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"VA’s Open Cash Register: Fraud, Waste, Abuse, and Revenue Operations"

House Veterans Affairs Committee, Technology Modernization Subcommittee Hearing

September 19, 2024 (recording here)

HEARING INFORMATION

Witnesses & Written Testimony (linked):

• The Honorable Kurt DelBene: Assistant Secretary for Information and Technology and Chief Information Officer, U.S. Department of Veterans Affairs

• Ms. Cherri Waters: Executive Director, Health Portfolio, U.S. Department of Veterans Affairs, on behalf of the Office of Information and Technology

• Ms. Laura Duke: Chief Financial Officer, U.S. Department of Veterans Affairs, on behalf of Veterans Health Administration

• Ms. Tracy Davis-Bradley, Ph.D.: Chief Integrity and Compliance Officer, U.S. Department of Veterans Affairs, on behalf of Veterans Health Administration

• Ms. Jennifer McDonald, Ph.D.: Director, Community Care Division, U.S. Department of Veterans Affairs, on behalf of the Office of Inspector General

Keywords mentioned:

• Program Integrity Tool (PIT), fraud, waste, community care, revenue, billing, improper payments, data accuracy, IT failures, budget shortfall, copays, contractor performance, delayed billing, oversight, accountability

IN THEIR WORDS

OPENING STATEMENTS FROM THE SUBCOMMITTEE

• Chairman Matt Rosendale explained that the VA’s Program Integrity Tool (PIT) consolidates community care claims data, helping prevent fraud and facilitating billing for non-service-connected care. He described how the PIT’s malfunction since February 2023 has led to an estimated $665 million in uncollected revenue, mostly from insurance companies. He stressed the need for accountability, particularly given a reported $12 billion budget shortfall for the Veterans Health Administration (VHA). The Chairman called for further scrutiny of how improper payments and miscollections impact veterans' care.

• Ranking Member Sheila Cherfilus-McCormick mentioned that the PIT, paused in February 2023 due to code defects and inaccurate data, had still not fully resumed operations. She expressed concern about the backlog and its potential financial impact on both VA employees and veteran patients. She was particularly worried about veterans on fixed incomes who might face large delayed bills, calling for the VA to assess the impact of the pause before resuming collections.

SUMMARY OF KEY POINTS

• Assistant Secretary Kurt DelBene discussed the VA’s efforts to rebuild the PIT and address the issues leading to its operational pause in February 2023. He noted that the tool, initially designed to detect fraud and process third-party billing, had issues with coding and data accuracy. Since then, the VA has expanded its team and implemented better oversight. He reported progress in addressing the backlog, mentioning that the VA had collected $171.6 million during recent months and was working to prevent similar issues in the future.

• Dr. Jennifer McDonald provided insight into the PIT’s pause and its impact on the VA’s revenue collection and fraud detection efforts. She stated that the pause, intended to fix coding errors, led to delays in veterans’ copayments and private insurance reimbursements, totaling an estimated $665 million. She expressed concern over veterans receiving bills for services provided up to 18 months prior, which may cause financial strain. Dr. McDonald recommended that the VA enhance its processes to clear the claims backlog and restore the tool’s fraud detection functionalities.

• Chairman Rosendale asked why the VHA bills insurance companies for community care and what role the PIT plays. Ms. Laura Duke explained that the VHA bills first and third-party insurance regardless of where care is provided. The PIT served as a central repository for community care data, allowing for accurate billing. When the PIT went offline, the billing data remained available but was not in a usable form. Access was restored in July, and collections have since increased.

• The Chairman then questioned Dr. Tracy Davis-Bradley about how the PIT prevents improper payments, fraud, and waste. Dr. Davis-Bradley explained that the PIT helped identify issues before payments were made, as well as conducted post-payment analytics to detect trends in fraud. She noted that only $22 million annually resulted from duplicate payments, while the majority of improper payments were linked to procedural issues, requiring more extensive analysis.

• Ranking Member Cherfilus-McCormick focused on the impact of the PIT pause on veterans, particularly regarding copays. Ms. Duke responded that while the VA did not yet have an estimate of outstanding copays, the total amount was historically small. The VA is working through the backlog of data and will provide more information once available.

• The Ranking Member expressed concerns about the VA collecting copays before fully understanding the impact on veterans. Ms. Duke acknowledged the legal obligations but emphasized that the VA was exploring regulatory changes to offer relief.

• Rep. Nancy Mace asked about the cost of developing and operating the PIT. Mr. DelBene stated that the annual budget was around $5 million, though he did not have the total 10-year cost. When asked why the contractor responsible for the PIT’s failures was not terminated, Mr. DelBene explained that he opted to bring in new leadership and increase the team size, which led to progress in fixing the system. He admitted that he took personal responsibility for the issues and got involved in March or April of the year to resolve them.

• Rep. Keith Self expressed concern about the VA proceeding with collections before fully assessing the impact on veterans. Ms. Duke reassured him that the VA was evaluating the data and exploring relief options. She relayed that the VA works closely with veterans, particularly those with large debts, to mitigate financial strain. Rep. Self stressed the importance of ensuring veterans, particularly those on fixed incomes, were not burdened with unexpected bills due to the VA’s delays.

• Chairman Rosendale asked the witnesses about the revenue recovery plan from the backlog. Ms. Duke confirmed that while the VA believed it could collect most of the missed revenue from the PIT’s shutdown, it would take time to work through the backlog. However, she could not guarantee full recovery, as various factors might affect the collection process. Dr. McDonald agreed that the VA had missed $940 million in revenue during PIT’s 18-month shutdown and that the VA was still assessing the full financial impact.

• Ranking Member Cherfilus-McCormick asked a series of questions focused on the VA’s responsibility to inform veterans about copays and the timeline for doing so. She inquired about how the VA was educating veterans on why they owe co-pays and how much time veterans are given to prepare for payments. Ms. Duke responded that the VA provides detailed information in billing notifications, including service dates and veterans' options for relief. She also mentioned that the VA works with veterans on extended payment plans when necessary.

• The Ranking Member followed up by asking whether the VA was conducting an analysis to ensure that veterans were not overwhelmed with multiple bills from various issues, such as past IT failures. Ms. Duke assured her that the VA looks at the overall financial responsibility of each veteran and works to communicate clearly before issuing bills. Ranking Member Cherfilus-McCormick stressed her concern about the potential financial strain on veterans, particularly those on fixed incomes, and she underscored that the VA should take every possible step to prevent veterans from being blindsided by large, unexpected bills.

• Rep. Self asked Ms. Duke how long it takes for the VA to collect each dollar for non-service-connected care after the care is delivered. Ms. Duke did not have an exact answer and promised to follow up.

• Rep. Self then asked if insurance companies have a statute of limitations on accepting bills. Ms. Duke explained that while some insurance contracts predate newer billing regulations, the VA generally works within these contracts to ensure bills are accepted. Rep. Self expressed interest in understanding how many bills are pushed back due to contractual limitations and suggested it might need legislative examination.

• Rep. Self inquired about the VHA’s issues with filing deadlines for billable claims, as highlighted in a 2022 report. Dr. McDonald stated that all three recommendations from that report are still open and that progress in resolving them is dependent on the full functionality of the PIT. Ms. Duke was then questioned about how the VA estimates medical collections in its budget. She explained that the VA uses historical data and care projections to formulate collection estimates.

• Chairman Rosendale then returned to questioning Ms. Duke about the delay in medical collections and how it impacts the VA’s budget. He pushed Ms. Duke to clarify the $700 million in delayed collections initially reported in July, which she confirmed as the impact of PIT being down. The Chairman criticized the VA’s collection projections, stating they were misleading because they could be adjusted to meet internal targets, but did not reflect actual obligations owed to the VA. Ms. Duke acknowledged that while monthly collections had increased, there was still uncertainty about fully meeting those obligations.

• Ranking Member Cherfilus-McCormick asked Mr. DelBene if he had any comments. He clarified that the VA’s collection projections were made at the beginning of the year and had been achieved, dismissing the notion that they were manipulated. Ms. Duke added that collection estimates help ensure the VA does not "double dip" when requesting resources from Congress.

• The Ranking Member asked Dr. Davis-Bradley about how the VA detected fraud, waste, and abuse while the PIT was down. Dr. Davis-Bradley explained that the VA had relied on upstream payment systems to continue detecting fraudulent claims, though it had been more labor-intensive. When asked if the VA would continue using PIT for fraud detection, she confirmed that the VA was working with other federal agencies to improve detection processes.

• Following questions from Rep. Self, Ms. Duke confirmed that the VA is requesting supplemental appropriations to address the shortfall created by the inability to carry over unspent funds. She explained that the decision to request additional resources was based on the increasing demand for care after the PACT Act.

• Rep. Self also asked whether the $12 billion supplemental request for the toxic exposure fund was fully related to the PACT Act. Ms. Duke clarified that the funds would be used for veterans with toxic exposures, whether or not they were covered under the PACT Act. Rep. Self then expressed concern that the fund might have been used improperly, but Ms. Duke assured him that all the funds would be used for veterans with toxic exposures.

• Chairman Rosendale expressed concerns about how the VA plans to collect outstanding revenue, criticizing the reliance on shifting resources from other areas of the VA to compensate for delayed collections from insurance companies. He reiterated that this shortfall was not fully reflected in the VA's budget request and voiced frustration that the VA’s financial management practices were affecting veterans' care.

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