On behalf of Mobile Medical International Corporation, of St. Johnsbury, Vermont, I want to thank Chairman Filner, Chairman Michaud and the rest of the members of the Subcommittee for allowing me to testify here today.  My name is Mark Munroe, Senior Vice President of Sales and Marketing for Mobile Medical. Mobile Medical is an international company that develops and manufactures commercial and military mobile surgical hospitals which meet all U.S. health care standards. These mobile health care solutions are rapidly deployable, fully integrated, self-contained and present innovative solutions for today’s health care delivery needs. My purpose here today is to explain how Mobile Medical has worked with VA medical centers throughout the country, while describing some of the challenges associated with those experiences and pointing out some of our exciting success stories.

Let’s begin with the New Orleans VA medical center.  As you are aware, Hurricane Katrina struck New Orleans five years ago.  Since Katrina, the New Orleans VA Medical Center has not provided surgical or endoscopic services to the veterans of New Orleans.  Veterans in the New Orleans region must seek out care at other facilities within the system.  This often causes veterans to wait for needed procedures, or travel greater distances to receive the care they need. In January 2009, Mobile Medical moved to mitigate this disruption of services by responding to a request from the New Orleans VA Medical Center leadership for a proposal involving mobile surgery units. These units were to be used to meet a variety of needs and to serve as a temporary surgical facility during the hospital re-building process.

The New Orleans VA issued a solicitation on FedBizOps in May 2009 for mobile surgery units. This solicitation was subsequently cancelled and re-directed to the GSA schedule. It should be noted that while Mobile Medical was in the process of contracting with GSA, code compliant mobile surgery units did not exist on the GSA schedule. As a result of this action, companies with GSA contracts responded, but none of them, including the one to whom the GSA solicitation was ultimately awarded, met the VA criteria for a history of producing and deploying regulatory compliant Mobile Surgery Units. In addition, Mobile Medical learned that its proprietary company confidential information, provided as part of its January proposal, had been released to over 70 GSA schedule holders. Quoting from the attached summary of Mobile Medical’s federal legal action, “Judge Horn clearly found that the VA’s actions were improper and the attempted modification was beyond the scope of the GSA schedule program.  An agency placing an order under the GSA schedule program may not simply send out an RFQ as a “solicitation feeler,” evaluate quotes for items that do not exist on anyone’s GSA schedule contract, and then hope a selected contractor can convince the GSA a modification is within scope of their existing contract by the time the agency places an order.  Such an end-run, which occurred in the case, violates even the most basic requirements of fair and open competition for federal contracts.”

As a small business working in a hub zone during difficult economic times, the last thing our company ever expected would be the need to sue the US Government for actions taken during a procurement process.  It should be noted that the legal costs alone with this process have run in excess of $300,000 dollars. Clearly oversight is necessary to ensure that other small businesses like Mobile Medical do not encounter this type of situation.

Standing in stark contrast to Mobile Medical’s experience in New Orleans is our very positive experience serving the needs of veterans at the VA Medical Center in Muskogee, Oklahoma. At the Muskogee VA, Mobile Medical is providing two mobile surgery units in support of a full operating suite renovation project. The leadership at the Muskogee VA Medical Center, from the Director to the contracting officer, facilities engineering and surgical team, should be commended for their work on this model project.  In this forum I am pleased to do that today. During a recent customer visit, a member of Mobile Medical’s Board of Directors, retired Air Force Surgeon General, Paul K. Carlton, learned from VA officials that this facility is saving over $9 million dollars in construction costs by closing all of their operating rooms for the duration of the renovation period rather than phasing in the renovation. Quoting Dr. Carlton in his report to Mobile Medical, “the renovation project began in 2008 with strong leadership. After researching alternative options, the Medical Center closed five operating rooms and the project began using two Mobile Surgery Units. By doing this they are shaving $9.3 million dollars off the original construction quote for the project, even after spending $3.6 million to lease the mobile surgical units.” The medical center is also avoiding another $14 million dollars that would have gone to local hospitals to carry the center’s surgical caseload during the renovation for a total savings of $23.3 million dollars.” Included in your packet is a copy of Dr. Carlton’s full report to Mobile Medical. General Carlton’s findings at the VA medical center in Muskogee support Mobile Medical’s previous testimony to this Committee that a project utilizing 5 mobile units to support OR renovations projects around the country over a three year period would save the VA $90 million dollars. Those savings are in the attached executive summary and we urge Members to note that the Senate Military Construction/Veterans Affairs Subcommittee has included language in its report to the Senate (Report Number 111-226) urging the VA to utilize qualified mobile surgical units in OR renovation projects where such utilization clearly offers savings. I have attached the report language to my testimony. Mobile Medical has continually pointed out the significant cost avoidance that the VA can achieve nationally by applying the methods described above in many VA OR renovation projects. The Senate Mil/Con Appropriations Committee has responded with its recommendation to the VA. We restate again today our belief that 20 mobile surgical units could save over $1.5 billion dollars in 5 years of OR renovation scenarios.

A final example of a successful project is the VA medical center in Miami, Florida. Miami is currently utilizing six Mobile Units during a full operating room renovation project. While the Miami project was also challenged through the contracting process, again strong leadership was the key. Dr. Seth Spector, Chief of Surgery, has kept the project moving forward and in August of this year Miami was able to turn their operating rooms over to the Army Corp of Engineers for renovation, while continuing to provide full surgical services to the veteran’s of the Miami service area.

While 5 minutes is a short time to share with you all of the successes and weaknesses in the VA contracting process, I am sure you will find our supporting documentation compelling. I look forward to any questions you may have and thank you for your time this morning.

Summary Federal Claims Court File No. 10-148C

On August 31, 2010, the Court of Federal Claims issued an Order acknowledging the Department of Veterans Affairs (“VA”) misused the General Services Administration’s (“GSA”) Federal Supply Schedule (“FSS” or “GSA Schedule”)[1] by attempting to purchase sophisticated mobile surgery units off of the GSA Schedule through an improper, out-of-scope modification to an existing GSA Schedule Contract that does not offer mobile surgery units.  While the Court dismissed the case on other, unrelated grounds, the Court acknowledged Mobile Medical International Corporation (“MMIC”) was correct in asserting the modifications were beyond the scope of the GSA Schedule Contractor’s existing products.  Therefore, the VA clearly acted improperly for attempting to use the GSA Schedule program to buy a sophisticated product (mobile surgery units) that were not otherwise on the GSA schedule.

The case, Mobile Medical International Corporation v. United States,[2] arose of out sole source negotiations between MMIC and the New Orleans Veterans Affairs Medical Clinic in New Orleans, Louisiana.  Hurricane Katrina devastated the New Orleans Clinic, seriously impacting the VA’s ability to offer crucial surgical procedures to New Orleans area veterans.  As an industry leader and prior sole source provider to the VA, the VA naturally reached out to MMIC to help develop and meet the VA’s needs regarding temporary surgical solutions.

However, these fair and open negotiations were derailed when personnel within the VA decided that MMIC’s product – sophisticated, fully integrated mobile surgical suites that meet all JCAHO and Medicare standards of care for performing invasive surgery – could be purchased not from MMIC and not through an open competition of contractors who purport to compete with MMIC, but instead through the GSA Schedule program. 

As discussed in Footnote 1, generally a “GSA buy” is only appropriate for “commercial” items or services, like a flatbed truck or a box of pencils.  Mobile surgical trailers, on the other hand, are niche items and are not currently offered through the GSA Schedule program.  To purchase a sophisticated, niche product like mobile surgery units, the VA should have engaged in open competition to obtain a fair and realistic price and to ensure fair access to the award. 

But instead of fair, open competition for these mobile surgical trailers (pursuant to FAR 15), the VA attempted to avoid FAR 15’s competition requirements and instead sought to modify existing products already offered by a GSA Schedule Contractor.  Ultimately, the VA sought to convert a basic expandable truck, commonly used for sports broadcasting, into the same code compliant operating room offered by MMIC.  The Contracting Officer contended, in response to MMIC’s protest, “that the new trailers merely ‘modified the already available [expanding trailer] with in scope customizations the [VA] required.’” 

But the Court determined, even “[t]aking a liberal view of the trailers offered by [the GSA Schedule Contractor] on its modified GSA schedule contract, it would appear that the modified trailers differ significantly from the original expanding trailer and lab trailer on [their] original GSA schedule contract.”  “In sum,” the Court concluded, “[the GSA Schedule Contractor] was offering non-FSS items in response to the FSS RFQ, although its FSS modifications were later approved.  The modifications to [its] GSA schedule contract departed so far from the original schedule as to render the modified [expandable trailers], certainly with respect to the surgical and endoscopy trailers, outside the scope of its FSS contract as reasonably interpreted.”

Although Judge Horn dismissed the action on other, technical grounds related to federal jurisdiction and standing, Judge Horn clearly found that the VA’s actions were improper and the attempted modification was beyond the scope of the GSA schedule program.  An agency placing an order under the GSA schedule program may not simply send out an RFQ as a “solicitation feeler,” evaluate quotes for items that do not exist on anyone’s GSA schedule contract, and then hope a selected contractor can convince the GSA a modification is within scope of their existing contract by the time the agency places an order.  Such an end-run, which occurred in the instant case, violates even the most basic requirements of fair and open competition for federal contracts. 

[1] FSS schedules are most commonly referred to as “GSA Schedules” or Multiple Award Schedules (“MAS”).  To avoid confusion, the memorandum will refer to the FSS program as the “GSA Schedule Program.”  Under the GSA Schedule program, Government customers have access to over 11 million commercial supplies and services at volume pricing.  The items must be “commercially available” to qualify.  Because these items are pre-qualified, commercial items, the GSA has pre-determined these items satisfy all FAR competition and price requirements. 

Items may be reviewed through the GSA Schedule List, which contain a list of all GSA Schedules.  Government contractors in turn enter into “schedule contracts” with the GSA in order to offer products through the GSA Schedule Program.  This memorandum will refer to these contract holders as “GSA Schedule Contractors.”

For more information, please visit: http://www.gsa.gov/portal/content/104447

[2] No. 10-148C, Court of Federal Claims, August 31, 2010.

Texas A&M
Health Science Center
Office of Homeland Security
College Station, TX.

September 15, 2010

Mr. Rick Cochran
President & CEO
Mobile Medical International Corporation
2176 Portland Street, Suite 4
St. Johnsbury, VT 05819

Subject: Muskogee VA Medical Center Findings

Mr. Cochran:

Thank you for the opportunity to represent MMIC as a member of the Board of Directors at my recent site visit to the Muskogee VA Medical Center. My findings, which clearly offer a substantial savings to the Medical Center and importantly, no loss of services for our Veterans, are as follows:

1. The renovation project began in 2008 with strong leadership and after researching alternative options, the Medical Center closed five operating rooms and the project began using two Mobile Surgery UnitsTM away from the old operating suites, but still attached to the facility.
2. The overall project timeline for completion of the renovation is one year, and is on track.
3. By using two Mobile Surgery Units'" the Muskogee VA Medical Center stated they are saving four times the amount of a more costly phased in renovation. The phased method would have included splitting the project to keep one half of the operating rooms open at a time; therefore, significantly increasing, by four times the current amount, what the total project cost would have been.
4. By keeping surgical procedures in house, this is allowing utilization of the OR staff members; rather than potential for loss of the staff during the renovation.
5. Hard cost savings:

1. OR renovation would have cost $17.2M using a split method. it cost $4.3M to do all at once~ a hard cost savings of $12.9M. Then subtract the $3.6M to rent the units from the savings of $12.9M= $9.3M total cost savings, not avoidance, savings!
2. Lower infection rates by at least a factor of two or three. Documented during actual split operation renovation projects. Each wound infection is estimated to cost $20,000, so the expected 1.5% wound infection rate would have yielded 1200 cases x 1.5%~ 18 cases during normal operations. If the infection rate doubled, we would have seen 36 wound infections, plus a tremendous amount of misery for the patient. This method avoided that extra 18 wound infections, saving 18 x $20,000= $360K.
3. Total cost savings then total $9.3M plus $360K-=$9.66M.

6. In addition there are other positives to consider: IF the OR's were closed and cases sent downtown, THEN:

1. At 600 cases per room per year, each case costing $12,000 to send downtown, that means each room was worth at least $7.2M. The total cost of renting the units was $3.6M. So the cost avoidance would be 2x $7.2~ $14.4, minus the cost of leasing the units at $3.6 meant a cost avoidance of at least $10.8M! The VA, when they saw these numbers, said the real cost would be some multiple of $12,000-probably at least 3 times as much. That meant a cost avoidance of at least 3 x $14.4 = $43.2M minus the cost of the units at $3.6M = $39.6M by using the two Mobile Surgery Units'" !
2. The medical centers would have had to close without the ability to do emergency surgical cases.
3. The OR staff could have been lost entirely, no work. The VA could have had trouble finding staff again.
4. The VA could not have fulfilled its readiness mission.

In conclusion, hard cost savings of $9.66M plus additional cost avoidance of up to $39.6M, plus the other positives make this a very wise decision for the VA system! This method should be evaluated for use throughout the entire VA system.

Paul K. Carlton, Jr., MD, FACS
LtGen, USAF, MC, retired
Director, Office of Innovations and Preparedness

Calendar No. 469

111TH CONGRESS 2d Session
 SENATE Report 111–226

MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND
RELATED AGENCIES APPROPRIATION BILL, 2011

JULY 19, 2010.—Ordered to be printed

Mr. JOHNSON, from the Committee on Appropriations, submitted the following

REPORT

[To accompany S. 3615]

The Committee on Appropriations reports the bill (S. 3615) making appropriations for military construction, the Department of Veterans Affairs, and related agencies for the fiscal year ending September 30, 2011, and for other purposes, reports favorably thereon and recommends that the bill do pass.

Amounts in new budget authority

Total of fiscal year 2011 bill as reported to the Senate ...................... $143,530,131,000

Total of fiscal year 2012 advance appropriations included in this bill ..... $50,610,985,000

Amount of 2010 appropriations ............................... 182,750,300,000

Amount of 2011 budget estimate ............................ 143,531,666,000

Bill as recommended to Senate compared to—

Amount of 2010 appropriations ........................ -39,220,169,000

Amount of 2011 budget estimate .....................   -1,535,000

57–470 PDF

 Page 47

Cost Saving Initiative.—Over the past decade, the Department has undertaken an effort to modernize its medical facilities through new construction and renovation. This recapitalization effort is imperative to the delivery of high quality medical care. Often when a new surgical ward or other treatment facility undergoes construction, the VA has to find alternative areas for treatment or contract care to non-VA medical providers. The Committee believes that the VA could achieve cost savings during renovation or construction by either leasing or purchasing mobile units. The Committee encourages the Department to launch a pilot project in at least two VISNs that have renovation or construction projects underway, to lease or purchase mobile surgical units through a full and open competition while construction is underway. Additionally, the VA should develop metrics for a cost benefit analysis to determine whether this approach has achieved savings versus contracting care through local medical providers.#

 MOBILE MEDICAL INTERNATIONAL CORPORATION

MMIC PROPOSAL TO VA CENTRAL OFFICE

(reflecting the use of 20 Units within the VA System)

 Presentation by

Mobile Medical International Corporation

World-class mobile medical facilities for commercial, military, international and emergency response applications

2176 Portland Street • St. Johnsbury, VT • USA • (802) 748-2322
www.mobile-medical.com