Better Oversight of Prosthetic Spending Needed to Reduce Unreasonable Prices Paid to Vendors

To enable veterans to function at their highest level, VA provides medically prescribed prosthetic and rehabilitative items and services to eligible recipients. In fiscal year 2019, such items—artificial limbs, shoes, shoe inserts, and compression garments—accounted for about $318.8 million, or about 9 percent of prosthetic spending. The Office of Inspector General (OIG) conducted this audit to determine if Veterans Health Administration (VHA) oversight ensured medical facilities paid reasonable prices when reimbursing vendors for prosthetic and orthotic items. Previous OIG audits identified weaknesses in VHA’s oversight, which led to overpayments to vendors and missed opportunities for cost savings. The OIG found VHA’s oversight of prosthetic spending was ineffective, resulting in medical facilities sometimes reimbursing vendors at unreasonable rates; medical facilities spent about $10 million more than reasonable rates in the six-month period from October 2019 through March 2020. Furthermore, the OIG found that prosthetic spending data was unreliable—about 36,200 transactions in the National Prosthetics Patient Database from October 2019 through March 2020 contained at least one inaccurate data element, including the price paid. Unreasonable rates, along with data inaccuracies, occurred because Prosthetic and Sensory Aids Service leaders did not assume their oversight role, assess laws and regulations applicable to prosthetic spending to ensure reasonable rates, review and update oversight roles and responsibilities in policies, or establish processes and procedures to monitor the accuracy of prosthetic spending data. The OIG made four recommendations, including determining and clarifying which reimbursement practices apply to the rates medical facilities pay vendors, monitoring spending to make sure medical facilities reimburse vendors at reasonable prices, establishing a formal oversight structure to define roles and responsibilities within the prosthetic program, and requiring routine monitoring of medical facilities’ data to improve accuracy.