Military Treatment Facilities: Internal Control Activities Need Improvement

Highlights

The $24 billion Military Health System provided health care to over 8 million eligible beneficiaries. Although Congress has provided sizeable increases in funding for health care over the past few years, the Department of Defense (DOD) has needed supplemental appropriations for 6 of the last 8 fiscal years from 1994 to 2001 because its costs were higher than expected. The growing budgetary pressure increases the risk of not achieving the mission of the organization. DOD's military treatment facilities (MTF) represent over half of DOD's health care expenditures. The three MTF's reviewed have not effectively implemented internal control activities in the areas of eligibility, billings and collections, expired drugs, personal property management, and government purchase card usage. The three MTFs also did not identify all patients with third party insurance coverage. In addition, they frequently did not bill those insurers even when they knew that such coverage existed, thereby losing opportunities to collect millions of dollars of reimbursements for services. Ineffective physical and financial controls over personal property assets and indications of control breakdowns in the use of government purchase cards existed at the three facilities.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, develop a strategy to make short-term and long-term improvements in data quality in the automated eligibility, cost, and clinical health care systems.	Closed – Implemented A strategy has been developed at both the DoD and Military Department levels to make improvements in data quality in the automated systems for eligibility, cost, and clinical healthcare. Among the data system improvements made at the DoD level were 1) the Coding and Compliance Editor, which has successfully completed testing and is in deployment, and 2) the Provider Graphical User Interface (PGUI) for the legacy Composite Health Care System (CHCS). PGUI development is complete and deployment was at the end of 2004.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, develop and utilize analytical tools for facilitating the identification of erroneous records in the eligibility, cost, and clinical health care systems such as comparisons between Social Security Administration records and facility automated medical management records.	Closed – Implemented The Department did not concur with this recommendation. Nonetheless, significant improvements have been taken to assist in identifying erroneous records. At the TMA level, procedures have been posted on the Web for over a year that address the process to be utilized in ensuring duplicate records are not kept in Composite Health Care System (CHCS). These guidelines have also been provided to the Military Treatment Facilities (MTFs). Within the Department's TMA's Management Control Program (MCP), an Assessable Unit was developed to compare MTF records to DEERS eligibles. A new Department of Defense Instruction (DoDI) was developed (based upon a DoD IG recommendation) to govern the confiscation of invalid identification cards at MTFs and is in the final stages of coordination before signature. The Navy created an Assessable Unit (AU) in its Management Control Program to monitor records. The Air Force has created an AFI (AFI 41-115) which outlines a two-step eligibility verification process.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, reiterate through correspondence with MTF personnel the importance of completing or updating the DOD Form 2569, as required, to document whether each health care beneficiary has third party insurance.	Closed – Implemented DOD has made significant improvements to its education, and billing/collection processes have been instituted. Outpatient Itemized Billing (OIB) was implemented to improve the billing/collection processes. The Uniform Business Office (UBO) process has been reinforced with UBO guidance sent to Services, Hotline established, Newsletter created, and the introduction of an annual conference. Each MTF commander was charged with reviewing his/her program against the demonstration results to identify improvements. The Navy is developing Best Practices to verify and capture patient insurance information. The requirement to identify, document and update health insurance information was reiterated via memorandum to Army Regional Medical Center Commanders. The memo was also disseminated to the Uniform Business Office Managers and staff of Army MTFs. To facilitate and encourage command support of the capture of Other Health Insurance (OHI), MTA has added a question to the MTF monthly Commanders Data Quality Statement requesting the percentages of completed and current DD2569s contained in the medical records.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, require MTFs to maintain an itemized list of the names and quantities of drugs to be returned to the pharmaceutical return goods contractor for credit or disposal, and require MTFs to routinely monitor and evaluate, based on the management reports provided by the contractor and the pharmaceutical prime vendor, the credits received from the returns of drugs and net losses of those drugs to use as an indicator in determining whether on hand inventory levels are appropriate.	Closed – Implemented In the DODIG Report D-2004-087, it was demonstrated that the recommendation to require MTFs to maintain an itemized list of the names and quantities of drugs to be returned to the pharmaceutical returned goods and contractor for credit or disposal was impracticable. The GAO Auditor in Charge concurred with DODIG and agreed to drop the recommendation in favor of the DODIG recommendation, i.e., require the PRMP contractor to take the returned pharmaceuticals inventory before leaving the MTF pharmacy and provide the inventory list to the MTF. Navy, Army, and Air Force have issued guidance on pharmaceutical inventory management. For the second part of the recommendation, the DODIG recommended changes in the Pharmaceutical Returns Management Program (PRMP) and Prime Vendor contracts to improve oversight and control over the PRMP. Defense Supply Center Philadelphia (DSCP) modified all current prime vendor contracts to allow the MTFs prime vendor credit accounts to reimburse all authorized drug returns companies. In addition, DSCP has initiated procedures to verify that MTFs using non-PRMP companies have contracts with those companies before authorizing reimbursement though the credit accounts. Further, DSCP will oversee the performance of the PRMP contract.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, require property office management to maintain, and have readily available, independent documentation supporting the cost and date of acquisition for all accountable personal property.	Closed – Implemented DOD reported that the Services have business procedures in place to document the acquisition and costs of all accountable personal property. Additionally, the Defense Medical Logistics Standard Support (DMLSS) system Release III provides a property accounting application to improve tracking and record keeping. Deployment continues on schedule at all MTFs. As of January 2004, DMLSS Release III was deployed to 70 of the 110 sites. ECD for all 110 sites is still 2005; and 2006 for the small sites.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, require property office management to promptly report the loss of any personal property items detected during their periodic physical inventories, and to adjust the property records accordingly.	Closed – Implemented DOD reported that the Services have business procedures in place to document the acquisition and costs of all accountable personal property. Additionally, the Defense Medical Logistics Standard Support (DMLSS) system Release III provides a property accounting application to improve tracking and record keeping. Deployment continues on schedule at all MTFs. As of January 2004, DMLSS Release III was deployed to 70 of the 110 sites. ECD for all 110 sites is still 2005; and 2006 for the small sites.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, review and modify the existing processes and requirements to improve documentation of purchase card transaction approvals, independent receipt of the items, and invoices to better verify costs and quantities.	Closed – Implemented DOD has reported taking a number of actions in response to GAO's recommendation, including reinforcing existing policies related to its purchase card program. Army issued Operating Procedures for Government Purchase Cards on February 23, 2012 which included strengthened controls over transaction approvals, evidence of receipt, and supporting invoices.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, reiterate through correspondence with MTF personnel the importance of entering patient insurance coverage information into the automated medical information system so that more complete and accurate reports can be generated to better identify reimbursable care for billing.	Closed – Implemented DOD made significant improvements to its education and billing/collection processes. Outpatient Itemized Billing (OIB) was implemented to improve the billing/collection processes. The Uniform Business Office (UBO) process has been reinforced with UBO guidance sent to Services, Hotline established, Newsletter created, and the introduction of an annual conference. Further enhancements include: Army - 1) implemented a Standardized Insurance Table in CHCS (October 2002); 2) disseminates a Best Practices primer each quarter to each MTF UBO; 3) the AMEDD recently enhanced its billing workforce by 90 FTEs to improve billing performance; 4) the AMEDD conducted a Business Process Reengineering Demonstration to identify the most efficient method of collecting third party insurance. This effort yielded lessons learned and an objective measure of process redesign benefits. Each MTF commander was charged with reviewing his/her program against the demonstration results to identify improvements; 5) the AMEDD entered into a contract with a vendor to collect accounts outstanding greater than 90 days. This frees the in-house staff to focus attention on accounts 1-90 days old; 6) the AMEDD is automating pharmacy billing. This was not the case during the GAO evaluation. The accuracy of billing and identification of patients with OHI is dramatically improving: Air Force - 1) developing procedure manuals for each step of the revenue cycle; 2) AFIs being updated; and 3) re-engineering being considered. Navy is developing Best Practices to verify and capture patient insurance information. The requirement to identify, document and update health insurance information was reiterated via memorandum to Army Regional Medical Center Commanders. The memo was also disseminated to the Uniform Business Office Managers and staff of Army MTFs. To facilitate and encourage command support of the capture of Other Health Insurance (OHI), MTA has added a question to the MTF monthly Commanders Data Quality Statement requesting the percentages of completed and current DD2569s contained in the medical records. MILDEPTS have been requested to add GAO Reports on the Third Party Collection to MTF Annual Statements of Assurance and to include GAO Third Party Collections issues in their IG and audit service evaluations of MTFs.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, reiterate through correspondence with MTF personnel the importance of billing third party insurance carriers promptly for admissions, outpatient visits, and pharmacy care, including items identified in our testing as well as other care not billed.	Closed – Implemented DOD made significant improvements to its education and billing/collection processes. Outpatient Itemized Billing (OIB) was implemented to improve the billing/collection processes. The Uniform Business Office (UBO) process has been reinforced with UBO guidance sent to Services, Hotline established, Newsletter created, and the introduction of an annual conference. Further enhancements include: Army - 1) implemented a Standardized Insurance Table in CHCS (October 2002); 2) disseminates a Best Practices primer each quarter to each MTF UBO; 3) the AMEDD recently enhanced its billing workforce by 90 FTEs to improve billing performance; 4) the AMEDD conducted a Business Process Reengineering Demonstration to identify the most efficient method of collecting third party insurance. This effort yielded lessons learned and an objective measure of process redesign benefits. Each MTF commander was charged with reviewing his/her program against the demonstration results to identify improvements; 5) the AMEDD entered into a contract with a vendor to collect accounts outstanding greater than 90 days. This frees the in-house staff to focus attention on accounts 1-90 days old; 6) the AMEDD is automating pharmacy billing. This was not the case during the GAO evaluation. The accuracy of billing and identification of patients with OHI is dramatically improving: Air Force - 1) developing procedure manuals for each step of the revenue cycle; 2) AFIs being updated; and 3) re-engineering being considered. Navy is developing Best Practices to verify and capture patient insurance information. The requirement to identify, document and update health insurance information was reiterated via memorandum to Army Regional Medical Center Commanders. The memo was also disseminated to the Uniform Business Office Managers and staff of Army MTFs. To facilitate and encourage command support of the capture of Other Health Insurance (OHI), MTA has added a question to the MTF monthly Commanders Data Quality Statement requesting the percentages of completed and current DD2569s contained in the medical records. MILDEPTS have been requested to add GAO Reports on the Third Party Collection to MTF Annual Statements of Assurance and to include GAO Third Party Collections issues in their IG and audit service evaluations of MTFs.
Office of the Under Secretary for Personnel and Readiness	Because having sound financial and management practices affects the ability of program directors and managers to make better decisions and achieve results, the Under Secretary of Defense for Personnel and Readiness and the military services' Surgeons General should, in conjunction with the senior management at the three MTF's, as appropriate, reiterate through correspondence with MTF personnel the importance of collecting third party reimbursements due to the government to the fullest extent allowed as required by DOD policy.	Closed – Implemented DOD made significant improvements to its education and billing/collection processes. Outpatient Itemized Billing (OIB) was implemented to improve the billing/collection processes. The Uniform Business Office (UBO) process has been reinforced with UBO guidance sent to Services, Hotline established, Newsletter created, and the introduction of an annual conference. Further enhancements include: Army - 1) implemented a Standardized Insurance Table in CHCS (October 2002); 2) disseminates a Best Practices primer each quarter to each MTF UBO; 3) the AMEDD recently enhanced its billing workforce by 90 FTEs to improve billing performance; 4) the AMEDD conducted a Business Process Reengineering Demonstration to identify the most efficient method of collecting third party insurance. This effort yielded lessons learned and an objective measure of process redesign benefits. Each MTF commander was charged with reviewing his/her program against the demonstration results to identify improvements; 5) the AMEDD entered into a contract with a vendor to collect accounts outstanding greater than 90 days. This frees the in-house staff to focus attention on accounts 1-90 days old; 6) the AMEDD is automating pharmacy billing. This was not the case during the GAO evaluation. The accuracy of billing and identification of patient with OHI is dramatically improving: Air Force - 1) developing procedure manuals for each step of the revenue cycle; 2) AFIs being updated; and 3) re-engineering being considered. Navy is developing Best Practices to verify and capture patient insurance information. The requirement to identify, document and update health insurance information was reiterated via memorandum to Army Regional Medical Center Commanders. The memo was also disseminated to the Uniform Business Office Managers and staff of Army MTFs. To facilitate and encourage command support of the capture of Other Health Insurance (OHI), MTA has added a question to the MTF monthly Commanders Data Quality Statement requesting the percentages of completed and current DD2569s contained in the medical records. MILDEPTS have been requested to add GAO Reports on the Third Party Collection to MTF Annual Statements of Assurance and to include GAO Third Party Collections issues in their IG and audit service evaluations of MTFs.

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BeneficiariesHealth care facilitiesHealth insuranceHospital care servicesInternal controlsMilitary facilitiesMilitary personnelMilitary health servicesMilitary treatment facilityDrugs