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Audit of the DoD’s Management of the Third Party Collection Program for Medical Claims DODIG-2019-108

Audit

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Publically released: September 18, 2019

Objective

The objective of this audit was to determine whether the DoD collected the cost of providing health care services from medical claims within the Third Party Collection Program. We reviewed claims from nine DoD medical treatment facilities (medical facilities) across the Army, Navy, Air Force, and National Capital Region Medical Directorate.

Background

Section 1095, Title 10, United States Code authorizes medical facilities to recover the cost of providing health care services to DoD beneficiaries from insurance providers. Medical facility Uniform Business Offices (UBOs) bill the beneficiaries’ other health insurance (OHI) directly for the cost of care, minus the applicable deductible or copayment amount, because beneficiaries are not responsible for deductibles or copayments when care is received at a medical facility. UBOs seek to ensure that billable services are identified, payer information is available, accurate and complete claims are generated, and appropriate collections are received. OHI is any health insurance policy covering medical, dental, or pharmacy services that a beneficiary may have through their employer or private insurance provider.

The money collected from the insurance provider directly supports the operation and maintenance budget of the medical facility where care was received and can help improve the quality of health care within the Military Health System (MHS) by providing additional funding for administrative, operating, and equipment costs; readiness training; or trauma consortium activities.

The Army, Navy, Air Force, and National Capital Region Medical Directorate establish and operate the UBOs to manage the cost recovery programs at their medical facilities throughout the world.

The Army, National Capital Region Medical Directorate, and Air Force awarded contracts to assist some medical facilities with third party collections; however, the Navy did not use contractors to support its Third Party Collection Program.

Finding

DoD medical facility UBO and Defense Health Agency (DHA) UBO personnel did not adequately manage the Third Party Collection Program to ensure collection of all available funds from delinquent medical claims for providing health care services. From October 1, 2015, to June 30, 2018, 250,932 claims, valued at $86.9 million, were more than 120 days old at nine medical facilities. We nonstatistically selected and reviewed 70 of these claims, valued at $3.6 million, and found that medical facility personnel did not:

  • collect beneficiaries’ OHI information at all medical facilities because commanders at medical facilities did not enforce OHI collection;
     
  • process and generate bills for services rendered on 26,236 potentially billable patient encounters due to inaccurate coding because front desk personnel at medical facilities using the MHS GENESIS system selected or maintained incorrect patient category codes, and medical facility personnel did not assign providers to all patient encounters;
     
  • generate and submit timely, accurate claims and follow up on unpaid claims because Services’ Medical Commands did not establish standard procedures to implement Federal and DoD regulations related to the collection of third party claims; or
     
  • use the Department of the Treasury or local Judge Advocate support to collect delinquent debt because commanders at the medical facilities did not implement procedures for transferring delinquent debt to the Department of the Treasury or ensure that sufficient legal support was made available to pursue required collection actions.

Furthermore, third party collection contractors did not conduct timely followup, document followup actions, or elevate claims in accordance with Federal and DoD regulations for 18 of 23 claims in our sample. This occurred because Army, National Capital Region Medical Directorate, and Air Force medical facility and contracting personnel did not structure the contracts to align with Federal and DoD regulations or implement adequate oversight procedures to identify and address deficiencies in the contractor’s performance.

We determined that without proper management of the Third Party Collection Program, the nine medical facilities did not collect up to $70.7 million of the $86.9 million over 120 days old, including up to $1.0 million for the 70 claims reviewed. As a result, substantial uncollected funds were not available for the medical facilities to use to improve the quality of health care.

Furthermore, additional funds could be collected when medical facility personnel collect OHI information at all clinics and process the 26,236 potentially billable encounters. Unless DoD MHS management takes prompt and aggressive actions to pursue collections and make improvements to the collection process of the delinquent debt among the Third Party Collection Program, medical facilities will continue to experience rising delinquent balances for future medical service and miss the opportunity to use the money collected to support the quality of health care.

Recommendations

We make several recommendations to address our findings, including that the DHA Director initiate a review of all medical facilities in the MHS to determine which medical facilities are not:

  • collecting OHI information at all clinics and coordinate with commanders of those medical facilities to enforce existing OHI regulations and, as appropriate, take administrative action for noncompliance;
     
  • conducting followup in compliance with the requirements of the DHA Procedures Manual 6015.01, and coordinate with commanders of those medical facilities to immediately revise procedures to ensure claims are followed up on in accordance with applicable DoD requirements; and
     
  • providing legal support to the UBO and coordinate with commanders of those medical facilities to provide legal support to collect on third party collection program claims, and report on the benefits of the DHA providing centralized legal resources for all DoD medical facilities to support cost recovery programs.

Additionally, we make 72 recommendations to the commanders or directors of the nine medical facilities reviewed, including recommendations to:

  • direct personnel at all medical facility clinics and clinical support activities to collect hardcopy or electronic versions of DD Form 2569, and as appropriate, take administrative action for noncompliance;
     
  • review and modify procedures for claim followup so debt can be transferred to the appropriate debt collection agency when claims become 120 days delinquent;
     
  • provide sufficient legal support to pursue collections through the Third Party Collection Program; and
     
  • review, research, and pursue collection on the delinquent third party claims that remain open.

Furthermore, we recommend that the Commanding General of Regional Health Command–Atlantic, Director of DHA National Capital Region Medical Directorate, and the Commander of the Air Force Medical Operations Agency review the contract language in the Third Party Collection Program contracts, and as appropriate, align the contract terms with all applicable Federal and DoD regulations related to the Third Party Collection Program. In addition, they should implement oversight procedures to monitor contractor performance in accordance with the applicable Federal and DoD regulations and contract terms. We recommend that they hold any contracting personnel assigned oversight responsibility accountable for not appropriately performing the oversight procedures necessary to ensure the contractor complied with Federal and DoD regulations and contract terms.

Management Comments and Our Response

The Deputy Assistant Secretary of the Navy (Military Manpower and Personnel), responding for the Commanders of Naval Hospital Bremerton and Naval Medical Center San Diego, agreed with and provided comments that address the specifics for 8 of 10 recommendations. These recommendations are resolved and will remain open until adequate documentation has been submitted showing that all agreed-upon actions have been completed. In addition, the Deputy Assistant Secretary provided comments that addressed the potential monetary benefits. However, the Deputy Assistant Secretary disagreed with or did not provide comments that address the specifics for 2 of 10 recommendations. Therefore, the recommendations related to providing legal support are unresolved.

The Chief of Staff, Army Office of the Surgeon General, responding for the Commanders of Madigan Army Medical Center, Brooke Army Medical Center, Kimbrough Ambulatory Care Center, and Regional Health Command–Atlantic, agreed with and provided comments that address the specifics for 11 of 18 recommendations. These recommendations are resolved and will remain open until adequate documentation has been submitted showing that all agreed-upon actions have been completed. In addition, the Chief of Staff provided comments that addressed the potential monetary benefits. However, the Chief of Staff disagreed with or did not provide comments that address the specifics for 7 of 18 recommendations. Therefore, the recommendations related to resolving patient encounters, reviewing and modifying procedures for obtaining pre-authorization, reviewing and modifying procedures for claim followup, and providing legal support are unresolved.

The Deputy Surgeon General of the Air Force, responding for the Commanders of the 59th Medical Wing at Lackland Air Force Base, the 75th Medical Group at Hill Air Force Base, and Air Force Medical Operations Agency, agreed with and provided comments that address the specifics for 10 of 15 recommendations. These recommendations are resolved and will remain open until adequate documentation has been submitted showing that all agreed-upon actions have been completed. However, the Deputy Surgeon General did not respond to the potential monetary benefits and disagreed with or did not provide comments that address the specifics for 5 of 15 recommendations. Therefore, the recommendations related to reviewing and modifying procedures for claim followup, reviewing all outstanding third party claims to determine eligibility for collection assistance, providing legal support, and holding contracting personnel assigned oversight responsibility accountable are unresolved.

The DHA Director, Director of Walter Reed National Military Medical Center, and Commander of Fort Belvoir Community Hospital did not respond to 29 recommendations and the potential monetary benefits in the draft report. Therefore, these recommendations are unresolved.

This report is a result of Project No. D2018-D000AX-0174.000