-va medical facility. Clinical staff conduct Utilization Reviews (UR) of cases being referred out through the Fee Care Program. In a number of instances, during the review, alternatives to the referral are found during the review, such as the availability of services at another VA facility. A number of VHA/CBO interviewees view this gatekeeper function as a critical step to ensure that Fee Care Program referrals are used only when appropriate. Although a number of interviewees stated that this review was a best practice, it is not mandatory and therefore, is not used in all VISNs or VAMCs. The CBO is currently managing a pilot to standardize both this practice as well as the staff case mix supporting this practice in two VISNs. The intent is to mandate these reviews and functions in FY2012. Non-VA health care is authorized at the local VAMC as a clinical decision. A number of interviewees told the study team that, regardless of the final model adopted for the Fee Care Program, this authorization decision should remain with the local facility. Registered Nurses (RNs) typically may do authorizations, but this varies depending on the VAMC. For example, clerks or Chiefs of Staff do authorizations as well. Generally, the person doing the authorization reports to the VAMC and/or VAMC Fee office and not the National Fee Care Program Office. However, the Fee office may want to have more involvement in the process than is currently the case to promote consistency and uniformity, as well as to maintain cost and care control. The RN or other person doing the authorization can enter the information into the electronic claims processing system, FBCS. Referral Referral of authorized cases to non-va care providers is not uniform or standardized across VAMCs. In one location, for example, VAMC doctors reportedly have a good network of doctors outside the VA system that facilitates effective referrals. In another location, VA physicians are less involved in the referral process, and RNs and clerks provide referral information to the veteran who then makes his or her own decision and arrangements. The study team was told that some VA physicians have concerns over potential litigation if the referral they make is too specific. The extent of VAMC referrals also depends on the severity of the case. For high profile cases such as dialysis, oncology, neurosurgery, and orthopedics, the VAMC is more likely to provide case management for a continuum of care across different providers. That is, they monitor the veteran s care throughout the referral process. For less severe cases the veterans may be more on their own to locate an appropriate care provider for their non-va care. At one location approximately half of the authorized cases are managed by the VAMC. 21

22 Claims Processing Figure 4 provides a general high level overview of the claim flow process using FBCS. The actual specific work flow processes may vary across Fee sites. Limitations with FBCS are noted above under the heading of Information Technology. Figure 4: FBCS Claims Processing Overview Authorization Module Create authorization, track care data Claim Intake and Verification FEE Processing Center Electronic Claims Claims submitted via EDI Automated Claim Checker Duplicates, OIG Excluded Denied Scanable? Yes Doc Manager/ Scan Module Authorized? Unauthorized Claims Paper Claims No Verification Clerk Authorized Claims Claim Adjudication Returned to Provider Mail to ACS for Medicare Pricing Outpatient Pricing Utilization Review Electronic Transfer for Re-pricing Inpatient Authorized, Approved VistA Central FEE Other Insurance Coverage Pay to $ Revenue Office (MCCF) Payment via VA Financial Services Center Claims Intake Claims are submitted either as hard copy or electronically. The great majority of claims are still being submitted by paper to VA Fee offices. (Note that Medicare mandates electronic submittal of its claims.) If claims are submitted on original standard Health Care Finance Administration (HCFA) 1500 or Uniform Billing (UB) claims forms and are Optical Character Recognition 22

23 compatible, then FBCS pulls the data into the FBCS database automatically when the forms are scanned in. FBCS allows for claim retrieval through storage and indexing of imaged claims. This is a new feature recently implemented with the national roll-out of FBCS in Prior to this, a much greater amount of manual data entry was required. Claims for emergency services require clinical documentation to be provided to VA facilities to appropriately adjudicate the claim; this practice makes the use of electronic claims submission a challenging option for both the community health providers as well as the VA facilities processing these cases. About 10 percent of claim line items are for unauthorized and Mill Bill claims. 12 Claims Distribution and Processing The claims are routed to the claims examiners. Authorized claims, unauthorized claims, and Millennium Bill (emergency, often called Mill Bill claims) claims are routed separately in the FBCS. Authorized claims are those referrals that were pre-approved by VA prior to the medical service being provided. Unauthorized and Mill Bill claims are those that did not receive pre-approval but which may be paid nonetheless (e.g., emergency hospital admissions for Mill Bill claims). Unauthorized claims go through a claim adjudication step to verify eligibility. If accepted, the claim goes through pricing review. Authorized claims go straight to pricing in the work flow process. One Fee office location reported that a claims examiner could handle about 60 to 70 Mill Bill cases a day versus 300 authorized cases a day using the latest enhanced version of FBCS. Previous studies report wide variation in productivity of claims processing across Fee offices. As of February 16, 2011, VA began using Medicare s standard payment rates for certain medical procedures performed by non-va providers. With the exception of VISN 6, which uses the 3M software system, claims examiners are using the services of a contractor, ACS, to price these claims at Medicare rates. Mail is used to transmit information between VA and ACS. Programming efforts are currently underway to incorporate Medicare pricing directly into FBCS before the end of FBCS processes the data through an automated claim checker to: Ensure claims are compliant with Medicare guidelines and Correct Coding Initiatives Eliminate bundling/unbundling errors Ensure medical necessity and IDC-9 / CPT match Ensure all codes are at ultimate specificity Avoid overused generic codes and catch-all codes. FBCS identifies claims that are duplicate claims from OIG excluded providers, and claims for veterans with insurance. FBCS facilitates transmittal of information to the VHA Medical Care 12 Source: Veterans Health Administration Support Services Center Cube Data. 23

24 Cost Recovery Program (MCCR) revenue office for billing non-va care to veterans third party insurance. Telephone Support Claims processing includes the handling of telephone calls from providers with questions and appeals. At one consolidated center location the study team visited, 6 operators handle 700 calls a day with an average wait time of 3 minutes, an average dropped-call rate of 10 to 15 percent, and an average call time of 8 minutes. Call centers are not integrated with FBCS and appear to be implemented on an ad-hoc basis within consolidated (VISN-level) Fee claims operations. Utilization Review of Unauthorized Claims During claims processing, LPNs or other clinicians in the Fee office conduct UR of claims that were not pre-authorized. In one location, for example, the reason for denial in the majority of cases was that the claim was not submitted within the required 90-day time limit. UR staff varies across Fee offices in terms of the use of LPNs, RNs, and/or physicians. At one location the study team visited, LPNs constituted the UR staff, while at another location the UR staff consisted of a combination of LPNs, RNs, and one physician. The manager at one location viewed UR as one area where automation could be improved in FBCS. Medicare Pricing In February, 2011, the Fee Care Program began to reimburse non-va doctors and facilities for services they provide to veterans at rates set by the Centers for Medicare and Medicaid Services Prospective Payment Systems and Fee Schedules. Determining those rates is currently a laborintensive process, with ACS, responsible for supplying Medicare pricing information to Fee offices. The exception is VISN 6, which is running a different claims software (3M) system, which generates the appropriate Medicare rates. Re-Pricing Fee offices obtain a reduction in the price submitted by providers in their claims to VA through re-pricing agreements procured for all Fee offices by the VHA CBO. The re-pricer (Health Net) works with provider networks to establish a reduced cost for non-va care services. Payments Payments are processed through the VA Financial Management System (FMS) in Austin, Texas. FBCS passes processed claim information through VistA Central Fee, which serves as a central data warehouse for processing payment. 24

25 Workflow Management FBCS provides workflow routing and monitoring. FBCS electronically sorts workload into individual work queues by routing claims to designated clerks for processing. The workflow management capabilities of FBCS can improve efficiency in the following ways: Provide management with a way to monitor individual productivity and reward star performers. Identify bottlenecks in the business process. For example, a workflow system could identify steps or claims processors where claims spend the most time. More workers could be added to the steps where work backs up. Streamline and standardize the business process for processing claims across multiple locations. Provide a complete audit trail for each claim processed. Reduce dependency on paper and eliminate time doing paper hand-offs. Reporting FBCS provides reports on days to pay, clerk productivity, claim status, claims denied (by reason code and vendor), and duplicate claims. There is a lot of potential for using this data to manage and improve operations but these capabilities are not widely utilized at this time given the system s newness. Project Hero Project HERO is a supplemental referral program that has been operating on a pilot basis in VISNs 8, 16, 23, and 20 for the past four years. Project HERO is designed to help veterans obtain the care they need when it is not readily available at their local VAMC or clinic. While veterans can still find and visit non-va doctors under the Fee care program, Project HERO provides veterans access to a pre-screened network of medical and dental providers who meet VA standards for quality care. Project HERO care is offered through contracts with Humana Veterans Healthcare Services and Delta Dental Federal Services. VAMCs in the four VISNs decide which authorized cases to pass on to Humana Veterans Healthcare Services. Humana then makes the referral within their network of providers and follows through with the patient on the appointment and coordination of clinical information between the VA and non-va providers. The percent of authorized cases handled by Humana ranges from about 10 to 26 percent (of cases that can potentially be referred) in the four VISNs where Project HERO is operating on a pilot basis. Humana pays the health care providers and then submits the individual claim to the Fee office as well. That is, claims are processed twice once by Humana and then by the Fee office. Given the limitations of IT and data systems currently in place, the double processing of claims is required. Enthusiasm and interest in using Humana for referral varies across VISNs and VAMCs. This may depend on the availability of providers within and outside VA and how well the referral process generally works in a given location. Start-up problems with Project HERO have contributed to some of the negative views held by VA officials. 25

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27 CHAPTER 3 IMPACT ANALYSIS AND RETURN ON INVESTMENT OVERVIEW This chapter provides an impact analysis for each alternative model including organizational consolidation models and virtual consolidation models. Impact analysis is conducted with respect to impact on staffing, cost to implement, and ROI. The previous chapter discussed Fee Care Program functions and the evaluation criteria upon which this analysis is based. MEASURES FOR EVALUATION OF ALTERNATIVE FEE MODELS Given the context of the VA strategic plan, relevant measures for evaluating alternative Fee models include: Cost efficiency; Accuracy of claim payment; Timeliness of claim payment; Access to health care; Quality of care; Continuum of care provided; Speed of appointment; and Standardization of non-va care coordination. Only some of these measures are available for the current Fee Care Program, and of course none are available for alternative models that do not exist at present. Hence, assumptions and qualitative judgments need to be made in order to assess alternative models for the Fee Care Program. Analysis of the Fee Care Program and comparison to other programs help inform the assumptions and qualitative assessment. Potential efficiency measures include: Administrative cost per claim; and Total number of claims processed per FTE staff processing the claims. The Panel analyzed differences in productivity across different Fee operating sites and time periods in order to assess potential areas for improvement in efficiency. For example, certain sites are more consolidated and/or more automated than others. The Panel performed statistical analysis of claims processing production as a function of volume of claims processed. The Panel also made cost comparisons across different programs to further assess the potential for cost reduction. Measurement of timeliness of claim payments is readily available from CBO s Stoplight performance metrics. Measures of veteran satisfaction with non-va care and quality of care are currently not collected. 27

28 The Fee Care Program overall is intended to enhance the accessibility of health care for veterans by providing non-va care when VA is not readily available, when wait times for VA care are long, or when VA services are either geographically inaccessible or VA facilities are not available to meet a veteran s needs. Fee Care Program expenditures have increased significantly over the past several years, in part, to improve accessibility of health care for veterans. However, it is largely unknown if an optimal allocation of VA versus non-va care is taking place or if alternative models could achieve a better balance than what currently exists. This could be affected, for example, by the relative supply of VA versus non-va care in a given locality. This will require further study beyond the current study scope of work. Table 1 presents a list of measures, data elements, and sources of data that the Panel sought to collect and analyze at the VISN or operating site level. Differences in operations across medical centers and VISNs provide an opportunity to analyze statistical variations in outcomes that inform the impact and ROI analyses. Table 1. Program Characteristics, Measures, and Data Sources Program Characteristics Measures Data Sources Transition costs FTEs Lease costs Non-labor costs Fee consolidation centers CPAC experience Site visits/interviews Fee operation staff FTEs CBO Stoplight Report Other studies Fee operation non-labor costs $ estimates CBO Volume of claims Claims processed Claim expenditures CBO Stoplight Report Type of diagnoses purchased Top 5 diagnoses purchased CBO Stoplight Report Claims pending over 30 days % backlog Timeliness of payments Interest penalties CBO Stoplight Report Processing cycle times Age of claims in inventory Accuracy of claims payments % improper payments OIG report Error rates CBO Customer satisfaction Veteran level of satisfaction HERO project Qualitative assessment Level of automation Manual vs. electronic CBO Site visits Other operating characteristics Various CBO Site visits Source: NAPA study team research ANALYSIS OF THE FEE CARE PROGRAM Review of the Fee Care Program Several studies and numerous study team interviews point to the following significant challenges and areas for improvement in the Fee Care Program: Decentralized mode of operation across VA hospitals resulting in inefficient operations 28

29 High error rates Fee Care Program organizational alignment, staffing, grade profiles, education, training, training certification, performance standards and performance expectations vary significantly across VISNs and operating sites Interpretation and application of rules vary across Fee operating sites. The study team s research found: Limited VISN-wide executive oversight of purchased care programs No clearly defined operational objectives or goals No defined strategy for optimally managing program expenditures Minimal understanding of the services being procured and prices paid for those services No pronounced effort to effectively capitalize on the expertise, resources and economies of scale of the VISN. Factors Affecting Efficiency and Accuracy Previous studies of the Fee Care Program and other sources of information based on study team interviews recommend consolidation of the program. The expectation for consolidated Fee operating centers is improved performance in terms of efficiency and accuracy. Consolidation is intended to improve the accuracy and efficiency of claims processing through economies of scale and greater standardization and consistency in critical business practices. Consolidation is intended to achieve economies of scale. For example, management staffing can be reduced if one operating site replaces several sites. With consolidation, certain positions such as coding, UR, accounting technician and appeals specialist can be staffed up on a full-time rather than part-time basis, thereby achieving efficiencies through better-trained and more fulltime dedicated staff. Consolidation is also expected to result in greater standardization and consistency in several areas of the business, including policies, operating procedures, application of pricing methodologies, training and education, decision-making in the adjudication of claims, application of regulatory changes, data management and reporting, and internal controls. In a decentralized environment, there are more opportunities to misinterpret laws and regulations. Consolidation can help achieve consistency and standardization, which, in turn, will improve accuracy as well as efficiency. Other factors affecting consistency and standardization are how well the regulations are specified and promulgated, training, performance standards, technology platform, reporting systems, CBO management, VISN management, and operating site management. The Panel concluded that technology and process automation are essential in solving the problem of inconsistency. 29

30 Productivity Analysis A basic measure of productivity is the number of claims processed per FTE. Number of FTEs serves as a basic measure of resources utilized. This measure can be converted into a cost measure based on salaries and overhead factors applied to salaries. The source of data made available to the study team is CBO s Stoplight cubed data. 13 Comparisons are made across VISNs, operating sites, annual time periods, and size of operations. Centers with the highest productivity level represent the potential for improving efficiency throughout the program. Four VISNs already have longstanding consolidated operating centers VISNs 2, 6, 16, and 19. Hence, we can compare the efficiency of these centers to non-consolidated operating sites. We can also make comparisons across varying sizes of operations, expecting operating sites that process larger volumes of claims to be more efficient. Units of analysis are the 21 VISNs and 114 operating sites. The latter includes four consolidated VISN operating sites. The productivity analysis includes frontend authorization as well as claims processing. With the Stoplight data available to the study team, it was not possible to separate the two areas. In future analysis, it would be useful to separate these two major functions as we would expect the productivity functions to differ. In particular, clinical authorizing of non-va care requires human intervention and cannot be as fully automated as claims processing. Summary Statistics A total of 114 operating sites processed an average of 4,593 claims per FTE in FY 2010 and 4,734 claims per FTE in FY as shown in Table 2 and Table 3 respectively. Size of the operations varied from 2,974 claims being processed (Bronx, New York) to 800,240 (VISN 16) in FY Productivity varied from 1,405 claims per FTE (Bronx, New York) to 13,601 (Ann Arbor, Michigan) at the operating site level. 2,201 FTEs processed 9,568,880 claims in FY 2010; 2,317 FTEs processed 10,185,669 claims in FY The Stoplight data is self-reported by the operating sites. The study team conducted edit checks for outliers, inconsistency, and missing values, reviewed data with operating sites, and made corrections where obvious errors had been made. 14 FY 2011 data is projected for the 4 th quarter based on previous 3 quarters. 30

31 Table 2. FY 2010 Claims per FTE VISN Level, FY 2010 Operating Site Level, FY 2010 Total Claims FTEs Claims/FTE Total Claims FTEs Claims/FTE Mean 455, ,632 83, ,593 Standard Deviation 183, , , ,187 Median 467, ,370 58, ,008 1 st Quartile 3 rd 379, ,794 36, ,197 Quartile 566, ,394 84, ,597 Low 88, ,659 2, ,405 High 800, , , ,601 N Total 9,568,880 2,201 4,348 9,568,880 2,201 4,348 Source: NAPA study team calculations of Stoplight cubed data Table 3. FY 2011 Projected Claims per FTE Operating Site Level, 2011 VISN Level, 2011 (Projected) (Projected) Total Claims FTEs Claims/FTE Total Claims FTEs Claims/FTE Mean 485, ,607 89, ,734 Standard Deviation 199, , ,957 Median 471, ,319 62, ,292 1 st Quartile 3 rd 421, ,857 40, ,491 Quartile 626, ,121 95, ,803 Low 88, ,982 3, ,269 High 913, , , ,195 N Total 10,185,669 2,317 4,397 10,185,669 2,317 4,396 Source: NAPA study team calculations of Stoplight data Productivity per claim may be affected by the type of claims being processed, including authorized claims, unauthorized claims, and Millennium Bill (emergency, often called Mill Bill claims). Unauthorized and Mill Bill claims require an extra step for determining eligibility. Table Table 4 shows the claims allocation of claim line items and disbursed amount between preauthorized care and unauthorized and Mill Bill care. Only about 13 percent of the disbursed amounts are for unauthorized and Mill Bill care. 31

32 Table 4. Claim Line Items and Disbursed Amounts Line Items Line Items Disbursed Amt Disbursed Amt Disbursed Amt FY10 FY11 (3rd Q) FY10 FY11 (3rd Q) Projected FY11 Community Nursing Home $ 106,973 $ 94,851 $ 513,685,883 $ 439,021,110 $ 585,361,480 Comp & Pen $ 73,624 $ 78,729 $ 11,077,054 $ 12,117,881 $ 16,157,175 Fee Dental $ 247,677 $ 219,039 $ 65,598,179 $ 60,280,635 $ 80,374,180 Home Health Services $ 8,889,761 $ 7,503,875 $ 581,327,149 $ 492,377,484 $ 656,503,312 Mental Health $ 25 $ 18,730 $ 24,973 Pharmacy $ 8,903 $ 4,261 $ 478,501 $ 237,950 $ 317,267 Preauthorized Inpt/Ancillary $ 1,055,918 $ 910,878 $ 918,803,463 $ 853,043,307 $ 1,137,391,076 Preauthorized Otpt/Ancillary $ 10,744,369 $ 9,724,137 $ 1,763,315,910 $ 1,422,606,772 $ 1,896,809,029 Total Pre-Authorized $ 21,127,225 $ 18,535,704 $ 3,854,286,139 $ 3,279,703,869 $ 4,372,938,492 Unauthorized $ 540,813 $ 436,104 $ 198,592,737 $ 162,931,627 $ 217,242,169 Mill Bill $ 1,826,160 $ 1,392,409 $ 386,102,466 $ 319,453,445 $ 425,937,927 Total Emergent $ 2,366,973 $ 1,828,513 $ 584,695,203 $ 482,385,072 $ 643,180,096 Total $ 23,494,198 $ 20,364,217 $ 4,438,981,342 $ 3,762,088,941 $ 5,016,118,588 Percent Emergent 10% 9% 13% 13% 13% Source: Veteran Health Administration (VHA) Support Services Center (VSSC) Cube data Claims per FTE by VISN No national benchmarks currently exist that compare facility or VISN efficiency metrics. Figure 5 below is a first attempt to provide a measure of efficiency based on calculating total claims processed per FTE. VISNs 2, 6, 16, and 19 have consolidated Fee processing centers while the other VISNs each have several operating sites or just recently consolidated. The productivity results for FY 2011 range from about 3,000 claims being processed annually by the operating sites in VISN 8 in Florida to about 7,100 claims per year for the consolidated center for VISN 19 in Montana. The average number of claims processed per FTE at the VISN level was about 4,600 in FY Ideally, variation in the composition of the claims workload should be taken into account. As described immediately above, productivity per claim may be affected by the type of claims being processed. However, VA does not have a weighted caseload system to help guide these estimates. The objective of the study team s initial analysis with the data made available is only to assess how great the variation in productivity might be across sites, not to determine a precise ranking or report card on each site s productivity. The productivity analysis shows a wide variation in productivity across operating sites, and therefore, there is potential for significant improvement in performance of the Fee Care Program. If the average VISN performed at the VISN 19 level, total claims could be processed with 33 percent fewer staff. If the average operating site were to perform at the high end of productivity for operating sites, the potential gain in efficiency is even greater. In contrast, claims processed within 30 days shows less variation across VISNs as shown in Figure 6. Claims processed within 32

33 30 days are a performance measure currently used for the Fee Care Program, but claims per FTE is not. Figure 5. Claims per FTE by VISN and Fiscal Year Source: Fee Care Program Stoplight Data Figure 6. Claims Processed within 30 Days by VISN and Fiscal Year Source: Fee Care Program Stoplight Data 33

34 Claims per FTE in FY 2010 Veterans Health Administration Fee Care Program White Paper Claims per FTE as a Function of Total Claims Processed Figure 7 and Figure 8 show claims per FTE (vertical axis) as a function of total claims processed (horizontal axis). Economies of scale occur only over part of the range, mostly from about 10,000 annual claims to 100,000 claims. Eighty percent of the operating sites process less than 100,000 claims in the year, with fifty-four percent processing less than 60,000. The three largest operating sites are the consolidated centers for VISN 6, VISN 16, and VISN 19. VISN 19 reflects economies of scale for its size of operation, but VISN 6 and VISN 16 do not. The processing of claims in VISN 6 has been manual and without the benefit of FBCS, which has been implemented in all the other sites. The 3M claims system was just very recently started up at the center in VISN 6, and its impact on productivity is unknown at this time. The relatively low measure of claims per FTE for VISN 16 can be explained by the fact that the local hospital facilities in VISN 16 retain over 120 FTEs for authorizations and dental claim processing while the consolidated center in Jackson, Mississipi, has only about 63 FTEs. Hence, its productivity is actually very high compared to other operating sites. Figure 7. FY 2010 Claims per FTE versus Total Claims Ann Arbor, MI, # Battle Creek, MI #11 Long Beach, CA, #22 Las Vegas, NV, #22 San Antonio, TX, #17 Indianapolis, IN, #11 Dayton, OH, #10 #19 y = x #6 # Gainsville, FL, #8 y = -3E-08x x Total Claims Processed in FY 2010 Source: NAPA study team analysis of Fee Care Program Stoplight Data 34

35 Claims per FTE in FY 2011 (Projected) Veterans Health Administration Fee Care Program White Paper Figure 8. FY 2011 Claims per FTE versus Total Claims Long Beach, CA, # North Chicago, IL, #12 Battle Creek, MI #11 Dayton, OH, #10 Sioux Falls, SD, #23 Ann Arbor, MI, # #19 y = x Gainsville, FL, #8 #6 y = -3E-08x x # Total Claims Processed in FY 2011 (Projected) Source: NAPA study team analysis of Fee Care Program Stoplight Data Productivity Benchmarks Productivity comparisons within the Fee program and with other programs can help to assess the potential for improvement in the Fee program for the different scenarios postulated in this study. VISN 19 Productivity and Cost Trends Given that VISN 19 is a high performer, it is useful to look at productivity and cost trends for this VISN since consolidation started in FY This is not to assume that VA could never become more efficient than VISN 19, but is presented as immediate benchmark for improvement in productivity for other operating sites given the current state of technology and systems available at all sites. VISN 19 data is highlighted in Table 5. Cost per claim includes actual salary and benefits for each employee and other operating budgetary items such as lease, supplies, equipment, and travel. Since 1998, the number of claims processed per FTE has increased, and the cost per claim and operating costs as a percent of benefits paid have decreased. Productivity nearly doubled between FY 1998 and FY 2008 as the number of annual claims processed per FTE nearly doubled from 3,333 to 6,452. The next major step up in productivity occurred with implementation of the new FBCS technology platform in

36 VISN 19 is also a leader in timeliness of claims processing, achieving 95 percent of claims processed within 30 days in FY 2009 and 94 percent Claims processed within 30 days in FY Table 5. VISN 19 Productivity and Costs Budget/ Operating Cost Amount paid for Non-VA care % Increase Paid % Increase Claims % Operating Cost to Benefits Paid Cost/ FTE # Claims Claim FY98 24 $1,297, $13,268,524 80,000 $ % 3333 FY99 24 $1,200, $15,392,231 14% 82,000 2% $ % 3417 FY00 24 $1,279, $18,715,128 18% 83,000 1% $ % 3458 FY $1,471, $26,593,478 30% 94,863 13% $ % 3580 FY $1,503, $32,237,800 18% 145,902 35% $ % 5306 FY $1,975, $43,424,242 26% 169,914 14% $ % 4925 FY $2,254, $50,859,193 15% 176,868 4% $ % 4642 FY $2,797, $58,402,962 13% 186,628 5% $ % 4654 FY $2,901, $66,059,141 12% 212,436 12% $ % 4817 FY $3,318, $81,014,094 18% 262,532 19% $ % 5695 FY08 * 53.1 $3,445, $112,959,112 28% 342,578 23% $ % 6452 FY $3,692, $137,971,680 18% 447,733 23% $ % 7450 FY10** 63.1 $4,354, $163,732,340 16% 463,079 3% $ % 7339 *FBCS Implementation. **FY10 Lease added to cost. Source: Cindy Heaton, VISN 19 Business Manager CHAMPVA VA currently runs a centralized claims processing business line for the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) in Denver, Colorado. CHAMPVA provides coverage for non-va purchased care provided to the spouse or widow(er) and to the children of a veteran who is rated permanently and totally disabled due to a serviceconnected disability or who died of a service-connected disability. In FY 2009 nearly 300 claims processing staff in Denver processed over 6 million CHAMPVA claims annually. The average number of claims processed per staff member is over 20,000. This level of productivity far exceeds the productivity of the most efficient sites for the Fee program, and can be viewed as a target for the Fee program to achieve. There are certain significant differences between the two programs that add unique challenges to each program. Authorization at the local VA hospital is a significant step in the Fee program that does not occur in CHAMPVA. Likewise, CHAMPVA has some requirements that do not exist in the Fee program. For example, CHAMPVA handles payment or reimbursement of service in foreign countries. TRICARE and Medicare TRICARE claims processing is totally contracted out. The claims processing cost is hidden in the total expenditures for TRICARE purchased care. The contractors do not report costs for Claims/ FTE 36

37 processing claims separately from the provider costs. However, the contractors report that about 75 percent of the claims processing is fully automated, that is, not requiring human intervention. The contractors also reported to the study team a cost per claim of $2.25 to $2.50 for electronic claims and $3.50 for paper-based claims. This serves as another basic benchmark to gauge the potential for productivity improvement in the Fee program. Medicare claims processing is also totally contracted out. The contractors report that about 95 percent of the claims processing ranges from about $0.40 to $1.60 per claim depending on whether the claim is electronic or paper-based, type of claims, and other factors 15 (compared to $9.40 per claim for VISN 19 and $2.55 for CHAMPVA). 16 Processing of commercial claims cost about the same, ranging from $0.85 per claim for electronic claims to $1.60 for paper-based claims 17. Error Rate Analysis Three VA OIG audits 18 issued over the last three years report hundreds of millions of dollars in erroneous payments or missed revenue collection opportunities. The Audit of Non-VA Inpatient Fee Care Program report (August 18, 2010), for example, concluded in its report highlights: VA Medical Centers (VAMCs) improperly paid 28 percent of inpatient Fee claims during the 6- month period of January 1, 2009 through June 30, The improper payments occurred because VHA s policies for determining eligibility for inpatient Fee care did not provide adequate guidance on how to determine eligibility for inpatient Fee care or were not understood by Fee staff. Other payment errors occurred because Fee staff did not have accurate and timely information to determine correct payments, and the VAMC did not have sufficient controls to detect clerical errors. We estimate that VHA made net overpayments of $120 million on inpatient care for veterans in FY 2009 or $600 million in improper payments over the next 5 years. CBO s own analysis of error rates in claims processing for recent activity is about 12 percent. (To date, this information has not been publicly released.) This measure of error rate is net of under and over charges on the billing. It does not include procedural errors or errors that do not result in inaccurate billing. An error rate of 12% applied against total Fee expenditures in FY 2011 indicates erroneous payments of $500,000,000. The current error rate of 12% is an improvement over the rate reported last year, 13.8%. 15 Source: interviews with industry contractors and Medicare officials. 16 As reported by CHAMPVA officials for FY Source: America s Health Insurance Plans (AHIP), which is a national trade association representing the health insurance industry. 18 Audit of the Medical Care Collection Fund Billings for Non-VA Carehttp:// Audit of Non-VA Inpatient Fee Care Program Audit of Veterans Health Administration's Non-VA Outpatient Fee Care Program pdf 37

38 VA s FY 2010 Performance and Accountability Report indicated significant variance in the estimated amount of improper payments between the OIG s results and VHA s results. According to the report, VHA implemented certain improvements in sample design, sample size, and measurement methodology. For 2010 a total of 1,020 claims were sampled from 20 medical centers. A claims sample size of 1,020 claims may be large enough for national representation but it does not allow for estimates at the VISN level or operating site level of analysis. Audit reports from either the OIG or VHA do not identify any sites that performed better than others. For a comparative benchmark, CBO reported to the study team that the national error rate for CHAMPVA for this year is 1.03 percent. This is based on using the same measurement processes (payment error compared to total payments) that was used to calculate the Fee Basis payment error rate of 12 percent. The TRICARE program may serve as an example of high performance with respect to management of improper payments as well. In interviews TRICARE program integrity officials reported error rates that are under 1/2 percent. Service level agreements with the claims processors require: The absolute value of the payment errors shall not exceed 2% of the total billed charges for the first two option periods. In all remaining option periods, the absolute value of the payment errors shall not exceed 1.75% of the total billed charges. 19 TRICARE s reported error rate of.42 percent is based on billed charges, as opposed to actual paid amounts used in calculating the error rate for the Fee program. Actual amounts paid are typically less than billed amounts. For example, if most payers pay at a rate of $1 in payment for every $3 to $5 in billed charges, a comparable error rate for the TRICARE program might be in the range of 1.26 percent to 2.1 percent. In any event, it is clear that the TRICARE program experiences far fewer errors than the Fee program does. TRICARE s Program Integrity office executes policies and procedures regarding prevention, detection, investigation and control of fraud, waste and program abuse. It provides oversight of contractor program integrity activities. It liaises with Department of Justice, law enforcement agencies, state and federal agencies, and private plans. TRICARE program integrity tools include: mandated use of fraud detection software; automated computer edit software program; post-pay duplicate software; quarterly and annual audits; prepayment review; beneficiary/provider education; and anti-fraud data mining (e.g., spike detection, outliers). TRICARE maintains and tracks electronic records of all adjudicated purchased care claims in its TRICARE Encounter Data (TED). The TED data provides many uses including: financial accountability; fraud and abuse detection; comparison to other health plans; establishing reimbursement rates; network utilization; Military Treatment Facility make versus buy decisions; calculation of payments and collections; evaluation of TRICARE programs; and ad hoc reporting. 19 TRICARE Operations Manual M, February 1, 2008, Chapter 1, Section 3, TRICARE Processing Standards. 38

39 ORGANIZATIONAL CONSOLIDATION OPTIONS There are two organizational consolidation options: (1) VISN consolidation; (2) national/regional alignment consolidation. The essential distinction between these two scenarios is that VISN consolidation builds upon existing operating centers, whereas the national/regional approach is to build new operating centers from the ground up. Organizational Option 1: Consolidation under VISN Alignment Centralization with VISN alignment would work within the current VISN organizational structure. Consolidation would occur not only within VISNs, but VISNs would collaborate with each other to consolidate beyond the individual VISN. For example, smaller networks would collaborate with other VISNs in seeking out opportunities to merge with each other or with a larger VISN. Larger networks may seek out partnerships with other VISNs as well. VISN Directors offices would plan for the consolidation within the VISN and in partnership with other VISNs. The Panel believes that under this model, VHA could reduce to 3 to 5 the number of VISNs that actually process claims. VISNs already have a certain amount of momentum for consolidating with VISN alignment. Ten VISNs have consolidated payment centers or are in the process of consolidating (VISNs 2, 4, 6, 9, 10, 16, 17, 19, 20, and 23). VISNs 2, 6, 16, and 19 established consolidation centers a number of years ago. The VISN 19 consolidation center was started in VISN 4 is transitioning to a consolidated Fee center this year with little set-up or acquisition cost. VISN 18 and VISN 19 are forming a partnership for the consolidated VISN 19 center to process VISN 18 claims. VISN 20 recently launched their consolidation center. VISN 17 is currently in the process of consolidating this year in Texas after developing a business plan. The set-up resources required is about 1.5 FTEs expended over a year-and-a-half. The business plan estimates a reduction in Fee staff from over 130 FTEs to 60 FTEs. The consolidation is taking place at a Fee operating site that has enough space for the new consolidated center so that no additional costs will be incurred for the space. In FY 2010, VISN 19 Consolidated Fee Service was approached by other facilities to assist with backlog reduction in claims processing. By using FBCS, VISN 19 is able to log directly into the local facility software system to assist with claims processing. VISN 19 processed claims for Orlando VAMC and Central Alabama HCS to help reduce backlog. VISN 19 has also partnered with VISN 17 and the VA Texas Valley Coastal Bend HCS (VCB) as a longer-term agreement and is processing claims for all inpatient contracts and outpatient Fee basis, and will soon take on all remaining claims for VCB. VISN 19 is currently collaborating with VISN 18 to process their Fee claims, starting with a pilot for Phoenix that is expected to last three to six months before proceeding further. VISN 19 will roll in each of the other facilities in VISN 18 every three months. This transition will take about one and a half years and will require no significant amount of one-time set-up or acquisition costs. A key factor affecting this cost outcome is the availability of accounts receivable staff in 39

40 leased space who can be readily transitioned over to the Fee Care Program due to the CPAC consolidation project. VISN 20 started consolidation planning a year before implementation, and the implementation process required about six months. About one and half FTEs were devoted to the planning and implementation processes. They took on one or two stations at one time, and Alaska is the only site left now. A total of about 80 Fee staff (including the staff at local facilities) is being reduced to 64. The authorization function is still done at the local facilities while the bill processing and UR are done in the network payment center. The timeliness of claims processing has improved substantially since consolidation. For example, there is no Fee claims backlog in Walla Walla for the first time since consolidation took place. No data is currently available at this time to indicate if VISN consolidation has resulted in lower error rates. A key premise of the VISN alignment model is to build upon consolidation centers or operational sites that exist already rather than start new centers. A key advantage of this option is lower start-up or transition costs compared to the establishment of new centers. Certain steps could be taken by CBO to accelerate the current momentum that VISNs have to consolidate and form partnerships with each other. Active communication between CBO and VISNs and high level VA management endorsement would help to accomplish this. CBO could set up a competitive process to identify the leading three to five operating centers for further consolidation. The Fee Care Program s Advisory Board could provide a forum to obtain input from all the VISNs for the consolidation. It is expected that consolidation would be phased in such a way that lay-offs would not occur. Interviewees consistently noted the relatively high turnover of staff in these administrative jobs, often driven by opportunities in other areas of VA or in private health care. Inasmuch as the total involved in Fee claims processing represents less than 1 percent of VHA staffing, normal turnover and reassignment of current Fee staff should eliminate the need for lay-offs. It is also expected that CBO would have metrics, authority, and leadership to effectively ensure that standardization occurs across the three to five consolidated centers. Organizational Option 2: Consolidation under Regional Alignment For the regional alignment model, a limited number of regional claims processing centers handle all claims. The CBO manages both policy and operations of the program without VISN alignment. New operating centers would be formed. For comparison to a model of regional alignment, CBO is consolidating VAMC revenue programs 20 into seven regional CPACs. Each location was rated and ranked on a variety of factors including: existing areas of revenue office consolidation, availability of existing VA 20 VA collects health insurance payments, (third-party collections) for veterans health care conditions it treats that are not a result of injuries or illnesses incurred or aggravated during military service. 40

41 owned space, construction costs, cost and availability of commercial real estate, cost of living, local labor market conditions, and the ability to recruit professional and technical staff. The four steps for implementing CPAC are readiness planning, transition of host VISN to CPAC, transition of non-host VISNs, and stabilization period after initial transition. Field officials interviewed by the study team were not enthusiastic, largely because collections under the consolidated model have not reached the levels of the decentralized process and process costs are reportedly higher. CBO officials noted that much of the decline in collections revenue can be attributed to the general economic conditions as opposed to the efficiency or effectiveness of the new organization. Currently, there is no readily available evidence of cost savings or increases in revenue gain that can be attributable to the consolidation. VHA formally announced plans in October 2008 to transition field revenue functions to seven (7) CPACs by the end of Fiscal Year Following the February 4, 2010 House Veterans Affairs Committee Hearing on VA s FY 2011 budget, the Deputy Secretary asked VHA to present updated cost/benefit information concerning a variety of CPAC deployment schedule alternatives. The Secretary subsequently selected a FY12 deployment strategy, which increased the project s acquisition cost from $265 million (original FY 2013 deployment budget) to $304 million in order to accelerate deployment by one year. The additional costs are attributed to: increased implementation and transition support cost; additional program management support requirements; temporary space and associated activation costs for staging each accelerated implementation; and the accelerated hiring of CPAC and CPAC PMO staff. The updated acquisition costs are shown in Table 6. Table 6. CPAC Acquisition Costs CPAC Acquisition Cost FY09 FY10 FY11 FY12 FY13 TOTAL Medical Support and Compliance (NR) Salaries and All Other $10.5 $39.4 $29.4 $37.7 $0.7 $117.7 Implementation & Transition $15.4 $41.5 $15.3 $32.4 $2.1 $106.7 Furniture/Equipment $1.2 $9.4 $3.7 $0 $0 $14.3 Medical Facilities (NR) $13 $28.9 $3.3 $2.1 $0.4 $47.7 Information Technology $0 $5.9 $5.4 $6.2 $0 $17.5 Total Cash Flow $40.1 $125.1 $57.1 $78.4 $3.2 $303.9 Note: numbers in millions Source: CPAC National Strategy, Page VIII In following the CPAC model, consolidation of the Fee Care Program with regional alignment would be planned for and managed at the national level. The set-up costs would be greater with regional alignment compared with the VISN alignment model. The regional model described entails building a new organization. Set-up costs with the CPAC model of $304 million are substantial. Set-up costs for a similar type of regional Fee model will vary depending on a number of different factors including how many regional centers are set up and their location. Regionalization costs could be reduced somewhat if existing VISNs were 41

42 selected to host the new regional centers. However, set-up costs for a CPAC- type regional Fee model can be expected to be substantial as well. Expected savings with regional alignment will take longer to achieve because it would involve starting a new organization and new Fee processing centers. A special case for the regional model would be to create a single national claims processing center. However, for back-up purposes a minimum of two centers would be required and possibly three centers would still be advisable as well. The Medicare and TRICARE programs and private insurance organizations all have regional set-ups rather than relying on a single processing center. Similar to the regional alignment model with more locations, this model requires building a new organization. Set-up costs can be expected to be substantial. Savings will require a longer period of time to achieve than VISN alignment. In the very long term after ten years, perhaps a central model might achieve lower operating costs due to greater standardization and consistency. National/regional consolidation or centralization could occur at any number of locations. Given the presence of CBO and CHAMPVA in Denver, consideration could be given to Denver for centralized processing of Fee claims. However, there is no Fee claim processing operation currently in Denver to build upon, while there are numerous consolidated or large operating sites in other locations. The regulatory statutes that authorize Fee care are completely different from the statutes that authorize CHAMPVA care. The CHAMPVA eligibility and claims processing system is highly customized to the CHAMPVA program such that modifications to adapt it to the Fee program are not practical. The space available at Denver for the CHAMPVA program is strictly limited to the functions currently being performed in support of CHAMPVA. Any expansion at Denver would require a space analysis review to determine if the agency should build or lease a facility. While the end goals under either VISN consolidation or national/regional consolidation are the same, the VISN consolidation approach offers a quicker and easier transition by building on existing claims processing sites and utilizing resources already in operation. Consolidation cannot happen overnight, and it will take at least four years or longer to fully implement staffing standards, new technology, and other means to achieve targeted levels of efficiency and accuracy. VISN consolidation will result in less overlap in dual operations than national/regional consolidation. VIRTUAL CONSOLIDATION OPTIONS Aside from physical consolidation models, IT systems can have a huge effect on efficiency and other outcomes. Greater automation in the processing of claims payments can be expected to increase both efficiency and accuracy. Less manual data entry and management result in faster processing and fewer errors being made. The lack of standardization and uniformity across Fee operating sites is cited frequently in previous studies and study team interviews. Implementation of optimal IT systems, with or 42

43 without physical consolidation, in effect constitutes virtual consolidation. Efforts to transform the organizational model should address virtual consolidation as well as physical consolidation and consider the sequencing of one change versus the other. The Fee Care Program has been using an older system, VistAFee, which is part of the VistA. VistA is an enterprise-wide information system used throughout the VA medical system. VistAFee provides little automation, requiring staff to enter data manually, understand all the business rules, and calculate the correct payment. VistAFee was developed over 20 years ago and is not suited for the volume and complexity of claims now being processed by VHA. In making a comparison to the CHAMPVA program, the CHAMPVA eligibility and claims processing system was built upon VistA software, but it is now a highly customized system that is, for the most part, divorced from the VistA routines that manage the Veteran Master Patient file (served population) and other VistA hospital and business modules that are part of the VistA Fee software. The majority of the enhancements that have been built into CHAMPVA were locally programmed and deployed separately from the national VistA system. Processes and programs are highly customized and designed to support CHAMPVA claims workflow. The current system in place for the Fee program, FBCS, is viewed by CBO as an interim solution to address a portion of the VistAFee limitations. Current limitations of FBCS, for example, include a direct link to the VistAFee software (FBCS is a GUI to VistAFee), resulting in VA maintaining some of the limitations of VistAFee, decentralized databases, limitations in interfacing with other systems, lack of Medicare pricing, and lack of integration with telephone customer support. FBCS is currently being enhanced to include Medicare pricing and is expected to be implemented before mid-year Claims processors need to simultaneously access both the VistA and FBCS systems to do their jobs. Objectives of virtual consolidation are to: Provide technology, policies, standards and procedures for paperless processing of claims Develop and maintain one central database Develop and maintain one system for users to interface with Provide a system that applies the same rules for all claims examiners throughout the country regardless of their physical location Provide a rules engine that minimizes the need for human intervention. Provide a program integrity component that is implemented in a standardized manner at all claims processing sites. Virtual consolidation is not exclusive of any of the organizational consolidation options described above. Virtual consolidation can take place alongside organizational consolidation. Even without physical consolidation, virtual consolidation should be able to accomplish the following: Share work, when necessary, among varying Fee Processing sites Streamline the assignment and allocation of work as the workload and number of employees at each site changes 43

44 Provide tracking of performance at an employee level, group level, or Fee Processing operation level Generate reporting for the enter Fee Processing operation with the ability to drill down. A key objective for any option should be to house the data in a central data repository. This would facilitate efforts to pursue program integrity as well as claims processing efficiency. Automation and data centralization facilitate standardization and efficiency as well as physical consolidation of operations would accomplish this objective. An enhanced and fully automated rules engine would standardize and automate pricing and claim adjudication. As possible models to consider for the Fee Care Program, both Medicare and TRICARE programs are highly automated. Several large commercial vendors specialize in servicing large volume processing of health services claims. Based on interviews with leading industry managers, the percent of TRICARE claims automated is in the range of 70 to 80 percent. The percentage of Medicare claims processing automated is in excess of 90 percent. All VA Fee claims require manual processing. In the Fee Care Program, certain claims, particularly the authorized claims, lend themselves readily to automation. Other claims, unauthorized and Mill Bill claims, do not receive preapproval and require an extra step to verify eligibility. Approximately 90 percent of all Fee claim line items are pre-authorized and approximately 13 percent of the disbursed claim amount is preauthorized. Hence, processing of 85 percent or 90 percent of the Fee claims could be largely automated. In order for the Medicare/TRICARE model to be practical for the Fee Care Program, certain fundamental steps would have to be taken. Business rules for claims adjudication and processing would have to be specified well enough and incorporated into the automation process in order for the Medicare/TRICARE model to be practical for the Fee Care Program, particularly for unauthorized and Mill Bill claims. VA IT systems would have to be enhanced to put the business rules into practice. A program integrity component could enable a more proactive effort to identify errors and abuses. A key requirement for the enterprise-wide technology solution would be to replace the two separate FBCS and VistA Fee systems with a single system. FBCS provides a modernized front end to the VistA database and automates some of the processing of claims. FBCS can interface with only one instance of VistA at a time so there is no common reporting for all Fee processing. Also, with the current two systems, reconciling actual claim payment with claim activity is not possible. Different options can be considered by CBO to move towards an optimal state of virtual consolidation including: Enhancement of FBCS and Other Systems CBO can continue to enhance FBCS incrementally, replace VistaFee, and take other steps. 3M Program after evaluation of FBCS and 3M systems, a decision could be made to proceed with the 3M program instead of FBCS. 3M was recently put into production at the VISN 6 consolidated site. 44

45 Implement FSC automation solution VA s Financial Services Center (FSC) 21 in Austin, Texas in partnership with VISN 11 has attempted to start a pilot program for processing all non-va Fee claims. This is described as a work-in-progress occurring over several years with uncertain outcomes. FSC anticipates implementing the pilot in A nation-wide roll-out would start in 2016 and be completed in Enterprise-wide technology solution CBO procures a new enterprise-wide technology solution that would centralize all operations in one integrated system and encompass all major components of the Fee Care Program including reporting and program integrity as well as claims processing. An enhanced and fully automated rules engine would standardize and automate pricing and claim adjudication. A program integrity component could enable a more pro-active effort to identify errors and abuses. A key requirement for the enterprise-wide technology solution would be to replace the two separate FBCS and VistAFee systems with a single system. FBCS only provides a modernized front end to the VistA database and automates some of the processing of claims. CBO could procure an enterprise-wide technology solution through the competitive process. Contractors who could do this include contractors who administer Medicare, Medicaid, and/or TRICARE claims as well as FSC and the developers of FBCS and 3M. To implement virtual consolidation, further study and a competitive bidding process would be needed to determine the requirements in greater detail and select the vendor(s). To increase the probability of success, further study would entail a detailed assessment of current systems in place and analysis of business requirements. To date, CBO has been taking somewhat of an incremental approach but appears to be making progress, particularly with the national roll-out of FBCS in CBO is also in the process of establishing a national integrity program, referred to as Program Integrity and Informatics. CBO recently started new procurements for developing a centralized database system and implementing predictive modeling software. The Purchased Care Systems Business Management office has developed specifications for developing a system that would replace the interim FBCS. Virtual consolidation would change the business process for the Fee processing program. Adequate training would be crucial to the success of the program. Study would be required to determine new user roles for workers using the system and to determine what permissions should be assigned to each individual. An implementation plan for the rollout of the new system should be developed that will ensure adequate training and allow for User Acceptance Testing to ensure that the system is correctly configured and that work continues uninterrupted during the transition. COST ANALYSIS AND ROI Cost analysis and ROI are conducted for the following four scenarios (as previously described in this report): 21 The FSC comes under the jurisdiction of VA s Office of Management. 45

46 VISN consolidation National/regional consolidation Virtual consolidation VISN consolidation and virtual consolidation. VISN consolidation is likely to result in the same number of processing centers as regional consolidation but the approaches taken are very different from each other and result in substantially different set-up costs. Investments in organizational consolidation and virtual consolidation can take place independently of each other or in combination. These scenarios assume that productivity metrics are implemented; clear lines of authority are established; and staffing standards and operating procedures are enforced. Operational costs for FBCS, CBO training costs, and other costs handled by CBO are not included in the scenario costs. Lease costs for space are reflected in the estimate of cost per FTE and constitute a small fraction of the total costs. As staffing levels are projected to decline in the future, lease costs become even less significant. In performing the cost analysis and ROI, the Academy Panel followed the guidance set forth in OMB Circular No. A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs. Projection of Fee Claims In order to perform cost analysis of alternative scenarios, projections of the annual volume of Fee claims processed and Fee disbursements over the next several years are needed. The National Center for Veterans Analysis and Statistics provides projections of the veteran population through year It also provides annual trend data for 2000 through 2009 on VA healthcare patient expenditures, utilization, and veterans with a service-connected disability. The projections show veteran population declining a little more than 10 percent annually for several years into the future. However, recent trend data show annual increases in patient expenditures, utilization, and veterans with a service-connected disability of more than 10 percent. The number of unique patients receiving non-va purchased care under the Fee Care Program increased from about 330,000 in FY 2003 to over 950,000 in FY 2010, resulting in an average annual increase of 14 percent over this period. Fee disbursements increased from about $3 billion in FY 2008 to $4.4 billion in FY 2010 and are projected to go over $5 billion in FY For FY 2009 to FY 2011 the annual increase in Fee disbursements has been about 14 percent. Many factors affect the upward trend including increases in veterans with a service-connected disability, legislation (e.g., Mill Bill), local decision-making at VA facilities, VA management policies and decisions, increased demand for nursing home care, and improving accessibility of health care to veterans in rural areas. Factors that may slow down the increases include the current budget crisis, health care reform, and management efforts to control costs. An example of the latter factor could be application of standardized practices for purchasing non-va health care and processing the claims. 46

47 Given all the factors together, alternative assumptions for future growth in claims processed could be reasonably specified to be in the range of 5 to 10 percent. Tighter management of operations, standardization, and policy direction could affect the result to be closer to 5 percent rather than 10 percent. On the other hand, if significant standardization and policy clarification on goals and expectations do not occur, future growth in claims could remain at 14 percent or higher. Set-Up Costs Table 7 presents set-up costs for the four investment scenarios. For the VISN consolidation scenario, several of the VISNs that have consolidated already indicated to the study team that about 1.5 FTEs were required for planning and implementation, taking an average about a year and a half to accomplish. Conservatively, we assume that 10 more consolidations would take place over a period of two years to reach the point of five or less VISNs running consolidated centers. We estimate an FTE cost of $100,000, assuming that higher paid staff are involved in the planning and implementation than claims processing staff. This results in set-up costs of $1.5 million. While the VISNs indicated that other costs were not significant for consolidating, an additional 50 percent or $750,000 is included for the ten iterations, resulting in a total estimate of $2.25 million in set-up costs for the VISN consolidation scenario. Since the costs of VISN consolidation are relatively low and no special budget allocation need be made, VISN consolidation can continue and accelerate through 2012 and VISN consolidations taking place have managed to use existing space without leasing new space. Also, space requirements in the future would decline as staffing levels decrease. Table 7. Projected Set-Up Costs for Fee Care Program Consolidation Year VISN Consolidation National/Regional Consolidation Virtual Consolidation Total Consolidation 2012 $ 1,125,000 $ - $ - $ 1,125, $ 1,125,000 $ 100,000,000 $ 25,000,000 $ 26,125, $ - $ 100,000,000 $ 25,000,000 $ 25,000, $ - $ 100,000,000 $ 25,000,000 $ 25,000,000 Total $ 2,250,000 $ 300,000,000 $ 75,000,000 $ 77,250,000 Source: NAPA study team calculations of Stoplight data In looking at the experience of the CPAC model, the set-up costs for the Fee regional consolidation scenario could be substantial, in the order of magnitude of $300 million. Given this amount, special budgetary funding and arrangements would need to be made such that the start would be 2013 as opposed to 2012 for the VISN consolidation scenario. Set-up would occur over a three-year period from 2013 to With the advantage of hindsight on the CPAC set-up, one could postulate lower set-up costs for the national/regional consolidation. However, the set-up costs can still be expected to be much greater than the VISN consolidation scenario. As discussed previously, the VISN consolidation scenario is a continuation of consolidation already underway that leverages existing operations and resources with minimal set-up costs and keeps the need for dual operations to a minimum. 47

48 For the virtual consolidation scenario, the Panel estimates a set-up cost of $75 million over the period from 2013 to The cost of $75 million is a rough estimate based on information gathered in interviews, an informal small survey of vendors, and a previous study of purchased care alternatives. The general expectation is that the cost would be under $100 million. Note that this is only the set-up costs. There would still be substantial annual operating costs to keep and maintain the software and technology, which is currently the case with the Fee program s FBCS interim solution. These costs are handled by CBO at the national level and are not included in the study scenarios. As discussed previously, different options for virtual consolidation include enhancement of the current FBCS and other systems that FBCS interfaces with, the 3M solution, FSC automation solution, or an enterprise-wide technology system that replaces the current systems. The previous study 22 considered three alternatives: custom development of a new system; commercial-off-the-shelf (COTS) purchase and modification; and FSC COTS solution. Set-up costs for the three alternatives were estimated to be, respectively, $127 million, $78 million, and $83 million. The study recommended the COTS purchase and modification alternative on the basis of having lowest life cycle cost and highest performance assessment (adaptability, scalability, and accuracy/compliance). The Panel is not recommending any particular approach or vendor as further study and a competitive bidding process would be needed to make the final decision. Further study would entail a detailed assessment of current systems in place, business requirements, and business requirement specifications produced already versus additional specifications needed. Productivity Savings Consolidation and standardization can be expected to substantially reduce FTE requirements over a three to five year period of time depending on the scenario. Given the history and success of VISN consolidation centers already in place, the VISN alignment consolidation scenario can be expected to achieve savings sooner than the regional consolidation scenario would. Success would also depend on enforcement of standardization requirements and staffing standards. All four scenarios assume that productivity increases would occur over a five-year period of time, considering that new staff would be hired, existing staff would be redeployed, and new staff would require training and time to reach full productivity. A five-year schedule also provides a reasonable amount of time for operating sites to make adjustments in their operating procedures and fully adopt changes. Significant productivity improvements would occur with all four scenarios, giving credit for many actions already underway, including (but not limited to) FBCS software improvements (which is still in relatively early stages), CBO Purchased Care organizational change, regulation improvements, policy standardization, training initiatives, fraud, waste, and abuse prevention 22 Purchased Care Alternatives Analysis: Evaluation of VA Business Strategy Options, report prepared for VHA CBO, Department of Veterans Affairs, by TC Associates, July 31,

49 activities, informatics improvements, and referral/authorization pilots. All of these areas are relatively new, and therefore it will take some period of time to see improvements. One specific area for improvement that is expected to occur under all four scenarios, for example, is the increasing submission of electronic claims and declining submission of paper claims. As noted in the study s productivity analysis, total FTEs across all the operating sites could be reduced by 33 percent if the average VISN performed as well as the most efficient VISN. The current level of 2300 FTEs at local facilities could be readily reduced to about 1,500 with physical consolidation, application of standard procedures at all operating sites, and monitoring of efficiency outcomes at CBO, VISN, and operating site levels. 800 FTEs is achievable with further advances in the technology platform and automation including a rules engine for claim adjudication. This assumes that staffing standards are analyzed on an ongoing basis, communicated to management of field operations, and enforced. Staffing standards, business rules, and standard operating procedures could be enforced with authority from the Deputy Under Secretary for Health for Operations and Management. The administrative cost of one FTE is estimated to be roughly $70,000, inclusive of the distribution of staff by grade level, their respective salaries and benefits, and other operating costs. Based on this cost and possible efficiency improvement, total annual administrative costs for field operations could be reduced from about $160 million to $107 million with a 33 percent reduction in staff and from $160 million to $53 million with a 67 percent reduction in staff. Table 8 presents staffing requirement estimates by scenario by year as a percent of the current level of staffing. For the VISN consolidation scenario, staffing requirements decline immediately and continuously over a five year period of time. Although VISN consolidation should require only about two years for implementation, the reduction in staffing would take place over five years to allow for redeployment of staff, learning curves for new employees, and implementation of standards in operating procedures. Table 8. Staffing Requirement Estimates by Consolidation Model Year VISN Consolidation Regional Consolidation Virtual Consolidation Total Consolidation % 100% 100% 100% % 100% 100% 90% % 90% 84% 70% % 80% 67% 50% % 70% 50% 35% % 60% 34% 20% % 50% 34% 20% % 50% 34% 20% % 50% 34% 20% % 50% 34% 20% % 50% 34% 20% % 50% 34% 20% Source: NAPA study team calculations of Stoplight data 49

50 The staffing requirement projections for the regional consolidation scenario are similar except that the consolidation would start one year later. For the virtual consolidation scenario staffing levels decline to 34 percent of the baseline compared to 50 percent for the physical consolidation scenarios. With this scenario, all the operating sites would be using the same system and central database, and with a rules engine the processing of claims would be largely automated with little human intervention. Authorizations and referrals would still take place at local facilities. Fee staff located in decentralized locations, in effect, would be teleworking. Total consolidation combines both the VISN consolidation and virtual consolidation. Greatest economies of scale and technology would occur with this scenario. Processing of claims would be largely automated. Productivity benchmarks based on CHAMPVA, TRICARE, and Medicare results as discussed previously provide the basis for setting targets for the total consolidation scenario. The recent VA OIG report cited above (Audit of Non-VA Inpatient Fee Care Program) state a CHAMPVA cost per claim of $2.55 for FY 2011, based on CHAMPVA data and analysis provided by CBO. Contractors for the TRICARE and Medicare programs state that 75 percent and 95 percent, respectively of their operations are fully automated, not requiring human intervention. CHAMPVA software automates claims processing by incorporating such features as electronically transferring claims data into the processing system, applying business rules that select the correct payment methodology and proper payment rate schedule, and calculating the correct payment. The CHAMPVA program has rules engines to cover eligibility determinations, the impact of other health insurance on processing a current submission, identification of previously paid claims that may indicate that the current claim in progress is a duplicate or potential duplicate claim, and automated process to apply allowable pricing to services. Table 9 shows the projected claims processed per FTE per consolidation scenario. This applies the reduction in staff projections to the current baseline processing of 4,400 claims per FTE. Table 9. Projected Claims Processed per FTE by Consolidation Scenario Status Quo VISN Regional Virtual Total Year Consolidation Consolidation Consolidation Consolidation ,400 4,400 4,400 4,400 4, ,400 4,889 4,400 4,400 4, ,400 5,500 4,889 5,238 6, ,400 6,286 5,500 6,567 8, ,400 7,333 6,286 8,800 12, ,400 8,800 7,333 12,941 22, ,400 8,800 8,800 12,941 22, ,400 8,800 8,800 12,941 22, ,400 8,800 8,800 12,941 22, ,400 8,800 8,800 12,941 22, ,400 8,800 8,800 12,941 22, ,400 8,800 8,800 12,941 22,000 Source: NAPA study team calculations of Stoplight data. 50

51 Claims processed per FTE is converted into a cost per claim based on an average operating cost of $70,000 per FTE. The $70,000 per FTE includes salaries and benefits, office space, supplies, equipment, and travel at the local operating site level. Salaries and benefits make up over 90 percent of the local facility operating budgets. Table 10 shows the projected cost per claims processed by consolidation scenario. Table 10. Projected Cost per Claims Processed by Consolidation Scenario Status Year VISN Regional Virtual Total Quo Consolidation Consolidation Consolidation Consolidation 2011 $15.91 $15.91 $15.91 $15.91 $15.91 Error Rate Savings 2012 $16.23 $14.60 $16.23 $16.23 $ $16.55 $13.24 $14.90 $13.90 $ $16.88 $11.82 $13.51 $11.31 $ $17.22 $10.33 $12.05 $8.61 $ $17.57 $8.78 $10.54 $5.97 $ $17.92 $8.96 $8.96 $6.09 $ $18.27 $9.14 $9.14 $6.21 $ $18.64 $9.32 $9.32 $6.34 $ $19.01 $9.51 $9.51 $6.46 $ $19.39 $9.70 $9.70 $6.59 $ $19.78 $9.89 $9.89 $6.73 $3.96 As discussed previously, the CBO analysis of error rates in claims processing for recent activity is about 12 percent, which is net of under and over charges on the billing. A net error rate of 12 percent results in erroneous payments of $600,000,000 for FY 2011 as shown in the table below. These costs are substantially greater than the potential to reduce administrative costs. Therefore, actions designed to correct errors have a far greater potential for return on investment than actions focused primarily on achieving economies of scale. Organizational consolidation, application of business rules that minimize potential for interpretation, standardization of operations and automation are important factors in achieving much lower error rates. Table 11. Example of Error Rate and Cost Calculations % Error Rate Purchased Care % Error Cost of Purchased Care 12% $5,000,000,000 $600,000,000 5% $5,000,000,000 $250,000,000 1% $5,000,000,000 $50,000,000 Source: NAPA study team Table 12 below presents a schedule of declining error rates by scenario. Virtual consolidation with automation has greater potential for reduction in error rates compared to the physical 51

52 consolidation scenarios. Productivity benchmarks based on CHAMPVA and TRICARE error rates as discussed previously provide the basis for setting targets for the total consolidation scenario. Also, as discussed previously, CBO has recently started up a national integrity program, referred to as Program Integrity and Informatics, and has a new contract in place for building a centralized database and predictive modeling. Both physical and virtual consolidation scenarios are expected to result in greatly lower error rates in addition to the total consolidation scenario. Hence, we show significant declines in error rates under all four scenarios. Table 12. Schedule of Error Rates for Consolidation Scenarios Status VISN Regional Virtual Total Year Quo Consolidation Consolidation Consolidation Consolidation % 12% 12% 12% 12% % 11% 12% 12% 11% % 10% 11% 11% 10% % 9% 10% 10% 9% % 8% 9% 9% 8% % 7% 8% 8% 7% % 6% 7% 7% 6% % 6% 6% 6% 5% % 6% 6% 5% 4% % 6% 6% 4% 3% % 6% 6% 3% 2% % 6% 6% 2% 1% Source: NAPA study team projections. Return on Investment Using the projections above combined with analysis of relevant data and the Fee Care Program, the Panel conducted an ROI analysis to identify the optimal consolidation strategy for the Fee Care Program. The ROI analysis used net present value (NPV) in order to identify, in today s dollars, the amount of money that may be saved based on the different consolidation scenarios. Table Table 13 below shows a summary of the analysis the Panel conducted. NPV was calculated using a discount rate of 7 percent. Annual claims processed were projected to increase 5 percent annually. Operating costs are assumed to increase 2 percent per year. Table 13. Return on Investment Summary for Consolidation Scenarios Consolidation Scenario NPV of Staff Cost NPV of Error Cost Savings Savings NPV of Total Savings Status Quo $ - $ - $ - VISN Consolidation $ 755,657,185 $ 2,200,885,065 $ 2,956,542,250 Regional Consolidation $ 420,170,140 $ 1,924,085,834 $ 2,344,255,974 Virtual Consolidation $ 877,064,778 $ 2,332,002,220 $ 3,209,066,998 Total Consolidation $ 1,158,251,005 $ 2,816,686,836 $ 3,974,937,841 Source: NAPA study team analysis of Fee Care Program 52

53 The ROI analysis run by the Panel indicates that a total consolidation of the Fee Care Program (which is a combination of virtual and VISN consolidation) would save the organization almost $4 billion in the next 10 years, net of the investment costs. The net total savings was calculated by adding the amount of net savings affected by reducing the number of FTEs through consolidation, integrating a more automated claims processing system, and reducing the errors in payments. Table 14 shows the ROI with varying assumptions for the projection period (15 years versus 10 years) and the annual growth rate in claims processed (10 percent versus 5 percent). Changing the assumptions affects the total ROI but does not change the relative ranking of the consolidation scenarios. By increasing the projection period from 10 years to 15 years and the annual increase in claims from 5 percent to 10 percent, ROI increases from almost $4 billion to nearly $5.9 billion. Table 14. ROI Analysis with Varying Assumptions Assumptions 10 Year, 5% Growth, 7% Discount Rate 15 Year, 5% Growth, 7% Discount Rate 10 Year, 10% Growth, 7% Discount Rate 15 Year, 10% Growth, 7% Discount Rate VISN Consolidation Regional Consolidation Virtual Consolidation Total Consolidation $ 2,956,542,250 $ 2,344,255,974 $ 3,209,066,998 $ 3,974,937,841 $ 3,379,553,269 $ 2,767,266,993 $ 3,767,626,340 $ 4,652,101,966 $ 3,301,883,402 $ 2,672,212,260 $ 3,656,654,728 $ 4,527,127,944 $ 4,153,727,808 $ 3,524,056,667 $ 4,781,473,013 $ 5,890,798,372 CONCLUSIONS - IMPACT ANALYSIS AND ROI The Fee Care Program is currently operating at an inefficient level due to the number of claim payment errors and the relatively low productivity of its staff compared to other similar programs. The recent increases in the number of claims processed and payments made each year by the Fee Care Program have brought these issues to the forefront. There are many options for the Fee Care Program to consider in order to alleviate the current problems plaguing the Program. The current system should be modified so there is more consistency in day-to-day activities and decision-making. A consolidation effort should also be undertaken in order to maximize efficiency and reduce staffing levels. After reviewing the costs and running a ROI analysis, the Panel has concluded that total consolidation shows more efficiency, lower error rates, lower resource needs, and over all higher return on investment. The standardization of the IT infrastructure along with physical consolidation will allow a smaller number of employees to work more efficiently and with a more structured rule-based environment resulting in a decrease in errors made while processing claims. 53

54 MANAGEMENT OF THE FEE CARE PROGRAM The Panel notes that VA is both a provider of health care and a payer of health care claims. The Fee Care Program and its current difficulties cannot be considered in isolation. Its requirements, priorities and ultimately, the solutions to its problems have to be considered within the context of multiple other needs and competing priorities. In addition to the problems associated with claims efficiency and accuracy described earlier, the Academy research also found broader management issues that also need to be addressed when crafting a solution to the program s current difficulties. As the Fee Care Program has grown, the Department has been playing catch-up in its attempts to modernize and improve its decentralized and inefficient claims processing system. Some interviewees stated that VHA's clinical focus sometimes leads to a lack of attention paid to business support systems, evidence of which they assert, can be found in the current archaic Fee Care Program IT infrastructure. The Panel believes the Fee Care Program has not been well managed at the senior VHA, Chief Business Office or Veterans Integrated Service Network (VISN) levels. VHA provides limited VISN-wide executive oversight of the Fee Care Program. The program lacks clearly defined operational objectives or goals, and it is not guided by an effective strategy for optimally managing program expenditures. While the Chief Business Office is to be commended for a number of initiatives it has undertaken to improve both the management oversight of the program as well as claims operational efficiency and accuracy, it is important to understand that not only does much more need to be done, but also, the solution to these problems will require a broad base of support from both senior VHA and VA executive offices. The Chief Business Office has limited control over events despite its responsibility for the system. Among the most important factors regarding this are: the fact that staff who process claims work for local medical centers or VISNs are not necessarily responsive to CBO business requirements; and, approval and funding for acquiring new claims technologies, an essential condition for making significant improvements to the IT platform, rests with other elements in VA. Numerous interviewees stated that this latter factor would likely prove to be a major impediment in securing a new claims system as recommended by this report. Although the Chief Business Office does not exercise direct line authority over field Fee operations, they still can use existing authority for insuring field business office structural and business process consistency since both CBO and all VISN directors report to the Deputy Under Secretary for Health/Operations and Management. This intersection between line and staff responsibilities should be a logical point to provide management oversight to the Fee Claims Program. The Chief Business Office can also help provide better Fee Care Program management oversight capabilities by creating and managing a program integrity component in each of the consolidated operating centers that are recommended in this report as well as the one now being developed for CBO headquarters. Academy research suggests that the TRICARE program has a particularly 54

55 robust program integrity element and would be a good organization for VHA to benchmark against. The CBO also needs to create a more balanced performance management system and robust Fee Program metrics that include measures of productivity/costs, customer satisfaction, and accuracy as well as timelines. The current system over-focuses on timeliness to the exclusion of other, equally important measures. It is unsurprising that accuracy and efficiency have become problem areas in that they have not been used as either individual or organizational performance measures. There are a number of organizations both inside and external to VA that can be benchmarked in terms of developing this balanced set of metrics. Accuracy, management, and accountability for data also need to be improved. It is impossible to adequately manage a program without accurate and timely information. While CBO is undertaking several important steps in improving its data reporting and collection, the Academy research found examples of existing management reports that were clearly in error and which also seemingly were not being reviewed by management officials. This is an area that can and should be improved even as new systems are being developed. CBO needs to change the organizational alignment within the Fee office to put more focus, effective leadership, and lines of authority to bring about the necessary changes. 55

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57 PANEL FINDINGS CHAPTER 4 FINDINGS, CONCLUSIONS AND RECOMMENDATIONS The Department of Veterans Affairs Fee Care Program needs to change. Historically, this program constituted a small fraction of health care resources. By 2012, it will be approximately 10 percent of the VA s total health care budget. During this period of unprecedented growth, the organizational, administrative, and technological systems used to operate and manage the program simply have not kept pace. VA is different from most federal health care systems in that it is both a provider of health care and a payer of health care claims. The Panel finds that there are a number of important factors that need to be understood when considering the reasons for the Fee Care Program s current challenges, as well as possible solutions: 1. Given the significant organizational and productivity challenges within the Fee Care Program, VHA has limited understanding of the services it is procuring through this program or their costs. The Fee Care Program has not been effectively managed at the senior VHA, Chief Business Office, or VISN levels. VHA provides limited VISN-wide executive oversight of the Fee care program. The program lacks clearly defined operational objectives or goals, and is not guided by an effective strategy for optimally managing program expenditures. 2. The Fee Care Program is significantly more inefficient and has higher error rates than benchmarked organizations. Productivity across operating sites varies considerably. The Chief Business Office (CBO) estimates the error rates (that is, erroneous payments 23 ) at 12 percent per year, or approximately $500 million in FY By contrast, TRICARE has a reported error rate of 0.42 percent. 24 Productivity varies so greatly across operating sites that the productivity of the most efficient processing site is nearly 10 times greater than the most inefficient site. The Fee Care Program s decentralized mode of operation across VA hospitals and networks results in inefficient operations and high payment error rates. Fee Care organizational alignment, staffing, grade profiles, education, training, training certification, performance standards and performance expectations vary significantly across VISNs and Fee operating sites. Interpretation and application of rules vary across Fee operating sites 23 Erroneous payments are net of overpayments and underpayments. 24 Information provided by TRICARE officials for FY TRICARE has service level agreements with their contractors mandating that payment errors shall not exceed 2 percent of the total billed charges for the first two option periods of the contract. In all remaining option periods, the absolute value of the payment errors cannot exceed 1.75 percent of the total billed charges. This reported error rate of.42 percent is based on billed charges, as opposed to actual paid amounts used in calculating the error rate for the Fee program. Actual amounts paid are typically less than billed amounts. For example, if most payers pay at a rate of $1 in payment for every $3 to $5 in billed charges, a comparable error rate for the TRICARE program might be in the range of 1.26 percent to 2.1 percent 57

58 Fee claims technology, while improving, still falls well short of benchmarked organizations standards as well as what is needed for improvement. There is no coordinated effort to effectively capitalize on the expertise, resources and economies of scale of the VISN structure in VHA s field organization. 3. The Fee Care Program has grown haphazardly over the years and the technology and administration of Fee care claims have been neglected. As VA s Fee Care Program has grown, the Department has been playing catch-up in its attempts to modernize and improve its decentralized and inefficient claims processing system. Despite a number of initiatives being undertaken to improve the current situation, the organization responsible for improving the system, the Chief Business Office, has limited control because: People actually processing claims work for local medical centers or VISNs are not necessarily responsive to CBO business requirements. CBO does not have the traditional tools for strong headquarters program management of field operations: solid performance metrics; accurate and timely data reporting systems; and, strong program integrity mechanisms. Acquiring new claims technologies is an essential requirement for making significant improvements in the system but is seen as very difficult in the current VA IT environment. The Panel believes that given the importance of the Fee Care Program and the significant financial losses it suffers because of inadequate technology, VA leaders need to find a way to support and fund the needed new technologies. 4. VA has an opportunity to create a markedly improved Fee claims system but faces major challenges. In addition to the significant changes recommended for VHA field operations outlined below and the needed technology enhancements, the Panel also believes that CBO needs to change the organizational alignment within the Fee office to achieve more focus, effective leadership, and improved lines of authority to bring about the necessary changes. 5. The Chief Business Office has struggled to meet its mandate to provide a single accountable authority to develop administrative processes, policy, regulations, and directives regarding the delivery of VA health benefit programs, including the Fee Care Program. 25 One factor in this observation is the divide between a highly centralized headquarters structure and a highly decentralized VISN structure that impedes a wellfunctioning business model. Examples of this divide can be seen in the varying approaches in the field with respect to Fee organization, staffing, management, and ultimately, performance. A second factor is that VHA's clinical focus sometimes leads to the under-resourcing of business systems, ample evidence of which can be found in the current archaic Fee Care Program IT infrastructure. 6. The support environment within VA and VHA particularly IT, HR and Contracting plays key roles in improving the functioning of the Fee Care Program. The Panel believes that strong leadership support from senior VA and VHA officials will be 25 CBO was created in 2002 and was split into Revenue Operations, Purchased Care, and Member Services in

59 required to provide the Fee Care Program with the institutional support required to bring about the recommended changes. 7. The Fee Care Program can significantly improve just by changing its organizational and administrative processes; however, the most significant performance breakthroughs can take place only through technology. Two excellent examples of how technology can do this are the Medicare and TRICARE programs, which respectively handle 90 percent plus and 75 percent of their claims without human intervention. VA in contrast, cannot process any claims without human intervention. 8. CBO also needs to develop stronger program management capabilities. Although CBO does not exercise direct line authority over field Fee operations, they still can develop mechanisms that can help to drive desired outcomes by using the traditional tools available to program managers: Metrics CBO needs a balanced set of metrics to oversee Fee operations in the field. This would include measures of speed, accuracy, costs and customer satisfaction. Data reliable performance data is essential for Fee Care Program oversight. This study found numerous examples of questionable and clearly erroneous data used in Fee Care Program reports. It was also clear that this information was not being adequately reviewed by Program officials. Program integrity CBO should create and manage a program integrity component in each of the consolidated operating centers as well as at its headquarters for determining whether work is being done in the prescribed manner. Use existing authority both CBO and all VISN directors report to the Deputy Under Secretary for Health/Operations and Management. In matters of insuring field business office structural and business process consistency, this office should exercise more direct control. Over the past decade, the Fee Care Program has grown from a small, relatively infrequently used adjunct to traditional VA health care services, into a critical element of clinical care for veterans. While the Fee Care Program has grown exponentially in terms of volume and budget outlays, there has been insufficient strategic oversight of the program and its administrative and support systems have languished. PANEL RECOMMENDATIONS A consolidation effort should be undertaken in order to maximize efficiency and reduce staffing levels. After reviewing the costs and conducting a ROI analysis, the Panel has concluded that consolidating the Fee Care Program at the VISN level while implementing a more standardized claim processing technology platform would be the best option. The standardization of the IT infrastructure along with consolidation will allow a smaller number of employees to work more efficiently and with a more structured rule-based environment which will drive a decrease in claims processing errors. This will result in substantial savings for VA, which can be redirected into care for veterans. 59

60 As a result of this study, the Academy Panel has concluded that VHA should take the following steps to strengthen the Fee Care Program: Organizational Consolidation and Management Changes 1. VA should consolidate its Fee Care Program from the current 100+ locations to the smallest number possible that will provide necessary redundancy and workload surge capabilities. This should result in no more than 3 to 5 regional locations. Organizational consolidations should take place within the existing VISN alignment. VHA should set up a competitive business plan process to identify the leading operating Fee centers for further consolidation. VISNs should be encouraged to seek out partnerships with each other and structure the consolidation to avoid layoffs. Consolidation would include the administrative requirements of the authorization function in addition to claims processing. Clinical decision-making would remain at the local facilities. Fee Care Program funding would remain with the local facilities to ensure accountability and buy-in using a governance model similar to the one used by the Consolidated Mail Outpatient Pharmacy (CMOP) program which includes both a national and local advisory boards. 2. Senior level VHA management (Under Secretary for Health, Deputy Under Secretary for Health for Operations and Management, and Deputy Under Secretary for Health for Policy and Services) should provide policy clarification on goals and expectations for VA purchased care, including the allocation of resources between VA-provided and purchased care to best meet strategic goals. 3. VHA should build greater program management expertise within its organization to better manage the Fee Care Program and to provide support to the consolidated operating centers. Both internal VA and external non-va organizations should be benchmarked in this effort. The Chief Business Office should create and manage a program integrity component in each of the consolidated operating centers as well as at its headquarters. The Chief Business Office should create more balanced performance management systems and robust Fee Care Program metrics that include measures of productivity/costs, customer satisfaction, and accuracy as well as timelines. Accuracy, management, and accountability for data need to be improved. Accountability and responsibility for Fee management and outcomes need to be better defined, communicated, clearly understood and executed by all line and staff elements in the Fee process, Staffing standards, business rules, and standard operating procedures should be enacted and enforced. Clear lines of authority should span the office of the Deputy Under Secretary for Health for Operations and Management, the Chief Business Office, the VISNs, and consolidated centers. 60

61 Technology and Virtual Consolidation 4. VHA should put an enterprise-wide technology solution in place that achieves virtual consolidation. VA has struggled with large scale IT implementation efforts, as recently noted by the Government Accountability Office. 26 To ensure the success of this recommendation, the minimum requirements are careful planning, the provision of sufficient resources, and support from senior leaders of both VHA and Office of Information & Technology (OI&T). The Chief Business Office should specify business rules in greater detail and incorporate them into the technology platform to significantly reduce opportunities for interpretation or judgment by claims processors. The Chief Business Office should put more resources, emphasis and priority in facilitating standardization in processing claims through templates, standard operating procedures, training, and technology tools. CBO should continue to create a single national database for Fee Care Program operations. VHA leaders need to work closely with the leadership of the VA OI&T to establish a way forward for the development of the resources and authorities to implement a new technology platform. CBO should host a technology bake-off to get the process underway. Other Considerations 5. Conduct a cost-benefit analysis of contracting out the processing of claims as with other payer models (TRICARE, Medicare, Medicaid, Blue Cross Blue Shield, etc.) and their applicability for VA. While outside the scope of this study, the Panel believes that an independent analysis of the costs and benefits for contracting out similar to TRICARE or Medicare would provide important information for VA policymakers when considering the long-term cost projections for the Fee Care Program. By implementing these recommendations, the Panel believes that VA will improve service to Fee care providers, which will help ensure maximal participation in the Fee Care Program and consequently, more available health care options for veterans. The savings gained from more efficient administration and more accurate payments can be redirected back into improving other health care services for veterans. 26 VA has, however, experienced challenges in managing its IT. Information Technology: Department Of Veterans Affairs Faces Ongoing Management Challenges. GAO T. May 11,

62 IMPLEMENTATION VA needs to move quickly to implement changes to the Fee Care Program, particularly the consolidation of field operations and technological enhancements. The program is projected to continue to grow and the unnecessary costs to VA s budget waste money that could be used to provide health care to veterans. Certain steps should be taken by CBO to accelerate the current momentum that VISNs have to consolidate and form partnerships with each other. Active communication between CBO and VISNs and high level VA management endorsement would help to accomplish this. CBO could set up a competitive process to identify the leading five or six operating centers for further consolidation. VISNs would be encouraged to seek out partnerships with other VISNs in order to attain no more than five or six consolidated centers. The Fee Care Program s Advisory Board could provide a forum to obtain input from all the VISNs for the consolidation prior to any formal competition taking place. VISN 18 and VISN 19 should continue with their partnership for a consolidated center. VISN 17 should continue with its consolidation. Any further consolidation among VISNs should involve multiple VISNs. All elements of the reorganization should be overseen by the Deputy Under Secretary for Health/Operations and Management (10N) with policy guidance from the Chief Business Office. Consolidation would be implemented such that lay-offs would not occur. Normal turnover and reassignment of current Fee staff would minimize the need for lay-offs. CBO should procure an enterprise-wide technology solution through the competitive process. Contractors who could do this include those who administer Medicare, Medicaid, and/or TRICARE claims as well as FSC and the developers of FBCS and 3M. Virtual consolidation should include the development of a single system that replaces the current FBCS and VistA Fee Care Programs, implementation of a rules engine to automate the processing of claims, and a robust program integrity component. Even without physical consolidation, virtual consolidation should be able to accomplish the following: Share work, when necessary, between varying Fee processing sites Streamline the assignment and allocation of work as the workload and number of employees at each site change Provide tracking of performance at an employee level, group level, or Fee processing operation level Generate reporting for the enter Fee Processing operation with the ability to drill down. To implement virtual consolidation, further study and a competitive bidding process would be needed to determine the requirements in greater detail and select the vendor(s). Further study would entail a detailed assessment of current systems in place and analysis of business requirements. VHA is encouraged to use a technology bake-off type competition to determine which vendors solutions best meet their needs. 62

63 Virtual consolidation would change the business process for the Fee processing program. Adequate training would be crucial to the success of the program. Study would be required to determine new user roles for workers using the system and to determine what permissions should be assigned to each individual. An implementation plan for the rollout of the new system should be developed to ensure adequate training and allow for User Acceptance Testing to ensure the system is correctly configured and continue work during the transition. As a key finding of this study, the Fee Care Program lacks clarity on policies and direction, and field operations lack standardization and interpret rules differently, to varying degree. In response VA management should take the Fee Care Program more explicitly into account when formulating strategies, developing capital investment plans, and providing guidance on how to allocate overall resources between VA and non-va purchased care, particularly now that the Fee Care Program has grown so rapidly in recent years and now constitutes approximately ten percent of the health care budget for veterans. Attention should be given to assessing the business case for purchased care and assessing the trade-offs among competing goals such as cost-effectiveness, access, and speed of appointment. Once the trade-offs are acknowledged and understood, policy direction can be made more deliberate and clear. For establishing clear lines of authority, CBO and the VISNs operate under the Deputy Under Secretary for Health for Operations and Management. This office can provide the authoritative control for central management of the Fee program. Authoritative control can be established independently of whether physical consolidation takes place in one centralized operation. The VISNs would manage the consolidations down to a greatly reduced number (e.g., five or possibly three centers). CBO will exercise increasing direction, standards, technology, and quality review. As CBO and the VISNs report to the same boss, CBO should be able to ensure that their directives on Fee claims are adhered to by field offices. The Deputy Under Secretary for Health for Operations and Management should make that clear to VISN directors. Virtual consolidation will also enable central direction and management by CBO. A centralized database and a common technology platform being used across all the operation sites, in particular, will greatly enhance standardization. Performance metrics for productivity should be implemented on a nation-wide basis with comparisons made at both the VISN level and operating site level. Productivity should be measured separately for front-end authorizations versus back-end claims processing. Measures of productivity should be adjusted for the composition of the claims workload. That is, VHA should have a weighted caseload system to help guide productivity standards. 63

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65 APPENDIX A COMPARISON OF FEDERAL HEALTH CARE PROGRAM CHARACTERISTICS Program Name Patient Population Size Program Costs Who Authorizes Treatment Who Processes Claim Number of Claims Payment Sites VA Fee Program 952, (FY 2010) $4.439 billion (FY2010) The Service/Clinical Program Chief, or Chief of Staff (COS) at the Medical Center level. Fee basis care program office staff 114 operating sites VA Project HERO VISN 8, 16, 20, and 23; about percent of authorized cases in this four VISNs are handled by HUMANA Approximately 51,000 veteran patients received Fee basis care through Project HERO (January 2008 and September 30, 2009) representing approximately 111,000 outpatient visits. Humana invoiced VA for $197,200,152 for Project HERO (January 2008 to May 2011). Costs are generally comparable to VA costs for other non-va Fee care. Savings, including value-added Fees, are estimated at $2.5 + million (January 2008 to September 2009). The individual VA Medical Centers (VAMCs) that participate in Project HERO authorize treatment. Humana Veterans utilizes a subcontractor to process claims and make payments to the network providers under Project HERO. Claims are processed twice, once by Humana and then by the Fee office. Humana Veterans utilizes one claims processing site. The number of VA claims processing sites varies by VISN. 27 The number of unique patients receiving non-va purchased care under the Fee Care Program in FY

66 Program Name Patient Population Size Program Costs Who Authorizes Treatment Who Processes Claim Number of Claims Payment Sites CHAMPVA TRICARE Medicare 350,000 VA (About 230 claims processing staff located in the Denver office) 5.4 million received services 9.6 million total beneficiaries domestic and overseas 47.2 million a year in 2010 at CMS (HI and/or SMI Part B) (15% of the US population) $ 47 billion Facility commander or through contract provisions Three managed care support contractors 28 : Humana, HealthNet, and TriWest $430 billion Claims administration contractors (MACs) 1 site the Denver Health Administration Center (HAC) Three 5 claims administrations contractors Medicaid FY 2010: 54 million $ billion (FY state and Federal; CMS share of Medicare outlays was $275 billion) States (e.g. Virginia: Department of Social Services Local Offices) States (e.g. Virginia: Department of Medical Assistance Services) 28 TRICARE oversea is administered by International SOS; the contractor of the TRICARE Pharmacy program is Express Scripts. 66

67 APPENDIX B COMPARISON OF FEDERAL HEALTH CARE PROGRAM METRICS Program Name Total Administrative Costs Processing Time Cost Per Claim Payment Error Rate Customer Satisfaction Percent of Claims handled electronically Fee Data not yet available from VA. Decentralized funding makes computations difficult. In FY 11, 2317 FTEs at local facilities processed 10,185,669 claims. VHA requirements: process 95% within 30 days. 61% of Fee claims are processed within 30 days. No significant difference between consolidated and non-consolidated site. $15.91 administrative cost per claim, FY , for both centralized and decentralized VA OIG reported that VHA improperly paid 28.2% of inpatient Fee claims and 37% of outpatient Fee claims. CBO s own analysis of error rates in claims processing for recent activity is 12% in FY Measures of veteran satisfaction with the Fee Care Program and quality of care are currently not collected. 0%-- All VA Fee claims require manual processing. 29 Source: NAPA study team productivity and cost analysis. 30 The CBO measure of error rate is net of under and over charges on the billing and does not include procedural errors or errors that do not result in inaccurate billing. 67

68 Program Name Total Administrative Costs Processing Time Cost Per Claim Payment Error Rate Customer Satisfaction Percent of Claims handled electronically CHAMPVA 98 percent of claims within 30 days of receipt in FY ,594 - average number of claims processed per staff member in FY 2009 $2.55 direct labor (FY 2009) 31 ; $1.39 (Indiana University/P urdue University Study) Customer satisfaction is high. 32 CHAMPVA Claims processing is a combination of automation and hands on processing. Very small percentage of claims are processed 100% electronically Project HERO $13,445,260 (January May 2011) 98% of provider claims are paid by Humana Veterans within 30 days. Median number of days to the electronic return of clinical information is 8 Overall satisfaction with Project HERO care through HVHS was 77 percent and 86 percent for Delta Dental (FY 09). Humana Veterans tracks customer complaints as a percentage of total customer contacts, and the percentage of complaints for the time period January Electronic information sharing available at all sites. Humana submits electronic claims to VA for payments. 92% of clinical information electronically returned to VA within 30 days of appointment; 31 VA OIG Report: Veterans Health Administration: Audit of Non-VA Inpatient Fee Care Program. August 18, The American Customer Satisfaction Index (ACSI) for 2011: CHAMPA scored

69 Program Name Total Administrative Costs Processing Time Cost Per Claim Payment Error Rate Customer Satisfaction Percent of Claims handled electronically May 2011 was 0.06%. 98% of clinical information electronically returned to the VA within 45 days of appointment TRICARE 30 days, as established by the Prompt Payment Act. This limits capability to check for accuracy of payments. $.35/.45 electronic $.95/1.50 paper 0.42% 33 In the range of 70 to 80 percent Contractors required to have claims editing software in place most use McKesson s Claim Check Medicare $7.485 billion It costs $1.5mln a year to run MACs that process Medicare claims billion claims in billion claims in day processing requirement. Most claims processed in 14 days $0.80 per claim in 2011 $0.84 per claim in % of money paid Audit & Reimbursement -80% Claims Processing - 75% Provider Enrollment - 55% Appeals 59% In excess of 90% ( Medicare mandates electronic submittal of its claims) 33 Source: NAPA study team Interview with TRICARE Integrity officials 69

70 Program Name Total Administrative Costs Processing Time Cost Per Claim Payment Error Rate Customer Satisfaction Percent of Claims handled electronically Medicaid FY 2010: $19.4 billion (state and Federal) Medicaid Admin. costs typically 4-6% of claims paid. FY 2010: 9.4% 70

71 APPENDIX C INTERVIEWEES NAME TITLE ORGANIZATION Gary Abe Director, Seattle Office for Audits and Evaluations Department of Veterans Affairs, Office of Inspector General Gary M. Baker Chief Business Officer Veterans Health Administration Mark Babbitt Senior VP, Corporate and Field TriWest Operations Judy Berglund Business Manager VISN 8 Virginia Benson Budget Analyst VISN 6 Patricia Bowles Lead Claims Assistant VISN 6 William Cahill Director, DC Office TriWest Tom Cappello Acting Director Tampa VAMC Thomas Carrato Vice President and DoD Program Health Net Executive Joleen Clark Deputy Network Director VISN 8 Hugh Deery Chief Financial Officer VISN 11 Dennis Duffy Vice President, Federal Solutions ACS Joseph Enderle National Fee Care Program Manager, Veterans Health Administration Chief Business Office Greg Eslinger Manager, Non-VA Care Support Veterans Health Administration Office; Project HERO Program Manager David Fisher Director, Management Control & TRICARE Uniform Billing Office Financial Studies Division Michael Fisher Deputy Network Director VISN 20 Patty Gheen Deputy Chief Business Officer for Veterans Health Administration Purchased Care Gail Graham Assistant Deputy Undersecretary for Department of Veterans Affairs Health for Informatics and Analytics Todd Grams Executive in Charge for the Office of Department of Veterans Affairs Management and Chief Financial Officer Linda Halliday Deputy Assistant Inspector General for Audits and Evaluations Department of Veterans Affairs Office of Inspector General Ben Hammond Professional Staff Member, Committee on Appropriations Veterans Affairs and Related Agencies, United States Senate Subcommittee on Military Construction George Hanerfeld Supervisory Claims Examiner VISN 2 Mindy Hatt DSS/VRS VistA Revenue Solutions VistA Cindy Heaton Business Manager VISN 19 71

72 NAME TITLE ORGANIZATION Jenn Hoffman 2010 Indiana University/Purdue Study Team Lead Donna Hoffmeier Vice President and VA Program Health Net Executive Karen Hudgins Director, Purchased Care Systems Business Management Chief Business Office Veterans Health Administration Ken Jacobs Chief, Performance Evaluation and TRICARE Transition Management Branch Sherry E. Johnson Director, Veterans Business Programs Humana Brad Jones Chief Operating Officer, Veterans Humana Healthcare Services Kristi Jordan Acting Business Implementation VISN 2 Manager Paul Kearns Chief Financial Officer Veterans Health Administration Amy Kelley Claims Assistant VISN 6 Cyndi Kindred Director of Program Integrity and Department of Veterans Affairs Informatics Cheri Lewis Non-VA Care Manager VISN 17 Bresha Lipscomb Chief of Fee Basis VISN 8 John Director, Program Integrity TRICARE Marchlowska Stephanie Mardon Deputy Chief Business Officer for Veterans Health Administration Revenue Operations Mars Mariano Vice President, Business Development ACS Philip Matkovsky Deputy Chief Business Officer Veterans Health Administration Victoria Maxey Supervisor VISN 6 Tim S. McClain Veterans Healthcare Services Humana James McGaha Deputy Chief Financial Officer Veterans Health Administration Jennifer Business Implementation Manager VISN 17 McGregor Mary McInnis Claims Assistant VISN 6 Michelle McNeil Supervisory Voucher Examiner VISN 2 Reta Michak Director, Operations Divisions TRICARE Michael Moreland Network Director VISN 4 Jimmy Neely Business Manager and Consolidated VISN 16 Fee Unit Manager Lyla Nichols Health Insurance Specialist, Rural Health Coordinator Centers for Medicare and Medicaid Services Michael W. Deputy Chief, Policy and Operations TRICARE O Bar Directorate Betty Parker Director, Centralized Fee Unit VISN 6 DeLisa Prater TMA UBO Program Manager TRICARE Agnes Quick Claims Assistant VISN 6 72

73 NAME TITLE ORGANIZATION Terry Riffel Associate Director, Financial Financial Services Center Operations Service Peaches Robinson Office Manager of the Consolidation VISN 16 Unit Susan Schmetzer Acting Director for Health Department of Veterans Affairs Administration Center; Director of Operations Chad Schulken Professional Staff Member, Committee on Appropriations Veterans Affairs and Related Agencies United States Senate Subcommittee on Military Construction Thomas W. Chief Financial Officer VISN 2 Sharpe Faiyaz Shikari Chief Technology Officer, ACS Government Healthcare Solutions Karen Smith Fee Care Program Manager VISN 2 Melissa Spears Accounting Tech VISN 6 Alex Spector Director Alaska VA Healthcare System Nina Thomas Acting Chief Business Office VISN 8 Steve Tough President, Government Programs Health Net Julie Townsend VP, Strategic Planning TRICARE Patricia Assistant Deputy Undersecretary for Department of Veterans Affairs Vandenberg Health for Policy and Planning Michael Chief Consultant, Pharmacy Benefits Department of Veterans Affairs Valentino Management Service Tracy Walker Lead Claims Assistant VISN 6 Linda Weiss Director Albany VA Medical Center David J. West Network Director VISN 2 Kathy Whitlock Lead Claims Assistant VISN 6 Dena Wright Supervisor VISN 6 Don Wunderlin Health Care Fraud Specialist TRICARE James Zarinczuk Fee Basis CMO VISN 8 73