Good morning, Chairman Michaud, Ranking Member Miller, and other members of this distinguished subcommittee.  Vietnam Veterans of America (VVA) thanks you for holding this very important hearing today, and we appreciate the opportunity to offer our views on Project HERO.

Project HERO, as you know, was born of a congressional mandate in Public Law 109-114, the Military Construction, Military Quality of Life and Veterans Affairs Appropriations Act of 2006, for the Department of Veterans Affairs to get a handle on the expenditures out of the VA system for veterans health care by establishing a comprehensive managed care demonstration program in at least three VISNs.  While the amount spent outside the system varies from VISN to VISN, and the cost per service varies dramatically, it totals at least one out of every ten dollars spent by the VA on health care – not an insignificant amount of money – and Congress was concerned, correctly, that a lot of this money was not properly tracked, nor was there any evidence of efforts to standardize costs and secure the most quality service for the best price.

The VA, to comply with this mandate, initiated in four VISNs what was conceived as a five-year pilot cleverly dubbed Project HERO, its acronym for Healthcare Effectiveness through Resource Optimization.  With shooting wars ongoing in Afghanistan and Iraq, “HERO” had a nice, patriotic ring.  Of course, this only served to raise our suspicions about what the VA was planning to do and how they were planning to do it.

VVA was concerned then that the pilot project would not fill in the gaps in care, e.g., for veterans living in rural or remote areas of the country, or in emergency situations, such as when a VA Medical Center’s MRI breaks down. 

Our suspicions were further incited initially when VA officials shared with the VSOs a list of companies, many of them small veteran-owned businesses, which were interested in bidding on the contract.  We felt that this was an attempt to quell our concerns or objections; after all, this could mean government contracts for these businesses, which too often are shut out of such contracts because of a variety of roadblocks.

As you know, it turns out that Humana and Delta Dental, two large entities, won the contracts.  This was hardly a surprise.  What was a surprise, however, was that Humana, certainly, did not have in place the network of providers in the areas, the rural and remote areas of the VISNs, in which the VA was hard-pressed to provide healthcare services on a timely basis.

After one year spent recruiting clinicians for its networks, several of whom, we believe, had already been providing fee-basis health care to veterans, Humana seems pretty well geared up.  But many of its providers appear to be located pretty close geographically to the VAMCs whose services they are supposed to supplement.  So the question is:  Are the healthcare services rendered by Humana, and by Delta Dental, “enhancing” the health care at the VAMCs and CBOCs?  Further, while this project was supposed to “fill in” services when VA had trouble recruiting key specialties for a reasonable time, is there is indication that the “temporary” fixes have now become permanent, and that VHA is no longer trying to fill the vacancies on its own staff at the relevant VAMC? And are they succeeding in filling in the gaps in VA service at a significant cost saving to VA? 

We are not convinced that they are. 

During our quarterly briefings with VA officials, we are given thick reports festooned with charts and graphs and lots of numbers.  What we are not given is any real evidence that HERO is enhancing care available at VAMCs and/or CBOCs.  What seems to have evolved is a parallel health sub-system in these VISNs.  What was supposed to supplement VA health care seems to be supplanting basic care – and not only in rural and remote areas.  This was not, we believe, the intent of Congress.

Through the fiscal largesse of Congress for VA healthcare operations over the past three years, it seems to us that rather than pay a middleman, which is what Humana and Delta Dental in essence are, the VAMCs and VISNs ought to be able, on their own, to get a handle on dollars for doctors and other clinicians whose fee-basis services are necessary for the provision of timely health care to veterans who either reside inconveniently away from VA facilities or who cannot get appointments in a reasonable amount of time, either with primary care providers or with specialists.

VVA sees no reason why internal units at VISNs and VAMCs can’t assemble a roster of clinicians and “regulate” fee-basis care, insuring that such care is available, of high quality, and can be integrated into the VA’s electronic health record system. 

Just as important, as we have written in the past, the entire business model of HERO threatens the underpinning of the VA healthcare system.  VISN and VAMC directors can find it is fiscally advantageous in the short term to outsource more and more of their services.  This can, and we believe will, eventuate in the shuttering of outpatient clinics as well as VA medical centers.

In fairness, VA officials who are overseeing Project HERO acknowledge that they are learning from their experiences with HERO, and that, with hindsight, they would have structured the contracts differently.  For this, we applaud them.  But we do not believe that any wholesale outsourcing of healthcare services is either warranted or justified by the experiences of HERO.

We agree with a statement by then-chairman Steve Buyer who stated, on March 29, 2006:  “This initiative is not intended to undermine our affiliations, or lead to expanded outsourcing or the replacement of existing VA facilities.  It should instead help us learn how to improve some of the contracted care we now provide, and the way we provide it.”

If Project HERO accomplishes, this, then it will have been a worthy experiment.  But that is all it ought to be:  an experiment, not an answer.

Thank you.