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

                             [H.A.S.C. No. 114-97]

                 DEFENSE HEALTH AGENCY: BUDGETING AND STRUCTURE

                                   __________

                                    HEARING

                                   BEFORE THE

                       SUBCOMMITTEE ON MILITARY PERSONNEL

                                     OF THE

                          COMMITTEE ON ARMED SERVICES

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  HEARING HELD

                               FEBRUARY 24, 2016

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                    U.S. GOVERNMENT PUBLISHING OFFICE

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                       SUBCOMMITTEE ON MILITARY PERSONNEL

                        JOSEPH J. HECK, Nevada, Chairman
    WALTER B. JONES, North Carolina      SUSAN A. DAVIS, California
    JOHN KLINE, Minnesota                ROBERT A. BRADY, Pennsylvania
    MIKE COFFMAN, Colorado               NIKI TSONGAS, Massachusetts
    THOMAS MacARTHUR, New Jersey, Vice   JACKIE SPEIER, California
        Chair                            TIMOTHY J. WALZ, Minnesota
    ELISE M. STEFANIK, New York          BETO O'ROURKE, Texas
    PAUL COOK, California
    STEPHEN KNIGHT, California
                   Jeanette James, Professional Staff Member
                    Craig Greene, Professional Staff Member
                               Colin Bosse, Clerk

                                C O N T E N T S

                                  ----------
                                                                       Page

                  STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

    Davis, Hon. Susan A., a Representative from California, Ranking
      Member, Subcommittee on Military Personnel.....................     2
    Heck, Hon. Joseph J., a Representative from Nevada, Chairman,
      Subcommittee on Military Personnel.............................     1

                                   WITNESSES

    Bono, VADM Raquel C., Medical Corps, USN, Director, Defense
      Health Agency..................................................     4
    Woodson, Jonathan, M.D., Assistant Secretary of Defense for
      Health Affairs, Department of Defense..........................     3

                                    APPENDIX

    Prepared Statements:

        Heck, Hon. Joseph J..........................................    25
        Woodson, Jonathan, M.D., joint with VADM Raquel C. Bono......    26

    Documents Submitted for the Record:

        Statement of The Fleet Reserve Association...................    53
        Statement of The Military Coalition..........................    59

    Witness Responses to Questions Asked During the Hearing:

        Mr. O'Rourke.................................................    73
        Ms. Stefanik.................................................    74

    Questions Submitted by Members Post Hearing:

        Mr. O'Rourke.................................................    77

                 DEFENSE HEALTH AGENCY: BUDGETING AND STRUCTURE

                                  ----------

                      House of Representatives,
                           Committee on Armed Services,
                            Subcommittee on Military Personnel,
                          Washington, DC, Wednesday, February 24, 2016.
        The subcommittee met, pursuant to call, at 5:01 p.m., in
    room 2212, Rayburn House Office Building, Hon. Joseph J. Heck
    (chairman of the subcommittee) presiding.

    OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM
          NEVADA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL

        Dr. Heck. Let me go ahead and call the subcommittee meeting
    to order. Today the subcommittee meets to continue our
    discussions on the military healthcare system, to help inform
    our efforts to reform military health care. I know the timing
    of our hearing is a little unusual for the Military Personnel
    Subcommittee. I appreciate everyone's participation even at
    this late hour. Just too much to get done and not enough time
    to get it done in.
        The Defense Health Agency [DHA] was established in October
    2013 to manage the activities of the Military Health System
    [MHS], which includes integrating clinical and business
    processes across DOD [Department of Defense] and the military
    services. A key element was establishing shared services to
    eliminate the need for each of the military medical services to
    manage functions that are common across the MHS.
        At the time the DHA stood up, DOD estimated that the shared
    services would generate significant savings by eliminating
    redundancy and variability. I am interested in hearing how much
    the DHA has saved DOD since 2013. I am also interested in
    hearing about the DHA's role in medical readiness, and in
    particular, how the DHA assists the Army, Navy, and Air Force
    medical services to provide a medically ready force and ready
    medical personnel to combatant commands.
        In the fiscal year 2017 budget the Department of Defense
    has proposed several measures aimed at reducing the cost of the
    defense health program by reforming TRICARE. While I appreciate
    the Department's efforts to simplify the health benefit, the
    proposal still shifts the cost burden through TRICARE fee and
    cost share increases to our Active Duty family members and our
    retirees.
        What is not clear from the Department's proposals is how
    this reform addresses the concerns we have heard from our
    beneficiaries. Does it improve access to care and reduce the
    hassles of the referral process? Will the anticipated savings
    generated by the reforms be used to improve the beneficiary's
    experience?
        Lastly, I am interested to hear your views on the MHS
    structure and function especially as it compares and contrasts
    with civilian hospital systems. I hope that our witnesses will
    address these important issues as directly as possible in their
    oral statements, and in response to member questions.
        Before I introduce our panel, I would like to offer our
    ranking member, Mrs. Davis from California, an opportunity to
    make her opening remarks.
        [The prepared statement of Dr. Heck can be found in the
    Appendix on page 25.]

        STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM
     CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL

        Mrs. Davis. Thank you, Mr. Chairman. I also want to welcome
    our witnesses, especially Admiral Bono. I believe that this is
    your first hearing before our subcommittee in this capacity.
        And Dr. Woodson, I hope that this will certainly not be the
    last time we are able to hear from you this year. And I look
    forward to working with you on these reform efforts. And I know
    that you have worked very hard on this for quite some time.
        The committee has held several roundtables and hearings
    over the past several months to try and better understand the
    Military Health System. And our goal is to find the most
    appropriate way to reform the military healthcare benefit in
    order to provide the best, the most cost-effective benefit,
    while maintaining, of course, the appropriate level of medical
    readiness for the force.
        Your written statement details the initiatives that you
    have taken on your own as well as the legislative reform
    proposals that you have submitted once again for our review.
        And I look forward to discussing how we can move forward
    together to continue to provide access to quality health care
    for your beneficiaries as well as ready and capable providers
    to care for our force.
        Thank you very much, Mr. Chairman, and I know we have a
    number of objectives with this hearing today, and I hope that
    we are able to work through those. Thank you.
        Dr. Heck. Thank you, Mrs. Davis. I would respectfully
    remind the witnesses that we desire that you just summarize, to
    the greatest extent possible, the high points of your written
    testimony in 5 minutes. As a reminder, you see the lighting
    system in front of you. At 4 minutes gone it will turn yellow
    and when your time is up, it will turn red.
        At this time without objection, I ask unanimous consent
    that additional statements from The Fleet Reserve Association
    and The Military Coalition be included in the record of this
    hearing. Without objection, so ordered.
        [The information referred to can be found in the Appendix
    beginning on page 53.]
        Dr. Heck. Let me welcome the panel. I am pleased again to
    welcome back the Honorable Dr. Jonathan Woodson, Assistant
    Secretary of Defense for Health Affairs, and for the first time
    welcoming Vice Admiral Raquel Bono, Medical Corps, United
    States Navy, Director of the Defense Health Agency.
        With that, Dr. Woodson, you are recognized for 5 minutes.

      STATEMENT OF JONATHAN WOODSON, M.D., ASSISTANT SECRETARY OF
           DEFENSE FOR HEALTH AFFAIRS, DEPARTMENT OF DEFENSE

        Secretary Woodson. Thank you very much. Chairman Heck,
    Ranking Member Davis, members of the committee, thank you for
    placing the issue of Military Health System reform high on your
    agenda for 2016.
        The Military Health System takes great pride in its
    performance in combat medicine over the last 14 years, with a
    greater than 95 percent survival rates for those wounded in
    battle. Our ability to prevent disease through exceptional
    primary care and preventive medicine services produced equally
    historic outcomes and reduction of disease and non-battle
    injuries. The challenges we face in medicine and national
    security, however, continue to evolve and require new
    approaches so that we are prepared for the future.
        We have undertaken a number of initiatives to strengthen
    the Military Health System in all facets of its
    responsibilities, and they have been organized around six
    principal lines of effort which we have spoken about in
    previous testimony. I was, therefore, encouraged that last
    year's Military Compensation and Retirement Modernization
    Commission reviewed and supported many of the initiatives that
    we had already set in motion in the Department.
        Let me briefly describe those efforts. First, we have
    modernized our management system with an enterprise focus. We
    established the Defense Health Agency that Vice Admiral Bono
    leads. The Agency is entrusted with providing common business
    processes and standards in support of the military departments
    and the combatant commanders, an approach that provides greater
    operational efficiency and ensures joint solutions to our
    customers. We identified multiservice markets and developed 5-
    year business plans to promote common solutions and optimize
    the use of the military treatment facilities, while providing
    required care to beneficiaries in the purchased care sector.
        In addition, we have acquired and are now preparing to
    deploy a new electronic health record using commercial off-the-
    self products. Together with the Surgeons General and Vice
    Admiral Bono we have established an enterprise-wide dashboard
    to actively manage our performance in readiness, access to
    care, quality, safety, patient satisfaction, and cost. The
    Defense Health Agency achieved a milestone of full operating
    capability on 1 October 2015 and in its first 2 years saved
    over $700 million.
        Second, we are defining and delivering the medical
    capabilities and manpower needed in the 21st century. With the
    services the Department has embarked upon a thorough process to
    define essential medical capabilities and metrics to monitor
    readiness.
        Third, as a result of the modernization study, we have
    analyzed infrastructure needs and rightsized several military
    treatment facilities, as well as made adjustments to move
    skilled medical personnel to markets where the MTFs can
    recapture care, they can maintain their skills, and reduce
    overall costs.
        The fourth line of effort is perhaps the main focus of
    today's discussion. That is our plan for reforming TRICARE. We
    are appreciative of the input from the beneficiaries and the
    service organizations that in recent testimony have expressed
    their support for TRICARE. The TRICARE benefit was named the
    number one health plan in the country for customer experience
    by Temkin in 2015, owing in no small part to the comprehensive
    coverage and low costs to the beneficiaries. But we also heard
    loud and clear from our beneficiaries that access to both
    primary and specialty care needs attention, particularly in the
    MTFs.
        In response, we have implemented a number of access
    improvements last year to open up appointments and resolve
    appointment issues on the first call. We are improving access
    to after-hours care, particularly childcare, whether that is
    through evening clinics, weekend clinics, the ability to email
    providers with questions through secure messaging, the
    availability of a 24/7 nurse advice line that is integrated
    into our appointment system, streamlining the referral process,
    and implementing urgent care demonstration programs that
    Congress requested in last year's Defense Authorization Act.
    Our T2017 contract which will be awarded in 2016 includes
    provisions that further improve upon the experience of care for
    our beneficiaries. The PB17 [President's budget for 2017]
    proposal provides choice and incorporates the feedback of our
    stakeholder groups.
        The fifth line of effort has been to expand the strategic
    partnerships with the civilian health organizations to enhance
    our ability to meet and exceed our responsibilities in
    readiness, quality, safety, and satisfaction. Partnerships with
    the organizations such as the American College of Surgeons and
    the Institute for Healthcare Improvement are providing tangible
    benefits that offer us ways to sustain our trauma system,
    improve clinical quality, and become a high reliability
    organization.
        Finally, the sixth line of effort is about the global
    health engagement where DOD is deeply engaged with other
    partners in reducing threats posed by emerging infectious
    diseases and building bridges through health care around the
    world. We have contributed to surveillance, prevention,
    diagnosis, and treatment strategies to combat well-known
    outbreaks of Ebola and now Zika, as well as ongoing efforts to
    prevent outbreaks in other areas.
        We enter 2016 confident that the reforms in the MHS and
    health benefits can be further strengthened through a
    combination of legislative and operational reforms.
        I am grateful for this opportunity to be here today, and
    look forward to your questions.
        [The joint prepared statement of Secretary Woodson and
    Admiral Bono can be found in the Appendix on page 26.]
        Dr. Heck. Thank you. Admiral Bono.

    STATEMENT OF VADM RAQUEL C. BONO, MEDICAL CORPS, USN, DIRECTOR,
                         DEFENSE HEALTH AGENCY

        Admiral Bono. Chairman Heck, Ranking Member Davis, and
    members of the subcommittee, thank you for the opportunity to
    appear here today. I am pleased to represent the Defense Health
    Agency and explain how the DHA is contributing to the
    modernization of the Military Health System. In November, I was
    honored to become the Defense Health Agency's second director.
    Only a month earlier the Agency had reached full operating
    capability. After 2 years of collaborative work with Army,
    Navy, Air Force, medical leaders, and the Joint Chiefs of
    Staff, it established the concept of operations for many of the
    functions of the Agency.
        Our responsibilities center on supporting the military
    departments and the combatant commanders in the execution of
    their missions. The Defense Health Agency was created in the
    recognition that most healthcare delivery is common across the
    Army, Navy, and Air Force; what we need, what we buy, and what
    a best practice entails in both the clinical and administrative
    environment. The Defense Health Agency helps bring together
    common support functions into a new enterprise-focused
    organizational structure.
        We are able to help Dr. Woodson and the Surgeons General
    see and manage across the MHS in a more unified way. One of the
    principal ways in which we deliver the support is through this
    operation of shared services. Critical enterprise support
    activities include TRICARE, pharmacy operations, health
    information technology, medical logistics, public health,
    medical R&D [research and development], education and training,
    health facilities, contracting, and budget resource management.
        In addition to the 10 shared services that have been
    implemented, the DHA has also brought in joint activities that
    had previously been distributed to the services that acted as
    executive agencies. These include the Armed Forces Health
    Surveillance Center, the Armed Forces Medical Examiner System,
    the DOD Medical Examination Review Board, the Defense Center of
    Excellence for Psychological Health and Traumatic Brain Injury,
    and the National Museum of Health and Medicine.
        The DHA offers value, however, to more than our COCOMs
    [combatant commanders] and services. We serve as a single point
    of contact for many intra-agency, interagency, and external
    industry matters, simplifying the process for our partners and
    outside colleagues to work with the Department of Defense in
    support of a number of our imperatives: research, global health
    engagement, adoption of emerging technologies, healthcare
    interoperability, and more.
        The existence of the DHA has streamlined engagement with
    the Defense Logistics Agency, Defense Information Systems
    Agency, and other field agencies. External to the Department,
    the DHA provides a single point of contact for operational
    matters with the VA [Department of Veterans Affairs], a number
    of agencies within HHS [Department of Health and Human
    Services], to include the Centers for Medicare and Medicaid
    Services, the Food and Drug Administration, the Centers for
    Disease Control and Prevention, the Public Health Service, and
    more. We have successfully collaborated with the Justice
    Department on the prosecution of healthcare fraud cases, most
    recently with highly suspect activities around compound
    medications.
        We work with Treasury, State, and the GSA [General Services
    Administration] on a number of critical functions that directly
    support our healthcare mission. I would like to focus on one
    shared service in particular, the operation of TRICARE, the
    military's health plan. TRICARE modernization is part of the
    MHS modernization plan that Dr. Woodson just outlined. We have
    a number of TRICARE initiatives already underway in 2016. Later
    this year, we will award the next round of TRICARE contracts
    known as T2017, which is when health care will become
    operational under the new contracts.
        We are simplifying the contracts, reducing management
    overhead in both government and contractor headquarters by
    moving from three regions to two regions. We are expanding the
    means by which we manage the quality of our networks to ensure
    that they meet the expectations for quality and safety that we
    expect for our beneficiaries whether in the direct care system
    or in private sector networks.
        We also will introduce innovative models for value-based
    purchasing in the coming year. My staff, in close collaboration
    with the services, is also crafting the contract amendments to
    permit TRICARE enrollees to use urgent care centers without
    preauthorization. And our analytics team provides the
    Department's civilian, military, and medical leadership at the
    headquarters and field level with the ability to assess
    enterprise-wide performance of the Military Health System using
    agreed upon joint measures for readiness, health, quality,
    safety, satisfaction, and cost.
        The DHA is now an integral and integrated part of the
    Military Health System. We are proud to contribute to the
    modernization of this system through a joint collaborative
    solution and responsible management approach.
        I am honored to represent the men and women of the Defense
    Health Agency and I look forward to answering any questions you
    may have.
        [The joint prepared statement of Admiral Bono and Secretary
    Woodson can be found in the Appendix on page 26.]
        Dr. Heck. I thank you both for your testimony. So, my first
    question is how does DHA relate to, and interact with, the
    service Surgeons Generals in carrying out shared services and
    in the relationship of facility management, staffing of
    facilities, and things along those lines?
        Secretary Woodson. Thanks for that question. And there are
    two parts, of course, to the revised enterprise management
    scheme, if you will, that we have outlined and carried out over
    the last few years.
        So first is the Defense Health Agency that has the 10
    shared services. And so in regards to your question about
    facilities, the Defense Health Agency provides the common
    business processes for managing those facilities. As it relates
    to governance and how the DHA interacts with the services,
    there is a governance system that is made up of medical
    operations group, and most importantly, the medical deputies
    advisory group, which looks at the enterprise priorities and
    helps set those priorities with Admiral Bono.
        Dr. Heck. So then can you provide some examples of how DHA
    has achieved integration of clinical and business processes at
    the MTFs, across the services, and what are the additional
    opportunities for expanding common activities and functions
    across the MTFs?
        Secretary Woodson. So maybe I will start and then certainly
    Admiral Bono will want to chime in. I think the biggest example
    is in health information technology. Prior to the DHA separate
    activities in the three services, a lot of money goes into
    health IT [information technology], whether it is in DOD or it
    is in any private health system. Bringing it into enterprise
    focus, you can reduce the redundancy. You can actually develop
    the enterprise tool. I don't think we could field a new
    electronic health record without an enterprise focus on health
    IT. It is allowing us to make changes in the network, at lower
    cost, that will save billions of dollars going into the future.
        Admiral Bono. A couple of additional areas, they would also
    be in pharmacy, where jointly working with the services we can
    create a uniform formulary that makes that available to all of
    our patients. We can also through this pharmacy shared services
    and working with the military services, have been able to move
    to almost 100 percent electronic ordering, order entry, not
    only within the MTFs, but from our providers, or from providers
    that are seen out in the network in the civilian world.
        One other area is in medical logistics, in ordering the
    equipment that we use in the MTFs, and what we use even down
    range. So being able to collaborate and consolidate some of
    those purchases has saved us money as well as created less
    variability, or more standardization in the acquisition of
    those products.
        Dr. Heck. So is all purchasing for durable equipment then
    purchased through DHA for the individual MTFs, or is there like
    a blanket purchase order that an MTF can buy off of at DHA-
    negotiated rates?
        Admiral Bono. Yes, sir. We work very closely with the
    Defense Logistics Agency and so they have created an e-catalog
    which contains all that and all MTFs can order off of that
    catalog.
        Dr. Heck. My next question is probably going to take longer
    to answer then a minute-30, so I am going to yield back my time
    and wait for the second round and recognize the ranking member.
        Mrs. Davis. Thank you, Mr. Chairman, and I think we all
    recognize there are a lot of layers to this. And at the same
    time, I think you have made an attempt to simplify the
    proposals from what we had seen initially. And I am very
    pleased to see that. I think that is great.
        But I am also wondering as we boil it down a little bit, I
    think the chairman mentioned earlier about shifting the cost,
    and the perception at least, and the reality for some, that
    there is a shifting of cost from the DOD to the beneficiary.
        So I wanted to, you know, I guess to just echo, perhaps,
    what constituents might be asking. I am paying more for my
    health care, but what do I get in return?
        Secretary Woodson. Well, that is a great question, and so
    let me see if I can explain this from a number of perspectives.
    PB17 really offers a simpler system. We have boiled down a lot
    of different programs into basically a managed care variety
    which is the HMO [health maintenance organization] variety, and
    a self-manage which is preferred provider organization variety,
    or fee for service, which is the ability to go anywhere, any
    time to receive health care.
        The issue brings into sharp focus, then it gives choice,
    because if you want to use the PPO [preferred provider
    organization] product or the fee-for-service product, you have
    the ability to go and see physicians that you want, when you
    want to see them. And particularly with the PPO product, no
    longer are you paying a percentage of the fee, but you are
    paying a fixed amount so you can predict your costs better.
        We did the analysis, let's say, for a family of four. The
    actual rise in total out-of-pocket costs rises from about 8
    percent to about 10.4 percent. And this needs to be seen in the
    context of when TRICARE was originally put forth where the cost
    share was 27 percent. So it modestly increases that cost, but
    it gives greater freedom. And of course, with the PPO product,
    the referrals go away, which was a major dissatisfier for many
    of our constituents.
        There is no change for Active Duty. There is this
    participation fee, but again, because we have moved to a fixed
    copay, the actual increase in out-of-pocket expenses is only
    from about 8 percent to 10.4 percent. Notably also, is that our
    catastrophic caps are low. So your expenses will accrue against
    your catastrophic cap, and the issue really is that this is a
    major benefit of TRICARE versus other commercial products where
    the catastrophic cap is much, much higher.
        So although there is a slight rise in that catastrophic
    cap, remember, those caps were reduced back in 2001 and have
    not risen over a decade and nearly a half. There is also the
    second payer option that we have put forward which lowers the
    fees for those who have other health insurance. We have also
    set the fee structure so that it incentivizes for those who are
    around MTFs really to receive care at very low cost or no cost
    if they receive care in the MTFs.
        So I think there is great value there. There is a very
    modest increase in cost, again, to this average family of four,
    but it is in the context of having had a diminished cost share
    that has progressively gone down over the years.
        Mrs. Davis. I don't know, Admiral Bono, if you want to--I
    actually wanted to sort of throw something else in there about
    an FEHBP [Federal Employee Health Benefits Program] option that
    might be along a continuum in terms of what people could look
    at. I would suspect that that would only be for people who
    would choose to have increased costs that would, you know, have
    a higher share of that option, but it would be possibly part of
    a continuum. And I think that folks have thought about that a
    little bit. We will probably have a chance to get into that in
    terms of whether you think it would be a good idea or not.
        But it certainly would continue to do that. I think that my
    time is up. But I think what you had to say is very helpful. I
    think we also have to find ways of doing it in a quicker
    elevator speech, so that people have an understanding
    immediately of what it means to their family. And maybe that
    additional percentage is the best way to talk about that.
        But I know that there is a lot of concern out there that
    nevertheless, people are going to be paying a little bit more.
    And when you think in terms of the benefit, they want to know
    that they are really getting something for that. So thank you.
        Dr. Heck. Mr. Knight.
        Mr. Knight. Thank you, Mr. Chair. So I just have a couple
    of questions on kind of the timing of this. I know this was
    established in 2013. Can you give me an idea of what happened
    before that, why we have had these problems, why it has taken a
    little bit long to figure out these problems? And because we
    are doing this kind of this purchasing power of getting the
    three services together, are there any audits that are going on
    out there that we can figure out if this is actually everything
    that we can do, or if there are other issues that we can
    handle?
        Admiral Bono. So part of the evolution of the DHA was when
    we identified these shared services which were brought together
    and designed by the services. And the conditions for successful
    performance was identified there. What we realized was in
    bringing the services together, that in many times we each had
    different business processes to accomplish similar end goals.
    And so being able to standardize that, and understand what
    nuances or what specific service concerns were being addressed
    took some time to do that.
        In addition, as we brought people together, we also had to
    understand what our own infrastructure had available to support
    some of this. And so it has been an adjustment but we have been
    able to watch that and look at it.
        I think at FOC now, full operating capability, we now have
    the ability after 2 years of actually measuring what our
    baseline performance is, and now being able to measure our
    progress towards goals. So I think that was probably the
    primary issue in standing up the DHA, was bringing three
    services with different business processes.
        Mr. Knight. Do either of you believe that this might be a
    model to move forward with other services that the branches are
    doing, that maybe at some point they are going in three
    different directions, and they have to go in three different
    directions in certain aspects because they do certain missions.
    But in other missions they don't because, you know, a hurt
    soldier is the same as a hurt marine or sailor. So could we use
    this as a model to help in other situations in the military?
        Secretary Woodson. So the short answer is yes. If you look
    at medical as you have suggested in your statement, 85 percent
    of what the services do in regards to delivering care is alike.
    As a surgeon, I always say that the outcomes you want when you
    do a procedure, the resources you bring to having to do that
    procedure, the standards you want to apply are all the same no
    matter whether you are wearing an Army uniform, a Navy uniform,
    or an Air Force uniform. So 85 percent is alike. And that
    relates to the operational environment as well as the garrison
    environment.
        There is that 15 percent which is service unique. So what
    Navy brings to a float platform and undersea medicine, what Air
    Force brings to aerial platforms, needs to be respected because
    they made great advances, and what Army brings to land-based
    projection of force, but the majority is alike, and so that is
    the underlying concept.
        And I would remind the committee members that prior to the
    DHA establishment we had 19 studies that suggested that we
    needed to come together. And when we conducted the task force
    back in 2011, it was pretty clear that we could achieve
    economies of scale and efficiencies, and so I think the issue
    is that we really have delivered on that at this point.
        Mr. Knight. Thank you. Thank you, Mr. Chair. I yield back.
        Dr. Heck. Mr. O'Rourke.
        Mr. O'Rourke. Thank you, Mr. Chairman. Dr. Woodson, what do
    we know about available or excess capacity at military
    treatment facilities since this proposal would drive more
    customer use? Maybe I will just start there and I might have
    some other questions based on your answer.
        Secretary Woodson. A great question. So we need to look at
    it in two ways: outpatient capacity and inpatient capacity.
    Inpatient capacity we clearly have excess capacity particularly
    in many specialty areas. And we need to be able to utilize the
    MTFs more effectively.
        In the outpatient, as is true throughout the country, there
    is less of a capacity in primary care. However, having said
    that, we have done analysis through the modernization study and
    we do have a significant capacity there, particularly if we
    drive up productivity. If we increase panel size, if we create
    capacity by use of telehealth and other mechanisms to interface
    with patients who don't require a face-to-face appointment, and
    just better management strategy. So there is capacity there.
        Mr. O'Rourke. And have you measured that capacity and is
    that a number that you have at the top of your head or one that
    you could get to the committee?
        Secretary Woodson. So I can get that to you, and I would
    rather take that for the record in terms of numbers, but let me
    just tell you that we conducted this modernization study which
    looked at just that. So I think we do have substantial data.
        [The information referred to can be found in the Appendix
    on page 73.]
        Mr. O'Rourke. Okay. And then if I heard you correctly, part
    of the capacity will be developed by forcing efficiencies and
    modernization, or were you saying that that has already
    happened and it has created the capacity?
        Secretary Woodson. So that is in progress and as I
    mentioned in my opening statement, things like secure
    messaging, streamlining the referral process, increasing panel
    size, urgent care, things that increase our ability. You know,
    weekend and night clinics, pre-school clinics for children, all
    of these things increase your capacity. So we are carrying out
    those reforms as we speak.
        Mr. O'Rourke. Great. So when you provide those numbers for
    the committee, I would love to know what established capacity
    we have and then the capacity we project forward if we are able
    to follow through on these great initiatives that you talk
    about.
        So one of the concerns that I hope your numbers will answer
    is whether there is any threat to current, you know, service
    members, Active Duty service members receiving care at military
    treatment facilities in terms of compromising capacity for
    their priorities and their care. And then I have another
    question related to that.
        Secretary Woodson. So I don't believe there will be any
    compromise to the services.
        Mr. O'Rourke. Because that capacity exists, great. And then
    the other question, Admiral Bono brought up care for veterans.
    Does the capacity then also exist to complement care provided
    at the VA where you have unacceptable wait times, especially in
    specialties like behavioral health and mental health, and
    should we avail ourselves of that capacity within military
    treatment facilities for veterans who may not be TRICARE
    beneficiaries?
        Secretary Woodson. So the short answer to that is yes. The
    longer answer is that we already have a number of sharing
    agreements with the VA around the country. And the issue really
    needs to be analyzed on a local level because all of the
    markets are different. And the capacity to take care, of
    particularly, behavioral health individuals, will be somewhat
    market dependent.
        So the short answer is yes. But the more involved answer
    and we have got data to look at the distribution of the
    facilities and what is available in each market.
        Mr. O'Rourke. Great. I look forward to seeing that and to
    the degree that you can localize that capacity, I would love to
    know, for example, William Beaumont Army Medical Center in El
    Paso at Bliss, what we have and what we project going forward.
    Maybe other members would like to know that for their districts
    as well. Thank you very much. I yield back.
        Dr. Heck. Ms. Stefanik.
        Ms. Stefanik. Thank you, Mr. Chairman, and thank you to the
    panelists for testifying today and for your service. I wanted
    to direct my question to Admiral Bono. I want to discuss the
    General Temporary Military Contingency Adjustment Program
    which, as you know, exists to offset the lower reimbursement
    levels provided under the Medicare payment model to sole
    community hospitals that provide care to large volumes of
    service members and military families.
        In my district Fort Drum does not have a full MTF on post
    so soldiers and their families depend on community hospitals,
    one of which is the Carthage Area Hospital. Outpatient services
    to our military and their families represent anywhere from 30
    to 35 percent of this hospital's outpatient services and
    unfortunately, Carthage is still being reimbursed at the
    Medicare levels. And although they have applied, they have not
    received relief from the General Temporary Military Contingency
    Adjustment Program. And this appeals process has been going on
    for 2 years, since September of 2013.
        So my question is, what is DHA doing to alleviate these
    bureaucratic challenges facing facilities like Carthage Area
    Hospital?
        Admiral Bono. Thank you for the opportunity. I confess that
    something like that is something I am still getting a better
    understanding. But your broader question about what DHA is
    doing to address some of these bureaucratic or these
    administrative challenges is something that I am taking into
    real strong consideration as we are going forward in the
    modernization of our healthcare plan.
        In looking and in arriving at the DHA one of the first
    things that I realized is that many times we have policies or
    operations in place that need to be brought into a more modern
    approach, to be a little bit more agile, and to look at some of
    the processes we are doing. This was particularly evident with
    some of our referral management operations and our processes
    there.
        So I would like to take that for the record, and look at it
    a little bit more closely so that I can better understand where
    the opportunities are. But I share your concern on that that
    administratively, part of what I feel my responsibility to do
    is to make sure that the DHA is looking at our administrative
    processes and streamlining them to the best of our ability.
        [The information referred to can be found in the Appendix
    on page 74.]
        Ms. Stefanik. Great. I appreciate that and I look forward
    to working with you to alleviate those bureaucratic challenges.
    But I would also like you to take for the record the specific
    case of Carthage Area Hospital, the uncertainty for 2 years
    since September of 2013.
        [The information referred to can be found in the Appendix
    on page 74.]
        Ms. Stefanik. We are working with their office. We are
    trying to work with DHA, and we need to get more understanding
    of the decision, which brings me to my next point.
        What actions have been taken to ensure that these
    reimbursement levels are determined in a transparent manner, so
    bringing more transparency to the decisionmaking process? Have
    you put any thought into that from your position?
        Admiral Bono. I have, as a matter of fact, and I realize
    that being able to be more transparent is more helpful to
    everybody. So you will see that in many of our discussions. We
    are bringing that to the table, being more transparent about
    our conversations, being more transparent about our analysis as
    well.
        Ms. Stefanik. Okay, great. Bringing greater transparency
    would not only help this specific case of Carthage Area
    Hospital, but in terms of who qualifies for this program
    because there has been an independent audit of Carthage that
    basically says that they are beyond the 10 percent requirement;
    that outpatient services make up 30 to 35 percent, so they
    should qualify for this program. So we need transparency and
    clarification. And I am sure this isn't the only hospital that
    is facing this issue.
        And I yield back the rest of my time.
        Dr. Heck. Thank you. Mr. MacArthur.
        Mr. MacArthur. Thank you, Mr. Chairman. I applaud you for
    thinking through how to simplify the TRICARE plans and I think
    the intended move to an HMO and a PPO makes some sense.
        But the PPO, which is where I want to focus, still relies
    on your current networks. And as I read and I just read it
    again last week, the Military Compensation and Retirement
    Modernization Commission's overall assessment, they were pretty
    critical of the adequacy of the provider networks within the
    TRICARE system.
        So I want to get into the weeds on this a little bit, but
    for starters, I would like to ask if you agree with their
    assessment of your networks. And if not, where do you differ?
    And I will, maybe I will start with you, Mr. Secretary.
        Secretary Woodson. Thank you very much for that question.
    And I don't agree with the assessment that the Commission made
    about the adequacy of the network. There are several things I
    think that they considered in making that assessment.
        So first of all, let's start with some big numbers. We have
    424,000 physicians in the TRICARE network. And we have got
    virtually all of the 5,000 hospitals that are available to take
    care of our patients. But the issue is that, some of the
    assessments that were made relative to, let's say the Fort
    Bragg or the Fayetteville area, didn't take into account that
    when we considered the network development, we consider what is
    available in the MTF as well as what is required. So we have
    formulas that we use for trying to decide the adequacy of the
    network.
        And the issue is that you may not need as many orthopedic
    surgeons in your network if you have got a lot of orthopedic
    surgeons in the MTF, particularly in that 30-mile area around
    the MTFs. You know, there are some other formulas that every
    insurance company uses to determine adequacy. It turns out that
    the average insurance company will have a ratio of particularly
    primary care providers to population of about 1 to 528.
    TRICARE's is 1 to 24.
        Mr. MacArthur. If I can stop you there, though, because it
    is an interesting comparison. The difference is when you are
    talking about private insurers, if they are wrong, if their
    formula might be right overall, but in particular communities
    around the country there are gaps, their beneficiaries can
    walk. And they can go to a different insurer, a different plan,
    and remedy their own situation. The difficulty is under
    TRICARE, that remedy doesn't exist.
        So let me just finish, my question then because I have only
    got another moment to try to unpack this, if we made the
    networks in the FEHBP available to our military personnel, what
    would that do in your opinion? Pro and con, what would that do?
        Secretary Woodson. So first of all, probably many of those
    physicians that are in these other plans are in our network. I
    mean, because physicians are in multiple plans. But to the
    issue of if there is inadequate, let's say, specialty in one
    area, two things: one, if you have a private insurance program,
    you are going to have to travel to get that care because the
    providers are not there. TRICARE has to pay for you to travel
    to get that care because we have a requirement to provide the
    care.
        So one of the issues that you are addressing is very real,
    but it is a ubiquitous issue that in certain rural communities
    there aren't enough providers of a variety of specialties. But
    TRICARE must pay for that beneficiary to travel, which is not
    true in other plans.
        Mr. MacArthur. But is it possible that there might be a
    closer service provider in a different network other than yours
    that perhaps they wouldn't have to travel quite as far?
        Secretary Woodson. And so, conceivably that could be a
    case, and certainly for Active Duty and Active Duty family
    members, they can actually go and see those providers without
    the added costs. So for the retiree, they may have to get a
    waiver, basically, but we have a requirement to provide care,
    so either there, or have them travel.
        Mr. MacArthur. I thank you. I yield back.
        Dr. Heck. Mr. Coffman.
        Mr. Coffman. Thank you, Mr. Chairman. I am on health care
    on both sides of VA and DOD. Can you tell me, I know that the
    Veterans Administration would certainly like to do more DOD
    work. To what extent is that occurring?
        Secretary Woodson. Thanks again for that question. We, too,
    would like to do more business with Veterans Administration.
    And as I mentioned before we have a number of sharing
    agreements and we are looking more closely how we can craft
    more mutually beneficial sharing agreements across the country.
        One of the interesting things that has happened with the
    rollout of the VA Choice product, is that the way it was, I
    guess, outlined, it put in conflict our ability to, in fact,
    operate under the sharing agreements and we are actually trying
    to unpack that right now and resolve those conflicts so that we
    can be at liberty to do more work with the VA.
        Mr. Coffman. Well, let me just say, I have had, obviously,
    problems with the VA in my district in the building of a
    hospital that happened to be $1 billion over budget. And so
    during the process before I didn't know whether I could get
    funding for it, and obviously, we stripped the VA's ability to
    build another hospital again.
        But I remember going to the University of Colorado Health
    System and saying, would you take over this project and work
    with the VA and somehow purpose this for veterans? And I
    remember during those discussions that were occurring when I
    was concerned about not getting funding and what I was going to
    do with this half-built building, they said something very
    interesting. They said, you know what, we will not have VA
    employees in this hospital because we have got two separate
    cultures and it would result in a separate standard of care.
    And I believe that the military medicine and the VA, I believe
    is two separate cultures. And I am very concerned.
        We need to reform the VA. But until it is reformed, as a
    veteran of 21 military years of service, I don't want to see
    them taking care of our Active Duty. And I don't want to see
    them taking care of our Active Duty families. And I think that
    is absolutely important. And so I am going to push back the
    other way. And in fact, we had flag officers from other
    branches of the service that testified before us in an earlier
    hearing and essentially said the same thing: different
    standard, two different cultures, different standard of care,
    and they were not supportive. And so I would ask you to relook
    at that. And I think I am going to visit it for the National
    Defense Authorization Act coming up.
        It would be wrong for our military personnel to subject
    them to that system. I want to clean it up. We owe it to our
    veterans to do that. But until we do, it would be wrong. My
    father was in military medicine and I can remember during
    Vietnam how those soldiers that came home from Vietnam severely
    wounded, were stabilized in the military system and were
    transferred to the VA for their rehabilitation. Thank God we
    don't do that right now. We keep our military personnel in the
    military system throughout the rehabilitation; only if they opt
    for the VA do they go to the VA. And so I want to caution you
    on the direction that you are taking. Do you have a response to
    that?
        Secretary Woodson. No, I appreciate your concern, and I
    appreciate your service and certainly your commitment to
    ensuring quality care.
        And we will take that under advisement. I think the issue
    is that we will be absolutely certain. Some of these sharing
    agreements have been in place for a while, but we will relook
    at the quality of care in the organizations that we have the
    sharing agreements with.
        Mr. Coffman. Thank you, Mr. Chairman. I yield back.
        Dr. Heck. Thank you. We will continue with a second round
    of questioning. If you could, you know, compare and contrast
    the differences between the Military Health System and its MTFs
    with civilian hospital systems and the best practices that are
    perhaps on the civilian side. I think you have alluded to some
    of them and how you try to increase capacity by increasing
    operational hours, increasing panel size, increasing
    productivity.
        How is that going to go? I mean, having worked in an MTF,
    certainly during my time there we did not have a taxing
    schedule of patient flow. Whereas if you were in a civilian
    hospital, you were expected to see many more patients in the
    same period of time. And as we have heard, you know, one of the
    issues that we hear from beneficiaries is the difficulty in
    getting an appointment slot.
        So I understand, you know, you have alluded to implementing
    some of those things. How do you expect those to roll out and
    what is the role being pushed by DHA or does that have to be
    pushed by the Surgeons Generals? How does that actually get
    down to the MTF and implemented?
        Secretary Woodson. So the Surgeon Generals have a real role
    to play in this because under the current system they actually
    operate the hospitals. But I think the issue is that the
    leadership with Admiral Bono and the Surgeon Generals have made
    it clear that we need to pivot to a full patient-centric,
    customer-focus delivery system. So in answer to your question
    about compare and contrast, there are many things that are the
    same.
        So we have to do hospitalization, we have to ensure access,
    quality, patient safety. We have to provide trained
    specialists. We have to organize and equip the hospital to
    provide those services and pay attention to all of those
    metrics that are important.
        The contrast is, again, that the MTFs are medical force
    readiness platforms. They are soldier-focused readiness
    platforms, and the people who are in those MTFs tonight, or
    tomorrow, may be called to deploy somewhere in the world.
        And so there is going to be some difference in operations
    and maybe some cost to the efficiency. Now, you can rightly
    push back at me and say, well, what is that cost? And I
    wouldn't have an answer for you today, but I can tell you that
    that is what we are working on now to define what is the
    readiness cost so that we can produce the efficiency and the
    productivity to the highest level it can be at.
        Dr. Heck. And I appreciate it and I have said in just about
    every hearing that we have had on this issue that there is a
    cost to readiness and we have to be ready to assume that cost
    if we want to have a ready, deployable medical force and then a
    ready deployable combat force. So there is that intangible cost
    that the civilian sector does not have to deal with.
        So transitions to the readiness issue as you just alluded
    to, as well as in your written testimony about how TRICARE
    supports the readiness mission of the MHS with the military
    treatment facilities as a readiness training platform for
    medical forces. So how does DHA expand choice to the
    beneficiaries with their ability to choose either a military or
    civilian provider while making sure we recapture the right mix
    of patients to ensure that we do have that medically ready
    force as you mentioned, incredible strides in combat casualty
    care, but we have also got to be ready to do the humanitarian
    mission and take care of that elderly patient with CHF
    [congestive heart failure] in some far-off land? So how does
    DHA look at getting that patient mix.
        Secretary Woodson. Let me start the answer and then maybe
    Admiral Bono can chime in. So the issue, again, at a basic
    level is, we need to have a good flow of patients through the
    hospitals to ensure that we keep the skills current. And that
    is not only for the docs, but it is for the nurses, it is for
    the OR [operating room] teams, the medics, the x-ray techs, the
    pharmacy folks, you know, the respiratory therapist. We need to
    have flow.
        And as you have indicated that when we get into the fight
    and particularly the medical fight, it is more than just trauma
    care. We actually have to take care of disease and non-battle
    injuries. And one of, again, our great statistics is the
    reduction in disease and non-battle injuries. So we need full-
    service platforms.
        Now, to answer your last question about the issue of the
    right flow. First of all, let me just pivot a little bit to
    PB17 because I think what we have done in PB17 is set a fee
    structure that encourages folks to use the MTF. We have got to
    deliver on the customer care, the experience of care, clearly,
    but we have set a fee structure that that is the lowest cost
    option, and incentivizes individuals to use the MTFs.
        But again, a lot of the detailed analysis relates to the
    geographic areas and what is available. So we can't put every
    subspecialist at every camp, post, and station, but we have got
    great centers and we have got great community hospitals that
    can be used more effectively. I don't know if the admiral wants
    to comment.
        Admiral Bono. I think just to piggyback on that, by making
    sure that the direct care system is the more attractive option,
    we incentivize patients to come in, but that also means that we
    need to be prepared to take them. And so working with the
    Surgeons General we realize that we have to be able to make
    sure that it is easier for our patients to get in.
        And some of the things that we have also put in place are
    single appointing centers, where the patient only has to call
    once, and also putting a first call resolution so with that
    first call the patient gets their appointment that they need.
        What we have also put in place is the nurse advice line and
    this is something that we have implemented across all of the
    MTFs with the services. And so patients can receive that advice
    from the nurses, and be able to get some counsel on whether or
    not they need to go in to see somebody, or whether they can
    take care of that.
        And then of course, Dr. Woodson mentioned asynchronous type
    of care through telehealth and secure messaging. All of that
    kind of combines to making sure that we have that capacity and
    that flow for our patients.
        Dr. Heck. Mrs. Davis.
        Mrs. Davis. Thank you, Mr. Chairman. I know, Dr. Woodson,
    you responded to Mr. MacArthur and trying to, what would, you
    know, is it even feasible to think about having an additional
    option for constituents? And I know that that was what the
    Commission brought to us, and they were interested and I think
    that you have done a good job of trying to lay out the piece as
    it relates to MTFs.
        I raise it just because I think that there might be a very
    small percentage of people that would have an interest in it. I
    can't imagine that there would be a great deal because it would
    be more costly.
        No other constituent should subsidize that interest on the
    part of someone who perhaps has some special needs for some
    reason or other within the family that they would choose to do
    that, just like people would choose more expensive options
    within, you know, their company plan.
        Does, does that play a role somewhere? And I think partly
    what we are dealing with, of course, there is all of these
    regions whether urban, rural, I mean, so that people don't
    always experience the same health care where they go because it
    is a more limited ability of the community to respond, at least
    within a very short time span.
        Secretary Woodson. So thanks again for that question. So
    within the realm of possibilities, it is possible. The question
    is whether or not it is feasible and makes sense to do.
        Because here is the issue: Number one, you would have to
    decide which benefits are going to be assigned to the health
    plan that they are going to get in the commercial market. So if
    you take the Commission's outline, they had OPM [Office of
    Personnel Management] setting up sort of a special exchange
    market where people could go and pick from 250 plans.
        But the Department of Defense was still responsible for
    dental, vision, pharmacy, and many other aspects of the
    program. And so there were going to be many more touchpoints
    that any beneficiary would have to coordinate on their own in
    order to get their full set of benefits.
        The biggest issue is, what would be the incentive? So
    TRICARE is a very robust comprehensive benefit. We have the
    best autism coverage, bar none, in the country. The question
    is, who would go and pay now a $6,000, $7,000 premium with
    maybe total out-of-pocket costs of $9,000 as opposed to the
    $1,700 that exists today? And then what would be our
    responsibilities if they are not happy with that insurance
    product about coordinating their care?
        So, in the realm of possibility? Yes. Feasibility for a
    small percentage, frankly, they have that right, right now.
    They can do that. Right? Because all you have to do is not use
    your TRICARE benefit, and you can buy a commercial product or
    if your husband or wife works for an employer and they offer
    other health insurance, you can take that. So that option is
    there right now.
        Mrs. Davis. I wondered about that. And part of the, I
    guess, transparency of this may be that it is helpful for
    people to see that. Even alongside the options that they have
    so that they know that, in fact, they really are getting great,
    great care at certainly a reduced cost.
        And people, you know, might know that. They might go on the
    Net [Internet] and see that. But there might be some reasons,
    and I guess it is just part of trying to say to people, we want
    you to be sure that you have all of the information. And part
    of the process that we will be going through is providing
    people with good information.
        So do you think that that would be information that would
    be important to people as in part of this education process?
    And I know my time is up. How are we going to go about making
    sure that people do get good information so they can make those
    decisions?
        Secretary Woodson. So that is an excellent point. We need
    to communicate effectively. We can certainly make people aware
    that as things stand today, they can exercise their option not
    to use TRICARE and buy commercial insurance and provide cost
    estimates so that they have a basis of comparison.
        Mrs. Davis. Yeah, that might be helpful to do. Okay. Thank
    you, Mr. Chair.
        Dr. Heck. Mr. MacArthur.
        Mr. MacArthur. Thank you. I am going to actually continue
    that for a moment. I think we have to be careful when we talk
    about this because in that discussion I think we were
    conflating the Commission's recommendation of a private
    healthcare model with 250 plans, with what I started with, and
    what Mrs. Davis started with which was FEHBP [Federal Employee
    Health Benefits Program], which was not a, you know, such an
    involved and dizzying, frankly, set of options.
        Personally, I don't think moving to a commercial system is
    advisable. I don't think it is necessary. And I was asking a
    much more directed question about a single option FEHBP which
    is currently run by the Federal Government and includes many
    networks which have been less criticized, frankly, than the
    Commission certainly was of yours. So I think we have to be
    careful.
        And I also think complex systems are difficult to manage.
    You have got 9.8 million lives in TRICARE. It is a $50 billion
    system. It is difficult to manage. And you have got the MTFs
    and the private contracts you have, but they are even more
    difficult to predict. And that is why I raise the question
    because I don't know whether people would opt for it. I have no
    idea.
        All I know is the Commission was critical of the current
    networks. And I heard you, Secretary, that you have a large
    number of physicians in the network, 424,000, 5,000 hospitals,
    but this may be a problem of geography more than volume.
        You may have plenty of providers. I am sure you do. The
    question is, do you have them where the beneficiaries have the
    need? And it is hard to predict that. And that is why I ask
    about whether another option allows people to make that
    judgment for themselves instead of all of us trying to make it
    for them, which is impossible to do.
        That is a comment. I am going to ask another question,
    though, and that is, Admiral, you mentioned the plan to go from
    three to two regions in TRICARE. So I am going to take a little
    different direction now. I am always concerned that when we
    talk about a change we don't confuse motion for progress. And I
    would like to ask you why is two better than three? These are
    still massive service providers, now each one gets even larger.
    How does that improve either service or cost?
        Admiral Bono. With going from three to two, I think this is
    a great question and something that bears fleshing out a little
    bit. What we realized is we needed to be able to offer a more
    standardized benefit across all of our MTFs and across our
    services. And in looking at our geography and our current
    configuration where we had three, we realized that we could
    already, geographically, work with two main contractors and be
    able then to kind of standardize and reduce some of the
    variability that we saw in having three plans.
        And so that was why we went ahead. We also looked at the
    overhead costs, not only within the contractors, but also
    within managing those from the DHA. And so we saw some great
    efficiencies by doing that by going to two.
        Mr. MacArthur. I need you to be a little more specific.
    Because economies of scale can be deceptive. You have already
    got massive scale on all three of your regions today. So what
    further economies do you expect to get out of just two?
        Specifically, I mean, you can't unpack all of that, but
    give me three, four very specific things that will be less
    costly in two regions than they are in three?
        Secretary Woodson. Administrative process, setting up the
    contracts, two versus three. You are going to have more
    standardized processes, easier flow as our beneficiaries move
    from one region to the other. We can standardize the automating
    process. We can standardize the communications to the
    beneficiaries and providers. We can leverage the use of their
    data systems without having to go to more data systems to do
    population management, quality management. So there are
    actually multiple benefits to moving to----
        Mr. MacArthur. Then if that is true from three to two, why
    not go to one?
        Secretary Woodson. Well, that is a good question. I think
    it is about the issue of risk if you put all of your eggs into
    one basket. But that is a good question. But I would also make
    this historical note. You know, we didn't arrive at this
    overnight. Remember, there was a time when we had 12 and then
    6, and then 4. And so we have been progressively getting here.
        The ability to coordinate when you have four, five, six
    contracts is just a nightmare. The updates in the manual when
    these contracts roll out, so they are always out of sequence,
    administratively it is just a lot easier.
        Mr. MacArthur. I would stay all night if I could, but my
    time has expired. Thank you.
        Dr. Heck. Thank you. I got one last question because I
    didn't see it addressed in PB17. The fate of TRICARE Reserve
    Select [TRS]. So what happens to Reserve members? Are they
    going to be moved into either a TRICARE Choice or TRICARE
    Select plan, or do we maintain TRS?
        Secretary Woodson. So as a product it will be TRICARE
    Choice. But I think the larger question you are asking has to
    do with what are the optimum products for the Reserve
    Components? And that is really under study because there are a
    couple of different, there are several different solutions that
    might be applied to the Reserve Component.
        The real issue with the Reserve Component is that when they
    are mobilized, how do you prevent turbulence in terms of
    families having to switch doctors and insurance plans. The
    answer for the Reserve Component might be one of several
    options. One would be if everybody took TRICARE Reserve Select
    or now TRICARE Choice, they would have that PPO product and
    then they could use, and of course the member comes on Active
    Duty and nobody has to change doctors.
        Another solution might be something similar to the
    Commission recommendation, which is to give BAHC [basic
    allowance for health care] when the reservist comes on Active
    Duty, and then they don't have to switch their insurance plan,
    but you just give them a basic allowance for health care.
        Another solution might be to offer TRICARE Choice into the
    employer insurance plans, which might work for the employer and
    might work for the reservist because it might be a lower-cost
    option and get greater acceptance of TRICARE Reserve Select.
        So there are many options, and we need to really poll and
    assess the Reserve community about what they are doing for
    insurance now and what the options are. Because we don't have
    the right answer. We don't have enough data to make the right
    answer now.
        Dr. Heck. I appreciate that. Three very great options, I
    believe. Do you believe that you will have data in time to make
    a suggestion through this NDAA [National Defense Authorization
    Act] process that is going to probably wind up before June?
        Secretary Woodson. We will not have enough data for this
    cycle. We certainly will have for the next.
        Dr. Heck. Okay. I appreciate that. Again, I thank both of
    you for being here so long at this late hour and answering the
    questions as effectively as you did.
        There being no further business, I will adjourn the
    subcommittee.
        [Whereupon, at 6:05 p.m., the subcommittee was adjourned.]

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                                A P P E N D I X

                               February 24, 2016

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                  PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                               February 24, 2016

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                       DOCUMENTS SUBMITTED FOR THE RECORD

                               February 24, 2016

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                  WITNESS RESPONSES TO QUESTIONS ASKED DURING

                                  THE HEARING

                               February 24, 2016

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                 RESPONSE TO QUESTION SUBMITTED BY MR. O'ROURKE

        Secretary Woodson. Primary Care: Current MHS capacity targets for
    primary care are for enrollment of 1,100 per adjusted full time
    equivalent (FTE) primary care managers (PCMs). Services standardize
    adjustments per FTE PCM in order maximize clinic provider availability.
    Current average enrollment per adjusted FTE PCM is 1,053; therefore,
    Services are open to enrollment overall as long as the MTF is able to
    provide access to care within MHS standards. The Services are working
    to increase capacity as follows:
          Reducing the Utilization Rate/Demand: The major variable
    in increasing capacity size is utilization [(number of duty days per
    year x 21 encounters per day]/utilization rate). Current MHS
    utilization or demand is over 4.1 visits per year, which is 187% higher
    than the national average of 1.43 visits per year in an insured
    population, per the CDC. If utilization/demand can be reduced, capacity
    will increase; conversely, if demand increases, primary care capacity
    will decrease. Numerous utilization/demand reduction efforts are
    underway. The MHS' main strategy to reduce unnecessary utilization is
    through optimization of the Patient Centered Medical Home (PCMH) model
    of care. The primary utilization reduction initiative is PCM
    continuity; a patient's continuous relationship with his/her PCM
    reduces demand because the PCM is aware of and can proactively address
    patient demand for care without multiple unnecessary appointments. In
    addition, PCMH uses team-based workflow to maximize PCMH teams' ability
    to meet patients' needs; the Services are ensuring teams have 3.1
    support staff per PCM. The PCMH model also includes embedded behavioral
    health specialists, physical therapists and clinical pharmacists to
    provide high quality comprehensive care to enrollees. PCMH is also
    maximizing the use of virtual health opportunities, such as telephone
    visits, secure messaging and the nurse advice line to meet patients'
    demand for care beyond face-to-face appointments with the PCM. The
    direct care system's most mature PCMHs have reduced demand for face to
    face appointments by using the strategies identified above and have
    increased capacity above 1,100 enrollees per PCM.
          Increasing number of direct care appointments: Simplified
    Appointing guidance increased the number of appointments available per
    duty day by 24% (an additional 11K appointments per duty day.) In
    addition, the Services hold MTFs accountable to schedule the target
    number of appointments based on an analysis of demand.
          Expanding Operating hours: MTFs are analyzing demand by
    day of week and hour of day to determine whether a positive business
    case exists to expand or implement extended hours in PCMH and/or MTF
    urgent care. Many MTFs currently offer extended and weekend hours (see
    below). All Services are exploring extended hours, based on an analysis
    of patient demand.
          Telehealth: Additional efforts are underway to deploy
    telehealth initiatives to increase capacity. For example, a pilot is
    underway to allow virtual PCM appointments using telehealth technology.
    In addition, a pilot is underway to allow remote home monitoring for
    patients with chronic disease; remote home monitoring will provide
    quality are using telehealth technology and increases convenience to
    the patient who does not need a face-to-face appointment.
          Provider Distribution: The Services are moving primary
    care managers (PCMs) from areas where no additional enrollment demand
    exists or where there is excess primary care capacity to areas where
    there is insufficient capacity to meet appointment or enrollment
    demand.
          Community Based Medical Homes (CBMHs): The Army is
    expanding its successful CBMH program, which implements stand-alone
    primary care clinics in population centers where beneficiaries live.
    For example, Harker Heights CBMH is located in a town near Ft Hood,
    Texas, where many beneficiaries reside; referrals generated support the
    specialty care base at Darnall AMC. The Army has implemented 20 CBMHs
    and has plans to implement 3 more in FY16 as well as to expand eight
    existing CBMHs due to their popularity with beneficiaries in FY17.
    Staffing CBMHs after hours, with overtime GS or active duty rotations,
    has increased additional capacity, as well (see below).
        Specialty Care: The process to standardize specialty care to
    improve processes and increase capacity is underway through the new
    Tri-Service Specialty Care Advisory Board (TSSCAB). The TSSCAB is
    responsible for executing MHS Review Action Plan 2, which outlines MHS
    requirements to develop standard processes for specialty care in MTFs.
    Based on the MHS Modernization study, which compared specialty care
    productivity to 40% of the MGMA standards, there currently is capacity
    in MTF specialty care; however, making this capacity available will
    require standard processes and supporting guidance be developed,
    similar to what was previously done in the MTF primary care product
    line. Specialty care plans to further increase available capacity
    include: Deployment of enhanced access tools such as telehealth and
    secure messaging in specialty care clinics
          Development and implementation of Tri-Service manpower
    standards for support staff and support staff protocols to increase the
    product lines' ability to meet the needs of more patients through team-
    based workflow
          Development and implementation of Simplified Appointing
    Guidance for specialty care product lines, which will identify the
    number and types of appointments expected per full time equivalent per
    day/year. Simplified Appointing Guidance in primary care has increased
    the number of available appointments per duty day by over 20%.
          Implementation of Specialty Appointing and Referral
    Guidance, in collaboration with primary care. The guidance is in final
    coordination with MHS governance; implementation is expected in CY2016.
    The goal of the guidance is to provide the patient with a confirmed
    specialty appointment date and time before the beneficiary departs the
    MTF after receiving a referral from a primary care manager. The
    guidance includes requiring the use of Tri-Service referral guidelines
    in primary care, to reduce unnecessary referrals, which will further
    increases specialty care capacity.   [See page 10.]
                                     ______

                RESPONSES TO QUESTIONS SUBMITTED BY MS. STEFANIK
        Admiral Bono. By law, TRICARE is required to adopt Medicare's
    reimbursement system to the extent practicable. TRICARE adopted the
    Outpatient Prospective Payment System in order to comply with this
    statutory requirement to reimburse like Medicare. However, TRICARE did
    create a General Temporary Military Contingency Payment Adjustment
    (GTMCPA) for those hospitals that served a disproportionate share of
    Active Duty Service Members and Active Duty Family Members.
        The process to apply for a GTMCPA is transparent and available to
    the public through the TRICARE web site at http://
    manuals.tricare.osd.mil/pages/Search.aspx, as well as, education from
    the facility's respective Manage Care Support Contractor (MCSC). There
    are no bureaucratic challenges preventing facilities like Carthage from
    navigating through the process.
        Per the TRICARE regulation, 32 CFR 199.14, a GTMCPA is ``available
    at the discretion of the Director. . . .'' Carthage submitted their
    initial GTMCPA request in September 2013. DHA provided a response in
    December of 2013. While there are no official appeals of the GTMCPA
    decision, TRICARE has shared detailed claims data on which the
    decisions are based with hospitals who fail to meet the GTMCPA
    criteria. DHA met with Carthage and the MCSC in January 2014 to resolve
    any discrepancies. In addition, on two separate occasions DHA shared
    the detailed claims data with Carthage and provided an opportunity for
    feedback. There was no communication/feedback from Carthage for a time
    period of approximately 18 months.   [See page 12.]
        Admiral Bono. The process is very transparent. It is outlined in
    the TRICARE Reimbursement Manual (TRM) that is available to the public.
    The starting site for the TRM is at http://manuals.tricare.osd.mil/
    pages/Search.aspx.
        Hospitals who serve a disproportionate share of Active Duty Service
    Members (ADSMs) and Active Duty Family Members (ADFMs) may qualify for
    the discretionary payment. The exact numbers/requirement is found in
    the TRM language. Upon request by the facility, TRICARE will provide
    detailed claims data that was used to evaluate the hospital's GTMCPA
    request. Further, the TRICARE Regional Office also serves as a liaison
    between the requesting facility and the MCSC in the event the facility
    expresses concerns, has questions regarding the process, and needs any
    assistance regarding the qualifying criteria or their application for a
    GTMCPA. The hospital has assistance from start to finish if they have
    questions about the process.   [See page 12.]

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                  QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                               February 24, 2016

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                      QUESTIONS SUBMITTED BY MR. O'ROURKE

        Mr. O'Rourke. During questioning, the Honorable Jonathan Woodson
    stated that patient capacity at military treatment facilities (MTF) is
    market-dependent and differs based on whether the care is inpatient or
    outpatient in nature. Based on this, we have the following questions:
    First, what is the current inpatient capacity for each MTF?
        Secretary Woodson. The Army has 1,810 current beds. Army inpatient
    capacity by MTF is provided below:

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     Navy Medicine currently has 842 beds. Navy inpatient
    capacity by MTF is provided below:

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     Air Force currently has inpatient capacity of 664
    beds, which includes staffing 166 beds at Walter Reed and San Antonio
    Military Medical Center. Air Force inpatient capacity (staffed beds) by
    MTF is provided below. The second columns reflects the results of the
    Air Force's staffed beds'' analysis. Also, highlighted in ``green'' are
    the non-AF MTFs where the Air Force Medical Service staff beds and the
    quantity. The analysis is based upon the AFMS FY17 PB MPPT file.

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     Current NCR MD inpatient capacity is 390 beds.
    The NCR MD current bed capacity by MTF is listed below.

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     Mr. O'Rourke. How do you expect the inpatient capacity to
    change for each MTF in the event that the Department of Defense's
    proposed FY 2017 TRICARE reforms were to be implemented in their
    entirety?
        Secretary Woodson. Army: The Army expects capacity to decrease by
    150 beds in FY17. Three MTFs are transitioning to outpatient
    facilities, representing a loss of 69 beds (Ft Knox, Ft Sill and Ft
    Jackson). Whether additional capacity will be available for new
    patients will be based on a confluence of both the Choice Act (pulling
    people away from the MTFs) and TRICARE Reform, which if approved,
    financially incentivizes beneficiaries to seek care at the MTFs.

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     Navy: Since the FY17 TRICARE reforms would primarily impact the
    delivery of private sector care, Navy Medicine anticipates minimal
    effects to MTF inpatient capacity. MTFs will continue to utilize its
    eligible beneficiary population enrolled in a managed care option,
    self- managed option, or TRICARE for Life, to optimize its inpatient
    and outpatient capacities to sustain critical medical skills and
    capabilities. The proposed reforms attempt to support military
    readiness and funnel beneficiary care to the MTF while balancing
    beneficiary choice, access to care, and cost containment. The proposal
    expands choice for non-active duty beneficiaries to choose a health
    benefit option that best meets their needs. The co-pay/cost-sharing
    structure is also modified to provide incentives to select the managed
    care option and highlights the MTF as a preferred place of care.
    Implementing an enrollment fee to participate in TRICARE for Life will
    also have minimal impact to MTF inpatient capacity and can continue to
    utilize the TRICARE Plus program and other recapture of care mechanisms
    to support military medical staff readiness and training.
        Air Force: Enacting PB17 would not change inpatient capacity at AF
    MTFs. If fully enacted, the plan would maintain current workload levels
    at our facilities by preserving TRICARE Prime as a healthcare option
    for retirees and their family members. The plan would also continue the
    practice at not charging copays at for care provided at our MTF to
    incentivize patients to seek their care at the military facility.
        DHA (NCR MD): PB17 should not impact inpatient capacity at Walter
    Reed National Military Medical Center (WRNMMC) or Fort Belvoir
    Community Hospital (FBCH)
        Mr. O'Rourke. In what MTFs does the capacity currently exist to
    potentially accept non-TRICARE Veteran's Affairs patients?
        Secretary Woodson. DHA: Currently 97 MTFs (hospitals and clinics)
    provide care to (have capacity for) VA patients under DOD/VA sharing
    agreements. Further, Army Medical Winn Ft. Stewart, GA, and Air Force
    Medical Travis, CA, are examples of 2 hospitals that have provided VA
    patients mental healthcare through the sharing agreement program. FY17
    TRICARE reforms are not the only influencers of VA patients being seen
    in DOD hospitals. VA is experiencing a budget shortfall in non-VA
    purchased care funding currently used to pay for DOD hospitals'
    provided care. Due to this shortfall, VA Directors are making the
    choice to re-direct VA patients downtown. VA is not authorized to use
    Choice dollars to pay for DOD provided care unless DOD MTFs become VA
    Choice (network) providers or legislative relief is given to allow
    Choice dollars to pay for DOD care. Since implementation of the
    Veterans Choice Act and VA's funding shortfalls in accounts used to pay
    DOD MTFs, DOD saw a decrease of referrals to DOD in summer 2015 and in
    2016.
        Army: The Army currently provides capacity to and $50M in
    inpatient, outpatient and/or specialty care to VA beneficiaries. The
    Army does not anticipate having additional capacity for VA patients
    beyond current levels. If the VA pulls its referrals from Army MTFs,
    similar to what is occurring in Air Force and Navy MTFs, inpatient and
    specialty care capacity will be available, which there Army will fill
    by inviting DOD retirees back into the MTFs. Army MTFs currently
    providing care to VA beneficiaries are:
          Tripler AMC
          William Beaumont AMC
          Eisenhower AMC
          Basset ACH
          Womack AMC
          McDonald AHC
          Ireland ACH (Transitioning to an AHC in FY17)
          Keller ACH
          Martin ACH
          Moncrief ACH (Transitioning to an AHC in FY17)
          Reynolds ACH (Transitioning to an AHC in FY17)
          Lyster AHC
          Evans ACH
          Gen Leonardwood ACH
          MEDDAC Korea
          Guthrie AHC
          Landstuhl RMC
        Navy: Excess capacity to see VA patients varies based on Navy MTF:
          Navy MTFs seeing the most VA patients include Naval
    Medical Center San Diego, Naval Medical Center Portsmouth, U.S. Naval
    Hospital Guam, Naval Hospital Pensacola and have capacity in clinical
    specialties that support graduate medical education and/or readiness.
          Within the last year, Naval Hospital Bremerton and Naval
    Hospital Lemoore began seeing VA patients.
          Naval Hospital Camp Lejeune treats small amount of VA
    patients, while Naval Hospital Camp Pendleton and Naval Hospital
    Jacksonville have expressed interest and explored the topic, but not
    yet signed agreements.
          Naval Health Clinic Charleston, Naval Hospital Beaufort,
    and Naval Branch Health Clinic Key West have entered joint ventures
    where the Navy provides space and equipment and VA brings in providers
    and staff who then sees both VA and DOD beneficiaries. Workload
    generated at joint venture sites are recorded in each agency's
    respective Electronic Health Record.
        Air Force: Currently there are 48 active DOD/VA sharing agreements
    involving 6 inpatient and 20 ambulatory care facilities. Included in
    the 48 are 9 Master Sharing Agreements that cover all available
    services at those sites allowing them to see veterans throughout the
    available clinical services based on capacity and capability. With the
    exception of the ambulatory surgical centers most of the sharing
    agreements at the 20 ambulatory care facilities are for education and
    training, laundry services, or other administrative requirements.
    Available clinical services at most ambulatory care facilities are
    generally for primary/family care and rarely include specialty care
    clinics. Based on the availability of clinical services, there are at
    least nine sites that provide significant levels of care to the VA and
    have capacity to see more. The nine sites include: 10th Medical Group
    (MDG) at the USAF Academy, 59 MDG (San Antonio Military Medical Center)
    at Lackland AFB, 633 MDG at Joint Base Langley-Eustis, 673 MDG at Joint
    Base Elmendorf-Richardson, 60 MDG at Travis AFB, 81 MDG at Keesler AFB,
    96 MDG at Eglin AFB, 88 MDG at Wright- Patterson AFB, and 99 MDG at
    Nellis AFB. The seventeen other sharing agreement sites may see small
    numbers of veterans but have only minimal capacity to see more with the
    exception of 779 MDG at Joint Base Andrews who appears to have
    additional capacity as an ambulatory surgical center.
        DHA (NCR MD): Both WRNMMC and FBCH currently provider care and have
    capacity to accept non-TRICARE Veteran's Affairs patients. NCR MD is
    actively engaged with VISN 5 to best determine how NCR MD facilities
    can assist the VA in meeting demand for specialty care and inpatient
    services.
        Mr. O'Rourke. Highlight specifically as it pertains to capacity in
    mental healthcare treatment.
        Secretary Woodson. Army: The Army does not anticipate having
    additional mental health inpatient capacity for VA beneficiaries
        Navy: Currently, within Department of the Navy, there is limited
    excess capacity in mental health that could be offered to VA
    beneficiaries based on current access to care priorities.
        Air Force: Information is provided on two MTFs participating in the
    current DOD/VA agreement:
          Travis--Currently capped at 8 beds due to a temporary
    nurse shortage (anticipate expanding to full 12-bed capacity by early
    Apr 2016). There is a VA sharing agreement already in place. Capacity
    would not change without manning solutions, particularly provider
    staff. Demand exceeds current capacity. Travis accepts AD and VA
    patients on a first come, first served basis.
          JBER--Capacity of 10 beds; limited by current provider
    manning. This capacity exceeds current demand of 2-3 inpatients;
    therefore, potential exists to provide beds to VA patients. This is
    also a DOD-VA Joint Venture hospital.
        DHA (NCR MD): In the NCR MD, there is little excess capacity in
    mental health available and would need to be prioritized based on
    current beneficiary demand.
        Mr. O'Rourke. What, if any, additional facilities would have this
    capacity in the event that the Department of Defense's proposed FY 2017
    TRICARE reforms were to be implemented in their entirety?
        Secretary Woodson. Army: Enacting PB17 would not change inpatient
    mental health capacity at Army MTFs
        Navy: Should the proposed FY17 TRICARE reforms be implemented, Navy
    Medicine anticipates very little impact to current mental health
    capabilities and capacity. There are currently 62 Navy MTFs with
    dedicated outpatient or inpatient mental health services.
        Air Force: Enacting PB17 would not change inpatient mental health
    capacity at AF MTFs.
        DHA (NCR MD): Implementing PB17 would not have a significant impact
    on NCR MD capacity.