The Department of Veterans Affairs healthcare system could squeeze almost $33 million a year out of its payments to private-sector physicians when it begins using Medicare's fee schedule later this year, VA officials said.
The department could save an additional $3.2 million in payments to private-sector hospitals through better implementation of its prospective payment system, which is based on Medicare's PPS, according to the VA inspector general's office.
The department plans in July to adopt Medicare's fee schedule to pay for outpatient care and inpatient physician services at private-sector hospitals. The government pays private-sector providers to care for eligible veterans when a VA facility can't provide a service or when it is too far from a veteran needing such care.
In fiscal 1995, the department paid an estimated $544.5 million to private-sector providers, out of a medical-care budget of $16.2 billion.
The move to adopt the Medicare fee schedule comes as the department is attempting to make its huge system of 702 healthcare facilities more efficient so it can live within a budget that is likely to lag behind inflation in coming years.
Beginning in October 1995, the department reorganized its facilities, which include 172 hospitals, into 22 integrated networks that will gradually begin operating under capitated budgets over the next two to three years. In addition, officials hope to enroll all its patients in primary-care plans by the end of 1996.
Veterans facilities develop their own local rate schedule to determine fees to private-sector physicians. Medicare, however, pays physicians from a national fee schedule based on the relative value of the resources required for each service, adjusted for local variations in the cost of living.
An audit by the VA inspector general's office estimated savings of $25.6 million a year in private-sector ambulatory-care fees if the department follows Medicare physician fee schedule.
A second audit of fees paid for inpatient hospital care estimated annual savings of $7.2 million for physicians' services and ancillary services if the Medicare physician fee schedule is followed.