[Senate Report 108-357]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 713
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-357

======================================================================
 
DEPARTMENT OF VETERANS AFFAIRS HEALTH CARE PERSONNEL ENHANCEMENT ACT OF 
                                  2004

               September 23, 2004.--Ordered to be printed

  Mr. Specter, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 2484]

    The Committee on Veterans' Affairs (hereinafter, ``the 
Committee''), to which was referred the bill (S. 2484), 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, having considered 
the same, reports favorably thereon, and recommends that the 
bill, as amended, do pass.

                              Introduction

    On June 1, 2004, Committee Chairman Arlen Specter 
introduced, at the request of the Administration, S. 2484, the 
proposed ``Department of Veterans Affairs Health Care Personnel 
Enhancement Act of 2003.'' S. 2484, as introduced, would have 
simplified and improved pay provisions for physicians and 
dentists employed by the Department of Veterans Affairs 
(hereinafter ``VA'') and authorized alternate work schedules 
and executive pay for VA nurses.

                           Committee Hearings

    On June 22, 2004, the Committee held a hearing to receive 
testimony on, among other bills, S. 2484. Testimony was heard 
from Senators Kent Conrad, Jon S. Corzine, and Hillary Rodham 
Clinton; The Honorable Tim McClain, VA's General Counsel; 
Michael J. Kussman, M.D., Acting Deputy Under Secretary for 
Health, Veterans Health Administration; Mr. Donald L. Mooney, 
Assistant Director for Resource Development, Veterans Affairs 
and Rehabilitation Commission, The American Legion; Mr. Paul A. 
Hayden, Deputy Director, National Legislative Service, Veterans 
of Foreign Wars; Mr. Adrian M. Atizado, Assistant National 
Legislative Director, Disabled American Veterans; Mr. Carl 
Blake, Associate Legislative Director, Paralyzed Veterans of 
America; and Mr. Richard Jones, National Legislative Director, 
AMVETS.

                           Committee Meeting

    After carefully reviewing the testimony from the foregoing 
hearing, the Committee met in open session on July 20, 2004, 
and voted by unanimous voice vote to report favorably S. 2484, 
as amended.

               Summary of the Committee Bill as Reported

    S. 2484, as reported (hereinafter, ``Committee bill''), 
consists of eight sections, summarized below, that would:
    1. State that this act may be cited as the ``Department of 
Veterans Affairs Health Care Personnel Enhancement Act of 
2004'' (section 1);
    2. State that any changes made as a result of amendments in 
this bill should be considered amendments to title 38, U.S. 
Code unless otherwise noted (section 2);
    3. Simplify and improve the pay for physicians and dentists 
by: creating a 15-step pay schedule; authorizing VA to set 
national pay bands for clinical specialties and subspecialties; 
requiring VA to consult at least two national pay surveys 
before setting the national pay bands; forbidding ``negative 
pay adjustments''; and providing minimal increases in salaries 
annually for each physician and dentist who performs 
satisfactorily (section 3);
    4. Authorize alternate work schedules for registered 
nurses, including a three day 12-hour shift that could be paid 
as though 40 hours of work had been completed, and a nine-
months-on, three-months-off schedule that would be paid over a 
twelve month period (section 4);
    5. Authorize a special rate of pay for the Director of 
Nursing Service in VA's Central Office (section 5);
    6. Authorize special pay for VA hospital-based nurse 
executives (section 6);
    7. Clarify the discretionary nature of the Secretary's 
authority under Chapter 74 of title 38 (section 7); and
    8. Establish the effective date of this Act as one year 
following the date of enactment (section 8).

                       Background and Discussion


Section 1. Short Title

    Section 1 of the Committee bill states that this act shall 
be known as the ``Department of Veterans Affairs Health Care 
Personnel Enhancement Act of 2004.''

Sec. 2. References to Title 38, United States Code

    Section 2 of the Committee bill requires that, unless 
otherwise noted, all amendments in this act shall be considered 
amendments to title 38, United States Code.

Sec. 3. Simplification and Improvement of Grade and Pay Provisions for 
        Physicians and Dentists

            Background
    The current VA compensation structure for physicians and 
dentists consists of two major elements: base pay and special 
pay. VA has operated under a similar ``two-tier'' system for 
compensating physicians and dentists since passage of the 
``Organic Act of 1946'', Public Law 79-293, which set ``base 
salary'' for physicians at $3,640 and ``special pay'' at 25 
percent of base pay.
    Base pay is similar, but not identical, to the General 
Schedule salary system used to compensate most Federal 
employees. A physician's or dentist's base pay is initially 
determined on the basis of the pay grade at which he or she is 
hired by VA, with the most common level being ``Service Chief 
Grade'' (a GS-15 equivalent). Base pay then increases over time 
with annual Federal comparability adjustments, with periodic 
``step promotions'' (salary increases, based primarily on 
seniority, within a pay grade), and with ``grade promotions'' 
(moving from one grade level to another). There is an overall 
cap on base pay at the rate of Executive Level V ($128,200 in 
Fiscal Year 2004).
    Special pay consists of numerous statutorily-set monetary 
awards that are designed to provide additional compensation to 
physicians and dentists for both common and uncommon skills and 
accomplishments. Examples of special pay ``add-ons'' include 
$9,000 per year for full-time employment, and $2,000 per year 
for a physician's or dentist's first board certification and 
$500 per year for each additional certification. Other special 
pay ``add-ons'' include up to $40,000 per year for a physician 
who has a medical specialty that is extraordinarily difficult 
for VA to recruit or retain, and up to $17,000 per year for a 
physician who works in a geographic location at which VA has 
difficulty recruiting and retaining qualified medical staff.
    A physician's or dentist's actual pay is determined by 
adding to his or her base pay all of the special pay rates for 
which he or she is eligible.
    Since passage of the Organic Act of 1946, the following 
pattern has recurred: VA has difficulty recruiting and 
retaining physicians and dentists due to inadequate pay; 
Congress is notified after recruitment or retention becomes a 
crisis; Congress acts to ``stabilize'' recruitment and 
retention by raising base pay and adding to the ``special pay'' 
rates; and the situation stabilizes--but only to be repeated 
later. Currently, VA is at the second step of this ``cycle.'' 
That is, VA now faces severe recruitment and retention 
difficulties, and it has notified Congress of these 
difficulties.
    VA's base pay and special pay scales were last adjusted in 
the Department of Veterans Affairs Health Care Personnel Act of 
1991, Public Law 102-40. Since that time, a large percentage of 
VA's physicians and dentists have reached the point at which 
they are paid the maximum base pay level. And because the 
special pay rates are capped by statute, those doctors and 
dentists have received only inflation adjustments to their 
salaries over the past few years. While VA physician salaries 
may be as high as $220,000 per year (assuming the physician 
receives the maximum base pay and many of the available special 
pay awards), that pay ceiling, coupled with a high medical 
inflation rate that has driven up salaries in the private 
sector, has widened the gap between VA salaries and 
compensation earned in the private and academic sectors. This 
gap has hampered VA efforts to hire physicians in specialties 
such as radiology, cardiology, and oncology where VA lags 
behind the competition in pay by, in some cases, 35 percent or 
more.
    The comparative gaps in pay have caused an increase in the 
use by VA of ``scarce medical contracts.'' By such contracts, 
VA medical centers are able to purchase needed medical services 
from community providers that are unavailable ``in-house'' for 
lack of staff. For example, the Pittsburgh VA Medical Center 
contracts for the services of two ``outside'' cardiologists at 
a cost of $1 million per year. The Medical Center reports that 
it could hire two cardiologists at salary levels of 
approximately $300,000 per year, but it lacks authority to pay 
such salaries.
            The Administration's Proposal
    The Administration submitted proposed legislation in July 
2003 to address inadequacies in the compensation of physicians 
and dentists. In contrast to past proposals, however, the 
Administration did not suggest that base pay and special pay 
rates simply be raised. Instead, it proposed a new three-tiered 
system consisting of base pay, market pay, and performance-
based pay. The sum total of the three tiers of pay would have 
been benchmarked against the 50th percentile of the Associate 
Professor compensation rate as published by the American 
Association of Medical Colleges (hereinafter, ``AAMC'') for 
each physician specialty. For dentists, the benchmark would 
have been the 75th percentile of the American Dental 
Association (hereinafter, ``ADA'') net private practice income. 
Thus, VA salary rates would have, for the first time, been able 
to rise without intervening Congressional action as the 
physician (AAMC) and dentist (ADA) pay indices rose.
    As for the mechanics of how each of the three tiers of pay 
would be set, the Administration proposed that base pay for 
each physician and dentist be set between the rate now paid to 
physicians and dentists compensated at the VA Chief Grade, step 
10, level and Level V of the Executive Schedule (approximately 
$110,000-$128,200 per year). To that base pay, VA would have 
added a second tier of compensation, market pay, that would 
have varied with several factors such as geographic area, 
specialty, and assignment being taken into account. Finally, 
the Administration proposed a third tier of compensation, 
performance-based pay that would have been awarded atop a 
physician's or dentist's base pay plus market pay to recognize 
individual achievements in quality, productivity, and advancing 
overall agency goals. An individual physician's (or dentist's) 
actual salary would have been set at the local medical center 
level and would have been indexed to AAMC's (or ADA's) rates 
for commensurate employment levels (entry-level, mid-career, or 
executive).
    According to VA, this new system ``would [have] ensure [d] 
that VA pay levels d[id] not fall drastically behind while 
awaiting adjustments to the statutory authority . . . . It 
[would have] be[en] a living system that adjusts to changing 
forces in the healthcare labor market.''
            The Committee Bill
    After receiving the Administration's proposed legislation, 
Chairman Specter instructed Committee staff to work with 
interested parties--including the National Association of VA 
Physicians and Dentists and the American Federation of 
Government Employees--to develop a consensus, if possible, on 
proposed changes in physician and dentist pay. Those 
discussions led to amendments to S. 2484, which were offered by 
the Chairman at the Committee's meeting on July 20, 2004. S. 
2484, as so amended, was approved by the Committee at that 
meeting. The Committee bill builds on the Administration's 
basic concept of a pay system that adjusts to market conditions 
without the need for intervening legislation. At the same time, 
it responds to concerns expressed by organizations that 
represent physicians and dentists--the VA personnel who would 
have been directly affected by these proposed changes in law.
    First, the Committee bill would continue, as today, to 
provide a predictable base salary for all VA physicians and 
dentists. Base salary would range from $90,000 per year to 
$133,000 per year, ``stepped'' to reflect the number of years a 
physician or dentist has worked in the VA health care system. A 
physician or dentist would move up one step for every two year 
period he or she has worked for VA. Further, base salaries 
would increase each year by the same percentage as annual cost-
of-living adjustments made under Section 5303 of Title 5.
    Second, instead of fixed ``special pay'' rates set now by 
statute, and similar to the Administration's proposal, the 
Committee bill would authorize VA-established special pay 
``add-ons'' based on national pay survey data for physicians 
and dentists. The Committee bill would require that pay survey 
data be drawn from at least two separate sources (not wholly 
from AAMC and ADA surveys as proposed by the Administration). 
Special pay ``add-ons'' would vary, as deemed necessary by VA, 
from specialty to specialty. For example, the Secretary could 
set separate national ``pay bands'' for primary care 
physicians, cardiologists, surgeons, and neurologists. Each 
physician hired would be placed in an appropriate pay band, and 
the amount of special pay to be added to his or her base pay 
would be set within the range established by the band. 
Individual physician or dentist salary levels within the 
physician's (or dentist's) appropriate pay band would be set 
based on recommendations from a Professional Standards Board 
established at the physician's or dentist's local VA medical 
facility. Such boards would also review the salary of each 
physician and dentist on staff and recommend adjustments as 
appropriate, not less frequently than once every two years.
    Finally, the Committee bill would allow for a third pay 
tier ``add-on'' of up to $10,000 in incentive and bonus pay. 
Such pay would be awarded to physicians or dentists in 
recognition of outstanding contributions in the furnishing of 
care to veterans locally and/or for contributions to the 
overall practice of medicine or dentistry.
    The changes made by the Committee bill to the 
Administration's proposed legislation are intended to 
accomplish two goals. First, and most importantly, they are 
intended to provide VA with a system that is appropriately 
flexible, as the Administration requested, for the recruitment 
and retention of doctors and dentists to care for veterans. But 
the Committee bill also seeks to retain some of the attractive 
elements of the civil service-like system that currently 
exists. While it may be the case that the nature of government 
service is such that VA salaries will never--and, perhaps, 
should never--reach the highest levels paid in the private 
sector, the Committee bill does ensure that VA physicians and 
dentists are provided uniform, guaranteed base salaries at 
highly attractive levels. It also ensures that physicians 
performing satisfactorily would be assured of some minimal 
periodic raises, much like today. Further, physicians and 
dentists would be assured that their salaries will not be 
reduced during their service with VA. This provision was 
extremely important to employee representatives because of the 
large amount of discretion over salaries placed in the hands of 
local and national officials.
    Finally, the Committee bill requires that practicing 
physicians have a significant role in making recommendations to 
the Secretary or his or her designee as to the appropriate 
levels of salaries paid to members of their professions. 
Physicians and dentists are at the ``front-lines'' of medicine; 
they know what is needed to provide care for veterans. This 
provision advances the tradition of cooperation among labor and 
management in the Federal sector, particularly within the 
healthcare environment.

Sec. 4. Alternative Work Schedules for Registered Nurses

            Background
    Under current law, VA nurse compensation is based wholly on 
a 40 hour work week. Consequently, VA is unable to offer 
employees the menu of special schedules and pay rates that are 
widely available to nurses in the private sector. This 
inflexibility in work schedules, according to VA, is a major 
cause of nurse dissatisfaction. In fact, a survey conducted in 
2000 by the American Organization of Nurse Executives found 
that, after salary, the top benefit sought by nurses is 
``flexible scheduling and control over shifts.'' Providing 
different options for scheduling would thus be a potentially 
useful way to bring more nurses into the VA workplace and to 
retain the services of VA nurses once they have entered the VA 
work force.
    VA Medical Centers must compete in local employment markets 
that offer a variety of flexible work schedules and pay 
practices to professional nurses. Flexible pay and work-
schedule options are popular because they allow nurses to 
adjust their work schedules to accommodate individual 
lifestyles and personal obligations. The ability to offer 
options comparable to those offered by private sector 
competitors would significantly enhance VA's ability to remain 
a competitive employer.
    In August 2003, the Administration requested legislation to 
enhance its ability to recruit and retain high quality nurses 
by enabling VA medical centers to offer to nurses, in addition 
to the current 40-hour work week, the following three flexible 
work schedule tours (1) three 12-hour shifts (36 hours) in a 
work week paid as 40 hours; (2) seven ten-hour days of work 
followed by seven days off in a pay period, with pay for 80 
hours; and (3) nine months of work with three months off, with 
pay apportioned over a 12-month period.
    After this proposed legislation was submitted to the 
Congress, two studies were released that made a compelling case 
against nurses working extended shifts. First, the Institute of 
Medicine (hereinafter, ``IOM'') released a report stating that 
extended work shifts create potentially hazardous conditions 
for patients. The report, Keeping Patients Safe: Transforming 
the Work Environment of Nurses, National Academies Press 
(2004), recommends that, in order to reduce error-producing 
fatigue, health care organizations establish policies designed 
to prevent nurses who provide direct patient care from working 
longer than 12 hours in a 24-hour period and in excess of 60 
hours per seven-day period. In addition, researchers at the 
University of Pennsylvania have concluded that the risks of 
error are significantly increased when work shifts are longer 
than twelve hours or when nurses work more than forty hours per 
week. Rogers, A. E. et al., ``The Working Hours of Hospital 
Staff Nurses and Patient Safety'' Health Affairs 23, no. 4 
(2004) at 202.
            Committee Bill
    Section 4 of the Committee bill authorizes two alternative 
work schedules for nurses. In light of the above-cited 
findings, however, the option of working seven ten-hour days 
with seven days off in a pay period is not included in the 
Committee bill. Such a measure would have directly conflicted 
with the safety recommendations outlined in both the IOM report 
and the University of Pennsylvania study.
    The first work schedule option, the ``36/40 work 
schedule,'' would consist of three 12-hour shifts (36 hours) in 
a work week paid as 40 hours. If VA were to use this authority, 
it would be required to develop policies to prevent nurses from 
working shifts in excess of 12 hours, as recommended by the IOM 
report. Section 4 of the Committee bill would also authorize a 
``Nine Month Work Schedule'' consisting of nine months of work 
with three months off, with pay apportioned over a 12-month 
period. Nurses working this schedule would be considered 0.75 
full-time equivalent employees except for the purpose of health 
care benefit premiums as outlined in chapter 89 of Title 5.
    Section 4 of the Committee bill would also allow a nurse 
who has already attained full-time, non-probationary status to 
choose one of the two alternative schedule options and retain 
his or her full-time/non-probationary status. Current law would 
deem either alternative schedule to be part-time work--work 
that gives rise 
to probationary status for an indefinite period. In addition, 
new employees or current part-time employees who work one of 
the new alternative schedules would be allowed to attain non-
probationary status after 4,160 hours of satisfactory work (the 
equivalent of two years) under the new schedule.
    Section 4 of the Committee bill would also require VA to 
submit to Congress a report on the overtime hours, if any, 
worked by nurses who choose to work these alternative 
schedules. The Committee is concerned that nurses may be 
disproportionately assigned overtime work; it will conduct 
rigorous oversight to ensure such is not the case.

Sec. 5. Rate of Pay for Director of Nursing Service

            Background
    The position of Director, Nursing Programs, is paid under 
VA's Nurse Locality Pay System. The maximum salary under that 
system is Executive Level V ($128,200 in Fiscal Year 2004), a 
rate of pay that is lower than the salary paid to comparable 
positions in the Senior Executive Service or to VA executives 
appointed under 38 U.S.C. 7306. The maximum payable rate under 
the Senior Executive Service Executive Level II, will be 
$158,200.
    Due to the current pay limitation, the pay for the 
Director, Nursing Programs, is not competitive with rates paid 
to comparable positions in the private sector or within the 
Federal government. The limitation has caused serious 
recruitment difficulties, resulting in the position being 
vacant for months despite aggressive recruitment efforts. Nurse 
executives in other Federal agencies are compensated under the 
Senior Executive Service pay system.
            Committee Bill
    Section 5 of the Committee bill would authorize VA to 
establish a special rate of pay for the Director of Nursing 
Service equal to the sum of the maximum rate of basic pay 
established for the Senior Executive Service and the amount of 
locality-based comparability payment.

Sec. 6. Nurse Executive Special Pay

            Background
    The realities of 21st century nursing--fewer nurses, 
intensive care demands, complex care environments and growing 
administrative requirements--require a pool of highly-skilled 
nurse executives at the facility and national levels who have 
the knowledge and experience to develop responsive and 
innovative care-delivery models. The nurse's role in executive 
practice has greatly evolved from a focus on nursing services 
to a broader accountability for patient care services across 
the healthcare continuum. Recruitment and voluntary loss trends 
underscore a growing concern for VA's ability to compete.
    Currently, VA nurse executive pay is not comparable to the 
pay and perquisites offered to nurse executives in the private 
sector. As a result, VA is not positioned to hire or retain 
nurse executives with exceptional skills. The current pay 
structure offers little or no incentive for nurse leaders to 
assume challenging and demanding assignments. Another major 
problem is the fact that the annual salaries of nurse 
executives are capped at Level V of the Executive Schedule, 
currently $128,200. There is no such cap in non-VA healthcare 
facilities.
    The VHA Future Nursing Workforce Planning Group, a body of 
medical center administrators, nurse executives, Network 
managers and clinicians, has contended that additional 
compensation in the $10,000-$25,000 range would place VA nurse 
executives at parity with non-VA nurse executives. Additional 
compensation in this range would also be consistent with the 
range of special pay currently available to VA physician 
executives.
            Committee Bill
    Section 6 of the Committee bill would authorize VA to 
approve special pay to nurse executives in a VA Medical Center 
or in VA Central Office. The special pay could range from 
$10,000 to $25,000. The amount of special pay offered to a 
particular nurse executive would vary based on factors such as 
the grade of the nurse executive, the scope and complexity of 
the nurse executive's position, his or her personal 
qualifications, the characteristics of the healthcare facility 
employing the nurse executive, and other such factors as VA 
might deem appropriate.

Sec. 7. Clarification of Discretionary Nature of Veterans Health 
        Administration Personnel Administration Authorities

    Section 7 of the Committee bill responds to a VA request to 
clarify whether it is Congress' intent that the authorities 
vested in the Secretary under Chapter 74 of title 38, U.S. 
Code, pertaining to certain VA personnel, are discretionary to 
the Secretary. While the Committee did not necessarily see the 
need to clarify existing law, the section is included in the 
Committee bill to affirm that the authorities set forth in 
Chapter 74 are indeed discretionary.

Sec. 8. Effective Date

    Section 8 of the Committee bill delays the effect of the 
amendments that would be made by the Committee bill until one 
year after the date of the enactment. Many of the changes that 
would be made by the Committee bill will require significant 
time for proper implementation. The Committee believes that one 
year will allow VA time to gather and analyze data, e.g., 
salary surveys, and make data-driven decisions with regard to 
physician pay and nurse scheduling.

                             Cost Estimate

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, the Committee, based on 
information supplied by the Congressional Budget Office 
(hereinafter, ``CBO''), estimates that enactment of the 
Committee bill would not increase direct spending for veterans 
programs over the 2006-2009 period. CBO estimates that 
enactment of the Committee bill would, assuming appropriations, 
increase discretionary spending outlays by $186 million in 
2006, and $763 million over the 2006-2009 period.
    The Committee bill contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act. Further, enactment of the Committee bill would not 
affect the budgets of state, local, or tribal governments.
    The cost estimate provided by CBO, setting forth a detailed 
breakdown of costs, follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 20, 2004.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2484, the Department 
of Veterans Affairs Health Care Personnel Enhancement Act of 
2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sarah T. 
Jennings.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.

S. 2484--Department of Veterans Affairs Health Care Personnel 
        Enhancement Act of 2004

    Summary: S. 2484 would change the compensation schedule 
that the Department of Veterans Affairs (VA) uses to pay its 
doctors and dentists. Those changes would increase salaries for 
many doctors and dentists. In addition it would allow VA nurses 
to work alternate work schedules that would be treated as the 
equivalent of full-time work--even though the total hours 
worked by the nurses would be less than 40 hours per week. 
Finally, the bill would allow VA to pay nurse executives a 
bonus ranging from $10,000 to $25,000.
    CBO estimates that implementing S. 2484 would cost $182 
million in 2006 and $763 million over the 2006-2009 period, 
assuming appropriation of the necessary amounts. Enacting the 
bill would not affect direct spending or receipts.
    S. 2484 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2484 is shown in the following table. 
The costs of this legislation fall within budget function 700 
(veterans' benefits and services).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                          ------------------------------------------------------
                                                             2004     2005     2006      2007     2008     2009
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending under current law for veterans' medical care:
    Estimated authorization level 1......................   27,957   28,888    29,706   30,608   31,117   32,104
    Estimated outlays....................................   27,141   28,334    29,293   30,210   30,846   31,756

                    Proposed changes:

Base pay and market pay:
    Estimated authorization level........................        0        0       164      170      176      183
    Estimated outlays....................................        0        0       148      168      174      181
Incentive pay:
    Estimated authorization level........................        0        0        11       11       11       11
    Estimated outlays....................................        0        0        10       11       11       11
Contract care savings:
    Estimated authorization level........................        0        0       -10      -22      -34      -35
    Estimated outlays....................................        0        0        -9      -21      -33      -35
Subtotal, pay for doctors and dentists:
    Estimated authorization level........................        0        0       165      159      153      159
    Estimated outlays....................................        0        0       149      158      152      157
Alternative work schedules for nurses:
    Estimated authorization level........................        0        0        33       34       35       36
    Estimated outlays....................................        0        0        30       34       35       36
Nurse executive bonus:
    Estimated authorization level........................        0        0         3        3        3        3
    Estimated outlays....................................        0        0         3        3        3        3
Total changes:
    Estimated authorization level........................        0        0       201      196      191      198
    Estimated outlays....................................        0        0       182      195      190      196
Spending for veterans' medical care under H.R. 4248:
    Estimated authorization level........................   27,957   28,888    29,907   30,804   31,308   32,302
    Estimated outlays....................................   27,141   28,334    29,475   30,405   31,036   31,952
----------------------------------------------------------------------------------------------------------------
1 The 2004 level is the amount appropriated for that year. No full-year appropriation has yet been provided for
  fiscal year 2005. The current-law amounts for the 2005-2009 period assume appropriations remain at the 2004
  level with adjustments for anticipated inflation.

    Basis of estimate: This estimate assumes that the bill will 
be enacted near the start of fiscal year 2005 and that the 
necessary amounts for implementing the bill will be 
appropriated for each year. Changes under the bill would not 
take effect for one year after the bill's enactment date. Thus, 
we do not estimate any costs for fiscal year 2005.

Doctor and Dentist Pay Schedule

    Section 3 would change the compensation schedule for 
doctors and dentists employed by VA. It would mandate a 
schedule for base pay that would be determined by the length of 
time each doctor or dentist has worked for VA. This schedule 
would start at $90,000 a year for someone with two years of 
service or less and increase to $133,000 for those with more 
than 28 years of service. In addition to base pay, each doctor 
and dentist would be eligible for additional compensation 
called market pay that would be determined by VA in a manner to 
account for each doctor's or dentist's relevant work 
experience, VA's needs for each particular medical specialty, 
the underlying market demand, and other factors that VA would 
determine to be relevant. Finally, the bill also would allow VA 
to pay each doctor and dentist incentive pay that would reflect 
outstanding performance. Incentive pay would be paid on a case-
by-case basis and would be limited to not more than $10,000 per 
year.
    Under the bill, this new compensation approach would 
replace the current compensation practices that VA uses to pay 
doctors and dentists. By offering higher pay to doctors and 
dentists, CBO expects VA would likely be able to hire more 
physicians and dentists and thus save some money that it 
currently pays for veterans to receive health care outside of 
VA facilities. Considering all these factors, CBO estimates 
that implementing this proposal would cost $149 million in 2006 
and $616 million over the 2006-2009 period, assuming 
appropriation of the necessary amounts.
    Base Pay and Market Pay. Based on information from VA, CBO 
estimates that this proposal would increase spending by VA on 
salaries for doctors and dentists. Under the first two 
components of the new pay system--base pay and market pay--
doctors in fields such as anesthesiology and neurosurgery could 
see significant increases, though doctors in other specialities 
would be less likely to receive a pay increase. Using 
information from VA, CBO estimates that under these two 
proposals, the average salary for VA's roughly 11,000 doctors 
and dentists would increase by about $14,500 in 2006. Thus, CBO 
estimates that implementing these two proposals would cost $148 
million in 2006 and $671 million over the 2006-2009 period, 
assuming appropriation of the required amounts.
    Incentive Pay. CBO assumes that 20 percent of VA's doctors 
and dentists would receive, on average, about $5,000 in 
incentive pay each year for this estimate. Accordingly, CBO 
estimates that implementing this provision would cost about $10 
million in 2006 and $43 million over the 2006-2009 period, 
assuming appropriation of the estimated amounts.
    Contract Care Savings. Under current practice, VA spends 
about $650 million a year to pay for health care for veterans 
furnished outside of VA health care facilities. By increasing 
its compensation for certain doctors, CBO expects that VA would 
be able to treat more veterans in its own facilities. Based on 
information from VA, CBOestimates that VA would be able to save 
about 5 percent of the total amount it spends on contracts for health 
care outside of VA facilities. Assuming it would take about three years 
to fully realize these savings, CBO estimates that implementing section 
3 would save VA about $9 million in 2006 and $98 million for providing 
contract care over the 2006-2009 period, assuming appropriations are 
reduced by the estimated amounts.

Alternative Work Schedules for Nurses

    Under section 4, VA would have the authority to treat 
nurses who work three regularly scheduled 12-hour shifts within 
one workweek as having worked a full 40 hours during that week. 
Under the bill, nurses would still be paid as if they had 
worked 40 hours, despite working less than 40 hours while on 
this alternative schedule. Under current law, VA cannot allow 
nurses who work these schedules to be treated as if they are 
working 40 hours a week.
    Based on information from VA, CBO expects that VA would 
allow more than 4,000 nurses to use this alternative work 
schedule. Because these nurses would be working fewer hours 
each week, CBO expects that VA would probably hire additional 
personnel to cover the remaining work load. Based on the 
estimated decrease in total hours worked, CBO estimates that VA 
would need to hire about 400 additional nurses at an estimated 
annual cost of about $78,000 per nurse in 2005. Assuming it 
takes about six months for VA to begin using this authority and 
that annual salaries increase with inflation, CBO estimates 
that implementing section 4 would cost $30 million in 2006 and 
$135 million over the 2006-2009 period, assuming appropriation 
of the necessary amounts.

Nurse Executive Bonus

    Section 6 would allow VA to pay the nurse executive in each 
of the Department's 165 medical care facilities and its central 
office an annual bonus ranging from $10,000 to $25,000. 
According to VA, this provision would affect about 185 people. 
Assuming that the average bonus is $17,500, CBO estimates that 
implementing this bonus system would cost $3 million in 2006 
and $12 million over the 2006-2009 period, assuming 
appropriation of the necessary amounts.
    Intergovernmental and private-sector impact: S. 2484 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Previous CBO estimate: On June 9, 2004, CBO transmitted an 
estimate for H.R. 4231, the Department of Veterans Affairs 
Nurse Recruitment and Retention Act of 2004, as ordered 
reported by the House Committee on Veterans' Affairs on May 19, 
2004. The differences in the estimated costs reflect 
differences in the bills. In particular, section 3 of H.R. 4231 
is similar to section 4 of S. 2484 in that both would allow VA 
to treat nurses who work three regularly scheduled 12-hour work 
shifts within one workweek as having worked a full 40 hours 
during that week. H.R. 4231 also would allow VA to treat nurses 
who work seven 10-hour shifts within a two week pay period as 
having worked 80 hours during that period, but S. 2484 would 
not allow such schedules. In addition, S. 2484 would allow VA 
to pay nurse executives an annual bonus ranging from $10,000 to 
$25,000 while H.R. 4231 would not. Finally, S. 2484 would 
change the compensation schedule for doctors and dentists while 
H.R. 4231 would make no changes in their compensation.
    Estimate prepared by: Federal Costs: Sam Papenfuss. Impact 
on State, Local, and Tribal Governments: Melissa Merrell. 
Impact on the Private Sector: Allison Percy.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee on Veterans' 
Affairs has made an evaluation of the regulatory impact that 
would be incurred in carrying out the Committee bill. The 
Committee finds that the Committee bill would not entail any 
regulation of individuals or businesses or result in any impact 
on the personal privacy of any individuals and that the 
paperwork resulting from enactment would be minimal.

                 Tabulation of Votes Cast by Committee

    In compliance with paragraph 7 of rule XXVI of the Standing 
Rules of the Senate, the following is a tabulation of votes 
cast in person or by proxy by members of the Committee on 
Veterans' Affairs at its July 22, 2004, meeting. On that date, 
the Committee, by unanimous voice vote, ordered S. 2484, a bill 
to amend title 38, United States Code, to simplify and improve 
pay provisions for physicians and dentists, and to authorize 
alternate work schedules and executive pay for nurses, as 
amended, reported favorably to the Senate.

                             Agency Report

    On June 22, 2004, the Honorable Gordon H. Mansfield, Deputy 
Secretary of Veterans Affairs, appeared before the Committee on 
Veterans' Affairs and submitted testimony on, among other 
things, S. 2484. Excerpts from this statement are reprinted 
below:

   Statement of the Views of the Administration, Statement of Gordon 
            Mansfield, Deputy Secretary of Veterans Affairs

Physicians/Dentists Special Pay
    Mr. Chairman, we very much appreciate your having 
introduced, by request, S. 2484. S. 2484 is an important VA 
proposal to overhaul physician and dentist pay to greatly 
enhance VA's ability to recruit and retain high quality 
physicians and dentists, particularly high-cost medical 
specialists, 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.
    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 unable to offer 
competitive positions for critical subspecialties, such as 
anesthesiology, radiology, cardiology, urology, 
gastroenterology, oncology, and orthopedic surgery. National 
shortages of qualified physicians in these specialties 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. Although 
Congress did increase the amounts of 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 
reliance on expensive scarce medical specialist contracts and 
fee-basis care.
    S. 2484 would establish a three-tiered system of base pay, 
market pay, and performance-based pay. The first tier, a 
uniform base pay band, would 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 would dramatically simplify hiring and employment and 
facilitate reassignments and position changes. Placement in 
this band would be based on the individual's qualifications. 
The second tier, the market pay band, would 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. The 
flexibility of this tier would allow VA to keep pace with the 
market, both on upward and downward trends. The third tier 
would be linked to performance, and would be paid for discrete 
achievements in quality, productivity, and support of corporate 
goals. VA facilities would be able to authorize performance pay 
of up to $10,000 for physicians and dentists below the Chief of 
Staff (CoS) level. VA would benchmark the sum of all three 
bands to the 50th percentile of the Association of American 
Medical Colleges (AAMC) Associate Professor compensation (for 
physicians) and 75 percent of American Dental Association (ADA) 
net private practice income (for dentists).
Flexible Schedules for Registered Nurses
    S. 2484 also includes provisions to help make VA more 
competitive in its ongoing efforts to recruit and retain 
registered nurses and other health care personnel. I am 
especially pleased that the bill would permit enhanced 
flexibility in scheduling tours of duty for registered nurses. 
Such flexibility would permit our facilities to offer our 
registered nurses schedule options comparable to those often 
available at private and other non-VA hospitals and medical 
centers. In prior testimony before this Committee, we have 
noted the projected increase in the number of aging veterans 
and increased enrollment in the VA health care system by 
veterans of all ages over the next several years and the 
projected national shortage of registered nurses. VA's health 
care providers are its most important resource in delivering 
high-quality, compassionate care to our Nation's veterans. VA's 
nurses are critical front-line components of the VA health care 
team. We must be able to recruit and retain well-qualified 
nurses. The ability to offer compensation, employment benefits 
and working conditions comparable to those available in their 
communities is critical to our ability to recruit and retain 
nurses, particularly in highly competitive labor markets and 
for hard-to-fill specialty assignments. Thanks to the efforts 
of this Committee and the House Veterans' Affairs Committee, VA 
has been able to offer generally competitive pay for nurses in 
most markets. Enactment of S. 2484 would permit VA to continue 
meeting the increasing challenge of recruiting and retaining 
sufficient nurses and other health care professionals to meet 
its patient care needs.

    Changes in Existing Law Made by the Committee Bill, as Reported

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, changes in existing law made by the 
Committee bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *


          Chapter 74--Veterans Health Administration--Personnel

                           Subchapter I * * *

     * * * * * * *

                           Subchapter II * * *

Sec. 7426. * * *
Sec. 7427. Discretionary nature of functions.

        Subchapter III--[Special] Pay for Physicians and Dentists

Sec. 7431. [Special] Pay. [:authority]
Sec. 7432. [Special] Pay of Under Secretary for Health. [:written 
          agreements]
Sec. 7433. [Special pay: full time physicians] Administrative matters.
[Sec. 7434. Special pay: part-time physicians.
[Sec. 7435. Special pay: full-time dentists.
[Sec. 7436. Special pay: part-time dentists.
[Sec. 7437. Special pay: general provisions.
[Sec. 7438. Special pay: coordination with other benefits laws.
[Sec. 7439. Periodic review of pay of physicians and dentists; 
          quadrennial report.
[Sec. 7440. Annual report.]

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

Sec. 7456. * * *
Sec. 7456A. Nurses: alternate work schedules.
Sec. 7457. On call pay
Sec. 7458. Recruitment and retention bonus pay.
Sec. 7459. Director of Nursing Service: rate of pay.

           *       *       *       *       *       *       *


         CHAPTER 74--VETERANS HEALTH ADMINISTRATION--PERSONNEL


                       Subchapter I--Appointments


Sec. 7401 * * *

           *       *       *       *       *       *       *


Sec. 7404. Grades and pay scales

    (a) * * *
    (b) [(1) The grades for positions provided for in paragraph 
(1) of section 7401 of this title shall be as follows. The 
annual ranges of rates of basic pay for those grades shall be 
prescribed from time to time by Executive order as authorized 
by chapter 53 of title 5 or as otherwise authorized by law:

                     PHYSICIAN AND DENTIST SCHEDULE

    [Director grade.
    Executive grade.
    Chief grade.
    Senior grade.
    Intermediate grade.
    Full grade.
    Associate grade].
    Physician grade
    Dentist grade

                             NURSE SCHEDULE

    Nurse V.
    Nurse IV.
    Nurse III.
    Nurse II.
    Nurse I.

      CLINICAL PODIATRIST, CHIROPRACTOR, AND OPTOMETRIST SCHEDULE

    Chief grade.
    Senior grade.
    Intermediate grade.
    Full grade.
    Associate grade.
    [(2) A person may not hold the director grade in the 
Physician and Dentist Schedule unless the person is serving as 
a director of a hospital, domiciliary, center, or outpatient 
clinic (independent) or comparable position. A person may not 
hold the executive grade in that Schedule unless the person 
holds the position of chief of staff at a hospital, center, or 
outpatient clinic (independent), or comparable position.]
    (c) Notwithstanding the provisions of section 7425(a) of 
this title, a person appointed under section 7306 of this title 
who is not eligible for [special pay] pay under subchapter III 
shall be deemed to be a career appointee for the purposes of 
sections 4507 and 5384 of title 5.
    (d) Except as provided under subchapter III and in [section 
7457] sections 7457 and 7459 of this title, pay may not be paid 
at a rate in excess of the rate of basic pay for an appropriate 
level authorized by section 5315 or 5316 of title 5 for 
positions in the Executive Schedule, as follows:
      (1) Level IV for the Deputy Under Secretary for Health.
      (2) Level V for all other positions for which such basic 
pay is paid under this section.

           *       *       *       *       *       *       *


Subchapter II--Collective Bargaining and Personnel Administration

           *       *       *       *       *       *       *



Sec. 7426 * * *

Sec. 7427. Discretionary nature of functions

    Any authority assigned to the Secretary or another officer 
of the Department under this chapter shall be carried out at 
the discretion of the Secretary or other officer, as the case 
may be.

           *       *       *       *       *       *       *


[Subchapter III--Special Pay for Physicians and Dentist

           *       *       *       *       *       *       *



[Sec. 7431. Special pay: administration

    [(a) In order to recruit and retain highly qualified 
physicians and dentists in the Veterans Health Administration, 
the Secretary shall provide special pay under this subchapter. 
Such special pay shall be provided under regulations that the 
Secretary shall prescribe to carry out this subchapter. Before 
prescribing regulations under this subchapter, the Secretary 
shall receive the recommendations of the Under Secretary for 
Health with respect to those regulations.
    [(b) Special pay may be paid to a physician or dentist 
under this subchapter only upon the execution of, and for the 
duration of, a written agreement entered into by the physician 
or dentist in accordance with section 7432 of this title.
    [(c) A physician or dentist serving a period of obligated 
service pursuant to chapter 76 of this title is not eligible 
for special pay under this subchapter during the first three 
years of such obligated service, except that, at the discretion 
of the Secretary and upon the recommendation of the Under 
Secretary for Health, such a physician or dentist may be paid 
special pay for full-time status during those three years.
    [(d) (1) The Secretary may determine categories of 
positions applicable to either physicians or dentists, or both, 
in the Veterans Health Administration as to which there is no 
significant recruitment and retention problem. While any such 
determination is in effect, the Secretary may not enter into an 
agreement under this subchapter with a physician or dentist 
serving in a position covered by the determination. Before 
making a determination under this paragraph, the Secretary 
shall receive the recommendations of the Under Secretary for 
Health with respect to the determination.
    [(2) Not later than one year after making any such 
determination with respect to a category of positions, and each 
year thereafter that such determination remains in effect, the 
Secretary shall make a redetermination.
    [(3) Any determination under this subsection shall be in 
accordance with regulations prescribed to carry out this 
subchapter.
    [(e) If the Under Secretary for Health determines that 
payment of special pay to a physician or dentist who is 
employed on a less than half-time basis is the most cost-
effective way available for providing needed medical or dental 
specialist services at a Department facility, the Under 
Secretary for Health may authorize the payment of special pay 
for factors other than for full-time status to that physician 
or dentist at a rate computed on the basis of the proportion 
that the part-time employment of the physician or dentist bears 
to full-time employment.
    [(f) Special pay may not be paid under this section to a 
physician or dentist who--
          [(1) is employed on less than a quarter-time basis or 
        on an intermittent basis;
          [(2) occupies an internship or residency training 
        position; or
          [(3) is a reemployed annuitant.
    [(g) (1) In the case of a physician or dentist who is 
employed in a position that is covered by a determination by 
the Secretary under subsection (d)(1) that the Administration 
does not have a significant recruitment or retention problem 
with respect to a particular category of positions and who on 
the day before the effective date of this subchapter was 
receiving special pay under an agreement entered into under 
section 4118 of this title (as in effect before such date), the 
Secretary may pay to that physician or dentist, in addition to 
basic pay, retention pay under this subsection.
    [(2) The annual rate of such retention pay for any 
individual may not exceed the rate which, when added to the 
rate of basic pay payable to that individual, is equal to the 
sum of the annual rate of basic pay and the annual rate of 
special pay paid to that physician or dentist pursuant to the 
final agreement with that individual under such section 4118.
    [(3) Such retention pay shall be treated for all purposes 
as special pay paid under subchapter III of chapter 74 of this 
title.
    [(4) Retention pay under this subsection shall be paid 
under such regulations as the Secretary may prescribe.

[Sec. 7432. Special pay written agreements

    [(a) An agreement entered into by a physician or dentist 
under this subchapter shall cover a period of one year of 
service in the Veterans Health Administration unless the 
physician or dentist agrees to an agreement for a longer period 
of service, not to exceed four years, as specified in the 
agreement. A physician or dentist who has previously entered 
into such an agreement is eligible to enter into a subsequent 
agreement unless the physician or dentist has failed to refund 
to the United States any amount which the physician or dentist 
is obligated to refund under any such previous agreement.
    [(b) (1) An agreement under this subchapter shall provide 
that, if the physician or dentist entering into the agreement 
voluntarily, or because of misconduct, fails to complete any of 
the years of service covered by the agreement (measured from 
the anniversary date of the agreement), the physician or 
dentist shall refund an amount of special pay received under 
the agreement for that year equal to--
          [(A) in the case of a failure during the first year 
        of service under the agreement, 100 percent of the 
        amount received for that year;
          [(B) in the case of a failure during the second year 
        of service under the agreement, 75 percent of the 
        amount received for that year;
          [(C) in the case of a failure during the third year 
        of service under the agreement, 50 percent of the 
        amount received for that year; and
          [(D) in the case of a failure during the fourth year 
        of service under the agreement, 25 percent of the 
        amount received for that year.
    [(2) (A) The Secretary may waive (in whole or in part) the 
requirement for a refund under paragraph (1) in any case if the 
Secretary determines (in accordance with regulations prescribed 
under section 7431(a) of this title) that the failure to 
complete such period of service is the result of circumstances 
beyond the control of the physician or dentist.
    [(B) The Secretary may suspend a special pay agreement 
entered into under this section in the case of a physician or 
dentist who, having entered into the special pay agreement, 
enters a residency training program. Any such 5sasuspension 
shall terminate when the physician or dentist completes, 
withdraws from, or is no longer a participant in the program. 
During the period of such a suspension, the physician or 
dentist is not subject to the provisions of paragraph (1).
    [(3) Any such agreement shall specify the terms under which 
the Department and the physician or dentist may elect to 
terminate the agreement.
    [(c) (1) If a proposed agreement under this subchapter will 
provide a total annual amount of special pay to be provided to 
a physician or dentist who has previously entered into an 
agreement under this subchapter (or under section 4118 of this 
title as in effect before the effective date of the Department 
of Veterans Affairs Physician and Dentist Recruitment and 
Retention Act of 1991) that will exceed the previous annual 
amount of special pay provided for the physician or dentist by 
more than 50 percent (other than in the case of a physician or 
dentist employed in an executive position in the Central Office 
of the Department), or that will be less than the previous 
annual amount of special pay provided for the physician or 
dentist by more than 25 percent, the proposed agreement shall 
be promptly submitted to the Secretary. The proposed agreement 
shall not take effect if it is disapproved by the Secretary 
within 60 days after the date on which the physician or dentist 
entered into the proposed agreement.
    [(2) For purposes of paragraph (1), the previous annual 
amount of special pay provided for a physician or dentist is 
the total annual amount of special pay provided, or to be 
provided, to the physician or dentist for the most recent year 
covered by an agreement entered into by the physician or 
dentist under this subchapter or under section 4118 of this 
title. In the case of an agreement entered into under section 
4118 of this title, incentive pay shall be treated as special 
pay for purposes of this paragraph.
    [(3) The Secretary shall adjust special pay as necessary 
for purposes of this subsection to reflect appropriately any 
change in the status of a physician or dentist (A) from full-
time status to part-time status, (B) from part-time status to 
full-time status, or (C) from one proportion of time spent as a 
Department employee under part-time status employment to a 
different proportion.
    [(d) (1) If a proposed agreement under this subchapter 
(other than anagreement in the case of the Under Secretary for 
Health) will provide a total annual amount of special pay to be 
provided to a physician or dentist which, when added to the amount of 
basic pay of the physician or dentist, will be in excess of the amount 
payable for positions specified in section 5312 of title 5, the 
proposed agreement shall be promptly submitted for approval to the 
Secretary through the Under Secretary for Health. The agreement shall 
take effect at the end of the 60-day period beginning on the date on 
which the physician or dentist entered into the proposed agreement if 
it is neither approved nor disapproved within that 60-day period. If 
the agreement is approved within that period, the agreement shall take 
effect as of the date of the approval. A proposed agreement may be 
disapproved under this paragraph only if it is determined that the 
amounts of special pay proposed to be paid are not necessary to recruit 
or retain the physician or dentist.
    [(2) A proposed agreement under this subchapter with the 
Under Secretary for Health may provide for payment of special 
pay for which the Under Secretary for Health is eligible under 
this subchapter (other than that specified in section 
7433(b)(4)(B) of this title) only to the extent specifically 
approved by the Secretary.
    [(3) The Secretary shall include in the annual report 
required by section 7440 of this title--
          [(A) a statement of the number of agreements entered 
        into during the period covered by the report under 
        which the total amount of special pay to be provided, 
        when added to the amount of basic pay of the physician 
        or dentist, will be in excess of the amount payable for 
        positions specified in section 5312 of title 5;
          [(B) a statement of the number of proposed agreements 
        which during the period covered by the report were 
        disapproved under this subsection; and
          [(C) a detailed explanation of the basis for 
        disapproval of each such proposed agreement which was 
        disapproved under this subsection.
          [(4) This subsection does not apply to any proposed 
        agreement entered into after September 30, 1994.

[Sec. 7433. Special pay: full-time physicians

    [(a) The Secretary shall provide special pay under this 
subchapter to eligible physicians employed on a full-time basis 
based upon the factors, and at the annual rates, specified in 
subsection (b).
    [(b) The special pay factors, and the annual rates, 
applicable to full-time physicians are as follows:
          [(1) For full-time status, $9,000.
          [(2) (A) For length of service as a physician within 
        the Veterans Health Administration--

------------------------------------------------------------------------
                                                             [Rate
                  Length of Service                  -------------------
                                                       Minimum   Maximum
------------------------------------------------------------------------
2 years but less than 4 years.......................    $4,000    $6,000
4 years but less than 8 years.......................     6,000    12,000
8 years but less than 12 years......................    12,000    18,000
12 years or more....................................    12,000    25,000
------------------------------------------------------------------------

          [(B) The Under Secretary for Health shall specify a 
        uniform national rate for each range of years of 
        service established by or under this paragraph. The 
        Under Secretary for Health may, as to length of service 
        in excess of 12 years, establish uniform national rates 
        for such ranges of years of service as the Under 
        Secretary for Health considers appropriate.
          [(3)(A) For service in a medical specialty with 
        respect to which there are extraordinary difficulties 
        (on a nationwide basis or on the basis of the needs of 
        a specific medical facility) in the recruitment or 
        retention of qualified physicians, an annual rate of 
        not more than $40,000.
          [(B) For service by a physician who serves only a 
        portion of a year in a medical specialty for which 
        special pay is paid under subparagraph (A), the annual 
        rate shall be calculated on the basis of the proportion 
        of time served in the specialty for which the special 
        pay is paid.
          [(4) (A) For service in any of the following 
        executive positions, an annual rate not to exceed the 
        rate applicable to that position as follows:

------------------------------------------------------------------------
                                                             [Rate
                      Position                       -------------------
                                                       Minimum   Maximum
------------------------------------------------------------------------
Service Chief (or in a comparable position as           $4,500   $15,000
 determined by the Secretary).......................
Chief of Staff or Executive Grade...................    14,500    25,000
Director Grade......................................         0    25,000
------------------------------------------------------------------------

          [(B) For service in any of the following executive 
        positions, the annual rate applicable to that position 
        as follows:
        Position                                                    Rate
Deputy Service Director.......................................   $20,000
Service Director..............................................    25,000
Deputy Assistant Chief Medical Director.......................    27,500
Assistant Chief Medical Director..............................    30,000
Associate Deputy Chief Medical Director.......................    35,000
Deputy Chief Medical Director.................................    40,000
Chief Medical Director........................................    45,000
          [(C) For service by a physician who serves only a 
        portion of a year in an executive position listed in 
        subparagraph (A) or (B) or who serves a portion of a 
        year in such a position and also serves a portion of 
        that year in another position or grade for which 
        special pay is provided under this section, the annual 
        rate shall be calculated on the basis of the proportion 
        of time served in the position or positions for which 
        special pay is provided.
          [(5) For specialty certification or first board 
        certification, $2,000, and for subspecialty 
        certification or secondary board certification, an 
        additional $500.
          [(6) For service in a specific geographic location 
        with respect to which there are extraordinary 
        difficulties in the recruitment or retention of 
        qualified physicians in a specific category of 
        physicians, an annual rate of not more than $17,000.
          [(7) (A) For service by a physician with exceptional 
        qualifications within a specialty, an annual rate of 
        not more than $15,000.
          [(B) Special pay under this paragraph may be paid to 
        a physician only if the payment of such pay to that 
        physician is approved by the Under Secretary for Health 
        personally and on a case-by-case basis and only to the 
        extent that the rate paid under this paragraph, when 
        added to the total of the rates paid to that physician 
        under paragraphs (1) through (6), does not exceed the 
        total rate that may be paid under those paragraphs to a 
        physician with the same length of service, specialty, 
        and position as the physician concerned.

[Sec. 7434. Special pay: part-time physicians

    [(a) Subject to section 7431(e) of this title and 
subsection (b) of this section, special pay under this 
subchapter for physicians employed on a part-time basis shall 
be based on the special-pay factors and annual rates specified 
in section 7433 of this title.
    [(b) The annual rate of special pay paid to a physician 
employed on a part-time basis shall bear the same ratio to the 
annual rate that the physician would be paid under section 7433 
(other than for full-time status) if the physician were 
employed on a full-time basis as the amount of part-time 
employment by the physician bears to full-time employment, 
except that such ratio may not exceed 3/4.

[Sec. 7435. Special pay: full-time dentists

    [(a) The Secretary shall provide special pay under this 
subchapter to eligible dentists employed on a full-time basis 
based upon the factors, and at the annual rates, specified in 
subsection (b).
    [(b) The special pay factors, and the annual rates, 
applicable to full-time dentists are as follows:
          [(1) For full-time status, $9,000.
          [(2) (A) For length of service as a dentist within 
        the Veterans Health Administration--

------------------------------------------------------------------------
                                                             Rate
                  Length of Service                  -------------------
                                                       Minimum   Maximum
------------------------------------------------------------------------
1 year but less than 2 years........................    $1,000    $2,000
2 years but less than 4 years.......................     4,000     5,000
4 years but less than 8 years.......................     5,000     8,000
8 years but less than 12 years......................     8,000    12,000
12 years but less than 20 years.....................    12,000    15,000
20 years or more....................................    15,000    18,000
------------------------------------------------------------------------

          [(B) The Under Secretary for Health shall specify a 
        uniform national rate for each range of years of 
        service established by or under this paragraph. The 
        Under Secretary for Health may, as to length of service 
        in excess of 12 years, establish uniform national rates 
        for such ranges of years of service as the Under 
        Secretary for Health considers appropriate.
          [(3)(A) For service in a dental specialty with 
        respect to which there are extraordinary difficulties 
        (on a nationwide basis or on the basis of the needs of 
        a specific medical facility) in the recruitment or 
        retention of qualified dentists, an annual rate of not 
        more than $30,000.
          [(B) For service by a dentist who serves only a 
        portion of a year in a dental specialty for which 
        special pay is paid under subparagraph (A), the annual 
        rate shall be calculated on the basis of the proportion 
        of time served in the specialty for which the special 
        pay is paid.
          [(4) (A) For service in any of the following 
        executive positions, an annual rate not to exceed the 
        rate applicable to that position as follows:

------------------------------------------------------------------------
                                                             Rate
                      Position                       -------------------
                                                       Minimum   Maximum
------------------------------------------------------------------------
Chief of Staff or in an Executive Grade.............   $14,500   $25,000
Director Grade......................................         0    25,000
Service Chief (or in a comparable position as            4,500    15,000
 determined by the Secretary).......................
------------------------------------------------------------------------

          [(B) For service in any of the following executive 
        positions, the annual rate applicable to that position 
        as follows:
        Position                                                    Rate
Deputy Service Director.......................................   $20,000
Service Director..............................................    25,000
Deputy Assistant Under Secretary for Health...................    27,500
Assistant Under Secretary for Health (or in a comparable 
    position as determined by the Secretary)..................    30,000
          [(C) For service by a dentist who serves only a 
        portion of a year in an executive position listed in 
        subparagraph (A) or (B) or who serves a portion of a 
        year in such a position and also serves a portion of 
        that year in another position or grade for which 
        special pay is provided under this section, the annual 
        rate shall be calculated on the basis of the proportion 
        of time served in the position or positions for which 
        special pay is provided.
          [(5) For specialty or first board certification, 
        $2,000 and for subspecialty or secondary board 
        certification, an additional $500.
          [(6) For service in a specific geographic location 
        with respect to which there are extraordinary 
        difficulties in the recruitment or retention of 
        qualified dentists in a specific category of dentists, 
        an annual rate not more than $12,000.
          [(7)(A) For service by a dentist with exceptional 
        qualifications within a specialty, an annual rate of 
        not more than $5,000.
          [(B) Special pay under this paragraph may be paid to 
        a dentist only if the payment of such pay to that 
        dentist is approved by the Under Secretary for Health 
        personally and on a case-by-case basis and only to the 
        extent that the rate paid under this paragraph, when 
        added to the total of the rates paid to that dentist 
        under paragraphs (1) through (6), does not exceed the 
        total rate that may be paid under those paragraphs to a 
        dentist with the same length of service, specialty, and 
        position as the dentist concerned.
          [(8) For a dentist who has successfully completed a 
        post-graduate year of hospital-based training in a 
        program accredited by the American Dental Association, 
        an annual rate of $2,000 for each of the first two 
        years of service after successful completion of that 
        training.

[Sec. 7436. Special pay: part-time dentists

    [(a) Subject to section 7431(e) of this title and 
subsection (b) of this section, special pay under this 
subchapter for dentists employed on a part-time basis shall be 
based on the special-pay factors and annual rates specified in 
section 7435 of this title.
    [(b) The annual rate of special pay paid to a dentist 
employed on a part-time basis shall bear the same ratio to the 
annual rate that the dentist would be paid under section 7435 
of this title (other than for full-time status) if the dentist 
were employed on a full-time basis as the amount of part-time 
employment by the dentist bears to full-time employment, except 
that such ratio may not exceed 3/4.

[Sec. 7437. Special pay: general provisions

    [(a) A physician who is provided special pay for service in 
an executive position under paragraph (4)(B) of section 7433(b) 
of this title may not also be provided scarce specialty special 
pay under paragraph (3) of that section. A dentist who is 
provided special pay for service in an executive position under 
paragraph (4) of section 7435(b) of this title for service as a 
Service Director, Deputy Service Director, Deputy Assistant 
Under Secretary for Health, or Assistant Under Secretary for 
Health may not also be provided scarce specialty special pay 
under paragraph (3) of that section.
    [(b) The following determinations under this subchapter 
shall be made under regulations prescribed under section 7431 
of this title:
          [(1) A determination that there are extraordinary 
        difficulties (on a nation-wide basis or on the basis of 
        the needs of a specific medical facility) in the 
        recruitment or retention of qualified physicians in a 
        medical specialty or in the recruitment or retention of 
        qualified dentists in a dental specialty.
          [(2) A determination of the rate of special pay to be 
        paid to a physician or dentist for a factor of special 
        pay for which the applicable rate is specified as a 
        range of rates.
          [(3) A determination of whether there are 
        extraordinary difficulties in a specific geographic 
        location in the recruitment or retention of qualified 
        physicians in a specific category of physicians or in 
        the recruitment or retention of qualified dentists in a 
        specific category of dentists.
    [(c) A determination for the purposes of this subchapter 
that there are extraordinary difficulties in the recruitment or 
retention of qualified physicians in a medical specialty, or in 
the recruitment or retention of qualified dentists in a dental 
specialty, on the basis of the needs of a specific medical 
facility may only be made upon the request of the director of 
that facility.
    [(d) A physician or dentist may not be provided scarce 
specialty pay under section 7433(b), 7434(b), 7435(b), or 
7436(b) of this title (whichever is applicable) on the basis of 
the needs of a specific medical facility unless the Secretary 
also determines that geographic location pay under that section 
is insufficient to meet the needs of that facility for 
qualified physicians or dentists, as the case may be.
    [(e) (1) A physician or dentist shall be paid special pay 
under this subchapter at a rate not less than the rate of 
special pay the physician or dentist was paid under section 
4118 of this title as of the day before the effective date of 
this subchapter if the physician or dentist--
          [(A) is employed on a full-time basis in the Veterans 
        Health Administration;
          [(B) was employed as a physician or dentist on a 
        full-time basis in the Administration on the day before 
        such effective date; and
          [(C) on such effective date was being paid for no 
        special-pay factors other than primary, full-time, 
        length of service, and specialty or board 
        certification.
          [(2) A physician or dentist shall be paid special pay 
        under this subchapter at a rate not less than the rate 
        of special pay the physician or dentist was paid under 
        section 4118 of this title as of the day before the 
        effective date of this subchapter if the physician or 
        dentist--
          [(A) is employed on a part-time basis in the Veterans 
        Health Administration;
          [(B) was employed as a physician or dentist on a 
        part-time basis in the Administration on the day before 
        such effective date; and
          [(C) on such effective date was being paid for no 
        special-pay factors other than primary, full-time, 
        length of service, and specialty or board 
        certification.
    [(f) Any amount of special pay payable under this 
subchapter shall be paid in equal installments in accordance 
with regularly established pay periods.
    [(g) Except as otherwise expressly provided by law, special 
pay may not be provided to a physician or dentist in the 
Veterans Health Administration for any factor not specified in 
section 7433, 7434, 7435,or 7436, as applicable, of this title.
    [(h) In no case may the total amount of compensation paid 
to a physician or dentist under this title in any year exceed 
the amount of annual compensation (excluding expenses) 
specified in section 102 of title 3.

[Sec. 7438. Special pay: coordination with other benefits laws

    [(a) Special pay paid under this subchapter shall be in 
addition to any other pay and allowances to which a physician 
or dentist is entitled.
    [(b)(1) A physician or dentist who has no section 4118 
service and has completed not less than 15 years of service as 
a physician or dentist in the Veterans Health Administration 
shall be entitled to have special pay paid to the physician or 
dentist under this subchapter considered basic pay for the 
purposes of chapter 83 or 84 of title 5, as appropriate.
    [(2) A physician or dentist who has section 4118 service 
and has completed a total of not less than 15 years of service 
as a physician or dentist in the Veterans Health Administration 
shall be entitled to have special pay paid to the physician or 
dentist under this subchapter considered basic pay for the 
purposes of chapter 83 or 84, as appropriate, of title 5 as 
follows:
          [(A) In an amount equal to the amount that would have 
        been so considered under section 4118 of this title on 
        the day before the effective date of this section based 
        on the rates of special pay the physician or dentist 
        was entitled to receive under that section on the day 
        before such effective date.
          [(B) With respect to any amount of special pay 
        received under this subchapter in excess of the amount 
        such physician or dentist was entitled to receive under 
        section 4118 of this title on the day before the 
        effective date of this section, in an amount equal to 
        25 percent of such excess amount for each two years 
        that the physician or dentist has completed as a 
        physician or dentist in the Veterans Health 
        Administration after the effective date of this 
        section.
    [(3) All special pay paid under this subchapter shall be 
included in average pay (as defined in sections 8331(4) or 
8401(3) of title 5, as appropriate) for purposes of computing 
benefits paid under section 8337, 8341 (d) or (e), 8442(b), 
8443, or 8451 of such title.
    [(4) Special pay paid under section 4118 of this title, as 
in effect before the effective date of this section, to a 
physician or dentist who has section 4118 service shall be 
credited to the physician or dentist for the same purposes and 
in the same manner and to the same extent that such special pay 
was credited to the physician or dentist before such effective 
date.
    [(5) Notwithstanding paragraphs (1) and (2), a dentist 
employed as a dentist in the Veterans Health Administration on 
the date of the enactment of the Veterans Benefits and Health 
Care Improvement Act of 2000 [enacted Nov. 1, 2000] shall be 
entitled to have special pay paid to the dentist under section 
7435(b)(2)(A) of this title (referred to as ``tenure pay'') 
considered basic pay for the purposes of chapter 83 or 84, as 
appropriate, of title 5 only as follows:
          [(A) In an amount equal to the amount that would have 
        been so considered under such section on the day before 
        such date based on the rates of special pay the dentist 
        was entitled to receive under that section on the day 
        before such date.
          [(B) With respect to any amount of special pay 
        received under that section in excess of the amount 
        such dentist was entitled to receive under such section 
        on the day before such date, in an amount equal to 25 
        percent of such excess amount for each two years that 
        the physician or dentist has completed as a physician 
        or dentist in the Veterans Health Administration after 
        such date.
    [(6) For purposes of this subsection:
          [(A) The term ``physician or dentist who has no 
        section 4118 service'' means a physician or dentist 
        employed as a physician or dentist in the Veterans 
        Health Administration who has no previous service as a 
        physician or dentist in the Administration (or its 
        predecessor) before the effective date of this section.
          [(B) The term ``physician or dentist who has section 
        4118 service'' means a physician or dentist employed as 
        a physician or dentist in the Veterans Health 
        Administration who has previous service as a physician 
        or dentist in the Administration (or its predecessor) 
        before the effective date of this section.
          [(C) Service in any predecessor entity of the 
        Veterans Health Administration shall be considered to 
        be service in the Veterans Health Administration.
    [(c) Compensation paid as special pay under this subchapter 
or under an agreement entered into under section 4118 of this 
title (as in effect on the day before the effective date of the 
Department of Veterans Affairs Physician and Dentist 
Recruitment and Retention Act of 1991) shall be considered as 
annual pay for the purposes of chapter 87 of title 5, relating 
to life insurance for Federal employees.

[Sec. 7439. Periodic review of pay of physicians and dentists; 
                    quadrennial report

    [(a) In order to make possible the recruitment and 
retention of a well qualified work force of physicians and 
dentists capable of providing quality care for eligible 
veterans, it is the policy of Congress to ensure that the 
levels of total pay for physicians and dentists of the Veterans 
Health Administration are fixed at levels reasonably 
comparable--
          [(1) with the levels of total pay of physicians and 
        dentists employed by or serving in other departments 
        and agencies of the Federal Government and
          [(2) with the income of non-Federal physicians and 
        dentists for the performance of services as physicians 
        and dentists.
    [(b)(1) To assist the Congress and the President in 
carrying out the policy stated in subsection (a), the Secretary 
shall--
          [(A) define the bases for pay distinctions, if any, 
        among various categories of physicians and dentists, 
        including distinctions between physicians and dentists 
        employed by the Veterans Health Administration and 
        physicians and dentists employed by other departments 
        and agencies of the Federal Government and between all 
        Federal sector and non-Federal sector physicians and 
        dentists; and
          [(B) obtain measures of income from the employment or 
        practice of physicians and dentists outside the 
        Administration, including both the Federal and non-
        Federal sectors, for use as guidelines for setting and 
        periodically adjusting the amounts of special pay for 
        physicians and dentists of the Administration.
    [(2) The Secretary shall submit to the President a report, 
on such date as the President may designate but not later than 
December 31, 1994, and once every four years thereafter, 
recommending appropriate rates of special pay to carry out the 
policy set forth in subsection (a) with respect to the pay of 
physicians and dentists in the Veterans Health Administration. 
The Secretary shall include in such report, when considered 
appropriate and necessary by the Secretary, recommendations for 
modifications of the special pay levels set forth in this 
subchapter whenever--
          [(A) the Department is unable to recruit or retain a 
        sufficient work force of well-qualified physicians and 
        dentists in the Administration because the incomes and 
        other employee benefits, to the extent that those 
        benefits are reasonably quantifiable, of physicians and 
        dentists outside the Administration who perform 
        comparable types of duties are significantly in excess 
        of the levels of total pay (including basic pay and 
        special pay) and other employee benefits, to the extent 
        that those benefits are reasonably quantifiable, 
        available to those physicians and dentists employed by 
        the Administration; or
          [(B) other extraordinary circumstances are such that 
        special pay levels are needed to recruit or retain a 
        sufficient number of well-qualified physicians and 
        dentists.
    [(c) The President shall include in the budget transmitted 
to the Congress under section 1105 of title 31 after the 
submission of each report of the Secretary under subsection 
(b)(2) recommendations with respect to the exact rates of 
special pay for physicians and dentists under this subchapter 
and the cost of those rates compared with the cost of the 
special pay rates in effect under this subchapter at the time 
the budget is transmitted.

[Sec. 7440. Annual report

    [The Secretary shall submit to the Committees on Veterans' 
Affairs of the Senate and House of Representatives an annual 
report on the use of the authorities provided in this 
subchapter. The report shall be submitted each year as part of 
the budget justification documents submitted by the Secretary 
in support of the budget of the President submitted pursuant to 
section 1105 of title 31 that year. Each such report shall 
include the following:
          [(1) A review of the use of the authorities provided 
        in this subchapter (including the Secretary's and Under 
        Secretary for Health's actions, findings, 
        recommendations, and other activities under this 
        subchapter) during the preceding fiscal year and the 
        fiscal year during which the report is submitted.
          [(2) The plans for the use of the authorities 
        provided in this subchapter for the next fiscal year.
          [(3) A description of the amounts of special pay paid 
        during the preceding fiscal year, shown by category of 
        pay.
          [(4) A list of those geographic areas, and those 
        scarce specialties, for which special pay was paid 
        during the preceding fiscal year, those for which 
        special pay is being paid during the current fiscal 
        year, and those for which special pay is expected to be 
        paid during the next fiscal year, together with a 
        summary of any differences among those three lists.
          [(5) The number of physicians and dentists (A) who 
        left employment with the Veterans Health Administration 
        during the preceding year, (B) who changed from full-
        time status to part-time status, (C) who changed from 
        part-time status to full-time status, as well as (D) a 
        summary of the reasons therefor.
          [(6) By specialty, the number of positions created 
        and the number of positions abolished during the 
        preceding fiscal year and a summary of the reasons for 
        such actions.
          [(7) 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, 
        in the case of any specialty not designated as a scarce 
        specialty for purposes of special pay under this 
        subchapter, an explanation (including comparisons with 
        other specialties that have been so designated) of why 
        the specialty has not been so designated.]

           *       *       *       *       *       *       *


            Subchapter III--Pay for Physicians and Dentists

Sec. 7431. Pay

    (a) Elements of Pay.--Pay of physicians and dentists in the 
Veterans Health Administration shall consist of three elements 
as follows:
          (1) Base pay as provided for under subsection (b)
          (2) Market pay as provided for under subsection (c)
          (3) Incentive pay as provided for under subsection 
        (d)
    (b) Base Pay.--One element of pay for physicians and 
dentists shall be base pay. Base pay shall meet the following 
requirements:
          (1) Each physician and dentist is entitled to base 
        pay determined under the Physician and Dentist Base and 
        Longevity Pay Schedule.
          (2) The Physician and Dentist Base and Longevity Pay 
        Schedule is composed of 15 rates of base pay 
        designated, from the lowest rate of pay to the highest 
        rate of pay, as base pay steps 1 through 15.
          (3) The rate of base payable to a physician or 
        dentist is based on the total number of the years of 
        the service of the physician or dentist in the Veterans 
        Health Administration as follows:

        For a physician or The rate of base pay is the rate payable for:
two years or less.......................................         step 1 
more than 2 years and not more than 4 years.............         step 2 
more than 4 years and not more than 6 years.............         step 3 
more than 6 years and not more than 8 years.............         step 4 
more than 8 years and not more than 10 years............         step 5 
more than 10 years and not more than 12 years...........         step 6 
more than 12 years and not more than 14 years...........         step 7 
more than 14 years and not more than 16 years...........         step 8 
more than 16 years and not more than 18 years...........         step 9 
more than 18 years and not more than 20 years...........         step 10
more than 20 years and not more than 22 years...........         step 11
more than 22 years and not more than 24 years...........         step 12
more than 24 years and not more than 26 years...........         step 13
more than 26 years and not more than 28 years...........         step 14
more than 28 years......................................         step 15

          (4) At the same time as rates of basic pay are 
        increased for a year under section 5303 of title 5, the 
        Secretary shall increase each rate of basic pay payable 
        under this subsection for that year by a percentage 
        equal to the percentage by which rates of basic pay are 
        increased under such section for that year.
    (c) Market Pay.--One element of pay for physicians and 
dentists shall be market pay. Market pay shall meet the 
following requirements:
          (1) Subject to paragraph (3), each physician and 
        dentist is eligible for market pay.
          (2) Market pay shall consist of pay intended to 
        reflect the value to the Veterans Health Administration 
        of the skills, experience, and availability of a 
        particular physician or dentist within a particular 
        health care labor market.
          (3) The annual amount of the market pay payable to a 
        physician or dentist shall be determined by the 
        Secretary on a case-by-case basis, subject to paragraph 
        (5). The sum of the total amount of the market pay 
        determined for a physician or dentist under this 
        subsection and the annual rate of base pay payable to 
        the physician or dentist under subsection (b) may not 
        be less than the minimum amount, nor more than the 
        maximum amount, applicable to the physician or dentist 
        under paragraph (4).
          (4)(A) Not less often than once every two years, the 
        Secretary shall prescribe for Department-wide 
        applicability the minimum and maximum amounts of annual 
        pay (excluding incentive pay under subsection (d)) that 
        may be paid under this section to physicians and the 
        minimum and maximum amounts of annual pay (excluding 
        incentive pay under subsection (d)) that may be paid 
        under this section to dentists.
          (B) The Secretary may prescribe for Department-wide 
        applicability under this paragraph separate minimum and 
        maximum amounts of pay for a specialty or subspecialty. 
        If the Secretary prescribes separate minimum and 
        maximum amounts for a specialty or subspecialty, the 
        Secretary may establish up to four tiers of minimum and 
        maximum amounts for such specialty or subspecialty and 
        prescribe for each tier a minimum amount and a maximum 
        amount that the Secretary determines appropriate for 
        the professional responsibilities, professional 
        achievements, and administrative duties of the 
        physicians or dentists (as the case may be) whose pay 
        is set within that tier.
          (5)(A) In determining the amount of the market pay 
        for a physician or dentist and determining a tier (if 
        any) to apply to a physician or dentist under paragraph 
        (4)(B), the Secretary shall consult with and consider 
        the recommendations of the Medical Professional 
        Standards Board for the medical facility of the 
        Department at which the physician or dentist is 
        employed, except in the case of a physician or dentist 
        whose market pay is determined under subparagraph (B).
          (B) In the case of a physician or dentist who is a 
        member of a Medical Professional Standards Board, the 
        Secretary shall determine the amount of market pay and 
        the tier (if any) applicable to the physician or 
        dentist under paragraph (4)(B) in accordance with such 
        procedures and standards as the Secretary shall 
        prescribe. Such procedures and standards shall, to the 
        maximum extent practicable, be similar to the 
        procedures and standards applicable to determinations 
        of the amount of market pay and the tier applicable to 
        physicians and dentists under paragraph (4)(B) who are 
        not members of a board. Under such regulations, no 
        member of a board may participate in or have a 
        consultative role in determining that amount of market 
        pay or tier of such member or any other member of such 
        board.
          (C) A Medical Professional Standards Board consulted 
        under this subparagraph shall consist of at least three 
        and not more than five persons, each of whom is either 
        a physician or a dentist. Not less than a majority of 
        the members of the board shall be practicing clinicians 
        in their professions.
          (6) Subject to paragraph (7), the determination of 
        the amount of market pay of a physician or dentist 
        shall take into account--
                  (A) the level of experience of the physician 
                or dentist in the specialty or subspecialty of 
                the physician or dentist;
                  (B) the need for the specialty or 
                subspecialty of the physician or dentist at the 
                Department facility concerned;
                  (C) the health care labor market for the 
                specialty or subspecialty of the physician or 
                dentist, which may cover any geographic area 
                the Secretary considers appropriate for the 
                specialty or subspecialty;
                  (D) the professional reputation of the 
                physician or dentist;
                  (E) the board certifications, if any, of the 
                physician or dentist;
                  (F) the prior experience, if any, of the 
                physician or dentist as an employee of the 
                Veterans Health Administration; and
                  (G) such other considerations as the 
                Secretary considers appropriate.
          (7) The amount that any consideration specified in 
        paragraph (6) may contribute to the amount of market 
        pay may not exceed, or be lessthan, such amount as the 
Secretary may specify in regulations prescribed under section 7433 of 
this title, or in directives issued for purposes of this subsection.
          (8) In determining amounts of market pay, the 
        Secretary:
                  (A) shall consult two or more national 
                surveys of pay for physicians or dentists, as 
                applicable, whether prepared by public, 
                private, or quasi-public entities, and
                  (B) may utilize the recommendations or 
                assistance of one or more boards of physicians 
                or dentists, as applicable, that are appointed 
                by the Secretary for purposes of this 
                subsection.
          (9) The amount of market pay of a physician or 
        dentist shall be adjusted at such times as the 
        Secretary considers appropriate in order to ensure the 
        retention of quaffed physicians and dentists by the 
        Veterans Health Administration.
          (10) The amount of market pay of a physician or 
        dentist shall be evaluated by the Secretary not less 
        often than once every 24 months. The amount of market 
        pay may be adjusted as the result of an evaluation 
        under this paragraph. A physician or dentist whose 
        market pay is increased by reason of an evaluation 
        under this paragraph shall receive written notice of 
        the increase in accordance with procedures prescribed 
        under section 7433 of this title.
          (11) No adjustment of the amount of market pay of a 
        physician or dentist under paragraph (9) or (10) may 
        result in a reduction of the amount of market pay of 
        the physician or dentist.
    (d) Incentive Pay.--One element of pay for physicians and 
dentists shall be incentive pay. Incentive pay shall meet the 
following requirements
          (1) Each physician and dentist is eligible for 
        incentive pay.
          (2) Incentive pay shall consist of an amount intended 
        to recognize outstanding contributions by a physician 
        or dentist to
                  (A) the facility in which employed;
                  (B) the furnishing of care to veterans; or
                  (C) the practice of medicine or dentistry, as 
                applicable.
          (3) The amount of incentive pay shall be determined 
        for a physician or dentist by the Secretary.
          (4) The amount of incentive pay shall be determined 
        for a physician or dentist on a case-by-case basis.
          (5) The amount of incentive pay paid to a physician 
        or dentist in a calendar year may not exceed $10,000.
    (e) Delegation of Responsibilities.--The Secretary may 
delegate to an appropriate officer or employee of the 
Department any responsibility of the Secretary under subsection 
(c) or (d), except for the responsibilities of the Secretary 
under subsection (c)(4).
    (f) Limitation on Total Compensation.--In no case may the 
total amount of compensation paid to a physician or dentist 
under this section in any year exceed the amount of annual 
compensation (excluding expenses) specified in section 102 of 
title 3.
    (g) Treatment of Pay.--(1) Except as provided in paragraph 
(2), pay under this subchapter shall be considered pay for all 
purposes, including retirement benefits under chapters 83 and 
84 of title 5 and 34 other benefits.
          (2) Incentive pay under subsection (d) shall not be 
        considered pay for purposes of retirement benefits 
        under chapters 83 and 84 of title 5.
    (h) Decreases in Certain Pay Not Treatable as Adverse 
Action.--A decrease in pay of a physician or dentist resulting 
from an adjustment in the amount of incentive pay of the 
physician or dentist under subsection 19(d) shall not be 
treated as an adverse action.

Sec. 7432. Pay of Under Secretary for Health

    (a) Base Pay.--The base pay of the Under Secretary for 
Health shall be the annual rate of basic pay for positions at 
Level III of the Executive Schedule under section 5314 of title 
5.
    (b) Market Pay.--(1) In the case of an Under Secretary for 
Health who is also a physician or dentist, in addition to the 
base pay specified in subsection (a) the Under Secretary for 
Health may also be paid the market pay element of pay of 
physicians and dentists under section 7431(c) of this title.
    (2) The amount of market pay of the Under Secretary for 
Health under this subsection shall be established by the 
Secretary.
    (3) In establishing the amount of market pay of the Under 
Secretary for Health under this subsection, the Secretary shall 
utilize an appropriate health care labor market selected by the 
Secretary for purposes of this subsection.

Sec. 7433. Administrative matters

    (a) Regulations.--(1) The Secretary shall prescribe 
regulations relating to the pay of physicians and dentists in 
the Veterans Health Administration under this subchapter. In 
prescribing the regulations, the Secretary shall take into 
account the recommendations of the Under Secretary for Health 
on the administration of this subchapter.
    (b) Reports.--(1) Not later than 18 months after the 
Secretary prescribes the regulations required by subsection 
(a), and annually thereafter for the next 10 years, the 
Secretary shall submit to the Committees on Veterans' Affairs 
of the Senate and House of Representatives a report on the pay 
of physicians and dentists in the Veterans Health 
Administration under this subchapter.
    (2) Each report under this subsection shall include the 
following
          (A) A description of the rates of pay in effect 
        during the preceding fiscal year with a comparison to 
        the rates in effect during the fiscal year preceding 
        fiscal year, set forth by facility and by specialty.
          (B) The number of physicians and dentists who left 
        the Veterans Health Administration during the preceding 
        fiscal year.
          (C) The number of unfilled physician positions 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 an 
        assessment of the reasons that such positions remain 
        unfilled.
          (D) An assessment of the impact of implementation of 
        this subchapter on efforts to recruit and retain 
        physicians and dentists in the Veterans Health 
        Administration.
    (3) The first two annual reports under this subsection 
shall also include a comparison of staffing levels, contract 
expenditures, and average salaries of physicians and dentists 
in the Veterans Health Administration for the fiscal year 
preceding such report and for the fiscal year preceding such 
fiscal year, set forth by facility and by specialty.

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

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Sec. 7452. Nurses and other health-care personnel administration of pay

    (a) * * *

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    (g)(1) In order to recruit and retain highly qualified 
Department nurse executives, the Secretary may, in accordance 
with regulations prescribed by the Secretary, pay special pay 
to the nurse executive at each location as follows
          (A) Each Department healthcare facility
          (B) The Central Office.
    (2) The amount of special pay paid to a nurse executive 
under paragraph (1) shall be not less than $10,000 or more than 
$25,000.
    (3) The amount of special pay paid to a nurse executive 
under paragraph (1) shall be based on factors such as the grade 
of the nurse executive position, the scope and complexity of 
the nurse executive position, the personal qualifications of 
the nurse executive, the characteristics of the healthcare 
facility concerned, the nature and number of specialty care 
units at the healthcare facility concerned, demonstrated 
difficulties in recruitment and retention of nurse executives 
at the healthcare facility concerned, and such other factors as 
the Secretary considers appropriate.
    (4) Special paypaid to a nurse executive 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 retirement 
benefits under chapters 83 and 84 of title 5, and other 
benefits, but shall not be considered basic pay for purposes of 
adverse actions under subchapter V.

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Sec. 7456 * * *

Sec. 7456A. Nurses: alternate work schedules

    (a) Applicability.--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 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 a nurse covered by 
this paragraph 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) A nurse covered by this paragraph is entitled to 
overtime pay for work performed in such periods as the 
Secretary shall prescribe.
    (ii) Except as otherwise provided in clause (i), a nurse 
covered by this paragraph 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 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 
every nine hours of absence.
    (4) A nurse working a work schedule under this subsection 
shall be eligible for holiday pay under section 7453(d) of this 
title for any service performed by the nurse on a designated 
holiday under such section, regardless of whether such holiday 
occurs during or outside the nurse's regularly scheduled tour 
of duty under such work schedule.
    (c) 9-Month Work Schedule for Certain Nurses.--
          (1) The Secretary may authorize a registered nurse 
        appointed under section 7405 of this title, with the 
        nurse's written consent, to work full-time for nine 
        months with 3 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.
          (2) A nurse who works under the authority in 
        paragraph (1) shall be considered a 0.75 full-time 
        equivalent employee in computing full-time equivalent 
        employees for the purposes of determining compliance 
        with personnel ceilings.
          (3) Work under this subsection shall be considered 
        part-time service for purposes of computing benefits 
        under chapters 83 and 84 of title 5.
          (4) A nurse who works under the authority in 
        paragraph (1) shall he considered a full-time employee 
        for purposes of chapter 89 of title 5.
    (d) Treatment as Full-Time Employee.--(1) A nurse working a 
work schedule under subsection (b) or (c) who is a full-time 
employee in non-probationary status at the commencement of work 
under such work schedule shall remain a full-time employee in 
non-probationary status while working under such work schedule.
    (2)(A) A nurse under a part-time appointment under section 
7405(d) of this title who, while working a work schedule under 
subsection (b) or (c), performs hours of service (as determined 
in accordance with such subsection) equivalent to two years of 
service shall be treated as a full-time employee and no longer 
in probationary status.
    (B) In determining the hours of service performed by a 
nurse for purposes of suhparagraph (A), any hours of service 
not performed under a work schedule under subsection (b) or (c) 
shall not be included.
    (e) Notification of Modification of Benefits.--The 
Secretary shall provide each nurse with respect to whom an 
alternate work schedule under this section may apply written 
notice of the effect, if any, the alternate work schedule will 
have on the nurses health care premium, retirement, life 
insurance premium, probationary status, or other benefit or 
condition of employment. The notice shall be provided not later 
than 14 days before the nurse consents to the alternate work 
schedule.
    (f) Regulations.--(1) The Secretary shall prescribe 
regulations to carry out this section.''.

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Sec. 7459. Director of Nursing Service: rate of pay

    (a) Senior Executive Service ES-6 Rate.--The rate of pay 
for the Director of Nursing Service shall be equal to the sum 
of the maximum rate of basic pay established for the Senior 
Executive Service under section 5382 of title 5 and the amount 
of the locality-based comparability payment provided under 
section 5304 of such title for the Director's locality.
    (b) Inapplicability of Nurse Pay Provision.--Section 7451 
of this title does not apply to the Director of Nursing 
Service.''.

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