May 17, 2000

I am pleased to be here this morning to speak to you about the promise, challenges, and prospects for the sharing of health care resources between the Veterans Health Administration (VHA) and the Department of Defense (DoD) military health system (MHS). VA fully supports Federal healthcare sharing as a means to improve the quality and efficiency of services provided to Federal beneficiaries, particularly in instances where beneficiaries are dually eligible for health care services. DoD is our single largest sharing partner. We welcome opportunities to provide healthcare to members of the military and the retiree community when we are able to do so.

The "Veterans’ Administration and Department of Defense Health Resources Sharing and Emergency Operations Act", Public Law 97-174, enacted in 1982, dramatically facilitated sharing arrangements between VA and DoD health care facilities. Virtually all VA medical centers and nearly all military treatment facilities (MTFs) have been involved in sharing agreements under this authority. The expansion of VA-DoD sharing authority in 1995 to allow VA facilities to participate in TRICARE provider networks added a new dimension to our relationship with DoD. Consistent with this law, VA’s primary focus is on providing quality care to our nation’s veterans and, when resources are available, to DoD beneficiaries.

VA/DoD sharing has been widely recognized and endorsed as an effective means to provide better service to Federal beneficiaries cost effectively. The Congressional Commission on Servicemembers and Veterans Transition Assistance in its January 14, 1999 report stated that it ". . . envisions a DoD/VA healthcare partnership offering beneficiaries a seamless transition from one system to the other, providing beneficiaries the highest possible return on the human and physical assets invested in the two systems while at the same time empowering each Department to fulfill its unique missions". The 1999 Defense Authorization law, Pubic Law 105-261 strongly endorsed the ongoing VA and DoD efforts to share resources and encouraged expansion of both health resource sharing and VA participation in the TRICARE program.

We note, furthermore, that sharing between DoD and VA may be subject in some respects to the medical privacy rules now being promulgated under the Health Insurance Portability and Accountability Act of 1996. The Department of Health and Human Services (HHS) issued proposed regulations last October. HHS has stated that it expects to issue final regulations this year for the handling of personal health information, including for such information held by Federal agencies. Both DoD and VA are participating with HHS in the inter-agency process to develop the final regulations.

A snapshot of VA/DoD health resource sharing activities (as of April 27, 2000) shows that there are 846 agreements (excluding TRICARE). VA medical facilities have agreed to provide 7,734 services to the MHS, while the MHS has agreed to provide 1,047 services to VA. In Fiscal Year 1999 VA earned $32,194,216 from sharing agreements while purchasing $23,853,957 in services from the MHS. TRICARE earnings in Fiscal Year 1999 were $4,897,427. Earnings from both programs increased from Fiscal Year 1998.

We are currently working with DoD to resolve issues that arose in Fiscal Year 1999 due to diverging business practices. Briefly, these issues involve confusion regarding the effect of TRICARE on the status of local sharing agreements between VA medical facilities and MTFs and difficulties that some of our medical facilities have experienced in receiving appropriate reimbursements. Similar issues also arose concerning services provided by VA in TRICARE Remote sites.

Dr. Bailey and I, along with our respective staffs, are committed to resolving any remaining issues concerning our joint sharing programs and to expanding these efforts when it is mutually beneficial. Of particular note, Dr. Bailey has taken a major step toward resolving these issues by issuing a directive clarifying the status of VA/DoD sharing agreements and requiring that payments related to those agreements be made at the rates specified in the agreements. We have also agreed to take additional steps under the auspices of the VA/DoD Executive council to assure that our sharing programs are functioning optimally:

• We plan to further review business practices to assure that those practices optimally support direct sharing and VA participation as a TRICARE provider.
• We plan to review case handling or case management – particularly involving patient movement to our centers of excellence and to VA national specialized programs.
• Over the next year, we plan to jointly review all existing agreements to assure that they optimally support our joint goals.
• We will also review issues raised by the GAO in its recent review of this program.

In addition to our efforts to resolve issues regarding direct care delivery sharing, there is significant cooperation in several other areas. With leadership from the VA/DoD Executive Council a number of important initiatives have been completed or are underway.

VA recently entered into a Memorandum of Agreement (MOA) with DoD to combine the purchasing power of the two Departments and eliminate contracting redundancies. The MOA has two appendices--one dealing with pharmaceutical, the second encompassing medical and surgical supplies. A third appendix, dealing with high-tech medical equipment, is under consideration. Regarding pharmaceutical standardization and joint procurement, staff from VA’s National Acquisition Center, Pharmacy Benefits Management Strategic Healthcare Group, DoD’s Pharmacoeconomic Center and Defense Support Center-Philadelphia are working together to address joint pharmaceutical procurement. Through joint committed use volume contracts we have already accomplished over $19 million savings annually from these efforts. Savings from these efforts help both Departments reduce health care costs.

In our role as primary backup to the DoD health care system, in times of war or national emergency, we are working with DoD in their development of an automated system to globally track and provide in-transit visibility of military evacuees to DoD and VA medical facilities. Interagency requirements to share both bed availability and patient information will be included in the U.S. Transportation Command’s Regulating and Command and Control Evacuation System (TRAC²ES). In addition, VA is collaborating with the Public Health Service to identify requirements for the National Disaster Medical System, which addresses civilian disaster needs. All of these projects were undertaken to overcome current difficulties associated with manually exchanging paper-based patient information.

The Government Computer-based Patient Record (GCPR) Project is a collaborative activity to create interoperability among information systems. Together VA, DoD and Indian Health Service are creating an electronic framework, which will allow us to easily and securely exchange medical information. This will enable us to provide better quality care to veterans, military personnel and their family members, and members of Native American tribes. The framework will develop and promulgate open standards for the sharing of health information and its security. The effort has the support of HCFA and has the potential to accelerate data interchange standards across the health care industry.

VA and DoD have made progress in the sharing and joint development of clinical practice guidelines. Guidelines for diabetes, smoking cessation, low back pain, hypertension, chronic obstructive pulmonary disease and asthma have been finalized in cooperation with other Federal health care organizations. During the next two years, we will be working on guidelines for pain management, preventative services, major depressive disorders, gastro-esophageal reflux disorder, substance abuse, uncomplicated pregnancy, and redeployment health concerns.

VA and DOD jointly are taking a leadership role in the promotion of patient safety. Through the National Patient Safety Partnership, we developed a "best practices" initiative to reduce preventable adverse drug effects, and we are identifying ways of sharing patient safety "lessons learned". VA’s mandatory reporting system is being adopted by DoD and our voluntary reporting system is being constructed to add DoD in the future if they wish.

At selected sites we have combined the military's discharge physical with VA's disability compensation examination for those service members applying for VA compensation benefits. VA is working cooperatively with DoD and HHS to establish a Military and Veterans Health Coordinating Board to oversee a variety of health care and deployment issues and build upon the accomplishments of the Gulf War Coordinating Board.

A number of these efforts parallel, or are a direct result of, recommendations of the previously mentioned Congressional Commission on Servicemembers and Veterans Transition Assistance. These include the streamlining of the disability physical examination process, the expanded use of combined purchasing power, and ongoing efforts to standardize information technology development.

I would like to address briefly the status of implementation of Section 113 of the Veterans’ Millennium Health Care and Benefits Act (Public Law 106-117) that provides for reimbursement to VA for medical care provided to eligible military retirees. The law calls for a Memorandum of Agreement (MOA) to be in effect by August 31, 2000.

OMB is working with VA and DoD to help develop a mutually acceptable agreement. OMB, VA, and DoD have formed a joint work group to draft such an agreement. We will continue to work to implement this provision.

In the future, federal beneficiaries and the programs that serve them would be improved by seamless coordination of federal benefits. Today, a veteran who is a military retiree may have benefits from VA, DoD, Medicare and private insurance. As an unintentional result, they may have incentives to seek treatments and medication coverage from whatever system offers the least out of pocket expense. The opportunity to coordinate care for better quality and efficiency is lost in the process. An approach which first defined the benefits for each person and then optimized their choice of delivery systems would improve the patchwork set of rules and systems that has evolved.

Both VA and DoD remain committed to increasing resource sharing to not only achieve the efficiencies that are possible, but also to better serve the veterans, retirees and active duty service members that rely on us for health care services. Our goal is to achieve a seamless transition of former service members from one system to the other and, when joint sharing is possible and beneficial, to provide the highest possible level of quality health care services to the patients being served. Steps have already been taken to resolve payment issues concerning our sharing agreements with the MHS and we have agreed to jointly conduct a thorough review of sharing with the MHS and VA’s participation as a TRICARE provider to assure that we have explored every opportunity to enhance these programs. VA is confident that with resolution of current challenges, the longstanding and beneficial sharing relationships will continue to grow for the benefit of both the taxpayers and the patients that we serve.

This concludes my statement. I will be pleased to answer any questions members of the Subcommittee may have.