[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
       VA FEE BASIS CARE: EXAMINING SOLUTIONS TO A FLAWED SYSTEM

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 14, 2012

                               __________

                           Serial No. 112-75

                               __________

       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 HEALTH

                ANN MARIE BUERKLE, New York, Chairwoman

CLIFF STEARNS, Florida               MICHAEL H. MICHAUD, Maine, Ranking
GUS M. BILIRAKIS, Florida            CORRINE BROWN, Florida
DAVID P. ROE, Tennessee              SILVESTRE REYES, Texas
DAN BENISHEK, Michigan               RUSS CARNAHAN, Missouri
JEFF DENHAM, California              JOE DONNELLY, Indiana
JON RUNYAN, New Jersey

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


                            C O N T E N T S

                               __________

                           September 14, 2012

                                                                   Page
VA Fee Basis Care: Examining Solutions to a Flawed System........     1

                           OPENING STATEMENTS

Chairwoman Ann Marie Buerkle.....................................     1
    Prepared statement of Chairwoman Buerkle.....................    35
Hon. Michael H. Michaud, Ranking Democratic Member...............     3

                               WITNESSES

Mr. Adrian Atizado, Assistant National Legislative Director, 
  Disabled American Veterans.....................................     4
    Prepared statement of Mr. Atizado............................    36
Mr. Shane Barker, Senior Legislative Associate, Veterans of 
  Foreign Wars of the United States..............................     7
    Prepared statement of Mr. Barker.............................    39
Mr. Jacob B. Gadd, Deputy Director for Healthcare, National 
  Veterans Affairs and Rehabilitation Division, The American 
  Legion.........................................................     5
    Prepared statement of Mr. Gadd...............................    43
Mr. Brad Jones, Chief Operating Officer, Humana Veterans 
  Healthcare Services, Inc.......................................    15
    Prepared statement of Mr. Jones..............................    46
Ms. Kris Doody, RN, MSB, Chief Executive Officer, Cary Medical 
  Center.........................................................    17
    Prepared statement of Ms. Doody..............................    51
Dr. Gregg A. Pane, MD, Chair, VHA Fee Care Program Panel, 
  National Academy of Public Administration......................    18
    Prepared statement of Dr. Pane...............................    56
The Honorable Dr. Robert A. Petzel, M.D., Under Secretary for 
  Health Veterans, Health Administration, U.S. Department of 
  Veterans Affairs...............................................    25
    Prepared statement of Dr. Robert A. Petzel, M.D..............    61

Accompanied by:

  Mr. Philip Matovsky, Assistant Deputy Under Secretary for 
    Health, Administrative Operations Veterans Health 
    Administration, U.S. Department of Veterans Health...........    25
  Ms. Cyndi Kindred, Acting Deputy Chief Business Officer for 
    Purchased, Care, Veterans Health Administration, U.S. 
    Department of Veterans Affairs...............................    25
  Ms. Deborah James, Non-VA Care Coordination Project Manager 
    Veterans Health Administration, U.S. Department of Veterans 
    Affairs......................................................    25

                       SUBMISSIONS FOR THE RECORD

Office of the Inspector General, U.S. Department of Veterans 
  Affairs........................................................    64
Paralyzed Veterans of America....................................    68
National Coalition for Homeless Veterans.........................    70

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:

Hon. Michael H. Michaud, Ranking Democratic Member, Subcommittee 
  on Health, Committee on Veterans' Affairs to the Honorable Dr. 
  Robert A. Petzel, M.D., Under Secretary for Health, Veterans 
  Health Administration, U.S. Department of Veterans Affairs.....    77
Hon. Michael H. Michaud, Ranking Democratic Member, Subcommittee 
  on Health, Committee on Veterans' Affairs to Jacob B. Gadd, 
  Deputy Director for Healthcare, The American Legion............    77


       VA FEE BASIS CARE: EXAMINING SOLUTIONS TO A FLAWED SYSTEM

                              ----------                              


                       FRIDAY, SEPTEMBER 14, 2012

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

    The Subcommittee met, pursuant to notice, at 9:32 a.m., in 
Room 334, Cannon House Office Building, Hon. Ann Marie Buerkle 
[Chairwoman of the Subcommittee] presiding.
    Present: Representatives Buerkle, Roe, Benishek, Runyan, 
Michaud, and Reyes.

            OPENING STATEMENT OF CHAIRWOMAN BUERKLE

    Ms. Buerkle. Good morning. This hearing will now come to 
order.
    Welcome and thank you all for being here this morning for 
today's hearing, VA Fee Basis Care: Examining Solutions to a 
Flawed System.
    Recent years have seen tremendous growth in the VA's Fee 
Care Program, with independent assessments estimating growth of 
close to 300 percent from fiscal year 2005 to today. 
Unfortunately, however, as the program has continued to grow, 
so have the management and oversight problems that have plagued 
the system through which the Department of Veterans Affairs 
provides care to veterans outside the walls of a VA facility. 
It is seriously flawed, if not altogether broken.
    In the last 3 years alone, the VA Inspector General has 
issued no less than seven separate reports detailing in-depth 
the serious deficiencies and challenges the Fee Care Program 
faces, including inadequate fiscal controls that have resulted 
in hundreds of millions of dollars in improper payments.
    Further, last September, the National Academy of Public 
Administration issued a white paper on VA's Fee Care Program 
that drew alarming conclusions about the VA's ability to 
effectively manage and oversee care and services under this 
program.
    According to NAPA, VA's Chief Business Office has exercised 
limited and ineffective oversight of the Fee Care Program; The 
program itself lacks operational objectives, performance goals, 
or a clearly defined strategy for managing expenditures; and VA 
doesn't understand what services are being procured through the 
fee program and at what cost.
    There have been some bright spots. Congressionally mandated 
pilot programs Project HERO and Project ARCH have shown 
promising results in achieving a more patient-centered, 
coordinated, cost-effective delivery model for fee care. These 
are small pockets of success, despite the VA's reluctance to 
implement and utilize these programs to the fullest intent of 
Congress.
    Recognizing the substantial deficiencies with the Fee 
program, VA has begun implementing two new initiatives, the 
Patient-Centered Community Care--PCCC--Program and the Non-VA 
Care Coordination--NVCC--Program. The Department this morning 
is going to testify that these two initiatives will address all 
of the challenges the Fee program faces and ensure our veterans 
receive effective and efficient non-VA care in a seamless 
manner.
    I honestly wish that I could believe that was true. 
However, given the history of failure we have seen already, I 
have serious reservations that the actions VA is taking now 
will address the core challenges that the VA faces and not 
simply lead to yet further fragmented care and an inability to 
deliver quality care, especially in our rural communities.
    Most notably, the VA lacks the information technology and 
administrative services solutions essential to establishing in-
house the clinical information sharing and electronic claims 
processing so very vital to a successful care-coordinated and 
veteran-centric program.
    The VA has spent approximately $4.6 billion to purchase 
care in the community for veteran patients in the last fiscal 
year. That is billion with a ``b''.
    We cannot afford to allow the VA to continue to flail and 
struggle to test new programs in an inherently flawed system. 
We cannot rely on the promises from the VA that they can 
finally get it right.
    Our veterans are everywhere, and VA cannot be. And at the 
end of the day what fee care is about is effective, efficient 
delivery of care to veterans, where they need it and when they 
need it.
    Getting it right is about honoring their preferences, their 
choices, and their daily lives as well as their service to our 
Nation.
    Getting it right is telling a Vietnam- or Korean-era 
veteran that he doesn't have to travel 4 hours to the nearest 
VA medical facility for his cancer treatments. He can go to a 
hospital closer to his home and spend the time he would have 
spent on the road getting better.
    Getting it right is telling a Gulf War veteran that she 
doesn't have to take a day off from work to drive a VA clinic 
two towns over for a physical examination. She can go to the 
doctor down the street if she would prefer and get to work on 
time.
    Getting it right is telling a young veteran, recently home 
from Iraq or Afghanistan, that he doesn't have to sit and wait 
all day in a waiting room to see his doctor. He can choose 
another provider who can see him now and spend the afternoon 
with the people he missed while he was overseas.
    This is what we are talking about today; and these stories, 
-stories that my colleagues and I hear every day from veterans 
in our community who are fed up, are what I want all of us to 
keep foremost in our minds this morning as we talk about how we 
can make this program better and get it right for the veterans 
and those who have served this Nation so honorably.
    I now yield to the Ranking Member, Mr. Michaud, for any 
opening statement he may have.
    [The prepared statement of Chairwoman Buerkle appears on p. 
35.]

          OPENING STATEMENT OF HON. MICHAEL H. MICHAUD

    Mr. Michaud. Thank you very much, Madam Chair, for having 
this very important hearing; and I would like to thank everyone 
for coming today.
    The subject of the hearing today is an important one and 
one that is fundamental to the ability of the Department of 
Veterans Affairs to deliver quality, timely, and accessible 
health care to all our veterans, regardless of where they live.
    Congress gave the authority to the VA to purchase hospital 
care and medical services in non-Department facilities for 
veterans in order to give the VA flexibility and ensure access 
to care. Of concern today is the inability of the Department to 
adequately manage this authority through the existing fee-based 
program.
    There have been many studies done in the fee program, and 
most of them have not been positive. The Veterans Affairs 
Office of Inspector General has conducted several audits over 
the past few years and has found a lack of education in the fee 
staff and the processing of claims, a lack of comprehensive fee 
policies and procedures from Veterans Health Administration, a 
lack of clear oversight responsibility, and an overall lack of 
management oversight and involvement. All of these lead to 
mismanagement of payment and billing and a whole host of other 
issues.
    And on the heels of the Inspector General report that 
documented the chaos and mismanagement within the fee program 
is a National Academy of Public Administration report that 
finds more of the same, and I am looking forward to testimony 
today. Quite frankly, because I see no improvement in any of 
these identified issues, it looks to me that the Inspector 
General's recommendations have been ignored; and I hope that 
the VA will take this new report seriously and will proceed 
with the recommendations to change some of the policies at VA.
    And, finally, I look forward to hearing from Dr. Petzel 
regarding VISN 1 and the veterans who reside in Martha's 
Vineyard. It is my understanding from testimony submitted by 
the American Legion that a contract with a private hospital in 
Martha's Vineyard was allowed to lapse in 2004, and 4 years 
passed before the gap in care was discovered, and there is 
still no contract. In the meantime, these veterans have to take 
a ferry, then drive 2 hours to Providence VA Medical Center. We 
know we can do better than that for our veterans, we must do 
better than that.
    So I want to thank all the panelists for coming today, I 
look forward to hearing testimony, and I look forward to having 
an open dialogue on how we can improve the VA as it delivers 
the services to our veterans.
    Thank you very much. I yield back, Madam Chair.
    [The prepared statement of Congressman Michaud appears on 
p. 3.]
    Ms. Buerkle. Thank you very much.
    I will now introduce our first panel this morning.
    Joining us from the veterans service organization community 
is Mr. Adrian Atizado, the Assistant National Legislative 
Director for the Disabled American Veterans; Mr. Shane Barker, 
Legislative Associate for the Veterans of Foreign Wars of the 
United States; and Mr. Jacob B. Gadd, the Deputy Director for 
Health Care for the National Veterans Affairs and 
Rehabilitation Division of the American Legion.
    Thank you all for joining us this morning, I am eager to 
hear your views. Please have a seat at the table. Thank you 
very much.
    Mr. Atizado, we will begin with you. Thank you.

 STATEMENTS OF ADRIAN ATIZADO, ASSISTANT NATIONAL LEGISLATIVE 
  DIRECTOR, DISABLED AMERICAN VETERANS; SHANE BARKER, SENIOR 
 LEGISLATIVE ASSOCIATE, VETERANS OF FOREIGN WARS OF THE UNITED 
  STATES; AND JACOB B. GADD, DEPUTY DIRECTOR FOR HEALTH CARE, 
  NATIONAL VETERANS AFFAIRS AND REHABILITATION DIVISION, THE 
                        AMERICAN LEGION

                  STATEMENT OF ADRIAN ATIZADO

    Mr. Atizado. Madam Chairwoman, Ranking Member Michaud, and 
Members of the Subcommittee, good morning.
    I would like to thank you for inviting the DAV to testify 
at this important hearing. We appreciate the Subcommittee's 
leadership in overseeing VA's contract and purchased care 
programs, including fee and contract medical care on which many 
service-connected disabled veterans rely. The DAV does 
recognize the care VA buys from the community is essential in 
providing access to better health care to veterans, but, as 
noted, significant improvements are indeed needed.
    The delegates to DAV's most recent national convention 
passed a resolution regarding VA's purchased care program. 
Among other things, this resolution urges VA to integrate and 
promote care coordination with all non-VA purchased care 
programs and services. With the exception of the ongoing 
Project HERO pilot program, today's care bought by VA does not 
exhibit the kind of care coordination discussed in our national 
resolution, nor health care as provided within the VA health 
care system.
    The focus of today's hearing, fee care, allows for 
individual authorizations by VA when demand is for only 
infrequent use. Yet, over the past several years, expenditures 
for fee care have been rising dramatically, greatly outpacing 
the number of veterans served by fee.
    Unfortunately, fee care has not received sufficient 
attention and resources to ensure its integrity, efficiency, 
and integration with the Department's health care system. 
Service-connected veterans were first to experience the ill 
effects of this neglect.
    When service-connected veterans were authorized under fee 
care to seek care in the community, there was a palpable 
disconnect from the continuity of care that the VA is known to 
provide. Veterans complained that they were required to 
identify community providers themselves, not knowing the 
quality of care that they would receive. They often are 
required to negotiate prepayment of care or pay for part of 
that care. They also have to serve as a health care linkage 
between the fee care provider and VA.
    All of these things encumber veterans when they are asked 
to step outside the VA health care system and receive care in 
the private community. In essence, as a health care delivery 
model, fee care is not optimal from the patient's perspective.
    The DAV does applaud VA for taking steps in the right 
direction to meet the goals of our resolution to provide proper 
care coordination and fee care and make care coordination a 
standard business practice. However, because non-VA care 
coordination, NVCC, is built upon the current fee care 
information technology system and infrastructure, we are 
concerned that its success will be limited.
    Fee care uses VistA Fee, which was developed over 20 years 
ago. There is a concurrent claims processing software called 
the Fee Basis Claims System which fee staff has to toggle, they 
have to use both systems, in order to do their job. It is very 
cumbersome and labor intensive. Both do not properly support 
the volume and complexity of fee care now being processed by 
VA.
    DAV believes that meeting fee care IT requirements is well 
past due. However, we believe our concerns are heightened 
because VA's Office of Information and Technology's focus and 
backlog of work will delay identification, development, and 
implementation of an IT solution.
    With regard to the program entitled Patient-Centered 
Community Care, which is described by VA as a soft approach to 
contracting care and that it will apply lessons learned from 
Project HERO, which is now in its fifth and final year, we 
would like to note that it was first met with skepticism by our 
community. We are very protective of the VA health care system 
because it is the only health care system devoted to veterans 
needs, which are very different than the needs of the private-
sector health care and their patients.
    The VA has repeatedly assured DAV that the care 
coordination that patients experience in Project HERO will be 
part of PCCC. But, as of this date, we are uncertain. We are 
waiting for confirmation in the form of a draft RFP which will 
proceed the official RFP due out in November of this year.
    While building on the success of Project HERO, it is an 
untested concept for the VA health care system, one that is not 
intended for pilot testing for effectiveness. We believe it is 
a good approach but not the best approach, and we hope that VA 
will take the opportunity to address its problems in Project 
HERO as well as the private sector's problems with Project 
HERO.
    Madam Chairwoman, there are a lot more things that I can 
talk about with regard to fee and contract care, but my time is 
up, and I will make myself available to any questions you or 
other members may have.
    [The prepared statement of Adrian Atizado appears on p. 
36.]
    Ms. Buerkle. Thank you very much.
    Mr. Gadd, you may proceed.

                   STATEMENT OF JACOB B. GADD

    Mr. Gadd. Chairwoman Buerkle, Members of the Committee, 
thank you for the opportunity to submit the American Legion's 
views on the fee basis program. Typically, VA uses fee basis as 
a last resort and prefers to treat the veteran within their 
closest hospital VISN or through a DoD collaboration prior to 
approving fee basis for our veteran patients. In contrast, 
however, VA utilizes fee basis programs as the first resort 
when VA hospitals are short on staffing and need to meet a 
performance measure.
    The question then is, what input does the veteran have on 
their fee basis decision and policy, particularly if they live 
in a rural area and have to drive 2 hours to the nearest 
hospital a couple times per week?
    The American Legion testified in a Senate field hearing in 
Montana and urged the VA to reconsider its policies to allow 
VAMCs to use their best judgment and discretion so veterans are 
not forced to drive hours to a facility for several routine and 
recurring appointments.
    In the last 4 years, non-VA purchased care has doubled, 
from 2.2 billion in 2007 to 4.5 billion in 2011, along with a 
corresponding increase of 355,000 new fee basis patients. The 
VA facilities struggle with what services they can provide 
inhouse or whether they contract out care.
    Nowhere is this challenge more evident than with women 
veterans, gender-specific specialty services. The majority of 
women services are feed out, but as women veterans are the 
fastest-growing demographic of veterans enrolling in the VA, 
VA's ability to hire women providers should be carefully 
considered.
    The American Legion System Worth Saving program conducts 
site visits to VA medical centers annually, and several 
concerns were identified during those visits. Number one, there 
is a lack of training and education program for non-VA 
providers. The VA has specific screening diagnosis and 
treatment guidelines which are evidence based and require their 
providers to be licensed, credentialed, and receive that 
specific training. Why would we want to refer a veteran to a 
non-VA provider who does not have those same credentials and 
training? If non-VA providers had training, it would ensure 
that they were held to the same quality of care standards and 
treatments as VA providers.
    The second concern is VA's computer system. If the non-VA 
provider had access to the veteran's medical record, it would 
help in three ways: Number one, the non-VA provider could 
review the patient's full record and history in order to make a 
proper diagnosis and treatment plan. Two, it would help the 
community provider meet all of the quality of care measures 
tracked in CPRS as well as promoting mandatory screenings for 
TBI, PTSD, and other quality of care measures that are 
currently tracked in CPRS. And, three, it would speed up 
receipt and documentation from the encounter, instead of VA 
having to wait weeks or months to receive documentation back 
from a non-VA provider.
    The Martha's Vineyard fee basis contract was the third 
concern. The American Legion conducted a site visit to Martha's 
Vineyard last year for our report on rural health care. In 
2000, a contract was signed between Providence VA Medical 
Center and Martha's Vineyard Hospital. The contract lapsed 
around 2004, which the VA didn't realize until 2008 when the 
hospital acquired new management. The way veterans treated 
there found out that this contract had lapsed was when Martha's 
Vineyard Hospital sent those veterans collection bill notices 
for medical expenses previously covered under that existing 
contract.
    Since 2008, these veterans have had to take a ferry from 
Martha's Vineyard to either a local community based outpatient 
clinic or drive 2 hours for care to Providence VA Medical 
Center. While there are only a few veterans that live on the 
island that were affected by this lapse in contract, this delay 
illustrates the frustrations that veterans living in rural and 
isolated locations face with contracting delays and receiving 
assurances from VA that it will be resolved.
    VA officials told us this week that the contract had 
recently been signed and approved, but in order to prevent 
situations like this in the future VA must strive to create a 
tracking database of all non-VA purchased care contracts to 
ensure those contracts do not lapse and veterans are involved 
as stakeholders.
    Secondly, VA should make every effort to hold stakeholder 
meetings with veterans from those communities, solicit input, 
and regularly communicate with them on the status of contracts. 
After all, it is those veterans' health care.
    In closing, along with the cost reduction and efficiencies 
the PCCC program is proposing, it is equally important that 
quality standards for contracting care must be the same or 
better than the care otherwise received in the VA. VA is at a 
crossroads with their legacy traditional fee basis program. 
Close to one million veterans rely on fee basis programs every 
day during a given year.
    Madam Chairwoman, thank you for allowing the American 
Legion to testify today; and I would be happy to answer any 
questions you or the Committee have.
    [The prepared statement of Jacob Gadd appears on p. 43.]
    Ms. Buerkle. Thank you.
    Mr. Barker, you may proceed.

                   STATEMENT OF SHANE BARKER

    Mr. Barker. Chairman Buerkle, Ranking Member Michaud, and 
Members of the Committee, on behalf of the two million members 
of the Veterans of Foreign Wars and our auxiliaries, I thank 
you for this opportunity to share our views on the need to 
improve VA's fee basis care program.
    This program has been badly mismanaged for years, if not 
decades, now. These problems have been well documented, most 
recently by the NAPA study last fall. For example, while the VA 
paid out more than 4.5 billion in fee basis health care claims 
in fiscal year 2011 alone, they have few tools at their 
disposal to ensure they are getting the most for their money.
    Among the serious problems that exist, VA has no way to 
ensure proper credentialing of those who bill VA, no way to 
ensure bill procedures actually occurred, and no way to fully 
integrate the documentation into a veteran's electronic health 
record. NAPA looked at each of these and other factors, 
concluding that VA could not determine the value they were 
getting out of their investment. We appreciate NAPA's attempt 
to look at the fee program as more than the sum of its parts, 
and we hope the Committee will also thoroughly examine all 
assets of the program, while not losing focus on the big 
picture.
    One aspect that has to have priority is the lack of a 
strong IT backbone to complement the work being done by VA 
employees and their partners in the private sector. It is 
imperative to employ IT solutions that can integrate the back-
end functions between VA facilities in the private sector is 
obvious, but that doesn't merely apply to business practices 
such as authorizations, referrals, and claims. The most 
important factor is the health and well-being of our veterans, 
and it is being put in jeopardy because health records are not 
getting back to VA.
    Meanwhile, duplicative services are throwing money down the 
drain, and we can no longer afford the high cost of stagnation 
in VA's health care IT. The health of our veterans is too 
important for us not to respond. Like the private sector, VA 
must try to save time and money using technology so we can 
provide robust care for the increasing number of veterans, 
including women veterans and rural veterans who are choosing 
VA. As Mr. Gadd said, women veterans are the highest growing 
population of VA, and it is imperative that we respond to that.
    Gaining efficiencies and improving coordination between 
direct care and traditional fee basis care is the purpose 
behind a new system known as Non-VA Care Coordination, or NVCC. 
If executed properly, this will standardize business rule, 
prioritize internal resources and partnerships before 
authorizing fee services, and ensure clinical notes are sent to 
VA in timely fashion. It would also regionalize business 
functions, taking them out of hospitals and moving them to a 
handful of regional locations. In theory, this would promote 
care coordination and save time and money.
    VA's pilot of NVCC has taken place in one hospital in 
nearly all of the VISNs, a fact that VA uses to suggest 
progress. They may well be right, but we are only left to 
wonder how VA's central office is collaborating with the 
hospitals, accepting criticism, and incorporating suggestions.
    The VA strongly believes in standardization and enhancing 
productivity for efficiency in savings. However, we do hope the 
central office is mindful that incorporating advice from the 
field may improve their efforts, and we hope the Committee 
explores that topic with VA. We don't want to simply automate 
and consolidate flawed processes, because flawed processes that 
are automated cause further problems down the road. We don't 
think that is appropriate, and we hope that the Committee will 
ensure that suggestions from the field are being taken into 
account.
    I also want to touch on another topic that we will be 
discussing today. The RFP for patients under community care 
known as PCCC, or PC3, will soon go public. This is VA's 
attempt to replace Project HERO, a 5-year pilot designed to 
evaluate whether contracting with a network provider would save 
money over the traditional fee program. Under PC3, VA will 
enter into multiple contracts with network providers across the 
country to complement but not to replace the traditional fee 
program, and we believe that that must succeed. As an aside, we 
also believe that this must include mental health services in 
primary care.
    Through VA partnership with Humana, Project HERO has met 
critical needs and saved VA money over traditional fee while 
also providing relevant customer satisfaction, distance, and 
access data. A traditional fee program provides no such data. 
However, VA has lamented the fact that no quality standards 
were included in Project HERO, and the VFW hopes and expects to 
see rigorous quality metrics in PC3.
    Project HERO is expected to end the same month as PC3 
begins. We hope that you can seek assurances from VA that 
veterans will truly be held harmless from this transition and 
that the PC3 networks will have the capacity to meet their 
mandate before HERO is terminated.
    Madam Chairwoman, this concludes my statement. I will be 
happy to address any questions that you or the Committee may 
have.
    [The prepared statement of Shane Barker appears on p.9.]
    Ms. Buerkle. Thank you to all three of you.
    I will now yield myself 5 minutes for questions.
    Mr. Barker, you talked about your concerns with regard to 
IT. Can you elaborate on that?
    Mr. Barker. Well, currently, there is no way for doctors to 
quickly or easily create a record of the service that was 
provided and get that over to VA. There is no--and VA has said 
they are working on a forms building IT solution that would 
allow doctors to quickly be able to choose a form that is 
appropriate for the care that was provided. We have also heard 
that they are working on the Cloud services piece of that to 
quickly transfer one piece to the other.
    The fact that those are separate pieces to the IT solution 
means that this is a complicated matter, but without those 
things being available to doctors at the local level it just 
creates a lot more paperwork and takes a lot more time. The 
duplicative service piece comes into play there as well.
    Ms. Buerkle. Thank you.
    Mr. Gadd, in your opening statement, you mentioned your 
concern that there was a lack of training for the non-VA 
personnel, and I wondered what specifically you were referring 
to.
    Mr. Gadd. Right. With the VA, they provide evidence-based 
treatments, for example, with PTSD or CPT, two of the evidence-
based treatments for mental health and for PTSD. The VA rolled 
out that training to all of their providers for mental health, 
and it is just one example of all----
    Veterans, as my colleague stated earlier, have unique 
injuries and illnesses from their service, environmental 
hazards, you know, different challenges than what we see in the 
private sector. But the VA has a robust training program, and 
we would like to see that shared with their clinicians that 
they contract with and to the community to make sure the 
treatments are the same.
    Ms. Buerkle. Thank you.
    And, Mr. Gadd, can you elaborate on your comment that 
hiring of women veteran providers within the VA to provide 
gender-specific services should be carefully considered? As was 
mentioned by many of you, there is an increasing number of 
females in the VA system and I would like to hear your 
thoughts.
    Mr. Gadd. Of course. So we know that women are the fastest-
growing population coming into the VA, but, unfortunately, we 
know that a lot of the gender-specific services are contracted 
out. So as VA develops its models for, you know, hiring and 
determining whether or not they should fee base or they should 
hire those providers in the hospitals, you know, that should be 
looked at so that they can provide that service and offer it, 
rather than having that contracted.
    Ms. Buerkle. Thank you.
    Mr. Atizado, in your testimony you talk about VA reaching a 
confidence level that PCCC is an adequate replacement for 
Project HERO. What do you think would be an appropriate measure 
of that confidence? When do you think it would be safe to 
transition to PCCC from Project HERO?
    Mr. Atizado. Well, I think the first thing that should be 
considered by VA before they terminate the Project HERO is to 
make sure that under PCCC veterans don't get less services, 
that they are not asked to drive further, that they are not 
asked to wait longer to receive care in the community, that the 
health information sharing does not exist or is not occurring.
    Project HERO has a lot of things that DAV finds attractive, 
but I think how that contract affects VA and Delta Dental as 
well as Humana, they have their own issues with it. It is the 
first time VA has done this, so that is to be expected, but, 
really, we want to make sure it is a seamless transfer.
    And that is really it, that veterans who experience care 
through Project HERO are very satisfied with it. They drive 
less, for the most part, less distance in Project HERO to VA. 
Their satisfaction is very high, if not comparable to VA's 
internal satisfaction survey. Their drive times, their access 
to follow up, if they don't make an appointment is there. So 
those patient-facing care coordination aspects of Project HERO 
would be one of the key elements that VA has to consider before 
they terminate Project HERO and solely rely on PCCC.
    Ms. Buerkle. Thank you very much.
    My time has expired. I now yield to the Ranking Member, Mr. 
Michaud, for his questions.
    Mr. Michaud. Thank you, Madam Chair.
    Once again, I want to thank the panel for being here today. 
Also, I want to thank the American Legion for doing your report 
every year, A System Worth Saving. That is definitely a good 
report and good reading. So thank you for that as well.
    I just want to follow up on that report. You heard my 
comment about Martha's Vineyard. Has the American Legion looked 
at--off the coast of Maine, we have a lot of islands. In your 
study of that, have you looked at fee for services for veterans 
that live on islands, particularly if they have a Federal 
qualified health care clinic that is located there on an 
island? Mr. Gadd?
    Mr. Gadd. Yes, sir. Our rural health report, we focus on 
four VISNs; and one of the VISNs was in New England. And so 
that was when we went up to Martha's Vineyard.
    And we also received a lot of information regarding Project 
ARCH, Access Received Closer to Home. We understand that that 
program is working wonderful in northern Maine, that the 
veterans that are being treated through that ARCH contract 
really have said a lot of great things about that.
    As you know, that is another remote area up there where 
there are no services that are available. So I think we have 
looked at some of the rural through that report and how ARCH is 
a potential solution. If that continues to work, then that 
should be something that the VA considers as it moves forward 
with that contract.
    Mr. Michaud. Thank you.
    This question is for all the panelists. We will start with 
Mr. Barker first. It is a two-part question regarding the 
Patient-Centered Community Care.
    The first question, has your organization--had any 
meaningful input into that process? And the second part of the 
question is, do you feel that the VA has the capability to 
effectively manage the community care program contracts?
    Mr. Barker. Thank you for that question.
    I think the answer to the first part has to be no. We 
haven't--we have had regular briefings that are downloads, but 
there is not much upload. We can't really--I know that is in 
part because the RFP hasn't been released. It is not even a 
draft, and I understand that. But we have had some information 
download. But I wouldn't say it has been a great collaborative 
process, if that is fair. And whether VA can manage that or not 
I think it is really difficult to say without seeing the RFP.
    I am not one to be overly negative. I don't think that it 
is impossible. But there is a sort of worrisome track record 
there, and we do want to make sure they get it right.
    I would always say that more collaboration equals better 
results, which is why I hit on the importance of the 
collaboration between hospital staff and central office in my 
oral remarks as very important, and I would hope to see more of 
that from the VA.
    Mr. Gadd. Thank you for the question.
    As Mr. Barker indicated, the VSOs have received briefings 
from the VA on the program. It is still new in conception; and, 
as it moves forward with RFP, we are going to be able to review 
whether all of our recommendations have been included.
    They were many lessons learned from Project HERO. We know 
that Project HERO was extended until the spring. That being the 
case, they have a really short window to tighten their plan and 
make sure that when it comes out in the spring it has VSO input 
and we have an opportunity again to review it.
    So thank you.
    Mr. Atizado. Ranking Member Michaud, first, I want to say 
that I would like to say that the chief business office, 
particularly the individuals involved with overseeing the 
development for PCCC, has been very open with us at the DAV. We 
have had regular communication. Whenever we have had issues or 
questions, they have always been very open with us and tried to 
tell us as much information as possible without compromising 
the process.
    However, as Mr. Barker said and my colleague, Mr. Gadd, 
until the draft RFP comes out, at which time we will be able to 
review and make comments and the final--the official RFP comes 
out and what that looks like, we really won't be able to answer 
that, your question to the extent you are looking for.
    Mr. Michaud. Thank you. And if could you provide for the 
record, because my time has expired, the VA has not had a 
proficient record of paying claims efficiently, and I would 
like your organization to submit for the record your thoughts, 
the pros and cons of contracting that process out.
    Thank you.
    Mr. Michaud. Thank you, Madam Chair.
    Ms. Buerkle. The chair now recognizes Dr. Benishek, the 
gentleman from Michigan.
    Mr. Benishek. Thank you, Madam Chairman.
    I just want to touch on a couple of things specific to my 
district. I am a general surgeon. I worked at a VA hospital as 
a fee basis physician, and I have also seen patients in my 
office on a fee basis to help the VA out when they couldn't get 
the services at their facility.
    My concern, number one, is this whole idea of not being 
able to manage the spending is a huge issue. I am just 
wondering, do you think in your mind an idea that the cost of 
the program is inhibiting the VA from sending people to a local 
facility for their care?
    I mean, I have a case here that I am looking at--and I am 
sure my colleagues have many of these cases, too--where a guy 
had Agent Orange related cancer and he couldn't get his 
chemotherapy in his hometown because he was denied the fee 
basis care, and he was told, oh, you can drive 4 hours and 7 
minutes to Detroit and get your chemotherapy in a facility in 
Michigan. So you are not geographically inaccessible to a VA 
facility. And yet it is 12 minutes to his local facility and 4 
hours and 7 minutes to Detroit, plus 4 hours and 7 minutes back 
immediately after his chemotherapy treatment.
    So is there some sort of a universal rule about who is 
eligible for--what distance qualifies you as eligible for fee-
based care? Because my people don't seem to think there is, and 
it is basically up to the local VA facility to decide. And I am 
just wondering what the criterion are then for those people to 
just make that decision. Is it because the cost becomes a 
detriment because their budget is over?
    Let me get your perspective in answering that thought that 
I am having here.
    Mr. Atizado. Sure. Thank you for that question Mr. 
Benishek.
    First of all, I think there is--I guess probably VA would 
be a better panel to answer.
    Mr. Benishek. Well, I want to hear from--you must have 
heard these things before.
    Mr. Atizado. Sure.
    In order to get fee care, there has to be a clinical 
determination that the care is indeed needed and whether it can 
be provided through VA's hierarchy of care. There is a decision 
process on whether or not the care can be provided within VA, 
another VA facility that is close by, through DoD or academic 
affiliate sharing agreements. After that, it is contract care 
and then, after that, it is fee care. In addition to the 
clinical determination and availability of services, there is 
also an eligibility determination whether a veteran is 
eligible.
    Mr. Benishek. What I am saying this guy apparently 
qualifies for all of that, except for the only difference is 
the distance.
    Mr. Atizado. I understand that, sir. I cannot tell you what 
kind of justification was used. I don't know the details of the 
case. But this is just one example, as I am sure all the other 
members on the Subcommittee has, about the variation of how 
this delivery--model delivery is implemented in the field.
    The NAPA study talks about that, about the wide variation 
on how the delivery of care--how care is delivered through fee 
care. That is a signature problem of fee care. What you get at 
one facility may not necessarily be the same at another 
facility.
    To even take into account the geographical access--the 
geographical access in a rural area cannot be the same 
geographical access in an urban area or an area with a high 
amount of medical resources. So that all has to be fleshed out, 
which it really has not.
    Mr. Benishek. Please.
    Mr. Gadd. That is a great question, and I think it is more 
VA system driven than patient driven. And I say that from what 
we have heard from veterans is, you know, where are they 
involved in the process with whether--if they do have to drive. 
So the first question we have is, how is the veteran part of 
the decision on whether they could be fee based?
    VA is moving toward a patient-centered strategy. Those 
discussions should happen with the patient. What does the 
patient want? If they don't have--if they have to go for 
recurring appointments twice a week and they choose not to do 
that and they are elderly and they can't or they leave in 
geographically inaccessible places.
    Then the second part is what recourse does the veteran have 
in the case that you had pointed out if they are not--or if 
they are denied.
    Mr. Benishek. Well, they called me.
    Mr. Gadd. Right, right.
    Mr. Benishek. I want to get this problem solved. Because I 
know that when I take care of patients they check me out. The 
VA checked me out to make sure I was board certified and made 
sure I had the experience to do what I am doing. I just don't 
understand why that doesn't happen in general. Why can't the 
local facility have been contracted or determined to be able to 
provide this service and just deal with it.
    I think the VA needs to have a much more extensive outreach 
program to its local facilities to ensure people are qualified 
and there is somebody available to do it and have the fee all 
figured out in advance. I did stuff like that when I worked for 
the VA. Why doesn't it happen generally?
    To me, the out-of-control cost business should not be. This 
should all be figured out in advance. It is very disheartening 
to me to worry that, because of the cost of it, this guy is 
having to stay, drive 4 hours because they are worried about 
cost.
    So, anyway, I am out of time.
    Mr. Barker. If I may, I would also like to quickly respond 
to that.
    I think that VA has said through NVCC one of the primary 
goals and first stages is to create a fee handbook, that 
everybody gets and receives all the same processes, that 
everything is standardized. I think this is a great opportunity 
for you to effect change through good oversight of the creation 
of this handbook. Why have a handbook if it doesn't solve the 
problem that you are bringing out?
    So I am just bringing that to your attention.
    Ms. Buerkle. Thank you.
    The chair now recognizes the gentleman from New Jersey, Mr. 
Runyan.
    Mr. Runyan. Thank you, Madam Chair.
    Mr. Barker, you brought kind of up where I was going to go, 
standardization. When we throw variables in, it raises cost. 
Kind of touching on what you were talking about before--and all 
of you can comment on this because I think it is something--we 
deal with it in other areas of the VA, whether it is in the 
disability process. That form changes four times a year. Well, 
when you do that to a private individual and they are not aware 
of it, you are adding education costs, retraining of the people 
processing the claims, and all that processing goes back to 
maybe an IT component or some consistency in that manner which 
helped drive down the cost at the end of the day.
    If could you comment on that, because I think that is a 
place to start. And, obviously, procedures and handbooks have a 
role in that kind of thing. But we have to stick to them, also. 
So we have to make sure it was done right the first time.
    Mr. Barker. You are absolutely right.
    I think that one area that you could look to for ideas, 
honestly, is TRICARE. When TRICARE started, a lot of doctors 
were hesitant to enter into contracts with contract writers 
because of the fact that forms were not--they didn't make 
sense. They weren't like Medicare. They were a big 
administrative burden. And a lot of doctors said no, and 
TRICARE really worked to standardize and make that an easy 
process for doctors.
    Now the administrative hassles of being a TRICARE provider 
isn't really the primary reason doctors don't enter into 
TRICARE. Now it is more about payments and that kind of thing. 
But there are ways to lower standardization, and I think the 
creation of simple forms that don't create a lot of 
administrative burden is one of the easy things, one of the 
low-hanging fruits that we can attack in this area.
    Mr. Runyan. It is multifaceted. Also, to get the 
information back into the electronic medical claim, also, it 
has to be part of that process.
    Mr. Barker. Absolutely. I think it is VA's opinion--and you 
can ask them about this--but they want to have a system where 
they get as much data as possible and they get to decide what 
information goes out, and I think that that is great. I think 
it is good for veterans. But there is no reason why VA is not 
getting the information that they need.
    Mr. Runyan. Thank you.
    Madam chair, I yield back.
    Ms. Buerkle. Thank you.
    I will ask the Ranking Member if he has any further 
questions?
    With that, thank you very much for being here; and, most 
importantly, thank you for what you do for our veterans, for 
your advocacy, and your leadership on veteran issues. So thank 
you very much.
    I would now like to welcome our second panel to the witness 
table.
    Thank you and good morning.
    Joining us this morning are Mr. Brad Jones, the Chief 
Operating Officer for Humana Veterans Healthcare Services, 
Inc.; Ms. Kris Doody, RN, Chief Executive Officer for Cary 
Medical Center; and Dr. Gregg A. Pane, Chair of the VHA Fee 
Care Program Panel for the National Academy of Public 
Administration.
    I am grateful for all of you for being here this morning; 
and, Mr. Jones, we will start with you.

   STATEMENTS OF BRAD JONES, CHIEF OPERATING OFFICER, HUMANA 
VETERANS HEALTHCARE SERVICES, INC.; KRIS DOODY, RN, MSB, CHIEF 
EXECUTIVE OFFICER, CARY MEDICAL CENTER; AND GREGG A. PANE, MD, 
 CHAIR, VHA FEE CARE PROGRAM PANEL, NATIONAL ACADEMY OF PUBLIC 
                         ADMINISTRATION

                    STATEMENT OF BRAD JONES

    Mr. Jones. Madam Chairman Buerkle, Ranking Member Michaud, 
and Members of the Subcommittee, thank you for the opportunity 
to discuss VA's fee process today.
    Madam Chairman, I ask that my full written statement be 
included in the hearing record.
    Humana Veterans is proud to be partnered with VA to provide 
health care services and care coordination to veterans designed 
to supplement the care received in the VA health care system. 
We currently have contracts with VA to provide quality health 
care through two congressionally mandated pilot programs, 
Project HERO and Project ARCH.
    To date, we have served over 163,000 veterans, making over 
300,000 patient visits, with an untapped capacity to serve even 
more veterans, including those who have mental health care 
needs and those who live in rural communities. Because of our 
extensive experience in providing timely, quality, and 
appropriate care in the community we have a unique perspective 
on the core program elements that are essential to ensure 
veterans receive these services through a veteran-centric care 
coordination program when VA refers veterans to care in the 
community.
    This was the hypothesis of the congressionally mandated and 
VA designed HERO pilot. In a care coordinated program like HERO 
where community providers are an extension of VA's health care 
system, the veteran never leaves the VA system and just 
receives one or more episodes of care from a robust network of 
trained and credentialed community providers that the 
contractor maintains.
    The community partner, in this case Humana Veterans, has 
the people, tools, and processes in place to help veterans 
navigate a complex health care system and help VA track and 
monitor veterans' care in the community.
    In addition, Humana Veterans returns the clinical 
information to VA and manages all of the administrative 
components of the process, such as billing and appointing. By 
keeping these insurance-like administrative tasks outside of 
VA, the Department can concentrate on what they do best and 
that is deliver world-class health care to our Nation's 
veterans.
    Over the past 5 years, the HERO pilot program has proven 
that a national health care administrative services 
organization can collaborate effectively with VA to deliver 
results-focused, high-quality, and cost-efficient care. The 
success of HERO is substantiated by a strong set of performance 
metrics, and in 2010 VA reported savings of $16 million from 
Project HERO in the four pilot VISNs, despite the fact that 
only about 11 percent of the total non-VA outpatient visits 
were referred to HERO.
    Based on VA's presentation to interested contractors, it 
appeared as though the planned follow-on program they are 
calling Patient-Centered Community Care, or PCCC, might only be 
a national contract for a network of providers to deliver 
medical and surgical service without the critical care 
coordination elements.
    VA appears to be creating and building new inhouse capacity 
to handle the administrative functions associated with fee care 
through the Non-VA Care Coordination program, or NVCC. Instead 
of leveraging the capacity and expertise that already exists in 
the industry, NVCC will require significant resource 
investments both in staff and the necessary tools to properly 
handle the back office administration functions. If PCCC is 
supposed to be the nationwide follow on to HERO, the 
administrative functions of the program need to be conducted by 
the contractor. Failure to do so means that VA will not be able 
to fully replicate the success of HERO.
    Rather than continue down the current path of these 
programs, now is the time for VA to incorporate the successful 
elements of HERO to create a veteran-centric collaborative 
health care program that will be a win-win for veterans and for 
VA. Veterans will benefit from a fully coordinated and 
integrated health care delivery system of both VA and community 
providers; and VA will be able to achieve cost savings by 
partnering with organizations that have existing systems, 
tools, and processes in place for efficiently managing fee-
related administrative functions.
    Both Congress by directing VA to establish the HERO pilot 
and the VSOs in the independent budget have supported the 
concept of a coordinated fee program that will both improve 
veterans' health care and lower costs. The inclusion of the 
elements of a veteran-centric collaborative health care program 
in PCCC will ensure that veterans realize all the benefits of 
care coordination between VA and community providers. This 
would create a truly integrated VA health care system that 
better leverages community health care assets, if and when VA 
decides to authorize such care.
    If VA contracts for a provider network only, that will 
represent a retreat from the Secretary's commitment to 
implement a patient-centered VA health care delivery system 
that includes all VA health care for veterans both inside and 
outside the walls of VA.
    Thank you for holding this hearing and tackling this vital 
issue. I appreciate the opportunity to share Humana Veterans 
experiences and views with the Subcommittee today, and I am 
happy to answer your questions.
    [The statement of Brad Jones appears in the appendix.]
    Ms. Buerkle. Thank you, Mr. Jones.
    Ms. Doody.

                    STATEMENT OF KRIS DOODY

    Ms. Doody. Good morning, committee Chairwoman Buerkle, 
Members of the Subcommittee, and our own revered congressman, 
Ranking Member Mike Michaud. I thank you for this opportunity 
to discuss the delivery of health care services to our brave 
men and women of the Armed Forces.
    I am Kris Doody, the CEO for Cary Medical Center, a small 
rural hospital in northern Maine. We have had the privilege of 
providing services to veterans on our campus for more than 25 
years.
    Cary was the first community based outpatient clinic in a 
rural hospital in the Nation. The clinic opened May 14th, 1987. 
The clinic was to serve veterans who historically were forced 
to travel 300 miles to the only VA hospital in Maine at Togus. 
A small group of veterans representing multiple veterans' 
organizations worked passionately for some 8 years to secure 
the VA clinic. The clinic has become a model for the country, 
and today some 600 CBOCs are now providing care to veterans 
throughout the Nation.
    The VA clinic was the first of what would become a growing 
center of veterans health care in Caribou, Maine. In 1990, the 
Maine veterans home opened 40 long-term care beds, with an 
additional 30-bed residential care facility for veterans with 
dementia in 2003 on our campus.
    We continued to advocate for inpatient beds through the 
CARES Project, but that never materialized. That is why in 2011 
we were so excited to be selected as one of only five locations 
in the country to launch Project ARCH. Since we already had the 
VA clinic and an excellent relationship with the Veterans 
Administration, we knew the implementation of the ARCH program 
would be a great success.
    While the VA clinic provides all the primary care, our 
hospital provides a select list of specialty services, 
including general surgery, orthopedic surgery, and a variety of 
other services, including inpatient care. The model has 
benefited veterans in accessing care close to their homes, the 
VA in reducing costs for travel pay, and at the same time 
delivering high-quality, safe, and efficient care to veterans. 
And Cary Medical Center has been able to expand its market 
share such that we have been able to recruit additional 
specialists.
    It is our understanding that at all five locations Cary 
Medical Center is the furthest distance from the nearest VA 
hospital, and in just this first year we have saved the VA a 
quarter of a million miles in travel pay. To date, some 1,000 
veterans have taken advantage of Project ARCH. Recent patient 
satisfaction surveys indicate that veterans are extremely 
satisfied with the care they receive at Cary Medical Center and 
no longer have to travel hundreds of miles to receive specialty 
care.
    One of the key reasons for our success is the relationship 
we have built with the Veterans Administration at the Togus VA 
hospital. We have worked with some outstanding center 
directors, including the current Director Ryan Lilly, and past 
directors Brian Stiller, Jack Simms, and Tom Holthaus, who 
provided the initial administrative approval to launch the 
first VA clinic in a rural hospital.
    We understand that the VA is considering other options for 
the delivery of care to rural veterans. We believe Project 
ARCH, in the unique model that has been developed in Caribou, 
Maine, has some tremendous advantages. First, with the VA 
presence on our campus, we are realizing a great coordination 
of care between the clinic and the hospital. Second, veterans 
feel a part of the VA system, even though they may be in a non-
VA facility. Third, the establishment of integrated case 
management creates a virtual medical home for the veteran, 
making sure all of their care is delivered in an efficient and 
coordinated way.
    While Project ARCH has been a marvelous success and 
benefit, some challenges do remain. One such challenge is the 
14-day scheduling of VA patients. The VA wants to be seen 
within 14 days of authorization, and it has been a challenge 
for us to work these patients into the regular schedule of our 
specialists.
    There are other administrative requirements that create a 
challenge, such as excessive monthly reports on every patient. 
In addition, now that veterans have experienced the level of 
care at our hospital for the select list specialty services, 
they would like more.
    Another issue that we face in Caribou and that is unique to 
Maine has to do with Medicare reimbursement. Maine is amongst 
the poorest reimbursed States in the Nation by Medicare. Our 
Congressman, Mike Michaud, has been working tirelessly to 
change this reality, but it has been a difficult fight. We 
would like to see if this can be addressed moving forward in a 
more equitable way.
    Finally, it has been a great privilege for Cary Medical 
Center to serve our Nation's veterans. It has been a source of 
pride for our hospital and for all of us who work there.
    Our hospital, like many across the Nation, is a convener of 
sorts. We bring people together to best serve the needs of 
health care in our community. We have experience with virtually 
every health care service in our marketplace, including mental 
health, home care, and long-term care. We are a regional 
hospital that demonstrates the highest scores in patient 
safety, clinical quality, and patient satisfaction. We have 
built an excellent relationship with the regional VA health 
care center, and we have demonstrated that Project ARCH can 
work in even in the most rural frontier regions of America.
    It is our hope that the VA will continue with Project ARCH 
and expand upon the number of health care services available to 
veterans living in the vast rural areas of this country.
    I thank you so much for this opportunity, and I would ask 
that Congressman Michaud include my prepared and written 
remarks in the congressional record of this hearing.
    I am also happy to answer any questions you may have.
    [The prepared statement of Kris Doody appears on p.Q.]
    Ms. Buerkle. Thank you very much.
    Dr. Pane.

                   STATEMENT OF GREGG A. PANE

    Dr. Pane. Madam Chair, Members of the Committee, good 
morning to you all. I appreciate the opportunity to testify 
today on behalf of a panel I chaired at NAPA in 2011. The 
Academy is an independent, nonprofit, nonpartisan organization 
dedicated to helping leaders meet today's challenges.
    Over the past decade, the VHA Fee Care Program has grown 
from an infrequently used adjunct into a critical element of 
clinical care for veterans, in fact, approaching now one 
million veterans being served in a $5 billion program, 10 
percent of VA's budget, with 2,400 FTEs.
    After extensive research and analysis, the Fee Care Panel 
recommended that VA consolidate this program into three to five 
operating centers, while modifying its claim processing 
structure to become a more standardized system. Standardization 
of the IT infrastructure along with consolidation will allow 
fewer employees to work more efficiently and effectively, and a 
more structured rule-based environment should lead to fewer 
payment errors and greater program value.
    The panel also emphasized the importance of contacting an 
independent analysis of contracting this function out, similar 
to the approach used by VA sister health care programs TRICARE, 
Medicare, and Medicaid.
    Some quick background. In 2009 and 2010, the VA Inspector 
General reported significant problems in the Fee Care Program, 
including hundreds of millions of dollars in improper payments. 
Their recommendation that VA evaluate alternate organizational 
models led to the NAPA study.
    The Academy convened a panel of fellows along with a 
professional study team, conducted interviews of VA staff, 
looked at all existing studies and audits, and spoke with 
Federal and commercial health care payor programs, as well as 
the OIG and others. Site visits were made to VISNs Denver and 
some of the other key areas as well as to Medicare and TRICARE.
    Both Medicare and TRICARE contract out all of their claims 
work and spend a majority of their time overseeing the work of 
contractors. Several large commercial vendors specialize in 
providing large-volume processing of these health care claims.
    TRICARE contractors report about 75 percent of their claims 
are automated and electronic, requiring no human intervention. 
The cost per claim is $2.25 to 2.50 for electronic claims.
    For Medicare, 95 percent of claims are automated and 
electronic, with a cost of $0.40 to 1.60. This compares to 
$9.40 per claim for VISN 19, which is the highest-performing 
VISN, and 2.55 per claim for CHAMPVA.
    A word about error rates. The chief business office, their 
own analysis of error rates in claims processing for recent 
activity is about 12 percent. If you extrapolate an error rate 
of 12 percent against total fee expenditures in 2011, erroneous 
payments would be $500 million.
    For a comparative benchmark, the national error rate for 
CHAMPVA is 1 percent and for TRICARE it is under .05 percent. 
That is a 25-fold error difference.
    The panel findings, the Fee Care Program is currently 
operating at an inefficient level due to a number of payment 
errors and relatively low productivity; and the return on an 
investment analysis run by the panel indicates that a total 
consolidation of the Fee Care Program would save the 
organization almost $4 billion over the next 10 years. These 
net savings were calculated by adding the savings by reducing 
the number of FTE through consolidation, integrating a more 
automated claims processing system, and reducing errors in 
payments.
    Let me highlight the panel recommendations:

          First, consolidate the Fee Care Program from the 
        current 100 plus operating sites to perhaps three to 
        five strategically located regional sites.

          Second, leadership should set clear policy direction 
        about performance, goals, and expectations for VA 
        purchased care. This is a big blind spot for VA, and 
        there is untold additional savings possibly available 
        through better coordination of care and increased 
        quality monitoring of veterans in this Fee Care 
        Program.

          Third, VA should build greater program management 
        competence, including a program integrity component to 
        look for fraud and abuse and a performance management 
        system to look at performance outcomes.

          Fourth, VA should procure an implemented enterprise-
        wide technology solution to facilitate virtual 
        consolidation.

    And, last, they should conduct an analysis of contracting 
out the functions similar to the sister programs.

    By implementing these recommendations, the panel believes 
VA will be able to improve care and help ensure maximum 
participation in the program, resulting in better care for 
veterans.
    Madam Chair, this conclude my prepared remarks; and I would 
be happy to answer any questions.
    [The prepared statement of Gregg Pane appears on p.V.]
    Ms. Buerkle. Thank you very much, Dr. Pane; and thank you 
again to all of our panelists.
    Mr. Jones, in your testimony you talk about Humana having 
an untapped capacity to serve more veterans, including those 
who have mental health needs and particularly those in rural 
communities. Can you comment on that?
    Mr. Jones. I would be happy to, Madam Chairman.
    Yes, we have--within the four HERO pilot VISNs we have a 
network of over 40,000 providers strong contracted. The volumes 
in HERO have been somewhat lower than they could have been. 
Given on the way you measure them, it is estimated that 
anywhere from 10 to 20 percent of the total fee basis referrals 
that went out went through Project HERO. So we believe we have 
more capacity--that we could have taken more.
    Specifically in the area of mental health, that was part of 
the Project HERO contract, and a mental health network in the 
community has been established. But it especially has been 
lightly used. There have been very few referrals over the 5 
years to that, and I think a lot more could be done in terms of 
serving mental health.
    Ms. Buerkle. Thank you.
    Also, Mr. Jones, we are hearing rumors that, although the 
VA has announced the extension of Project HERO, some of the 
VISNs are not going to continue on with the program. In your 
view, I would like to know what you anticipate or what you 
think about if there is a sudden cessation of Project HERO?
    Mr. Jones. I am very troubled and concerned about that, 
Madam Chairman. Our volumes have declined significantly since 
early June when VA sent out a notice to the participating VA 
medical centers that HERO would be ending on September 30th and 
that they should revert to the regular fee program if the 
follow-on program were not in place at that time.
    You are correct that they have now formally extended the 
contract, but I fear that medical centers are still in a state 
of not being sure what the status of program is.
    There is one VISN that has formally taken the position they 
are not going to participate in the extension, and they have--
in fact, we have been getting calls from our network providers 
that this VISN has been reaching out to them and contacting 
them, informing them that HERO has ended and that they would 
like to send care directly to them.
    So I am very concerned about the veterans losing the care-
coordinated benefits that they have had under Project HERO 
until the new program is in place. Unfortunately, I have 
already received one email from a provider stating that they 
have 33 veterans that need authorization for ongoing care and 
they have not been able to get that authorized through VA to 
date. So I would be concerned that veterans will get kind of 
caught in the middle of this transition if it is not done 
properly and suffer as a consequence.
    Ms. Buerkle. Thank you very much.
    Ms. Doody, in your statement, you mention that Cary Medical 
has experienced over a thousand patient encounters since 
Project ARCH began. Is that what you were expecting during the 
first year and do you think that the program is being 
effectively administered by VA? And just comment on the program 
in general.
    Ms. Doody. Absolutely. Thank you, ma'am.
    When we started the program we tried to anticipate the 
volume, and we knew that there was a backlog in certain 
specialties at VA Togus. So we anticipated that that would be 
the priority of getting patients into the ARCH program in 
Caribou, and that did materialize, because the majority of the 
patients are primarily in orthopedics. The backlog at Togus is 
out about 6 to 9 months to my understanding of patients trying 
to get in to be seen at the Togus hospital. So we have seen the 
majority of our numbers have been primarily in the orthopedic 
surgery evaluation.
    Actually, at the end of the first year we did not 
anticipate a thousand. We are very pleased. We think it has 
been very successful. We are seeing a leveling on the number of 
authorizations each week. So we think we are getting now into a 
pattern that is probably not going to be at that level the 
coming year, because I think we took care of some backlog with 
Togus, but I think it will be fairly close even for this coming 
year.
    Ms. Buerkle. Thank you very much.
    Dr. Pane, can you comment further on your statement that, 
despite a number of initiatives being undertaken to improve the 
current situation, the organization responsible for improving 
the system, the chief business office, has limited control and 
authority?
    Dr. Pane. I think we pointed out the management challenges 
in our report. Of course, the current fee system is highly 
decentralized across VISNs, and VA medical centers and staff, 
of course, report locally, and the office has a big challenge 
trying to oversee.
    There is wide variation on how things are done. You saw the 
wide difference in outcomes in terms of efficiency. And so the 
office has the leadership role, but there are a lot of 
challenges for them in terms of IT procurements and 
standardization across networks and reporting structures and so 
forth. So there is a lot of change that needs to occur, and 
then they have a big job on our hands.
    Ms. Buerkle. My time has expired. But if the chief business 
office doesn't have control or authority, who does?
    Dr. Pane. Well, the Under Secretary--there is a large 
structure, so they certainly have the tools to get it done.
    Anything this large across this big of a system, I think 
the way to look at it is, one, what are the immediate steps you 
can take based on some of the pilots and some immediate steps 
and then what is in parallel is the larger fix. And I think 
that is taking a look at what your fellow Federal programs do 
and looking at others who might be better at processing claims.
    Ms. Buerkle. Thank you very much.
    I now yield to the Ranking Member, Mr. Michaud.
    Mr. Michaud. Thank you very much, Madam Chair.
    Before I begin my questions, I first off would like to 
thank Cary Medical Center for participating in this very 
important hearing. This year, Madam Chair, Cary Medical Center 
celebrates their 25th year of hosting the Nation's first 
community based outpatient clinic, and they continue to be a 
leader in providing high-quality care for our veterans.
    And the reason why I know that, Madam Chair, is, first of 
all, Kris is committed to caring for our veterans, and it is 
reflected in the reports I get from veterans in the area, who 
praise not just Cary Medical Center for the high-quality care 
but also Kris and her willingness to really work with the 
veterans community in northern Maine.
    So I want to thank you, Kris, and Cary Medical Center for 
all that you are doing to provide good-quality care for our 
veterans in a timely fashion.
    Ms. Doody. Thank you, Congressman.
    Mr. Michaud. My question actually is for Mr. Jones and Ms. 
Doody. You talked about the ARCH program. My question would be, 
are there ways that we can improve upon the ARCH program that 
you would like to see? I know, Ms. Doody, you mentioned the 14 
days. In talking with staff I believe the VA actually takes 
longer than 14 days, on average. So, Ms. Doody, I will start 
with you. What ways do you think that we can improve upon the 
ARCH program?
    Ms. Doody. Some of the metrics that we are looking at like 
the 14-day window I think we have to have some honest dialogue 
whether or not it is really reasonable. My understanding is the 
metric for being seen for the VA is 30 days, and it is hard for 
the VA to see the patients even within 30 days in their own VA 
hospitals.
    Cary and the VA are both--we are very mature as it relates 
to IT. I think we could do a better job at integrating our 
information. The information we have to provide monthly, which 
is a lot of work, it is very cumbersome, I think we could 
streamline that by using information technology. Right now, it 
is all manual. In fact, we have had to add more resources 
because of the administrative burden about 2 months into the 
program because there was a lot of reports that had to be 
completed. I think the reports are important, because I think 
the quality metrics should be reported, but I think there are 
ways we can streamline it to make it a lot more efficient and 
not as manual and cumbersome.
    The other issue I would like to talk about was adding 
additional services. I am hearing repeatedly from veterans 
additional services they would like to see, primarily 
ophthalmology, women's services, women's health services, and 
also podiatry. I am hearing repeatedly from our area veterans.

DCMN BURRELL

    Mr. Jones. Congressman, first I would like to highlight 
before I talk about the improvements, there are some great 
successes out of ARCH, most notably what we are hearing from 
the veterans themselves in terms of gratitude of being able to 
get this access close to the home. So I think the program is 
hitting the bull's eye on that intended mark.
    In terms of improvements that I think could make it go even 
farther, volumes are an important issue, my colleague 
referenced some of the administrative challenges and burdens 
that come with this program. And when you are dealing with 
community providers that are seeing very low volumes, combined 
with those administrative challenges, that creates an issue. So 
that would be an area we could look at, not necessarily in 
terms of sending more care outside of VA, but perhaps looking 
at the definition of the pilot sites. And as you know they were 
very narrowly defined.
    In some cases we are seeing veterans having to travel a 
pretty good distance from outside of those pilot sites to come 
in and get the care they received. So I would say looking at 
that would be an option.
    I also agree with my colleagues on some of the standards, 
including the 14-day metric is a challenge, but I would say 
probably the main issue would be looking at some of the other 
administrative burdens. There are some VA required training 
that has to take place that in many's view is not necessarily 
value added but it is an annual thing where the community 
providers have to go into the VA system and sign in and go 
through a fairly lengthy training module that again adds 
another administrative burden that they are not accustomed to 
and it creates a barrier to participation.
    Thank you.
    Mr. Michaud. Ms. Doody mentioned additional services, do 
you feel that would also be important?
    Mr. Jones. Yes, I would agree and I want to commend my 
colleagues at VA and the Office of Rural Health that they have 
been treating this and managing this like a pilot, and they are 
looking at what is working and not working, and that is very 
important. And an example of that is we had in our case, cases 
where veterans were getting discharged from surgeries, but 
because of those post surgery needs such as the rehabs and 
therapies weren't on contract, they may have gotten the surgery 
very close to home but then had to travel very far back to VA 
often on a recurring basis to get that follow-up care. So 
Office of Rural Health has put forward a modification of the 
contract that is currently being negotiated that would add 
those important services so the veteran could get the whole 
package of care there.
    So, yes.
    Ms. Buerkle. The chair now yields to the gentleman from 
Michigan, Dr. Benishek.
    Mr. Benishek. Thank you, Madam Chairwoman. I want to ask 
Dr. Pane a question sort of related to what we talked about in 
my previous opportunity. Is it your understanding, Dr. Pane, 
that the eligibility criterion for the fee basis care is 
different at each VA medical center and at the discretion of 
the director of that facility?
    Dr. Pane. I cannot speak to specifics of how VA has 
operationalized this. I will say I think the panel did find 
wide variation in performance and management. And I am sure 
there is some variability in exactly how the program is done. 
In terms of specific criterion and outcomes, I couldn't 
comment. That would be better directed to VA.
    Mr. Benishek. Right. Do you think national standards for 
this would be beneficial or do you think it is better to have 
local standards?
    Dr. Pane. No, I think we certainly recommended that a 
greater degree of standardization is absolutely the way to go 
and a much greater automation. Most comparable large Federal 
programs like this and even in the commercial world they work 
with a claims processing entity, that is the guts and glue of 
your system. That is really what allows to you pay claims, to 
detect fraud, to monitor outcomes and to in a standardized 
audit trail way be able to document care. I think VA lacks 
this, and I think it is something they are trying to move 
towards, but it is a big challenge. But it is a big gap between 
what VA does and I think what comparable Federal programs, 
TRICARE, Medicare and Medicaid do today.
    Mr. Benishek. Thanks for that answer. My experience with 
the VA has been good really. I thought that they investigated 
who I was and what I was doing and the quality of my care. And 
we had to submit a bill and we put our paperwork and we just 
sent it to them and they scanned it into the record. And I 
thought it was fairly efficient. But it is surprising to me 
that apparently this is not happening throughout the system. My 
local office I thought managed it fairly well, but not that it 
couldn't have used improvement. But I am looking forward to 
talking to the VA representative as well.
    So thank you, Dr. Pane. I yield back the remainder of my 
time.
    Ms. Buerkle. Thank you again to all three of you for being 
here this morning. Ms. Doody, congratulations on 25 years, that 
is quite a successful milestone. Thank you all for what you do 
on behalf of our veterans.
    I would now like to invite our third panel to the witness 
table. Representing the Department this morning is the 
Honorable Dr. Robert A. Petzel, M.D., VA's Under Secretary for 
Health. Dr. Petzel is accompanied by Mr. Philip Matovsky, 
Assistant Deputy Under Secretary for Health, Administrative 
Operations; Ms. Cyndi Kindred, the Acting Deputy Chief Business 
Officer for Purchased Care; and Ms. Deborah James, the Non-VA 
Care Coordination Project Manager.
    Thank you all very much for being here today, and Dr. 
Petzel, if you could please begin your testimony.

    STATEMENT OF THE HON. DR. ROBERT A. PETZEL, M.D., UNDER 
  SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION, U.S. 
DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY PHILIP MATOVSKY, 
  ASSISTANT DEPUTY UNDER SECRETARY FOR HEALTH, ADMINISTRATION 
OPERATIONS, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 
 VETERANS AFFAIRS; CYNDI KINDRED, ACTING DEPUTY CHIEF BUSINESS 
  OFFICER FOR PURCHASED CARE, VETERANS HEALTH ADMINISTRATION, 
  U.S. DEPARTMENT OF VETERANS AFFAIRS; AND DEBORAH JAMES, RN, 
   NON-VA CARE COORDINATION PROJECT MANAGER, VETERANS HEALTH 
      ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

    Dr. Petzel. Good morning, chairwoman, Ranking Member 
Michaud, and Members of the Subcommittee. Thank you for the 
opportunity to discuss the Department of Veterans Affairs, VA's 
Purchased Care Program. I am accompanied today by Dr. Philip 
Matovsky, Assistant Deputy Under Secretary for Health for 
Administrative Operations; Ms. Cyndi Kindred, Acting Deputy 
Chief Business Office for Purchased Care; and Deborah James, 
Non-VA Care Coordination, NVCC Project Manager.
    VA provides care to veterans directly in a VHA facility or 
indirectly through either individual authorizations or through 
contracts with local providers. This mix of in-house and 
external care provides veterans with the full continuum of 
health services covered under our medical benefits package. VA 
recognizes the improvements that are needed in a non-VA care 
program, including that part of this program previously known 
as fee basis. To address these concerns VAs have developed and 
managed multiple initiatives in the non-VA care program. These 
initiatives are designed to ensure that high quality care is 
consistently provided to veterans under these authorities.
    My testimony today will discuss two initiatives, Patient 
Centered Community Care, or PCCC, and Non-VA Care Coordination, 
or NVCC. Both of these will help ensure that high quality care 
is consistently provided to veterans regardless if they receive 
their care in-house or from non-VA care providers.
    I will provide you with an update on the Project HERO and 
update on Project ARCH and how our use of these non-VA care 
programs is increasing access to care for rural veterans.
    We are aware of the numerous reviews performed regarding 
VA's non-VA care program and we concur with these findings. 
There is much that needs to be addressed. We are here today to 
provide a candid discussion of our efforts to diagnose and 
overhaul the way VA manages the care that we acquire from the 
private sector. We are transitioning our non-VA care program, 
we are taking a comprehensive look at this program and 
assembling what we believe is the right team to achieve 
lasting, meaningful results and reform. We are standardizing 
our approach to ensure non-VA care is cost effective, meets 
quality standards and is accessible within a reasonable 
distance.
    Today I will outline two initiatives, as I mentioned 
earlier. VA developed and managed multiple initiatives to 
improve their oversight of the management and delivery of non-
VA care. PCCC, or Patient Centered Community Care, will be a 
network of standardized health care contracts, including a 
range of services consisting of mental health, laboratory and 
skilled nursing home care. It is useful to think of PCCC as 
really a national extension of Project HERO, and we will 
discuss hopefully the details of that as we proceed.
    Non Non-VA Care Coordination, or NVCC, is our internal 
program to improve our referral management practices. NVCC is a 
set of business processes that are going to be implemented 
through tools and templates to improve how we justify and 
authorize non-VA referrals. NVCC will standardize our practices 
and reduce or eliminate variation within the non-VA care 
program nationally. NVCC is explicitly addressing major 
concerns that were raised by the OIG and other reviews, as 
mentioned today.
    Additionally, VA has worked to increase access to health 
care for rural veterans, as I mentioned before, through Project 
HERO and Project ARCH. The VA recognizes improvements are 
needed in our non-VA care program. We have reviewed our 
approach to management program, we have established a clear 
corrective action plan that will address our program 
shortcomings. We are also committed to a long-term strategy 
that will change the way we perform key business functions in 
the managed care program.
    The corrective action plan will make measurable progress in 
reducing improper payments, creating a culture of 
accountability, enhancing internal control and data integrity, 
training and education, educating the field and establishing 
internal policies with heavy, heavy oversight.
    Our long-term strategy consists of implementing health care 
claims processing software, consolidating claims processing 
functions, as mentioned by Dr. Pane, and continuing to 
strengthen the management and oversight of the program.
    When necessary care is not readily available at one of our 
facilities, VA is authorized to provide that care to eligible 
veterans outside of VA's health care system. We expect that 
these non-VA care providers will deliver the same high quality 
care as our providers do. We believe that our current 
initiatives are major steps in the direction of providing the 
care that our veterans need and deserve.
    And we appreciate the opportunity to appear before you to 
discuss VA's non-VA care program. My colleagues and I are 
prepared to answer your questions.
    [The prepared statement of Dr. Petzel appears on p.a.]
    Ms. Buerkle. Thank you very much. I will now yield myself 5 
minutes for questions. After listening to the last two panels I 
must say to you that I have grave concerns as to the previous 
folks who testified about what is going to happen with this fee 
basis service and how flawed the system is. As in all of these 
hearings and all of these issues we talk about, time is of the 
essence because every day failure at the VA results in 
frustration, in this case physical or mental health issues, 
with our veterans. We don't have the luxury of time, which is 
what I am not sure VA understands. Time is of the essence, 
whether we are talking about prosthetics, today we are talking 
about fee basis care. We have to get this moving right away, 
because every time we fail our veterans are hurt. I cannot 
emphasize that enough that time is of the essence, that we do 
not have luxury of time.
    This morning in a statement Mr. Barker from the VFW said 
that we have learned the contract care provider through PCCC 
will be prioritized over other avenues of non-VA care, which is 
a departure from Project HERO. Now in your testimony you just 
mentioned that really you could look at PCCC as an extension of 
Project HERO so if you could comment on that.
    Dr. Petzel. I am not aware, Madam Chairman, of what exactly 
he's referring to. But let me explain what PCCC is. It is, as I 
said, an extension of Project HERO. We want to create 
nationally three to five regional contracts that mimic all of 
what we see in Project HERO. The back office functions that 
Project HERO does would be done under the contract. All of the 
functions that we see in Project HERO would be a part of that 
contract. It would not just be a contract for a group of 
providers. I think there has been some misunderstanding on the 
part, particularly Humana VA, of exactly what that would be.
    The priority always is going to be provide the care within 
the VA system if it is possible to do that, and perhaps that is 
what was meant by the comment. But in terms of it having less 
priority than other kinds of fee programs, et cetera, the 
problem here is meet the needs of the veteran, to provide 
accessible high quality care particularly in rural areas where 
we don't have as much of a presence as we would like to have, 
and that would be the same priority for the PCCC regional 
contracts.
    Ms. Buerkle. One of the issues we heard from previous 
members of the panels was about primary care being a part of 
fee basis service and I would like you to comment on that. What 
is the plan with regard to primary care and mental health care 
as well?
    Dr. Petzel. To take mental health care first and quickly 
dispense of that, mental health care will be a part of the 
contract. It is a part of contracts that we have now, and it 
will definitely be a major feature of the PCCC contracts.
    Ms. Buerkle. And if I could interrupt you because when Mr. 
Jones testified he talked about that they had a mental health 
network in place, but it isn't something that is being advanced 
by the VA, the numbers are very poor. Are we not letting our 
veterans know that this mental health service is available 
through Project HERO?
    Dr. Petzel. I can't answer the question about the use. We 
will go back and take a look at the data, Madam Chairman. I 
don't have that information in front of me. The way the 
contracts usually work is that the VA decides that something 
needs to be done for a patient. We don't have the service in a 
geographically accessible area or there is a long wait in the 
VA facility to do that. And then we would turn to the contract 
provider and say we need to have this orthopedic consult. And 
then they would arrange to do that.
    So it is not as much education of the patients as it is of 
our providers that those services are available.
    I am going to have to go back, Madam Chairman, and look to 
see what the usage patterns are. I was not aware we were under 
utilizing when we need to use utilize the mental health 
features of our contracts.
    Ms. Buerkle. Comment on primary care in the short amount of 
time I have left.
    Dr. Petzel. Thank you. Primary care right now is not a part 
of Project HERO. It is being used in one of the five networks 
in Project ARCH, the network that is involved in Pratt, Kansas. 
VA views primary care as being its primary responsibility. We 
have primary clinics in our medical centers, we have primary 
clinics in our community based outpatient clinics, which are 
extensive. We have home based primary care where we reach into 
the home and provide medical care in rural areas, actually in 
the patient's home, and then we have telehome health where we 
are able to provide help in remote areas the connections to a 
primary care provider in a CBOC or a clinic.
    We view this as our primary responsibility and do not think 
that this is an appropriate thing to be contracting for in the 
main. There are some instances in certain very remote areas 
where we may do this, but as a part of the contract, it is not 
featured as a part of either the HERO contract or the PCCC 
contracts.
    Ms. Buerkle. Thank you, Dr. Petzel. I now yield to the 
Ranking Member, Mr. Michaud.
    Mr. Michaud. Thank you, Madam Chair. And thank you very 
much, Dr. Petzel, for coming here today. I have a couple of 
questions. When you look at access to health care. And I know I 
sent you a letter as it relates to the Inspector General report 
for the Calais CBOC and one of the problems that came out of 
that report was the fact that the position wasn't filled for 
over a year. That caused some problems. I guess my question is 
particularly in rural areas, what are you doing to make sure 
that veterans can have that good quality access to health care 
in rural areas? And are you looking at contracting out with 
private providers, or what type of program are you looking at 
particularly in rural areas? I am sure it is not unique just to 
Calais in trying to find doctors to go to rural areas for the 
VA.
    Dr. Petzel. Thank you, Congressman Michaud. You are right 
it is not unique to Calais, Maine or to Maine in general. Our 
most difficult problem in terms of recruitment is finding 
primary care providers for remote areas. It is a very--we are 
not unique. This is a problem that many, many communities in 
the private sector around the country are having. We are trying 
to do several things. One in terms of making recruitment more 
desirable, we have the capacity to offer financial incentives, 
we have some flexibility in terms of salary, we have a debt 
forgiveness program where we can forgive a large portion of a 
person's medical school debt should they be coming out with 
that. We also are using other than physician providers. We have 
scattered now across the country a number of clinics that are 
being run under the supervision of physicians by nurse 
practitioners and PAs, physicians' assistants. In Colorado and 
Utah a unique program where we are providing telemedicine 
primary care. There is a location in the community where we 
have telemedicine capability. There is an individual that 
operates, if you will, the tools, often a nurse. And they are 
then connected to either a community based outpatient clinic or 
either Denver or Salt Lake City. And we can actually do a 
primary care clinic and a primary care clinic visit follow-up, 
if you will, for medical problems in that kind of a setting. 
And then finally, as I mentioned earlier, Congressman, 
telehealth, telehome health and home based primary care are the 
things that we are trying to do.
    I want to again emphasize the fact this is not a problem 
that is unique to us. We think we have a number of very good 
alternatives to address the problem, but it still I think quite 
honestly is going to remain a problem. The VA is in a unique 
position in terms of telehealth solutions here particularly. We 
have the largest telehealth network in the country. And I think 
we are the only or the first organization that has pioneered 
this telehealth primary care clinic. It may be a solution that 
we will be using around the country.
    Mr. Michaud. Thank you. My next question actually, the 
previous panel talked about additional services, whether it is 
the ARCH program or HERO. What is the VA doing to expedite the 
needs out there, particularly the needs of programs for 
additional services? And I actually heard one of my colleagues 
earlier talking about veterans having to travel long distance 
and he is getting a lot of calls from the veterans that the VA 
is not providing those services. Likewise we keep track of the 
complaints we are getting from our veterans in Maine, and a lot 
of it has to actually deal with traveling a long distance. For 
instance, cancer treatment, that is a big issue, and if you 
look at veterans in different parts of the State, if they 
traveled to Massachusetts it could take 10, 11 hours and that 
is a huge concern. The bigger concern I have is that I think 
part of that is because of the VERA model and the VA and the 
different facilities being reimbursed because of the veterans 
they see. They are requiring veterans to go longer distances. 
It is only a thought on my part to go to Massachusetts, so they 
can get the numbers up. This is not veteran centric, it is VA 
centric.
    Can you answer the question about additional services?
    Dr. Petzel. I will. I would like to give, Congressman, a 
little bit of background. First of all, the fee basis work does 
count in the way they get reimbursed. So it is not a 
disadvantage to the network necessarily that someone would be 
seen locally as opposed to going to the Boston VA medical 
center.
    One of the things that has been commended on by others is 
the huge growth in the non-VA care program. 7 or 8 years ago it 
was a 1,700,000, now it is about 4.6 billion. This is because 
we have expanded dramatically our use of fee basis. As we do 
more of this, as we have more community based outpatient 
clinics, the need is noticed by both patients and providers 
that now these people that are being seen in the CBOC need to 
have specialty care. And my example in the network I ran was 
Williston, North Dakota, as far from the Fargo VA hospital as 
Atlanta, Georgia is from Washington, D.C. and to send somebody 
from Williston to Fargo for an MRI or a CT scan is just not 
conscionable. So we now buy that service in Williston.
    So the expansion that you see is the fact that we have 
expanded dramatically, Congressman, the services. There are 
many other things that we need to be looking at though. I am 
pleased to say that the Rural Health Office that runs Project 
ARCH is in the process of evaluating the other kinds of things, 
such as women's health services, et cetera, that we might be 
able to offer under Project ARCH.
    I absolutely agree with the way I know you and Chairwoman 
Buerkle feel, and that is care closer to home is better 
delivered care.
    Ms. Buerkle. The chair recognizes the gentleman from 
Michigan, Dr. Benishek.
    Mr. Benishek. Thank you, Madam Chairwoman. Dr. Petzel, I 
have finally gotten to you. The VA policy to provide eligible 
veteran care within the VA whenever feasible, could you please 
provide to the Committee the complete copy of the policy, as 
well as any additional guidance given to the field as to how 
this takes place?
    Dr. Petzel. Yes, sir, we will do that. Very quick answer to 
that if you don't mind.
    Mr. Benishek. That is all I want from that question. How 
does the VA defined extraordinary distances from a veteran's 
home?
    Dr. Petzel. We have two definitions of--we have a 
definition for rural care, ruralness, and then people living in 
highly rural areas. It can be defined in two ways. It can be 
defined by distance, that is how far someone has to travel. Is 
it 60 miles or is it 200 miles. And it could be defined by 
time. And it matters that there are differences. In the Midwest 
where travel is on a freeway the distance may be long but the 
time could be relatively short.
    Mr. Benishek. Let me give you example of what I am talking 
about. This is a letter to me from the VA based on this case I 
mentioned before. Based on your inquiry, all available medical 
records and administrative information has been reviewed. Non-
VA care is considered as an alternative to VA care when VA care 
is not available. The veteran's ability to travel is also a 
consideration. In this case VA care is available within the 
State of Michigan and the patient is considered capable of 
travel. So he is welcome to take advantage of the available 
health services in the State of Michigan.
    So the place they wanted him to travel was 235 miles from 
Alpena to Detroit. So 4 hours and 7 minutes, according to the 
Google map, one way. So I mean to me this is what disingenuous, 
the VA care is available within the State of Michigan. I mean 
this distance is further than Detroit is from Fort Wayne, 
Indiana, it is further than Detroit is from Cleveland. It is a 
long way for something that is available in the local town 10 
minutes from his home, besides the follow-up with the blood 
tests and stuff. So this concerns me. And I just want to get 
your explanation for this.
    Dr. Petzel. Well, I can't explain the case without taking a 
look at it. What I would like to do, Congressman Benishek, is 
to take the information about this patient and find out what is 
going on and get back to you immediately.
    Mr. Benishek. Well, I understand. You yourself stated the 
fact that you have seen these patients between Atlanta and 
Washington. This is something like that. It concerns me that 
there doesn't seem to be any standards or criterion that I have 
been able to find out as to what makes this determination other 
than what you vaguely outlined.
    The cost of all this of course is one of our main concerns. 
To me that should be something that is automatic and you guys 
have to do a lot better job in organizing that. But what really 
concerns me is the access to care. This fellow is 70 years old, 
he has chemotherapy for colon cancer and it is okay for him to 
travel 4 hours there and 4 hours back right after his 
chemotherapy. That doesn't seem in my view as a physician to be 
adequate access to care, frankly.
    Dr. Petzel. I would agree with you and we will take the 
information and find out what the problem is with that case. 
Thank you.
    Mr. Benishek. Well, that is all I want to go into. Thanks.
    Ms. Buerkle. Thank you very much. We are going to have a 
second round of questions, Dr. Petzel, if that is okay with 
you. So I will yield myself 5 minutes for questions.
    I guess my concern is we heard from previous testimony that 
Project HERO is expiring. There is some confusion among the 
VISNs and among the veterans as to--who is going to continue on 
with Project HERO, who is not. Now we are being told that PCCC 
will be on the heels of Project HERO to carry that forth. But 
what we are hearing from the veterans service organizations is 
that there is confusion and uncertainty and there is no formal 
plan in place. What is your vision for a timeframe for knowing 
what is going to happen for the veterans and for these critical 
services they get through this program?
    Dr. Petzel. Well, they should know now. And if there is 
that confusion and if there is a lot of knowledge of what is 
going on we will correct that immediately.
    Let me go through the scenario as I see it occurring. We 
are about to send out the first RFI for the new set of 
contracts. And in the meantime the individuals that are 
enrolled in Project HERO have several alternatives. One is that 
they can continue using Project HERO and using that contract. 
And we will go back again and make absolutely certain that all 
of those VISNs that are involved with HERO understand that that 
is available.
    But an alternative for that is to use regular fee basis. 
And if there is any fear that a veteran or anyone has because 
Project HERO is going to expire and maybe PCCC isn't spun up or 
whatever, we will use individual fee. I know of no instance 
right now where a veteran has been dropped from fee care, has 
lost their provider and we will not let that happen. We want 
these individuals to have continuity of care with the people 
that they are involved in now. And we have the ways to do that 
as we are bringing PCCC online.
    Ms. Buerkle. My concern is that VA and the health care that 
it renders to our veterans is very good care. In Syracuse we 
have a wonderful VA hospital. My concern is the business 
portion of this like the processing of claims and making sure 
that all of the providers get paid and paid appropriately and 
we are not wasting money, we are not under paying or over 
paying claims. I will just say in my previous life I worked for 
a hospital who had fee basis. I worked for Upstate Medical 
Center but we accepted VA patients from the VA hospital 
locally. And when it came time to pay those claims they 
couldn't tell us what methodology was used to reach the fee. 
There was no standardization. Depending on the situation, the 
same procedure, be at a different payment rate. So I say to the 
VA, look, you really render health care fairly well and we want 
you to make sure our veterans have access to care in the 
community and to have rural health care. This business piece 
you don't do so well. Why do you want to hang on to that? Why 
don't we have VA focus instead on care and let the claims be 
processed by someone who does it and does it well and takes 
care of that piece?
    Dr. Petzel. Chairman Buerkle, I do share your concern about 
the business processes. Historically we have no argument with 
the findings from the National Academy of findings and from the 
IG findings. We have incorporated all of their recommendations 
into our plan for moving forward.
    Now you need to think about fee care in several different 
categories. The contracts that we will have under PCCC which 
right now are 21 percent of our fee care and probably will 
increase somewhat with the contracts. All those back office 
functions will be done by the contractor as they are being done 
in Project HERO. That is good, that phenomena is going to 
continue. But there is a large segment of our fee that is not 
done by contract and quite a bit of it I think will remain at 
non-contract. We need to have in place the management processes 
to be able to do that management effectively.
    There are six primary steps in fee management. The first 
two of those steps are being addressed right now. We have a 
champion facility in each one of our networks under NVCC that 
has addressed the two first issues that will be rolled out, the 
first two steps that will be rolled out across the country and 
in place and operating before the end of 2013. In addition that 
step two we have revised a handbook, it is going to be out by 
the 1st of January. We will have standard operating procedures, 
we will educate our people about how to manage this. And then 
finally when that is accomplished through 2013 we are going to 
consolidate our business practice, we are going to consolidate 
our payment into probably three to five regional payment 
centers to gain the efficiencies that we need, to gain the 
capacity to have good oversight over that payment.
    This is our plan moving forward. We have incorporated 
industries and oversight recommendations in that plan. We have 
the right people in place now, and I don't think we did 
previously. We have a new chief in the business office. We have 
Ms. Kindred sitting next to me in the business office, and we 
have Mr. Matovsky overseeing all of those operations in his 
role with operations.
    So I think we can do this. I don't think we can, I know we 
can do this in-house. And most importantly it is going to be 
less costly and less wasteful for to us do it in-house. Because 
we have the people, we don't need to hire anybody new. We have 
all the people there that we need to do it. We can do it.
    Ms. Buerkle. Thank you. Can you provide the plan to the 
Committee, please?
    Dr. Petzel. We will.
    Ms. Buerkle. Thank you. I now yield to the Ranking Member, 
Mr. Michaud.
    Mr. Michaud. Thank you very much, Madam Chair. They just 
called the vote, so I have a quick question. You mentioned you 
want to consolidate into five areas for this. I guess my only 
concern is consolidation probably is good, you probably could 
save more money. It depends on where you consolidate. I know 
when we went through the whole BRAC process, the Department of 
Defense did consolidate the DFAS facilities. But when they 
originally were going to do it before the Commission made a 
different decision, the consolidation efforts were actually 
consolidated in a less efficient facility, primarily because of 
a lot of issues when you look at employer of choice, and that 
is a big issue. If you have a huge turnover, particularly if 
you locate these facilities in large metropolitan areas where 
employees have an option of moving around anywhere they can, 
the turnover rate is huge and you might not get the best output 
and simply because you are consolidating it doesn't mean it is 
going to improve the system. So I would caution you on how you 
move forward in that particular consolidation process because 
it might not work out well. And so do you want to comment on 
that?
    Dr. Petzel. I would. But before I do, Congressman Michaud, 
I need to mention the fact that we have signed a contract with 
Martha's Vineyard hospital, care will begin being delivered 
there on October 1st.
    Mr. Michaud. Okay, thank you.
    Dr. Petzel. So we have solved this problem. We need to go 
back and look at what happened with the lapse of that contract, 
et cetera. That is another issue.
    I would use the example in terms of consolidation of the 
CPACS, this is the MCCF collection process. We consolidated 
that into seven areas and they happened to be pretty rural and 
remote, Leavenworth, Kansas and those sorts of places. And we 
have seen a substantial jump in the revenues that we are 
collecting, indicating to us we have a more efficient process, 
better control of our processes, et cetera. The consolidation 
in fee will be primarily the payment part of this. We have had 
issues, as you have pointed out, with payment in South 
Carolina, in Texas. Particularly there have been long delays 
and inefficient payment. We think we can add substantially to 
improving that by consolidation. We think that we can 
tremendously improve the improper payments, both overpayments 
and underpayments by consolidating. I do believe this will be 
an effective thing and we will be careful about where we do our 
consolidation.
    Mr. Michaud. Thank you very much. Really appreciate your 
testimony today and look forward to working with you as we move 
forward in this area. Thank you.
    Ms. Buerkle. Thank you. In the plan that you are going to 
submit to us, Dr. Petzel, I would trust that there will be an 
IT plan included in that because one of the issues we heard 
this morning is lack of an IT plan, and that is such an 
integral part of success here.
    If there are no further questions, I move that the members 
have 5 legislative days to revise and extend their remarks and 
to include extraneous material. Without objection, so ordered.
    Before we end today I would just like to say that I think 
that given VA's continued struggles in managing the fee 
programs and the serious doubts that have been raised here 
today about VA's ability to properly construct staff and manage 
an in-house program that can provide a level of business 
related service, patient support and patient coordination and 
provider networks that is currently available under Project 
HERO, I would really respectfully request that rather than 
continue down this path that you would stop and you would think 
about what you have heard here today, and that you would come 
back to this committee with a plan that really incorporates the 
successful elements of Project HERO. We have heard good things 
about Project HERO. Why are we trying to reinvent the wheel? 
Let's take those good pieces and let's incorporate it going 
forward. And so I would respectfully request that you would be 
open to the testimony you heard here this morning and 
incorporate that into the plan that you are going to give to 
this committee.
    Would you like to comment?
    Dr. Petzel. I would, Madam Chairwoman. We are incorporating 
all of those processes from Project HERO into the PCCC 
contract. That will be done almost exactly in terms of its 
processes as those other contracts have been done. We have done 
that, we absolutely have done that.
    Ms. Buerkle. I hope so. We will look forward to seeing the 
plan.
    Dr. Petzel. Okay.
    Ms. Buerkle. Once again I want to thank all of the panel 
members for being here today, the Subcommittee members, and of 
course my Ranking Member, Mr. Michaud. To the audience thank 
you for participating here today. We here in Washington and 
this government has no greater responsibility or moral duty 
than to make sure our veterans have the services and the care 
they have earned and they richly deserve. And as we end our 
hearing today always keep in our thoughts and prayers the men 
and women who serve our Nation and our veterans. We are a 
grateful Nation, and we thank you for your service.
    This hearing is adjourned.
    [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

                Prepared Statement of Chairwoman Buerkle

    Good morning. This hearing will come to order.
    Welcome and thank you all for being here for today's hearing, ``VA 
Fee Basis Care: Examining Solutions to a Flawed System.''
    Recent years have seen tremendous growth in VA's Fee Care program, 
with independent assessments estimating growth of close to 300 percent 
from fiscal year 2005 to today.
    Unfortunately, however, as the program has continued to grow, so 
have the management and oversight problems that have plagued the system 
through which the Department of Veterans Affairs (VA) provides care to 
veterans outside the walls of a VA facility.
    It is seriously flawed, if not altogether broken.
    In the last 3 years alone, the VA Inspector General has issued no 
less than seven separate reports detailing in-depth the serious 
deficiencies and challenges the Fee Care Program faces, including 
inadequate fiscal controls that have resulted in hundreds of millions 
of dollars in improper payments.
    Further, last September, the National Academy of Public 
Administration (NAPA) issued a white paper on VA's Fee Care Program 
that drew alarming conclusions about VA's ability to effectively manage 
and oversee care and services under the program.
    According to NAPA: VA's Chief Business Office has exercised limited 
and ineffective oversight of the Fee Care Program; the Program itself 
lacks operational objectives, performance goals, or, a clearly defined 
strategy for managing expenditures; and, VA doesn't understand what 
services are being procured through the Fee Program and at what cost.
    There have been some bright spots. Congressionally-mandated pilot 
programs--Project HERO and Project ARCH--have shown promising results 
in achieving a more patient centered, coordinated, and cost-effective 
delivery model for fee care.
    Small pockets of success--despite VA's reluctance to implement and 
utilize these programs to the fullest intent of Congress.
    Recognizing the substantial deficiencies with the Fee Program, VA 
has begun implementing two new initiatives--the Patient-Centered 
Community Care (PCCC) Program and the Non-VA Care Coordination (NVCC) 
Program.
    The Department is going to testify today that these two initiatives 
will address all of the challenges the Fee Program faces and, ``. . . 
ensure veterans receive effective and efficient non-VA care 
seamlessly.''
    I wish that I could believe that was true. However, given the 
history of failure we've seen already, I have serious reservations that 
the actions VA is taking will address the core challenges VA faces and 
not simply lead to further fragmented care and an inability to deliver 
quality care in rural communities.
    Most notably, VA lacks the information technology (IT) and 
administrative services solutions essential to establish in-house the 
clinical information sharing and electronic claims processing vital to 
a successful care-coordinated and veteran-centric program.
    VA spent approximately $4.6 billion dollars to purchase care in the 
community for veteran patients last fiscal year. That is billion, with 
a ``b.''
    We cannot afford to allow VA to continue to flail and struggle to 
test new programs in an inherently flawed system. We cannot rely on 
promises from VA that they can finally get it right.
    Our veterans are everywhere; VA can't be.
    And, at the end of the day, what fee care is about is the effective 
and efficient delivery of care to veterans where they need it, when 
they need it.
    Getting it right is about honoring their preferences, choices, and 
daily lives as well as their service to our country.
    Getting it right is about telling a Vietnam or Korean-era veteran 
that he doesn't have to travel 4 hours to the nearest VA medical center 
for his cancer treatments.
    He can go to a hospital closer to his home and spend the time he 
would have spent on the road getting better.
    Getting it right is about telling a Gulf War veteran that she 
doesn't have to take a day off of work to drive to the VA clinic two 
towns over for a physical.
    She can go to the doctor down the street if she would prefer and 
get to work on time.
    Getting it right is about telling a young veteran, recently home 
from Iraq or Afghanistan, that he doesn't have to wait all day in a VA 
waiting room to see his doctor.
    He can choose another provider who can see him now and spend the 
afternoon with the people he missed while he was overseas.
    That is what we are talking about today. And those stories--stories 
that my colleagues and I hear every day from veterans in our 
communities who are fed up--are what I want all of us to keep foremost 
in our minds this morning as we talk about how to make this program 
better and get it right.
    I now yield to the Ranking Member, Mr. Michaud [ME-SHOW] for any 
opening statement he may have.

                                 
                 Prepared Statement of Adrian Atizado,

    Madam Chairwoman, Ranking Member Michaud, and Members of the 
Subcommittee:
    Thank you for inviting the Disabled American Veterans (DAV) to 
testify at this important oversight hearing of the Subcommittee on 
Health. DAV is an organization of 1.2 million wounded and injured 
veterans, and is dedicated to empowering veterans to lead high-quality 
lives with respect and dignity; ensuring that veterans and their 
families can access the full range of benefits available to them; 
fighting for the interests of America's injured heroes on Capitol Hill; 
and educating the public about the great sacrifices and needs of 
veterans transitioning back to civilian life.
    We appreciate the Subcommittee's leadership in overseeing the 
Department of Veterans Affairs (VA) contract and purchased health care 
programs, including fee basis medical services, contract 
hospitalization, and scarce medical specialist services contracting, on 
which many service-connected disabled veterans must rely for their 
care. DAV recognizes these programs are essential in providing access 
to vital health care to veterans, but significant improvements are 
needed.
    The delegates to DAV's most recent National Convention passed 
Resolution No. 212 regarding VA's purchased care program. Our 
resolution urges Congress and the Administration to conduct stronger 
oversight of the non-VA purchased care program to ensure service-
connected disabled veterans are not encumbered in receiving non-VA care 
at the Department's expense.
    This resolution also urges VA to integrate and promote care 
coordination with all non-VA purchased care programs and services. Such 
coordination should include provider credentialing, case management, 
ensuring quality of care and patient safety, timely processing of 
claims, reimbursing at adequate rates, integrating records of care with 
VA's electronic health record, and scheduling appointments through a 
centralized process. With the exception of the ongoing Project on 
Healthcare Effectiveness through Resource Optimization (Project HERO) 
pilot program,\1\ today's VA contract and purchased care programs do 
not exhibit most of these attributes.
---------------------------------------------------------------------------
    \1\ Project on Healthcare Effectiveness through Resource 
Optimization (See H. Rept. 109-305 for the Military Quality of Life and 
Veterans Affairs Appropriations Act of 2006 (P.L. 109-114). Project 
HERO's dental contract with Delta Dental of California will end 
September 30, 2012. Project HERO's medical and surgical contract with 
Humana Veterans Healthcare Services, Inc. is intended to be extended 
for six months to March 31, 2013.
---------------------------------------------------------------------------
    Under current law, VA practices three basic approaches in 
furnishing non-VA care: pre-authorized fee-for-service arrangements 
(called Non-VA Fee Care); contract care, including obtaining scarce 
medical specialists; and sharing agreements with the Department of 
Defense and VA's academic affiliates and their associated professional 
groups.

Non-VA Fee Care

    The statutory authority for fee basis health care is title 38, 
United States Code, section 1703. This section authorizes VA to 
contract for inpatient care and limited outpatient care by contract or 
individual authorizations for certain categories of veterans, when VA 
facilities are unable to provide needed care, or when VA facilities are 
geographically inaccessible to those veterans. This contracting 
authority is not limited to contracts that contain prices negotiated 
between VA and non-VA providers, but of individual authorizations that 
serve as price offers to non-VA providers chosen by eligible veterans. 
Contract hospitalization is generally reserved to emergency situations 
for which VA reimburses contract hospitals at Medicare rates.
    Notably, the purpose of fee-basis health care is addressed in the 
regulatory authority which implements the statutory authority granted 
by section 1703. Specifically, title 38, Code of Federal Regulations, 
section 17.52, allows for individual authorizations when demand is only 
for ``infrequent use.'' Over the past several fiscal years, however, 
expenditures for fee basis services have been rising dramatically. In 
fiscal year (FY) 2005, VHA spent approximately $1.6 billion serving 
approximately one-half million veterans. By FY 2011, that amount had 
increased by 185 percent to approximately $3 billion, serving nearly 
one million veterans. This expenditure now comprises an estimated 9 
percent of VHA's total medical services appropriation.
    In addition to our organization's concern regarding the lack of 
care coordination and rising costs in fee care, specific concerns have 
been raised by others. The program is highly decentralized to the 
facility level, and lacks a standardized business process across the VA 
health care system. These concerns and others were raised by the 
National Academy of Public Administration (NAPA) in its 2011 analysis 
of VA's organizational model supporting the fee-basis program, and by 
VA's Office of Inspector General (OIG) regarding the significant number 
of improper payments and the need for improvement in risk assessment in 
fee care.
    Generally, fee basis and contract hospitalization are unmanaged, 
are not governed by a program office locally, are not standardized or 
consistent across the system, do not exhibit ``patient-centered care'' 
attributes that characterize VA's internal care programs, and their 
costs to VA have surged over the past decade without sufficient action 
being taken to ensure program integrity, efficiency, and integration in 
the Department's health care system.
    In general, VA agreed with the observations and recommendations of 
OIG. DAV is aware of the Department's efforts to address these 
concerns. Among such efforts is the Non-VA Care Coordination (NVCC) 
project, which is a focus of today's hearing.

Non-VA Care Coordination

    The Non-VA Care Coordination (NVCC) project is part of a major 
initiative VA calls Health Claims Efficiency (HCE). The purpose of HCE 
is to coordinate and accelerate the ongoing cost savings initiatives 
with new initiatives to allow VA to enhance services to veterans.\2\ 
Specifically, this initiative includes reducing operational costs and 
streamline program deployment to enhance program efficiency, achieving 
cost savings through consolidated purchasing and reducing variability 
in non-VA care coordination clinical and business practice.
---------------------------------------------------------------------------
    \2\ Department of Veterans Affairs Strategic Plan Refresh, FY 2011-
2015.
---------------------------------------------------------------------------
    Currently VA lacks industry standard automated tool sets to 
identify and take action on improper payments, including fraud, waste 
and abuse. Further, while fee care's information technology systems and 
infrastructure have been improving, they have not been updated for cost 
effectiveness due to local variations in how they are established. DAV 
believes VA should continue to pursue private sector IT solutions to 
modernize the processing of non-VA health care claims.
    With care coordination included in its name, a fully implemented 
NVCC as envisioned by the Chief Business Office will include 
improvements to patient-facing aspects of fee care. These include 
timely patient notification of Fee Care approval, appointment 
scheduling assistance, tracking appointments for completion, health 
care information sharing and timely notification of results to the 
patient as well as the VA provider responsible for the fee care 
referral.
    DAV applauds VA for taking steps in the right direction to meet the 
goals of DAV Resolution No. 212 to provide proper care coordination in 
fee care and to make care coordination a standard business practice. To 
ensure these new processes are being achieved in each VA facility, we 
have requested from VA results for key metrics for this and other focus 
areas. Until DAV has had the opportunity to review these results, we 
are unable to provide further comment on NVCC and whether this 
initiative will address concerns outlined in this testimony.
    The 2011 NAPA report observes that the organizational, 
administrative, and technological systems used to operate and manage 
fee care have not kept pace with the unprecedented growth of fee care. 
Unlike OIG reports, VA comments were not part of the report and DAV is 
unaware of any public response from the agency regarding the NAPA 
report.
    Madam Chairwoman, it should be noted that VA is authorized to 
attempt to recover any improper payments. VA also has the authority to 
bill third-party health insurers for non-VA care. DAV believes that 
internal controls should be improved to help prevent improper payments 
for non-VA fee care, and recovery auditing and third party billing 
should be included as a part of this Subcommittee's oversight and the 
Department's overall strategy to improve VA's purchased care programs.

Project HERO and Patient Centered Community Care

    Under section 8153, the VA exercises discretionary authority to use 
contracts and sharing agreements with non-VA providers as a means to 
provide hospital care and medical services (defined in title 38, United 
States Code, section 1701) to all enrolled veterans. The stated purpose 
of VA's contracting authority under section 8153 is ``[t]o strengthen 
the medical programs at Department facilities and improve the quality 
of health care provided veterans under this title by authorizing the 
Secretary to enter into agreements . . . while ensuring no diminution 
of services to veterans.'' Since the law does not address quality of 
care and care coordination, it only partially meets the goals of DAV 
Resolution No. 212.
    VA has informed DAV of its plan to rely on the authority of section 
8153 to create a new approach to centrally supported health care 
contracting, to be provided throughout the VA health care system. The 
program is to be entitled ``Patient Centered Community Care'' (PCCC). 
This effort is described by VA as a ``soft approach'' to contracting, 
but that it will apply lessons learned from Project HERO, now in its 
fifth and final year.
    According to VA, the goal of PCCC is to create centrally supported 
health care contracts available throughout the VHA to provide veterans 
coordinated, timely access to high quality care from a comprehensive 
network of VA and non-VA providers. VA has completed a draft 
specification for PCCC, and we understand PCCC may include contracts 
covering five regional subdivisions with standards for access to care, 
quality of care, and medical documentation to facilitate the provision 
of care. Further, use of contract services under the PCCC umbrella will 
receive priority over other non-VA care options.
    VA has repeatedly assured DAV that the care coordination that 
patients experienced under Project HERO will be made part of PCCC, but 
as of this date we are uncertain of these particulars. Information in 
more concrete terms will become available in VA's official Request for 
Proposals (RFP), which VA currently projects will be released in 
November 2012, with contract awards in March 2013. Given the national 
scope and complexity of this change by VA, the challenging history of 
contract care, and the current leadership vacuum in VA's Chief Business 
Office, we believe these plans may be overly optimistic. While building 
on the successes in Project HERO, this is an untested concept for the 
VA health care system, and one that is not intended for pilot-testing 
for effectiveness.
    DAV considers Project HERO to have been a moderate success story. 
The Chief Business Office in VA Central Office and the contractors, 
Humana Veterans Healthcare Services, Inc., and Delta Dental, responded 
effectively to veterans service organizations' early expressions of 
concern about the potential for Project HERO to be corrosive or even 
destructive to Congress's intention that VA's contracting authorities 
be used to strengthen medical programs at VA facilities and improve the 
quality of health care while ensuring no diminution of services to 
veterans. While Project HERO is meeting those goals now, VA field 
facilities have been slow to utilize Project HERO principally because 
Project HERO lies low on a multi-tier algorithm used by VA fee-basis 
clerks, after their considering existing sharing agreements and 
availability of accessible services at other nearby VA facilities, but 
before authorizing unmanaged fee-basis services as described above. As 
a result, the volume of referrals to Project HERO has been low.
    We believe the current approach in Project HERO is a good model for 
VA to pursue as it moves to the next phase in reforming non-VA 
purchased care. We have concerns nevertheless that VA will struggle to 
establish in-house the kinds of services, supports and provider 
networks that are available within the large managed care systems such 
as Humana and Delta Dental in fashioning the PCCC effort. In addition, 
we are concerned PCCC contractors will have too short an implementation 
period between the time contracts are awarded and when they become 
operational to establish robust networks of providers.
    We applaud VA for announcing its intent to extend Project HERO for 
6 months beyond the final option year that ends on September 30, 2012. 
Nevertheless, DAV urges VA to extend Project HERO for such additional 
time until VA has built its own capacity or determines to rely on a 
contract managed care firm (or firms if the program is regionally 
dispersed) to handle the workload of VA purchased care. Ending the 
Project HERO pilot program premature to VA's completing its new 
initiative would leave ill and disabled veterans, including many of our 
members, in jeopardy, and could lead to higher costs for non-VA care 
through the legacy fee-basis program. When VA reaches a confidence 
level that PCCC is an adequate replacement for Project HERO or any 
other non-VA health care contract, then and only then should it be 
ended.

Need for Reorganization of All Fee and Contract Services

    VA has a long and distinguished record of providing social support 
services (including health care services) to veterans, but VA 
continually struggles to provide adequate business-related services as 
a part of its responsibility. We see those problems reflected brightly 
here. We have witnessed this struggle year-in and year-out within the 
activities of the Chief Business Office, both in terms of its managing 
VA first- and third-party collections from veterans and health 
insurers, as well as its lack of management controls over these 
contract health care programs. With this backdrop we are doubtful that 
VA will be able to properly construct, staff, and manage a program 
overseeing VA contract health care that will perform as well as the 
Project HERO contractor is performing now. We urge the Subcommittee to 
closely examine VA's plans and make its own determination, but we hope 
the Subcommittee and VA will take our concerns into account. At 
minimum, we believe PCCC should be judiciously deployed and carefully 
expanded to ensure veterans are unencumbered when accessing contracted 
health care.
    Madame Chairwoman, given the cost of this program and its 
importance to DAV and our service-disabled members, we believe bolder 
action is required than is currently envisioned by VA in NVCC and PCCC. 
In our view, the VA Chief Business Office is not the correct 
organization to build this new system. That office should concentrate 
on its original and basic mission to improve VA revenue performance for 
first- and third-party payments.\3\ VA instead should establish in 
Central Office a new contract care services management office, charged 
with the responsibility to use managed care industry best practices in 
establishing new approaches to VA purchased health care for veterans, 
taking fully into its jurisdiction all non-VA purchased care under 
current law. All of these programs have been criticized at one time or 
another by external reviewers and this may be VA's best opportunity in 
years to respond effectively to improve them. We believe a new office 
of this type--if staffed by professionals experienced in private health 
insurance and the managed care enterprise--could concentrate these 
similar programs (in which VA pays a non-VA party for the care of a 
veteran, dependent or survivor) under one management structure, 
integrated with the VA health care system; clarify accountability for 
policy and practice effectiveness across the system; and set standards 
for compliance and reporting.
---------------------------------------------------------------------------
    \3\ In May 2002, VA established the Chief Business Office in its 
Veterans Health Administration (VHA) to underscore the importance of 
revenue, patient eligibility, and enrollment functions; and to give 
strategic focus to improving these functions by directing VHA's Revenue 
Office and to develop a new approach for VA's first- and third-party 
collections activity.
---------------------------------------------------------------------------
    This new office should coordinate with the TRICARE Management 
Agency (TMA) in the Department of Defense in developing its plans and 
policies, and as well with the Center for Medicare and Medicaid 
Services (CMS) of the Department of Health and Human Services. The TMA 
office has more than two decades of experience in dealing with managed 
contract care policy and practice for a very large constituency of 
military servicemembers, their families and the military retired 
community. The CMS is the Federal Government's expert on both health 
care and pricing policies.
    The end goal of this new office would be to allow veterans and 
other eligible family members to live a higher quality of life with 
respect and dignity, through receipt of better services, including care 
coordination, continuity and quality of care, at a defensible and lower 
cost to VA and taxpayers. Absent this kind of bold action and change, 
DAV fears that VA's poor record in the management of contract and 
purchased care will not be corrected or improved.
    Madame Chairwoman, thank you for this opportunity for DAV to 
testify on an important topic to our members. I would be pleased to 
address your questions, or those of other Members of the Subcommittee.

                                 
                   Prepared Statement of Shane Barker

    Madam Chairwoman, Ranking Member Michaud and Members of this 
committee, on behalf of the more than 2 million members of the Veterans 
of Foreign Wars of the United States (VFW) and our Auxiliaries, I would 
like to thank you for the opportunity to present our views on the Fee 
Care Program.
    The VFW is very appreciative of the efforts made by this 
Subcommittee to better understand and address a persistent, growing 
challenge for VA. Your interest in this issue is critical to affecting 
positive change as we enter into a pivotal time in the life of the Fee 
Basis Program. Our veterans are from all walks of life and live in 
urban and rural areas. Some live in what we describe as highly rural 
areas, and their access to care is limited as a result. VA has for 
decades operated the Fee Basis Program to meet their needs by allowing 
them to utilize civilian doctors as part of the care VA provides. I 
would like to take this opportunity to identify some shortcomings of 
that program, and how we can address them to both save money and 
enhance the quality of care we provide.
    We have no shortage of evidence to convince us that change is 
necessary. Between Fiscal Year (FY) 2005 and FY 2011, overall costs for 
the Fee program increased nearly 200 percent, from $1.6 billion to 
nearly $3.9 billion per year. During this same period the population 
size rose 95 percent, adding nearly 400,000 patients to the program and 
bringing the total to 893,421 unique veterans. However, VA constrained 
overall cost per unique veteran to 33 percent. During that time, it 
rose from $3,246 to $4,331 per year. For all the cost increases and 
more veterans utilizing the program, care is not coordinated between 
the private sector and VA in the traditional Fee program. Because of 
inadequate technology and an aversion to change that persisted within 
VA for years, VA did not consider this a priority. We hope that 
sentiment is changing, and are hopeful about the direction in which VA 
seems to be heading.
    As we face the reality of fiscal restraint, cost increases of this 
magnitude rightfully cause us to pay attention and work to enhance the 
performance of this program. The VFW is convinced that it can be done, 
and we want to be a part of the solution. This committee obviously 
understands the need to restrain unnecessary growth in the Fee program 
to ensure the program survives over the long-term, and we appreciate 
your efforts to put it on a more solid footing.
    Fee Basis Care was created to ensure that a civilian doctor is 
meeting the needs of veterans when VA is unable to meet the demand. It 
has been in place to meet the needs of eligible veterans for decades, 
ensuring that those who live great distances away from a VA medical 
facility or require non-VA provided specialty care are granted care 
through a civilian doctor closer to home. VA is mandated to consider 
allowing a veteran to use the Fee program based on distance from VA 
facilities, their portfolio of services, wait-times, and the 
availability of the specific doctors and treatments a veteran requires. 
Obviously, this function is a necessary and inextricable part of VA's 
mission. VA's ability to decide when a veteran should be able to 
utilize the Fee program is an inherent strength of the program, and the 
VFW strongly believes that VA must retain absolute responsibility for 
their patients when they receive care in the private sector. There are 
many implications that emanate from this conviction that VA retain 
ultimate control for every veteran they send into the private sector, 
and VA bears the burden of responsibility for their well-being 
regardless of where they seek treatment.
    The shortcomings of the Fee Basis program were painstakingly 
detailed in a September 2011 report of the National Academy of Public 
Administration (NAPA). The report paints a stark picture of the current 
state of the program, and validates many of our long-standing concerns 
with the lack of care coordination and spending controls. Of their many 
specific and disconcerting findings, the totality of the situation led 
NAPA to find that VA is utterly lacking in the ability to discern the 
return on investment for the program. There is not one single factor 
that would lead NAPA to make such a serious claim; rather, the numerous 
inefficiencies taken as a whole are the culprit.

Administration from VA Central Office

    The Fee program is orchestrated from the Chief Business Office 
(CBO) in VA Central Office (VACO). However, their influence over how 
the program is operated at lower levels in the system is limited. CBO 
enjoys limited cooperation with the field. CBO gathers no standard 
performance metrics, has no mechanism to receive documentation from 
providers, and does not validate credentialing of private physicians. 
CBO has no way to verify that billed services have been rendered, and 
far too often pays rates that are far too high for billed services. 
VACO also does not audit how Fee Basis dollars are spent at the local 
level. To our knowledge, they do not conduct the oversight needed to 
analyze when the Fee program operates within budget, and when available 
funds are exhausted earlier than expected.
    NAPA recommended consolidating the authorization and claims 
processing function of the 100 plus Fee Basis program offices 
nationwide, eliminating the vast majority and creating a regional 
system of three to five sites. They make clear in their report that 
this change would not centralize clinical decisions or leave them to 
the bureaucracy. Clinical decisions would still be made by medical 
staff. The VFW believes this recommendation makes sense. However, in 
considering such change, the VFW hopes the Committee will be mindful 
that the lack of a comprehensive IT solution may complicate a regional 
approach to administering the Fee program.

Technological Limitations

    For years VA has relied upon antiquated technologies that are 
simply out of step with the private sector and among other Federal 
agencies such as the Center for Medicare and Medicaid Services (CMS). 
Policymakers in the Chief Business Office have very limited access to 
clinical data from veterans episodes of care in the civilian sector. 
This is an enormous disadvantage that directly impacts the quality of 
care for veterans. It slows down civilian and VA doctors by eating away 
at their time and making decisions more complicated. It also hinders 
VA's ability to detect and prevent improper payments, creating an 
environment that is susceptible to waste, fraud and abuse.
    The Fee program does not have the ability to broadly automate 
incoming or outgoing bills or payments. By way of comparison, the 
Department of Defense (DoD) aggressively pursues automation wherever 
possible. They are currently contracting with Wisconsin Physician 
Services (WPS) through the TRICARE Management Activity (TMA) to process 
the vast majority of their claims. In doing so, TMA saves both time and 
money for DoD, allowing that department to focus on core competencies. 
We believe it is time for VA to consider what they can do to bring 
their operations in line with industry standards and generate dollars 
through such efficiencies.
    To their credit, VA is working to resolve many of these issues. VA 
has openly acknowledged the shortcomings and failures in their IT 
infrastructure, and it is our understanding that VA has been working to 
affect change at many levels--including within the acquisition process. 
VA's Office of Information & Technology (OI&T) seems to be adopting a 
more modern and lean process to build the IT systems needed to 
coordinate and provide care in today's complex health care 
infrastructure. Changes like the implementation of agile systems 
development hold the promise of faster, cheaper, more usable software 
solutions. Though we have seen some evidence of success at VA, it is 
just a start. VA is working on a common platform to provide civilian 
doctors with an easy way to provide CBO with searchable clinical data 
from visits resulting from using the Fee program. Though we do not know 
the development and implementation timeline, the possibility of 
providing doctors with an IT solution that gives VA the information 
they need--and is quick and easy enough for doctors to use without 
unnecessary burden--holds great promise. The VFW will continue to 
closely monitor the development of IT projects underway.

The Question of Contracted Care

    Over the years, VFW has heard many stories of veterans who enter 
into the Fee program, only to be confused and disappointed by the 
experience. What should be an easy and convenient alternative to direct 
care for veterans often leaves them feeling detached from VA. The 
reasons are clear: VA does not reach back to the veteran to gauge their 
satisfaction with episodes of care in the civilian sector; veterans are 
left to make their own appointments, completely independent of any VA 
facilitation; and they are sometimes responsible for getting patient 
records to VA from their civilian providers when possible. Once they 
enter the Fee program, they have little contact with VA, and are given 
no direction from them.
    Congress attempted to address this issue in 2005 with the ongoing 
Project on Healthcare Effectiveness through Resource Optimization 
(Project HERO) pilot program. To date, it is VA's single foray into the 
business of contracting for the provision of private care to veterans, 
and it has achieved generally positive results. We all know that the 5-
year pilot program had a rough start. However, VA responded to the 
concerns of the Veteran Service Organization (VSO) community and the 
program is drawing to a close with a successful record. It regularly 
met quality measures outlined by VA, while also saving money. For this 
and other reasons, the VFW is concerned it may be ending too soon.
    Project HERO is still meeting VA requirements for customer 
satisfaction and distance metrics. The data shows they have greatly 
reduced missed appointments through regular communication with 
patients, providing them with timely reminders. Because VA gets 
clinical notes from providers Humana has contracted with for Project 
HERO, care is being coordinated properly. VA can be certain of this 
because they regularly receive all the metrics they have asked for from 
their remaining contracted partner, Humana Veterans Healthcare 
Services, Inc. Unfortunately, the traditional Fee Basis program 
provides no such metrics.
    One benefit of coordinated care has been the elimination of many 
duplicative services. As a result, VA has saved money even though 
referrals into the program were low throughout the life of the program. 
In addition, VA doctors have the requisite information to bring 
veterans back to VA when it was in the best interest of the veteran. 
Humana's contract was extended beyond the planned termination date 
until March 31, 2013 to allow for more time to transition out of 
Project HERO and to prevent veterans using current Project HERO 
providers from any interruption of service. It should be noted that VA 
still plans to end the contract with Delta Dental, their other partner 
in Project HERO, on the original contract termination date of September 
30, 2012.
    Meanwhile, VA has been working on their plan to replace Project 
HERO with a permanent program, known as Patient-Centered Community Care 
(PCCC) for some time. This program was designed to incorporate the 
lessons learned over the past 5 years working on Project HERO alongside 
Humana and Delta Dental. To the best of our knowledge, this program is 
being crafted to allow VA Central Office to establish numerous 
contracts for coordinating timely and high-quality care that could 
comprise both VA and non-VA providers at the discretion of VA 
clinicians. Veterans would have to be referred into PCCC by a VA 
physician, thereby ensuring the decision to send a veteran into these 
contracted networks would be maintained in-house. VA doctors would also 
have the benefit of detailed clinical notes from each patient visit in 
the network, and thus would be far better equipped to make a decision 
to transfer to a different provider or bring a veteran back into VA 
care based on clinical data. VA would coordinate the care for these 
veterans through the Patient-Aligned Care Teams, in cooperation with a 
care coordinator working for the PCCC contracted network provider. 
Doctors would potentially have the latitude to treat one condition in a 
VA setting, while allowing the veteran to remain in PCCC for other 
conditions. For example, a female veteran with PTSD could be sent into 
the network for maternity care, while continuing to visit the VA 
clinicians she has already bonded with at her VA facility.
    According to VA, initial market research began in November 2010. In 
June 2011, PCCC became an official program through an Executive 
Decision Memorandum of the National Leadership Council. In the closing 
months of 2011, VA released a Request for Information (ROI) and held 
three ``industry days'' to allow companies to dialogue with VA on a 
one-on-one basis.
    Since then, VA has worked to prepare the Request for Proposals 
(RFP) and had intended to release it last month. Because of various 
delays, we now expect the RFP to be released in November 2012. The VFW 
looks forward to the release, as it should answer many remaining 
questions about PCCC. So far, we have learned that PCCC is projected to 
include five regions, which we assume will be managed by different 
contractors. We have learned that contract care provided through PCCC 
will be prioritized over other avenues of non-VA care; a departure from 
Project HERO, as it was given a low priority when being considered for 
Fee Basis services. Unfortunately, the issue of mental health services 
being included in PCCC is still an open question. The November 2, 2011 
RFI regarding PCCC explicitly stated that mental health would not be 
included. However, this committee and VA are now assuring us that 
mental health will be a part of PCCC. We hope that the RFP will make 
VA's intentions clear.
    The contract award for PCCC is scheduled for March 2013, barely 6 
months from now. Project HERO--a relatively small pilot program that 
got off to a slow start--is scheduled to end the same month. The VFW is 
concerned about a possible service gap between the end of Project HERO 
and the indeterminable point in the future when PCCC can serve veterans 
at full capacity. The VFW believes extending Project HERO for 6 months 
was the right thing to do. We also believe that they should extend 
Project HERO until contracts under PCCC are mature enough to handle the 
full caseload for every veteran in the program with a fully capable 
nationwide network of all contracted services. It is unfair to our 
veterans to give them a cold handoff from Project HERO to PCCC. Though 
we are confident VA would do all they can to ensure a smooth 
transition, they deserve someone on the civilian side of the equation 
as well.

VA's Plan To Improve Internal Shortcomings in the Fee Basis Program

    The VFW believes VA is finally taking the shortcomings in the 
traditional Fee Basis Program seriously. Since the release of the 2011 
NAPA report, VA has initiated an ambitious plan to meet many of the 
NAPA recommendations by significantly overhauling referral management 
processes. The initiative, known as Non-VA Care Coordination (NVCC), 
seeks to establish end-to-end documentation for patients admitted to 
civilian facilities. If properly implemented, NVCC will also 
standardize all business rules to document the reasons for using the 
Fee program, thereby facilitating administrative and clinical reviews 
of such decisions. It is designed to establish a system-wide practice 
that will avail veterans to all internal services, such as sharing 
agreements with DoD and university affiliates before being referred 
into the Fee program. NVCC is intended to decrease missed appointments 
by engaging veterans in the appointment management process, and will 
also move VA to a system of form templates to smooth out the paperwork 
and create a database that is searchable. A fully implemented NVCC 
program would also notify patients when Fee Basis--or non-VA, as it is 
now referred to--care is available to them. Through bulk purchasing of 
care, NVCC will hopefully save money and standardize the care provided 
across the country, leading to better outcomes for veterans and metrics 
for VA to use for continuous improvement of the program.
    The VFW will be watching how NVCC is implemented, both at Central 
Office and across the country. We believe it is vitally important that 
such an ambitious program not reside solely within VA Central Office. 
It must be implemented at the local level, even if the up-front costs 
are high. We must not allow more failings at VA because of low morale 
or a culture of indifference. The changes envisioned must take effect. 
Today, NVCC stands as the best vehicle for these changes to take place, 
and we fully support the stated goals of the program.
    VA has a tall order ahead. PCCC must retain the successes of 
Project HERO, and NVCC must fix the internal shortcomings of the 
traditional Fee program. None of these changes will succeed without 
leadership. In the end, it always comes back to leadership. Leaders at 
the highest levels of VA must commit themselves to a coherent and 
sensible approach that meets each of these objectives. Policies that 
are made must be clear, comprehensive and must be enforced at all 
levels within VA. Solutions must leverage the best practices in program 
management, design and information technology. Any long-term success 
must also include cultivating relationships with a number of entities 
in the private sector that believe VA is a capable and responsible 
partner.
    The VFW believes these shortcomings represent a clear-cut 
opportunity to fix a badly broken system, and we are confident that 
veterans can receive better quality of care with greater coordination 
at a lower cost. With that in mind, the VFW hopes this committee will 
take a holistic approach to fixing the Fee program. Each circumstance 
that we resolve creates opportunity, and a systematic fix has the 
potential to both save a considerable amount of money and improve the 
quality of care for veterans using the program.
    Madam Chairwoman, this concludes my statement. I am pleased to 
address any questions you or other Members of the Committee may have.

                                 
                  Prepared Statement of Jacob B. Gadd

    Chairwoman Buerkle and distinguished Members of the Subcommittee on 
Health:
    Thank you for this opportunity to submit The American Legion's 
views on the Department of Veterans Affairs (VA) Fee-Basis Program.
    Title 38, United States Code (U.S.C.) Section 1703a states when VA 
facilities are not ``capable of furnishing economical hospital care or 
medical services because of geographical inaccessibility or are not 
capable of furnishing the care or services required, the Secretary may 
contract with non-Department facilities in order to furnish medical 
care (1).''
    According to the Veterans Health Administration (VHA), if a medical 
service or procedure cannot be provided in a timely manner by VHA due 
to capability, capacity or accessibility, the service may, with 
approval, be fee-based or contracted outside of the VA. Typically, VA 
will utilize fee-basis as a last resort and prefers to treat the 
veteran within their closest hospital, another hospital within Veteran 
Integrated Service Network (VISN), through a sharing arrangement with a 
Department of Defense (DoD) Military Treatment Facility before 
purchasing care in the community. However, VA utilizes fee-basis 
programs as a first resort when the VA Medical Center is short on 
staffing and needs to meet a performance measure for timeliness of 
appointments or care within the established wait time guidelines.
    In a Senate Field Hearing on ``Improving Access to Quality 
Healthcare for Rural Veterans'' our American Legion Past National Vice 
Commander Merv Gunderson said, ``The American Legion urges VA to 
reconsider its national non-VA purchased care policies to allow VA 
Medical Center Chiefs of Staff to use their best judgment and 
discretion to prevent veterans from being forced to drive hours to a 
facility for several routine and reoccurring appointments'' (2).
    There is a need for VA to develop and raise fee-basis care program 
policies and procedures with a patient-centered care strategy that 
takes veterans' interest and distance into account. The directive could 
clarify the roles and responsibilities of the Chief Business Office's 
Purchased Care Office, VISN, VA Medical Center, Business Office and 
clinical staff's policies and procedures for fee basis directives and 
policies to reduce variance and improve coordination between National, 
VISN and VA Medical Centers. The new policy should be well-defined, 
explained to veteran patients and be consistent policy within all VA 
Medical Centers.
    In the last 4 years, non-VA purchased care has doubled from $2.2 
billion in FY 2007 to $4.5 billion in FY 2011 along with a 
corresponding increase of 615,768 veterans served in FY 2007 to 970,727 
veterans served in FY 2011 (2). VA program leadership has stated the 
reasons for growth of non-VA usage are: the increase of unique veterans 
seeking VHA care; economic conditions; waiting times because of more 
veterans enrolling in the system; and growth of number of CBOCs and 
emergency medical needs in rural areas (2). During our System Worth 
Saving site visits, Directors and VA hospital finance staff have told 
us the fee-care is between 15-25 percent of their medical center 
budgets and continues to grow. The facilities struggle with what 
services they can provide in-house and whether they should hire a full-
time specialist to balance the number of veterans requesting the 
specialty services or contract out this care.
    Nowhere is this challenge more evident than with women veterans' 
gender specific specialty services. The majority of women veterans' 
gender-specific care and services are contracted out as VA does not 
currently have the numbers of women veteran staff and demand for 
services. Yet, as women veterans are the fastest growing demographic of 
veterans enrolling in VA, the hiring of women veteran providers within 
the VA to provide gender-specific services should be carefully 
considered.
    In an effort to reduce the continued rise in fee-basis costs as 
well as to improve coordination of care between VA and non-VA purchased 
care, VA is developing a Patient Centered Community Care (PCCC) 
program. The PCCC program is defined as an ``effort to create centrally 
supported health care contracts available throughout the VA. 
Additionally, ``the goal is to provide veterans coordinated, timely 
access to high quality care from a comprehensive network of VA and non-
VA providers.'' The PCCC is taking many of the lessons learned from 
Project Access Received Closer to Home (ARCH), a 5 year pilot that 
recently was completed.
    In a Chief Business Briefing in May 2012, VA stated that current 
individual fee program care concerns include: ``veterans obtains an 
authorization, veterans chooses provider, services are provided 
(accreditation/credentialing status is unknown), no shows are not 
tracked/reported, VA Medical Centers pay the local fee schedule rate, 
provision of medical documentation is not always consistent or timely 
and access, timeliness, safety and complaints are not always a part of 
traditional fee requirements'' (3).
    VA's future plan through PCCC is to refer veterans to network 
provider, require accreditation and credentialing and VA Medical Center 
pays the national negotiated rate rather than the local fee schedule 
rate. By establishing national contracts for non-VA purchased care, VA 
can reduce these program costs by improving economies of scale and 
lowering of fee prices as well as ensuring VA's standards for 
timeliness and quality is tied to these contracts.
    However, VA must be cognizant that not all fee-basis coordination 
can be managed nationally. Many rural areas do not have specialty or 
even primary care providers so some collaboration and coordination 
between the facility and local community providers should be leveraged 
and encouraged to ensure small private practice providers, which may be 
the only option in a community, and especially rural areas, continue to 
be permitted to submit contracts.

Quality of Care Findings with Fee-Basis Programs

    Along with the cost reduction and efficiencies the PCCC program is 
proposing, it is equally important that quality standards for 
contracting care must be the same or better than the care the veteran 
would otherwise have if they were treated in VA.
    Since 2003, the System Worth Saving Task Force has conducted site 
visits to VA Medical Centers to assess the timeliness and quality of 
veterans health care programs and to provide feedback from veterans on 
their level of care. Across the country, we have heard from veterans 
that in many cases, the quality of care they have received from non-VA 
providers has been great and they were treated close to their home.
    However, a few concerns were identified during our System Worth 
Saving site visit interviews with VA Medical Center leadership, staff 
and by local veterans. These concerns include: lack of training and 
education program for non-VA providers; making sure veterans receive 
list of comprehensive network of VA and non-VA providers;lack of 
integration of VA's Computer Patient Record System (CPRS) with non-VA 
providers' computer systems/delay in contractors submitting appointment 
documentation; and the lapsing of Martha's Vineyard Fee Basis/Contract.

Lack of Training and Education Program for Non-VA Providers

    In the System Worth Saving Report on Rural Health it stated, ``In a 
recent article published in the Journal of American Medical Association 
in February 2012, Dr. Kenneth Kizer, former Under Secretary for Health 
for VA said, ``Physicians in private practice may not be prepared to 
treat conditions prevalent among veterans--for example, the Reaching 
Rural Veterans Initiative in Pennsylvania found that primary care 
clinicians lacked knowledge of PTSD, and other mental health disorders 
prevalent among veterans, and were unfamiliar with VA treatment 
resources for such conditions.'' (5)
    There is a need for development of military culture and awareness 
training for non-VA providers to educate and certify them on specific 
veterans' injuries/illnesses such as blast induced TBI, PTSD, and 
suicide prevention prior to contracting any veterans to them for care. 
The VA is a leader in mental health treatment and development of 
evidence-based therapies for PTSD. In addition, the majority of women 
veterans' gender specific care in VA is contracted out to the 
community. Non-VA clinicians need women veterans' specific training on 
the unique challenges women veterans face through injuries/illnesses 
they incurred during their military service.
    If non-VA providers had a formal training and education program for 
military injuries/illnesses, it would ensure they are held to the same 
quality of care standards and treatments as VA providers.

Make sure veterans receive list of comprehensive network of VA and non-
        VA providers.

    VA is developing a national database of local community providers 
that they have fee-based/purchased care from in the community. If this 
effort is expanded, veterans ultimately would receive a list of 
community providers for fee-basis or contracted care so they can 
determine the best provider for them.

Lack of Integration of VA's Computer Patient Record System with Non-VA 
        Providers Computer Systems/Delay in contractors submitting 
        appointment documentation

    Non-VA providers do not have full access to VA's Computer Patient 
Record System (CPRS) to ensure the veteran receives the same or higher 
quality of care. First, access to the veterans' medical record will 
allow the contracted community provider to review the patient's full 
record and history in order to make a proper diagnosis and treatment 
plan. Currently, VA makes copies of the veteran's record for any 
relative injuries/illnesses relating to the appointment but the 
provider does not have the full record in order to understand the 
patient's medical record and any co-occurring medical conditions. 
Second, sharing of the medical record will help the community provider 
to meet all of the quality of care measures tracked in CPRS as well as 
promote screening for TBI, PTSD, depression, substance use and suicide 
or other quality of care measures tracked in CPRS. Thirdly, allowing 
the non-VA provider access to the medical record will speed up receipt 
and documentation from the encounter instead of VA having to wait weeks 
or months to receive documentation back from a non-VA provider.
    With emergence and development of the Lifetime Virtual Electronic 
Record (LVER) and Nationwide Health Information Exchanges across the 
United States, Federal agencies will be integrated with private 
hospitals and companies to improve the interoperability of medical 
records if a veteran is contracted into the community for care.

Martha's Vineyard Fee-Basis/Contract

    The American Legion conducted a site visit to Martha's Vineyard 
last year for our report on Rural Health Care. In 2000, a contract was 
signed between the Providence VA Medical Center and Martha's Vineyard 
Hospital. Through the contract, veterans living on Martha's Vineyard 
were able to receive care at Martha's Vineyard Hospital through fee 
basis instead of having to travel off of the island. The contract 
lapsed around 2004 which the VA did not realize until 2008 when the 
hospital acquired new management. Veterans who were being treated under 
the original contract found out the contract lapsed when Martha's 
Vineyard Hospital sent collection bill notices to those veterans for 
medical expenses previously covered under the contract.
    Since 2008, VA has been negotiating a new contract between 
Providence VA and veterans are forced to take a ferry from Martha's 
Vineyard and drive 2 hours for care at the Providence VA Medical 
Center. Veterans on the island continue to be promised that VA is 
working on the contract but coordination and the processing of the 
contract between VA Central Office, VA's Purchasing Care Office, VISN 
and the Providence VA Medical Center has continued to be delayed.
    While there are only a few veterans that live on the island, this 
delay illustrates the frustrations that veterans living in rural and 
isolated locations or other areas across the country experience in 
waiting for contracts and receiving assurances from VA that the 
contract will be resolved. VA should develop and implement a process to 
ensure all VA and non-VA purchased care contracts are inputted into a 
tracking system to ensure they remain current and do not lapse. If 
there are instances with a contract lapsing, such as in Martha's 
Vineyard, VA should make every effort to hold stakeholder meetings with 
veterans from those communities to solicit input and keep veterans 
enrolled in these contracts/services informed.
    In order to improve situations like Martha's Vineyard, VA must 
strive to create a tracking database of all non-VA purchased care 
contracts to ensure contracts do not lapse and veterans are involved as 
stakeholders and VA regularly communicate with veterans on the status 
of contracts.
    Madame Chairwoman, thank you for allowing The American Legion to 
testify today. I look forward to answering any questions you may have.

    References:

        (1)  Title 38, United States Code (U.S.C.) Section 1703a

        (2)  Chief Business Office Purchased Care VSO Briefing to 
        Veteran Service Organizations. May 2, 2012. PowerPoint 
        Presentation.

        (3)  Chief Business Office Purchased Care VSO Briefing to 
        Veteran Service Organizations. May 2, 2012. PowerPoint 
        Presentation.

        (4)  Senate Field Hearing on ``Improving Access to Quality 
        Healthcare for Rural Veterans.''

        (5)  Wong, Fang. National Commander of The American Legion. 
        2012 System Worth Saving Report on Rural Healthcare. May 2012.

                                 
                    Prepared Statement of Brad Jones

    Chairwoman Buerkle, Ranking Member Michaud, and Members of the 
Subcommittee:

                              Introduction

    Thank you for the opportunity to discuss the Department of Veterans 
Affairs' (VA) Fee care process, which allows eligible Veterans to 
receive medical care in the community when VA determines that care is 
not available at VA facilities. Humana Veterans is proud to be 
partnered with VA to provide health care services and care coordination 
to Veterans authorized to access care in their community designed to 
supplement the care received in the VA health care system.
    Humana Veterans Healthcare Services, Inc. (Humana Veterans), a 
Humana Government Business subsidiary, has contracts with VA to provide 
quality health care through two congressionally-mandated pilot 
programs--Project HERO (Healthcare Effectiveness through Resource 
Optimization) in VISNs 8, 16, 20, and 23 and Project ARCH (Access 
Received Closer to Home) in Farmville, VA, Pratt, KS, Flagstaff, AZ, 
and Billings, MT. In both of these pilot programs, Humana Veterans 
provides access to a competitively priced network of physicians, 
institutions and ancillary providers who adhere to high quality and 
access to care standards. To date, we have served 163,951 Veterans 
making 300,930 patient visits through HERO and ARCH, with an untapped 
capacity to serve more Veterans including those who have mental health 
care needs and who live in rural communities. In addition, through our 
subsidiary company Valor Healthcare, we operate 21 Joint Commission 
certified VA Community Based Outpatient Clinics (CBOCs) across the 
country that serve more than 58,000 Veterans, accommodating over 
100,000 patient visits on an annual basis with services ranging widely 
from primary care to counseling and group therapy.
    With our extensive experience in helping Veterans receive timely, 
quality, and appropriate care in the community, we have a unique 
perspective on the core program elements that are essential to ensuring 
that Veterans receive these services through a Veteran-centric care 
coordination program. This is the essence of the congressionally 
mandated and VA-designed HERO pilot. In a care coordinated program like 
HERO where community providers are an extension of VA's health care 
system, the Veteran never leaves the VA system and just receives one or 
more episodes of care from community providers. The community partner, 
in this case Humana Veterans, returns the clinical information to VA 
and manages all the administrative components of the process, such as 
billing and appointment-making. By keeping these insurance-like, 
administrative tasks outside of VA, the Department can concentrate on 
what they do best--deliver world class health care to our Nation's 
Veterans. Through our work in HERO, we have proven the hypothesis that 
a national health care administrative services provider can deliver 
timely and quality specialty care with significant cost savings. VA's 
annual report on Project HERO for FY 2010 stated that VA saved $16 
million in the four piloted VISNs. That savings figure becomes even 
more impressive considering the fact that only 11 percent of the total 
non-VA outpatient visits in the pilot VISNs went to Project HERO during 
that time period. Extrapolating the savings across total number of non-
VA outpatient visits suggests that VA could have saved $142 million 
that year in those four VISNs if HERO were fully implemented. The 
estimated 950,000 Veterans who were authorized for and received care in 
the legacy Fee process last year would have been better served under a 
contract care program with a strong care coordination element, such as 
the tried and tested HERO pilot program that can be implemented nation-
wide. The additional bonus would be that these Veterans would remain 
connected to VA because in HERO, the Veteran's care is coordinated and 
the clinical information from the Fee treatment is returned to VA.

VA's Fee Process Challenges
    The current Fee process is not integrated with VA's health care 
delivery system and there is no coordination or care management of 
Veterans with Fee care authorizations. This is a fundamental flaw of 
the Fee process; moreover, the importance of care coordination in 
health care has been widely documented and has a broad base of support. 
For example, the National Quality Forum (NQF), a non-profit 
organization dedicated to improving health care quality, has stated the 
following:

        ``Care coordination is a vital aspect of health and health care 
        services. When care is poorly coordinated- with inaccurate 
        transmission of information, inadequate communication, and 
        inappropriate follow-up care- patients who see multiple 
        physicians and care providers face medication errors, hospital 
        readmissions, and avoidable emergency department visits. Health 
        care is not currently delivered uniformly in a well-coordinated 
        and efficient manner.''

    NQF has also provided a framework for defining care coordination by 
identifying key domains, which include a health care home, proactive 
plan of care and follow-up, communication, information system and data 
exchange, and transition of care.\1\
---------------------------------------------------------------------------
    \1\ National Quality Forum, Preferred Practices and Performance 
Measures for Measuring and Reporting Care Coordination. October 2010. 
Web. 5 Sept. 2012, .
---------------------------------------------------------------------------
    Using this framework, the current Fee process fails Veterans in 
each of the above domains. With the exception of Veterans participating 
in Project HERO and Project ARCH, Veterans are left to navigate a 
confusing health care system on their own and become lost to VA. VA has 
no mechanism to track and monitor the care that Veterans receive in the 
community and there is no guarantee that these Veterans do not lose the 
quality, safety and other protections that HERO and ARCH provide. For 
example, these Veterans may not be seen by credentialed and qualified 
community providers, clinical information often does not return to the 
VA in a timely manner, and there is no single point of contact who 
integrates the care that Veterans receive within and outside of the VA 
health care system. Without this care coordinator, it is not possible 
to provide Veterans with the benefits of a proactive plan of care and 
seamless transition of care between VA and community providers. In 
addition, the lack of care coordination hinders VA's ability to 
optimize its resources because there can be duplicative and conflicting 
treatment regimen. This not only results in wasted resources, but also 
can cause adverse medical outcomes. Without the care coordination 
element, VA is foregoing significant potential savings and cost 
avoidance from reducing duplicative and conflicting care.
    Another missed opportunity is in the area of claims payment. At a 
recent House floor debate in May on H.R. 5854, Military Construction 
and Veterans Affairs and Related Agencies Appropriations Act of 2013, 
various members raised serious concerns about past due claims payments 
from VA and the economic realities that will force community providers 
to stop serving Veterans without timely payments. The Fee process not 
only has issues with delayed payments, but also has major challenges in 
erroneous payments. Despite VA's best efforts to automate the Fee 
claims process through various pilot programs over the past 10 years, 
claims are still not automated today and the current manual claims 
process places VA at high risk for improper payments. For example, a 
March 2012 report by the VA Office of Inspector General identified the 
Fee program's improper payment rate at 12.4 percent, \2\ and the 
Government Accountability Office's February 2012 report placed the Fee 
program among the top 10 Federal programs with the highest reported 
improper payment rates. \3\ These findings are consistent in the 
September 2011 report by the National Academy of Public Administration 
(NAPA). The NAPA study also discusses the Fee program's use of 
``antiquated systems and technology'' and points to private sector 
payors who provide ``much more efficient and accurate claims 
processing''. \4\ Case in point, when VA transferred this function to 
Humana Veterans for Project HERO, we demonstrated our ability to make 
timely and accurate payments to our network of providers, which is 
further explained later in this testimony.
---------------------------------------------------------------------------
    \2\ VA Office of Inspector General. Department of Veterans Affairs: 
Review of VA's Compliance with the Improper Payments Elimination and 
Recovery Act. Mar. 14, 2012. Web. 5 Sept. 2012, .
    \3\ U.S. Government Accountability Office. Improper Payments: 
Moving Forward with Government-Wide Reduction Strategies. Feb. 7, 2012. 
Web. 5 Sept. 2012 .
    \4\ National Academy of Public Administration. Veterans Health 
Administration Fee Care Program. Sept. 2011. Web. 5 Sept. 2012 http://
www.napawash.org/wp-content/uploads/2011/11/
White_Paper11012011webposting.pdf.

---------------------------------------------------------------------------
National Contract for Medical and Surgical Services

    Over the past 5 years, the HERO pilot program has proven the 
hypothesis that a national health care administrative services provider 
can collaborate effectively with VA to deliver results-focused, high 
quality, and cost-efficient care. The success of HERO is substantiated 
by a strong set of performance metrics, which include access to care, 
quality standards, safety requirements, return of clinical information, 
and Veteran satisfaction. News of this success has begun to spread with 
the demand for the HERO program growing amongst the local VA Medical 
Centers that fall outside of the pilot locations. Project HERO has 
presented this contracted care as an alternative preferred option to 
the uncoordinated Fee process. However, based on VA's presentation to 
interested contractors, VA is not leveraging the lessons learned from 
HERO in the planned follow-on HERO program that they are calling 
Patient Centered Community Care (PCCC). PCCC, as presented to 
interested companies by VA, would only create a national contract for a 
network of providers to deliver medical and surgical services without 
the critical care coordination elements. This means that PCCC would be 
nothing more than a discounted Fee network, with no added benefits for 
Veterans.
    PCCC, while well-intentioned, would significantly limit the 
contractor's role to one of establishing and managing a provider 
network. Under PCCC, the contractor would not be able to provide the 
administrative services that exist in the HERO pilot and which were 
instrumental to the contractor's care coordination role. The positive 
outcomes achieved under the HERO pilot would be eliminated once the 
contractor no longer has the ability to enforce the VA requirements and 
quality standards within the community provider network. Another 
unintended consequence of removing contractor-provided administrative 
services is the threat to the contractor's ability to maintain a 
provider network that is responsive to VA's changing needs. 
Specifically, the contractor's ability to guarantee a low no-show rate 
and make timely, predictable reimbursements were effective incentives. 
In exchange for these benefits, the network community providers 
returned clinical documents on a timely basis and adhered to an 
extensive list of VA specific requirements that do not exist in the 
providers' other patient populations. Given the on-going challenges VA 
faces with claims payments and inability to match the low no-show rates 
that Humana Veterans achieved, network providers will experience an 
increasing number of missed appointments and delayed and erroneous 
payments. In effect, the Department will lose these once valuable 
incentives that are so critical in driving good behavior and will 
ultimately result in community providers leaving the network. There is 
also the issue of a predictable minimum workload. VA can analyze data 
on past authorizations for purchased care to develop a floor for a 
minimum number of referrals. This will ensure that VA receives the most 
advantageous pricing while also having a positive impact on the 
recruitment and retention of community providers to create a robust 
network that supplements the VA health care system.
    Based on VA-provided information, Humana Veterans believes VA is 
misinterpreting the lessons learned from HERO to create and build new 
in-house capacity to handle administrative functions associated with 
the Fee care authorizations, visits and treatment through the Non-VA 
Care Coordination (NVCC) program. Instead of leveraging the capacity 
and expertise that already exists in industry, NVCC will require 
significant resource investments both in staff and the necessary tools 
to properly handle the ``back-office'' administrative functions. VA's 
implementation of NVCC in the 100+ Fee program offices in the field 
also runs counter to the NAPA recommendation. Rather than consolidate 
to no more than 3 to 5 strategically located regional sites, VA is 
continuing to invest resources to growing the 100+ Fee program offices 
and is reinforcing NAPA's message that the ``Fee program has grown 
haphazardly''. If PCCC is supposed to be the nationwide follow on to 
HERO, the administrative functions of the program need to be conducted 
by the contractor.

Veteran Centric Collaborative Health Care Program

    Rather than continue down the current path for PCCC and NVCC, there 
is still time for VA to incorporate the successful elements of HERO to 
create a Veteran centric collaborative health care program. This 
program should be centered on care coordination and enhanced 
partnerships with national health care administrative services 
providers that will be fully integrated in the continuum of the VA 
health care system as the Department's network of community care 
providers. Such a program will be a win-win for Veterans and VA. 
Veterans will benefit from a fully coordinated and integrated VA health 
care delivery system of VA and community providers, whereas VA will be 
able to achieve cost-savings by partnering with national health care 
administrative services organizations that have existing systems, 
tools, and processes in place for efficiently managing Fee related 
administrative functions.
    There are numerous advantages of a Veteran centric collaborative 
health care program for Veterans, as explained below. Mainly, Veterans 
for whom VA has authorized community care are guaranteed to receive 
care from a network of community providers who are fully credentialed 
and certified so that geographic distance is no longer a barrier to 
access to care. For example, through the HERO pilot program, Humana 
Veterans provides a robust network of about 42,000 providers in the 
four pilot VISNs with the ability to expand pending increased 
referrals. This has made it possible for Veterans to travel a median 
distance of only 13 miles even though 45 percent of the HERO 
appointments were in rural or highly rural areas. Beyond the HERO 
program requirements, VA could charge the contractor with the 
responsibility for training the network of community providers on 
military and Veteran culture where VA provides the training materials 
and contractors are reimbursed for the training.
    Another key advantage to Veterans is the clinical information 
exchange, which ensures timely return of clinical decision-making while 
also minimizing duplicate care and services. This was demonstrated in 
the HERO pilot program where Humana Veterans returns 94 percent of 
clinical information to the VA within 30 days with a median return of 9 
days. In addition, Humana Veterans' care coordinators help each Veteran 
in Project HERO navigate the care that they receive in the community. 
For example, Humana Veterans assists Veterans in identifying network 
community providers, scheduling the appointment, and following up to 
ensure that the Veteran made the doctor's visit. As a result, Humana 
Veterans achieved a no-show rate of 5 percent, which is significantly 
below the industry average that ranges between 14 percent and 24 
percent. Humana Veterans also provides VA direct access to the 
Authorization and Consult Tracking (ACT) system, which is our 
proprietary IT tool for care coordination that allowed VA to track and 
monitor Veterans with Fee authorizations for the very first time.
    Among the other HERO lessons that should be included in a new 
Veteran centric collaborative health care program is a strong clinical 
quality management program to respond to patient safety events. Under 
Project HERO, Humana Veterans operates a clinical quality management 
program, which provides a structured way of identifying and addressing 
possible patient safety events. Through the clinical quality management 
program, Humana Veterans reviews all identified potential quality 
indicators and investigates 100 percent of confirmed quality issues, as 
well as engages VA in a discussion of outcomes through the jointly 
operated Patient Safety Peer Review Committee. Project HERO has also 
demonstrated the ability to ensure accurate and timely claims payment. 
Using our automated claims process and contracted rates that minimize 
the risk for improper payments, Humana Veterans makes 99 percent of 
claim payments to our providers within 30 days and maintained an 
extremely low payment error rate in FY 2011.
    The Veteran centric collaborative health care program could also go 
beyond the lessons learned in HERO by requiring a VA-provided and a 
contractor-provided care coordinator to work together in managing the 
care that Veterans receive. Additional program enhancements should 
focus on eliminating variations, with VA making more consistent 
determination of non-VA care authorizations for Veterans. VA should 
also retain the flexibility to define the standards for referrals and 
authorizations, as well as retain its ``gate-keeper'' role. This means 
that VA retains the decision-making control of, if and when they use 
the community provider network as a tool to supplement the care that 
Veterans receive in VA facilities.
    When VA determines that it is appropriate to send a Veteran to a 
community provider, there must be accountability established to ensure 
that the care is arranged through the Veteran centric collaborative 
health care program. Use of the Project HERO contract was made optional 
for the participating VA Fee offices, and less than 20 percent of the 
total Fee care services in the pilot VISNs went to Project HERO. Not 
only was this often confusing for Veterans and community providers, but 
it resulted in VA not realizing all of the benefits and cost savings 
that could have been achieved through full implementation of the HERO 
pilot. The Veteran centric collaborative health care program must be 
structured to ensure maximum utilization with very limited exceptions 
by all VA Medical Centers.

                               Conclusion

    PCCC presents an excellent opportunity to effect positive change in 
Veterans' health care experience and outcomes. The inclusion of the 
above elements of a Veteran centric collaborative health care program 
in PCCC will ensure that Veterans realize all the benefits of care 
coordination between VA and community providers. VA has a unique 
opportunity to expand the HERO program now available to Veterans in 
only four VISNS to all VISNs. This would create a truly integrated VA 
health care system that better leverages community health care assets 
if and when VA decides to authorize such care. If PCCC ends up being a 
rent-a-network contract or something short of a full care coordination 
model, it will represent a retreat from the Secretary's commitment to 
implement a patient-centered VA health care delivery system that 
includes all VA health care for Veterans--both within and outside the 
walls of the VA.
    Thank you for holding this hearing and tackling this vital issue. I 
appreciate the opportunity to share Humana Veterans' experiences and 
views with the Subcommittee today, and am happy to answer your 
questions.

Brad Jones

    Mr. Brad Jones serves as Chief Operating Officer (COO) of Humana 
Veterans Healthcare Services (Humana Veterans). As a senior leader at 
Humana Veterans, he is responsible for the day-to-day operations and 
the successful execution of all Department of Veterans Affairs 
contracts including Project HERO, Project ARCH, and over 20 VA 
Community Based Outpatient Clinics across the country.
    After obtaining a Bachelor of Science degree in Computer Science 
from the University of Kentucky, Brad began a career in the life and 
health insurance industries that has spanned over 25 years. From 1986 
to 1996, he served as a management information systems professional 
with both Kentucky Central Life Insurance Co. and Jefferson Pilot Life 
Insurance Co. In 1996, Brad was selected to join Humana Military 
Healthcare Services (Humana Military) where he worked on TRICARE 
contracts with the Department of Defense. He was responsible for all 
electronic health care claims initiatives, implementation of Health 
Insurance Portability and Accountability Act (HIPAA) regulations, as 
well as direct oversight of provider data management systems. In 
October 2007, he was promoted to his current position of COO with 
Humana Veterans.
    Humana Veterans Healthcare Services, Inc., a subsidiary of Humana 
Government Business, Inc., is currently providing administrative 
services to the Department of Veterans Affairs under the following 
contracts:
    Project HERO (Healthcare Effectiveness through Resource 
Optimization), originally awarded in 2007 and currently in the fourth 
and final option year. Humana Veterans provides administrative health 
care services to Veterans referred outside of the VA health care system 
for specialty care.
    Project ARCH (Access Received Closer to Home), was awarded in 2011. 
Services under the contract began on August 29, 2011, and include 
administrative health care services to Veterans who meet certain 
eligibility criteria and agree to participate in the program.
    Valor Healthcare, Inc., a subsidiary of Humana Government Business, 
Inc., currently operates 21 VA Community Based Outpatient Clinics 
across the country that provide services ranging widely from primary 
care to counseling and group therapy.

                                 
                    Prepared Statement of Kris Doody

Veterans Health Care Closer to Home

    My brief oral presentation at the Veterans Affairs Sub-Committee on 
Health did not provide an opportunity to relate in some detail the 
unique model that has developed at Cary Medical Center in Caribou, 
Maine for the delivery of VA health care services to eligible, rural 
Veterans. In my extended remarks that follow I will review the 
advantages of our current model as well as some of the challenges we 
face in providing VA care at a non-VA facility.
    It might be wise to consider the current demographics of Veterans 
living in the United States. In 2010 there were 21.8 million Veterans 
living in America. Nine million of the Veterans are over age 65. The 
number of WWII Veterans in 2011 are estimated to be nearly 2.1 million 
but this number is expected to be cut in half by 2015 and in 15 years 
will be down to 50,000. The average age of the WWII Veteran is 86. 
Surviving Korean War Veterans are estimated to be between 3 and 5 
million with some 3.2 million between 65 and 74 and another 363,000 
over age 75. Surviving Vietnam Veterans number some 7.6 million with an 
average age of 60-65. Nearly 3.5 million U.S. Veterans have service 
connected disabilities with some 698,000 at 70 percent or higher.
    Pertinent to this discussion is that some 3.4 million Veterans or 
about 41 percent of the total enrolled in the VA Health Care System 
live in rural or highly rural areas of the country. In recent years the 
Veterans Administration has been working to improve access to care for 
rural Veterans and Cary Medical Center has had the privilege to be part 
of that process. Cary Medical Center is unique in that the hospital is 
located in highly rural Northern Maine. Historically Veterans would 
have to travel some 500-600 miles round trip to access care at Maine's 
only VA hospital at Togus, Maine. Togus is the oldest VA hospital in 
the United States.
    As early as May of 1946 the Department of Maine American Legion was 
advocating for a Veterans Administration Hospital in Aroostook County 
sighting the disadvantage suffered by Veterans living in this vast and 
remote area. In 1979 the Aroostook County Veterans Medical Facility 
Research and Development, Inc. (ACVMFRD) was formally incorporated with 
a single purpose of establishing local health care for Veterans living 
in the County. Providing access to health care for Veterans living in 
rural areas was not a strong suit for the VA. During their original 
efforts to create VA health services the local Veterans group learned 
that in order to establish a formal Veterans Administration Outpatient 
Clinic the VA required that some 180,000 Veterans exist within a 60 
mile radius. With less than 100,000 in total population it was clear 
that Aroostook County would not go the existing route to secure access. 
From 1979 to 1987 this small group of Veterans worked with the state's 
congressional delegation, the VA, the local hospital, Cary Medical 
Center and multiple Veterans Service Organizations.
    While Senator George Mitchell initiated the first attempt to create 
an outpatient VA Clinic in Caribou, Maine based on a new priority of 
improving VA services to rural Veterans, it would not be until the 
Director of the VA Hospital at Togus, through his own authority, 
cleared the way, administratively for a small `follow up' clinic to be 
opened at Cary Medical Center, a public acute care hospital. It would 
become the first such clinic of its kind in the United States. Senator 
George Mitchell, Senator Bill Cohen and then Congresswoman Olympia 
Snowe joined in a united effort to address the issue of rural health 
care for Veterans and helped pass legislation which established a study 
committee to assess the state of care for rural Veterans and to make 
recommendations. The timing was great and as the issue of rural health 
care became more of a priority for the VA, the health care services in 
the new fledgling VA Clinic in Caribou, Maine began to grow.
    Over the last 25 years the clinic has seen numerous expansions and 
now encompasses some 5,000 square feet and serves some 120 veterans per 
day including more than 5,000 clinical visits annually. The clinic now 
has a staff of 21 and provides outreach to satellites in northern and 
southern parts of Aroostook County. Primary Care, Mental Health 
Services, Home Based Care, Tele-Health Services, Health Promotion and 
Education, and Smoking Cessation are among the offerings at the center. 
A number of other CBOCs have now been opened around the State of Maine 
based on the Caribou model and some 600 clinics are available 
nationwide.

Collaboration Key to Success

    It would be easy to just assume that providing convenient access to 
health care for Veterans living in rural and highly rural areas of the 
Nation would be a `no-brainer'. Veterans who live in rural communities 
demonstrated the same level of valor and courage as those living in 
metropolitan and large urban areas of the country. However, there were 
many challenges and these challenges remain. The VA Clinic in Caribou, 
Maine is a great laboratory for the ongoing development of rural VA 
health care. The clinic came about because of a grassroot effort by 
local Veterans and the relationship that was created between the 
Veterans groups, a local hospital, and the Veterans Administration. The 
development of the VA clinic was a gradual process. The clinic started 
as a follow up clinic for specific patients that had been treated at 
the VA hospital in Togus. The VA than established a contract with a 
local physician and expanded care. Finally came the establishment of 
the first VA Community Based Outpatient Clinic staffed by a VA 
physician and staff. All along the way there was a communication 
process that started to open the window for expanded services without 
creating an adversarial or combative environment between the 
constituencies. The VA and its leadership began to hold `Town Hall 
Meetings' at Cary Medical Center in Caribou. They listened to the 
concerns of Veterans and their families. The VA hospital director would 
bring key staff specializing in eligibility, benefits, claims 
processing, women's health and others to hold one on one sessions for 
Veterans with specific issues to resolve. A bond was built that allowed 
for collaboration to grow.
    This dialogue between Veterans, the VA, and the local health care 
providers is absolutely critical to the growth of rural health care for 
Veterans. There must be an understanding that the kinds and numbers of 
clinical services available to Veterans in these rural parts of the 
country depend greatly on the scope of services available in the local 
health care system. Throughout our experience with Veterans they were 
keen on preserving the VA health care system and wanted to stay 
connected with it but they also wanted to be able to access more 
routine care locally. The credibility of the VA health care system and 
the quality of the system has come a great distance in the past 25 
years. Veterans generally have confidence in VA health care and that 
has been demonstrated by the growing numbers accessing VA care. Recent 
surveys point out that when asked if they could choose a health care 
provider more Veterans are indicating that they would choose VA care. 
In fact based on a CBO Paper, published December, 2007--The Health 
System for Veterans--An Interim Report; the VA Health Care System 
scores significantly higher than the private sector on multiple 
measures including Clinical Practice Guidelines and Patient 
Satisfaction. The growth of patients seeking care within the VA System 
has also grown dramatically from 3.6 million to more than 5 million. 
The VA system in 2011 treated some 6.1 million Veterans and saw some 80 
million outpatient visits.
    The entire world changed for Veterans Health care when the Veterans 
Health Care Eligibility Reform Act was passed in 1996 greatly 
increasing the numbers of Veterans eligible for VA care. In the past 
decade the health care budget in the VA has increased from $17 billion 
to $36 billion The VA has established a priority system with levels 1-8 
with level 1 serving those with service connected disabilities and 
level 8, for which enrollment has been frozen since 2003, for any 
honorably discharged veteran.
    The challenges faced by the growing VA health care system are not 
unlike the traditional American health care system. Many Veterans like 
many Americans are aging. The availability of convenient, local access 
to health care services for this aging population is paramount in 
providing high quality management of chronic illness which impacts many 
of the elderly. Helping individuals to remain in their homes, reducing 
hospital admissions, preventing pre-mature institutionalization and 
supporting patients so that they may enjoy a high quality of life 
during the aging process is also a key goal of both the VA and the 
private health care sector. The VA has proven itself, in recent years, 
to be very adept at managing some of the most difficult chronic 
conditions. Recent studies point out that patients with the VA Health 
Care System receive significantly better care for depression, diabetes, 
hyperlipidemia, and hypertension. This has come about primarily because 
of the expansion of services including more than 882 ambulatory care 
and community-based outpatient clinics. Still the problems facing 
Veterans in rural America remain a major challenge. How can we use the 
knowledge and experience gained over the past 25 years to solve these 
challenges?

The Cary Medical Center Model

    We have already discussed the history of the VA clinic at Cary 
Medical Center in Caribou, Maine. While there are many aspects of this 
development that involved pure advocacy of local, dedicated Veterans 
for their fellow comrades, the integration of the VA clinic in Caribou 
within the traditional or private health care system offers a unique 
and intriguing perspective as to future approaches to expanding VA 
Healthcare in rural communities.
    First, and perhaps most important, the successful implementation of 
the rural VA outpatient clinic must have near universal support from 
local Veterans Organizations. When the small group of Veterans began 
their advocacy work in the late 1970's, a visionary Chief Executive 
Officer at Cary Medical Center, a small centrally located acute care 
hospital in Aroostook County, Maine offered to help. The hospital and 
the Veterans group created a bond of mutual support and respect that 
still strongly exists today. Once the Veterans were satisfied that the 
hospital had the commitment and resources to take on the challenge of 
an integrated program with the Veterans Administration Medical Regional 
Office Center at Togus, Maine, they utilized the expertise of the 
hospital in advancing the medical, political, and public support that 
would be required.
    The hospital began by approaching the VA about utilizing space to 
establish a physical presence on the hospital campus. While initially 
contracting a member of its own medical staff to the VA for the purpose 
of seeing a limited number of patients for follow-up after surgical 
procedures at the VA Hospital, the demand for additional services began 
to grow. The VA then moved to recruit a physician from the region to 
staff the clinic as a Veterans Administration Employee. Gradually the 
VA began to expand staff based on volume and the continuing requests of 
the Veterans advocacy group.
    The expansion of the VA clinic came with it a growing relationship 
between the hospital and the VA. This included the hospital's 
understanding of the VA Fee Schedule. Initially only a limited number 
of services were available to Veterans outside the VA clinic. However 
with the passage of the Veterans Health Care Eligibility Reform Act of 
1996, access to more outpatient services was expanded. There continued 
to be some hesitancy of the VA to `let go' of traditional care 
involving Veterans traveling hundreds of miles to the VA hospital for 
minor outpatient procedures but over time services available locally 
began to grow.
    The growing integration between the hospital and the VA was a 
tremendous benefit to area Veterans. The success of the VA clinic 
inspired the Veterans advocacy group to explore other important health 
care needs of Veterans living in Aroostook County. The State of Maine 
had established the `Maine Veterans Home' program in the 1980's. The 
first home was in Augusta, Maine some 300 miles from Caribou. Veterans 
in Aroostook County organized an effort to build a long term care 
facility. Working with the State legislature, and the VA, a new home 
was opened, only the second of its kind in 1990. There are now five 
such long term care facilities in Maine as part of the Maine Veterans 
Homes system. Then in 2003, a new 30-bed Maine Veterans Home 
Residential Care facility was opened on the campus of Cary Medical 
Center.
    While the long term care facilities and the VA outpatient clinic 
are clearly separate, one is directly tied to the VA and the other is a 
purely State run organization, there are common threads which involve 
eligibility requirements, reimbursement issues and a connection to the 
greater Veterans community in Aroostook County.
    While the growth of VA health care in Aroostook County presents a 
very dramatic and unique scenario, the effort to monitor, study, 
explore and expand services continues to be a top priority for both 
Veterans and the hospital. For more than 25 years the hospital has 
maintained a liaison relationship within the Veterans community. A 
member of the hospital's administrative staff is charged with 
monitoring the VA health service at the hospital and to assist with any 
potential issues, and the hospital's CEO conducts quarterly meetings 
with key Veterans leadership. These meetings are designed to address a 
variety of issues including recent national developments in VA health 
care and the needs of the local VA clinic. These meetings are pivotal 
to the continued success of the VA clinic and have led to the ongoing 
expansion of services.
    Over the years the clinic has expanded multiple times and current 
plans are for another expansion. The key to this growth, again, has 
been the dialogue, collaboration and partnership among the major 
players; Veterans groups, the Veterans Administration, and the 
hospital. Each expansion has been based on priority need, a well-
developed strategy, cost benefit analysis, and the answer to a key 
question, how the expansion will impact rural Veterans living in 
Aroostook County. Over the years the level of mutual trust and respect 
that has been established have become a way of life here and the rancor 
and turmoil that characterized so much of the relationship between the 
VA and the Veterans community of the 1970's and 80's has all but 
disappeared.

Project ARCH--The Next Step

    Throughout the years of working with the VA Outpatient Clinic and 
the development of long term care for Veterans through the Maine 
Veterans Homes one key priority eluded the Veterans community in 
Aroostook County, Inpatient and Specialty Care. While Veterans 
continued to advocate for these services the VA stood firm in 
protecting the current system of patients being transferred to the VA 
hospital for any surgical or medical services requiring 
hospitalization. The impact of such a reality for Aroostook County 
Veterans and others living in highly rural areas of the Nation should 
be obvious.
    Patients who require hospitalization are often the most medically 
burdened elderly and may find it difficult to travel the hundreds of 
miles required to receive the services. In rural Northern Maine we have 
no Interstate system and our roads our icy and snow covered for many 
months every year. Many of the Veterans in need of this care are low 
income and while the VA does reimburse travel for the Veteran, family 
members and others who may be key support to the Veteran are often 
unable to make the long trip to the only VA hospital in Maine. The 
support of family and friends has been demonstrated to be a key element 
in the ultimate and early recovery of patients.
    Over the years the issue of inpatient hospital care has been 
discussed and in fact, the CARES project revealed a serious need to 
address hospitalizations for Veterans in rural communities. The project 
actually designated specific areas, including Northern Maine, as a 
priority location for inpatient beds. Funding to execute the findings 
never materialized. The establishment of Project ARCH, Access Received 
Closer to Home, has finally made this piece of the care continuum 
available to Veterans living in five areas of the Nation as a pilot or 
demonstration project. Fortunately Aroostook County was one of these 
selected areas and Cary Medical Center was the hospital selected to 
contract with the Veterans Administration to provide a select number of 
specialty services including hospital care for eligible Veterans.
    Once again this project benefits greatly from the long history that 
Cary Medical Center has with the Veterans Administration and the 
Veterans community. The VA already has primary care and other related 
services on the hospital campus. The level of satisfaction with 
hospital care experienced by Veterans and the hospital's ongoing 
support and advocacy for Veterans health care also played a key role in 
attracting Veterans to Project ARCH project. The compassion and quality 
of care provided by the VA outpatient clinic itself was another key 
driver for the initial and remarkable success of the project.
    A key question with Project ARCH was whether or not the community 
hospital could meet the stringent demands for quality and customer 
satisfaction required by the VA. In the CBO Interim Report--The Health 
Care System for Veterans sighted earlier addressed the improving 
quality of care in the VA system. The VA has adopted the Institute of 
Medicine (IOM) definition of quality: ``the degree to which health 
services for individuals and populations increase the likelihood of 
desired health outcomes and are consistent with current professional 
knowledge''. The IOM also noted that health care should be Safe, 
Effective, Patient-Centered, Timely, Efficient and Equitable. The VA 
tracks many aspects of its health care along the dimensions highlighted 
by the IOM. Based on established Clinical Care Guidelines and other 
measures the quality of care in the VA has significantly improved since 
the organization experienced reengineering from 1994-2000.
    Early indicators are that Cary Medical Center is not only capable 
of meeting these quality expectations but has exceeded them both in 
specific measures of clinical quality and patient satisfaction. The 
hospital has worked closely with its VA contracting office and has 
established a team of key stakeholders in the care delivery process 
including clinical personnel, case management staff, administration, 
finance and other aspects of the project. While the project is just now 
completing its first year of operations nearly 1,000 clinical 
encounters including a number of surgical procedures and hospital stays 
have been completed. We are now in the process of assessing the 
outcomes and opportunities for improvement. The vigilance of the VA in 
monitoring quality and patient satisfaction for Veterans eligible for 
health care close to home is admirable.
    While we wait for the specific and detailed data on the first year 
experience with Project ARCH it is appropriate to pause and consider 
where we have come. From our earlier discussions on the long history of 
the development of the first VA Community Based Outpatient Clinic 
(CBOC) in a rural hospital in the United States to the reality of 
providing overnight hospitalization and specialty services to eligible 
Veterans closer to their homes much has been accomplished. The Veterans 
Health Care Eligibility Reform Act of 1996 made it clear that our 
Nation wanted to do more for those men and women who gave so much in 
service to our country. We have also discussed the aging of our 
Veterans population and the declining WW II survivors. Our Korea and 
Vietnam Veterans are also aging and the implications for their medical 
needs and those that will come after from experience in Iraq and 
Afghanistan are daunting. Visionary ideas like Project ARCH will go a 
great distance in advancing access to care for rural Veterans.
    While we applaud the VA for its consideration of our Nation's 
Veterans and the advancement of both access and quality of care, there 
are some issues that we face here in Maine that are of particular 
concern. The VA has a reimbursement program based on the Medicare Fee 
Schedule. Unfortunately the State of Maine is among the lowest, in the 
Nation, in the level of Medicare reimbursement. While the complicated 
implications of this payment system are much too voluminous for 
discussion here such reimbursement unfairly impacts Cary Medical Center 
as we provide care to Veterans through the VA system. Payment for the 
same service here at Cary Medical Center such as a total joint 
replacement is far lower than the same procedure performed in other 
states. We continue to work with our congressional delegation, 
including Congressman Mike Michaud to gain a more equitable Medicare 
reimbursement rate which would, in turn, support improved reimbursement 
for health care services we provide to Veterans.
    At the same time and perhaps counter intuitive in light of the 
current reimbursement structure, Veterans who have experienced care at 
the local level from Cary Medical Center are clamoring for more access. 
The ability to still feel connected to the VA through accessing primary 
care at the VA Community Based Outpatient Clinic and at the same time 
obtain specialty care, and, if needed hospital care close to their 
homes has been a very positive experience for Veterans. It is our hope 
that the Veterans Administration will, over time, consider adding more 
specialty care options for eligible Veterans in Project ARCH such as 
Ophthalmology. The idea of expanding specialty care in rural 
communities to meet an expanding market share of eligible VA patients 
has a number of positive implications for not only the Veterans who 
will be served but for the entire local community.
    Often times specialty services are not available in a rural 
community due to the number of patients needed to support such 
services. While access to primary care has dramatically improved in 
Caribou, Maine thanks to the expansion of our Federally Qualified 
Health Center, Pines Health Services, additional medical specialists 
are needed. Thanks to the growth in volume presented by Project ARCH we 
have already been able to expand services in Cardiology, Pulmonology, 
Neurology, General Surgery and Orthopedic Surgery. Such development 
speaks well for the future of the hospital and the quality and 
availability of specialty care for the communities we serve including a 
growing number of Veterans.
    Another challenging issue for providing VA health care in non-VA 
facilities has to do with measures of access. Within the current ARCH 
contract the VA has included strict access guidelines. The contract 
calls for Veterans to be scheduled with a specialty medical provider 
within 14 days of authorization. This has been a difficult task for our 
local hospital as we try and build the Veterans patients into the 
routine schedule of very limited specialists, often a single specialist 
deep. Recent figures sighted by the VA IG suggested many VA patients 
were not receiving appointments within 30-days within the VA health 
care system itself. Still, creative solutions are being developed to 
cope with this issue including additional recruitment of specialists, 
`set-aside' days where the specialists schedule only VA patients or 
`catch-up' days that may be held on a Saturday or other non-traditional 
access times.
    The beauty to the seamless integration of the private sector health 
care system at the local community hospital level and the VA primary 
care clinic is that as these issues surface and mutual team, committed 
to improving the delivery of care to the Veteran, comes together and 
creative solutions are identified, tested, modified and implemented on 
an ongoing basis. This process has helped to create what we believe is 
a potential national model for community based Veterans health care.

A Focus on Prevention and Patient Education

    We have established the many benefits of bringing health care 
closer to home for patients within the Veterans Administration Health 
Care System. We have also demonstrated that through closer partnership 
and with mutual trust and respect a strong collaborative approach can 
be developed assuring the provision of quality care and high customer 
satisfaction. But one key advantage that we believe can have 
significant implications in the future is the growth of patient 
education and prevention. This is one area that has only begun to 
evolve. The partnership that exists between the community hospital and 
the VA outpatient clinic holds great promise in the collaborative 
approach to educating patients about chronic disease, preventing Type 2 
diabetes, reducing the risk for heart disease and stroke and many other 
preventable health conditions. The resources of the local VA clinic may 
be limited for such general community work but partnering with the 
hospital and its strong outreach programs could lead to a healthier 
more personally accountable general population as well as a healthier 
Veterans Community.

Conclusion

    It is our hope that we have been able to present a strong case in 
support of Project ARCH and the continuing willingness of the VA to 
work with rural communities in establishing more locally available 
health care for our nations deserving Veterans. Once again we applaud 
the VA for its continuing advancements in technology, patient safety 
and overall quality of care. It is our belief that the continuing 
dialogue between the VA and the private health care sector in rural 
areas of the country will lead to an ever increasing partnership and 
improving health status for the communities in rural America.
    Cary Medical Center particularly salutes the Veterans 
Administration Regional Medical Office Center at Togus, Maine for their 
visionary and remarkable outreach in advancing the care of Veterans in 
rural Maine. We stand ready to offer any assistance we can in advancing 
such efforts and we pay tribute to the Veterans, many of whom have now 
passed, for their tireless efforts on behalf of their Veteran brothers 
and sisters to establish Veterans health care close to home. While all 
of us can hope for an end for the wasteful violence and tragedy of War 
we recognize the many perilous and dark forces that challenge freedom 
on nearly a daily basis. Those men and women who put themselves in 
harm's way offering the greatest sacrifice deserve our best efforts in 
guaranteeing that they will be well cared for when they return home to 
a grateful nation.
    Thank you.

                                 
                Prepared Statement of Dr. Gregg A. Pane

    Madam Chairwoman and Members of the Committee, I appreciate the 
opportunity to testify today, on behalf of a Panel I chaired at the 
National Academy of Public Administration (the Academy) in 2011. 
Established in 1967 and chartered by Congress, the Academy is an 
independent, non-profit, and non-partisan organization dedicated to 
helping leaders meet today's most critical and complex challenges. The 
Academy has a strong organizational assessment capacity; a thorough 
grasp of cutting-edge needs and solutions across the Federal 
Government; and unmatched independence, credibility, and expertise. Our 
organization consists of over 700 Fellows--including former cabinet 
officers, Members of Congress, governors, mayors, and state 
legislators, as well as distinguished scholars, business executives, 
and public administrators. The Academy has a proven record of improving 
the performance and enhancing the accountability of government at all 
levels.
    Over the past decade, the VHA Fee Care Program has grown from an 
infrequently used adjunct to traditional VA health care services into a 
critical element of clinical care for veterans. After extensive 
research and analysis, the Academy's Fee Care Panel recommended that 
VHA consolidate this program into three to five operating centers while 
modifying its claim processing structure to become a more standardized 
system. Standardization of the IT infrastructure along with 
consolidation will allow fewer employees to work more efficiently and 
effectively, and a more structured rule-based environment should lead 
to fewer payment errors and greater program value. The Panel also 
emphasized the importance of conducting an independent analysis of the 
costs and benefits for contracting out this function--similar to the 
approach used by TRICARE and Medicare--to provide important information 
for Congress and VA.

BACKGROUND

    The Veterans Health Administration (VHA) provides the majority of 
medical care services to eligible veterans with Department of Veterans 
Affairs (VA) assets. In some instances, however, VHA procures the 
services of health care providers outside of the VA health care system. 
These services are referred to as ``Fee Basis Care'' or ``Fee Care.''
    Fee Care is typically utilized when a clinical service cannot be 
provided by a VA Medical Center (VAMC), when a veteran is unable to 
access VA health care facilities due to geographic inaccessibility, or 
in emergencies when delays could lead to life-threatening situations. 
In recent years, Fee Care has been increasingly used to meet patient 
wait-time standards.
    VA's Fee Care Program expenditures have grown 275 percent since 
Fiscal Year (FY) 2005. At the time the study was conducted there were 
approximately 2400 Full Time Employees (FTEs) working in the program. 
Paid claims rose from $3 billion in FY 2008 to $4.4 billion in FY 2010 
(46 percent increase), while the number of unique patients served 
increased from 820,000 to 952,000 (16 percent) in the same period.
    In 2009 and 2010, the VA Office of Inspector General (OIG) reported 
on significant problems with the accuracy and efficiency of claims paid 
in the Fee Care Program. The VA OIG reported that VAMCs made hundreds 
of millions of dollars in improper payments--including duplicate 
payments and incorrect amounts, both under- and over-payments--because 
VHA had not established adequate organizational management structures 
and processes. The OIG audit report also included a recommendation that 
VHA evaluate alternative organizational models and payment processing 
options to identify mechanisms to improve payment processing costs and 
timeliness. This recommendation provided a primary impetus for this 
study.
    As part of its strategy to improve payments in this Non-VA Care 
(Fee) Program, VA contracted with the National Academy of Public 
Administration to conduct an independent assessment of the program, 
with the intent of providing VHA with options on the most efficient 
model(s) for its future state.

THE ACADEMY STUDY

    The Academy formed an independent Panel of Fellows to conduct this 
review with support from a professional study team. The Panel's 
assessment focused on promoting active participation and direct 
engagement by all parties involved. The primary methods for collecting 
information as well as verifying our understanding of VA's internal and 
external dynamics approach were to:

      Conduct targeted interviews with VA staff and 
stakeholders.

      Review all existing reports, studies, and audits of the 
current program.

      Collect and analyze data and metrics regarding the 
current performance of the existing program from all available sources.

      Interview staff and research the performance of other 
Federal and commercial health care payer programs.

      Prepare an analysis of findings based on the above 
collection methods for review by the Academy's expert Panel. Draft 
proposals were sent to VA for consideration and comment prior to 
finalization.

    The study team also met with some of the OIG authors to gain 
additional insights into the studies. Another recent, highly relevant 
study was the Indiana University/Purdue University Fee Service 
Evaluation Project, which examined best practices within 13 VHA claims 
processing sites and evaluated overall efficiency, operations 
management, and cost metrics. The Academy study team also interviewed 
the Indiana University/Purdue University researchers.
    In addition to existing reports and studies, another important 
source of information was site visits. The Academy study team visited 
the VHA Chief Business Office Field Office and the National Fee Care 
Program Office in Denver, Colorado, Veterans Integrated Service 
Networks (VISNs) with consolidated centers, and VISNs that still 
process claims in individual VAMCs.
    The study team also visited Medicare and TRICARE program officials 
in Falls Church, VA and Denver, CO. Interviews were conducted with 
officials from some of the major contractors used by Medicare, 
Medicaid, and TRICARE to process claims, including TriWest, Health Net, 
Affiliated Computer Services (ACS), and Humana.

TRICARE AND MEDICARE MODELS

    Both Medicare and TRICARE contract out all of their claims work and 
spend a majority of their staff time on overseeing the contractors and 
contracts. Several large commercial vendors specialize in providing 
large volume processing of these health services claims.
    Medicare provides approximately $400 billion in health insurance 
coverage to people who are aged 65 and over, those who are under 65 
with certain disabilities, and people of all ages with end-stage renal 
disease. The Medicare Program offers an alternative to current VHA 
organizational structures because all administrative (back-office) 
functions have been contracted out. Each of five Medicare Regional 
Offices oversees various activities of the Medicare Administrative 
Contractors (MAC), which in turn are responsible for providing services 
to Medicare's enrolled population.
    TRICARE's $40 billion a year program has outsourced its 
administrative office functions, dividing the United States into three 
regions, each awarded to a separate contractor. Contractors are 
responsible for ensuring that TRICARE's enrolled population receives 
care, developing and maintaining a network of providers, and 
maintaining an information system based on guidance established by 
TRICARE. Taken a step further than Medicare, TRICARE has tried to 
create contracts that push some ``program risks'' to the contractors 
and has created a robust Program Integrity Office with clearly-defined 
criteria and staff consisting of lawyers, statisticians, physicians and 
nurses (RNs). This office directs contractors in identifying and 
limiting fraud and abuse throughout the program.
    TRICARE contractors report that about 75 percent of the claims 
processing is fully automated, that is, not requiring human 
intervention. The contractors also reported to the study team a cost 
per claim of $2.25 to $2.50 for electronic claims and $3.50 for paper-
based claims. This serves as another basic benchmark to gauge the 
potential for productivity improvement in the Fee program.
    Medicare contractors report that about 95 percent of the claims 
processing ranges from about $0.40 to $1.60 per claim depending on 
whether the claim is electronic or paper-based, type of claims, and 
other factors (compared to $9.40 per claim for VISN 19 and $2.55 for 
CHAMPVA). Processing of commercial claims cost about the same, ranging 
from $0.85 per claim for electronic claims to $1.60 for paper-based 
claims.

CHAMPVA

    VA currently runs a centralized claims processing business line for 
the Civilian Health and Medical Program of the Department of Veterans 
Affairs (CHAMPVA) in Denver, Colorado. CHAMPVA provides coverage for 
non-VA purchased care provided to the spouse or widow(er) and to the 
children of a veteran who is rated permanently and totally disabled due 
to a service-connected disability or who died of a service-connected 
disability. In FY 2009 nearly 300 claims processing staff in Denver 
processed over 6 million CHAMPVA claims annually. The average number of 
claims processed per staff member is over 20,000. This level of 
productivity far exceeds the productivity of the most efficient sites 
for the Fee program, and can be viewed as a target for the Fee program 
to achieve.
    There are certain significant differences between the two programs 
that add unique challenges to each program. Authorization at the local 
VA hospital is a significant step in the Fee program that does not 
occur in CHAMPVA. Likewise, CHAMPVA has some requirements that do not 
exist in the Fee program. For example, CHAMPVA handles payment or 
reimbursement of service in foreign countries.

THE FEE CARE PROGRAM'S CHALLENGES

    Several studies and numerous study team interviews point to the 
following significant challenges and areas for improvement in the Fee 
Care Program:

      Decentralized mode of operation across VA hospitals 
resulting in inefficient operations
     
      High error rates
     
      Fee Care Program organizational alignment, staffing, 
grade profiles, education, training, training certification, 
performance standards and performance expectations vary significantly 
across VISNs and operating sites
     
      Interpretation and application of rules vary across Fee 
operating sites.

    The study team's research found:
     
       Limited VISN-wide executive oversight of purchased care programs
     
       No clearly defined operational objectives or goals
     
       No defined strategy for optimally managing program expenditures
     
       Minimal understanding of the services being procured and prices 
paid for those services
     
       No pronounced effort to effectively capitalize on the expertise, 
resources and economies of scale of the VISN.

Error Rate Analysis

    Three VA OIG audits issued over the last 3 years report hundreds of 
millions of dollars in erroneous payments or missed revenue collection 
opportunities. The Audit of Non-VA Inpatient Fee Care Program report 
(August 18, 2010), for example, concluded in its report highlights:
    ``VA Medical Centers (VAMCs) improperly paid 28 percent of 
inpatient Fee claims during the 6-month period of January 1, 2009 
through June 30, 2009. The improper payments occurred because VHA's 
policies for determining eligibility for inpatient Fee care did not 
provide adequate guidance on how to determine eligibility for inpatient 
Fee care or were not understood by Fee staff. Other payment errors 
occurred because Fee staff did not have accurate and timely information 
to determine correct payments, and the VAMC did not have sufficient 
controls to detect clerical errors. We estimate that VHA made net 
overpayments of $120 million on inpatient care for veterans in FY 2009 
or $600 million in improper payments over the next 5 years.''
    The VHA's Chief Business Office (CBO)'s own analysis of error rates 
in claims processing for recent activity is about 12 percent. This 
measure of error rate is net of under and over charges on the billing. 
It does not include procedural errors or errors that do not result in 
inaccurate billing. An error rate of 12 percent applied against total 
Fee expenditures in FY 2011 indicates erroneous payments of 
$500,000,000. The FY 2011 error rate of 12 percent is an improvement 
over the rate reported the previous year (13.8 percent).
    For a comparative benchmark, CBO reported to the study team that 
the national error rate for CHAMPVA for this year is 1.03 percent. This 
is based on using the same measurement processes (payment error 
compared to total payments) that was used to calculate the Fee Basis 
payment error rate of 12 percent.
    The TRICARE program may serve as an example of high performance 
with respect to management of improper payments as well. In interviews 
TRICARE program integrity officials reported error rates that are under 
.05 percent.
    TRICARE's Program Integrity office executes policies and procedures 
regarding prevention, detection, investigation and control of fraud, 
waste and program abuse. It provides oversight of contractor program 
integrity activities. It liaises with Department of Justice, law 
enforcement agencies, state and Federal agencies, and private plans. 
TRICARE program integrity tools include: mandated use of fraud 
detection software; automated computer edit software program; post-pay 
duplicate software; quarterly and annual audits; prepayment review; 
beneficiary/provider education; and anti-fraud data mining (e.g., spike 
detection, outliers). TRICARE maintains and tracks electronic records 
of all adjudicated purchased care claims in its TRICARE Encounter Data 
(TED).

PANEL FINDINGS

    The Fee Care Program is currently operating at an inefficient level 
due to the number of claim payment errors and the relatively low 
productivity of its staff compared to other similar programs. In fact, 
the return on investment (ROI) analysis run by the Panel indicates that 
a total consolidation of the Fee Care Program (which is a combination 
of virtual and VISN consolidation) would save the organization almost 
$4 billion in the next 10 years, net of the investment costs. The net 
total savings was calculated by adding the amount of net savings 
affected by reducing the number of FTEs through consolidation, 
integrating a more automated claims processing system, and reducing the 
errors in payments.
    A consolidation effort would maximize efficiency and reduce 
staffing levels. After reviewing the costs and running a ROI analysis, 
the Panel has concluded that total consolidation shows more efficiency, 
lower error rates, lower resource needs, and over all higher return on 
investment. The standardization of the IT infrastructure along with 
physical consolidation will allow a smaller number of employees to work 
more efficiently and with a more structured rule-based environment 
resulting in a decrease in errors made while processing claims.
    The Department of Veterans Affairs' Fee Care Program needs to 
change. Historically, this program constituted a small fraction of 
health care resources. The Panel estimated that it would constitute 
approximately 10 percent of the VA's total health care budget in FY 
2012. During this period of unprecedented growth, the organizational, 
administrative, and technological systems used to operate and manage 
the program simply have not kept pace. VA is different from most 
Federal health care systems in that it is both a provider of health 
care and a payer of health care claims.
    The Panel reached the following conclusions:

        1.  Given the significant organizational and productivity 
        challenges within the Fee Care Program, VHA has limited 
        understanding of the services it is procuring through this 
        program or their costs.
        2.  The Fee Care Program is significantly more inefficient and 
        has higher error rates than benchmarked organizations. 
        Productivity across operating sites varies considerably. CBO 
        estimates the error rates (that is, erroneous payments) at 12 
        percent per year, or approximately $500 million in FY 2011. By 
        contrast, TRICARE has a reported error rate of 0.42 percent. 
        Productivity varies so greatly across operating sites that the 
        productivity of the most efficient processing site is nearly 10 
        times greater than the most inefficient site.
        3.  The Fee Care Program has grown haphazardly over the years 
        and the technology and administration of Fee care claims have 
        been neglected. As VA's Fee Care Program has grown, the 
        Department has been playing catch-up in its attempts to 
        modernize and improve its decentralized and inefficient claims 
        processing system. Despite a number of initiatives being 
        undertaken to improve the current situation, the organization 
        responsible for improving the system, CBO, has limited control 
        and authority.
        4.  VA has an opportunity to create a markedly improved Fee 
        claims system but faces major challenges. In addition to the 
        significant changes recommended for VHA field operations 
        outlined below and the needed technology enhancements, the 
        Panel also believes that CBO needs to change the organizational 
        alignment within the Fee office to achieve more focus, 
        effective leadership, and improved lines of authority to bring 
        about the necessary changes.
        5.  CBO has struggled to meet its mandate to provide a single 
        accountable authority to develop administrative processes, 
        policy, regulations, and directives regarding the delivery of 
        VA health benefit program.
        6.  The support environment within VA and VHA--particularly IT, 
        H.R. and Contracting--plays key roles in improving the 
        functioning of the Fee Care Program. The Panel believes that 
        strong leadership support from senior VA and VHA officials will 
        be required to provide the Fee Care Program with the 
        institutional support required to bring about the recommended 
        changes.
        7.  Although the Fee Care Program can significantly improve 
        just by changing its organizational and administrative 
        processes, the most significant performance breakthroughs can 
        take place only through technology. Two excellent examples of 
        how technology can do this are the Medicare and TRICARE 
        programs, which respectively handle 90 percent plus and 75 
        percent of their claims without human intervention. VA in 
        contrast, cannot process any claims without human intervention.
        8.  CBO also needs to develop stronger program management 
        capabilities. Although CBO does not exercise direct line 
        authority over field Fee operations, they still can develop 
        mechanisms that can help to drive desired outcomes by using the 
        traditional tools available to program managers:

    Metrics--CBO needs a balanced set of metrics to oversee Fee 
operations in the field. This would include measures of speed, 
accuracy, costs and customer satisfaction.
    Data--reliable performance data is essential for Fee Care Program 
oversight. This study found numerous examples of questionable and 
clearly erroneous data used in Fee Care Program reports. It was also 
clear that this information was not being adequately reviewed by 
Program officials.
    Program integrity--CBO should create and manage a program integrity 
component in each of the consolidated operating centers as well as at 
its headquarters for determining whether work is being done in the 
prescribed manner.
    Use existing authority--both CBO and all VISN directors report to 
the Deputy Under Secretary for Health/Operations and Management. In 
matters of insuring field business office structural and business 
process consistency, this office should exercise more direct control.
    Over the past decade, the Fee Care Program has grown from a small, 
relatively infrequently used adjunct to traditional VA health care 
services, into a critical element of clinical care for veterans. While 
the Fee Care Program has grown exponentially in terms of volume and 
budget outlays, there has been insufficient strategic oversight of the 
program and its administrative and support systems have languished.

PANEL RECOMMENDATIONS

    After analyzing the costs and ROI, the Panel concluded that 
consolidating the Fee Care Program into three to five operating centers 
while modifying its claim processing structure to become a more 
standardized system is the appropriate course of action in order to 
increase effectiveness and efficiency. Standardization of the IT 
infrastructure along with consolidation will allow fewer employees to 
work more efficiently and effectively. A more structured rule-based 
environment would lead to fewer payment errors and greater program 
value.
    More specifically, the Panel recommended that VHA take the 
following steps to strengthen the Fee Care Program:

Organizational Consolidation and Management Changes

    1.  Consolidate its Fee Care Program from the current 100+ 
operating sites to the smallest number possible that will provide 
necessary redundancy and surge capabilities. This should result in no 
more than three to five strategically located regional sites.
    2.  High level VA management should provide clear policy direction 
about performance goals and expectations for VA purchased care, 
including the allocation of resources between VA-provided and purchased 
care to best meet strategic goals.
    3.  VHA should build greater program management competence and 
capacity for overseeing the Fee Care Program and supporting the 
consolidated claims processing sites. VHA should look both within and 
external to VA for expertise in this effort.
    Create and manage a program integrity component in each of the 
claims processing sites, in addition to the planned headquarters 
component.
    Establish a performance management system having performance 
metrics for productivity, accuracy, timeliness and customer 
satisfaction, among other things.
    VHA should establish short and long-term performance goals.
    Build greater program management competence for overseeing the Fee 
program.

Technology and Virtual Consolidation

    4.  VHA should procure and implement an enterprise-wide technology 
solution to facilitate virtual consolidation.

Other Considerations

    5.  Conduct a cost-benefit analysis of contracting out the 
processing of claims as with other payer models (such as TRICARE, 
Medicare, Medicaid, and Blue Cross Blue Shield) and their applicability 
for VA. This was outside the scope of the Academy Panel's mandate in 
this study.
    By implementing these recommendations, the Panel believes that VA 
will improve service to Fee Care providers, which will help ensure 
maximal participation in the Fee Care Program and, consequently, more 
available health care options for veterans. The savings gained from 
more efficient administration and more accurate payments can be 
redirected back into improving other health care services for veterans.
    Madam Chairwoman, that concludes my prepared statement, and I would 
be pleased to answer any questions you or the Committee members may 
have.

                                 
     Prepared Statement of The Honorable Dr. Robert A. Petzel, M.D.

    Good morning, Madam Chairwoman, Mr. Ranking Member, and Members of 
the Subcommittee. Thank you for the opportunity to discuss the 
Department of Veterans Affairs' (VA) purchased care programs. I am 
accompanied today by Philip Matkovsky, Assistant Deputy Under Secretary 
for Health for Administrative Operations; Cyndi Kindred, Acting Deputy 
Chief Business Officer for Purchased Care; and Deborah James, Non-VA 
Care Coordination (NVCC) Project Manager.
    VA provides care to Veterans directly in a VHA facility or 
indirectly through either individual authorizations or through 
contracts with local providers. This mix of in-house and external care 
provides Veterans the full continuum of health care services covered 
under our medical benefits package. VHA recognizes that improvements 
are needed in the Non-VA Care Program, including that part of this 
program previously known as Fee Basis. To address these concerns, VA 
has developed and managed multiple initiatives in the Non-VA Care 
Program. These initiatives are designed to ensure that high-quality 
care is consistently provided to Veterans under the non-VA care 
authorities. They are also designed to ensure Veterans receive 
effective and efficient non-VA care seamlessly.
    My testimony today will discuss two initiatives, Patient-Centered 
Community Care (PCCC) and Non-VA Care Coordination (NVCC), both of 
which will help ensure that high-quality care is consistently provided 
to Veterans regardless if they receive their care in-house or from a 
non-VA care provider. I will also provide you with an update on the 
Project HERO (Healthcare Effectiveness through Resource Optimization) 
Program, Project ARCH (Access Received Closer to Home) and how our use 
of non-VA care is increasing access to care for rural Veterans. My 
testimony will discuss the clinical metrics and standards we have 
instituted to ensure Veterans receive the same quality care from non-VA 
providers participating in the Non-VA Providers Program as Veterans 
receive in-house.

Non-VA Care Generally

    It is VHA policy to provide eligible Veterans care within the VA 
system whenever feasible and to the extent authorized by law. When VA 
cannot provide all of the necessary medical care and services at a VA 
medical facility, VA is, generally speaking, authorized to provide the 
needed care through non-VA providers in a manner consistent with the 
requirements and parameters of the non-VA care program and its 
underlying legal authorities.
    VA uses criteria to determine whether non-VA care may be used. VA 
may consider non-VA care due to a lack of an available specialist, long 
wait times, or extraordinary distances from the Veteran's home. 
Purchasing the services will only be considered if other options within 
VHA are not appropriate or viable. If purchasing services is required, 
two principal avenues exist for contracting health care services: 
conventional commercial providers and academic affiliates.
    VHA's academic affiliates (schools of medicine, academic medical 
centers and their associated clinical practices) provide a large 
proportion of contracted clinical care both within and outside of VHA. 
All non-competitive VHA health care resource contracts valued at 
$500,000 or more and competitive contracts over $1.5 million are 
reviewed through a thorough process that includes the Office of General 
Counsel (for legal sufficiency), VHA's Office of Patient Care Services 
(for quality and safety), VHA's Office of Academic Affiliations (for 
affiliate relations assessment), and VHA's Procurement and Logistics 
Office (for acquisition technical review for policy compliance). In 
addition, the Office of Inspector General performs a pre-award audit of 
all non-competitive contracts valued over $500,000.
    VA is focusing on two initiatives to improve the oversight, 
management, and delivery of non-VA care: Patient-Centered Community 
Care (PCCC), which is still in development, and the Non-VA Care 
Coordination (NVCC) program. In earlier discussions with stakeholders, 
including this Subcommittee, VA has heard concerns regarding the 
implementation of PCCC and NVCC. I assure you, we are taking the 
necessary precautions to see that these initiatives provide timely, 
high quality medical care.

Patient-Centered Community Care (PCCC)

    PCCC will consist of a network of centrally supported standardized 
health care contracts, available throughout VHA's Veterans Integrated 
Service Networks (VISN). This initiative will focus on ensuring proper 
coordination between VA and non-VA providers. PCCC is not intended to 
increase the purchasing of non-VA care, but rather to improve 
management and oversight of the care that is currently purchased. This 
includes improvements in numerous areas such as consistent clinical 
quality standards across all contracts, standardized referral 
processes, and timeliness of receipt of clinical information from non-
VA providers. The goal of this program is to ensure Veterans receive 
care from community providers that is timely, accessible, and 
courteous, that honors Veterans' preferences, enhances medical 
documentation sharing, and that is coordinated with VA providers when 
VA services are not available.
    While VA intends to administer these contracts directly, it has not 
yet determined how they will be managed. Additionally, VA is currently 
researching the appropriateness of incentives tied to performance 
standards to help ensure the selected contractors provide excellent 
customer service and timely care. VA conducted a business case analysis 
which compared the cost of purchasing care through individual 
authorizations and through regional contracts. The analysis showed that 
regional contracts are more cost-effective, with the cost/benefit ratio 
improving as participation increases. The PCCC contracts will cover 
inpatient and outpatient specialty care and mental health care. Primary 
care is not included in the solicitation because it is an essential 
function of VA and is the key to coordinating Veteran health care. 
Chronic dialysis is also excluded from the solicitation; currently 7 
contracts and 19 Basic Ordering Agreements are in place nationally to 
purchase dialysis services, and these contracts are proving to be very 
successful in ensuring quality and accessible services are available 
for our Veterans close to where they live.
    The original schedule for release of the Request for Proposal (RFP) 
and subsequent evaluation of proposals and award was first quarter 
fiscal year (FY) 2013. However, in an effort to strengthen the 
requirements, incorporate a broader range of ideas from key 
stakeholders such as our Veterans Service Organizations and the private 
sector, VA will release a draft RFP for comment before the release of 
the final RFP in the interest of making this effort a more effective 
solution. VA now plans to award the new contracts in late second 
quarter of FY 2013.

Non-VA Care Coordination (NVCC)

    NVCC is VA's internal program to improve and standardize our 
processes for referrals to non-VA care. The NVCC model centers on 
effective referral management and consistency in documenting, tracking, 
managing receipt of supporting clinical documentation and coordinating 
patients in community health facilities. Through NVCC, non-VA care 
staff use standardized processes and templates for the administrative 
functions associated with non-VA care. VA successfully conducted 
initial pilot programs in VISNs 11 and 18 in FY 2011. VHA incorporated 
best practices from the pilot sites and created the structure that is 
currently being deployed to one champion site per VISN. All champion 
sites will be completed in late fall 2012. Full national deployment 
will be complete by the end of FY 2013.

Quality Standards

    VHA exercises its responsibility to provide quality contracted care 
to Veterans through several clinical and business mechanisms. These 
include credentialing and privileging, quality and patient safety 
monitoring, medical documentation sharing requirements, financial and 
compliance reviews, and specific quality of care provisions included in 
the contract itself. Facility directors are responsible for ensuring 
that these oversight mechanisms are consistently and effectively 
applied to all medical services provided under contract in a VHA 
facility. Ensuring quality standards for VHA contracted care outside of 
a facility is more difficult, but VHA includes language in such 
contracts that requires industry standard accreditation or 
certification requirements are being met, clinical reporting occurs, 
and oversight mechanisms are in place to ensure that this care meets VA 
standards.

Rural Care

    Project HERO (Healthcare Effectiveness through Resource 
Optimization) is a pilot program in VISNs 8, 16, 20, and 23 that helps 
eligible Veterans receive the care they need when it is not available 
at a VA facility. The objectives of Project HERO are to provide as much 
care as possible within VHA, efficiently refer Veterans to high quality 
community-based care, foster high quality care and patient safety, 
improve the exchange of information, and increase Veterans overall 
satisfaction of care. The Project is currently in its fifth year. 
Medical care is offered through contracts with Humana Veterans 
Healthcare Systems (HVHS) and Delta Dental Federal Government Programs 
(Delta Dental). Project HERO provides Veterans with access to a pre-
screened network of medical and dental providers who meet VA standards 
for quality care. These providers must meet VA defined standards for 
credentialing, accreditation, and quality. Specifically, these 
contracts require that HVHS and Delta Dental have quality management 
programs that comply with VA, Joint Commission, Federal, and state 
requirements.
    Once VA determines that contract care is appropriate, HVHS and 
Delta Dental communicate directly with Veterans to schedule 
appointments, and Veterans see HVHS or Delta Dental doctors or 
dentists. Requests for additional services must be referred back to VA, 
which allows the Department to coordinate each patient's care and 
maintain oversight of each patient's care needs. Following each 
appointment, HVHS and Delta Dental providers send patient records and 
invoices to HVHS and Delta Dental, which in turn submit medical records 
and claims to VA.
    VA learned many lessons from Project HERO and is using this 
information to develop the PCCC contracts. We also realized success in 
several key measures, such as scheduling and completing appointments 
within 30 days and receiving updated clinical information within 30 
days. We confirmed that we can ensure availability of credentialed and 
accredited providers that meet our standards for care. Additionally, 
when compared to traditional fee basis care, Project HERO has yielded a 
significant cost savings, amounting to more than $27 million through 
July 2012.
    The lessons learned over the course of Project HERO will be 
incorporated into PCCC as it is fully implemented. To ensure a smooth 
transition from Project HERO to PCCC, VA has notified HVHS of its 
intent to extend the current medical/surgical services contract until 
March 2013. This extension will help ensure Veterans currently seeing a 
Project HERO provider have no disruption of service while the PCCC 
contracts are being awarded. The extension will also allow VA medical 
centers in those four VISNs to continue taking advantage of the 
quality, access, and medical documentation sharing requirements in the 
Project HERO contract. If the PCCC contracts are not in place by the 
expiration of this extension, VA will ensure Veterans will still 
receive timely and quality non-VA care through the use of individual 
authorizations.
    Additionally, VA's Office of Rural Health has implemented a 3-year 
pilot program to provide health care services through contractual 
arrangements with non-VA care providers--Project ARCH (Access Received 
Closer to Home). This pilot intends to improve access for eligible 
Veterans by connecting them to health care services closer to home. 
Five pilot sites have been established across the country: Caribou, ME; 
Farmville, VA; Pratt, KS; Flagstaff, AZ; and Billings, MT. On July 29, 
2011, health care delivery contracts were awarded to: Humana Veterans 
in VISNs 6, 15, 18, and 19, and Cary Medical Center in VISN 1. This 
program became operational on August 29, 2011.

Conclusion

    As the Nation's only health care system designed specifically to 
treat Veterans, VA offers services and benefits unavailable elsewhere. 
This system has been designed and continuously updated to respond to 
the unique needs of Veterans in an environment that understands and 
honors their military service. For these reasons, VA's first preference 
is to provide care to Veterans within its system, but we recognize that 
we cannot provide the necessary care to every Veteran in our 
facilities, which is why we utilize non-VA services where appropriate. 
Veterans receiving care from non-VA sources should rightfully expect 
the same quality care from these providers as they would receive from 
ours. Consequently, VA has developed a strategy to improve its 
purchased care programs to achieve quality improvements and cost 
savings. This strategy entails greater use of standardized contracts 
through PCCC and better referral management through NVCC. We are 
currently in a moment of transition for VA's purchased care program, 
and we appreciate the advice and counsel of our stakeholders--the 
Veterans we serve, the Service Organizations that represent them, and 
Congress--as we proceed.
    Madam Chairwoman and Mr. Ranking Member, VA has utilized its 
authorities to provide eligible Veterans quality care in non-VA 
settings. We have also instituted new models and controls to ensure 
Federal resources are used appropriately. We appreciate the opportunity 
to appear before you today. My colleagues and I are now prepared to 
answer your questions.

                                 
    Prepared Statement of the Office of the Inspector General, U.S. 
                     Department of Veterans Affairs

    Madam Chairwoman, Ranking Member Michaud, and Members of the 
Subcommittee, thank you for the opportunity to provide testimony 
concerning the Office of Inspector General's (OIG) work related to VA's 
purchase of health care services for veterans from non-VA providers. As 
health care costs continue to increase, ensuring that VA has strong 
controls over purchased care activities is a critical aspect of 
providing the health care veterans need.
    Over the past 3 years, the OIG has issued seven reports \1\ on VA's 
fee care program. Our audits and reviews of fee care have identified 
significant weaknesses and inefficiencies. Specifically, we found that 
VA had not established effective policies and procedures to oversee and 
monitor services provided by non-VA providers to ensure they are 
necessary, timely, high quality, and properly contracted and billed.
---------------------------------------------------------------------------
    \1\ Audit of Veterans Health Administration's Non-VA Outpatient Fee 
Care Program (August 3, 2009); Audit of Non-VA Inpatient Fee Care 
Program (August 18, 2010); Review of Veterans Health Administration's 
Fraud Management for the Non-VA Fee Care Program (June 8, 2010); Review 
of Alleged Mismanagement of Non-VA Fee Care Funds at the Phoenix VA 
Health Care System (November 8, 2011); Administrative Investigation, 
Improper Contracts, Conflict of Interest, Failure to Follow Policy, and 
Lack of Candor, Health Administration Center, Denver, Colorado (April 
12, 2012); and Review of Enterprise Technology Solutions, LLC, 
Compliance with Service-Disabled Veteran-Owned Small Business Program 
Subcontracting Limitations (August 20, 2012).

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BACKGROUND

    Title 38 of the United States Code permits VA to purchase health 
care services on a fee-for-service or contract basis when services are 
unavailable at VA facilities, when VA medical centers (VAMCs) cannot 
provide services economically due to geographical inaccessibility, or 
in emergencies when delays may be hazardous to a veteran's life or 
health. At the time of our initial work in fiscal year (FY) 2008, the 
Veterans Health Administration's (VHA) medical care budget totaled 
approximately $39 billion. In FY 2011, the medical care budget 
increased to about $48 billion. We estimate that of this amount, VHA 
spent about $4.6 billion to purchase health care services from non-VA 
entities such as other government agencies, affiliated universities, 
community hospitals, nursing homes, and individual providers. VHA uses 
various mechanisms to purchase health care services, including sharing 
agreements with affiliated universities and the Department of Defense, 
Federal Supply Schedule (FSS) contracts, the Non-VA Fee Care Program, 
Project HERO, and the Foreign Medical Program. According to VHA 
managers, the authority to purchase services from non-VA sources helps 
to improve veterans' access to needed health care services, in 
particular specialty care that may not be available at VAMCs.

OIG REPORTS Audit of Non-VA Outpatient Fee Care Program

    At the time of our audit in FY 2008, 137 VAMCs processed an 
estimated 3.2 million outpatient fee claims at a cost of about $1.6 
billion. These claims were for a wide range of diagnostic and 
therapeutic services including visits to primary care physicians, x-
rays and diagnostic imaging procedures, chemotherapy and radiation 
therapy, dialysis, physical therapy, and outpatient surgical 
procedures. Based on our review of a statistical sample of 800 claims, 
we concluded that VHA had not established adequate management controls 
and oversight procedures to ensure that claims for outpatient fee 
services were accurately paid, justifications for services were 
adequately documented, and services were properly pre-authorized. We 
concluded that the improper payments, justifications, and 
authorizations occurred because VHA had not established an adequate 
organizational structure to support and control the complex, highly 
decentralized, and rapidly growing fee program. For example:
    VAMCs improperly paid 37 percent of outpatient fee claims by making 
duplicate payments, paying incorrect rates, and making other less 
frequent payment errors, such as paying for the wrong quantity of 
services. As a result, we estimated that in FY 2008, VAMCs overpaid 
$225 million and underpaid $52 million to fee providers, or about $1.13 
billion in overpayments and $260 million in underpayments over 5 years.
    For 80 percent of outpatient fee claims we reviewed VAMCs did not 
adequately document justifications for use of outpatient fee care or 
properly pre-authorize services as required by VHA policy, thereby 
increasing the risk of additional improper payments.
    We identified three specific areas that required strengthening:
    Comprehensive Fee Policies and Procedures--VHA did not have a 
centralized source of comprehensive, clearly written policies and 
procedures for the Fee Program. Instead, fee supervisors and staff had 
to rely on an assortment of resources including the Code of Federal 
Regulations, outdated VA policy manuals, and other procedural guides, 
training materials, or informal guidance.
    Identification of Core Competencies and Required Training for Fee 
Staff--Because the Fee Program is very complex and requires significant 
judgment by fee staff to ensure correct payments, processing fee claims 
requires specialized knowledge and skills, such as understanding 
medical records, insurance billing concepts, and medical procedure 
coding. However, VHA did not require fee staff or their supervisors to 
attend initial or refresher training.
    Clear Oversight Responsibilities and Procedures--Strong oversight 
of the Fee Care Program should include procedures and performance 
metrics for assessing compliance with program requirements, conducting 
risk assessments, assessing program controls, and monitoring accuracy 
and quality of claims processing. However, no one from VHA's Chief 
Business Office, National Fee Program Office, Veterans Integrated 
Service Networks, or Compliance and Business Integrity Office was 
routinely performing oversight activities of the Fee Program.
    We made eight recommendations to strengthen controls over the 
Outpatient Fee Care Program. The Under Secretary for Health agreed with 
the findings and recommendations and has since implemented all the 
recommendations.

Audit of Non-VA Inpatient Fee Care Program

    In our report, Audit of Non-VA Inpatient Fee Care Program, we 
estimated that VAMCs had a combined authorization error and improper 
payment rate of 30 percent during the 6-month period of January 1, 
2009-June 30, 2009.\2\ VAMC staff made authorization errors because 
VHA's policies did not provide adequate guidance on how to determine 
eligibility for inpatient fee care or were not understood by fee staff. 
Payment errors occurred because fee staff did not have accurate and 
timely information to determine correct payments, and the VAMC did not 
have sufficient controls to detect clerical errors. We estimated that 
VHA made net overpayments of $120 million on inpatient care for 
veterans in FY 2009 or $600 million in improper payments over 5 years. 
For example:

    \2\ The population of claims consisted of 32,380 non-VA inpatient 
claims valued at approximately $386.2 million for the 6-month period. 
Our review was of 791 inpatient fee claims valued at $10.6 million 
which identified 235 payments errors valued at $1.6 million. We found 
181 overpayments valued at $1.7 million and 54 underpayments valued at 
about $25,000.
---------------------------------------------------------------------------
    VAMCs improperly paid 9 percent of all inpatient fee claims by 
authorizing non-emergency inpatient fee care for veterans who were not 
eligible for this care. These errors occurred because VHA's policy did 
not adequately address how to determine eligibility for non-emergency 
inpatient fee care.
     VAMCs improperly paid 4 percent of all inpatient fee claims by 
authorizing emergency care for veterans who were ineligible for this 
care. These errors occurred because fee staff did not understand the 
individual eligibility criteria for emergency inpatient fee care, such 
as the authorized treatment must be related to a service-connected 
disability.
     VAMCs paid improper amounts for 17 percent of pre-authorized 
inpatient fee claims. VAMCs made three types of payment errors; they 
did not:

      Know where to find inpatient transfer information needed 
to determine when to apply per diem payment methodology.
     
      Utilize Preferred Pricing Program rates because the 
Program process was not timely.
     
      Pay other proper rates because fee staff were provided 
with inaccurate rate information or made clerical errors.

    We made recommendations to establish guidance on how to determine 
eligibility, to develop and implement mandatory training on eligibility 
criteria for inpatient fee care, to establish guidance on where to find 
inpatient transfer information needed to determine when to apply the 
per diem payment methodology, and to implement a quality control 
mechanism to address the types of payment errors identified by this 
audit. The Under Secretary for Health agreed with the findings and 
recommendations and has since implemented the recommendations.

Review of Veterans Health Administration's Fraud Management for the 
        Non-VA Fee Care Program

    As a result of the identification of the lack of outpatient and 
inpatient fee care program controls and the problems reported in other 
Federal medical programs, we also reviewed the fee care's fraud program 
and controls. In June 2010, we completed a review that determined VHA 
had not established controls designed to prevent and detect fraud 
primarily. This occurred because it had not identified fraud as a 
significant risk to the Fee Care Program, even though VHA's Fee Care 
Program is not significantly different from other health care programs 
that have identified numerous cases of fraud. We estimated that the 
program could be paying between $114 million and $380 million annually 
for fraudulent claims. We recommended that the Under Secretary for 
Health establish a fraud management program that includes such fraud 
controls as data analysis and high-risk payment reviews, system 
software edits, employee fraud training, and fraud awareness and 
reporting. The Under Secretary for Health agreed with our finding and 
recommendation and completed all corrective actions.

Review of Alleged Mismanagement of Non-VA Fee Care Funds at the Phoenix 
        VA Health Care System

    In November 2011, we issued Review of Alleged Mismanagement of Non-
VA Fee Care Funds at the Phoenix VA Health Care System approximately 
2\1/2\ years since we issued our first report on the Fee Care Program. 
However, we found that this medical facility mismanaged fee care funds 
and experienced a budget shortfall of $11.4 million or 20 percent of 
their FY 2010 fee care program funds. We concluded that the 
authorization procedures were so weak that the Phoenix Health Care 
System (HCS) processed about $56 million of fee care claims without 
adequate review.
    The reason for the shortfall was the lack of effective pre-
authorization procedures, a problem we reported in August 2009. The 
Phoenix HCS did not have effective pre-authorization procedures for fee 
care because the physician who was responsible for reviewing and pre-
authorizing virtually all of the of fee care claims routinely approved 
requests for fee care with no substantive questions or requests for 
additional information. Further, the medical facility did not have 
adequate procedures to obligate sufficient funds to ensure it could pay 
its commitments for these services.
    The mismanagement of fee authorization procedures at the Phoenix 
HCS highlights the risks to the Non-VA Fee Care Program, such as 
authorizing:

     Diagnostic tests or procedures that are not medically necessary.
     
     Services that are available at a VA medical facility.
     
     Unnecessary and often excessive numbers of medical treatments.

    Our recommendations included the establishment of monitoring 
procedures to ensure that the official designated to pre-authorize fee 
care thoroughly review fee care requests and that fee staff obligate 
sufficient funds for approved fee care. The Interim Director of the 
Phoenix HCS agreed with our findings and recommendations and is working 
to implement our recommendations.

Administrative Investigation, Improper Contracts, Conflict of Interest, 
        Failure to Follow Policy, and Lack of Candor, Health 
        Administration Center, Denver, Colorado

    The OIG Administrative Investigations Division recently completed 
an administrative investigation regarding the Deputy Chief Business 
Officer for Purchased Care. We substantiated that the Deputy Chief 
Business Officer for Purchased Care engaged in improper contracting 
activities by instructing subordinates to issue sole-source task orders 
to one specific contractor and engaged in a conflict of interest when 
failing to maintain an arm's-length relationship with two VA 
contractors.
    This is significant because VHA's Patient-Centered Community Care 
(PCCC) initiative proposes to purchase non-VA care by contracting with 
various provider networks. The engagement of improper contracting 
practices at the senior executive level and previous OIG findings on 
ineffective and improper contracting in the Department, only highlights 
our concerns that VA must ensure proper controls are implemented and 
monitored before, during, and after contracts are awarded. In addition, 
responsible contract officers and contracting officers' technical 
representatives (COTRs) must be properly trained and supervised to 
effectively oversee PCCC vendors.

Review of Enterprise Technology Solutions, LLC, Compliance with 
        Service-Disabled Veteran-Owned Small Business Program 
        Subcontracting Limitations

    The OIG Office of Contract Review initiated and conducted a 
compliance review of subcontracting limitations contained in five 
contracts with Enterprise Technology Solutions, LLC (ETS) for re-
pricing fee claims. The review was initiated after VHA requested an 
audit of a claim submitted by ETS regarding an unauthorized commitment 
that VHA procurement officials appropriately refused to ratify. ETS is 
a service-disabled veteran-owned small business (SDVOSB) concern and 
all five contracts for re-pricing fee claims were awarded as SDVOSB 
set-asides.
    We determined that ETS subcontracted all of the re-pricing tasks to 
its subcontractor Health Net Federal Services (Health Net), a large 
business. We concluded that ETS did not process any of the claims nor 
did they have the expertise or capability of re-pricing claims and 
never intended to perform the work. Health Administration Center 
contracting personnel were fully aware that ETS was subcontracting all 
of the work to Health Net in violation of the provision in the contract 
limiting subcontracting because ETS had VA forward all claims directly 
to Health Net for processing.
    Based on work conducted by the Office of Contract Review and by the 
Office of Healthcare Inspections, we also determined that the revised 
regulations implemented in February 2011 allow for VA to use the amount 
submitted by a re-pricer if the amount is lower than the Medicare rate 
established by the Centers for Medicare and Medicaid Services. We found 
that the amounts submitted by the re-pricer were not lower than the 
established Medicare rates; therefore, we questioned whether VA was 
overpaying for the services given the hierarchy for payment established 
in the regulations. We also questioned whether it was fiscally sound to 
pay for both a Medicare pricer and a re-pricer to review each claim for 
VA to determine which is lower. This is especially true given the 
significant fees paid to the re-pricer regardless of whether there was 
a cost savings.
    We made seven recommendations to the Under Secretary for Health: 
terminate the five ETS contracts for claims re-pricing; determine if 
there is a need for any contract(s) to re-price non-VA care fee claims; 
ensure that the requirements for future contracts do not preclude 
competition; establish procedures to ensure that all non-VA fee claims 
are submitted to VA's Medicare pricer; determine whether claims re-
pricing for non-VA care have resulted in rates that are lower than 
Medicare rates; implement mandatory training requirements for program 
offices to ensure requirements are not written to preclude competition; 
and ensure justifications for sole-source awards receive appropriate 
approvals. The Under Secretary for Health concurred with our findings 
and recommendations. The contracts with ETS were terminated for cause 
in August. We will follow up on the remaining planned actions until 
implemented.

CONCLUSION

    While purchasing health care services from non-VA providers may 
afford VHA flexibility in terms of expanded access to care and services 
that are not readily available at VAMCs, it also poses a significant 
risk to VA when adequate controls are not in place. Although the Under 
Secretary for Health agreed to our recommendations and provided 
implementation plans to correct identified issues, VHA still faces 
major challenges managing the fee care program. Improper contracting 
practices as reported in other OIG reports only highlight our concerns 
that VA must ensure proper controls are implemented and monitored 
before, during, and after contracts are awarded, and responsible 
contract officers and COTRs must be properly trained and supervised to 
effectively oversee future PCCC vendors.

                                 
          Prepared Statement of Paralyzed Veterans of America

    Chairwowan Buerkle, Ranking Member Michaud, and Members of the 
Subcommittee, Paralyzed Veterans of America (PVA) would like to thank 
you for allowing us to submit a statement for the record on the issue 
of health care purchased by the Department of Veterans Affairs (VA) and 
delivered outside of the health care system--commonly referred to as 
fee-basis care. There is no doubt that fee-basis care provides an 
important tool to the VA in order to provide quality, timely health 
care services when those services are not readily available in the 
system or when that care is geographically inaccessible to a veteran.
    As we have stated many times in the past, it is the position of PVA 
that the VA is the best health care provider for veterans. The VA's 
unique ``veteran specific'' expertise is unrivaled. However, the VA 
serves a large veteran population with a myriad of complex medical 
needs, and when the VA is not able to provide that care it must partner 
with community providers through its Non-VA Care program.
    The Non-VA care program provides contracted care services that are 
authorized at the discretion of VA leadership. The contracted services 
are reserved for veterans who have sustained a service-connected 
disability, or a disability for which a veteran was discharged or 
released from active duty, and provided when the VA is not capable of 
delivering the needed care, or such services are geographically 
inaccessible.
    Over the years, PVA has remained concerned about the non-VA health 
care services provided to veterans as it relates to the VA's ability to 
monitor the quality of care delivered, as well as the lack of a system 
to facilitate care coordination with non-VA providers so that veterans 
have a seamless exchange between the two systems. One mechanism used by 
the VA that began to address these concerns was the implementation of 
pilot project Healthcare Effectiveness through Resource Optimization 
(Project HERO). The VA implemented Project HERO as a pilot in selected 
Veterans Integrated Service Networks (VISNs) to identify how a system 
could manage care that is provided through contracts with non-VA 
providers when the VA is not able to provide health care services to 
veterans. The pilot focused on objectives such as health care access, 
patient safety, and care coordination.
    As the pilot is in its fifth and final year, the VA has identified 
the Patient Centered Community Care (PCCC) initiative and the Non-VA 
Care Coordination (NVCC) program to improve its Non-VA Care program. 
While the Project HERO pilot resulted in some positive outcomes and 
lessons upon which the VA can build an improved Non-VA Care program, 
PVA still has concerns regarding the implementation and management of 
the PCCC and NVCC programs. Most importantly, we remain concerned about 
the VA's ability to monitor the quality of non-VA health care services, 
and coordinate care with outside providers.

Patient Centered Community Care (PCCC) and Non-VA Care Coordination 
        (NVCC)

    The VA describes the PCCC program as a centralized system to manage 
non-VA provider contracts. Specifically, through PCCC the VA intends to 
create a standardized contract referral process that will allow 
veterans to receive care outside of the VA, when necessary and 
authorized, in a timely and coordinated manner. In conjunction with 
PCCC, the NVCC program will focus on referrals for non-VA health care 
services. NVCC will also require that non-VA providers utilize required 
VA procedures and processes to allow for an exchange of information 
between providers and facilitate care coordination.
    PVA appreciates that these two programs combined, in theory, 
address our concerns regarding the quality of non-VA purchased care and 
the VA's ability to coordinate such care, and creates a permanent 
system to better manage non-VA contracted care. However, we believe 
that the success of PCCC and NVCC depends on the VA establishing 
systems that allow for a seamless exchange of information between non-
VA providers and the VA, and the VA's ability to collect data to 
measure the quality of non-VA care.
    While the VA is in the implementation phase of re-creating its fee-
basis care program and has not yet commenced PCCC and NVCC in all 
VISNs, it also has not provided details on the systems that will need 
to be in place to guarantee care coordination. Of particular concern to 
PVA is the transition phase when Project HERO has ended and PCCC and 
NVCC are expected to begin. If these two programs are not fully 
implemented when Project HERO ends, what happens to those veterans 
already receiving care coordinated through Project HERO? Coordination 
of veterans' care cannot be compromised during this transition.
    One of the major components of PCCC and NVCC is having a system 
that allows for care-coordination. Care-coordination requires systems 
that exchange information that is timely and reliable. As the Project 
HERO pilot is ending, it is essential that VA ensure that the 
technological capabilities and the systems that are capable of sharing 
data, standardized templates, and programs with private providers are 
in place when PCCC and NVCC are implemented to coordinate care with 
community providers.
    In order to support a system of care coordination between VA and 
community providers, a system for electronic information exchange must 
be a strong foundation. A primary goal for both the PCCC and NVCC 
programs should be to enable VA and non-VA providers to exchange 
information in a timely manner. Such information includes medical 
records, medical documentation, and payment information. If such a 
system for exchange of information is not available when the Project 
HERO pilot ends and these programs begin, then we believe the VA will 
be moving in the wrong direction.
    It is also important to note that care coordination not only 
involves the VA and community providers, but must also include 
veterans. Veterans must have access to support services through the VA 
as they seek non-VA purchased care and referrals. As previously stated, 
PVA strongly believes that the VA is the best health care provider for 
veterans and as such we recommend that the NVCC program work closely 
with veterans' Patient Aligned Care Teams to coordinate with community 
providers and ensure that veterans continue to receive their care 
through the VA health care system while receiving authorized treatments 
from outside (contract) providers. Another serious concern for PVA is 
quality management. How will the VA manage the quality of care provided 
to veterans by non-VA providers? PVA believes that PCCC and NVCC 
programs must collect data on quality metrics such as patient 
satisfaction, safety and timeliness to adequately measure the quality 
of care provided by non-VA facilities. Such information not only serves 
as important metrics to identify areas for improvement, but also allows 
VA to hold private providers accountable for providing care that meets 
VA's standards for quality. The VA must make certain that non-VA 
providers consistently provide veterans with timely, quality care that 
is patient-centric.
    PVA understands that as the health care demands of veterans 
continue to evolve, and enrollment in VA's health care system 
increases, so too does the need to partner with community providers. 
This partnership must be well managed, veteran-centric, and serve as a 
supplement to the quality of VA health services. PVA believes that the 
VA is moving in the direction of improving its non-VA purchased care 
program; however, many pertinent details are not in place. As the VA 
determines how to best implement PCCC, PVA believes that the VA must 
exercise its power to give final authorization to the providers with 
which it is entering contracts. Additionally, VA must determine the 
selection criteria to ensure that its quality standards for health care 
delivery are not compromised, and that the care provided meets VA's 
other standards for safety and patient satisfaction.
    Until PCCC and NVCC can be implemented with the systems that will 
allow electronic exchange of patient information and the collection of 
quality metrics, PVA recommends VA extend the Project HERO pilot 
program, and extend its existing fee-basis program as part of a 
continuing safety net for veterans. We also strongly encourage 
continued oversight from this Subcommittee to monitor the progress of 
the VA implementing these systems. Meanwhile, we must reemphasize that 
as the VA works to improve its purchased care and care coordination 
programs, foremost remains the fact that none of these initiatives 
should be designed to replace the high quality of care provided by the 
VA health care system. These programs should only serve to provide 
access to care where it is not readily available within the VA system.
    Chairwoman Buerkle, and Members of the Subcommittee, once again PVA 
thanks you for holding this hearing on such an important issue for the 
many sick and disabled veterans who are unable to directly access VA 
facilities for their care. We also thank VA leadership for keeping 
veteran service organizations informed and involved during this 
process. We look forward to working with both the Subcommittee and VA 
leadership to improve the delivery of veterans' health care services, 
whether those services are provided directly from VA, or through 
effective contract arrangements.

Information Required by Rule XI 2(g)(4) of the House of Representatives

    Pursuant to Rule XI 2(g)(4) of the House of Representatives, the 
following information is provided regarding Federal grants and 
contracts.

                            Fiscal Year 2012
    No Federal grants or contracts received.

                            Fiscal Year 2011
    Court of Appeals for Veterans Claims, administered by the Legal 
Services Corporation--National Veterans Legal Services Program--
$262,787.

                            Fiscal Year 2010
    Court of Appeals for Veterans Claims, administered by the Legal 
Services Corporation--National Veterans Legal Services Program--
$287,992.

                                 

     Prepared Statement of National Coalition for Homeless Veterans

    Chairwoman Ann Marie Buerkle, Ranking Member Michael Michaud, and 
distinguished members of the House Committee on Veterans' Affairs, 
Subcommittee on Health.
    The National Coalition for Homeless Veterans (NCHV) is honored to 
present this Statement for the Record for the hearing, ``VA Fee Basis 
Care: Flawed Policies Not a Fix for a Flawed System,'' on Sept. 14, 
2012. On behalf of the 2,100 community- and faith-based organizations 
that NCHV represents, we thank you for your commitment to serving our 
Nation's most vulnerable heroes.

VA's ``no wrong door'' approach

    The Department of Veterans Affairs (VA) strives to make world-class 
health services available to veterans in communities nationwide. Yet to 
directly provide equitable care in every locality would stretch VA 
resources thin beyond recognition. A robust contract-care program, 
therefore, is needed to supplement VA care, harnessing existing service 
delivery systems in areas where veterans do not have reasonable access 
to the department's health facilities.
    NCHV recognizes the potential of the VA fee basis care program to 
fill this role. In fact, the program could be well-situated to help 
fulfill VA's self-described ``no wrong door'' approach to ending 
veteran homelessness, in which veterans who seek assistance can receive 
it from VA programs, from community partners or through contract 
services.\1\
---------------------------------------------------------------------------
    \1\  ``VA Secretary Announces $41.9 Million to Help Homeless,'' 
U.S. Air Force (Oct. 5, 2010). Accessed Sept. 10, 2012. .
---------------------------------------------------------------------------
    Unfortunately, this philosophy is at odds with reality. The fee 
basis program requires that veterans obtain preauthorization for non-VA 
care at a VA medical facility. In some cases, this means that a veteran 
must travel hundreds of miles--passing several qualified community 
providers along the way--in order to apply for fee basis care with no 
guarantee they will succeed.
    For veterans with mental illness, chronic substance abuse and other 
disabilities, this practice is exclusive rather than inclusive. A 
daytrip to a distant VA medical facility may be unrealistic even for 
relatively healthy veterans, especially if they are among the 1.4 
million with extreme low incomes.

Financial stewardship issues

    Homeless veteran service providers know better than most the impact 
that limited VA dollars can have on entire communities. In light of the 
fee basis program's record of financial stewardship, we join those who 
call for its immediate reform.\2\
---------------------------------------------------------------------------
    \2\  Veterans Health Administration Fee Care Program: White Paper. 
National Academy of Public Administration (September 2011). Accessed 
Sept. 7, 2012. .
---------------------------------------------------------------------------
    In FY 2011, the fee basis program accounted for an estimated $500 
million in erroneous payments, according to the Veterans Health 
Administration Chief Business Office. By any measure, this is a 
tremendous loss of taxpayer dollars. By our measure, this amounts to 
more than VA's expenditures in FY 2013 on both the HUD-VA Supportive 
Housing (HUD-VASH) Program--directly responsible for reduction in 
chronic veteran homelessness--and the Homeless Providers Grant and Per 
Diem (GPD) Program, which has been the cornerstone of community-based 
homeless veteran assistance for more than two decades.
    An effective reform of the fee basis program should represent a 
significant departure from existing policies, and must shift the burden 
of responsibility for authorized care from the veteran to the VA health 
care system.

Legislative proposals and departmental initiatives

    NCHV submitted written testimony to this Subcommittee in April 2012 
regarding H.R. 3723, Rep. Bobby Schilling's ``Enhanced Veteran 
Healthcare Experience Act of 2011.'' As originally written, this bill 
would replace the current fee basis system with a contract-based 
``veterans enhanced care program.'' While we recognize that this 
legislation may not be a cure-all for the fee basis program's 
deficiencies, we are supportive of an approach to make much-needed 
health services accessible to veterans who live in areas without a VA 
presence.
    VA does not support H.R. 3723, but it is undertaking new 
initiatives that seek to expand and improve its contract-based care, 
among them the Patient-Centered Community Care (PCCC) program. The PCCC 
program will foster contractual agreements with non-VA providers when 
VA facilities are not able to provide needed specialty care for 
veterans.\3\ It is fair to say that this program has not been given an 
opportunity to succeed, as it is in the early stages of implementation.
---------------------------------------------------------------------------
    \3\  ``Patient Centered Community Care (PCCC) Notice'' (Nov. 3, 
2011). Accessed Sept. 11, 2012. .
---------------------------------------------------------------------------
    It is our understanding, however, that the program will not cover 
mental health services, primary care and dialysis.\4\ This may be 
precisely the support that some veterans need to avoid entering what VA 
Secretary Eric Shinseki has characterized as ``that downward spiral 
towards joblessness, depression and substance abuse that often leads to 
homelessness and, sometimes, to suicide.'' \5\ If we are going to 
strive for a ``no wrong door'' approach to ending veteran homelessness, 
it must apply to health services through the PCCC program as well.
---------------------------------------------------------------------------
    \4\  ``Witness Testimony of Shane Barker, Senior Legislative 
Associate, Veterans of Foreign Wars,'' U.S. House Committee on 
Veterans' Affairs (April 16, 2012). Accessed Sept. 8, 2012. .
    \5\  ``Remarks by Secretary Eric K. Shinseki: 2012 National 
Coalition for Homeless Veterans (NCHV) Annual Conference,'' Department 
of Veterans Affairs (May 30, 2012). Accessed Sept. 10, 2012. .

---------------------------------------------------------------------------
In Summation

    Thank you for the opportunity to submit this Statement for the 
Record for today's hearing. It is a privilege to work with the House 
Committee on Veterans' Affairs, Subcommittee on Health, to ensure that 
every veteran in crisis has reasonable access to the health care they 
earned.

John Driscoll
President and CEO
National Coalition for Homeless Veterans

                          NCHV Staff Biography
                    John Driscoll, President and CEO

    John Driscoll joined the staff of NCHV in January 2002. He served 
in the U.S. Army from 1970-1980, including a tour as an air-evac medic 
and platoon sergeant with the 575th Medical Detachment during the 
Vietnam War. After returning from Vietnam, he served as the senior 
clinical specialist on the Surgical Intensive Care Unit of the Walter 
Reed Army Medical Center in Washington, D.C., from 1973-1980, and 
remained a certified medevac specialist for both fixed-wing and 
helicopter aircraft until his discharge from the service.
    Driscoll graduated from the University of Maryland with a Bachelor 
of Arts degree in journalism in 1988, and spent 13 years as a group 
newspaper editor for the Chesapeake Publishing Corporation. As a 
journalism student intern in 1987, he wrote a series on homeless 
veterans living on the streets of the Nation's capital which was 
submitted for Pulitzer Prize consideration in two categories by 
Chesapeake Publishing.
    Significant publishing credits while working with NCHV, in 
partnership with the Department of Labor-Veterans Employment and 
Training Service (DOL-VETS), include ``Planning for Your Release, A 
Guide for Incarcerated Veterans,'' distributed to more than 20,000 
employment specialists, transition assistance counselors and 
incarcerated veterans--this guide was adapted by the Department of 
Veterans Affairs for its state-specific transition resource guides; 
``Assistance Guide for Employment Specialists Helping Homeless 
Veterans,'' used by DOL-VETS as a training resource for homeless 
assistance providers; and the ``HVRP Best Practices Project,'' a study 
of 36 community-based programs cited for exemplary performance in 
helping formerly homeless veterans prepare for and obtain steady, 
gainful employment.
    Driscoll is responsible for the development of the NCHV Web site 
(www.nchv.org) into the most comprehensive homeless veteran assistance 
on-line resource in the Nation, providing information and service 
referrals to more than 85,000 visitors each month. His work with 
veteran assistance programs nationwide gave rise to the Nation's first 
Veteran Homelessness Prevention Platform in 2006, a document that has 
helped steer development of initiatives to reduce the risk of 
homelessness for veterans of the wars in Afghanistan and Iraq, and 
their families. Eleven of the 18 recommendations in that document have 
been signed into law or are in various stages of development.
    Driscoll has prepared testimony and has testified before both the 
U.S. House of Representatives and U.S. Senate on a number of landmark 
homeless veteran assistance initiatives since 2005. He meets regularly 
with the leadership of Federal agencies invested in homeless veteran 
services, and is frequently invited to speak as a subject matter expert 
on homeless veterans issues and assistance programs at conferences and 
symposia nationwide.

                    NCHV Disclosure of Federal Grants



Grantor:                           U.S. Department of Labor
Subagency:                         Veterans' Employment and Training
                                    Service
Grant/contract amount:             $350,000
Performance period:                8/13/2010-8/12/2011
Indirect costs limitations or CAP  20 percent total award
 limitations:
Grant/contract award notice        Yes
 provided as part of proposal:
Grantor:                           U.S. Department of Labor
Subagency:                         Veterans' Employment and Training
                                    Service
Grant/contract amount:             $350,000
Performance period:                8/13/2011-8/12/2012
Indirect costs limitations or CAP  20 percent total award
 limitations:
Grant/contract award notice        Yes
 provided as part of proposal:


                                 
                   MATERIAL SUBMITTED FOR THE RECORD

    Questions from Honorable Michael H. Michaud and responses from 
Honorable Dr. Robert A. Petzel, M.D., Under Secretary for Health, 
Veterans Health Administration, U.S. Department of Veterans Affairs

                           September 14, 2012
                               Hearing on

       VA Fee Basis Care: Examining Solutions to a Flawed System
        Questions for the Honorable Dr. Robert A. Petzel, M.D.,
                      Under Secretary for Health,
                    Veterans Health Administration,
                  U.S. Department of Veterans Affairs

    Question 1: Painful and disabling joint and back disorders continue 
to be reported as the top health problems of veterans returning from 
overseas. According to a report in the Journal of General Internal 
Medicine, diseases of the musculoskeletal and connective system, the 
precise maladies doctors of chiropractic (DC) treat, is the primary 
health issue diagnosed among veterans returning from combat theatres of 
operation with over 56 percent of veterans reporting this ailment. 
Further, the report recommends that veterans suffering from 
musculoskeletal injury with chronic pain be transitioned off opiates to 
alternative analgesics, including referral to a Doctor of Chiropractic, 
which is consistent with the widely recognized belief that chiropractic 
is one of the safest drug-free, non-invasive therapies available for 
the treatment of chronic musculoskeletal pain. Given the magnitude of 
this problem and serious complications and costs associated with the 
extended use of opiates, do you think the DVA should develop a program 
involving both on-site and off-site DCs to help provide an avenue of 
treatment that would provide an alternative to the use of these drugs? 
If this has not been considered wouldn't it be a good idea for the DVA 
to explore doing so?

    Response: Department of Veterans Affairs (VA) currently provides 
chiropractic services both on-site at VA facilities, and off-site using 
community Chiropractors as needed. At the end of fiscal year (FY) 2012, 
38 VA facilities offered chiropractic care totaling more than 98,000 
patient visits, while VA also provided similar services on a fee basis 
means at over 4,000 non-VA facilities to more than 9,000 Veterans in FY 
2012. Chiropractic services have been embraced by VA providers and 
Veterans as an appropriate option in pain management treatment. Between 
FY 2008 and FY 2011, the number of Veterans receiving chiropractic care 
increased by 67 percent for on-station and by 82 percent for fee basis. 
In March 2012, the Under Secretary for Health (USH) directed VA's 
Office of Rehabilitation Services to review the current utilization of 
chiropractic services and strategies that support continued awareness 
and access to utilization. Utilization of chiropractic services within 
VA will continue to be monitored and reported regularly to the USH to 
ensure that availability, access, and utilization of services within VA 
continues to meet Veterans' needs.
    Chiropractic care is provided in the context of a comprehensive 
National Pain Management Strategy that promotes multidisciplinary and 
integrated care. Although opioid therapy is one important pain 
management strategy, VA/DoD Clinical Practice Guidelines for the 
Management of Opioid Therapy for Chronic Pain emphasize strategies for 
promoting the safe and effective use of opioid therapy in the context 
of a comprehensive, integrated Veteran-centered treatment plan. To 
support this approach, VA is working diligently to build its capacity 
to manage most common pain conditions in the primary care setting while 
providing routine and timely Veteran access to specialty pain medicine, 
rehabilitation, behavioral health, complementary and alternative 
medicine, and other specialty pain management services, when indicated. 
VA is also committed to developing Commission on Accreditation of 
Rehabilitation Facilities (CARF) accredited tertiary, interdisciplinary 
pain rehabilitation programs in each Veterans Integrated Service 
Network (VISN). Through this effort, chiropractic services are 
represented in the planning and dissemination of guidance on pain 
management options within these programs.

    Question 2: Where there are Doctors of Chiropractic on staff at DVA 
treatment facilities, I understand the arrangement is working very 
well. Referrals are taking place--and this obviously wouldn't be taking 
place if the PCM's did not think it was appropriate to do so. What 
about locations without a DC on staff. Does the DVA have a plan to 
place DCs at all major DVA treatment facilities? If not, why not? If 
yes, how long before this plan will be fully implemented? In locales 
without DCs on staff has the DVA engaged in a formal education campaign 
to inform beneficiaries of their ability to obtain a referral to a DC? 
If not, why not? Obviously, if a patient does not know he or she has 
access to chiropractic care as an alternative they probably aren't 
going to ask for it.

    Response: VA policy is that each Veterans Integrated Service 
Network must have an on-station chiropractic clinic located at a 
minimum of one facility, while other facilities can provide the service 
either on-station or by non-VA care per Veterans Health Administration 
(VHA) Directive 2004-35. Chiropractic care is part of the standard 
benefits package and is included in the list of available services made 
known to all Veterans. While VA does not currently have a plan to place 
Chiropractors at all major treatment facilities, decisions on use of 
chiropractic services for musculoskeletal conditions are made by the 
individual VA facilities. VA facilities make staffing determinations by 
assessing their local needs and resources, including the need for 
chiropractic services and available options. A fact sheet listing 
current VA on-station chiropractic clinics, as well as a table 
reflecting patients seen by chiropractic by facility over for FY 2008-
FY 2011 is attached (attachment 1 and 2).
    A VHA multidisciplinary group recently completed a utilization 
review of chiropractic services in VA, and implemented a plan to 
increase awareness, access, and utilization of chiropractic services 
across VA. Utilization of chiropractic services will continue to be 
monitored and reported regularly to the Under Secretary for Health 
through fiscal year FY 2013 to ensure that availability, access, and 
utilization of services in VA continues to increase.

                        VA Chiropractic Services

    Since late 2004, chiropractic services have been included as part 
of the Medical Benefits Package (Standard Benefits) available to all 
enrolled Veterans. As with all specialty services, a chiropractic 
consultation request must be initiated by any VA provider who is caring 
for the Veteran.
    VA provides these services on-site at one or more VA facilities in 
each VISN. If a VA facility does not have an on-site chiropractic 
clinic it will provide chiropractic services via the fee-basis 
mechanism. The decision to use on-station vs. fee-basis chiropractic 
services is made at the facility level.
    As of September 2011 the following VA facilities have established 
on-site chiropractic clinics:


               VISN                               Location

1                                  Togus, ME
                                   West Haven, CT
                                   Newington, CT
2                                  Buffalo, NY
                                   Batavia, NY
                                   Canandaigua, NY
                                   Rochester, NY CBOC
                                   Bath, NY
                                   Syracuse, NY
3                                  Bronx, NY
4                                  Butler, PA
5                                  Martinsburg, WV
6                                  Salisbury, NC
7                                  Augusta, GA
8                                  Tampa, FL
                                   Miami, FL
                                   Oakland Park, FL
9                                  Mountain Home, TN
10                                 Columbus, OH
                                   Dayton, OH
                                   Chillicothe, OH
11                                 Danville, IL
12                                 Iron Mountain, MI
                                   Tomah, WI
15                                 Kansas City, MO
                                   St. Louis, MO
                                   Poplar Bluff, MO
16                                 Jackson, MS
17                                 Dallas, TX
                                   Temple, TX
                                   Austin, TX
                                   San Antonio, TX
18                                 Phoenix, AZ
                                   Albuquerque, NM
19                                 Ft. Harrison, MT
20                                 American Lake, WA
21                                 Sacramento, CA
                                   Redding, CA
                                   Martinez, CA
22                                 West Los Angeles, CA
                                   Sepulveda, CA
                                   Loma Linda, CA
                                   Las Vegas, NV
23                                 Sioux Falls, SD


References

General VA Medical Benefits

    http://www.va.gov/healtheligibility/coveredservices/
StandardBenefits.asp

                               __________

Questions from the Honorable Michael H. Michaud and responses from 
        Jacob B. Gadd, Deputy Director for Healthcare, The American 
        Legion

October 22, 2012

Honorable Michael H. Michaud
Ranking Democratic Member
Subcommittee on Health
Committee on Veterans' Affairs
U.S. House of Representatives
335 Cannon House Office Building
Washington, DC 20515

Dear Ranking Member Michaud:

    Thank you for allowing The American Legion to participate in the 
Subcommittee on Health hearing entitled ``VA Fee Basis Care: Examining 
Solutions to a Flawed System'' on September 14, 2012. I respectfully 
submit the following in response to your question:

        1.  ``Many studies have shown us that the VA is not the 
        proficient in paying claims. In fact, their track record for 
        over paying and underpaying providers is not very good. Some of 
        that is due to ineffective training of those who process the 
        claims. What are your organization's thoughts on the pros and 
        cons of contracting out this process?

    The American Legion currently adopted Resolution no. 46, Department 
of Veterans Affairs (VA) Non-VA Care Coordination Programs at the fall 
2012 National Executive Conference meetings in Indianapolis. In the 
resolution, The American Legion recommends VA 1) develop a non-VA care 
coordination that is patient-centered and takes their travel and 
distance into account; 2) implement a military culture and evidence-
based treatment training program for non-VA providers to ensure 
veterans receive the same or better quality of care and 3) provide non-
VA providers with full access to VA's Computer Record System (CPRS) to 
ensure the contracted community provider can review the patient's full 
medical history which allows the community provider to meet all of the 
quality of care screening and measures tracked in CPRS. A copy of this 
resolution is attached in this letter for your review and reference.

    In regards to your specific question as to whether VA should 
outsource its non-VA provider payment system, The American Legion 
presently does not have an official position.

    The American Legion appreciates the opportunity to provide written 
comments to your question and looks forward to working with you on 
behalf of our Nation's veterans.
            Sincerely,
                                                      Jacob B. Gadd
                                     Deputy Director for Healthcare
                                                The American Legion

                                 
