[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PURCHASING PERSPECTIVE: VA'S PROSTHETICS PARADOX
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, MAY 30, 2012
__________
Serial No. 112-63
__________
Printed for the use of the Committee on Veterans' Affairs
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
CLIFF STEARNS, Florida BOB FILNER, California, Ranking
DOUG LAMBORN, Colorado CORRINE BROWN, Florida
GUS M. BILIRAKIS, Florida SILVESTRE REYES, Texas
DAVID P. ROE, Tennessee MICHAEL H. MICHAUD, Maine
MARLIN A. STUTZMAN, Indiana LINDA T. SANCHEZ, California
BILL FLORES, Texas BRUCE L. BRALEY, Iowa
BILL JOHNSON, Ohio JERRY McNERNEY, California
JEFF DENHAM, California JOE DONNELLY, Indiana
JON RUNYAN, New Jersey TIMOTHY J. WALZ, Minnesota
DAN BENISHEK, Michigan JOHN BARROW, Georgia
ANN MARIE BUERKLE, New York RUSS CARNAHAN, Missouri
TIM HUELSKAMP, Kansas
MARK E. AMODEI, Nevada
ROBERT L. TURNER, New York
Helen W. Tolar, Staff Director and Chief Counsel
______
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
BILL JOHNSON, Ohio, Chairman
CLIFF STEARNS, Florida JOE DONNELLY, Indiana, Ranking
DOUG LAMBORN, Colorado JERRY McNERNEY, California
DAVID P. ROE, Tennessee JOHN BARROW, Georgia
DAN BENISHEK, Michigan BOB FILNER, California
BILL FLORES, Texas
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
May 30, 2012
Page
Purchasing Perspective: VA's Prosthetics Paradox................. 1
OPENING STATEMENTS
Chairman Bill Johnson............................................ 1
Prepared Statement of Chairman Johnson....................... 33
Hon. Joe Donnelly................................................ 3
WITNESSES
Michael Oros, Board Member, American Orthotic and Prosthetics
Association.................................................... 4
Prepared Statement of Mr. Oros............................... 34
Daniel Shaw, Managing Partner, Academy Medical, LLC.............. 6
Prepared Statement of Mr. Shaw............................... 39
Accompanied by:
Steven Kent, Director of Government Sales, Academy Medical,
LLC
Stephen Schurr, Consultant, Academy Medical, LLC
Dr. Charles Scoville, Chief of Amputee Patient Care Service,
Walter Reed National Military Medical Center, U.S. Department
of Defense..................................................... 16
Prepared Statement of Dr. Scoville........................... 41
Linda Halliday, Assistant Inspector General for Audits and
Evaluations, Office of Inspector General, U.S. Department of
Veterans Affairs............................................... 18
Prepared Statement of Ms. Halliday........................... 43
Accompanied by:
Nick Dahl, Director of Bedford Office of Audits and
Evaluations, Office of Inspector General, U.S.
Department of Veterans Affairs
Kent Wrathall, Director of Atlanta Office of Audits and
Evaluations, Office of Inspector General, U.S.
Department of Veterans Affairs
Philip Matkovsky, Assistant Deputy Under Secretary for Health for
Administrative Operations, Veterans Health Administration, U.S.
Department of Veterans Affairs................................. 24
Prepared Statement of Mr. Matkovsky.......................... 47
Accompanied by:
Dr. Lucille Beck, Chief Consultant, Rehabilitation
Services; Director, Audiology and Speech Pathology; and
Acting Chief Consultant, Prosthetic and Sensory Aids
Service, Veterans Health Administration, U.S.
Department of Veterans Affairs
Norbert Doyle, Chief Procurement Logistics Officer,
Veterans Health Administration, U.S. Department of
Veterans Affairs
Ford Heard, Associate Deputy Assistant Secretary, Office of
Acquisitions and Logistics, U.S. Department of Veterans
Affairs
SUBMISSIONS FOR THE RECORD
Orthotic and Prosthetic Alliance................................. 50
National Association for the Advancement of Orthotics and
Prosthetics.................................................... 52
MATERIAL SUBMITTED FOR THE RECORD
Letter from Hon. Bill Johnson, Chairman. Subcommittee on
Oversight and Investigations to Mr. George Opfer, Inspector
General, U.S. Department of Veterans Affair.................... 55
Response from Mr. George Opfer, Inspector General, U.S.
Department of Veterans Affair to Hon. Bill Johnson, Chairman.
Subcommittee on Oversight and Investigations................... 56
PURCHASING PERSPECTIVE: VA'S PROSTHETICS PARADOX
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WEDNESDAY, MAY 30, 2012
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Oversight and Investigations,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 4:00 p.m., in
Room 334, Cannon House Office Building, Hon. Bill Johnson
[Chairman of the Subcommittee] presiding.
Present: Representatives Johnson, Benishek, Donnelly, and
Barrow.
OPENING STATEMENT OF CHAIRMAN BILL JOHNSON
Mr. Johnson. Good afternoon. I would like to welcome
everyone to today's hearing titled: Purchasing Perspective:
VA's Prosthetics Paradox.
Section 8123 of Title 38, Procurement of Prosthetic
Appliances, states the following: ``The Secretary may procure
prosthetic appliances and necessary services required in the
fitting, supplying, and training and use of prosthetic
appliances by purchase, manufacture, contract, or in such other
manner as the Secretary may determine to be proper without
regard to any other provision of law.''
Section 8123 originated in 1958, over 15 years before
Federal Acquisition Regulations, or the FAR, were codified in
law and has been slightly amended a handful of times since
then.
In March of this year, I sent a letter to the Secretary
regarding the VA's procurement of biologics over the open
market instead of from better-known small businesses already on
the Federal supply schedule. One specific example I brought to
the Secretary's attention involved a company that supplied
biologics.
In the timely response I received from Deputy Secretary
Gould, I was informed that the VA considered biologics to fall
under its lengthy and broad definition of prosthetics; and,
therefore, it could acquire biologics through Section 8123 as
it clearly had been doing.
Those last words, and I quote, ``without regard to any
other provision of law,'' mean at least to the VA that it does
not have to follow Federal Acquisition Regulations, VA
Acquisition Regulations, the VAR, or the Competition and
Contracting Act. This interpretation was made clear in the
Deputy Secretary's letter.
In addition to informing the Oversight Investigation
Subcommittee that the VA considered biologics as prosthetics,
other answers throughout the Deputy Secretary's letter prompted
several important follow-up questions which were relayed to the
VA on March 28th. One part of the letter immediately following
the interpretation that purchases made under Section 8123 were
not subject to acquisition regulations stated that the VA would
work on, and I quote, ``guidance to ensure that prosthetics
purchasing agents and logisticians conform with VAR to the
maximum extent practicable.''
I have to wonder why the VA explicitly and publicly ignores
the acquisition regulations when making these Section 8123
purchases but now will attempt to comply with them.
Among my follow-up questions was a request for a copy of
the VA's guidance in how it would ensure purchasing agents
follow the VAR. Just yesterday, a response to that and the
other questions was provided. It is interesting that only now
is the VA working to ensure that purchases using Section 8123
are documented and in line with the FAR and the VAR. After all,
the VA has had nearly three decades to work on this.
Failing to document purchases under Section 8123, as
acknowledged in the answers I received yesterday, is a reckless
use of taxpayer dollars. To us on this Committee, it appears as
though the VA operates as it sees fit until attention is called
to its operation.
What the Deputy Secretary's letter did not address is the
VA's use of a VHA directive, and I quote, ``Prosthetics
Simplified Acquisition Procedures Training'' that was issued
July 16, 2003, and expired July 31st, 2008. An updated
directive would probably have been useful over the last 4 years
as the VA increased its prosthetics spending by 80 percent.
However, we have seen no such update and have even learned that
those in the field at the VA's central office has instructed
VISNs to continue following it.
That expired directive contains important language stating
that Section 8123 was only to be used as a last resort,
reinforcing the importance of compliance with Federal
Acquisition Regulations. However, this Subcommittee has found
substantial evidence of VA purchasing agents using Section 8123
as a first resort. Given the broad language it contains, one
can see why this easier approach can be so tempting, and it is
certainly not the first time we have seen VA purchasers opting
for the easy route.
While there are over 100 definitions for prosthetics
throughout the Federal Government, the definition used by the
VA is a full paragraph in length. As we will hear today, some
of the items falling under this broad definition do not sound
like prosthetics to anyone except the VA.
The VHA handbook's definition of prosthetic appliance is as
follows: all aids, devices, parts, or accessories which
patients require to replace, support, or substitute for
impaired or missing anatomical parts of the body. The items
include artificial limbs, terminal devices, stump socks,
braces, hearing aids and batteries, cosmetic, facial, or body
restorations, optical devices, manual or motorized wheelchairs,
orthopedic shoes, and similar items. Perhaps this overly broad
definition is a contributing factor to the VA's inability to
effectively manage its prosthetics inventories.
As one of the members of the first panel will note, the
definition is confusing, and I am concerned that confusion is
widespread inside the VA as well as outside of it. Recent
audits from the VA's Office of Inspector General have
substantiated that the Department does not effectively manage
its prosthetic supply, nor does it have adequate control over
its payments when procuring prosthetics. Given what we already
know and what we will hear today, these findings are not
surprising.
A tailored definition of prosthetics is just one way the VA
can better track and manage its prosthetics acquisition. For
instance, the broad inclusion of durable medical equipment
under its prosthetics definition could encourage the misuse of
Section 8123 authority. In addition, as the IG noted about the
VA's overpayments, excess inventories, and failure to receive
the best value, and I quote, ``strengthening controls over
these actions should not compromise the quality of the
prosthetic limbs provided to veterans.''
In short, the VA can be a better steward of taxpayer
dollars while still providing veterans timely access to care,
including in the area of prosthetics.
Another way the VA can better manage the billions spent in
prosthetics every year is to actually enforce the acquisition
regulations that apply to Section 8123. In the response I
received yesterday, the VA still fails to acknowledge the abuse
of Section 8123 and the blatant circumvention of the FAR and
the VAR by VA employees. We know the problem exists. Now is the
time to fix it. If employees in the past have failed to follow
internal guidance, then perhaps a legislative clarification is
necessary to ensure best value for taxpayer dollars.
Lastly, before simply reorganizing employee structures and
moving chess pieces around on the board, I am requesting here
today that the VA present to this Committee in detail its plan
to improve its acquisition of prosthetics and the specific
reasons for the changes before putting the plan in place. This
effort at transparency will help both veterans and Congress see
that meaningful reform is taking place.
Mr. Johnson. With that, I now recognize the Ranking Member
for his opening statement.
[The prepared statement of Hon. Johnson appears in the
Appendix]
OPENING STATEMENT OF HON. JOE DONNELLY
Mr. Donnelly. Thank you, Mr. Chairman.
In response to the First and Second World Wars, physical,
occupational, and rehabilitation therapy was introduced to
respond to the needs of injured servicemembers. With the high
number of servicemembers whose lives were altered due to limb
loss from combat trauma, the Department of Veterans Affairs
needed to provide assistive devices to help servicemembers and
veterans lead a meaningful and independent lifestyle.
VA now contracts with many companies across the country to
provide prosthetics, including companies in my home State of
Indiana, which is an important medical device hub. For example,
Zimmer, in Warsaw, has a contract covering primary hip and knee
implants; and I know the company is proud of its good working
relationship with both the VA and DoD.
Today, we have the opportunity to discuss VA's prosthetic
acquisition and procurement policies. Following the
Subcommittee on Health's hearing on May 16th, further
discussion is needed on VA's prosthetic and orthotic
purchasing. Over half a century ago, Congress gave VA the
authority under Title 38, Section 8123, to pass over Federal
Acquisition Regulations and purchase state-of-the-art
prosthetic limbs efficiently and quickly. This exemption is
written into VA acquisition regulations.
By enacting Section 8123 exempting procurement of
prosthetic limbs from other laws, VA would have the ability to
provide veterans with services and prosthetic devices needed to
obtain a lifestyle similar to the one they lived pre-injury.
While Section 8123 may provide the flexibility the Veterans
Health Administration needs to respond to veterans, we must
also ensure this flexibility is used properly and not as a
means of bypassing Federal Acquisition Regulations.
Finally, I hope that by reviewing the Department of Defense
prosthetic process we may gain further insight on how to
improve VA's prosthetic procurement policies.
I look forward to hearing from the VA, DoD, and other
witnesses on how we can find this balance.
Thank you, and I yield back.
Mr. Johnson. Thank you.
We are now going to welcome the first panel to the witness
table. We will hear from Mr. Michael Oros, a member of the
Board of Directors of the American Orthotic and Prosthetics
Association, and Mr. Daniel Shaw, managing partner of Academy
Medical, LLC.
Both of your complete written statements will be made part
of the hearing record.
You can come to the table, please.
Mr. Oros, you are now recognized for 5 minutes, sir.
STATEMENTS OF MICHAEL OROS, BOARD MEMBER, AMERICAN ORTHOTIC AND
PROSTHETICS ASSOCIATION; AND DANIEL SHAW, MANAGING PARTNER,
ACADEMY MEDICAL, LLC, ACCOMPANIED BY STEVEN KENT, DIRECTOR OF
GOVERNMENT SALES, ACADEMY MEDICAL, LLC, AND STEPHEN SCHURR,
CONSULTANT, ACADEMY MEDICAL, LLC
STATEMENT OF MICHAEL OROS
Mr. Oros. Good afternoon and thank you for the invitation
to testify on procurement of prosthetic and orthotic care for
our veterans.
My name is Michael Oros, and I am a member of the American
Orthotic and Prosthetics Association's Board of Directors. I am
also a licensed clinical prosthetist and the President of
Scheck and Siress, a leading provider of orthotic and
prosthetic services in the State of Illinois.
My experience is with a subset of the VA's ``prosthetic''
services. If you asked someone on the street what a prosthesis
is, the response would probably be an artificial leg or
possibly an arm. If you talked about an orthosis, a few
individuals with family members who have had a traumatic brain
injury or a stroke might be able to describe a custom-made and
fitted device to help damaged limbs function properly. I am
fairly certain that nobody would suggest a seeing eye dog,
wheelchair, or many of the other items that are in the VA's
``prosthetics'' budget.
Why does this matter? AOPA's concern is that an overly
broad definition of prosthetics leads to policies that are
inappropriate when it comes time to deliver replacement limbs
and orthopedic devices. The result is barriers to care for
veterans with limb loss who need prosthetics to provide for
their families and to live their everyday lives.
Only 2 weeks ago, Health Subcommittee Chairwoman Buerkle
held a hearing on prosthetics as traditionally understood and
defined. During that hearing, the chief procurement officer
testified that because changes in procurement policies applied
only to items that cost $3,000 or more, those changes would not
apply to 97 percent of the prosthetics budget.
While I am sure that statement is accurate, it is also
unhelpful. Nearly all the components of a basic prosthetic limb
cost more than $3,000. So policies that do not apply to 97
percent of the VA's prosthetic purchasing program can still
delay vitally needed care for our veterans with limb loss.
Congress authorized the VA to go to great lengths to ensure
veterans access to prosthetic services in his or her community.
If you are a veteran in need of prosthetic care, VA has been
given legal authority to do what it takes to secure prosthetics
and orthotics from the provider of the veteran's choice.
AOPA urges this Subcommittee to do everything in its power
to ensure that the necessary procurement legislation,
authority, and policies remain in place to guarantee the
veterans' right to choose their own provider. It seems like we
shouldn't have to urge the Committee to remain vigilant on this
point, but we do, because AOPA shares the concerns of several
veteran service organizations that the veterans' choice of
providers is being eroded.
There are real and increasing barriers being erected to
non-VA-provided care. For one example: One veteran was recently
told how he could receive a high-tech knee only from the VA
services department that was more than 2 hours away, and not
from the community-based prosthetist whom had been caring for
him for more than 11 years. After much pushback from the
veteran and his local prosthetist, the VA offered two
solutions: one, he could receive the knee from the VA that was
more than 2 hours away, or his local prosthetist could resubmit
all the paperwork and it would take up to 3 months' time for
the approval to come through. That veteran finally switched to
the VA for care because he was tired of arguing for his own
rights.
AOPA doesn't believe this is an isolated incident, and I
could go on with similar stories. The question really is, is
why is the VA establishing policies to undermine the veteran's
choice?
It has been suggested by some the cost may be a factor. A
recent IG audit claimed that the average cost of a prosthetic
limb fabricated by the VA in-house is about 25 percent of what
an outside contractor charges. That analysis almost certainly
fails to take into consideration VA staff salaries, benefits,
facility, and administrative costs. Community-based providers
working under contract with the VA provide high-quality care to
veterans at rates below the industry standards that have been
approved by Medicare.
The goal of procurement systems for prosthetics and
orthotics should be to deliver the highest-quality timely
prosthetic and orthotic care possible to all veterans,
regardless of their age, their geographic location, their
ability or willingness to become the ``squeaky wheel'' and
demand appropriate care.
Procurement policies should ensure four basic elements:
Veterans have access to the prosthetics provider of their
choice without having to overcome artificial and unnecessary
barriers.
Veterans must be able to receive timely care from the
provider, whether that provider is VA or an independent
practice.
The prosthetist serving those veterans should not simply
have the minimum certifications and qualifications needed, but
actually have the training and experience to meet the
specialized needs of veterans. This will become more and more
of a challenge for the VA and for independent O&P practices as
the requirement for a master's degree as an entry level is
implemented.
Contracting and other policies should require the
measurement and continuous improvement of veterans' outcomes
until each veteran achieves their highest level of restored
function.
Mr. Chairman, members of the Committee, thank you very much
for the invitation to testify and for your commitment to
providing the highest-quality prosthetic and orthotic care to
our Nation's veterans. I look forward to answering any
questions that you may have.
[The prepared statement of Mr. Oros appears in the
Appendix]
Mr. Johnson. Thank you, Mr. Oros.
Mr. Shaw, you are now recognized for 5 minutes.
STATEMENT OF DANIEL SHAW
Mr. Shaw. Mr. Chairman, Ranking Member Donnelly, members of
the Subcommittee, thank you for the opportunity to appear
before you today to discuss the Department of Veterans Affairs
prosthetic purchasing practices and their impact on Academy
Medical, a VA-verified veteran-owned small business.
My name is Daniel Shaw; and I am the managing partner of
Academy Medical, located in Wellington, Florida. Academy is a
reliable source of supply of biologics and holds a mandatory
source Federal Supply Schedule, FSS, contract, issued by VA's
National Acquisition Center. My fellow managing partner and I
graduated from the U.S. Naval Academy in 1991. Academy Medical
is so named to pay homage to our alma mater.
Accompanying me here today is Mr. Steven Kent, our director
of government sales, and Mr. Stephen Schurr, a subject matter
expert in the field of biologics.
My original testimony here today is pleasantly overtaken by
events. By memorandum dated May 23, 2012, the Veterans Health
Administration notified VHA procurement and prosthetic
personnel engaged in the ordering of biological implants of its
policy on ordering biological implants using the FSS program.
We are very pleased with this change in VHA's position, one
which levels the playing field and respects the mandatory
source nature of VA's FSS program. We have worked long and hard
to get VHA to adopt this policy. I have a copy of the policy
and would like to offer it for inclusion in the record of
today's hearing.
[The attachment appears in the Appendix]
Mr. Shaw. We hope the Subcommittee will encourage the VA to
formalize this VHA policy memorandum by having it codified to
amend the VA Acquisition Regulations. Policy of this magnitude
should be formalized for perpetuity, as policies are easily
forgotten as time goes on or through leadership changes. This
is especially true given there is likely to be a short- and
long-term resistance to this policy, especially by purchase
card holders.
One concern we have is whether the VHA policy applies to
all biological implant procurements, to include those acquired
as micro-purchases by government purchase card holders. We
estimate nearly 95 percent of biological implants are acquired
by purchase card holders who are neither trained nor nuanced in
the use of FSS contracts. This will have a major impact on the
success or failure of VHA's policies from a supplier
perspective and could potentially result in no improvement for
FSS contract holders.
How VHA will implement, monitor, and enforce compliance
with this policy is still unclear. The policy memorandum is
silent on this.
We hope this new VHA policy will make a difference. We
estimate VA purchases approximately $175 million annually in
biologics. This will be a nice cost-savings for the taxpayer.
In addition, if VA makes better use of the schedule's
program, it will avoid Competition in Contracting Act
violations. It will be assured of receiving high-quality
products and also reap the revenue from the FSS program
industrial funding fee used to fund its supply chain management
operations.
What is hurting Academy is VHA's use of authority granted
under Section 8123, Title 38, United States Code. Although
VHA's new policy for the procurement of biological implants is
welcome news to us and other FSS contract holders, Section 8123
still looms large as long as this authority exists and is
likely to be applied to open market procurements for biologics
not procured through the FSS program.
We recently learned VA determined and subsequently notified
this Subcommittee the authorities in Section 8123 trump even
the Veterans First Contracting Program authorities contained in
Sections 8127 and 8128. The unprecedented and extraordinary
contracting authorities granted to VA under its Veterans
Contracting Program were effective June, 2007. It would seem in
passing Public Law 109-461 the Veterans Benefits, Healthcare
and Information Technology Act of 2006, Congress would have
specifically exempted Section 8123 procurements from Sections
502 and 503 Public Law 109-461, but it did not. In light of
VHA's new biological implant procurement policy, this issue
needs to be addressed, given that non-FSS biological
procurements will be conducted on the open market.
In closing, Mr. Chairman, the use of VHA's new biological
implant procurement policy gives us hope and levels the playing
field, and for that we are truly grateful. We seek only to be a
reliable source of supply of biological implants, to be treated
respectfully, and given the opportunity we have earned to be
VA's industry partner. We have no axe to grind. We simply have
a business to run and will work to create an environment that
engenders trust, mutual respect, and cooperation as VA provides
its services to America's heroes.
Thank you, sir, for your distinguished leadership and for
that of the Subcommittee. We hope to match our private-sector
success in the VA marketplace. We never sought an adversarial
relationship with VA. We seek only to be trusted business
partners with VA and to be given the respect and opportunity we
have earned.
Thank you for holding this hearing, Mr. Chairman. We will
be happy to respond to any questions you or your Subcommittee's
members may have.
[The prepared statement of Mr. Shaw appears in the
Appendix]
Mr. Johnson. Thank you, Mr. Shaw.
We will now begin with questions, and I will yield myself 5
minutes.
Mr. Shaw, who is the national regulatory agency for
biologics throughout the country?
Mr. Schurr. If I may, the FDA is not a formal regulation
body. It is the American Association of Tissue Banks. It is a
voluntary regulatory body.
Mr. Johnson. Okay. Could you briefly explain some of the
criteria that the Association of Tissue Banks, AATB, has to
ensure patient safety?
Mr. Schurr. Yes, sir. The AATB monitors that there are
safety regulations such as testing for each donor through a
variety of tests, the cancers, the HIV, hepatitis, various
screenings to make sure that each donor is safe to move on to
processing.
Mr. Johnson. And I am sorry. Let's go back. Mr. Schurr, and
Mr. Kent, for the record, would you tell us where you are from,
and who you represent?
Mr. Schurr. Yes, sir. My name is Stephen Schurr. I am a
consultant with Academy Medical. I am a subject matter expert
with a long history in biologics.
Mr. Johnson. Okay.
Mr. Kent. I am Steven Kent. I am from Wellington, Florida,
and I am the Director of government sales for Academy Medical.
Mr. Johnson. Okay, thank you.
How can a surgeon or VA facility be assured that the
biologics they purchase are indeed safe for the patient?
Mr. Schurr. All biologic companies that are in the hospital
systems and are to serve patients and are implanted into
patients follow the AATB guidelines. Therefore, all are deemed
safe.
Mr. Johnson. How can or do biologics vary from manufacturer
to manufacturer?
Mr. Schurr. All biologic companies share. There is just a
handful of donor facilities that supply the processing plants.
So pretty much they all come from the same sources.
Mr. Johnson. Okay. Where do biologics manufacturers procure
their donors?
Mr. Schurr. Again, there is a handful of donor facilities
that dispense and supply the donors to the processing
facilities and they move on to the biologic companies.
Mr. Johnson. Where exactly do these donors or cadavers,
where are they procured from? Do they come from foreign
countries or from the U.S.?
Mr. Schurr. Well, as per the AATB, they all come from the
United States.
Mr. Johnson. Okay, how do the various biologics
manufacturers work cohesively together? Do they commingle?
Mr. Schurr. They certainly do. They all share in the donor
pool.
Mr. Johnson. Okay. Do they share and swap products and
brands?
Mr. Schurr. Absolutely.
Mr. Johnson. Okay, with regard to traditional biologics,
what special training, experience, tooling, or technique is
required on behalf of the surgeon to use the various biological
brands?
Mr. Schurr. To my knowledge, all biologics pretty much
follow the same technique guides with very little variance.
Mr. Johnson. Regardless of the supplier?
Mr. Schurr. Correct.
Mr. Johnson. So, to clarify, you are stating that the
surgeon's ability and technique to use brand A over brand B is
identical, not altering the surgeon's skills in any way at all
that would jeopardize patient safety?
Mr. Schurr. It is pretty much just how it is prepared in
the OR, whether it is rinsed or soaked to rehydrate
demineralized bone product, for example. There might be
variance in how many minutes that is. It is a small difference.
Mr. Johnson. Okay.
Mr. Oros, you talked about four elements of care that in
your experience comprise quality.
Mr. Oros. Yes.
Mr. Johnson. How does the VA oversee, supervise, and
otherwise hold community-based providers accountable for
providing quality care to veterans? And how does that compare
to the way in-house VA prosthetists are evaluated? I hope I
pronounced that right.
Mr. Oros. Prosthetists. It is close enough.
Frankly, the system goes back to a clinic-based system.
There aren't really any measured outcomes, if you will, from
the time most veterans begin their care, at least in--
I would say my experience is solely with the VA system.
They will be seen in an amputee clinic, for example. The
prosthesis is prescribed. The patient will receive their
service on the outside, and then they will go back for a
``clinic checkup''. But there is not really any sort of
objective measure, if you will, other than asking the patient
to walk around a little bit and demonstrate that they can, in
fact, move with their prosthesis. But there aren't really any
functional outcomes tied to the care that is provided either
in-house or outside the system.
Mr. Johnson. Okay, I have some additional questions, and we
may have a second round for this panel, but at this time I will
yield to my colleague, Representative Donnelly, for his
questions.
Mr. Donnelly. Thank you, Mr. Chairman; and, to all of you,
thank you for your service to our country.
And, Mr. Shaw, my nephew is a 2005 Academy graduate and
flew helicopters in Iraq. And as a Notre Dame graduate, you
have been unkind to us in football these past few years.
Thank you very much for being--I am sorry?
Mr. Shaw. That is a long time coming.
Mr. Donnelly. Yes, it was.
Mr. Johnson. I will point out that Ohio State is trying to
be unkind to your football team, too.
Mr. Donnelly. And it was well deserved, Mr. Shaw. Your
players were extraordinary to watch every year I have had the
chance.
I wanted to ask you, has Section 8123 prevented the VA from
providing veterans with assistive devices they may need?
Mr. Shaw. I am not sure I understand the question, sir.
Mr. Donnelly. Okay, have we been able to get the best
products that the vets have needed through Section 8123, or do
you think there are some better ways?
Mr. Shaw. I think, as we have discussed, there really is
very little difference in the products. And what we have tried
to express to the VA is that there is no difference in
biologics and particular products that we have on the Federal
supply schedule. There is no difference. And our story is that
we feel like, as an FSS contract holder, we can provide the
same, if not better, products at a much more affordable price
to the taxpayer.
Mr. Donnelly. Okay, Mr. Oros, you indicated that you
disagree with the Inspector General's audit which indicated the
average cost of a prosthetic limb made by contractors is more
expensive than if the VA made it in-house. What do you consider
the average cost of a prosthetic limb made by contractors
compared to the VA?
Mr. Oros. It is hard to answer that question, only because
when you describe a prosthetic limb you could be talking about
a simple below-the-knee prosthesis, which might run in the
neighborhood of 8 to--
Mr. Donnelly. Well, I guess I mean on average, if the VA
made it or--
Mr. Oros. I think they would be remarkably similar if it
was a true apples-to-apples comparison. Because the reality is
the component costs should be relatively similar from the
manufacturer to either the VA or the outside clinician. And
then there are industry standards for what the practitioners
make that should be relatively similar. Benefit costs, et
cetera, should all be relatively similar.
Mr. Donnelly. What do you think the comparison, like the
audit, what do you think they are missing?
Mr. Oros. Well, at the hearing 2 weeks ago, the IG said--it
was actually footnoted in the report--that it really wasn't
meant to be an apples-to-apples comparison because--and I am
going to paraphrase here--the VA didn't have a good assessment
of their own internal costs. And as someone who looks at our
business' P&Ls pretty closely, my sense is that, without the
costs, for human resources, et cetera, that is a big component
of it.
Mr. Donnelly. Well, let me ask you this: If there is no
handle on--if there is no real estimate of the cost, as you
said, does any comparison really stand up if the numbers are
not the same?
Mr. Oros. In my mind, no.
Mr. Donnelly. Okay. Well, I yield back. And, again, thank
you all for your service to the country; and as you well know,
the most important thing we can do is to make sure that every
veteran is served properly. So thanks again for what you do.
Mr. Johnson. I thank the gentleman for yielding back.
We will go to our colleague now from Michigan, Dr.
Benishek.
Mr. Benishek. Thank you, gentlemen, for coming and
testifying today. I just have a couple of questions.
Mr. Oros, are the people that work at the VA, the
orthotists at the VA, are they members of your association,
too? I mean, do they have the same access to the same
prosthetics as the people on the outside?
Mr. Oros. Yes, they should.
Mr. Benishek. Because one of the questions I have, you
know, I have done amputations and had to deal with orthotists
and had people take care of it, of my patients; and one of the
things that you brought up in your testimony was sometimes it
is simply the fact of going to the VA. Sometimes there is a
travel issue--
Mr. Oros. Yes.
Mr. Benishek. --or a comfort issue with the orthotist, you
know, the guy is familiar with. Do all of these people already
have contracts with the VA? I mean, are we having to deal with
the special section a lot dealing with outside orthotists or
they have a contract?
Mr. Oros. Actually, the majority of VA care is actually
provided outside the VA system through independent, contracted
providers.
Mr. Benishek. All right. Well, I am just trying to, you
know, verify that the VA and the outside providers are
providing comparable care. They have access to the highest-
quality orthotics and all that.
Mr. Oros. The care should be comparable. It is more a
matter of what is the veteran's choice. Is it to receive care
locally, or to go to the VA? And I think AOPA's position is
that that should be the veteran's choice. And it is fine if it
is within the VA system, but it also should be fine if it is
outside the system.
Mr. Benishek. It seems like your testimony indicates that
sometimes the VA seems to discourage the outside presence?
Mr. Oros. That is absolutely the case.
Mr. Benishek. All right, so is it the issue that we think
that it is just charging--the VA thinks that they are charging
too much or they already have their own overhead involved? I
mean, is there a reasoning for that that you can--
Mr. Oros. I can't speak for the VA's stated intention or,
you know, unintended steering of patient care.
Mr. Benishek. Right. Well, I know in my district, you know,
I have a very rural district and people have to travel
sometimes hours to get to the VA facility, and especially to
contract with orthotists it might be even further to go to some
specialty clinic, you know, way outside the area. So I think
increased access to a local orthotist would be excellent.
Let me ask Mr. Shaw a question. We are talking about
biologics. Are you talking about bone implants for the most
part?
Mr. Shaw. Yes, sir, bone, any kind of cadaveric device,
milled bone, ACL tendons, skin grafts, things of that nature.
Mr. Benishek. Okay, so for now we have a contract, where
before people were, for the most part, going out of the Section
8123. Is that the issue here?
Mr. Shaw. Yes, sir. We have an FSS contract, and we are one
of the few vendors who took the time to get an FSS contract.
And we are--our situation is, as we are going out and marketing
our contract, we are coming up against leadership that is
invoking 8123 and saying that, because with 8123 they don't
have to abide by any contract, that our FSS contract is
irrelevant for purchase of biologics.
Mr. Benishek. I tend to agree with the Chairman on that. I
don't believe that really biologics are the same thing as
prosthetics, to tell you the truth. And I would prefer to see
most people have a contract because--is there a wide variety in
the price then, basically? Tell me the variety of prices.
Mr. Shaw. We found that we are probably 20 to 30 percent
more affordable than some of our competitors.
Mr. Benishek. What percent of the business of the VA is
with a contractor like yourself, then? Is it mostly
noncontracted 8123?
Mr. Shaw. Yes, sir. It is maybe 97 percent off contract,
versus our small 3 percent. We estimate that the VA spends
about $175 million annually in biologics. And, to be honest,
there has never been a vendor putting these products on
contract. And so we have kind of gone through that arduous task
of getting it on contract; and we have let the VA know that,
hey, we are out here, and as a veteran-owned small business we
really want to be your partner. And it has relatively fallen on
deaf ears.
Mr. Benishek. Is there a different cost structure between
your company and the other companies that make the difference
in the price that you are aware of?
Mr. Shaw. I can't really speak for my competitors and what
their situations are, but I think that if you don't have to--if
you are not asked for a discount when someone is swiping a
purchase card, then they are not going to get one.
Mr. Benishek. So how many different providers are there of
these biologics?
Mr. Shaw. Six or eight.
Mr. Benishek. All right--throughout the country?
Mr. Shaw. Probably six or eight that are comparable, that
are AATB certified, that provide good-quality products.
Mr. Benishek. Well, I guess my question to the Committee
then would be to, you know, see if we can investigate this a
little bit further. I mean, not only does it not seem to be an
orthotic to me but just the process itself doesn't seem to be
quite right. So I appreciate your testimony.
I see my time is up. Thanks.
Mr. Shaw. Yes, sir.
Mr. Johnson. Thank you for yielding back.
We will go to Mr. Barrow from Georgia.
Mr. Barrow. Thank you, Mr. Chairman.
Gentlemen, thank you all for your testimony today.
I want you to pitch that hay down there real low where us
goats can get at it, okay?
If I understand the whole purpose of 8123, it is basically
to say, with respect to something that is as important as
prosthetic devices, money is no object. Cut through all of the
red tape. There is no red tape. We are going to spend whatever
is necessary to get folks what they need. There is a noble
impulse in that, but if I understand what you are saying, we
are spending a whole lot more and we are not getting enough
value for the taxpayers and benefit for the veterans at the
same time. Is that the upshot of this?
Mr. Shaw. Yes, sir.
Mr. Barrow. Help me understand how you would rewrite 8123
in order to make sure that we preserve that prime directive of
money is no object when it comes to trying to replace a vital
function for folks. We are not going to cut corners. We are
also not going to waste money in the process. How would you
suggest that we change 8123 so that we can continue to take the
attitude of we are going to get whatever you need to the folks
who need it, when they need it, but not waste money and get
value for the taxpayers and benefit for the vets at the same
time. How should we change 8123?
Mr. Shaw. Sir, I don't think you really need 8123. I think
most purchases could be--the Federal Acquisition Regulation
does a pretty nice job I think for acquisitions of even
prosthetic limbs.
Mr. Barrow. Do you have any concerns that the red tape
associated with trying to making sure we get stuff off the
shelf at the lowest price--bulk rates, discounts, that kind of
stuff--isn't going to interfere with folks getting exactly what
they need with respect to something that is much more out of
the ordinary than something, you know, off the shelf?
Mr. Shaw. There is a VA waiver form--if a clinician were to
have a specific appliance that he felt that would be
specifically needed for that particular patient, there is a
waiver form that is quite easy for them to fill out; and I
think that many clinicians are familiar with the waiver form
and would most likely fill it out for that patient.
Mr. Barrow. And, in that context, how would things work
differently than they do right now, if we did that?
Mr. Shaw. I think what would happen is there would be
several contracted vendors, most likely your more reputable
manufacturers, and that would be what most guys would most
likely use on a straightforward case.
But, again, if you have a patient that needed something in
particular, the clinician could fill out a waiver form and the
patient would get the care that he needed.
Mr. Barrow. Thank you.
Mr. Oros, same question for you. Do you have anything to
add to that?
Mr. Oros. I think there might be a slight difference when
it comes to what I will call traditional orthotic and
prosthetic care. I will highlight your first comment was to
provide whatever is the best for those individual patients, and
they are really not commodity services.
Mr. Barrow. Exactly.
Mr. Oros. So to that end, I think you want to eliminate
whatever type of barriers. I don't think that you want to lump
it in with something, for example, like biologics. So I would
absolutely tighten the definition of 8123 to mean replacement
of artificial limbs and orthopedic devices.
Mr. Barrow. How about you, Mr. Shaw? Do you feel the same
way? Do you think that would accomplish--
Mr. Shaw. I would agree with that. I think if the Committee
felt like there needed to be an 8123 and the leadership at VA
felt that 8123 is necessary, I would definitely limit it to a
very, very limited access; and I would certainly ensure that it
could not be delegated down.
Mr. Barrow. Thank you, gentlemen.
I only have a minute and a half, and I would be happy to
yield so much of that time as either the Ranking Member or the
Chairman would like to have.
Mr. Johnson. I thank the gentleman for yielding back.
We will actually go into a second round. I do have a few
more questions, and then we will see if our colleagues have
any.
Mr. Oros, you pointed out in your testimony that 80 to 90
percent of veterans' prosthetic and orthotic care is provided
by community-based providers. I am sure this is a significant
and unwieldy system of contracts for the VA to manage. What in
your view is the advantage to veterans of sustaining this
contract-based system?
Mr. Oros. It is simply that access to their individual
provider.
And the reality of the VA network, you are right. It is
unwieldy. But the fact of the matter is that our injured
veterans, they might be originally cared for in a VA, in a DoD
facility, but they want to go back to their own community and
live their own lives; and to have to go to a VA hospital that
is 2 hours away is more than an inconvenience.
Mr. Johnson. And maybe you have already answered this
question in some of your comments, but if you were going to
design a system, Mr. Oros, for the VA to evaluate the quality
of care provided to veterans, what would you do? What
provisions would you put in that system to improve the quality
of care for veterans--that veterans receive?
Mr. Oros. I would start to look at the implementation of
some functional outcome measurements at the time of the
original prescription and then follow it throughout that
veteran's care so that you see that there has been restoration
of function. And that can be done with validated instruments,
and there is also technology available that can support that
kind of measurement.
Mr. Johnson. Okay, as one of the elements of quality you
described the need to educate veterans about their right to
choose a provider of prosthetic care. The Committee is starting
to hear more and more stories about veterans who say that the
VA is creating barriers to their selection of non-VA care. What
has been your experience? Have you heard from veterans that
this is a growing problem?
Mr. Oros. I have seen it locally. I think what I can speak
to most directly to, is, locally, we no longer have access. For
at least the last 2 years our company, while we have had a VA
contract, has not been invited to that amputee clinic that I
referred to previously. Really that's where those referrals
are, and the veteran's ability to communicate with the
prosthetist as well as the referring VA physician, are all kind
of present in the same building.
Mr. Johnson. Okay, here is that word again. From your point
of view, what barriers are preventing veterans from selecting a
prosthetist of their own choice? Is it just that veterans don't
know their rights?
Mr. Oros. I think it is unfamiliarity with their rights.
Mr. Johnson. Okay. You talked in your written testimony
specifically about older veterans at your practice complaining
that there appears to be new administrative hurdles to prevent
their continuing to receive care at non-VA facilities. Can you
give us some examples?
Mr. Oros. We have seen in our own facility where veterans
who have received care from our company for a number of years--
and, I have heard similar stories from other providers--
veterans have gone back to the VA for other services,
prescriptions, et cetera. And the patient has been--I will use
the word discovered--to be an amputee, and they have been
directed to receive their care within the VA system versus,
again, that outside provider.
Mr. Johnson. Okay. I yield now to the Ranking Member, see
if he has additional questions.
Mr. Donnelly. No additional questions.
Mr. Johnson. Dr. Benishek.
Dr. Benishek, would you have any additional questions?
Mr. Benishek. I have a couple of questions here.
Mr. Johnson. Okay. Thank you.
Mr. Benishek. Mr. Oros, you talked about the quality of the
orthotic providers, and your testimony mentioned, you know, a
master's degree program.
Mr. Oros. Uh-huh.
Mr. Benishek. Is it easy to find people that can do this
work? I mean, is there a lot of people out there that do this?
I am just kind of curious as to the experience that you have in
finding qualified people to do this job.
Mr. Oros. Frankly, there is probably not enough. Between
certainly the growing problem we have in this country with
diabetes, we have got increasing veteran population, the baby
boomers in general. So even the demand for these services are
growing, and the reality of it is we have a limited number of
schools graduating students that have their training in
orthotics and prosthetics. So it is an issue and a concern,
yes, but it is one we face in the private practice as well as
within the Veterans Administration.
Mr. Benishek. Do you think the qualifications for the
typical VA orthotist are pretty much the same as the private
practice person?
Mr. Oros. I would like to think they are. We have two
national credentialing agencies, the American Board for
Certification and the BOC. And I believe that both inside and
outside the VA they should be--
Mr. Benishek. Those folks are members of your--
Mr. Oros. I believe so.
Mr. Benishek. Is there ongoing certification required for
that?
Mr. Oros. Ongoing continuing education required, yes.
Mr. Benishek. Right. Okay.
I think that is about all I want to ask. Thank you very
much, sir.
Mr. Johnson. I thank the gentleman for yielding back.
Mr. Barrow from Georgia.
Mr. Barrow. I thank the Chairman. And my thanks to the
witnesses. I have no further questions.
Mr. Johnson. Well, our thanks to the panel. You are now
excused. Thank you for your testimony today and for responding
to our question.
I now invite the second panel to the witness table.
On our second panel we will hear from Dr. Charles Scoville,
Chief of Amputee Patient Care Service at Walter Reed National
Military Medical Center; and Ms. Linda Halliday, Assistant
Inspector General for Audits and Evaluations at the U.S.
Department of Veterans Affairs Office of Inspector General. Ms.
Halliday is accompanied today by Mr. Nick Dahl, Director of the
Bedford Office of Audits and Evaluations, and Mr. Kent
Wrathall, Director of the Atlanta Office of Audits and
Evaluations.
Both of your complete written statements will be made part
of the hearing record.
Dr. Scoville, you are now recognized for 5 minutes.
STATEMENTS OF CHARLES SCOVILLE, CHIEF OF AMPUTEE PATIENT CARE
SERVICE, WALTER REED NATIONAL MILITARY MEDICAL CENTER, U.S.
DEPARTMENT OF DEFENSE; AND LINDA HALLIDAY, ASSISTANT INSPECTOR
GENERAL FOR AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR
GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY
NICK DAHL, DIRECTOR OF BEDFORD OFFICE OF AUDITS AND
EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF
VETERANS AFFAIRS, AND KENT WRATHALL, DIRECTOR OF ATLANTA OFFICE
OF AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S.
DEPARTMENT OF VETERANS AFFAIRS
STATEMENT OF CHARLES SCOVILLE
Dr. Scoville. Thank you, Chairman Johnson, Ranking Member
Donnelly, and distinguished members of the Subcommittee. Thank
you for the opportunity to provide a perspective on how the
Department of Defense cares for individuals with limb loss and
in particular prosthetic care, new technologies and our
collaboration between DoD and the Department of Veterans
Affairs.
It is always important for us to look back before we look
forward, to take lessons--take from lessons learned. The
Washington D.C. Times-Herald reported, ``In a few days the Army
will print a formal regulation which will give officers and
enlisted of men who have lost arms, or legs, or both, in the
line of duty the opportunity to return to active duty.''
This was written in 1951. Fast forward to 2003. We repeated
this within the military returning individuals to active duty.
To date, we have had over 305 individuals with limb loss who
remain on active duty, and over 53 of these have redeployed
into Iraq or Afghanistan.
The goal of our program is to return patients to tactical
athleticism or to their pre-injury level of activity. The
philosophy that we use for that program is to have the patient
tell us how far they want to go, and then we work with them to
achieve those goals.
DoD has a significantly lower patient population than the
VA. Our patients are significantly different than the vast
majority of the VA patients. They are young, active
servicemembers, frequently with severe trauma and multiple limb
loss, that desire and deserve to return to the highest levels
of function, including returning to active duty. These
servicemembers are strong willed and impressive warriors who
challenge us daily to improve how we care for them. We started
with the very small decentralized program and have built it
into an efficient progressive program recognized as a world
leader in amputee care and in meeting our patients needs.
The VA and DoD have long worked together. In 1945, the Army
Prosthetic Research Lab was established at Walter Reed Army
Medical Center. In 1948, the VA established the Prosthetic
Research Department headquartered in New York City VA. Many of
the devices they developed together were continuing to be used
at the time the current conflict started.
In 2004, Congress provided $2.5 million for prosthetic
device technology enhancement and clinical evaluation at Walter
Reed and added an additional $10 million in 2005, and the DARPA
project for upper extremity prosthetic devices programmed $30
million. Much of the research included partnership with the VA,
and we would not have been able to complete the research
without this partnership.
For example, the advanced DARPA arms that have been
developed have first been tested in VA facilities and then
migrated to DoD facilities. And the newest research to help our
patients return to the highest levels of function is a study
projected to begin either later this year or early next year
with the Salt Lake City VA on osseointegration. If this is
successful, it will allow patients that are unable to wear
prosthetic sockets the opportunity to use prosthetic devices to
return to high-end activity.
Several factors help us explain why DoD has led in the
efforts to provide prosthetic care for our Wounded Warriors.
One of the keys is the interdisciplinary program. We are
pulling together providers from a wide range to address the
basic patient daily needs. While the standard of care requires
the Wounded Warrior is to be seen within 7 days, we at Walter
Reed have set the standard, they are seen within 72 hours.
Another factor is the integration of logistics and
contracting within prosthetic services. Walter Reed embedded a
warranted contract officer in the orthopedic and prosthetic
service which enables same-day ordering of new prosthetic
devices with next-day delivery. The development of blanket
purchase agreements have ensured best value through discount
pricing and fixed component costs. The logistics technician
embedded within the service provides the ability to warehouse
non-patient-specific items for fabrication and custom fitting,
further reducing delay and delivery of care.
A third factor in the success of the DoD has been the
research efforts in partnership with industry and the VA in
providing new devices such as the Genium/X2/X3 microprocessor
knees, the BiOM robotic ankle, and Power Knee.
So the Department uses both civilian and contract
prosthetists within our facility, enabling the DoD with the
contracts to rapidly expand or contract the staff to meet the
basic requirements that we have. The best value is guaranteed
within the contracts through pricing proposals provided by the
vendor in a bid phase of the procurement. The civilian model
has a wide degree of variability in costs based on the use of
not otherwise classified codes within the health care common
procedure coding system.
The DoD requires offerors to list what not-otherwise-
classified procedures and components they propose to bill for
and the amount of reimbursement they will seek. The DoD
contract officer representative may reject any bid with a not-
otherwise-specified code determined to be excessive.
A large percent of our patients receive a significant
portion of their care within the Veterans Health Care
Administration at VA. This is crucial to the success of both
DoD and VA patient care. The DoD does not have the capacity to
provide life-long prosthetic care for our Wounded Warriors.
We continue to work closely with the VA, and we have their
providers working in our clinics at Walter Reed and in San
Antonio. Creates a great relationship where we share knowledge
and assist the patients as they transition to long-term care
within the VA system. Through our long history of DoD and VA
collaborative research and patient care efforts, we continue to
meet the needs of our Wounded Warriors and veterans.
Thank you.
[The prepared statement of Mr. Scoville appears in the
Appendix]
Mr. Johnson. Thank you, Dr. Scoville.
Ms. Halliday, you are now recognized for 5 minutes.
STATEMENT OF LINDA HALLIDAY
Ms. Halliday. Chairman Johnson, Ranking Member Donnelly,
and members of the Subcommittee, thank you for the opportunity
to discuss the results of the OIG reports dealing with how VA
acquires prosthetic limbs and manages its prosthetic
inventories nationwide. We conducted these audits at the
request of the House Veterans Affairs Committee.
I am accompanied by Mr. Nick Dahl, Director of the OIG
Bedford Audit office, and Mr. Kent Wrathall, Director of our
Atlanta office.
Before I discuss the results of our work, let me make one
thing clear. The OIG supports that veterans should be able to
receive the limbs that they and their clinicians determine are
best for them from the source of their choice, either VA or
commercial vendors.
Our audit focused on the effectiveness of VA's acquisitions
and contract administration practices. We did not examine nor
do we offer an opinion on the definition of the prosthetics or
whether the VA labs are the preferred source for prosthetic
limbs rather than contract vendors based on cost comparisons or
other factors.
In our first report, we evaluated VHA's management and
acquisition practices used to buy prosthetic limbs and we
examined the procurement practices and costs paid for limbs. We
identified opportunities for VHA to improve payment controls to
avoid overpaying for prosthetic limbs and improved contract
negotiations to obtain the best value for prosthetic limbs
purchased from contract vendors.
Overpayments for prosthetic limbs were a systemic issue at
all 21 Veteran-Integrated Service Networks. We identified
overpayments in 23 percent of the transactions paid in fiscal
year 2010. We found VHA overpaid contract vendors about $2.2
million of the total $49.3 million spent on prosthetic limbs in
that year.
The overpayments generally occurred because VHA paid vendor
invoices that included charges in excess of the prices agreed
to in the vendors' contracts with VA. We also found that
contracting officers were not always negotiating to obtain the
best discount rates with vendors. Without COs negotiating the
best discount rate, VHA cannot be assured it receives the best
value for prosthetic limbs. We noted that taking action to
ensure COs consistently negotiate better discount rates should
in no way compromise the quality of prosthetic limbs purchased
for veterans.
Ms. Halliday. In addition, prosthetic staff should
periodically conduct evaluations to ensure prosthetic labs are
operating as effectively and economically as possible.
We found officials suspended the VISN-based review of labs
in January 2011 after reviewing only nine of 21 VISNs
nationwide. As a result, the prosthetic staff were unsure of
its in-house fabrication capabilities and generally lacked the
information needed to know if the labs were operating
effectively and efficiently.
Our second report provided a comprehensive perspective of
the suitability of VHA's prosthetic inventory management
policies and procedures. We reported that strengthening VA
Medical Centers' management of prosthetic inventories will
reduce costs and minimize risks of supply expiration and
disruptions to patient care due to supply shortages.
For almost 60 percent of the inventory prosthetic items,
VAMCs did not maintain optimal inventory levels. For
approximately 93,000 items, we estimated VAMC inventories
exceeded current needs for about 43,000 of these items, and
inventories on-hand were too low for another 10,000 items. This
situation occurred because VA Medical Centers did not
consistently apply basic inventory practices and techniques.
For example, we found that VAMCs did not set normal, reorder,
or emergency stock levels in automated inventory systems for
over 90 percent of the prosthetic items.
In conclusion, until VHA improves the acquisition and
contract administration practices used to buy prosthetic limbs,
VA will not have sufficient assurance that its practices are
effective or economical. Improvements in inventory practices
and accountability for these inventories needs strengthening,
and VHA needs to remain committed to replacing its existing
inventory systems with a more modern inventory system by 2015.
We are pleased to see that VA is responding to the issues
we identified in our reports and that they agreed with our
recommendations. VA is adopting practices to ensure the
financial stewardship of the funding needed for prosthetic
care.
Chairman Johnson, my colleagues and I would be happy to
answer any questions.
[The prepared statement of Ms. Halliday appears in the
Appendix]
Mr. Johnson. Thank you, Ms. Halliday.
We will now begin with questions, and I recognize myself
for 5 minutes. Ms. Halliday, did the Inspector General use the
VA's definition for ``prosthetic'' in its recent audits?
Ms. Halliday. We looked at the definition and I believe in
the inventories report we really didn't find any real problems
with it because it was defined, and we could then apply it
against the purchases we reviewed.
Mr. Johnson. Your testimony mentions that overpayments
generally occur because VHA paid vendor invoices that included
charges in excess of prices agreed to in the vendor's contracts
with VA. Did you find any reason as to why or how the VA
purchasers failed to obtain best value, even with the contract
in place?
Ms. Halliday. Well, the question on the best value led to
the contracting officers' not trying to negotiate discount
rates. The problem with the overpayments was because the
invoices were not receiving adequate review by the COTRs prior
to certification for payment so they just were not looking at
the invoices in relationship to the terms of the contract.
Mr. Johnson. You also discussed how VA purchasing agents,
following the terms of contracts would not compromise, I quote,
``the quality of the prosthetic limbs provided to veterans.''
Would the quality of prosthetic limbs decline if purchasing
agents followed their training as well as the FAR and the VAR?
Ms. Halliday. No, I don't see any reason for it.
Mr. Johnson. Do you know why Prosthetic and Sensory Aid
service suspended its review of labs last year after reviewing
only nine VISNs?
Mr. Dahl. My understanding is that at the time they made
that decision, they weren't sure what the need was for
conducting those reviews. There was a change in leadership and
they decided that they weren't getting enough information from
those reviews to continue them.
Mr. Johnson. Why is there such widespread failure to use
ECMS?
Ms. Halliday. ECMS is not considered user-friendly. It does
take some training. We have actually have had some of our staff
get the training. It is difficult to put information in. What
we have found through many of our reviews is that VA
contracting staff use it as a shell. They will put the basic
information in, but they won't put all the information in to
give you a good understanding of the contract actions that lead
to award and then through contract closeout.
Mr. Johnson. Will the VA be able to effectively recover
money that it overpaid to vendors?
Ms. Halliday. Yes, they will, because these overpayments
were in excess of the contract terms. And we do believe the
$2.2 million is a conservative estimate. The VHA staff, and Dr.
Beck took action immediately to start looking to recover those
overpayments. Those moneys can then be reprogrammed for more
prosthetics' care in VA.
Mr. Johnson. Do you think overpayments will cease in the
near future?
Ms. Halliday. We would like to see a more rigorous review
of invoices against contract terms throughout VA. I think that
there is the knowledge now that this is a systemic problem, and
I think more attention will be brought to that based on the
discussions we have had with VA officials.
Mr. Johnson. Turning to the DoD, does the Department of
Defense use any mechanism similar to section 8123 of title 38
for its acquisition of prosthetic appliances?
Dr. Scoville. No, it does not have any similar.
Mr. Johnson. Do you know whether or not DoD has any kind of
procurement statute that allows it to procure items and
disregard any other provision of law?
Dr. Scoville. No it does not. We have researched that and
there is no similar provision in the DoD.
Mr. Johnson. Are there any instances where DoD doesn't
document procurements, whether they are on- or off-contract?
Dr. Scoville. None that I am aware of, sir.
Mr. Johnson. That is all of my questions. I will yield to
the Ranking Member for his questions.
Mr. Donnelly. Thank you, Mr. Chairman.
Dr. Scoville, when you look at the VA processes, what do
you think are some of the best steps that they can take to
provide even better care in this area? When you look at how
things are done on DoD's side and on the VA side, what are some
of the tips you can give us to operate better?
Dr. Scoville. Again, the DoD and VA has a significantly
different population as far as the number, the location. We
have the advantage that we are treating the newly wounded that
have not been out for a long period of time, and can provide
the unified care at our facilities, so we don't need to rely on
a large nationwide network.
The approach that we found very successful was embedding
the warranted contract officers within our facility, which is
something the VA is now proposing or looking to do. What that
did was it allowed our providers to have more time to work with
the patients, and it gave us all the appropriate authorities to
do the contracting side, making sure we were hitting all of the
requirements, meeting all regulations.
Mr. Donnelly. Is DoD's definition of ``prosthetics'' as
broad as the VA's?
Dr. Scoville. No. The DoD definition of ``prosthetics'' is
an artificial substitute for a missing body part, determined to
be necessary by the Secretary of Defense, because of
significant conditions resulting from trauma, congenital
abnormalities or disease, and it is limited to artificial
limbs, eyes, voice prostheses, ears, nose, and fingers.
Mr. Donnelly. So by that definition, ``biologics'' would
not be included then?
Dr. Scoville. No, sir.
Mr. Donnelly. Can you explain why the use of blanket
purchase agreements and indefinite delivery, indefinite
quantity ensure the best value when acquiring prosthetics?
Dr. Scoville. These are small business set-aside
competitive contracts that provide the DoD to look at the cost
and make assessment and then select the sole source that will
provide the best value to DoD.
Mr. Donnelly. This will be for Ms. Halliday.
Do you have any opinions, as a result of what you have
looked into, as to items the VA may be including in its
definition of ``prosthetics'' that would be better suited for
purchase outside of section 8123?
Ms. Halliday. There was a large inventory of prosthetics
when we looked at the medical centers. VA really has to take a
look at which items are not unique, but just standardized items
that you would use on a regular basis. I understand that the
VHA is moving in that direction.
There are just so many items. I think when it is unique
like a limb, an arm, or extension, they are very specific
requirements, and it has to be tailored to the veteran's needs,
and the clinicians will work with the veterans. But when we get
into the prosthetics inventory within the medical center, there
are many items that can be standardized.
Mr. Donnelly. Thank you. Thank you, Mr. Chairman.
Mr. Johnson. Dr. Benishek.
Mr. Benishek. Thank you, Mr. Chairman.
Ms. Halliday, I have a couple of questions concerning the
overpayment. You said on average there is like a $2,300
overpayment. Was this systemic through all the hospitals you
checked? Were there some hospitals that were paying their right
amount and then others that weren't? I am just trying to figure
out if it is just across the board.
Ms. Halliday. I believe what we said was there was a 23
percent error rate in overpayments. We looked at the contracts
within the VISNs and all of the actions to buy the limbs and it
was systemic across all 21 of the network offices in VA.
Mr. Benishek. So it is apparent that the purchasing agents
on the routine didn't look at the contracts at all, then? Is
that the impression that you get from looking at how it was
done?
Ms. Halliday. The impression we got was that the
contracting officers' technical representatives were not doing
a good job of reviewing the invoices, once they are submitted
by vendors, before they are certified for payment. Clearly, I
think, this is called for in the VHA COTR handbook which
requires them to do some review of those invoices against the
contract terms, and that wasn't happening.
Mr. Benishek. Was there some difficulty--you mentioned that
the software is difficult to use or to call up these contracts;
should these people have this at their fingertips as they are
doing this? It seems to me that they would be--having these
contracts right available to them and they should know all this
as they were doing these reviews, right?
Ms. Halliday. You could get transparency for contract
actions if you had a good dedication to using the ECMS system,
and you would be able to find out much more about the progress
and what the contract was and the terms, and be able to do
these reviews much quicker and better.
Mr. Benishek. Is there a defined training level with the
competency requirement for the people that do these reviews
that include something like that, or are you aware of that?
Ms. Halliday. Yes, there is. For COTRs, which is a
contracting officer's technical rep, there is training. It
takes them through a process where they are delegated the
responsibilities, and the contracting officers will clearly lay
out the responsibilities to review such things as the invoices,
because normally the COTRs work is after the award of a
contract. So they are looking to ensure contract administration
actions.
Mr. Benishek. So since your investigation, has anyone
changed the way they are doing business here? Or is this going
on the way it is? Is anyone reviewing the process? Has anyone
been reprimanded for not following the rules? Has anything like
that occurred?
Ms. Halliday. At this point, I would have to say it is too
early for us to assess that. The Department has accepted our
recommendations in the report. They are moving forward on some
18 different recommendations to tighten up the controls
associated with what we saw as weaknesses in the contract
administration. We have to provide time to put all of the
controls in place, and then we would come back at a later date
and assess the effectiveness of VA's actions.
Mr. Benishek. Is there a timeline for that?
Ms. Halliday. Normally, we give the Department a year after
we have issued an audit, and I believe our audits were issued
in March of this year, so we will be looking to do some testing
and follow-up work within the next year.
Mr. Benishek. I would be happy to see that report. Thank
you. I yield back the remainder of my time.
Mr. Johnson. I thank the gentleman for yielding back.
We will go to Mr. Barrow from Georgia.
Mr. Barrow. Thank you Mr. Chairman. Just to follow up a
little bit more on the subject of overpayments, Ms. Halliday,
just how is the government going to go about getting back some
of the money that has been overpaid?
Ms. Halliday. Could you ask that question again, sir? I
don't believe I heard you.
Mr. Barrow. Sure. I overheard you saw that we acknowledge
that money has been overpaid because some of the officers were
not scrutinizing before they were certifying. Some folks got
paid something they shouldn't have got paid; I think at one
point the subject was touched on. Are we going to walk away
from it? And I think I got the impression that somehow we are
going to be pursuing recoupment, reimbursement, something,
compensation.
Ms. Halliday. It is the responsibility of the contracting
officer to make the final determination on funds that have been
overpaid and set up bills of collection and work with the
vendors to recoup those moneys.
Mr. Barrow. And what if--is there any possibility or
likelihood that it might be difficult to recoup the money
because some of them don't want to pay it back? Or is this too
small potatoes, with an ongoing book of businesses, for someone
to get that kind of a problem?
Ms. Halliday. I think the pressure to maintain ongoing
business is really what brings about a cooperative relationship
between the vendor and VA.
Mr. Barrow. Glad to hear it. Thank you, ma'am.
Mr. Johnson. I thank the gentleman for yielding back.
Our thanks to the panel. You are now excused. And I invite
the third panel to the witness table.
Mr. Johnson. On this panel we will hear from Mr. Philip
Matkovsky, Assistant Deputy Under Secretary for Health for
Administrative Operations, Veterans Health Administration.
He is accompanied by Dr. Lucille Beck, Chief Consultant for
Rehabilitation Services, Director for Audiology and Speech
Pathology and Acting Chief Consultant for Prosthetic and
Sensory Aids Service in the Veterans Health Administration. He
is also accompanied by Mr. Norbert Doyle, Chief Procurement
Logistics Officer for the Veterans Health Administration, and
Mr. Ford Heard, Associate Deputy Assistant Secretary in the
Department of Veterans Affairs, Office of Acquisitions and
Logistics.
Mr. Matkovsky, your complete written statement will be made
part of the hearing record, and you are now recognized for 5
minutes.
STATEMENT OF PHILIP MATKOVSKY, ASSISTANT DEPUTY UNDER SECRETARY
FOR HEALTH FOR ADMINISTRATIVE OPERATIONS, VETERANS HEALTH
ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS;
ACCOMPANIED BY DR. LUCILLE BECK, CHIEF CONSULTANT,
REHABILITATION SERVICES; DIRECTOR, AUDIOLOGY AND SPEECH
PATHOLOGY; AND ACTING CHIEF CONSULTANT, PROSTHETIC AND SENSOR
AIDS SERVICE, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT
OF VETERANS AFFAIRS; NORBERT DOYLE, CHIEF PROCUREMENT LOGISTICS
OFFICER, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF
VETERANS AFFAIRS; AND FORD HEARD, ASSOCIATE DEPUTY ASSISTANT
SECRETARY, OFFICE OF ACQUISITIONS AND LOGISTICS, U.S.
DEPARTMENT OF VETERANS AFFAIRS
STATEMENT OF PHILIP MATKOVSKY
Mr. Matkovsky. Chairman Johnson, Ranking Member Donnelly
and members of the Subcommittee, thank you for the opportunity
to speak about the Department of Veterans Affairs' ability to
deliver quality care and acquire prosthetics and other devices
for veterans in need of these items.
I am accompanied today by Dr. Lucille Beck, chief
consultant, rehabilitation services; and acting chief
consultant, prosthetic and sensory aids service. Also, Mr.
Norbert Doyle the chief procurement logistics officer; and Mr.
Ford Heard, associate deputy assistant secretary for the Office
of Acquisitions and Logistics.
VA has been engaging in prudent and appropriate reform to
improve the business processes governing the procurement of
prosthetic devices for veterans. We are taking great care to
ensure that these changes improve the accountability of these
purchases while maintaining the high quality of care and
clinical decision-making critical to veterans' health care.
Enhancing access and tailoring devices and clinical solutions
to the unique needs of veterans is and will remain our chief
priority.
In the few minutes I have now, I would like to broadly
outline how we are exercising better oversight of our
procurement operations and maintaining patient care.
First, VA is transitioning the authority to purchase
prosthetics from clinical support to contracting staff. The
authority to select the most appropriate prosthetic device
remains, however, with the clinical provider and the veteran.
Technologies and equipment must be highly individualized to
meet each veteran's unique rehabilitative needs. We are making
this transition, though, to bring our practices more in line
with Federal and VA acquisition regulations. While these
regulations generally require full and open competition and
procurement, section 8123, as we have heard today, authorizes
VA to limit competition when physicians require specific
devices or equipment for patient care. And the FAR and VAR
similarly authorize limiting competition under these
circumstances.
If the Secretary elects to use section 8123 in this manner,
all applicable FAR and VAR requirements must still be followed.
When products are generally available and interchangeable,
competitive procurements may be more appropriate. VA has
aggressively pursued national contracts over the past 10 years
for these types of items, achieving cost savings, and to
standardize and to find commodities where appropriate.
When we can purchase products, devices or supplies that are
generally available and interchangeable, we will comply with
the FAR to ensure we are obtaining the best price possible. In
the long term, VHA will develop a catalogue of such items to
facilitate better, more cost-effective purchasing decisions.
We are also increasing the number of audits of purchases to
identify best practices and to conduct better oversight to
ensure we are realizing the best value.
As we gather more data on how these changes are working, we
can continue to refine and streamline and simplify our
processes. We are using new templates, checklists and
justifications, and we are improving the communication between
staff and leadership so we have a comprehensive view of our
procurement activities. We will correct noncompliant contracts
as required, and evaluate contract or performance as required
by the FAR, and institute collection activities when warranted.
Finally, we are better defining our policies and guidance
to the field, strengthening our training programs and
increasing oversight and audit functions. We are directing our
facilities to reconcile physical inventories and take action to
eliminate excess inventories without creating supply shortages.
We are reserving our standards for facilities to require at
least one prosthetic supply inventory manager to become a
certified VA supply chain manager.
In conclusion, VHA's prosthetics and sensory aids service
is the largest and most comprehensive provider of prosthetic
devices and sensory aids in the world, offering a full range of
equipment and services. VA supports high-quality amputation and
prosthetics care by promoting ground-breaking research into new
technologies, training a highly qualified cadre of staff in
pursuing accreditation of all eligible prosthetic laboratories
in VA's amputation system of care. We are improving our
oversight and management of prosthetic purchasing and inventory
management to better utilize the resources we have been
appropriated by Congress as we serve America's veterans.
However, we must always ensure our processes do not adversely
affect our ability to provide veterans with high-quality
individualized and timely prosthetic services they have earned.
We appreciate the opportunity to appear before you today,
sir, to discuss this important program. My colleagues and I are
prepared to answer your questions.
[The prepared statement of Mr. Matkovsky appears in the
Appendix]
Mr. Johnson. Thank you and we will begin with questions. I
will recognize myself for 5 minutes.
Is a procurement official responsible for documenting that
a procurement is authorized under title 38, section 8123, as
outlined in the FAR 6.2, 6.302-1, and 6.302-5?
Mr. Matkovsky. Yes, they are.
Mr. Johnson. Would the procurement official also be
required to document the technical health care and other
factors supporting this decision through justification and
approval for other than full and open competition in the
contract file?
Mr. Matkovsky. We expect that the contracting official will
document the basis for the sole-source justification and using
8123. Especially as we have developed the templates moving
forward, the basis for that justification is clinical
indication, as in a physician's prescription, so noted, or a
veteran's choice.
Mr. Johnson. So the short answer is yes?
Mr. Matkovsky. Yes, sir.
Mr. Johnson. Why did Deputy Secretary Gould's letter to
this Subcommittee in March cite section 8123 and further stated
that the VA is not required to document waivers and deviations
from the Federal supply schedule when invoking section 8123?
Mr. Matkovsky. Sir, I believe the Deputy Secretary's letter
was with respect to some specific acquisitions that were cited
in the incoming correspondence, and in explaining why we did
not actually have to cite or provide a prior waiver request,
8123 was noted as the reason for not requiring a prior waiver
from the VAR hierarchy of contracts, sir.
Mr. Johnson. Many physicians at the VA are part-time
employees and in this capacity can promote companies with which
they are associated as consultants. Through section 8123, these
physicians can also direct sole-source contracts.
Are VA physicians required to disclose any outside
partnerships that could create an ethical or moral dilemma for
the VA?
Mr. Matkovsky. They are absolutely required to do so, sir.
Mr. Johnson. You note the VA's new policy for purchases
over $3,000. Approximately 5 percent of biologics cost more
than $3,000, so your policy will have minimal bearing on 95
percent of biologics purchased. Can you describe how your
policy will affect the other 95 percent of biologics purchased?
Mr. Matkovsky. Well, I don't actually have the specific
cost breakout for the biologics themselves. But the $3,000
threshold was noted that it was 97 percent of the cost would
below $3,000. Actually the number is a little bit north of 50,
55 percent of all of the prosthetics purchases are greater than
$3,000 in cost. It is the number of transactions, is the 3
percent number.
In terms of the biologics themselves, our expectation is
that we are asking in this policy moving forward that we
document that a waiver from FSS was requested and that part of
what we hoped to achieve from this--and we expect to achieve
from this--is that we will collect information about why FSS is
actually not being selected as a source for biologics or for
other items, or national contracts for that matter, and be able
to attenuate practice through education, communication in the
field as well.
Mr. Johnson. Numerous contracts reviewed by this
Subcommittee show VA purchasers splitting contracts in order to
remain under a specific price threshold for purchase. In one
case 12 purchases went to the same company for the same product
from the same contracting officer one right after the other.
Why is VHA not aggregating their micropurchases of
biologics and other prosthetics appliances to properly follow
the FAR and VAR or to be CICA-compliant, notwithstanding the
section 8123 authority?
Mr. Matkovsky. Sir, it is not appropriate to split
transactions to remain below a micropurchase threshold. So if
that is occurring, that is not a condoned practice.
Mr. Johnson. What, then, would the VHA do to stop that?
Mr. Matkovsky. Monitor the action and ensure that--look,
every purchase cardholder who is committing a transaction below
$3,000 has a supervisor who is supposed to be watching and
monitoring that. They should be looking for any split
transactions to remain below a threshold. That is an
inappropriate action, and I would request taking that item for
the record to research it.
Mr. Johnson. I appreciate you recognizing that, sir. We
have got page after page of examples of that kind of thing. So
I would hope that the VHA would take that issue very seriously
because we on this Committee do.
Why are some prosthetic items purchased using FAR
guidelines and procedures instead of section 8123?
Mr. Matkovsky. I will initiate the discussion: 8123 and
FAR-VAR are not actually as much in conflict as it seems in
prior discussion today. Within FAR, part 6, 302-5, and VAR
8302-5, there is reference to other statutory authority. The
question is under what conditions does the physician prescribe
a specific product, or does a veteran choice weigh in as the
justification for sourcing a particular item, and that is
primarily the scenario within which 8123 is used.
VA over a number of years has been awarding national
contracts. There are well above 50 national contracts for
prosthetic supplies, some of the more high-performing being of
course within the assistive audio devices. There are roughly
600 contracts throughout the country for local regional
contracts. All of those are precompeted price-negotiated as
well.
The use of 8123, the way we use it is for the source
justification for other than full and open, when it is a
physician prescription or a veteran choice.
Mr. Johnson. Okay. I may have additional questions but I
will yield to Mr. Barrow from Georgia at this time.
Mr. Barrow. Thank you, Mr. Chairman. Mr. Matkovsky, when it
comes to the exercising discretion under the statute 8123, what
problems would you foresee if the VA were to adopt the DoD's
definition of prosthetic?
Mr. Matkovsky. Thank you for the question. I believe the
concern that we would have is many of our veterans whom we
serve have come to expect a certain degree of their own choice
to be honored in the system, and frankly, the expectation that
a physician doesn't have to defend his or her prescription
through an administrative process.
My concern would be that the degree of vigilance to ensure
that those elements in our system are not lost is what I would
worry about, that it would work 90 percent of the time. I would
be concerned that as we try to constrain the definition of a
prosthetic, our definition is because we have a broad system
that is geographically distributed, serves veterans across many
ages.
My concern would be that we restrict the ability to source
specifically what is for the benefit for a veteran, either
through a physician prescription or through the veteran's
choice, and that we would overcorrect and lose that dimension,
sir.
Mr. Barrow. I get that. I understand what I think the
purpose of 8123 is. It is supposed to cut through the red tape,
it is supposed to make sure that nothing is going to stand in
the way of getting just what the person needs, it is tailored
to fit them. But biologics don't seem to fit that definition.
That is clearly something that a doctor is going to use, like
something that comes off the shelf. How a doctor applies that,
of course, is highly individual and specific to the patient and
what is pulled off the shelf ain't.
And what I am getting at is the DoD has a definition that
seems to be fairly comprehensive and meets what most folks with
walking-around sense have an idea of what we are talking about
here. You all have a definition; it seems to be much broader
than and allows for a whole bunch of slippage. I want to make
sure that nothing that we do or nothing that we recommend puts
a red-tape barrier between the provider and the veteran, the
person who needs the benefit of a device or the technology that
we are trying to make available to them.
At the same time, though, I think we have an obligation
both to the vet and to the taxpayer to make sure that we are
not such a loosey-goosy definition, that we are cutting all
kinds of corners and not applying best practices when it comes
to making sure we are getting value for the taxpayer. What do
you say to that?
Mr. Matkovsky. Sir, when we compared our definitions at the
Committee's request, we compared our definitions with other
entities. And there are some commercial entities that actually
use a definition of prosthetics that is comparable to our
definition. Kaiser Permanente, for one.
Mr. Barrow. Shouldn't there be folks who would use some
that conform to yours? I'm sure there are folks that would use
definitions that would be broad enough to conform to yours?
Mr. Matkovsky. Correct. But the other thing I wanted to
mention as we are committing this warrant transition process,
and we are trying to commit that process as carefully as
possible, but we are committed to completing it within this
fiscal year, there is nothing in the use of a source
justification that precludes us from engaging in a price
negotiation. A warranted contracting officer is the only person
authorized to make a fair and reasonable price determination
within the VA. And it is our expectation as we transition, that
price negotiation, even when source is under limited or
restricted competition, that the price reasonableness
determination would still continue; that is, I think, our
mechanism that we are trying to use to balance the flexibility
granted to source a physician's prescription or veteran's
choice with FAR and VAR and procurement reform.
Mr. Barrow. I understand your position. One last question.
You heard from representatives of the provider community, you
have heard from representatives of DoD, you have heard from
representatives of VA-OIG. Is there anything you heard other
folks talk about today that you think needs to be amplified or
supplemented in order to give us a fuller appreciation of the
issues before the Committee? Is there anything that you think
needs to be said that has gone unsaid?
Mr. Matkovsky. Well, yes. I don't think we heard from the
veteran community today, and hearing directly from their
concerns. This is not a process, this is not a rule that we
invoke to make our life easier. This is a process that is in
place to serve our clients. That would be it, sir.
Mr. Barrow. I understand that. I appreciate that. How about
any clarification or correction of what you have heard from
these other folks?
Mr. Matkovsky. I made one clarification point, which is
what we are talking about in the warrant transition process, is
over 50 percent of the prosthetics spend, and I think that is
clarification that we wanted to make sure was understood. So as
the warrants transition from the prosthetics community into
procurement, that is well over 50, 55 percent of the
procurement action in dollars.
The next thing that I would indicate is that part of what
our challenge is to ensure that we have available prosthetics
timely for veterans. And this notion of ``timely'' has to be
true across the entire system.
Mr. Barrow. Thank you. Mr. Chairman, our time has expired.
Thank you, Mr. Matkovsky.
Mr. Johnson. I thank the gentleman for yielding.
Mr. Matkovsky, I do have some follow-on questions.
What you are saying here today is the exact opposite of
what the Deputy Secretary's letter said in regards to the
application of 8123. Why is that?
Mr. Matkovsky. Sir, I do not believe it is the exact
opposite. I think that with respect to the specific
acquisitions that were noted we were asked a specific question
about whether or not we had to seek waiver approval prior to
sourcing the items that were not on Federal supply schedule. We
cited 8123 as the source justification that would allow us to
obviate the need for the waiver.
I do want to emphasize one thing; that what we are doing
here today is not something we have just embarked on over the
last couple of months. The transition in prosthetics to the
procurement community is something that Mr. Doyle and Dr. Beck
began in last August and we have been working on. So this is
not a new transition for us either.
Mr. Johnson. Okay. What policies and processes does the VA
have in place for its purchasing officials to determine when--
and when not--to use the FAR in purchasing prosthetics?
Mr. Matkovsky. Well, we have mentioned a few policies that
we have. We have a few policies that actually identify the
conditions under which we would apply the 8123 source authority
that remains. We also have the VAR which makes explicit
reference to 8123 contained within it. We are updating our
policies right now to ensure that they are current. We have
reason to directives out to the field in the form of memorandum
requesting that unless explicitly specified by a physician
prescription, that for biologics the VAR hierarchy is to be
followed.
Mr. Johnson. Okay. Why does the VA not document purchases
made under section 8123 in accordance with the FAR?
Mr. Matkovsky. I could tell you that on a moving forward
basis, all of our procurements that would use 8123 as a source
justification will be templated and will contain the basis of
justification within them. They will also be within the ECMS
system, they will be our procurement contracting officers will
actually initiate and conclude those purchase actions within
ECMS and would be documented.
Mr. Johnson. That would be helpful because for the last 30
years they haven't been documented. The fact that you are going
to do it moving forward will certainly be helpful.
Does the VA have record or can it audit purchases made
under section 8123?
Mr. Matkovsky. On a point forward basis we expect, we don't
expect--we expect all of our procurement officials to use ECMS
as a contract writing, not as a shell system but as a contract
writing system and contain all of their procurement actions and
documentation within them. The justification for limited scope
competition must be documented and there must be a
justification contained in the contract file. That would be an
auditable item, and we expect the ability to audit any
prosthetics procurement action that contains a less than full
and open competition contained within our ECMS system. Sir.
Mr. Johnson. Does the VA need section 8123 to acquire
prosthetics?
Mr. Matkovsky. We believe section 8123 allows us to
preserve intact the physician's prescription from their
professional opinion and the veteran's choice, and not subject
it to a second guess, a request for strengthening the
definition or justification. We believe it codifies that for
us. It actually, when used appropriately, allows us to actually
have a standard basis for the justification for the
prescription or veteran choice.
Mr. Johnson. How and when did the VA's definition of
prosthetics come into use?
Mr. Matkovsky. I believe this went over time, but we have
in our specific policy documents we have explicit definition of
the prosthetics items that are contained in that definition.
Mr. Johnson. When was the last time that policy and
definition was updated?
Mr. Matkovsky. I have to defer to Dr. Beck on this one.
Dr. Beck. Our handbook is from 2001. We have an internal
initiative now and are working on updating our regulations.
Mr. Johnson. Eleven years. Wow. Does the VA employ VHA
directive 2003-037, entitled ``Prosthetics Simplified
Acquisitions Procedures Training'' in its prosthetics
acquisition?
Mr. Matkovsky. Yes we do, sir.
Mr. Johnson. Okay. That directive expired on July 31, 2008.
Mr. Matkovsky. That is correct. The directive that has
expired, unless explicitly rescinded or replaced by another
directive, remains in force until one of those two actions
comes about.
Mr. Johnson. There we go again. You know, not doing things
for 30 years, working off of expired directives, 11 years
between reviewing documents. That is part of what has gotten us
into this mess now, wouldn't you agree?
Mr. Matkovsky. I would say that we do need--
Mr. Johnson. You won't run a business that way.
Mr. Matkovsky. I would say that we need to strengthen some
of our policies now. I would say that the definition--however,
11 years for the definition of a prosthetic, I don't know that
that in and of itself, sir, is problematic.
Mr. Johnson. Okay. When can this Committee expect to see
the full detailed plan on reorganizing your prosthetics
purchasing process?
Mr. Matkovsky. We are right now--and I will ask Mr. Doyle
to elaborate a little bit on this for us--we are in the midst
right now, as we testified earlier 2 weeks ago, in the process
of transitioning. That process was documented in a plan that
was approved by the Senior Procurement Executive within VA,
September of last year. We committed to pilot-test that. We did
not want to production change this, so we tested in three
VISNs, and we are now in the process of completing that
transition process. Again, our target date is July 1. We have
some additional time built in to ensure that we don't take any
unnecessary risks.
Mr. Johnson. Let me re-ask my question because it sounds
like you are saying that you have already gone into the
execution phase of the plan. What I am asking is when can this
Committee expect to see the full detailed plan of reorganizing
your prosthetics purchasing process?
Mr. Matkovsky. We will provide that to the Committee sir.
Mr. Johnson. Let me ask it one more time. When?
Mr. Matkovsky. I will go back and work on it, as soon as we
can, sir. We have been executing--
Mr. Johnson. A week? Two weeks?
Mr. Matkovsky. I will commit to 2 weeks, sir.
Mr. Johnson. Great. Great.
I think those are all my questions. Let me go back to Mr.
Barrow for a final round.
Mr. Barrow. I thank you, Mr. Chairman. Mr. Matkovsky, thank
you for being here today. I think we have a better
understanding of where you are coming from, but I think you
also have a better understanding of our concerns as well. And
my thanks to you. I would like to thank Dr. Beck, Mr. Doyle,
and Mr. Heard also for your service to our country.
I think you get an idea of what we are concerned about.
Please work with us. This conversation is not going to end
today. We need to make progress on this to make sure you have
the flexibility to do what needs to be done when it needs to be
done and to make sure we are not going to have any unnecessary
waste in this, because it all comes out of the same pocket and
ends up affecting the folks we are trying to help ultimately.
With that Mr. Chairman I yield back.
Mr. Johnson. I thank you for your comments, Mr. Barrow,
because, Mr. Matkovsky, I too sense your desire to do the right
things, and we are all focused on the same issue here. I know
the questioning at times appears potentially confrontational
but that is because we have a responsibility here on the O&I
Subcommittee to make sure that we are asking the right
questions. We don't always get the answers that we want, but I
certainly sense the sincerity in what you are trying to do and
I appreciate that.
I want to say thanks to the panel, and you are also now
excused.
[The panel was excused]
Mr. Johnson. The VA's sweeping definition for prosthetics
opens the door for confusion. I think we have heard that today.
Such an inclusive definition means that small policy changes
can have impacts on areas that would not otherwise be impacted
under a traditional definition of prosthetic. However, it is
also clear that actions by the VA's purchasing agents have
greatly reduced the chances for getting the best value in
prosthetics acquisition. While some guidance and regulations
already existed that would have helped ensure that best value,
even those were ignored, time and time again.
As I mentioned earlier, the Committee looks forward to
receiving the VA's detailed plan on changes to its acquisition
structure for prosthetics before it moves forward. Once again,
a partnership between the VA and the Committee can further
assure that veterans continue to receive the best care
possible.
With that, this hearing is now adjourned. Thank you.
[Whereupon, at 5:45 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Hon. Bill Johnson, Chairman
Good afternoon. I would like to welcome everyone to today's hearing
titled: ``Purchasing Perspective: VA's Prosthetics Paradox''.
Section 8123 of Title 38, ``Procurement of Prosthetic Appliances,''
states the following: The Secretary may procure prosthetic appliances
and necessary services required in the fitting, supplying, and training
and use of prosthetic appliances by purchase, manufacture, contract, or
in such other manner as the Secretary may determine to be proper,
without regard to any other provision of law.
Section 8123 originated in 1958, over fifteen years before Federal
Acquisition Regulations were codified in law, and has been slightly
amended a handful of times since then. In March of this year, I sent a
letter to the Secretary regarding the VA's procurement of biologics
over the open market instead of from Veteran-owned small businesses
already on the Federal Supply Schedule. One specific example I brought
to the Secretary's attention involved a company that supplied
biologics. In the timely response I received from Deputy Secretary
Gould, I was informed that the VA considered biologics to fall under
its lengthy and broad definition of prosthetics, and therefore it could
acquire biologics through Section 8123, as it clearly had been doing.
Those last words- ``without regard to any other provision of law''-
mean, at least to the VA, that it does not have to follow Federal
Acquisition Regulations (FAR), VA Acquisition Regulations (VAAR), or
the Competition in Contracting Act. This interpretation was made clear
in the Deputy Secretary's letter.
In addition to informing the Oversight and Investigations
Subcommittee that the VA considered biologics as prosthetics, other
answers throughout the Deputy Secretary's letter prompted several
important follow-up questions, which were relayed to the VA on March
28th. One part of the letter, immediately following the interpretation
that purchases made under Section 8123 were not subject to acquisition
regulations, stated that the VA would work on ``guidance to ensure that
prosthetics purchasing agents and logisticians conform with VAAR . . .
to the maximum extent practicable.'' I have to wonder why the VA
explicitly and publicly ignores acquisition regulations when making
these Section 8123 purchases, but now will attempt to comply with them.
Among my follow-up questions was a request for a copy of the VA's
guidance in how it would ensure purchasing agents followed the VAAR.
Just yesterday, a response to that and the other questions was
provided. It is interesting that only now is the VA working to ensure
that purchasers using Section 8123 are documented and in line with the
FAR and VAAR. After all, the VA has had nearly three decades to work on
this. Failing to document purchases under 8123, as acknowledged in the
answers I received yesterday, is a reckless use of taxpayer dollars. To
us on this Committee, it appears as though the VA operates as it sees
fit until attention is called to its operation.
What the Deputy Secretary's letter did not address is the VA's use
of a VHA directive, ``Prosthetics Simplified Acquisition Procedures
Training,'' that was issued July 16, 2003, and expired July 31, 2008.
An updated directive would probably have been useful over the last four
years as the VA increased its prosthetics spending by 80 percent.
However, we have seen no such update, and have even learned from those
in the field that the VA's Central Office has instructed VISNs to
continue following it.
That expired directive contains important language stating that
Section 8123 was only to be used as a last resort, reinforcing the
importance of compliance with Federal Acquisition Regulations. However,
this Subcommittee has found substantial evidence of VA purchasing
agents using Section 8123 as a first resort. Given the broad language
it contains, one can see why this easier approach could be so tempting,
and it's certainly not the first time we have seen VA purchasers opting
for the easy route.
While there are over 100 definitions for prosthetics throughout the
Federal government, the definition used by the VA is a full paragraph
in length. As we will hear today, some of the items falling under this
broad definition do not sound like a prosthetic to anyone except the
VA. The VHA handbook's definition of prosthetic appliance is as
follows:
All aids, devices, parts or accessories which patients require to
replace, support, or substitute for impaired or missing anatomical
parts of the body. The items include artificial limbs, terminal
devices, stump socks, braces, hearing aids and batteries, cosmetic
facial or body restorations, optical devices, manual or motorized
wheelchairs, orthopedic shoes, and similar items.
Perhaps this overly broad definition is a contributing factor to
the VA's inability to effectively manage its prosthetics inventories.
As one of the members of the first panel will note, the definition is
confusing, and I am concerned that confusion is widespread inside the
VA as well as outside of it. Recent audits from the VA's Office of
Inspector General have substantiated that the Department does not
effectively manage its prosthetic supply, nor does it have adequate
control over its payments when procuring prosthetics. Given what we
already know, and what we will hear today, these findings are not
surprising.
A tailored definition of prosthetics is just one way the VA can
better track and manage its prosthetics acquisition. For instance, the
broad inclusion of durable medical equipment under its ``prosthetics''
definition could encourage the misuse of the Section 8123 authority. In
addition, as the IG noted about the VA's overpayments, excess
inventories, and failure to receive the best value: ``Strengthening
controls over these actions should not compromise the quality of the
prosthetic limbs provided to veterans.'' In short, the VA can be a
better steward of taxpayer dollars while still providing veterans
timely access to care, including in the area of prosthetics.
Another way the VA can better manage the billions spent in
prosthetics every year is to actually enforce the acquisition
regulations that apply to Section 8123. In the response I received
yesterday, the VA still fails to acknowledge the abuse of Section 8123
and the blatant circumvention of the FAR and the VAAR by VA employees.
We know the problem exists; now is the time to fix it. If employees in
the past have failed to follow internal guidance, then perhaps a
legislative clarification is necessary to ensure best value for
taxpayer dollars.
Lastly, before simply reorganizing employee structures and moving
chess pieces around on the board, I am requesting here today that the
VA present to this Committee, in detail, its plan to improve its
acquisition of prosthetics and the specific reasons for the changes
before putting the plan in place. This effort at transparency will help
both veterans and Congress see that meaningful reform is taking place.
With that, I now recognize the Ranking Member for his opening
statement.
Prepared Statement of Michael Oros
Good afternoon Chairman Johnson, Ranking Member Donnelly, and
Members of the Subcommittee. Thank you for the opportunity to provide
testimony today. The American Orthotic and Prosthetic Association
(AOPA) is grateful for your work to ensure that Veterans with limb loss
and limb impairment receive state of the art prosthetic and orthotic
care. We appreciate the invitation to shed some light on current issues
facing the fields of prosthetics and orthotics when it comes to
procurement of high quality prosthetic and orthotic care for our
Veterans.
My name is Michael Oros, and I am a member of the AOPA Board of
Directors. The American Orthotic & Prosthetic Association (AOPA),
founded in 1917, is the country's largest national orthotic and
prosthetic trade association. Our membership draws from all segments of
the field of artificial limbs and customized bracing for the benefit of
patients who have experienced limb loss, or limb impairment resulting
from a traumatic injury, chronic disease or health condition. AOPA
members include patient care facilities, manufacturers and distributors
of prostheses (artificial limbs), orthoses (orthopedic braces such as
those used by TBI and stroke patients) and related products, and
educational and research institutions.
In my day job, I am a licensed prosthetist and President of Scheck
and Siress, Inc., a leading provider of O&P services based in Illinois.
Like many other community-based providers, Scheck and Siress is
committed to serving Veterans, and does so through contracts with the
VA. Scheck and Siress is also proud to employ Melissa Stockwell, the
first American service woman to lose a limb in Iraq. After sustaining
the injury that resulted in her limb loss, Ms. Stockwell went on to
become a Paralympic athlete, and had the honor of carrying the American
flag at the closing ceremonies of the Paralympic Games in Beijing.
Melissa is now a certified prosthetist, and a member of the staff at
Scheck and Siress.
I would like to begin by clarifying that my experience is with, and
my comments will pertain to, a fairly small, but vitally important,
subset of the goods and services that fall within the scope of
``prosthetics'' at the VA. If you asked the man on the street what a
``prosthesis'' is, the response would probably be an artificial leg or
arm. If asked about an ``orthosis,'' a few folks with family members
who have had Traumatic Brain Injury, stroke, or Multiple Sclerosis
might be able to describe a custom-made and fitted device to help
damaged limbs function properly. I am certain, however, that nobody
would suggest seeing eye dogs, wheelchairs, eyeglasses, hearing aids,
or myriad other items that are lumped together by the VA in its
``prosthetics'' budget.
Why does this matter? I would suggest that the very broad
definition of ``prosthetics'' can lead to confusion and, worse,
application of policies that are inappropriate to replacement limbs and
orthotics. The result: inappropriate barriers to care for Veterans with
limb loss who need timely access to high quality prosthetics in order
to go to work, care for their families, and live their everyday lives.
In fact, the Health Subcommittee saw that confusion on display in
its hearing in this very room only two weeks ago. Chairwoman Buerkle
held a hearing on ``Optimizing Care for Veterans with Prosthetics'' on
May 16th. During the hearing, she clarified multiple times that the
topic of the hearing was prosthetics as traditionally understood and
defined. During that hearing, the VA's Chief Procurement and Logistics
Officer told the Subcommittee that because changes in procurement
policies applied only to items that cost $3,000 or more, those changes
would not apply to 97% of the prosthetics budget.
I'm sure that statement is accurate for everything included in the
billion -dollar-plus line item described by the VA as ``prosthetics.''
However, for the approximately $58 million portion of that line item
spent on replacement limbs and orthoses, that statement is confusing
and unhelpful. Virtually every part of even a fairly low-tech
prosthetic limb costs more than $3,000. So adopting procurement
policies with the understanding that the policy does not apply to 97%
of prosthetic purchases can lead to decisions that delay specialized
and vitally needed care for Veterans with limb loss or limb impairment.
The Veterans we see have already sacrificed enough. They are working
hard to put their personal, family and professional lives back
together. This task should not be made more difficult by the
application of overly broad policies that do not take into
consideration the very specialized and unique nature of prosthetics and
orthotics.
For prosthetics and orthotics are a very specialized medical
service. An artificial leg or arm becomes an extension of the Veteran's
body. It needs to be checked and potentially adjusted several times a
year to maintain maximum comfort and functionality. If the Veteran
loses or gains weight, or as the muscle structure changes, parts of the
device may have to be re-fitted. A prosthesis that no longer fits
properly or has come out of alignment is not merely an inconvenience;
it can cause debilitating pain and complete loss of function.
It is vital that Veterans with limb loss identify and have access
to a clinician that they trust, who listens to them and works with them
to ensure the best possible fit and function of their artificial limb
or orthotic brace. Quite literally, their ability to get out of bed in
the morning and go about their lives may depend on that relationship
and timely access to appropriate assistance from that orthotic or
prosthetic caregiver.
Congress and the VA have acknowledged the vital need for Veterans
to have access to a prosthetist they trust by establishing various
policies to facilitate Veterans' timely access to prosthetic services.
It is the VA's policy that Veterans may receive prosthetic care
from the provider of their choice. To facilitate high quality, timely
care in the communities in which Veterans live, the VA maintains
contracts with more than 600 independent prosthetic and orthotic
providers, in addition to serving Veterans at VA Medical Centers.
But Congress authorized the VA to go even a step further in
ensuring Veterans' choice and access. If you are a Veteran in need of
prosthetic care, no VA bureaucrat is supposed to limit your choice to a
list of ``approved'' providers that have contracts with the VA.
Veterans are supposed to be able to choose the clinician that they work
with best, who best meets their needs, and the VA has been given legal
authority to do what it takes to secure prosthetics and orthotics from
that provider even in the absence of a pre-existing VA contract.
Congress acknowledged the unique status, role and needs in prosthetics,
and took steps to ensure that procurement policies should facilitate,
not stand in the way of, Veteran choice.
AOPA agrees that it is necessary and appropriate for the VA to do
whatever it takes to ensure that Veterans can receive their prosthetic
and orthotic care from the provider of their choice. AOPA urges this
Subcommittee to do everything in its power to ensure that the necessary
procurement authorities, policies and oversight remain in place to
guarantee the Veteran's right to choose.
It seems like we shouldn't have to urge the Committee to remain
vigilant on this point. But we do, because AOPA shares the concerns of
Paralyzed Veterans of America, the Wounded Warrior Project, Disabled
Veterans of America and other Veterans Service Organizations that that
right to Veterans' choice of providers is being eroded.
Anecdotal evidence from Veterans and providers suggest that there
are real, and increasing, procurement barriers to non-VA care being
erected.
Two weeks ago, Veteran John Register, a Board Member for the
National Association for the Advancement of Orthotics and Prosthetics
and a sophisticated Veteran consumer of prosthetics, testified about
his difficulty obtaining an advanced knee. He was told that he could
not receive the knee from the prosthetics practice he sees, seven
minutes from his home. Instead, he was told the only way he could
obtain the advanced knee was to go to the VA, seventy miles away. While
he is satisfied with the care he received at the VA, and with the
advanced knee, he now has to take time off work several times a year to
travel more than an hour away to have his new knee checked, adjusted
and maintained. This is extremely disruptive, particularly when his own
qualified prosthetist is just down the road.
I'm aware of another example that arose with one Veteran who had
been working with his independent prosthetist for eleven years. He had
never before been to the VA for his prosthesis, in part because it is
two hours away. Recently, this Veteran went to the VA amputee clinic
for his prosthetics prescription. The clinic prescribed an above knee
prosthesis, including an advanced knee. As per protocol and the VA
contract, the company submitted L codes for approval through the VA to
give him his prescribed prosthesis. The Certified Prosthetist-Orthotist
(CPO) who works for the VA saw the codes come across his desk and
called the Veteran. The Veteran was told that he had to come to that VA
in order to get the prosthesis.
The Veteran preferred to continue to receive his care from the
outside provider, because they had taken care of him successfully,
close to his home, for more than a decade. He told his prosthetist what
was going on, and the contractor contacted the person in charge of
prosthetics at that VISN. The contractor was told that the Veteran had
received incorrect information, that Veterans have the right to choose,
and since the independent firm had been providing this Veteran's care
for eleven years he could continue. The VA then put pressure on the
Veteran, telling him if he wanted the advanced knee he would still need
to come two hours away to the VA. After more pushback, the VA's story
changed: the VA told the Veteran he could get the advanced knee
immediately, from the VA. The alternative: wait months to get it from
his regular prosthetist as the approval process would have to start all
over again from the beginning. Ultimately, the Veteran switched to the
VA, two hours away, as the VA made him feel that it would be easy and
quick to get the technology from the VA, and would be difficult and
lengthy to obtain the technology from the community-based provider.
I could go on and on with similar stories. The question is: why is
the VA establishing procurement and other administrative policies to
undermine Veteran choice?
It has been suggested by some that cost may be a factor. AOPA
believes that the vast majority of community-based providers working
under contract with the VA provide high quality care to Veterans at
highly competitive rates--rates, in fact, that represent an average
discount of 10% below the published Medicare fee schedule, which
establishes the prevailing industry rate (and is followed by insurance
companies and other private sector payers). The IG's recent Audit of
the Management and Acquisition of Prosthetic Limbs issued on March 9,
2012, claimed that the average cost of a prosthetic limb fabricated by
the VA in house is $2,900, while the average cost of a limb fabricated
by a third party contractor was $12,000. We have been unable to
determine precisely which costs were taken into account by the IG when
making these calculations, but certainly, it fails to take into
consideration VA staff salaries, the cost of benefits, facilities,
administration and other overhead. In addition, it is not unusual for
Veterans with extremely complicated devices to choose community-based
providers rather than VA staff, which would skew the cost of devices
provided in-house downwards.
The IG's analysis does not present an apples to apples comparison,
and the footnote in the report suggests that the difference in price is
attributable to private sector profit and overhead. We reject this
suggestion, and this analysis. We are disappointed that this statement
was not challenged by the VA Prosthetics and Sensory Aids staff before
the report was published. This so-called cost comparison offers the
Subcommittee and the VA leadership no useful information. We believe
that, with few exceptions, a complete and accurate cost comparison
would show that community-based O&P contractors provide excellent value
to Veterans and taxpayers.
In fact, forcing Veterans to switch prosthetists can actually
generate unnecessary additional costs. In the example I cited, the VA
duplicated the socket the community-based practice had made for him,
even though his socket was not due for replacement and was functioning
well. We have heard of many other cases where the VA essentially
requires Veterans to switch to VA facilities, and then provides them
with a completely new prosthesis to replace a fully functional,
warranteed and effective prosthesis that was made by the community-
based provider.
The goal of the procurement system for prosthetics and orthotics
should be to deliver the highest quality, timely prosthetic and
orthotic care possible to all Veterans, regardless of age, geographic
location, ability or willingness to become the squeaky wheel and demand
appropriate care. What would such a procurement system drive towards?
I'm not certain that I've ever seen an official VA definition of
``quality'' care, so at the risk of being pushy, I'd like to suggest my
own for the purposes of our discussion today. For me, as a practicing
clinician who has been taking care of Veterans with limb loss for 26
years, four major elements comprise quality prosthetic care:
1) Access. Veterans must be able to receive care on a timely basis,
without waiting for weeks or having to travel hundreds of miles for
their prostheses to be checked, adjusted, repaired or replaced.
2) Trust. Veterans must know about and be able to exercise their
right to receive care from a provider they trust, who listens to them
and works with them to achieve the most functional prosthesis possible.
Fitting a good prosthesis is as much art as it is science, and a
positive, ongoing working relationship between the Veteran and the
prosthetist is an important element of getting it right.
3) Expertise and experience. Clinicians serving Veterans must have
the training and clinical know-how to select, custom-build, fit and
adjust the best possible prosthetic device to address the complex
challenges Veterans with limb loss face every day.
4) Outcomes. The result of high quality prosthetic care is greater
comfort, higher activity levels, more independence and greater
restoration of function for Veterans with limb loss, so that they can
live their everyday lives successfully and continue to do the things
they want to do despite the absence of one or more limbs.
VA procurement policies are critical to all four elements of
quality. Procurement policies should ensure that:
1) Veterans have access to the prosthetics provider of their choice
without having to overcome artificial and unnecessary barriers to care.
2) Veterans can receive timely care from their provider, whether
that provider is in the VA or an independent practice, without
artificially created hoops or delays established to influence their
choice of caregiver.
3) Prosthetists serving Veterans do not just have the minimum
certifications and qualifications needed, but actually have the
training and experience to meet the specialized needs of Veterans. This
will become more and more of a challenge for the VA and for independent
O&P practices as the requirement for a master's degree as an entry-
level qualification is implemented.
4) Contracting (and other) policies should require measurement, and
continuous improvement, of Veteran outcomes until Veterans achieve the
highest level of restored function possible for that individual
Veteran.
I would like to take a few additional minutes to talk in greater
detail about this last point, which AOPA believes is critically
important. While AOPA is firm in our belief that the vast majority of
private sector clinicians are providing care to Veterans that is as
good or better than that they could receive at the VA, we also believe
that it is important to hold O&P professionals accountable for the
quality of care and the cost of that care. This poses something of a
challenge for the VA, due to the fact that there is currently no body
of objective, comparative outcomes research to support evidence-based
practice in O&P. Currently, the only mechanism used by the VA to
evaluate the quality of prosthetic and orthotic services offered by any
provider--inside or outside the VA--is the patient satisfaction survey.
While community-based providers typically score very highly on such
surveys, we know that more could and should be done to evaluate O&P
outcomes for Veterans.
For example, the ``Amputee Mobility Predictor'' and the ``Timed Up
and Go'' are two validated instruments to determine a baseline
functional level that could be administered in the prosthetic clinic at
the time the prescription is generated. Functional level can then be
re-documented at routine intervals during the rehab process to record
and evaluate progress in terms of functional activity. Quality
prosthetic outcomes should mean functional mobility improvements.
College Park's iPecs and Orthocare Innovations' Compas systems measure
forces and provide objective data regarding proper alignment. Orthocare
Innovations' Stepwatch and Galileo system are another example of a
simple data collection device and software application to record real-
world activity outside the clinic. Having the ability to ``see'' our
patients' real activity once they leave our facility is the best, most
objective and most accurate measure of how successful the rehab process
was.
This leads me to my final point. Unlike other health professions,
there is no body of comparative outcomes research to guide O&P
professionals. Their judgments about which prosthetic device, service
or support is most appropriate for which patient is based largely on
personal experience and expertise developed over years in the field.
However, there is almost no objective research on outcomes to validate
or inform that experience.
To give simplest of examples, there are more than 20 prosthetic
feet on the market. The lowest tech, least expensive cost about $3,000.
A little more than a year ago, CMS approved a foot that costs more than
$15,000. Now, there is a new foot that will cost about $125,000. But
there is no research to suggest and document which Veteran will benefit
most from which foot.
Please do not misunderstand me. I do not believe that cost
considerations should guide selection of prosthetic components for
Veterans. In some cases, the most expensive foot may restore
significant additional functionality. But in other cases, Veterans may
actually have better outcomes with less expensive or lower-tech
components. It would be helpful to have objective research documenting
which Veterans have the best outcomes from which prosthetic devices,
services and supports.
There are multiple elements of a coherent O&P research agenda,
including but not limited to comparative outcomes of prosthetic
components, that are vitally important to ensuring that Veterans
receive appropriate, necessary care as well as to eliminating
unnecessary future health care costs. An outcomes-based research
portfolio, and the resulting body of evidence, in the field of O&P
would increase the quality of care for Veterans and others with limb
loss. It would give the VA an appropriate management tool for
overseeing a decentralized system with procurement of prosthetics and
orthotics from more than 600 VA and external sites. It would protect
taxpayers by ensuring that patients receive the most appropriate care
from the beginning, and that quality and cost effectiveness objectives
are attained in a data-driven manner that generates the best possible
outcomes. AOPA has invested significantly in the area of outcomes
research, having developed two study instruments--accessing data from
both patients and their O&P providers on outcomes. AOPA has both
spearheaded and supported financially pending comparative effectiveness
studies involving dynamic/non-dynamic response prosthetic feet, and
microprocessor/non-microprocessor controlled prosthetic knees, and we
support an annual program with thousands of dollars in grants from the
underlying clinical research that are the building blocks of evidence-
based practice. AOPA would greatly welcome and value the opportunity to
work with the VA in tracking patient outcomes and comparative
effectiveness.
AOPA applauds the VA for working toward this end by joining with
the Department of Defense in March of 2010 to hold the joint State of
the Art Conference on Orthotics and Prosthetics. This conference
generated much discussion related to the creation and execution of an
outcomes-based research portfolio in the field of O&P. While the
discussion was encouraging, we have been disappointed to see that no
progress toward the implementation of the recommendations has been
made. No report on the conference has ever been made publicly
available, and so far as we can tell, no steps have been taken by the
VA or DoD to implement any of the conference recommendations.
Despite the government-wide focus on health care outcomes, there is
currently no Federal research agenda on prosthetic and orthotic
outcomes. Not at the VA. Not at the DoD. Not at the NIH, the CDC, or
NIDRR. AOPA strongly encourages the VA, DoD and NIH to help improve the
care for Veterans, servicemembers, and seniors by implementing a robust
comparative outcomes research agenda that addresses the questions in
the field and helps to inform effective, efficient delivery of O&P care
for the Veterans, seniors and civilians with limb loss and limb
impairment. We believe this will also yield dividends in assuring that
the major technological advances precipitated by research commitments
from VA and DoD for Veterans and active duty military are actually
pulled through to have a practical impact on care provided to our
nation's seniors and other members of the general public.
Mister Chairman, Members of the Committee, thank you very much for
the invitation to testify, and for your commitment to providing the
highest quality prosthetic and orthotic care to our nation's Veterans.
I look forward to answering any questions that you might have.
Prepared Statement of Daniel Shaw
Mr. Chairman, Ranking Member Donnelly, members of the Subcommittee,
thank you for the opportunity to appear before you today to discuss the
Department of Veterans Affairs (VA) prosthetic purchasing practices and
their impact on Academy Medical, a VA-verified Veteran-Owned Small
Business.
My name is Dan Shaw, I am the managing partner of Academy Medical,
L.L.C. (Academy), located in Wellington, FL. Academy is a reliable
source of supply for biologics, and holds a mandatory-source Federal
Supply Schedule (FSS) Contract issued by VA's National Acquisition
Center. My fellow managing partner, Patrick Papa, and I graduated in
1991 from the U.S. Naval Academy, where we first met in 1987. Academy
Medical is so named to pay homage to our Alma Mater. Accompanying me
here today is Mr. Steven Kent, our Director of Government Sales, and
Mr. Stephen Schurr, a subject matter expert in the field of biologics.
My testimony here today is pleasantly overtaken by events. By
memorandum dated May 23, 2012, the Veterans Health Administration (VHA)
notified VHA procurement and prosthetics personnel engaged in the
ordering of biological implants of its policy on ordering biological
implants using the FSS Program. We are very pleased with this change in
VHA's position, one which will benefit Academy and other FSS contract
holders for biologics--it levels the playing field and respects the
mandatory source nature of VA's FSS Program. We have worked long and
hard to get VHA to adopt this policy. I have a copy of the policy and
would like to offer for inclusion in the record of today's hearing.
We hope the Subcommittee will encourage VA to formalize this VHA
policy memorandum by having it formally codified to amend the VA
Acquisition Regulations. Policy of this magnitude should be formalized
for perpetuity, as policies are easily forgotten as time goes on or
through leadership changes. This is especially true given there is
likely to be short and long-term resistance to this policy, especially
by purchase cardholders.
One concern we hope the Subcommittee will clear up with VA's
witness here today, is whether the VHA policy applies to all biological
implant procurements, to include those acquired as micropurchases by
government purchase cardholders. We estimate nearly 95 percent of
biological implants are acquired by purchase cardholders who are
neither trained or nuanced in the use of FSS contracts. This will have
a major impact on the success or failure of VHA's policy from a
supplier perspective, and could potentially result in no improvement
for FSS contract holders.
With this new policy will come a new issue: Compliance and
Enforcement. While we are elated with and applaud VHA's leadership for
the new policy, our experiences show VHA currently fails to follow
established waiver. Past performance, as in government contracting, is
a good indicator of what can be expected in the future. To that end Mr.
Chairman, if this policy is to be effective and successful, VHA have to
develop and mechanism to monitor and enforce compliance The policy
memorandum is silent on this. We know the devil is always in the
details, and hopefully this Subcommittee will consider establishing
some type of follow-up on this policy or reporting requirements from
VHA in terms of the implementation, monitoring, compliance and
enforcement with the program to determine if the spirit and intent of
the policy is being embraced and executed.
We hope this new VHA policy will make a difference. We estimate VA
purchases approximately $175 million in biologics annually. As of May
23, 2012, we sold only $74,000 in biologics to VA through our VA
mandatory source Federal Supply Schedule contract in Fiscal Year 2012.
We think this will be a good deal for the taxpayers too. We know we can
save them money. In addition, if VA makes better use of the schedules
program, it will avoid Competition in Contracting Act (CICA)
violations, by fragment . In addition, VA will be assured of receiving
high-quality Trade Agreement Act-compliant products and also reap the
revenue from the FSS Program Industrial Funding Fee, used to fund its
Supply Chain Management Operations.
Academy will continue to take every logical step to be successful
in the VA market place. We obtained our verification from VA's Center
for Veterans Enterprise, as well as a mandatory-source Federal Supply
Schedule contract, yet we continue to struggle in the VA market place.
What is hurting Academy, and undoubtedly other Veteran-Owned Small
Businesses (VOSBs) and Service-Disabled Veteran Small Businesses
(SDVOSBs), is VA's use of authority granted it under Section 8123,
Title 38, United States Code. Although VHA's new policy for the
procurement of biological implants is welcome news to us and other FSS
contract holders, Section 8123 still looms large as long as this
authority exists and is likely to be applied to open market
procurements for biologics not procured through the FSS Program.
This authority, established in September 1958, grants VA sweeping
and unprecedented authorities to acquire ``prosthetic appliances''
without regard to any other provision of Federal law. Simply put, this
authority has become the easiest of easy buttons for VA to use to buy
prosthetic appliances. VA is purported to spend about $3.5 billion
annually for prosthetic appliances.
Perhaps the Section 8123 authority was needed back in 1958, to
assist Orthotist & Prosthetist trying to improve the quality of
artificial limbs of World War II and Korean War Veterans upset about
substandard appliances. But this was some 25 and a half years before
the advent of the Federal Acquisition Regulation (FAR), when the old,
arcane procurement system provided users with less flexibility. Clearly
the authors of Section 8123 never envisioned a new and ensuing
procurement regulatory system such as the FAR would provide such
significant flexibility for the government to buy everything from A to
Z, including biologics, while simultaneously providing much needed best
value and transparency in the procurement process. It is also unlikely
they realized VA's spend for prosthetic appliances would approach the
significant spend it has today, nor is it likely they envisioned how
the definition of prosthetic appliances would grow, now to even include
biologics. Biologics were not even introduced into traditional health
care practice until the 1960s.
Many current and former government procurement professionals we
spoke with opine the FAR's flexibilities actually obviate the need for
the authority contained in Section 8123. If the Section 8123 authority
is to remain, it should be significantly curtailed or controlled to the
highest levels of VA's procurement infrastructure without power to re-
delegate this authority. Section 8123 must include the much needed
transparency, and it must be the authority of last resort.
VA's formal definition of prosthetic appliances does not officially
include biologics. We learned on April 27, 2012, from officials in
Veterans Integrated Service Network 8, the VA Sunshine Healthcare
Network, that biologics are actually included in the definition of
prosthetic appliances. It appears when VHA Directive 2003-037,
Prosthetics Simplified Acquisition Procedures Training, Dated July 16,
2003, expired July 31, 2008, the Veterans Health Administration
prepared a new and ensuing directive which was never formalized or
formally issued. The expired directive set forth procurement procedures
for prosthetic appliances, and VA's use of Section 8123 was essentially
the authority of last resort to buy prosthetic appliances.
The new, un-issued directive expands the definition of prosthetic
appliances to include anything implanted into the body for a period in
excess of 30 days. This would include biologics. We have attempted to
get the un-issued directive through a Freedom of Information Act
request, but were denied because the document is considered ``pre-
decisional'' and is therefore exempt from release. Since VA is using
the directive and makes decisions on buying its biologics in accordance
with this directive, for nearly four years now, it would seem this is
no longer ``pre-decisional.'' Since this is clearly no longer ``pre-
decisional,'' we hope the Subcommittee will encourage VHA to formalize
this document and make it available to the public, as needed. This
provides greater transparency and helps VA's industry partners
understand the rules of the road at VA.
We recently learned VA determined and subsequently notified this
Subcommittee the authorities in Section 8123 trump even the Veterans
First Contracting Program authorities contained in Sections 8127 and
8128. The unprecedented and extraordinary contracting authorities
granted to VA under its Veterans Contracting Program were effective
June 20, 2007. It would seem in passing Public Law 109-461, the
Veterans Benefits, Healthcare and Information Technology Act of 2006,
Congress would have specifically exempted Section 8123 procurements
from Sections 502 and 503 Public Law 109-461. But it did not. In light
of VHA's new biological implant procurement policy, this issue needs to
be addressed for non-FSS biological procurements which will be
conducted on the open market.
In closing Mr. Chairman, although the U.S. Naval Academy provided
us with a stellar education and prepared us for some of the most
challenging situations we would face as naval officers, nothing in our
time at Annapolis could have adequately prepared us as entrepreneurs
for the daunting challenge of dealing with an incalcitrant and non-
responsive bureaucracy such as VA. The news of VHA's new biological
implant procurement policy gives us hope and levels the playing field,
and for that we are very grateful. We seek only to be a reliable source
of supply of biological implants, to be treated respectfully and given
the opportunity we have earned to be VA's industry partner. We have no
ax to grind, we simply have a business to run, and work to create an
environment that engenders trust, mutual respect and cooperation, as VA
provides its services to America's heroes.
Thank you for your distinguished leadership and that of this
Subcommittee. , our predicament and those of similarly situated VOSBs
and SDVSOBs will improve; that we can match our private sector success
in the VA market place. We never sought an adversarial relationship
with VA, we seek only to be trusted business partners with VA, to be
given the respect and opportunity we have earned.
Thank you for holding this hearing Mr. Chairman. We will be happy
to respond to any questions you or the Subcommittee's members have.
Prepared Statement of Dr. Charles Scoville
Chairman Johnson, Ranking Member Donnelly and distinguished members
of the Committee. Thank you for the opportunity to provide a
perspective on how the Department of Defense (DoD) cares for
individuals with limb loss, and in particular prosthetic care, new
technologies, and the collaboration between DoD and the Department of
Veterans Affairs (VA).
It is always important to look back before looking forward, to take
from lessons learned. The Washington D.C. Times-Herald reported ``In a
few days the Army will print a formal regulation which will give
officers and enlisted men who have lost arms, or legs, or both, in the
line of duty, the opportunity to return to Active Duty.'' This was
written on November 11, 1951. Fast forward to 2003 and the Army found
itself repeating the effort to return individuals with limb loss back
to Active Duty. To date we have had over 305 individuals with limb loss
on Active Duty, and over 53 of these have deployed again into combat
roles in Iraq and Afghanistan.
On January 20, 2004 the Office of the U.S. Army Surgeon General in
response to a request from the U.S. Congress as part of the Fiscal Year
2004 Omnibus Bill submitted an infrastructure improvement plan for the
U.S. Army Amputee Patient Care Program (USAAPCP). In this we stated
``The goal of the USAAPCP is to return patients to ``tactical
athleticism,'' or to their pre-injury level of activity. The philosophy
of the program is ``Tell me how far you want to go, and we will work
with you to achieve your goals.''
The DoD Amputee Patient Care Program grew over the past 10 years
out of necessity to meet the demands of a population that is
significantly different from the typical VA patient. At the beginning
of current military conflicts, the DoD treated patients with limb loss
that primarily resulted from dysvascular disease, diabetes, and tumors.
The DoD lagged the VA and many of the activities the VA was doing in
the prevention of limb loss. DoD still has a significantly lower
patient population than that of the VA. However, we are faced with a
population that is much different from the typical patient seen in the
VA. Our patients are young, active Service Members, frequently with
severe trauma and multiple limb loss, that desire and deserve to be
returned to the highest levels of activity and some deserve to be
returned to Active Duty. These Service Members are strong-willed,
impressive Warriors who challenge us daily to improve how we care for
them. We started from a very decentralized, small program and built an
efficient, progressive program. We developed a world leading, world
recognized program for amputee patient care to meet our patients'
needs.
The DoD and the VA have long shared a strong working relationship
in caring for our wounded warriors and make significant advances in the
care of patients with limb loss through many focused programs. In April
of 1945 the National Research Council Advisory, Committee on Artificial
Limbs, a technical body within the National Academy of Science, tasked
US Army to develop amputee research at its 7 amputee patient care
centers. These were very quickly merged into one center, the Army
Prosthetic Research Lab (APRL) at Walter Reed Army Medical Center
(WRAMC) early in 1946. Shortly thereafter, on March 1, 1946 the
Veterans Administration joined forces with the APRL in financing the
research. In 1948, the VA established the Prosthetics Research
Department headquartered in the NYC VA Center. In 1956 the VA expanded
this by supporting the Prosthetics Research Lab (PRL) at Northwestern
University. Working together, the DoD and VA efforts lead to many of
the prosthetic advances that were still utilized at the beginning of
the current conflicts.
In 2004 Congress provided $2.5 million for Prosthetic Device
Technology Enhancement and Clinical Evaluation at WRAMC, and added $10
million in 2005. The Military Amputee Research Program was developed to
best manage these funds across the DoD. At this same time Defense
Advanced Research Projects Agency (DARPA) programmed $30 million for
advancements in upper extremity prosthetics. Much of the research that
has been completed has been in partnership with the VA, and would not
have been easily completed without the VA's involvement. The advanced
arms developed through the DARPA project were first tested within the
VA facilities. The newest research to help our patients return to the
highest levels of function is a study projected to begin in the Salt
Lake City VA, late this year or early in 2013 on osseo-integration.
This is based on earlier research which was partially funded by the DoD
at the University of Utah. Successful osseo-integration could
potentially provide patients that have difficulty wearing the
traditional prosthetic socket the opportunity to wear prosthetic
devices.
In 2005 $10 million in military construction was reprogrammed to
build the Military Advanced Training Center (MATC) at Walter Reed. At
the same time the Intrepid Fallen Heroes Fund offered to build the
Center for the Intrepid (CFI) in San Antonio, Texas. Shortly thereafter
the U.S. Navy dedicated funds to renovate facilities at the Naval
Medical Center San Diego to house the Comprehensive Complex and Combat
Casualty Care Center. These three phenomenal centers are dedicated to
providing world class care to our Wounded Warriors.
Several factors explain why the DoD led efforts to provide
prosthetic care for Wounded Warriors. One of the keys is DoD's
interdisciplinary program, pulling together a range of providers who
work with the patients on a daily basis to address patient needs. While
the standard of care requires that a Wounded Warrior be seen within
seven days, the standard at Walter Reed National Military Medical
Center (WRNMMC) is 72 hours. Another factor has been the integration of
logistics and contracting within the prosthetics service at WRNMMC.
WRNMMC contracting provided blanket purchasing agreements to simplify
the acquisition of all supplies and components required for treatment
of the Wounded Warrior. Logistics embedded a warranted contracting
officer into the Orthotic & Prosthetic Service at WRNMMC enabling same
day ordering with next day delivery of prescribed components. The
development of the blanket purchasing agreements insured best value
through discounted pricing and fixed component costs. A logistics
technician embedded within the Service provides the ability to
warehouse non-patient-specific items for fabrication and custom
fitting, further reducing delays in the delivery of care.
A third factor is the success of DoD research efforts and
partnership with industry that has led to the commercial availability
of the Genium/X2/X3 microprocessor knees, the BiOM robotic ankle, and
the Power Knee 2. Blanket purchase agreements for these items will not
be developed until the technology matures and the price stabilizes.
These items are purchased through sole source indefinite duration,
indefinite quantity contract vehicles with the only suppliers for these
unique medical devices. These contracts minimize delay in the provision
of the required components.
Department of the Army civilian prosthetic providers provide the
most cost effective delivery of prosthetic patient care. Contract
providers enable the DoD to rapidly expand or contract the requirements
based on the size of mission at any moment in time. These contracts are
small business set-aside, competitively bid contracts with a single
provider award. Best value is guaranteed within these contracts through
pricing proposals provided by the vendor in the bid phase of the
procurement. The civilian model has a wide degree of variability in
costs because of the use of ``not otherwise classified'' codes within
the health care common procedure coding system. The DoD requires
offerors to list what ``not otherwise classified'' procedures and
components they propose to bill and the amount of reimbursement they
that are seeking. DoD contract officer representative (COR) may reject
any bid with a `not otherwise specified code'' determined to be
excessive.
A large percentage of our patients receive a significant portion of
their care through the Veterans Health Administration at VA. This is
crucial to the success of both DoD and VA patient care, as the DoD does
not have the capacity to provide lifelong prosthetic care to all
Wounded Warriors. In the early years of current conflicts, patients
reported frustration with long delays in the VA process. Things have
improved since the VA expanded its Amputation System of Care,
organizing and structuring interdisciplinary care teams, increasing VA/
DoD collaboration including advanced technology training initiatives,
clinical practice guidelines, the establishment of the DoD-VA Extremity
Trauma and Amputation Center of Excellence (EACE), and the development
of Regional Amputee Centers (RACs). These initiatives have demonstrated
that there is a much closer relationship and greater parity with the
DoD advanced rehabilitation centers. We are actively engaged with the
transition of our Wounded Warrior amputee patients to VA care and
recognize, as reflected in a recent VA Inspector General report, that
the care provided by the VA is comprehensive and lifelong.
We continue to work closely with the VA, we have their providers
working in our clinics at both the CFI and at the MATC, to create a
great relationship where we share knowledge and assist patients as they
transition to long term care with the VA system. Through our long
history of DoD and VA collaborative research and patient care efforts
we are continuing to meet the needs of our Wounded Warriors and
Veterans.
Prepared Statement of Linda Halliday
Chairman Johnson, Ranking Member Donnelly, and Members of the
Subcommittee, thank you for the opportunity to discuss the results of
two recent Office of Inspector General (OIG) reports dealing with
prosthetic contracting and supply issues. \1\ Based on the Committee's
interest in how VA obtains prosthetic limbs and oversees its prosthetic
supplies, we conducted audits of how VA acquires prosthetic limbs and
manages its prosthetics inventory. I am accompanied by Mr. Nick Dahl,
Director of the OIG's Bedford Office of Audits and Evaluations and Mr.
Kent Wrathall, Director of the OIG's Atlanta Office of Audits and
Evaluations.
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\1\ Veterans Health Administration--Audit of the Management and
Acquisition of Prosthetic Limbs, March 8, 2012, and Veterans Health
Administration--Audit of Prosthetics Supply Inventory Management, March
30, 2012.
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Before we discuss the results of our audits, let me make one thing
clear: the OIG believes veterans should be able to receive the limbs
that their clinicians determine are the best for them whether the
source is VA or commercial vendors. Our audits focused on the
effectiveness of VA's acquisition and contract administration
practices. We did not examine nor do we offer an opinion on whether VA
labs are a preferred source of prosthetic limbs rather than contract
vendors based on cost comparisons or other factors.
BACKGROUND
The Veterans Health Administration (VHA) defines prosthetics as all
aids, devices, parts or accessories which patients require to replace,
support, or substitute for impaired or missing anatomical parts of the
body. The items include artificial limbs, terminal devices, stump
socks, braces, hearing aids and batteries, cosmetic facial or body
restorations, optical devices, manual or motorized wheelchairs,
orthopedic shoes, and similar items. \2\ VA maintains an inventory for
most prosthetics items. However, for some prosthetic items, such as
artificial limbs, VA Medical Centers (VAMCs) do not maintain
inventories and instead order these items, as needed, for individual
patients. From fiscal year (FY) 2007 through FY 2011, VHA's prosthetic
costs increased from $1.0 billion to $1.8 billion.
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\2\ VHA Handbook 1173.1, Eligibility, November 2, 2000.
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VA uses two automated inventory systems to manage prosthetic
inventories. VHA's Prosthetic and Sensory Aids Service (PSAS) uses the
Prosthetic Inventory Package (PIP) to manage the majority of prosthetic
inventories. Supply Processing and Distribution (SPD) Service uses the
Generic Inventory Package (GIP) to manage prosthetic supplies stored in
Surgery Service.
Three VA organizations have responsibilities related to prosthetic
inventory management. PSAS develops policies and procedures for
providing prosthetics to veterans. VHA's Procurement and Logistics
Office (P&LO) provides VAMCs logistics support and monitors compliance
with inventory management policies and procedures. VA's Office of
Acquisition, Logistics, and Construction supports VAMCs in acquiring
and managing supplies and offers training to VA's acquisition
professionals. All three organizations need to work together to provide
the leadership and coordinated support needed to manage VA's prosthetic
supplies.
AUDIT OF THE MANAGEMENT AND ACQUISITION OF PROSTHETIC LIMBS
In this report, we evaluated VHA's management and acquisition
practices used to procure prosthetic limbs, and examined the costs paid
for prosthetic limbs. Overpayments for prosthetic limbs were a systemic
issue at all 21 Veterans Integrated Service Networks (VISNs). Overall,
we identified opportunities for VHA to: (1) improve controls to avoid
overpaying for prosthetic limbs, (2) improve contract negotiations to
obtain the best value for prosthetic limbs purchased from contract
vendors, and (3) identify and assess the adequacy of in-house
prosthetic limb fabrication capabilities to be better positioned to
make decisions on the effectiveness of its labs.
Improved Internal Controls Needed
We reported VHA's PSAS needed to strengthen payment controls for
prosthetic limbs to minimize the risk of overpayments. We identified
overpayments in 23 percent of all the transactions paid in FY 2010. VHA
overpaid vendors about $2.2 million of the $49.3 million spent on
prosthetic limbs in FY 2010. VHA could continue to overpay for
prosthetic limbs by about $8.6 million over the next 4 years if it does
not take action to strengthen controls. On average, VHA overpaid about
$2,350 for each of these prosthetic payments. Overpayments generally
occurred because VHA paid vendor invoices that included charges in
excess of prices agreed to in the vendors' contracts with VA.
Strengthening controls to ensure invoices submitted by vendors are
consistent with contract terms should and can be accomplished without
compromising the quality of the prosthetic limbs provided to veterans.
At the four VISNs we visited (VISN 1, 8, 12, and 15 \3\), we found
that Contracting Officer's Technical Representatives (COTRs) either did
not conduct reviews of prosthetic limb invoices or conducted only
limited reviews of invoices. Instead, Prosthetic Purchasing Agents were
reviewing vendor quotes, creating purchase orders, and reviewing
invoices prior to making final payments. This is contrary to the
Government Accountability Office's Standards for Internal Controls in
Federal Government that requires key duties and responsibilities be
divided to reduce the risk of error or fraud. VHA should ensure
responsibility for determining compliance with contract terms and for
processing payments is kept separate to better ensure proper
segregation of duties. Further, while Prosthetic Purchasing Agents at
the four VISNs reported conducting reviews to ensure invoice prices
matched Medicare pricing and appropriate vendor discounts, results of
our audit revealed these reviews were not effective in preventing
overpayments.
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\3\ VISN 1--New England Healthcare System; VISN 8--VA Sunshine
Healthcare Network; VISN 12--VA Great Lakes Health Care System; and
VISN 15--VA Heartland Network.
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Due to the frequency of overpayments, immediate attention is needed
to prevent future overpayments and to recover current overpayments. By
strengthening internal controls over payments for prosthetic limbs and
properly separating duties, PSAS staff have the opportunity to improve
their acquisition practices and provide better stewardship of funds.
Actions Needed To Ensure the Best Value When Procuring Prosthetic Limbs
We found that VISN Contracting Officers were not always negotiating
to obtain better discount rates with vendors and some items were
purchased without specific pricing guidance from either the P&LO or
PSAS. Without negotiating for the best discount rates obtainable, VHA
cannot be assured it receives the best value for the funds it spends to
procure prosthetic limbs. We noted that while strengthening acquisition
practices to ensure contracting officers consistently negotiate better
discount rates should result in lower costs, it should in no way
compromise the quality of prosthetic limbs procured.
We also reported VA paid almost $800,000 for about 400 prosthetic
limb items using ``not otherwise classified'' (NOC) codes in FY 2010.
NOC codes are used by VA to classify items that have not yet been
classified or priced by Medicare. While this may not be a significant
amount in aggregate, the prices paid for individual items that have not
yet been classified can be significant. For example, absent pricing
guidance VA was paying about $13,700 for a type of Helix joint before
it was classified. Once the item was classified, the price dropped to
about $4,300. To avoid situations like this, we reported VHA needed to
develop guidance to help VISN staff determine reasonable prices for
items that Medicare has yet to classify and price.
Improved Prosthetic Limb Fabrication and Acquisition Practices Needed
We did not identify information that showed either how many limbs
specific VHA labs could fabricate or how many limbs they should be
fabricating. PSAS management did not know the current production
capabilities of their labs and could not ensure labs were operating
efficiently. VHA guidance states that PSAS should periodically conduct
an evaluation to ensure prosthetic labs are operating as effectively
and economically as possible. We found that PSAS suspended their review
of labs in January 2011 after reviewing only 9 of 21 VISNs. Because
reviews of all VISNs were not conducted, PSAS was unaware of its in-
house fabrication capabilities and management does not know if labs are
operating as effectively and efficiently as possible.
We also reported VISN prosthetic officials did not always identify
the appropriate number of contractors needed to provide prosthetic
limbs to veterans. VHA guidance recommends three to five vendors
receive contract awards depending on the geographic area and workload
volume. However, three of four VISN Prosthetic Managers interviewed
were under the assumption they were to award contracts to all vendors
who responded to their solicitation, provided those vendors met VA's
criteria to qualify as a contract vendor. The VHA guidance conflicted
with prosthetic limb contract guidance that states maximum flexibility
be given to individual medical centers to determine the number of
contracts required to meet their needs.
Due to the inconsistencies in the guidance, differing procurement
practices existed among the four VISNs visited. Three of the four VISNs
did not identify an appropriate number of contract vendors and VISN
Contracting Officers made awards to nearly all vendors that submitted
proposals, many of which were located in the same general areas. As a
result, overlaps and gaps in service existed and VISN contracting staff
may have been performing unnecessary contract work. Additionally, VHA
could not be assured the decision to make contract awards was
effectively aligned with workload volume or with what individual
medical centers required to meet their needs in serving patients.
We reported VHA lacked the information to know whether its
prosthetic limb fabrication and acquisition practices are working as
effectively and economically as possible. By evaluating fabrication and
acquisition practices, PSAS will be in a better position to know the
current capabilities of its labs and to make decisions regarding the
number of contracts needed to provide services to veterans in each
VISN.
Use of VA's Electronic Contract Management System (eCMS) Needs To
Improve
Use of eCMS is mandatory for all procurement actions valued at
$25,000 or more. We found that VHA's contracting officers did not
consistently use eCMS to document contract awards to prosthetic limb
vendors, which was consistent with the findings from our recent audit
of VISN contracts. \4\ Nearly all of the eCMS contract files for awards
made to vendors at the four VISNs visited were missing key acquisition
documentation.
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\4\ Veterans Health Administration--Audit of Veterans Integrated
Service Network Contracts, December 1, 2011. This audit examined
whether VHA's new contract oversight structure and review processes
were effective in improving VISN procurement practices. Despite the new
contract oversight structure, we still identified recurring systemic
deficiencies associated with acquisition planning, contract award, and
contract administration.
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Missing documentation included evidence of required contract
oversight reviews and determinations of responsibility of the
prospective contractors through a check of the Excluded Parties List
System. Further, contract invoices were not included in eCMS. As a
result, we could not readily verify whether a COTR had reviewed vendor
invoices prior to certification to ensure they accurately reflected
that goods received were in accordance with contract requirements,
including prices charged. The lack of documentation in eCMS adversely
affects management's ability to readily assess the quality, timeliness,
and administration of contracts.
Recommendations
We made eight recommendations to the Under Secretary of Health.
They include strengthening controls over the process for reviewing
vendor quotes, purchase orders, and verification of invoices and costs
charged by prosthetic limb vendors. In conjunction with this, we
recommended VHA take collection action to recover the $2.2 million
overpaid to vendors. We also made recommendations to ensure contracting
officers conduct price negotiations to obtain the best value for
prosthetic limb items and for PSAS to assess the capabilities of VHA's
prosthetic labs.
The Under Secretary for Health agreed with our recommendations and
presented an action plan. VHA reported that, as part of the
reorganization of P&LO, contracting officers or delegated ordering
officers will place prosthetic orders above the micro-purchase
threshold of $3,000. VHA indicated this change will properly separate
acquisition duties for reviewing vendor quotes, purchase orders, and
invoices received from prosthetic limb vendors. VHA told us that their
Service Area Organization offices will review every prosthetic limb
contract to ensure price negotiations have occurred. These controls are
critical for VA to receive the best value for prosthetic limbs. It is
too early to measure the effectiveness of these changes, however we
will follow-up as appropriate.
AUDIT OF VHA'S PROSTHETICS INVENTORY MANAGEMENT
This report provides a comprehensive perspective of the suitability
of VHA's prosthetic supply management policies. In assessing VAMC
prosthetic inventory management, VHA agreed that inventories maintained
above the 30-day level would be considered excessive unless there was
evidence VAMCs needed a higher inventory level to meet replenishment
and safety requirements. VHA also agreed prosthetic inventory levels of
7 days or less would create a risk of supply shortages.
We found VHA needs to strengthen VAMC management of prosthetic
supply inventories to avoid disruption to patients, to avoid spending
funds on excess supplies, and to minimize risks related to supply
shortages. Further, because of weak inventory management practices,
losses associated with diversion could go undetected. VHA needs to
improve the completeness of its inventory information and standardize
annual physical inventory requirements.
Inventory Systems Are Not Integrated
VAMC Inventory Managers need real-time information from VA's
Integrated Funds Distribution, Control Point Activity, Accounting, and
Procurement System (IFCAP) and its Computerized Patient Record System
(CPRS) to keep PIP quantities accurate and manage prosthetic
inventories effectively. However, VHA's PIP does not integrate with
IFCAP and CPRS. As a result, when warehouse staff record received
supplies in IFCAP and when clinical staff record used supplies in CPRS,
PIP is not automatically updated. Consequently, staff must manually
record all supplies received and used in PIP. This work is labor-
intensive and reduces the time staff have to actively manage supply
inventories, and introduces errors into these systems.
Inefficiencies from Using Two Inventory Systems
VHA policies require VAMCs to use PIP to manage prosthetic supplies
and GIP to manage surgical device implants (SDIs). VAMCs use of two
inventory systems caused staff confusion about the responsibility for
managing SDI inventories and created inefficiencies in managing SDIs
stored in Surgery Service closets, crash carts, and operating rooms. As
a result, VAMCs did not use either PIP or GIP to manage about 7,000 (28
percent) of 25,000 SDIs. The estimated inventory value for these items
was almost $8 million. By replacing PIP and GIP with one automated
modern inventory system, VHA can help VAMCs manage these inventories
and avoid excess prosthetic inventories and shortages.
Inadequate Staff Training
Inadequate training was a major cause of VAMCs accumulating excess
inventory and experiencing supply shortages. VHA's Inventory Management
Handbook requires staff receive training from qualified instructors on
basic inventory management principles, practices, and techniques on how
to use PIP and GIP effectively. However, staff at the six VAMCs we
visited had not received training from qualified instructors. \5\
Because staff did not receive adequate training, they did not
consistently apply basic inventory management practices and techniques.
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\5\ VA Medical Centers in Decatur, Georgia; Indianapolis, Indiana;
Northampton, Massachusetts; Nashville and Murfreesboro, Tennessee;
Salem, Virginia; and Clarksburg, West Virginia.
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VHA requires VAMCs to complete annual wall-to-wall inventories of
quantities on hand with inventory accuracy rates of at least 90
percent. However, none of the six VAMCs we audited had the required
documentation of completed physical inventories. VAMCs' failure to
consistently complete and document physical inventories was also a
contributing cause of reporting inaccurate quantities on hand. When
VAMCs do not keep quantities on hand current, the automated inventory
systems cannot accurately track item demand, which VAMCs must know in
order to establish reasonable stock levels.
Insufficient Oversight
Insufficient VHA Central Office and VISN oversight contributed to
VAMCs maintaining excess inventory and supply shortages. VHA's
Inventory Management Handbook states that GIP will be the source of
reported inventory data and lists seven performance metrics VAMCs must
report every month. However, because the Handbook does not specifically
require VAMCs to extract performance metric data from PIP, VAMCs did
not report the required performance metrics for prosthetic inventories.
In addition, VHA's Handbook does not sufficiently define the role
of VISN prosthetic representatives' (VPRs) inventory oversight
responsibilities. The VPRs, who had jurisdiction over the audited
VAMCs, stated they conducted VAMC site visits. However, the frequency
of the site visits varied from quarterly to annually and during the
site visits VPRs did not consistently perform a complete assessment of
prosthetic supply inventory management.
VHA Handbook Inadequacies
Although VHA's Inventory Management Handbook provided a reasonable
foundation for VAMC management of prosthetic supplies, the Handbook
needed more guidance to ensure VAMCs do not accumulate excess supplies
or experience supply shortages. We identified several Handbook
inadequacies VHA must improve to help ensure VAMCs maintain reasonable
inventory levels. For example, the Handbook did not have clear guidance
on establishing normal, reorder, and emergency stock levels or
timeliness standards for recording supplies received and used in PIP
and GIP. A comprehensive and clear Handbook is an essential VHA control
to ensure proper stewardship and accountability of VAMC prosthetic
inventories.
Recommendations
Our second report made 10 recommendations to the Under Secretary of
Health. They include requiring VISN and VAMC Directors to eliminate
excess prosthetic inventories and avoid prosthetic shortages,
developing a plan to implement a modern inventory system, and
strengthening management of prosthetic supply inventories. In addition,
we recommended VHA officials collaborate with the Executive Director,
Office of Acquisition, Logistics, and Construction, to develop a
training and certification program for prosthetic supply inventory
managers. The Under Secretary for Health agreed with our
recommendations and presented an action plan. We will follow-up as
appropriate.
CONCLUSION
VA needs to improve contract administration and inventory
management practices. Improvements in contract administration and
inventory management will help ensure more funds are available for
prosthetic care in VA. We expect VA to follow through on its commitment
to replace the current inventory systems.
By strengthening internal controls, VA will reduce the financial
risks associated with unused prosthetic supply inventories and waste.
Until VHA strengthens the management and acquisition practices used to
procure prosthetic limbs, VA will not have sufficient assurance that
its practices are as effective and economical as possible.
Chairman Johnson, thank you for the opportunity to discuss our
work. We would be pleased to answer any questions that you or other
members of the Subcommittee may have.
Prepared Statement of Philip Matkovsky
Chairman Johnson, Ranking Member Donnelly, and Members of the
Subcommittee: thank you for the opportunity to speak about the
Department of Veterans Affairs' (VA) ability to deliver quality care
and acquire prosthetics and other devices for Veterans in need of these
items. I am accompanied today by Dr. Lucille Beck, Chief Consultant,
Rehabilitation Services, Director, Audiology and Speech Pathology, and
Acting Chief Consultant, Prosthetics and Sensory Aids Service, Veterans
Health Administration; Norbert Doyle, Chief Procurement Logistics
Officer, Veterans Health Administration, and Ford Heard, Associate
Deputy Assistant Secretary, Office of Acquisition and Logistics.
VA continually strives to improve our programs and we appreciate
independent reviews that can validate our successes and offer
recommendations for improvement. On March 8, 2012, VA's Office of
Inspector General (OIG) published a report on the Management and
Acquisition of Prosthetic Limbs. In this Report, OIG found that
overpayment for prosthetic limbs was a systemic issue in each Veterans
Integrated Service Network (VISN), and that internal controls needed to
be strengthened to better control the process. VHA concurred with OIG's
recommendations in this report. OIG found that VA spent approximately
$54 million on artificial limbs in fiscal year (FY) 2010, including
total contracts to vendors valued at close to $49 million. VA
acknowledges it could have saved approximately 4 percent, or $2.2
million, by strengthening its internal control processes for
prosthetics procurement and has adopted such practices to achieve
greater savings.
Later that same month (March 30, 2012), OIG published a second
report, an Audit of Prosthetics Supply Inventory Management. In this
Report, OIG concluded that VA needs to strengthen management of
prosthetic supply inventories at its medical centers and make better
use of excess inventories. VHA concurred with OIG's recommendations in
this report, and has developed action plans to improve oversight and
management processes to better ensure VHA delivers the quality care
Veterans deserve while exercising responsible stewardship of
prosthetics supplies.
My testimony today will begin by briefly describing initiatives we
have taken to improve the quality of care for Veterans in need of
prosthetics or devices, as well as how we define this term. It will
then cover how VA acquires prosthetics, how VA maintains oversight of
its prosthetics acquisitions, and how VA ensures the best value for
Veterans and taxpayers when acquiring prosthetics.
Quality of Amputation and Prosthetic Care
VHA's Prosthetic and Sensory Aids Service is the largest and most
comprehensive provider of prosthetic devices and sensory aids in the
world, offering a full range of equipment and services. All enrolled
Veterans may receive any prosthetic item prescribed by a VA clinician,
without regard to service-connection, when it is determined to promote,
preserve, or restore the health of the individual and is in accord with
generally accepted standards of medical practice. ``Prosthetic'' is a
broad term used in VA to describe devices and equipment in the Veteran,
on the Veteran, or for the Veteran intended to replace or support
missing body parts or function. VA's definition is similar to that used
by other Federal agencies and private health care systems.
Once we have identified eligible Veterans in need of prosthetics
and other devices, we can begin providing the specialty care they
require. VA has initiatives falling under five general areas to improve
the quality and availability of amputation care. These include staffing
and community partnerships, accreditation of VA laboratories, improved
training for VA staff, greater research into amputation clinical
issues, and collaborations with the Department of Defense (DoD). I will
briefly discuss each of these in turn.
First, VHA's Prosthetic and Sensory Aids Service has a robust
clinical staff of orthotists and prosthetists at more than 75
locations, and also partners with the private sector to provide custom
fabrication and fitting of state-of-the-art orthotic and prosthetic
devices. VA maintains local contracts with more than 600 accredited
Orthotic and Prosthetic (O&P) providers to help deliver care closer to
home. Commercial partners help fabricate and fit prosthetic limbs for
Veterans across the country. Since its creation in 2009, VA's
Amputation System of Care (ASoC) has expanded to deliver more
accessible, high quality amputation care and rehabilitation to Veterans
across the country. The ASoC utilizes an integrated system of VA
physicians, therapists, and prosthetists working together to provide
the best devices and state-of-the-art care.
Second, VA promotes the highest standards of professional expertise
for its workforce of more than 300 certified prosthetists, orthotists,
and fitters. Each VA lab that is eligible for accreditation is
accredited either by the American Board for Certification in Orthotics,
Prosthetics, and Pedorthics, Inc. (ABC), the Board of Certification/
Accreditation International (BOC), or both. This accreditation process
ensures quality care and services are provided by trained and educated
practitioners.
Third, to support the continued delivery of high quality care, VA
has developed a robust staff training program. We offer clinical
education, technical education, and business process and policy
education, in addition to specialty product training, to help our staff
provide better services to Veterans. Further, VA has one of the largest
orthotics and prosthetics residency programs in the Nation, with 18
paid residency positions at 11 locations across the country.
Fourth, VA's Office of Research and Development is investing
heavily in prosthetics and amputation health care research. It is
issuing Requests for Applications for studies to investigate a variety
of upper limb amputation technologies and applications. VA also works
with DoD to support joint research initiatives to determine the
efficacy and incorporation of new technological advances.
Finally, the partnership between VA and DoD extends further to
provide a combined, collaborative approach to amputation care by
developing a shared Amputation Rehabilitation Clinical Practice
Guideline for care following lower limb amputation. VA is supporting
DoD by collaborating on the establishment of the Extremity Trauma and
Amputation Center of Excellence. The mission of this center encompasses
clinical care, including outreach and clinical informatics, education,
and research, and is designed to be the lead organization for policy,
direction, and oversight in each of these areas. The center is
currently being established and will obtain initial operating capacity
by the end of this fiscal year.
In summary, VA supports high quality amputation and prosthetics
care by promoting ground-breaking research into new technologies,
training a highly qualified cadre of staff, and pursuing accreditation
of all eligible prosthetic laboratories in VA's Amputation System of
Care.
Acquisition of Prosthetics, Oversight of Acquisitions, and Ensuring
Best Value
The goal of VHA's Prosthetics and Sensory Aids Service is to
provide devices, technologies, and equipment that assist Veterans in
achieving maximal levels of independent function and a high quality of
life. Technologies and equipment must be highly individualized to meet
each Veteran's unique rehabilitative needs. Clinicians determine the
prosthetic needs of Veterans as a part of their clinical care, and VA
procures the devices necessary to achieve personal clinical outcomes.
While our focus is on providing state-of-the-art clinical care,
procurement, acquisition, and management policies reflect a
complementary and essential piece of this system as well. VA is
reforming its procurement practices to obtain better prices and more
competition in obtaining the devices and supplies Veterans need where
appropriate. We are doing this while maintaining the range of products
available to Veterans and the services we offer. While price is an
important consideration, our primary focus is on ensuring the product
meets the Veteran's needs.
Turning to how we acquire prosthetics, these devices are procured
according to the Federal Acquisition Regulations (FAR) and VA
Acquisition Regulations (VAAR). Due to the unique needs of Veterans in
this area, VA uses its statutory authority under title 38, United
States Code (U.S.C.), section 8123, as a sole source justification when
required to ensure a Veteran receives medically needed items. 38 U.S.C.
8123 grants VA authority to procure prosthetics and services in any
manner ``the Secretary may determine to be proper without regard to any
other provision of law.'' When exercising this authority the Department
may ``procure prosthetic appliances and necessary services required in
the fitting, supplying, and training and use of prosthetic appliances
by purchase, manufacture, contract, or in such other manner as the
Secretary may determine to be proper.'' This flexibility was granted to
ensure that Veterans receive devices and supplies that are suitable for
them and that meet their clinical needs. Many of the products VA
purchases are either going to become a part of a Veteran or will be a
critical part of their daily lives, helping them walk, work, and
interact with their families. The Sec. 8123 authority permits VA to
limit competition when physicians require specific devices or equipment
for patient care. Also, FAR and VAAR authorize limiting competition
under these circumstances. If the Secretary elects to use Sec. 8123 in
this manner, all applicable FAR and VAAR requirements must still be
followed.
When products are generally available and interchangeable,
competitive procurements may be more appropriate. VA must comply with
all applicable FAR and VAAR requirements in such procurements. VA has
aggressively pursued national contracts over the past 10 years for
these types of items. VHA specifies contract requirements, such as
nationally recognized quality and safety standards (e.g.,
Rehabilitation Engineering Society of North America's standards for
wheelchairs and ISO good manufacturing systems for hearing aids), to
support a high quality standard of care for rehabilitation products. As
a result, Veterans receive high quality devices that are effective and
safe. VA also pursues local and regional contracts for items and
services, such as home oxygen, artificial limbs, and durable medical
equipment (DME). The provision of prosthetic goods and services is
complex, as a balance must be maintained between what is clinically
indicated while ensuring we realize the best value.
VA also continues to improve how it oversees these acquisitions.
For example, VHA is working to place appropriate limits on the use of
the title 38 authority so that it secures fair and reasonable prices
for products while still delivering state-of-the-art care, and so we
can improve opportunities for Veteran-owned and small businesses. VHA
is pursuing three strategies to achieve greater cost savings while
preserving high quality, patient-centered health care and appropriate
clinical determinations. First, we are transitioning who procures this
equipment to bring us more in line with the FAR, which requires that
only fully trained contracting officers be able to obligate the
government for purchases above the micro-purchase threshold of $3,000.
This will also allow us to improve our business processes through
better contracting practices and increased attention to post-award
contract administration, including reconciliation of invoices.
Specifically, we are transferring purchasing authority from prosthetics
purchasing agents to contracting specialists for any purchase above
$3,000 (the micro-purchase threshold). VHA has notified the field that
warranted contracting officers will be required to contract for these
items. For items less than $3,000, micro-purchase requirements continue
to apply. We conducted a pilot program to evaluate the impact of this
change from January until March in Veterans Integrated Service Networks
(VISN) 6, 11, and 20, and beginning this month, we are transitioning to
national implementation. This transition to warranted contracting
officers will improve our business practices while ensuring clinical
decision-making and treatment plans remain with the Veteran and
provider.
VHA is pursuing a phased approach to standardize and define
commodities for its products where appropriate. When we can purchase
products, devices, or supplies that are generally available and
interchangeable, we will comply with the FAR to ensure we are obtaining
the best price possible. In the long term, VHA will develop a catalog
of such items to facilitate better, more cost effective purchasing
decisions. Again, we must balance this goal with quality clinical and
patient care.
VHA is updating policies and directives to better guide clinical
and procurement staff on the proper use of Sec. 8123. These updates
will allow us to more accurately and timely provide services to the
benefit of Veterans.
VHA is also increasing its audits of purchases to identify best
practices and conduct better oversight to ensure we are realizing the
best value. As we gather more data on how these changes are working, we
can continue to refine and enhance our programs. We are using new
templates, checklists, and justifications to streamline and simplify
our processes and improve communication between staff and leadership so
we have a comprehensive view of our procurement activities. VHA will
ensure proper controls are in place to review vendor quotes, purchase
orders, and verify invoices and costs by developing a comprehensive
database of all existing contracts. We will correct non-compliant
contracts as required and evaluate contractor performance as required
by the FAR, and institute collection activities when warranted for VA
overpayments. To improve the guidance provided to certified
prosthetists, we are developing contract templates, clearer guidance,
and notices that will be disseminated later this summer to our VISN and
facility contracting offices. VHA's Service Area Organizations, which
provide support, oversight, and guidance to our facilities, will review
the award of every new prosthetic limb base contract to ensure price
negotiations took place, and will review a random sample of delivery
orders between May and September 2012, to ensure the base contracts
include the correct prices. We will determine if base prices can be
established following a system-wide review of non-Medicare classified
limb items by the end of the fiscal year. In some circumstances, VHA
may be better suited to fabricate items in-house. To better identify
when we should pursue this approach, we will be contracting for an
external review to assess how expanded use of in-house functions would
impact patient satisfaction, support Veterans' needs and capabilities,
and staffing.
Once VHA has procured devices and supplies, management of our
inventories and resources is also essential. In the recently published
OIG report auditing VHA's prosthetics and supply inventory management
practices, OIG concluded VHA had made overpayments because of
inefficiencies in our system and inadequate training and guidance. We
appreciate OIG's efforts and recommendations, and in response, we are
better defining our policies and guidance to the field, improving our
information technology (IT) systems to better track supplies,
strengthening our training programs, and increasing oversight and audit
functions. We are directing our facilities to reconcile physical
inventories and take action to eliminate excess inventories without
creating supply shortages. We are revising our standards for facilities
to require at least one prosthetic supply inventory manager to become a
certified VA Supply Chain Manager. We have developed a patch that is 95
percent complete that will enhance the ability of the prosthetics
package to interface with inventory management software, facilitating
better information sharing. Through these steps, we will better utilize
existing and available resources as we deliver prosthetic and
amputation services and products to Veterans.
Conclusion
VA supports high quality amputation and prosthetics care by
supporting ground-breaking research into new technologies, training a
highly qualified cadre of staff, and pursuing accreditation of all
eligible prosthetic laboratories in VA's Amputation System of Care. We
are improving our oversight and management of prosthetic purchasing and
inventory management to better utilize the resources we have been
appropriated by Congress as we serve America's Veterans. High quality
patient care is our top priority, but we understand we must pursue this
objective in balance with other aims. These aims include: supporting
Veteran-owned and service-disabled Veteran-owned small businesses,
ensuring responsible fiscal stewardship of the funding provided to VA
by Congress, and complying with all applicable laws and regulations in
this regard. We appreciate the opportunity to appear before you today
to discuss this important program. My colleagues and I are prepared to
answer your questions.
Prepared Statement of Orthotic and Prosthetic Alliance
Chairman Johnson, Ranking Member Donnelly, and Members of the
Subcommittee:
The five members of the Orthotic and Prosthetic Alliance (O&P
Alliance) thank you for this opportunity to submit for the written
record testimony on the ability of the Department of Veterans Affairs
(VA) to deliver state of the art care to veterans with amputations. The
O&P Alliance represents the major organizations representing the
clinical, scientific, provider, supplier, business, accreditation, and
quality improvement aspects of the O&P field.
One of our Alliance members, AOPA, testified in person at this
hearing and another, NAAOP, submitted detailed written testimony on the
issues that were the subject of this important hearing. The O&P
Alliance submits this brief statement for the record to highlight some
of the dialogue that occurred during the hearing itself on 38 U.S.C.
Section 8123 as well as the three OIG reports recently issued by the
Department of Veterans Affairs, including:
Audit of the Management and Acquisition of Prosthetic
Limbs,'' Report No. 11-02254-102, March 8, 2012;
Healthcare Inspection: Prosthetic Limb Care in VA
Facilities,'' Report No. 11-02138-116, March 8, 2012; and,
Audit of Prosthetics Supply Inventory Management, Report
No. 11-00312-127, March 30, 2012.
Special Rules of Prosthetic Limb Purchases: Entitled ``Procurement
of Prosthetic Appliances,'' 38 U.S.C. Sec. 8123 was enacted in 1958
and was specifically designed to apply to prosthetic limbs provided by
the VA to veteran amputees. This section of the law was enacted in
response to protests by World War II veterans who marched on Washington
D.C. in 1945 waving artificial limbs and protesting the quality of the
prostheses provided through the Veterans' Administration relative to
those received by civilians. The provision allowed the VA to contract
directly with private prosthetists without respect to any other
provision of VA acquisition law, thereby cutting through bureaucratic
delay. The purpose was to provide the veteran amputee with the high
quality, timely prosthetic limb care they needed, when they needed it.
The need for the VA to continue meeting this standard continues today
and is as important as ever, considering the new wave of injured and
amputee veterans created by a decade of war.
Highlights of the VA Hearing Testimony: The O&P Alliance highlights
for the Subcommittee the following points to help guide it through its
consideration of VA prosthetic procurement:
1. If this Subcommittee contemplates legislative changes to Section
8123, we strongly urge you to preserve the original intent of this
provision which, in the end, was designed to empower the VA to cut
through bureaucracy and deliver high quality, timely and convenient
prosthetic limb care to veteran amputees. This goal remains all the
more important today. We are grateful that both witnesses in the first
panel of the hearing made this same point to the Subcommittee.
2. A number of the VA witnesses testified during the hearing that
the Section 8123 authority to procure prosthetics for veterans is used
to ensure full compliance with the physician's prescription as well as
veterans' choice. The O&P Alliance believes these are key principles
that justify the invocation of this broad authority when the VA
purchases prosthetics for injured and amputee veterans.
3. Custom orthotics (orthopedic braces for the back, neck, legs,
and arms) is a field closely aligned with prosthetics and has been
treated under Section 8123 in the same way as prosthetics. It is
critical that Section 8123 applies to injured and amputee veterans who
require custom orthotic care in the same way it applies to amputees who
require prosthetic limb care.
4. The O&P Alliance questions several conclusions in the VA OIG
Report entitled, ``Veterans Health Administration: Audit of the
Management and Acquisition of Prosthetic Limbs'' (11-02254-102). The
most egregious conclusion in this report is OIG's calculation of what
it spends on prosthetic limb care. The OIG asserts that VA spent
$12,000 on average for a prosthesis provided by a contract supplier
while the average cost of a prosthesis fabricated in the VHA's
prosthetic labs was approximately $2,900. This is a highly suspect
calculation of VA's true costs of providing prosthetic care to veteran
amputees and sends the erroneous signal that the VA is vastly
overpaying for contract prosthetic care. This is simply not the case.
It is not clear which costs the OIG factored into its analysis because
the report offers no detail on its calculations, but it is highly
likely that OIG failed to include the critical costs of labor (salaries
for certified prosthetists and technicians), overhead (the costs of
maintaining clinical facilities, laboratory machinery, information
processing, etc.), and myriad other costs that go into the fabrication
and fitting of prosthetic limbs. We note that in the testimony
delivered before this Subcommittee at this hearing, the VA OIG
essentially conceded the calculations in the report as to the cost of
prosthetic limb care were not based on complete information or cost
data.
5. The O&P Alliance applauds the dialogue that occurred at the
hearing that focused on the importance of certification of
prosthetists/orthotists and accreditation of O&P facilities and
programs, both internal to the VA and as a requirement in all contracts
between the VA and private practitioners. The VA recognizes the two
primary accrediting organizations for the O&P field, ABC and BOC (both
signatories to this written testimony), and the standards those
accreditors require. Professional certification and facility
accreditation are important mechanisms to help ensure quality in the
provision of orthotic and prosthetic care.
6. The O&P Alliance is also gratified by the dialogue that occurred
during the hearing on the issue of veterans' awareness of the processes
that determine their access to appropriate prosthetic care. For
instance, the hearing exposed that most veterans have little or no idea
that the VA is statutorily permitted to contract directly with private
prosthetists without respect to compliance with the Federal Acquisition
Regulations or the Veterans Affairs Acquisition Regulations (see, 38
U.S.C. Section 8123). This problem could be easily addressed by passage
of H.R. 805, the Injured and Amputee Veterans Bill of Rights. This
legislation calls for the posting of a list of rights and procedures at
every O&P VA clinic across the country and on the VA Web site so that
veterans can understand their rights and the proper procedures, and
advocate for the care they need on their own behalf. H.R. 805 is
pending before this Subcommittee and the O&P Alliance urges action on
this legislation as expeditiously as possible.
7. Finally, we are grateful to you, Mr. Chairman, for insisting
that the VA issue within two weeks from the date of the hearing a
written plan for its implementation of new procedures for the
procurement of prosthetic limbs. There have been numerous changes under
discussion by the VA in this regard but very little issued in writing.
We hope this document is made public so that all stakeholders,
including veterans themselves, can understand the changes taking place
in an area that means so much to their ability to function and live
fulfilling lives.
Conclusion: The O&P Alliance thanks you, Mr. Chairman, and this
Subcommittee for its leadership in examining this critical set of
issues. We hope to continue working with this Subcommittee and the VA
to help ensure that veterans with amputations and other injuries
receive the highest quality prosthetic and orthotic care possible. We
call on this Subcommittee to seriously consider passage of H.R. 805,
the Injured and Amputee Veterans Bill of Rights, in subsequent
legislative hearings as soon as possible, and to ultimately enact this
legislation this year. We also look forward to learning more about the
VA's specific plans to implement prosthetic procurement changes in a
manner that does not impact the quality of care received by veterans
who require prosthetic and orthotic care.
We thank you for the opportunity to submit testimony to this
Subcommittee for the written record.
Prepared Statement of National Association For Advancement of Orthotics
& Prosthetics
Chairman Johnson, Ranking Member Donnelly, and Members of the
Subcommittee:
Thank you for this opportunity to submit for the written record
testimony on the ability of the Department of Veterans Affairs (VA) to
deliver state of the art care to veterans with amputations. The
National Association for the Advancement of Orthotics and Prosthetics
(NAAOP) is a non-profit trade association dedicated to educating the
public and promoting public policy that is in the interests of orthotic
and prosthetic (``O&P'') patients and the providers who serve them.
The issues to be addressed in this hearing are critical to the
ability of veterans with amputations and other injuries and conditions
to live active, fulfilling lives, to live as independently as possible,
to participate in community and recreational activities, to raise
families, and ultimately to work and participate fully in society.
Office of Inspector General Reports on Prosthetics: We have
reviewed the three reports recently issued by the Office of Inspector
General and have some general observations to offer. Two reports were
issued on March 8th and are entitled, ``Veterans Health Administration:
Audit of the Management and Acquisition of Prosthetic Limbs,'' Report
No. 11-02254-102, and ``Healthcare Inspection: Prosthetic Limb Care in
VA Facilities,'' Report No. 11-02138-116. The third report was issued
by the OIG on March 30, 2012 (Report No. 11-00312-127) and is entitled,
``Audit of Prosthetics Supply Inventory Management.'' This report
addresses the broader VA prosthetics benefit and goes well beyond limb
prosthetics. Before we offer our general observations on these reports,
it is important to examine one of this Subcommittee's priorities in
this hearing, a close review of 38 U.S.C. Section 8123.
Background on 38 U.S.C. Sec. 8123: 38 U.S.C. Sec. 8123, entitled
``Procurement of Prosthetic Appliances,'' dates back to 1958 when
Congress passed the Veterans' Benefits Act to consolidate the laws
applicable to the Veterans' Administration passed previously. Section
8123 has only been minimally updated since then to incorporate a few,
minor language changes, but the meaning of the provision has not been
altered since its original enactment.
The purpose and scope of Section 8123 was confirmed in Comments
from the Veterans' Administration in connection with H.R. Report No.
1298 of the 85th Congress, the 1958 Veterans' Benefits Act and in the
Senate Report No. 2259 pertaining to the same Act. Many veterans
benefits laws were passed in the legislative environment following
World War II, and many of those concerning prosthetics for veterans
specifically trace their origins to 1945. In that year, World War II
veterans marched on Washington D.C. waving artificial limbs and
protesting the quality of the prosthetics provided through the
Veterans' Administration relative to those received by civilians. The
quality of these limbs was viewed by veteran amputees as substandard as
the administration had been purchasing these limbs from the lowest
bidder. In response to public outrage, and the need to provide for the
increasingly large number of veterans covered by the VA, Congress
passed a law creating the Prosthetic Appliance Service in 1945, later
expanded in 1948 to the Prosthetics and Sensory Aids Service, and began
to invest in research into more advanced limbs. \1\ A Committee of
veteran amputees was also established in 1945 by then Surgeon General,
Major General Paul R. Hawley, to advise the VA on the quality of any
new limb types it was considering for its programs. \2\
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\1\ James McAleer, Mobility Redux: Post World War II Prosthetics
and Functional Aids for Veterans, 48 J. Rehabilitation Res. & Dev. 2011
WLNR 3664126 (2011)
\2\ Charles Hurd, Veterans to Pass on Artificial Limbs; Committee
on Amputees Will Advise Administration on Merits of New Types, N.Y.
Times, Nov. 3 1945
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Laws governing the provision of prosthetic appliances under VA
benefits have--from the beginning--included coverage of artificial
limbs and still do today. In comparison to the VA's definition of
``prosthetics,'' other Federal health care programs, including
Medicare, specifically cover ``artificial legs, arms and eyes'' in the
definition of the term ``prosthetics and orthotics.'' However, durable
medical equipment and other prosthetic devices (such as colostomy bags)
are covered by separate provisions under Medicare law (See, 42 U.S.C.
Section 1861(s)). No matter how the VA has expanded its definition of
prosthetic appliances over time, it cannot be denied that artificial
limbs were intended to be covered under 38 U.S.C. Sec. 8123, and that
the provision of quality prosthetic limb care was--and continues to
be--of great importance to Congress and the VA.
If this Subcommittee contemplates legislative changes to Section
8123, we strongly urge you to preserve the original intent of this
provision which, in the end, was designed to empower the VA to cut
through bureaucracy and get the veteran amputee the quality prosthetic
limb care they need, when they need it. This goal remains all the more
important with the new wave of veterans with amputations and other
injuries and disabilities.
General Observations on the OIG Reports: NAAOP offers the following
comments on the three OIG Reports issued in March of this year for the
Subcommittee's consideration.
The term ``Prosthetics'' is used by the VA to describe a
wide variety of devices that have nothing to do with limb prosthetics
or artificial limbs. In fact, the data establish that of the $1.8
billion spent by the VA on ``prosthetics'' in FY 2010, only $54 million
(or 3 percent) was spent on prosthetic limbs. This is a relatively
small portion of dollars spent by the VA on the broader category of
prosthetics.
The VA's nomenclature (i.e., defining ``prosthetics''
more broadly than virtually any other health care program or payer, has
implications on the VA's use of the authority granted to it in 38
U.S.C. Section 8123, which permits the VA to purchase ``prosthetic
appliances'' without respect to any other provision of law. This
provision was enacted in 1958 in direct response to veterans who were
not satisfied with the VA's capacity to provide quality prosthetic care
in-house. This provision allowed veterans to obtain prosthetic limb
services from private prosthetists under contract with the VA without
the requirement that VA follow the Federal acquisition regulations in
the process. This authority has allowed the VA to provide timely and
high quality, convenient prosthetic limb care to veteran amputees for
decades since passage of that law. Custom orthotics (orthopedic braces
for the back, neck, legs, and arms) is a field closely aligned with
prosthetics and has been treated under Section 8123 in much the same
way as prosthetics.
The VA has made a major investment in its internal limb
prosthetics capacity since 2009 with the development of the Amputee
Systems of Care (ASoC) program, a series of prosthetic centers with
differing levels of prosthetic expertise and capacity. The VA has
emphasized accreditation of these programs and certification of the
professionals in these programs as a measure on quality. The new
investments in amputee care are designed to integrate care for veterans
and treat the whole patient, not just the prosthetic needs of the
amputee. Maintaining internal VA capacity and expertise to treat
amputees in an integrated manner is important and the VA should be
commended for its commitment and focus on this important population.
But this new internal VA capacity does change in any way the legal
authority the VA has to contract with qualified, private practitioners
who may be located more conveniently to veteran amputees' home and
communities.
We note that despite some internal payment controls that
need improvement, the Healthcare Inspection Report (11-02138-116)
concludes that the vast majority of veteran amputees have high
satisfaction rates with their prosthetic care which are primarily
provided by private practitioners under contract with the VA.
NAAOP questions several conclusions in the VA OIG Report
entitled, ``Veterans Health Administration: Audit of the Management and
Acquisition of Prosthetic Limbs'' (11-02254-102).
NAAOP takes strong issue with the OIG's calculation of
the difference in what it asserts it costs the VA to provide a
prosthesis, on average, to a veteran through its in-house capability at
the Veterans Health Administration (VHA) versus what it costs the VA to
purchase an average prosthesis under contract from a private
prosthetist. The OIG asserts that VA spent $12,000 on average for a
prosthesis while the average cost of a prosthetic limb fabricated in
the VHA's prosthetic labs was approximately $2,900. This is a highly
suspect calculation of VA's true costs of providing prosthetic care to
veteran amputees and sends the erroneous signal that the VA is vastly
overpaying for contract prosthetic care. This is simply not the case.
It is not clear which costs the OIG factored into its analysis because
the report offers no detail on its calculations, but it is highly
likely that OIG failed to include the critical costs of labor (salaries
for certified prosthetists and technicians), overhead (the costs of
maintaining clinical facilities, laboratory machinery, information
processing, etc.), and myriad other costs that go into the fabrication
and fitting of prosthetic limbs. In fact, if the OIG were to factor
into the calculation the recent investments the VA has made on its
Amputee Systems of Care initiative, the cost of providing prostheses to
veterans through its internal capacity would be significantly higher
than calculated. We note that in the testimony delivered before this
Subcommittee at this hearing, the VA OIG essentially conceded the
calculations in the report as to the cost of prosthetic limb care were
not based on complete information or cost data.
As this Subcommittee examines the implications of Section
8123 on the VA's ability to purchase prosthetics in the most cost-
effective manner, it is important to recognize the legitimate role that
private prosthetists have played for decades in providing prosthetic
care to veterans under contract with the VA. Allowing veterans to
access private prosthetists in their own communities preserves quality
by allowing choice of provider. The relationship between a prosthetist
and a patient can mean all the difference in successful prosthetic
rehabilitation. Proximity to care is also very important for veterans.
It is important that the VA maintains access to local private
prosthetists under contract with the VA to conveniently serve
veterans--within the overall plan of care designed by the VA clinical
team. Finally, choice of prosthetic technology is critical in order to
allow veterans to access the most effective prosthetic alternatives
that address their medical and functional needs.
NAAOP agrees with and strongly supports the
recommendation in the Healthcare Inspection Report (11-02138-116) that
VA's Under Secretary for Health consider veterans' concerns with the VA
approval processes for fee-basis and VA contract care for prosthetic
services to meet the needs of veterans with amputations. This is a key
area that addresses the satisfaction of prosthetic care among amputee
veterans. In fact, there is legislation pending before this Committee
that seeks to address this very issue, H.R. 805, the Injured and
Amputee Veterans Bill of Rights.
Support for H.R. 805, the Injured and Amputee Veterans Bill of
Rights: H.R. 805, the Injured and Amputee Veterans Bill of Rights, has
been introduced in the past three Congresses by Ranking Member Bob
Filner. In fact, this bill--its predecessor, H.R. 5730--passed the
House in December 2010 but the Senate did not have time to act before
the 111th Congress adjourned. This legislation proposes the
establishment and posting of a ``Bill of Rights'' for recipients of VA
health care who require O&P services. This Bill of Rights will help
ensure that all veterans across our country have consistent access to
the highest quality of care, timely service, and the most effective and
technologically advanced treatments available, all in concert with the
enhanced internal capacity of the VA in the prosthetic field. NAAOP
believes that adoption of this ``Bill of Rights'' will establish a
consistent set of standards that will form the basis of expectations of
all veterans who have incurred an amputation or injury requiring
orthotic or prosthetic care.
The bill proposes a straightforward mechanism for ``enforcement''
of this ``Bill of Rights,'' with an explicit requirement that every O&P
clinic and rehabilitation department in every VA facility throughout
the country be required to prominently display the list of rights. In
addition, the VA's Web sites would also post this Bill of Rights for
the interest of injured and amputee veterans. In this manner, veterans
across the country would be able to read and understand what they can
expect from the VA health care system in terms of their orthotic and
prosthetic care. And if a veteran is not having their orthotic or
prosthetic needs met, they will be able to avail themselves of their
rights and become their own best advocate. But above all, no veteran
will be in the position of resigning him or herself to the fact that
they are not functioning well with their O&P care for lack of
information about their rights.
This bill would simply condense to writing the O&P rules and
procedures that the VA has used for years. An analysis of Congressional
testimony delivered in 2008 by the Chief of the VA Prosthetic and
Sensory Aids Service before the House Small Business Committee confirms
that none of the rights listed in H.R. 805 (and its predecessor, H.R.
5730) would expand the rights the VA has granted veterans for years,
including in the area of practitioner choice and choice of prosthetic
technology. \3\ But the bill would, in fact, put these rights in
writing and post them for veterans to see, understand, and employ to
help ensure they receive the quality O&P care they need and deserve.
This bill would also provide Congress with easy access to the level of
compliance with this ``Bill of Rights'' across the country and could
identify particular regions of the country where problems persist.
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\3\ Congressional Testimony of Frederick Downs, House Small
Business Committee, Subcommittee on Contracting and Technology, Hearing
on Ensuring Continuity of Care for Veteran Amputees; The Role of Small
Prosthetic Practices, Serial No. 110-105 (July 16, 2008).
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We understand the Congressional Budget Office gave the bill a
nominal ``score'' in terms of what this would cost the VA. This is
because none of the rights in the bill expand the rules and procedures
the VA has acknowledged it uses for veterans in need of O&P care.
Thirty-five veterans' organizations, rehabilitation associations, and
consumer and disability groups support passage of H.R. 805. While
passage of H.R. 805 will not solve every problem raised with the
current VA prosthetics program, we believe it will have a material
effect on the ability of the VA to deliver consistent, state of the art
care to all veterans with amputations.
In fact, testimony from this Subcommittee's hearing clearly
indicated that rank and file veterans simply do not know that VA law
permits them to access prosthetists outside of VA clinics and
facilities. H.R. 805 would go a long way toward addressing this lack of
knowledge among veterans who require prosthetic and orthotic services
and devices.
NAAOP and a number of national O&P associations recently met with
senior VA officials in charge of the Prosthetic and Sensory Aids
Service. While the VA does not appear to support passage of the
legislation, we have agreed to continue discussions to see if there are
ways to address issues raised by H.R. 805. But passage of legislation
would establish, in law, a baseline of expectations for injured and
amputee veterans that would not subject the contents of the ``Bill of
Rights'' to the discretion of future VA administrations.
Conclusion: NAAOP thanks you, Mr. Chairman, and this Subcommittee
for examining this critical set of issues. NAAOP hopes to continue
working with this Subcommittee and the VA to help ensure that veterans
with amputations and other injuries receive the highest quality
prosthetic and orthotic benefit possible. We call on this Subcommittee
to seriously consider passage of H.R. 805, the Injured and Amputee
Veterans Bill of Rights, in subsequent legislative hearings as soon as
possible, and to ultimately enact this legislation this year.
We thank you for the opportunity to submit testimony to this
Subcommittee for the written record.
1501 M Street, NW, Seventh Floor ( Washington, DC 20005-1700 ( PH
202-624-0064 ( FAX 202-785-1756 ( [email protected] ( www.naaop.org
MATERIAL SUBMITTED
Letter from Hon. Bill Johnson, Chairman, Subcommittee on Oversight
and Investigations to Mr. George J. Opfer, Inspector General, U.S.
Department of Veterans Affairs
June 26, 2012
Mr. George J. Opfer
Inspector General
U.S. Department of Veterans Affairs
801 I Street, NW
Washington DC 20001
Dear Mr. Opfer:
I request your response to the enclosed questions for the record I
am submitting in reference to the Oversight and Investigations
Subcommittee hearing entitled ``Purchasing Perspective: VA's
Prosthetics Paradox'' that took place on May 30, 2012. The questions
are in respect to the audit of the Department of Veterans Affairs
management and acquisition of prosthetic limbs. I would appreciate if
you could answer the enclosed hearing questions by the close of
business on July 31, 2012.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for materials for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively and single-spaced. In
addition, please restate the question in its entirety before the
answer.
Due to the delay in receiving mail, please provide your response to
Ms. Bernadine Dotson at [email protected]. If you have
any questions, please call Mr. Eric Hannel, Majority Staff Director of
the Oversight & Investigations Subcommittee, at 202-225-3527.
Sincerely,
Bill Johnson
Chairman
Subcommittee on Oversight & Investigations
Enclosure
BJ/rm
Questions:
1) What data was analyzed to reach the conclusion that the average
cost of a prosthesis made by the Department of Veterans Affairs (VA)
was approximately one-quarter the cost of a prosthesis made by a
contractor?
2) The VA has recently made significant investments in prosthetics,
including upgrading labs and hiring new staff in some areas. How are
those costs factored into your analysis?
3) What additional information would you have needed to make an
apples-to-apples comparison between VA and contractor costs? Do you
believe that the VA has the information needed to make an apples-to-
apples comparison?
4) How are relative costs tracked and monitored by the VA?
Contractor costs are very simple to account for. What steps are taken
to ensure that all VA costs are appropriately accounted for?
5) Were any adjustments made to account for the relative complexity
of devices provided by VA and contractor staff?
6) VA contractors who have looked at your figures have suggested
that the estimated for the VA-made prostheses represents only the
direct cost of components, without VA salaries, benefits, facilities,
administration, and other costs. Do you have any information to
indicate that this suggestion is inaccurate?
7) Footnote 1 in the report suggests that the difference between
VA-made and contractor-made prosthetics is due to overhead and profit.
What information does the IG have to indicate that these may be the
only differences between the two figures? Do you believe that other
costs were omitted from the information you analyzed?
8) If the comparison was not an apples-to-apples comparison, what
value does that analysis have? What useful information does it provide
to the Congress and to the VA?
9) If the comparison was not apples-to- apples, then why was it
included in the report?
10) When the draft report that included the $2,900-$12,000
comparison was submitted to Prosthetic and Sensory Aids Service (PSAS)
for comments, did PSAS submit comments on that figure? If so, what were
the comments?
Response from Mr. George J. Opfer, Inspector General, U.S.
Department of Veterans Affairs to Hon. Bill Johnson, Chairman,
Subcommittee on Oversight and Investigations
DEPARTMENT OF VETERANS AFFAIRS
INSPECTOR GENERAL
WASHINGTON DC 20420
July 31, 2012
The Honorable Bill Johnson
Chairman, Subcommittee on
Oversight and Investigations
Committee on Veterans' Affairs
United States House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
Enclosed are the Office of Inspector General's responses to the
questions for the record from the May 30, 2012, hearing before the
Subcommittee, ``Purchasing Perspective: VA's Prosthetics Paradox.'' We
appreciate the opportunity to testify on our work in this area.
Thank you for your interest in the Department of Veterans Affairs.
Sincerely,
/s/
GEORGE J. OPFER
Enclosure
VA Office of Inspector General Responses to Questions for the
Record from the May 30, 2012, Hearing Before the Subcommittee on
Oversight and Investigations, Committee on Veterans Affairs, United
States House of Representatives on ``Purchasing Perspective: VA's
Prosthetics Paradox''
Question 1: What data was analyzed to reach the conclusion that the
average cost of a prosthesis made by the Department of Veterans Affairs
(VA) was approximately one-quarter the costs of a prosthesis made by a
contractor?
The VA Office of Inspector General (OIG) report, Audit of VHA
Acquisition and Management of Prosthetic Limbs, focused on the
effectiveness of VA's acquisition and contract administration practices
used to procure prosthetic limbs. Our primary focus was the accuracy of
the vendor payments. We did not assess the completeness or accuracy of
VHA's reported data on the internal costs to fabricate limbs. We
presented VA's reported costs as background information in the
introduction to our report.
Question 2: The VA has recently made significant investments in
prosthetics, including upgrading labs and hiring staff in some areas.
How are those costs factored into your analysis?
The costs we reported for prosthetic limbs fabricated at Veterans
Health Administration (VHA) labs were included in an Orthotic
Laboratory Workorder report provided to us by the Prosthetic and
Sensory Aids Service (PSAS). The report summarized and categorized the
total quantity, lab hours, labor costs, material costs, and average
unit cost for each prosthetic limb fabricated by these labs. We did not
assess the impact of any lab upgrades or staff hiring on VHA's reported
costs nor did we assess the completeness and accuracy of this data.
Question 3: What additional information would you have needed to
make an apples-to-apples comparison between VA and contractor costs? Do
you believe that the VA has the information needed to make an apples-
to-apples comparison?
While PSAS provided us with an Orthotic Laboratory Workload report
that we used to calculate costs for prosthetic limbs manufactured at
VHA labs, we determined that PSAS was unaware of their in-house
fabrication capabilities because the Chief Consultant of PSAS had not
conducted periodic evaluations of labs, as required by VHA Handbook
1173.2, Furnishing Prosthetic Appliances and Services, to ensure the
labs were operating as effectively and economically as possible. Until
VA tracks all of the necessary information, including general
administrative expenses, related to in-house and contractor prosthetic
limb fabrication, the OIG and other interested parties will not be able
to fully compare VHA and vendor fabrication costs.
Question 4: How are relative costs tracked and monitored by the VA?
Contractor costs are very simple to account for. What steps are taken
to ensure that all VA costs are appropriately accounted for?
At that time of the OIG's review, costs for limbs fabricated at VHA
labs were tracked in the Orthotic Laboratory Workload system. A senior
PSAS official provided us with information from this system for FY
2010. This information summarized and categorized the total quantity,
lab hours, labor costs, material costs, and average unit cost for each
prosthetic limb fabricated by VHA's labs. The same official also
provided our auditors with vendors' costs, which included the total
quantity and total cost of all prosthetic limbs fabricated by vendors
for veterans. After calculating the costs for VHA in-house and vendor
fabrication, we contacted this official regarding the significant
difference between the two costs. The difference behind the two costs
was attributed to vendor costs for materials and profit. Accounting for
VHA's internal costs to fabricate limbs or VHA's process for capturing
costs was not within the scope of our audit.
Question 5: Were any adjustments made to account for the relative
complexity of devices provided by VA and contractor staff?
We did not make any adjustments to account for the relative
complexity of devices provided by VA and contractor staff because it
was not in the scope of our audit. Any questions about such adjustments
should be addressed by VA.
Question 6: VA contractors who have looked at your figures have
suggested that the estimates for the VA-made prosthesis represents only
the direct cost of components, without VA salaries, benefits,
facilities, administration, and other costs. Do you have any
information to indicate that this suggestion is inaccurate?
We reported on data that was provided by PSAS. Any discussion about
cost comparisons should be addressed by VA.
Question 7: Footnote 1 in the report suggests that the difference
between VA-made and contractor-made prosthetics is due to overhead and
profit. What information does the IG have to indicate that these may be
the only differences between the two figures? Do you believe that other
costs were omitted from the information you analyzed?
A senior PSAS official reported the price discrepancy between VHA
in-house fabrication and vendor fabrication was due to material costs
and profits. Determining whether the costs VHA reported for fabricating
limbs were complete was outside the purview of this audit.
Question 8: If the comparison was not an apples-to-apples
comparison, what value does that analysis have? What useful information
does it provide to the Congress and to the VA?
Based on the Committee's interest in how VA obtains prosthetic
limbs, we conducted an audit of how VA acquires prosthetic limbs. As a
result, the OIG reported on VA's prosthetic limb workload (that is,
limbs fabricated and costs to fabricate) for FY 2010. In describing
VA's prosthetic limb workload, we reported on the funds spent on
prosthetic items overall, as well as the funds spent specifically on
prosthetic limbs. As the VA acquires limbs through in-house labs and
contract vendors, we also reported on workload for those two groups. As
noted in our report, VHA does not know their in-house capabilities
because they did not do the required evaluations of labs.
Question 9: If the comparison is not apples-to-apples, then why was
it included in the report?
See response to Question 8.
Question 10: When the draft report that included the $2,900-$12,000
comparison was submitted to Prosthetic and Sensory Aids Service (PSAS)
for comments, did PSAS submit comments on that figure? If so, what were
the comments?
The Under Secretary for Health concurred with our findings and
recommendations and provided an appropriate action plan. His comments,
which are included in our report, did not include any remarks on VA's
prosthetic limb workload or the costs included in the draft report.