Army backs off plan to privatize medical bill collection

The Army has reversed course on a proposal to outsource bill collection at military treatment facilities nationwide after a federal labor union raised concerns about the legality of the effort.

The initial plan could have nearly doubled collection amounts at the Army's Southern Regional Medical Command, according to a Feb. 25 memo written by Commanding Brig. Gen. Joseph Caravalho Jr. That plan was based on an analysis of the command's billing structure, compared to that of the Air Force, which relies on a contractor. But the conversion was over nearly as quickly as it began for the command, which delivers care in 11 states and two territories.

The American Federation of Government Employees, which represents more than 200,000 Defense Department civilian employees, fired off a letter to Army Secretary John McHugh on March 3, decrying the privatization initiative as illegal.

Federal law prevents the department from converting any function currently performed by a civilian employee to a contractor without first conducting a formal cost comparison, and the department is forbidden from performing a cost comparison due to a moratorium on the A-76 public-private job competition process.

"The rank-and-file workforce would be delighted to work with management to generate efficiencies, but the privatization of these services is flatly illegal," wrote AFGE President John Gage.

"Please provide me with a written assurance that I can share with threatened rank-and-file employees that the Army will comply with the law and not perpetrate an illegal privatization of these services," he said. "This would be an excellent opportunity to educate all Army activities about various sourcing laws, including the prohibition against direct conversions."

The following day, the Southern Regional Medical Command rescinded the Feb. 25 memo. The command said it would provide further guidance after conducting additional analysis and coordinating with the Army Medical Command.

The union, however, said it remains concerned that the command plans to phase out the use of civilian employees for the billing and collection functions by not replacing retiring workers.

"We are more than happy to work with Army leaders to make these functions more efficient, but we will not allow the Army to illegally transfer this work to contractors without any regard to the federal workers currently performing these jobs," Gage said.

The contract had been expected to be awarded by the third quarter of fiscal 2011, at which point Army personnel would be directed to perform other functions. The union suggests that between 50 and 80 government employees would have been affected by the plan.

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