The Department of Veterans Affairs (VA) Office of Inspector General (OIG) Office of Audits and Evaluations (OAE) issued an audit report on March 8, 2012, that indicates the Veterans Health Administration (VHA) overpaid for veterans’ prosthetic arms and legs, and that this has been a systematic issue in the VA.
The House Veterans Affairs Committee Chairman, Rep. Jeff Miller (R-FL), requested the investigation in which the OAE evaluated the management and acquisition practices VHA used to procure prosthetic limbs.
According to the report, the VA spent nearly $54 million on prosthetic limbs in fiscal year (FY) 2010. During that time, VHA’s prosthetic labs fabricated almost 1,500 prosthetic limbs at a cost of about $4.4 million. The VA relied on contract vendors to manufacture more than 4,000 prosthetic limbs at a cost of about $49.3 million. The average item cost for limbs fabricated in VHA’s prosthetic labs was about $2,900, while items supplied by private vendors averaged about $12,000.
Of the 3,933 payments the OAE examined, 915 (23 percent) included overpayments that were valued at about $2.2 million for FY 2010. Overpayments generally occurred because VHA paid vendor invoices that included charges in excess of prices agreed to in the vendors’ contracts with the VA. Total overpayments ranged from $180 to about $466,000. Overpayments were also identified with 314 of 690 vendors (46 percent) that provided prosthetic limbs in FY 2010. One national vendor received nearly $730,000 of the approximate $2.2 million in overpayments.
The report went on to state that VHA did not receive the best value for the $49.3 million spent in FY 2010 to procure prosthetic limbs. Specifically, Veterans Integrated Service Network (VISN) Contracting Officers (COs) did not negotiate for better discount rates with vendors, and VHA purchased some items without specific pricing guidance.
To address these issues, the OAE has issued three recommendations, with which the Undersecretary for Health concurred and plans to address by September 30, 2012.
- VHA needs to strengthen management and acquisition practices to procure and fabricate prosthetic limbs.
- Improve guidance issued to certified prosthetists for their review of vendor quotes.
- Establish collection actions to recover overpayments.
To read the full audit report, visit the VA OIG website.