THE MISSISSIPPI LEGISLATURE

The Mississippi Legislature created the four state veterans’ homes with the understanding that the homes would be self-supporting for ongoing operations, primarily through federal funds and resident fees. The first home, built in Jackson in 1989, was self-supporting for the first five years of operation. Since the opening of three additional homes in Collins, Kosciusko, and Oxford during Fiscal Year 1997, the Veterans Affairs Board (VAB) has become increasingly reliant on state general funds to support the ongoing operation of the homes. General fund support for operations has grown from 0% in fiscal years 1990 through 1994 to 13% in FY 1999, the most recently completed fiscal year. General fund support continues to grow, as the Legislature appropriated $2.8 million in general funds for operation of the homes in FY 2000. Further, VAB has requested $3.9 million in general funds for operation of the homes in FY 2001, even though the board will realize an approximately $2 million increase in revenues during the upcoming fiscal year from non-state sources. This increase will occur as a result of a $6.63 increase in VA per diems (effective October 1, 1999) and a $3 per day increase in resident fees (effective December 31, 1999).

VAB’s increasing reliance on general funds is due primarily to costs associated with increases in the number of staff per resident. On a per-resident basis, salary expenditures for operation of the state veterans’ homes increased from $21.23 in FY 1995 to $50.98 in FY 1998. Part of this increase is due to the hiring of more non-nursing staff than employed by comparably sized nursing homes in the state.

PEER explored several options for reducing VAB’s reliance on state general funds, as presented in the following table. Based on conservative estimates, PEER identified $3.2 million in cost savings or additional net income which VAB could realize from implementation of these options. However, these totals do not include the option of increasing residents’ fees, which could be used to further reduce reliance on general funds. These options, combined with diligent control of other costs not examined in this review (e.g., costs of management company overhead), could significantly reduce VAB’s reliance on state general funds.

PEER also determined that the option of the homes becoming federally certified to receive Medicare Part A reimbursement would result in increased revenues to VAB, but that these revenues would be used to provide a higher level of post-hospitalization care, and would therefore not be available to offset state general fund expenditures for the homes.

PEER also explored the option of the homes becoming federally certified to receive Medicaid, but determined that given current income levels of state veterans’ home residents, this option could increase state expenses by approximately $177,000 annually.

During the course of this review, PEER also identified the following specific problems related to management and operation of the homes:

• From July 1, 1999, through February 29, 2000, Diversified Health Services provided an average of 3.33 direct care nursing hours per resident per day in the four VAB homes instead of the 3.74 hours per resident per day specified in the management contract. VAB paid Diversified Health Services at least $477,000 for 59,000 direct care nursing hours not rendered during this period.

• In FY 1999, the Legislature appropriated to VAB $3.1 million for the hiring of new direct care nursing staff over a fifteen-month period, beginning April 1, 1999. VAB did not incur expenses for the new staff until July 1, 1999; however, the board inappropriately used $1.62 million of the appropriation to pay VAB homes’ operating expenses for the period April 1, 1999, through June 30, 1999. Further, on July 1, 1999, rather than reducing the amount of its expenses for new nursing services by $620,000 for the three-month period when it did not receive these services, VAB obligated the entire $3.1 million appropriation amount for a twelve-month contract with its management company, resulting in a higher monthly cost for these services than contemplated in the appropriations bill.

• VAB’s practice of paying hospitalization costs of its veteran residents is not authorized by state law establishing the homes. Further, the practice presents a potential liability to the state in the event that VAB funds cannot cover the hospitalization expenses and VAB’s Executive Director requests the funds from the state.

• VAB is not legally protected to ensure its entitlement to Medicare Part B reimbursements, because its contracts for physicians’ services do not contain language specifying the reassignment of benefits from physicians to VAB.

• VAB compensates its Medicare billing contractor on a percentage of billings basis, which violates the intent of a Health Care Financing Administration regulation designed to prevent fraud in the Medicare program.

1. VAB should require Diversified Health Services to provide direct care nursing staff in accordance with terms of the management contract. Should Diversified Health Services fail to meet required levels of staffing, VAB officials should consult with the VAB attorney and the Attorney General’s Office in exercising remedies available under the management contract or any other remedies available under law for breach of contract.



2. VAB officials should consult with the VAB attorney and the Attorney General’s office to determine possible actions for seeking reimbursement of funds paid to Diversified Health Services for direct care nursing services never rendered.



3. VAB should reduce non-nursing staff at the veterans’ homes to non-nursing staff levels of comparably sized nursing homes in Mississippi.

4. VAB should diligently review management company costs in order to ensure that the company is delivering quality services to VAB as efficiently and economically as possible.

9. The board should ensure that it receives all federal and other insurance revenue available to it by strictly enforcing its contract with the Medicare billing contractor to provide such services. Specifically, VAB should implement the procedures necessary to ensure that all eligible Medicare claims are filed and reimbursements received and that all secondary insurance claims are filed and payments received.

10. The board should include language in contracts with physicians and other medical service providers to reassign their Medicare B reimbursements to the VAB. The assignment language is required by HCFA in those instances in which the board receives Medicare reimbursements on behalf of doctors who provide services for nursing home patients. As outlined in the HCFA document, "Claims, Filing, Jurisdiction and Development Procedures," Section 3060.2 C, the suggested assignment language should be signed and dated by both the facility and the physician and should read as follows:
It is agreed that only (name of facility) will bill and receive any fees or charges for the services of (name of physician) furnished to patients at the above-named facility (or specify other limitations of the reassignment).
11. The board should review all past remittance notices (explanations of benefits) and secondary insurance contracts of residents to determine whether secondary insurance reimbursement due to the board can be recovered. The board should continue to attempt to recover all possible Medicare Part B reimbursements which were never filed (e.g., podiatrist’s services, flu vaccinations).

12. After becoming certified, VAB should evaluate the feasibility of filing for Medicare Part A reimbursement and assigning responsibility to residents for Medicare Part A co-payments which can be paid through secondary insurance or family resources.

13. VAB should officially amend its resident hospitalization policy to state that all hospital costs, whether at VA hospitals or private hospitals, are the responsibility of the resident (both veteran and non-veteran) and should amend its pre-admission application accordingly.

14. VAB should consider increasing resident fees to the extent necessary to support efficient operations of the veterans’ homes in lieu of asking for general fund support.

15. The Veterans Affairs Board should periodically reassess the feasibility of the homes becoming federally certified to receive Medicaid, in light of changing income levels of state veterans’ home residents.