[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


               VA AND ACADEMIC AFFILIATES: WHO BENEFITS?

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                         TUESDAY, JUNE 7, 2016

                               __________

                           Serial No. 114-71

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]       


         Available via the World Wide Web: http://www.fdsys.gov
         
         
                              __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
25-182                      WASHINGTON : 2017                     
          
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, [email protected].          
         
         
         
                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Minority Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION

                    MIKE COFFMAN, Colorado, Chairman

DOUG LAMBORN, Colorado               ANN M. KUSTER, New Hampshire, 
DAVID P. ROE, Tennessee                  Ranking Member
DAN BENISHEK, Michigan               BETO O'ROURKE, Texas
TIM HUELSKAMP, Kansas                KATHLEEN RICE, New York
JACKIE WALORSKI, Indiana             TIMOTHY J. WALZ, Minnesota

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

                              ----------                              

                         Tuesday, June 7, 2016

                                                                   Page

VA And Academic Affiliates: Who Benefits?........................     1

                           OPENING STATEMENTS

Honorable Mike Coffman, Chairman.................................     1
Honorable Ann M. Kuster, Ranking Member..........................     2

                               WITNESSES

Robert L. Jesse, M.D., Ph.D., Chief Academic Affiliations 
  Officer, U.S. Department of Veterans Affairs...................     3
    Prepared Statement...........................................    30

        Accompanied by:

    David Atkins, M.D., M.P.H., Acting Chief Research and 
        Development Officer, U.S. Department of Veterans Affairs

    Ricky L. Lemmon, Acting Chief Procurement and Logistics 
        Officer, U.S. Department of Veterans Affairs

Mr. Randall Williamson, Director, Health Care Issues, Government 
  Accountability Office..........................................     5
    Prepared Statement...........................................    32

Janis Orlowski, M.D., MACP, Chief Health Care Officer, 
  Association of American Medical Colleges.......................     7
    Prepared Statement...........................................    40
Nancy Watterson-Diorio, Board Member, National Association of 
  Veterans' Research and Education Foundations...................     8
    Prepared Statement...........................................    52

                        STATEMENT FOR THE RECORD

Dr. Christian Kreipke............................................    58

 
               VA AND ACADEMIC AFFILIATES: WHO BENEFITS?

                              ----------                              


                         Tuesday, June 7, 2016

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                                  Subcommittee on Oversight
                                        and Investigations,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 4:17 p.m., in 
Room 334, Cannon House Office Building, Hon. Mike Coffman 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Coffman, Lamborn, Roe, Huelskamp, 
Kuster, O'Rourke, and Walz.

          OPENING STATEMENT OF MIKE COFFMAN, CHAIRMAN

    Mr. Coffman. Good afternoon. This hearing will come to 
order.
    I want to the welcome everyone to today's hearing, titled 
``VA and Academic Affiliates: Who Benefits?'' This hearing will 
examine the relationship between the VA and the academic 
affiliates. The hearing will focus on issues and concerns 
related to sole-source contracting, billing issues, research 
funding, space, data and equipment.
    VA has had a relationship with academic affiliates dating 
back to World War II. This relationship was developed and 
encouraged as a way to ensure that our Nation's veterans 
received the best care possible following their service to our 
country. We all agree our veterans deserve nothing less than 
the best care.
    We have already witnessed many ways in which veterans are 
being denied high-quality health care, including excessive wait 
times, confusing scheduling processes, and the lack of access 
to non-VA care because of poor implementation of the Choice 
Act.
    Now we are hearing that the relationship between VA and its 
affiliates may not be as beneficial as VA and veterans--I'm 
sorry--not be as beneficial to VA and veterans as was initially 
intended.
    We are discovering that affiliates control the affiliate 
relationship and make decisions related to VA and the way it 
operates. Leadership positions at VA medical centers are held 
by employees who also have appointments at the academic 
affiliate.
    This begs the question as to where the loyalties lay for 
these VA leaders. Are these VA leaders making decisions in the 
best interests of the veteran when they also have an allegiance 
to the affiliate? How can we be sure? What oversight is in 
place to ensure that veterans are benefiting from this 
relationship?
    According to a recent OIG report from August 2015, VA 
medical centers are allowing physicians to come and go between 
VA and the affiliate with no true oversight of their time. 
There are no assurances that these physicians are in the VA 
performing their VA responsibilities when they are supposed to 
be, and the bills are being paid without questions about the 
services rendered.
    Similarly, we are aware that VA leadership is allowing VA 
research projects to be conducted at the affiliate, VA 
equipment to be removed to the affiliate, and VA research data 
to be stored on university servers. These actions can greatly 
impact VA's ability to assert ownership rights in inventions 
made by VA employees who are using VA resources. We certainly 
do not want to see VA in a similar position to what it was 
regarding the hepatitis C drug.
    We also know that VA nonprofit corporations are not being 
utilized to their fullest potential. Congress authorized these 
nonprofits in order to allow additional research dollars to be 
put back into VA research for the benefit of veterans, but much 
of this money is being administered by the affiliates instead, 
resulting in a loss of millions of dollars to VA.
    Finally, according to the GAO report just issued yesterday, 
we know that VA is taking years to negotiate and enter into 
sole-source affiliate contracts, which results in gaps in 
patient care. This is most definitely not in the best interest 
of our veterans. Hopefully we can hear what VA is doing to 
improve this relationship with academic affiliates to better 
benefit veterans.
    With that, I now yield to Ranking Member Kuster for any 
opening remarks she may have.

       OPENING STATEMENT OF ANN M. KUSTER, RANKING MEMBER

    Ms. Kuster. Thank you, Chairman Coffman.
    This afternoon, the Subcommittee on Oversight and 
Investigation will delve into issues involving VA and its 
academic affiliates.
    The VA plays a vital role in our national health care 
delivery system. In 70 years of partnership with academic 
affiliates, the VA is the largest single provider of medical 
training in the United States. Today, over 70 percent of health 
care providers have received their training through the 
Veterans Administration.
    While our overall health care system reaps the benefits of 
VA's education and training efforts, the VA also benefits by 
being able to rely on additional providers and specialists who 
are on the leading edge of medical knowledge and leaders in 
their field of practice. This is especially important to the 
VA, which is facing shortages in health care providers. In 
fact, it's estimated that there will be a nationwide shortage 
of between 46,000 to 90,000 physicians within the next decade.
    The VA's relationship to its academic affiliates is 
essential if the VA is to provide the level of health care that 
we all expect for our veterans. This is why Congress and the VA 
must work together to address areas that need improvement.
    We simply must improve the contracting process between the 
VA and its affiliates for medical services. How medicine is 
practiced in this country is undergoing a revolution, with more 
integration and more consolidation. VA's contracting process 
must recognize these changes and evolve with the practice of 
medicine.
    It should not take 3 years for the VA to contract with its 
affiliates to provide medical services to our veterans. This 
cumbersome process meant that 161 academic affiliates who 
wanted to provide more doctors and services during the patient 
access crisis of 2014 were turned away because the contracting 
process was just too hard. It's unacceptable that a 
bureaucratic process stands in the way of our veterans 
accessing high-quality care.
    Further, according to the GAO, who is with us today, the 
process for sole-source affiliate contracts is a mirror of what 
we often find on this Subcommittee when we look into VA's 
contracting processes in general--too little oversight, not 
enough data, and too many barriers to getting the job done. 
It's simply impossible to manage such a vital program if you do 
not have the information to make decisions, spot problems, and 
systemize and streamline the process.
    I am hopeful that we have a conversation on how best to 
provide needed oversight and flexibility, and how best to 
recognize the changing nature of the health care industry in 
America, and to make sure that we leverage these changes to the 
benefit of our veterans.
    I look forward to hearing from all of our witnesses invited 
to appear before us today.
    And I yield back the balance of my time.
    Mr. Coffman. Thank you, Ranking Member Kuster.
    I ask all Members--I ask that all Members waive their 
opening remarks, as per this Committee's custom.
    Hearing no objection, so ordered.
    With that, I would like to introduce our panel. On the 
panel, we have Dr. Robert Jesse, Chief Academic Affiliations 
Officer for the Department of Veterans Affairs, who is 
accompanied by Dr. David Atkins, Acting Chief Research and 
Development Officer, and Ricky Lemmon, Acting Chief Procurement 
and Logistics Officer; Mr. Randall Williamson, Director of 
GAO's health care team; Dr. Janis Orlowski, Chief Health Care 
Officer, Association of American Medical Colleges; and Ms. 
Nancy Watterson-Diorio, Board Member of the National 
Association of Veterans' Research and Education Foundations.
    I now ask that all witnesses stand and raise their right 
hands.
    Do you solemnly swear under penalty of perjury that the 
testimony you are about to provide is the truth, the whole 
truth, and nothing but the truth?
    Thank you. Please be seated.
    And let the record reflect that all witnesses answered in 
the affirmative.
    Dr. Jesse, you are now recognized for 5 minutes.

           STATEMENT OF ROBERT L. JESSE, M.D., PH.D.

    Dr. Jesse. Good afternoon, Mr. Chairman, Ranking Member 
Kuster, and Members of the Committee, and thank you for this 
opportunity to discuss VA's relationship with its academic 
affiliates.
    As you mentioned, I'm accompanied today by Mr. Rick Lemmon, 
the Acting Chief Procurement and Logistics Officer, and Dr. 
David Atkins, the Chief Research and Development Officer.
    January 30th of this year, marked the 70th anniversary of 
Policy Memorandum 2. This established the visionary partnership 
between VA and America's medical schools. Strong academic 
relationships have proven to be a foundation for providing 
veterans access to high-quality health care and support for VHA 
to fill its statutory missions to educate for VA and for the 
Nation, and to carry out a program of medical research in 
connection with the provision of medical care and treatment of 
veterans.
    Academic affiliates facilitate the recruitment of 
outstanding clinical staff to VA, and trainees working under 
their supervision serve as force multipliers. The opportunity 
to teach America's best and brightest attracts clinicians 
motivated by professional excellence, ensuring that VA can 
remain a leader in the knowledge and skills associated with the 
practice, teaching, research, and the building of the learning 
health care system.
    The Office of Academic Affiliations manages the educational 
components of these relationships through affiliation 
agreements that address the health profession's educational 
activities and disbursements of funds for physician trainees. 
Research operations, including grant funding, as well as the 
arrangements for shared space, equipment, and personnel, are 
managed by the Office of Research and Development. And 
contracts for professional and clinic services are managed by 
the Office of Procurement and Logistics through sharing 
agreements and other contractual mechanisms.
    VA is profoundly important to U.S. professional education, 
having affiliations with over 1,800 schools and programs. 
Nearly 124,000 trainees receive supervised clinical education 
in VA facilities each year, with about 70 percent of all U.S. 
physicians having some VA clinical experience in the course of 
their education. VA is the second-largest funder of graduate 
medical education after Health and Human Services.
    VA research has contributed to transformational advances 
impacting virtually every aspect of health care as we know it 
today. VA research benefits from its position within a national 
integrated health care system, and from having a state-of-the-
art electronic health record. It also benefits from dynamic 
collaborations with university partners, Federal agencies, 
nonprofit organizations, and industry, which bring in 
additional funding, and this was, I think, $287 million in 
2015.
    The Federal investment in VA research returns incredible 
value to veterans and to the taxpayer. Take, for example, the 
Million Veteran Program, which has already enrolled close to 
half a million veterans, who have donated samples and completed 
surveys to help unlock the genomic basis of health and disease, 
and is poised to be a cornerstone for precision medicine in the 
future.
    Yesterday, GAO released its report entitled ``Improvements 
Needed for Management and Oversight of Sole-Source Affiliate 
Contract Development.'' This report suggested eight Executive 
actions to ensure timely development of high-value, long-term 
sole-source affiliate contracts and effective development and 
use of short-term contracts, including the need to ensure 
better effective communication between VA and its affiliates.
    VA has concurred with the GAO's recommendations and has 
developed an action plan to meet each of these. The goal is to 
more effectively and efficiently use VA's existing sole-source 
contracting authorities to meet the needs of veterans and to 
ensure compliance that meets our fiscal responsibilities. VA 
appreciates the input from GAO and other adviser groups to 
identify root causes and develop long-term solutions.
    Academic affiliations has brought great value to VA, to 
veterans, and to the American public for 70 years. However, 
U.S. health care has changed dramatically over this time. The 
organization of health systems now often involve multiple 
contracting entities. Health education is now rigidly 
prescriptive, research oversight is now intense, and payment 
models for health care are now rapidly evolving.
    So, too, must VA change the way we do business with our 
partners in order to optimize the value of these relationships 
for veterans and the American taxpayer. Bold, innovative 
partnership models with affiliates structured around shared 
resources and accountability to optimize care for veterans are 
being explored.
    As VA commits to improving existing processes, we hope to 
work with Congress to enhance the authorities under which 
partnership can be leveraged to improve the quality, safety, 
and timeliness of health care for all veterans, while also 
supporting the research mission and the training of the health 
care workforce for the Nation.
    Mr. Chairman, this concludes my testimony. My colleagues 
and I are prepared to answer any questions you and Ranking 
Member Kuster may have--and the Committee. Thank you.

    [The prepared statement of Robert L. Jesse appears in the 
Appendix]

    Mr. Coffman. Thank you, Dr. Jesse.
    Mr. Williamson, you are now recognized for 5 minutes.

                STATEMENT OF RANDALL WILLIAMSON

    Mr. Williamson. Thank you, Chairman Coffman and Ranking 
Member Kuster and Members of the Subcommittee. I am pleased to 
be here to discuss GAO's report, released yesterday, on VA's 
use of sole-source affiliate contracts.
    VA partners with the university medical schools to provide 
learning opportunities for medical residents, while also 
increasing a pool of physicians available to treat our Nation's 
veterans. Over 40 percent of VA's total physician workforce is 
made up of residents and physicians supplied through academic 
affiliations.
    VA has the unique authority to establish sole-source 
contracts with its university partners without competition. 
Today, I will address this very important aspect of VA's 
academic affiliations.
    Sole-source affiliate contracts allow VA to obtain 
physician services needed to treat veterans and oversee 
residents working in VA medical centers. Our review covered 
VA's use and oversight of these contracts and compliance with 
existing VA procurement policies.
    Most of these contracts are of two types: first, high-
value, long-term contracts that are over $500,000 and more than 
1 year in duration; second, short-term contracts that are less 
than $500,000 and less than 1 year duration. The value of the 
contract is an important factor to determine the amount of 
oversight it will receive. Short-term contracts under $500,000 
are subject to much less oversight than high-value, long-term 
contracts.
    We found that at four of the five VA medical centers we 
visited, they relied mainly on short-term sole-source affiliate 
contracts to obtain physician services from their affiliates, 
often avoiding high-level reviews and oversight that 
potentially could have reduced the contract prices and better 
ensured that VA was complying with procurement policy.
    Contracting officials we interviewed attributed this over-
reliance on short-term sole-source affiliate contracts to a 
number of factors. The most notable reason was that high-value, 
long-term contracts we reviewed took 3 years to process and 
finalize, on average, and this timeframe does not work for many 
medical centers that must seek quick solutions to physician 
shortages or add additional physicians in critical specialty 
areas. In contrast, short-term contracts can be finalized in 3 
months or less.
    The lengthy process to develop high-value, long-term sole-
source affiliate contracts is due to incomplete and untimely 
information submitted by VA medical centers to contracting 
officers, rework to update paperwork to comply with revised 
forms or new policies, multiple reviews, and inexperienced 
contracting staff. Currently, VHA does not have performance 
standards to hold contracting staff accountable for timeliness, 
and does not have data to identify and resolve potential 
bottlenecks in the contracting process.
    Relying on short-term sole-source affiliate contracts can 
have some significant downsides and risks for VA. For example, 
for short-term sole-source affiliate contracts, contracting 
officers aren't required to consult trained negotiators to help 
them establish contract price, as occurs for high-value, long-
term contracts. Also, short-term sole-source affiliate 
contracts are not monitored by VHA's central office, and place 
VA at risk for overpaying the affiliate services provided 
through them.
    Also, at one VAMC we visited, we found that all five short-
term sole-source affiliate contracts we reviewed had serious 
violations of VHA policy and VA policy, including the absence 
of negotiations to address pricing issues before finalizing the 
contract.
    More broadly, we found that nowhere in VA does anyone 
review the big-picture use of short-term sole-source affiliate 
contracts among medical centers to identify patterns of 
overreliance and detect potential noncompliance with VA 
policies and procedures.
    Exacerbating the problems that I've outlined thus far is 
the relative inexperience and high turnover among medical 
sharing contracting staff. We found that one-quarter of the 
medical sharing staff leave each year, and two-thirds have less 
than 3 years of experience working with these types of 
contracts. It usually takes about 5 years to become proficient 
in developing these contracts, according to senior VA 
contracting staff. Moreover, VA has provided limited training 
to medical sharing contract staff, further aggravating an 
already difficult situation.
    In short, VA needs to take bold steps now on many fronts to 
rectify its poor management of these contracts. In this regard, 
we made eight recommendations to improve VA's management of 
sole-source affiliate contracts, and VA concurred with all of 
them.
    That concludes my opening remarks, Mr. Chairman.

    [The prepared statement of Randall Williamson appears in 
the Appendix]

    Mr. Coffman. Well, thank you, Mr. Williamson.
    Dr. Orlowski, you are now recognized for 5 minutes.

               STATEMENT OF JANIS ORLOWSKI, M.D.

    Dr. Orlowski. Mr. Chairman, Members of the Subcommittee, 
thank you for the opportunity to testify on VA academic 
affiliations.
    The Association of American Medical Colleges is a nonprofit 
institution comprised of all 145 accredited U.S. medical 
schools and nearly 400 major teaching hospitals, including 51 
VA medical centers. As the chief health care officer at the 
association, my focus is on the interface between the health 
care delivery system and academic medicine.
    The VA has over 500 academic affiliation agreements with 
our Nation's medical schools and teaching hospitals. As noted, 
2016 is an important anniversary for the VA and academic 
medicine, as we celebrate our 70th anniversary in partnership.
    The relationship, as you had noted, followed World War II, 
when the VA and the Nation faced very much the same situation 
we face today. At that time, the VA had a severe shortage of 
physicians as nearly 16 million men and women returned from 
overseas. Today, there's a combination of the VA's aging 
veteran population and an influx of veterans from recent 
engagements. There's an increasing need for more health care, 
resulting in access issues that are symptomatic of a broader 
trend, which is the physician shortage.
    You ask who benefits from these relationships. Simply put, 
the veterans do. The AAMC projects a nationwide shortage of 
between 46,000 and 90,000 physicians by 2025. Though these 
shortfalls will affect all Americans, we note the most 
vulnerable populations, including veterans and those in 
underserved areas, will be the first to feel this impact as the 
VA is now.
    What the VA and academic affiliations established was 
improved access and quality of care for our Nation's veterans. 
What started as a simple idea in a time of great need has 
developed into an unprecedented private-public partnership. The 
VA's education mission trains new physicians on cultural 
competency for treating veteran patients. Further, the VA has 
found that a physician is twice as likely to consider 
employment at the VA after training at a VA facility.
    The VA's research mission creates advances in areas 
important to the veterans population, such as traumatic brain 
injury, PTSD, prostheses, respiratory exposure, not to mention 
the system reforms that improve care delivery within the VA 
systems.
    Perhaps most importantly, VA academic affiliations put 
veterans first in line for the best health care in the world at 
the Nation's teaching hospitals. Our members take pride in 
being partners with the VA and providing care to veterans. They 
view this as an important part of their mission.
    The AAMC believes VA's sole-source contracting, joint 
ventures, and the proposed core network of the Veterans Choice 
programs improve access for our Nation's veterans to the 
highest quality care by preserving the academic affiliates as a 
direct extension of VA care and a preferred provider.
    Direct clinical care agreements, such as sole-source 
contracts, allow academic affiliates to plan, staff, and 
sustain infrastructure for certain complex clinical care 
services that are not available elsewhere, such as trauma 
centers, burn centers, comprehensive stroke centers, and 
surgical transplant centers. Solely relying on fee-based 
mechanisms has the potential to reduce veterans' access to care 
if teaching hospitals scale back services if they are faced 
with an uncertain patient load from the VA.
    Both VA medical centers and their academic affiliates 
recognize the value of these relationships to improving 
veterans' health care access and quality. As with any 
partnership, there's always room for improvement, and the AAMC 
is working with the VA on contracting reform, including right-
sizing the OIG review threshold to reflect clinical services, 
preapproved contract templates for selected services at 
Medicare reimbursement levels, and standardized overhead rates. 
These reforms will streamline agreements, reduce the 
negotiation times, help prevent delays in veterans' care, and 
shift reliance on short-term, temporary contracts in favor of 
the high-value, long-term contracts.
    The VA is at a crossroads. Strengthening the 70-year 
history of the VA academic affiliation will prepare our country 
for the next chapter of VA health care. The AAMC and our member 
institutions will continue to work with Congress and the VA to 
address the challenges and opportunities to ultimately improve 
care for the veterans and all Americans.
    Thank you very much for this opportunity to testify, and I 
look forward to answering your questions.

    [The prepared statement of Janis Orlowski appears in the 
Appendix]

    Mr. Coffman. Thank you.
    The written statements of those who have just provided 
oral--oh, I'm sorry. Ms. Watterson-Diorio, you are now 
recognized for 5 minutes.

              STATEMENT OF NANCY WATTERSON-DIORIO

    Ms. Watterson-Diorio. Good afternoon, Chairman Coffman, 
Ranking Member Kuster, and Members of the Subcommittee. Thank 
you for the opportunity to discuss the topic of ``VA and 
Academic Affiliates: Who Benefits?''
    My name is Nancy Watterson-Diorio. I am a board member of 
the National Association of Veterans' Research and Education 
Foundations, also known as NAVREF, and the CEO of the Boston VA 
Research Institute, known as BVARI.
    As a witness, my topics include how the VA nonprofit 
corporations fulfill an important role at the VA, in addition 
to the academic affiliates, in administering this extramural 
research.
    In 1988, Congress authorized the NPCs under title 38 to 
support VA research and, shortly thereafter, amended 
legislation to include educational activities. NAVREF 
represents the entire membership of 82 VA NPCs who are co-
located within the VA medical centers across the country.
    As reported in the 2014 annual NPC report to Congress, we 
raised over $260 million of annual extramural research and 
educational awards specifically targeted toward the VA's health 
care mission of supporting veterans' care. This represents 
approximately 15 percent of the total research portfolio 
supporting research at VA.
    The founding legislation felt several areas of difficulty 
for the VA research and education programs. It discontinued 
handshake agreements with no contractual obligations, an 
acknowledgement of VA's research successes. It supplemented 
VA's intramural funding expertise with expert support for 
extramural pre- and post-award funding and unique compliance 
knowledge. It leveraged VA's ability to expand its research 
portfolio to support clinical trials and Federal funding, thus 
allowing more veterans to be supported with state-of-the-art 
research knowledge, and the opportunity to be treated with the 
newest therapies. And, finally, it fostered an innovative 
spirit of public-private sponsorship that we should continue to 
nurture and grow.
    There are many advantages to using NPCs as envisioned by 
Congress. NPCs rigorously comply with Federal regulations and 
are subject to VA oversight that includes recurring VA audit 
requirements and inspections. Additional VA oversight includes 
statutory VA board members at each NPC, and a nonprofit 
oversight board at VA's central office. And NPCs operate 
transparently by providing an annual report to Congress 
detailing their accomplishments and successes in support of VA 
research.
    There are also challenges that we must find ways to 
overcome. The VA NPCs are unable to pay investigators in the 
same manner as the academic affiliates. We have managed to be 
successful despite this inconsistency, but if we were given the 
opportunity to administer payments in the same way as the 
affiliates, it would further enhance our successes in 
completing our mission of improved veteran health outcomes.
    Local practices are inconsistent on whether an NPC or an 
academic affiliate should be administering VA research 
projects. I recognize that not all 82 VA nonprofits have the 
current expertise to manage Federal grants. But without 
allowing them an opportunity to grow into this role, they will 
not be able to serve the veteran community to their potential.
    And, finally, the decisionmaking process within VA 
regarding the administration of Federal grants varies from site 
to site. Frequently, principal investigators, who are duly 
appointed at the academic affiliates, or even local leadership 
make the determination on who will administer the research, 
which is a potential conflict of interest.
    I believe that Congress created the NPCs for all the right 
reasons. However, I believe that the NPCs can contribute much 
more and be of even greater benefit to our veterans if the 
lingering barriers were removed.
    To that end, I respectfully request that the Subcommittee 
consider updated directives that would allow NPCs to pay 
investigators to the same extent the academic affiliates, 
provide the VA NPC right of first refusal on administering all 
research awards supporting VA research, and reduce the level of 
variability from site to site by creating general guidelines 
and decision trees that remove or reduce conflicts of interest 
among decisionmakers.
    Again, thank you for this opportunity to share the good 
work that is being done at the VA NPCs, and your support in 
allowing us this opportunity to participate in the important 
work that is being done in the VA's extramural research and 
education programs. NPCs offer great services and value, and I 
encourage congressional and VA leaders to look at expanding 
opportunities to use these great resources.
    I look forward to your questions. Thank you.

    [The prepared statement of Nancy Watterson-Diorio appears 
in the Appendix]

    Mr. Coffman. Thank you.
    The written statements of those who have just provided oral 
testimony will be entered into the hearing record. We will now 
proceed to questioning.
    Dr. Jesse, VA has been asking for noncompetitive 
contracting authority like what we see related to this hearing 
topic for other purposes, such as provider agreements. Its 
sole-source contracting with affiliates is such a mess, why 
should we believe that sole-sourcing other contracts would be 
any different?
    Dr. Jesse. So I think there's two issues here. It's clear 
that the administration of the existing sole-source contracts 
that we have requires some work. And Mr. Lemmon can talk more 
about that. It certainly is the focus of the GAO report. But 
there are times when sole-source contracting provides the speed 
and agility one needs in order to provide care that veterans 
need in a timeframe that can be done.
    And the issue here is primarily getting the proper care to 
veterans when they need it, and then ensuring that it's done in 
a fiscally responsible manner.
    Mr. Coffman. Dr. Jesse or Mr. Lemmon, can you assure me 
that this affiliate contract situation is different from the 
purchase card abuse situation we have seen over the past few 
years, where VA has been making payments with purchase cards 
spread over many split transactions under false pretense that, 
actually, contracts existed?
    Mr. Lemmon. Yes. There's no relationship to those issues 
with the purchase card program and what we're trying to do with 
affiliates.
    The purchase card program is something that we're also 
working on. We didn't prepare statements for that. But we're 
working on establishing a lot of national-level contracts 
instead of more open-market procurements under the micro-
purchase threshold of $2,500. And so the goal is to bring that 
in.
    Right now, we have way too many people with purchase cards, 
way too many transactions. And we want to act more as an 
enterprise and buy off of nationally leveraged contracts that 
provide great value to VHA, and reduce the amount of open-
market buying that's going on now that's created some of the 
problems that you identified.
    Mr. Coffman. Well, can you assure me there aren't any 
handshake agreements here, that all this affiliate spending is 
done on bona fide contracts?
    Mr. Lemmon. I believe we do have contracts in place for our 
affiliate agreements. It's hard to say that in no hospital at 
any place in the country there's something that I wouldn't know 
about, but there's been great effort to put contracts in place 
with affiliates.
    GAO certainly found a number of challenges that we take 
ownership of and we're going to address, but I don't believe 
there's handshake agreements like there were in the past.
    Mr. Coffman. Dr. Jesse, in a 2015 OIG report, it was found 
that the VA medical center in Pittsburgh had overpaid the 
University of Pittsburgh Physicians, Incorporated, by $44,082 
for call-back service hours that should have been attributed to 
a VA physician as a five-eighths employee. Will this money be 
refunded to the VA?
    Dr. Jesse. Well, I can't answer that question. I can take 
it for the record and get back to you.
    But the question here is, when a five-eighths--when a part-
time physician has already committed their hours to the VA and 
then are working for another agent, meaning the university, 
what are the responsibilities going back and forth there.
    But I don't know the exact answer to your question. I will 
get back to you.
    Mr. Coffman. Are you disputing the factual nature of the 
OIG report in terms of the overpayment?
    Dr. Jesse. No. I agree the OIG report said that they were 
paid an additional $24,000. The question was, is it going to be 
returned, and I said I don't know the answer to that question, 
but we can find that out for you.
    Mr. Coffman. It's $44,000.
    Dr. Jesse. $44,000. I'm sorry.
    Mr. Coffman. $44,000. And so are you going to try and get 
that money back? That's the question.
    Dr. Jesse. Well, we have to make sure--and I would defer to 
Mr. Lemmon--do we have the authority to get that back. And 
that's what I don't know. But if we have the authority to get 
it back, we will try and get it back.
    Mr. Coffman. Mr. Lemmon?
    Mr. Lemmon. Yeah, the network contracting office involved 
is working with general counsel to determine if we can recover 
the funds. If they determine that legally we can do that, we 
will.
    Mr. Coffman. Well, since we didn't get back--since we 
didn't attempt to get back any of the bonus money that was 
given during the appointment-wait-time scandal, I'm not all 
that surprised.
    Ranking Member Kuster, you're now recognized for 5 minutes.
    Ms. Kuster. Thank you.
    And these go to anyone who would like to answer.
    So I want to get at: Knowing that the practices of the 
delivery of medicine is dramatically changing--we've got 
accountable care organizations, we have group practices, we 
have lots of different affiliations that are happening outside 
of the VA process, but just happening with academic affiliates 
across the country--how have these changes created issues with 
the development of these long-term sole-source affiliate 
contracts?
    And if you can add to that, what is it that takes so long? 
Is this contributing to the length of time? Or are they issues 
within the VA that--because 3 years just sounds untenable to 
me.
    Dr. Jesse. So let me take, sort of, the preamble to your 
question, and then I'll turn it over to Mr. Lemmon.
    Actually, up in VISN 1, up in your area, there are a number 
of alternative relationships being explored with the affiliates 
in Burlington, Vermont, in Worcester, Mass., and in Maine, 
where we are looking more at a joint-venture model, which would 
share both care and accountability for care with the affiliate 
in shared space, actually, where the VA could provide care to 
the veteran under its authorities, the partner could provide 
care to their family under their authorities, and we would 
share in the other things like the social services that we know 
are required to engender good health and well-being.
    And that model doesn't work well in a contracting venue 
that's really driven by a fee-for-service-type of model. And 
that was the comment I was alluding to about really relooking 
about how we can have the authorities to contract with partners 
to develop these types of models. So think about joint ACOs, 
for instance, as a potential, or other responsibilities, where 
we would have a shared capitation for caring for a group of 
patients rather than negotiating services for X number of 
cardiac surgeries, X number of transplants, X number of 
cholecystectomies or colonoscopies, but rather a much more 
holistic approach.
    And, frankly, this is where CMS is really trying to drive 
with its alternative payment models, including both ACOs and 
the--
    Ms. Kuster. So do you think we're in a period of transition 
where the VA--I mean, as the country is transitioning over to 
the accountable care organizations, the VA is also following 
that process, and that we could get to a place of a better 
contracting and more effective and efficient and--
    Dr. Jesse. So I'll speak on behalf of me and not the 
agency, because this is my opinion. And I think we have to. 
Because the current model--and as everybody on this panel has 
alluded to, the affiliation relationships that were established 
70 years ago were done for a good reason, and they're here 
today, but the model of care in this country, how government 
functions in this country is very different than it was in the 
1940s. So we need new structures that allow us to optimize the 
care for veterans consistently, where data moves back and forth 
smoothly, where there is no opportunity for people to get lost 
because of fractured care.
    And as an example--
    Ms. Kuster. Do you think you need new--do you need new 
authority from Congress--
    Dr. Jesse. Oh, I think we do. And I think--
    Ms. Kuster [continued].--to enter into those kinds of 
relationships?
    Dr. Jesse [continued]. I think we do need new authorities 
from Congress, and we will be exploring them. We're just not 
prepared to say exactly what now.
    But let me give you an example. This was just announced 
last month. In Palo Alto, they have now a relationship. The 
word went to CVS, to the MinuteClinics, where veterans out in 
the bay area, if they have a problem, they can call the nurse 
triage line. And if it's a problem that is in the purview of 
what MinuteClinics provide, they will be referred to a 
MinuteClinic, the closest one. They won't have to travel into 
Palo Alto or go to the ER or urgent care or to their primary 
care provider. They get seen on the spot. VA pays; there's no 
pay for the veteran. But the information comes back over into 
the VA records so we get continuity of care.
    Today, any veteran can go to any Walmart in the country and 
get a flu shot for free, and that information will come back 
in. And so these types of more extensive partnerships, I think, 
are the models we're going to be talking about in the future. 
Holistically--an ACO means certain things to certain people. 
I'm not sure it's exactly the right term. But more cohesive 
payment models will be key.
    Ms. Kuster. All right. Thank you.
    My time is up. I yield back.
    Mr. Coffman. Thank you, Ranking Member Kuster.
    Congressman Lamborn, you're now recognized for 5 minutes.
    Mr. Lamborn. Thank you, Mr. Chairman. And thank you for 
having this hearing and for your leadership on investigative 
and oversight issues like this.
    Dr. Atkins, you might be familiar with our recent Full 
Committee hearing regarding invention disclosure, which we held 
in February. What is VA doing to ensure that VA employees are 
disclosing inventions they develop to the VA?
    Dr. Atkins. Thank you. Yes, since that February hearing, 
we've instituted three steps.
    With the specific example that was the subject of that 
hearing, regarding the hep C drug, we have an internal--an 
external review by our National Research Advisory Committee 
that will be reporting to us tomorrow. There is a criminal IG 
investigation of that case that has completed its interviews, 
but we have not received the report of that.
    And I think, to your question specifically, we're revising 
our policies to ensure that we get more complete annual 
disclosure of inventions, so that the VA would be aware of 
intellectual property to which it may lay a legitimate claim.
    Part of the problem has been the reporting process. We're 
going to try to make that easier for our researchers, so they 
can report it in the same way that they report it to the 
universities.
    Mr. Lamborn. Thank you for making some progress on that. I 
would like to ask that you provide the Committee copies of 
those reports as soon as you get them. You've referred to a 
couple of different--
    Dr. Atkins. Certainly.
    Mr. Lamborn [continued].--reports or updates and status 
reports. This is a big issue, and I hope there's nothing else 
out there of the magnitude of this hanging problem.
    On the issue of disclosures, Dr. Jesse, changing gears 
slightly, we know that VA employees can have dual appointments 
with the affiliates and collect salary and benefits for both 
institutions. Does VA require financial disclosures from these 
employees?
    Dr. Jesse. Of total salaries?
    Mr. Lamborn. Their dual status and--
    Dr. Jesse. Oh, I don't think a dual status would be missed. 
The VA--
    Mr. Lamborn [continued]. And benefits.
    Dr. Jesse [continued]. Yeah. So the VA maps clinicians' 
time, and it apportions that to clinical care, research, 
administrative, for the like. But if somebody's a part-time 
physician, then the rest of their time would be known to the 
university.
    And, frankly, many of the clinicians are actually jointly 
recruited. So the recruitment includes a department chair, say, 
from the university working with a department chair, the 
counterpart at the VA, to bring a person in that would spend 
joint time. And this is particularly common in procedural-laden 
issues.
    I think one of the challenges--and I want to be really 
clear about how I say this. But VA accounts for physicians' 
time as essentially an 80-hour pay period. And VA time and 
attendance--and I think you've heard the Secretary talk about 
problems with emergency physicians and hospitalists, that they 
don't fit normal hours that we ascribe physicians to work in. 
But we account for hours at a 40-hour week, 80-hour pay period.
    Most universities account their physicians' time closer a 
70-hour work week. And this is in part because of how they have 
to map and commit time on NIH grants and teaching and research. 
And clinical care is not a 9-to-5 operation. And so it is 
possible to have a full-time, 40-hour-a-week VA who also has a 
time commitment to the university above and beyond that.
    And those arrangements are disclosed, as far as I'm aware. 
I don't think it could be missed. And this follows an NIH model 
that actually allows physicians to be paid for, actually, an 
additional 20 hours.
    Mr. Lamborn. Well, thank you for that. But I'm also wanting 
to make sure that we have disclosure in place that would lead 
to the revealing of conflicts of interest.
    Dr. Jesse. Yeah. So I would hope that would be so. And I 
think you're driving at if there's shared development of 
intellectual property is probably the most important thing.
    And, you know, a conflict of interest that--you know, we 
just talked about financial conflicts of interest, but there's 
also influence conflicts of interest too. And, you know, those 
have to be managed very carefully. Our lawyers, our general 
counsel, always advises people that we can clear you of certain 
levels of conflict of interest, but it does not absolve you, as 
the individual, from a criminal conflict of interest.
    So the physicians themselves, you know, myself, always need 
to be aware of the rules and aware of those boundaries. But if 
there are issues, we will have counsel review them to make sure 
that the boundaries are clear. And this actually has happened 
recently with the chief of staff, for instance.
    But they're very clear. If you cross--if you, as the 
individual, regardless of whatever clearance we've given you, 
cross certain boundaries, then you are liable for your actions.
    Mr. Lamborn. Okay.
    Thank you for your answers, and thank you for being here 
today, all of you.
    Dr. Jesse. Thank you.
    Mr. Coffman. Mr. O'Rourke, you're now recognized for 5 
minutes.
    Mr. O'Rourke. Thank you, Mr. Chairman.
    Mr. Williamson, thank you for your work on this. The 
findings are serious, and I am glad to hear that the VA agrees 
with them, and has a course-correction plan in place. I'm going 
to ask Dr. Jesse about that in a minute.
    But I wanted to ask you, Mr. Williamson, if there's any way 
to quantify the scope of these failings. There are anecdotes 
about overages that extend beyond the review threshold. Do we 
have an overall number? And do we know how much of this money 
you would characterize as wasted, where the taxpayer and the 
veteran did not receive value for the dollar spent over the 
threshold?
    Mr. Williamson. No, unfortunately, we don't know that. And 
we certainly tried to look.
    We do know that there are high risks through the use of 
short-term contracts when there's been poor management. At one 
VA facility where we looked at five short-term, low-value 
contracts, all five had procedural errors, including basically 
the affiliate getting the price they asked for with no 
negotiation.
    So we know it's going on. We can't quantify that.
    Mr. O'Rourke. And just from human nature, we can surmise 
that that leaves the VA, the veteran, the taxpayer open to 
fraud potentially. We don't know that that, in fact, took 
place, but--
    Mr. Williamson. Absolutely.
    Mr. O'Rourke. Yeah. So this is pretty serious.
    I heard Dr. Jesse say that at some point in the future the 
VA will come to us requesting new authorities. Is it the GAO's 
position that any new restrictions or laws are necessary? Or 
are you satisfied with the VA implementing the recommendations 
that you made?
    Mr. Williamson. Well, we're very happy that VA has 
concurred with our recommendations, and is apparently taking 
action. We'll see how that goes.
    I think that this is a process that's going to take some 
time, because, just from the standpoint of the experience of 
the contracting officers who are working on medical sharing 
contracts, a third of them have less than a year of experience. 
Two-thirds have less than 3 years. That needs to be fixed very 
quickly, on a retention plan perhaps. One of our 
recommendations was that they have a retention plan.
    So there are a number of things. There are duplicative 
processes in the--or duplicative functions within the process. 
Both, for example, the VA Office of Inspector General does a 
price analysis, and the Medical Sharing Office in Nashville 
also does one. You know, the question could be asked, why are 
two different organizations doing that.
    Mr. O'Rourke. Dr. Jesse, you said you agreed with the 
findings. Do you agree that employees of the VA purposefully 
avoided oversight? And if that is the case, can you outline the 
accountability--
    Dr. Jesse. Well, I don't know that people purposely avoided 
oversight. I think people used contracts in order to get care 
for veterans, and when they know that--
    Mr. O'Rourke. The intentions may have been good, but, in 
the process of trying to get that care for veterans, did they 
know what the requirement was and exceed that requirement on 
purpose?
    Dr. Jesse. I don't know that that's true or not true, and I 
really don't want to have to make a judgment there.
    Mr. O'Rourke. Okay.
    Dr. Jesse. And I think part of the issue of--
    Mr. O'Rourke. How do we get VA employees to follow the 
rules and regulations within the VA? And it might concern 
people I represent that you don't seem to be concerned about 
that being the case. And so we can implement the reforms, but 
if you're not going to hold your employees accountable, I 
think, you know, that would be a concern for me.
    Dr. Jesse. I don't want to appear unconcerned at all. We're 
very concerned about it. But I think it also speaks to Mr. 
Williamson's comments about the lack of seniority amongst this 
very crucial group of contracting staff. And it takes, what, 5 
years to really get proficient at these contracts, so there is 
a very steep learning curve.
    So, you know, people are trying to get their jobs done. I 
don't think they purposely lie, cheat, mislead. I think they 
try and provide solutions that can get veterans what they need.
    Our job is to make that job easier and to make the process 
transparent so that we, all of us, can see what's going on and 
have the kinds of data flows we need to be able to have 
transparency into the process and know when issues arise. And 
we don't have that today. And that's one of the crucial things 
that needs to happen as part of the recommendations and the 
reforms.
    Mr. O'Rourke. I'm out of time, but I would agree with 
everything you just said. And I would add that we then also 
need to hold ourselves accountable. I mean, we can make 
countless excuses for failure to perform, but I don't think the 
people we represent, and I know you are not either, interested 
in hearing those excuses for failures within the VA.
    So what I really want to hear--and perhaps you can follow-
up for the record if you don't have it today--is the timeline 
to implement these recommendations, and an assurance that we're 
going to hold ourselves accountable for adhering to those new 
standards so that we get greater value for the taxpayer, we 
eliminate fraud and abuse, and we deliver care to veterans in a 
timely fashion, producing better outcomes than we see today. 
That's what I'm looking for.
    Dr. Jesse. Okay. Absolutely. That's all laid out, and we 
can get that to you.
    Mr. O'Rourke. Great.
    Dr. Jesse. Mr.--
    Mr. O'Rourke. I'm going to have to yield back to the chair. 
I'm out of time. Thank you.
    Mr. Coffman. Dr. Roe, you're now recognized for 5 minutes.
    Mr. Roe. Thank you, Chairman.
    I'm probably going to take a little bit different vantage 
point on this. First of all, we know the VA is deeply involved 
in medical education. Forty percent, as Mr. Williamson, I 
think, pointed out, of the VA staff now are residents or 
faculty from the university. So that relationship, which has 
been there 70 years, helped train our physician workforce in 
the country, is absolutely paramount.
    I think the Institute of Medicine back in the 1990s thought 
we had 25,000 too many doctors by 2010, and that's kind of like 
predicting who's going to win the next Super Bowl, but I think 
we do have--whatever the number is--a physician shortage. I 
don't think there's any question about that. The Committee 
recognized that with the Veterans Choice Act and put 1,500 
residency slots in there, which the VA's trying to implement 
right now.
    One of the things I think--and I may be wrong on this, but 
we had hearing after hearing when we found out all these wait 
times are going on. And so, if you're a contractor, you're a 
medical center director, you're going to try to find the 
quickest way you can to get additional manpower to see these 
patients. And that may end up being why there are so many 
short-term contracts.
    That relationship between academia and the VA is absolutely 
paramount for medical education and for care in this country. 
And it's good for both parties. It's good for the veteran, it's 
good for the students, the doctors, like myself, who trained 
there. It's also very good for the academic institutions and 
for research. The VA carries on a very big research arm, and 
they have to have these collaborations with universities and 
the teaching hospitals. So I think this system has to work.
    One of the questions I have, Mr. Williamson or Dr. Jesse, 
whoever wants to take it, how many of the contracts are short-
term contracts? What percent I guess is what I'm asking.
    Mr. Williamson. There are a total of 1,200 sole-source 
contracts. I'm blanking right now on how many of those are 
short-term. Many of them, perhaps most of them.
    Mr. Roe. Most of them.
    And the other question, I think everyone's going to ask, 
is, why does it take--why in the world does it take 3 years. I 
mean, that's unbelievable when I heard that. If it takes that 
long to have a long-term contract with an East Tennessee State 
University Quillen College of Medicine, the University of 
Pittsburgh, or whomever, you're going to have short-term 
contracts. Because the care's got to get delivered; I mean, 
there's no question. So that's got to get fixed, I think. And I 
think that would be paramount, to me, to fix--so you can go 
with these long-term contracts.
    The other thing, the payment models, as you all have 
pointed out, the fee-for-service contract ought to be pretty 
simple. You're just paying somebody if it's a fee-for-service 
procedure done. That's been laid out by Blue Cross, by 
Medicare, by Medicaid. I mean, that's not a hard number to 
find.
    I will agree with you, it's a lot tougher on the new 
models, with the ACO and with the capitated model. I don't know 
whether VA's put their toe in that water yet or not, but that's 
a little tougher one to--and you do need some very skilled 
people to do that.
    And I don't know whether you have or not, Dr. Jesse.
    Dr. Jesse. Well, that's why I parsed it by saying that's my 
opinion and not necessarily the agency's.
    But we are an ACO. Fundamentally, we are a capitated system 
with social responsibilities. How one brings in external 
partners and pays them is actually the real challenge that we 
need to figure out. And, you know, that's--if it's a tenable 
model, then we'll come back to you. If it's not, we'll look at 
alternatives.
    Mr. Roe. Well, the way the VA's capitated model works is it 
just creates waste. That's what happened in Arizona and others. 
When you can't get enough providers to get in, and you run to 
the end of your budget, you just put it off and--
    Dr. Jesse. And that's not acceptable. There's no argument 
there.
    Mr. Roe. And there's a much more efficient way, I think, to 
do it. I think we all agree with that.
    And I think, again, I want to know--for the record, I'd 
like to know what percent of those contracts are short-term 
contracts versus long-term contracts.
    Mr. Roe. If you fix that problem, I think you've gone a 
long way to fixing the other. The research arm, if you need 
some other help from us on that, let us know what that is, 
because that needs to be nurtured too, I think. We need to make 
sure that the VA and the other folks out there trying to do 
research--I think it's great. I think the VA does need to 
maintain that intellectual property.
    For instance, in the hepatitis C, we've all heard that. We 
all know what a fiasco that was. We can't let that happen. But, 
again, the good news of that whole research was hepatitis C got 
cured. Whoever got the money, still, patients out there 
benefited from that. It was a slipup, there's no question about 
that, on the VA's part to turn that resource loose, but the 
fact is patients today, right now, are getting benefit from 
that research that's been done.
    I yield back.
    Mr. Coffman. Thank you, Dr. Roe.
    Congressman Walz, you're now recognized for 5 minutes.
    Mr. Walz. Thank you, Chairman.
    And thank you all for being here.
    Mr. Williamson, and each of us have said this, it's hard to 
get people--and I'm going to focus on the contracting and the 
skill set of the employees--to get them there, to be able to do 
this, to get it right. But that employee skill training and 
execution, that's a personnel management issue. That is a 
personnel management issue.
    And I don't know if I'm making--it seems to me this is a 
very similar situation, with lack of training, that went into 
some of the scheduling issues that we had.
    So my question is this: Is there any discussion amongst VA 
to standardize the training, like a training center, and have 
the requirements clearly laid out, like the Foreign Service 
Initiative I'm familiar with and the military? When I go to a 
military school, there's a set of standards. When I come out of 
there, I'm skilled, I can do A, B, C, and D, and it is measured 
in there. Is there something similar in the VA for someone who 
is working on contracts, just to show level of competency?
    Mr. Lemmon. Yes, there is. We have a VA Acquisition Academy 
in Frederick, Maryland, that provides all the training that's 
required to be certified as a contracting officer. In addition, 
our Medical Sharing Office has developed specific classes in 
health care contracting to deliver to our workforce. So we've 
got, really, two avenues that are good.
    The turnover issue and the experience issue, there's a lot 
of reasons for it, but one of the big ones--and maybe I'm 
answering more than you asked, but we've got process issues we 
have to correct. And it's been mentioned, 3 years. It's 
ridiculous that it takes that much time. So if you're an 1102 
with a broken process, where you can't satisfy your customer in 
a reasonable amount of time, you're probably going to look for 
other work that would be more satisfying.
    So, in my mind, we have to fix the process. And I'm 
committed to do that.
    Mr. Walz. Is it a case, you have to help me understand 
this, if I get all the training and I--say, I'm certified to 
teach, my first year in that classroom is arguably not going to 
be or shouldn't be as good as my 10th year in that classroom. 
So they have the skill set, but it's still a case of you have 
to execute, and there's something that comes with doing the 
job, is that the case, of not having enough experience no 
matter if they're trained or not?
    Mr. Lemmon. Right. For warranted contracting officers, 
there's requirements both for education and length of time 
doing the work. So they have to have an experience requirement 
to be warranted to award contracts at certain levels.
    So we have that in place. And we can talk about the issues 
with health care contracts, but they are much more complex than 
many of the other contracts we work on. We have to keep our 
workforce, and we have to have a process that makes sense so we 
can get these contracts done in a reasonable time period.
    Mr. Walz. And you think that's happening now? The process 
changes are happening, you're making the--
    Mr. Lemmon. We're working on them right now.
    Mr. Walz. Okay. My next thing, we were just discussing up 
here the ability on these contracts on the useable data. And 
hard to--if we don't have all the useable data on them, if it's 
not collected useable, how are we--what are we doing about 
that? Can you fix that on your own or do we need to legislate 
it?
    Mr. Lemmon. Well, it depends on what you're referring to as 
data. Certainly one of our plans to address the findings that 
GAO provided is we're going to create enterprise visibility on 
performance against new milestone plans for these contracts.
    So leadership will know if there's a roadblock or 
something's not moving as fast as it needs to be. I believe we 
can do that without additional resources, quite frankly.
    Mr. Walz. And that was not happening before?
    Mr. Lemmon. No.
    Mr. Walz. And it can be now?
    Mr. Lemmon. It can be.
    Mr. Walz. And that should--I would think that would make a 
significant difference. Is that your take, that--
    Mr. Lemmon. I think it will make a significant difference.
    Mr. Walz. Okay. I yield back, Mr. Chairman.
    Dr. Orlowski. Sir, if I can make a comment.
    Mr. Walz. Oh. Absolutely. I have 40 seconds, so--
    Dr. Orlowski. Thank you. About a year ago, one of the 
suggestions that the academic medical centers made to the VA is 
that we actually have some template agreements. They're very 
complex agreements, but there are certain standards that, 
rather than having each VA work on a specific language, that 
we'd like to see national templates. They could have some local 
changes to them as needed, but that was one of the suggestions, 
because the academic affiliates actually have the same 
frustration with the fact that we're dealing with short-term 
contracts.
    So that is one of the multiple suggestions that we've made 
as we've worked with the VA.
    Mr. Walz. Great.
    Mr. Lemmon. I know there's just a few seconds left. But we 
do have 19 standardized performance work statements for various 
specialties now.
    Mr. Walz. Great. Thank you.
    Thank you, Mr. Chairman.
    Mr. Coffman. Thank you, Congressman Walz.
    Congressman Huelskamp, you are now recognized for 5 
minutes.
    Mr. Huelskamp. Thank you, Mr. Chairman.
    First a question for Dr. Jesse. The OIG reports in three 
contracts, the Pittsburgh VA entered with the University of 
Pittsburgh Physicians Incorporated, there was a total of nearly 
$850,000 administrative overhead expenses not supported or 
documented. What is VA doing to prevent this waste of taxpayer 
dollars?
    Dr. Jesse. So Pittsburgh is already done. The issue is how 
do we prevent that from happening again, and this is why we 
have set up, for instance, the Office of Medical Sharing that 
reviews these contracts and negotiates with the universities. 
And, in fact, the history of that group and doing this in a 
relatively short period of time of a couple of years has saved, 
and Mr. Lemmon can give you the exact numbers, but it's, what, 
about 113?
    Mr. Lemmon. Right. Even though the current process is 
horrible in terms of timeliness and we have to fix it, since 
October 2013 through April 2016, the VHA Medical Sharing Office 
has participated in the negotiation of 69 affiliate contracts 
and has achieved price reductions of over $113 million. That 
translates to well over $1 million per affiliate contract 
negotiated.
    Mr. Huelskamp. Follow up to the GAO on this, trying to 
understand. Mr. Williamson, how widespread is it that the 
contracting officers accept the affiliate's proposed prices 
rather than negotiating or doing an independent price analysis?
    Mr. Williamson. Why did that happen? Is that what you 
asked? Why--
    Mr. Huelskamp [continued]. How widespread is the practice--
    Mr. Williamson. Oh.
    Mr. Huelskamp [continued].--of accepting the proposed 
prices?
    Mr. Williamson. We don't know, but, you know, we only 
looked at 12 short-term contracts, and seven of those had 
problems like that. We can't project that, because, again, we 
only looked at 12, but it's a high incidence, and it's happened 
at more than one hospital.
    Mr. Huelskamp. Okay. Second question I'd like to follow-up. 
In looking at the testimony, Dr. Atkins, in the VA testimony 
noted VA research has been involved in the CAT scan, the 
pacemaker, organ transplants, treatments for high blood 
pressure, and heart disease. You note Nobel Peace prize winners 
and other such honors. How many of these inventions does the VA 
own and how much money do they receive from these research 
projects?
    Dr. Atkins. I'll have to take that question for the record 
to get back the exact number. I know some of that was discussed 
at the hearing in February, and the feeling was that we could 
do better, but I'll get you the exact number.
    Mr. Huelskamp. Okay. So since that hearing, you didn't look 
into it at all? You changed the policies or you're getting back 
to us?
    Dr. Atkins. So the policies on disclosure are being 
changed.
    Mr. Huelskamp. Okay.
    Dr. Atkins. So--but we'll get back to you with the exact 
number.
    Mr. Huelskamp. And disclosure. And what about policies on 
ownership with research affiliates and the researcher? Now 
we're talking about, I think, what, up to $400 million for just 
Hepatitis C. And so, yeah, I look forward to your response and 
follow-up with the Subcommittee.
    I do have another question, Dr. Atkins, though. We've had 
reports of VA research data being stored on affiliate servers. 
Is this allowed?
    Dr. Atkins. That's not in compliance with policy. There are 
information security audits that actually look at where VA data 
is stored. It's supposed to be stored on VA servers. And so 
where that's found, we seek to correct that. That's not 
something we control, but the policy's pretty clear about that. 
And that would be--
    Mr. Huelskamp. Policy is they cannot do that?
    Dr. Atkins. Correct.
    Mr. Huelskamp. What are the penalties for violating that 
policy?
    Dr. Atkins. So we first try to go in and look and see--this 
is actually under the Information Security Office, their 
responsibility. And so they go and they find that, and they 
issue a corrective action, and then the facility's responsible 
for instituting that.
    Mr. Huelskamp. And so what is the VA doing to protect 
veterans' information in these and other circumstances and 
their participation in VA research?
    Dr. Atkins. So, that's the reason we have the policy, to 
keep VA data stored on VA servers. And I think in some of those 
cases, those are maybe animal studies, there may be some cases 
of patient data being stored. But, again, we're seeking to make 
sure that those exceptions aren't happening. I can't tell you 
right now.
    Mr. Huelskamp. So the policy is they can happen. You do 
know it's happening, and the only way we'll protect--
    Dr. Atkins. Actually, I don't know--
    Mr. Huelskamp. Oh. I misunderstood.
    Dr. Atkins [continued].--it's happening, but you're telling 
me it is.
    Mr. Huelskamp. Okay. Well, I was looking at reports. So you 
don't know if it's happening or not? I thought you said earlier 
you--it was--or you can't have the research data on affiliate 
servers. Is that correct?
    Dr. Atkins. VA data, involving VA patients, should be 
stored on VA servers. There are data use agreements that can 
allow sharing of data as long as other protection policies are 
in place. So it's--if stored on a secure server and it's part 
of an explicit data use agreement to collaborate with 
investigators outside of VA, that is permitted. It's not 
permitted for a university investigator to take the data from 
the VA, put it on his or her university server.
    Mr. Huelskamp. Thank you, Mr. Chairman. I have one more 
question. If we're going to do another round, I do have an 
additional question.
    Mr. Coffman. There will be one more round.
    Ms. Watterson-Diorio, why are some NIH grants being 
administered through VA nonprofits while others are 
administered through the academic affiliate, with more than 51 
percent of the research--when more than 51 percent of the 
research is being conducted at the VA?
    Ms. Watterson-Diorio. Mr. Chairman, that's an interesting 
question, and one that we have differing data on across the 
country. VA nonprofits on the East Coast versus the West Coast 
completely differ 100 percent, where the West Coast is actually 
administering NIH grants.
    Decisions are made at a local level. These are done by VA 
leadership. They could even be done by a principal 
investigator. So decisions are being made because, in my 
opinion, there's not enough directives, regulatory directives 
that would allow the investigators to be told, you know, this 
is the equitable way in which we're arranging the 
administration of research.
    Mr. Coffman. Now aren't they supposed to be administered by 
the VA?
    Ms. Watterson-Diorio. Well, Title 38 proclaims that we have 
the authority to administer this research. That's not, in fact, 
happening all across the country.
    Mr. Coffman. Who does--who again, who decides where a grant 
is administered?
    Ms. Watterson-Diorio. It would be on the VA leadership side 
on--that would be, like, the board members of the VA 
nonprofits.
    Mr. Coffman. So those are not uniform? It's not--it's not 
uniform?
    Ms. Watterson-Diorio. It's not uniform at all.
    Mr. Coffman. It's not uniform? Can you estimate how much 
money VA is losing by having these grants administered through 
the affiliates instead of VA nonprofits?
    Ms. Watterson-Diorio. Well, again, I think that's a very 
hard number for me to be able to justify, because that's--
    Mr. Coffman. We're in the millions. We're in the millions. 
Is that a fair assessment?
    Ms. Watterson-Diorio. Yeah.
    Mr. Coffman. Okay.
    Ms. Watterson-Diorio. Yes. I would agree.
    Mr. Coffman. Okay. Dr. Jesse, according to the GAO report, 
high value--quote, ``high value long-term,'' unquote, affiliate 
contracts go through three different reviews. Why is that?
    Dr. Jesse. I think Mr. Lemmon is in better shape to answer 
that than I am, but in--I do know that the IG does a preaudit 
review, and that's one of them. So--
    Mr. Lemmon. Well, certainly the contract is looked at, at 
the local level. Then if it's over a half million dollars, our 
current process requires our university affiliates to provide 
cost data. Once we receive that cost data, there's a 
requirement that the IG review that data. And it's also 
reviewed at our Medical Sharing Office level, and at that 
level, they get concurrence from Patient Care Services and the 
Office of General Counsel. So there is a number of levels of 
review.
    We need to look at what pieces of this process we can 
streamline. We have to do these faster, no question.
    Mr. Coffman. How long have you been in your position now?
    Mr. Lemmon. Since October 15th, I've been acting in this 
position.
    Mr. Coffman. We always have somebody--I love it when the VA 
always has somebody who's brand-new and who, you know, kind of 
washes their hands of the problem, but 3 years? I mean, that is 
unbelievable. I--you know, it--I don't know how you have a 
contracting negotiation process that lasts 3 years.
    Mr. Lemmon. It's indefensible, but I would like to say that 
not all of--there are multiple parties involved. With some 
affiliates, getting cost data takes a long time. We do have 
situations with affiliates where we can't get a reasonable 
price. And I think what we have to do in those instances is 
make decisions quicker whether we're going to continue the 
relationship. It could involve--there are tough decisions. It 
could involve pulling out a residency program.
    So it's not all the contracting process itself. Certainly 
there's plenty of opportunities to improve that, but some of 
it, there are legitimate problems that come up when negotiating 
these contracts.
    Mr. Coffman. But this is supposedly done by experts who 
have all the training, am I correct in that, that have gone 
through--that Congressman Walz had mentioned that have gone 
through the appropriate certifications of the VA in terms of 
procurement?
    Mr. Lemmon. They have. You have to have the requisite 
warrant level to sign and negotiate these contracts.
    Dr. Jesse. So if I may, and this comes back to a comment 
that Ranking Member Kuster made in her opening remarks about 
how health care has been changing. And 70 years ago, virtually 
everything could be done on the signature of a dean of a 
medical school. Today when we have contracts with academic 
affiliates, as I mentioned, there are often multiple 
contracting entities. So in your report, I think, two of your 
agencies you were--the contracts were with the practice group 
as opposed to the university.
    So we now have deans of medical schools, we have CEOs of 
hospitals, we have chairmen of practice groups, and they often 
have a vice-president for health sciences, and even in--there 
may be an office of managed care. And so it's not the--the time 
is not all on the part of the VA, it's often the going back and 
forth that requires multiple--multiple entities and--
    Mr. Coffman. Let's just say it's a broken system.
    Ranking Member Kuster, you're now recognized for 5 minutes.
    Ms. Kuster. Thank you, Mr. Chair.
    And let me start right where we've left off and the 
changing nature of these practices and the complexity. For 25 
years before I came here, I was an attorney in New Hampshire 
and I represented Dartmouth Medical School, and I'm very 
familiar with their relationships with the VA and White River 
Junction, Vermont.
    You had mentioned in our previous dialogue about 
liabilities, you had used that word in passing, and sharing 
responsibility, but that entails liability. I want to focus in 
on the flip side of that, and which are benefits that come from 
these contracts, and in particular, the benefits from 
discoveries of VA researchers.
    In the best of all worlds, there are times when the VA is 
on the leading edge of treatment, of techniques, of protocols. 
I'm working with the VA now on the reduction of use of opiates 
and pain medication. I'm hoping that they'll be able to lead 
the country in that.
    But can you talk to me in terms of these relationships and 
these contracts, how do you manage the benefits and the need to 
ensure that the VA and the veterans, most importantly, but 
preferably the veterans and the taxpayers, benefit from 
breakthroughs in--whether it's medical technology or new 
techniques?
    Dr. Jesse. So I'm going to ask Dr. Atkins to answer most of 
that, but as a preamble, I'd like to say that we think this is 
really important. And the front end of a lot of the research we 
do is an institution, and article, I'm not sure of the right 
word, called a CRADA, which is an agreement of the sharing of 
intellectual property, and it actually--and sometimes it's 
quite frustrating to investigators, because it takes times to 
work that out because it's a lawyer-to-lawyer conversation, but 
that is a hard and fast thing that should be included in any 
research agreement that we do with an outside entity.
    So do you want to expound on that?
    Dr. Atkins. Yeah. Well, thank you for your point, because I 
think we all feel that this is not a zero sum game, that all 
parties benefit. So the fact that our academic affiliates 
benefit is a good thing, because it makes them want to partner 
with us, and we benefit from that partnership.
    And so, I want to comment a little bit on one of the 
questions Chairman Coffman asked about the NPCs in terms of 
whether all of our research should be administered through the 
NPCs. We don't lose any money by administering our research 
through the university. That actually builds a partnership that 
provides a lot of benefit. We owe a lot to our nonprofit 
corporations, they provide very good value, but they are 
independent entities. They are not the VA.
    And so we leave the decision of which grants should be 
administered by the nonprofit corporation, which should be 
administered by the university to the VA Medical Center. There 
are some projects that solely recruit veterans, almost always 
are administered by the nonprofit corporation; but many of our 
research is relevant to veterans but may not involve patients, 
may be much more aligned with the grants that are being 
administered by the university, and the university certainly 
benefits from having those grants.
    And I think the figures that were given show that roughly 
half of the non-VA research money that's brought in is 
administered through the nonprofit corporations, about half 
through the universities, but there's no--
    Ms. Kuster. So at the risk of sounding overly lawyerly, I 
want to follow the benefit, if I could, on behalf of the 
veterans and the taxpayers. Walk me through, and let's just 
make up an example about a breakthrough discovery in a new 
medication to treat pain that's not addictive and doesn't lead 
to substance use disorder.
    Help me understand the value of that, and who controls it, 
and who owns it. If you get into a patent, does the VA pursue 
that, does it then get turned over to some other entity in the 
Federal Government? Who owns the benefit of this?
    Dr. Atkins. So as Dr. Jesse mentioned, that's governed by 
these CRADAs, Cooperative Research and Development Agreements, 
where that shared ownership is worked out upfront, and that's 
the way the universities do it and the way that VA does it. 
It's a shared ownership of the intellectual property and the 
profits that flow from that.
    Ms. Kuster. So my time is up, but if I could ask for the 
record if there are examples maybe that would be beneficial for 
the Committee to understand, of technologies or breakthroughs 
in the past, and then how they've been adopted, and how they've 
been shared around the VA, and if there is a commercial value, 
how the dollars have flowed back to the taxpayers.
    Dr. Atkins. Thank you.
    Ms. Kuster. If that--thanks very much.
    Dr. Atkins. We'll do that.
    Ms. Kuster. I yield back.
    Mr. Coffman. Congressman Huelskamp, you're recognized for 5 
minutes.
    Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate the 
opportunity to follow-up on a couple more questions.
    First one, Ms. Watterson-Diorio, since the time it became 
public that you would be testifying here today, have you 
received any pushback from anyone about testifying, or 
concerning what you might say?
    Ms. Watterson-Diorio. Nothing official at this time, sir.
    Mr. Huelskamp. Nothing official. Anything unofficial?
    Ms. Watterson-Diorio. A few emails questioning where I was, 
what I was doing, yes.
    Mr. Huelskamp. Okay. I would be interested in sharing that 
with the Committee. And I say this, obviously I know of the 
certain situation, but over the last 3 or 4 years, we have run 
into multiple situations where whistleblowers have received 
various levels of, I would say, penalties and punishments and 
displeasure from folks above them. And we rely heavily on folks 
from the inside sharing with us what does occur. So I--
    Ms. Watterson-Diorio. I certainly appreciate your concern, 
and I will share back. Thank you very much.
    Mr. Huelskamp. And, Mr. Chairman, the second question I 
would have--I didn't get to last time, is in reference to 
research equipment.
    Dr. Atkins, we have had reports of VA research equipment 
being transferred to the affiliates. Is that allowed?
    Dr. Atkins. The research equipment bought by the VA belongs 
to the VA. It is permissible for the research equipment to be 
stored offsite where that makes sense to the research. So we 
don't want to recreate a whole laboratory that exists on the 
university side in the VA.
    And if we buy a piece of equipment that can augment what 
that laboratory can do, it makes sense for it to be over at the 
university. It doesn't make sense for it to stay over there 
after its use is expired. We have monitoring--tracking programs 
that track all of our medical equipment at the hospitals, and 
that's their responsibility.
    Mr. Huelskamp. So the question wasn't about storage, it's 
whether it's transferred, whether before or after the contract, 
the research. Is it transferred to them? Is it given to them?
    Dr. Atkins. No.
    Mr. Huelskamp. Is it shared?
    Dr. Atkins. No. It remains at the VA. It's just being used 
over at--offsite. We don't--we don't give up ownership of that.
    Mr. Huelskamp. Okay. And then if the contract ends--or 
maybe they never end in this case. If they end, you collect the 
equipment back, or you transfer it or give it away? I'm just 
trying to follow-up what happens perhaps at the end of a 
contract.
    Dr. Atkins. If it's not being used at the--for research at 
the university site, and we have a use for it at the VA site, 
we would bring it back.
    Mr. Huelskamp. Okay. Is it used by the research facility 
for other types of research outside the VA? Is that permitted?
    Dr. Atkins. Are you saying is it permissible for them to 
use it for non-VA research--
    Mr. Huelskamp. No. Yes.
    Dr. Atkins [continued].--in the lab? I don't think there 
would be any prohibition against that.
    Mr. Huelskamp. Okay. So what oversight measures have you--
    Dr. Atkins. It's a shared piece of equipment and it's 
governed--
    Mr. Huelskamp. Shared, but VA owns it?
    Dr. Atkins. Right.
    Mr. Huelskamp. So what oversight do you have to ensure that 
VA ownership that's used exclusively for VA, or you don't mind?
    Dr. Atkins. That's not a major concern of ours, in the 
sense that usually that research is being done to benefit--it's 
a partnership. And we buy the equipment where it seems to make 
sense, and the fact that our partners are using it to benefit 
research--
    Mr. Huelskamp. That actually does bother me, Doctor. We 
just discussed a $400 million invention that was done by a VA 
researcher, probably using VA equipment, we don't know, and you 
all are looking into that. And that should be part of the 
agreement.
    That should be part of the agreement of use of their time 
and equipment in order to capitalize. I mean, we talked about 
these tremendous advances through VA research. And we look 
forward to the response, but I think after months of expecting 
us to show, hey, this is what the VA got for all these 
investments, but the private sector, these individuals have 
taken that. So I just want to know what oversight measures you 
have in place to ensure VA equipment is accounted for, 
maintained, and used for the VA purpose, and if not, rented by 
the VA--by the research facility.
    Dr. Atkins. Yeah. I'm going to take that question for the 
record, because I may not be entirely right about the--how much 
of that is spelled upfront.
    When there is an agreement to transfer the equipment for 
use, and I--in terms of whether that agreement specifies that 
it can only be used for certain uses and not for others, that 
may exist, and I--I will get back to you.
    Mr. Huelskamp. Yeah. And I'm not lawyerly. I'm a farmer. 
I'd hate to be accused of that, but you mentioned storage.
    Ms. Kuster. Better to be accused of a farmer than a lawyer.
    Mr. Huelskamp. I agree. I agree.
    So we talked about storage, we talked about sharing, and we 
talked about transferring, and I think all those three terms 
have been mixed up in the response, at least I haven't followed 
that. So I appreciate the response and follow-up to the second 
question.
    Dr. Jesse. If I may, if a VA researcher is using--has 
authority of a VA piece of equipment in a university lab, there 
is probably a much greater chance than--not that they are 
utilizing university assets in support of their VA research. 
And so it's--you know, it's a shared entity, it's a shared 
resource, and it's a partnership.
    Mr. Huelskamp. No. I understand.
    Dr. Jesse. It could go both ways, right.
    Mr. Huelskamp. This question was about VA research 
equipment. Now, if that's the response that, well, we share 
their equipment, they share ours, then I would say there's not 
enough oversight measures in effect to say whether or not it's 
equal sharing, I mean, that's part of the question here, so I 
appreciate us digging into that and getting a close response--a 
better response to that.
    I yield back, Mr. Chairman.
    Mr. Coffman. Thank you, Congressman Huelskamp.
    Congressman O'Rourke, you're now recognized for 5 minutes.
    Mr. O'Rourke. Yeah. Mr. Chairman, I just wanted to make the 
point that I think academic affiliations make a lot of sense, 
and I would like to better understand the authorities that Dr. 
Jesse and the VA are going to ask for, and these may be 
authorities that we want to support, and certainly, I'd like to 
see the process accelerated and shorten the amount of time it 
takes to enter into those agreements. We know from testimony 
earlier in the year from the VA that there are 43,000 
authorized funded, but unfilled positions within VHA, and so 
this makes a world of sense to me to do this.
    I just want to, you know, make the point that thanks to the 
GAO, I think there are some significant concerns that have been 
raised, and I'm very grateful that the VA has agreed with the 
recommendations and is going to implement them, and I'd love to 
see the detail of that, that addresses the lack of performance 
standards, this avoidance of oversight, intentional or not, and 
some of the other issues that are raised.
    But I know, Dr. Jesse, when we came through the first round 
of questions, you were going to make an additional point, and I 
ran out of time, where you were going to refer to one of your 
colleagues. If you'd like to add anything to that, you're 
certainly welcome to.
    Dr. Jesse. Well, thanks. And I guess I'm going to--Janis 
stole one of my lines in who benefits, being the question asked 
at the title of this hearing, and she said the veterans, and 
absolutely, but I would also add that it's you, me, and the 
American public, because if you have a good physician, if you 
have a good health care team, there is a great chance that it's 
the VA academic-affiliate relationship that was intimately 
involved in the training and skill building in those 
individuals. So we all benefit.
    Mr. O'Rourke. Yeah. You just want to make sure that there's 
absolute adherence to the standards--
    Dr. Jesse. Oh, yes.
    Mr. O'Rourke [continued].--that you don't have fraud, 
because this is a little bit of a departure in some ways if we 
were to increase the level of participation with academic 
affiliates to help staff and provide care for veterans like 
those in El Paso, which are historically underserved. So I 
don't want anything to jeopardize the program with some big 
scandal, hey, we were overbilled--
    Dr. Jesse. Yeah.
    Mr. O'Rourke [continued].--X millions. Let's bring 
everything back in house and no longer do this again.
    So I think the GAO's findings give us an opportunity to get 
this right so that we can expand it, accelerate it. You're 
asking perhaps for new flexibilities and authorities. We may 
want to do that. We just want to make sure that this thing's 
being run really well, so that we can expand it.
    Dr. Jesse. Absolutely.
    Mr. O'Rouke. Yeah.
    Dr. Jesse. Thank you.
    Mr. O'Rourke. Okay.
    Mr. Coffman. You know, I have one question. And out of 
fairness to my colleagues, I'll let them ask another question 
if they do have one, but, Mr. Atkins, I think you said that 
there was really no--fundamentally no difference using the 
nonprofit--VA nonprofit, versus using a university, yet it 
seems to me that the issue with the Hep C drug totally 
contradicts your statement, where Emory University 
disproportionately benefited by whatever agreement was reached 
in terms of that Hep C drug, and so I don't understand what 
your rationale is.
    The nonprofit, it would have flowed back into the VA versus 
it flowed to Emory University. Could you comment on that?
    Dr. Atkins. Well, as you know, that whole issue is under 
investigation and the facts as to what the research was done. I 
mean, I'm not sure that it flowing through the nonprofit would 
have changed the fact, depending on where--whether that--how 
that research was done and what--who had rights to the 
intellectual property.
    Mr. Coffman. Ms. Diorio, can you comment on that?
    Ms. Watterson-Diorio. Well, I would say that, you know, as 
we all know, the sole purpose of the VA nonprofits is to serve 
the VA. We are under a lot of oversight to make sure that the 
tech transfer is upheld, the CRADA language is just perfect. A 
CRADA is a Federal document that allows the VA to enter and be 
bound by language to support research.
    So when we do that, there are tech transfer laws, there are 
all of this documentation that is supporting the VA to own that 
property, but there are also some other regulations, and I can 
get that to you for the record, that allows the university an 
opportunity to enter into and help with tech transfer, because 
sometimes they are very expert in that field.
    Mr. Coffman. Thank you.
    Dr. Orlowski. If I could add.
    Mr. Coffman. Thank you very much. Yeah. Go ahead.
    Dr. Orlowski. Thank you, Congressman. The academic 
affiliates don't take a position as to which is the better--but 
I would say that there are specific reasons why the academic 
institution may in certain circumstances have more experience. 
There's complex regulations for human subject research, complex 
regulations for animal research, and depending upon what is 
being studied, DNA sequencing changes, sometimes the local VA 
authorities will make a decision as to which institution has 
the better oversight.
    Mr. Coffman. It just seems the problem is there's not 
oversight, and the problem is that some of these institutions 
get the better of the VA, which is not all that hard to do, 
given the lack of oversight.
    Let me just conclude. Today we have had a chance to hear 
about the relationship between VA and its academic affiliates. 
As has been described, there are numerous issues, concerns, and 
problems surrounding this relationship that takes great 
advantage of VA and ultimately the veteran.
    This hearing was necessary to accomplish a number of items: 
To highlight the conflicts when employees in leadership 
positions at VA also hold academic appointments at the 
affiliate; to highlight the potential for lost intellectual 
property rights when VA-approved research, VA equipment, and VA 
data are utilized by the academic affiliate; to highlight the 
potential lost revenue when Federal grants are administered by 
the affiliate, instead of the VA nonprofit corporations, when 
the majority of the research is being performed at VA; and to 
highlight the problems VA has in entering into fair and timely 
sole-source affiliate contracts. I hope that shedding light on 
these issues will lead to changes.
    I ask unanimous consent that all Members have 5 legislative 
days to revise and extend their remarks, and include extraneous 
material. Without objection, so ordered.
    I would like to once again thank all of the witnesses and 
audience members for joining in today's conversation.
    With that, this hearing is adjourned.

    [Whereupon, at 5:53 p.m., the Subcommittee was adjourned.]

                         A P P E N D I X

                              ----------                              

           Prepared Statement of Robert L. Jesse, M.D., Ph.D.
    Good afternoon, Mr. Chairman, Ranking Member Kuster, and Members of 
the Committee. Thank you for the opportunity to discuss VA's 
relationship with its academic affiliates, specifically, the use of 
sole-source affiliate contracts, affiliate universities, billing 
issues, research funding, and use of research space. I am accompanied 
today by Mr. Rick Lemmon, Acting Chief Procurement and Logistics 
Officer, and Dr. David Atkins, Acting Chief Research and Development 
Officer.

Office of Research and Development (ORD)

    For more than 90 years, VA has conducted research within its 
hospitals and health care system in accord with Congressional authority 
to advance scientific knowledge about critical issues facing Veterans. 
In establishing VA Research, Congress recognized both the need to study 
the unique problems of Veterans but also the opportunity for research 
to support excellent clinical care.
    Since its inception, VA Research has contributed to groundbreaking 
advances such as the Computerized Axial Tomography scan, the pacemaker, 
and organ transplants; it has sponsored groundbreaking studies on the 
treatment of tuberculosis, high blood pressure, heart disease, and 
Posttraumatic Stress Disorder (PTSD). It has partnered with industry to 
demonstrate the value of vaccination to prevent shingles, and to 
develop state of the art prosthetic limbs. These achievements have 
resulted in three Nobel prizes, seven Lasker Awards, and numerous other 
national and international honors. VA Research continues to drive 
advances in Veteran care in issues as diverse as diabetes, spinal cord 
injury, and mental health. Its groundbreaking Million Veterans Program 
has already enrolled close to half a million Veterans who have donated 
blood samples and completed surveys to help unlock the genomic basis of 
medical disease.
    VA Research benefits from its position within an integrated health 
care system with 167 medical centers and a state-of-the-art electronic 
health record. Our ability to recruit patients throughout the country, 
to draw on detailed clinical data over two decades on 8 million 
Veterans, and to implement research findings into clinical care makes 
VA a model for bench-to-bedside research. Partnerships with national 
and regional VA clinical leaders, new outreach to Veterans in the 
community, and a network of research Centers with specific areas of 
focus ensure that research reflects the current and future needs of 
Veterans.
    The VA Research program plays a unique role that cannot be filled 
by external funding sources. First, VA Research prioritizes problems 
that are common or important to Veterans- PTSD, traumatic brain injury, 
polytrauma, military sexual trauma. Second, 60% of our researchers are 
also practicing clinicians at VA medical centers (VAMC). As a result 
they are familiar with the Veteran experience and are able to seek 
knowledge and pursue research topics to help our patients. 
Additionally, unlike other Federal agencies, VA has no laboratories 
whose predominant function is research. Research studies are performed 
in parallel in the same space at VAMCs where patient care is provided. 
This leads to a focus on research areas benefiting Veterans. Third, 
research is conducted by VA employees who are dedicated to the mission 
of improving care for Veterans. Finally, a research program planned and 
run within VA can adapt to the changing needs of the Veteran 
population. For example, the Office of Research and Development has 
dramatically increased the number of researchers and studies addressing 
the needs of women Veterans over the past decade to meet the growing 
population of women entering VA care.
    VA's research mission is entirely supported by intramural funding. 
VA does not have authority to award grants to parties outside VA, and 
all VA Research funding is provided to VA-employed researchers.
    VA researchers work at more than 100 VAMCs conducting research. In 
addition, 124 VAMCs have formal affiliations with academic institutions 
and hospitals, and many full-time and part-time VA employees also have 
academic appointments or are employed at an affiliated academic 
institution or hospital - they are dually appointed personnel. Many 
clinicians/researchers have laboratory access at both VA and the 
academic affiliate. Because of these arrangements, many VA inventions 
could be jointly owned by VA and its academic affiliates.
    VA Research fosters dynamic collaborations with its university 
partners, other federal agencies, nonprofit organizations, and private 
industry. Researchers are able to leverage $663 million in VA funding 
to bring in an additional $685M in external funding from industry and 
Federal agencies such as the National Institute of Health. The Federal 
investment in VA Research returns incredible value to Veterans and the 
taxpayers, value that is reflected in Veterans positive attitudes about 
research and health care outcomes in VA.

Office of Academic Affiliation (OAA)

    Strong academic relationships have been the foundation of improving 
quality care and patient access in VA health care since 1946. January 
30, 2016, marked the 70th anniversary of VA ``Policy memorandum #2,'' a 
document crafted by General Omar Bradley and other VA leaders which 
established the visionary partnership that VA has with America's 
medical schools. The initial motivation for integrating academic 
relationships in VA's mission is just as relevant today: academic 
affiliations are invaluable to facilitate recruitment of outstanding 
clinical staff to VA, and the presence of supervised trainees often 
allows efficient leverage of effort for clinical staff because several 
trainees working under the careful eye of one supervisor can often 
treat many more patients than that senior clinician could treat if 
alone. Such academic activities are also vital for assuring that VA 
clinical staff remains at the leading edge of clinical knowledge and 
skill, and to attract clinicians motivated by professional excellence 
that is associated with practice, teaching, research, and system 
improvement activities that occur in academic settings. VA's health 
profession education activities have blossomed to include affiliations 
with over 1,800 schools of medicine, nursing, pharmacy, and nearly all 
other health professions. Through these affiliations, and VA's own 
sponsorship of selected programs, nearly 124,000 trainees in health 
professions receive supervised clinical education in VA facilities each 
year. The Veterans Health Administration (VHA) is profoundly important 
to overall health professions education in the US, with about 70% of US 
physicians having VA clinical experiences at some point in their 
education, VHA being the second largest funder of Graduate Medical 
Education (after the Centers for Medicare and Medicaid Services (CMS)), 
and VHA being a major source of both trainee and faculty funding and 
clinical experiences for professions including pharmacy, psychology, 
optometry, podiatry and many others.
    The result is that VHA robustly fulfills statutory missions 
prescribed by 38 U.S. Code Sec.  7303 ``to carry out a program of 
medical research in connection with the provision of medical care and 
treatment to veterans.'' It is important to note that these many 
academic relationships and affiliation agreements address only 
educational activities and do not address contracts for provision of 
professional or clinical services for VHA's patient care services - 
those are addressed by VHA through other sharing agreement and 
contractual mechanisms.

Government Accountability Office (GAO) Report

    GAO released its final report (GAO-16-426) titled ``Improvements 
Needed for Management and Oversight of Sole-Source Affiliate Contract 
Development'' on May 6, 2016 with a 30 day hold on public release. This 
report recommended eight executive actions to ensure timely development 
of high-value-long-term sole-source affiliate contracts (SSAC), 
effective development and use of short-term SSACs, develop and maintain 
medical sharing expertise within network contracting offices, and 
ensure effective communication between VHA and its affiliates regarding 
SSACs.
    VA concurred with GAO's recommendations and developed an action 
plan to implement each of the recommendations. As part of this action 
plan, the Deputy Under Secretary for Health for Operations and 
Management will charter a workgroup to address several of the 
recommendations. The workgroup will be charged with tasks such as:

      Establishing performance standards for appropriate 
development time frames for high-value long-term SSACs;
      Establishing the oversight process for these standards;
      Developing requirements for VAMCs and network contracting 
offices to effectively engage in early acquisition planning for the 
replacement of expiring high-value long-term SSACs to reduce reliance 
on short-term SSACs as bridge contracts; and
      Developing standards for the minimum amount of time 
necessary to develop and award short-term SSACs to minimize cases of 
nonadherence to VA policy for these contracts.

    The estimated timeframe for the workgroup to complete 
deliberations, finalize performance standards, and receive approval 
across all stakeholders, is one year. The estimated timeframe for 
nationwide implementation of new performance standards is one year, 
including pilot testing of any new technology and training of staff.
    VA is strongly committed to developing long-term solutions that 
mitigate risks to the timeliness, cost-effectiveness, quality and 
safety of the VA health care system. VA is using the input from GAO and 
others to identify root causes and to develop critical actions. As we 
implement corrective measures, we will ensure our actions are meeting 
the intent of the recommendations. Our actions will serve to establish 
strong oversight on SSACs, improve current training offerings for VHA 
staff who work on SSACs, and seek increase prioritization of funding 
for training to appropriate department decision makers.
    Since receiving the draft GAO report VA/VHA has initiated two short 
term initiatives and one long term initiative to improve outcomes of 
SSAC contracting. First, VA Directive 1663 which provides overall 
guidance for sole source academic affiliate contracts is being revised 
and updated to ensure more timely contract awards while still 
protecting VA financial interests. The 1663 revision is expected to be 
completed within the next 60 days. Second, enterprise capability to 
monitor the milestone adherence of sole-source affiliate contracts will 
be developed. This will enable senior management to take action when 
needed to overcome barriers to timely awards, with a targeted 
completion date of November 30, 2016. To meet the long-term goals of 
strong oversight and address all of the GAO recommendations, VHA is 
chartering an integrated workgroup.
    Mr. Chairman, this concludes my testimony. My colleagues and I are 
prepared to answer any questions you, Ranking Member Kuster, or other 
Members of the Committee may have.

                                
              Prepared Statement of Randall B. Williamson
                             VA HEALTH CARE
    Improvements Needed for Management and Oversight of Sole-Source 
                     Affiliate Contract Development
    Chairman Coffman, Ranking Member Kuster, and Members of the 
Subcommittee:
    I am pleased to be here today to discuss our May 2016 report on the 
Department of Veterans Affairs' (VA) development and use of sole-source 
contracts with university-affiliated hospitals, medical schools, and 
practice groups. \1\ Since 1946, VA has partnered with medical schools 
to provide educational opportunities for resident physicians and other 
types of students and to increase the availability of specialty 
physicians to treat veterans in VA medical facilities. This partnership 
has grown to include 124 of the 167 VA medical centers (VAMC) 
establishing affiliate relationships with at least one university 
medical school and its associated university hospital. As a part of 
these affiliate relationships, VA can obtain additional physician 
services to supplement available VAMC physician services from a 
university medical school, hospital, or affiliated physician practice 
group through expanded contracting authority- referred to as sole-
source affiliate contracts (SSAC). \2\ Through SSACs, which are 
available only to VAMCs and their affiliates, VAMCs can obtain 
physician services directly from the affiliate without competition if 
those services are necessary to support learning opportunities for 
physicians during their residency training in VAMCs. \3\ SSACs serve an 
important role in helping to ensure that VAMCs can provide specialty 
health care services for our nation's veterans and support the 
residency training of a new cadre of physicians. From fiscal year 2011 
through fiscal year 2015, VA had nearly 1,200 SSACs valued at almost 
$724 million throughout its health care system.
---------------------------------------------------------------------------
    \1\ GAO. VA Health Care: Improvements Needed for Management and 
Oversight of Sole- Source Affiliate Contract Development, GAO-16-426 
(Washington, D.C.: May 6, 2016).
    \2\ See 38 U.S.C. Sec.  8153(a)(3)(A). For the purposes of this 
testimony, we use the term physician services to describe services 
provided by physicians and other highly-qualified professionals that 
are necessary for the operation of clinical departments that train 
resident physicians at VAMCs.
    \3\ See Department of Veterans Affairs, Health Care Resources 
Contracting-Buying, Title 38 U.S.C. 8153, VA Directive 1663 (Aug. 10, 
2006). For the purposes of this testimony, we refer to this directive 
as VA Directive 1663.
---------------------------------------------------------------------------
    SSACs can be used to fill short-term or long-term needs at the 
VAMCs and the level of VA oversight they require varies by their value. 
Specifically, high-value, long-term SSACs have a total initial value of 
$500,000 or more and provide affiliate services for more than 1 year. 
\4\ Among all SSACs, high-value, long-term SSACs require the most 
review from the Veterans Health Administration (VHA) Central Office. 
\5\ There are two types of low-value SSACs that are distinguished by 
the length of time the affiliate is providing services to the VAMC, and 
neither are required by VA policy to receive oversight from VHA Central 
Office. Low-value, long- term SSACs have a total initial value of less 
than $500,000 and provide affiliate services for more than 1 year. 
Short-term SSACs have a total initial value of less than $500,000 and 
provide affiliate services for less than 1 year.
---------------------------------------------------------------------------
    \4\ The total initial value of a SSAC refers to the combined value 
of the contract's base period and any option periods included in the 
contract. For example, a high-value, long- term SSAC may have a base 
period of 1 year valued at $1 million and four option periods that are 
1 year each with a $1 million value for each option period. This high-
value, long- term SSAC would have a total initial value of $5 million 
dollars.
    \5\ In this testimony, we use the term develop to describe a 
multistep process used to initiate, create, and review SSACs. This 
multistep process includes actions related to acquisition planning for 
a SSAC, development and issuance of a solicitation used to inform the 
affiliate of VA's needs, development and evaluation of the affiliate's 
proposal, and preparation for and negotiation between the affiliate and 
VA.
---------------------------------------------------------------------------
    Oversight of the VHA contracting workforce and the contracts they 
create is provided by the VHA Office of Procurement and Logistics. VHA 
created the Medical Sharing Office, a component of the VHA Office of 
Procurement and Logistics, to provide guidance to contracting officers 
and oversee the development and award of medical sharing contracts, 
which include SSACs. Both VHA contracting and clinical staff are to 
work together to plan, execute, and monitor medical sharing contracts. 
On the contracting side, contracting officers are responsible for 
developing, awarding, and administering contracts on behalf of the 
federal government. Each contracting officer works within 1 of the 21 
network contracting offices and is overseen by a medical sharing team 
supervisor within their network contracting office. \6\ Network 
contracting offices manage all the contracting activities of a single 
Veterans Integrated Service Network (VISN) that oversees the day-to-day 
functions of VAMCs that are within that VISN's network. On the clinical 
side, the VAMC seeking the SSAC is to designate a contracting officer's 
representative at the VAMC to assist in the development of the SSAC and 
monitor the affiliate's performance once the contract is awarded. 
Common tasks delegated to the VAMC-based contracting officer's 
representative include developing the initial information required to 
begin acquisition planning, referred to as the procurement package, 
which includes a definition of the services the VAMC needs the 
affiliate to provide and approvals from leadership officials.
---------------------------------------------------------------------------
    \6\ There are 21 network contracting offices within VHA that report 
to the VHA Procurement and Logistics Office in VHA Central Office and 
manage all the contracting activities of a single Veterans Integrated 
Service Network (VISN) and all VAMCs assigned to that VISN. At the 
start of fiscal year 2016, there were 21 VISNs, but VHA is in the 
process of consolidating some VISNs so that by the end of fiscal year 
2018, there will be 18 VISNs.
---------------------------------------------------------------------------
    My testimony today discusses the findings from our May 2016 report 
examining VA's use of SSACs. Accordingly, this testimony addresses (1) 
VHA's time frames for developing and awarding high-value, long-term 
SSACs; (2) VHA's use of short-term SSACs and how it oversees their 
development and use; (3) how much experience the workforce that 
develops SSACs has and what specialized training VHA provides; and (4) 
the challenges selected affiliates experienced with the development and 
use of SSACs. In addition, I will highlight the eight actions we 
recommended in our report that VA take to help ensure the timely and 
effective development of SSACs, the professional growth of the VHA 
contracting staff responsible for SSAC development and award, and 
effective communication between VHA and its affiliates. VA concurred 
with these eight recommended actions.
    To conduct our work, among other things, we selected five VAMCs- 
located in Indianapolis, Indiana; Miami, Florida; Minneapolis, 
Minnesota; Palo Alto, California; and San Antonio, Texas-to visit along 
with the five network contracting offices responsible for developing 
and awarding SSACs for these VAMCs. We selected these VAMCs based on 
VHA reports on the number and value of SSACs. These five VAMCs are each 
located within different VISNs. At each of these VAMCs, we selected 
four to six SSACs and reviewed the terms of these contracts and 
supporting documents to determine the total elapsed time spent by VHA 
staff in developing and awarding each contract. We reviewed a total of 
25 SSACs from these five VAMCs for services provided from fiscal year 
2011 through fiscal year 2015. \7\ In addition, we administered a data 
collection instrument to supervisors responsible for overseeing the 
development and award of SSACs in all 21 network contracting offices 
throughout VHA to capture information about various aspects of network 
contracting offices' experiences developing SSACs, including oversight 
by the Medical Sharing Office and contracting officer turnover. We also 
reviewed VA policy documents and interviewed officials from the VHA 
Medical Sharing Office and the VHA Procurement and Logistics Office, as 
well as officials from our selected VAMCs and their associated network 
contracting offices. \8\ Further, we interviewed representatives of the 
five university affiliates that provided services to VAMCs under the 25 
SSACS we selected for review and discussed their experiences with the 
development of SSACs. For each of our objectives, we reviewed relevant 
standards for internal control in the federal government. \9\ Further 
details on our scope and methodology are included in our May 2016 
report. The work this statement is based on was performed in accordance 
with generally accepted government auditing standards.
---------------------------------------------------------------------------
    \7\ These 25 SSACs included 11 high-value, long-term SSACs from 
three VAMCs; 2 low- value, long-term SSACs from one VAMC; and 12 short-
term SSACs from four VAMCs
    \8\ VA Directive 1663 outlines VA's policies and procedures for the 
establishment of medical sharing contracts, including SSACs.
    \9\ See GAO, Internal Control: Standards for Internal Control in 
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 
1999). Internal control is a process effected by an entity's oversight 
body, management, and other personnel that provides reasonable 
assurance that the objectives of an entity will be achieved.

Selected VAMC's Time Frames for Developing High- Value SSACs Can Be 
    Significant, But VHA Has Not Established Standards for Timeliness 
---------------------------------------------------------------------------
    and Does Not Collect Data

    We found that the 11 high-value, long-term SSACs we selected for 
review from three of the five VAMCs we visited took nearly 3 years 
(33.8 months) on average to develop and award. \10\ (See fig. 1.) The 
total time required for the development and award of these 11 high-
value, long-term SSACs ranged from 18 to 46 months and the longest 
contracting phases were the solicitation and negotiation phases.
---------------------------------------------------------------------------
    \10\ One of our selected VAMCs acquired affiliate services 
exclusively through short-term SSACs and another of our selected VAMCs 
acquired affiliate services through low-value, long-term SSACs and 
short-term SSACs.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

    Note: Time frames for the development and award of 11 selected 
high-value, long-term SSACs from three VA medical centers (VAMC) are 
calculated using dates from available documentation in each contract's 
file; however, not all development actions are documented within 
contract files. As a result, this figure does not include calculations 
for actions that are not documented. The total time spent developing 
and awarding a high-value, long-term SSAC is calculated from the date 
the Veterans Integrated Service Network (VISN) approved the VAMC to 
acquire the service through a SSAC to the date the contract was awarded 
to the affiliate. VISNs are required to approve all SSACs before the 
formal solicitation process can officially begin. The duration of each 
contracting phase was calculated based on our analysis of selected 
contract files. Minimum and maximum values in this figure represent the 
shortest and longest time spent developing and awarding a single 
contract, as well as the shortest and longest time each phase took for 
a single contract. Average values in this figure represent the average 
time spent developing and awarding a high-value, long-term SSAC across 
all 11 of our selected contracts, as well as the average time each 
---------------------------------------------------------------------------
phase took across all 11 selected contracts.

    According to leadership officials and contracting officers from all 
five of the network contracting offices we visited, establishing high-
value, long- term SSACs in a timely manner has been challenging for 
several reasons, including (1) not always receiving a complete, 
actionable, and timely initial information package from the VAMC that 
contains information the contracting officer needs to begin acquisition 
planning; (2) lengthy review processes for high-value, long-term SSACs; 
(3) negotiation challenges with the affiliates on the price of high-
value, long- term SSACs; and (4) VAMC resistance to developing and 
pursuing high- value, long-term SSACs. VAMC-based contracting officer's 
representatives and medical directors from all five of the VAMCs we 
visited also explained that establishing high-value, long-term SSACs 
has presented challenges for them. Specifically, 9 of the 14 
contracting officer's representatives we spoke with noted that they are 
often asked to resubmit initial information packages to the contracting 
officer throughout the development of a SSAC due to form updates or 
policy changes that occurred since the time they created these 
documents. Moreover, VAMC officials from all five VAMCs we visited 
indicated that the length of time it takes to develop and award high-
value, long-term SSACs presents many challenges for their VAMCs, 
including the potential for gaps in patient care and the need to 
repeatedly establish short-term solutions.
    We also found that VHA has not developed standards that can be used 
to measure the timeliness of developing high-value, long-term SSACs. 
However, during fiscal year 2016, VHA developed estimates for the 
maximum duration of each contracting phase, referred to as procurement 
action lead times (PALT). Currently, the PALT goal for the development 
and award of a high-value, long-term SSAC is between 20 and 21 months; 
however, we found that 10 of the 11 high-value, long-term SSACs we 
reviewed exceeded these PALT goals by as little as 1.4 months and as 
many as 25.8 months. According to VHA officials we interviewed, PALT 
goals are not used as performance standards for VAMC, network 
contracting office, and Medical Sharing Office staff responsible for 
the development of high-value, long-term SSACs. These officials told us 
that VHA is currently developing and conducting validity tests of 
revised PALT goals for several types of contracts, including SSACs, but 
there is no planned end date for these tests and they do not expect to 
implement revised PALT goals across VHA until at least fiscal year 
2017. These officials explained that the revised PALT goals will be 
used for setting expectations with VAMC officials for the length of 
time it should take to develop and award several types of contracts, 
including SSACs. Federal internal control standards recommend 
establishing and reviewing performance standards at all levels of an 
agency. \11\ Absent such standards, VHA cannot ensure that its high-
value, long-term SSACs are being developed in a timely manner.
---------------------------------------------------------------------------
    \11\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Additionally, we found that VHA does not collect data on the length 
of time each contracting phase took to complete for any SSACs, 
including the 11 high-value, long-term and 12 short-term SSACs we 
selected for review. Federal internal control standards state that 
information should be recorded and communicated to management and 
others within the agency that need it in a format and time frame that 
enables them to carry out their responsibilities. \12\ However, in 
contrast with these standards, VA is unable to analyze the time spent 
in each phase of SSAC development, and this inability has disadvantages 
in terms of management decisions and accountability for SSAC 
development. The absence of real-time data on the amount of time being 
spent within each contracting phase limits VA's ability to make 
informed management decisions, including changes to the assignment of 
staff that are either overburdened by their workloads or in need of 
additional training to build their competency with a particular type of 
contract or contracting phase. This lack of information prevents VHA 
from effectively setting clear and consistent objectives for 
organizational performance and making improvements as needed.
---------------------------------------------------------------------------
    \12\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Our report concluded that a lack of attention to the time spent to 
develop and award high-value, long-term SSACs has resulted in VHA's 
inability to ensure that contracts are being developed in a timely 
manner. To ensure the timely development of high-value, long-term 
SSACs, we recommended that VA (1) establish performance standards for 
appropriate development time frames for high-value, long-term SSACs and 
use these performance standards to routinely monitor VAMC, network 
contracting office, and Medical Sharing Office efforts to develop these 
contracts; and (2) collect performance data on the time spent in each 
phase of the development of high-value, long-term SSACs and 
periodically analyze these data to assess performance. VA concurred 
with these recommendations and said that it will take steps to address 
these weaknesses, including the creation of a workgroup that will 
establish performance standards for development time frames for high-
value, long-term SSACs and the designation of an office within VHA to 
routinely monitor these performance standards. VA also said that it 
will assess its current data systems to determine whether a new or 
different system would be needed to capture all relevant data and that 
the Medical Sharing Office will collaborate with other stakeholders to 
determine the need for and the mechanism to collect additional data.

Short-Term SSACs Have Been Used to Overcome Lengthy High-Value, Long- 
    Term SSAC Development Time Frames, but VHA Lacks Effective 
    Oversight for Their Development and Use

    We found that short-term SSACs are used to provide coverage to 
bridge the gap between an expired or expiring high-value, long-term 
SSAC and its replacement. Specifically, 6 of our 12 selected short-term 
SSACs were awarded as bridge contracts, which creates duplicative work 
for VAMC and contracting staff because they must simultaneously develop 
both the short-term SSAC bridge contract and the replacement high-
value, long- term or low-value, long-term SSAC. \13\ Of the remaining 6 
short-term SSACs we reviewed, 5 were awarded to allow affiliate 
services to begin while new high-value, long-term SSACs were being 
developed for the same services and 1 was awarded to fill a short-term 
staffing need at a VAMC. In addition, we found that the use of these 12 
short-term SSACs was consistent with reasons reported by from the 
majority of the medical sharing team supervisors from the 21 network 
contracting offices. Specifically, 12 medical sharing team supervisors 
from the 21 network contracting offices (57 percent) reported that the 
most prevalent reason that they opt to award short-term SSACs is to 
avoid any gaps in services due to the length of time it takes to 
develop and award high-value, long- term SSACs.
---------------------------------------------------------------------------
    \13\ See GAO, Sole-Source Contracting: Defining and Tracking Bridge 
Contracts Would Help Agencies Manage Their Use, GAO-16-15 (Washington, 
D.C.: Oct. 14, 2015).
---------------------------------------------------------------------------
    Federal internal control standards state an agency should provide 
for an assessment of the agency's risk associated with achieving its 
objectives, including identifying risks through forecasting and 
strategic planning. \14\ However, in contrast with these standards, VHA 
does not have a policy that requires VAMCs and network contracting 
offices to engage in timely acquisition planning to ensure that 
expiring high-value, long-term SSACs are replaced without the need to 
use a short-term SSAC as a bridge contract. Moreover, VA's governing 
directive for the development of SSACs does not specify when VAMC and 
network contracting office staff should begin acquisition planning 
activities to replace an existing high- value, long-term SSAC. \15\ As 
a result, VHA lacks assurance that its staff are performing and 
accountable for their roles in ensuring that replacement high-value, 
long-term SSACs are developed in time and that the agency is minimizing 
duplicative work when short-term SSACs are used as bridge contracts.
---------------------------------------------------------------------------
    \14\ See GAO/AIMD-00-21.3.1.
    \15\ VA Directive 1663.
---------------------------------------------------------------------------
    We also found that VHA was further exposed to potential risks 
associated with using short-term SSACs because the Medical Sharing 
Office, the VHA Central Office entity with oversight authority of 
SSACs, does not consistently review available data on all SSACs awarded 
throughout VHA; in particular, it does not review the level of reliance 
on short-term SSACs. While this office creates monthly reports for all 
VISNs and network contracting offices that provide information on the 
status of their medical sharing contracts, including all SSACs, they 
rely on network contracting offices to determine if they are selecting 
the appropriate term for their contracts. This can potentially be 
problematic because 7 of the medical sharing supervisors from the 21 
network contracting offices we contacted and leadership teams and 
contracting officers from 3 of the 5 network contracting offices we 
visited told us that at times they have purposefully developed short-
term SSACs in lieu of high-value, long-term SSACs because the Medical 
Sharing Office does not review any short- term SSACs. In fact, we found 
6 of the 12 short-term SSACs we selected for review were extended 
beyond their initial performance periods for up to 11 months resulting 
in total values for these 6 contracts that ranged from almost $686,000 
to $1.4 million-well beyond the $500,000 Medical Sharing Office review 
threshold. Standards for internal control in the federal government 
state that control activities should occur at all levels of an agency 
to help ensure that management's directive are carried out by staff and 
that top-level reviews of actual performance by agency management are 
needed to track major agency achievements and compare these to plans, 
goals, and objectives that were previously established. \16\
---------------------------------------------------------------------------
    \16\ See GAO/AIMD-00-21.3.1
---------------------------------------------------------------------------
    In addition, we found that 7 of the 12 short-term SSACs we selected 
for review from two network contracting offices did not follow VA and 
VHA policy for the development of SSACs. Specifically, we found 5 
short-term SSACs we reviewed from one network contracting office where 
(1) a solicitation was not issued to the affiliate, (2) the affiliate 
did not provide VHA a formal proposal outlining its services and 
instead submitted a price quote, and (3) negotiations were not 
conducted to address potential pricing issues before awarding the final 
contract. \17\ The contracting officer responsible for these 5 short-
term SSACs explained that he was often given as little as 10 business 
days to develop and award a short-term SSAC before the prior short-term 
SSAC expired and that he did not have the skills needed to conduct 
negotiations with the affiliate. We found that this contracting 
officer's supervisor had reviewed all 5 of these contracts prior to 
their award; however, the review process did not identify the areas 
that did not adhere to VA and VHA policy requirements for the 
development of SSACs. Federal internal control standards recommend that 
agencies establish processes to ensure the proper execution of 
transactions, including the provision of the proper amount of 
supervision. \18\ However, without ensuring that contracting officers 
are adhering to VA and VHA policies and network contracting offices are 
effectively reviewing the development of short-term SSACs as required 
by VA and VHA policies, VHA may be at risk for overpaying for affiliate 
services provided through these contracts.
---------------------------------------------------------------------------
    \17\ The other two short-term SSACs that did not follow VA and VHA 
policy for the development of SSACs had similar policy adherence 
problems.
    \18\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Our report concluded that the lack of attention to this 
overreliance on short-term SSACs as bridge contracts exposes VHA to 
risks. To ensure the effective development and use of short-term SSACs, 
we recommended VA (1) develop requirements for VAMCs and network 
contracting offices to effectively engage in early acquisition planning 
for the replacement of expiring high-value, long-term SSACs, (2) 
prioritize the review of SSAC contract data to identify patterns of 
overreliance on short-term SSACs that avoid appropriate Medical Sharing 
Office oversight, and (3) develop standards for the minimum amount of 
time necessary to develop and award short-term SSACs to minimize cases 
of nonadherence to VA policy for these contracts. VA concurred with 
these recommendations, and laid out plans to develop new requirements 
and standards while also charging the Medical Sharing Office with 
conducting data reviews of short-term SSACs.

High Turnover and Limited Training Opportunities Result in 
    Inexperienced VHA Medical Sharing Contracting Officers and Impede 
    the Development of SSACs

    We found a high level of turnover among medical sharing contracting 
officers in all 21 network contracting offices that was exacerbated by 
a high level of inexperience among contracting officers responsible for 
developing SSACs. Network contracting office medical sharing teams 
experienced significant turnover in recent years, with 23 percent (49 
of 217) of medical sharing contracting officer full-time employee 
equivalents (FTEE) in fiscal year 2014 and 27 percent (65 of 239) of 
FTEEs in fiscal year 2015 either resigning or transferring to another 
VHA contracting team.
    Medical sharing supervisors offered several potential explanations 
for turnover on medical shar17ing teams, including job burnout, the 
complexity of medical sharing contracts, the workload associated with 
medical sharing teams, and frustration with the layers of review 
required for these contracts. Medical Sharing Office officials told us 
that this turnover hinders the SSAC development process because newer 
contracting officers have greater difficulty developing high-value, 
long-term SSACs due to a lack of experience and knowledge. They also 
told us that they believe it takes approximately 5 years for a 
contracting officer to become experienced in developing medical sharing 
contracts, including SSACs. We found, however, that more than half of 
medical sharing contracting officers had 2 years or less medical 
sharing contract experience and less than one-quarter had more than 4 
years of experience developing medical sharing contracts. Federal 
internal control standards state that effective management of an 
organization's workforce, such as having the right personnel on board, 
is essential to achieving results. \19\ However, in contrast to these 
standards, VHA does not have a plan to address medical sharing 
contracting officer turnover. As a result, VHA lacks assurance that 
network contracting offices can maintain and develop the contracting 
officers' skillsets that are necessary for developing complex medical 
sharing contracts, such as SSACs.
---------------------------------------------------------------------------
    \19\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Moreover, we found that limited training opportunities for medical 
sharing contracting officers further erodes VA's knowledge base for 
developing high-quality and cost-effective SSACs. The Medical Sharing 
Office has developed and offered three in-person training courses 
designed to progressively build a contracting officer's competence in 
developing medical sharing contracts, including SSACs. Medical Sharing 
Office officials reported in February 2016 that over 90 percent of all 
participants for each of the training classes reported that the 
trainings increased their medical sharing competency and that the 
information presented would contribute to their job performance. Since 
fiscal year 2015, however, VHA has not consistently provided training 
for medical sharing teams in network contracting officers throughout 
VHA. VHA has canceled some of their course offerings due to budget 
constraints. In addition, VHA Central Office requested that the Medical 
Sharing Office cut the class size of each course offering by 25 
percent. Federal internal control standards state that agencies should 
establish good human capital policies and practices, such as 
appropriate practices for training. \20\ In contrast to these 
standards, VHA has not determined how to either provide the existing 
training courses or develop alternatives that do not require travel in 
response to a changing budgetary environment. As a result, VHA cannot 
build the skills of its medical sharing contracting officers and 
overcome the challenges associated with their inexperience.
---------------------------------------------------------------------------
    \20\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Our report concluded that instability in the medical sharing 
workforce, due to high levels of turnover among medical sharing 
contracting officers, has limited VHA's ability to develop high-quality 
SSACs throughout VHA. To develop and maintain medical sharing expertise 
within the network contracting offices, we recommended that VA (1) 
create a plan to increase retention of contracting officers that work 
in medical sharing teams, and (2) develop mechanisms to either provide 
existing training courses or create training courses that do not 
require travel for contracting officers working within network 
contracting offices. VA concurred with both of these recommendations 
and summarized planned steps to address these recommendations, 
including the development of a retention plan and soliciting agency 
leadership for assistance in resource prioritization to fund VHA health 
care contracting training courses.

Selected Affiliates Reported Communication and Coordination Challenges 
    with VHA Regarding SSACs

    We found that representatives from the five affiliates that provide 
services through SSACs to our selected VAMCs noted challenges related 
to receiving information on changes to VA and VHA requirements for 
SSACs. These included communication from VHA about what services the 
VAMC needed from the affiliate, the documentation requirements 
affiliates needed to submit to support their physician salary pricing, 
and changes to VHA's approach to negotiations. The affiliate 
representatives also noted coordination challenges related to 
responding to SSAC solicitations. For example, representatives reported 
that it was challenging for them to provide services to VAMCs under 
short-term SSACs because the length of these contracts does not provide 
a commitment from VHA for the physicians hired by the affiliate to 
fulfill the contract. These affiliate representatives explained that it 
can take a year or longer to recruit a well-qualified academic 
physician and short-term SSACs do not provide the funding commitment 
needed by the affiliate to recruit these physicians. Federal internal 
control standards state that information should be communicated both 
internally and externally to enable the agency to carry out its 
responsibilities; for external communications, these standards state 
that management should ensure that there are adequate means of 
communicating with, and obtaining information from, external 
stakeholders that may have a significant impact on the agency achieving 
its goals. \21\ In contrast to these standards, VHA's efforts to 
cultivate better communication and coordination with affiliates at the 
national level have been limited, consisting of three regional forums 
with all its affiliates in fiscal year 2012. Since 2012, VA has relied 
primarily on local coordination with affiliates in lieu of regional 
forums, due to travel restrictions associated with VA's recent budget 
shortfalls. As a result, VHA cannot ensure that it is effectively 
responding to the concerns of its affiliates.
---------------------------------------------------------------------------
    \21\ See GAO/AIMD-00-21.3.1.
---------------------------------------------------------------------------
    Our report concluded that concerns about VA's communication and 
coordination with its affiliates, as voiced by representatives from the 
five affiliates we spoke with, demonstrate potentially ineffective 
communication streams with these critical partners. To ensure VHA 
effectively communicates with its affiliates regarding SSACs, we 
recommended that VA reach out to all its affiliates, identify any 
concerns, and determine the most effective method of communicating with 
affiliates regarding SSAC development. VA concurred with this 
recommendation and said that the VHA's Office of Academic Affiliations 
and Medical Sharing Office will re-engage with the American Association 
of Medical Colleges to determine the best ways to gather input from 
affiliates on their concerns and determine the most effective method of 
communication with them regarding SSAC development. Furthermore, VA 
added that these offices will evaluate VA's current partnerships with 
affiliates to identify both highly functional relationships that could 
be highlighted as best practices and partnerships that could benefit 
from targeted intervention.

    Chairman Coffman, Ranking Member Kuster, and Members of the 
Subcommittee, this concludes my prepared statement. I would be pleased 
to answer any questions that you may have at this time.

GAO Contact and Staff Acknowledgments

    If you or your staff members have any questions concerning this 
testimony, please contact me at (202) 512-7114 or [email protected]. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this statement. Other 
individuals who made key contributions to this testimony include Marcia 
A. Mann, Assistant Director; Cathleen Hamann; Katherine Nicole 
Laubacher; Dharani Ranganathan; and Said Sariolghalam.

GAO's Mission

    The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

    The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's website (http://www.gao.gov). Each weekday 
afternoon, GAO posts on its website newly released reports, testimony, 
and correspondence. To have GAO e-mail you a list of newly posted 
products, go to http://www.gao.gov and select ``E-mail Updates.''

Order by Phone

    The price of each GAO publication reflects GAO's actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO's website, 
http://www.gao.gov/ordering.htm.
    Place orders by calling (202) 512-6000, toll free (866) 801-7077, 
or TDD (202) 512-2537.
    Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information.

Connect with GAO

    Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 
Subscribe to our RSS Feeds or E-mail Updates.
    Listen to our Podcasts and read The Watchblog. Visit GAO on the web 
at www.gao.gov.

To Report Fraud, Waste, and Abuse in Federal Programs

    Contact:
    Website: http://www.gao.gov/fraudnet/fraudnet.htm E-mail: 
[email protected]
    Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional Relations

    Katherine Siggerud, Managing Director, [email protected], (202) 
512- 4400, U.S. Government Accountability Office, 441 G Street NW, Room 
7125, Washington, DC 20548

Public Affairs

    Chuck Young, Managing Director, [email protected], (202) 512-4800
    U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, DC 20548

                                 
               Prepared Statement of Janis Orlowski, M.D.
 Fostering Department of Veterans Affairs Relationships with Academic 
   Affiliates to Improve Health Care Access and Quality for Veterans
Executive Summary

    As you finalize legislation to reform and improve health care for 
our nation's veterans, the AAMC respectfully asks that you recognize 
the importance of Department of Veterans Affairs (VA) academic 
affiliations and urges you not to undermine these important public-
private partnerships. For 70 years, VA's shared research, education, 
and patient care missions with academic medicine have improved access 
and quality of care for veterans, both inside and outside the VA 
system.
    The AAMC is a not-for-profit association comprised of all 145 
accredited U.S. medical schools; nearly 400 major teaching hospitals 
and health systems, including 51 VA medical centers; and more than 80 
academic societies. The AAMC serves the leaders of America's medical 
schools and teaching hospitals and their 148,000 faculty members, 
83,000 medical students, and 115,000 resident physicians.
    To better align the VA and the nation's medical schools and 
teaching hospitals, the AAMC supports the DOCs for Veterans Act (S. 
1676, H.R. 3755, H.R. 4011); the Enhanced Veterans Health Care Act 
(H.R. 3879); and the Improving Veterans Access to Care in the Community 
Act (S.2633).
    The AAMC believes VA graduate medical education, research, joint 
ventures, sole-source contracting, and the proposed Core Network of the 
Veterans Choice Program help ensure access for our nation's veterans to 
the highest quality care by preserving academic affiliates as a direct 
extension of VA care and a preferred provider. This relationship serves 
multiple purposes:
    Access to Complex Clinical Care - Direct clinical care contracts 
allow academic affiliates to plan, staff, and sustain infrastructure 
for certain complex clinical care services that are scarcely available 
elsewhere, including trauma centers, burn care units, comprehensive 
stroke centers, and surgical transplant services. Solely relying on 
fee-basis mechanisms has the potential to reduce veterans' access to 
care if teaching hospitals scale back services when faced with an 
uncertain patient load from the VA.
    Workforce Development - There is a pressing need for physicians to 
care for our nation's veterans now and in the future. VA physician 
shortages are symptomatic of a broader trend, the proverbial ``canary 
in the coal mine.'' The AAMC projects a nationwide shortage of between 
46,000-90,000 physicians by 2025. Though these shortfalls will affect 
all Americans, the most vulnerable populations, including veterans, in 
underserved areas will be the first to feel the impact.
    Physician Recruitment - The VA is an irreplaceable component of the 
U.S. medical education system, training more than 40,000 medical 
residents annually, but academic partnerships also facilitate the joint 
recruitment of faculty to provide care at both institutions. VA GME 
programs also educate new physicians on cultural competencies for 
treating veteran patients (inside and outside the VA), and help recruit 
residents to the VA after they complete their training.
    Innovation and Quality - The combination of education, research, 
and patient care at VA and academic medical centers cultivates a 
culture of curiosity and innovation. Under this tripartite mission, it 
is critical to expand VA research on chronic conditions of aging 
veterans, emerging conditions prevalent among younger veterans, and the 
Million Veteran Program. Medical faculty must be skilled in the latest 
clinical innovations to train the next generation physicians that will 
care for veterans. State-of-the-art technology and groundbreaking 
treatments jump quickly from the research bench to the bedside, 
enhancing the quality of care provided to veterans.
    Good evening and thank you for this opportunity to testify on 
behalf of the Association of American Medical Colleges (AAMC). As you 
consider reforms to improve health care for our nation's veterans, the 
AAMC respectfully asks that you recognize the importance of the 
Department of Veterans Affairs (VA) academic affiliations and urges you 
not to undermine these important partnerships. VA's shared patient 
care, research, and education missions with academic medicine improve 
access and quality of care for veterans, both inside and outside the VA 
system.
    The AAMC is a not-for-profit association dedicated to transforming 
health care through innovative medical education, cutting-edge patient 
care, and groundbreaking medical research. Its members comprise all 145 
accredited U.S. and 17 accredited Canadian medical schools; nearly 400 
major teaching hospitals and health systems, including 51 VA centers; 
and more than 80 academic societies. Through these institutions and 
organizations, the AAMC serves the leaders of America's medical schools 
and teaching hospitals and their nearly 160,000 faculty members, 83,000 
medical students, and 115,000 resident physicians.
    This year, the VA and academic medicine will celebrate their 70th 
anniversary. This relationship dates back to the end of World War II 
when the VA faced a severe shortage of physicians as nearly 16 million 
men and women returned from overseas, many with injuries and illnesses 
that would require health care for the rest of their lives. At the same 
time, many physicians were returning from the war without having 
completed residency training.
    The solution was VA-academic affiliations established under VA 
Policy Memorandum No. 2, making the VA an integral part of residency 
training for the nation's physicians. In return, the VA improved access 
and quality of care for our nation's veterans. What started as a simple 
idea in a time of great need has developed into an unprecedented 
private-public partnership. Today, the VA has over 500 academic 
affiliations, and 127 VA facilities have affiliation agreements for 
physician training with 135 of the 145 U.S. medical schools.

THE ROLE OF ACADEMIC AFFILIATES IN CARING FOR VETERANS

    The AAMC believes VA sole-source contracting, joint ventures, and 
the proposed Core Network of the Veterans Choice Program help ensure 
access for our nation's veterans to the highest quality care by 
preserving academic affiliates as a direct extension of VA care and a 
preferred provider. This relationship serves multiple purposes:
Access to Complex Clinical Care
    VA sole-source contracting allows academic affiliates to plan, 
staff, and sustain infrastructure for complex clinical care services 
that are scarcely available elsewhere. U.S. teaching hospitals provide 
around-the-clock, onsite, and fully-staffed standby services for 
critically-ill or injured patients, including trauma centers, burn care 
units, comprehensive stroke centers, and surgical transplant services. 
Solely relying on fee-basis mechanisms like the Veterans Choice Program 
has the potential to reduce veterans' access to care if teaching 
hospitals scale back services when faced with the inability to plan for 
a consistent patient load from the VA.

Medical Education
    The VA is an irreplaceable component of the U.S. medical education 
system. The VA trains more than 40,000 medical residents within its 
walls annually. VA medical centers are the largest training sites for 
physicians, and fund approximately 10 percent of graduate medical 
education (GME). VA residency programs are sponsored by an affiliate 
medical school or teaching hospital. Without these affiliations, many 
VA programs would be unable to meet the requirements set by the 
Accreditation Council for Graduate Medical Education (ACGME). A 
provider referral preference for academic affiliates under clinical 
services contracts helps ensure an adequate and diverse patient load 
necessary for GME program accreditation.

Physician Recruitment
    Academic partnerships between VA institutions and academic medical 
centers facilitate the joint recruitment of faculty to provide care at 
both sites. VA GME programs also educate new physicians on cultural 
competencies for treating veteran patients (inside and outside the VA), 
and help recruit residents to the VA after they complete their 
training. According to results from the VA's Learners Perception 
Survey, residents that rotate through the VA are nearly twice as likely 
to consider employment at the VA. The Veterans Choice Act recognizes 
the importance of this recruitment to addressing Veterans Health 
Administration (VHA) health professional shortages by creating up to 
1,500 new VA GME positions.

Innovation
    The combination of education, research, and patient care that 
occurs because of the close relationships between VA institutions and 
academic medical centers cultivates a culture of curiosity and 
innovation. Medical faculty must be skilled in the latest clinical 
innovations to train the next generation physicians that will care for 
veterans. State-of-the-art technology and groundbreaking treatments 
jump quickly from the research bench to the bedside, enhancing the 
quality of care provided to patients, including access to a majority of 
National Institutes of Health (NIH)-funded clinical trials. Without 
strong ties to academic affiliates, VA's tripartite mission is put in 
jeopardy.

AAMC SUPPORTS VA PLAN TO CONSOLIDATE COMMUNITY CARE PROGRAMS

    The Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-
41) required the VA to ``develop a plan to consolidate all non-
Department provider programs by establishing a new, single program to 
be known as the `Veterans Choice Program' to furnish hospital care and 
medical services to veterans enrolled in the system of patient 
enrollment established under section 1705(a) of title 38, United States 
Code, at non-Department facilities.''
    The AAMC applauds the VA for including academic providers in its 
proposed VA Core Network of preferred providers under its Plan to 
Consolidate Community Care Programs delivered to Congress last year. 
The plan, which outlines how the VA will purchase veteran health care 
at non-VA facilities, proposes a tiered network of providers and allows 
academic affiliates to continue contracting directly with local VA 
medical centers.

Current and Previous Challenges Hinder Clinical Relationships

    The AAMC supports VA's goal of streamline and improve the 
efficiency of VA contracting with the nation's medical schools and 
teaching hospitals. Unwieldy and drawn-out clinical contracting has 
hinder these relationships, despite their potential to greatly expand 
the reach of the VHA. Several of these issues have been raised 
previously by the AAMC and academic affiliates but there has been no 
subsequent VA reforms to their contracting process. For example, as the 
VHA faced patient-access issues across the country, 161 of our member 
medical schools and teaching hospitals have told us they had the 
capacity to help, yet were often stymied due to contracting hurdles - 
delaying, and in some cases preventing, veterans' access to health 
care.
    Fee-basis care through a predecessor to the Veterans Choice 
Program, the ``Patient-Centered Community Care (PC3)'' program, 
inserted a middleman between longtime partners, resulting in delayed 
and misdirected referrals due to skewed third party incentives, 
additional costs for the VA and affiliates directed to the third party, 
and unnecessary administrative burden for all. The AAMC appreciates 
that the VA has now recognized the inefficient processes for onboarding 
physicians/institutions through third party administrators, which 
further delayed veteran access to care.

The VA Plan to Consolidate Community Care Improves the Current System

    There are many aspects of the proposed VA plan that will improve 
VA-academic affiliations and veterans' access to quality health care. 
The VA plan proposes a tiered network of providers. The Core Network 
would include federal and academic partners, and would be treated as a 
direct extension of VA care. The External Network would include a 
Standard Tier as well as a Preferred Tier for providers that 
demonstrate quality and value.
    Under the plan, academic affiliates would be able to continue 
contracting directly with the local VA Medical Center to provide 
clinical services. This contracting would be streamlined with national 
templates, but allow for local flexibility.
    Importantly, medical schools and teaching hospitals would also be 
eligible for fee-basis care under the new External Network that is 
reimbursed at Medicare rates with customized fee schedules for selected 
areas and scarce specialty services.
    The VA would be responsible for case management and referrals 
instead of third party administrators. Additionally, VA would accept 
academic affiliates' credentialing, with a new VA oversight committee 
to audit compliance with credentialing standards. The VA also plans to 
streamline referrals and health information sharing by automating these 
processes.
    The plan also calls for greater monitoring of outcomes and quality 
metrics for non-VA providers. VA is expected to utilize existing 
metrics, such as those under the Centers for Medicare and Medicaid 
(CMS) Hospital Value-Based Purchasing (VBP) program.

Recommendations

    The AAMC recommends that the Veterans Choice Program continue a 
provider referral preference for academic affiliates. We support 
passage of the Improving Veterans Access to Care in the Community Act 
(S.2633) implement the VA plan to consolidate community care. This bill 
would allow VA to create a tiered network that facilitates provider 
participation, but importantly does not dictate how veterans will use 
the network. For academic affiliates who do not yet participate in the 
VA Choice Program, the Core Network will enable VA to sustain and 
strengthen relationships with affiliates and allow veterans access to 
the high quality, timely care these affiliates deliver.
    The Veterans Choice Program should also continue full Medicare 
reimbursement rates, including medical education costs. Additionally, 
we respectfully ask that the agency and Congress consult with 
representatives from the academic affiliate community as you implement 
the updated Veterans Choice Program. One important venue is the VA's 
National Academic Affiliations Council (NAAC) federal advisory 
committee, established by VA for the very purpose of advising the 
Secretary on these issues.

IMPROVING VA SOLE-SOURCE CONTRACTING WITH AFFILIATES

    While it is important to have performance standards and data, they 
will only confirm what we already know: the process for long-term, high 
value sole-source affiliate contracts (SSACs) is too arduous, resulting 
in short-term SSACs as a fallback. In other words, the problem is the 
process itself, not the oversight of the process. The most frequently 
identified barrier is the additional review of contracts greater than 
$500,000 by the VA Office of Inspector General (OIG). To apply similar 
review to short-term contracts under $500,000 would only create the 
same problems we've seen with long-term, high-value SSACs.
    Short-term agreements are made as services are about to expire and 
leave veterans in a lurch. AAMC members frequently report that short-
term contracts are used as placeholders for long- term, high-value 
contracts. Both VA medical centers and their affiliates would prefer 
long-term, high-value SSACs, but the process and OIG oversight prevents 
or significantly delays agreements. As such, the focus should be on 
improving the process of long-term, high-value SSACs, rather than 
imposing similar arduous oversight on short-term SSACs.
    In addition to improving turnaround for SSAC development and 
approval, the contracting rules for the VA are not designed with 
clinical services in mind. The size of clinical services contracts 
varies greatly, but AAMC members report that virtually all 5-year 
contracts with the VA are between $2 million and $10 million, far 
exceeding the current $500,000 threshold for additional review. As an 
example, the AAMC estimates that contracts for the following clinical 
services would surpass $500,000 and trigger additional review:

      10 uncomplicated cardiac surgeries
      4 burn cases
      5 intensive care unit cases
      10 outpatient radiation cases
      10 esophageal cancer surgery cases

    The AAMC understands the need for federal oversight, but often the 
administrative bodies designed to review and enforce this oversight 
have a less than full understanding of the value in contracts with 
academic affiliates. This value is why VA Directive 1663 states, 
``Sole-source awards with affiliates must be considered the preferred 
option whenever education and supervision of graduate medical trainees 
is required (in the area of the service contracted). The contract cost 
cannot be the sole consideration in the decision on whether to sole 
source or to compete.''
    However, by VA's own estimation, once the decision to contract out 
care has been made, VA sole-source contracting with trusted academic 
affiliates takes longer than the formal competitive solicitation 
process - officially between 17-28 weeks compared to 14-18 weeks, 
respectively, according to VA Directive 1663. The contracting decision 
tree from VA Directive 1663 (attached as an Appendix) outlines the 
complexity and administrative burden embedded in the process. Sole-
source contracts over $500,000 go through an additional 10-11 weeks of 
review (23-25 weeks total) compared to contracts under $500,000. 
Contracts over $5 million require an additional 3 weeks (26-28 weeks 
total). AAMC members report additional delays of up to 18 months as a 
result of the VA OIG pre-award audit for sole-source contracts that 
exceed $500,000.
    Further delaying action, the VA can require academic affiliates to 
submit documentation of all costs associated with physician employment. 
As an example, this might include faculty contracts, continuing 
education policies, time and effort reports, benefits costs, vacation 
policies, time and attendance policies, the distance and time it takes 
to walk from the hospital to the VA hospital, and even the monthly cost 
of parking. The VA reviews these items, in some cases for months. There 
are often a variety of questions about the data submitted, some 
substantive but many that seem to be of dubious value.
    As a result of approval delays, it is necessary to execute a series 
of extensions or short-term contracts to continue to be paid for 
services. This requires a great deal of time and effort on the part of 
both the VA and the academic affiliate. In some cases, payment is 
delayed as a result of this process. In the long term, it makes it 
difficult for departments to recruit faculty for the VA because there 
is no commitment for future funding.

Recommendations

    Local VA medical centers and their academic affiliates see the 
benefits of these relationships, but are stymied by a process mired in 
misplaced oversight. Sole-source contracting with trusted academic 
affiliates should not take longer than the competitive bid process. The 
AAMC recommends exempting sole-source contracting with academic 
affiliates from additional OIG review triggered by the $500,000 
threshold, or raising the trigger to at least $2.5 million for 5- year 
contracts.
    As referenced in the VA's consolidation plan, the AAMC appreciates 
VA's willingness to develop pre-approved template contracts that 
reimburse certain services with at least Medicare rates. Additionally, 
we have discussed the development of standardized overhead rates to 
eliminate unnecessary negotiations and contract administration.
    Involving individuals with academic appointments in the contracting 
process should not be considered a conflict of interest, but rather 
recognized for the value they add to VA leaderships' ability to 
contract for clinical services. The AAMC recommends allowing VA 
officials with academic appointments to participate in contract 
negotiations with the academic affiliate.
    VA must recognize the unique costs and circumstances associated 
with clinical contracting compared to other goods and services. The 
AAMC recommends increased training for VA contracting officers 
regarding clinical services contracting.
    Academic affiliates also have a role to play in improving these 
negotiations. We have committed to working with our institutions to 
develop single points of contact instead of renegotiating the same 
contract with each program head.

ESTABLISHING JOINT VENTURES WITH ACADEMIC AFFILIATES

    To better align the VA and the nation's medical schools and 
teaching hospitals, the AAMC supports the Enhanced Veterans Health Care 
Act (H.R. 3879). The VA and academic medicine have enjoyed a 70-year 
history of affiliations to help care for those who have served this 
nation. This shared mission can be strengthened through joint ventures 
in research, education, and patient care. Already our institutions and 
medical faculty collaborate in these areas, but often VA lacks the 
administrative mechanisms to cooperatively increase medical personnel, 
services, equipment, infrastructure, and research capacity.
    Current authority for VA to coordinate health care resources with 
affiliates has been narrowly interpreted by VA Office of General 
Counsel and the OIG. VA can occupy and use non-VA space for limited 
purposes, but only under 6-month sharing agreements, 6-month revocable 
licenses, or 5-year leasing agreements - all of which have failed in 
practice.
    The Enhanced Veterans Healthcare Act of 2015 would direct the VA to 
enter into sole-source agreements for health care resources (including 
space) with schools of medicine and dentistry, university health 
science centers, and teaching hospitals to deliver care to our veterans 
to meet the growing demand for veteran health care services.

INVESTING IN VA-CENTRIC RESEARCH FOR CLINICIAN RECRUITMENT

    The VA Medical and Prosthetic Research and Development program is 
widely acknowledged as a success on many levels, all directly leading 
to improved care for veterans and an elevated standard of care for all 
Americans:

      Advancing Patient Care - VA research has made critical 
contributions to advancing standards of care for veterans in areas 
ranging from tuberculosis in the 1940s to immunoassay in the 1950s to 
today's ongoing projects dealing with Alzheimer's disease, developing 
and perfecting the DEKA advanced prosthetic arm and other inventions to 
help the recovery of veterans grievously injured in war, studies in 
genomics and in chronic pain, cardiology, diabetes, and improved 
treatments for PTSD and other mental health challenges in veterans. 
These studies and their findings ultimately aid the health of all 
Americans.
      Recruitment and Retention - VA research is a completely 
intramural program that recruits clinicians to care for veterans while 
conducting biomedical research. More than 70 percent of these 
clinicians are VA-funded researchers. VA also awards more than 500 
career development grants each year designed to help retain its best 
and brightest researchers for long and productive careers in VA health 
care.
      High-Quality Research - VA researchers are well published 
(between 8,000 and 10,000 refereed articles annually) and boast three 
Nobel laureates and seven awardees of the Lasker Award (the ``American 
Nobel Prize''); this level of success translates effectively from the 
bench to the veteran's bedside.
      Investing Taxpayers' Dollars Wisely - Through a 
nationwide array of synergistic relationships with other federal 
agencies, academic affiliates, nonprofit organizations, and for-profit 
industries, the program leverages a current annual appropriation of 
$631 million into a $1.9 billion research enterprise.

Sustaining Research Investment and Addressing Emerging Veteran Research 
    Needs

    The AAMC strongly believes funding for VA research must be steady 
and sustainable to meet current commitments while allowing for 
innovative scientific growth to address critical emerging needs.
    Despite documented success, since FY 2010 appropriated funding for 
VA research and development has lagged far behind biomedical research 
inflation, resulting in a net loss of nearly 5 percent of VA purchasing 
power. As estimated by the Department of Commerce Bureau of Economic 
Analysis and the National Institutes of Health (NIH), to maintain VA 
research at current service levels, the VA Medical and Prosthetic 
Research appropriation would require $17 million in FY 2017 (a 2.7 
percent increase over the 2016 pending appropriation). Should the 
availability of research awards decline as a function of budgetary 
policy, VA risks terminating ongoing research projects and losing these 
clinician researchers who are integral to providing direct care for our 
nation's veterans. Numerous meritorious proposals for new VA research 
cannot be awarded without a significant infusion of additional funding 
for this vital program.
    The AAMC believes an additional $17 million in FY 2017, beyond 
uncontrollable inflation, is necessary for expanding research on 
conditions prevalent among newer veterans as well as continuing 
inquiries into chronic conditions of aging veterans from previous 
wartime periods. For example, VA research is uniquely positioned to 
advance genomic medicine through the Million Veteran Program (MVP), an 
effort that seeks to collect genetic samples and general health 
information from one million veterans over the next five years. 
Additional funding will also help VA support emerging areas that remain 
critically underfunded, including:

      Post-deployment mental health concerns such as PTSD, 
depression, anxiety, and suicide;
      The gender-specific health care needs of the growing 
population of women veterans;
      Engineering and technology to improve the lives of 
veterans with prosthetic systems that replace lost limbs or activate 
paralyzed nerves, muscles, and limbs;
      Studies dedicated to understanding chronic multi-symptom 
illnesses among Gulf War veterans and the long-term health effects of 
potentially hazardous substances to which they may have been exposed; 
and
      Innovative health services strategies, such as telehealth 
and self-directed care, relatively new concepts that can lead to 
accessible, high-quality, cost-effective care for all veterans, as VA 
works to address chronic patient backlogs and reduce wait times.

The Million Veteran Program

    The VA research program is uniquely positioned to advance genomic 
medicine through the MVP, an effort that seeks to collect genetic 
samples and general health information from 1 million veterans over the 
next five years. When completed, the MVP will constitute one of the 
largest genetic repositories in existence, offering tremendous 
potential to study the health of veterans. To date, more than 450,000 
veterans have enrolled in the MVP.
    To support the President's Precision Medicine Initiative, AAMC 
recommends an additional $75 million to process the first 100,000 
samples without reducing funding for other designated research areas.

VA Research Infrastructure

    State-of-the-art research also requires state-of-the-art 
technology, equipment, and facilities. For decades, VA construction and 
maintenance appropriations have failed to provide the resources VA 
needs to replace, maintain, or upgrade its aging research facilities. 
The impact of this funding shortage was observed in a congressionally-
mandated report that found a clear need for research infrastructure 
improvements systemwide. Nearly 40 percent of the deficiencies found 
were designated ``Priority 1: Immediate needs, including corrective 
action to return components to normal service or operation; stop 
accelerated deterioration; replace items that are at or beyond their 
useful life; and/or correct life safety hazards.''
    The AAMC believes designating funds to specific VA research 
facilities is the only way to break this stalemate. In 2010, VA 
estimated that approximately $774 million would be needed to correct 
all of the deficiencies found throughout the system; only a fraction of 
that funding has been appropriated since. A follow-up report is already 
underway and will guide VA and Congress in further investment in VA 
research infrastructure to recruit the next generation of clinicians to 
care for the nation's next generation of veterans. However, Congress 
needs to begin now to correct the most urgent of these known 
infrastructure deficiencies, especially those that concern life safety 
hazards for VA scientists and staff, and veterans who volunteer as 
research subjects.

Recommendations

    The Administration and Congress should provide at least $740 
million for the VA Medical and Prosthetic Research program for FY 2017 
to support current research on the chronic conditions of aging 
veterans, emerging research on conditions prevalent among younger 
veterans, and the Million Veteran Program.
    The Administration and Congress should provide funding for up to 
five major construction projects in VA research facilities in the 
amount of at least $50 million and appropriate $175 million in 
nonrecurring maintenance and for minor construction projects to address 
deficiencies identified in the independent VA research facilities 
review provided to Congress in 2012.

TRAINING THE NEXT GENERATION OF PHYSICIANS TO CARE FOR VETERANS

    To help VA address patient access and recruitment issues, the AAMC 
supports the Delivering Opportunities for Care and Services (DOCs) for 
Veterans Act (S. 1676, H.R. 4011) and H.R. 3755. VA physician shortages 
are symptomatic of a broader trend, the proverbial ``canary in the coal 
mine'' for the nation's health system. The AAMC projects a nationwide 
shortage of physicians between 61,700 and 94,700 physicians by 2025. 
Though these shortfalls will affect all Americans, the most vulnerable 
populations in underserved areas will be the first to feel the impact 
(e.g., the VA, Medicare and Medicaid patients, rural and urban 
community health centers, and the Indian Health Service).
    The study, conducted by the Life Science division of the global 
information company IHS Inc., and prepared on behalf of the AAMC, and 
estimates a shortfall of between 14,900 and 35,600 primary care 
physicians and between 37,400 and 60,300 non-primary care specialties. 
Similarly, an AAMC review of physician vacancies advertised by the VHA 
found that approximately two thirds were for non-primary care 
specialists, and about one-third were for primary care providers.
    To address this shortage, the nation's medical schools have done 
their part by expanding enrollment by 30 percent. However, there has 
not been a commensurate increase in the number of GME residency 
training positions. The primary barrier to increasing residency 
training at teaching hospitals - and the U.S. physician workforce in 
turn - is the cap on Medicare GME financial support, which was 
established in 1997. Thankfully, the DOCs for Veterans Act helps 
address this hurdle.
    Just as Medicare GME supports Medicare's share of training costs at 
institutions that care for Medicare beneficiaries, VA GME supports 
residency training programs based at VA medical centers. According to 
results from the VA's Learners Perception Survey, residents that rotate 
through the VA are nearly twice as likely to consider employment at the 
VA. The Veterans Access, Choice, and Accountability Act of 2014 (VACAA, 
P.L. 113-146) instructs VA to add 1,500 GME residency slots over five 
years at VA facilities that are experiencing shortages. However, 
without an increase in Medicare GME support, there may not be enough 
affiliate residency positions to accommodate this VA expansion.
    Most VA residency programs do not operate independently. They rely 
upon the existing administrative and training infrastructure maintained 
by the nation's medical schools and teaching hospitals. Nearly all VA 
residency programs are sponsored by an affiliate medical school or 
teaching hospital.
    To assure that VA-based residents receive the highest quality 
training possible, they need diverse and supervised experiences in a 
variety of clinical settings. This includes training experiences at the 
nation's teaching hospitals and the multispecialty practices run by the 
nation's medical schools. While there is considerable variability among 
VA medical centers, programs, and specialties, on average medical 
residents rotating through the VA spend approximately three months of a 
residency year at the VA (i.e., a quarter of their training).
    As such, simply increasing VA GME funding alone will not address 
the VA crisis. Without a corresponding increase in Medicare GME 
support, VA medical centers will be unable to capitalize fully on 
increases in VA GME funding. The DOCs for Veterans Act will allow 
affiliate teaching hospitals that are already at or above their 1997 
Medicare GME cap to receive Medicare support for VACAA residents while 
they are training at a non-VA facility.

CONCLUSION

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify on these important issues. To improve the 
relationships between the VA and the nation's medical schools and 
teaching hospitals, the AAMC reiterates its support the following 
bills:

      The Delivering Opportunities for Care and Services (DOCs) 
for Veterans Act (S. 1676, H.R. 4011) and H.R. 3755;
      The Enhanced Veterans Health Care Act (H.R. 3879); and
      The Improving Veterans Access to Care in the Community 
Act (S.2633).

    The VA is at a crossroads. VA GME, joint ventures, sole-source 
contracting, and the proposed Core Network of the Veterans Choice 
Program can strengthen the 70-year history of VA- academic affiliations 
and prepare our country for the next chapter of VA health care. The 
AAMC and our member institutions will continue to work with the 
Congress and the VA to address the challenges and opportunities to 
ultimately improve care for veterans and all Americans.

APPENDICES

    VA Directive 1663 Contracting Decision Tree
    Biography of Janis Orlowski, M.D., MACP
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
                                 
              Prepared Statement of Nancy Watterson-Diorio
                           EXECUTIVE SUMMARY
    Testimony by Nancy Watterson-Diorio, board member of the National 
Association of Veterans' Research and Education Foundations (NAVREF) 
and CEO of the Boston VA Research Institute, Inc. (BVARI).
    The VA Nonprofit Corporations (VA NPCs or NPCs) fulfill an 
important role at the VA, in addition to the academic affiliates (AAs), 
in administering extramural research. I believe the NPCs can contribute 
much more and be of greater benefit to our veterans if the lingering 
barriers surrounding consistent national practices were removed. To 
that end, I respectfully request consideration of the following 
recommendations: 1) Allow NPCs to pay investigators to the same extent 
as AAs. 2) Provide NPCs right-of-first-refusal on administering all 
awards supporting VA research. 3) Reduce the level of variability from 
site-to-site by creating general guidelines and decision trees that 
remove or reduce conflicts of interests among decision-makers.
    The NAVREF network consists of 82 VA NPCs that are co-located 
within the VA medical centers (VAMCs or VAs) across the country. As 
reported in the 2014 Annual Report to Congress, the NPCs raised over 
$260M of annual extramural research and educational awards specifically 
targeted toward the VA's mission of supporting veterans' care. This 
represents approximately 15% of the total portfolio supporting research 
at the VA.
    The NPCs' congressional founding legislation solved several areas 
of difficulty for VA research and education programs: 1) It 
discontinued handshake agreements with no contractual obligations and 
acknowledgement of the VA's research successes. 2) It supplemented VA's 
intramural funding expertise with expert support for extramural pre- 
and post-award funding and unique compliance knowledge. 3) It leveraged 
VA's ability to expand its research portfolio to support clinical 
trials and federal funding; thus, allowing more veterans to be 
supported with state-of-the-art research knowledge and the opportunity 
to be treated with the newest therapies. 4) It fostered an innovative 
spirit of public-private sponsorship.
    There are many advantages to using NPCs as envisioned by Congress. 
First, NPCs rigorously comply with federal regulations and are subject 
to VA oversight that includes recurring VA audit inspections. 
Additional VA oversight includes statutory VA board members at each NPC 
and a Nonprofit Oversight Board at VA Central Office. In addition, NPCs 
operate transparently by providing an annual report to Congress 
detailing their accomplishments and successes in support of VA 
research.
    There are also challenges that we must find ways to overcome in 
order to successfully carry out the mission and purpose of the 
congressional vision for NPCs: 1) The NPCs are unable to compete on a 
level playing field with the AAs because we are unable to pay 
investigators in the same manner. 2) The decision-making process within 
VA, regarding the administration of federal grants, varies from site-
to-site. Frequently, Principal Investigators (PIs) who are dually-
appointed at the AA, or local leadership, make the determination on who 
will administer the research, which is a potential conflict of 
interest.
    By congressional design, the NPCs exist to advance veterans' health 
through innovative research and education programs, and I request that 
we remove all barriers and employ all available tools to accomplish 
that powerful mission.
                      Witness Disclosure Statement
    Begins on following page.
              Disclosure of Foreign Payments to Witnesses
    I, Nancy Watterson-Diorio, attest that I am a nongovernmental 
witness and that I am not receiving foreign payments or contracts as a 
witness or a representative of the National Association of Veterans 
Research and Education Foundation or the Boston VA Research Institute, 
Inc. and have never received foreign payments.
    Nancy Watterson-Diorio
                Curriculum Vitae: Nancy Watterson-Diorio
    Begins on following page.

TESTIMONY

    Chairman Coffman, Ranking Member Kuster, esteemed Subcommittee 
Members, I am Nancy Watterson-Diorio, and I am honored to be with you 
here today to share with you my experiences and insights regarding the 
Department of Veterans Affairs' medical research program and the role 
of the Congressionally authorized VA-affiliated nonprofit research and 
education corporations. As a board member of the National Association 
of Veterans' Research and Education Foundations (NAVREF) and CEO of the 
Boston VA Research Institute, Inc. (BVARI), I have over twenty years of 
experience in administering VA research through VA nonprofit 
corporations.
    My career path has been exclusively spent engaged in medical 
research administration, first at the academic affiliate (15 years) and 
then at the Boston VA Research Institute, Inc. (BVARI), the VA 
nonprofit located at the VA Boston Healthcare System (20 years). I was 
told when I started at BVARI (and just 3 years from its inception) that 
``if you build it, they will come.'' BVARI's revenues were $100,000 in 
1996 and only a few active investigators were interested. After 20 
years, BVARI has increased its annual revenue to $14M, much of which is 
supported by the Department of Defense (DoD). Key areas of interest 
include posttraumatic stress disorder/syndrome (PTSD), traumatic brain 
injury (TBI), the Precision Medicine Initiative, and a newly developed 
clinical trials network supporting the northeast medical centers. I am 
proud of the work we have done at BVARI to support research that has 
positively impacted so many veterans and their families.
    Veterans' Affairs Nonprofit Corporations (VA NPCs or NPCs) are 
congressionally authorized entities under US Public Law 111-163 Title 
38 - Subchapter IV - Research and Education Corporations (``Title 38") 
sponsored by a great advocate for our nation's veterans, the late 
Congressman Sonny Montgomery. The mission and purpose of the VA NPCs is 
``to provide a flexible funding mechanism for the conduct of approved 
research and education'' at an affiliated VA Medical Center (VAMC or 
VA) 1. Under Title 38, NPCs are allowed to ``accept, administer, 
retain, and spend funds derived from gifts, contributions, grants, 
fees, reimbursements, and bequests from individuals and public and 
private entities.[and] enter into contracts and agreements with 
individuals and public and private entities''1. Recognizing that VA-
appropriated funds are not the only source of revenue available to 
support US veterans' research and educational programs, Congress 
established VA NPCs to enable more avenues to support and add capacity 
to these programs. The mission of the NPCs is to advance veterans' 
health through innovative research and education programs by providing 
the technical support and the management expertise necessary to best 
enable their success. Over the past 28 years, since the establishment 
of the NPCs, the original concept has yielded great success; for the 
10-year period from 2005-2014, NPCs expended over $2 billion in support 
of VA research activities, expending over $260M in 2014 alone in direct 
support of improving veterans' health. This represents over 4,000 
research and education activities. Funds are predominantly federal 
(excluding VA appropriated dollars), at 72% of total, with the rest 
made up of private industry trials, foundation grants, donations, and 
other sources2.
    The NPCs are accountable under congressional oversight, which 
requires a detailed annual report to the Committees on Veterans' 
Affairs of the Senate and House of Representatives, triennial Nonprofit 
Program Office (NPPO) audit and direct oversight under the federal 
Nonprofit Oversight Board (NPOB), as well as other regulatory 
requirements including federal, state, and local regulations governing 
their 501(c)(3) benefit status1. Those NPCs who are recipients of 
federal awards and meet certain financial threshold criteria are also 
subject to government's Single Audit requirements under the Uniform 
Guidance policy.
    In addition to the NPCs, most VAs are affiliated with university 
academic affiliates (AAs). The affiliation supports healthcare, 
research, and medical education and training. The academic affiliation 
constitutes direct advantages to veterans' health research, most 
notably, it allows the VAs to recruit and retain the most highly 
qualified research Principal Investigators (PIs), who traditionally 
have an academic faculty appointment at the non-governmental academic 
medical centers (AMCs). At the VA, this faculty appointment exists in 
addition to their VA appointment, and thus they are dually appointed. 
Under this dual appointment, PIs may conduct research at the AA under 
their academic appointment, but in keeping with the intent of Title 38, 
their AA research must be clearly severable from their VA-approved 
research. With this option available to dual appointments, there are, 
however, notable inconsistencies around the nation about how this 
distinction is overseen and enforced. With the objective of achieving 
the maximum effectiveness of the affiliation in reference to the 
research aim, I am not aware of any specific definitions, metrics, or 
governance requirements guiding this partnership, which as noted may 
function differently at every local site.

Problem Statement and Recommended Action

    Due to the inconsistencies of national practice on whether the NPCs 
or the AAs administer extramural research programs for the VA, the 
potential growth of NPCs and their ability to support veterans' 
research programs have yet to achieve their full potential that I 
believe was originally envisioned by Mr. Montgomery. A recommendation 
in the VA's 2009 Blue Ribbon Panel Final Report, conducted in 
partnership with the American Association of Medical Colleges (AAMC) 
stated (emphasis added):

    ``Transformative medical research requires investigators with 
disparate expertise. Moreover, many research questions are best 
addressed collaboratively. To enhance the translation of biomedical 
science into improved health care, the Panel recommends that VA and its 
academic partners redouble their efforts to develop new knowledge 
through collaborative research. The Panel endorses the need for a 
strong VA intramural research program, but cautions that policies 
limiting more dynamic collaboration with affiliated institutions 
[including the NPCs] may ultimately undermine the quality of the 
Nation's overall research enterprise.''3

    In this context, there are many areas to pursue in recognition of 
this recommendation. One such area I believe to be important is that 
the VA establish clear guidelines through its Office of Academic 
Affiliations governing policy for the administration of non-VA funded 
research activities that maximizes the benefits of the NPC and 
generally offers the NPC ``right of first refusal'' for all research 
efforts where the majority of effort occurs physically within the VA.

Background and NPC Qualifications

    As statutorily established and governed entities, and due to their 
close relationship and direct knowledge of the VA system, NPCs are 
uniquely qualified to acquire funding and administer research awards 
supporting veterans' health priorities.
    Additionally, NPC personnel and their volunteers are not paid 
federal employees and are therefore not restricted from fundraising 
activities like their federal colleagues, allowing them to directly 
solicit funds in support of their mission-an avenue that has improved 
veterans' health outcomes, as all funds raised are reinvested in the 
NPC's veteran research and educational programming in accordance with 
its statement of purpose.
    The NPCs also provide a specialized role significant in securing 
research grant and contract funding opportunities. As specialists in 
veterans' health programs, the NPCs are highly qualified and have 
direct access to the resources and expertise necessary for successful 
programming. Some of the benefits of an NPC's internal expertise 
include access to government and non-government space; knowledge of and 
direct access to VA infrastructure, including the complexities of 
government information technology (IT); professional connections and 
recruitment channels to specialized research program staff; familiarity 
of the federal Without Compensation (WOC) process and direct 
relationships with VA HR personnel for processing WOCs; the direct 
ability to reimburse VA personnel for their work on a funded project; 
and direct understanding and knowledge of the unique effort-reporting 
and payment practices for VA PIs, including the ``60-hour workweek'' 
and effort disclosure Memorandum of Understanding (MoU), which are 
discussed in more detail below.
    The NPCs are also recognized by the Department of Defense (DoD) as 
the direct conduit to the VA patient population, an important criterion 
on grant review and funding allocation due to the DoD's programmatic 
priorities. As of the 2014 NPC annual report to Congress, federal 
funding represented 87% of the top five NPCs' research portfolios2. The 
NPCs' role as specialized program experts can be compared to a disease-
focused hospital that is seen as a national leader in that disease. 
There are, for example, numerous hospitals, AAs, and corporate entities 
pioneering advances in cancer research outcomes, but a few major 
dedicated cancer treatment and research institutes across the nation 
remain the most highly-renowned and receive very large annual funding 
allocations from research awards and donors. When comparing the NPCs' 
expertise and dedicated efforts, they serve in a comparable capacity 
for veterans' health advances.
    NPCs also have significant expertise in negotiating and 
administering industry-funded clinical trial research agreements, by 
using the federally approved VA Cooperative Research and Development 
Agreement (CRADA) mechanism. Veterans represent a large patient 
population that encompasses some of the nation's most serious health 
concerns, which are priority areas for many pharmaceutical and device 
companies' research and development initiatives. More importantly, 
veteran patients deserve access to the most cutting-edge therapies and 
treatments, which frequently can only be found through industry-funded 
clinical trials. NPCs provide the VA with a mechanism to accept and 
administer these much-needed trials. The VA also maintains a robust 
inventory of patient data and bio-specimen samples, which offers 
researchers rich insight into many diseases and their treatments. They 
have been leaders in major discoveries and treatment advances in over 
thirty disease areas, most significantly including PTSD and TBI, and in 
many cases, the NPCs enabled the research funding for these advances4.
    A final area in which NPCs support veteran medical research is 
through the direct financial support of Veterans' Equitable Resource 
Allocation (VERA) under the Research Support weighting program. VERA 
Research funds are managed by the VA to ``acknowledge the additional 
expense and provide an allocation of dollars for a facility to support 
and sustain a research mission''5. Revenue supporting VA-administered 
research programs, including NPC revenue, is weighted toward research 
support at 100%, whereas non-VA administered programs, including AA 
revenue, is weighted at 25%-75%5. According to the 2015 VERA Book, ``by 
weighting VA-administered research at 100% and discounting non-VA 
administered research, there is an incentive to encourage VA 
administered research''5. NPC revenue, therefore, more directly 
supports veterans' research initiatives.

Significant Challenges Affecting NPCs and Impacting Research to Improve 
    Veteran Health Outcomes

    Among the most significant and pervasive issues for many NPCs are: 
1) the inconsistent management of National Institutes of Health (NIH)-
funded research award administration, and 2) PI salary payments on NIH 
(and other) awards.
    The current practices surrounding NIH award administration varies 
greatly across the US. In some regions, AAs are administering the 
entire VA NIH-funded research portfolio; in others, NPCs maintain a 
productive relationship with the AAs and collaborate on NIH award 
administration; at still others, NIH award administration is considered 
by local VA officials on a case-by-case basis. Due to a lack of 
consistent policy interpretation, at this time, several VAs prohibit 
their NPCs from administering NIH awards, even though there is no 
formal regulation against doing so. As the NIH is the ``largest public 
funder of biomedical research in the world''6, this represents a 
significant impairment to NPC growth and development. When AAs 
administer VA-approved research programs in lieu of the NPCs, there is 
often a significant increase in the amount of federal funding allocated 
to the program due to the often substantially higher F&A rates at the 
AAs in contrast to the NPCs. The biggest discrepancy in F&A rates 
between NPCs and AAs is seen in the small- to medium-sized NPCs, who 
typically do not have access to the NIH portfolio (data available upon 
request to NAVREF). These NPCs' growth trend has plateaued after their 
initial establishment, potentially due to the tendency at many VAMCs to 
allow all NIH awards to flow to the AA regardless of where the majority 
of effort is being exerted. Whether or not intentional, imposing 
barriers to NPCs' access to the largest source of US medical research 
funding is akin to cutting off the lifeblood of the NPCs, which in turn 
contributes to a reduction in veterans' research programs' ability to 
thrive.
    Additionally, there are very specialized policies in the NIH Grants 
Policy Statement (NIHGPS or GPS) pertaining to jointly-affiliated VA-AA 
PIs, which are a major contributor to the inconsistencies in national 
understanding and practice surrounding federal award administration. In 
my conversations with numerous representatives on this issue, I have 
observed that many parties hold to historical interpretations and 
unilateral application of the NIH GPS language, which currently 
restricts the ability of entities to pay VA-AA joint-appointed PIs on 
NIH awards such that only a university AA may make those payments7. An 
NPC may be the recipient of NIH awards, but may not pay the PI's salary 
directly unless it is in the form of a reimbursement to the VA for the 
PI's official VA tour of duty7. Hence, if the PI is working on the 
project above-and-beyond his or her VA tour of duty (an allowable and 
recognized activity as long as total professional effort [TPE] remains 
within 60 hours per week across all employers [``the 60-hour 
workweek'']), the only functional mechanism for payment of that time is 
via a Joint Personnel Agreement (JPA), a convention that allows an AA 
to employ and issue salary payments when an NPC is the award recipient. 
The salary for PI effort is awarded to the NPC, but through a JPA 
agreement, the NPC agrees to send those awarded salary funds to the AA, 
who issues the PI's paycheck using those funds. After comprehensive 
research of the history and applicability of these practices, I have 
discovered that other agencies (federal and non-federal) accept the 60-
hour workweek concept and have no objections to NPCs issuing PI salary 
payments directly, without using a JPA. However, local practices and a 
lack of understanding of the applicable policies have prevented many 
NPCs from making direct payments, which has resulted in direct 
financial loss to the NPCs due either to: 1) the need to forego the 
drawdown of budgeted award revenue covering PI project salary because 
there is no agreed-upon mechanism for issuing payment by the NPC, 2) 
the decision by the PI to forego acceptance of the award because they 
are unable to be paid under the original contractual expectations and 
terms of the award, or 3) the direct loss of the entire award by the 
NPC under local directives to relinquish it to the AA in order to 
enable PI salary payments. These foregone payments have had a 
devastating impact on the ability of the NPCs to support veteran 
research programs.
    In my research and discussions with national leaders on this issue, 
I have not found a significant regulatory basis behind the NIH policy 
language that restricts the flexibility of NPCs, and if left unaltered, 
the language will continue to raise concerns as it gives direct 
preferential treatment to the university AAs. NAVREF, with the approval 
of VA's Office of Research and Development (ORD), is discussing with 
NIH the possibility of modifying language in the GPS to allow NPCs to 
pay PIs directly for their NIH-funded project effort.
    NIH has current policy language restricting VA PI ``60-hour 
workweek'' payments to the use of JPAs, but it is our finding that no 
other agency publishes such restrictions. Due to local policies and 
practices, many NPCs are utilizing ``optional JPAs'' (a JPA that is 
being practiced locally, but that is not officially sanctioned or 
governed by the funding agency). While optional JPAs are in some cases 
useful mechanisms for NPCs, there are several ways in which their local 
application can affect the NPCs financially: first, some AAs charge an 
administrative fee-on top of their federally negotiated fringe benefit 
(FB) rate and rolled into the award's FB budget-for processing these 
payments. The fee is treated as a Direct Cost (DC) expense on the 
award, and often costs the award more than the NPC FB rates would, thus 
taking funds away from the veterans' healthcare research project. In 
addition, several AAs do not currently allow JPAs due mostly to the 
inherent risk posed to the AA in taking accountability for the PI's 
effort without direct knowledge of the project. In many cases, the 
decision is being made locally to request that the AA directly 
administer the entire research award, simply as a means of enabling PI 
payment. This approach is in direct competition with the NPCs' mission 
and purpose, as defined in Title 38, to further veterans' health 
outcomes by administering VA-approved research and educational programs 
(when they are funded by non-VA-appropriated dollars).
    I am concerned about the inherent conflict of interest posed by the 
PI and/or any organization's (e.g., VA, AA, NPC) direct leadership if 
they are given the option to choose the entity under which to submit 
grants, rather than following a vetted policy or directive. Whether or 
not intentional, a reasonable independent party could conclude that the 
person making the choice as to where the award is administered stands 
to personally gain from that decision, as they will either receive 
direct salary (and, potentially, benefits) from that entity (in the 
case of PIs) or financially benefit as an organization (in the case of 
organizational leadership being the decision-maker). The lack of 
consistent national practice has led to significant variation in which 
party administers the research project and/or pays the PI for project 
effort, and has resulted in consequential significant loss of potential 
revenue for veterans' medical research programs. Although the VHA 
Handbook 1200.17 allows NPCs to hire and pay VA employees (PIs)-and 18 
U.S. Code Sec.  209 provides NPCs with an exemption from salary 
supplementation concerns, as the employees serve in a ``without 
compensation'' (WOC) government capacity when working for an NPC on a 
portion of their 60-hour workweek-a lack of clear national guidance on 
conflict of interest vetting has resulted in paralysis of the ability 
of many NPCs to make payments8,9. I recommend a single national 
practice on NPC/VA conflict of interest vetting and a national 
directive explicitly allowing NPCs to make payments to PIs.

Summary, Impact, and Request for Action

    The NPCs were created under Title 38 to serve as flexible funding 
mechanisms to enable advancements to veteran health outcomes. Because 
of inconsistent national practices, local decision-making, and a lack 
of clear and consistent policy language, the intent of the original 
legislation in Title 38 pertaining to the NPCs' missions has been 
diluted and redistributed across multiple parties (NPCs and AAs). 
Without any clear VA or congressional guidelines, each local medical 
center is afforded the ability to pick and choose the source of 
research award administration.
    I recommend a comprehensive review of national practices and 
updated policies and directives to clarify the roles and 
responsibilities of the AAs and NPCs, and to give the NPCs the enhanced 
opportunity to participate in the important work that is being done in 
the VA's extramural research and education programs. I believe this is 
in keeping with the original intent of the NPCs and their statutory 
authorization, which was designed to directly benefit-without 
interpretation, dilution, or bias-the veterans.
    Thank you for inviting me to discuss these important issues and 
thank you for your support of veterans. The VA's medical research 
program is a hidden jewel with an enduring legacy of improving the care 
of veterans and citizens throughout the nation. The close collaboration 
and cooperation of VA medical centers, their academic affiliates, and 
the nonprofit corporations is absolutely essential to the continued 
success of this impactful research program.
                   TESTIMONY: NANCY WATTERSON-DIORIO
    PROFESSIONAL BACKGROUND: My career has been focused on research 
administration for over 35 years. Of that, 15 years has been spent as 
an employee of the academic affiliate, Harvard Medical School, in 
several capacities. During that time I was directly employed by the 
affiliated teaching hospitals, Brigham and Women's Hospital and Beth 
Israel Hospital. My role involved many administrative aspects of 
research administration, which would often overlap with issues 
pertaining to the Department of Veterans Affairs (VA). In 1996 I became 
the Executive Director of two VA nonprofit organizations, the New 
England Medical Research Institute, Inc. (NEMRI) and the Boston VA 
Research Institute, Inc. (BVARI). Both organizations were in their very 
early stages of business development (less than five years). Annual 
revenue of both organizations was approximately $100,000. As the 
medical center underwent a merger, it was decided by VA leadership to 
merge both VA nonprofits into one. BVARI has just recently celebrated 
its 25th year of operations and its annual revenue for FY2015 totaled 
over $13M. BVARI directly supports 125 employees who play a key role in 
the organization from administration (12 employees) to research 
positions (113 employees). BVARI serves the faculty in both research 
and educational projects and programs from foundation grants to 
administering federal awards.
    PERSONAL BACKGROUND: I am the granddaughter of a WWI veteran, the 
daughter of a WWII veteran, the niece of a vast array of service 
veterans, and the aunt of two nephews who most recently served. I've 
only known my family to be devoted Americans who felt it was their duty 
to serve in the military. I will mention that my Grandmother was a Gold 
Star Mother and my family most recently lost my nephew to suicide upon 
his successful completion of a tour as a submarine operator in the US 
Navy. And finally, my granddaughter graduated high school this week and 
her active military status in the U.S. Navy begins in July of 2016. 
Although not a veteran myself, I've had close family ties throughout my 
life. My service to the VA now makes me feel a part of this inclusive 
family bond.
                               References
    1. US Public Law 111-163 Title 38 - Subchapter IV - Research and 
Education Corporations: www.navref.org/assets/1/7/1-----NPC--Auth--
Statute-----38--USC--7361-7366-Word.doc
    2. VA NPC Annual Reports to Congress: http://www.navref.org/about-
our-members/va-annual-reports-to-congress/
    3. The Report of the Blue Ribbon Panel on the VA-Medical School 
Affiliations (quotation: pg. 3): http://www.va.gov/oaa/archive/BRP-
final-report.pdf
    4. VA Research Advances: http://www.research.va.gov/pubs/docs/
VAResearchAdvances2015-16.pdf and VA Research Topics: http://
www.research.va.gov/topics/
    5. 2015 VERA Book: https://commissiononcare.sites.usa.gov/files/
2016/01/20151116-13-Veterans--Equitable--Resource--Allocation--VERA--
1025--Briefing--Book.pdf
    6. NIH Grants & Funding: https://www.nih.gov/grants-funding
    7. NIH Grants Policy Statement: http://grants.nih.gov/policy/
nihgps/index.htm

    a. 17.3 VA-University Affiliations: http://grants.nih.gov/grants/
policy/nihgps/HTML5/section--17/17.3--va-university--affiliations.htm
    b. 17.6 Allowable and Unallowable Costs: http://grants.nih.gov/
grants/policy/nihgps/HTML5/section--17/17.6--allowable--and--
unallowable--costs.htm

    8. VHA Handbook 1200.17: http://www.navref.org/about-our-members/
npc-statute-and-vha-handbook/
    9. 18 U.S. Code Sec.  209: https://www.gpo.gov/fdsys/pkg/USCODE-
2012-title18/html/USCODE-2012-title18-partI-chap11-sec209.htm

                                 
                        Statement For The Record

                         Dr. Christian Kreipke
    To the Subcommittee on Oversight and Investigations of The House 
Committee on Veterans Affairs:

    Nearly five years ago I was traveling the world sharing the results 
of my research which were touted in Neurology Today as the first real 
hope for a cure for head trauma. I was generously funded by both the 
National Institutes of Health (NIH) and the Veterans Administration 
(VA) to develop this research into a viable treatment for our Veterans 
and the public, at large, suffering the effects of brain injury. I was 
an assistant professor on tenure track, a VA investigator, a world-
renowned expert in the field of traumatic brain injury (TBI), had a 
well-staffed laboratory, mentored students, the Chairman of the Board 
of Southfield Oncology Institute (IRB), and had a very successful and 
happy personal life-all the signs of success that can be achieved in 
America. However, this was all stripped away from me when I started to 
detect and brought to light chronic and systemic misappropriation of 
government monies. Now, I am an entry level line worker at an 
automotive plant without a home, swimming in debt, and involved in 
multiple litigations against the very entities I am trying to protect. 
In short, my payment for blowing the whistle on hundreds of millions of 
dollars of grant fraud is not protection but, rather, currently total 
destruction.
    To explain how my life was ruined, in 2010 I was heavily immersed 
in my research which sought to develop a drug therapy to alleviate the 
signs and symptoms of head trauma. Additionally, I was selected by 
multiple government agencies (e.g., Department of Defense, VA, NIH) to 
review grants pertaining to TBI. Around the same time, large amounts of 
tax payers' dollars were being requested and reallocated to develop 
treatments for TBI which appears to be a national crisis affecting both 
our military personnel and the general public. At this same time I 
received funding from both NIH and VA to explore a novel therapy for 
TBI. The mechanism to allow me to explore further research to combat 
TBI was facilitated by a three way contract entered into between 
myself, VA and the affiliated educational institute for VA in Detroit, 
Wayne State University (``WSU'') (Exhibit A).
    While engaged in research at WSU, I began to detect irregularities 
in the grant procurement process-from how grants were being funded, who 
reaped the benefits of the money, to even how my salary was being 
determined. Specifically, I was asked by VA's educational affiliate, 
WSU, to sign off on an effort report which declares to government 
agencies how much time I was willing to allocate to a particular funded 
project in order for the University to be reimbursed from federal funds 
for my salary. I noted that I was being asked to sign off on a document 
that contained erroneous information. The University was claiming that 
I was allocating more time on my NIH grant than I was and, 
consequently, was asking the government to reimburse more of my salary 
than should be. I protested this and refused to sign off as it was not 
a true reflection of my effort and represented potential grant fraud. 
Two months after this I noted that grant funds from my grant were being 
syphoned off to pay for another faculty member's project. This, too, 
seemed blatantly wrong and I further protested this to the chair of my 
department. In December 2010, after discussing some of these issues 
with colleagues that sat on the policy committee at WSU I was 
recommended to serve on an internal committee designed to report to the 
Provost, Ronald T. Brown, any irregular policies that may be occurring 
at the University. I specifically was tasked to probe the research 
division. What I found was astonishing.
    In the process of my review of Wayne State University's granting 
practices, I discovered that a chronic issue was manipulation of effort 
reports in order to obtain more money from the government to offset 
salary costs of faculty. I also discovered that often money allocated 
to particular projects was being used to fund different projects 
without reporting this to the funding agency. I detailed this in a 
report to the Provost and to the Vice President of Research, Hilary 
Ratner. It was at this time that I was severely retaliated against. I 
was charged with allegations of committing scientific misconduct in my 
own research. Ironically, my ultimate judges in this matter were both 
the Provost and the Vice President of Research who both promptly 
terminated my employment at WSU and reported to NIH that I was not a 
trustworthy individual.
    In March of 2012, after being terminated from Wayne State on 
spurious charges of scientific misconduct after I blew the whistle 
regarding grant fraud, I moved my entire research project to John D. 
Dingell VAMC (JDDVAMC), again, Wayne State University's academic and 
financial partner. Unfortunately, the same type of retaliation 
continued, leading to my termination at VA, as well. After being 
exonerated twice of the same misconduct charges at VA, a third inquiry 
was undertaken that ultimately led to an Administrative Investigative 
Board (AIB) and pronouncement of my guilt at VA, too. It should be 
noted that WSU inserted its influence in that inquiry and AIB members 
wore two hats, being faculty or even Deans at WSU in addition to VA 
employees. Furthermore, the new Chief of Staff at the time, Scott 
Gruber, was also a Dean at WSU's medical school.
    To now focus on, specifically, the VA involvement in this 
situation, through my own investigation of my grants and those that I 
had access to through grant review, I detected the following grant 
disparities which occur through partnering of VA medical centers with 
affiliated Universities:
    1). Inappropriate sharing of funds between VA and the affiliate 
without proper oversight. Upon comparing my VA grant expenditures to my 
NIH grant expenditures I noticed that the vast majority of my VA grant 
was going directly to Wayne State University (Exhibit B), supposedly to 
pay for faculty and personnel at Wayne State that would contribute to 
my VA grant project. There were two fundamental problems, here. First, 
those same personnel were being paid by my NIH grant and/or University 
start-up funds and, second, many of these people never contributed to 
my VA project. In one case, there was a ``ghost employee'', or someone 
who I was not even sure who it was. Obviously, Wayne State should not 
have been receiving VA funds for these people as they were, 
essentially, ``double-dipping''.
    2). Allegedly falsified effort reporting. I also noted that effort 
was being manipulated by several individuals in order to allow those 
individuals to compete for other grants without exceeding 100% effort 
or in some cases disregarding time and effort standards altogether. As 
recently as my pending trial in front of the Merit Systems Protection 
Board (MSPB), it was revealed through the course of testimony that the 
administration at JDDVAMC arbitrarily manipulated my effort on a 
currently funded grant in order to make the math work on me having two 
projects at once. In fact, through my grant reviewing efforts, I 
discovered that this is, in fact, common practice. As an example I have 
included a biosketch of a VA-funded researcher at University of 
Pittsburg, Edward Dixon, who is Principle Investigator on numerous 
grants which, conceivably, it is impossible that he could devote 
physical effort to all of these projects, yet he is receiving salary 
support for each (Exhibit C).
    3). Inappropriate sharing of equipment and payments for this 
equipment between VA and the affiliate. Furthermore, Wayne State 
University in many cases charged VA for use of its space and equipment 
even when, in some cases, the very equipment being purchased is being 
purchased by VA funds. Thus, Wayne State not only benefits from 
receiving VA-funded equipment, but also receives direct funds from VA 
to utilize this equipment and/or the space that houses the equipment. 
It should also be noted that in many of the same cases this space and/
or equipment, is also being charged to NIH and, thus, the government is 
paying twice for the same item while the University is reaping in the 
government funds.
    4). ``Improper influence'' \1\ of the Affiliate over VA. Also 
astonishing was what I discovered about oversight of VA grants. I 
discovered that Wayne State University provides research and monetary 
oversight over JDDVAMC using Wayne State personnel, many of which are 
both Wayne State and VA employees. Thus, the VA had little control over 
how research is conducted or how research money is being processed as 
the oversight is conducted by and through Wayne State University, the 
affiliated University, which receives a significant portion of the VA 
funds. It is through this affiliate oversight and influence over the VA 
that another chronic problem emerges. Contracts with individual faculty 
that share University and VA appointments are negotiated chiefly by 
University personnel or by those VA personnel that also have 
appointments with the University. In fact, as pointed to above, the 
Chief of Staff at JDDVAMC, Scott Gruber, is a Dean at WSU's medical 
school. This allows for a broad range of salaries to be paid via VA 
funds to supplement University salary (e.g., in excess of $155,000 per 
year for just the VA portion of an individual's salary), none of which 
conform to any VA policy, let alone to any general schedule (GS) 
standards. These potentially fraudulent practices are not limited to 
Wayne State University/JDDVAMC, but, rather, are ubiquitous throughout 
the nation.
---------------------------------------------------------------------------
    \1\  See Mithen v. Department of Veteran's Affairs. Of note, this 
case involves similar "improper influence" of Universities over VA.
---------------------------------------------------------------------------
    What steps were taken to try to rectify these troubling grant 
practices? After discovering these allegedly illicit practices which 
not only waste tax payers' resources but also divert funds that are 
supposed to be used to help discover cures for disease and infirmity, I 
first reported to my superiors. At Wayne State I reported to first my 
chair and then to the Provost. At VA I reported many of these 
irregularities through a series of administrative Grievances filed 
against the Medical Center Director, Pamela Reeves, and other VA 
personnel. What was the outcome? My report to the Provost at Wayne 
State was, in the words of the Provost's assistant, ``deep-sixed.'' My 
Grievances were either ignored or summarily dismissed by Pam Reeves, 
the very person being grieved. I also brought my allegations to both 
administrators at HHS and the VA IG. They were largely ignored or 
referred back to the very people that ignored them initially. Even at 
the highest levels, my Grievances were ignored. Robert Petzel, former 
Undersecretary of Health, chose not to address the problems that I 
raised in the Grievances. Further, Douglas Bannerman, former Research 
Misconduct Officer for the VA, admitted, under oath, that he was aware 
of my Grievances yet did nothing. As what happened to me in WSU, I was 
likewise retaliated against and terminated by VA by a panel stacked 
with members that have clear conflicts as further discussed above.
    To address my wrongful termination at WSU, I had no choice but to 
file lawsuit. Currently, my False Claims lawsuit against Wayne State is 
pending cert. from the Supreme Court of the United States of America. 
(By way of background, the current laws governing the False Claims 
action are interpreted differently across circuits as to whether or not 
Wayne State can be sued based on its status as a ``State-
Institution''.). To address my wrongful termination by VA, I filed an 
appeal, which is currently being tried through the MSPB. I continue to 
be retaliated against even pending the outcome of this trial.
    Despite heroic efforts by Congress to protect whistleblowers, does 
the VA still engage in retaliation for blowing the whistle? Yes. I feel 
it is important to also illustrate to you the level at which the VA 
continues to retaliate against those that blow the whistle, which is 
the subject of my MSPB claim. While at the VA, and after making my 
disclosures of grant fraud at Wayne State University, JDDVAMC's 
affiliate, I was charged and found guilty of scientific misconduct 
despite there being little to no evidence which suggests that I 
committed any misconduct. In fact, previous to VA being aware of my 
disclosures, I was found not guilty of misconduct. It was only after 
they were made aware of my disclosures of grant fraud that a third 
investigation against me was conducted which, again, was run by VA 
employees who had Wayne State appointments as stated above.
    During the course of this investigation VA personnel took my 
computers (even though they admitted that no evidence was located on 
these computers) and accidentally erased all of my data which 
completely eradicated my ground-breaking research. I was subjected to 
being warehoused in a small office with two other individuals that 
often exceeded 90 degrees Fahrenheit. My phones were routinely 
monitored. My emails were routinely hacked. My due process rights were 
trampled on. My salary was reduced. I never received salary from a 
grant that I was on despite JDDVAMC receiving the funds to cover 
salary. I was stripped of my union representation. I was harassed by 
multiple VA personnel. I was taken out of the building by police escort 
in front of my colleagues and forced to go on paid leave (which further 
crippled my research mission). Further, my personnel, who supported me 
in testimony, were terminated despite my grant continuing to be funded. 
To meet their retaliatory end, VA personnel ultimately fired me and 
banned me from VA service for 10 years (which is outrageous even if I 
had committed misconduct, especially in light of the lack of punishment 
for so many VA administrators who did manipulate data with regards to 
wait times). Even the current MSPB trial has been met with great 
challenge at the hand of VA personnel. For example, VA agreed to 
mediation in settling this matter only to go on to show a lack of good 
faith by not proffering any reasonable offer. This added unnecessary 
time to the MSPB proceedings. Dennis McGuire, Chief Counsel to VA, 
taunted me after one of their witnesses stated that VA routinely 
changes effort in order to facilitate other grants, stating that he 
welcomes me to file a lawsuit against the VA for grant fraud. 
Furthermore even Robert McDonald, Secretary of the VA, attempted to 
strip me of my due process rights by, through his lawyers, submitting a 
motion to essentially attempt to block my ability to exercise my rights 
through the MSPB. So currently, instead of putting my talents to 
finding a cure for TBI I am sorting and balancing tires for pickup 
trucks twelve hours a day. To add insult to injury, during the course 
of my current trial, this matter was raised and Counsel for VA, Amy 
Slameka, objected stating that I should not complain since a line job 
is not a bad job. While I will not comment on the degree of 
satisfaction of my current job, certainly we can agree that I did not 
go through nearly twelve years of University coursework and training to 
work in an entry level position at a fraction of my previous salary.
    To further illustrate the extent to which retaliation is the modus 
operandi of VA administrators, the retaliation against me is not 
limited to just me. My colleague and former student, Justin Graves, 
refused to condemn me when he was called to be a witness in the 
investigation into scientific misconduct. Further, he called into 
question the Administrative Investigation Board's conduct (which 
included stripping him of his union rights) and within weeks he was 
fired. Now Mr. Graves is involved in a separate MSPB lawsuit which has 
languished on for over two years now. He too has been humiliated and 
stripped of his career trajectory. Thus, despite the efforts of 
Congress to establish laws that protect whistleblowers, regrettably 
these laws do not dissuade VA personnel from engaging in what appears a 
chronic culture of retaliation.

How does one fix this systemic problem?

    Now that I have illustrated not only how University/hospital 
affiliates exert undue influence on the VA which often leads to waste 
and gross mismanagement in hundreds of millions of dollars of VA funds 
and after articulating my personal case of how the VA continues to 
engage in Kafkaesque retaliation to those that are compelled to blow 
the whistle on such schemes, I would be remiss in not acknowledging 
that this otherwise dismal situation can be fixed. First, the lines 
that University affiliates have so blurred need to made clear again. 
Proper policies that make clear the dissemination of resources need to 
be put into place to protect the VA mission and resources from being 
squandered. Second, oversight needs to be placed back into the central 
authority of the VA and not entrusted to Universities which often have 
self-interests that may conflict with the ethics and standards of VA. 
Third, proper oversight of all government granting agencies needs to be 
centralized such that redundancy and overlap in resources and effort 
are mitigated. With these and other measures, the ever-encroaching 
cancer that infects the otherwise beneficial mission of the VA can be 
excised. As for the whistleblower, VA administration must shed the 
current culture of treating whistleblowers as the enemy that needs to 
be crushed and try to understand that the vast majority of us are 
trying to help a broken system. Regrettably, currently even the 
Secretary of VA seems to want to live in a fantasy world where making 
excuses for what the nation sees as systemic problems is the way to fix 
the VA, while many of us are begging for the eyes to be open and to be 
transparent to systemic problems that CAN be fixed before the entire VA 
is reduced to mere ruins.
    In closing, I discovered hundreds of millions of dollars of grant 
fraud (billions if one includes institutions in addition to Wayne State 
University and JDDVAMC) which deplete government funds, including those 
earmarked for the VA. Much of this fraud is related to the lack of 
oversight of grant funds to the VA and, more broadly, to the affiliated 
Universities. When I reported this I was met with extreme retaliation 
leading to my current dismal situation.
    However, as I still have complete faith in my country, my 
government, and my government institutions, I do believe this tragedy 
is still capable of being fixed. I also believe that many of the 
aspects that make this Great Nation were accomplished through great 
personal sacrifice. Though I have made this sacrifice and have been 
annihilated by the VA, I am still committed to helping in any way that 
I can to fix this problem. With appropriate oversight, clear separation 
of duties between the VA and its affiliated University/Hospital, and 
proper provisions to assure accountability of those receiving 
government funds, VA's commitment to finding cures for diseases and 
injuries can be achieved. As our country faces ever increasing health 
problems, whether it be cancer or head trauma or new issues such as 
Zika virus, I still firmly believe that government-funded research 
holds the answer to cures to overcome the adversity associated with 
these medical issues.
    I thank you for your due diligence in investigating this matter, I 
thank you for allowing me the opportunity to bear witness to my 
situation as being a representative of a more chronic dilemma, and I 
thank you for serving our country in its efforts to protect the 
American People. Once again, please feel free to call on me to assist 
in any way that I can in fixing this problem so that the VA and other 
government institutions can more efficiently and more effectively treat 
medical complications.

    Respectfully Submitted,

    Dr. Christian Kreipke

                                 [all]