[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




U.S. DEPARTMENT OF VETERANS AFFAIRS HEALTH CARE FUNDING: APPROPRIATIONS 
                              TO PROGRAMS

=======================================================================

                                HEARING

                               before the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 2, 2009

                               __________

                           Serial No. 111-53

                               __________

       Printed for the use of the Committee on Veterans' Affairs









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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   Malcom A. Shorter, Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                            December 2, 2009

                                                                   Page
U.S. Department of Veterans Affairs Health Care Funding: 
  Appropriations to Programs.....................................     1

                           OPENING STATEMENTS

Chairman Bob Filner..............................................     1
    Prepared statement of Chairman Filner........................    53
Hon. Steve Buyer, Ranking Republican Member......................     3
Hon. Harry E. Mitchell, prepared statement of....................    54

                               WITNESSES

U.S. Department of Veterans Affairs:
    Rita A. Reed, Principal Deputy Assistant Secretary for 
      Management, Office of the Assistant Secretary for 
      Management.................................................    14
        Prepared statement of Ms. Reed...........................    56
    Michael S. Finegan, Director, Veterans Integrated Service 
      Network 11, Ann Arbor, MI..................................    17
        Prepared statement of Mr. Finegan........................    57

                                 ______

Parkis, Clyde L., Sebastian, FL, and Former Director, Veterans 
  Integrated Service Network 10, Veterans Affairs Healthcare 
  System of Ohio, Veterans Health Administration, U.S. Department 
  of Veterans Affairs............................................     4
    Prepared statement of Mr. Parkis.............................    54

                   MATERIAL SUBMITTED FOR THE RECORD

Background Charts:

    Appropriations Total for VA Medical Care Line Graph..........    60
    Budget Process Flow Chart....................................    60

Post-Hearing Questions and Responses for the Record:

    Hon. Bob Filner, Chairman, Committee on Veterans' Affairs to 
      Hon. Eric K. Shinseki, Secretary, U.S. Department of 
      Veterans Affairs, letter dated December 4, 2009, and VA 
      responses..................................................    61

 
                  U.S. DEPARTMENT OF VETERANS AFFAIRS
                          HEALTH CARE FUNDING:
                       APPROPRIATIONS TO PROGRAMS

                              ----------                              


                      WEDNESDAY, DECEMBER 2, 2009

                     U.S. House of Representatives,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:01 a.m., in 
Room 334, Cannon House Office Building, Hon. Bob Filner 
[Chairman of the Committee] presiding.

    Present: Representatives Filner, Michaud, Herseth Sandlin, 
Mitchell, Perriello, Teague, Donnelly, Space, Walz, Adler, 
Kirkpatrick, Buyer, Brown of South Carolina, Miller, Boozman, 
Bilbray, Buchanan, and Roe.

              OPENING STATEMENT OF HON. BOB FILNER

    The Chairman. Good morning. The Committee on Veterans' 
Affairs will come to order.
    I ask unanimous consent that all Members may have 5 
legislative days in which to revise and extend their remarks. 
Hearing no objection, so ordered.
    Thank you all for being here this morning.
    I think we all, during the time of our service on the 
Committee, hear about issues that suggest that Federal funds 
may not be flowing to the local U.S. Department of Veterans 
Affairs (VA) facilities in the way that we envision, either 
efficiently or effectively, to best serve our veterans.
    We have worked very hard to provide a robust medical care 
budget. In fact, appropriations for VA medical care have 
increased over 40 percent in the last 2\1/2\ years.
    The purpose of this hearing is to ensure that appropriated 
Federal dollars reach the local VA medical centers. This 
requires a good understanding of how the 21 Veterans Integrated 
Service Networks (VISNs) distribute the appropriated Federal 
dollars to the local medical centers and how the VA tracks the 
dollars spent at the local level.
    It requires a good understanding of the budget planning 
process and how the VA Central Office involves the VISNs and 
the local medical centers to determine the resources needed to 
provide proper medical care to our veterans.
    Some local VA medical centers claim that their allocation 
from the VISNs have either remained stagnant or have not been 
proportional to the unprecedented increase in overall funding 
for VA medical care.
    We have appropriated a lot of money and we hear that their 
local budgets have not increased accordingly.
    Obviously we cannot examine every anecdotal concern without 
understanding the rationale that the VISNs use for allocating 
funds to the VA medical centers. I hope through today's 
hearing, we can learn more about the decision-making process 
that the VISNs use for distributing the appropriated dollars to 
the local medical centers.
    In the VA medical centers that serve the veterans in my own 
district, I understand there is a hiring freeze which may be 
linked to the growing queues that our veterans face for mental 
health care appointments.
    We have reports that the hiring freeze is not limited to 
mental health professionals and that it is VISN-wide. We have 
heard that this VISN-wide hiring freeze may have resulted from 
one particular medical center going over its budget in fiscal 
year 2009. This raises questions about how the VISNs track the 
funds that the local medical centers spend and whether VISNs 
are able to predict and prevent funding shortfalls at the local 
level before they occur.
    Today, we hope to explore who decides how to prioritize, 
spend, and track the funding that the local medical centers 
receive. We would like to uncover how the VA Central Office 
(VACO), the VISNs, and local medical centers plan and execute 
budgets and manage potential funding shortfalls.
    I constantly hear when I go around the country from local 
medical directors that they lack flexibility to move funds 
between the three accounts that are included in the VA medical 
care budget--Medical Services, Medical Support and Compliance, 
and Medical Facilities. Central Office tells me that they do 
have the flexibility to move money, but the medical director 
continues to tell me they do not. I want to know the facts.
    Finally, in a September 2008 report, the U.S. Government 
Accountability Office (GAO) found that VA policies and 
procedures were not designed to provide adequate controls over 
the authorization and use of miscellaneous obligations, which 
totaled about $7 billion in fiscal year 2007.
    The flaws in the design of the internal control system 
increase the VA's risk for fraud, waste, and abuse. Through 
today's hearings, we will examine whether the VA has an 
internal budget control system that is strong enough to track, 
safeguard and account for the flow of Federal dollars to the 
local VA medical centers.
    I look forward to hearing from our witnesses as we work 
together to provide the best health care for our veterans by 
ensuring that appropriated Federal dollars reach VA medical 
centers in the most sensible and effective manner.
    I yield to Mr. Buyer for any comments he would like to 
make.
    [The prepared statement of Chairman Filner appears on p. 
53.]

             OPENING STATEMENT OF HON. STEVE BUYER

    Mr. Buyer. Thank you very much, Mr. Chairman.
    I note on panel two you have Michael Finegan. Michael 
worked on what we call the Collaborative Opportunities Steering 
Group (COSG), which as we were developing the Charleston model, 
the VA had put Mike Moreland in charge of that, and Mike 
Finegan worked very well on the, I think it was the finance 
piece, testing memories here, it was the finance piece.
    And then you were also recruited to put together that very 
same model down in New Orleans. And I really appreciate your 
work on both of those models.
    Any time whenever you want to think anew on how to come up 
with how we are building new facilities and trying to do things 
jointly, it is new and it is different. And so what you did, 
you made an investment and it was a great idea and a great 
concept, and we tried to bend it and the bureaucracy bent us 
back.
    But one thing I do know about the quality of your work and 
what you and Mike Moreland did is that you cannot suppress good 
ideas forever. So I think what you have done is a great 
investment and in time, I think many people will begin to see 
what you have done and the quality of your work.
    So welcome to the Committee.
    Mr. Chairman, with regard to the questions you are asking 
here today, I think they are very pertinent. When you think 
about the last 12 years that VA has relied on the decentralized 
funding model for the VISNs to fund their respective medical 
centers, the VA provides the general guidance and then permits 
the flexibility and allocations with regard to these resources.
    I believe in the clear delineation of responsibility, 
careful planning, and performance measures then to gauge the 
coordination and the accountability.
    I think it is also prudent for us, and I was mindful of the 
questions that you had asked, for us to ask these key questions 
such as should allocations be formula driven or standards based 
with real-time analysis.
    It has been 5 years since the GAO has placed their eyes 
upon the funding allocation issues and I endorse a meaningful, 
independent review.
    Effective today, I will ask the GAO to conduct a review of 
the following: Number one, the criteria and process VA has for 
VISN allocation of resources to the medical centers; number 
two, how the VA ensures that VISNs conform to establish 
criteria and process in their allocation of resources; and, 
number three, how the VA centrally tracks and assesses the 
distribution and use of funds at the medical center levels.
    I would invite cosponsors of the letter. I would be more 
than happy, Mr. Chairman, to sign one with you if you would 
like and invite any colleagues for any further recommendations 
of substance, analytical inquiry as necessary with regard to 
this letter to the GAO.
    An issue that I would like to bring up, and I think with 
regard to Ms. Rita Reed, you can think about this as you come 
to testify, and that is with regard to the concerns on funding. 
If you do not have the funds over here, you take it from over 
there.
    And what we have right now is the VA has depleted the 
stimulus dollars intended to help the VA process Post-9/11 GI 
Bill claims by hiring extra temporary staff. So it is now 
dipping into overtime pay funds intended to reduce the 
disability claims backlog.
    Now, to put it another way, the VA is diverting resources 
from a disability payment program with a huge backlog to pay 
for a nondisability program.
    So the latest VA data shows that the backlog of 26,000 
Post-9/11 GI Bill claims for those who are currently enrolled, 
average processing time for those claims is now 47 days. And 
with second semester registration now underway, that time is 
likely to increase.
    So I am requesting that the VA provide us with a projection 
of its GI Bill workload through the end of May so we can 
address the funding needs in this regard.
    In the meantime, what I would ask of you, the gentlelady, 
is, ma'am, let us know what your needs are right now so we can 
continue to use compensation claims funding for its intended 
purposes.
    With that, I yield back to the Chairman.
    The Chairman. I thank the Ranking Member.
    I will be glad to join with you on that letter.
    Mr. Buyer. Good.
    The Chairman. I would like to make sure we include the 
things that I mention.
    Mr. Buyer. I will work with you.
    The Chairman. I also would like to include the issue of 
flexibility of the local director in terms of the three 
different stove-piped accounts that they are given.
    Mr. Buyer. Will the gentleman yield?
    The Chairman. Yes.
    Mr. Buyer. I think from our hearing today and from the 
other Members and their inquiries, I think we can put together 
a good letter. I will work together with the Chairman and we 
can do that.
    The Chairman. Okay. I look forward to working with you. 
Thank you.
    Our first panel is Mr. Clyde Parkis. Mr. Parkis is the 
Former Director of the VISN 10 Healthcare System for Ohio.
    Mr. Parkis, thank you for joining us here today. We will 
include your written statement in the record and hope that your 
oral remarks can be made in about 5 minutes. You have the floor 
and we again, appreciate you being here today. Do not forget to 
press the button to start your microphone.

    STATEMENT OF CLYDE L. PARKIS, SEBASTIAN, FL, AND FORMER 
  DIRECTOR, VETERANS INTEGRATED SERVICE NETWORK 10, VETERANS 
      AFFAIRS HEALTHCARE SYSTEM OF OHIO, VETERANS HEALTH 
      ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

    Mr. Parkis. It takes a while to retrain us retired guys.
    I will let the statement for the record stand and would 
like to hit what I consider just the high points of my 
experience with the Veterans Equitable Resource Allocation 
(VERA) process.
    First of all, I was a big fan of the VERA process because 
it did connect funding with workload, with veterans treated. I 
had trouble frequently with people confusing medical center 
funding with veterans' care funding. And the VERA model funds 
veterans' care.
    If a medical center wants more money, the incentive is to 
find ways to earn more money.
    As I gained experience over 5 years distributing money at 
the network level, I began to emphasize the VERA model more and 
more. I would have directors talk about, you know, not getting 
their fair share of the VERA funding. And I would counter that 
with, you got your fair share of the earnings based on what you 
actually earned.
    I called funding above what was earned as corporate welfare 
and wanted to get on a welfare-to-work program. I wanted the 
medical center leadership to understand where money comes from, 
why it comes, and what behaviors they need to exhibit to 
actually get the funding that they want.
    Each year, it got a little better. You cannot distribute 
money to medical centers that does not come into the VISN or 
into the network.
    As we got better at doing that, and times kept getting a 
little tighter each year, we were experiencing between 2001 and 
2006 roughly 10 percent health care inflation in our costs. We 
were running five to 8 percent increased enrollment every year 
and our funding increase, as I recall, was limited to about 5 
percent. That made it extremely difficult to continue our 
mission.
    One of the things we were extremely proud of was Network 10 
in Ohio kept our doors open to new enrollment. Ohio, as you may 
recall, was losing steel plants left and right, auto plants. A 
lot of people were losing their health insurance and turning to 
the VA. So our enrollment was always a little higher than the 
national average.
    Because of the hard work of all the people in the network 
and our increased focus on funding follows veteran workload, 
not medical center history, we were able to perform actually 
quite well.
    A couple of things I would kind of like to bring up today. 
While I used VERA for a starting point for budget distribution, 
it could not be the end point. You have different things that 
happen every year. We were fortunate to get two major projects, 
a replacement clinic for Columbus and a new addition, new wing 
to the hospital at Cleveland that will eventually allow for 
consolidating all of Brecksville at the Cleveland campus.
    Along with the good luck comes activations funding, which 
at least back then and I think it is probably still the same 
way comes primarily from the network. You have to find a way to 
build that into your budget every year. So those are the things 
that you have to do in terms of cooperation.
    As a Vietnam veteran, I sometimes have trust issues. And it 
took me a long time to kind of figure out who to trust in the 
process as we went through the budget cycles. I was aware that 
the Office of Management and Budget (OMB) liked to screen VA 
testimony before it came to the Committees and I thought 
sometimes that prevented us from asking for what we thought we 
really needed.
    I was told to say we do not have our budget, you know, 
officially yet, so I cannot speculate on the impact of that. 
That made it difficult to answer my local Congressmen in terms 
of what was going on with the VA.
    And I thought some of that actually was coming from this 
Committee, but maybe that was not the case. As I gained some 
trust over time, there are some things I wished I had spoken up 
about a little earlier.
    With that said, I will answer any questions you have for 
me.
    [The prepared statement of Mr. Parkis appears on p. 54.]
    The Chairman. Thank you, Mr. Parkis.
    Mr. Michaud, any questions?
    Mr. Michaud. Thank you very much, Mr. Chairman, Mr. Ranking 
Member, for having this hearing. I think it is timely and a 
very important hearing. And I appreciate the Ranking Member for 
putting together that letter as well because I think that is 
also extremely important.
    As a former VISN director looking at VISN 10, I notice that 
there are no new proposed Community-Based Outpatient Clinics 
(CBOCs) in your VISN. But how do you calculate the census for 
veterans? Is it by the U.S. Census Bureau, the veterans that 
actually are enrolled in the VA system, or some other mechanism 
to determine the appropriate allocations for the medical 
facilities that you have to deal with?
    Mr. Parkis. Our primary method was to follow enrollment or 
demand, the veterans that actually came to the VA.
    Mr. Michaud. I mean, you hit the nail right on the head and 
I have seen it up in Maine where there are a lot of veterans 
who are not in the VA system because their current employment 
level or their employment, they offer health care and so, 
therefore, they do not need VA health care. But if their mill 
or factory shuts down, then they are in need of health care 
needs from the VA.
    So how do you account for those who would be eligible for 
VA benefits but are not utilizing it in case of economic time? 
Is there a mechanism to increase funding for the clinics or 
hospitals within your VISN that you are director of?
    Mr. Parkis. In my experience, and I am having a little 
trouble hearing, I need hearing aids in both ears and I have 
been putting it off, in my experience, funding followed 
workload. If we thought we had a lot of veterans that were 
there, but we were not meeting their needs, we did enrollment 
fairs sometimes.
    When the Ford plant shut down, we sent teams out there to 
actually enroll veterans at the plant before the shutdown 
happened. We coordinated that with their employers. We did the 
same at several steel mills.
    Mr. Michaud. And when you account for veterans, and I am 
thinking of VISN 1, which is, you know, Maine, Massachusetts, 
where you will have a veteran in one region, for instance, I 
will use Maine, but because of whatever purposes that they are 
required to actually go to Boston in some cases, 8 or 9 hours 
travel time, how do you account--where does that veteran count? 
Is he part of the Maine system or would be part of the Boston 
system since he is using the medical facility in Boston because 
that is where they told him he had to go? How would you, not 
necessarily for the Maine situation, but how would account for 
that under VISN 10? Where is that veteran counted?
    Mr. Parkis. What we did in VISN 10, and, again, if I heard 
you correctly, we looked at, you know, where the veterans were, 
where the need was, and we put in total 25 or 28 community-
based outpatient clinics. So we put care in their neighborhood.
    Mr. Michaud. And my last question, and I notice looking at 
the VISN 10 map that came about through the Capital Asset 
Realignment for Enhanced Services (CARES) process, I notice 
that there are no CBOCs, new CBOCs according to this map, but 
during your tenure as VISN director, when you look at trying to 
establish new CBOCs that were recommended under the CARES 
process, that comes out of the VISN budget.
    How were you as far as trying to care, or what the CARES 
process recommended, knowing that it might--you are going to 
have to use up some of your resources to establish a new CBOC, 
did you just ignore that and did what you had to do to make 
your budget balanced?
    Mr. Parkis. We definitely did not ignore it. What we did 
was we looked at how can we open CBOCs in the area where the 
veterans are and we tried to move a lot of our care there.
    Cleveland probably set the best example in our network and 
grew the CBOCs the fastest. We did have some facilities that 
were a little reluctant to do that because he considered that 
as taking resources from the mother ship and moving it out to 
the CBOC.
    But our policy and our emphasis was always on what the 
veteran needs. So we opened CBOCs. And in those medical centers 
that were slow to do it, we had one-on-one conversations to 
encourage them to do that.
    Mr. Michaud. Thank you very much.
    And thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Roe, any questions?
    Mr. Roe. Just briefly, Mr. Chairman.
    Mr. Parkis, thank you for your service in Vietnam and also 
thank you for your service as a VISN director.
    And to sort of dovetail with what Congressman Michaud was 
saying is that in our area in Tennessee, we have a large VA 
system and I think some of the best resources.
    My concern with this great increase in the VA budget is 
that the money gets down to the veterans. As it filters down--I 
mean, I see all these billions of dollars and I see all this 
need that our veterans have.
    And in my district in Tennessee, we have more veterans than 
any other district in the States. So it is a real issue. And I 
think these outpatient clinics are the best money the VA has 
ever spent. I absolutely believe that. We have three. We need 
more.
    How do you make a decision about, you know, what is the 
critical mass and how do you as the director make a decision 
about, okay, let us do another outpatient clinic because as our 
veterans age, it is harder for them to travel?
    As you said, in the mother ship, you are not doing anything 
for most of them there that you cannot do in their local 
communities. And it makes absolute sense to do that. So I will 
let you answer that, if you would.
    Mr. Parkis. Our emphasis always started with, you know, 
where are the veterans, what are their needs. And we tasked the 
medical centers with developing plans and opening CBOCs that 
best met the veterans' need.
    Mr. Roe. When you say that, how is that decision made? I 
mean, when you are sitting as VISN director and a hospital 
director there, I want to open an outpatient clinic. Here is 
this new money coming down through the system and there are 
veterans out there. How do you make a decision we are going to 
put one in X city or Y city?
    Mr. Parkis. Oh, I see. Okay. As we went through the 
strategic planning process every year, we come up with, you 
know, a new iteration of the plan. That was a major area we 
always looked at.
    And in our VISN, we believe very heavily in CBOCs. And we 
called for the groups who do a planning process always based on 
veteran need and come in with the list of where those clinics 
should be.
    Mr. Roe. Do you use the zip codes? I mean, if you have so 
many veterans coming to your major medical center, is that how 
you decide? I mean, it is not clear to me how a VISN director 
makes a decision about putting a clinic in, let us say, 
Rogersville, Tennessee, or something?
    Mr. Parkis. Okay. It was a combination of where the 
veterans are, you look at your demographics, you know, spread 
out by zip code or by county and in addition to that, where are 
you experiencing the demand. Sometimes we open CBOCs for 
different reasons.
    In Cincinnati, we had a construction project that was just 
not coming to completion and we were down to one exam room per 
primary care provider. So we opened up a CBOC just to get local 
capacity. And that was so successful that it has continued 
until today even though at the medical center, the project was 
finally completed and they have enough, I believe, enough exam 
rooms to cover their workload.
    Mr. Roe. See, I think taking the care out to the veterans 
is the way to do it. I mean, I think you are going to see more 
demand and I agree that as the economy worsens, the VA is going 
to see a higher click in demand. We certainly have at home.
    And I would emphasize just for this Committee, I--have we 
ever closed an outpatient clinic; do you know? Have you ever 
closed one in yours? I bet you the demand always went up at 
those outpatient centers.
    Mr. Parkis. Our demand always went up. In my experience at 
one location, we switched from a contract model to a VA-run 
model because we just had too many logistical problems. We were 
contracting with our medical affiliate to run the clinic and 
the people in the clinic, it became too hard for them to 
differentiate between a veteran patient and a regular patient 
that would come there that they might refer over to the 
university for follow-up care.
    And it was the veterans that got upset with it. We did not 
close it. We switched it to a VA-run clinic and the enrollment, 
as I recall, either doubled or tripled within the first 6 
months after rededicating.
    Mr. Roe. That has been our experience also.
    I yield back, Mr. Chairman. Thank you.
    The Chairman. Thank you.
    Mr. Teague, any questions?
    Mr. Teague. Yes. Thank you, Mr. Chairman.
    I also would like to associate myself with the letter that 
you all are going to prepare, if I could, please.
    Sir, thank you for being here and thank you for your 
service.
    In your experience as a director, did you have centers that 
fell short on their funding and if they did, what did you 
actually do to keep them going? Were services cut or how did 
you make that adjustment?
    Mr. Parkis. I was kind of tough in that area. I wanted to 
keep the programs going and keep the center going. What I would 
do when a medical center said, you know, I do not have enough 
money, the first thing I would do is ask for an assist team to 
come in and evaluate the programs and the operations and come 
up with a recommendation for are we doing everything we can 
there to address the budget issues.
    One time that I recall, I would call it as much a matter of 
arrogance or just feeling that, you know, we are such a good 
medical center, you should fund us, you know, whatever we ask 
for. And there were several things within their power that they 
could do to manage better.
    I did give them the extra money, but I also tried to hold 
their feet to the fire in terms of their performance. And I sat 
down with the leadership team and developed a corrective action 
plan to address the recommendations that came from the assist 
team. And the assist team, these were very well-intentioned 
people with expertise from all over the VA system and they were 
there to help, not to punish.
    Mr. Teague. Did you ever have any of the CBOCs, the 
outpatient clinics that continually lost money, ran out of 
money? How did you handle those, if you did?
    Mr. Parkis. It is almost impossible in my mind or my 
experience for a CBOC to actually be a money loser. They always 
generated way more funds than it cost to operate them. And that 
helped offset costs at the referral medical center or at the 
parent medical center because the patients that go to the 
CBOCs, they do have acute episodes. They do have issues that 
need to be addressed. And that does increase the cost at the 
parent facility.
    Mr. Teague. You know, and I am kind of reiterating things 
that other Congressmen have said before me, but, you know, as 
they did say, in New Mexico, which is a very huge State, the 
number of people that have to travel 5, 6, 8 hours to go to the 
VA hospital in Albuquerque is pretty large.
    And also Congressman Roe asked, you know, about how you 
decided to open new CBOCs and things like that. And I was just 
wondering how do you do that and is there a number that they 
need to meet so that these people do not have to drive 6 and 8 
hours?
    Mr. Parkis. Well, in addition to CBOCs, we look very hard 
at telemedicine. And it works. It works extremely well and the 
veterans love it. We worked hard on what are the things you can 
do to keep a patient, you know, out of a medical center. 
Telemedicine, telehealth, telepsychiatry, all those things are 
very effective programs.
    We even did telehome care where we could have a patient--
one of them was on a respirator, so this is an extremely 
fragile, you know, high maintenance patient, but he wanted to 
be home up in the Plattsburgh area up in northern New York and 
his spouse wanted that. And they made it work for him. I was 
extremely proud of that.
    Mr. Teague. Okay. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Boozman.
    Mr. Boozman. Thank you, Mr. Chairman.
    I appreciate your testimony. We do appreciate your service 
to veterans.
    In your testimony, you talked about that you use the VERA 
model, you know, kind of as a basis.
    Mr. Parkis. Uh-huh.
    Mr. Boozman. And then you challenged the folks to produce 
the income that they needed. Can you talk a little bit more 
about that? The best practice management tools that were used 
at the medical centers that were doing a good job, how did you 
distribute those among the other centers? Does that make sense?
    Mr. Parkis. I am not sure I understood the last part of the 
question.
    Mr. Boozman. Well, again, the medical centers that were 
doing a good job as far as producing income and, you know, 
thinking outside the box----
    Mr. Parkis. Uh-huh.
    Mr. Boozman [continuing]. And supporting themselves, how 
did you distribute or did you distribute those best practice 
models from those successful centers versus the ones that were 
not pulling their weight?
    Mr. Parkis. I used to run into the National Institutes of 
Health (NIH) syndrome or not invented here. It is always 
difficult to spread a best practice model, but we did do it. We 
did emphasize doing that.
    I am going to try a different track to answer your 
question. I had five medical centers. Two of them were two 
division medical centers in my network. Two of them were 
consistent, positive in the VERA model. One was some years it 
was, some years it was not. And the other two always cost way 
more money to operate than VERA produced.
    Well, what we challenged the leadership at those centers 
with doing is learn the VERA model, learn what it is that is 
being done at these centers that are so successful that you can 
adapt where you are.
    One center had always been a, you know, long-term care 
neuropsychiatric center. But over time, it developed into a 
tremendous community support center that did a lot of basic 
care and then started building on that higher-level care.
    We got them a, I think it was a CT scanner so they could 
expand the level of medical patients that they were taking care 
of. And as I was retiring, they were becoming more and more 
positive in the VERA model.
    Also, the CBOCs that we added there tended to produce a lot 
more revenue for them. So they were transitioning from a 
neuropsychiatric mission to a medical care mission for all of 
southeast Ohio.
    Another one was running some very expensive programs and we 
did not honestly have the numbers to support the program at 
that center, although they had the expertise. And we started 
transferring that workload to another center. That was the Open 
Heart Surgery Program.
    Mr. Boozman. Very good. I think, you know, that is really a 
good story to tell in the sense of--and it seems like perhaps 
that we need to do a better job of moving in that direction.
    So thank you very much. We do appreciate your hard work.
    Mr. Parkis. Thank you.
    The Chairman. Thank you, Mr. Boozman.
    Mr. Mitchell.
    [No response.]
    The Chairman. Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman.
    And thank you very much for your testimony.
    I appreciate your telling us that one of the factors you 
look at in distributing the money is demand. However, that 
causes me some concern and let me put this in context for you.
    I represent a huge district in Arizona that is rural. I 
have 11 Native American tribes who have their own tribal land. 
We have a very high percentage of veterans but an 
underutilization of services.
    So I am concerned that if you are looking at demand, that 
may be skewed against the rural areas where they either do not 
know what services are available to them or it is so difficult 
to get those services, they are not asking for them.
    So is there some adjustment so that we make sure that the 
rural areas get their fair share?
    Mr. Parkis. Yes. Is that the Prescott area, by any chance?
    Mrs. Kirkpatrick. Yes. Prescott is in my district, yes.
    Mr. Parkis. Okay. I was in Phoenix for a while and I knew 
Pat McLenman----
    Mrs. Kirkpatrick. Yes.
    Mr. Parkis [continuing]. In that area.
    Mrs. Kirkpatrick. It is a great facility. They do a great 
job.
    Mr. Parkis. Yes, they do.
    Mrs. Kirkpatrick. They just have a huge area to cover.
    Mr. Parkis. Yes. Veterans' outreach activities, they are 
extremely important not just for the funding stream of the 
medical centers but to tie the missions of the medical centers 
to the needs of the veterans served by that center.
    The way I would recommend going about outreach in that area 
is talking to the tribal leaders, going out--we used to do 
health fairs all the time--and start gathering that 
information. People live a long ways away, but I bet you that 
through the tribal buildings or tribal councils or whatever, it 
would be very effective to set up telemedicine programs.
    Most health care these days is actually chronic health 
care, not acute. And chronic care does very well being 
evaluated through telemedicine programs. You only bring the 
veteran in when they need an inpatient or specialty diagnostic 
episode. Other than that, they can be treated locally.
    Mrs. Kirkpatrick. And there are some good programs. You are 
right. Telemedicine is working there. There is also a mobile 
van that goes up to the remote areas.
    But my concern is in the formula of distributing the funds, 
at that level, is there some kind of factoring? I am looking at 
your indexes in the written report you gave us. For instance, I 
do not see anything, an adjustment for, say, transportation or 
motel stays or length of travel to a center in terms of making 
a distribution of a fund.
    So just keep in mind my goal is to make sure the rural 
areas get their fair share in comparison to the metropolitan 
areas. And I just do not see that in the indexes in your 
statement.
    Mr. Parkis. Okay. Most of my experience was in more 
populated areas, although I did have experience in working with 
people doing rural outreach.
    I think where we would address the concerns that you 
brought up would be in the annual strategic planning process, 
identify the patients, identify their needs, and then come up 
with alternative strategies about how to meet those needs.
    Mrs. Kirkpatrick. Thank you very much.
    The Chairman. Mrs. Kirkpatrick, the issues you brought up 
are very important. In January, we are going to be 
concentrating on rural access for veterans because everything 
you pointed out is correct.
    My experience has been that if you build it, they will 
come. That is, the model says one thing, but if you put it up, 
they do come. That is what happened in my district.
    You mention certain factors that were not taken into 
consideration, but I would include poverty, for example. If 
they say you have to be within 100 miles but nobody owns a car, 
what does it matter how close you are if you are 2 hours away?
    Many Members of Congress have the exact same issues and we 
are going to focus on them in the first part of next year 
because, the problem is nationwide and you brought up some real 
important factors, thank you.
    Mrs. Kirkpatrick. Thank you.
    The Chairman. Mr. Brown.
    Mr. Brown of South Carolina. Thank you, Mr. Chairman.
    And thank you, Mr. Parkis, for giving your testimony this 
morning.
    I represent the area around Charleston, South Carolina, 
which is a long, narrow Congressional district, and we have one 
major hospital in Charleston, but it serves, I guess, probably 
a 200-mile, you know, radius on either side.
    But my question to you, and I know that you already 
expressed that you had a pretty dense populated district that 
you were involved in, my question is along the lines of 
providing service to those veterans that cannot get to the 
major, you know, facilities.
    We do have an outpatient clinic in Myrtle Beach which is 
probably 100 miles away. And I know that we talked about the 
telemedicine and some other creative ideas about trying to meet 
the needs of the veterans.
    But we also have in my district, and I am sure probably 
yours, too, these community health centers. And I was just 
wondering if you had any experience of maybe trying to share 
some of the medical facilities that the State already provides 
the general population or whether that could be, you know, some 
kind of a, you know, compromise to be able to help meet the 
needs rather than establishing two CBOCs and a community health 
center which basically boils down to saying resources, you 
know, administered to a different population base.
    I know in Charleston, we have been working with the Medical 
University and the VA hospital. Mr. Finegan here I think will 
be testifying that we have been a big part of that process of 
trying to see where we could reach across those lines to 
provide better health care delivery for our veterans by drawing 
from the expertise from both the VA and the Medical University 
to be able to provide better health care.
    I wonder if you had any direction you might give us as 
trying to do the same idea out in some of the rural communities 
where you have, you know, already have established a community 
health center and maybe somehow or another through a voucher 
program or some other means you could share those facilities 
rather than create whole new, you know, CBOCs.
    Mr. Parkis. Okay. I found the VA always extremely open to 
that kind of process, those kind of arrangements. When I was in 
Alabama in the early 1980s, we had a lot of community-based 
clinics that would share, say, like an American Legion hall. We 
would go there however many times a month and hold a clinic 
there.
    In Vermont, I know of a State veterans nursing home where 
the VA has been operating a clinic in there for years.
    As you get into the more rural areas, people actually have 
probably more use to sharing and working with each other to 
develop solutions. And there are a lot of examples across the 
VA.
    In Cincinnati, they came up with some--I cannot remember 
the specifics, but I remember just by having somebody tasked 
with developing those kinds of partnerships, a lot of success 
stories generated from that. And then the next set of ideas 
generate.
    It is a path that you have to start on and just assume that 
good things are going to come out of it. You do not come up 
with a whole solution the first time. As people begin to trust 
each other, you get more and more people volunteering to help 
you out.
    Mr. Brown of South Carolina. I think because as the veteran 
grows older, you know, even if he has a mode to travel, you 
know, his ability to operate that vehicle might not be possible 
and so he is dependent upon somebody else. And so I would think 
as close to his home that we could provide some kind of health 
care, not maybe the major portions, but by using telemedicine, 
some other, you know, techniques that we could meet most of his 
needs without having him to travel into the main facility.
    Mr. Parkis. We had a program called hospital-based home 
care and a lot of it was focused on veterans, that if they were 
not in that program, they would be in a VA nursing home. And we 
provided nursing home-like services in their home. They loved 
it. It worked really, really great.
    Mr. Brown of South Carolina. Well, I think that is exactly 
the direction we ought to be going to try to allow them to stay 
in their facilities where they have familiar surroundings 
rather than transport them into a nursing home or either to a 
hospital.
    But thank you for your service. I noticed my time has 
expired, but I appreciate you being here today.
    Mr. Parkis. If I remember the numbers correctly, you can 
serve three veterans in their home for every one that you have 
in a nursing home. It is just so much better and they like it 
better.
    The Chairman. Thank you.
    Mr. Perriello, you have any questions?
    Mr. Perriello. No.
    The Chairman. Mr. Bilbray.
    [No response.]
    The Chairman. We thank you, Mr. Parkis, for your testimony. 
We appreciate your being here.
    Mr. Parkis. Thank you very much.
    The Chairman. And enjoy further retirement.
    Mr. Parkis. Okay. Go back and take my shoes off again.
    The Chairman. Thank you.
    Our second panel is Ms. Rita Reed who is with the Office of 
the Assistant Secretary for Management and Michael Finegan who 
is the Director of the Veterans Integrated Service Network 
Number 11 in Ann Arbor, Michigan.
    Accompanying the two witnesses are William Schoenhard who 
is the Deputy Under Secretary for Health Operations and 
Management, Veterans Health Administration (VHA) and Paul 
Kearns who is the Chief Financial Officer (CFO).
    We thank you all for being here. Your written testimony 
will be made a part of the record and hopefully your oral 
remarks can be done in about 5 minutes.
    Ms. Reed, you have the floor.

    STATEMENTS OF RITA A. REED, PRINCIPAL DEPUTY ASSISTANT 
SECRETARY FOR MANAGEMENT, OFFICE OF THE ASSISTANT SECRETARY FOR 
  MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS; MICHAEL S. 
FINEGAN, DIRECTOR, VETERANS INTEGRATED SERVICE NETWORK 11, ANN 
ARBOR, MI, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY 
   WILLIAM C. SCHOENHARD, DEPUTY UNDER SECRETARY FOR HEALTH 
OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. 
DEPARTMENT OF VETERANS AFFAIRS; AND W. PAUL KEARNS III, FACHE, 
     FHFMA, CPA, CHIEF FINANCIAL OFFICER, VETERANS HEALTH 
      ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

                   STATEMENT OF RITA A. REED

    Ms. Reed. Thank you, Mr. Chairman. Thank you for 
introducing the panel with me. I will not need to repeat that. 
As you know, they are all senior long-time operational and 
financial managers in the VHAs and private sector in the case 
of Mr. Schoenhard who recently joined VA.
    Mr. Chairman, Ranking Member Buyer, distinguished Members, 
thank you for the opportunity to discuss appropriations to 
Veterans Integrated Service Networks, also known as VISNs.
    The process of making appropriated funds available to the 
VISNs and then to the medical centers begins immediately after 
the Congressional bill becomes law. Our central Budget Office 
reviews financial and performance metrics in concert with VHA's 
Financial Office to construct the usual apportionment documents 
that all departments must do.
    Once these documents are approved by OMB, the central 
Budget Office allocates these funds to VHA in total through the 
Financial Management System. VHA can then distribute to its 
program offices and field facilities for obligation.
    At the beginning of the fiscal year, VHA prepares operating 
budget plans for monthly obligations. These plans, once 
approved, provide the basis for monitoring macro expenditures. 
Oversight from a national perspective is accomplished with 
monthly performance reviews chaired by the Deputy Secretary of 
VA and senior management officials.
    For this meeting, the Budget Office compiles extensive 
comparisons of plans, obligations, and metrics versus the 
actual data. These monthly reviews concentrate on these metrics 
and financial performance, workload, and access; this is the 
primary vehicle that top management uses in Central Office to 
help ensure the Department achieves its financial and program 
performance goals.
    They also provide data for risk analysis and serve as a 
warning system to highlight potential operational or funding 
issues. However, as you have heard, the first line of 
accountability for resources in VA's decentralized health care 
system is the hospital and VISN director. These directors and 
their financial staff maintain frequent communication with 
VHA's Chief Financial Officer.
    The first category of funding for the medical care program 
is by the three direct appropriations--medical services, 
medical support and compliance, and medical facilities.
    The second category for funding is through collections and 
reimbursements. Collections are received from----
    The Chairman. Ms. Reed, I am sorry to interrupt you, but 
you mentioned those three categories.
    Ms. Reed. Yes, sir.
    The Chairman. While I have those on my mind, every medical 
director I meet seems to say that they are inhibited because 
there is a wall between those three accounts and how they are 
able to be spent.
    Is that factually correct that they have no flexibility? 
Does the VISN director have flexibility? For instance, if a 
director had money for a program, but did not have the space 
for it, could they use these funds to build it?
    Ms. Reed. Yes, sir. There are mechanisms, as I know you 
know, in terms of transferring and we are required, as the 
appropriation law provides for each and every year, to come 
before the Committees to request permission to transfer money 
between and among the appropriations. And that has been done in 
the past.
    The Chairman. But the medical director does not have any 
flexibility?
    Ms. Reed. I would have to defer in terms of how VHA 
provides flexibility once the funds are allotted.
    The Chairman. And who does? Do you have to come to a 
Committee for that? If somebody needs space for a program that 
has been allocated, it would seem that they ought to be able to 
build the space.
    Do you need more flexibility than you have is what I am 
asking? Does the law work for you or do you need some changes?
    Ms. Reed. I can relate exactly what I have heard from the 
financial managers in VHA over the years. I believe speaking 
for them when they sit here, but I am sure that they will have 
an opportunity if I misspeak, that they would enjoy a bit more 
flexibility in terms of being able to move funding as they see 
the need come up.
    Thank you.
    The Chairman. Sorry to interrupt you, but we will take the 
timer off so you can have as much time as you need.
    Ms. Reed. We are happy to answer as we go along.
    The second category of funding that is provided, of course, 
is through the collections and reimbursement mechanisms. These 
collections are received from some veterans and their health 
care insurance policies. These collections are added to the 
medical services account at each medical facility that 
generates the collections. This also applies to reimbursements 
earned for activities such as sharing agreements with U.S. 
Department of Defense (DoD) and other facilities.
    The allocation process by VHA's Financial Office involves 
only the first category because, as I stated, the second 
category goes directly to the medical facilities.
    To be specific in some of the examples of how this has 
worked, in the 2009 allocation for the three medical accounts, 
which totaled almost $41.5 billion including $1 billion 
provided by the American Recovery and Reinvestment Act, of the 
total funding, $31.8 billion or about 77 percent was allocated 
to the 21 VISNs using the Veterans Equitable Resource 
Allocation model, what you have referred to as VERA.
    VERA is primarily based on the estimated number of patients 
treated in each VISN, the severity or complexity of each 
patient's treatment, and the cost of the services provided. The 
balance of about $9.7 billion was allocated outside the VERA 
model. Slightly more than $1.5 billion was for specific 
initiatives, which were allocated separately, for example, 
Priority 8 veteran expansion, prosthetics and sensory aids, 
housing and homeless programs, and rural health initiatives.
    Funding in the amount of about $6.8 billion was allocated 
as specific purpose funds. This includes operation of VHA's 
program offices and centrally managed programs such as salaries 
of clinical trainees and State nursing home per diem payments.
    Funding provided by the American Recovery and Reinvestment 
Act was distributed to the VISNs based on a pro rata share of 
each medical center's facility improvement needs. The VISN 
director is then responsible for making the allocations to each 
of their medical facilities. They use the method best suited 
for their specific needs which are in turn reported to the VHA 
Office of Finance.
    The directors consider many factors in making their 
allocations such as patient care needs, adjustments to the 
prior year base, and workload increases.
    Finally, Mr. Chairman, the basic principle of this 
allocation process is that health care occurs locally. The VISN 
director has the most complete knowledge of the changing 
requirements at each medical facility and the needs of the 
veterans they serve.
    We appreciate the opportunity to participate in this 
hearing and my colleagues and I will be pleased to answer any 
questions after Mr. Finegan presents his testimony.
    The Chairman. Thank you.
    Ms. Reed. Now or after Mr. Finegan----
    The Chairman. Mr. Finegan.
    Ms. Reed [continuing]. Offers his testimony. Thank you.
    The Chairman. Thank you.
    [The prepared statement of Ms. Reed appears on p. 56.]

                STATEMENT OF MICHAEL S. FINEGAN

    Mr. Finegan. Thank you, Mr. Chairman, Ranking Member Buyer. 
It is good to see you. Thank you very much, distinguished 
Members of the Committee, for the opportunity to be here this 
morning to review the process we use to allocate funds from the 
VISN to the local medical centers.
    I will share this morning our steps in the process, the 
rationale supporting it, our monitoring systems, and how we 
ensure these resources are most effectively used in caring for 
our veterans.
    Mr. Chairman, most of my 20 years in the VA have involved 
resource allocation at various levels and positions in the 
agency. In each of these assignments, several principles have 
guided my approach to allocating funds. Specifically funding 
should follow the workload. It should support access and 
quality care, have a component of efficiency, recognize case 
mix or patient complexity, be easy to understand, and, most 
importantly, should be fair and use thresholds to manage large 
magnitude changes. We use the principles today in our VISN 11 
model.
    Our model of funding the medical centers uses workload and 
patient complexity data to ensure that funding follows workload 
growth. In any given year, depending on our VERA allocation, an 
adjustment may be made to the facility's funding level to 
either encourage efficiency or to mitigate what might otherwise 
be a significant budget change.
    We also established a VISN-level capital pool to help us 
invest strategically in new growth, expensive high-tech 
equipment, and also address our top facility maintenance 
priorities. In 2009, this pool comprised 3.7 percent of our 
overall VERA distribution.
    We asked a VISN-level panel of clinical experts to develop 
a detailed investment plan for equipment. This plan provides a 
structured schedule for investing in new technologies, 
replacing outdated equipment, reducing duplication, and 
leveraging volume discounts.
    In one example, we were able to save over $12 million off 
of retail and $6 million off of the Federal supply schedule 
pricing by purchasing physiological monitors in bulk.
    The funds for these strategic purchases are held in reserve 
at the beginning of the year by the VISN until later in the 
year as budget execution is monitored to ensure that we meet 
our overall funding targets. Reserving these funds is necessary 
to address unforeseen conditions at medical centers such as 
inordinately complex clinical cases, dramatic workload changes, 
or facility emergencies. These costs are often above and beyond 
what medical centers budget.
    For example, in 2009, one facility in our Network 
experienced an electrical fire in the acute psychiatry floor 
causing us to evacuate the patients and resulting in over $1 
million worth of repairs. We had to supplement that facility 
for $1.4 million from our VISN funds.
    In a prior assignment as a Facility director, I encountered 
a young woman veteran with a very complex and rare condition 
that was beyond our ability to treat. We arranged for care for 
her at a specialized facility with expertise in her condition, 
but at a cost of over $64,000 a month.
    So unforeseen expenses like this occur throughout the year 
and require a funding process that is flexible enough to cover 
the costs while enabling normal business to continue.
    In VISN 11, all funds that we hold in reserve that are not 
expended for such unforeseen events are either spent on our 
strategic items or distributed to the facilities.
    After receiving the budget, each medical center is required 
to submit an operating plan that describes how the budget will 
be spent appropriately to meet the mission requirements and the 
performance expectations.
    We track monthly through variance reports financial 
performance at the facility, the VISN, and the national level. 
And the facilities that are over or under budget, we can 
discuss why this occurred and determine if corrective action is 
needed.
    We also monitor on a monthly basis clinical and 
administrative performance measures including access, quality, 
satisfaction, and business metrics. These performance reports 
are discussed in my network each month at our quality meeting, 
our Executive Leadership Council, and during my site visits at 
the medical centers. I also have a quarterly performance review 
with my boss to make sure VISN 11 is meeting its targets.
    Mr. Chairman, the allocation process used in VISN 11 is 
similar to those I have experienced throughout my career in VA. 
The process assures that medical centers are moving in the 
direction set by senior VA leadership and Congressional 
mandate. It does allow for local action to meet the changing 
circumstances and manage the risk of unforeseen events that 
occur every day in health care. And at the same time, our 
performance measures and business metrics ensure that quality 
access and satisfaction remain high and the mission 
requirements are met.
    Thank you again for the opportunity to be here and I am 
available for any questions you may have.
    [The prepared statement of Mr. Finegan appears on p. 57.]
    The Chairman. Thank you.
    Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    Ms. Reed, is the distribution formula the same for all 
VISNs? Are they all treated the same?
    Ms. Reed. Sir, I will attempt to answer any VISN and 
hospital questions as best I can, but I would like to be clear 
that I do not participate in that process.
    Mr. Michaud. As far as Central Office distributing to the 
different VISNs.
    Ms. Reed. We do not distribute to the----
    Mr. Michaud. You do not?
    Ms. Reed [continuing]. VISNs, sir, from my office. We make 
those funds available to VHA who then follows the VERA 
allocation as well as special purpose or initiative funds that 
need to be put out specific to programs.
    Mr. Michaud. Can anyone on the panel answer that question?
    Mr. Kearns. Yes, sir. Basically we use the same model for 
all 21 VISNs, which basically is the VERA model, which assesses 
patient volume, patient complexity, and various factors like 
that.
    So to answer your question, we use the same model across 
the 21 VISNs. The results are different because the patient mix 
and patient volume are different.
    Mr. Michaud. Okay. And when you distribute that money, do 
you take into consideration the CARES process that recommends 
that--for instance, the map I have here for VISN 11 at this 
time was three new CBOCs. Do you take that into consideration, 
the new CBOCs as recommended under CARES?
    Mr. Kearns. The new CBOCs would be incorporated in the 
VISN's financial plans. We would pick those in the VERA model 
once the patient population is actually served.
    Mr. Michaud. Okay. Here is my concern in talking about the 
mother ship that was mentioned during the first panel, is under 
the CBOC process, those are operating money that comes out of 
the VISN budget.
    So if you have a VISN, for instance, VISN 11, where there 
is required for three new CBOCs, I am not comfortable that the 
mother ship is going to be very aggressive in getting those 
CBOCs up and running because it comes out of their operating 
budget.
    And I can tell you from the State of Maine for VISN 1, the 
only State actually in VISN 1 that was recommended under the 
CARES process for multiple CBOCs was actually the State of 
Maine. So when you look at the mother ship in Boston, they are 
not going to be very amendable to sending their operating 
dollars to a rural State like Maine.
    And as you heard from the first panel, and I have heard the 
7 years I have been on this Committee, is access to health care 
regardless of whether you live in an urban area or rural area. 
The rural areas unfortunately have not had that access. And it 
is because the mother ship tends to be hoarding the money 
because of the way the CBOC dollars are allocated. And if you 
do not take that into consideration, then they are not going to 
get their share and then the clinics and the CBOCs will not be 
up and running.
    And that is where a lot of frustration among Members of 
Congress and veterans service organizations (VSOs) that they 
have is that access issue. And until we change in the way we 
are distributing the money, particularly into the CBOCs to 
allow the mother ship to let those funds go, I guess I still 
will have a big concern with the access issue in rural areas.
    The other issue I want to talk about, when you distribute 
the funding, how do you account for the census? Is it the 
veterans that are actually utilizing the facility or is it the 
population of veterans? Do you use the VA--how do you account 
for the veterans? Is it actual veterans using the system and it 
is a VA count versus what the census say there are for veterans 
in that particular region?
    Mr. Kearns. Yes, sir. We look back for the last 3 years for 
veterans that seek acute care and the last 5 years for veterans 
that are seeking our specialty care like spinal cord injury, 
long-term care, that we count a veteran one time in all of 
those periods and we use that as the projection for the current 
budget year.
    Mr. Michaud. So it is veterans who actually seek the care, 
not the veterans who might qualify----
    Mr. Kearns. That is right, sir.
    Mr. Michaud [continuing]. That you distribute the money?
    Mr. Kearns. That is right, sir.
    Mr. Michaud. Okay. And in your process when you figure this 
out and it gets right back to the mother ship, and I will use 
VISN 1 as an example where people would have to travel 7 or 8 
hours to go to Boston for their health care needs, is that 
veteran counted for the Boston versus where the veteran 
actually lives which is Maine and, if so, does that not tend to 
skew good policy manners as far as the mother ship wanting to 
keep the money that she is receiving so, therefore, she is 
counting that veteran as utilized in the Boston facility versus 
where they actually might be able to utilize or contract out a 
place that is closer to home?
    So where is that veteran counted for? I would assume it 
would be where it is receiving the services which might not be 
fair or----
    Mr. Kearns. The individual veteran is counted and the cost 
of their care at the location where they receive the care. If 
it is at a local CBOC, it would be counted proportionately 
there. If it is at the mother ship, in your words, it would be 
there. And if it is in another VISN, we pro rate it across the 
VISNs.
    Mr. Michaud. So, in other words, it would be to the benefit 
of Boston to keep that veteran coming there and the VISN 
director can dictate to the other States that you have to send 
your veterans there versus trying to find access to health care 
locally because they are getting money from it.
    In closing, actually, Mr. Chairman, I would like a very 
detailed funding distribution, and I do not want for the 
system-wide because I will not be able to digest all of it, but 
for VISN 1, I want to know how the money is allocated to VISN 1 
in a very detailed manner, as well as where they are counted 
from, where the resident or that veteran might be located, 
physically actually living so I can really follow this through 
as far as how the distribution of funds are allocated.
    And it gets back to a lot of the questions you heard 
earlier from the first panel, and I am sure you will hear 
again, with veterans in rural areas being able to get the 
health care that they need. And part of it is the distribution 
method.
    And the problem with medical facilities in rural areas is 
trying to get the money they need to establish the clinics or 
CBOCs that they are not going to be able to get because for 
whatever reason, you know, the VISN office, actually, it comes 
out of their operating budget and it might be more of a problem 
how we appropriate the funding.
    Mr. Kearns. Yes, sir. We will provide it.
    I might add that this last year and for next year, we have 
a special funds reserve for rural initiatives where the VISNs 
and the facilities come in and compete for those funds. And we 
allocate them out separately to target new outreach initiatives 
for rural veterans to actually be like seed money to begin to 
start that. And then once the care is provided out there, it 
would be accommodated in our VERA model.
    So we had last year $250 million set aside for that and we 
will have a comparable amount in this year.
    [The VA subsequently provided the following information:]


                  FY08 VISN 1 Patients and Costs Includes Place of Enrollment and Place of Care
----------------------------------------------------------------------------------------------------------------
VISN Where                                                                                        Cost of Unique
 Care was                                               Unique                        Unique       Patients Not
 Provided                 Enrolled VISN                Patients    Expenditures    Patients Not   Seen in VISN 1
                                                                                  Seen in VISN 1
----------------------------------------------------------------------------------------------------------------
1           Enrolled VISN 1                             205,834   $1,456,761,872               0               0
----------------------------------------------------------------------------------------------------------------
     2      Enrolled VISN 1                                 847       $5,861,533             488      $3,962,922
----------------------------------------------------------------------------------------------------------------
     3      Enrolled VISN 1                                 847      $10,105,630             590      $7,972,489
----------------------------------------------------------------------------------------------------------------
     4      Enrolled VISN 1                               1,000       $7,231,950             780      $5,083,467
----------------------------------------------------------------------------------------------------------------
     5      Enrolled VISN 1                               1,138       $4,312,528             425      $3,312,298
----------------------------------------------------------------------------------------------------------------
     6      Enrolled VISN 1                               1,436       $9,848,442           1,126      $7,887,085
----------------------------------------------------------------------------------------------------------------
     7      Enrolled VISN 1                               1,275       $7,984,126           1,003      $6,710,077
----------------------------------------------------------------------------------------------------------------
     8      Enrolled VISN 1                               7,964      $39,141,062           4,947     $28,533,095
----------------------------------------------------------------------------------------------------------------
     9      Enrolled VISN 1                                 505       $4,492,586             383      $2,286,617
----------------------------------------------------------------------------------------------------------------
    10      Enrolled VISN 1                                 327       $2,118,372             262      $1,732,050
----------------------------------------------------------------------------------------------------------------
    11      Enrolled VISN 1                                 284       $2,020,192             236      $1,620,452
----------------------------------------------------------------------------------------------------------------
    12      Enrolled VISN 1                                 215       $1,588,234             170      $1,345,464
----------------------------------------------------------------------------------------------------------------
    15      Enrolled VISN 1                                 195       $1,416,692             155      $1,146,889
----------------------------------------------------------------------------------------------------------------
    16      Enrolled VISN 1                                 733       $4,444,323             559      $3,692,351
----------------------------------------------------------------------------------------------------------------
    17      Enrolled VISN 1                                 492       $3,074,128             360      $2,181,111
----------------------------------------------------------------------------------------------------------------
    18      Enrolled VISN 1                                 740       $4,187,801             513      $3,394,957
----------------------------------------------------------------------------------------------------------------
    19      Enrolled VISN 1                                 356       $2,663,228             260      $2,337,975
----------------------------------------------------------------------------------------------------------------
    20      Enrolled VISN 1                                 467       $3,395,480             388      $2,929,403
----------------------------------------------------------------------------------------------------------------
    21      Enrolled VISN 1                               1,033       $3,429,094             660      $2,882,090
----------------------------------------------------------------------------------------------------------------
    22      Enrolled VISN 1                                 873       $6,507,490             668      $5,613,522
----------------------------------------------------------------------------------------------------------------
    23      Enrolled VISN 1                                 269       $2,301,526             207      $1,863,418
----------------------------------------------------------------------------------------------------------------
                                                         20,996     $126,124,417        14,180.0     $96,487,732
----------------------------------------------------------------------------------------------------------------
     1      Enrolled in                                  22,664     $157,400,053               0               0
            Another VISN
----------------------------------------------------------------------------------------------------------------
Expenditures are the Allocation Resource Center Cost used in the VERA allocation.

    Mr. Michaud. Thank you very much. I appreciate it.
    The Chairman. Mr. Michaud, you are asking some really good 
questions. Is there an internal dynamic to the bureaucracy that 
forces resources?
    I have found it very difficult in my experience to get 
answers from that same bureaucracy about whether that is good 
or bad. You were not getting good answers. I think that is 
where we may need the GAO to give us those answers.
    I think in the same dynamic maybe you could comment on the 
fee basis, I do not see the directors using their fee-basis 
authority very liberally or conservatively.
    That decreases their budget and leaves either less for 
the--I love that term--the mother ship or it may be a factor in 
their promotions. The bigger surplus they return may be a 
factor in promotions and, therefore, they do not want to spend 
that money on veterans' access.
    Those are the kinds of questions that I think really go to 
the heart of accountability and are very difficult to get the 
answers from panels from that bureaucracy.
    Does anybody want to comment on that? Should I trust what 
you are saying?
    There seems to be some internal dynamics here, as I think 
Mr. Michaud pointed out very, very well, that they would rather 
have the money coming to them, so they are not going to build 
the CBOCs or they want to save money for their budget, so they 
will look better to the Central Headquarters. Is that going on 
or how do you deal with that?
    Mr. Schoenhard. Mr. Chairman, I am new to the VA, but I 
would just respond, and perhaps would ask Mr. Finegan to 
expand, that I think a lot of what in terms of accountability 
for medical center directors and VISN directors and all line 
officers charged with serving veterans is incorporated in the 
performance review plan.
    In my early weeks, I am very impressed. Really gets at 
access and other issues. And what I have learned so far, that 
is much more on the minds of medical center directors than the 
financial incentives or disincentives that might----
    The Chairman. Yes, but what if the performance review 
includes that? Are you looking at the amount of money they 
return to Central Office? I am sure you are, and does that mean 
the director is doing a good job or does that mean that they 
are not using their money to serve all the veterans they should 
be?
    Mr. Finegan. Mr. Chairman, I have something in my network I 
call the refrigerator list. These are the performance measures 
that go on the refrigerator for each director and those are the 
ones that are of top priority. And they are access, quality, 
and satisfaction first and foremost.
    We build our strategic plan around the access standards and 
so the three new CBOCs that Mr. Michaud----
    The Chairman. Tell me what that means in practice. What if 
I tell you that 100 veterans in a rural part of my area are 
complaining? I bet you do not measure performance based on that 
kind of anecdotal evidence. Otherwise, you would be listening 
to us a lot more.
    I do not know what that measurement means. We heard in 
Maine that the guy may not be looking at Maine. He is looking 
at Boston. So what does access mean? How do you measure that?
    Mr. Finegan. Well, it is measured several ways. One is the 
days to appointment and----
    The Chairman. Which?
    Mr. Finegan. The number of days until the appointment, so 
getting veterans in within 30 days in all of our clinics. The 
other is the mileage and those are the mileage standards that 
are established.
    The Chairman. What about a guy who cannot come because it 
is too far away? He is not even in the measurement? You are 
missing some very important things here.
    Mr. Brown brought up the aging of veterans. When they are 
less able, and drop out of the system. Access is not even 
measured for those people.
    That is the problem that we, in Congress, have. We have 
these anecdotal but very accurate stories about access and I 
bet you can provide us the exact things that go into access and 
that these other areas are not even measured.
    Again, I will refer to the fee-basis issue. How do you 
measure that? If 100 people have asked for fee basis and 98 
were rejected, is that part of your performance measure? I 
suspect not. Yet, you have denied access to those people.
    I am not saying that one is wrong and one is right. I will 
bet that somebody has in mind how much money access is costing 
and that is what is measured, not that 98 people were denied 
fee basis.
    Has anybody looked at what percentage of fee basis is 
granted? There is a performance measure that I think you ought 
to look at.
    I am just making the point that you think you are measuring 
stuff that you are not. I am not telling you something you do 
not know, but some things are easily measured and some things 
are not. I believe you leave out the things that are hard to 
measure and you put such things as the number of waiting times.
    By the way, that was manipulated, if you remember. People 
were entering the time they entered the clinic versus the time 
they applied for an appointment or they were told to call back 
in 2 weeks. Those 2 weeks were not counted in the measurement. 
So anything you measure can be manipulated, I suspect.
    Our anecdotes, or the things we hear from our constituents, 
probably are more accurate than some of your measurements. You 
get locked into this measurement and there are other things, as 
Mr. Michaud pointed out, where you need three CBOCs, but people 
will have to take it out of their operations, so it is not in 
there.
    Do you want to respond to my intellectual critique of 
measurement and bureaucracy?
    Mr. Finegan. I wonder if I could respond to the three 
CBOCs. I mean, I know, of course, VISN 11 best. We have 
actually set aside money for the activation of each of those 
CBOCs in the lower peninsula of Michigan because the mother 
ship, the Saginaw VA, does not have the money in their 
operating budget to support the activation of those clinics.
    So the debate that we have among our Executive Leadership 
Council is how much money do we set aside up front for our 
imaging equipment budget versus how much money we set aside for 
the activation of those clinics.
    Our strategic plan drives how we allocate the money. So I 
draw a 30-mile circle around population centers. I also look at 
the demand. Pardon me? Thirty miles for primary care. So I draw 
a circle around every reasonable population size and it does 
not get at some of those rural communities that----
    The Chairman. What if there is a mountain between the two 
areas? I mean, that is what they did in San Diego and I have a 
mountain between two counties. They just did not put that in 
the measurement. It takes a little bit of time to go from one 
county to another.
    What does a radius mean when you have a mountain? What does 
a radius mean if you do not own a car? What does a radius mean 
if you have to rely on a Disabled American Veterans bus that is 
only running once a week? What does that mean? It does not 
bring in the real circumstances that people have.
    Mr. Finegan. So that is, I think, why we use the fee-basis 
authority and the telehealth technologies that Mr. Parkis 
mentioned.
    The Chairman. Can you find out the percentages of approval 
of fee-basis requests to show what I am talking about or maybe 
we have something here that ought to be looked at?
    Mr. Kearns. Mr. Chairman, I can comment on that. The fee 
basis has been going up each year and we have it tied to the 
performance measures of access. So if a facility or VISN 
director cannot meet the access standards within their 
facility, they are required to fee out the care.
    The Chairman. Yes, but that is putting the cart before the 
horse. I have rural and urban areas in my district. Now, it is 
a lot easier and more cost effective in the long run if people 
get their eye examinations 150 miles away from the mother ship, 
but all your formulas show you have the ophthalmological 
capacity to handle those guys at the mother ship. So denying 
the fee basis goes according to your model. They have the 
ability and they have you come in any time.
    If they have to go 150 miles and they cannot see and do not 
have a car and they have an examination building in the block 
next to them. That is just stupid. Yet, by your model, it is 
accounted for. It comes out rational. It is not rational to the 
person who cannot go for the exam.
    All right. I owe Mr. Brown, I think, questions.
    Mr. Brown of South Carolina. Thank you, Mr. Chairman.
    And thank you all for coming and giving testimony today.
    I know, Mr. Finegan, you were involved in trying to create 
the Charleston model and I know we have been very patient 
trying to see it work.
    Do you know whether it has been implemented in any of the 
facilities around the country?
    Mr. Finegan. Sir, I cannot speak to that specifically. I 
know that we have examples around the country. I know of a 
facility that I was the director of several years ago. We 
installed a computerized axial tomography (CAT) scanner 
purchased with VA money in the local facility and got free 
scans in return. The local facility managed the scanner, paid 
the electric bill, and that sort of thing. But I think there 
are pockets of those initiatives throughout the system.
    Mr. Brown of South Carolina. I know that we have some 
illustration in Charleston where they put some kind of a 
scanning type device in the Medical University which is run by 
the Medical University, but it was paid for by VA.
    I know back in 2006, we actually put, I think, $37 million 
in the VA Reauthorization Bill to start construction of a 
hospital in Charleston. The Medical University is undergoing a 
massive uplifting, refitting, building new facilities. And we 
were hoping somehow or another we could implement that 
Charleston model in that overall plan. But so far, we have not 
been able to make any real major direction in that part.
    And I do not know whether you had any insight. I know we 
talked about in Denver and maybe down in Orlando and maybe New 
Orleans and whether any of that has actually taken legs.
    Mr. Finegan. No. I was on the project for the duration of 
the report and then was relieved and went back to my day job 
after that, so I do not know. I cannot speak to any more 
progress since then.
    Mr. Brown of South Carolina. But you were pretty bought 
into the process, though, were you not?
    Mr. Finegan. Pardon me?
    Mr. Brown of South Carolina. You were pretty convinced that 
that model should have some implications in the better health 
care delivery for veterans?
    Mr. Finegan. Well, I think the issue is how to spread the 
dollars as far as possible and provide as much continuity as 
possible for the veterans. And so I think whenever you can make 
a model that reduces the travel time and creates a seamless 
handoff between providers, you are on to something. And that 
sort of governed my approach.
    Mr. Brown of South Carolina. I know during the last panel, 
we talked about, you know, using some kind of a sharing with 
the community health centers, particularly rural community 
health centers, that we have available, I know in my district, 
and I am sure they must be around the rest of the country.
    Do you have any insight of maybe how that could practically 
work?
    Mr. Finegan. Yeah. I mean, as I said, I think, you know, 
you work with the assets that are available in the community 
that you are serving and you supplement those somehow. So if 
the local provider does not have something that the veterans 
need, you can supplement that with some kind of VA asset of 
some sort.
    We had a clinic that was not particularly rural when I was 
the director in Buffalo that was a hybrid clinic that treated 
both nonveterans and veterans and we sort of leased the doctor 
time and the exam rooms from this big practice, but it also 
enabled veterans whose wife, for example, wanted to be followed 
by the non-VA doctor, they could show up at the same clinic. 
One would go one way and one would go the other way.
    So I think those kinds of models do make sense.
    Mr. Brown of South Carolina. That is pretty interesting. Do 
you know whether there are any other VISNs that are using that 
same----
    Mr. Finegan. I do not know.
    Mr. Brown of South Carolina. That seems like to me that 
would work for us.
    And I believe, Mr. Michaud, that would probably work well 
in Maine, too, where there is, you know, I know, a lot of 
travel distance between the CBOCs there.
    So that model, that certainly looks, you know, very 
workable to me and I would be interested to get a little bit 
more information on that.
    The Chairman. Thank you, Mr. Brown.
    Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman.
    I thank the panel for being here today and testifying. This 
is interesting information.
    And I share the concerns expressed by Chairman Filner and 
also Mr. Michaud. What we are hearing as Members of Congress is 
that a one-size-fits-all model or formula is not adequately 
serving our veterans, especially in rural areas.
    So my question is back to process. Who decides what the 
VERA model looks like and is there a regular update of that 
model and really who makes that decision?
    Mr. Kearns. Basically we have a Finance Committee that is 
made up of a number of VISN directors, a number of facility 
directors, and then a few people from the Central Office. We 
look at it each year, propose, recommend changes to it, and 
then it goes up through our national Leadership Board and to 
the Under Secretary for final approval.
    Each year of the last 5 that I can remember, we have had 
enhancements or improvements to the model. It has also been 
reviewed three times by GAO and three times by RAND. In all of 
those instances, they have recommended slight enhancements or 
improvements to it which we have addressed. None of them have 
ever recommended a replacement for it, that there would be a 
better way, and we have asked them.
    Mrs. Kirkpatrick. Is geography and diversity taken into 
consideration in choosing the Members of that Committee?
    Mr. Kearns. Yes, ma'am. And the Committee Membership is 
updated periodically, but we have a fairly diverse membership.
    Mrs. Kirkpatrick. I have a little bit of concern if most of 
the members are VISN directors.
    Mr. Kearns. No, ma'am.
    Mrs. Kirkpatrick. Okay.
    Mr. Kearns. I think we have three VISN directors, a number 
of facility directors, and then some other individuals on it 
too.
    Mrs. Kirkpatrick. Okay. Would it be possible to get a 
breakdown of that Committee in terms of where they live, what 
they represent?
    Mr. Kearns. Sure.
    Mrs. Kirkpatrick. You know, just back to that concern to 
make sure that the rural areas are being heard from adequately 
and in the model-making process.
    Mr. Kearns. Yes, ma'am.
    [The VA subsequently provided the following information:]
        Veterans Health Administration National Leadership Board
            Finance Committee Members as of December 4, 2009
        Peter Almenoff, Assistant Deputy Under Secretary for Health for 
            Quality & Safety

        Gary Baker, VHA Chief Business Officer

        Larry Biro, Director, VISN 7

        Donna Chirwa, Business Operations Liaison, Office of the Deputy 
            Under Secretary for Health for Operations and Management

        Stanlie Daniels, VHA Deputy Chief Patient Care Services Officer

        Hugh Deery, Chief Financial Officer, VISN 11

        Mike Finegan, Director, VISN 11 (Co-chair)

        Michael Fisher, Deputy Director, VISN 20

        Danny Foster, Chief Financial Officer, VISN 9

        Lisa Freeman, Director, Palo Alto VA Medical Center

        Sandy Garfunkel, Director, VISN 5

        Florence Hutchison, Chief of Staff, Charleston VA Medical 
            Center

        Paul Kearns, VHA Chief Financial Officer (Co-chair)

        Jim McGaha, VHA Deputy Chief Financial Officer

        Mary Ellen Piche, Director, Albany VA Medical Center

        Lynn Ryan, Chief Financial Officer, VISN 16

        Jim Tuchschmidt, VHA Director, Patient Access and Care 
            Management

        Dan Tucker, VA Deputy Assistant Secretary for Budget

        Mark Yow, VHA Associate Chief Financial Officer for Resource 
            Management

    Mrs. Kirkpatrick. Thank you.
    The Chairman. Thank you, Mrs. Kirkpatrick.
    Mr. Roe.
    Mr. Roe. Thank you, Mr. Chairman.
    And, Congressman Michaud, what people will do is look after 
their own best interest and you are absolutely right. What will 
happen, let me give you an example about how this works.
    If you go to Boston, and I do not know that area very well, 
I know Tennessee pretty well, but let us say a patient is going 
from Maine to Boston and it is in their best interest to keep 
their resources there because who are they around every day? 
They are around people that tell them we do not have enough 
resources right there in the center where they are. I hear it 
all the time at Mountain Home.
    And what you can do, Chairman Filner, to make the 
statistics work is this. Let us say you are seeing a post-
traumatic stress disorder (PTSD) patient and to meet this 30-
day criteria, you are seeing a clinical psychologist every 
month. Well, then you say, well, no, you can see a clinical 
social worker every 6 months. And you just change the criteria 
on whatever process you are seeing. You meet the criteria to 
get in the 30 days, but are you getting the quality care that 
you need. And I have seen those things manipulated and happen.
    And what I heard Mr. Parkis say originally, and I would 
want to know on the CBOCs, every time you open one up, they are 
full. And so if you do that in Maine, I can assure you that 
what is going to happen is those patients are going to be seen 
there and there is no incentive for that person in Boston to be 
shipping their money off to Maine.
    And the rural health that you mentioned, Mr. Kearns, is 
going to be meeting in my hometown in March of this coming 
year, 2010, and I would like to invite, if he has the time, to 
come with us and we will check into this down there. That rural 
health, $250 million, I am very familiar with.
    And we need to look at that because the area where I live, 
as Chairman Filner has said, there is a mountain between 
everywhere where I live. So you can look on MapQuest and it 
will take you 30 minutes to go somewhere. Well, it may take you 
2 hours to get there. So I think we have to look at this.
    And the incentive is wrong for the local, and I am not 
blaming them. They have limited resources too. They do not have 
unlimited resources at the Mountain Home VA, so they have to 
look after their own well-being along with then trying to 
provide this outpatient therapy out of their own budget. So I 
am not really pointing a finger at them. We may have the 
incentive lined up wrong is what I am saying.
    Another question I have, and it should work better, how is 
this 2 year--you all have not had a chance to do it yet, but 
how do you like the 2-year budgeting? I just wondered about 
your comments about that, where you can make your plans 2 years 
ahead now.
    Ms. Reed. Well, sir, certainly we are very much looking 
forward to actually getting those funds. We were hoping it 
would be this month, but now it looks like we are hearing it 
will be February.
    But in concept, I think we are all excited about the 
opportunity to be able to know at least what core funds for 
medical care will be long before we have been able to in the 
past and be able to plan on that.
    If any of my VHA colleagues would like to comment.
    Mr. Finegan. I mean, my planning horizon has normally been 
12 months and, you know, it gets murkier out beyond there. So I 
consider it a privilege to be able to now look out 24 months 
before the murkiness starts. So I am looking forward to it.
    Mr. Roe. I think what we need to do and as our veterans 
age, as they are more infirmed, as people live longer, we have 
to look at whether it is telemedicine or regional health 
clinics, as Congressman Brown said, or whatever, but to get the 
care out to the veterans, not have them come long distance. It 
is much less efficient.
    I have done it that way and I practiced medicine for 30-
plus years before I came here. And you are much better off 
taking the care out. It is much more efficient. It is cheaper. 
The veterans certainly like it where I am. They absolutely like 
it.
    They do not like 8-hour drives as you are talking about. 
And last year when gas, quite frankly, was $4.50 a gallon, many 
of them could not afford to come to the doctor because it just 
cost too much money. Two tanks of gas was more money than they 
had.
    So I think we have, as a VA and as a resource, to look at 
how we expand that. Certainly in rural areas where obviously 
many of us live, we need to do that and it will be cheaper. It 
will actually save money.
    But we cannot go to the hospital directors and say we are 
going to take this money away from you, so you will provide 
this care out there. I think that is something we have to look 
at.
    Mr. Chairman, I yield back.
    The Chairman. Thank you, Mr. Roe.
    Ms. Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. I thank you 
and the Ranking Member for holding this hearing on this 
important topic.
    I thank the witnesses for their testimony. I apologize for 
not being here sooner. Three other Committee hearings going on 
simultaneously.
    But I understand that Mr. Michaud explored with you the 
issue, and perhaps Mr. Roe was following up on that, the issue 
of the CBOCs. There are 11 in South Dakota. There is a 12th 
being constructed.
    And I do think in light of what I have heard the response 
was to Mr. Michaud's line of questioning, we do need to do some 
work here. I, for one, think there is an obvious disincentive 
for a medical center to look at constructing a new CBOC if it 
comes out of their operating budget. Fortunately in South 
Dakota, given the various needs and given how this is not just 
a rural State, some parts of South Dakota are really frontier 
more than they are rural when you look at other regions of the 
country, I think that is true for some other Members of the 
Committee, we need to work very closely with you as it relates 
to the allocation of the funds and any disincentive that any 
medical center may have to look at the long-term planning for 
additional community-based outreach clinics to serve veterans 
of all generations in some of these outlying areas to avoid the 
long distances they have to seek their primary care and other 
specialized needs.
    Ms. Reed, could you talk with me about the oversight that 
the VA Central Office exercises as it relates to the different 
VISNs and the flexibility they have being left to determine how 
they allocate funds among their facilities to make sure that 
they are distributing the funds in the most efficient and 
effective manner and then how the various VISNs share data or 
best practices as it relates to developing the methods for 
distributing these funds?
    Ms. Reed. Ma'am, I think you were not here when I mentioned 
what we do at the Central Office, what we consider or what I 
consider macro oversight. And so we participate with the Deputy 
Secretary, with top leadership that is called the Senior 
Management Council in terms of monthly reviews, looking at 
national aggregates.
    However, in terms of data specific to VISNs, resources 
given by VISNs to hospitals or how that may be shared, that 
manifests itself ultimately in terms of performance measures 
that we have talked about. But formulating or executing up 
front is very much decentralized and begins with VHA's 
Financial Office and flows down through their VISNs.
    So I would defer to Mr. Kearns if he would like to add 
specifics.
    Mr. Kearns. I think specifically we look at the performance 
each month of the VISNs. And Mr. Schoenhard has weekly meetings 
with the VISN directors. I have biweekly conference calls with 
the VISN CFOs.
    And so as we identify practices in one VISN versus another, 
we will communicate that so that the best practices can be 
proliferated throughout the system. As problems surface, we 
also address those. And then we have a VHA Finance Committee, 
which looks at the overall execution of the financial program 
throughout the year.
    Ms. Herseth Sandlin. So could either of you speak 
specifically then to how allocation decisions have been 
affected either by the influx or Operation Enduring Freedom and 
Operation Iraqi Freedom (OEF/OIF) veterans or a significantly 
higher proportion of women veterans seeking access to medical 
centers within a particular VISN? Have any of those issues come 
up in the discussions you have had either with the Senior 
Management Council or at the VISN level?
    Mr. Kearns. Yes. Relative to the OEF/OIF, at least 
nationally, we are fairly on track with our estimates. In fact, 
we had overestimated what the actual experience has come in.
    And with women veterans, we are creating a new initiative 
to target any increases or target facilities where there are 
not the proper facilities to accommodate the growing number of 
women veterans and also in those instances where we do not have 
the proper provider mix to address that. In other words, any 
places that do not have the proper provider mix for gender-
specific care. And we have a program office that is doing that 
under Dr. Hayes, monitoring that across the networks.
    Ms. Herseth Sandlin. And, Mr. Finegan, would you like to 
add anything?
    Mr. Finegan. Thank you. Yeah.
    Women veterans' issues and OEF/OIF inform our strategic 
planning process, so we have, for example, built our facility 
maintenance plan around issues like women's privacy, look at 
the services that we provide in mental health such as PTSD 
services, residential care and see if we have adequate 
resources for women. And that drives then the submission of 
construction projects to change that footprint.
    And the same thing with OEF/OIF, case management, field-
based services as opposed to hospital-based services, 
connections with the Vet Centers. Those are all deliberate 
parts of the strategic planning process, again both in the 
mental health uniformed services plan, the women's 
comprehensive health plan, and just normal facility planning.
    Ms. Herseth Sandlin. Thank you all.
    I yield back.
    The Chairman. Thank you.
    Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Let me get back to the data you have basically based on the 
clientele mix. You were saying you have those who are served at 
a location.
    Do you have their residents in your data system? So if they 
go from Maine and they are going in, you can detect that?
    So let me just say bluntly rural is never going to be 
served to the level of urban. It may sound terrible and 
insensitive, but that is a fact of life that we have just got 
to understand.
    And there are advantages to being out there. I am looking 
at my father-in-law. He drives into Stennis or New Orleans, but 
there is no way in the world he wants to move into the city and 
get that closer service.
    But that stated, how can we improve it and have our system 
more reality based? Do you have the addresses?
    Mr. Kearns. Yes, sir, we do. We track where the care is 
provided and the cost of that care in our allocation file.
    Mr. Bilbray. But do you residence location of the person 
receiving the care?
    Mr. Kearns. Yes, sir.
    Mr. Bilbray. Okay. So now, with that, you can create a 
model that basically will detect these long-distance commuters 
down the line.
    The question is, when you talk about a 30-mile circle, have 
you looked into the Council of Governments and the 
transportation agencies that can give you drive times, because 
the Chairman's point was if there is a mountain, that may look 
good on a map, but this is a three-dimensional--no offense, but 
getting somebody to drive out of El Centro and come to San 
Diego in August is a service to them, not a problem. But those 
who have been in Imperial Valley in August will understand what 
I mean.
    But the question is----
    The Chairman. I ask that the gentleman's remarks be taken 
down.
    Mr. Bilbray. Mr. Chairman, you forget. I grew up and was 
Mayor of the city named after the Imperial Valley because all 
the farmers used to come to the beach during the summer.
    The Chairman. And they wanted you out of town, so they sent 
you to Congress, right?
    Mr. Bilbray. Yeah. Yeah. One way to fight crime.
    Let me just say, has anybody looked at drive times and 
looked at getting that data from transportation agencies and 
Council of Governments because they develop these models where 
you can literally see the way it works out?
    A good example would be, let us just say the Chairman's 
district, it may only be an hour out to El Centro, but then it 
could be, you know, another hour out to the northern parts of 
Imperial Valley.
    Has anybody even looked at creating that level of 
sophistication?
    Mr. Finegan. I can answer. The second part is, no, I have 
not looked at external third-party transportation data sets. 
That is a very good idea.
    The first part, though, yes, we do build in feedback from 
veterans who live there and remind us of the mountains, for 
example. And so the level of service that we put into our CBOCs 
is commensurate with the drive time to the parent facility.
    So, for example, the further away you are either in mileage 
or drive time, the more likely we are to try to build in more 
robust specialty services, for example. Whereas, where I came 
from in Buffalo, if the CBOC was closer to the facility and 
there was an interstate and you could get there in 45 minutes, 
we might just make it a primary care and primary mental health.
    So that factors into our strategic planning. And, I mean, I 
do not think I need to tell you that the veterans' community is 
very vocal about keeping us honest as far as drive times and 
things like that.
    Mr. Bilbray. Well, one of the things that we found very 
essential in serving the active-duty military was the ability 
to identify where the residents were and that allowed us to do 
modeling to specifically engineer it based on the maximum 
coverage with a minimum amount of effort.
    And I do not know if you have the ability, if you have 
looked at literally mapping out where your veterans live, where 
they live, where are locations, and that is a lot more 
effective in the long run and much more cost effective in the 
long run than drawing a circle.
    And I understand why you drew the circle, but I am just 
saying those are things we used to do back in the 1970s. We are 
not doing that anymore. If you ran a transportation agency or 
run any kind of marketing group, you know, they would throw you 
overboard if you were drawing circles.
    And I think that what we have to do is identify your 
market, identify the clients you have to serve, and know where 
they are. And then you add in what kind of triage, how you are 
going to do it, and it becomes multidimensional. But you have 
people doing this across the board, very, very sophisticated.
    And I think a lot of the complaints we hear from the Chair 
and from veterans can be addressed to a large degree by looking 
at new modern modeling concepts so that you now know what is 
out there. You are not flying blind and waiting for them to 
come to you. You already know where they are and get out to.
    Thank you. We call it scouting in bow hunting, but you guys 
would not know what I mean.
    The Chairman. Thank you, I think.
    Mr. Buyer.
    Mr. Buyer. Thank you.
    I would like to first address to Ms. Herseth Sandlin, we 
are going to put together a letter to the GAO for an 
independent review. This funding and allocation, this 
flexibility that we have given unto the VISN directors, great 
discretion, we have our questions on allocation on those 
resources.
    But even the Chief Financial Officer here has testified 
that what we have here has been in place since 1997. And so 
when that was put in place, Ms. Herseth Sandlin, in 1997, a lot 
has changed. And so what we have are VERA. We have out of VERA. 
We have specialized.
    We also have this question about the more we sophisticate 
our collections through our Consolidated Patient Accounting 
Centers (CPACs) and we are working on this and the VA is also 
working on how to increase our collections on fee-basis care, 
more money has come in, how do those get allocated. It is all 
part of this. I mean, this is a little more complex than what 
it was when we put it together in 1997.
    And so I think the questions that you asked are very 
similar to what Mr. Michaud has asked and the Chairman, 
everybody has given a pretty good contribution here today and I 
think please work with us. And I would ask you to join with us 
in this review for the GAO. I think it is timely. The last time 
it was done was 5 years ago. And I think it would be good, so I 
welcome the gentlelady for her to join us with that.
    I yield to her.
    Ms. Herseth Sandlin. Would the gentleman yield?
    I would be more than happy to join you in that. You know, 
the situation in South Dakota, we are part of VISN 23, they do 
not use the VERA model. We have a lot of urban and rural parts 
in this VISN.
    And while I think some of the directors of the medical 
centers feel that the funds have been allocated fairly, they 
are not using that model. And I think that there are some 
questions being raised again about the CBOCs that Mr. Michaud 
had pursued and we want to get more information in terms of how 
VISN 23 operates.
    Mr. Buyer. Your VISN director would have to follow the VERA 
model, that they have great discretion with regard to how those 
dollars are then distributed. And that is the core of the 
question that you are asking and Mr. Michaud. And I think that 
is really pertinent for us.
    Ms. Herseth Sandlin. But it also reflects, if the gentleman 
would----
    Mr. Buyer. Yes.
    Ms. Herseth Sandlin [continuing]. Some misunderstanding 
because as we explored this with some of the people that we 
work with in South Dakota, their description of it was 
essentially, and I do not know how much flexibility they are 
using out there, but VISN 23 according to some of the folks we 
talked to does not follow the VERA model very closely, if at 
all.
    And so while there may be a requirement, they are using 
historical data and trends. They are using expected inflation 
numbers to adjust from the previous year's allocation in the 
new fiscal year.
    So, again, as we all get more information from our medical 
centers and what VISN is doing what, it does seem to me just as 
you described the measure of discretion that they have been 
given and how that has modified sort of the expectations or the 
understandings of some of the directors out there of the 
medical centers and how they have adapted to these changes.
    But I think it is very timely not only in the fact that you 
mentioned it has not been done in 5 years, but the dramatic 
increase in funding that we have seen over the last few years 
to get answers to some of the questions we are hearing on the 
ground about what the new hires have been for some of the PTSD 
funding and how that is meeting the needs of the veterans at 
the different centers or CBOCs.
    Mr. Buyer. Let me reclaim my time.
    Ms. Herseth Sandlin. Thank you for yielding.
    Mr. Buyer. I thank the gentlelady's contribution.
    Let me go right to Mr. Finegan. I not only respect your 
intellect, but I also respect your candor. So you have come 
right out of VISN 4, now with VISN 11.
    Can you describe for me the differences between the 
allocation methods in VISN 11 and VISN 4 in the distribution of 
funds to the medical centers?
    Mr. Finegan. Sure. Thank you.
    They are not all that different at the end of the day. 
Every network uses some form of workload, whether it is the 
VERA workload passed down to the facility or more current 
workload or some kind of case mix adjusted something. VISN 4 
uses one. VISN 11 uses one.
    Most every network uses some comparison to last year's 
budget, so any one facility does not get either too much of an 
increase at the expense of another or too little of an increase 
so as not to be able to cover inflation. VISN 4 uses that kind 
of governor and so does VISN 11.
    The actual, I cannot remember, frankly, the actual data 
element for workload that was used in VISN 4, but it was an 
element of workload, either some case mix adjusted workload 
from our data systems or the VERA data, and then the outcome of 
that model is then compared to how much we got in VERA as a 
network and then what is the percent change from last year.
    And so you are either kind of a low capper or a higher 
capper or low floor or high capper depending on how much you 
grew last year. And that same philosophy is what we use in VISN 
11 and in the VISN 2 where I came from and those VISNs that I 
have worked in.
    Mr. Buyer. So, Mr. Michaud, this was the answer to the 
question you were asking earlier, but there are some 
differences.
    And let me go to the Chairman's point of inquiry a little 
bit earlier with regard to performance measures. Are the 
performance measures different from VISN 4 and VISN 11? If so, 
how are they different?
    Mr. Finegan. No. Our executive contract, performance 
contract is the same for all directors across the system. The 
wait times that I mentioned, access in terms of the number of 
days to wait and the mileage and then the quality measures and 
the satisfaction measures.
    Mr. Buyer. So even though you have flexibility and 
discretion, the Central Office gives you these types of 
guidance, i.e., performance measures?
    Mr. Finegan. Right. I call it that there is the tight, 
loose, tight. We have a very tight budget that is given to us 
from Congress. We have some discretion as to how we allocate to 
the facilities, but we are all held very tightly to the 
performance measures. And that is, frankly, what we manage to--
--
    Mr. Buyer. And so let us go to the Chairman's concern. The 
Chairman's concern is that if within a particular region or 
medical center you have some issue, if it comes down from 
Central Office to you, how does it go back up to either alter 
or change a particular measure?
    Mr. Finegan. Well, within the authority that I have in the 
VISN, I can move the money from what VERA would have allocated. 
If VERA was passed down directly to a facility, which is how it 
is built from the ground up, it could allocate right back down 
to a facility.
    The problem with that is our workload is not equally 
distributed among all of our facilities. So a complex 
psychiatric hospital, for example, has a disproportionate share 
of real complex, real expensive patients. A more basic 
hospital, a small general medical hospital has more of what we 
would call the less expensive kinds of patients.
    So VERA, it loses its effectiveness the further down into 
the organization you go. So I have the ability to move the 
money according to where our strategic priorities are and where 
I see potential performance issues. And then if I am running 
short as a network, I have the ability to go into Washington 
and ask for what Mr. Parkis described, either a site review 
team or ask for a supplement if I was inclined to do that.
    Mr. Buyer. Mr. Chairman, with your indulgence, I have two 
questions.
    The last question I would like for you to answer was the 
one that I opened in my opening statement to you, Ms. Reed. But 
I also would like the Chief Financial Officer to comment with 
regard to the funding that is being done here to cover the 
shortfall that you have paying for overtime on the GI Bill 
claims being utilized out of another pot of money.
    Let us go to the question. I want to make sure this is in 
our request for the GAO review and this deals with the 
collections. So as we have also been noticing the increase in 
fee basis and we know that we are in our 4th year on this pilot 
from this company down in Jupiter, Florida, you know, it is 
kind of the challenge we have had all along with information 
technology. I mean, my gosh. We get pilots that just kind of 
continue on and at some point, they have to go to request for 
proposal or you have to change something here.
    But I am getting off on a tangent. We are increasing our 
collections not only on fee-basis care, but also with regard to 
our third-party collections. As we sophisticate and say we are 
done with our CPAC, we have now brought so much more moneys 
into the system, okay, over and above what we even had 
expected.
    So my question is, given the increasing focus on our 
specialized programs, should we be taking a portion of the 
increase in allocations and placing those collections into the 
specialized programs?
    Now, I know VSO partners out there would always say, oh, 
you have to keep it within health care. I understand that. We 
are going to do that. But, you know, when we started this 
process, we said unto the medical directors out there, you 
know, you work hard on your collections and you get to keep the 
money. Well, the world is changing here a little bit. Do we 
need to change our paradigm?
    Mr. Kearns. Well, sir, I would say right now the 
collections and reimbursements, whether reimbursements come 
from sharing that we normally do at DoD, that type of thing, 
those automatically go back to the local facility where it was 
generated.
    So we think that that is the proper incentive. Even under 
the CPAC model where we are going to centralize a lot of the 
collection functions and activity for economy and efficiency, 
where the collection was generated at that facility, the 
collections still go back there. And we do that each month as 
the collections come in.
    Mr. Buyer. I know that.
    Mr. Kearns. Now, I----
    Mr. Buyer. Do we change the paradigm is my question?
    Mr. Kearns [continuing]. I do not know. I guess I would 
suggest if that is to be considered, consider some of the 
potential unintended consequences and incentives.
    The Chairman brought up at the very beginning about the 
three accounts that we have and the comments he received from 
facility directors that they have no flexibility. Within the 
three-account structure, we have a flexibility at the 
appropriation level, so we can make the movements to 
accommodate the facility or the VISN director as long as we do 
not break the overall limits. If we need movement beyond that, 
we do have to come back to the two Appropriations Committees, 
the House and the Senate, to ask permission.
    It would be nice if we had more flexibility in that. The 
last year in the Appropriations Act, we had up to a 1 percent 
threshold between medical services and medical support and 
compliance which was very helpful and we just had to submit 
notification, not ask for permission.
    Anything in or out of the medical facilities account, 
though, we have to ask permission. So that is a restriction 
that does limit our flexibility and our ability to respond to 
the changing needs in the field to support the veterans.
    Mr. Buyer. Do you need a legislative fix with regard to 
your request for increased flexibility or is this something 
that the Secretary can do?
    Mr. Kearns. The Secretary does not have that authority, 
sir, to approve transfers into or out of the medical facility 
account.
    Mr. Buyer. You need a legislative fix? Will you shop that? 
If that is your testimony, would you shop that to the 
Secretary? I mean, either that or we take our own unilateral 
actions at the Committee.
    Mr. Kearns. I think I was just describing a situation, sir, 
that we have. We are operating within it.
    Mr. Buyer. I understand. But, you know, you just provided 
testimony to us with regard to how we can best----
    Mr. Kearns. Yes, sir. Well, I----
    Mr. Buyer [continuing]. Improve the system.
    Mr. Kearns [continuing]. I guess for the record, I would 
suggest or I would offer that I think 2 years ago, we did come 
over with a proposal to combine the two accounts and Congress 
chose not to accept that.
    Mr. Buyer. Well, you know, send it back. Send it back to 
us. Seriously we will take a look at it. Okay?
    Mr. Schoenhard, we are not picking on you. We know you are 
new on the job. But, you know, put your eyes on it for us, give 
us your consideration. You have a lot of intellect and 
experience out there. And the Committee will take a look at 
that.
    The last thing, can you tell us what we are going to do 
here about the accounts, the paying, robbing from Peter to pay 
Paul here with regard to the disability?
    Ms. Reed. Sir, I am sorry. But, quite frankly, I am not 
aware of that situation in detail. It is not something that we 
have discussed at the central level.
    Mr. Buyer. Do you know about it?
    Mr. Kearns. Sir, I am the CFO for the Veterans Health 
Administration. I think you are referring to the Veterans 
Benefit Administration.
    Mr. Buyer. Okay. I will send it over and ask the right 
question to the right person.
    Ms. Reed. And we will get the right people to answer it.
    Mr. Buyer. Okay. All right. Thank you.
    I yield back.
    [The VA subsequently provided the following information:]

          The FY 2009 budget submission requested combining the Medical 
        Services and Medical Administration appropriations into one 
        appropriation. Please see the following cover page of FY 2009 
        President's Budget Submission Vol. 2 of 4, and page 1A-1 
        showing only 2 appropriations (Medical Services with Medical 
        Administration combined with it and Medical Facilities), and 
        page 1C-2 explaining that the Medical Services and Medical 
        Administration were combined.
          The Congress did not accept this proposed combination, but 
        instead continued the three appropriation structure and renamed 
        Medical Administration to Medical Support & Compliance.
          Since that time there have not been any other formal 
        proposals to combine the accounts.
                               __________
                               Cover Page
                       FY 2009 BUDGET SUBMISSION
                  U.S. DEPARTMENT OF VETERANS AFFAIRS
           ``To care for him who shall have borne the battle,
               and for his widow, and his orphan. . . .''
          Medical Programs and Information Technology Programs
                             Volume 2 of 4
                             February 2008
                   2009 Budget Submission, Page 1A-1
    Executive Summary of Medical Care
          Department of Veterans Affairs (VA) is committed to providing 
        veterans and other eligible beneficiaries timely access to 
        high-quality health services. VA's health care mission covers 
        the continuum of care providing inpatient and outpatient care; 
        a wide range of services, such as: pharmacy, prosthetics, and 
        mental health; long-term care in both institutional and non-
        institutional settings; and other health care programs such as 
        CHAMPVA and Readjustment Counseling. VA will meet all of its 
        commitments to treat Operation Enduring Freedom and Operation 
        Iraqi Freedom (OEF/OIF) veterans and servicemembers in 2008 and 
        2009. In meeting our commitment, VA faces many of the same 
        financial challenges as the health care industry in general and 
        some that reflect our unique population of veterans.
          To meet our commitment VA is requesting $41.2 billion in 
        direct appropriation for 2009 for the two medical care 
        appropriations, an increase of nearly $2.3 billion over the 
        2008 level. The direct appropriation includes $2.5 billion in 
        collections, a 5.4-percent increase in the Medical Care 
        Collections Fund. This request supports an increase of 3,076 
        full-time equivalents (FTE) or 1.4 percent over the 2008 
        current estimate of 215,515 FTE. The funding for each of the 
        medical appropriations is displayed in the following table. In 
        the 2009 request, VA is proposing that the Medical 
        Administration appropriation be consolidated into the Medical 
        Services appropriation.

                                          Medical Care Budget Authority
                                             (Dollars in Thousands)
----------------------------------------------------------------------------------------------------------------
                                                                      2008
                                            --------------------------------------------------------------------
                                                              Budget        Current        2009       Increase/
                                              2007 Actual    Estimate      Estimate      Estimate      Decrease
----------------------------------------------------------------------------------------------------------------
Appropriation:
----------------------------------------------------------------------------------------------------------------
Medical Services                              $28,298,231   $30,609,671   $32,500,837   $34,075,503   $1,574,666
----------------------------------------------------------------------------------------------------------------
Medical Facilities                             $3,911,165    $3,592,000    $4,073,182    $4,661,000     $587,818
----------------------------------------------------------------------------------------------------------------
Total Appropriation                           $32,209,396   $34,201,671   $36,574,019   $38,736,503   $2,162,484
----------------------------------------------------------------------------------------------------------------
MCCF Collections                               $2,219,169    $2,352,469    $2,340,787    $2,466,860     $126,073
----------------------------------------------------------------------------------------------------------------
2007 Emergency Supplemental (PL 110-28)        $1,311,778                
----------------------------------------------------------------------------------------------------------------
Total Budget Authority                        $35,740,343   $36,554,140   $38,914,806   $41,203,363   $2,288,557
----------------------------------------------------------------------------------------------------------------
FTE                                               204,574       197,117       215,515       218,591        3,076
----------------------------------------------------------------------------------------------------------------
\1\ FY 2008 Current Estimate does not reflect rescission of $66 million for Polytrauma Center in Medical
  Services.


                Medical Services, Excerpt from Page 1C-2

    Explanation of Change in Appropriation Language
          In the 2009 request, VA is proposing that the Medical 
        Administration appropriation be consolidated into the Medical 
        Services appropriation. Merging these two accounts will improve 
        the execution of our budget and will allow VA to respond 
        rapidly to unanticipated changes in the health care environment 
        throughout the year. This portion of the Medical Services 
        appropriation finances the expenses of management, security, 
        and administration of the VA health care system through the 
        operation of VA medical centers, other facilities, Veterans 
        Integrated Service Network offices and facility Director 
        offices, Chief of Staff operations, quality of care oversight, 
        legal services, billing and coding activities, procurement, 
        financial and human resource management.

    The Chairman. Thank you.
    Let me just make a couple of quick points. Whenever we say 
accountability, you say performance measures. I do not know all 
of your performance measures, but what I heard you describe 
does not sound like they are necessarily appropriate. Somebody 
has to look at that and maybe that is what the GAO should do.
    For example, the first thing you said was access. You are 
talking about the data you have of people enrolled in the 
system who come to the VA. What about the ones who cannot get 
there because they do not have access? You are measuring access 
and you are not including people who have no access. Do you see 
what I mean?
    I do not know if that is right or wrong. I am just taking 
what you said in your testimony. It sounds to me like that is 
not a good performance measure of access.
    Do you have a comment on that? Are you only measuring those 
enrolled and who come----
    Mr. Finegan. No. We actually----
    The Chairman [continuing]. And ask for an appointment so 
you can measure the days?
    Mr. Finegan. We actually have data on veteran population by 
zip code and by county. And so I measure market penetration 
which is total enrollment as a percentage of total veterans who 
live in a county.
    And, frankly, VISN 11 is the lowest in the country. And so 
I have set targets at several percentage points higher than 
where we are now and that informs where I draw my circles and 
where I start to put my clinic applications in an attempt to 
get at those pockets of veterans who do not right now, are 
not----
    The Chairman. It does not sound like the measure gets down 
to the bottom of the issue. Every time VA did a study for a 
CBOC in one of my counties, they would say, well, you do not 
have enough enrolled veterans. Well, I kept saying build it and 
they will come. I forget what the measure was you needed, say 
11,000 and there were only 7,000. Well, as soon as they built 
it, 15,000 came.
    Everybody kept saying you only have 7,000, you only have 
7,000. But I knew there were more veterans there and I assume 
you did too. Why was that not used in a CBOC determination?
    Mr. Finegan. I cannot speak to the policy, but I think the 
value in looking at the market penetration gets at exactly what 
Mr. Michaud was mentioning with----
    The Chairman. Yes, but I would like to see some----
    Mr. Finegan [continuing]. Those that do not have access.
    The Chairman [continuing]. We would all like to see some of 
that data relative to where facilities are located. It seems to 
me to be primary.
    Every one of us has heard people testify here and almost 
everyone who asked a question said our local people think they 
are not getting the resources that you all appropriated. We had 
a 40-percent increase, right? They do not see that they are not 
hiring 40 percent more psychiatrists. They do not have 40 
percent more of everything.
    What is going on between what we did and what they feel or 
see? Are they just not seeing the whole picture? What is going 
on there, assuming we are accurate or they are? Maybe we are 
getting wrong information.
    Everywhere we go, we do not see the increase in our 
hospitals, whether it is staffing or space or access. We keep 
talking about how we added $20 billion more. Where is it going? 
That is what the medical directors are asking us.
    Mr. Schoenhard. Sir, Mr. Kearns may want to comment on this 
more, but we are committed in VHA to getting the money to 
service the veterans. And Mr. Kearns may want to speak a little 
bit about some of what----
    The Chairman. Can you tell me right now, whether there are 
158 medical centers?
    Mr. Schoenhard. One hundred fifty-three, sir.
    The Chairman. One hundred fifty-three. Can you tell me 
immediately from a computer, what the budget is for each of 
those 153 medical centers and compare it with last year's 
budget? Certainly you should be able to do that. I will bet 
they do not reach some of the levels that we have been talking 
about here. I just have a sense of that, but can you do that?
    Mr. Schoenhard. I think that will be--yes.
    Mr. Kearns. Yes, sir, we can provide that to you. And you 
will find that probably almost half of them had a larger 
increase and the others had a smaller increase. And much of the 
time, it was due to changes in workload. Sometimes you will see 
facility projects that are at one facility, one-time purchases 
that were not the next year, but we can provide that 
information.
    And I think to say also, I think maybe what you might be 
hearing sometimes is we have a multi-step process of how the 
funds are allocated. The majority go out in VERA. But then 
separately after we get the appropriation, funds go out that 
are specifically targeted for such things as prosthetics, about 
$1.8 billion, and then the salaries of the clinical trainees 
from the local medical schools that work in our facilities, 
they go out separately.
    Then last year, Congress tagged certain additional items 
that had to go out separately. So I think sometimes what you 
hear is a comparison of the initial allocation rather than the 
ultimate allocation. And also some facility directors----
    The Chairman. Most of them are more sophisticated than that 
to tell us.
    Mr. Kearns [continuing]. And sometimes the facility 
directors will not include the collections money that is theirs 
in their analysis and those are increasing.
    [The VA subsequently provided the following information:]

          Fifty-six percent of requests for Mill Bill Claims were 
        granted for FY 2008. The percentage is based on FY 2008 Mill 
        Bill Data, the most recent data available. The percentage 
        reflects the percentage of approved fee claims versus total 
        claims received.
          Data for every VAMC (153) on their change in budget from FY 
        2008 to FY 2009 follows:



--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Obligations as of September 30 (Millions)                                        Change
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  VISN                     Station             Name             FY 2008      FY 2009       Amount        %              Comment
--------------------------------------------------------------------------------------------------------------------------------------------------------
1                                              402   TOGUS                        $222.7       $240.0        $17.2       7.7%
------------------------------------------------------------------------------------------------------------------------------
1                                              405   WHITE RIVER JCT              $141.3       $152.7        $11.3       8.0%
------------------------------------------------------------------------------------------------------------------------------
1                                              518   BEDFORD                      $153.8       $177.3        $23.5      15.3%
------------------------------------------------------------------------------------------------------------------------------
1                                              523   VA BOSTON HCS                $552.8       $609.5        $56.7      10.3%
------------------------------------------------------------------------------------------------------------------------------
1                                              608   MANCHESTER                   $113.0       $129.0        $15.9      14.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1                                              631   NORTHAMPTON                  $108.5       $107.6        -$0.9      -0.8%  $7.9 million of one-time
                                                                                                                                non-recurring
                                                                                                                                maintenance requirements
                                                                                                                                funded in FY 2008 did
                                                                                                                                not require funding in
                                                                                                                                FY 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
1                                              650   PROVIDENCE                   $178.7       $199.4        $20.7      11.6%
------------------------------------------------------------------------------------------------------------------------------
1                                              689   VA CONN HCS                  $396.9       $430.9        $34.0       8.6%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 1                                                                    $1,867.9     $2,046.3       $178.4       9.6%
-------------------------------------------------------------------------------------------------------
2                                              528   UPSTATE NY HCS               $937.5     $1,013.0        $75.5       8.1%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 2                                                                      $937.5     $1,013.0        $75.5       8.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                              526   BRONX                        $250.2       $255.5         $5.3       2.1%  $2.0 million of one-time
                                                                                                                                non-recurring
                                                                                                                                maintenance requirements
                                                                                                                                funded in FY 2008 did
                                                                                                                                not require funding in
                                                                                                                                FY 2009, $4.1 million of
                                                                                                                                one-time equipment
                                                                                                                                replacement/refresh in
                                                                                                                                FY 2008 reduced the FY
                                                                                                                                2009 need, and change to
                                                                                                                                market-based acquisition
                                                                                                                                of natural gas reduced
                                                                                                                                requirement by $2.0
                                                                                                                                million in FY 2009 as
                                                                                                                                compared to FY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                              561   VA NEW JERSEY HCS            $426.3       $453.7        $27.4       6.4%
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                              620   VA HUDSON VALLEY HCS         $213.1       $215.7         $2.6       1.2%  $13.3 million of one-time
                                                                                                                                non-recurring
                                                                                                                                maintenance requirements
                                                                                                                                funded in FY 2008 did
                                                                                                                                not require funding in
                                                                                                                                FY 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                              630   VA NY HARBOR HCS             $621.2       $659.4        $38.2       6.1%
------------------------------------------------------------------------------------------------------------------------------
3                                              632   NORTHPORT                    $253.9       $268.9        $15.0       5.9%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 3                                                                    $1,764.8     $1,853.2        $88.4       5.0%
-------------------------------------------------------------------------------------------------------
4                                              460   WILMINGTON                   $142.8       $154.7        $11.9       8.3%
------------------------------------------------------------------------------------------------------------------------------
4                                              503   ALTOONA                       $96.1       $109.0        $12.8      13.4%
------------------------------------------------------------------------------------------------------------------------------
4                                              529   BUTLER                        $79.4        $94.3        $15.0      18.8%
------------------------------------------------------------------------------------------------------------------------------
4                                              540   CLARKSBURG                   $120.3       $142.7        $22.4      18.6%
------------------------------------------------------------------------------------------------------------------------------
4                                              542   COATESVILLE                  $162.0       $170.7         $8.7       5.3%
------------------------------------------------------------------------------------------------------------------------------
4                                              562   ERIE                          $99.7       $108.7         $8.9       8.9%
------------------------------------------------------------------------------------------------------------------------------
4                                              595   LEBANON                      $201.2       $227.1        $25.9      12.9%
------------------------------------------------------------------------------------------------------------------------------
4                                              642   PHILADELPHIA                 $362.0       $401.0        $39.0      10.8%
------------------------------------------------------------------------------------------------------------------------------
4                                              646   VA PITTSBURGH HCS            $465.0       $514.9        $49.9      10.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
4                                              693   WILKES BARRE                 $185.2       $189.9         $4.7       2.5%  $4.7 million of equipment
                                                                                                                                replaced/refreshed in FY
                                                                                                                                2008, coupled with a
                                                                                                                                similar amount in FY
                                                                                                                                2007, reduced the FY
                                                                                                                                2009 need
--------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 4                                                                    $1,913.6     $2,112.8       $199.2      10.4%
-------------------------------------------------------------------------------------------------------
5                                              512   VA MARYLAND HCS              $453.5       $496.0        $42.5       9.4%
------------------------------------------------------------------------------------------------------------------------------
5                                              613   MARTINSBURG                  $236.3       $254.6        $18.3       7.7%
------------------------------------------------------------------------------------------------------------------------------
5                                              688   WASHINGTON                   $374.0       $413.2        $39.2      10.5%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 5                                                                    $1,063.9     $1,163.8       $100.0       9.4%
-------------------------------------------------------------------------------------------------------
6                                              517   BECKLEY                       $90.2       $104.1        $14.0      15.5%
------------------------------------------------------------------------------------------------------------------------------
6                                              558   DURHAM                       $359.5       $403.1        $43.7      12.1%
------------------------------------------------------------------------------------------------------------------------------
6                                              565   FAYETTEVILLE, NC             $172.6       $186.9        $14.3       8.3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
6                                              590   HAMPTON                      $228.4       $233.9         $5.5       2.4%  Centralized acquisition
                                                                                                                                site for one-time $20.3
                                                                                                                                million investment in
                                                                                                                                furnishings and fixtures
                                                                                                                                for VISN-wide refresh of
                                                                                                                                patient waiting areas,
                                                                                                                                CBOCs, education and
                                                                                                                                employment areas for
                                                                                                                                applicants
--------------------------------------------------------------------------------------------------------------------------------------------------------
6                                              637   ASHEVILLE                    $206.5       $228.7        $22.2      10.8%
------------------------------------------------------------------------------------------------------------------------------
6                                              652   RICHMOND                     $325.9       $365.0        $39.2      12.0%
------------------------------------------------------------------------------------------------------------------------------
6                                              658   SALEM                        $243.3       $266.0        $22.7       9.3%
------------------------------------------------------------------------------------------------------------------------------
6                                              659   SALISBURY                    $342.8       $375.2        $32.3       9.4%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 6                                                                    $1,969.2     $2,163.0       $193.8       9.8%
-------------------------------------------------------------------------------------------------------
7                                              508   ATLANTA                      $444.5       $484.3        $39.8       9.0%
------------------------------------------------------------------------------------------------------------------------------
7                                              509   AUGUSTA                      $324.6       $346.6        $22.0       6.8%
------------------------------------------------------------------------------------------------------------------------------
7                                              521   BIRMINGHAM                   $317.8       $331.0        $13.2       4.2%
------------------------------------------------------------------------------------------------------------------------------
7                                              534   CHARLESTON                   $255.5       $268.2        $12.7       5.0%
------------------------------------------------------------------------------------------------------------------------------
7                                              544   COLUMBIA, SC                 $307.8       $334.8        $27.0       8.8%
------------------------------------------------------------------------------------------------------------------------------
7                                              557   DUBLIN                       $160.1       $170.8        $10.7       6.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
7                                              619   VA CENT AL VET HCS           $222.3       $224.2         $1.9       0.9%  $8.4 million of one-time
                                                                                                                                equipment replacement/
                                                                                                                                refresh in FY 2008
                                                                                                                                reduced the FY 2009 need
--------------------------------------------------------------------------------------------------------------------------------------------------------
7                                              679   TUSCALOOSA                   $129.3       $136.5         $7.3       5.6%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 7                                                                    $2,161.8     $2,296.4       $134.6       6.2%
-------------------------------------------------------------------------------------------------------
8                                              516   BAY PINES                    $526.7       $564.8        $38.2       7.2%
------------------------------------------------------------------------------------------------------------------------------
8                                              546   MIAMI                        $407.6       $424.4        $16.8       4.1%
------------------------------------------------------------------------------------------------------------------------------
8                                              548   PALM BCH GRDNS               $327.6       $340.7        $13.1       4.0%
------------------------------------------------------------------------------------------------------------------------------
8                                              573   N FL/S GA HCS                $708.9       $785.4        $76.4      10.8%
------------------------------------------------------------------------------------------------------------------------------
8                                              672   SAN JUAN                     $440.6       $482.0        $41.4       9.4%
------------------------------------------------------------------------------------------------------------------------------
8                                              673   TAMPA                        $720.1       $802.5        $82.3      11.4%
------------------------------------------------------------------------------------------------------------------------------
8                                              675   ORLANDO                      $172.9       $215.3        $42.4      24.5%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 8                                                                    $3,304.5     $3,615.1       $310.6       9.4%
-------------------------------------------------------------------------------------------------------
9                                              581   HUNTINGTON                   $175.9       $189.5        $13.6       7.8%
------------------------------------------------------------------------------------------------------------------------------
9                                              596   LEXINGTON                    $256.3       $277.4        $21.1       8.2%
------------------------------------------------------------------------------------------------------------------------------
9                                              603   LOUISVILLE                   $243.1       $262.0        $18.9       7.8%
------------------------------------------------------------------------------------------------------------------------------
9                                              614   MEMPHIS                      $310.1       $347.5        $37.4      12.1%
------------------------------------------------------------------------------------------------------------------------------
9                                              621   MOUNTAIN HOME                $266.0       $301.1        $35.2      13.2%
------------------------------------------------------------------------------------------------------------------------------
9                                              626   MID TENN HCS                 $531.0       $580.3        $49.2       9.3%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 9                                                                    $1,782.3     $1,957.8       $175.4       9.8%
-------------------------------------------------------------------------------------------------------
10                                             538   CHILLICOTHE                  $163.0       $190.2        $27.2      16.7%
------------------------------------------------------------------------------------------------------------------------------
10                                             539   CINCINNATI                   $287.3       $328.3        $41.0      14.3%
------------------------------------------------------------------------------------------------------------------------------
10                                             541   CLEVELAND                    $599.2       $683.2        $84.0      14.0%
------------------------------------------------------------------------------------------------------------------------------
10                                             552   DAYTON                       $259.8       $286.6        $26.8      10.3%
------------------------------------------------------------------------------------------------------------------------------
10                                             757   COLUMBUS VAOPC               $135.5       $153.6        $18.1      13.4%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 10                                                                   $1,444.8     $1,641.9       $197.1      13.6%
-------------------------------------------------------------------------------------------------------
11                                             506   VA ANN ARBOR HCS             $262.0       $305.1        $43.1      16.4%
------------------------------------------------------------------------------------------------------------------------------
11                                             515   BATTLE CREEK                 $206.7       $219.8        $13.1       6.3%
------------------------------------------------------------------------------------------------------------------------------
11                                             550   DANVILLE                     $164.1       $200.0        $35.8      21.8%
------------------------------------------------------------------------------------------------------------------------------
11                                             553   DETROIT                      $255.8       $283.6        $27.9      10.9%
------------------------------------------------------------------------------------------------------------------------------
11                                             583   INDIANAPOLIS                 $335.8       $380.1        $44.4      13.2%
------------------------------------------------------------------------------------------------------------------------------
11                                             610   VA N INDIANA HCS             $181.8       $209.5        $27.7      15.3%
------------------------------------------------------------------------------------------------------------------------------
11                                             655   SAGINAW                      $123.7       $140.3        $16.6      13.5%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 11                                                                   $1,529.8     $1,738.4       $208.6      13.6%
-------------------------------------------------------------------------------------------------------
12                                             537   CHICAGO HCS                  $319.5       $341.6        $22.1       6.9%
------------------------------------------------------------------------------------------------------------------------------
12                                             556   NORTH CHICAGO                $206.4       $221.7        $15.2       7.4%
------------------------------------------------------------------------------------------------------------------------------
12                                             578   HINES                        $475.9       $495.5        $19.6       4.1%
------------------------------------------------------------------------------------------------------------------------------
12                                             585   IRON MOUNTAIN                 $88.6       $102.1        $13.5      15.2%
------------------------------------------------------------------------------------------------------------------------------
12                                             607   MADISON                      $236.7       $251.4        $14.7       6.2%
------------------------------------------------------------------------------------------------------------------------------
12                                             676   TOMAH                        $106.8       $116.5         $9.7       9.1%
------------------------------------------------------------------------------------------------------------------------------
12                                             695   MILWAUKEE                    $411.3       $442.8        $31.5       7.7%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 12                                                                   $1,845.2     $1,971.5       $126.3       6.8%
-------------------------------------------------------------------------------------------------------
15                                             589   VA HEARTLAND WEST            $887.4       $929.0        $41.6       4.7%
------------------------------------------------------------------------------------------------------------------------------
15                                             657   VA HEARTLAND EAST            $674.9       $750.4        $75.5      11.2%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 15                                                                   $1,562.3     $1,679.4       $117.1       7.5%
-------------------------------------------------------------------------------------------------------
16                                             502   ALEXANDRIA                   $166.0       $185.3        $19.3      11.6%
------------------------------------------------------------------------------------------------------------------------------
16                                             520   VA GULF COAST VHCS           $286.9       $303.0        $16.1       5.6%
------------------------------------------------------------------------------------------------------------------------------
16                                             564   FAYETTEVILLE, AR             $178.3       $213.0        $34.6      19.4%
------------------------------------------------------------------------------------------------------------------------------
16                                             580   HOUSTON                      $580.1       $623.7        $43.7       7.5%
------------------------------------------------------------------------------------------------------------------------------
16                                             586   JACKSON                      $298.8       $333.0        $34.2      11.4%
------------------------------------------------------------------------------------------------------------------------------
16                                             598   LITTLE ROCK                  $446.8       $507.2        $60.4      13.5%
------------------------------------------------------------------------------------------------------------------------------
16                                             623   MUSKOGEE                     $165.3       $206.5        $41.2      24.9%
------------------------------------------------------------------------------------------------------------------------------
16                                             629   SE LOUISIANA VHCS            $216.9       $268.9        $52.0      24.0%
------------------------------------------------------------------------------------------------------------------------------
16                                             635   OKLAHOMA CITY                $327.3       $390.4        $63.2      19.3%
------------------------------------------------------------------------------------------------------------------------------
16                                             667   SHREVEPORT                   $219.7       $229.4         $9.7       4.4%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 16                                                                   $2,886.0     $3,260.4       $374.4      13.0%
-------------------------------------------------------------------------------------------------------
17                                             549   VA N TEXAS HCS               $671.3       $729.8        $58.5       8.7%
------------------------------------------------------------------------------------------------------------------------------
17                                             671   VA S TEXAS HCS               $553.4       $657.8       $104.4      18.9%
------------------------------------------------------------------------------------------------------------------------------
17                                             674   VA CENT TEXAS HCS            $439.9       $509.3        $69.4      15.8%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 17                                                                   $1,664.6     $1,896.8       $232.3      14.0%
-------------------------------------------------------------------------------------------------------
18                                             501   NEW MEXICO VAHCS             $324.6       $342.2        $17.6       5.4%
------------------------------------------------------------------------------------------------------------------------------
18                                             504   AMARILLO VAHCS               $145.2       $156.9        $11.7       8.1%
------------------------------------------------------------------------------------------------------------------------------
18                                             519   BIG SPRING                    $89.0        $95.3         $6.3       7.1%
------------------------------------------------------------------------------------------------------------------------------
18                                             644   PHOENIX                      $379.1       $408.5        $29.4       7.8%
------------------------------------------------------------------------------------------------------------------------------
18                                             649   PRESCOTT                     $127.5       $138.9        $11.4       8.9%
------------------------------------------------------------------------------------------------------------------------------
18                                             678   TUCSON                       $302.3       $354.8        $52.5      17.4%
------------------------------------------------------------------------------------------------------------------------------
18                                             756   EL PASO VAHCS                $100.9       $129.9        $29.0      28.7%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 18                                                                   $1,468.5     $1,626.4       $157.9      10.8%
-------------------------------------------------------------------------------------------------------
19                                             436   VA MONTANA HCS               $144.2       $162.0        $17.8      12.4%
------------------------------------------------------------------------------------------------------------------------------
19                                             442   CHEYENNE                      $85.0        $96.2        $11.2      13.2%
------------------------------------------------------------------------------------------------------------------------------
19                                             554   E COLORADO HCS               $394.8       $425.3        $30.5       7.7%
------------------------------------------------------------------------------------------------------------------------------
19                                             575   GRAND JUNCTION                $78.0        $80.7         $2.7       3.4%
------------------------------------------------------------------------------------------------------------------------------
19                                             660   SALT LAKE CITY               $295.5       $321.8        $26.3       8.9%
------------------------------------------------------------------------------------------------------------------------------
19                                             666   SHERIDAN                      $78.4        $81.5         $3.1       4.0%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 19                                                                   $1,075.9     $1,167.5        $91.6       8.5%
-------------------------------------------------------------------------------------------------------
20                                             463   ANCHORAGE                    $116.9       $131.4        $14.5      12.4%
------------------------------------------------------------------------------------------------------------------------------
20                                             531   BOISE                        $130.4       $151.3        $20.9      16.0%
------------------------------------------------------------------------------------------------------------------------------
20                                             648   PORTLAND                     $446.0       $503.4        $57.4      12.9%
------------------------------------------------------------------------------------------------------------------------------
20                                             653   ROSEBURG                     $125.4       $134.0         $8.7       6.9%
------------------------------------------------------------------------------------------------------------------------------
20                                             663   PUGET SOUND HCS              $535.2       $557.4        $22.2       4.1%
------------------------------------------------------------------------------------------------------------------------------
20                                             668   SPOKANE                      $124.7       $133.1         $8.5       6.8%
------------------------------------------------------------------------------------------------------------------------------
20                                             687   WALLA WALLA                   $71.4        $77.5         $6.1       8.5%
------------------------------------------------------------------------------------------------------------------------------
20                                             692   WHITE CITY                    $72.1        $77.1         $4.9       6.8%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 20                                                                   $1,622.0     $1,765.2       $143.2       8.8%
-------------------------------------------------------------------------------------------------------
21                                             358   MANILA                         $9.1         $9.9         $0.8       8.3%
------------------------------------------------------------------------------------------------------------------------------
21                                             459   HONOLULU                     $148.7       $168.5        $19.8      13.3%
------------------------------------------------------------------------------------------------------------------------------
21                                             570   FRESNO                       $159.2       $164.7         $5.4       3.4%
------------------------------------------------------------------------------------------------------------------------------
21                                             612   N CAL HLTH CARE              $424.4       $461.8        $37.4       8.8%
------------------------------------------------------------------------------------------------------------------------------
21                                             640   VA PALO ALTO HCS             $628.6       $694.8        $66.2      10.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
21                                             654   SIERRA NEVADA HCS            $198.4       $192.7        -$5.7      -2.9%  $24.6 million of one-time
                                                                                                                                non-recurring
                                                                                                                                maintenance requirements
                                                                                                                                funded in FY 2008 did
                                                                                                                                not require funding in
                                                                                                                                FY 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
21                                             662   SAN FRANCISCO                $431.5       $435.3         $3.9       0.9%  $25.4 million of one-time
                                                                                                                                non-recurring
                                                                                                                                maintenance requirements
                                                                                                                                funded in FY 2008 did
                                                                                                                                not require funding in
                                                                                                                                FY 2009; $2.1 million
                                                                                                                                one-time build-out cost
                                                                                                                                for Santa Rosa CBOC in
                                                                                                                                FY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 21                                                                   $2,000.0     $2,127.7       $127.8       6.4%
-------------------------------------------------------------------------------------------------------
22                                             593   LAS VEGAS                                                          11.7%
------------------------------------------------------------------------------------------------------------------------------
22                                             600   LONG BEACH                   $384.4       $400.2        $15.8       4.1%
------------------------------------------------------------------------------------------------------------------------------
22                                             605   LOMA LINDA                   $397.0       $432.8        $35.8       9.0%
------------------------------------------------------------------------------------------------------------------------------
22                                             664   SAN DIEGO                    $437.8       $465.5        $27.7       6.3%
------------------------------------------------------------------------------------------------------------------------------
22                                             691   LA HCS                       $705.8       $779.3        $73.4      10.4%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 22                                                                   $2,183.4     $2,366.4       $183.0       8.4%
-------------------------------------------------------------------------------------------------------
23                                             437   FARGO                        $139.7       $162.5        $22.8      16.3%
------------------------------------------------------------------------------------------------------------------------------
23                                             438   SIOUX FALLS                  $136.3       $141.4         $5.1       3.7%
------------------------------------------------------------------------------------------------------------------------------
23                                             568   VA BLACK HILLS HCS           $156.3       $168.7        $12.4       7.9%
------------------------------------------------------------------------------------------------------------------------------
23                                             618   MINNEAPOLIS                  $587.8       $610.8        $23.1       3.9%
------------------------------------------------------------------------------------------------------------------------------
23                                             636   NEB-W IOWA HCS               $709.4       $785.4        $76.1      10.7%
------------------------------------------------------------------------------------------------------------------------------
23                                             656   ST CLOUD                     $158.6       $180.1        $21.5      13.6%
------------------------------------------------------------------------------------------------------------------------------
TOTAL VISN 23                                                                   $1,887.9     $2,048.9       $161.0       8.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
VA HQS, CHAMPVA AND OTHER                                                       $1,452.0     $1,712.6       $260.6      17.9%  Increase driven by
                                                                                                                                centralized Fee Care
                                                                                                                                payments and activation
                                                                                                                                of CPACs
--------------------------------------------------------------------------------------------------------------------------------------------------------
VHA TOTAL                                                                      $39,388.0    $43,224.7     $3,836.8       9.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Chairman. All right. I yield to Mr. Buyer for a 
question.
    Mr. Buyer. Mr. Chairman, you asked a really good question.
    Let me go right to Mr. Finegan. The difference between your 
budget from last year to this year and what did you do with any 
increase? Tell me the difference. Do you know?
    Mr. Finegan. From 2008 to 2009 was 8.7 percent all in. Part 
of what I think Mr. Kearns was describing was the closest 
apples to apples comparison we make is last year's VERA to this 
year's VERA. But what happens after that is money comes in for 
prosthetics and some of the----
    Mr. Buyer. That is all non-VERA?
    Mr. Finegan. That is all non-VERA. Some of the centrally 
driven initiatives and that takes that VERA allocation and 
steps it up several percentage points.
    Mr. Buyer. So your VERA allocation--no. All in is 8 percent 
or all in is approximately what?
    Mr. Finegan. Pardon me?
    Mr. Buyer. That is approximately what kind of dollar 
figure?
    Mr. Finegan. In terms of dollar? Well, let us see.
    Mr. Buyer. Just a ballpark.
    Mr. Finegan. A couple hundred million.
    The Chairman. A couple hundred million?
    Mr. Finegan. We are at $1.3 billion in my network all 
inclusive. And so I cannot do that math in my head.
    Mr. Buyer. No. That is okay.
    The Chairman. All VISN directors should be able to do that 
in their head.
    Mr. Finegan. My kids might be watching on the Internet, 
sir.
    The Chairman. I am watching.
    Mr. Buyer. With regard to the allocation of the increase 
that came, let me ask the Chief Financial Officer here, do you 
know approximately how much of this went into non-VERA?
    Mr. Kearns. From last year, yes, sir.
    Mr. Buyer. Yes.
    Mr. Kearns. There were specific items that Congress 
targeted that would not be in VERA. I think it was $300 million 
of nonrecurring maintenance, $200 million of fee-basis care, 
and then the additional money that we got for the Priority 8 
increased enrollment. And all that, it went out separately, but 
it was not----
    The Chairman. But that is not a lot compared to the 
increase you got.
    Mr. Kearns. It is not a lot, no, sir. Well, it was the bulk 
of the--last year, as I recall, the increase over the 
President's budget was approximately, I think it was $1.5 
billion, if I recall. And most of it was all targeted by 
Congress to go out a special way. And we did comply with that.
    Mr. Finegan. It was a $100 million, sir. I had it right in 
front of me.
    Mr. Buyer. One hundred million dollars?
    Mr. Finegan. One hundred million dollars was the increase 
from 2008 to 2009, all inclusive. That was construction, 
equipment, and operating funds.
    Mr. Buyer. That is not a lot.
    The Chairman. It just does not sound like a lot compared to 
what we thought we appropriated.
    Mr. Buyer. Well, this included construction?
    Mr. Finegan. Not major and minor. Just NRM construction.
    Mr. Buyer. It does not include nonrecurring maintenance?
    Mr. Finegan. It does include nonrecurring maintenance. It 
does not include major or minor construction.
    Mr. Buyer. Well, that would account for some of the 
increase.
    Can I ask----
    The Chairman. Sure.
    Mr. Buyer. Mr. Finegan, I need to ask you this specific 
question. If we are going to be increasing non-VERA more 
specialized, go back to this collections question, should we be 
dedicating? I mean, we can do specifically from the Committee 
in our authorization that a specific percentage of allocation 
of our increases here in collections from the Central Office go 
to a specific cause. Should we be doing that?
    Mr. Finegan. I feel very strongly in the incentives right 
now. I have seen growth in collections by targeting it to the 
facility. The whole facility gets around the concept of better 
documentation, quicker billing, better collections. They see 
the little thermometer in the facilities showing the increases 
in collections and how that can be plowed into local 
initiatives at the facility.
    So I think any change to that would have unintended 
consequences that I would not recommend.
    The Chairman. I will end the hearing by thanking Mr. Buyer 
for his initiative on the GAO letter. We will work together 
with you. Accountability is difficult to evaluate on your own. 
We would evaluate ourselves different by than our voters, for 
example. I appreciate the initiative, and we appreciate you 
being here today and look forward to working with you in the 
future.
    This hearing is adjourned.
    [Whereupon, at 12:08 p.m., the Committee was adjourned.]



                            A P P E N D I X

                              ----------                              

            Prepared Statement of Hon. Bob Filner, Chairman,
                     Committee on Veterans' Affairs
    I would like to thank everyone for attending the hearing today. 
Recently, I have become aware of potential issues which suggest that 
Federal funds may not be flowing to the local VA facilities in the most 
efficient and effective manner to best serve our veterans. This is a 
concern for me, since I have worked alongside my colleagues to provide 
for a robust VA medical care budget. In fact, appropriations for VA 
medical care have increased over 40 percent since I assumed leadership 
as the Chairman of this Committee.
    The purpose of this hearing is to ensure that appropriated Federal 
dollars reach the local VA medical centers. This requires a good 
understanding of how the 21 VISNs distribute the appropriated Federal 
dollars to the local medical centers and how the VA tracks the dollars 
spent at the local level.
    It also requires a good understanding of the budget planning 
process and how the VA central office involves the VISNs and the local 
medical centers to determine the resources needed to provide proper 
medical care to our veterans.
    Some local VA medical centers claim that their allocations from the 
VISNs have either remained stagnant or have not been proportional to 
the unprecedented increase in overall funding for VA medical care. At 
this time, we are not able to examine these anecdotal concerns without 
a full understanding of the rationale that the VISNs use for allocating 
funds to the VA medical centers. Through today's hearing, my goal is to 
learn more about the decision-making process that the VISNs use for 
distributing the appropriated dollars to the local medical centers.
    In the VA medical centers that serve the veterans in my district, I 
understand that there is a hiring freeze which may be linked to the 
growing queues that our veterans face for mental health care 
appointments. We have reports that the hiring freeze is not limited to 
mental health professionals and is VISN-wide.
    Also, we have heard that this VISN-wide hiring freeze may have 
resulted from one particular medical center going over its budget in 
fiscal year 2009. This raises questions about how the VISNs track the 
funds that the local medical centers spend and whether VISNs are able 
to predict and prevent funding shortfalls at the local level before 
they occur.
    Through this hearing, I plan to explore who decides how to 
prioritize, spend, and track the funding that the local medical centers 
receive from the VISNs. I would also like to uncover how the VA central 
office, VISNs, and local medical centers plan and execute budgets, and 
manage potential funding shortfalls.
    Finally, in a September 2008 report, the Government Accountability 
Office found that VA policies and procedures were not designed to 
provide adequate controls over the authorization and use of 
miscellaneous obligations, which totaled about $7 billion in FY 2007. 
The flaws in the design of the internal control system increased the 
VA's risk for fraud, waste, and abuse. Through today's hearing, we will 
examine whether the VA has an internal budget control system that is 
strong enough to track, account for, and safeguard the flow of Federal 
dollars to the local VA medical centers.
    I look forward to hearing from our witnesses as we work together to 
provide the best health care to our veterans by ensuring that 
appropriated Federal dollars reach VA medical centers in the most 
sensible and effective manner.

                                 
              Prepared Statement of Hon. Harry E. Mitchell
    Thank you Mr. Chairman.
    I would also like to thank our distinguished panels for joining us 
today to discuss our priorities for the VA going forward.
    This year's veteran's budget has increased the investment in 
veterans' health care and services by 60 percent since January 2007, 
including the largest single increase in the 78-year history of the VA.
    This funding has strengthened health care for more than 5 million 
veterans, resulting in the addition of 17,000 new doctors and nurses, 
and more Community-Based Outpatient Clinics and new Vet Centers.
    It has been critical to meeting the needs of the 363,000 veterans 
returning from Iraq and Afghanistan in need of care over the last 3 
years. This funding also is expanding mental health screening and 
treatment--vital to the many veterans suffering from PTSD and Traumatic 
Brain Injury.
    I am very proud of that legislation, and I know it will make a 
difference in the lives of millions of veterans and their families.
    And while it represents an important step forward, I think we can 
all agree that we need to do more.
    Unfortunately, we already know that our veterans are facing a host 
of challenges. They're encountering unacceptable wait times for care, 
questions about the safety of their personal information, and 
difficulties accessing their medical records from the Department of 
Defense, just to name a few. We have an obligation to work together to 
address these issues.
    We also have an obligation to provide the resources necessary to 
help veterans cope with the new and different kinds of injuries they 
are suffering in Iraq and Afghanistan.
    We need to ensure that they have access to treatments for traumatic 
brain injury and post-traumatic stress disorder, as well as the latest 
in prosthetic technology.
    We clearly have a lot of work to do, and that's why I am looking 
forward to today's hearing. I yield back.
                                 
    Prepared Statement of Clyde L. Parkis Sebastian, FL, and Former
       Director, Veterans Integrated Service Network 10, Veterans
  Affairs Health Care System of Ohio, Veterans Health Administration,
                  U.S. Department of Veterans Affairs
    The VERA (Veterans Equitable Resource Allocation) workload 
methodology is broken into two categories: BASIC and COMPLEX.

      BASIC is further broken down into six groups composed of 
30 classes, mostly outpatient care and short-stay inpatient care 
(surgeries).
      COMPLEX is further broken down into five groups in FY 
2010, composed of 24 classes, mostly inpatient mental health and long-
term nursing home care (now called Community Living Centers).

    The Allocation Resource Center (ARC) has identified reimbursement/
funding rates for the 11 Basic and Complex groups. These rates are the 
same for all VISNs. The rates are based on average costs of the classes 
that are assigned to each group, and cost relationships to the other 
groups.
    VERA distributes funding to the 21 VISNs by a workload-based 
methodology. The overriding premise is that all VISNs are large enough 
to provide a similar continuum of care to the veteran patient 
population, i.e., each VISN provides the same care as every other VISN. 
Therefore, a workload-based methodology would be a fair and consistent 
approach for funding distribution to all VISNs.
    However, there are a few identified factors that are necessary for 
consideration to level the playing field. These are salary and other 
cost factors that differ across the country, and the difference in 
commitment to other missions of the VA such as Research and Education.
    Patients (workload) are counted based on 1) where they receive 
their care, and 2) the attributed costs incurred. If all care is 
provided at one site, then that site receives credit for 1.0 patient. 
If care is provided at more than one site, whether inside the VISN or 
not, that one unit of credit is split, based upon the costs incurred at 
each site. So, if the first site sees the patient for 10 outpatient 
visits and then the patient goes for surgery to a second site, and the 
second site incurs 85 percent of the cost to care for that patient 
during the fiscal year, then the second site would receive 0.85 of a 
patient count and the former site would receive 0.15 of a patient 
count.
    Because reimbursement rates for the eleven groups are the same for 
all 21 VISNs, Indexes were developed to level the playing field in 
certain areas:

      The Geographic Index moves money from the Midwest to the 
coasts to account for higher cost-of-living-salaries, utilities, 
contracted care, research involvement, and education commitment.
      The Research Support Index recognizes that some medical 
centers incur greater unit costs for care because their Research 
Mission takes medical-care-funded providers with grants away from 
patient care.
      The Education Index provides funding to those sites with 
residents, to cover greater costs incurred for tests, etc.
      The HiCost Patients Index covers costs above a certain 
threshold incurred by caring for catastrophic patients whose costs do 
not match well with reimbursement under the 11 groups. In FY 2010 that 
threshold is $95K, which means that once the patient's costs reach that 
threshold, the model will reimburse the medical center dollar-for-
dollar for actual expenses. However, VISNs will have to absorb any 
costs between reimbursement for the group the patient falls into and 
the assigned threshold. This approach creates a shared financial 
responsibility between the VISN and the model.

    Other factors/Indexes have been looked at by the ARC over the 
years, but have been determined to have not enough significance to be 
distinguished in the model.
    The ARC continually reviews components of the model to ensure that 
the composition of the groups is consistent and material, and works 
well with other components of the model. That is why in FY 2010 a 
determination was made to form an 11th group, Long Term Stay Users, 
patients who are essentially institutionalized and incur major expenses 
well beyond the reimbursement figure of $65K, greatly distorting the 
composition of the group they formerly fell under. By breaking these 
patients out into a new category, funding is increased by $160K.
    Distribution of funding to the medical centers has been the 
responsibility of each VISN. Most VISNs utilize some form of the VERA 
model for that task. VISNs usually modify the model to account for 
those medical center missions that may not blend as well under VERA as 
under other models. This provides an opportunity for VISN leadership to 
make budget allocation adjustments to account for those requirements.
    The VERA model promotes seeing more patients in the most cost 
effective setting, ensuring that the mix of long-term care, mental 
health and primary care is such that the system meets the VA missions 
to serve the needs of the veteran patient population, and makes sense 
to the field leadership.
    During five budget cycles as VISN 10 director, I began to focus 
increasingly on using the VERA model at the medical center level as a 
starting point for budgeting individual VAMCs, and then challenging 
VAMC leadership to develop strategies to earn any additional funding 
they needed to support their programs. I preferred this to reallocating 
money earned by another medical centers. As I recall, only two or three 
of the five VAMCs in VISN 10 were resource positive under VERA. I 
labeled funding allocated above money earned as ``corporate welfare,'' 
and challenged each VAMC to replace welfare with earnings. This 
strategy helped people understand where funding comes from and to 
connect the VERA process with program management.
    VISN 10 was able to avoid or minimize the use of waiting lists 
while responding to increased enrollment during my tenure. 2001-2006 
Health Care cost index rose approximately 10 percent per year, while 
our enrollments increased by 5-8 percent per year. During this time our 
budget increase averaged about 5 percent per year. This provided an 
enormous challenge to our Health Care providers and I am very proud of 
the way they met the challenge. Team members in VISN 10 met the 
challenge by continuously finding ways to improve performance and 
provide quality compassionate care to an ever-increasing number of 
veterans.
SUMMARY
    1.  The VERA model's workload-based system is the best way so far 
created to distribute core funds to 21 VISNs that support over 150 
medical centers. The model accounts for historical workload as well as 
future projections of workload.
    2.  VERA supports seeing more patients, as funding is based on the 
number of individual patients seen and not the number of times the same 
patient is seen.
    3.  It is important to recognize that not all sites have the same 
mission, and thus there are differences in financial needs to support 
differing missions. Identifying workload based on costs to provide that 
varying workload through the Basic/Complex categories to 11 groups and 
54 classes provides funding based on complexity of care.
    4.  Understanding that providing the same care does not necessarily 
incur the same costs in different regions of the country, through no 
fault of the VISNs or medical centers in those regions, it is 
appropriate to level the playing field in areas that are material, such 
as salaries, utilities, research involvement and education commitment.
    5.  There is flexibility in the methodology as the ARC constantly 
reviews the classes and groups, to ensure that they are viable and 
current. Just for FY 2010 alone, substantive changes were made to more 
appropriately account for institutional long-term stays and movement 
toward more defined telehealth, and to support costs associated with 
patients who are seen as both outpatients and inpatients during the 
same period.
    6.  There has been no better system developed to date to 
effectively replace VERA and ensure as much equity and keep politics at 
arms length.

    I would like to take this opportunity to thank the Committee for 
inviting us here to discuss this issue. Our veterans depend on you and 
the VISNs depend on you to see that they receive the necessary funding 
and support to enable them to meet the increased call to provide 
veterans with the care they deserve.

                                 
     Prepared Statement of Rita A. Reed, Principal Deputy Assistant
      Secretary for Management, Office of the Assistant Secretary
          for Management, U.S. Department of Veterans Affairs
    Chairman Filner, Ranking Member Buyer, Distinguished Members of the 
Committee, thank you for providing this opportunity to discuss the 
Department of Veterans Affairs' (VA) Health Care Funding: 
Appropriations to Programs and the decision-making process used by 
Veterans Integrated Service Networks (VISN) to distribute appropriated 
dollars to VA medical centers (VAMC). I am accompanied today by Mr. 
William Schoenhard, Deputy Under Secretary for Health Operations and 
Management, Veterans Health Administration (VHA); Mr. Michael Finegan, 
Network Director, VHA VISN 11, Ann Arbor, Michigan; and Mr. Paul 
Kearns, VHA Chief Financial Officer (CFO).
    The process of making appropriated funds available to the VISNs and 
then to the VAMCs begins immediately after Congress passes and the 
President signs VA's appropriations bill. The Department's central 
Budget Office in concert with the VHA CFO's office, reviews financial 
and performance metrics associated with VA health care to construct the 
apportionment documents that request funding availability approval from 
the Office of Management and Budget (OMB). These apportionments, once 
approved by OMB, stipulate how much funding is available throughout the 
fiscal year (FY) for each appropriation account. If necessary, 
reapportionments may be resubmitted throughout the year to adjust the 
availability of funds.
    Once the apportionments have been approved by OMB, the central 
Budget Office allocates these funds to VHA in total through VA's 
Financial Management System. At this point the resources are available 
to VHA to distribute to its program offices and field facilities for 
obligation.
    At the beginning of the fiscal year, VHA prepares operating budget 
plans that outline planned obligations, by month, for each 
appropriation account. The Department's central Budget Office prepares 
extensive comparisons of planned vs. actual data, generally on a 
national basis, for Monthly Performance Reviews (MPRs) chaired by the 
Deputy Secretary and attended by senior management officials. These 
monthly reviews include metrics that measure financial performance, 
workload, and access and are one of the primary vehicles used at the 
central office level to help ensure that the Department achieves its 
financial and program performance goals. These reviews provide data for 
risk analysis and serve as a warning system to highlight potential 
operational or funding problems that could be significant. 
Nevertheless, the first line of accountability in assuring adequate 
resources for VA's decentralized health care system on a facility-by-
facility basis is the hospital and VISN directors. These Directors and 
their financial staff maintain frequent communication with VHA's CFO 
and provide timely information to ensure necessary resources are 
available.
    The medical care program is largely funded by three direct 
appropriation accounts (medical services, medical support and 
compliance, and medical facilities) and collections received from some 
Veterans and their health care insurance policies. These collections 
are added to the medical services account at each medical facility that 
generates the collections; as well as, reimbursements earned for 
activities such as sharing agreements with the Department of Defense 
are also added to each medical facility where the reimbursements have 
been earned. The allocation process by VHA's CFO office involves only 
the first category described above because the second category (i.e., 
collections and reimbursements) go directly to the medical facilities 
that generated the collections or reimbursements.
    What follows is an overview of the FY 2009 allocation process for 
medical funding. The appropriations in the three medical accounts 
totaled almost $41.5 billion, including $1 billion provided by the 
American Recovery and Reinvestment Act. Of the total funding, $31.8 
billion (77 percent) was allocated to the 21 VISNs using the Veterans 
Equitable Resource Allocation (VERA) model that is primarily based on 
the estimated number of patients treated in each VISN, the severity or 
complexity of each patient's treatment, and the cost of the services 
provided. The balance of about $9.7 billion (23 percent) was allocated 
outside the VERA model. Of the $9.7 billion, slightly more than $1.5 
billion (3.6 percent) was identified in the appropriations process for 
specific initiatives and was allocated separately for each initiative 
such as: Priority 8 Veterans, Vet Centers, new generation prosthetics 
and sensory aids, HUD-VA supportive housing program, Homeless grant and 
per diem program, Homeless grant and per diem liaisons, rural health 
initiative, expanded outpatient services for the blind, Eye Injury 
Center of Excellence, FEE-based services outside VERA, non-recurring 
maintenance projects outside VERA and a major lease. Funding in the 
amount of about $6.8 billion (16.9 percent) was allocated as specific 
purpose funds of which $1 billion (2.5 percent) was for the operation 
of VHA's program offices and $5.8 (14.4 percent) was for the centrally 
managed programs such as prosthetics prescriptions in each medical 
facility, salaries of clinical trainees at specific medical facilities, 
State Nursing Home per diem payments paid by the supporting medical 
facility, and the CHAMPVA benefit claims paid to both VA medical 
facilities and civilian medical facilities and providers. Funding 
provided by the American Recovery and Reinvestment Act were distributed 
to the VISNs based on a pro-rata share of each medical centers facility 
improvement needs.
    After each VISN receives its VERA allocation, the VISN Director is 
responsible for making the allocations to each of their medical 
facilities using the method that best suits the specific needs of each 
VISN and consistent with long established guiding principles that focus 
on such things as ensuring support for high quality health care 
delivery in the most appropriate setting; improving access to care; 
and, consistency with the network's strategic plans and initiatives.
    The specific allocation methods used by each VISN are reported to 
the VHA Office of Finance. In FY 2009, the allocation methods used by 
the 21 VISNs were grouped into four broad categories: two VISNs used a 
patient workload basis and modified VERA capitation; two VISNs used an 
adjustment to the prior year's base; eight VISNs used a combination of 
patient workload, modified VERA capitation, and adjustment to the prior 
year's base; and nine VISNs used other methods, for example: one used a 
combination of the Stochastic Frontier model, utilization, and care 
lines; four used a combination of VERA and facility workload; three 
used a combination of adjusted VERA, historical funding, workload 
increases, and marginal costs; and one used the service delivery model 
budget process incorporating care lines.
    Mr. Chairman, the basic principle of this allocation process is 
that health care occurs locally. Allocation decisions and adjustments 
during the budget execution year are best vested in the VISN director 
who has the most complete knowledge of the changing requirements at 
each of his/her individual medical facilities and the needs of the 
Veterans that each medical facility serves. Should situations arise 
that dictate additional funding is needed for a particular facility 
during the year, the VISN director would provide additional funds to 
ensure veterans health care needs are met or would request these funds 
from VHA Central Office from funds reserved to meet unanticipated 
needs.
    Mr. Chairman, we appreciate the opportunity to participate in this 
hearing. My colleagues and I are available to respond to questions from 
you and the other members of the Committee.
                                 
Prepared Statement of Michael S. Finegan, Director, Veterans Integrated 
 Service Network 11, Ann Arbor, MI, U.S. Department of Veterans Affairs
    Chairman Filner, Ranking Member Buyer, distinguished members of the 
Committee: thank you for the opportunity to appear before you today to 
review the process used to allocate appropriated funds from the 
Veterans Integrated Service Network (VISN) to our local medical 
centers. I will share the steps in our process, the rationale 
supporting it, our monitoring and communications systems used 
throughout the year, and how we ensure these resources are most 
effectively used in caring for our Veterans.
    Mr. Chairman, most of my 20 years in the Department of Veterans 
Affairs (VA) have involved resource allocation, whether at a facility 
and network level as a financial manager, as a medical center director 
or interim director at three facilities, or as a VISN director 
conducting financial reviews at several VA medical centers. I have also 
dealt with this issue during my many years as a member and now co-chair 
of the Veterans Health Administration's (VHA) Finance Committee. In 
each of these assignments, several principles have guided VHA policy 
and governed my approach to resource allocation: funding should follow 
workload, support access and quality care, have a component of 
efficiency, recognize case mix or patient complexity, be easy to 
understand, and most importantly, should be fair and use thresholds to 
manage changes. Each year, at all levels of the organization, 
improvements to the allocation models addressing these principles are 
debated and enhanced. These principles are reflected today in our VISN 
11 model.
    Our process begins with the release of the Veterans Equitable 
Resource Allocation (VERA) allocation from VA Central Office (VACO). 
Our model of funding to medical centers involves using workload and 
complexity data to ensure that funding follows the workload and that 
more complex workload receives greater resources. In any given year, 
depending on the overall VERA allocation, an adjustment to a facility's 
requested funding level might be applied to encourage efficiency or 
mitigate what might otherwise be a significant change in workload. 
Research and education support funding is disbursed directly to medical 
centers to ensure appropriate support of these missions. Specific 
purpose allocations, such as prosthetics, are allocated from VA CO 
directly to facilities.
    Capital funds (such as high dollar value equipment and facility 
maintenance or construction projects) are allocated at both the 
facility and VISN levels. We established a VISN level capital pool to 
help us invest strategically in expensive high tech equipment and 
address our top operational priorities. In fiscal year (FY) 2009, this 
pool represented 3.7 percent of our overall VERA distribution. Over 
several years, a VISN level clinical expert panel has developed 
prioritization criteria and a detailed investment plan for imaging 
equipment. This plan provides a structured schedule for replacing 
outdated equipment, investing in new technologies, reducing 
duplication, and leveraging economies of scale and volume discounts. 
For example, in 2009, VISN 11 was able to save $12 million off retail 
and $6 million off Federal supply schedule pricing by purchasing 
physiological monitors in bulk.
    The funds for these strategic purchases are held until later in the 
year, as budget execution is monitored, to ensure that overall funding 
needs are met. Reserving such funds is necessary to address unforeseen 
conditions at medical centers, such as increased needs for inordinately 
complex clinical care, larger than expected workload changes, or 
facility emergencies. These costs are often above and beyond what 
medical centers budget, but they do not necessitate supplemental 
appropriations. For example, in 2009 one facility in VISN 11 
experienced an electrical fire in the acute psychiatry wing, resulting 
in evacuation of patients to other facilities in the VISN and 
increasing non-VA hospitalization costs for subsequent admissions and 
substantial repairs. This required an increase to the facility's budget 
of just over $1.4 million from the resources held at the VISN level. 
Another medical center today has two chronic ventilator patients in a 
specialized facility outside VA; their care costs approximately $1 
million each annually and represents an extraordinary expense for the 
medical center. In a prior assignment as a facility director, I 
encountered a young woman Veteran with a complex and rare service-
connected condition that was beyond our ability to treat. We arranged 
care for her at a specialized facility with expertise in her condition 
at a cost of over $64,000 per month. While the VERA allocation to the 
VISN will be adjusted in future years to account for these 
extraordinary expenses, we must be able to address such unforeseen 
expenses when they occur throughout the year. In VISN 11, all funds 
budgeted, but not expended for such unforeseen events are used to fund 
our strategic items or are distributed to the medical centers by the 
end of the fiscal year. If necessary, the VISN can request funds from 
VA Central Office, from funds held in reserves for such purpose.
    Each year our Business Operations Board analyzes this process and 
the allocation model outcomes. This Board is comprised of associate 
directors from each medical center and VISN leaders in finance, 
logistics and capital assets. This Board's recommendations are 
submitted to the VISN Executive Leadership Council, which consists of 
all medical center directors in the VISN, select clinical leaders from 
throughout the VISN, and the VISN Chief Medical and Quality Officers. 
The Council's deliberations are often spirited, and we have made 
changes to our allocation based on recommendations from various 
stakeholders.
    Our budget process is communicated to stakeholders in numerous ways 
throughout VISN 11. Medical centers discuss their budgets periodically 
with congressional members or staff. We also hold facility townhalls, 
community Veterans Service Organization meetings, county service 
officer meetings, and state level functions. Each of these briefs 
contains a budget update. At the VISN level, I have established 
Management Assistance Councils in each state to engage Federal, state 
and local elected officials, state and county Veteran agencies, Veteran 
advocates, and community health partners. Invariably these meetings 
include budget updates and discussion. Finally, our VISN annual report 
contains information on our budget for our stakeholders.
    Upon final approval of the budget, each medical center is required 
to submit an operating plan describing how the funds will be spent. VA 
has established several mechanisms to ensure its resources are spent 
appropriately to meet mission requirements and performance 
expectations. First, throughout the year, monthly variance reports 
track overall financial performance to plan. This occurs at the 
facility, VISN and national levels. If facilities are over or under 
budget, we can discuss why this has occurred and determine if 
corrective action is needed. Second, we monitor on a monthly basis 
clinical and administrative performance measures, including access, 
quality, patient satisfaction and business metrics. In VISN 11, monthly 
performance reports are discussed at our Executive Leadership Committee 
and during my regular site visits to medical centers. I also have a 
quarterly performance review with the Deputy Under Secretary for Health 
for Operations and Management to ensure VISN 11 is meeting its targets. 
Nationally, the VHA Finance Committee tracks monthly financial variance 
reports and financial indicators to ensure budget execution is 
appropriate. Finally, each VISN has both required and locally developed 
performance improvement projects that are tracked and reported 
nationally and spread through our systems redesign infrastructure to 
keep the focus on efficiency and effectiveness. VISN 11 is currently 
involved in national projects concerning the effective use of non-VA 
care, cancer care, reduced length of stay, non-institutional care 
alternatives, clinic productivity improvement, and infection control 
and prevention. These projects will allow us to accomplish our mission 
more efficiently and effectively.
    Mr. Chairman, the allocation process used in VISN 11 is similar to 
those I have experienced throughout my career in VA. It is a process 
that assures each medical center is moving in the direction set by VA 
senior leadership and congressional mandate. It also allows for local 
action to meet changing patient circumstances and to manage the risk 
and unforeseen events that occur everyday in health care. At the same 
time, our performance measures and business metrics ensure quality and 
access remain consistently high. This allocation process also funds 
both routine operations and strategic investments that support our 
mission. I am now available to answer any questions you or other 
members of the Committee may have.
                   MATERIAL SUBMITTED FOR THE RECORD

Background Charts:
          Appropriations Total for VA Medical Care Line Graph

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                       Budget Process Flow Chart

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



          Post-Hearing Questions and Responses for the Record:
                                     Committee on Veterans' Affairs
                                                    Washington, DC.
                                                   December 4, 2009
Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our full Committee hearing entitled ``VA Health 
Care Funding: Appropriations to Programs'' on December 2, 2009, I would 
appreciate it if you could answer the enclosed hearing questions by the 
close of business on January 15, 2010.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.
    Due to the delay in receiving mail, please provide your response to 
Debbie Smith by fax at 202-225-2034. If you have any questions, please 
call 202-225-9756.

            Sincerely,

                                                         BOB FILNER
                                                           Chairman

CW:ds

                               __________
                        Questions for the Record
                       Hon. Bob Filner, Chairman
                  House Committee on Veterans' Affairs
         ``VA Health Care Funding: Appropriations to Programs''
                            December 2, 2009
    Question 1(a): How does each VISN allocate funds to local VA 
medical centers?

    Response: The Veterans Heath Administration (VHA) uses a 
decentralize funding model with inherent flexibility to adapt to real-
time, changing patient needs at the local level. VHA has found this to 
be the most effective method of ensuring Veterans are best served. Each 
Veterans Integrated Services Network (VISN) has discretion to use its 
own allocation methodology to allocate funds to their medical centers. 
In FY09:

      Eight VISNs used a combination of workload and the prior 
year's funding baseline.
      Four VISNs used a combination of Veterans Equitable 
Resource Allocation (VERA) and workload.
      Three VISNs used a combination of VERA, historical 
funding, workload and marginal costs.
      Two VISNs used workload and a modified VERA capitation 
methodology.
      Two VISNs used the prior year's funding base.
      One VISN used a Service Delivery Model incorporating Care 
Lines.
      One VISN used a combination of a Stochastic Frontier 
Model, Utilization and Care Lines.

    Question 1(b): Are there 21 separate funding allocation formulas?

    Response: Each VISN Network Director has the final decision on how 
funds are allocated to each of the medical centers within that VISN; 
therefore, there are variances between VISNs. However, the VISN 
allocation methodologies can be categorized into seven general models 
described in the response to question 1a. above.

    Question 1(c): Please provide an explanation of the formulas used 
by each of the VISNs.

    Response: Examples of Allocation alternatives used by VISNs 
include:

    a.  Allocation A: Pro-Rated Persons (PRP) multiplied by the VERA 
prices in each of the patient classes.
    b.  Allocation B; PRP multiplied by a Weighted Work Unit (WWU) 
Facility Workload (FACWORK) / Adjust). The Weighted Workload Unit (WWU) 
= National Cost per PRP (for a patient class) / National Cost per PRP 
(all classes).
    c.   Allocation C: Adjusted Workload.

    Allocation A: PRPs are created by the Allocation Resource Center 
(ARC), to account for care across networks or facilities based on a 
pro-ration of the cost of care provided at each facility. A PRP is a 
measure of patient workload based on the proportionate distribution of 
cost. PRPs are used in the VERA System to allocate funds to networks. 
PRPs are computed from patient workload data obtained from the National 
Patient Care Database (NPCD), Patient Treatment Files (PTF), Census 
files and Fee files for non-VA care. Costs associated with patient care 
are obtained from the Decision Support System (DSS) National Data 
Extract (NDE).
    Allocation A example: The facility has a share of its unique 
patients in the VERA Price Group of $20,000. In this specific VERA 
Price Group 90 percent of the PRP patients are in Facility A and 10 
percent are in Facility B. In Facility A, 90 percent of $20,000 
provides $18,000 which is allocated to Facility A. In Facility B, 10 
percent of $20,000 equals $2,000 which is allocated to Facility B.
    Allocation B: FACWORK is a workload measure created by VERA patient 
care class using patient workload and costs. Facility Workload is 
computed using a fiscal year of clinical and cost data (unit's pro-
rated patients and weighted work units) and takes into account the age 
of the patient. This workload measure is used to describe the intensity 
of resource requirements for a grouping of patients. For example, the 
greater the Facility Workload value, the more resource intensive the 
patient workload. Facility Workload is frequently used to compare the 
relative efficiencies of VHA units (i.e., networks or facilities). 
Allocation B is the allocation using FACWORK. When applying FACWORK 
each unique patient is placed in one of the 54 Patient Classes 
annually. FACWORK provides a Weighted Workload Unit (WWU). One WWU is 
the average cost of treating a Veteran for 1 year.
    Allocation B example: The national average cost per patient is 
$100. One Patient class with national average cost is $50 which is 
equivalent to 0.5 WWU. Another Patient class with national average cost 
of $200 is equivalent 2.0 WWU.
    Allocation C: Adjusted Workload is a workload measure computed 
using Facility Workload as a base that is further adjusted by factors 
intended to normalize the differences between VHA units. The specific 
factors include indices representing the labor cost differences, and 
workload associated with a unit's education and research missions. In 
addition, workload is further modified for specific high cost 
procedures and for patients with an eligibility status of sharing. 
Sharing patients are not VERA-funded so their workload is removed in 
Adjusted Workload.
    Allocation C example: The VISN uses the most current workload 
versus the historical workload, and allocates funding by VERA Patient 
Classes rather than VERA Price Groups. The VISN then distributes 
funding to each facility according to where the services were provided 
rather than where the patient resides.

    Question 2(a): Does VA Central Office provide guidance to the 
individual VISNs on the common factors that they should consider when 
allocating funds to the local VA medical centers?

    Response: In 1997, ten principles were established to guide the 
allocation of resources at all levels within the VHA to move the entire 
organization toward accomplishing its systemwide goals and objectives. 
These principles are to be followed when networks allocate funds to 
their facilities. These principles are published each year in the 
annual VERA handbook. While the VERA model is an effective system for 
allocating resources at the network level, the VERA methodology is not 
designed to allocate funds to the facility level. This is because there 
are significant differences at the facility level that, in the 
aggregate, are not a factor when allocating at the network level. Among 
the factors that significantly affect facility-level health care 
environments are: the size of the facility, the mission, and the 
locality of local facilities; levels of affiliations with academic 
institutions; efficiency of operations; proportions of shared patients; 
and patient complexity and case-mix. As a result, the following guiding 
principles are to be used by networks in providing allocations below 
the network level. Network allocations must:

      Be readily understandable and result in predictable 
allocations.
      Support high quality health care delivery in the most 
appropriate setting.
      Support integrated patient-centered operations.
      Provide incentives to ensure continued delivery of 
appropriate Complex Care.
      Support the goal of improving equitable access to care 
and ensure appropriate allocation of resources to facilities to meet 
that goal.
      Provide adequate support for the VA's research and 
education missions.
      Be consistent with eligibility requirements and 
priorities.
      Be consistent with the network's strategic plans and 
initiatives.
      Promote managerial flexibility, (e.g., minimize 
``earmarking'' funds) and innovation.
      Encourage increases in alternative revenue collections.

    Question 2(b): Are there financial accounting steps in place? 
Please explain.

    Response: Yes. Financial accounting for allocation of funds is 
accomplished through the Automated Allotment Control System (AACS). 
VISN Chief Financial Officers and VA Central Office Budget Officials 
prepare Transfer of Disbursing Authority (TDA) documents that are 
entered into AACS. The VHA Chief Financial Officer (CFO) ensures that 
the submitted TDAs balance to the total allocations approved for each 
VISN and Program Office. Once all TDA submissions are in balance, AACS 
transfers the funding authority from the VHA Office of Finance to the 
facility level for execution. TDAs are issued by fiscal quarter and on 
an as needed basis when VISN CFOs or VA Central Office Budget Officials 
want to make additional allocations or adjust previous allocations.
    Financial accounting for the obligation and disbursement of funds 
is accomplished through the Financial Management System (FMS). 
Obligation and disbursement status is available within FMS daily at 
facility level and in many additional levels of detail (appropriation, 
budget object code, accounting classification code, program code, 
etc.).

    Question 3: Does VA Central Office have reporting requirements and/
or an oversight process in place to ensure that funds are allocated to 
the individual VA medical centers in a fair and equitable manner? If 
so, please provide a detailed explanation of the requirements and the 
process.

    Response: Yes. The CFO requires the VISN Network Directors to 
complete an annual network-to-facility allocation survey describing how 
the Networks allocate funding to each of their facilities. The Network 
Directors identify and briefly describe the approach used to allocate 
their funds to facilities, how their allocation process adheres to the 
allocation principles described in the response to question 2, above. 
If their methodology has changed from the prior year, they must also 
describe the changes in detail and the rationale for the changes.

    Question 4(a): Since fiscal year 2006, how many local VA medical 
centers experienced growth in funding proportional to the overall 
increase in appropriated funds for VA medical care?

    Response: (NOTE: FY 2006 funding included Information Technology 
costs, and in subsequent fiscal years, these funds were removed from 
VHA budgets and placed in a separate appropriation. This serves to make 
FY 2006 a very dissimilar base year for comparison; therefore, 
responses to question 4 address changes from an FY 2007 base year. 
Also, although the VA operates 153 VA Medical Centers, some of these 
centers have been merged within the Financial Management System as a 
single station for accounting purposes; therefore, the total number of 
reporting stations is 129).
    From FY 2007-2008, total obligations for all stations increased by 
an average of 12.7 percent. Obligations for 63 stations increased at or 
above this average, 65 stations increased below this average, and one 
station decreased (see explanations in 4c).
    From FY 2008-2009, total obligations for all stations increased by 
an average of 9.4 percent. Obligations for 57 stations increased at or 
above this average, 70 stations increased below this average, and two 
stations decreased (see explanations in 4c).

    Question 4(b): How many experienced a decrease in funding?

    Response: See Response to question 4.a. above.

    Question 4(c): What is the rational for this pattern?Response: The 
primary driver of changes in funding from 1 year to the next is 
workload, as reflected in the General Purpose fund allocation using the 
VERA model. In addition, there are changes from year to year in the 
VERA Specific Purpose allocations and there are other factors that can 
cause significant variation from 1 year to the next. Examples of these 
other factors include:

      One time non-recurring maintenance projects that are a 
significant expense in a single year.
      One time equipment replacement or refreshment costs that 
are not required in the next subsequent year or years.
      ``Green'' energy investments that yield utility savings 
in subsequent years.
      Negotiated savings in contract costs that reduce funding 
requirements in subsequent years.
      Centralized acquisition at a single station in a single 
year can cause a 1 year increase in obligations that is not repeated in 
subsequent years.
      Lease build-out costs in the first year of a lease period 
that are not required in subsequent years.

    Question 5: Who determines the allocations for program dollars and 
is there a mechanism in place to track program dollars at the local 
level and VISN levels? In other words, who are the decision-makers?

    Response: Allocation recommendations are prepared by VHA's CFO 
based upon guidance from VA and VHA senior leadership. These 
recommendations are submitted to the VA National Leadership Board (NLB) 
Finance Committee, the NLB, and the Under Secretary for Health. Final 
allocation decisions are approved by the Secretary of Veterans Affairs.

    Question 6: Are resource allocations linked to strategic planning 
so that the allocations are clearly associated with VA long-range 
goals, performance standards, and workload priorities?

    Response: Yes. For FY 2010, several new strategic initiatives are 
being separately funded to supportVA's Strategic Goals, Integrated 
Objectives, and Integrated Strategies as articulated in the VA 
Strategic Plan. The vast majority of these funds will be allocated to 
the facility level and all of these funds will provide benefit to 
Veterans at the facility level.

    Question 7: Please explain the existing internal control system 
that provides oversight of Federal funds, including funds provided 
through the annual Appropriations Act and the American Recovery 
Reinvestment Act (ARRA)?

    Response: Funds are managed through the VA's FMS. The allocation of 
funds to facilities is based on the direction of VHA Central Office and 
VISNs. At the facility level, funds are distributed through FMS and 
monitored by management through FMS financial reports. Expenditures are 
initiated by the facility using the VA's Integrated Funds Distribution, 
Control Point Activity, Accounting, and Procurement System (IFCAP) 
through which procurement requests are entered, executed by the 
Acquisition Office, and forwarded to Finance for obligation of funds. 
Receipt of goods and services is accepted by the receiving office. 
Payment invoices are sent by vendors to the VA's Financial Service 
Center (FSC) in Austin, TX for processing through the On-Line 
Certification System where they are entered into that system for 
certification by the receiving office and processing for payment by the 
FSC. Separation of duties is managed through assignment and control of 
access through the various phases of the execution process and periodic 
review of those accesses for appropriateness.

    Question 8(a): How do VA Central Office, VISNs, and local medical 
centers plan, execute, and manage potential shortfalls in funding?

    Response: Potential shortfalls in funding are first identified at 
either the VISN or facility level. The VISN leadership and financial 
staff review the issues in detail and make a determination as to 
whether or not the issues can be resolved within the VISN's total 
funding allocation. If the VISN cannot accommodate the requirement, the 
VISN leadership presents the issue to the VHA leadership for 
resolution. The VHA Office of Finance, the NLB Finance Committee, and 
Deputy Under Secretary for Health for Operations and Management review 
the issues in detail and make a recommendation to the Under Secretary 
for Health on how to address the issue within the VHA's total 
resources.

    Question 8(b): Also, are funding shortfalls a common occurrence and 
at what point does VA central office get involved to restore the issue 
instead of entrusting VISNs to take care of the problem? If so, has VA 
revisited the budget planning process to refine the budget projections?

    Response: Shortfalls above VISN level are generally infrequent and 
typically involve a relatively small portion of VHA's total funds. 
Issues like this are resolved using a portion of the unallocated funds 
that are reserved for contingencies and unanticipated requirements. 
When issues like this arise, they are considered in updating future 
budget planning processes.

    Question 9: Mr. Parkis testified that the VHA Finance Committee 
tracks monthly financial variance reports and financial indicators to 
ensure budget executions are appropriate. Could you explain to the 
Committee what actions are taken when a VISN is found to be out of 
compliance with what is considered appropriate? In other words, what 
accountability mechanisms are in place to ensure compliance?

    Response: The VHA NLB Finance Committee and the VHA NLB review 
monthly financial execution reports at the VISN level. When a VISN 
appears to be significantly above or below their annual operating plan, 
the VHA Chief Financial Officer, who co-chairs the VHA NLB Finance 
Committee, contacts the VISN Director and the VISN CFO to determine if 
the variance is a temporary anomaly or an indication of a significant 
issue. If there is a significant issue, the VHA CFO conducts a review 
with the VISN staff to determine the best course of action to resolve 
the requirement and makes recommendations to the NLB Finance Committee 
and the VHA senior leadership.

    Question 10(a): Please explain the existing transfer authorities 
between the three medical accounts at VACO, VISN and VAMC levels 
respectively.

    Response: The only current transfer authority for the three VHA 
Medical Appropriations is included in Public Law 111-117, section 202, 
which states:
    Amounts made available for the Department of Veterans Affairs for 
fiscal year 2010, in this Act or any other Act, under the ``Medical 
services'', ``Medical support and compliance'', and ``Medical 
facilities'' accounts may be transferred among the accounts: Provided, 
That any transfers between the ``Medical services'' and ``Medical 
support and compliance'' accounts of 1 percent or less of the total 
amount appropriated to the account in this or any other Act may take 
place subject to notification from the Secretary of Veterans Affairs to 
the Committees on Appropriations of both Houses of Congress of the 
amount and purpose of the transfer: Provided further, That any 
transfers between the ``Medical services'' and ``Medical support and 
compliance'' accounts in excess of 1 percent, or exceeding the 
cumulative 1 percent for the fiscal year, may take place only after the 
Secretary requests from the Committees on Appropriations of both Houses 
of Congress the authority to make the transfer and an approval is 
issued: Provided further, That any transfers to or from the ``Medical 
facilities'' account may take place only after the Secretary requests 
from the Committees on Appropriations of both Houses of Congress the 
authority to make the transfer and an approval is issued.
    The decision to exercise this transfer authority is retained by the 
Secretary and not further delegated. However, realignments among the 
three appropriation accounts that do not exceed the total amount 
appropriated in each of the three accounts, are approved and executed 
by the VHA Office of Finance at the VACO, VISN and VAMC levels to 
ensure effective execution of the appropriated amounts in the three 
accounts.

    Question 10(b): Please provide examples that illustrate when a 
transfer is needed. If the transfer is not done, how is the shortfall 
resolved?

    Response: An example, in the 4th Quarter of FY 2009, under the 
provisions of section 202 of Public Law 110-329, the Secretary approved 
the transfer of $44.5 million from the Medical Support and Compliance 
appropriation to the Medical Services appropriation to address emerging 
Fee Basis care requirements, with appropriate Congressional 
notification as required by the statute.
    If an emerging requirement for current year funds in one 
appropriation exceeds the funds available in that appropriation, and 
funds are available in a different appropriation, those funds are 
identified and the requirement is presented by the VHA CFO through the 
VHA and VA leadership to the Secretary for decision in accordance with 
section 202 of Public Law 111-117.

    Question 11: Please provide the Committee what decision-making 
process is in place on determining if a Veteran is going to be granted 
Fee Basis care or not. Does VA keep track of how many Veterans are 
denied access to Fee Basis care and for what reason? If so, please 
provide to the Committee a report, broken down to the lowest level, on 
number denied and for what reason.

    Response: VA Medical Centers receive requests for non-VA (Fee) care 
in multiple ways, via paper, electronic, phone contacts, etc. For care 
referred from a VA facility to the community, the approval is based on 
clinical need, availability of VA resources and geographic 
accessibility to services. Emergency services are self-referred by 
Veterans, requiring review and approval by the local facilities. These 
emergency services require assessment of specific eligibility factors 
and a clinical decision on the emergent nature of the service provided.
    VA does track denials for Mill Bill (emergency) claims. In FY09, a 
total of 662,813 claims were received, with 384,431 approved and paid, 
278,352 denied.
    Below is a listing of denied claims and reasons for those denials. 
The most significant of these are:

      Veteran with other health insurance coverage
      Services were non-emergent, and
      Timely filing

    Major reasons for denial are identified in Attachment A. It should 
be noted that a Veteran may submit more than one claim each year and 
the columns do not represent mutually exclusive numbers as a claim may 
have multiple denial reasons.

    * These represent the top 9 reasons for denials. Not all denials 
are included in Attachment A. In addition, as claims may have multiple 
denial reasons, these denial reason totals will not match total claims 
denied.

    Question 12: In a September 2008 report, the Government 
Accountability Office found that VHA policies and procedures were not 
designed to provide adequate controls over the authorization and use of 
miscellaneous obligations, which totaled about $7 billion in FY2007. 
The flaws in the design of the internal control system increased the 
VA's risk for fraud, waste and abuse. Also, a December 2, 2009, VAOIG 
report entitled Audit of Veterans Health Administration's Undelivered 
Orders found that internal controls to identify invalid undelivered 
orders needed improvement. VAOIG estimated that hundreds of millions of 
dollars could be put to better use if invalid orders are identified in 
a timely manner and funds de-obligated. VAOIG further found that 
current policies were not being followed or enforced; such as VHA's 
practice to conduct follow-up after the end date instead of every 90 
days of inactivity. This is not the first time audits have found 
material oversight weaknesses in VHA. There seems to have been no 
improvement over the last 3 years. Please provide to the Committee a 
detailed plan on how VHA plans to provide oversight, follow-up, 
accountability, and enforcement of policy, down to the medical center 
levels, on Financial Management System reports.

    Response: A systems patch was installed September 2009 in IFCAP 
that will enable local management at facilities to have improved 
oversight over the use of miscellaneous obligations. Reports are now 
available that identify those obligations that do not have the required 
procurement information and those that were created in violation of 
separation of duties policies. To improve follow-up and accountability, 
a monthly analysis of open obligations was initiated in December 2009. 
This analysis identifies open obligations that are inactive for 90 days 
and those that do not contain end dates. Additionally, this information 
is being provided to the VISN and VAMC CFOs for review and necessary 
follow-up action.


                                                               Attachment A--Question #11
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   FY 2009--Total of 662,813 Mill Bill Claims Were Received--Approximately 58% Were Approved and Paid; 42% Were Denied
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             VA Approved to
                                  Total #     (1725)     (1725)                              Stabilization/    No VA       Not          VA
                                 Veterans   Claim Not     Non-     Has Other     Request          Past       Treatment   Enrolled   Facilities   Refused
            FY 2009             Submitting    Timely    Emergent   Insurance    Additional    Stabilization   Past 24    with the   Available   Transfer
                                  Claims      Filed       Care                Documentation       Dates        Months       VA     (Could have    to VA
                                                                                                                                     used VA)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Q1                          30,982     6,377      9,225      24,566          375             312        3,589        270       6,259         6
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Q2                          29,939     6,288      8,876      22,454          460             280        3,288        253       5,870         5
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Q3                          28,633     6,800      7,400      25,366          580             345        3,756        299       6,189        33
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Q4                          31,866     6,488      7,956      23,899          622             360        3,589        296       6,433        13
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Grand Total                     121,420    25,953     33,457      96,285        2,037           1,297       14,222      1,118      24,751        57
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These represent the top 9 reasons for denials. Not all denials are included in the table above. In addition, as claims may have multiple denial
  reasons, these denial reasons totals will not match total claims denied.



                               
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