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Good Morning. Today’s hearing is the fourth oversight hearing held by the Subcommittee on the VA’s third party collections program.

The good news is that collections have risen from $690 million in fiscal year 2002 to $1.489 billion in fiscal year 2003. On the flip side, there was $1 billion in unbilled care in fiscal year 2002 and $516 million in fiscal year 2003. How was this allowed to happen? Even though the amount was reduced by almost half, the better question is, how much has been collected?

Our last hearing on this issue was fourteen months ago. I think it’s important that we take a look at where we are today in terms of what the VA told us would be accomplished and what has actually been completed.

At our last hearing, former Deputy Secretary MacKay talked about the need to use “industry best” performance practices to ensure reliable registration, insurance identification and verification, and pre-authorization processes. These “best practices” were incorporated into the 2001 Revenue Cycle Improvement Plan. Today, we hope to learn when the VA anticipates completion of this plan, which was designed to improve core business processes. To date, 17 of the 24 proposed initiatives have been completed. What is the status of the most difficult last seven initiatives?

The other major program that was touted by the VA is the Patient Financial Services System demonstration. The PFSS pilot project was originally scheduled for implementation in late fall of 2003. The pilot is designed to test PFSS in order to demonstrate how an integration of commercial patient management and financial software programs is suppose to significantly improve VA's third party collections by capturing and consolidating inpatient and outpatient billing information. Unisys Corporation was selected by the VA to implement the pilot project.

Today, we will receive an update on the PFSS pilot project. In particular, we will examine why the November 2003, projected implementation date was missed, and why it was necessary to rebaseline the entire project in June 2004 with new milestone dates. Don’t get me wrong, I do not believe we should rush through this process. At the same time, I don’t think sound project management practices were used by VA in the initial stages of the project. This appears to be a common reason for repeated failure of almost every major IT initiative in the VA.

Frankly, it concerns me that the VA did not have a business plan prior to startup of the project and that an analysis of VA’s current business process was not accomplished until June of 2004.

It appears the poor program management practices that led to the virtual meltdown of CoreFLS a major IT initiative at Bay Pines, Florida have also plagued the PFSS project.

As we know from past hearings, there are several problems that have been repeatedly identified in the last 8 years which contribute to the VA’s poor performance in collections. They include missed billing opportunities, huge billing backlogs, and undocumented or inadequate follow-up in pursuit of accounts receivable. The GAO and the VA IG will share their findings with us on what the VA has done to improve in these areas.

Another area that is an integral part of the collections process is how much it costs to collect. The GAO will provide us with its analysis of why the VA still does not know how to calculate the cost of its collections efforts.

I look forward to hearing the testimony of our witnesses.