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Army says controversial project was not outsourcing

Mar. 23, 2011 - 06:00AM   |  
By SARAH CHACKO   |   Comments
Army Secretary John McHugh
Army Secretary John McHugh (Thomas Brown / Staff)

Plans to change an Army medical command's billing system continue after allegations from a federal employee union that the effort was an illegal attempt at privatization.

The Army's Southern Regional Medical Command, which delivers health care in 11 states, said in a Feb. 25 memo that it would be outsourcing its outpatient and inpatient third-party billing and collections functions at all military treatment facilities in the region.

The American Federation of Government Employees said in a news release Friday that the action would violate federal rules that prohibit the Defense Department from privatizing federal work without first conducting a formal cost comparison.

Army Medical Command spokeswoman Cynthia Vaughan said in an email Tuesday that the command's memo mischaracterized the changes as "outsourcing."

The Southern Regional Medical Command has to replace its outdated billing software system currently used to bill insurance companies and other third parties for care provided to their beneficiaries at military treatment facilities, Vaughan said.

The Feb. 25 memo was sent to the treatment facilities to convey that information and ensure they develop staffing plans, she said.

"Our intent is not to displace existing civilian employees or outsource as that term is otherwise understood," Vaughan said in the email.

"We should not have used the term ‘outsourcing' as it is not an accurate depiction of the ongoing analysis or potential courses of action. At this phase in the action we have not submitted a request to contracting, nor have we coordinated an independent government estimate."

Still, the Southern Regional Medical Command rescinded the Feb. 25 memo after AFGE President John Gage sent a letter to Army Secretary John McHugh asking him to immediately stop the effort.

"The rank-and-file work force would be delighted to work with management to generate efficiencies, but this privatization of these services is flatly illegal," Gage wrote in the March 3 letter.

Gage received help from the Office of the Secretary of Defense and members of the House Armed Services Committee in stopping the alleged privatization effort, according to the release.

Vaughan said the memo was rescinded because the command realized that it was not adequately explaining its plans. The command is still exploring methods to replace the billing software system, she said.

"The AFGE letter did not change the underlying exploration process, but underscored the need for effective communication with our employees," Vaughan said in an email. "When we decide on the appropriate method, we will obtain all the necessary consultations and concurrences."

Despite the change of course, AFGE said it remains concerned that the command intends to phase out the use of civilian employees for billing and collection by not replacing employees as they retire.

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