[Congressional Record Volume 150, Number 74 (Tuesday, June 1, 2004)]
[Senate]
[Pages S6280-S6284]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (by request):
  S. 2484. A bill to amend title 38, United States Code, to simplify 
and improve pay provisions for physicians and dentists, to authorize 
alternate work schedules and executive pay for nurses; to the Committee 
on Veterans' Affairs.
  Mr. SPECTER. Mr. President, as Chairman of the Committee on Veterans' 
Affairs, I have today introduced, at the request of the Secretary of 
Veterans Affairs, S. 2484, a proposed bill to simplify and improve pay 
provisions for physicians and dentists, and to authorize alternate work 
schedules and executive pay for nurses. The Secretary of Veterans 
Affairs submitted this proposed legislation to the President of the 
Senate by letter dated July 18, 2003.
  My introduction of this measure is in keeping with the policy which I 
have adopted of generally introducing--so that there will be specific 
bills to which my colleagues and others may direct their attention and 
comments--all administration-proposed draft legislation referred to the 
Committee on Veterans' Affairs. In this case, I delayed introduction of 
this measure so that certain provisions of the proposed legislation, 
which proposes extensive changes in the physician pay policies of the 
Department of Veterans Affairs (VA), might be reviewed by the 
Committee's staff, and by potentially-interested parties, prior to its 
introduction. I am pleased to state that many constructive ideas have 
been expressed, and the Committee's staff, working with the VA, the 
National Association of VA Physicians and Dentists, the American 
Federation of Government Employees, the National Federation of Federal 
Employees, and other representatives of VA's labor force, have 
identified prospective modifications to the proposed bill's text which, 
all appear to agree, would represent improvements over the language of 
the legislation forwarded to the Senate in July 2003.
  Even so, the bill I introduce today is the bill which the Secretary 
of Veterans Affairs sent to the Committee in July 2003. I have 
introduced that bill so that the original ``by request'' legislation 
might be available to the Senate, and to the public, as part of the 
public record. As is always my policy with respect to any such ``by 
request'' legislation, I reserve the right to oppose the provisions of, 
as well as any amendment to, this legislation. Indeed, as I have 
indicated, the Committee's staff, with the assistance of VA and other 
interested parties, is already working on modifications to the bill as 
proposed by the administration.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record, together with the transmittal letter and a 
section-by-section analysis which accompanied it.
  There being no objection, the material ordered to be printed in the 
Record, as follows:

                                S. 2484

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Department of Veterans 
     Affairs Health Care Personnel Enhancement Act of 2003''.

     SEC. 2. REFERENCES TO TITLE 38, UNITED STATES CODE.

       Except as otherwise expressly provided, whenever in this 
     Act an amendment is expressed in terms of an amendment to a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of title 38, 
     United States Code.

     SEC. 3. IMPROVEMENT AND SIMPLIFICATION OF PAY PROVISIONS FOR 
                   PHYSICIANS AND DENTISTS.

       (a) Chapter 74 is amended--
       (1) In section 7404(b)--
       (A) by striking ``(1)'' after ``(b)''.
       (B) by striking the list of position grades under the 
     caption, ``PHYSICIAN AND DENTIST SCHEDULE'' and inserting in 
     lieu thereof the following:
       ``Physician grade.
       Dentist grade.''
       (C) by striking paragraph (2) in its entirety.
       (2) In section 7404(c) by striking ``special''.
       (3) By striking Subchapter III in its entirety and 
     inserting in lieu thereof the following new sections:

            Subchapter III--Pay for Physicians and Dentists

     Sec. 7431. Pay authority.

       (a) In order to recruit and retain highly qualified 
     physicians and dentists in the Veterans Health 
     Administration, the Secretary shall establish and 
     periodically adjust the rates of pay for physicians and 
     dentists based upon the factors specified in subsection (b). 
     Total pay shall be benchmarked to representative salaries of 
     non-Department physicians, dentists, and health care 
     clinician-executives.
       (b) Pay for physicians and dentists employed in the 
     Veterans Health Administration shall have three components:
       (1) Base pay.--This shall be a uniform pay band applicable 
     nationwide. The minimum rate shall be the maximum rate for 
     Chief grade in the Veterans Health Administration Physician 
     and Dentist Pay Schedule in effect on the day before the date 
     of enactment of this Act. The maximum rate may not exceed the 
     rate of basic pay authorized by section 5316 of title 5 for 
     Level V of the Executive Schedule. The Secretary shall adjust 
     annually the minimum rate by the same percentage as the 
     adjustment under section 5303 of title 5 in the rates of pay 
     for the General Schedule, and the maximum rate in accordance 
     with section 5318 of title 5. Administration facilities, 
     under regulations prescribed by the Secretary, may set 
     individual base pay anywhere within the pay band.
       (2) Market pay.--This shall be a variable pay band based on 
     geographic area, specialty, assignment, personal 
     qualifications, and individual experience, and shall be 
     established and adjusted locally in accordance with 
     regulations prescribed under subsection (c). Administration 
     facilities will set individual market pay in accordance with 
     regulations prescribed by the Secretary. The Under Secretary 
     for Health shall periodically review and recommend to the 
     Secretary adjustments to the market pay band based on 
     published healthcare workforce employment and compensation 
     data. The Secretary may adjust the market pay band 
     periodically based on the recommendations of the Under 
     Secretary and in response to changing health-care labor 
     trends.
       (3) Performance pay.--
       (A) There shall be a variable pay band linked to the 
     physician's or dentist's achievement of specific corporate 
     goals and individual performance objectives. Physicians and 
     dentists other than those specified in subsection (f)(1) 
     shall not be eligible for this component during the first 
     year of appointment. The amount payable to a physician or 
     dentist for this component may vary based on individual 
     achievement. The performance component paid to any physician 
     or dentist other than those specified in subsection (f)(1) 
     will be in accordance with regulations prescribed by the 
     Secretary and may not exceed $10,000 in a year.
       (B) In accordance with regulations prescribed by the 
     Secretary, ten percent of the benchmarked total pay for 
     physicians and dentists specified in subsection (f)(1) shall 
     be linked to the physician's or dentist's achievement of 
     specific corporate goals and individual performance 
     objectives as a performance component. Administration 
     facilities may set the performance pay in accordance with 
     regulations prescribed by the Secretary.
       (c) Compensation paid under this subchapter shall be 
     considered pay for all purposes, including but not limited to 
     retirement benefits under chapters 83 and 84 of title 5, 
     United States Code, and other benefits. Notwithstanding the 
     preceding sentence, amounts paid for performance pay under 
     subsection (b)(3)(A) shall not be considered pay for 
     retirement benefits under chapters 83 and 84 of title 5, 
     United States Code.
       (d) Any decrease in pay that results from an adjustment to 
     the market or performance component of a physician's or 
     dentist's total compensation does not constitute an adverse 
     action.
       (e) In no case may the total amount of compensation paid to 
     a physician or dentist under this title in any one year 
     exceed the amount of annual compensation (excluding expenses) 
     specified in section 102 of title 3, United States Code.
       (f)(1) Covered Positions.--This subsection applies to 
     physicians and dentists in the following positions: Chiefs of 
     Staff or equivalent facility-level and Network-level clinical 
     management positions (including Network Clinical Service 
     Managers), facility and Network or Regional executive 
     positions (including Network Service Line Coordinators and 
     Medical Center/Health Care System Directors), Central Office 
     executive positions, and such other positions under this 
     title as the Secretary may determine in accordance with 
     regulations prescribed in accordance with section 7434(a).
       (2) Notwithstanding the special relationships of the 
     Veterans Health Administration with affiliated institutions 
     under section 7302, physicians and dentists serving in 
     covered positions and receiving compensation under this 
     subchapter may not receive any compensation on or after the 
     date specified in regulations issued by the Secretary, 
     through employment or contract with, or negotiate or accept 
     any offer of employment from, any institution or other entity 
     that is affiliated with the VA medical center to which they 
     are assigned, or affiliated with a VA medical center which 
     falls under their official responsibilities. This limitation 
     shall include receiving compensation through or from practice 
     groups or any other entities associated with the affiliated 
     institution(s), or from entities under contract with the 
     affiliated institution(s). Compensation includes anything of 
     monetary value, including but not limited to honoraria, 
     salary, and any fringe benefits such as: tuition waiver, 
     insurance protection, contributions to a retirement fund, 
     payment for books, below-

[[Page S6281]]

     market interest loans, or employee discounts. Nothing in this 
     section precludes physicians and dentists in covered 
     positions from holding uncompensated appointments as other 
     than officer, director, or trustee with affiliated 
     institutions in furtherance of section 7302.
       (3) Subject to any conditions the Secretary may by 
     regulation prescribe, the Secretary may, on a case-by-case 
     basis, suspend or waive the limitation in paragraph (2) to an 
     individual physician or dentist, when necessary and 
     appropriate to carry out the purposes of section 7302, to 
     assist communities or practice groups to meet medical needs 
     which otherwise would not be met, or where the Secretary 
     determines that suspension or waiver would be in the best 
     interest of the United States. The Secretary shall make any 
     suspension or waiver made pursuant to this paragraph in 
     writing.

     Sec. 7432. Transition to new pay system.

       (a) All current special pay agreements entered into under 
     the provisions of this subchapter in effect on the day before 
     the date of enactment of this Act shall terminate on the date 
     of enactment of this Act. Any physician or dentist in receipt 
     of special pay on that date shall continue to be compensated 
     as if such agreement were still in effect until the date 
     specified in regulations issued by the Secretary implementing 
     this new subchapter.
       (b) Physicians and dentists appointed or reassigned on or 
     after the date of enactment of this Act, but before 
     implementation of this subchapter shall be compensated in 
     accordance with sections 7404, 7405, 7433, 7434, 7435, and 
     7436, as applicable, in effect on the day before the date of 
     enactment of this Act. Any such physician or dentist shall 
     continue to be compensated at the applicable rates until such 
     date specified in regulations issued by the Secretary 
     implementing the new pay system. No special pay agreement 
     will be required of any physician or dentist receiving such 
     pay.
       (c) During the period from the date of enactment of this 
     Act through the date of implementation of this subchapter, 
     physicians and dentists paid pursuant to this section shall 
     be subject to paragraphs (1), (2), (4), (5), and (6) of 
     subsection (b) of section 7438 in effect on the day before 
     the date of enactment of this Act.
       (d) The amount of pay paid under this subchapter for a 
     physician or dentist appointed before the effective date of 
     regulations implementing this subchapter shall be not less 
     than the amount of base pay and special pay such physician or 
     dentist received under this title on the day before such 
     effective date.
       (e) Special pay subject to the provisions of section 7438, 
     as in effect before the date of enactment of this section, or 
     subject to subsection (c), paid to Veterans Health 
     Administration physicians and dentists appointed before the 
     effective date of regulations implementing this subchapter 
     and who separate after such effective date, shall be fully 
     creditable for purposes of computing benefits under chapters 
     83 and 84 of title 5.

     Sec. 7433. Pay for Under Secretary for Health

       (a) Section 5314 of title 5 establishes the base pay for 
     the Under Secretary for Health at Level III of the Executive 
     Schedule.
       (b) In addition to base pay under section 5314 of title 5, 
     the Under Secretary for Health shall be eligible for Market 
     Pay under section 7431(b)(2).
       (c) Transition. The current special pay agreement of the 
     Under Secretary for Health entered into under the provisions 
     of this subchapter in effect on the day before the date of 
     enactment of this Act shall terminate on the date of 
     enactment of this Act. The incumbent Under Secretary for 
     Health on the date of enactment of this Act shall continue to 
     receive special pay as if such agreement were still in effect 
     until the date specified in regulations issued by the 
     Secretary implementing this new subchapter. Any Under 
     Secretary for Health appointed on or after the date of 
     enactment of this Act, but before the date specified in 
     regulations issued by the Secretary implementing this new 
     subchapter, shall receive special pay in accordance with 
     sections 7432(d)(2), 7433 and 7437(a) in effect on the day 
     before the date of enactment of this Act.

     Sec. 7434. Administrative provisions.

       (a) After receiving the recommendations of the Under 
     Secretary for Health, the Secretary, pursuant to the 
     authority in section 7421(a), shall prescribe regulations 
     implementing the physician and dentist pay system established 
     in this new subchapter. Such regulations shall include the 
     method for computing the pay for all physicians and dentists 
     in the Veterans Health Administration under this title.
       (b) Eighteen months after the Secretary issues regulations 
     implementing this subchapter and annually thereafter for the 
     next ten years, the Secretary shall provide to the Committees 
     on Veterans' Affairs of the Senate and House of 
     Representatives a report on the implementation of the 
     authorities under this subchapter. Each report shall include:
       (1) a description of the rates of pay in effect during the 
     preceding fiscal year with a comparison to the rates in 
     effect during the previous fiscal year by facility and by 
     specialty;
       (2) the number of physicians and dentists who left 
     employment with the Veterans Health Administration during the 
     preceding year;
       (3) the number of unfilled physician and dentist positions 
     in each specialty in the Veterans Health Administration, the 
     average and maximum lengths of time that such positions have 
     been unfilled, and a summary of the reasons that such 
     positions remain unfilled; and
       (4) an assessment of the impact of implementation of this 
     subchapter on efforts to recruit and retain physicians and 
     dentists in the Veterans Health Administration.
       In addition, the first two reports following implementation 
     of this subchapter shall also include a comparison of 
     staffing levels, contract expenditures, and average salary of 
     physicians and dentists by facility and specialty for the 
     preceding and previous fiscal years.
       (b) The title and list of sections for Subchapter III in 
     the table of sections at the beginning of Chapter 74 is 
     amended to read as follows:

            Subchapter III--Pay for Physicians and Dentists

Sec. 7431. Pay authority.
Sec. 7432. Transition to new pay system.
Sec. 7433. Pay for Under Secretary for Health
Sec. 7434. Administrative provisions.

     SEC. 4. ALTERNATE WORK SCHEDULES.

       (a) Chapter 74 is amended by adding a new section 7456a:

     Sec. 7456a. Alternate work schedules.

       (a) Coverage.--This section applies to registered nurses 
     appointed under this chapter.
       (b) 36/40 Work Schedule.--
       (1) Subject to paragraph (2), if the Secretary determines 
     it be necessary in order to obtain or retain the services of 
     registered nurses at any Department health-care facility, the 
     Secretary may provide, in the case of nurses employed at such 
     facility, that such nurses who work three regularly scheduled 
     12-hour tours of duty within a workweek shall be considered 
     for all purposes (except computation of full-time equivalent 
     employees for the purposes of determining compliance with 
     personnel ceilings) to have worked a full 40-hour basic 
     workweek.
       (2)(A) Basic and additional pay for a registered nurse who 
     is considered under paragraph (1) to have worked a full 40-
     hour basic workweek shall be subject to subparagraphs (B) and 
     (C).
       (B) The hourly rate of basic pay for such a nurse for 
     service performed as part of a regularly scheduled 36-hour 
     tour of duty within the workweek shall be derived by dividing 
     the nurse's annual rate of basic pay by 1,872.
       (C)(i) Such a nurse who performs a period of service in 
     excess of such nurse's regularly scheduled 36-hour tour of 
     duty within a workweek is entitled to overtime pay under 
     section 7453(e) of this title, or other applicable law, for 
     officially ordered or approved service performed in excess of 
     eight hours on a day other than a day on which such nurse's 
     regularly scheduled three 12-hour tours fall, or in excess of 
     12 hours for any day included in the regularly scheduled 36-
     hour tour of duty, or in excess of 40 hours during an 
     administrative workweek.
       (ii) Except as provided in subparagraph (i), a registered 
     nurse to whom this subsection is applicable is not entitled 
     to additional pay under section 7453 of this title, or other 
     applicable law, for any period included in a regularly 
     scheduled 12-hour tour of duty.
       (3) A nurse who works a 36/40 work schedule described in 
     this subsection who is absent on approved sick leave or 
     annual leave during a regularly scheduled 12-hour tour of 
     duty shall be charged for such leave at a rate of ten hours 
     of leave for nine hours of absence.
       (c) 7/7 Work Schedule.--
       (1) Subject to paragraph (2), if the Secretary determines 
     it be necessary in order to obtain or retain the services of 
     registered nurses at any Department health-care facility, the 
     Secretary may provide, in the case of nurses employed at such 
     facility, that such nurses who work seven regularly scheduled 
     10-hour tours of duty, with seven days off duty, within a 
     two-week pay period, shall be considered for all purposes 
     (except computation of full-time equivalent employees for the 
     purposes of determining compliance with personnel ceilings) 
     to have worked a full 80 hours for the pay period.
       (2)(A) Basic and additional pay for a registered nurse who 
     is considered under paragraph (1) to have worked a full 80-
     hour pay period shall be subject to subparagraphs (B) and 
     (C).
       (B) The hourly rate of basic pay for such a nurse for 
     service performed as part of a regularly scheduled 70-hour 
     tour of duty within the pay period shall be derived by 
     dividing the nurse's annual rate of basic pay by 1,820.
       (C)(i) Such a nurse who performs a period of service in 
     excess of such nurse's regularly scheduled 70-hour tour of 
     duty within a pay period is entitled to overtime pay under 
     section 7453(e) of this title, or other applicable law, for 
     officially ordered or approved service performed in excess of 
     eight hours on a day other than a day on which such nurse's 
     regularly scheduled seven 10-hour tours fall, or in excess of 
     10 hours for any day included in the regularly scheduled 70-
     hour tour of duty, or in excess of 80 hours during a pay 
     period.
       (ii) Except as provided in subparagraph (i), a registered 
     nurse to whom this subsection is applicable is not entitled 
     to additional pay under section 7453 of this title, or other 
     applicable law, for any period included in a regularly 
     scheduled 10-hour tour of duty.
       (3) A nurse who works a 7/7 work schedule described in this 
     subsection who is absent on approved sick leave or annual 
     leave during a

[[Page S6282]]

     regularly scheduled 12-hour tour of duty shall be charged for 
     such leave at a rate of eight hours of leave for seven hours 
     of absence.
       (d) 9-Month Work Schedule.--The Secretary may authorize a 
     registered nurse appointed under section 7405, with the 
     nurse's written consent, to work full-time for nine months 
     with three months off duty, within a fiscal year, and be paid 
     at 75 percent of the full-time rate for such nurse's grade 
     for each pay period of such fiscal year. Such employee shall 
     be considered a .75 full-time equivalent employee in 
     computing full-time equivalent employees for the purposes of 
     determining compliance with personnel ceilings. Service on 
     this schedule shall be considered part-time service for 
     purposes of computing benefits under chapters 83 and 84 of 
     title 5.
       (f) The Secretary shall prescribe regulations for the 
     implementation of this section.
       (b) The title and list of sections for Subchapter IV in the 
     table of sections at the beginning of Chapter 74 is amended 
     to read as follows:

     Subchapter IV--Pay for Nurses and Other Health-Care Personnel

7451. Nurses and Other Health-Care Personnel: competitive pay.
7452. Nurses and other health-care personnel: administration of pay.
7453. Nurses: additional pay.
7454. Physician assistants and other health care professionals: 
              additional pay.
7455. Increases in rates of basic pay.
7456. Nurses: special rules for weekend duty.
7456a. Alternate work schedules.
7457. On-call pay.
7458. Recruitment and retention bonus pay.

     SEC. 5. NURSE EXECUTIVE SPECIAL PAY.

       (a) Section 7452 is amended by adding at the end thereof:
       ``(g)(1) In order to recruit and retain highly qualified 
     Department nurse executives, the Secretary, in accordance 
     with regulations the Secretary shall prescribe, shall pay 
     special pay to the nurse executive at each Department health-
     care facility or at Central Office.
       (2) Special pay paid under paragraph (1) shall be a minimum 
     of $10,000 and a maximum of $25,000. The amount paid to each 
     nurse executive shall be based on factors such as the grade 
     of the nurse executive position, the scope and complexity of 
     the nurse executive position, the nurse executive's personal 
     qualifications, the characteristics of the health-care 
     facility, e.g., tertiary, single site or multi-site, nature 
     and number of specialty care units, demonstrated recruitment 
     and retention difficulties, and such other factors the 
     Secretary deems appropriate.
       (3) Special pay paid under paragraph (1) shall be in 
     addition to any other pay (including basic pay) and 
     allowances to which the nurse executive is entitled, and 
     shall be considered pay for all purposes, including but not 
     limited to retirement benefits under chapters 83 and 84 of 
     title 5, United States Code, and other benefits, but shall 
     not be considered basic pay for purposes of adverse actions 
     under subchapter V.''

     SEC. 6. EFFECTIVE DATE.

       The amendments to title 38, United States Code, contained 
     herein shall take effect on the first day of the first pay 
     period on or after the later of April 1, 2004, or six months 
     after the date of enactment.

     SEC. 7. ADMINISTRATIVE PROVISION.

       (a) Chapter 74 is amended by adding a new section 7427:

     Sec. 7427. Functions.

       The functions assigned to the Secretary and other officers 
     of the Department of Veterans Affairs under this chapter are 
     vested in their discretion.
                                  ____



                            The Secretary of Veterans Affairs,

                                    Washington, DC, July 18, 2003.
     Hon. Richard B. Cheney,
     President of the Senate,
     Washington, DC.
       Dear Mr. President: There is transmitted herein a draft 
     bill ``To amend title 38, United States Code, to simplify and 
     improve pay provisions for physicians and dentists, to 
     authorize alternate work schedules and executive pay for 
     nurses.'' We request that it be referred to the appropriate 
     committee for prompt consideration and enactment.
       The revised physician and dentist pay system and nursing 
     provisions were included in the President's budget. They 
     would be effective on the first day of the first pay period 
     on or after the later of April 1, 2004, or six months after 
     the date of enactment.

                     Enhanced Physician/Dentist Pay

       This bill will greatly enhance ability of the Department of 
     Veterans Affairs (VA) to recruit and retain the highest 
     quality physicians and dentists to treat the Nation's 
     veterans. It would completely revise the VA physician and 
     dentist pay system to allow VA to adjust physician and 
     dentist compensation levels according to market forces. The 
     system's simplicity and flexibility would ensure that VA 
     physician and dentist compensation levels and practices do 
     not become outdated over time due to statutory limits. This 
     system also would ensure that VA pay levels do not fall 
     drastically behind while awaiting adjustment to the statutory 
     authority. It will be a living system that adjusts to 
     changing forces in the healthcare labor market. Generally, 
     amounts paid under this system will be considered pay for all 
     purposes, including retirement benefits under chapters 83 and 
     84 of title 5, United States Code, and other benefits. 
     However, amounts paid under the performance pay component 
     will not be considered pay for retirement benefits.


                         VA Staffing Challenges

       The VA compensation structure for physicians and dentists 
     has not changed since 1991. The current system is extremely 
     complex, comprising seven or eight different special pay 
     components in addition to basic pay. The system offers 
     insufficient flexibility to respond to the changing 
     competitive market for many of the medical specialties, 
     especially for the highest paid medical subspecialties. VA is 
     no longer able to compete for these critical subspecialties. 
     Also, although Congress increased special pay for dentists in 
     2000, those increases did not bring VA pay up to the levels 
     in private dental practice. The effects of noncompetitive pay 
     and benefits are reflected in dramatic increases in VA's 
     scarce specialty, fee basis, and contractual expenditures.
       VA is facing a critical situation. Its compensation system 
     for physicians and dentists is unable to respond to the 
     demands of the current market. Severe shortages of qualified 
     physician specialists currently exist throughout the country 
     in specialties critical to VA's health care mission, such as 
     Anesthesiology, Radiology, Cardiology, Urology, 
     Gastroenterology, Oncology, and Orthopedic Surgery. These 
     shortages have driven compensation levels dramatically 
     upward. In these shortage specialties, VA total compensation 
     lags behind the private or academic sectors by 35 percent or 
     more. Such compensation gaps make recruitment almost 
     impossible and retention becomes more difficult. This 
     legislation will enable VA to compete for physicians in the 
     higher-paid, critical specialties and will protect other 
     physicians' and dentists' pay. Moreover, VA will be able to 
     offer to all physicians and dentists the prospect, now and in 
     the future, of market-sensitive pay rates, with a portion of 
     their compensation based on achievement of specific 
     performance goals.
       The problems with the current system are clear: special pay 
     rates are fixed in statute, so over time their values are 
     eroded by inflation, and VA pay eventually falls behind the 
     market. The mechanisms available to VA to adjust physician 
     and dentist pay are not able to respond to fluctuations in 
     market levels of incomes for the different specialties. VA 
     physician and dentist base salary rates increase by the 
     amount of the annual national comparability adjustment that 
     Federal employees generally receive; however, there is no 
     increase in special pay amounts. Compensation for many 
     specialties has risen significantly in the private sector, 
     and VA pay cannot be increased to keep pace. VA is already 
     paying the maximum authorized amounts for scarce specialists; 
     there is no discretion under existing statute to pay more to 
     retain employees.
       Additionally, the current system does not adequately 
     recognize disparities in pay among specialties. This results 
     in serious pay compression and makes it difficult for VA to 
     compete for the most highly paid specialists. For example, 
     the difference between the average pay of non-Federal 
     cardiologists vs. primary care practitioners is about 100 
     percent; in VA, the difference averages about 20 percent.
       VA historically had been able to use the Federal benefits 
     package as a major recruitment tool. To offset pay 
     disparities with the private sector, VA publicized its 
     benefits, such as the generous leave policies, opportunities 
     to pursue research and education activities, and formal 
     relationships with academic affiliates. More and more, 
     though, the private sector offers comparable or better 
     benefits. Some benefits widely available in the private 
     sector exceed VA's offerings including paid relocation as a 
     recruiting incentive, cafeteria-style benefit plans, payment 
     for courses to acquire continuing medical education (CME) 
     credits for license and board renewal, disability insurance, 
     and retirement benefits.
       Increased enrollment by veterans for Veterans Health 
     Administration, VHA, services and the need for more 
     comprehensive care to aging veteran patients will result in 
     an increase in workload across the system over the next 5 
     years. Current trends indicate a steady decrease in the 
     number of physicians and dentists VHA will be able to employ 
     over the same period. This decrease will result from 
     increased retirements, losses to the private sector, a 
     shrinking dentist labor supply, and increasing difficulty in 
     recruiting replacements. These factors will combine to create 
     significant gaps between VHA's staffing needs and available 
     resources for most physician specialties.
       Without the flexibility to adjust pay in response to market 
     pressures and improve its competitive position in recruiting 
     and retaining physicians, the Department will be unable to 
     meet the demands of its increasing workload. VHA will be 
     forced to rely more heavily on scarce medical specialist 
     contracts and fee basis care, which often cost more than 
     using VHA physicians. It is critical that VHA be able to 
     offer more competitive compensation for physicians and 
     dentists.


              Proposed New VA Physician/Dentist Pay System

       We propose a three-tiered system of base pay, market pay, 
     and performance-based pay. VA would benchmark the sum of all 
     three bands to the 50th percentile of the Association of 
     American Medical Colleges (AAMC) Associate Professor 
     compensation

[[Page S6283]]

     (for physicians) and 75 percent of American Dental 
     Association (ADA) net private practice income (for dentists). 
     The base pay component would be increased by the annual 
     comparability adjustments to Federal pay authorized by 
     Executive Order.
       First Tier--Base Pay. A uniform base pay band will apply to 
     all positions in VHA, without grade distinctions. The 
     proposed range is Chief grade, step 10 of the VA Physician/
     Dentist Schedule to Level V of the Executive Schedule, from 
     roughly $110,000 to $125,000. This change will dramatically 
     simplify hiring and employment and facilitate reassignments 
     and position changes. Placement in this band would be based 
     on the individual's qualifications. This band would form the 
     floor below which no individual's pay would ever go.
       Second Tier--Market Pay. The second tier, the market pay 
     band, will be determined according to geographic area, 
     specialty, assignment, personal qualifications and individual 
     experience. It would be indexed to the salaries of similarly 
     qualified non-Department physicians, dentists, and health-
     care executives at the entry, mid-career, and senior levels. 
     The flexibility of this tier allows VA to keep pace with the 
     market, both on upward and downward trends. VA would link the 
     market band for clinicians to AAMC faculty compensation. For 
     executives at the Chief of Staff (COS) level and above, the 
     benchmarks would be hospital and HMO executive compensation 
     levels. For dentists, the benchmark will be American Dental 
     Association (ADA) net private practice income.
       Third Tier--Performance Pay. The third band will be linked 
     to performance, and would be paid for discrete achievements 
     in quality, productivity, and support of corporate goals. The 
     measures will be flexible and generally set locally; national 
     objectives could also be mandated. VA facilities may 
     authorize performance pay of up to $10,000 for physicians and 
     dentists below the Chief of Staff (COS) level. For managers 
     at the COS level and above, ten percent of their benchmarked 
     pay would be at risk, and would be payable to the extent that 
     performance goals are met. This will address a concern that 
     has been raised by the General Accounting Office and others 
     of a disconnect between employees' performance and their pay.
       The draft bill also would prohibit senior title 38 
     officials at the Chief of Staff level and above from 
     receiving any compensation, whether from employment or 
     contract, and from accepting any offers of future employment, 
     from medical schools affiliated with their respective VAMCs. 
     This prohibition will reduce the risk of potential conflicts 
     of interest, and will ensure that the Department's interests 
     in agreements with affiliated medical schools are adequately 
     protected. It is highly desirable to have an independent 
     senior clinical official at each facility. VA's 
     implementation of the bill will increase executive 
     compensation to a level that would offset any loss of outside 
     income resulting from this provision. In limited 
     circumstances, the Secretary could suspend or waive this 
     prohibition.


                  Details of VA's Implementation Plan

       Salary benchmarks will be set at the national level and 
     communicated to networks. Local facilities would set pay 
     levels within a range (10 percent of the 
     benchmark) according to local circumstances. Any decision to 
     set pay outside the 10-percent band will require higher-level 
     approval.
       Benchmark salaries will be set for each specialty and 
     location, at entry, mid-career, and senior levels. Increments 
     and graduated benchmarks will be set to reflect varying 
     levels of experience and to provide for reasonable income 
     growth over a period of time.
       VA will use ADA net private practice income to set VA 
     dentist salary benchmarks. About 93 percent of all practicing 
     dentists are employed in private practice, so VA's primary 
     competition in the marketplace is private practice income.
       Specific amounts of each tier and the total payable for 
     each clinician will be set at the local level. This continues 
     the VA practice of local pay setting based on national policy 
     (used for physician and dentist special pay, nurse locality 
     pay system, and special salary rates):
       This proposal will greatly enhance VA's ability to compete 
     for the full range of skilled medical and dental services at 
     the most reasonable cost. VA will be able to offer 
     competitive compensation to full-time, part-time, or 
     occasional staff, or pay on contract, according to the most 
     clinically appropriate and efficient option.
       This proposed physician and dentist pay aligns with the 
     President's budget and would be effective on the first day of 
     the first pay period on or after the later of April 1, 2004, 
     or six months after the date of enactment.


                                Examples

       An example of how this system will work for Internal 
     Medicine:

     VA internist with 10 years of experience, 2003: $142,682; 
         AAMC Associate Professor median salary, 2001-2002: 
         $142,000; Benchmark for VA Salary (10% of 
         AAMC): $127,800-156,200; Targeted Increase: $0-$13,518.

       An example of how this system will work for Therapeutic 
     Radiologists:

     VA radiologist with 10 years of experience, 2003: $190,682; 
         AAMC Associate Professor median salary, 2001-2002: 
         $248,000; Benchmark for VA Salary (10% of 
         AAMC): $223,200-272,800; Targeted Increase: $32,518-
         82,118.

       An example of how this system will work for General 
     Dentists:

     VA general dentist with 10 years of experience, 2003: 
         $131,682; ADA net private practice income (minus 
         benefits), 2002: $134,928; Benchmark for VA Salary 
         (10% of ADA): $121,435-148,421; Targeted 
         Increase $0-$16,739.


                        Estimated Costs/Savings

       VA estimates the first year costs to be $69.42 million, 
     with ten-year costs of $1.59 billion. There are expected 
     savings from productivity and the avoidance of costly 
     specialty contracts resulting from more competitive pay. The 
     net first year costs are $48.47 million, with net ten-years 
     costs of $636.25 million. A detailed explanation is in the 
     attached charts.

                        Enhancements for Nurses

       Over the next several years the projected increase in the 
     number of aging veterans and increased enrollment in the VA 
     healthcare system by veterans of all ages will increase 
     workload across the VA healthcare system. Between 2000 and 
     2010, the number of veterans age 75 and above will increase 
     from 4 million to 4.5 million and within that number, those 
     veterans age 85 and older will triple from 422,000 to 1.3 
     million. Veteran enrollees in the VA healthcare system will 
     increase from approximately 6 million in FY 2002, to 
     approximately 7.75 million in FY 2007. This increasing and 
     aging population of veterans will exhibit higher comorbidity 
     and require more comprehensive care both as inpatients and as 
     outpatients.
       At the same time, national nursing leaders and healthcare 
     organizations project a shortage of registered nurses that 
     will be unlike any experienced in the past. Changes in 
     healthcare delivery requiring larger numbers of professional 
     nurses to perform increasingly complex functions in hospitals 
     and the community has heightened the demand for professional 
     nurses. Given the aging of the current registered nurse 
     workforce (average age nationally, 45.2 yrs., in VA, 46 
     yrs.), and the decreasing number of students who choose 
     nursing as a career, the future availability of professional, 
     registered nurses (RN) will be insufficient to meet our 
     national healthcare needs. Negative perceptions of nursing as 
     a profession (i.e., perceived negative work environment and 
     pay inequities between nurses and a wide range of alternative 
     career options that require less education and have less 
     responsibility) have exacerbated this situation. VA already 
     is experiencing some staffing difficulties. VA's nurse 
     vacancy and turnover rates have greatly increased since 1998. 
     VA must better position itself to attract the nurses to meet 
     current and future healthcare needs.
       Nurse shortages, complex healthcare environments and 
     growing administrative demands require highly skilled nurse 
     executives at facility and national levels with the knowledge 
     and experience to develop responsive care delivery models in 
     an ever-changing healthcare environment. VA nursing 
     leadership must be highly qualified and capable of 
     implementing cutting edge, innovative changes. Current VA pay 
     for nurse executives is not comparable to private sector pay 
     and perquisites. As a result, VA often is not in a position 
     to hire and retain nurse executives with exceptional skills. 
     The current pay structure offers little or no incentive for 
     current VA nurse executives and potential nurse leaders to 
     take on progressively more responsible and complex 
     assignments. Moreover, the current VA pay structure is 
     generally not attractive to highly skilled and experienced 
     non-VA nurse executives.
       Approximately 55 percent of all VA Nurse Executives are 
     eligible for retirement by 2005; 69 percent will be eligible 
     by 2008. In addition, 35 percent of all current VA registered 
     nurses are eligible to retire by 2005. When coupled with the 
     national shortage, this potential loss of nurses could 
     jeopardize VA's ability to accomplish its healthcare mission.
       Thus, we propose legislation enabling VA medical centers 
     (VAMCs) to offer flexible tours, and establishing a nurse 
     executive special pay program.


                             Flexible Tours

       The proposed legislation would authorize VA to offer 
     registered nurses the following flexible tours:
       (1) three 12-hour tours (36 hours) in a workweek paid as 40 
     hours;
       (2) 7 ten-hour days/7 days off in a pay period, with pay 
     for 80 hours;
       (3) 9 months of work with 3 months off, with pay 
     apportioned over a 12-month period.
       Inflexibility in work schedules is a major cause of 
     dissatisfaction in nurse employment. A 2000 survey conducted 
     by the American Organization of Nurse Executives (AONE), 
     found that after salary, the top benefit sought by nurses was 
     ``flexible scheduling and control over shifts.'' Providing 
     different options for scheduling would be a way of bringing 
     more nurses into the workplace and retaining their services.
       VAMCs across the country must compete in local employment 
     markets that offer a variety of flexible working schedules 
     and pay practices to professional nurses. Such options are 
     popular among nurses because it allows them to accommodate 
     individual lifestyles and personal obligations. The proposed 
     changes would allow VAMCs to implement flexible pay and work-
     schedule options common in many job markets. The ability to 
     offer options comparable to those offered by their 
     competitors would enhance VAMCs'

[[Page S6284]]

     ability to remain competitive employers. These flexible nurse 
     tour proposals align with the President's budget and would be 
     effective on the first day of the first pay period on or 
     after the later of April 1, 2004, or six months after the 
     date of enactment.


                      Nurse Executive Special Pay

       The proposed legislation also would authorize VA to approve 
     special pay to the nurse executive at each VA medical center 
     or VA Central Office. The special pay would range from a 
     minimum of $10,000 to a maximum of $25,000, based on factors 
     such as the grade of the nurse executive, the scope and 
     complexity of the nurse executive position, the nurse 
     executive's personal qualifications, the characteristics of 
     the of the healthcare facility, e.g., tertiary, single site 
     or multi-site, nature and number of specialty care units, 
     demonstrated recruitment and retention difficulties, and such 
     other factors as the Secretary deems appropriate.
       This proposed nurse executive pay aligns with the 
     President's budget and would be effective on the first day of 
     the first pay period on or after the later of April 1, 2004, 
     or six months after the date of enactment.
       There are significant inadequacies in the VA nurse locality 
     pay system (LPS) as it relates to nurse executive 
     compensation. There are difficulties in obtaining comparative 
     survey data on non-VA nurse executive positions to use in 
     making an informed determination concerning locality pay. 
     Non-VA employers often do not cooperate in the survey 
     process. Nurse executive positions are often one-of-a-kind 
     positions making it difficult to match VA and non-VA jobs. 
     Non-VA employers typically do not include nurse executives in 
     compensation surveys. With the organizational changes and 
     scope of responsibilities changes for nurse executives 
     occurring in both VA and non-VA healthcare facilities, lines 
     of authority and levels of responsibilities for executive 
     nurses are changing. Thus, job and pay matching for nurse 
     executives at VAMCs and non-VA healthcare facilities is 
     extremely difficult. Furthermore, nurse executives work in a 
     national labor market, or at least a regional one. LPS 
     compares jobs on a local basis. Another major problem is that 
     VA nurse executives are capped at Level V of the Executive 
     Schedule (EL-V), $125,400. There is no such cap in the non-VA 
     healthcare industry. The EL-V rate is no longer competitive 
     with non-VA nurse executive positions. Moreover, non-VA 
     employers negotiate nurse executive compensation as a total 
     compensation package, often including bonuses and other 
     incentives in addition to base pay. VA is unable to do that.
       The proposal derives from a recommendation of the VHA 
     Future Nursing Workforce Planning Group. This group, composed 
     of Medical Center Administrators, Nurse Executives, Network 
     Managers and clinicians, has identified the $10,000-$25,000 
     range as the amount that most commonly would mirror salary 
     and/or community based prerequisites of non-VA nurse 
     executives, while not making VA the pay leader within the 
     community. It is also consistent with the range of special 
     pay currently available to VA physician executives.
       Responsibilities of VA nurse executives are rapidly 
     changing and becoming more varied and complex. VA's pay 
     system for them must address this growing variety and 
     complexity.


                                 Costs

                             Flexible Tours

       (1) Three 12-hour tours (36 hours) paid as 40 hours.
       Assumptions: Based on a 36 hour work week/72 hours per pay 
     period for selected RNs. 40 hours/wk (Full-time) - 36 hours/
     wk (Full-time requested) = 4.
       Average VA RN hourly wage = $29.02 (using FY02 avg RN 
     salary = $56,679, adjusted by 3.2% annual pay increase = 
     $60,364, divided by 2,080).
       Cost is 4 hours per week/208 hours per year per nurse.

     Cost per RN per week: 4 $29.02 = $116.08; Cost per RN per 
         year: 208 $29.02 = $6036.

       Based on an estimated 25 nurses per facility, the cost 
     would be as follows:

     25 (RNs) $6036 = $150,900; 162 (VAMCs) $150,900 = $24.4 
         million.

       FY 2004 costs would be $12,222,900 (half-year 
     implementation).
       Costs in future years increased by 3.2%.

                        [In millions of dollars]

FY05.............................................................$25.22
FY06..............................................................26.03
FY07..............................................................26.86
FY08..............................................................27.72
FY09..............................................................28.61
FY10..............................................................29.53
FY11..............................................................30.47
FY12..............................................................31.45
FY13..............................................................32.45
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