[Senate Hearing 111-327]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-327
 
                      HEARING ON VA CONTRACTS FOR 
                            HEALTH SERVICES

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


                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 30, 2009

                               __________

       Printed for the use of the Committee on Veterans' Affairs


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate



                  U.S. GOVERNMENT PRINTING OFFICE
53-066                    WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                     COMMITTEE ON VETERANS' AFFAIRS

                   Daniel K. Akaka, Hawaii, Chairman
John D. Rockefeller IV, West         Richard Burr, North Carolina, 
    Virginia                             Ranking Member
Patty Murray, Washington             Lindsey O. Graham, South Carolina
Bernard Sanders, (I) Vermont         Johnny Isakson, Georgia
Sherrod Brown, Ohio                  Roger F. Wicker, Mississippi
Jim Webb, Virginia                   Mike Johanns, Nebraska
Jon Tester, Montana
Mark Begich, Alaska
Roland W. Burris, Illinois
Arlen Specter, Pennsylvania
                    William E. Brew, Staff Director
                 Lupe Wissel, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           September 30, 2009
                                SENATORS

                                                                   Page
Akaka, Hon. Daniel K., Chairman, U.S. Senator from Hawaii........     1
Tester, Hon. Jon, U.S. Senator from Montana......................     2
Begich, Hon. Mark, U.S. Senator from Alaska......................     9
Burr, Hon. Richard, Ranking Member, U.S. Senator from North 
  Carolina.......................................................    17
    Prepared statement...........................................    17
Burris, Hon. Roland W., U.S. Senator from Illinois...............    20
    Prepared statement...........................................    20

                               WITNESSES

Williams, Hon. Joseph A., Jr., RN, BSN, MPM, Acting Deputy Under 
  Secretary for Health for Operations and Management, Veterans' 
  Health Administration, U.S. Department of Veterans Affairs; 
  accompanied by Frederick Downs, Jr., Chief Procurement and 
  Logistics Officer, Veterans Health Administration; Gary Baker, 
  Chief Business Officer, Veterans Health Administration; Bradley 
  Mayes, Director, Compensation and Pension Service, Veterans 
  Benefits Administration; and Jan Frye, Deputy Assistant 
  Secretary for Acquisition and Logistics........................     3
    Prepared statement...........................................     5
    Response to questions arising during hearing by:
        Hon. Jon Tester...................................12-14, 25, 27
        Hon. Mark Begich.........................................    47
        Hon. Daniel K. Akaka.....................................    48
    Response to post-hearing questions submitted by Hon. Daniel 
      K. Akaka...................................................    58
        Attachments..............................................    70
Curtis, Mary A., APRN, BC, Boise VA Medical Center, representing 
  the American Federation of Government Employees................   137
    Prepared statement...........................................   140
McClain, Tim S., President and Chief Executive Officer, Humana 
  Veterans Health Care Services..................................   142
    Prepared statement...........................................   144
        Appendix.................................................   151
    Response to questions arising during hearing.................   178
Shahani, Marjie, Chief Executive Officer, QTC Management, Inc....   151
    Prepared statement...........................................   153
Earnest, John L., President and Chief Executive Officer, 
  Ambulatory Care Solutions......................................   155
    Prepared statement...........................................   157
        Attachment...............................................   162


                      HEARING ON VA CONTRACTS FOR 
                            HEALTH SERVICES

                              ----------                              


                     WEDNESDAY, SEPTEMBER 30, 2009

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room 418, Russell Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Committee, presiding.
    Present: Senators Akaka, Tester, Begich, Burris, and Burr.

     OPENING STATEMENT OF HON. DANIEL K. AKAKA, CHAIRMAN, 
                    U.S. SENATOR FROM HAWAII

    Chairman Akaka. Good morning. Please be seated. The hearing 
of the Senate Committee on Veterans' Affairs on VA Contracts 
for Health Services will come to order.
    This hearing will explore how VA purchases health care 
services. The Committee is interested in gaining a better sense 
of the process by which services are purchased and how VA 
oversees and manages those outside services.
    While VA has authority to buy services for veterans in the 
community through various means, it is not clear if VA compares 
the cost of providing these services in-house to the costs of 
outsourcing. This raises a question as to whether VA gets value 
for the more than $3 billion spent annually on purchased care.
    There are also concerns about how the VA monitors the 
quality of contract services to ensure that veterans are 
receiving timely and appropriate care. Whether contract care is 
obtained through a national contract with a large HMO, through 
a local contract for care at a community clinic, or for 
compensation and pension exams, VA remains responsible for 
insuring that the care or services are of high quality. This 
includes making sure that VA and contract providers share 
accurate and complete medical information.
    Another area of concern is the extent to which individual 
VA hospitals and their networks have contracts for care which 
are unknown to managers here in DC. In an effort to increase 
accountability and oversight of contract services, VA recently 
restructured the contracting process to move contracting 
authority from the local level to more centralized points. The 
Committee hopes to learn today about how this reorganization 
will help VA ensure that contractors supply quality services at 
a fair price to the benefit of the VA and the taxpayers.
    It is also important to focus on what mechanisms are in 
place so that VA contracts for services only if it does not 
make sense for VA to supply the services directly. Today's 
hearing is part of the Committee's oversight of how VA provides 
health services outside of VA. No matter the setting, the 
Nation's veterans deserve timely access to the highest quality 
services available.
    At this time I would like to welcome the witnesses on our 
first panel. Joseph Williams, Acting Deputy Under Secretary for 
Health, Operations and Management of the Veterans' Health 
Administration, will lead the discussion on VA contracts for 
health services. He is accompanied by Frederick Downs, who is 
Chief of Procurement and Logistics Officer at VHA; Gary Baker, 
Chief Business Officer at VHA; Bradley Mayes, Director, 
Compensation and Pension Service at VBA; and Jan Frye, Deputy 
Assistant Secretary for Acquisition and Logistics.
    I thank all of you for being here this morning and want you 
to know that your full testimony will appear in the record.
    Before we begin with your testimonies, I want to call on 
Senator Tester for his opening remarks.

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman.
    I guess I made it just in time. I wish I could have heard 
your comments, yet I want to thank you very much for having 
this hearing on this important issue. And, as always, I want to 
thank the folks who came to testify and give their perspective 
for being here also. I appreciate it very much.
    I start from the same perspective as the American Legion 
when it comes to the VA health system. The Legion called it a 
system worth saving and I could not agree more.
    It is clear to me that the Legion speaks for an awful lot 
of veterans who want to see the system strengthened, not 
dismantled.
    But I recognize that there are limits to what the VA can 
do. We see it all over rural and frontier America; contracting 
of mental health services in Montana is an absolute necessity.
    There is only one mental health professional in the entire 
State east of Billings, and Billings is not the eastern edge of 
Montana. Contracting of speciality care and emergency services 
in rural and frontier areas makes sense as well because we 
simply do not have the providers.
    It does not do anyone any good to put the VA and the 
private sector in direct competition for the doctors and nurses 
and other medical professionals that are increasingly in short 
supply in rural America.
    Contracting out can sometimes simply be the right thing to 
do for the veteran. You do not put a veteran from Billings with 
a back injury on an 8-hour bus ride to Denver for surgery; at 
least I would hope you better not. You find a way to get him 
surgery in his own neighborhood.
    But contracting is not a cure-all even in rural America. I 
know that the VA in Montana has had to cancel a couple of CBOC 
contracts for poor performance or failure to adapt to the VA 
electronic medical records, which are the linchpin of VA's 
health care system.
    I am particularly concerned about reports regarding VA's 
overpayment of contracted services for compensation and pension 
exams. I see that private companies are doing more and more of 
these exams at an average cost of $850 per veteran. That might 
make some sense and it might not. I guess that is what this 
hearing is about.
    I am very worried that we do not have the data we need to 
understand whether privately performed C&P exams actually lead 
to more efficient C&P claims processing. I hope we can get 
information on that during this hearing.
    We are in tight budget times so let us make sure we are not 
tolerating waste, fraud, or abuse in the contracting process 
before we think about trying to raise copayments and fees on 
veterans, as the Bush administration had proposed, or before we 
think about forcing VA health costs onto veterans private 
insurance, as the Obama Administration proposed.
    Finally, Mr. Chairman, I would just add that contracting 
out medical services is hardly a cure-all for the private 
providers. Many of these folks in my State wait for 
reimbursement well beyond the VA's goal of 30 days after the 
claim is submitted. Many of these facilities are small critical 
access hospitals that have little or no margin for error in 
their cash-flow.
    So, I want to commend you, Mr. Chairman, for holding this 
hearing. I look forward to hearing from the witnesses and the 
questions thereafter.
    Thank you very much.
    Chairman Akaka. Thank you very much, Senator Tester.
    At this time I would like to call on Mr. Williams for your 
statement.

  STATEMENT OF JOSEPH A. WILLIAMS, JR., RN, BSN, MPM, ACTING 
     DEPUTY UNDER SECRETARY FOR HEALTH FOR OPERATIONS AND 
MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 
 VETERANS AFFAIRS; ACCOMPANIED BY FREDERICK DOWNS, JR., CHIEF 
      PROCUREMENT AND LOGISTICS OFFICER, VETERANS HEALTH 
 ADMINISTRATION; GARY BAKER, CHIEF BUSINESS OFFICER, VETERANS 
 HEALTH ADMINISTRATION; BRADLEY MAYES, DIRECTOR, COMPENSATION 
AND PENSION SERVICE, VETERANS BENEFITS ADMINISTRATION; AND JAN 
 FRYE, DEPUTY ASSISTANT SECRETARY FOR ACQUISITION AND LOGISTICS

    Mr. Williams. Mr. Chairman, Ranking Member, Members of the 
Committee. Thank you for the opportunity for us to discuss the 
Veterans' Affairs oversight of health care contracting.
    The VA provides care to veterans directly in a VA medical 
center or indirectly through either fee-basis care or through 
contracts with local providers. This strategic mix of in-house 
and external care provides veterans with a full continuum of 
health care services.
    VA medical center directors determine when additional 
resources are required. It is VHA policy to hire clinical staff 
whenever feasible. But when this is not possible or 
inadvisable, the medical center director must first consider 
sending patients to another VA medical center. If contracting 
of services are required, a competitive bid is the first option 
considered.
    There are two principal avenues of contracting for health 
care services: conventional commercial providers and academic 
affiliates. VA academic affiliates provide a large portion of 
contract care and critical care.
    In either approach, VA is ultimately responsible for the 
quality of care delivered in its facilities for veterans. VA 
exercises this responsibility through credentialing and 
privileging, quality and patient safety monitoring, and 
specific quality of care positions within a contract itself.
    All applicable VA quality and patient safety standards must 
be met for medical services provided under contract in a VA 
facility. Ensuring quality standards for VA-contracted care 
when services are provided outside of the VA facility is more 
complex, but VA-contracted care includes language that allows 
for industry standards of accreditation, certification 
requirements, clinical reporting, and oversight. VA also 
includes clauses in their contract that allows it to negotiate 
additional terms as the new clinical requirements are 
instituted within the department.
    VA understands the importance of closely managing its 
contracts and has initiated multiple efforts to address this. 
Project HERO is a cornerstone of those efforts. Project HERO, 
which is available in four VISNs, four of our networks, is a 
contracting pilot to increase quality oversight and reduce the 
cost of purchased care.
    In Project HERO, VA contracts with Humana Veterans' Health 
Care Services and Delta Dental Federal Services to provide 
veterans with prescreened networks of doctors and dentists who 
meet VA quality standards. This is done at negotiated rates.
    In fact, 89 percent of Project HERO contact medical prices 
with HVHS are below the Medicare rates and contracted rates 
with Delta Dental are less than 80 percent of the National 
Dentistry Advisory Services Comprehensive Fee for dental 
services.
    Project HERO contracts require that Humana and Delta Dental 
meet VA standards for credentialing and privileging. Timely 
reporting of access to care, timely return of clinical 
information to VA, patient safety and patient satisfaction, and 
quality programs including peer review are all components of 
this process.
    There are no known instances where VA medical centers have 
reduced staff following the introduction of Project HERO 
contracts.
    While Project HERO is only in the second year of a 5-year 
pilot, VA has found that patient satisfaction is comparable to 
VA and robust quality programs including peer review with VA 
participation while meeting Joint Commission and other industry 
standards.
    While VHA recognizes the continuous need for improvement, 
this project has validated our ability to resolve key oversight 
issues.
    Mr. Chairman, you also asked us to discuss contracting for 
compensation and pension examinations. Medical examination 
reports are an important part of VA's disability claim process.
    Although the majority of these examinations are conducted 
by VHA, C&P Service has the authority to contract with the 
outside for medical providers in an examination process.
    During fiscal year 2008, medical disability examination 
contractors conducted approximately 24 percent of all the 
compensation and pension exams. C&P Service has contracted with 
two medical disability examination providers: QTC Medical 
Services and MES Solutions.
    QTC was first awarded a contract in 1998. QTC successfully 
competed for rebid of a contract in 2003. During fiscal year 
2008 QTC completed 117,089 examinations.
    Six VA regional offices order at least some of their 
examinations from MES. This contractor currently performs 
approximately 1,550 examinations per month.
    C&P Service oversees both of these contracts. The oversight 
involves three standards: performance; quality and timeliness; 
and customer service, which are evaluated quarterly.
    Mr. Chairman, VA prides itself on providing consistent, 
high-quality care to veterans; and contracting and fee-basis 
arrangements and agreements are important components of the 
VA's national system of health care.
    We recognize the importance of our responsibilities in the 
oversight of care purchased outside our facilities or provided 
by contractors within our facilities. We will continue to work 
to develop initiatives intended to improve the oversight of 
these agreements.
    Thank you for this opportunity. My colleagues and I are 
prepared to answer your questions.
    [The prepared statement of Mr. Williams follows:]
  Prepared Statement of Joseph A. Williams, Jr., RN, BSN, MPM, Acting 
 Deputy Under Secretary for Operations and Management, Veterans Health 
          Administration, U.S. Department of Veterans Affairs
    Mr. Chairman, Ranking Member, and Members of the Committee: Thank 
you for providing me this opportunity to discuss the Department of 
Veterans Affairs' (VA) oversight of health care organizations 
contracting with VA to provide health services to Veterans. I am 
accompanied today by Jan Frye, Deputy Assistant Secretary for 
Acquisition and Logistics, Department of Veterans Affairs; Fred Downs, 
Chief Procurement and Logistics Officer, Veterans Health 
Administration; Patricia Gheen, Deputy Chief Business Officer for 
Purchased Care, Chief Business Office, Veterans Health Administration; 
and Bradley Mayes, Director of the Compensation and Pension Service, 
Veterans Benefits Administration.
    VA provides care to Veterans directly in a VA medical center 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. My testimony today will focus on VA's 
oversight of health care organizations contracting with VA to provide 
health services to Veterans, VA's obligations and procedures for 
ensuring quality care through contracts, VA's Project on Healthcare 
Effectiveness through Resource Optimization (Project HERO), oversight 
of compensation and pension examinations conducted by QTC Management, 
Inc., and other large-scale contracts.
                   oversight of health care contracts
    All VA health care resource contracting is accomplished under the 
provisions 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.
    VA medical center directors determine when additional health care 
resources are required. It is the policy of the Veterans Health 
Administration (VHA) to provide Veterans care within the VA health care 
system, whenever feasible.
    When VA is unable to provide care within the system, for example 
because a qualified clinician cannot be recruited the medical center 
director must first consider sending patients to another VA medical 
center. Contracting for necessary services will only be considered if 
these options are not appropriate or viable. If contracting for 
services is required, a competitive bid is the first option to be 
considered.
    There are two principal avenues to contract for health care 
services: conventional commercial providers and academic affiliates. 
VA'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 VA.
    All VA health care resource contracts 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 Procurement and Logistics Office (for 
acquisition technical review for policy compliance). A formal Medical 
Sharing Review Committee, consisting of senior executives from those VA 
organizations, approves or disapproves the concept of contracting for 
care and provides management oversight of the health care contracting 
requirements and acquisition process.
                 quality management for contracted care
    VA retains ultimate responsibility for the quality of care 
delivered within its facilities to Veterans. VA exercises this 
responsibility through several clinical and administrative oversight 
mechanisms, including credentialing and privileging, quality and 
patient safety monitoring, and the inclusion of specific quality of 
care provisions in the contract itself.
    Quality assurance is a shared responsibility of VA and the vendor. 
The joint and separate responsibilities of VA and the vendor must be 
defined in advance so that medical care delivery under a sharing 
agreement (contract) can be effectively monitored (VA Directive 1663, 
Health Care Resources Contracting--Buying, Sections 4.d.1 and 4.d.2). 
The VISN Director is responsible for ensuring that each facility Chief 
of Staff has appropriate quality assurance standards in place; 
appropriate data methods have been defined; and data collection, 
analysis and reporting are performed as specified.
    VA Central Office's Sharing Contract Review Committee is 
responsible for providing an additional level of review, including 
review of the quality assurance provisions. Within this Committee, 
VHA's Patient Care Services has primary responsibility for assuring 
that medical sharing contracts contain appropriate quality and patient 
safety provisions.
    Facility Directors must ensure that these oversight mechanisms are 
consistently and effectively applied to all in-house contracted care. 
All contracts for physician services provided at VA must state that 
credentialing and privileging is to be done in accordance with the 
provisions of VHA Handbook 1100.19, ``Credentialing and Privileging.'' 
Facility Service Chiefs are responsible for the quality of care within 
their clinical disciplines pursuant to VHA Handbook 1100.19 and Joint 
Commission Standards MS. 03.01.01, MS. 04.01 .01, LD.04.03.01 and 
LD.04.03.09. Facility Service Chiefs exercise this responsibility 
through such actions as oversight of credentialing and privileging, and 
review of provider-specific data and peer review processes.
    The Joint Commission also has specific standards for focused 
monitoring whenever new procedures or new technology are involved 
(Joint Commission Standards MS. 08.01 .01 and LD.04.03.01). As noted 
above, Clinical Service Chiefs and/or the Chief of Staff have primary 
responsibility for the oversight of quality and safety monitoring.
    Quality and safety standards and monitoring procedures will vary as 
a function of the specific service being provided. However, all 
applicable VA quality and patient safety standards must be met for 
medical services provided under contract in a VA facility. Ensuring 
quality standards for VA-contracted care when services are provided 
outside of a VA facility is more difficult, but VA includes language in 
contracts that allows for industry standard accreditation or 
certification requirements, clinical reporting and oversight. VA also 
includes clauses that allow it to negotiate additional terms as new 
clinical requirements are instituted by the Department.
   project on healthcare effectiveness through resource optimization 
                             (project hero)
    Given our desire for patient-centered care and recognizing that it 
may not always be able to provide Veterans care within our facilities, 
VA has a continued need for non-VA services. This purchasing of health 
care services represents a key component in our health care delivery 
continuum. VA understands the importance of closely managing the 
services purchased and has initiated multiple efforts around improving 
that management. Project HERO is a cornerstone of those efforts.
    House Report 109-305, the conference report to accompany Public Law 
109-114, provided that VA establish at least three managed care 
demonstration programs to satisfy a set of health care objectives 
related to arranging and managing care. The conferees supported VA's 
expeditious implementation of care management strategies that have 
proven valuable in the broader public and private sectors, and to 
ensure care purchased for enrollees from community providers is cost-
effective and complementary to the larger VA health care system. The 
conferees encouraged VA to collaborate with industry, academia, and 
other organizations to incorporate a variety of public-private 
partnerships.
    Project HERO is in year two of a proposed five-year contracting 
pilot to increase the quality oversight and decrease the cost of 
purchased (fee) care. It is currently available in four Veterans 
Integrated Service Networks (VISN): VA Sunshine Healthcare Network 
(VISN 8), South Central VA Health Care Network (VISN 16), Northwest 
Network (VISN 20) and VA Midwest Health Care Network (VISN 23). These 
VISNs have historically had high expenditures for non-VA purchased care 
(fee care) and substantial Veteran enrollee populations. When VA cannot 
readily provide the care Veterans need internally, VA medical centers 
utilize the traditional fee basis program or, in selected VISNs, 
Project HERO.
    Project HERO is one of our most comprehensive pilot programs 
intended to improve the management and oversight of the purchase of 
non-VA health care services. It represents a significant and proactive 
approach to assessing timeliness, quality, and clinical information 
sharing for purchased care services, resolving potential deficiencies 
in this area. In Project HERO, VA contracts with Humana Veterans 
Healthcare Services (HVHS) and Delta Dental Federal Services to provide 
Veterans with pre-screened networks of doctors and dentists who meet VA 
quality standards at negotiated contract rates.
    Project HERO is predominantly an outpatient program for specialty 
services such as dental, ophthalmology, physical therapy, and other 
services not always available in VA. For every patient, VA medical 
centers determine and authorize the specific services and treatments to 
Project HERO contracted network doctors and dentists.
    Project HERO's demonstration objectives have been shared with a 
number of key stakeholders, including Veterans Service Organizations, 
the American Federation of Government Employees, academic affiliates, 
and industry. The VHA Project HERO Program Management Office presented 
the following objectives to the House Appropriations Committee and 
House Veterans' Affairs Committee in the second quarter of 2006:

     Provide as much care for Veterans within VHA as practical;
     Refer Veterans efficiently to high-quality community-based 
care when 
necessary;
     Improve the exchange of medical information between VA and 
non-VA 
providers;
     Foster high-quality care and patient safety;
     Control operating costs;
     Increase Veteran satisfaction;
     Secure accountable evaluation of demonstration; and
     Sustain partnerships with university Affiliates.

    The VHA Chief Business Office oversees purchased care programs, 
including fee care and Project HERO. This Office meets with internal 
and external stakeholders and monitors and evaluates program metrics. 
The Project HERO Governing Board oversees program activities and is 
composed of the Acting Deputy Under Secretary for Health Operations and 
Management, the VHA Chief Business Officer, and network directors from 
the four participating VISNs. The Board also has advisors from General 
Counsel, the Office of Academic Affiliations, and the Office of 
Acquisition, Logistics, and Construction.
    The Contract Administration Board provides contract guidance as 
needed and includes contracting and legal representatives. The Project 
HERO Program Management Office (PMO) oversees the contracts to help 
ensure quality care, timely access to care, timely return of clinical 
information to VA, patient safety and satisfaction. The PMO includes 
contract administration, project management, performance and quality 
management; data analysis, reporting and auditing; and communication 
and training.
    Project HERO contracts require HVHS and Delta Dental to meet VA 
standards for:

     Credentialing and accreditation;
     Timely reporting of access to care;
     Timely return of clinical information to VA;
     Reporting patient safety issues, patient complaints and 
patient satisfaction; and
     Robust quality programs including peer review with VA 
participation, while meeting Joint Commission and other industry 
requirements.

    Humana Veterans Healthcare Services utilizes the Agency for Health 
Research and Quality patient safety indicators as well as complaints, 
referrals and as sources for initiating peer review. The Project HERO 
PMO monitors contract performance, audits credentialing and 
accreditation, and evaluates HVHS and Delta Dental performance compared 
to VA Survey of Healthcare Experiences of Patients (SHEP), Joint 
Commission measures, and proxy measures based on HEDIS measures. This 
analysis indicates that Project HERO facilities are equal to or better 
than the national average for all non-VA hospitals that report to the 
Joint Commission.
    Project HERO has negotiated contract rates with HVHS and Delta 
Dental. Eighty-nine percent of Project HERO contracted medical prices 
with HVHS are at or below Medicare rates, and contracted rates with 
Delta Dental are less than 80 percent of National Dentistry Advisory 
Service Comprehensive Fee Report for dental services.
    While Project HERO is only in the second year of a 5 year pilot, 
the program is meeting its objectives and improving quality oversight, 
access, accountability and care coordination. As a demonstration 
project, VA has gained invaluable experience in developing future 
health care contracts, managing both the timely delivery of health care 
and the quality of the care provided. Specifically, VA has found:

     Patient satisfaction is comparable to VA;
     HVHS and Delta Dental providers meet VA quality standards 
and maintain extensive quality programs. The Project HERO PMO audits 
for compliance and participates in their quality councils and peer 
review committees.
     HVHS and Delta Dental provide timely access to care, 
providing specialty or routine care within 30 days 84 percent and 100 
percent of the time respectively.
     Both vendors are contracted to return medical 
documentation to VA within 30 days for more informed, continuous 
patient care. The Project HERO PMO worked with HVHS, Delta Dental and 
VA medical centers to make electronic clinical information sharing 
available at all Project HERO sites.

    These significant improvements, gained through Project HERO, have 
resulted in a more robust oversight of these key programs. While VHA 
recognizes the continuous need for improvement, the initial 
demonstration has validated our ability to resolve the key oversight 
issues identified as a program goal.
    compensation and pension service oversight of contract medical 
                        examinations background
    Medical examination reports are an important part of VA's 
disability claims process. They provide VA regional office rating 
personnel with a means to establish service connection if a medical 
opinion is needed and evaluate the severity of a Veteran's disabling 
symptoms for compensation purposes. A standardized protocol with 
specific worksheets for various types of examinations was developed 
jointly by the Compensation and Pension (C&P) Service and VHA. Although 
the majority of these examinations are conducted by VHA, C&P Service 
has authority to contract with outside medical providers in the 
examination process. During fiscal year 2008, medical disability 
examination (MDE) contractors conducted approximately 24 percent of all 
compensation and pension examinations.
MDE Contractors
    C&P Service has contracted with two MDE providers: QTC Medical 
Services, Inc. (QTC) and MES Solutions, Inc. (MES). The initial 
authority for use of contract examinations is found in Public Law 104-
275, enacted in 1996. The authority is limited to ten VA regional 
offices and authorizes use of mandatory funds for the examinations. QTC 
was first awarded the contract in 1998. This authority required a 
report to Congress on the feasibility and efficacy of contracting for 
examinations from non-VA sources. VA selected the ten regional offices 
to reflect a broad range of claims activity, including: (1) offices 
participating in the Benefits Delivery at Discharge Program (BDD), (2) 
offices in remote and medically underserved areas where Veterans had to 
travel long distances for examinations, and (3) offices in areas of 
high demand for examinations that may require longer waiting periods to 
get appointments. Two of the ten offices selected are involved with BDD 
and process QTC pre-discharge examinations for separating 
servicemembers that are conducted at 40 different military base sites.
    Following submission of the VA report in the autumn of 1997, 
Congress took no further action to modify, expand, or rescind the 
authority. QTC successfully competed for a rebid of the contract in 
2003 and this is the contract currently in force. During fiscal year 
2008, QTC completed 117,089 examinations.
    Public Law 108-183 provided VA with supplemental contracting 
authority that differed from the existing authority in the following 
ways: (1) funding for examinations under this authority utilizes 
discretionary funds, (2) the number of locations at which VA may use 
contract examiners is not limited, and (3) the authority currently will 
expire on December 31, 2010. Pub. L. 110-389, section 105 extends the 
authority of Pub. L. 108-183 until December 31, 2010. MES has been 
awarded the contract under this authority and began performing 
examinations in August 2008. Six VA regional offices order at least 
some of their examinations from MES. This contractor currently performs 
approximately 1,550 examinations per month.
VA Oversight
    C&P Service oversees both of these contracts. The oversight 
involves three standards of performance: quality, timeliness, and 
customer satisfaction. These performance standards are evaluated 
quarterly. The contract provides for financial incentives and 
disincentives for superior and below standard performance respectively. 
The quality performance measurement for both contractors involves a 
review of examinations to determine how closely they follow the 
approved examination protocols for each medical disability. In addition 
to performance evaluations, C&P Service oversight includes an audit of 
the financial reimbursement process. An independent auditor monitors 
the billing statements presented by QTC and MES to VA and assures that 
they are accurate and appropriate for the work performed. Oversight 
audits are performed twice yearly.
    There are three primary performance measures for assessing 
contractors:

     The QTC quality performance standard requires at least a 
92 percent accuracy rate. Quarterly, 384 examination reports are 
randomly selected from the ten VA regional offices and their BDD sites. 
Reviews are conducted by the Medical Director of Contract Examinations 
and C&P Service rating experts for accuracy.
     The timeliness performance standard is 38 days measured 
from the time the contractor receives the examination request until the 
final examination report is entered into the electronic system for 
retrieval.
     The customer satisfaction performance standard is based on 
a survey questionnaire given to the Veteran as part of the examination. 
An independent contractor distributes, receives, and analyzes the 
results. The questionnaire asks for information on the following: 
medical office wait time; performance of medical administrative and 
support staff; reasonableness of medical office visit time and place; 
cleanliness of the medical office; performance and responsiveness of 
the medical examiner; and the overall satisfaction with the medical 
office visit. Answers provided by Veterans are converted to an overall 
percentage rate. A customer satisfaction standard of at least 92 
percent is required.
                               conclusion
    Mr. Chairman, VA prides itself on providing consistent, high 
quality care to Veterans, but we know there are times and locations 
where we cannot meet every possible medical need for our Veterans. In 
these situations, contracting and fee-basis agreements are important 
complements to VA's national system of health care. We recognize the 
importance of our responsibilities in the oversight of care purchased 
outside our facilities or provided by contractors within our 
facilities, and we continue to develop initiatives intended to improve 
the oversight of these agreements. We are exploring opportunities 
across the Department and across the government. Thank you again for 
the opportunity to testify. My colleagues and I are prepared to answer 
your questions.

    Chairman Akaka. Thank you very much for your testimony, Mr. 
Williams.
    I would like to, before asking questions, ask Senator 
Begich for any opening remarks he may have.

                STATEMENT OF HON. MARK BEGICH, 
                    U.S. SENATOR FROM ALASKA

    Senator Begich. Mr. Chairman, I do not have any. I will 
look forward to the questions because Senator Tester told me to 
say that.
    [Laughter.]
    Chairman Akaka. Thank you very much, Senator Begich.
    Mr. Williams, I thank you for bringing others to accompany 
you here at this hearing. I just want to mention to you to feel 
free to call on them as we move along with the questions, 
though I will pose the questions to you.
    Mr. Williams, what is the total amount that the VA spends 
on outside providers including all health services?
    Mr. Williams. Mr. Chairman, I would like to defer that to 
Mr. Baker.
    Mr. Baker. The answer is in 2008 we spent approximately $3 
billion on contracted services and fee services, and this year 
we estimate that we will spend approximately $3.8 billion.
    Chairman Akaka. Can you describe how VA is able to monitor 
such large spending?
    Mr. Baker. We have standard financial controls in place. 
Over the last 2\1/2\ years, we have developed a financial data 
warehouse of information at our Veterans' Service Center. We 
use that information to provide detailed financial information 
concerning the use of fee-basis and contracted services 
available with information at the medical center level, at the 
division level, and at the national level. This information is 
not at those levels and used for internal review and for 
financial reporting across the organization, sir.
    Chairman Akaka. Does VA have access to and routinely review 
quality assurance information by contractors?
    Mr. Williams. Yes, sir, we do; and we do that through a 
number of means. Mr. Downs would be able to share with you some 
of the aspects of contract oversight.
    Mr. Downs. The contracting officer and the COTR, their 
responsibility is to work with the program as they build those 
quality measures into the contract for performance standards 
and metrics.
    The COTR then monitors that contract on a regular basis, 
reports back to the contracting officer if there are any 
difficulties, in which case then the contracting officer then 
works with the vendor to correct those. We have regular reviews 
that are conducted internally to ensure that the contractor is 
performing up to the metrics he or she is supposed to.
    We then also have outside reviewers. The OIG and GAO will 
come by and review those contracts. They have a CAP review that 
they conduct now on a regular bases, certainly among the CBOCs. 
We have those internal reviews that we are using. Yes, sir.
    Chairman Akaka. Recently, Mr. Williams, a review by the 
Inspector General found that a contractor providing services at 
a community clinic, did not follow VA's credentialing and 
privileging policies. The question is: What will VA do to 
ensure that contract providers are following these policies?
    Mr. Williams. Thank you, Mr. Chairman.
    There are several actions that we have initiated. One is to 
ensure that the appropriate language is included in contracts 
going 
forward.
    The second is the medical center, in addition to the COTR, 
has a responsibility to review this information and make sure 
it is incorporated into leadership discussions and appropriate 
actions are communicated up through the channels to be taken.
    At various levels in the contracting process, we have 
individuals that also are reviewing the contracts against the 
deliverables of that contract and decisions will be made based 
upon those as to what training, education, or other actions 
that may be necessary are taken.
    I will defer to Mr. Downs for any additional comments.
    Chairman Akaka. Mr. Williams, on overcharges for CBOC 
contract care, a recent report from the Inspector General found 
that VA had been charged by a clinic contractor for over 4,000 
veterans who are no longer enrolled in that VA clinic.
    What did VA do to address that specific problem and what 
steps will the department take to prevent similar situations 
from occurring in the future?
    Mr. Williams. Mr. Chairman, I would like to defer to Mr. 
Frye.
    Chairman Akaka. Mr. Frye.
    Mr. Frye. I have to admit that I am not familiar with the 
CBOC operation, and I just looked at that IG report yesterday.
    Those contracts are put in place by Veterans Health 
Administration in the local contracting offices. Again, Mr. 
Downs has outlined the fact that he has contracting officer 
technical representatives looking at the performance of these 
contractors and they are the first line of defense. They are 
the eyes and ears of the contracting officer. If they see 
something awry with the performance of the contractor, they are 
to immediately bring that to the attention of the contracting 
officer--the government contracting officer--so that remedial 
action can take place.
    Chairman Akaka. Thank you.
    Mr. Baker. Mr. Chairman, if I might, in answer to your 
question, one of your concerns was do we preclude this from 
occurring going forward.
    We do take these lessons learned from IG reports and 
outside reviews and share them across our networks with our 
network directors and facility directors. We have regular 
conference calls and we have summary reports of these type of 
reviews to make sure that information is shared so it can 
integrate and the lessons learned can be shared with our 
leadership. We make sure we do not repeat the same mistakes in 
the future.
    Mr. Williams. Mr. Chairman, if I may, in addition, from an 
operations standpoint, we review the contracts. Every 2 weeks 
we look at all of the contracts from the beginning of the 
process through to the end of the process.
    In addition to that, we have an advisory group that will 
review contracts and bring them to me directly at this point 
through the reorganization where we will review those contracts 
and determine what additional actions--be it training, 
education, or reconfiguration--that need to take place.
    Chairman Akaka. Thank you.
    I would like to call on Senator Tester for his questions.
    Senator Tester. Thank you, Mr. Chairman.
    We have learned from previous hearings that the disability 
exam can be quite complicated, especially when exams involve 
multiple body systems and a complex rating system.
    Can you tell me how long it takes for a VA physician to 
learn how to conduct the exams?
    Mr. Williams. Sir, I do not have that specific information 
with regard to the actual time it would take. I would add, 
though, that we have a time requirement relative to the 
completion of an examination--the actual completion of 
examination.
    Senator Tester. But I mean as far as what kind of regimen 
the VA physician has to go through in order to be competent 
when they step into the exam room.
    Mr. Williams. Mr. Baker will address that.
    Mr. Baker. We do have a certification program that was 
begun approximately 1\1/2\ years ago for compensation and 
pension exam providers. It was designed through our 
compensation and pension exam program in Nashville.
    Senator Tester. Typically how long does it take for a 
physician to go through that program?
    Mr. Baker. It depends to a certain extent on the specialty. 
There is a general medical examination module, but there are 
modules I think for approximately 29 specialty type exams.
    I do not have the specific amount of time that each of 
those modules is, but we will take that as a note for the 
record to provide to the Committee.
    Senator Tester. That would be good.
    [The additional information requested during the hearing 
follows:]
          time to complete cpep certification/training modules
    In 2007, the Compensation and Pension Examination Project (CPEP) 
developed six web-based certification modules for Compensation and 
Pension (C&P) exams; the certification process began in 2008. These 
certification modules are designed to instruct providers on how to 
effectively conduct and document C&P exams for rating purposes. The 
intent is to provide a thorough understanding of the C&P process, 
terminology, types of requests and strategies for writing exam reports 
and opinions in order that providers can help ensure that Veterans 
receive timely, thorough and fair evaluations of their claimed 
conditions.
    CPEP has produced a total of 19 training modules on performing and 
documenting C&P exams. There are six certification modules: General 
Certification, Musculoskeletal, Initial PTSD, Review PTSD, Initial 
Mental Disorders and Review Mental Disorders.
    There are 13 other informational CPEP modules: Aid and Attendance, 
Cold Injury Exam, Diabetes Exam, Foot Exam, General Medical Exam, 
Genitourinary Exam, Hand, Fingers & Thumbs Exam, Heart Exam, Muscle 
Exam, Nerve/Neurology Exam, Prisoner of War Exam, Respiratory Exam and 
Skin & Scar Exam.
    The intended audience for the modules is C&P examiners, physicians, 
physician assistants, psychiatrists, psychologists, nurses and nurse 
practitioners. The clinicians can receive Accreditation Council for 
Continuing Medical Education (ACCME) or American Nurses Credentialing 
Center (ANCC) continuing education credits for each of the modules.
                        time to complete modules
    The average time required to view each CPEP module and answer the 
accompanying questions is provided below, but the time may vary 
depending on the 
clinician.

     General Certification module: 1.5 hours
     Musculoskeletal Certification module: 1 hour
     Initial Mental Disorders Certification module: 1.5 hours
     Review Mental Disorders Certification module: 1 hour
     Initial PTSD Certification module: 2 hours
     Review PTSD Certification module: 1 hour
     Other informational training modules: 1 hour each

    All C&P clinicians must complete the one and-a-half (1.5) hour 
General Certification module. Those performing musculoskeletal exams 
must complete that module also, for a total time of two and-a-half 
(2.5) hours. Mental health specialists performing only review mental 
health exams must complete the General Certification plus the two 
review mental health modules for a total time of three and-a-half (3.5) 
hours. Mental health specialists performing all four types of mental 
health exams must complete the General Certification plus all four 
mental health modules for a total time of seven hours.
                    time to learn to conduct exams 
       (regimen to be competent when clinician steps in the room)
    From the summary above, we know that it takes one and-a-half to 
seven hours to complete the CPEP certification process. Completing the 
appropriate CPEP certification modules should provide a clinician with 
the background and overview that he or she needs to perform a competent 
C&P disability exam and report.
    However, expertise in the C&P process is something that takes time 
to acquire. Most clinicians are experienced in performing treating 
exams, but not C&P disability exams, which are unique medical-legal 
exams. Many new C&P clinicians will go through the certification 
process and then shadow another clinician for a week or so. New C&P 
clinicians often have their exam reports critiqued by more experienced 
C&P clinicians for several weeks or longer.
    As clinicians take time to attend C&P conferences, review results 
from CPEP's quality reviews, discuss cases with colleagues, and gain 
experience in interviewing and examining Veterans specifically for C&P 
disability purposes, their expertise and skill as C&P clinicians 
increases.

    Senator Tester. You have 29 specialty exams. Does each 
veteran have 29 docs take a look at him?
    Mr. Baker. No. In terms of the rating requests that we 
receive from the Veterans Benefits Administration, there are 
approximately 29 templates for types of exams that are 
requested from them. I think 29 is the correct number. I may be 
off one or two.
    Senator Tester. Typically how many docs look at a vet when 
they do their exam?
    Mr. Baker. My understanding is that for recently discharged 
veterans, there are up to 11 disabilities that have been 
requested; and in general, they require two or three exams at 
least to complete the review of their body systems for the 
disability exams that have been requested.
    Senator Tester. Do you have any idea how long those exams 
take?
    Mr. Baker. I do not have that information, really.
    Senator Tester. That is fine. Does the VA train the 
contractor physicians in the same way they train the VA 
physicians?
    Mr. Baker. I cannot speak for QTC as to whether or not they 
use our training modules or not. Mr. Mayes may have the answer.
    Mr. Mayes. We did not specifically train the contract exam 
providers but there are certain credentialing requirements that 
they have to have before they can conduct a C&P examination. 
All of the examiners or the contract providers that are 
conducting C&P exams are physicians.
    The other point that I would make is that the criteria by 
which the exam is conducted is based on exam templates and exam 
worksheets. This is a collaboration between the Veterans 
Benefits Administration and the Veterans Health Administration.
    We work with the medical experts to come up with the 
protocol for the C&P exams, such that it gives us an exam 
report and exam findings that allow us to match that up against 
the VA rating schedule.
    Senator Tester. So, what I am hearing you say--and you may 
correct me--the critical component of this is not necessarily 
the physician's level of expertise on how to conduct the exam, 
but rather the template?
    Mr. Mayes. I would not characterize it exactly that way, 
Senator. I think it is critical that an examiner be properly 
credentialed, be familiar, and understand how to apply that.
    Senator Tester. When it comes to quality control, I am sure 
you do assessments on the docs that do these 29 different types 
of exams. Does the VA do quality control on those docs to make 
sure that there is a level of adequacy and accuracy there?
    Mr. Baker. The compensation and pension exam program that I 
mentioned in Nashville has a comprehensive quality assurance 
program for examinations conducted by VHA physicians. We do a 
sample review of exams from each medical center for all 
providers on a monthly basis and provide that information to 
VBA and internally to VHA.
    [Additional information provided by VA follows:]

    Question. How does VBA ensure that field stations send accurate 
examination requests to the contractors?
    Response. The C&P Contract Management Staff reviews examination 
requests on a daily basis. If the examination request is incomplete, it 
is immediately sent back to the field station of jurisdiction for 
correction. The Contract Management staff is in contact with the 
examination coordinators at the regional offices daily to answer 
questions and provide guidance. The staff holds monthly conference 
calls with the examination coordinators to review any error trends and 
update them on changes.

    Senator Tester. What quality assurance process do you have 
for the QTC folks?
    Mr. Mayes. There are three elements to the measurement of 
quality with respect to QTC and MES, the other contractor that 
provides exam services.
    We measure the contractor on timeliness. We measure the 
contractor on quality. It is very similar to what we do under 
the VHA exams with respect to quality--do they comply with the 
criteria that is established for the exam report that then 
allows our rater to evaluate the veteran's disability claim. 
And then, also, we evaluate the provider on customer 
satisfaction.
    [Additional information provided by VA follows:]

    Question. How does VBA ensure that contractors properly complete 
examination requests?
    Response. Both medical disability examination contractors are 
reviewed for compliance on exam quality (92% or better), exam 
timeliness (38 days to complete the request on average), and overall 
customer satisfaction (90% or better).
    To measure compliance with examination quality, the C&P Contract 
Management Staff completes quality review on 530 completed examinations 
quarterly. These reviews are in addition to reviews completed by the 
contractors.
    To measure examination timeliness, completed examinations are 
pulled from the contractor's computer system into VA's system on a 
nightly basis, and VA measures the number of days between the exam 
request and delivery.
    Overall customer satisfaction is measured through a Customer Survey 
Card contract with AMTIS. AMTIS produces customer survey cards that are 
sent to the contractors for insertion in the Veteran's examination 
appointment letter. AMTIS compiles the card results and submits a 
report to the Contract Management staff on a monthly basis. The average 
return rate on the customer survey cards is 40 percent.
    The Contract Management Staff also holds monthly conference calls 
with both contractors to discuss issues and provide guidance on any 
changing policies.

    Senator Tester. Do you compare the outcomes of the 
disability ratings between the contractors and the VA?
    Mr. Mayes. For our purposes in making an entitlement 
determination, we are concerned that the output--the exam 
report--is adequate for us to evaluate the veteran's claim. To 
that extent, we have standards in place for quality and we are 
checking that both in VHA and with our contract providers.
    Senator Tester. I did not note it and you do not have to 
say it again. Are the outcomes of the disability ratings that 
are given by VA and QTC, are they tracked?
    Mr. Mayes. Yes, Senator, they are tracked. The quality is 
tracked both for VHA exams, C&P exams, and contract-provided 
exams.
    Senator Tester. OK. My time is up. Thank you, Mr. Chairman.
    Chairman Akaka. Thank you very much, Senator Tester.
    Let me call on Senator Begich for your questions.
    Senator Begich. Thank you very much, Mr. Chairman.
    First, I have a more general question on HERO versus the 
traditional fee-basis program. I know you are 2\1/2\ years into 
the HERO program, and it seems to have--or at least in the 
process of having--some success.
    What is the long-term outlook that you would see in the 
HERO program in the sense that it is on a 5-year demonstration 
project; so what is next?
    Mr. Williams. Sir, Mr. Baker will answer that question.
    Mr. Baker. The HERO program, as you know, is a pilot 
program with a potential of 5 years. We are getting ready and, 
in fact, have exercised the third year of the contract, which 
will start actually tomorrow.
    We believe that the HERO contract has given us a wonderful 
opportunity to learn some valuable lessons on our ability to 
have national- or regional-level contracts, the type of 
specifications we need for that contract, and how to interact 
with our partners in providing those services.
    I would say that going forward I would not expect that if 
we were to recompete a HERO contract that it would be exactly 
the way that we specified in our original contract.
    There are many lessons that we have learned from both sides 
of the equation, both from a VA perspective--in terms of 
specifying the pricing schedule, some of the criteria in terms 
of how we refer patients, and what our expectations are of the 
provider--and I am sure the provider side has some feelings on 
that as well.
    We have used this as a test bed to learn lessons going 
forward and we expect to continue to do that through the life 
of the existing contract.
    Senator Begich. Great. I just want a clarification on one 
point. I do not remember who said it, but on the amount of 
contracted services, you indicated $3 billion this year and 
next year $3.8 billion. When I look at the IG report, it talks 
about I think $1.6 billion. So, just help me understand.
    Mr. Baker. The IG report was on outpatient pre-authorized 
care only.
    Senator Begich. So, a portion of the total----
    Mr. Baker. Right, a portion of the total. But, the question 
we were asked was about total cost of non-VA care, or purchased 
care, so the numbers I provided were for that amount.
    Senator Begich. Great. I do not know who would answer this, 
maybe Mr. Williams. Do you agree with the IG report in their 
analysis of what they have calculated in overpayments and those 
kinds of issues?
    Mr. Williams. I will defer to Mr. Baker.
    Mr. Baker. You are talking about the fee-basis IG report 
rather than the CBOC?
    Senator Begich. Yes.
    Mr. Baker. In general we agree with the IG report. We think 
that there are some specific numbers, in terms of their 37 
percent figure, that probably are an overstatement.
    Senator Begich. How much overstatement would you say? I 
mean is it double what you think it is; because I am going to 
drive to the next question which is further discussion of the 
accountability measures that you have in place or will have in 
place.
    So, is it a little bit over? 37 percent is a lot.
    Mr. Baker. We agree with that.
    Senator Begich. Give me an idea of what you think.
    Mr. Baker. I cannot give you an exact number, but I can 
tell you a couple of factors that I think need to be taken into 
consideration.
    One is that we have a mechanism where on our fee 
authorizations we specify a certain payment amount and that 
payment amount may not be in line with the 75th percentile that 
is our fee schedule.
    The IG considered that as an error on our part, saying we 
should have paid on the 75th percentile. We actually have a 
General Counsel opinion that says that we were correct in using 
the authorized amount. So, that will have an impact of that 
number.
    They also included any discrepancy between the paid amount 
and the amount that they calculated would be accurate, even if 
it was less than a dollar. The industry standard is that many 
of those would not have been counted.
    So, we are doing a detailed review of their information. We 
expect the number will go down but it still will be a number 
that requires us to follow up with actions.
    Senator Begich. Have you at any point in the last 3 or 4 
years--I think this was a 4-year study--have any folks that you 
do business with been canceled in the sense of outpatient care?
    In other words, because of double billing or inappropriate 
expenditures that appear for reimbursement? Have you ever 
canceled anybody? Have you ever said, you know what, you have 
an error rate that is too high, you are out? Have you ever done 
that?
    Mr. Baker. Not to my knowledge.
    Senator Begich. OK. You can see where I am going here. It 
is great to have a report and let us say it is 15 percent, let 
us say it is half, say it is 18\1/2\ percent; it is still tens 
of millions of dollars.
    And if the contractor continues to perform the service and 
all it amounts to is a lot of paper going back and forth but 
you do not actually lay down hard on them and say, you know 
what, we are not doing business with you anymore; that will 
send a message and create a ripple effect to people who 
inappropriately bill.
    So, I guess I would urge you in your process of 
reevaluating your procedures that is part of it: that you make 
it clear that if you continually send poor records you are out, 
period.
    Then the next question I would have is do you have any 
numbers that you can share with me or the Committee on how much 
you have recouped in any of the overbillings or accounting 
errors on the part of physicians or outpatient services?
    Mr. Baker. I think we have some apples and oranges that are 
being mixed here. In terms of the IG report and the 37 percent, 
the vast majority of that was a determination that we had 
inappropriately processed those bills internally, not that they 
had been billed incorrectly by the providers.
    So, in terms of saying that because of the IG report we 
should have taken action against providers, I do not think that 
is the case.
    Senator Begich. OK. My time is pretty much up. But when I 
read it, there is an amount overpaid--maybe it is defined 
differently, how you define it--and then there is underpaid.
    So, are you telling me all the overpaid are just VA 
mistakes on the proper report paperwork and that everyone 
should have been paid?
    Mr. Baker. I am saying that in the IG report when they said 
there were overpayments, they are saying that VA 
inappropriately applied either its fee schedule or a Medicare 
schedule that should have applied for what was billed to us, 
and that was not a fault of the vendor but rather an internal 
fault of VA, and that we need to improve our procedures.
    Senator Begich. Let me end there. So in no case, a vendor 
has received double payment for any services?
    Mr. Baker. No. There were some situations where VA should 
recoup and we are following up on those specific cases----
    Senator Begich. That is the question.
    Mr. Baker [continuing]. As identified in the IG report and 
we will be requesting repayment to VA where that overpayment 
has occurred.
    Senator Begich. I will end there. Thank you, Mr. Chairman. 
I am sorry I went over a little bit.
    Chairman Akaka. Thank you, Senator Begich.
    Senator Burr, your opening statement and your questions.

        STATEMENT OF HON. RICHARD BURR, RANKING MEMBER, 
                U.S. SENATOR FROM NORTH CAROLINA

    Senator Burr. Mr. Chairman, I thank you and I apologize to 
our witnesses for my tardiness. I would ask unanimous consent 
that my opening statement be a part of the record and I will 
use the time for questions.
    [The prepared statement of Senator Burr follows:]
       Prepared Statement of Hon. Richard Burr, Ranking Member, 
                    U.S. Senator from North Carolina
    Thank you Mr. Chairman. Welcome to our witnesses this morning.
    We are here to look at how VA ensures veterans are receiving 
quality, cost-effective healthcare services when it purchases those 
services from the private sector.
    I think many would be surprised to learn the extent to which VA 
relies on outside providers to deliver services to veterans and certain 
survivors of veterans.
    Of course contract care should never be used to supplant the VA 
health care system. VA provides services that are specialized to the 
unique needs of veterans and is now known as one of the top providers 
of medical care in the country. But, in some cases, it does make sense 
to complement that care with the help of community providers.
    I welcome this discussion. I've heard from many North Carolinians 
who live in rural communities who tell me that while they like the VA 
health care system, they'd rather avoid the long trip and just see 
their community doctor in some cases.
    For this reason I'm excited about the rural health contract pilot 
program that was part of Public Law 110-487. VISN 6 will be a part of 
that pilot, which will give veterans residing long distances from VA 
medical facilities the option of receiving their care in their 
community.
    Using local community providers can save rural veterans from long, 
tiresome trips. It can also be a way to deal with veterans' healthcare 
needs in rural America, especially when there are very few providers to 
meet the current need, particularly in specialty care. Therefore, 
establishing relationships with community providers is essential.
    Of course when VA uses taxpayer dollars to purchase care for 
veterans we must ensure that we're getting three key things in return: 
timely access; quality care; and a fair price for the contracted 
services.
    I look forward to hearing from our witnesses to see if the 
contracts which are the focus of today's hearing address these three 
key elements.
    A couple of other points I think are worth noting. VA spends more 
than $3 billion on healthcare provided outside its doors. Obviously 
some of this care is governed under a contract relationship. But the 
bulk of it is regular fee-based care.
    I'm interested to see what quality and cost mechanisms are in place 
for fee-based care as well. A comparison between care purchased under 
contract and regular fee-based care will help determine whether VA 
should favor one approach over the other.
    Finally, I'm interested to see VA's own measures when it comes to 
performance, quality, and cost. We should hold those VA does business 
with to the same standard as VA holds itself. To ensure that VA 
healthcare continues to serve our veterans well, VA must set meaningful 
measures in place to compare itself with the private sector and vice 
versa.

    Mr. Chairman, I look forward to the testimony and, again, thank you 
for calling the hearing. I yield back.

    Senator Burr. Mr. Baker, I will direct this at you. Well, 
let me pickup on what Senator Begich was asking. Does the VA 
track error rates in fee-for-service health care provided? With 
fee-based health care, do you track the error rates?
    Mr. Baker. We do not have an effective mechanism of 
identifying the error rate to track at this point, Senator.
    Senator Burr. That is in large measure because the patient 
may only go to the fee-based physician once or the times that 
are prescribed by the VA and there is no requirement by the 
provider to supply the medical outcome from a standpoint of 
what their observation was or their treatment was. Is that 
correct?
    Mr. Baker. In contracted care and we do----
    Senator Burr. I am separating contract care from fee-based. 
In contracting care, you can stipulate in the contract that 
they have to report their error experience.
    Mr. Baker. With our past practice, we may or may not have 
gotten the medical information, which I think is your point. We 
have modified our directions to the local facilities indicating 
that they should indicate on the individual authorization forms 
a requirement that providers provide to VA the medical 
information generated by the treatment that was authorized.
    Senator Burr. Is it not safe to say that if we do not 
capture the treatment that was provided, then we have an 
incomplete medical history on that veteran?
    Mr. Baker. That would be correct, sir.
    Senator Burr. Within the VA system, if the rest of their 
care was delivered there, it would be delivered without the 
knowledge of that one, two, or three times that they went 
outside the system at the direction of the VA?
    Mr. Baker. If that information is not available nor sent 
back to us, you are correct, sir.
    Senator Burr. I have been contacted by a urologist in North 
Carolina who is now refusing to see any new VA patients. He 
indicates that it is due to a history of VA diagnosing patients 
and then sending them outside with less than complete 
evaluations required and no additional clinical surveillance.
    I do not want to practice medicine in this hearing. But my 
point would be this: are we asking for the right things when we 
send people out and do we attempt to do any post-treatment 
surveillance that is beneficial to the overall health care 
treatment of the veteran?
    Mr. Baker. My reaction, sir, is that we do try to do that. 
That the fee-basis and contract care both are considered an 
integral part of our treatment of veterans and that we do have 
monitoring systems and quality performance standards in place 
so that whether the care is outside of VA or inside the VA that 
we monitor the outcome for the patient.
    Senator Burr. But there is no requirement on any fee-based 
service to provide the medical records to the VA, am I correct?
    Mr. Baker. If we indicated that on the authorization form 
as I indicated earlier, then we would expect that that is an 
implied contract and they would provide that information to us, 
sir.
    Senator Burr. What are the three things that trigger within 
VA the decision to contract outside or to arrange for a fee-
based service outside?
    Mr. Baker. Availability within VA and geographic 
accessibility are the principal issues.
    Senator Burr. OK. Any other ones?
    Mr. Baker. I cannot remember off the top, sir.
    Senator Burr. Good. According to the National Council for 
Community Behavioral Health Care, VA is competing for the 
limited number of mental health providers, a situation that may 
be, and I quote, ``. . . exacerbating an existing mental health 
workforce shortage, and potentially compromising the long-term 
treatment and rehabilitation needs of returning veterans.''
    What has been suggested is a model of collaboration versus 
a VA attempt to take all of the health care professionals in 
mental health and bring them under the VA's ownership.
    What are your thoughts about the idea of creating these 
targeted partnerships with existing community providers?
    Mr. Williams. Senator, I would suggest we look for every 
opportunity to partner within the community to find a way to 
improve our access for our veterans and to provide the care 
that they need.
    We work very closely with our affiliations in universities 
and medical schools across the country to meet many other 
specialty care needs.
    With regards to the idea of a model where we can improve 
our access to care and to be a greater partner in the delivery 
of that service, I would think that would be a good idea.
    But, we continue to be afforded the opportunity to meet or 
exceed the expectations of the mental health community. We work 
diligently to try to get those providers, those specialist, 
that staff on board, and oftentimes as an adjunct to the 
recruitment and retention that we enjoy, we still have to rely 
on our universities and our community partners to provide that 
service.
    To answer your question, again I think we look forward to 
the opportunity to explore partnership opportunities to improve 
access.
    Senator Burr. I appreciate that because I think it is an 
important component. I hope you understand that we are 
concerned about what the council raised and that is, if the VA 
absorbs 99 percent of the mental health providers into the VA 
system, there is nobody to partner with on the outside.
    I think they are raising a red flag very early to say maybe 
the goal within the Veterans Administration--from the 
standpoint of having all the mental health providers on the 
employment of the Veterans Administration--might cause a real 
problem.
    I mean statistically, 25 percent of enrollees in the VA 
seek all their care within the VA, while 75 percent treat some 
combination of care with both the VA and outside.
    For mental health we are getting to a point with the number 
of providers available outside of the VA system that vets are 
going to have to seek 100 percent of their mental health care 
within the VA because that is going to be where the only 
providers are.
    I understand the unbelievable requirements within the 
system now to treat mental health. Much of it emanates from 
this Committee. I would only say it is time to understand why 
the council is releasing this red flag for us to rethink 
whether we want a good balance of private providers in mental 
health matched with employees of the Veterans Administration. 
If not, we are limited to one path and that path is not 
necessarily always the most cost-effective or the most 
effective from the standpoint treatment.
    I thank the Chairman for allowing me to go over.
    Chairman Akaka. Thank you very much, Senator Burr.
    I would like to call on Senator Burris for his questions.

              STATEMENT OF HON. ROLAND W. BURRIS, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Burris. Thank you, Mr. Chairman.
    Mr. Chairman, I have an opening statement. I would ask for 
unanimous consent that it also be included in the record.
    Chairman Akaka. It will be included in the record.
    [The prepared statement of Senator Burris follows:]
   Prepared Statement from Hon. Roland W. Burris, U.S. Senator from 
                                Illinois
    Thank you, Mr. Chairman. I am glad that our committee has decided 
to tackle this important issue today, because I believe that we are not 
seeing the proper transparency and accountability in the VA's 
contracting procedures.
    I fully appreciate that in some cases the VA must seek services 
outside of VA facilities. For example, it would not be cost-effective 
for the VA to staff every potential medical specialist in every 
geographic area.
    It is perfectly reasonable to use outside providers in these cases.
    However, I am concerned that VA may be relying on outside entities 
too heavily, and that some contracts may not provide the best possible 
service or value to our veterans.
    Contracts should be used sparingly, and only in cases where the VA 
is unable to effectively provide a necessary service.
    As I have said many times, our veterans deserve the best possible 
care, and no entity is in a better position to understand the unique 
needs of our veterans than VA providers.
    Through this hearing, I hope we can clarify the VA's method for 
determining the costs and benefits of contract services and work toward 
improvements in that 
process.

    Senator Burris. I will go straight to my questions to 
follow up on what Senator Burr and Senator Begich asked.
    I am concerned about--could you give me an accounting of 
the costs associated with the HERO project when compared to the 
fee-for-service model. Is there an accounting that you can give 
for that?
    Mr. Williams. Mr. Baker will take that question, sir.
    Mr. Baker. We have done an analysis of the HERO contract. I 
think you heard Mr. Williams indicate that at a very high level 
the Humana contract in general 89-90 percent are at Medicare 
level or below and that Delta Dental is 80 percent or below of 
the dental standard.
    In terms of actual costs per patient----
    Senator Burris. Yes.
    Mr. Baker [continuing]. The cost per patient for the HERO 
patient is something over $1,000 for medical care--outpatient 
medical care. The gross fee per patient is over $4,200.
    I am not sure that the comparison of patient to patient in 
HERO and all of the fee programs is necessarily a direct 
comparison but those are how the numbers come out.
    In terms of Delta Dental, the fee average cost of $1,600 
and the average for HERO was approximately $1,500. So 
approximately $100 less.
    Senator Burris. So, that is the side-by-side fee for 
service.
    Mr. Baker. C o m p a r i s o n o f f e e v e r s u s t h e 
H E R O c o s t s p e r 
patient.
    Senator Burris. Why is it that the contract services are 
necessary for 20 percent of compensation and pension medical 
examinations?
    Mr. Williams. Mr. Mayes.
    Senator Burris. Mr. Mayes.
    Mr. Mayes. Yes, Senator. Essentially, it is the same 
criteria that Mr. Baker pointed out earlier. It is an access 
issue. We looked around the country at areas where the VHA was 
having a challenge in I guess providing the C&P exams in a 
timely manner. Some of those challenges were related to 
securing adequate folks to do those exams.
    When we analyzed the lay of the land with regard to 
providing those needs, we collaborated with VHA and we put 
contracts in place that covered those jurisdictions.
    Senator Burris. So, why cannot the VA hire those physician 
directly? You said there is a problem with the VA staffing and 
recruitment in this regard?
    Mr. Mayes. I cannot speak to whether or not VHA can hire 
the physicians directly. What I can say is that when we were 
trying to target where it was we were going to utilize the 
contracted services, we were looking at the performance of the 
VHA exams at the time. This goes back to, initially, 1998 with 
the QTC contract.
    So, that was the basis for where it was within the country 
that we were going to target these contracted services. I would 
defer to my colleagues with respect to the hiring.
    Senator Burris. What about the QTC contract that is in 
close proximity to Washington, DC, in Alexandria, VA? Why is 
the VA unable to directly hire examiners in our Nation's 
capitol? I mean you are contracting right out here in the 
vicinity?
    Mr. Mayes. We are utilizing, for example, QTC exam 
providers in support of our BDD program. Two of the regional 
offices handle our BDD and quick start claims. So we have an 
opportunity to have exam providers in close proximity to 
military installations where we have servicemembers who are 
separating.
    Senator Burris. Is there a VA hospital here in the 
vicinity? VA facilities here?
    Mr. Mayes. Yes, Senator, there is.
    Senator Burris. Is there a staffing problem there?
    Mr. Mayes. Again I would have to defer to my colleagues on 
staffing the C&P exams directly.
    Mr. Williams. Senator, I am not aware of any specific 
staffing problems, particularly at the DC facility. There are 
only three facilities in the immediate area: the DC facility 
which handles the primary catchment area for the District and 
some of the surrounding counties; Martinsburg VA Medical 
Center, which is a much smaller facility; and then we have a 
Baltimore facility, which is an acute care facility.
    With regards to, and again I cannot speak to QTC, but with 
regards to the recruitment piece, typically where we have 
challenges is in the specialty area where we are trying to find 
neurologists 
or where we might be looking at audiology, and some of those 
specialties.
    When we look at this, we look at it from a couple of 
standpoints. One is, are we able to complete an examination in 
35 days. That is one of our marks that we have been looking at. 
So, it is a rate.
    On average on a national basis, we complete these physicals 
in about 30 days, but we do have outliers. We do have a 
monitoring system in place where if we see a trend of 2 months 
where there is an increase in the rate, if it goes beyond the 
35 days, then we intervene from a leadership standpoint. Many 
of our facilities are able to complete those physicals in less 
than 30 days.
    The other piece is a quality measure. I think VBA might be 
able to speak more definitively to that. But in the quality 
measure, we look at the number of returned physicals.
    If we get a significant number, whatever that threshold may 
be, then there is an indication there with regard to the amount 
of staffing, training and education of the staffing, and 
possibly of the availability of specialists that can address 
these issues.
    The third component is the satisfaction piece, what 
feedback we get from the veterans that are receiving these 
types of services and benefits.
    But with regard specifically to the Washington area, I am 
not personally aware of any hiring challenges. From time to 
time, depending on the rate and volume of physicals that we get 
at any one time, we do have some challenges with getting those 
out in a timely manner. Then we rely on QTC and other means to 
address those physical exam needs.
    Senator Burris. Thank you, Mr. Chairman. I am sorry my time 
did go over. Thank you very much.
    Chairman Akaka. Thank you, Senator Burris.
    Mr. Williams, I understand VA is creating four new regional 
offices to oversee local contracts. My question is: what are 
the advantages of this new structure and how will it fix some 
of the issues that are being discussed at this time: over 
billing; quality-control; and access to care?
    Mr. Williams. Thank you, Mr. Chairman. I will defer to Mr. 
Downs.
    Chairman Akaka. Mr. Downs.
    Mr. Downs. Mr. Chairman, this is a whole movement toward 
professionalism of acquisition in the Veterans Health 
Administration and throughout VA.
    We have implemented a number of initiatives. Mr. Frye, when 
he came on board in his position, he had PriceWaterhouseCooper 
do a review of all VA acquisition. They came forth with a 
number of recommendations that would improve the efficiency of 
our operation and improve acquisition in the areas of quality, 
oversight, monitoring, policy, procedures, standardization, and 
business practices, and put all of the acquisition people into 
one chain of command from the facility level all the way up to 
Washington and remove the influence of the local directors, the 
network directors, and others so that the acquisition officer, 
the contracting officer, could concentrate on his job--
fulfilling the requirements of the program managers in 
developing the requirements, getting the contracts out, and 
making sure that they are properly monitored and that oversight 
was conducted.
    This whole process is going to make us much more efficient. 
We are dealing with nearly 22,700 active contracts this year. 
These individuals who do these contracts with this new 
organization--we will be able to make sure that they receive 
all the training that is required; that they will be properly 
certified. In fact, that is a requirement. They cannot perform 
their jobs unless they are certified. They will have continuing 
education.
    The four regional offices. Their job is to: monitor the 
quality of the contracts; do the audits; make sure that they 
are compliant with all the regulations; and make sure they 
follow up on the COTRs, which the contracting technical 
representatives who are the program folks responsible for 
monitoring the contract to make sure it is being met, which 
relates to some of the earlier questions.
    So, this is a whole movement toward professionalizing and 
moving our acquisition organization up in line, not only with 
the other agencies in the government, but to move us forward 
into the 21st century.
    Chairman Akaka. Thank you.
    Mr. Williams, the Office of Management and Budget directed 
Federal agencies to end their overreliance on contractors. What 
has VA done to comply with this direction?
    Mr. Williams. Mr. Chairman, I defer to Mr. Jan Frye.
    Mr. Frye. Thank you, Mr. Chairman. In accordance with the 
Office of Management and Budget's direction of July 29, 2009, 
each agency subject to the CFO Act--the Chief Financial Officer 
Act--must conduct a pilot under which they perform a multi-
sector, human capital analysis of at least one organization, 
program, project, or activity where there are concerns about 
the extent of reliance on contractors and take appropriate 
steps to address any identified weaknesses.
    The VA is in the process of identifying a program or 
activity that will serve as VA's pilot program. The VA is due 
to notify OMB of its candidate organization for the pilot 
employee program tomorrow, October 1.
    Chairman Akaka. I am glad to hear this. It was mentioned 
during the testimony that there is, as you said, a policy not 
to rely entirely on contractors.
    Mr. Williams, QTC was awarded additional years on its 
contract for good performance. Yet a report by the Inspector 
General on payment issues under the contract resulted in QTC 
paying VA millions of dollars because of overbilling. Can you 
explain this apparent inconsistency?
    Mr. Williams. Sir, I will defer to Mr. Mayes.
    Chairman Akaka. Mr. Mayes.
    Mr. Mayes. Mr. Chairman, I will take that question. First 
of all, I would like to point out that the VA had brought in an 
auditor and had discovered the overbilling in the first place. 
The OIG then came in following the audit that we had 
implemented and identified or confirmed some of that 
overbilling.
    Following that, we sent a bill of collection to QTC and 
they did repay the government for the overbilling. They not 
only repaid the overbilling for the term of the initial audit 
that we had initiated, but also going back to the beginning of 
the contract. So, QTC was very forthcoming and repaid the 
government.
    Regarding the award terms, the way the contract was 
structured was based on performance from the veteran's 
perspective: the timeliness of the exam; the quality of the 
exam report, as we talked about; and then customer 
satisfaction.
    So, the award terms based on that contract were not linked 
to billing. QTC has met the performance targets that were 
established in the contract. I would mention that they did not 
receive award terms for all of the years of the contract, which 
were one base year and four option years. They only received 
award terms for 3 out of those 5 years.
    I hope that answers your question, Mr. Chairman.
    Chairman Akaka. Thank you.
    Senator Tester.
    Senator Tester. Thank you, Mr. Chairman.
    I wanted to go back to my previous round of questions and 
get clarification. I assume we go through Mr. Williams, though 
I think you are probably going to refer it to Mr. Mayes because 
it was a question he answered.
    The VA does track the outcomes of disability ratings by the 
contract and by the VA. I believe that is what I heard you say 
and I just want to make sure that that is correct.
    Mr. Mayes. We track the exam quality, not the rating 
outcome. The quality of the exam in many cases forms the basis 
for the rating decision.
    Senator Tester. OK. But ultimately in the end you track the 
outcomes of those exams that are done as far as potential 
problems that the vet would have. Do you track those kind of 
things, if they are appealed, all that stuff?
    Mr. Mayes. No, sir, we do not track whether they are 
appealed.
    Senator Tester. So, not to put words in your mouth, but 
what you are tracking is performance and timeliness of the 
exams, to refer to the Chairman's question?
    Mr. Mayes. Performance in terms of timeliness, performance 
in terms of quality as measured with compliance to the exam 
template, and then performance with respect to customer 
satisfaction.
    Senator Tester. How do you determine the customer 
satisfaction? That is what I am getting at.
    Mr. Mayes. Understood, Senator. I am sorry if I created----
    Senator Tester. No, you have not.
    Mr. Mayes. The customer satisfaction--we have a separate 
contract with another vendor. They administer customer 
satisfaction questionnaires. Those questionnaires are provided 
to the veteran prior to----
    Senator Tester. Can you tell me what the results of those 
questionnaires are as far as the contractor versus the VA 
exams?
    Mr. Mayes. I can only speak to the contractors. C&P Service 
administers the contracts for QTC and for MES, the two 
providers. Veterans say they are consistently highly satisfied.
    Senator Tester. They are consistently highly satisfied with 
the work that the contractors are doing. How about the VA? Are 
they consistently highly satisfied with the work the VA is 
doing?
    Mr. Mayes. I cannot speak to that, Senator. I will have to 
defer to my colleagues.
    Mr. Baker. We do not have a systemwide customer 
satisfaction specifically for C&P exams. We do have individual 
medical centers and some networks that have established focus 
groups, interviews, and some customer satisfaction.
    We do have an initiative to initiate such a customer 
satisfaction program in 2010.
    Senator Tester. All right. I want to go back to the 
previous round of questions. I just want to make sure my 
understanding is correct; and this is probably for Mr. Mayes 
again.
    You give the contractors a VA template or form but you do 
not train them, and I assume you do not train them how to use 
that form either; or if I am wrong on that, clarify in any way.
    Mr. Mayes. I will take this for the record and provide a 
fully developed response, Senator. We are interacting with the 
contractors on a regular basis and we have a staff within C&P 
Service that is monitoring the exam requests because those 
requests come from VBA regional office personnel. Then we have 
a statistical quality control mechanism on the reports that 
come back.
    So, we are looking at if there are problems meeting the 
quality indicators as the exams come back. We then, are 
constantly in communication with vendors with respect to any 
findings that we discover on the reports that are coming back--
really with our people too--because we have got to make sure 
that it is an adequate request. We have to ask for the right 
exam.
 Response to Request Arising During the Hearing by Hon. Jon Tester to 
  Bradley Mayes, Director, Compensation and Pension Service, Veterans 
      Benefits Administration, U.S. Department of Veterans Affairs
    Question. How do the medical disability examination contractors 
(QTC and MES) train their medical examiners?
    Response. Both Medical Disability Examination contracts require the 
contractors do the following in consultation with VA:

     Prepare and implement a training program for all 
examiners;
     Provide orientation and instructions for conducting 
examinations based on VA worksheets;
     Provide training to ensure that examiners have an 
appropriate attitude toward veterans and their unique circumstances;
     Explain the concept of presumptive diagnoses in view of 
the unique circumstances of military service;
     Ensure that examiners understand how to assess and 
document pain in accordance with VA regulations;
     Provide training to explain the differences between VA 
disability examination protocols versus examination protocols for 
treatment purposes;
     Demonstrate a quality assurance program;
     Monitor physicians' offices to ensure veterans are seen 
within 30 minutes of the appointment time; and
     Make any corrections and return them to VA within 14 
business days.

    Senator Tester. It would seem to me that the appeals rate 
would be something that you would use as a method by which to 
determine adequacy.
    D o y o u u s e a p p e a l s r a t e s? I a m 
t a l k i n g a b o u t V A v e r s u s contractor.
    Mr. Mayes. Appeal with the decision?
    Senator Tester. Appeal with the examination. That is 
correct, when they come back.
    Mr. Mayes. The exam is used to form the basis for our 
entitlement determination.
    Senator Tester. That is correct.
    Mr. Mayes. We are not measuring a notice of disagreement 
with the entitlement determination. We are not looking at that 
in those cases where that entitlement determination is based on 
a contract exam as opposed to a VHA-provided exam.
    Senator Tester. Why not? It just seems to me--and just tell 
me Mr. Williams or Mr. Mayes, if you can tell me what you do 
now. There is probably a good reason for it.
    Mr. Mayes. Senator, I am back to--it is a legal decision. 
The entitlement determination is a legal decision that is made 
by our raters in VA regional offices.
    Senator Tester. Based on that exam.
    Mr. Mayes. Based on that exam, yes, sir.
    If the exam is returned as adequate, whether it comes from 
VHA or it comes to the contract exam provider, then we have 
received the information--the medical information, limitation 
of motion, or the impairment of functioning or medical 
impairment--we have received what information we need for us 
then to make the legal determination.
    So, we are looking at the quality of the exam to see if it 
meets our needs, but we are not then going beyond that to look 
at appeal rates. That is something I can take back.
    Senator Tester. I just want to make sure the vet is treated 
fairly. Appealing stuff is not fun. And if the appeal rate--and 
I do not know that it is or is not--if the appeal rate is 
higher with the contracted versus the in-house examiners, then 
maybe we need to take a look--or if it is the other way 
around--take a look at what is going on because that is a big 
thing.
    One last question. The VA budget, does it differentiate--
and this probably is not a question for you, Mr. Mayes, so you 
can take a break.
    Mr. Mayes. I appreciate that.
    Senator Tester. Does it differentiate the submission 
between the costs of providing CBOC contract care and CBOC care 
provided by the VA? Can you tell me why there is not a 
differentiation between those costs provided in the budget?
    Mr. Williams. No, sir, I am not able to answer that 
specifically. I will take that for the record.
    Senator Tester. If somebody can get back to me on that I 
would be very appreciative. I appreciate you folks being here 
today. I appreciate the work you do. I am sorry I cannot be 
here for the second panel because we could further clarify some 
of these questions.
    Thank you very much.
    [The requested information follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    Chairman Akaka. Thank you, Senator Tester.
    Senator Begich.
    Senator Begich. Thank you very much, Mr. Chairman.
    I just have some follow-up. And like Mr. Tester, I have to 
preside at 11 o'clock, so I will not be able to stay for a 
sizable amount of the second panel.
    Mr. Mayes, I hate to put you back on the spot here but you 
made a good point. I want to follow up on it in regard to what 
sounded like you did an internal audit. When was that done?
    Mr. Mayes. We did an internal audit. It was for the period 
June 2005 to May 2006. We have subsequently put in a regular 
audit process and we are auditing both of our contract exam 
providers twice a year at this point which we will continue in 
the future. These are some of the lessons we are learning.
    Senator Begich. The process of repaying the billing or the 
inappropriate billing or however you want to categorize it, do 
you extend that contract every single year then?
    Explain the contract procedure. Did you make modifications 
to the contract with the vendors in order to have a process to 
ensure--I understand your internal audit--that they have a 
certain responsibility or change in their procedures or a 
change in the way they operate; did you change anything in the 
contract?
    Mr. Mayes. We have modified the contract to, I guess, 
refine the billing procedures is maybe the best way to say it, 
to make sure there is no ambiguity in what charges can be made 
for what services. We have done that. We are in the process of 
recompeting both contracts, so we are further refining that.
    The contracts with the auditors are obviously separate and 
apart from the contracts for the vendors. So, what we wanted to 
do was not rely on just our internal quality controls--or for 
that matter the vendor's internal quality controls--but bring 
in a disinterested third party to take a look and protect our 
investment.
    Senator Begich. Within the contracts that are about to go 
out, will you have some procedure or some process that clearly 
stipulates, you know, if they have a certain error rate or 
percent of their amount allocated that goes in the wrong 
direction, meaning as you go through a process in theory if you 
are auditing and you are looking at the numbers, the problems 
should go down.
    Otherwise you are just burning up money to verify what you 
probably can already identify. Is that part of the new 
contracting procedure? I do not know who can answer that.
    Mr. Mayes. It is a very good point. We have an integrated 
product team that involves people from acquisitions and the 
program, and that is one of the issues that we are in the 
process of discussing.
    Senator Begich. Let me put it another way. Should it be and 
will it be?
    Mr. Mayes. Yes, I think that vendors should be accountable.
    Senator Begich. Good. The customer satisfaction, again I 
know Senator Tester put you on the spot. I know customer 
satisfaction. I know when I was the chair of the Alaska Student 
Loan Corporation for 7 years, we did an analysis every quarter 
of our customers in determining the satisfaction of the quality 
of work, processing, and all the stuff that goes with it.
    It also drove everything from how long they held on the 
phone waiting for service, how long it took them to get an 
appointment for loan processing--everything we did then helped 
us develop a better product and a better service.
    Do you have that kind of robust customer service analysis? 
I know that is all you are in, the business of customer 
service, basically. I mean you are a service agency.
    Mr. Mayes. Yes, Senator, that is exactly right. I can tell 
you what we look at in terms of customer satisfaction. In the 
contract 90 percent of the appointments--the veterans should 
not wait more than half an hour to get into the appointment. 
That is a component of our customer satisfaction.
    Senator Begich. That is a benchmark, a measurement tool.
    Mr. Mayes. Also there are actually five statements on that 
card that I referenced earlier in my response: the performance 
of administrative staff--the question is are you very 
satisfied, somewhat satisfied with that; reasonableness of 
appointment time and place; cleanliness of examiner's office; 
concern and attention demonstrated by the examiner; and then 
overall satisfaction with the services provided.
    Senator Begich. Let me end with you there and say I would 
love to see annual numbers for the last few years, a trend line 
of what that looks like in some of those categories.
    Mr. Mayes. It is very high.
    Mr. Begich. That is great. If you can share with me that.
    Mr. Mayes. We can do that, yes, sir.
    [The additional information requested during the hearing 
follows:]



    Senator Begich. The last thing. I will just end on this and 
that is the whole issue of credentialing folks who do service 
for the VA, and this could be just a very simple yes or no or 
you can get back to me.
    If someone is already doing services for like Indian Health 
Services, are they automatically credentialed in the VA for the 
services provided to VA?
    If they are providing the exact same service to the Indian 
Health Services, can they just go right over or do you create a 
whole new process? If you do not want to answer to the detail 
now----
    Mr. Williams. Senator, I will take that for the record.
    Mr. Begich. That would be great. Just of those services 
because that is the general question. I will leave it at that.
    Thank you very much, Mr. Chairman.
 Response to Request Arising During the Hearing by Hon. Mark Begich to 
  Joseph A. Williams, Jr., Acting Deputy Under Secretary for Health, 
    Operations and Management, Veterans Health Administration, U.S. 
                     Department of Veterans Affairs
    Question. If someone is doing services for Indian Health Services, 
are they automatically credentialed in the VA for the services provided 
to VA? If they are providing the exact same service to the Indian 
Health Services, can they just go right over or do we create a whole 
new process?
    Response. VA requires all practitioners delivering care in VA 
medical facilities to be credentialed and privileged by VA in 
accordance with VA policy prior to delivering care in the facility. 
This includes not only VA employees, but also all contract providers 
working on site. VA does not accept credentialing completed by another 
agency. In those instances where VA contracts for care with a specific 
provider outside of the VA facility, VA similarly requires that the 
specific provider be credentialed and privileged by the VA medical 
facility contracting for the provider to deliver care.
    There are instances where VA plays the role of payer for care 
outside of VA through contractual agreements that do not list a 
specified provider. VA facility directors must ensure that there are 
oversight mechanisms in place to demonstrate consistent and effective 
care in accordance with the Joint Commission standards for 
accreditation, but there is not a requirement for VA credentialing and 
privileging, since the agency is not directing the care.
    We note that, for the specific situation of providers shared 
between VA and the Department of Defense (DOD), there is currently a 
workgroup charged by the VA/DOD Executive Committee that is developing 
a Memorandum of Understanding (MOU) for the exchange of credentialing 
information between the two departments. The MOU will establish the 
guidelines for the sharing of credentialing data collected by one 
department to be used in the privileging of the practitioner by the 
other department, therefore facilitating the utilization of personnel 
across both departments.

    Chairman Akaka. Thank you very much, Senator Begich.
    Mr. Williams, apparently VA recently published a directive 
barring the release of a contractor's inspections of VA nursing 
homes. I understand the VA said that the records contain 
protected information. Since taxpayers paid for those reports, 
should not that information be made public and how is the 
information in them protected if it has not disclosed the 
identity of either the patient or the provider?
    Mr. Williams. Mr. Chairman, I am not intimately 
knowledgeable about that situation.
    Chairman Akaka. I am referring to the long-term care 
institute.
    Mr. Williams. I will have to take that question for the 
record, sir, and get back to you.
    Chairman Akaka. Thank you.
Response to Request Arising During the Hearing by Hon. Daniel K. Akaka 
 to Joseph A. Williams, Jr., Acting Deputy Under Secretary for Health, 
    Operations and Management, Veterans Health Administration, U.S. 
                     Department of Veterans Affairs
    Question. Since taxpayers paid for those reports, should not that 
information be made public and how is the information in them protected 
if it has not disclosed the identity of either the patient or the 
provider? I am referring to the long-term care institute.
    Response. The reports that VA generates from its unannounced review 
program are for the purpose of managing quality of care and quality of 
life in VA Community Living Centers (CLC), formerly known as VA Nursing 
Homes. There is no directive barring the release of these documents. 
Rather, the documents are internal quality management documents and are 
therefore not subject to release under the Freedom of Information Act 
(FOIA) as stated in 38 U.S.C. Sec. 5705.
    38 U.S.C. Sec. 5705 provides that records and documents created by 
VHA as part of a designated medical quality assurance program are 
confidential and privileged and may not be disclosed to any person or 
entity except when specifically authorized by statute. When requested 
under FOIA, the Act's Exception 3 provides that records should be 
withheld from disclosure when such records are specifically exempted 
from disclosure by another statute. Thus, the CLC reports must be 
withheld under FOIA Exemption 3, providing 38 U.S.C. Sec. 5705 as the 
applicable statute.
    The requirements for documents to be protected by 38 U.S.C. 
Sec. 5705 include the following:

     First, the activity that generated the document must be 
conducted by or for VA to improve the quality of health care. The CLC 
reports are conducted as a means to perform unannounced program 
monitoring of quality of care provided in the CLCs.
     The final requirement for a document to be confidential 
under 38 U.S.C. Sec. 5705 is that the document generated must have been 
previously designed in writing as a quality management document which 
can produce confidential documents. In VHA Directive 2008-077, Quality 
Management (QM) and Patient Safety Activities that can Generate 
Confidential Documents, the Under Secretary for Health specifically 
designates under paragraph 4(a)(1)(k) that documents resulting from 
service and program monitoring activities are confidential. The 
Directive is enclosed.

    A verbal reminder of the FOIA restriction on release of quality 
management documents was given on a VA national conference call on 
Friday, September 25, 2009, to ensure VA's compliance with statutory 
requirements.















    Chairman Akaka. Under contract management, in light of some 
high-profile pass/failures like CoreFLS, what is being done to 
contract management in VA?
    Mr. Williams. I will refer to Mr. Frye.
    Chairman Akaka. Mr. Frye.
    Mr. Frye. Thank you, Mr. Chairman.
    First of all, I would like to distinguish between contract 
management and program management. Program managers are 
responsible for the cost schedule, performance, and quality of 
their programs.
    Contracting officers support program managers by putting 
contracts in place and that is the tool that the program 
manager uses to get to his or her objectives.
    So, oftentimes we intermix program management and contract 
management, and I just wanted to make that distinction if you 
will.
    We have made a number of improvements in our overall VA 
contracting in the last year. For instance in the area of 
training, we have known we have had a training shortfall for 
sometime. We have stood up the VA Acquisition Academy in 
Frederick, Maryland. This is the only acquisition academy that 
I am aware of outside of the Department of Defense.
    In this academy we train our contracting officers. Very 
soon we will begin training program and project managers. We 
train our contracting officer technical representatives; and we 
have also implemented an intern program where we are recruiting 
30 interns per year.
    This is a 3-year program. It is very robust. We have just 
recently brought on our second group of 30. So, at the end of 3 
years, we will have approximately 100 interns in our program.
    We are doing everything we can within our budget to raise 
up some of the younger folks coming straight out of school, and 
in some cases older people, as well, who decided to change 
career fields.
    But the point is, we need to fill our pipeline with some 
very well trained professionals. It is very difficult, 
impossible as a matter fact, to just take someone off the 
street and put them to work in the contract arena. It takes 
time and money to get it done.
    In addition, we have stood up three new procurement 
organizations in the VA. As you are well aware, we have had 
problems in the information technology arena.
    We took advantage of the Army's base realignment and 
closure of Fort Monmouth, NJ. As you may know, they are moving 
to Aberdeen Proving Ground. We decided about a year ago to open 
up an office there in Eatontown, NJ. We are in the process of 
hiring over 200 contracting professionals as well as attorneys, 
engineers, and program managers; and this will greatly assist 
us in the execution of our information technology mission 
across the VA.
    In addition, we have stood up an office that we termed the 
Center for Acquisition Innovation in Frederick, MD. The 
strategy there is that it is easier to have people drive 
against traffic. Instead of coming to Washington, DC, stay in 
Frederick, MD, or drive against the grain of traffic. We have 
recruited thus far over 30 contracting professionals there. 
They are mostly involved in the VA central office procurement 
requirement.
    We have also stood an office up in Austin, TX. That office 
will be engaged primarily in support of the Office of 
Information Technology.
    We have recently fielded a contract writing system across 
the VA that was fully operationally capable in July 2007. But 
just a few years ago we had no contract writing system. That 
has been a large undertaking for us.
    We are installing business intelligence tools on top of 
that contract writing system so that we can measure things like 
procurement action lead time.
    And we can actually go to our customers and say, look, we 
have your requirement and we predict that we will have your 
requirement on contract in a given period of time instead of 
leaving them guessing when we would get it done.
    We are developing the acquisition corps, that is, c-o-r-p-
s, much like the U.S. Army's. This is a process where we will 
identify critical program management and contract positions 
across the VA. We will then assign only certified acquisition 
corps members for those critical positions.
    As also indicated earlier, we have developed processes like 
integrated product teams. The most difficult piece of the 
procurement business, the acquisition business, is developing 
the requirement.
    We no longer do that by allowing someone to go in the 
corner and write a requirement by themselves. We now use 
integrated product teams so we have a collaborative effort in 
writing the requirements up front.
    We are also moving to seek a lot of information from 
industry partners. We recently held a forum at the Ritz Carlton 
near the Pentagon, which we invited 120 vendors, and we have 
ongoing efforts with them to assist us. We had them identify 
areas where they think we are deficient. We are going to have 
them help us hopefully come to some means to improve our 
processes.
    I would like to take a couple of minutes to say something 
about what we are doing on the program management side of the 
house.
    You may or may not know that the Assistant Secretary for 
Information and Technology is reviewing all IT programs in the 
VA. They recently put, I believe, 27 programs ``on pause'' as 
they are calling it. They are taking a very close look at these 
programs. The programs may be canceled, but obviously they are 
under duress either in terms of performance or schedule, or 
perhaps cost.
    The OIT is reviewing all of the IT programs. They are 
applying their program management accounting assistant or PMAS 
system to these programs. Again, some programs may be canceled 
or restructured if they are behind schedule or over budget.
    Program managers across the VA will soon be trained in our 
VA Acquisition Academy. We are planning on training several 
thousand program managers next year. This will not be done 
alone at our academy. We will have industry partners help us do 
that.
    It will be an attempt to bring up all program managers at a 
given level, and then we will go from there. There is further 
training to be done but we want to make sure that all of them 
have a common grounding in program management skills.
    I think all of those things take a holistic approach to 
improving the big ``A,'' Acquisition, not only for contracting 
or procurement, but program management and all of the other 
skill sets that we need to effectively manage our programs 
across the VA.
    Chairman Akaka. Thank you very much, Mr. Frye.
    I want to thank you very much for your responses. Before I 
dismiss this panel, I would like you to take back to VA my 
concern about the situation in American Samoa and the 
Philippines.
    I want to know that VA is doing everything possible to help 
in the wake of the recent natural disaster there. Many veterans 
in American Samoa and the Philippines have served this country 
honorably and all of those affected deserve any help we can 
give them. I thought I would mention it to you and to the VA 
through you.
    So, I want to thank you very much again. This area of 
contracting, of course, is a huge concern to all of us and we 
need to look at the challenges that we are facing in 
contracting and begin to try to improve the system. No one 
knows better than you what needs to be done, but we certainly 
want be a part of that. However we can help, legislatively 
even, we would like to do that.
    Again, I thank you very much first panel.
Response to Post-Hearing Questions Submitted by Hon. Daniel K. Akaka to 
Hon. Joseph A. Williams, Jr., Acting Deputy Under Secretary for Health 
    for Operations and Management, VHA, U.S. Department of Veterans 
                                Affairs
    Question 1. VA has over 2000 active contracts. At the hearing, ACS 
testified that each of their 6 contracts was interpreted differently by 
local contracting officials. What will the restructuring of the 
acquisitions organization do to remedy this problem for ACS and all 
other VA contractors?
    Response. It is important the Department of Veterans Affairs (VA) 
industry partners receive the same general guidance and interpretations 
from the Department's acquisition workforce. To begin achieving this 
the has Secretary directed that the Office of Acquisition, Logistics 
and Construction establish a plan that moves the Department's 
contracting operations to an integrated model with the potential to go 
to a centralized model based on a series of performance measures to be 
reviewed in 18-24 months. Organizing the VA Acquisition Enterprise in 
an integrated fashion and commodity-driven Centers of Excellence will 
enhance VA's ability to deploy uniform guidance to all contracting 
officers, regardless of geographic location. While organizational 
change will play a role in our relationships with suppliers the key 
driver is educating our contracting staffs on how they relate to our 
customers. To provide our contracting officers these critical skills 
the VA Acquisition Academy has an in-depth program that offers 
contracting officers across the Department the necessary courses to 
hone their skills in performing their jobs. As a condition of 
maintaining their buying warrants contracting officers must take 80 
hours of continuing education courses every twenty four months to 
remain certified.

    Question 2. Please provide a written description of how you are 
complying with OMB's directive to reduce agency reliance on 
contractors, including a detailed description of the implementation 
status of OMB's required pilot program.
    Response. VA is complying with OMB's directive to reduce agency 
reliance on contractors by implementing OMB's required pilot program. 
VA identified the Office of IT Enterprise Strategy, Policy, Plans and 
Programs in the Office of Information & Technology to oversee its 
Multi-Sector Workforce pilot. VA assembled a pilot team with 
representation from the Office of Information Technology; Office of 
Human Resources and Administration; Office of Budget; Office of Policy 
and Planning; Office of Acquisition and Logistics; Veterans Health 
Administration; National Cemetery Administration; and Veterans Benefits 
Administration. The team has followed the ``Framework for Managing the 
Multi-Sector Workforce'' in OMB Memorandum M-09-26. The team has 
analyzed the strategic plans, contracts, FAIR Act Inventory 
classifications, cost models, workforce competencies and sources of 
talent. The team has identified the limitations on the number of 
authorized Federal positions and the cumbersome hiring process as 
obstacles to bringing work in-house. An action plan to address these 
obstacles to recruitment and hiring is currently under development.

    Question 3. Cardinal Health, Inc. holds a contract with VA worth 
$136 million. What services are provided to VA under this contract, and 
in what facilities? Please include the location of the facilities 
(city, state).
    Response. The Cardinal Health, Inc. (Cardinal) contract is a prime 
vendor contract for the distribution of medical and surgical products. 
Medical Surgical Prime Vendors (MSPVs) warehouse and distribute 
products for VA identified on various VA national, regional and local 
contracts, and agreements. MSPVs deliver products to VA facilities 
within 24-72 hours. This allows VA to obtain the medical and surgical 
products specified, from a single prime vendor for all facilities under 
the contract. This provides ease of ordering, reduces the number of 
purchase orders, reduces the number of shipments received, the number 
of invoices processed by medical centers, and helps reduce facility 
inventory levels.
    The following VA facilities [Veterans Integrated Service Network 
(VISN)] and other Government Agencies are covered by the Cardinal 
contract:

VISN 3
     VA Medical Center
        130 W. Kingsbridge Road, Bronx, NY 10468
     VA Hudson Valley Healthcare System
        - Castle Point, NY 12511
        - 622 Albany Post Road, Montrose, NY 10548
     VA New Jersey Healthcare System
        - 385 Tremont Avenue, East Orange, NJ 07018
        - 151 Knollcroft Road, Lyons, NJ 07939
        - Outpatient Clinic, 970 Route 70, Brick, NJ 08724
     VA New York Harbor Healthcare System:

        - 800 Poly Place, Brooklyn, NY 11209
        - 423 E. 23rd Street, New York, NY 10010
        - 179th Street and Linden Boulevard, St. Albans, NY 11425
     VA Medical Center
        79 Middleville Road, Northport, NY 11768
VISN 4
     VA Medical Center
        2907 Pleasant Valley Boulevard, Altoona, PA 16602
     VA Medical Center
        325 New Castle Road, Butler, PA 16001
     VA Medical Center
        One Medical Center Drive, Clarksburg, WV 26301
     VA Medical Center
        1400 Black Horse Hill Road, Coatesville, PA 19320
     VA Medical Center
        135 E. 38 Street, Erie, PA 16504
     VA Medical Center
        1700 S. Lincoln Avenue, Lebanon, PA 17042
     VA Medical Center
        University & Woodland Avenue, Philadelphia, PA 19104
     VA Pittsburg Healthcare System
        - Progressive Care Center (Aspinwall Division)
          Delafield Road, Pittsburg, PA 15260
        - 7180 Highland Drive, Pittsburgh, PA 15206
        - University Drive, Pittsburgh, PA 15240
     VA Medical Center
        1111 E. End Boulevard, Wilkes-Barre, PA 18711
     VA Medical Center
        1601 Kirkwood Highway, Wilmington, DE 19805
VISN 5
     VA Maryland Healthcare System:

        - 10 N. Greene Street, Baltimore, MD 21201
        - Bldg. #11, Perry Point, MD 21902
     VA Medical Center
        510 Butler Avenue, Martinsburg, WV 25401
     VA Medical Center
        50 Irving Street, N.W., Washington, DC 20422
VISN 6
     VA Medical Center
        1100 Tunnel Road, Asheville, NC 28805
     VA Medical Center
        200 Veterans Avenue, Beckley, WV 25801
     VA Medical Center
        508 Fulton Street, Durham, NC 27705
     VA Medical Center
        2300 Ramsey Street, Fayetteville, NC 28301
     VA Medical Center
        100 Emancipation Drive, Hampton, VA 23667
     VA Medical Center
        1201 Broad Rock Road, Richmond, VA 23249
     VA Medical Center
        1970 Roanoke Blvd., Salem, VA 24153
     VA Outpatient Clinic
        190 Kimel Park Drive, Winston-Salem, NC 27103
     VA Medical Center
        1601 Brenner Avenue, Salisbury, NC 28144
     Charlotte Outpatient Clinic
        8601 University East Drive, Charlotte, NC 28213
VISN 7
     VA Medical Center
        1670 Clairmont Road, Decatur (Atlanta), GA 30033
     VA Medical Center
        Uptown Warehouse, 1 Freedom Way, Augusta, GA 30904
     VA Medical Center
        (Downtown), 800 Bailie Drive, Augusta, GA 30901
     VA Medical Center
        700 S. 19th Street, Birmingham, AL 35233
     VA Central Alabama Healthcare System
        - 215 Perry Hill Road, Montgomery, AL 36109
        - 2400 Hospital Road, Tuskegee, AL 36083
     VA Medical Center
        109 Bee Street, Charleston, SC 29401
        (Ship to: 1001 Trident Street, Trident Industrial Park, 
        Hanahan, SC 29406)
     VA Medical Center
        6439 Garners Ferry Road, Columbia, SC 29209
     VA Medical Center
        1826 Veterans Boulevard, Dublin, GA 31021
     VA Medical Center
        3701 Loop Road E, Tuscaloosa, AL 35404
VISN 9
     VA Medical Center
        1540 Spring Valley, Huntington, WV 25704
     VA Medical Center
        1101 Veterans Drive, Lexington, KY 40502
     VA Medical Center
        2250 Leestown Road, Bldg. 12, Lexington, KY 40511
     VA Medical Center
        800 Zorn Avenue, Louisville, KY 40206
     VA Medical Center
        1030 Jefferson Avenue, Memphis, TN 38104
     VA Medical Center
        Sidney & Lamont Street, Mountain Home, TN 37684
     Tennessee Valley Healthcare System
        - 3400 Lebanon Pike, Murfreesboro, TN 37129
        - 1310 24th Avenue S., Nashville, TN 37212
     VA Outpatient Clinic
        9031 Cross Park Drive, Knoxville, TN 37923
VISN 10
     VA Medical Center
        10000 Brecksville Road, Brecksville, OH 44141
     VA Medical Center
        Bldg. 23 (Warehouse) & Bldg. 24 (SPD) 17273 State Rt. 104
        Chillicothe, OH 45601
     VA Medical Center
        3200 Vine Street, Cincinnati, OH 45220
     VA Medical Center
        10701 E. Boulevard, Cleveland, OH 44106
     VA Ambulatory Care Center
        420 N. James Road, Columbus, OH 43219
     VA Outpatient Clinic
        543 Taylor Avenue, Columbus, OH 43203
     VA Medical Center
        4100 W. 3rd Street (Buildings #126 & #330), Dayton, OH 45428
VISN 11
     VA Ann Arbor Healthcare System
        2215 Fuller Street, Ann Arbor, MI 48105
     VA Medical Center
        5500 Armstrong Road, Battle Creek, MI 49015
     VA Illiana Healthcare System
        1900 E. Main Street, Danville, IL 61832
     VA Medical Center
        4646 John R. Detroit, MI 48201
     VA Medical Center
        1481 W. 10th Street, Indianapolis, IN 46202
     VA Northern Indiana Healthcare System
        2121 Lake Avenue, Fort Wayne, IN 46805
        1700 E. 38th Street, Marion, IN 46953
     VA Medical Center
        1500 Weiss St., Saginaw, MI 48602
VISN 12
     Chicago Healthcare System
        2030 W. Taylor Street, Chicago, IL 60012
     VA Medical Center
        5th & Roosevelt Road., (Supply Warehouse and Bldg. #4), Hines, 
        IL 60141
     VA Medical Center
        325 East ``H'' Street, Iron Mountain, MI 49801
     VA Medical Center
        2500 Overlook Terrace, Madison, WI 53705
     VA Medical Center
        - 5000 W. National Avenue (Bldg. 111), Milwaukee, WI 53295
        - Appleton CBOC, 10 Tri-Park Way, Appleton, WI 54914
     VA Medical Center
        - 3001 Green Bay Road, (Bldg. 138) North Chicago, IL 60064
        - Green Bay CBOC, 141 Siegler Street, Green Bay, WI 54303
     VA Medical Center
        - 500 E. Veterans Street (Bldg. #452), Tomah, WI 54660
        - Emergency Pharmacy Service, Bldg. 37, Hines, IL 60141
VISN 15
     VA Medical Center
        800 Hospital Dr, Columbia, MO 65201
     VA Eastern Kansas Healthcare System
        - 4101 S. 4th Street Trafficway (Leavenworth Campus)
          Leavenworth, KS 66048
        - 2200 Gage Boulevard (Topeka Campus), Topeka, KS 66622
     VA Medical Center
        4801 Linwood Boulevard, Kansas City, MO 64128
     VA Medical Center
        2401 West Main Street, Marion, IL 62959
     VA Medical Center
        1500 N. Westwood Blvd., Poplar Bluff, MO 64128
     VA Medical Center
        915 N. Grand Blvd., St. Louis, MO 63106
     VA Medical Center
        5500 E. Kellogg, Wichita, KS 67218
VISN 16
     VA Medical Center
        Alexandria, LA 713306
     VA Medical Center
        1100 N. College Avenue, Fayetteville, AR 72703
     VA Gulf Coast Healthcare System
        400 Veterans Avenue, Biloxi, MS 39531
     VA Medical Center
        2002 Holcombe Boulevard, Houston, TX 77030
     VA Medical Center
        1500 E. Woodrow Wilson Drive, Jackson, MS 39216
     Central Arkansas Veterans Healthcare System
        - 2200 Forts Roots Drive (NLR), Building #182, N. Little Rock, 
        AR 72114
        - 4300 W. 7th Street, (LR), Little Rock, AR 72205
     VA Medical Center
        1011 Honor Heights Drive, Muskogee, OK 74401
     VA Medical Center
        1601 Perdido Street, New Orleans, LA 70112
     VA Medical Center
        921 NE 13th Street, Oklahoma City, OK 73104
     VA Medical Center
        510 E. Stoner Avenue, Shreveport, LA 71101
VISN 17
     VA North Texas Healthcare System
        - 1201 E. 9th St., Bonham, TX 75418
        - 4500 S. Lancaster Road, (Bldg. #44), Dallas, TX 75216
        - 4500 S. Lancaster Road, (Bldg 2j Dock), Dallas, TX 75216
     VA Central Texas Veterans Healthcare System
        1901 Veterans Memorial Drive, Temple, TX 76504
     VA South Texas Veterans Healthcare System
        7400 Merton Minter Blvd, San Antonio, TX 78229
     VA Outpatient Clinic
        2901 Montopolis Drive, Austin, TX 78741
     VA Outpatient Clinic
        300 West Rosedale Street, Fort Worth, TX 76104
     VA Supply Warehouse
        3600 Memorial Boulevard, Kerrville, TX 78028
     Brownwood CBOC
        2600 Memorial Park Drive, Brownwood, TX 76801
     Cedar Park CBOC
        701 E. Whitestone Boulevard, Cedar Park, TX 78613
     College Station CBOC
        1605 Rock Prairie Road, College Station, TX 77845
     Palestine Community CBOC
        3215 W. Oak Street, Palestine, TX 75801
VISN 18
     VA Amarillo Healthcare System
        6010 Amarillo Boulevard, W. Amarillo, TX 79106
     VA El Paso Healthcare System
        300 N. Piedras Street, El Paso, TX 79930
     VA New Mexico Healthcare System
        1501 San Pedro Drive SE, Albuquerque, NM 87108
     VA N. Arizona Healthcare System
        500 N. Hwy 89, Prescott, AZ 86313
     VA Medical Center
        650 E. Indian School Road, Phoenix, AZ 85012
     VA S. Arizona Healthcare System
        3601 S. 6th Avenue, Tucson, AZ 85723
     VA W. Texas Healthcare System
        300 Veterans Boulevard, Big Spring, TX 79720
     VA Outpatient Clinic
        6104 Avenue, Q South Drive, Lubbock, TX 79412
VISN 19
     VA Medical Center
        2360 E. Pershing Boulevard, Cheyenne, WY 82001
     Eastern Colorado Healthcare System
        1055 Clermont Street, Denver, CO 80220
     VA Montana Healthcare System
        1892 Williams Street, Fort Harrison, MT 59636
     VA Medical Center
        2121 N. Avenue, Grand Junction, CO 81501
     VA Salt Lake City Healthcare System
        500 Foothill Drive, Salt Lake City, UT 84148
     VA Medical Center
        1898 Fort Road, (Bldgs. #35 & #71), Sheridan, WY 82801
     VA Outpatient Clinic
        1300 Fortino Boulevard, Suite B, Pueblo, CO 81008
     Miles City Clinic and Nursing Home
        210 S. Winchester, Miles City, MT 59310
VISN 20
     VA Medical Center
        500 W. Fort St., Boise, ID 83702
     VA Medical Center
        3710 SW US Veterans Hospital Road, Portland, OR 97239
     VA Medical Center
        4th Plain & St. Johns Road, Vancouver, WA 98661
     VA Roseburg Healthcare System
        913 NW Garden Valley Boulevard, Roseburg, OR 97470
     VA Puget Sound Healthcare System
        1660 S. Columbian Way, Seattle, WA 98108
     VA Medical Center
        4815 N. Assembly Street, Spokane, WA 99205
     VA Medical Center
        77 Wainwright Drive, Walla, Walla, WA 99362
     Southern Oregon Rehabilitation Center & Clinics
        8495 Crater Lake, White City, OR 97503
     Oregon Veterans Home
        700 Veterans Drive, The Dalles, OR 97058
VISN 22
     VA Loma Linda Healthcare System
        11201 Benton Street, Loma Linda, CA 92357
     VA Long Beach Healthcare System
        5901 E. 7th Street, Long Beach, CA 90822
     VA Greater L.A. Healthcare System
        11301 Willshire Boulevard, Los Angeles, CA 90073
     VA So. Nevada Healthcare System
        P.O. Box 360001, N. Las Vegas, NV 89036
     VA San Diego Healthcare System
        3350 La Jolla Village Drive, San Diego, CA 92161
     VA SepuAE1lveda Ambulatory Care Center
        Bldg. 200, 16111 Plumber, N. Hills, CA 90073
Hawaii
     VA Pacific Island Healthcare System
        459 Patterson Road, Honolulu, HI 96819
     VA CBOC--Hilo
        1285 Waianuenue Avenue, Suite 211, Hilo, HI 96720
     VA PTSD Residential Rehabilitation Program--Hilo
        891 Ululani Street, Hilo, HI 96720
     VA CBOC--Kona
        75-5995 Kuakini Highway, Suite 413, Kailua-Kona, HI 96740
     VA CBOC--Kauai
        3367 Kuhio Highway, Suite 200, Lihue, HI 96766
     VA CBOC--Maui
        203 Ho'ohana Street, Suite 300, Kahului, HI 96732
     VA CBOC--Guam
        US Naval Hospital, Bldg. 1, E-200, Box 7608, Agana Heights, 
        Guam 96919
Alaska
     Alaska VA Healthcare System
        2925 Debarr Road, Anchorage, AK 99508
                     other government agency (oga)
Indian Health Services
     National Supply Service Center
        501 NE 122nd Street, Suite F, Oklahoma City, OK 73114-8138
     WW Hasting Hospital
        100 S. Bliss, Tahlequah, OK 74464
     Claremore Indian Hospital
        101 S. Moore Street, Claremore, OK 74017
     Choctaw Nation Health Care Center
        1 Choctaw Way, Talihina, OK 74571
     Lawton IHS Hospital
        1515 Lawrie Tatum Road, North of Lawton, Lawton, OK 73507
     Choctaw Nation Health Clinic
        902 East Lincoln Road, Idabel, OK 74745
     Choctaw Nation Health Center
        P.O. Box 340, 410 North M. Hugo, OK 74743
     Rubin White Health Clinic
        109 Kerr Avenue, Poteau, OK 74953
     Choctaw Nation Clinic
        1300 Martin Luther King Drive, Broken Bow, OK 74728
     Choctaw Nation Health Center
        1127 S. George Nigh Expressway, McAlester, OK 74501
     Choctaw Health Center
        210 Hospital Circle, Philadelphia, MS 39350-6781
     Wewoka Clinic
        P.O. Box 1475, US State Highway 56 & 270 Junction, Wewoka, OK 
        74884-1475
     Clinton IHS Health Center
        Rt. 1, Box 3060, Clinton, OK 73601-9303
     El Reno Health Center
        1631-A East Highway 66, El Reno, OK 73036-5769
     Watonga Health Center
        Rt. 1, Box 34-A, 1 Mile S on Highway 281, Watonga, Oklahoma 
        73772
     Cherokee Indian Hospital
        HC-1 Box 9700, Kickapoo Tribal Health Reservation, Rosita 
        Valley Road, Cherokee, NC 28771
Federal Bureau of Prisons
     Federal Correctional Complex
        5880 State Highway 67 South, Florence, CO 81226-7500
     Federal Correctional Complex
        Federal Medical Center, Old North Carolina Highway 75, Butner, 
        NC 27509

    Question 4. In a staff briefing, VA stated that their industrial 
fee was lower than any other Federal agencies. Do you intend to adjust 
this fee in light of the increased costs associated with restructuring 
the Acquisitions Department? What do you anticipate the cost of the 
restructuring to be?
    Response. At this time, VA does not plan to increase the industrial 
funding fee (currently at 0.5 percent). The Department plans to charge 
fees for contractual services provided by the new organization and to 
use the flexibility of the Supply Fund to manage restructuring costs. 
The Department will have better projections of the cost of 
restructuring as we continue to define the new organization. The 
implementation plan for this restructuring is anticipated to be 
complete by the end of the third quarter of FY 2010.

    Question 5. Mr. Brown testified that program officers are 
responsible for oversight of the programs, while contracting officers 
are only responsible for the contracts. How do contracting officers 
communicate with program managers to ensure that the terms of the 
contract comply with the quality standards of the program?
    Response. (Please note this question references testimony given by 
Mr. Brown. However, this testimony was actually provided by Mr. 
Frederick Downs, Jr., Chief Prosthetics and Clinical Logistics Officer, 
Veterans Health Administration.) Contracting officers (CO) are actively 
engaged with program managers in the acquisition planning phase of the 
procurement process to ensure that appropriate contract administration 
procedures are established including: (a) a list of terms and 
conditions related to administration functions; b) contract milestones; 
(c) Quality Assurance Guidelines; (d) Inspection and Acceptance 
procedures; and (e) modification process. Contracting Officer's 
Technical Representatives (COTRs) are subject matter experts in given 
program offices and communicate and serve as a bridge between the 
Contracting Officers and Program Offices. The CO delegates limited 
oversight functions to the COTR to ensure the contractors' performance 
and delivery schedule are in accordance with the terms and conditions 
of the contract. Any issues related to the terms and performance of the 
contract is reported to the CO by the COTR. The CO then communicates 
with the program office based on the method of communication 
established at the pre-award meeting.

    Question 6. VA employs individuals who purchase goods or services 
for the agency who are not GS-1102 contract specialists. In what 
acquisitions and purchasing roles are these individuals currently 
utilized?
    Response. Warranted non-1102 purchasing agents are used for small 
purchasing activities of supplies, services, and prosthetics equipment 
for open market procurements below the simplified acquisition threshold 
(SAT) ($100,000), and delivery and task orders up to the maximum order 
limit against Federal supply schedule contracts.

    Question 7. VA informed staff in a briefing that VA intends to 
certify purchasing agents who are not GS-1102 contract specialists. 
What are the advantages to certification? Has VA engaged AFGE or other 
employee organizations about this potential change?
    Response. Certifying non-1102 purchasing agents offers several 
advantages and benefits to VA including:

    (a) Standardizing core training, education and experience 
requirements to assure uniformity of performance and acquisition 
standards;
    (b) Developing a trained, professional corps of acquisition 
professionals skilled and dedicated to deliver the best value in 
supplies and services to the agency and the Government;
    (c) Certifying supports the implementation of the Office of Federal 
Procurement Policy Letter 05-01, Developing and Managing the 
Acquisition Workforce to better train and establish contracting and 
procurement personnel; and
    (d) Standardizing small purchasing procedures and processes across 
VA constituent agencies and offices.

VA will reach out to AFGE and relevant employee groups once 
certification standards and practices are established to preserve 
collective bargaining agreements and to enhance employee participation 
in improving agency acquisition practices.

    Question 8. If contractors for dialysis services change, are 
veterans already receiving dialysis offered the option of continuing at 
the same facility, or are they required to change to a new facility?
    Response. When contracts are established, VHA will make an 
assessment on the appropriate timeframe to move patients to a new 
contract. These decisions are based on clinical needs of the Veterans. 
If there are no clinical concerns, VA will transition Veterans to new 
contract providers, which may entail referring patients to a different 
facility. This change will also consider an appropriate transition time 
to assure quality of care is not impacted. In the case of this specific 
dialysis contract, assessments are made concerning the most clinically 
appropriate setting, Veterans are notified in advance of VA's decision 
and when appropriate, provided clinical appeal rights and due process.

    Question 9. In the Independent Budget for FY10, the following 
statement appears on p. 145: ``VA does not track this care [purchased 
care], its related costs, outcomes, or customer satisfaction levels.'' 
Is this true for care purchased by VA on a fee-for-service basis? If 
so, does VA intend to change the current process?
    Response. VHA does track and monitor purchased care, including 
those services purchased under contracts or in the traditional fee-for-
service program. Monitors of expenditures occur on a routine basis, 
both at the VA Medical Center level and the enterprise level. Within 
contracts, VHA track results based on the clinical services purchased. 
For example, when diagnostic services are purchased under a contract, 
VHA includes this documentation in its electronic medical record. 
Contractual metrics are tied to each contract. Within Project HERO, 
metrics are received on a monthly and quarterly basis. Monthly metrics 
include items such as patient wait times, appointments received within 
30 days of request, and return of clinical information (30 day 
standard).
    At present, customer satisfaction is routinely assessed as a 
component of the Project HERO program. VHA is developing an initiative 
to expand this customer satisfaction assessment to all purchased care 
services. This initiative is currently in the initial planning phases.

    Question 10. Do all facilities process claims from private 
providers for fee services in the same way? If not, how do processes 
vary, and what is being done to create an IT infrastructure that would 
permit standardization?
    Response. Although the organizational structure for processing 
claims varies among facilities, VA uses its standardized software 
product, known as ``VistA Fee'' to process Fee Basis claims for 
payment. The processing of claims for services purchased by contract or 
sharing agreement may be accomplished using means other than VistA Fee, 
such as online certification.
    VistA Fee was developed in the mid-1990s. Its automated processing 
capabilities need modernization to keep abreast of coding, billing and 
payment changes in the industry, such as automated code-editing 
practices, as well as updates to its processing capabilities to 
accommodate legislative changes.
    A full analysis of the existing and future needs of a claims 
processing replacement system for all VA-purchased care is underway. In 
the interim, VA is installing a commercial off-the-shelf (COTS) product 
on top of VistA Fee, the Fee Basis Claims (FBCS) that improves 
inventory management through use of scanning capabilities, claims 
editing, and automated processing capabilities in the payment of non-VA 
health care claims.

    Question 11. Exactly how many current contracts for health services 
does VA have, and how does VA track performance under those contracts? 
This should include two categories: all contracts paid for out of the 
medical services appropriation, and a second category for those 
contracts paid for from other sources.
    Response. The VA Electronic Contract Management System (eCMS) 
currently contains 4,524 active Health Care Resources contracts. 
Contracting Officers (COs) assign a designation of health care when 
entering contract records into eCMS based on the type of service being 
procured, not by funding/appropriation. VA eCMS, owned by the Office of 
Acquisition and Logistics (OA&L), is the official system of record for 
VA contract actions. The system currently does not have the 
functionality to allow VA to pull databased on the funding/
appropriation codes.
    COs track contract performance by obtaining contract performance 
information from their designated Contracting Officer Technical 
Representative (COTRs). Through the issuance of the COTR delegation of 
authority, COs delegate routine contract administration functions, 
which includes monitoring contract performance to their COTRs. The role 
of the COTR is to monitor the contractors' performance to ensure 
performance conforms to the contract's terms and conditions, and to 
elevate any concerns, issues, or suggested actions to the COs as 
necessary. COs also advise contractors of identified performance issues 
and request action plans to resolve issues. COs utilize all remedies 
available under VA and Federal Acquisition Regulations to deal with 
contractors that fail to perform. Performance issues are documented 
accordingly in the contract file.

    Question 12. VA has a goal of completing contract renewals in 140 
calendar days or 240 calendar days in the event a pre-award review is 
necessary. Vendors have reported to the Committee that GSA completes 
this process in 60 days or less. Why does it take VA longer to complete 
contract renewals?
    Response. VA's Procurement Reform Taskforce (PRTF) established a 
metric of 180 calendar days to complete a Federal supply schedule (FSS) 
offer negotiation, which is the standard used to measure progress under 
the program. Procedural Guideline #22, an internal VA document 
establishing contract audit procedures, also provides for an additional 
90 calendar days for the Office of Inspector General to complete any 
required pre-award reviews. General Services Administration (GSA) 
confirmed with VA that its normal processing times are in line with 
what VA experiences. There are two major differences between VA and GSA 
program management. These are:

    (a) GSA implemented a Quick Program allowing for some offers to be 
streamlined and completed within 30 work days. These offers must meet 
specific criteria to include having a structured commercial pricing 
scheme and a straight forward, streamlined proposal. Also, these 
vendors must complete pre-offer training assignments requiring 
completion of various compliance checks prior to even submitting offers 
for consideration. VA is currently moving toward implementing a similar 
program, limited to select offers that can be identified as straight 
forward and meeting pre-offer training requirements. VA is currently 
formulating the requirements and processes needed for this type of 
program. The program draft is expected to be completed in June 2010. 
Once approved, all FSS solicitations will be updated to include the 
provisions for the Quick Program including the requirement for pre-
offer training. We expect the program will be in place by December 
2010.
    (b) For offers that do not meet the criteria for the Quick Program, 
mainly those offers from current or past FSS contractors who had annual 
Federal sales of $3 million or more, a pre-award review must be 
performed. VA, with GSA's approval, continues to maintain the 
requirement for pre-award reviews. This adds time to the process, 
increasing overall workload and overall processing times. VA not only 
establishes and awards the FSSs for health care related products and 
services; it also has a vested interest as a buyer. Because the health 
care industry has a complex matrix of customers and related terms and 
conditions, VA performs these pre-award reviews to ensure a fair and 
reasonable price is attained. It should be noted that the GSA timeline 
for processing offers which do not fall under the Quick Program, is 
comparable to VA's timeline.

    Question 13. VA's Office of Inspector General Report 05-01670-04 
(October 15, 2007), as well as an earlier report from 2001, recommends 
that medical device manufacturers be required to contract directly with 
the Federal Government. What is VA's position on this recommendation?
    Response. VA believes mandating that all medical device 
manufacturers deal directly with VA would prevent many small businesses 
from doing business with VA and/or other Federal agencies. Many 
manufacturers do not have a distributor network to sell and fill 
orders. Additionally, those manufacturers with an established 
distributor network may be forced to renegotiate contracts with 
distributors as a VA mandate may put the firms in ``breach of 
contract'' with those distributors.

    Question 14. In VISN 23, the Black Hills VA Health Care System was 
budgeted for $17 million in FY10 for non-VA care, but spent $25 million 
in FY09. How much of the spending in FY09 is for care furnished under 
Project HERO, and how is it that this system would budget for less non-
VA care in FY10 than was incurred in FY09?
    Response. In FY09, Black Hills Health Care System (BHHCS) spent 
$185,254 on care purchased through the Project HERO contracts with 
Humana Veterans Healthcare Services and Delta Dental Federal Services. 
Overall spending for care purchased in the community by Black Hills in 
FY09 was just over $25M. The budget for FY2010 in Black Hills for 
purchased care is $24M. Throughout VISN 23, VAMCs are working to 
maximize the use of ``within VA network'' resources where possible and 
to assure efficient use of non-VA Healthcare dollars when referrals 
into the community are necessary. Black Hills is expected to gain 
efficiencies through effective screening to assure referrals are in 
line with evidence-based care and use of Project HERO where available 
and when there is a cost-benefit. Therefore, the budget for FY10 is 
less than the FY09 actual spending.

    Question 15. How many complaints has VA received from veterans 
concerning the timeliness or quality of compensation and pension 
examinations provided by VHA compared to those provided under contract? 
Describe the actions taken to address such complaints.
    Response. VA sends customer surveys to Veterans for each contract 
medical exam they attend. The majority of complaints or comments are 
received through this medium, although Veterans occasionally contact 
their local Regional Office (RO) with a concern. The chart on the next 
page summarizes surveys received regarding timeliness and quality.

    Table 1.--Contract Exams Customer Service: Timeliness and Quality
                   January 26, 2009-September 25, 2009
------------------------------------------------------------------------
                                                            Veterans
                Surveys    Veterans   Veterans  ``very     ``somewhat
 Contractor    Returned   waiting  >   dissatisfied''    dissatisfied''
                            1 hour      with examiner     with examiner
------------------------------------------------------------------------
MES            4,456       91          81                52
QTC           34,199      754         617               661
------------------------------------------------------------------------

    To address complaints, Compensation & Pension (C&P) contacts the 
contractors and asks them to contact the Veteran. The contractor then 
reports the status to VBA. If an acceptable outcome is not achieved, 
the contractor is either asked to not utilize the examiner again or to 
put the examiner on notice.
    VA has no record of receiving Veterans' complaints about the 
timeliness or quality of compensation and pension examinations 
performed by VHA vis-a-vis those performed by contract providers. 
However, the Compensation and Pension Examination Program (CPEP) is in 
the process of developing a VHA C&P customer satisfaction survey. The 
survey questions have been field-tested and are awaiting OMB 
approval.

    Question 16. Describe the procedures for identifying VHA and 
contracted C&P examiners whose examinations or reports do not comply 
with VA policy, and the actions taken when non-compliance is 
identified.
    Response. VBA does not have access to information from VHA for a 
comparison. Each medical disability examination administered by a 
contractor for C&P is reviewed for quality based on Automated Medical 
Information Exchange (AMIE) worksheet compliance. Each contractor's 
Quality Analysis staff completes a review prior to releasing the 
examination for RO use. If the RO finds a problem with the completed 
examination, they notify the contractor and the C&P Service Contract 
Exam staff. The contractor will have the sub-contractor fix the issue, 
and the Contract Exam staff will request retraining of the examiner on 
the particular issue. If the situation arises again after retraining 
has been attempted, the contractor is asked not to use the examiner 
again.

    Question 17. What actions does VA take when non-compliance with VA 
policy or procedure is identified?
    Response. When VBA finds that contracted medical disability exams 
were not compliant with VA policy and procedures, the contractor is 
instructed to cease sending Veterans to the sub-contractor for C&P 
examinations.

    Question 18. How many examiners were identified during the past 
three years which resulted in VHA taking corrective action, such as 
performance improvement plans?
    Response. The CPEP exam review process is used as an aggregated 
measure of performance, tracked by exam type and rolled-up at the VISN 
level for performance measure tracking. Between 700-800 unique 
examiners are evaluated each month through random sampling of C&P 
examinations. CPEP releases individual examination report scores, which 
can be used by medical center management to identify and address 
specific performance issues. However, there is no centralized authority 
for remediation or tracking of individual performance-related actions 
at VHA field sites.
    Recognizing this is an issue, VHA is in the process of re-examining 
the CPEP Program with the intent of re-designing the quality review 
process to incorporate field-based peer reviews, larger numbers of 
monthly reviews, and the ability to identify deficits and implement a 
central remediation program. Implementation of this change should begin 
within the next calendar year.
    CPEP has addressed the issue of improving provider performance 
through multiple education strategies. Over the past three years, CPEP 
has conducted three multi-day training conferences (attended by VBA and 
VHA staff) and a number of regional and local training sessions. CPEP 
evaluates approximately 160-300 monthly requests for scoring appeals, 
which serves as an educational tool through the appeals feedback 
mechanism. In addition, the CPEP examination quality and timeliness 
scores are part of the VISN and medical center leadership's performance 
plan.
    CPEP reporting demonstrates improvement from around 40 percent for 
the quality review scores in 2003 to a high of above 90 percent 
approximately 3 years ago. It is recognized that, although there has 
been significant improvement, a plateau has been reached and changes to 
the review process and educational efforts must be instituted. CPEP's 
educational material is under evaluation with new training modules in 
development for Muskuloskeletal, General Medical and Foot examination 
types. Audiology is being evaluated as a fourth training module effort. 
ATraumatic Brain Injury module has been activated within the past 45 
days.

    Question 19. How does VA determine and monitor the amount of time 
needed to conduct compensation and pension examinations?
    Response. For C&P medical disability examination contracts, times 
are based on the Current Procedural Terminology (CPT) codes. The 
following codes are used to report evaluation and management services 
provided in the physician's office or in an outpatient clinic: 99203: 
30 minutes, 99204: 45 minutes, and 99205: 60 minutes. An initial post-
traumatic stress disability examination time of 90 minutes is built 
into the contracts. C&P MDEs take more time than standard medical exams 
due to their complexity.

    Question 20. Provide a list of the amount and percentage of budget 
allocated to the conduct of compensation and pension examinations in 
each VISN, broken down by VA and local contractors.
    Response. The information below covers medical disability 
examination contracts administered by C&P Service.

               Table 2.--FY 2009 Expenditures at QTC Sites
------------------------------------------------------------------------
                      VISN                           %        Amount
------------------------------------------------------------------------
Boston (VISN 1).................................     1.6      $1,778,348
Roanoke (VISN 6)................................    13.5      15,004,813
Winston-Salem (VISN 6)..........................    11.1      12,337,290
Atlanta (VISN 7)................................    13.2      14,671,372
Muskogee (VISN 16)..............................    12.5      13,893,345
Houston (VISN 16)...............................    12.8      14,226,785
Salt Lake City (VISN 19)........................     1.5       1,667,201
Seattle (VISN 20)...............................    10.9      12,114,997
Los Angeles (VISN 22)...........................     5.5       6,113,072
San Diego (VISN 22).............................     8.4       9,336,328
Louisville (VISN 9).............................     0.8         889,174
Nashville (VISN 9)..............................     0.5         555,734
St. Petersburg (VISN 8).........................     2.4       2,667,522
Waco (VISN 17)..................................     0.3         333,440
Phoenix (VISN 18)...............................     2.9       3,167,683
St. Paul (VISN 23)..............................     0.1         111,147
Lincoln (VISN 23)...............................     2.0       2,222,935
                                                 -----------------------
      Total.....................................   100.0    $111,091,188
------------------------------------------------------------------------



               Table 3.--FY 2009 Expenditures at MES Sites
------------------------------------------------------------------------
                      VISN                           %        Amount
------------------------------------------------------------------------
Cleveland (VISN 10).............................     9.6      $1,002,319
Indianapolis (VISN 11)..........................    23.3       2,438,242
Des Moines (VISN 23)............................     1.8         192,713
Lincoln (VISN 23)...............................     7.8         821,126
St. Louis (VISN 15).............................    19.0       1,993,116
Waco (VISN 17)..................................    38.4       4,022,890
                                                 -----------------------
      Total.....................................   100.0     $10,470,406
------------------------------------------------------------------------


    Question 21. How does VA determine and monitor the amount of time 
needed to conduct compensation and pension examinations?
    Response. Please see the response to #19.

    Question 22. At the hearing, Mr. Baker said that the total amount 
VA spent on outside providers last year, including all health services, 
was $3 billion. Does this number include all contract and fee basis 
services, including Project HERO?
    Response. Yes, the $3 billion number Mr. Baker quoted is the FY 
2008 amount VA spent on outside providers, including Fee Basis and 
Project HERO care paid for through the VistA Fee claims processing 
system. By comparison, FY 2009 expenditures were approximately $3.8 
billion.

    Question 23. Project HERO been described in the media as a $915 
million project. What is the total amount of money spent on Project 
HERO annually since its inception?
    Response. The $915 million described in the media at the inception 
of the Project HERO contracts was an approximation of the maximum 
amount that would be spent for care services purchased through the 
Humana Veterans Healthcare Services award over a five-year contract 
period.
    The following tables show the actual amount of dollars disbursed on 
Project HERO annually since its inception in FY 2008.



    Sources: VSSC Non-VA Care cube was used for disbursed dollars for 
healthcare, and HVHS and Delta Dental report directly on value-added 
fees invoiced.

    Question 24. How many providers, by specialty and location, have 
agreed to provide services to veterans through Project HERO?
    Response. (See Attachment 1 with Delta Federal Services and 
Attachment 2 with detailed lists for Humana Veterans Healthcare, which 
follow).
                      Attachment 1 for Question 24
















                      Attachment 2 for Question 24





















































































    Question 25. Does VA consider Project HERO a success? If so, does 
VA anticipate expanding the project, or similar projects?
    Response. Project HERO has had many successes and challenges, but 
VA cannot expand the current contract. As a demonstration pilot, it has 
been a vehicle to gather invaluable information for VA to better 
understand methods to utilize contracted networks to meet its needs 
when purchasing needed care outside VA medical centers. The Project 
HERO Program Management Office (PMO) gathers, applies and shares these 
lessons learned in this program and other purchased care contracts. VA 
does anticipate a need to continue purchasing health care services in 
the community at some level. Similar projects will be planned to 
improve purchasing capability, impose quality standards, and leverage 
pricing where possible.

    Question 26. How many Project HERO providers work in highly rural 
areas?
    Response. (See Attachments 3 with detailed list of Project HERO 
providers who work in rural areas and Attachment 4 with Project HERO 
Delta Federal Services in rural areas, which follow).
                      Attachment 3 for Question 26






























                      Attachment 4 for Question 26



    Question 27. How would VA improve Project HERO if VA decided to 
expand it or create similar projects in other VISNs?
    Response. While VA cannot expand the existing Project HERO pilot, 
if we were to create similar contracts in other VISNs, we have 
collected many lessons learned that would be applied to future 
purchased care contracts:

    (a) Include broader and more in-depth stakeholder research and 
analysis through facilitated focus group sessions, requirements 
sessions, and improved bi-directional communications.
    (b) Create contracts that are more adaptable to changing VA needs 
and regulations.
    (c) Improve expected clinical quality standards and methods for 
capturing clinical quality information and measures.
    (d) Establish care categories and definitions per industry, Centers 
for Medicare & Medicaid Services, and American Medical Association 
definitions.
    (e) Consider making contract use mandatory as the first care 
purchasing option and if the contracted network cannot meet the need, 
defer to other purchased care methods.
    (f) Establish health care pricing and payment methodologies that 
better reflect commercial market payment processes and rates.
    (g) Include travel time and distance standards for purchased care, 
based on urban, rural, and highly rural situations.
    (h) Create an environment that encourages and promotes physician-
to-physician communication between the VA and community providers.
    (i) Increase the use of VA's Computerized Patient Record System so 
VA and community providers have access to the same patient medical 
documentation, enhancing their ability to optimize Veteran care 
services.
    (j) Implement a provider relations program to improve understanding 
and communication between community and VA providers

    We currently are in the process of assessing future options, using 
a lessons learned survey to begin this process. We intend to use the 
results of the survey to begin an additional independent evaluation of 
the pilot. Both the prior evaluation as well as our future evaluations 
will be comparing the Project HERO results with our control group 
(traditional Fee Basis). Throughout our evaluations, we have used this 
control group to assess impacts of change as well as determine future 
options for improving health care purchasing. Our next independent 
evaluation will assist VA in understanding the full results of the 
demonstration and how these results will inform future health care 
purchasing processes. As the demonstration contract has two remaining 
years, we intend to initiate this external review in Q1, FY11.

    Question 28. Are there widespread delays in the process to relocate 
existing CBOCs? For example, I have been told that the relocation of 
the Raton Community-Based Outpatient Clinic (CBOC) in New Mexico has 
been especially delayed.
    Response. There have indeed been delays in obtaining leased 
community based outpatient clinics (CBOC) in New Mexico (NM) and these 
lease process delays are of significant concern to facility and 
Veterans Integrated Service Network (VISN) 18 leadership. Setbacks in 
particular locations such as Raton, NM, occurred while seeking leases 
for facilities that would enable the level of care our Veteran clients 
deserve. Five lease extensions were recently executed and VISN 18 
leadership is taking swift and strong action to improve contracting for 
leases so that every patient in every clinic receives the highest level 
of care possible. Enclosed is a fact sheet that provides details on the 
status of leases in New Mexico.
    Prior to 2008, contracting officers (COs) in VISN 18 operated in a 
decentralized model at each medical center, and the COs accomplished 
both contracts and leases, functioning in a generalist approach to 
tasks. The Network Director determined that creating centralized VISN-
wide teams specializing in areas such as leases, construction, and 
medical sharing would be more productive and enhance staff skills in 
these complex areas. As part of this centralized approach, 19 
additional staff were approved including a Deputy Contract Manager 
position established to improve oversight in NM and west Texas. The 
Deputy was hired in October 2009, and one of her top priorities is to 
manage the lease program to assure activities are completed timely and 
in accordance with prioritized needs. Directed and streamlined 
attention to the leasing process will expedite the implementation of 
proposed new lease contracts.
    VA is committed to providing quality services to rural Veterans. In 
addition to the planned clinic expansions, there have been many 
advances in service across NM over the past three years. These include: 
implementation of state-of-the-art Telemedicine equipment used for 
Tele-mental health in eight CBOCs; implementation of teleretinal 
cameras to provide retinal exams for diabetic patients in five CBOCs; 
and increased implementation of Care Coordination Home Telehealth 
(CCHT) care. The CCHT program provides devices for Veterans to use in 
their own home to communicate health status to dedicated physician and 
nursing staff at the Albuquerque VA Medical Center, minimizing the need 
to travel for care. An average of 177 patients used this program on a 
daily basis in 2009, and additional funding of $2.3 million will be 
used to further expand this program in 2010.
    VA will continue to explore and implement methods to better serve 
Veterans in rural areas of New Mexico, minimizing the need for travel 
wherever possible.
                  Department of Veterans Affairs (VA)
                               fact sheet
  Status of New Mexico Community Based Outpatient Clinic (CBOC) Leases
    Artesia: Extension of the current lease was executed on January 1, 
2010, and will expire on December 31, 2010. A new lease for expanded 
and improved space will be awarded with occupancy no later than 
December 2011.
    Farmington: Extension of the current lease was executed on January 
1, 2010, and will expire on December 31, 2010. A new lease to expand 
and relocate to improved space will be awarded with occupancy no later 
than June 2011.
    Gallup: The current lease expires on February 28, 2013. A new lease 
for expanded and improved space will be awarded with occupancy no later 
than February 2013.
    Raton: Extension of the current lease was executed for a start date 
of February 1, 2010, and will expire on January 31, 2011. Contracting 
is currently procuring the new lease for expanded and improved space, 
which is anticipated to be awarded by June 2010, with occupancy by 
January 2011.
    Rio Rancho: This is a new lease procurement. Contracting will begin 
the procurement process in February 2010; anticipates an award by July 
2010, and occupancy by January 2011. The Business Plan originally 
developed for this CBOC, approved in June 2008 using Capital Asset 
Realignment for Enhanced Services (CARES) Priority CBOC criteria, 
underestimated demand by Sandoval County Veterans. With the addition of 
anticipated demand for specialty care and dental services, it was 
necessary to revise the Business Plan space requirements and seek 
approval on the corrected plan, which was received during the third 
quarter of Fiscal Year 2009. The VISN has strengthened their Strategic 
Planning process to more accurately project workload growth in order to 
avoid such situations in the future.
    Santa Fe: The current lease expires on October 31, 2012. An 
additional 800 square feet to expand the CBOC at the same location for 
Mental Health services was procured on January 1, 2010, to temporarily 
address needs. A new lease for improved space will be awarded with 
occupancy no later than October 2012.
    Silver City: Extension of the current lease was executed on January 
1, 2010, and will expire on December 31, 2010. An additional extension 
will be issued on January 1, 2011, until December 31, 2011. The lease 
for new space will be awarded on December 1, 2010, for anticipated 
occupancy of January 1, 2012.

Veterans Health Administration
January 2010

    Chairman Akaka. I would like to call the second panel.
    Mary A. Curtis of the Boise VA Medical Center, testifying 
on behalf of the American Federation of Government Employees.
    Tim McClain, President and Chief Executive Officer at the 
Humana Veterans Health Care Services. Mr. McClain served 
previously as VA general counsel.
    Marjie Shahani, Chief Executive Officer at QTC Management, 
Incorporated.
    John L. Earnest, President and Chief Executive Officer of 
the Ambulatory Care Solutions.
    I want to thank all of you for being here this morning. 
Your full testimony will appear in the record.
    Ms. Curtis, will you please begin with your testimony.

STATEMENT OF MARY A. CURTIS, APRN, BC, BOISE VA MEDICAL CENTER, 
  REPRESENTING THE AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES

    Ms. Curtis. Chairman Akaka, Ranking Member and Members of 
the Committee. Mary Curtis is my name. I have been employed at 
the Boise VA since 1989. I am a long-timer I guess you would 
say. I am a Psychiatric Clinical Nurse Specialist since 1997. I 
am also a Clinical Application Coordinator working with the 
information technology department and closely working with CPRS 
which is our Computerized Patient Record System, our electronic 
medical record. I am on numerous committees including quality 
management and process improvement.
    I am really concerned about the way the VA has been using 
more fee-basis care than it needs to. The VA providers do the 
best job; they do a great job and are much more experienced in 
the unique needs of the veterans. But due to staff shortages 
our capacity has not kept up with the need.
    I did hear testimony earlier about C&P exams being 
contracted out. We are fortunate at Boise. Although a very 
small community, we do not contract out our C&Ps. We hire 
retired physicians from the community and bring them in as VA 
employees. They are on a part-time basis. They seem to really 
enjoy doing this.
    They use our computer software which interacts very closely 
with CPRS, so that really improves the quality of the exams.
    But back to the other contracting issues. I will bring up 
an example of our dental services. Our veterans could easily be 
treated by a part-time endodontist within the VA. This would 
not only save money but it would also eliminate the convoluted 
process required to contract out the care and then finalize the 
payment.
    If a veteran is seen by our VA dentist and then requires 
more dental work, a consult and an authorization paperwork have 
to be filled out while the patient is still there. Then the VA 
staff contacts the fee-basis provider for an appointment and to 
verify the treatment plan.
    Many times the reimbursement needs to be negotiated too 
because the VA cap for dental services in Idaho is lower than 
the VA cap for dental services in eastern Oregon, which is part 
of our catchment area.
    Later with the patient in the contract dentist's chair, the 
VA may be contacted to authorize additional procedures which 
increase the dentist's reimbursement but may actually not 
always be needed.
    Our person who authorizes sometimes feels kind of trapped 
to go ahead and authorize that payment since the patient is in 
the dentist's chair.
    So, I surely hope that the VA implements the 
recommendations that the IG made to make sure that the fee-
basis program is properly authorized and reimbursed.
    I am also concerned about Project HERO, which has been up 
and running in the Boise VA for over 2 years now. AFGE received 
a briefing from the HERO program office last week, but, 
unfortunately, a lot of data they provided was incomplete and 
confusing. Overall the briefing raised a lot more questions 
than it really did answer.
    There is so much we do not know about this project. 
Management gets regular briefings but those who are actually 
providing the care have never gotten a briefing.
    No one has ever asked our opinion about the HERO 
contractors prior to renewing their contract to second and 
third years.
    Basically, those of us on the front lines are pretty much 
kept in the dark when it comes to Project HERO even when it 
affects the veterans we care for.
    When we are contacted by the patients who have been 
referred to HERO and have questions or problems, we are not 
allowed to intervene or talk directly to Humana or to Delta 
Dental to smooth things out. All we can do is transfer the 
veteran to our fee-basis office.
    I really think that the veterans and the VA health care 
system would be better served if the clinicians on the front 
lines, myself included, were involved more in the contract care 
process and received training on how this process actually 
should work.
    My colleagues in VISN 23 tell me that their directors have 
mandates to send all contract care referrals through Project 
HERO first even when we have a fee-basis provided we already 
know and trust lined up.
    If HERO cannot find a network provider, the veteran's care 
is delayed until they can find one or decide that the case has 
to be sent back to the VA.
    In my VISN, which is VISN 20, there has been a similar push 
to use HERO over our own fee-basis providers during the last 2 
years. HERO claims that they save the VA about $3 million, but 
it appears that they charge referral fees for each appointment 
they arrange even if they call them ``fees for value-added 
services'' like appointment setting, clinical information 
return, and claims payment, which are not applied to really the 
reduced savings.
    They say they are increasing access for rural veterans, but 
HERO has sent some of our veterans hundreds of miles away for 
procedures that could have been done in the community with 
closer fee-basis providers or even right at the VA if we were 
fully staffed.
    The problem is Humana has not been able to build a big 
enough rural network. I suspect that many providers are 
unwilling to contract with Humana or Delta Dental because of 
their low reimbursement rates and other contract terms.
    This is really in the news lately with the million med 
march that is coming tomorrow--providers being unhappy with the 
Medicare fees, Medicaid fees, let alone reduced fees from other 
companies.
    Humana also sold this project to VA based on the promise 
that it would improve access for our rural veterans, but in 
fact, Project HERO is taking over a lot of care for our 
veterans in the urban areas.
    Boise VA is sending veterans to Project HERO for 
dermatology, GI procedures, audiology and podiatry regardless 
of where they live because the VA is short-staffed.
    I maintain a part-time private practice myself in the 
community in addition to my full-time VA job. I was very 
surprised when I was contacted by Humana to join the Project 
HERO provider network since my office is only five miles away 
from the VA.
    In fact, HERO claims that veterans referred to them travel 
roughly the same distance as fee patients. So, why are we 
paying HERO all these extra fees? And that is in their handout 
here.
    HERO also claims that veterans are better off under HERO 
because all clinical information is sent to the VA within 30 
days. But the HERO provider has to first send the records 
through Humana, which increases the risk of delay and lost 
records.
    In contrast, when care is provided inside the VA all 
providers have immediate access to the full electronic medical 
record.
    HERO touts higher patient satisfaction scores, called SHEP 
scores, than the VA; but HERO also acknowledges that, although 
similar, these measures should not be used as direct 
comparisons between Project HERO and SHEP satisfaction scores.
    So, this is only one of many areas where the HERO program 
made confusing or unsubstantiated claims. And I must say also 
that the Boise VA SHEP scores are much higher than what was 
claimed in the Project HERO data.
    In closing, I hope Congress will demand more oversight of 
the HERO Program and do an independent investigation of its 
claims about producing great benefits for veterans within the 
VA.
    I would really like to see the VA return to a time where 
they only used contract care as Congress intended, that is, 
only when the care was truly not available through the VA 
system--where direct patient services would be fully staffed 
and adequately funded with an educated staff. Thank you.
    [The prepared statement of Ms. Curtis follows:]
 Prepared Statement of Mary A. Curtis, APRN, BC, Psychiatric Clinical 
Nurse Specialist and Clinical Application Coordinator, Boise VA Medical 
 Center, Boise, Idaho, on Behalf of American Federation of Government 
                           Employees, AFL-CIO
    Chairman and Members of the Committee: Thank you for the 
opportunity to share AFGE's concerns regarding VA contracts for health 
care services. My name is Mary A. Curtis. Since 1997, I have worked as 
a Psychiatric Clinical Nurse Specialist at the Boise (Idaho) VA Medical 
Center, one of the facilities participating in Project HERO. I am also 
a Clinical Application Coordinator working with computer applications, 
including the Computerized Patient Record System. I work closely with 
Quality Management identifying external peer review and Joint 
Commission issues. I also have a private practice in the community as 
an advanced practice nurse.
                    overutilization of contract care
    AFGE is a long time supporter of the veterans' Independent Budget 
(IB). Every day, my colleagues and I on the front lines of the VA 
health care system strive to achieve the health care principles of the 
IB: ensuring that veterans have access to timely, high quality care and 
a full range of services from a health care system that focuses on 
specialized care, conducts veteran focused research and supports health 
professional education.
    As a mental health provider caring for veterans in a highly rural 
state, I frequently experience the challenge of providing veterans with 
adequate access to health care--a challenge that has increased with the 
growing number of rural OIF/OEF veterans returning home.
    Health care contracts are one of many tools available to the VA to 
increase access for rural veterans and address other gaps in care. The 
Veterans Health Administration (VHA) Office of Care Coordination 
Services has a highly developed Telehealth program. The Office of Rural 
Health is focusing on education and training, workforce recruitment and 
retention and new technologies to develop innovative solutions to rural 
access problems. AFGE thanks Chairman Akaka and Senator Begich for 
introducing the Rural Veterans Health Care Access and Quality Act of 
2009 (S. 734) to attract more health care providers to rural areas and 
increase quality controls over contract care.
    The Boise VA has a strong Community Care Home Telehealth program 
which treats veterans with congestive heart failure, diabetes and other 
chronic conditions utilizing remote equipment for blood pressure 
readings and other tests. We also use telehealth for our implantable 
defibrillator clinic. Our mental health team travels to the Community 
Based Outpatient Clinics (CBOC) and other outpatient settings to 
provide care. Our Vet Center has a new mobile clinic that is able to 
reach veterans in rural areas.
    When choosing between contract care and other means of providing 
care to rural veterans, the VA should balance the benefits of contract 
care against its risks. Contract care requires that the VA give up a 
certain degree of control to a for profit outside entity. In the short 
term, the effect is that the VA may be less able to control costs, 
quality of care, provider qualifications and medical privacy or ensure 
that care is delivered timely and is geographically accessible. In the 
long term, excessive use of contract care may deplete the VA health 
care system of the staff, equipment and other resources it needs to 
continue to provide veterans with a full range of services. The 
diversion of large numbers of veterans to contract providers may also 
weaken VA's research capacity and academic affiliations.
    Congress clearly recognized the risks of sending veterans outside 
the VA for care, limiting the use of health care contracts to specific 
circumstances: geographic inaccessibility, lack of in-house capability 
to furnish the type of care required and medical emergencies (38 U.S.C. 
Sec. Sec. 1702, 1725 and 1728).
    Unfortunately, medical center directors seeking short term fixes 
for patient wait lists and staff shortages often ignore these criteria 
and opt for fee basis and other costly contract care arrangements 
without adequately considering alternatives that would better serve the 
veteran and VA health care system. As a result, contract care is over-
utilized and under-scrutinized by many VA medical facilities in both 
rural and urban areas.
                             fee basis care
    Many medical center directors justify the increased use of costly 
fee basis care in recent years as the only means of providing care to 
veterans in a timely manner and accessing specialty care, in the face 
of physician recruitment and retention problems. As a result, 
management may end up paying more on a fee basis that it would cost to 
attract providers to the VA workforce.
    AFGE members report that the increased use of fee basis care is 
causing budget shortfalls at a number of facilities, despite record 
funding increases by Congress. Cost overruns from fee care produce a 
vicious cycle: directors impose hiring freezes and defer equipment 
purchases, which trigger the need for more costly contract care.
    The Boise VA would be able to reduce a large number of fee-basis 
consults if we had more providers on staff. Although Boise is a smaller 
facility, we still have a GI clinic staffed by in-house providers who 
perform colonoscopies. Due to limited staffing and space, a high number 
of these procedures have been sent out to the community. Our dental 
department is also short staffed.
    We commend the VA Office of the Inspector General (IG) for its 
comprehensive study of the VA Fee Program (VA OIG Report No. 08-02901-
185). The IG found that the fee program is ``complex, highly 
decentralized and rapidly growing,'' with extensive noncompliance with 
requirements for justifying and authorizing fee services. AFGE strongly 
endorses the IG's recommendation that VHA strengthen controls over this 
program to reduce payment, justification and authorization errors.
                              project hero
    This pilot project is supposed to manage VA contract care more 
effectively than the VA can manage it with its own staff and 
infrastructure. Project HERO essentially injects for profit contractors 
into the contract care process as the intermediary between the VA and 
veterans who may need to be referred outside the VA for care.
    Both the implementation and ongoing operations of Project HERO have 
been conducted largely behind closed doors. Based on the limited 
objective data available and observations by our members in facilities 
participating in HERO, it appears that HERO has little or no ``value 
added:'' HERO contractors are simply not doing a better job managing 
contract care than the VA.
    In fact, there are early signs that the insertion of another layer 
in the contract care process and the use of for profit care 
coordinators have delayed care, left veterans confused and 
dissatisfied, required some veterans to travel further and depleted 
VA's internal capacity to directly manage fee basis care (in addition 
to the larger budget problems resulting from increased spending on 
contract care, as already discussed.)
    It also appears that HERO contract care referrals cost the VA more 
than fee basis referrals it makes directly. The HERO program pays its 
network providers less than they would be paid if they were contracting 
directly with the VA under its fee basis program. Then, it appears that 
HERO contractors bills the VA at a higher rate and also tacks on hefty 
referral fees.
    HERO has failed to build adequate provider networks, especially in 
rural areas where the need is greatest. In fact, it appears that 
providers are reluctant to do business with HERO contractors 
(especially given the low reimbursement rate already mentioned). For 
example, last year, the Idaho Medical Association cautioned its members 
about the problematic terms of the Humana provider contract. An AFGE 
nurse involved with contract care at another VISN 23 participating 
facility reported that several dialysis providers refused to contract 
with Humana. Last year, VISN 23 data indicated that the vast majority 
of veterans referred to HERO had to be referred back to the VA because 
HERO providers were not available.
    We have seen no justification for awarding contracts to Humana and 
Delta for all four pilot VISNs; the use of a different contractor in 
each VISN would have yielded useful comparative information and may 
have better served the unique needs of each area.
    Similarly, despite AFGE's request, HERO has provided no 
justification for renewing the Humana and Dental contracts of the 
second and third years. (The third pilot project year begins on October 
1, 2009; HERO has the option to renew these contracts for a total of 
five years.)
          among the critical questions that remain unanswered:

     How much is Project HERO costing the VA in terms of 
program administration at the national, VISN and local facility levels? 
The Nation magazine (April 9, 2008 issue) described HERO as a $915 
million program, but AFGE is not aware of any specific appropriations 
for the program.
     What does HERO cost the VA compared to fee care arranged 
directly by the VA? What do HERO contractors charge the VA for 
different medical services, and how are referral fees set?
     What share of VA provided care and VA fee basis care has 
been shifted to HERO? Last year, HERO program officials reported to the 
media that the program covered 30% of all veterans enrolled with the 
VA. At a September 23rd briefing for AFGE, HERO program staff told AFGE 
that ``HERO contract use is less than 2% of VA unique outpatients 
receiving medical care.''
     What criteria were used to award Humana and Delta Dental 
an exclusive contract for all 4 pilot VISNs? What criteria were used to 
renew these contracts year?

    It does not appear that Project HERO has achieved any improvements 
in the Boise VA's fee basis program. The Boise VA has had a good 
relationship with contract providers within our catchment area, 
including dentists for our OIF/OEF veterans. But Project HERO has made 
arrangements with providers for reimbursement of less than the Medicare 
rate and it can be difficult to find willing providers within a 
reasonable distance. For example, a veteran referred to HERO was 
expected to get his colonoscopy 500 miles away from his home.
    At Boise, the use of an outside entity to arrange contract care has 
added another unnecessary administrative layer for staff who act as 
liaisons between patients and community providers. VA staff is 
prohibited from contacting Humana when patients have questions or need 
to change their appointments. All we can do is refer them to Fiscal 
Services. We are not allowed to give any phone numbers to the patients. 
As a result, patients get very frustrated and upset with us, but there 
isn't much we are permitted to do to assist them.
    Also, Project HERO dentists in the Boise area have refused to see a 
patient until additional procedures are approved in order to increase 
their reimbursement, which has not been a problem with local contracts 
under the fee program.
                               conclusion
    On July 29, 2009, the Office of Management and Budget directed 
Federal agencies to end their overreliance on contractors, conduct an 
inventory of their in-house and contract workforces, and bring 
appropriate work back into the government. AFGE urges the Committee to 
ensure that the VA aligns its health care contract policies with this 
historic new directive, including an inventory of all pending contracts 
for health care and an assessment of contract care functions are more 
appropriately performed in-house.
    More specifically, through Project HERO, the VA has outsourced a 
function that has traditionally been performed in-house: determining 
whether a veteran should receive medical care from an outside provider 
rather than the VA. Second, the VA has outsourced the operation of a 
large number of CBOCs; the IG recently identified a number of problems 
associated with contract outpatient clinics (Report Number 09-01446-
226, 9/23/2009). Third, Congress continues to authorize the use of 
contractors to conduct C&P exams for disability claims, despite mixed 
evidence of using the benefits of using a for profit contractor rather 
than providing the VA with additional staff and training to perform 
more of these exams in-house.
    AFGE also recommends joint labor-management training on the VA fee 
program. Informed staff working on the front lines of VA health care 
can play a valuable oversight role in assessing whether fee basis 
determinations are properly justified and authorized.
    Finally, Congress should withhold funding for the fourth and fifth 
option years of Project HERO and any further expansion of the pilot 
pending an investigation of its actual costs, its impact on health care 
quality and access, and on VA's internal capacity to manage contract 
care. We commend Senate appropriators for including HERO oversight 
language in the FY 2010 VA appropriations bill report (Senate Report 
111-040), and urge this Committee to ensure that the VA complies with 
the requirement to report to Congress by October 30, 2009.

    Thank you for the opportunity to testify on this issue.

    Chairman Akaka. Thank you very much, Ms. Curtis.
    Mr. McClain.

  STATEMENT OF TIM S. MCCLAIN, PRESIDENT AND CHIEF EXECUTIVE 
         OFFICER, HUMANA VETERANS HEALTH CARE SERVICES

    Mr. McClain. Thank you, Mr. Chairman.
    I am Tim McClain, President and CEO of the Humana Veterans 
Health Care Services, Inc., the contract partner with VA in 
Project HERO.
    I am accompanied today by my Chief Operating Officer, Mr. 
Brad Jones, and also present is Joanne Webb, a member of our 
advisory board and a tireless advocate for veterans.
    On behalf of the dedicated employees of Humana Veterans, we 
appreciate the opportunity today to discuss this very important 
demonstration project.
    As you are aware, the veteran-friendly concept for Project 
HERO was congressionally inspired. VA was asked to develop a 
pilot project in partnership with a commercial company to focus 
on improved administration and outcomes for veterans referred 
to community providers for specialty health care or other 
services.
    Through collaborative efforts and a close partnership, 
Humana Veterans and VA concentrated on three areas that became 
the hallmarks for Project HERO: quality health care services; 
timely access to care; and cost-effective care.
    The collaboration with VA has resulted in what we described 
as the HERO model. The model is more fully described in my 
written statement, but it is specifically designed to enhance 
the veteran's overall experience and ensure the quality of 
health care delivery by a community provider.
    Since my arrival at Humana Veterans as CEO in July of this 
year, I have emphasized that the model must be veteran centric. 
I can best describe the theory of the HERO model as an 
extension of the respect and atmosphere shown to veterans 
within VA's four walls.
    Many veterans feel a special sense of belonging when they 
are in VA facilities as they are surrounded by other veterans 
and VA's very caring staff. That feeling may go missing for the 
most part when a veteran goes into the civilian community.
    The Project HERO model is designed to metaphorically place 
a firm but gentle hand on the veteran's shoulder and guide the 
veteran through the maze of care outside VA. The hand remains 
on his or her shoulder until the veteran returns to the primary 
care VA doctor.
    During the journey the veteran receives various 
personalized services that comprise the HERO model, as I stated 
in my written statement.
    The employees of Humana Veterans are proud of what we have 
accomplished in the past 21 months. However, we realize that 
there have been bumps and hurdles along the way and certain 
individuals and organizations have expressed concern about 
Project HERO. Through collaboration and innovation, we are 
working through each of the concerns and issues with our VA 
partners.
    For example, although not required in the written contract, 
we have implemented a data repository, called ``Data Mart.'' 
One of the major advantages of the Project HERO model is data 
availability and accountability through the contract metrics.
    Another advantage is the planned online issue resolution 
system that is under development at Humana Veterans. Issues 
raised at any VA site by veterans, by the fee office, or indeed 
by Humana Veterans, will be given a tracking number, assigned 
to a responsible office, and tracked until a resolution has 
been formed and implemented. In our view, each issue resolved 
contributes to better quality health care for veterans.
    One significant issue we have identified is the unexpected 
low volume of HERO utilization in the four demonstration VISNs. 
We believe the HERO model has now developed to the point where 
an increase of referral volumes is required to fully test the 
HERO model.
    I want to emphasize this is not an increase in outsourced 
care. The fee office decides whether to send a preauthorized 
veteran to regular fee-based care or to Project HERO. So, we 
are simply asking for an increase of the number of veterans 
already going into community care to go to HERO.
    We encourage the Committee to recommend VA fully engage in 
this demonstration project to show what a true veteran-centric 
model can do for veteran services in the community.
    Mr. Chairman, thank you for the opportunity to discuss 
Project HERO and the important contributions it is making to 
quality veterans health care, and I will be glad to answer any 
questions.
    [The prepared statement of Mr. McClain follows:]
    Prepared Statement of Tim S. McClain, President and CEO, Humana 
                   Veterans Healthcare Services, Inc.
                              introduction
    Chairman Akaka, Ranking Member Burr, and Distinguished Committee 
Members, Thank you for the opportunity to address the Committee on 
Project HERO (Health Care Effectiveness through Resource Optimization) 
and the supporting role Humana Veterans Healthcare Services plays in 
the delivery of excellent health care to our Nation's Veterans.
    On behalf of the dedicated men and women of Humana Veterans, I 
appreciate the opportunity to provide information to the Committee on 
the three hallmarks of Project HERO: 1) Quality health care services 
for Veterans; 2) timely Access to care; and, 3) Cost effective care.
    I am President and CEO of Humana Veterans, the contractor 
responsible for providing health care services for the Veterans Affairs 
Project HERO demonstration and welcome this opportunity to discuss the 
objectives, successes and efficiencies of Project HERO, that make it a 
clear benefit to the Department, and most importantly, to the Veterans 
relying on VA for excellent medical care.
                       humana veterans background
    Humana Veterans, headquartered in Louisville, Kentucky and 
incorporated in 2007, was established to develop and implement 
solutions for Veterans' health care issues. It provides an 
organizational structure that is flexible, agile, and responsive to the 
emerging requirements of the Department of Veterans Affairs and the 
Veterans who rely on VA services.
                   overview of project hero contract
    Project HERO is a demonstration project (pilot) currently 
implemented in four Veteran Integrated Service Networks (VISNs). The 
project is congressionally inspired and has developed into a 
partnership between the U.S. Department of Veterans Affairs, Veterans 
Health Administration (VHA) and Humana Veterans.
    Humana Veterans was awarded the contract for medical/surgical, 
mental health, diagnostics and dialysis for Project HERO on October 1, 
2007. Delta Dental Federal Services (Delta Dental) was awarded the 
contract for dental services. My testimony today addresses only the 
partnership between the VA and Humana Veterans and does not intend to 
address the contract awarded to Delta Dental.
    The purpose of the project is to determine how a personalized 
services approach to care provided outside the VA (traditionally termed 
``fee-based care'') can improve and complement timely access to care, 
quality of care, and preserve the fiscal integrity of VA health care 
expenditures, while maintaining high customer satisfaction. Project 
HERO has succeeded in all of these areas.
    As displayed in the map in the attached Appendix, HERO is currently 
a four-VISN demonstration including the Sunshine Healthcare Network 
(VISN 8); South Central Healthcare Network (VISN 16); Northwest 
Healthcare Network (VISN 20); and the Midwest Healthcare Network (VISN 
23). We understand VA selected these four VISNs for Project HERO based 
on their considerable fee-based populations and the significant amount 
of health care funds expended on Veterans care through the VA's regular 
fee-basis program.
                               objectives
    The Project HERO solicitation, sent out to bid in late December 
2006, clearly identified a number of overall objectives for the 
demonstration. These objectives remain steadfast today and are 
objectives Humana Veterans strives to attain as we collaborate with VA 
to improve the level of care provided to our Nation's Veterans outside 
VA facilities. The objectives outlined in the solicitation included:

     Cost--providing cost-effective, consistent, and 
competitive pricing
     Quality of Care--ensuring the quality of community care 
provided
     Patient Satisfaction--achieving high patient satisfaction
     Clinical Information--improving the exchange of patient 
care information between community providers and the VA
     Patient Safety--fostering high quality care and patient 
safety
     Transparency--improving care coordination so all care, 
including care provided outside of the VA, is perceived by the patient 
as VA care
     Clinical Coordination--ensuring efficiency in the VA 
referral process and timely appointments for patients
     Coverage--providing health services to Veterans where and 
when the VA does not have capacity or capability to deliver services 
internally.

    It is important to highlight that we believe Humana Veterans has 
met or exceeded each of the contract objectives to date. The result is 
better health care services to Veterans. While these objectives are 
crucial in providing services for the men and women who have honorably 
served our Nation, there is a more implicit goal of Project HERO. That 
goal is to combine all of these elements and create a standardized 
method of providing fee-basis care to ensure eligible Veterans gain 
timely access to care, in a manner that is cost-effective to the VA, 
and most importantly, preserves the level of service Veterans have come 
to rely on inside the VA. After nearly eighteen months of working 
diligently with our partners at VA, we believe we are delivering on 
these objectives.
                   contract performance requirements
    The following are the specific performance metrics enumerated in 
the Project HERO contract:
Access
    Appointments with specialists and routine diagnostics are scheduled 
for patients within 30 days of receipt of the referral by the provider 
and the provider will see patients within 20 minutes of their scheduled 
appointment.
Accreditation
    Unless a waiver exists, all network providers must be accredited by 
the Joint Commission (JCAHO), the Commission on Accreditation of 
Rehabilitation Facilities (CARF), the Intersocietal Commission on the 
Accreditation of Vascular Laboratories (ICAVL), or the American 
Osteopathic Association (AOA). Humana Veterans must provide proof of 
accreditation to the VA for providers.
Clinical Information
    All routine clinical information and test results must be returned 
within 30 days from the day of care. For inpatient care, clinical 
information must be returned within 30 days of the patient's discharge.
Credentialing
    Humana Veterans provides written certification to the VA validating 
network providers are credentialed, including physician assistants, 
registered professional nurses, nurse practitioners, and other 
personnel in the network providing health care services to Veterans. 
The VA conducts random inspections of our credentialing files 
guaranteeing this compliance.
Patient Safety
    Humana Veterans reports all patient safety reports/incidents to the 
VA and Contracting Officer Technical Representative (COTR). All patient 
safety events are investigated, confirmed, and resolved and we keep the 
VA informed of the progress in resolving patient safety events.
Patient Satisfaction
    Humana Veterans designated a Patient Advocate with the 
responsibility of receiving patient grievances. We submit all patient 
complaints regarding quality of care to the VISN Patient Advocate and 
COTR. We developed materials outlining the grievance process and we 
assist patients with complaints.
Reporting Requirements
    Humana Veterans submits a monthly report to the VA including 
metrics on contract performance standards plus a variety of other 
metrics. We maintain a data repository (Data Mart) and provide 
unlimited access to the VA. Anyone in the PMO or Fee Office at the VAMC 
level has access to the data and may pull reports on the metrics, after 
they have been granted access by the Contracting Officer Technical 
Representative.
                             misconceptions
    Mr. Chairman, now that I have established the rationale for the 
development of the demonstration, at this point I feel it is also very 
important to address some serious, ongoing misconceptions regarding 
Project HERO. I firmly believe the perpetuation of these misconceptions 
is a disservice to Veterans enjoying the many benefits of Project HERO, 
to VA as it executes this demonstration project, and to Humana Veterans 
as we continue serving Veterans through our HERO Model. I will address 
two misconceptions that emerged early on in the demonstration project 
and continue to linger to some degree today. It is a ``Myth vs. Fact'' 
phenomenon.
Myth Number 1
    Project HERO seeks to undermine the care currently provided inside 
VA facilities, leading to greater levels of care in the community, and 
ultimately diminishing the VA health care delivery system as a national 
treasure for Veterans.
            Fact
    VA and Humana Veterans are clearly in agreement that is false. I 
want to explain why we think this claim is erroneous. As you know, 
traditional VA fee-basis care, and care now provided through Project 
HERO, are authorized and provided only when the requisite capacity 
inside VA does not support the timely access to care or a specialty is 
not available in VA. Simply translated, this means the VA retains 
ultimate control over who enters the community for care, including 
which patients are referred to HERO for personalized services. We 
understand the statutory mandate that the VA must provide care inside 
its' proverbial four walls whenever possible. HERO, and the processes 
developed under it, was created to serve as an effective complement to 
the high quality care VA provides internally, not an initiative to 
supplant it.
    Having said that, we are also aware the VA spends more than three 
billion dollars per year nationally on care outside VA facilities. We 
recognize that the demand for services is often times beyond the 
control of the VA--in such instances as Veterans residing in rural 
areas or the lack of specialty providers available to the VA in a given 
geographic area. HERO could serve as an effective backstop at times 
when the VA's internal capacity is limited and the Veterans' needs 
temporarily exceed the VA's ability to deliver services in a timely 
fashion. This is a clear advantage to the veteran.
Myth Number 2
    Project HERO reduces the need for the VA's current fee-basis 
offices and staff due to services being ``outsourced.''
            Fact
    Mr. Chairman, we have heard this concern for some time, and while 
at face value it may sound like a reasonable suggestion, there is one 
major reason it is not accurate. The reason is the way referrals or 
authorizations for care outside VA are provided to Humana Veterans 
under the HERO Model. All referrals provided to Humana Veterans are 
generated out of the fee-basis offices at local VA facilities. Once a 
VA physician sends a referral to the fee office, it has already been 
determined that the VA does not have the capacity to provide for the 
care of the veteran. In response, the fee office determines what 
specific services are required for a veteran, and then decides what 
avenues are available to the veteran for care rendered outside the VA. 
In contrast to the myth, and based on these well-established, long-
standing processes, the fee office becomes indispensable in the process 
of generating HERO referrals or authorizations, not endangered by it.
    Humana Veterans supports the Veterans Health Administration (VHA) 
in achieving delivery of high quality, accessible, seamless, and cost 
efficient health care services to our Nation's Veterans.
                           project hero model
    Humana Veterans, in collaboration with VA, coordinates quality, 
timely health care services through Project HERO. VA refers patients to 
civilian health care providers when there is a need for specialty care 
or other treatment that is not readily available at the VA facility. 
This is accomplished through a model developed by both VA and Humana 
Veterans, with contract metrics tracked and reported on a monthly 
basis.
    The Project HERO Model includes a personalized service process for 
Veterans and is outlined below.

    (1) First, the veteran receives authorization for care from the VA. 
Before issuing an authorization, the VA determines if the specialty or 
other care is available at a VA facility, if the veteran lives a 
significant distance from that facility, or makes a determination based 
on other medical reasons. The VA then determines whether to send the 
authorization directly to the veteran, send it to the Project HERO 
office at Humana Veterans, or refer the veteran directly to a civilian 
provider.
    (2) When an authorization is sent to Project HERO, the veteran 
receives personal assistance and specialized services. Initial contact 
with the veteran is made by a Customer Care Representative (CCR) at 
Humana Veterans. This appointment specialist provides an explanation of 
the HERO process and determines when the veteran is available for the 
medical appointment.
    In terms of making the encounter more veteran friendly, we 
developed our personalized services approach for three reasons: (a) to 
ensure the veteran is comfortable with what the medical appointment 
will entail; (b) the veteran understands where the civilian provider is 
located; and, (c) ensure maximum reliability in terms of the 
appointment date established between the veteran and HERO contract 
provider.
    (3) The CCR then conducts a three-way conference call with the 
veteran and a Humana Veterans network provider's office. This call 
occurs within five days of receiving the authorization form from the 
VA. As part of the Humana Veterans network agreement, network providers 
must schedule appointments within 30 days of the conference call. In 
any event, the veteran must agree to the scheduled date.
    (4) The veteran receives a letter confirming the provider's name, 
address, telephone number, date and time of appointment, including how 
to obtain directions to the provider's office and Humana Veterans 
customer service number should questions or problems arise. The 
referring VA facility is also informed of the appointment details.
    (5) The veteran goes to the scheduled appointment. An agreement 
with our network providers limits the veteran's wait time to no longer 
than 20 minutes when they are in the office for their scheduled 
appointment. If a copy of the veteran's medical records is required, we 
contact the VA to inform them of the provider's request.
    (6) After the appointment, we actively track the provider's written 
consult report and ensure it is returned to the VA for inclusion in the 
veteran's electronic health record. The average time for a consult 
report to be returned to VA is 15 days.
    (7) If the provider recommends the veteran have additional tests, 
procedures or services, Humana Veterans communicates the recommendation 
to the VA for review and action. When providers submit their claims to 
us, we pay the provider directly within 30 days of receipt of the 
claim. We then submit the claim for services under the contract and VA 
pays Humana Veterans.
    (8) Finally, we are committed to a seamless ``hand-off'' of the 
veteran back into the VA system and their primary care providers. This 
personalized approach is beneficial to the veteran. The return of 
clinical information in a timely manner ensures quality and continuity 
of care.
                     cost savings and efficiencies
Efficiencies
    The topic of efficiencies as it relates to health care for Veterans 
generally results in a discussion about timeliness of the care 
provided. While that is undeniably one of the most important metrics 
and successes of HERO to date, efficiencies go well beyond how quickly 
a veteran is seen in a clinician's office.
    A great deal of work goes into scheduling an appointment and making 
the veteran comfortable with the nature and location of his or her 
appointment. Having a reliable, credentialed network of providers 
sufficient to handle the care required in the community and providing a 
smooth clinical transition of the veteran back to their primary care 
provider at the VA is equally important.
    The Humana Veterans provider network has grown to include over 
27,000 providers across the four VISNs. A greater concentration of 
potential VA providers exists today than at any time in the past--for 
both urban and rural areas--because of Project HERO.
Cost Savings
    Although we are not able to make a direct comparison to VA's costs 
for fee-based care, we nonetheless believe VA is benefiting from cost 
savings through Project HERO. Health care services provided under HERO 
are priced as a percentage of the applicable Medicare Fee Schedule. 
Under the current contract, 92% of all contract line items for health 
care services are priced below the corresponding Medicare Fee Schedule.
    A comparison of our network costs to Medicare rates shows 
significant savings. Subjectively speaking, reimbursement rates under 
HERO are generally more favorable than the traditional fee-based 
structure at the VA, and commonly below Medicare reimbursement rates in 
the geographic regions where HERO is operational. We attribute this to:

    (1) Humana Veterans is respected in the civilian community and has 
developed a reputation for on-time payments to providers; and,
    (2) Even with the indefinite delivery/indefinite quantity (IDIQ) 
nature of the contract, Humana Veterans is successful in garnering 
deeper discounts, across the four VISNs, due to corporate presence, 
reputation and ongoing relationships with provider groups.

    It is important to state at this point that even if the cost was 
the same for VA between Project HERO and the regular fee-based program, 
the advantage to Veterans through the HERO Model ensures personalized 
service, quality, timely access, and convenience resulting in superior 
value to the VA and Veterans. There is a clear advantage in the HERO 
Model, which should be extended beyond the four VISNs and 
institutionalized nationally across VA facilities.
                      what is quality health care?
    I am sure that if you asked 10 Veterans for their definition of 
quality health care in VA you would receive many different answers. The 
answers may differ significantly from a medical professional's 
definition. There are certain attributes, however, that would be common 
in most responses from Veterans and form elements of quality health 
care. The elements would likely include:

    1. Respect for the individual veteran and her or his service to our 
Nation.
    2. State-of-the-art services from the health care provider
    3. A level of comfort that the provider is licensed and 
credentialed for the services provided.
    4. Timely and convenient access to the provider.
    5. Assurance that the civilian provider has access to the veteran's 
medical records, if needed, to ensure excellent continuity of care and 
to avoid the need for multiple incidents of the same test or procedure.
    6. Timely return of the clinical information to the VA primary 
provider and inclusion in the electronic health record.

    We at Humana Veterans believe the Project HERO Model delivers on 
each of these quality indicators.
    Humana Veterans works tirelessly with VA to ensure care provided 
through our HERO networks reflect the level of quality provided inside 
VA facilities, but our goal and the real goal of the demonstration, is 
to raise the bar compared to VA's traditional fee-basis care. A number 
of existing initiatives undertaken in the Project HERO Model contribute 
to this goal including personalized appointment services, timely access 
to care and the return of vital clinical information to VA.
Return of Clinical Information
    Accurate accounting for outside consult reports and other clinical 
information is a critical component of quality health care. VA's 
decentralized approach to its normal fee-based care makes it difficult 
to track metrics on the timeliness of outside provider consult reports. 
Humana Veterans, in partnership with VA, has established a benchmark 
requirement for the return of clinical information to VA. Humana 
Veterans expends considerable administrative effort in tracking 
clinical consult reports and has established a standard for reports to 
be returned to VA within 30 days. This ensures that treatment 
information and test results contained in the clinical consult reports 
are available to the primary care VA providers. This is simply another 
indication of the quality that Project HERO brings to care delivered 
outside of VA facilities.
    Currently, the process of entering clinical consult reports into 
VA's electronic health record is a manual process. In the future, the 
Project HERO Model could be institutionalized across VA, electronic 
consult records could be contractually required, entered directly into 
the system, and directed to the VA primary provider's desktop.
    I would like to share some metrics associated with this largely 
electronic exchange. Based on our latest data extraction, reporting all 
data from the beginning of HERO in January 2008 through the end of 
August 2009 shows:

     Seventy-two percent (72%) of clinical information is 
returned within 15 days.
     Eighty-eight percent (88%) return of routine clinical 
information to the VA within 30 days of the HERO encounter;
     Ninety-two percent (92%) return of routine clinical 
information within 45 days
     On average, clinical information is returned to VA within 
15 days.

    More needs to be done to facilitate an increasingly electronic, 
workable exchange with Veterans Health Information Systems and 
Technology Architecture (VistA)/Computerized Patient Record System 
(CPRS), the VA's electronic health record. However, we are convinced 
efforts made to date represent significant progress in enhancing the 
continuum of care for Veterans outside of VA facilities through this 
project.
                       management of quality care
Clinical Quality Management Committee (CQMC)
    Humana Veterans understands the importance of ensuring quality 
health care delivery to our Nation's Veterans. As a result, we 
initiated the Humana Veterans Clinical Quality Management Committee 
(CQMC).
    The CQMC is an interdisciplinary committee that meets at least 
quarterly and comprised of Humana associates, VA representatives, and 
representatives of delegated CQM and Credentialing services. The CQMC 
oversees and directs activities of the Clinical Quality Management 
Program (CQMP) on behalf of the Humana Veterans Executive Committee. 
The CQMC acts as an interface between the VA and delegated 
subcontractors and ensures compliance with the VA contract. The 
findings of the CQMC are reported quarterly to the Humana Veterans 
Executive Committee.
Credentialing Committee (CC)
    Credentialing of Humana Veterans providers is performed by the 
Credentialing Committee. The Credentialing Committee is responsible for 
evaluating the qualifications of professional health care practitioners 
based on appropriate industry standards. Evaluations may include data 
related to alleged misconduct, performance or competence of a provider. 
The Committee reviews credentialing reports and makes final 
determinations on all provider applicants and delegated groups. The re-
credentialing of contracted providers is conducted at least every three 
years. The decision to accept, retain, deny or terminate a provider 
shall be at the discretion of the Committee, which meets as often as 
necessary to fulfill its responsibilities.
Patient Safety Peer Review Committee (PSPRC)
    The Humana Veterans PSPRC provides peer review for any potential 
clinical quality of care issue identified and delineates steps to 
resolve problems and the ongoing monitoring of these issues. The 
Committee performs peer review of patient safety and quality of care 
issues identified through the Potential Quality Indicator (PQI) process 
and provides input for communicating and educating providers of 
concerns related to patient safety or clinical improvement. Upon 
confirmation of a quality issue the PSPRC will assign an appropriate 
severity level, determine intervention(s) to address the issue, and 
review and monitor intervention(s) to completion.
    The levels of severity utilizes by Humana Veterans include:


------------------------------------------------------------------------
 Level                      Adverse Effect On Patient
------------------------------------------------------------------------
     1   Quality issue is present with minimal potential for significant
          adverse effects on the patient.
     2   Quality issue is present with the potential for significant
          adverse effects on the patient.
     3   Quality issue is present with significant adverse effects on
          the patient.
     4   Quality issue with the most severe adverse effect(s) and
          warrants exhaustive review.
------------------------------------------------------------------------

    Quality issues with minimal potential for significant adverse 
effects on the patient are assigned a Severity Level 1 by the Chief 
Medical Officer. This information is entered into the Provider Trend 
Data base (PTD) for tracking and trending purposes. Cases assigned a 
Severity Level 2 are presented in summary to the Committee for 
informational purposes and entered into the PTD. Cases recommended as a 
Severity Level 3 or 4 are presented to the Committee for peer review 
and final determination.
                        future of the hero model
    Given the attributes mentioned in my testimony, Project HERO has 
the potential to go beyond its current form. However, the Model has not 
been adequately tested under conditions of a full-load of referrals. 
The numbers of Project HERO referrals continue to steadily decline and 
have for the past six months. It would be difficult to draw many 
conclusions on the ultimate future of HERO without a true test of its 
capabilities. The current monthly volume of referrals has fallen below 
6,000 total from all four VISNs. A minimum number of referrals per 
month should be 10,000-12,000 in order to validate the HERO Model.
    We encourage the Committee to recommend VA utilize the services 
offered in Project HERO to the greatest extent practicable to enhance 
the demonstration project and validate the HERO Model.
    In addition to increasing usage of the current HERO contract, we 
see other potential areas of benefit to Veterans. These include:

    (1) Humana Veterans has established networks in areas VA might 
consider rural or highly rural. Given the emerging demographics as it 
relates to new Veterans from Operations Iraqi and Enduring Freedom, our 
rural footprint could be advantageous as VA seeks to provide care 
closer to where the veteran population.
    (2) Women's health is another example of where we can positively 
affect the emerging requirements of the VA. Women are among the fastest 
growing segment of eligible Veterans and expected to double over the 
next five years. The VA may be at a disadvantage when it comes to 
building the requisite infrastructure to meet the emerging demands and 
requirements of women depending on the VA for care. Humana Veterans, 
due to our large reach into the provider community, could be an 
effective ``backstop'' for the VA when they lack the capacity to 
deliver this care.
    (3) Finally, we have made great progress ensuring Veterans' 
clinical information is returned in a timely fashion to the VA after a 
clinical encounter with a HERO provider. It would be more effective if 
we could provide it electronically through VistA and have it compatible 
with CPRS as the VA is at the forefront of enterprise-wide electronic 
health records. We want to partner with the VA to ensure clinical 
information associated with the more than three billion dollars spent 
in clinical care provided outside of VA facilities, is increasingly 
available to providers inside the VA, thus improving the clinical 
continuum of care for our Veterans.
                               conclusion
    Mr. Chairman and Ranking Member Burr, I would again like to thank 
you for the opportunity to come before the Committee today to discuss, 
for the first time, the value Project HERO brings to Veterans, and the 
value Humana Veterans adds through the HERO Model. I am confident at 
this early stage in the demonstration contract that Project HERO has 
delivered, and will continue to deliver, value on its three hallmarks: 
Quality, Access and Cost effectiveness. Our Nation's heroes deserve 
quality health care services and that is our ultimate mission at Humana 
Veterans.

    Thank you, Mr. Chairman. I would be glad to answer any questions 
from the Committee.



    Chairman Akaka. Thank you very much, Mr. McClain.
    Ms. Marjie Shahani.

   STATEMENT OF MARJIE SHAHANI, CHIEF EXECUTIVE OFFICER, QTC 
                        MANAGEMENT, INC.

    Ms. Shahani. Good morning, Chairman Akaka and Members of 
the Committee. Thank you for the opportunity to testify this 
morning. QTC provides compensation and pension medical 
examinations and administrative services to VBA in support of 
ten VA regional offices.
    Our contract with VBA is to provide medical evidence that 
is used by the VA rating specialists to determine a veteran's 
disability rating.
    Our testimony today addresses the Committee's request to 
understand how this VA contract ensures both high-quality and 
cost-effective services.
    Our VA contract is a performance-based contract with 
financial incentives and disincentives. The intent of 
performance-based acquisitions is to encourage contractors and 
the government to work together to achieve the contract 
objectives and provide the best services to our customers, the 
veterans and servicemembers.
    The VA contract ensures high-quality services through both 
performance requirements and performance metrics. Performance 
requirements include: using licensed and credentialed 
physicians and other specialists to conduct medical exams; 
adherence to over 50 VA exam protocols which are also used by 
VA medical center providers who perform C&P exams; and a 
quality assurance program to ensure exam reports comply with VA 
requirements.
    There was a question about training earlier. Training 
doctors regarding VA programs, how to conduct a C&P exam and on 
the differences between disability and treatment protocols are 
included in the requirement.
    Performance metrics in our contract include standards for 
timeliness, quality, and customer satisfaction that were 
discussed by Mr. Mayes. Timeliness standards provide VBA with 
timely delivery of the exam reports and support efforts to 
improve average claims processing timeliness.
    The timeliness standard is 38 days on average from receipt 
of exam request to report delivery, and it is measured at the 
VA VERIS system. Quality standards ensure examination reports 
are complete and can be used by the VA rating specialist to 
make a sound rating decision.
    The quality standard is a minimum of 92 percent defined as 
complete adherence to VA exam protocols, and is measured by VA 
through a random sample of reports on a quarterly basis.
    Customer satisfaction standards are used to determine the 
veteran's overall satisfaction with QTC service. Satisfaction 
is measured by a survey of each veteran, as mentioned. 
Responses are tracked by an independent third party.
    There are two metrics. Veterans are to be seen within 30 
minutes of their appointment a minimum of 90 percent of the 
time, and veterans must be satisfied with QTC services at least 
92 percent of the time.
    I am proud to state that QTC has met or exceeded timeliness 
and quality standards in the last 25 quarters and has achieved 
100 percent of customer service standards for the past 6 years.
    There was a question about the cost of contractor services. 
The Committee should be aware that the contracted cost of C&P 
medical exam services include more than the cost of the exam 
itself.
    Associated program costs are also included such as 
scheduling the appointment, mileage reimbursement, management 
of the veteran's case file, expert quality review, provider 
credentialing and training.
    In addition to ensuring high-quality, the VA contract 
ensures cost-effective services through three mechanisms. One 
is a competitive contracting process. By following the Federal 
Acquisition Regulation for full and open competition, VA is 
able to receive a competitive price.
    Two, paying for services only when they are needed. The 
volume of exams based on our experience in any given week or 
month, the number of claimed conditions for each veteran, and 
the location of veterans including remote and rural areas, all 
vary dramatically. Permanently staffing for these variances at 
locations would be extremely difficult and costly for any 
medical entity.
    And three, paying for services when they meet or exceed 
contract standards. Financial penalties are assessed when 
performance does not meet the standards.
    In conclusion, our VBA contract contains stringent 
performance requirements and metrics and is designed to 
incentivize quality and cost-effective services.
    Our contract is successful as a result of our high level of 
performance and the extraordinary role our VBA customer has 
displayed in achieving the objectives.
    We are dedicated to serving veterans and active duty 
servicemembers, and we have invested the time and resources to 
automate the exam protocols and process to positively impact 
the experience of our veterans.
    We are proud to have played a role in VBA's mission in 
providing quality and timely C&P services. We have enjoyed our 
partnership with VA as we work collaboratively to serve our 
Nation's heroes.
    Thank you again for the opportunity to testify here today, 
Mr. Chairman.
    [The prepared statement of Ms. Shahani follows:]
  Prepared Statement of Marjie Shahani, MD, Chief Executive Officer, 
                       QTC Medical Services, Inc.
    Good morning Chairman Akaka, Ranking Member Burr and Members of the 
Committee. On behalf of QTC Medical Services, Inc. (QTC), I would like 
to first and foremost thank you for the opportunity to discuss our 
support of the Department of Veterans' Affairs (VA's) Compensation and 
Pension Service, and how we provide medical examination services to the 
VA in a cost-effective and high quality manner. We have been honored to 
serve our Nation's veterans and active duty servicemembers since 1998. 
We consider ourselves a partner of the VA and are committed to 
providing excellent quality, timeliness and customer service to the VA 
and to our Nation's veterans and servicemembers.
    QTC was founded in 1981. Over the past 28 years, we have grown to 
be a nationwide provider of disability and occupational health 
evaluation services. QTC has long-term contracts with Federal, state 
and local government agencies and manages a nationwide credentialed 
network of private health care providers.
    QTC provides Compensation and Pension (C&P) medical examinations 
and administrative services to the Department of Veterans Affairs in 
support of 10 VA Regional Offices in 9 states consisting of Texas, 
Oklahoma, Massachusetts, Virginia, North Carolina, Georgia, Washington, 
Utah and California. Our contract is with the Veterans Benefit 
Administration (VBA) to provide the medical evidence used by the VA 
Rating Specialists to determine the disability rating of a veteran. The 
primary contract deliverable is the narrative report and associated 
results from a medical examination performed in accordance with VA 
requirements.
    Our testimony today addresses the Committee's request to understand 
how this VA contract for C&P medical examinations ensures both high 
quality and cost effective services.
    The VA contract is a performance-based contract with financial 
incentives and disincentives. The intent of performance-based 
acquisitions is to encourage contractors and the Government to work 
together to achieve the contract objectives and provide the best 
services to customers--veterans and servicemembers.
    The VA contract ensures high quality services through performance 
requirements and performance metrics. It describes the required results 
in clear, specific and objective terms with measurable outcomes as well 
as the method for monitoring performance. The management of contract 
performance is guided by the contract's terms and conditions and is 
achieved with the support of the business relationships and 
communications established between QTC and the VBA.
    Performance requirements include:

     Conducting medical examinations using licensed and 
credentialed physicians, audiologists, psychologists, optometrists and 
other specialists as applicable.
     Adherence to over 50 VA Automated Medical Information 
Exchange (AMIE) worksheets which are also used by VA Medical Center 
(VAMC) medical providers performing C&P exams.
     Quality Assurance program to ensure that exam reports 
comply with VA requirements for a ratable report.
     Training program for examiners regarding VA programs, 
conducting C&P exams and differences between disability and treatment 
protocols.

    Performance metrics include standards for timeliness, quality and 
customer satisfaction. The contractor must meet or exceed the defined 
standard for each metric. QTC monitors its operational metrics on a 
daily basis and the VBA formally measures and report results to QTC in 
Quarterly Performance Reports.
    Timeliness standards provide the VBA with timely delivery of exam 
reports to support their efforts to improve average claims processing 
timeliness:

     The standard is 38 days average cycle time from receipt of 
exam request to submission of final exam report to the VBA.
     It is measured by quarterly reports from the VA's Veterans 
Examination Request Information System (VERIS).

    Quality standards are used to ensure examination reports meet AMIE 
worksheet requirements needed for VA Rating Specialists to complete 
rating decisions:

     The standard is a minimum of 92% quality defined as 
complete adherence to, VA's AMIE worksheets.
     It is measured by quarterly reviews of a random sample of 
exam reports performed by the VA Medical Director and VA Central Office 
rating experts.

    Customer satisfaction standards are used to determine the veteran's 
overall satisfaction with QTC's services to include scheduling, 
appointment notification and the examination itself:

     Satisfaction is measured by a customer survey provided to 
each veteran that is tracked by an independent third party under 
contract to the VA. Results are provided to QTC quarterly.
          o Metric 1: Veterans are seen by the examiner within 30 
        minutes of their appointment.
                   The standard is a minimum of 90% of veterans 
                are seen by the examiner within 30 minutes of their 
                appointment.
          o Metric 2: Satisfaction scores on contractor's services.
                   The standard is a minimum of 92% of 
                respondents are very satisfied or somewhat satisfied 
                responses.

    In addition to the contract requirements and performance metrics, 
QTC imposes its own extensive internal quality assurance processes to 
every aspect of the contract from scheduling the examination to 
submission of the complete medical report to the VBA. We are focused on 
consistent achievement of the contract objectives and strive for 
continual improvement.
    Effective contract management by the VBA and QTC, ongoing oversight 
by the VBA and constant dialog and communication assures the focus on 
results. Formal monthly reports and meetings between VBA and QTC are 
used to track achievement toward the performance metrics and discuss 
upcoming exam needs to assist planning efforts.
    The VA contract ensures cost-effective services through three 
mechanisms:

    (1) A competitive contracting process,
    (2) Paying for services only when they are needed, and
    (3) Paying for services only when they meet or exceed contract 
performance standards.

    The contract ensures cost effective services by following the 
Federal Acquisition Regulations (FAR) for full-and-open competition 
requirements. Through a competitive contracting process, the VA 
receives a competitive price for the services it 
requires.
    The Committee should be aware that the contracted cost of C&P 
medical exam services includes more than the cost of the medical 
examination. Associated medical administrative activities are also 
included, such as scheduling, management of the veteran's case file, 
expert quality review, provider credentialing and training. The 
contract specifies that contractors are to charge the VA a fixed price 
per examination to include fully loaded labor costs, fringe benefits, 
equipment, locality adjustments, necessary reports, overhead, general 
and administrative and profit.
    Contracting for C&P medical examination services provides an 
essential service as the volume of exams, the number of claimed 
conditions and specific location of the exams varies dramatically. 
Permanently staffing for these variances at all locations would be 
extremely difficult, and costly, for any medical entity or program 
office. The VA contract is a fixed price contract which provides the 
VBA complete control on ordering examinations as needed with no 
commitment of volume from the government to the contractor. Contracting 
for these services is a cost effective way to ensure the VA only pays 
for services when and where they are needed. The use of volume 
discounts on our contract also provides a mechanism for the VA to 
receive cost-effective services during periods with high examination 
requests.
    Additionally, the contract performance requirements and metrics--
that we have reviewed with you--ensure the VA only pays for high 
quality services and results. Financial penalties are assessed when 
performance does not meet the defined 
standard.
    The VBA contract is designed to incentivize quality and cost-
effective services. QTC is proud of the partnership that has been 
developed with the Department of Veterans Affairs while working 
together in achieving the contract objectives.
    Finally, QTC believes the reasons this contract is successful 
include our performance over the past decade and dedication to our 
veterans and the VA's mission. Of equal importance is the twofold 
effort from VBA--to have effectively executed a performance-based 
contract with focused performance metrics and clear requirements, and 
the extraordinary role our VBA customer has played in working alongside 
us, providing ongoing communications, collaboration and support. We are 
partners: both working to provide excellent, ratable examinations for 
veterans filing claims for disability compensation--with quality, 
timeliness and veteran satisfaction.

    Thank you again for the opportunity to testify today. I look 
forward to answering any questions you may have.

    Chairman Akaka. Thank you very much, Ms. Shahani.
    Mr. Earnest.

  STATEMENT OF JOHN L. EARNEST, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, AMBULATORY CARE SOLUTIONS

    Mr. Earnest. Thank you, Mr. Chairman, and I thank the 
Committee for the opportunity to testify in front of you.
    My name is John L. Earnest. I am the President and Chief 
Executive Officer of Ambulatory Care Solutions. We are a small 
business and we are headquartered in Marion, Indiana.
    In 2006 we received a call from the VA Secretary's office 
stating he wanted to visit one of our clinics in Bloomington, 
Indiana. We thought oh my gosh what did we do now.
    Then 2 weeks ago we received a call from Dr. Andrea Buck 
stating that she would like for us to testify in front of your 
Committee, and here we go again.
    We have always prided ourselves in flying under the radar 
screen, but it looks like the radar hit us today, so please 
bear with us.
    Our senior management has been involved in physician 
staffing and practice management for over 30 years. When the 
Veterans Health Care Eligibility Reform Act came out in 1996, 
we looked at the Act and we thought there were some things that 
we could be doing in contracting with the VA.
    Our first contact was in South Bend, Indiana, and that was 
in 2004. We now have six contracts which include Terre Haute, 
Bloomington, and Goshen, IN, and also St. Clairsville, OH, and 
Jonesboro, AK. We have over 25,000 veterans enrolled in these 
six clinics.
    We are a small business, and as such, we have a management 
philosophy of being hands on. We want to maintain a 
conservative, managed growth strategy. We do not want to be 
exceeding our means when we go to contract with the VA.
    There are two or three items we want to highlight today. 
One of them is the quality of care. First of all, there are 
multiple levels of oversight in terms of a CBOC that includes 
the parent hospital; it includes the Joint Commission; and most 
recently we were inspected by the Office of Inspector General.
    The key point I want to make here is that as a VA 
contractor we operate in a fish bowl. By operating in a fish 
bowl, both VA and its contractors know that their operations 
are subject to a transparency that providers in the private 
sector never have to worry about.
    Here is a copy of our Jonesboro contract. In that contract 
there are many performance measures and many reports that we 
supply on a monthly basis to the VA.
    With regard to performance measures, in August 2004 after 
being in practice management for several years, I felt that I 
knew everything that there was to know about practice 
management. Wow, what a surprise.
    What I found by working with the VA is the VA is ahead of 
the private sector in so many ways. This includes the 
electronic medical records, CPRS system. It includes the number 
of performance measures that we must attain on a monthly and 
quarterly basis, and we are graded on these performance 
measures.
    All of our contracts have incentives or penalties involved 
with them--performance measures. The interesting thing is our 
incentive is 3 percent of a monthly bill if we attain a good 
score. Our penalty is 10 percent of a monthly bill if we do not 
attain a good score. Needless to say, we want the incentive and 
not the penalty.
    In our opinion, the integration of performance measures 
make the quality of care in VA's primary care operations 
difficult to match in similar operations in the private sector.
    From a contracting standpoint, we learned the hard way. We 
put in multiple bids and then we finally were able to get a 
contract. The single most important thing that the VA can do to 
promote greater interest in its contracting opportunities is to 
allow more time for proposal preparation.
    In summary, we would like to say that the VA engineered a 
remarkable transformation over the last decade. Many times the 
VA does not tell its story. There is a high-quality of care 
that extends through its contractors.
    Again we want to thank you for this opportunity and we also 
want to thank the Veterans Administration and Northern Indiana 
Health Care System, the Richard A. Roudebush VA Medical Center, 
the VA Pittsburgh Health Care Center, and the Memphis VA Health 
Care Center.
    It is a privilege and honor to work with these 
professionals and we invite any Members of the Committee to 
join us at any time in any of our clinics.
    Thank you.
    [The prepared statement of Mr. Earnest follows:]
         Prepared Statement of John L. Earnest, President/CEO, 
                     Ambulatory Care Solutions, LLC
                              introduction
    Good morning. My name is John L. Earnest and I am the President and 
Chief Executive Officer of Ambulatory Care Solutions, LLC (ACS). ACS is 
a small business headquartered in Marion, Indiana. We currently operate 
six Community Based Outpatient Clinics (CBOCs) under contract to the 
Department of Veterans Affairs (VA).
    We appreciate the invitation to offer comments to the Committee 
about VA health care contracts. While VA contracts for almost every 
different type of health care service imaginable, my comments this 
morning will be limited primarily to our experience under the VA's CBOC 
initiative.
    Senior management of ACS has been involved in the operation of 
emergency care, urgent care and primary care clinics in the private 
sector for over 30 years. In previous positions prior to ACS, I was 
responsible for the recruitment and staffing of 85 hospital emergency 
department contracts and was involved in the startup of over 50 walk-in 
medical facilities east of the Mississippi, including the first urgent 
care center in the state of Indiana in 1980.
    Following enactment of Public Law 104-262, the Veterans Health Care 
Eligibility Reform Act of 1996, the legislation that gave the VA 
additional contracting flexibility, we began to notice the VA's 
expansion into community based primary care. My colleagues and I 
believed that our operational experience was directly relevant to the 
kind of care sought for veterans under CBOC contracts and that we were 
well-positioned to respond to this rapidly growing demand. Ambulatory 
Care Solutions was established in 2004 specifically to provide primary 
care for veterans through the CBOC initiative.
    ACS was awarded its first CBOC contract in South Bend, Indiana in 
August 2004. Since then we have added contracts in Terre Haute, Indiana 
in February, 2006; Bloomington, Indiana, in March, 2006 and Goshen, 
Indiana in July, 2008. We were awarded our first CBOC contract outside 
of Indiana in St. Clairsville, Ohio in December 2008, and the contract 
for Jonesboro, Arkansas in April of this year. At the present time, 
through our six CBOC contracts in three states, we serve over 25,000 
veteran enrollees and provide in excess of 125,000 patient visits 
annually.
    ACS is a small business whose management philosophy is 
characterized by a ``hands-on'' approach. We emphasize on-site presence 
by senior management throughout the life of our CBOC contracts. We 
maintain a conservative managed-growth strategy that ensures we devote 
the time necessary to bring each new CBOC contract online smoothly. 
While ACS now looks carefully at most CBOC opportunities that come up, 
we have historically declined to pursue any new opportunity until we 
are confident that our existing contracts are running smoothly. We have 
actually withdrawn one of our bids after submission, as a result of 
simultaneous, but unanticipated changes in multiple procurement 
schedules, rather than proceed with a project where changes threatened 
our ability to deliver as promised. While this was a difficult 
management decision, it was one that we felt was ultimately in the best 
interests of veterans, the VA and ACS.
    Although ACS is not veteran owned, we place a priority on 
recruiting and hiring vets at both the corporate level and each of our 
delivery sites. For example, ACS' Chief Financial Officer, Jerry Jones, 
is an Army veteran.
    There are several key points I wish to emphasize in my testimony 
today about VA contracts for health services. They are as follows:

     To Contract or Not Contract? That is the Question . . . 
Under the right circumstances, contracting for a CBOC may be the best 
solution for veterans and the VA in a given market area.
     The Procurement Process is a Barrier to Entry--The 
procurement process is complex and serves as a significant barrier to 
entry for many qualified firms.
     Contract Operations--While we find the requirements of VA 
CBOC contracts to be very demanding, we believe that they ultimately 
serve to significantly enhance overall performance and quality of care.
     Contract Oversight--The potential for public oversight of 
most VA contracts is significant. In many respects, the degree of 
transparency now available to the public for CBOCs operated both by VA 
and by contract is unmatched in the private sector.
     Future Considerations--Improved access to veterans in 
rural and more remote areas through partnerships or relationships with 
local providers may call for the VA to relax some of the demanding 
contractual requirements that have been largely responsible for the 
agency's successful transformation over the last decade.
          to contract or not to contract? that is the question
    One of the age old questions in every Federal agency responsible 
for providing some type of service is the perennial ``make or buy'' 
dilemma. This remains a complex question for the VA in particular, as 
the longstanding tradition of having medical care for veterans provided 
primarily by VA employees in VA facilities has been put to a challenge 
by economic rules that guide such decisions.
    It was a much easier decision to make in the ``old days'' . . . 
when most health care for veterans was provided in inpatient settings. 
But as the demand for care shifted to outpatient settings, the 
economics changed as well. While we readily acknowledge and respect the 
preference on the part of many veterans and veterans' organizations for 
the privilege of being treated by VA staff in VA facilities, we know of 
no formula that incorporates the powerful emotional attachment to ``our 
facilities'' and ``our staff'' into the ``make or buy'' decision model. 
In general, we think that most constituencies, including veterans, 
Veterans Services Organizations, as well as Congress, ultimately 
recognize the need for, and benefits of contracting to supplement the 
VA's system of care in appropriate circumstances, but there remain 
pockets of strong opposition based on principle . . . if not economics.
    It is much too easy to suggest that only VA itself can provide the 
quality of care and respect that veterans deserve, or, that, 
conversely, no contractor is capable of demonstrating the same degree 
of respect, concern or quality as veterans receive in VA facilities.
    We think the most appropriate response to the ``make or buy'' 
question is what's best for the local veteran population in question on 
a case-by-case basis. So while the decision to have the VA staff and 
operate a CBOC in one location may be the right decision, the best 
solution in another location may indeed be a contractor-operated CBOC. 
Neither the VA nor its contractors have a perpetual ``lock'' on 
delivering high quality care. Issues can, and do arise from time to 
time, regardless of the source of care or location; the most important 
consideration is to put in place the management controls to 
continuously review and monitor performance so that it remains at or 
above target levels. VA does this for its own services, and those 
protocols extend to their contracted services as well.
    VA utilizes a comprehensive evaluation process to make such make-
or-buy decisions, as described in VHA Handbook 1001.6, Planning and 
Activating Community Based Outpatient Clinics. ACS carefully evaluates 
those opportunities where VA has decided that the best alternative is 
to acquire the services via contract.
          the procurement process is a barrier to market entry
    The Federal contracting and procurement process is a tremendously 
complex, highly bureaucratic, intimidating process that is always 
changing . . . and not for the feint-of-heart. That is a lesson we 
learned the ``old fashioned'' way. ACS submitted multiple bids over 
several years before we successfully entered this market. We have 
become more adept at the process since then. It wasn't easy then . . . 
and it remains a challenge to this day.
    As an example, the last Request for Proposal (RFP) we bid on for a 
CBOC was 170 pages long, not including the hundreds of pages of 
internal VA documents cited in the RFP itself, or most of the Federal 
Acquisition Regulation (FAR) or VA Acquisition Regulation (VAAR) 
clauses cited ``by reference''. The latest printed version of the FAR 
is 1,969 pages and the VAAR, a ``quick read'' by comparison, turns in 
at a mere 370 pages. To its credit, part 873 of VA's own regulations 
provide ``Simplified Acquisition Procedures for Health care 
Resources'', although they are to be used ``in conjunction with'' the 
FAR and VAAR. When the level of complexity is combined with the limited 
time available to prepare bids, many otherwise well-qualified providers 
make a rational decision . . . they simply walk away.
    Over time, like IRS regulations, Federal Acquisition Regulations 
have grown not only in volume, but in complexity. Figuring out how to 
``muddle though'' the procurement process is a necessary hurdle to 
overcome for any contractor and invariably a nightmare for the 
uninitiated.
    Most experienced Federal contractors eventually learn how to manage 
the procurement process. But for the health care organization that 
doesn't routinely pursue Federal contracts, the procurement process is 
a daunting and intimidating hurdle. The reality is that the acquisition 
process is a very real barrier to market entry for many of the kinds of 
health care providers VA would like to encourage to bid on its 
contracts. The single most important step VA can take to promote 
greater interest and participation in its health contracting 
opportunities is to allow more time for proposal preparation. The three 
to four-week window typically available for proposal preparation is 
simply insufficient for most organizations unfamiliar with the process, 
and often a struggle for those with experience.
                          contract operations
    VA's CBOC contracts include numerous requirements to help ensure 
that the contractor meets target performance levels for key measures. 
As a contractor, while we ``moan and grown'' about such requirements, 
we readily acknowledge they have ultimately raised our level of 
performance and enhance our ability to offer high quality service.
    One of the characteristics generally associated with the overall 
improvements in quality and outcomes in the VA since the early 1990s is 
the almost obsessive-like focus on the achievement of target 
performance measures. Part of the transformation of the VA from a 
system of last resort to a provider of choice has been the successful 
cultural transformation to an organization that established target 
performance measures and then aggressively and consistently monitored 
performance at local, VISN-wide and national levels. Another key 
element of the VA's success is the development, application and 
deployment of the Veterans Information System Technology Architecture 
(VISTA), it's version of the electronic medical record. In our opinion, 
the emphasis on performance measures and the deployment of an 
electronic medical record systemwide, are probably the two most 
significant characteristics that account for the VA's ability to 
achieve the remarkable turnaround that it has over the last decade.
    These practices are inextricably woven into all aspects of VA care, 
including contractor-operated CBOCs. For example, in most CBOC 
contracts, there are many key performance measures (e.g., performing 
specific preventative tests; access requirements; requirements for 
accuracy and completion of data entry into the medical record; patient 
satisfaction; credentialing documentation, etc.) that are routinely 
compared to target goals. These are aggressively monitored and 
carefully watched and require prompt corrective action if not achieved. 
Performance measures are calculated for each facility, compared within 
each VISN, across all VISNs, and 
nationally.
    Having been involved with, and managing primary care operations in 
the private sector for over 30 years, I can unequivocally confirm the 
positive impact of the VA's emphasis on performance measures in the 
primary care setting. In our opinion, the integration of and reliance 
on performance measures make the quality of care in VA's primary care 
operations difficult to match in similar operations in the private 
sector.
    With respect to contracted CBOCs, certain performance measures are 
actually greater than those for VA staffed and managed primary care 
operations. As an example, one key aspect of contracted CBOCs is VA's 
practice of linking financial incentives to the achievement of target 
performance measures. Most of our contracts include nominal bonuses if 
we significantly exceed certain performance measures, or penalties if 
we fail to meet minimum performance measures.
                           contract oversight
    The level of agency oversight embedded into most VA health care 
contracts is distinguishing characteristic of VA health care 
contracting.
    For example, the parent hospital associated with a CBOC performs 
semi-annual safety inspections on the CBOC as well. In addition, when 
the parent hospital is surveyed by The Joint Commission, the 
accreditation survey also extends to the CBOC.
    One of the ironic elements of VA health care, however, is that the 
level of transparency that allows the public to see some of the 
agency's operational deficiencies and weaknesses, is, in fact, one of 
the system's major strengths. While some of the same elements of 
transparency exist in the private health sector, the nature and depth 
of information that is publicly available about VA operations, whether 
it be through routine reports and incident-specific investigations by 
the Government Accountability Office (GAO) or the VA Office of the 
Inspector General (OIG), is unmatched in the private sector.
    For example, the VA OIG has, for years, conducted regular, periodic 
reviews of the VA's health care operations through its Comprehensive 
Assessment Program (CAP) reports. These reports are similar to an 
internal audit of program operations and identify both strengths and 
weakness. They are scheduled so that every VAMC is reviewed every 
couple years. Until recently, CAP reports included evaluation of 
selected aspects of both VA and contract CBOCs under the jurisdiction 
of a particular VAMC.
    In response to legislative language from last year VA,\1\ the OIG 
began a new series of inspections specifically for CBOCs to provide a 
systematic examination of these clinics on a routine, periodic basis, 
much in the same way as medical centers are reviewed under the CAP.\2\ 
Two of ACS' clinics in Indiana were among the first CBOCs in the 
country subject to this new type of inspection by the OIG. The OIG made 
eight recommendations about our clinics in particular, some of which 
involved elements of operations that we, as the contractor are 
responsible for, while other recommendations were for VA management. 
The recommendations have since been adopted and the issues resolved.
---------------------------------------------------------------------------
    \1\ H. Rpt. 110-775, to accompany H.R. 6599, Military Construction, 
Veterans Affairs and Related Agencies Appropriation Bill, Fiscal Year 
2009.
    \2\ ``Informational Report, Community Based Outpatient Clinic 
Cyclical Reports'', Department of Veterans Affairs Office of Inspector 
General; Report No. 08-00623-169; July 16, 2009.
---------------------------------------------------------------------------
    The key point here is that as a VA CBOC contractor, we ultimately 
operate in a fishbowl unlike comparable operations in the private 
sector. Once completed, the OIG reports are available on the VA's web 
site and to the public at large through the internet. We note that the 
same degree of scrutiny exists for any element of VA operations subject 
to review by the OIG. Both VA and its contractors know that their 
operations are subject to a degree of transparency that most providers 
in the private sector simply never have to worry about. While most 
large health care systems in the private sector conduct routine 
internal audits similar to those performed by the VA, for the most part 
they remain ``internal'' upon completion, and any results or findings, 
unsubstantiated or not, remain hidden from public view. By contrast, 
the VA's version of internal audits are routinely made public. I might 
add that the OIG inspection of our clinics recently were the most 
thorough of any we have experienced. While the prospect of undergoing 
any type of operational audit or inspection by an unrelated party can 
be intimidating, the prospect of going through that and having the 
results available for the world to see cannot help but instill a 
greater sense of discipline that helps ensure the achievement of target 
performance measures.
    We believe that the transparency of program operations through 
these various levels of oversight, not only of our contract operations, 
but indeed, of all aspects of VA health care, is a tremendous strength 
of the VA health care system as it forces a higher level of 
accountability that ultimately, is in the VA and veterans' best 
interests.
                         future considerations
    As the VA looks to reach more veterans in rural and remote 
locations, we see increasing challenges from a health care contracting 
standpoint. Much of the success that the VA has enjoyed over the last 
decade is attributable to its focus on performance measures and the use 
of VISTA, its electronic medical record system. Many of the demanding 
requirements that apply to VA facilities and for VA staff are extended 
to its contractors. In our experience, contractors are sometimes held 
to higher standards than VA facilities and staff.\3\ As VA moves into 
rural and more remote communities with the hope of negotiating various 
kinds of contracts and partnerships, the burdens of the procurement 
process and demanding contract requirements will become potentially 
significant deterrents to establishing the kind of business 
relationships sought. VA may be forced to relax many of its existing 
requirements in order to recruit the number and mix of providers that 
it seeks in certain locations. To the extent that VA hopes to address 
the needs of rural veterans by different kinds of contracts with local 
providers, it will have to rethink some of its contracting approaches 
to meet them halfway.
---------------------------------------------------------------------------
    \3\ As an example, a contractor awarded a contract for a new CBOC 
typically has anywhere from 60-90 days to begin operations after award. 
During that time, the contractor must typically finalize negotiation of 
leases, renovate or buildout anywhere from 3,000-10,000 square feet of 
clinical space, recruit, hire and credential as many as 25 clinical and 
administrative staff, undergo comprehensive background checks, conduct 
exhaustive training and certification on VISTA and related IT security 
provisions, and pass multiple state, local and VA facility inspections. 
In general, completion of these startup tasks is a requirement of every 
CBOC contract. To the best of our knowledge, VA would have a very 
difficult time meeting the same kind of CBOC startup requirements as it 
imposes upon contractors.
---------------------------------------------------------------------------
                                summary
    The VA has engineered a remarkable transformation over the last 
decade to become a national model of high quality care through its 
emphasis on performance measures and the use of an electronic medical 
record. Those practices extend to most of its contractors and force 
them to operate with the same set of performance and quality 
expectations. Contracts, when justified through a make-or-buy analysis, 
represent a legitimate approach to provide care when and where such 
services are not available in a VA facility by VA employees. While the 
system is now considered among the nations' best, reports of clinical 
problems or quality issues nevertheless continue to be uncovered as 
others are resolved. That deficiencies remain as visible and 
transparent as they do is, in fact, a major strength of the system, one 
that leads to quicker resolution and a level of accountability that is 
not seen in the private sector. The demanding practices that have 
improved performance and outcomes within VA over time, however, will be 
burdensome for rural and remote providers and may require a rethinking 
of VA's contracting strategies.
    Thank you again for the opportunity to share our thoughts about VA 
contracts for health care. We want to acknowledge the extraordinary 
level of support we receive from the VA staff and management at the 
parent facilities of our CBOCs: the VA Northern Indiana Health Care 
System in Marion, Indiana; the Richard A. Roudebush VA Medical Center 
in Indianapolis; the VA Pittsburgh Health Care System, and Memphis VA 
Health Care System. It is a privilege to work with these professionals 
and an honor to serve the veteran population. I would be pleased to 
answer any questions.
      Attachment: Company Briefing, Ambulatory Care Solutions, LLC

























    Chairman Akaka. Thank you very much, Mr. Earnest.
    Mr. McClain, how do you respond to Ms. Curtis's comments 
about the problems that Project HERO has creating a large 
enough network in rural areas?
    Mr. McClain. Mr. Chairman, I will be glad to comment on 
that. Obviously Ms. Curtis has a tremendous amount of 
experience in the VA and in Boise, which is a very rural area. 
Many of her comments, I think, were directed at the fact that 
some of this care must be sent outside the VA, and most of it 
should be kept inside VA.
    That certainly is an issue that this Committee has 
addressed and other committees have addressed and VA talks 
about considerably inside; and I know that funding has been 
provided over the years to do just that--to do more treatment 
inside.
    So, we are simply talking about care that for whatever 
reason VA has decided to send outside its walls that they 
cannot handle either because of access issues or because the 
specialty does not exist inside the VA walls.
    From what I have learned of the start of Project HERO and 
Humana Veterans there were issues with the network, and indeed, 
issues in rural areas. In fact, we have pretty much the same 
issues anyone else does.
    I believe that Senator Tester stated that in one large 
geographic region there was one provider in his area.
    Well, Humana runs into the same problem. If the providers 
are not there, we certainly cannot contract with them. But we 
have increased our network now in the four VISNs to where we 
have over 27,000 providers in our network.
    There are patches and holes in that, which we are trying to 
fill right now. But for the most part we believe that we 
provide a very good experience for the veteran who is referred 
to outside care by VA in a rural setting.
    Chairman Akaka. Ms. Curtis, do you have any further 
comments on that?
    Ms. Curtis. Yes. I am one of those mental health providers 
that Senator Tester spoke about. Again I mentioned that I live 
only five miles away from the VA, and Project HERO attempted to 
obtain my services for the project.
    I felt that, first off, it would be a conflict of interest 
obviously for me, and second off, I felt that they would be 
much much better served within the VA to eliminate 
fragmentation of treatment that might occur with outside 
providers.
    Speaking of the highly rural areas, our Vet Center just 
recently initiated a mobile vet clinic for those mental health 
needs of veterans throughout our extensive rural network.
    We also have several CBOCs and our mental health providers 
will actually go to those CBOCs to provide the health care. We 
also have mental health tele-health so that they can provide 
the treatment such as in Salmon. Actually we have a CBOC in 
Salmon, which is like 4 hours away from Boise. We have the 
mental health treatment capabilities within the VA practically 
with the mobile clinics and the tele-help.
    Chairman Akaka. This question is for Mr. Earnest and Mr. 
McClain. Has the VA asked your organizations to verify that you 
are complying with VA quality and performance measures? Will 
you please describe the level of VA's oversight?
    Mr. Earnest.
    Mr. Earnest. Thank you, Mr. Chairman.
    With regard to the VA oversight in the contracts that we 
presently have, we work very closely with the local hospital. 
In terms of performance measures, we even go to the point where 
we are proactive.
    We pull identified performance measures every other week to 
see how we are scoring and if we are having any problems with 
those performance measures. Then, in addition, we work closely 
with the parent hospitals to make sure that those performance 
measures are met.
    We have biweekly meetings in-house and we have monthly 
meetings with each one of the hospitals that we serve.
    Chairman Akaka. Mr. McClain.
    Mr. McClain. Thank you, Mr. Chairman.
    In Project HERO there are quite a few contract requirements 
and metrics that Humana Veterans must meet. One of them is the 
fact that our providers, the medical care providers, are all 
credentialed. That may or may not be the case in the normal 
fee-based referral out in the community. But in our case we go 
through an extensive credentialing process.
    As far as VA oversight is concerned, VA actually comes out 
and audits our credential files on a regular basis. In fact, 
they were just at our office about 3 weeks ago to conduct their 
audit and found no deficiencies in our credentialing system.
    Also we have a very active quality management oversight 
committee that includes VA representation. So, whenever there 
is a potential quality indicator--in other words some issue 
that arises, and this includes a peer review type of process--
it will actually go to these committees for resolution. If any 
remedial action is required, we, in conjunction with our VA 
partner, would recommend that remedial action.
    Chairman Akaka. This question is for all of the panelists. 
From your perspectives, how can VA improve its contracting 
process? Project HERO had a difficult time getting off the 
ground so let us hear from Mr. McClain first.
    Mr. McClain. Mr. Chairman, yes, it did have a difficult 
time. I think part of it was the short ramp-up time that we 
had. The contract was actually awarded, I believe, in early 
October 2007 and went online January 2, 2008. So, that is a 
little less than a 3-month period.
    In order to implement in such a large geographic area with 
so many providers needed, that was probably too short of a time 
and therefore the network was lacking initially.
    As I said, that has been corrected. But, I think that more 
collaboration with the contractor to determine exactly what an 
adequate ramp-up time should be, so that when you go live 
everything is lined-up for the veteran and the veteran is the 
one who gets the benefit of the contracted services.
    Chairman Akaka. Ms. Curtis.
    Ms. Curtis. The VA could best improve contract services by 
going back to Congress's intent, only for emergent services 
that VA is unable to provide.
    If the VA were given the staffing that we need or the 
space--which sometimes that is the issue--then we would not be 
required to buy down the wait list. And that is basically what 
has happened at Boise. We wanted to get our colonoscopy wait 
list reduced. Instead of building another suite for 
colonoscopies, we bought it down through contract services. 
That is really unnecessary.
    Chairman Akaka. Ms. Shahani.
    Ms. Shahani. As I mentioned, our VA contract is 
performance-based and monitoring of quality, timeliness, and 
customer service has been very good.
    There was a question about the IG report and the IG audit. 
I think it is very good that VA finally put a billing audit in 
place. It was conducted first in 2005, and currently we are 
undergoing another audit based on an independent third party 
contracted by the VA.
    The initial issue with the IG report, if I may, Mr. 
Chairman, was a difference in contract language interpretation. 
Once VA brought this to our attention, what we did was we 
really sat down with VA and the contracting office--both the 
program office and contracting office. We went through the 
issues and we both resolved them mutually. Once everybody was 
on the same page--because there is an inherent difference 
between using Medicare for treatment guidelines versus a 
disability program--so, once we were able to resolve those 
issues and define the differences, QTC offered a payment to VA 
to reimburse them. This was even before the IG got involved.
    Since then QTC has reimbursed the monies, and basically we 
have ongoing quality process improvement based on our billing 
and audit standards. So, I am glad to hear Mr. Mayes say that 
they are going to do it twice a year now.
    The other thing that I would recommend is to involve the 
contractor every time they update the VA examination protocols. 
Our physicians and experts basically conduct the C&P 
examinations on a regular basis. They have developed expertise, 
and I know there is a partnership between VBA and VHA in 
updating these protocols. But we too would like to play a role 
in it because we have a lot of lessons learned that we would 
like to share with them.
    Thank you, Mr. Chairman.
    Chairman Akaka. Thank you.
    Mr. Earnest, please.
    Mr. Earnest. Thank you, Mr. Chairman.
    One of the points that we heard when we first started 
contracting with the VA was the slogan, ``One VA.'' We have six 
different contracts. We have four different hospitals, and 
those four different hospitals interpret those contracts in 
different ways. 
So, the point I am making here is that we need to learn to be 
consistent.
    I also echo what was mentioned earlier. There needs to be 
stronger communication between the VA and its contractors. 
Whether we are talking about changes in the way that physical 
examinations are made or the ways that the contract is being 
interpreted, those are things that we feel just need to be 
happening.
    The last point I will make is that we are facing these four 
regional offices for contracting.
    I believe just the opposite works. Local communication 
makes a big difference. If I know that I can meet with my 
contracting officer--whether I drive to Indianapolis or I drive 
to Fort Wayne--it is a lot easier than having to worry about 
meeting with my contractor in Washington, DC, or wherever those 
four offices are.
    It is potentially a much closer relationship with the 
people that you do business with on a daily basis.
    Chairman Akaka. Thank you.
    This question is for Ms. Curtis. In your written testimony 
you point out that OMB has directed Federal agencies to reduce 
their reliance on contractors. Are you aware of any instances 
in which VA has failed to fill vacancies, laid off workers, or 
otherwise reduce staff in favor of contracting out services?
    Ms. Curtis. I am not aware of any reduction of staff at my 
facility based on contracting out, but it appears that there is 
a perception that contracting out may be quicker and easier 
than actually putting the staff in place at our facility.
    However, the contracting out, as far as I am concerned, is 
just a stopgap method to take care of this wait list that we 
talked about. The much better way to treat our veterans in a 
facility that truly understands their unique needs is by hiring 
the staff, providing education that they require--the 
credentialing, the privileging--all as if we were one VA I 
guess you would say.
    Thank you.
    Chairman Akaka. Ms. Curtis, are the problems with the 
Project HERO you describe in your testimony limited only to 
Boise, Idaho?
    Ms. Curtis. No, they are not. This is happening throughout 
the Nation and particularly in the rural treatment areas.
    Chairman Akaka. As a follow-up, was the system for 
providing care outside VA better before Project HERO?
    Ms. Curtis. I feel it was. We have personal relationships 
with our contractors. Personal relationships really go a long 
way in helping the veteran feel at ease when he is receiving 
treatment there.
    I believe it also helped us keep their medical record from 
being as fragmented. We would quite quickly get the results of 
any procedures that were done and scan it into our medical 
records so when the veteran came back to their primary care 
provider, they had the complete information.
    I worry with that second layer between the provider and the 
VA with the records going through Humana that something might 
get dropped. It would be much easier for that to happen and 
then the veteran's care would definitely suffer.
    Thank you.
    Chairman Akaka. T h a n k y o u v e r y m u c h f o r 
a p p e a r i n g h e r e today.
    Contracts for services will almost certainly be part of 
VA's efforts to provide care to veterans. But the VA is 
obligated to ensure that the Nation's veterans receive the best 
health care services in any setting regardless of whether such 
services are provided at a hospital, a contract clinic, or 
during a compensation and pension exam. VA must also be a good 
steward of the taxpayers dollars and obtain these services at a 
reasonable cost.
    We wanted this hearing to try to flush out what needed to 
be done to improve the whole program. So, my final question to 
all four of you--and you may or may not wish to comment--is do 
you have any recommendations or even suggestions to make about 
this process to us, that is Congress, as well as the VA?
    Ms. Curtis. Mr. Chairman, obviously my suggestion would be 
to bring the treatment back to the VA in-house.
    Chairman Akaka. Thank you.
    Mr. McClain.
    Mr. McClain. Mr. Chairman, I do have some suggestions I 
would like to, if I could provide those after the hearing.
    Chairman Akaka. We would appreciate that, yes.
    [The additional information requested during the hearing 
follows:]
                Humana Veterans Health Care Services, Inc.,
                                                   October 7, 2009.
Hon. Daniel K. Akaka,
Chairman,
Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.

                             HVHS #09-0051
    Dear Mr. Chairman: This letter is a follow-up to the hearing on 
September 30, 2009, entitled ``VA's Contracts for Health Services,'' 
and is in response to your solicitation of recommendations from the 
second panel to improve outcomes in contracted health care and to fully 
realize the benefits and efficiencies of Project HERO. We appreciate 
the opportunity to provide this input. I want to emphasize at this 
point that Humana Veterans and the VHA Program Management Office (PMO) 
for Project HERO have an excellent working relationship. The following 
recommendations are put forth to enhance Project HERO and are submitted 
for your consideration in legislating for a 21st Century Project HERO.

    1. Approach Project HERO as a true demonstration project. 
Demonstration projects take on many forms, but most have the common 
attribute of implementing a procedure or set of procedures, an 
evaluation of the processes with sufficient workload to emulate real 
world conditions, and ultimately, the implementation of identified 
improvements. Then the process is replicated, using the newly-
identified best practices while continually improving the model.
    We believe Congress desired such a demonstration process with the 
ultimate goal of improved service to veterans who are referred to 
community providers for evaluation or care. VA has implemented the 
Congressional directive by awarding a single contract for all four 
VISNs and simply administering the contract. There is currently no 
provision or contractual mechanism that allows for a mandatory workload 
adjustment after either (1) a specific period of performance; or (2) 
the effective implementation of improved processes. In other words, VA 
is not required to improve their larger, institutional processes as 
lessons are learned during the demonstration. Further, they are 
required only to send a minimal workload to the demonstration, thereby 
defeating the true purpose of a demonstration project, (i.e., testing 
new and innovative management initiatives and implementing best 
practices and lessons learned). There is still plenty of time, under 
HERO, to conduct a true demonstration project within the existing 
contract. Three years remain on the five-year demonstration and a world 
class fee-based process can be realized if VA is willing to commit to 
realistic workloads and process adjustments to test proposed process 
improvements.
    It is difficult to run a demonstration project when there is a 
competing process in the same fee office. We suggest that Project HERO 
become a first and preferred option in at least one VISN, perhaps VISN 
8 or 16. Project HERO currently runs alongside VA's normal fee-based 
processes. The only manner to truly test the demonstration concept is 
to make referral to Project HERO the first or preferred option in a 
busy VISN fee office.
    2. Access to VHA's CPRS. Currently, Humana Veterans as the project 
HERO contractor does not have access to VHA's Computerized Patient 
Record System (CPRS). The written consult reports from the outside 
medical specialists are transmitted via secure email or faxed to VHA 
and either manually downloaded or scanned into CPRS. While this 
represents significant progress beyond VA's current fee based efforts, 
this imperfect process can result in delay or lost records and remains 
subject to human error. VHA should be directed to provide direct access 
to CPRS for the Project HERO contractor. This will result in increased 
efficiencies, reduce the time for the written consult to be returned to 
the primary VA provider, and reduce delay in providing vital diagnostic 
and expert opinions to the veteran's VA primary provider. With direct 
access to CPRS, the contractor can enter an electronic or scanned 
consult into CPRS and send it directly to the VA primary care provider. 
It will also reduce the time it takes to provide a veteran's medical 
records required for the outside consult.
    3. VA would benefit from standardized processes, procedures and 
forms. The existing fee-based process in VA is completely 
decentralized. Standard forms exist, but many are locally modified. 
Further, there is no standard language for authorizations for care 
outside VA. The phrase ``Evaluate and treat'' means different things in 
different fee offices. Standard electronic forms and language would 
greatly enhance VA's legacy, fee-based system.
    4. VA should track metrics in their legacy Fee-based process. One 
of the most significant lessons learned from Project HERO to date is 
the importance of metrics in the delivery of quality healthcare both 
inside and outside of VA. The Project HERO contractor has developed a 
data repository called the Data Mart to assist in tracking the metrics 
required for quality healthcare and facilitating analysis of that data. 
These metrics include:

          a. Length of time until appointment is scheduled.
          b. Length of time from receipt of an authorization for care 
        until the veteran is seen by the network provider.
          c. Length of time until the network provider's written 
        consult report is returned to VA.

    Implementing similar metrics would greatly enhance fee-based care 
in VHA.

    5. The HERO Model of personalized services for veterans should be 
implemented at each VHA Fee office. The HERO Model as developed by 
Humana Veterans in partnership with VA includes the following services 
to veteran patients:

          a. First, the veteran receives authorization for care from 
        the VA. Before issuing an authorization, the VA determines if 
        the specialty or other care is available at a VA facility, if 
        the veteran lives a significant distance from that facility, or 
        makes a determination based on other medical reasons. The VA 
        then determines whether to send the authorization directly to 
        the veteran, send it to the Project HERO office at Humana 
        Veterans, or refer the veteran directly to a community 
        provider.
          b. When an authorization is sent to Project HERO, the veteran 
        receives personal assistance and specialized services. Initial 
        contact with the veteran is made by a Customer Care 
        Representative (CCR) from Humana Veterans. This appointment 
        specialist provides an explanation of the HERO process and 
        determines when the veteran is available for the medical 
        appointment. In terms of making the encounter more veteran 
        friendly, we developed our personalized services approach for 
        three reasons: (a) to ensure the veteran is comfortable with 
        what the medical appointment will entail; (b) the veteran 
        understands where the civilian provider is located; and, (c) 
        ensure maximum reliability in terms of the appointment date 
        established between the veteran and HERO contract provider.
          c. The CCR then conducts a three-way conference call with the 
        veteran and a Humana Veterans network provider's office. This 
        call occurs within five days of receiving the authorization 
        form from the VA. As part of the Humana Veterans network 
        agreement, network providers must schedule appointments within 
        30 days of the conference call. In any event, the veteran must 
        agree to the scheduled date.
          d. The veteran receives a letter confirming the provider's 
        name, address, telephone number, date and time of appointment, 
        including how to obtain directions to the provider's office and 
        Humana Veterans customer service number should questions or 
        problems arise. The referring VA facility is also informed of 
        the appointment details.
          e. The veteran goes to the scheduled appointment. An 
        agreement with our network providers limits the veteran's wait 
        time to no longer than 20 minutes when they are in the office 
        for their scheduled appointment. If a copy of the veteran's 
        medical records is required, we contact the VA to inform them 
        of the provider's request.
          f. After the appointment, we actively track the provider's 
        written consult report and ensure it is returned to the VA for 
        inclusion in the veteran's electronic health record. The 
        average time for a consult report to be returned to VA is 15 
        days.
          g. If the provider recommends the veteran have additional 
        tests, procedures or services, Humana Veterans communicates the 
        recommendation to the VA for review and action. When providers 
        submit their claims to us, we pay the provider directly within 
        30 days of receipt of the claim. We then submit the claim for 
        services under the contract and VA pays Humana Veterans.
          h. Finally, we are committed to a seamless ``hand-off'' of 
        the veteran back into the VA system and their primary care 
        providers. This personalized approach is beneficial to the 
        veteran. The return of clinical information in a timely manner 
        ensures quality and continuity of care.

    Humana Veterans stands ready to assist the Committee and VA in 
every way possible to ensure enhanced quality and personalized 
healthcare services to our Nation's heroes. Please do not hesitate to 
contact me directly at 502-301-6984 or [email protected] if there 
are any questions.
            Sincerely,
                                            Tim S. McClain,
                                                   President & CEO.

    Chairman Akaka. Ms. Shahani.
    Ms. Shahani. Mr. Chairman, I would recommend that there is 
a role for contractors. I believe there is a role for 
contractors and there is also a role for the VHA. There are a 
lot of veterans and active duty servicemembers who need to be 
serviced in remote areas and in areas where VHA is unable to 
staff and provide the services for our veterans and active-duty 
servicemembers, especially for compensation and pension 
services. I suggest that the Committee maybe invite us so that 
we can share with you what we have done to actually bring the 
physician to the active duty servicemember and to the veteran, 
and how we've improved access, thereby improving services to 
them.
    So, we are here if you need us to elaborate on things and 
discuss things better. We would like to share with you. And at 
the end of the day, I believe we are all here to service our 
veterans and active-duty servicemembers.
    So, anything we can do please let us know.
    Chairman Akaka. Mr. Earnest.
    Mr. Earnest. Thank you again, Mr. Chairman.
    The two points I would make is, number 1, management. We 
feel it is very strong within our organization, that is, 
management. There is management at all levels and there should 
be management of the contractor by the VA.
    We welcome that management. In terms of an OIG inspection, 
we cannot correct it if we do not know about it. We want to 
know those things so that we can be an even better contractor 
for the VA.
    The second point I would make is communication. We said 
that two or three times already this morning. It is important 
that the two entities--whether it is the VA or the contractor 
or the employees group--communicate with one another so that we 
all know what the agenda is and we can all better serve our 
veterans.
    Chairman Akaka. Thank you very much. You are right that all 
of us here are trying to do the best we can to provide for our 
veterans. That is the bottom line. So, I thank you so much for 
what you are doing and look forward to continuing to work with 
you.
    This hearing is adjourned.
    [Whereupon, at 11:36 a.m., the Committee was adjourned.]
      

                                  
