Report 93027 Summary - April 1994

The Veterans Home of California Has Not Maximized Revenue From Residents and Reimbursements From the Federal Government

Results in Brief

The 1993-94 Budget Act (Chapter 55, Statutes of 1993) required the Bureau of State Audits to review the policies and procedures of the state Department of Veterans Affairs (department) to maximize fees paid by residents of the Veterans Home of California (home). The Budget Act also required that the review evaluate the department's efforts to exhaust all sources of reimbursements from both the residents and the federal government. During our review, we noted the following:

By not implementing adequate procedures and adopting policies to recover all possible fees, the home has not maximized revenue from residents. For example, the home can collect up to $1.15 million more from residents if it assesses an estimated $150,000 annually in fees on some social security income received by residents and charges residents an additional $1.0 million annually by raising fees to the maximum allowed by the Budget Act, while assuring that residents do not pay more than the state-funded cost of their care.

The home does not have the authority to collect the statefunded cost of care provided to residents who leave the home to live somewhere else. For example, the state-funded cost of care provided to the approximately 100 residents who left the home in 1993 would have been approximately $787,000 if they had resided in the home for only one year and had received domiciliary care, the least costly level of care. The amount the home might have recovered depends on the income and assets of the residents who left the home.

By not implementing adequate procedures to recover all possible reimbursements, the home has not maximized reimbursements from the federal government. We reviewed the home's reimbursements in fiscal year 1992-93 and found that the home received $260,000 less in Medicare reimbursements for hospital care than it would have if it had been reimbursed at rates similar to comparable institutions. In addition, the home received $200,000 less in reimbursements for outpatient clinic visits than it would have if it had received reimbursements for the percentage of residents who were eligible for Medicare. Also, the home received approximately $293,000 less in reimbursements than possible for certain therapy services.

The home received less in these reimbursements because its manual procedures and automated systems do not adequately accumulate all the possible charges to Medicare, do not properly classify all the charges by complexity, and do not properly price all the charges. Factors outside the home's control, such as differences in facility size, complexity of cases, and patient demographics between the home and the comparable institutions, explain in part why the home received less in reimbursements. In addition, according to its reimbursements officer, the home provides residents with all medical services, including services which are not covered by Medicare. Other institutions may not provide these additional services. Moreover, according to the home's administrator, the lack of staff resources is a major factor in preventing the home from maximizing reimbursements.

The home could have received up to approximately $446,000 annually in aid and attendance allowances if the federal Department of Veterans Affairs determines that 95 residents had been eligible to receive the allowances and if the home had obtained the statutory authority to receive the allowance for all veterans, including those with dependents.

Because the information is not available, we could not quantify the total lost revenue the home could have collected from residents if it had consistently verified income information on which fees were calculated. We also could not determine the total lost reimbursements the home could have received from Medicare and Medi-Cal if it had adequate manual billing procedures and automated systems. Because the home did not maximize revenue from residents and reimbursements from the federal government, support from the State's General Fund is higher than it needs to be. In addition, the cost of care to be recovered from residents is higher than it needs to be.

The home has implemented some corrective action to address these issues. For example, on February 1, 1994, it implemented new fees which we estimate will increase revenue annually by $1.1 million of the $2.1 million in possible additional revenue based on the maximum allowed by the Budget Act. In addition, on March 1, 1994, it began assessing fees for February 1994 on the social security income not previously assessed. Further, the home is presently analyzing and implementing ways to improve its billing information system.

The home at Yountville provides long-term residential care for aged and/or disabled war-time veterans. To offset costs, the California Military and Veterans Code allows the home to collect revenue from residents, which the home generally assesses as fees based on a percentage of the residents' income. The Budget Act for fiscal year 1993-94 allowed the home to collect fees of up to 70 percent of the residents' income and limited the total amount collected from residents to 40 percent of the State's general fund costs of the home for fiscal year 199394, approximately $9 million. The home is also eligible to receive reimbursements from the federal government and other third parties. For example, it may receive reimbursements from Medicare, Medi-Cal, the federal Department of Veterans Affairs, and thirdparty insurance companies. These fees and reimbursements reduce the home's costs that are supported by the General Fund.

Background

The Home Has Not Maximized Revenue From Residents

The home's procedures, policies, and statutory limitations have prevented the home from maximizing revenue from residents. By not implementing adequate procedures and adopting policies to recover all possible fees, the home has not maximized revenue from residents, and support from the State's General Fund may be higher than it needs to be. For example, the home can collect up to $1.15 million more from residents if it assesses an estimated $150,000 annually in fees on some social security income received by residents and if it charges residents an additional $1.0 million annually by raising fees to the maximum allowed by the Budget Act.

In addition, the home does not have the authority to collect the statefunded cost of care provided to residents who leave the home to live somewhere else. For example, the state-funded cost of care provided to the approximately 100 residents who left the home in 1993 would have been approximately $787,000 if they had resided in the home for only one year and had received domiciliary care, the least costly level of care. The amount that the home might have recovered depends on the income and assets of the residents who left the home.

Further, because the information to determine all lost revenue is not available, we could not quantify the total lost fees the home could have collected from residents if it had consistently verified income information on which fees were calculated. The home has implemented some corrective action to address these issues. For example, on February 1, 1994, it implemented new fees which we estimate will increase revenue annually by $1.1 million of the $2.1 million in possible additional revenue based on the maximum allowed by the Budget Act. In addition, on March 1, 1994, it began assessing fees for February 1994 on the social security income not previously assessed.

The Home Has Not Maximized Reimbursements From the Federal Government

By not implementing adequate procedures to recover all possible reimbursements, the home has not maximized reimbursements from the federal government. To determine how effective the home was in maximizing Medicare reimbursements, we compared the home's reimbursements with the reimbursements that comparable institutions received, with the reimbursements available based on its population of residents eligible for Medicare, and with its possible reimbursements for certain therapy services.

We reviewed the home's reimbursements in fiscal year 1992-93 and found that the home received $260,000 less in Medicare reimbursements for hospital care than it would have if it had been reimbursed at rates similar to comparable institutions. In addition, the home received $200,000 less in reimbursements for outpatient clinic visits than it would have if it had received reimbursements for the percentage of residents who were eligible for Medicare. Finally, the home received approximately $293,000 less in reimbursements than possible for certain therapy services.

The home received less in Medicare reimbursements because its manual procedures and automated systems do not adequately accumulate all the possible charges to Medicare, do not properly classify all the charges by complexity, and do not properly price all the charges. In addition, because the information to determine all lost reimbursements is not available, we could not determine the total lost reimbursements the home could have received from Medicare and Medi-Cal if it had adequate manual billing procedures and automated systems. Factors outside the home's control, such as differences in facility size, complexity of cases, and patient demographics between the home and the comparable institutions, explain in part why the home received less in reimbursements. Also, the home may have received less because, according to its reimbursements officer, the home provides residents with all medical services, including services which are not covered by Medicare. Other institutions may not provide these additional services. Moreover, according to the home's administrator, the lack of staff resources is a major factor in preventing the home from maximizing reimbursements.

Finally, the home could have received up to approximately $446,000 annually in aid and attendance allowances if the federal Department of Veterans Affairs determines that 95 residents had been eligible to receive the allowances and if the home had obtained the statutory authority to receive the allowance for all veterans, including those with dependents. Because the home did not maximize reimbursements, the cost of care to be recovered from residents and the State's General Fund is higher than it needs to be. The home has implemented some corrective action to address these issues. For example, the home is presently analyzing and implementing ways to improve its billing information system.

To further its efforts in maximizing revenue from residents and reimbursements from the federal government, the home should take the following actions:

Recommendations

Continue to assess and collect fees on the social security income it reimburses the residents;

Raise fees to residents to the maximum allowed by the Budget Act, while assuring that residents do not pay more than the statefunded cost of their care;

Seek statutory authority to collect the state-funded cost of care from residents who leave the home to live somewhere else;

Consistently verify income information from the residents;

Develop an action plan for improving manual procedures that will capture all patient care charges;

Continue analyzing and procuring a cost-effective management information system capable of supporting all aspects of the home's activities, including patient care, reimbursements, and general management information beneficial to the overall costefficient management of the home;

Continue to develop procedures to ensure that aid and attendance allowances are received for all eligible residents; and

Seek legislation to allow the home to receive aid and attendance allowances for residents with dependents who do not provide regular assistance to the residents.

Agency Comments

The Department of Veterans Affairs responded that it believes that the findings and recommendations contained in the report will help the home be more effective in providing services to California's aged and disabled veteran population. However, the department is concerned that raising fees to the maximum allowed by the Budget Act while assuring that residents do not pay more than their cost of care will have a negative impact on the quality of residents' lives. The department also notes that some amounts in our report, which we included for illustrative purposes, do not necessarily represent revenue or reimbursements that are attainable by the home. In addition, the department believes that the home will incur some costs to increase reimbursements.


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