[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
VETERANS HEALTH ADMINISTRATION
CONTRACTING AND PROCUREMENT PRACTICES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 23, 2010
__________
Serial No. 111-100
__________
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
SUBCOMMITTEE ON HEALTH
MICHAEL H. MICHAUD, Maine, Chairman
CORRINE BROWN, Florida HENRY E. BROWN, Jr., South
VIC SNYDER, Arkansas Carolina, Ranking
HARRY TEAGUE, New Mexico CLIFF STEARNS, Florida
CIRO D. RODRIGUEZ, Texas JERRY MORAN, Kansas
JOE DONNELLY, Indiana JOHN BOOZMAN, Arkansas
JERRY McNERNEY, California GUS M. BILIRAKIS, Florida
GLENN C. NYE, Virginia VERN BUCHANAN, Florida
DEBORAH L. HALVORSON, Illinois
THOMAS S.P. PERRIELLO, Virginia
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
__________
September 23, 2010
Page
Veterans Health Administration Contracting and Procurement
Practices...................................................... 1
OPENING STATEMENTS
Chairman Michael H, Michaud...................................... 1
Prepared statement of Chairman Michaud....................... 46
Hon. Henry E. Brown, Jr., Ranking Republican Member.............. 2
Prepared statement of Congressman Brown...................... 46
Hon. Russ Carnahan, prepared statement of........................ 47
WITNESSES
U.S. Government Accountability Office, Debra A. Draper, Ph.D.,
M.S.H.A., Director, Health Care................................ 19
Prepared statement of Dr. Draper............................. 73
U.S. Department of Veterans Affairs:
Belinda J. Finn, Assistant Inspector General for Audits and
Evaluations, Office of Inspector General..................... 21
Prepared statement of Ms. Finn............................. 78
Frederick Downs, Jr., Chief Procurement and Logistics Officer,
Veterans Health Administration............................... 27
Prepared statement of Mr. Downs............................ 82
______
Goold Health Systems, Augusta, ME, James A. Clair, M.P.A., M.S.,
Chief Executive Officer........................................ 11
Prepared statement of Mr. Clair.............................. 70
Mobile Medical International Corporation, St. Johnsbury, VT, Mark
T. Munroe, Senior Vice President, Sales and Marketing.......... 3
Prepared statement of Mr. Munroe............................. 47
Modular Building Institute, Lincoln Moss, Senior Vice President
and Chief Operating Officer, Ramtech Building Systems, Inc.,
Mansfield, TX.................................................. 8
Prepared statement of Mr. Moss............................... 60
Robert Bosch Healthcare, Palo Alto, CA, Derek Newell, MPA., MPH,
President...................................................... 5
Prepared statement of Mr. Newell............................. 59
Wise Knowledge Systems, Inc., Piper Creek, TX, Jay Wise, Ph.D.,
Chief Executive Officer........................................ 9
Prepared statement of Dr. Wise............................... 63
SUBMISSIONS FOR THE RECORD
The Coalition for Government Procurement, Larry Allen, President,
letter......................................................... 86
Gordon, Hon. Bart, a Representative in Congress from the State of
Tennessee, statement........................................... 88
Murfreesboro Pharmaceutical Nursing Supply, Murfreesboro, TN,
Richard Reeves, Chief Executive Officer, statement............. 89
MATERIAL SUBMITTED FOR THE RECORD
Post-Hearing Questions and Responses for the Record:
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Mark Munroe, Senior Vice
President, Sales and Marketing, Mobile Medical
International Corporation, letter dated October 4, 2010,
and Mr. Munroe's responses................................. 91
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Derek Newell, President,
Robert Bosch Healthcare, letter dated October 4, 2010, and
Mr. Newell's responses, dated November 15, 2010............ 92
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Lincoln Moss, Senior Vice
President and Chief Operating Officer, Ramtech Building
Systems, letter dated October 4, 2010, and the Modular
Building Institutes' responses, dated November 3, 2010..... 94
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Jay Wise, Ph.D., Chief
Executive Officer, Wise Knowledge Systems, Inc., letter
dated October 4, 2010, Mr. Wise's responses................ 95
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to James A. Clair, M.P.A.,
M.S., Chief Executive Officer, Goold Health Systems, letter
dated October 4, 2010, and Mr. Clair's responses, letter
dated November 23, 2010.................................... 98
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Gene L. Dodaro, Acting
Comptroller General, U.S. Government Accountability Office,
letter dated October 4, 2010, and response from Debra A.
Draper, Ph.D., M.S.H.A., Director, Health Care, letter
dated November 8, 2010..................................... 99
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs to Hon. George J. Opfer,
Inspector General, Office of Inspector General, U.S.
Department of Veterans Affairs, letter dated October 4,
2010, and response from Richard J. Griffin, on behalf of
Hon. George Opfer, letter dated November 15, 2010.......... 104
Hon. Michael Michaud, Chairman, Subcommittee on Health,
Committee on Veterans' Affairs, to Hon. Eric K. Shinseki,
Secretary, U.S. Department of Veterans Affairs, letter
dated October 4, 2010, and VA responses.................... 106
Hon. Henry E. Brown, Jr., Ranking Republican Member,
Subcommittee on Health, Committee on Veterans' Affairs, to
Belinda J. Finn, Assistant Inspector General for Audits and
Evaluations, Office of Inspector General, U.S. Department
of Veterans Affairs, letter dated October 19, 2010, and
response from Richard J. Griffin, on behalf of Hon. George
Opfer, Inspector General, letter dated November 16, 2010... 120
VETERANS HEALTH ADMINISTRATION
CONTRACTING AND PROCUREMENT PRACTICES
----------
THURSDAY, SEPTEMBER 23, 2010
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:01 a.m., in
Room 334, Cannon House Office Building, Hon. Michael Michaud
[Chairman of the Subcommittee] presiding.
Present: Representatives Michaud, Brown of Florida,
Donnelly, Perriello, Brown of South Carolina, and Boozman.
Also Present: Representative Carnahan.
OPENING STATEMENT OF CHAIRMAN MICHAUD
Mr. Michaud. As we get started, would the first panel
please come forward? Good morning. The Subcommittee on Health
will now come to order. I would like to thank everyone for
attending this hearing. The purpose of today's hearing is to
investigate potential weaknesses in the Veterans Health
Administration's (VHA's) contracting and procurement practices,
and explore ways that we can strengthen how VHA contracts and
procures medical equipment and health care products for our
veterans.
In recent years, we have seen many reports and studies on
the contracting and procurement activities of the U.S.
Department of Veterans Affairs (VA). These reports have
identified the need for increased transparency and fiscal
responsibility, as well as highlighted problems of inadequate
competition and lack of accountability and oversight. As a
result of these deficiencies in VHA's contracting and
procurement practices, veterans may not be getting the latest
innovation in health care products. This was also made evident
in our June Health Subcommittee hearing on wireless health care
technology, which revealed the difficulties that many private
companies face in informing VA about their products and getting
their products in the hands of our veterans. Furthermore, we
are all aware of the problems of dirty reusable medical
equipment at certain VA medical centers.
Today, we will hear from the U.S. Government Accountability
Office (GAO) about a study that they are conducting on the
purchasing and tracking of supplies and medical equipment.
Their preliminary observations include the potential risk to
our veterans' safety when VA is in noncompliance with VA
purchasing and tracking requirements. Finally, internal control
weaknesses with VHA's use of billions in miscellaneous
obligation continues to be a problem because VA contracting
officials do not have sufficient control over the authorization
and use of miscellaneous obligations. It is unclear whether
these obligations were for legitimate needs.
I have been very supportive of increasing funding for the
VA. However, I think we must also make sure that they are using
our dollars wisely. For instance, the VA does a great job in
negotiating for lower cost prescription drugs. The cost is
estimated in 2011 to be $4.8 billion. Even though we are able
to negotiate for the lower cost prescription drugs, my concern
is whether or not the utilization for those prescription drugs
are the most cost effective way that the VA should be moving
forward. And I look forward to hearing from today's witnesses
as we aim to better understand the challenges that face the VHA
contracting and procurement practices, and work together to
find potential solutions to these challenges.
I want to now recognize my good friend and colleague Mr.
Brown for any opening statement that he may have.
[The prepared statement of Chairman Michaud appears on p. 46
.]
OPENING STATEMENT OF HON. HENRY E. BROWN, JR.
Mr. Brown of South Carolina. Thank you, Mr. Chairman, and I
appreciate you calling this hearing today. I am pleased to be
here to discuss contracting and procurement issues within the
Veterans Health Administration. VA's troubled contracting and
procurement processes have long been an issue of great concern
to this Committee and the subject of various Government
Accountability Office and VA Office of Inspector General (OIG)
reports that continue to cite major deficiencies and material
weaknesses. Given the wide scope of VA's reach and budget, it
is particularly important that we ensure that they have the
proper procedures and oversight mechanisms in place to ensure
that VA's procurement and contracting is done responsibly,
appropriately, and with proper oversight.
In that vein, I am particularly concerned about testimony
we will hear from the Office of Inspector General that ``data
in VA and VHA acquisition support information systems is
incomplete and unreliable.'' Without accurate data, we have no
idea what we are doing right or what we are doing wrong, where
we are, where we are going, or where we need to be. This is
unacceptable within a system that is responsible for the care
of our Nation's veterans and spent a little over $9 billion on
health care goods and services last fiscal year alone.
Streamlining contracting and procurement processes to
eliminate the potential for waste, fraud, and abuse, while at
the same time improving the cost and comfort of doing business
with VA to ensure our veteran heroes have access to the highest
quality medical care is and should be at the top of our
priority list.
I look forward to hearing from the witnesses on our first
panel about the obstacles to doing business with VHA, and from
the government witnesses on our second and third panel about
the functioning of VHA's acquisition system. Although we are
nearing the end of this legislative session, I am hopeful that
we will be able to move legislation H.R. 4221, the ``Department
of Veterans Affairs Acquisition Improvement Act of 2009,''
introduced by our Ranking Member Steve Buyer. This bill, that I
originally cosponsored, would correct the long-term procurement
issues within VA and provide great oversight of VA's
contracting and access management processes.
I thank you, Mr. Chairman, for being here for this
discussion, and I yield back the balance of my time.
[The prepared statement of Congressman Brown appears on
p. 46.]
Mr. Michaud. Thank you very much, Mr. Brown. Before I begin
I would like to ask unanimous consent that Mr. Carnahan, who
will be attending this hearing later, be invited to sit on the
dais on the Subcommittee on Health today. Hearing no
objections, so ordered. I also would like unanimous consent to
include all the written testimony in the record. Hearing none,
so ordered.
At this time I would like to introduce the panel. Our first
panel includes Mark Munroe, who is the Senior Vice President of
Sales and Marketing for the Mobile Medical International
Corporation. We have Derek Newell, President of Robert Bosch
Healthcare; Linc Moss, who is the Senior Vice President and
Chief Operating Officer for Ramtech Building Systems, Inc. We
have Jay Wise, who is from Wise Knowledge System, and Jim Clair
who is Chief Executive Officer of Goold Health System (GHS).
Jim is also accompanied in the audience by Lorraine
Lachappelle, who is an R.N., and is the Director of Community
Assessment. And it is my understanding that Lorraine also
served in the Army. I want to thank you very much for your
service on behalf of this great Nation of ours.
Without any further ado, we will start off with Mr. Munroe.
STATEMENTS OF MARK T. MUNROE, SENIOR VICE PRESIDENT, SALES AND
MARKETING, MOBILE MEDICAL INTERNATIONAL CORPORATION, ST.
JOHNSBURY, VT; DEREK NEWELL, M.P.A., MPH, PRESIDENT, ROBERT
BOSCH HEALTHCARE, PALO ALTO, CA; LINCOLN MOSS, SENIOR VICE
PRESIDENT AND CHIEF OPERATING OFFICER, RAMTECH BUILDING
SYSTEMS, INC., MANSFIELD, TX, ON BEHALF OF MODULAR BUILDING
INSTITUTE (MBI); JAY WISE, PH.D., CHIEF EXECUTIVE OFFICER, WISE
KNOWLEDGE SYSTEMS, INC., PIPER CREEK, TX; AND JAMES A. CLAIR,
M.P.A., M.S., CHIEF EXECUTIVE OFFICER, GOOLD HEALTH SYSTEMS,
AUGUSTA, ME
STATEMENT OF MARK T. MUNROE
Mr. Munroe. My name is Mark Munroe, Senior Vice President
of Sales and Marketing for Mobile Medical. Mobile Medical is an
international company that develops and manufactures commercial
and military mobile surgical hospitals, which meet all U.S.
health care standards. These mobile health care solutions are
rapidly deployable, fully integrated, self-contained, and
present innovative solutions for today's health care delivery
needs. My purpose here today is to explain how Mobile Medical
has worked with VA medical centers throughout the country while
describing some of the challenges associated with those
experiences, and pointing out some of our exciting success
stories.
Let us begin with the New Orleans VA Medical Center. As we
are all aware, Hurricane Katrina struck New Orleans 5 years
ago. Since Katrina, the New Orleans VA Medical Center has not
provided surgical or endoscopic services to the veterans of New
Orleans. Veterans in the New Orleans region must seek health
care at other facilities within the system. This often causes
veterans to wait for needed procedures, or travel greater
distances to receive the care they need. In January 2008,
Mobile Medical moved to mitigate this disruption of services by
responding to a request from the New Orleans VA Medical Center
leadership for a proposal involving mobile surgery units.
These units were to be used to meet a variety of needs and
to serve as a temporary surgical facility during the hospital
rebuilding process. You will notice on your screen I have
brought up an image of the mobile surgery unit in what we call
transportation mode. The New Orleans VA issued a solicitation
on FedBizOpps in May 2009 for mobile surgery units. This
solicitation was subsequently canceled and redirected to the
General Services Administration (GSA) Schedule. It should be
noted that while Mobile Medical was in the process of
contracting with GSA, code compliant mobile surgery units did
not exist on the GSA Schedule. As a result of this action,
companies with GSA contracts responded but none of them,
including the one to whom the GSA solicitation was ultimately
awarded, met the VA criteria for a history of producing and
deploying regulatory compliant mobile surgery units.
In addition, Mobile Medical learned that its proprietary
company confidential information provided as part of its
January proposal had been released to over 70 GSA Schedule
holders. Quoting from the attached summary of Mobile Medical's
Federal legal action, which is in your packet, ``Judge Horn
clearly found that the VA's actions were improper and the
attempted modification was beyond the scope of the GSA Schedule
program. An agency placing an order under the GSA schedule
program may not simply send out a request for quotation (RFQ)
as, in her words, a `solicitation feeler,' evaluate quotes for
items that do not exist on anyone's GSA schedule contract, and
then hope a selected contractor can convince the GSA a
modification is within the scope of their existing contract by
the time the agency places an order. Such an end run, which
occurred in the case, violates even the most basic requirements
of fair and open competition for Federal contracts.''
As a small business working in a HUBZone during difficult
economic times, the last thing our company ever expected would
be the need to sue the U.S. Government for actions taken during
a procurement process. It should be noted that the legal costs
alone with this process have run Mobile Medical in excess of
$300,000. Clearly, oversight is necessary to ensure that other
small businesses, like Mobile Medical, do not encounter this
type of situation.
Standing in stark contrast to Mobile Medical's experience
in New Orleans is our very positive experience serving the
needs of veterans at the VA Medical Center in Muskogee,
Oklahoma. I am going to bring up a few images as we kind of go
through that will represent some of the interior of the mobile
surgery unit as well as some of these projects.
The leadership at the Muskogee VA Medical Center from the
Director to the Contracting Officer, Facilities Engineering,
and surgical teams, should be commended for their work on this
model project. In this forum I am happy to do that today.
During a recent customer visit, a member of Mobile Medical's
Board of Directors, Retired Air Force Surgeon General Paul K.
Carlton, learned from VA officials that this facility is saving
over $9 million in construction costs by closing their
operating rooms for the duration of the renovation period
rather than phasing in their renovation. Quoting Dr. Carlton in
his report to Mobile Medical, ``the renovation project began in
2008 with strong leadership. After researching alternative
options, the medical center closed five operating rooms and the
project began using two mobile surgery units,'' which you see
being delivered and installed at the facility on your screen.
``By doing this they are shaving $9.3 million off the original
construction quote for the project, even after spending $3.6
million to lease the mobile surgery units.'' The medical center
is also avoiding another $14 million that would have gone to
local hospitals to carry the surgical center's case load during
the renovation, for a total savings of just over $23 million.
Included in your packet is that full report. Those savings are
attached in the executive summary and we urge Members to note
that the Senate Military Construction Veterans Affairs
Subcommittee has also included language in its report to the
Senate, Report 111-115, urging the VA to utilize qualified
mobile surgical units in OR renovation projects where such
utilization clearly offers savings.
A final example of a successful project is the VA Medical
Center in Miami, Florida. Miami is currently utilizing six
mobile surgery units during a full operating room renovation
project. And this will just give you a quick summary of the
actual images from Muskogee, and now into the Miami project.
While the Miami project was also challenged through the
contracting process, again strong leadership was the key. Dr.
Seth Spector, Chief of Surgery, has kept the project moving
forward and in August of this year, Miami was able to turn
their operating rooms over to the Army Corps of Engineers for
renovation, while continuing to provide full surgical services
to the veterans of the Miami service area.
While 5 minutes, and I apologize for running a bit over, is
a short time to share with you all of the successes and
weaknesses in the VA contracting process, I am sure you will
find our supporting documentation compelling. I look forward to
any questions you may have, and thank you for your time this
morning.
[The prepared statement of Mr. Munroe appears on p. 47.]
Mr. Michaud. Thank you very much. Mr. Newell.
STATEMENT OF DEREK NEWELL, M.P.A., MPH
Mr. Newell. Mr. Chairman and other Members of the
Subcommittee, on behalf of Robert Bosch Healthcare, I thank you
for the opportunity to provide testimony. I am the President of
Robert Bosch Healthcare, and Bosch which makes the T-400 and
the Health Buddy systems, provides remote patient monitoring
services to the Veterans Administration, which allows veterans
to remain at home and get adequate care while they are in their
homes. We have been doing this since 2003 and currently we have
over 30,000 veterans who use our systems, which represents
about 70 percent of the total telehealth and remote patient
monitoring systems used by the VA. The population we serve
suffers from chronic illnesses like congestive heart failure,
diabetes, hypertension, and post-traumatic stress disorder. The
Health Buddy and the T-400 systems collect patient data and
vital signs, send those back to clinicians. They check for, the
system automatically checks for, out of bounds indicators and
alerts physicians and nurses to possible deterioration and
veterans' health status. And that prevents the exacerbation of
the veterans' systems and alleviates high levels of usage of
the emergency room by some of these veterans.
These technologies have demonstrated positive results in
improving the health care of our Nation's veterans population
and in reducing costs. There was a study published last year
that showed a 25-percent reduction in inpatient days and a 19-
percent reduction in hospital admissions for those veterans
that were using our system compared to similar veterans who
were not using our systems. The VA has been a visionary in
building this technology, and improving it, and working with
the vendor community to ensure that this segment of the health
care delivery system within the VA is expanded.
Regarding improvements in the procurement process, between
the time I was invited to this Committee and today, the VA has
published a request for procurement (RFP) for the procurement
of our devices and for remote patient monitoring devices. And
we applaud the transition of the procurement to the Denver
Acquisition Center. So there have been some improvements that I
was going to recommend that have already occurred, so I am
applauding the folks within the VA for doing that. This move
will integrate and mainstream procurement practices for home
monitoring technologies, including ours as well as our
competitors. The purchasing was previously done through
individual Veterans Integrated Service Networks (VISNs) through
a national contract, through the prosthetic center at the
VISNs, which results in a high degree of variability between
the facilities and how they would procure and their purchasing
practices. Another challenge that has been rectified was that
our devices, while prosthetics is good at buying wheelchairs
and other types of devices that are not connected to technology
systems and not connected to the Internet, the purchasing
practices did not allow for the payment of services and other
technologies required to operate our systems, such as the
servers that exist within the VA's firewall. They buy a
computer and they want it to connect but they do not want to
pay for the back end. Or they have, they do not have a
mechanism to pay for that. They did not, they do now.
While we compliment the VA's innovation to date, we believe
there are a number of ways that Congress could assist the
agency in improving the procurement process to expedite greater
use of remote patient monitoring technology. Based on our
experience, I suggest the following enhancements that would
improve contract and procurement processes in the VA. These
apply specifically to remote patient monitoring but may be able
to be used in other areas.
One is preferred partners. In our particular situation
often increased numbers of vendors would increase competition
and reduce prices for the VA, which is a State objective of the
procurement process. However, when each vendor must comply with
installing duplicate sets of servers and security requirements
to make our systems work, but there is no guarantee of volume
in terms of purchase of the devices, having too many vendors
may actually cause them to amortize the cost of the back end
over too few units which would have the opposite effect of
raising prices. So we would suggest that the VA pick a fewer
number of partners, preferred partners, maybe two or three, in
areas where there are fixed cost infrastructure requirements
associated with technologies that get deployed to the home.
Currently in the contract they are going to pick up to six
vendors. I think that three would probably be more appropriate.
Targeted innovation. Recently the VA has started
communicating to partners about its vision of veterans' health
needs and priorities. However, this could still be improved.
Better education and funding, targeted innovation with
preferred partners, would enable us to respond in a more timely
manner to the VA's needs and to be partners in finding
solutions. At present, a majority of our information comes to
us when there is a solicitation, which is once every 5 years.
Only then do we have concrete knowledge of their vision, and
their plans and their goals, and the specific number of units
that they might buy. And as you can imagine, in a company we
would need to know what kind of volumes before we would make
significant investments.
Two more smaller elements that could help the contracting
process and the Federal Supply Schedule (FSS) contracting
process, moving back to a single point of contact for contract
partners would allow more efficiency. Currently we interact
with a variety of FSS contract staff which creates a constant
learning curve for them and is a challenge for us. Greater
sharing of information between the VHA and other Federal health
care agencies would expedite the adoption of telehealth as well
as expedite the adoption of best practices, not just for our
technology but for other technology. Keeping information about
the quality of care improvements and cost savings that can be
made under wraps can present a challenge when you are trying to
disseminate effective best practices.
Mr. Chairman and Members of the Committee, we believe these
few but concrete specific actions would go a great distance to
support the VA's efforts to expand the use of our technologies
and other innovative technologies. In this regard, we admire
the VA's efforts to date and hope that our years of experience
in interacting with the agency as a private vendor will be
useful to the Committee. We are proud to be partnered with the
VA in improving the quality of care and reducing the costs of
health care for our veterans. I appreciate this opportunity to
testify and would be happy to answer any questions you may
have.
[The prepared statement of Mr. Newell appears on p. 59.]
Mr. Michaud. Thank you very much, Mr. Newell. Mr. Moss.
STATEMENT OF LINCOLN MOSS
Mr. Moss. Good morning. Chairman Michaud, Ranking Member
Brown, and Members of the Committee, my name is Linc Moss. I am
Senior Vice President and Chief Operating Officer of Ramtech
Building Systems. Ramtech is a vertically integrated design-
build commercial modular building construction firm based in
Mansfield, Texas. I am testifying today on behalf of the
Modular Building Institute. MBI is a not-for-profit trade
association that was established in 1983 that serves companies
involved in the manufacturing and distribution of commercial
factory-built structures.
I appreciate the opportunity to speak to the Committee on
ways to improve contracting with the Department of Veterans
Affairs. Throughout the construction industry, there is a
concern with the VA as to the solicitation of construction
projects that call for a delivery system referred to as Design-
Bid-Build. This traditional project delivery method is often
more costly and less efficient than other delivery methods and
its restrictive nature prohibits alternate forms of
construction, such as permanent modular, from being able to
participate in the bidding process.
Over the past decade, the use of Design-Build has greatly
increased in the United States making it one of the significant
changes in the construction industry. The Design-Build method
streamlines project delivery through a single contract between
the government agency and the contractor. This simple but
fundamental difference not only saves money and time, it
improves communication between the stakeholders and delivers a
project more consistent with the agency's needs. It also allows
for all sectors of the construction industry to participate.
The Design-Build project delivery system offers the VA a
variety of advantages that other construction delivery systems
cannot. Typically under the Design-Build approach, an agency
will contract with one entity for both design and construction
of the project. By greater utilization of the Design-Build
delivery system, the VA can achieve these goals: faster
delivery, greater cost savings, improved quality, a single
source of responsibility, and reduction in administrative
burden.
As our Nation prepares for an influx of returning warriors,
it is imperative that we are able to provide them with the
services and facilities that will help them assimilate into
civilian life. By adopting the Design-Build approach, the VA
could provide various facilities in a compressed time frame
while ensuring that the product delivered meets the missions
and various quality expectations.
Design-Build also allows for other sectors of the
construction industry that are often excluded from Design-Bid-
Build projects to compete and bid on VA projects. Alternate
design offerings, such as modular construction, tilt wall, pre-
engineered steel, would be able to participate in VA
solicitations if they were issued using a Design-Build delivery
system. Numerous permanent modular contractors such as Ramtech
have performed services for the VA in the past, but because of
the limited amount of Design-Build solicitations the
opportunities are severely restricted. However, in those cases
where Ramtech did perform on projects the customers were
extremely satisfied as our building met mission requirements
and exceeded quality expectations. In fact, one of the projects
was in Congressman Brown's area, and it was a clinic at Myrtle
Beach.
By greater utilizing the Design-Build delivery system in
the Department of Veterans Affairs construction policy, the VA
would greatly increase the amount of projects that alternative
construction contractors could participate in. Let me emphasize
that alternative construction methods, such a permanent modular
are not always the solution, as there is no one perfect
building system for every application. However, by expanding
opportunities for them to be part of the process, the Federal
Government could be assured that it gets the best value by
seeing all options before awarding a contract.
Another possible advantage is the fact that one of the
missions within the Department of Veterans Affairs is the
ability for the VA to support service-disabled veteran-owned
small businesses. Because the Design-Build methodology
typically relies on a single source for both design and
construction of the project, Design-Build contractors often
partner with architectural and engineering firms to assist in
the design of the project. This fact facilitates partnering
between service-disabled veteran-owned small business (SDVOBs)
and construction firms similar to Ramtech. In the permanent
modular construction field, the relationship with a contractor
such as Ramtech means the SDVOB partner will get approximately
60 percent to 70 percent of the building delivered and
installed by the Design-Build firm while the SDVOB partner
performs the site work, utility connections. Often SDVOBs do
not have the logistical capabilities to site build the entire
building, but have the ability to perform other critical
functions that comprise 30 percent to 40 percent of the overall
construction project.
In conclusion, contractors that rely on Design-Build
delivery system have, and continue to overcome, obstacles when
it comes to working with the Department of Veterans Affairs.
While businesses such as Ramtech are anxious to compete, the
current trend of Design-Bid-Build projects issued by the VA
severely prohibit that participation.
On behalf of MBI as well as Ramtech Building Systems, I
thank you for your time. We will be happy to answer questions.
[The prepared statement of Mr. Moss appears on p. 60.]
Mr. Michaud. Thank you very much, Mr. Moss. Mr. Wise.
STATEMENT OF JAY WISE, PH.D.
Dr. Wise. Thank you for the opportunity to speak this
morning. My name is Jay Wise, Dr. Jay Wise. I am the President
and CEO of Wise Knowledge Systems. Wise Knowledge Systems has
produced and deployed the medical technology called Knowledge
Based Expert Systems, KBES. We call it KBES. I am going to
abbreviate this to save some time. I am going to have to leave
at 11:00, Mr. Chairman, period, so I have to go. But I want to
share with you some things that have to do with acquisition in
my experience almost daily for the last 6 years with the VA.
The KBES technology is an interesting tool. It is a
decision support technology that keys on entire domains of
knowledge. Our cardiac model can assimilate knowledge instantly
from 10,000 cardiac surgeons and put it on a particular
patient. This has resulted in extraordinary savings in cost and
some extraordinary care improvements down the road. I am going
to kind of zip ahead a little bit.
Dr. Paul Tibbits, Deputy Chief Information Officer of the
VA, we met with him and he said that he was aware of the
success of Wise Knowledge Systems Smart Tool deployed in active
military operations for the Navy and the Marine Corps and
wanted to find a place for it at the VA. I was then sent to
visit with a Ms. Lloyd at VHA. Ms. Lloyd's remarks were, ``The
VA is broken. KBES might be a very good thing for the VA, but
that would mean we would have to work and people at the VA will
not work.'' Dr. Tibbits then said that yes, Ms. Lloyd is right,
the VA is broken, and nobody around here wants to work.
Dr. Tibbits then edited and published with our group a very
detailed capability assessment of Knowledge Based Expert
Systems for his office, for the VA, for the medical mission of
the VA. It was altogether the most glowing analysis we have
ever had, and we have been tested, quite literally we are on
permanent exhibit at the Smithsonian. So this is not a new
thing.
Following that, Dr. Tibbits said that Ms. Wendy McCutcheon,
a person working in one of the acquisition offices, was now the
sole authority to acquire medical things for the VA, this one
person. And Ms. McCutcheon said that, ``She did not see any
particular value in it,'' and we should start the whole process
over. I asked them if the fact that I was a veteran-owned small
business had any bearing on any of this with the GSA. They
said, ``No, we will not use the GSA, they are not helping us.''
That is a direct quote.
On February 23 I spoke again with Chairman Filner, and he
invited me to this hearing. That is my testimony. It is quite
short. I will give you my summary now, all right?
Since 2004 Wise Knowledge Systems has attempted to provide
Knowledge Based Expert Systems to the VA. KBES has received
very positive technical reviews as an advanced modeling and
simulation decision support technology from each and every
point of assessment and testing that it has been sent. That
would be all of them. In the Navy, in the Marine Corps, at the
U.S. Department of Defense (DoD), at VA, and in the private
sector. Wise Knowledge Systems believe there is an important
ethical issue for the health and medical care of American
veterans being crippled by arrogant leadership, thus, making
the VA fail in part to keep its promise to deliver state-of-
the-art medicine and health care to American veterans.
Once a medical technology has been tested, evaluated,
praised, deployed, and what else, nonresponse is unacceptable.
One does not do that. And one does not say that the reason we
are not going to have some is because the VA is broke and
nobody around here wants to work.
It is an unfortunate part of our American history that our
government made and intentionally broke virtually every treaty
with American Indian tribes. These treaties or agreements were
made by our government knowing they would not be kept. The
explanation for this fraudulent manipulation was often Indians
were not people, they are not quite human beings. One wonders
if some of the VA leadership, and that is in my written
testimony, you can read who is what, one wonders if some of the
VA leadership maintaining the status quo of failing to provide
these tools when they know and have published that it is state
of the art, feel that our young people in uniform are also not
quite people, not quite human beings, that their families are
not quite human beings. I do not know.
It is clear to me and to my team that the vast majority of
individuals at the VA are sincerely dedicated to American
veterans and do want to work and work hard. Wise Knowledge
Systems recommends installing and supporting qualified
individuals who have the experience and expertise to actually
evaluate these sorts of things for our veterans. We recommend
the VA do the right thing, honor your contract with the
veterans.
I want to thank all of you all for having this hearing and
giving our experience a voice. I am here for a little while to
answer any questions you may have. I am sorry, Chairman, but I
must leave at 11:00. I have an engagement, so.
[The prepared statement of Dr. Wise appears on p. 63.]
Mr. Michaud. Thank you very much, Mr. Wise, for your
testimony. And we should be done by then, but if not, feel free
to just get up and leave. Mr. Clair.
STATEMENT OF JAMES A. CLAIR, M.P.A., M.S.
Mr. Clair. To Chairman Michaud, to Ranking Member Brown,
and Members of the Subcommittee, thank you for your kind
invitation to discuss the Department of Veterans Affairs
procurement practices and specifically how the VA might benefit
by incorporating certain cost containment strategies within
their pharmacy benefit management and nursing home care
programs. My name is Jim Clair, I am the Cheif Executive
Officer of Goold Health Systems, and I am accompanied today by
Lorraine Lachappelle, a registered nurse, and Goold Health
Systems' Director of Community Assessments.
Goold is a national health care management company that
specializes in meeting our clients' specific health care
objectives with a special emphasis on cost containment.
However, at all times, we are driven by evidence-based medicine
and achieving clinically effective outcomes. In the interests
of time, I am skipping forward to page three of my prepared
remarks and will concentrate on three specific cost containment
strategies that we think would benefit the VA.
Number one, medication management. The U.S. Department of
Health and Human Services recommends medication therapy
management (MTM), a program that sets out to ensure optimum
therapeutic outcomes, reduce the risks of side effects when
using medications, and must be coordinated as part of a care
management plan. Goold Health Systems expands upon MTM by using
predictive modeling to analyze pharmacy and medical claims data
to measure the probability of exceeding set cost parameters for
high cost users and complex medical conditions. Problematic
patients are ultimately placed in an intensive benefit
management program or a chronic pain management program. We
utilize regression analyses that correlate chronic conditions
with total drug cost. We then identify individuals who would
benefit from our targeted interventions. Once in IBM or chronic
pain management the patient is linked to one physician
prescriber and one pharmacy dispenser for management of complex
medical conditions and chronic pain issues, ensuring that those
patients receive appropriate drug therapies. We provide
educational materials and monitoring services to those
individuals to help them better understand their medical
conditions as well as work with them on medication adherence
and potential drug interactions.
We also work with their providers to help ensure that
optimum clinical outcomes are achieved. Savings accrue to our
clients because of the intensive involvement of the provider,
the patient, and the GHS clinical team. Examples would be
narcotics use, asthma, and COPD.
Other examples of medical management strategies that we
believe would benefit the VA are formulary management,
including 15-day supply limits. GHS performs extensive analyses
to identify drugs that have high discontinuation rates shortly
after the onset of therapy. It was reasoned that limiting the
number of day supply of these first scripts would result in
savings from reducing waste. About 30 drugs were identified
that meet our criteria. These drugs tend to have high
discontinuation rates due to either significant side effects or
relative lack of efficacy. Targeted drugs for this effort
include long acting narcotic stimulants, psychiatric medicines,
urinary and continence products, and smoking cessation drugs.
Another example of formulary management is dose
consolidation. Many existing drugs now only need to be taken
once per day. There is a considerable amount of savings
available if these drugs are not allowed to be used more
frequently without good clinical cause. Examples of targeted
dose consolidation are Zyprexa and Risperdal, two anti-
psychotic drugs that have allowed our State clients to save
over 1 percent of their pre-rebate expenditures annually by
aggressively pursuing dose consolidation.
The second cost containment strategy I would like to
discuss is pharmacy program integrity, the definition being
that it should ensure that our tax dollars are not put at risk
through fraudulent violations of the rules or abuses of the
system. It should ensure that appropriate payments are paid
only to legitimate providers for services only to eligible
beneficiaries. Like many other health care managers, Goold
Health Systems has significantly expanded our program integrity
efforts over the last few years. The National Healthcare Anti-
Fraud Association recently estimated that 3 percent of the
health care industry's expenditures in the United States are
due to fraudulent activities. This calculates to an annual
amount of approximately $51 billion.
In a recent analysis for one of our clients we created a
``monthly outlier report'' on pharmacy expenditures and trends.
The analysis was performed for each drug filled in the previous
month. A review of the average amount spent per drug, and the
average quantity per day supply based on quantity limits was
undertaken. Those drug claims that fell outside of established
guidelines were flagged for audit. This resulted in claims
being reviewed as a result of improper use of override codes
and subsequently many of these outlier claims were reversed.
For this one client with a pharmacy budget of approximately
$200 million, small certainly by VA standards, we expect the
results of the specific audit to yield between $500,000 to $1
million in savings.
Two other examples of pharmacy program integrity review
would include automatic early refills. The VA is heavily
reliant on mail order. It is important that the mail order
provider be monitored to ensure that mail order pharmacies wait
to ask for the patient to ask for their medication to be
refilled. This does not preclude a mail order pharmacy from
making outgoing calls to a patient if they would like their
next dose of medication sent. But it would not allow a mail
order pharmacy from automatically sending the prescription to
them in all cases.
A second example being something called near duplicates.
Each medication intended for human use is assigned a number
called an NDC, a national drug code. It is a unique product
identifier that, for example, distinguishes an oxycodone 10
milligram tablet from an oxycodone 20 milligram tablet, a
generic medication. Near duplicates can occur with generics
with a different NDC of the same drug, same strength, is used a
few days after that patient's first prescription was filled. In
many cases, this is an appropriate fill due to the legitimate
loss of medication. However, there can also be billing errors
or inappropriate dispensing such that these claims should be
reversed. Monitoring utilization at this level, this granular
level, can yield additional savings to the VA if it is not
being done now.
The third cost containment strategy I would like to discuss
is something called long-term care assessments, and it is the
reason that Ms. Lachappelle is with me. Through the early
1990's, nursing facility costs in one of our client's States
were increasing at annual rates far exceeding the general
inflation rate, or even the health care cost inflation rate.
Eligibility determinations for Medicaid nursing facility care
were determined by the provider, leading to much higher
utilization rates than otherwise supported by independent
review. As a result, Maine State government instituted an
independent, objective Maine Medicaid eligibility screening
process with the following objectives: to create a single entry
point for medical functional eligibility assessments for long-
term care programs; to increase consumer participation and
control; to educate consumers about in home long-term care
programs and other alternatives to nursing and residential
facility care, the most expensive level of care; and to
identify and address caregiver needs; to reduce the long-term
cost of services by requiring greater emphasis on rehab and
health promotion; and to reduce the number of unnecessary
admissions to increase the number of discharges from and
decrease the length of stay in nursing facilities.
Within strict time parameters set by our client, the GHS
screener's job is to provide an accurate prescreening to
determine the need for medical functional assessment, maintain
the waiting list, and refer consumers to appropriate nurses.
More importantly, when an evaluation is indicated the Goold
Health Systems registered nurse conducts an accurate, objective
medical functional eligibility assessment using the automated
medical eligibility determination tool in a way that is always
based on sound clinical judgment and in compliance with
appropriate policy. We employ about 35 nurses Statewide to do
this work, who work with a laptop, portable printer, and cell
phone.
In State fiscal year 2010, we performed over 15,000
assessments. The State share of the medical nursing home
expenses in 2010 are more than 35 percent lower than their
State fiscal year 1994 in nominal non-inflation adjusted
dollars. This is a result of policy changes made by the
government and the long-term assessment process that we
conduct. Comparing where the unmanaged nursing facility budget
was headed to where it actually is today has yielded annual
State savings that exceed $100 million.
Mr. Chairman, the VA is a very effective provider of
important pharmacy and medical benefits to our country's
veterans. The cost strategies that I have discussed above have
been proven to be very effective in containing health care
costs for our Medicaid clients. We believe that these clinical
management approaches can assist the VA in further containing
costs. Thank you again for the opportunity to testify. My
colleague and I would be pleased to answer questions you or the
Committee may have.
[The prepared statement of Mr. Clair appears on p. 70.]
Mr. Michaud. Thank you very much, Mr. Clair. I want to
thank all the panelists for your testimony this morning. It has
been very enlightening and I look forward to your answering
some of the questions. I know Mr. Wise has to leave at 11:00. I
do not know if anyone has any questions for Mr. Wise? So any
time you want to leave, feel free. We might have questions once
we get going, but I just wanted to check first.
Once again, I want to thank everyone for coming. I have a
couple of questions. Mr. Newell, you mentioned, the Buddy and
the components that you have at your company and how you are
working with the VA system. Do you work also with Federally-
qualified health care clinics and rural hospitals? And if you
do, are there any problems associated with rural areas, such as
that system not working in very rural areas where they might
not have cell phone service? Or can you expound on that a
little bit?
Mr. Newell. Yes, I can. Our systems work great in rural
areas. There is a challenge in a rural area with getting the
system to the person and getting it set up at times, because it
is a rural area. So by definition the logistical challenges of
getting the systems to the location and set up are still there.
But we have solved those. Our system works on a plain old
telephone line. So as long as there is POTS (plain old
telephone service) line availability we can deploy the system,
and most areas have POTS lines. We also have a cellular modem,
which we can attach externally to the Health Buddy or to the T-
400 system, and that will allow it to communicate via whatever
cellular network is available in the area. So if there is any
cellular network available at all, we can connect to it.
It is very effective for rural health. It is being used,
our T-400 system especially is being used for the home-based
primary care project within the VA. We also have a video
system, which allows veterans in rural areas to have a video
camera in their home and allows the doctors to assess them
without bringing them in to the VA medical center. Not for
obviously extremely serious conditions, but as part of their
home-based primary care initiative, they are allowed to do
that. So it has had huge success. We have a project in Alaska,
which is not with the Veterans Administration with our T-400
system that has been exceedingly successful. And the biggest
success in rural areas is the cost of transport of getting
somebody who does have an exacerbation from the location to the
facility, and that can save tens of thousands of dollars,
especially in cases like Alaska where they have to be flown in.
So we have had a huge amount of success in rural areas. And
it is a huge application for rural areas. I would say we are
very under-penetrated in terms of the number of people who
could benefit from it. Thank you.
Mr. Michaud. Thank you. My next question is, Mr. Clair, you
mentioned that by utilizing some of the work that you have done
in different States, VA may be able to save money. The
estimated cost for prescription drugs in 2011 is $4.8 billion.
That is a good deal, the VA negotiated for lower cost
prescriptions. My concern, however, is on utilization within
the VA on the drug system. How the VA is bigger than a lot of
the States. How would you be able to help the VA? Can you
narrow that down? Or in a small pilot program? And what
potential do you think there might be for cost savings within
the VA pharmacy benefits program?
Mr. Clair. Thank you, Mr. Chairman. The first thing that we
do when we work with one of our clients is get the actual drug
utilization data. It is very important, as I think all of the
Members of the Subcommittee know, that the VA has a very
effective pricing strategy. They purchase very well. They have
very good network and communications and distribution systems.
But reviewing the utilization data is very important. And what
we would be interested in doing is some, is getting some
subset, a region, a State, an area, to be defined by the VA in
which we would get pharmacy claims and medical claims over a
period of time. Hopefully, at least 12 months worth of data.
Load that in and start to have my clinical team of doctors and
pharmacists and nurses and data analysts reviewing that in
order to identify savings opportunities specifically.
Mr. Michaud. Thank you. I do not want to elaborate on
nursing homes because of my displeasure with VA on how they
deal with reimbursement for State Veterans Nursing Homes. It is
my understanding that the cost of nursing homes within the VA
system is much higher than at Veterans Nursing Homes. When you
have worked with nursing homes, how much savings were you able
to achieve?
Mr. Clair. It is significant. The issue specifically is
that if you do not have, in effect what we are employed to do
is be a gatekeeper into the nursing home facility itself. And
if there can be a support system that allows one to stay in
their home based on their acuity and their emotional state,
etcetera, you are diverting people away from the nursing home
level of care and that saves appreciable amounts of money. My
calculation in State fiscal year 2010 is that the savings to
one State client was over $100 million. So in effect, nursing
home expenditures go down. You reinvest some of those savings
into the community level of care, but overall your net savings
to the VA would be significant.
Mr. Michaud. Thank you. Mr. Brown.
Mr. Brown of South Carolina. Thank you, Mr. Chairman. Thank
you, gentlemen, for being here today. Mr. Munroe, in your
testimony you state that the New Orleans VA solicitation was
redirected through the GSA schedule. What reason did VA give
you for this move?
Mr. Munroe. As you know, there are a number of different
procurement methods that the VA can use. The original redirect
was to facilitate supposedly ease of contracting. And certainly
a VA contracting officer's discretion is to use whatever
contracting method he or she feels best serves. The challenge
that we have with that is when you redirect to a method that
does not have a solution, you cannot then go try to create that
solution on the GSA, for example. So there were a number of
things that happened in that process. Our biggest concern in
that process is, if you are going to use the GSA schedule, use
it for what it is worth, or for what it is supposed to be used
for. Go there, identify the product that exists on a Federal
Supply Schedule, and procure it. If it does not exist on the
Federal Supply Schedule, you cannot then go back to GSA and
say, ``Here are all the requirements that I have. Let us
solicit in an open forum everybody who has a GSA contract and
see if they can try to do this.''
So there are a number of different ways that the
procurement process can happen. The answer that we were given
as to why it was redirected through the GSA schedule was for
pure ease of contracting. Which we are in full support of. If
products exist on the GSA schedule then an easier process
obviously is to use that schedule. But when they do not exist,
as you saw from the comments that Judge Horn provided, you
cannot then go into open solicitation and try to convince GSA
that that product can exist there as a vendor.
Mr. Brown of South Carolina. So how many units do you have
now in operation?
Mr. Munroe. I am sorry?
Mr. Brown of South Carolina. How many units do you have in
operation?
Mr. Munroe. We have, now we have 12 units within the VA and
the government health care system. We also provide services to
the U.S. Navy in their hospitals as well, that use the product
for exactly the same reason.
Mr. Brown of South Carolina. But you do not have any in New
Orleans?
Mr. Munroe. We do not, there is nothing in New Orleans
right now.
Mr. Brown of South Carolina. Where do they get their
service?
Mr. Munroe. If you are a veteran right now in New Orleans
and you need endoscopic services, you have to travel 2 hours
for those services. You have to travel outside of the New
Orleans service area to another VA service area.
Mr. Brown of South Carolina. What reason did they give you
for not using your service?
Mr. Munroe. Well the intent there was to use the service.
They started that process. But through an incorrect procurement
procedure they stopped. That contract has been awarded to
another company. The problem is, that other company does not
meet the standards of care that the VA has in all of their
medical centers. And you cannot take, you know, our contention
with that is, in Miami, for example, in Muskogee, in
Martinsburg, facilities that members have seen and actually
gone to, those facilities require the same standard of care in
a mobile unit as they do in their fixed based facility.
Mr. Brown of South Carolina. So when you bring the unit, do
you bring the medical support staff, too?
Mr. Munroe. We do not bring the medical support staff, and
that is probably the most important part of what we do with the
VA. In Muskogee what we were told--and let me answer your
question. We do not bring them because the utilization of the
existing medical staff is the key to the project. So the
surgeons, the nurses, the technicians, the facility is
supplying both their equipment, which they know how to use, and
they are supplying their staff, which keeps them productive. In
Muskogee, for example, the operating room nurse manager told me
that if they had to move their patients to the community to
render services, she would have lost 80 percent of her nursing
staff. Because they would have not stayed. They would have gone
to where the patients would have gone. And that is part of that
overall savings that comes into play. Those are the
intangibles. They did not lose 80 percent of their staff
because they are doing it this way. But if they had, what would
have been both the financial impacts to the VA health system?
And more importantly, the service impact to the veterans in
that service area?
Mr. Brown of South Carolina. Do you lease the equipment or
do you sell it?
Mr. Munroe. We lease, we do both. But in the VA network, we
lease. It is an operating lease. So if the renovation project
is a 12-month, 24-month, 36-month project, it is an operating
lease and then we remove the equipment at the end. So if you do
not mind I can just--can you bring that back up for me?
Mr. Brown of South Carolina. Could you tell me how many
vendors are in the market?
Mr. Munroe. Well our, it is my understanding that over the
next 10 years, and I will be curious when some of the other
panelists come up, over the next 10 years the VA is estimating
that there will be over a hundred facilities that will go
through an operating room renovation project. The average
number of units that we see is around four units in order to be
able to service a medical center.
Mr. Brown of South Carolina. But how many vendors are out
there providing those units?
Mr. Munroe. How many VISNs are we in currently?
Mr. Brown of South Carolina. No, how many vendors? How many
people like you are selling----
Mr. Munroe. Oh, vendors. I am sorry, I thought you were
selling VISNs.
Mr. Brown of South Carolina. It is a southern thing.
Mr. Munroe. That provide a--that is the difference between
the southern and the Vermont piece of it. So sorry, Chairman
Michaud, for those of us up in the Northeast.
Mr. Michaud. It took me a while to get used to his accent
as well, so.
Mr. Brown of South Carolina. Sometimes we have to have an
interpreter.
Mr. Munroe. VISNs and vendors just got too close there. So
there are no other vendors in the market today that provide a
State licensed, and this is the key, State licensed, Medicare
certified, JCAHO accredited, mobile surgery unit. So there are
no other vendors in the United States that provide that level
of certification. Does that answer your question?
Mr. Brown of South Carolina. Sure.
Mr. Munroe. So, you know, when you look at this 400 square
foot operating room, it is just over 400, it is 402 square
feet, when I travel to the Phoenix VA, which has seven
operating rooms and two special procedure rooms, they are
embarrassed to bring me into their operating room suites.
Because they know that this level of care in these mobile units
is higher than what they service, than what they provide for
service today in Phoenix.
Mr. Brown of South Carolina. What would one cost a month to
lease?
Mr. Munroe. The units are $76,000 per month, per unit.
Mr. Brown of South Carolina. To purchase?
Mr. Munroe. Two point sixty-seven million dollars.
Mr. Brown of South Carolina. Okay.
Mr. Munroe. So if you are doing what I think you are, and
you understand how many units we have in service in the VA, it
does not take a lot, and you will see in the packet I provided
you, it does not take a lot of units to produce a very
significant return on investment to the VA. Especially if we
believe what they are telling us, which is over the next 10
years, 100 facilities will go through this renovation project.
And I truly believe, in Muskogee for example where they have
done in depth financial analysis of this, they did the analysis
before the units came in. I truly believe the contracting
officer when he tells me that they are saving, hard cost
savings at that facility, $4 million per unit by doing it this
way.
Mr. Brown of South Carolina. Okay. Well, I thank you very
much.
Mr. Munroe. Thank you.
Mr. Brown of South Carolina. And I know that my time has
expired, Mr. Chairman, but I would just like to mention to Mr.
Moss, I am grateful for that facility at Myrtle Beach. We have
doubled and tripled the size in a fairly short period of time.
I know it took a long time to get the project moving, but once
it got on board it moved pretty quick. What is the largest
facility in which you have been able to use the Design-Build
method?
Mr. Moss. We just completed a 99,000-square foot combined
brigade-battalion headquarters building for the Combat Aviation
Brigade at Fort Bliss in El Paso. And that was constructed of
100 individual sections in conjunction with site built
elements, what we refer to as hybrid construction. So.
Mr. Brown of South Carolina. But you do not use modular
units?
Mr. Moss. Pardon me?
Mr. Brown of South Carolina. But you do not use modular
units?
Mr. Moss. Well yes sir, they are. They are built off site.
They are trucked to the building site and put together, stacked
atop one another.
Mr. Brown of South Carolina. Very good. Sorry, Mr.
Chairman, for taking so much time. But thank you, gentlemen.
Sorry I did not get a chance to ask questions of the other two
panelists.
Mr. Michaud. Thank you very much, Mr. Brown. We gave you a
little extra time for interpretation. Mr. Donnelly. Mr.
Carnahan. Once again I would like to thank the panel for coming
today. I appreciate your testimony, and if there are any
additional questions we will definitely get in touch with each
of you. So once again, thank you very much. I would like to ask
the second panel to come forward. And while they are coming
forward I will introduce them. The panel includes Debra Draper,
who is the Director of Health Care for the GAO, and Belinda
Finn, who is the Assistant Inspector General for Audits and
Evaluation within the VA Office of Inspector General. I would
like to thank both of you for coming today, and I look forward
to your testimony. And we will begin with Ms. Draper.
STATEMENTS OF DEBRA A. DRAPER, PH.D., M.S.H.A., DIRECTOR,
HEALTH CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; AND BELINDA
J. FINN, ASSISTANT INSPECTOR GENERAL FOR AUDITS AND
EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF
VETERANS AFFAIRS; ACCOMPANIED BY MAUREEN REGAN, COUNSELOR,
OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS
AFFAIRS
STATEMENT OF DEBRA A. DRAPER, PH.D., M.S.H.A.
Ms. Draper. Mr. Chairman and Members of the Subcommittee,
thank you for the opportunity to be here today as you discuss
VA's contracting and procurement practices.
My testimony today focuses on the intersection of some of
these activities and veterans' safety.
VA medical centers purchase supplies and equipment that
allows them to provide a range of health care services to the
5.5 million veterans served annually. These purchases include
expendable medical supplies such as needles, which are used
once and discarded and reusable medical equipment such as
endoscopes which are reused for multiple patients.
VA has established policies that its medical centers are
required to follow when purchasing and tracking medical
supplies and equipment. In part, these policies are intended to
help ensure the safety of veterans treated in VA facilities.
For example, VA medical centers need information on the
reusable medical equipment in their facilities to ensure that
they have developed procedures for properly cleaning and
disinfecting or sterilizing the equipment prior to reuse.
This information is also critical if a supply item or piece
of equipment is the subject of a manufacturer or FDA recall or
patient safety alert from VA.
In my testimony today, I will first discuss some
preliminary observations from our ongoing work on VA's
oversight of compliance with its purchasing and tracking
policies for expendable medical supplies or reusable medical
equipment.
These observations are based on site visits to five VA
medical centers and raised concerns about the safety of
veterans receiving care at these facilities. I will then
discuss steps that VA Headquarters plans to take to improve its
oversight of these activities.
Our initial work has focused on three requirements that we
determined were relevant to veterans' safety. These include
ensuring Committee review and approval of medical supplies and
equipment not previously purchased by the facility, obtaining
signatures of ordering and approving officials prior to making
purchases, and entering information about supplies and
equipment in the VA's inventory management systems.
At the five VA medical centers we visited, our preliminary
work identified examples of inconsistent compliance with these
three requirements we reviewed. In some cases, noncompliance
created potential risk to veterans' safety.
At one VA medical center, for example, officials told us
that clinical department staff were allowed to purchase certain
reusable medical equipment such as surgical and dental
instruments using purchase cards and that these purchases may
not have received the required Committee review and approval.
As a result, these purchases may have been made without
assurance that they were cost effective and safe for use on
veterans.
Officials at another VA medical center discovered that a
staff member working in a dialysis department ordered a supply
item without obtaining the required signature of an approving
official. The staff member ordered an incorrect item which was
subsequently used, resulting in the potential exposure of more
than 80 veterans to infectious diseases such as HIV, hepatitis
B, and hepatitis C.
At a third VA medical center, more than 2,500 veterans were
potentially exposed to infectious diseases because according to
the facility officials and the VA's Office of the Inspector
General a piece of reusable medical equipment was not being
properly cleaned and disinfected.
After receiving a patient safety alert from VA, the medical
center incorrectly concluded that the item was not being used
in part because it was not listed in the facility's inventory.
The delayed identification resulted in the item's continued use
and potential exposure of veterans.
With regard to VA's plans to improve its oversight of VA
medical centers' purchasing and tracking of medical supplies
and equipment, VA Headquarters officials told us that they
planned to change the oversight of the use of their purchase
cards, shifting greater responsibilities from the medical
centers to the VISNs.
VA is also developing a new inventory management system
which officials expect will improve their ability to track
information across facilities.
To summarize, VA has policies that its medical centers are
required to follow with purchasing and tracking expendable
medical supplies and reusable medical equipment. But based on
preliminary observations from our ongoing work, there is
inconsistent compliance with these requirements, creating
potential risk to veterans' safety.
Mr. Chairman, this concludes my opening remarks. I am happy
to answer any questions.
[The prepared statement of Dr. Draper appears on p. 73.]
Mr. Michaud. Thank you very much.
Ms. Finn.
STATEMENT OF BELINDA J. FINN
Ms. Finn. Thank you.
Mr. Chairman and Members of the Subcommittee, thank you for
this opportunity to testify on the findings of the Office of
the Inspector General regarding the Veterans Health
Administration's contracting and procurement practices.
Maureen Regan, Counselor to the Inspector General, joins me
at the table today. In addition to her legal duties, Ms. Regan
manages the Office of Contract Review within the OIG.
In December 2009, the OIG testified on acquisition
deficiencies in VA. At that time, numerous OIG audits,
investigations, reviews, and inspections has identified
systemic issues such as poor acquisition planning, problematic
contract award processes, poorly written contracts, and
inadequate contract monitoring that negatively affected VA's
ability to attain quality goods and services in a timely manner
at fair and reasonable prices.
These acquisition weaknesses significantly impact VHA,
which purchased over $9 billion in health care related goods
and services in fiscal year 2009.
Since December, we have continued to identify systemic
acquisition weaknesses, low levels of compliance with Federal
Acquisition Regulations (FARs) and VA acquisition regulations,
and incomplete and unreliable data in VA and VHA acquisition
systems.
For example, two national audits over contracts for patient
transportation and Federal Supply Schedule health care staffing
services found that strengthened procurement practices and
contract monitoring could reduce improper payments and
overpayments by $130 million over the next 5 years.
Additionally, our recent reviews of the VHA's nonrecurring
maintenance contracts funded by the American Recovery and
Reinvestment Act of 2009 (ARRA) have found that although VA and
VHA oversight has improved compliance with FAR competition
requirements, the contracting officers were not performing
adequate contractor responsibility determinations.
These determinations are critical to mitigate possible
risks to ARRA funds and ensure the expeditious completion of
VHA projects. In fact, 60 of the 65 contracts we reviewed
valued at $83 million lacked adequate contractor responsibility
determinations.
In May 2010, we reported that the VA medical center in
Philadelphia had inappropriately purchased brachytherapy
services from the University of Pennsylvania without a contract
between 1999 and 2005.
Additionally, OIG health care inspections at community-
based outpatient clinics have found problems in the
administration of contracts for clinic operations.
For example, the Contracting Officer's Technical
Representatives (COTRs) are not notifying vendors about
patients who should be disenrolled. Because VHA pays the
contractor a capitated rate for the enrollees, the community-
based outpatient clinic (CBOC) vendors may be overpaid. The
COTRs were also not consistently holding contractors
accountable for meeting performance standards set forth in the
contracts.
In fiscal year 2010, the Office of Contract Review has
completed 65 pre-award and 26 post-award reviews. Thirty-two of
the pre-award reviews were of proposals from VA affiliated
institutions for sole source health care resource contracts.
These reviews identified $39 million in potential savings that
could be achieved during contract negotiations.
The Office of Contract Review continues to identify issues
with a lack of communication between procurement and program
officials and inadequate planning for these health care
resources contracts.
The lack of communication and poor planning results in
unnecessary contract cost because requirements have not been
properly identified. The statements of work are inadequate and
the estimated quantities are overstated.
We also routinely find that VHA's health care resources
contracts lack adequate oversight to ensure VA receives the
services it pays for.
Mr. Chairman, this concludes our oral statement. Myself and
Ms. Regan would be pleased to answer any questions that you or
other Members of the Subcommittee may have.
[The prepared statement of Ms. Finn appears on p. 78.]
Mr. Michaud. Thank you very much for your testimony and
thank you Ms. Draper, as well.
Ms. Draper, why are the VA medical centers not entering the
information about expendable medical supplies in their system?
Do you have any idea why they are not doing that?
Ms. Draper. Yes. VA policy requires that all expendable
medical supplies that are purchased on a recurring basis are to
be entered into the inventory system. However, policies differ.
The policies are ambiguous as to what recurring refers to. One
refers to at least four times per year and others are just
basically silent.
So what we found is that some facilities are entering all
medical supplies and others are not. So there is confusion at
the local level.
Mr. Michaud. Do you feel the VA Central Office provides
sufficient guidance to the VA medical centers on implementing
its policies on purchasing and tracking? If not, do you have
any recommendations of what we can do to make them comply?
Ms. Draper. Yes. Our work is ongoing, so we are continuing
to look at that area. And we are also going to be planning to
talk to the VISNs about their role in oversight and compliance.
As part of our preliminary work, we have found that some
policies are ambiguous and some policies appear to be
contradictory. I can give you an example.
The purchase of medical equipment with purchase cards. One
VA policy says that it is not allowed, another says that it is.
So that is one area that is problematic.
Another issue is that there is conflicting guidance as to
what reusable medical equipment should be inventoried.
According to one policy, it is defined as equipment that costs
more than $5,000 with a useful life of 2 years or more.
However, reusable medical equipment is any equipment that is
designed by the manufacturer to be reused for multiple patients
and arguably should be tracked.
Mr. Michaud. Ms. Finn, we have heard some concerns that OIG
has decision-making authority over awarding contracts and that
has caused some delays in the contracts and procurement
process. Further, there has been concern that prospective
contractors are unable to communicate with OIG to better
understand why their bid has been rejected.
Could you comment on those two concerns? And what role does
the OIG have in the contracting and procurement process?
Ms. Regan. If it is a Federal Supply Schedule contract or
health care resource contract that is awarded on a sole source
basis, we have an agreement with the Department that we do the
pre-award reviews to look for price reasonableness. We do the
review and we give a report to the contracting officer with
recommendations for negotiations. But that is the only role
that we have in the contracting process.
If a vendor believes that there is some part of the process
that was not done right; as the witness testified before, they
were exceeding the scope of the GSA contract for the services,
there is a protest process either to the contracting officer or
the procurement executive or to the Government Accountability
Office. But we do not get involved in that process at all.
Mr. Michaud. Okay. We heard Mr. Wise on the first panel say
that he feels the VA is broken and that the VA said that.
Would both of you want to comment on that? If broken, how
do we fix the problem?
Ms. Finn. Broken is a very definitive term that has a wide
range of possibilities. I think there definitely are large
areas for improvement in the VHA acquisition processes. As we
have testified, we see problems again and again with planning
for contracting, the awarding of contracts, and then the
administration of contracts.
Fixing those issues is going to take a concerted effort; to
improve the planning through communication between the program
officials and the contracting officials. A number of the
discussions we heard from the first panel seem to indicate
problems with that type of communication.
Once we have an acquisition strategy, then we need
oversight of the contracting process to ensure that the
contracts are awarded properly and competed.
And, finally, the administration of the contract at the
field level is always going to require expert and trained
Contracting Officer's Technical Representatives to really
ensure the contract provisions are met.
Ms. Draper. Our work, as I mentioned, we have identified
issues with some VA purchasing and tracking policies with
regard to medical supplies and equipment. And some of the
policies are often ambiguous or contradictory.
And we have also tentatively identified gaps particularly
related to the inventory management systems that may increase
the risk or even contribute to patient safety incidents.
Our work indicates that VA could make improvements by
ensuring that their policies are clear and comprehensive and
that there are clear lines of accountability. Effective
oversight and enforcement to ensure compliance are also
critical aspects of making those improvements.
Mr. Michaud. Thank you.
Mr. Brown.
Mr. Brown of South Carolina. I thank the panel for being
here and giving us their insights.
As I mentioned in my opening statement, I am particularly
concerned with your assertion that data in the VA and VHA
acquisition support and information system is incomplete and
unreliable.
And how does that compare to other Federal departments?
Ms. Finn. I do not have total experience with other Federal
departments. I can tell you a little bit about the situation in
VA.
We did an audit about 2 years ago of the Electronic
Contract Management System (ECMS), which is a relatively new
vehicle within VA to track contract actions. It was established
to track contract actions over $25,000.
At the time we did our first audit, we found a wide range
of contracts that were not being placed into the system for
many reasons. It was difficult to work with and users were not
necessarily aware of all the requirements.
With the ARRA requirements, VA and VHA required all of the
ARRA contracts to be recorded in ECMS. So from our experience,
we did find a lot more information on those contracts in ECMS,
although we still have found issues with the completeness of
the data in that contracting system.
Because VA and VHA are so decentralized, it is hard to get
all of this information together in a system. Ms. Regan might
have more insight.
Ms. Regan. I would say there is also a difference between a
contract action and a purchasing action. A lot of purchases are
below $3,000 for items that are purchased off the Federal
Supply Schedule contract or even open market and you are not
required to do competition. So it is very hard to track
individual purchases of an item even if the contracting action
is in the system.
One example would be your Federal Supply Schedule
contracts. The contracting action is in there. It has the
pricing structure, but it is very difficult to follow who
purchases what items off those contracts, especially when it is
below the $25,000 threshold. So there is no visibility of those
types of items out there.
I know when we do our work, we have to go to the vendors to
find out exactly what VA purchased. But I will qualify that
they do have a pretty good system in VA to track purchasing of
pharmaceuticals because purchasing is done through a prime
vendor. And they also have a good system to track
prescriptions. We use that data consistently and we do get
reliable data from the Department in that area.
Mr. Brown of South Carolina. How many average vendors do
you have before you issue a contract?
Ms. Regan. It depends on the value of your contract. If you
are purchasing off a Federal Supply Schedule and it is under
$3,000, you can issue it without any competition. Up to
$25,000, I believe, or $100,000, you call up and get some
offers from vendors. If it requires a statement of work, you
are required to post an RFQ, request for quotation, on GSA
Advantage to get quotes, give it to at least three vendors.
Again, it is the dollar amount, the $3,000, the $100,000
and over that makes a difference on how you will do your
procurement.
Mr. Brown of South Carolina. I know that one of the members
of the last panel said that there were too many vendors in the
particular field that he was talking about. Some of you were in
the room when he said that.
What is too many?
Ms. Regan. I am not sure what is too many, but I do know
that on the VA schedules, the Federal Supply Schedules, he was
talking about the GSA Schedules. On the VA Federal Supply
Schedules, anybody purchasing can go to the National
Acquisition Center's Web site and actually put in the type of
item that they want and it will come up with all the vendors.
When they buy through the prime vendor for pharmaceuticals, the
prime vendor has a list of every company that sells that drug,
particularly generics where you have a lot of competition. So
it is easier because you have visibility.
I know in my personal use of the GSA schedules, it is a
little more difficult because they go by special item number.
There may be a lot of businesses that fit into the general
category, and it is very difficult to find those that have
specifically what you are looking for.
So there are a lot of vendors. You could have 70 vendors
listed for that special item number, but maybe only five of
them have exactly what you are looking for. So it is very
difficult to find the right vendors using GSA Advantage.
Mr. Brown of South Carolina. I know that we ask that we
give special consideration to disabled veterans, for instance.
Are they flagged in a way that they would get preferential
treatment if they were competitive or how does that work?
Ms. Finn. In many cases, VHA actually does a set aside for
those type of procurements and then only vendors who qualify as
a service-disabled veteran-owned small business or a veteran-
owned small business can bid on those contracts.
Mr. Brown of South Carolina. Thank you. I see my time is
expired.
Mr. Michaud. Thank you.
Mr. Carnahan.
Mr. Carnahan. Thank you, Mr. Chairman and Ranking Member.
I wanted to ask you to comment, if you would, about the
specific findings with regard to the Cochran VA Medical Center
in St. Louis.
Ms. Draper. We are actually going there next month. We have
not conducted that work yet. Our work is ongoing.
Mr. Carnahan. So you have begun that work, but you have not
made a specific site visit?
Ms. Draper. Yes. The site visit, I think it is going to
happen in about 2 weeks. It is the first part of October.
Mr. Carnahan. Okay. Well, I would request that you notify
us when that is going to happen specifically.
And you mentioned in your report inconsistent policies,
noncompliance with oversight, and in particular the situation
at the Cochran VA Medical Center where dental instruments were
not properly sterilized for at least a year.
What kind of oversight was supposed to be there that was
not that did not catch that for at least a year's time?
Ms. Draper. One of the areas that we have found a
particular concern in our work is that it appears that clinical
department staff are allowed to purchase specialty items,
surgical and dental instruments. And often those do not go
through the required committee review and approval.
So the consequence of that is that staff responsible for
cleaning and reprocessing that equipment is not always aware
that it exists in the facility. And, actually, we have seen
that on other site visits.
Mr. Carnahan. And the steps that are being taken to address
the inconsistent policies, but also to address the oversight
and enforcement of those policies, can you describe what is
being done now to address that?
Ms. Draper. Yes. As I said, as I mentioned earlier, we are
continuing to look at the oversight and compliance
responsibilities and we are continuing to talk with VA. And we
also plan to do additional work with the VISNs to see what
their role is.
Ultimately responsibility for compliance at the facility
level lies with the facility director and then it is also the
responsibility of the VISN and VHA to ensure that there is
compliance with the policies.
And as I mentioned, some of the issues arise because there
is some ambiguity and contradiction in the policies. And, you
know, our work has identified ambiguity and contradiction
within the three requirements that we reviewed, and also where
there are gaps related to the inventory management systems.
Mr. Carnahan. And when will those ambiguities be addressed
so there is a clear standard throughout the VA?
Ms. Draper. Well, we hope that our report will be issued
after we finish our next site visit and finish doing our
analytical work. We are anticipating that the report will be
issued in the spring.
Mr. Carnahan. And then, finally, one of the issues that has
come to light in the conversations back in St. Louis is with
regard to employees that have come forward, attempted to come
forward. One employee talked about some problems early on was
actually fired some believe in a retaliatory way. Others have
been intimidated in terms of coming forward with information.
What is the VA doing in terms of protecting employees that
want to come forward with information about improvements but
also being sure that those responsible are being held
accountable?
Ms. Draper. Yes. That is not really part of how we have
looked at our work and that is probably a question that VA
might be better able to answer. We are aware of the situation.
And as I said, we are visiting St. Louis next month, so we will
learn more about the particular situation there.
Mr. Carnahan. And let me ask the other witness from the OIG
what steps can or should be taken with regard to those
employees that may have helpful information in terms of how
some of these things happen but also how to prevent them going
forward so they are not being retaliated against when they may
have important information to come forward?
Ms. Finn. Mr. Carnahan, I cannot address all the ways, but
one option they have is to call the OIG hotline. We receive
numerous complaints and questions, concerns from employees and
entities over the course of a year. And we investigate many of
them and work to protect the rights of that employee or the
complainant.
Mr. Carnahan. All right. I see my time is up, Mr. Chairman.
Thank you for having me sit in today on this hearing.
Mr. Michaud. Thank you very much, Mr. Carnahan.
Mr. Boozman, do you have any questions?
I would like to thank our second panel for coming forward.
And I am sure there will be more questions that we will submit
in writing. So, once again, thank you all for coming. I
appreciate it.
The last panel includes Frederick Downs who is the Chief
Procurement and Logistics Officer for VHA. He is accompanied by
Dr. Andrea Buck who is the National Director of Medicine for
VHA.
I want to thank you very much, Mr. Downs, for coming
forward and I look forward to your testimony.
STATEMENT OF FREDERICK DOWNS, JR., CHIEF PROCUREMENT AND
LOGISTICS OFFICER, VETERANS HEALTH ADMINISTRATION, U.S.
DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY ANDREA BUCK,
M.D., J.D., NATIONAL DIRECTOR OF MEDICINE, VETERANS HEALTH
ADMINISTRATION, U.S. DEPARTMENT OF VETERANS
Mr. Downs. Thank you, Congressman.
And let me just get a second here to get my papers all
straightened out. I was taking a lot of notes during the
panels. I would like to be able to address those to you.
Good morning, Chairman and Ranking Member and Members of
the Subcommittee. Thank you for inviting me to discuss the
Veterans Health Administration contracting and procurement
practices.
I have testimony here. I want to make one thing clear on my
paragraph and then I would like to go right into answering some
of these questions if that is okay with you. We will get right
to it.
Mr. Michaud. Is there any objection? Hearing none, your
full written testimony will be submitted for the record.
Mr. Downs. First, I want to state that acquisition reform
is a central piece of the Secretary's charge to fundamentally
change the Department of Veterans Affairs in ways that will
transform it into a 21st Century organization that is people-
centric, results driven, and forward looking.
And it is important to know that the integrated operating
model is the Department's acquisition and transformation
initiative. And VHA fully embraces the Secretary's
transformation vision and the implementation of this integrated
operating model.
And to go forward with that, you know, listen to the
testimony first of the folks, the vendors and their concerns,
and we want to make sure that people understand that we are
very open to listening to what is going wrong, but we want to
make sure that we are open to all the vendors and address their
concerns.
But in the area of the concerns that were addressed by the
different individuals, what we attempt to do in VHA and VA is
we need a level playing field. We have a lot of competition
that we need to adhere to as far as making sure that everyone
has a fair chance to apply for the contracts that we let out.
Contracting officers are one part of it. The needs of the
clinical service or the service at hand is another part of it.
In the area of construction, we have construction in facilities
and they have their needs and requirements. And what they do is
work together as a team in putting all of this together.
Contracting is difficult in the government, complex, but we
are regulated by the FAR and by both the Federal Acquisition
Regulations and the Veterans Administration Acquisition
Regulations. And so when adhering to those, we follow a certain
process and procedure to make sure that we are doing the right
thing, that we are making the processes the way they should be.
And the competition out there will come to us and they will
make presentations. We then take that information. We share it
with the clinical programs or the other programs and they are
able then to decide whether this is something they need or they
do not need.
And I think in trying to address the concerns of the
vendors, we are always open for that. And one of the areas that
we are very conscious of is our small business and what we have
done to improve our outreach to the small businesses.
Within VHA, we have appointed a small business
administrator or point of contact in my office. At each one of
the VISNs, we have a small business coordinator. And then they
work with the facilities to ensure that when the inquiries come
in from the small businesses or the large businesses, there is
a point of contact to send that person to.
In my office, we do about 150 meetings a year with vendors.
At the VISN level, I know that the VISN coordinators for small
business say they get four or five inquiries a week from the
different facilities. We have a brochure that we give to these
individuals to help them do business with the government. Our
job in VHA is to help that individual do business with us
because we are successful if they are successful.
Now, one of the things that we have as a mantra or a
philosophy is that we buy American, buy small business. And
with that in mind, that is how we approach all of this.
And, in fact, our small business for this year for the
service-disabled veteran-owned small businesses, we are at 17
percent. And so we address that aggressively.
In the ARRA funding this year, which VHA had $1 billion, we
had 98 percent competition and 76 percent of that business went
to small businesses and 75 percent of that was to service-
disabled veteran-owned small businesses and veteran-owned
businesses. That is an indication of the direction that we are
going in the future.
We want to address these problems, but some of these things
that are perceived as problems are not really problems but are
part of the process. And we want to make that process as clear
and as understanding as we can. That is the reason we have this
openness and allow people to come in and talk to us, to meet
with us.
And I have met with some of these individuals who were on
the first panel and so we try to work as we should in making
sure they have the information and learning how to do business
with us.
[The prepared statement of Mr. Downs appears on p. 82.]
Mr. Michaud. Thank you very much.
How do you respond to the concerns that GAO and OIG have
raised in their testimony? When you look at contracts
associated with the ARRA funds, they found that 60 out of 65
were not in compliance with established rules.
I guess I do have a concern, especially when you are
dealing with veterans' health. So how do you address the
concerns that GAO and OIG raised today and what steps is VA
taking to address these concerns? How quickly will you be able
to address those concerns?
Mr. Downs. Well, sir, we are in the middle of addressing
those concerns now. Been very active in developing action
plans.
In VHA, what we have done is reorganized into a centralized
integrated model and so that all the procurement people
throughout VHA have been taken out of the chain of command of
the local facilities and network directors. They now answer
through their chain of command straight through to my office.
The other thing we have done, we have formed what we call
three service area offices. And in those service area offices,
we are setting up quality and compliance teams in addition to
audit and review teams.
We also have in my office set up a quality officer and her
job is to develop the policies and procedures, the
standardization and to do the audits and direct the audits at
the local level.
These problems that were mentioned by the OIG and the GAO
have us very much concerned, but we have been working hard to
address those. Certainly we are dealing with, in our area when
it comes to inventory, for instance, we are dealing with seven
antiquated stovepipe systems within each facility for
inventory.
And we have that at 153 or 154 facilities. They were always
designed as facility level, never national-level inventory
systems. So for us to get data to control it from a national
level, VISN level, even at the facility level is extremely
difficult.
We understand what the problems are and that is the reason
we have what we call strategic asset management. This was part
of FLITE, which is the Financial Logistics Integrated
Technology Enterprise system, and it was recently canceled. But
the SAM, the Strategic Asset Management, piece of it is
something that was handed to us in VHA. And I am not the SAM
program management for that.
We have a pilot program in Milwaukee right now. We have
gone through our first user's test, been very successful. And
we intend to go live in Milwaukee in March 2011 and then we are
going to have a post alpha time to make little tweaks to it if
we need to because of the cancellation of Financial Accounting
System and FLITE. In the data warehouse, some of the IT things
that were going to be a part of that are now changed and so we
are going to go through the process of making that alpha
product our basic inventory model.
We will then go to the beta stations, approve a concept,
and then we go nationwide. And we intend to do that, our goal,
we think 2013, 2014, we will be nationwide.
Now, what that system allows us to do is to keep track of
every piece of equipment from the time it comes into the
medical center to the time it is accessed.
Then the reporting system is going to be the answer to many
of the issues and problems brought out here in the OIG and GAO
when it concerns equipment and supplies. We will be able to
keep track of that at the facility level, at the VISN level,
and at the regional level. In a way, it will be part of the
21st century.
And these antiquated systems, which are what is hindering
us now because we are dependent upon manual reports, what we
are trying to do right now is to hold these people accountable
for making sure they are filling out their reports, they are
putting information into the Automated Engineering Management
System/Medical Equipment Reporting System of the Generic
Inventory Package.
So we have a current process in which we are intensifying
our ability to try and get compliance for them to do that. But
until then, until we get our national product, we will continue
our efforts on a facility-by-facility basis.
We are going through also a logistics transformation in
addition to our acquisition transformation. We are making
tremendous strides in logistics. But, again, this was the first
time this office has existed in VHA and it has been in place
for 5 years. And so there was no office before. There was no
one in VHA to oversee or monitor the carrying out of the
policies nationwide for almost 25 years.
And so what we are doing is making a lot of effort, a lot
of effort into correcting that by reorganizing, going through a
transformation. We are looking at all these policies you have
heard where it is haphazard. We are standardizing our policy.
We are setting up teams to go out and do the audits, the
quality review teams.
There is a whole genre of good management kinds of actions
we are taking to address all of these issues. This is extremely
important to us, the patient safety issues.
I as a patient, I have to tell you in the VHA system, I am
driven to correct these issues because there are almost six
million of us using this VHA system. It is imperative that we
do a good job with it.
So, yes, we are concerned. We are passionate. We are making
the changes. We are locked into the processes, so that we are
changing those processes also and writing new standard
operating procedures.
And all this is being done very rapidly. The acquisition
part started a year and a half ago. The end of this month, we
will finish the acquisition part. And the final individuals at
the local level who are doing purchases will be now a part of
our chain of command which will address--I have gone too far.
Mr. Michaud. No. You mentioned you are taking the
responsibility from the local level down to your office. And
that was done what, a year and a half ago?
Mr. Downs. January of 2009 or January, February of 2009 was
when we started the process.
Mr. Michaud. When you started. How do you look at, for
instance, whether the VA actually does do a good job in
purchasing prescription drugs, which cost $4.8 billion in 2011?
I do not know if it is the best question for you, Mr.
Downs, or Dr. Buck. My concern is, even though you might be in
compliance with whatever procedures the VA has set up, what
about the utilization rate of those drugs?
As you heard from the first panel, distributing a 15-day
supply, instead of a 30-day supply or a 2-month supply, could
actually save dollars in the pharmacy area. Are you focused on
that as well?
Mr. Downs. No, sir. Dr. Buck or myself would not be
involved with that. That is a clinical decision by the
pharmacists and clinicians. And we can take that for the
record, but certainly not one I can answer.
[The VA provided the response in subsequent information,
which appears on p. 34.]
Mr. Michaud. Okay. Thank you.
And my last question is, we heard Mr. Wise on the first
panel quote a VA employee who admitted the VA is broken.
Mr. Downs. Well, we have about 300,000 employees and there
are certainly some who are unhappy with it. But the individual
in mind, and I know the individual, it is not broken. I have
tried to compare this many times.
We are doing, in VHA at least, we do about 320,000
purchases a month. We are taking care of six million patients a
year. We have the largest health care system in the United
States. We are able to provide the service that the veterans
need. And we are getting the job done day to day and it is
proven by the fact that we are considered one of the top health
caregivers in the United States.
And so we are getting the job done. So it is not that we
are broken. What it is is that we have a system. The clinical
change started in the 1990s when Dr. Kaiser turned this upside
down and made quality patient care number one. But the
infrastructure to support that, the supply, service, and the
others, they were sort of disbanded and left to the field to do
what they wanted to do. Those roles and responsibilities of the
logistics people, the function still remained, they just got
spread out. And that is one of the reasons that you hear about
we have different policies and such.
Okay. One of the things that we are doing is bringing this
back together because we need to have the infrastructure to
support that top-quality health care. And that is the reason
that logistics and acquisition are so important.
I am in charge of VHA's complete supply chain. And we have
been working to correct all of those kinds of issues about how
we bring it back together at the facility level, to the VISN
level, how we then make that into a strategic plan to go into
the future to meet the Secretary and Under Secretary for
Health's objectives of keeping that health care where it needs
to be.
So that is the reason we are so desperate, not desperate,
we are so intense to try and make sure that we are speeding up
this process of making these corrections. But we are still
limited. We need to go through the testing process, for
instance, on the SAM project.
On the logistics side, we are going through a lot of
changes at the local level. And like I said, we just within the
last year and a half have been able to put this organization
into place, my Systematic Analysis of Operations (SAOs), my
logistics transformation.
My Deputy in Procurement has only been on board for 6
weeks. My Deputy in Logistics has only been on board since
December. And my Deputy in Prosthetics has been on board for 2
years. So we have a complete infrastructure that we have put
together within VHA and that is the reason we are moving
smartly forward to correct these issues.
We have the people in place. We have a lot more folks that
we need to put into place both at our level and at the field
level to ensure that the work starts getting done the way it
should be and that we are doing audits and follow-ups,
compliance and reviews, and have reports and metrics to back up
what we are doing, all part of a very large plan, sir.
Mr. Michaud. Thank you.
Mr. Brown.
Mr. Brown of South Carolina. Thank you, Mr. Downs. I
appreciate you being here today.
And I think those numbers put things back in perspective.
It is a big process. It is a big operation and sometimes they
try to micromanage one or two issues. I know we have been
talking about it for a long time and I'm not sure this is a
proper question for you.
But seamless transition from the DoD to VA, do you know how
the progress of that is proceeding?
Mr. Downs. No, sir. I am not able to answer that question.
Mr. Brown of South Carolina. Okay. In the previous panel,
they mentioned that there would be some relative savings if you
did not go to the automatic prescription refill.
What do you think?
Mr. Downs. Well, that, sir, I have not studied that. I do
not know. Again, the pharmacy people would be the best ones to
answer that. I have not done an analysis on that.
Mr. Brown of South Carolina. I was just trying to evaluate
it in my own mind. It seemed to me that it is a really
convenient item not to worry about if you have blood pressure
medicine coming, whether you have to make a call. It seemed to
me the logistics of doing that would be certainly something
that we would expense.
And if you are going to save money by not getting the
medicine to the veteran, then I think that it would cost more
to get the person back on blood pressure medicine regularly
than it would be to send that prescription in the first place.
So I am not sure exactly what kind of savings would be
attributed to that, or whether there would be any. There may be
a downside to the administrative costs.
Mr. Downs. I was not sure of that either, sir. And like I
said, I cannot address it professionally. I just know that as a
patient, when I need to renew my blood pressure medicine, I
just call and record and the next thing I know, it shows up on
my doorstep.
Mr. Brown of South Carolina. Right.
Mr. Downs. So that is a pretty effective process.
Mr. Brown of South Carolina. You are not on automatic
refill?
Mr. Downs. It is an automatic refill. I mean, I call them
and they send it.
Mr. Brown of South Carolina. But you still have to make the
call?
Mr. Downs. I make the call, yes. But that is a patient
safety factor, I would think.
Mr. Brown of South Carolina. I see. Okay.
Mr. Downs. Because I am only allowed six refills and then I
have to go back in to the doctor.
Mr. Brown of South Carolina. To get another prescription?
Mr. Downs. That kind of a thing.
Mr. Brown of South Carolina. Okay. Very good. Thanks for
being here today. I have no further questions.
Mr. Downs. Okay.
Mr. Michaud. I have a question for Dr. Buck. You are the
National Director of Medicine, so what do you do over in VHA?
Is it establish policy or----
Dr. Buck. Presently I am located in the Office of Patient
Care Services and that is actually the area that I am in of
subspecialty care. And it is primarily a policymaking function.
Mr. Michaud. Okay. I will ask you the question I asked Mr.
Downs since you are in the policy area. When you look at the
$4.8 billion that VA spends on drugs, what is the policy of the
VA on utilization? This gets back to Mr. Brown's question. When
a prescription runs out, do you automatically send the
prescriptions to the veteran or do you give them a 15-day
supply? Can you address the utilization issue?
Dr. Buck. Sir, the way that our policymaking functions are
organized, there is actually a separate pharmacy division,
which has the expertise of doctorates in pharmacy who actually
are responsible for the policymaking functions for pharmacy.
So, unfortunately, those folks are not represented here
today, so I cannot answer your question.
Mr. Michaud. But as a doctor----
Dr. Buck. Yes, sir.
Mr. Michaud [continuing]. Utilization, is there a problem
with utilization or could you see that there is a problem with
utilization?
Dr. Buck. Sir, honestly I speak generally. The one thing
that I do is I always try to answer the questions as honestly
as possible. And the one thing that I strenuously avoid doing
is answering one incorrectly. And that is what I would do in
this case because I do not have that information.
Mr. Michaud. Now, I guess my concern is, and I have heard
it actually in the private sector, where you have these drug
manufacturers----
Dr. Buck. Uh-huh.
Mr. Michaud [continuing]. With a very cozy relationship
with doctors, such as pharmacists within VA. And my concern is
that we are probably spending billions of dollars more than we
have to on drugs for our veterans.
I want to make sure they get, you know, the prescriptions
that they need. But I am also concerned about the waste in the
system. And even though the procurement might not address that
issue, it is part of the VA system.
And that is why as a doctor, I was just curious about
whether or not you see utilization as a problem, not
necessarily what the VA might be doing, but as a doctor,
whether that could be a problem and whether we might be able to
address it to actually save some money in the pharmacy area.
But we will forward that question to someone within the VA
that actually can address it.
[The VA subsequently provided the following information:]
Question: When I look at the $4.8 billion that VA spends on
drugs, what is the policy of the VA as far as utilization
issues? Is there a problem with utilization?
Response: The Department of Veterans Affairs (VA) does not have
a problem with drug utilization. Minor adjustments and
corrections need to be continually made in any health care
system, including VA, to assure drug utilization is consistent
with emerging medical evidence and meets the needs of patients.
In VA, medication utilization is guided by an extremely well-
managed formulary process whose origin dates to the 1950s. VA
has been a pioneer in the area of formulary management for
nearly 60 years and is regarded by many experts as an industry
benchmark in the United States for cost-effective, safe,
evidenced based formulary management.
Formulary Management Infrastructure
The organizational responsibility for facilitating VA's
formulary management process rests with the Pharmacy Benefits
Management (PBM) office which is organizationally aligned under
the Office of Patient Care Services (PCS), which in turn is
aligned under the office of the Under Secretary for Health
(U.S.H). In 1996, VA established a National Formulary process
to augment and eventually replace independent local formulary
practices which had been in use across the system. The purpose
of implementing a national formulary process was to assist
practitioners in clinical decision-making, to standardize and
improve quality of patient care, to promote seamless
portability of mediation access from one facility to another,
to promote cost-effective evidence-based prescribing practices
and to develop and disseminate clinically relevant
pharmacoepidemiologic data. Within PCS, the PBM coordinates
formulary management activities using a variety of subject
matter experts organized into two primary decision-making
bodies, the Medical Advisory Panel (MAP) and the Veterans
Integrated Service Networks (VISN) Pharmacist Executives
(VPEs).
The MAP provides physician oversight of the formulary process
and is comprised of 12 practicing VA physicians including
general internists, as well as specialists practicing in the
areas of cardiology, critical care, endocrinology, geriatrics,
infectious disease, and psychiatry; VA PBM clinical pharmacist
specialists; a VPE and one physician from the Department of
Defense. The MAP provides clinical oversight of the formulary
management process. The VPE committee includes pharmacist
representatives from each of VA's 21 VISNs, a representative
from VA's National Center for Patient Safety (NCPS), a
physician representative from the MAP and representatives from
the DoD. This group provides operational and clinical oversight
of the formulary management process.
Formulary Management Process
VA policy (VHA Handbook 1108.08; http://www1.va.gov/
vhapublications/ViewPublication.asp?pub_ID=1834) requires that
drugs newly approved by the Food and Drug Administration (FDA)
and which have utility in VA, be automatically reviewed for
potential addition to the VA National Formulary (VANF); this
review occurs as soon as sufficient safety and efficacy
information becomes available. The VA policy for updating the
VANF specifies additional triggers for updating the VANF.
Requests for change in VANF status may be submitted to the PBM
by a VISN Formulary Committee, the VPE Committee, the MAP
Committee, a VHA Chief Medical Consultant, or a VHA Chief
Medical Officer. An individual or group of physicians may
submit a request for VANF addition through their VISN Formulary
Committee(s). In addition, the VA uses its evidence-based drug
class reviews to pursue contracting opportunities within or
across drug classes, allowing for lower acquisition prices for
pharmaceuticals, while maintaining or improving the quality of
drug therapy. A review may also be initiated if new safety data
becomes available that may require discussion of removal of a
medication from the VANF, or implementation of restrictions to
ensure safe and appropriate use of the medication.
The review process for a medication consists of an extensive
and in-depth evaluation of the published literature in order to
determine the efficacy of the medication, with an emphasis on
results reported for a patient population similar to the
Veteran community; the potential for adverse events and long-
term safety; and the cost-effectiveness compared to other
available treatments. This review process begins with the PBM
clinical pharmacist specialist, in consultation with MAP
members and/or VA's physician subject matter experts,
representing a variety of subspecialty disciplines. Input is
also sought from VA clinicians and experts in the field.
The philosophy for VA's formulary management process is an
unwavering reliance on well-researched, well-documented
clinical evidence demonstrating that a specific drug can
provide an expected cost-effective benefit for the Veteran
population. According to an analysis of the VANF in 2001, the
Institute of Medicine (IOM) stated:
``The VA National Formulary and formulary system that enable
the VHA to make quality choices among drugs and negotiate
favorable prices should be maintained . . . The VHA should
continue to make careful choices among drugs, based first on
quality considerations but with an understanding of cost
implications, and should negotiate the best prices possible
using the leverage of committed use and the ability to drive
market share.''
The cost of a medication is only one factor when considering
the overall cost and quality of therapy; however, VA has been
able maintain or improve the quality of medication therapy,
while also keeping the price of medications low as shown in
Chart 1 and Chart 2 below.
Chart 1: VA Average Cost of a 30-day Equivalent Outpatient Prescription
[GRAPHIC] [TIFF OMITTED] T1758A.001
Note: The VA average cost of a 30-day equivalent outpatient
prescription changed from $13.03 in FY 1999 to $12.64 in FY
2009, a 3.0 percent decrease over a 10-year period.
Chart 2: VA Average Outpatient Prescription Drug Cost Per Unique
Patient
[GRAPHIC] [TIFF OMITTED] T1758A.002
Note: The VA average outpatient prescription drug cost per
unique patient changed from $599 in FY 1999 to $697 in FY 2009,
a 16 percent increase over a 10-year period.
VA prescription drug costs per patient include all patients
receiving drugs. In contrast, other prescription benefit plans
report per member per month or per member per year, which
underestimates costs because members that do not use the
benefit are counted in the calculation. Patients served by
other prescription benefit plans are typically younger with
fewer chronic diseases than patients served by VA; therefore
their prescription costs would be expected to be lower than
VA's costs. Indeed, a recent study using data from the Medical
Expenditure Panel Survey from the Agency for Health care
Research and Quality (AHRQ) showed that Veterans who use the VA
have substantially more medical and psychiatric issues than
those that do not use the VA. Despite these differences, VA's
costs are significantly lower than other health plans. These
comparisons are illustrated below in Chart 3.
According to a presentation entitled, ``Overview and Update on
DoD Pharmacy'' presented at the 2010 Military Health System
Conference, the pharmaceutical cost per Department of Defense
eligible beneficiaries aged 65 and older was $1,927 in FY 2009,
compared to $686 in the same age group in VA during the same
time period. The report is available at http://www.health.mil/
Libraries/2010_MHS_Conference_Presentations/M36_T
_McGinnis.pdf.
According to the Pharmacy Benefit Management Institute (PBMI)
2009 Prescription Drug Benefit Cost and Plan Design Survey,
completed by 417 employers representing 7,041,676 members, the
average net prescription drug cost per retiree per month
extrapolates to $1,770 per member per year. In comparison, the
VA average prescription drug cost per unique patient in FY 2009
was $697 and VA's cost is a gross cost; it does not subtract
first party co-payments. The report is available at http://www
.benefit design report.com/ Drug Cost Highlights / Per Member
Per Month
Metrics/tabid/88/Default.aspx.
According to Express Scripts, the overall per member per year
drug cost was $911 based on the 36 million lives in the
commercial client groups. In comparison, the VA average
prescription drug cost per unique patient in FY 2009 was $697;
again, other plans have younger, healthier patients than VA's
patients and include all members, and unlike VA, patients are
included regardless of whether or not they use the prescription
benefit. The report is available at http://www.express-
scripts.com/research/studies/drugtrendreport/2009/dtrFinal.pdf.
Chart 3: VA Average Outpatient Prescription Drug Cost per Unique
Patient Compared to Other Prescription Benefit Plans
[GRAPHIC] [TIFF OMITTED] T1758A.003
According to the Kaiser Family Foundation's (KFF) May 2010
Prescription Drug Trends report, industry data show that retail
prescription prices (which reflect both manufacturer price
changes for existing drugs and changes in use to newer, higher-
priced drugs) rose from an average price of $38.43 in 1998 to
$71.69 in 2008. The increase over the 10-year period is 87
percent. The change in prescription prices for VA over nearly
the same 10-year period (FY 1999 to FY 2009) was a DECREASE of
3 percent. The report is available at http://www.kff.org/
rxdrugs/upload/3057-08.pdf. The comparison is illustrated in
Chart 4.
Chart 4: VA Average Cost of a 30-day Equivalent Outpatient Prescription
Compared to Retail Prices
[GRAPHIC] [TIFF OMITTED] T1758A.004
In response to recommendations from a 2001 U.S. Government
Accountability Office (GAO) report and the 2001 IOM report on
the VA formulary, VA monitors utilization and conducts safety
and efficacy reviews using a central drug utilization analysis
database. The results of these analyses are then used to assess
future needs. One of the ways the database is utilized is to
identify potential areas for managing drug costs through cost-
avoidance initiatives. These are developed nationally, and may
be implemented at the VISN or local medical care facility
level. The intent of the program is to actively pursue pharmacy
efficiencies and appropriateness of use for selected
pharmaceuticals and reduce the variance in drug cost per
patient across the system, while ensuring there is no negative
impact on the quality of care. The program was formally
initiated in Fiscal Year 2007 and has resulted in substantial
cost avoidance and a subsequent reduction in the variance in
drug cost per patient. The program documented cost avoidance of
$264 Million in FY 2007, $354 Million in FY 2008, $191 Million
in FY 2009 and $112 Million projected for FY 2010. As a result
of these efforts, the variance in cost per patient has
decreased substantially as show in the chart below.
Chart 5: VA Average Outpatient Prescription Cost per Unique Patient by
VISN
[GRAPHIC] [TIFF OMITTED] T1758A.005
Note: The variance in VA average outpatient prescription cost
per unique patient decreased significantly from FY 1999 to FY
2009.
VA's primary motivation in formulary management has always been
and always will be to improve the quality of care for Veterans.
Economic considerations though important, are secondary
compared to safety and efficacy. VA has often been criticized
for not adding recently approved medications to the VANF, or
for unduly restricting medications, and has been the subject of
inquiries and investigations prompted by these criticisms by
the Institute of Medicine, the Government Accountability Office
and the Office of the Inspector General. Although some of the
external reviews conducted to date made suggestions for minor
process improvements, in general, VA's processes were
determined to be safe and cost-effective and formulary
decisions were determined to be based on sound reviews of the
medical evidence.
During 2008 and 2009, VA PBM-MAP and VPEs reviewed 61
medications for potential VANF inclusion; 11 were added to the
VANF, and 50 were approved for use via the non-formulary
process. Criteria for use or additional restrictions were
developed for 25 medications to ensure their safe and
appropriate use. As described previously, extensive evidence-
based reviews are conducted (refer to documents posted to
http://www.pbm.va.gov) for VANF consideration or for developing
guidance on a medication's place in therapy.
Consideration for VANF listing includes whether the medication
is applicable to the VA population (e.g., medications for
pediatric use will typically not be added, or for rare
conditions not expected to be seen in the Veteran population),
whether a medication will provide benefit over an existing VANF
agent, and whether adequate safety data are available. Often,
amedication may not be added to VANF at the time of initial
review due to unanswered questions about long-term safety or
lack of comparison data to less expensive or generic
medications that are readily available on the VANF for the
management of the majority of Veteran patients. An example of a
medication that was not added to the VANF due to lack of long-
term safety and efficacy outcome data compared to other
available agents on the VANF was cerivastatin (Baycol), a
medication used to treat hyperlipidemia (high cholesterol),
which is a common condition in the Veteran patient population.
The VA formulary included medications within this class with
proven benefit in reducing cardiovascular morbidity and
mortality that had been shown to be safe in treating patients
with hyperlipidemia). Cerivastatin was marketed as a more
potent agent; however, it did not have the long-term outcome
data as with the other available agents. Subsequently,
cerivastatin was removed from the market after deaths due to
kidney failure. Rofecoxib (Vioxx) was another example of a
drug never placed on the VANF and withdrawn from the market due
to cardiovascular toxicity associated with death.
Via a formal Memorandum of Understanding, the VA PBM works
closely with the FDA through VAMedSAFE, a group within the PBM
tasked with identifying and responding to medication safety
signals via communication and guidance on improving the safe
use of pharmaceuticals in VA. A recent example of the efforts
of VAMedSAFE is the identification of a safety signal for the
drug varenicline (Chantix) which is used for smoking
cessation, and the risk for serious adverse events including
the potential for suicidal thoughts and actions. This resulted
in safety communications disseminated to VA health care
professionals, letters to Veteran patients, and modification to
the VA criteria for use of this medication. Another safety
initiative was to restrict the use of rosiglitazone (Avandia)
a drug used for diabetes that was found to be associated with
an increased risk for heart attack and death. Prior to the
safety signal, this medication was already restricted in VA
patients, well before its use was being curtailed in other
health care systems. In response to VA's action in restricting
the medication from use in new patients and to provide guidance
for alternate therapies, on October 18, 2007 it was stated in
the New York Times (http://www.nytimes.com/2007/10/18/business/
18drug.html?_r=2&adxnnl=1&oref=slogin&adxnnlx=11 92713524-
bGMLReuAbDJNXwuo9QSfEw) that:
``The Department of Veterans Affairs has decided to severely
limit the use of Avandia, the once-popular drug for Type 2
diabetes, delivering another blow to the products maker . . .''
The VA was also criticized by the manufacturer, quoted to be
``. . . surprised and disappointed by the V.A. Central Office
decision . . . We do not believe it is in the best interest of
patients.''
More recently, the FDA has made similar recommendations
restricting the use of rosiglitazone due to the safety concerns
and after considering the risk vs. benefit of treatment with
this drug.
We are extremely proud of VA's formulary management program. We
have carefully developed and refined the VA formulary process
over the past 15 years and are fortunate to have a process that
meets the needs of Veterans in an evidence-based,
comprehensive, safe, and efficient manner. VA's prescription
benefit is a national plan that is managed by practicing VA
physicians and pharmacists. While we value the products the
pharmaceutical industry offers for use, the industry itself has
no role in determining VA's need for their products, nor how
those products are managed. VA has effectively neutralized the
inappropriate impact the pharmaceutical industry can
potentially have on health care delivery by a strict reliance
on published evidence and by curtailing the marketing and
advertising strength of the industry. Using a structured and
evidence-based formulary management process benefits Veterans
by assuring the VA prescription benefit is first and foremost
safe, and then that it is cost-effective and sustainable well
into the future. The clinical guidance and formulary
recommendations of the VA PBM-MAP and VPEs are routinely
accessed by State Medicaid programs, other health care
organizations and providers, and the international pharmacy
community and are a valuable public resource for those entities
as they develop their own formulary policies and initiatives.
Question: When you look at when someone runs out, do you
automatically send the prescriptions to the veteran or do you
give them a 15-day supply?
Response: VA does not automatically send prescription refills
to patients who run out of medication. Patients whose providers
have authorized refills for a prescription may request a refill
up to 10 days before their supply is exhausted. Patients have
several ways to requests refills including via automated
telephone request lines, via the internet, via mail and in
person at the pharmacy window. The latter method is encouraged
only for patients who have failed to reorder their medications
10 days before their supplies ran out and who are in danger of
interrupting their therapy if they do not get an emergency
supply. In these cases, up to a 10-day partial supply of
medication is commonly provided, with the full refill being
sent in the mail.
Question: Now, I guess my concern is, and I have heard it
actually in the private sector, where you have these drug
manufacturers having a cozy relationship with doctors, whether
it is a doctor or within the pharmacy system within the VA. And
my concern is that we are probably spending billions of dollars
more than we have to in drugs, you know, for our Veterans.
Response: VA is cognizant of potential for conflicts of
interest, especially in regard to formulary management. In
order to become a member of the voting bodies of the MAP and
VPEs, an individual is unable to have financial ties to a drug
manufacturer within the previous 12 months. In addition, each
PBM clinical pharmacist specialist, MAP physician, and VPE
completes an annual Confidential Financial Disclosure or in
some cases, Public Financial Disclosure Report and is subject
to the requirements of the Ethical Standards of Conduct for
Employees of the Executive Branch. Each MAP and VPE meeting or
conference call agenda where VA formulary issues are discussed
includes a listing of the drug manufacturers at the end of the
discussion item. Per VHA HANDBOOK 1004.07 Financial
Relationships between VHA Health Care Professionals and
Industry, verbal disclosures are solicited by the chairperson
at the beginning of each of these meetings (and at appropriate
times during that meeting for any late-arriving members). Any
reported financial disclosures or perceived conflicts of
interest are recorded in the minutes for that meeting and the
individual is asked to recuse themselves from the discussion
and are not allowed to participate in the voting for that
issue. Requests for VA National Formulary addition initiated by
a VA provider require accompanying disclosure of any potential
conflicts of interest.
In order for the VA formulary process to succeed, the MAP and
VPEs understand the value of input from VA providers in the
field treating the Veteran; however, it is important that
comments are free from potential bias. Therefore, a request for
financial disclosure accompanies all new molecular entity drug
monographs, criteria for use, and drug class reviews when
soliciting input from field clinicians. In an effort to improve
the process of requesting disclosure of financial relationships
and interpreting comments received that may have a perceived
conflict of interest, the MAP and VPEs recently invited a
Medical Ethicist with the VA National Center for Ethics in
Health care to discuss implementation of VHA Handbook 1004.07
Financial Relationships between VHA Health Care Professionals
and Industry, which is consistent with current MAP and VPE
requirements (http://www1.va.gov/vhapublications/
ViewPublication.asp?pub_ID=2102; excerpt below):
``Responsibilities:
1. Health Care Professionals are responsible for:
Avoiding or managing conflicts of interest
Certifying in VetPro as part of the VHA
credentialing process: I understand that my professional
obligations can be compromised by financial conflicts of
interest; therefore, I will avoid conflicts or seek guidance in
their management.
2. Service Chiefs are responsible for:
Ensuring that VHA health care professional staff
members are oriented to the types of financial relationships
with industry that pose a potential for conflicts of interest.
Reinforcing expectations regarding professional
norms and conflicts of interest by, for example:
Reviewing individual prescribing data received
from local P&T Committees.
Scrutinizing staff requests to use leave to
participate in industry-sponsored events.
Assessing potential conflicts of interest in
staff topic selection for presentations at VA facilities.
3. Members of VHA decision-making and advisory groups are
responsible for:
Making real-time verbal disclosures of potentially
conflict-creating financial relationships with industry.
4. Chairpersons of decision-making and advisory groups are
responsible for:
Soliciting and managing follow-up on verbal
disclosure of members' financial relationships.
The handbook applies to any full-time, part-time, or without
compensation employee or trainee (i.e., physicians, advanced
practice nurses, psychologists, physician assistants,
pharmacists, other associated health practitioners with
prescriptive authority, and certain administrators) in VHA who
makes treatment recommendations that pertain to commercial
products or are involved in making formulary decisions, in
developing clinical practice guidelines or institutional
policies on care, or in other activities within the health care
system that can have a significant effect on the range of
treatment options available to patients.
Financial relationships that either constitute a conflict of
interest or give the appearance of a conflict, including:
1. Compensation for participation as a member, presenter,
moderator, etc., on an industry-funded speaker's bureau.
2. Compensation for participation as an advisor, consultant,
member, presenter, moderator, etc., on an industry-funded
advisory board.
3. Compensation for participation as an author on an industry-
funded publication.
4. Paid expert witness testimony provided on behalf of
industry.
5. Industry-funded education or research grants, honoraria, or
low interest loans.
6. Compensation for a paid role (Medical Director, Board
Member, Resident or Trainee Representative, etc.) on a
pharmaceutical, biotechnology, medical device, product,
equipment, or technology company or their proxies.
7. Compensation for participation as developer, speaker,
moderator, attendee, etc., of industry-funded Continuing
Medical Education (CME) or other industry-sponsored programs,
such as lectures, dinner meetings, or teleconferences.''
In addition, VHA Handbook 2003.060Business Relationships
between VHA Staff and Pharmaceutical Industry Representatives
(which is currently undergoing revision via the regulatory
process) includes policy to control access of pharmaceutical
representatives to VA providers in an effort to minimize
disruption of patient care activities and to ensure that only
VA approved guidance are promoted by the pharmaceutical
industry representative. Only medications that are available on
the VANF may be discussed, any speaker at an educational
program sponsored by industry must disclose their financial
relationship to the audience and meals may not be provided at
such meetings. Also per the policy, medication samples (often
used in an effort for providers in the private sector to begin
to prescribe the medication) are not allowed to be distributed
directly from the provider to the patient in VA.
Disclosure of any potential conflict of interest or financial
relationship in the formulary decision-making process is also
addressed in the Principles of a Sound Formulary System, which
are endorsed by the VA PBM, which was a core participant in the
Coalition that developed the recommendations. The Principles
recognize that:
``The formulary system, when properly designed and
implemented, can promote rational, clinically appropriate,
safe, and cost-effective drug therapy. The Coalition has
enumerated these principles, however, because it recognizes
that patient care may be compromised if a formulary system is
not optimally developed, organized and administered. This
document contains ``Guiding Principles'' that the Coalition
believes must be present for a drug formulary system to
appropriately serve the patients it covers.''
By all measures, it is very unlikely that VA is spending more
that it has to for drugs. VA has a long history of being a
national leader in drug safety and evidence-based, cost-
effective prescribing habits which underscore its independence
from influence by the pharmaceutical industry.
Attachments:
[The attachments referenced below will be retained in the
Committee files. Some attachments are accessible online at the
Internet links listed.]
VHA HANDBOOK 1108.08VHA Formulary Management Process, February
26, 2009. Available at http://www1.va.gov/vhapublications/View
Publication.asp?pub_ID=1834
VHA HANDBOOK 1004.07Financial Relationships between VHA Health
Care Professionals and Industry, October 21, 2009. Available at
http://www1.va.gov/vhapublications/
ViewPublication.asp?pub_ID=2102
VHA DIRECTIVE 2003.060Business Relationships between VHA Staff
and Pharmaceutical Industry Representatives, October 21, 2003.
Description and Analysis of the VA National Formulary.
Institute of Medicine. January 1, 2000.
VA Drug Formulary: Better Oversight Is Required, but Veterans
Are Getting Needed Drugs. U.S. Government Accountability
Office. January 29, 2001. Available at http://www.gao.gov/
new.items/d01183.pdf
VA Drug Formulary: Drug Review Process Is Standardized at the
National Level, but Actions Are Needed to Ensure Timely
Adjudication of Nonformulary Drug Requests. U.S. Government
Accountability Office. August 31, 2010. Available at http://
www.gao.gov/new.items/d10776.pdf
Aspinall SL, Banthin, JS, Good, CB, Miller, GE, Cunningham FE.
VA Pharmacy Users: How They Differ from Other Veterans. Am J
Manag Care. 2009; 15(10) 701-708.
Sales MM, Cunningham FE, Glassman PA, Valentino MA, Good CB.
Pharmacy Benefits Management in the Veterans Health
Administration: 1995-2003. Am J Manag Care 2005;11:104-12.
Principles of a Sound Formulary Drug System. U.S. Pharmacopeia.
October 2000. Available at http://www.usp.org/hqi/
patientSafety/resources/sound FormularyPrinciples.html
V.A. is Limiting Use of Diabetes Drug, New York Times, October
18, 2007 available at http://www.nytimes.com/2007/10/18/
business/18drug.html?_r=
2&adxnnl=1&oref=slogin&adxnnlx=1192713524-bGMLReuAbDJNXwuo9QS
fEw
FDA significantly restricts access to the diabetes drug
Avandia, FDA News Release, September 23, 2010 available at
http://www.fda.gov/newsevents/newsroom/pressannouncements/
UCM226975.htm
Mr. Michaud. My last question involves concerns I have
heard from veteran service organizations at the local level, on
the time it takes to get an answer from the Central Office when
trying to get VA to move quickly in a certain area.
Since we are centralizing everything, Mr. Downs, in your
operation, how can you assure the Subcommittee that VA is going
to do everything both accurately and in a timely manner as
well? Are there any assurance you can give us that you will be
moving forward quickly, but also ensuring accuracy?
Mr. Downs. Yes, sir. The key to the way we have centralized
within VHA and the integrated model is that we have centralized
direction but decentralized execution. So the acquisition
people are in place at the medical center to do that day-to-day
buying. The contracting officers are located within the VISN.
They work there with teams with the facilities to purchase and
to develop the contracts that are necessary for the purchases
that are required to keep the medical center going.
The feedback mechanism, also we have what we call network
contract managers at the VISN level, and they coordinate their
activities with the nurse care managers (NCMs). They are
responsible for them. And one of the things that we have is the
need to always make sure that we have a customer service
relationship with the facility, the clinical folks and all the
people that we deal with.
That has been an ongoing issue with the National Leadership
Board. This week, I met with them and we went through that
process. Two of the network directors are part of what we have
called an Acquisition Committee. And so they give me feedback
from the network director's point of view. I have three
facility directors on there. They give me feedback.
I have also acquisition, my network contract manager, SAOs
on that Committee along with the CLOs or chief logistics
officers. So I have my field input coming in at all three
levels. We have discussed with them policy because if we are
going to have policy, they need to be able to carry it out.
They need to be a part of it. And that ability to do that day-
to-day purchasing is what is key.
Now, some of the veterans I know and reference, they worry
about, you know, are we going to be able to provide service to
them. Yes, indeed.
And the issue of rural health which has come in the
conversations and the testimony has to do with can the veteran
out in the rural area get the same kind of service. And, again,
that is a balance because we want to serve that veteran there
if it is a veteran who needs a prosthetic device. And the
reason we want them to come down to the medical center for a
review when they want a new one is to see if their health has
changed or there has been some condition that needs to be
addressed.
The VA has reached out and we try to also provide service
in the area. We do that through fee basis or whatever necessary
means that it takes to make sure that veterans are being served
where they are. We do not want them to make those unnecessary
trips down, but sometimes from a clinical aspect they need to
be looked at by the medical team.
Other times we have the medical team that we will contract
with in the local area. So it is a judgment call, sir, about
how that is done. And we are trying to stay on top of all of
those kind of issues because the veteran is the key person.
And, again, it is judgment calls. It takes logic and common
sense and certainly good communication between the patient and
the VA as we try to work out a solution for them.
Mr. Michaud. Well, thank you very much.
I am awfully glad to hear that because, as I discussed with
you the other day, that is a concern I have heard from veterans
in really rural areas; having to drive 4 or 5 hours to go to
the medical facility. And if they miss their appointment
because of a snowstorm, then it is another month or so before
they can get back for another appointment. That is a huge
concern that I have heard from veterans who live in rural
areas.
Mr. Downs. And I brought that up to the network directors
at the National Leadership Board and they all agree with what I
told you is that that was a mistake. When those things happen,
that is a mistake because when a vet comes down like that and
for some reason the doctor cannot be there or whatever happens
and what they try to do is we put the patient up for a day or a
night in the hotel and arrange to get it redone the next day.
So we have a policy in place at the facility to make sure
that the vet is taken care of. But there are times when things
like that do happen. But all the network directors assured me
that, oh, no, they have policies in place out there at the
facility level to make sure that those long kinds of trips do
not happen. And they do happen, but we try to make sure it does
not happen very many times anyway.
Mr. Michaud. Well, thank you very much, Mr. Downs. I
appreciate your testimony this morning and Dr. Buck's as well.
I know there will be some more questions that we will be
submitting to you in writing and hopefully we can get responses
as quickly as possible.
Mr. Boozman.
If there are no other questions, I want to thank all three
panels for your testimony this morning. It has been very
helpful and I look forward to working with you as we try to
sort out some of the issues dealing with contracting and
procurement.
So if there are no other questions, I declare the hearing
adjourned.
[Whereupon, at 11:58 a.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Hon. Michael H. Michaud, Chairman,
Subcommittee on Health
The Subcommittee on Health will now come to order. I would like to
thank everyone for attending this hearing.
The purpose of today's hearing is to investigate potential
weaknesses in VHA's contracting and procurement practices and explore
ways that we can strengthen how VHA contracts and procures medical
equipments and health care products for our veterans.
In recent years, we have seen many reports and studies on VA's
contracting and procurement activities. These reports have identified
the need for increased transparency and fiscal responsibility, as well
as highlighted problems of inadequate competition and lack of
accountability and oversight.
As a result of these deficiencies in VHA's contracting and
procurement practices, veterans may not be getting the latest
innovations in health care products. This was made evident at our June
Health Subcommittee hearing on wireless health technologies and the
difficulties that many private companies faced in informing VA about
their products and getting their products in the hands of our veterans.
Furthermore, we are all aware of the problem of dirty reusable
medical equipments at certain VA medical centers. Today, we will hear
from GAO about a study that they are conducting on the purchasing and
tracking of supplies and medical equipment. Their preliminary
observations include the potential risks to veterans' safety when there
is noncompliance with VA purchasing and tracking requirements.
Finally, internal control weaknesses with VHA's use of billions in
miscellaneous obligations continues to be problem. Because VA
contracting officials don't have sufficient controls over the
authorization and use of miscellaneous obligations, it is unclear
whether these obligations were for legitimate needs.
As we can see, the implications of contracting and procurement
deficiencies go beyond the fiscal component to have a potentially
negative impact on the health care that our veterans receive.
I look forward to hearing from today's witnesses, as we aim to
better understand the challenges facing VHA contracting and procurement
practices and work together to find potential solutions to these
challenges.
Prepared Statement of Hon. Henry E. Brown, Jr., Ranking Republican
Member, Subcommittee on Health
Thank you, Mr. Chairman, and good morning.
I'm pleased to be here today to discuss contracting and procurement
issues within the Veterans Health Administration (VHA).
VA's troubled contracting and procurement processes have long been
an issue of great concern to this Committee and the subject of various
Government Accountability Office (GAO) and VA Office of Inspector
General (OIG) reports that continue to cite major deficiencies and
material weaknesses.
Given the wide scope of VHA's reach and budget, it is particularly
important that we ensure that they have the proper procedures and
oversight mechanisms in place to ensure that VHA procurement and
contracting is done responsibly, appropriately, and with proper
oversight.
In that vein, I am particularly concerned about testimony we will
hear by the Office of Inspector General that ``. . . data in VA and VHA
acquisition support information systems is incomplete and unreliable.''
Without accurate data, we have no idea what we're doing right, what
we're doing wrong, where we are, where we're going, and where we need
help.
This is unacceptable within a system that is responsible for the
care of our Nation's veterans and spent a little over nine billion
dollars on health care goods and services last fiscal year alone.
Streamlining contracting and procurement processes to eliminate the
potential for waste, fraud, and abuse while at the same time improving
the cost and comfort of doing business with VA to ensure our veteran
heroes have access to the highest quality medical care is and should be
at the top of our priority list.
I look forward to hearing from the witnesses on our first panel
about the obstacles to doing business with VHA and from the government
witnesses on our second and third panels about the functioning of VHA's
acquisition system.
Although we are nearing the end of this legislative session, I am
hopeful that we will be able to move legislation, H.R. 4221, the
Department of Veterans Affairs Acquisition Improvement Act of 2009,
introduced by our Ranking Member, Steve Buyer. This bill that I am an
original cosponsor of would correct the long-term procurement issues
within VA and provide greater oversight of VA's contracting and asset
management processes.
I thank you all for being here for this discussion and I yield back
the balance of my time.
Prepared Statement of Hon. Russ Carnahan, a Representative in Congress
from the State of Missouri
Mr. Chairman, thank you for holding this important hearing on VA
Health Administration Contracting and Procurement Practices. I
appreciate the attention that is being given to this topic and hope
that today's hearing provides insight into contracting and procurement
practices that are working and suggestions on how to improve those that
are ineffective.
In July, the House Committee on Veterans Affairs held a much needed
field hearing in St. Louis, to address safety lapses at the John
Cochran VA Medical Center, after 1812 veterans throughout the St. Louis
and Illinois area received notification that they could have been
exposed to blood borne pathogens such as Hepatitis B, Hepatitis C, and
HIV while receiving dental care at the medical center. Since the
hearing, I have been encouraged to hear that the Veterans Health
Administration has implemented some new and more stringent oversight
measures for reusable medical equipment and expendable medical supplies
(like those used in dental clinics and endoscopy clinics).
However, it is painfully clear that much more work is needed.
It is critical that the VA identify and rectify any existing
problems in regards to the purchasing and tracking of reusable medical
equipment and expendable medical supplies. Yes, contracting and
procurement are just small pieces of a much larger issue. But the VA
must make considerable improvements to all policies and procedures at
every step of the process, to make sure that incidents like the one at
John Cochran Medical Center never happen again, and take whatever steps
needed to ensure that our veterans are receiving the best health care.
To all the witnesses today--thank you for taking time out of your
busy schedules to appear before us. I look forward to hearing your
testimony.
Prepared Statement of Mark T. Munroe, Senior Vice President, Sales and
Marketing, Mobile Medical International Corporation, St. Johnsbury, VT
On behalf of Mobile Medical International Corporation, of St.
Johnsbury, Vermont, I want to thank Chairman Filner, Chairman Michaud
and the rest of the Members of the Subcommittee for allowing me to
testify here today. My name is Mark Munroe, Senior Vice President of
Sales and Marketing for Mobile Medical. Mobile Medical is an
international company that develops and manufactures commercial and
military mobile surgical hospitals which meet all U.S. health care
standards. These mobile health care solutions are rapidly deployable,
fully integrated, self-contained and present innovative solutions for
today's health care delivery needs. My purpose here today is to explain
how Mobile Medical has worked with VA medical centers throughout the
country, while describing some of the challenges associated with those
experiences and pointing out some of our exciting success stories.
Let's begin with the New Orleans VA medical center. As you are
aware, Hurricane Katrina struck New Orleans 5 years ago. Since Katrina,
the New Orleans VA Medical Center has not provided surgical or
endoscopic services to the veterans of New Orleans. Veterans in the New
Orleans region must seek out care at other facilities within the
system. This often causes veterans to wait for needed procedures, or
travel greater distances to receive the care they need. In January
2009, Mobile Medical moved to mitigate this disruption of services by
responding to a request from the New Orleans VA Medical Center
leadership for a proposal involving mobile surgery units. These units
were to be used to meet a variety of needs and to serve as a temporary
surgical facility during the hospital re-building process.
The New Orleans VA issued a solicitation on FedBizOps in May 2009
for mobile surgery units. This solicitation was subsequently cancelled
and re-directed to the GSA schedule. It should be noted that while
Mobile Medical was in the process of contracting with GSA, code
compliant mobile surgery units did not exist on the GSA schedule. As a
result of this action, companies with GSA contracts responded, but none
of them, including the one to whom the GSA solicitation was ultimately
awarded, met the VA criteria for a history of producing and deploying
regulatory compliant Mobile Surgery Units. In addition, Mobile Medical
learned that its proprietary company confidential information, provided
as part of its January proposal, had been released to over 70 GSA
schedule holders. Quoting from the attached summary of Mobile Medical's
Federal legal action, ``Judge Horn clearly found that the VA's actions
were improper and the attempted modification was beyond the scope of
the GSA schedule program. An agency placing an order under the GSA
schedule program may not simply send out an RFQ as a ``solicitation
feeler,'' evaluate quotes for items that do not exist on anyone's GSA
schedule contract, and then hope a selected contractor can convince the
GSA a modification is within scope of their existing contract by the
time the agency places an order. Such an end-run, which occurred in the
case, violates even the most basic requirements of fair and open
competition for Federal contracts.''
As a small business working in a hub zone during difficult economic
times, the last thing our company ever expected would be the need to
sue the U.S. Government for actions taken during a procurement process.
It should be noted that the legal costs alone with this process have
run in excess of $300,000 dollars. Clearly oversight is necessary to
ensure that other small businesses like Mobile Medical do not encounter
this type of situation.
Standing in stark contrast to Mobile Medical's experience in New
Orleans is our very positive experience serving the needs of veterans
at the VA Medical Center in Muskogee, Oklahoma. At the Muskogee VA,
Mobile Medical is providing two mobile surgery units in support of a
full operating suite renovation project. The leadership at the Muskogee
VA Medical Center, from the Director to the contracting officer,
facilities engineering and surgical team, should be commended for their
work on this model project. In this forum I am pleased to do that
today. During a recent customer visit, a member of Mobile Medical's
Board of Directors, retired Air Force Surgeon General, Paul K. Carlton,
learned from VA officials that this facility is saving over $9 million
dollars in construction costs by closing all of their operating rooms
for the duration of the renovation period rather than phasing in the
renovation. Quoting Dr. Carlton in his report to Mobile Medical, ``the
renovation project began in 2008 with strong leadership. After
researching alternative options, the Medical Center closed five
operating rooms and the project began using two Mobile Surgery Units.
By doing this they are shaving $9.3 million dollars off the original
construction quote for the project, even after spending $3.6 million to
lease the mobile surgical units.'' The medical center is also avoiding
another $14 million dollars that would have gone to local hospitals to
carry the center's surgical caseload during the renovation for a total
savings of $23.3 million dollars.'' Included in your packet is a copy
of Dr. Carlton's full report to Mobile Medical. General Carlton's
findings at the VA medical center in Muskogee support Mobile Medical's
previous testimony to this Committee that a project utilizing 5 mobile
units to support OR renovations projects around the country over a 3-
year period would save the VA $90 million dollars. Those savings are in
the attached executive summary and we urge Members to note that the
Senate Military Construction/Veterans Affairs Subcommittee has included
language in its report to the Senate (Report Number 111-226) urging the
VA to utilize qualified mobile surgical units in OR renovation projects
where such utilization clearly offers savings. I have attached the
report language to my testimony. Mobile Medical has continually pointed
out the significant cost avoidance that the VA can achieve nationally
by applying the methods described above in many VA OR renovation
projects. The Senate Mil/Con Appropriations Committee has responded
with its recommendation to the VA. We restate again today our belief
that 20 mobile surgical units could save over $1.5 billion dollars in 5
years of OR renovation scenarios.
A final example of a successful project is the VA medical center in
Miami, Florida. Miami is currently utilizing six Mobile Units during a
full operating room renovation project. While the Miami project was
also challenged through the contracting process, again strong
leadership was the key. Dr. Seth Spector, Chief of Surgery, has kept
the project moving forward and in August of this year Miami was able to
turn their operating rooms over to the Army Corp of Engineers for
renovation, while continuing to provide full surgical services to the
veteran's of the Miami service area.
While 5 minutes is a short time to share with you all of the
successes and weaknesses in the VA contracting process, I am sure you
will find our supporting documentation compelling. I look forward to
any questions you may have and thank you for your time this morning.
__________
Summary Federal Claims Court File No. 10-148C
On August 31, 2010, the Court of Federal Claims issued an Order
acknowledging the Department of Veterans Affairs (``VA'') misused the
General Services Administration's (``GSA'') Federal Supply Schedule
(``FSS'' or ``GSA Schedule'') \1\ by attempting to purchase
sophisticated mobile surgery units off of the GSA Schedule through an
improper, out-of-scope modification to an existing GSA Schedule
Contract that does not offer mobile surgery units. While the Court
dismissed the case on other, unrelated grounds, the Court acknowledged
Mobile Medical International Corporation (``MMIC'') was correct in
asserting the modifications were beyond the scope of the GSA Schedule
Contractor's existing products. Therefore, the VA clearly acted
improperly for attempting to use the GSA Schedule program to buy a
sophisticated product (mobile surgery units) that were not otherwise on
the GSA schedule.
---------------------------------------------------------------------------
\1\ FSS schedules are most commonly referred to as ``GSA
Schedules'' or Multiple Award Schedules (``MAS''). To avoid confusion,
the memorandum will refer to the FSS program as the ``GSA Schedule
Program.'' Under the GSA Schedule program, Government customers have
access to over 11 million commercial supplies and services at volume
pricing. The items must be ``commercially available'' to qualify.
Because these items are pre-qualified, commercial items, the GSA has
pre-determined these items satisfy all FAR competition and price
requirements.
Items may be reviewed through the GSA Schedule List, which contain
a list of all GSA Schedules. Government contractors in turn enter into
``schedule contracts'' with the GSA in order to offer products through
the GSA Schedule Program. This memorandum will refer to these contract
holders as ``GSA Schedule Contractors.''
For more information, please visit: http://www.gsa.gov/portal/
content/104447.
---------------------------------------------------------------------------
The case, Mobile Medical International Corporation v. United
States, \2\ arose of out sole source negotiations between MMIC and the
New Orleans Veterans Affairs Medical Clinic in New Orleans, Louisiana.
Hurricane Katrina devastated the New Orleans Clinic, seriously
impacting the VA's ability to offer crucial surgical procedures to New
Orleans area veterans. As an industry leader and prior sole source
provider to the VA, the VA naturally reached out to MMIC to help
develop and meet the VA's needs regarding temporary surgical solutions.
---------------------------------------------------------------------------
\2\ No. 10-148C, Court of Federal Claims, August 31, 2010.
---------------------------------------------------------------------------
However, these fair and open negotiations were derailed when
personnel within the VA decided that MMIC's product--sophisticated,
fully integrated mobile surgical suites that meet all JCAHO and
Medicare standards of care for performing invasive surgery--could be
purchased not from MMIC and not through an open competition of
contractors who purport to compete with MMIC, but instead through the
GSA Schedule program.
As discussed in Footnote 1, generally a ``GSA buy'' is only
appropriate for ``commercial'' items or services, like a flatbed truck
or a box of pencils. Mobile surgical trailers, on the other hand, are
niche items and are not currently offered through the GSA Schedule
program. To purchase a sophisticated, niche product like mobile surgery
units, the VA should have engaged in open competition to obtain a fair
and realistic price and to ensure fair access to the award.
But instead of fair, open competition for these mobile surgical
trailers (pursuant to FAR 15), the VA attempted to avoid FAR 15's
competition requirements and instead sought to modify existing products
already offered by a GSA Schedule Contractor. Ultimately, the VA sought
to convert a basic expandable truck, commonly used for sports
broadcasting, into the same code compliant operating room offered by
MMIC. The Contracting Officer contended, in response to MMIC's protest,
``that the new trailers merely `modified the already available
[expanding trailer] with in scope customizations the [VA] required.' ''
But the Court determined, even ``[t]aking a liberal view of the
trailers offered by [the GSA Schedule Contractor] on its modified GSA
schedule contract, it would appear that the modified trailers differ
significantly from the original expanding trailer and lab trailer on
[their] original GSA schedule contract.'' ``In sum,'' the Court
concluded, ``[the GSA Schedule Contractor] was offering non-FSS items
in response to the FSS RFQ, although its FSS modifications were later
approved. The modifications to [its] GSA schedule contract departed so
far from the original schedule as to render the modified [expandable
trailers], certainly with respect to the surgical and endoscopy
trailers, outside the scope of its FSS contract as reasonably
interpreted.''
Although Judge Horn dismissed the action on other, technical
grounds related to Federal jurisdiction and standing, Judge Horn
clearly found that the VA's actions were improper and the attempted
modification was beyond the scope of the GSA schedule program. An
agency placing an order under the GSA schedule program may not simply
send out an RFQ as a ``solicitation feeler,'' evaluate quotes for items
that do not exist on anyone's GSA schedule contract, and then hope a
selected contractor can convince the GSA a modification is within scope
of their existing contract by the time the agency places an order. Such
an end-run, which occurred in the instant case, violates even the most
basic requirements of fair and open competition for Federal contracts.
__________
Texas A&M
Health Science Center
Office of Homeland Security
College Station, TX.
September 15, 2010
Mr. Rick Cochran
President and Chief Executive Officer
Mobile Medical International Corporation
2176 Portland Street, Suite 4
St. Johnsbury, VT 05819
Subject: Muskogee VA Medical Center Findings
Mr. Cochran:
Thank you for the opportunity to represent MMIC as a member of the
Board of Directors at my recent site visit to the Muskogee VA Medical
Center. My findings, which clearly offer a substantial savings to the
Medical Center and importantly, no loss of services for our Veterans,
are as follows:
1. The renovation project began in 2008 with strong leadership and
after researching alternative options, the Medical Center closed five
operating rooms and the project began using two Mobile Surgery Units/
TM/ away from the old operating suites, but still attached to the
facility.
2. The overall project timeline for completion of the renovation
is 1 year, and is on track.
3. By using two Mobile Surgery Units/TM/ the Muskogee VA Medical
Center stated they are saving four times the amount of a more costly
phased in renovation. The phased method would have included splitting
the project to keep one half of the operating rooms open at a time;
therefore, significantly increasing, by four times the current amount,
what the total project cost would have been.
4. By keeping surgical procedures in house, this is allowing
utilization of the OR staff members; rather than potential for loss of
the staff during the renovation.
5. Hard cost savings:
a. OR renovation would have cost $17.2M using a split method.
It cost $4.3M to do all at once=a hard cost savings of $12.9M. Then
subtract the $3.6M to rent the units from the savings of $12.9M=$9.3M
total cost savings, not avoidance, savings!
b. Lower infection rates by at least a factor of two or three.
Documented during actual split operation renovation projects. Each
wound infection is estimated to cost $20,000, so the expected 1.5
percent wound infection rate would have yielded 1200 cases x 1.5
percent=18 cases during normal operations. If the infection rate
doubled, we would have seen 36 wound infections, plus a tremendous
amount of misery for the patient. This method avoided that extra 18
wound infections, saving 18 x $20,000=$360K.
c. Total cost savings then total $9.3M plus $360K=$9.66M.
6. In addition there are other positives to consider: IF the OR's
were closed and cases sent downtown, THEN:
a. At 600 cases per room per year, each case costing $12,000 to
send downtown, that means each room was worth at least $7.2M. The total
cost of renting the units was $3.6M. So the cost avoidance would be 2
$7.2=$14.4, minus the cost of leasing the units at $3.6 meant a cost
avoidance of at least $10.8M! The VA, when they saw these numbers, said
the real cost would be some multiple of $12,000--probably at least 3
times as much. That meant a cost avoidance of at least 3 $14.4 =
$43.2M minus the cost of the units at $3.6M = $39.6M by using the two
Mobile Surgery Units/TM/!
b. The medical centers would have had to close without the
ability to do emergency surgical cases.
c. The OR staff could have been lost entirely, no work. The VA
could have had trouble finding staff again.
d. The VA could not have fulfilled its readiness mission.
In conclusion, hard cost savings of $9.66M plus additional cost
avoidance of up to $39.6M, plus the other positives make this a very
wise decision for the VA system! This method should be evaluated for
use throughout the entire VA system.
Sincerely,
Paul K. Carlton, Jr., MD, FACS
LtGen, USAF, MC, retired
Director, Office of Innovations and Preparedness
__________
Calendar No. 469
111TH CONGRESS 2d SESSION
SENATE REPORT 111-226
MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND
RELATED AGENCIES APPROPRIATION BILL, 2011
July 19, 2010.--Ordered to be printed
Mr. Johnson, from the Committee on Appropriations, submitted the
following
REPORT
[To Accompany S. 3615]
The Committee on Appropriations reports the bill (S. 3615) making
appropriations for military construction, the Department of Veterans
Affairs, and related agencies for the fiscal year ending September 30,
2011, and for other purposes, reports favorably thereon and recommends
that the bill do pass.
Amounts in new budget authority
Total of fiscal year 2011 bill as reported to the Senate$143,530,131,000
Total of fiscal year 2012 advance appropriations
included in this bill............................... 50,610,985,000
Amount of 2010 appropriations........................... 182,750,300,000
Amount of 2011 budget estimate.......................... 143,531,666,000
Bill as recommended to Senate compared to--
Amount of 2010 appropriations....................... -39,220,169,000
Amount of 2011 budget estimate...................... -1,535,000
57-470PDF
__________
Page 47
Cost Saving Initiative.--Over the past decade, the Department has
undertaken an effort to modernize its medical facilities through new
construction and renovation. This recapitalization effort is imperative
to the delivery of high quality medical care. Often when a new surgical
ward or other treatment facility undergoes construction, the VA has to
find alternative areas for treatment or contract care to non-VA med-
ical providers. The Committee believes that the VA could achieve cost
savings during renovation or construction by either leasing or
purchasing mobile units. The Committee encourages the Department to
launch a pilot project in at least two VISNs that have renovation or
construction projects underway, to lease or purchase mobile surgical
units through a full and open competition while construction is
underway. Additionally, the VA should develop metrics for a cost
benefit analysis to determine whether this approach has achieved
savings versus contracting care through local medical providers.
__________
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Presentation by
Mobile Medical International Corporation
World-class mobile medical facilities for commercial, military,
international and emergency response applications
2176 Portland Street St. Johnsbury, VT USA
(802) 748-2322
www.mobile-medical.com
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Prepared Statement of Derek Newell, MPA., MPH, President,
Robert Borsch Healthcare, Palo Alto, CA
Mr. Chairman and other Members of the Committee: Thank you for
giving me the opportunity to provide testimony to the Committee. My
name is Derek Newell and I am President of Robert Bosch Health care.
Bosch, which makes the Health Buddy and T-400 remote monitoring
devices, has been providing remote patient monitoring in the Veterans
Health Administration (VA) since 2003 and is the largest provider of
in-home monitoring services to the VA. Bosch serves over 30,000 veteran
patients and accounts for approximately 70 percent of the remote
monitoring devices used by the veteran population.
The population we serve suffers from chronic illnesses like
congestive heart failure, diabetes and lung disease, and most have more
than one condition. The Health Buddy and the T-400 Systems collect
patient symptoms and vital signs, such as blood pressure or blood sugar
levels, and provide education and self-support tools through a series
of questions answered by patients. The responses are prioritized by
risk and transmitted to care managers within the VA. This risk
stratified output then enables care managers to quickly determine what
kind of intervention is necessary for each patient, preventing
escalation of symptoms.
These technologies have demonstrated positive results in improving
the health care of our Nation's veterans' population and in reducing
costs, for example, 25 percent reduction in inpatient days and 19
percent reduction in hospital admissions. The VA has been visionary in
building upon the successes of this rapidly emerging segment of the
health care delivery system.
Regarding improvements in the procurement process, first, we
applaud the transition of procurement and purchasing of home monitoring
devices to the Denver Acquisitions Center, which will integrate and
mainstream procurement practices for home monitoring technologies,
including the Health Buddy, and T-400. The purchasing was previously
done through the prosthetics department, which is excellent at
purchasing physical objects, but is not accustomed to purchasing
devices that also have content, applications and services integrated
with them. Our devices are required to be connected to our data centers
and to be available to upload data from the veteran and download
content and programs for the veteran. Moving the procurement to the
Denver Acquisitions Center allows separate payment for materials,
applications, content and services, which will be increasingly
important as these elements become increasingly intertwined with
physical devices.
While we compliment the VA's innovation to date, we believe there
are a number of ways that Congress could assist the agency in improving
the contract and procurement process to expedite greater use of home-
based remote health care and other innovative technologies.
Based on our experience, I suggest the following enhancements that
would improve contract and procurement processes in the VA.
Preferred Partners: The cost of some of the systems and
technologies, as well as the cost of continual innovation, require
vendors to have some reasonable sense that they will have a successful
relationship with the VA. Currently, remote monitoring vendors need to
commit to installing hardware in a data center within the VA as well as
within a backup data center within the VA. After this they are free to
sell their technologies to the related VISN's, but there is no
guarantee on how many units the VA will buy or how many units any
vendor would sell. Rather than have a broad spectrum of vendors (the
current proposal is 6), we recommend a more limited number of vendors
with a larger commitment to and from each vendor (maximum 3 vendors).
This would meet the VA goals of ensuring adequate competition within
the VA and avoiding major supply disruptions if one vendor has
financial or production problems, but it would also ensure a viable
market for each vendor within the VA.
Targeted Innovation: Recently the VA has started communicating to
partners about its vision of veterans' health needs and priorities,
however this could still be improved. Better communication and funding
targeted innovation with preferred partners would enable us to respond
in a more timely manner to the needs of the VA and to be partners in
finding solutions. At present, a majority of our information comes only
when a solicitation is released. Only then do we have a concrete
knowledge of the VA's national perspective and the goals and
priorities. The short turnaround cycles for proposal submissions do not
allow for the innovation that would be possible with longer planning
cycles. The recent Innovation grants proposed and funded by the VA are
a step in the right direction.
Introduce continuity into the FSS contracting process by
appointing a single point of contact for partners. Currently we
interact with a variety of FSS contract staff, which creates a constant
learning curve for them. We encourage a move back to FSS's former
process of a consistent point of contact, which would streamline
information flow and trim down bottlenecks.
Greater sharing of information between VHA and other
Federal health care agencies could expedite telehealth adoption rates
by the VA and those agencies. We believe poor information-sharing
hampers agencies' ability to make mid-course program corrections and,
by keeping information ``under wraps,'' effectively limits adoption of
emerging and known best practices.
Mr. Chairman and Members of the Committee, we believe these few but
concrete and specific actions would go a great distance to support the
VA's efforts to expand the use of telehealth technologies. In this
regard, we admire the VA's efforts to date and hope that our years of
experience in interacting with the agency as a private vendor will be
of use to the Committee.
I appreciate this opportunity to testify and would be happy to
answer any questions you might have.
Prepared Statement of Lincoln Moss, Senior Vice President and
Chief Operating Officer, Ramtech Building Systems, Inc., Mansfield, TX,
on behalf of Modular Building Institute
Chairman Michaud, Ranking Member Stearns and Members of the
Committee, I am Linc Moss, Senior Vice President and Chief Operating
Officer of Ramtech Building Systems, Inc. a vertically integrated
design-build commercial modular construction firm based in Mansfield,
Texas. I am testifying today on behalf of MBI--the Modular Building
Institute--a not-for-profit trade association established in 1983 that
serves to represent companies involved in the manufacturing and
distribution of commercial factory-built structures.
MBI appreciates the opportunity to speak to the Committee on ways
to improve contracting with the Department of Veterans' Affairs (VA).
Throughout the construction industry there has been concern with the VA
as to the solicitation of construction projects that call for a
delivery system referred to as ``Design-Bid-Build.'' This traditional
project delivery method is often more costly and less efficient than
other delivery methods and its restrictive nature prohibits alternate
forms of construction such as permanent modular, tilt-wall and pre-
engineered steel construction from being able to participate in the
bidding process. Within the last few months there have been two
separate RFP's issued by the VA that Ramtech was interested in bidding
on. However, because the RFP was issued using a Design-Bid-Build
approach, Ramtech and other alternative forms of construction firms
were unable to participate.
As is explained in greater detail throughout this testimony, the
Department of Veterans' Affairs could greatly improve the way it
solicits construction projects if it utilized an alternate project
delivery system known as ``Design-Build.'' Over the past decade, the
use of Design-Build has greatly increased in the United States, making
it one of the most significant changes in the construction industry.
The Design-Build method, which has been embraced by several government
agencies, including the United States Army Corps of Engineers (USACE),
streamlines project delivery through a single contract between the
government agency and the contractor. This simple but fundamental
difference not only saves money and time, improves communication
between stakeholders, and delivers a project more consistent with the
agency's needs, it also allows for all sectors of the construction
industry to participate.
The Increased Use of a Design-Build Delivery System_How would it
benefit the Department of Veterans' Affairs?
The Design-Build project delivery system offers the VA a variety of
advantages that other construction delivery systems cannot. Typically,
under the Design-Build approach, an agency will contract with one
entity to both design and construct the project. This is in contrast
with Design-Bid-Build, where an agency has to contract with multiple
entities for various design and construction scopes during the
construction project.
By greater utilization of the Design-Build delivery system, the
Department of Veterans Affairs can achieve these goals:
Faster Delivery--collaborative project management means
work is completed faster with fewer problems;
Cost Savings--an integrated team is geared toward
efficiency and innovation. Furthermore, with Design Build, construction
costs are often known far earlier than in other delivery methods.
Because one entity is typically responsible for the entire project,
they are able to predict costs more accurately than when a Design-Bid-
Build system is utilized. The contracting for Design-Build services
allows the agency several decision points during design. The decision
to proceed with the project is made before substantial design
expenditure and with knowledge of final project costs;
Quality--Design-Builders meet performance needs, not
minimum design requirements, often developing innovations to deliver a
better project than initially foreseen;
Single Entity Responsibility--one entity is held
accountable for cost, schedule and performance. With both design and
construction in the hands of a single entity, there is a single point
of responsibility for quality, cost, and schedule adherence. The firm
is motivated to deliver a successful project by fulfilling multiple
objectives, such as with the budget and schedule for completion. With
Design-Build, the owner is able to focus on timely decision-making,
rather than on coordination between designer and builder;
Reduction in Administrative Burden--owners can focus on
the project rather than managing separate contracts;
Reduced Risk--the Design-Build team assumes additional
risk. Performance aspects of cost, schedule and quality are clearly
defined and responsibilities balanced. Change orders due to errors are
virtually eliminated, because the design-builder had responsibility for
developing drawings and specifications as well as constructing a fully-
functioning facility.
Just to underscore the benefits of a Design-Build project delivery
system, the Construction Industry Institute, in collaboration with
Pennsylvania State University performed a study examining the various
construction methods and found that:
Unit Cost: Design-Build was typically 6 percent less
costly than a Design-Bid-Build system;
Delivery Speed: Design-Build was 33 percent faster than
Design-Bid-Build;
Quality: Design-Build met and exceeded quality
expectations at all levels
Unfortunately, the Department of Veterans' Affairs has been
unwilling to embrace the Design-Build construction method as much as
other Federal Agencies. According to VA personnel, only 30 percent of
VA solicitations call for a Design-Build delivery system, while the
rest rely on a Design-Bid-Build delivery method.
As our Nation prepares for an influx of returning warriors, it is
imperative that we are able to provide them with the services that will
help them assimilate into civilian life. Medical clinics, dental
facilities, physical rehabilitation facilities, mental health treatment
facilities as well as interim veteran housing will need to be provided
in an efficient and cost effective manner. By adopting the Design-Build
approach, the VA could provide these facilities in a compressed time
frame while ensuring that the product delivered is top quality.
A Design-Build System Opens Opportunities for Alternative Design
Offerings
By utilizing a Design-Build philosophy, the Department of Veterans
Affairs could allow for sectors of the construction industry, such as
modular construction, tilt-wall and pre-engineered steel to offer
products as well as project means and methods that are currently not
exercised due to the restrictive nature of Design-Bid-Build project
delivery methods.
Numerous permanent modular contractors such as Ramtech have
performed services for the VA facilities but because of the limited
amount of Design-Build solicitations, the opportunities are severely
limited.
Recently, the National Institute of Standards and Technology (NIST)
released a report identifying modular construction as an underutilized
resource and a breakthrough for the U.S. construction industry to
advance its competitiveness and efficiency. One of the findings in the
NIST report was ``Greater use of prefabrication, preassembly,
modularization, and off-site fabrication techniques and processes.''
For those of us who specialize in alternative construction such as
permanent modular, this report simply validated what has been known for
a long time: Construction methods such as permanent modular leads to
improved efficiency and productivity.
By greater utilizing the Design-Build delivery system into the
Department of Veterans' Affairs construction policies, the VA could
greatly increase the amount of projects that contractors utilizing
alternative forms of construction could participate in and therefore
experience the benefits as outlined in the NIST report.
Let me emphasize that alternative construction methods such as
permanent modular are not always the solution. There is no one perfect
building system for every application. However, by expanding
opportunities for them to be part of the process the Federal Government
can be assured that it gets the `best value' by seeing all the options
before awarding a contract.
The Design-Build Delivery System Enhances Service-Disabled, Veteran-
Owned Small Business Participation
Because the Design-Build method typically relies on a single source
for both the design and construction of the project, Design-Build
contractors often partner with architectural/engineering firms to
assist in the design of the project. This fact facilitates partnering
between Service Disabled, Veteran-Owned Small Business with
construction firms such as Ramtech that perform the work.
Because of this direct working relationship between the SDVOB and
the Design-Build contractor, the project is consolidated eliminating
unnecessary levels within the project structure. Because the Design-
Build method encourages these relationships, businesses such as those
that comprise the membership of MBI have forged excellent partnerships
with SDVOB's to perform on projects for various government agencies.
In the permanent modular construction field, a relationship with a
contractor such as Ramtech means that a SDVOB partner will get
approximately 60-70 percent of the building delivered and installed by
Ramtech while a SDVOB partner performs the site work, utility
connections, foundation and roof. SDVOB's often do not have the
logistical capability to site- build an entire building, but they have
the ability to perform other critical functions that comprise 30-40
percent of the project.
Undoubtedly, one of the top goals of the VA is to ensure that there
are increased contracting opportunities for SDVOB's with the VA. To
that end, MBI feels that simple changes could greatly increase SDVOB
participation in construction projects.
One way to expand the involvement of Service Disabled, Veteran
Owned Businesses is by encouraging and expanding the use of the Design-
Build approach.
Conclusion
Contractors that rely on a Design-Build delivery system have, and
continue to overcome obstacles when it comes to working with the
Department of Veterans Affairs. While businesses such as Ramtech are
anxious to compete, the current trend of Design-Bid-Build projects
issued by the VA inevitably prohibits that participation.
The construction industry has seen great advances over the past 10
years, and one of those is the Design-Build delivery system. More and
more contractors are beginning to utilize Design-Build because of the
advantages that are offered. However, until agencies such as the VA
decide to solicit more projects using a Design-Build method, these
companies will be unable to participate. The members of MBI ask that
the Veterans' Affairs Committee look into the issues discussed today in
the hopes of improving the way the VA procures construction projects.
Our recommendations would ensure that the Federal Government gets the
`best value' and also maximizes opportunities among SDVOB's and
alternative construction methods.
On behalf of MBI, as well as on behalf of Ramtech Building Systems,
Inc, I thank you for your time and attention to these matters. It is
our hope the Committee can continue to rely on MBI as a valuable
resource when it comes to issues relating to the construction industry.
Respectfully Submitted.
Prepared Statement of Jay Wise, Ph.D., Chief Executive Officer,
Wise Knowledge Systems, Inc., Piper Creek, TX
Introduction
Wise Knowledge Systems, Inc. (WKS) has produced the Knowledge-based
Expert Systems (KBES) application as an advanced modeling and
simulation/decision discovery and support tool. KBES keys on continual
input from whole communities of domain experts to evaluate situations
and decisions and produce information on optimized strategic actions.
This cumulative knowledge continually refines the KBES output resulting
in a very current and very accurate contribution to actionable
knowledge.
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KBES is a learning tool that continually evolves via the use of the
experts.
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KBES is accurate at a minimum of 95 percent, and has received
important validation and praise from mathematicians at major
universities, the Office of the Chief of Naval Operations, juried
scientific journals, the Smithsonian Institute where it is part of
their collection, and, in the private sector. KBES has been
successfully deployed in both private sector operations, and in active
military operations.
The production of the dynamic assessment of medical readiness for
the Navy produced highly accurate and user friendly information on
current and future state of medical readiness with modeling and
simulation to produce optimized strategies for medical readiness.
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The architecture of all KBES models and applications supports the
interchange of values for ``triggers'' that can open new pathways and
establish a different or new decision and optimized strategic
interventions. All of the KBES analytical engines are modular and can
be used individually or in tandem.
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The four KBES analysis engines work both individually and in
combination. The output of these analyses is actionable action based on
the sum of the knowledge of the domain experts using the application.
In certain cases, the analyses can produce a decision or suggest an
action that is not part of the typical responses and thereby improve
the final outcome.
[GRAPHIC] [TIFF OMITTED] T1758A.021
Excerpts, reviews and deployment details for all WKS KBES models,
technology, and applications are available both on request and at the
WKS Web site: wiseknowledgesystems.com.
Precise dates and times and full transcripts of meetings and
conversations are available on request.
The following is a very small sample of the documents, and
communications for WKS and the VA since 2004.
Overview
10/15/2007
Dr. Wise met in Washington with Dr. Paul Tibbits. Dr Tibbits says
he is aware of WKS' KBES as successfully applied to the Navy Shipboard
Medical Administrative Readiness Tool (SMART). Dr. Tibbits says he
wishes to identify the best application of the KBES technology for the
VA.
Wise Knowledge Systems, Inc. has received positive praise following
analysis of KBES technology by:
Paul Tibbits, M.D.-Veterans Administration
Roy Pratt-HP
Joe Goodin-Office of the Chief of Naval Operations
The Smithsonian Institute
Dr. John Sharp-UMKC School of Medicine
Frank Sisti-Software Engineering Institute
Dr. Dale Alverson-Telemedicine Director, University of New Mexico
Ciro Rodriquez-U.S. Congress, House of Representatives
W.C. Vanderwagen, M.D.-Indian Health Service
Wendell Porth-St. Lukes Lutheran Hospital
Richard A. Cooper-Trinity University, Department of Mathematics
Bill Silva-Dyncorp
Wise Knowledge Systems, Inc. clients, since 1985
Although WKS continued to provide the full information/material to
Dr. Tibbits since our initial meeting with him, the following
individuals have, in meeting with WKS, said initially that they have
either not received any information from Dr. Tibbits, and/or, they have
not reviewed the material. Following their review with Dr. Wise each
said that the KBES application would support the VA/VHA health mission
with veterans. Other than Ms. Lloyd, VHA, and Ms. McCutcheon, VA OAL,
each said that they would recommend a pilot KBS project for VA to Dr.
Tibbits. Importantly, Dr. Tibbits wrote the most positive evaluation of
KBES for the VA, yet he failed to put KBES on the ``list'' for
prioritization for acquisition. Other than Ms. McCutcheon, each of
these individuals said they would not acquire KBES because: ``the VA is
broken, nobody here wants to work/it is hard to find anybody at the VA
who wants to work, and the VA is not mature to use this technology''.
This response may be seen as rather extraordinary when one reviews
the assessment given by Dr. Tibbits himself, and by Joe Goodin of the
Office of The Chief of Naval Operations.
[GRAPHIC] [TIFF OMITTED] T1758A.022
The following is the SPAWAR evaluation as edited by Dr. Paul
Tibbits.
POINT PAPER
10 Sept 2009
Subj: Use of modeling and expert system to strengthen system
development lifecycle (SDLC), as related to IT systems capacity
planning.
BACKGROUND
On an enterprise level, the SDLC processes present at the VA are
still too fragmented, with multiple opportunities for improvement in
process documentation, modeling, and standardization, as well as
accuracy of capacity forecasting and adherence to software efficiency
constraints.
If applied properly, the use of the modeling and exper systems
approach has the potential to provide significant value to the SDLC
processes by:
Facilitating process and data discussions with
stakeholders;
Modeling transaction volumes based on actual vs paper
based processes and ``what if'' variations in between;
Aligning SDLC processes and organizations;
Identifying potential root cause issues based on similar
process data;
Supporting change and communications.
Deploying in a modular, flexible, and secure manner with
lowest possible risk of poor systems performance.
The implementation of modeling and expert systems methodology could
yield early benefits in facilitation and communications while benefits
surrounding toolsets and data modeling would be limited until process
alignment has been achieved and initial data is available for use in
the models.
ANALYSIS
Modeling and Expert Systems Methodology
There are a variety of commercial approaches to use of modeling and
expert systems which approach process modeling, knowledge management,
and data analysis in a proprietary manner.
Value in process modeling, knowledge management, and data analysis
are typically seen in 3 discrete areas: Communications facilitated by
the knowledge, data gathering, modeling process; the extensibility of
the models themselves; and the potential for root cause analysis and
process improvement based on data and structural analysis.
Communications facilitation value is typically measured
as ``soft'' returns. Benefits can be seen in training/mentoring, team
building, and other areas of organizational and individual development.
Model extensibility value can be measured by perceived
benefits to functionally related processes which allow for value to be
replicated with less cost and/or as ongoing management tools such as
dashboards and training toolsets.
Root cause analysis can be an outcome of both modeling
and data analysis.
Value in data analysis is dependent on the amount and
type of data available. Detailed data modeling implies sufficient data
to make it useful for achieving buy in on outcomes
Benefits of data analysis are limited typically by
confidence in models and quality of data. The confidence in the model
is based on the transparency of the modeling process and the
facilitation approach. The quality of data is often in question when
processes are not standardized or if stakeholders are not involved in
developing underlying assumptions.
Modeling and Expert Systems
Are flexible and modular.
Have been deployed on a number of databases and operating
environments.
Can receive either ``stand alone,'' ``batch,'' or ``real-
time'' data inputs based on standard data base sharing techniques.
Have been accredited and deployed in DoD environments.
Can be a reasonable methodology for leveraging benefits
in a secure and flexible manner.
Ms. McCutcheon simply said ``I see no value in it. You (WKS) can
start over with the VA!''
These individuals are:
Navy Captain Christine Boltz
Greg Donham--VA
Navy Commander Margret Beaubein
Dr. Julius Chou
Ms. Susan Lloyd--VHA
Dr. Michael
Valivullah--VA
Dr. Pat Pearcy--SPAWAR
Ms. Wendy McCutcheon--VA OAL
Dr. Tibbits says his efforts and funds are spent to ``support the
status quo'' at the VA. Dr. Tibbits says ``I will just go down the hall
and get the money from my boss''. Dr. Tibbits said that Ms. McCutcheon
was now the sole authority for acquisition for the VA for health and
medical applications and that the first people funded by her office
were ``raving'' about her performance.
Dr. Tibbits and Ms. McCutcheon say that, though they know WKS is a
Veteran owned small business, they will not consider Wise Knowledge
Systems, Inc. using the GSA, because the ``GSA is not helping us
(VA)''.
Cathy Wiblemo of Chairman Filner's office reports she has heard/
seen nothing in response to Chairman Filner's request to the Secretary
of the VA for the Secretary's office to ``provide the Committee with
evaluation and feedback of SMART. Please respond by November 16,
2007'', Ms. Wiblemo has said there remains no response by the Office of
the Secretary of the VA to this request by Chairman Filner.
Following a conversation with Chairman Filner's staff, Chairman
Filner and I spoke and he invited me to testify at this hearing.
Summary
Since 2004, WKS has been in communication with leadership at the VA
to develop an understanding of a potentially important, potentially
life saving, resource allocation technology to the VA. This is WKS
Knowledge-Based Expert System (KBES) technology. KBES has received very
positive technical reviews as an advanced modeling and simulation
decision, support technology from every point of assessment to which it
has been assigned by both the Navy and the VA, and in the private
sector. The critical health area of CRTBI and the fundamental nature of
SDLC development for the VA make positive movement on these topics
significant to the mission of the VA. There is clearly an important
ethical issue of the VA being enabled to keep its promise and deliver
its mission to American veterans.
Once a technology has been tested, evaluated, praised, and
successfully focused on an emergent health issues or in support of
technology that supports health; non-response is an unacceptable
option. The leadership at the VA, their staff and colleagues all seem
to agree that the KBES technology could be very good for the VA, but
some persons of authority have decided that they will not attempt to
acquire or apply KBES because the VA is'' not mature, is broken, and
that the people at the VA do not want to work''. These individuals at
VA seem to be defaulting the responsibility for a decision. Failing
that they simply do not respond.
It is an unfortunate part of our American history that treaties
(contracts) were made with the American Indian tribes to remove them as
an obstacle to what was called progress. These treaties or agreements
were made by our government knowing they would not be kept. The
explanation for this fraudulent manipulation was often that ``Indians
are not people/they are not human beings''. One wonders if the
individuals mentioned above at the VA, in maintaining the ``status
Quo'', failing to provide state-of-the-art medical and health care to
our young people enlisting in the service, while referring to the VA as
``immature, broken and not willing to work'', also considers these
young Americans as ``not human beings''.
This arrogant and non-productive behavior is not appropriate when
the health and lives of American Veterans, and their families are at
risk.
While it is clear that the vast majority of individuals at the VA
are sincerely dedicated to American veterans and do want to work for
the mission of the VA, there remains a few in leadership positions who
frustrate the evolution of the medical responses and capabilities now
available to the VA. WKS recommends installing and supporting qualified
individuals in these important positions who have the experience and
expertise to follow up on positive evaluations, and acquire state-of-
the-art advanced medical and health care technology, like KBES. Saying
that ``the VA is broken and nobody here wants to work'' as the
rationale for non-acquisition of proven technologies does not support
the critical mission of the VA, nor does it compliment those at the VA
who work hard and are not broken and give much more than for hollow lip
service for American veterans. We all look forward to a more positive
approach to acquisition for the future of the VA and American veterans.
Do the right thing. Honor the contract with American veterans.
I want to thank the Committee and in particular Chairman Dr. Bob
Filner for giving our experience a voice. I will try to answer any
questions you may have now.
Respectfully presented.
Jay Wise
Wise Knowledge Systems
Prepared Statement of James A. Clair, M.P.A., M.S., Chief Executive
Officer,
Goold Health Systems, Augusta, ME
Chairman Michaud, Ranking Member Brown, and Members of the
Subcommittee: thank you for your kind invitation to discuss Department
of Veterans' Affairs (VA) procurement practices and, specifically, how
the VA might benefit by incorporating certain cost containment
strategies within their pharmacy benefit management (PBM) and Nursing
Home Care programs. I am accompanied today by Lorraine Lachapelle, RN,
Goold Health Systems' Director of Community Assessments.
Goold Health Systems is a national health care management company
that specializes in meeting our clients' specific health care
objectives with a special emphasis on cost containment. At all times we
are driven by evidence-based medicine and achieving clinically
effective outcomes. We manage certain health benefits as directed by
our clients in a very detailed, granular level so that health care
costs are contained and, in many cases, reduced on a per user per year
(PUPY) basis.
Our work is accomplished in ``clinical-analyst teams'' that are
lead by Goold doctors, pharmacists and nurses who team with our data
analysts, software developers, database administrators and project
managers to achieve effective cost-containment strategies for our
clients. Our primary clients are the State Medicaid Agencies. We have
offices in Augusta, Maine; Atlanta, Georgia; Cheyenne, Wyoming; and Des
Moines, Iowa.
GHS provides four major business offerings to our clients: (1)
pharmacy benefits services administration; (2) community assessment
services; (3) medical prior authorizations; and (4) business
outsourcing services. My testimony today will be focused on items 1 and
2 above.
I would like to preface my remarks by stating that the VA does a
very good job at providing pharmacy services. They purchase in a very
cost-effective manner, have a modern and effective dispensing network
and have deployed many effective technical and clinical solutions so
that our Nation's veterans receive the services they require.
My testimony focuses on three ways in which the VA can enhance the
monitoring and evaluation of certain health benefits so that veterans
receive their services:
Medication Management
Pharmacy Program Integrity
Long-Term Care Assessments
1. Medication Management
The U.S. Department of Health and Human Services' (U.S. DHHS)
Centers for Medicare and Medicaid Services (CMS) recommends Medication
Therapy Management (MTM)--a program that sets out to ensure optimum
therapeutic outcomes, reduce the risks of side-effects when using
medications and must be coordinated as part of a care management plan.
GHS then expands upon MTM by using predictive modeling to analyze
pharmacy and medical claims data to measure the probability of
exceeding set cost parameters for high cost users and complex medical
conditions. Problematic patients are ultimately placed in an Intensive
Benefits Management (IBM) or Chronic Pain Management (CPM) program. We
utilize regression analyses that correlate chronic conditions with
total drug cost; we then identify individuals who would benefit from
our targeted interventions. Once in IBM or CPM the patient is linked to
one physician/prescriber and one pharmacy/dispenser for management of
complex medical conditions and chronic pain issues, ensuring that those
patients receive appropriate drug therapies. We provide educational
materials and monitoring services to those individuals to help them
better understand their medical conditions, as well as work with them
on medication adherence and potential drug interactions. We also work
with their providers to help ensure that optimal clinical outcomes are
achieved. Savings accrue to our clients because of the intensive
involvement of the provider, patient and GHS clinical team. Examples of
health conditions we focus on for IBM have been narcotics use, asthma &
Chronic Obstructive Pulmonary Disease (COPD).
Other examples of Medication Management strategies involve
formulary management, which uses our clinical and analytical expertise
to most effectively manage the drug benefit, including:
Formulary Management: 15 Days Supply Limit
GHS performs extensive analyses to identify drugs that have high
discontinuation rates shortly after the onset of therapy. It was
reasoned that limiting the number of days supply of these first scripts
would result in savings from reducing waste. About 30 drugs were
identified that met our criteria. These drugs tend to have high
discontinuation rates due to either significant side effects or
relative lack of efficacy. Targeted areas for this effort include long-
acting narcotics, stimulants, psychiatric medicines, urinary and
continence products, and smoking cessation drugs (e.g, Chantix).
Formulary Management: Dose Consolidation
Many existing drugs now only need to be taken once per day.
There is a considerable amount of savings available if these drugs are
not allowed to be used more frequently without good clinical cause.
Examples of targeted dose consolidation are Zyprexa and Risperdal, two
anti-psychotic drugs that have allowed our State clients to save over 1
percent of their pre-rebate expenditures annually by aggressively
pursuing dose consolidation.
2. Pharmacy Program Integrity
Program Integrity by definition should ensure that our tax dollars
are not put at risk through fraudulent violations of the rules or
abuses of the system. It should ensure that appropriate payments are
paid only to legitimate providers for services only to eligible
beneficiaries.
Like many other health care managers, we have significantly
expanded our Program Integrity efforts over the last few years. Some
health care expert's have found that as much as 10 percent of all
payments in health care can be attributed to fraud, waste or abuse. The
National Health Care Anti-Fraud Association estimated that 3 percent of
the health care industry's expenditures in the United States are due to
fraudulent activities. This calculates to an annual amount of
approximately $51 billion.
In a recent analysis for one of our State clients we created a
``Monthly Outlier Report'' on pharmacy expenditures and trends. The
analysis was performed for each drug filled in the previous month, a
review of the average amount spent per drug and the average quantity
per days supply based on quantity limits was undertaken. Those drug
claims that fell outside established guidelines were flagged for audit.
This resulted in claims being reviewed as a result of improper use of
override codes and, subsequently, many of these outlier claims were
reversed. For this one State client with a pharmacy budget of
approximately $200 million per year, we expect the results of this
specific audit to yield between $500,000 to $1 Million dollars in
savings.
By way of example I have listed below two other areas of pharmacy
practice that are prime candidates for Program Integrity review:
Automatic Early Refills
In pharmacy benefit programs like the VA, where there is a heavy
reliance on mail order, it is important that the mail order provider be
monitored to ensure that mail order pharmacies wait for the patient to
ask for their medication to be refilled. This doesn't preclude a mail
order pharmacy from making outgoing calls to ask a patient if they
would like their next dose of medication sent, but it would not allow a
mail order pharmacy from automatically sending the prescription to them
in all cases.
Near Duplicates
Each medication intended for human use is assigned a number
called an NDC (National Drug Code). It is a unique product identifier
that, for example, distinguishes an Oxycodone 10 milligram (mg) tablet
from an Oxycodone 20 mg tablet.
``Near duplicates'' can occur with generics when a different NDC
of the same drug/same strength is used a few days after that patient's
first prescription was filled. In many cases, this is an appropriate
fill due to the legitimate loss of medication. However, these can also
be billing errors or inappropriate dispensing such that these claims
should be reversed. Monitoring utilization at this level can yield
additional savings to the VA if it is not being done now.
3. Long-Term Care Assessments
Through the early 1990's Nursing Facilities (NF) Medicaid costs
were increasing at annual rates far exceeding the general inflation
rate or even the higher rate at which health care costs were
increasing. Eligibility determinations for Medicaid NF care were
determined by the provider, leading to much higher utilization rates
than otherwise supported by independent review. As a result Maine State
Government instituted an independent, objective Maine Medicaid
eligibility screening process with the following objectives: to create
a single entry for medical/functional eligibility assessments for long-
term care (LTC) programs; to increase consumer participation and
control; to educate consumers about in-home long-term care programs and
other alternatives to nursing and residential facility care; to
identify and address caregiver needs; to reduce the long-term costs of
services by requiring greater emphasis on rehabilitation and health
promotion; and to reduce the number of unnecessary admissions to,
increase the number of discharges from, and decrease the length of stay
in, nursing facilities.
Within strict time parameters set by our client, the GHS Intake
Screener's job is: to provide accurate prescreening to determine the
need for a medical/functional assessment, maintain a waiting list for
assessment as needed and refer consumers to appropriate resources.
When an evaluation is indicated, the GHS Registered Nurse (RN):
conducts an accurate, objective medical/functional eligibility
assessment using the automated Medical Eligibility Determination (MED)
tool in a way that is always based on sound clinical judgment and in
compliance with appropriate policy; and provides timely information
about all long-term care service options, including a thorough
explanation of consumer-directed options, regardless of payment source.
GHS employs approximately 35 nurses who perform the LTC assessments
on-site with the assistance of a laptop, portable printer and cell
phone.
In State Fiscal Year 2010 (ending June 30, 2010), we performed over
15,000 assessments. The State's share of the Medicaid NF expenses in
2010 are more than 35 percent lower than their SFY 1994 peak in nominal
(non-inflation adjusted) dollars. This is the result of some policy
changes made by Maine State Government and the LTC Assessment process.
Comparing where the unmanaged NF budget was headed to where it actually
is today has yielded annual State savings that exceed $100 million.
It is important to point out that the State of Maine has invested
some of the annual cost-savings toward a stronger network of Home-Based
Care (HBC) services so that those clients determined to be eligible to
remain in their home setting would have the supporting services
available to them.
Conclusion
Mr. Chairman, the VA is a very effective provider of important
pharmacy and medical benefits to our country's veterans. The strategies
described above have been proven to be very effective in containing
health care costs for our Medicaid clients. We believe that these
clinical management approaches can assist the VA in further containing
costs.
Thank you again for the opportunity to testify. My colleague and I
would be pleased to answer any questions you may have.
Prepared Statement of Debra A. Draper, Ph.D., M.S.H.A., Director,
Health Care, U.S. Government Accountability Office
VA Health Care: Preliminary Observations on the Purchasing
and Tracking of Supplies and Medical Equipment and the
Potential Impact on Veterans' Safety
GAO Highlights
Why GAO Did This Study
VA clinicians use expendable medical supplies--disposable items
that are generally used one time--and reusable medical equipment (RME),
which is designed to be reused for multiple patients. VA has policies
that VA medical centers (VAMC) must follow when purchasing such
supplies and equipment and tracking--that is, accounting for--these
items at VAMCs.
GAO was asked to evaluate VA's purchasing and tracking of
expendable medical supplies and RME and their potential impact on
veterans' safety. This testimony is based on GAO's ongoing work and
provides preliminary observations on (1) the extent of compliance with
VA's requirements for purchasing and tracking of expendable medical
supplies and RME and (2) steps VA plans to take to improve its
oversight of VAMCs' purchasing and tracking of expendable medical
supplies and RME. GAO reviewed VA policies and selected three
requirements that GAO determined to be relevant to patient safety. At
each of the five VAMCs GAO visited, GAO reviewed documents used to
identify issues related to the three requirements and interviewed
officials to gather further information on these issues. The VAMCs GAO
visited represent different surgical complexity groups, sizes of
veteran populations served, and geographic regions. GAO also
interviewed VA headquarters officials and obtained and reviewed
documents regarding VA headquarters' oversight. GAO shared the
information in this statement with VA officials.
What GAO Found
During its preliminary work at the five selected VAMCs, GAO found
inconsistent compliance with the three VA purchasing and tracking
requirements selected for review. Noncompliance with these requirements
created potential risks to veterans' safety.
Requirement for VAMC committee review and approval. At
two of the VAMCs, officials stated that the required designated
committee review and approval occurred for all of the expendable
medical supplies and RME that the VAMCs had not previously purchased.
These reviews are designed to evaluate the cost of the purchase as well
as its likely impact on veterans' care. However, at the remaining three
VAMCs, officials stated that the required committee review and approval
of the expendable medical supplies, such as those used in conjunction
with dialysis machines, did not always occur. As a result, these
purchases were made without evaluating the likely impact on veterans'
care.
Requirement for signatures of purchasing and approving
officials. At one of the VAMCs, VAMC officials discovered that a staff
member in a dialysis department ordered an expendable medical supply
item for use in dialysis machines, without obtaining the required
signature of an approving official. That staff member ordered an
incorrect item, the use of which presented a risk of exposing veterans
to infectious diseases, such as Human Immunodeficiency Virus.
Requirement for entering information in VA's inventory
management systems. Officials from one of the five VAMCs told GAO that
information about expendable medical supplies that were ordered on a
recurring basis was entered into the appropriate inventory management
system, as required. At the remaining four VAMCs, officials told GAO
that information about certain expendable medical supplies--those used
in a limited number of clinical departments such as dialysis
departments--was not always entered into the system. This lack of
information can pose a potential risk to veterans' safety; in the event
of a recall of these items, these VAMCs may have difficulty determining
whether they possess the targeted item.
VA reports that it plans to improve its oversight of VAMCs'
purchasing and tracking of expendable medical supplies and RME. For
example, VA headquarters officials stated that, effective October 1,
2010, VA plans to shift greater responsibility for reviews of purchase
card transactions from the VAMCs to the Veterans Integrated Service
Networks, which are responsible for overseeing VAMCs. VA headquarters
officials also told GAO that VA is developing a new inventory
management system, which it expects will help improve VA's ability to
track information about expendable medical supplies and RME across
VAMCs. VA expects this new system to be operational in March 2011.
__________
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today as you discuss the Department of
Veterans Affairs' (VA) contracting and procurement practices. VA
operates one of the largest integrated health care delivery systems in
the United States, providing care to over 5.5 million veterans
annually. Organized into 21 Veterans Integrated Service Networks
(VISN), VA's health care system includes 153 VA medical centers (VAMC)
nationwide that offer a variety of outpatient, residential, and
inpatient services.\1\ These services range from primary care to
complex specialty care, such as cardiac and spinal cord injury care. In
providing these health care services to veterans, VA clinicians at
VAMCs use supplies and equipment that must be purchased by VA. These
include expendable medical supplies, such as needles and scalpel
blades, which are generally used once, and reusable medical equipment
(RME), which is designed to be reused for multiple patients and
includes such equipment as endoscopes and some surgical instruments.
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\1\ The management of VAMCs is decentralized to the 21 VISNs.
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VA has established policies that VAMCs are required to follow when
purchasing items such as expendable medical supplies or RME and
tracking--that is, accounting for--these items at their facilities.\2\
For example, VA requires that a designated VAMC committee review and
approve purchases of any expendable medical supplies or RME that the
VAMC has not previously purchased. VA also requires that VAMCs enter
information about certain expendable medical supplies and certain RME
at their facilities into the appropriate inventory management system.
VA's purchasing and tracking policies help ensure that VAMCs make
effective use of available resources and that they know which supplies
and equipment are being used at their facilities.
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\2\ See, for example, VA Handbook 7176, Supply, Processing and
Distribution (SPD) Operational Requirements (Aug. 16, 2002) and
Veterans Health Administration (VHA) Handbook 1761.02, VHA Inventory
Management (Oct. 20, 2009).
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VA's purchasing and tracking policies are also designed, in part,
to help ensure the safety of veterans who receive care at VAMCs. For
example, VAMCs need information on the RME in use at their facilities
in order to ensure that they have procedures for properly
reprocessing\3\ these items. VAMCs also need information on the
supplies and equipment in use in their facilities in order to determine
when they have expendable medical supplies or RME that are the subject
of a manufacturer or U.S. Food and Drug Administration (FDA) recall or
a patient safety alert.\4\
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\3\ Reprocessing refers to the steps by which RME is prepared for
reuse, and includes cleaning and disinfecting or sterilizing the
medical equipment.
\4\ A patient safety alert is a notification sent to VAMCs from
VA's National Center for Patient Safety regarding veterans' safety.
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Congressional committees and certain Members of Congress have
raised questions about VAMCs' purchasing and tracking of expendable
medical supplies and RME and their potential impact on veterans'
safety. My testimony today consists of preliminary observations as part
of our ongoing work on VA's oversight of compliance with its policies
for purchasing and tracking expendable medical supplies and RME. These
observations, based on site visits to five selected VAMCs, raise
concerns about the safety of veterans receiving care at these
facilities. We cannot determine the extent to which the purchasing and
tracking problems in the five selected VAMCs reflect the broader VA
health care system.
In my remarks today I will provide preliminary observations on (1)
the extent of compliance with VA's requirements for purchasing and
tracking of expendable medical supplies and RME and (2) steps VA
headquarters plans to take to improve its oversight of VAMCs'
purchasing and tracking of expendable medical supplies and RME.
To identify the extent of VAMCs' compliance with VA's requirements
for purchasing and tracking of expendable medical supplies and RME, we
reviewed VA policies\5\ and selected three purchasing and tracking
requirements that we determined were relevant to veterans' safety
issues. The requirements we selected are (1) having a designated VAMC
committee review and approve purchases of any expendable medical
supplies and RME that the VAMC has not previously purchased, (2)
obtaining signatures of purchasing and approving officials, and (3)
entering information about expendable medical supplies and RME at VAMCs
into VA's inventory management systems. We selected these requirements
to inform our discussions with VAMC officials about patient safety
incidents related to the purchase and tracking of expendable medical
supplies and RME that were identified at certain VAMCs in 2009.\6\ We
judgmentally selected five VAMCs to visit: the VAMCs in Albany, New
York; Cheyenne, Wyoming; Detroit, Michigan; Miami, Florida; and Palo
Alto, California. These VAMCs represent different surgical complexity
groups,\7\ sizes of veteran populations served, and geographic regions.
At the five VAMCs, we reviewed applicable VAMC committee meeting
minutes\8\ and other documentation used to identify problems related to
the three purchasing and tracking requirements we selected for our
review. We also interviewed VAMC officials to gather additional
information on these problems. To obtain information on steps VA
headquarters plans to take to improve its oversight of VAMCs'
purchasing and tracking of expendable medical supplies and RME, we
interviewed VA headquarters officials responsible for overseeing VAMCs'
purchasing of expendable medical supplies and RME. In addition, we
obtained and reviewed relevant documents regarding VA headquarters'
oversight, including internal reports and policy memorandums. We shared
the information provided in this statement with VA headquarters
officials.
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\5\ We reviewed applicable VA policies, including VA Handbook 7176,
Supply, Processing and Distribution (SPD) Operational Requirements
(Aug. 16, 2002); Department of Veterans Affairs, VA Financial Policies
and Procedures, Volume II, Chapter 6, Miscellaneous Obligations (Jan.
2009); VHA Handbook 1761.02, VHA Inventory Management (Oct. 20, 2009);
and VA Directive 1725.1, Accountability (Apr. 5, 1996).
\6\ We are continuing to review VA's policies to determine whether
additional requirements relate to these patient safety incidents and
should be included in our ongoing work.
\7\ VA assigns each VAMC a complexity score between 1 and 3 (level
1 is broken down further into 1a, 1b, and 1c), with level 1 being the
most complex, using a facility complexity model. That model uses
multiple variables to measure facility complexity arrayed along 4
categories, namely patient population served, clinical services
offered, education and research complexity, and administrative
complexity.
\8\ We reviewed minutes from the following committees: commodity
standards, equipment, infection control, medical executive, and
reusable medical equipment.
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We are conducting this performance audit in accordance with
generally accepted government auditing standards. We conducted the work
for this statement from March 2010 to September 2010. The audit
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background
VA policy specifies how VAMCs can purchase expendable medical
supplies and RME. VAMCs can purchase expendable medical supplies and
RME through their acquisition departments or through purchase card
holders, who have been granted the authority to make such purchases.
Purchase cards are issued to certain VAMC staff, including staff from
clinical departments, to acquire a range of goods and services,
including those used to provide care to veterans. According to VA, as
of the third quarter of 2010, there were about 27,000 purchase cards in
use across VA's health care system.
VA has two inventory management systems, which VAMCs use to track
the type and quantity of supplies and equipment in the facilities. Each
VAMC is responsible for maintaining its own systems and for entering
information about certain expendable medical supplies and certain RME
in the facilities into the appropriate system. Specifically, the
Generic Inventory Package (GIP) is used to track information about
expendable medical supplies that are ordered on a recurring basis.\9\
The Automated Engineering Management System/Medical Equipment Reporting
System (AEMS/MERS) is used to track information about RME that is
valued at $5,000 or more and has a useful life of 2 years or more.\10\
VAMC officials told us they use information about the items in their
facilities for a variety of purposes, for example, to readily determine
whether they have expendable medical supplies or RME that are the
subject of a manufacturer or FDA recall or a patient safety alert.
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\9\ GIP is used to track additional items besides expendable
medical supplies, including non-medical supplies.
\10\ AEMS/MERS is used to track additional equipment besides RME,
including information technology equipment.
---------------------------------------------------------------------------
VA's purchasing and tracking policies include the following three
requirements for VAMCs:
1. A designated VAMC committee must review and approve proposed
purchases of any expendable medical supplies or RME that have not been
previously purchased by the VAMC.\11\ The Committee, which typically
includes administrative staff and clinicians from various departments,
reviews the proposed purchases to evaluate the cost of the purchase as
well as its likely impact on veterans' care.\12\ For example, the
Committee that reviews and approves proposed RME purchases often
includes a representative from the department responsible for
reprocessing RME, in order to determine whether the VAMC has the
capability to reprocess--clean and disinfect or sterilize--the item
correctly and that staff are appropriately trained to do so. Proper
reprocessing of RME is important to ensure that RME is safe to use and
that veterans are not exposed to infectious diseases, such as Human
Immunodeficiency Virus (HIV), during treatment.
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\11\ Generally, a VAMC's commodity standards committee reviews and
approves purchases of expendable medical supplies and a VAMC's
equipment committee reviews and approves purchases of RME.
\12\ See VA Handbook 7176, Supply, Processing and Distribution
(SPD) Operational Requirements (Aug. 16, 2002).
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2. All approvals for purchases of expendable medical supplies or
RME must be signed by two officials, the official placing the order and
the official responsible for approving the purchase.\13\
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\13\ Department of Veterans Affairs, VA Financial Policies and
Procedures, Volume II, Chapter 6, Miscellaneous Obligations (Jan.
2009).
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3. VAMCs must enter information on all expendable medical supplies
that are ordered on a recurring basis and all RME that is valued at
$5,000 or more and has a useful life of 2 years or more into the
appropriate inventory management system, either GIP or AEMS/MERS.\14\
VA does not require information about RME that is valued at less than
$5,000 to be entered into AEMS/MERS.
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\14\ See VHA Handbook 1761.02, VHA Inventory Management (Oct. 20,
2009) and VA Directive 1725.1, Accountability (Apr. 5, 1996).
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GAO's Preliminary Work Identified Examples of Inconsistent Compliance
with VA's Purchasing and Tracking Requirements at Five Selected
VAMCs
At the five VAMCs we visited, our preliminary work identified
examples of inconsistent compliance with the three purchasing and
tracking requirements we selected for our review. In some cases,
noncompliance with these requirements created potential risks to
veterans' safety. We are continuing to conduct this work.
VAMC committee review and approval.
Officials at two of the five VAMCs we visited stated that
VAMC committees reviewed and approved all of the expendable medical
supplies the VAMCs purchased for the first time. However, at the
remaining three VAMCs, officials told us that VAMC committees did not
conduct these reviews in all cases. Officials from these three VAMCs
told us that certain expendable medical supplies--for example, new
specialty supplies--were purchased without VAMC committee review and
approval. Specialty supplies, such as those used in conjunction with
dialysis machines, are expendable medical supplies that are only used
in a limited number of clinical departments. Without obtaining that
review and approval, however, the VAMCs purchased these supplies
without evaluating their cost effectiveness or likely impact on
veterans' care.
At one VAMC we visited, officials told us that clinical
department staff were permitted to purchase certain RME--surgical and
dental instruments--using purchase cards and that these purchases were
not reviewed and approved by a committee. Therefore, the VAMC had no
assurance that RME purchased by clinical department staff using
purchase cards had been reviewed and approved by a committee before it
was purchased for the first time. As a result, these purchases may have
been made without assurance that they were cost effective and safe for
use on veterans and that the VAMC had the capability and trained staff
to reprocess these items correctly.
Signatures of purchasing and approving officials.
At one of the five VAMCs we visited, VAMC officials
discovered that one staff member working in a dialysis department
purchased specialty supplies without obtaining the required signature
of an appropriate approving official. That staff member was responsible
for ordering an item for use in 17 dialysis machines that was
impermeable to blood and would thus prevent blood from entering the
dialysis machine. However, the staff member ordered an incorrect item,
which was permeable to blood, allowing blood to pass into the machine.
After the item was purchased, the incorrect item was used for 83
veterans, resulting in potential cross-contamination of these veterans'
blood, which may have exposed them to infectious diseases, such as HIV,
Hepatitis B, and Hepatitis C.\15\
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\15\ As of June 2, 2010, the VAMC reported that all testing has
been completed and that no veterans have acquired infectious diseases
as a result of this incident. The VAMC found that one of the 83
veterans identified was dialyzed on an uncontaminated machine and
therefore this veteran was not notified or tested for these infectious
diseases.
Entry of information about items into VA's inventory management
---------------------------------------------------------------------------
systems.
At the time of our site visits, officials from one of the
five VAMCs we visited told us that information about expendable medical
supplies that were ordered on a recurring basis was entered into GIP,
as required. In contrast, officials at the remaining four VAMCs told us
that information about certain expendable supplies that were ordered on
a recurring basis, such as specialty supplies, was not always entered
into GIP. Since our visit, one of the four VAMCs has reported that it
has begun to enter all expendable medical supplies that are ordered on
a recurring basis, including specialty supplies, into GIP. By not
following VA's policy governing GIP, VAMCs have an incomplete record of
the expendable medical supplies in use at their facilities. This lack
of information can pose a potential risk to veterans' safety. For
example, VAMCs may have difficulty ensuring that expired supplies are
removed from patient care areas. In addition, in the event of a
manufacturer or FDA recall or patient safety alert related to a
specialty supply, VAMCs may have difficulty determining whether they
possess the targeted expendable medical supply.
Officials at one VAMC we visited told us about an issue
related to tracking RME in AEMS/MERS that contributed to a patient
safety incident, even though the VAMC was not out of compliance with
VA's requirement for entering information on RME into AEMS/MERS.
Specifically, because VA policy does not require RME valued under
$5,000 to be entered into AEMS/MERS, an auxiliary water tube, a type of
RME valued under $5,000 that is used with a colonoscope, was not listed
in AEMS/MERS.\16\ According to VAMC officials and the VA Office of the
Inspector General, in response to a patient safety alert that was
issued on the auxiliary water tube in December 2008, officials from the
VAMC checked their inventory management systems and concluded--
incorrectly--that the tube was not used at the facility.\17\ However,
in March 2009, the VAMC discovered that the tube was in use and was not
being reprocessed correctly, potentially exposing 2,526 veterans to
infectious diseases, such as HIV, Hepatitis B, and Hepatitis C.\18\
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\16\ VAMC officials stated that they also checked GIP to determine
whether the auxiliary water tube was listed and determined that it was
not listed in that inventory management system. According to a VA
headquarters official, the auxiliary water tube is not required to be
entered in GIP because it is not ordered on a recurring basis.
\17\ See VA Office of the Inspector General, Use and Reprocessing
of Flexible Fiberoptic Endoscopes at VA Medical Facilities, 09-01784-
146 (Washington, DC: June 2009).
\18\ As of August 17, 2010, the VAMC reported that it has
successfully notified 2,523 of the 2,526 veterans of possible exposure
to infectious diseases and that there were 17 new positive test
results. VA reports that these results are not necessarily linked to
RME issues and it is continuing its evaluation.
In addition, officials from VA headquarters told us that when
information about certain RME is entered into AEMS/MERS, it is
sometimes done inconsistently. The officials explained that this is
because AEMS/MERS allows users to enter different names for the same
type of RME. As a result, in the case of a manufacturer or FDA recall
or patient safety alert related to a specific type of RME, VAMCs may
have difficulty determining whether they have that specific type of
RME.
VA Reports It Plans to Change Its Oversight of Purchasing and Tracking
During our preliminary work, we discussed with VA headquarters
officials examples of steps VA plans to take to improve its oversight
of VAMCs' purchasing and tracking of expendable medical supplies and
RME. For example, VA plans to change its oversight of the use of
purchase cards. Specifically, VA headquarters officials told us that
designated VAMC staff are currently responsible for reviewing purchase
card transactions to ensure that purchases are appropriate. However,
one VA headquarters official stated that these reviews are currently
conducted inconsistently, with some being more rigorous than others. VA
headquarters officials stated that VA plans to shift greater
responsibility for these reviews from the VAMCs to the VISNs, effective
October 1, 2010. In addition, VA plans to standardize the reviews by,
for example, adding a checklist for reviewers. Because this change has
not yet been implemented across VA, we can not evaluate the extent to
which it will address the appropriateness of purchases using purchase
cards.
Our preliminary work also shows that VA plans to create a new
inventory management system. VA headquarters officials told us that
they are developing a new inventory management system--Strategic Asset
Management (SAM)--which will replace GIP and AEMS/MERS and will include
standardized names for expendable medical supplies and RME.\19\
According to these officials, SAM will help address inconsistencies in
how information about these items is entered into the inventory
management systems. VA headquarters officials stated that SAM will help
improve VA's ability to monitor information about expendable medical
supplies and RME across VAMCs. VA provided us with an implementation
plan for SAM, which stated that this new system would be operational in
March 2011. At this time, we have not done work to determine whether
this date is realistic or what challenges VA will face in implementing
it.
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\19\ SAM will be used to track additional items besides expendable
medical supplies and RME.
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Mr. Chairman, this concludes my statement. I would be pleased to
respond to any questions you or other Members of the Committee may
have.
GAO Contacts and Staff Acknowledgments
For further information about this statement, please contact Debra
A. Draper at (202) 512-7114 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this testimony. Key contributors to this statement
were Randall B. Williamson, Director; Mary Ann Curran, Assistant
Director; David Barish; Alana Burke; Krister Friday; Melanie Krause;
Lisa Motley; and Michael Zose.
Prepared Statement of Belinda J. Finn, Assistant Inspector General for
Audits and Evaluations, Office of Inspector General,
U.S. Department of Veterans Affairs
Mr. Chairman and Members of the Subcommittee, thank you for this
opportunity to testify on the findings of the Office of Inspector
General (OIG) on the Veterans Health Administration's (VHA) contracting
and procurement practices and possible solutions to VHA procurement
problems. I am accompanied today by Maureen Regan, Counselor to the
Inspector General.
Background
In December 2009, the OIG testified on acquisition deficiencies in
VA.\1\ At that time, numerous OIG audits, investigations, reviews, and
inspections had identified systemic issues such as poor acquisition
planning, problematic contract award processes, poorly written
contracts, and inadequate contract monitoring that impacted VA's
efforts to effectively and economically deliver goods and services to
VA facilities. Our testimony also addressed concerns that procurement
problems led to inadequate competition for contracts, the misuse of
funds, and a general lack of assurance that VA procurements achieved
fair and reasonable prices or were in the best interest of the
Government. We attributed many of these systemic procurement problems
to VA's decentralized organizational structure for procurement
activities, inadequate oversight and accountability, and inaccurate and
incomplete procurement data.
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\1\ Statement of Maureen T. Regan, Counselor to the Inspector
General, Office of Inspector General, Department of Veterans Affairs,
Before the Subcommittee on Oversight and Investigations, Committee on
Veterans Affairs, United States House of Representatives, December 16,
2009.
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Update
Our work since we testified in December continues to identify
systemic weaknesses in procurement practices that negatively impact
VA's ability to obtain quality goods and services in a timely manner at
fair and reasonable prices. We also continue to identify compliance
issues with Federal Acquisition Regulations (FAR) and VA Acquisition
Regulations (VAAR) and find that data in the VA and VHA acquisition
support information systems is incomplete and unreliable. The impact of
these weaknesses is significant for VHA because of the high dollar cost
of health care-related goods and services--$9.05 billion spent in
fiscal year (FY) 2009--and because they negatively impact VHA's
oversight and ability to make good decisions.
I will now discuss the results of recent work which continues to
highlight weaknesses in VHA's acquisition processes.
Audit of Oversight of Patient Transportation Contracts
Our May report on patient transportation services contracts, Audit
of Oversight of Patient Transportation Contracts, (Report Number 09-
01958-155, May 17, 2010), found that VHA missed opportunities to
provide full and open competition in their efforts to solicit offers
from potential contractors and make contract awards. Contracting
officers (COs) did not properly plan and prioritize for the time needed
to open new solicitations needed for ambulance services, medical car
patient transportation, and other patient transportation requirements.
We identified 9 of 36 patient transportation contracts, with an
estimated value of about $12.3 million, that were inappropriately
awarded as sole-source and then were extended for up to 6 months after
the contract expired. According to COs that we interviewed, this was
due to acquisition staff shortages that increased their workload and
resulted in insufficient time to solicit new contracts. For seven of
nine contracts, the required information, including the number of trips
and the type of equipment needed, was not provided by the requesting
service in order to develop an accurate solicitation proposal. In 14 of
the 36 contracts (39 percent) we reviewed, basic contract documentation
required by the FAR such as price negotiation memoranda, determinations
of price reasonableness, best value analyses, notices of awards,
insurance certificates, and Contracting Officer Technical
Representatives (COTRs) designation letters were missing. We also found
that COs did not adequately monitor the contractor performance which we
estimated could result in VHA overpaying contractors as much as $91.8
million over the next 5 years if COTRs did not consistently review
contractor invoices and verify the appropriateness of charged mileage
rates and additional mileage charges.
This national audit highlights serious weaknesses in acquisition
award and administration processes that fail to adequately protect
VHA's contractual interests. VHA needs to provide more oversight to
ensure it has adequate statements of work that can guide its staff to
know what VHA is buying and measure contractor performance effectively.
VHA Recovery Act Audits
We have issued two audit reports dealing with VHA Recovery Act
contract awards for non-recurring maintenance (NRM) projects, American
Recovery and Reinvestment Act Oversight Advisory Report--VHA Non-
Recurring Maintenance Contract Award Oversight Needs Strengthening
(Report Number 09-01814-97, March 15, 2010) and American Recovery and
Reinvestment Act Oversight Advisory Report: Veterans Health
Administration's Efforts to Meet Competition Requirements and Monitor
Recovery Awards (Report Number 09-00969-248, September 17, 2010).
Our March review found that COs failed to maximize competition
because they did not consistently and properly publicize solicitations
in FedBizOpps, as required. The more recent September review, which was
conducted after the Office of Acquisition, Logistics, and Construction
(OAL&C) issued policy guidance and VHA increased its oversight of these
awards, found that VHA achieved a competition rate of over 98 percent.
These contracts, where VHA oversight processes generally ensured COs
used competition and properly assessed bids, demonstrate how
strengthened national and field-level acquisition oversight and
governance structures can improve competition and reduce unnecessary
sole-source contracting.
Although oversight improved compliance with FAR competition
requirements, we found that COs were not performing adequate contractor
responsibility determinations to mitigate possible risks to Recovery
Act funds and to ensure VHA received the best value. Sixty of the 65
contracts (92 percent) we reviewed, valued at $83.1 million, lacked
adequate contractor responsibility determinations. This occurred
because guidance from OAL&C failed to include all elements required to
make contract award responsibility determinations. Additionally, some
COs did not address all the elements because they relied heavily on
their prior experiences with prospective contractors, instead of
checking the General Service Administration's Excluded Parties List
System or obtaining reports to assess the contractor's current
financial resources as required.
Federal Supply Schedule Contracts for Professional and Allied Services
Our June report, Audit of VISN Procurement Practices for FSS
Professional and Allied Health care Staffing Services (Report Number
08-00270-162, June 7, 2010) found that health care services orders were
not being adequately reviewed and had ordering and competition issues.
Task orders issued by VA entities against these schedules totaled $339
million in FY 2009.
Review of these health care services orders supported that:
Contracting officers had not adequately assessed Federal
Supply Schedule (FSS) health care staffing services vendors' price
quotes to ensure the reasonableness of prices.
Contracting officers did not ensure labor rates for FSS
health care services orders remained at or below FSS not to exceed
(NTE) rates.
Contracting officers did not effectively evaluate all-
inclusive FSS health care staffing services orders to prevent improper
payments. We found that improper payments occurred when order prices
exceeded FSS NTE rates and FSS vendors received unsupported travel
reimbursements.
Weaknesses related to ordering and competition issues included:
Contracting officers did not ensure adequate competition
when they failed to issue requests for quotations to a minimum of three
FSS health care staffing vendors.
Contracting officers did not adequately plan when they
used local contracts to order health care staffing services even though
the same vendors offered the same services for less on the FSS.
Controls were not adequate to prevent Medical staff from
bypassing contracting officers and making unauthorized commitments when
they inappropriately placed orders directly with FSS vendors.
As a result we concluded that Veterans Integrated Service Network
(VISN) procurement practices and ordering procedures are not
consistently ensuring the proper, cost effective use of FSS health care
staffing services contracts, the integrity of the FSS procurement
process, and compliance with the FAR. We reported that strengthened FSS
health care staffing services procurement practices could reduce VHA
expenses and improper payments by at least $7.7 million annually or
$38.5 million over the next 5 years.
A companion report also found similar systemic weaknesses in
acquisition processes, Review of Federal Supply Schedule 621 I--
Professional and Allied Health care Staffing Services (Report Number
08-02969-165, June 7, 2010). This report details how VHA paid more than
fair and reasonable prices due in part to a failure by contracting
officers at VA's National Acquisition Center to comply with FSS
contract requirements and award contracts with fair and reasonable
pricing.
Other Reports
Our inspection of the Brachytherapy program at the VA Medical
Center in Philadelphia, Health care Inspection Review of Brachytherapy
Treatment of Prostate Cancer, Philadelphia, Pennsylvania and Other VA
Medical Centers (Report Number 09-02815-143, May 3, 2010), revealed
that between 1999 and April 2005, the Medical Center inappropriately
purchased services from the University of Pennsylvania without a
contract in place. Since April 2005, the Medical Center was purchasing
services under an interim contract that was issued and extended in
violation of VA policy. The interim contract was inappropriately
extended despite the fact that VA had received a proposal from the
University for a long-term contract. Further, a pre-award review
provided to the contracting officer showed that the prices being paid
under the interim contract were significantly higher than what was
determined to be fair and reasonable. In addition, we found that the
COTR was approving payments without verifying that the services were
provided and approving payments for engineering services that were
outside the scope of the interim contract.
Our continuing health care inspections of the administration of
Community Based Outpatient Clinic (CBOC) contracts have identified
deficiencies in contract administration that have resulted in
overpayments that may be uncollectible. The reviews found that COTRs
were not complying with their responsibilities under the contract to
notify vendors of patients who were disenrolled because they had not
been seen within a 12-month period, had changed to another clinic, or
who had died. Because payment under these contracts is set at a
capitated rate, VA overpaid for veterans who should have been taken off
the rolls. The inspections also found that COTRs were not consistently
holding contractors accountable for meeting performance standards set
forth in CBOC contracts. For example, at one clinic a COTR was required
to assess the contractor's compliance with access to care and entry of
medical data benchmarks on a quarterly basis and assess penalties for
noncompliance. However, the COTR had completed only one assessment
during the calendar year reviewed.\2\ In a similar case involving a
different CBOC, OIG inspectors found that the former and current COTRs
on a CBOC contract did not assess whether the contractor met
performance criteria and whether financial penalties applied.\3\ Good
administration of CBOC contracts is critical because VHA had more than
200 contracted CBOCs nationwide as of July 2009.
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\2\ Community Based Outpatient Clinic Reviews-Smithville, MS and
Memphis, TN; Knoxville, TN; and Norton, VA; Chattanooga and Nashville,
TN (Report Number 10-00627-174, June 16, 2010).
\3\ Community Based Outpatient Clinic Reviews-Macon and Albany, GA;
Beaver Dam, WV and Rockford, IL; Sioux City, IA and Aberdeen, SD; and
Waterlook, IA and Galesburg, IL (Report Number 09-01446-37, December 2,
2009).
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OIG Contract Review Work
Our Office of Contract Review (OCR) conducts pre-award, post-award,
drug pricing, and special reviews of vendor proposals and contracts
through a reimbursable agreement with VA's OAL&C. The majority of
reviews are related to FSS contracts awarded by the VA National
Acquisition Center for pharmaceutical, medical and surgical supplies,
and equipment; and contracts for health care resources awarded by VA
medical facilities. In FY 2010 to date, OCR completed 65 pre-award and
26 post-award reviews. The pre-award reviews identified more than $370
million in cost savings that could be achieved during contract
negotiations and post-award reviews recovered more than $20 million for
VA's Supply Fund.
Pre-award reviews are required for both FSS and health care
resources proposals where the estimated contract costs exceed
predetermined dollar thresholds. The pre- award reviews provide
valuable information to assist contracting officers in negotiating fair
and reasonable contract prices. Of the 65 pre-award reviews, 32 were
for health care resource proposals. The potential cost savings for
these proposals was more than $39 million.
OCR continues to identify information submitted by vendors that is
not accurate, complete, and current that would result in VA paying
inflated contract prices. Also, OCR continues to identify the lack of
communication between procurement and program officials and inadequate
planning as a management challenge for health care resources contracts.
The lack of communication and poor planning results in higher and
unnecessary contract costs because requirements have not been properly
identified, the statements of work are inadequate, and the estimated
quantities are overstated. We also routinely find that VHA's health
care resources contracts lack adequate oversight provisions to ensure
VHA receives the services it pays for.
Post-award reviews are conducted to determine if a contractor
submitted accurate, complete, and current pricing data to the
contracting officer during negotiations as required by the terms of the
contract. These reviews also determine whether the vendor adhered to
other terms and conditions of the contract such as the Price Reductions
Clause. Post-award reviews include OCR's efforts to ensure
pharmaceutical vendors are in compliance with statutory drug pricing
provisions contained in Section 603 of P.L. 102-585, The Veterans
Health Care Act of 1992, which sets statutory price limits of covered
drugs for VA, the Department of Defense, the United States Public
Health Service, and the Coast Guard. OCR's post-award program is a
significant factor in the success of VA's voluntary disclosure program
where a vendor can disclose non-compliance with contract terms and
conditions that resulted in the Government overpaying for goods or
services and reimbursement agreements are established. These voluntary
disclosures are typically resolved administratively but are referred to
the Department of Justice if warranted.
Recent VA Actions
VA has made progress in the development of its acquisition
workforce. VA established its Acquisition Academy in September 2008 to
address growing acquisition workforce challenges. VA's acquisition
workforce, consisting of COs, COTRS, and program/project managers, has
lost institutional knowledge through downsizing and retirements and is
trying to keep pace with the increasingly numerous and complex
contracts needed to support VA's mission.
VA's recent implementation of an automated acquisition information
system, eCMS, to monitor contracts and orders demonstrates the
potential eCMS has to increase transparency and VA acquisition
oversight capabilities at the local and national levels. However, we
are continuing to find VHA and VA need to ensure that staff properly
and consistently use the system across the country for all procurements
at or above $25,000. Before VA can consistently rely on this
acquisition information system to leverage its significant buying
power, it must have assurance that the system provides adequate
visibility and transparency over complete and accurate information.
Conclusion
VHA needs to ensure that its program offices and acquisition
personnel are engaging in disciplined acquisition practices that
consistently protect the Government's interests. VHA cannot realize its
full buying potential unless it better ensures compliance with
regulations and establishes visibility and transparency over purchases.
We understand that VA recognizes deficiencies in its acquisition
processes and infrastructure and has taken steps to strengthen
contracting practices. However, many of VA's reforms are still in the
early process of planning and implementation. Our oversight will
continue to provide valuable information to VA and Congress as VA
pursues its acquisition initiatives. Future OIG work will focus on the
effectiveness of VA's efforts to improve the skills and competencies of
its acquisition workforce, program managers, and program staff serving
as COTRs because the performance of these key personnel is critical to
the improvements VA needs to make in its acquisition processes.
Mr. Chairman, this concludes my statement and we would be pleased
to answer any questions that you or other Members of the Subcommittee
may have on these issues.
Prepared Statement of Frederick Downs, Jr., Chief Procurement and
Logistics Officer, Veterans Health Administration,
U.S. Department of Veterans Affairs
Good morning Chairman Michaud, Ranking Member Brown, and Members of
the Subcommittee. Thank you for inviting me to discuss the Veterans
Health Administration (VHA) Contracting and Procurement practices.
Acquisition reform is a central piece of the Secretary's charge to
fundamentally change the Department of Veterans Affairs (VA) in ways
that will transform it into a 21st Century organization that is people-
centric, results-driven, and forward-looking.
VA is in the process of developing a strategic roadmap to guide
this acquisition transformation, while ensuring that we always remain
focused on satisfying Veterans' needs and customer service
expectations, while controlling costs. A central part of this effort is
establishing an Integrated Operating Model for the Department to
provide a strong management infrastructure across functional work
domains. This will ensure that service delivery requirements are fully
satisfied, necessary innovation and improvements are achieved, and
accountability is fixed for performance outcomes at all levels
throughout the Department. A top initiative under the Integrated
Operating Model is the Department's Acquisition Transformation
initiative. VHA fully embraces the Secretary's transformation vision
and the implementation of this Integrated Operating Model.
VA is committed to providing the most advanced, creative, and
innovative technologies to meet the needs of our Veterans. Within VHA,
our health care experts are directly involved in patient care and
provide input on current practices, while developing technical
knowledge to drive the selection and purchase of new technologies. As
new technologies become available, VHA staff members from clinical,
logistics and acquisition disciplines form a team to carefully review
potential applications before determining which advances to adopt. VHA
leadership is committed to obtaining the most advanced and innovative
technologies while improving the guidance, oversight, and business
processes associated with contracting and procurement in the delivery
of services to our Veterans.
My testimony today will cover VHA's recent reorganization of
contracting and procurement processes, highlighting the strengths of
our program. I will also touch on issues of particular interest to the
Subcommittee, including the use of purchase cards at VHA medical
centers. Finally, I will conclude with a brief discussion of how VA
uses innovative technologies to better serve Veterans.
Reorganization of VHA Acquisitions
VHA continues to transform and improve its acquisition operations.
This year we have implemented a new acquisition business model that
promotes centralized decision-making and decentralized execution. VHA
has realigned its acquisition staff under a centralized structure with
three regional offices. These regional offices will concentrate on
running an acquisition organization with a deliberate approach to
training and oversight. The four major focus areas of our organization
are:
1. Customer and stakeholder satisfaction;
2. Operational regional service area offices;
3. Performance monitors; and
4. Seamless transition.
VHA's primary goal in reorganizing its acquisition operations is to
transform into a customer-focused organization through the effective
and innovative use of acquisition policies, procedures and processes to
provide the best possible care to our Veterans and reduce the risk of
patient safety. Veterans Integrated Service Network (VISN) Directors
and the Network Contract Managers will collaboratively prepare Customer
Service Agreements. The agreements will focus on establishing customer
service measures that meet the intent of regulations established in the
Federal Acquisition Regulation (FAR) and Veterans Affairs Acquisition
Regulation (VAAR) while simultaneously providing excellent customer
service and patient care. VHA leadership has communicated clear
expectations for each acquisition organization and provided appropriate
training to staff to ensure they are competent and effective leaders
within the organization.
All acquisition personnel previously reporting to the VISN or
Medical Center Directors have now been realigned under the Procurement
and Logistics Office (PL&O). This Office has created three Service Area
Offices based on geographic location: Pittsburgh, PA, Minneapolis, MN,
and Sacramento, CA. VHA has created several goals for these Service
Area Offices:
Achieve cost savings of 3.5 percent in fiscal years 2010
and 2011, as identified in the Office of Management and Budget's (OMB)
Improving Government Acquisition Initiative;
Enforce standardization of contract requirements; and
Establish staff as business consultants and value-added
team members for VHA.
To achieve the cost savings goal, VHA will leverage its buying
power by combining procurements across the country to obtain more
favorable pricing and discounts. VHA also intends to reduce the
administrative costs associated with Interagency Acquisitions, for
example the requirements sent to the Army Corps of Engineers, by
bringing these services back into VHA. VHA has further stepped up
efforts to decrease the use of sole source and other high-risk
contracts, focusing instead on increasing competition and securing
better prices. This reorganization will help ensure fiscal
responsibility for the Department and for the American taxpayer. This
structure allows the VHA PL&O to drive organizational standardization
and individual performance, while promoting direct responsibility and
accountability through a professional certified workforce.
VHA's reorganization also included developing quality assurance and
compliance programs to promote standardization and greater compliance
with Federal regulations and policies. The quality assurance program is
designed to plan, implement, monitor, identify and correct processes.
It establishes checks and balances as required by the VA Office of
Acquisition and Logistics Information Letter 001AL-09-02, Integrated
Oversight Process, dated June 19, 2009. The overall goal is to
implement an oversight process that is efficient in how time and
resources are allocated and effective by holding acquisition
professionals responsible for building quality into the acquisition
process.
The VHA Operations Quality Assurance Office provides direct
oversight to VHA acquisition activities and conducts yearly site visits
to Service Area Offices. The Quality Compliance Office provides the
Chief Procurement Office a comprehensive assessment of the entire
acquisition program, not just individual procurement actions. The
compliance program's key elements include: (1) organizational
management; (2) human capital; (3) acquisition planning and information
management; and (4) contracting. The goals of the quality compliance
program are to ensure compliance with VA policies, procedures and
regulations; determine if the processes are helping us achieve our
stated objectives; validate our processes and discover ``best
practices'' to improve our business model; and establish an
ISO9001:2008 Quality Management Standards organization. ISO9001:2008 is
a family of standards for quality management systems developed by the
International Organization for Standardization. Combined, the Quality
Assurance and Quality Compliance programs will provide oversight
necessary for VHA to become a world-class professional acquisition
organization. In sum, this reorganization improves oversight,
performance, and customer service, and ensures VA policies and
procedures are followed. All of this contributes directly to achieving
the Department's mission and improving patient care.
Purchase Cards
As part of the overall VHA acquisition reorganization, VHA is
establishing a centralized purchase card program under the Network
Contract Managers. VHA's PL&O has implemented VISN Purchase Card
Manager and Purchase Card Coordinators to monitor all credit card
transactions within a VISN. These coordinators previously reported to
their own facility. Reporting to centralized Network Contract Managers
increases oversight of the facility level. Under the existing
structure, most purchase card coordinators fulfill this responsibility
as a collateral duty and do not report to an acquisition professional.
Full-time, dedicated VISN Purchase Card Managers and Purchase Card
Coordinators will conduct daily reviews of transactions, increase the
number of audits and other reporting mechanisms for oversight, and will
be dedicated to monitoring the purchase card program.
Based on an audit of VHA government purchase card practices issued
in 2008 by VA's Office of the Inspector General, VHA implemented
training to approving officials on using the revised approving official
checklist to ensure cardholders maintain adequate documentation to
support their purchases. On February 18, 2010, the Deputy Under
Secretary for Health for Operations and Management mandated that all
purchase card approving officials receive this training. Each VISN
Purchase Card Manager submitted written certification when the training
was complete. Moreover, to monitor the appropriate use of purchase
cards, VHA Handbook 1730.1 requires the Facility Director to perform an
annual review of the Purchase Card Program and provide certification of
the program to their respective VISN Director by June 30 of each year.
The Handbook also requires the VISN Purchase Card Program Managers
chair an annual review team and conduct site reviews at each facility
within their area of responsibility. Managers conduct reviews using
several audit guides in addition to the requirements identified in the
1730.1 Handbook. VHA's P&LO is developing standard operating procedures
that address cardholder audits and site reviews, and these tools will
be the standard practice for all VISNs.
Health Care Resources
VHA provides care to Veterans directly in a VHA facility or
indirectly through either fee-basis care or through contracts with
local providers. This strategic mix of in-house and external care
provides Veterans the full continuum of health care services covered
under our benefits package. VHA health care resource contracting is
accomplished under the provision of VA Directive 1663, ``Health Care
Resources Contracting.'' VA's Directive 1663 further implements
provisions of Public Law 104-262, ``The Veterans Health Care
Eligibility Reform Act of 1996,'' which significantly expanded VA's
health care resources sharing authority in title 38 United States Code
(U.S.C.) sections 8151 through 8153.
VHA medical center directors and VISN directors determine when
additional health care resources are required. It is VHA policy to
provide Veterans care within the VA system whenever feasible. However,
there are times when VHA is unable to provide care within the system.
For example, VHA may have difficulty recruiting a qualified clinician.
In these cases, the medical center director must first consider sending
patients to another VHA medical center. Contracting for necessary
services will only be considered if other options within VHA are not
appropriate or viable. If contracting for services is required, a
competitive bid is the first option considered.
There are two principal avenues to contract for health care
services: conventional commercial providers and academic affiliates.
VHA's academic affiliates (schools of medicine, academic medical
centers and their associated clinical practices) provide a large
proportion of contracted clinical care both within and outside of VHA.
All non-competitive VHA health care resource contracts $500,000 or more
and competitive contracts over $1.5 million are reviewed through a
thorough process that includes the Office of General Counsel (for legal
sufficiency), VHA's Patient Care Services (for quality and safety),
VHA's Office of Academic Affiliations (for affiliate relations
assessment), and VHA's PL&O (for acquisition technical review for
policy compliance).
VHA exercises its responsibility to provide quality contracted care
to Veterans through several clinical and administrative oversight
mechanisms. This includes credentialing and privileging, quality and
patient safety monitoring, and specific quality of care provisions
included in the contract itself. Facility directors are responsible for
ensuring that these oversight mechanisms are consistently and
effectively applied to all in-house contracted care. All applicable VHA
quality and patient safety standards must be met for medical services
provided under contract in a VHA facility. Ensuring quality standards
for VHA contracted care outside of a facility is more difficult, but
VHA includes language in contracts that allows for industry standard
accreditation or certification requirements, clinical reporting, and
oversight. The Office of Acquisition, Logistics, and Construction is in
the process of developing policy to implement Federal Acquisition
Certification (FAC) for Contracting Officers' Technical Representatives
(COTR). The new guidance will requires training to maintain or be
designated as a COTR. This will further help ensure health care staff
are well-trained to manage important health care contracts.
VHA Logistics
VHA's P&LO also develops and fosters best practices in logistics
for VHA. Through the VHA Acquisition Board, P&LO develops the annual
VHA Acquisition plan that forms the basis for VHA's acquisition
strategy. This strategy seeks to procure high quality health care
products and services in the most cost effective manner. P&LO develops
and implements a comprehensive plan for the standardization of health
care supplies and equipment. This includes developing and administering
clinical product user groups. P&LO is also responsible for improving
supply chain management within VHA, which includes establishing and
monitoring logistics benchmarking data. P&LO serves as the liaison for
logistics staff in each of the 21 VISNs.
VHA's supply chain processes utilize the Integrated Funds
distribution Control Point Activity, Accounting and Procurement (IFCAP)
module that includes a Generic Inventory Package (GIP). The GIP system
fully integrates and allows for a seamless relationship between
purchasing and expendable supply inventory. Use of GIP allows
logistical managers to automate inventory practices that track
expendable items from purchase until use by the end user. VHA tracks
over 1,300 inventories consisting of 928,816 line items. The
inventories include medical, surgical, dental, imaging, and laboratory
supplies, as well as engineering and environmental management supplies.
VHA classifies equipment as non-expendable or expendable and tracks
this equipment in the Automated Engineering Management System/Medical
Equipment Reporting System (AEMS/MERS). For AEMS/MERS, this includes
tracking the location of equipment, maintaining ownership, and
submitting a work order as needed. VHA currently tracks over 17,000
equipment lists, which make up 2.1 million pieces of equipment. Through
the 3rd quarter of fiscal year 2010, VHA has inventoried 13,000 of
these equipment lists, ensuring that equipment is found and being used
properly. The remaining 4,000 lists are expected to be inventoried in
the 4th quarter of 2010.
VHA continues to make improvements to the lifecycle management of
equipment and expendable supplies. These improvements have included
updating policies and procedures over the last 2 years, providing new
training programs for logistical staff, improving oversight through
management reports on equipment, and strengthening communication
channels with stakeholders in engineering, bio-medical engineering, and
information technology.
Medical Equipment in VHA
VHA has approximately $5 billion worth of medical equipment in
service at more than 1,400 sites of care with over 750,000 discrete
devices in hundreds of different categories. VHA centralized the
responsibility for medical equipment maintenance, including all
equipment in all clinical departments, within Biomedical Engineering
(BME). BME provides corrective maintenance, periodic maintenance and
training, and education to ensure safe, high quality care. BME works
directly with clinicians, logisticians and acquisitions staff to
facilitate the strategic purchasing of equipment. BME strategically
identifies equipment due for replacement, conducts market research,
defines functional requirements with clinicians, writes specifications
and statements of work, leads in the technical evaluation of proposals
and is the contracting officer's technical representative (COTR) on
contracts. When combined with our logistics and centralized procurement
functions, a VISN-focused BME program is allowing VHA to improve its
maintenance and technology management, realize cost savings, and
strategically lead VHA to provide the best health care possible to our
Nation's Veterans.
Conducting Business with VHA
VHA's mission is to honor American's Veterans by providing
exceptional health care that improves their health and well-being. VHA
will continue to use and support new and innovative technologies to
enhance the quality of life for Veterans. Providing service, supply and
construction acquisitions are central to VHA's success in meeting its
mission. We purchase these goods and services on national, regional,
and local levels. Acquisitions are accomplished by sealed bidding,
negotiation, or simplified acquisition procedures. Purchases are
accomplished through the use of mandatory sources such as VA's Federal
Supply Schedules Parts 65 and 66. A significant portion, however, is
acquired from sources obtained through the publication of solicitations
in the Federal Business Opportunities (FedBizOpps), commercial
advertising, or any other accepted means that will provide the
procuring activity with a sufficient number of responsible bidders and
offerors to ensure full and open competition. The most suitable,
efficient, and economical procedure will be used, taking into
consideration the circumstances of each acquisition.
Conclusion
Mr. Chairman, this concludes my statement. Thank you again for the
opportunity to speak about VHA's reorganized contracting and
procurement functions. Our recent reorganization establishes more
accountable business practices that allow VHA to continue to provide
the highest quality of care for our Veterans at the best rate of return
for the American taxpayer. I am prepared to respond to any questions
you or the Members of the Subcommittee may have at this time.
The Coalition for Government Procurement
Washington, DC.
September 20, 2010
The Honorable Michael H. Michaud
Chairman, House Veterans' Affairs Subcommittee on Health
338 Cannon House Office Building
Washington, D.C. 20515
Re: Hearing on ``VHA Contracting and Procurement Practices'' before the
Subcommittee on Health of the U.S. House of Representatives
Committee on Veterans' Affairs
Dear Chairman Michaud:
On behalf of the Coalition for Government Procurement (Coalition),
I am writing to thank you for your offer to submit for the record the
Coalition's views on contracting with the Department of Veterans
Affairs (VA). We submit our remarks for the hearing on ``VHA
Contracting and Procurement Practices'' before the Subcommittee on
Health of the U.S. House of Representatives Committee on Veterans'
Affairs on September 23, 2010.
The Coalition for Government Procurement (CGP) is a multi-industry
association representing over 330 member companies that sell commercial
products and services to the Federal Government, including
pharmaceutical and medical device manufacturers that sell commercial
products to the Federal Government primarily through the Federal Supply
Schedules administered by the VA under a delegation of authority from
the General Services Administration (GSA).
We are writing today based on our members' experiences with the VA
National Acquisition Center (NAC). Three years ago we reached out to
the VA NAC with concerns about the timeliness of contract actions and
the significant delays our members were experiencing. At that time, we
were told by VA officials that they had just gone through personnel
changes and to please give them time to adjust. We agreed to give NAC
officials time to reorganize and bring new hires up to speed.
Our members have been patient and since then have experienced
reorganization at the VA NAC designed to improve efficiency. Today,
however, the VA NAC remains among the slowest contracting centers in
government acquisition. The length of time needed to negotiate Federal
Supply Schedule (FSS) contracts and contract modifications has worsened
not improved, and is particularly slow when compared to FSS contract
actions at the General Services Administration.
The Coalition has enjoyed strong relationships with VA officials at
the VA NAC and here in Washington, DC, and has discussed with them our
concerns. However, VA officials in Washington have been reluctant to
meet with us, despite our members accounting for a significant amount
of the business that runs through the VA NAC. By comparison, the
Coalition regularly meets with officials from GSA concerning the
Schedules program that GSA administers.
Last year, the VA NAC reorganized in an effort to resolve problems
with the length of time it takes to process contract actions, including
awards and modifications. In order to streamline the process and
prevent backlogs, the VA changed the system of assigning contracting
officers from one in which contracting officers were assigned to
contractors for the life of the contract, commencing with pre-award
negotiations. Under the reorganization, the contracting officer
assigned to negotiate the contract has no responsibility for
administering the contract. Post-award, the contracting officer
processing a modification request or answering a question is the next
available one, not the same one, much like a call-in center, and thus
there is no familiarity with the contractor or continuity of service.
Survey Results
The Coalition surveyed all of our health care members doing
business with the VA regarding their experience with the VA NAC since
the reorganization. All ratings were made in comparison to members'
contracting experience prior to the reorganization. Over 40 members
responded. These companies account for well over half of the total
sales made through NAC FSS contracts. As such, we believe that these
results show that the NAC currently cannot keep pace with innovations
and new products that could have a significant impact on the care
provided to veterans. Based on the survey results, there is no question
in our members' minds the VA NAC is broken.
A summary of the survey results are below:
85 percent said the VA NAC was more efficient before the
reorganization
Over 75 percent said the timeliness of VA NAC Contracting
Officers in responding to their questions regarding the administration
of their contract was below average or poor
74 percent said the timeliness of VA NAC Contracting
Officers in responding to their needs was below average or poor
75 percent said their experience in adding products or
services to their contract was below average or poor
66 percent said their experience with the VA NAC
concerning contract modifications was below average or poor
46 percent said the original award process took over 1
year
48 percent said it took over 6 months for their last
modification request to be processed
Over 50 percent said the knowledge level of the
Contracting Officers assisting them was below average or poor
59 percent said their experience in adjusting prices on
their contract was below average or poor
Over 78 percent ranked their overall experience with the
VA NAC as below average or poor
Reform
Clearly, there are opportunities for procurement reforn1 at the VA
NAC. First, we would encourage the Subcommittee to look at management
of the NAC. Our members did not experience the contracting issues
expressed in the survey results previously. It is worth noting that at
least one prior NAC Executive Director was a pharmacist at the VHA,
came up through the FSS program ranks, and understood how the program
worked. After the prior Executive Director left, there was
a 2-year long search tor his replacement. The problems began in the
past three to 4 years since his departure and have been exacerbated by
the reorganization.
In fairness to the NAC, in our view, one of the primary reasons the
procurement system at the NAC is broken is the inappropriate insertion
of the VA Office of Inspector General (OIG) into the contracting
process. We believe the OIG has an important and necessary role to play
in preventing fraud and abuse and assisting the Contracting Officers'
determination of fair and reasonable prices. That role does not include
serving as a defacto program manager looking over the shoulders of
Contracting Officers and second guessing their decisions to award
contracts. Particularly with respect to pre-award audits, the OIG
should be in a supportive role and not assume primary price negotiation
and decision-making responsibility. In short, the OIG should not have
operational responsibility, but that is what the case is here.
The Coalition is very familiar with the role of the GSA OIG and
regularly interfaces with that office. In our experience, the GSA OIG
acts within the customary role of an IG. As a result, contracting
officers at GSA are more willing to work with contractors and are far
more flexible regarding the supporting documentation necessary for them
to establish fair and reasonable prices. We believe it is the VA's
requirement for pre-award audits on most FSS contracts and contract
modifications, and the usurpation by the VA OIG of the contracting
officer's role as the determinator of fair and reasonable prices that
is the cause of the sustained delays in contract actions at the NAC.
Our survey results are clear on this issue. When asked ``In your
negotiations with the VA, what did your CO rely on?'', many members
said the VA OIG Pre-Award Audit. We hear frequently from our members
that after receiving and accepting an offer from a Contracting Officer,
the OIG will step in and make the Contracting Officer withdraw the
offer. There will never be true reform unless the VA OIG understands
its role and operates appropriately.
A final issue of concern is the grade of VA Contracting Officers.
Our understanding is that VA CO's are one grade below the level of
their colleagues in other agencies. This makes it difficult for the VA
to retain experienced, senior level contracting officials. The VA
should give serious consideration to increasing the grade of its
Contracting Officers in order to attract and retain high caliber
personnel.
Recommendations
1. The VA should reconsider the reorganization of the NAC
2. The VA OIG Must Operate appropriately, and not as a defacto
program manager
3. The VA should increase the grade of its Contracting Officers
The Coalition appreciates the opportunity to provide input on this
important topic.
Sincerely,
Larry Allen
President
Statement of Hon. Bart Gordon, a Representative in Congress from the
State of Tennessee
Thank you, Chairman Michaud and Ranking Member Brown, for holding
this important hearing on the Contracting and Procurement Practices of
the Veterans Health Administration. As I am not a member of this
committee, I appreciate the opportunity to submit my statement and
questions for the record.
The VA Consolidated Mail Outpatient Pharmacy (CMOP) program is an
important resource for our veterans. The program provides mail order
refills of prescriptions to veterans using advanced automated systems
at seven facilities located throughout the country. This provides an
efficient, effective and safe manner for our veterans to receive the
medication they need without having to leave home.
I am submitting this statement today to seek clarification of the
VA's decision to switch from blister pack to bottle delivery in the
distribution of medication through the Mid-South CMOP. My primary
concern is ensuring the VA conducts the most efficient and effective
policy for all United States veterans and taxpayers.
Seven years ago, Murfreesboro Pharmaceutical Nursing Supply (MPNS)
was awarded a contract with the Mid-South CMOP to supply veterans in
the region with the delivery of medication through the outpatient
program. MPNS was specifically contracted to supply this medication in
blister packs because, at that time, the VA determined them to be safer
and more efficient for the veteran and the delivery process than the
traditional method in a 120cc bottle.
The contract has been extended six times but expired January 31,
2010. In May of this year, the VA announced it would no longer provide
this medication in blister packs, but instead would switch to bottles.
Seven years ago, MPNS advised the VA and was later contracted
specifically to provide blister packs. Blister packs maintain the
integrity of the medication during transport, and avoid theft by being
less-easily detected during delivery. Over these years, MPNS has
provided a cost efficient and effective service without issue.
Why now, in 2010, is the VA changing a process that has worked
effectively? An individual analysis by the company estimates it can
save the VA more than $300,000 per year by continuing to provide the
medication under existing procedures.
Three weeks ago, I asked for documentation of the business case
review that was cited by the VA as a reason for changing its existing
policy to use blister packs. On September 22, I received a chart of
final numbers showing differences between the CMOP automated fill
procedure and the MPNS manual fill. I have yet to receive any
documentation of the methodology used in determining these numbers, and
I am requesting it again now.
This is one small instance in an incredibly complex system. If the
VA feels a change in policy is prudent, I respect and applaud that
decision. But before we change procedure, we must be sure that this
change is necessary and warranted. My concern is that this change will
not only cost jobs, but also cost the taxpayers and veterans.
Statement of Richard Reeves, Chief Executive Officer, Murfreesboro
Pharmaceutical Nursing Supply, Murfreesboro, TN
Mr. Chairman and Members of the Subcommittee, on behalf of
Murfreesboro Pharmaceutical Nursing Supply (MPNS) located in
Murfreesboro, TN, and its 20 employees, I am pleased to submit the
following statement for the record.
At the outset, I want to commend you and the Subcommittee for
holding this important hearing. As a Veteran, I truly believe that our
collective effort to provide the brave men and women who fight on
behalf of our country with the best quality health care is one of our
most fundamental responsibilities. Having been a proud participant in
the contracting process that delivers medication to our Veteran's, I am
pleased to see the Subcommittee take a comprehensive view of the
Department of Veteran's Affairs (VA) contracting practices.
As a matter of background, MPNS was founded in 1982 to provide
pharmacies a user-friendly solution to regulatory changes in the long-
term care industry. The solution MPNS brought to the table was
providing long term care pharmacies FDA compliant and cGMP adhering
repackaged unit dose medications in a universal format from a
centralized closed door pharmacy.
In 2003, the VA, and in particular the Consolidated Mail Outpatient
Pharmacy (CMOP) approached MPNS to provide recommendations and advice
on more effective formats for the delivery of medication than
traditional 120cc bottles. The VA had grown concerned that this
particular medication (for erectile dysfunction) was not being
delivered in the most optimal nor cost effective manner. We concurred!
Seems that this particular medication was only to be delivered in
doses of 2, 4 or 6 pills and in a 120cc bottle. In the course of
delivery, it sounded as though there were 6 marbles in a bottle, making
the medication a prime target for tampering or theft and re-sale.
MPNS recommended going with a solution of blister packs. This
delivery method would meet the standards of the CMOP in correcting
their concerns and also save significant revenue for the VA that we
would hope would be directed to other programs for our Veteran's
returning from combat. For the past 7 years, the Mid-South CMOP has
been the only one utilizing this automated method and MPNS has been
providing the service with no complaint.
Mr. Chairman, the use of blister packs with pharmacies is a crucial
delivery method that should be considered for all medications and with
each CMOP. I first recommended this method to the CMOP not for my own
purposes, but because it is simply the safest and most economical
format for the delivery of medication under any circumstance.
The following are just a few of the key issues comparing blister
pack delivery to bottle delivery:
A 120cc vial (bottle) costs the CMOP 60-65 cents per prescription
due to the added cost of the bottle. This is twice the amount of the
blister pack. The blister pack is priced based on a per tablet charge
of 8 cents. Delivery of the medication was based on packages of 2, 4 or
6 tablets per childproof vial. Most deliveries averaged 4 tablets for
an average cost of 32 cents per delivery. At no time should a delivery
in this scenario exceed 48 cents. From our experience with ED
medication and based on 1 million deliveries, using blister packs can
save the VA around $300,000 annually. There will be times when the
delivery of medication will include medication that far exceeds our
example, making the bottle delivery more cost effective. However, for
smaller deliveries, the CMOP should not give up it's ability to provide
medication on a per pill cost and utilize a more effective means of
delivery of that medication.
In addition to the cost of the medication, you must consider the
integrity of the medication. In some cases the dosage can be diminished
in the delivery process if it is chipped as a result of the medication
rattling in a bottle. This issue also addresses discretion related to
the mailing of the product. One of the participating factors in the
Mid-South CMOP using blister packs had been an issue of discretion and
concern over theft.
Finally, every year, millions of prescription bottles find their
way into our landfills. VA should be taking a responsible look at ways
they can decrease their participation in this issue by finding more
environmentally responsible formats of delivery such as blister packs.
Mr. Chairman, our goal today is to inform you of this issue. We
respectfully request that the Subcommittee work with the VA to develop
a plan for all upcoming procurements through the CMOP to utilize
blister packs wherever possible. Further, we believe that the VA should
use its upcoming CMOP procurements to test automated blister pack
delivery against automated bottle delivery methods between two willing
CMOP's to determine which method is more cost effective.
Thank you.
MATERIAL SUBMITTED FOR THE RECORD
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Mr. Mark Munroe
Senior Vice President, Sales and Marketing
Mobile Medical International Corporation
P.O. Box 672
2176 Portland Street
St. Johnsbury, VT 05819
Dear Mr. Munroe:
Thank you for your testimony at the U.S. House of Representatives
Committee on Veterans' Affairs Subcommittee on Health oversight hearing
on ``VHA Contracting and Procurement Practices,'' which took place on
September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
2. To what do you attribute the notable differences in your
contracting experiences with the Muskogee, Miami, and New Orleans
VAMCs? You cited strong leadership at the Muskogee VAMCS. Have there
also been specific policies that may have contributed to these very
different experiences?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
U.S. House of Representatives--Committee on Veterans' Affairs
Subcommittee on Health
``VHA Contracting and Procurement Practices''
September 23, 2010
Mobile Medical International Corporation
Response to Questions
Question 1: Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
Response: Yes. There are a number of standards which MMIC would
recommend be implemented to help facilitate and improve the contract in
process. They are:
1. Standards initially need to be developed that take into
consideration the medical requirements at all VA medical centers.
2. Standards need to be religiously followed and not be deviated
from without proper documentation.
3. Quality of care for our veterans needs to be placed at the top
of those standards.
4. During any acquisition process an acquisition plan needs to be
developed. That plan needs to be followed and plan should be the same
across all Medical Centers.
Question 2: To what do you attribute the notable differences in
your contracting experiences with the Muskogee, Miami, and New Orleans
VAMCs? You cited strong leadership at the Muskogee VAMCS. Have there
also been specific policies that may have contributed to these very
different experiences?
Response: At the Muskogee VAMC strong leadership was the key.
However, Muskogee's use of an acquisition plan that was not only
developed across all divisions, but also followed by each division was
forefront in their success. A policy which requires each medical center
to develop and follow such a plan should be implemented. Contents of a
sample plan are attached to this response.
Additionally, health and safety of all Veterans serviced was placed
at the forefront in Muskogee. During an open solicitation for a
solution, Muskogee leadership did not waiver from the following
requirements that the chosen solution:
1. Have a history of success at other VA and government owned
Medical Centers
2. Demonstrate a history of:
a. JCAHO accreditation
b. Medicare Certification
c. State Licensure
Acquisition Plan
Acquisition Background and Objectives
Statement of Need
Cost
Capability or Performance
Delivery or Performance-Period Requirements
Trade-Offs
Risks
Plan of Action
Sources
Competition
Source-Selection Procedures
Acquisition Considerations
Budgeting and Funding
Product or Service Descriptions
Contractor versus Government Performance
Inherently Governmental Functions
Management Information Requirements
Test and Evaluation
Logistics Considerations
Contractor Access to Federally-Controlled Facilities and/or Information
Contract Administration
Other Considerations
Milestones for the Acquisition Cycle
Acquisition Plan Preparation Participants
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Mr. Derek Newell
President
Robert Bosch Healthcare
2400 Geng Road, Suite 200
Palo Alto, CA 94303
Dear Mr. Newell:
Thank you for your testimony at the U.S. House of Representatives
Committee on Veterans' Affairs Subcommittee on Health oversight hearing
on ``VHA Contracting and Procurement Practices,'' which took place on
September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
2. In your testimony, you noted that home health device companies
contracting with VA may need to make an investment, such as installing
hardware, without any certainty as to how many units of the device VA
will purchase. How does VA currently address this concern of
prospective contractors?
3. In your testimony you mentioned that companies such as Bosch
often do not understand the innovations that VA is looking for until a
solicitation is issued. Can you please expand on the benefits that the
innovation grants can have for remedying this gap between the VA and
prospective contractors? What other measures might VA take?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
Bosch Healthcare Responses to Veterans Health Subcommittee Questions
November 15, 2010
Question 1: Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
Response: As the largest health care provider in the Nation, the
VHA is a leader in the establishment and use of new and innovative care
technologies, such as telehealth. As a result, the private health care
system often follows the VHA's lead in the use and deployment of these
technologies. Vendors routinely offer the VHA the newest and most
cutting edge technologies, often developed prior to a private sector
demand--making the VHA the first customer for new technologies and
products. However, the VHA's Federal Supply Schedule contracts contain
sales provisions that require prior sales of devices in the commercial
sector. This is problematic because, as noted earlier, the commercial
sector often follows--rather than leads--the VHA's vision for and
procurement of new technologies. Therefore, Bosch Health care
recommends that the VHA develop a contracting mechanism that would
allow and encourage VHA adoption of new technologies without provisions
requiring prior commercial sales.
Question 2: In your testimony, you noted that home health device
companies contracting with VA may need to make an investment, such as
installing hardware, without any certainty as to how many units of the
device VA will purchase. How does VA currently address this concern of
prospective contractors?
Response: Our experience has been that VA is attempting to address
this concern through monthly contracting fees (per patient per month)
where investment costs are incorporated into the ``General Services''
fees. In theory, this practice could work; however, the VHA generally
is only willing to guarantee a minimal number of devices for purchase.
Thus, the number of devices that VHA is willing to guarantee falls
short of the number needed to minimize the investment risk of its
partners. We recommend that when entering agreements, the VHA work with
its vendors to jointly establish the number of devices that is
sufficient to incentivize private sector investment without placing
undue burden on the VA budget.
Question 3: In your testimony you mentioned that companies such as
Bosch often do not understand the innovations that VA is looking for
until a solicitation is issued. Can you please expand on the benefits
that the innovation grants can have for remedying this gap between the
VA and prospective contractors? What other measures might VA take?
Response: The Innovation Grants are a good start to a partnership
with the private sector to spur development and testing of innovative
products and methodologies. However, this type of endeavor is more
suited for the innovations of industry rather than fulfillment of the
VHA's vision. As a result, we believe another approach is also in
order--one that would allow the VHA to share its vision of the tools,
devices, methodologies, and processes that are needed for next
generation health care.
Such an approach would include a complete technology roadmap
consisting of VHA's vision, its short- and long-term goals, and its
ideas about specific technology solutions that would meet those goals.
In turn, this would create the clarity and transparency needed for
vendors to address the VA's specific needs and plan for the future.
This challenge can be achieved by VA communicating more frequently with
its industry partners, and should include (1) a focus on the health
specialty or VHA product line in question, (2) what VHA believes is
currently working or not working in that area, and (3) its ``wish
list'' for future product development.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Mr. Lincoln Moss
Senior Vice President and Chief Operating Officer
Ramtech Building Systems
1400 U.S. Highway 287 South
Mansfield, TX 76063
Dear Mr. Moss:
Thank you for your testimony at the U.S. House of Representatives
Committee on Veterans' Affairs Subcommittee on Health oversight hearing
on ``VHA Contracting and Procurement Practices,'' which took place on
September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
2. In your contact with VA, what opportunities have you had to
express your views on the merits of moving from a design-bid-build
approach to a design-build approach, or other changes in the
procurement process that you feel would represent an improvement?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
Modular Building Institute
Committee on Veterans' Affairs, Subcommittee on Health
United States House of Representatives
Follow-Up Questions on VHA Contracting and Procurement Practices
Wednesday, November 3, 2010
Question 1: Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
Response: The primary focus of our testimony on VHA Contracting and
Procurement Practices was the advantage to the Department of Veterans
Affairs that a Design-Build project delivery system offered over
traditional Design-Bid-Build. We are firmly convinced that by adopting
a culture that embraces Design-Build, the VHA will achieve greater
efficiency and value in future construction projects.
Not only are there less ``moving parts'' to the process, this
approach allows alternate forms of constructions to participate,
potentially increasing value even further. As an industry, MBI
understands it is vitally important that veterans play an active role
in the Contracting process when it comes to working with the Department
of Veterans Affairs and the VHA. It is our goal to ensure that when it
comes to construction projects, veteran involvement increases. It is
our belief that the VHA and the VA, in general should incorporate the
changes discussed in our September 23rd Testimony to maximize veteran
involvement.
If this simple but fundamental construction policy was changed it
would reflect greater opportunities for design-build contractors, who,
in turn, would be able to partner with veteran-owned businesses to
complete projects.
Undoubtedly, one of the top goals of the VA is to ensure that there
are increased contracting opportunities for SDVOBs with the VA. To that
end, MBI feels this one change could greatly increase SDVOB
participation in construction projects.
Question 2: In your contact with VA, what opportunities have you
had to express your views on the merits of moving from a Design-Bid-
Build approach to a Design-Build approach, or other changes in the
procurement process that you feel would represent an improvement?
Response: While MBI has reached out to the Department of Veterans
Affairs, Office of Construction on this matter, to date, we have not
received a response to our request for a meeting to discuss the current
construction policies within the VA. MBI remains committed to working
on this issue through all appropriate channels and is continuing to
pursue the VA to discuss this matter in greater detail.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Jay Wise, Ph.D.
Chief Executive Officer
Wise Knowledge Systems, Inc.
6210 Bear Creek Road
Pipe Creek, TX 78063
Dear Dr. Wise:
Thank you for your testimony at the U.S. House of Representatives
Committee on Veterans' Affairs Subcommittee on Health oversight hearing
on ``VHA Contracting and Procurement Practices,'' which took place on
September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
2. In your testimony you cited leadership concerns with bearing
on the VA contracting and procurement process. In addition to these
concerns, are there structural or policy barriers that have played a
role in your experience with VA?
3. Has the KBES been tested and deployed? If so, where? What were
the results?
4. What do you think would be the best application of the medical
KBES for the VA at this time?
5. What evidence do we have that KBES could materially support
the VA in its attempt to improve diagnosis and treatment of Traumatic
Brain Injury?
6. Is KBES being used in military medicine now?
7. What do you recommend that VA do with your KBES technology?
8. Why do you believe that VA failed to acquire KBES after some
staff had initially positively discussed its potential use in the VA
system?
9. Did VA promise you a contract?
10. What would it cost and how long would it take for VA to
contract with you?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
Questions and Responses for Chairman Michaud: Wise Knowledge Systems
Dr. Jay Wise
For Chairman Michaud
Question 1: Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
Response: The first most important recommendation would be to
install and support individuals who have a real interest and energy for
helping our veterans, rather than dismissing promising technology
because ``nobody at the VA wants to work''.
Secondly, you might consider the advantage of installing an ad hoc
panel of scientists to evaluate technologies presented to the VA/VHA.
These would need to be ``honest third party'' individuals whose central
concern is the welfare of our veterans. Please note that WKS was told
that they did not need to go thru the evaluation procedure because we
were a proved technology used in the DoD, years ago, when Wise
Knowledge Systems (WKS) first contacted the VA! Had WKS had that
opportunity, much of this unfortunate history might have been avoided.
Question 2: Leadership concerns and obstacles to VA contracting and
procurement processes. Structural and policy barriers.
Response: Again, the policies of the VA, while not entirely
understood here at WKS, seem sufficient to provide the VA/VHA with
strategically sound technologies.
The key issue is that individuals such as Dr. Paul Tibbits, CIO of
the VA, and Ms. Lloyd of the VHA, and others, seem both overwhelmed by
the ``portfolio'' of technology they deal with, and the situation they
repeatedly reported: ``the VA is broken and nobody here wants to
work''.
Question 3: Has IKBES been tested and deployed? If so, where? What
were the results?
Response: Please see our written testimony for the documents that
support the successes in application, deployment, and testing for KBES.
Please especially note the correspondence from Joe Goodin of the Navy.
A full description of the architecture, application, and results of
application of KBES is available to you on request.
KBES has received positive test validation and deployment successes
in active military operations with the Navy SMART (Shipboard Medical
Administrative Readiness Tool). We refer you to the letter from Joe
Goodin of the Office of Naval Operations. Additionally KBES medical
applications have received validation and praise in application in the
private sector in cardiac care optimization, neonatal disease mapping,
juried scientific journals (please refer to our written testimony), and
is part of the collection at the Smithsonian Institute. As deployed,
the KBES analyses are proven to be 95 percent accurate, or better, in
providing decision support and optimizing medical outcomes.
Wise Knowledge Systems, Inc. has received positive praise following
analysis of KBES technology by:
Paul Tibbits, M.D.--Veterans Administration
Roy Pratt---HP
Joe Goodin--Office of the Chief of Naval Operations
The Smithsonian Institute
Dr. John Sharp--UMKC School of Medicine
Frank Sisti--Software Engineering Institute
Dr. Dale Alverson--Telemedicine Director, University of New Mexico
Ciro Rodriquez--U.S. Congress, House of Representatives
W.C. Vanderwagen, M.D.--Indian Health Service
Wendell Porth--St. Luke's Lutheran Hospital
Bill Silva--Dyncorp
Wise Knowledge Systems, Inc. clients, since 1985
Question 4: What do you think would be the best application of the
medical KBES would be for the VA at this time?
Response: WKS feels that the most strategically significant and
efficient se of the medical KBE at this time would be to be deployed in
support of the emerging science associated with Combat Related
Traumatic Brain Injury (CRTBI). An SOW and details for this deployment
were provided, repeatedly, to Dr. Tibbits who agreed that there could
be great benefit from KBES supporting the work on CRTBI, and then
changed his focus to another project when he ''could not find a
customer''.
Question 5: What evidence do we have that KBES could materially
support the VA in its attempt to improve diagnosis and treatment of
Traumatic Brain Injury?
Response: Please review the KBES successes reflected in our
correspondence in our written testimony. KBES has successfully
supported major advances in the treatment of very complex medical
issues including Medical Readiness for our Navy.
Our private sector successes includes the improvement of the
diagnosis and treatment strategies for acute myocardial infarction
resulting in a significant reduction of the length of stay and cost of
cardiac care, and better positive outcome; and the mapping and
strategic intervention plans for Neonatal Respiratory Distress
Syndrome.
While CRTBI is a very complex issue, WKS believes it will benefit
from the robust analytic and predictive capabilities of KBES, just as
the previous applications have benefited.
Question 6: Is KBES being used in military medicine now?
Response: No. Please refer to our written testimony for the
explanation from the Navy.
Question 7: What do you recommend that the VA do with your KBES
technology?
Response: With the license from WKS, the VA could use KBES in any
situation that would be improved by accurate and responsive outcome
prediction and the deployment of positive strategic actions.
KBES supports planning, decision discovery and support, in very
large and complex human issues.
Medicine might be the most appropriate and urgent application, but
very likely, not the only application for the VA.
Question 8: Why do you believe that VA failed to acquire KBES after
some staff had initially positively discussed its potential use in the
VA?
Response: WKS was told that the reason there would be no
acquisition of KBES by the VA was because ``the VA is immature (Dr. Pat
Pearcy at SPAWAR, and Dr. Mike Valivullah at VA), the VA is broken, and
nobody at the VA wants to work (Dr. Paul Tibbits, Deputy CIO of VA, Ms
Lloyd VHA, and others)''. WKS was told that the acquisition of the KBES
technology would mean ``work'' for the VA.
Please note, in meeting, each of these individuals praised the KBES
technology, saying it would help the VA medical mission, and other than
Ms. Lloyd, that they would recommend a ``pilot'' project to Dr. Tibbits
for funding.
Question 9: Did VA promise you a contract?
Response: Yes.
On multiple occasions, Dr. Paul Tibbits, Deputy CIO of VA, said he
had ``no problem contracting directly'' with WKS.
Dr. Tibbits has said ''I will just go down the hall and get the
money from my boss,'' and ``I will ask SPAWAR (Dr. Pat Pearcy) to do a
contract with you now''.
Question 10: What would it cost and how long would it take for VA
to contract with you?
Response: VA contracting with WKS should be very straightforward.
WKS is VA a GSA veteran owned certified small business.
The VA (Dr. Tibbits and others) have said they would not use the
GSA in acquisition, as ``the GSA is not helping us''.
The license for the WKS KBES technology is $450k, and depending on
the scope of the project (looking at an estimate for CRTBI) the
development cost should be circa $350k-$450k.
WKS' interest in pursuing this issue is the welfare of our
veterans. Finances are of lesser concern to WKS.
If the VA will use KBES to benefit our veterans, these costs may be
able to be lowered.
The typical time required to produce a medical KBES is about 6
months. CRTBI may take just a bit longer. We will know more on that
once we have begun the development process.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Mr. James A. Clair, M.P.A., M.S.
Chief Executive Officer
Goold Health Systems
45 Commerce Drive, Suite 5
P.O. Box 1090
Augusta, ME 04332
Dear Mr. Clair:
Thank you for your testimony at the U.S. House of Representatives
Committee on Veterans' Affairs Subcommittee on Health oversight hearing
on ``VHA Contracting and Procurement Practices,'' which took place on
September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
2. In your testimony, you discussed how Goold Healthcare Systems
can work with VA to improve their pharmacy benefits program. Other
witnesses have cited a concern that, prior to a solicitation being
issued, they have little understanding of VA's goals and perspective.
Have you encountered the same issues, or have you been able to
communicate with VA?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
Goold Health Systems
Augusta, ME.
November 23, 2010
The Honorable Michael H. Michaud
Chairman, Subcommittee on Health
Committee of Veterans' Affairs
U.S. House of Representatives
335 Cannon House Office Building
Washington, DC 20515
Dear Congressman Michaud,
I am writing in response to your October 4th letter in which you
asked two questions to follow-up on the September 23rd oversight
hearing on ``VHA Contracting and Procurement Practices.''
Listed below are your questions along with my responses:
Question 1: Are there any other recommendations for improving the
contracting process at VHA that you would like to share with us?
GHS Response: I recommend that the VHA publish the means by which
they monitor, audit and analyze existing VHA contracts so that the
public can understand the value of the services each vendor/contractor/
subcontractor provides to the VHA. A more public contract review
process will help Congress, and the public, understand that the VHA is
continuously monitoring, and improving, their contract oversight
process.
In addition, I recommend that the VHA more earnestly seek out small
companies with whom they can provide contracting opportunities. Smaller
companies can very often provide services in a more efficient, nimble
and cost-effective manner than their larger competitors yet can
presently be eliminated from consideration due to contract requirements
that favor the larger companies.
Question 2: In your testimony, you discussed how Goold Health
Systems can work with VA to improve their pharmacy benefits program.
Other witnesses have cited a concern that, prior to a solicitation
being issued, they have little understanding of VA's goals and
perspective. Have you encountered the same issues, or you have you been
able to communicate with VA?
GHS Response: Goold Health Systems has never competed for work at
the VA. Therefore, we don't have a perspective on the degree to which
they communicate their goals and perspectives (and timelines and
objectives) about the matters for which they solicit bids.
We have extensive experience competing in other public
solicitations and know that the best procurements are those that are
open, well-communicated and fairly judged. The best results for the
public agency are when they have a wealth of qualified competitors
submitting proposals at optimally competitive prices.
I want to thank you and the Subcommittee Members again for the
opportunity to testify on September 23rd and to provide additional
recommendations now so that the VHA procurement practices are optimally
effective.
I would be pleased to answer your questions or provide any
additional information.
Sincerely,
James A. Clair
Chief Executive Officer
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Gene L. Dodaro
Acting Comptroller General of the United States
U.S. Government Accountability Office
441 G Street, NW
Washington, D.C. 20548
Dear Comptroller General Dodaro:
Thank you for the testimony of Debra A. Draper, Director, Health
Care, at the U.S. House of Representatives Committee on Veterans'
Affairs Subcommittee on Health oversight hearing on ``VHA Contracting
and Procurement Practices,'' which took place on September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. How were the incidents mentioned in Ms. Draper's testimony
discovered?
How were patients impacted by these incidents?
Could these incidents have been prevented by VAMCs
following the policies GAO identified?
2. Why are committee reviews important for patient safety?
3. Why are VAMCs not always following the required committee
review and approval process?
4. In her testimony, Ms. Draper mentioned VA's double signature
policy related to the purchasing of supplies and equipment. Could you
please elaborate on how this policy is connected to patient safety?
5. Why are VAMCs not entering information about expendable
medical supplies in GIP?
6. Does VA headquarters provide sufficient guidance to VAMCs on
implementing its policies on purchasing and tracking of expendable
medical supplies and reusable medical equipment?
7. Will VA's new inventory management system, Strategic Asset
Management, address the problems about items not being listed in VA's
inventory management systems?
8. Is it a violation of VA policy to purchase instruments, such
as surgical or dental instruments, with purchase cards? What about
other reusable medical equipment?
9. What gaps has GAO identified in VA's requirements for tracking
medical equipment in its inventory management systems?
10. Why is oversight of VA's policies on purchasing and tracking
important for patient safety?
11. Is VA doing enough oversight of VAMCs' purchasing and tracking
policies?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
U.S. Government Accountability Office
Washington, DC.
November 8, 2010
The Honorable Michael H. Michaud
Chairman
Subcommittee on Health
Committee on Veterans' Affairs
House of Representatives
Subject: Responses to Questions for the Record; Hearing Entitled
Veterans Health Administration Contracting and Procurement
Practices
Dear Mr. Chairman,
This letter responds to your October 4, 2010, request that we
address several questions for the record related to the Subcommittee's
September 23, 2010, hearing on the Veterans Health Administration's
contracting and procurement practices. Our responses to the questions,
which are in the enclosure, are based on our ongoing work on the
Department of Veterans Affairs' oversight of compliance with its
policies for purchasing and tracking expendable medical supplies and
reusable medical equipment. Our response to these questions is based on
work we performed in accordance with generally accepted government
auditing standards.
If you have any questions about our responses or need additional
information, please contact me on (202) 512-7114 or at [email protected].
Sincerely yours,
Debra A. Draper
Director, Health Care
Enclosure
__________
Questions for the Record Submitted by the Honorable Michael H. Michaud
for Debra A. Draper, Ph.D., M.S.H.A., Director, Health Care
U.S. Government Accountability Office
Veterans Health Administration Contracting and Procurement Practices
Subcommittee on Health, Committee on Veterans' Affairs
U.S. House of Representatives
September 23, 2010
Question 1: How were the incidents mentioned in Ms. Draper's
testimony discovered?
Response: The incident in which an incorrect expendable medical
supply item was purchased and subsequently used in dialysis machines,
which resulted in the potential cross-contamination of veterans' blood,
was discovered by VA medical center (VAMC) staff on October 21, 2009
during an annual, routine maintenance inspection of the VAMC's dialysis
machines. Initially the incident was presumed to be the result of a
defect in the machine. On October 26, 2009, the VAMC staff contacted
the manufacturer and during discussions with the manufacturer
determined that an incorrect expendable medical supply item had been
purchased and was in
use in the machines. That incorrect item allowed veterans' blood to
pass into the machine during treatment and resulted in potential cross-
contamination with the blood of veterans who were subsequently treated
using these machines.
Another incident, which involved the improper reprocessing \1\ of
an auxiliary water tube, a type of reusable medical equipment (RME)
used with a colonoscope, was discovered by VAMC staff in March 2009.
Initially, in response to a VA patient safety alert that was issued on
the auxiliary water tube in December 2008, officials from the VAMC
checked their inventory management systems and concluded--incorrectly--
that the tube was not used at the facility because it was not listed in
the facility's inventory management systems. However, during an in-
depth inspection of the facility's reprocessing activities, which
consisted of searching all clinical areas of the VAMC for RME, VAMC
staff determined that the auxiliary water tube was, in fact, being used
at the facility.
---------------------------------------------------------------------------
\1\ Reprocessing refers to the steps by which RME is prepared for
reuse and includes cleaning and disinfecting or sterilizing the medical
equipment.
---------------------------------------------------------------------------
How were patients impacted by these incidents?
According to VAMC staff, the incident in which an incorrect
expendable medical supply item was purchased and subsequently used in
dialysis machines potentially exposed 83 veterans to infectious
diseases, such as Human Immunodeficiency Virus (HIV), Hepatitis B, and
Hepatitis C. As of June 2, 2010, the VAMC reported that testing for 82
of the 83 veterans had been completed and that no veterans had acquired
infectious diseases as a result of this incident. The VAMC found that
one of the 83 veterans identified was dialyzed on an uncontaminated
machine and therefore this veteran was not notified or tested for these
infectious diseases.
According to VAMC staff, the incident that involved the improper
reprocessing of an auxiliary water tube potentially exposed 2,526
veterans to infectious diseases, such as HIV, Hepatitis B, and
Hepatitis C. As of August 17, 2010, the VAMC reported that it had
successfully notified 2,523 of the 2,526 veterans of possible exposure
to infectious diseases and that there were 17 new positive test
results. VA reports that these results are not necessarily linked to
RME issues and is continuing its evaluation.\2\
---------------------------------------------------------------------------
\2\ The VAMC reported that it was unable to contact the remaining
three veterans.
Could these incidents have been prevented by VAMCs
---------------------------------------------------------------------------
following the policies GAO identified?
The incident in which an incorrect expendable medical supply item
was purchased and subsequently used in dialysis machines may have been
prevented had the VAMC followed VA's purchasing policies. VA policy
requires that a designated VAMC committee review and approve proposed
purchases of any expendable medical supplies that have not been
previously purchased by the VAMC. However, the incorrect item that was
used in conjunction with the dialysis machines was not reviewed and
approved by a VAMC committee. If the item had gone through the
Committee review and approval process, a clinical representative on the
Committee may have recognized that it was inappropriate for use in
dialysis machines and not approved the purchase. Furthermore, VA policy
requires that all approvals for purchases of expendable medical
supplies must be signed by two officials, the official placing the
order and the official responsible for approving the purchase. However,
the staff member working in the dialysis department purchased the
incorrect item without obtaining the signature of an approving
official. An approving official may have recognized that the item was
inappropriate for use in dialysis machines and not approved the
purchase.
The incident that involved the incorrect reprocessing of an
auxiliary water tube may have been recognized 3 months earlier, and
fewer veterans would have been potentially exposed to improperly
reprocessed RME, had the auxiliary water tube been listed in one of the
facility's inventory management systems. However, VA policy does not
currently require information about RME valued under $5,000 that is not
purchased on a recurring basis to be entered into an inventory
management system. This incident does not indicate a lack of compliance
with VA's requirement for entering information on RME into an inventory
management system, because the auxiliary water tube is valued at less
than $5,000 and is not purchased on a recurring basis. However, this
incident exposed a gap in VA policy with regard to tracking RME. In
part because the item was not listed in the facility's inventory
management system, personnel incorrectly concluded that the item was
not in use.
Question 2: Why are Committee reviews important for patient safety?
Response: The Committee review and approval process is important
for patient safety because Committees review and approve proposed
purchases to evaluate the cost effectiveness of the purchase, as well
as its likely impact on veterans' care. Therefore, without this review,
the VAMC has no assurance that expendable medical supplies and RME that
are purchased are appropriate or safe for use on veterans. For example,
the Committee that reviews and approves proposed RME purchases often
includes a representative from the department responsible for
reprocessing the RME. This individual serves on the Committee to
determine whether the VAMC has the capability to reprocess the RME
correctly and to ensure that staff is appropriately trained to do so.
Proper reprocessing of RME is important to ensure that veterans are not
exposed to infectious diseases during treatment.
Question 3: Why are VAMCs not always following the required
Committee review and approval process?
Response: We are unable to determine why VAMCs do not always follow
VA's required Committee review and approval process. However, we found
several instances at the VAMCs we visited in which clinical department
staff placed orders for expendable medical supplies or surgical
instruments, a type of RME, directly with the vendor instead of
following this process. In these cases, officials outside the clinical
departments may not be aware that the supplies have been ordered.
Question 4: In her testimony, Ms. Draper mentioned VA's double
signature policy related to the purchasing of supplies and equipment.
Could you please elaborate on how this policy is connected to patient
safety?
Response: While one purpose of this policy is to prevent fraudulent
purchases from occurring through segregating purchasing
responsibilities, such as completing a purchase order and approving a
purchase order, this policy is also connected to patient safety as it
helps VAMCs identify whether proposed purchases are correct and
appropriate for the clinical department making the purchase.
Question 5: Why are VAMCs not entering information about expendable
medical supplies in the Generic Inventory Package (GIP)?
Response: We are continuing to evaluate why VAMCs are not entering
information about expendable medical supplies in GIP. Based on our
preliminary work we have found that officials from one VAMC we visited
incorrectly believed that VA policy does not require expendable medical
supplies used in only one clinical department to be entered into GIP.
In contrast, officials from another VAMC correctly believed that VA
policy requires them to enter information about all expendable medical
supplies in GIP regardless of whether they are used facility-wide or
only in a limited number of clinical departments. However, this
facility had difficulty ensuring that supplies that are ordered by
clinical department staff on a recurring basis are actually entered
into GIP.
Question 6: Does VA headquarters provide sufficient guidance to
VAMCs on implementing its policies on purchasing and tracking of
expendable medical supplies and reusable medical equipment?
Response: We are continuing to evaluate whether VA headquarters
provides sufficient guidance to VAMCs on implementing VA's policies on
purchasing and tracking of expendable medical supplies and RME;
however, we found that in some cases these policies lack clarity or
appear to contradict each other. For example, VHA Handbook 1761.02
states that purchase cards are not authorized for purchasing equipment,
while VHA Handbook 1730.01 states that ``national policy allows
purchase cards to be used for repair and equipment purchase.'' \3\
---------------------------------------------------------------------------
\3\ See VHA Handbook 1761.02, VHA Inventory Management (Oct. 20,
2009) and VHA Handbook 1730.01, Use and Management of the Purchase Card
Program (Aug. 27, 2008).
Question 7: Will VA's new inventory management system, Strategic
Asset Management, address the problems about items not being listed in
---------------------------------------------------------------------------
VA's inventory management systems?
Response: Because Strategic Asset Management (SAM) is not expected
to be operational until March 2011, we cannot determine if the problems
we identified would be fully addressed by the implementation of SAM.
However, it does appear that this system will address the problem of
inconsistent naming of RME in VA's inventory management systems as it
is expected to help standardize names for all expendable medical
supplies and RME. Inconsistent naming of RME in VA's inventory
management systems makes it difficult for VAMCs to locate a specific
type of RME in response to a manufacturer or FDA recall or patient
safety alert.
Question 8: Is it a violation of VA policy to purchase instruments,
such as surgical or dental instruments, with purchase cards?
Response: According to a VA headquarters official, it is not a
violation of VA policy for clinical department staff to purchase
instruments using purchase cards because instruments are not considered
to be ``equipment'' for purposes of VA's purchasing and tracking
policies, even though they are a type of RME. However, we have found
that this may contribute to a potential patient safety concern because
at some VAMCs, purchases made by clinical department staff using
purchase cards were not always reviewed and approved as required by a
Committee and that the department responsible for reprocessing the
instruments may be unaware of the purchases. To prevent this problem
from occurring, some VAMCs we visited have developed policies that
prohibit clinical department staff from purchasing instruments using
purchase cards.
What about other reusable medical equipment?
We have found that VA's policies on purchasing equipment appear
to contradict each other. VHA Handbook 1761.02 states that purchase
cards are not authorized for purchasing equipment, while VHA Handbook
1730.1 states that ``national policy allows purchase cards to be used
for repair and equipment purchase.'' \4\
---------------------------------------------------------------------------
\4\ See VHA Handbook 1761.02, VHA Inventory Management (Oct. 20,
2009) and VHA Handbook 1730.01, Use and Management of the Purchase Card
Program (Aug. 27, 2008).
VA headquarters officials told us that clinical department staff
is not permitted to purchase RME using purchase cards. However, VA
headquarters officials also told us that some VAMC staff members may be
granted the authority by a VAMC Committee to use purchase cards to
---------------------------------------------------------------------------
purchase RME.
Question 9: What gaps has GAO identified in VA's requirements for
tracking medical equipment in its inventory management systems?
Response: We are continuing to evaluate VA's requirements for
tracking medical equipment and expendable medical supplies in its
inventory management systems. Through our preliminary work, we have
identified, for example, a gap in VA's requirements for tracking
medical equipment in the Automated Engineering Management System/
Medical Equipment Reporting System (AEMS/MERS)--VA's inventory
management system for equipment. VA policy only requires RME costing
$5,000 or more and with a useful life of 2 years or more to be entered
in AEMS/MERS. Certain RME costs less than $5,000 and would therefore
not be required to be entered in AEMS/MERS. This means that VAMCs'
inventory of medical equipment could be incomplete. This gap has
important patient safety implications. For example, in response to a VA
patient safety alert that was issued on the auxiliary water tube in
December 2008, officials from one VAMC checked their inventory
management systems and concluded--incorrectly--that an auxiliary water
tube, a type of RME, was not used at the facility. However, in March
2009, the VAMC discovered that the tube was in use and was not being
reprocessed correctly, potentially exposing veterans to infectious
diseases.
Question 10: Why is oversight of VA's policies on purchasing and
tracking important for patient safety?
Response: Oversight of VAMC's compliance with VA's policies on
purchasing and tracking is important for patient safety because
compliance with these policies can help prevent patient safety
incidents. For example, compliance can help prevent the purchase of
incorrect medical supplies and the purchase of RME that VAMC staff
members are not trained to reprocess or that the VAMC cannot reprocess
correctly because it lacks the appropriate equipment. Compliance with
these policies can also help ensure that VAMCs do not use expired
supplies and that they are able to identify supplies and equipment that
are the subject of a patient safety alert or a recall in a timely
manner.
Question 11: Is VA doing enough oversight of VAMCs' purchasing and
tracking policies?
Response: We are continuing to evaluate the oversight of compliance
with VA's purchasing and tracking requirements by VA headquarters,
selected Veterans Integrated Service Networks, and selected VAMCs.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Honorable George J. Opfer
Inspector General
Office of the Inspector General
U.S. Department of Veterans Affairs
801 I Street, N.W.
Washington, D.C. 20002
Dear Inspector General Opfer:
Thank you for the testimony of Belinda J. Finn, Assistant Inspector
General for Audits and Evaluations, at the U.S. House of
Representatives Committee on Veterans' Affairs Subcommittee on Health
oversight hearing on ``VHA Contracting and Procurement Practices,''
which took place on September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. During OIG's audit of oversight over patient transportation
contracts, you found that contracting officers cited staff shortages
and heavy workloads as a factor contributing to the issues you
unearthed surrounding these contracts. Were there other factors as
well? Are shortages in contracting officers a common problem within
VHA, and if so, how can this issue be addressed?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
U.S. Department of Veterans Affairs
Office of Inspector General
Washington, DC.
November 15, 2010
The Honorable Michael H. Michaud
Chairman
Subcommittee on Health
Committee on Veterans' Affairs
United States House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
This is in response to your October 4, 2010, letter following the
September 23, 2010, hearing on VHA Contracting and Procurement
Practices. Enclosed is our response to the additional hearing question.
Thank you for your interest in the Department of Veterans Affairs.
Sincerely,
/s/Richard J. Griffin for
GEORGE J. OPFER
Inspector General
Enclosure
__________
Questions From the Honorable Michael Michaud
For Belinda Finn, Assistant Inspector General for Audits and
Evaluations
Office of Inspector General, U.S. Department of Veterans Affairs
Before the Subcommittee on Health
Committee on Veterans' Affairs
United States House of Representatives
Hearing on VHA Contracting and Procurement Practices
Question 1: During OIG's audit of oversight over patient
transportation contracts, you found that contracting officers cited
staff shortages and heavy workloads as a factor contributing to the
issues you unearthed surrounding these contracts. Were there other
factors as well? Are shortages in contracting officers a common problem
within VHA, and if so, how can this issue be addressed?
Response: Our current work shows that contracting staff
inexperience is also a challenge and that staff could benefit from
training. With the loss of institutional knowledge resulting from
retirements, VA's acquisition workforce has been strained to keep pace
with the increased amount of and complexities associated with
outsourced work in support of VA's mission. In response to this
challenge, VA created an Acquisition Academy to address the growing
acquisition workforce challenge facing the Department to help meet
required certification standards for the acquisition workforce.
Our audits and reviews frequently report that contracting officers
staffing shortages are an issue. The total staff authorized for
Veterans Integrated System Network (VISN) contracting activities is
2,111 full time equivalents (FTEs). In June of 2010, the vacancy rate
was approximately 28 percent; by September 30, 2010, the vacancy rate
was just under 10 percent.
VA has developed a workforce modeling tool to determine whether
staffing levels are sufficient to meet the demands of the workload.
However, to remain useful this tool needs constant maintenance
including the monitoring of current contract workload and staffing
levels. Indications are that the information in this tool has not been
kept current. Also, VA's Electronic Contract Management System (eCMS)
has a workload data tool that provides the functionality needed for the
purpose of monitoring workload and staffing levels. VA and Veterans
Health Administration acquisition management need to decide which tool
is best suited to monitor workload, determine appropriate staffing, and
commit the resources to maintain and monitor workload and staffing
levels.
To address staff shortages, VA can aggressively pursue options to
recruit staff trained in acquisition support activities or provide more
opportunities for VA staff to assume these mission-critical
responsibilities. In addition, VA should consider evaluating the
adequacy of the training provided at the VA Acquisition Academy to VISN
contracting officers, Contracting Officers Technical Representatives,
and other acquisition support staff. During 2010 audit work, we
performed a survey of VISN Network Contract Managers (NCMs). Nine out
of 16 NCMs, who reported taking training at the Academy, responded that
the training contracting officers receive from the Academy did not
adequately prepare them to support the needs of program officials and
comply with acquisition laws, regulations, and VA policy. When asked to
explain why the training was not adequate, NCMs recommended that
training needed to be more tailored to the VA environment. NCMs also
responded that there was a need for health care contract training.
Another step that could improve the development of VA's acquisition
workforce is to ensure the entire VA procurement force is trained and
uses the same acquisition support information system. Use of eCMS is
mandated, however the system is not fully utilized and information
within the system is often incomplete. VA can develop specific
performance measures that align with the performance related to the
use, quality, and completeness of the information in eCMS. VA's ability
to obtaining reliable information and transparency over all
acquisitions and to assess how well these acquisitions complied with
laws, regulations and policies is key to helping identify systemic
weaknesses in acquisition practices and to tailor training requirements
to address deficiencies in the future.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 4, 2010
Honorable Eric K. Shinseki
Secretary
U.S Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, D.C. 20420
Dear Honorable Shinseki:
Thank you for the testimony of Frederick Downs, Jr., Chief
Procurement and Logistics Officer in the Veterans Health
Administration, and Dr. Andrea Buck, National Director of Medicine, at
the U.S. House of Representatives Committee on Veterans' Affairs
Subcommittee on Health oversight hearing on ``VHA Contracting and
Procurement Practices,'' which took place on September 23, 2010.
Please provide answers to the following questions by Monday,
November 15, 2010, to Jeff Burdette, Legislative Assistant to the
Subcommittee on Health.
1. Does the VA have any policies in place that limit the
dispensing of the initial supply of expensive brand name drugs that
have high discontinuation rates? If yes, can you define, by therapeutic
drug class or NDC, the types of drugs that have less than 30-day or 90-
day supplies? If not, can you explain your rationale?
2. As you know, pharmacy high-cost users account for a
disproportionately high percentage of a plan's drug expenditures. Are
there any programs in place to identify, monitor then manage, the drug
utilization for these members? Please explain.
3. Management of narcotic use is a balance between pain
management and potential abuse. Are there programs in place to
identify, monitor then manage VA patients using chronic pain
medication? Please explain.
4. Prescription refills of maintenance medications are a routine
event in most cases. However, issues can arise for non-maintenance
medications. Can you please explain how early refills for non-
maintenance drugs are presently managed?
5. How do you respond to the concerns that GAO and OIG raised in
their testimony? What steps has VHA taken to address contracting and
procurement weaknesses and deficiencies that GAO and OIG have
identified over the years?
6. What are the different ways that vendors can get their
products to veterans? Are there multiple ways to do this and what is
VHA doing to ensure that there is transparency this process?
7. Would VA be willing to share de-identified pharmacy and
medical claims data for an independent review, providing the entity
performing the reviews signed a Non-Disclosure and HIPAA Business
Associate Agreement?
8. In his testimony, Mr. Downs noted that ``as new technologies
become available, VHA staff members from clinical, logistics and
acquisition disciplines form a team to carefully review potential
applications before determining which advances to adopt''. This is
contrary to what we heard at a recent Health Subcommittee hearing on
wireless health technologies. We heard about the lack of transparency
and the difficulties that companies face in informing VHA about their
products. Can you explain this disconnect?
9. How does the VHA Procurement and Logistics Office prioritize
procurement requests from the program office?
10. What coordination exists between the VHA Procurement and
Logistics Office and the VHA policy/program offices?
11. In his testimony, Mr. Downs referred to VHA's use of the
Generic Inventory Package and how VHA tracks over 1,300 expendable
inventories consisting of 928,816 line items. Is there a threshold,
such as a dollar amount, that dictates which expendable equipments are
entered into the Generic Inventory Package?
a. What is the difference between the GIP and the Automated
Engineering Management System/Medical Equipment Reporting System (AEMS/
MERS)? Do the two programs overlap in function?
12. GAO identified gaps in VA policies regarding entering
information on expendable medical supplies and RME into VA's inventory
management systems. Does VA have plans to address those gaps so that
VAMCs will have an accurate record of the medical supplies and medical
equipment they use? If so, how does VA plan to do so?
13. Please describe VA's current oversight to ensure that VAMCs
comply with VA's policies for purchasing and tracking of expendable
medical supplies and reusable medical equipment. Does VA plan to
strengthen its oversight and, if so, what steps does VA plan to take to
do this?
14. What role do the VISNS currently have in overseeing VAMC
compliance with VA's policies on purchasing and tracking of expendable
medical supplies and reusable medical equipment? Please describe any
plans VA Central Office has to change or enhance this oversight.
15. How will SAM enhance VA's ability to oversee purchasing and
tracking of expendable medical supplies and reusable medical equipment
by VAMCs?
16. Could you explain the relationship between the VHA Procurement
and Logistics Office and the central VA National Acquisition Center?
Under what circumstances does a local VA medical center obtain goods
through the VHA Procurement and Logistics Officer versus the VA
National Acquisition Center?
17. How does VA central office monitor VISNs to ensure that they
are adequately overseeing VAMC compliance with VA's policies on
purchasing expendable medical supplies and reusable medical equipment?
18. What oversight do VAMC acquisition and Materiel Management
(A&MMS) departments receive from the VISN and VA central office
regarding compliance with 1) VA's prime vendor program; 2) small
business programs and socioeconomic goals; 3) the Federal supply
schedule program; and 4) general purchasing and acquisition policies.
19. What steps is VA taking to standardize certain types of
reusable medical equipment, such as using the same type of
colonoscopes, across VAMCs?
20. 20) How will VAMCs be impacted by VHA's new acquisitions and
contracting policy requiring all items over $3,000 to be purchased by a
VISN-level contracting officer, which goes into effect on October 1,
2010?
21. When are VAMCs required to make purchases from prime vendors?
22. Please describe the process by which VAMCs may negotiate
prices under the Federal supply schedule program. To what extent are
VAMCs successful at negotiating lower prices under the Federal supply
schedule program.
23. Please describe the extent to which VAMCs met the prescribed
small business programs and socioeconomic goals in fiscal year 2008 and
2009? What steps have VAMCs taken to meet these goals?
24. Could you explain the process of how VA medical centers obtain
and provide Durable Medical Equipment (DME) to veteran patients?
25. Is there a dollar threshold for local medical center
acquisitions? Could the local VA medical center make acquisitions using
government purchase cards?
26. The VHA Operations Quality Assurance Office provides direct
oversight to VHA acquisition activities and conducts annual site visits
to Service Area Offices. Has the VHA Operations Quality Assurance
Office identified the same weaknesses that GAO and OIG have found over
the years? Also, GAO and OIG have independence and can expose problems
without any fear or recourse. What assurances does the VHA Operations
Quality Assurance Office have that they will not face any retribution
from their oversight activities and that their findings will be taken
seriously?
27. Does VHA use competitive bidding in the procurement of DME
such as beds, wheelchairs, walkers?
28. It is my understanding that the Prosthetics and Clinical
Logistics Office (P&CLO) generally oversees DME procurement and
utilization, but medical facilities administer the home oxygen and
respiratory services locally to provide eligible VA patients home
oxygen and respiratory services, is that correct? If so, could you
explain why home oxygen and respiratory services are administered
locally, whereas other DME purchases are overseen and administered by
the Prosthetics and Clinical Logistics Office?
29. It is my understanding that VHA uses several contracting
mechanisms for acquisition of pharmaceuticals, medical and surgical
supplies, prosthetics, information technology. For example VA uses the
Federal Supply Schedule (FSS), Blanket Purchase Agreements (BPA),
National Contracts, etc, when procuring pharmaceuticals for veterans.
Could you explain to the Committee what mechanisms are used to purchase
medical and surgical supplies, prosthetics, and medical information
technology? What office or offices in VHA oversees these acquisitions?
30. As you are aware, VA and DoD have made substantial progress in
increasing joint procurement activities since December 1999. This was
done to eliminate redundancies in purchases. Could you please provide
the Committee with an update of current joint DoD-VA procurement
activities? How do VA and DoD collaborate to make medical acquisitions?
31. In Mr. Downs' testimony, he noted that all acquisition
personnel previously reporting to the VISN or medical center directors
have now been realigned under the VHA Procurement and Logistics Office.
When did this change take place and what are some improvements that you
have observed as a result of this change?
32. In 2006, Secretary Nicholson signed VA Directive 1663 which
established specific policies and procedures for the award of sole-
source health care resource contracts to VA affiliated institutions. An
OIG audit issued in September 2008, showed that VHA entities were not
complying with the Directive.
a. What actions have you taken since the OIG Audit was issued
to ensure compliance with this Directive?
b. What percentage of health care resource contracts awarded
by VHA in FY 2009 and FY 2010 complied with the Directive?
c. Given the significant potential cost savings identified by
the pre-awards, what actions have you taken to ensure that all
proposals for contracts with an estimated value $500,000 or more are
referred to the OIG for a pre-award?
33. To optimize the performance of VA's acquisition system, the
former Secretary of Veterans Affairs established a Procurement Reform
Task Force in June 2001 and a final report was released in May 2002. It
is my understanding that the VA began implementing recommendations made
by the Task Force. Were the recommendations fully implemented? Have
there been any new initiatives to improve VA's medical acquisition
system?.
34. I understand you signed an executive decision memorandum April
29, 2010, which directed the Chief Acquisition Officer to implement the
Acquisition Transformation Initiative at VA. Under this initiative, VA
is to establish a strategic acquisition center to implement strategic
sourcing initiatives for VA and handle contracting requirements
exceeding field purchasing thresholds. However, I recently learned VHA
is moving forward to increase its contracting workforce by an
additional 400 FTE, and is currently advertising senior executive
positions for VHA's three Service Area Offices. How does VHA's actions
in this regard comport to Secretary Shinseki's direction to the Chief
Acquisition Officer? What is the rationale and justification behind
such an increase given the new strategic acquisition center will
provide contracting support to VHA above a notional threshold for field
purchases? Will this not complicate the Chief Acquisition Officer's
ability to implement the Secretary's Acquisition Transformation
Initiative?
a. Another key change is that all acquisition authorities will
flow from the Chief Acquisition Officer in the Office of Acquisition,
Logistics, and Construction to the Heads of Contracting Activities who
will be directly accountable to the Chief Acquisition Officer for
ensuring compliance with enterprise policies, processes, and systems.
i. What actions are being taken by VHA to ensure that the
proper flow of information from the Chief Acquisition Officer to the
Head of Contracting Activities in VHA?
ii. What actions are being taken by VHA to ensure the HCA's
implement these policies, processes, and systems, and are held
accountable?
35. I'm interested in some general statistics about the contracts
that VA awards. How many contracts did VHA award in fiscal year 2009?
What percentage of the contracts were competitive versus sole-source
contracts? What was the percentage of performance-based contracts?
36. In 2010, OIG's Office of Contract Review conducted pre-award
reviews of 32 health care resource proposals. These reviews identified
$39 million in potential cost savings that could be realized during
negotiations.
a. What is the amount spent annually on contracts awarded on a
sole-source basis to VA affiliated institutions?
b. What actions have you taken or are you planning to take to
ensure that the cost savings identified in the pre-award reports are
realized by negotiating lower prices?
Thank you again for taking the time to answer these questions. The
Committee looks forward to receiving your answers by November 15, 2010.
Sincerely,
MICHAEL H. MICHAUD
Chairman
__________
Questions for the Record
Chairman Michaud
House Veterans' Affairs Subcommittee on Health Oversight hearing on
``VHA Contracting and Procurement Practices''
September 23, 2010
Question 1: Does the VA have any policies in place that limit the
dispensing of the initial supply of expensive brand name drugs that
have high discontinuation rates? If yes, can you define, by therapeutic
drug class or NDC, the types of drugs that have less than 30-day or 90-
day supplies? If not, can you please explain your rationale?
Response: There is not a national policy; however, Veterans
Integrated Service Networks (VISNs) and facilities are not prohibited
from having policies and procedures in place to limit initial supplies
of medications. These regional and local policies and procedures are
typically based on drug safety, cost, and utilization patterns. Each
VISN Pharmacist Executive (VPE) and Chief of Pharmacy has access to a
business analysis tool for data mining to assist in identifying
regional and/or local patterns in drug utilization where limits on
initial dispensing of certain medications may be required. The
following are known examples where VISNs and/or facilities have
implemented initial supply limits: atypical antipsychotics, pain
medications, warfarin, growth factors, oncology medications,
cholinesterase inhibitors, erythropoiesis-stimulating agents, and non-
formulary brand name medications.
Question 2: As you know, pharmacy high-cost users account for a
disproportionately high percentage of a plan's drug expenditures. Are
there any programs in place to identify, monitor then manage the drug
utilization for these members? Please explain.
Response: VA prescription drug costs per patient include all
patients receiving drugs from VA pharmacies. In contrast, other
prescription benefits plans report per member per month or per member
per year, which underestimates costs because members that do not use
the benefit are counted in the calculation. Patients served by other
prescription benefit plans are typically younger with fewer chronic
diseases than patients served by VA; therefore their prescription costs
would be expected to be lower than VA's costs. Despite these
differences, VA's costs are significantly lower than other health
plans. VA closely manages drug utilization for all patients, not just
high-cost users, to ensure safe, effective and appropriate medication
use.
According to a presentation entitled ``Overview and Update on DoD
Pharmacy'' presented at the 2010 Military Health System Conference, the
pharmaceutical cost per Department of Defense eligible beneficiaries
aged 65 and older was $1,927 in fiscal year (FY) 2009, compared to $686
in the same age group in VA during the same time period. According to
the Pharmacy Benefit Management Institute (PBMI) 2009 Prescription Drug
Benefit Cost and Plan Design Survey, completed by 417 employers
representing 7,041,676 members, the average net prescription drug cost
per retiree per month extrapolates to $1,770 per member per year. In
comparison, the VA average prescription drug cost per unique patient in
FY 2009 was $697 and VA's cost is a gross cost; it does not subtract
first party co-payments. According to Express Scripts, the overall per
member per year drug cost was $911 based on the 36 million lives in the
commercial client groups. In comparison, the VA average prescription
drug cost per unique patient in FY 2009 was $697; again, other plans
have younger, healthier patients than VA's patients and include all
members, and unlike VA, patients are included regardless of whether or
not they use the prescription benefit.
VA Pharmacy Benefits Management Services (PBM) monitors utilization
and conducts safety and efficacy reviews using a central drug
utilization analysis database. The results of these analyses are then
used to assess future needs. One of the ways the database is utilized
is to identify potential areas for managing drug costs through cost-
avoidance initiatives. These are developed nationally, and may be
implemented at the VISN or local medical care facility level. The
intent of the program is to actively pursue pharmacy efficiencies and
appropriateness of use for selected pharmaceuticals and reduce the
variance in drug cost per patient across the system while assuring no
negative impact on the quality of care. The program was formally
initiated in FY 2007 and has resulted in substantial cost avoidance and
a subsequent reduction in the variance in drug cost per patient. The
program documented cost avoidance of $264 Million in FY 2007, $354
Million in FY 2008, $191 Million in FY 2009 and $112 Million projected
for FY 2010. As a result of these efforts, the variance in cost per
patient has decreased substantially between VISNs. VA's average cost of
a 30-day equivalent outpatient prescription changed from $13.03 in FY
1999, to $12.64 in FY 2009, a 3.0 percent decrease over a 10-year
period.
Question 3: Management of narcotic use is a balance between pain
management and potential abuse. Are there programs in place to
identify, monitor then manage VA patients using chronic pain
medication? Please explain.
Response: VHA appreciates the important balance between meeting the
needs of Veterans with pain by providing access to opioid analgesic
medications and concerns about patient opioid misuse, abuse, and
addiction and public safety concerns related to diversion. VHA has been
in the forefront of efforts to address this issue and has developed a
comprehensive approach for promoting safe and effective use of opioids.
In October 2009, as directed by Congress, VHA published a
comprehensive policy for pain management (VHA Directive 2009-053). The
policy articulates standards for pain assessment and treatment
including parameters for safe and effective prescribing of opioid
analgesics. Earlier in 2007, VHA launched a comprehensive Opioid-High
Alert Medication Initiative to address concerns about safe prescribing
of opioids in both inpatient and outpatient settings. Parameters of
safe prescribing were established, and a comprehensive approach to
dissemination and implementation of these standards was undertaken. A
recent Health Analysis and Information Group (HAIG) Pain Management
Survey documented a high level of implementation of these standards
across VHA facilities.
A key to safe and effective use of opioids for the management of
pain is the education and training of both prescribers to assure their
competencies in this practice area and the education of patients and
families about benefits and risks of opioid analgesics. In 2010, VHA
and DoD collaborated in the publication of a Chronic Opioid Therapy
Clinical Practice Guideline (CPG) that articulates state-of-the-science
practice recommendations for the use of this class of medications. The
CPG specifically addresses the balance of promoting effective use of
these medications for the management of chronic pain and strategies for
evaluating and mitigating risk. Supporting the CPG is a comprehensive,
web-based educational program available on the VHA's Learning
Management System (LMS). Both the CPG and LMS course on opioid therapy
recommend the use of a Opioid Pain Care Agreement as a key resource for
promoting education of patients and family members about the potential
benefits and risks of chronic opioid therapy, for establishing the
parameters of safe prescribing of opioid therapy, and for generally
promoting well-informed shared medical decision-making involving
prescribers and patients. Currently under review in the VA Central
Office concurrence process, is a VHA Directive, a national standard
Opioid Pain Care Agreement and supplemental patient educational tools
to be used for these purposes. Finally, this comprehensive approach is
supported by a variety of additional educational efforts including
workshops at national pain management leadership conferences and
regularly scheduled educational teleconferences.
Through the national Pharmacy Benefits Management Services (PBM),
VHA also conducts semi-annual opioid prescription reviews that identify
patients who obtain prescription fills from more than one facility
either within Veterans Integrated Service Networks or VISNs (``Multi-
site'') or between VISNs (``Multi-VISN''). After contacting providers
and patients, locally designated personnel identify the one site that
will fill future opioid prescriptions. Local personnel may take
additional steps as indicated to address any patient drug-seeking or
other aberrant drug-related behaviors. These prescription reviews have
reduced the number of Multi-site and Multi-VISN opioid prescription
fills since their inception in late 2002.
In addition to the Multi-site and Multi-VISN opioid prescription
surveillances, the PBM has recently implemented semi-annual Large Dose
opioid prescription reviews that identify patients who have been
prescribed aberrantly large doses of opioids, defined as the top 10
largest quantities of opioids in each VISN. Locally designated
personnel evaluate the Large Dose patient cases for appropriateness in
terms of quality of care and safety using a protected peer review
process.
Question 4: Prescriptions refills of maintenance medications are a
routine event in most cases. However, issues can arise for non-
maintenance medications. Can you please explain how early refills for
non-maintenance drugs are presently managed?
Response: In VA, all refills are managed by the facility where the
prescription was originally written. The VA computer system
automatically builds a 10 day early window into the request process for
all refillable prescriptions. This has the effect of generally ensuring
that patients receive the next refill in plenty of time. In all cases,
the patient must request a refill; they are not automatically sent.
This is done to avoid waste by sending patients prescriptions that have
been discontinued or modified by their provider and to prevent unsafe
conditions resulting from the stockpiling of unneeded medications.
Requests for refills beyond the 10-day window are handled on a case-by-
case basis by local pharmacy staff members based on the unique
situations encountered by patients. In some cases, a partial quantity
may be dispensed to bridge the patient's supply until receipt of the
regularly scheduled refill or until the next medical appointment.
Requests for early fills for controlled substances are generally
referred to the patient's provider as running out of these medications
can signal a change in medical condition or potential misuse.
Question 5: How do you respond to the concerns that GAO and OIG
raised in their testimony? What steps has VHA taken to address
contracting and procurement weaknesses and deficiencies that GAO and
OIG have identified over the years?
Response: The acquisition concerns raised by GAO and OIG during
their testimony are valid. VHA has taken several steps to address
acquisition deficiencies including: realigning VHA's acquisition
workforce and establishing a VHA Compliance/Quality division
responsible for tracking, reviewing and addressing recommendations.
The purpose of the realignment was to provide decision makers with
the appropriate authority to execute strategic procurement programs,
improve procurement oversight and create the best opportunity for
stewardship. The realignment created a regional infrastructure with
three service area office's being responsible for regions of 6-8
Networks or Program Offices. Each Service Area Offices (SAO) includes
the following staff: SAO Director, SAO Deputy Director, Quality
Reviewers, Training Officers, Data/Program Analysts, Finance/Budget
Specialists and an Administrative Officer dedicated to regional
management of the Networks. At the national level, the VHA Procurement
& Logistics Office (P&LO) monitors the metrics established for each SAO
to determine if the SAO regions are compliant with procurement
regulations and guidelines. This robust system drastically improved the
oversight and monitoring of procurement functions.
In addition, the National VHA Quality/Compliance team is
responsible for ensuring that the recommendations made by the OIG/GAO
are instituted and all Networks comply with the requirements. This team
tracks the OIG/GAO audits and monitors the associated recommendations.
This team is also responsible for conducting random internal audits to
ensure continued compliance.
Question 6: What are the different ways that vendors can get their
products to Veterans? Are there multiple ways to do this and what is
VHA doing to ensure there is transparency in this process?
Response: A vendor can get their products to Veterans by
identifying and responding to procurement opportunities in their
product or service area by visiting the FedBizOpps (FBO) Web site at
www.fbo.gov. The FBO site is the Federal Civilian and Military
Government single point of entry for business opportunities over
$25,000. A vendor can also establish a General Service Administration
(GSA) Federal Supply Schedule (FSS) contract. Federal agencies can use
Government-wide Acquisition Contracts (GWACs) and GSA FSS contracts to
make purchases for commonly used products and services. These
opportunities are typically not advertised on the FBO Web site, they
are normally competed among pre-qualified vendors under contract. VHA
ensures transparency by advertising procurement opportunities above
$25,000 and competing procurements, to the maximum extent possible.
Question 7: Would VA be willing to share de-identified pharmacy and
medical claims data for an independent review, providing the entity
performing the reviews signed a Non-Disclosure and HIPAA Business
Associate Agreement?
Response: VA can provide de-identified health care claims data upon
request through FOIA. These are very large files and a focused request
would be more appropriate. VA can provide fee claims data, although at
this point approximately 5 percent of claims are received
electronically and it is unlikely that a review of this very small
percentage of claims would realize any significant result.
Given the potential volume for these files, there will likely be
costs to the VA to provide these data.
Representatives from the Chief Business Office would be more than
happy to meet with any vendor to discuss tools they may have that could
improve our health care claims processing.
Question 8: In his testimony, Mr. Downs noted that ``as new
technologies become available, VHA staff members from clinical,
logistics and acquisition disciplines form a team to carefully review
potential applications before determining which advances to adopt''.
This is contrary to what we heard at a recent Health Subcommittee
hearing on wireless health technologies. We heard about the lack of
transparency and the difficulties that companies face in informing VHA
about their products. Can you explain this disconnect?
Response: VHA's statement is accurate. As new technologies become
available, VHA staff members from clinical, logistics, and acquisition
disciplines form a team to carefully review potential applications
before determining which advances to adopt. There are many standards
that must be met and verified before we can allow health information to
be broadcast via various wireless mediums. As such, some wireless
health technologies present unique challenges to the VA as one of our
primary concerns is to protect Veterans' health information. This does
not mean VHA is not pursuing these technologies; however, the team must
validate that the technology meets VHA's predetermined requirements
before recommending a potential wireless technology solution.
Additionally, VHA is not able to review every vendor's technological
solution; but VHA makes a concerted effort to meet with as many vendors
as possible.
Question 9: How do VHA Procurement and Logistics Office prioritize
procurement requests from the program office?
Response: Procurement requests from the program offices are
prioritized based on the needs of the requesting service. VHA
acquisition staff work with their respective customers to establish
priorities given: (1) When the procurement is needed and (2) dollar
value and complexity of the procurement.
Question 10: What coordination exists between the VHA Procurement
and Logistics Office and VHA policy/program offices?
Response: On all issues impacting VHA acquisition, the VHA
Procurement and Logistics Office (P&LO) closely coordinates with the
appropriate VHA policy/program offices. When an acquisition policy,
process, procedure or other change within acquisition is anticipated,
P&LO identifies the appropriate stakeholders and develops a plan of
action including determining the impact on: (1) Leadership; (2)
stakeholders; (3) resource management; (4) budget/finance; (5)
personnel; and (6) operations. This information is communicated with
the appropriate offices; and the identified implementation team works
with the VHA policy/program offices to accomplish the established
objectives.
Question 11: In his testimony, Mr. Downs referred to VHA's use of
the Generic Inventory Package and how VHA tracks over 1,300 expendable
inventories consisting of 928,816 line items. Is there a threshold,
such as a dollar amount that dictates which expendable equipments are
entered into the Generic Inventory Package?
Response: No, there is not a threshold to determine which
expendable equipment is entered into the Generic Inventory Package
(GIP).
Question 11(a): What is the difference between the GIP and the
Automated Engineering Management System/Medical Equipment Reporting
System (AEMS/MERS)? Do the two programs overlap in function?
Response: The GIP is the inventory system utilized for consumable
supplies. To date, VHA tracks over 1,300 expendable inventories
consisting of 928,816 line items. The Automated Engineering Management
System/Medical Equipment Reporting System (AEMS/MERS) is utilized to
maintain equipment inventory and maintenance information for Non-
Expendable (NX) Items (Equipment items which have been formally
classified as NX and assigned a category stock number by the cataloging
division of Office of Acquisition, Logistics, and Construction). The
two programs do not overlap in function.
Question 12: GAO identified gaps in VA policies regarding entering
information on expendable medical supplies and RME into VA's inventory
management systems. Does VA have plans to address those gaps so that
VAMCs will have an accurate record of the medical supplies and medical
equipment they use? If so, how does VA plan to do so?
Response: Yes. P&LO is currently collaborating with the VACO
Medicine Program office (responsible for programmatic oversight of
reusable medical equipment processes), and the VACO Real Time Location
System (RTLS) Program office in identifying and pursuing supply and
equipment tracking technology, which will address those gaps which have
been identified. It is expected that the technology ultimately adopted
will be in collaboration with the Strategic Asset Management (SAM)
initiatives so that this technology can be integrated with and
incorporated into VA's overall SAM system, anticipated to begin
national deployment in Fiscal Year 2013.
Question 13: Please describe VA's current oversight to ensure that
VAMCs comply with VA's policies for purchasing and tracking of
expendable medical supplies and reusable medical equipment. Does VA
plan to strengthen its oversight and, if so, what steps does VA plan to
take to do this?
Response: P&LO currently monitors and reports performance
achievements in the management of consumable and NX items for all
facilities and at a VISN and national level. This oversight is based
upon established performance thresholds for effective management of
consumable supplies based upon GIP data reports and NX inventory
compliance reports. In addition to these reports, the Office of
Business Oversight--Management Quality Assurance Section conducts
assessment reviews of facilities, comparing actual records and business
processes at a site to those requirements contained within VA and VHA
policy and directives. P&LO currently has an initiative under way to
enhance the Logistics Operations Team by building an assessment and
compliance team, which will be charged with ongoing assessment and
assistance activities directed to all facilities.
Question 14: What role does the VISNs currently have in overseeing
VAMC compliance with VA's policies on purchasing and tracking of
expendable medical supplies and reusable medical equipment? Please
describe any plans VA Central Office has to change or enhance this
oversight.
Response: VISNs, through the network Chief Logistics Officer (CLO)
with programmatic oversight responsibility are expected to ensure
compliance with VA and VHA level policy on tracking of expendable
supplies and NX equipment. P&LO currently has an initiative under way
to enhance the Logistics Operations Team by building an assessment and
compliance team, which will be charged with ongoing assessment and
assistance activities directed to all facilities. Additionally, P&LO is
pursuing an initiative directed towards a standardized network level
Logistics organization, to include staffing requirements designed to
enhance overall program oversight.
Question 15: How will SAM enhance VA's ability to oversee
purchasing and tracking of expendable medical supplies and reusable
medical equipment by VAMCs?
Response: The SAM initiative is designed to centralize the
consumable and NX equipment asset data from all field level sites to a
centralized database, utilizing nationally standardized item
nomenclature. Standardizing the data will enhance VA's ability to track
and monitor all assets within the system in a consistent manner.
Question 16: Could you explain the relationship between the VHA
Procurement and Logistics Office and central VA National Acquisition
Center? Under what circumstances does a local VA medical center obtain
goods through the VHA Procurement and Logistics Officer versus the VA
National Acquisition Center?
Response: The National Acquisition Center (NAC) has responsibility
for National Contracts and Blanket Purchase Agreements, in support of
National Standardization, which are established under the Federal
Supply Schedule Program. All of these programs are open to VA medical
centers. Most of these contracts and agreements include other
Government agencies such as the Department of Defense, Indian Health
Service and Bureau of Prisons. Most of the solicitations for these
contracts and agreements are competitive, best value procurements.
Essentially, the NAC establishes National contracts that can be
utilized by the Networks under P&LO. The local VA Medical Centers
(VAMCs) do not obtain goods or services through P&LO instead the
procurements are accomplished through the Network procurement
activities that report to the P&LO infrastructure. The VAMC procurement
activity makes the determination of whether to use the NAC or local
procurement process based on whether the requirement is National in
scope or whether this requirement presents an opportunity for National
standardization.
Question 17: How does VA Central Office monitor VISNs to ensure
that they are adequately overseeing VAMC compliance with VA's policies
on purchasing expendable medical supplies and reusable equipment?
Response: P&LO is establishing a methodology to monitor Network
compliance with VA policy on purchasing supplies and reusable medical
equipment. P&LO's initiative to enhance the Logistics Operations
infrastructure, as referenced in 13 and 14 above, will increase the
level of oversight and monitoring related to the request, review, and
approval processes. Additionally, the acquisition realignment
initiative will enhance compliance with the appropriate sourcing
related to this issue.
Question 18: What oversight do VAMC acquisition and Materiel
Management (A&MMS) departments receive from the VISNs and VA central
office regarding compliance with 1) VA's prime vendor program; 2) small
business programs and socioeconomic goals; 3) the supply schedule
program; and 4) general purchasing and acquisition policies?
Response: VA's prime vendor programs: Network and VAMC Logistics
program offices are provided with VA Medical/Surgical Prime Vendor
(MSPV), Pharmaceutical Prime Vendor (PPV) and Subsistence Prime Vendor
(SPV) reports of compliance related to commitment versus actual
expenditures, as well as, order fill rates and invoice/payment
processes. P&LO receives compliance reports from the NAC, reviews and
disseminates these reports to identify out of line situations and
requests appropriate corrective action on the part of the network Chief
Logistics Officer, who is expected to effect the corrective action
through program oversight communication with the deficient VAMC
Logistics Manager.
Small business programs and socioeconomic goals: VHA socioeconomic
spend goals are incorporated into the annual P&LO performance metrics,
as well as the performance plans of VISN leadership. These metrics are
monitored throughout the year by VA Central Office leadership and VISN
Directors.
The supply schedule program: Oversight of the VA Federal Supply
Schedule (FSS) program fall within the auspices of the VA Office of
Acquisition, Logistics and Construction (OALC). The National
Acquisition Center is a strategic purchasing arm of the VA, and
maintains and administers the FSS program.
General purchasing and acquisition policies: It is the
responsibility of OALC to develop, communicate, and enforce policies to
ensure VA complies with Federal laws, policies, and regulations
governing procurement and logistics activities. VHA does not create
acquisition policy, but rather institutes standard operating procedures
to ensure uniformity of contracting efforts and practices throughout
the VISNs and operating locations.
Question 19: What steps is VA taking to standardize certain types
of reusable medical equipment, such as using the same type of
colonoscopes, across VAMCs?
Response: VA chartered an Integrated Procurement Team (IPT) to
address lease versus purchase options as a way to standardize
gastrointestinal (GI) endoscopes across VAMCs. The IPT recommended
leases as the best method to ensure standardization of GI endoscopes
across VAMCs. Leases allow upgrade to current generation technology
through lease amendments as new technology becomes available, ongoing
refresher training for personnel on care and handling of the equipment,
and continuous maintenance for the endoscopes at a fixed price. This
allows facilities the flexibility to trade up or trade out as needed
without having to maintain an inventory of GI endoscopes of varying
age. However, the lease must be amended at an increased cost to add or
substitute a newer model.
The lease recommendation from the IPT team was accepted and the
medical facilities in the field have received instruction from the
Deputy Under Secretary for Health for Operations and Management to
implement standardization of endoscopes through leasing as early as
possible in the current fiscal year.
Question 20: How will VAMCs be impacted by VHA's new acquisitions
and contracting policy requiring all items over $3,000 to be purchased
by a VISN-level contracting officer, which goes into effect on October
1, 2010?
Response: VAMCs will be minimally impacted by requiring purchases
above $3,000 to be completed by the Network Contracting Activities
(NCA). The purchasing agents previously responsible for these purchases
were realigned under the NCA. Therefore, the workload for these
purchases will be readily absorbed by the NCA.
Question 21: When are VAMCs required to make purchases from prime
vendors?
Response: VAMCs are required to make purchases from prime vendors
when the items required are included under the umbrella of the prime
vendor contract. Exceptions are provided for emergency or non-core list
items.
Question 22: Please describe the process by which VAMCs may
negotiate prices under the Federal supply schedule program. To what
extent are VAMCs successful at negotiating lower prices under the
Federal supply schedule program?
Response: In accordance with the Federal Acquisition Regulations
(Part 8), prices found within the General Services Administration and
the Federal Supply System GSA/FSS programs have already been determined
to be fair and reasonable. However, VHA contracting officers do attempt
to seek additional price considerations when placing orders. It is
mandatory to request a price discount when orders are placed in excess
of the per-contract maximum order threshold. In an effort to better
leverage VA and government-wide spending, the VHA CLOs have been
evaluating commonly-procured and high volume medical/surgical items
purchased under the FSS program. Prices of competing vendors have been
analyzed, so greater negotiating power can be achieved in the future.
Question 23: Please describe the extent to which VAMCs meet the
prescribed small business programs and socioeconomic goals in fiscal
year 2008 and 2009. What steps have VAMCs taken to meet these goals?
Response: In FY 2010, VHA exceeded the small business goals in all
except two categories (refer to the chart below). In FY 2009, VHA
exceeded the small business goals in all except two categories (refer
to the chart below). In FY 2008, VHA exceeded the small business goals
in all except one category (refer to the chart below). Each Network has
a Small Business Liaison responsible for working with the Network
Contract Activities to meet socioeconomic goals. The steps taken for
VAMCs to meet these goals include: participation in small business
vendor outreach and monthly National small business conferences to
discuss small business concerns, and provide training on FAR Part 19
compliance and other special small business programs/initiatives.
FY 2010 VHA Small Business Accomplishments
----------------------------------------------------------------------------------------------------------------
SDB +
VA-Wide Goal SDVOSB VOSB 8(a) SDB (5%) WOSB HUBZone SB 8(a)
(10%) (12%) (0%) (5%) (3%) (33.5%) (5%)
----------------------------------------------------------------------------------------------------------------
VHA Accomplishments l7.7% 20.2% .7% 6.7% 3.3% 2.2% 35.1% 7.4%
----------------------------------------------------------------------------------------------------------------
FY 2009 VHA Small Business Accomplishments
----------------------------------------------------------------------------------------------------------------
SDB +
VA-Wide Goal SDVOSB VOSB 18(a) SDB (5%) WOSB HUBZone SB 8(a)
(7%) (10%) (0%) (5%) (3%) (28.7%) (5%)
----------------------------------------------------------------------------------------------------------------
VHA Accomplishments 15.65% 18.69% 1.02% 7.24% 3.61% 2.21% 34.58% 8.26%
----------------------------------------------------------------------------------------------------------------
FY 2008 VHA Small Business Accomplishments
----------------------------------------------------------------------------------------------------------------
SDB +
VA-Wide Goal SDVOSB VOSB 8(a) SDB (5%) WOSB HUBZone SB 8(a)
(10%) (12%) (0%) (5%) (3%) (33.5%) (5%)
----------------------------------------------------------------------------------------------------------------
VHA Accomplishments 11.67% 14.89% 1.95% 7.26% 4.53% 3.10% 38.33% 9.21%
----------------------------------------------------------------------------------------------------------------
Question 24: Could you explain the process of how VA medical
centers obtain and provide Durable Medical Equipment (DME) to Veterans
patients?
Response: Every VAMC has a Prosthetic and Sensory Aids Service
(PSAS) that is responsible for the procurement of all devices for the
personal use of a Veteran. Whenever a qualified VA clinician determines
that a particular device is needed, an electronic request is sent to
PSAS to determine if this is something that can be stock issued
directly to the patient, mailed from stock to the Veteran, or purchased
from a vendor and shipped to either the hospital, third party vendor,
or to the Veteran's home for installation and training. The method that
is pursued is based upon the availability of the prescribed item, any
fitting or training required for it, and other logistical issues such
as size or timing. The provision of these items is a very personalized
approach specific to the needs and preferences of each Veteran. If not
stock issued the same day, all requests are initially acted upon within
5 days. VHA has been monitoring this for several years and has steadily
increased the complexity and compliance standards for the delivery of
goods to Veterans.
Question 25: Is there a dollar threshold for local medical center
acquisitions? Could the local VA medical center make acquisitions using
government purchase cards?
Response: No, there is no dollar threshold for local VA medical
center acquisitions. The VAMC determines which purchases should be made
by acquisition versus small purchasing based on the dollar value and
complexity of the procurement.
The VAMCs are able to make acquisitions using the purchase card.
However, the purchasing ability is limited by the given purchase card
holder's authority. To monitor the purchase card program, centralized
purchase card program managers have been established at every Network.
Additionally, facility purchase card coordinators are being realigned
under the purchase card managers in the acquisition chain of command.
Question 26: The VHA Operations Quality Assurance Office provides
direct oversight to VHA acquisition activities and conducts annual site
visits to Service Area Offices. Has the VHA Operations Quality
Assurance Office identified the same weaknesses that GAO and OIG have
found over the years? Also, GAO and OIG have independence and can
expose problems without any fear or recourse. What assurances does the
VHA Operations Quality Assurance Office have that they will not face
any retribution from their oversight activities and that their findings
will be taken seriously?
Response: The VHA Quality Assurance Office (QA) has been able to
validate that weaknesses identified in the OIG/GAO report exist. The
VHA QA office has been working with the QA staff at each Network on
establishing action plans to address the deficiencies identified in the
OIG/GAO audits. Additionally, the QA office works with the compliance
team to identify key areas to review during internal audits.
P&LO leadership has clearly delineated the roles and
responsibilities of this office. All Service Area Offices (SAOs) and
staff are aware of the role of QA, and acknowledge that their quality
team must work closely with QA to address all recommendations and
findings. The QA office will not face retribution and their findings
will be taken seriously because the QA office reports to P&LO
independently of the SAOs. As such, P&LO will ensure that there is no
retribution and will monitor the implementation and execution of QA
recommendations as part of the SAO performance.
Question 27: Does VA use competitive bidding in the procurement of
DME such as beds, wheelchairs, and walkers?
Response: The Prosthetic and Sensory Aids Service has been very
aggressive in its approach to competitive bidding. For high volume or
high cost items, VHA has been pursuing national contracts in
conjunction with the National Acquisition Center. We analyze our
extensive database to look for opportunities to use our economies of
scale by securing national contracts. These national contracts not only
guarantee a lower price for the government, but they also elevate the
standard of care being provided to Veterans because VHA identifies what
features and criteria a device must have to meet VHA's requirements. We
also work closely with the Office of Small and Disadvantaged Business
Utilization (OSDBU) to ensure that we are meeting small business goals
to the maximum extent possible, while meeting the needs of the Veteran
and the agency. Between FY 2002-FY 2009, VHA realized a cost savings of
over $380 million by using National contracts.
Question 28: It is my understanding that the Prosthetics and
Clinical Logistics Office (P&CLO) generally oversees DME procurement
and utilization, but medical facilities administer the home oxygen and
respiratory services locally to provide eligible VA patients home
oxygen and respiratory services, is that correct? If so, could you
explain why home oxygen and respiratory services are administered
locally, whereas, other DME purchases are overseen and administered by
the Prosthetics and Clinical Logistics Office?
Response: We apologize if we were unclear in a previous answer that
led you to believe this. The Prosthetic and Sensory Aids Service out of
Central Office creates policy covering all items and services for the
personal use of the Veteran including home respiratory care, durable
medical equipment, and home and vehicle adaptations, but all of these
procurements are actually handled by the local medical centers'
Prosthetic and Sensory Aids Services.
Question 29: It is my understanding that VHA uses several
contracting mechanisms for acquisition of pharmaceuticals, medical and
surgical supplies, prosthetics, and information technology. For example
VA uses the Federal Supply Schedule (FSS), Blanket Purchase Agreements
(BPA), National Contracts, etc, when procuring pharmaceuticals for
Veterans. Could you explain to the Committee what mechanisms are used
to purchase medical and surgical supplies, prosthetics, and medical
information technology? What office or offices in VHA oversees these
acquisitions?
Response: The methods used to purchase pharmaceuticals, medical and
surgical supplies, prosthetics and information technology vary
depending on the acquisition. VHA procures in compliance with Federal
Acquisition Regulations (FAR) and VA Acquisition Regulations (VAAR).
The methods used to purchase pharmaceuticals, medical and surgical
supplies, prosthetics and information technology include: 1. FAR/VAAR
Part 8--required sources of Supplies and Services i.e. AbilityOne,
Federal Prison Industries, FSS, etc.; 2. FAR/VAAR Part 15--contracting
by negotiation: best value, tradeoff or lowest price technically
acceptable source selections using full and open competition; 3. FAR/
VAAR Part 13--Simplified Acquisitions; 4. FAR/VAAR Part 19--Small
Business Set-Asides; 5. use of contract vehicles such as Government-
Wide Acquisition Contracts, Multiple-Award Contracts; 6. Prime Vendor
Programs (Med/Sug, Pharmaceutical and Subsistence; 7. National
Contracts and 8. utilizing unique statutory authorities under 38 U.S.C.
8127 & 8128 (Veterans First Program); 38 U.S.C. 8123 (Procurement of
Prosthetic Appliances). In VHA, P&LO oversees these acquisition through
SAO oversight and management of field acquisition activities.
Question 30: As you are aware, VA and DoD have made substantial
progress in increasing joint procurement activities since December
1999. This was done to eliminate redundancies in purchases. Could you
please provide the Committee with an update of current joint DoD-VA
procurement activities? How do VA and DoD collaborate to make medical
acquisitions?
Response: The need for more initiatives within the medical/surgical
commodity is evident. As a formal work group of the joint VA/DoD Health
Executive Council (HEC), the Acquisition and Medical Materiel Work
Group meets regularly to discuss ways to increase joint contracts and
sales. High on the work group's agenda are initiatives and strategies
to affect the expansion of the medical/surgical joint contracts.
During the past year, DoD and VA awarded four new joint radiology
contracts. These contracts were: ICAD, Aurora Advanced Breast Imaging,
iCRco and Neurologica. In addition to these awards, four new offers for
new joint radiology contracts were received during this year's open
season from Bronchus Technology, Technical Communities, Ultrasonix and
Insighttec. The VA National Acquisition Center (NAC) and the DLA Troop
Support Medical work on potential joint contracts. For radiation
therapy, DoD and VA awarded 10 follow-on contracts.
There are currently eighty-six joint national contracts for
pharmaceutical, two Blanket Purchase Agreements, seven pending
contracts (at NAC going through the award process) and thirty-one
proposed contracts which may or may not come to contracting as they are
currently undergoing clinical review.
A comparison of joint contract sales (in millions) is shown below.
A total of 27.4 percent of all contract sales are joint/shared sales.
----------------------------------------------------------------------------------------------------------------
FY 2010 (thru 2nd FY 2009 (thru 2nd Change (thru 2nd
Commodity Qtr) Qtr) Qtr)
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals $86.98 $96.75 ($9.77)
----------------------------------------------------------------------------------------------------------------
Medical/Surgical Supplies $0.015 $0.016 ($0.001)
----------------------------------------------------------------------------------------------------------------
Equipment $223.5 $368.63 ($145.13)
----------------------------------------------------------------------------------------------------------------
Total $310.50 $465.40 ($154.90)
----------------------------------------------------------------------------------------------------------------
Question 31: In Mr. Down's testimony, he noted that all acquisition
personnel previously reporting to the VISN or medical center directors
have now been realigned under the VHA Procurement and Logistics Office.
When did this change take place and what are some improvements that you
have observed as a result of this change?
Response: On January 27, 2009, all acquisition workforce members
that reported to the Network/Program Contract Managers (NCM/PCMs) were
realigned under the new acquisition organization. The improvements that
have been observed since this change include: (1) Transformation into a
customer-focused organization; (2) improved fiscal responsibility; (3)
increased performance oversight; (4) improved ability to implement and
enforce acquisition metrics; (5) increased ability to involve customers
in the full acquisition cycle; (5) increased opportunity for cost
savings; and (6) standardized processes and procedures throughout the
Service Area Office regions. These improvements have been validated
through the various Network performance metrics established and
reviewed by P&LO. These metrics include: procurement action lead time
(tracks the amount of time from a completed acquisition package to
award); purchase cards (verify that the purchase card holders
reconciliations are performed within 30 days); customer survey
(measures the level of customer satisfaction) ; electronic contract
management system (eCMS) compliance (ensures procurement actions above
$25,000 are in eCMS); unauthorized commitments (tracks the number and
dollar value of unauthorized commitments); and socioeconomic goals
(identifies percent of awards in the socioeconomic categories).
The second phase of the acquisition realignment occurred on October
1, 2010. As of this date, all warranted purchasing agents realigned
under the acquisition chain of command. This change will allow VHA to
improve training, oversight and management of all warranted individuals
with purchasing responsibilities.
Question 32: In 2006, Secretary Nicholson signed VA Directive 1663,
which established specific policies and procedures for the award of
sole-source health care resource contracts to VA affiliated
institutions. An OIG audit issued in September 2008 showed that VHA
entities were not complying with the Directive.
Question 32(a): What actions have you taken since the OIG Audit was
issued to ensure compliance with this Directive?
Response: A memorandum was issued to the field by the Medical
Sharing Director on August 2008, defining the review process and
thresholds.
Integrated Oversight Process (IOP) Review Checklists have been
developed to identify the steps as required in VA Directive 1663, which
include verification of the OIG pre-negotiation review defined in VA
Directive paragraph 4.b.8.
Question 32(b): What percentage of health care resource contracts
awarded by VHA in FY 2009 and FY 2010 complied with the Directive?
Response: Presently, this information is not known. For future
purposes, the Medical Sharing Office could generate a monthly or
quarterly report and have the SAO certify that pre-negotiation reviews
were conducted in accordance with the directive.
Question 32(c): Given the significant potential cost savings
identified by the pre-awards, what actions have you taken to ensure
that all proposals for contracts with an estimated value of $500,000 or
more are referred to the OIG for a pre-award?
Response: Using the IOP Checklists as mentioned above, allows for a
quality check point to ensure appropriate reviews are conducted. If an
OIG review has not been completed as required, it will be noted during
the pre-award Contract Review Team (over $500K) or Contract Review
Board (over $5M) review.
Question 33: To optimize the performance of VA's acquisition
system, the former Secretary of Veterans Affairs established a
Procurement Reform Task Force in June 2001 and a final report was
released in May 2002. It is my understanding that the VA began
implementing recommendations made by the Task Force. Were the
recommendations fully implemented? Have there been any new initiatives
to improve VA's medical acquisition system?
Response: VA continues to improve its medical acquisition system
through the Acquisitions Realignment. The purpose of the realignment
was to provide decision makers with the appropriate authority to
execute strategic procurement programs, improve procurement oversight
and create the best opportunity for stewardship. The realignment
infrastructure ensures increased oversight and compliance with
procurement regulations. These changes should effectively address the
recommendations from the 2002 Procurement Reform Task Force.
Question 34: I understand you signed an executive decision
memorandum April 29, 2010, which directed the Chief Acquisition Officer
to implement the Acquisition Transformation Initiative at VA. Under
this initiative, VA is to establish a strategic acquisition center to
implement strategic sourcing initiatives for VA and handle contracting
requirements exceeding field purchasing thresholds. However, I recently
learned VHA is moving forward to increase its contracting workforce by
an additional 400 FTE, and is currently advertising senior executive
positions for VHA's three SAOs. How does VHA's actions in this regard
comport to Secretary Shinseki's direction to the Chief Acquisition
Officer? What is the rationale and justification behind such an
increase given the new strategic acquisition center will provide
contracting support to VHA above a national threshold for field
purchases? Will this not complicate the Chief Acquisition Officer's
ability to implement the Secretary's Acquisition Transformation
Initiative?
Response: The VHA contracting workforce increases are to supplant
the lack of personnel increases over the last several years. Within
many VISNs there has been no increase in contracting personnel over the
past 7 years, while there has been a substantial increase in workload.
Additional personnel are required at the VHA level due to workload
increases created as VHA corrects deficiencies in its acquisition
programs. VHA fully supports the Integrated Acquisition Model, and
requires additional staff to support this initiative. P&LO used the VA
OALC staffing tool to determine additional staffing needs. OALC's
staffing tool validated that VHA needed to hire an additional 399
acquisition staff. However, this staff number was based only on a $7.4
billion VHA spend; the actual spend for FY 2009 was $11.3 billion. VHA
will request assistance from OALC to re-run the staffing tool using the
final FY 2010 amount spent, which was approximately $13 billion.
Currently, VHA has 1,575 operational acquisition staff and 194
existing 1105 purchasing staff. This is significant because in FY 2009,
VHA assumed additional contracting responsibilities for VHA Central
Office Programs, absorbed the workload from over 1,000 non-acquisition
staff and received an increase in workload from the reduction of the
use of Miscellaneous Obligations (1358s). The ongoing VHA Acquisition
Realignment established the proper acquisition structure and will
drastically improve VHA Acquisition Operations. We do not see this as
overlapping with the Strategic Acquisition Center implementation or
complicating the implementation of the Secretary's Acquisition
Transformation Initiative. Instead, this further supports the agency-
wide goal to improve acquisition. Essentially, VHA's realignment and
potential staffing increases create an acquisition infrastructure that
supports both the integrated acquisition model and Secretary's
Acquisition Transformation Initiative.
With regard to the Service Area Office Director positions; these
positions were originally proposed as Senior Executive (SES) positions
in the PricewaterhouseCoopers Study (PWC). The study indicated that SES
positions for the VHA Service Area Offices (SAO) are reasonable due to
the scope, size and complexity of VHA Acquisition operations, including
interactions with National Unions, VISN Network Directors, Medical
Center Directors and senior health care professionals. In addition to
the approval of the SES positions in August 2010, VHA also received
approval to upgrade the Network Contract Managers from GS-14s to GS-
15s. The actions being taken to upgrade positions and obtain additional
staff will ensure succession planning and compliance with the SAO SES
recommendation in the PWC study.
Question 34(a): Another key change is that all acquisition
authorities will flow from the Chief Acquisition Officer in the Office
of Acquisition, Logistics, and Construction to the Heads of Contracting
Activities who will be directly accountable to the Chief Acquisition
Officer for ensuring compliance with enterprise policies, processes,
and systems.
Question 34(i): What actions are being taken by VHA to ensure the
proper flow of information from the Chief Acquisition Officer to the
Head of Contracting Activities in VHA?
Response: The Chief Acquisition Officer provides information
directly to the Head Contracting Activity in VHA. In addition, when
acquisition information is provided to the Chief Procurement and
Logistics Officer (CP&LO), the CP&LO ensures that VHA's HCA is informed
and advised on the potential impact on VHA acquisition activities.
Question 34(ii): What actions are being taken by VHA to ensure the
HCA implements these policies, processes, and systems are held
accountable?
Response: As new policies, processes and systems are implemented,
the VHA Quality Assurance (QA) team develops a plan of action and/or
standard operating procedure, if necessary. The QA works closely with
the SAOs to ensure that SAO and VISN staff are informed and trained on
the new policies, processes and/or systems. To ensure compliance, the
QA team conducts compliance reviews at the SAO level; corrective action
is initiated as necessary. The SAO level QA staff implements the
corrective action at the VISN level.
Question 35: I'm interested in some general statistics about the
contracts that VA awards. How many contracts did VHA award in fiscal
year 2009? What percentage of the contracts was competitive versus
sole-source contracts? What was the percentage of performance-based
contracts?
Response: The total contract actions awarded by VHA in 2009 were
71,695, of which 22 percent were noncompetitive; 25 percent were
performance based and 15.65 percent were awarded to Service-Disabled
Veteran Owned Small Businesses (SDVOSBs).
Question 36: In 2010, OIG's Office of Contract Review conducted
pre-award reviews of 32 health care resources proposals. These reviews
identified $39 million in potential cost savings that could be realized
during negotiations.
Question 36(a): What is the amount spent annually on contracts on a
sole-source basis to VA affiliated institutions?
Response: Annually, approximately $181 million is awarded on a
sole-source basis to VA affiliated institutions. In FY 2010, 9 percent
of health care resource contracts were awarded sole-source to VA
Affiliated institutions; none of these institutions are SDVOSBs.
Question 36(b): What actions have you taken or are you planning to
take to ensure that the cost of savings identified in the pre-award
reports are realized by negotiating lower prices?
Response: VHA has created a Cost Price Work Group to identify best
practices to develop training information for the VHA contracting
officers. VHA has requested assistance from OALC in defining the
duties, responsibilities and authorities in regard to Medical Sharing.
Committee on Veterans' Affairs
Subcommittee on Health
Washington, DC.
October 19, 2010
Belinda J. Finn
Assistant Inspector General for Audits and Evaluations
U.S. Department of Veterans Affairs
Office of Inspector General
801 I Street, NW
Washington, DC 20001
Dear Ms. Finn:
Thank you for testifying at the House Committee on Veterans
Affairs' Subcommittee on Health oversight hearing on ``VHA Contracting
and Procurement Practices'' held on September 23, 2010. We would
greatly appreciate if you would provide answers to the enclosed follow-
up questions in writing by Friday, November 19, 2010.
Due to the delay in receiving mail, please also provide your
responses to Dolores Dunn, Minority Staff Director to the Subcommittee
on Health. If you have any further questions, please call (202) 225-
3527.
Sincerely,
Henry E. Brown, Jr.
Ranking Member
__________
Office of Inspector General
Washington, DC,
November 16, 2010
The Honorable Henry E. Brown, Jr.
Ranking Member
Subcommittee on Health
Committee on Veterans' Affairs
United States House of Representatives
Washington, DC 20515
Dear Congressman Brown:
This is in response to your October 19, 2010, letter following the
September 23, 2010, hearing on VHA Contracting and Procurement
Practices. Enclosed are our responses to the additional hearing
questions.
Thank you for your interest in the Department of Veterans Affairs.
Sincerely,
/s/ by Richard J. Griffin for
GEORGE J. OPFER
Inspector General
Enclosure
__________
Questions from the Honorable Henry Brown, Jr.
For Belinda Finn, Assistant Inspector General for Audits and
Evaluations
Office of Inspector General, U.S. Department of Veterans Affairs
Before the Subcommittee on Health, Committee on Veterans' Affairs
United States House of Representatives
Hearing on VHA Contracting and Procurement Practices
Question 1: Please comment on the development of the VA's
acquisition workforce. What further steps would you recommend VA take
to ensure it has acquisition staff with the skill sets needed to
provide appropriate contract oversight?
Response: To further develop VA's acquisition workforce, VA could
consider evaluating the adequacy of the training provided at the VA
Acquisition Academy to Veterans Integrated Service Network (VISN)
contracting officers, Contracting Officers Technical Representatives,
and other acquisition support staff. During fiscal year 2010 audit
work, we performed a survey of VISN Network Contract Managers (NCMs).
Nine out of 16 NCMs, who reported taking training at the Academy,
responded that the training contracting officers receive from the
Academy did not adequately prepare them to support the needs of program
officials and comply with acquisition laws, regulations, and VA policy.
When asked to explain why the training was not adequate, NCMs
recommended that the training needed to be more tailored to the VA
environment. NCMs also responded that there was a need for health care
contract training.
Another step that could improve the development of VA's acquisition
workforce is to ensure the entire VA procurement workforce is trained
and uses the same acquisition support information system. Use of the
Electronic Contract Management System (eCMS) is mandated, however the
system is not fully utilized and information within the system is often
incomplete. VA can develop specific performance measures on the use,
quality, and completeness of the information in eCMS. VA's ability to
obtain reliable information and transparency over all acquisitions and
to assess how well these acquisitions complied with laws, regulations
and policies is key to helping identify systemic weaknesses in
acquisition practices and to tailor training requirements to address
deficiencies in the future.
Question 2: What can VA do to ensure the completeness and accuracy
of information in the system? Note we have addressed how improving the
eCMS program is needed to promote visibility and transparency in VA
acquisition processes in our September 23, 2010 testimony.
Response: In response to the above-referenced survey, VISN NCMs
identified the need to integrate eCMS with the Integrated Funds
Distribution, Control Point Activity, Accounting and Procurement system
(IFCAP) to ensure VA and the Veterans Health Administration (VHA)
information systems are connected and compatible. In our July 2009
audit, we recommended VA determine the feasibility of integrating eCMS
with IFCAP or the Financial Management System in order to avoid or
minimize the duplicate data entry and streamline the process. VA agreed
to implement this integration. Once in place, we expect that the
integration will help strengthen the management of VA's acquisition
processes.
VA recently reported to Office of Inspector General (OIG) auditors
that VA's vendor is scheduled to complete a release of eCMS in November
2010, which will provide drop down lists for improved data consistency.
The release will also incorporate mandatory data elements. Furthermore,
VA reported to the OIG that an Action Review and Approval process will
be introduced in calendar year 2011. This feature will provide business
rules to enforce compliance at selected acquisition process milestones.
After these changes are implemented, VA can consult with NCMs to
determine whether these improvements effectively meet their needs and
if other improvements to eCMS are needed. VA can greatly benefit from
fully leveraging the use of eCMS from the standpoint of relying on a
standardized management tool to improve the procurement process;
however, VA cannot fully realize the benefits without ensuring the tool
properly integrates with existing and planned financial systems.
Question 3: In a written statement submitted for the September 23,
2010, hearing on VHA procurement, the Coalition for Government
Procurement (Coalition) alleges numerous problems with the timeliness
of awards at VA's National Acquisition Center (NAC). The Coalition
alleges that one of the primary reasons the NAC is broken is the
``inappropriate insertion of the VA Office of Inspector General (OIG)
into the contracting process.'' The Coalition implies that the OIG has
assumed primary price negotiation and decision-making responsibility
for contracts negotiated by the NAC. The Coalition also asserts that it
hears ``frequently from its members that after receiving and accepting
an offer from a Contracting Officer, the OIG will step in and make the
Contracting Officer withdraw its offer.'' Please explain the role of
the OIG with respect to contracts awarded at the NAC and address in
your response whether the statements by the Coalition are accurate.
Response: We have had the opportunity to review the statement
submitted for the record to the Subcommittee on Health by Mr. Larry
Allen on behalf of the Coalition for Government Procurement
(Coalition). As way of background information, one component of the OIG
is the Office of Contract Review (OCR). This group of 25 auditors and
management analysts is responsible for conducting pre-award reviews of
proposals submitted to the NAC by vendors seeking Federal Supply
Schedule (FSS) contracts or modifications to those contracts and
proposals for sole-source health care resource contracts. These reviews
provide information and recommendations to VA contracting officers for
use during contract negotiations. These services have been provided to
VA since 1993 under a reimbursable agreement between the OIG and VA's
Office of Acquisition and Logistics.
We also note that the Coalition is not a vendor, does not contract
with VA, and to our knowledge, has not participated in the contracting
process with VA on behalf of any of its members. Furthermore, the OIG
and the Coalition have not engaged in discussions during any pre- or
post-award review.
The Coalition's assertion regarding OIG actions in the contracting
process are erroneous. The OIG has never assumed primary price
negotiation and decision-making authority in the award of a contract or
modification. During contract negotiations, contracting officers can,
and do, consult with OCR staff who conducted the pre-award review to
clarify findings and recommendations or seek additional review. Any
involvement by OCR during contract negotiations is at the request of
the contracting officer and does not constitute ``primary negotiation
or decision-making authority'' or ``operational responsibility'' as
alleged by the Coalition.
The Coalition criticizes VA's decision to conduct pre-award reviews
of proposals submitted by vendors to determine whether the prices
offered are fair and reasonable. The basis of the criticism is that
this process is the cause for delays in award. The Coalition's position
is not unexpected because these reviews often find that prices offered
by vendors are not fair and reasonable when compared to those paid by
commercial customers. As noted in our written statement, in 2010 pre-
award reviews identified over $370 million in potential cost savings if
the contracting entity negotiated fair and reasonable prices. In the
past 5 fiscal years, the potential cost savings identified in the pre-
award reviews exceeded $1.54 billion. These reviews have consistently
shown that vendors fail to provide accurate, current, and complete
information with their proposals. Although it can take up to 90 days to
conduct these reviews, they are necessary to ensure that VA pays fair
and reasonable prices for commercial products and services.
VA's pre-award program has been cited by the Government
Accountability Office (GAO) as a best practice (Contract Management:
Further Efforts Needed To Sustain VA's Progress in Purchasing Medical
Products and Services, June 22, 2004). In a separate report, Contract
Management: Opportunities To Improve Pricing of GSA Multiple Award
Schedules Contracts (issued on February 11, 2005), GAO stated:
The more than 1,200 FSS and 330 national contracts that VA has
awarded have resulted in more competitive prices and have yielded
substantial savings. VA has achieved these favorable prices and
savings, in part, by exercising its audit rights and access to
contractor data to pursue best prices aggressively for medical supplies
and services. For example, pre-award audits of vendors' contract
proposals and post-award audits of vendors' contract actions resulted
in savings of about $240 million during fiscal years 1999 to 2003.
In the report, GAO was critical of GSA's failure to conduct pre-
award and post-award audits and its negative impact on Government
pricing. GAO also noted in this report that the price negotiation tools
available to contracting entities to analyze information provided by
vendors and make price reasonableness determinations were not
effective.
The Coalition also criticizes VA contracting officers for relying
on the pre-award review during negotiations. The criticism is based on
the results of a survey question asking Coalition members: ``In your
negotiations with the VA, what did your CO rely on.'' The Coalition
states that many members responded ``the VA-OIG Pre-Award Audit.'' It
is understandable that the Coalition and its members see this as a
negative because the use of the pre-award report often results in the
negotiation of lower prices. As a result, the profits the vendor
anticipates receiving by charging VA more than fair and reasonable
prices for products and services are decreased. Contracting Officers
should be applauded for relying on the information obtained during the
pre-award review to negotiate lower pricing for VA.
The Coalition further alleges that that after receiving and
accepting an offer from a contracting officer, the OIG will step in and
make the contracting officer withdraw the offer. However, the Coalition
did not provide any evidence to support this allegation. This scenario
could not happen because the OIG does not have any authority to make a
contracting officer withdraw an offer that has been accepted. Such an
action could only be taken by the contracting officer or someone within
the contracting officer's chain of command. In addition, if a vendor
believes VA has acted inappropriately during the award process, the
vendor has the right to file a protest. To our knowledge, no protest
has been filed alleging inappropriate actions by the OIG during
contract negotiations.