[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


 NEW NAMES, SAME PROBLEMS: THE VA MEDICAL SURGICAL PRIME VENDOR PROGRAM

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

                                HEARING

                               BEFORE THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                       THURSDAY, DECEMBER 7, 2017

                               __________

                           Serial No. 115-40

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       

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                     COMMITTEE ON VETERANS' AFFAIRS

                   DAVID P. ROE, Tennessee, Chairman

GUS M. BILIRAKIS, Florida, Vice-     TIM WALZ, Minnesota, Ranking 
    Chairman                             Member
MIKE COFFMAN, Colorado               MARK TAKANO, California
BRAD R. WENSTRUP, Ohio               JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American    ANN M. KUSTER, New Hampshire
    Samoa                            BETO O'ROURKE, Texas
MIKE BOST, Illinois                  KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine                J. LUIS CORREA, California
NEAL DUNN, Florida                   KILILI SABLAN, Northern Mariana 
JODEY ARRINGTON, Texas                   Islands
JOHN RUTHERFORD, Florida             ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana              SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto 
    Rico
                       Jon Towers, Staff Director
                 Ray Kelley, Democratic Staff Director

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 
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unintentional errors or omissions. Such occurrences are inherent in the 
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                           C O N T E N T S

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                       Thursday, December 7, 2017

                                                                   Page

Overcoming PTSD: Assessing VA's Efforts To Promote Wellness And 
  Healing........................................................     1

                           OPENING STATEMENTS

Honorable David P. Roe, Chairman.................................     1
Honorable Timothy J. Walz, Ranking Member........................     3

                               WITNESSES

Mr. Ricky Lemmon, Acting Chief, Procurement and Logistics 
  Officer, Veterans Health Administration, U.S. Department of 
  Veterans Affairs...............................................     5
    Prepared Statement...........................................    32

        Accompanied by:

    Mr. Phillip Christy, Acting Executive Director, Office of 
        Acquisition Operations, U.S. Department of Veterans 
        Affairs
Ms. Shelby Oakley, Director, Acquisition and Sourcing Management, 
  U.S. Government Accountability Office..........................     6
    Prepared Statement...........................................    34
Mr. Roger Waldron, President, The Coalition for Government 
  Procurement....................................................     8
    Prepared Statement...........................................    41

                       STATEMENTS FOR THE RECORD

AdvaMed..........................................................    57

                 MATERIAL SUBMITTED FOR FOR THE RECORD

GAO Powerpoint Chart.............................................    60

 
 NEW NAMES, SAME PROBLEMS: THE VA MEDICAL SURGICAL PRIME VENDOR PROGRAM

                              ----------                              


                       Thursday, December 7, 2017

            Committee on Veterans' Affairs,
                    U. S. House of Representatives,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 334, Cannon House Office Building, Hon. David P. Roe 
[Chairman of the Committee] presiding.
    Present: Representatives Roe, Bilirakis, Coffman, Wenstrup, 
Bost, Poliquin, Dunn, Arrington, Higgins, Bergman, Banks, Walz, 
Takano, Kuster, Correa, Sablan, Peters.

          OPENING STATEMENT OF DAVID P. ROE, CHAIRMAN

    The Chairman. Good morning. This hearing will come to 
order. I want to welcome everyone today to the hearing 
examining VA's Medical Surgical Prime Vendor, or MSPV Program.
    And before we get started, I want to just take a moment and 
remember what happened 76 years ago today at Pearl Harbor in 
Hawaii, where 2,403 Americans were killed, 1,178 were wounded 
during the surprise attack on Pearl Harbor. And I had family 
that--in my family that served there and Hawaii immediately 
after that. So it is what brought America into World War II. So 
I just wanted to take a moment and remember that, those lost 
Americans. And I am sure many of you visited the memorial there 
and it is really a very moving experience to do that.
    I will continue now. Our MSPV is a system of contracts 
consisting of suppliers and what are called prime vendors that 
VA has used for over a decade to purchase and distribute 
medical and surgical supplies in a just-in-time inventory 
system. The prime vendors handle all logistics in their 
assigned regions to get supplies to the medical center door. 
The suppliers provide the items selected by VA to the prime 
vendors.
    Many of you may remember our earlier hearing on the issue 
in September of 2016. At that time, VA was about to launch the 
MSPV Next Generation or NG Program. Whereas the older version 
of MSPV had never sought to limit the medical and surgical 
supplies that could be purchased, it never saved very much 
money either. NG is an aggressive attempt to simplify the 
supply chain and establish a medical surgical formulary 
containing a vastly reduced universe of products, initially 
600,000, now roughly 10,000.
    The goal was to leverage VA's buying power with fewer 
suppliers and items to achieve maximize savings. It was and 
remains a worthy goal, but the medical surgical formulary 
represents a huge clinical cultural and operational shift.
    Last September, we expressed our reservations that the 
formulary and its underlying supplier contracts were far from 
ready. The timeline seemed like a stretch, clinical involvement 
seemed tentative and belated at best, and only a handful of 
competitive contracts were in place. Nonetheless, VA launched 
MSPV NG last December and that launch was rocky. The formulary 
omitted many necessary products and at the same time included 
more than a few erroneous items. VA recognized this and decided 
to keep the old MSPV program in place alongside NG through 
April.
    Since then, physicians, surgeons, and nurses have been put 
on teams and tasked to review the formulary, which was created 
with little clinical input. At one point, a group of clinicians 
was essentially put in a room for a week to concentrate on the 
task, but the formulary remains troubled. It seems the early 
decision to concentrate on every group of medical and surgical 
supply at one time continues to poison the effort.
    Meanwhile, a large number of sole-source supplier contracts 
were put in place to launch the formulary. They were intended 
to be short-term and replaced with competitive contracts. The 
competitive contracts remained elusive and VA finds itself 
continuously awarding new sole-source contracts to replace the 
old ones as they expire. The prices remain high and the 
contracting officer's time is consumed by nonproductive 
activities.
    In the midst of these problems with NG, VA recently 
unveiled a new concept called MSPV 2.0. It entails outsourcing 
everything, including developing a formulary for every VHA 
veterans facility to one all-powerful prime vendor. While I 
absolutely believe there are many functions the private sector 
is best suited to perform, the 2.0 model as it has been 
described does not seem to exist in the commercial market. Some 
things like deciding which medical surgical products it will 
buy are inherently the responsibility of a health care 
organization. I am also skeptical that given VA's difficulty in 
coordinating formulary decisions among all its practitioners an 
external company would have a better experience.
    MSPV has created nervousness and frustration among VA 
employees, and many of the prime vendors and suppliers for 
years now, but the volume of complaints has lately become 
overwhelming.
    At the Committee's request, GAO completed a wide-ranging 
report after reviewing the program for roughly a year, finding 
continual missteps and difficulties. The Coalition for 
Government Procurement has also submitted a white paper to VA 
with recommendations.
    I hope through our discussion today we can identify a 
viable path forward and make MSPV work and stop repeating the 
same mistakes. Whether we call it MSPV Next Generation, 2.0 or 
whatever, it has to make operational sense, work for 
clinicians, and be timely and safe for veterans.
    I now yield to Ranking Member Walz for his opening 
comments.

         OPENING STATEMENT OF TIM WALZ, RANKING MEMBER

    Mr. Walz. Thank you, Mr. Chairman, and I concur with much 
of the Chairman's statement. I would also like to thank him for 
pointing out today Pearl Harbor. My favorite great uncle, 
Morris Ryeman [ph], was a fireman in the Navy in Pearl Harbor 
and it was a source of pride and family oral history about what 
he did there. So, thank you for that.
    Some of you have heard me, those who have been here for a 
long time, for the last 11 years I had a saying that I am the 
VA's great advocate, but when need be, I will be their harshest 
critic. I will be in the harshest critic mode today.
    This program was set up for failure from the very beginning 
due to a lack of commitment and prioritization by senior VA 
leadership. It appears to be nearly incompetent in how it was 
done. If I were a conspiracy theorist, I would believe this is 
an intentional way to undermine the VA to force outsourcing and 
privatization. It looks that bad, especially when other 
hospital systems have been able to do it. VA knew about the 
best practices and chose to ignore them. And I want to be very 
clear about that: it appears that the choices were made to 
ignore what needed to be done.
    VA's Medical Surgical Prime Vendor Program is clearly worse 
than it was 2 years ago. I don't know how VA leadership at its 
highest levels thought an approach to managing this program 
would be successful.
    As the Chairman said, the previous formulary allowed 
forwarding hundreds of thousands of items by Federal supply, 
now the formulary contains 10,000 items. That in itself might 
not be a note of concern, but what the Chairman also said was 
they don't meet the needs of the providers at the medical 
centers. They weren't asked. This has forced medical centers to 
buy supplies with purchase cards through emergency contracts at 
added cost to taxpayers.
    And this afternoon we will talk to the Secretary about 
needing more money for the VA; that conversation cannot happen 
in a vacuum. Clinicians and medical centers know their supply 
needs. Large hospital systems have done this for decades. When 
you think about the program this way, it is simple in 
comparison to requiring something more complex like an 
electronic medical record.
    Think about that. We are going to be asked to spend $16 
billion over nearly a decade on the Electronic Health Record 
Modernization Program. A project of this size with a 
requirement like that to be interoperable with other health 
care systems like DoD and community providers has never been 
done. I certainly support that decision, I have advocated for 
it for years, but VA's failure to successfully implement the 
medical supply acquisition programs is simple in comparison to 
what we are going to be up against. It does not give me a whole 
lot of confidence that the VA is capable of successfully 
undertaking that complex acquisition of size and scope.
    This all points to a leadership failure. VA's contracting 
and logistics organizations do not have permanent leadership. 
The MSPV Program Office lacks a leader, it is only half-
staffed. President Trump's hiring freeze prevented an acting 
director from filling in.
    I want to be clear, there were years here that every single 
VA person who sat there was responsible and was grilled on 
everything that the President of the United States did. We have 
not taken that mode. We have taken a collaborative mode to 
getting things done, but I will have to tell you, that 
honeymoon is nearly over. The logistics contract program 
officers do not communicate and coordinate their efforts or 
work with stakeholders. The program has never had a strategic 
plan.
    This program was set up to fail and I want to hear today 
why that is not the case. VA has the potential to save at least 
$150 million, if it is done right. VA has enormous buying power 
it can leverage to negotiate lower prices by buying in bulk. 
Instead, it has caused more of a burden for providers. 
Contracting and logistics staff made it difficult for suppliers 
to do business with VA.
    VA could have done this properly by getting buy-in from its 
doctors, nurses, and clinical staff, the employees who provide 
care to veterans. Instead, VA cut corners and incorrectly 
assumed that orders of previous supply purchases met the needs. 
Medical centers were left in the dark about the formulary 
rollout and suppliers chose not to participate because doing 
business with VA was vastly different from how the medical 
supply industry does under industry standards. VA had to cancel 
the rest of the contract solicitations because of low supplier 
participation.
    VA knows what practices and best practices of their 
hospital systems follow. Instead, it overestimated its ability 
to successfully implement the program, and did not provide the 
leadership, staffing, and resources needed to make the 
formulary a success. Without Government's leadership and buy-in 
from the stakeholders, VA's programs will continue to fail.
    I want a commitment today from VA that it will take 
immediate action to turn this program around. This program 
needs bold leadership. A lot of work will need to be done to 
get provider buy-in. The same old way of managing won't work.
    I would suggest this: how about start small? Find one 
category of supplies and use it as a beta test through your 
process to developing the formulary. Involve the providers and 
medical centers, solicit feedback from suppliers, include other 
stakeholders, apply lessons learned to the next category of 
supplies, and work to build the formulary right. This is 
Project Management 101 and it is also what DoD told you to do.
    This Committee is committed to ensuring VA is capable of 
providing world-class care to veterans and we are committing to 
helping VA get this effort right. And I want to thank the 
Chairman for once again being dogged on this issue, continuing 
to follow up, and making it clear that anything less than 
world-class won't be accepted.
    I yield back.
    The Chairman. I thank the gentleman for yielding.
    I would now like to welcome our panel who are seated at the 
witness table. On our panel we have Mr. Ricky Lemmon, the 
Acting Chief Procurement and Logistics Officer for the Veterans 
Health Administration. Welcome. He is accompanied by Mr. 
Phillip Christy, Acting Executive Director of the Office of 
Acquisition Operations. Welcome.
    Finally, we have Mr. Roger Waldron, President of the 
Coalition for Government Procurement. And we also have Ms. 
Shelby Oakley, Director of Acquisition and Sourcing Management 
at GAO.
    If you would, I will ask the witnesses to stand and raise 
your right hand.
    [Witnesses sworn.]
    The Chairman. Let the record reflect that the witnesses 
have answered in the affirmative.
    Mr. Lemmon, you are recognized for 5 minutes.

                   STATEMENT OF RICKY LEMMON

    Mr. Lemmon. Good morning, Chairman Roe, Ranking Member 
Walz, and Members of the Committee. Thank you for the 
opportunity to discuss VA's Medical Surgical Prime Vendor 
Program and the related Government Accountability Office 
report.
    I am accompanied by Mr. Phillip Christy, Associate 
Executive Director of the Strategic Acquisition Center.
    VA is committed to providing our veterans the best care 
available, while being good stewards of taxpayers' dollars. 
Part of meeting these commitments is making sure that our 
medical centers have the right supplies and equipment to 
deliver the care our veterans need.
    In the mid-1990s, VA eliminated its in-house depot system 
and converted to a commercially-sourced med-surge prime vendor 
program to provide medical and surgical supplies.
    The primary source of supplies for previous generations of 
MSPV contracts were the Federal Supply Schedules. This approach 
resulted in our hospitals having access to a clinically viable 
selection of supplies, but this operational model did not 
facilitate clinical product decisions on a national level that 
would allow VHA to leverage its purchasing power. Adoption of 
clinically-driven strategic sourcing is VA's objective under 
the existing med-surge prime vendor contract and any future 
med-surge prime vendor contracts.
    The current MSPV contract was conceived in part to leverage 
VA enterprise-wide purchase volume in order to drive lower 
prices and improve product quality through the development and 
use of a national catalog of products. While VA is committed to 
providing our veterans the best care available, we must do so 
while also being good stewards of taxpayers' dollars. To 
achieve this, we must ensure that our medical centers have the 
right supplies and equipment to deliver the care our veterans 
need.
    In 2016, VA announced the award of four MSPV contracts. 
Product prices were primarily established by negotiated blanket 
purchase agreements against FSS contracts, VA national 
indefinite delivery contracts, and local contracts to support 
veterans integrated service networks. VA has decided to move 
forward with either modifying the current contracts or 
development of replacement contracts to rectify many of the 
issues identified by the GAO report.
    An acquisition plan has not yet been finalized for 
replacement of MSPV. VA is exploring a different approach to 
MSPV where potential prime vendors can propose a full catalog 
of medical and surgical products. This would depart from the 
current approach where individual contracts are negotiated with 
each supplier.
    The potential benefits of MSPV replacement, known as 2.0, 
would be a more robust catalog of items than we have today and 
lower prices. Additionally, the administrative resources and 
time required to negotiate hundreds of individual contracts 
would be reduced if VA only negotiated with the prime vendors.
    There have been multiple meetings with industry leaders to 
obtain feedback regarding this approach to MSPV 2.0 and that 
feedback is currently being considered. Feedback will also be 
obtained from VA clinicians before any final decisions are 
made.
    This is why our efforts to make the current MSPV contracts 
more robust are important. We want to make sure the needs of 
our medical centers are met while we develop a better approach 
to MSPV. In GAO's recently released report, they made ten 
recommendations concerning our current MSPV management 
processes and VA has already begun to institute each of them.
    VA seeks to continue to provide our veterans with the 
timely care they have earned and deserved, at the same time we 
are seeking new and innovative ways to be more responsible 
stewards of the taxpayers' dollars. We are grateful to GAO for 
their report and to the Committee for their commitment to 
helping the Department improve.
    I look forward to responding to any questions you may have.
    Thank you.

    [The prepared statement of Mr. Lemmon appears in the 
Appendix]

    The Chairman. Thank you.
    Ms. Oakley, you are recognized for 5 minutes.

                   STATEMENT OF SHELBY OAKLEY

    Ms. Oakley. Good morning, Mr. Chairman, Ranking Member 
Walz, and Members of the Committee. Thank you for having me 
here today to discuss VA's implementation of its Medical 
Surgical Prime Vendor Next Generation Program, which I will 
call NG.
    NG is VA's primary means for purchasing the supplies to 
meet the needs of its 170 medical centers that serve almost 7 
million veterans. Some of the goals of NG are to standardize 
requirements for greater clinical consistency, leverage VA's 
substantial buying power to achieve cost avoidance, and provide 
greater efficiency in supply chain management.
    Effective supply chain management is an essential element 
of delivering quality care to veterans. Recently, the VA IG 
found supply management issues at the D.C. VA Medical Center 
that posed risks to patient care. Our past work suggests that 
VA's confusing and outdated procurement framework compounds 
issues like these and leaves the department without a sound 
basis for effective and efficient procurement activities to 
support patient care.
    As the Chairman mentioned, we released a report a few days 
ago on NG. We found that VA underestimated the significance of 
the change and lacked an overarching strategy, stable 
leadership and the workforce capacity that, if in place, could 
have facilitated buy-in for the change. These shortcomings, 
among others, have kept VA from achieving the goals of the 
program to date.
    Today, I will discuss three topics from that report: first, 
the challenges that VA faced in setting up NG; second, the 
effect these challenges had on the medical centers' use of the 
program; and, third, VA's efforts to address shortcomings in 
its future plans.
    First, I would like to point to a graphic that you might 
have seen in our report. It identifies practices that leading 
hospital networks follow in managing their supply chains which 
have resulted in significant cost savings and improved patient 
care. These practices include prioritizing categories of 
supplies based upon the likelihood of cost savings, working 
closely with medical staff to identify the right supplies to 
buy, and awarding competitive contracts to achieve the best 
prices.
    VA did not follow these same practices when implementing 
NG. It did not prioritize which categories of supplies to focus 
on first or work closely enough with medical staff. For 
example, VA developed its formulary based almost exclusively on 
flawed data on prior purchases and not on input from medical 
staff. This flawed approach for determining what items to buy 
led VA to take actions directly in conflict with the goals of 
the program and the practices of leading hospitals. For 
example, VA resorted to noncompetitive agreements for 79 
percent of the items on the formulary to meet its December 2016 
date to get NG up and running.
    Given how far VA strayed from leading practices in setting 
up the formulary, it should come as no surprise that the items 
on the formulary did not meet the needs of the medical centers 
or enable the Department to leverage its significant buying 
power.
    VA has taken some steps to address the shortcomings with 
the rollout of NG, but continues to struggle with 
implementation. Specifically, VA included medical staff in its 
second round of requirements development. However, it relied on 
just a small group of medical staff to review more than 4,000 
products in 1 weeks' time representing almost half of the 
formulary. This approach limited their ability to standardize 
requirements for the formulary.
    VA is likely changing its approach to MSPV yet again. It is 
considering hiring a prime contractor not only to provide 
distribution services, as they do now, but also to develop and 
manage the formulary. Many details remain unclear with VA's new 
approach, but it wouldn't be safe for VA to assume that simply 
changing its approach will solve the challenges it encountered 
thus far.
    We recommended several steps that VA could take to overcome 
some of these challenges such as developing and communicating a 
consistent strategy for NG, prioritizing efforts by supply 
category, involving medical staff every step along the way, and 
ensuring stable leadership at all levels of the effort. NG 
could save both money and enhance services to veterans, but 
only if VA can get the execution right. Until VA takes steps to 
address some of the challenges we identified in our report, it 
will continue to struggle with implementation.
    Mr. Chairman, Ranking Member Walz, this concludes my 
remarks. I am happy to answer any questions you have.

    [The prepared statement of Ms. Oakley appears in the 
Appendix]

    The Chairman. Thank you, Ms. Oakley.
    Mr. Waldron, you are recognized for 5 minutes.

                   STATEMENT OF ROGER WALDRON

    Mr. Waldron. Chairman Roe, Ranking Member Walz, and 
Committee Members, thank you for the opportunity to appear 
before you today.
    The Coalition is a non-profit association of small, medium 
and large business concerns representing more than $145 billion 
in annual Government sales, including more than $12 billion in 
medical surgical products and pharmaceuticals supporting 
veterans' health care. Today my remarks summarize my written 
testimony, which I ask be included in the record.
    The Prime Vendor Program serves as the brains of the VA's 
logistic operations because it touches essentially all critical 
VA health care operations and contractors. It is responsible 
for developing and communicating the med-surge formulary and 
thus serves as a bridge connecting requirements holders, the 
VISNs, hospitals, and health care providers serving veterans, 
and the VA procurement professionals and contractors.
    Given this critical role, it is imperative that the Prime 
Vendor Office be led and managed by clinicians. A clinical-led 
program office is a fundamental commercial best practice and it 
is our understanding that the MSPV Program is the only medical 
supply chain in the VA and DoD that currently is not led by 
either clinicians or medical supply chain experts.
    This structure has contributed increased inefficiencies and 
generated medical care concerns. Our members are seeing an 
incomplete formulary, which causes supply shortages, leaving 
facilities with no choice but to purchase items on the open 
market, often at sub-optimal prices.
    Clinical leadership will result in well-defined 
requirements, thereby avoiding these problems and supporting 
delivery of best-value health care. Without this leadership, 
many of the challenges of the Prime Vendor Program will 
continue into the next generation with strategies and decisions 
that too often are driven primarily by acquisition process 
needs rather than veterans' health care needs.
    Turning to the next iteration, the MSPV 2.0 essentially 
envisions outsourcing the program to a single super prime 
vendor that would determine what the agency buys and how the 
items sought will be sourced. The super prime vendor would 
develop the formulary, manage and distribute items, administer 
subcontracts, and ensure quality control. Nationwide electronic 
ordering and invoicing would be facilitated using the super 
prime vendor's e-commerce platform. Coalition members report no 
comparable commercial model that delivers the extensive scope 
of management services and med-surge items contemplated by 2.0.
    Although our members support improving the Prime Vendor 
Program, the 2.0 initiative has generated significant 
confusion. With the needs of more than 9 million veterans in 
the balance, the Coalition believes that prior to any decision 
to shift to a new commercially untested platform, the VA should 
undertake a thoroughly vetted and methodical approach with 
ongoing evaluations over time to ensure success.
    We also note that the 2.0 vision would give rise to an 
inherent business conflict as one company would be responsible 
for both developing the formulary and delivering the items 
listed on it. The Coalition is concerned that this structure 
risks incentivizing contractor formulary decisions based on 
vendor financial incentives rather than best interest of 
patients.
    Similarly, the current proposal stipulates that cost 
savings will be a significant objective for the 2.0 program. If 
this objective translates into low cost technically acceptable 
veterans' care, however, it would be inconsistent with the VA's 
mission, the expectation of our veterans, and the interests of 
the American people. For this reason, Coalition members also 
believe that the VA must clearly assert that value, not low 
price, is the objective when acquiring medical equipment and 
supplies for our Nation's veterans.
    Finally, we are concerned that by focusing on a single-
vendor approach, the 2.0 proposal fails to adequately leverage 
competition necessary to bring innovation to our veterans' 
health care. Further, 2.0 places no discernible checks on the 
super prime vendor; rather, it cedes inherently governmental 
discretion and authority to a private entity. From a program 
perspective, vesting a single contractor with too much 
authority has negative implications for Government and industry 
regarding market power, the Government's ability to replace a 
non-performing prime vendor, and the ability of the private 
sector, including service-disabled veteran-owned firms, to 
either contract with the VA directly or be subcontractors to 
the super prime vendor.
    The Coalition believes that there is a path to success 
here, starting with assuring that the Prime Vendor Program 
Office is led and managed by clinicians; that inherently 
governmental decisions are not outsourced to a super prime 
vendor; that conflicts of interest are avoided; and that market 
competition is leveraged appropriately to access innovation for 
veterans.
    Chairman Roe and Ranking Member Walz, thank you again for 
the opportunity to address the Committee, and I look forward to 
answering questions.

    [The prepared statement of Mr. Waldron appears in the 
Appendix]

    The Chairman. Thank you, all of you all, and for remaining 
within the 5-minute timeframe. I will try to do the same and I 
will start the questioning.
    And just sort of open that large medical centers do this 
all the time. This is not putting the Voyager III up. This is 
how we as clinicians are able to practice every day. The 
vendors and the hospital provides the products and tools 
necessary for us to provide care and do our jobs.
    Just the first question, Mr. Lemmon, has the VA had cases, 
surgical cases cancel because of a lack of needed equipment?
    Mr. Lemmon. I probably have to take that question for the 
record. I do believe there has been a very small number, but I 
would want to research that and get back with you.
    The Chairman. That's fair enough. I know we have heard that 
there have been cases cancelled.
    In my 31 years of practice, I was trying to remember as you 
all were testifying, I don't ever remember a case being 
cancelled because I didn't have the supplies I needed to do the 
case. We knew ahead of time, unless it is an emergency, and 
those cases were scheduled a week, 2 weeks, 3 weeks, a month 
ahead. The surgical team and the hospital team went right ahead 
and made sure I had every bit of equipment. I have had the 
surgical nurses call me and say, Dr. Roe, do you need this, 
this, and this before this procedure, and we would go over that 
ahead of time.
    And that is why clinicians have to be involved in this, 
because they are the only ones that know when they are in those 
situations what tools they need. And I don't expect someone 
else to know that, but I do expect them to ask me, so that they 
can--that you in the supply chain can provide it for me.
    I think that the other question I have, the second question 
I have is, who decided--and I am not necessarily saying this is 
bad, but who decided to go with a program that has never been 
done with an organization that doesn't exist?
    Mr. Lemmon. Well, that decision, it has not been made.
    The Chairman. So, the 2.0 is not--I mean, I am not saying 
it is bad, I am just asking the question.
    Mr. Lemmon. Yeah, it is a concept that is being explored, 
but there has not been any decision to go forward with 2.0.
    The Chairman. Okay. So during this exploration, what 
exactly is VA doing to--because this is critical for patient 
care, there is no question, and I know there is a lot of work 
that goes on behind the scenes before I show up gowned and 
gloved in an operating room, getting ready to make an incision.
    So is the system that we have gone to, we have gone from 
500,000 different items on there to 10,000 or so items on 
there, are the clinicians, the nurses, the providers being 
given in a timely fashion the tools they need to do their job?
    Mr. Lemmon. Generally, the answer is yes, but because of 
the limited formulary it is not being done nearly as 
efficiently as it could be. So, there is an imperative on the 
part of our office working with clinicians and the strategic 
acquisition center to make the formulary more robust.
    The Chairman. I know how--and, Ms. Oakley, I want to ask 
you this question, because my time is running out, can you 
explain how the formulary was developed and ultimately who 
makes the decision about who is on there? That is Ms. Oakley.
    Ms. Oakley. Sure. As I understand it, VA began the 
formulary development effort by running what is called a spend 
analysis on purchase data, supply purchase data. And 
documentation that I have seen indicates that this was deemed 
sufficient to have clinical input, because the physicians and 
clinicians voted with their dollars by making prior purchases. 
Unfortunately, what wasn't recognized was that this data wasn't 
the best data to use and it didn't reflect all the things that 
the medical centers needed to use on a daily basis.
    And so that provided the basis of the initial formulary and 
the logistics office began writing requirements based upon that 
spend analysis with limited input from clinicians. And what 
resulted was more manufacturer-specific requirements than 
general requirements that more than one manufacturer could 
meet.
    The Chairman. So this was basically built from the top 
down--
    Ms. Oakley. From the top down.
    The Chairman [continued]. --not the bottom up?
    Ms. Oakley. From the very beginning, the faulty process 
from the very beginning kind of flowed down throughout all of 
the subsequent actions that impacted how useful the formulary 
was.
    The Chairman. This would have taken some time, but if I had 
been building that model, I would have done it just the 
opposite. I would have gotten that information, but I would 
gone down to my clinicians and said, what do you need to do 
your job? On the nursing floor and whatever. And then I would 
have built it up this way medical-center-by-medical-center and 
then seen how that data meshed.
    Would that seem reasonable?
    Ms. Oakley. That is in fact what we found when we talked to 
leading hospital networks is that the basis of all of their 
efforts is involving clinicians and including them from the 
very beginning as a part of the process.
    The Chairman. Thank you. My time has expired.
    Mr. Walz?
    Mr. Walz. And thank you, Mr. Chairman.
    I would like to associate myself with the Chairman's 
question about have there been delays, affected patient 
outcomes, cancelled medical procedures, or other issues to 
patient access. So if you would take questions too, I would 
like both of us to be addressed by this.
    For all the members who are new here, again, this 
Committee, we have addressed this before. And we said in here 
and I listened to the testimony a year and a half, 2 years ago, 
and the abject failure of President Obama and Secretary 
McDonald to fix this program, we were going to do something 
about it. Here we sat, it is right here.
    Now, keep in mind that the suggestion to be made is to 
allow the private sector to fix it. There is no one in the 
private sector to do this.
    So, this is our responsibility, these are questions that 
have been brought up before, this is--as I said in my opening 
statements, there is an abject failure in leadership to get 
this right. We are going to get responses back that there were 
adverse impacts on veterans, so I fully would expect the 
outrage to be equally strong as it was 2 years ago when we 
talked about this as it is today. And at this point in time, I 
think what is different is, we are going to look for some 
answers on how to fix that.
    So, if it is a lack of leadership, how come we don't have 
anybody in leadership positions in the Procurement and 
Logistics Office, Medical Surgical Prime Vendor Program office, 
and, more importantly, the Chief Acquisition Officer; how come 
that is not filled, Mr. Lemmon?
    Mr. Lemmon. Well, the Chief Acquisition Officer, that was 
filled by Greg Giddens was Acting, he just retired at the end 
of November. With the Chief Procurement and Logistics Office 
position, I know that leadership is looking at that.
    I think part of the modernization effort in determining how 
those functions would be aligned within the Department has kept 
from making a decision to permanently fill that position or 
recruit it, but it does need to happen. I have been acting for 
some time.
    We also are recruiting the program manager for our health 
care team that will oversee Prime Vendor, that announcement is 
on the street. We have had prior attempts that were 
unsuccessful to hire that position. We have also had some 
hiring freezes that we have dealt with, but--
    Mr. Walz. So what exactly does that mean? We are not 
getting supplies to people, we have veterans waiting. Did you 
just tell me one of the potential reasons is because we have a 
hiring freeze that does not allow us to fill those positions?
    Mr. Lemmon. Within our program executive office structure 
where those positions that will do this work, we have been 
impacted by a hiring freeze at the headquarters level with 
those key positions. We have attempted to recruit the Health 
Care Commodities Program Manager and that position is now being 
advertised again.
    Mr. Walz. Well, that is pretty disconcerting and I would 
hope there would be a concerted effort by this Committee to get 
to the bottom of that and to address that. It is simply not 
good enough to say we are going to cut Government freeze 
positions and get rid of them. When that initially came out, we 
had to start backing away from it. Oh, yeah, we will get the 
doctors. And then we said, well, what about the emergency room 
nurses? Oh, yeah, we will get the emergency room nurses. And 
then we said, what about the people who wash the sheets? Oh, 
yeah, we will take them off the freeze. You fall into that 
chain too. Everybody plays a role in this.
    So this lack of leadership position, I would go back, Ms. 
Oakley, with my remaining time, you said that this new approach 
won't solve the problems. We are piloting this, you heard that, 
it is not on the street yet. Is there a retool to this or is 
this the wrong approach in general of what is being described 
with the Prime Vendor, the 2.0? Or should we retool and go back 
again, as I think the Chairman clearly and I think adequately 
said we are building at the wrong direction?
    Ms. Oakley. I think fundamentally the concept of MSPV NG as 
it stands now is solid, it was the execution that fell down. So 
I am not necessarily convinced that a complete reboot of the 
approach is necessary, especially given that some of the steps 
that VA could have taken to better implement the program are, 
you know, fairly common steps: include the clinician, 
communicate a strategy, make sure everybody understands their 
role in implementing this change.
    And I think, just to comment on the leadership, this is a 
huge shift for VA to an NG program and when you are talking 
about leadership vacancies from the CAO on down to the program 
office in the height of the transition to this new program, it 
is no wonder that there wasn't a captain steering the ship at 
this point--
    Mr. Walz. Yes.
    Ms. Oakley [continued]. --and it went a little off course.
    Mr. Walz. Yes, very well said.
    I yield back.
    Mr. Bilirakis. [Presiding.] Yes, I recognize Dr. Dunn for 5 
minutes. Thank you.
    Mr. Dunn. Thank you very much, Mr. Chairman.
    Let me start out by saying that I share the outrage that 
Mr. Walz has expressed. I am a surgeon and I have worked in a 
lot of hospitals, a lot of different systems, there are so many 
errors in judgment in the implementation of this that it takes 
your breath away.
    I want to start with a concept. The concept I want to start 
with is, you may delegate authority, but you may not delegate 
responsibility. Now, that is true in the military, it is also 
true in business, and it is certainly true in surgery. You 
know, the surgeon is the captain of the ship, he can authorize 
people to help him do different things in the operation and 
around the room, but he takes responsibility for it. And that 
certainly is true in any system of business and the VA 
included.
    So, remember, please remember that when we start talking 
about these super prime vendors and prime vendors and we are 
pretending like they are the ones whose responsibility it is to 
make this system work, it is your responsibility to make it 
work, and they are set up for failure. And they also set up and 
inveigled to do things that I think were certainly odious and 
bad behavior, but maybe illegal, and I want to ask you 
specifically about that.
    It was said that some prime vendors improperly, improperly 
substituted their own products for products that were offered 
by the contracted suppliers. In this context, does improper 
mean illegal, or does it just mean odious and wrong and bad 
behavior? Certainly there is a tort there; is there a crime?
    Mr. Waldron, maybe you can answer that best.
    Mr. Waldron. That is a tough question. I think it would go 
back and depend on the nature of the transaction, and the 
agreement between the prime vendor and the hospital and what 
was actually ordered. If items are substituted for a brand name 
that was specifically ordered, then that would be an issue and 
that would be a problem under that particular contract.
    Mr. Dunn. Yeah, we can't litigate it here, but you--
    Mr. Waldron. Right.
    Mr. Dunn [continued]. --get the sense, this is wrong. I 
mean, it is very wrong behavior. And to then turn around and 
suggest that what we do is to concentrate all of this power in 
one of these super, super prime vendors is an appalling idea.
    Ms. Oakley has said she thought that the MSPV Next Gen, I 
guess, is a good idea, but failed in execution. Do you agree 
with that, Mr. Waldron?
    Mr. Waldron. I do believe that the prime vendor program is 
foundationally a solid approach. DHS and DLA are successfully 
managing prime vendor programs right now. On the pharmaceutical 
side, the VA has run a very successful prime vendor program. It 
goes back to execution and it goes back to people. You can't 
underestimate the importance of people.
    And the last thing I would just make that is kind of 
interesting. When I read the GAO report, one thing that struck 
me that just is the terminology used, for example, to identify 
the program office responsible for the formulary, it was the 
Health Care Commodity Executive Program Office. That term 
``commodity'' I think again sends a message that these things 
are all interchangeable, that it is like pens and paper.
    Mr. Dunn. Well, we know as clinicians that they aren't 
interchangeable.
    Mr. Waldron. Right.
    Mr. Dunn. There are very, very subtle, but important 
differences in many of the different medicines and tools we 
use.
    Is the VA capable of implementing another prime vendor 
program, this one that would work, your opinion, Mr. Waldron?
    Mr. Waldron. They have a long way to go. They need to put 
in place a clinician-led program office with medical supply 
chain experts to execute this, that is first and foremost. It 
boils down to requirements development: if you don't have sound 
requirements development, you can't support the health care 
providers who are serving our veterans. They need to put the 
people in place.
    I think the jury is out. We have spent--our members have 
spent the last two years, you know, trying to execute--
    Mr. Dunn. But the timeline on this is years, it is always 
years and years, and veterans are dying and being injured by us 
in each of those years. I mean, we can't be measuring time in 
years.
    And I want to ask you one more in the few seconds left to 
me. We are all familiar with group purchasing organizations; in 
what way is this very different from a GPO, the MSPV?
    Mr. Waldron. In a certain sense, it is similar with their 
idea of they are trying to leverage their requirements across 
hospitals and get better pricing, and consistency and tiered 
pricing. In that sense it is very similar, from my perspective; 
it again goes back to the execution. I think there is a way 
forward, we do believe there is a way of forward, but it starts 
with putting clinicians in place to manage the formulary--
    Mr. Dunn. Well, thank you for ending it, because my time is 
expired, ending with the clinicians, though. And, please, I beg 
you, go back and talk to your doctors, I mean, you have to do 
that.
    Mr. Chairman, thank you. I yield back.
    Mr. Bilirakis. Thank you, Dr. Dunn.
    Mr. Takano, you are recognized for 5 minutes.
    Mr. Takano. Thank you, Mr. Chairman.
    Mr. Lemmon, the GAO report highlighted challenges with 
staffing and I want to associate myself with Ranking Member 
Walz's comments about the hiring freeze. As we know, President 
Trump's hiring freeze did not exempt acquisition and logistics 
personnel. And I want to just drill down into how this hiring 
freeze affected staffing at the Medical Surgical Prime Vendor 
Program Office, and staffing in the Procurement and Logistics 
Office, and in key logistics and leadership positions at the 
facility and network level.
    What actions--I want to get into this--what actions have 
been taken to fill the 16 unfilled positions at the MSPV 
Office, Program Office?
    Mr. Lemmon. Well, many of the positions we have received 
exemptions where we can recruit those positions and are working 
to do that. At the network level in the field--
    Mr. Takano. How many of those positions have you received 
waivers to fill, waivers from the hiring freeze out of the 16?
    Mr. Lemmon. I would have to get back to you.
    Mr. Takano. So you don't know that number, you will get 
back to us on that. Thank you.
    And how many of those positions have been filled of the 16?
    Mr. Lemmon. I would have to get with you with that number.
    Mr. Takano. Okay. And can you tell me, is there a timeline 
on when these positions will be filled, is there a goal? And 
how many of them would we intend to fill? Well, you don't know 
how many have been exempted, so you really can't answer that, 
right?
    Mr. Lemmon. I can't answer it today.
    Mr. Takano. Okay. I want to clarify, did the hiring freeze 
adversely affect patient care, in this particular instance?
    Mr. Lemmon. You know, having an inefficient supply chain 
does impact logistics in the hospitals as far as their ability 
to order the products efficiently. Certainly, they do have ways 
to do purchases outside of the Med-Surge Prime Vendor, but I 
won't say there has not been any negative impact to veteran 
care, because this does touch veterans' care.
    Mr. Takano. So at the very least it could have 
significantly affected veterans, patient care of our veterans.
    Now, I want to expand upon, I mean, I appreciate Dr. Dunn's 
question, I wish he hadn't used the acronyms, because what I 
think he was asking is can you compare the VA's Pharmacy Prime 
Vendor Program, I think he used the acronym, to its Medical 
Surgical Prime Vendor Program? So these two programs, one is 
the vaunted pharmacy program. And we know the VA has the 
ability to negotiate, unlike Medicare, I mean, this huge 
volume, the VA is able to negotiate with the pharmaceuticals, 
unlike other Government programs, right?
    So the question was, is there a comparison between the two, 
because we are obviously purchasing medical surgical supplies 
through also a similar situation? Can best practices from the 
pharmacy prime vendor program be applied to the MSPV Program?
    Mr. Lemmon. We believe they can, particularly in the area 
of program management and developing the requirements area. 
Pharmaceuticals are different in some respects than med-surge 
items, but there are certainly lessons that we can learn from 
our prime vendor program.
    Mr. Takano. Well, is the development of a medical surgical 
supply formulary potentially more complex, is it more complex 
than a pharmacy procurement?
    Mr. Lemmon. I believe that it is.
    Mr. Takano. Therefore, it would mean that we would have to 
have very good managers, very good personnel, and these are the 
vacancies that I am alluding to. If it is more complex, even 
more important to have people staffing the program.
    Mr. Lemmon. I agree with that.
    Mr. Takano. I am puzzled as to why it has not been a bigger 
priority, especially when we talk about surgical supplies and 
the timeliness of acquiring them, you know, impacting on when 
these surgeries can be scheduled. And it would seem to me that 
this is kind of an all-hands-on-deck emergency situation, that 
these positions should be filled and they should have been 
filled a long time ago.
    All right, that is all the questions I have, sir. I yield 
back.
    The Chairman. I thank the gentleman for yielding.
    General Bergman, you are recognized for 5 minutes.
    Mr. Bergman. Thank you, Mr. Chairman.
    I will get to the point very quickly and I will keep my 
questions short, you keep your answers short. How's that?
    Mr. Lemmon, does a strategy document exist for developing 
the Med-Surge Prime Vendor Program?
    Mr. Lemmon. The--
    Mr. Bergman. Does the document exist? Do you have a 
strategy? Did somebody within the VA develop a strategic plan, 
with a mission statement and the strategy that follows?
    Mr. Lemmon. There were documents--
    Mr. Bergman. Is there a document that exists that you are 
working from today? Yes or no?
    Mr. Lemmon. Is there one document that lays out 
succinctly--
    Mr. Bergman. Is anybody in charge--
    Mr. Lemmon. Yes.
    Mr. Bergman [continued]. --of this over there? Who?
    Mr. Lemmon. We do have--
    Mr. Bergman. Who?
    Mr. Lemmon. We do have acting people in charge.
    Mr. Bergman. If you are acting, you are still in charge.
    Mr. Lemmon. Right.
    Mr. Bergman. Are you in charge?
    Mr. Lemmon. I am.
    Mr. Bergman. Okay. Does a document exist that you use on 
your desk, a reference when you are making sure those under 
your charge who you are leading and making progress in this 
programs, that there is a reference document that guides you in 
your decisions in your leadership role?
    Mr. Lemmon. We do have a supply chain transformation 
document that touches multiple areas, but if you are talking 
about MSPV--
    Mr. Bergman. We are talking about a specific program here 
that does not exist, because it hasn't been developed. Is there 
a document?
    Mr. Lemmon. I am not going to say there is a specific 
document--
    Mr. Bergman. Okay. Well, I would suggest maybe you consider 
it if you are going to be successful in creating one. All 
right?
    Now, I am going to give you an example. By the way, in a 
former life before Congress--is this uncomfortable? It is, 
isn't it? It is uncomfortable for me too. It is uncomfortable 
for all of us here, because there are a lot of veterans in the 
room who potentially could suffer the consequences of bad 
decisions at the administrative and deliverables level. Okay? 
We have great clinicians doing the job, we are not backing them 
up on the business side of it, not the clinical side. All 
right? So that is, if you sense a little edge on my part, your 
sense is correct.
    Let me just give you an example. Okay? Because a lot of 
things are near and dear to my heart, and I just a couple of 
weeks ago was up at Walter Reed for a, you know, procedure that 
gentlemen and ladies of my age are recommended to get. Okay? 
And it is a little uncomfortable at times. You know, in the 
medical business, we look for new products. I was in the 
medical products business for a long time and have dealt with 
the VA. But, for example, there is a product available that is 
used throughout the industry for colon-rectal screening, VA 
doesn't use it. It makes things simpler.
    Can you give me an idea for new products, without 
guidelines driven by clinicians and validated through the 
industry through others that are already using the products 
outside the VA system, so any other hospital, have we created a 
barrier to introducing quality products that are going to allow 
our veterans to get better care?
    Mr. Lemmon. Well, we certainly have to have a more robust 
involvement with clinicians, so they can inform our decisions 
on what products would be on a formulary and available for ease 
of purchase in the hospitals. Certainly at the hospital level 
there are ways to procure items that any doctor may feel like 
they would like to have.
    So, you know, I wouldn't say we have a barrier, but we can 
certainly--
    Mr. Bergman. Okay. Do you have a sense of urgency?
    Mr. Lemmon. We do.
    Mr. Bergman. When are we going to see it?
    Mr. Lemmon. We are developing a plan.
    Mr. Bergman. Is anybody in the hierarchy, the wire 
diagram--and I know my time is running out here--in the wire 
diagram who has been responsible for developing this new 
program, has anybody in that, again, wire diagram been paid a 
bonus?
    Mr. Lemmon. I don't know.
    Mr. Bergman. I would like to find--I would like to know.
    Mr. Chairman, I yield back.
    The Chairman. I thank you the gentleman for yielding back.
    Ms. Kuster, you are recognized for 5 minutes.
    Ms. Kuster. Thank you, Mr. Chairman. And thank you to our 
panel for being with us today.
    With my colleague General Bergman, who is the chair of the 
Oversight and Investigation Subcommittee, I am the Ranking 
Member, you can imagine that we take this role very seriously. 
I am sorry that you are the person in the hot seat today, but I 
do have to remind you that you are under oath and these 
questions are very serious for us.
    We are here to represent the balance of the well-being of 
our veterans and the well-being of our taxpayers, and we 
constantly are faced with this dilemma. But I have to say, 
joining the comments on both sides of the aisle from our 
colleagues, that we swung and missed in a big way on this 
project, because not only have we put veterans' care at risk, 
which is our first and foremost goal, it sounds to me as though 
we have also cost the taxpayers. And you have talked about 
these purchase cards that are used. I know for a fact that that 
is not the most efficient, effective, or frugal way to go about 
making these decisions.
    So my concern--and you have had a lot of people ask you if 
veteran care was compromised--in my view, I want you to include 
when you come back with that answer to this Committee veteran 
care that was delayed was likely compromised, because treatment 
that is delayed is treatment that may be denied, and I think 
that is our concern. And you can tell it is not partisan, but 
this is simply unacceptable.
    And what I want to focus in on is the impact of the hiring 
freeze, because this may be the first time that this Committee 
has heard that veterans' care is compromised, the quality of 
care, the timeliness of care, based on that hiring freeze. So 
could you just state for the record how the hiring freeze has 
affected staffing at the MSPV Program Office, staffing in the 
Procurement and Logistics Office, and in key logistics and 
leadership positions at the facility. And once, for the record, 
could you state has patient care been compromised due to a 
hiring freeze?
    Mr. Lemmon. Well, certainly over the past year there have 
been delays in hiring because of the freeze. Certainly we don't 
have as an efficient of a supply chain as we need right now and 
not having key leadership positions or a more robust staff has 
impacted that.
    I do believe that hospitals have ways to get the products 
they need, we need to make it easier for them to get the 
products and assure taxpayers are getting good value when 
those--
    Ms. Kuster. And would you agree--and I am sorry to 
interrupt, I want to hear the rest of your answer, but would 
you agree that using these purchase cards is not the most 
effective, efficient, and frugal way to go about making those 
purchases?
    Mr. Lemmon. I completely agree with that. It is really more 
of a last-resort approach. We need a very robust catalog of 
products that can be efficiently ordered by an ordering officer 
at a hospital and delivered through the prime vendor program 
for med-surge supplies.
    Ms. Kuster. So, Mr. Lemmon, can I ask you, what is the next 
step for dealing with this hiring freeze? And I would like to 
work with our Committee chair, I am asking our Committee chair 
to work with the Trump administration, how are we going to 
guarantee that our veterans receive the highest quality of care 
in the timely manner that they deserve and how are we going to 
get around this hiring freeze to make sure that that gets 
accomplished?
    Mr. Lemmon. Well, we do have a process to request waivers, 
which we have done and we have received--
    Ms. Kuster. Would it take legislation for you to--I mean, 
the waiver doesn't seem to be an effective process here. I am 
trying to look at how we could make sure that this procurement 
is included--or excluded from the hiring freeze. This is 
important; this is the quality of care that our veterans 
receive and it is being compromised. Would that take 
legislation?
    Mr. Lemmon. I don't believe so. I believe that those 
positions can be approved for hire.
    Ms. Kuster. My time is up. I would direct that question to 
the chair, if I could, for a response going forward on how we 
get around this problem.
    Thank you.
    The Chairman. I will try to get that response to you by 
tomorrow. How's that?
    Ms. Kuster. Thank you, Mr. Chair. I yield back.
    The Chairman. I thank the gentlelady for yielding.
    Mr. Banks, you are recognized.
    Mr. Banks. Thank you, Mr. Chairman.
    Ms. Oakley, the GAO report mentions a, quote, ``lack of 
leadership stability,'' end quote, at the VHA program office, 
but no mention of what actual qualifications VHA leaders need 
to possess in order to be able to effectively lead a medical 
surgical program office. So what is your vision on the 
qualifications and experience for the MSPV director that was 
recommended in the report?
    Ms. Oakley. I think you need someone that has both clinical 
experience as well as acquisition and procurement experience.
    One of the things that we found during the course of our 
review is, you know, this effort requires collaboration across 
a number of different types of offices--procurement, logistics, 
clinicians--and they all speak different languages. So getting 
somebody in there that has experience on both sides that would 
be able to bridge that gap and translate, would be an ideal 
person to put in place. But frankly, at the very minimum, 
getting somebody in there for the long term. Getting somebody 
who is going to be there and be able to establish relationships 
all across VA to be able to implement this big change is what 
should be the priority.
    Mr. Banks. Okay, that is very helpful.
    Now, Mr. Lemmon, now that I gave you a break, back to you 
for a moment. It was brought to our attention at a recent 
roundtable that you participated in that the Department was in 
the final stages of determining a, quote, ``way forward,'' as 
you called it, to address the backlog by implementing business 
process reforms in Section 8123 of Title 38 through 
administrative means via a rulemaking.
    Can you provide us with a more specific update of the 
status of this effort and a better understanding why the 
potential exists for a rulemaking? It would seem that you 
already have the authority for this and it would likely be 
better if this was done administratively.
    So what is the timing for such a decision and when do you 
think it would be implemented if we have to do it 
administratively? If it has to be done via a rulemaking, as you 
said, what authority do you need from the Committee to do that?
    Mr. Lemmon. Okay. The question you posed is in regards to 
prosthetic implants, which is covered by the special authority 
VA has under 8123. A business process has been drafted, it is 
being circulated amongst the Department for concurrence. At 
that time, once that is finalized, our Office of General 
Counsel will determine whether we can implement 
administratively or go through rulemaking. And that decision 
has not been made yet, but we anticipate that that will happen 
quickly, probably within the next 30 to 60 days we will have a 
decision on that.
    Mr. Banks. Okay. We will follow up with you in the next 30 
to 60 days.
    On another note, how is the new process for purchasing the 
surgical implants different from the existing prosthetics and 
sensory aids services process?
    Mr. Lemmon. Well, the proposed process really, essentially 
relies on having a national contracts where we have leveraged 
our spend, but the contracts are with the major suppliers. The 
portion where we have to depend on the authority in 8123 is 
really the timing of the orders, because a physician would 
actually choose exactly what they are going to use in the 
surgery, we would issue those orders after the products are 
consumed, and that is where we need the authority that is 
outside of the FAR.
    Mr. Banks. Okay. Thank you.
    Ms. Oakley, since I have a minute left, the GAO report 
stated that the recent reforms did not meet the needs of 
medical centers and as the end user in caring for the patient. 
It would seem that for the arrows in determining the formulary 
items are more likely not points up from the clinical needs 
perspective and instead down to the physician or surgeon, do 
you see any of this--if that makes sense--do you see any of 
this changing in the 2.0 effort?
    Ms. Oakley. I think that VA has come to the recognition 
that having a clinically-driven program is vital to success. I 
think it was a late recognition and I think that they are, at 
least on paper and what I have seen, indicating that this would 
be the way forward. And so I find that as a positive 
development; again, though, it all comes back to execution.
    Mr. Banks. Okay. Thank you. My time has expired.
    The Chairman. I thank the gentleman for yielding.
    Mr. Coffman, you are recognized.
    Mr. Coffman. Thank you, Mr. Chairman.
    First of all, Mr. Lemmon, can you tell me, Ms. Stella 
Fiotes, what position does she have right now?
    Mr. Lemmon. I believe that she is the Acting Chief 
Acquisition Officer after Greg Giddens retired.
    Mr. Coffman. So she is in charge right now, temporarily, 
until a decision can be made. That is interesting, because she 
was in charge, she was one of those in charge of the--she was 
the Office of Construction Projects, Office of--and so under 
the Office of Acquisition Logistics and Construction. And so we 
had a project in the State of Colorado that she was in a 
leadership on that was supposed to cost $600 million, a little 
over $600 million, it cost 1.67 billion, is where we are right 
now, because it was so badly mismanaged, and yet she has been 
promoted in terms of the hierarchy at the VA. And so you can 
guess why there is not a change. This Administration made so 
many promises about how they were going to clean up the VA, but 
if they are keeping people like this around, they are obviously 
not that interested in cleaning up the VA.
    So one of the problems that we had before when we had a 
briefing, I think it was probably a couple years ago, on 
procurement, a year or 2 years ago--last September, was that 
they were--and, Ms. Oakley, maybe this is to you--they were 
taking the purchase cards to get around the contracting process 
and just adding them all up. So just to--but part of the 
problem was is that patient safety was compromised, because 
they were able to get around all the procurement rules and with 
some of those regarding patient safety, particularly in the 
purchase of tissues and things like that, human tissues.
    And so could you comment on that?
    Ms. Oakley. I can't directly comment on patient safety, but 
I would say that purchase cards were definitely seen as the way 
to meet the needs of the medical centers because of the limited 
formulary and the formulary that didn't meet their needs. And 
so VA has seen an increase in purchase card purchases, you 
know, during the course of the past year with the rollout of 
MSPV-NG.
    Mr. Coffman. Okay. Anybody else? Mr. Lemmon?
    Mr. Lemmon. Certainly the greater use of purchase cards has 
not been good for VHA.
    Mr. Coffman. Well, how can you--I mean, so we have known 
this problem for so long, we have identified it, and identified 
it that people are using it to get around procurement rules, 
get around contracting rules, because that is much more 
involved and, you know, they want to take a shortcut. And that 
is not good for the taxpayers and that is not good for the VA 
patients, but yet you continue to do it, I mean, your 
organization continues to do that. Can you tell me why?
    Mr. Lemmon. Well, the reason they are doing it at the field 
is because we haven't provided a robust enough prime vendor 
program for med-surge supplies to meet their needs, quite 
frankly, and that is what has to be corrected to reduce the 
purchase card spend.
    Mr. Coffman. Okay. Well, I can say I am very disappointed, 
I don't see changes from the last Administration to this 
Administration in the VA and that is very disappointing.
    I yield back.
    The Chairman. Dr. Wenstrup, you are recognized for 5 
minutes.
    Mr. Wenstrup. Thank you, Dr. Roe.
    Mr. Lemmon, who is the MSPV Program leader at this time?
    Mr. Lemmon. Currently, we have Dan Harris, and he is 
supported by John Miller in our office.
    Mr. Wenstrup. Can I ask what their qualifications are? Do 
they have any clinical background, you know, RN, MD, where they 
fit in that?
    Mr. Lemmon. They have logistics background, they are not 
doctors or nurses.
    Mr. Wenstrup. So who at VHA is the clinical leader overall?
    Mr. Lemmon. My boss is Tammy Czarnecki and she is certainly 
involved in the program, Assistant Deputy Under Secretary for 
Health, for Operations and Management, and she has a nursing 
background.
    Mr. Wenstrup. Okay. VHA has said they plan to utilize about 
130 clinical program offices to provide clinical input going 
forward, which makes sense. Can you tell me how this will work 
and give me some specifics?
    Mr. Lemmon. We have developed a very structured, 
clinically-driven sourcing program that is being routed for 
concurrence at this juncture, but it does involve the program 
leaders and clinical leaders, and they would identify those 
clinicians in the field and actually take responsibility for 
the product areas that falls under their responsibility.
    It is recognized, I think, across VHA how important having 
a very robust and in-depth clinical program is to support our 
med-surge program, and that is what we are trying to build.
    One of the weaknesses or failures in our prior attempt at 
this is that we didn't have the structure behind it that we 
needed. So it was always a challenge to the clinicians and get 
the input. And it has been recognized within the Department 
that to fix this, we have to have a very structured, 
clinically-driven sourcing program where these department heads 
fully understand their responsibilities and obtain the services 
of the clinical experts in the field to bring to bear to the 
decisions on our formulary.
    Mr. Wenstrup. Yeah, I am just curious how far down the line 
you go. If you have one person who is in a certain field and 
maybe they have some input, that may be fine.
    And I can tell you how big the VA is, but I can tell you at 
every hospital I worked, every year, every hearing when it 
comes to budgeting and planning and everything else, every 
individual surgeon would get asked, is there anything that you 
need? Is there something now out there that you need to do your 
job better?
    How far down do you take this? I know Ms. Oakley talked 
about execution, right? How are we executing his?
    And this pertains a lot to the retention of those that we 
are trying to recruit, because if you come in and you want to 
take care of veterans, but your hands are tied because you 
can't get the things you need to take care of them the best way 
that you know how, and they say, well, that is the system or we 
can't do that, guess what? You leave, because your name is on 
the line. And that doesn't mean you get everything you want 
whenever you ask for it, you know, but you have to have a 
process all the way down to each and every individual, in my 
opinion.
    So I would like some comment on that, and maybe some advice 
from Ms. Oakley as well.
    Mr. Lemmon. Well, I completely agree with you, and that is 
why at the hospitals we have clinical product review committees 
that can actually push requirements up, in addition to trying 
to establish this clinically-driven source of--
    Mr. Wenstrup. So that is at a committee level, but I am 
asking, are you getting down to the nitty-gritty to those that 
are actually doing the work, currently?
    Mr. Lemmon. We definitely need to do a better job of that--
    Mr. Wenstrup. Thank you.
    Mr. Lemmon [continued]. --there is no question.
    Mr. Wenstrup. Ms. Oakley?
    Ms. Oakley. That was one of the things that we found in our 
review is that VA didn't really outline a process for how to 
get something onto the formulary that would meet the needs of a 
physician-identified need. And so one of the things we 
recommended, because the formulary is a living, breathing 
thing, right, I mean, it is going to be changing all the time, 
is laying out how does one, how does one working-level 
physician go about getting something on the formulary, so that 
they can actually have the things that they need in their day-
to-day life.
    And so that is right in line with one of our 
recommendations in saying that they should lay out this process 
and communicate it through all levels of VA.
    Mr. Wenstrup. Thank you.
    I yield back.
    The Chairman. I thank the gentleman for yielding.
    Mr. Poliquin, you are recognized.
    Mr. Poliquin. Thank you, Mr. Chairman, very much. I 
appreciate it.
    I am a little taken aback here, to be very blunt with you, 
so let me just get right to it. You folks over at the VA have 
about 170 veteran's medical centers around the country, right? 
Is that right, Mr. Lemmon? Okay, about 170. About 40,000 
doctors, practitioners, and 170 medical centers around the 
country. And you are taking care of about 7 million of our 
veterans, our veterans who stood up for this country and fought 
for our country and gave us our freedom, is that right? Okay.
    Now, you would think with that kind of horsepower you folks 
would be able to get your act together, use the volume that you 
folks represent, and go out to these different folks that 
manufacture catheters and stethoscopes and scalpels and buy 
this stuff in volume, such that the folks up at Togus, Maine, 
when they need to operate on one of our heroes, they will have 
the stuff that they need. And now we are hearing from Mr. 
Bergman a minute ago, you said you don't even have a plan to 
execute this process.
    Number two, I just heard a minute ago that because you 
folks are unable to get the equipment that we need in our 
operating rooms or what have you, you folks are using credit 
cards or some sort of Government credit card to get what you 
need before they go in the OR and take care of one of our 
veterans.
    And you know what I think? I think you have had 12 years to 
do this. The last time I asked my staffer, she said, yeah, this 
process started in 1995. This is 2017 on December 7, Pearl 
Harbor Day, it is almost 2018. This is the third time you guys 
have tried to do this.
    I don't know. Neal and I are new here, along with Jodey and 
Clay, and Jim and Jim--and Jack and Jim. I will tell you, if I 
am here 12 years from now, I don't want to hear you folks come 
in and say, well, this is our sixth time trying this, we can't 
quite get it right. I don't think you guys are competent.
    You have 340,000, 345,000 employees, your budget has gone 
from 120 billion a year to 190 billion a year over eight years. 
You have got plenty of dough, plenty of people, and you are 
saying you can't find the people to run this. Give me one day, 
I will go over there, I will find you someone to run this.
    So I don't want to be around for the next few years having 
you folks come back in saying, well, we couldn't quite get it 
right.
    Mrs. Oakley, you are involved in the part of the Government 
that is supposed to oversee these folks and analyze if they can 
do it, right? Okay. Have you ever heard of this outfit over at 
the DoD called the Defense Logistics Agency?
    Ms. Oakley. I have.
    Mr. Poliquin. Okay, good. And they have a similar process, 
right? They are trying to do what you guys are trying to do, 
which is to buy in bulk to make sure the folks that are 
providing health care for our heroes can do it cheaply and save 
the taxpayers money, right? How are they doing?
    Ms. Oakley. As far as I know, the DLA has a fairly 
successful program.
    Mr. Poliquin. Good. How are we doing over at the VA? 
Poorly, right?
    Ms. Oakley. Yes.
    Mr. Poliquin. Good. I am trying to save you some breath 
here.
    Have you saved any money, Mr. Lemmon, over the last 12 
years trying to do this? Have you saved any money?
    Mr. Lemmon. Well, we have saved--
    Mr. Poliquin. How much have you saved?
    Mr. Lemmon. Under the supply chain initiatives, it was 
approximately $300 million.
    Mr. Poliquin. What percent have you saved?
    Mr. Lemmon. What--
    Mr. Poliquin. What percent have you saved? You are buying a 
scalpel, you are buying a thousand of them instead of two of 
them on a credit card, you would think you would be able to 
save a little bit of money.
    Mr. Lemmon. You would. I don't know what the--
    Mr. Poliquin. Okay, fine.
    For the record, I have a couple questions for Mr. Lemmon. 
Number one, you talk about distribution-of-pricing agreements. 
They are different from contracts, right?
    Mr. Lemmon. They are.
    Mr. Poliquin. Are the prices binding in a distribution-of-
pricing agreement? Yes or no?
    Mr. Lemmon. I don't believe they are.
    Mr. Poliquin. Okay, so that is a no?
    Mr. Lemmon. No.
    Mr. Poliquin. That is a no. Okay, thank you, Mr. Lemmon. Is 
there any competition when you are dealing with a distribution-
of-pricing agreement?
    Mr. Lemmon. Not normally.
    Mr. Poliquin. Oh, okay. So it is sole source, right? Okay.
    Let's see. How about any conflicts of interest? Ms. Oakley, 
have you seen any potential conflicts of interest? These folks 
have been trying to do this for 12 years, now they have the 
third try, they are coming back to us, they are trying to do 
this? Any potential conflicts of interest in what they are 
trying to do, which I have no confidence they are going to be 
able to do?
    Ms. Oakley. I didn't see any apparent conflicts of interest 
in our work.
    Mr. Poliquin. Good.
    Mr. Chairman, I have 30 seconds, I have to do this, but I 
am going to yield back the 30 seconds, so I can give Mr. Lemmon 
break here.
    [Laughter.]
    Mr. Poliquin. Thank you.
    The Chairman. I may have the big one here that Mr. Poliquin 
yielded back some time, that is amazing. Thank you, sir.
    Mr. Arrington, you are recognized.
    Mr. Arrington. Thank you, Mr. Chairman.
    I don't think there is enough outrage on this Committee, 
quite frankly, with what we hear day in and day out. The last 
Oversight Committee that I sat under the leadership of Chairman 
Bergman was about a GAO report that basically said that the VHA 
is not investigating bad doctors, they are not disciplining bad 
doctors, and they are not reporting bad doctors to a database, 
so that those bad doctors can't continue to practice in the VHA 
and in other places, and it was just astonishing. And so I want 
to associate myself with the indignation of Ranking Member Walz 
and of my colleague Bruce Poliquin.
    I don't even know where to begin. I think I would first say 
for the record, thank God our veterans have a choice now. And 
we can't do enough, Mr. Chairman, to give them more choice and 
flexibility to get out of this broken Government-run, single-
payor health care system that they are trapped in, and it is 
shameful that we do that. And so we need to do everything we 
can to continue to enhance that Choice Program.
    Ms. Oakley, I appreciate your clarity and your 
definitiveness in your answers. You seem very confident, so I 
am going to start with you. And I appreciate that; that is 
sincere.
    You said there is an execution problem; that the model is a 
good model, but that we are not executing. Is that because 
there is not enough staff, there is not the right staff, there 
is not continuity in staff? Is it leadership? Is it poor 
planning? Break that down for me, if you would.
    Ms. Oakley. Okay. Well, the short answer is, it is all of 
the above.
    Mr. Arrington. Okay.
    Ms. Oakley. I think any--
    Mr. Arrington. Rank order the top two or three for me.
    Ms. Oakley. Well, if you look at organizational 
transformation-leading practices, the bottom line is it all 
starts with solid leadership and tone from the top.
    Mr. Arrington. Can I stop you just right there? Because it 
is my understanding we invited some of the medical leadership 
from the VHA to come and testify today; are you aware of that?
    Ms. Oakley. I am not.
    Mr. Arrington. Mr. Lemmon, are you aware of that?
    Mr. Lemmon. I heard that earlier today.
    Mr. Arrington. Yeah, we asked your bosses to come and they 
decided to send you all. And it tells me that there is a 
leadership problem; they ought to be here. I can't think of 
anything more important to veteran patient care than what you 
are doing and they refused to come. I don't know the reason, 
maybe there is a good reason.
    So, leadership, tell me the chain of command. Give me the 
three or four layers up. Start with the top and work your way 
to yourself.
    Ms. Oakley. It is actually complicated within VA, right?
    Mr. Arrington. Well, there is problem number one.
    Ms. Oakley. Yeah, which we have reported on before, within 
the organization. And so, you know, the Chief Acquisition 
Officer is a key role in all of this. It is the person that is 
advising the Secretary of VA on how to accomplish VA's mission 
through its acquisition management function, and it has been 
somebody in an acting position and has turned over multiple 
times since at least 2009.
    Mr. Arrington. So I have heard a lot about hiring freezes 
from my colleagues today. Were there vacancy problems before 
the hiring freeze?
    Ms. Oakley. There were.
    Mr. Arrington. So the continuity in leadership existed or 
preexisted--
    Ms. Oakley. Yes.
    Mr. Arrington [continued]. --this hiring freeze?
    Ms. Oakley. Yeah, absolutely.
    Mr. Arrington. And by the way, I am for hiring freezes, I 
am for cutting this Government, I think you could cut a third 
of it and we could continue to provide--it is about cutting the 
right parts of it, and being smart and strategic about it.
    And I am willing to work with the Ranking Member and anyone 
else to send a letter to the leadership, whether it is the 
Secretary or if it is Ms. Clancy or Czarnecki, and express our 
serious concern that they aren't here at this hearing to 
explain why this program is not working for our veterans, and 
to tell them that they need to get in gear in hiring people and 
getting their operation fully functioning.
    Ms. Oakley. Absolutely.
    Mr. Arrington. But that is something that I would be 
willing to do, Mr. Ranking Member, and anyone else. But, again, 
this seems to pre--this continuity or lack thereof seems to 
preexist this hiring freeze--
    Ms. Oakley. Absolutely.
    Mr. Arrington [continued]. --is that accurate?
    Ms. Oakley. Yeah, and at all levels, from the CAO on down 
to key logistics positions within the medical centers. They are 
not easy positions to fill. So it is not necessarily, you know, 
that you would be able to hire somebody off the street. And 
competition from private hospitals, as I understand it, is 
pretty fierce for skilled, experienced logistics individuals, 
as well as the acquisition workforce related to contracting 
skills.
    So these kind of vacancies and lack of skill sets are 
pervasive throughout VA and also other agencies.
    Mr. Arrington. Thank you, Ms. Oakley. My time has expired.
    I yield back.
    The Chairman. I thank the gentleman for yielding.
    Mr. Peters, you are recognized for 5 minutes.
    Mr. Peters. Thank you, Mr. Chairman. As you know, we co-
hosted a roundtable with Mr. Banks, which brought together the 
VA and stakeholders from the medical device community who could 
participate in the program to discuss what is occurring and 
what we could do to make it better, and I appreciate the 
Chairman having the hearing today.
    We also had the GAO and Coalition for Government 
Procurement in attendance, we also had the Chairman, and I am 
very interested in continuing to work to improve this program.
    At this time, though, I have not been able to attend most 
of the hearings. I am going to yield my time, remaining time to 
the Ranking Member, Mr. Walz.
    Mr. Walz. Thank you, Mr. Peters.
    And I would just like to say--and I appreciate the 
gentleman's willingness to work together on this--I would like 
to say, though, using a fully-functional VA is a choice, it is 
a choice that 94 percent of VFW members who were surveyed would 
like to make. So as I said in my opening statements, should I 
be a conspiracy theorist on this, continuing to undermine the 
VA's capacity to do what it is going to do under the guise of 
then you will have to go to the private sector is not providing 
a full range of choices. Those of us who use VA services and 
find it quite adequate are very frustrated when the reason we 
are not getting that care is, is because we haven't filled the 
positions.
    And I don't disagree that may have extended before, but I 
want to be very clear, under oath, a VA person said the hiring 
freeze has precluded us from filling these positions and it has 
adversely affected veterans' care. That should sink in to all 
of us that we do have a responsibility to get that together, we 
do have a responsibility to find this.
    And I would like to say, Mr. Lemmon, I think the questions 
were right about asking other folks to attend here, because the 
buck does stop somewhere. And again, for years I heard it, it 
stops with the President and it stops with the Secretary.
    I want to be thankful for you, your honesty and candor, and 
I also want to make it clear in a public setting, should there 
be any retaliation for stating factually what you see, that 
will pay with a heavy price in this Committee. This idea of 
making sure VA employees are able to come up here, speak 
candidly about what is going to improve our veterans' care, I 
am appreciative of that. I know you are taking a lot of this, 
it is systemwide. GAO is here to help us do that. There are 
certainly things out there.
    There aren't necessarily, as we heard, if you send this 
over to the private sector, who is going to do it? Who can do 
it?
    And as the Chairman and I were talking about here, the 
Defense Logistics Agency might not be the best example of how 
everything is supposed to work, and the F-35 certainly comes to 
mind and other things, that these are complex issues trying to 
get care. But if we are looking for the easy fix or we are 
looking to pass the buck on this, that is simply unacceptable.
    I am with--the Chairman said it right, we are not trying to 
launch Voyager III here, we are trying to order surgical 
supplies that they had, the suggestion is made and this is why 
this Committee is so strong. These physicians speak with 
experience, they speak with let them into that. GAO put out a 
chart we have been up here referencing and looking at that said 
follow this and you will get this right.
    And so I thank the gentleman for yielding his time. I want 
to be clear that I am a supporter of Choice, I was there when 
Choice was created, I was part of that, as was Mr. Takano and 
Mr. Roe, but part of the Choice is a fully functional. And 
again, if it is hyperbole that it is a Government--no, it is 
our responsibility. And we have said this, you give them that 
card and tell them go somewhere, what hearing are we going to 
have with hospital executives from the private sector who get 
to do it the way they want to? These are the only people that 
we can capture, bring in here, swear under oath, and get some 
results.
    This should not be that difficult. This is not the fight of 
privatization, Choice, community-based care or whatever, this 
is basic logistics of functioning of a medical institution that 
is being accomplished. I represent the Mayo Clinic, they have 
to order a lot of supplies for their institutions and they are 
able to do that.
    So I have full confidence we can do this. We just need to 
again--now I have come full circle and been back here from that 
11 years ago starting and I have been convinced of this, almost 
every single problem can be fixed by proper leadership, by 
accountability and what is there, and this is no different.
    I yield back.
    The Chairman. I thank the gentleman for yielding.
    There are many private sector systems, HCA comes to mind. 
It is a large system, about the size of VA as far as number of 
hospitals, and they don't have these problems.
    Mr. Higgins, you are recognized for five minutes.
    Mr. Higgins. Thank you, Mr. Chairman.
    Mr. Chairman, Mr. Ranking Member, this hearing is 
reflective of exactly the type of exasperation that we the 
people, we just don't get it, so we shake our head. Any 
attempted savings for money from bulk purchasing is certainly 
wasted on bureaucracy. I don't have confidence in this entire 
MSPV system.
    VA operates I believe 1233 medical facilities, including 
hospitals and CBOCs, we are spending a billion dollars a year, 
that would be about 4 million per facility. There are 
distinguished doctors and surgeons on this panel. I have 
certainly had my surgeries based upon traumatic injury, 
including my entire right eye socket to be reassembled, but I 
just presumed that the surgeons and doctors and surgical staff 
had the tools and the facilities that they needed in order to 
perform that surgery. And I would expect that we can do a 
better job by allowing the money to follow the veteran.
    I think that the money we are spending on this program is 
wasted. We already have oversight over the command and control 
and chain of command over every VA facility and the directors 
thereof. I think the doctors and surgeons and medical 
professionals that work within the VA and the VHA should be 
able to order what they feel they need.
    And I think that the Members of this panel that are 
testifying today are quite courageous to have appeared, you 
know, because it is virtually indefensible the waste of the 
people's treasure to accomplish nothing.
    I represent the LAC group in Louisiana. They operate in 26 
states, they have 13,000 employees and 60 hospitals. They don't 
have this problem, but they don't have the bureaucracy that we 
deal with in this town.
    With the Chairman's permission, I would like to yield my 
remaining time to my friend and colleague Dr. Dunn, an 
accomplished surgeon.
    The Chairman. Two minutes, Dr. Dunn.
    Mr. Dunn. Thank you very much, Mr. Chairman. Thank you, 
Congressman Higgins.
    I am a bit of a supply site kind of guy, I want to turn to 
the suppliers. There is a great sense of dissatisfaction among 
the suppliers to this program and I want to ask Mr. Waldron if 
you would characterize that dissatisfaction briefly.
    Mr. Waldron. Our members have been frustrated with the 
rollout of the Prime Vendor Next Generation. We have seen, you 
know, RFPs and solicitations that have not accurately described 
products that to be acquired--
    Mr. Dunn. We have information that some of them are 
actually considering just not dealing with the VA, it is just 
not worth their trouble; is that accurate?
    Mr. Waldron. I think there is bid fatigue out there right 
now, because we have had a cycle, so to speak, where 
solicitations were put out, then they were cancelled, now the 
VA is attempting to put them back out again. And all this bid-
and-proposal costs are part of the business when you are 
dealing with the Government and those funds are not unlimited 
for a private entity.
    Mr. Dunn. That is right. So these are businesses, I just 
want to underscore this for everybody, these are businesses 
that literally exist to make and sell products, and the VA is 
making it so painful to do business with them that they will 
walk away from the business. That really is just a huge 
statement against the process that they are faced with.
    One more question I want to bring up, because this one also 
is a little frightening from a clinician's point of view, and 
that is the gray market items that we see. These are really 
dangerous for patients, because a lot of the things that we use 
have to be handled very carefully, very sterile, and I see that 
the gray market has somehow entered into the VA purchasing 
system. Can anybody make sense out of that for me? Tell me how 
that happens or that it won't happen anymore? Give me some 
comfort. Gray market items being bought by our Government.
    Mr. Lemmon?
    Mr. Lemmon. I have heard of a few examples of that. I don't 
think we generally have that problem on any scale, but, again, 
I think it goes back to our supply chain system. When we don't 
have the breadth of products we should have available that is 
on national contract with reputable manufacturers and--
    Mr. Dunn. My time has expired, but I would like you to 
assure us, in fact I am going to ask you to get back to our 
Committee, send something back that says what are you doing to 
address this problem so that it doesn't continue to be a 
problem.
    Thank you very much, Mr. Chairman.
    The Chairman. I thank the gentleman for yielding.
    And I thank the witnesses today for being here and sharing 
your testimony. I know this has been a difficult hearing today.
    And I will see if Mr. Walz has any closing comments.
    Mr. Walz. Thank you, Mr. Chairman.
    Thank you all for being here and helping. And in lieu of a 
closing statement, I would like to yield 30 seconds to Mr. 
Takano.
    Mr. Takano. Thank you, Ranking Member Walz.
    I just want to make sure that we don't rush to a conclusion 
or make a wrong conclusion from today's testimony that the 
answer is to put everyone into the private sector or that the 
Choice program is somehow going to alleviate what is going on 
here. What I heard today is we have a lot of unfilled 
positions, and those positions have been vacant and possibly 
attributed to an unwise hiring freeze.
    Second, I was also at that Oversight hearing and my line of 
questioning focused on whether or not private sector health 
organizations were just as guilty or just as lax in terms of 
their reporting about practitioners, and the questioners were 
either unable to answer that question or were actually saying 
that they probably weren't any better than the VA.
    So the answer is not necessarily that the private sector 
health medicine is a panacea or an answer to the challenges we 
have at the VA. And I would say that we have to do our best to 
make sure that the positions we have at the VA are filled, that 
we staff the 40, the 45,000 unfilled positions in the health 
arena here at the VA, that these are some of the things that we 
need to focus on just as much, rather than rush to the 
conclusion that people are trapped, so-called trapped in this 
system, rather than making the VA the very best VA that it can 
be.
    The Chairman. I thank the gentleman for yielding.
    I will point out that in my 9 years finishing up this month 
on the VA, I looked at the first budget that I showed up on in 
2009, it was 93.5 billion and about 250,000 employees, and now 
VA has a budget that we are trying to work to, it is $186.5 
billion. And I do want to point out to people that because of 
the Budget Control Act in 2011, essentially, until we changed 
the caps this year, those numbers were almost level.
    So we got that money from the military, from education, 
from other programs and put it in the VA, because this 
Congress, both Republicans and Democrats, felt that was 
important. And I think when it is not being spent wisely, it is 
frustrating to us here and to those other people that we took 
the money from. Basically, that is what we did.
    And just to make it very clear, it is not a money problem. 
It is not a hiring freeze that is doing this, I can tell you 
right now it is not. It is leadership and that is absolutely 
what it is.
    And so when you good leaders in places--I got a letter that 
I wish I had time to read on here, from a veteran in 
Albuquerque, New Mexico that six years ago wouldn't go to the 
VA there, and he walked through every bit of his visit and then 
he wrote me a letter--I called the guy yesterday--he wrote me a 
letter about how much better it is. So he walked me through his 
next visit, which was absolutely a great visit to the health 
care.
    So things are not all doom and gloom. I want to make sure 
that is out there. There's a lot of good things going on at the 
VA. Right now this is not one of them, though, I will have to 
say. And it has got to get corrected.
    Because, Mr. Takano, in my career I don't remember having 
to go out and walk and tell a patient's family I don't have the 
equipment and tools to do the operation on your wife today, 
that never happened. I have worked in VA hospitals, I have 
worked in private not-for-profit hospitals, I have worked in 
for-profits, I worked the whole gamut, it has never happened to 
me before, but it is happening in VA because of this 
procurement problem.
    And, as Ms. Kuster said, this ultimately will affect 
quality of care. Putting the hernia off for a day or a week, 
that doesn't matter. Putting a bypass off or a stent or 
something that really matters, or a cancer operation might 
really matter.
    And I know our witnesses today, many of you in the audience 
also, none of the MSPV trials and travails are just not news to 
you, but you work with the program every day. And I get the 
impression that when many of the decisions that we have 
discussed were made causing problems that we are still 
grappling with today, some of you probably felt that they were 
questionable. For example, setting a 6,000-item formulary when 
the industry standard is 30 to 50,000 items, trying to 
establish the formulary all at once in a little more than a 
year, initially. They are not insisting on clinical leadership 
involvement or deliberately sidelining them. You are 
professionals and I believe these decisions must have made you 
uneasy.
    I ask that you use this GAO report and this hearing as a 
catalyst to take a hard look at the situation and decide what 
really makes sense. What kind of MSPV Program, whatever you 
want to call it, I don't care, are you truly prepared to live 
with for years in the future. This is critically important to 
providing quality health care for people. What is best for our 
veterans?
    Unfortunately, it seems the desire to gloss over 
difficulties and declare victory and move on may have 
contributed to MSPV's problems in the past. If it takes longer 
to get it right, so be it, get it right.
    I appreciate your participation today and 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 do before I finish want to thank the Committee, both 
sides of the aisle, for a very, very productive year from this 
Committee and what we have accomplished for our Nation's 
veterans, many times we don't--the Accountability and 
Whistleblower Act, the Choice Act we have done, the Forever GI 
Bill, the claims appeal, and we are going to continue. This 
Committee is going to continue to work to try to get things 
right and provide, as Mr. Takano said, the best quality care 
for our Nation's heroes.
    And I again want to wish everyone here in the audience and 
on this Committee a very, very merry Christmas with your 
family, and a happy holiday season for all of you.
    Mr. Takano. Mr. Chairman, as a point of personal privilege, 
I just want to acknowledge that our colleague Ms. Brownley is 
not with us today because she is in her home district because 
of the fires in California. And I appreciate your holiday 
wishes and I take them to heart, and I too enjoyed this year of 
productivity.
    The Chairman. Thank you all very much. And with nothing 
further, the meeting is adjourned.

    [Whereupon, at 11:39 a.m., the Committee was adjourned.]


                            A P P E N D I X

                              ----------                              

                 Prepared Statement of Ricky L. Lemmon
    Good morning Chairman Roe, Ranking Member Walz and Members of the 
Committee. Thank you for the opportunity to discuss VA's Medical/
Surgical Prime Vendor (MSPV) program and the related Government 
Accountability Office (GAO) draft report. I am accompanied by Mr. 
Philip Christy, Associate Executive Director, Strategic Acquisition 
Center.

Introduction and History of MSPV

    VA is committed to providing our Veterans the best care available 
while being good stewards of taxpayers' dollars. Part of meeting these 
commitments is making sure that our medical centers have the right 
supplies and equipment to deliver the care our Veterans need.
    The Department once relied on its own procurement, storage and 
transportation system to distribute relatively low cost and frequently 
demanded medical and surgical supplies until the mid-1990s. VA then did 
away with this in-house system and converted to a commercially sourced 
MSPV program to provide this capability. Since then, the MSPV program 
has been the primary method used to provide our medical centers these 
kinds of supplies.
    The primary source of supplies for previous generations of MSPV 
contracts was the Federal Supply Schedule (FSS). Use of FSS, when 
combined with local and regional contracts, resulted in our hospitals 
having access to a clinically viable selection of supplies. However, 
this operational model did not facilitate clinical product decisions on 
a national level that would allow VHA to leverage its purchasing power.
    Adoption of clinically driven strategic sourcing was, and continues 
to be, envisioned to leverage VA enterprise-wide purchase volume in 
order to drive lower prices and improve product quality. The MSPV-Next 
Generation (MSPV-NG) contract was conceived, in part, to address these 
issues through the development and use of a mandated national catalog 
or formulary.

Current Medical/Surgical Prime Vendor

    In 2016, the Office of Acquisition Operations, Strategic 
Acquisition Center, in partnership with VHA, announced the award of 
four Indefinite Delivery Indefinite Quantity (IDIQ) contracts in 
support of MSPV-NG. The program was mandatory for all VA medical 
centers. Medical centers pay prime vendors a distribution fee plus the 
product price. Product prices were primarily established by negotiated 
blanket purchase agreements against FSS contracts, VA national 
indefinite delivery contracts, and local contracts to support Veterans 
Integrated Service Networks. The distribution fee was a markup to the 
product prices intended to cover prime vendor costs for managing 
customer inventories and ensuring the timely delivery of needed 
products to customers. As documented in the GAO report, this contract 
has not been as successful as we would have liked, due to the time 
required to solicit and award enough medical and surgical products to 
meet the needs of our medical centers. Accordingly, VHA has decided to 
move forward with modifying the current contracts or developing 
replacement contracts to rectify the issues identified in the GAO 
audit. In determining how to potentially improve the availability of 
items under the current MSPV contract, we are considering the 
contracting process used by the Defense Logistics Agency (DLA) to 
efficiently establish pricing agreements that enable over 100,000 
medical and surgical items to be available through DLA's MSPV contract.
    An acquisition plan has not been finalized for replacement of MSPV. 
VA is exploring a different approach to MSPV, where potential prime 
vendors can propose a full catalog of medical and surgical products. 
This would depart from the current approach to MSPV where individual 
contracts are negotiated with each supplier to form a book of contracts 
that MSPVs can distribute against. The potential benefits of MSPV 2.0 
would be a more robust catalog of items than we have today that could 
be available from the beginning of the contract and lower prices. VA is 
conducting market research to identify the best commercial solutions to 
meet its mission needs in this area. Additionally, the administrative 
resources and time required to negotiate thousands of individual 
contracts would be reduced if VA only negotiated with the prime vendors 
for both medical and surgical products and distribution services. There 
have been multiple meetings with industry leaders to obtain feedback 
regarding the proposed approach to MSPV 2.0 and that feedback is 
currently being considered. Feedback will also be obtained from VA 
clinicians before VA makes any final decisions regarding a new MSPV. 
This is why our efforts to make the current MSPV contracts more robust 
are important. We want to make sure the needs of our medical centers 
are met while we develop a better approach to MSPV.

GAO Report

    GAO recently released the report, ``Veterans Affairs Contracting: 
Improvements in Buying Medical and Surgical Supplies Could Yield Cost 
Savings and Efficiency.'' GAO made 10 recommendations concerning our 
current MSPV management processes, and VA has already begun to 
institute each of them:
      VHA is developing an implementation plan that clearly 
articulates our strategy for the MSPV program. The plan will include 
how to prioritize categories of supplies for future requirement 
development and contracting. This document will also serve as a 
communication tool for all stakeholders involved in MSPV. We expect the 
first draft to be completed by the end of calendar year (CY) 2017.

      Hiring a permanent program office director for MSPV is a 
high priority. We expect a vacancy announcement to be posted by the end 
of CY 2017.
      VA acknowledges that the role of Chief Acquisition 
Officer should be assigned to a non-career employee, per the third GAO 
recommendation, but our flexibility is limited by restrictions on non-
career positions within the Department.
      To ensure we are providing complete guidance for matching 
equivalent supply items, VHA has replaced the MSPV Item Conversion 
Tracker Tool with the Medical Product Data Bank eZSave program, which 
collects product information from over 80 government and private 
sources. We will conduct a review by the end of this CY to measure our 
success.
      Similarly, we are developing a communication plan to 
ensure frequent and effective outreach to the medical centers 
concerning the criteria and processes for changing items of the 
formulary. We fully expect that several modes of communication will be 
in use by the end of this CY.
      VHA is developing a new metric for MSPV cost avoidance. 
The implementation of this metric is contingent upon the completion of 
a separate data standardization project, but we anticipate this new 
metric will take effect by June 2018.
      VHA plans to replace or modify the current MSPV contract 
and formulary process with a contract which will facilitate greater 
access to a wider variety of products, using best commercial and 
government practices. This plan includes providing improved service 
until the current contract is modified or replaced.
      VHA will emphasize the importance of clinical program 
offices' involvement in MSPV requirements development and 
standardization efforts. Proposed guidance is being finalized, enabling 
clinical program offices to directly manage the selection of items in 
the formulary related to their clinical expertise. By the end of CY 
2018, clinical program offices will prioritize their requirements and 
will emphasize standardization where clinically acceptable.
      VHA is formalizing guidance for contracting offices, the 
Supply Chain Data and Informatics Office, and medical centers to ensure 
they work together to identify opportunities for strategically 
obtaining goods and services on an emergency basis. The target 
completion date is June 2018.
      VHA will establish a process to identify commodities and 
supplies that are frequently purchased using emergency procurement 
methods. These items will be evaluated for inclusion in the MSPV 
formulary, if appropriate, by June 2018.

Conclusion

    VA seeks to continue to provide our Veterans with the timely care 
they have earned and deserve. At the same time, we are seeking new and 
innovative ways to be more responsible stewards of the taxpayers' 
dollars. We are grateful to GAO for their report and to the Committee 
for their commitment to helping the Department improve. I look forward 
to responding to any questions you may have.

                                 
                 Prepared Statement of Shelby S. Oakley
                      VETERANS AFFAIRS CONTRACTING
 Improvements in Buying Medical and Surgical Supplies Could Yield Cost 
                         Savings and Efficiency
    Chairman Roe, Ranking Member Walz, and Members of the Committee:

    In December 2016, the Department of Veterans Affairs (VA) launched 
the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program as 
its primary means for purchasing supplies, such as bandages and 
scalpels, for 170 VA medical centers. These supplies are intended to 
meet the health care needs of about 7 million veterans. In fiscal year 
2015, VA obligated $465 million for these types of supplies, and, in 
2016, it stated that it planned to achieve $150 million in cost 
avoidance through a supply chain transformation effort, which includes 
MSPV-NG. This transition represents a significant change to how medical 
and surgical supplies are purchased, which has raised questions about 
whether MSPV-NG will appropriately balance medical needs with 
logistical efficiency, and whether VA can achieve its planned cost 
avoidance. Effective supply chain management is an essential part of 
delivering quality health care to veterans-for instance, an April 2017 
interim report issued by the VA Inspector General detailed supply 
management issues at the District of Columbia VA Medical Center that 
posed risks to patient care. \1\
---------------------------------------------------------------------------
    \1\ Department of Veterans Affairs Office of Inspector General, 
Interim Summary Report (Washington, D.C.: Apr. 12, 2017).
---------------------------------------------------------------------------
    My remarks today are based on our recently issued report on the 
MSPV-NG program, and I will summarize a few key findings from that 
report. \2\ Specifically, I will address the extent to which VA's 
implementation of MSPV-NG has been effective in meeting program goals.
---------------------------------------------------------------------------
    \2\ GAO, Veterans Affairs Contracting: Improvements in Buying 
Medical and Surgical Supplies Could Yield Cost Savings and Efficiency, 
GAO 18 34 (Washington, D.C.: Nov. 9, 2017).
---------------------------------------------------------------------------
    As part of our work for our November 2017 report, we reviewed VA 
policy, communications, briefings, and other documents, prior GAO 
reports on best practices for organizational transformation, and 
internal control standards. \3\ We interviewed Veterans Health 
Administration (VHA)- and VA-wide procurement leaders, program office 
managers, and members of three integrated product teams who helped 
develop the product descriptions for supply items (known as 
requirements). We also interviewed supply chain managers from four 
leading hospital networks regarding their medical supply management 
practices and compared them to those used by VA when implementing the 
MSPV-NG program. \4\ To assess VA's MSPV-NG contracting process, we 
analyzed the contents of the formulary (a list of specific items that 
medical centers are allowed to purchase) to determine what acquisition 
instrument was used to add the items. We determined that the MSPV-NG 
formulary data were sufficiently reliable by tracing data to a sample 
of source documents, among other steps. We selected three VHA regional 
networks based on those with the highest total contract obligations in 
fiscal years 2014 through 2016, geographic diversity, and other 
factors. We conducted site visits to six medical centers within these 
three regional networks, interviewing contracting and clinical 
officials. Finally, we obtained and analyzed data on VA's metrics for 
the program and determined the data were sufficiently reliable for our 
purpose of measuring utilization by interviewing officials responsible 
for maintaining the data and other measures.
---------------------------------------------------------------------------
    \3\ GAO, Standards for Internal Control in the Federal Government, 
GAO 14 704G (Washington, D.C.: Sept. 10, 2014).
    \4\ We selected these hospital networks because they were 
identified by an industry study as having leading supply chain 
practices. See Gartner, Inc., The Healthcare Supply Chain Top 25 for 
2015 (Nov. 18, 2015).
---------------------------------------------------------------------------
    More detailed information on our objectives, scope, and methodology 
for our work can be found in our November 9, 2017 report. \5\ We 
conducted the work on which this statement is based in accordance with 
generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives.
---------------------------------------------------------------------------
    \5\ See GAO 18 34.

---------------------------------------------------------------------------
Background

MSPV-NG Program

    For over a decade, each of VA's 170 medical centers used VHA's 
legacy MSPV program to order medical supplies, such as bandages and 
scalpels. Many of those items were purchased using the Federal Supply 
Schedules, which provided medical centers with a great deal of 
flexibility. \6\ However, as we reported in 2016, this legacy program 
prevented VHA from standardizing items used across its medical centers 
and affected its ability to leverage its buying power to achieve 
greater cost avoidance. \7\ Standardization is a process of narrowing 
the range of items purchased to meet a given need, such as buying 10 
varieties of bandages instead of 100, in order to improve buying power, 
simplify supply chain management, and provide clinical consistency. In 
part because of the legacy MSPV program's limited standardization, VHA 
decided to transition to a new iteration, called MSPV-NG.
---------------------------------------------------------------------------
    \6\ The Federal Supply Schedules program, managed by the General 
Services Administration, provides federal agencies a simplified method 
of purchasing commercial products and services at prices associated 
with volume buying. The General Services Administration has delegated 
authority to VA to manage health-care-related supplies and services. 
For more details on the legacy MSPV program, see GAO, Veterans Affairs 
Contracting: Improvements in Policies and Processes Could Yield Cost 
Savings and Efficiency, GAO 16 810 (Washington, D.C.: Sept. 16, 2016).
    \7\ See GAO 16 810.
---------------------------------------------------------------------------
    The transition to MSPV-NG has been a major effort, involving the 
MSPV-NG program office, stakeholders from the VHA's Procurement and 
Logistics Office and VA's Strategic Acquisition Center (SAC)-a VA-wide 
contracting organization-and logistics and clinical personnel at every 
medical center. The program also includes hundreds of new contracts 
with individual supply vendors and a new set of prime vendor contracts 
to distribute the supplies.
    VA's goals for the MSPV-NG program include (1) standardizing 
requirements for supply items for greater clinical consistency; (2) 
demonstrating cost avoidance by leveraging VA's substantial buying 
power when making competitive awards; (3) achieving greater efficiency 
in ordering and supply chain management, including a metric of ordering 
40 percent of medical centers' supplies from the MSPV-NG formulary; and 
(4) involving clinicians in requirements development to ensure uniform 
clinical review of medical supplies.
    VHA launched the MSPV-NG program in December 2016, but allowed a 4-
month transition period. After April 2017, medical centers could no 
longer use the legacy program. MSPV-NG now restricts ordering to a 
narrow formulary. VHA policy requires medical centers to use MSPV-NG-as 
opposed to other means such as open market purchase card transactions-
when purchasing items that are available in the formulary.

Supply Chain Practices Identified by Selected Leading Hospital Networks

    Leading hospital networks we spoke with have similar goals to VA in 
managing their supply chains, including clinical standardization and 
reduced costs. These hospital networks reported they analyze their 
spending to identify items purchased most frequently, and which ones 
would be the best candidates to standardize first to yield cost 
savings. The hospitals' supply chain managers reported establishing 
consensus with clinicians through early and frequent collaboration, 
understanding that clinician involvement is critical to the success of 
any effort to standardize their medical supply chain. By following 
these practices, these hospital networks have reported they have 
achieved significant cost savings in some cases, and the potential for 
improved patient care, while maintaining buy-in from their clinicians.

VHA's Implementation of MSPV-NG Program Has Not Yet Achieved Its Goals

    VHA's implementation of the MSPV-NG program-from its initial work 
to identify a list of supply requirements in early 2015, through its 
roll-out of the formulary to medical centers in December 2016-was not 
executed in line with leading practices. Specifically, VHA lacked a 
documented program strategy, leadership stability, and workforce 
capacity for the transition that, if in place, could have facilitated 
buy-in for the change throughout the organization. Further, the initial 
requirements development process and tight timeframes contributed to 
ineffective contracting processes. As a result, VHA developed an 
initial formulary that did not meet the needs of the medical centers 
and has yet to achieve utilization and cost avoidance goals. VA made 
some changes in the second phase of requirements development to address 
deficiencies identified in the initial roll out. Key among these was to 
increase the level of clinical involvement, that is, to obtain input 
from the doctors and nurses at VA's individual medical facilities. 
Despite changes aimed at improving implementation, the agency continues 
to face challenges that prevent the program from fully achieving its 
goals.

VA's Lack of an Overarching Strategy and Leadership Instability Were 
    Obstacles to Effective Implementation of MSPV-NG

    VA did not document a clear overall strategy for the MSPV-NG 
program at the start and has not done so to date. About 6 months after 
our initial requests for a strategy or plan, a VHA official provided us 
with an October 2015 plan focusing on the mechanics of establishing the 
MSPV-NG formulary. However, this plan was used only within the VHA 
Procurement and Logistics Office and had not been approved by VHA or VA 
leadership. Leading practices for organizational transformation state 
that agencies must have well-documented plans and strategies for major 
initiatives (such as MSPV-NG) and communicate them clearly and 
consistently to all involved-which included VHA headquarters, the SAC, 
and all 170 medical centers. \8\ Without such a strategy, VA could not 
reasonably ensure that all stakeholders understood VHA's approach for 
MSPV-NG and worked together in a coordinated manner to achieve program 
goals. In our November 2017 report, we recommended that the Director of 
the MSPV-NG program office should, with input from SAC, develop, 
document, and communicate to stakeholders an overarching strategy for 
the program, including how the program office will prioritize 
categories of supplies for future phases of requirement development and 
contracting. VA agreed with this recommendation and reported it would 
have a strategy in place by December 2017.
---------------------------------------------------------------------------
    \8\ GAO, Organizational Transformation: A Framework for Assessing 
and Improving Enterprise Architecture Management, GAO 10 846G 
(Washington, D.C.: August 2010); and Results-Oriented Cultures: 
Implementation Steps to Assist Mergers and Organizational 
Transformations, GAO 03 669 (Washington, D.C.: July 2, 2003).
---------------------------------------------------------------------------
    Leadership instability and workforce challenges also made it 
difficult for VA to execute its transition to MSPV-NG. Our work has 
shown that leadership buy-in is necessary to ensure that major programs 
like MSPV-NG have the resources and support they need to execute their 
missions. \9\ Due to a combination of budget and hiring constraints, 
and lack of prioritization within VA, the MSPV-NG program office has 
never been fully staffed and has experienced instability in its 
leadership. As of January 2017, 24 of the office's 40 positions were 
filled, and program office officials stated that this lack of staff 
affected their ability to implement certain aspects of the program 
within the planned timeframes. In addition, since the inception of 
MSPV-NG, the program office has had four directors, two of whom were 
acting and two of whom were fulfilling the director position while 
performing other collateral duties. For instance, one of the acting 
MSPV-NG program office directors was on detail from a regional health 
network to fulfill the position, but had to abruptly leave and return 
to her prior position due to a federal hiring freeze. In our November 
2017 report, we recommended that VHA prioritize the hiring of a MSPV-NG 
program director on a permanent basis. VA agreed with this 
recommendation and indicated a vacancy announcement will be posted by 
the end of 2017.
---------------------------------------------------------------------------
    \9\ GAO, High-Risk Series: An Update, GAO 15 290 (Washington, D.C.: 
Feb. 11, 2015).

The MSPV-NG Initial Requirements Development Process Had Limited 
---------------------------------------------------------------------------
    Clinician Involvement and Did Not Prioritize Categories of Supplies

    The MSPV-NG program office initially developed requirements for 
items to be included in the formulary based almost exclusively on prior 
supply purchases, with limited clinician involvement. The program 
office concluded in its October 2015 formulary plan that relying on 
data from previous clinician purchases would be a good representation 
of medical centers' needs and that clinician input would not be 
required for identifying which items to include in the initial 
formulary. \10\ Further, rather than standardizing purchases of 
specific categories of supplies-such as bandages or scalpels-program 
officials told us they identified medical and surgical items on which 
VA had spent $16,000 or more annually and ordered at least 12 times per 
year, and made those items the basis for the formulary. Officials said 
this analysis initially yielded a list of about 18,000 items, which the 
program office further refined to about 6,000 items by removing 
duplicate items or those that were not considered consumable 
commodities, such as medical equipment. This approach to requirements 
development stood in sharp contrast to those of the leading hospital 
networks we met with, which rely heavily on clinician input to help 
drive the standardization process and focus on individual categories of 
supplies that provide the best opportunities for cost savings.
---------------------------------------------------------------------------
    \10\ The fiscal year 2014 data on historical purchasing by medical 
centers came from the Medical Product Data Bank database, jointly 
funded by VA and the Department of Defense, and was the principal 
source for identifying potential items to include on the initial 
version of the MSPV-NG formulary.

Requirements Development and Tight Time Frames Contributed to 
---------------------------------------------------------------------------
    Ineffective Contracting Practices for Initial Formulary

    Based on the requirements developed by the program office, SAC 
began to issue competitive solicitations for the 6,000 items on the 
initial formulary in June 2015. Medical supply companies had responded 
to about 30 percent of the solicitations as of January 2016. As a 
result, according to SAC officials, they conducted outreach and some of 
these companies responded that VHA's requirements did not appear to be 
based on clinical input and instead consisted of manufacturer-specific 
requirements that favored particular products instead of broader 
descriptions. Furthermore, SAC did not solicit large groups of related 
items, but rather issued separate solicitations for small groups of 
supply items-consisting of three or fewer items. This is contrary to 
industry practices of soliciting large groups of related supplies 
together. Therefore, according to SAC officials, some medical supply 
companies told them that submitting responses to SAC's solicitations 
required more time and resources than they were willing to commit.
    By its April 2016 deadline for having 6,000 items on the formulary, 
SAC had been working on the effort for over a year and had established 
competitive agreements for about 200 items, representing about 3 
percent of the planned items. Without contracts for the items on the 
formulary in place, VA delayed the launch of the MSPV-NG program until 
December 2016 and SAC began establishing non-competitive agreements in 
the last few months before the launch of MSPV-NG. As shown in figure 1, 
these non-competitive agreements accounted for approximately 79 percent 
of the items on the January 2017 version of the formulary. While this 
approach enabled the MSPV-NG program office to establish the formulary 
more quickly, it did so at the expense of one of the primary goals of 
the MSPV-NG program-leveraging VA's buying power to obtain cost 
avoidance through competition.
[GRAPHIC] [TIFF OMITTED] T1432.001


Initial Formulary Did Not Meet Medical Center Needs, Resulting in Low 
    Utilization of MSPV-NG and a Missed Opportunity to Leverage VA's 
    Large Buying Power

    Once VA's MSPV-NG initial formulary was established in December 
2016, each medical center was charged with implementing it. According 
to logistics officials we spoke with at selected medical centers, they 
had varying levels of success due, in part, to incomplete guidance from 
the program office. Without clear guidance, many medical centers 
reported they were unable to find direct matches or substitutes on the 
MSPV-NG formulary for a substantial number of items they routinely 
used, which negatively impacted utilization rates for the initial 
formulary. In our November 2017 report, we recommended that the 
Director of the MSPV-NG program office provide complete guidance to 
medical centers for matching equivalent supply items. VA agreed with 
this recommendation and indicated it would provide this guidance to 
medical centers by December 2017.
    According to SAC, as of June 2017, only about a third of the items 
on the initial version of the formulary were being ordered in any 
significant quantity by medical centers, indicating that many items on 
the formulary were not those that are needed by medical centers. Senior 
VHA acquisition officials attributed this mismatch to shortcomings in 
their initial requirements development process as well as with VA's 
purchase data.
    VA had set a target that medical centers would order 40 percent of 
their supplies from the MSPV-NG formulary, but utilization rates were 
below this target with a nationwide average utilization rate across 
medical centers of about 24 percent as of May 2017. Specifically, Chief 
Supply Chain Officers-who are responsible for managing the ordering and 
stocking of medical supplies at six selected medical centers-told us 
that many items they needed were not included in the MSPV-NG formulary. 
As such, we found that these six medical centers generally fell below 
VA's stated utilization target. As shown in figure 2, among the six 
selected medical centers we reviewed, one met the target, while the 
remaining five were below 25 percent utilization. \11\
---------------------------------------------------------------------------
    \11\ The one facility that met the target, Hampton VA Medical 
Center, is categorized by VA as a smaller, less complex facility, and 
had fewer items to match, which could contribute to its higher 
utilization.
[GRAPHIC] [TIFF OMITTED] T1432.002

    Instead of fully using MSPV-NG, the selected medical centers are 
purchasing many items through other means, such as purchase cards or 
new contracts awarded by their local contracting office, in part, 
because they said the formulary does not meet their needs. These 
approaches run counter to the goals of the MSPV-NG program and 
contribute to VA not making the best use of taxpayer dollars.
    Greater utilization of MSPV-NG is essential to VA achieving the 
cost avoidance goal of $150 million for its supply chain transformation 
effort. Under the legacy MSPV program, the National Acquisition Center 
tracked cost avoidance achieved by comparing prices for competitively-
awarded MSPV supply contracts with prices available elsewhere. However, 
VHA officials stated that they are not currently tracking cost 
avoidance related specifically to MSPV-NG. In our November 2017 report, 
we recommended that the VHA Chief Procurement and Logistics Officer, in 
coordination with SAC, should calculate cost avoidance achieved by 
MSPV-NG on an ongoing basis. VA agreed with this recommendation and 
reported it would develop a new metric to measure cost avoidance by 
June 2018.

VA Continues to Encounter Requirements Development and Contracting 
    Challenges as It Works to Address MSPV-NG Shortcomings

    In Phase 2 of MSPV-NG, the program office has taken some steps to 
incorporate greater clinical involvement in subsequent requirements 
development, but both its requirements development and SAC's 
contracting efforts have been hampered by staffing and schedule 
constraints. \12\ In the fall of 2016, the program office began to 
establish panels of clinicians to serve on MSPV-NG integrated product 
teams (IPT) assigned to the task of developing updated requirements for 
the second phase of the formulary. Program officials said they had 
difficulty recruiting clinicians to participate. We found that slightly 
more than half (20 of the 38) of the IPTs had begun their work to 
review items and develop updated requirements by the time the MSPV-NG 
program launched in December 2016. Staff on the IPTs had to complete 
their responsibilities by the end of March 2017 while simultaneously 
managing their regular workload as physicians, surgeons, or nurses.
---------------------------------------------------------------------------
    \12\ Work on Phase 2 began while medical centers were implementing 
Phase 1 and beginning to order from the MSPV-NG formulary.
---------------------------------------------------------------------------
    By early March 2017, the IPTs still had about 4,200 items to 
review. Faced with meeting this unrealistic timeframe, the MSPV-NG 
program office had 9 IPT members travel to one location-with an 
additional 10 members participating virtually-to meet for 5 days to 
review the remaining items. Members told us that this time pressure 
limited the extent to which they were able to pursue the goal of 
standardizing supplies, and that their review ended up being more of a 
data validation exercise than a standardization review. VHA ultimately 
met this compressed timeline, but in a rushed manner that limited the 
impact of clinician involvement.
    In our November 2017 report, we recommended that the VHA Chief 
Procurement and Logistics Officer use input from national clinical 
program offices to prioritize its requirements development and 
standardization efforts beyond Phase 2 to focus on supply categories 
that offer the best opportunity for standardization and cost avoidance. 
VA agreed with this recommendation and stated it is in the process of 
finalizing guidance that will detail the importance of involving the 
national clinical program offices in MSPV-NG requirements development 
and standardization efforts.
    The SAC plans to replace the existing Phase 1 non-competitive 
agreements with competitive awards based on the Phase 2 requirements 
generated by the IPTs, but it may not be able to keep up with expiring 
agreements due to an unrealistic schedule. \13\ Because they were made 
on a non-competitive basis, the Phase 1 agreements were established for 
a period of 1 year. In order to keep the full formulary available, the 
SAC director said the staff must award 200 to 250 contracts before the 
Phase 1 agreements expire later this year. SAC officials acknowledged 
that it is unlikely that they will be able to award the contracts by 
the time the existing agreements expire. According to SAC officials, 
they are in the process of hiring more staff to deal with the increased 
workload. Further, the SAC division director told us that they canceled 
all outstanding Phase 2 solicitations in September 2017 due to low 
response rates, protests from service-disabled veteran-owned small 
businesses, and changes in overall MSPV-NG strategy.
---------------------------------------------------------------------------
    \13\ According to VA, the agency plans to use indefinite delivery/
indefinite quantity contracts in addition to blanket purchase 
agreements for Phase 2.
---------------------------------------------------------------------------
    In our November 2017 report, we recommended that the MSPV-NG 
program office and SAC should establish a plan for how to mitigate the 
potential risk of gaps in contract coverage while SAC is still working 
to make competitive Phase 2 awards, which could include prioritizing 
supply categories that are most likely to yield cost avoidance. VA 
agreed with this recommendation and indicated it has developed a plan 
to mitigate the risk of gaps in contract coverage with short- and mid-
term procurement strategies to ensure continued provision of medical 
and surgical supplies to VHA facilities. The department also stated 
that it plans to replace the current MSPV-NG contract and formulary 
process with a new approach where the prime vendor would develop the 
formulary. However, VA will likely face challenges in this new approach 
until it fully addresses the existing shortcomings in the MSPV-NG 
program.
    Chairman Roe, Ranking Member Walz, and Members of the Committee, 
this concludes my prepared statement. I would be pleased to respond to 
any questions that you may have at this time.

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    If you or your staff have any questions about this statement, 
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Individuals who made key contributions to the report on which this 
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Katherine Lenane; Teague Lyons; Roxanna Sun; and Colleen Taylor.

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                 Prepared Statement of Roger D. Waldron
    Good Morning Chairman Roe, Ranking Member Walz and Members of the 
House Committee on Veterans Affairs. Thank you for the opportunity to 
appear before you to address the VA Medical/Surgical Prime Vendor 
(MSPV) program, including its ``Next Generation'' and ``2.0'' 
iterations.
    The Coalition for Government Procurement (The Coalition) is a non-
profit association of firms selling commercial services and products to 
the Federal Government. Our members collectively account for more than 
$145 billion dollars of the sales generated annually through government 
contracts including the GSA Multiple Award Schedules (MAS) program, VA 
Federal Supply Schedule (FSS), the Government-wide Acquisition 
Contracts (GWACs), and agency-specific multiple award contracts (MACs). 
Coalition members include small, medium, and large business concerns 
that provide more than $12 billion worth of medical/surgical products 
and pharmaceuticals to support the health care needs of veterans. The 
Coalition is proud to have worked with Government officials for more 
than 38 years towards the mutual goals of common sense acquisition and 
to support our veterans.
    As you know, the VA uses several strategies to acquire medical/
surgical equipment and supplies including national contracts, federal 
supply schedules and the Medical/Surgical Prime Vendor (MSPV) program. 
It is critical that these programs work together consistently and 
effectively to create a high value acquisition and distribution system. 
The VA faces numerous challenges associated with the management of its 
hospitals and supply chain. Studies, reports, and analyses have been 
published about these challenges and possible solutions. In September 
2016, the Government Accountability Office (GAO) made 10 
recommendations to improve the efficiency and effectiveness of VA 
acquisitions. \1\ On Monday GAO released a new report, GAO -18-34, 
``Veterans Affairs Contracting: Improvements in Buying Medical and 
Surgical Supplies Could Yield Cost Saving and Efficiency'' which 
documents many of the challenges and impacts the of the MSPV-NG on the 
VHA customer and the VA's industry partners over the last two years.
---------------------------------------------------------------------------
    \1\ GAO-16-810, Improvements in Policies and Processes Could Yield 
Cost Savings and Efficiency, September 2016
---------------------------------------------------------------------------
    Earlier this year, the Coalition was pleased to have submitted 
recommendations to the VA to reform its procurement operations in 
connection with the VA modernization program. Attachment 1 to this 
statement contains our detailed recommendations for:

    1. Establishing Clinician Leadership/Program Management

    2. Centralizing VA Procurement Operations

    3. Streamlining Unnecessary and Duplicative Regulations

    4. Improving IT Systems

    5. Reorganizing Pharmacy Benefits Program

    6. Reforming the Role of the VA Office of the Inspector General in 
Contracting

    The Coalition also has been privileged to prepare comments in 
response to the VA's proposed MSPV 2.0. The MSPV program seeks to 
deliver a national strategic sourcing solution that combines a 
formulary approach with electronic cataloging and ordering to support 
the Veterans Administration Medical Centers. VA's version 2.0 would 
outsource the program to a single commercial contractor. The contractor 
would determine what the agency would buy, and how the items would be 
sourced, managed and distributed; administer contracts; and ensure 
quality control. Nationwide electronic ordering and invoicing would be 
facilitated using the commercial contractor's e-commerce platform.
    Coalition members support VA's objectives related to aligning the 
acquisition of medical/surgical products more with commercial best 
practices and increased efficiency. The current MSPV 2.0 proposal, 
however, leaves so many questions unanswered that, at this time, we are 
unable to make a realistic evaluation of its impact on veteran's 
health, VA suppliers or the contracting process. Our questions and 
areas of concern are described in detail in Attachment 4 to this 
statement.
    The Coalition has several fundamental concerns that our members 
believe must be addressed to ensure the success of the MSPV program 
and/or any future VA program for the application of medical/surgical 
equipment and supplies. Specifically, we believe that the VA needs to:

    1.Establish a strong program office, led and managed by clinicians

    2.Be clear that best value for the veteran, not price, will drive 
program requirements

    3.Maximize alignment with commercial practice

    4.Leverage competition to benefit the prime vendor program

A Clinically Led and Managed Program Management Office

    Our members continue to emphasize that a program office led and 
managed by clinicians is a commercial best practice and is critical to 
implementation of a successful prime vendor program that supports 
President Lincoln's promise ``To care for him who shall have borne the 
battle, and for his widow, and his orphan''. The foundation for an 
effective and efficient VA medical supply program, focused squarely on 
the needs of veterans, is a VHA program office that is led by health 
care professionals with both clinical and medical supply chain 
expertise. A clinically led program office possesses the breadth of 
skills and experience to make effective and efficient evaluation of 
medical devices and overall product decisions that result in optimal 
outcomes and best value for patients and practitioners across the VA 
health care system. Our experience with MSPV-NG has shown that without 
clinical program leadership and management, VA is destined to have MSPV 
strategies and decisions that are focused on, and driven by, the 
government ``procurement process,'' potentially compromising the health 
care needs of veterans.
    The lack of clinician and medical supply chain experience within 
the VHA medical/surgical Program Office has led what appears to be the 
view that medical and surgical products are simple and interchangeable 
commodities. This view simply is not the case; these acquisitions cover 
highly regulated and complex medical products with unique 
characteristics that directly impact patient outcomes in VA facilities. 
Under the current program, there have been several issues which seem to 
be contract-driven, rather than clinician-driven. For example, the 
practice of awarding a limited number of line items, rather than the 
standard commercial practice of awarding contracts for coordinated 
suites of products. This practice:

    1.Leads to inefficiencies at VA facilities. The unavailability of 
certain products can impact the ability to perform medical procedures, 
often resulting in cancellations, and it consumes valuable nursing time 
to find and source products;

    2.Challenges industry in the solicitation process to recognize 
individual product codes that may be buried in unfamiliar groupings, 
increasing the potential misalignment of expectations and performance; 
and

    3.Raises concerns for the practice of medical care by end-users. 
Awarding different medical products within a suite of products may 
require additional training for VA medical staff to ensure appropriate 
use, increasing time pressures on already stressed medical staff, and 
potentially introducing safety risks through the expansion of product 
variation.
    The proposed MSPV 2.0 does not address the imperative of a 
clinically-led, successful program office. In fact, MSPV 2.0, as we 
understand the vision, likely will exacerbate the clinician vacuum by 
vesting in a commercial entity, the responsibility and authority to 
develop, determine and manage what products are included on the MSPV 
formulary and how such products are sourced. Coalition members have 
raised questions as to how the VA will ensure that this ``super'' prime 
vendor will ensure an appropriate clinical role when making formulary 
decisions that prioritize patient outcomes for our nation's veterans. 
Moreover, they are concerned that there is no assurance that formulary 
items are NOT selected by the MSPV 2.0 contractor based on competing 
business interests/decisions rather than the health care needs of 
veterans. The establishment of a program office with strong leadership 
by clinicians who have medical supply chain expertise is necessary to 
assure well-developed technical requirements that address these 
concerns. Best value outcomes start with sound, effective and clear 
customer requirements in this regard.
    Coalition members continue to report a lack of clinician input in 
developing technical requirements. For example, in connection with 
MSPV-NG, the Strategic Acquisition Center (SAC) establishes IDIQs and 
BPAs based on requirements developed in consultation with the 
procurement and logistics arm of the VHA. Clinicians apparently provide 
input in some instances, though there is a lack of transparency 
regarding these decisions. Under these circumstances, members are 
concerned that award decisions are based on price and not best value 
for veterans' health care. It is their experience that a lack of 
clinical input has led to an incomplete formulary, which causes supply 
shortages and may require facilities to purchase items via the open 
market, often at a high cost, on government purchase cards. Robust 
clinical leadership during the requirements development process would 
avoid such problems. It is not enough to formalize the current 
``clinical input'' process (the VHA's Integrated Product Teams) being 
utilized under MSPV-NG for the future 2.0 program. See Attachment 2 
providing additional background and recommendations on creating a 
clinician led program office.

Best Value

    Veterans cannot be relegated to ``low price technically 
acceptable'' health care, and for this reason, the VA must clearly 
assert that value, i.e., the facilitation of the most positive health 
care outcomes for veterans, not raw low price, is the objective when 
acquiring medical equipment and supplies for our nation's veterans. 
Value drives positive health care outcomes for veterans. Coalition 
members understand that a significant objective for the MSPV 2.0 is 
cost savings. The MSPV 2.0 vision, to date, however, provides little-
to-no detail regarding how cost savings will be measured and considered 
in the context of medical outcomes, supply chain efficiencies, or the 
like. Further, there is no detail as to whether the responsibility for 
making these important decisions will rest with the MSPV 2.0 contractor 
or the government. Without a clear articulation of a VA position that 
value, not price is the driving force, there is little incentive for a 
contractor to offer the latest innovative, but perhaps more expensive 
new, life-saving technology for our veterans. Given this lack of 
clarity, coupled with the abense of a clinician led and managed program 
office, the Coalition members are concerned that financial incentives, 
rather than a focus on patient outcomes, will drive the program. 
Clinical expertise is essential to making best value selections of 
medical and surgical products.
    Attachment 3 includes a letter from the Coalition to the VAC SAC 
regarding low price technically acceptable evaluation methodology for 
medical/surgical items.

Commercial Practice

    To assure streamlined processes and reasonable prices, we strongly 
urge the VA to align with best commercial practices. In issuing the RFI 
for MSPV 2.0, VA stated that alignment with commercial practice was a 
key objective. Paragraph 2.0 of the Scope section of the RFI, however, 
provides that one contractor will be responsible for ``developing a 
medical surgical supply and equipment formulary for each facility in 
the VA.., [and will] provide strategic sourcing, life cycle management, 
distribution, inventory management and analysis services, quality 
control/quality assurance support services, and warranty management 
services for materials they are responsible for providing.'' This 
approach is inconsistent with commercial practice. Indeed, Coalition 
members report that there is no comparable commercial model that 
provides for a super prime vendor essentially responsible for 
developing, designing, and managing a formulary while at the same time 
distributing, delivering, and managing all the products listed on that 
formulary.
    In particular, as noted in Attachments 2 and 4, the RFI's approach 
does not reflect the complexity associated with establishing, 
competing, and managing the requirements for a medical/surgical prime 
vendor catalog world-wide. As currently constructed, the RFI proposes 
the execution of a competition within a few months. For comparison, our 
members have explained to the VA that pursuant to the commercial model, 
which represents 98-99% of the US market for medical devices, a 
commercial organization, with a clinically led program office, 
typically takes approximately four years to successfully compete such a 
catalogue.
    In addition, our experience with MSPV-NG has shown that the VA does 
not utilize the established medical product categories that are used in 
the commercial market. Although VHA has attempted to create product 
categories, an improvement upon the current line item competitions, 
these categories are government-unique and not recognized by industry. 
Following product categories that are well known in the commercial 
market increases the likelihood of developing a comprehensive scope of 
formulary products that meet the needs of clinicians in the VA medical 
system. To do otherwise risks suffering significant gaps in the 
availability of medical and surgical products on the Formulary, similar 
to the experience under the current MSPV-NG contracts
    Further, MSPV 2.0 should allow companies to distribute their 
products to the VA as they do for commercial hospitals. Specifically, 
although many medical products are available through medical/surgical 
distributers, a considerable number of medical devices are only 
available through direct acquisition from manufacturers. Direct 
ordering from manufacturers for certain products is a standard 
commercial practice typically driven by medical safety requirements and 
the corresponding chain of custody tracking to ensure traceability of 
product. In these circumstances it is neither appropriate nor efficient 
to stock these through distributors. Thus, the VA should look to other 
alternatives such as separate IDIQ contracts of the Schedules program, 
as appropriate.
    In sum, prior to launching MSPV 2.0, the Coalition recommends that 
the VA take the time to identify commercial best practices for the 
medical supply chain and align the VA's purchasing strategy 
accordingly.

Competition

    Finally, VA's proposal for MSPV 2.0 in the RFI assigns one 
commercial entity responsibility for making critical decisions that, 
generally are reserved to the government, specifically, what to buy, 
how to buy, and contract administration. The Coalition cannot emphasize 
enough its recommendations that the VA establish the MSPV 2.0 
formulary, based on requirements developed by a clinically led program 
office, rather than outsourcing this function to a contractor. The 
establishment of the formulary for veterans is an inherently 
governmental function that should be conducted by the government and 
not a private entity. It is the VA's responsibility to identify the 
medical and surgical products that meet the health care needs of 
veterans at best value to taxpayers, as the VA possesses unparalleled 
expertise and intimate understanding of the panoply of needs of this 
client base. A private entity does not, and thus to allow that private 
entity to do so would risk formulary decisions being made based on an 
individual contractor's business and financial incentives, rather than 
the best interest of veterans. It is also a direct business conflict of 
interest for a single contractor to both manage and perform the 
requirement. Here, the contractor would be responsible for the overall 
development/management of the formulary and delivery of all the items 
listed on that formulary
    The VA's proposal also would allow a single 2.0 prime vendor to 
have total control over the program, without any readily discernible 
checks, and it assumes that further consolidation of the MSPV program 
is desirable. The Coalition believes that this approach is flawed 
because it fails to recognize the is the value to competition and 
having multiple prime vendors to supply VA health care facilities 
world-wide. For instance, distribution is a commercial activity, with 
many competent players at a regional or sub-regional level. Rather than 
leverage competition among those players, VA's MSPV 2.0 vision cedes 
disproportionate market power to one firm. Over time, vesting too much 
authority into a single contractor is not good for government or its 
supplier base because it enables the contractor to control not only the 
federal market, but also federal suppliers in ways that may be 
detrimental to the government and the ultimate customer, veterans. By 
way of example, this disproportionate market power can affect:

      VA's ability to replace a non-performing prime vendor
      A supplier's ability to access VA procurement through a 
single point of entry
      Continual performance improvement over the life of the 
contract due to competition
      The ability of small/small disabled veteran businesses to 
either contract with VA directly as prime contractors or successfully 
participate in the prime vendor program.

    VA is still in the process of creating its vision for MSPV 2.0. 
Program development and implementation will likely occur over an 
extended period of time. Given the millions of veterans impacted by the 
program, the Coalition strongly urges VA to stabilize the current 
program while it takes the time to explore future options.
    We recommend that VA immediately launch a clinician led management 
program office that will lead initiatives to both shore up the current 
MSPV-NG program, and help build future programs. The program office 
should have a clinical leader and clinical staff, mixed with 
experienced medical supply chain professionals. We also recommend that 
VA reinvigorate use of the VA Federal Supply Schedule contracts 
(Schedules) to help stabilize the current program and streamline 
procedures at the VA National Acquisition Center to support the MSPV-NG 
program. In the past the VA and its prime vendors relied heavily on 
Schedules to supply medical/surgical equipment and supplies. The 
Schedules feature:

      Established contract relationships with major suppliers;
      A broad representation of small and large contractors;
      Extensive choices among commercial products; and
      Streamlined ordering that allows VA to leverage its 
volume.

    With an anticipated rise in the micro-purchase threshold, the 
Schedules should become easier to use than they are now. The Coalition 
has submitted to VA a number of recommendations to streamline the 
Schedules contracting process and enhance the government's ability to 
add new and innovative products and services. We have attached those 
recommendations to this statement.
    Thank you for the opportunity to submit this statement. I will be 
happy to answer questions.

Attachment 1

    August 2, 2017

    Mr. Greg Giddens
    Modernization Lead
    Department of Veterans Affairs
    810 Vermont Ave, NW
    Washington, DC 20420

    Subject: Department of Veterans Affairs Modernization

    Dear Mr. Giddens,

    The Coalition for Government Procurement (Coalition) appreciates 
the opportunity to submit comments regarding the reorganization and 
modernization efforts at the Department of Veterans Affairs (VA).
    The Coalition for Government Procurement (The Coalition) is a non-
profit association of firms selling commercial services and products to 
the Federal Government. Our members collectively account for more than 
$145 billion dollars of the sales generated through government 
contracts including the GSA Multiple Award Schedules (MAS) program, VA 
Federal Supply Schedule (FSS), the Government-wide Acquisition 
Contracts (GWAC), and agency-specific multiple award contracts (MAC). 
Coalition members include small, medium, and large business concerns 
that provide more than $12 billion worth of pharmaceuticals and 
medical/surgical products to support health care needs of our nation's 
veterans. The Coalition is proud to have worked with Government 
officials for more than 38 years towards the mutual goals of common 
sense acquisition and support for our veterans.
    The Coalition is submitting these comments on behalf of our members 
in response to the ``Executive Order on a Comprehensive Plan for 
Reorganizing the Executive Branch,'' directing agencies to enhance 
efficiency, effectiveness, and accountability by reorganizing and 
eliminating unnecessary agencies, components, and programs. The 
Coalition sincerely appreciates the opportunity to provide input 
regarding opportunities to increase efficiencies in VA's acquisition 
functions. If there are any questions I may be reached at (202) 331-
0975 or [email protected].

    Sincerely,

    Roger Waldron
    President

VA Modernization Recommendations

    In Fiscal Year 2016, the VA obligated more than $23.2 billion to 
prime contractors-more than a third of the VA's total discretionary 
budget. Contractors are essential to the VA's mission, providing 
pharmaceuticals, services, and medical supplies and equipment that are 
required for the care for our Nation's veterans. The VA faces numerous 
challenges associated with the management of its hospitals and supply 
chain. Studies, reports, and analyses have been published about these 
challenges and possible solutions. Instead of duplicating this work, 
the Coalition's comments solely focus on recommendations for reforming 
the VA's procurement operations in order to maximize quality health 
care services for veterans. The Coalition recommends:

    1.Increasing Clinician Input

    2.Centralizing VA Procurement Operations

    3.Streamlining Unnecessary and Duplicative Regulations

    4.Improving IT Systems

    5.Reorganizing Pharmacy Benefits Program

    6.Reforming the Role of the VA Office of the Inspector General in 
Contracting

1. Increasing Clinician Input
    Coalition members report that there is a lack of clinician input in 
the VA procurement process. For example, for MSPV-NG, the Strategic 
Acquisition Center (SAC) establishes IDIQs and BPAs based on 
requirements developed in consultation with the procurement and 
logistics arm of the Veterans Health Administration (VHA). Clinicians 
apparently provide input in some instances, though there is a lack of 
transparency regarding these decisions and members are concerned that 
the awards are primarily based on price, rather than best value for 
veterans' health care. A lack of clinical input will lead to an 
incomplete formulary, which causes supply shortages and may require 
facilities to directly purchase items. Likewise, input by clinicians 
into the selection of drugs and biologics for the National Formulary is 
not transparent and there are impediments to drug company 
representatives providing information to VA medical professionals 
regarding clinical aspects of non-formulary drugs. By comparison, as 
discussed below, the Department of Defense (DoD) has a process for 
formulary decision-making that includes input from manufacturers and 
representatives of Tricare beneficiaries and publication of the basis 
for the Pharmacy and Therapeutics Committee recommendations. 
Additionally, there is no visibility into the process for transitioning 
care from DoD to the VA, including integration with DoD clinicians, to 
ensure the VA is providing access to products based on their 
effectiveness and appropriateness and not just low cost.

Recommendations:

      Create an office (similar in function to Pharmacy 
Benefits Management (PBM) and Prosthetics and Sensory Aids Service) 
which is responsible for providing clinician input to the MSPV-NG
      Streamline the VHA procurement bureaucracy to allow 
clinicians to have more input in ordering-including, as suggested 
below, streamlining and merging the acquisition functions of the VHA 
and OALC.
      Provide greater transparency in clinician's product 
recommendations similar to the PBM

2. Centralizing VA Procurement Operations

    The decentralized nature of the VA's procurement operations at the 
VA headquarters level and within the Veterans Health Administration 
(VHA) leads to significant inefficiencies and delays in the delivery of 
health care products and services to veterans compared to the 
commercial market.
    VA procurement offices, like the Strategic Acquisition Center and 
National Acquisition Center, report to different management offices at 
VA headquarters leading to duplication, and a lack of coordination and 
consistency in how health care products and services are purchased by 
the VA. Currently, many VA suppliers invest in contracting with the VA 
through both the Federal Supply Schedules (FSS) program and the 
Medical/Surgical Prime Vendor (MSPV) program for the same products. 
Consolidating the operations and leadership of these programs would 
lead to greater consistency and drive process improvements that would 
reduce costs for contractors. Reduced operational costs will allow for 
increased health care services for veterans.

Recommendations:

      Streamline and centralize the VA's acquisition 
operations--move the NAC and the SAC into the same organization. 
Additionally, the VA should merge the acquisition functions of the OALC 
and the VHA in order to streamline the procurement process. Coalition 
members remain concerned that clinician input (which comes from VHA) is 
divorced from contracting decisions made by the NAC and the SAC.
      Develop standard operating procedures for the MSPV-NG and 
VAFSS programs with the goal of reducing acquisition lead times, 
developing greater consistency in requirements and interpretations of 
policies/procedures, adding new products to contract, streamlining 
solicitations and awards
      Increase transparency and communications by:
      Improving coordination and shared internal and external 
communications from the NAC and SAC
      Establishing an Industry Liaison or ombudsman within each 
program to respond to general questions, refer contractors to 
appropriate VA resources, raise issues of concern with leadership
      Establish standard processing times for the completion of 
modifications
      Update the Priority for Use of Government Supply Sources 
to provide greater clarity to both VA purchasers and contractors
      Extend VAFSS contract term to 5-year contracts with three 
5-year option periods consistent with GSA Schedules to streamline 
processes for government and industry
      Additionally, the VA's should establish additional 
national contracts with Ordering Officer Delegation (OOD). Currently, 
only two national contracts have OOD; the lack of this capability 
forces contracting to a local level resulting in a slow process.

    3. Streamlining Unnecessary and Duplicative Regulations

    The current VA regulatory environment for procurement is overly 
burdensome and complex. Coalition members report that contract actions 
on the VA Schedules can take as much as three times longer than 
comparable actions on the GSA Schedules. While these regulations and 
long delays represent a significant burden for industry (including 
Veteran-Owned Small Businesses), the VA's contracting workforce must 
also devote significant resources to compliance with certain regulatory 
requirements. Most importantly lack of a streamlined process fails to 
ensure that high quality products and services are available to 
veterans as quickly and efficiently as possible.

Recommendations:

      Eliminate the Price Reductions Clause (PRC). While the 
Coalition has consistently advocated for the removal of the PRC from 
the Schedules program, the need to remove the PRCis particularly 
evident for Schedule 65 I B Drugs, Pharmaceuticals, & Hematology 
Related Products, since the Veterans Health Care Act already controls 
the price of covered drugs. Ultimately, the PRC's only one regulation 
which is unnecessary and duplicative. The VA Regulatory Reform Officer, 
in compliance with Executive Order 13777 ``Enforcing the Regulatory 
Reform Agenda,'' should be given the appropriate resources, 
particularly staff, to complete a thorough review to identify other 
unnecessary practices to eliminate and/or reform.
      Create a FSS Program Office housed within GSA which would 
include VA acquisition professionals on detail. The office would ensure 
the alignment of GSA and VA/MAS policies, increase productivity, and 
reduce cycle time. The FSS Program Office would also be responsible for 
resolving differences between the VA and GSA on key regulatory and 
policy matters. The Coalition has identified several areas where the VA 
and GSA have different policy interpretations including: (i) 
negotiating for lowest price, considering terms and conditions, (ii) 
negotiating for products versus product lines, and (iii) the approach 
to resellers.

4. Improving IT Systems

    There has been significant attention given to the VA's electronic 
health records, but there are other IT systems which are in dire need 
of updates to support a better health care system for veterans. For 
example, the VA needs updates to its IT systems that handle basic 
business functions such as billing, claims, payment, and contract 
administration. An IT system that collects information on the VA's 
supply chain utilization is also essential to identifying what the VA 
is purchasing, and how improvements can be made over time. Outdated IT 
systems and manual processes lead to unnecessary delays and 
inefficiencies in the VA health care system.

Recommendations:

      For the FSS program, leverage existing resources of the 
GSA such as e-offer and e-mod, which will reduce contracting time at 
the NAC. When administering the VA Schedules, the VA should focus on 
health care for veterans and leave FSS administrative matters to GSA.
      The VA should establish an integrated IT system to 
support supply chain management. This system would be essential to 
resolving issues such as late payments and product shortages and better 
inform the VA about purchasing trends and behaviors.

5. Reorganizing the Pharmacy Benefits Program

    DoD, in managing its pharmaceutical benefits program, permits 
clinical input from industry and beneficiaries during a transparent 
decision-making process that considers clinical and cost effectiveness 
of products. Ultimately, decisions focus on clinical/therapeutic 
attributes, as well as price. Additionally, DoD posts the basis for its 
decisions on a public website. Further, a Beneficiary Advisory Panel 
holds public meetings to comment on formulary recommendations before 
they are finalized including the effect on patients if prescribed 
medication will no longer be as accessible, for example if conditions 
are imposed on their use. New drugs are considered for formulary 
placement within a set time after coming on the market to ensure 
products are timely reviewed and those available through military 
treatment facilities are purchased. Additionally, DoD manages blanket 
purchase agreements (BPA) for pharmaceutical agents on its formulary 
through a class review process in order to leverage market forces. 
Coalition members remain concerned about the VA's formulary process, 
which less structured than in DoD. The VA's process could be 
strengthened by implementing a similar process, while increasing 
clinician input and improving outcomes for veterans. Finally, veterans 
receiving care remotely may not be able to easily travel to a VA 
facility to receive a prescription. Integrating retail pharmacies would 
resolve this issue and provide a better outcome for veterans.

Recommendations:

      The VA should modify their formulary process by creating 
an effective, efficient, and integrated pharmacy benefits program 
modeled after the DoD program (see 31 CFR  199.21). 
Additionally, the VA should allow for manufacturer input and engage in 
frequent and effective communication with industry-for example DoD 
allows for manufacturer input in the decision- making process, will 
post the minutes from its meetings on their website, and has defined 
decision-making criteria.
      Another important aspect of DoD's process for procuring 
pharmaceuticals is that they will compete BPAs for agents that are 
added to the formulary, thereby taking advantage of volume discounts 
and market forces. The VA should adopt this model and issue a class 
deviation on the Multiple Award Schedule ordering procedures in 
FAR8.405-3 to streamline the process for creating single award BPAs for 
pharmaceutical agents on the formulary. The Coalition raised this issue 
in 2011 when the MAS ordering procedures were proposed, and we believe 
that the VAwould benefit from revisiting it.
      New drugs should be reviewed for addition to the 
formulary within six months after they are available commercially.
      Veterans receiving care remotely should not have to 
obtain their initial prescriptions from a VA facility, which could be 
many miles away, or through mail order, which could take two weeks. 
Allowing retail pharmacies to dispense initial prescriptions of 30-days 
while requiring refills of maintenance drugs through mail order. 
VAshould implement a process that complies with Veterans Choice and 
ensures immediate access to needed medication without overburdening the 
beneficiary.

6. Reforming the Role of the VA Office of the Inspector General in 
    Contracting

    The VAOIGplays a crucial role in detecting waste, fraud, abuse 
within the VA and is essential to protecting the interests of veterans 
in the VA's care. However, the OIG's role in contracting is overly 
expansive, which, ultimately, leads to significant delays. Veterans may 
wait months in order to receive innovative products and 
pharmaceuticals. This is particularly true in the case of mandatory 
pre-award audits, which often must be repeated. GSA, which administers 
the Schedules program, does not require pre-award audits.

Recommendations:

      Eliminate the OIG's pre-award and post-award audit 
functions for the VAFederal Supply Schedules (FSS). The administrative 
and pricing review functions can be completed by the contracting 
officer. The OIG should focus its efforts on investigating cases of 
suspected fraud related to the VAsupply chain. Additionally, this would 
eliminate any potential conflicts of interest.
      Transfer pricing support staff to the National 
Acquisition Center (NAC). Members report that contract award and 
modification times at the NACare at an all-time high-preventing 
veterans from accessing new and innovative products and discouraging 
veteran-owned companies from participating in the FSS. Transferring 
these staff to the NACand removing the OIG's audits function will 
significantly speed up the process

Attachment 2

The Core Issue: VHA needs a Clinically Led and Managed VHA Program 
    Office

Background:

      Medical devices are highly regulated and frequently very 
complex devices, which lead to specific medical outcomes in the hands 
of the surgeon or clinicians and often have variations in cost of use. 
Commercial hospital systems recognize these complexities, and create 
oversight organizations that are permanently staffed with individuals 
with both clinical and medical supply chain expertise to evaluate 
medical devices and make product decisions that result in optimal 
outcomes and best value for their patients and clinicians across their 
hospital system
      Industry supports and encourages VHA to follow the 
commercial models which represents 98-99% of the US market vs 1-2% for 
VHA, and make enterprise level decisions through their Program Office 
for medical devices to improve efficiencies for both VA and industry, 
however the overwhelming concern of the medical device industry as well 
as VAMCs is that the VHA Program Office is neither clinically led nor 
staffed with experienced medical supply professionals. It is roughly 
the equivalent of trying to fly an airplane with individuals who are 
not pilots

Problems that the current VHA Program Office creates:

      The absence of relevant expertise to lead the program has 
led to many challenging issues:

      The NG-MSPV program was created without proper leadership 
from VHA, and instead was created by individuals unfamiliar with 
medical devices. It has been recognized as a total failure and costly 
to VA. Examples include:

      Naive to sheer size and effort of task: VHA did not 
recognize the level of complexity and the challenge of competing 
requirements for a med-surg PV catalog. A process that a commercial 
organization (like the GPO Premier) with all the key experienced 
clinical staff in place, would take four years to execute, was 
approached by VHA to complete in only a few months
      Poor procurement strategy by VHA: VHA Program Office was 
unfamiliar with established medical product categories, and elected to 
compete individual line items rather than recognized product category 
suites, resulting in significant product suite gaps and confusing 
product mixes that did not meet the needs of VHA clinicians. When VHA 
later attempted to create product categories, they developed ones that 
were hospital departments (Exam Rooms, OR Supplies, Central Supplies, 
etc) rather than product categories industry would recognize and 
respond to
      Unrealistic goal to restrict medical products to only 
highest volume products: VHA decided to severely restrict the number of 
lines on formulary that did not adequately support clinical care, 
eliminating critical product sizes needed by clinicians
      Low price approach: VA used a single award based on 
lowest price for most of the MSPV awards, resulting in products that 
were not acceptable to clinical users and also awards that did not take 
into consideration other factors such as:

      Award for medical disposables that were lowest price but 
did not function with existing medical equipment at VAMCs
      Award for medical disposables that did not factor that 
VAMCs would incur additional costs as other disposable products would 
need to be used with the awarded product, resulting in higher cost in 
use for VA
      Award for medical product that did not factor total costs 
to VAMCs, such as construction costs for the change
      Lack basic understanding of medical supply chain: VHA was 
unaware of very basic medical supply chain structure that while many 
medical products are available through med-surg distributors, there is 
a significant number of medical devices that are only available direct 
from manufacturers, which led to VA SAC spending significant 
contracting time, dollars, and effort to create solicitations for the 
direct only products that manufacturers would not respond to as it was 
inconsistent with the commercial model. VA also created unrealistic 
goals for procurement through MSPV based on this lack of knowledge that 
VAMCs could never meet
      Confused by medical products: Many solicitations were 
posted that reflected that medical products confuse VHA, such as an ENT 
catheters posted in a Urology Supply solicitation.

Negative Impact to VA and Industry

      VHA clinician satisfaction: Clinicians at VAMCs are very 
unhappy with current product availability and access, as it impacts the 
ability to perform medical procedures, often resulting in 
cancellations, and also consumes valuable VHA nursing time trying to 
find and source products. This impacts veteran access and satisfaction 
with VA Medical Centers, and physician/nurse retention
      VAMCs opinion of the VHA Program Office and their 
decisions is very low: VAMCs are very aware and vocal that the VHA 
Program Office lacks the clinical and medical supply chain experience, 
which they view as being less than exists at their own VAMCs, and 
consequently ignore many of the decisions from Program Office as it 
fails to meet their needs
      Purchase card use: VAMCs are using government purchase 
cards at an increasing rate as needed products are no longer available 
from the MSPV, increasing costs but also increasing the very real risk 
of gray market and/or counterfeit medical device purchases outside of 
the secure medical supply chain (MSPV), and ongoing problem for VHA for 
a number of years
      Industry opinion of VHA: Industry is experiencing ``bid 
fatigue'', and has occurred significant costs in trying to respond to 
solicitations that are poorly developed and then cancelled. Industry 
extremely concerned about lack of resolve from VHA leadership to 
correct and lead the program

The Solution

      Create an Effective VHA Program Office: An effective VHA 
Program Office would be staffed in similar fashion to other federal 
agencies that manage medical products: have a clinical leader and 
clinical staff, mixed with experienced medical supply chain 
professionals, and preferably all these individuals would have 
experience working within the VA system and have knowledge of the 
unique processes. Models to replicate would be DHA MedLog, which is the 
med-surg equivalent for DoD and is led by a critical care nurse, and 
staffed with seasoned medical logisticians and nurses who have actually 
worked in Military Treatment Facilities. The VA PBM is a good VA 
example of what a program office should look like, led by a pharmacist 
and staffed with clinicians who have experience working in VAMCs. 
Common elements of a good federal medical program office:
      Leader is a clinician (RN, pharmacist, or MD) who has 
also worked in a VA/DoD medical center and familiar with VA/DoD medical 
supply chains
      Staffed full-time with other clinicians and medical 
supply chain professionals (logisticians), who have also worked in a 
VA/DoD medical center
      VHA needs to create career paths for medical supply 
professionals to insure VHA has a bench of qualified individuals to 
work at the national Program Office level, similar to how DoD develops 
medical supply professionals

Attachment 3

    August 8, 2017

    Phil Christy
    Acting Executive Director, Office of
    Acquisition Operations
    Department of Veterans Affairs
    810 Vermont Ave NW
    Washington, DC 20420

    Subject: Solicitation for MSPV- Next Generation

    Dear Mr. Christy,

    The Coalition for Government Procurement appreciates the Strategic 
Acquisition Center (SAC) publication of draft solicitations for the 
Next Generation Medical/Surgical Prime Vendor (MPSV) program and the 
opportunity for industry to provide feedback in response. We would like 
to submit the following comments on the MSPV solicitations on behalf of 
our member companies.
    The Coalition for Government Procurement (The Coalition) is a non-
profit association of firms selling commercial services and products to 
the Federal Government. Our members collectively account for more than 
$145 billion dollars of the sales generated through government 
contracts including the GSA Multiple Award Schedules (MAS) program, VA 
Federal Supply Schedule (FSS), the Government-wide Acquisition 
Contracts (GWAC), and agency-specific multiple award contracts (MAC). 
Coalition members include small, medium, and large business concerns 
that provide more than $12 billion worth of pharmaceuticals and 
medical/surgical products to support health care needs of our nation's 
warfighter and veterans. The Coalition is proud to have worked with 
Government officials for more than 38 years towards the mutual goals of 
common sense acquisition and support for our veterans.
    Based on our member companies extensive experience with medical 
device supply chains in both the government and commercial sectors, and 
also consistent with feedback member companies have heard from VA 
Medical Centers, many believe the current MSPV-NG program formulary is 
being driven through a process that may actually result in 
significantly less use of the MSPV. Rather than the VA developing a 
program designed to meet the clinical end-users needs which creates 
efficiencies and reduces VA system costs, the NG-MSPV program is being 
driven by government contracting goals that do not reflect the reality 
of effectively managing medical devices. Our concerns include the 
following:

      Lowest price technically acceptable (LPTA) source 
selection
      A lack of consistent and effective clinician input
      Risks associated with grey market items

    We appreciate your attention to these matters impacting the 
efficiency and effectiveness of the medical and surgical supply chain 
and the quality of health care for veterans.

Lowest Price Technically Acceptable Source Selection

    The MSPV program seeks to deliver a national strategic sourcing 
solution that combines a formulary approach with electronic cataloging 
and ordering to support the Veterans Administration Medical Centers. 
The program relies on four Prime Vendor Contracts and supporting 
Indefinite Delivery-Indefinite Quantity (IDIQ) contracts with 
suppliers. Additionally, Section E.14 of the Request for Proposals 
(RFP) notes that the contract award for the IDIQ's will be determined 
in accordance with FAR 15.101-2, LPTA Source Selection Process. LPTA 
source selection procedures are being used in the RFP's for Patient 
Care Products, Urology, Respiratory Products, Medical Imaging Products, 
and many other hospital department level groupings.
    Given the nature of these procurements, a LPTA source selection 
raises significant concerns. LPTA source selections are most effective 
in situations where unsuccessful contractor performance is minimal and 
where there is little value or need to pay for higher performance. 
Those criteria are not met in this situation. The SAC is procuring 
products that will be used in the care and treatment of our Nation's 
veterans-these are situations where the quality of the products is 
integral to the health care outcomes for our veterans. As such, an LPTA 
source selection is inappropriate. Further, products within these 
categories may be complex devices with unique features that 
differentiate them from a clinical perspective, or that reduce overall 
cost of care, making comparative clinical and cost effectiveness a more 
appropriate standard.
    Section E.14 of the RFP's for Patient Care Products, Urology, 
Respiratory Products, and Medical Imaging Products also directs 
offerors to provide tiered pricing information based on unit volume. 
Additionally, offerors may be subject to a Unit of Measure adjustment 
(calculated at 4.4%) based on the Unit of Issue. This pricing approach 
ignores commercial practices where vendors usually sell products as 
packages or cases, rather than individual units.
    We recommend that the VA reconsider its use of LPTA selection 
criteria for these and future MSPV solicitations, and instead focus on 
a program that is based on best value decisions with clinician input.

Clinician Input in the MSPV

    Coalition members remain concerned about the level of clinician 
input in the MSPV program. There have been several issues which seem to 
be contract-driven, rather than clinician-driven.
    The practice of awarding by line item rather than the standard 
commercial practice of awarding contracts by a coordinated suite of 
products 1) leads to inefficiencies with VA and industry contracting, 
2) challenges industry with the basic recognition of the solicitations 
as individual product codes are buried in unfamiliar groupings, and 
most important, 3) concerns for the practice of medical care by end-
users. Awarding different medical products within a suite of products 
may require additional training for VA medical staff for each product 
code to ensure appropriate use, increasing time on already stressed 
medical staff and potentially increasing safety risks by increasing 
variation. Robust clinical oversight during the requirements 
development would correct this issue and be aligned with the best 
practice of contracting by a coordinated suite of products.
    Many products that are proprietary were posted under the Brand Name 
or Equal solicitations, even though there are no equivalents. These 
will include a number of products that are disposable components for 
capital equipment located at VAMCs, and using other disposables will 
typically not work with that equipment, may invalidate the equipment 
warrantee, or could cause patient harm. We believe that these items, if 
there was robust clinical input, would have been place in the Brand 
Name Only designation.
    Additionally, products are being placed under improper categories. 
For example, a Coalition member identified an ear, nose, and throat 
product was posted under the urology category. Although this issue has 
been rectified, the Coalition remains concerned that the products and 
categories of the contract are not properly aligned. Duplicate product 
codes are also being uncovered in totally different solicitations 
(example: same product code listed in Medical Imaging and also in OR 
Supplies). This would be resolved if contracted by coordinated suites 
and product categories, rather than line item by hospital department.
    We recommend that the SAC immediately incorporate clinician input 
into their contracting process, including individuals with robust 
medical supply chain experience. A model that the SAC could emulate is 
the Department of Defense (DoD) pharmaceutical formulary process (see 
31 CFR  199.21). The DoD Pharmacy and Therapeutics Committee 
assures that the selection of agents for the formulary is based on 
broadly representative professional expertise concerning clinical and 
cost effectiveness of products within the pharmaceutical agent class. 
The Committee's decisions and minutes are posted publicly, and industry 
is given the chance to provide their input and feedback to the 
Committee. This process ensures sufficient clinical input for the DoD 
formulary in assessing clinical differentiators and cost tradeoffs as 
well as identifying errors in category assignments. There should be a 
permanent organization in the VA responsible for ensuring clinician 
input, which is crucial to the MSPV's success.

Grey Market Items

    The Coalition supports the SAC's efforts to prohibit grey market 
items from being sold through the MSPV-NG via unauthorized resellers. 
The MSPV solicitations include a definition of grey market goods that 
we recommend be modified consistent with commercial practice. Section B 
of the solicitation defines a grey market good as, ``genuine branded 
goods sold outside of an authorized sales-territory (or by non-
authorized dealers in an authorized territory) at prices lower than 
being charged in authorized sales territories [emphasis added] (or by 
authorized dealers).'' Instead, we recommend the following:

    The Contractor shall provide only new equipment and new parts for 
the required products described herein. ABSOLUTELY NO ``GREY MARKET 
GOODS'' shall be provided under any Delivery Order. Grey Market Goods 
are defined as genuine branded goods sold outside of the manufacturer's 
authorized. Grey market goods purchased from unauthorized sources have 
left the authorized supply chain and may not be stored in conditions 
that meet the manufacturer's specifications, and medical devices could 
be counterfeit or adulterated which pose a threat to patient safety. 
Grey market items will typically invalidate a manufacturer's warranty. 
All Equipment must be covered by the manufacturer's warranty.

    We recommend that the ``grey market good'' definition be modified 
to remove the reference to price and to provide some rationale as to 
why grey market items are prohibited for delivery orders. Grey market 
items may have a lower price or a higher price than the price of items 
sold within the authorized medical supply chain. Unauthorized resellers 
could purchase the product from an authorized distributor and then 
resell to the government at a higher price. The price of an item does 
not relate to whether it is a grey market good or not. The revised 
``grey market goods'' definition above also emphasizes the risk to 
patient safety of purchasing outside of an authorized distributor 
network and potential invalidation of the manufacturer's warranty.
    In summary, the Coalition recommends that the SAC:

    1)Reconsider use of LPTA source selection criteria for the MPSV 
RFP's. Instead we recommend a program based on best value decisions and 
clinician input.

    2)Incorporate more clinician review into the MSPV RFP's. The 
Coalition has identified several aspects of the RFP's including the 
unit of measure adjustment and the groups that may not be supported by 
clinicians.

    3)Host a meeting between the SAC, VHA, and industry, so that 
stakeholders can discuss the process for clinician input and identify 
solutions.

    4)Create a permanent office that is responsible for delivering 
clinician input. This process could be modeled on DoD's pharmaceutical 
formulary process.

    5)Revise the definition of grey market items as proposed.

    Thank you for considering the Coalition's comments concerning the 
Next Generation MSPV. If there are any questions, please contact me at 
(202) 331-0975 or [email protected].

    Sincerely,

    Roger Waldron
    President

Attachment 4

    November 9, 2017

    Brian C. Love
    Contracting Officer, MSPV 2.0
    Strategic Acquisition Center (SAC)
    Department of Veterans Affairs
    10300 Spotsylvania Ave, Suite 400
    Fredericksburg, VA 22408

    Dear Mr. Love,

    The Coalition for Government Procurement appreciates the 
opportunity to respond to the Department of Veteran Affairs (VA) 
October 19, 2017, Request for Information and Statement of Objectives 
(SOO) seeking information about the capability, capacity, and viability 
of US businesses that provide product supply chain end-to-end 
management. VA is considering options for the next iteration of its 
current Prime Vendor program for medical surgical supplies and 
equipment.
    The Coalition for Government Procurement (The Coalition) is a non-
profit association of firms selling commercial services and products to 
the Federal Government. Our members collectively account for more than 
$145 billion dollars of the sales generated through government 
contracts including the GSA Multiple Award Schedules (MAS) program, VA 
Federal Supply Schedule (FSS), the Government-wide Acquisition 
Contracts (GWAC), and agency-specific multiple award contracts (MAC). 
Coalition members include small, medium, and large business concerns 
that provide more than $12 billion worth of pharmaceuticals and 
medical/surgical products to support health care needs of our nation's 
warfighters and veterans. The Coalition is proud to have worked with 
Government officials for more than 38 years towards the mutual goals of 
common sense acquisition and support for our veterans.
    VA would like to improve the quality, effectiveness and efficiency 
of its medical/surgical prime vendor program by using best commercial 
practices and technology. To achieve these objectives, the Department 
is examining the possibility of a single contractor that would provide 
VA worldwide, a turn- key solution, for a one-stop-shop acquisition 
platform for medical supplies, equipment, and related products. As we 
read the notice, VA is anticipating that the potential contractor 
would:

    A.Determine what the agency would buy

    i.''.be responsible for developing a medical surgical supply and 
equipment formulary for each facility in VA .''

    B.Acquire the items

    i.''.provide strategic sourcing...''

    C.Manage and distribute the items

    i.'' .life cycle management, distribution, inventory management.''

    D.Administer contracts and assure quality control

    i.''.analysis services, quality control/quality assurance support 
services, warranty management services, and

    E.Provide for electronic ordering, invoicing, and real-time status.

    These services would be provided using an e-commerce platform that 
incorporates best business practices.
    Coalition members support VA's objectives related to aligning the 
acquisition of medical/surgical products more with commercial best 
practices and increased efficiency. Before, however, we can 
realistically assess MSPV 2.0, there are a number of important 
questions that VA must address. Those questions are set forth below. 
Without answers to these questions, Coalition members are concerned 
that VA's vision could negatively impact the ability of government 
suppliers to adequately respond to the health care needs of veterans. 
The Coalition values opportunities for continued discussion with VA on 
these questions.

1. Is the MSPV 2.0 vision based on a viable commercial model?

    Despite the expansive involvement of our member companies in the 
market for commercial items, our members question whether there is an 
existing commercial provider that can deliver the extensive scope of 
services described in the FBO notice for medical supplies and 
equipment.
    VA's current prime vendor program supports more than 9 million 
veterans. An initiative that moves to a new, commercially untested e-
commerce platform should be undertaken only in increments, after a 
series of periodic evaluations, over a period to time. To do otherwise 
risks failing the health care needs of veterans.
    Prior to launching MSPV 2.0, the Coalition recommends that the SAC:

    a.Identify through what channels the medical and surgical products 
considered for the program are purchased in the commercial market 
(recognizing that they are bought through different pathways, not just 
one)

    b.Align the VA's purchasing strategy with these commercial 
practices

    c.Coordinate with the program offices that are already contracting 
for these products, ensuring that there is no duplication of effort

    We also recommend that the VA consider following the VHA's 
pharmacy/prosthetics/logistics working group as a model, which 
determines the responsibility and management for specific products. A 
MSPV/equipment/direct working group could be established to coordinate 
the efforts between the responsible program offices.

2. Does the Veterans Health Administration (VHA) have a clinically led 
    and managed program office that will determine which products will 
    be acquired through MSPV 2.0?

    Coalition members note particularly that there is a lack of 
clinician involvement in determining what products are included on the 
current MSPV-NG formulary and how such products are sourced. To date, 
VHA has not taken responsibility for its medical supply chain by 
establishing a clinician led and managed MSPV program office. Under the 
proposed model, how would the VA ensure that the prime vendor has the 
appropriate clinical staff to make formulary decisions that prioritize 
patient outcomes? How would the VA ensure that formulary items are NOT 
being selected by business people based on business decisions?
    The Coalition is concerned that under the current proposal, 
financial incentives rather than a focus on patient outcomes will drive 
the program. There is also concern that without the program being led 
and managed by clinicians at VHA, many of the same challenges with the 
current MSPV program will continue into the next iteration.

    3. Should ``medical equipment'' items be excluded from the 
formulary given that, commercially, they are sold direct from 
manufacturers and not through distributors?

    VA mentions that medical equipment items will be included in the 
Formulary. These types of products are typically purchased direct from 
manufacturers and not sold through distributors in the commercial 
market. Many equipment items such as Ventilators have various software 
options and accessories that are purchased with the equipment in a 
customized manner. Meaning that each particular end user customer could 
ask for a unique configuration of software options and accessory items. 
In addition, the VA has a Non-Expendable Medical Equipment program that 
would seem to conflict with including equipment items in a MSPV 
formulary.

    4. Are some of the functions contemplated for the contract, 
inherently governmental?

    The United States has been the long-standing policy that inherently 
governmental functions shall not be performed by a contractor. FAR 7.5 
lists examples of functions that have been considered as inherently 
governmental. Those examples include processes that VA appears to 
contemplate contracting out, specifically:

      Determining what supplies or services are to be acquired 
by the Government
      Approving any contractual documents, to include documents 
defining requirements, incentive plans, and evaluation criteria
      Awarding contracts
      Administering contracts
      Determining whether contract costs are reasonable, 
allocable, and allowable

    VA should examine its proposal and statement of objectives to 
assure that it will not outsource inherently government functions to a 
contractor.

5. Does the VA proposal establish an organizational conflict of 
    interest that cannot be mitigated?

    FAR 9.502 states that ``[a]n organizational conflict of interest 
may result when factors create an actual or potential conflict of 
interest on an instant contract, or when the nature of the work to be 
performed on the instant contract creates an actual or potential 
conflict of interest on a future acquisition'.
    The vision for MSPV 2.0 assigns one entity responsibility for 
decisions on what to buy, how to buy and contract administration. As 
described, the entity has total control over the system without any 
readily discernible checks. What prevents for example, a contractor 
from selecting products for formulary based on its commercial 
relationships?
    The MSPV 2.0 approach presumes that further consolidation of the 
MSPV program is desirable. There is some thought that this approach is 
flawed. There is value to competition. Distribution is a commercial 
activity and there are many competent players at a regional or sub-
regional level. Rather than leverage that competition, VA's MSPV 2.0 
vision cedes disproportionate market power to one firm. If that 
contractor has difficulty performing, it would be very difficult to 
terminate and bring in a new provider. Fewer choices is not in the 
interest of the VA facilities.
    Over time, vesting too much authority into a single contractor is 
not good for government or its supplier base. The downside of 
consolidating that much authority into one entity is that it enables 
the contractor to control not only the federal market, but also to 
leverage federal suppliers in ways that may be detrimental. Will 
bargaining power between the suppliers and prime vendor be so distorted 
that the prime vendor will be able to influence not only federal but 
commercial business? For example, will the supplier fees be consistent 
with the 3% rate in the commercial market for medical devices?

    6. Will MSPV 2.0 address compliance with underlying procurement 
policy?

    The SOO does not offer guidance as to how fundamental procurement 
policies will be addressed. For example, must suppliers comply with the 
requirements of the Trade Agreement and Buy American Acts and who will 
determine compliance? Must prices be determined fair and reasonable and 
if so who will do so - VA or the Prime vendor? Will the small business 
``Rule of Two'' be adequately considered?
    Would it be the PV's responsibility to comply and how would they do 
so?

    7. How will disputes between suppliers and the prime vendor be 
resolved?

    Our members are concerned that conflict of interest concerns may 
drive disputes with the prime vendor both in selecting items for 
formulary and handling future orders. Will a supplier have any ability 
to challenge these issues or others arising in the acquisition process?
    Is the agreement between the supplier and prime vendor a federal or 
a commercial contract? Does VA envision such matters to be totally 
between the commercial parties or will the Government have a role?

8. Does the e-commerce platform adequately protect government and 
    contractor data?

    The draft SOO includes a requirement for a metrics dashboard and 
the ability to provide analytics to assess performance, supply chain 
costs, and forecast market expectations. Who would own the data 
generated in the electronic system? Will the prime vendor be required 
to provide sales tracings to suppliers consistent with commercial 
practices for medical devices? How will this data be protected?
    Is the contractor able to also sell product through the program? 
Can they use/access this data to gain an unfair advantage in the 
government or commercial marketplace?

9. Is a ``requirements'' type contract appropriate in this instance?

    The SOO (section 5.2.1) states the government intends to issue a 
single requirements contract using FAR parts 15 and 16. A requirements 
contract would obligate VA to filling all actual purchase requirements 
of the government during a specified contract period from one 
contractor. VA estimates that there will be 86.4 million patient care 
events in 2018. Given the broad scope of potential users of this 
acquisition platform, it would seem very difficult for VA to adequately 
police it users to ensure all orders go to the contractor. ``Leakage'' 
from the contract could result in significant liability to the 
government.

10. Has VA considered the impact of its cost objectives on innovation?

    A significant objective for the MSPV 2.0 is cost savings. How will 
cost savings be measured - lowest price or best value (medical 
outcomes, supply chain efficiencies, etc.)? Will the contractor or 
government be responsible for measuring such savings?
    There is a potential for the contractor to limit innovation because 
the innovative product may be more expensive than current technology. 
Without sufficient clinician input, what incentive does a contractor 
have to offer more expensive new technology?

    11. What does the goal of a 95% usage rate for the ``one-stop-
shop'' acquisition of consumable medical and related commodities 
described in 5.1.1 mean?

    VA has a goal for 95% of medical disposables to come through MSPV 
program. This goal may be unrealistic depending on what medical 
products are considered within scope, as a significant portion of these 
products are available commercially only directly from manufacturers. 
It is unlikely that those manufacturers are going to change their 
commercial models for a customer that only represents 1-2% of US sales.

12. Would the VA consider establishing separate contracts for direct 
    only products?

    Again, the draft SOO states that there would be a 95% usage goal 
for the acquisition of consumable medical and related commodities. Much 
of this industry is direct only. It is not cost effective or efficient 
to stock them through distributors. VA should follow commercial model 
of establishing separate contracts. VA could use an Electronic Medical 
Catalogue (ECAT) like that used by the Department of Defense to 
facilitate ordering.

13. What will be the drop shipping policy under MSVP 2.0?

    Will VA align more with the commercial market and establish 
contracts with manufacturers for direct- only products.

14. Will prosthetics be excluded from MSPV 2.0?

    The variety of products and nature of procedures does not translate 
to MSPV purchase or delivery infrastructure. Although most cases are 
templated prior to surgery, the case often requires a change on the 
spot. As such, multiple sizes and types are made available to the 
surgeon during each case. This flexibility cannot be achieved by 
warehousing implants and having a single size/type delivered to the 
hospital on the date of surgery.

15. The VA SAC would like access to the latest technologies under the 
    formulary. What will the process be to add new products?

    Again, more clarification is needed as to how formulary decisions 
will be made. Members report challenges with the process to add new 
products under the existing MSPV-NG. What criteria will be used by 
clinicians to determine which products to add to ensure that veterans 
have access to the latest technologies?

16. The draft SOO proposes a Period of Performance that could extend 12 
    to 15 years. What is the rationale for this timeframe?

    A performance period of 12 to 15 years far exceeds FAR limitations. 
Under FAR 17.204(e) the total period of base plus options ``shall not 
exceed 5 years'' in the case of services. For supplies, the base plus 
option quantities shall not exceed 5 years. These limitations do not 
apply to IT contracts. However, other statutes may further limit the 
contract term.
    The performance period for the Pharmacy Prime Vendor contract is 8 
years. Members would like to better understand the SAC's rationale for 
a potential performance period of 12 to 15 years for MSPV 2.0.

17. Would the VA further explain Performance Objective 5.1.6, which 
    states, ``Allow maximum physician choice in consumable medical 
    commodities, consistent with patient safety and enterprise-wide 
    interoperability and standardization goals, used while maximizing 
    cost saving possibilities?''

    Based on this statement, it appears that the VA program office and/
or contracting personnel may view many technical medical devices as 
being commodities without recognizing the differences in brands that 
can impact patient outcomes. In addition, allowing maximum physician 
choice and having standardization goals appear to be two completely 
different initiatives. Further clarification on these points would be 
helpful.

    18. What are the implications of section 6.4 of the SOO that 
states, ``Only FDA approved Medical/surgical supplies that are 
compliant with Global Standard 1 (GS1), Health Industry Business 
Communications Council (HIBCC), and/or International Society for Blood 
Transfusion (ISBT) 28 standards will be available to VHA facilities 
through the MSPV program?''

    It is unclear whether the VA intends to exclude products from the 
formulary that do not meet these criteria/standards.
    Again, the Coalition for Government Procurement sincerely 
appreciates the SAC's efforts to collect industry's input on the 
proposed next generation of the Prime Vendor program. We support better 
aligning the program with commercial best practices and ensuring that 
it is led and managed by clinicians at the Veterans Health 
Administration. Significant progress in achieving both objectives will 
result in more efficiencies and cost savings in the delivery of best 
value medical and surgical supplies to VA facilities worldwide.
    Thank you for considering industry's input in designing MSPV 2.0. 
We look forward to working with the VA as it continues to explore 
options for building the next iteration of the Prime Vendor program.

    Sincerely,

    Roger Waldron
    President
                                 
                       Statements For The Record

                                ADVAMED
    AdvaMed is the leading trade association representing medical 
technology manufacturers and suppliers that operate in the United 
States. Our members range from the largest to the smallest medical 
technology innovators and companies. Collectively, we are committed to 
ensuring patient access to life-saving and life-enhancing devices and 
other advanced medical technologies.
    The sacrifice our nation's veterans and their families make on our 
behalf cannot be understated. We all have an obligation to ensure they 
receive the highest quality care and have access to the best medical 
technology available. In particular, AdvaMed and its member companies 
believe strongly in our collective relationship with the U.S. 
Department of Veterans' Affairs (VA) and share the Department's goal of 
providing our veterans with the highest quality health care possible.
    There are approximately 8 million U.S. veterans of the armed 
services accessing the VA health care system, with another nearly 2.3 
million currently serving in the military on active duty that may do so 
in the future. These Americans can experience unique health care 
challenges, both in terms of battlefield injuries and the after-effects 
of their time spent in service. Through earlier diagnosis and 
intervention, less invasive procedures and more effective treatments, 
medical technology is revolutionizing health care across the continuum 
of service and enhancing the lives of America's troops in the field and 
beyond. Technologies include: spinal cord stimulation; joint/limb 
replacements; wound care products; neurological devices; cardiac 
technologies; and many others. Through these technologies, our 
companies can help provide the standard of care reflective of the 
respect and commitment we owe to our nation's veterans.
    However, recent changes in the VA's procurement of these critical 
medical technologies have created new barriers within the veteran 
health care system. The transition from the VA's National Acquisition 
Center (NAC) procurement process to a new national procurement system 
for medical devices through the Strategic Acquisition Center (SAC), 
along with the pre-authorization for certain surgical implants, has 
resulted in significant inefficiencies in veterans obtaining access to 
care, a reduction in the quality of health care accessible to veterans, 
and risks pushing high caliber providers and suppliers of innovative 
products out of the VA system.
    We believe that the VA's effort to reduce catalog items from 
475,000 items is appropriate. However, the lack of clinicians in all 
aspects of this reform and the award process is problematic because it 
threatens the quality of patients care and also restricts the VA's 
ability to retain and recruit high quality health care providers. The 
benefit of providing choice with complex medical-surgical products will 
improve outcomes. Many VA physicians and providers also practice at the 
107 affiliated academic health systems and/or the private sector. 
Clinicians should have access to a responsible number of highly 
technical tools available to them at a teaching hospital/private 
facility in the morning as well as at the VA facility down the street 
in the afternoon. More broadly, the product catalog should be 
determined according to a thoughtful and detailed process and not 
simply reduced to meet a ``savings'' goal independent of any patient 
outcome consideration.
    While the VA has engaged with industry to break down these barriers 
as they arise, the approaches taken do not consistently result in 
positive outcomes or solutions. Concerns remain, including:

      The absence of a dedicated, clinically-led and -managed 
program office for device procurement at the VA has resulted in a 
significant void in clinical understanding in the contracting process. 
This gap in expertise means decisions are made without a basic 
understanding of the medical supply chain and often on a bottom-dollar 
basis without thoughtful consideration of provider and patient need.
      The Next Generation - Medical Surgery Prime Vendor (NG-
MSPV) distribution program has reduced access to the vast majority of 
medical products currently available while also adding additional costs 
to the system.
      The overall experience with the migration to this new 
system is confusing, burdensome and inconsistent with historical 
contract management practices and efficient medical care.
      The VA is assigning contracts and making procurement 
decisions based solely on price rather than measuring value as defined 
by patient outcomes. There is also little to no clinician input.
      The pre-authorization process for certain technologies 
(such as surgical implants like stents, total joints, spine implants, 
pacemakers, and others) is increasing the backlog and amount of unpaid 
purchase orders, creating challenges for vendors who are trying to 
support VA health care. More critically, these payment delays have 
impacted veteran access to care, with delayed procedures and inadequate 
supplies.
      The NG-MSPV program lacks a mechanism for the timely 
consideration and addition of new technologies to the program.

    The overarching concern is that, collectively, these problems have 
restricted veterans' timely access to critical technologies and quality 
care, as well as impacted the ability of the VA to attract and retain 
medical professionals. The Commission on Care, established under the 
Veterans Access, Choice, and Accountability Act of 2014, raised many of 
these same concerns in its July 2016 report. In particular, the 
Commission noted that the Veterans Health Administration's (VHA's) 
supply chain for clinical supplies, medical devices, and related 
services is:

    ``inadequate compared to.best practices in leading hospital 
systems. Its contracting processes are bureaucratic and slow, which can 
delay veterans' access to care. Purchasing processes are cumbersome, 
which has driven VHA staff to work arounds.''

    The recently released Statement of Objectives (SOO) for MSPV 
version 2.0 appears to outsource the management of the program to a 
single commercial contractor and shifts significant responsibility from 
the VA to this contractor. While we applaud the VA for seeking to 
increase commercial practices, we question whether there is a 
commercial entity that has the extensive medical background to perform 
the expansive responsibilities, including: determining what items would 
be on the formulary; administering the contracts between it and the 
manufacturers; managing the procurement process; and distributing the 
actual medical supplies. It is unclear if such a model exists or who 
can provide such a service.
    Our companies strongly encourage the VHA to follow best practice 
commercial models and make enterprise level decisions through a program 
office for medical devices, which will improve efficiencies for both 
the VA and industry. The overwhelming concern of the medical device 
industry as well as the VA medical centers is that the VHA Program 
Office is neither clinically led nor staffed with experienced medical 
supply professionals. It is roughly the equivalent of trying to fly an 
airplane with individuals who are not pilots.
    An effective VHA Program Office would be staffed in similar fashion 
to other federal agencies that manage medical products: have a clinical 
leader and clinical staff, mixed with experienced medical supply chain 
professionals, and preferably all these individuals would have 
experience working within the VA system and have knowledge of the 
unique processes. Models to replicate would be the Defense Health 
Agency (DHA)'s Medical Logistics (MedLog) division, which is the 
equivalent operation for the Defense Department. DHA MedLog is led by a 
critical care nurse, and staffed with seasoned medical logisticians and 
nurses who have actually worked in military treatment facilities. 
Within the VA, the VA pharmacy benefit manager (PBM) is a good example 
of what a program office should look like, led by a pharmacist and 
staffed with clinicians who have experience working in the VHA system.
    Meanwhile, delays in resolving purchase orders and eliminating 
payment backlogs also continue to impact our industry's ability to 
serve the VHA and our veterans. For current backlogs, the recent move 
by the VA to initiate a ratification clean-up process provided some 
relief, but problems persist and a precise schedule for completing work 
to resolve these issues is needed. More importantly, the VA has yet to 
issue any guidance to address future concerns or otherwise demonstrate 
how the Department will prevent these problems from developing again. 
Without a real prompt pay requirement, such as 30 days from date of 
procedure, purchase order issues will continue to persist.
    We welcome today's hearing as another opportunity to understand on 
how the VA, Congress, and industry can take a solutions-oriented 
approach to these issues and work together on the most effective 
resolution. We support efforts to ensure the VA, Congress, and industry 
to work together to review and seek ways to better implement processes 
and to ensure that all procurement policies evaluate technologies based 
on the value to patients. Ultimately, the most important measure of the 
success of the VA's new procurement policies is whether the veterans 
that they serve are getting access to the best medical care in a cost-
effective manner.
    Again, we are grateful for the Committee's leadership on this issue 
and appreciate the work of Reps. Banks and Peters in particular. Thank 
you for holding this hearing and we look forward to continuing to work 
with Congress and the VA to provide access to high-quality, cost 
effective medical technology that meets the needs of our nation's 
veterans.
                                 
                   Material Submitted For The Record

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