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The Honorable Dr. Robert A. Petzel, M.D.

The Honorable Dr. Robert A. Petzel, M.D., Under Secretary for Health Veterans, Health Administration, U.S. Department of Veterans Affairs

Good morning, Madam Chairwoman, Mr. Ranking Member, and Members of the Subcommittee.  Thank you for the opportunity to discuss the Department of Veterans Affairs’ (VA) purchased care programs.  I am accompanied today by Philip Matkovsky, Assistant Deputy Under Secretary for Health for Administrative Operations; Cyndi Kindred, Acting Deputy Chief Business Officer for Purchased Care; and Deborah James, Non-VA Care Coordination (NVCC) Project Manager.

VA provides care to Veterans directly in a VHA facility or indirectly through either individual authorizations or through contracts with local providers.  This mix of in-house and external care provides Veterans the full continuum of health care services covered under our medical benefits package.  VHA recognizes that improvements are needed in the Non-VA Care Program, including that part of this program previously known as Fee Basis.  To address these concerns, VA has developed and managed multiple initiatives in the Non-VA Care Program.  These initiatives are designed to ensure that high-quality care is consistently provided to Veterans under the non-VA care authorities.  They are also designed to ensure Veterans receive effective and efficient non-VA care seamlessly.

My testimony today will discuss two initiatives, Patient-Centered Community Care (PCCC) and Non-VA Care Coordination (NVCC), both of which will help ensure that high-quality care is consistently provided to Veterans regardless if they receive their care in-house or from a non-VA care provider.  I will also provide you with an update on the Project HERO (Healthcare Effectiveness through Resource Optimization) Program, Project ARCH (Access Received Closer to Home) and how our use of non-VA care is increasing access to care for rural Veterans.  My testimony will discuss the clinical metrics and standards we have instituted to ensure Veterans receive the same quality care from non-VA providers participating in the Non-VA Providers Program as Veterans receive in-house.

Non-VA Care Generally

It is VHA policy to provide eligible Veterans care within the VA system whenever feasible and to the extent authorized by law.  When VA cannot provide all of the necessary medical care and services at a VA medical facility, VA is, generally speaking, authorized to provide the needed care through non-VA providers in a manner consistent with the requirements and parameters of the non-VA care program and its underlying legal authorities.

VA uses criteria to determine whether non-VA care may be used.  VA may consider non-VA care due to a lack of an available specialist, long wait times, or extraordinary distances from the Veteran’s home.  Purchasing the services will only be considered if other options within VHA are not appropriate or viable.  If purchasing services is required, two principal avenues exist for contracting health care services: conventional commercial providers and academic affiliates. 

VHA’s academic affiliates (schools of medicine, academic medical centers and their associated clinical practices) provide a large proportion of contracted clinical care both within and outside of VHA.  All non-competitive VHA health care resource contracts valued at $500,000 or more and competitive contracts over $1.5 million are reviewed through a thorough process that includes the Office of General Counsel (for legal sufficiency), VHA’s Office of Patient Care Services (for quality and safety), VHA’s Office of Academic Affiliations (for affiliate relations assessment), and VHA’s Procurement and Logistics Office (for acquisition technical review for policy compliance).  In addition, the Office of Inspector General performs a pre-award audit of all non-competitive contracts valued over $500,000.

VA is focusing on two initiatives to improve the oversight, management, and delivery of non-VA care:  Patient-Centered Community Care (PCCC), which is still in development, and the Non-VA Care Coordination (NVCC) program.  In earlier discussions with stakeholders, including this Subcommittee, VA has heard concerns regarding the implementation of PCCC and NVCC.  I assure you, we are taking the necessary precautions to see that these initiatives provide timely, high quality medical care.  

Patient-Centered Community Care (PCCC)

PCCC will consist of a network of centrally supported standardized health care contracts, available throughout VHA’s Veterans Integrated Service Networks (VISN).  This initiative will focus on ensuring proper coordination between VA and non-VA providers.  PCCC is not intended to increase the purchasing of non-VA care, but rather to improve management and oversight of the care that is currently purchased.  This includes improvements in numerous areas such as consistent clinical quality standards across all contracts, standardized referral processes, and timeliness of receipt of clinical information from non-VA providers.  The goal of this program is to ensure Veterans receive care from community providers that is timely, accessible, and courteous, that honors Veterans’ preferences, enhances medical documentation sharing, and that is coordinated with VA providers when VA services are not available. 

While VA intends to administer these contracts directly, it has not yet determined how they will be managed.  Additionally, VA is currently researching the appropriateness of incentives tied to performance standards to help ensure the selected contractors provide excellent customer service and timely care.  VA conducted a business case analysis which compared the cost of purchasing care through individual authorizations and through regional contracts.  The analysis showed that regional contracts are more cost-effective, with the cost/benefit ratio improving as participation increases.  The PCCC contracts will cover inpatient and outpatient specialty care and mental health care.  Primary care is not included in the solicitation because it is an essential function of VA and is the key to coordinating Veteran health care.  Chronic dialysis is also excluded from the solicitation; currently 7 contracts and 19 Basic Ordering Agreements are in place nationally to purchase dialysis services, and these contracts are proving to be very successful in ensuring quality and accessible services are available for our Veterans close to where they live.

The original schedule for release of the Request for Proposal (RFP) and subsequent evaluation of proposals and award was first quarter fiscal year (FY) 2013.  However, in an effort to strengthen the requirements, incorporate a broader range of ideas from key stakeholders such as our Veterans Service Organizations and the private sector, VA will release a draft RFP for comment before the release of the final RFP in the interest of making this effort a more effective solution.  VA now plans to award the new contracts in late second quarter of FY 2013.

Non-VA Care Coordination (NVCC)

NVCC is VA’s internal program to improve and standardize our processes for referrals to non-VA care.  The NVCC model centers on effective referral management and consistency in documenting, tracking, managing receipt of supporting clinical documentation and coordinating patients in community health facilities.  Through NVCC, non-VA care staff use standardized processes and templates for the administrative functions associated with non-VA care.  VA successfully conducted initial pilot programs in VISNs 11 and 18 in FY 2011.  VHA incorporated best practices from the pilot sites and created the structure that is currently being deployed to one champion site per VISN.    All champion sites will be completed in late fall 2012.  Full national deployment will be complete by the end of FY 2013.     


Quality Standards

VHA exercises its responsibility to provide quality contracted care to Veterans through several clinical and business mechanisms.  These include credentialing and privileging, quality and patient safety monitoring, medical documentation sharing requirements, financial and compliance reviews, and specific quality of care provisions included in the contract itself.  Facility directors are responsible for ensuring that these oversight mechanisms are consistently and effectively applied to all medical services provided under contract in a VHA facility.  Ensuring quality standards for VHA contracted care outside of a facility is more difficult, but VHA includes language in such contracts that requires industry standard accreditation or certification requirements are being met, clinical reporting occurs, and oversight mechanisms are in place to ensure that this care meets VA standards.

Rural Care

Project HERO (Healthcare Effectiveness through Resource Optimization) is a pilot program in VISNs 8, 16, 20, and 23 that helps eligible Veterans receive the care they need when it is not available at a VA facility.  The objectives of Project HERO are to provide as much care as possible within VHA, efficiently refer Veterans to high quality community-based care, foster high quality care and patient safety, improve the exchange of information, and increase Veterans overall satisfaction of care.  The Project is currently in its fifth year.  Medical care is offered through contracts with Humana Veterans Healthcare Systems (HVHS) and Delta Dental Federal Government Programs (Delta Dental).  Project HERO provides Veterans with access to a pre-screened network of medical and dental providers who meet VA standards for quality care.  These providers must meet VA defined standards for credentialing, accreditation, and quality.  Specifically, these contracts require that HVHS and Delta Dental have quality management programs that comply with VA, Joint Commission, Federal, and state requirements. 

Once VA determines that contract care is appropriate, HVHS and Delta Dental communicate directly with Veterans to schedule appointments, and Veterans see HVHS or Delta Dental doctors or dentists.  Requests for additional services must be referred back to VA, which allows the Department to coordinate each patient’s care and maintain oversight of each patient’s care needs.  Following each appointment, HVHS and Delta Dental providers send patient records and invoices to HVHS and Delta Dental, which in turn submit medical records and claims to VA.

VA learned many lessons from Project HERO and is using this information to develop the PCCC contracts.  We also realized success in several key measures, such as scheduling and completing appointments within 30 days and receiving updated clinical information within 30 days.  We confirmed that we can ensure availability of credentialed and accredited providers that meet our standards for care.  Additionally, when compared to traditional fee basis care, Project HERO has yielded a significant cost savings, amounting to more than $27 million through July 2012.

The lessons learned over the course of Project HERO will be incorporated into PCCC as it is fully implemented.  To ensure a smooth transition from Project HERO to PCCC, VA has notified HVHS of its intent to extend the current medical/surgical services contract until March 2013.  This extension will help ensure Veterans currently seeing a Project HERO provider have no disruption of service while the PCCC contracts are being awarded.  The extension will also allow VA medical centers in those four VISNs to continue taking advantage of the quality, access, and medical documentation sharing requirements in the Project HERO contract.  If the PCCC contracts are not in place by the expiration of this extension, VA will ensure Veterans will still receive timely and quality non-VA care through the use of individual authorizations. 

Additionally, VA’s Office of Rural Health has implemented a 3-year pilot program to provide health care services through contractual arrangements with non-VA care providers – Project ARCH (Access Received Closer to Home).  This pilot intends to improve access for eligible Veterans by connecting them to health care services closer to home.  Five pilot sites have been established across the country:  Caribou, ME; Farmville, VA; Pratt, KS; Flagstaff, AZ; and Billings, MT.  On July 29, 2011, health care delivery contracts were awarded to: Humana Veterans in VISNs 6, 15, 18, and 19, and Cary Medical Center in VISN 1.  This program became operational on August 29, 2011.


As the Nation’s only health care system designed specifically to treat Veterans, VA offers services and benefits unavailable elsewhere.  This system has been designed and continuously updated to respond to the unique needs of Veterans in an environment that understands and honors their military service.  For these reasons, VA’s first preference is to provide care to Veterans within its system, but we recognize that we cannot provide the necessary care to every Veteran in our facilities, which is why we utilize non-VA services where appropriate.  Veterans receiving care from non-VA sources should rightfully expect the same quality care from these providers as they would receive from ours.  Consequently, VA has developed a strategy to improve its purchased care programs to achieve quality improvements and cost savings.  This strategy entails greater use of standardized contracts through PCCC and better referral management through NVCC.  We are currently in a moment of transition for VA’s purchased care program, and we appreciate the advice and counsel of our stakeholders—the Veterans we serve, the Service Organizations that represent them, and Congress—as we proceed.

Madam Chairwoman and Mr. Ranking Member, VA has utilized its authorities to provide eligible Veterans quality care in non-VA settings.  We have also instituted new models and controls to ensure Federal resources are used appropriately.  We appreciate the opportunity to appear before you today.  My colleagues and I are now prepared to answer your questions.