[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                       HEARING ON PROJECT HEALTHCARE
                      EFFECTIVENESS THROUGH RESOURCE
                                OPTIMIZATION


Wednesday, March 29, 2006
House of Representatives
Committee on Veterans' Affairs,
Washington, D.C.





The Committee met, pursuant to call, at 10:30 a.m., in Room 334, Cannon 
House Office Building, Hon. Steve Buyer [Chairman of the Committee] 
presiding.


Present:  Representatives Buyer, Brown, Michaud, Boozman, Brown-Waite, 
Bradley, Udall, Herseth, Strickland, Berkley, Moran, Snyder.


Mr. Brown.  [Presiding]  Good morning.  The Committee will now come to 
order.  Welcome, colleagues and distinguished witnesses and all in 
attendance this morning.


Our colleague and Chairman, Mr. Steve Buyer, is unfortunately unable to 
be here to start this hearing due to unavoidable conflict.  However, I 
do anticipate the Chairman will be joining us shortly.


Our hearing today provides an opportunity to consider new and innovative 
ways to enhance health care access of our nation's veterans while at the 
same time making prudent use of the taxpayers' dollars.  Specifically we 
are here to critically examine the Project Healthcare Effectiveness 
Through Resource Optimization, a demonstration known as Project HERO.


One of the reasons that I am excited to be here today is that I think it 
is important to hear what is currently being considered inside the VA, 
gain a better understanding of how these demonstrations will be rolled 
out, and to put to rest in a public forum some people's concern over the 
outsourcing of VA health care.


Project HERO, as I understand, is a series of VISN-wide demonstrations 
that seek to improve the level of collaboration between private 
contractor providers and the VA to ensure the most prudent expenditure 
of VA's resources while enhancing the continuity of services provided in 
and outside the VA system.


Project HERO is intended to be a purely voluntary program for currently-
enrolled veterans that will not seek to expand eligibility.


The competitive contractor process is currently projected to take place 
in the summer, with contracts awarded the end of 2006.


The testimony we are about to hear today from Congressman Osborne, the 
VA, a private-sector contractor, and the Veteran Service Organization, I 
sense, will help detail a set of VISN-wide demonstration projects that 
are still in their infancy.  That is to say I think it is clear that 
there is still  a considerable amount of work to be done before Project 
HERO becomes a reality.


I would now like to recognize Mr. Michaud for any opening statements he 
might have.


Mr. Michaud.  Thank you very much, Mr. Chairman.  I want to thank you 
for holding this hearing and also would ask that my full statement be 
part of the record.


Mr. Brown.  Without objection.


Mr. Michaud.  Because the scope, focus, cost, and duration of this 
project have not specifically been authorized by this Committee, this 
hearing, I think, is extremely important.  I appreciate that because we 
are at the beginning stage of this project most of the parameters are 
undefined.


While VA may not know at this time whether this project is going to cost 
two million or $2 billion, I believe it is important to clarify the cost 
of this demonstration and projected savings the VA hopes to achieve by 
better coordinating fee-based care.


With respect to this demonstration project, we have a balancing act.  We 
want to encourage bold thinking about ways to enhance quality and cost 
efficiencies, but we must also exercise responsible stewardship to 
ensure accountability and performance.


Chairman Buyer, as Chair of the Oversight and Investigation Committee, 
was a leader in examining how poor contract management can ruin good 
ideas.  With CoreFLS, VA attempted an innovative idea to generate 
synergies through an integrated system that combined logistical, 
billing, and other management functions, but we know that the results 
did not come close to meeting that expectation.


At is inception, the VA did not clearly define what it needed from its 
contractor.  VA, in effect, invited the contractor to make government 
decisions without the necessary independent evaluation to ensure 
success.


Mr. Chairman, it is my hope that with this hearing and in future action 
as authorizers, we can help VA flush out a clear focus of the scope, 
cost, projected cost savings, and quality performance measures for this 
project to advance quality care for our veterans.


I am also interested in learning how this program will work in 
conjunction with the implementation of CARES' recommendation, and 
particularly how can we reduce VA's cost by purchasing care, by moving 
forward on established, needed CBOCs, and outreach centers.


So, Mr. Chairman, I will submit the rest of my testimony for the record.  
Thank you.


Mr. Brown.  Thank you, Mr. Michaud.


[The statement of Mr. Michaud appears on p.  ]



Mr. Brown.  Mr. Boozman.


Mr. Boozman.  Thank you.  Very quickly, I would like to thank the staff 
on both sides.  We had a hearing in Arkansas concerning updating the GI 
Bill and the Transition Assistance Program.  And Mr. Snyder, Ms. 
Herseth, and Senator Pryor were there.  I just want to thank the hard 
work of the staff.  We had an excellent meeting.


The other thing is, and I know we are going to do a lot more on this, 
but I just want for the record to let everyone known how saddened I am 
by the retirement of Mr. Evans.  Nobody has worked harder for veterans 
or been more active on this Committee than he has.  And so hopefully we 
will do a lot more along that line.  But, again, thank you.


Mr. Brown.  Thank you, Mr. Boozman.


Ms. Berkley.


Ms. Berkley.  Thank you, Mr. Chairman.


And, Mr. Boozman, I think those are very lovely words.  I was very 
heartsick to hear about Lane Evans' retirement, although I thought it is 
a long time coming.  And he will be missed by the veterans and by the 
people that worked with him on this Committee and throughout Congress on 
both sides of the aisle.


Mr. Chairman, I am going to submit my comments, my opening statement for 
the record, but there are a couple of comments that I would like to make 
on the record.


I am a proponent of the VA system.  And I read with great interest the 
Independent Budget letter to Dr. Perlin expressing concerns about the 
HERO demonstration project, and I share those concerns.


I have a series of questions that I would like answered.  Unfortunately, 
I have three Committees meeting simultaneously and I am not going to be 
able to stay to hear the responses to my questions, but we are very 
delighted to welcome our colleague, Mr. Osborne.


And if you would not mind, when -- and I am sure that in your opening 
remarks you will address yourself to your thoughts on the best way to 
provide private care for our veterans.


Should they be able to go to any doctor, hospital, or clinic, or will 
they go to one location?  I would like to know your ideas on the best 
way to run Project HERO.


And I recognize while I represent the very urban part of our country 
that many of our veterans living in rural areas are in need of care and 
have difficulty finding a VA hospital or clinic near enough to them to 
actually help.


When we have our second panel, I would be very appreciative if certain 
questions were answered regarding the care provided to veterans by VA 
contractors.  The fact that it is usually disconnected from VA quality 
standards, electronic medical records, clinical guidelines, a continuum 
of VA provided care, how will they hold private providers to VA 
standards and guidelines?


And one of my primary concerns is the fact that the VA budget in my 
estimation is underfunded as it is.  Is this project going to divert 
limited funding away from the established VA clinics and outreach 
centers that could replace the need for the VA to collaborate with 
private contractors?  And my concern is that we do not substitute and 
use this as a foothold to start dismantling the VA health care system.


I do not have in my packet Dr. Perlin's response to the letter written 
by the Independent Budget, but I would appreciate either seeing his 
response or having the questions that were asked in this letter answered 
for the entire Committee.  I think they brought up some very interesting 
points that need addressing.  And before I would embrace this project, I 
would need to have these questions answered to my satisfaction.


And with that, I want to thank you for giving us an opportunity to share 
your thoughts with us.  Appreciate it very much.


Mr. Brown.  Thank you, Ms. Berkley.


[The statement of Ms. Berkley appears on p.  ]



Mr. Brown.  Mr. Moran, do you have an opening statement?


Mr. Moran.  I do, Mr. Chairman.  Thank you very much for recognizing me.  
I applaud the opportunity to be here today with the department.


Appreciate the opportunity to cross-examine Mr. Osborne.  I will miss 
the opportunity for him and I to work together.  He and I share 
districts that are very similar.  And this is an important issue for us 
in trying to make certain that rural veterans have access to health 
care.


I think there are two components of this project that I think I want to 
hear more about.  I want to lend my support in efforts to make 
improvements to see that something happens in this regard, at the same 
time making certain that our hospitals in communities across the 
country, our VA hospitals, have the adequate resources to provide the 
specialized care that they so adequately provide.


So I very much want to make sure this is not a net loss to the VA 
hospital system.  But I represent a district in which there is no VA 
hospital and to me, there are two issues about access, one being access, 
the other being sharing of information between the VA, its physicians 
and community physicians, and hospitals.


On the access side, two examples.  And I have seen Mr. Osborne's 
testimony and he will talk about what the situation is in Nebraska.  But 
in my district just within the last couple of months -- one of my 
neighbors down the street is a retired FBI agent who has been receiving 
VA approved dental care for his injuries that he received during his 
military service in our hometown since 1989.


And recently the VA has determined that no longer will they provide 
dental services at home, but that Mr. Schwartz, who is in his eighties, 
must now travel to Wichita, which is about a three-hour drive, to see 
the dentist.


The other one, about a four-and-a half-hour trip to Wichita or to Denver 
to the VA hospital in the community of Hocksee.  This gentleman needed a 
new pair of glasses, was not eligible to see his hometown optometrist, 
as he has for his past history in dealing with the VA, told that he must 
go to Wichita in order to see the optometrist to have his glasses 
adjusted.  It is at least a four-hour, four-and-a-half-hour trip either 
to Wichita or to Denver.


In the first instance, we were able to satisfactorily resolve the issue 
and the second, we have not been able to.  But those are just examples 
of people who are in their eighties who have the difficulty.


Clearly going to the city for many of my constituents is a long drive.  
It can be a frightening experience and something that they are 
uncomfortable with and generally takes family members or friends, 
someone from a VSO to get them there.


And so we want to work with the VA and the VSOs to try to make access to 
health care much more readily available, particularly in the routine 
circumstances.  We have been successful in a number of instances.  And 
community outpatient clinics, very much a supporter of those, but there 
is a niche that is still, in my opinion, is unfilled.


And, finally, the second issue is adequate communication between the 
VA's physicians and the community physicians in regard to medical 
records.


One of my close friends is a professor of family practice medicine at 
the University of Kansas at their campus in Wichita, Kansas.  He is now 
the President of the National Association of the American Academy of 
Family Physicians.


His point and his letter here to me just within the last few weeks, 
community physicians complain they do not receive consultation notes, 
lab tests, and X-ray results back from the VA.  The community physician 
does not know the medications that have been charged or tests that have 
been conducted.


When the patient shows up at a local hospital for an appointment, the 
local physician is unaware of the changes in the veteran's care.  And 
for dual-care patients, I think this is a dangerous circumstance, and we 
want to work closely with the VA to see if we can solve the problem of 
that hometown physician or other health care provider that is providing 
services to the local veteran, that they know about the continuum of 
care between the VA and that hometown physician.


Mr. Chairman, I thank you for having this hearing.  I look forward to 
hearing the witnesses.  And, again, appreciate Mr. Osborne in particular 
highlighting the importance of this issue to many veterans, particularly 
those who live in rural America.


The Chairman.  [Presiding]  Thank you, Mr. Moran.


Ms. Brown-Waite, you are now recognized.


MS. Brown-Waite.  Thank you very much, Mr. Chairman.


You know, certainly looking at ways that we can stretch those health 
care dollars is something that this Committee is very interested in as 
the number of veterans increase, whether it is from the War on Terror or 
whether they are from Vietnam, the Korean War or World War II, I still 
have veterans from, as we all do, thankfully.  We need to find new ways 
to stretch those dollars so that health care is provided and provided in 
a very cooperative manner.


Last week, I had a veteran come to me and he said I know that the VA 
does not want to become a pharmacy, but he said it is such a duplication 
of effort, he said, on my part and also on the part of the health care 
system that we have in America to go to a Medicare physician first, get 
a prescription, and then have to have a totally new exam and take up a 
slot that another veteran who does not have Medicare could use.


So finding ways to stretch those dollars so that the veterans in every 
single VISN are taken better care of is something that I know this 
Committee feels very, very strongly about.  And I look forward to 
hearing the testimony on this, Mr. Chairman.


The Chairman.  Thank you very much.


I apologize to everyone for my late entry.  I would like to thank 
Chairman Brown, the Chairman of the Health Subcommittee, for taking over 
in my absence.


Shortly we will hear testimony on Project HERO, a VA demonstration 
project that seeks to better coordinate fee-based care currently 
purchased outside the VA.  The chief purpose of this initiative would, 
as I understand, be to enhance the access of quality care to America's 
veterans.


I believe this is a timely topic in the sense that Project HERO is 
currently being considered by the department, and I thought this hearing 
would also provide us a good opportunity to discuss very publicly what 
Project HERO is and what it is not.


Moreover, it will provide everyone here with an opportunity to share 
with the VA what they think it should look like and what matrix should 
be adopted to evaluate the effectiveness of the demonstrations as the 
requirements are drafted over the coming months.


We all know that the quality of health care provided by the Department 
of Veterans' Affairs is excellent.  The challenge often lies in the 
access to VA facilities, especially for veterans living in the rural 
areas.


Public law authorizes VA to use contracted, fee-based, private health 
care providers for service-connected injuries and conditions when its 
own facilities simply cannot provide suitable care for reasons such as 
emergency, inaccessibility, or certain other factors.


Our first panelist, Mr. Tom Osborne, a member of Congress from the State 
of Nebraska, knows only too well the challenges faced by veterans in his 
part of this country.  Some of his constituents must travel for days to 
get VA health care.


And so, Tom, I want to thank you for your appearance before the Veterans 
Affairs' Committee, for your being here this morning, and for your 
testimony.


I would also like to thank our panelists, Dr. Mike Kussman, representing 
the Department of Veterans' Affairs, Ms. Cathleen Wiblemo on behalf of 
the American Legion, and Dave Gorman representing the Disabled American 
Veterans.  We also have Humana Military Healthcare Services President 
and CEO, David Baker, himself a veteran.


And, Mr. Baker, I want to thank you for your willingness to step up to 
the plate and testify here today, especially in light of sort of 
traditional hesitancy among contractors due to potential procurement 
sensitivities.  And so your willingness to step forward and be helpful 
to us is welcomed.


These panelists will present a good deal of information this morning and 
we appreciate the opportunity to learn about this care coordination, its 
demonstration, its potential, and its potential limitations early in the 
process.


Health care is undergoing a revolution.  Earlier this month, this 
Committee held a hearing on collaborative approaches to the provision of 
health care through enhanced partnerships with teaching universities and 
other entities such as the Department of Defense.


These innovative partnerships have already proven their value in 
delivering America's veterans efficient health care of the highest 
quality.  But these affiliations are only part of the solution to 
ensuring wide and timely access to quality care.


Project HERO, which stands for Healthcare Effectiveness Through Resource 
Optimization, is an outgrowth of the conference report of the VA's 2006 
appropriation.  Its stated objectives are to increase the efficiency of 
VHA process associated with purchasing care from outside sources, to 
reduce the growth of costs associated with the purchased care, to 
implement management systems and processes that further quality and 
patient safety, and make contracted providers virtual, high-quality 
extensions of VHA, control administrative costs and limit administrative 
growth, increase net collections of medical care revenues where 
applicable, and increase enrollee satisfaction with VHA's service.


In other words, Project HERO should help us learn how to improve some of 
the contracted care we now provide and the way we provide it.  My 
understanding is that HERO is not intended to undermine our affiliations 
or to lead to expanded outsourcing or replacement of existing VA 
facilities.


With that in mind, open to the possibilities, but cognizant of the 
importance of preserving the quality associated with VA health care, I 
look forward to hearing more about this demonstration project.


I would yield to Mr. Osborne of Nebraska.  I know you have a written 
statement.  It will be submitted for the record, and you are now 
recognized for an opening statement.


STATEMENT OF HON. TOM OSBORNE, MEMBER OF CONGRESS, STATE OF NEBRASKA



Mr. Osborne.  Thank you, Mr. Chairman, members of the Committee, and 
staff.  Particularly appreciate some of the staff work that has gone 
into this.  I want to thank you for holding this hearing and really 
appreciate the Chairman's leadership on this issue.


Access to health care is one of the greatest obstacles facing veterans 
in Nebraska, as well as many veterans across the nation.  What we found 
is that the older you are, the sicker you are, and the further away you 
are from a facility, the less likely you are to get care.  At some 
point, the veteran simply does not go.  And so I think people throughout 
the VA system recognize this shortcoming.


And so currently in the district I represent, there are 64,000 square 
miles.  And if you look at VISN 23, which is what we are talking about 
here, this would be 390,000 square miles.  It would encompass Iowa, 
Minnesota, Nebraska, North Dakota, South Dakota, parts of Illinois, 
Kansas, Missouri, Wisconsin, Wyoming.


So these are all relatively sparsely populated areas and the veterans in 
VISN 23 are traveling thousands of miles for their medical care.  There 
is no question that there is a huge amount of travel involved.


At each stop that I make in Nebraska, veterans continue to express to me 
their concern about traveling hours for medical care.  Many travel one 
to two hours to receive primary medical care, while some veterans who 
live in the western part of Nebraska must travel four days in order to 
have testing done in Omaha at the veterans hospital.


Let me explain how that works.  They often will drive, sometimes have to 
get a family member to take off from work to drive them down to Grand 
Island or some place where they get on a bus and then they will go down 
to Omaha.  They will spend usually a day or two days there and another 
full day coming back.  And at some point, a veteran simply will not make 
that trip.  They can no longer do that physically.  So it is certainly a 
problem.


Many veterans in Nebraska who are elderly encounter difficulty or find 
it impossible to travel long distances to receive their health care.  If 
a veteran has to cancel an appointment, it may take months to 
reschedule.


We had a massive snowstorm, which we were very pleased to get.  It 
covered the whole State of Nebraska a week ago.  And the depth of the 
snowfall was anywhere from a foot to two feet, so almost every 
appointment had to be cancelled.  And as you know, this may mean a 
three-month, six-month wait to get that rescheduled and as a result, 
this certainly creates a hardship.


I recently received a letter from the widow of a World War II veteran 
who resides in my district.  Her husband had served 44 months in the 
military including 39 months overseas during World War II.  In recent 
years, this veteran suffered from poor circulation and lung problems as 
a result of years spent serving his country.


Because of this man's poor health condition and physical limitations and 
the distance he lived from a VA medical facility, he was not able to 
travel the great distance necessary to access the care that he needed on 
a regular basis.  He passed away in a local community hospital in 2005.  
and this is unacceptable.


The thing I would like to point out here, Mr. Chairman, is that because 
of the distance factor, sometimes these people simply do not get 
preventative care.  Sometimes their care is undertaken only when things 
become critical.  And as a result, the life expectancy of many of these 
veterans is shortened considerably simply because they do not get their 
blood pressure checked on a regular basis.  They do not get their 
medications adjusted and all the things that people living closer to a 
facility can get done on a regular basis.


So we are trying to rectify that situation as much as we can.  After 
looking at various options to address these problems, I introduced House 
Resolution 1741, the Rural Veterans Access to Care Act, and this would 
establish a pilot program to assist highly-rural or geographically-
remote veterans who enrolled in the VA in obtaining primary health care 
at a medical facility closer to home.


The legislation requires the Secretary of the VA to use authority to 
contract with nondepartment facilities in order to furnish routine 
medical services to enrolled veterans who were classified as highly 
rural or geographically remote.


I believe VISN-wide care coordination demonstration will address many of 
the issues that my legislation is intended to address with regard to 
access to care.


And I might mention, let us say that you are in Chicago and you live on 
one side of the city and the VA facility is on the other side.  It may 
not be a huge distance in miles, but it may take you an hour, hour and a 
half to get there.
So this is not strictly an isolated rural problem.  It also affects 
people in relatively densely-populated areas.  So we think this would 
serve all veterans.


Although I believe the demonstrations can be an effective way to provide 
reliable quality care to veterans in these areas, I understand that the 
contracts have not yet been written and all the demonstration 
requirements have not been completely defined.


So we are dealing with something that is a little bit amorphus here.  
However, I hope today's hearing will provide a valuable opportunity for 
everyone to get a better sense of what can be accomplished through the 
demonstration and give the department a better sense of what veterans' 
needs can and should be addressed through the demos.


While I believe it is critically important to provide additional access 
points through the Veterans Integrated Services Networks that have been 
selected for the demonstration, I think we should also demand that 
quality standards be effectively maintained.  After all, my interest 
like yours, Mr. Chairman, is to provide timely, quality care to those 
who have served and are eligible for VA care.


Once again, I would like to thank the Chairman and the Committee and the 
staff for developing this demonstration project, and we hope that it 
will be looked upon favorably.
And at this point, I would be glad to entertain any questions that 
people might have.


The Chairman.  Thank you, Mr. Osborne.


[The statement of Tom Osborne appears on p.  ]




The Chairman.  The issue that you are touching on and exercising 
leadership on has also been an issue that has been addressed in the 
Independent Budget.  It has been an issue that was touched in the 
Presidential Task Force.  And so there are individuals who are advocates 
on how to provide this care in the rural areas.


But it is one where we say, oh, I know there is a problem, gosh, I hope 
somebody takes care of it.  We really do not want it to affect our 
facilities.  We want to preserve those facilities and the access and 
personnel.  And there is such a tendency in this town not to ever make a 
change if it is going to affect the FTE.  And it is a bizarre nature of 
the town, I think.


But I want to thank you for your willingness to step in to define this 
because it deals with the access to quality care.  And it is 
interesting, some people will take that really simple word and say, 
well, it is defined only through the gateway toward a VA-based facility.


And what you are saying is that it is getting health care on a timely 
basis to a veteran in need.  And so you have given some pretty good 
examples for us on how difficult it is in rural areas.  And if the VA 
cannot provide that form of specialized care, whatever the need is, it 
ought to be done on a contracted basis.


That is sort of your recommendation to us, correct?


Mr. Osborne.  Absolutely.  The main thing we want to make sure is that 
there is fairly equal access across the country and that there is 
reasonably equal quality of care.  Nobody is going to be able to 
construct an entirely level playing field.  Obviously if you live out, 
you know, 50 miles from the nearest town, there is going to be some 
difficulties.


But most of these veterans at least live within ten or fifteen miles of 
a health care facility where they can get their blood pressure checked, 
where they can get their medication adjusted, where they can at least 
get primary care.  And in many cases, this is what keeps us going a lot 
longer because if your blood pressure is out of control and you do not 
even know it, you obviously are going to go downhill a lot faster than 
somebody who can get that primary care.


So we think that access is critical and we are certainly not trying to 
undermine the VA system.  We are just saying, you know, as these folks 
get older and as they get sicker, they just do not go.  And really I 
think everyone would like to see people treated somewhat equally in the 
system.  And that is what we are after.


The Chairman.  Thank you.


Mr. Michaud.


Mr. Michaud.  Thank you very much, Mr. Chairman.


I want to thank you, Mr. Osborne, for your testimony.  Like you, I am 
very concerned with improving access to health care for our veterans in 
rural areas.


And when you related a situation where it took a veterans four days to 
receive care, travel time, I can relate to that being from the State of 
Maine.  I have heard where veterans have taken four days to receive 
their care. I look forward to working with you as we deal with the issue 
of rural health care and access.  Thank you very much for your 
testimony.


Thank you, Mr. Chairman.


The Chairman.  Mr. Moran.


Mr. Moran.  I have already complimented Mr. Osborne during my opening 
remarks, so it would only be repetitive, although he is very deserving 
of those compliments.  I appreciate his efforts to once again highlight 
how difficult it is for many veterans in our country to access health 
care.


And I think he particularly did a fine job in reminding us that it is 
about extending life.  It is about quality of life.  It is not just 
numbers and statistics and number of miles.  There is actual 
consequences to our failure to develop adequate policies to meet our 
countries veterans' needs wherever they live.


And so I commend Mr. Osborne and I look forward to working with him 
throughout the remainder of this term to see if we cannot get something 
done.


I thank you, Mr. Chairman, for this hearing.


The Chairman.  Thank you, Mr. Moran.


Mr. Strickland.


Mr. Strickland.  Mr. Chairman, I also would just like to say to our 
colleague thank you for his obvious concern for a very real problem and 
thank you for your efforts to address that problem.


Thank you, Mr. Chairman.


The Chairman.  Ms. Brown-Waite.


Ms. Brown-Waite.  I do not have any comments.


The Chairman.  Dr. Boozman.


Mr. Boozman.  Nothing, sir.


The Chairman.  Mr. Osborne, if you have recommendations as the VA 
proceeds with the drafting of this demonstration program, please let 
them know and let us also know what they are.  I will not put you on the 
spot today.  But what is wonderful about your testimony is is that we 
are going to be helpful.


Usually what happens is with demos, right, we send them down to the 
Executive Branch of government and we wait to see what it is.  Right now 
we want to know what it is as they are proceeding.  We do not do this 
very often.


But we know about your legislation.  There are members that sit on this 
Committee who also represent rural areas.  And we have all experienced a 
very similar fact scenario as you have described.


And sometimes we can be cold and we can draw a catchment area, a circle 
around a VA hospital and say, okay, if you are within the catchment 
area, then these types of rules apply.  If you are outside it, other 
types of rules apply.  And we really do not have that sort of managed 
care on a personal basis that perhaps we really should.


It is kind of interesting.  We are challenged on this Committee because 
we are managing a social health system.  It is.  So as we are managing a 
government-based social health system, we then try to incorporate best 
business practices of the private sector into a government system to try 
to perfect a government system.  And then as you try to perfect a 
government system, the system itself develops a culture and the culture 
then adopts defensive measures to protect itself.


And what you have done is you stepped forward here with an idea that 
coincides very closely with the initiative from the Appropriations 
Committee on this demo.  And so we are going to try to figure out how we 
can provide that timely, accessibiliy to good-quality health care that 
you are seeking.


So I would just ask for your continued leadership on the subject.  And I 
will yield to you if you have any closing comments you would like to 
make.


Mr. Osborne.  No, Mr. Chairman.  I just appreciate the openness of the 
Committee and the fact that I have not been grilled extensively by Mr. 
Moran.  I was expecting much harsher treatment than I got.  And so he 
must be having a good day.


But I do apologize for the fact that, you know, we are at the start of 
this whole process.  We do not have all the answers.  And so I think as 
we move forward, what we can expect is there will undoubtedly be -- some 
difficult decisions have to made.  There may be some additional expense 
on the front end.


But hopefully as this thing proceeds, there will be some long-term 
savings and certainly people will be much better served because if you 
think about the cost of providing a van to go from Ainsworth, Nebraska 
down to Grand Island and doing this every day, which is essentially what 
is happening -- that is a trip of 400 miles -- when most of the people 
in that van could probably go four or five blocks away and get whatever 
treatment they need, that is tremendously expensive.


So long term, long haul, we think there will be some savings plus access 
will certainly be much better and health care will be much better of 
some of these remote veterans.


So appreciate your initiative and thank the Committee and the staff very 
much.


The Chairman.  To be very up front here with you, Mr. Osborne, is we 
have two distinct paths in front of us.  We have a defined present 
system and it is facilities based.  And we are sort of in this pause at 
the moment because we are coping with a system that is taking in so many 
of our returning veterans from the war.


So not only for those who have been recently injured and wounded, but 
not for those who have the right of access to care that we have given 
them because we are caring for present population, we have this pause 
with regard to building outpatient facilities and these clinics.


So what we have in front of us is an advocacy of, well, Mr. Osborne, the 
best way we can do that is to continue a build-out, maybe even CARES 
plus, and build these clinics on almost every corner of America.  And 
that is how we can deliver the care.


That is a huge advocacy, a build-out of the national system.  It is also 
very, very expensive.  And we are learning this as we have five 
hospitals in front of us that we are to build for billions of dollars in 
cost.  Or, do we hold on to a present system like we are and then turn 
to an initiative that you have done?


So we have really two very distinct paths in front of us.  And so I want 
to thank you for your leadership.  You are right.  We need to examine 
this and the challenges that are in front of us.


Thank you, Mr. Osborne, for your testimony.


Mr. Osborne.  Thank you.


The Chairman.  The first panel is now excused.


For our second panel, if you will please come forward, is Dr. Michael 
Kussman, who is the Principal Deputy Under Secretary of Health for the 
Department of Veterans' Affairs.


Dr. Kussman began his military career in 1970, serving with the 7th 
Infantry Division in Korea.  He left active duty in 1972 to resume 
medical training and complete his residency at the Joslyn Clinic in 
Boston.


In 1979, Dr. Kussman returned to active duty at Tripler Army Medical 
Center in Honolulu serving as the Chief of Internal Medical and was 
later serving as a division surgeon in the Department of Medicine of 
Brook Army Medical Center in San Antonio; he became the Army Surgeon 
General's chief consultant in internal medicine, and the governor for 
the Army region for the American College of Physicians in 1988.


He commanded the Martin Army Community Hospital at Ft. Benning, Georgia 
from March 1993 to August 1995 and later commanded Walter Reed in 
Washington, D.C. where he was promoted to Brigadier General.


Following Walter Reed, Dr. Kussman served as the commander for Europe 
Regional Medical Command, the command surgeon for the United States Army 
in Europe, and the TRICARE lead agent for Europe.


Dr. Kussman, I appreciate you being here.


Mr. Loper, good to see you.


Gentlemen, if you have a written statement -- you do?


Dr. Kussman.  Yes, sir.  I think that has been submitted and we would 
appreciate it being submitted for the record.


The Chairman.  It shall be.  So ordered.


And, Dr. Kussman, you are recognized.


STATEMENT OF MICHAEL KUSSMAN, M.D., PRENCIPAL DEPUTY UNDER SECRETARY FOR 
HEALTH, DEPARTMENT OF VETERANS' AFFAIRS; ACCOMPANIED BY C. MARK LOPER, 
CHIEF BUSINESS OFFICER, VETERANS HEALTH ADMINISTRATION

STATEMENT OF MICHAEL KUSSMAN



Dr. Kussman.  Yes, sir.  Good morning, Mr. Chairman and members of the 
Committee.


I am here today with Mr. Mark Loper, the Veterans Health 
Administration's Chief Business Officer to talk to you about Project 
HERO.  As mentioned, we will submit our written testimony for the 
record.


And let me just up front apologize for my voice.  If I lose it, I 
apologize, and my sidekick will act as my ventriloquist here.


My oral testimony will be brief.  My testimony today will focus on the 
goals of the program, our plans to work with Veterans Service 
Organizations, and business partners in academia in implementing the 
pilot, our criteria for selection of the Veterans' Integrated Services 
Networks, or VISNs, for participation in the pilot, and finally our 
preliminary plans to evaluate the pilot.


Mr. Chairman, Project HERO is a pilot program developed in November 2005 
in response to requirements in the Appropriations conference report of 
November 17th, 2005.  The report called for expeditious action by VA to 
implement care management strategies that have proven valuable in the 
public and private sectors.


The report counsels VA to implement this pilot in a manner that ensures 
purchased care will be secured in a cost-effective manner that 
complements the VHA's system of care, preserves the agency's interest, 
and sustains our affiliate partnerships.


HERO stands for Healthcare Effectiveness Through Resource Optimization.  
Project HERO is intended to help VA better manage contracted health care 
by reducing the associated overall expenditures and improving quality.  
Done right, the pilot has the potential to reduce our contract costs 
while improving access, accountability, care coordination, patient 
satisfaction, and clinical quality.


Project HERO's demonstration objectives have been defined and 
communicated to a number of key stakeholders including the VA's National 
Leadership Board, VSOs, industry, and academia.


Some of these objectives include reducing the rate of cost growth 
associated with purchased care, implementing managed systems and 
processes for contracted care that foster quality, patient satisfaction 
and patient safety, and that will make contracted providers virtually 
high-quality extenders of the VHA, sustaining partnerships with 
university affiliates, controlling administrative costs and limiting 
administrative cost growth, increasing the efficiency of VHA processes 
associated with purchasing care from commercial and other external 
sources, increasing net collections of medical care revenues, and moving 
toward the integration of the use of the VA's electronic health record 
with the episode of care in contracted settings.  This last step is 
really essential to our ability to succeed.


During this pilot, VA will work with business partners, including 
medical schools, to explore potential management strategies that might 
help VA meet the goals of the HERO Project.  Participating networks will 
develop proposals for pilot consideration incorporating the best 
available strategies and tactics.


Proposals for each network will be reviewed by the network director, VA 
headquarters, and the Veteran Service Organizations to ensure that they 
align with our VA health care model and to ensure that the best 
interests of the veterans are addressed at every point in the process.


Each proposal will be assessed in terms of its potential impact on the 
clinical training program of each facility.


VA has selected four Veterans Integrated Service Networks to pilot 
Project HERO demonstrations.  They are VISN 8, which includes all of 
Florida and southern Georgia; VISN 16, which includes Oklahoma, 
Arkansas, Louisiana, Mississippi, and portions of the States of Texas, 
Missouri, Alabama, and Florida; VISN 20, which includes Washington 
State, Oregon, most of the State of Idaho, and one county each in 
Montana and California; and, last, VISN 23, which includes Iowa, 
Minnesota, Nebraska, North Dakota, South Dakota, and portions of 
northern Kansas, Missouri, western Illinois, Wisconsin, and eastern 
Wyoming.


The VISNs selected were among those who have the highest expenditures 
for community-based care relative to the number of veterans enrolled for 
care.  In addition, these VISNs include some of our largest VA networks 
representing 25 percent of our total enrollment and 30 percent of our 
annual out-of-network expenditures.


We use these selection criteria to ensure that our demonstration will be 
representative of the larger VA population and to facilitate our ability 
to measure whether the pilot is successful.


We will assess the pilot's success by evaluating each program using a 
methodology that is still under development by the Project HERO team.  
This methodology will measure both clinical and business performance and 
patient satisfaction and will incorporate rigorous scientific means of 
measuring results relative to VA's performance matrix.
Strategies with demonstrated success will be considered for adoption by 
other networks.


Mr. Chairman, Project HERO is an opportunity for our business partners 
to work with us to improve VA health care, especially health care we 
contract for the VA.  We plan to implement the Project HERO 
demonstration and we welcome your continued thoughts and ideas about 
this process.


Thank you for your continuing interest in this most important 
initiative.  This concludes my statement, Mr. Chairman.  I will be happy 
to answer any question that you or other Committee members have.


The Chairman.  Thank you.


[The statement of Tom Osborne appears on p.  ]




The Chairman.  This is a very challenging project that you have in front 
of you because we have not even made the present system sophisticated on 
how we are delivering the care to category sevens and eights.


The reason I say that, meaning with collections, is this movement to the 
electronic medical record, if we want there to be extenders into the 
system--you know, are we saying then that these providers out there have 
to also be up to date with electronic medical records and we get into 
some legal issues?


I do not know where this is going to take us.  I just know this is -- I 
do not mind stepping into something that is difficult and dark and try 
to define it.  It is how we press the bounds.  I just recognize there 
are some really challenging issues here in front of us.


You know, we also struggle with management tools with regard to 
utilization rate.  So whether it is in our Medicaid and our Medicare and 
TRICARE, thinking about reimbursement systems out there, it is a real 
challenge and struggle that we have.


You know, the highest utilization rate--it is not now, but it was a few 
years back--for health care in the country was in Kokomo, Indiana, and 
it was in my congressional district.  And UAW has a very strong presence 
there and it was first dollar, no deductible.  And the utilization rate 
was very, very high.  And they had to come in because it just got out of 
whack.  It really did.


And so if you have an individual that has a right to care and it is in 
the community and just around the corner, being able to put together a 
system with regard to effective management tools and utilization is 
going to be extremely important in the management of the health system.


I just want to throw that out to you as some of my thoughts as we begin 
to work through this.


The other is Coach Osborne was referring to his legislation with regard 
to enrolled veterans who are classified as highly rural or 
geographically remote.


How would you define that?


Dr. Kussman.  Mr. Chairman, I appreciate all the comments that you made 
and I agree with you that these are challenges.  We will work through 
these to maximize what we can do.


I have not seen the legislation specifically that Representative Osborne 
has put forward, so I do not know exactly what is defined as extremely 
rural or not having access to care.  But obviously it will be someone 
that had to travel a long distance, but I am not sure what that would be 
defined specifically as.


The Chairman.  In your demonstration program, are they going to take 
these types of veterans into account, individuals that are highly rural 
or in a geographically-remote area?


Dr. Kussman.  Sir, as you know, that care for rural veterans and care 
for people who live in rural areas of the country is a very important 
issue.


The Project HERO was not geared or specifically directed in any way to 
the rural health issue.  Not to say that it is not important, but it was 
not geared to do that.  It was geared to look at what we are doing now 
when we contract fee-based care, but it was not directed at development 
of a program specifically for rural health.


The Chairman.  I know we have some overlapping things happening.  That 
is why I sort of asked the question to you.


In your written testimony, you mentioned that the VA will develop 
specific regional action plans to focus on purchasing care in a cost-
effective, high-quality manner that is complementary to larger VA 
systems.


Do you anticipate the action plans to greatly differ between the four 
VISNs selected as demonstration sites?


Dr. Kussman.  Obviously, sir, using the four VISNs with the 
characteristics that I described in my oral testimony, there may be some 
nuances from VISN to VISN because of the specifics related to the VISNs.  
But there will be certain basic tenants that would be with all the 
VISNs, setting certain standards.


Right now, as you know, we fee base and contract a large amount of care.  
But the ability to monitor that care and assure the quality is a 
challenge for all the reasons that you already articulated.


One of the efforts here would be to have a better ability to put in the 
contracts specifically what we expect to do to meet the standards that 
we have in our system, hopefully be able to integrate.


I certainly appreciate your comments about the electronic health record.  
We hope to be able to improve what we are doing with the contract.


The Chairman.  I am going back to Coach Osborne again.  How will 
geographic regions dictate your action plan?


Mr. Osborne.  As I said, I do not think that they will dictate the 
action plan.  I think that the action plan will be generally the same 
for all four VISNs.


I am just leaving it open that it could be that there are some nuances 
from one VISN to anther that they would have to look at.  But generally 
the plan would be fairly standardized.


The Chairman.  Mr. Michaud.


Mr. Michaud.  Thank you very much, Mr. Chairman.


Will Project HERO mean that CBOCs and other access points will be 
delayed in opening?


Dr. Kussman.  Are you suggesting that if we implement this plan, there 
would be something different about our implementation plan for CBOCs?


Mr. Michaud.  Yes, in those pilot areas.


Dr. Kussman.  I do not believe that there is any direct relationship 
with the implementation of the CBOC plan with Project HERO.


Mr. Michaud.  Okay.  Given that the VA has already submitted its fiscal 
year 2007 budget, will you need to request additional funding for the 
development and implementation of Project HERO and, if not, where in the 
budget will you be getting the money to do this project?


Dr. Kussman.  Thank you for that question.


We believe that we have the resources available to implement this plan 
and that long-term, when the plan gets implemented, hopefully, it will 
pay for itself with the savings that we are going to achieve by better 
managing our contracting and outsourcing.


Mr. Michaud.  Now, the resources that you said you have available for 
the plan, is that coming out of the different VISNs' operating budgets 
or will it be out of the central office?


Dr. Kussman.  At present, the money will be coming out of the business 
office and the central office to work on the standards for the plan.  We 
do not believe we will have to tap into the VISNs early on to develop 
the plan and develop the contracts.


Mr. Michaud.  The Independent Budget testimony has raised concerns that 
Project HERO has strayed far off the course from the Independent Budget 
recommendation.


Is Project HERO broader in scope than the Independent Budget 
recommendation and is there anything that you can do to put to rest the 
concerns raised by the VSOs?


Dr. Kussman.  Yes, sir.  I have read the Independent Budget.  There were 
obviously questions raised by the VSOs and concerns about that.


We have had the opportunity to meet with the VSO leadership.  I was not 
there.  Mr. Bill Feeley and Mr. Loper were there last week talking to 
the VSO leadership about the issues that they raised.


It is my understanding that they have a better understanding of where we 
are going.  Some of the concerns that were raised, they are appreciative 
of the fact that will not be the case.


Mr. Michaud.  Thank you very much.


Mr. Chairman, I know we will be taking some votes pretty soon, so I 
would request permission to submit the remainder of my questions in 
writing.


The Chairman.  No objection.


Mr. Michaud.  Mr. Chairman, Ms. Brown, she has requested her statement 
be included in the record.


The Chairman.  No objection.  So ordered.


Mr. Michaud.  Thank you, Mr. Chairman.


[The attachment appears on p.  ]




[The statement of Corrine Brown appears on p.  ]




The Chairman.  Mr. Bradley.


Mr. Bradley.  Thank you very much, Mr. Chairman.


I realize this question, General, may not be a hundred percent germane 
to this hearing today, but I raise it because of a concern that 
information that I found out in the last few days regarding emergency 
rooms at VA medical centers are under review with a possible definition 
change from emergency room to urgent care center that is being 
considered by the Veterans' Administration.


When I first got involved on this issue in my home State of New 
Hampshire in the Manchester VA, myself, the veterans' leaders that I 
work with believed that this was a local issue in VISN 1, that it was 
not part of a nationwide policy debate that the VA was conducting.


I, therefore, asked the Medical Director of the Manchester VA as well as 
VISN 1 Administrator, Dr. Post, to come to a meeting in my office 
earlier this week with veterans' leaders.  And I was somewhat surprised 
to find out that this is not just a VISN 1 issue, but, as I said, a 
change in the definitions from emergency rooms to urgent care center.


And just wondering if you might be able to illuminate a little bit where 
this policy change is, you know, what kind of oversight this Committee 
potentially has, where you are in your decision making.  And if it is 
totally outside your purview, then just let me know that too.


Thank you.


Dr. Kussman.  Yes, sir.  Thank you for the question.


You are right.  It is not necessarily directly related to HERO, but I 
appreciate your concerns and I am aware of your concerns and the issue 
that you bring up.


I think there are two issues related.  The Manchester issue, just like 
all other things that really are a local phenomenon, that each place has 
to determine what they are going to do and make recommendations.


But as far as the larger thing, we have had an ongoing review of the 
quality of care and the level of care that we provide in different 
emergency departments, emergency rooms, urgent care centers.  There are 
a lot of definitions and terms that get kicked around.  No policy has 
been established, no national plan has been articulated.


We are in the process of looking at that not for any reason other than 
to be sure that the veterans who are getting care there can expect to 
get the level of quality care and safety at the institution.


If people believe that they are having an acute problem and they really 
believe there is an emergency room at the place they go, and it is 
clearly not the standard of being able to provide that level of care, we 
probably should not call it an emergency room because we are doing a 
disservice to the veteran.  And they need to be informed that they would 
be better off potentially going some place else.


This whole issue is purely to look at what is in the best interest of 
the veterans and maintain the quality of care and safety for them.


I hope I answered your question.


Mr. Bradley.  Yeah.  If I could, Mr. Chairman, just illuminate on that a 
little bit.  I certainly share the thought expressed that the idea here 
is to make sure that whether it is an urgent care center or an emergency 
room is giving the greatest level of care possible, especially in those 
dire circumstances.


And one thing that was brought out to me in this meeting that I had the 
other day was that oftentimes in my state, because of the payment issue, 
a veteran will get in their car or their family member will get them in 
their car and drive, could be, you know, as much as an hour to get to 
the Manchester VA when there are other hospitals much closer.


And, quite frankly, when you talk about whether it is stroke or heart 
attack or other emergencies like that, that golden hour is critically 
important for the ability to save somebody's life.  And so there is 
certainly legitimate issues there.


But what was brought out -- and this is more of a comment than a 
question -- by the VSO leaders at the time was that if there is an 
unintended consequence, if you will, of an unknown, if you are not 
Medicare eligible, if you are not Millennium eligible, of who is going 
to be responsible for payment in those emergency situations -- and let's 
face it, that is an expensive situation -- that there is an unintended 
consequence of an incentive to get in your car and to drive to the VA 
center because you believe the payment will be taken care of.


So I really hope that in any debate on this, and I am pleased to see 
that, you know, you have not established a plan, and I hope that this 
Committee will conduct oversight hearings and work with the 
administrators, but I hope and trust that before any plan is 
established, if there is going to be a diminution of hours of operation 
of these emergency rooms, that the payment issue is also addressed so 
that the unintended consequence of in a dire emergency somebody 
thinking, well, I need to go to the VA center because that is where the 
payment issue will be resolved, that we do not impinge upon the safety 
of the veteran because that payment is not resolved.


And I really feel that the one goes with the other.  Has to be part of 
any plan for change of emergency rooms nationwide.  And look forward to 
working with you and the Committee and the Chairman on this.


The Chairman.  Thank you.


Ms. Herseth.


Ms. Herseth.  Thank you, Mr. Chairman.  And if I might just continue 
along the line of questioning of Mr. Bradley and I understand some of 
the other questions that were posed before I was able to get here by Mr. 
Michaud about just the payment, the budgeting for all of this.


I am glad to hear that it is not going to affect community-based 
outreach clinics.  And I understand that in terms of the budgeting for 
Project HERO that it is not going to initially come out of any VISN's 
budget; is that correct?


Dr. Kussman.  Yes.


Ms. Herseth.  So does that leave open the possibility that while it may 
not initially come out of the VISN's budget that at some point in time, 
the budget for a particular VISN may actually be impacted?


Dr. Kussman.  Well, thank you for that question.


The issue here is that ultimately as the pilots go out, hopefully as I 
mentioned, that any cost to the VISNs would be more than adequately 
covered by the savings that they get for not having the ability to 
manage their care, contracted care and fee-based care, better than we 
are doing now.


So hopefully at the end of this, there will be actually a profit for the 
VISNs, not a loss.


Ms. Herseth.  And is there a plan in place to track that in terms of 
projected cost savings and actual cost savings and how it impacts the 
VISN budgets?


Dr. Kussman.  Yes.  The whole idea, that is what a pilot is about, is to 
make sure that we can benefit by doing this.  If it turns out that we 
are not maintaining the quality or doing the things that we intended to 
do including saving money and be able to get a bigger bang for our buck, 
then we would have to reevaluate that.


Ms. Herseth.  With all due respect, I understand that is what pilots are 
about, but our experience suggests those pilots become expanded and 
systems change, that sometimes those tracking devices for each pilot 
tend to not work quite as well once those programs are expanded and then 
we find ourselves in a budget crunch.  That has been the case in a 
number of programs.


And in just my short time here in Congress coming up on two years, I 
know that that is the case.  So I appreciate the assurance and I 
appreciate the affirmation about what pilots are intended to do.


I just want to make sure that beyond the initial pilot stage, that as 
the projects are expanded to the degree that we find that Project HERO 
is indeed achieving the goals that we hope it achieves, that your 
responsibility, our responsibility on the Committee is to continue to 
share that information to ensure that the VISNs' budgets are not unduly 
affected or to ensure that cost savings that are projected are actually 
being realized at the level that we hope that they will achieve.


Dr. Kussman.  Yes, ma'am.


Ms. Herseth.  And the last question would be, as Project HERO moves 
forward, do you feel that cost savings is the most important 
consideration when making decisions regarding patient care, for example?


And I ask this because many of the veterans in South Dakota are in 
geographically-isolated areas.  But will a patient who can receive more 
cost-effective care through a contract provider be forced to receive 
care with the contract provider instead of a VA facility?


Dr. Kussman.  Thank you for the question, yes.  I do not mean yes to the 
answer, but yes to the question.


Obviously if a contracted mechanism, fee basing with a contractor is 
going to be successful, the majority of patients would have to use it; 
otherwise, you will not get your maximum benefit.


We understand the reality of people having formed relationships with 
particular providers that are clinically important to maintain.  We will 
look at that on a case-by-case basis because, although to make it work 
as I said, we would presume that most people would use the provider 
network; otherwise, we will not get our maximum benefit of assuring the 
quality and tracking and as well as  cost-effectiveness.


But we certainly do not want to do anything inappropriate clinically.


Ms. Herseth.  Thank you for your responses.


I yield back, Mr. Chairman.


The Chairman.  Ms. Herseth, I thank you for your questions.


She is correct.  Sometimes these pilot projects and demonstrations and 
commissions, three entities that we in Congress love to create, become 
more organic than mechanical and they take a life of their own.  And so 
the oversight of these things is pretty important.


We have one vote.  And so I intend to recess the Committee and return 
because I have some questions for you, Mr. Loper.


So the Committee will stand in recess for 15 minutes.


[Recess.]


The Chairman.  The Committee will come back to order.


I have some questions for the second panel.  With regard to Project 
HERO, as I understand, you are simply trying to better coordinate the 
care that is already purchased outside the VA, right?


Dr. Kussman.  Yes, sir.


The Chairman.  Now, as you do that, my sense is that as you begin to 
work with private providers, we are going to learn things in the process 
and it could provide for additional venues.


Now, I recognize the comment I made before we broke with regard to how 
demos and pilots and commissions all become organic, and there is a 
reason they become organic.  It is because sometimes we get into these 
things and we learn things that we did not know and we are seeking 
latitude.


And sometimes just things grow, you know.  Kind of like PFSS, right, Mr. 
Loper, they kind of grow, right?


Mr. Loper.  I will take your word for it.


The Chairman.  Pardon?  You are going to take my word for it?


But at some point, my sense is that when you do this VISN-wide, we have 
to be able to anticipate that points of access will increase.  Would you 
agree with that?


Mr. Loper.  Yes, sir.  I think there is potential for that to occur in 
the demonstration framework.


The Chairman.  So if there is potential for that to occur within the 
framework, would that potential come from the strength that private 
contractors also bring to the demo?


Dr. Kussman.  Sir, I think that that is what we are looking at now is 
some input from contractors who have done this, other public venues that 
have done it, academia, thought leaders on all of this, as well as 
bringing into account, as I mentioned earlier, our affiliates to be sure 
that as we develop the pilots, we try to incorporate the lessons learned 
from other people who have gone down this road in the past.


The Chairman.  Now, Mr. Loper, as you put this thing together, what 
performance measures do you intend to use to assess the use, cost, and 
consistency and continuity of care for the veterans enrolled in the 
demonstrations?


Mr. Loper.  Sir, we have a team working on the specifics of that, but 
the basic framework that I would offer is that we have a very 
sophisticated system of performance measurement in the VA and we intend 
to use that.


The principal reporting unit for the demonstration operations is at the 
network or VISN level.  And we would seek whatever interventions are 
made within the network to lead to favorable performance in those 
existing measures.


The Chairman.  Let be me circle back to an opening comment that I had 
made referencing the electronic health record.


So what measures do you intend to put into place to make sure that the 
complete medical records associated with the purchased network care will 
be part of his or her electronic health record?


Dr. Kussman.  Yes, sir.  Obviously one of the weaknesses that we have 
now with people who use different delivery systems, whether we fee based 
it or whether they are using a Medicare benefit or some other insurance 
plan, even TRICARE, and then they come to us, the problem is the 
coordination of that care.


What we expect to do is write into the contracts the intent to have the 
providers use our CPRS Vista Electronic Health System that is 
proprietary, and it would not be all that costly for that to be used to 
be able to electronically continue to track the patients.  That is one 
of the linchpins of our potential program.


The Chairman.  Let me go back to the issue on costs with regard to the 
demo.  If there are costs associated with the demo, do you know what 
accounts you might be looking to take from?


Mr. Loper.  I think I would like to take that sort of officially for the 
record with Mr. Norris as the CFO.


But having said that, we have invested small amounts of money from the 
business office to organize the program and acquire the services of 
someone to help us with the acquisition which should get us to the point 
of award for a very modest amount of money.


Dr. Kussman suggested that we believe the demonstration will essentially 
pay for itself.  What specific account it comes out of for this medical 
care or what have you, we will sort out.


Dr. Kussman.  I appreciate the question and we will get back to you on 
that.  I am not sure exactly which -- 


The Chairman.  So you are anticipating that for most of the fee-based 
care for the service-connected conditions or injuries, you are going to 
have collections sufficient to pay for all of this?


Dr. Kussman.  Sir, as mentioned, we are already paying a huge amount of 
money for contracted and fee-based care.  We believe the pilots will 
show that when we can coordinate this care, we will be able to save 
money on it, whatever that turns out to be, and that will pay for any 
overhead that we had for the contractors and potentially generate some 
dollars for us above and beyond that.


The Chairman.  Mr. Loper, I understand the VA is reprogramming $5.5 
million for the Patient Financial Service System Project in Cleveland.  
Could you please describe why the additional $5.5 million is needed?


Mr. Loper.  Yes, sir, Mr. Chairman.  We look forward to the scheduled 
briefing on Friday to a deeper level of review on this.


Our program had a scope in 2006 to deploy PFSS to Cleveland and to 
Dayton and be prepared to go further.  In the light of the recent IT 
appropriation adjustments to the current program, PFSS was funded at 
about $5 million.


And what we explored was what it would take to actually deliver PFSS to 
the Cleveland operating location and for a marginal amount, we would 
seek restoration by reprogramming within our program to 10.5.  They are 
marginal 5.5 to get us to 10.5 and we will deliver a functional PFSS 
product at Cleveland later this year.


The Chairman.  So these dollars will keep the demonstration project on 
track for deployment this fall?  Is that what -- 


Mr. Loper.  Yes, it will, Mr. Chairman.


The Chairman.  All right.  How is the second competitive demonstration 
project going?


Mr. Loper.  Yes, sir.  You mean the Revenue Enhancement Project has been 
awarded to a veteran disabled business with a subcontractor, and they 
are beginning work in Asheville at the CPAC.  And we look forward to 
that.  It has been awarded basically in a three-phase effort.


The first phase is an assessment.  Our competitive bidders each were 
asked to provide an assessment phase and a performance phase.  In the 
down select, we were real pleased with the nature of the work offered by 
the successful bidder.


The Chairman.  And why did you choose Asheville, North Carolina?


Mr. Loper.  Mr. Chairman, we chose Asheville in the sense that we know 
the sense of the Committee was that there was an interest in two low-
performing medical centers.  And as you know and I believe with the 
Committee's knowledge and consent, we thought CPAC by addressing at 
least six medical centers provided better leverage.


And, frankly, one of the aspects of all the business proposals 
anticipated a business model for following success, a site-by-site 
rollout which was pretty labor intensive.  So what we are intending is 
to demonstrate a CPAC, at the same time demonstrate CPAC in a 
streamlined deployment to a broader application if that is indicated.


The Chairman.  I would ask unanimous consent that minority counsel be 
given the opportunity to offer two questions.  Hearing no objection, so 
ordered.


Minority counsel is recognized.


Ms. Bennett.  Thank you, Chairman Buyer.


In the past, the VA has based its budget on claims of management 
efficiencies that the GAO found could not be fully substantiated.


What assurances could you give us that this demonstration will indeed be 
cost neutral or will save money?


Dr. Kussman.  Thank you for the question.  I understand the issue that 
you raised.  We are very aware of that.


The intent here is to put in very clear performance standards, both 
clinical and economic, to be sure that we do not after the pilots 
reinforce something that is not economically viable.


Ms. Bennett.  Thank you.


During Industry Day on February 2nd, you discussed a number of 
objectives for Project HERO.  One of the objectives was enhancing VA 
internal capacities and processes to minimize the need for purchased 
care.


Can you elaborate on the role you see for contractors in achieving this 
objective and the likely cost savings for this component of Project 
HERO?


Dr. Kussman.  Are you asking whether we are going to use contractors to 
look at our efficiencies in-house?


Ms. Bennett.  I was asking you to elaborate on the role you see for 
contractors in that process.


Dr. Kussman.  I think that we are doing that internally.  I do not 
believe that there is any contracting mechanism, but we are looking at -
- I mean, just like any other enterprise, we have got to continually 
look critically at how we do our business.  I think that we are looking 
at our processes to try to be more efficient and approximate our great 
clinical performances.


The Chairman.  I have a question.  Are you at any time going to seek 
independent evaluations?  Have you thought about this, for the end?


Mr. Loper.  Mr. Chairman, at Industry Day and hence forth, we have 
expressed a specific interest in external evaluation, validation, or 
whatever program reviews take place.


The Chairman.  All right.  I may have additional questions for the 
record.  And I know Mr. Michaud also does.  Minority counsel indicates 
they will have additional questions.


I want to thank you for your leadership and, Mr. Loper, appreciate your 
service.


Mr. Loper.  Thanks, Mr. Chairman.


The Chairman.  This panel is now excused.


Dr. Kussman.  Thank you, Mr. Chairman.


The Chairman.  Thank you.


The third panel may proceed and come forward.


The panel consists of Ms. Cathleen Wiblemo who is here representing the 
American Legion as their Deputy Director for Health Care in the 
Veterans' Affairs and Rehabilitation Division.  She is a graduate of 
Black Hill State University in South Dakota where she received her 
degree in history.


Upon graduation December 1984, she was commissioned as a Second 
Lieutenant in the United States Army.  During her ten years in the 
military, she served in various positions both in country and overseas 
and is currently a major in the reserves.


How often have we all been introduced as we were commissioned as a 
Second Lieutenant?  I have never heard anybody say, yeah, okay, we were 
commissioned as a Brigadier, you know, commissioned as a Major, 
commissioned as a Lieutenant Colonel, right?


Ms. Wiblemo.  Right.


The Chairman.  It is like that of course, isn't it?  I know we get some 
direct appointments and commissions, but it is always Second Lieutenant, 
in the most humbling years of our lives, that always seems to come back 
as if that was our greatest achievement, when we were commissioned as a 
Second Lieutenant.


Ms. Wiblemo.  I have never actually been introduced, so that is very -- 
that is the first time anybody has ever said that.


The Chairman.  What, that you were a Second Lieutenant?


Ms. Wiblemo.  Commissioned as a Second Lieutenant.


The Chairman.  Okay.  Well, I will call you Major, Major.


Our next witness is Dave Gorman representing Disabled American Veterans.  
Mr. Gorman entered the United States Army in 1969, serving with 103rd 
Airborne Brigade, the famed Sky Soldiers of the Vietnam War.


During a campaign to secure an area in central Vietnam where the United 
States forces had suffered extremely high casualties, Mr. Gorman stepped 
on a land mine, leaving him with wounds that required amputation of both 
legs.


Discharged in 1970, Mr. Gorman immediately joined the DAV and is 
currently a life member of DAV's National Amputation Chapter in Chapter 
12, Rockville, Maryland.  Mr. Gorman was appointed as Executive Director 
of the DAV in 1995.


Our final witness is Mr. David Baker, President and CEO of Humana 
Military Healthcare Services.  Following a distinguished active-duty 
career of 27 years in the United States Air Force Medical Service 
Corps., Mr. Baker joined Humana Military Healthcare Services, Region 3, 
Executive Director in 1996.  In 1999, he became Humana's chief military 
operating officer and in January 2000, he assumed his current position.


Mr. Baker holds and MBA in Health and Hospital Administration from the 
University of Florida and a BS Degree in Business Administration from 
the University of Maryland.  He is a graduate of the Executive Program 
in Health Care Management from Ohio State.


And were you commissioned as a Second Lieutenant?  Proudly, Mr. Baker 
was commissioned as a Second Lieutenant in the United States Air Force.


I would like to thank all of you for coming and your patience today.


And with the American Legion, we will begin with you.


STATEMENTS OF CATHLEEN WIBLEMO, DEPUTY DIRECTOR, VETERANS AFFAIRS AND 
REHABILITATION COMMISSION, THE AMERICAN LEGION; ACCOMPANIED BY DAVE 
GORMAN, EXECUTIVE DIRECTOR, DISABLED AMERICAN VETERANS, REPRESENTATIVE 
FROM THE INDEPENDENT BUDGET; DAVID J. BAKER, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, HUMANA MILITARY HEALTHCARE SERVICES

STATEMENT OF CATHLEEN WIBLEMO



Ms. Wiblemo.  Thank you.  Thank you for the opportunity to present the 
American Legion's views on the comprehensive care coordination 
demonstration projects.  My remarks will be brief, but I ask that my 
full statement be submitted for the record.


The Chairman.  So ordered.


Ms. Wiblemo.  We all know VA has made giant strides in improving the 
quality of care provided to America's veterans.  The improvement has not 
gone unrecognized by the industry and VA is now considered by many to be 
the best care anywhere.


For the sixth consecutive year, they have set the public and private 
sector benchmark for health care satisfaction, quite an accomplishment 
by any standard.


This achievement could not have been realized without the dedication and 
commitment of the VA employees.  They have a special mission that they 
take very seriously and that is to take care of the nation's heros.


Public Law 109-114 tasked VA without proper funding to implement care 
management strategies that are proven valuable in the broader public and 
private sectors.  These programs are to satisfy a set of health system 
objectives related to arranging and managing care by the end of calendar 
year 2006.  VA is to collaborate with academia and private industry to 
assist in reaching this goal.  This obviously is no small task.


As we understand it, these demonstration projects are to be designed as 
a complement to VA health care and not as a surrogate.  We also 
understand that the devil is always in the details and the 
implementation of these demonstration projects will require strict 
oversight of the contracting process to ensure that veterans who are 
being treated by non-VA providers receive the same level of quality and 
professionalism inherent to the VA health care system.


There should not be any semblance of the concurrent system and the 
process should be transparent to the veteran patient.


The American Legion recognizes the need for contracted care and, indeed, 
the VA has had the authority to contract care for quite some time.  
However, the VA has not always been the most efficient at contracting 
and the American Legion has some real concerns.


VA must routinely monitor all contracted health care services being 
provided to veterans and they must obtain patient satisfaction feedback 
on the timeliness and quality of care received from contracted 
providers.


While some treatments may be handled effectively by outside contractors, 
the delivery of more specialized care is very difficult to access 
outside of the VA health care system.  Mental health care, blind 
rehabilitation, amputee treatment, and long-term care services are a but 
a few that come to mind.


Further, many of VA's patients are older, poorer, and sicker than the 
general population.  The American Legion is deeply concerned that VA 
patients would be treated differently than other non-veteran patients.  
Within the VA health care system, patients are our priority, not just a 
customer, and they receive holistic care.


While the American Legion supports veterans' timely access to quality 
health care, it is important that we do not create initiatives that will 
lead to the dissolution of the very health care system created to care 
for these heros.  Accessibility delays must be solved by enabling VA to 
meet its obligation through adequate funding levels.


There is much left to be done with regard to these demonstration 
projects and the American Legion looks forward to being involved in the 
process.


Pass through the doors of any VA medical center and you witness 
firsthand the price of freedom.  It hammers home the very reason the VA 
health care system exists and it also reminds us that the price tag of 
freedom does not end on the battlefield.


Thank you very much.  I look forward to your questions.


The Chairman.  Thank you very much.


[The statement of Cathleen Wiblemo appears on p.  ]




The Chairman.  Mr. Gorman.


STATEMENT OF DAVE GORMAN



Mr. Gorman.  Thank you, Mr. Chairman.  I know you did not ask, but just 
for the record, I was never commissioned as a PFC.


The Chairman.  If you note, I did not ask you and you would have been 
insulted.


Mr. Gorman.  I would not have been.


Mr. Chairman, appearing here as an employee of the DAV, I want to just 
make it clear that I am making a unified statement on behalf of the 
Independent Budget, the AMVETS, Paralyzed Veterans of American, and 
Veterans of Foreign Wars.


Mr. Chairman, historically Congress has granted service-connected 
disabled veterans an opportunity to receive private health care, but has 
very much limited VA's power to contract for care.


And it has been stated already, but bears repeating, generally VA only 
contracts for care when VA facilities are incapable of providing care 
necessary for a veteran, the VA facilities are geographically 
inaccessible to the veteran, a medical emergency prevents a veteran from 
reaching a VA facility in time, VA determines it appropriate preparation 
for or completion of an episode of VA Care, or VA needs certain 
specialty examinations in adjudicating a veteran's disability claim.


VA also has the authority to contract for care for services of scarce 
medical specialists in VA facilities.  The Independent Budget 
acknowledges that VA contract care has been used judiciously and only in 
specific circumstances so as to not endanger the integrity of VA 
facilities and the health care system in general.


We believe, Mr. Chairman, that VA must maintain a critical mass of 
capital, financial, human, and technical resources to provide direct, 
high-quality care to veterans, especially those disabled in military 
services and those with highly sophisticated health problems such as 
blindness, amputations, spinal cord and brain injury, or chronic mental 
health problems.


Mr. Chairman, in recent months, much has been reported in medical 
literature and the general media on the stature VA health care has 
achieved in providing health care of the highest quality.  At a time of 
public cynicism over the ability of the federal government to respond 
effectively to public needs, VA as the provider of health care for 
veterans has been touted as being, and I quote, 'the best health care 
system in the United States'.


VA has achieved this position because they control to whom care is 
provided and knows who provides and receives that care and, more 
importantly, measures how that care is given on a daily basis.


The potential direction and scope of Project HERO, at least as we 
understand it today, could well evolve into an open environment of mixed 
VA and private providers.  The contract element of that environment, if 
it focuses on acute and primary care, could well grow.  That growth, 
like the enormous growth we have seen in the TRICARE Program over the 
last 15 years, may place at risk VA's unique quality as a renowned and 
comprehensive health care provider for veterans.


We have some fear that the HERO project, if it expands outsourcing of 
health care services, is only a beginning.  Once contractors are in 
place, we would expect proposals from them for VA to contract out even 
more services.


We believe that such a mixed program would only become more expensive, 
threaten VA's restorative and rehabilitation programs, and damage VA's 
health professions, affiliations, and its biomedical research, which we 
all know is the bedrock of VA quality.


Mr. Chairman, here is our nightmare scenario.  Increasing contract care 
evolves VA into a mere payor for health care services provided to 
veterans by others.  VA writes the checks to obtain health care to a 
growing patient population outside the system, but must pay for those 
services from funds it receives to carry out its health care mission for 
patients inside that system.


In a struggle to manage its growing insurance function, VA's control 
over the quality and the quantity of inside services diminishes.  As a 
result, veterans and the American taxpayer will lose out on that 
process.


We could not object more strongly to this kind of a change, Mr. 
Chairman.  VA is first and foremost a direct provider of health care to 
sick and disabled veterans.  That single fact is why the VA system is a 
great asset to America's veterans and to America's taxpayers.


We believe the best course for VA is to care for veterans in facilities 
under the direct jurisdiction of the Secretary when at all possible.


For the past 25 years or more, veterans' organizations have opposed 
proposals to contract out, voucher, or privatize VA health care.


We believe proposals that claim to expand access to VA to broader areas 
serving additional veteran populations at less cost or provide health 
care vouchers enabling veterans to choose private providers in lieu of 
traditional, well-established VA programs in the end will only dilute 
the quality of VA care.


Given the dire financial straits VA has experienced over several recent 
fiscal years, privatization, whether called Project HERO or something 
else, is a vitally important policy to sick and disabled veterans and 
those who represent their interest.


Given that background, Mr. Chairman, I know you are not surprised that 
we have recommended to VA that VA take a series of actions to improve 
contract health care.  VA contract workloads have grown and now cost 
over $2 billion annually.


VA has not been able to monitor this care very well, consider its 
relative costs, analyze outcomes, or establish patient satisfaction 
measures.  VA lacks a viable process to verify that contract care is 
safe and provided by licensed, credentialed providers, to monitor for 
care, to direct patients back to the VA health care system, to ensure 
records of that care are accurate and complete, and to validate the care 
received is consistent with VA's clinical policies.


Twice in the Independent Budget, we have recommended that VA implement a 
program of community care coordination that integrates clinical and 
claims information for veterans currently cared for by contract 
providers.


VA has achieved significant savings through its current Preferred 
Pricing Program, which I explain more fully in my written statement.  VA 
has saved more than $53 million since its inception and estimates they 
will save some $80 million this year.


But much more could be done, Mr. Chairman.  By partnering with an 
experienced contractor in this field, the VA could define a care 
management model with a high probability of achieving our objectives in 
the Independent Budget.


The Independent Budget suggests the program features would include 
established provider networks complementing the capabilities and 
capacities of each VA medical center, to meet VA access standards, 
comply with VA performance standards, and address appropriateness and 
continuity of care, case management to assist every veteran and each VA 
medical center when the veteran must receive non-VA care in lieu of VA 
care, standardize billing, record keeping, and reporting, and specific 
methods to gauge and report veteran satisfaction.


Mr. Chairman, the overall results of our recommendation if implemented 
by VA, we believe, will offer veterans a truly integrated and seamless 
health care delivery system.  The fact is that currently many service-
connected veterans are disengaged from the VA health care system when 
they receive medical services from private physicians at VA expense.


Based on our current knowledge of VA's pending demonstration project, 
HERO, today we could not verify that VA is preparing our model of 
community care coordination for that demonstration.


Both at the Industry forum hosted by VA in February to announce its 
plans for Project HERO and in more recent meetings with VA's central 
office officials, we have expressed our concern about the lack of 
specifics to describe the coming demonstration.


Only within the last week have we learned of the proposed geographic 
sites for this demonstration.  The VISNs were described to us as the 
best targets because they spend most of the contract care funds.


VA officials have informed us they plan to reduce contract costs on the 
networks by using some of the ideas we have presented in the Independent 
Budget.  However, we have not yet been briefed on industry proposals 
that will shape the VA's bid package and we have not consulted with the 
four network directors to assess their plans as of yet.


We remain concerned, Mr. Chairman, that in developing Project HERO 
model, the department has still strayed off course from the intent of 
the IB's recommendations.  Until our concerns are allayed about the true 
nature and goals of Project HERO, that demonstration project should not 
be attributed to or justified by our recommendations.


Based on what we know and considering what we do not know at this point, 
Project HERO is not entirely consistent with our goals for VA contract 
care.


In summary, Mr. Chairman, we are united that whatever emerges from our 
managed care industry or from these VISNs. As representatives of 
millions of enrolled, sick, and disabled veterans, we should be involved 
in any proposed VA decision making on this initiative.


It is our hope that department will shift the focus of Project HERO to 
achieve the goal of the Independent Budget.  And we hope to work with 
them and this Committee to secure that objective.


I would also add, Mr. Chairman, that just last Friday, we met with VA, 
Mr. Feeley, and I am speaking now only for DAV.  I think that we are a 
little bit more optimistic about where the VA is driving this project 
and their intent of it.


And we are still anxious to see the bids from the contractors and what 
VA hopes to achieve by this.  And we look forward to working closely 
with them.


The Chairman.  Thank you.


[The statement of Dave Gorman appears on p.  ]




The Chairman.  Mr. Baker.


STATEMENT OF DAVID J. BAKER



Mr. Baker.  Mr. Chairman, I appreciate the opportunity to provide input 
today on VA efforts to improve the delivery of and access to cost-
effective health care services through Project HERO.


I am Dave Baker, President and CEO of Humana Military Healthcare 
Services and a veteran of this great country.  I have provided a written 
statement that I would ask be included in the record.


The Chairman.  So ordered.


Mr. Baker.  Thank you, sir.


I want to begin by extending my appreciation to the Veterans' Health 
Administration for its recent achievements including its advancements in 
developing state-of-the-art medical records, CARES programs that have 
realigned VA costs and assets, its increased efficiency and its control 
of administrative costs, and I also extend thanks for serving as members 
of current TRICARE networks when capacity has existed.  And, finally, I 
appreciate VHA's successes in so magnificently improving the quality of 
VA health care services.


As I heard Dr. Perlin state on more than one occasion, it is not your 
father's VA, and I agree.  It truly has achieved world-class status.


Mr. Chairman, since I have not testified before this Committee before, 
some background information may be helpful.


Humana Military Healthcare Services is a wholly-owned subsidiary of 
Humana, one of the nation's largest health benefit companies.  Our 
subsidiary was formed in 1993 to work with the Department of Defense in 
controlling costs, improving access, and enhancing the quality of 
purchased care services for the military community under a program 
called TRICARE.  We have delivered TRICARE services since 1996 and today 
we serve approximately 2.8 million eligible TRICARE beneficiaries.


Our contracts with DoD are founded on achieving five major objectives.  
First and foremost, optimizing the delivery of health care services 
inside military hospitals and clinics; second, maximizing the 
beneficiary satisfaction; third, delivering best value in the purchased 
care arena; fourth, ensuring smooth contract implementation; and finally 
providing DoD access to our data.


Though the terminology is a bit different, I have seen the objectives 
for Project HERO and I believe that they are very consistent and 
similar.


Now, we operationalize these objectives by providing a number of 
contractually-required services.  Some or all may be applicable to 
Project HERO, so let me explain.


We provide a stable network of high-quality, credentialed health care 
providers to augment those in military facilities.  We furnish 
complementary medical management services and clinical support.  We 
provide comprehensive customer information and support.


We perform various eligibility verification, billing, and enrollment 
services.  We process all claims for services rendered by civilian 
providers.  And, finally, we provide DoD access to our health care data.


I have included specific recommendations on each of these functions in 
my written testimony.  And I also included a series of recommendations 
related to possible contractual elements of Project HERO.


Among the topics the VA should consider are development of measurable 
standards of performance, inclusion of fair and objective incentives to 
reward performance excellence, provisions related to the sharing of 
financial risk, and developing a culture of collaboration and trust with 
industry partners.


I hope these inputs will be helpful to the VA as it develops Project 
HERO's specifications and to the Committee as you collaborate in this 
important undertaking.


Mr. Chairman, thank you again for the chance to be here today.  I look 
forward to answering any questions you may have.


The Chairman.  Thank you very much.


[The statement David J. Baker appears on p.  ]




The Chairman.  Mr. Gorman, I think what I enjoyed most about your 
testimony was your last statement on behalf of the DAV because I think 
what we have here is a statement drafted by the Independent Budget and 
then you met with the VA and that put you in better comfort.


So you gave testimony on behalf of the Independent Budget that is sort 
of locked in place and you did not have some of the understanding, but 
you then gave it as testimony on behalf of DAV.  That was my sense as I 
was sitting here listening to it.


And that is why what I enjoyed most was your final statement, not the 
original statement, because part of the original statement I bifurcated 
almost.  It was very much an alarmist type statement.  And then without 
having the knowledge base, it is hard to be briefed on something that 
has not even been written.


And so I am concerned about whoever drafted that and gave it to you.  
And you did your job.  You came here to testify on behalf of the 
Independent Budget, but your last comment was probably the most 
important comment that I took from your statement.  I just wanted you to 
know that.


Mr. Gorman.  Mr. Chairman, I appreciate that, but I would also say that 
I am not so sure it is an alarmist view that the oral remarks, the 
majority of them up front, tried to convey, but one that we were just 
very much unsure of how the VA was proceeding.  And in many respects, we 
still are.


But I think that the leadership of VHA has come forward and tried to 
allay those fears.  And I think generally there is some optimism now 
that they are going to be moving forward with the bulk of the 
recommendations the Independent Budget has made, plus what we have heard 
today for testimony, and not necessarily a free for all as far as 
contracting out.


The Chairman.  Mr. Gorman, please understand who you are talking with.  
You are talking to the guy who helped create TRICARE for life.  So as I 
created TRICARE for life, at no time was that diminished as somehow 
being is private care and, therefore, bad.


And so we have soldiers being treated in a military medical treatment 
facility and we have dependents then being treated in TRICARE, receiving 
private care.  So, therefore, we have two different standards and it is 
a bad program?  No.


So even in the VA itself, we have fixed-based facilities and there are 
certain times with regard to specialized care, what do we do?  We 
contract for it.  When we contract for it, that does not mean, when you 
go out to the private sector, that it is bad.  So privatization is not a 
bad word.


So the reason I used the word alarmist is because I picked it up not 
only from the American Legion testimony but also yours on this concern 
that somehow this is going to erode the present system--the fear of a 
surrogate for care as if all this can be a bad thing.  We do not want to 
deny access to care.  If a veteran cannot get access to care, we want to 
be able to get them the care.


I cannot believe that the Independent Budget or the American Legion 
would be saying, okay, it has got to be through a VA fixed-base facility 
and if it is not, well, I guess tough luck.  That is denying access to 
care and I do not believe that is what you are embracing.


Mr. Gorman.  No.  That is not what we have said.  What we have said, and 
if you listened, and I am sure you did, we think VA has judiciously used 
their contract ability so far.


The only fear that we have here is that they are going to or somebody is 
going to take this legislation and this authority and now the creation 
of this project to completely try to in certain areas and certain 
programs, completely contract out care.  And I do not think that is a 
good thing.


The Chairman.  Let's go down that road for just a second.  Why is 
gaining access for health care for a veteran, a disabled veteran such as 
yourself -- you live in Nebraska and you cannot gain access to care -- 
why is that bad?  If I were to say, okay, we are going to adopt the 
position of the Independent Budget, then we are denying your access to 
care.  That is exactly the testimony of Coach Osborne.  So please 
explain to me why that is a bad thing.


Mr. Gorman.  Well, it is a bad thing only if you are going to take -- 
and, for example, I asked a question at the meeting with VA last week, 
will your contractors, as far as you know, or can you speculate, are 
they going to require a critical mass, a number of veterans if they want 
to enter into this contract.  And they do not know that.


It is not a question of denying care.  It is a question of taking 
veteran patients who are already in the VA system and saying now we have 
got a contract out here to provide care in the private sector for them.  
That is not denying care.


The Chairman.  It is.  It is denying care.  If I have a veteran -- Mr. 
Gorman, let's see if we can get on the same page here.  We have a 
present VA system.  We have enrolled veterans in that system.  And how 
do we then access them into the system.  If, in fact, they are enrolled 
and in distant rural areas, how do we access them into that system?


And I just cannot believe that it would be the position of the 
Independent Budget to say that they should be denied their access to 
care because they live so far out.


Mr. Gorman.  We are talking apples and oranges, I believe, Mr. Chairman.  
That is not our concern.  That is almost a separate issue.


The Chairman.  Thank you very much.  Thank you.  That is why I used the 
word alarmist, because it is a separate issue.


Mr. Gorman.  The rural health care issue.


The Chairman.  Absolutely.  So you have testified at a hearing based on 
HERO and were alarmist based on something that has not even been 
created.  So I want to thank you for -- no, you did.


Mr. Gorman.  You have to explain that one to me.


The Chairman.  Okay.  We want to say, okay, of the present dollars that 
are contracted from the VA, we want them to be able to show to us how 
they can institute private sector initiatives and managed care, and 
better utilize those dollars.  That is what the Independent Budget says.  
That is a good thing.  That is what Dr. Kussman wants to do.


The testimony goes so much farther--we hear what Coach Osborne is saying 
in his testimony, but there is this alarmism that I get out of your 
testimony for the Independent Budget that somehow if you then contract 
in a remote geographic area with somebody private, that is a bad thing, 
it is such a bad thing.  It is okay to let that veteran die because we 
are going to protect the VA-based facility system.


Mr. Gorman.  You will have to show me in our testimony where we said 
contracting out for rural health care was a bad thing.


The Chairman.  Well, then, you know what?  I accept it as your testimony 
that contracting for rural health care is a good thing.


Mr. Gorman.  It can be.


The Chairman.  Thank you very much.


Mr. Gorman.  You are missing the point of our concern.  It has nothing 
to do with bringing new veterans into the system.  It has more to do 
with taking existing veteran patients, existing programs that VA 
provides, taking those away from the control of the VA and putting them 
out into contract care.  That is taking veterans away from the VA and 
putting them into the private sector.


The Chairman.  The American Legion gives their testimony.  This is the 
American Legion's testimony.  While the American Legion supports the 
selective use of contracted care in extreme cases where veterans have 
few or no other options, but we object to the broad blanket approach to 
outsourcing of care.


These are really clever words, you know, words that have negative 
connotation or negative meaning, and they are used to generalize.  It is 
always fascinating to me.


Extreme cases, I ask the American Legion, how do you define that?  How 
do you define the word "extreme cases"?


Ms. Wiblemo.  If the VA cannot provide the services in the areas that 
they are needed.


The Chairman.  What is an extreme case?


Ms. Wiblemo.  Well, there would be extreme cases in highly-rural areas.  
There would be an extreme case if they did not have the expertise in 
their facility.  That would be an extreme case.


The Chairman.  They could not gain access to an MRI?  They could not 
gain access to a mammogram?  What is an extreme case?


Ms. Wiblemo.  Well, the extreme cases would be those that they could not 
provide.  I mean, that to me would be an extreme case.


The Chairman.  At some point, we cannot build a VA facility that can be 
all things to all people.


So, Mr. Gorman, you used the words, and I have heard you over the years 
use them, about critical mass.  And you are right.  So we build a system 
with regard to a critical mass and with regard to the services that can 
be offered.


And because we cannot be all things to all people with regard to disease 
management, we recognize in our affiliations with our medical 
universities that there is subject area expertise that we can gain 
access to.  And we contract for that.  And that is what Dr. Kussman 
does.  In many different affiliations, every one of those medical-based 
facilities do that.


So with regard to then these individuals that find themselves in a rural 
or geographically-remote area, why shouldn't they be able to gain some 
access?


Ms. Wiblemo.  Well, we have never said that they should not have access.


The Chairman.  Thank you.


Mr. Gorman, in your written testimony, you state that the VA has no 
systematic process for contract care services.  So it seems to me that 
the stated objectives of Project HERO are nearly identical to those that 
you called for in your testimony, as I was also listening to that.  Do 
you disagree?


Mr. Gorman.  No.


The Chairman.  Okay.  Your meeting that you had with the VA, did you do 
that in the capacity as Independent Budget or were you there as 
Executive Director of the DAV?


Mr. Gorman.  DAV.


The Chairman.  Okay.  And what is your level of satisfaction with regard 
to the outcomes of those meetings?


Mr. Gorman.  The first one, I believe, was horrible as far as an outcome 
because there was no good plan laid out.  There was no good descriptive 
nature of the scope of Project HERO.  Once that was conveyed, a second 
meeting was held without the principal of the first meeting, and that 
was Mr. Feeley, at the second meeting.


I think at that point, the scope, although still largely unknown because 
the contracts have not been written and all those other kind of 
variables, the intent of what the VA wants to move forward with was more 
satisfactorily relayed and described to us outside of -- I think we have 
always agreed with the principles that the VA has taken as were relayed 
in the Independent Budget.  It is the generalized contracting of care 
that has always concerned us.  That was more fully described as not 
their intent.


The Chairman.  Was the American Legion present at this meeting?


Ms. Wiblemo.  I am sorry.  What did you say?


The Chairman.  Were you present at this meeting?


Ms. Wiblemo.  Yes, we were.


The Chairman.  What is your assessment?


Ms. Wiblemo.  Well, the meeting with Mr. Feeley went really well.  It 
was very productive.  We had good feelings about it.  And like I wrote 
in the testimony, there is a lot left to be done on these projects.  I 
mean, these are demonstration projects.  They are pilot programs.


Just like you said earlier, you know, we do not know what we do not 
know.  We do not know and we are going to learn from this.  And our 
major concern is that it grows into something that was unintended.


And, you know, we recognize that VA needs to change with the changing 
veteran population and the changing patient population, and certainly 
the demographics of where people live.  But the pilot projects are just 
that, they are pilot projects.


VA has a great leadership in VHA and we know that they are very sincere 
in putting their program forward and doing the best that they can for 
the veteran.  So the second meeting went, I thought, much better and we 
look forward to working with everybody as far as getting these projects 
going and steering them in the right direction.


The Chairman.  Did you ever have any of your Legionnaires or members of 
the DAV ever come up to you and say, you know, all I should have to do 
is I should have a card and I should be able to gain access to health 
care with any doctor like anybody else and off they go?


Ms. Wiblemo.  We have certainly had that.  We have that within our 
membership.


The Chairman.  I get it a lot.


Ms. Wiblemo.  Certainly we do.


The Chairman.  That is why I am saying that.


Ms. Wiblemo.  Yeah.  We do.  And we get that all the time.


The Chairman.  Mr. Gorman, I want you to know that my service here in 
Congress is extensive with regard to the entire medical systems, whether 
it is the military health delivery system, VA, Medicare, Medicaid, and 
the private-pay systems.  And I enter into many forms of pilots and 
demos and examinations.  And I do so without any form of fear.  I never 
fear.  I never fear because I hold on to some pretty strong principles.


I respect the doctor-patient relationship, and whatever we can to do 
press the bounds of science to enhance the quality of life of our 
citizens is a good thing.  And how do we gain access to this health care 
for people at prices that they can afford for who earns what.  I mean, I 
deal with all these issues.


But I just do not react hardly at all to things that, oh, if you do 
this, it triggers that, X, Y, Z, and all kinds of other things.  I mean, 
I think about consequences that are beyond the unintended consequences 
that you talk about.


But when those veterans come up to me and say, Steve, I should just have 
a card, if I want to go to the VA, I should be able to go to the VA, if 
I want to go to my own private-pay doctor, I ought to be able to do that 
and you ought to pay for it, and away they go, right?


And I also tell them about the importance of VA-based facilities, making 
sure that we as a country fulfill an obligation to a veteran to provide 
medical care to them.  But I also am conflicted because there are 
individuals that find themselves, as Coach Osborne had testified, in 
geographically remote areas and how come they cannot get their care.  
And if they cannot gain access to it, then you really are being denied 
care.


You testified to us about that.  You use that in all your propaganda and 
stuff that you put out there, that, oh, my gosh, eights, if they cannot 
get in, they cannot get the access, therefore, you are denying them 
care.


So I know what the mantra is and that is why earlier I had mentioned to 
you that these individuals, if they are in geographically-remote areas, 
they really are being denied their care.


So I am trying to figure out how we can gain access to them.  That is 
what I am trying to do, an explanation for you, Mr. Gorman.


Mr. Gorman.  Well, again, from my perspective, Mr. Chairman, you are 
still talking apples and oranges.  We would holler louder than anyone if 
a rural veteran cannot get access to care.  And we have.  That is not 
the issue here.  That is not the issue that we are trying to -- maybe we 
are just not explaining it very well.


We are talking about a new program that is all of a sudden going to 
potentially have the impact of taking patients who are already getting 
their treatment within the confines of the VA health care system under 
the auspices of VA by VA physicians with all the safeguards that go with 
that being potentially removed from that system and put out to the 
private sector.  That is not the same as denying veteran access to care.  
You already have -- 


The Chairman.  But this is going to be defined narrowly.


Mr. Gorman.  If that is the case, then we are entirely supportive of it 
based on the IB recommendation.


The Chairman.  This is going to be defined narrowly.  That is why I used 
the word alarmist.  I know you do not like that word.  But the reason I 
used the word alarmist is that we are trying to say, okay, we are 
working on Project HERO and then, my gosh, if we do Project HERO, then, 
oh my gosh, this could happen.


Mr. Gorman.  Only because Project HERO was not like this.  It is like 
this, right.  It is wide open.


The Chairman.  It is sort of wide open at the moment.  They are going to 
let us know.  They are going to work with you.  They are going to work 
with us.


Mr. Gorman.  And all we want to say is as long as it is wide open and 
when you are going to start narrowing the focus down, keep these 
concerns in mind.  That is basically our message.


The Chairman.  Right.  Well, my concern is to make sure that the 
disabled veteran out there gets his access to care.


Mr. Gorman.  As is ours.


The Chairman.  That is my concern.  My concern is not, as you had set 
the alarms, that somehow this project, if it expands, begins the erosion 
or dissolution of a health system.  That is a huge generalization.


Mr. Gorman.  Well, we are speaking in generalization to a generalized 
situation, Mr. Chairman.


Ms. Wiblemo.  Right.  It is undefined.


The Chairman.  Well, that is true because it is not really defined.


Ms. Wiblemo.  It is undefined.


The Chairman.  It's not really defined.


Ms. Wiblemo.  It is an undefined situation, so, you know, you encompass 
everything.


The Chairman.  All right.  Well, I am having this conversation with you 
here because we are trying to work through this.  We believe in the same 
thing.  Okay?  It is how we are going to get this delivered.  And so do 
Dr. Kussman and Mr. Loper.


So this letter that you had sent to the VA -- where is this?  No, 
neither of you were signatories to this letter.  Oh, no.  Joe Violante 
signed this letter.


This January 5th letter that you sent to Chairs Walsh and Hutchinson, 
are you familiar with this letter?


Mr. Gorman.  Not by date.


The Chairman.  It is a letter that expressed the concerns about the HERO 
Project.  Are you familiar with it?  Take that letter, Mr. Gorman.


I show you a letter dated January 5th of 2006, with signatures of four 
of the VSOs of the Independent Budget.  Do you recognize this letter?


Mr. Gorman.  I do now.


The Chairman.  First of all, I was trying to reconcile the position of 
the Independent Budget with positions that were taken in the letter.  Do 
you believe that there are any discrepancies?


Mr. Gorman.  I am sorry.  Between the -- 


The Chairman.  Do you believe there are any discrepancies between the 
recommendations of the Independent Budget and that letter that you have 
in front of you?


Mr. Gorman.  I do not believe so, Mr. Chairman, on a quick read.


The Chairman.  Okay.  And so then I should today embrace your testimony 
that the recommendations of the Independent Budget are now closely 
mirroring that of Dr. Kussman?


Mr. Gorman.  In part.


The Chairman.  Okay.  So I should accept the testimony of today, not 
that letter, right?  In other words, some of the concerns raised in that 
letter have already been addressed?  I want to be able to have a 
credible conversation with Chairman Walsh.


Mr. Gorman.  I think so.  I think we are still talking the same thing, 
although we are still talking here that we are supporting as an 
Independent Budget the better management of the care that VA is 
contracting out and still in opposition to, as it says here, to 
ratcheting up the level of contract care or to increase and 
exponentially expand the level of contract care.


The Chairman.  Well, that is an issue for another day.  Okay?  If we are 
able to learn things, and now we are going back to the issue about being 
organic versus mechanical, if we get to learn things and somehow we can 
improve quality of care and access, that is an issue for another day.


Mr. Baker, I would like to ask for your insight that you could offer 
based on your experience with TRICARE in the development phase.  What 
are some insights that you could give to the VA right now as they 
formulate this demonstration project?  I embrace your testimony, but if 
you could articulate them a little bit further.


Mr. Baker.  Well, thank you very much, Mr. Chairman.


If I could offer any advice to the VA and indeed to the service 
organizations, it is in the wisdom of incrementally moving down the path 
that you are moving. The demonstration projects embedded in Project HERO 
make perfect sense to me.


I am reminded of the way TRICARE has evolved.  And as you pointed out in 
your introduction, I am a TRICARE beneficiary as well.  I am reminded of 
the fact that TRICARE started with a series of demonstration projects in 
the early 1990s.  In fact, the services started some of those back in 
the 1980s.


And with each iteration, we learned more and more.  And, in fact, that 
was true with the service initiatives.  It was true with the 
demonstration projects that DoD started to run.  And it was true with 
each and every iteration of the TRICARE contracts as they migrated from 
the west coast to the east over a series of years.  They got better all 
the time.  And they were refined to the point that they better met the 
department's objectives over time.


And I would just encourage everyone to bear in mind that the VA is 
trying to become more efficient.  They are not trying to solve a ten-
year problem with one demonstration.  It is my belief that the 
demonstration projects will provide lessons that will serve as 
springboards and enable the VA to become even better.


The Chairman.  I am trying to understand your fears a little bit better, 
Mr. Gorman.  The reason I want to have this conversation with you is 
because you are sitting here with a TRICARE provider, so let's have this 
conversation.


And, The American Legion, can pipe in any time you would like.


We have actually in the 1990s and prior, soldiers being treated at 
military medical treatment facilities and retirees gaining their access 
to facilities-based care at these medical treatment facilities on a 
space available.  But really they would do everything they could to care 
for them.


And then as we go through the draw-down and base closures, these 
individuals are going to be triggered then into Medicare.  Okay?  So we 
went through that in the 1990s with how we were going to resolve this as 
TRICARE was evolving.


The one thing that I learned through the development of TRICARE for life 
and having done the pharmacy redesign was that beneficiaries love 
convenience.  They do.  And convenience also has an impact upon 
utilization.  Okay?


So it is interesting.  When I look back on the development of TRICARE 
for life, I probably did not do as good a job on utilization management 
tools as I should have because the soldiers and dependents are utilizing 
that program a lot, and it is costing DoD a lot.


And they also then tried to go in and even though we put in management 
tools that we do not have on sevens and eights, and you have heard me 
talk about that before, they have an explosion of costs.  And they are 
trying to cope with that within DoD.


Now, my concern, Mr. Gorman, is more on escalation on costs as opposed 
to yours about the erosion, if you have a surrogate, that begins to 
erode a critical mass and then you begin to have dissolution.  I am kind 
of commingling two of your testimonies.


I am trying to figure out how we can best serve a veterans' population 
and I just want to let you know, I do not fear private-pay systems.  I 
do not.  So we are managing a social system that really does pretty well 
cost-wise because of the pressures that Mr. Loper here puts on 
contractors and suppliers, and you get care at the best rate, better 
than anybody else out there in the private sector.


So people like to talk about how much better health care is or cheaper -
- I should not say the word cheaper -- less expensive in the VA, but we 
have some challenges.


Well, I should not beat this one continuously.  Your fear is any form of 
erosion of a critical mass of enrolled veterans?  Is that sort of a 
close -- 


Mr. Gorman.  Close.  My fear is an erosion of the critical mass of 
veterans over a period of time to a significant degree where you have 
veterans who otherwise could or should have been treated within the VA 
facilities as has been the case up until now with their specialized 
programs and expertise all of a sudden being told as new enrollees, we 
are going to have to put you out on a contract basis.


Once that starts to happen, in our view, the very real potential for 
critics of the VA would be to scale down the size of the VA or VA 
medical centers to the point where they become inefficient.


The Chairman.  But the reason I want to have this conversation with you, 
to explore this is that I think the real pressure does not come from 
whereever the critics are.  The pressure comes from your membership, the 
IB, and the beneficiaries or the enrolled veterans, because once you 
extend it out there -- now I am jumping into the what if -- we extend it 
out there, and for the American Legion, your cite of the word extremes.


Let's say that we are able to define the types of care that are out 
there.  The pressure of your membership to redefine the access to 
private based care which is closest or convenient for them will be 
great.  That is why I am just saying what I have learned out there from 
the management of all these systems, it will.  I just sense that could 
very well happen.


As a matter of fact, I do not even know who the ghost is that you just 
cited as the critics of the VA.  I do not know who those ghosts are.  Do 
you know who they are?


Mr. Gorman.  Well, we would typically say it is OMB and has been for 
years.


The Chairman.  Well, I do not know.  OMB has delivered some pretty good 
budgets that have built this health system for which you are singing 
praise.  So it cannot be OMB as the ghost.


I just want to let you know, I am trying to get into your vein to define 
fear and I think it could very well be that when you have an enriched 
benefit and convenience to access to care as an enriched benefit, that 
is where individuals begin to erode.  That is where it begins to erode.


And without sufficient utilization tools -- matter of fact, the 
utilization tool that The American Legion is using right now is this 
one, that it should be defined as extreme cases.  That is a utilization 
management tool.  You are setting a definition with regard to who can 
gain access to private care.  That might be permissible.


I would ask unanimous consent to permit minority counsel to ask any 
questions she may have.  Hearing no objection, so ordered.


Ms. Bennett.  Thank you, Mr. Chairman.


This is, to the two Veterans Service Organization representatives and, I 
guess, Mr. Gorman, you are representing both DAV as well as the 
Independent Budget VSOs.


The written testimony from Dr. Kussman, states clearly that the overall 
goal is to maximize the care VA provides directly.  And he states that 
VA's care is high in quality and less costly when VA delivers it 
directly.  Only when we cannot provide care directly should we purchase 
care.


That seems to state very clearly this is not about outsourcing or trying 
to reduce that critical mass that you talk about that is important to 
maintain the VA system's quality to veterans and capacity to provide 
care in specialized services.


I sense some of the uneasiness about Project HERO has been because many 
of the basic parameters are undefined.  Are there any particular 
parameters with regard to scope in terms of time or cost or number of 
veterans to which this would apply or duration so that we can then come 
back and step back and see what lessons we have learned that would 
increase your comfort that this is not going to morph into something 
other than what they are saying their ultimate goal is?


Ms. Wiblemo.  I do not have anything to comment about the scope yet.  
The whole thing with the Project HERO and the parameters and this is 
what we want to do and the VA saying this is what we want to do, 
historically -- and I do not know that our testimony was alarming.  I 
would not characterize it as alarming.


Better put, we want to make sure that we are heard and so we repeat 
ourselves and we say we want the VA health care system to stick around.  
We think they are the best.  Certainly there are reasons why they have 
to contract out and that is all recognized.  It has been recognized for 
years.


But, again, you do not know.  Everything is so undefined.  And I know 
the VA will get there and we want to be there to help them get there and 
define that kind of stuff.


But when you went to Industry Day, which was back in January, I mean, 
there was mass confusion as to what was going to happen which led to the 
meetings, which led to a much better understanding just recently.  So I 
think, again, as we go through this process, like Mr. Chairman Buyer was 
saying, absolutely we are going to learn from this.


But, you know, we want the VA to stick around and I know everybody in 
this room does too.  We want the veteran to be treated the best way that 
VA knows how and that they are the priority patient in all of this.  And 
to convey that to the contracted providers is important.


So, you know, there is a lot of discussion that has to go on.  But, you 
know, I would not presume to sit here and try and figure out what the 
scope is just sitting here right now.  We would have to look into that.


Mr. Gorman.  I do not want to be duplicative of what Cathy said and I 
agree with everything she said.  I think we wanted to put out front and 
up front the concerns that we had and also the support that we had with 
VA for this project to go forward.


We think it has a long way to go.  It is going to do great things, I 
think, for the VA internally and also ultimately for patient care.  But 
we also want to see it not go too far too fast.  And I think that is the 
concern that we brought to VA and hopefully that ultimately was going to 
come out of the discussion here is that there are concerns and there is 
a lot of support out there from everybody for this project.


The Chairman.  Well, I want to thank all of you for your testimony, more 
importantly, all three of you for your service to our country.


Mr. Gorman, next time I will make sure I recognize you, the date of your 
enlistment as a Private E-1.


Mr. Gorman.  E-3.


The Chairman.  You went in as an E-3?


Mr. Gorman.  No.  No, I did not.  I came out as an E-3.


The Chairman.  Right.  You went in as a Private E-1.


Mr. Gorman.  E-1.


The Chairman.  I want to recognize that status.  It is an important 
status in your life.  Thank you very much for your testimony.


Mr. Gorman.  Thank you.


The Chairman.  The hearing is now concluded.)


[The statement of Thomas Zampieri appears on p.  ]




[Whereupon, at 1:20 p.m., the Committee was adjourned.]
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