[Senate Hearing 116-450]
[From the U.S. Government Publishing Office]
S. Hrg. 116-450
BUILDING A MORE RESILIENT VA SUPPLY CHAIN
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HEARING
BEFORE THE
COMMITTEE ON VETERANS' AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JUNE 9, 2020
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Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-699 PDF WASHINGTON : 2021
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SENATE COMMITTEE ON VETERANS' AFFAIRS
Jerry Moran, Kansas, Chairman
John Boozman, Arkansas Jon Tester, Montana, Ranking
Bill Cassidy, Louisiana Member
Mike Rounds, South Dakota Patty Murray, Washington
Thom Tillis, North Carolina Bernard Sanders, (I) Vermont
Dan Sullivan, Alaska Sherrod Brown, Ohio
Marsha Blackburn, Tennessee Richard Blumenthal, Connecticut
Kevin Cramer, North Dakota Mazie K. Hirono, Hawaii
Kelly Loeffler, Georgia Joe Manchin III, West Virginia
Kyrsten Sinema, Arizona
Caroline R. Canfield, Republican Staff Director
Tony McClain, Democratic Staff Director
C O N T E N T S
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Tuesday, June 9, 2020
SENATORS
Page
Moran, Hon. Jerry, Chairman, U.S. Senator from Kansas............ 1
Tester, Hon. Jon, Ranking Member, U.S. Senator from Montana...... 3
Boozman, Hon. John, U.S. Senator from Arkansas................... 11
Manchin, Hon. Joe, III, U.S. Senator from West Virginia.......... 13
Rounds, Hon. Mike, U.S. Senator from South Dakota................ 15
Blumenthal, Hon. Richard, U.S. Senator from Connecticut.......... 17
Tillis, Hon. Thom, U.S. Senator from North Carolina.............. 19
Hirono, Hon. Mazie K., U.S. Senator from Hawaii.................. 22
Cassidy, Hon. Bill, U.S. Senator from Louisiana.................. 23
Sinema, Hon. Kyrsten, U.S. Senator from Arizona.................. 25
Blackburn, Hon. Marsha, U.S. Senator from Tennessee.............. 27
WITNESSES
PANEL I
Stone, Dr. Richard A., Executive in Charge, Veterans Health
Administration: Accompanied by Brazell, Karen, Principal
Executive Director, Office of Acquisition, Logistics, and
Construction and Chief Acquisition Officer, and Acting
Assistant Secretary for Enterprise Integration; Kramer,
Deborah, Acting Under Secretary for Health for Support
Services, VHA; and Centineo, Andrew, Executive Director,
Procurement and Logistics Office, VHA.......................... 5
PANEL II
Oakley, Shelby, Director of Contracting and National Security
Acquisitions, GAO.............................................. 29
Waldron, Roger, President, Coalition for Government Procurement.. 31
McDonald, Michael, Director of Government Operations, 3M Health
Care........................................................... 32
Heyssel, Kurt, Former Chief Supply Chain Officer, Veterans Health
Administration................................................. 34
APPENDIX
Moran, Hon. Jerry, Chairman, U.S. Senator from Kansas, prepared
statement...................................................... 48
Stone, Dr. Richard A., Executive in Charge, Veterans Health
Administration, prepared statement............................. 50
Oakley, Shelby, Director of Contracting and National Security
Acquisitions, GAO, prepared statement.......................... 56
Waldron, Roger, President, Coalition for Government Procurement,
prepared statement............................................. 69
McDonald, Michael, Director of Government Operations, 3M Health
Care, prepared statement....................................... 74
Heyssel, Kurt, Former Chief Supply Chain Officer, Veterans Health
Administration, prepared statement............................. 78
American Federation of Government Employees, AFL-CIO, prepared
statement...................................................... 81
VA Response to hearing questions submitted by:
Hon. Jon Tester................................................ 87
Attached PDFs................................................ 115
Hon. Richard Blumenthal........................................ 95
Attached PDFs................................................ 125
Hon. Kyrsten Sinema............................................ 102
GAO Response to hearing questions submitted by:
Hon. Jon Tester.............................................. 108
Hon. Kyrsten Sinema.......................................... 110
3M Health Care Response to hearing questions submitted by:
Hon. Jon Tester.............................................. 112
BUILDING A MORE RESILIENT VA SUPPLY CHAIN
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TUESDAY, JUNE 9, 2020
U.S. Senate,
Committee on Veterans' Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 3:02 p.m., in
room SD-430, Dirksen Senate Office Building, Hon. Jerry Moran,
Chairman of the Committee, presiding.
Present: Senators Moran, Boozman, Cassidy, Rounds, Tillis,
Blackburn, Tester, Brown, Blumenthal, Hirono, Manchin, and
Sinema.
OPENING STATEMENT OF CHAIRMAN MORAN
Chairman Moran. Good afternoon, everyone. The Committee
will come to order.
Today's hearing is on building a more resilient VA supply
chain with a focus on what we have learned from COVID-19's
pandemic. A bipartisan enduring priority of this Committee is
to ensure that the VA is equipped to fulfill its core mission
to deliver timely, high-quality health care to the veterans it
was created to serve.
Last August, as the VA entered into partnership with the
Defense Logistics Agency to speed acquisition for materiel
support, Secretary Wilkie stated, ``In the 21st century, an ad
hoc supply chain is not sufficient'' and ``It does not do
justice to those we are sworn to serve.''
The VA recognizes the need to build a more resilient supply
chain. The question is always ``How?'' COVID-19 pandemic has
put massive stress on the supply chain and created
unprecedented global demand for personal protective equipment
and other medical supplies.
Inherent fragilities in the just-in-time inventory model
have been severely strained in recent months. This confluence
of factors has highlighted the need and necessity to reform the
VA's procurement organization and process.
The challenge VA confronts is how to strengthen the supply
chain in real time, while also making it more resilient and
operationally effective in the long term.
I am encouraged to see VA is moving quickly, but there is
also a need to be certain that we are strategic in our
decisionmaking.
I understand the need to have more inventory on hand, and
reestablishing some form of supply depot may be part of that
effort, but we also must take care not to establish parallel
and competing supply chains.
Logistics is also fundamental to this equation. Inventory
that is unable to move is no use to anyone.
The Veterans Health Administration is saddled with an
aging, disparate inventory management system and a medical
supply chain that was conceived over 30 years ago. Repeated
reform attempts have too often misfired or added complexity,
resulting in time-consuming and error-prone inventory counts.
Transferring supplies between the VA facilities in a
different Veteran Integrated Service Networks is also
unnecessarily burdensome and difficult. It is a testament to
the dedication of VA's clinicians and administrators and staff
that they make the system work despite the difficulties.
The Medical Surgical Prime Vendor contracts were once the
backbone of this supply chain, but this program has been
chaotic since it was relaunched in 2016. And I believe the
strategy needs to be reevaluated.
These supply chain issues are not intractable, but they
will require sustained attention to develop a modern inventory
management system across the enterprise.
This administration has used the Defense Production Act to
provide loan guarantees and cost-matching grants to help
domestic manufacturers expand their production capacity in
response to COVID-19. Many companies have added shifts and
reconfigured equipment to boost output. For example, Spirit
Aerosystems in Wichita, Kansas, is using the speed of their
aircraft manufacturing line to build respirators.
The DPA also allows the Federal Government to allocate
materiel and subcontracts on a manufacturer's behalf, and I
commend the administration for doing so when asked.
Under the DPA, Federal agencies can prioritize the delivery
of their contracts, but this results in an inherent tradeoff. I
would like to understand how the coordination among VA, FEMA,
and HHS may be affecting the VA supply chain.
Coordination is key in challenging circumstances, and I
believe the VA Secretary should be added to the Defense
Production Act Committee to efficiently facilitate veteran care
and leverage VA resources.
Senator Tester and I expressed this desire in a letter to
President Trump, and it is my understanding the VA concurs.
There are substantive suggestions on how to strengthen the VA's
medical supply chain, including recommendations from the
Commission on Care, the VA's Office of Inspector General, and
the Government Accountability Office. Each has called for a
more unified supply chain from the VA's Central Office to the
medical centers, supported by modern, integrated IT systems.
I am eager to hear the perspective of our witnesses on the
second panel as to how the A can rise to this challenge.
The COVID-19 crisis has compounded persistent VA supply
chain problems, and there is no better time than the present to
address them. It would be a mistake to consider this pandemic
transitory and let our guard down.
I look forward to hearing the testimony of our witnesses
and working on solutions that can build a more resilient VA
supply chain that meets the needs of our Nation's veterans.
I look forward particularly to hearing from Dr. Stone and
his colleagues in this first panel, and, Dr. Stone, I take this
opportunity to thank you for once again being before our
Committee. It has become commonplace, and I appreciate your
availability as well as that of your colleagues.
Let me now turn to the Senator from Montana, Senator
Tester, the Ranking Member, for his opening Statement.
Jon?
OPENING STATEMENT OF SENATOR TESTER
Senator Tester. Thank you. Thank you, Chairman Moran. I
appreciate your remarks. I think you are spot on in a number of
areas. I am going to touch on just a few of them, and before I
start, I want to also welcome Dr. Stone and his leadership team
to this hearing.
Look, we have been through some hard times with COVID-19.
It showed where our weaknesses were in our supplies, and quite
frankly, it has put a staff of frontline employees that have
done an incredible job out there serving not only our veterans,
but also nonveterans during this pandemic in a difficult
situation.
We had austerity measures that were taken in April, and
quite frankly, even now, Dr. Stone--and I brought this up in a
previous hearing--we are hearing of shortages. We are hearing
folks that are asked to reuse their mask, and even in the best
of times--even in the worst of times, that is not something we
should be doing.
So the bottom line is this hearing's title is ``Building a
Resilient VA Supply Chain.'' The Chairman mentioned in his
opening remarks--I do not think we want to have VA setting up a
whole bunch of PPE, along with HHS doing their own thing, with
Commerce doing their own thing, and FEMA doing their own thing,
and DoD doing their own thing. Hopefully, everybody is going to
be working together, and that is why, by the way, the Chairman
and I sent off that letter to the President saying--the VA
needs to be part of the Defense Production Act Committee,
because this needs to be a whole-of-government approach.
Now, make no mistake about it. If VA's staff needs to have
personal protective equipment, VA needs to make sure it's
available. And if the VA cannot depend upon FEMA or HHS to make
sure that personal protective equipment is there or any other
equipment as far as that goes, then I get it. You guys have to
take care of your own staff because our veterans are too
important for us to fail.
But the bottom line is that a government that works for the
people works together, and that is why I think the Chairman and
I feel so strongly about you guys being part of the Defense
Production Act Committee. As I said earlier, you have the
biggest integrated health care system in this Nation, and if
you are not part of the equation, then I do not know who should
be a part of that equation. You absolutely should be a part of
it.
To add complexity to this whole situation, the VA is
putting in three--and maybe more, but three new computer
programs to do their outdated IT, one in electronic health
records, one with the financial system program, one with DMLSS
which is a DoD acquisition program that will, as I understand
it, be replaced not long after you start it. All that has
impacts on the supply chain, and how the VA is going to deal
with that, it is going to be interesting to hear in this
hearing, because we spent a fair amount of money over two
different administrations on EHR. That is for sure, and making
sure that EHR works not only for electronic medical records,
but also for making sure that we have the resilient supply
chain that we need is critically important.
So I am not going to take up a lot more time. I would just
say that I look forward to this hearing. I think it should be a
good one. I look forward to figuring out how different agencies
could work together to meet the needs. I look forward to
hearing from the second panel, how much of things like masks
and shields and gowns, regardless if you are a company that is
domiciled here, how much of that is made in China.
Quite frankly, we heard stories of China saying, ``You know
what? This is a pandemic. This stuff is being made here. We are
going to take care of ourselves first.'' I do not deny them
that ability, but it shows that we have an inequity in our
system. And I believe that much of that personal protective
equipment, masks, shields, gowns, those sort of things, need to
be built right here in America so that when we need them, we
got them, and we can ramp it up. I will be pushing that moving
forward, and hopefully, the folks from 3M and others would
agree with that. But we will find that out during the second
panel.
With that, Mr. Chairman, I am going to turn it back to you.
I look forward to hearing from Dr. Stone and his leadership
group, and we will have some good questions for him when he
gets done with his presentation.
Thank you.
Chairman Moran. Senator Tester, thank you.
I share your views in regard to the supply chain in China,
and I look forward to working with you and our colleagues to
accomplish a different circumstance in the near future.
Let me introduce our first panel from the Department of
Veterans Affairs. Dr. Richard Stone is the executive in charge
of the Veterans Health Administration. He is accompanied by Ms.
Karen Brazell, principal executive director, Office of
Acquisition, Logistics, and Construction, and Chief Acquisition
Officer and Acting Assistant Secretary for Enterprise
Integration--how do you have time to be with us today?--and Ms.
Deborah Kramer, Acting Assistant Under Secretary of health and
Support Services--just because your title is shorter, I could
say the same ting to you, Deborah--and Mr. Andrew Centineo,
executive director of the VHA Office of Procurement and
Logistics.
I will reserve introductions of our second witness panel
representing the Government Accountability Office and industry
perspectives and now recognize our lead witness, Dr. Stone, for
his opening remarks.
Dr. Stone, as I said earlier, thank you very much for your
presence.
PANEL I
STATEMENT OF RICHARD A. STONE: ACCOMPANIED BY KAREN BRAZELL;
DEBORAH KRAMER; AND ANDREW CENTINEO
Dr. Stone. Chairman Moran, Ranking Member Tester, and
distinguished members of this Committee, thank you for the
invitation to testify today about VHA's response to COVID-19
and our efforts to build a more resilient supply chain.
You have already introduced my fellow members here. We are
all veterans. Andrew has joined us virtually. Andrew has been
assigned to FEMA since the beginning of this pandemic as our
lead logistician to represent VHA's interest.
Let me say that both Deborah and Andrew have deployed and
been recognized for their work in combat, and I appreciate
between the three of them, 60 years of supply chain experience
to accompany me here today.
Chairman Moran. Dr. Stone, let me express the Committee's
gratitude for yours and their service and particularly their
expertise on this topic, but mostly thank you for your service
in caring for our Nation.
Dr. Stone. Thank you, sir.
COVID-19 has forever changed the world's approach to
medical supply. For decades, the long-acclaimed just-in-time
supply system kept shelves stocked because there was always
another delivery of materiel on the way, usually from a prime
vendor or a manufacturer who acted as an intermediary. The
prime vendor is acting as an intermediary between manufacturers
and the end user.
This system has not delivered the responsiveness necessary
to support the worldwide demand of health providers on medical
supplies during this pandemic.
More importantly, the pandemic forced us to recognize that
we cannot depend on the global supply chain to equip VA just in
time in a future disaster. VA is able to cross-level supplies,
equipment, and personnel across our integrated system. No
facility at VA ever ran out of protective equipment, and we are
taking steps to ensure that we never risk exhaustion of our
supplies in future disasters.
We are working diligently to not only prepare for a
potential second wave of COVID-19 but also for any other
disaster the Nation might face.
As the Secretary told this Committee last week, COVID-19
has shown the Nation what VA is truly capable of. In executing
our fourth mission, VA has demonstrated extraordinary
flexibility and responsiveness as we continue to delivery an
integrated response to a first-in-a-hundred-year public health
event, thus, allowing us to provide health care support to 46
States, Territories, and Tribal regions.
One of the good news stories to come out of this pandemic
will be the positioning of the VA firmly at the center of the
Nation's response to future public health disasters.
I could not be more proud of the fact that VA employees at
every level have served with extraordinary heroism. VA
professionals have responded day and night, week after week to
save lives and make a difference in this pandemic, including
hundreds who have volunteered to travel to the cities most
impacted by this disease.
Never in our history has VA's fourth mission to backstop
the American health care system been so expansive, and we
continue to rally to this cause.
We cannot do our duty to America's veterans without an
effective, responsive, and resilient supply chain. As the
Nation's largest integrated health system, our demand for a
complex combination of expendables, durables, equipment, and
computers is unique in American medicine because of our sheer
size.
I want to directly address the negative perception of our
relationship with FEMA caused by a published article. At no
time did FEMA ``take'' our supplied. There was a short period
of time immediately after the activation of the Defense
Production Act that every vendor and supplier in this Nation
paused delivery of some materiel to await further guidance. As
a result, there was a single week where we simply were not
receiving supply orders; therefore, we employed measures to
ensure our employees had the PPE needed to be safe. We followed
CDC guidance for conservation and prioritization of equipment,
and there was never a point that a VA health care worker was
put in danger treating COVID-19 patients without the materiel
they needed.
Our relationship to FEMA has always been and remains today
strong, collegial, and productive across all levels. The safety
of the heroic VA personnel serving our Nation's veterans
remains my No. 1 priority.
As I close, I want to thank the Committee for the
productive dialog and strong relationship between our
Department and all members of your Committee in response to
this pandemic. VA is better positioned today to provide health
care services to veterans and support our Nation because of
what we have learned in our response to COVID-19.
My colleagues and I look forward to answering your
questions, sir.
Chairman Moran. Dr. Stone, again, thank you.
Let me begin a round of questions. Let me first start with
building on the current system. Obviously, the VA needs to deal
in an all-encompassing, holistic approach to manage its system
to make improvements. My question is if you set up supply
depots with the existing inventory management system, GIP, I
worry that you are building on something that in and of itself
is not a very solid foundation.
But my understanding is to implement the new system, the
Defense Medical Logistics Standard Support, is expected to take
7 to 8 years.
So how do those two things, the timing of replacing the
existing system and the creation of the supply depots, how do
they fit together?
Dr. Stone. Sir, we have the prototype sites in Chicago and
the Pacific Northwest that we will exercise during this Fiscal
Year for the DMLSS modernization.
You mentioned in your opening statement that the EHRM is
the centerpiece of our modernization, but that must be
supported by a modernized IT system for logistics and supply as
well as a financial modernization system.
I will defer to Deb Kramer and Andrew Centineo for their
comments on how we will proceed with this.
We do have funding this year that we are spending on the
DMLSS modernization. We also have requested funds in the 2021
year and the 2022 year to do this, but the original plan was to
go out 7 years in this modernization. This pandemic has
revealed that that is too long a timeframe for us to execute
that.
I will refer to Ms. Kramer.
Ms. Kramer. Good afternoon, sir.
Chairman Moran. Yes, ma'am.
Ms. Kramer. Yes, sir. We were going to be looking for
commercial and potentially Federal partners for the regional
readiness centers. The most likely outcome is probably a
combined, potentially, DoD commercial sector.
Those organizations already have IT systems. They already
use electronic data interchange, or EDI, and through that, we
can communicate with the existing VA systems.
You are absolutely right. CHIP is archaic. It is an
inventory management system and not a supply chain management
system. So we need to get DMLSS out there as well, but we can
do the regional readiness centers using our partners' IT
system.
Chairman Moran. Ms. Kramer, my impression--you can correct
me if I am wrong, but the Department of Veterans Affairs has
had significant challenges with IT systems in the past and the
present. What assurance should I have that this one is going to
be what is needed to solve the problem and we are going to be
able to accomplish the IT system that will go with the changes
that you are proposing?
Ms. Kramer. Yes, sir. The fact that we are using DMLSS,
which is already in the field in DoD, a proven medical supply
chain system, one that I used while I was on active duty, that
is what we are doing. We are not doing a one-off. We are not
developing our own system. We are going with a proven system,
and we are working with DoD to do that implementation.
We are also not doing it ourselves. This is a full
partnership with the Department of Defense.
Dr. Stone. Sir, Andrew may have some additional comments.
Chairman Moran. Oh, yes.
Mr. Centineo. Yes, Dr. Stone. Yes, Senator Moran.
In addition to that, you mentioned how can we look at
getting supportive energy behind this. The Department of
Defense, both the Defense Health Agency, which is the element
that supports the IT enabler DMLSS, and the Defense Logistics
Agency, which is tied to the supply chain, are both going to be
critical for the success moving forward.
You mentioned in the opening remarks a whole-of-government
approach. Leveraging this application is certainly a whole-of-
government approach, and it will take us well beyond just the
supply element. It will also tie into the equipment. It will
tie into the facilities.
Key to this PPE response was obviously our consumables, but
we also had an equipment requirement. That certainly would be
able to be facilitated through the DMLSS application, being
able to see the equipment that we needed, versus having to go
through a manual process.
But, certainly, this is not VA alone. This certainly is
going to require the partnership through our statute, 8111, to
partner with other whole-of-government agencies.
Chairman Moran. Thank you very much.
Maybe this was answered, but, Dr. Stone, you indicated
there were two depots planned or in the works, and you
mentioned Chicago and the Northwest. Is that the plan?
Dr. Stone. No. Those are the two prototype sites----
Chairman Moran. Prototype sites.
Dr. Stone [continuing]. for DMLSS and to expand that
relationship with the Defense Logistics Agency as a vendor for
us.
Chairman Moran. You absolutely did say that, but I had in
my mind the question I had intended to ask you. How many supply
depots do you intend to have, and what do you expect their
locations to be?
Dr. Stone. So we see four readiness centers, which will not
only house equipment for us but also house excess medical
equipment that needs biomeds in order to sustain them, like the
ventilators you talked about in your opening statement, as well
as to house the four Battelle systems that we have attained
from HHS and from FEMA that can sterilize reusable equipment.
And we are in the process now of sterilizing masks for future
waves.
Chairman Moran. I will take from my vocabulary ``depots''
and replace it with ``readiness centers,'' which is a much more
appealing concept.
Dr. Stone. I think both you and Ranking Member Tester have
brought up the point that this should not be independent.
We are a behemoth of health care system. At the height of
this pandemic, we were consuming a quarter of a million N95
masks a day. That, when you begin to discuss with any supply
chain system, is a daunting amount, and we do believe that our
relationship to DoD, which is active--I meet with the DLA
director on a monthly basis, also with their acquisition lead
every 2 weeks. I also meet with Admiral Polowczyk, the admiral
from the FEMA lead who has done the supply chain, on a weekly
basis. We are unified in our approach to this but recognize
that a future pandemic wave may test all of us in our
preparation.
Chairman Moran. Senator Tester?
Senator Tester. Thank you, Mr. Chairman.
So I kind of want to followup a little bit with you, Dr.
Stone, and whoever you want to refer to on DMLSS. DMLSS is not
fully implemented currently. Is it implemented at all?
Ms. Kramer. Sir, we are in the process of implementing it
at the Federal Health Care Center, James A. Lovell Federal
Health Care Center. That will go live in August of this year.
So that will be our first site and followed this fall by two
sites in the Northwest.
Senator Tester. Okay. So you talk about how critical this
was as it applied to the supply chain. I am not putting words
in your mouth now, right? That is what you said, right?
Ms. Kramer. That is correct, sir.
Senator Tester. So when do you anticipate DMLSS will be
fully implemented?
Ms. Kramer. Sir, the current schedule calls for a 7-year
fielding that would complete the----
Senator Tester. Okay. That is the 7 years that Dr. Stone
talked about, because that was my next question. It is too
long. Boy, is it ever too long. I mean, we are not talking
DHRM. We are not talking the financial system program. We are
talking DMLSS, and both of those others impact our supply chain
too, correct?
Ms. Kramer. Yes, sir.
Dr. Stone. Yes, sir. That is correct.
Senator Tester. So how do you shorten this up? What kind of
timeframe are you looking at? If it is not 7 years, is it 5
years? I assuming working with the private sector is one way to
shorten it up, but is there any other way you could shorten it
up to get it done quicker? Because, gosh, within the next 7
yeas, we will probably have another pandemic. There is a
possibility for a second wave. There is all sorts of bad crap
that can happen.
Ms. Kramer. Yes, sir. I think 5 years is perhaps possible,
but we have got to talk to our Department of Defense
colleagues. They are on the critical path to getting this
system fielded. We cannot do it without their support, and we
need to understand what their constraints are before we can
actually tell you what a realistic schedule would be.
Senator Tester. And it is my understanding the DMLSS is
fully operational within DoD, correct?
Ms. Kramer. That is correct.
Dr. Stone. It is the supply chain system, sir, that we use
in deployment. All of us are familiar with DMLSS, and it has
supported us throughout the years of the war.
Senator Tester. I got it.
But it is also an old system, right, Dr. Stone? I mean, it
is also a system that is pretty short term. No? I see someone
shaking his head no.
Dr. Stone. Yes. It is being replaced. Actually, the next
generation of DMLSS----
Senator Tester. Okay.
Dr. Stone [continuing]. is going to be called LogiCole, and
LogiCole is DMLSS On a cloud-based system----
Senator Tester. I got it. Okay.
Dr. Stone [continuing]. which is scheduled to come out in
2022.
Senator Tester. I have go to tell you, there are some
things about virtual hearings that I really like. It is when I
say something that nobody agrees with and I see two people
shaking their head no before you even spoke, Dr. Stone, so that
is good. That is good.
Say, tell me where we are at right now, Dr. Stone. What is
the current State of the VA's PPE and medical supply chain and
reserves? You talked about a second wave. If a second wave
happened in 2 weeks, are you set up to take care of it and
protect our frontline employees?
Dr. Stone. The answer is yes. Ms. Kramer and her team have
developed a manual system that every day is updated from every
single medical center in the Nation, and so we are at
approximately 30 days on all PPE.
And I will defer to Ms. Kramer and Andrew for----
Senator Tester. Dr. Stone, what does that mean? What does
that mean, 30 days? Does that mean you have got a 30-day
supply?
Dr. Stone. Yes.
Senator Tester. And you believe that to be adequate?
Dr. Stone. No. I believe that we need to move to a 60-day
supply. I believe that for a full second wave, we will need an
additional 6 months of supply, and either that can be supplied
by the vendors----
Senator Tester. So we are----
Dr. Stone [continuing]. a manufacturing system, or must be
in our readiness centers.
Senator Tester. So, Dr. Stone, we are not where we need to
be?
Dr. Stone. That is correct.
Senator Tester. Okay. So the question is, When are we going
to be where we need to be, and what is the issue? It sounds
like--and I cannot say this because our cases in Montana are
actually going up recently, but it sounds like we are kind of
in a dip in this whole COVID-19 thing.
We have seen the cases--I mean, I heard the other day there
were no deaths from it in New York City, for example. That is a
very good thing.
But the question is, Are we taking advantage of this lag,
or are we even seeing all that? You guys are not as busy as you
were 2 months ago, are you?
Dr. Stone. So we have seen a reduction in the amount of
hospitalization, and therefore, we have seen a reduction in our
ICU demand. But what we have not seen is a reduction in
materials that are necessary for us to even reopen our
ambulatory services. Every single ambulatory services now needs
masks, now needs PPE, needs cleaning materials, the sort of
things that you have seated around this room on your desks. We
are not----
Senator Tester. So it sounds to me like, Dr. Stone, if we
have a second wave, we are going to be back in the same boat we
were in April.
Dr. Stone. Well, sir, my job on behalf of the Secretary is
to make sure that we do not, and therefore, let me defer to
Andrew and Deb to give you some comments on what we are doing
to bring us to a readiness for wave two.
Ms. Kramer. Thank you, sir.
We are working with our partners at DoD, FEMA, and Health
and Human Services and our commercial partners to get the
materiel to buildup and to sustain the operations that we
currently have today.
But what I need to share with you is that supply chain
system is still broken. There is still a tremendous demand on
all of PPE, not just in the United States, but worldwide. And
the manufacturing capacity has not caught up to the
requirement. We are working hard every day to pull materiel in
and to sustain operations, and we cannot let down.
And we are going to need your help in helping bring things
onshore in terms of manufacturing. We need more 3M production.
We need more production from every N95 mask producer. We need a
U.S.-based gown manufacturing capacity here that can support
readiness, but the current supply chain is still struggling to
support not just our needs but the needs of every health care
system and hospital in the country.
Senator Tester. I am going to give this up right now, but
as the Chairman already pointed out, I think you have got
bipartisan support to give you whatever help you need to make
sure that this manufacturing occurs.
I yield, Mr. Chairman. Thank you.
Chairman Moran. You have nothing to yield.
Senator Boozman?
SENATOR JOHN BOOZMAN
Senator Boozman. Thank you, Mr. Chairman, and thank you all
for being here. We really do appreciate you, Dr. Stone, and
your team and really all of those throughout the system that
are working. They work so very hard, anyway.
In the midst of a pandemic, you mentioned that you truly
have a huge system, an unimaginably large health care system.
We appreciate all that you have done.
Also, being forward thinking and dealing with the problems
of the telehealth, the tele-mental health, all of that has been
a great success. Again, that is the ability of your team to
really adapt and ramp up. So we appreciate that.
I agree with Senator Tester about the concerns of PPE, but
the problem is that as we reopen--I am talking the daycares.
They are being required to have all of this stuff, all of our
businesses. As we reopen, we are still required--people are
getting out more, so they are wearing the stuff more rather
than sitting in their homes. So it is just a huge problem with
the demand versus what even as we have ramped up, and it does
tend to, in my mind, think of the importance of perhaps doing
the stockpile that you suggested that we used to do.
Do you need any additional authority to do that?
Dr. Stone. Karen?
Ms. Brazell. Thank you, Senator.
At the time, what I would offer is that at least we have
some--the authorities we have in place today will provide what
we need, but we do need to make sure that VA is at the table
anytime there are discussions with relationship to health care
support across the Nation. That is one thing this pandemic has
provided, but the authorities we have today will meet our
needs.
Dr. Stone. Let me just add, sir, one thing, and that is
following Desert Storm, DoD was given a authority called
``Warstopper.'' War stopper allowed them to pre-commit
inventory from a manufacturer.
When you heard about DoD committing 10 million masks to
FEMA, that came from Warstopper, and what it does is it allows
DoD to pre-commit that inventory. It is kept in a warehouse,
but the manufacturer actually rotates it and keeps it fresh. So
that if it begins to go toward expiration, it is a guarantee at
a fraction of the cost to keep that fresh.
We believe having that type of authority would be very
beneficial to VA also or to allow us to partner with DoD to
actually execute that.
Senator Boozman. That was really going to be my next
question. Can you assure us that that would not be the case?
Because, sadly, we have had some instances of that during this
crisis that we found that the stuff was pretty old and maybe
not where we would like for it to be. So that is good to know.
Tell me about the IG report regarding delivery orders and
things. There is some concern there. I think they found that a
percentage, a significant percentage perhaps, were getting the
wrong stuff. I think there was an IG report in December, is
that correct, the Medical/Surgical Prime Vendor program?
Dr. Stone. Andrew, do you have that one?
Mr. Centineo. Senator Boozman, I am not quite sure I
understood the question. That there was a shortage or an
inability to get materiel?
Senator Boozman. They reviewed delivery orders and
estimated that the medical centers received incorrect orders
about 60 percent of the time, so a significant number.
Dr. Stone. Sir, I am going to have to take that one for the
record.
Senator Boozman. Okay.
Dr. Stone. I am not familiar with that report.
Senator Boozman. Very good.
Are you adopting the Department of Defense Medical
Logistics Standard Support system? Does that ring true? Are we
upgrading that?
Ms. Kramer. Well, we are going to adopt DMLSS. DoD is in
the process of doing a tech refresh. That tech refresh is
called ``LogiCole.'' So we would begin fielding DMLSS, and then
we would switch from DMLSS to LogiCole.
Senator Boozman. So would that help with that kind of a
problem?
Ms. Kramer. It would help with that kind of a problem
because we have much better ability to track everything that we
are doing inside DMLSS. GIP does not give us that opportunity.
In fact, our supply techs need to swivel between systems. They
have to work in multiple systems at one time for a single order
to make things work. In DMLSS, it will all be done in one box.
Senator Boozman. Right.
Ms. Kramer. Much simpler.
Dr. Stone. So, as the Secretary has discussed this
extensively in previous testimony, because of this fractured
system, a large percentage of our purchases are done locally at
medical centers using government purchase cards with literally
billions of dollars traversing those government purchase cards.
So it is very difficult for us to track those as well as to
track the contracts that are being used and to assure the
validity and the transparency of the system that you expect.
Senator Boozman. Okay. Thank you, guys. We do appreciate
you very much.
Chairman Moran. Senator Boozman, thank you.
Senator Manchin?
SENATOR JOE MANCHIN
Senator Manchin. Thank you all very much. Let me turn on my
mic.
Like many of us, I am worried about the surge of cases in
the fall and the winter and did not know what you all had
planned to do to make sure that every frontline VA employee has
the protections.
We have had some complaints, as you know, and you and I
have talked about it before, Dr. Stone. It concerns in our VA
hospitals that they did not have the proper protection and were
not getting as much as they needed and were concerned about
their own welfare.
So the gowns and the new masks that they are needing, I am
sure you guys have been working on that, and I am hoping that
you are able to fulfill that. But do you think the surge would
be a strain on basically the supply chain that you have now?
Dr. Stone. Yes. I think the surge is a complete unknown.
All we have to go by is what happened in the fall of 1918 with
the influenza pandemic where the second wave had a dramatically
greater mortality than the first wave.
Senator Manchin. Correct.
Dr. Stone. Certainly, a second wave is not an absolute. Dr.
Fauci has said that in his testimony as well as his public
Statements. It depends on the activity of the American people,
and it depends on the virus and----
Senator Manchin. Let me ask this question. Are we moving in
an area to be prepared in case it does happen? Do you think
that we are as a country? Do you think we are as the Veterans
Administration?
Dr. Stone. I think that we are moving in the correct
direction in order to develop the resilience that will allow us
to meet a second wave. It is why we have now hired over 18,800
employees and continue to hire to prepare for the second wave.
But prior to this, we purchased $10 million a month worth
of PPE as the VA. We are now purchasing $100 million of PPE a
month.
Now, certainly, costs have gone up dramatically as part of
this, but that does reflect a massive consumption of PPE in
which the industrial base of this Nation must be developed in
order to develop that.
Ms. Kramer has been----
Senator Manchin. We have been begging the President to do
the Defense Production Act on PPEs. We think, first of all, it
would hold the price down. Next of all, it would increase the
amount of supply all over our country, cannot figure out why we
have not moved in that direction.
Dr. Stone. Sir, from our standpoint, every day Andrew and
Deb's teams are in discussions with domestic vendors who are
making investments in order to move us forward with a domestic
supply chain.
The difficulty they have--and you may hear that in your
second panel--is when all of this is over, how do they maintain
that investment?
I think this is one of the things I would ask you to
consider in the Warstopper program that has allowed DoD to do
exactly that since Desert Storm for these type of materials.
Senator Manchin. But the Federal Government has a
responsibility to make sure that we do have necessary
equipment.
Dr. Stone. Yes, sir.
Senator Manchin. Ms. Kramer, would you want to respond to
that?
Ms. Kramer. Yes, sir.
I am actually a member of the committee that is working on
the next-generation SNS with DoD, with Health and Human
Services, with FEMA, and with a number of executive branch
partners. And they are working very hard on working to set up
that industrial base capability that we need.
Senator Manchin. Have you been on that for a while----
Ms. Kramer. I have been on that for about 4 weeks, sir. It
is just getting started and----
Senator Manchin. Have you all evaluated how we got behind
the curve and got caught so flat-footed?
Ms. Kramer. Well, sir, I think that no one ever--well, I
had a chance to speak to a former Chairman of the Joint Chiefs
this spring who had called the lead for PPE because he cares
about veterans, and he shared that in his war-gaming
experience, DoD never played out the biodefense events the
whole way to the end, because it was just too hard to do. And
what we are going to need to do now, sir, is play it out to the
end to see how it really works.
It was a tough problem; it is a tough problem now. And we
have a long way to go to bring us back to where we need to be.
Senator Manchin. Are you all looking at basically a
deposit, if you will, a depot that we will have for national
defense, have the PPEs that we need so we do not have to reply
on other nations, other countries?
Ms. Kramer. The Strategic National Stockpile is going to
reestablish so that they can meet the second wave and then
continue their readiness mission. We would like to work with
DoD and our commercial sector partners to do things like the
Warstopper program, Vendor-Managed Inventory, smart things that
allow us to buildup what we need.
But just in time for PPE is not the way to go, because a
just-in-time supply chain cannot support a tremendous surge.
Senator Manchin. We know that, yes.
Ms. Kramer. Yes, sir.
Senator Manchin. We know we have been caught behind, but
the bottom line is bring manufacturing back. And unless we are
going to have a stockpile, then you are right, Dr. Stone, they
are not going to invest in that because they are going to say,
``What happens when it goes away?'' Well, it is never going to
go away. We are going to have to continue to be prepared, and
we have not been.
Thank you.
Chairman Moran. Thank you, Senator Manchin.
Senator Rounds?
SENATOR MIKE ROUNDS
Senator Rounds. Thank you, Mr. Chairman.
First, to the entire panel, thank you for your service to
our veterans and to our country. Thanks for being here to talk
today about one of the VA Secretary's top priorities.
I want to ask you about the VA's ongoing issues with its
latest prime vendor program model, Next Gen 2.0.
Right now, the tiered acquisition rules give special
considerations to certain small businesses. I recognize that
that is important, but we also want to be sure that when it
comes to large-scale critical missions like the VA supply chain
that we are contracting with suppliers who have the experience
and capability to deliver, even when times get tough.
But right now, as I understand it, it is up to the
individual contracting officer who is reviewing the 2.0 supply
contract bids to determine what fair and reasonable pricing is
per the Kingdomware Decision that they are--that they are under
right now.
This is one of the most important criteria involved in the
contract award process. So my question is, What is the VA doing
to set up standard criteria for defining fair and reasonable so
that when they talk about pricing, we can be sure that these
contracts are going to folks who have the supply and the
distribution capability to succeed?
Ms. Brazell. Thank you, Senator.
Fair and reasonable pricing is driven--what we would do is
we would look at the market. So a market research is going to
drive the prices and who can provide that, being a supplier or
a distributor.
I do want to point out, though, that the MSPV 2.0 contract
is an active solicitation. So there is not a lot we can go
into, other than the fact that we took the lessons learned from
the previous MSPV Next Generation and GAO's recommendation as
well as Congress, and we brought our clinicians in.
So this time around, it is clinically driven sourcing, and
it is going to be competitive. We are going to have tier
reviews. So our service-disabled veteran-owned community is
your tier one. Your tier two is your veteran-owned small
businesses. Then your tier three would be the larger
businesses.
Those will all be vetted. They are going to be competitive,
and again, the market research is going to drive what would be
the fair and reasonable pricing.
Senator Rounds. Let me just kind of followup a little bit
on some examples, perhaps. Let us take PPEs as an example. Let
us take the gowns.
Right now, how many different providers, how many different
markets are there for the gowns that you would need?
Ms. Kramer. There are a number, and most of them are
located overseas. There is very little cloth textile
manufacturing in the United States, and we want to get to more
reusables because that reduces the demand on the supply chain.
Senator Rounds. During this pandemic, have you had the
opportunity to actually look at or negotiate with any
manufacturers or suppliers that would do that within the United
States?
Ms. Kramer. Actually, that is something that the SNS Next
Generation Committee is doing. So through DoD, they are
actually having those discussions right now.
Senator Rounds. Were they successful during this pandemic
in making any of that happen within the United States?
Ms. Kramer. I think, sir, that that is a question that is
probably addressed to DoD and FEMA.
Senator Rounds. So the VA probably would not be the lead
agency in working through any of those? You would be tagging on
with what others were doing?
Ms. Kramer. Sir, we would be providing our requirements so
that industry would understand what the government requires.
Senator Rounds. Would the same thing be true with regard to
other necessary items within the realm of the PPEs----
Ms. Kramer. Yes, sir.
Senator Rounds [continuing]. masks, face guards, and so
forth?
Ms. Kramer. Yes, sir.
Senator Rounds. Are there any examples where we have
actually had progress made after this pandemic or during this
pandemic where we started bringing any of those back into the
United States?
Ms. Kramer. Again, sir, I am not intimately involved with
what DLA is doing with that effort between them. FEMA and they
can provide the best answer to that question. It is also under
solicitation, so there are some concerns about discussing it in
an open forum, sir.
Senator Rounds. Would it be fair to say that making a
transition from existing providers to new providers under
emergency circumstances leave something to be desired right
now?
Ms. Kramer. Well, sir, what we would like to do is the
current providers--we would like them to bring things back
onshore, do it here.
Senator Rounds. But in order to do that, do not they have
to be assured that you would continue to use their resources,
even after this pandemic is over? I mean, they cannot just
simply go out and put in whole new lines without having some
assurance that you would participate with them for an extended
period of time; is that fair?
Dr. Stone. Sir, you are exactly correct in that, and
therefore, it has been very slow progress in this during the
pandemic to move.
Every bit of domestic manufacturer has been completely
overwhelmed by the demand. So if we are up 800, 900, 1,000
percent, so is every other health care system in America.
Let me give you one area of hope, and that is not clearly
about PPE. As you know, there has been a worldwide shortage of
swabs to do the testing on for COVID. We have been a leader in
3D manufacturing. We have been manufacturing a few thousand
swabs a month--I am sorry--a week. We now have a plan in place
to expand our swab manufacturing using advanced 3D
manufacturing printers to the tune of about 100,000 a week by
this fall.
So I think there is hope, but every small manufacturer we
deal with in the United States is questioning a capital
investment and whether that will be enduring.
Senator Rounds. Mr. Chairman, the only thing I would say--
thank you. My time has expired, but I think we really have to
talk about during an emergency situation when we run out of
supplies. How do we cut through the bureaucracy to actually be
able to award contracts on an emergency basis to individual
entities who might very well be perfectly capable of providing,
whether it be masks or other gowns and so forth, if allowed to
do so in a timely fashion and with the appropriate assurances
that it will not be a one-time shot that basically breaks them
up in business?
I think we have got--as you say, I think we have got a long
way to go, and perhaps the VA could be a part of helping to
solve that problem.
Thank you, Mr. Chairman.
Chairman Moran. Thank you, Senator Rounds.
Senator Blumenthal?
SENATOR RICHARD BLUMENTHAL
Senator Blumenthal. Thank you, Mr. Chairman.
Thank you all for being here.
Dr. Stone, a GAO report last year on VA's Office of Health
Equity--I am sure you are familiar with it--made two
recommendations. One was to ensure that the VA was collecting
reliable racial and ethnic data on veteran patients, and the
other was to ensure that any Health Equity action plan included
measurable criteria and clear lines of responsibility to
specific offices within the VA.
These steps are really important--again, I do not need to
tell you why--because racial and ethnic minority veterans
currently make up about 22 percent of the total veteran
population, and they are projected to make up 40--or almost 40
percent of the total veteran population by 2040.
The VA has identified worse health care outcome for some
diseases among minority veterans at VA facilities with recent
data showing that COVID-19 is affecting African Americans at a
higher rate than any other racial or ethnic population.
I find it unacceptable that the VA has not implemented any
meaningful reforms to address racial disparities within the VA
system. You have established the Office of Health Equity to
identify and address health care outcome disparities and to
develop an action plan, but the GAO report published last year
found that there are no clear lines of accountability or
measurable data.
So my question is whether you are committed to act on these
recommendations, when you will do so, and what immediate steps
you can take to change the fact that black Americans are
treated differently than others and what we can do in Congress
to support you.
Dr. Stone. Senator, when I came back to the VA in 2018, it
was about the time that this report was circulating. We
established the Office of Health Equity under my principal
deputy, Dr. Lieberman.
Right at the beginning of this pandemic, we began sending
to the field, information on data on the relative risk of the
black male population and the fact that they were testing
positive at a higher rate than other ethnic groups.
What we have not seen is an enhanced death rate, unlike
other health care systems, or the broader American population.
This is similar to what we have seen in prostate cancer, in
black males enrolled in the VA health care system, where black
males in the American public actually die at a higher rate from
prostate cancer than do Caucasians or other ethnic groups.
That disparity is erased in the VA. We believe that that is
erased in the VA because of our care of the comorbidities that
exist with prostate cancer. We do not think that the disease is
fundamentally different in black males versus Caucasian males
or American Indian males, but we have been able to erase that
disparity.
This is an absolute priority for us and reflects the
respect that we hold for all veterans and our responsibility to
deliver the utmost value in this integrated health care system.
Senator Blumenthal. Do you attribute the absence of
different death rates from COVID-19--if I understood you
correctly, the death rates are the same for African American
veterans as they are for Caucasians? Is that due also to your
addressing the comorbidity factors? You just talked about
prostate cancer, but is that the same?
Dr. Stone. For COVID, we believe the same thing, but it is
too early to absolutely tell.
Since the beginning, our research team has been working
this, and it is just too early to get the data out and to
really discuss it, but it is an absolute priority. And they are
meeting weekly and briefing me biweekly on the results of this.
Steve Lieberman, my deputy, is taking this on a weekly
basis and working our way through.
But I think the question that you ask is really about the
value of a fully integrated health care system in erasing
access to health care problems that exist across American
society, and that is the beauty of this system and why all of
us choose to work within it.
Senator Blumenthal. I agree totally that the thrust of the
question is to address health care inequities, disparities in
access to health care generally, which is, in my view, the
reason why there are different death rates among black and
brown Americans as opposed to others resulting from COVID-19.
It is those comorbidity factors, whether it is respiratory
problems or diabetes or--you can identify them better than I.
But if the VA is addressing those factors and diminishing
disparities, I think that will be important to know.
Dr. Stone. So, with your forbearance, sir, we just took a
look at a gene present in prostate cancer that allows the
metastasis of prostate cancer and compared that to a gene that
is present that opens lung cells to the penetration of COVID.
It is that type of research and effort that you allow to go on
by funding us in the manner you do that I think carries great
hope and shows why all of this interrelates.
Senator Blumenthal. I think that is very important.
One last question, and I am pretty much over time, but
since the Chairman is not giving me a negative sign, I am going
to go ahead quickly and ask it.
Active COVID-19 cases are on the rise in several States:
North Carolina, Arkansas, Alaska, Texas. And my understanding
is also on the rise in some VA facilities. Is it on the rise in
those States or in other States? Is there an overlap in the
incidence of that trend?
Dr. Stone. Sir, as we discussed earlier with your
colleague, our number of cases in both our med-surg units and
our ICU continues to go down. I had predicted that we would
stay at a 500-600 occupancy for COVID. We are down at 345 this
morning, and so it continues to go down.
However, you have listed a number of very troublesome
States. I would add to that Arizona, which in major areas are
seeing an increase in cases. We have not seen that increase in
cases correlate well to the veteran population; therefore, we
remain with substantial capacity in those areas that we think
the commercial health care systems may call upon us to execute
our fourth mission if this wave continues in those multiple
States.
Senator Blumenthal. And you may have asked this already, in
which case you can just say, ``I have answered it.'' You do not
have to be polite. Have you identified the reason for that non-
correlation?
Dr. Stone. No, no. But I think it is part of the research
that we have to go through.
We have questioned--70 percent of America's veterans have
deployed. So they have been exposed to multiple immunizations.
We have wondered is there something different about the
American veteran that is allowing us to do very well in this.
With that being said, I think it is too early for me to
really extrapolate that, and the researchers will be working on
this for a fair length of time.
Senator Blumenthal. Thank you. Thanks very much.
Chairman Moran. Senator Blumenthal, I always look at the
clock, and it is an inverse to the respect that one shows the
Chairman once it goes beyond 5 minutes.
I recognize now Senator Tillis.
SENATOR THOM TILLIS
Senator Tillis. Thank you, Chairman Moran. I am sorry you
are not going to be able to see my face. I am having a problem
with the camera, but I hope my audio feed is going Okay.
Chairman Moran. We hear you well.
Senator Tillis. I have got a real quick question. One
question, I know that the DMLSS system of the VA medical center
is not going to be implemented, I believe, until 2027, and the
DLA is--I guess the VA is going to need to pay the DLA to
support the DMLSS system.
The question I had is--we are going to be in a situation. I
think there is also a relationship between the EHRM
implementation and DMLSS, that they kind of roll out alongside
one another. So I am just trying to get my head around some of
the sequencing in some of the decisions that you all thought
about.
The two questions that I have on the rollout really is, No.
1, have you all assessed the feasibility of speeding up the
DMLSS implementation or the rollout of it? And I know that a
part of that depends on the delay that we have seen with the
EHRM system, but have you looked at how you sequence those and
potentially speed up the rollout? That is one question.
The other question is, Have you all assessed the cost
versus benefits to just transitioning all the VMACs to--is it
LogiCole?
Dr. Stone. Yes, sir. It is LogiCole.
I am going to defer to Andrew Centineo to give the most
depth to this, but our plan has been to field the DMLSS
solution no less than 60 days prior to go live of EHRM, so that
we would get out of their way.
One of the beauties of doing EHRM is we are upgrading all
of our closets, all of our communication closets to accommodate
these systems.
There has already been a more rapid effort to improve the
closets in EHRM, which would allow DMLSS to go faster. I would
not characterize the cost to do that at this point. I think we
can work our way through that.
We have money in the 2021 and 2022 budget, but if we wanted
to accelerate it, which we think is appropriate, that would
cost additional dollars.
So let me defer to Andrew for additional details.
I want to make sure, because I made some comments before
you go, Andrew. LogiCole is not a new software system. It is
simply moving DMLSS to a cloud-based system, and so, Andrew, do
you want to go ahead?
Mr. Centineo. Yes, Dr. Stone, I will. Thank you so much,
and thank you, Senator Tillis, for the question.
So one of the key elements, as has been discussed here, has
been documented in GAO reports, is to be able to have systemic
business processes. So DMLSS needs to be the application. It
has been decided to be the application to provide holistic
enterprise logistics support.
I will just quickly touch on a few of the items because I
do not want to lose sight of the fact that it will give us
supply capability. It will give us enterprise equipment,
ordering, receiving, accountability, maintenance. It will
provide us facility management to include space or space file.
So if we took, for example, today's environment for PPE, the
need to expand our negative pressure rooms for patients, having
that information resident in DMLSS could have an enterprise
pull and an enterprise view for Dr. Stone to look at all of his
facilities to say where do I have negative pressure rooms or
where do I have capacity.
This enterprise application is fully integrated, unlike the
current applications that we have today, AEMS/MERS, GIP, and
Maximo, three islands, three completely separate instances
across 170 facilities customized at every one of those
locations.
So if we just look at the rudimentary business processes,
DMLSS will give us the structural foundation to do that.
The question has been raised before. Senator Tillis, a
great question. LogiCole is the future advancement. It will
give us enhanced enterprise capabilities, but what we need to
do is start with the technology that gives us the business
processes and migrating it to that next level, which was
already programmed within DoD. It will be nothing more than
having it go from a Microsoft Office Version 1.0 to 2.0 with
mild enhancements that then the end user will have to get
prepared with.
I mentioned it early, and I would like to reiterate the
point that this is not a journey for the VA alone. The way it
thrusts to enable ourselves to do this is the partnership with
the Defense Logistics Agency, which is the supply chain side of
the house, and the Defense Health Agency, which is the IT
enabler, to bring the capability to our organization.
Dr. Stone talked about funding. Funding is a component of
it, but the capability and capacity for DoD to be lock step
with us is absolutely something that we will need support with
to make sure that we have a fundamental whole-of-government
approach that positions VA, DoD, and other partners in the
environment of the supply chain specifically for DMLSS for DoD
and the VA.
I would personally ask for consideration from the Committee
to look at how we can position ourselves with language to be
able to get ourselves in that direction.
Senator Tillis. Well, I would be happy to speak with you
about that.
I have got limited time. I can barely see the clock, but
one thing I just wanted to bring to your attention more than
anything, we just got a recent announcement from HHS BARDA at
Corning, got a $204 million contract to expand production lines
for glass vials and preparation in anticipation of the vaccine.
So one of the questions I just had for VA, I would not
expect you to answer it here, but just think about it. If you
are taking a look at the promising reports that we are getting
on the development of a vaccine and a large population and a
fair number are in the at-risk category within the VA system,
what are you all doing right now thinking through--let us say
the clock ticks. We get into September-October. We could
potentially have a vaccine that has already got the
manufacturing capability to be manufactured at scale. What
would you all need to think about now to make sure that you
could take full advantage of that?
And then another question around syringes, other vials,
other challenges. Are you thinking through the supply chain
challenges for the vaccine response to COVID-19?
Ms. Kramer. Yes, sir.
We are working with FEMA and Health and Human Services on
this. That is a whole-of-government approach. They are
producing it for the Nation, and we will be part of the group
that is supported with that.
And we are evaluating our requirements for syringes and
needles to be able to administer those, the vaccine, but we
need to understand a little bit more about what FEMA and SNS
are doing so we do not duplicate what they are also doing. They
are planning on acquiring quite a few syringes and needles.
Dr. Stone. And our medical research team is participating
with the development of the vaccine.
Chairman Moran. Senator Tillis, that is an excellent
question, and I look forward to hearing more about the plans
for utilization of vaccines as they become available. And it is
worthy of our Committee spending some time on.
I now recognize Senator Hirono.
SENATOR MAZIE HIRONO
Senator Hirono. Thank you, Mr. Chairman.
Tragically, 33 VA employees have died due to COVID-19. Dr.
Stone, does the VA have any data or accounting of how many of
those employees were working in a facility that had implemented
austerity measures with regard to the use of PPEs, and are you
concerned that lack of proper PPEs led to employee deaths?
Dr. Stone. Senator, my No. 1 responsibility is the safety
of veterans and safety of the employees that have pledged their
work lives to the VA.
It is impossible for any of us to understand how these
employees got this disease, and we can go through privately the
events regarding a number of these.
We had an early death that occurred in someone who was
moonlighting in another facility and carried it back to a
number of coworkers in an area that really was in no-patient
contact.
So to suggest----
Senator Hirono. The record----
Dr. Stone. To suggest--please give me a minute here. To
suggest that somehow we have endangered our personnel is just
not borne out by the facts. We will be happy to go through and
look at every single one. We are doing that at this time, and
OSHA is involved in every one of our deaths, and so I
appreciate it.
So let me say one other thing. In Italy and in Spain, 10 to
15 percent of health care workers actually caught COVID-19. In
Detroit, which is one of the few health care systems that has
actually talked about their infection rates, their rate of
infection is between 2.5 and 4 percent. We are at 0.8 percent
on our personnel who have become infected. That to me reflects
the fact that we have done a good job of working to protect our
workers.
Thank you.
Senator Hirono. On the other hand, Dr. Stone, at our last
hearing, VA acknowledged that it is not there yet with COVID-19
testing for employees, and VA specifically cited a lack of
cartridges and swabs.
So you know that there is a very low rate of hospitals
testing positive, but then we are told that you are not there
yet with regard to adequacy of your testing program.
What is VA doing to procure enough testing supplies for
robust testing of VA employees, and when do you expect to have
sufficient supplies?
Dr. Stone. So----
Senator Hirono. And once you have enough supplies, will
there be restrictions on which VA employees can receive tests?
Dr. Stone. So what we would like to get to and I think what
our employees deserve is on-demand testing. We, as of today,
are just under 50,000 of our employees have been tested, which
is about 17 percent of our work force. That is dramatically
higher than the American population.
We have tested all of our work force in certain high-risk
areas, including our CLCs as well as our spinal cord treatment
areas.
We have the capacity at this time to test about 60,000
tests a week. We are running between 600 and 700 employees a
day through that testing, and we hope to get there soon. But it
is not the equipment that we need. It is really the cartridges
and the swabs that we must get to in order to get to the amount
of testing that I think both you and I would agree would be the
right amount of testing that any employees could feel safe
going home at night, that they are safe for their family.
Senator Hirono. So there is acknowledgement that you do not
have enough cartridges and swabs. So are you getting them?
I realize that 50,000, that only represents 17,000 of your
work force, but many of your work force work directly with
patients who are, therefore, in a risk category. So I think it
is more important that the people who are working directly with
patients in the VA system get tested. So where are you
procuring the cartridges and swabs that you need to perform
adequate testing?
Dr. Stone. So these are coming from multiple manufacturers
based on the multiple different types of machines that we have.
Ms. Kramer or Andrew, do you have----
Ms. Kramer. Yes, sir.
And they come from a variety of places. Some of these are
actually centrally controlled by Health and Human Services and
are actually sent out on allocation. Again, these are products
where there are shortages nationally. Swabs and these
cartridges are not a challenge just for VHA. They are a
challenge for many health care systems. So we get that
allocation.
As they are able to--the manufacturers are able to speed up
production and as we develop, there is only two--three swab
manufacturers that I am aware of in the world: one in Italy,
one here in the United States, one in China. We are hoping more
people get into that market and begin producing more swabs that
would actually relieve some of the shortages that we are
experiencing today.
Senator Hirono. Well, this is one of the reasons that so
many of us have advocated that the President fully utilize the
Defense Production Act because it is just unacceptable--that is
kind of a nice way of putting it--that a system as large as the
VA does not have an adequate amount of these kinds of
materials, and yet you have to compete with other systems.
Every State is competing for these materials.
I mean, I do not necessarily want to put you on the spot,
Dr. Stone, but it would make a lot of sense if the Defense
Production Act had been fully mobilized to produce all of these
necessary testing supplies. I do not know if you care to
answer. Would you care to answer?
Chairman Moran. Senator Hirono, let me see if Dr. Stone
wants to say something. If not, we will move on to Senator
Cassidy.
Dr. Stone. I think that when you are dealing with a once-
in-a-hundred-year pandemic, there are lots of lessons learned.
One of them is how we use domestic manufacturing.
Chairman Moran. Senator Cassidy?
SENATOR BILL CASSIDY
Senator Cassidy. Thank you all. Again, Dr. Stone, thank you
for the assistance the VA gave to the people in New Orleans,
and you all stepped up. When I hear that your infection rate is
0.8 percent, as a physician, that is incredibly impressive, and
so let me just say that as well.
Let me get to my question. Here is something. Let me just
ask you. The VA clearly has enormous buying power. You can get
the lowest price, if you wish, of all products.
Now, I hear from doctors, and they are telling me that they
were not necessarily consulted in the decisions made as to what
products to purchase.
It comes to mind that when I was practicing medicine, I
worked in a State-run hospital, and you know those little
packets of K-Y jelly that we use for endoscopy. We put it on
the end, and we pass it. Somebody went out and bought a
substitute for the normal vendor, and it turns out they only
gave three-quarters of the amount per packet. So we ended up
using more packets than we would have, even though they got a
better price on the packets.
If they had asked a clinician who actually used it, we
would have known.
So I am hearing from some of my folks within the VA that
these standardization decisions are made as regards to
purchasing, but the clinician himself or herself is not
consulted in that decisionmaking process.
One more thing I will say, I think this is called the Next
Generation Medical-Surgical Prime Vendor contracts, and as
subsequent, it has not been embraced by the clinicians.
I will also say I had a bill pass in 2018, the VA Medical-
Surgical Purchasing Stabilization Act, which was to ensure
clinician input on formulary decisions, but again, I am hearing
that that has not been implemented as per the purpose of the
law.
So, Dr. Stone, what comments do you have on that? How
involved are the clinicians in driving the contracting
strategy?
Dr. Stone. Senator Cassidy, thank you.
You are talking about clinically driven sourcing, and I
think that Andrew Centineo can talk a bit about that, as can
Karen.
So, Andrew, do you want to take this?
Mr. Centineo. Yes, Dr. Stone, I will.
Thank you, Senator Cassidy, for the question.
Unequivocally, clinically driven strategic sourcing is at
the center of where we are.
True, in our old-generation med-surge prime vendor
contracts, that was lacking or perhaps not there.
I would offer that last year, we actually assembled over
150 clinicians as part of the clinically driven strategic
sourcing initiative. That does have clinicians across the
entire VA in areas of specialty that are required to be able to
help us source our material as we are doing our MSPV 2.0
solicitations. It is with clinical technical review teams
before those products are put into the sourcing selection.
We unequivocally have brought in leaders, to include Dr.
Paul Varosy, who is one of the premier cardiologists. He is in
there leading it from his vantage point, and he is working with
the chief medical officers across all of our VISNs to be able
to have their input providing clinically driven sourcing.
I would offer you have to have a background in supply and
logistics to look at the factors that go in there. We also have
to bring in there, how do we bring our buying power.
Although the VA is large, only if we are brought together
in a larger entity, if we look at a whole-of-government
approach, do we really start to see market share.
If we were to partner with DoD, we would probably get to
the 4 to 5 percent market share. That is where we are. Although
we have 170 medical facilities, we do not really dominate that
much of a market, but we certainly can get buying power by
collaborating more closely, but we----
Senator Cassidy. Well, let me ask that because I am almost
out of time. Thank you for that answer, and that is reassuring.
One of the problems we have right now, at least in
pharmaceuticals, is that there can be a price driven so low
with the sole-source provider that you end up with only one
provider of a generic drug.
And I see you nodding your head. This is something we all
recognize.
DoD will actually pay a little bit more to make sure that
they have at least two providers of a certain widget, if you
will, whatever they need to make things happen.
So has there been any consideration for VA to perhaps
invest in--as some other big systems are--invest in making sure
that we have more than one provider of key elements of that
which we need?
And, Karen, you seem teed up to address it.
Ms. Brazell. Yes, Senator Cassidy. Thank you.
I just want to make clear that the current MSPV 2.0
contract is under active solicitation, but I can tell you what
they did for MSPV Next Generation.
First and foremost, it was not competitively bid. What they
did is took 400,000 items, and we were directed by GAO and, of
course, Congress to bring in the clinicians for it to be
clinically driven sourcing. So we are down to 22 categories,
that each of those categories had a physician as part of that
team in the development process.
Competition is what is going to drive the price, and so
this contract is going to be competitively bid. And we are
going to have it tier-reviewed. So there will be three
different levels of tier review, starting first with our
service-disabled, veteran-owned community.
Senator Cassidy. That addressed my first but not my second,
but I am out of time. So I will yield back. Thank you.
Chairman Moran. Thank you, Dr. Cassidy.
Now Senator Sinema.
SENATOR KYRSTEN SINEMA
Senator Sinema. Thank you, Mr. Chairman, and thanks to our
Ranking Member for holding this hearing.
Thank you to all of our witnesses for being with us today.
This topic is extremely important to ensure VA can protect
its staff and the veterans it serves as they continue to treat
veterans during the coronavirus pandemic and prepare for future
health emergencies that might occur.
My first question is for Dr. Stone. The VA has multiple
avenues for procuring medical and surgical equipment and
supplies, including government procurement cards for ad hoc
purchases.
Given the short supply and high demand for personal
protective equipment and other supplies during the pandemic,
facilities have been making purchases in some cases from
unknown or new vendors. Some of these purchases resulted in the
VA facilities receiving expired or otherwise compromised
supplies.
Does the VA Central Office have a way to identify and track
these purchases to ensure that the VA does not spend taxpayer
dollars on fraudulent sales?
Dr. Stone. Not as effectively as we should.
Ms. Kramer has been working this.
Ms. Kramer. Yes. And I just actually would like to go back
to Senator Cassidy's question to also mention that Warstopper
is another way that we can make sure that we can maintain more
than one manufacturer out there, but we do not have that
authority. And we would need that authority to be able to
support two manufacturers, especially if one is offering a
significantly lower price.
We have a very difficult time, given the systems that we
have at VA, on being able to see the government purchase card
orders in real time. We are catching these typically later and
typically after someone has reported a problem. That is one of
the other big reasons that we need the Defense Medical
Logistics Standard Support System because the government
purchase cards are put into that system, and it can only be
used through that system. And the system will actually stop you
from making a purchase where there is a better source.
We are putting guidance out to support the facilities in
terms of how to identify counterfeit products so they do not
acquire those, and it sounds like I need to put a little more
training out in the field in terms of how to identify
manufacturers who can deliver FDA-cleared products.
Senator Sinema. So a followup question to that, then. As
the VA is moving forward with a plan to modernize the
procurement systems, have you considered creating systems that
have the capability to prevent flagged vendors from conducting
business with the VA while also allowing the incorporation of
vetted local suppliers that can provide local VISNs with more
flexibility and shorten the supply chain, basically doing two
things at once, stopping the guys who are fraudulent so no one
else makes that same mistake and then also incentivizing using
local folks who are trusted and proven?
Ms. Brazell. Senator, this is Karen Brazell.
Yes. We do have methods. When we have what we call a ``bad
actor,'' we flag those. So that message is promulgated
throughout the VA, and that messages are sent out from our
senior procurement executive.
And then we also flag it in our contract management
systems. When we do have those bad actors, we make sure that we
communicate to the entire acquisition community at the VA, what
to look for and how to address fraud, waste, and abuse.
Senator Sinema. Thank you.
My office has heard concerns from some VA health care
personnel that as PPE shortages increased, they were given less
PPE, and they did not understand why one person would receive a
surgical mask while someone else would get an N95 respirator.
There were also strong concerns that we heard in our office
that new CDC guidelines related to reusing and conserving
certain types of PPE put the health of personnel and veterans
at risk.
So, Dr. Stone, as part of evaluating the proper use of PPE
during this pandemic, can the VA and other Federal agencies
work with the CDC to reevaluate their guidelines? And can the
VA and other Federal agencies track and evaluate the impact of
changing PPE guidelines in the years to come?
Dr. Stone. I think we can, and I think we should. I think
that one of the frustrations in a health care system not under
stress is that you can throw a lot of things away that have
usable life.
I think we saw that with the N95 masks. If I go into a
surgery that I need a surgical N95 and that surgery takes 6
hours, I wear that mask for 6 hours, but yet on a floor when we
are out in a med-surg floor, in an ICU, we might throw that
mask away in 5 minutes, even if it has not been soiled or
contaminated in some manner.
So when we said to employees that you can use a mask for
your shift, whether that be 8 or 12 hours, it was done with CDC
guidance and only after the CDC guidance, and it was reflecting
the fact that studies have shown that those masks will work for
that 8 to 12 hours.
So there was a lot of discomfort in that on the floors, and
it has been an education for all of us who for my nearly 40
years of being a physician have just simply thrown those things
away when I walked out of a room.
This was different but also reflected the experience that
we have around the world as well as the research that has been
done demonstrating those material safety.
Senator Sinema. Thank you.
My time has expired. Mr. Chairman, thank you.
Chairman Moran. Senator Sinema, thank you very much.
Now Senator Blackburn.
SENATOR MARSHA BLACKBURN
Senator Blackburn. Thank you, Mr. Chairman, and thank you
to each of you for being there.
As we talk about having this inventory system, having the
purchasing system, let me ask something I have not heard you
mention in this hearing. How many purchasing agents does the VA
employ, and where are those agents located?
Ms. Brazell. Thank you, Senator.
Specifically, I can address at least your contracting
officers because purchasing agents may be like GPC cardholders
vice a contracting officer.
So within the VA, we have at least 3,300 contracting
officers geographically dispersed. The proponent of them reside
in VHA. So about 2,200 of those contracting officers reside in
VHA to make those decisions and award contracts.
Senator Blackburn. And how many hospitals are in the VA
system?
Dr. Stone. 175.
Senator Blackburn. Say that again
Dr. Stone. 175.
Senator Blackburn. Okay. For 175 hospitals, you have 3,300
purchasing agents, and in addition to that, you have
individuals that hold the GPD cards. Am I correct about that?
Dr. Stone. Yes. I think there are 17,000 GPC cards that are
in the field.
Senator Blackburn. Let me ask you this. First of all, let
me say your 7-to-8-year implementation plan is just way too
long. That means the job is never going to get done, but let me
ask those of you on the panel. Have any of you looked at any of
the hospital chains, the hospital management companies like HCA
or Community Health or LifePoint Health, and looked at their
purchasing departments and the number of people that are there
and how they make their purchasing decisions? Have you done a
deep dive on this?
Dr. Stone. So I have, and I will defer to everybody else to
answer also.
So we took this concept of moving to a more centralized and
a more accountable system, and we took a look at Ascension
Health, which is about the same size as us and has gone through
multiple procurements of other hospitals. We presented this
concept to our special medical advisory group, which has a
number of health care leaders, including leaders from HCA.
We have dramatically more purchasers of materiel than any
of the other commercial health care systems which is----
Senator Blackburn. Probably several hundred-fold.
Dr. Stone. Yes, ma'am.
Senator Blackburn. If most of those have purchasing
departments, that would be about 25 people. Am I correct on
that?
Dr. Stone. I am not sure it would be that austere.
Senator Blackburn. I think I am correct on that. Yes.
Dr. Stone. But you are correct that we are severalfold
greater, and hence, we have a system that does not deliver the
transparency or the level of accountability that either you or
I would expect.
Senator Blackburn. So looking at that answer--and I know it
is difficult to do this by video. So looking at that answer,
then before we get going down into replacing any kind of
system, we need to look at your structure and find a way for
you to, first of all, take you--you would be better served to
have 130 people as opposed to 3,300 people. You would be better
served not to have 17,000 additional that can go make
purchases, but looking at a different way to approach this and
doing it more like a hospital system.
Ascension is a good one because they deal with
pharmaceuticals. They deal with the hospitals. They deal with
clinics. They deal with a variety of facilities within that
framework. So you need a structural overhaul before you can
even address your problem.
Mr. Chairman, I would recommend that we go back to the
drawing board on this and that we work with the VA in a way to
get their structural system in order first and then give them a
timeline that is going to be more realistic. Seven or 8 months,
they ought to be able to do this as opposed to 7 or 8 years.
I yield back.
Chairman Moran. Senator Blackburn, thank you very much.
I would ask our witnesses, Dr. Stone, do you or any of your
colleagues want to add anything to what has been said
previously, any opportunity to correct to add or modify any of
your testimony?
Dr. Stone. The only addition I would make, sir, is to
reemphasize what I said at the opening.
The collegial relationship we have with your Committee and
each of the principals is a dynamic and excellent discussion
that helps us through all of these issues.
When the Secretary and I came to the VA, we recognized
there were three major systems that must be fixed: our
information system for collecting clinical records, the EHR;
the supply chain; as well as financial modernization.
We have hit today on the second pillar, but in this
pandemic, it is that pillar that has really created most risk
for us.
We appreciate the manner of the questions and how you have
conducted this and look forward to our next discussion.
Chairman Moran. Dr. Stone, thank you to you and your
colleagues, and we will now call the second panel for their
testimony.
We have with us today: Ms. Shelby Oakley, the Government
Accountability Office's director for Contracting and National
Security Acquisitions; Mr. Roger Waldron, president of the
Coalition for Government Procurement; Mr. Michael McDonald,
director of Government Operations at 3M Health Care; and
finally, Mr. Kurt Heyssel, a principal with Sightline
Performance Advisors and the former Chief Supply Chain Officer
at the Veterans Health Administration.
I am not sure who all are appearing in person and who are
appearing by technology.
Thank you very much for joining us today and for providing
your testimony and the conversation that I know we will have,
and we will begin by recognizing Ms. Oakley.
PANEL II
STATEMENT OF SHELBY OAKLEY
Ms. Oakley. Thank you.
Mr. Chairman, Ranking Member Tester, and members of the
Committee, thank you for having me here today to discuss our
observations on VA's medical supply chain and its response to
the COVID-19 pandemic.
Like most medical institutions nationwide, VA has faced
difficulties obtaining personal protective equipment for its
work force in recent months. VA's existing mechanisms for
obtaining medical supplies, such as its Medical-Surgical Prime
Vendor program and other national contracts, were not able to
meet the demands for PPE at its 170 medical centers.
Global shortages of supplies led VA officials to use
whatever means available to obtain supplies, including existing
and new contracts and other means such as government purchase
cards.
VA mobilized its work force, and it was--and still is--an
all-hands-on-deck effort to respond. I commend VA's contracting
and logistics work forces for their tireless efforts.
While some of the challenges VA experienced during the
height of the pandemic were a result of an unprepared global
supply chain, some were due to longstanding problems with VA's
acquisition management function that we have reported on in our
work and that led us to elevate VA's acquisition management to
our high-risk list in 2019, problems such as an ineffective
program for purchasing medical supplies and old and unreliable
systems.
VA has taken steps to address some of its acquisition
management challenges, but our ongoing work indicates that some
will not go far enough, and others are years away. For example,
preliminary observations from our ongoing work show that VA has
made improvements to the Medical-Surgical Prime Vendor program
that have mitigated a few of the shortcomings we identified in
prior work.
These shortcomings, including a limited catalog of
supplies, led to low usage of the program by medical centers.
Despite making some improvements, medical center officials
report continued challenges, even under normal circumstances,
with receiving timely supplies. VA's planned improvements to
the program will not likely address these challenges or others.
VA has a just-in-time inventory supply model, a practice
employed by many hospital networks. As you can imagine, a
strategy premised on historical demand signals, small stocks,
and daily deliveries, if disrupted, could quickly lead to a
situation where a medical center is lacking necessary supplies.
VA's current inventory management system does not provide
decisionmakers with real-time information to monitor and assess
supply levels and support critical decisions about where gaps,
needs, or surpluses are located.
As early as February, the Nation faced unprecedented supply
chain paralysis, bringing VA's lack of visibility into its
agencywide inventory of PPE front and center. In March, VA
officials implemented a patchwork approach to obtaining
information that relies on daily manual reporting from its 170
medical centers on their provisions of PPE for COVID response.
VA has evolved this system over the past few months, for
example, by putting in place a dashboard for decisionmakers and
by issuing guidance to assure more consistent data, but the
bottom line remains. Our Nation's largest integrated health
care system relies on an antiquated inventory management system
that even in the best of circumstances is inefficient.
While VA has improvements planned as part of its supply
chain modernization efforts, a recent status update indicates
that they are at critical risk of not meeting modernization
milestones, even before COVID. For example, VA plans to roll
out a Defense Logistics Agency system which provides more real-
time inventory management. Technology integration issues,
however, have delayed near-term implementation, and complete
implementation throughout the VA hospital enterprise is not
planned for at least 7 years.
In conclusion, VA experienced many of the same challenges
obtaining PPE as private-sector hospitals and other entities in
responding to this devastating pandemic; however, VA was
particularly ill-positioned to respond efficiently, given its
existing acquisition management and supply chain challenges,
despite the valiant efforts of its work force.
Chairman Moran, Ranking Member Tester, and members of the
Committee, this concludes my oral Statement. I would be happy
to answer any questions that you have.
Chairman Moran. Thank you very much. Mr. Waldron?
STATEMENT OF ROGER WALDRON
Mr. Waldron. Chairman Moran, Ranking Member Tester, and
members of the Committee. Thank you for the opportunity to
appear before you today to address the challenges facing the
Department of Veterans Affairs as it builds a resilient supply
chain supporting the health care of our Nation's veterans.
I am Roger Waldron, president of the Coalition for
Government Procurement, and our association is pleased that the
Committee is focusing on the VA's supply chain and its role in
delivering best value health care to veterans.
By way of background, the Coalition is a nonprofit
association of small, medium, and large businesses collectively
representing more than $145 billion in annual purchases through
government contracts for commercial products and services.
Coalition members provide more than $12 billion in medical-
surgical products and pharmaceuticals to support health care
needs of our Nation's veterans and warfighters.
Today my remarks summarize my written testimony, which has
been submitted to the Committee and which I ask to be included
in the record.
Chairman Moran. Without objection.
Mr. Waldron. Coalition members strongly support the VA's
efforts to implement a clinically led program office to develop
sound requirements. These requirements will define the scope of
the VA's formulary and the commercial and medical-surgical
products available through the MSPV program, national
contracts, and the Federal Supply Schedules.
A clinically led program office serves as a bridge between
program entities generating requirements and VA procurement
professionals and contractors by identifying, collecting,
analyzing, and communicating formulary requirements across the
Department and to industry.
Given this central role in the VA logistics supply chain,
it is vital that the program office be managed and led by
clinicians. This management includes the naming of a medical
supply chain leader responsible for formulary management and
engagement with industry along with the investment of resources
to implement a robust clinically led program office for medical
requirements development.
Further, this office should serve as the lead point of
contact for industry about new products and innovations. This
role would provide industry with a clear, direct channel
through which it can engage with the Department and should have
the latest developments in the rapidly evolving field of
medical and surgical technologies.
Engagement with industry, however, is just one factor in
developing a robust formulary. Input from health care providers
and treatment facilities across the VA along with the
availability and analysis of transactional data are critical to
developing an efficient, effective formulary. The lack of
meaningful, accurate purchase data undermines the development
of a comprehensive, holistic formulary. In this regard, the
current significant reliance on government purchase cards
undermines the VA's formulary because it fails to provide such
data.
The condition is circular. Treatment centers use the
purchase card because items are not on the formulary, and as a
result of that use, the VA lacks the data necessary to improve
the formulary.
The VA should enhance and expand the formulary to reflect
clinical needs. This effort would provide the VA with a sound
spend data, and that combined with clinical input can be used
to improve the formulary incrementally, standardizing product
categories, where appropriate, while providing clinical
flexibility and choice in other product categories.
A first step in expanding the formulary would be to allow
firms to offer their full product lines rather than picking and
choosing subsets of products, lines, or individual products.
Coalition members support the VA's efforts to modernize its
financial and logistics systems. These systems are critical,
indeed foundational, to creating, managing, and collecting data
to support clinically led sourcing.
With regard to DMLSS, transparency regarding implementation
schedule, milestones, and operations will assist all
stakeholders in responding to changes in the Federal health
care market. The VA's industry partners need to understand the
implications for their business of a transition to this new
logistics channel.
Correspondingly, all stakeholders will need to understand
how the DLA contracts will evolve over time with the expanded
scope and increased usage by the VA.
Finally, regarding acquisition generally, streamlining
processes and streamlining regulations would help the VA meet
its needs.
Efficiencies could also be obtained by centralizing procurement
operations. This coordinated management would allow the
Department to focus on all aspects of the supply chain,
including small businesses.
Chairman Moran and Ranking Member Tester, the job is
complicated, but the suggestions made here could help the VA
improve the supply chain programs that serve our Nation's
veterans.
Thank you again for the opportunity to address the
Committee. I look forward to answering questions.
Chairman Moran. Thank you for addressing the Committee. Now
Mr. McDonald.
STATEMENT OF MICHAEL McDONALD
Mr. McDonald. Chairman Moran, Ranking Member Tester, and
distinguished members of the Committee, thank you for the
opportunity to appear before you today.
Mr. Waldron. I think you have to press that button.
Mr. McDonald. Good afternoon, Chairman Moran, Ranking
Member Tester, and distinguished members of the Committee.
Thank you for the opportunity to appear before you today . My
name is Michael McDonald. ``Mac,'' they call me. I am the
director of Government Operations for 3M's Health Care Business
Group.
Prior to joining 3M in 2013, I served in the United States
Army for 30 years. I retired at the rank of colonel. My area of
medical specialty was as a medical logistician in the Medical
Service Corps.
Arriving here, given my experience, I hope that my
testimony today will provide helpful to your Committee and
reviews possible steps and strengthens and improves the supply
and delivery of medical materiel throughout Veterans Health
Administration.
3M is a leading provider of personal protective equipment
and medical solutions worldwide for medical professionals,
workers, and the public. Besides disposable N95 respirators, we
are also a leading manufacturer and supplier of reusable
respirators.
In addition, 3M provides other critical solutions in
support of a pandemic response, including hand antiseptics,
industrial cleaning, and any microbial testing and monitoring.
3M is playing a unique role in the fight against COVID-19,
and it is a responsibility we take seriously. Beginning in
January, 3M began increasing its production of N95s and other
respirators, doubling its global output. In the United States
alone, we activated our surge capacity and made an additional
investment, increasing our N95 rate from 22 million per month
pre-pandemic to 35 million per month today.
By the end of this month, we will be producing at a rate of
50 million per month, and by the end of October, we will be
producing 95 million a month. Total for the annual year
projection, we will be producing 1.1 billion N95 respirators.
That is four times pre-pandemic production rates.
In addition, 3M has launched a global effort to combat
fraud and price gouging and help protect the public against
those who seek to exploit the demand of critical 3M products
during a pandemic. Most important, 3M has not and will not
increase the prices for N95s and other respirators as a result
of the pandemic. We have also created and made available a
number of resources to help purchasers of respirators and the
public to avoid price gouging and other unlawful activities.
3M and the VA have partnered together for well over 25
years, with 3M providing solutions through multiple contract
vehicles and responding to the COVID-19 crisis. The VA has
contracted with 3M and additionally has received 1.8 million
respirators to date and have contracted for over 25,000 powered
air purifiers and 25,000 elastomeric, which are the reusable
respirators.
While working with the VA to deliver critical medical
supplies during the ongoing COVID-19 pandemic, we observed that
there would be value in implementing a clinically integrated
supply chain system to ensure systemwide visibility and
requirements-driven solutions. Going forward, the concept of a
sale to centralize and coordinate acquisition and logistical
efforts should be considered as a best practice.
Furthermore, VA should be considered a stockpile program,
much like DoD. 3M currently works with the Department of
Defense incorporating contingency matters that allows them to
work rotatable sticks.
While significant reforms have been adopted to modernize
the VA, Medical Surgical Prime Vendor program still remains a
work in progress.
Health care supply chain transformation starts with the
patient, clinical provider, and reform should aim to address
those topics directly, a clinically driven, integrated, and
clinical adopted solution where clinicians are involved in the
decisionmaking. Automating systems and the process is just one
component of that. Standardizing and simplifying processes
will, indeed, increase efficiencies throughout the Department
of Veterans Affairs. Besides these and other reforms that are
delineated in my written testimony, one key concept in this
development of this process is a process map, not 7 years,
because this actually began in 2012 when they did a proof of
concept with DMLSS at the level facility. So that process map
will prove to be very effective.
3M is a proud leader and supplier of personal protective
equipment and other health care-related solutions to assist not
only with the COVID-19 pandemic but also enabling the VA to
achieve its main goal and function, to serve our Nation's
veterans.
We are committed to continuing to work with and to be a
strong partner with the VA as they move forward in their
efforts and modernization, their current procurement processes.
We are dedicated in serving as a resource in both agency and
the Committee during this ongoing process.
I would like to thank you again for this opportunity to
appear before you today and happy to answer any of your
questions.
Chairman Moran. I thank you, Mr. McDonald, for appearing
before our Committee. Mr. Kurt Heyssel is recognized.
STATEMENT OF KURT HEYSSEL
Mr. Heyssel. Thank you, Chairman Moran, Ranking Member
Tester, and honored Senators. It is an honor for me to be here
today as much as it was when I was originally asked to serve
our veterans over 2 years ago. I believe there is no higher
mission for this Nation than to ensure the care and well-being
of those who have served to protect all that we know and love.
A lot has been said today regarding various issues facing
the VA, and they are all pressing issues. However, I believe a
fair amount of what ails the VA supply chain is due to an
organizational structure that has evolved over time. The
current structure lends itself not to a unity of mission,
vision, or a shared sense of purpose, but to operational and
functional independence. This creates a bias for action to do
what is thought best locally, without thinking of the larger
organization and oftentimes without all or much of the
information. As a result, any nationwide standards of
performance or best practices or efforts to develop systems of
management are hard to implement and monitor, which leads to
the greatly varying results across the system we see today.
It leads to an expenditure of effort and resources to
create transparency and to understand the big picture facing
VHA supply chain. Oftentimes, the left hand does not know what
the right hand is doing.
VA corporate is not in control as it must be to achieve
supply chain success. Many large private-sector health systems
when faced with this same issue implemented a shared service
organization. I believe this is the answer for the VA.
Again, this is not the fault of any one person or group of
persons. It took years to become this way, and this situation
is, in my opinion, the single largest reason the VHA runs a
high risk of failure and often does fail whenever a large
systemwide effort is undertaken, and the result is a failure to
serve our veterans.
VHA supply chain can and should be much more effective than
it is, and the very good news is that this is a fixable
condition.
I am anxious to get the conversation started. Thank you so
much for your time.
Chairman Moran. Thank you for your time.
Let me begin with questions, and then I will turn it to
Senator Tester.
I assume that you listened to the testimony in the previous
panel, Dr. Stone and his colleagues. Let me just ask you. If
you were in my place or our place, what did you hear that I
should be asking questions about? What did you hear in regard
to their plans that raises the significant concerns, any
significant concerns? Help me know what it is that we should be
observing and pursuing as we continue to look at this issue of
procurement.
I ask that of any and all of you.
Mr. Heyssel. Mr. Chairman, if I might?
Chairman Moran. Please.
Mr. Heyssel. This is Kurt Heyssel.
A good bit of time is spent talking about the contracting
process and how there are so many contracting officers employed
by the VA versus what the private sector has. While the
difference is almost staggering, I think what does need to be
recognized is I think the VAAR or FAR needs to recognize what a
source is. A source for anything, be it an N95 respirator or a
scalpel or a clip applier is not whoever can sell it to you.
The source is the manufacturer. This is at the heart of the
contracting issues the VA and perhaps the rest of the Federal
Government's procurement and contracting offices have.
I think the VA, VHA--and even VHA, all the Federal agencies
involved in health care need and should contract directly with
the manufacturer and then hold separate contracts with the
people or companies they are choosing to buy from. That is what
happens in the private sector. I would have 1,600 contracts
with 1,600 different manufacturers, and then I had a contract
with my distributor and perhaps a contract with other
independent distributors. We pay a guaranteed price for the
suture, and then we pay a guaranteed markup to our distributor,
oftentimes anywhere from 1.75 percent to 3 percent.
Then in order for the distributor to stay in business,
because the distributor needs to make at least 8.5 percent to
keep their doors open, they had a relationship with the
manufacturer, and they would pick up back-end money or a rebate
from the manufacturer, which was essentially the manufacturer's
recognition of the important role the distributor plays. The
distributor creates elasticity in the supply chain. The
distributor helps the manufacturer by making sure the
manufacturer is not managing 5-or 6,000 ship-to's, and the
distributor is helping its customer by making sure the health
system is not managing 5-or 6,000 purchase-from sites.
So this is something that really would help the VHA
incredibly. It would shorten the time needed to make a
procurement. It would actually shorten some time needed to make
a decision as to what they are going to buy and from who.
Chairman Moran. Thank you very much.
Others?
Ms. Oakley. This is Shelby.
First off, I would say that, unfortunately, I think the
situation that Mr. Heyssel is describing is only going to get
worse under the 2.0 contracts, but that gets a little
technical. So I am not going to get into that. I can share it
with your staff.
But one of the things that I would be asking questions
about of VA is, What are their supply chain goals? It seems
like, since we have been reviewing their medical supply program
over the past several years, that it is a flavor-of-the-week
kind of thing where it is one goal 1 day, one goal the next
day, ``Oh, wait. We are going to go look at DoD's MSPV program.
Maybe that is our panacea,'' and I think that it has led to a
kind of lack of focus on what the actual goals are of the
medical supply program within the VA. So I would really be
pressing them on all of their different approaches that they
are taking to obtain medical supplies and all their pilots that
they are going to be holding with regard to DLA's MSPV program
and find out what, in fact, is their goal that they are trying
to achieve through all of these efforts, because it is taking a
lot of time and resources to continue to move forward with MSPV
2.0 and do all these other things on the side as well.
Chairman Moran. Thank you.
Mr. Waldron. Senator, I would just pick up on what Shelby
said in talking about goals. I think how you set goals is you
have the leadership to focus on a clinically led program office
for the Prime Vendor program in particular and establishing the
formulary.
The discussion in the last panel was about there were
clinicians participating in, quote, the evaluation of offers or
looking at products in different categories, but we are
thinking about a comprehensive, strategic, overall approach led
by a clinician and developing a formulary, which ultimately the
goal is to serve our veterans.
So I would focus on that because, at the end of the day, I
have worked in procurement for the government for over 20
years. I worked in the private sector. It is foundational, and
the key that I always found, regardless of the industry or the
sector, it is requirements development is the key to success,
successful contract performance on behalf of whatever mission
you are performing. And that is what the formulary is about.
That is what a clinically led program office is about,
overarching approach--and I think it dovetails with what Kurt
said as well, an overarching approach to how you serve the
veterans across 175 different hospitals and other treatment
centers across the board.
Chairman Moran. Thank you.
Mr. McDonald?
Mr. McDonald. Chairman Moran, the aspect that I bring to
the table is I actually was part of the DMLSS development
process, and prior to that, I worked with the Army's TMIS
development system. I have seen what takes change, the
necessary elements for change to occur, and you have to have,
as we all said, clear goals. But you have to have a milestone
and objectives that you want to bring your partners together.
So we had three different stovepipes: Army, Air Force,
Navy, et cetera. And how do we get them operating on an
integrated, combined, clinically driven system? This is not a
short panacea or a quick fix.
To do that implementation at the largest health care system
in the United States, 13th largest in the world, it will be a
yeoman's challenge to get done, phased in and implemented
correctly, but when they are giving you a timeline could it be
done faster or can it be done quickly, do you want it right, or
will we be back here 5 to 7 years looking for another solution?
So taking a path and commitment and allowing them to
establish clear process maps, so regardless who is in this room
here today, you hold their feet to the fire for the execution
of implementing and integrate clinically accepted supply chain
system, and that will improve the VA's Veterans Health
Administration moving forward.
Chairman Moran. Well, thank you all. I may come back to
request additional conversation about those topics, but let me
now turn to the Ranking Member, Senator Tester.
Senator Tester. Yes. Thank you, Mr. Chairman.
Look, we will get back to the IT systems here in a second.
I have said this before in this Committee and other committees
that it seems like every time we deal with IT systems, it ends
up costing a lot of money. We end up with a bag of cow manure
in the end. I mean, we have been dealing with electronic health
records for a long time now, $7 billion right now. We have got
nothing to show for it, at least not from my perspective. Let
us put it that way.
I am not a techie. So I do not get all this stuff. I do not
understand how you cannot take a system that DoD is using and
roll it into your agency. I know it is a big agency. It is the
second biggest in the government, but I just do not get why it
takes 7 years to do that.
So I want to set up timelines, and I want to set up
benchmarks, but to be honest with you, I do not want to set up
ones that are unreasonable. But I do want to hold these birds
accountable, and they know that, by the way. They are watching,
and they know this is part of the deal. Moran is the same way I
am. We want to make sure we are getting the biggest bang for
the buck, and we want to make sure the doggone thing works for
the veterans.
So we may have to have this conversation further because it
is unfortunate that we are at the end of the day with you guys.
Mr. McDonald--or, Mac, I want to ask you something. You
talked about 95 million masks a month that 3M is putting out.
Look, I think 3M is a great company. I am not being critical of
3M at all. You guys run an incredible business. When you talk
about 95 million masks being built a month now, that is
impressive. The question I have is, Are any of those built in
the United States?
Mr. McDonald. Senator Tester, in my previous capacity as a
director of logistics at DLA and when this similar, not to this
extent, but when we were hit with the avian pandemic flu, we
were in the process of acquisitioning for the Department of
Defense. As the director, I was saying there was only one
company that actually made the mask that we needed, and it was
3M. So I learned in 2005, and hence, here I am in 2020 with
that company that never left the United States.
They do have and support regionally accordingly by ensuring
that we work with sources locally to ensure that our
manufacturing capability can surge much like we did from 22
million, now at 35 million. By the end of this month with the
help of the DFAS through the utilization of Title VII and Title
III authorities, accelerating production capability--and we
never left. We always maintained manufacturing capability here
in the United States, and with the help of the Department of
Defense and the Federal Government, we will continue to have
those lines now and in the distant future to move forward to
support the U.S. as required.
Senator Tester. So when you are talking about 95 million
masks being built a month, you are talking about 95 million
masks being built in the United States of America a month?
Mr. McDonald. Yes, sir, I am. We currently have----
Senator Tester. That is good. Sorry for cutting you off,
but the reason I ask that is because there were--and I believe
it was a 3M manufacturing plant in China, and I could be wrong
on this. You correct me if I am. That it was basically
nationalized by the Chinese government when they needed masks,
and they said, ``No. We are keeping them here because they are
for our people. They are built here. We are keeping them here.
You are not shipping them anywhere else in the world, the
United States or anywhere else, because we need them.''
But what you are saying is you can build domestically, 3M
can, 1.1 billion masks a year now?
Mr. McDonald. With the additional manufacturers that have
come online with 3M under the Title III authorities, by the end
of November, we will be producing roughly 95 million masks a
month, and yes, we----
Senator Tester. And then those are all domestic? Those are
all domestic manufacturers? There are not a bunch of folks from
Indonesia or China or Brazil or wherever?
Mr. McDonald. No.
Senator Tester. They are all here?
Mr. McDonald. Yes, sir. Those are all domestic
manufacturing plants. We have one, a new one coming online in
Aberdeen, and the other one, I believe, is also in South
Dakota.
Senator Tester. Look, Montana is a much better place to do
business than South Dakota. Rounds is sitting over there.
[Laughter.]
Senator Tester. Well, that is good news. That is really
good news.
I mean, that is just one component. I mean, we have also
got shields and gowns and all that, but I can take that up via
emails with you guys, if you want.
I just have a question, and any of you can answer it. Mac,
you have done enough talking. So any of the others who have not
talked yet can answer this. What kind of benchmark should we be
setting up for the DMLSS fully integrated into the VA? How long
should that take? What is a reasonable timeline?
I am hearing a lot of silence.
Mr. Heyssel. I will take a stab at it. To make a
comparison, it took me 6 months to simply upgrade one academic
medical center, a couple jumps forward in our Materials
Management Information System. It is a complex process to
upgrade a new system, much less implement one.
That being said, I think 7 years is a long time. I think we
could find ways to compress that to 4, maybe 5, but recognizing
that the more we compress the implementation timeline, the
larger we expand the chances of something going wrong. So we
have to find a way to mitigate all those risks.
It can be done any number of ways. I have always been more
of a big-bang person than an evolution person, but I think 5
years is probably a doable timeframe. There is a lot of
training that needs to happen. We have to make sure every
facility has the right PCs. Even at this point, when I left as
chief supply chain officer, there were facilities in the VA
that had not upgraded their PCs to anything that is close to
capable of running something as sophisticated as DMLSS. So all
of that needs to be taken into consideration.
Senator Tester. Anybody else want to answer that?
Mr. Waldron. Yes, Senator Tester.
I was just going to mention the challenges the government
faces in a lot of places--and I think VA is no different--are
legacy systems, systems that have been around for 20, 30 years,
and trying to modernize or move away from those systems creates
huge challenges.
I think your question fundamentally should go directly to
the VA. One of the things that our members are very interested
in is transparency from the VA with regard to the rollout of
DMLSS. What are the steps necessary? What are the expectations?
What does the training look like for the hospitals that are
going to be utilizing the new system?
Companies need to understand that timeline, just like
Congress does, because companies want to be able to serve the
VA and be able to react and respond.
So I think it would be great to have the VA lay out their
implementation plan so we all could take a look.
Senator Tester. I am way, way, way over time, but thank
you, Mr. Chairman. I want to thank all of you.
Mr. Chairman, I just might add this is really a good panel,
and we did not get them--at least I did not get the challenges
as far as the questions. I hope they will accept some written
questions in the free time that I have got to be able to answer
those.
Chairman Moran. Senator Tester, you are over time, but you
are welcome to remain over time if you would like to ask
another question.
Senator Tester. Well, I mean, I appreciate that. I think
most of it has to do with--Mac answered my question on the
masks being built here.
I would ask that same question for shields. I would ask the
same question for gowns. I would ask that same question for
test kits. I would ask the same question for media that
revolves around that. But I do not know that 3M does all those
things.
Chairman Moran. I do not know whether that was rhetorical
or not, Mr. MacDonald.
Mr. McDonald. Sir, we do not do gowns at this time.
Senator Tester. Right. And it is the same thing on all of
them. I think the masks are good news. Those N95 respirators
are good news that we have got them built here. We need to do
the same thing with those gowns.
Somebody mentioned--I believe it was on this panel--that
said we need to--no. I think it was actually on the previous
one. We need to work with gowns that are washable and can be
reused because that helps with the supply chain. I agree with
that, but the truth is we have got to get them built first.
Anyway, thank you, Mr. Chairman.
Chairman Moran. Thank you, Senator Tester.
Let me followup with a few more things. Mr. Waldron, let me
start with you. At least there are reports of bidding between
various Federal and private entities, Federal, State, and local
businesses for the same equipment, and tell me whether that is
true.
One of the primary purposes of FEMA task force and the
Defense Production Act was to prevent bidding wars. Has it
worked? Do you want to shift to Mr. McDonald?
Mr. Waldron. What I have heard from members is around the
issue of communication on the Federal level because our members
focus primarily on the Federal level, and just, I guess, two
things. One, understanding where the requirements are coming
from and who is coordinating them, and I think the government
over time has done a better and better job of that, the
initial--just like this has not happened for 100 years, right?
So we are all reacting, adjusting, and changing direction, and
just the focus on a national strategy across a government
versus local entities, you know, going out to buy because they
are a local facility, needs the product immediately, and how
you find that right balance. And I think that is kind of where
the communication between the government and the producers of
product could be a bit more focused. But that is just sort of a
general reaction.
I think overall, the performances have improved over time
in terms of that communication.
Chairman Moran. Are there circumstances in which an entity
has a contract, in your case, a Federal entity or, in other
cases, a private company has a contract to be supplied, but the
market forces change, the circumstances change, and you can
make more money selling to someone else that you have not
previously contracted for? You do not have more to sell. You
just have a better buyer, a buyer that is willing to pay a
higher price than what you previously contracted for.
Mr. Waldron. Sure.
Chairman Moran. Is that a problem? Is that real or just
kind of talk?
Mr. Waldron. I have not--our members have not reported that
they have had that kind of issue.
My reaction to that is it goes to the idea, if you have a
government contract and the government orders from you, there
are consequences for not fulfilling that order at the price
that has been negotiated in the contract.
Companies sign up to that. They have their obligations
under the contract. Orders are placed. They have to fulfill
those orders. Otherwise, bad things happen to them in terms of
their contract performance and that sort of thing. That is part
of the remedy, and other things that would be in this context
would be the Defense Production Act and utilization of that.
That creates priorities.
I think one of the things that I have heard is it is very
effective and it works when the government sits down with a
major supplier and works through those supply issues and
figures out how to proceed forward, not necessarily a meeting
immediately going to issuing a rated order under the Defense
Production Act. That way, the company understands the
expectations, understands how to react quicker. You have worked
together initially before you have actually placed the order
and move forward from that perspective.
Chairman Moran. Let me see if I can paraphrase what you are
saying because this has become--I do not know whether it is a
political conversation, but it has become a topic of
conversation among colleagues.
You are saying that while the Defense Production Act can
get a company's attention, rather than its full implementation
or its full force and effect, that conversations, discussions,
you can reach a better result?
Mr. Waldron. The Defense Production Act will get the full
attention of a company. Let me assure you of that. That is not
what I was trying to say.
What I was trying to say is that there are multiple ways to
go about attacking the supply issue. You can issue rated orders
and more forward immediately. The company has to react to that.
There are other people's orders who would go to the back of the
line because of the rated order. Having conversations and that
communication between government and industry in partnership to
address that planning goes a long way to ensuring you will meet
the Federal Government's requirements and at the same time be
able to adjust and meet those order orders as well.
So I am promoting the idea of communication between
government and industry, especially in our current context.
Chairman Moran. I was trying to give you the opportunity to
do that, but I must have inartfully asked my question. I was
not suggesting that you did not believe the Defense Production
Act was sufficient to get somebody's attention.
Mr. Waldron. yes.
Chairman Moran. But its full authorities forcing somebody
to do something may not be the best way to get the result that
you are looking for and also may be damaging to others who are
trying to acquire, in this case, personal protection equipment
for their own and very valid uses. Is that a better summary?
Mr. Waldron. That is a fair way to look at it. One size
does not fit all in the supply chain, and there is going to be
different companies and different situations as well. And there
are going to be different obligations between the government
and the producer as well. So, yes, that is a fair, a good
characterization of it.
Chairman Moran. Ms. Oakley, I cannot tell if your hand is
up, but I guess your finger is on the button.
Ms. Oakley. Yes. I just wanted to comment on how it worked
with the Medical-Surgical Prime Vendor program contracts, and I
think that while Mr. Waldron is correct, you are signed up to a
government contract, you have to fulfill those needs. But those
supply contracts are based upon demand signals. So your
historical demand signals are what drives what those prime
vendors have in stock for you.
So what you saw at the beginning of the pandemic was this
surging increase in demand from the VA contracts, from the VA
medical centers, that was not supported by those prime vendor
contracts because they did not have that demand signal in the
past.
So then what ended up happening was that VA ended up
getting its allocation of its percentage of business that they
were typically for whatever supplier through that prime vendor.
So that is where you saw some of the challenges with meeting
those surge-in-demand needs from VA. So that is just kind of
how it worked, at least initially, under the prime vendor
contracts.
Chairman Moran. Thank you for that.
Mr. Heyssel. Mr. Chairman?
Chairman Moran. Yes.
Mr. Heyssel. This is Kurt Heyssel.
Chairman Moran. Yes, sir.
Mr. Heyssel. If I might give one brief Statement. What
happened with the health care supply chain since December-
January was a test I have never seen before. Everybody from the
manufacturer through the distributor to the health care
provider was caught flat-footed. I am not sure there is
anything that could have been done to avoid what we went
through.
We all said after the end of the avian flu, ``Oh, we will
never be caught flat-footed again,'' and slowly but surely, as
organizations do, we tend to forget.
But even if we had stayed prepared at the level we were for
the avian flu, it would not have even touched the need created
over the last 5, 6 months.
Chairman Moran. Thank you.
There sometimes are the answers that nothing is going to
work perfectly in the circumstances that we are in, and we are
all looking for ways to make certain that everything works just
as we wish it would.
I think maybe this is my concluding question. I will ask
this of Mr. Heyssel. It seems to me that the VA is attempting
to blend a just-in-time inventory system with a depot system.
If we look back at the VA supply chain compared to other large
health organizations, what are the strategic factors that need
to be considered here?
Mr. Heyssel. The first I had really heard of the depot
system was today, and if I heard it correctly, they are talking
about four strategically located centers around the Nation to
hold emergency stockpiles, which is something that I believe
other private health care systems may be doing to be sure they
have at least a month's worth of supply on hand to handle
something like this.
The just-in-time approach has been working for years in the
private sector. The just-in-time approach, I believe, is the
least costly of all the methods of acquiring what is needed to
adequately care for our patients, care for the veteran, care
for any patient.
The notion that the VA should--I do not know if anybody is
discussing it, but just in case they are, the notion that the
VA should move back to what was the old system in 1992 of the
VA doing its own acquisition and distribution is probably a
sizable mistake.
Certainly, you cannot do it without a system with at least
the sophistication of DMLSS, but it is redundant. It actually
adds a lawyer of cost for the supplies to the VA.
If you recall, I said the average distributor needs to make
about an 8.5 percent margin to keep the doors open. So that can
be applied to the costs of running those depots and the self-
distribution around the Nation to feed the VA its products, and
then you have the heightened risk of unused inventory spoiling,
unused capital investment in that inventory--in other word
waste. I just do not think that is the way it should be.
The distributors today are incredibly sophisticated.
Cardinal, Owens & Minor, Concordance, Medline, you name them,
they have the information systems set up. They have the
logistics set up to do an amazing amount of work on behalf of
the VA.
There is one distributor out there who can handle pretty
much all of the health system's orthopedic implant needs and
ships sterile containers of implants to the hospital according
to the surgical schedule. That sort of partnership between
distributor and health care provider and manufacturer is really
what is needed rather than taking a step back into the 1990's
and having distribution centers pretty much around the United
States.
Chairman Moran. Let me ask you about another partnership.
It seems a natural fit--but I want you to tell me whether it is
or is not--that we model ourselves or partner with the
Department of Defense at the VA, and we see that in a number of
circumstances and certainly trying to get an integrated health
care system that takes care of a veteran from service to post--
I should not say it that way--to being a veteran as compared to
being a member of the active military. Is that a model that we
should at least initially assume is a pretty good idea when it
comes to the VA?
Mr. Heyssel. I do believe it should be investigated. I
think it should be investigated in depth.
If you were to bring the VA and the Department of Defense
together in such a manner, using the same information system,
DMLSS, you then have the power to aggregate the purchasing
volume across both networks of care, and the supply cost should
drop. That would be a very good thing, but it would also
require that clinicians from both organizations be heavily
involved in the choice of products being selected and
purchased.
You want to offer alternatives, but you do not want the
Wild West, and you do not want the VHA using 15 different
things and Department of Defense using 15 different things in
the OR, if all of them do the same thing. When that occurs, you
lose your leverage with the manufacturers.
But I think it is a model that must be investigated. VHA,
DLA have already proven that they are pretty good at what they
do. When I was with Owens & Minor, I worked very closely with
Langley Air Force Base and Portsmouth Naval Medical Center. As
a representative, I got to know their processes very well, and
they were on top of the game.
So I think it should be investigated closely.
Chairman Moran. Ms. Oakley--Senator Tester, I am going to
conclude, but, Ms. Oakley, in your reviews and observations, I
guess I will not ask you to--I do not know that it is a fair
question to ask you to compare how DoD operates as compared to
the Department of Veterans Affairs, and they are both large
organizations, huge organizations. Is there ever a sense that
the Department of Veterans Affairs is so large that we cannot
get the services, the efficiency--we cannot get the VA to
operate the way that we want it, just because of the size, or
is size always to our advantage?
Ms. Oakley. I do not think that that should be the excuse
for the VA not to be able to operate efficiently and
effectively.
I think it really harkens back to part of what Mr. Heyssel
was saying. Structurally, they have a lot of challenges with
regard to executing and efficient procurement function within
the organization, and part of that is driven by the fact that
VHA drives so much of the procurement dollars within the
Department of Veterans Affairs.
So I think from my perspective, it is less about how large
VA is, and it is more about how leadership plans and implements
large-scale change and transformation within the organization,
and how even in the short time that I have been doing this work
over the past 5 years, I have seen a number of different things
come and go. So I think there is something to be said for
laying out that plan for transformation and putting milestones
associated with it and being held accountable to making those
changes.
There is nothing wrong with modeling themselves after DoD
or leveraging what they can from DoD, but there is stuff to be
learned.
In fact, in our ongoing work on the MSPV program, we are
taking a look at VA's pilot program where they are going to be
using DLA's MSPV program. It is a very limited pilot at this
point, but one of our preliminary findings is showing they do
not even have a plan in place for assessing the outcomes of the
pilot, to know is this something that we should do, is this
something that we can scale within the Department of Veterans
Affairs and apply to all of VA.
And I think just--I have to mention it because I am from
the Contracting and National Security Acquisitions Team. VA
does also have very specific procurement requirements that it
has to abide by in the Kingdomware requirements, and that makes
that kind of collaboration a little bit more challenging than
DoD collaborating with any other organization.
Chairman Moran. I make it a practice of asking any
witnesses before our Committee if they have something they
would like to augment what they said, correct what they said,
add to what they said, anything that you would like to make
clear for us or improve what you thought you said, which is
always a chance I wish I had. Are we good?
[No response.]
Chairman Moran. Senator Tester?
[No response.]
Chairman Moran. All right. We will conclude this hearing,
then. I thank you for joining us. Thank you for the opportunity
to learn from you.
The hearing record will remain open for 5 legislative days,
should any member wish to add a written Statement or submit a
question for the record.
With that, this hearing is now adjourned. Thank you.
[Whereupon, at 5:29 p.m., the Committee was adjourned.]
APPENDIX
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