Federal Reports

The OIG issued this memorandum to help VHA determine whether additional actions are needed to address significant cost concerns and potential issues about patients’ length of stay and quality of care for residential substance use disorder treatment provided under community care contracts with two third-party administrators (TPAs). The OIG found the contracts do not require community providers to use designated billing codes, which could lead to VHA overpaying providers for these services. Though VHA has amended the contract for one TPA, negotiations are ongoing with the other; until this occurs, overpayments to the second TPA—which were over $268 million for FYs 2023 and 2024—will continue.

The OIG is also concerned that lax oversight of the TPAs could lead to VHA overpaying for these services because TPAs may bill for unnecessary treatment that could needlessly lengthen the time a veteran receives care. Further, the OIG is concerned about the quality of residential substance use disorder treatment veterans receive in the community and suggests greater oversight could mitigate financial risk as well as safeguard the care veterans receive.

The OIG notes that while VHA has taken steps to create a new payment policy and has completed a contract modification with the first TPA to clarify the use of billing codes, VHA should apply those changes to current and future contracts and monitor whether these changes control costs. The OIG also suggests VHA consider consulting with mental health staff at authorizing VA facilities for feedback on improving the care veterans receive in the community for these services.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements.

VA is authorized by statute to procure healthcare resources from affiliates on a sole-source basis without regard to laws or regulations that require competition. VA policy requires that contracting officers request an Office of Inspector General (OIG) review or audit for any sole-source healthcare proposal with an anticipated annual value of at least $400,000. The OIG provides information that contracting officers may use as they negotiate fair and reasonable prices. In fiscal year 2024, the OIG completed 16 audits of sole-source healthcare proposals. The combined estimated contract value of these 16 preaward audits was about $300.6 million, and the OIG team identified over $121.7 million in potential cost savings. Following the OIG audits, the Veterans Health Administration sustained about $47.5 million in cost savings.

Fifteen proposals reviewed had full-time-equivalent or hourly pricing. For 13 of these proposals, the OIG determined the hourly rate pricing offered to the government was higher than the supported amounts, and the OIG recommended contracting officers obtain lower prices than those offered to the government.

One proposal reviewed had per-procedure pricing. The OIG found the affiliate offered rates higher than current Medicare rates for per-procedure pricing. In this audit, the OIG recommended reimbursement rates that were 100 percent of the current Medicare rates for the per-procedure portion of the affiliate’s proposal.

Finally, for six of the 16 contract proposals examined, the OIG found potential conflicts of interest for VA personnel who may be involved in the acquisition process and who also held a position with the affiliate. In each instance, the OIG recommended the contracting officer request an opinion from VA’s Office of General Counsel as to whether these individuals would have a financial interest in the proposal.

At the request of the Tennessee Valley Authority’s (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for (1) outage and supplemental maintenance and modification services and (2) support services at TVA’s nuclear plants.  Our examination objective was to determine if the cost proposal was fairly stated for a planned $975 million contract.

In our opinion, the cost proposal was fairly stated. Specifically, the proposed total noncraft labor burden rates for the recovery of indirect costs were supported by recent actual costs.  However, we determined the proposed noncraft wage ranges were not reflective of the actual salary costs for the contractor’s employees.  In addition, (1) the proposed rate schedule included a payroll tax rate even though the contractor indicated it could bill payroll taxes at actual costs and (2) the contractor did not propose a rate for long-term temporary assignments, as requested in the request for proposal.