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Witness Testimony of Philip Matkovsky, Assistant Deputy Under Secretary for Health for Administrative Operations Veterans Health Administration, U.S. Department of Veterans Affairs

Chairman Johnson, Ranking Member Donnelly, and Members of the Subcommittee:  thank you for the opportunity to speak about the Department of Veterans Affairs’ (VA) ability to deliver quality care and acquire prosthetics and other devices for Veterans in need of these items.  I am accompanied today by Dr. Lucille Beck, Chief Consultant, Rehabilitation Services, Director, Audiology and Speech Pathology, and Acting Chief Consultant, Prosthetics and Sensory Aids Service, Veterans Health Administration;Norbert Doyle, Chief Procurement Logistics Officer, Veterans Health Administration, and Ford Heard, Associate Deputy Assistant Secretary, Office of Acquisition and Logistics.

VA continually strives to improve our programs and we appreciate independent reviews that can validate our successes and offer recommendations for improvement.  On March 8, 2012, VA’s Office of Inspector General (OIG) published a report on the Management and Acquisition of Prosthetic Limbs.  In this Report, OIG found that overpayment for prosthetic limbs was a systemic issue in each Veterans Integrated Service Network (VISN), and that internal controls needed to be strengthened to better control the process.  VHA concurred with OIG’s recommendations in this report.  OIG found that VA spent approximately $54 million on artificial limbs in fiscal year (FY) 2010, including total contracts to vendors valued at close to $49 million.  VA acknowledges it could have saved approximately 4 percent, or $2.2 million, by strengthening its internal control processes for prosthetics procurement and has adopted such practices to achieve greater savings.

Later that same month (March 30, 2012), OIG published a second report, an Audit of Prosthetics Supply Inventory Management.  In this Report, OIG concluded that VA needs to strengthen management of prosthetic supply inventories at its medical centers and make better use of excess inventories.  VHA concurred with OIG’s recommendations in this report, and has developed action plans to improve oversight and management processes to better ensure VHA delivers the quality care Veterans deserve while exercising responsible stewardship of prosthetics supplies.

My testimony today will begin by briefly describing initiatives we have taken to improve the quality of care for Veterans in need of prosthetics or devices, as well as how we define this term.  It will then cover how VA acquires prosthetics, how VA maintains oversight of its prosthetics acquisitions, and how VA ensures the best value for Veterans and taxpayers when acquiring prosthetics.

Quality of Amputation and Prosthetic Care

VHA’s Prosthetic and Sensory Aids Service is the largest and most comprehensive provider of prosthetic devices and sensory aids in the world, offering a full range of equipment and services.  All enrolled Veterans may receive any prosthetic item prescribed by a VA clinician, without regard to service-connection, when it is determined to promote, preserve, or restore the health of the individual and is in accord with generally accepted standards of medical practice.  “Prosthetic” is a broad term used in VA to describe devices and equipment in the Veteran, on the Veteran, or for the Veteran intended to replace or support missing body parts or function.  VA’s definition is similar to that used by other Federal agencies and private health care systems.

Once we have identified eligible Veterans in need of prosthetics and other devices, we can begin providing the specialty care they require.  VA has initiatives falling under five general areas to improve the quality and availability of amputation care.  These include staffing and community partnerships, accreditation of VA laboratories, improved training for VA staff, greater research into amputation clinical issues, and collaborations with the Department of Defense (DoD).  I will briefly discuss each of these in turn.

First, VHA’s Prosthetic and Sensory Aids Service has a robust clinical staff of orthotists and prosthetists at more than 75 locations, and also partners with the private sector to provide custom fabrication and fitting of state-of-the-art orthotic and prosthetic devices.  VA maintains local contracts with more than 600 accredited Orthotic and Prosthetic (O&P) providers to help deliver care closer to home.  Commercial partners help fabricate and fit prosthetic limbs for Veterans across the country.  Since its creation in 2009, VA’s Amputation System of Care (ASoC) has expanded to deliver more accessible, high quality amputation care and rehabilitation to Veterans across the country.  The ASoC utilizes an integrated system of VA physicians, therapists, and prosthetists working together to provide the best devices and state-of-the-art care.

Second, VA promotes the highest standards of professional expertise for its workforce of more than 300 certified prosthetists, orthotists, and fitters.  Each VA lab that is eligible for accreditation is accredited either by the American Board for Certification in Orthotics, Prosthetics, and Pedorthics, Inc. (ABC), the Board of Certification/Accreditation International (BOC), or both.  This accreditation process ensures quality care and services are provided by trained and educated practitioners.

Third, to support the continued delivery of high quality care, VA has developed a robust staff training program.  We offer clinical education, technical education, and business process and policy education, in addition to specialty product training, to help our staff provide better services to Veterans.  Further, VA has one of the largest orthotics and prosthetics residency programs in the Nation, with 18 paid residency positions at 11 locations across the country.

Fourth, VA’s Office of Research and Development is investing heavily in prosthetics and amputation health care research.  It is issuing Requests for Applications for studies to investigate a variety of upper limb amputation technologies and applications.  VA also works with DoD to support joint research initiatives to determine the efficacy and incorporation of new technological advances. 

Finally, the partnership between VA and DoD extends further to provide a combined, collaborative approach to amputation care by developing a shared Amputation Rehabilitation Clinical Practice Guideline for care following lower limb amputation.  VA is supporting DoD by collaborating on the establishment of the Extremity Trauma and Amputation Center of Excellence.  The mission of this center encompasses clinical care, including outreach and clinical informatics, education, and research, and is designed to be the lead organization for policy, direction, and oversight in each of these areas.  The center is currently being established and will obtain initial operating capacity by the end of this fiscal year.

In summary, VA supports high quality amputation and prosthetics care by promoting ground-breaking research into new technologies, training a highly qualified cadre of staff, and pursuing accreditation of all eligible prosthetic laboratories in VA’s Amputation System of Care.

Acquisition of Prosthetics, Oversight of Acquisitions, and Ensuring Best Value

The goal of VHA’s Prosthetics and Sensory Aids Service is to provide devices, technologies, and equipment that assist Veterans in achieving maximal levels of independent function and a high quality of life.  Technologies and equipment must be highly individualized to meet each Veteran’s unique rehabilitative needs.  Clinicians determine the prosthetic needs of Veterans as a part of their clinical care, and VA procures the devices necessary to achieve personal clinical outcomes.  While our focus is on providing state-of-the-art clinical care, procurement, acquisition, and management policies reflect a complementary and essential piece of this system as well.  VA is reforming its procurement practices to obtain better prices and more competition in obtaining the devices and supplies Veterans need where appropriate.  We are doing this while maintaining the range of products available to Veterans and the services we offer.  While price is an important consideration, our primary focus is on ensuring the product meets the Veteran’s needs.

Turning to how we acquire prosthetics, these devices are procured according to the Federal Acquisition Regulations (FAR) and VA Acquisition Regulations (VAAR).  Due to the unique needs of Veterans in this area, VA uses its statutory authority under title 38, United States Code (U.S.C.), section 8123, as a sole source justification when required to ensure a Veteran receives medically needed items.  38 U.S.C. 8123 grants VA authority to procure prosthetics and services in any manner “the Secretary may determine to be proper without regard to any other provision of law.”  When exercising this authority the Department may “procure prosthetic appliances and necessary services required in the fitting, supplying, and training and use of prosthetic appliances by purchase, manufacture, contract, or in such other manner as the Secretary may determine to be proper.”  This flexibility was granted to ensure that Veterans receive devices and supplies that are suitable for them and that meet their clinical needs.  Many of the products VA purchases are either going to become a part of a Veteran or will be a critical part of their daily lives, helping them walk, work, and interact with their families.  The §8123 authority permits VA to limit competition when physicians require specific devices or equipment for patient care.  Also, FAR and VAAR authorize limiting competition under these circumstances.  If the Secretary elects to use §8123 in this manner, all applicable FAR and VAAR requirements must still be followed.

When products are generally available and interchangeable, competitive procurements may be more appropriate.  VA must comply with all applicable FAR and VAAR requirements in such procurements.  VA has aggressively pursued national contracts over the past 10 years for these types of items.  VHA specifies contract requirements, such as nationally recognized quality and safety standards (e.g., Rehabilitation Engineering Society of North America’s standards for wheelchairs and ISO good manufacturing systems for hearing aids), to support a high quality standard of care for rehabilitation products.  As a result, Veterans receive high quality devices that are effective and safe.  VA also pursues local and regional contracts for items and services, such as home oxygen, artificial limbs, and durable medical equipment (DME).  The provision of prosthetic goods and services is complex, as a balance must be maintained between what is clinically indicated while ensuring we realize the best value.

VA also continues to improve how it oversees these acquisitions.  For example,VHA is working to place appropriate limits on the use of the title 38 authority so that it secures fair and reasonable prices for products while still delivering state-of-the-art care, and so we can improve opportunities for Veteran-owned and small businesses.  VHA is pursuing three strategies to achieve greater cost savings while preserving high quality, patient-centered health care and appropriate clinical determinations.  First, we are transitioning who procures this equipment to bring us more in line with the FAR, which requires that only fully trained contracting officers be able to obligate the government for purchases above the micro-purchase threshold of $3,000.  This will also allow us to improve our business processes through better contracting practices and increased attention to post-award contract administration, including reconciliation of invoices.  Specifically, we are transferring purchasing authority from prosthetics purchasing agents to contracting specialists for any purchase above $3,000 (the micro-purchase threshold).  VHA has notified the field that warranted contracting officers will be required to contract for these items.  For items less than $3,000, micro-purchase requirements continue to apply.  We conducted a pilot program to evaluate the impact of this change from January until March in Veterans Integrated Service Networks (VISN) 6, 11, and 20, and beginning this month, we are transitioning to national implementation.  This transition to warranted contracting officers will improve our business practices while ensuring clinical decision making and treatment plans remain with the Veteran and provider. 

VHA is pursuing a phased approach to standardize and define commodities for its products where appropriate.  When we can purchase products, devices, or supplies that are generally available and interchangeable, we will comply with the FAR to ensure we are obtaining the best price possible.  In the long term, VHA will develop a catalog of such items to facilitate better, more cost effective purchasing decisions.  Again, we must balance this goal with quality clinical and patient care. 

VHA is updating policies and directives to better guide clinical and procurement staff on the proper use of §8123.  These updates will allow us to more accurately and timely provide services to the benefit of Veterans. 

VHA is also increasing its audits of purchases to identify best practices and conduct better oversight to ensure we are realizing the best value.  As we gather more data on how these changes are working, we can continue to refine and enhance our programs.  We are using new templates, checklists, and justifications to streamline and simplify our processes and improve communication between staff and leadership so we have a comprehensive view of our procurement activities.  VHA will ensure proper controls are in place to review vendor quotes, purchase orders, and verify invoices and costs by developing a comprehensive database of all existing contracts.  We will correct non-compliant contracts as required and evaluate contractor performance as required by the FAR, and institute collection activities when warranted for VA overpayments.  To improve the guidance provided to certified prosthetists, we are developing contract templates, clearer guidance, and notices that will be disseminated later this summer to our VISN and facility contracting offices.  VHA’s Service Area Organizations, which provide support, oversight, and guidance to our facilities, will review the award of every new prosthetic limb base contract to ensure price negotiations took place, and will review a random sample of delivery orders between May and September 2012, to ensure the base contracts include the correct prices.  We will determine if base prices can be established following a system-wide review of non-Medicare classified limb items by the end of the fiscal year.  In some circumstances, VHA may be better suited to fabricate items in-house.  To better identify when we should pursue this approach, we will be contracting for an external review to assess how expanded use of in-house functions would impact patient satisfaction, support Veterans’ needs and capabilities, and staffing. 

Once VHA has procured devices and supplies, management of our inventories and resources is also essential.  In the recently published OIG report auditing VHA’s prosthetics and supply inventory management practices, OIG concluded VHA had made overpayments because of inefficiencies in our system and inadequate training and guidance.  We appreciate OIG’s efforts and recommendations, and in response, we are better defining our policies and guidance to the field, improving our information technology (IT) systems to better track supplies, strengthening our training programs, and increasing oversight and audit functions.  We are directing our facilities to reconcile physical inventories and take action to eliminate excess inventories without creating supply shortages.  We are revising our standards for facilities to require at least one prosthetic supply inventory manager to become a certified VA Supply Chain Manager.  We have developed a patch that is 95 percent complete that will enhance the ability of the prosthetics package to interface with inventory management software, facilitating better information sharing.  Through these steps, we will better utilize existing and available resources as we deliver prosthetic and amputation services and products to Veterans.

Conclusion

VA supports high quality amputation and prosthetics care by supporting ground-breaking research into new technologies, training a highly qualified cadre of staff, and pursuing accreditation of all eligible prosthetic laboratories in VA’s Amputation System of Care.  We are improving our oversight and management of prosthetic purchasing and inventory management to better utilize the resources we have been appropriated by Congress as we serve America’s Veterans.  High quality patient care is our top priority, but we understand we must pursue this objective in balance with other aims.  These aims include: supporting Veteran-owned and service-disabled Veteran-owned small businesses, ensuring responsible fiscal stewardship of the funding provided to VA by Congress, and complying with all applicable laws and regulations in this regard.  We appreciate the opportunity to appear before you today to discuss this important program.  My colleagues and I are prepared to answer your questions.