Kusserow on Compliance: CMS and Veterans Affairs partnering to address fraud and abuse

The Department of Veterans Affairs (VA) and CMS announced a partnership to share data, data analytics tools, and best practices for identifying and preventing fraud, waste, and abuse. The Veterans Health Administration is a large integrated health care system operated by the VA and has many issues already being addressed by CMS. Through the Veterans Health Administration, the VA is itself the provider, operating an integrated network of 168 medical centers, more than 1,000 outpatient clinics, 250 brick-and-mortar pharmacies, and seven mail-order pharmacies. The VA health system employs over 200,000 health care professionals and covers about nine million veterans in the US.

The new alliance is intended to enhance ongoing efforts between the country’s two largest public-private health-care payment organizations. This collaboration is intended to identify new and innovative ways to seek out fraud, waste, and abuse. CMS estimates that its program integrity activities saved Medicare operations $17 billion in fiscal 2015. Much of this arises from new practices and technologies that will now be shared with the VA, which will be able to capitalize on the advancements in analytics CMS has made and hopefully it will be able to close existing gaps in its own claims payment process. CMS also noted in its announcement that VA invited industry experts in November 2017 to provide information on the latest commercial sector tools and techniques to enhance VA’s fraud detection capabilities.


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.

Four VA facilities weak on controlled substance diversion protections

In recent years, diversion of controlled substances has occurred at several Veterans Affairs (VA) medical facilities. In fact, in a 2009 and 2014 report, the VA Office of the Inspector General (OIG) identified a number of weaknesses in VA medical facilities’ implementation of controlled substance inspection programs. For example, the VA OIG found that some VA medical facilities had not conducted the required monthly inspections, and when facilities did conduct the monthly inspections, the inspections were sometimes incomplete because they did not follow all of the required Veterans Health Administration (VHA) procedures.

GAO review

As a result of these deficiencies, Congress requested that the Government Accountability Office (GAO) report on VHA’s processes to reduce the risk of diversion of controlled substances at its medical facilities and VHA’s oversight of these processes. The report examined: (1) the extent to which selected VA medical facilities have implemented controlled substance inspection programs as required by VHA policies, and (2) VHA’s oversight of these programs at selected VA medical facilities.

Implementation of inspections

The GAO found weaknesses in the way four VA medical facilities were implementing their controlled substance inspection programs. Two of the four facilities did not conduct monthly inspections of controlled substances as required by the VHA. Between January 2015 and February 2016, one facility missed 43 percent of monthly inspections in critical patient care areas and the pharmacy. Further, inspections that three of the four facilities performed did not include or follow three or more of the nine VHA requirements. At two of the three facilities, inspectors did not properly verify that controlled substances had been transferred from VA pharmacies to patient care areas; nor did inspectors ensure that all controlled substances on hold for destruction were properly documented.

Contributing factors

GAO discovered that several factors contributed to the failure to adhere to VHA policy. First, the two facilities that missed inspections lacked an additional control procedure (such as the use of an alternate controlled substance coordinator) to help prevent missed inspections when inspectors could not conduct them due to professional or other personal responsibilities. Second, three of the four facilities did not ensure their written procedures included the nine VHA program requirements. Third, while the VHA relies on coordinators at the facilities to ensure that the inspections are completed appropriately, the GAO found that VHA’s training course for the coordinators does not focus on its required inspection procedures.

Inconsistent oversight

The GAO also found inconsistent oversight at the selected facilities of their controlled substance inspection programs by facility directors and the Veterans Integrated Service Networks to which the facilities report. Directors at two of the four selected VA medical facilities had not implemented corrective actions to address missed inspections identified in the monthly inspection reports. In addition, two of the four selected networks did not review their facilities’ quarterly trend reports, as required by VHA. One network that had reviewed the trend reports failed to follow up with a facility to ensure it had submitted missed trend reports. The GAO concluded that without effective oversight of the inspection programs by directors and networks, VHA lacks reasonable assurance that its programs are being implemented as required to prevent and identify diversion of controlled substances.


The GAO recommended that the Secretary of the VA direct the Under Secretary for Health to:

  • ensure that VA medical facilities have established an additional control procedure, such as an alternate controlled substance coordinator or additional inspectors, to help coordinators meet their responsibilities and prevent missed inspections;
  • ensure that VA medical facilities have established a process where coordinators, in conjunction with pharmacy officials, periodically compare facility inspection procedures to VHA’s policy requirements and modify facility inspection procedures as appropriate;
  • improve the training of VA medical facility controlled substance coordinators by ensuring the training includes the inspection procedures that VHA requires;
  • ensure that medical facility directors have designed and implemented a process to address nonadherence with program requirements, including documenting the nonadherence and the corrective actions taken to remediate nonadherence or the actions that demonstrate why no remediation is necessary; and
  • ensure that networks review their facilities’ quarterly trend reports and ensure facilities take corrective actions when nonadherence is identified.

The VA concurred with the GAO’s recommendations.

$157M compounding pharmacy fraud scheme leads to indictment

Eight individuals who allegedly caused the submission of false claims to Medicare, TRICARE, and private insurance companies are facing an indictment charging them with conspiracy to commit health care fraud and wire fraud, and, in some cases, with money laundering. The Florida residents allegedly used several Tampa Bay- and Miami-area compounding pharmacies to submit false claims for prescription medications from October 2012 through December 2015. Several defendants were arrested on August 9, 2016.

The indictment claims that the eight men used six separate pharmacies to submit $633 million worth of claims for prescription compounded medications and received $157 million in reimbursement. Prescriptions allegedly resulted from illegal kickbacks and bribes and/or were not based on legitimate provider/patient relationships. Some reimbursement claims resulted from the misuse of patient information.

The indictment avers that the claims for reimbursement falsely indicated that the prescription medications contained certain pharmaceutical ingredients. Compounding pharmacies were initially created to prepare special medicines, based on me prescriptions, for individuals with special medical needs; however, large-scale manufacturing of compounded medicines has become increasingly common.

The defendants will make their initial federal court appearances in the Middle and Southern Districts of Florida.

Voluntary retirement and resignations primary drivers of VHA loss of clinical employees

While the Veterans Health Administration (VHA) provided health care to about 6.7 million veterans in fiscal year (FY) 2015, it continues to face growing demand, a trend that is expected to continue. For example, the total annual outpatient medical appointments the VHA provided increased by 17.1 million visits (20 percent) from FY 2011 through 2015. To serve these veterans, in 2015, the VHA had 195,900 employees in 45 types of clinical occupations. And despite a number of target hiring initiatives by the VHA, the U.S. Senate’s Committee on Veterans’ Affairs and others have expressed concern about the VHA’s ability to maintain the appropriate clinical workforce to meet the needs of veterans, due to factors such as national shortages and increased competition for clinical employees.

After the Veterans Access, Choice, and Accountability Act of 2014 (P.L. 113-146) required the VA Office of Inspector General (OIG) to identify and report annually on the five VHA clinical occupations with the largest staffing shortages, in January 2015, the VA OIG reported that these occupations were physicians, registered nurses, physician assistants, psychologists, and physical therapists. The Committee on Veterans’ Affairs then asked the Government Accountability Office (GAO) to review the issues related to retention of clinical employees at VHA. Specifically, the GAO was asked to examine: (1) how the VHA collects and uses information on employees’ decisions to leave clinical occupations; and (2) what trends, if any, exist over the last five years in the number of, and reasons for, VHA employee losses from the five shortage occupations.

The GAO report found that the VHA collects data on the reasons clinical employees leave the agency and uses that data for planning purposes. For example, the VHA collects personnel data on the number of and reasons for clinical employee losses, including voluntary resignations, retirements, or removals due to adverse actions, in its HR databases and through a voluntary exit survey. The VHA uses this information to evaluate its workforce needs and inform its recruitment and retention efforts.

The GAO reported that the VHA losses for the five shortage occupations increased from about 5,900 employees in FY 2011 to about 7,700 in FY year 2015. Voluntary resignations and retirements were the primary reasons for the VHA’s losses for these occupations, with resignations accounting for about 54 percent, and retirements 36 percent of losses annually. Physician assistants consistently had the highest loss rate among the five shortage occupations. The loss rate for physician assistants increased from 9.3 to 10.9 percent during this period. The loss rate for physical therapists decreased from FY 2011 to 2012 (from 8.3 to 6.4 percent), but then increased to 8.0 percent in FY 2015. The GAO found a similar trend for all clinical occupations across the VHA.

In addition to its review of the VHA’s five shortage occupations, the GAO also identified the 10 clinical occupations within the VHA with the highest loss rates as of FY 2015.  These occupations included: physician assistant, medical support assistant, medical supply aide and technician, optometrist, nursing assistant, medical records technician, health technician (optometry), physician, medical records administration, and practical nurse. The loss rates for these 10 occupations ranged from 5.3 percent to 10.9 percent from fiscal year 2011 through 2015. Two of the five shortage occupations—physician assistants and physicians—were among the 10 highest loss-rate occupations each year from FY 2011 through 2015. In addition, two other occupations—medical support assistants and nursing assistants—were also consistently among the 10 highest loss-rate occupations each year during this period. The six remaining occupations were technical positions that were generally small in overall number, such as medical supply aides and technicians. Because employees in these occupations generally do not require specialized education or licensing, the VHA told the GAO that they tend to be more easily replaced than those in the five shortage occupations.

The GAO also found the VHA’s exit survey indicated that advancement issues or dissatisfaction with certain aspects of the work were commonly cited as the primary reasons respondents in the five shortage occupations left VHA. According to the exit surveys, the reasons why respondents in the five shortage categories left the VHA can be summarized as follows:

  • 28 percent said that advancement and 21 percent said that dissatisfaction with certain aspects of the work, such as concerns about management and obstacles to getting the work done, was the primary reason they were leaving.
  • 71 percent said that a single event generally did not cause them to think about leaving, while 28 percent reported that it did.
  • 50 percent indicated that they were generally satisfied with the quality of senior management, while 31 percent were not.
  • 73 percent felt that their immediate supervisors treated them fairly at work, while 15 percent reported that they did not.
  • 67 percent felt that they were treated with respect at work, while 19 percent reported they were not.
  • 50 percent reported that one or more benefits would have encouraged them to stay, such as alternative or part-time schedules (25 percent) or student loan repayment or tuition assistance (12 percent).

The GAO made no recommendations in its report. The VA, however, provided written comments, citing a historical context for loss rate trends. For example, they noted that loss rates decreased during the economic downturn of 2008 to 2009 and that current loss rates represent a return to the rates seen in FYs 2006 to 2007. The VA also noted that the VHA’s workforce challenges mirror those of the health care industry, including the growing national shortage of physicians and nurses and increased competition for health care professionals in hard-to-fill occupations. The VA further suggested that the GAO use other, non-VA data sources to provide additional context.