VA Privatization = Longer Waits and Higher Costs

Increased Privatization of the VA Has Led to Longer Waits and Higher Costs for Taxpayers – By Isaac Arnsdorf & Jon Greenberg – Dec 2018

For years, conservatives have assailed the United States Department of Veterans Affairs as a dysfunctional bureaucracy. They said private enterprise would mean better, easier-to-access health care for veterans. 

Here’s what has actually happened in the four years since the government began sending more veterans to private care:

• longer waits for appointments and,
• a new analysis of VA claims data by ProPublica and PolitiFact shows, higher costs for taxpayers.  

Since 2014, 1.9 million former service members have received private medical care through a program called Veterans Choice.

It was supposed to give veterans a way around long wait times in the VA.

But their average waits using the Choice Program were still longer than allowed by law, according to examinations by the VA inspector general and the Government Accountability Office.

The watchdogs also found widespread blunders, such as booking a veteran in Idaho with a doctor in New York and telling a Florida veteran to see a specialist in California. Once, the VA referred a veteran to the Choice Program to see a urologist, but instead he got an appointment with a neurologist.

The winners have been two private companies hired to run the program.

ProPublica and PolitiFact obtained VA data showing how much the agency has paid in medical claims and administrative fees for the Choice Program.

Since 2014, the two companies have been paid nearly $2 billion for overhead, including profit. That’s about 24 percent of the companies’ total program expenses—a rate that would exceed the federal cap that governs how much most insurance plans can spend on administration in the private sector.

According to the agency’s inspector general, the VA was paying the contractors at least $295 every time it authorized private care for a veteran.

The fee was so high because the VA hurriedly launched the Choice Program as a short-term response to a crisis.

This is exactly what happens when policies are enacted in “crisis mode” when people override any time consuming sensible thinking and quckly jump into the most politically attractive and financially profitable policies.

Four years later, the fee never subsided—it went up to as much as $318 per referral.

“This is what happens when people try and privatize the VA,” Senator Jon Tester of Montana, the ranking Democrat on the Senate veterans committee, said in a statement responding to these findings.

“The VA has an obligation to taxpayers to spend its limited resources on caring for veterans, not paying excessive fees to a government contractor. When VA does need the help of a middleman, it needs to do a better job of holding contractors accountable for missing the mark.“

Even excluding the costs of setting up the new program, the Choice contractors’ overhead still amounts to 21 percent of revenue.

TriWest did not dispute ProPublica and PolitiFact’s estimated overhead rate,

The company defended the $295-plus fee by saying it covers “highly manual” services such as scheduling appointments and coordinating medical files.

Such functions are not typically part of the contracts for other programs, such as the military’s Tricare. But Tricare’s contractors perform other duties, such as adjudicating claims and monitoring quality, that Health Net and TriWest do not.

In a recent study comparing the programs, researchers from the Rand Corporation concluded that the role of the Choice Program’s contractors is “much narrower than in the private sector or in Tricare.”

Before the Choice Program, TriWest and Health Net performed essentially the same functions for about a sixth of the price, according to the VA inspector general. TriWest declined to break down how much of the fee goes to each service it provides.

Because of what the GAO called the contractors’ “inadequate” performance, the VA increasingly took over doing the Choice Program’s referrals and claims itself.

In many cases, the contractors’ $295-plus processing fee for every referral was bigger than the doctor’s bill for services rendered, the analysis of agency data showed

In the three months ending January 31st, 2018, the Choice Program made 49,144 referrals for primary care totaling $9.9 million in medical costs, for an average cost per referral of $201.16.

A few other types of care also cost less on average than the handling fee: chiropractic care ($286.32 per referral) and optometry ($189.25). 

Beyond what the contractors were entitled to, audits by the VA inspector general found that they overcharged the government by $140 million from November of 2014 to March of 2017.

Both companies are now under federal investigation arising from these overpayments.

• Health Net’s parent company, Centene, disclosed a Department of Justice civil investigation into “excessive, duplicative or otherwise improper claims.”
• A federal grand jury in Arizona is investigating TriWest for “wire fraud and misused government funds,” according to a court decision on a subpoena connected to the case. Both companies said they are cooperating with the inquirie

Despite the criminal investigation into TriWest’s management of the Choice Program, the Trump administration recently expanded the company’s contract without competitive bidding. Now, TriWest stands to collect even more fees as the administration prepares to fulfill Trump’s campaign promise to send more veterans to private doctors.

Many of the Choice Program’s defects trace back to its hasty launch.

As they say: Act in haste, repent in leisure.

officials at the Phoenix VA were covering up long wait times, and critics seized on this scandal to demand that veterans get access to private medical care.

McCain struck a compromise with Democrats to open up private care for veterans who lived at least 40 miles from a VA facility or would have to wait at least 30 days to get an appointment.

In the heat of the scandal, Congress gave the VA only 90 days to launch the Choice Program.

The VA reached out to 57 companies about administering the new program, but the companies said they couldn’t get the program off the ground in just three months, according to contracting records.

The smart companies knew that you can’t create such a deeply involved system in just 90 days.

From my own experience in high tech, setting up new databases and new processes, when done right, requires 90 days just to create a truly functional design. Then the programming and testing would take about another 4-6 months.

There’s no way to do the job right without taking more than 90 days, so this project was doomed to failure by design.

So the VA tacked the Choice Program onto existing contracts with Health Net and TriWest to run a much smaller program for buying private care. “There is simply insufficient time to solicit, evaluate, negotiate and award competitive contracts and then allow for some form of ramp-up time for a new contractor,” the VA said in a formal justification for bypassing competitive bidding.

In a 2016 report, the VA inspector general said officials hadn’t followed the rules “to ensure services acquired are based on need and at fair and reasonable prices.” The report criticized the VA for awarding higher rates than one of the vendors proposed.

The new contract with the VA was a lifeline for TriWest. Its president and chief executive officer, David J. McIntyre Jr., was a senior aide to McCain in the mid-1990s before starting the company

McIntyre’s annual compensation, according to federal contracting disclosures, is $2.36 million. He declined to be interviewed

Previously, the VA paid the companies between $45 and $123 for every referral, according to the inspector general. But for the Choice Program, TriWest and Health Net raised their fee to between $295 and $300 to do essentially the same work on a larger scale, the inspector general said.

The price hike was a direct result of the time pressure, according to Greg Giddens, a former VA contracting executive who dealt with the Choice Program.

Even though the whole point of the Choice Program was to avoid 30-day waits in the VA, a convoluted process made it hard for veterans to see private doctors any faster. Getting care through the Choice Program took longer than 30 days 41 percent of the time

The GAO found that, in 2016, using the Choice Program could take as long as 70 days, with an average of 50 days.

Sometimes the contractors failed to make appointments at all. Over a three-month period in 2018, Health Net sent back between 9 percent and 13 percent of its referrals, according to agency data. TriWest failed to make appointments on 5 percent to 8 percent of referrals, the data shows.

After Thompson used the Choice Program in 2018 for a sinus surgery that the VA couldn’t perform within 30 days, the private provider came after him to collect payment, according to documentation he provided

Thousands of veterans have had to contend with bill collectors and credit bureaus because the contractors failed to pay providers on time, according to the inspector genera

The VA shares the blame, since it fell behind in paying the contractors, the inspector general said

The VA tried to tackle the backlog of unpaid doctors, but it had a problem: The agency didn’t know who was performing the services arranged by the contractors.

That’s because Health Net and TriWest

• controlled the provider networks, and
• the medical claims they submit to the VA do not include any provider information.

This is just plain crazy. There must be a good reason so many details of the veterans’ care is hidden and I’m sure it involves billing for more “medical care” than was provided.

The contractors’ role as middlemen created the opportunity for payment errors, according to the inspector general’s audit. The inspector general found 77,700 cases where the contractors billed the VA for more than they paid providers and pocketed the difference, totaling about $2 million. The inspector general also identified $69.9 million in duplicate payments and $68.5 million in other errors.

Because the contractors were failing to find participating doctors to treat veterans, the VA in mid-2015 launched a full-court press to sign up private providers directly,

Officials decided in 2016 to design new contracts that would change the fee structure and re-absorb some of the services that the VA had outsourced to Health Net and TriWest.

The new contracts, called the Community Care Network, also aimed to reduce overhead by paying the contractors based on the number of veterans they served per month, rather than a flat fee for every referral. To prevent payment errors like the ones the inspector general found, the new contracts sought to increase information-sharing between the VA and the contractors

Hopefully, the contractors will be forced to supply more detailed information on their billing.

Right now it sounds like they can write up a bill for any amount without any itemization and send it to the VA to be paid, and often repeatedly.

But until those new contracts were in place, the VA was still stuck paying Health Net and TriWest at least $295 for every referral. So VA officials came up with a workaround: they could cut out the middleman and refer veterans to private providers directly

TriWest’s chief executive officer, McIntyre, objected to this workaround and blamed the VA for hurting his bottom line.

Remember, this is the guy who is making millions in salary (and there are always additional bonuses for corporate officers).

Officials were puzzled that, despite all the VA was paying TriWest, McIntyre was claiming he couldn’t make ends meet, according to agency emails provided to ProPublica and PolitiFact

McIntyre explained that he wanted the VA to waive penalties for claims that lacked adequate documentation and to pay TriWest an administrative fee on canceled referrals and no-show appointments, even though the VA read the contract to require a fee only on completed claims.

In a March letter to key lawmakers, McIntyre said the VA’s practice of bypassing the contractors and referring patients directly to providers “has resulted in a significant drop in the volume of work and is causing the company irreparable financial harm.”

So he saying their profit was all from the outrageous referral fees and that providing the medical service they bill for (excessively, repeatedly) doesn’t generate any profit.

But when the VA asked to see TriWest’s financial records to substantiate McIntyre’s claims, the numbers didn’t add up, according to agency emails.

The new permanent program for buying private care will take effect in June of 2019. The VA’s new and improved Community Care Network contracts were supposed to be in place by then. But the agency repeatedly missed deadlines for these new contracts and has yet to award them.

The VA has said it’s aiming to pick the contractors for the new program in January and February. Yet even if the VA meets this latest deadline, the contracts include a one-year ramp-up period, so they won’t be ready to start in June.

That means TriWest will by default become the sole contractor for the new program.

Meanwhile, TriWest will continue receiving a fee for every referral. And the number of referrals is poised to grow as the administration plans to shift more veterans to the private sector.

This post originally appeared on ProPublica as “The VA’s Private Care Program Gave Companies Billions and Vets Longer Waits” and is republished here under a Creative Commons license.

By Isaac Arnsdorf & Jon Greenberg
Isaac Arnsdorf covers politics, influence, and the Trump administration for ProPublica.
Jon Greenberg is a staff writer with PolitiFact.