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David McGill Blogger

OIG Report on VA Purchasing of Prosthetics Published

Posted by David McGill | October 09, 2017

The Office of Inspector General recently released a report titled "Audit of Purchase Card Use to Procure Prosthetics." The main headline coming out of that report is the claim that the VA may have overpaid on an estimated $256.7 million in prosthetic purchases during FY 2015.

Here's what you need to know:

  1. The OIG investigation was triggered in May 2015 then it received a tip that VA employees used Government purchasing cards for prosthetic purchases above the micro-purchase limit of $3,500, instead of letting the VA use its purchasing power to establish contracts that ensured fair and reasonable prices. This audit resulted. 
  2. From 2012 to 2015, VA cardholder purchases increased by 25% (from $1.6B to $2B), 43% ($863M) of which was for purchases exceeding the micro-threshold limit.
  3. The OIG contends that 30% of Government card transactions above the micro-purchase limit were made by contracting officers who failed to establish contracts leveraging the VA's purchasing power. More specifically, the OIG sampled 240 transactions and concluded that 77 of those offered the opportunity for either VHA-wide, multi-VISN, or VISN contracts. Those 77 transactions involved 38 vendors who received more than $318M in VA payments in 2015.
  4. The OIG investigation also uncovered something not flagged by the whistleblower: VA staff who lacked the authority to make purchases in excess of the micro-threshold did so anyway. This occurred in about 61% of purchases, for a total amount of $520M in unauthorized commitments by VA staff.

What does this mean for you?

The most important thing to realize is that notwithstanding its title, this report is not fundamentally about limb prostheses. The term "prosthetics" within the VA includes surgical implants, hearing aids, ramps, and items used for vehicle modifications. Every specific example cited in the report references either implantables or equipment used in home modifications. 

And while the list of the 38 vendors that the OIG claims that the VA should have established contracts with for lower pricing does include 5 O&P companies, they account for less than 1% (.74%, to be specific) of the $2B in purchases exceeding the micro-threshold limit. Stated another way, it appears that more than 99% of the spend at issue in this report was for implantables and home medical equipment.

Unfortunately, the report's title may lead some individuals to conclude that the VA has overpaid for limb prostheses over the past several years. It is important that you understand what this document is really talking about and disabuse anyone who makes erroneous conclusions about it of the notion that it identifies rampant problems with the VA's payments for limb prostheses. 

To download a PDF copy of the OIG report, click here.

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