VA officials misused millions in funding for new IT system — IG

Editor’s Note: This story was updated on March 4 to reflect additional reporting, including the identification of the former chief business officer at the Veterans Health Administration implicated in the recent inspector general report.

Two former officials who were in charge of the Veterans Health Administration’s Chief Business Office violated federal appropriations law by channeling $92.5 million in medical support funding toward the development of a new health care claims processing system, according to a report released Monday by the Department of Veterans Affairs inspector general.

Acting on an anonymous hotline tip, the IG found that the last two officials responsible for the CBO for Purchased Care did not seek funding for the development of a new Health Care Claims Processing System, or HCPS, to improve the timeliness and accuracy of medical claims filed from outside the VA medical system. Instead, the two former deputy CBO officials — both of whom were allowed to retire from VA — deliberately used medical support funding in an effort to avoid competing with other VHA IT projects for funding, the IG report states.

One of the officials, former Deputy Chief Business Officer for Purchased Care Patricia Gheen, retired in May 2012 after a VA IG investigation found that she attempted to steer more than $2 million in contracts to a firm that employed her former boss. Gheen also received nearly $35,000 in bonuses while employed at VA.

Cyndi Kindred, the most recent deputy chief business officer at VHA — who is implicated but not named in the IG report — retired from VA in November, according to VA officials.

Lori Amos is currently serving as the acting CBO at VHA, according to a VA spokesperson.

Gheen committed $21.3 million from the medical support and compliance account to the development of the new claims processing system, and Kindred allowed another $71.2 million to be taken from funding earmarked for the administration of medical, hospital, nursing home, domiciliary, construction, supply and research activities.

The IG recommended that the VA strip all medical support and compliance funding from the HCPS program. VA’s Interim Undersecretary for Health Carolyn M. Clancy said the agency agreed with the IG’s findings, had developed action plans for identifying IT funding lines for the new claims processing system, and is referring the matter to VA’s Office of Accountability Review for potential administrative action against Gheen and other VHA officials involved in the violations.

House Veterans Affairs Committee Chairman Rep. Jeff Miller, R-Fla., called the report “deeply troubling” and said it demonstrates a glaring lack of budget oversight at the agency.

“It is also disturbing that the two VA employees directly responsible for these activities were allowed to retire with full benefits, while the inspector general refused to name them in its report,” Miller told FedScoop. “In light of that, the IG owes the public an explanation regarding why no charges were filed and why it is protecting the identity of the employees at the heart of this illegal activity. Additionally, VA leaders must outline the steps they are taking to hold those responsible for overseeing VA’s budget and the Chief Business Office accountable,” he said.

An HCPS is being developed to replace VHA’s Fee Basis Claims System, which processes non-VA medical claims. The pilot efforts for the new HCPS began in late 2009 and were focused on eliminating more than $500 million in improper payments stemming from duplication and manual entry errors.