Curtis Thompson got billed for private medical services he received through the VA’s Choice Program. “There was never supposed to be any charges,” he said. (Andrew Burton, special to ProPublica)

After Thompson used the Choice Program in 2018 for a sinus surgery that the VA couldn’t perform within 30 days, the private provider came after him to collect payment, according to documentation he provided.

Thousands of veterans have had to contend with bill collectors and credit bureaus because the contractors failed to pay providers on time, according to the inspector general. Doctors have been frustrated with the Choice Program, too. The inspector general foundthat 15 providers in North Carolina stopped accepting patients from the VA because Health Net wasn’t paying them on time.

The VA shares the blame, since it fell behind in paying the contractors, the inspector general said. TriWest claimed the VA at one point owed the company $200 million. According to the inspector general, the VA’s pile of unpaid claims peaked at almost 180,000 in 2016 and was virtually eliminated by the end of the year.

The VA tried to tackle the backlog of unpaid doctors, but it had a problem: The agency didn’t know who was performing the services arranged by the contractors. That’s because Health Net and TriWest controlled the provider networks, and the medical claims they submit to the VA do not include any provider information.

The contractors’ role as middlemen created the opportunity for payment errors, according to the inspector general’s audit. The inspector general found 77,700 cases where the contractors billed the VA for more than they paid providers and pocketed the difference, totaling about $2 million. The inspector general also identified $69.9 million in duplicate payments and $68.5 million in other errors.

John Moen, a Vietnam veteran, waited longer to see a private physical therapist through the Choice Program than it would have taken him to get an appointment at the VA. “Total fail for me,” Moen said. “I should have taken the six-week wait offered by the Dallas VA.” (Dylan Hollingsworth for ProPublica)

TriWest said it has worked with the VA to correct the payment errors and set aside money to pay back. The company said it’s waiting for the VA to provide a way to refund the confirmed overpayments. “We remain ready to complete the necessary reconciliations as soon as that process is formally approved,” TriWest said.

The grand jury proceedings involving TriWest are secret, but the investigation became public because prosecutors sought to obtain the identities of anonymous commenters on the jobs website Glassdoor.com who accused TriWest of “mak[ing] money unethically off of veterans/VA.” Glassdoor fought the subpoena but lost, in November 2017. The court’s opinion doesn’t name TriWest, but it describes the subject of the investigation as “a government contractor that administers veterans’ healthcare programs” and quotes the Glassdoor reviews about TriWest. The federal prosecutor’s office in Arizona declined to comment.

“TriWest has cooperated with many government inquiries regarding VA’s community care programs and will continue to do so,” the company said in its statement. “TriWest must respect the government’s right to keep those inquiries confidential until such time as the government decides to conclude the inquiry or take any actions or adjust VA programs as deemed appropriate.”

The VA tried to make the Choice Program run more smoothly and efficiently. Because the contractors were failing to find participating doctors to treat veterans, the VA in mid-2015 launched a full-court press to sign up private providers directly, according to the inspector general. In some states, the VA also took over scheduling from the contractors.

“We were making adjustments on the fly trying to get it to work,” said David Shulkin, who led the VA’s health division starting in 2015. “There needed to be a more holistic solution.”

Officials decided in 2016 to design new contracts that would change the fee structure and reabsorb some of the services that the VA had outsourced to Health Net and TriWest. The department secretary at the time, Bob McDonald, concluded the VA needed to handle its own customer service, since the agency’s reputation was suffering from TriWest’s and Health Net’s mistakes. Reclaiming those functions would have the side effect of reducing overhead.

“Tell me a great customer service company in the world that outsources its customer service,” McDonald, who previously ran Procter & Gamble, said in an interview. “I wanted to have the administrative functions within our medical centers so we took control of the care of the veterans. That would have brought that fee down or eliminated it entirely.”

The new contracts, called the Community Care Network, also aimed to reduce overhead by paying the contractors based on the number of veterans they served per month, rather than a flat fee for every referral. To prevent payment errors like the ones the inspector general found, the new contracts sought to increase information-sharing between the VA and the contractors. The VA opened bidding for the new Community Care Network contracts in December 2016.

But until those new contracts were in place, the VA was still stuck paying Health Net and TriWest at least $295 for every referral. So VA officials came up with a workaround: they could cut out the middleman and refer veterans to private providers directly. Claims going through the contractors declined by 47 percent from May to December in 2017.

TriWest’s CEO, McIntyre, objected to this workaround and blamed the VA for hurting his bottom line.

In a Feb. 26, 2018, email with the subject line “Heads Up… Likely Massive and Regrettable Train Wreck Coming!” McIntyre warned Shulkin, then the department secretary, that “long unresolved matters with VA and current behavior patterns will result in a projected $65 million loss next year. This is on top of the losses that we have amassed over the last couple years.”

Officials were puzzled that, despite all the VA was paying TriWest, McIntyre was claiming he couldn’t make ends meet, according to agency emails provided to ProPublica and PolitiFact. McIntyre explained that he wanted the VA to waive penalties for claims that lacked adequate documentation and to pay TriWest an administrative fee on canceled referrals and no-show appointments, even though the VA read the contract to require a fee only on completed claims. In a March letter to key lawmakers, McIntyre said the VA’s practice of bypassing the contractors and referring patients directly to providers “has resulted in a significant drop in the volume of work and is causing the company irreparable financial harm.”

McIntyre claimed the VA owed TriWest $95 million and warned of a “negative impact on VA and veterans that will follow” if the agency didn’t pay. Any disruptions at TriWest, he said, would rebound onto the VA, “given how much we are relied on by VA at the moment and the very public nature of this work.”

But when the VA asked to see TriWest’s financial records to substantiate McIntyre’s claims, the numbers didn’t add up, according to agency emails.

McIntyre’s distress escalated in March, as the Choice Program was running out of money and lawmakers were locked in tense negotiations over its future. McIntyre began sending daily emails to the VA officials in charge of the Choice Program seeking updates and warning of impending disaster. “I don’t think the storm could get more difficult or challenging,” he wrote in one of the messages. “However, I know that I am not alone nor that the impact will be confined to us.”

McIntyre lobbied for a bill to permanently replace Choice with a new program consolidating all of the VA’s methods of buying private care. TriWest even offered to pay veterans organizations to run ads supporting the legislation, according to emails discussing the proposal. Congress overwhelmingly passed the law (named after McCain) in May.

“In the campaign, I also promised that we would fight for Veterans Choice,” Trump said at the signing ceremony in June. “And before I knew that much about it, it just seemed to be common sense. It seemed like if they’re waiting on line for nine days and they can’t see a doctor, why aren’t they going outside to see a doctor and take care of themselves, and we pay the bill? It’s less expensive for us, it works out much better, and it’s immediate care.”

The new permanent program for buying private care will take effect in June 2019. The VA’s new and improved Community Care Network contracts were supposed to be in place by then. But the agency repeatedly missed deadlines for these new contracts and has yet to award them.The VA has said it’s aiming to pick the contractors for the new program in January and February. Yet even if the VA meets this latest deadline, the contracts include a one-year ramp-up period, so they won’t be ready to start in June.

“There’s still not a clear timeline moving forward,” said Giddens, the former VA contracting executive. “They need to move forward with the next program. The longer they stay with the current one, and now that it’s down to TriWest, that’s not the best model.”

Meanwhile, TriWest will continue receiving a fee for every referral. And the number of referrals is poised to grow as the administration plans to shift more veterans to the private sector.