Lax Oversight of Outside Care Busts Phoenix VA’s Budget

PHOENIX — Extremely lax oversight of the use of outside care was blamed for a budget crisis at the Phoenix VA Healthcare System, according to a recently-released report from the VA Inspector General.

The Arizona health system was forced to cut its budget by $11.4 million after it spent more for non-VA care at other nearby hospitals than it had anticipated in 2010.

The Phoenix VA Healthcare System (HCS) serves 81,000 veterans annually and had a budget of about $438 million in FY 2010. Of that, $56 million (13%) was for their Non-VA Fee Care Program, which is intended  to assist veterans who cannot easily access a VA medical facility for care.

Eligible veterans can go to non-VA providers when VA is unable to provide specific treatments or because the veteran lives far from a VA facility. Fee care can include dental services, outpatient care, inpatient care, emergency care and medical transportation. VA will pay the cost of that care; however, preauthorization is required for non-emergency inpatient and outpatient care.

Phoenix VAMC

In FY 2010, the Phoenix HCS went 20% over its Non-VA Fee Care Program budget. To make up the shortfall, the facility obtained $2.3 million in special funding from the National Fee Program and $5.3 million in supplemental funding from Veterans Integrated Service Network (VISN) 18. It also cancelled $3.8 million in equipment and other purchases.

Lack of Oversight

According to the VA IG report, the overspending was a result of VA officials’ signing off on non-fee-care utilization without sufficiently reviewing the cases. HCS management did not have the procedural and monitoring controls in place to ensure that pre-authorization officials thoroughly reviewed requests, clinical staff conducted concurrent reviews or that staff confirmed sufficient funds were in place for fee care.

The report notes that much of the overspending was due to an increase in the use of fee care for long-term, acute-hospital (LTAH) care. Investigators estimate that $4.5 million of the $11.3 million in overspending came from LTAH cases that did not have preauthorization procedures in place. An IG review of the medical records of these veterans found no justification for the care.

 The Phoenix HCS did not have effective preauthorization for LTAH fee care because the chief of staff delegated responsibility for reviewing all such fee claims ($56 million worth) to one physician in FY 2010, the IG report said. This resulted in the physician preauthorizing hundreds of requests each week while attending to his other clinical responsibilities, the report noted.

The physician told IG investigators that he routinely approved requests for LTAH care with no follow-up questions or requests for additional information.

In January 2011, Phoenix management delegated the responsibility for overseeing the preauthorization of fee care to a different physician solely dedicated to managing the process.

The lack of review during and after patient treatment led to more lost money, the IG report states. The average cost paid for LTAH fee care by Phoenix exceeded $2,600 per day. Reviews were rarely conducted, however, because management did not commit the resources or staff needed to have a concurrent review team.

Since October 2010, Phoenix HCS management has developed a utilization-review team, investigators said.

Breakdown in the System

The remaining $6.9 million (61%) of the shortfall is due to Phoenix HCS not obligating enough funds for fee care, investigators found. Also, staff frequently paid claims for non-emergency fee care that had not been preauthorized.

VA medical staffers initiate requests for fee care by entering the request into the computerized patient-record system (CPRS), then sending it to the official whose job it is to preauthorize such care. When the expenditure is preauthorized, the request is then entered into the payment system which obligates sufficient funds for the case. The facility then provides the veteran with an approval letter stating he or she can obtain the care from a non-VA provider.

In many cases, however, VA medical staff entered the request into CPRS, but did not send it to the designated preauthorization official. Instead, they provided the copy of the request for fee care directly to veterans, who then presented the hard-copy fee request to their non-VA providers as authorization of care.

The care was then given without the awareness of the requirements or the funds to cover it. When the non-VA facility sent an invoice for the care, VA fee staff entered it into the fee payment system and paid the invoice.

In other instances, fee staff did not calculate the correct estimated cost of care based upon current rates. For example, in FY 2010, fee staff obligated $200 for six physical therapy sessions, the cost for which was about $1,000.

Since the shortfall’s discovery last year, the Phoenix HCS has made some improvements, including training physicians regarding the preauthorization of fee care. Also, a statement has been added to the fee request, so that if a hard copy is printed, it states that the request does not constitute authorization.

The report includes a number of recommendations for the Phoenix HCS to improve its authorization practices, some of which the HCS is already implementing. However, the report notes that any substantive change will take significant time and attention by management before it becomes a permanent part of the culture.

Department of Veterans Affairs Office of Inspector General

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