1. Health Budgets & Financial Policy Financial Statements & Accounting Data TMA Office of the Chief Financial Officer (OCFO) Management Control & Financial Studies Division

2. Health Budgets & Financial Policy 2 Outline Financial Statement Reporting Requirement Legacy Accounting Systems Medical Accounts Receivable (A/R) Managed Care Forecasting & Analysis System (MCFAS)

3. Health Budgets & Financial Policy 3 CFO Act of 1990: Integrated Financial Management (FM) systems supporting DoD accounting needs are key to effective financial management Federal Financial Management Improvement Act (FFMIA) of 1996: All Federal agencies to comply –Implement/maintain systems that meet Federal FM system requirements (Joint Financial Management Improvement Program (JFMIP)) –Support Federal accounting standards (Federal Accounting Standards Advisory Board (FASAB)) –Apply US Standard General Ledger (USSGL) at the transaction level Fiscal Management Requirements

4. Health Budgets & Financial Policy 4 Financial Statements MHS Financial Statement Reporting Entities (FSREs) MHS MERHCF 1 DHP 3 TRICARE Mgmt. Activity (TMA) Service Medical Activity (SMA) TMA - FODTMA – CRM 1 TMA-USUHS 2 SMA – Army (MEDCOM) 4 (USACE) 5 SMA – Navy (BUMED) 4 (NAVFAC) 5 SMA – Air Force (AFMS) 4 (USAFE) 5 (1 ) Under Audit (2) All Proprietary Statements Validation Through Examination In Process (3) Includes American Recovery and Reinvestment Act (ARRA) Funding (4) Executes DHP Funds (5) Executes MILCON Funds MERHCF: Medicare-Eligible Retiree Health Care Fund DHP: Defense Health Program Appropriation MILCON: Military Construction Appropriation FOD: Financial Operations Division CRM: Contract Resource Management USUHS: Uniformed Services University MEDCOM: Army Medical Command BUMED: Navy Bureau of Medicine and Surgery AFMS: Air Force Medical Service USACE: U.S. Army Corps of Engineers NAVFAC: Naval Facilities Engineering Command USAFE: U.S. Air Forces in Europe MILCON 3

5. Health Budgets & Financial Policy 5 Accounting Data FSRELegacyEnterpriseBusiness Rules Command Control TMAWAASDAITMA USUHSCUFSDAIUSUHS ArmySTANFINSGFEBSArmy NavySTARS-FLNavy ERPNavy Air ForceGAFS-RDEAMSAir Force

6. Health Budgets & Financial Policy 6 Accounting System Acronyms CUFS – College and University Financial System DAI – Defense Agency Initiative DEAMS – Defense Enterprise Accounting and Management System FSRE – Financial Statement Reporting Entities GAFS-R – General Accounting Financial System - Revised GFEBS – General Fund Enterprise Business System STANFINS – Standard Army Finance Information System STARS-FL – Standard Accounting and Reporting System - Field Level TMA – TRICARE Management Activity USUHS – Uniformed Services University of the Health Sciences WAAS – Washington Headquarters Services (WHS) Allotment Accounting System

7. Health Budgets & Financial Policy 7 Office of Management & Budget (OMB) –Use commercial off-the-shelf (COTS) JFMIP- certified software for replacement of core FM systems (OMB Circular A-127) New Service FM COTS are JFMIP-certified –Army – General Fund Enterprise Business System (GFEBS) SAP COTS –Navy – Navy Enterprise Resource Planning (ERP) Oracle COTS –Air Force – Defense Enterprise Accounting and Management System (DEAMS) Oracle COTS Fiscal Management Requirements

8. Health Budgets & Financial Policy 8 Standard Financial Information Structure (SFIS) –A comprehensive, standard “business language” that defines financial information that supports all DoD-wide budget, cost/performance management, and external reporting requirements –SFIS is NOT an IT system –http://www.defenselink.mil/dbt/sfis_resources.html What is SFIS?

9. Health Budgets & Financial Policy 9 Financial Statements FSRE Structure Challenges –TMA clear chain of command and organizational structure –MERHCF actuarial and accounting information –SMA components have two lines of authority (command and control, and finance business rules) vs dollar flow. Face issues related to MILDEP priorities vs fund flow priorities: financial impact, accounting system, financial business rules

10. Health Budgets & Financial Policy 10 Financial Statements FSRE Structure Challenges (continued) –Solution: single accounting system with common business rules and chain of command simplifies, streamlines the financial statement, financial reporting, financial performance reporting

11. Health Budgets & Financial Policy 11 Financial Metrics Monthly Reporting, History and Measures –Accounts Receivable (A/R) Public debt > 30 days at Sep 30, 2009 (Red Metric) SMA-Army ($22.5 million) –A/R Intragovernmental Debt > 30 days at Sep 30, 2009 (Red Metric) SMA-Army ($17.7 million) SMA Navy ($17.3 million) SMA A/R increased dramatically in 1 st Qtr FY 2010 when recording begins

12. Health Budgets & Financial Policy 12 Financial Metrics Obligation Rates (9/30/2009) (Millions) –Procurement Fundings (3 year life) FY 2009FY 2008FY 2007 SMA$ 95.2 (57.6%) $197.5 (78.5%) $307.7 (99.9%) TMA$ 78.9 (40.2%) $125.8 (58.6%) $199.8 (100.0%)

13. Health Budgets & Financial Policy 13 Financial Metrics –Research, Development, Test and Evaluation (RDT&E) Fundings (2 year life) FY 2009FY 2008 SMA$130.4 (14.0%) $735.8 (99.9%) TMA$ 78.8 (42.5%) $250.7 (99.7%)

14. Health Budgets & Financial Policy 14 DoD Financial Management Regulation (FMR), Volume 4, Chapter 3, “Receivables” dated November 2009 DoD Financial Management Regulation (FMR), Volume 6B, Chapter 10, “Notes to Financial Statements” dated September 2008 Located at OSD (Comptroller) Web site: –http://www.defenselink.mil/comptroller/fmr/http://www.defenselink.mil/comptroller/fmr/ DoD References

15. Health Budgets & Financial Policy 15 Two types of A/R in governmental accounting –Intra-governmental (e.g., Coast Guard, VA) Expect to get paid 100% of Billed Amount Disputes regarding claims against other federal agencies (e.g., Coast Guard, VA) are to be resolved per Code of Federal Regulations 4 CFR 101 –Public (civilian emergencies, TPC) Need to establish an allowance for bad debt MTFs may be reporting collections to higher headquarters but what data is reported regarding outstanding and aged (e.g., >30 days, >120 days) Medical A/R? Accounts Receivable (A/R)

16. Health Budgets & Financial Policy 16 Third Party Collections Total Third Party Collections (TPC) Billings were in FY 2009 were $496.0 million Total TPC Collections in FY 2009 were $240.7 million How much is really being written off as uncollectible, and how much is still on the books as Medical A/R?

17. Health Budgets & Financial Policy 17 Medical Services Account (MSA) Combination of both Intra-governmental A/R (e.g., Coast Guard, VA) and Public A/R (e.g., civilian emergencies) Total MSA amount collected TMA-wide in FY 2009 was $151 million

18. Health Budgets & Financial Policy 18 Medical Affirmative Claims (MAC) Medical Affirmative Claims (MAC) A/R is all Public A/R (e.g., insurance companies, liable individuals) Total amount collected for medical care provided in MTFs for FY 2009 was $15 million

19. Health Budgets & Financial Policy 19 FMR guidance states: The accounting office shall establish an allowance for doubtful debt, which shall provide for reducing gross receivables by the amount of the estimated loss to their net realizable value A write-off occurs when an agency official determines, after using all appropriate collection tools, that is it more than 50% likely that a debt is uncollectible Doubtful Accounts & Write-offs

20. Health Budgets & Financial Policy 20 A/R are reported on the annual audited financial statements Service Financial Statements located at OSD(Comptroller) Web site: –http://www.dod.mil/comptroller/cfs/fy2009.html Service Financial Statements

21. Health Budgets & Financial Policy 21 Accounts Receivable - Policy Accounts Receivable Policy Memorandum (with attachment) –Policy signed on May 8, 2008 Purpose –Establish policy for the recognition (“as rendered”), classification, recording, aging, collection, disposition and reporting of accounts receivable in order to improve the accuracy of financial statements –Compliance with DoD’s Financial Management Regulation (FMR) and Generally Accepted Accounting Principles (GAAP)

22. Health Budgets & Financial Policy 22 Accounts Receivable – Policy (con’t) Implementation Date –1 October 2009 (for FY 2010 reporting purposes) Title 10 United States Code, Chapter 55, Section 1095 –This policy does not modify the ability of the Services to use monies collected in the fiscal year collected 10 U.S.C. 1095(g) reads as follows: "Amounts collected under this section from a third-party payer or under any other provision of law from any other payer for health care services provided at or through a facility of the uniformed services shall be credited to the appropriation supporting the maintenance and operation of the facility and shall not be taken into consideration in establishing the operating budget of the facility."

23. Health Budgets & Financial Policy 23 Financial Metrics Implementation of Medical A/R Policy in 1 st Quarter of FY 2010 had a large impact –Accounts Receivable (A/R) Public debt > 30 days at Dec 31, 2009 (Red Metric) SMA-Army ($358.7 million) SMA-Navy ($5.8 million) SMA-Air Force ($182.1 million) –Total reported Medical A/R was $546.6 million

24. Health Budgets & Financial Policy 24 Management of Accounts Receivable Revenue Recognition –All Defense Health Program (DHP) funded activities will recognize and record a receivable when it establishes a claim based on goods or services provided (“as rendered”) –Financial statements have two A/R classifications: Intragovernmental and Nonfederal (public) Debt Management (Debt Collection Improvement Act (DCIA) –Working with OUSD(C) to potentially add language to the FMR to better clarify medical debt and when to “turn-it over” to DFAS

25. Health Budgets & Financial Policy 25 Management of Accounts Receivable (continued) Proprietary vs. Budgetary –Recommended accounting entries are: Debit USSGL 1310 (Accounts Receivable) and credit USSGL 6790 (Other Expenses Not Requiring Budgetary Resources) –This will ensure a correct financial statement entry without the potential for a appropriation violation and maintain USC 1095 flexibility

26. Health Budgets & Financial Policy 26 Accounts Receivable - Revenue Recognition All Defense Health Program (DHP) funded activities will recognize and record a receivable when it establishes a claim based on goods or services provided (“as rendered”) There are two classifications of accounts receivables: –Intragovernmental –Nonfederal

27. Health Budgets & Financial Policy 27 Accounts Receivable - Going Forward Accuracy in reporting –Accounts receivable reports will be better than what we have now –Reports will include aging data –Visibility of all accounts (including TPC accounts receivable older than prior year 2) Will become more accurate as procedures, systems and data collection become more standardized Central reporting will improve as funded systems change request have been submitted to: –“Push” accounts receivable data from TPOCS and CHCS/AHLTA (both MSA and inpatient TPC), and –Calculate interest in both MSA and TPOCS

28. Health Budgets & Financial Policy 28 Accounts Receivable - Going Forward Do not want to impact ability for billing contractors to develop and/or use their own billing management system Possibility of accounts marked as transferred in MSA, but documentation never forwarded to the Defense Finance and Accounting Services (DFAS) Support Center Some joint ventures are generating Department of Veterans Affairs bills on Excel spread sheets

29. Health Budgets & Financial Policy 29 Accounting System – Going Forward SMA Audit Committee will work with the SMA – Army, SMA – Navy, and SMA – Air Force to establish procedures for recording AR Provide your UBO Service Manager and Service RM monthly AR data in the following categories: –Intragovernmental MSA, TPOCS, Unbilled, changes to Allowance –Nonfederal MSA, TPOCS, Unbilled, changes to Allowance

30. Health Budgets & Financial Policy 30 Accounts Receivable Service Points of Contact Army - Navy - Air Force –

31. Health Budgets & Financial Policy 31 Managed Care Forecasting and Analysis System (MCFAS) End of year forecast by beneficiary group –Active duty (AD) and AD family members using Service-supplied units –Retiree (R) or R family members or survivors using actuarial model with inputs from Defense Enrollment Eligibility Reporting System (DEERS), new retirees and death rates from DoD actuary, migration estimates –Mobilized Guard and Reserve (GR) and Inactive GR MCFAS

32. Health Budgets & Financial Policy 32 Beneficiary demographics forecasted from historical DEERS data –Use historical unit age/gender mix to estimated demographics of Service-supplied officer/enlisted unit endstrengths Forecast ZIP Code location of beneficiaries Map eligibles and historical enrollees to geographic concepts –Drive-time market areas, catchment areas, TRICARE Regions, MAJCOMs MCFAS (Continued)

33. Health Budgets & Financial Policy 33 Active Duty/Family MembersRetirees/Family Members/Survivors Active/Inactive Guard Reserve/Family Members Comptroller Active Duty FYDP Office of DoD Actuary Retiree Death Rates Survivor Death Rates New Retirees Historical DEERS Family Profiles Student Losses Migration Rates Service Ops Plans HA/TMA /Policy Mobilization Assumptions Forecasts of TRICARE Reserve Select Timing/Duration of Transitional Benefits DEERS Eligible/Enrollee demographics Market Areas Drive-time Market Areas TMA Catchment Area ZIP Codes Geography TMA DMIS ID table MTF changes (e.g., BRAC) Boundaries - Region, State, Country, County, ZIP Code MCFAS: Inputs

34. Health Budgets & Financial Policy 34 Outline Financial Statement Reporting Requirement Legacy Accounting Systems Medical Accounts Receivable (A/R) Managed Care Forecasting & Analysis System (MCFAS)

35. Health Budgets & Financial Policy 35 Questions? TMA OCFO/MC&FS