Executive Summary Non-VA Emergency Care Claims Inappropriately Denied and Rejected VAOIG-18-00469-150
When veterans receive emergency care at non-VA facilities, they can file for reimbursement of non-VA emergency care costs. If claims are denied or rejected, non-VA facilities and providers can bill the veterans for some or all the costs of the emergency care services provided.
A September 2017 request from then Representative Tim Walz (Minnesota) expressed a concern about claims processors denying veterans’ non-VA emergency care claims to meet production goals and receive incentives such as high performance ratings and bonuses.1 The VA Office of Inspector General (OIG) conducted this audit to determine whether processors of non-VA emergency care claims inappropriately denied or rejected the claims, and if so, whether the cause was pressure to meet production standards.
A Significant Number of Denied and Rejected Claims Were Inappropriately Processed, Some Leading to Wrongful Denials and Rejections
VA personnel who process payments of claims for medical care obtained outside VA are from the Claims Adjudication and Reimbursement Directorate (CAR) in the VA’s Office of Community Care (OCC). The audit team’s nationwide accuracy review found that an estimated 31 percent of denied or rejected non-VA emergency care claims were inappropriately processed by CAR staff.2 Denied and rejected claims could shift the financial burden of non-VA care from VA to the veteran. Under regulations, when a claim is “denied” it is because there is not a basis for a payment, but a claim may also be “rejected,” which means that it cannot be decided until the claimant provides additional or corrected information.3 When CAR denies a claim, the claimant may have to pay out of pocket for his or her emergency care.
The billed amount of inappropriately processed claims from April 1 through September 30, 2017, that were denied or rejected was large in the aggregate—an estimated $716 million—and presented potential undue financial risk to an estimated 60,800 veterans. The audit team could not determine whether providers billed veterans for inappropriately processed claims that VA did not reimburse. However, the risk of undue financial burden remained for individuals who could ultimately be billed by the non-VA provider for their episode of emergency care. Although claimants can appeal denied claims, CAR was not effectively monitoring veterans’ appeals of non-VA emergency care claims decisions.
While not all claims-processing errors resulted in inaccurate decisions, the audit revealed that a portion of those denied and rejected claims should have been approved. The OIG estimated that about 17,400 veterans, with bills totaling at least $53.3 million, were negatively affected during the audit period. The OIG estimated that if corrective actions are not taken, these errors could result in $533 million in improper underpayments to claimants over five years.4
The remaining processing errors are also significant, as claimants did not receive complete and accurate information regarding why their claims were not approved. In other words, the procedural errors created a risk that claimants could not effectively respond with necessary information to obtain claim approval and payment.
OCC’s CAR Culture Created Pressure for Timely Production
The audit found that the OCC’s CAR placed more emphasis on the number of claims processed than the accuracy of the claims decisions. Prioritizing production over quality stemmed from a backlog of unprocessed claims more than 30 days old, which OCC and CAR leaders tried to reduce. At the start of fiscal year (FY) 2016, the inventory of aged claims was about 482,000 claims out of 1.7 million (28 percent).5 The initial goal in 2016 was to process and pay at least 85 percent of authorized non-VA care claims within 30 days (and 45 days for unauthorized
non-VA emergency care claims) and reduce the claims backlog to less than 10 percent of the total inventory. By 2017, that goal increased to 98 percent of claims. Even with these goals, Veterans Health Administration (VHA) data showed the inventory of aged claims had increased to 36 percent of all claims by November 2018.
To address the congressional request, the audit team conducted interviews with 182 CAR staff and leaders, reviewed survey responses from 435 CAR staff, assessed 180 denied and 60 rejected non-VA claims that were scanned or electronically received during the audit period, and reviewed relevant email records. Since at least December 2016, OCC and CAR leaders have discussed and developed strategies to process more claims.6 Interviews revealed that voucher examiners received a work-production credit when they rejected or denied a claim, or sent the claim for payment, but did not receive credit for researching the claim and then suspending it for clinical review.
Interviews and survey responses showed that some voucher examiners were verbally directed or encouraged to deny non-VA emergency claims to meet production standards. Additionally, some examiners who had not been directly encouraged to reject or deny claims responded that they still felt the CAR culture created “systemic pressure to favor speed over accuracy.” Overall, the responses showed that the claims-processing environment focused on production and prioritized quantity over quality.
Through interviews, the audit team identified factors in CAR’s claims-processing environment that staff considered to be incentives (such as overtime and telework privileges) that were tied to meeting or exceeding production targets. OCC policy instructs supervisors to authorize overtime only to examiners who meet performance standards. Examiners felt that supervisors incentivized overtime opportunities based on production outcomes. Similarly, telework opportunities were tied to the quantity of claims processed. Examiners who did not consistently meet the production numbers were not considered for overtime and had their telework privileges removed. Examiners also earned bonuses when they exceeded performance standards. The FY 2017 annual bonuses awarded to eligible voucher examiners at general schedule-4 (GS-4) through GS-6 pay levels were $500 for an outstanding rating and $350 for an excellent rating. Although performance ratings are directly tied to performance bonuses, the OIG did not find that performance bonuses were a driving factor for examiners to inappropriately process claims to meet production standards. While production standards were tied directly to performance evaluations and overtime and telework opportunities, accuracy standards did not hold a similar weight.
CAR Lacked Sufficient Quality Controls
Senior voucher examiners were held to a production standard of processing 13 unauthorized or Millennium Bill (Mill Bill) claims per hour to receive a fully successful performance rating, and 15 of these claims per hour to receive an exceptional rating.7 The accuracy performance standard required processing 96.5 percent of claims accurately to receive a fully successful rating and
98.5 percent to receive an exceptional rating. The audit found that standards for accurate claims processing were unofficial and inconsistently monitored from region to region. Even though performance evaluations for voucher examiners included an accuracy standard, CAR did not have an accuracy assessment policy or standardized practice. These accuracy standards were inconsistently applied because they were based on supervisory review and spot checks for potential errors at the local level.
Nearly half the voucher examiners who responded to the audit team’s survey said they were not aware of supervisors reviewing any of their claims for accuracy. Furthermore, voucher examiners reported that the production and accuracy standards at the fully successful level were too high and did not allow enough time to do a thorough and complete job of assessing claims. Because, according to CAR data, nearly 80 percent of unauthorized and Mill Bill claims are denied or rejected, it is especially important that they be denied or rejected for accurate reasons.
Additional Barriers Affected Claims Processing
Clear communication about claims status is critical for veterans to respond to denials and rejections in a timely manner. However, during the course of the audit, the OIG team found a significant backlog in mail processing that created a risk that veterans would not be informed of a claims decision or would be informed too late to resubmit or appeal. Backlogs at three facilities showed stacks of unsent claims decision letters printed between one and two months prior to the OIG site visits. The outgoing mail typically included claim rejection and denial letters that needed time-sensitive responses, such as updating claim information or appealing a denial.
Finally, since FY 2017 the OCC experienced several leadership changes, including three CAR directors. While the findings in this report cannot be tied directly to the lack of stability in key leadership positions, it provided the context in which problems were allowed to continue without remediation.
VHA’s Recent Actions
During this audit, the OIG team provided interim briefings to CAR leaders. In May 2019, VHA officials reported to the audit team that they had implemented process improvements and initiatives that affect claims processing nationwide and the environment in which claims are processed. The changes that VHA reported include standardizing denial and rejection reasons, reviewing denial and rejection reasons on clinical decisions, offering regular training, and developing plans and strategies that focus on quality. The OIG has not verified the implementation of these actions.
What the OIG Recommended
The audit team concluded that there was a significant risk that some of the errors identified resulted from the environmental pressure to meet production targets, insufficient quality assurance of claims-processing accuracy, and incentives that were associated with meeting production targets.
The OIG made 11 recommendations to improve the accuracy of non-VA emergency claims processing, including recommendations to address the culture of prioritizing claims productivity over accuracy, improve performance evaluation standards and review processes, tie incentives to all performance standards rather than just production quantity, reevaluate inappropriately processed claims, and improve internal and external communication about claim status.
The Executive in Charge, Office of the Under Secretary for Health, concurred with recommendations 1–4, 7–9, and 11; concurred in principle with recommendations 5, 6, and 10; and submitted acceptable corrective action plans for all recommendations. The OIG will monitor implementation of planned actions and will close the recommendations when VA provides sufficient evidence demonstrating progress in addressing the intent of the recommendations and the issues identified.
1 Throughout this report, claims processors are generally referred to as voucher examiners.
2 The audit team assessed 240 denied or rejected non-VA emergency care claims that were scanned or electronically received from April 1 through September 30, 2017, and processed under 38 U.S.C. § 1728 (unauthorized claims) or
§ 1725 (Millennium Bill claims).
3 A claimant can be the veteran or a non-VA provider or facility.
4 To project the monetary benefit over the next five years, the audit team multiplied the estimated financial impact during the six-month period to obtain a yearly rate.
5 Aged claims are authorized claims over 30 days old and unauthorized claims over 45 days old.
6 Appendix A provides additional details on instances of concerted claims-processing efforts, and the emphasis on timeliness, to meet goals and reduce backlogs.
7 Unauthorized claims are for reimbursement of unauthorized care for veterans with service-connected disabilities that meet certain administrative and clinical eligibility requirements under 38 U.S.C. § 1728. Millennium Bill claims are for reimbursement of unauthorized care for veterans with nonservice-connected disabilities that meet certain administrative and clinical eligibility requirements under 38 U.S.C. § 1725.