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Chairwoman Buerkle, Ranking Member Michaud, and members of the Subcommittee:


Thank you for the opportunity to present Humana Veterans’ views on H.R. 3723, the Enhanced Veteran Healthcare Experience Act of 2011, which would provide much needed improvements to the Department of Veterans Affairs’ (VA) Fee program for Veterans who are authorized to receive medical care from non-VA providers.  

Through the congressionally-directed pilot Project HERO (Healthcare Effectiveness through Resource Optimization), Humana Veterans Healthcare Services, Inc. (Humana Veterans), a Humana Government subsidiary, provides Veterans with access to non-VA healthcare when the Department determines that specific medical resources are not available within the VA healthcare system in VISNs 8, 16, 20, and 23.  In these VISNs, we provide access to a competitively priced network of physicians, institutions and ancillary providers to supplement the VA healthcare system while adhering to high quality and access to care standards.  With the HERO pilot scheduled to end on September 30, 2012, we would like to provide the Subcommittee our perspective on what key pilot program elements should be adopted and incorporated into a follow-on national program to replace the current VA Fee process. 

Humana strongly supports H.R. 3723 because the bill addresses the fundamental flaws of the VA’s non-HERO Fee program where Veterans receive fragmented care with little or no coordination between VA and non-VA healthcare systems.  The bill ensures that VA would adopt the successful elements of the HERO pilot program, along with additional improvements to create a fully integrated healthcare delivery system where Veterans receive well-coordinated, patient-centric care.  This bill enables VA to track and monitor all Veterans with Fee care authorizations, requires proper care coordination to positively impact Veterans’ health outcomes, and will lead to cost savings by minimizing duplicative healthcare services and tests.  Because of the care coordination elements in this bill, its adoption will also result in greater empowerment for VA to recapture as much of the Fee workload into the VA healthcare delivery system as they can absorb.

Challenges in VA’s Fee Process

As currently implemented, the Fee process is not integrated with VA’s healthcare delivery system and there is no coordination or care management of Veterans with Fee care authorizations, except in certain congressionally-directed pilot programs such as Project HERO and Project ARCH (Access Received Closer to Home).  VA’s Fee process fails to ensure that Veterans are seen by credentialed and qualified non-VA providers and does not guarantee the return of pertinent clinical information to the VA primary care provider in a timely manner.  With the exception of Veterans participating in Project HERO and Project ARCH, VA has no way of tracking and monitoring if and when Veterans schedule and receive care in the community.  This means that VA loses track of Veterans and the care they receive once they leave the VA system for Fee care.  Veterans are also left with the daunting task of navigating the very confusing VA and non-VA healthcare systems on their own without a single point of contact who will be the integrator of all care.  This process is not Veteran-centered nor structured to allow VA to determine if and how a Veteran can be brought back to the VA for follow- up care and treatment, if appropriate.

In addition, the problem of erroneous Fee payments is well documented.  Despite VA’s best efforts to automate the Fee claims process through various pilot programs over the past 10 years, claims are still not automated today and the current manual claims process places VA at high risk for improper payments.  For example, a March 2012 report by the VA Office of Inspector General identified the Fee program’s improper payment rate at 12.4 percent[1], and the Government Accountability Office’s February 2012 report placed the Fee program among the top 10 Federal programs with the highest reported improper payment rates[2].  These findings are consistent in the September 2011 report by the National Academy of Public Administration (NAPA).  The NAPA study also discusses the Fee program’s use of “antiquated systems and technology” and points to private sector payors who provide “much more efficient and accurate claims processing”[3]

To address these problems, VA and Humana Veterans worked in a close partnership to implement the HERO pilot program.  The result of this experience has allowed us to capture the positive outcomes and lessons learned, and we can identify the ideal core elements that should be incorporated into the Fee program.  However, instead of leveraging the lessons learned from this pilot program, VA’s plan for the follow-on HERO program that they are calling Patient Centered Community Care (PCCC), would only result in the creation of a sub-specialty provider network.  Care coordination is not possible under PCCC, because it excludes a number of health care services that will end up being provided in the community separately from PCCC.  This will not yield meaningful improvements in the existing Fee program.  Instead, PCCC will maintain the status quo of the current Fee program and the re-pricing contract that only gives VA a discount in price, but does not include Veteran-facing services. 

In addition, under PCCC the contractor would not be able to provide the administrative services that exist in the HERO pilot and which were instrumental to the contractor’s care coordination role.  In its current design, PCCC would significantly limit the contractor’s role to one of establishing and managing a provider network.  Concurrently, VA is also creating and building new in-house capacity to handle administrative functions associated with the Fee care authorizations, visits and treatment through the Non-VA Care Coordination (NVCC) program.  Instead of tapping the capacity that already exists in industry, NVCC will require significant resource investments, both in staff and the necessary tools (including IT) to properly handle the “back-office” administrative functions.  It is not clear why VA would want to build internal capacity to become an insurance payor, when their expertise and experience is in delivering excellent healthcare as a provider.  An unintended consequence of removing contractor-provided administrative services under the PCCC proposed model is the threat to the contractor’s ability to maintain a provider network responsive to VA’s changing needs.  It also means that VA will not be able to get the best price, since the contractor cannot negotiate a better price with their network providers in the absence of a predictable minimum workload and without the ability to guarantee a low no-show rate, and timely, predictable payments.

The current flawed Fee program operates much like a fee-for-service program, which has perpetuated and magnified the risk for poor health outcomes, improper payments, and has resulted in unnecessary duplicative healthcare services and tests.  These problems will persist if VA moves forward with PCCC in its current design, and NVCC that will excise the back-office functions that contributed to the success of HERO.  In today’s challenging budget environment, VA cannot afford to support and expand ineffective and efficient programs.  VA must make fundamental changes to the traditional Fee program to address the current program challenges.  This is possible with the enactment of H.R. 3723, since this bill provides a sound foundation of core Fee program elements that can be used to guide VA as they develop the requirements for PCCC.  The purpose of the congressionally directed HERO pilot program was to test ways to improve the broken Fee process.  As discussed below, the HERO pilot program data point to key positive outcomes.  H.R. 3723 builds on the integrity and basic successful elements of HERO to create meaningful improvements to the traditional Fee program. 

H.R. 3723

H.R. 3723 ensures that Veterans with Fee authorizations receive the same high-quality care and protections that the VA healthcare system provides through the following HERO elements: 

  • Fully credentialed and certified network of specialty providers:  Humana Veterans provided a network of 39,443 providers in the four HERO pilot VISNs.  This network made it possible for Veterans to travel a median appointment distance of only 13 miles, even though 45 percent of the HERO appointments were in rural or highly rural areas. 
  • Clinical information exchange:  Under Project HERO, Humana Veterans returned 94 percent of clinical information to the VA within 30 days with a median return of 9 days.  This helped to improve clinical decision-making, and minimized duplicate care and services. 
  • Care coordination:  Humana Veterans’ care coordinators helped each Veteran in Project HERO navigate the care that they receive in the community.  For example, Humana Veterans assisted Veterans in identifying a network community provider, scheduling the appointment, and following up to ensure that the Veteran made the doctor’s visit.  As a result, Humana Veterans achieved a no-show rate of 5 percent, which is significantly below the industry average that ranges between 14 percent and 24 percent.  Humana Veterans also provided VA direct access to the Authorization and Consult Tracking (ACT) system, which is our proprietary IT tool for care coordination that allowed VA to track and monitor Veterans with Fee authorizations for the very first time.  
  • Clinical quality management to respond to patient safety events:  Under Project HERO, Humana Veterans operated a clinical quality management program, which provided a structured way for identifying and addressing possible patient safety events.                  The clinical quality management program has reviewed all identified potential quality indicators and investigated 100 percent of confirmed quality issues, as well as discussed outcomes with the VA through the jointly operated Patient Safety Peer Review Committee.  
  • Accurate and timely claims payment:  Project HERO required Humana Veterans to handle Fee related administrative services, including claims processing for our network providers.  Using our automated claims process and contracted rates that minimize the risk for improper payments, we made 99 percent of claim payments to our providers within 30 days and maintained an extremely low payment error rate in FY 2011.

In addition, H.R. 3723 provides for stronger care coordination by requiring a VA-provided and a contractor-provided care coordinator to work together in managing the care that Veterans receive.  The bill also attempts to eliminate variation by requiring VA to make consistent determination of Fee authorizations for Veterans, while leaving the Department with the flexibility to define the standards for referrals and authorizations.  This means that VA retains the decision-making control of if and when they use Fee care as a tool to supplement the care that Veterans receive in the VA.  In summary, H.R. 3723 provides necessary changes to the Fee program and incorporates the successful elements from HERO that will enable the VA to work in partnership with community providers to provide Veterans with not only patient-centric and coordinated care, but also ensures continuity of care across VA and non-VA provided healthcare systems.  


In order to enhance the Veteran’s healthcare experience, VA should do what they do very well (i.e., delivery of excellent healthcare) and partner with an administrative services contractor to provide services they do very well in the marketplace (e.g., care coordination, maintaining credentialed provider networks, payments, etc.).  For the reasons outlined above, Humana Veterans strongly supports H.R. 3723 and encourages its enactment.  Eligible Veterans for whom VA provides Fee authorizations will benefit greatly from a fully integrated care coordinated Fee program that will also ensure VA’s ability to bring these Veterans back into the VA if and when follow-up care is needed.  We look forward to working with the Committee to make the necessary transformational changes to the Fee program so that Veterans receive more effective and efficient care when they must go outside of the VA system for care.

Tim S. McClain

TimS. McClain was appointed President, Humana Government and Other Business segment in February 2012 and has responsibility for business and administrative services contracts with the federal government.  Previously, Tim was President and CEO of Humana Veterans Healthcare Services.  He is a recognized expert in Veterans health care law and policy.

 President and CEO President and CEOMr. McClain has over thirty-five years ofexperience in executive leadership and management positions.  He served as General Counsel for the U.S. Department of Veterans Affairs (VA) from2001-2006, a Senate-confirmed Presidential appointment position, serving two Cabinet secretaries and managing an office comprised of nearly 400 attorneys.

In 2005, Mr. McClain served concurrently as General Counsel and as Chief Management Officer for VA, with overall responsibilityfor the Cabinet department’s budget formulation and execution, procurementpolicy, acquisitions management, and business process oversight.

He is a graduate of the U.S. NavalAcademy, Annapolis, Maryland, and California Western School of Law, SanDiego, California.  He is aretired Naval officer, having served as a Surface Warfare Officer and in the Navy’s Judge Advocate General’s (JAG) Corps.

Humana Veterans Healthcare Services, Inc., a subsidiary of Humana Military Healthcare Services, Inc. and part of the Humana Government and Other Business organization, is currently providing administrative services to the Department of Veterans Affairs under the following contracts:

Project HERO (Healthcare Effectiveness through Resource Optimization), originally awarded in 2007 and currently in the fourth and final option year.  Humana Veterans provides administrative healthcare services to Veterans referred outside of the VA healthcare system for specialty care.

Project ARCH (Access Received Closer to Home), was awarded in 2011.  Services under the contract began on August 29, 2011, and include administrative healthcare services to Veterans who meet certain eligibility criteria and agree to participate in the program.

[1] VA Office of Inspector General.  Department of Veterans Affairs: Review of VA’s Compliance with the Improper Payments Elimination and Recovery Act. Mar. 14, 2012. Web. 6 Apr. 2012, <

[2] U.S. Government Accountability Office.  Improper Payments: Moving Forward with Government-Wide Reduction Strategies.  Feb. 7, 2012.  Web. 6 Apr. 2012 <>

[3] National Academy of Public Administration.  Veterans Health Administration Fee Care Program.  Sept. 2011.  Web. 6 Apr. 2012 <>