Mr. Chairman, Mr. Ranking Member, Members of the Subcommittee:  thank you for providing me this opportunity to discuss the Department of Veterans Affairs’ (VA) demonstration Project on Healthcare Effectiveness through Resource Optimization (Project HERO). I am accompanied today by Ms. Patricia Gheen, Deputy Chief Business Officer for Purchased Care, and Mr. Craig Robinson, Executive Director and Chief Operations Officer for VA’s National Acquisition Center.

Given our focus on providing patient-centered care and recognizing that we may not always be able to provide Veterans in every location with ready access to care within our facilities, VA has a continued need for non-VA services. This purchasing of health care services represents a key component in our health care delivery continuum. VA understands the importance of closely managing the services purchased and has initiated multiple efforts focused upon improving that management.  Project HERO is a cornerstone of those efforts.

House Report 109-305, the conference report to accompany the Military Quality of Life and Veterans Affairs Appropriations Act of 2006 (Public Law 109-114), provided that VA establish at least three managed care demonstration programs to satisfy a set of health care objectives related to arranging and managing care. The conferees supported VA’s expeditious implementation of care management strategies that have proven valuable in the broader public and private sectors, and to ensure care purchased for enrollees from community providers is cost-effective and complementary to the larger VA health care system. The conferees also encouraged VA to collaborate with industry, academia, and other organizations to incorporate a variety of public-private partnerships.

Project HERO is in year 3 of a proposed 5-year contracting pilot to increase quality oversight and decrease the cost of purchased (fee) care. The program is currently available in four Veterans Integrated Service Networks (VISNs):  VA Sunshine Healthcare Network (VISN 8), South Central VA Health Care Network (VISN 16), Northwest Network (VISN 20) and VA Midwest Health Care Network (VISN 23). Historically, these VISNs have had high expenditures for non-VA purchased (fee) care and substantial Veteran enrollee populations.  When VA cannot readily provide the care Veterans need internally, VA Medical Centers utilize the traditional Fee-basis program or, in selected VISNs, Project HERO.

Project HERO is our most comprehensive and ambitious pilot program.  It is intended to improve the management and oversight of the purchase of non-VA health care services. Through Project HERO, VA contracts with Humana Veterans Healthcare Services (HVHS) and Delta Dental Federal Services (Delta Dental) to provide Veterans with pre-screened networks of providers, principally doctors and dentists who meet VA quality standards at negotiated contract rates.

Project HERO is predominantly an outpatient program for specialty services, such as dental, ophthalmology, physical therapy, diagnostic and other services that are not always available in VA.  For every patient, VA Medical Centers determine and authorize specific services and treatments referred to Project HERO contracted network doctors and dentists.

Project HERO’s demonstration objectives have been shared with a number of key stakeholders, including Veterans Service Organizations, the American Federation of Government Employees, Academic Affiliates and industry. The VHA Project HERO Program Management Office (PMO) presented the following objectives to the House Appropriations Committee and House Veterans’ Affairs Committee in the second quarter of 2006:

• Provide as much care for Veterans within VHA, as practical;
• Refer Veterans efficiently to high-quality community-based care when necessary;
• Improve the exchange of medical information between VA and non-VA providers;
• Foster high-quality care and patient safety;
• Control operating costs;
• Increase Veteran satisfaction;
• Secure accountable evaluation of the demonstration; and
• Sustain partnerships with Academic Affiliates.

The VHA Chief Business Office oversees purchased care programs, including fee care and Project HERO. The Chief Business Office meets with internal and external stakeholders and monitors and evaluates program metrics. VA established a Project HERO Governing Board which oversees program activities.  It is composed of the Deputy Under Secretary for Health Operations and Management, the VHA Chief Business Officer, and Network Directors from the four participating VISNs.  The Governing Board also has advisors from General Counsel, the Office of Academic Affiliations, and the Office of Acquisition, Logistics, and Construction.

The Contract Administration Board provides contract guidance, as needed, and includes contracting and legal representatives. The Project HERO Program Management Office (PMO) oversees the contracts to help ensure quality care, timely access to care, timely return of medical documentation to VA, patient safety and satisfaction. The PMO conducts contract administration, project management, performance and quality management; data analysis, reporting and auditing; and communication and training.

Project HERO contracts require that HVHS and Delta Dental meet VA standards for:

• Credentialing and accreditation;
• Timely reporting of access to care;
• Timely return of medical documentation to VA;
• Reporting patient safety issues, patient complaints and patient satisfaction; and
• Robust quality programs including peer review with VA participation, while meeting Joint Commission and other industry requirements.

HVHS uses patient safety indicators, developed by the Agency for Healthcare Research and Quality, as well as complaints and referrals as sources for initiating peer review. The Project HERO PMO monitors contract performance, audits credentialing and accreditation, and evaluates HVHS and Delta Dental performance compared to the VA Survey of Healthcare Experiences of Patients (SHEP), Joint Commission measures, and proxy measures based on Healthcare Effectiveness and Data Information Set (HEDIS) measures.  This analysis indicates that Project HERO facilities are equal to or better than the national average for all non-VA hospitals that report to the Joint Commission. 

Project HERO has negotiated contract rates with HVHS and Delta Dental.  Eighty-nine percent of Project HERO contracted medical prices with HVHS are at or below Medicare rates, and contracted rates with Delta Dental are less than 80 percent of rates in the National Dentistry Advisory Service Comprehensive Fee Report for dental services.

While Project HERO is only in the third year of a five-year pilot, the program is meeting its objectives of improving quality oversight, access, accountability and care coordination.  As a demonstration project, Project HERO has provided VA with invaluable experience in developing future health care contracts, managing both the timely delivery of health care and the quality of the care provided.  Specifically, VA has found:

• Patient satisfaction is comparable to VA.  Through the third quarter of FY 2009, overall satisfaction with Project HERO care through HVHS was 77 percent and 86 percent for Delta Dental.
• Costs are generally comparable to VA costs for other non-VA fee care.  Project HERO savings, including value-added fees, are estimated at more than $2.5 million from January 2008 to September 2009.
• HVHS and Delta Dental providers meet VA credentialing standards and quality standards, and maintain extensive quality programs. The Project HERO PMO audits for compliance and participates in their quality councils and peer review committees.
• HVHS and Delta Dental provide timely access to care, defined as within 30 days, providing specialty or routine care 90 percent and 100 percent of the time respectively.
• Both vendors are contracted to return medical documentation to VA within 30 days for more informed, continuous patient care.  While HVHS and Delta Dental are not meeting the 100 percent standard, the contracts provide a vehicle for tracking return of medical documentation that did not exist previously in fee care and we are seeing monthly progress.  In November 2009, HVHS met this metric more than 90 percent of the time, while Delta Dental returned requested treatment plans to VA within 10 calendar days more than 74 percent of the time.
• The Project HERO PMO worked with HVHS, Delta Dental and VA Medical Centers to make electronic clinical information sharing available at all Project HERO sites.
• Additionally, participating VA Medical Centers report that they have not reduced staff due to the introduction of the Project HERO contracts.

Using a contract vehicle allows VA to impose these specific and rigorous requirements consistently among providers, resulting in a more robust oversight of these key programs.  While VHA recognizes the continuous need for improvement, the initial demonstration has validated our ability to resolve the key oversight issues identified as a program goal.

Mr. Chairman, we appreciate the opportunity to discuss this initiative with you.  My colleagues and I are available for your questions.