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Hearing Transcript on VA Fee Basis Care: Examining Solutions to a Flawed System

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Committee on Veterans' Affairs, Health Subcommittee, Hearing Title, Date

 

 

VA FEE BASIS CARE:  EXAMINING SOLUTIONS TO A
FLAWED SYSTEM

 



HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON VETERANS' AFFAIRS

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION


SEPTEMBER 14, 2012


SERIAL No. 112-75


Printed for the use of the Committee on Veterans'
Affairs

 

 

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON, DC:  2012


For sale by the Superintendent of
Documents,  U.S. Government Printing Office

Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; DC
area (202) 512-1800

Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 20402-0001

 



COMMITTEE ON VETERANS' AFFAIRS


JEFF MILLER, Florida, Chairman

  CLIFF STEARNS, Florida

DOUG LAMBORN, Colorado

GUS M. BILIRAKIS, Florida

DAVID P. ROE, Tennessee

MARLIN A. STUTZMAN, Indiana

BILL FLORES, Texas

BILL JOHNSON, Ohio

JEFF DENHAM, California

JON RUNYAN, New Jersey

DAN BENISHEK, Michigan

ANN MARIE BUERKLE, New York

TIM HUELSKAMP, Kansas

MARK E. AMODEI, Nevada

ROBERT L. TURNER, New York
BOB FILNER, California, Ranking

CORRINE BROWN, Florida

SILVESTRE REYES, Texas

MICHAEL H. MICHAUD, Maine

LINDA T. SÁNCHEZ, California

BRUCE L. BRALEY, Iowa

JERRY MCNERNEY, California

JOE DONNELLY, Indiana

TIMOTHY J. WALZ, Minnesota

JOHN BARROW, Georgia

RUSS CARNAHAN, Missouri
 

 

 

Helen W. Tolar,
Staff Director and Chief Counsel


SUBCOMMITTEE ON HEALTH

ANN MARIE BUERKLE, New York,
Chairwoman

CLIFF STEARNS, Florida

GUS M. BILIRAKIS, Florida

DAVID P. ROE, Tennessee

DAN BENISHEK, Michigan

JEFF DENHAM, California

JON RUNYAN, New Jersey
MICHAEL H. MICHAUD, Maine,
Ranking

CORRINE BROWN, Florida

SILVESTRE REYES, Texas

RUSS CARNAHAN, Missouri

JOE DONNELLY, Indiana

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House,
public hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains
the official version.
Because electronic submissions are used
to prepare both printed and electronic versions of the hearing record,
the process of converting between various electronic formats may
introduce unintentional errors or omissions. Such occurrences are
inherent in the current publication process and should diminish as the
process is further refined.

 

       

C O N T E N T S

September 14, 2012


VA Fee Basis Care:  Examining Solutions to a
Flawed System

OPENING STATEMENTS

Chairwoman Ann Marie Buerkle

    Prepared statement of Chairwoman Buerkle

Hon. Michael H. Michaud., Ranking Democratic Member


 

WITNESSES

Mr. Adrian Atizado, Assistant National Legislative Director,
Disabled American Veterans

    Prepared statement of Mr.
Atizado

Mr. Shane Barker, Senior Legislative Associate, Veterans of Foreign Wars of the
United States

    Prepared statement of Mr.
Barker

Mr. Jacob B. Gadd, Deputy Director for Healthcare, National Veterans Affairs and
Rehabilitation Division, The American Legion

    Prepared statement of Mr. Gadd

Mr. Brad Jones, Chief Operating Officer, Humana Veterans Healthcare Services,
Inc.

    Prepared statement of Mr. Jones

Ms. Kris Doody, RN, MSB, Chief Executive Officer, Cary Medical Center

    Prepared statement of Ms. Doody

Dr. Gregg A. Pane, MD, Chair, VHA Fee Care Program Panel, National Academy of
Public Administration

    Prepared statement of Dr. Pane

The Honorable Dr. Robert A. Petzel, M.D., Under Secretary for Health Veterans,
Health Administration, U.S. Department of Veterans Affairs

    Prepared statement of Dr.
Robert A. Petzel, M.D.

Accompanied by:

Mr. Philip Matovsky, Assistant Deputy Under Secretary for Health, Administrative
Operations Veterans Health Administration, U.S. Department of Veterans Health

Ms. Cyndi Kindred, Acting Deputy Chief Business Officer for Purchased, Care,
Veterans Health Administration, U.S. Department of Veterans Affairs

Ms. Deborah James, Non-VA Care Coordination Project Manager Veterans Health
Administration, U.S. Department of Veterans Affairs

 


SUBMISSIONS FOR THE RECORD

Office of the Inspector General, U.S. Department of Veterans
Affairs

Paralyzed Veterans of America

National Coalition for Homeless Veterans

 

 


MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:

Hon. Michael H. Michaud, Ranking
Democratic Member, Subcommittee on Health,
Committee on Veterans' Affairs to the Honorable Dr. Robert A. Petzel,
M.D., Under Secretary for Health, Veterans Health Administration, U.S.
Department of Veterans Affairs

Hon. Michael H. Michaud,
Ranking Democratic Member, Subcommittee on Health,
Committee on Veterans' Affairs to Jacob B. Gadd, Deputy Director for
Healthcare, The American Legion

 


VA FEE BASIS CARE:  EXAMINING SOLUTIONS TO A FLAWED
SYSTEM


Friday, September 14, 2012

U. S. House of Representatives,

Subcommittee on Health,

Committee on Veterans' Affairs,

Washington, DC.

The subcommittee met, pursuant to notice, at
9:32 a.m., in Room 334, Cannon House Office Building, Hon. Ann Marie Buerkle
[chairwoman of the subcommittee] presiding.

Present:  Representatives Buerkle, Roe,
Benishek, Runyan, Michaud, and Reyes.

OPENING STATEMENT OF CHAIRWOMAN BUERKLE

MS. BUERKLE.  Good morning.  This
hearing will now come to order. 

Welcome and thank you all for being here this
morning for today's hearing, VA Fee Basis Care: Examining Solutions to a Flawed
System. 

Recent years have seen tremendous growth in
the VA's Fee Care Program, with independent assessments estimating growth of
close to 300 percent from fiscal year 2005 to today.  Unfortunately,
however, as the program has continued to grow, so have the management and
oversight problems that have plagued the system through which the Department of
Veterans Affairs provides care to veterans outside the walls of a VA facility. 
It is seriously flawed, if not altogether broken. 

In the last 3 years alone, the VA
Inspector General has issued no less than seven separate reports detailing in‑depth
the serious deficiencies and challenges the Fee Care Program faces, including
inadequate fiscal controls that have resulted in hundreds of millions of
dollars in improper payments. 

Further, last September, the National Academy
of Public Administration issued a white paper on VA's Fee Care Program that
drew alarming conclusions about the VA's ability to effectively manage and
oversee care and services under this program. 

According to NAPA, VA's Chief Business Office
has exercised limited and ineffective oversight of the Fee Care Program;  The
program itself lacks operational objectives, performance goals, or a clearly
defined strategy for managing expenditures; and VA doesn't understand what
services are being procured through the fee program and at what cost. 

There have been some bright spots. 
Congressionally mandated pilot programs Project HERO and Project ARCH have
shown promising results in achieving a more patient‑centered,
coordinated, cost‑effective delivery model for fee care.  These are small pockets
of success, despite the VA's reluctance to implement and utilize these programs
to the fullest intent of Congress. 

Recognizing the substantial deficiencies with
the Fee program, VA has begun implementing two new initiatives, the Patient‑Centered
Community Care ‑‑ PCCC ‑‑ Program and the Non‑VA
Care Coordination ‑‑ NVCC ‑‑ Program.  The
Department this morning is going to testify that these two initiatives will
address all of the challenges the Fee program faces and ensure our veterans
receive effective and efficient non‑VA care in a seamless manner.

I honestly wish that I could believe that was true.  However, given the
history of failure we have seen already, I have serious reservations that the
actions VA is taking now will address the
core challenges that the VA faces and not simply lead to yet further fragmented
care and an inability to deliver quality care, especially in our rural
communities. 

Most notably, the VA lacks the information
technology and administrative services solutions essential to establishing in‑house
the clinical information sharing and electronic claims processing so very vital
to a successful care‑coordinated and veteran‑centric program. 

The VA has spent approximately
$4.6 billion to purchase care in the community for veteran patients in the
last fiscal year.  That is billion with a "b". 

We cannot afford to allow the VA to continue
to flail and struggle to test new programs in an inherently flawed system.  We
cannot rely on the promises from the VA that they can finally get it right. 

Our veterans are everywhere, and VA
cannot be.  And at the end the day what fee care is about is effective,
efficient delivery of care to veterans, where they need it and when they need
it. 

Getting it right is about honoring their
preferences, their choices, and their daily lives as well as their service to
our Nation. 

Getting it right is telling a Vietnam‑
or Korean‑era veteran that he doesn't have to travel 4 hours to the
nearest VA medical facility for his cancer treatments.  He can go to a hospital
closer to his home and spend the time he would have spent on the road getting
better. 

Getting it right is telling a Gulf War
veteran that she doesn't have to take a day off from work to drive a VA clinic
two towns over for a physical examination.  She can go to the doctor down the
street if she would prefer and get to work on time. 

Getting it right is telling a young veteran,
recently home from Iraq or Afghanistan, that he doesn't have to sit and wait
all day in a waiting room to see his doctor.  He can choose another provider
who can see him now and spend the afternoon with the people he missed while he
was overseas. 

This is what we are talking about today; and
these stories, -stories that my colleagues and I hear every day from veterans in
our community who are fed up, are what I want all of us to keep foremost in our
minds this morning as we talk about how we can make this program better and get
it right for the veterans and those who have served this Nation so honorably. 

I now yield to the ranking member,
Mr. Michaud, for any opening statement he may have. 

OPENING STATEMENT OF HONORABLE MICHAEL H. MICHAUD

MR. MICHAUD.  Thank you very much,
Madam Chair, for having this very important hearing; and I would like to thank
everyone for coming today. 

The subject of the hearing today is an
important one and one that is fundamental to the ability of the Department of
Veterans Affairs to deliver quality, timely, and accessible health care to all
our veterans, regardless of where they live. 

Congress gave the authority to the VA to
purchase hospital care and medical services in nonDepartment facilities for
veterans in order to give the VA flexibility and ensure access to care.  Of
concern today is the inability of the Department to adequately manage this
authority through the existing fee‑based program. 

There have been many studies done in the fee
program, and most of them have not been positive.  The Veterans Affairs Office
of Inspector General has conducted several audits over the past few years and
has found a lack of education in the fee staff and the processing of claims, a
lack of comprehensive fee policies and procedures from Veterans Health
Administration, a lack of clear oversight responsibility, and an overall lack
of management oversight and involvement.  All of these lead to mismanagement of
payment and billing and a whole host of other issues. 

And on the heels of the Inspector General
report that documented the chaos and mismanagement within the fee program is a
National Academy of Public Administration report that finds more of the same,
and I am looking forward to testimony today.  Quite frankly, because I see no
improvement in any of these identified issues, it looks to me that the
Inspector General's recommendations have been ignored; and I hope that the VA will
take this new report seriously and will proceed with the recommendations to
change some of the policies at VA. 

And, finally, I look forward to hearing from
Dr. Petzel regarding VISN 1 and the veterans who reside in Martha's Vineyard. 
It is my understanding from testimony submitted by the American Legion that a
contract with a private hospital in Martha's Vineyard was allowed to lapse in
2004, and 4 years passed before the gap in care was discovered, and there
is still no contract.  In the meantime, these veterans have to take a ferry, then
drive 2 hours to Providence VA Medical Center.  We know we can do
better than that for our veterans, we must do better than that. 

So I want to thank all the panelists for
coming today, I look forward to hearing testimony, and I look forward
to having an open dialogue on how we can improve the VA as it delivers the
services to our veterans. 

Thank you very much.  I yield back, Madam
Chair.

MS. BUERKLE.  Thank you very much. 

I will now introduce or first panel this
morning. 

Joining us from the veterans service
organization community is Mr. Adrian Atizado, the Assistant National
Legislative Director for the Disabled American Veterans; Mr. Shane Barker,
Legislative Associate for the Veterans of Foreign Wars of the United States;
and Mr. Jacob B. Gadd, the Deputy Director for Health Care for the
National Veterans Affairs and Rehabilitation Division of the American Legion. 

Thank you all for joining us this morning,
I am eager to hear your views.  Please have a seat at the table.  Thank you
very much. 

Mr. Atizado, we will begin with you. 
Thank you.

 

STATEMENTS OF ADRIAN ATIZADO, ASSISTANT NATIONAL LEGISLATIVE DIRECTOR,
DISABLED AMERICAN VETERANS; SHANE BARKER, SENIOR LEGISLATIVE ASSOCIATE,
VETERANS OF FOREIGN WARS OF THE UNITED STATES; AND JACOB B. GADD, DEPUTY
DIRECTOR FOR HEALTHCARE, NATIONAL VETERANS AFFAIRS AND REHABILITATION DIVISION,
THE AMERICAN LEGION

STATEMENT OF ADRIAN ATIZADO

Mr. ATIZADO.  Madam Chairwoman,
Ranking Member Michaud, and members of the subcommittee, good morning. 

I would like to thank you for inviting the
DAV to testify at this important hearing.  We appreciate the subcommittee's
leadership in overseeing VA's contract and purchased care programs, including
fee and contract medical care on which many service‑connected disabled
veterans rely.  The DAV does recognize the care VA buys from the community is
essential in providing access to better health care to veterans, but, as noted,
significant improvements are indeed needed. 

The delegates to DAV's most recent national
convention passed a resolution regarding VA's purchased care program.  Among
other things, this resolution urges VA to integrate and promote care
coordination with all non‑VA purchased care programs and services.  With
the exception of the ongoing Project HERO pilot program, today's care bought by
VA does not exhibit the kind of care coordination discussed in our national
resolution, nor health care as provided within the VA health care system. 

The focus of today's hearing, fee care,
allows for individual authorizations by VA when demand is for only infrequent
use.  Yet, over the past several years, expenditures for fee care have been
rising dramatically, greatly outpacing the number of veterans served by fee. 

Unfortunately, fee care has not received
sufficient attention and resources to ensure its integrity, efficiency, and
integration with the Department's health care system.  Service‑connected
veterans were first to experience the ill effects of this neglect. 

When service‑connected veterans were
authorized under fee care to seek care in the community, there was a palpable
disconnect from the continuity of care that the VA is known to provide. 
Veterans complained that they were required to identify community providers
themselves, not knowing the quality of care that they would receive.  They
often are required to negotiate prepayment of care or pay for part of that
care.  They also have to serve as a health care linkage between the fee care
provider and VA. 

All of these things encumber veterans when
they are asked to step outside the VA health care system and receive care in
the private community.  In essence, as a health care delivery model, fee care is
not optimal from the patient's perspective. 

The DAV does applaud VA for taking steps in
the right direction to meet the goals of our resolution to provide proper care
coordination and fee care and make care coordination a standard business
practice.  However, because non‑VA care coordination, NVCC, is built upon
the current fee care information technology system and infrastructure, we are
concerned that its success will be limited. 

Fee care uses VistA Fee, which was developed
over 20 years ago.  There is a concurrent claims processing software
called the Fee Basis Claims System which fee staff has to toggle, they have to
use both systems, in order to do their job.  It is very cumbersome and labor
intensive.  Both do not properly support the volume and complexity of fee care
now being processed by VA. 

DAV believes that meeting fee care IT
requirements is well past due.  However, we believe our concerns are heightened
because VA's Office of Information and Technology's focus and backlog of work
will delay identification, development, and implementation of an IT solution. 

With regard to the program entitled Patient‑Centered
Community Care, which is described by VA as a soft approach to contracting care
and that it will apply lessons learned from Project HERO, which is now in its
fifth and final year, we would like to note that it was first met with
skepticism by our community.  We are very protective of the VA health care
system because it is the only health care system devoted to veterans needs,
which are very different than the needs of the private‑sector health care
and their patients. 

The VA has repeatedly assured DAV that the
care coordination that patients experience in Project HERO will be part of
PCCC.  But, as of this date, we are uncertain.  We are waiting for confirmation
in the form of a draft RFP which will proceed the official RFP due out in
November of this year. 

While building on the success of Project
HERO, it is an untested concept for the VA health care system, one that is not
intended for pilot testing for effectiveness.  We believe it is a good approach
but not the best approach, and we hope that VA will take the opportunity to
address its problems in Project HERO as well as the private sector's problems
with Project HERO. 

Madam Chairwoman, there are a lot more things
that I can talk about with regard to fee and contract care, but my time is up,
and I will make myself available to any questions you or other members may
have.

[The statement of Adrian Atizado appears in the Appendix.]



MS. BUERKLE.  Thank you very much. 

Mr. Gadd, you may proceed.

STATEMENT OF JACOB B. GADD

MR. GADD.  Chairwoman Buerkle, members
of the committee, thank you for the opportunity to submit the American Legion's
views on the fee basis program.  Typically, VA uses fee basis as a last resort
and prefers to treat the veteran within their closest hospital VISN or through
a DOD collaboration prior to approving fee basis for our veteran patients.  In
contrast, however, VA utilizes fee basis programs as the first resort when VA
hospitals are short on staffing and need to meet a performance measure. 

The question then is, what input does the
veteran have on their fee basis decision and policy, particularly if they live
in a rural area and have to drive 2 hours to the nearest hospital a couple
times per week? 

The American Legion testified in a Senate field
hearing in Montana and urged the VA to reconsider its policies to allow VAMCs
to use their best judgment and discretion so veterans are not forced to drive
hours to a facility for several routine and recurring appointments. 

In the last 4 years, non‑VA
purchased care has doubled, from 2.2 billion in 2007 to 4.5 billion in
2011, along with a corresponding increase of 355,000 new fee basis patients. 
The VA facilities struggle with what services they can provide inhouse or
whether they contract out care. 

Nowhere is this challenge more evident than
with women veterans, gender‑specific specialty services.  The majority of
women services are feed out, but as women veterans are the fastest‑growing
demographic of veterans enrolling in the VA, VA's ability to hire women
providers should be carefully considered. 

The American Legion System Worth Saving
program conducts site visits to VA medical centers annually, and several
concerns were identified during those visits.  Number one, there is a lack of
training and education program for non‑VA providers.  The VA has specific
screening diagnosis and treatment guidelines which are evidence based and
require their providers to be licensed, credentialed, and receive that specific
training.  Why would we want to refer a veteran to a non‑VA provider who
does not have those same credentials and training?  If non‑VA providers
had training, it would ensure that they were held to the same quality of care
standards and treatments as VA providers. 

The second concern is VA's computer system. 
If the non‑VA provider had access to the veteran's medical record, it
would help in three ways:  Number one, the non‑VA provider could review
the patient's full record and history in order to make a proper diagnosis and
treatment plan.  Two, it would help the community provider meet all of the
quality of care measures tracked in CPRS as well as promoting mandatory
screenings for TBI, PTSD, and other quality of care measures that are currently
tracked in CPRS.  And, three, it would speed up receipt and documentation from
the encounter, instead of VA having to wait weeks or months to receive
documentation back from a non‑VA provider. 

The Martha's Vineyard fee basis contract was
the third concern.  The American Legion conducted a site visit to Martha's
Vineyard last year for our report on rural health care.  In 2000, a contract
was signed between Providence VA Medical Center and Martha's Vineyard
Hospital.  The contract lapsed around 2004, which the VA didn't realize until
2008 when the hospital acquired new management.  The way veterans treated there
found out that this contract had lapsed was when Martha's Vineyard Hospital
sent those veterans collection bill notices for medical expenses previously
covered under that existing contract. 

Since 2008, these veterans have had to take a
ferry from Martha's Vineyard to either a local community based outpatient
clinic or drive 2 hours for care to Providence VA Medical Center.  While
there are only a few veterans that live on the island that were affected by
this lapse in contract, this delay illustrates the frustrations that veterans
living in rural and isolated locations face with contracting delays and
receiving assurances from VA that it will be resolved. 

VA officials told us this week that the
contract had recently been signed and approved, but in order to prevent
situations like this in the future VA must strive to create a tracking database
of all non‑VA purchased care contracts to ensure those contracts do not
lapse and veterans are involved as stakeholders. 

Secondly, VA should make every effort to hold
stakeholder meetings with veterans from those communities, solicit input, and
regularly communicate with them on the status of contracts.  After all, it is
those veterans' health care. 

In closing, along with the cost reduction and
efficiencies the PCCC program is proposing, it is equally important that
quality standards for contracting care must be the same or better than the care
otherwise received in the VA.  VA is at a crossroads with their legacy
traditional fee basis program.  Close to one million veterans rely on fee basis
programs every day during a given year. 

Madam Chairwoman, thank you for allowing the
American Legion to testify today; and I would be happy to answer any questions
you or the committee have.



[The statement of Jacob Gadd appears in the Appendix.]



MS. BUERKLE.  Thank you.

Mr. Barker, you may proceed.

STATEMENT OF SHANE BARKER

Mr. BARKER.  Chairman Buerkle, Ranking
Member Michaud, and members of the committee, on behalf of the two million
members of the Veterans of Foreign Wars and our auxiliaries, I thank you for
this opportunity to share our views on the need to improve VA's fee basis care
program. 

This program has been badly mismanaged for
years, if not decades, now.  These problems have been well documented, most
recently by the NAPA study last fall.  For example, while the VA paid out more
than 4.5 billion in fee basis health care claims in fiscal year 2011
alone, they have few tools at their disposal to ensure they are getting the
most for their money. 

Among the serious problems that exist, VA has
no way to ensure proper credentialing of those who bill VA, no way to ensure
bill procedures actually occurred, and no way to fully integrate the
documentation into a veteran's electronic health record.  NAPA looked at each
of these and other factors, concluding that VA could not determine the value
they were getting out of their investment.  We appreciate NAPA's attempt to
look at the fee program as more than the sum of its parts, and we hope the
committee will also thoroughly examine all assets of the program, while not
losing focus on the big picture. 

One aspect that has to have priority is the
lack of a strong IT backbone to complement the work being done by VA employees
and their partners in the private sector.  It is imperative to employ IT
solutions that can integrate the back‑end functions between VA facilities
in the private sector is obvious, but that doesn't merely apply to business
practices such as authorizations, referrals, and claims.  The most important
factor is the health and well‑being of our veterans, and it is being put
in jeopardy because health records are not getting back to VA. 

Meanwhile, duplicative services are throwing
money down the drain, and we can no longer afford the high cost of stagnation
in VA's health care IT.  The health of our veterans is too important for us not
to respond.  Like the private sector, VA must try to save time and money using
technology so we can provide robust care for the increasing number of veterans,
including women veterans and rural veterans who are choosing VA.  As Mr. Gadd
said, women veterans are the highest growing population of VA, and it is
imperative that we respond to that.

Gaining efficiencies and improving
coordination between direct care and traditional fee basis care is the purpose
behind a new system known as Non‑VA Care Coordination, or NVCC.  If
executed properly, this will standardize business rule, prioritize internal
resources and partnerships before authorizing fee services, and ensure clinical
notes are sent to VA in timely fashion.  It would also regionalize business
functions, taking them out of hospitals and moving them to a handful of
regional locations.  In theory, this would promote care coordination and save
time and money. 

VA's pilot of NVCC has taken place in one
hospital in nearly all of the VISNs, a fact that VA uses to suggest progress. 
They may well be right, but we are only left to wonder how VA's central office
is collaborating with the hospitals, accepting criticism, and incorporating
suggestions. 

The VA strongly believes in standardization
and enhancing productivity for efficiency in savings.  However, we do hope the
central office is mindful that incorporating advice from the field may improve
their efforts, and we hope the committee explores that topic with VA.  We don't
want to simply automate and consolidate flawed processes, because flawed
processes that are automated cause further problems down the road.  We don't
think that is appropriate, and we hope that the committee will ensure that
suggestions from the field are being taken into account. 

I also want to touch on another topic that we
will be discussing today.  The RFP for patients under community care known as
PCCC, or PC3, will soon go public.  This is VA's attempt to replace Project
HERO, a 5‑year pilot designed to evaluate whether contracting with a
network provider would save money over the traditional fee program.  Under PC3,


VA will enter into multiple contracts with network providers across the country
to complement but not to replace the traditional fee program, and we believe
that that must succeed.  As an aside, we also believe that this must include
mental health services in primary care.

Through VA partnership with Humana, Project
HERO has met critical needs and saved VA money over traditional fee while also
providing relevant customer satisfaction, distance, and access data.  A
traditional fee program provides no such data.  However, VA has lamented the
fact that no quality standards were included in Project HERO, and the VFW hopes
and expects to see rigorous quality metrics in PC3. 

Project HERO is expected to end the same
month as PC3 begins.  We hope that you can seek assurances from VA that
veterans will truly be held harmless from this transition and that the PC3
networks will have the capacity to meet their mandate before HERO is
terminated. 

Madam Chairwoman, this concludes my
statement.  I will be happy to address any questions that you or the committee
may have.



[The statement of Shane Barker appears in the Appendix.]



MS. BUERKLE.  Thank you to all three
of you. 

I will now yield myself 5 minutes for
questions. 

Mr. Barker, you talked about your
concerns with regard to IT.  Can you elaborate on that?

Mr. BARKER.  Well, currently, there is
no way for doctors to quickly or easily create a record of the service that was
provided and get that over to VA.  There is no ‑‑ and VA has
said they are working on a forms building IT solution that would allow doctors
to quickly be able to choose a form that is appropriate for the care that was
provided.  We have also heard that they are working on the Cloud services piece
of that to quickly transfer one piece to the other. 

The fact that those are separate pieces to
the IT solution means that this is a complicated matter, but without those
things being available to doctors at the local level it just creates a lot more
paperwork and takes a lot more time.  The duplicative service piece comes into
play there as well.

MS. BUERKLE.  Thank you. 

Mr. Gadd, in your opening statement, you
mentioned your concern that there was a lack of training for the non‑VA
personnel, and I wondered what specifically you were referring to.

MR. GADD.  Right.  With the VA, they
provide evidence‑based treatments, for example, with PTSD or CPT, two of
the evidence‑based treatments for mental health and for PTSD.  The VA
rolled out that training to all of their providers for mental health, and it is
just one example of all ‑‑

Veterans, as my colleague stated earlier,
have unique injuries and illnesses from their service, environmental hazards,
you know, different challenges than what we see in the private sector.  But the
VA has a robust training program, and we would like to see that shared with
their clinicians that they contract with and to the community to make sure the
treatments are the same.

MS. BUERKLE.  Thank you. 

And, Mr. Gadd, can you elaborate on your
comment that hiring of women veteran providers within the VA to provide gender‑specific
services should be carefully considered?  As was mentioned by many of you, there
is an
increasing number of females in the VA system and I would like to hear your
thoughts. 

MR. GADD.  Of course.  So we know that
women are the fastest‑growing population coming into the VA, but,
unfortunately, we know that a lot of the gender‑specific services are
contracted out.  So as VA develops its models for, you know, hiring and
determining whether or not they should fee base or they should hire those
providers in the hospitals, you know, that should be looked at so that they can
provide that service and offer it, rather than having that contracted.

MS. BUERKLE.  Thank you. 

Mr. Atizado, in your testimony you talk
about VA reaching a confidence level that PCCC is an adequate
replacement for Project HERO.  What do you think
would be an appropriate measure of that confidence?  When do you think it would
be safe to transition to PCCC from Project HERO? 

Mr. ATIZADO.  Well, I think the first
thing that should be considered by VA before they terminate the Project HERO is
to make sure that under PCCC veterans don't get less services, that they are not
asked to  drive further, that they are not asked to wait longer to
receive care in the community, that the health information sharing does not
exist or is not occurring. 

Project HERO has a lot of things that DAV
finds attractive, but I think how that contract affects VA and Delta
Dental as well as Humana, they have their own issues with it.  It is the first
time VA has done this, so that is to be expected, but, really, we want to make
sure it is a seamless transfer. 

And that is really it, that veterans who experience care through Project HERO
are very satisfied with it.  They drive less, for the most part, less
distance in Project HERO to VA.  Their
satisfaction is very high, if not comparable to VA's internal satisfaction
survey.  Their drive times, their access to follow up, if they don't make an
appointment is there.  So those patient-facing care coordination aspects of
Project HERO would be one of the key elements that VA has to consider before
they terminate Project HERO and solely rely on PCCC.

MS. BUERKLE.  Thank you very much. 

My time has expired.  I now yield to the
Ranking Member, Mr. Michaud, for his questions. 

MR. MICHAUD.  Thank you, Madam Chair. 

Once again, I want to thank the panel for
being here today.  Also, I want to thank the American Legion for doing your
report every year, A System Worth Saving.  That is definitely a good report and
good reading.  So thank you for that as well. 

I just want to follow up on that report.  You
heard my comment about Martha's Vineyard.  Has the American Legion looked at ‑‑
off the coast of Maine, we have a lot of islands.  In your study of that, have
you looked at fee for services for veterans that live on islands, particularly
if they have a Federal qualified health care clinic that is located there on an
island?  Mr. Gadd?

MR. GADD.  Yes, sir.  Our rural health
report, we focus on four VISNs; and one of the VISNs was in New England.  And
so that was when we went up to Martha's Vineyard. 

And we also received a lot of information
regarding Project ARCH, Access Received Closer to Home.  We understand that
that program is working wonderful in northern Maine, that the veterans that are
being treated through that ARCH contract really have said a lot of great things
about that. 

As you know, that is another remote area up
there where there are no services that are available.  So I think we have
looked at some of the rural through that report and how ARCH is a potential
solution.  If that continues to work, then that should be something that the VA
considers as it moves forward with that contract. 

MR. MICHAUD.  Thank you. 

This question is for all the panelists.  We
will start with Mr. Barker first.  It is a two‑part question
regarding the Patient‑Centered Community Care. 

The first question, has your
organization ‑‑ had any meaningful input into that
process?  And the second part of the question is, do you feel that the VA has
the capability to effectively manage the community
care program contracts? 

Mr. BARKER.  Thank you for that
question. 

I think the answer to the first part has to
be no.  We haven't ‑‑ we have had regular briefings that are
downloads, but there is not much upload.  We can't really ‑‑ I
know that is in part because the RFP hasn't been released.  It is not even a
draft, and I understand that.  But we have had some information download.  But
I wouldn't say it has been a great collaborative process, if that is fair.  And
whether VA can manage that or not I think it is really difficult to say without
seeing the RFP. 

I am not one to be overly negative.  I don't
think that it is impossible.  But there is a sort of worrisome track record
there, and we do want to make sure they get it right. 

I would always say that more collaboration
equals better results, which is why I hit on the importance of the
collaboration between hospital staff and central office in my oral remarks as
very important, and I would hope to see more of that from the VA.

MR. GADD.  Thank you for the
question. 

As Mr. Barker indicated, the VSOs have
received briefings from the VA on the program.  It is still new in conception;
and, as it moves forward with RFP, we are going to be able to review whether
all of our recommendations have been included. 

They were many lessons learned from Project
HERO.  We know that Project HERO was extended until the spring.  That being the
case, they have a really short window to tighten their plan and make sure that
when it comes out in the spring it has VSO input and we have an opportunity
again to review it. 

So thank you.

Mr. ATIZADO.  Ranking Member Michaud,
first, I want to say that I would like to say that the chief business office,
particularly the individuals involved with overseeing the development for PCCC,
has been very open with us at the DAV.  We have had regular communication. 
Whenever we have had issues or questions, they have always been very open with
us and tried to tell us as much information as possible without compromising
the process. 

However, as Mr. Barker said and my
colleague, Mr. Gadd, until the draft RFP comes out, at which time we will
be able to review and make comments and the final ‑‑ the
official RFP comes out and what that looks like, we really won't be able to
answer that, your question to the extent you are looking for.

MR. MICHAUD.  Thank you.  And if could
you provide for the record, because my time has expired, the VA has not had a
proficient record of paying claims efficiently, and I would like your
organization to submit for the record your thoughts, the pros and cons of
contracting that process out. 

Thank you. 

MR. MICHAUD.  Thank you, Madam Chair.

MS. BUERKLE.  The chair now recognizes
Dr. Benishek, the gentleman from Michigan.

Mr. BENISHEK.  Thank you, Madam
Chairman.

I just want to touch on a couple of things
specific to my district.  I am a general surgeon.  I worked at a VA hospital as
a fee basis physician, and I have also seen patients in my office on a fee
basis to help the VA out when they couldn't get the services at their
facility. 

My concern, number one, is this whole idea of
not being able to manage the spending is a huge issue.  I am just wondering, do
you think in your mind an idea that the cost of the program is inhibiting the
VA from sending people to a local facility for their care? 

I mean, I have got a case here that I am
looking at ‑‑ and I am sure my colleagues have many of these
cases, too ‑‑ where a guy had Agent Orange related cancer and he
couldn't get his chemotherapy in his hometown because he was denied the fee
basis care, and he was told, oh, you can drive 4 hours and 7 minutes
to Detroit and get your chemotherapy in a facility in Michigan.  So you are not
geographically inaccessible to a VA facility.  And yet it is 12 minutes to
his local facility and 4 hours and 7 minutes to Detroit, plus
4 hours and 7 minutes back immediately after his chemotherapy
treatment. 

So is there some sort of a universal rule
about who is eligible for ‑‑ what distance qualifies you as
eligible for fee‑based care?  Because my people don't seem to think there
is, and it is basically up to the local VA facility to decide.  And I am just
wondering what the criterion are then for those people to just make that
decision.  Is it because the cost becomes a detriment because their budget is
over? 

Let me get your perspective in answering that
thought that I am having here. 

Mr. ATIZADO.  Sure.  Thank you for
that question Mr. Benishek. 

First of all, I think there is ‑‑
I guess probably VA would be a better panel to answer.

Mr. BENISHEK.  Well, I want to
hear from ‑‑ you must have heard these things before.

Mr. ATIZADO.  Sure. 

In order to get fee care, there has to be a
clinical determination that the care is indeed needed and whether it can be
provided through VA's hierarchy of care.  There is a decision process on
whether or not the care can be provided within VA, another VA facility that is
close by, through DOD or academic affiliate sharing agreements.  After that, it
is contract care and then, after that, it is fee care.  In addition to the
clinical determination and availability of services, there is also an
eligibility determination whether a veteran is eligible. 

Mr. BENISHEK.  What I am saying this
guy apparently qualifies for all of that, except for the only difference is the
distance.

Mr. ATIZADO.  I understand that, sir. 
I cannot tell you what kind of justification was used.  I don't know the
details of the case.  But this is just one example, as I am sure all the other
members on the subcommittee has, about the variation of how this delivery ‑‑
model delivery is implemented in the field. 

The NAPA study talks about that, about the
wide variation on how the delivery of care ‑‑ how care is
delivered through fee care.  That is a signature problem of fee care.  What you
get at one facility may not necessarily be the same at another facility. 

To even take into account the geographical
access ‑‑ the geographical access in a rural area cannot be
the same geographical access in an urban area or an area with a high amount of
medical resources.  So that all has to be fleshed out, which it really has not.

Mr. BENISHEK.  Please. 

MR. GADD.  That is a great question,
and I think it is more VA system driven than patient driven.  And I say that
from what we have heard from veterans is, you know, where are they involved in
the process with whether ‑‑ if they do have to drive.  So the
first question we have is, how is the veteran part of the decision on whether
they could be fee based? 

VA is moving toward a patient‑centered
strategy.  Those discussions should happen with the patient.  What does the
patient want?  If they don't have ‑‑ if they have to go for
recurring appointments twice a week and they choose not to do that and they are
elderly and they can't or they leave in geographically inaccessible places. 

Then the second part is what recourse does
the veteran have in the case that you had pointed out if they are not ‑‑
or if they are denied.

Mr. BENISHEK.  Well, they called me.

MR. GADD.  Right, right.

Mr. BENISHEK.  I want to get this
problem solved.  Because I know that when I take care of patients they check me
out.  The VA checked me out to make sure I was board certified and made sure I
had the experience to do what I am doing.  I just don't understand why that
doesn't happen in general.  Why can't the local facility have been contracted
or determined to be able to provide this service and just deal with it. 

I think the VA needs to have a much more
extensive outreach program to its local facilities to ensure people are
qualified and there is somebody available to do it and have the fee all figured
out in advance.  I did stuff like that when I worked for the VA.  Why doesn't
it happen generally? 

To me, the out‑of‑control cost
business should not be.  This should all be figured out in advance.  It is very
disheartening to me to worry that, because of the cost of it, this guy is
having to stay, drive 4 hours because they are worried about cost. 

So, anyway, I am out of time.

Mr. BARKER.  If I may, I would also
like to quickly respond to that. 

I think that VA has said through NVCC one of
the primary goals and first stages is to create a fee handbook, that everybody
gets and receives all the same processes, that everything is standardized.  I
think this is a great opportunity for you to effect change through good
oversight of the creation of this handbook.  Why have a handbook if it doesn't
solve the problem that you are bringing out? 

So I am just bringing that to your attention.

MS. BUERKLE.  Thank you. 

The chair now recognizes the gentleman from
New Jersey, Mr. Runyan. 

Mr. RUNYAN.  Thank you, Madam Chair. 

Mr. Barker, you brought kind of up where
I was going to go, standardization.  When we throw variables in, it raises
cost.  Kind of touching on what you were talking about before ‑‑
and all of you can comment on this because I think it is something ‑‑
we deal with it in other areas of the VA, whether it is in the disability process. 
That form changes four times a year.  Well, when you do that to a private
individual and they are not aware of it, you are adding education costs,
retraining of the people processing the claims, and all that processing goes
back to maybe an IT component or some consistency in that manner which helped
drive down the cost at the end of the day. 

If could you comment on that, because I think
that is a place to start.  And, obviously, procedures and handbooks have a role
in that kind of thing.  But we have to stick to them, also.  So we have got to
make sure it was done right the first time. 

Mr. BARKER.  You are absolutely
right. 

I think that one area that you could look to
for ideas, honestly, is TRICARE.  When TRICARE started, a lot of doctors were
hesitant to enter into contracts with contract writers because of the fact that
forms were not ‑‑ they didn't make sense.  They weren't like
Medicare.  They were a big administrative burden.  And a lot of doctors said
no, and TRICARE really worked to standardize and make that an easy process for
doctors. 

Now the administrative hassles of being a
TRICARE provider isn't really the primary reason doctors don't enter into
TRICARE.  Now it is more about payments and that kind of thing.  But there are
ways to lower standardization, and I think the creation of simple forms that
don't create a lot of administrative burden is one of the easy things, one of
the low‑hanging fruits that we can attack in this area.

Mr. RUNYAN.  It is multifaceted. 
Also, to get the information back into the electronic medical claim, also, it
has to be part of that process. 

Mr. BARKER.  Absolutely.  I think it
is VA's opinion ‑‑ and you can ask them about this ‑‑
but they want to have a system where they get as much data as possible and they
get to decide what information goes out, and I think that that is great.  I
think it is good for veterans.  But there is no reason why VA is not getting
the information that they need.

Mr. RUNYAN.  Thank you. 

Madam chair, I yield back.

MS. BUERKLE.  Thank you. 

I will ask the ranking member if he has any
further questions? 

With that, thank you very much for being
here; and, most importantly, thank you for what you do for our veterans, for
your advocacy, and your leadership on veteran issues.  So thank you very
much. 

I would now like to welcome our second panel
to the witness table.

Thank you and good morning. 

Joining us this morning are Mr. Brad
Jones, the Chief Operating Officer for Humana Veterans Healthcare Services,
Inc.; Ms. Kris Doody, RN, Chief Executive Officer for Cary Medical Center; and
Dr. Gregg A. Payne, Chair of the VHA Fee Care Program Panel for the National
Academy of Public Administration. 

I am grateful for all of you for being here
this morning; and, Mr. Jones, we will start with you.

 

STATEMENTS OF BRAD JONES, CHIEF OPERATING OFFICER, HUMANA VETERANS
HEALTHCARE SERVICES, INC.; KRIS DOODY, RN, MSB, CHIEF EXECUTIVE OFFICER, CARY
MEDICAL CENTER; AND GREGG A. PANE, MD, CHAIR, VHA FEE CARE PROGRAM PANEL,
NATIONAL ACADEMY OF PUBLIC ADMINISTRATION

STATEMENT OF BRAD JONES

Mr. Jones.  Madam Chairman Buerkle,
Ranking Member Michaud, and members of the subcommittee, thank you for the
opportunity to discuss VA's fee process today. 

Madam Chairman, I ask that my full written
statement be included in the hearing record. 

Humana Veterans is proud to be partnered with
VA to provide health care services and care coordination to veterans designed
to supplement the care received in the VA health care system.  We currently
have contracts with VA to provide quality health care through two
congressionally mandated pilot programs, Project HERO and Project ARCH. 

To date, we have served over 163,000
veterans, making over 300,000 patient visits, with an untapped capacity to
serve even more veterans, including those who have mental health care needs and
those who live in rural communities.  Because of our extensive experience in
providing timely, quality, and appropriate care in the community we have a
unique perspective on the core program elements that are essential to ensure
veterans receive these services through a veteran‑centric care
coordination program when VA refers veterans to care in the community. 

This was the hypothesis of the
congressionally mandated and VA designed HERO pilot.  In a care coordinated
program like HERO where community providers are an extension of VA's health
care system, the veteran never leaves the VA system and just receives one or
more episodes of care from a robust network of trained and credentialed
community providers that the contractor maintains. 

The community partner, in this case Humana
Veterans, has the people, tools, and processes in place to help veterans
navigate a complex health care system and help VA track and monitor veterans'
care in the community. 

In addition, Humana Veterans returns the
clinical information to VA and manages all of the administrative components of
the process, such as billing and appointing.  By keeping these insurance‑like
administrative tasks outside of VA, the Department can concentrate on what they
do best and that is deliver world‑class health care to our Nation's
veterans. 

Over the past 5 years, the HERO pilot
program has proven that a national health care administrative services
organization can collaborate effectively with VA to deliver results‑focused,
high‑quality, and cost‑efficient care.  The success of HERO is
substantiated by a strong set of performance metrics, and in 2010 VA reported
savings of $16 million from Project HERO in the four pilot VISNs, despite
the fact that only about 11 percent of the total non‑VA outpatient
visits were referred to HERO. 

Based on VA's presentation to interested
contractors, it appeared as though the planned follow‑on program they are
calling Patient‑Centered Community Care, or PCCC, might only be a
national contract for a network of providers to deliver medical and surgical
service without the critical care coordination elements. 

VA appears to be creating and building new
inhouse capacity to handle the administrative functions associated with fee
care through the Non‑VA Care Coordination program, or NVCC.  Instead of
leveraging the capacity and expertise that already exists in the industry, NVCC
will require significant resource investments both in staff and the necessary
tools to properly handle the back office administration functions.  If PCCC is
supposed to be the nationwide follow on to HERO, the administrative functions
of the program need to be conducted by the contractor.  Failure to do so means
that VA will not be able to fully replicate the success of HERO.

Rather than continue down the current path of
these programs, now is the time for VA to incorporate the successful elements of
HERO to create a veteran‑centric collaborative health care program that
will be a win‑win for veterans and for VA.  Veterans will benefit from a
fully coordinated and integrated health care delivery system of both VA and
community providers; and VA will be able to achieve cost savings by partnering
with organizations that have existing systems, tools, and processes in place
for efficiently managing fee‑related administrative functions. 

Both Congress by directing VA to establish
the HERO pilot and the VSOs in the independent budget have supported the
concept of a coordinated fee program that will both improve veterans' health
care and lower costs.  The inclusion of the elements of a veteran‑centric
collaborative health care program in PCCC will ensure that veterans realize all
the benefits of care coordination between VA and community providers.  This
would create a truly integrated VA health care system that better leverages
community health care assets, if and when VA decides to authorize such care. 

If VA contracts for a provider network only,
that will represent a retreat from the Secretary's commitment to implement a
patient‑centered VA health care delivery system that includes all VA
health care for veterans both inside and outside the walls of VA. 

Thank you for holding this hearing and
tackling this vital issue.  I appreciate the opportunity to share Humana
Veterans experiences and views with the subcommittee today, and I am happy to
answer your questions.

[The statement of Brad Jones appears in the Appendix.]



MS. BUERKLE.  Thank you,
Mr. Jones. 

Ms. Doody.

STATEMENT OF KRIS DOODY

MS. DOODY.  Good morning, committee
Chairwoman Buerkle, members of the subcommittee, and our own revered
congressman, Ranking Member Mike Michaud.  I thank you for this opportunity to
discuss the delivery of health care services to our brave men and women of the
Armed Forces. 

I am Kris Doody, the CEO for Cary Medical
Center, a small rural hospital in northern Maine.  We have had the privilege of
providing services to veterans on our campus for more than 25 years. 

Cary was the first community based outpatient
clinic in a rural hospital in the Nation.  The clinic opened May 14th, 1987. 
The clinic was to serve veterans who historically were forced to travel
300 miles to the only VA hospital in Maine

at Togus.  A small group of veterans representing multiple veterans'
organizations worked passionately for some 8 years to secure the VA clinic. 
The clinic has become a model for the country, and today some 600 CBOCs are now
providing care to veterans throughout the Nation. 

The VA clinic was the first of what would
become a growing center of veterans health care in Caribou, Maine.  In 1990,
the Maine veterans home opened 40 long‑term care beds, with an additional
30‑bed residential care facility for veterans with dementia in 2003 on
our campus. 

We continued to advocate for inpatient beds
through the CARES Project, but that never materialized.  That is why in 2011 we
were so excited to be selected as one of only five locations in the country to
launch Project ARCH.  Since we already had the VA clinic and an excellent
relationship with the Veterans Administration, we knew the implementation of
the ARCH program would be a great success. 

While the VA clinic provides all the primary
care, our hospital provides a select list of specialty services, including
general surgery, orthopedic surgery, and a variety of other services, including
inpatient care.  The model has benefited veterans in accessing care close to
their homes, the VA in reducing costs for travel pay, and at the same time
delivering high‑quality, safe, and efficient care to veterans.  And Cary
Medical Center has been able to expand its market share such that we have been
able to recruit additional specialists. 

It is our understanding that at all five
locations Cary Medical Center is the furthest distance from the nearest VA
hospital, and in just this first year we have saved the VA a quarter of a
million miles in travel pay.  To date, some 1,000 veterans have taken advantage
of Project ARCH.  Recent patient satisfaction surveys indicate that veterans
are extremely satisfied with the care they receive at Cary Medical Center and
no longer have to travel hundreds of miles to receive specialty care. 

One of the key reasons for our success is the
relationship we have built with the Veterans Administration at the Togus VA
hospital.  We have worked with some outstanding center directors, including the
current Director Ryan Lilly, and past directors Brian Stiller, Jack Simms, and
Tom Holthaus, who provided the initial administrative approval to launch the
first VA clinic in a rural hospital. 

We understand that the VA is considering
other options for the delivery of care to rural veterans.  We believe Project
ARCH, in the unique model that has been developed in Caribou, Maine, has some
tremendous advantages.  First, with the VA presence on our campus, we are realizing
a great coordination of care between the clinic and the hospital.  Second,
veterans feel a part of the VA system, even though they may be in a non‑VA
facility.  Third, the establishment of integrated case management creates a
virtual medical home for the veteran, making sure all of their care is
delivered in an efficient and coordinated way. 

While Project ARCH has been a marvelous
success and benefit, some challenges do remain.  One such challenge is the 14‑day
scheduling of VA patients.  The VA wants to be seen within 14 days of
authorization, and it has been a challenge for us to work these patients into
the regular schedule of our specialists. 

There are other administrative requirements
that create a challenge, such as excessive monthly reports on every patient. 
In addition, now that veterans have experienced the level of care at our
hospital for the select list specialty services, they would like more.

Another issue that we face in Caribou and
that is unique to Maine has to do with Medicare reimbursement.  Maine is
amongst the poorest reimbursed States in the Nation by Medicare.  Our
Congressman, Mike Michaud, has been working tirelessly to change this reality,
but it has been a difficult fight.  We would like to see if this can be
addressed moving forward in a more equitable way. 

Finally, it has been a great privilege for
Cary Medical Center to serve our Nation's veterans.  It has been a source of
pride for our hospital and for all of us who work there. 

Our hospital, like many across the Nation, is
a convener of sorts.  We bring people together to best serve the needs of
health care in our community.  We have experience with virtually every health
care service in our marketplace, including mental health, home care, and long‑term
care.  We are a regional hospital that demonstrates the highest scores in
patient safety, clinical quality, and patient satisfaction.  We have built an
excellent relationship with the regional VA health care center, and we have
demonstrated that Project ARCH can work in even in the most rural frontier
regions of America. 

It is our hope that the VA will continue with
Project ARCH and expand upon the number of health care services available to
veterans living in the vast rural areas of this country. 

I thank you so much for this opportunity, and
I would ask that Congressman Michaud include my prepared and written remarks in
the congressional record of this hearing. 

I am also happy to answer any questions you
may have.

[The statement of Kris Doody appears in the Appendix.]



MS. BUERKLE.  Thank you very much. 

Dr. Payne.

STATEMENT OF GREGG A. PANE

Dr. PANE.  Madam Chair, members of
the committee, good morning to you all.  I appreciate the opportunity to
testify today on behalf of a panel I chaired at NAPA in 2011.  The Academy is
an independent, nonprofit, nonpartisan organization dedicated to helping
leaders meet today's challenges. 

Over the past decade, the VHA Fee Care
Program has grown from an infrequently used adjunct into a critical element of
clinical care for veterans, in fact, approaching now one million veterans being
served in a $5 billion program, 10 percent of VA's budget, with 2,400
FTEs. 

After extensive research and analysis, the
Fee Care Panel recommended that VA consolidate this program into three to five
operating centers, while modifying its claim processing structure to become a
more standardized system.  Standardization of the IT infrastructure along with
consolidation will allow fewer employees to work more efficiently and
effectively, and a more structured rule‑based environment should lead to
fewer payment errors and greater program value. 

The panel also emphasized the importance of
contacting an independent analysis of contracting this function out, similar to
the approach used by VA sister health care programs TRICARE, Medicare, and
Medicaid. 

Some quick background.  In 2009 and 2010, the
VA Inspector General reported significant problems in the Fee Care Program,
including hundreds of millions of dollars in improper payments.  Their
recommendation that VA evaluate alternate organizational models led to the NAPA
study. 

The Academy convened a panel of fellows along
with a professional study team, conducted interviews of VA staff, looked at all
existing studies and audits, and spoke with Federal and commercial health care
payor programs, as well as the OIG and others.  Site visits were made to VISNs
Denver and some of the other key areas as well as to Medicare and TRICARE. 

Both Medicare and TRICARE contract out all of
their claims work and spend a majority of their time overseeing the work of
contractors.  Several large commercial vendors specialize in providing large‑volume
processing of these health care claims. 

TRICARE contractors report about
75 percent of their claims are automated and electronic, requiring no
human intervention.  The cost per claim is $2.25 to 2.50 for electronic
claims. 

For Medicare, 95 percent of claims are
automated and electronic, with a cost of $0.40 to 1.60.  This compares to $9.40
per claim for VISN 19, which is the highest‑performing VISN, and 2.55 per
claim for CHAMPVA. 

A word about error rates.  The chief business
office, their own analysis of error rates in claims processing for recent
activity is about 12 percent.  If you extrapolate an error rate of
12 percent against total fee expenditures in 2011, erroneous payments
would be $500 million. 

For a comparative benchmark, the national
error rate for CHAMPVA is 1 percent and for TRICARE it is under
.05 percent.  That is a 25‑fold error difference. 

The panel findings, the Fee Care Program is
currently operating at an inefficient level due to a number of payment errors
and relatively low productivity; and the return on an investment analysis run
by the panel indicates that a total consolidation of the Fee Care Program would
save the organization almost $4 billion over the next 10 years.  These net
savings were calculated by adding the savings by reducing the number of FTE
through consolidation, integrating a more automated claims processing system,
and reducing errors in payments. 

Let me highlight the panel recommendations: 

First, consolidate the Fee Care Program from
the current 100 plus operating sites to perhaps three to five strategically
located regional sites. 

Second, leadership should set clear policy
direction about performance, goals, and expectations for VA purchased care. 
This is a big blind spot for VA, and there is untold additional savings
possibly available through better coordination of care and increased quality
monitoring of veterans in this Fee Care Program. 

Third, VA should build greater program
management competence, including a program integrity component to look for
fraud and abuse and a performance management system to look at performance outcomes. 

Fourth, VA should procure an implemented
enterprise‑wide technology solution to facilitate virtual consolidation. 

And, last, they should conduct an analysis of
contracting out the functions similar to the sister programs. 

By implementing these recommendations, the
panel believes VA will be able to improve care and help ensure maximum
participation in the program, resulting in better care for veterans. 

Madam Chair, this conclude my prepared
remarks; and I would be happy to answer any questions.

[The statement of Gregg Pane appears in the Appendix.]



MS. BUERKLE.  Thank you very much, Dr.
Payne; and thank you again to all of our panelists. 

Mr. Jones, in your testimony you talk
about Humana having an untapped capacity to serve more veterans, including those
who have mental health needs and particularly those in rural communities.  Can
you comment on that?

Mr. Jones.  I would be happy to, Madam
Chairman. 

Yes, we have ‑‑ within the four
HERO pilot VISNs we have a network of over 40,000 providers strong contracted. 
The volumes in HERO have been somewhat lower than they could have been.  Given
on the way you measure them, it is estimated that anywhere from 10 to
20 percent of the total fee basis referrals that went out went through
Project HERO.  So we believe we have more capacity ‑‑ that we could
have taken more. 

Specifically in the area of mental health,
that was part of the Project HERO contract, and a mental health network in the
community has been established.  But it especially has been lightly used. 
There have been very few referrals over the 5 years to that, and I think a
lot more could be done in terms of serving mental health.

MS. BUERKLE.  Thank you. 

Also, Mr. Jones, we are hearing rumors
that, although the VA has announced the extension of Project HERO, some of the VISNs are not going to continue on with the program. 
In your view, I would like to know what you anticipate or what you think about
if there is a sudden cessation of Project HERO?

Mr. JONES.  I am very troubled and
concerned about that, Madam Chairman.  Our volumes have declined significantly
since early June when VA sent out a notice to the participating VA medical
centers that HERO would be ending on September 30th and that they should
revert to the regular fee program if the follow‑on program were not in
place at that time. 

You are correct that they have now formally
extended the contract, but I fear that medical centers are still in a state of
not being sure what the status of program is. 

There is one VISN that has formally taken the
position they are not going to participate in the extension, and they have ‑‑
in fact, we have been getting calls from our network providers that this VISN
has been reaching out to them and contacting them, informing them that HERO has
ended and that they would like to send care directly to them. 

So I am very concerned about the veterans
losing the care‑coordinated benefits that they have had under Project
HERO until the new program is in place.  Unfortunately, I have already received
one email from a provider stating that they have 33 veterans that need
authorization for ongoing care and they have not been able to get that
authorized through VA to date.  So I would be concerned that veterans will get
kind of caught in the middle of this transition if it is not done properly and
suffer as a consequence.

MS. BUERKLE.  Thank you very much. 

Ms. Doody, in your statement, you mention that
Cary Medical has experienced over a thousand patient encounters since Project
ARCH began.  Is that what you were expecting during the
first year and do you think that the program is being effectively
administered by VA?  And just comment on the program in general. 

MS. DOODY.  Absolutely.  Thank you,
ma'am. 

When we started the program we tried to
anticipate the volume, and we knew that there was a backlog in certain
specialties at VA Togus.  So we anticipated that that would be the priority of
getting patients into the ARCH program in Caribou, and that did materialize,
because the majority of the patients are primarily in orthopedics.  The backlog
at Togus is out about 6 to 9 months to my understanding of patients trying
to get in to be seen at the Togus hospital.  So we have seen the majority of
our numbers have been primarily in the orthopedic surgery evaluation. 

Actually, at the end of the first year we did
not anticipate a thousand.  We are very pleased.  We think it has been very
successful.  We are seeing a leveling on the number of authorizations each
week.  So we think we are getting now into a pattern that is probably not going
to be at that level the coming year, because I think we took care of some
backlog with Togus, but I think it will be fairly close even for this coming
year.

MS. BUERKLE.  Thank you very much. 

Dr. Payne, can you comment further on your statement that, despite a number of initiatives being undertaken to improve
the current situation, the organization responsible for improving the system,
the chief business office, has limited control and authority? 

Dr. PANE.  I think we pointed out the
management challenges in our report.  Of course, the current fee system is a
highly decentralized across VISNs, and VA medical centers and staff, of course,
report locally, and the office has a big challenge trying to oversee. 

There is wide variation on how things are
done.  You saw the wide difference in outcomes in terms of efficiency.  And so
the office has the leadership role, but there are a lot of challenges for them
in terms of IT procurements and standardization across networks and reporting
structures and so forth.  So there is a lot of change that needs to be occur,
and then they have a big job on our hands.

MS. BUERKLE.  My time has expired. 
But if the chief business office doesn't have control or authority, who does? 

Dr. PANE.  Well, the Under
Secretary ‑‑ there is a large structure, so they certainly
have the tools to get it done. 

Anything this large across this big of a
system, I think the way to look at it is, one, what are the immediate steps you
can take based on some of the pilots and some immediate steps and then what is
in parallel is the larger fix.  And I think that is taking a look at what your
fellow Federal programs do and looking at others who might be better at
processing claims.

MS. BUERKLE.  Thank you very much. 

I now yield to the ranking member,
Mr. Michaud. 

MR. MICHAUD.  Thank you very much,
Madam Chair. 

Before I begin my questions, I first off
would like to thank Cary Medical Center for participating in this very
important hearing.  This year, Madam Chair, Cary Medical Center celebrates
their 25th year of hosting the Nation's first community based outpatient
clinic, and they continue to be a leader in providing high‑quality care
for our veterans. 

And the reason why I know that, Madam Chair,
is, first of all, Kris is committed to caring for our veterans, and it is
reflected in the reports I get from veterans in the area, who praise not just
Cary Medical Center for the high‑quality care but also Kris and her
willingness to really work with the veterans community in northern Maine. 

So I want to thank you, Kris, and Cary
Medical Center for all that you are doing to provide good‑quality care
for our veterans in a timely fashion. 

MS. DOODY.  Thank you, Congressman.

MR. MICHAUD.  My question actually is
for Mr. Jones and Ms. Doody.  You talked about the ARCH program.  My
question would be, are there ways that we can improve upon the ARCH program
that you would like to see?  I know, Ms. Doody, you mentioned the 14 days. 
In talking with staff I believe the VA actually takes longer than
14 days, on average.  So, Ms. Doody, I will start with you.  What ways do
you think that we can improve upon the ARCH program? 

MS. DOODY.  Some of the metrics that
we are looking at like the 14‑day window I think we have to have some
honest dialogue whether or not it is really reasonable.  My understanding is
the metric for being seen for the VA is 30 days, and it is hard for the VA
to see the patients even within 30 days in their own VA hospitals. 

Cary and the VA are both ‑‑
we are very mature as it relates to IT.  I think we could do a better job at
integrating our information.  The information we have to provide monthly, which
is a lot of work, it is very cumbersome, I think we could streamline that by
using information technology.  Right now, it is all manual.  In fact, we have
had to add more resources because of the administrative burden about 2 months
into the program because there was a lot of reports that had to be completed. 
I think the reports are important, because I think the quality metrics should
be reported, but I think there are ways we can streamline it to make it a lot
more efficient and not as manual and cumbersome. 

The other issue I would like to talk was
adding additional services.  I am hearing repeatedly from veterans additional
services they would like to see, primarily ophthalmology, women's services,
women's health services, and also podiatry.  I am hearing repeatedly from our
area veterans.



DCMN BURRELL

Mr. Jones.  Congressman, first I would
like to highlight before I talk about the improvements, there are some great
successes out of ARCH, most notably what we are hearing from the veterans
themselves in terms of gratitude of being able to get this access close to the
home.  So I think the program is hitting the bull'S eye on that intended mark. 

In terms of improvements that I think could
make it go even farther, volumes are an important issue, my colleague
referenced some of the administrative challenges and burdens that come with
this program.  And when you are dealing with community providers that are
seeing very low volumes, combined with those administrative challenges, that
creates an issue.  So that would be an area we could look at, not necessarily
in terms of sending more care outside of VA, but perhaps looking at the
definition of the pilot sites.  And as you know they were very narrowly
defined. 

In some cases we are seeing veterans having
to travel a pretty good distance from outside of those pilot sites to come in
and get the care they received.  So I would say looking at that would be an
option. 

I also agree with my colleagues on some of
the standards, including the 14‑day metric is a challenge, but I would
say probably the main issue would be looking at some of the other
administrative burdens.  There are some VA required training that has to take
place that in many's view is not necessarily value added but it is an annual
thing where the community providers have to go into the VA system and sign in
and go through a fairly lengthy training module that again adds another
administrative burden that they are not accustomed to and it creates a barrier
to participation. 

Thank you.

MR. MICHAUD.  Ms. Doody mentioned
additional services, do you feel that would also be important? 

Mr. Jones.  Yes, I would agree and I
want to commend my colleagues at VA and the Office of Rural Health that they
have been treating this and managing this like a pilot, and they are looking at
what is working and not working, and that is very important.  And an example of
that is we had in our case, cases where veterans were getting discharged from
surgeries, but because of those post surgery needs such as the rehabs and
therapies weren't on contract, they may have gotten the surgery very close to
home but then had to travel very far back to VA often on a recurring basis to
get that follow‑up care.  So Office of Rural Health has put forward a
modification of the contract that is currently being negotiated that would add those
important services so the veteran could get the whole package of care there. 

So, yes.

MS. BUERKLE.  The chair now yields to
the gentleman from Michigan, Dr. Benishek. 

Mr. BENISHEK.  Thank you, Madam
Chairwoman.  I want to ask Dr. Payne a question sort of related to what we
talked about in my previous opportunity.  Is it your understanding, Dr. Payne,
that the eligibility criterion for the fee basis care is different at each VA
medical center and at the discretion of the director of that facility? 

Dr. PANE.  I cannot speak to
specifics of how VA has operationalized this.  I will say I think the panel did
find wide variation in performance and management.  And I am sure there is some
variability in exactly how the program is done.  In terms of specific criterion
and outcomes, I couldn't comment.  That would be better directed to VA.

Mr. BENISHEK.  Right.  Do you think
national standards for this would be beneficial or do you think it is better to
have local standards? 

Dr. PANE.  No, I think we certainly
recommended that a greater degree of standardization is absolutely the way to
go and a much greater automation.  Most comparable large Federal programs like
this and even in the commercial world they work with a claims processing
entity, that is the guts and glue of your system.  That is really what allows
to you pay claims, to detect fraud, to monitor outcomes and to in a
standardized audit trail way be able to document care.  I think VA lacks this,
and I think it is something they are trying to move towards, but it is a big
challenge.  But it is a big gap between what VA does and I think what comparable
Federal programs, TRICARE, Medicare and Medicaid do today. 

Mr. BENISHEK.  Thanks for that
answer.  My experience with the VA has been good really.  I thought that they
investigated who I was and what I was doing and the quality of my care.  And we
had to submit a bill and we put our paperwork and we just sent it to them and
they scanned it into the record.  And I thought it was fairly efficient.  But
it is surprising to me that apparently this is not happening throughout the
system.  My local office I thought managed it fairly well, but not that it
couldn't have used improvement.  But I am looking forward to talking to the VA
representative as well. 

So thank you, Dr. PANE.  I yield back the
remainder of my time.

MS. BUERKLE.  Thank you again
to all three of you for being here this morning.  Ms. Doody, congratulations
on 25 years, that is quite a successful milestone.  Thank you all for what
you do on behalf of our veterans. 

I would now like to invite our third panel to
the witness table.  Representing the Department this morning is the Honorable
Dr. Robert A. Petzel, M.D., VA's Under Secretary for Health.  Dr. Petzel is
accompanied by Mr. Philip Matovsky, Assistant Deputy Under Secretary for
Health, Administrative Operations; Ms. Cyndi Kindred, the Acting Deputy Chief
Business Officer for Purchased Care; and Ms. Deborah James, the Non‑VA
Care Coordination Project Manager. 

Thank you all very much for being here today,
and Dr. Petzel, if you could please begin your testimony.



STATEMENT OF THE HON. DR. ROBERT A. PETZEL, M.D., UNDER SECRETARY FOR
HEALTH, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS;
ACCOMPANIED BY PHILIP MATOVSKY, ASSISTANT DEPUTY UNDER SECRETARY FOR HEALTH,
ADMINISTRATION OPERATIONS, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF
VETERANS AFFAIRS; CYNDI KINDRED, ACTING DEPUTY CHIEF BUSINESS OFFICER FOR
PURCHASED CARE, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS
AFFAIRS; AND DEBORAH JAMES, RN, NON‑VA CARE COORDINATION PROJECT MANAGER,
VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS




Dr. PETZEL.  Good morning, chairwoman,
Ranking Member Michaud, and members of the subcommittee.  Thank you for the
opportunity to discuss the Department of Veterans Affairs, VA's Purchased Care
Program.  I am accompanied today by Dr. Philip Matovsky, Assistant Deputy Under
Secretary for Health for Administrative Operations; Ms. Cyndi Kindred, Acting
Deputy Chief Business Office for Purchased Care; and Deborah James, Non‑VA
Care Coordination, NVCC Project Manager. 

VA provides care to veterans directly in a
VHA facility or indirectly through either individual authorizations or through
contracts with local providers.  This mix of in‑house and external care
provides veterans with the full continuum of health services covered under our
medical benefits package.  VA recognizes the improvements that are needed in a
non‑VA care program, including that part of this program previously known
as fee basis.  To address these concerns VAs have developed and managed
multiple initiatives in the non‑VA care program.  These initiatives are
designed to ensure that high quality care is consistently provided to veterans
under these authorities. 

My testimony today will discuss two initiatives,
Patient Centered Community Care, or PCCC, and Non‑VA Care Coordination,
or NVCC.  Both of these will help ensure that high quality care is consistently
provided to veterans regardless if they receive their care in‑house or
from non‑VA care providers. 

I will provide you with an update on the
Project HERO and update on Project ARCH and how our use of these non‑VA
care programs is increasing access to care for rural veterans.

We are aware of the numerous reviews
performed regarding VA's non‑VA care program and we concur with these
findings.  There is much that needs to be addressed.  We are here today to
provide a candid discussion of our efforts to diagnose and overhaul the way VA
manages the care that we acquire from the private sector.  We are transitioning
our non‑VA care program, we are taking a comprehensive look at this
program and assembling what we believe is the right team to achieve lasting,
meaningful results and reform.  We are standardizing our approach to ensure non‑VA
care is cost effective, meets quality standards and is accessible within a
reasonable distance. 

Today I will outline two initiatives, as I
mentioned earlier.  VA developed and managed multiple initiatives to improve
their oversight of the management and delivery of non‑VA care.  PCCC, or
Patient Centered Community Care, will be a network of standardized health care
contracts, including a range of services consisting of mental health,
laboratory and skilled nursing home care.  It is useful to think of PCCC as
really a national extension of Project HERO, and we will discuss hopefully the
details of that as we proceed. 

Non Non‑VA Care Coordination, or NVCC,
is our internal program to improve our referral management practices.  NVCC is
a set of business processes that are going to be implemented through tools and
templates to improve how we justify and authorize non‑VA referrals.  NVCC
will standardize our practices and reduce or eliminate variation within the non‑VA
care program nationally.  NVCC is explicitly addressing major concerns that
were raised by the OIG and other reviews, as mentioned today. 

Additionally, VA has worked to increase
access to health care for rural veterans, as I mentioned before, through
Project HERO and Project ARCH.  The VA recognizes improvements are needed in
our non‑VA care program.  We have reviewed our approach to management
program, we have established a clear corrective action plan that will address
our program shortcomings.  We are also committed to a long‑term strategy
that will change the way we perform key business functions in the managed care
program. 

The corrective action plan will make
measurable progress in reducing improper payments, creating a culture of
accountability, enhancing internal control and data integrity, training and
education, educating the field and establishing internal policies with heavy,
heavy oversight. 

Our long‑term strategy consists of
implementing health care claims processing software, consolidating claims
processing functions, as mentioned by Dr. Payne, and continuing to strengthen
the management and oversight of the program. 

When necessary care is not readily available
at one of our facilities, VA is authorized to provide that care to eligible
veterans outside of VA's health care system.  We expect that these non‑VA
care providers will deliver the same high quality care as our providers do.  We
believe that our current initiatives are major steps in the direction of
providing the care that our veterans need and deserve. 

And we appreciate the opportunity to appear
before you to discuss VA's non‑VA care program.  My colleagues and I are
prepared to answer your questions.

[The statement of Dr. Petzel appears in the Appendix.]



MS. BUERKLE.  Thank you very much.  I
will now yield myself 5 minutes for questions.  After listening to the
last two panels I must say to you that I have grave concerns as to the previous
folks who testified about what is going to happen with this fee basis service and
how flawed the system is.  As in all of these hearings and all of these issues
we talk about, time is of the essence because every day failure at the VA
results in frustration, in this case physical or mental health issues, with our
veterans.  We don't have the luxury of time, which is what I am not sure
VA understands.  Time is of the essence, whether we are talking about
prosthetics, today we are talking about fee basis care.  We have got to get
this moving right away, because every time we fail our veterans are hurt.  I
cannot emphasize that enough that time is of the essence, that we do not have luxury
of time. 

This morning in a statement Mr. Barker
from the VFW said that we have learned the contract care provider through PCCC will be prioritized over other avenues of non‑VA care, which is a
departure from Project HERO.  Now in your testimony you just mentioned that
really you could look at PCCC as an extension of Project HERO so if you could
comment on that.

Dr. PETZEL.  I am I am not aware, Madam
Chairman, of what exactly he's referring to.  But let me explain what PCCC is. 
It is, as I said, an extension of Project HERO.  We want to create nationally
three to five regional contracts that mimic all of what we see in Project
HERO.  The back office functions that Project HERO does would be done under the
contract.  All of the functions that we see in Project HERO would be a part of
that contract.  It would not just be a contract for a group of providers.  I
think there has been some misunderstanding on the part, particularly Humana VA,
of exactly what that would be. 

The priority always is going to be provide
the care within the VA system if it is possible to do that, and perhaps that is
what was meant by the comment.  But in terms of it having less priority than
other kinds of fee programs, et cetera, the problem here is meet the needs of
the veteran, to provide accessible high quality care particularly in rural
areas where we don't have as much of a presence as we would like to have, and
that would be the same priority for the PCCC regional contracts.

MS. BUERKLE.  One of the issues we heard from previous members of
the panels was about primary
care being a part of fee basis service and I would like you to
comment on that.  What is the plan with regard to primary care and mental
health care as well? 

Dr. PETZEL.  To take mental health
care first and quickly dispense of that, mental health care will be a part of
the contract.  It is a part of contracts that we have now, and it will
definitely be a major feature of the PCCC contracts.

MS. BUERKLE.  And if I could interrupt
you because when Mr. Jones testified he talked about that
they had a mental health network in place, but it isn't something that is being
advanced by the VA, the numbers are very poor.  Are we not letting our veterans
know that this mental health service is available through Project HERO? 

Dr. PETZEL.  I can't answer the
question about the use.  We will go back and take a look at the data, Madam
Chairman.  I don't have that information in front of me.  The way the contracts
usually work is that the VA decides that something needs to be done for a
patient.  We don't have the service in a geographically accessible area or
there is a long wait in the VA facility to do that.  And then we would turn to
the contract provider and say we need to have this orthopedic consult.  And
then they would arrange to do that. 

So it is not as much education of the
patients as it is of our providers that those services are available. 

I am going to have to go back, Madam
Chairman, and look to see what the usage patterns are.  I was not aware we were
under utilizing when we need to use utilize the mental health features of our
contracts.



MS. BUERKLE.  Comment on primary care
in the short amount of time I have left. 

Dr. PETZEL.  Thank you.  Primary care
right now is not a part of Project HERO.  It is being used in one of the five
networks in Project ARCH, the network that is involved in Pratt, Kansas.  VA
views primary care as being its primary responsibility.  We have primary clinics
in our medical centers, we have primary clinics in our community based
outpatient clinics, which are extensive.  We have home based primary care where
we reach into the home and provide medical care in rural areas, actually in the
patient's home, and then we have telehome health where we are able to provide
help in remote areas the connections to a primary care provider in a CBOC or a
clinic. 

We view this as our primary responsibility
and do not think that this is an appropriate thing to be contracting for in the
main.  There are some instances in certain very remote areas where we may do
this, but as a part of the contract, it is not featured as a part of either the
HERO contract or the PCCC contracts.

MS. BUERKLE.  Thank you, Dr. Petzel. 
I now yield to the ranking member, Mr. Michaud. 

MR. MICHAUD.  Thank you, Madam Chair. 
And thank you very much, Dr. Petzel, for coming here today.  I have a couple of
questions.  When you look at access to health care.  And I know I sent you a
letter as it relates to the Inspector General report for the Calais CBOC and one
of the problems that came out of that report was the fact that the position
wasn't filled for over a year.  That caused some problems.  I guess my
question is particularly in rural areas, what are you doing to make sure that
veterans can have that good quality access to health care in rural areas? 
And are you looking at contracting out with private providers, or what type of program are
you looking at particularly in rural areas?  I am sure it is not unique just to
Calais in trying to find doctors to go to rural areas for the VA.

Dr. PETZEL.  Thank you, Congressman
Michaud.  You are right it is not unique to Calais, Maine or to Maine in
general.  Our most difficult problem in terms of recruitment is finding primary
care providers for remote areas.  It is a very ‑‑ we are not
unique.  This is a problem that many, many communities in the private sector
around the country are having.  We are trying to do several things.  One in
terms of making recruitment more desirable, we have the capacity to offer
financial incentives, we have some flexibility in terms of salary, we have a
debt forgiveness program where we can forgive a large portion of a person's
medical school debt should they be coming out with that.  We also are using
other than physician providers.  We have scattered now across the country a
number of clinics that are being run under the supervision of physicians by
nurse practitioners and PAs, physicians' assistants.  In Colorado and Utah a unique
program where we are providing telemedicine primary care.  There is a location
in the community where we have telemedicine capability.  There is an individual
that operates, if you will, the tools, often a nurse.  And they are then
connected to either a community based outpatient clinics or either Denver or
Salt Lake City.  And we can actually do a primary care clinic and a primary
care clinic visit follow‑up, if you will, for medical problems in that
kind of a setting.  And then finally, as I mentioned earlier, Congressman,
telehealth, telehome health and home based primary care are the things that we
are trying to do. 

I want to again emphasize the fact this is
not a problem that is unique to us.  We think we have a number of very good
alternatives to address the problem, but it still I think quite honestly is
going to remain a problem.  The VA is in a unique position in terms of
telehealth solutions here particularly.  We have the largest telehealth network
in the country.  And I think we are the only or the first organization that has
pioneered this telehealth primary care clinic.  It may be a solution that we
will be using around the country.

MR. MICHAUD.  Thank you.  My next
question actually, the previous panel talked about additional services, whether
it is the ARCH program or HERO.  What is the VA doing to expedite the needs out
there, particularly the needs of programs for additional services?  And I
actually heard one of my colleagues earlier talking about veterans having to travel
long distance and he is getting a lot of calls from the veterans that the VA is
not providing those services.  Likewise we keep track of the complaints
we are getting from our veterans in Maine, and a lot of it has to actually deal
with traveling a long distance.  For instance, cancer treatment, that is a big
issue, and if you look at veterans in different parts of the State, if they
traveled to Massachusetts it could take 10, 11 hours and that is a huge
concern.  The bigger concern I have is that I think part of that is because of
the VERA model and the VA and the different facilities being reimbursed because of
the veterans they see. They are requiring veterans to go
longer distances.  It is only a thought on my part to go to
Massachusetts, so they can get the numbers up.  This is not veteran
centric, it is VA centric. 

Can you answer the question about additional
services? 

Dr. PETZEL.  I will.  I would like to
give, Congressman, a little bit of background.  First of all, the fee basis work
does count in the way they get reimbursed.  So it is not a disadvantage to the
network necessarily that someone would be seen locally as opposed to going to
the Boston VA medical center. 

One of the things that has been commended on
by others is the huge growth in the non‑VA care program.  7 or
8 years ago it was a 1,700,000, now it is about 4.6 billion.  This is
because we have expanded dramatically our use of fee basis.  As we do more of
this, as we have more community based outpatient clinics, the need is noticed
by both patients and providers that now these people that are being seen in the
CBOC need to have specialty care.  And my example in the network I ran was
Williston, North Dakota, as far from the Fargo VA hospital as Atlanta, Georgia
is from Washington, D.C. and to send somebody from Williston to Fargo for an
MRI or a CT scan is just not conscionable.  So we now buy that service in
Williston. 

So the expansion that you see is the fact
that we have expanded dramatically, Congressman, the services.  There are many
other things that we need to be looking at though.  I am pleased to say that
the Rural Health Office that runs Project ARCH is in the process of evaluating
the other kinds of things, such as women's health services, et cetera, that we
might be able to offer under Project ARCH. 

I absolutely agree with the way I know you
and Chairwoman Buerkle feel, and that is care closer to home is better
delivered care.

MS. BUERKLE.  The chair recognizes the
gentleman from Michigan, Dr. Benishek. 

Mr. BENISHEK.  Thank you, Madam
Chairwoman.  Dr. Petzel, I have finally gotten to you.  The VA policy to
provide eligible veteran care within the VA whenever feasible, could you please
provide to the committee the complete copy of the policy, as well as any
additional guidance given to the field as to how this takes place? 

Dr. PETZEL.  Yes, sir, we will do
that.  Very quick answer to that if you don't mind.

Mr. BENISHEK.  That is all I want from
that question.  How does the VA defined extraordinary distances from a
veteran's home? 

Dr. PETZEL.  We have two
definitions of ‑‑ we have a definition for rural care,
ruralness, and then people living in highly rural areas.  It can be defined in
two ways.  It can be defined by distance, that is how far someone has to
travel.  Is it 60 miles or is it 200 miles.  And it could be defined
by time.  And it matters that there are differences.  In the Midwest where
travel is on a freeway the distance may be long but the time could be
relatively short,

Mr. BENISHEK.  Let me give you example
of what I am talking about.  This is a letter to me from the VA based on this
case I mentioned before.  Based on your inquiry, all available medical records
and administrative information has been reviewed.  Non‑VA care is
considered as an alternative to VA care when VA care is not available.  The
veteran's ability to travel is also a consideration.  In this case VA care is
available within the State of Michigan and the patient is considered capable of
travel.  So he is welcome to take advantage of the available health services in
the State of Michigan. 

So the place they wanted him to travel was
235 miles from Alpena to Detroit.  So 4 hours and 7 minutes,
according to the Google map, one way.  So I mean to me this is what
disingenuous, the VA care is available within the State of Michigan.  I mean
this distance is further than Detroit is from Fort Wayne, Indiana, it is
further than Detroit is from Cleveland.  It is a long way for something that is
available in the local town 10 minutes from his home, besides the follow‑up
with the blood tests and stuff.  So this concerns me.  And I just want to get
your explanation for this.

Dr. PETZEL.  Well, I can't explain the
case without taking a look at it.  What I would like to do, Congressman
Benishek, is to take the information about this patient and find out what is
going on and get back to you immediately. 

Mr. BENISHEK.  Well, I understand. 
You yourself stated the fact that you have seen these patients between Atlanta
and Washington.  This is something like that.  It concerns me that there
doesn't seem to be any standards or criterion that I have been able to find out
as to what makes this determination other than what you vaguely outlined. 

The cost of all this of course is one of our
main concerns.  To me that should be something that is automatic and you guys
have to do a lot better job in organizing that.  But what really concerns me is
the access to care.  This fellow is 70 years old, he has chemotherapy for
colon cancer and it is okay for him to travel 4 hours there and
4 hours back right after his chemotherapy.  That doesn't seem in my view
as a physician to be adequate access to care, frankly.

Dr. PETZEL.  I would agree with you
and we will take the information and find out what the problem is with
that case.  Thank you. 

Mr. BENISHEK.  Well, that is all I
want to go into.  Thanks.

MS. BUERKLE.  Thank you very much.  We
are going to have a second round of questions, Dr. Petzel, if that is okay with
you.  So I will yield myself 5 minutes for questions. 

I guess my concern is we heard from previous
testimony that Project HERO is expiring.  There is some confusion among the
VISNs and among the veterans as to‑‑ who is going to
continue on with Project HERO, who is not.  Now we are being told that PCCC will be on the heels of Project HERO to carry that forth.  But what we are
hearing from the veterans service organizations is that there is confusion
and uncertainty and there is no formal plan in place.  What is your vision for
a time frame for knowing what is going to happen for the veterans and for these
critical services they get through this program? 

Dr. PETZEL.  Well, they should know
now.  And if there is that confusion and if there is a lot of knowledge of what
is going on we will correct that immediately. 

Let me go through the scenario as I see it
occurring.  We are about to send out the first RFI for the new set of
contracts.  And in the meantime the individuals that are enrolled in Project
HERO have several alternatives.  One is that they can continue using Project
HERO and using that contract.  And we will go back again and make absolutely
certain that all of those VISNs that are involved with HERO understand that
that is available. 

But an alternative for that is to use regular
fee basis.  And if there is any fear that a veteran or anyone has because Project
HERO is going to expire and maybe PCCC isn't spun up or whatever, we will use
individual fee.  I know of no instance right now where a veteran has been
dropped from fee care, has lost their provider and we will not let that
happen.  We want these individuals to have continuity of care with the people
that they are involved in now.  And we have the ways to do that as we are
bringing PCCC on line.

MS. BUERKLE.  My concern is
that VA and the health care that it renders to our veterans is very good
care.  In Syracuse we have a wonderful VA hospital.  My concern is the
business portion of this like the processing of claims and making sure that all
of the providers get paid and paid appropriately and we are not wasting money,
we are not under paying or over paying claims.  I will just say
in my previous life I worked for a hospital who had fee basis.  I worked for
Upstate Medical Center but we accepted VA patients from the VA hospital
locally.  And when it came time to pay those claims they couldn't tell us what
methodology was used to reach the fee.  There was no standardization.  Depending on the situation,
the same procedure, be at a different payment
rate.  So I say to the VA, look, you really render health care fairly well and
we want you to make sure our veterans have access to care in the community and
to have rural health care.  This business piece you don't do so well.  Why do
you want to hang on to that?  Why don't we have VA focus instead on care and let
the claims be processed by someone who does it and does it well and takes care
of that piece? 

Dr. PETZEL.  Chairman Buerkle, I do
share your concern about the business processes.  Historically we have no
argument with the findings from the National Academy of findings and from the
IG findings.  We have incorporated all of their recommendations into our plan
for moving forward. 

Now you need to think about fee care in
several different categories.  The contracts that we will have under PCCC which
right now are 21 percent of our fee care and probably will increase somewhat
with the contracts.  All those back office functions will be done by the
contractor as they are being done in Project HERO.  That is good, that
phenomena is going to continue.  But there is a large segment of our fee that
is not done by contract and quite a bit of it I think will remain at non‑contract. 
We need to have in place the management processes to be able to do that
management effectively. 

There are six primary steps in fee
management.  The first two of those steps are being addressed right now.  We
have a champion facility in each one of our networks under NVCC that has
addressed the two first issues that will be rolled out, the first two steps
that will be rolled out across the country and in place and operating before
the end of 2013.  In addition that step two we have revised a handbook, it is
going to be out by the 1st of January.  We will have standard operating
procedures, we will educate our people about how to manage this.  And then finally
when that is accomplished through 2013 we are going to consolidate our business
practice, we are going to consolidate our payment into probably three to five
regional payment centers to gain the efficiencies that we need, to gain the
capacity to have good oversight over that payment. 

This is our plan moving forward.  We have
incorporated industries and oversight recommendations in that plan.  We have
the right people in place now, and I don't think we did previously.  We have a
new chief in the business office.  We have got Ms. Kindred sitting next to me
in the business office, and we have got Mr. Matovsky overseeing all of
those operations in his role with operations. 

So I think we can do this.  I don't think we
can, I know we can do this in‑house.  And most importantly it is going to
be less costly and less wasteful for to us do it in‑house.  Because we
have got the people, we don't need to hire anybody new.  We have got all the
people there that we need to do it.  We can do it.

MS. BUERKLE.  Thank you.  Can you
provide the plan to the committee, please? 

Dr. PETZEL.  We will.

MS. BUERKLE.  Thank you.  I now yield
to the ranking member, Mr. Michaud. 

MR. MICHAUD.  Thank you very much,
Madam Chair.  They just called the vote, so I have a quick question.  You
mentioned you want to consolidate into five areas for this.  I guess my only
concern is consolidation probably is good, you probably could save more money. 
It depends on where you consolidate.  I know when we went through the whole BRAC
process, the Department of Defense did consolidate
the DFAS facilities.  But when they originally were going to do it before
the Commission made a different decision, the consolidation efforts were actually
consolidated in a less efficient facility, primarily because of a
lot of issues when you look at employer of choice, and that is a big issue. 
If you have a huge turnover, particularly if you locate these
facilities in large metropolitan areas where employees have an option of moving
around anywhere they can, the turnover rate is huge and you might not get the
best output and simply because you are consolidating it doesn't mean it is
going to improve the system.  So I would caution you on how you move forward in
that particular consolidation process because it might not work out well.  And
so do you want to comment on that? 

Dr. PETZEL.  I would.  But before I
do, Congressman Michaud, I need to mention the fact that we have signed a
contract with Martha's Vineyard hospital, care will begin being delivered there
on October 1st. 

MR. MICHAUD.  Okay, thank you.

Dr. PETZEL.  So we have solved this
problem.  We need to go back and look at what happened with the lapse of that
contract, et cetera.  That is another issue. 

I would use the example in terms of
consolidation of the CPACS, this is the MCCF collection process.  We consolidated
that into seven areas and they happened to be pretty rural and remote,
Leavenworth, Kansas and those sorts of places.  And we have seen a substantial
jump in the revenues that we are collecting, indicating to us we have a more
efficient process, better control of our processes, et cetera.  The
consolidation in fee will be primarily the payment part of this.  We have had
issues, as you have pointed out, with payment in South Carolina, in Texas. 
Particularly there have been long delays and inefficient payment.  We think we
can add substantially to improving that by consolidation.  We think that we can
tremendously improve the improper payments, both overpayments and underpayments
by consolidating.  I do believe this will be an effective thing and we will be
careful about where we do our consolidation.

MR. MICHAUD.  Thank you very much. 
Really appreciate your testimony today and look forward to working with you as
we move forward in this area.  Thank you.

MS. BUERKLE.  Thank you.  In the plan
that you are going to submit to us, Dr. Petzel, I would trust that there will
be an IT plan included in that because one of the issues we heard this morning
is lack of an IT plan, and that is such an integral part of success here. 

If there are no further questions, I move
that the members have 5 legislative days to revise and extend their remarks and
to include extraneous material.  Without objection, so ordered. 

Before we end today I would just like to
say that I think that given VA's continued struggles in managing the fee
programs and the serious doubts that have been raised here today about VA's
ability to properly construct staff and manage an in‑house program that
can provide a level of business related service, patient support and patient
coordination and provider networks that is currently available under Project
HERO, I would really respectfully request that rather than continue down this
path that you would stop and you would think about what you have heard here
today, and that you would come back to this committee with a plan that really
incorporates the successful elements of Project HERO.  We have heard good
things about Project HERO.  Why are we trying to reinvent the wheel?  Let's
take those good pieces and let's incorporate it going forward.  And so I would
respectfully request that you would be open to the testimony you heard here
this morning and incorporate that into the plan that you are going to give to
this committee. 

Would you like to comment? 

Dr. PETZEL.  I would, Madam Chairwoman. 
We are incorporating all of those processes from Project HERO into the PCCC
contract.  That will be done almost exactly in terms of its processes as those
other contracts have been done.  We have done that, we absolutely have done
that.

MS. BUERKLE.  I hope so.  We will
look forward to seeing the plan. 

Dr. PETZEL.  Okay.

MS. BUERKLE.  Once again I want to
thank all of the panel members for being here today, the subcommittee members,
and of course my ranking member, Mr. Michaud.  To the audience thank you for
participating here today.  We here in Washington and this government has no
greater responsibility or moral duty than to make sure our veterans have the
services and the care they have earned and they richly deserve.  And as we end
our hearing today always keep in our thoughts and prayers the men and women who
serve our Nation and our veterans.  We are a grateful Nation, and we thank
you for your service. 

This hearing is adjourned.

[Whereupon, at 11:25 a.m., the subcommittee
was adjourned.]

 


APPENDIX


Prepared Statement of Chairwoman Buerkle

Good morning. This hearing will come to order.     

Welcome
and thank you all for being here for today’s hearing, “VA Fee Basis Care:
Examining Solutions to a Flawed System.”

Recent
years have seen tremendous growth in VA’s Fee Care program, with independent
assessments estimating growth of close to 300 percent from fiscal year 2005 to
today.  

Unfortunately,
however, as the program has continued to grow, so have the management and
oversight problems that have plagued the system through which the Department of
Veterans Affairs (VA) provides care to veterans outside the walls of a VA
facility. 

It is seriously flawed, if not altogether
broken. 

In
the last three years alone, the VA Inspector General has issued no less than
seven separate reports detailing in-depth the serious deficiencies and
challenges the  Fee Care Program faces,
including inadequate fiscal controls that have resulted in hundreds of millions
of dollars in improper payments.

Further, last September, the National
Academy of Public Administration (NAPA) issued a white paper on VA’s Fee Care
Program that drew alarming conclusions about VA’s ability to effectively manage
and oversee care and services under the program.

According to NAPA:  VA’s Chief Business Office has exercised
limited and ineffective oversight of the Fee Care Program; the Program itself
lacks operational objectives, performance goals, or, a clearly defined strategy
for managing expenditures; and, VA doesn’t understand what services are being
procured through the Fee Program and at what cost. 

There
have been some bright spots. Congressionally-mandated pilot programs – Project
HERO and Project ARCH – have shown promising results in achieving a more
patient centered, coordinated, and cost-effective delivery model for fee care.

Small pockets of success - despite VA’s
reluctance to implement and utilize these programs to the fullest intent of
Congress.

Recognizing
the substantial deficiencies with the Fee Program, VA has begun implementing
two new initiatives – the Patient-Centered Community Care (PCCC) Program and
the Non-VA Care Coordination (NVCC) Program.

The
Department is going to testify today that these two initiatives will address
all of the challenges the Fee Program faces and, “…ensure veterans receive
effective and efficient non-VA care seamlessly.”

I
wish that I could believe that was true. 
However, given the history of failure we’ve seen already, I have serious
reservations that the actions VA is taking will address the core challenges VA
faces and not simply lead to further fragmented care and an inability to
deliver quality care in rural communities. 

Most
notably, VA lacks the information technology (IT) and administrative services
solutions essential to establish in-house the clinical information sharing and
electronic claims processing vital to a successful care-coordinated and
veteran-centric program. 

VA
spent approximately $4.6 billion dollars to purchase care in the community for
veteran patients last fiscal year. That is billion, with a “b.”

We cannot afford to allow VA to continue to
flail and struggle to test new programs in an inherently flawed system.  We cannot rely on promises from VA that they
can finally get it right.  

Our
veterans are everywhere; VA can’t be.

And,
at the end of the day, what fee care is about is the effective and efficient
delivery of care to veterans where they need it, when they need it.

Getting
it right is about honoring their preferences, choices, and daily lives as well
as their service to our country.  

Getting
it right is about telling a Vietnam or Korean-era veteran that he doesn’t have
to travel 4 hours to the nearest VA medical center for his cancer treatments.

He can go to a hospital closer to his home
and spend the time he would have spent on the road getting better.

Getting
it right is about telling a Gulf War veteran that she doesn’t have to take a
day off of work to drive to the VA clinic two towns over for a physical.

She can go to the doctor down the street if
she would prefer and get to work on time.

Getting
it right is about telling a young veteran, recently home from Iraq or
Afghanistan, that he doesn’t have to wait all day in a VA waiting room to see
his doctor.

He can choose another provider who can see
him now and spend the afternoon with the people he missed while he was
overseas.

That
is what we are talking about today. And those stories – stories that my
colleagues and I hear every day from veterans in our communities who are fed up
– are what I want all of us to keep foremost in our minds this morning as we
talk about how to make this program better and get it right.

I
now yield to the Ranking Member, Mr. Michaud [ME-SHOW] for any opening
statement he may have.

Prepared Statement of Adrian Atizado

Madam
Chairwoman, Ranking Member Michaud, and Members of the Subcommittee:

Thank you for
inviting the Disabled American Veterans (DAV) to testify at this important
oversight hearing of the Subcommittee on Health.  DAV is an organization of 1.2 million wounded
and injured veterans, and is dedicated to empowering veterans to lead
high-quality lives with respect and dignity; ensuring that veterans and their
families can access the full range of benefits available to them; fighting for
the interests of America’s injured heroes on Capitol Hill; and educating the
public about the great sacrifices and needs of veterans transitioning back to
civilian life.

We appreciate the Subcommittee’s leadership
in overseeing the Department of Veterans Affairs (VA) contract and purchased
health care programs, including fee basis medical services, contract
hospitalization, and scarce medical specialist services contracting, on which
many service-connected disabled veterans must rely for their care.  DAV recognizes these programs are essential
in providing access to vital health care to veterans, but significant
improvements are needed. 

The delegates to DAV’s most recent
National Convention passed Resolution No. 212 regarding VA’s purchased care
program.  Our resolution urges Congress
and the Administration to conduct stronger oversight of the non-VA purchased
care program to ensure service-connected disabled veterans are not encumbered
in receiving non-VA care at the Department’s expense. 

This resolution also urges VA to
integrate and promote care coordination with all non-VA purchased care programs
and services.  Such coordination should
include provider credentialing, case management, ensuring quality of care and
patient safety, timely processing of claims, reimbursing at adequate rates,
integrating records of care with VA’s electronic health record, and scheduling
appointments through a centralized process. 
With the exception of the ongoing Project on Healthcare Effectiveness
through Resource Optimization (Project HERO) pilot program,[1]
today’s VA contract and purchased care programs do not exhibit most of these
attributes.

Under current law, VA practices
three basic approaches in furnishing non-VA care: pre-authorized
fee-for-service arrangements (called Non-VA Fee Care); contract care, including
obtaining scarce medical specialists; and sharing agreements with the
Department of Defense and VA’s academic affiliates and their associated
professional groups. 

Non-VA Fee Care

The statutory authority for fee
basis health care is title 38, United States Code, section 1703.  This section authorizes VA to contract for
inpatient care and limited outpatient care by contract or individual
authorizations for certain categories of veterans, when VA facilities are
unable to provide needed care, or when VA facilities are geographically
inaccessible to those veterans.  This
contracting authority is not limited to contracts that contain prices
negotiated between VA and non-VA providers, but of individual authorizations
that serve as price offers to non-VA providers chosen by eligible
veterans.  Contract hospitalization is
generally reserved to emergency situations for which VA reimburses contract
hospitals at Medicare rates. 

Notably, the purpose of fee-basis
health care is addressed in the regulatory authority which implements the
statutory authority granted by section 1703. 
Specifically, title 38, Code of Federal Regulations, section 17.52,
allows for individual authorizations when demand is only for “infrequent use.”  Over the past several fiscal years, however,
expenditures for fee basis services have been rising dramatically.  In fiscal year (FY) 2005, VHA spent
approximately $1.6 billion serving approximately one-half million veterans.  By FY 2011, that amount had increased by 185%
to approximately $3 billion, serving nearly one million veterans.  This expenditure now comprises an estimated 9
percent of VHA’s total medical services appropriation.

In addition to our organization’s
concern regarding the lack of care coordination and rising costs in fee care,
specific concerns have been raised by others. 
The program is highly decentralized to the facility level, and lacks a
standardized business process across the VA health care system.  These concerns and others were raised by the
National Academy of Public Administration (NAPA) in its 2011 analysis of VA’s
organizational model supporting the fee-basis program, and by VA’s Office of
Inspector General (OIG) regarding the significant number of improper payments and
the need for improvement in risk assessment in fee care. 

Generally, fee basis and contract
hospitalization are unmanaged, are not governed by a program office locally,
are not standardized or consistent across the system, do not exhibit
“patient-centered care” attributes that characterize VA’s internal care
programs, and their costs to VA have surged over the past decade without
sufficient action being taken to ensure program integrity, efficiency, and
integration in the Department’s health care system.

In general, VA agreed with the
observations and recommendations of OIG. 
DAV is aware of the Department’s efforts to address these concerns.  Among such efforts is the Non-VA Care
Coordination (NVCC) project, which is a focus of today’s hearing.

Non-VA Care
Coordination

The Non-VA Care Coordination (NVCC)
project is part of a major initiative VA calls Health Claims Efficiency
(HCE).  The purpose of HCE is to
coordinate and accelerate the ongoing cost savings initiatives with new initiatives
to allow VA to enhance services to veterans.[2]  Specifically, this initiative includes
reducing operational costs and streamline program deployment to enhance program
efficiency, achieving cost savings through consolidated purchasing and reducing
variability in non-VA care coordination clinical and business practice.

Currently VA lacks industry
standard automated tool sets to identify and take action on improper payments,
including fraud, waste and abuse. 
Further, while fee care’s information technology systems and
infrastructure have been improving, they have not been updated for cost
effectiveness due to local variations in how they are established.  DAV believes VA should continue to pursue
private sector IT solutions to modernize the processing of non-VA health care
claims.

With care coordination included in
its name, a fully implemented NVCC as envisioned by the Chief Business Office
will include improvements to patient-facing aspects of fee care.  These include timely patient notification of
Fee Care approval, appointment scheduling assistance, tracking appointments for
completion, health care information sharing and timely notification of results
to the patient as well as the VA provider responsible for the fee care
referral.

DAV applauds VA for taking steps in
the right direction to meet the goals of DAV Resolution No. 212 to provide
proper care coordination in fee care and to make care coordination a standard
business practice.  To ensure these new
processes are being achieved in each VA facility, we have requested from VA
results for key metrics for this and other focus areas.  Until DAV has had the opportunity to review
these results, we are unable to provide further comment on NVCC and whether this
initiative will address concerns outlined in this testimony. 

The 2011 NAPA report observes that the
organizational, administrative, and technological systems used to operate and
manage fee care have not kept pace with the unprecedented growth of fee care.  Unlike OIG reports, VA comments were not part
of the report and DAV is unaware of any public response from the agency
regarding the NAPA report.

Madam Chairwoman, it should be
noted that VA is authorized to attempt to recover any improper payments.  VA also has the authority to bill third-party
health insurers for non-VA care.  DAV
believes that internal controls should be improved to help prevent improper
payments for non-VA fee care, and recovery auditing and third party billing
should be included as a part of this Subcommittee’s oversight and the
Department’s overall strategy to improve VA’s purchased care programs.

Project HERO and Patient Centered Community
Care

Under section 8153, the VA exercises discretionary authority to use
contracts and sharing agreements with non-VA providers as a means to provide
hospital care and medical services (defined in title 38, United States Code,
section 1701) to all enrolled veterans.  The
stated purpose of VA’s contracting authority under section 8153 is “[t]o
strengthen the medical programs at Department facilities and improve the
quality of health care provided veterans under this title by authorizing the
Secretary to enter into agreements…while ensuring no diminution of services to
veterans.”  Since the law does not
address quality of care and care coordination, it only partially meets the
goals of DAV Resolution No. 212.

VA has informed DAV of its plan to
rely on the authority of section 8153 to create a new approach to centrally
supported health care contracting, to be provided throughout the VA health care
system.  The program is to be entitled
“Patient Centered Community Care” (PCCC). 
This effort is described by VA as a “soft approach” to contracting, but
that it will apply lessons learned from Project HERO, now in its fifth and
final year.

According to VA, the goal of PCCC
is to create centrally supported health care contracts available throughout the
VHA to provide veterans coordinated, timely access to high quality care from a
comprehensive network of VA and non-VA providers.   VA has completed a draft specification for
PCCC, and we understand PCCC may include contracts covering five regional
subdivisions with standards for access to care, quality of care, and medical
documentation to facilitate the provision of care.  Further, use of contract services under the
PCCC umbrella will receive priority over other non-VA care options.

VA has repeatedly assured DAV that
the care coordination that patients experienced under Project HERO will be made
part of PCCC, but as of this date we are uncertain of these particulars.  Information in more concrete terms will
become available in VA’s official Request for Proposals (RFP), which VA
currently projects will be released in November 2012, with contract awards in March
2013.  Given the national scope and
complexity of this change by VA, the challenging history of contract care, and
the current leadership vacuum in VA’s Chief Business Office, we believe these
plans may be overly optimistic.  While
building on the successes in Project HERO, this is an untested concept for the
VA health care system, and one that is not intended for pilot-testing for
effectiveness. 

DAV considers Project HERO to have
been a moderate success story.  The Chief
Business Office in VA Central Office and the contractors, Humana Veterans
Healthcare Services, Inc., and Delta Dental, responded effectively to veterans
service organizations’ early expressions of concern about the potential for
Project HERO to be corrosive or even destructive to Congress’s intention that
VA’s contracting authorities be used to strengthen medical programs at VA facilities
and improve the quality of health care while ensuring no diminution of services
to veterans.  While Project HERO is
meeting those goals now, VA field facilities have been slow to utilize Project
HERO principally because Project HERO lies low on a multi-tier algorithm used
by VA fee-basis clerks, after their considering existing sharing agreements and
availability of accessible services at other nearby VA facilities, but before
authorizing unmanaged fee-basis services as described above.  As a result, the volume of referrals to Project
HERO has been low. 

We believe the current approach in
Project HERO is a good model for VA to pursue as it moves to the next phase in
reforming non-VA purchased care.  We have
concerns nevertheless that VA will struggle to establish in-house the kinds of
services, supports and provider networks that are available within the large
managed care systems such as Humana and Delta Dental in fashioning the PCCC
effort.  In addition, we are concerned
PCCC contractors will have too short an implementation period between the time
contracts are awarded and when they become operational to establish robust
networks of providers.

We applaud VA for announcing its
intent to extend Project HERO for six months beyond the final option year that
ends on September 30, 2012. 
Nevertheless, DAV urges VA to extend Project HERO for such additional
time until VA has built its own capacity or determines to rely on a contract
managed care firm (or firms if the program is regionally dispersed) to handle
the workload of VA purchased care. 
Ending the Project HERO pilot program premature to VA’s completing its
new initiative would leave ill and disabled veterans, including many of our
members, in jeopardy, and could lead to higher costs for non-VA care through
the legacy fee-basis program.  When VA
reaches a confidence level that PCCC is an adequate replacement for Project
HERO or any other non-VA health care contract, then and only then should it be
ended.

Need for
Reorganization of All Fee and Contract Services

VA has a long and distinguished
record of providing social support services (including health care services) to
veterans, but VA continually struggles to provide adequate business-related
services as a part of its responsibility. 
We see those problems reflected brightly here.  We have witnessed this struggle year-in and
year-out within the activities of the Chief Business Office, both in terms of
its managing VA first- and third-party collections from veterans and health
insurers, as well as its lack of management controls over these contract health
care programs.  With this backdrop we are
doubtful that VA will be able to properly construct, staff, and manage a
program overseeing VA contract health care that will perform as well as the
Project HERO contractor is performing now. 
We urge the Subcommittee to closely examine VA’s plans and make its own
determination, but we hope the Subcommittee and VA will take our concerns into
account.  At minimum, we believe PCCC
should be judiciously deployed and carefully expanded to ensure veterans are
unencumbered when accessing contracted health care.

Madame Chairwoman, given the cost
of this program and its importance to DAV and our service-disabled members, we
believe bolder action is required than is currently envisioned by VA in NVCC
and PCCC.  In our view, the VA Chief
Business Office is not the correct organization to build this new system.  That office should concentrate on its
original and basic mission to improve VA revenue performance for first- and
third-party payments.[3]  VA instead should establish in Central Office
a new contract care services management office, charged with the responsibility
to use managed care industry best practices in establishing new approaches to
VA purchased health care for veterans, taking fully into its jurisdiction all
non-VA purchased care under current law. 
All of these programs have been criticized at one time or another by
external reviewers and this may be VA’s best opportunity in years to respond
effectively to improve them.  We believe
a new office of this type—if staffed by professionals experienced in private
health insurance and the managed care enterprise—could concentrate these similar
programs (in which VA pays a non-VA party for the care of a veteran, dependent
or survivor) under one management structure, integrated with the VA health care
system; clarify accountability for policy and practice effectiveness across the
system; and set standards for compliance and reporting.  

This new office should coordinate
with the TRICARE Management Agency (TMA) in the Department of Defense in
developing its plans and policies, and as well with the Center for Medicare and
Medicaid Services (CMS) of the Department of Health and Human Services.  The TMA office has more than two decades of
experience in dealing with managed contract care policy and practice for a very
large constituency of military service members, their families and the military
retired community.  The CMS is the
federal government’s expert on both health care and pricing policies. 

The end goal of this new office
would be to allow veterans and other eligible family members to live a higher
quality of life with respect and dignity, through receipt of better services,
including care coordination, continuity and quality of care, at a defensible
and lower cost to VA and taxpayers. 
Absent this kind of bold action and change, DAV fears that VA’s poor
record in the management of contract and purchased care will not be corrected
or improved. 

Madame Chairwoman, thank you for
this opportunity for DAV to testify on an important topic to our members.  I would be pleased to address your questions,
or those of other Members of the Subcommittee.



[1]Project on Healthcare Effectiveness through Resource
Optimization (See H. Rept. 109-305 for the Military Quality of Life and
Veterans Affairs Appropriations Act of 2006 (P.L. 109-114).  Project HERO’s dental contract with Delta
Dental of California will end September 30, 2012. Project HERO’s medical and
surgical contract with Humana Veterans Healthcare Services, Inc. is intended to
be extended for six months to March 31, 2013.

[2]
Department of Veterans Affairs Strategic Plan Refresh, FY 2011-2015.

[3] In May
2002, VA established the Chief Business Office in its Veterans Health
Administration (VHA) to underscore the importance of revenue, patient
eligibility, and enrollment functions; and to give strategic focus to improving
these functions by directing VHA’s Revenue Office and to develop a new approach
for VA’s first- and third-party collections activity.


Prepared Statement of Shane Barker

Madam Chairwoman, Ranking
Member Michaud and Members of this committee, on behalf of the more than 2
million members of the Veterans of Foreign Wars of the United States (VFW) and
our Auxiliaries, I would like to thank you for the opportunity to present our
views on the Fee Care Program. 

The VFW is very appreciative
of the efforts made by this Subcommittee to better understand and address a
persistent, growing challenge for VA. 
Your interest in this issue is critical to affecting positive change as
we enter into a pivotal time in the life of the Fee Basis Program.  Our veterans are from all walks of life and
live in urban and rural areas.  Some live
in what we describe as highly rural areas, and their access to care is limited
as a result.  VA has for decades operated
the Fee Basis Program to meet their needs by allowing them to utilize civilian
doctors as part of the care VA provides. 
I would like to take this opportunity to identify some shortcomings of
that program, and how we can address them to both save money and enhance the
quality of care we provide.

We have no shortage of
evidence to convince us that change is necessary.  Between Fiscal Year (FY) 2005 and FY 2011,
overall costs for the Fee program increased nearly 200%, from $1.6 billion to
nearly $3.9 billion per year.  During
this same period the population size rose 95%, adding nearly 400,000 patients
to the program and bringing the total to 893,421 unique veterans.  However, VA constrained overall cost per
unique veteran to 33%.  During that time,
it rose from $3,246 to $4,331 per year. 
For all the cost increases and more veterans utilizing the program, care
is not coordinated between the private sector and VA in the traditional Fee
program.  Because of inadequate
technology and an aversion to change that persisted within VA for years, VA did
not consider this a priority.  We hope
that sentiment is changing, and are hopeful about the direction in which VA
seems to be heading. 

As we face the reality of
fiscal restraint, cost increases of this magnitude rightfully cause us to pay
attention and work to enhance the performance of this program.  The VFW is convinced that it can be done, and
we want to be a part of the solution. 
This committee obviously understands the need to restrain unnecessary
growth in the Fee program to ensure the program survives over the long-term,
and we appreciate your efforts to put it on a more solid footing.

Fee Basis Care was created to
ensure that a civilian doctor is meeting the needs of veterans when VA is
unable to meet the demand.  It has been
in place to meet the needs of eligible veterans for decades, ensuring that
those who live great distances away from a VA medical facility or require
non-VA provided specialty care are granted care through a civilian doctor
closer to home.  VA is mandated to
consider allowing a veteran to use the Fee program based on distance from VA
facilities, their portfolio of services, wait-times, and the availability of
the specific doctors and treatments a veteran requires.  Obviously, this function is a necessary and
inextricable part of VA’s mission.  VA’s
ability to decide when a veteran should be able to utilize the Fee program is
an inherent strength of the program, and the VFW strongly believes that VA must
retain absolute responsibility for their patients when they receive care in the
private sector.  There are many
implications that emanate from this conviction that VA retain ultimate control
for every veteran they send into the private sector, and VA bears the burden of
responsibility for their well-being regardless of where they seek treatment.

The shortcomings of the Fee
Basis program were painstakingly detailed in a September 2011 report of the
National Academy of Public Administration (NAPA).  The report paints a stark picture of the
current state of the program, and validates many of our long-standing concerns
with the lack of care coordination and spending controls.  Of their many specific and disconcerting
findings, the totality of the situation led NAPA to find that VA is utterly
lacking in the ability to discern the return on investment for the
program.  There is not one single factor
that would lead NAPA to make such a serious claim; rather, the numerous
inefficiencies taken as a whole are the culprit.

Administration
from VA Central Office

The Fee program is
orchestrated from the Chief Business Office (CBO) in VA Central Office
(VACO).  However, their influence over
how the program is operated at lower levels in the system is limited.  CBO enjoys limited cooperation with the
field.  CBO gathers no standard
performance metrics, has no mechanism to receive documentation from providers,
and does not validate credentialing of private physicians.  CBO has no way to verify that billed services
have been rendered, and far too often pays rates that are far too high for
billed services.  VACO also does not
audit how Fee Basis dollars are spent at the local level.  To our knowledge, they do not conduct the
oversight needed to analyze when the Fee program operates within budget, and
when available funds are exhausted earlier than expected. 

NAPA recommended
consolidating the authorization and claims processing function of the 100 plus
Fee Basis program offices nationwide, eliminating the vast majority and
creating a regional system of three to five sites.  They make clear in their report that this
change would not centralize clinical decisions or leave them to the
bureaucracy.  Clinical decisions would
still be made by medical staff.  The VFW
believes this recommendation makes sense. 
However, in considering such change, the VFW hopes the committee will be
mindful that the lack of a comprehensive IT solution may complicate a regional
approach to administering the Fee program.

Technological
Limitations

For years VA has relied upon
antiquated technologies that are simply out of step with the private sector and
among other federal agencies such as the Center for Medicare and Medicaid
Services (CMS). Policymakers in the Chief Business Office have very limited
access to clinical data from veterans episodes of care in the civilian
sector.  This is an enormous disadvantage
that directly impacts the quality of care for veterans.  It slows down civilian and VA doctors by
eating away at their time and making decisions more complicated.  It also hinders VA’s ability to detect and
prevent improper payments, creating an environment that is susceptible to
waste, fraud and abuse.

The Fee program does not have
the ability to broadly automate incoming or outgoing bills or payments. By way
of comparison, the Department of Defense (DoD) aggressively pursues automation
wherever possible.  They are currently
contracting with Wisconsin Physician Services (WPS) through the TRICARE
Management Activity (TMA) to process the vast majority of their claims.  In doing so, TMA saves both time and money
for DoD, allowing that department to focus on core competencies.  We believe it is time for VA to consider what
they can do to bring their operations in line with industry standards and
generate dollars through such efficiencies. 

To their credit, VA is
working to resolve many of these issues. 
VA has openly acknowledged the shortcomings and failures in their IT
infrastructure, and it is our understanding that VA has been working to affect
change at many levels – including within the acquisition process.  VA’s Office of Information & Technology
(OI&T) seems to be adopting a more modern and lean process to build the IT
systems needed to coordinate and provide care in today’s complex healthcare
infrastructure.  Changes like the
implementation of agile systems development hold the promise of faster,
cheaper, more usable software solutions. 
Though we have seen some evidence of success at VA, it is just a
start.  VA is working on a common
platform to provide civilian doctors with an easy way to provide CBO with
searchable clinical data from visits resulting from using the Fee program.  Though we do not know the development and
implementation timeline, the possibility of providing doctors with an IT
solution that gives VA the information they need – and is quick and easy enough
for doctors to use without unnecessary burden – holds great promise.  The VFW will continue to closely monitor the
development of IT projects underway. 

The
Question of Contracted Care

Over the years, VFW has heard
many stories of veterans who enter into the Fee program, only to be confused
and disappointed by the experience.  What
should be an easy and convenient alternative to direct care for veterans often
leaves them feeling detached from VA. 
The reasons are clear: VA does not reach back to the veteran to gauge
their satisfaction with episodes of care in the civilian sector; veterans are
left to make their own appointments, completely independent of any VA
facilitation; and they are sometimes responsible for getting patient records to
VA from their civilian providers when possible. 
Once they enter the Fee program, they have little contact with VA, and
are given no direction from them. 

Congress attempted to address
this issue in 2005 with the ongoing Project on Healthcare Effectiveness
through Resource Optimization (Project HERO) pilot program.  To date, it is VA’s single foray into the business of contracting for the
provision of private care to veterans, and it has achieved generally positive
results.  We all know that the 5-year
pilot program had a rough start. 
However, VA responded to the concerns of the Veteran Service
Organization (VSO) community and the program is drawing to a close with a
successful record.  It regularly met
quality measures outlined by VA, while also saving money.  For this and other reasons, the VFW is
concerned it may be ending too soon. 

Project HERO is still meeting
VA requirements for customer satisfaction and distance metrics.  The data shows they have greatly reduced
missed appointments through regular communication with patients, providing them
with timely reminders.  Because VA gets
clinical notes from providers Humana has contracted with for Project HERO, care
is being coordinated properly.  VA can be
certain of this because they regularly receive all the metrics they have asked
for from their remaining contracted partner, Humana Veterans Healthcare
Services, Inc.  Unfortunately, the
traditional Fee Basis program provides no such metrics. 

One benefit of coordinated
care has been the elimination of many duplicative services.  As a result, VA has saved money even though
referrals into the program were low throughout the life of the program.  In addition, VA doctors have the requisite
information to bring veterans back to VA when it was in the best interest of
the veteran.  Humana’s contract was
extended beyond the planned termination date until March 31, 2013 to allow for
more time to transition out of Project HERO and to prevent veterans using
current Project HERO providers from any interruption of service.  It should be noted that VA still plans to end
the contract with Delta Dental, their other partner in Project HERO, on the
original contract termination date of September 30, 2012.

Meanwhile, VA has been
working on their plan to replace Project HERO with a permanent program, known
as Patient-Centered Community Care (PCCC) for some time.  This program was designed to incorporate the
lessons learned over the past five years working on Project HERO alongside
Humana and Delta Dental.  To the best of
our knowledge, this program is being crafted to allow VA Central Office to
establish numerous contracts for coordinating timely and high-quality care that
could comprise both VA and non-VA providers at the discretion of VA
clinicians.  Veterans would have to be
referred into PCCC by a VA physician, thereby ensuring the decision to send a
veteran into these contracted networks would be maintained in-house.  VA doctors would also have the benefit of
detailed clinical notes from each patient visit in the network, and thus would
be far better equipped to make a decision to transfer to a different provider
or bring a veteran back into VA care based on clinical data.  VA would coordinate the care for these
veterans through the Patient-Aligned Care Teams, in cooperation with a care
coordinator working for the PCCC contracted network provider.  Doctors would potentially have the latitude
to treat one condition in a VA setting, while allowing the veteran to remain in
PCCC for other conditions.  For example,
a female veteran with PTSD could be sent into the network for maternity care,
while continuing to visit the VA clinicians she has already bonded with at her
VA facility. 

According to VA, initial
market research began in November 2010. 
In June 2011, PCCC became an official program through an Executive
Decision Memorandum of the National Leadership Council.  In the closing months of 2011, VA released a
Request for Information (ROI) and held three “industry days” to allow companies
to dialogue with VA on a one-on-one basis.

Since then, VA has worked to
prepare the Request for Proposals (RFP) and had intended to release it last
month.  Because of various delays, we now
expect the RFP to be released in November 2012. 
The VFW looks forward to the release, as it should answer many remaining
questions about PCCC.  So far, we have
learned that PCCC is projected to include five regions, which we assume will be
managed by different contractors.  We
have learned that contract care provided through PCCC will be prioritized over
other avenues of non-VA care; a departure from Project HERO, as it was given a
low priority when being considered for Fee Basis services.  Unfortunately, the issue of mental health
services being included in PCCC is still an open question.  The November 2, 2011 RFI regarding PCCC
explicitly stated that mental health would not be included.  However, this committee and VA are now
assuring us that mental health will be a part of PCCC.  We hope that the RFP will make VA’s
intentions clear. 

The contract award for PCCC
is scheduled for March 2013, barely six months from now.  Project HERO – a relatively small pilot
program that got off to a slow start – is scheduled to end the same month.  The VFW is concerned about a possible service
gap between the end of Project HERO and the indeterminable point in the future
when PCCC can serve veterans at full capacity. 
The VFW believes extending Project HERO for six months was the right
thing to do.  We also believe that they
should extend Project HERO until contracts under PCCC are mature enough to
handle the full caseload for every veteran in the program with a fully capable
nationwide network of all contracted services. 
It is unfair to our veterans to give them a cold handoff from Project
HERO to PCCC.  Though we are confident VA
would do all they can to ensure a smooth transition, they deserve someone on
the civilian side of the equation as well. 

VA’s
Plan to Improve Internal Shortcomings in the Fee Basis Program

The VFW believes VA is
finally taking the shortcomings in the traditional Fee Basis Program
seriously.  Since the release of the 2011
NAPA report, VA has initiated an ambitious plan to meet many of the NAPA
recommendations by significantly overhauling referral management
processes.  The initiative, known as
Non-VA Care Coordination, (NVCC) seeks to establish end-to-end documentation
for patients admitted to civilian facilities. 
If properly implemented, NVCC will also standardize all business rules
to document the reasons for using the Fee program, thereby facilitating
administrative and clinical reviews of such decisions.  It is designed to establish a system-wide
practice that will avail veterans to all internal services, such as sharing
agreements with DoD and university affiliates before being referred into the
Fee program.  NVCC is intended to decrease
missed appointments by engaging veterans in the appointment management process,
and will also move VA to a system of form templates to smooth out the paperwork
and create a database that is searchable. 
A fully implemented NVCC program would also notify patients when Fee
Basis – or non-VA, as it is now referred to – care is available to them.  Through bulk purchasing of care, NVCC will
hopefully save money and standardize the care provided across the country,
leading to better outcomes for veterans and metrics for VA to use for
continuous improvement of the program. 

The VFW will be watching how
NVCC is implemented, both at Central Office and across the country.  We believe it is vitally important that such
an ambitious program not reside solely within VA Central Office.  It must be implemented at the local level,
even if the up-front costs are high.  We
must not allow more failings at VA because of low morale or a culture of
indifference.  The changes envisioned
must take effect.  Today, NVCC stands as
the best vehicle for these changes to take place, and we fully support the
stated goals of the program.  

VA has a tall order
ahead.  PCCC must retain the successes of
Project HERO, and NVCC must fix the internal shortcomings of the traditional Fee
program.  None of these changes
will succeed without leadership.  In the
end, it always comes back to leadership. 
Leaders at the highest levels of VA must commit themselves to a coherent
and sensible approach that meets each of these objectives.  Policies that are made must be clear,
comprehensive and must be enforced at all levels within VA.  Solutions must leverage the best practices in
program management, design and information technology.  Any long-term success must also include
cultivating relationships with a number of entities in the private sector that
believe VA is a capable and responsible partner.

The VFW believes these
shortcomings represent a clear-cut opportunity to fix a badly broken system,
and we are confident that veterans can receive better quality of care with
greater coordination at a lower cost. 
With that in mind, the VFW hopes this committee will take a holistic
approach to fixing the Fee program.  Each
circumstance that we resolve creates opportunity, and a systematic fix has the
potential to both save a considerable amount of money and improve the quality
of care for veterans using the program. 

Madam
Chairwoman, this concludes my statement. 
I am pleased to address any questions you or other members of the
committee may have.

Prepared Statement of Jacob B. Gadd

Chairwoman Buerkle and distinguished Members of
the Subcommittee on Health:

Thank you for this opportunity to submit The
American Legion’s views on the Department of Veterans Affairs (VA) Fee-Basis
Program.  

Title 38, United States Code (U.S.C.) Section
1703a states when VA facilities are not “capable of furnishing economical
hospital care or medical services because of geographical inaccessibility or
are not capable of furnishing the care or services required, the Secretary may
contract with non-Department facilities in order to furnish medical care.(1)”

According to the Veterans Health Administration
(VHA), if a medical service or procedure cannot be provided in a timely manner
by VHA due to capability, capacity or accessibility, the service may, with
approval, be fee-based or contracted outside of the VA.  Typically, VA will utilize fee-basis as a
last resort and prefers to treat the veteran within their closest hospital,
another hospital within Veteran Integrated Service Network (VISN), through a
sharing arrangement with a Department of Defense (DOD) Military Treatment
Facility before purchasing care in the community.  However, VA utilizes fee-basis programs as a
first resort when the VA Medical Center is short on staffing and needs to meet
a performance measure for timeliness of appointments or care within the established
wait time guidelines.  

In a Senate Field Hearing on “Improving Access
to Quality Healthcare for Rural Veterans” our American Legion Past National
Vice Commander Merv Gunderson said, “The American Legion urges VA to reconsider
its national non-VA purchased care policies to allow VA Medical Center Chiefs
of Staff to use their best judgment and discretion to prevent veterans from
being forced to drive hours to a facility for several routine and reoccurring
appointments” (2). 

There is a need for VA to develop and raise
fee-basis care program policies and procedures with a patient-centered care
strategy that takes veterans’ interest and distance into account.  The directive could clarify the roles and
responsibilities of the Chief Business Office’s Purchased Care Office, VISN, VA
Medical Center, Business Office and clinical staff’s policies and procedures
for fee basis directives and policies to reduce variance and improve
coordination between National, VISN and VA Medical Centers.  The new policy should be well-defined,
explained to veteran patients and be consistent policy within all VA Medical
Centers.  

In the last four years, non-VA purchased care
has doubled from $2.2 billion in FY 2007 to $4.5 billion in FY 2011 along with
a corresponding increase of 615,768 veterans served in FY 2007 to 970,727
veterans served in FY 2011 (2).  VA
program leadership has stated the reasons for growth of non-VA usage are: the
increase of unique veterans seeking VHA care; economic conditions; waiting
times because of more veterans enrolling in the system; and growth of number of
CBOCs and emergency medical needs in rural areas (2).  During our System Worth Saving site visits,
Directors and VA hospital finance staff have told us the fee-care is between
15-25 percent of their medical center budgets and continues to grow.  The facilities struggle with what services
they can provide in-house and whether they should hire a full-time specialist
to balance the number of veterans requesting the specialty services or contract
out this care.

Nowhere is this challenge more evident than with
women veterans’ gender specific specialty services.  The majority of women veterans’
gender-specific care and services are contracted out as VA does not currently
have the numbers of women veteran staff and demand for services.  Yet, as women veterans are the fastest
growing demographic of veterans enrolling in VA, the hiring of women veteran
providers within the VA to provide gender-specific services should be carefully
considered. 

In an effort to reduce the continued rise in
fee-basis costs as well as to improve coordination of care between VA and
non-VA purchased care, VA is developing a Patient Centered Community Care
(PCCC) program.  The PCCC program is
defined as an “effort to create centrally supported health care contracts
available throughout the VA. 
Additionally, “the goal is to provide veterans coordinated, timely
access to high quality care from a comprehensive network of VA and non-VA
providers.”  The PCCC is taking many of
the lessons learned from Project Access Received Closer to Home (ARCH), a five
year pilot that recently was completed.   

In a Chief Business
Briefing in May 2012, VA stated that current individual fee program care
concerns include: “veterans obtains an authorization, veterans chooses
provider, services are provided (accreditation/credentialing status is
unknown), no shows are not tracked/reported, VA Medical Centers pay the local
fee schedule rate, provision of medical documentation is not always consistent
or timely and access, timeliness, safety and complaints are not always a part
of traditional fee requirements” (3).  

VA’s future plan through
PCCC is to refer veterans to network provider, require accreditation and
credentialing and VA Medical Center pays the national negotiated rate rather
than the local fee schedule rate.  By
establishing national contracts for non-VA purchased care, VA can reduce these
program costs by improving economies of scale and lowering of fee prices as
well as ensuring VA’s standards for timeliness and quality is tied to these
contracts. 

However, VA must be cognizant that not all fee-basis coordination can be
managed nationally. Many rural areas do not have specialty
or even primary care providers so some collaboration and coordination between
the facility and local community providers should be leveraged and encouraged
to ensure small private practice providers, which may be the only option in a
community, and especially rural areas, continue to be permitted to submit
contracts.   

Quality of
Care Findings with Fee-Basis Programs

Along with the cost reduction and
efficiencies the PCCC program is proposing, it is equally important that
quality standards for contracting care must be the same or better than the care
the veteran would otherwise have if they were treated in VA.  

Since 2003, the System Worth Saving
Task Force has conducted site visits to VA Medical Centers to assess the
timeliness and quality of veterans health care programs and to provide feedback
from veterans on their level of care. 
Across the country, we have heard from veterans that in many cases, the
quality of care they have received from non-VA providers has been great and
they were treated close to their home.  

However, a few concerns were
identified during our System Worth Saving site visit interviews with VA Medical
Center leadership, staff and by local veterans. 
These concerns include: lack of training and education
program for non-VA providers; making sure veterans
receive list of comprehensive network of VA and non-VA providers;lack of integration of VA’s Computer Patient
Record System (CPRS) with non-VA providers’ computer systems/delay in
contractors submitting appointment documentation; and the lapsing of Martha’s
Vineyard Fee Basis/Contract. 

 Lack of
Training and Education Program for Non-VA Providers

In the System Worth Saving Report on Rural
Health it stated, “In a recent article published in the Journal of American
Medical Association in February 2012, Dr. Kenneth Kizer, former Under Secretary
for Health for VA said, “Physicians in private practice may not be prepared to
treat conditions prevalent among veterans – for example, the Reaching Rural
Veterans Initiative in Pennsylvania found that primary care clinicians lacked
knowledge of PTSD, and other mental health disorders prevalent among veterans,
and were unfamiliar with VA treatment resources for such conditions.” (5)

There is a need for development of military
culture and awareness training for non-VA providers to educate and certify them
on specific veterans’ injuries/illnesses such as blast induced TBI, PTSD, and suicide
prevention prior to contracting any veterans to them for care.  The VA is a leader in mental health treatment
and development of evidence-based therapies for PTSD. In addition, the majority
of women veterans’ gender specific care in VA is contracted out to the
community.  Non-VA clinicians need women
veterans’ specific training on the unique challenges women veterans face
through injuries/illnesses they incurred during their military service.    

If non-VA providers had
a formal training and education program for military injuries/illnesses, it
would ensure they are held to the same quality of care standards and treatments
as VA providers. 

Make sure veterans receive list of
comprehensive network of VA and non-VA providers.

VA is
developing a national database of local community providers that they have
fee-based/purchased care from in the community. 
If this effort is expanded, veterans ultimately would receive a list of
community providers for fee-basis or contracted care so they can determine the
best provider for them. 

Lack of
Integration of VA’s Computer Patient Record System with Non-VA Providers
Computer Systems/ Delay in contractors submitting appointment documentation

Non-VA providers do not
have full access to VA’s Computer Patient Record System (CPRS) to ensure the
veteran receives the same or higher quality of care.  First, access to the veterans’ medical record
will allow the contracted community provider to review the patient’s full
record and history in order to make a proper diagnosis and treatment plan.  Currently, VA makes copies of the veteran’s
record for any relative injuries/illnesses relating to the appointment but the
provider does not have the full record in order to understand the patient’s
medical record and any co-occurring medical conditions. Second, sharing of the
medical record will help the community provider to meet all of the quality of
care measures tracked in CPRS as well as promote screening for TBI, PTSD, depression,
substance use and suicide or other quality of care measures tracked in CPRS.  Thirdly, allowing the non-VA provider access
to the medical record will speed up receipt and documentation from the
encounter instead of VA having to wait weeks or months to receive documentation
back from a non-VA provider.  

With emergence and
development of the Lifetime Virtual Electronic Record (LVER) and Nationwide
Health Information Exchanges across the United States, federal agencies will be
integrated with private hospitals and companies to improve the interoperability
of medical records if a veteran is contracted into the community for care.  

Martha’s
Vineyard Fee-Basis/Contract

The American Legion conducted a site visit to
Martha’s Vineyard last year for our report on Rural Health Care.  In 2000, a contract was signed between the
Providence VA Medical Center and Martha’s Vineyard Hospital.  Through the contract, veterans living on
Martha’s Vineyard were able to receive care at Martha’s Vineyard Hospital
through fee basis instead of having to travel off of the island.  The contract lapsed around 2004 which the VA
did not realize until 2008 when the hospital acquired new management.  Veterans who were being treated under the
original contract found out the contract lapsed when Martha’s Vineyard Hospital
sent collection bill notices to those veterans for medical expenses previously
covered under the contract.

Since 2008, VA has been negotiating a new
contract between Providence VA and veterans are forced to take a ferry from
Martha’s Vineyard and drive two hours for care at the Providence VA Medical
Center. Veterans on the island continue
to be promised that VA is working on the contract but coordination and the
processing of the contract between VA Central Office, VA’s Purchasing Care
Office, VISN and the Providence VA Medical Center has continued to be delayed.

While there are only a few veterans that live on
the island, this delay illustrates the frustrations that veterans living in
rural and isolated locations or other areas across the country experience in
waiting for contracts and receiving assurances from VA that the contract will
be resolved.  VA should develop and
implement a process to ensure all VA and non-VA purchased care contracts are
inputted into a tracking system to ensure they remain current and do not
lapse.  If there are instances with a
contract lapsing, such as in Martha’s Vineyard, VA should make every effort to
hold stakeholder meetings with veterans from those communities to solicit input
and keep veterans enrolled in these contracts/services informed.  

In order to improve
situations like Martha’s Vineyard, VA must strive to create a tracking database
of all non-VA purchased care contracts to ensure contracts do not lapse and
veterans are involved as stakeholders and VA regularly communicate with
veterans on the status of contracts. 

Madame Chairwoman, thank you for
allowing The American Legion to testify today. 
I look forward to answering any questions you may have.  

References:

(1)   Title 38, United States
Code (U.S.C.) Section 1703a

(2)   Chief
Business Office Purchased Care VSO Briefing to Veteran Service
Organizations.   May 2, 2012.  PowerPoint Presentation.

(3)   Chief
Business Office Purchased Care VSO Briefing to Veteran Service
Organizations.   May 2, 2012.  PowerPoint Presentation.

(4)   Senate Field Hearing on
“Improving Access to Quality Healthcare for Rural Veterans.”

(5)   Wong, Fang.  National Commander of The American
Legion.  2012 System Worth Saving Report
on Rural Healthcare.  May 2012. 

Prepared Statement of Brad Jones

Chairwoman Buerkle,
Ranking Member Michaud, and members of the Subcommittee:

Introduction

Thank you for the opportunity to discuss
the Department of Veterans Affairs’ (VA) Fee care process, which allows
eligible Veterans to receive medical care in the community when VA determines
that care is not available at VA facilities. 
Humana Veterans is proud to be
partnered with VA to provide healthcare services and care coordination to
Veterans authorized to access care in their community designed to supplement
the care received in the VA healthcare system.

Humana
Veterans Healthcare Services, Inc. (Humana Veterans), a Humana Government
Business subsidiary, has contracts with VA to provide quality healthcare
through two congressionally-mandated pilot programs -- Project HERO (Healthcare
Effectiveness through Resource Optimization) in VISNs 8, 16, 20, and 23 and
Project ARCH (Access Received Closer to Home) in Farmville, VA, Pratt, KS,
Flagstaff, AZ, and Billings, MT.  In both
of these pilot programs, Humana Veterans provides access to a competitively
priced network of physicians, institutions and ancillary providers who adhere
to high quality and access to care standards. 
To date, we have served 163,951 Veterans making 300,930 patient visits
through HERO and ARCH, with an untapped capacity to serve more Veterans
including those who have mental healthcare needs and who live in rural
communities.  In addition, through our
subsidiary company Valor Healthcare, we operate 21 Joint Commission certified
VA Community Based Outpatient Clinics (CBOCs) across the country that serve
more than 58,000 Veterans, accommodating over 100,000 patient visits on an
annual basis with services ranging widely from primary care to counseling and
group therapy.  

With
our extensive experience in helping Veterans receive timely, quality, and
appropriate care in the community, we have a unique perspective on the core
program elements that are essential to ensuring that Veterans receive these
services through a Veteran-centric care coordination program.  This is the essence of the congressionally
mandated and VA-designed HERO pilot.  In
a care coordinated program like HERO where community providers are an extension
of VA’s healthcare system, the Veteran never leaves the VA system and just
receives one or more episodes of care from community providers.  The community partner, in this case Humana
Veterans, returns the clinical information to VA and manages all the
administrative components of the process, such as billing and
appointment-making.  By keeping these
insurance-like, administrative tasks outside of VA, the Department can
concentrate on what they do best –deliver world class healthcare to our
Nation’s Veterans.  Through our work in
HERO, we have proven the hypothesis that a national healthcare administrative
services provider can deliver timely and quality specialty care with
significant cost savings.  VA’s annual
report on Project HERO for FY 2010 stated that VA saved $16 million in the four
piloted VISNs.  That savings figure
becomes even more impressive considering the fact that only 11% of the total
non-VA outpatient visits in the pilot VISNs went to Project HERO during that
time period.  Extrapolating the savings
across total number of non-VA outpatient visits suggests that VA could have
saved $142 million that year in those four VISNs if HERO were fully
implemented.  The estimated 950,000
Veterans who were authorized for and received care in the legacy Fee process
last year would have been better served under a contract care program with a
strong care coordination element, such as the tried and tested HERO pilot
program that can be implemented nation-wide. 
The additional bonus would be that these Veterans would remain connected
to VA because in HERO, the Veteran’s care is coordinated and the clinical
information from the Fee treatment is returned to VA.

VA’s Fee Process Challenges

The current Fee
process is not integrated with VA’s healthcare delivery system and there is no
coordination or care management of Veterans with Fee care authorizations.  This is a fundamental flaw of the Fee
process; moreover, the importance of care coordination in healthcare has been
widely documented and has a broad base of support.  For example, the
National Quality Forum (NQF), a non-profit organization dedicated to improving
healthcare quality, has stated the following:

“Care coordination is a vital
aspect of health and healthcare services. 
When care is

poorly coordinated- with inaccurate
transmission of information, inadequate

communication, and inappropriate
follow-up care- patients who see multiple physicians

and care providers face medication
errors, hospital readmissions, and avoidable

emergency department visits.  Healthcare is not currently delivered
uniformly in a well-coordinated and efficient manner.”

 NQF has also
provided a framework for defining care coordination by identifying key domains,
which include a healthcare home, proactive plan of care and follow-up,
communication, information system and data exchange, and transition of care.[1] 

Using
this framework, the current Fee process fails Veterans in each of the above
domains.  With the exception of Veterans
participating in Project HERO and Project ARCH,
Veterans are left to navigate a confusing healthcare system on their own and
become lost to VA.  VA has no mechanism
to track and monitor the care that Veterans receive in the community and there
is no guarantee that these Veterans do not lose the quality, safety and other
protections that HERO and ARCH provide. 
For example, these Veterans may not be seen by credentialed and
qualified community providers, clinical information often does not return to
the VA in a timely manner, and there is no single point of contact who
integrates the care that Veterans receive within and outside of the VA
healthcare system.  Without this care
coordinator, it is not possible to provide Veterans with the benefits of a
proactive plan of care and seamless transition of care between VA and community
providers.  In addition, the lack of care coordination hinders VA’s ability to
optimize its resources because there can be duplicative and conflicting treatment
regimen.  This not only results in wasted
resources, but also can cause adverse medical outcomes.  Without the care coordination element, VA is
foregoing significant potential savings and cost avoidance from reducing
duplicative and conflicting care. 

Another
missed opportunity is in the area of claims payment.  At a recent House floor debate in May on H.R.
5854, Military Construction and Veterans Affairs and Related Agencies
Appropriations Act of 2013, various members raised serious concerns about past
due claims payments from VA and the economic realities that will force
community providers to stop serving Veterans without timely payments.  The Fee process not only has issues with
delayed payments, but also has major challenges in erroneous payments.  Despite VA’s best efforts to automate the Fee
claims process through various pilot programs over the past 10 years, claims
are still not automated today and the current manual claims process places VA
at high risk for improper payments.  For
example, a March 2012 report by the VA Office of Inspector General identified
the Fee program’s improper payment rate at 12.4 percent[2], and the
Government Accountability Office’s February 2012 report placed the Fee program
among the top 10 Federal programs with the highest reported improper payment
rates[3].  These findings are consistent in the
September 2011 report by the National Academy of Public Administration (NAPA).  The NAPA
study also discusses the Fee program’s use of “antiquated systems and
technology” and points to private sector payors who provide “much more
efficient and accurate claims processing”[4].  Case in point, when VA transferred this
function to Humana Veterans for Project HERO, we demonstrated our ability to
make timely and accurate payments to our network of providers, which is further
explained later in this testimony.

National
Contract for Medical and Surgical Services

 Over the past five years, the HERO pilot program has proven the
hypothesis that a national healthcare administrative services provider can
collaborate effectively with VA to deliver results-focused, high quality, and
cost-efficient care.  The success of HERO
is substantiated by a strong set of performance metrics, which include access
to care, quality standards, safety requirements, return of clinical
information, and Veteran satisfaction. 
News of this success has begun to spread with the demand for the HERO
program growing amongst the local VA Medical Centers that fall outside of the
pilot locations.  Project HERO has
presented this contracted care as an alternative preferred option to the
uncoordinated Fee process.  However,
based on VA’s presentation to interested contractors, VA is not leveraging the
lessons learned from HERO in the planned follow-on HERO program that they are
calling Patient Centered Community Care (PCCC). 
PCCC, as presented to interested companies by VA, would only create a
national contract for a network of providers to deliver medical and surgical
services without the critical care coordination elements.  This means that PCCC
would be nothing more than a discounted Fee network, with no added benefits for
Veterans.

PCCC, while well-intentioned, would significantly limit the contractor’s
role to one of establishing and managing a provider network.  Under PCCC,
the contractor would not be able to provide the administrative services that
exist in the HERO pilot and which were instrumental to the contractor’s care
coordination role.  The positive outcomes
achieved under the HERO pilot would be eliminated once the contractor no longer
has the ability to enforce the VA requirements and quality standards within the
community provider network.  Another unintended consequence of
removing contractor-provided administrative services is the threat to the
contractor’s ability to maintain a provider network that is responsive to VA’s
changing needs.  Specifically, the
contractor’s ability to guarantee a low no-show rate and make timely,
predictable reimbursements were effective incentives.  In exchange for these benefits, the network
community providers returned clinical documents on a timely basis and adhered
to an extensive list of VA specific requirements that do not exist in the providers’
other patient populations.  Given the
on-going challenges VA faces with claims payments and inability to match the
low no-show rates that Humana Veterans achieved, network providers will
experience an increasing number of missed appointments and delayed and
erroneous payments.  In effect, the
Department will lose these once valuable incentives that are so critical in
driving good behavior and will ultimately result in community providers leaving
the network.   There
is also the issue of a predictable minimum workload.  VA can analyze data on past authorizations
for purchased care to develop a floor for a minimum number of referrals.  This will ensure that VA receives the most
advantageous pricing while also having a positive impact on the recruitment and
retention of community providers to create a robust network that supplements
the VA healthcare system.

Based on VA-provided information, Humana
Veterans believes VA is misinterpreting the lessons learned from HERO to create
and build new in-house capacity to handle administrative functions associated
with the Fee care authorizations, visits and treatment through the Non-VA Care
Coordination (NVCC) program.  Instead of
leveraging the capacity and expertise that already exists in industry, NVCC
will require significant resource investments both in staff and the necessary
tools to properly handle the “back-office” administrative functions.  VA’s implementation of NVCC in the 100+ Fee
program offices in the field also runs counter to the NAPA
recommendation.  Rather than consolidate
to no more than 3 to 5 strategically located regional sites, VA is continuing
to invest resources to growing the 100+ Fee program offices and is reinforcing
NAPA’s message that the “Fee program has grown haphazardly”4.  If PCCC is supposed to be the nationwide
follow on to HERO, the administrative functions of the program need to be
conducted by the contractor.

 Veteran Centric Collaborative Healthcare
Program

Rather than continue down the
current path for PCCC and NVCC,
there is still time for VA to incorporate the successful elements of HERO to
create a Veteran centric collaborative healthcare program. This program should
be centered on care coordination and enhanced partnerships with national healthcare administrative services providers
that will be fully integrated in the continuum of the VA healthcare system as
the Department’s network of community care providers.  Such a program will be a win-win for Veterans
and VA.  Veterans will benefit from a
fully coordinated and integrated VA healthcare delivery system of VA and
community providers, whereas VA will be able to achieve cost-savings by
partnering with national healthcare administrative services organizations that
have existing systems, tools, and processes in place for efficiently managing
Fee related administrative functions.

There
are numerous advantages of a Veteran centric collaborative healthcare program
for Veterans, as explained below. 
Mainly, Veterans for whom VA has authorized community care are
guaranteed to receive care from a network of community providers who are fully
credentialed and certified so that geographic distance is no longer a barrier
to access to care.  For example, through
the HERO pilot program, Humana Veterans provides a robust network of about
42,000 providers in the four pilot VISNs with the ability to expand pending
increased referrals.  This has made it
possible for Veterans to travel a median distance of only 13 miles even though
45 percent of the HERO appointments were in rural or highly rural areas.  Beyond the HERO program requirements, VA could charge the contractor with the
responsibility for training the network of community providers on military and
Veteran culture where VA provides the training materials and contractors are
reimbursed for the training. 

Another
key advantage to Veterans is the clinical information exchange, which ensures
timely return of clinical decision-making while also minimizing duplicate care
and services.  This was demonstrated in
the HERO pilot program where Humana Veterans returns 94 percent of clinical information
to the VA within 30 days with a median return of 9 days.  In addition, Humana Veterans’ care
coordinators help each Veteran in Project HERO navigate the care that they
receive in the community.  For example,
Humana Veterans assists Veterans in identifying network community providers,
scheduling the appointment, and following up to ensure that the Veteran made
the doctor’s visit.  As a result, Humana
Veterans achieved a no-show rate of 5 percent, which is significantly below the
industry average that ranges between 14 percent and 24 percent.  Humana Veterans also provides VA direct
access to the Authorization and Consult Tracking (ACT) system, which is our
proprietary IT tool for care coordination that allowed VA to track and monitor
Veterans with Fee authorizations for the very first time. 

Among
the other HERO lessons that should be included in a new Veteran centric
collaborative healthcare program is a strong clinical quality management
program to respond to patient safety events. 
Under Project HERO, Humana Veterans operates a clinical quality management
program, which provides a structured way of identifying and addressing possible
patient safety events.  Through the
clinical quality management program, Humana Veterans reviews all identified
potential quality indicators and investigates 100 percent of confirmed quality
issues, as well as engages VA in a discussion of outcomes through the jointly
operated Patient Safety Peer Review Committee. 
Project HERO has also demonstrated the ability to ensure accurate and
timely claims payment.  Using our
automated claims process and contracted rates that minimize the risk for
improper payments, Humana Veterans makes 99 percent of claim payments to our
providers within 30 days and maintained an extremely low payment error rate in
FY 2011.

The
Veteran centric
collaborative healthcare program could also go beyond the lessons learned in
HERO by requiring a VA-provided and a
contractor-provided care coordinator to work together in managing the care that
Veterans receive.  Additional program
enhancements should focus on eliminating variations, with VA making more
consistent determination of non-VA care authorizations for Veterans.  VA should also retain the flexibility to
define the standards for referrals and authorizations, as well as retain its
“gate-keeper” role.  This means that VA
retains the decision-making control of, if and when they use the community
provider network as a tool to supplement the care that Veterans receive in VA
facilities.   

When
VA determines that it is appropriate to send a Veteran to a community provider,
there must be accountability established to ensure that the care is arranged
through the Veteran centric collaborative healthcare program.  Use of the Project HERO contract was made
optional for the participating VA Fee offices, and less than 20% of the total
Fee care services in the pilot VISNs went to Project HERO.  Not only was this often confusing for
Veterans and community providers, but it resulted in VA not realizing all of
the benefits and cost savings that could have been achieved through full
implementation of the HERO pilot.  The
Veteran centric collaborative healthcare program must be structured to ensure
maximum utilization with very limited exceptions by all VA Medical Centers.

Conclusion

PCCC
presents an excellent opportunity to effect positive change in Veterans’
healthcare experience and outcomes.  The
inclusion of the above elements of a Veteran centric collaborative healthcare
program in PCCC will ensure that
Veterans realize all the benefits of care coordination between VA and community
providers.  VA has a unique opportunity
to expand the HERO program now available to Veterans in only four VISNS to all
VISNs.  This would create a truly
integrated VA healthcare system that better leverages community healthcare
assets if and when VA decides to authorize such care.  If PCCC ends up being a rent-a-network
contract or something short of a full care coordination model, it will
represent a retreat from the Secretary’s commitment to implement a
patient-centered VA healthcare delivery system that includes all VA healthcare
for Veterans – both within and outside the walls of the VA.

Thank you for holding this hearing
and tackling this vital issue.  I
appreciate the opportunity to share Humana Veterans’ experiences and views with
the Subcommittee today, and am happy to answer your questions. 

Brad Jones

Mr. Brad Jones serves as Chief
Operating Officer (COO) of Humana Veterans Healthcare Services (Humana
Veterans).  As a senior leader at Humana Veterans, he is responsible for
the day-to-day operations and the successful execution of all Department of
Veterans Affairs contracts including Project HERO, Project ARCH, and over 20 VA
Community Based Outpatient Clinics across the country.

After obtaining a
Bachelor of Science degree in Computer Science from the University of Kentucky,
Brad began a career in the life and health insurance industries that has
spanned over 25 years.  From 1986 to 1996, he served as a management
information systems professional with both Kentucky Central Life Insurance Co.
and Jefferson Pilot Life Insurance Co.  In 1996, Brad was selected to join
Humana Military Healthcare Services (Humana Military) where he worked on
TRICARE contracts with the Department of Defense.  He was responsible for
all electronic healthcare claims initiatives, implementation of Health
Insurance Portability and Accountability Act (HIPAA) regulations, as well as
direct oversight of provider data management systems.  In October 2007, he
was promoted to his current position of COO with Humana Veterans.

Humana Veterans Healthcare
Services, Inc., a subsidiary of Humana Government Business, Inc., is currently
providing administrative services to the Department of Veterans Affairs under
the following contracts:

Project
HERO (Healthcare Effectiveness through Resource Optimization), originally
awarded in 2007 and currently in the fourth and final option year.  Humana Veterans provides administrative
healthcare services to Veterans referred outside of the VA healthcare system
for specialty care.

Project
ARCH (Access Received Closer to
Home), was awarded in 2011.  Services
under the contract began on August
29, 2011, and include administrative healthcare services to Veterans
who meet certain eligibility criteria and agree to participate in the program.

Valor Healthcare,
Inc., a subsidiary of Humana Government Business, Inc., currently operates 21
VA Community Based Outpatient Clinics across the country that provide services
ranging widely from primary care to counseling and group therapy.



[1]
National Quality Forum, Preferred
Practices and Performance Measures for Measuring and Reporting Care
Coordination.
  October 2010.  Web. 5 Sept. 2012,  <http://www.qualityforum.org/Publications/2010/10/Preferred_Practices_and_Performance_Measures_for_Measuring_and_Reporting_Care_Coordination.aspx>

[2] VA
Office of Inspector General.  Department
of Veterans Affairs: Review of VA’s Compliance with the Improper Payments
Elimination and Recovery Act.
Mar. 14, 2012. Web. 5 Sept. 2012,

<http://www.va.gov/oig/pubs/VAOIG-12-00849-120.pdf

[3] U.S.
Government Accountability Office.  Improper
Payments: Moving Forward with Government-Wide Reduction Strategies. 
Feb. 7, 2012.  Web. 5 Sept. 2012 <http://www.gao.gov/products/GAO-12-405T>

[4] National Academy
of Public Administration.  Veterans
Health Administration Fee Care Program. 
Sept.
2011.  Web. 5 Sept. 2012 <http://www.napawash.org/wp-content/uploads/2011/11/White_Paper11012011webposting.pdf>

Prepared Statement of Kris Doody

Veterans Healthcare
Closer to Home

My brief oral presentation at the Veterans
Affairs Sub-Committee on Health did not provide an opportunity to relate in
some detail the unique model that has developed at Cary Medical Center in
Caribou, Maine for the delivery of VA health care services to eligible, rural
Veterans.  In my extended remarks that
follow I will review the advantages of our current model as well as some of the
challenges we face in providing VA care at a non-VA facility. 

It might be wise to consider the current
demographics of Veterans living in the United States.  In 2010 there were 21.8 million Veterans
living in America.  Nine million of the Veterans
are over age 65.  The number of WWII
Veterans in 2011 are estimated to be nearly 2.1 million but this number is
expected to be cut in half by 2015 and in 15 years will be down to 50,000.  The average age of the WWII Veteran is
86.  Surviving Korean War Veterans are
estimated to be between 3 and 5 million with some 3.2 million between 65 and 74
and another 363,000 over age 75. 
Surviving Vietnam Veterans number some 7.6 million with an average age
of 60 – 65.  Nearly 3.5 million US
Veterans have service connected disabilities with some 698,000 at 70% or
higher.  

Pertinent to this discussion is that some 3.4
million Veterans or about 41% of the total enrolled in the VA Healthcare System
live in rural or highly rural areas of the country.  In recent years the Veterans Administration
has been working to improve access to care for rural Veterans and Cary Medical
Center has had the privilege to be part of that process.  Cary Medical Center is unique in that the
hospital is located in highly rural Northern Maine.  Historically Veterans would have to travel
some 500 – 600 miles round trip to access care at Maine’s only VA hospital at
Togus, Maine.  Togus is the oldest VA
hospital in the United States.

As early as May of 1946 the Department of Maine
American Legion was advocating for a Veterans Administration Hospital in
Aroostook County sighting the disadvantage suffered by Veterans living in this
vast and remote area.  In 1979 the
Aroostook County Veterans Medical Facility Research and Development, Inc.
(ACVMFRD) was formally incorporated with a single purpose of establishing local
healthcare for Veterans living in the County. 
Providing access to healthcare for Veterans living in rural areas was
not a strong suit for the VA.  During
their original efforts to create VA health services the local Veterans group
learned that in order to establish a formal Veterans Administration Outpatient
Clinic the VA required that some 180,000 Veterans exist within a 60 mile
radius.  With less than 100,000 in total
population it was clear that Aroostook County would not go the existing route
to secure access.  From 1979 to 1987 this
small group of Veterans worked with the state’s congressional delegation, the
VA, the local hospital, Cary Medical Center and multiple Veterans Service
Organizations. 

While Senator George Mitchell initiated the
first attempt to create an outpatient VA Clinic in Caribou, Maine based on a
new priority of improving VA services to rural Veterans, it would not be until
the Director of the VA Hospital at Togus, through his own authority, cleared
the way, administratively for a small ‘follow up’ clinic to be opened at Cary
Medical Center, a public acute care hospital. 
It would become the first such clinic of its kind in the United
States.  Senator George Mitchell, Senator
Bill Cohen and then Congresswoman Olympia Snowe joined in a united effort to
address the issue of rural healthcare for Veterans and helped pass legislation
which established a study committee to assess the state of care for rural
Veterans and to make recommendations. 
The timing was great and as the issue of rural healthcare became more of
a priority for the VA, the healthcare services in the new fledgling VA Clinic
in Caribou, Maine began to grow.

Over the last 25 years the clinic has seen
numerous expansions and now encompasses some 5,000 square feet and serves some
120 veterans per day including more than 5,000 clinical visits annually.   The clinic now has a staff of 21 and
provides outreach to satellites in northern and southern parts of Aroostook County.  Primary Care, Mental Health Services, Home
Based Care, Tele-Health Services, Health Promotion and Education, and Smoking
Cessation are among the offerings at the center.  A number of other CBOCs have now been opened
around the State of Maine based on the Caribou model and some 600 clinics are
available nationwide.

Collaboration Key to
Success

It would be easy to just assume that providing
convenient access to healthcare for Veterans living in rural and highly rural
areas of the nation would be a ‘no-brainer’. 
Veterans who live in rural communities demonstrated the same level of
valor and courage as those living in metropolitan and large urban areas of the
country.  However, there were many
challenges and these challenges remain. 
The VA Clinic in Caribou, Maine is a great laboratory for the ongoing
development of rural VA healthcare.  The
clinic came about because of a grassroot effort by local Veterans and the
relationship that was created between the Veterans groups, a local  hospital, and the Veterans
Administration.  The development of the
VA clinic was a gradual process.  The
clinic started as a follow up clinic for specific patients that had been treated
at the VA hospital in Togus.  The VA than
established a contract with a local physician and expanded care.  Finally came the establishment of the first VA
Community Based Outpatient Clinic staffed by a VA physician and staff.  All along the way there was a communication
process that started to open the window for expanded services without creating
an adversarial or combative environment between the constituencies.  The VA and its leadership began to hold ‘Town
Hall Meetings’ at Cary Medical Center in Caribou.  They listened to the concerns of Veterans and
their families.  The VA hospital director
would bring key staff specializing in eligibility, benefits, claims processing,
women’s health and others to hold one on one sessions for Veterans with
specific issues to resolve.  A bond was
built that allowed for collaboration to grow.

This dialogue between Veterans, the VA, and the
local healthcare providers is absolutely critical to the growth of rural
healthcare for Veterans.  There must be
an understanding that the kinds and numbers of clinical services available to
Veterans in these rural parts of the country depend greatly on the scope of
services available in the local healthcare system.  Throughout our experience with Veterans they
were keen on preserving the VA healthcare system and wanted to stay connected
with it but they also wanted to be able to access more routine care
locally.  The credibility of the VA
healthcare system and the quality of the system has come a great distance in
the past 25 years.  Veterans generally
have confidence in VA healthcare and that has been demonstrated by the growing
numbers accessing VA care. Recent surveys point out that when asked if they
could choose a healthcare provider more Veterans are indicating that they would
choose VA care.  In fact based on a CBO
Paper, published December, 2007 – The Health System for Veterans – An Interim
Report; the VA Healthcare System scores significantly higher than the private
sector on multiple measures including Clinical Practice Guidelines and Patient
Satisfaction.  The growth of patients
seeking care within the VA System has also grown dramatically from 3.6 million
to more than 5 million.  The VA system in
2011 treated some 6.1 million Veterans and saw some 80 million outpatient
visits.

The entire world changed for Veterans Healthcare
when the Veterans Healthcare Eligibility Reform Act was passed in 1996 greatly
increasing the numbers of Veterans eligible for VA care.  In the past decade the healthcare budget in
the VA has increased from $17 billion to $36 billion  The VA has established a priority system with
levels 1 – 8 with level 1 serving those with service connected disabilities and
level 8, for which enrollment has been frozen since 2003, for any honorably
discharged veteran.

The challenges faced by the growing VA
healthcare system are not unlike the traditional American Healthcare
system.  Many Veterans like many
Americans are aging.  The availability of
convenient, local access to healthcare services for this aging population is
paramount in providing high quality management of chronic illness which impacts
many of the elderly.  Helping individuals
to remain in their homes, reducing hospital admissions, preventing pre-mature
institutionalization and supporting patients so that they may enjoy a high
quality of life during the aging process is also a key goal of both the VA and
the private healthcare sector.  The VA
has proven itself, in recent years, to be very adept at managing some of the
most difficult chronic conditions. 
Recent studies point out that patients with the VA Healthcare System
receive significantly better care for depression, diabetes, hyperlipidemia, and
hypertension.  This has come about
primarily because of the expansion of services including more than 882
ambulatory care and community-based outpatient clinics.  Still the problems facing Veterans in rural
America remain a major challenge.  How
can we use the knowledge and experience gained over the past 25 years to solve
these challenges?

The Cary Medical Center
Model

 We have already discussed the history of the VA
clinic at Cary Medical Center in Caribou, Maine.  While there are many aspects of this
development that involved pure advocacy of local, dedicated Veterans for their
fellow comrades, the integration of the VA clinic in Caribou within the
traditional or private healthcare system offers a unique and intriguing
perspective as to future approaches to expanding VA Healthcare in rural
communities.

First,
and perhaps most important, the successful implementation of the rural VA
outpatient clinic must have near universal support from local Veterans
Organizations.  When the small group of
Veterans began their advocacy work in the late 1970’s, a visionary Chief
Executive Officer at Cary Medical Center, a small centrally located acute care
hospital in Aroostook County, Maine offered to help.  The hospital and the Veterans group created a
bond of mutual support and respect that still strongly exists today.  Once the Veterans were satisfied that the
hospital had the commitment and resources to take on the challenge of an
integrated program with the Veterans Administration Medical Regional  Office Center at Togus, Maine, they utilized
the expertise of the hospital in advancing the medical, political, and public
support that would be required.

The hospital began by approaching the VA about
utilizing space to establish a physical presence on the hospital campus.  While initially contracting a member of its
own medical staff to the VA for the purpose of seeing a limited number of
patients for follow-up after surgical procedures at the VA Hospital, the demand
for additional services began to grow. 
The VA then moved to recruit a physician from the region to staff the
clinic as a Veterans Administration Employee. 
Gradually the VA began to expand staff based on volume and the
continuing requests of the Veterans advocacy group.

The expansion of the VA clinic came with it a
growing relationship between the hospital and the VA. This included the
hospital’s understanding of the VA Fee Schedule.  Initially only a limited number of services
were available to Veterans outside the VA clinic.  However with the passage of the Veterans
Health Care Eligibility Reform Act of 1996, access to more outpatient services
was expanded.  There continued to be some
hesitancy of the VA to ‘let go’ of traditional care involving Veterans
traveling hundreds of miles to the VA hospital for minor outpatient procedures
but over time services available locally began to grow. 

The growing integration between the hospital and
the VA was a tremendous benefit to area Veterans.  The success of the VA clinic inspired the
Veterans advocacy group to explore other important healthcare needs of Veterans
living in Aroostook County.  The State of
Maine had established the ‘Maine Veterans Home’ program in the 1980’s.  The first home was in Augusta, Maine some 300
miles from Caribou.  Veterans in
Aroostook County organized an effort to build a long term care facility.  Working with the State legislature, and the
VA, a new home was opened, only the second of its kind in 1990.  There are now five such long term care
facilities in Maine as part of the Maine Veterans Homes system.  Then in 2003, a new 30-bed Maine Veterans
Home Residential Care facility was opened on the campus of Cary Medical Center.

While the long term care facilities and the VA
outpatient clinic are clearly separate, one is directly tied to the VA and the
other is a purely State run organization, there are common threads which
involve eligibility requirements, reimbursement issues and a connection to the
greater Veterans community in Aroostook County.

While the growth of VA health care in Aroostook
County presents a very dramatic and unique scenario, the effort to monitor,
study, explore and expand services continues to be a top priority for both
Veterans and the hospital.  For more than
25 years the hospital has maintained a liaison relationship within the Veterans
community.  A member of the hospital’s
administrative staff is charged with monitoring the VA health service at the
hospital and to assist with any potential issues, and the hospital’s CEO
conducts quarterly meetings with key Veterans leadership. These meetings are
designed to address a variety of issues including recent national developments
in VA healthcare and the needs of the local VA clinic.  These meetings are pivotal to the continued
success of the VA clinic and have led to the ongoing expansion of services.

Over the years the clinic has expanded multiple
times and current plans are for another expansion.  The key to this growth, again, has been the
dialogue, collaboration and partnership among the major players; Veterans
groups, the Veterans Administration, and the hospital.  Each expansion has been based on priority
need, a well-developed strategy, cost benefit analysis, and the answer to a key
question, how the expansion will impact rural Veterans living in Aroostook
County.  Over the years the level of
mutual trust and respect that has been established have become a way of life
here and the rancor and turmoil that characterized so much of the relationship
between the VA and the Veterans community of the 1970’s and 80’s has all but
disappeared.

Project ARCH – The Next
Step

 Throughout the years of working with the VA
Outpatient Clinic and the development of long term care for Veterans through
the Maine Veterans Homes one key priority eluded the Veterans community in
Aroostook County, Inpatient and Specialty Care. While Veterans continued to
advocate for these services the VA stood firm in protecting the current system
of patients being transferred to the VA hospital for any surgical or medical
services requiring hospitalization.   The
impact of such a reality for Aroostook County Veterans and others living in
highly rural areas of the nation should be obvious.

Patients who require hospitalization are often
the most medically burdened elderly and may find it difficult to travel the
hundreds of miles required to receive the services.  In rural Northern Maine we have no Interstate
system and our roads our icy and snow covered for many months every year.  Many of the Veterans in need of this care are
low income and while the VA does reimburse travel for the Veteran, family members
and others who may be key support to the Veteran are often unable to make the
long trip to the only VA hospital in Maine. 
The support of family and friends has been demonstrated to be a key
element in the ultimate and early recovery of patients.

Over the years the issue of inpatient hospital
care has been discussed and in fact, the CARES project revealed a serious need
to address hospitalizations for Veterans in rural communities.  The project actually designated specific
areas, including Northern Maine, as a priority location for inpatient
beds.  Funding to execute the findings
never materialized. The establishment of Project ARCH, Access Received Closer
to Home, has finally made this piece of the care continuum available to
Veterans living in five areas of the nation as a pilot or demonstration
project.   Fortunately Aroostook County
was one of these selected areas and Cary Medical Center was the hospital
selected to contract with the Veterans Administration to provide a select
number of specialty services including hospital care for eligible Veterans.

Once again this project benefits greatly from
the long history that Cary Medical Center has with the Veterans Administration
and the Veterans community.  The VA
already has primary care and other related services on the hospital
campus.  The level of satisfaction with
hospital care experienced by Veterans and the hospital’s ongoing support and
advocacy for Veterans healthcare also played a key role in attracting Veterans
to Project ARCH project.   The compassion and quality of care provided by
the VA outpatient clinic itself was another key driver for the initial and
remarkable success of the project.

A key question with Project ARCH was whether or
not the community hospital could meet the stringent demands for quality and
customer satisfaction required by the VA. 
In the CBO Interim Report – The Health Care System for Veterans sighted
earlier addressed the improving quality of care in the VA system.  The VA has adopted the Institute of Medicine
(IOM) definition of quality:  “the degree
to which health services for individuals and populations increase the
likelihood of desired health outcomes and are consistent with current
professional knowledge”.   The IOM also
noted that health care should be Safe, Effective, Patient-Centered, Timely,
Efficient and Equitable.  The VA tracks
many aspects of its health care along the dimensions highlighted by the
IOM.  Based on established Clinical Care
Guidelines and other measures the quality of care in the VA has significantly
improved since the organization   experienced reengineering from 1994 – 2000.

Early indicators are that Cary Medical Center is
not only capable of meeting these quality expectations but has exceeded them
both in specific measures of clinical quality and patient satisfaction.  The hospital has worked closely with its VA
contracting office and has established a team of key stakeholders in the care
delivery process including clinical personnel, case management staff,
administration, finance and other aspects of the project.  While the project is just now completing its
first year of operations nearly 1,000 clinical encounters including a number of
surgical procedures and hospital stays have been completed. We are now in the
process of assessing the outcomes and opportunities for improvement.   The
vigilance of the VA in monitoring quality and patient satisfaction for Veterans
eligible for healthcare close to home is admirable. 

While we wait for the specific and detailed data
on the first year experience with Project
ARCH it is appropriate to pause and consider where we have come.  From our earlier discussions on the long
history of the development of the first VA Community Based Outpatient Clinic
(CBOC) in a rural hospital in the United States to the reality of providing
overnight hospitalization and specialty services to eligible Veterans closer to
their homes much has been accomplished. The Veterans Health Care Eligibility
Reform Act of 1996 made it clear that our nation wanted to do more for those
men and women who gave so much in service to our country.  We have also discussed the aging of our
Veterans population and the declining WW II survivors.  Our Korea and Vietnam Veterans are also aging
and the implications for their medical needs and those that will come after
from experience in Iraq and Afghanistan are daunting.  Visionary ideas like Project ARCH will go a
great distance in advancing access to care for rural Veterans. 

While we applaud the VA for its consideration of
our nation’s Veterans and the advancement of both access and quality of care,
there are some issues that we face here in Maine that are of particular
concern.  The VA has a reimbursement
program based on the Medicare Fee Schedule. 
Unfortunately the State of Maine is among the lowest, in the nation, in
the level of Medicare reimbursement. While the complicated implications of this
payment system are much too voluminous for discussion here such reimbursement
unfairly impacts Cary Medical Center as we provide care to Veterans through the
VA system.  Payment for the same service
here at Cary Medical Center such as a total joint replacement is far lower than
the same procedure performed in other states. 
We continue to work with our congressional delegation, including
Congressman Mike Michaud to gain a more equitable Medicare reimbursement rate
which would, in turn, support improved reimbursement for healthcare services we
provide to Veterans.  

At the same time and perhaps counter intuitive
in light of the current reimbursement structure, Veterans who have experienced
care at the local level from Cary Medical Center are clamoring for more
access.  The ability to still feel
connected to the VA through accessing primary care at the VA Community Based Outpatient
Clinic and at the same time obtain specialty care, and, if needed hospital care
close to their homes has been a very positive experience for Veterans.  It is our hope that the Veterans
Administration will, over time, consider adding more specialty care options for
eligible Veterans in Project ARCH such as Ophthalmology. The idea of expanding
specialty care in rural communities to meet an expanding market share of
eligible VA patients has a number of positive implications for not only the
Veterans who will be served but for the entire local community.

Often times specialty services are not available
in a rural community due to the number of patients needed to support such
services.  While access to primary care
has dramatically improved in Caribou, Maine thanks to the expansion of our
Federally Qualified Health Center, Pines Health Services, additional medical
specialists are needed.  Thanks to the
growth in volume presented by Project ARCH we have already been able to expand
services in Cardiology Pulmonology, Neurology, General Surgery and Orthopedic Surgery.  Such development speaks well for the future
of the hospital and the quality and availability of specialty care for the
communities we serve including a growing number of Veterans.

Another challenging issue for providing VA
healthcare in non-VA facilities has to do with measures of access.  Within the current ARCH contract the VA has
included strict access guidelines.  The
contract calls for Veterans to be scheduled with a specialty medical provider
within 14 days of authorization.  This
has been a difficult task for our local hospital as we try and build the
Veterans patients into the routine schedule of very limited specialists, often
a single specialist deep.  Recent figures
sighted by the VA IG suggested many VA patients were not receiving appointments
within 30-days within the VA healthcare system itself.  Still, creative solutions are being developed
to cope with this issue including additional recruitment of specialists, ‘set-aside’
days where the specialists schedule only VA patients or ‘catch-up’ days that
may be held on a Saturday or other non-traditional access times. 

The beauty to the seamless integration of the
private sector healthcare system at the local community hospital level and the
VA primary care clinic is that as these issues surface and mutual team,
committed to improving the delivery of care to the Veteran, comes together and
creative solutions are identified, tested, modified and implemented on an
ongoing basis.  This process has helped
to create what we believe is a potential national model for community based
Veterans healthcare.

A Focus on Prevention
and Patient Education

We have established the many benefits of
bringing health care closer to home for patients within the Veterans
Administration Healthcare System.  We
have also demonstrated that through closer partnership and with mutual trust
and respect a strong collaborative approach can be developed assuring the
provision of quality care and high customer satisfaction.  But one key advantage that we believe can
have significant implications in the future is the growth of patient education
and prevention. This is one area that has only begun to evolve.  The partnership that exists between the
community hospital and the VA outpatient clinic holds great promise in the
collaborative approach to educating patients about chronic disease, preventing
Type 2 diabetes, reducing the risk for heart disease and stroke and many other
preventable health conditions.  The
resources of the local VA clinic may be limited for such general community work
but partnering with the hospital and its strong outreach programs could lead to
a healthier more personally accountable general population as well as a
healthier Veterans Community. 

Conclusion

It is our hope that we have been able to present
a strong case in support of Project ARCH and the continuing willingness of the
VA to work with rural communities in establishing more locally available
healthcare for our nations deserving Veterans. Once again we applaud the VA for
its continuing advancements in technology, patient safety and overall quality
of care.  It is our belief that the
continuing dialogue between the VA and the private healthcare sector in rural
areas of the country will lead to an ever increasing partnership and improving
health status for the communities in rural America. 

Cary Medical Center particularly salutes the
Veterans Administration Regional Medical Office Center at Togus, Maine for
their visionary and remarkable outreach in advancing the care of Veterans in
rural Maine.  We stand ready to offer any
assistance we can in advancing such efforts and we pay tribute to the Veterans,
many of whom have now passed, for their tireless efforts on behalf of their
Veteran brothers and sisters to establish Veterans healthcare close to
home.  While all of us can hope for an
end for the wasteful violence and tragedy of War we recognize the many perilous
and dark forces that challenge freedom on nearly a daily basis.  Those men and women who put themselves in
harm’s way offering the greatest sacrifice deserve our best efforts in
guaranteeing that they will be well cared for when they return home to a
grateful nation.

Thank you.

Prepared Statement of Dr. Gregg A. Pane

Madam Chairwoman and members of
the Committee, I appreciate the opportunity to testify today, on behalf of a
Panel I chaired at the National Academy of Public Administration (the Academy)
in 2011.  Established in 1967 and
chartered by Congress, the Academy is an independent, non-profit, and
non-partisan organization dedicated to helping leaders meet today’s most
critical and complex challenges. The Academy has a strong organizational
assessment capacity; a thorough grasp of cutting-edge needs and solutions
across the federal government; and unmatched independence, credibility, and
expertise. Our organization consists of over 700 Fellows—including former
cabinet officers, Members of Congress, governors, mayors, and state
legislators, as well as distinguished scholars, business executives, and public
administrators.  The Academy has a proven
record of improving the performance and enhancing the accountability of
government at all levels.

Over the past
decade, the VHA Fee Care Program has grown from an infrequently used adjunct to
traditional VA health care services into a critical element of clinical care
for veterans.  After extensive research
and analysis, the Academy’s Fee Care Panel recommended that VHA consolidate this
program into three to five operating centers while modifying its claim
processing structure to become a more standardized system. Standardization of
the IT infrastructure along with consolidation will allow fewer employees to
work more efficiently and effectively, and a more structured rule-based
environment should lead to fewer payment errors and greater program value.  The Panel also emphasized the importance of
conducting an independent analysis of the costs and benefits for contracting
out this function—similar to the approach used by TRICARE and Medicare—to provide
important information for Congress and VA.

BACKGROUND

The Veterans Health
Administration (VHA) provides the majority of medical care services to eligible
veterans with Department of Veterans Affairs (VA) assets. In some instances,
however, VHA procures the services of health care providers outside of the VA health
care system. These services are referred to as “Fee Basis Care” or “Fee Care.”

Fee Care is typically utilized
when a clinical service cannot be provided by a VA Medical Center (VAMC), when
a veteran is unable to access VA health care facilities due to geographic
inaccessibility, or in emergencies when delays could lead to life-threatening
situations. In recent years, Fee Care has been increasingly used to meet
patient wait-time standards.

VA’s Fee Care Program
expenditures have grown 275 percent since Fiscal Year (FY) 2005. At the time
the study was conducted there were approximately 2400 Full Time Employees
(FTEs) working in the program. Paid claims rose from $3 billion in FY 2008 to
$4.4 billion in FY 2010 (46 percent increase), while the number of unique
patients served increased from 820,000 to 952,000 (16 percent) in the same
period.

In 2009 and 2010, the VA Office
of Inspector General (OIG) reported on significant problems with the accuracy
and efficiency of claims paid in the Fee Care Program.  The VA OIG reported that VAMCs made hundreds
of millions of dollars in improper payments—including duplicate payments and
incorrect amounts, both under- and over-payments—because VHA had not
established adequate organizational management structures and processes. The
OIG audit report also included a recommendation that VHA evaluate alternative
organizational models and payment processing options to identify mechanisms to
improve payment processing costs and timeliness. This recommendation provided a
primary impetus for this study.

As
part of its strategy to improve payments in this Non-VA Care (Fee) Program, VA
contracted with the National Academy of Public Administration to conduct an
independent assessment of the program, with the intent of providing VHA with
options on the most efficient model(s) for its future state.

THE ACADEMY STUDY

The Academy formed an independent
Panel of Fellows to conduct this review with support from a professional study
team.  The Panel’s assessment focused on
promoting active participation and direct engagement by all parties
involved.  The primary methods for
collecting information as well as verifying our understanding of VA’s internal
and external dynamics approach were to:

  • Conduct targeted interviews with VA staff and
    stakeholders.
  • Review all existing reports, studies, and audits of
    the current program.
  • Collect and analyze data and metrics regarding the
    current performance of the existing program from all available sources.
  • Interview staff and research the performance of other
    federal and commercial health care payer programs.
  • Prepare an analysis of findings based on the above
    collection methods for review by the Academy’s expert Panel. Draft
    proposals were sent to VA for consideration and comment prior to
    finalization.

The study team also met with some
of the OIG authors to gain additional insights into the studies. Another
recent, highly relevant study was the Indiana University/Purdue University Fee
Service Evaluation Project, which examined best practices within 13 VHA claims
processing sites and evaluated overall efficiency, operations management, and
cost metrics. The Academy study team also interviewed the Indiana
University/Purdue University researchers.

In addition to existing reports
and studies, another important source of information was site visits.  The Academy study team visited the VHA Chief
Business Office Field Office and the National Fee Care Program Office in Denver,
Colorado, Veterans Integrated Service Networks (VISNs) with consolidated
centers, and VISNs that still process claims in individual VAMCs.

The study team also visited
Medicare and TRICARE program officials in Falls Church, VA and Denver, CO.
Interviews were conducted with officials from some of the major contractors
used by Medicare, Medicaid, and TRICARE to process claims, including TriWest,
Health Net, Affiliated Computer
Services (ACS), and Humana.

TRICARE AND MEDICARE MODELS

Both Medicare and TRICARE
contract out all of their claims work and spend a majority of their staff time
on overseeing the contractors and contracts. Several large commercial vendors
specialize in providing large volume processing of these health services
claims.

Medicare provides approximately
$400 billion in health insurance coverage to people who are aged 65 and over,
those who are under 65 with certain disabilities, and people of all ages with
end-stage renal disease. The Medicare Program offers an alternative to current
VHA organizational structures because all administrative (back-office)
functions have been contracted out. Each of five Medicare Regional Offices
oversees various activities of the Medicare Administrative Contractors (MAC),
which in turn are responsible for providing services to Medicare’s enrolled
population.

TRICARE’s $40 billion a year
program has outsourced its administrative office functions, dividing the United
Stated into three regions, each awarded to a separate contractor. Contractors
are responsible for ensuring that TRICARE’s enrolled population receives care,
developing and maintaining a network of providers, and maintaining an
information system based on guidance established by TRICARE. Taken a step
further than Medicare, TRICARE has tried to create contracts that push some
“program risks” to the contractors and has created a robust Program Integrity
Office with clearly-defined criteria and staff consisting of lawyers,
statisticians, physicians and nurses (RNs). This office directs contractors in
identifying and limiting fraud and abuse throughout the program.

TRICARE
contractors report that about 75 percent of the claims processing is fully
automated, that is, not requiring human intervention. The contractors also
reported to the study team a cost per claim of $2.25 to $2.50 for electronic
claims and $3.50 for paper-based claims. This serves as another basic benchmark
to gauge the potential for productivity improvement in the Fee program.

Medicare
contractors report that about 95 percent of the claims processing ranges from
about $0.40 to $1.60 per claim depending on whether the claim is electronic or
paper-based, type of claims, and other factors (compared to $9.40 per claim for
VISN 19 and $2.55 for CHAMPVA). Processing of commercial claims cost about the same,
ranging from $0.85 per claim for electronic claims to $1.60 for paper-based
claims.

CHAMPVA

VA currently
runs a centralized claims processing business line for the Civilian Health and
Medical Program of the Department of Veterans Affairs (CHAMPVA) in Denver,
Colorado. CHAMPVA provides coverage for non-VA purchased care provided to the
spouse or widow(er) and to the children of a veteran who is rated permanently
and totally disabled due to a service-connected disability or who died of a
service-connected disability. In FY 2009 nearly 300 claims processing staff in
Denver processed over 6 million CHAMPVA claims annually. The average number of
claims processed per staff member is over 20,000. This level of productivity
far exceeds the productivity of the most efficient sites for the Fee program,
and can be viewed as a target for the Fee program to achieve.

There are
certain significant differences between the two programs that add unique
challenges to each program. Authorization at the local VA hospital is a
significant step in the Fee program that does not occur in CHAMPVA. Likewise,
CHAMPVA has some requirements that do not exist in the Fee program. For
example, CHAMPVA handles payment or reimbursement of service in foreign
countries.

THE FEE CARE
PROGRAM
’S CHALLENGES

Several studies
and numerous study team interviews point to the following significant
challenges and areas for improvement in the Fee Care Program:

  • Decentralized mode of operation across VA
    hospitals resulting in inefficient operations
  • High error rates
  • Fee Care Program organizational alignment,
    staffing, grade profiles, education, training, training certification,
    performance standards and performance expectations vary significantly across VISNs and operating    sites
  •  Interpretation and application of rules vary
    across Fee operating sites.

The study
team’s research found:

·       
Limited VISN-wide executive oversight of
purchased care programs

·       
No clearly defined operational objectives or
goals

·       
No defined strategy for optimally managing
program expenditures

·       
Minimal understanding of the services being
procured and prices paid for those services

·       
No pronounced effort to effectively capitalize
on the expertise, resources and economies of scale of the VISN.

Error Rate Analysis

Three VA OIG
audits issued over the last three years report hundreds of millions of dollars
in erroneous payments or missed revenue collection opportunities. The Audit of
Non-VA Inpatient Fee Care Program report (August 18, 2010), for example,
concluded in its report highlights:

“VA Medical Centers (VAMCs) improperly paid 28 percent of
inpatient Fee claims during the 6-month period of January 1, 2009 through June
30, 2009. The improper payments occurred because VHA’s policies for determining
eligibility for inpatient Fee care did not provide adequate guidance on how to
determine eligibility for inpatient Fee care or were not understood by Fee
staff. Other payment errors occurred because Fee staff did not have accurate
and timely information to determine correct payments, and the VAMC did not have
sufficient controls to detect clerical errors. We estimate that VHA made net
overpayments of $120 million on inpatient care for veterans in FY 2009 or $600
million in improper payments over the next 5 years.”

The VHA’s Chief
Business Office (CBO)’s own analysis of error rates in claims processing for
recent activity is about 12 percent. This measure of error rate is net of under
and over charges on the billing. It does not include procedural errors or
errors that do not result in inaccurate billing. An error rate of 12 percent
applied against total Fee expenditures in FY 2011 indicates erroneous payments
of $500,000,000. The FY 2011 error rate of 12 percent is an improvement over
the rate reported the previous year (13.8 percent).

For a comparative benchmark, CBO
reported to the study team that the national error rate for CHAMPVA for this
year is 1.03 percent. This is based on using the same measurement processes
(payment error compared to total payments) that was used to calculate the Fee
Basis payment error rate of 12 percent.

 The TRICARE program may serve as
an example of high performance with respect to management of improper payments
as well. In interviews TRICARE program integrity officials reported error rates
that are under .05 percent.

TRICARE’s Program Integrity
office executes policies and procedures regarding prevention, detection,
investigation and control of fraud, waste and program abuse. It provides
oversight of contractor program integrity activities. It liaises with
Department of Justice, law enforcement agencies, state and federal agencies,
and private plans. TRICARE program integrity tools include: mandated use of
fraud detection software; automated computer edit software program; post-pay
duplicate software; quarterly and annual audits; prepayment review;
beneficiary/provider education; and anti-fraud data mining (e.g., spike
detection, outliers). TRICARE maintains and tracks electronic records of all
adjudicated purchased care claims in its TRICARE Encounter Data (TED).

PANEL
FINDINGS

The Fee Care
Program is currently operating at an inefficient level due to the number of
claim payment errors and the relatively low productivity of its staff compared
to other similar programs. In fact, the return on investment (ROI) analysis run
by the Panel indicates that a total consolidation of the Fee Care Program
(which is a combination of virtual and VISN consolidation) would save the
organization almost $4 billion in the next 10 years, net of the investment
costs.  The net total savings was
calculated by adding the amount of net savings affected by reducing the number
of FTEs through consolidation, integrating a more automated claims processing
system, and reducing the errors in payments. 

A consolidation
effort would maximize efficiency and reduce staffing levels. After reviewing
the costs and running a ROI analysis, the Panel has concluded that total
consolidation shows more efficiency, lower error rates, lower resource needs,
and over all higher return on investment. The standardization of the IT
infrastructure along with physical consolidation will allow a smaller number of
employees to work more efficiently and with a more structured rule-based
environment resulting in a decrease in errors made while processing claims.

 The Department
of Veterans Affairs’ Fee Care Program needs to change.  Historically, this program constituted a
small fraction of health care resources. 
The Panel estimated that it would constitute approximately 10 percent of
the VA’s total health care budget in FY 2012. During this period of
unprecedented growth, the organizational, administrative, and technological
systems used to operate and manage the program simply have not kept pace. VA is
different from most federal health care systems in that it is both a provider
of health care and a payer of health care claims.

The Panel
reached the following conclusions:

1.      Given the
significant organizational and productivity challenges within the Fee Care
Program, VHA has limited understanding of the services it is procuring through
this program or their costs. 

2.      The Fee Care
Program is significantly more inefficient and has higher error rates than
benchmarked organizations. Productivity across operating sites varies
considerably. CBO estimates the error rates (that is, erroneous payments) at 12
percent per year, or approximately $500 million in FY 2011.  By contrast, TRICARE has a reported error
rate of 0.42 percent. Productivity varies so greatly across
operating sites that the productivity of the most efficient processing site is
nearly 10 times greater than the most inefficient site.

3.      The Fee Care
Program has grown haphazardly over the years and the technology and
administration of Fee care claims have been neglected. As VA’s Fee Care Program
has grown, the Department has been playing catch-up in its attempts to
modernize and improve its decentralized and inefficient claims processing
system. Despite a number of initiatives being undertaken to improve the current
situation, the organization responsible for improving the system, CBO, has
limited control and authority.

4.      VA has an
opportunity to create a markedly improved Fee claims system but faces major
challenges. In addition to the significant changes recommended for VHA field
operations outlined below and the needed technology enhancements, the Panel
also believes that CBO needs to change the organizational alignment within the
Fee office to achieve more focus, effective leadership, and improved lines of
authority to bring about the necessary changes.

 5.      CBO has
struggled to meet its mandate to provide a single accountable authority to
develop administrative processes, policy, regulations, and directives regarding
the delivery of VA health benefit program.

6.      The support
environment within VA and VHA—particularly IT, HR and Contracting—plays key roles
in improving the functioning of the Fee Care Program.  The Panel believes that strong leadership
support from senior VA and VHA officials will be required to provide the Fee
Care Program with the institutional support required to bring about the recommended
changes.

7.      Although the
Fee Care Program can significantly improve just by changing its organizational
and administrative processes, the most significant performance breakthroughs
can take place only through technology.Two
excellent examples of how technology can do this are the Medicare and TRICARE
programs, which respectively handle 90 percent plus and 75 percent of their
claims without human intervention. VA in contrast, cannot process any claims
without human intervention. 

8.      CBO also needs
to develop stronger program management capabilities.  Although CBO does not exercise direct line
authority over field Fee operations, they still can develop mechanisms that can
help to drive desired outcomes by using the traditional tools available to
program managers:

·       
Metrics – CBO needs a balanced set of metrics to
oversee Fee operations in the field. This would include measures of speed,
accuracy, costs and customer satisfaction.

·       
Data – reliable performance data is essential
for Fee Care Program oversight. This study found numerous examples of
questionable and clearly erroneous data used in Fee Care Program reports. It
was also clear that this information was not being adequately reviewed by
Program officials.

·       
Program integrity – CBO should create and manage
a program integrity component in each of the consolidated operating centers as
well as at its headquarters for determining whether work is being done in the
prescribed manner.

·       
Use existing authority – both CBO and all VISN
directors report to the Deputy Under Secretary for Health/Operations and
Management. In matters of insuring field business office structural and
business process consistency, this office should exercise more direct control.

Over the past
decade, the Fee Care Program has grown from a small, relatively infrequently
used adjunct to traditional VA health care services, into a critical element of
clinical care for veterans. While the Fee Care Program has grown exponentially
in terms of volume and budget outlays, there has been insufficient strategic
oversight of the program and its administrative and support systems have
languished.

PANEL RECOMMENDATIONS

After analyzing
the costs and ROI, the Panel concluded that consolidating the Fee Care Program
into three to five operating centers while modifying its claim processing
structure to become a more standardized system is the appropriate course of
action in order to increase effectiveness and efficiency. Standardization of
the IT infrastructure along with consolidation will allow fewer employees to
work more efficiently and effectively. A more structured rule-based environment
would lead to fewer payment errors and greater program value.

More specifically, the Panel
recommended that VHA take the following steps to strengthen the Fee Care
Program:

Organizational
Consolidation and Management Changes

 1.      Consolidate its Fee Care
Program from the current 100+ operating sites to the smallest number possible
that will provide necessary redundancy and surge capabilities. This should
result in no more than three to five strategically located regional sites.

2.      High level VA management should
provide clear policy direction about performance goals and expectations for VA
purchased care, including the allocation of resources between VA-provided and
purchased care to best meet strategic goals.

3.      VHA should build greater
program management competence and capacity for overseeing the Fee Care Program
and supporting the consolidated claims processing sites. VHA should look both
within and external to VA for expertise in this effort.

·       
Create
and manage a program integrity component in each of the claims processing
sites, in addition to the planned headquarters component.

·       
Establish
a performance management system having performance metrics for productivity,
accuracy, timeliness and customer satisfaction, among other things.  

·       
VHA should establish short and long-term performance
goals.

·       
Build greater program management competence for
overseeing the Fee program.

Technology and Virtual Consolidation

4.     
VHA
should procure and implement an enterprise-wide technology solution to facilitate
virtual consolidation.

Other
Considerations

 5.     
Conduct
a cost-benefit analysis of contracting out the processing of claims as with
other payer models (such as TRICARE, Medicare, Medicaid, and Blue Cross Blue
Shield) and their applicability for VA. 
This was outside the scope of the Academy Panel’s mandate in this study.

By implementing
these recommendations, the Panel believes that VA will improve service to Fee Care
providers, which will help ensure maximal participation in the Fee Care Program
and, consequently, more available health care options for veterans. The savings
gained from more efficient administration and more accurate payments can be
redirected back into improving other health care services for veterans.

Madam
Chairwoman, that concludes my prepared statement, and I would be pleased to
answer any questions you or the Committee members may have.

Prepared Statement of The Honorable Dr. Robert A. Petzel,
M.D.

Good morning, Madam Chairwoman, Mr. Ranking Member,
and Members of the Subcommittee.  Thank
you for the opportunity to discuss the Department of Veterans Affairs’ (VA)
purchased care programs.  I am
accompanied today by Philip Matkovsky, Assistant Deputy Under Secretary for
Health for Administrative Operations; Cyndi Kindred, Acting Deputy Chief
Business Officer for Purchased Care; and Deborah James, Non-VA Care
Coordination (NVCC) Project Manager.

VA provides care to Veterans directly in a VHA
facility or indirectly through either individual authorizations or through contracts
with local providers.  This mix of
in-house and external care provides Veterans the full continuum of health care
services covered under our medical benefits package.  VHA recognizes that improvements are needed
in the Non-VA Care Program, including that part of this program previously
known as Fee Basis.  To address these
concerns, VA has developed and managed multiple initiatives in the Non-VA Care
Program.  These initiatives are designed
to ensure that high-quality care is consistently provided to Veterans under the
non-VA care authorities.  They are also
designed to ensure Veterans receive effective and efficient non-VA care
seamlessly.

My testimony today will discuss two initiatives,
Patient-Centered Community Care (PCCC) and Non-VA Care Coordination (NVCC),
both of which will help ensure that high-quality care is consistently provided
to Veterans regardless if they receive their care in-house or from a non-VA
care provider.  I will also provide you
with an update on the Project HERO (Healthcare Effectiveness through Resource
Optimization) Program, Project ARCH (Access Received Closer to Home) and how
our use of non-VA care is increasing access to care for rural Veterans.  My testimony will discuss the clinical
metrics and standards we have instituted to ensure Veterans receive the same
quality care from non-VA providers participating in the Non-VA Providers
Program as Veterans receive in-house.

Non-VA
Care Generally

It is VHA policy to provide eligible Veterans care
within the VA system whenever feasible and to the extent authorized by law.
 When VA cannot provide all of the necessary medical care and services at
a VA medical facility, VA is, generally speaking, authorized to provide the
needed care through non-VA providers in a manner consistent with the
requirements and parameters of the non-VA care program and its underlying legal
authorities.

VA uses criteria to determine whether non-VA care may
be used.  VA may consider non-VA care due
to a lack of an available specialist, long wait times, or extraordinary
distances from the Veteran’s home. 
Purchasing the services will only be considered if other options within
VHA are not appropriate or viable.  If
purchasing services is required, two principal avenues exist for contracting
health care services: conventional commercial providers and academic
affiliates. 

VHA’s academic affiliates (schools of medicine,
academic medical centers and their associated clinical practices) provide a
large proportion of contracted clinical care both within and outside of
VHA.  All non-competitive VHA health care
resource contracts valued at $500,000 or more and competitive contracts over
$1.5 million are reviewed through a thorough process that includes the Office
of General Counsel (for legal sufficiency), VHA’s Office of Patient Care
Services (for quality and safety), VHA’s Office of Academic Affiliations (for
affiliate relations assessment), and VHA’s Procurement and Logistics Office (for
acquisition technical review for policy compliance).  In addition, the Office of Inspector General
performs a pre-award audit of all non-competitive contracts valued over
$500,000.

VA is focusing on two initiatives to improve the
oversight, management, and delivery of non-VA care:  Patient-Centered Community Care (PCCC), which
is still in development, and the Non-VA Care Coordination (NVCC) program.  In earlier discussions with stakeholders,
including this Subcommittee, VA has heard concerns regarding the implementation
of PCCC and NVCC.  I assure you, we are
taking the necessary precautions to see that these initiatives provide timely,
high quality medical care.  

Patient-Centered
Community Care (PCCC)

PCCC will consist of a network of centrally supported
standardized health care contracts, available throughout VHA’s Veterans
Integrated Service Networks (VISN).  This
initiative will focus on ensuring proper coordination between VA and non-VA
providers.  PCCC is not intended to
increase the purchasing of non-VA care, but rather to improve management and
oversight of the care that is currently purchased.  This includes improvements in numerous areas
such as consistent clinical quality standards across all contracts,
standardized referral processes, and timeliness of receipt of clinical
information from non-VA providers.  The
goal of this program is to ensure Veterans receive care from community
providers that is timely, accessible, and courteous, that honors Veterans’
preferences, enhances medical documentation sharing, and that is coordinated
with VA providers when VA services are not available. 

While VA intends to administer these contracts
directly, it has not yet determined how they will be managed.  Additionally, VA is currently researching the
appropriateness of incentives tied to performance standards to help ensure the
selected contractors provide excellent customer service and timely care.  VA conducted a business case analysis which
compared the cost of purchasing care through individual authorizations and
through regional contracts.  The analysis
showed that regional contracts are more cost-effective, with the cost/benefit
ratio improving as participation increases. 
The PCCC contracts will cover inpatient and outpatient specialty care
and mental health care.  Primary care is
not included in the solicitation because it is an essential function of VA and
is the key to coordinating Veteran health care. 
Chronic dialysis is also excluded from the solicitation; currently 7
contracts and 19 Basic Ordering Agreements are in place nationally to purchase
dialysis services, and these contracts are proving to be very successful in
ensuring quality and accessible services are available for our Veterans close
to where they live.

The original schedule for release of the Request for
Proposal (RFP) and subsequent evaluation of proposals and award was first
quarter fiscal year (FY) 2013.  However,
in an effort to strengthen the requirements, incorporate a broader range of ideas
from key stakeholders such as our Veterans Service Organizations and the
private sector, VA will release a draft RFP for comment before the release of
the final RFP in the interest of making this effort a more effective
solution.  VA now plans to award the new
contracts in late second quarter of FY 2013.

Non-VA
Care Coordination (NVCC)

NVCC is VA’s internal program to improve and
standardize our processes for referrals to non-VA care.  The NVCC model centers on effective referral
management and consistency in documenting, tracking, managing receipt of
supporting clinical documentation and coordinating patients in community health
facilities.  Through NVCC, non-VA care
staff use standardized processes and templates for the administrative functions
associated with non-VA care.  VA
successfully conducted initial pilot programs in VISNs 11 and 18 in FY
2011.  VHA incorporated best practices
from the pilot sites and created the structure that is currently being deployed
to one champion site per VISN.    All
champion sites will be completed in late fall 2012.  Full national deployment will be complete by
the end of FY 2013.     

Quality
Standards

VHA exercises its responsibility to provide quality
contracted care to Veterans through several clinical and business
mechanisms.  These include credentialing
and privileging, quality and patient safety monitoring, medical documentation
sharing requirements, financial and compliance reviews, and specific quality of
care provisions included in the contract itself.  Facility directors are responsible for
ensuring that these oversight mechanisms are consistently and effectively
applied to all medical services provided under contract in a VHA facility.  Ensuring quality standards for VHA contracted
care outside of a facility is more difficult, but VHA includes language in such
contracts that requires industry standard accreditation or certification
requirements are being met, clinical reporting occurs, and oversight mechanisms
are in place to ensure that this care meets VA standards.

Rural
Care

Project HERO (Healthcare Effectiveness through
Resource Optimization) is a pilot program in VISNs 8, 16, 20, and 23 that helps
eligible Veterans receive the care they need when it is not available at a VA
facility.  The objectives of Project HERO
are to provide as much care as possible within VHA, efficiently refer Veterans
to high quality community-based care, foster high quality care and patient
safety, improve the exchange of information, and increase Veterans overall
satisfaction of care.  The Project is
currently in its fifth year.  Medical
care is offered through contracts with Humana Veterans Healthcare Systems
(HVHS) and Delta Dental Federal Government Programs (Delta Dental).  Project HERO provides Veterans with access to
a pre-screened network of medical and dental providers who meet VA standards
for quality care.  These providers must
meet VA defined standards for credentialing, accreditation, and quality.  Specifically, these contracts require that
HVHS and Delta Dental have quality management programs that comply with VA,
Joint Commission, Federal, and state requirements. 

Once VA determines that contract care is appropriate,
HVHS and Delta Dental communicate directly with Veterans to schedule
appointments, and Veterans see HVHS or Delta Dental doctors or dentists.  Requests for additional services must be
referred back to VA, which allows the Department to coordinate each patient’s
care and maintain oversight of each patient’s care needs.  Following each appointment, HVHS and Delta
Dental providers send patient records and invoices to HVHS and Delta Dental,
which in turn submit medical records and claims to VA.

VA learned many lessons from Project HERO and is
using this information to develop the PCCC contracts.  We also realized success in several key
measures, such as scheduling and completing appointments within 30 days and
receiving updated clinical information within 30 days.  We confirmed that we can ensure availability
of credentialed and accredited providers that meet our standards for care.  Additionally, when compared to traditional
fee basis care, Project HERO has yielded a significant cost savings, amounting
to more than $27 million through July 2012.

The lessons learned over the course of Project HERO
will be incorporated into PCCC as it is fully implemented.  To ensure a smooth transition from Project
HERO to PCCC, VA has notified HVHS of its intent to extend the current
medical/surgical services contract until March 2013.  This extension will help ensure Veterans
currently seeing a Project HERO provider have no disruption of service while
the PCCC contracts are being awarded. 
The extension will also allow VA medical centers in those four VISNs to
continue taking advantage of the quality, access, and medical documentation
sharing requirements in the Project HERO contract.  If the PCCC contracts are not in place by the
expiration of this extension, VA will ensure Veterans will still receive timely
and quality non-VA care through the use of individual authorizations. 

Additionally, VA’s Office of Rural Health has
implemented a 3-year pilot program to provide health care services through
contractual arrangements with non-VA care providers – Project ARCH (Access
Received Closer to Home).  This pilot
intends to improve access for eligible Veterans by connecting them to health
care services closer to home.  Five pilot
sites have been established across the country: 
Caribou, ME; Farmville, VA; Pratt, KS; Flagstaff, AZ; and Billings,
MT.  On July 29, 2011, health care
delivery contracts were awarded to: Humana Veterans in VISNs 6, 15, 18, and 19,
and Cary Medical Center in VISN 1.  This
program became operational on August 29, 2011.

Conclusion

As the Nation’s only health care system designed
specifically to treat Veterans, VA offers services and benefits unavailable
elsewhere.  This system has been designed
and continuously updated to respond to the unique needs of Veterans in an
environment that understands and honors their military service.  For these reasons, VA’s first preference is
to provide care to Veterans within its system, but we recognize that we cannot
provide the necessary care to every Veteran in our facilities, which is why we
utilize non-VA services where appropriate. 
Veterans receiving care from non-VA sources should rightfully expect the
same quality care from these providers as they would receive from ours.  Consequently, VA has developed a strategy to
improve its purchased care programs to achieve quality improvements and cost
savings.  This strategy entails greater
use of standardized contracts through PCCC and better referral management
through NVCC.  We are currently in a
moment of transition for VA’s purchased care program, and we appreciate the
advice and counsel of our stakeholders—the Veterans we serve, the Service Organizations
that represent them, and Congress—as we proceed.

Madam Chairwoman and Mr. Ranking Member, VA has
utilized its authorities to provide eligible Veterans quality care in non-VA
settings.  We have also instituted new
models and controls to ensure Federal resources are used appropriately.  We appreciate the opportunity to appear
before you today.  My colleagues and I
are now prepared to answer your questions.

Prepared Statement of Office of the Inspector General, U.S.
Department of Veterans Affairs

Madam Chairwoman, Ranking Member
Michaud, and Members of the Subcommittee, thank you for the opportunity to
provide testimony concerning the Office of Inspector General’s (OIG) work
related to VA’s purchase of health care services for veterans from non-VA providers.  As health care
costs continue to increase, ensuring that VA has strong controls over purchased
care activities is a critical aspect of providing the health care veterans
need.  

Over the past 3 years, the OIG has issued seven reports[1]
on VA’s fee care program.  Our audits and
reviews of fee care have identified significant weaknesses and inefficiencies.  Specifically, we found that VA had not
established effective policies and procedures to oversee and monitor services
provided by non-VA providers to ensure they are necessary, timely, high
quality, and properly contracted and billed.

BACKGROUNDTitle 38 of the United States Code permits
VA to purchase health care services on a fee-for-service or contract basis when
services are unavailable at VA facilities, when VA medical centers (VAMCs) cannot
provide services economically due to geographical inaccessibility, or in
emergencies when delays may be hazardous to a veteran’s life or health.  At the time of our
initial work in fiscal year (FY) 2008, the Veterans Health Administration’s
(VHA) medical care budget totaled approximately $39 billion.  In FY 2011, the medical care budget increased
to about $48 billion.  We estimate that
of this amount, VHA spent about $4.6 billion to purchase health care services
from non-VA entities such as other government agencies, affiliated universities,
community hospitals, nursing homes, and individual providers.  VHA uses various mechanisms to purchase health
care services, including sharing agreements with affiliated universities and
the Department of Defense, Federal Supply Schedule (FSS) contracts, the Non-VA
Fee Care Program, Project HERO, and the Foreign Medical Program.  According to VHA managers, the authority to
purchase services from non-VA sources helps to improve veterans’ access to
needed health care services, in particular specialty care that may not be
available at VAMCs.

OIG REPORTS Audit of Non-VA Outpatient Fee Care Program

At the time of our audit in FY 2008,
137 VAMCs processed an estimated 3.2 million outpatient fee claims at a cost of
about $1.6 billion.  These claims were
for a wide range of diagnostic and therapeutic services including visits to
primary care physicians, x-rays and diagnostic imaging procedures, chemotherapy
and radiation therapy, dialysis, physical therapy, and outpatient surgical
procedures.  Based on our review of a
statistical sample of 800 claims, we concluded that VHA had not established
adequate management controls and oversight procedures to ensure that claims for
outpatient fee services were accurately paid, justifications for services were
adequately documented, and services were properly pre-authorized.  We concluded that the improper payments,
justifications, and authorizations occurred because VHA had not established an
adequate organizational structure to support and control the complex, highly
decentralized, and rapidly growing fee program.  For example: 

 

·       
VAMCs
improperly paid 37 percent of outpatient fee claims by making duplicate
payments, paying incorrect rates, and making other less frequent payment
errors, such as paying for the wrong quantity of services.  As a result, we estimated that in FY 2008,
VAMCs overpaid $225 million and underpaid $52 million to fee providers, or
about $1.13 billion in overpayments and $260 million in underpayments over 5
years.

 

·       
For
80 percent of outpatient fee claims we reviewed VAMCs did not adequately
document justifications for use of outpatient fee care or properly
pre-authorize services as required by VHA policy, thereby increasing the risk
of additional improper payments.  

 

We identified three specific areas that required
strengthening:

 

·       
Comprehensive Fee Policies and Procedures – VHA did not have a centralized source of
comprehensive, clearly written policies and procedures for the Fee
Program.  Instead, fee supervisors and
staff had to rely on an assortment of resources including the Code of Federal
Regulations, outdated VA policy manuals, and other procedural guides, training
materials, or informal guidance.

 

·       
Identification of Core Competencies and Required Training for Fee Staff – Because the Fee Program is very
complex and requires significant judgment by fee staff to ensure correct
payments, processing fee claims requires specialized knowledge and skills, such
as understanding medical records, insurance billing concepts, and medical
procedure coding.  However, VHA did not
require fee staff or their supervisors to attend initial or refresher
training. 

 

·       
Clear Oversight Responsibilities and
Procedures
– Strong oversight of the Fee Care Program should include procedures
and performance metrics for assessing compliance with program requirements,
conducting risk assessments, assessing program controls, and monitoring
accuracy and quality of claims processing. However, no one from VHA’s Chief
Business Office, National Fee Program
Office, Veterans Integrated Service Networks, or Compliance and Business
Integrity Office was routinely performing oversight activities of the Fee
Program.

We made eight recommendations to
strengthen controls over the Outpatient Fee Care Program. The Under Secretary
for Health agreed with the findings and recommendations and has since
implemented all the recommendations. 

Audit of Non-VA
Inpatient Fee Care Program

In our report, Audit of Non-VA Inpatient Fee Care Program, we estimated that VAMCs
had a combined authorization error and improper payment rate of 30 percent
during the 6‑month period of January 1, 2009–June 30, 2009[2].  VAMC staff made authorization errors because
VHA’s policies did not provide adequate guidance on how to determine
eligibility for inpatient fee care or were not understood by fee staff.  Payment errors occurred because fee staff did
not have accurate and timely information to determine correct payments, and the
VAMC did not have sufficient controls to detect clerical errors.  We estimated that VHA made net overpayments
of $120 million on inpatient care for veterans in FY 2009 or $600 million
in improper payments over 5 years.  For
example:

 

·       
VAMCs improperly
paid 9 percent of all inpatient fee claims by authorizing non-emergency
inpatient fee care for veterans who were not eligible for this care.  These errors occurred because VHA’s policy
did not adequately address how to determine eligibility for non-emergency
inpatient fee care. 

·       
VAMCs improperly
paid 4 percent of all inpatient fee claims by authorizing emergency care for
veterans who were ineligible for this care. 
These errors occurred because fee staff did not understand the
individual eligibility criteria for emergency inpatient fee care, such as the
authorized treatment must be related to a service-connected disability. 

·       
VAMCs paid
improper amounts for 17 percent of pre-authorized inpatient fee claims.  VAMCs made three types of payment errors;
they did not:

o      
Know where to
find inpatient transfer information needed to determine when to apply per diem
payment methodology.

o      
Utilize
Preferred Pricing Program rates because the Program process was not timely.

o      
Pay other proper
rates because fee staff were provided with inaccurate rate information or made
clerical errors.

We
made recommendations to establish guidance on how to determine eligibility, to
develop and implement mandatory training on eligibility criteria for inpatient
fee care, to establish guidance on where to find inpatient transfer information
needed to determine when to apply the per diem payment methodology, and to implement
a quality control mechanism to address the types of payment errors identified
by this audit. The Under Secretary for Health agreed with the
findings and recommendations and has since implemented the recommendations. 

Review of
Veterans Health Administration’s Fraud Management for the Non-VA Fee Care
Program

As a result of the
identification of the lack of outpatient and inpatient fee care program
controls and the problems reported in other Federal medical programs, we also reviewed
the fee care’s fraud program and controls. 
In June 2010, we completed a review that determined VHA had not
established controls designed to prevent and detect
fraud primarily.  This occurred because
it had not identified fraud as a significant risk to the Fee Care Program, even
though VHA’s Fee Care Program is not
significantly different from other health care programs that have identified
numerous cases of fraud.  We estimated that the program could be paying between
$114 million and $380 million annually for fraudulent claims.  We recommended that the Under
Secretary for Health establish a fraud
management program that includes such fraud controls as data analysis and
high-risk payment reviews, system software edits, employee fraud training, and
fraud awareness and reporting.  The Under Secretary for Health agreed with our finding and
recommendation and completed all corrective actions.   

Review of Alleged Mismanagement of Non-VA Fee Care Funds at
the Phoenix VA Health Care System 

In November 2011, we
issued Review of Alleged Mismanagement of Non-VA Fee Care Funds at the Phoenix VA
Health Care System

approximately 2 ½ years since we issued our first
report on the Fee Care Program.  However,
we found that this medical facility mismanaged fee care funds and
experienced a budget shortfall of $11.4 million or 20 percent of their FY 2010
fee care program funds.  We concluded
that the authorization procedures were so weak that the Phoenix Health Care
System (HCS) processed about $56 million of fee care claims without adequate
review.

The
reason for the shortfall was the lack of effective pre-authorization
procedures, a problem we reported in August 2009.  The Phoenix HCS did not have effective pre-authorization procedures for fee care because the physician who was responsible for
reviewing and pre-authorizing virtually all of the of fee care claims routinely
approved requests for fee care with no substantive questions or requests for
additional information.  Further, the medical
facility did not have adequate procedures to obligate sufficient funds to
ensure it could pay its commitments for these services. 

The mismanagement of fee
authorization procedures at the Phoenix HCS highlights the risks to the Non-VA
Fee Care Program, such as authorizing:

·       
Diagnostic
tests or procedures that are not medically necessary.

·       
Services
that are available at a VA medical facility.

·       
Unnecessary
and often excessive numbers of medical treatments.

Our
recommendations included the establishment of monitoring procedures to ensure
that the official designated to pre-authorize fee care thoroughly review fee
care requests and that fee staff obligate sufficient funds for approved fee
care.  The Interim Director of the Phoenix HCS agreed
with our findings and recommendations and is working to implement our
recommendations.

Administrative Investigation,
Improper Contracts, Conflict of Interest, Failure to Follow Policy, and Lack of
Candor, Health Administration Center, Denver, Colorado

The OIG Administrative Investigations Division recently completed
an administrative investigation regarding the Deputy Chief Business Officer for
Purchased Care.  We substantiated that
the Deputy Chief Business Officer for Purchased Care engaged in improper
contracting activities by instructing subordinates to issue sole-source task
orders to one specific contractor and engaged in a conflict of interest when
failing to maintain an arm’s-length relationship with two VA contractors. 

This is significant because VHA’s Patient-Centered Community Care
(PCCC) initiative proposes to purchase non-VA care by contracting with various
provider networks.  The engagement of improper
contracting practices at the senior executive level and previous OIG findings
on ineffective and improper contracting in the Department, only highlights our
concerns that VA must ensure proper controls are implemented and monitored
before, during, and after contracts are awarded.  In addition, responsible contract officers
and contracting officers’ technical representatives (COTRs) must be properly
trained and supervised to effectively oversee PCCC vendors.

Review of Enterprise Technology
Solutions, LLC, Compliance with Service-Disabled Veteran-Owned Small Business
Program Subcontracting Limitations

The OIG Office of Contract Review initiated and conducted a compliance
review of subcontracting limitations contained in five contracts with Enterprise
Technology Solutions, LLC (ETS) for re-pricing fee claims.  The review was initiated after VHA requested
an audit of a claim submitted by ETS regarding an unauthorized commitment that
VHA procurement officials appropriately refused to ratify.  ETS is a service-disabled veteran-owned small
business (SDVOSB) concern and all five contracts for re-pricing fee claims were
awarded as SDVOSB set-asides.

We determined that ETS subcontracted all of the re-pricing tasks
to its subcontractor Health Net Federal Services (Health Net), a large
business.  We concluded that ETS did not
process any of the claims nor did they have the expertise or capability of
re-pricing claims and never intended to perform the work.  Health Administration Center contracting personnel
were fully aware that ETS was subcontracting all of the work to Health Net in
violation of the provision in the contract limiting subcontracting because ETS
had VA forward all claims directly to Health Net for processing.

Based on work conducted by the Office of
Contract Review and by the Office of Healthcare Inspections, we also determined
that the revised regulations implemented in February 2011 allow for VA to use
the amount submitted by a re-pricer if the amount is lower than the Medicare
rate established by the Centers for Medicare and Medicaid Services.  We found that the amounts submitted by the
re-pricer were not lower than the established Medicare rates; therefore, we
questioned whether VA was overpaying for the services given the hierarchy for
payment established in the regulations. 
We also questioned whether it was fiscally sound to pay for both a
Medicare pricer and a re-pricer to review each claim for VA to determine which
is lower.  This is especially true given
the significant fees paid to the re-pricer regardless of whether there was a
cost savings.

We made
seven recommendations to the Under Secretary for Health:  terminate the five ETS contracts for claims
re-pricing; determine if there is a need for any contract(s) to re-price non-VA
care fee claims; ensure that the requirements for future contracts do not
preclude competition; establish procedures to ensure that all non-VA fee claims
are submitted to VA’s Medicare pricer; determine whether claims re-pricing for
non-VA care have resulted in rates that are lower than Medicare rates; implement
mandatory training requirements for program offices to ensure requirements are
not written to preclude competition; and ensure justifications for sole-source
awards receive appropriate approvals.  The
Under Secretary for Health concurred with our findings and recommendations.  The contracts with ETS were terminated for
cause in August.  We will follow up on
the remaining planned actions until implemented.

CONCLUSION

While
purchasing health care services from non-VA providers may afford VHA
flexibility in terms of expanded access to care and services that are not
readily available at VAMCs, it also poses a significant risk to VA when adequate
controls are not in place. Although the Under Secretary for Health agreed to
our recommendations and provided implementation plans to correct identified
issues, VHA still faces major challenges managing the fee care program.  Improper
contracting practices as reported in other OIG  reports only highlight our concerns that VA
must ensure proper controls are implemented and monitored before, during, and
after contracts are awarded, and responsible contract officers and COTRs must
be properly trained and supervised to effectively oversee
future PCCC vendors. 



[1]   Audit of Veterans Health Administration’s
Non-VA Outpatient Fee Care Program (August 3, 2009); Audit of Non-VA Inpatient
Fee Care Program (August 18, 2010); Review of Veterans Health Administration’s
Fraud Management for the Non-VA Fee Care Program (June 8, 2010); Review of
Alleged Mismanagement of Non-VA Fee Care Funds at the Phoenix VA Health Care
System (November 8, 2011); Administrative Investigation, Improper Contracts,
Conflict of Interest, Failure to Follow Policy, and Lack of Candor, Health Administration
Center, Denver, Colorado (April 12, 2012); and Review of Enterprise Technology
Solutions, LLC, Compliance with Service-Disabled Veteran-Owned Small Business
Program Subcontracting Limitations (August 20, 2012).

[2]
The population of claims consisted of 32,380 non-VA inpatient claims valued at
approximately $386.2 million for the 6-month period.  Our review was of 791 inpatient fee claims
valued at $10.6 million which identified 235 payments errors valued at $1.6
million.  We found 181 overpayments
valued at $1.7 million and 54 underpayments valued at about $25,000.

Prepared Statement of Paralyzed Veterans of America

Chairwowan Buerkle, Ranking Member
Michaud, and Members of the Subcommittee, Paralyzed Veterans of America (PVA)
would like to thank you for allowing us to submit a statement for the record on
the issue of health care purchased by the Department of Veterans Affairs (VA)
and delivered outside of the health care system—commonly referred to as
fee-basis care.   There is no doubt that fee-basis care provides
an important tool to the VA in order to provide quality, timely health care
services when those services are not readily available in the system or when
that care is geographically inaccessible to a veteran. 

As we have stated many times in the past,
it is the position of PVA that the VA is the best health care provider for
veterans.  The VA’s unique “veteran
specific” expertise is unrivaled. 
However, the VA serves a large veteran population with a myriad of
complex medical needs, and when the VA is not able to provide that care it must
partner with community providers through its Non-VA Care program. 

The Non-VA care program provides
contracted care services that are authorized at the discretion of VA
leadership.  The contracted services are
reserved for veterans who have sustained a service-connected disability, or a
disability for which a veteran was discharged or released from active duty, and
provided when the VA is not capable of delivering the needed care, or such
services are geographically inaccessible. 

Over the years, PVA has remained
concerned about the non-VA health care services provided to veterans as it
relates to the VA’s ability to monitor the quality of care delivered, as well
as the lack of a system to facilitate care coordination with non-VA providers
so that veterans have a seamless exchange between the two systems.  One mechanism used by the VA that began to
address these concerns was the implementation of pilot project Health Care
Effectiveness through Resource Optimization (Project HERO).  The VA implemented Project HERO as a pilot in
selected Veterans Integrated Service Networks (VISNs) to identify how a system
could manage care that is provided through contracts with non-VA providers when
the VA is not able to provide health care services to veterans.  The pilot focused on objectives such as
health care access, patient safety, and care coordination. 

As the pilot is in its fifth and final
year, the VA has identified the Patient Centered Community Care (PCCC)
initiative and the Non-VA Care Coordination (NVCC) program to improve its
Non-VA Care program.  While the Project
HERO pilot resulted in some positive outcomes and lessons upon which the VA can
build an improved Non-VA Care program, PVA still has concerns regarding the
implementation and management of the PCCC and NVCC programs.  Most importantly, we remain concerned about the
VA’s ability to monitor the quality of non-VA health care services, and
coordinate care with outside providers.

Patient
Centered Community Care (PCCC) and Non-VA Care Coordination (NVCC)

The VA describes the PCCC program as a
centralized system to manage non-VA provider contracts.  Specifically, through PCCC the VA intends to
create a standardized contract referral process that will allow veterans to
receive care outside of the VA, when necessary and authorized, in a timely and
coordinated manner.  In conjunction with
PCCC, the NVCC program will focus on referrals for non-VA health care
services.  NVCC will also require that
non-VA providers utilize required VA procedures and processes to allow for an
exchange of information between providers and facilitate care
coordination.      

PVA appreciates that these two programs
combined, in theory, address our concerns regarding the quality of non-VA purchased
care and the VA’s ability to coordinate such care, and creates a permanent
system to better manage non-VA contracted care. 
However, we believe that the success of PCCC and NVCC depends on the VA
establishing systems that allow for a seamless exchange of information between
non-VA providers and the VA, and the VA’s ability to collect data to measure
the quality of non-VA care.

While the VA is in the implementation
phase of re-creating its fee-basis care program, and has not yet commenced PCCC
and NVCC in all VISNs, it also has not provided details on the systems that
will need to be in place to guarantee care coordination.  Of particular concern to PVA is the
transition phase when Project HERO has ended and PCCC and NVCC are expected to
begin.  If these two programs are not
fully implemented when Project HERO ends, what happens to those veterans
already receiving care coordinated through Project HERO?  Coordination of veterans care cannot be
compromised during this transition.     

One of the major components of PCCC and
NVCC is having a system that allows for care-coordination.  Care-coordination requires systems that exchange
information that is timely and reliable. 
As the Project HERO pilot is ending, it is essential that VA ensure that
the technological capabilities and the systems that are capable of sharing
data, standardized templates, and programs with private providers are in place
when PCCC and NVCC are implemented to coordinate care with community providers. 

In order to support a system of care
coordination between VA and community providers, a system for electronic
information exchange must be a strong foundation.  A primary goal for both the PCCC and NVCC
programs should be to enable VA and non-VA providers to exchange information in
a timely manner.  Such information
includes medical records, medical documentation, and payment information.  If such a system for exchange of information
is not available when the Project HERO pilot ends and these programs begin,
then we believe the VA will be moving in the wrong direction.

It is also important to note that care
coordination not only involves the VA and community providers, but must also
include veterans.  Veterans must have
access to support services through the VA as they seek non-VA purchased care
and referrals.  As previously stated, PVA
strongly believes that the VA is the best health care provider for veterans and
as such we recommend that the NVCC program work closely with veterans’ Patient
Aligned Care Teams to coordinate with community providers and ensure that
veterans continue to receive their care through the VA health care system while
receiving authorized treatments from outside (contract) providers.    Another serious concern for PVA is
quality management.  How will the VA
manage the quality of care provided to veterans by non-VA providers?  PVA believes that PCCC and NVCC programs must
collect data on quality metrics such as patient satisfaction, safety and
timeliness to adequately measure the quality of care provided by non-VA
facilities.  Such information not only serves
as important metrics to identify areas for improvement, but also allows VA to
hold private providers accountable for providing care that meets VA’s standards
for quality.  The VA must make certain
that non-VA providers consistently provide veterans with timely, quality care
that is patient-centric.

PVA understands that as the health care
demands of veterans continue to evolve, and enrollment in VA’s health care
system increases, so too does the need to partner with community
providers.  This partnership must be well
managed, veteran-centric, and serve as a supplement to the quality of VA health
services.   PVA believes that the VA is
moving in the direction of improving its non-VA purchased care program; however,
many pertinent details are not in place. 
As the VA determines how to best implement PCCC, PVA believes that the
VA must exercise its power to give final authorization to the providers with
which it is entering contracts. 
Additionally, VA must determine the selection criteria to ensure that
its quality standards for health care delivery are not compromised, and that
the care provided meets VA’s other standards for safety and patient
satisfaction.      

Until PCCC and NVCC can be implemented
with the systems that will allow electronic exchange of patient information and
the collection of quality metrics, PVA recommends VA extend the Project HERO
pilot program, and extend its existing fee-basis program as part of a
continuing safety net for veterans. We also strongly encourage continued oversight
from this Subcommittee to monitor the progress of the VA implementing these systems.  Meanwhile, we must reemphasize that as the VA
works to improve its purchased care and care coordination programs, foremost
remains the fact that none of these initiatives should be designed to replace
the high quality of care provided by the VA health care system.  These programs should only serve to provide
access to care where it is not readily available within the VA system.  

Chairwoman Buerkle, and Members of the Subcommittee,
once again PVA thanks you for holding this hearing on such an important issue
for the many sick and disabled veterans who are unable to directly access VA
facilities for their care.  We also thank
VA leadership for keeping veteran service organizations informed and involved during
this process.  We look forward to working
with both the Subcommittee and VA leadership to improve the delivery of
veterans’ health care services, whether those services are provided directly
from VA, or through effective contract arrangements.     



Information Required by Rule XI
2(g)(4) of the House of Representatives

Pursuant to Rule XI
2(g)(4) of the House of Representatives, the following information is provided
regarding federal grants and contracts.

Fiscal Year 2012

 No federal grants or
contracts received.

Fiscal Year 2011

 Court of Appeals for
Veterans Claims, administered by the Legal Services Corporation — National
Veterans Legal Services Program— $262,787.

Fiscal Year 2010

 Court of Appeals for
Veterans Claims, administered by the Legal Services Corporation—National
Veterans Legal Services Program— $287,992.

Prepared Statement of National Coalition for Homeless
Veterans

Chairwoman Ann Marie Buerkle, Ranking Member Michael
Michaud,

and distinguished members of the House Committee on
Veterans’ Affairs,

Subcommittee on Health:

The National Coalition for
Homeless Veterans (NCHV) is honored to present this Statement for the Record
for the hearing, “VA Fee Basis Care: Flawed Policies Not a Fix for a Flawed
System,” on Sept. 14, 2012. On behalf of the 2,100 community- and faith-based
organizations that NCHV represents, we thank you for your commitment to serving
our nation’s most vulnerable heroes.

VA’s “no wrong door” approach

The Department
of Veterans Affairs (VA) strives to make world-class health services available
to veterans in communities nationwide. Yet to directly provide equitable care
in every locality would stretch VA resources thin beyond recognition. A robust
contract-care program, therefore, is needed to supplement VA care, harnessing
existing service delivery systems in areas where veterans do not have
reasonable access to the department’s health facilities.

NCHV recognizes the potential of the VA fee basis care
program to fill this role. In fact, the program could be well-situated to help
fulfill VA’s self-described “no wrong door” approach to ending veteran
homelessness, in which veterans who seek assistance can receive it from VA
programs, from community partners or through contract services.1

Unfortunately, this philosophy is at odds with
reality. The fee basis program requires that veterans obtain preauthorization
for non-VA care at a VA medical facility. In some cases, this means that a
veteran must travel hundreds of miles – passing several qualified community
providers along the way – in order to apply for fee basis care with no
guarantee they will succeed.

For veterans with mental illness, chronic substance
abuse and other disabilities, this practice is exclusive rather than inclusive.
A daytrip to a distant VA medical facility may be unrealistic even for
relatively healthy veterans, especially if they are among the 1.4 million with
extreme low incomes.

Financial stewardship issues

Homeless veteran
service providers know better than most the impact that limited VA dollars can
have on entire communities. In light of the fee basis program’s record of
financial stewardship, we join those who call for its immediate reform.2

In FY 2011, the fee
basis program accounted for an estimated $500 million in erroneous payments, according
to the Veterans Health Administration Chief Business Office. By any measure,
this is a tremendous loss of taxpayer dollars. By our measure, this amounts to
more than VA’s expenditures in FY 2013 on both the HUD-VA Supportive
Housing (HUD-VASH) Program – directly responsible for reduction in chronic
veteran homelessness – and the Homeless Providers Grant and Per Diem (GPD) Program,
which has been the cornerstone of community-based homeless veteran assistance
for more than two decades.

An effective reform of the fee basis program should
represent a significant departure from existing policies, and must shift the
burden of responsibility for authorized care from the veteran to the VA health
care system.

Legislative proposals and departmental
initiatives

NCHV submitted written testimony to this subcommittee
in April 2012 regarding H.R. 3723, Rep. Bobby Schilling’s “Enhanced Veteran
Healthcare Experience Act of 2011.” As originally written, this bill would
replace the current fee basis system with a contract-based “veterans enhanced
care program.” While we recognize that this legislation may not be a cure-all
for the fee basis program’s deficiencies, we are supportive of an approach to
make much-needed health services accessible to veterans who live in areas
without a VA presence.

VA does not support H.R. 3723, but it is undertaking
new initiatives that seek to expand and improve its contract-based care, among
them the Patient-Centered Community Care (PCCC) program. The PCCC program will
foster contractual agreements with non-VA providers when VA facilities are not
able to provide needed specialty care for veterans.3 It is fair to
say that this program has not been given an opportunity to succeed, as it is in
the early stages of implementation.

It is our understanding, however, that the program will
not cover mental health services, primary care and dialysis.4 This may
be precisely the support that some veterans need to avoid entering what VA
Secretary Eric Shinseki has characterized as “that downward spiral towards
joblessness, depression and substance abuse that often leads to homelessness
and, sometimes, to suicide.”5 If we are going to strive for a “no
wrong door” approach to ending veteran homelessness, it must apply to health
services through the PCCC program as well.

In Summation

Thank you for the opportunity to submit this Statement
for the Record for today’s hearing. It is a privilege to work with the House
Committee on Veterans’ Affairs, Subcommittee on Health, to ensure that every
veteran in crisis has reasonable access to the health care they earned.

John Driscoll

President and CEO
National Coalition for
Homeless Veterans


1 “VA Secretary Announces $41.9 Million to Help
Homeless,” U.S. Air Force (Oct. 5,
2010). Accessed Sept. 10, 2012. <http://www.af.mil/news/story.asp?id=123225103>.

2 Veterans
Health Administration Fee Care Program: White Paper.
National Academy of Public Administration (September
2011). Accessed Sept. 7, 2012. <http://www.napawash.org/wp-content/uploads/2011/11/White_Paper11012011webposting.pdf>.

3 “Patient Centered Community Care (PCCC) Notice” (Nov.
3, 2011). Accessed Sept. 11, 2012. <https://www.fbo.gov/>.

4 “Witness Testimony of Shane Barker, Senior Legislative
Associate, Veterans of Foreign Wars,” U.S.
House Committee on Veterans’ Affairs
(April 16, 2012). Accessed Sept. 8,
2012. <http://veterans.house.gov/witness-testimony/shane-barker-2>.

5 “Remarks by Secretary Eric K. Shinseki: 2012 National
Coalition for Homeless Veterans (NCHV) Annual Conference,” Department of Veterans Affairs (May 30, 2012). Accessed Sept. 10,
2012. <http://www.va.gov/opa/speeches/2012/05_30_2012.asp>.

NCHV Staff Biography
John
Driscoll, President and CEO

John Driscoll joined the
staff of NCHV in January 2002. He served in the U.S. Army from 1970-1980,
including a tour as an air-evac medic and platoon sergeant with the 575th
Medical Detachment during the Vietnam War. After returning from Vietnam, he
served as the senior clinical specialist on the Surgical Intensive Care Unit of
the Walter Reed Army Medical Center in Washington, D.C., from 1973-1980, and
remained a certified medevac specialist for both fixed-wing and helicopter
aircraft until his discharge from the service.

Driscoll graduated from the
University of Maryland with a Bachelor of Arts degree in journalism in 1988,
and spent 13 years as a group newspaper editor for the Chesapeake Publishing
Corporation. As a journalism student intern in 1987, he wrote a series on
homeless veterans living on the streets of the nation’s capital which was
submitted for Pulitzer Prize consideration in two categories by Chesapeake
Publishing.

Significant publishing
credits while working with NCHV, in partnership with the Department of
Labor-Veterans Employment and Training Service (DOL-VETS), include “Planning
for Your Release, A Guide for Incarcerated Veterans,” distributed to more than
20,000 employment specialists, transition assistance counselors and
incarcerated veterans – this guide was adapted by the Department of Veterans
Affairs for its state-specific transition resource guides; “Assistance Guide
for Employment Specialists Helping Homeless Veterans,” used by DOL-VETS as a
training resource for homeless assistance providers; and the “HVRP Best
Practices Project,” a study of 36 community-based programs cited for exemplary
performance in helping formerly homeless veterans prepare for and obtain
steady, gainful employment.

Driscoll is responsible for
the development of the NCHV website (www.nchv.org) into the most comprehensive
homeless veteran assistance on-line resource in the nation, providing
information and service referrals to more than 85,000 visitors each month. His
work with veteran assistance programs nationwide gave rise to the nation’s
first Veteran Homelessness Prevention Platform in 2006, a document that has
helped steer development of initiatives to reduce the risk of homelessness for
veterans of the wars in Afghanistan and Iraq, and their families. Eleven of the
18 recommendations in that document have been signed into law or are in various
stages of development.

Driscoll has prepared
testimony and has testified before both the U.S. House of Representatives and
U.S. Senate on a number of landmark homeless veteran assistance initiatives
since 2005. He meets regularly with the leadership of Federal agencies invested
in homeless veteran services, and is frequently invited to speak as a subject
matter expert on homeless veterans issues and assistance programs at
conferences and symposia nationwide.

NCHV Disclosure of Federal Grants

Grantor:                                    U.S.
Department of Labor

Subagency:                               Veterans’
Employment and Training Service

Grant/contract amount:              $350,000

Performance period:                  8/13/2010 - 8/12/2011

Indirect costs limitations or
 CAP limitations:                       20% total award

Grant/contract award notice
 provided as part of proposal:      Yes     

Grantor:                                    U.S.
Department of Labor

Subagency:                               Veterans’
Employment and Training Service

Grant/contract amount:              $350,000

Performance period:                  8/13/2011 - 8/12/2012

Indirect costs limitations or
 CAP limitations:                       20% total award

Grant/contract award notice
 provided as part of proposal:      Yes


MATERIAL SUBMITTED FOR THE RECORD

Questions from Honorable Michael H.
Michaud and responses from Honorable Dr. Robert A. Petzel, M.D., Under Secretary
for Health, Veterans Health Administration, U.S. Department of Veterans Affairs

September 14, 2012

Hearing on

VA Fee Basis Care:  Examining Solutions to a

Flawed System

 

Questions
for the Honorable Dr. Robert A. Petzel, M.D., Under Secretary for

Health,
Veterans Health Administration, U.S. Department of Veterans Affairs

Question 1:  Painful
and disabling joint and back disorders continue to be reported as the top
health problems of veterans returning from overseas.  According to a report in
the Journal of General Internal Medicine, diseases of the
musculoskeletal and connective system, the precise maladies doctors of
chiropractic (DC) treat, is the primary health issue diagnosed among
veterans returning from combat theatres of operation with over 56 percent of
veterans reporting this ailment.  Further, the report recommends that veterans
suffering from musculoskeletal injury with chronic pain be transitioned off
opiates to alternative analgesics, including referral to a Doctor of
Chiropractic, which is consistent with the widely recognized belief that
chiropractic is one of the safest drug-free, non-invasive therapies available
for the treatment of chronic musculoskeletal pain.  Given the magnitude of
this problem and serious complications and costs associated with the extended
use of opiates, do you think the DVA should develop a program involving both
on-site and off-site DCs to help provide an avenue of treatment that would
provide an alternative to the use of these drugs?  If this has not been
considered wouldn’t it be a good idea for the DVA to explore doing so?

Response:  Department of
Veterans Affairs (VA) currently provides chiropractic services both on-site at
VA facilities, and off-site using community Chiropractors as needed.  At the
end of fiscal year (FY) 2012, 38 VA facilities offered chiropractic care
totaling more than 98,000 patient visits, while VA also provided similar
services on a fee basis means at over 4,000 non-VA facilities to more than
9,000 Veterans in FY2012.  Chiropractic services have been embraced by VA
providers and Veterans as an appropriate option in pain management treatment.  Between
FY 2008 and FY 2011, the number of Veterans receiving chiropractic care
increased by 67 percent for on-station and by 82 percent for fee basis.  In
March 2012, the Under Secretary for Health (USH) directed VA’s Office of
Rehabilitation Services to review the current utilization of chiropractic
services and strategies that support continued awareness and access to
utilization.  Utilization of chiropractic services within VA will continue to
be monitored and reported regularly to the USH to ensure that availability,
access, and utilization of services within VA continues to meet Veterans’ needs. 

Chiropractic care is provided in the context of a
comprehensive National Pain Management Strategy that promotes multidisciplinary
and integrated care.  Although opioid therapy is one important pain management
strategy, VA/DoD Clinical Practice Guidelines for the Management of Opioid
Therapy for Chronic Pain emphasize strategies for promoting the safe and
effective use of opioid therapy in the context of a comprehensive, integrated
Veteran-centered treatment plan.  To support this approach, VA is working
diligently to build its capacity to manage most common pain conditions in the
primary care setting while providing routine and timely Veteran access to
specialty pain medicine, rehabilitation, behavioral health, complementary and
alternative medicine, and other specialty pain management services, when
indicated.  VA is also committed to developing Commission on Accreditation of
Rehabilitation Facilities (CARF) accredited tertiary, interdisciplinary pain
rehabilitation programs in each Veterans Integrated Service Network (VISN). 
Through this effort, chiropractic services are represented in the planning and dissemination
of guidance on pain management options within these programs. 

Question 2:  Where there are
Doctors of Chiropractic on staff at DVA treatment facilities, I understand the
arrangement is working very well.  Referrals are taking place – and this
obviously wouldn’t be taking place if the PCM’s did not think it was
appropriate to do so.  What about locations without a DC on staff.  Does the
DVA have a plan to place DCs at all major DVA treatment facilities?  If not,
why not?  If yes, how long before this plan will be fully implemented?  In
locales without DCs on staff has the DVA engaged in a formal education campaign
to inform beneficiaries of their ability to obtain a referral to a DC?  If not,
why not?  Obviously, if a patient does not know he or she has access to
chiropractic care as an alternative they probably aren’t going to ask for it.

Response:  VA policy is that
each Veterans Integrated Service Network must have an on-station chiropractic
clinic located at a minimum of one facility, while other facilities can provide
the service either on-station or by non-VA care per Veterans Health
Administration (VHA) Directive 2004-35.  Chiropractic care is part of the
standard benefits package and is included in the list of available services
made known to all Veterans.  While VA does not currently have a plan to place
Chiropractors at all major treatment facilities, decisions on use of
chiropractic services for musculoskeletal conditions are made by the individual
VA facilities.  VA facilities make staffing determinations by assessing their
local needs and resources, including the need for chiropractic services and
available options.  A fact sheet listing current VA on-station chiropractic
clinics, as well as a table reflecting patients seen by chiropractic by
facility over for FY2008 – FY2011 is attached (attachment 1 and 2).

A VHA multidisciplinary group recently completed a
utilization review of chiropractic services in VA, and implemented a plan to
increase awareness, access, and utilization of chiropractic services across
VA.  Utilization of chiropractic services will continue to be monitored and
reported regularly to the Under Secretary for Health through fiscal year FY 2013
to ensure that availability, access, and utilization of services in VA
continues to increase.

VA Chiropractic Services

 Since late
2004, chiropractic services have been included as part of the Medical Benefits
Package (Standard Benefits) available to all enrolled Veterans. As with all
specialty services, a chiropractic consultation request must be initiated by
any VA provider who is caring for the Veteran.

VA provides these
services on-site at one or more VA facilities in each VISN. If a VA facility
does not have an on-site chiropractic clinic it will provide chiropractic
services via the fee-basis mechanism. The decision to use on-station vs.
fee-basis chiropractic services is made at the facility level.  

As of
September 2011 the following VA facilities have established on-site
chiropractic clinics:

 



VISN Location

1

Togus, ME

West Haven, CT

Newington, CT

2

Buffalo, NY

Batavia, NY

Canandaigua, NY

Rochester, NY CBOC

Bath, NY

Syracuse, NY

3

Bronx, NY

4

Butler, PA

5

Martinsburg, WV

6

Salisbury, NC

7

Augusta, GA

8

Tampa, FL

Miami, FL

Oakland Park, FL

9

Mountain Home, TN

10

Columbus, OH

Dayton, OH

Chillicothe, OH

11

Danville, IL

 

 

VISN Location

12

Iron Mountain, MI

Tomah, WI

15

Kansas City, MO

St. Louis, MO

Poplar Bluff, MO

16

Jackson, MS

17

Dallas, TX

Temple, TX

Austin, TX

San Antonio, TX

18

Phoenix, AZ

Albuquerque, NM

19

Ft. Harrison, MT

20

American Lake, WA

21

Sacramento, CA

Redding, CA

Martinez, CA

22

West Los Angeles, CA

Sepulveda, CA

Loma Linda, CA

Las Vegas, NV

23

Sioux Falls, SD



                       

References

 

General VA
Medical Benefits

            http://www.va.gov/healtheligibility/coveredservices/StandardBenefits.asp

 

Questions from Honorable Michael H. Michaud and
responses from Jacob B. Gadd, Deputy Director for Healthcare, The American
Legion

October 22, 2012

 

Honorable
Michael H. Michaud

Ranking
Democratic Member

Subcommittee
on Health

Committee on Veterans’
Affairs

U.S.
House of Representatives

335
Cannon House Office Building

Washington,
DC 20515

Dear
Ranking Member Michaud:

Thank you for allowing The
American Legion to participate in the Subcommittee on Health hearing entitled
“VA Fee Basis Care: Examining Solutions to a Flawed System” on September 14,
2012.  I respectfully submit the following in response to your question:

 1.      “Many studies
have shown us that the VA is not the proficient in paying claims.  In fact,
their track record for over paying and underpaying providers is not very good. 
Some of that is due to ineffective training of those who process the claims. 
What are your organization’s thoughts on the pros and cons of contracting out
this process?

The American
Legion currently adopted Resolution no. 46, Department of Veterans Affairs (VA)
Non-VA Care Coordination Programs at the fall 2012 National Executive
Conference meetings in Indianapolis. In the resolution, The American Legion
recommends VA 1) develop a non-VA care coordination that is patient-centered
and takes their travel and distance into account; 2) implement a military
culture and evidence-based treatment training program for non-VA providers to
ensure veterans receive the same or better quality of care and 3) provide
non-VA providers with full access to VA’s Computer Record System (CPRS) to
ensure the contracted community provider can review the patient’s full medical
history which allows the community provider to meet all of the quality of care
screening and measures tracked in CPRS.   A copy of this resolution is attached
in this letter for your review and reference.  

In regards to
your specific question as to whether VA should outsource its non-VA provider
payment system, The American Legion presently does not have an official
position.  

The American
Legion appreciates the opportunity to provide written comments to your question
and looks forward to working with you on behalf of our nation’s veterans.

Sincerely,

Jacob
B. Gadd

Deputy
Director for Healthcare

The American
Legion