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25–182 2017

VA AND ACADEMIC AFFILIATES: WHO BENEFITS? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

TUESDAY, JUNE 7, 2016 

Serial No. 114–71 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.fdsys.gov 

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(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

JEFF MILLER, Florida, Chairman 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking 

Minority Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

JON TOWERS, Staff Director 

DON PHILLIPS, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

MIKE COFFMAN, Colorado, Chairman 

DOUG LAMBORN, Colorado 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

JACKIE WALORSKI, Indiana 

ANN M. KUSTER, New Hampshire, Ranking 

Member 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

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(III) 

C O N T E N T S 

Tuesday, June 7, 2016 

Page 

VA And Academic Affiliates: Who Benefits? ......................................................... 1 

OPENING STATEMENTS 

Honorable Mike Coffman, Chairman ..................................................................... 1 

Honorable Ann M. Kuster, Ranking Member ....................................................... 2 

WITNESSES 

Robert L. Jesse, M.D., Ph.D., Chief Academic Affiliations Officer, U.S. Department of Veterans Affairs ..................................................................................... 3 

Prepared Statement ......................................................................................... 30 

Accompanied by: 

David Atkins, M.D., M.P.H., Acting Chief Research and Development 

Officer, U.S. Department of Veterans Affairs 

Ricky L. Lemmon, Acting Chief Procurement and Logistics Officer, U.S. 

Department of Veterans Affairs 

Mr. Randall Williamson, Director, Health Care Issues, Government Accountability Office ......................................................................................................... 5 

Prepared Statement ......................................................................................... 32 

Janis Orlowski, M.D., MACP, Chief Health Care Officer, Association of American Medical Colleges ........................................................................................... 7 

Prepared Statement ......................................................................................... 40 

Nancy Watterson-Diorio, Board Member, National Association of Veterans’ 

Research and Education Foundations ................................................................ 8 

Prepared Statement ......................................................................................... 52 

STATEMENT FOR THE RECORD 

Dr. Christian Kreipke ............................................................................................. 58 

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VA AND ACADEMIC AFFILIATES: WHO 

BENEFITS? 

Tuesday, June 7, 2016 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON VETERANS’ AFFAIRS, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

Washington, D.C. 

The Subcommittee met, pursuant to notice, at 4:17 p.m., in Room 

334, Cannon House Office Building, Hon. Mike Coffman [Chairman 

of the Subcommittee] presiding. 

Present: Representatives Coffman, Lamborn, Roe, Huelskamp, 

Kuster, O’Rourke, and Walz. 

OPENING STATEMENT OF MIKE COFFMAN, CHAIRMAN 

Mr. COFFMAN. Good afternoon. This hearing will come to order. 

I want to the welcome everyone to today’s hearing, titled ‘‘VA 

and Academic Affiliates: Who Benefits?’’ This hearing will examine 

the relationship between the VA and the academic affiliates. The 

hearing will focus on issues and concerns related to sole-source contracting, billing issues, research funding, space, data and equipment. 

VA has had a relationship with academic affiliates dating back 

to World War II. This relationship was developed and encouraged 

as a way to ensure that our Nation’s veterans received the best 

care possible following their service to our country. We all agree 

our veterans deserve nothing less than the best care. 

We have already witnessed many ways in which veterans are 

being denied high-quality health care, including excessive wait 

times, confusing scheduling processes, and the lack of access to 

non-VA care because of poor implementation of the Choice Act. 

Now we are hearing that the relationship between VA and its affiliates may not be as beneficial as VA and veterans—I’m sorry— 

not be as beneficial to VA and veterans as was initially intended. 

We are discovering that affiliates control the affiliate relationship 

and make decisions related to VA and the way it operates. Leadership positions at VA medical centers are held by employees who 

also have appointments at the academic affiliate. 

This begs the question as to where the loyalties lay for these VA 

leaders. Are these VA leaders making decisions in the best interests of the veteran when they also have an allegiance to the affiliate? How can we be sure? What oversight is in place to ensure 

that veterans are benefiting from this relationship? 

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According to a recent OIG report from August 2015, VA medical 

centers are allowing physicians to come and go between VA and 

the affiliate with no true oversight of their time. There are no assurances that these physicians are in the VA performing their VA 

responsibilities when they are supposed to be, and the bills are 

being paid without questions about the services rendered. 

Similarly, we are aware that VA leadership is allowing VA research projects to be conducted at the affiliate, VA equipment to be 

removed to the affiliate, and VA research data to be stored on university servers. These actions can greatly impact VA’s ability to assert ownership rights in inventions made by VA employees who are 

using VA resources. We certainly do not want to see VA in a similar position to what it was regarding the hepatitis C drug. 

We also know that VA nonprofit corporations are not being utilized to their fullest potential. Congress authorized these nonprofits 

in order to allow additional research dollars to be put back into VA 

research for the benefit of veterans, but much of this money is 

being administered by the affiliates instead, resulting in a loss of 

millions of dollars to VA. 

Finally, according to the GAO report just issued yesterday, we 

know that VA is taking years to negotiate and enter into solesource affiliate contracts, which results in gaps in patient care. 

This is most definitely not in the best interest of our veterans. 

Hopefully we can hear what VA is doing to improve this relationship with academic affiliates to better benefit veterans. 

With that, I now yield to Ranking Member Kuster for any opening remarks she may have. 

OPENING STATEMENT OF ANN M. KUSTER, RANKING MEMBER 

Ms. KUSTER. Thank you, Chairman Coffman. 

This afternoon, the Subcommittee on Oversight and Investigation 

will delve into issues involving VA and its academic affiliates. 

The VA plays a vital role in our national health care delivery 

system. In 70 years of partnership with academic affiliates, the VA 

is the largest single provider of medical training in the United 

States. Today, over 70 percent of health care providers have received their training through the Veterans Administration. 

While our overall health care system reaps the benefits of VA’s 

education and training efforts, the VA also benefits by being able 

to rely on additional providers and specialists who are on the leading edge of medical knowledge and leaders in their field of practice. 

This is especially important to the VA, which is facing shortages 

in health care providers. In fact, it’s estimated that there will be 

a nationwide shortage of between 46,000 to 90,000 physicians within the next decade. 

The VA’s relationship to its academic affiliates is essential if the 

VA is to provide the level of health care that we all expect for our 

veterans. This is why Congress and the VA must work together to 

address areas that need improvement. 

We simply must improve the contracting process between the VA 

and its affiliates for medical services. How medicine is practiced in 

this country is undergoing a revolution, with more integration and 

more consolidation. VA’s contracting process must recognize these 

changes and evolve with the practice of medicine. 

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It should not take 3 years for the VA to contract with its affiliates to provide medical services to our veterans. This cumbersome 

process meant that 161 academic affiliates who wanted to provide 

more doctors and services during the patient access crisis of 2014 

were turned away because the contracting process was just too 

hard. It’s unacceptable that a bureaucratic process stands in the 

way of our veterans accessing high-quality care. 

Further, according to the GAO, who is with us today, the process 

for sole-source affiliate contracts is a mirror of what we often find 

on this Subcommittee when we look into VA’s contracting processes 

in general—too little oversight, not enough data, and too many barriers to getting the job done. It’s simply impossible to manage such 

a vital program if you do not have the information to make decisions, spot problems, and systemize and streamline the process. 

I am hopeful that we have a conversation on how best to provide 

needed oversight and flexibility, and how best to recognize the 

changing nature of the health care industry in America, and to 

make sure that we leverage these changes to the benefit of our veterans. 

I look forward to hearing from all of our witnesses invited to appear before us today. 

And I yield back the balance of my time. 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

I ask all Members—I ask that all Members waive their opening 

remarks, as per this Committee’s custom. 

Hearing no objection, so ordered. 

With that, I would like to introduce our panel. On the panel, we 

have Dr. Robert Jesse, Chief Academic Affiliations Officer for the 

Department of Veterans Affairs, who is accompanied by Dr. David 

Atkins, Acting Chief Research and Development Officer, and Ricky 

Lemmon, Acting Chief Procurement and Logistics Officer; Mr. Randall Williamson, Director of GAO’s health care team; Dr. Janis 

Orlowski, Chief Health Care Officer, Association of American Medical Colleges; and Ms. Nancy Watterson-Diorio, Board Member of 

the National Association of Veterans’ Research and Education 

Foundations. 

I now ask that all witnesses stand and raise their right hands. 

Do you solemnly swear under penalty of perjury that the testimony you are about to provide is the truth, the whole truth, and 

nothing but the truth? 

Thank you. Please be seated. 

And let the record reflect that all witnesses answered in the affirmative. 

Dr. Jesse, you are now recognized for 5 minutes. 

STATEMENT OF ROBERT L. JESSE, M.D., PH.D. 

Dr. JESSE. Good afternoon, Mr. Chairman, Ranking Member 

Kuster, and Members of the Committee, and thank you for this opportunity to discuss VA’s relationship with its academic affiliates. 

As you mentioned, I’m accompanied today by Mr. Rick Lemmon, 

the Acting Chief Procurement and Logistics Officer, and Dr. David 

Atkins, the Chief Research and Development Officer. 

January 30th of this year, marked the 70th anniversary of Policy 

Memorandum 2. This established the visionary partnership beLeonard.horne on VACREP0180 with DISTILLER

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tween VA and America’s medical schools. Strong academic relationships have proven to be a foundation for providing veterans access 

to high-quality health care and support for VHA to fill its statutory 

missions to educate for VA and for the Nation, and to carry out a 

program of medical research in connection with the provision of 

medical care and treatment of veterans. 

Academic affiliates facilitate the recruitment of outstanding clinical staff to VA, and trainees working under their supervision serve 

as force multipliers. The opportunity to teach America’s best and 

brightest attracts clinicians motivated by professional excellence, 

ensuring that VA can remain a leader in the knowledge and skills 

associated with the practice, teaching, research, and the building 

of the learning health care system. 

The Office of Academic Affiliations manages the educational components of these relationships through affiliation agreements that 

address the health profession’s educational activities and disbursements of funds for physician trainees. Research operations, including grant funding, as well as the arrangements for shared space, 

equipment, and personnel, are managed by the Office of Research 

and Development. And contracts for professional and clinic services 

are managed by the Office of Procurement and Logistics through 

sharing agreements and other contractual mechanisms. 

VA is profoundly important to U.S. professional education, having affiliations with over 1,800 schools and programs. Nearly 

124,000 trainees receive supervised clinical education in VA facilities each year, with about 70 percent of all U.S. physicians having 

some VA clinical experience in the course of their education. VA is 

the second-largest funder of graduate medical education after 

Health and Human Services. 

VA research has contributed to transformational advances impacting virtually every aspect of health care as we know it today. 

VA research benefits from its position within a national integrated 

health care system, and from having a state-of-the-art electronic 

health record. It also benefits from dynamic collaborations with 

university partners, Federal agencies, nonprofit organizations, and 

industry, which bring in additional funding, and this was, I think, 

$287 million in 2015. 

The Federal investment in VA research returns incredible value 

to veterans and to the taxpayer. Take, for example, the Million Veteran Program, which has already enrolled close to half a million 

veterans, who have donated samples and completed surveys to help 

unlock the genomic basis of health and disease, and is poised to be 

a cornerstone for precision medicine in the future. 

Yesterday, GAO released its report entitled ‘‘Improvements 

Needed for Management and Oversight of Sole-Source Affiliate 

Contract Development.’’ This report suggested eight Executive actions to ensure timely development of high-value, long-term solesource affiliate contracts and effective development and use of 

short-term contracts, including the need to ensure better effective 

communication between VA and its affiliates. 

VA has concurred with the GAO’s recommendations and has developed an action plan to meet each of these. The goal is to more 

effectively and efficiently use VA’s existing sole-source contracting 

authorities to meet the needs of veterans and to ensure compliance 

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that meets our fiscal responsibilities. VA appreciates the input 

from GAO and other adviser groups to identify root causes and develop long-term solutions. 

Academic affiliations has brought great value to VA, to veterans, 

and to the American public for 70 years. However, U.S. health care 

has changed dramatically over this time. The organization of 

health systems now often involve multiple contracting entities. 

Health education is now rigidly prescriptive, research oversight is 

now intense, and payment models for health care are now rapidly 

evolving. 

So, too, must VA change the way we do business with our partners in order to optimize the value of these relationships for veterans and the American taxpayer. Bold, innovative partnership 

models with affiliates structured around shared resources and accountability to optimize care for veterans are being explored. 

As VA commits to improving existing processes, we hope to work 

with Congress to enhance the authorities under which partnership 

can be leveraged to improve the quality, safety, and timeliness of 

health care for all veterans, while also supporting the research mission and the training of the health care workforce for the Nation. 

Mr. Chairman, this concludes my testimony. My colleagues and 

I are prepared to answer any questions you and Ranking Member 

Kuster may have—and the Committee. Thank you. 

[THE PREPARED STATEMENT OF ROBERT L. JESSE APPEARS IN THE

APPENDIX]

Mr. COFFMAN. Thank you, Dr. Jesse. 

Mr. Williamson, you are now recognized for 5 minutes. 

STATEMENT OF RANDALL WILLIAMSON 

Mr. WILLIAMSON. Thank you, Chairman Coffman and Ranking 

Member Kuster and Members of the Subcommittee. I am pleased 

to be here to discuss GAO’s report, released yesterday, on VA’s use 

of sole-source affiliate contracts. 

VA partners with the university medical schools to provide learning opportunities for medical residents, while also increasing a pool 

of physicians available to treat our Nation’s veterans. Over 40 percent of VA’s total physician workforce is made up of residents and 

physicians supplied through academic affiliations. 

VA has the unique authority to establish sole-source contracts 

with its university partners without competition. Today, I will address this very important aspect of VA’s academic affiliations. 

Sole-source affiliate contracts allow VA to obtain physician services needed to treat veterans and oversee residents working in VA 

medical centers. Our review covered VA’s use and oversight of 

these contracts and compliance with existing VA procurement policies. 

Most of these contracts are of two types: first, high-value, longterm contracts that are over $500,000 and more than 1 year in duration; second, short-term contracts that are less than $500,000 

and less than 1 year duration. The value of the contract is an important factor to determine the amount of oversight it will receive. 

Short-term contracts under $500,000 are subject to much less oversight than high-value, long-term contracts. 

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We found that at four of the five VA medical centers we visited, 

they relied mainly on short-term sole-source affiliate contracts to 

obtain physician services from their affiliates, often avoiding highlevel reviews and oversight that potentially could have reduced the 

contract prices and better ensured that VA was complying with 

procurement policy. 

Contracting officials we interviewed attributed this over-reliance 

on short-term sole-source affiliate contracts to a number of factors. 

The most notable reason was that high-value, long-term contracts 

we reviewed took 3 years to process and finalize, on average, and 

this timeframe does not work for many medical centers that must 

seek quick solutions to physician shortages or add additional physicians in critical specialty areas. In contrast, short-term contracts 

can be finalized in 3 months or less. 

The lengthy process to develop high-value, long-term sole-source 

affiliate contracts is due to incomplete and untimely information 

submitted by VA medical centers to contracting officers, rework to 

update paperwork to comply with revised forms or new policies, 

multiple reviews, and inexperienced contracting staff. Currently, 

VHA does not have performance standards to hold contracting staff 

accountable for timeliness, and does not have data to identify and 

resolve potential bottlenecks in the contracting process. 

Relying on short-term sole-source affiliate contracts can have 

some significant downsides and risks for VA. For example, for 

short-term sole-source affiliate contracts, contracting officers aren’t 

required to consult trained negotiators to help them establish contract price, as occurs for high-value, long-term contracts. Also, 

short-term sole-source affiliate contracts are not monitored by 

VHA’s central office, and place VA at risk for overpaying the affiliate services provided through them. 

Also, at one VAMC we visited, we found that all five short-term 

sole-source affiliate contracts we reviewed had serious violations of 

VHA policy and VA policy, including the absence of negotiations to 

address pricing issues before finalizing the contract. 

More broadly, we found that nowhere in VA does anyone review 

the big-picture use of short-term sole-source affiliate contracts 

among medical centers to identify patterns of overreliance and detect potential noncompliance with VA policies and procedures. 

Exacerbating the problems that I’ve outlined thus far is the relative inexperience and high turnover among medical sharing contracting staff. We found that one-quarter of the medical sharing 

staff leave each year, and two-thirds have less than 3 years of experience working with these types of contracts. It usually takes 

about 5 years to become proficient in developing these contracts, 

according to senior VA contracting staff. Moreover, VA has provided limited training to medical sharing contract staff, further aggravating an already difficult situation. 

In short, VA needs to take bold steps now on many fronts to rectify its poor management of these contracts. In this regard, we 

made eight recommendations to improve VA’s management of solesource affiliate contracts, and VA concurred with all of them. 

That concludes my opening remarks, Mr. Chairman. 

[THE PREPARED STATEMENT OF RANDALL WILLIAMSON APPEARS IN

THE APPENDIX]

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Mr. COFFMAN. Well, thank you, Mr. Williamson. 

Dr. Orlowski, you are now recognized for 5 minutes. 

STATEMENT OF JANIS ORLOWSKI, M.D. 

Dr. ORLOWSKI. Mr. Chairman, Members of the Subcommittee, 

thank you for the opportunity to testify on VA academic affiliations. 

The Association of American Medical Colleges is a nonprofit institution comprised of all 145 accredited U.S. medical schools and 

nearly 400 major teaching hospitals, including 51 VA medical centers. As the chief health care officer at the association, my focus is 

on the interface between the health care delivery system and academic medicine. 

The VA has over 500 academic affiliation agreements with our 

Nation’s medical schools and teaching hospitals. As noted, 2016 is 

an important anniversary for the VA and academic medicine, as we 

celebrate our 70th anniversary in partnership. 

The relationship, as you had noted, followed World War II, when 

the VA and the Nation faced very much the same situation we face 

today. At that time, the VA had a severe shortage of physicians as 

nearly 16 million men and women returned from overseas. Today, 

there’s a combination of the VA’s aging veteran population and an 

influx of veterans from recent engagements. There’s an increasing 

need for more health care, resulting in access issues that are symptomatic of a broader trend, which is the physician shortage. 

You ask who benefits from these relationships. Simply put, the 

veterans do. The AAMC projects a nationwide shortage of between 

46,000 and 90,000 physicians by 2025. Though these shortfalls will 

affect all Americans, we note the most vulnerable populations, including veterans and those in underserved areas, will be the first 

to feel this impact as the VA is now. 

What the VA and academic affiliations established was improved 

access and quality of care for our Nation’s veterans. What started 

as a simple idea in a time of great need has developed into an unprecedented private-public partnership. The VA’s education mission 

trains new physicians on cultural competency for treating veteran 

patients. Further, the VA has found that a physician is twice as 

likely to consider employment at the VA after training at a VA facility. 

The VA’s research mission creates advances in areas important 

to the veterans population, such as traumatic brain injury, PTSD, 

prostheses, respiratory exposure, not to mention the system reforms that improve care delivery within the VA systems. 

Perhaps most importantly, VA academic affiliations put veterans 

first in line for the best health care in the world at the Nation’s 

teaching hospitals. Our members take pride in being partners with 

the VA and providing care to veterans. They view this as an important part of their mission. 

The AAMC believes VA’s sole-source contracting, joint ventures, 

and the proposed core network of the Veterans Choice programs 

improve access for our Nation’s veterans to the highest quality care 

by preserving the academic affiliates as a direct extension of VA 

care and a preferred provider. 

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Direct clinical care agreements, such as sole-source contracts, 

allow academic affiliates to plan, staff, and sustain infrastructure 

for certain complex clinical care services that are not available elsewhere, such as trauma centers, burn centers, comprehensive stroke 

centers, and surgical transplant centers. Solely relying on fee-based 

mechanisms has the potential to reduce veterans’ access to care if 

teaching hospitals scale back services if they are faced with an uncertain patient load from the VA. 

Both VA medical centers and their academic affiliates recognize 

the value of these relationships to improving veterans’ health care 

access and quality. As with any partnership, there’s always room 

for improvement, and the AAMC is working with the VA on contracting reform, including right-sizing the OIG review threshold to 

reflect clinical services, preapproved contract templates for selected 

services at Medicare reimbursement levels, and standardized overhead rates. These reforms will streamline agreements, reduce the 

negotiation times, help prevent delays in veterans’ care, and shift 

reliance on short-term, temporary contracts in favor of the highvalue, long-term contracts. 

The VA is at a crossroads. Strengthening the 70-year history of 

the VA academic affiliation will prepare our country for the next 

chapter of VA health care. The AAMC and our member institutions 

will continue to work with Congress and the VA to address the 

challenges and opportunities to ultimately improve care for the veterans and all Americans. 

Thank you very much for this opportunity to testify, and I look 

forward to answering your questions. 

[THE PREPARED STATEMENT OF JANIS ORLOWSKI APPEARS IN THE

APPENDIX]

Mr. COFFMAN. Thank you. 

The written statements of those who have just provided oral—oh, 

I’m sorry. Ms. Watterson-Diorio, you are now recognized for 5 minutes. 

STATEMENT OF NANCY WATTERSON-DIORIO 

Ms. WATTERSON-DIORIO. Good afternoon, Chairman Coffman, 

Ranking Member Kuster, and Members of the Subcommittee. 

Thank you for the opportunity to discuss the topic of ‘‘VA and Academic Affiliates: Who Benefits?’’ 

My name is Nancy Watterson-Diorio. I am a board member of 

the National Association of Veterans’ Research and Education 

Foundations, also known as NAVREF, and the CEO of the Boston 

VA Research Institute, known as BVARI. 

As a witness, my topics include how the VA nonprofit corporations fulfill an important role at the VA, in addition to the academic affiliates, in administering this extramural research. 

In 1988, Congress authorized the NPCs under title 38 to support 

VA research and, shortly thereafter, amended legislation to include 

educational activities. NAVREF represents the entire membership 

of 82 VA NPCs who are co-located within the VA medical centers 

across the country. 

As reported in the 2014 annual NPC report to Congress, we 

raised over $260 million of annual extramural research and eduLeonard.horne on VACREP0180 with DISTILLER

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cational awards specifically targeted toward the VA’s health care 

mission of supporting veterans’ care. This represents approximately 

15 percent of the total research portfolio supporting research at 

VA. 

The founding legislation felt several areas of difficulty for the VA 

research and education programs. It discontinued handshake 

agreements with no contractual obligations, an acknowledgement of 

VA’s research successes. It supplemented VA’s intramural funding 

expertise with expert support for extramural pre- and post-award 

funding and unique compliance knowledge. It leveraged VA’s ability to expand its research portfolio to support clinical trials and 

Federal funding, thus allowing more veterans to be supported with 

state-of-the-art research knowledge, and the opportunity to be 

treated with the newest therapies. And, finally, it fostered an innovative spirit of public-private sponsorship that we should continue 

to nurture and grow. 

There are many advantages to using NPCs as envisioned by Congress. NPCs rigorously comply with Federal regulations and are 

subject to VA oversight that includes recurring VA audit requirements and inspections. Additional VA oversight includes statutory 

VA board members at each NPC, and a nonprofit oversight board 

at VA’s central office. And NPCs operate transparently by providing an annual report to Congress detailing their accomplishments and successes in support of VA research. 

There are also challenges that we must find ways to overcome. 

The VA NPCs are unable to pay investigators in the same manner 

as the academic affiliates. We have managed to be successful despite this inconsistency, but if we were given the opportunity to administer payments in the same way as the affiliates, it would further enhance our successes in completing our mission of improved 

veteran health outcomes. 

Local practices are inconsistent on whether an NPC or an academic affiliate should be administering VA research projects. I recognize that not all 82 VA nonprofits have the current expertise to 

manage Federal grants. But without allowing them an opportunity 

to grow into this role, they will not be able to serve the veteran 

community to their potential. 

And, finally, the decisionmaking process within VA regarding the 

administration of Federal grants varies from site to site. Frequently, principal investigators, who are duly appointed at the academic affiliates, or even local leadership make the determination 

on who will administer the research, which is a potential conflict 

of interest. 

I believe that Congress created the NPCs for all the right reasons. However, I believe that the NPCs can contribute much more 

and be of even greater benefit to our veterans if the lingering barriers were removed. 

To that end, I respectfully request that the Subcommittee consider updated directives that would allow NPCs to pay investigators to the same extent the academic affiliates, provide the VA 

NPC right of first refusal on administering all research awards 

supporting VA research, and reduce the level of variability from 

site to site by creating general guidelines and decision trees that 

remove or reduce conflicts of interest among decisionmakers. 

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Again, thank you for this opportunity to share the good work 

that is being done at the VA NPCs, and your support in allowing 

us this opportunity to participate in the important work that is 

being done in the VA’s extramural research and education programs. NPCs offer great services and value, and I encourage congressional and VA leaders to look at expanding opportunities to use 

these great resources. 

I look forward to your questions. Thank you. 

[THE PREPARED STATEMENT OF NANCY WATTERSON-DIORIO APPEARS IN THE APPENDIX]

Mr. COFFMAN. Thank you. 

The written statements of those who have just provided oral testimony will be entered into the hearing record. We will now proceed to questioning. 

Dr. Jesse, VA has been asking for noncompetitive contracting authority like what we see related to this hearing topic for other purposes, such as provider agreements. Its sole-source contracting with 

affiliates is such a mess, why should we believe that sole-sourcing 

other contracts would be any different? 

Dr. JESSE. So I think there’s two issues here. It’s clear that the 

administration of the existing sole-source contracts that we have 

requires some work. And Mr. Lemmon can talk more about that. 

It certainly is the focus of the GAO report. But there are times 

when sole-source contracting provides the speed and agility one 

needs in order to provide care that veterans need in a timeframe 

that can be done. 

And the issue here is primarily getting the proper care to veterans when they need it, and then ensuring that it’s done in a fiscally responsible manner. 

Mr. COFFMAN. Dr. Jesse or Mr. Lemmon, can you assure me that 

this affiliate contract situation is different from the purchase card 

abuse situation we have seen over the past few years, where VA 

has been making payments with purchase cards spread over many 

split transactions under false pretense that, actually, contracts existed? 

Mr. LEMMON. Yes. There’s no relationship to those issues with 

the purchase card program and what we’re trying to do with affiliates. 

The purchase card program is something that we’re also working 

on. We didn’t prepare statements for that. But we’re working on establishing a lot of national-level contracts instead of more openmarket procurements under the micro-purchase threshold of 

$2,500. And so the goal is to bring that in. 

Right now, we have way too many people with purchase cards, 

way too many transactions. And we want to act more as an enterprise and buy off of nationally leveraged contracts that provide 

great value to VHA, and reduce the amount of open-market buying 

that’s going on now that’s created some of the problems that you 

identified. 

Mr. COFFMAN. Well, can you assure me there aren’t any handshake agreements here, that all this affiliate spending is done on 

bona fide contracts? 

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Mr. LEMMON. I believe we do have contracts in place for our affiliate agreements. It’s hard to say that in no hospital at any place 

in the country there’s something that I wouldn’t know about, but 

there’s been great effort to put contracts in place with affiliates. 

GAO certainly found a number of challenges that we take ownership of and we’re going to address, but I don’t believe there’s handshake agreements like there were in the past. 

Mr. COFFMAN. Dr. Jesse, in a 2015 OIG report, it was found that 

the VA medical center in Pittsburgh had overpaid the University 

of Pittsburgh Physicians, Incorporated, by $44,082 for call-back 

service hours that should have been attributed to a VA physician 

as a five-eighths employee. Will this money be refunded to the VA? 

Dr. JESSE. Well, I can’t answer that question. I can take it for 

the record and get back to you. 

But the question here is, when a five-eighths—when a part-time 

physician has already committed their hours to the VA and then 

are working for another agent, meaning the university, what are 

the responsibilities going back and forth there. 

But I don’t know the exact answer to your question. I will get 

back to you. 

Mr. COFFMAN. Are you disputing the factual nature of the OIG 

report in terms of the overpayment? 

Dr. JESSE. No. I agree the OIG report said that they were paid an additional $24,000. The question was, is it going to be returned, 

and I said I don’t know the answer to that question, but we can 

find that out for you. 

Mr. COFFMAN. It’s $44,000. 

Dr. JESSE. $44,000. I’m sorry. 

Mr. COFFMAN. $44,000. And so are you going to try and get that 

money back? That’s the question. 

Dr. JESSE. Well, we have to make sure—and I would defer to Mr. 

Lemmon—do we have the authority to get that back. And that’s 

what I don’t know. But if we have the authority to get it back, we 

will try and get it back. 

Mr. COFFMAN. Mr. Lemmon? 

Mr. LEMMON. Yeah, the network contracting office involved is 

working with general counsel to determine if we can recover the 

funds. If they determine that legally we can do that, we will. 

Mr. COFFMAN. Well, since we didn’t get back—since we didn’t attempt to get back any of the bonus money that was given during 

the appointment-wait-time scandal, I’m not all that surprised. 

Ranking Member Kuster, you’re now recognized for 5 minutes. 

Ms. KUSTER. Thank you. 

And these go to anyone who would like to answer. 

So I want to get at: Knowing that the practices of the delivery 

of medicine is dramatically changing—we’ve got accountable care 

organizations, we have group practices, we have lots of different affiliations that are happening outside of the VA process, but just 

happening with academic affiliates across the country—how have 

these changes created issues with the development of these longterm sole-source affiliate contracts? 

And if you can add to that, what is it that takes so long? Is this 

contributing to the length of time? Or are they issues within the 

VA that—because 3 years just sounds untenable to me. 

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Dr. JESSE. So let me take, sort of, the preamble to your question, 

and then I’ll turn it over to Mr. Lemmon. 

Actually, up in VISN 1, up in your area, there are a number of 

alternative relationships being explored with the affiliates in Burlington, Vermont, in Worcester, Mass., and in Maine, where we are 

looking more at a joint-venture model, which would share both care 

and accountability for care with the affiliate in shared space, actually, where the VA could provide care to the veteran under its authorities, the partner could provide care to their family under their 

authorities, and we would share in the other things like the social 

services that we know are required to engender good health and 

well-being. 

And that model doesn’t work well in a contracting venue that’s 

really driven by a fee-for-service-type of model. And that was the 

comment I was alluding to about really relooking about how we can 

have the authorities to contract with partners to develop these 

types of models. So think about joint ACOs, for instance, as a potential, or other responsibilities, where we would have a shared 

capitation for caring for a group of patients rather than negotiating 

services for X number of cardiac surgeries, X number of transplants, X number of cholecystectomies or colonoscopies, but rather 

a much more holistic approach. 

And, frankly, this is where CMS is really trying to drive with its 

alternative payment models, including both ACOs and the— 

Ms. KUSTER. So do you think we’re in a period of transition 

where the VA—I mean, as the country is transitioning over to the 

accountable care organizations, the VA is also following that process, and that we could get to a place of a better contracting and 

more effective and efficient and— 

Dr. JESSE. So I’ll speak on behalf of me and not the agency, because this is my opinion. And I think we have to. Because the current model—and as everybody on this panel has alluded to, the affiliation relationships that were established 70 years ago were done 

for a good reason, and they’re here today, but the model of care in 

this country, how government functions in this country is very different than it was in the 1940s. So we need new structures that 

allow us to optimize the care for veterans consistently, where data 

moves back and forth smoothly, where there is no opportunity for 

people to get lost because of fractured care. 

And as an example— 

Ms. KUSTER. Do you think you need new—do you need new authority from Congress— 

Dr. JESSE. Oh, I think we do. And I think— 

Ms. KUSTER [continued].—to enter into those kinds of relationships? 

Dr. JESSE [continued]. I think we do need new authorities from 

Congress, and we will be exploring them. We’re just not prepared 

to say exactly what now. 

But let me give you an example. This was just announced last 

month. In Palo Alto, they have now a relationship. The word went 

to CVS, to the MinuteClinics, where veterans out in the bay area, 

if they have a problem, they can call the nurse triage line. And if 

it’s a problem that is in the purview of what MinuteClinics provide, 

they will be referred to a MinuteClinic, the closest one. They won’t 

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13 

have to travel into Palo Alto or go to the ER or urgent care or to 

their primary care provider. They get seen on the spot. VA pays; 

there’s no pay for the veteran. But the information comes back over 

into the VA records so we get continuity of care. 

Today, any veteran can go to any Walmart in the country and 

get a flu shot for free, and that information will come back in. And 

so these types of more extensive partnerships, I think, are the models we’re going to be talking about in the future. Holistically—an 

ACO means certain things to certain people. I’m not sure it’s exactly the right term. But more cohesive payment models will be 

key. 

Ms. KUSTER. All right. Thank you. 

My time is up. I yield back. 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

Congressman Lamborn, you’re now recognized for 5 minutes. 

Mr. LAMBORN. Thank you, Mr. Chairman. And thank you for 

having this hearing and for your leadership on investigative and 

oversight issues like this. 

Dr. Atkins, you might be familiar with our recent Full Committee hearing regarding invention disclosure, which we held in 

February. What is VA doing to ensure that VA employees are disclosing inventions they develop to the VA? 

Dr. ATKINS. Thank you. Yes, since that February hearing, we’ve 

instituted three steps. 

With the specific example that was the subject of that hearing, 

regarding the hep C drug, we have an internal—an external review 

by our National Research Advisory Committee that will be reporting to us tomorrow. There is a criminal IG investigation of that 

case that has completed its interviews, but we have not received 

the report of that. 

And I think, to your question specifically, we’re revising our policies to ensure that we get more complete annual disclosure of inventions, so that the VA would be aware of intellectual property to 

which it may lay a legitimate claim. 

Part of the problem has been the reporting process. We’re going 

to try to make that easier for our researchers, so they can report 

it in the same way that they report it to the universities. 

Mr. LAMBORN. Thank you for making some progress on that. I 

would like to ask that you provide the Committee copies of those 

reports as soon as you get them. You’ve referred to a couple of different— 

Dr. ATKINS. Certainly. 

Mr. LAMBORN [continued].—reports or updates and status reports. This is a big issue, and I hope there’s nothing else out there 

of the magnitude of this hanging problem. 

On the issue of disclosures, Dr. Jesse, changing gears slightly, we 

know that VA employees can have dual appointments with the affiliates and collect salary and benefits for both institutions. Does 

VA require financial disclosures from these employees? 

Dr. JESSE. Of total salaries? 

Mr. LAMBORN. Their dual status and— 

Dr. JESSE. Oh, I don’t think a dual status would be missed. The 

VA— 

Mr. LAMBORN [continued]. And benefits. 

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14 

Dr. JESSE [continued]. Yeah. So the VA maps clinicians’ time, 

and it apportions that to clinical care, research, administrative, for 

the like. But if somebody’s a part-time physician, then the rest of 

their time would be known to the university. 

And, frankly, many of the clinicians are actually jointly recruited. So the recruitment includes a department chair, say, from 

the university working with a department chair, the counterpart at 

the VA, to bring a person in that would spend joint time. And this 

is particularly common in procedural-laden issues. 

I think one of the challenges—and I want to be really clear about 

how I say this. But VA accounts for physicians’ time as essentially 

an 80-hour pay period. And VA time and attendance—and I think 

you’ve heard the Secretary talk about problems with emergency 

physicians and hospitalists, that they don’t fit normal hours that 

we ascribe physicians to work in. But we account for hours at a 40- 

hour week, 80-hour pay period. 

Most universities account their physicians’ time closer a 70-hour 

work week. And this is in part because of how they have to map 

and commit time on NIH grants and teaching and research. And 

clinical care is not a 9-to-5 operation. And so it is possible to have 

a full-time, 40-hour-a-week VA who also has a time commitment to 

the university above and beyond that. 

And those arrangements are disclosed, as far as I’m aware. I 

don’t think it could be missed. And this follows an NIH model that 

actually allows physicians to be paid for, actually, an additional 20 

hours. 

Mr. LAMBORN. Well, thank you for that. But I’m also wanting to 

make sure that we have disclosure in place that would lead to the 

revealing of conflicts of interest. 

Dr. JESSE. Yeah. So I would hope that would be so. And I think 

you’re driving at if there’s shared development of intellectual property is probably the most important thing. 

And, you know, a conflict of interest that—you know, we just 

talked about financial conflicts of interest, but there’s also influence conflicts of interest too. And, you know, those have to be managed very carefully. Our lawyers, our general counsel, always advises people that we can clear you of certain levels of conflict of interest, but it does not absolve you, as the individual, from a criminal conflict of interest. 

So the physicians themselves, you know, myself, always need to 

be aware of the rules and aware of those boundaries. But if there 

are issues, we will have counsel review them to make sure that the 

boundaries are clear. And this actually has happened recently with 

the chief of staff, for instance. 

But they’re very clear. If you cross—if you, as the individual, regardless of whatever clearance we’ve given you, cross certain 

boundaries, then you are liable for your actions. 

Mr. LAMBORN. Okay. 

Thank you for your answers, and thank you for being here today, 

all of you. 

Dr. JESSE. Thank you. 

Mr. COFFMAN. Mr. O’Rourke, you’re now recognized for 5 minutes. 

Mr. O’ROURKE. Thank you, Mr. Chairman. 

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15 

Mr. Williamson, thank you for your work on this. The findings 

are serious, and I am glad to hear that the VA agrees with them, 

and has a course-correction plan in place. I’m going to ask Dr. 

Jesse about that in a minute. 

But I wanted to ask you, Mr. Williamson, if there’s any way to 

quantify the scope of these failings. There are anecdotes about 

overages that extend beyond the review threshold. Do we have an 

overall number? And do we know how much of this money you 

would characterize as wasted, where the taxpayer and the veteran 

did not receive value for the dollar spent over the threshold? 

Mr. WILLIAMSON. No, unfortunately, we don’t know that. And we 

certainly tried to look. 

We do know that there are high risks through the use of shortterm contracts when there’s been poor management. At one VA facility where we looked at five short-term, low-value contracts, all 

five had procedural errors, including basically the affiliate getting 

the price they asked for with no negotiation. 

So we know it’s going on. We can’t quantify that. 

Mr. O’ROURKE. And just from human nature, we can surmise 

that that leaves the VA, the veteran, the taxpayer open to fraud 

potentially. We don’t know that that, in fact, took place, but— 

Mr. WILLIAMSON. Absolutely. 

Mr. O’ROURKE. Yeah. So this is pretty serious. 

I heard Dr. Jesse say that at some point in the future the VA 

will come to us requesting new authorities. Is it the GAO’s position 

that any new restrictions or laws are necessary? Or are you satisfied with the VA implementing the recommendations that you 

made? 

Mr. WILLIAMSON. Well, we’re very happy that VA has concurred 

with our recommendations, and is apparently taking action. We’ll 

see how that goes. 

I think that this is a process that’s going to take some time, because, just from the standpoint of the experience of the contracting 

officers who are working on medical sharing contracts, a third of 

them have less than a year of experience. Two-thirds have less 

than 3 years. That needs to be fixed very quickly, on a retention 

plan perhaps. One of our recommendations was that they have a 

retention plan. 

So there are a number of things. There are duplicative processes 

in the—or duplicative functions within the process. Both, for example, the VA Office of Inspector General does a price analysis, and 

the Medical Sharing Office in Nashville also does one. You know, 

the question could be asked, why are two different organizations 

doing that. 

Mr. O’ROURKE. Dr. Jesse, you said you agreed with the findings. 

Do you agree that employees of the VA purposefully avoided oversight? And if that is the case, can you outline the accountability— 

Dr. JESSE. Well, I don’t know that people purposely avoided oversight. I think people used contracts in order to get care for veterans, and when they know that— 

Mr. O’ROURKE. The intentions may have been good, but, in the 

process of trying to get that care for veterans, did they know what 

the requirement was and exceed that requirement on purpose? 

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16 

Dr. JESSE. I don’t know that that’s true or not true, and I really 

don’t want to have to make a judgment there. 

Mr. O’ROURKE. Okay. 

Dr. JESSE. And I think part of the issue of— 

Mr. O’ROURKE. How do we get VA employees to follow the rules 

and regulations within the VA? And it might concern people I represent that you don’t seem to be concerned about that being the 

case. And so we can implement the reforms, but if you’re not going 

to hold your employees accountable, I think, you know, that would 

be a concern for me. 

Dr. JESSE. I don’t want to appear unconcerned at all. We’re very 

concerned about it. But I think it also speaks to Mr. Williamson’s 

comments about the lack of seniority amongst this very crucial 

group of contracting staff. And it takes, what, 5 years to really get 

proficient at these contracts, so there is a very steep learning 

curve. 

So, you know, people are trying to get their jobs done. I don’t 

think they purposely lie, cheat, mislead. I think they try and provide solutions that can get veterans what they need. 

Our job is to make that job easier and to make the process transparent so that we, all of us, can see what’s going on and have the 

kinds of data flows we need to be able to have transparency into 

the process and know when issues arise. And we don’t have that 

today. And that’s one of the crucial things that needs to happen as 

part of the recommendations and the reforms. 

Mr. O’ROURKE. I’m out of time, but I would agree with everything you just said. And I would add that we then also need to hold 

ourselves accountable. I mean, we can make countless excuses for 

failure to perform, but I don’t think the people we represent, and 

I know you are not either, interested in hearing those excuses for 

failures within the VA. 

So what I really want to hear—and perhaps you can follow-up for 

the record if you don’t have it today—is the timeline to implement 

these recommendations, and an assurance that we’re going to hold 

ourselves accountable for adhering to those new standards so that 

we get greater value for the taxpayer, we eliminate fraud and 

abuse, and we deliver care to veterans in a timely fashion, producing better outcomes than we see today. That’s what I’m looking 

for. 

Dr. JESSE. Okay. Absolutely. That’s all laid out, and we can get 

that to you. 

Mr. O’ROURKE. Great. 

Dr. JESSE. Mr.— 

Mr. O’ROURKE. I’m going to have to yield back to the chair. I’m 

out of time. Thank you. 

Mr. COFFMAN. Dr. Roe, you’re now recognized for 5 minutes. 

Mr. ROE. Thank you, Chairman. 

I’m probably going to take a little bit different vantage point on 

this. First of all, we know the VA is deeply involved in medical 

education. Forty percent, as Mr. Williamson, I think, pointed out, 

of the VA staff now are residents or faculty from the university. So 

that relationship, which has been there 70 years, helped train our 

physician workforce in the country, is absolutely paramount. 

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17 

I think the Institute of Medicine back in the 1990s thought we 

had 25,000 too many doctors by 2010, and that’s kind of like predicting who’s going to win the next Super Bowl, but I think we do 

have—whatever the number is—a physician shortage. I don’t think 

there’s any question about that. The Committee recognized that 

with the Veterans Choice Act and put 1,500 residency slots in 

there, which the VA’s trying to implement right now. 

One of the things I think—and I may be wrong on this, but we 

had hearing after hearing when we found out all these wait times 

are going on. And so, if you’re a contractor, you’re a medical center 

director, you’re going to try to find the quickest way you can to get 

additional manpower to see these patients. And that may end up 

being why there are so many short-term contracts. 

That relationship between academia and the VA is absolutely 

paramount for medical education and for care in this country. And 

it’s good for both parties. It’s good for the veteran, it’s good for the 

students, the doctors, like myself, who trained there. It’s also very 

good for the academic institutions and for research. The VA carries 

on a very big research arm, and they have to have these collaborations with universities and the teaching hospitals. So I think this 

system has to work. 

One of the questions I have, Mr. Williamson or Dr. Jesse, whoever wants to take it, how many of the contracts are short-term 

contracts? What percent I guess is what I’m asking. 

Mr. WILLIAMSON. There are a total of 1,200 sole-source contracts. 

I’m blanking right now on how many of those are short-term. Many 

of them, perhaps most of them. 

Mr. ROE. Most of them. 

And the other question, I think everyone’s going to ask, is, why 

does it take—why in the world does it take 3 years. I mean, that’s 

unbelievable when I heard that. If it takes that long to have a longterm contract with an East Tennessee State University Quillen 

College of Medicine, the University of Pittsburgh, or whomever, 

you’re going to have short-term contracts. Because the care’s got to 

get delivered; I mean, there’s no question. So that’s got to get fixed, 

I think. And I think that would be paramount, to me, to fix—so you 

can go with these long-term contracts. 

The other thing, the payment models, as you all have pointed 

out, the fee-for-service contract ought to be pretty simple. You’re 

just paying somebody if it’s a fee-for-service procedure done. That’s 

been laid out by Blue Cross, by Medicare, by Medicaid. I mean, 

that’s not a hard number to find. 

I will agree with you, it’s a lot tougher on the new models, with 

the ACO and with the capitated model. I don’t know whether VA’s 

put their toe in that water yet or not, but that’s a little tougher 

one to—and you do need some very skilled people to do that. 

And I don’t know whether you have or not, Dr. Jesse. 

Dr. JESSE. Well, that’s why I parsed it by saying that’s my opinion and not necessarily the agency’s. 

But we are an ACO. Fundamentally, we are a capitated system 

with social responsibilities. How one brings in external partners 

and pays them is actually the real challenge that we need to figure 

out. And, you know, that’s—if it’s a tenable model, then we’ll come 

back to you. If it’s not, we’ll look at alternatives. 

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Mr. ROE. Well, the way the VA’s capitated model works is it just 

creates waste. That’s what happened in Arizona and others. When 

you can’t get enough providers to get in, and you run to the end 

of your budget, you just put it off and— 

Dr. JESSE. And that’s not acceptable. There’s no argument there. 

Mr. ROE. And there’s a much more efficient way, I think, to do 

it. I think we all agree with that. 

And I think, again, I want to know—for the record, I’d like to 

know what percent of those contracts are short-term contracts 

versus long-term contracts. 

Mr. ROE. If you fix that problem, I think you’ve gone a long way 

to fixing the other. The research arm, if you need some other help 

from us on that, let us know what that is, because that needs to 

be nurtured too, I think. We need to make sure that the VA and 

the other folks out there trying to do research—I think it’s great. 

I think the VA does need to maintain that intellectual property. 

For instance, in the hepatitis C, we’ve all heard that. We all 

know what a fiasco that was. We can’t let that happen. But, again, 

the good news of that whole research was hepatitis C got cured. 

Whoever got the money, still, patients out there benefited from 

that. It was a slipup, there’s no question about that, on the VA’s 

part to turn that resource loose, but the fact is patients today, right 

now, are getting benefit from that research that’s been done. 

I yield back. 

Mr. COFFMAN. Thank you, Dr. Roe. 

Congressman Walz, you’re now recognized for 5 minutes. 

Mr. WALZ. Thank you, Chairman. 

And thank you all for being here. 

Mr. Williamson, and each of us have said this, it’s hard to get 

people—and I’m going to focus on the contracting and the skill set 

of the employees—to get them there, to be able to do this, to get 

it right. But that employee skill training and execution, that’s a 

personnel management issue. That is a personnel management 

issue. 

And I don’t know if I’m making—it seems to me this is a very 

similar situation, with lack of training, that went into some of the 

scheduling issues that we had. 

So my question is this: Is there any discussion amongst VA to 

standardize the training, like a training center, and have the requirements clearly laid out, like the Foreign Service Initiative I’m 

familiar with and the military? When I go to a military school, 

there’s a set of standards. When I come out of there, I’m skilled, 

I can do A, B, C, and D, and it is measured in there. Is there something similar in the VA for someone who is working on contracts, 

just to show level of competency? 

Mr. LEMMON. Yes, there is. We have a VA Acquisition Academy 

in Frederick, Maryland, that provides all the training that’s required to be certified as a contracting officer. In addition, our Medical Sharing Office has developed specific classes in health care 

contracting to deliver to our workforce. So we’ve got, really, two 

avenues that are good. 

The turnover issue and the experience issue, there’s a lot of reasons for it, but one of the big ones—and maybe I’m answering more 

than you asked, but we’ve got process issues we have to correct. 

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19 

And it’s been mentioned, 3 years. It’s ridiculous that it takes that 

much time. So if you’re an 1102 with a broken process, where you 

can’t satisfy your customer in a reasonable amount of time, you’re 

probably going to look for other work that would be more satisfying. 

So, in my mind, we have to fix the process. And I’m committed 

to do that. 

Mr. WALZ. Is it a case, you have to help me understand this, if 

I get all the training and I—say, I’m certified to teach, my first 

year in that classroom is arguably not going to be or shouldn’t be 

as good as my 10th year in that classroom. So they have the skill 

set, but it’s still a case of you have to execute, and there’s something that comes with doing the job, is that the case, of not having 

enough experience no matter if they’re trained or not? 

Mr. LEMMON. Right. For warranted contracting officers, there’s 

requirements both for education and length of time doing the work. 

So they have to have an experience requirement to be warranted 

to award contracts at certain levels. 

So we have that in place. And we can talk about the issues with 

health care contracts, but they are much more complex than many 

of the other contracts we work on. We have to keep our workforce, 

and we have to have a process that makes sense so we can get 

these contracts done in a reasonable time period. 

Mr. WALZ. And you think that’s happening now? The process 

changes are happening, you’re making the— 

Mr. LEMMON. We’re working on them right now. 

Mr. WALZ. Okay. My next thing, we were just discussing up here 

the ability on these contracts on the useable data. And hard to— 

if we don’t have all the useable data on them, if it’s not collected 

useable, how are we—what are we doing about that? Can you fix 

that on your own or do we need to legislate it? 

Mr. LEMMON. Well, it depends on what you’re referring to as 

data. Certainly one of our plans to address the findings that GAO 

provided is we’re going to create enterprise visibility on performance against new milestone plans for these contracts. 

So leadership will know if there’s a roadblock or something’s not 

moving as fast as it needs to be. I believe we can do that without 

additional resources, quite frankly. 

Mr. WALZ. And that was not happening before? 

Mr. LEMMON. No. 

Mr. WALZ. And it can be now? 

Mr. LEMMON. It can be. 

Mr. WALZ. And that should—I would think that would make a 

significant difference. Is that your take, that— 

Mr. LEMMON. I think it will make a significant difference. 

Mr. WALZ. Okay. I yield back, Mr. Chairman. 

Dr. ORLOWSKI. Sir, if I can make a comment. 

Mr. WALZ. Oh. Absolutely. I have 40 seconds, so— 

Dr. ORLOWSKI. Thank you. About a year ago, one of the suggestions that the academic medical centers made to the VA is that we 

actually have some template agreements. They’re very complex 

agreements, but there are certain standards that, rather than having each VA work on a specific language, that we’d like to see national templates. They could have some local changes to them as 

Leonard.horne on VACREP0180 with DISTILLER

20 

needed, but that was one of the suggestions, because the academic 

affiliates actually have the same frustration with the fact that 

we’re dealing with short-term contracts. 

So that is one of the multiple suggestions that we’ve made as 

we’ve worked with the VA. 

Mr. WALZ. Great. 

Mr. LEMMON. I know there’s just a few seconds left. But we do 

have 19 standardized performance work statements for various 

specialties now. 

Mr. WALZ. Great. Thank you. 

Thank you, Mr. Chairman. 

Mr. COFFMAN. Thank you, Congressman Walz. 

Congressman Huelskamp, you are now recognized for 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. 

First a question for Dr. Jesse. The OIG reports in three contracts, the Pittsburgh VA entered with the University of Pittsburgh 

Physicians Incorporated, there was a total of nearly $850,000 administrative overhead expenses not supported or documented. 

What is VA doing to prevent this waste of taxpayer dollars? 

Dr. JESSE. So Pittsburgh is already done. The issue is how do we 

prevent that from happening again, and this is why we have set 

up, for instance, the Office of Medical Sharing that reviews these 

contracts and negotiates with the universities. And, in fact, the history of that group and doing this in a relatively short period of time 

of a couple of years has saved, and Mr. Lemmon can give you the 

exact numbers, but it’s, what, about 113? 

Mr. LEMMON. Right. Even though the current process is horrible 

in terms of timeliness and we have to fix it, since October 2013 

through April 2016, the VHA Medical Sharing Office has participated in the negotiation of 69 affiliate contracts and has achieved 

price reductions of over $113 million. That translates to well over 

$1 million per affiliate contract negotiated. 

Mr. HUELSKAMP. Follow up to the GAO on this, trying to understand. Mr. Williamson, how widespread is it that the contracting 

officers accept the affiliate’s proposed prices rather than negotiating or doing an independent price analysis? 

Mr. WILLIAMSON. Why did that happen? Is that what you asked? 

Why— 

Mr. HUELSKAMP [continued]. How widespread is the practice— 

Mr. WILLIAMSON. Oh. 

Mr. HUELSKAMP [continued].—of accepting the proposed prices? 

Mr. WILLIAMSON. We don’t know, but, you know, we only looked 

at 12 short-term contracts, and seven of those had problems like 

that. We can’t project that, because, again, we only looked at 12, 

but it’s a high incidence, and it’s happened at more than one hospital. 

Mr. HUELSKAMP. Okay. Second question I’d like to follow-up. In 

looking at the testimony, Dr. Atkins, in the VA testimony noted VA 

research has been involved in the CAT scan, the pacemaker, organ 

transplants, treatments for high blood pressure, and heart disease. 

You note Nobel Peace prize winners and other such honors. How 

many of these inventions does the VA own and how much money 

do they receive from these research projects? 

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Dr. ATKINS. I’ll have to take that question for the record to get 

back the exact number. I know some of that was discussed at the 

hearing in February, and the feeling was that we could do better, 

but I’ll get you the exact number. 

Mr. HUELSKAMP. Okay. So since that hearing, you didn’t look 

into it at all? You changed the policies or you’re getting back to us? 

Dr. ATKINS. So the policies on disclosure are being changed. 

Mr. HUELSKAMP. Okay. 

Dr. ATKINS. So—but we’ll get back to you with the exact number. 

Mr. HUELSKAMP. And disclosure. And what about policies on 

ownership with research affiliates and the researcher? Now we’re 

talking about, I think, what, up to $400 million for just Hepatitis 

C. And so, yeah, I look forward to your response and follow-up with 

the Subcommittee. 

I do have another question, Dr. Atkins, though. We’ve had reports of VA research data being stored on affiliate servers. Is this 

allowed? 

Dr. ATKINS. That’s not in compliance with policy. There are information security audits that actually look at where VA data is 

stored. It’s supposed to be stored on VA servers. And so where 

that’s found, we seek to correct that. That’s not something we control, but the policy’s pretty clear about that. And that would be— 

Mr. HUELSKAMP. Policy is they cannot do that? 

Dr. ATKINS. Correct. 

Mr. HUELSKAMP. What are the penalties for violating that policy? 

Dr. ATKINS. So we first try to go in and look and see—this is actually under the Information Security Office, their responsibility. 

And so they go and they find that, and they issue a corrective action, and then the facility’s responsible for instituting that. 

Mr. HUELSKAMP. And so what is the VA doing to protect veterans’ information in these and other circumstances and their participation in VA research? 

Dr. ATKINS. So, that’s the reason we have the policy, to keep VA 

data stored on VA servers. And I think in some of those cases, 

those are maybe animal studies, there may be some cases of patient data being stored. But, again, we’re seeking to make sure that 

those exceptions aren’t happening. I can’t tell you right now. 

Mr. HUELSKAMP. So the policy is they can happen. You do know 

it’s happening, and the only way we’ll protect— 

Dr. ATKINS. Actually, I don’t know— 

Mr. HUELSKAMP. Oh. I misunderstood. 

Dr. ATKINS [continued].—it’s happening, but you’re telling me it 

is. 

Mr. HUELSKAMP. Okay. Well, I was looking at reports. So you 

don’t know if it’s happening or not? I thought you said earlier 

you—it was—or you can’t have the research data on affiliate servers. Is that correct? 

Dr. ATKINS. VA data, involving VA patients, should be stored on 

VA servers. There are data use agreements that can allow sharing 

of data as long as other protection policies are in place. So it’s— 

if stored on a secure server and it’s part of an explicit data use 

agreement to collaborate with investigators outside of VA, that is 

permitted. It’s not permitted for a university investigator to take 

the data from the VA, put it on his or her university server. 

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Mr. HUELSKAMP. Thank you, Mr. Chairman. I have one more 

question. If we’re going to do another round, I do have an additional question. 

Mr. COFFMAN. There will be one more round. 

Ms. Watterson-Diorio, why are some NIH grants being administered through VA nonprofits while others are administered through 

the academic affiliate, with more than 51 percent of the research— 

when more than 51 percent of the research is being conducted at 

the VA? 

Ms. WATTERSON-DIORIO. Mr. Chairman, that’s an interesting 

question, and one that we have differing data on across the country. VA nonprofits on the East Coast versus the West Coast completely differ 100 percent, where the West Coast is actually administering NIH grants. 

Decisions are made at a local level. These are done by VA leadership. They could even be done by a principal investigator. So decisions are being made because, in my opinion, there’s not enough directives, regulatory directives that would allow the investigators to 

be told, you know, this is the equitable way in which we’re arranging the administration of research. 

Mr. COFFMAN. Now aren’t they supposed to be administered by 

the VA? 

Ms. WATTERSON-DIORIO. Well, Title 38 proclaims that we have 

the authority to administer this research. That’s not, in fact, happening all across the country. 

Mr. COFFMAN. Who does—who again, who decides where a grant 

is administered? 

Ms. WATTERSON-DIORIO. It would be on the VA leadership side 

on—that would be, like, the board members of the VA nonprofits. 

Mr. COFFMAN. So those are not uniform? It’s not—it’s not uniform? 

Ms. WATTERSON-DIORIO. It’s not uniform at all. 

Mr. COFFMAN. It’s not uniform? Can you estimate how much 

money VA is losing by having these grants administered through 

the affiliates instead of VA nonprofits? 

Ms. WATTERSON-DIORIO. Well, again, I think that’s a very hard 

number for me to be able to justify, because that’s— 

Mr. COFFMAN. We’re in the millions. We’re in the millions. Is 

that a fair assessment? 

Ms. WATTERSON-DIORIO. Yeah. 

Mr. COFFMAN. Okay. 

Ms. WATTERSON-DIORIO. Yes. I would agree. 

Mr. COFFMAN. Okay. Dr. Jesse, according to the GAO report, 

high value—quote, ‘‘high value long-term,’’ unquote, affiliate contracts go through three different reviews. Why is that? 

Dr. JESSE. I think Mr. Lemmon is in better shape to answer that 

than I am, but in—I do know that the IG does a preaudit review, 

and that’s one of them. So— 

Mr. LEMMON. Well, certainly the contract is looked at, at the 

local level. Then if it’s over a half million dollars, our current process requires our university affiliates to provide cost data. Once we 

receive that cost data, there’s a requirement that the IG review 

that data. And it’s also reviewed at our Medical Sharing Office 

level, and at that level, they get concurrence from Patient Care 

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Services and the Office of General Counsel. So there is a number 

of levels of review. 

We need to look at what pieces of this process we can streamline. 

We have to do these faster, no question. 

Mr. COFFMAN. How long have you been in your position now? 

Mr. LEMMON. Since October 15th, I’ve been acting in this position. 

Mr. COFFMAN. We always have somebody—I love it when the VA 

always has somebody who’s brand-new and who, you know, kind of 

washes their hands of the problem, but 3 years? I mean, that is unbelievable. I—you know, it—I don’t know how you have a contracting negotiation process that lasts 3 years. 

Mr. LEMMON. It’s indefensible, but I would like to say that not 

all of—there are multiple parties involved. With some affiliates, 

getting cost data takes a long time. We do have situations with affiliates where we can’t get a reasonable price. And I think what we 

have to do in those instances is make decisions quicker whether 

we’re going to continue the relationship. It could involve—there are 

tough decisions. It could involve pulling out a residency program. 

So it’s not all the contracting process itself. Certainly there’s 

plenty of opportunities to improve that, but some of it, there are 

legitimate problems that come up when negotiating these contracts. 

Mr. COFFMAN. But this is supposedly done by experts who have 

all the training, am I correct in that, that have gone through—that 

Congressman Walz had mentioned that have gone through the appropriate certifications of the VA in terms of procurement? 

Mr. LEMMON. They have. You have to have the requisite warrant 

level to sign and negotiate these contracts. 

Dr. JESSE. So if I may, and this comes back to a comment that 

Ranking Member Kuster made in her opening remarks about how 

health care has been changing. And 70 years ago, virtually everything could be done on the signature of a dean of a medical school. 

Today when we have contracts with academic affiliates, as I mentioned, there are often multiple contracting entities. So in your report, I think, two of your agencies you were—the contracts were 

with the practice group as opposed to the university. 

So we now have deans of medical schools, we have CEOs of hospitals, we have chairmen of practice groups, and they often have 

a vice-president for health sciences, and even in—there may be an 

office of managed care. And so it’s not the—the time is not all on 

the part of the VA, it’s often the going back and forth that requires 

multiple—multiple entities and— 

Mr. COFFMAN. Let’s just say it’s a broken system. 

Ranking Member Kuster, you’re now recognized for 5 minutes. 

Ms. KUSTER. Thank you, Mr. Chair. 

And let me start right where we’ve left off and the changing nature of these practices and the complexity. For 25 years before I 

came here, I was an attorney in New Hampshire and I represented 

Dartmouth Medical School, and I’m very familiar with their relationships with the VA and White River Junction, Vermont. 

You had mentioned in our previous dialogue about liabilities, you 

had used that word in passing, and sharing responsibility, but that 

entails liability. I want to focus in on the flip side of that, and 

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24 

which are benefits that come from these contracts, and in particular, the benefits from discoveries of VA researchers. 

In the best of all worlds, there are times when the VA is on the 

leading edge of treatment, of techniques, of protocols. I’m working 

with the VA now on the reduction of use of opiates and pain medication. I’m hoping that they’ll be able to lead the country in that. 

But can you talk to me in terms of these relationships and these 

contracts, how do you manage the benefits and the need to ensure 

that the VA and the veterans, most importantly, but preferably the 

veterans and the taxpayers, benefit from breakthroughs in—whether it’s medical technology or new techniques? 

Dr. JESSE. So I’m going to ask Dr. Atkins to answer most of that, 

but as a preamble, I’d like to say that we think this is really important. And the front end of a lot of the research we do is an institution, and article, I’m not sure of the right word, called a CRADA, 

which is an agreement of the sharing of intellectual property, and 

it actually—and sometimes it’s quite frustrating to investigators, 

because it takes times to work that out because it’s a lawyer-tolawyer conversation, but that is a hard and fast thing that should 

be included in any research agreement that we do with an outside 

entity. 

So do you want to expound on that? 

Dr. ATKINS. Yeah. Well, thank you for your point, because I think 

we all feel that this is not a zero sum game, that all parties benefit. 

So the fact that our academic affiliates benefit is a good thing, because it makes them want to partner with us, and we benefit from 

that partnership. 

And so, I want to comment a little bit on one of the questions 

Chairman Coffman asked about the NPCs in terms of whether all 

of our research should be administered through the NPCs. We 

don’t lose any money by administering our research through the 

university. That actually builds a partnership that provides a lot 

of benefit. We owe a lot to our nonprofit corporations, they provide 

very good value, but they are independent entities. They are not 

the VA. 

And so we leave the decision of which grants should be administered by the nonprofit corporation, which should be administered 

by the university to the VA Medical Center. There are some 

projects that solely recruit veterans, almost always are administered by the nonprofit corporation; but many of our research is relevant to veterans but may not involve patients, may be much more 

aligned with the grants that are being administered by the university, and the university certainly benefits from having those grants. 

And I think the figures that were given show that roughly half 

of the non-VA research money that’s brought in is administered 

through the nonprofit corporations, about half through the universities, but there’s no— 

Ms. KUSTER. So at the risk of sounding overly lawyerly, I want 

to follow the benefit, if I could, on behalf of the veterans and the 

taxpayers. Walk me through, and let’s just make up an example 

about a breakthrough discovery in a new medication to treat pain 

that’s not addictive and doesn’t lead to substance use disorder. 

Help me understand the value of that, and who controls it, and 

who owns it. If you get into a patent, does the VA pursue that, does 

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25 

it then get turned over to some other entity in the Federal Government? Who owns the benefit of this? 

Dr. ATKINS. So as Dr. Jesse mentioned, that’s governed by these 

CRADAs, Cooperative Research and Development Agreements, 

where that shared ownership is worked out upfront, and that’s the 

way the universities do it and the way that VA does it. It’s a 

shared ownership of the intellectual property and the profits that 

flow from that. 

Ms. KUSTER. So my time is up, but if I could ask for the record 

if there are examples maybe that would be beneficial for the Committee to understand, of technologies or breakthroughs in the past, 

and then how they’ve been adopted, and how they’ve been shared 

around the VA, and if there is a commercial value, how the dollars 

have flowed back to the taxpayers. 

Dr. ATKINS. Thank you. 

Ms. KUSTER. If that—thanks very much. 

Dr. ATKINS. We’ll do that. 

Ms. KUSTER. I yield back. 

Mr. COFFMAN. Congressman Huelskamp, you’re recognized for 5 

minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the opportunity to follow-up on a couple more questions. 

First one, Ms. Watterson-Diorio, since the time it became public 

that you would be testifying here today, have you received any 

pushback from anyone about testifying, or concerning what you 

might say? 

Ms. WATTERSON-DIORIO. Nothing official at this time, sir. 

Mr. HUELSKAMP. Nothing official. Anything unofficial? 

Ms. WATTERSON-DIORIO. A few emails questioning where I was, 

what I was doing, yes. 

Mr. HUELSKAMP. Okay. I would be interested in sharing that 

with the Committee. And I say this, obviously I know of the certain 

situation, but over the last 3 or 4 years, we have run into multiple 

situations where whistleblowers have received various levels of, I 

would say, penalties and punishments and displeasure from folks 

above them. And we rely heavily on folks from the inside sharing 

with us what does occur. So I— 

Ms. WATTERSON-DIORIO. I certainly appreciate your concern, and 

I will share back. Thank you very much. 

Mr. HUELSKAMP. And, Mr. Chairman, the second question I 

would have—I didn’t get to last time, is in reference to research 

equipment. 

Dr. Atkins, we have had reports of VA research equipment being 

transferred to the affiliates. Is that allowed? 

Dr. ATKINS. The research equipment bought by the VA belongs 

to the VA. It is permissible for the research equipment to be stored 

offsite where that makes sense to the research. So we don’t want 

to recreate a whole laboratory that exists on the university side in 

the VA. 

And if we buy a piece of equipment that can augment what that 

laboratory can do, it makes sense for it to be over at the university. 

It doesn’t make sense for it to stay over there after its use is expired. We have monitoring—tracking programs that track all of our 

medical equipment at the hospitals, and that’s their responsibility. 

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Mr. HUELSKAMP. So the question wasn’t about storage, it’s 

whether it’s transferred, whether before or after the contract, the 

research. Is it transferred to them? Is it given to them? 

Dr. ATKINS. No. 

Mr. HUELSKAMP. Is it shared? 

Dr. ATKINS. No. It remains at the VA. It’s just being used over 

at—offsite. We don’t—we don’t give up ownership of that. 

Mr. HUELSKAMP. Okay. And then if the contract ends—or maybe 

they never end in this case. If they end, you collect the equipment 

back, or you transfer it or give it away? I’m just trying to followup what happens perhaps at the end of a contract. 

Dr. ATKINS. If it’s not being used at the—for research at the university site, and we have a use for it at the VA site, we would bring 

it back. 

Mr. HUELSKAMP. Okay. Is it used by the research facility for 

other types of research outside the VA? Is that permitted? 

Dr. ATKINS. Are you saying is it permissible for them to use it 

for non-VA research— 

Mr. HUELSKAMP. No. Yes. 

Dr. ATKINS [continued].—in the lab? I don’t think there would be 

any prohibition against that. 

Mr. HUELSKAMP. Okay. So what oversight measures have you— 

Dr. ATKINS. It’s a shared piece of equipment and it’s governed— 

Mr. HUELSKAMP. Shared, but VA owns it? 

Dr. ATKINS. Right. 

Mr. HUELSKAMP. So what oversight do you have to ensure that 

VA ownership that’s used exclusively for VA, or you don’t mind? 

Dr. ATKINS. That’s not a major concern of ours, in the sense that 

usually that research is being done to benefit—it’s a partnership. 

And we buy the equipment where it seems to make sense, and the 

fact that our partners are using it to benefit research— 

Mr. HUELSKAMP. That actually does bother me, Doctor. We just 

discussed a $400 million invention that was done by a VA researcher, probably using VA equipment, we don’t know, and you all 

are looking into that. And that should be part of the agreement. 

That should be part of the agreement of use of their time and 

equipment in order to capitalize. I mean, we talked about these tremendous advances through VA research. And we look forward to 

the response, but I think after months of expecting us to show, hey, 

this is what the VA got for all these investments, but the private 

sector, these individuals have taken that. So I just want to know 

what oversight measures you have in place to ensure VA equipment is accounted for, maintained, and used for the VA purpose, 

and if not, rented by the VA—by the research facility. 

Dr. ATKINS. Yeah. I’m going to take that question for the record, 

because I may not be entirely right about the—how much of that 

is spelled upfront. 

When there is an agreement to transfer the equipment for use, 

and I—in terms of whether that agreement specifies that it can 

only be used for certain uses and not for others, that may exist, 

and I—I will get back to you. 

Mr. HUELSKAMP. Yeah. And I’m not lawyerly. I’m a farmer. I’d 

hate to be accused of that, but you mentioned storage. 

Ms. KUSTER. Better to be accused of a farmer than a lawyer. 

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Mr. HUELSKAMP. I agree. I agree. 

So we talked about storage, we talked about sharing, and we 

talked about transferring, and I think all those three terms have 

been mixed up in the response, at least I haven’t followed that. So 

I appreciate the response and follow-up to the second question. 

Dr. JESSE. If I may, if a VA researcher is using—has authority 

of a VA piece of equipment in a university lab, there is probably 

a much greater chance than—not that they are utilizing university 

assets in support of their VA research. And so it’s—you know, it’s 

a shared entity, it’s a shared resource, and it’s a partnership. 

Mr. HUELSKAMP. No. I understand. 

Dr. JESSE. It could go both ways, right. 

Mr. HUELSKAMP. This question was about VA research equipment. Now, if that’s the response that, well, we share their equipment, they share ours, then I would say there’s not enough oversight measures in effect to say whether or not it’s equal sharing, 

I mean, that’s part of the question here, so I appreciate us digging 

into that and getting a close response—a better response to that. 

I yield back, Mr. Chairman. 

Mr. COFFMAN. Thank you, Congressman Huelskamp. 

Congressman O’Rourke, you’re now recognized for 5 minutes. 

Mr. O’ROURKE. Yeah. Mr. Chairman, I just wanted to make the 

point that I think academic affiliations make a lot of sense, and I 

would like to better understand the authorities that Dr. Jesse and 

the VA are going to ask for, and these may be authorities that we 

want to support, and certainly, I’d like to see the process accelerated and shorten the amount of time it takes to enter into those 

agreements. We know from testimony earlier in the year from the 

VA that there are 43,000 authorized funded, but unfilled positions 

within VHA, and so this makes a world of sense to me to do this. 

I just want to, you know, make the point that thanks to the 

GAO, I think there are some significant concerns that have been 

raised, and I’m very grateful that the VA has agreed with the recommendations and is going to implement them, and I’d love to see 

the detail of that, that addresses the lack of performance standards, this avoidance of oversight, intentional or not, and some of 

the other issues that are raised. 

But I know, Dr. Jesse, when we came through the first round of 

questions, you were going to make an additional point, and I ran 

out of time, where you were going to refer to one of your colleagues. 

If you’d like to add anything to that, you’re certainly welcome to. 

Dr. JESSE. Well, thanks. And I guess I’m going to—Janis stole 

one of my lines in who benefits, being the question asked at the 

title of this hearing, and she said the veterans, and absolutely, but 

I would also add that it’s you, me, and the American public, because if you have a good physician, if you have a good health care 

team, there is a great chance that it’s the VA academic-affiliate relationship that was intimately involved in the training and skill 

building in those individuals. So we all benefit. 

Mr. O’ROURKE. Yeah. You just want to make sure that there’s 

absolute adherence to the standards— 

Dr. JESSE. Oh, yes. 

Mr. O’ROURKE [continued].—that you don’t have fraud, because 

this is a little bit of a departure in some ways if we were to inLeonard.horne on VACREP0180 with DISTILLER

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crease the level of participation with academic affiliates to help 

staff and provide care for veterans like those in El Paso, which are 

historically underserved. So I don’t want anything to jeopardize the 

program with some big scandal, hey, we were overbilled— 

Dr. JESSE. Yeah. 

Mr. O’ROURKE [continued].—X millions. Let’s bring everything 

back in house and no longer do this again. 

So I think the GAO’s findings give us an opportunity to get this 

right so that we can expand it, accelerate it. You’re asking perhaps 

for new flexibilities and authorities. We may want to do that. We 

just want to make sure that this thing’s being run really well, so 

that we can expand it. 

Dr. JESSE. Absolutely. 

Mr. O’ROUKE. Yeah. 

Dr. JESSE. Thank you. 

Mr. O’ROURKE. Okay. 

Mr. COFFMAN. You know, I have one question. And out of fairness to my colleagues, I’ll let them ask another question if they do 

have one, but, Mr. Atkins, I think you said that there was really 

no—fundamentally no difference using the nonprofit—VA nonprofit, versus using a university, yet it seems to me that the issue 

with the Hep C drug totally contradicts your statement, where 

Emory University disproportionately benefited by whatever agreement was reached in terms of that Hep C drug, and so I don’t understand what your rationale is. 

The nonprofit, it would have flowed back into the VA versus it 

flowed to Emory University. Could you comment on that? 

Dr. ATKINS. Well, as you know, that whole issue is under investigation and the facts as to what the research was done. I mean, 

I’m not sure that it flowing through the nonprofit would have 

changed the fact, depending on where—whether that—how that research was done and what—who had rights to the intellectual 

property. 

Mr. COFFMAN. Ms. Diorio, can you comment on that? 

Ms. WATTERSON-DIORIO. Well, I would say that, you know, as we 

all know, the sole purpose of the VA nonprofits is to serve the VA. 

We are under a lot of oversight to make sure that the tech transfer 

is upheld, the CRADA language is just perfect. A CRADA is a Federal document that allows the VA to enter and be bound by language to support research. 

So when we do that, there are tech transfer laws, there are all 

of this documentation that is supporting the VA to own that property, but there are also some other regulations, and I can get that 

to you for the record, that allows the university an opportunity to 

enter into and help with tech transfer, because sometimes they are 

very expert in that field. 

Mr. COFFMAN. Thank you. 

Dr. ORLOWSKI. If I could add. 

Mr. COFFMAN. Thank you very much. Yeah. Go ahead. 

Dr. ORLOWSKI. Thank you, Congressman. The academic affiliates 

don’t take a position as to which is the better—but I would say that 

there are specific reasons why the academic institution may in certain circumstances have more experience. There’s complex regulations for human subject research, complex regulations for animal 

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research, and depending upon what is being studied, DNA sequencing changes, sometimes the local VA authorities will make a decision as to which institution has the better oversight. 

Mr. COFFMAN. It just seems the problem is there’s not oversight, 

and the problem is that some of these institutions get the better 

of the VA, which is not all that hard to do, given the lack of oversight. 

Let me just conclude. Today we have had a chance to hear about 

the relationship between VA and its academic affiliates. As has 

been described, there are numerous issues, concerns, and problems 

surrounding this relationship that takes great advantage of VA and 

ultimately the veteran. 

This hearing was necessary to accomplish a number of items: To 

highlight the conflicts when employees in leadership positions at 

VA also hold academic appointments at the affiliate; to highlight 

the potential for lost intellectual property rights when VA-approved 

research, VA equipment, and VA data are utilized by the academic 

affiliate; to highlight the potential lost revenue when Federal 

grants are administered by the affiliate, instead of the VA nonprofit corporations, when the majority of the research is being performed at VA; and to highlight the problems VA has in entering 

into fair and timely sole-source affiliate contracts. I hope that shedding light on these issues will lead to changes. 

I ask unanimous consent that all Members have 5 legislative 

days to revise and extend their remarks, and include extraneous 

material. Without objection, so ordered. 

I would like to once again thank all of the witnesses and audience members for joining in today’s conversation. 

With that, this hearing is adjourned. 

[Whereupon, at 5:53 p.m., the Subcommittee was adjourned.] 

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(30) 

A P P E N D I X 

Prepared Statement of Robert L. Jesse, M.D., Ph.D. 

Good afternoon, Mr. Chairman, Ranking Member Kuster, and Members of the 

Committee. Thank you for the opportunity to discuss VA’s relationship with its academic affiliates, specifically, the use of sole-source affiliate contracts, affiliate universities, billing issues, research funding, and use of research space. I am accompanied today by Mr. Rick Lemmon, Acting Chief Procurement and Logistics Officer, 

and Dr. David Atkins, Acting Chief Research and Development Officer. 

Office of Research and Development (ORD) 

For more than 90 years, VA has conducted research within its hospitals and 

health care system in accord with Congressional authority to advance scientific 

knowledge about critical issues facing Veterans. In establishing VA Research, Congress recognized both the need to study the unique problems of Veterans but also 

the opportunity for research to support excellent clinical care. 

Since its inception, VA Research has contributed to groundbreaking advances 

such as the Computerized Axial Tomography scan, the pacemaker, and organ transplants; it has sponsored groundbreaking studies on the treatment of tuberculosis, 

high blood pressure, heart disease, and Posttraumatic Stress Disorder (PTSD). It 

has partnered with industry to demonstrate the value of vaccination to prevent 

shingles, and to develop state of the art prosthetic limbs. These achievements have 

resulted in three Nobel prizes, seven Lasker Awards, and numerous other national 

and international honors. VA Research continues to drive advances in Veteran care 

in issues as diverse as diabetes, spinal cord injury, and mental health. Its 

groundbreaking Million Veterans Program has already enrolled close to half a million Veterans who have donated blood samples and completed surveys to help 

unlock the genomic basis of medical disease. 

VA Research benefits from its position within an integrated health care system 

with 167 medical centers and a state-of-the-art electronic health record. Our ability 

to recruit patients throughout the country, to draw on detailed clinical data over two 

decades on 8 million Veterans, and to implement research findings into clinical care 

makes VA a model for bench-to-bedside research. Partnerships with national and regional VA clinical leaders, new outreach to Veterans in the community, and a network of research Centers with specific areas of focus ensure that research reflects 

the current and future needs of Veterans. 

The VA Research program plays a unique role that cannot be filled by external 

funding sources. First, VA Research prioritizes problems that are common or important to Veterans- PTSD, traumatic brain injury, polytrauma, military sexual trauma. Second, 60% of our researchers are also practicing clinicians at VA medical centers (VAMC). As a result they are familiar with the Veteran experience and are able 

to seek knowledge and pursue research topics to help our patients. Additionally, unlike other Federal agencies, VA has no laboratories whose predominant function is 

research. Research studies are performed in parallel in the same space at VAMCs 

where patient care is provided. This leads to a focus on research areas benefiting 

Veterans. Third, research is conducted by VA employees who are dedicated to the 

mission of improving care for Veterans. Finally, a research program planned and 

run within VA can adapt to the changing needs of the Veteran population. For example, the Office of Research and Development has dramatically increased the number of researchers and studies addressing the needs of women Veterans over the 

past decade to meet the growing population of women entering VA care. 

VA’s research mission is entirely supported by intramural funding. VA does not 

have authority to award grants to parties outside VA, and all VA Research funding 

is provided to VA-employed researchers. 

VA researchers work at more than 100 VAMCs conducting research. In addition, 

124 VAMCs have formal affiliations with academic institutions and hospitals, and 

many full-time and part-time VA employees also have academic appointments or are 

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employed at an affiliated academic institution or hospital - they are dually appointed personnel. Many clinicians/researchers have laboratory access at both VA 

and the academic affiliate. Because of these arrangements, many VA inventions 

could be jointly owned by VA and its academic affiliates. 

VA Research fosters dynamic collaborations with its university partners, other 

federal agencies, nonprofit organizations, and private industry. Researchers are able 

to leverage $663 million in VA funding to bring in an additional $685M in external 

funding from industry and Federal agencies such as the National Institute of 

Health. The Federal investment in VA Research returns incredible value to Veterans and the taxpayers, value that is reflected in Veterans positive attitudes about 

research and health care outcomes in VA. 

Office of Academic Affiliation (OAA) 

Strong academic relationships have been the foundation of improving quality care 

and patient access in VA health care since 1946. January 30, 2016, marked the 70th 

anniversary of VA ‘‘Policy memorandum #2,’’ a document crafted by General Omar 

Bradley and other VA leaders which established the visionary partnership that VA 

has with America’s medical schools. The initial motivation for integrating academic 

relationships in VA’s mission is just as relevant today: academic affiliations are invaluable to facilitate recruitment of outstanding clinical staff to VA, and the presence of supervised trainees often allows efficient leverage of effort for clinical staff 

because several trainees working under the careful eye of one supervisor can often 

treat many more patients than that senior clinician could treat if alone. Such academic activities are also vital for assuring that VA clinical staff remains at the leading edge of clinical knowledge and skill, and to attract clinicians motivated by professional excellence that is associated with practice, teaching, research, and system 

improvement activities that occur in academic settings. VA’s health profession education activities have blossomed to include affiliations with over 1,800 schools of 

medicine, nursing, pharmacy, and nearly all other health professions. Through these 

affiliations, and VA’s own sponsorship of selected programs, nearly 124,000 trainees 

in health professions receive supervised clinical education in VA facilities each year. 

The Veterans Health Administration (VHA) is profoundly important to overall 

health professions education in the US, with about 70% of US physicians having VA 

clinical experiences at some point in their education, VHA being the second largest 

funder of Graduate Medical Education (after the Centers for Medicare and Medicaid 

Services (CMS)), and VHA being a major source of both trainee and faculty funding 

and clinical experiences for professions including pharmacy, psychology, optometry, 

podiatry and many others. 

The result is that VHA robustly fulfills statutory missions prescribed by 38 U.S. 

Code § 7303 ‘‘to carry out a program of medical research in connection with the provision of medical care and treatment to veterans.’’ It is important to note that these 

many academic relationships and affiliation agreements address only educational 

activities and do not address contracts for provision of professional or clinical services for VHA’s patient care services - those are addressed by VHA through other 

sharing agreement and contractual mechanisms. 

Government Accountability Office (GAO) Report 

GAO released its final report (GAO–16–426) titled ‘‘Improvements Needed for 

Management and Oversight of Sole-Source Affiliate Contract Development’’ on May 

6, 2016 with a 30 day hold on public release. This report recommended eight executive actions to ensure timely development of high-value-long-term sole-source affiliate contracts (SSAC), effective development and use of short-term SSACs, develop 

and maintain medical sharing expertise within network contracting offices, and ensure effective communication between VHA and its affiliates regarding SSACs. 

VA concurred with GAO’s recommendations and developed an action plan to implement each of the recommendations. As part of this action plan, the Deputy Under 

Secretary for Health for Operations and Management will charter a workgroup to 

address several of the recommendations. The workgroup will be charged with tasks 

such as: 

• Establishing performance standards for appropriate development time frames 

for high-value long-term SSACs; 

• Establishing the oversight process for these standards; 

• Developing requirements for VAMCs and network contracting offices to effectively engage in early acquisition planning for the replacement of expiring highvalue long-term SSACs to reduce reliance on short-term SSACs as bridge contracts; and 

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1GAO. VA Health Care: Improvements Needed for Management and Oversight of Sole- Source 

Affiliate Contract Development, GAO–16–426 (Washington, D.C.: May 6, 2016). 2See 38 U.S.C. § 8153(a)(3)(A). For the purposes of this testimony, we use the term physician 

services to describe services provided by physicians and other highly-qualified professionals that 

are necessary for the operation of clinical departments that train resident physicians at VAMCs. 3See Department of Veterans Affairs, Health Care Resources Contracting-Buying, Title 38 

U.S.C. 8153, VA Directive 1663 (Aug. 10, 2006). For the purposes of this testimony, we refer 

to this directive as VA Directive 1663. 

• Developing standards for the minimum amount of time necessary to develop 

and award short-term SSACs to minimize cases of nonadherence to VA policy 

for these contracts. 

The estimated timeframe for the workgroup to complete deliberations, finalize 

performance standards, and receive approval across all stakeholders, is one year. 

The estimated timeframe for nationwide implementation of new performance standards is one year, including pilot testing of any new technology and training of staff. 

VA is strongly committed to developing long-term solutions that mitigate risks to 

the timeliness, cost-effectiveness, quality and safety of the VA health care system. 

VA is using the input from GAO and others to identify root causes and to develop 

critical actions. As we implement corrective measures, we will ensure our actions 

are meeting the intent of the recommendations. Our actions will serve to establish 

strong oversight on SSACs, improve current training offerings for VHA staff who 

work on SSACs, and seek increase prioritization of funding for training to appropriate department decision makers. 

Since receiving the draft GAO report VA/VHA has initiated two short term initiatives and one long term initiative to improve outcomes of SSAC contracting. First, 

VA Directive 1663 which provides overall guidance for sole source academic affiliate 

contracts is being revised and updated to ensure more timely contract awards while 

still protecting VA financial interests. The 1663 revision is expected to be completed 

within the next 60 days. Second, enterprise capability to monitor the milestone adherence of sole-source affiliate contracts will be developed. This will enable senior 

management to take action when needed to overcome barriers to timely awards, 

with a targeted completion date of November 30, 2016. To meet the long-term goals 

of strong oversight and address all of the GAO recommendations, VHA is chartering 

an integrated workgroup. 

Mr. Chairman, this concludes my testimony. My colleagues and I are prepared to 

answer any questions you, Ranking Member Kuster, or other Members of the Committee may have. 

f 

Prepared Statement of Randall B. Williamson 

VA HEALTH CARE 

IMPROVEMENTS NEEDED FOR MANAGEMENT AND OVERSIGHT OF SOLE-SOURCE

AFFILIATE CONTRACT DEVELOPMENT

Chairman Coffman, Ranking Member Kuster, and Members of the Subcommittee: 

I am pleased to be here today to discuss our May 2016 report on the Department 

of Veterans Affairs’ (VA) development and use of sole-source contracts with university-affiliated hospitals, medical schools, and practice groups. 1 Since 1946, VA has 

partnered with medical schools to provide educational opportunities for resident 

physicians and other types of students and to increase the availability of specialty 

physicians to treat veterans in VA medical facilities. This partnership has grown to 

include 124 of the 167 VA medical centers (VAMC) establishing affiliate relationships with at least one university medical school and its associated university hospital. As a part of these affiliate relationships, VA can obtain additional physician 

services to supplement available VAMC physician services from a university medical 

school, hospital, or affiliated physician practice group through expanded contracting 

authority- referred to as sole-source affiliate contracts (SSAC). 2 Through SSACs, 

which are available only to VAMCs and their affiliates, VAMCs can obtain physician 

services directly from the affiliate without competition if those services are necessary to support learning opportunities for physicians during their residency training in VAMCs. 3 SSACs serve an important role in helping to ensure that VAMCs 

can provide specialty health care services for our nation’s veterans and support the 

residency training of a new cadre of physicians. From fiscal year 2011 through fiscal 

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4The total initial value of a SSAC refers to the combined value of the contract’s base period 

and any option periods included in the contract. For example, a high-value, long- term SSAC 

may have a base period of 1 year valued at $1 million and four option periods that are 1 year 

each with a $1 million value for each option period. This high-value, long- term SSAC would 

have a total initial value of $5 million dollars. 5 In this testimony, we use the term develop to describe a multistep process used to initiate, 

create, and review SSACs. This multistep process includes actions related to acquisition planning for a SSAC, development and issuance of a solicitation used to inform the affiliate of VA’s 

needs, development and evaluation of the affiliate’s proposal, and preparation for and negotiation between the affiliate and VA. 6There are 21 network contracting offices within VHA that report to the VHA Procurement 

and Logistics Office in VHA Central Office and manage all the contracting activities of a single 

Veterans Integrated Service Network (VISN) and all VAMCs assigned to that VISN. At the start 

of fiscal year 2016, there were 21 VISNs, but VHA is in the process of consolidating some VISNs 

so that by the end of fiscal year 2018, there will be 18 VISNs. 

year 2015, VA had nearly 1,200 SSACs valued at almost $724 million throughout 

its health care system. 

SSACs can be used to fill short-term or long-term needs at the VAMCs and the 

level of VA oversight they require varies by their value. Specifically, high-value, 

long-term SSACs have a total initial value of $500,000 or more and provide affiliate 

services for more than 1 year. 4 Among all SSACs, high-value, long-term SSACs require the most review from the Veterans Health Administration (VHA) Central Office. 5 There are two types of low-value SSACs that are distinguished by the length 

of time the affiliate is providing services to the VAMC, and neither are required by 

VA policy to receive oversight from VHA Central Office. Low-value, long- term 

SSACs have a total initial value of less than $500,000 and provide affiliate services 

for more than 1 year. Short-term SSACs have a total initial value of less than 

$500,000 and provide affiliate services for less than 1 year. 

Oversight of the VHA contracting workforce and the contracts they create is provided by the VHA Office of Procurement and Logistics. VHA created the Medical 

Sharing Office, a component of the VHA Office of Procurement and Logistics, to provide guidance to contracting officers and oversee the development and award of 

medical sharing contracts, which include SSACs. Both VHA contracting and clinical 

staff are to work together to plan, execute, and monitor medical sharing contracts. 

On the contracting side, contracting officers are responsible for developing, awarding, and administering contracts on behalf of the federal government. Each contracting officer works within 1 of the 21 network contracting offices and is overseen 

by a medical sharing team supervisor within their network contracting office. 6 Network contracting offices manage all the contracting activities of a single Veterans 

Integrated Service Network (VISN) that oversees the day-to-day functions of VAMCs 

that are within that VISN’s network. On the clinical side, the VAMC seeking the 

SSAC is to designate a contracting officer’s representative at the VAMC to assist 

in the development of the SSAC and monitor the affiliate’s performance once the 

contract is awarded. Common tasks delegated to the VAMC-based contracting officer’s representative include developing the initial information required to begin acquisition planning, referred to as the procurement package, which includes a definition of the services the VAMC needs the affiliate to provide and approvals from 

leadership officials. 

My testimony today discusses the findings from our May 2016 report examining 

VA’s use of SSACs. Accordingly, this testimony addresses (1) VHA’s time frames for 

developing and awarding high-value, long-term SSACs; (2) VHA’s use of short-term 

SSACs and how it oversees their development and use; (3) how much experience the 

workforce that develops SSACs has and what specialized training VHA provides; 

and (4) the challenges selected affiliates experienced with the development and use 

of SSACs. In addition, I will highlight the eight actions we recommended in our report that VA take to help ensure the timely and effective development of SSACs, 

the professional growth of the VHA contracting staff responsible for SSAC development and award, and effective communication between VHA and its affiliates. VA 

concurred with these eight recommended actions. 

To conduct our work, among other things, we selected five VAMCs- located in Indianapolis, Indiana; Miami, Florida; Minneapolis, Minnesota; Palo Alto, California; 

and San Antonio, Texas-to visit along with the five network contracting offices responsible for developing and awarding SSACs for these VAMCs. We selected these 

VAMCs based on VHA reports on the number and value of SSACs. These five 

VAMCs are each located within different VISNs. At each of these VAMCs, we selected four to six SSACs and reviewed the terms of these contracts and supporting 

documents to determine the total elapsed time spent by VHA staff in developing and 

awarding each contract. We reviewed a total of 25 SSACs from these five VAMCs 

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7These 25 SSACs included 11 high-value, long-term SSACs from three VAMCs; 2 low- value, 

long-term SSACs from one VAMC; and 12 short-term SSACs from four VAMCs 8 VA Directive 1663 outlines VA’s policies and procedures for the establishment of medical 

sharing contracts, including SSACs. 9See GAO, Internal Control: Standards for Internal Control in the Federal Government, GAO/ 

AIMD–00–21.3.1 (Washington, D.C.: November 1999). Internal control is a process effected by 

an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. 10One of our selected VAMCs acquired affiliate services exclusively through short-term SSACs 

and another of our selected VAMCs acquired affiliate services through low-value, long-term 

SSACs and short-term SSACs. 

for services provided from fiscal year 2011 through fiscal year 2015. 7 In addition, 

we administered a data collection instrument to supervisors responsible for overseeing the development and award of SSACs in all 21 network contracting offices 

throughout VHA to capture information about various aspects of network contracting offices’ experiences developing SSACs, including oversight by the Medical 

Sharing Office and contracting officer turnover. We also reviewed VA policy documents and interviewed officials from the VHA Medical Sharing Office and the VHA 

Procurement and Logistics Office, as well as officials from our selected VAMCs and 

their associated network contracting offices. 8 Further, we interviewed representatives of the five university affiliates that provided services to VAMCs under the 25 

SSACS we selected for review and discussed their experiences with the development 

of SSACs. For each of our objectives, we reviewed relevant standards for internal 

control in the federal government. 9 Further details on our scope and methodology 

are included in our May 2016 report. The work this statement is based on was performed in accordance with generally accepted government auditing standards. 

Selected VAMC’s Time Frames for Developing High- Value SSACs Can Be 

Significant, But VHA Has Not Established Standards for Timeliness and 

Does Not Collect Data 

We found that the 11 high-value, long-term SSACs we selected for review from 

three of the five VAMCs we visited took nearly 3 years (33.8 months) on average 

to develop and award. 10 (See fig. 1.) The total time required for the development 

and award of these 11 high-value, long-term SSACs ranged from 18 to 46 months 

and the longest contracting phases were the solicitation and negotiation phases. 

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11See GAO/AIMD–00–21.3.1. 12See GAO/AIMD–00–21.3.1. 

Note: Time frames for the development and award of 11 selected highvalue, long-term SSACs from three VA medical centers (VAMC) are calculated using dates from available documentation in each contract’s file; 

however, not all development actions are documented within contract files. 

As a result, this figure does not include calculations for actions that are not 

documented. The total time spent developing and awarding a high-value, 

long-term SSAC is calculated from the date the Veterans Integrated Service 

Network (VISN) approved the VAMC to acquire the service through a SSAC 

to the date the contract was awarded to the affiliate. VISNs are required 

to approve all SSACs before the formal solicitation process can officially 

begin. The duration of each contracting phase was calculated based on our 

analysis of selected contract files. Minimum and maximum values in this 

figure represent the shortest and longest time spent developing and awarding a single contract, as well as the shortest and longest time each phase 

took for a single contract. Average values in this figure represent the average time spent developing and awarding a high-value, long-term SSAC 

across all 11 of our selected contracts, as well as the average time each 

phase took across all 11 selected contracts. 

According to leadership officials and contracting officers from all five of the network contracting offices we visited, establishing high-value, long- term SSACs in a 

timely manner has been challenging for several reasons, including (1) not always 

receiving a complete, actionable, and timely initial information package from the 

VAMC that contains information the contracting officer needs to begin acquisition 

planning; (2) lengthy review processes for high-value, long-term SSACs; (3) negotiation challenges with the affiliates on the price of high-value, long- term SSACs; and 

(4) VAMC resistance to developing and pursuing high- value, long-term SSACs. 

VAMC-based contracting officer’s representatives and medical directors from all five 

of the VAMCs we visited also explained that establishing high-value, long-term 

SSACs has presented challenges for them. Specifically, 9 of the 14 contracting officer’s representatives we spoke with noted that they are often asked to resubmit initial information packages to the contracting officer throughout the development of 

a SSAC due to form updates or policy changes that occurred since the time they 

created these documents. Moreover, VAMC officials from all five VAMCs we visited 

indicated that the length of time it takes to develop and award high-value, longterm SSACs presents many challenges for their VAMCs, including the potential for 

gaps in patient care and the need to repeatedly establish short-term solutions. 

We also found that VHA has not developed standards that can be used to measure 

the timeliness of developing high-value, long-term SSACs. However, during fiscal 

year 2016, VHA developed estimates for the maximum duration of each contracting 

phase, referred to as procurement action lead times (PALT). Currently, the PALT 

goal for the development and award of a high-value, long-term SSAC is between 20 

and 21 months; however, we found that 10 of the 11 high-value, long-term SSACs 

we reviewed exceeded these PALT goals by as little as 1.4 months and as many as 

25.8 months. According to VHA officials we interviewed, PALT goals are not used 

as performance standards for VAMC, network contracting office, and Medical Sharing Office staff responsible for the development of high-value, long-term SSACs. 

These officials told us that VHA is currently developing and conducting validity 

tests of revised PALT goals for several types of contracts, including SSACs, but 

there is no planned end date for these tests and they do not expect to implement 

revised PALT goals across VHA until at least fiscal year 2017. These officials explained that the revised PALT goals will be used for setting expectations with 

VAMC officials for the length of time it should take to develop and award several 

types of contracts, including SSACs. Federal internal control standards recommend 

establishing and reviewing performance standards at all levels of an agency. 11 Absent such standards, VHA cannot ensure that its high-value, long-term SSACs are 

being developed in a timely manner. 

Additionally, we found that VHA does not collect data on the length of time each 

contracting phase took to complete for any SSACs, including the 11 high-value, longterm and 12 short-term SSACs we selected for review. Federal internal control 

standards state that information should be recorded and communicated to management and others within the agency that need it in a format and time frame that 

enables them to carry out their responsibilities. 12 However, in contrast with these 

standards, VA is unable to analyze the time spent in each phase of SSAC development, and this inability has disadvantages in terms of management decisions and 

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13See GAO, Sole-Source Contracting: Defining and Tracking Bridge Contracts Would Help 

Agencies Manage Their Use, GAO–16–15 (Washington, D.C.: Oct. 14, 2015). 14See GAO/AIMD–00–21.3.1. 15 VA Directive 1663. 

accountability for SSAC development. The absence of real-time data on the amount 

of time being spent within each contracting phase limits VA’s ability to make informed management decisions, including changes to the assignment of staff that are 

either overburdened by their workloads or in need of additional training to build 

their competency with a particular type of contract or contracting phase. This lack 

of information prevents VHA from effectively setting clear and consistent objectives 

for organizational performance and making improvements as needed. 

Our report concluded that a lack of attention to the time spent to develop and 

award high-value, long-term SSACs has resulted in VHA’s inability to ensure that 

contracts are being developed in a timely manner. To ensure the timely development 

of high-value, long-term SSACs, we recommended that VA (1) establish performance 

standards for appropriate development time frames for high-value, long-term SSACs 

and use these performance standards to routinely monitor VAMC, network contracting office, and Medical Sharing Office efforts to develop these contracts; and (2) 

collect performance data on the time spent in each phase of the development of 

high-value, long-term SSACs and periodically analyze these data to assess performance. VA concurred with these recommendations and said that it will take steps to 

address these weaknesses, including the creation of a workgroup that will establish 

performance standards for development time frames for high-value, long-term 

SSACs and the designation of an office within VHA to routinely monitor these performance standards. VA also said that it will assess its current data systems to determine whether a new or different system would be needed to capture all relevant 

data and that the Medical Sharing Office will collaborate with other stakeholders 

to determine the need for and the mechanism to collect additional data. 

Short-Term SSACs Have Been Used to Overcome Lengthy High-Value, 

Long- Term SSAC Development Time Frames, but VHA Lacks Effective 

Oversight for Their Development and Use 

We found that short-term SSACs are used to provide coverage to bridge the gap 

between an expired or expiring high-value, long-term SSAC and its replacement. 

Specifically, 6 of our 12 selected short-term SSACs were awarded as bridge contracts, which creates duplicative work for VAMC and contracting staff because they 

must simultaneously develop both the short-term SSAC bridge contract and the replacement high-value, long- term or low-value, long-term SSAC. 13 Of the remaining 

6 short-term SSACs we reviewed, 5 were awarded to allow affiliate services to begin 

while new high-value, long-term SSACs were being developed for the same services 

and 1 was awarded to fill a short-term staffing need at a VAMC. In addition, we 

found that the use of these 12 short-term SSACs was consistent with reasons reported by from the majority of the medical sharing team supervisors from the 21 

network contracting offices. Specifically, 12 medical sharing team supervisors from 

the 21 network contracting offices (57 percent) reported that the most prevalent reason that they opt to award short-term SSACs is to avoid any gaps in services due 

to the length of time it takes to develop and award high-value, long- term SSACs. 

Federal internal control standards state an agency should provide for an assessment of the agency’s risk associated with achieving its objectives, including identifying risks through forecasting and strategic planning. 14 However, in contrast with 

these standards, VHA does not have a policy that requires VAMCs and network contracting offices to engage in timely acquisition planning to ensure that expiring 

high-value, long-term SSACs are replaced without the need to use a short-term 

SSAC as a bridge contract. Moreover, VA’s governing directive for the development 

of SSACs does not specify when VAMC and network contracting office staff should 

begin acquisition planning activities to replace an existing high- value, long-term 

SSAC. 15 As a result, VHA lacks assurance that its staff are performing and accountable for their roles in ensuring that replacement high-value, long-term SSACs 

are developed in time and that the agency is minimizing duplicative work when 

short-term SSACs are used as bridge contracts. 

We also found that VHA was further exposed to potential risks associated with 

using short-term SSACs because the Medical Sharing Office, the VHA Central Office entity with oversight authority of SSACs, does not consistently review available 

data on all SSACs awarded throughout VHA; in particular, it does not review the 

level of reliance on short-term SSACs. While this office creates monthly reports for 

all VISNs and network contracting offices that provide information on the status of 

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16See GAO/AIMD–00–21.3.1 17The other two short-term SSACs that did not follow VA and VHA policy for the development 

of SSACs had similar policy adherence problems. 18See GAO/AIMD–00–21.3.1. 

tracting offices to determine if they are selecting the appropriate term for their contracts. This can potentially be problematic because 7 of the medical sharing supervisors from the 21 network contracting offices we contacted and leadership teams 

and contracting officers from 3 of the 5 network contracting offices we visited told 

us that at times they have purposefully developed short-term SSACs in lieu of highvalue, long-term SSACs because the Medical Sharing Office does not review any 

short- term SSACs. In fact, we found 6 of the 12 short-term SSACs we selected for 

review were extended beyond their initial performance periods for up to 11 months 

resulting in total values for these 6 contracts that ranged from almost $686,000 to 

$1.4 million-well beyond the $500,000 Medical Sharing Office review threshold. 

Standards for internal control in the federal government state that control activities 

should occur at all levels of an agency to help ensure that management’s directive 

are carried out by staff and that top-level reviews of actual performance by agency 

management are needed to track major agency achievements and compare these to 

plans, goals, and objectives that were previously established. 16

In addition, we found that 7 of the 12 short-term SSACs we selected for review 

from two network contracting offices did not follow VA and VHA policy for the development of SSACs. Specifically, we found 5 short-term SSACs we reviewed from 

one network contracting office where (1) a solicitation was not issued to the affiliate, 

(2) the affiliate did not provide VHA a formal proposal outlining its services and instead submitted a price quote, and (3) negotiations were not conducted to address 

potential pricing issues before awarding the final contract. 17 The contracting officer 

responsible for these 5 short-term SSACs explained that he was often given as little 

as 10 business days to develop and award a short-term SSAC before the prior shortterm SSAC expired and that he did not have the skills needed to conduct negotiations with the affiliate. We found that this contracting officer’s supervisor had reviewed all 5 of these contracts prior to their award; however, the review process did 

not identify the areas that did not adhere to VA and VHA policy requirements for 

the development of SSACs. Federal internal control standards recommend that 

agencies establish processes to ensure the proper execution of transactions, including the provision of the proper amount of supervision. 18 However, without ensuring 

that contracting officers are adhering to VA and VHA policies and network contracting offices are effectively reviewing the development of short-term SSACs as required by VA and VHA policies, VHA may be at risk for overpaying for affiliate 

services provided through these contracts. 

Our report concluded that the lack of attention to this overreliance on short-term 

SSACs as bridge contracts exposes VHA to risks. To ensure the effective development and use of short-term SSACs, we recommended VA (1) develop requirements 

for VAMCs and network contracting offices to effectively engage in early acquisition 

planning for the replacement of expiring high-value, long-term SSACs, (2) prioritize 

the review of SSAC contract data to identify patterns of overreliance on short-term 

SSACs that avoid appropriate Medical Sharing Office oversight, and (3) develop 

standards for the minimum amount of time necessary to develop and award shortterm SSACs to minimize cases of nonadherence to VA policy for these contracts. VA 

concurred with these recommendations, and laid out plans to develop new requirements and standards while also charging the Medical Sharing Office with conducting data reviews of short-term SSACs. 

High Turnover and Limited Training Opportunities Result in Inexperienced VHA Medical Sharing Contracting Officers and Impede the Development of SSACs 

We found a high level of turnover among medical sharing contracting officers in 

all 21 network contracting offices that was exacerbated by a high level of inexperience among contracting officers responsible for developing SSACs. Network contracting office medical sharing teams experienced significant turnover in recent 

years, with 23 percent (49 of 217) of medical sharing contracting officer full-time 

employee equivalents (FTEE) in fiscal year 2014 and 27 percent (65 of 239) of 

FTEEs in fiscal year 2015 either resigning or transferring to another VHA contracting team. 

Medical sharing supervisors offered several potential explanations for turnover on 

medical shar17ing teams, including job burnout, the complexity of medical sharing 

contracts, the workload associated with medical sharing teams, and frustration with 

the layers of review required for these contracts. Medical Sharing Office officials 

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19See GAO/AIMD-00-21.3.1. 20See GAO/AIMD-00-21.3.1. 

told us that this turnover hinders the SSAC development process because newer 

contracting officers have greater difficulty developing high-value, long-term SSACs 

due to a lack of experience and knowledge. They also told us that they believe it 

takes approximately 5 years for a contracting officer to become experienced in developing medical sharing contracts, including SSACs. We found, however, that more 

than half of medical sharing contracting officers had 2 years or less medical sharing 

contract experience and less than one-quarter had more than 4 years of experience 

developing medical sharing contracts. Federal internal control standards state that 

effective management of an organization’s workforce, such as having the right personnel on board, is essential to achieving results. 19 However, in contrast to these 

standards, VHA does not have a plan to address medical sharing contracting officer 

turnover. As a result, VHA lacks assurance that network contracting offices can 

maintain and develop the contracting officers’ skillsets that are necessary for developing complex medical sharing contracts, such as SSACs. 

Moreover, we found that limited training opportunities for medical sharing contracting officers further erodes VA’s knowledge base for developing high-quality and 

cost-effective SSACs. The Medical Sharing Office has developed and offered three 

in-person training courses designed to progressively build a contracting officer’s 

competence in developing medical sharing contracts, including SSACs. Medical 

Sharing Office officials reported in February 2016 that over 90 percent of all participants for each of the training classes reported that the trainings increased their 

medical sharing competency and that the information presented would contribute to 

their job performance. Since fiscal year 2015, however, VHA has not consistently 

provided training for medical sharing teams in network contracting officers throughout VHA. VHA has canceled some of their course offerings due to budget constraints. In addition, VHA Central Office requested that the Medical Sharing Office 

cut the class size of each course offering by 25 percent. Federal internal control 

standards state that agencies should establish good human capital policies and practices, such as appropriate practices for training. 20 In contrast to these standards, 

VHA has not determined how to either provide the existing training courses or develop alternatives that do not require travel in response to a changing budgetary 

environment. As a result, VHA cannot build the skills of its medical sharing contracting officers and overcome the challenges associated with their inexperience. 

Our report concluded that instability in the medical sharing workforce, due to 

high levels of turnover among medical sharing contracting officers, has limited 

VHA’s ability to develop high-quality SSACs throughout VHA. To develop and maintain medical sharing expertise within the network contracting offices, we recommended that VA (1) create a plan to increase retention of contracting officers that 

work in medical sharing teams, and (2) develop mechanisms to either provide existing training courses or create training courses that do not require travel for contracting officers working within network contracting offices. VA concurred with both 

of these recommendations and summarized planned steps to address these recommendations, including the development of a retention plan and soliciting agency 

leadership for assistance in resource prioritization to fund VHA health care contracting training courses. 

Selected Affiliates Reported Communication and Coordination Challenges 

with VHA Regarding SSACs 

We found that representatives from the five affiliates that provide services 

through SSACs to our selected VAMCs noted challenges related to receiving information on changes to VA and VHA requirements for SSACs. These included communication from VHA about what services the VAMC needed from the affiliate, the 

documentation requirements affiliates needed to submit to support their physician 

salary pricing, and changes to VHA’s approach to negotiations. The affiliate representatives also noted coordination challenges related to responding to SSAC solicitations. For example, representatives reported that it was challenging for them to 

provide services to VAMCs under short-term SSACs because the length of these contracts does not provide a commitment from VHA for the physicians hired by the affiliate to fulfill the contract. These affiliate representatives explained that it can 

take a year or longer to recruit a well-qualified academic physician and short-term 

SSACs do not provide the funding commitment needed by the affiliate to recruit 

these physicians. Federal internal control standards state that information should 

be communicated both internally and externally to enable the agency to carry out 

its responsibilities; for external communications, these standards state that management should ensure that there are adequate means of communicating with, and obLeonard.horne on VACREP0180 with DISTILLER

39 

21See GAO/AIMD-00-21.3.1. 

taining information from, external stakeholders that may have a significant impact 

on the agency achieving its goals. 21 In contrast to these standards, VHA’s efforts 

to cultivate better communication and coordination with affiliates at the national 

level have been limited, consisting of three regional forums with all its affiliates in 

fiscal year 2012. Since 2012, VA has relied primarily on local coordination with affiliates in lieu of regional forums, due to travel restrictions associated with VA’s recent budget shortfalls. As a result, VHA cannot ensure that it is effectively responding to the concerns of its affiliates. 

Our report concluded that concerns about VA’s communication and coordination 

with its affiliates, as voiced by representatives from the five affiliates we spoke 

with, demonstrate potentially ineffective communication streams with these critical 

partners. To ensure VHA effectively communicates with its affiliates regarding 

SSACs, we recommended that VA reach out to all its affiliates, identify any concerns, and determine the most effective method of communicating with affiliates regarding SSAC development. VA concurred with this recommendation and said that 

the VHA’s Office of Academic Affiliations and Medical Sharing Office will re-engage 

with the American Association of Medical Colleges to determine the best ways to 

gather input from affiliates on their concerns and determine the most effective 

method of communication with them regarding SSAC development. Furthermore, 

VA added that these offices will evaluate VA’s current partnerships with affiliates 

to identify both highly functional relationships that could be highlighted as best 

practices and partnerships that could benefit from targeted intervention. 

Chairman Coffman, Ranking Member Kuster, and Members of the Subcommittee, 

this concludes my prepared statement. I would be pleased to answer any questions 

that you may have at this time. 

GAO Contact and Staff Acknowledgments 

If you or your staff members have any questions concerning this testimony, please 

contact me at (202) 512–7114 or williamsonr@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last page of this 

statement. Other individuals who made key contributions to this testimony include 

Marcia A. Mann, Assistant Director; Cathleen Hamann; Katherine Nicole 

Laubacher; Dharani Ranganathan; and Said Sariolghalam. 

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f 

Prepared Statement of Janis Orlowski, M.D. 

Fostering Department of Veterans Affairs Relationships with Academic 

Affiliates to Improve Health Care Access and Quality for Veterans 

Executive Summary 

As you finalize legislation to reform and improve health care for our nation’s veterans, the AAMC respectfully asks that you recognize the importance of Department 

of Veterans Affairs (VA) academic affiliations and urges you not to undermine these 

important public-private partnerships. For 70 years, VA’s shared research, education, and patient care missions with academic medicine have improved access and 

quality of care for veterans, both inside and outside the VA system. 

The AAMC is a not-for-profit association comprised of all 145 accredited U.S. medical schools; nearly 400 major teaching hospitals and health systems, including 51 

VA medical centers; and more than 80 academic societies. The AAMC serves the 

leaders of America’s medical schools and teaching hospitals and their 148,000 faculty members, 83,000 medical students, and 115,000 resident physicians. 

To better align the VA and the nation’s medical schools and teaching hospitals, 

the AAMC supports the DOCs for Veterans Act (S. 1676, H.R. 3755, H.R. 4011); the 

Enhanced Veterans Health Care Act (H.R. 3879); and the Improving Veterans Access to Care in the Community Act (S.2633). 

The AAMC believes VA graduate medical education, research, joint ventures, solesource contracting, and the proposed Core Network of the Veterans Choice Program 

help ensure access for our nation’s veterans to the highest quality care by preserving academic affiliates as a direct extension of VA care and a preferred provider. 

This relationship serves multiple purposes: 

Access to Complex Clinical Care - Direct clinical care contracts allow academic affiliates to plan, staff, and sustain infrastructure for certain complex clinical care 

services that are scarcely available elsewhere, including trauma centers, burn care 

units, comprehensive stroke centers, and surgical transplant services. Solely relying 

on fee-basis mechanisms has the potential to reduce veterans’ access to care if 

teaching hospitals scale back services when faced with an uncertain patient load 

from the VA. 

Workforce Development - There is a pressing need for physicians to care for our 

nation’s veterans now and in the future. VA physician shortages are symptomatic 

of a broader trend, the proverbial ‘‘canary in the coal mine.’’ The AAMC projects a 

nationwide shortage of between 46,000–90,000 physicians by 2025. Though these 

shortfalls will affect all Americans, the most vulnerable populations, including veterans, in underserved areas will be the first to feel the impact. 

Physician Recruitment - The VA is an irreplaceable component of the U.S. medical 

education system, training more than 40,000 medical residents annually, but academic partnerships also facilitate the joint recruitment of faculty to provide care at 

both institutions. VA GME programs also educate new physicians on cultural competencies for treating veteran patients (inside and outside the VA), and help recruit 

residents to the VA after they complete their training. 

Innovation and Quality - The combination of education, research, and patient care 

at VA and academic medical centers cultivates a culture of curiosity and innovation. 

Under this tripartite mission, it is critical to expand VA research on chronic condiLeonard.horne on VACREP0180 with DISTILLER

41 

tions of aging veterans, emerging conditions prevalent among younger veterans, and 

the Million Veteran Program. Medical faculty must be skilled in the latest clinical 

innovations to train the next generation physicians that will care for veterans. 

State-of-the-art technology and groundbreaking treatments jump quickly from the 

research bench to the bedside, enhancing the quality of care provided to veterans. 

Good evening and thank you for this opportunity to testify on behalf of the Association of American Medical Colleges (AAMC). As you consider reforms to improve 

health care for our nation’s veterans, the AAMC respectfully asks that you recognize 

the importance of the Department of Veterans Affairs (VA) academic affiliations and 

urges you not to undermine these important partnerships. VA’s shared patient care, 

research, and education missions with academic medicine improve access and quality of care for veterans, both inside and outside the VA system. 

The AAMC is a not-for-profit association dedicated to transforming health care 

through innovative medical education, cutting-edge patient care, and 

groundbreaking medical research. Its members comprise all 145 accredited U.S. and 

17 accredited Canadian medical schools; nearly 400 major teaching hospitals and 

health systems, including 51 VA centers; and more than 80 academic societies. 

Through these institutions and organizations, the AAMC serves the leaders of 

America’s medical schools and teaching hospitals and their nearly 160,000 faculty 

members, 83,000 medical students, and 115,000 resident physicians. 

This year, the VA and academic medicine will celebrate their 70th anniversary. 

This relationship dates back to the end of World War II when the VA faced a severe 

shortage of physicians as nearly 16 million men and women returned from overseas, 

many with injuries and illnesses that would require health care for the rest of their 

lives. At the same time, many physicians were returning from the war without having completed residency training. 

The solution was VA-academic affiliations established under VA Policy Memorandum No. 2, making the VA an integral part of residency training for the nation’s 

physicians. In return, the VA improved access and quality of care for our nation’s 

veterans. What started as a simple idea in a time of great need has developed into 

an unprecedented private-public partnership. Today, the VA has over 500 academic 

affiliations, and 127 VA facilities have affiliation agreements for physician training 

with 135 of the 145 U.S. medical schools. 

THE ROLE OF ACADEMIC AFFILIATES IN CARING FOR VETERANS 

The AAMC believes VA sole-source contracting, joint ventures, and the proposed 

Core Network of the Veterans Choice Program help ensure access for our nation’s 

veterans to the highest quality care by preserving academic affiliates as a direct extension of VA care and a preferred provider. This relationship serves multiple purposes: 

Access to Complex Clinical Care 

VA sole-source contracting allows academic affiliates to plan, staff, and sustain infrastructure for complex clinical care services that are scarcely available elsewhere. 

U.S. teaching hospitals provide around-the-clock, onsite, and fully-staffed standby 

services for critically-ill or injured patients, including trauma centers, burn care 

units, comprehensive stroke centers, and surgical transplant services. Solely relying 

on fee-basis mechanisms like the Veterans Choice Program has the potential to reduce veterans’ access to care if teaching hospitals scale back services when faced 

with the inability to plan for a consistent patient load from the VA. 

Medical Education 

The VA is an irreplaceable component of the U.S. medical education system. The 

VA trains more than 40,000 medical residents within its walls annually. VA medical 

centers are the largest training sites for physicians, and fund approximately 10 percent of graduate medical education (GME). VA residency programs are sponsored by 

an affiliate medical school or teaching hospital. Without these affiliations, many VA 

programs would be unable to meet the requirements set by the Accreditation Council for Graduate Medical Education (ACGME). A provider referral preference for academic affiliates under clinical services contracts helps ensure an adequate and diverse patient load necessary for GME program accreditation. 

Physician Recruitment 

Academic partnerships between VA institutions and academic medical centers facilitate the joint recruitment of faculty to provide care at both sites. VA GME programs also educate new physicians on cultural competencies for treating veteran patients (inside and outside the VA), and help recruit residents to the VA after they 

complete their training. According to results from the VA’s Learners Perception Survey, residents that rotate through the VA are nearly twice as likely to consider employment at the VA. The Veterans Choice Act recognizes the importance of this reLeonard.horne on VACREP0180 with DISTILLER

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cruitment to addressing Veterans Health Administration (VHA) health professional 

shortages by creating up to 1,500 new VA GME positions. 

Innovation 

The combination of education, research, and patient care that occurs because of 

the close relationships between VA institutions and academic medical centers cultivates a culture of curiosity and innovation. Medical faculty must be skilled in the 

latest clinical innovations to train the next generation physicians that will care for 

veterans. State-of-the-art technology and groundbreaking treatments jump quickly 

from the research bench to the bedside, enhancing the quality of care provided to 

patients, including access to a majority of National Institutes of Health (NIH)-funded clinical trials. Without strong ties to academic affiliates, VA’s tripartite mission 

is put in jeopardy. 

AAMC SUPPORTS VA PLAN TO CONSOLIDATE COMMUNITY CARE PROGRAMS 

The Veterans Health Care Choice Improvement Act of 2015 (P.L. 114–41) required the VA to ‘‘develop a plan to consolidate all non-Department provider programs by establishing a new, single program to be known as the ‘Veterans Choice 

Program’ to furnish hospital care and medical services to veterans enrolled in the 

system of patient enrollment established under section 1705(a) of title 38, United 

States Code, at non-Department facilities.’’ 

The AAMC applauds the VA for including academic providers in its proposed VA 

Core Network of preferred providers under its Plan to Consolidate Community Care 

Programs delivered to Congress last year. The plan, which outlines how the VA will 

purchase veteran health care at non-VA facilities, proposes a tiered network of providers and allows academic affiliates to continue contracting directly with local VA 

medical centers. 

Current and Previous Challenges Hinder Clinical Relationships 

The AAMC supports VA’s goal of streamline and improve the efficiency of VA contracting with the nation’s medical schools and teaching hospitals. Unwieldy and 

drawn-out clinical contracting has hinder these relationships, despite their potential 

to greatly expand the reach of the VHA. Several of these issues have been raised 

previously by the AAMC and academic affiliates but there has been no subsequent 

VA reforms to their contracting process. For example, as the VHA faced patient-access issues across the country, 161 of our member medical schools and teaching hospitals have told us they had the capacity to help, yet were often stymied due to contracting hurdles - delaying, and in some cases preventing, veterans’ access to health 

care. 

Fee-basis care through a predecessor to the Veterans Choice Program, the ‘‘Patient-Centered Community Care (PC3)’’ program, inserted a middleman between 

longtime partners, resulting in delayed and misdirected referrals due to skewed 

third party incentives, additional costs for the VA and affiliates directed to the third 

party, and unnecessary administrative burden for all. The AAMC appreciates that 

the VA has now recognized the inefficient processes for onboarding physicians/institutions through third party administrators, which further delayed veteran access to 

care. 

The VA Plan to Consolidate Community Care Improves the Current System 

There are many aspects of the proposed VA plan that will improve VA-academic 

affiliations and veterans’ access to quality health care. The VA plan proposes a 

tiered network of providers. The Core Network would include federal and academic 

partners, and would be treated as a direct extension of VA care. The External Network would include a Standard Tier as well as a Preferred Tier for providers that 

demonstrate quality and value. 

Under the plan, academic affiliates would be able to continue contracting directly 

with the local VA Medical Center to provide clinical services. This contracting would 

be streamlined with national templates, but allow for local flexibility. 

Importantly, medical schools and teaching hospitals would also be eligible for feebasis care under the new External Network that is reimbursed at Medicare rates 

with customized fee schedules for selected areas and scarce specialty services. 

The VA would be responsible for case management and referrals instead of third 

party administrators. Additionally, VA would accept academic affiliates’ 

credentialing, with a new VA oversight committee to audit compliance with 

credentialing standards. The VA also plans to streamline referrals and health information sharing by automating these processes. 

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The plan also calls for greater monitoring of outcomes and quality metrics for nonVA providers. VA is expected to utilize existing metrics, such as those under the 

Centers for Medicare and Medicaid (CMS) Hospital Value-Based Purchasing (VBP) 

program. 

Recommendations 

The AAMC recommends that the Veterans Choice Program continue a provider 

referral preference for academic affiliates. We support passage of the Improving Veterans Access to Care in the Community Act (S.2633) implement the VA plan to consolidate community care. This bill would allow VA to create a tiered network that 

facilitates provider participation, but importantly does not dictate how veterans will 

use the network. For academic affiliates who do not yet participate in the VA Choice 

Program, the Core Network will enable VA to sustain and strengthen relationships 

with affiliates and allow veterans access to the high quality, timely care these affiliates deliver. 

The Veterans Choice Program should also continue full Medicare reimbursement 

rates, including medical education costs. Additionally, we respectfully ask that the 

agency and Congress consult with representatives from the academic affiliate community as you implement the updated Veterans Choice Program. One important 

venue is the VA’s National Academic Affiliations Council (NAAC) federal advisory 

committee, established by VA for the very purpose of advising the Secretary on 

these issues. 

IMPROVING VA SOLE–SOURCE CONTRACTING WITH AFFILIATES 

While it is important to have performance standards and data, they will only confirm what we already know: the process for long-term, high value sole-source affiliate contracts (SSACs) is too arduous, resulting in short-term SSACs as a fallback. 

In other words, the problem is the process itself, not the oversight of the process. 

The most frequently identified barrier is the additional review of contracts greater 

than $500,000 by the VA Office of Inspector General (OIG). To apply similar review 

to short-term contracts under $500,000 would only create the same problems we’ve 

seen with long-term, high-value SSACs. 

Short-term agreements are made as services are about to expire and leave veterans in a lurch. AAMC members frequently report that short-term contracts are 

used as placeholders for long- term, high-value contracts. Both VA medical centers 

and their affiliates would prefer long-term, high-value SSACs, but the process and 

OIG oversight prevents or significantly delays agreements. As such, the focus should 

be on improving the process of long-term, high-value SSACs, rather than imposing 

similar arduous oversight on short-term SSACs. 

In addition to improving turnaround for SSAC development and approval, the 

contracting rules for the VA are not designed with clinical services in mind. The size 

of clinical services contracts varies greatly, but AAMC members report that virtually all 5-year contracts with the VA are between $2 million and $10 million, far 

exceeding the current $500,000 threshold for additional review. As an example, the 

AAMC estimates that contracts for the following clinical services would surpass 

$500,000 and trigger additional review: 

• 10 uncomplicated cardiac surgeries 

• 4 burn cases 

• 5 intensive care unit cases 

• 10 outpatient radiation cases 

• 10 esophageal cancer surgery cases 

The AAMC understands the need for federal oversight, but often the administrative bodies designed to review and enforce this oversight have a less than full understanding of the value in contracts with academic affiliates. This value is why VA 

Directive 1663 states, ‘‘Sole-source awards with affiliates must be considered the 

preferred option whenever education and supervision of graduate medical trainees 

is required (in the area of the service contracted). The contract cost cannot be the 

sole consideration in the decision on whether to sole source or to compete.’’ 

However, by VA’s own estimation, once the decision to contract out care has been 

made, VA sole-source contracting with trusted academic affiliates takes longer than 

the formal competitive solicitation process - officially between 17–28 weeks compared to 14–18 weeks, respectively, according to VA Directive 1663. The contracting 

decision tree from VA Directive 1663 (attached as an Appendix) outlines the complexity and administrative burden embedded in the process. Sole-source contracts 

over $500,000 go through an additional 10–11 weeks of review (23–25 weeks total) 

compared to contracts under $500,000. Contracts over $5 million require an additional 3 weeks (26–28 weeks total). AAMC members report additional delays of up 

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44 

to 18 months as a result of the VA OIG pre-award audit for sole-source contracts 

that exceed $500,000. 

Further delaying action, the VA can require academic affiliates to submit documentation of all costs associated with physician employment. As an example, this 

might include faculty contracts, continuing education policies, time and effort reports, benefits costs, vacation policies, time and attendance policies, the distance 

and time it takes to walk from the hospital to the VA hospital, and even the monthly cost of parking. The VA reviews these items, in some cases for months. There 

are often a variety of questions about the data submitted, some substantive but 

many that seem to be of dubious value. 

As a result of approval delays, it is necessary to execute a series of extensions 

or short-term contracts to continue to be paid for services. This requires a great deal 

of time and effort on the part of both the VA and the academic affiliate. In some 

cases, payment is delayed as a result of this process. In the long term, it makes 

it difficult for departments to recruit faculty for the VA because there is no commitment for future funding. 

Recommendations 

Local VA medical centers and their academic affiliates see the benefits of these 

relationships, but are stymied by a process mired in misplaced oversight. Solesource contracting with trusted academic affiliates should not take longer than the 

competitive bid process. The AAMC recommends exempting sole-source contracting 

with academic affiliates from additional OIG review triggered by the $500,000 

threshold, or raising the trigger to at least $2.5 million for 5- year contracts. 

As referenced in the VA’s consolidation plan, the AAMC appreciates VA’s willingness to develop pre-approved template contracts that reimburse certain services 

with at least Medicare rates. Additionally, we have discussed the development of 

standardized overhead rates to eliminate unnecessary negotiations and contract administration. 

Involving individuals with academic appointments in the contracting process 

should not be considered a conflict of interest, but rather recognized for the value 

they add to VA leaderships’ ability to contract for clinical services. The AAMC recommends allowing VA officials with academic appointments to participate in contract negotiations with the academic affiliate. 

VA must recognize the unique costs and circumstances associated with clinical 

contracting compared to other goods and services. The AAMC recommends increased 

training for VA contracting officers regarding clinical services contracting. 

Academic affiliates also have a role to play in improving these negotiations. We 

have committed to working with our institutions to develop single points of contact 

instead of renegotiating the same contract with each program head. 

ESTABLISHING JOINT VENTURES WITH ACADEMIC AFFILIATES 

To better align the VA and the nation’s medical schools and teaching hospitals, 

the AAMC supports the Enhanced Veterans Health Care Act (H.R. 3879). The VA 

and academic medicine have enjoyed a 70-year history of affiliations to help care 

for those who have served this nation. This shared mission can be strengthened 

through joint ventures in research, education, and patient care. Already our institutions and medical faculty collaborate in these areas, but often VA lacks the administrative mechanisms to cooperatively increase medical personnel, services, equipment, infrastructure, and research capacity. 

Current authority for VA to coordinate health care resources with affiliates has 

been narrowly interpreted by VA Office of General Counsel and the OIG. VA can 

occupy and use non-VA space for limited purposes, but only under 6-month sharing 

agreements, 6-month revocable licenses, or 5-year leasing agreements - all of which 

have failed in practice. 

The Enhanced Veterans Healthcare Act of 2015 would direct the VA to enter into 

sole-source agreements for health care resources (including space) with schools of 

medicine and dentistry, university health science centers, and teaching hospitals to 

deliver care to our veterans to meet the growing demand for veteran health care 

services. 

INVESTING IN VA–CENTRIC RESEARCH FOR CLINICIAN RECRUITMENT 

The VA Medical and Prosthetic Research and Development program is widely acknowledged as a success on many levels, all directly leading to improved care for 

veterans and an elevated standard of care for all Americans: 

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• Advancing Patient Care - VA research has made critical contributions to advancing standards of care for veterans in areas ranging from tuberculosis in the 

1940s to immunoassay in the 1950s to today’s ongoing projects dealing with Alzheimer’s disease, developing and perfecting the DEKA advanced prosthetic arm 

and other inventions to help the recovery of veterans grievously injured in war, 

studies in genomics and in chronic pain, cardiology, diabetes, and improved 

treatments for PTSD and other mental health challenges in veterans. These 

studies and their findings ultimately aid the health of all Americans. 

• Recruitment and Retention - VA research is a completely intramural program 

that recruits clinicians to care for veterans while conducting biomedical research. More than 70 percent of these clinicians are VA-funded researchers. VA 

also awards more than 500 career development grants each year designed to 

help retain its best and brightest researchers for long and productive careers 

in VA health care. 

• High-Quality Research - VA researchers are well published (between 8,000 and 

10,000 refereed articles annually) and boast three Nobel laureates and seven 

awardees of the Lasker Award (the ‘‘American Nobel Prize’’); this level of success translates effectively from the bench to the veteran’s bedside. 

• Investing Taxpayers’ Dollars Wisely - Through a nationwide array of synergistic 

relationships with other federal agencies, academic affiliates, nonprofit organizations, and for-profit industries, the program leverages a current annual appropriation of $631 million into a $1.9 billion research enterprise. 

Sustaining Research Investment and Addressing Emerging Veteran Research Needs 

The AAMC strongly believes funding for VA research must be steady and sustainable to meet current commitments while allowing for innovative scientific growth to 

address critical emerging needs. 

Despite documented success, since FY 2010 appropriated funding for VA research 

and development has lagged far behind biomedical research inflation, resulting in 

a net loss of nearly 5 percent of VA purchasing power. As estimated by the Department of Commerce Bureau of Economic Analysis and the National Institutes of 

Health (NIH), to maintain VA research at current service levels, the VA Medical 

and Prosthetic Research appropriation would require $17 million in FY 2017 (a 2.7 

percent increase over the 2016 pending appropriation). Should the availability of research awards decline as a function of budgetary policy, VA risks terminating ongoing research projects and losing these clinician researchers who are integral to providing direct care for our nation’s veterans. Numerous meritorious proposals for new 

VA research cannot be awarded without a significant infusion of additional funding 

for this vital program. 

The AAMC believes an additional $17 million in FY 2017, beyond uncontrollable 

inflation, is necessary for expanding research on conditions prevalent among newer 

veterans as well as continuing inquiries into chronic conditions of aging veterans 

from previous wartime periods. For example, VA research is uniquely positioned to 

advance genomic medicine through the Million Veteran Program (MVP), an effort 

that seeks to collect genetic samples and general health information from one million veterans over the next five years. Additional funding will also help VA support 

emerging areas that remain critically underfunded, including: 

• Post-deployment mental health concerns such as PTSD, depression, anxiety, 

and suicide; 

• The gender-specific health care needs of the growing population of women veterans; 

• Engineering and technology to improve the lives of veterans with prosthetic systems that replace lost limbs or activate paralyzed nerves, muscles, and limbs; 

• Studies dedicated to understanding chronic multi-symptom illnesses among 

Gulf War veterans and the long-term health effects of potentially hazardous 

substances to which they may have been exposed; and 

• Innovative health services strategies, such as telehealth and self-directed care, 

relatively new concepts that can lead to accessible, high-quality, cost-effective 

care for all veterans, as VA works to address chronic patient backlogs and reduce wait times. 

The Million Veteran Program 

The VA research program is uniquely positioned to advance genomic medicine 

through the MVP, an effort that seeks to collect genetic samples and general health 

information from 1 million veterans over the next five years. When completed, the 

MVP will constitute one of the largest genetic repositories in existence, offering treLeonard.horne on VACREP0180 with DISTILLER

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mendous potential to study the health of veterans. To date, more than 450,000 veterans have enrolled in the MVP. 

To support the President’s Precision Medicine Initiative, AAMC recommends an additional $75 million to process the first 100,000 samples without reducing funding 

for other designated research areas. 

VA Research Infrastructure 

State-of-the-art research also requires state-of-the-art technology, equipment, and 

facilities. For decades, VA construction and maintenance appropriations have failed 

to provide the resources VA needs to replace, maintain, or upgrade its aging research facilities. The impact of this funding shortage was observed in a congressionally-mandated report that found a clear need for research infrastructure improvements systemwide. Nearly 40 percent of the deficiencies found were designated ‘‘Priority 1: Immediate needs, including corrective action to return components to normal service or operation; stop accelerated deterioration; replace items that are at 

or beyond their useful life; and/or correct life safety hazards.’’ 

The AAMC believes designating funds to specific VA research facilities is the only way to break this stalemate. In 2010, VA estimated that approximately $774 million 

would be needed to correct all of the deficiencies found throughout the system; only 

a fraction of that funding has been appropriated since. A follow-up report is already 

underway and will guide VA and Congress in further investment in VA research 

infrastructure to recruit the next generation of clinicians to care for the nation’s 

next generation of veterans. However, Congress needs to begin now to correct the 

most urgent of these known infrastructure deficiencies, especially those that concern 

life safety hazards for VA scientists and staff, and veterans who volunteer as research subjects. 

Recommendations 

The Administration and Congress should provide at least $740 million for the VA 

Medical and Prosthetic Research program for FY 2017 to support current research 

on the chronic conditions of aging veterans, emerging research on conditions prevalent among younger veterans, and the Million Veteran Program. 

The Administration and Congress should provide funding for up to five major con- struction projects in VA research facilities in the amount of at least $50 million and 

appropriate $175 million in nonrecurring maintenance and for minor construction 

projects to address deficiencies identified in the independent VA research facilities 

review provided to Congress in 2012. 

TRAINING THE NEXT GENERATION OF PHYSICIANS TO CARE FOR VETERANS 

To help VA address patient access and recruitment issues, the AAMC supports 

the Delivering Opportunities for Care and Services (DOCs) for Veterans Act (S. 

1676, H.R. 4011) and H.R. 3755. VA physician shortages are symptomatic of a 

broader trend, the proverbial ‘‘canary in the coal mine’’ for the nation’s health system. The AAMC projects a nationwide shortage of physicians between 61,700 and 

94,700 physicians by 2025. Though these shortfalls will affect all Americans, the 

most vulnerable populations in underserved areas will be the first to feel the impact 

(e.g., the VA, Medicare and Medicaid patients, rural and urban community health 

centers, and the Indian Health Service). 

The study, conducted by the Life Science division of the global information company IHS Inc., and prepared on behalf of the AAMC, and estimates a shortfall of 

between 14,900 and 35,600 primary care physicians and between 37,400 and 60,300 

non-primary care specialties. Similarly, an AAMC review of physician vacancies advertised by the VHA found that approximately two thirds were for non-primary care 

specialists, and about one-third were for primary care providers. 

To address this shortage, the nation’s medical schools have done their part by expanding enrollment by 30 percent. However, there has not been a commensurate increase in the number of GME residency training positions. The primary barrier to 

increasing residency training at teaching hospitals - and the U.S. physician workforce in turn - is the cap on Medicare GME financial support, which was established 

in 1997. Thankfully, the DOCs for Veterans Act helps address this hurdle. 

Just as Medicare GME supports Medicare’s share of training costs at institutions 

that care for Medicare beneficiaries, VA GME supports residency training programs 

based at VA medical centers. According to results from the VA’s Learners Perception Survey, residents that rotate through the VA are nearly twice as likely to consider employment at the VA. The Veterans Access, Choice, and Accountability Act 

of 2014 (VACAA, P.L. 113–146) instructs VA to add 1,500 GME residency slots over 

five years at VA facilities that are experiencing shortages. However, without an inLeonard.horne on VACREP0180 with DISTILLER

47 

crease in Medicare GME support, there may not be enough affiliate residency positions to accommodate this VA expansion. 

Most VA residency programs do not operate independently. They rely upon the 

existing administrative and training infrastructure maintained by the nation’s medical schools and teaching hospitals. Nearly all VA residency programs are sponsored 

by an affiliate medical school or teaching hospital. 

To assure that VA-based residents receive the highest quality training possible, 

they need diverse and supervised experiences in a variety of clinical settings. This 

includes training experiences at the nation’s teaching hospitals and the multispecialty practices run by the nation’s medical schools. While there is considerable variability among VA medical centers, programs, and specialties, on average medical 

residents rotating through the VA spend approximately three months of a residency 

year at the VA (i.e., a quarter of their training). 

As such, simply increasing VA GME funding alone will not address the VA crisis. 

Without a corresponding increase in Medicare GME support, VA medical centers 

will be unable to capitalize fully on increases in VA GME funding. The DOCs for 

Veterans Act will allow affiliate teaching hospitals that are already at or above their 

1997 Medicare GME cap to receive Medicare support for VACAA residents while 

they are training at a non-VA facility. 

CONCLUSION 

Mr. Chairman and Members of the Committee, thank you for the opportunity to 

testify on these important issues. To improve the relationships between the VA and 

the nation’s medical schools and teaching hospitals, the AAMC reiterates its support 

the following bills: 

• The Delivering Opportunities for Care and Services (DOCs) for Veterans Act (S. 

1676, H.R. 4011) and H.R. 3755; 

• The Enhanced Veterans Health Care Act (H.R. 3879); and 

• The Improving Veterans Access to Care in the Community Act (S.2633). 

The VA is at a crossroads. VA GME, joint ventures, sole-source contracting, and 

the proposed Core Network of the Veterans Choice Program can strengthen the 70- 

year history of VA- academic affiliations and prepare our country for the next chapter of VA health care. The AAMC and our member institutions will continue to work 

with the Congress and the VA to address the challenges and opportunities to ultimately improve care for veterans and all Americans. 

APPENDICES 

VA Directive 1663 Contracting Decision Tree 

Biography of Janis Orlowski, M.D., MACP 

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Insert offset folio 1 here 25182.001Leonard.horne on VACREP0180 with DISTILLER

August 10, 2006 

VAMC Identifies a 

Healthcare Need 

HR Certification 

that recruitment effortsl+----1 

were unsuccessful 

Patients to 

Another 

VAMC or 

Appendix D 

Conduct Needs 

Assessment 

Cannot Recruit -

Justification 

Needed to 

Support 

Healthcare Resource Decision Tree 

First Priority- Hire 

Page 1 

VA DIRECTIVE 1663 

APPENDIXD 

fvEs 

YES 

,/ "' _,--------

( Direct Hire or ) HR Fee Basis 

Authority 

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VA DIRECTIVE 1663 APPENDIXD 

August 10, 2006 

Appendix D, Page 2 

Healthcare Resource Decision Tree - Decision to Contract O

D-2 

Decision to 

Contract Out 

Annual review of 

waivers to 

contract out 

Request/Justification 

for Sole Source with 

Affiliate from Medical 

Center Director 

Sole 

Source 

NO 

Compete 

YES 

YES 

Compete 

CompetE 

Formal 

Competitive 

Solicitation 

Process 

Begins 

(Continued 

or Sole 

Source? 

7409 or 

8153? 

Page 3) 

Formal Non-competitive 

Solicitation Process 

Begins 

(Continued Page 4) 

Submit Re

Non-com

Interim C

Autho

1 

Interim Con

Emergency 

(Dual path 

solicitation 

Insert offset folio 3 here 25182.003Leonard.horne on VACREP0180 with DISTILLER

August 10, 2006 VA DIRECTIVE 1663 

APPENDIXD 

Appendix 0, Page 3- Healthcare Resource Decision Tree 

Formal Competitive Solicitation Process 

Formal Competitive 

Solicitation Process Begins 

Develop Solicitation (3 weeks) 

Sharing Office sends to OA&MM, 

PCS (2 weeks), Legal Counsel (1 

weeks) for review. 

Receive proposal and negotiate 

contract. (4 -5 weeks) 

If solicitation $1.5M or more, 

resource sharing office for leg

technical review. Include jus

tions and certifications. All co

for transplants, regardless o

value. must be sent for rev

Pr

M

(

If approved, prepare P

make award." 

(2 weeks) 

(17·18 weeks) 

'DND & CO will certify that 

all processes have been 

followed 

Insert offset folio 4 here 25182.004Leonard.horne on VACREP0180 with DISTILLER

VA DIRECTIVE 1663 

APPENDIXD 

August10,2006 

Appendix - Page 4 - Healthcare Resource Decision Tree 

Formal Non-competitive Solicitation Process 

D-4 

Solicitation sent to sharing office 

for legal and technical review. 

lndude justifications and 

certifications. All contracts for 

transplant, regardless of dollar 

value, must be sent for review. 

Make changes and issue 

solicitation. (2 weeks) Send in 

PDF file format to affiliate. 

Receive proposal 

and cost 

When review results are received 

from OIG, begin price negotiations. 

(4-5 weeks) 

Send proposed contract & PNM to 

PCS through Sharing Office for 

final review of pricing prior to 

award. (2 weeks) 

If $5M or more, send to OA&MM 

for business clearance. {3 weeks) 

make 

(1 w

(17-1

Under 

Make 

(1 

(23-2

If a

mak

(1 

(26-2

·oND & CO w

all processes 

follo
f 

52 

Prepared Statement of Nancy Watterson-Diorio 

EXECUTIVE SUMMARY 

Testimony by Nancy Watterson-Diorio, board member of the National Association 

of Veterans’ Research and Education Foundations (NAVREF) and CEO of the Boston VA Research Institute, Inc. (BVARI). 

The VA Nonprofit Corporations (VA NPCs or NPCs) fulfill an important role at 

the VA, in addition to the academic affiliates (AAs), in administering extramural research. I believe the NPCs can contribute much more and be of greater benefit to 

our veterans if the lingering barriers surrounding consistent national practices were 

removed. To that end, I respectfully request consideration of the following recommendations: 1) Allow NPCs to pay investigators to the same extent as AAs. 2) 

Provide NPCs right-of-first-refusal on administering all awards supporting VA research. 3) Reduce the level of variability from site-to-site by creating general guidelines and decision trees that remove or reduce conflicts of interests among decisionmakers. 

The NAVREF network consists of 82 VA NPCs that are co-located within the VA 

medical centers (VAMCs or VAs) across the country. As reported in the 2014 Annual 

Report to Congress, the NPCs raised over $260M of annual extramural research and 

educational awards specifically targeted toward the VA’s mission of supporting veterans’ care. This represents approximately 15% of the total portfolio supporting research at the VA. 

The NPCs’ congressional founding legislation solved several areas of difficulty for 

VA research and education programs: 1) It discontinued handshake agreements 

with no contractual obligations and acknowledgement of the VA’s research successes. 2) It supplemented VA’s intramural funding expertise with expert support 

for extramural pre- and post-award funding and unique compliance knowledge. 3) 

It leveraged VA’s ability to expand its research portfolio to support clinical trials 

and federal funding; thus, allowing more veterans to be supported with state-of-theart research knowledge and the opportunity to be treated with the newest therapies. 

4) It fostered an innovative spirit of public-private sponsorship. 

There are many advantages to using NPCs as envisioned by Congress. First, 

NPCs rigorously comply with federal regulations and are subject to VA oversight 

that includes recurring VA audit inspections. Additional VA oversight includes statutory VA board members at each NPC and a Nonprofit Oversight Board at VA Central Office. In addition, NPCs operate transparently by providing an annual report 

to Congress detailing their accomplishments and successes in support of VA research. 

There are also challenges that we must find ways to overcome in order to successfully carry out the mission and purpose of the congressional vision for NPCs: 1) The 

NPCs are unable to compete on a level playing field with the AAs because we are 

unable to pay investigators in the same manner. 2) The decision-making process 

within VA, regarding the administration of federal grants, varies from site-to-site. 

Frequently, Principal Investigators (PIs) who are dually-appointed at the AA, or 

local leadership, make the determination on who will administer the research, 

which is a potential conflict of interest. 

By congressional design, the NPCs exist to advance veterans’ health through innovative research and education programs, and I request that we remove all barriers 

and employ all available tools to accomplish that powerful mission. 

WITNESS DISCLOSURE STATEMENT

Begins on following page. 

DISCLOSURE OF FOREIGN PAYMENTS TO WITNESSES

I, Nancy Watterson-Diorio, attest that I am a nongovernmental witness and that 

I am not receiving foreign payments or contracts as a witness or a representative 

of the National Association of Veterans Research and Education Foundation or the 

Boston VA Research Institute, Inc. and have never received foreign payments. 

Nancy Watterson-Diorio 

CURRICULUM VITAE: NANCY WATTERSON-DIORIO

Begins on following page. 

TESTIMONY 

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53 

Chairman Coffman, Ranking Member Kuster, esteemed Subcommittee Members, 

I am Nancy Watterson-Diorio, and I am honored to be with you here today to share 

with you my experiences and insights regarding the Department of Veterans Affairs’ 

medical research program and the role of the Congressionally authorized VA-affiliated nonprofit research and education corporations. As a board member of the National Association of Veterans’ Research and Education Foundations (NAVREF) and 

CEO of the Boston VA Research Institute, Inc. (BVARI), I have over twenty years 

of experience in administering VA research through VA nonprofit corporations. 

My career path has been exclusively spent engaged in medical research administration, first at the academic affiliate (15 years) and then at the Boston VA Research Institute, Inc. (BVARI), the VA nonprofit located at the VA Boston 

Healthcare System (20 years). I was told when I started at BVARI (and just 3 years 

from its inception) that ‘‘if you build it, they will come.’’ BVARI’s revenues were 

$100,000 in 1996 and only a few active investigators were interested. After 20 years, 

BVARI has increased its annual revenue to $14M, much of which is supported by 

the Department of Defense (DoD). Key areas of interest include posttraumatic stress 

disorder/syndrome (PTSD), traumatic brain injury (TBI), the Precision Medicine Initiative, and a newly developed clinical trials network supporting the northeast medical centers. I am proud of the work we have done at BVARI to support research 

that has positively impacted so many veterans and their families. 

Veterans’ Affairs Nonprofit Corporations (VA NPCs or NPCs) are congressionally 

authorized entities under US Public Law 111–163 Title 38 - Subchapter IV - Research and Education Corporations (‘‘Title 38′′) sponsored by a great advocate for 

our nation’s veterans, the late Congressman Sonny Montgomery. The mission and 

purpose of the VA NPCs is ‘‘to provide a flexible funding mechanism for the conduct 

of approved research and education’’ at an affiliated VA Medical Center (VAMC or 

VA) 1. Under Title 38, NPCs are allowed to ‘‘accept, administer, retain, and spend 

funds derived from gifts, contributions, grants, fees, reimbursements, and bequests 

from individuals and public and private entities.[and] enter into contracts and 

agreements with individuals and public and private entities’’1. Recognizing that VAappropriated funds are not the only source of revenue available to support US veterans’ research and educational programs, Congress established VA NPCs to enable 

more avenues to support and add capacity to these programs. The mission of the 

NPCs is to advance veterans’ health through innovative research and education programs by providing the technical support and the management expertise necessary 

to best enable their success. Over the past 28 years, since the establishment of the 

NPCs, the original concept has yielded great success; for the 10-year period from 

2005–2014, NPCs expended over $2 billion in support of VA research activities, expending over $260M in 2014 alone in direct support of improving veterans’ health. 

This represents over 4,000 research and education activities. Funds are predominantly federal (excluding VA appropriated dollars), at 72% of total, with the rest 

made up of private industry trials, foundation grants, donations, and other sources2. 

The NPCs are accountable under congressional oversight, which requires a detailed annual report to the Committees on Veterans’ Affairs of the Senate and 

House of Representatives, triennial Nonprofit Program Office (NPPO) audit and direct oversight under the federal Nonprofit Oversight Board (NPOB), as well as other 

regulatory requirements including federal, state, and local regulations governing 

their 501(c)(3) benefit status1. Those NPCs who are recipients of federal awards and 

meet certain financial threshold criteria are also subject to government’s Single 

Audit requirements under the Uniform Guidance policy. 

In addition to the NPCs, most VAs are affiliated with university academic affiliates (AAs). The affiliation supports healthcare, research, and medical education and 

training. The academic affiliation constitutes direct advantages to veterans’ health 

research, most notably, it allows the VAs to recruit and retain the most highly 

qualified research Principal Investigators (PIs), who traditionally have an academic 

faculty appointment at the non-governmental academic medical centers (AMCs). At 

the VA, this faculty appointment exists in addition to their VA appointment, and 

thus they are dually appointed. Under this dual appointment, PIs may conduct research at the AA under their academic appointment, but in keeping with the intent 

of Title 38, their AA research must be clearly severable from their VA-approved research. With this option available to dual appointments, there are, however, notable 

inconsistencies around the nation about how this distinction is overseen and enforced. With the objective of achieving the maximum effectiveness of the affiliation 

in reference to the research aim, I am not aware of any specific definitions, metrics, 

or governance requirements guiding this partnership, which as noted may function 

differently at every local site. 

Problem Statement and Recommended Action 

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Due to the inconsistencies of national practice on whether the NPCs or the AAs 

administer extramural research programs for the VA, the potential growth of NPCs 

and their ability to support veterans’ research programs have yet to achieve their 

full potential that I believe was originally envisioned by Mr. Montgomery. A recommendation in the VA’s 2009 Blue Ribbon Panel Final Report, conducted in partnership with the American Association of Medical Colleges (AAMC) stated (emphasis added): 

‘‘Transformative medical research requires investigators with disparate expertise. 

Moreover, many research questions are best addressed collaboratively. To enhance 

the translation of biomedical science into improved health care, the Panel recommends that VA and its academic partners redouble their efforts to develop new 

knowledge through collaborative research. The Panel endorses the need for a strong 

VA intramural research program, but cautions that policies limiting more dynamic 

collaboration with affiliated institutions [including the NPCs] may ultimately undermine the quality of the Nation’s overall research enterprise.’’3 

In this context, there are many areas to pursue in recognition of this recommendation. One such area I believe to be important is that the VA establish clear 

guidelines through its Office of Academic Affiliations governing policy for the administration of non-VA funded research activities that maximizes the benefits of the 

NPC and generally offers the NPC ‘‘right of first refusal’’ for all research efforts 

where the majority of effort occurs physically within the VA. 

Background and NPC Qualifications 

As statutorily established and governed entities, and due to their close relationship and direct knowledge of the VA system, NPCs are uniquely qualified to acquire 

funding and administer research awards supporting veterans’ health priorities. 

Additionally, NPC personnel and their volunteers are not paid federal employees 

and are therefore not restricted from fundraising activities like their federal colleagues, allowing them to directly solicit funds in support of their mission-an avenue 

that has improved veterans’ health outcomes, as all funds raised are reinvested in 

the NPC’s veteran research and educational programming in accordance with its 

statement of purpose. 

The NPCs also provide a specialized role significant in securing research grant 

and contract funding opportunities. As specialists in veterans’ health programs, the 

NPCs are highly qualified and have direct access to the resources and expertise necessary for successful programming. Some of the benefits of an NPC’s internal expertise include access to government and non-government space; knowledge of and direct access to VA infrastructure, including the complexities of government information technology (IT); professional connections and recruitment channels to specialized research program staff; familiarity of the federal Without Compensation (WOC) 

process and direct relationships with VA HR personnel for processing WOCs; the direct ability to reimburse VA personnel for their work on a funded project; and direct 

understanding and knowledge of the unique effort-reporting and payment practices 

for VA PIs, including the ‘‘60-hour workweek’’ and effort disclosure Memorandum 

of Understanding (MoU), which are discussed in more detail below. 

The NPCs are also recognized by the Department of Defense (DoD) as the direct 

conduit to the VA patient population, an important criterion on grant review and 

funding allocation due to the DoD’s programmatic priorities. As of the 2014 NPC 

annual report to Congress, federal funding represented 87% of the top five NPCs’ 

research portfolios2. The NPCs’ role as specialized program experts can be compared 

to a disease-focused hospital that is seen as a national leader in that disease. There 

are, for example, numerous hospitals, AAs, and corporate entities pioneering advances in cancer research outcomes, but a few major dedicated cancer treatment 

and research institutes across the nation remain the most highly-renowned and receive very large annual funding allocations from research awards and donors. When 

comparing the NPCs’ expertise and dedicated efforts, they serve in a comparable capacity for veterans’ health advances. 

NPCs also have significant expertise in negotiating and administering industryfunded clinical trial research agreements, by using the federally approved VA Cooperative Research and Development Agreement (CRADA) mechanism. Veterans represent a large patient population that encompasses some of the nation’s most serious health concerns, which are priority areas for many pharmaceutical and device 

companies’ research and development initiatives. More importantly, veteran patients deserve access to the most cutting-edge therapies and treatments, which frequently can only be found through industry-funded clinical trials. NPCs provide the 

VA with a mechanism to accept and administer these much-needed trials. The VA 

also maintains a robust inventory of patient data and bio-specimen samples, which 

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55 

offers researchers rich insight into many diseases and their treatments. They have 

been leaders in major discoveries and treatment advances in over thirty disease 

areas, most significantly including PTSD and TBI, and in many cases, the NPCs enabled the research funding for these advances4. 

A final area in which NPCs support veteran medical research is through the direct financial support of Veterans’ Equitable Resource Allocation (VERA) under the 

Research Support weighting program. VERA Research funds are managed by the 

VA to ‘‘acknowledge the additional expense and provide an allocation of dollars for 

a facility to support and sustain a research mission’’5. Revenue supporting VA-administered research programs, including NPC revenue, is weighted toward research 

support at 100%, whereas non-VA administered programs, including AA revenue, is 

weighted at 25%-75%5. According to the 2015 VERA Book, ‘‘by weighting VA-administered research at 100% and discounting non-VA administered research, there is an 

incentive to encourage VA administered research’’5. NPC revenue, therefore, more 

directly supports veterans’ research initiatives. 

Significant Challenges Affecting NPCs and Impacting Research to Improve 

Veteran Health Outcomes 

Among the most significant and pervasive issues for many NPCs are: 1) the inconsistent management of National Institutes of Health (NIH)-funded research award 

administration, and 2) PI salary payments on NIH (and other) awards. 

The current practices surrounding NIH award administration varies greatly 

across the US. In some regions, AAs are administering the entire VA NIH-funded 

research portfolio; in others, NPCs maintain a productive relationship with the AAs 

and collaborate on NIH award administration; at still others, NIH award administration is considered by local VA officials on a case-by-case basis. Due to a lack of 

consistent policy interpretation, at this time, several VAs prohibit their NPCs from 

administering NIH awards, even though there is no formal regulation against doing 

so. As the NIH is the ‘‘largest public funder of biomedical research in the world’’6, 

this represents a significant impairment to NPC growth and development. When 

AAs administer VA-approved research programs in lieu of the NPCs, there is often 

a significant increase in the amount of federal funding allocated to the program due 

to the often substantially higher F&A rates at the AAs in contrast to the NPCs. The 

biggest discrepancy in F&A rates between NPCs and AAs is seen in the small- to 

medium-sized NPCs, who typically do not have access to the NIH portfolio (data 

available upon request to NAVREF). These NPCs’ growth trend has plateaued after 

their initial establishment, potentially due to the tendency at many VAMCs to allow 

all NIH awards to flow to the AA regardless of where the majority of effort is being 

exerted. Whether or not intentional, imposing barriers to NPCs’ access to the largest 

source of US medical research funding is akin to cutting off the lifeblood of the 

NPCs, which in turn contributes to a reduction in veterans’ research programs’ ability to thrive. 

Additionally, there are very specialized policies in the NIH Grants Policy Statement (NIHGPS or GPS) pertaining to jointly-affiliated VA–AA PIs, which are a 

major contributor to the inconsistencies in national understanding and practice surrounding federal award administration. In my conversations with numerous representatives on this issue, I have observed that many parties hold to historical interpretations and unilateral application of the NIH GPS language, which currently 

restricts the ability of entities to pay VA–AA joint-appointed PIs on NIH awards 

such that only a university AA may make those payments7. An NPC may be the 

recipient of NIH awards, but may not pay the PI’s salary directly unless it is in the 

form of a reimbursement to the VA for the PI’s official VA tour of duty7. Hence, 

if the PI is working on the project above-and-beyond his or her VA tour of duty (an 

allowable and recognized activity as long as total professional effort [TPE] remains 

within 60 hours per week across all employers [‘‘the 60-hour workweek’’]), the only 

functional mechanism for payment of that time is via a Joint Personnel Agreement 

(JPA), a convention that allows an AA to employ and issue salary payments when 

an NPC is the award recipient. The salary for PI effort is awarded to the NPC, but 

through a JPA agreement, the NPC agrees to send those awarded salary funds to 

the AA, who issues the PI’s paycheck using those funds. After comprehensive research of the history and applicability of these practices, I have discovered that 

other agencies (federal and non-federal) accept the 60-hour workweek concept and 

have no objections to NPCs issuing PI salary payments directly, without using a 

JPA. However, local practices and a lack of understanding of the applicable policies 

have prevented many NPCs from making direct payments, which has resulted in 

direct financial loss to the NPCs due either to: 1) the need to forego the drawdown 

of budgeted award revenue covering PI project salary because there is no agreedupon mechanism for issuing payment by the NPC, 2) the decision by the PI to forego 

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56 

acceptance of the award because they are unable to be paid under the original contractual expectations and terms of the award, or 3) the direct loss of the entire 

award by the NPC under local directives to relinquish it to the AA in order to enable PI salary payments. These foregone payments have had a devastating impact 

on the ability of the NPCs to support veteran research programs. 

In my research and discussions with national leaders on this issue, I have not 

found a significant regulatory basis behind the NIH policy language that restricts 

the flexibility of NPCs, and if left unaltered, the language will continue to raise concerns as it gives direct preferential treatment to the university AAs. NAVREF, with 

the approval of VA’s Office of Research and Development (ORD), is discussing with 

NIH the possibility of modifying language in the GPS to allow NPCs to pay PIs directly for their NIH-funded project effort. 

NIH has current policy language restricting VA PI ‘‘60-hour workweek’’ payments 

to the use of JPAs, but it is our finding that no other agency publishes such restrictions. Due to local policies and practices, many NPCs are utilizing ‘‘optional JPAs’’ 

(a JPA that is being practiced locally, but that is not officially sanctioned or governed by the funding agency). While optional JPAs are in some cases useful mechanisms for NPCs, there are several ways in which their local application can affect 

the NPCs financially: first, some AAs charge an administrative fee-on top of their 

federally negotiated fringe benefit (FB) rate and rolled into the award’s FB budgetfor processing these payments. The fee is treated as a Direct Cost (DC) expense on 

the award, and often costs the award more than the NPC FB rates would, thus taking funds away from the veterans’ healthcare research project. In addition, several 

AAs do not currently allow JPAs due mostly to the inherent risk posed to the AA 

in taking accountability for the PI’s effort without direct knowledge of the project. 

In many cases, the decision is being made locally to request that the AA directly 

administer the entire research award, simply as a means of enabling PI payment. 

This approach is in direct competition with the NPCs’ mission and purpose, as defined in Title 38, to further veterans’ health outcomes by administering VA-approved research and educational programs (when they are funded by non-VA-appropriated dollars). 

I am concerned about the inherent conflict of interest posed by the PI and/or any 

organization’s (e.g., VA, AA, NPC) direct leadership if they are given the option to 

choose the entity under which to submit grants, rather than following a vetted policy or directive. Whether or not intentional, a reasonable independent party could 

conclude that the person making the choice as to where the award is administered 

stands to personally gain from that decision, as they will either receive direct salary 

(and, potentially, benefits) from that entity (in the case of PIs) or financially benefit 

as an organization (in the case of organizational leadership being the decisionmaker). The lack of consistent national practice has led to significant variation in 

which party administers the research project and/or pays the PI for project effort, 

and has resulted in consequential significant loss of potential revenue for veterans’ 

medical research programs. Although the VHA Handbook 1200.17 allows NPCs to 

hire and pay VA employees (PIs)-and 18 U.S. Code § 209 provides NPCs with an 

exemption from salary supplementation concerns, as the employees serve in a ‘‘without compensation’’ (WOC) government capacity when working for an NPC on a portion of their 60-hour workweek-a lack of clear national guidance on conflict of interest vetting has resulted in paralysis of the ability of many NPCs to make 

payments8,9. I recommend a single national practice on NPC/VA conflict of interest 

vetting and a national directive explicitly allowing NPCs to make payments to PIs. 

Summary, Impact, and Request for Action 

The NPCs were created under Title 38 to serve as flexible funding mechanisms 

to enable advancements to veteran health outcomes. Because of inconsistent national practices, local decision-making, and a lack of clear and consistent policy language, the intent of the original legislation in Title 38 pertaining to the NPCs’ missions has been diluted and redistributed across multiple parties (NPCs and AAs). 

Without any clear VA or congressional guidelines, each local medical center is afforded the ability to pick and choose the source of research award administration. 

I recommend a comprehensive review of national practices and updated policies 

and directives to clarify the roles and responsibilities of the AAs and NPCs, and to 

give the NPCs the enhanced opportunity to participate in the important work that 

is being done in the VA’s extramural research and education programs. I believe 

this is in keeping with the original intent of the NPCs and their statutory authorization, which was designed to directly benefit-without interpretation, dilution, or 

bias-the veterans. 

Thank you for inviting me to discuss these important issues and thank you for 

your support of veterans. The VA’s medical research program is a hidden jewel with 

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57 

an enduring legacy of improving the care of veterans and citizens throughout the 

nation. The close collaboration and cooperation of VA medical centers, their academic affiliates, and the nonprofit corporations is absolutely essential to the continued success of this impactful research program. 

TESTIMONY: NANCY WATTERSON–DIORIO 

PROFESSIONAL BACKGROUND: My career has been focused on research administration for over 35 years. Of that, 15 years has been spent as an employee of 

the academic affiliate, Harvard Medical School, in several capacities. During that 

time I was directly employed by the affiliated teaching hospitals, Brigham and 

Women’s Hospital and Beth Israel Hospital. My role involved many administrative 

aspects of research administration, which would often overlap with issues pertaining 

to the Department of Veterans Affairs (VA). In 1996 I became the Executive Director of two VA nonprofit organizations, the New England Medical Research Institute, 

Inc. (NEMRI) and the Boston VA Research Institute, Inc. (BVARI). Both organizations were in their very early stages of business development (less than five years). 

Annual revenue of both organizations was approximately $100,000. As the medical 

center underwent a merger, it was decided by VA leadership to merge both VA nonprofits into one. BVARI has just recently celebrated its 25th year of operations and 

its annual revenue for FY2015 totaled over $13M. BVARI directly supports 125 employees who play a key role in the organization from administration (12 employees) 

to research positions (113 employees). BVARI serves the faculty in both research 

and educational projects and programs from foundation grants to administering federal awards. 

PERSONAL BACKGROUND: I am the granddaughter of a WWI veteran, the 

daughter of a WWII veteran, the niece of a vast array of service veterans, and the 

aunt of two nephews who most recently served. I’ve only known my family to be 

devoted Americans who felt it was their duty to serve in the military. I will mention 

that my Grandmother was a Gold Star Mother and my family most recently lost 

my nephew to suicide upon his successful completion of a tour as a submarine operator in the US Navy. And finally, my granddaughter graduated high school this 

week and her active military status in the U.S. Navy begins in July of 2016. Although not a veteran myself, I’ve had close family ties throughout my life. My service to the VA now makes me feel a part of this inclusive family bond. 

REFERENCES

1. US Public Law 111–163 Title 38 - Subchapter IV - Research and Education 

Corporations: www.navref.org/assets/1/7/1—-—NPC—Auth—Statute—-—38—USC— 

7361–7366–Word.doc 

2. VA NPC Annual Reports to Congress: http://www.navref.org/about-our-members/va-annual-reports-to-congress/ 

3. The Report of the Blue Ribbon Panel on the VA–Medical School Affiliations 

(quotation: pg. 3): http://www.va.gov/oaa/archive/BRP-final-report.pdf 

4. VA Research Advances: http://www.research.va.gov/pubs/docs/ 

VAResearchAdvances2015–16.pdf and VA Research Topics: http:// 

www.research.va.gov/topics/ 

5. 2015 VERA Book: https://commissiononcare.sites.usa.gov/files/2016/01/ 

20151116–13–Veterans—Equitable—Resource—Allocation—VERA—1025—Briefing—Book.pdf 

6. NIH Grants & Funding: https://www.nih.gov/grants-funding 

7. NIH Grants Policy Statement: http://grants.nih.gov/policy/nihgps/index.htm 

a. 17.3 VA–University Affiliations: http://grants.nih.gov/grants/policy/nihgps/ 

HTML5/section—17/17.3—va-university—affiliations.htm 

b. 17.6 Allowable and Unallowable Costs: http://grants.nih.gov/grants/policy/ 

nihgps/HTML5/section—17/17.6—allowable—and—unallowable—costs.htm 

8. VHA Handbook 1200.17: http://www.navref.org/about-our-members/npc-statuteand-vha-handbook/ 

9. 18 U.S. Code § 209: https://www.gpo.gov/fdsys/pkg/USCODE–2012-title18/html/ 

USCODE–2012-title18-partI-chap11-sec209.htm 

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Statement For The Record 

Dr. Christian Kreipke 

To the Subcommittee on Oversight and Investigations of The House Committee 

on Veterans Affairs: 

Nearly five years ago I was traveling the world sharing the results of my research 

which were touted in Neurology Today as the first real hope for a cure for head 

trauma. I was generously funded by both the National Institutes of Health (NIH) 

and the Veterans Administration (VA) to develop this research into a viable treatment for our Veterans and the public, at large, suffering the effects of brain injury. 

I was an assistant professor on tenure track, a VA investigator, a world-renowned 

expert in the field of traumatic brain injury (TBI), had a well-staffed laboratory, 

mentored students, the Chairman of the Board of Southfield Oncology Institute 

(IRB), and had a very successful and happy personal life-all the signs of success that 

can be achieved in America. However, this was all stripped away from me when I 

started to detect and brought to light chronic and systemic misappropriation of government monies. Now, I am an entry level line worker at an automotive plant without a home, swimming in debt, and involved in multiple litigations against the very 

entities I am trying to protect. In short, my payment for blowing the whistle on hundreds of millions of dollars of grant fraud is not protection but, rather, currently 

total destruction. 

To explain how my life was ruined, in 2010 I was heavily immersed in my research which sought to develop a drug therapy to alleviate the signs and symptoms 

of head trauma. Additionally, I was selected by multiple government agencies (e.g., 

Department of Defense, VA, NIH) to review grants pertaining to TBI. Around the 

same time, large amounts of tax payers’ dollars were being requested and reallocated to develop treatments for TBI which appears to be a national crisis affecting 

both our military personnel and the general public. At this same time I received 

funding from both NIH and VA to explore a novel therapy for TBI. The mechanism 

to allow me to explore further research to combat TBI was facilitated by a three 

way contract entered into between myself, VA and the affiliated educational institute for VA in Detroit, Wayne State University (‘‘WSU’’) (Exhibit A). 

While engaged in research at WSU, I began to detect irregularities in the grant 

procurement process-from how grants were being funded, who reaped the benefits 

of the money, to even how my salary was being determined. Specifically, I was 

asked by VA’s educational affiliate, WSU, to sign off on an effort report which declares to government agencies how much time I was willing to allocate to a particular funded project in order for the University to be reimbursed from federal 

funds for my salary. I noted that I was being asked to sign off on a document that 

contained erroneous information. The University was claiming that I was allocating 

more time on my NIH grant than I was and, consequently, was asking the government to reimburse more of my salary than should be. I protested this and refused 

to sign off as it was not a true reflection of my effort and represented potential 

grant fraud. Two months after this I noted that grant funds from my grant were 

being syphoned off to pay for another faculty member’s project. This, too, seemed 

blatantly wrong and I further protested this to the chair of my department. In December 2010, after discussing some of these issues with colleagues that sat on the 

policy committee at WSU I was recommended to serve on an internal committee designed to report to the Provost, Ronald T. Brown, any irregular policies that may 

be occurring at the University. I specifically was tasked to probe the research division. What I found was astonishing. 

In the process of my review of Wayne State University’s granting practices, I discovered that a chronic issue was manipulation of effort reports in order to obtain 

more money from the government to offset salary costs of faculty. I also discovered 

that often money allocated to particular projects was being used to fund different 

projects without reporting this to the funding agency. I detailed this in a report to 

the Provost and to the Vice President of Research, Hilary Ratner. It was at this 

time that I was severely retaliated against. I was charged with allegations of committing scientific misconduct in my own research. Ironically, my ultimate judges in 

this matter were both the Provost and the Vice President of Research who both 

promptly terminated my employment at WSU and reported to NIH that I was not 

a trustworthy individual. 

In March of 2012, after being terminated from Wayne State on spurious charges 

of scientific misconduct after I blew the whistle regarding grant fraud, I moved my 

entire research project to John D. Dingell VAMC (JDDVAMC), again, Wayne State 

University’s academic and financial partner. Unfortunately, the same type of retalLeonard.horne on VACREP0180 with DISTILLER

59 

1 See Mithen v. Department of Veteran’s Affairs. Of note, this case involves similar ′′improper 

influence′′ of Universities over VA. 

iation continued, leading to my termination at VA, as well. After being exonerated 

twice of the same misconduct charges at VA, a third inquiry was undertaken that 

ultimately led to an Administrative Investigative Board (AIB) and pronouncement 

of my guilt at VA, too. It should be noted that WSU inserted its influence in that 

inquiry and AIB members wore two hats, being faculty or even Deans at WSU in 

addition to VA employees. Furthermore, the new Chief of Staff at the time, Scott 

Gruber, was also a Dean at WSU’s medical school. 

To now focus on, specifically, the VA involvement in this situation, through my 

own investigation of my grants and those that I had access to through grant review, 

I detected the following grant disparities which occur through partnering of VA 

medical centers with affiliated Universities: 

1). Inappropriate sharing of funds between VA and the affiliate without proper 

oversight. Upon comparing my VA grant expenditures to my NIH grant expenditures I noticed that the vast majority of my VA grant was going directly to Wayne 

State University (Exhibit B), supposedly to pay for faculty and personnel at Wayne 

State that would contribute to my VA grant project. There were two fundamental 

problems, here. First, those same personnel were being paid by my NIH grant and/ 

or University start-up funds and, second, many of these people never contributed 

to my VA project. In one case, there was a ‘‘ghost employee’’, or someone who I was 

not even sure who it was. Obviously, Wayne State should not have been receiving 

VA funds for these people as they were, essentially, ‘‘double-dipping’’. 

2). Allegedly falsified effort reporting. I also noted that effort was being manipulated by several individuals in order to allow those individuals to compete for other 

grants without exceeding 100% effort or in some cases disregarding time and effort 

standards altogether. As recently as my pending trial in front of the Merit Systems 

Protection Board (MSPB), it was revealed through the course of testimony that the 

administration at JDDVAMC arbitrarily manipulated my effort on a currently funded grant in order to make the math work on me having two projects at once. In 

fact, through my grant reviewing efforts, I discovered that this is, in fact, common 

practice. As an example I have included a biosketch of a VA-funded researcher at 

University of Pittsburg, Edward Dixon, who is Principle Investigator on numerous 

grants which, conceivably, it is impossible that he could devote physical effort to all 

of these projects, yet he is receiving salary support for each (Exhibit C). 

3). Inappropriate sharing of equipment and payments for this equipment between 

VA and the affiliate. Furthermore, Wayne State University in many cases charged 

VA for use of its space and equipment even when, in some cases, the very equipment being purchased is being purchased by VA funds. Thus, Wayne State not only 

benefits from receiving VA-funded equipment, but also receives direct funds from 

VA to utilize this equipment and/or the space that houses the equipment. It should 

also be noted that in many of the same cases this space and/or equipment, is also 

being charged to NIH and, thus, the government is paying twice for the same item 

while the University is reaping in the government funds. 

4). ‘‘Improper influence’’ 1 of the Affiliate over VA. Also astonishing was what I 

discovered about oversight of VA grants. I discovered that Wayne State University 

provides research and monetary oversight over JDDVAMC using Wayne State personnel, many of which are both Wayne State and VA employees. Thus, the VA had 

little control over how research is conducted or how research money is being processed as the oversight is conducted by and through Wayne State University, the affiliated University, which receives a significant portion of the VA funds. It is 

through this affiliate oversight and influence over the VA that another chronic problem emerges. Contracts with individual faculty that share University and VA appointments are negotiated chiefly by University personnel or by those VA personnel 

that also have appointments with the University. In fact, as pointed to above, the 

Chief of Staff at JDDVAMC, Scott Gruber, is a Dean at WSU’s medical school. This 

allows for a broad range of salaries to be paid via VA funds to supplement University salary (e.g., in excess of $155,000 per year for just the VA portion of an individual’s salary), none of which conform to any VA policy, let alone to any general 

schedule (GS) standards. These potentially fraudulent practices are not limited to 

Wayne State University/JDDVAMC, but, rather, are ubiquitous throughout the nation. 

What steps were taken to try to rectify these troubling grant practices? After discovering these allegedly illicit practices which not only waste tax payers’ resources 

but also divert funds that are supposed to be used to help discover cures for disease 

and infirmity, I first reported to my superiors. At Wayne State I reported to first 

my chair and then to the Provost. At VA I reported many of these irregularities 

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through a series of administrative Grievances filed against the Medical Center Director, Pamela Reeves, and other VA personnel. What was the outcome? My report 

to the Provost at Wayne State was, in the words of the Provost’s assistant, ‘‘deepsixed.’’ My Grievances were either ignored or summarily dismissed by Pam Reeves, 

the very person being grieved. I also brought my allegations to both administrators 

at HHS and the VA IG. They were largely ignored or referred back to the very people that ignored them initially. Even at the highest levels, my Grievances were ignored. Robert Petzel, former Undersecretary of Health, chose not to address the 

problems that I raised in the Grievances. Further, Douglas Bannerman, former Research Misconduct Officer for the VA, admitted, under oath, that he was aware of 

my Grievances yet did nothing. As what happened to me in WSU, I was likewise 

retaliated against and terminated by VA by a panel stacked with members that 

have clear conflicts as further discussed above. 

To address my wrongful termination at WSU, I had no choice but to file lawsuit. 

Currently, my False Claims lawsuit against Wayne State is pending cert. from the 

Supreme Court of the United States of America. (By way of background, the current 

laws governing the False Claims action are interpreted differently across circuits as 

to whether or not Wayne State can be sued based on its status as a ‘‘State-Institution’’.). To address my wrongful termination by VA, I filed an appeal, which is currently being tried through the MSPB. I continue to be retaliated against even pending the outcome of this trial. 

Despite heroic efforts by Congress to protect whistleblowers, does the VA still engage in retaliation for blowing the whistle? Yes. I feel it is important to also illustrate to you the level at which the VA continues to retaliate against those that blow 

the whistle, which is the subject of my MSPB claim. While at the VA, and after 

making my disclosures of grant fraud at Wayne State University, JDDVAMC’s affiliate, I was charged and found guilty of scientific misconduct despite there being little to no evidence which suggests that I committed any misconduct. In fact, previous 

to VA being aware of my disclosures, I was found not guilty of misconduct. It was 

only after they were made aware of my disclosures of grant fraud that a third investigation against me was conducted which, again, was run by VA employees who had 

Wayne State appointments as stated above. 

During the course of this investigation VA personnel took my computers (even 

though they admitted that no evidence was located on these computers) and accidentally erased all of my data which completely eradicated my ground-breaking research. I was subjected to being warehoused in a small office with two other individuals that often exceeded 90 degrees Fahrenheit. My phones were routinely monitored. My emails were routinely hacked. My due process rights were trampled on. 

My salary was reduced. I never received salary from a grant that I was on despite 

JDDVAMC receiving the funds to cover salary. I was stripped of my union representation. I was harassed by multiple VA personnel. I was taken out of the building 

by police escort in front of my colleagues and forced to go on paid leave (which further crippled my research mission). Further, my personnel, who supported me in 

testimony, were terminated despite my grant continuing to be funded. To meet their 

retaliatory end, VA personnel ultimately fired me and banned me from VA service 

for 10 years (which is outrageous even if I had committed misconduct, especially in 

light of the lack of punishment for so many VA administrators who did manipulate 

data with regards to wait times). Even the current MSPB trial has been met with 

great challenge at the hand of VA personnel. For example, VA agreed to mediation 

in settling this matter only to go on to show a lack of good faith by not proffering 

any reasonable offer. This added unnecessary time to the MSPB proceedings. Dennis McGuire, Chief Counsel to VA, taunted me after one of their witnesses stated 

that VA routinely changes effort in order to facilitate other grants, stating that he 

welcomes me to file a lawsuit against the VA for grant fraud. Furthermore even 

Robert McDonald, Secretary of the VA, attempted to strip me of my due process 

rights by, through his lawyers, submitting a motion to essentially attempt to block 

my ability to exercise my rights through the MSPB. So currently, instead of putting 

my talents to finding a cure for TBI I am sorting and balancing tires for pickup 

trucks twelve hours a day. To add insult to injury, during the course of my current 

trial, this matter was raised and Counsel for VA, Amy Slameka, objected stating 

that I should not complain since a line job is not a bad job. While I will not comment on the degree of satisfaction of my current job, certainly we can agree that 

I did not go through nearly twelve years of University coursework and training to 

work in an entry level position at a fraction of my previous salary. 

To further illustrate the extent to which retaliation is the modus operandi of VA 

administrators, the retaliation against me is not limited to just me. My colleague 

and former student, Justin Graves, refused to condemn me when he was called to 

be a witness in the investigation into scientific misconduct. Further, he called into 

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61 

question the Administrative Investigation Board’s conduct (which included stripping 

him of his union rights) and within weeks he was fired. Now Mr. Graves is involved 

in a separate MSPB lawsuit which has languished on for over two years now. He 

too has been humiliated and stripped of his career trajectory. Thus, despite the efforts of Congress to establish laws that protect whistleblowers, regrettably these 

laws do not dissuade VA personnel from engaging in what appears a chronic culture 

of retaliation. 

How does one fix this systemic problem? 

Now that I have illustrated not only how University/hospital affiliates exert 

undue influence on the VA which often leads to waste and gross mismanagement 

in hundreds of millions of dollars of VA funds and after articulating my personal 

case of how the VA continues to engage in Kafkaesque retaliation to those that are 

compelled to blow the whistle on such schemes, I would be remiss in not acknowledging that this otherwise dismal situation can be fixed. First, the lines that University affiliates have so blurred need to made clear again. Proper policies that 

make clear the dissemination of resources need to be put into place to protect the 

VA mission and resources from being squandered. Second, oversight needs to be 

placed back into the central authority of the VA and not entrusted to Universities 

which often have self-interests that may conflict with the ethics and standards of 

VA. Third, proper oversight of all government granting agencies needs to be centralized such that redundancy and overlap in resources and effort are mitigated. With 

these and other measures, the ever-encroaching cancer that infects the otherwise 

beneficial mission of the VA can be excised. As for the whistleblower, VA administration must shed the current culture of treating whistleblowers as the enemy that 

needs to be crushed and try to understand that the vast majority of us are trying 

to help a broken system. Regrettably, currently even the Secretary of VA seems to 

want to live in a fantasy world where making excuses for what the nation sees as 

systemic problems is the way to fix the VA, while many of us are begging for the 

eyes to be open and to be transparent to systemic problems that CAN be fixed before the entire VA is reduced to mere ruins. 

In closing, I discovered hundreds of millions of dollars of grant fraud (billions if 

one includes institutions in addition to Wayne State University and JDDVAMC) 

which deplete government funds, including those earmarked for the VA. Much of 

this fraud is related to the lack of oversight of grant funds to the VA and, more 

broadly, to the affiliated Universities. When I reported this I was met with extreme 

retaliation leading to my current dismal situation. 

However, as I still have complete faith in my country, my government, and my 

government institutions, I do believe this tragedy is still capable of being fixed. I 

also believe that many of the aspects that make this Great Nation were accomplished through great personal sacrifice. Though I have made this sacrifice and have 

been annihilated by the VA, I am still committed to helping in any way that I can 

to fix this problem. With appropriate oversight, clear separation of duties between 

the VA and its affiliated University/Hospital, and proper provisions to assure accountability of those receiving government funds, VA’s commitment to finding cures 

for diseases and injuries can be achieved. As our country faces ever increasing 

health problems, whether it be cancer or head trauma or new issues such as Zika 

virus, I still firmly believe that government-funded research holds the answer to 

cures to overcome the adversity associated with these medical issues. 

I thank you for your due diligence in investigating this matter, I thank you for 

allowing me the opportunity to bear witness to my situation as being a representative of a more chronic dilemma, and I thank you for serving our country in its efforts to protect the American People. Once again, please feel free to call on me to 

assist in any way that I can in fixing this problem so that the VA and other government institutions can more efficiently and more effectively treat medical complications. 

Respectfully Submitted, 

Dr. Christian Kreipke 

Æ 

Leonard.horne on VACREP0180 with DISTILLER