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[Senate Hearing 107-791]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-791
 
  OVERSIGHT HEARING ON THE INTEGRATION OF VETERANS INTEGRATED SERVICE 
                           NETWORKS 13 AND 14
=======================================================================

                             FIELD HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 13, 2002

                               __________

      Printed for the use of the Committee on Veterans' Affairs 

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                     COMMITTEE ON VETERANS' AFFAIRS

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman

BOB GRAHAM, Florida                  ARLEN SPECTER, Pennsylvania
JAMES M. JEFFORDS (I), Vermont       STROM THURMOND, South Carolina
DANIEL K. AKAKA, Hawaii              FRANK H. MURKOWSKI, Alaska
PAUL WELLSTONE, Minnesota            BEN NIGHTHORSE CAMPBELL, Colorado
PATTY MURRAY, Washington             LARRY E. CRAIG, Idaho
ZELL MILLER, Georgia                 TIM HUTCHINSON, Arkansas
E. BENJAMIN NELSON, Nebraska         KAY BAILEY HUTCHISON, Texas

                     William E. Brew, Chief Counsel

      William F. Tuerk, Minority Chief Counsel and Staff Director

                                  (ii)

  

                            C O N T E N T S

                              ----------                              

                              May 13, 2002

                                SENATORS

                                                                   Page
Nelson, Hon. E. Benjamin, U.S. Senator from Nebraska, prepared 
  statement......................................................     3

                               WITNESSES

Bereuter, Hon. Doug, a U.S. Representative in Congress from the 
  State of Nebraska..............................................     4
    Prepared statement...........................................     6
Bernhardt, Elaine, President, AFGE Local 2601, Grand Island, NE..    21
    Prepared statement...........................................    22
Bove, Jerry P., State Commander, The American Legion, Department 
  of Nebraska....................................................    38
Braman, Howard, Commander, Disabled American Veterans............    34
Cada, Jim, State Commander, Military Order of the Purple Heart, 
  Nebraska Department, Lincoln, NE...............................    29
    Prepared statement...........................................    30
Crawford, Mike, Engineering Employee, Nebraska-Western Iowa 
  HealthCare System (NWIHC), Omaha, NE...........................    24
Enenbach, Craig F., National Director, Great Plains Paralyzed 
  Veterans of America............................................    41
Fickenscher, Keith, Immediate Past Director, Veterans Affairs for 
  Nebraska.......................................................    26
Hilgert, John, Director of Veterans Affairs, State of Nebraska...    13
Kulm, Greg, on behalf of the Military Order of the Purple Heart..    40
Martinez, Al, State President, Vietnam Veterans of America and 
  Legislative Coordinator........................................    35
    Prepared statement...........................................    36
Potter, Jane F., M.D., Harris Professor of Geriatric Medicine, 
  Chief, Section of Geriatrics and Gerontology, Department of 
  Internal Medicine, University of Nebraska Medical Center, 
  Omaha, NE......................................................    31
    Prepared statement...........................................    32
Principi, Hon. Anthony J., Secretary of Veterans Affairs.........     7
    Prepared statement...........................................    10

                                 (iii)

  OVERSIGHT HEARING ON THE INTEGRATION OF VETERANS INTEGRATED SERVICE 
                           NETWORKS 13 AND 14

                              ----------                              

                          MONDAY, MAY 13, 2002

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:12 a.m., the 
Alumni Center Building, University of Nebraska at Omaha, 6500 
Dodge Street, Omaha, NE, Hon. E. Ben Nelson presiding.
    Present: Senator Nelson.
    Senator Nelson. [Raps gavel.] I've always seen Chairman 
Rockefeller do that and I always had the desire to do that and 
now I have just done it and this morning I would like to thank 
you all for being here and call to order this field hearing of 
the Veterans' Affairs Committee of the U.S. Senate. I would 
like to thank everyone for your attendance here today and for 
the opportunity to learn and to discuss more about the services 
our veterans have earned and receive here in Nebraska.
    For the veterans in the room, I want to give you my 
personal thanks and thanks on behalf of everyone for your 
service and your sacrifice. Your service and sacrifice give us 
the freedom to express our opinions as we will do here today.
    I would also like to thank my friend Secretary Principi for 
his attendance, and his staff as well, for taking the time out 
of what is obviously a very busy schedule for being here today 
to listen to Nebraska's veterans. Special word to Jim Cada, my 
classmate from law school; he'll be testifying here with the 
second panel, and I want to thank Jim for everything that he 
has done to help make this possible today as well.
    As a matter of housekeeping items, we'll hear testimony 
from 14 witnesses on three panels today. That's an aggressive 
effort. And although we couldn't accommodate everyone who 
wanted to testify, we have tried to present a broad spectrum of 
veterans experts and veterans affairs. I apologize to those 
that we were unable to accommodate. We've got a signing 
specialist here today, if I could see a show of hands today for 
those who may need the services of a sign language interpreter? 
Is there anyone who has a special challenge that would need 
these services because she could come closer? I guess we're in 
good shape, and we appreciate very much you being here today.
    If you have cell phones with you, could you please switch 
them off ring to vibrate, so that we don't have any unnecessary 
interruptions as a result. I notice that if one of those 
vibrates or one of those rings these days, everybody jumps for 
theirs, they feel guilty, thinking maybe it's theirs. I'm 
fortunate I haven't had mine ring in a hearing or anything like 
that, but I have seen it happen to various other people. If you 
would, please put them in the vibrator or off position.
    Today we are holding a field hearing on the issues and 
concerns relating to the integration of VISN's 13 and 14, and 
for the benefit of us all, I want to review how it is that we 
came to the decision to call for a field hearing.
    On December 11rd, I received a letter from Secretary 
Principi stating that he had asked for the Veterans Health 
Administration to conduct a review of the possible merger of 
VISN's 13 and 14 and I also received a draft copy of the 
Administration findings.
    Then on January 23th, I received another letter from the 
Secretary stating that he had approved the integration and that 
it should be conducted as rapidly as possible.
    On the same day a press release was issued by the 
Department of Veterans Affairs announcing the decision to 
integrate the VISN's and that Dr. Petzel, who is here with us 
today, was selected to be the interim network director of the 
proposed VISN 23. In addition to the letter, Undersecretary 
Laura Miller conducted a staff briefing in DC about the 
consolidation.
    On January 24th, I sent a letter to the Secretary and Dr. 
Petzel addressing my concerns with merging both VISN's. At the 
same time my colleague and my friend, Congressman Bereuter, was 
also directing a letter raising concerns about the integration. 
I didn't understand why speed was necessary in the process 
before we could fully understand the ramifications of 
integration and why there wasn't time to begin dialog on the 
issue. There are over 450,000 veterans in VISN 14 with a vested 
interest. We were not informed of how the merger would affect 
their earned care, how it would affect the quality and quantity 
of their care, or if there would be any effect at all. We also 
felt that elected representatives weren't given the time or 
evidence in order to adequately address these concerns.
    So on February 14th, we held a Veterans' Affairs hearing in 
the U.S. Senate. I thanked the Secretary for his help on the 
Grand Island Veterans Nursing Home facility where he had been 
very responsive. I invited him to Nebraska for a field hearing 
to address Nebraska's concerns about VISN integration. The 
Secretary at the time said he would be honored to come, and he 
kept his word.
    On March 25th, the Secretary assured me that the services 
provided to Nebraska's veterans would not be affected by the 
merger.
    This brings us up to date, for the record, of what happened 
and why we are all here today. It brings us up to date on the 
issue, but unfortunately there's still lingering questions and 
concerns about how care might be affected and if the decision 
to integrate is warranted.
    There have been at least two other studies prior to the 
most recent one in late 2001 on whether or not VISN's 13 and 14 
should be integrated. Both concluded that there was not a 
substantial cost savings to warrant the merger and now we're 
under the impression that somewhere between $650,000 and $1 
million may be saved. Obviously, there's no guarantee that 
there will be a savings in this situation, or at least, there 
was no guarantee in the study. This adds up to about 1 percent 
of the VISN's 13 and 14 combined budget, which leaves 
speculation about what VISN 23's budget will actually be.
    It appears that there are many sound arguments for not 
integrating and as far as I can tell maybe three reasons to 
integrate; cost savings, consolidated leadership, and 
consolidating two large geographic but lightly populated areas.
    Last year VISN 14 had a patient satisfaction rate of 64 
percent, which is 2 percentage points above the national 
average, yet it failed to meet the 45-day fully successful 
standard in 3 out of 6 clinics. This leads me to believe that 
Nebraska veterans are patient and pleased with their care, so I 
am deeply concerned when I get letters from veterans in 
Nebraska that say the veteran health care system in Nebraska 
may not be as it should be. So I hope that these rates climb 
this year because the quality of care and the time it takes a 
veteran to receive care will be the true test of whether this 
merger is the right decision.
    VISN 23 would encompass 429 counties and 12 different 
States serving over 1 million veterans. The decision to 
integrate has, unfortunately, already been made. I know that 
Secretary Principi has the best interests of veterans at heart, 
but the process in making the decision, in my opinion, should 
have included something similar to what we are doing today. But 
better late than never, so we are here to help veterans, and 
their representatives, become better informed about their care 
givers on how and why this process is going to proceed as well 
as soliciting opinions on if it is necessary. The good of our 
veterans should always be our goal as public servants.
    In order to allow everyone to voice their opinions to gain 
more information, opening statements will be limited to 5 
minutes and we have brought one of our verbal traffic lights 
here from DC which has always mesmerized me. When the red light 
is on, you've exhausted your 5 minutes.
    [The prepared statement of Senator Nelson follows:]

   Prepared Statement of Hon. E. Benjamin Nelson, U.S. Senator From 
                                Nebraska

    Good Morning. I would like to thank all of you for 
appearing here today to discuss the services our veterans have 
earned and receive here in Nebraska, For the veterans in the 
room, it is thanks to your service and sacrifice that we have 
the freedom to express our opinions, as we will do here today. 
I would also like to thank Secretary Principi and his staff for 
taking the time out of their busy schedule to visit with 
Nebraska's veterans. Jim Cada is also here today, he will be 
testifying here with the second panel, and I want to thank you 
for everything you have done to make this hearing possible.
    Today we hold a field hearing on the issues and concerns 
relating to the integration of VISNS 13 and 14. For the benefit 
of all of us, I want to review how it is that we came to the 
decision to call for a field hearing.
    On December 11th, I received a letter from Secretary 
Principi stating that he had asked the Veteran's Health 
Administration to conduct a review of the possible merger of 
VISNs 13 and 14. I also received a draft copy of the 
administrations findings.
    On January 23rd, I received another letter from the 
Secretary stating that he had approved the integration and that 
it be conducted ``as rapidly as possible.''
    On the same day a press release was issued by the 
Department of Veterans Affairs announcing the decision to 
integrate the VISNs and that Dr. Petzel, who is here with us 
today, was selected to be the interim network director of the 
proposed VISN 23. In addition to the letter, Undersecretary 
Laura Miller conducted a staff briefing in D.C. about the 
consolidation.
    On January 24th, I sent a letter to the Secretary and Dr. 
Petzel addressing my concerns with merging both VISNs, I did 
not feel and did not understand why speed was essential in the 
process before we could fully understand the ramifications of 
integration. And why there was not time to begin dialogue on 
the issue. There are over 450,000 veterans in VISN 14 with a 
vested interest that were not informed of how the merger would 
affect their earned care. Elected representatives were not 
given enough time, discussion, nor evidence in order to 
adequately address their concerns either.
    On 14 February, we held a Veterans' Affairs hearing in the 
United States Senate where I thanked the Secretary for his help 
on the Grand Island Nebraska Veterans' Nursing Home facility 
and invited him to Nebraska for a field hearing to address 
Nebraska's concerns about VISN integration.
    On 25 March, the Secretary assured me the merger would not 
affect veterans' services in Nebraska.
    This brings us up to date on this issue but unfortunately 
there still exist many lingering concerns about how care will 
be affected and if the decision to integrate is warranted.
    There have been at least two other studies prior to the 
most recent in late 2001 on whether or not VISN's 13 and 14 
should be integrated. Both concluded that there was not a 
substantial cost savings to warrant the merger. Now we are 
under the impression that somewhere between $650,000 and 
$1,000,000 may be saved but there is no guarantee of a savings 
in this study either. This adds up to about 1 percent of the 
VISN 13 and 14 combined budget. Which leaves speculation about 
what VISN 23's budget will be.
    It appears that there am many sound arguments for not 
integrating and as far as I can tell maybe three reasons to 
integrate; cost savings, consolidated leadership, and 
consolidating two large geographical but lightly populated 
areas.
    Last year VISN 14 had a patient satisfaction rate of 64%, 
which is 2 points above the national average, yet it failed to 
meet the 45-day fully successful standard in 3 out of 6 
clinics. This leads me to believe that Nebraska veterans are 
patient and pleased with their care so I am deeply concerned 
when I get letters from veterans that say the veteran health 
care system in Nebraska is not as it should be. I hope those 
rates climb this year, because the quality of care and the time 
it takes a veteran to receive care will be the true test of 
whether this merger is the right decision.
    VISN 23 would encompass 429 counties and 12 different 
states serving over 1 million veterans. The decision to 
integrate has unfortunately already been made, and I know that 
Secretary Principi has the best interests of veterans at heart, 
but the process in making the decision should have included 
something similar to what we are doing today. Informing 
veterans, their care givers, and their representatives on how 
and why this process is going to proceed as well as soliciting 
opinions on if it is necessary and good for our veterans should 
always be our goal as public servants.
    In order to allow everyone to voice their opinions and for 
us to be successful in gaining more information about today's 
subject of integration from different experts, opening 
statements will be limited to 5 minutes. We have brought one of 
our verbal traffic lights here from D.C. Obviously when the red 
light is on you have exhausted your five minutes.
    Secretary Principi, again, welcome to Nebraska, and I look 
forward to hearing your comments.

    Senator Nelson. Before we begin, I would ask my friend and 
colleague, Congressman Bereuter, if he would have an opening 
statement to make? We appreciate very much his being here today 
as well.

   STATEMENT OF HON. DOUG BEREUTER, A U.S. REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Bereuter. Senator Nelson, I appreciate the fact that 
you are holding this hearing here and that you invited me to 
participate when I expressed my concerns similar to your own. I 
had a full day of meetings scheduled in Lincoln, but we have 
rearranged things. I won't be able to stay for much of the 
hearing, but I want to learn as much as I can in the brief time 
available and also to share some thoughts about this subject.
    Secretary Principi, we very much appreciate your attendance 
here, you and your staff, all of the distinguished witnesses, 
veterans leaders and the people that support them and their 
families today. The subject, of course, is the proposed merger 
of VISN, V-I-S-N, Veterans Integrated Service Network. I happen 
to think that the primary problem underlying it however is the 
VERA program, which is Veterans Equitable Resource Allocation 
system which isn't equitable in my judgment and that's the 
basic problem we're having today in this part of the country. 
And so I wrote to Secretary Principi in January and I believe 
that's about the same timing of your expressed concern, 
Senator, and I do oppose the merger which was officially 
announced.
    I think unfortunately the VA simply has not presented a 
strong case that the merger will improve the service for 
Nebraska's veterans or that it will result in addressing the 
ongoing funding shortfalls which have plagued both VISN's. 
Indeed, VISN's 13 and 14 have a combined shortfall of $92.7 
million for fiscal year 2001, but a consultant's study not too 
long ago suggested that there is no cost effective efficiency 
resulting from the proposed merger. That's not too long ago 
that that statement was made. And, of course, the merger 
savings are said to be or projected to be somewhere between $1 
and $6 million now. That's in contrast to what was said 
earlier.
    Immediately upon receiving that information about the 
merger, I sent a letter to the Secretary to protest the merger. 
In the response which I received from the Secretary he stated 
that the merger in and of itself will not bring financial 
stability to the two VISN's, and I agree with that. 
Subsequently, I therefore must ask two questions: (1) Why does 
the VA plan to simply restructure the VISN system rather than 
find a long-term solution to the continuing financial 
shortfalls facing VA facilities in the midwest, especially the 
Northern Great Plains, and (2) what value does the merger add 
to the quality of service which veterans in our Heartland will 
receive?
    I would note that I believe the current VISN structure is 
not the primary reason for the financial woes that VISN 14 and 
VISN 13 face and which VISN 23, that's a new one, would now 
face. Indeed, I have been a long-term outspoken opponent of the 
badly misnamed Veterans Equitable Resource Allocation system, 
or VERA. Through VERA, the VA distributes its health care 
budget on the basis of a per capita veterans usage of 
facilities, not basic health care facility needs or geographic 
considerations. For sparsely populated States such as Nebraska, 
this is simply unfair to veterans who are entitled to VA health 
benefits and who are forced to drive many miles to receive this 
care.
    In a letter to the Secretary that I sent, I would like to 
quote from it. When the Clinton administration constructed 
these arbitrary regional divisions and subsequently instituted 
the VERA system, I also strongly protested that these policies 
would negatively impact health care services to veterans in 
rural areas. Allocating veterans health care funds on a veteran 
per capital basis is unbelievably discriminatory for sparsely 
settled States like Nebraska. I and other representatives in 
Congress from such States have tried unsuccessfully to alter 
this formula since it was announced. Every veteran, no matter 
where he or she lives, deserves equal access to VA medical 
services, equal to those living in sun-belt States. As we see 
this migration of veterans to the southland, we're left here 
with less and less veterans and yet we have to provide the full 
degree of veterans care that the Nation has promised its 
veterans in these settled parts of the country. So we voted on 
this issue on three or four occasions on the House floor, but 
it runs into a strictly geographic kind of vote and the 
veterans in New York or New England also have some of the same 
concerns, but it is particularly acute for the people who live 
in the Northern Great Plains. So I think that's the basic 
problem that VISN's has today. You cannot simply provide 
adequate health care to the veterans of the Northern Great 
Plains on a per capital funding basis. That is just too 
simplistic. It is not the way that we should do things in this 
country.
    So you can have a merger between VISN 13 and 14, but that 
just is a little attempt to adjust numbers and to write a few 
efficiencies if that and the basic problem is the VERA system, 
it needs to be abandoned. It should have been abandoned by the 
Clinton administration. It should be abandoned by the Bush 
administration and something more equitable determined. So 
those are my concerns. I feel very strongly about that because 
my veterans are not receiving the same health care 
opportunities that veterans in other parts of the country 
receive and that is because of a discriminatory VERA system. So 
we can look at VISN today and we know that's the primary focus, 
but the basic problem is the VERA program.
    Senator Nelson, thank you very much for giving me a chance 
for me to speak and to listen on this subject. I think that you 
do us a great service by giving this careful scrutiny today and 
I thank you for your initiative and I would be pleased now to 
hear from the Secretary and the other witnesses.
    [The prepared statement of Mr. Bereuter follows:]

  Prepared Statement of Hon. Doug Bereuter, a U.S. Representative in 
                  Congress From the State of Nebraska

    Mr. Chairman, I would like to express my appreciation to 
the Senate Veterans' Affairs Committee for convening this field 
hearing in Nebraska. Additionally, I would like to commend my 
colleague in the Nebraska Congressional Delegation (Senator Ben 
Nelson) for his efforts to highlight the issue before us today. 
Indeed, the merger of Veterans Integrated Service Network 
(VISN) 14, which includes Nebraska, Iowa, and western Illinois, 
with VISN 13, which includes Minnesota, North Dakota, and South 
Dakota, is a topic which certainly deserves greater examination 
by Congress and more detailed explanation on the part of the 
Veterans Administration (VA).
    I strongly oppose the merger which was officially announced 
by Department of Veterans Affairs (VA) Secretary Anthony 
Principi on January 23, 2002. Unfortunately, the VA simply has 
not presented a strong case that the merger will improve care 
for Nebraska's veterans or that it will result in addressing 
the ongoing funding shortfalls which have plagued both VISNs. 
Indeed, VISNs 13 and 14 have a combined shortfall of $92.7 
million for FY2001.
    Immediately upon receiving information about the merger, I 
sent a letter to VA Secretary Anthony J. Principi to protest 
the merger. In the response, which I received from the VA, 
Secretary Principi stated that ``the merger, in and of itself, 
will not bring financial stability to the two VISNs.'' 
Subsequently, I must ask two questions? (1) why does the VA 
plan to simply restructure the VISN system rather than find a 
long-term solution to the continued financial shortfalls facing 
VA facilities in the Midwest, and (2) what value does the 
merger add to the quality of service which veterans in our 
heartland will receive?
    I would note that I believe that the current VISN structure 
is not solely to blame for the financial woes which VISN 14 and 
VISN 13 faced and which VISN 23 must now face. Indeed, I have 
been a frequent and outspoken opponent of the Veterans 
Equitable Resource Allocation (VERA) system. Through VERA, the 
VA distributes its health care budget on the basis of a per 
capita veterans usage of facilities, not basic health care 
facilities needs or geographic considerations. For sparsely 
populated states such as Nebraska, this is simply unfair to 
veterans who are entitled to VA health benefits and who are 
forced to drive many miles to receive care.
    During the House Floor debate on the VA, Housing and Urban 
Development (HUD), and Independent Agencies appropriations bill 
for FY2002 (H.R. 2620), I spoke in favor of an amendment 
offered by Representative Rodney P. Frelinghuysen (R-NJ) which 
would have prohibited the use of funds in the bill for 
implementing the VERA system. Unfortunately, and to my dismay, 
the Frelinghuysen amendment was withdrawn, and, therefore, the 
House did not vote on it. Such amendments have been defeated 
during the past several years, and I suspect Mr. Frelinghuysen 
wanted to avoid still another defeat on a recorded vote.
    Mr. Chairman, the health care needs of our military 
veterans must be met to the fullest extent possible. Veterans 
fought to protect our freedom and way of life. As they served 
our nation in a time of need, the Federal Government must 
remember them in their time of need. The people of the U.S. owe 
our veterans a great deal and should keep the promises made to 
them. I look forward to hearing Secretary Principi's responses 
to the questions I have raised and any other insights he might 
provide on the future of the misbegotten VERA system now in 
effect.
    I am committed to ensuring that Nebraska's veterans receive 
the benefits they deserve--benefits they have been promised and 
which the American people support. The VERA system stands in 
the way of meeting that commitment to the veterans of Nebraska 
and other sparsely settled states of the Northern Great Plains 
and the northern states in the Rocky Mountain region of our 
country.
    Thank you.

    Senator Nelson. Thank you, Congressman Bereuter.
    Our first panel is a very distinguished panel. First of 
all, we have Secretary Anthony J. Principi, who is the 
Secretary of the U.S. Department of Veterans Affairs; Dr. 
Robert A. Petzel, the Acting Director, Veterans Integrated 
Service Network No. 23; Gary Nugent, is the Chief Executive 
Officer, VA Nebraska-Western Iowa Health Care System; and John 
Hilgert, former State senator, Director of the Nebraska 
Department of Veteran Affairs.
    Once again, Secretary Principi, it's a real pleasure to 
have you in Nebraska and we are very anxious to learn from you 
and help you learn from us.

STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, DEPARTMENT OF 
                        VETERANS AFFAIRS

    Mr. Principi. Thank you, Mr. Chairman, Mr. Bereuter. It is 
certainly a pleasure to be with you. I thank you so much for 
your kind invitation to visit Nebraska to attend this field 
hearing. I'm pleased to be accompanied by Dr. Petzel, our 
acting Network Director, Network VISN 23 and Mr. Gary Nugent, 
the Director here in Omaha and I'm certainly pleased to be with 
Mr. John Hilgert.
    I'm also very honored to be in the company of so many 
distinguished veteran leaders, members of veteran service 
organizations, and my fellow VA employees who are here this 
morning for this hearing.
    I thank you for the opportunity to discuss the merger of 
VISN 13 and 14 into VISN 23, the meaning of that merger and 
perhaps to address some of the other issues that you 
highlighted this morning, Mr. Bereuter, and Mr. Chairman as 
well.
    Let me begin by bringing a national perspective to this 
regional issue. The Department of Veterans Affairs faces 
extraordinary challenges in providing health care today. We are 
reaching crisis levels, I'm afraid to say, and I want to talk a 
little bit about the historical perspective for it.
    In the mid-1990's a couple of very important decisions were 
made that profoundly impacted and changed the face of the VA 
today. The first I think was a very, very important decision, 
and that was to transition the VA from a hospital centric 
health care system to a more primary patient focused health 
care system. The result of that is that today VA has some 800 
outpatient clinics which are much closer to veterans homes. 
Whereas in the past, of course, we had very, very few, if any, 
community based outpatient clinics and that made it much more 
difficult for veterans to access the VA health care system.
    Also about the same time, around 1998, the decision was 
made to go to enrollment so that any veteran whether they're 
service-connected disabled by virtue of their military service, 
poor, nonservice connected higher income, anyone can come to 
the VA. Prior to that time, of course, the VA was considered to 
be a health care system for men and women who were disabled by 
virtue of their military service and/or poor. It was a safety 
net for poor veterans. But with that change to open enrollment, 
any of the 25 million veterans could come to the VA health care 
system.
    Those changes were premised on a couple of things 
happening. One was that we would have Medicare subvention. The 
VA would be able to tap into the Medicare trust fund because a 
large percentage of our veterans are Medicare eligible. They 
contribute to the trust fund. That never happened. Perhaps 
there were a lot of reasons for it, and I certainly don't blame 
the administration back then or the Congress, Medicare 
subvention just never was realized.
    Another factor was that the VA would do much better in 
medical care cost recovery. We have the authority to bill the 
insurance company for nonservice connected health care. 
Congress gave us that authority back in 1998, to allow those 
dollars to stay with the VA, the networks, the medical centers 
where those dollars were collected. Our medical care cost 
recovery program didn't reach the levels that everyone 
anticipated back then, and, of course, appropriations--we're a 
discretionary funded health care system. We are not an 
entitlement program. Not one veteran under law, is entitled, so 
we have to rely upon annual appropriations, and Congress has 
been very, very generous with us. But the fact remains that as 
a result of opening all of the outpatient clinics, and open 
enrollment, veterans have come to us in significant numbers. Of 
course, we have had a lot of Medicare HMO's close down around 
the country. We have had fluctuations in the economy where 
veterans have lost their jobs and lost their health care 
coverage and have come to us. So as a result of these changes, 
we now have over 6 million veterans enrolled in the VA health 
care system. We have a million additional veterans who have 
used the system who never used it before. The growth in 
Priority 7's since 1996 has been dramatic. In 1996 they were 3 
percent of VA's workload; today they comprise 33 percent and we 
expect that Priority 7's will be almost 50 percent by the end 
of this decade. They have grown 500 percent since 1996, and the 
growth this year alone is 50 percent higher than it was last 
year.
    So the fact is, we have many veterans who are looking to 
the VA, and, of course, VA's quality is much better. This is 
not my father's VA. The VA health care system today is a truly 
fine, high quality health care system. Our Nation should be 
very, very proud of the health care system we have. But with 
the increasing number of veterans who are turning to us 
combined with the rising cost of health care, our 
pharmaceutical budget is now $3.1 billion. It has grown from 
$750 million to $3.1 billion and that's just for ingredients 
only. That does not include the cost of managing this program, 
which is about $600 million additional. You can see some of the 
challenges facing us. So we have had to make some hard 
decisions if we are going to continue to meet the ever growing 
increases on a finite budget.
    Our budget requests for fiscal year 2003, I am very, very 
proud to say, is the largest increase ever requested by a 
President, whether Republican or Democrat. It is $6.1 billion 
more than 2002, about 7 percent for discretionary spending 
health care, when most agencies of Government are being limited 
to 2 percent. I am grateful to the Congress. I thank you for 
your leadership, Mr. Chairman, Mr. Bereuter, Senator Hagel and 
Congressman Osborne and for your tremendous support of VA in 
trying to get us additional resources. But I think we all know 
that unless we have something like Medicare subvention or 
increased appropriations, it is going to be difficult to meet 
the expanding need of health care.
    So what we're trying to do, what I am trying to do as head 
of the VA, an agency that I am very, very honored and humble to 
lead, is the following: improve our procurement practices so 
that the dollars we save can be put back into health care, by 
reshaping our legacy infrastructure to meet the needs of 21st 
century veterans, not the century gone by, by increasing 
cooperation with the Department of Defense, health care system, 
through more sharing, more partnership, by improving our 
business practices.
    I try to bring a business sense to what we do because we 
have a bottom line. It may not be dividends, but it certainly 
is more health care for veterans. Every dollar we save is a 
dollar we can use to expend the reach of health care, by 
increasing the effectiveness of our collections operations. You 
told us we can keep the dollars we collect from insurance 
companies. We need to do better because that is money that is 
being left on the table. VA is making intelligent use of the 
opportunities offered us by modern technology, telemedicine, so 
that in rural areas we can in fact reach some of those veterans 
that Congressman Bereuter talked about. VA is using 
telemedicine and radiology and psychiatry and continuing to 
look for ways to make our medical practices more cost effective 
without sacrificing quality. We have worked very, very hard. My 
predecessors have worked very, very hard to improve the VA's 
quality. I certainly do not want to see it diminished. Under no 
circumstances will I allow quality to be compromised.
    Combining VISN 13 and 14 certainly as you both indicated 
will not solve all of our problems. Our challenges are much 
greater than the consolidation of these two networks. But I 
believe it is a step in the right direction. It is a step that 
will save us some dollars. Now, these are administrative 
management overhead dollars. These are not clinical dollars, 
and I really want to make sure that I separate the two. By 
combining the networks, we are talking more in terms of 
administrative overhead as opposed to clinical practice.
    I believe it is a step that will improve the quality of 
care for many veterans. It will allow us to better coordinate 
health care among veterans in a larger area of Nebraska, the 
Dakotas, Minnesota, and Iowa. It will affect veterans who 
previously used facilities in both networks.
    I hope it will help us to reduce waiting times for 
appointments as we develop new strategies to make access to 
care more equitable. So those are primarily some of the reasons 
that we have undertaken this consolidation. I am told by Dr. 
Petzel that we are already saving money on pharmaceutical 
procurements through our widespread use of generic substitutes 
and laboratory contracts in the two now combined networks. We 
have already prepared a plan to expand psychiatric services in 
rural midwestern areas through the use of the telepsychiatry 
program. We will soon hire psychiatric regional care 
coordinators in both Nebraska and Iowa to enhance our services 
in this area and to ensure the project's success and we have 
already authorized funding for temporary new staff to renew our 
business procedures. This staff will prepare a plan so that we 
can increase our third-party collection from insurance 
companies.
    But, Mr. Chairman, and Mr. Bereuter, let me be clear about 
one thing. None of the 28 employees of either network directly 
affected by this change provide direct patient care to 
veterans. VISN staff performs staff support work for the VISN 
Director and for the networks' facilities. Changing our network 
configuration will not curtail service at any VA facility that 
provides health care in Nebraska or anywhere else in either 
network because Networks 13 and 14 have a continuous boundary, 
have few facilities in metropolitan areas, and have large areas 
where rural health care is an issue. It is my hope that 
combining their management will enhance care while reducing 
costs. I believe that's a win/win situation for veterans and 
for the VA.
    My time is well past the 5 minutes, Mr. Chairman, so at 
that point I will stop and be pleased to answer whatever 
questions you or Mr. Bereuter might have.
    Thank you, sir.
    [The prepared statement of Secretary Principi follows:]
 Prepared Statement of Hon. Anthony J. Principi, Secretary of Veterans 
                                Affairs
    Mr. Chairman and Members of the Committee:
    I am pleased to appear before the Committee to discuss the merger 
of VISNs 13 and 14 into VISN 23 and what that merger means for the 
future of VA health care for all affected veterans.
    On January 23, 2002, the Department of Veterans Affairs (VA) 
announced the merger of VISN 13 and 14 into new VISN 23. This merger 
has placed under one structure two health care networks that provided 
services to veterans in Iowa. Nebraska, Minnesota, South Dakota, North 
Dakota, and portions of western Illinois, western Wisconsin, and 
eastern Wyoming.
    Combining these two Networks to improve health care delivery and 
access makes good sense. The facilities within the two VISNs maintain 
excellent Joint Commission for Accreditation of Health Care 
Organizations (JCAHO) scores, rank high in patient satisfaction, and 
are strong performers in quality measures. The change should have no 
effect on the facilities or their scores, beyond what is expected to be 
gained in administrative efficiencies. The two VISNs share many 
commonalities. They are close geographically and both have few 
metropolitan areas and large areas where rural health care is an issue.
    VISN 23 provides services throughout a large region that includes 
Iowa, Nebraska, Minnesota, South Dakota, North Dakota, western Illinois 
and western Wisconsin. The Network operates nine medical centers, 
thirty-five community-based outpatient clinics, four domiciliaries, and 
seven VA nursing homes. Nearly one million veterans reside within the 
Network service area, which represents 4.3 percent of the Nation's 
veteran population. In 2001, Network medical facilities served a total 
of 215,711 patients and provided 1.8 million outpatient visits.
    When compared to the other networks, VISN 23 ranks fifth in the 
number of patients served last year as compared to their rankings as 
individual networks where VISN 13 ranked 18th, and VISN 14 was 22nd. 
VISN 23's combined budget represents 4.87 percent of the national 
budget and ranks 11th among the other networks. Prior to integration, 
VISN 13's budget was 2.84 percent of the national budget and VISN 14's 
budget was 2.03 percent. As you can see from these numbers, integrating 
VISNs 13 and 14 into a larger VISN 23 has not created for the VISN 
leadership any extraordinary budgetary or workload challenges beyond 
those currently faced by other VA health care Networks. More 
importantly, integration has in no way diminished the VA's health care 
presence in Nebraska or any other area of the new VISN 23. A VISN is 
simply the administrative structure. Reorganizing that structure will 
not affect provision of care.
    I would now like to highlight several of the benefits to be gained 
from this merger.
Improved Coordination of care
    The two networks share many patients between Nebraska and South 
Dakota, and Minnesota and Iowa. For those patients that move between 
the borders, coordination of care will be improved.
Economies of Scale
    The merger is expected to generate cost savings through economies 
of scales. Joint purchasing across the Midwest will bring lower prices 
for high cost medical equipment and supplies.
Budget Flexibility
    Combining the budgets of former VISN 13 and 14 will give VISN 23 
greater flexibility in allocating the estimated one billion dollars on 
VA programs and services. The merger is expected to generate cost 
savings, and the estimated savings ($1-6 million), over a period of 
time, will be redirected into expanding access and enhancing services 
for veterans throughout the Midwest.
Consolidation of Administration Functions
    There will be opportunities to implement management efficiencies by 
integrating fiscal services, consolidating business offices, and 
materiel service functions, such as contracting, logistics, supply, and 
warehouse functions. Combining the talents of the staffs of the two 
former Network Offices (13 and 14) will bring greater efficiency and 
effectiveness and eliminate duplication. Of the more than 8,000 
employees in VISN 23, less than four tenths of a percent (approximately 
28 network office employees) will be directly impacted by the initial 
phases of this merger, although all VISN 23 employees will ultimately 
benefit from the improved, more viable organization created by the 
integration.
Clinical Benefits
    Access to specialty care in rural areas such as those served by 
VISN 23 is often limited and traveling long distances to access health 
care can be a burden to the elderly. The Department of Veterans Affairs 
recognizes the importance of healthcare providers working 
collaboratively with veterans and their families in developing 
effective ways for delivering accessible, high quality health care in 
rural areas. A fully integrated senior clinical leadership team will 
seek to understand the veterans perspective and work cooperatively to 
eliminate or reduce long distance travel for veterans by developing 
health care delivery systems that will assure equitable access to VA 
health care across the Midwest.
    When a veteran must travel to access care not available at the 
local VA medical facility, VA considers all available options and 
discusses with the veterans and family the most appropriate referral 
site for accessing the level of care needed. Referral patterns in 
Nebraska have remained the same in recent years and the reorganization 
of VISN 23 has not impacted on how or where veterans are referred for 
care. Currently, elective open-heart surgery is provided at the 
Minneapolis VA Medical Center through a contract that was established 
prior to the merger of VISNs 13 and 14. An integrated VISN 23 Cardiac 
Services Task Force is reviewing this current arrangement and is 
considering contracting for open-heart surgery in the Omaha, Nebraska 
area.
    Overall, the now VISN 23 will build on the successes of VISNs 13 
and 14 and seize opportunities for enhancing quality, expanding access, 
gaining efficiencies. and improving veteran satisfaction in areas that 
need improvement. Both Networks 13 and 14 have done excellent clinical 
work, and we expect that, in combination, the clinical staffs will 
learn from each other, creating a better and improved health care 
delivery system.
    Today, I am also pleased to report some of the early successes of 
integration.
Pharmacy and Purchasing Efficiencies
    The new Network has been able to identity savings as a result of 
the joint pharmacy and therapeutics committee's implementation of the 
use of generic substitutes and laboratory contracting.
Enhanced Mental Health Services
    The Network has approved plans to expand psychiatry services in 
rural areas through the use of Tele-Psychiatry. Included in the plan is 
the hiring of Psychiatric Regional Care Coordinators in Nebraska and 
Iowa to enhance coordination of care and Tele-psychiatry services at 
CBOCs throughout Nebraska.
Improved Business Practices
    Recently the Network identified problems within the Nebraska and 
Iowa MCCF Collections and Fee Basis Units. The Interim Network Director 
authorized funding for additional temporary staff and combined the 
resources and expertise of the Business Managers to review business 
practices and develop a plan for eliminating backlogs and improve 
business practices. Within the next six months, the Network expects to 
have the backlog eliminated and plans in place to prevent problems from 
recurring in the future.
                            closing comments
    The merger of the two networks should be transparent to veterans. 
Each medical facility within Network 23 fulfills important missions for 
VA, and there are no plans to reduce or eliminate VA programs or 
services in Nebraska or any other state within the network. For the 
foreseeable future we plan to maintain a network presence in Lincoln. 
Unique programs. such as the partnerships VA created with community 
hospitals in Grand Island and Lincoln, Nebraska, to provide acute 
inpatient medical care, serve as models for exploring new opportunities 
and creating new initiatives.
    The new Network will continue to address a number of challenges, 
including managing unprecedented growth within appropriated funding; 
exercising stewardship of all resources; increasing market share; 
continuously improving quality of care and veteran satisfaction; fully 
integrating administrative and clinical programs and processes; 
investing in capital improvements and information technology; and 
effectively communicating with veteran groups. labor partners, 
educational affiliates and other stakeholders.
    We will monitor the integration process carefully, and I can assure 
you that service to Nebraska veterans will be preserved. If resources 
permit, we hope to expand services in community-based outpatient 
clinics so that we can provide better access for veterans living in 
rural Nebraska. We expect this integration to provide us better insight 
for providing care to patients in rural communities, and, as a result, 
Nebraska veterans will see more accessible and better-coordinated care. 
I assure you that VA is committed to redeeming the debt we owe to 
Nebraska' veterans and to all of our Nation's veterans.
    Mr. Chairman, thank you for this opportunity to testify.

    Senator Nelson. Thank you, Mr. Secretary. Would your 
preference be to hear the rest of the panel?
    Congressman Bereuter. I'm willing to do that. Thank you 
very much.
    Senator Nelson. Yes. Dr. Petzel.
    Dr. Petzel. I would defer to Mr. Hilgert.
    Senator Nelson. OK. Director Hilgert.

STATEMENT OF JOHN HILGERT, DIRECTOR OF VETERANS AFFAIRS, STATE 
                          OF NEBRASKA

    Mr. Hilgert. Good morning, Senator Nelson, Congressman 
Bereuter, Secretary Principi, distinguished guests and fellow 
veterans.
    Mr. Secretary, welcome back to Nebraska.
    I'm John Hilgert, Director of Veterans Affairs for the 
State of Nebraska. I am rather new to this position. I became 
director in late November of last year. Prior to serving the 
State of Nebraska as Director of Veterans Affairs, I served in 
the Nebraska Unicameral Legislature as a State senator. Also 
prior to taking on this responsibility, I worked for 10 years 
at Catholic Charities of the Archdiocese of Omaha. My 
background therefore is in government and in private nonprofit 
behavioral health field. I am a Gulf War veteran having served 
in the 1st Infantry Division in the U.S. Army.
    The merger of Veterans Integrated Service Network (VISN) 13 
and 14, was announced on January 23, 2002, and as Director I 
was made known of many concerns that veterans in Nebraska had 
regarding the prospect of the merger. Among the foremost of 
concerns was the access of care for our veterans and the 
quality of care for our veterans. The prospect of diminished 
control over limited funds as well as a more distant and 
therefore less accessible leadership of the VISN was also of 
great concern.
    Since the creation of VISN 23 I must report according to my 
perspective that the transition directed by Acting Director Dr. 
Robert Petzel has been fairly transparent. Electronic and 
written communications regarding the transition have been 
numerous. Dr. Petzel has visited Nebraska several times and I 
myself have had occasion to speak with Dr. Petzel in person at 
least in four instances while he has been in our State. I also 
report that Dr. Petzel's traveled across our State even 
attending the County Veterans Service Officer School that was 
held last week in Scottsbluff. This is very encouraging and 
helps diminish somewhat the concerns that I had regarding the 
merger. Communication is essential to a smooth transition.
    However, I remain concerned about the allocation of 
resources that directly impact Nebraska veterans' access to 
service as well as the quality of their service. To my 
knowledge, both VISN's and former VISN 13 and former VISN 14 
have financial deficits. I have also been told that at least 
one factor that led to the merger was the prospect of financial 
savings. I am not convinced that savings through management 
efficiencies can satisfy the combined deficit of VISN 23. There 
lies the basis for my concern regarding access of care and 
quality of care. Simply put, where will the cuts, if additional 
funding is not forthcoming, be made? I do recognize that this 
is not singularly relevant only to VISN 23 and there is need 
throughout the system. I see the challenges that the employees 
of the Veterans Administration are facing. They are challenged 
to treat more patients, exceed expectations and at the same 
time do this with limited staff and limited resources.
    Some particular observations regarding access to service 
and quality of care and please infer nothing by the order of 
which I make them. A concern or need is the top priority to 
every individual that is affected by that need.
    It has been related to me that there are documented 
deficiencies regarding the surgery and ICU units at the Omaha 
VAMC. Additional resources are required to remedy these 
deficiencies. I do not have the specifics about these 
deficiencies, but I have been told VA staff that they are 
indeed documented.
    I am concerned about the future of Nebraska's medical 
centers and community based outpatient clinics. I was 
encouraged last Wednesday in Scottsbluff when Dr. Petzel 
observed and volunteered on his own to examine this issue 
recognizing the great distances that some Nebraska veterans are 
required to travel to access these services. Although I have 
been told that there are staffing and budget challenges 
throughout the system, the Lincoln VAMC stands out in my mind 
as a particular concern. The Lincoln VAMC plays an important 
role in service delivery. However, with the loss the VISN 
headquarters in Lincoln, one can only project a diminished role 
for Lincoln. There is space at the Lincoln VAMC and I would 
encourage the administration to use that for a clinical 
function, clinical function meaning a clinical use rather than 
an administrative use or function. Personally I would like to 
see an inpatient dual diagnosis unit established at the Lincoln 
VAMC. I believe there's an ever increasing need for such a 
facility in Nebraska. Nebraska has one of the lowest 
penetrations for PTSD services utilized by our veterans. I 
believe this also would be a great asset for Nebraska's State 
veterans homes to refer veterans in order to treat and 
stabilize those veterans in need of those services before 
admission into a home. There's an ever increasing acuity among 
the veterans seeking entrance into our State veterans homes. 
Obviously I would encourage and support any use of that space 
that translates into greater service for Nebraska's veterans.
    There is also a need for additional clinical pharmacists in 
order to support our physicians. I believe this would result in 
time savings for the doctor, freeing her up to maximize time 
with the patient directing addressing the whole health needs of 
the patient. Quality would be enhanced as well as probable 
financial savings. I have been encouraged by reports of 
cooperation between the two former VISN's in this area, the 
willingness of former VISN 14 to adjust their formula to match 
former VISN 13's.
    It has been recognized by the VISN 23 leadership that the 
greatest challenges that VISN faces is the large geographical 
area, the employees and veterans travel distances, the budget 
shortfalls, the large number of Priority 7's and the 
infrastructure maintenance costs. This recognition is very 
encouraging.
    These are some of my observations that I have made in my 
short tenure as director of Veterans Affairs for our State. I 
look forward to continuing the dialog with VISN 23 officials. I 
look forward to working with the VA as we address the issues 
concerning the Thomas Fitzgerald Veterans Home in Omaha. I look 
forward to working with the VA as we continue to work toward 
the establishment of State veterans cemeteries in Alliance and 
in Grand Island. It is with great pride and confidence that all 
Nebraskans can rely on the oversight by Nebraska's 
congressional delegation.
    There are many concerns that remain among Nebraska veterans 
and you will hear from them today. There are many challenges 
facing VISN 23 as well as the entire system. Extensive 
communication must be maintained. Access should not be 
diminished, but rather enhanced and quality must always be top 
priority. The system, no matter what the management style, 
organization or by what moniker it is called must always, 
always be veteran centered.
    Thank you for the opportunity to share with you my 
observations. Thank you, Mr. Secretary, for coming to our State 
and thank you, Senator Nelson, for convening this field hearing 
in Nebraska for Nebraska's veterans. Thank you.
    Senator Nelson. Thank you, Director Hilgert.
    Dr. Petzel.
    Dr. Petzel. I have no prepared remarks, but am here and 
available to answer questions.
    Senator Nelson. That would be fine.
    Mr. Nugent.
    Mr. Nugent. Mr. Chairman, I have no prepared remarks, but I 
would be more than happy to answer any questions.
    Senator Nelson. Thank you. I'll defer to my colleague for 
the first questions.
    Mr. Bereuter. Thank you very much, Senator.
    Secretary Principi, I wonder if I have made clear my basic 
concern about VERA, that there must be an underlying structure, 
a minimum structure at least providing quality care throughout 
the whole country even though the veterans are piling up the 
sun-belt States with their political clout which keeps us from 
changing the formula because of the large population in the 
south and California and Texas and Florida today that there 
must be a very basic structure of delivered services throughout 
the whole country, even though the number of veterans in this 
region are proportionally quite small and therefore the funds 
coming into this area are therefore very limited.
    Mr. Principi. Mr. Bereuter, you have made your point very 
clear and I hear what you're saying. I too agree. As I travel 
the country, and this is my second trip to Nebraska, Kansas, 
and the Heartland, I too am concerned about rural health care 
and to ensure that we have adequate resources that are coming 
to places like Nebraska to care for veterans who for whatever 
reason can't get down to the sun-belt and retire are here 
working on the farms or whatever.
    I think the VERA model generally speaking is a good model, 
it does fund workload. There have been supplementals that have 
gone to former--the VISN 13 in the past. We are looking at 
refinements of the VERA model to make it more equitable to 
address some of the issues that you have mentioned. But 
generally speaking, I hear the points you're making. I think 
it's a very, very important one and something that needs to be 
addressed to ensure veterans in rural America are not suffering 
as a result of this model.
    Mr. Bereuter. Mr. Secretary, thank you for your recognition 
of this problem. If it's impossible for us to change the 
allocation system, thus far we have been unable to do that by 
legislative requirement because of the limited number of votes 
we have in the Northern Great Plains and the Northern Midwest. 
Is it possible that we can rely more heavily on outpatient 
clinics which I think are moving into the right direction? Can 
the funds for the outpatient clinics be considered separately 
for sparsely settled parts of the Nation?
    Mr. Principi. I think that's what we need to look at. Now, 
we have 37 or 35----
    Dr. Petzel. Thirty-five.
    Mr. Principi [continuing]. Thirty-five outpatient clinics 
in the new Network 23. There were nine community-based 
outpatient clinics in the old Network 14 and that may be the 
answer. Our goal is to have an adequate number of community 
based outpatient clinics within 30 miles of a veterans home. 
That way veterans can access the VA health care system and they 
can use that as the entry point. If they need complex inpatient 
care, they can then go to one of the urban hospitals which may 
be a little further from their home. But I believe that by 
consolidating some of those complex surgical procedures, it has 
been proven that the quality is much better as a result.
    I think that's been true in both the private sector and in 
the VA. When, for example, you have consolidated open heart 
surgery and providers do more surgical procedures, the quality 
becomes much better. Today we have a moratorium on opening new 
clinics, until the budget situation is clarified. But that is 
something that I will look very, very seriously at--to see if 
there is a need for outpatient clinics in this area and to see 
if it is possible for us to either expand existing ones or open 
new ones as the 2003 budget becomes more.
    Mr. Bereuter. Mr. Secretary, we would very much appreciate 
that. I know in the Heartland--in contrast of having a clinic 
available within 30 miles of every veteran, we'd feel very good 
if there was one within 60 miles of every veteran, in many 
cases, of course, the alternatives are much longer as Director 
Hilgert pointed out, our problems are the travel time for the 
veterans and for their families to visit. The history is, of 
course, that we have had two hospitals out of the three close 
in this State, the ones in Grand Island and Lincoln, and so it 
is the Black Hills, Hot Springs, South Dakota, or Denver or 
Omaha that are the alternatives for inpatient care.
    There was a very interesting case which I think presents 
our concerns about whether or not a consolidated VISN 
headquartered in the Twin Cities is really going to understand 
and be sympathetic and address the problems that we have. I 
will give you this example. It made quite a newspaper story.
    A veteran living in west central Nebraska, not in my 
district, in Congressman Osborne's district and, of course, 
constituencies of our two Senators as well, the poor man was 
suffering not only from physical problems that required 
pharmaceuticals, but from Alzheimer's as well, and in order to 
get his prescriptions renewed on an annual basis to be given 
the kind of scrutiny by a physician to see if, in fact, those 
prescriptions were still appropriate, the man has to travel to 
a veterans hospital or at least perhaps to an outpatient clinic 
like the one in Lincoln, but this woman cannot even with help 
take her husband to those clinics, she physically--because of 
his Alzheimer's problems and the travel difficulties, and so 
she's faced with a very high prescription by going to a local 
doctor and not being able to get the prescription filled by the 
VA. So it occurred to us as we looked at it in the initial 
stages, well, you could have your VA people basically doing 
circuit riders around the State to handle those kinds of 
extraordinary situations which are unfortunately not unique, 
not too uncommon where it's a difficulty to come in even 
annually for a reexamination to renew the prescription, or 
second you could permit local physicians on a contract basis in 
that community to do that work for the VA.
    This woman has no alternative with her husband in the 
current condition for getting his prescription renewed so she 
can get VA prescriptions, and that is just something that came 
to our attention. We were looking for a legislative solution, 
but really an administrative solution just presents itself very 
clearly to one when you think about that, permitting a doctor 
on a contract basis to do very basic kind of examinations and 
prescription renewal in isolated parts of our State. Do you 
have any reaction to this problem?
    Mr. Principi. Well, certainly. In that specific case, if 
the veteran is enrolled in the VA health care system--other 
than periodic exams--all of his prescriptions should be mailed 
to him there. We have a wonderful consolidated mail-out 
pharmacy program, so----
    Mr. Bereuter. Secretary, excuse me for interrupting, but it 
is the periodic exam that is the problem.
    Mr. Principi. The problem.
    Mr. Nugent. I'm actually familiar with this case and I 
think someone from Congressman Osborne's office contacted us 
and when we were aware of it, we tried to get a physician up 
there and I believe that we can supply the information for the 
record, but we were going to either send one of our staff up or 
contract with one of the physicians in the area to go out and 
see this particular veteran.
    Mr. Bereuter. I wish you would consider one of those two. 
This just happens to be a notorious case that made the paper, 
but there are others.
    Mr. Chairman, Senator Nelson, thank you, and I'll turn to 
you for your questions, of course.
    Senator Nelson. Thank you, Mr. Bereuter, and again, thank 
you, Mr. Secretary.
    What the veterans are concerned about is any kind of 
reduction in the quality or quantity of services or in their 
ability to deal with the administration of those services. So 
it's both about clinic and management that we are here today. 
Obviously the more distant the administrative headquarters is 
the more concern people have about how you deal with that 
administration, how you're going to interface with them to make 
sure the quality and quantity of services are not reduced. So 
I'm encouraged, Dr. Petzel, by Director Hilgert's comments 
about your having been in Nebraska a lot and we hope that that 
will continue. Obviously we would love to have you be a 
Nebraska resident, but we want you to be a near resident and 
qualify for our income tax laws.
    That's how much we want you to be here because I think 
that's the heart of what this is about today in terms of 
veterans. I mean, we don't have to go through why veterans are 
entitled, maybe not under the law, but morally entitled to 
these kinds of services. We don't need to go through that, 
everybody in the room understands that and everybody outside 
the room understands that. How we deliver it is so critical. 
Our concern is that we have reassurance that there won't be any 
reduction in the quality or quantity of either management or 
clinical care and/or services that they're entitled to.
    Is there anything that the Secretary can tell us 
specifically that might help us have that kind of reassurance 
beyond where you are at the moment? For example, I think that 
there was a location issue that's been raised and one of the 
recommendations in the business case study was to establish a 
satellite VISN 23 office in Nebraska for the transition 
process. Has that been accomplished and is there something that 
might take us beyond that transition office?
    Dr. Petzel. Thank you, thank you. There is a plan to have a 
satellite as you put it network office in Lincoln. We will 
maintain a presence as a network office for as far into the 
future as I can see. We've not done anything definitive, we 
won't until there's a permanent network director named and we 
begin the actual process of consolidating the network offices, 
but it's already been identified that there is a need to 
maintain that.
    I should also add that my wife thinks I spend more time in 
Nebraska now than I do in Minnesota since the 23rd of January.
    Mr. Principi. Well, I can certainly commit to you, Mr. 
Chairman, Mr. Bereuter, that I will watch the situation very, 
very carefully. I intend to hold my people accountable to 
ensure that resources are equitably distributed just as I 
expect you will hold me accountable in the discharge of my 
responsibilities as head of the VA, but I believe this is a 
good management step that we have taken. We have two relatively 
small networks. We know we have a declining veteran population 
across the country as the World War II population passes on. We 
are just trying to take good management steps to ensure that we 
are stewards of the public trust--of the taxpayers' dollars, 
that we are spending those dollars wisely, efficiently and 
effectively across the country and, as you have indicated, to 
ensure that the veterans across the country have equitable 
access to the VA as best we can. Now, you can't do it in every 
community in America, and certainly there are stories of 
factories closing down and veterans not having health care or 
there is no VA facility in an area etc. Those are always very 
heart wrenching. But I think to the degree we can, we have 
tried to move health care closer to the veteran. Of course, 30 
miles in transiting Chicago or one of the larger areas is a 
great distance. It probably takes you as long to go 60 miles, 
as you have indicated, out west, where you don't have as many 
traffic lights or congestion, but we are trying to ensure that 
access to health care is equitably distributed.
    Mr. Bereuter. One final question, Mr. Chairman. Secretary, 
with the shortfall last fiscal year, $92.7 million, is it worth 
all of the concerns that we are going to fail to have adequate 
administrative contact and concern to save $600,000 or at the 
most $6 million, which is the highest estimate I have seen and 
isn't this a very minor savings as compared to a huge problem 
that this VISN region faces even in a more populated area of 
VISN 14, 13 combined? $92.7 million shortfall in 1 year 
suggests there's something basically wrong with the allocation 
system, I believe.
    Mr. Principi. Mr. Bereuter, you are absolutely correct. 
This is really a very, very small issue relative to the larger 
issues facing the VA health care system. I don't know how else 
to say it. I have never seen anything else quite like it. Now, 
I have been in and out of this business for 20 years since I 
first went to the U.S. Senate, starting with the Armed Services 
Committee and then Veterans' Affairs Committee and then with 
President Bush One. I get a call every day from a Member of 
Congress. I mean, from Florida to Seattle, WA and everyplace in 
between. We have more and more veterans coming to us for care 
and, you know, the waiting lines are growing longer.
    The clinics we opened just a year or 2 ago, and which we 
thought would not reach capacity for several more years, are at 
capacity. As I indicated, we are treating a million more 
veterans today than we were treating just a short time ago. So, 
we do have a serious issue here and it's just not in Nebraska, 
it is everywhere.
    Mr. Bereuter. Is this shortfall of $92.7 million for fiscal 
year 2001 the largest shortfall in the region on a per capita 
basis in the whole country?
    Mr. Principi. No, I don't believe so. We have much larger 
shortfalls in other parts of the country.
    Mr. Bereuter. On a per capita basis?
    Dr. Petzel. Yes.
    Senator Nelson. Dr. Petzel, maybe you can----
    Dr. Petzel. We do in New York and Boston, both of those 
places.
    Mr. Bereuter. No wonder they are always helping us when we 
try to bring this issue to the floor.
    Dr. Petzel. Oh, yes, yes. They have the same serious 
problems as we do.
    Mr. Principi. Now, the good news is that the Congress--the 
House has just marked up a supplemental appropriation for 2002 
for the VA. We had requested $142 million in additional funding 
for the VA health care system. We now have that figure up to 
$417 million for 2002. That, combined with some of the 
management steps we have taken, such as procurement reform and 
information technology spending, if we get that amount as it 
goes through the Senate, we will be fine for 2002. Much of that 
shortfall, I don't want to say every penny of that shortfall, 
but much of the shortfall in places like VISN 23, will be 
offset by that supplemental.
    For 2003, it's another set of challenges. We have requested 
about a $1.6 billion increase in VA health care alone. I think 
Congress is looking to add to that budget. So will it be 
enough? Maybe not, but I think we're moving in the right 
direction. So I think the shortfall will be offset by the 
supplemental.
    Senator Nelson. Mr. Secretary, my question is in the form 
of cost containment. What can be done to control costs, where 
they are controllable, not by taking away services, but by 
making sure that utilization severity and the provision of 
services is appropriate to the conditions? Ordinarily when you 
have a centralization of authority and you pull people away 
from an area where they can otherwise watch it more closely, 
wouldn't this argue for more decentralization? Somebody closer 
to the scene could watch the dollars a little bit more closely 
and watch the provisions of services to make sure that they are 
appropriate and cost effective?
    Mr. Principi. Well, that's a good question and I may--Dr. 
Petzel may have a little different take on it because he's in 
the field, but I don't pretend or believe that you can 
centralize all of management in Washington, DC or corporate 
headquarters in the private sector. I think there needs to be a 
balance between in our case Washington, DC and the field. You 
have to manage health care closest to where the patient is, but 
at the same time, I think in some instances we have 
decentralized too much and we have 21 separate health care 
systems all competing against one another for the dollars and 
without recognizing this is a zero-sum gain. At the end of the 
day, you give us an appropriation, and we have to allocate that 
appropriation across the country. Maybe at one time, we had 
medical centers competing against one another, but now we have 
networks competing against one another for those dollars, and 
we have this imbalance. I like to look at it as kind of a 
Federalist approach but you've got to balance it. Washington 
has to make the policy, has to oversee the operations to make 
sure it is equitable and then allow the people in the field 
like Dr. Petzel, who really understand health care and 
understand their network in accordance with those guidelines, 
to distribute the dollars and manage the workload.
    One thing that the president told me that has stuck with 
me, he said, ``You know, every dollar we spend is a dollar that 
some American has to send to us, take out of his or her pocket 
and send to us.'' In my case, I'm the steward of those funds, 
and I have the responsibility to ensure that those dollars are 
spent wisely and effectively. Compassion is not how much money 
we are spending; compassion is measured by the results we get. 
That's basically what I am trying to do as Secretary, to ensure 
that we are spending the dollars, and those dollars are 
reaching veterans. The only reason we exist is to serve 
veterans, and I take that responsibility very seriously.
    Mr. Nugent. I wonder if I could add just one comment----
    Senator Nelson. Sure.
    Mr. Nugent [continuing]. From just the operational aspect 
of the hospital system. The creation of these small cells 
creates problems for us as well. Three or 4 weeks ago, we 
attempted to get a patient into another network only to be 
informed that they didn't take patients from our network. Now, 
we were able to resolve that with some help, but it does create 
a level of competition that I think is unhealthy and creates 
different levels of care across the country.
    Senator Nelson. Thank you very much, and Secretary 
Principi, will you please join us here.
    Mr. Bereuter. Senator Nelson, I need to go back into my 
schedule around Lincoln. Thank you so much for permitting me to 
be part of the Senate Veterans' Affairs Committee hearing 
today. I am leaving my Veterans' Affairs caseworker, Jeanie 
Walker, back here who will give me full reports on what has 
been said here and the kinds of things that we might need to do 
to help. Thank you for inviting me.
    Senator Nelson. Well, thank you very much, Congressman 
Bereuter. It's a pleasure to have you here. It certainly makes 
this a bipartisan effort. Thank you.
    We'll just take a second or two here to invite up the 
second panel which I might introduce as the name cards are 
being changed. We have Elaine Bernhardt who is the President of 
American Federation of Government Employees, Local 2601; Mike 
Crawford, the President of American Federation of Government 
Employees, Local 2270; Keith Fickenscher, the Executive 
Director of Tabitha Health Care Services--the former Director 
of the Department of Veterans Administration Affairs in 
Lincoln; Jim Cada, the Chairman of the Inquiry and Review Board 
of the Nebraska State Veterans Home, and Dr. Jane Potter, 
Harris Professor of Geriatric Medicine, the Chief of the 
Section of Geriatrics and Gerontology, the Department of 
Internal Medicine at the University of Nebraska Medical Center. 
Doctor and everyone, we are very delighted to have you join us 
here today. We will start first with Ms. Bernhardt. If you 
would share with us the concerns you have on behalf of the 
employees.

  STATEMENT OF ELAINE BERNHARDT, PRESIDENT, AFGE LOCAL 2601, 
                        GRAND ISLAND, NE

    Ms. Bernhardt. Thank you, Senator Nelson.
    My name is Elaine Bernhardt. I'm the President of Local 
2601 AFGE in Grand Island. When I first talked to Eric Pierce 
about this hearing today, he asked me to identify some 
opportunities that I could associate with integration. That was 
2 weeks ago and I haven't been able to do that. I have been 
racking my brain and I just can't think of very many 
opportunities. But the second thing he told me was that if I 
identified some problems, if I could please identify solutions 
at the same time. That's been even tougher. I think the budget 
crisis--and I understand what the Secretary was saying earlier, 
we have an appropriation we have to live with--but I do have to 
question the distribution of that budget. I think Nebraska has 
suffered tremendously under the old administration of VISN 14.
    There was a deficit in VISN 14. Nebraska was to assume $4 
million of that deficit as compared to $300,000 that Iowa City 
was to assume.
    As it is now, under Dr. Petzel's leadership, he did put 
$7.7 million into the Nebraska budget that wasn't there before, 
but that still leaves us with a deficit of close to $7 million. 
It doesn't equate to me, but then I'm not a mathematician 
either.
    We've take some measures in Nebraska to deal with the 
deficits. Some of the things that we have done is curb our 
pharmaceutical costs. We have limited travel, particularly 
employee travel for education. We've done some other things. 
FTEE ceiling, we have limited that and we have cut some of the 
control points. Every control point has been cut.
    What happens is that the employees recognized that they're 
not going to have those positions filled, so that person is 
gone who used to work beside them--and there's not enough money 
in the control points to even buy arm bands for our VA officers 
when a fellow officer was killed on duty in another part of the 
United States. Instead what they were told to do is take a 
piece of electrical tape and put it on their badges. That's 
pretty tacky.
    We need to take a look at the budget and the distribution, 
and what is that telling the employees. How they feel about 
this right now is that yeah, there's a lot of things wrong with 
the integration because these things weren't happening before. 
There was a hiring freeze, but now their nose is being kept to 
the grindstone and they are not able to travel for education. 
And that's where the rubber meets the road. Those are the 
people that the veteran sees and who they deal with when they 
come in for attention. We need someone in Grand Island--every 
one of the facilities in Nebraska--in a visible place to answer 
some of the questions that the veterans have. Right now if they 
have insurance questions or they have billing questions, what 
they do is call a number and nine times out of ten they get a 
voice mail, they leave their voice mail, the calls are not 
returned, their billing questions go unanswered. If they go to 
triage, they have to call Des Moines, IA, and that's really a 
tough one to answer those health questions or tell those 
veterans they can indeed go to a private hospital for their 
care if it's an emergency in the case of Grand Island.
    Those are the things that need to be looked at very, very 
hard and we need some answers. I don't have the answers to the 
problems. I mean, it's easy to throw resources at things when 
you have the resources, but we don't have them. So what I have 
managed do is identify some problems. I don't really have any 
solutions other than give us more money. And with that, I will 
close.
    [The prepared statement of Ms. Bernhardt follows:]
  Prepared Statement of Elaine Bernhardt, President, AFGE Local 2601, 
                            Grand Island, NE
opportunities for va nebraska/western iowa health care system with the 
                    integration of visn's 13 and 14
Mental health
    Not unlike other health trends, it has been found that most 
patients respond in a more positive manner when treated in a non-
institutional setting. The current Mental Health Outreach programs in 
Nebraska are successful but are grossly understaffed and under-funded. 
Veterans in rural Nebraska would benefit from expansion of this program 
and the VISN would realize compliance with DVA performance standards.
Extended care
    This field encompasses all aspects of expanded care for the aging 
veteran populace. The Nursing Home Care Unit in Grand Island provides 
transitional care and terminal care for veterans in the entire state. 
The renovation project will satisfy this need for a few but as the 
veterans age, the demand will grow. Nebraska communities are unable to 
keep up with the present day demand and it is not expected they will 
meet future private needs for long-term care yet alone, veterans' 
requirements. The vacant building in Lincoln could be utilized for 
Geropsychiatric care, and/or an Alzheimers Unit, but the building needs 
to be equipped with an adequate sprinkler system. The projected costs 
for this project have been largely inflated. All three Nebraska VA 
buildings could be utilized for Adult Day care, Hospice, Geriatic 
Evaluation Units, Geropsych, Alzheimers. etc. There is adequate space 
in the main hospital buildings on all three sites if offices were moved 
to vacant outlying buildings.
Community based outpatient clinics
    These clinics, have proven to be expensive for the VA to maintain. 
It is expected that the expense will increase as medical costs rise. 
The most expensive method of providing this benefit is through 
contracts with community health providers. This process limits the 
number of veterans that can be in the community panel and once 
established, is subject to the providers' demands when the contract is 
renewed. For example, the Norfolk Community Based Outpatient Clinic is 
limited to approximately a 300 veteran panel with limited number of 
visits per year and has recently increased the cost of care for this 
panel. The North Platte Clinic provides this service to approximately 
1500 veterans with unlimited number of visits and at a much smaller 
expense. VA staffed CBOCs seem to be the answer.
    There is the threat that the Lincoln facility will be downsized to 
a minimal service CBOC. This cannot happen if we are to continue to 
provide high quality, efficient outpatient medical attention at a 
minimal cost.
Transportation
    The Nebraska VA Transportation Network benefits veterans in rural 
Nebraska by bringing them into the Outpatient Clinics at all four VA-
staffed Outpatient Clinics. The van runs include O'Neill, McCook, North 
Platte, as well as Grand Island, Lincoln and Omaha. VA employees and 
Veterans Service Organizations staff the transportation system. The 
system is in need of constant refining and is in dire need of more 
staff. Presently, higher-paid tradesmen are covering for drivers' 
absences. This occurs, nearly daily in Grand Island.
Staff issues
    Nebraska/Western Iowa HCS has employed various methods to recruit 
staff in the field of nursing but the national shortage is felt at all 
three campuses. The few retention incentives available are subject to 
supervisory initiation/approval and we monetary only. In Grand Island, 
there is a movement to provide quality, affordable Day Care in a vacant 
building, which will aid greatly in recruitment and retention efforts. 
Day Care Centers in Lincoln and Omaha would provide the same incentive.
    The staffs in all three facilities have been taxed during the past 
several years. The hiring restriction that was imposed last summer 
remains as NWI is limited to a cumulative FTEE level of 1302. Ninety 
Nebraska positions need to be cut in order to adhere to the FTEE 
ceiling. At the same time, ceilings on overtime usage have been imposed 
and budgets for each department have been decreased. These constraints 
have placed a huge burden on the employees; consequently the initial 
impact from the integration has been negative.
    Although our FTEE levels are perceived to be high (down 19% in the 
past five years) the personnel cost for medical care per patient is 
less than the national average. The median salary in VISN 14 was the 
lowest in the nation, and the Nebraska side of the VISN average salary 
was lower than the Iowa side.
Communication
    The communication and referral process between and among the three 
NWI campuses is in dire need of improvement. Follow up responsibility 
in shifted from campus to campus while the veteran awaits word on the 
results of testing or what is to be done next. Procedures for early 
detection of any medical condition need to be performed quickly, not 
delayed for three months, which is often the case when we limit 
ourselves to the Omaha VA.
Customer satisfaction
    Veteran satisfaction would increase drastically with implementation 
of the following:
     A designated Customer Service Representative at each 
campus. This person would be placed in a visible area to answer 
questions from our veterans. Presently, veterans are required to call a 
voice mail number in Omaha for billing and insurance questions and 
often their messages are not returned.
     Insurance information needs to be obtained at time of 
eligibility determination and when VA patients are seen at the contract 
facilities. Many months can pass before insurance information is 
obtained and in the meanwhile the patient pays full co pay amounts and 
interest accrues.
     Realistic establishment of panel sizes for providers. 
Presently, the panel size is undetermined, as a satisfactory 
``formula'' has not been developed.
     Presently appointment times for established patients are 
20 minutes. For the reason that our clientele in older and sicker than 
the private sector, these times need to be increased to 30 minutes with 
one hour appointments for more complex now patient exams.
     We need a hospitalist at each contract hospital. On an 
average, we house 12 patients a day at St. Francis Medical Center. The 
Medical Officer of the Day is currently responsible for inpatients at 
the contract hospital while still maintaining his/her regularly 
scheduled clinic appointments.
     Ancillary services personnel need to be increased as the 
FTEE in these services have stagnated while the number of providers and 
number of uniques has increased drastically.
Opportunity for research
    With the integration comes the opportunity for the highly-acclaimed 
Minneapolis VA Research Department to expand their subject clientele 
and research issues to include the aging veteran population in a rural 
setting.
Opportunity for fair and equitable consideration
    NWI has endured the short end of a biased VISN administration prior 
to the VISN 23 management. With the new management comes an opportunity 
to target incentive and recruitment dollars for distribution to the 
front line rather then bonuses for VISN Managers that ranged anywhere 
from $5000 to $20,000. Presently, travel dollars are restricted and 
most bargaining unit employees are not approved for travel associated 
with training. No other facility in the new VISN 23 experiences these 
restrictions.

    Senator Nelson. Thank you.
    Mr. Crawford.

  STATEMENT OF MIKE CRAWFORD, ENGINEERING EMPLOYEE, NEBRASKA-
       WESTERN IOWA HEALTHCARE SYSTEM (NWIHC), OMAHA, NE

    Mr. Crawford. Senator Nelson, Secretary Principi.
    My name is Mike Crawford and I am an engineering employee 
for the Nebraska-Western Iowa Health Care System at the Omaha 
facility. I have worked there for over 20 years and have 26 
years of government service. I also serve as President of the 
American Federation of Government Employees, Local 2270, 
representing approximately 600 dedicated and hard-working 
employees at the Omaha facility.
    I want to thank you for giving me the opportunity to voice 
some of our concerns regarding the integration of Networks 13 
and 14.
    During my over 20 years, we have seen our share of changes. 
We have gone through districts, regions, local authorities, 
statewide mergers, VISN's, independent CBOC's and now merged 
VISN's. Just one more change in a long line of changes.
    For years it has been rumored that VISN 14 was going to be 
dissolved. There has been talk of sending us to at least three 
different VISN's and even talking about splitting Iowa and 
Nebraska and sending each State to a different VISN. The reason 
has always been the same, VISN 14 has been operating with a 
budget deficit. It is common knowledge that in fact there are 
15 VISN's that are currently operating with a budget deficit. 
Therefore I maintain as I always have, that the VISN concept 
has not worked since its inception and however well meaning, 
this merger will not work either.
    In Nebraska we have seen our wait times for our veterans 
increase at a substantial rate, up to 9 months for some of our 
specialty clinics and Veteran Satisfaction Surveys have fallen 
because of it. A lot of this is due to the continued increase 
in our patient workload. When compared to fiscal year 2001 
workload, our fiscal year 2002 outpatient visits are expected 
to grow by 6 percent and we anticipate seeing 187,000 patients 
in our clinics. Once our new outpatient exam rooms are open, we 
will be able to see more patients in a timelier fashion. But if 
we are not allowed to increase the needed full-time employee 
equivalent, FTEE, to care for them, the increased workload will 
only prove to compound our problems.
    Because of both parochialism and political pressures on 
VISN 14, I believe that the Nebraska facilities have suffered 
unnecessarily under the policies of VISN 14. I would like to 
lay out some specific examples:
    As far as staffing is concerned, in comparing the Omaha 
facility with the Iowa City facility, excluding CBOC's, we find 
that Omaha reported more patient days, discharges, outpatient 
visits and encounters than Iowa City, but Omaha was expected to 
do this with 65 fewer FTEE's. The impact on Omaha has seen 
increased use of overtime, mandatory overtime, increased use of 
contract nurses which we all know equates to extremely high 
costs, restricted number of ICU beds, employee burnout and low 
staff morale.
    Mr. Gary Nugent, our current Chief Executive Officer, upon 
arriving in Omaha noted the staffing issue and began taking 
action to correct the problem. At the insistence of VISN 14, 
all facilities in VISN had to do a comparative bottom-up review 
with like facilities. This information has not been used but 
does indicate the need for additional staffing to meet our 
increasing workload. About 6 months ago, VISN 14 placed the 
Nebraska-Western Iowa Health Care Divisions on a hiring 
restriction. All positions after being reviewed by local 
management had to be referred to senior management at VISN 
level for recruitment approval. It seems absolutely ridiculous 
to me that we would have VISN senior management officials 
spending time to determine if we should be filling housekeeping 
positions in our facility. Is that not part of the local 
facility director's responsibilities to ensure that we have the 
proper level of staff. We saw this same form of VISN control 
play out at the Kansas City VA and we certainly don't want a 
repeat of the embarrassment that occurred there.
    In 2002 VISN 14 budget allocation process, the Nebraska-
Western Iowa Health Care System allocation was cut by more than 
$4.2 million from its budget request and the Central Iowa 
Health Care System was cut 6.1 million, yet the Iowa City 
facility was asked to only cut 300,000. Again, we have 
comparable size and workloads, but disproportionate budget 
allocation. Another interesting fact is that in the Iowa City 
budget allocation was an additional 2.5 million to deal with 
their backlog in getting patients into clinics. If you would 
look at the backlogs in Central Iowa and Nebraska you could 
justify the same infusion. When you compare the Iowa City and 
the Omaha campuses workloads, you will see that Omaha had the 
larger inpatient and outpatient workload, but Iowa City before 
the infusion already had 30 more physicians on staff. Why did 
they need an infusion? Logically you would think that with 40 
more physicians than Omaha there should never have been a 
backlog.
    In VISN 14 there continues to be staff mix and pay grade 
disparity between network facilities. Employees find it 
difficult to understand why a position in Omaha is graded lower 
than like positions at another VISN 14 facility. My many 
requests for physician standardization have fallen upon deaf 
ears. This contributes to the low morale, low job satisfaction 
rating and mistrust among VISN 14 facilities.
    I believe that there will be no significant cost savings 
associated with this merger. In fact, I can see increased 
costs, for example, travel. Nebraska-Western Iowa is required 
to send officials to Minneapolis to discuss the merger. To meet 
this financial demand, the employee education money and 
employee travel fund will be used. Has this same practice been 
instituted throughout both VISN's or will just the Omaha 
employees pay the price? Did anyone at the VISN level ask 
central office for financial relief for this mandated travel? 
This will not only increase the deficit at the Nebraska-Western 
Iowa Health Care System, but penalizes the education and travel 
fund set aside for employees.
    One of the noted goals of this merger was that all VISN 
staff would be retained. VISN staff will most likely need to be 
absorbed into local facilities. It was also announced there 
will need to be some form of VISN staff left in the Lincoln 
facility while the major VISN staff will be located in 
Minneapolis. Again, logically this does not seem to make much 
sense. There will be the cost of maintaining the property, 
office administration and obviously duplicated positions.
    Currently VISN 14 reports that it has a staffing level of 
16 FTEE. This is inaccurate. All facilities in VISN 14 have 
staff working full time for the network that are costed to the 
local facility and counted against their FTEE. Local management 
has no authority to delay or disapprove filling these 
positions, but is held accountable when they exceed their 
assigned FTEE ceiling.
    I believe the million dollars being spent in the operation 
of a VISN could be better utilized in providing health care to 
our veterans. I would propose that instead of an integrated 
merged VISN, we would look at having a regional chief executive 
officer, fiscal officer and medical officer. We should allow 
our facility directors to utilize their training, experience 
and expertise to operate the local facilities in the best 
interest of the veterans they serve. These directors should be 
held accountable for their actions to the three regional 
directors I have previously mentioned.
    Finally, I want to assure you that no matter what direction 
the VA takes in the proposed merger, our employees will 
continue to provide the high quality health care this Nation's 
veterans have earned and deserve. We must honor the commitment 
this Nation has made to its veterans. Again, thank you for 
giving me the opportunity to speak before you.
    Senator Nelson. Thank you.
    Keith.

   STATEMENT OF KEITH FICKENSCHER, IMMEDIATE PAST DIRECTOR, 
                 VETERANS AFFAIRS FOR NEBRASKA

    Mr. Fickenscher. Thank you, Senator Nelson, Secretary 
Principi. I am pleased to be here. I think I bring kind of a 
historical perspective, having been through a lot in this VISN 
during my tenure as Director of Veterans Affairs from 1996 
until just about 10, 11 months ago.
    In July 1996 I was appointed Director of Veterans Affairs 
for Nebraska by Governor Ben Nelson. Change was just beginning 
to occur in the care model for VA medical centers across the 
country. Those Nebraska veterans who were eligible to use the 
system, were very proud of our State's three VA medical centers 
in Omaha, Lincoln, and Grand Island. Quality of care and 
compassionate service were both highly acclaimed. The only 
significant dissatisfaction that I recall came from those 
Category C, now Priority 7 veterans, who were denied access to 
the VA health care system. They felt strongly that their 
government had made implied and explicit promises of perpetual 
health care for them in exchange for their service to their 
country. As a group, they were pretty upset about the way the 
VA health care system denied them access.
    In my early months as Director, the three VA hospitals in 
Nebraska were operated pretty much independently. However, 
there was a lot of information coming from the system 
indicating the financial picture, especially for Grand Island, 
was not good. There were rumors about closing Grand Island, 
which was an option vehemently opposed, especially by veterans 
west of Kearney. Eventually the solution the VA recommended was 
to integrate Grand Island and Lincoln. This was supposed to 
solve the financial crunch. At the time, I recall veterans 
being very skeptical because there was a belief that Grand 
Island was a cost efficient operation operating in the black, 
whereas Lincoln was not. A year later, the deficits were still 
piling up and there was a push to integrate Lincoln and Grand 
Island with Omaha. Veterans were wary because the previous 
integration had resulted in the loss of inpatient medicine, 
dialysis, ICU and telemetry at Grand Island. Surgery at Grand 
Island had been previously discontinued. The argument used by 
the VA for integrating Lincoln and Grand Island with Omaha was 
that the inpatient and surgical census at Lincoln did not 
warrant continuation of those services. Veterans believed the 
VA had perpetuated a self-fulfilling prophesy. By excluding 
care to large groups of veterans, their inpatient numbers were 
dwindling. Nebraska veterans felt they had given up enough with 
the loss of services at Grand Island and they did not want to 
see the same thing happen at Lincoln, but it did. With the 
integration of Lincoln and Grand Island with Omaha, Lincoln 
lost acute inpatient medicine, general surgery, urology, 
orthopedic, psychiatry, and substance abuse rehabilitation.
    Throughout the process of both integrations, Nebraska 
veterans were given five consistent messages by the VA: No. 1, 
the result would be seamless to the veterans, they would never 
know it; 2, savings from integration would be put back into the 
system to provide better health care; 3, the VA would have 
contracts with the local hospitals, St. Francis in Grand 
Island, St. Elizabeth's in Lincoln, to provide care to veterans 
when transportation to Lincoln and then later Omaha was not in 
the patient's best interests; 4, the VA would operate an 
extensive transportation network in the State to transport 
veterans to the appropriate VA facility; and 5, veterans were 
told that they needed to encourage their comrades to enroll in 
the VA health care system to get the numbers up and thereby get 
a bigger piece of the VERA revenue pie for Nebraska.
    Taking these points in order, the actual affect on veterans 
was quite different from what they believed they could expect. 
First, the changes that were implemented were not seamless, 
they resulted in a concentration of services in Omaha, making 
care much more inaccessible to outstate veterans; second, there 
never were any savings. Every year veterans were told new 
horror stories of the burgeoning budget deficits in Nebraska's 
three VAMC's and in VISN 14. If no savings were realized from 
the previous two mergers, we wondered why this one would be 
different; third, the process to obtain care in a non-VA 
facility was never well understood, which resulted in veterans 
being stuck with medical bills and ambulance charges they 
thought the VA was going to pay; fourth, and to this day, I am 
told the VA transportation system is no better than it was in 
1997 when Grand Island was integrated with Lincoln. A veteran 
in western Nebraska is not likely to believe that an 
administrator in Minneapolis is going to fix this problem; and 
fifth, Nebraska veterans responded to the invitation to enroll 
their comrades.
    As I recall in one particular year, Nebraska led the Nation 
in enrollment percentage increases. The problem was most of 
them were Priority 7's and the VA then began telling us these 
Priority 7 veterans were bankrupting the system because VISN 14 
did not receive any reimbursement for providing them care. 
Furthermore, we were told the additional enrollment of Priority 
7 veterans was creating a huge burden in the cost of supplying 
them their prescription medications. So in effect, by doing 
exactly what they were asked to do, Nebraska veterans helped 
increase the deficits and put more pressure on cutting costs in 
VISN 14.
    I recall a discussion I had with a county service officer 
who told me he wasn't going to enroll any more Priority 7's 
because every time he did, he was contributing to the demise of 
the VA health care system. In a tragic and sad way, he may have 
been right. This VISN even canceled scheduled health screening 
clinics because they produced too many new enrollments.
    Given this historical overview, which admittedly has 
omitted many veterans' frustrations involving emergency care 
situations, transportation, lodging, billing errors and 
extraordinarily long waits for appointments, I believe it 
should be apparent why Nebraska veterans might mistrust yet 
another integration. Hopefully, there are no plans this time to 
strip any more services or product lines out of Nebraska.
    So where do the efficiencies arise? We could conceivably 
eliminate the VISN director for Nebraska and Iowa and the VISN 
office in Lincoln. That wouldn't be enough.
    As this integration goes forward, Nebraskans deserve to be 
told the truth, Mr. Secretary, up front about what will happen 
to their facilities and services. They deserve a commitment to 
a plan that will resolve the transportation problems. They 
deserve to have clear, consistent rules about when and how they 
can access care outside the VA system and still expect the VA 
to pay for it. They deserve to have Medicare cover the cost of 
their care. They deserve to have an associate director at their 
facilities in Omaha, Grand Island and in Lincoln. And finally, 
I don't know if they deserve this or not, but it would be 
awfully nice if whenever they called their VA medical center 
regardless of the time of day, a live, helpful and 
knowledgeable person would answer the phone. I think it is 
disrespectful to those who have served this country to expect 
them to deal with an answering machine when they have health-
related concerns.
    Senator Nelson and Secretary Principi, thank you for this 
opportunity to present my views to you. And in ending now, I 
would just add that I do say that you have a great group of 
people in Nebraska. It was a great honor for me to work with 
people like Gary Nugent, Ken Huibregtse, Cindy Sestak, Dr. 
Graham and I always admired Dr. Petzel from afar, as a great 
leader. You have the right people here, but they just simply 
don't have the resources to do the job that they want to do.
    Senator Nelson. Thank you.
    Jim.

 STATEMENT OF JIM CADA, STATE COMMANDER, MILITARY ORDER OF THE 
         PURPLE HEART, NEBRASKA DEPARTMENT, LINCOLN, NE

    Mr. Cada. Thank you, Senator Nelson, Secretary Principi.
    In January I presented a letter to Secretary Principi and 
to the Nebraska congressional district and other members of the 
Senate Committee on Veterans' Affairs, a copy of the letter has 
been provided and the information in that letter continues to 
be correct and the questions asked therein are still 
unanswered.
    As the State Commander of the Military Order of the Purple 
Heart, I am here today as a veteran that is deeply concerned 
for the care of all veterans. In the late 1990's as Senator 
Nelson discussed, we had some studies and those studies showed 
that the merger would not bring any benefit, either for the 
patient or for the financial situation. So the big question is 
why was there another VA VISN study accomplished in secret and 
what was the Veterans Administration hiding by not providing 
that to us until they decided to merge in January? The VISN 
case study was to clearly identify advantages, disadvantages 
and opportunities and potential efficiencies. It's just 
impossible in any way to say that this merger is going to save 
us money.
    A sound business decision based on adding two very large 
financially deficient entities and concluding that the bottom 
line results in financial stability is certainly next to 
impossible to understand. If my law office was millions of 
dollars in debt, I wouldn't be creating a merger with another 
law office that was worse off than mine, let alone being 
located several hundred miles away from each other and 
expecting to receive economies of scale, and satisfied 
customers by sending them to Minnesota.
    So what is really being accomplished? It appears that the 
VA is trying to drive veterans away so they will seek other 
health care providers and use their Medicare benefits instead. 
Is that why our veteran patients are being told if they want VA 
to pay for their cardiac care, then it will be accomplished at 
the VA in Minneapolis not Bryan LGH in Lincoln? They are told 
if you want to go to Bryan, you will need to use your Medicare 
benefits. I have sort of a conflict of interest in that we 
represent Bryan Hospital in Lincoln and Bryan does provide 
inpatient care for some of our veterans. But we have stories 
about the VA coming into their rooms, closing the door and 
saying, ``If you want care, you're going to have to go to 
Omaha. We are going to stop paying for your care at the 
hospital--at Bryan Hospital,'' and there are many of those 
stories.
    It appears that the VA is trying to close down veterans' 
care in Nebraska because the VA has not given this VISN a 
director with the vision and power and the resources to improve 
care for all Nebraska veterans.
    It appears that the VA is trying to close the Lincoln 
facility by downsizing, by sending veterans away, by requiring 
travel and delays in care, and making care for veterans 
unpleasant or discouraging them with the transfer of the 
administrative power to Minneapolis.
    The VA has reduced care for Nebraska veterans by 
eliminating certain types of care in Lincoln and Grand Island.
    It appears that the VA has reduced care for Nebraska 
veterans due to reduction of staff, which is going on in 
Lincoln at the present time, and the loss of doctors and staff 
because of the underlying fear that they have of closure of the 
medical facilities. It appears further that the Nebraska 
veterans health care continues to be the target for new ideas 
that increases the deficit rather than decreases the deficit. 
VA administration approved the contracting out of all inpatient 
care in Lincoln and Grand Island. VA studies show that it is 
cost prohibitive to do that. But now the VA administration has 
made a decision to merge without evidence that favorably 
supports that decision. The first initiative has been extremely 
costly to Nebraska veterans. The second initiative is resulting 
in rationed health care.
    So in summary, before my yellow light even goes on, the 
veterans of Nebraska have the right to receive the same health 
care benefits that are provided to veterans that live in other 
parts of the country, and that's not so, at the present time at 
least. Veterans should not have to worry if the VA can afford 
to treat them. The men and women who were wounded and served 
our country in the armed forces have earned and paid in full 
for the medical care that should be made available. I want to 
thank you very much for allowing me to speak. I appreciate the 
opportunity and I am finished.
    [The prepared statement of Mr. Cada follows:]

Prepared Statement of Jim Cada, State Commander, Military Order of the 
             Purple Heart, Nebraska Department, Lincoln, NE

    In January I presented a letter to Secretary Principi, the 
Nebraska congressional delegation and other members of the 
Senate Committee on Veterans' Affairs, a copy of that letter 
has been provided. The information in that letter continues to 
be correct, and the questions asked therein are still 
unanswered.
    As the State Commander of the Military Order of the Purple 
Heart, I am here today as a Veteran that is deeply concerned 
for the care of all veterans. The battle might appear to have 
been won, but the war will not be over until such time that the 
smoke screens or ``Veterans'' are gone.
    During the late nineties questions were raised by both the 
congressional delegation and service organizations as to why 
VISN 14 was being considered for a merger. The answer given and 
received was that ``VISN 14 is to small to support its self''. 
A substantial amount of money was spent on various outside 
consultants that were tasked to study, analyze and provide a 
written report on the feasibility of merging V14 with another 
VISN. Feedback on all accounts was that there was ``NO 
Benefit'' to both the patient and the financial situation.
    The big question is why was there another review ``VHA 
Business Study'', accomplished in secret? What was the Veterans 
Administration trying to hide? By the time the veteran and 
their constituents caught wind of the internal review and tried 
to make their voices heard, the ink was already dry on the 
merger papers.
    Lets get down to some hard facts. The smoke has cleared the 
screen, the merger has happened but the veterans want some 
answers. I won't bore you with the details of the fifty four-
page Business Study. The Business Case Study was to clearly 
identify advantages, disadvantages, and estimated cost savings, 
clinical opportunities and potential efficiencies. It is 
ridiculous for anyone to say that this merger is going to save 
us money? The only tangible dollar savings even mentioned 
within the document is or was the ``possible savings associated 
with joining the two Network Offices''. A million dollars is 
nothing when you are facing a $140 million shortfall tins year 
alone.
    Besides you couldn't even count the VISN 14 Network 
Director's salary since that position was temporary and had 
been vacant for 19 months. That savings had already been 
realized in VISN 14.
    Why didn't we just do away with facility Directors and save 
twice the money? If VISN 14 was so small why not treat it like 
one facility and reduce the number of top management officials, 
i.e. facility directors, facility chief operation officers, 
facility associate directors, etc.
    A sound business decision based on adding two very large 
financially deficient entities and concluding that the bottom 
line results in financial stability is certainly next to 
impossible to understand. Give me a break! If my Law office was 
millions of dollars in debt I sure wouldn't be creating a 
merger with several other law offices that were worse off than 
mine, let alone being located several hundred of miles away 
from each other and expecting to receive economies of scale, 
and satisfied customer by sending them to Minnesota.
    What is VA really doing?
    (1) It appears that the VA is trying to drive Veterans away 
so they will seek other health care providers, and use their 
Medicare benefits instead. Is that why our Veteran Patients are 
being told if they want VA to pay for their cardiac care than 
it will be accomplished at VA Mpls not Bryan LOH? They are told 
that if you want to go to Bryan you will need to use your 
Medicare Benefits.
    (2) It appears that the VA is trying to close down 
veteran's care in Nebraska, because the VA has not given this 
VISN a director with the vision and power to improve care for 
all Nebraska veterans.
    (3) It appears that the VA is trying to close the Lincoln 
facility, by downsizing, by sending veteran's away, requiring 
travel and delays in care, making care for veterans unpleasant 
or discouraging them with the transfer of the administrative 
power to Minneapolis.
    (4) The VA has reduced care for Nebraska's veterans by 
eliminating certain types of care in Lincoln and Grand Island.
    (5) It appears that the VA has reduced cue for Nebraska's 
veterans due to reduction of staff, and the lose of doctors and 
staff because of the underlying fear of closure of the medical 
facilities.
    (6) It appears that Nebraska veterans healthcare continues 
to be the target for new ideas that increases the deficit 
rather than decreases the deficit. VA administration approved 
contracting out of all inpatient care both in Lincoln and Grand 
Island. VA studies show that it is cost prohibitive to do that. 
Now VA administration has made a decision to merge without 
evidence that favorably supports such a decision. The first 
initiative has been extremely costly to Nebraska VA Healthcare 
Resources. The second initiative (merger) is resulting in 
rationed healthcare.
    In Summary, the veterans of Nebraska have the right to 
receive the same health care benefits that are provided to 
veterans that live in other parts of the country. Veterans 
should not have to worry if the VA can afford to treat them. 
The men and women who were wounded or that served out of the 
country in the Armed Forces have earned and paid in full for 
medical care that should be made easily available.

    Senator Nelson. Thank you.
    Dr. Potter.

    STATEMENT OF JANE F. POTTER, M.D., HARRIS PROFESSOR OF 
     GERIATRIC MEDICINE, CHIEF, SECTION OF GERIATRICS AND 
  GERONTOLOGY, DEPARTMENT OF INTERNAL MEDICINE, UNIVERSITY OF 
               NEBRASKA MEDICAL CENTER, OMAHA, NE

    Dr. Potter. Yes. I would like to thank Secretary Principi 
for his visit and also thank Senator Nelson for the opportunity 
to speak. I need to say that missing from my credentials is 20 
years of very proud service as a member of the medical staff at 
the Omaha Veterans Administration Hospital where I also led the 
section of geriatrics within medical service for 6 years.
    In 1982 I came to Nebraska as the first geriatrition in 
Nebraska. And Senator Nelson, I think it's very important that 
we all appreciate how important the Veterans Health 
Administration has been in leading efforts nationally to 
improve the care for our aging population.
    The VA's focus on aging veterans, on increasing knowledge 
of aging, on transmitting that knowledge to health care 
providers and ultimately improving the quality of care for the 
aged has been unparalleled nationally.
    VA set up as a cornerstone for their programs in aging back 
in the 1970's, programs known as geriatric research education 
and clinical centers. Public Law 99-166 expressed Congress 
intent that there would be a geographic dispersion of the GRECC 
programs across the United States. There would be 25 of these 
geographically dispersed. Every network was to have a GRECC, 
and prior to the merger of VISN 13 and 14, Nebraska/Iowa was 
one of three such VISN's nationally without a GRECC. This 
Congress also had recommended appropriations for an additional 
two of these geriatric research education clinical centers in 
the current congressional budget. We have been aware of this 
program over many years and have planned and built out programs 
and services specifically waiting the opportunity to apply.
    I am here representing the researchers, the clinicians and 
educators in our network. Our specific request is that the 
Secretary allow this region to compete for a GRECC as would 
have occurred prior to the merger.
    Every GRECC not only serves its region, but it also serves 
VA nationally. The VA region in Nebraska I would say in 
particular is well equipped to address two important VA needs. 
That includes, not surprisingly given the conversations this 
morning, the needs of rural veterans.
    Currently there is no geriatric research and education 
clinical centers in the country specifically addressing the 
needs of rural veterans. And second, the Omaha VA Medical 
Center and the national VA appreciates the importance of aging 
and alcohol and substance abuse problems. The Omaha VA Medical 
Center has 1 of 2 VA funded alcohol research centers which 
would nicely combine with a GRECC in research education and 
clinical programs to address the problem of aging and alcohol 
use within VA.
    And then in closing, it is my request that our network, the 
Nebraska-Iowa region, be allowed to compete for a geriatric 
research education clinical center so that the veterans in the 
Nebraska-Iowa region don't become the only geographic region in 
the country without one of these very important valuable and 
laudable VA resources. And I thank you for the opportunity to 
be heard.
    [The prepared statement of Dr. Potter follows:]
    Prepared Statement of Jane F. Potter, M.D., Harris Professor of 
   Geriatric Medicine, Chief, Section of Geriatrics and Gerontology, 
Department of Internal Medicine, University of Nebraska Medical Center, 
                               Omaha, NE
        geriatric research education and clinical center (grecc)
Summary
    During the next 30 years, growth in the older population will 
transform our society. Caring for a large and growing older population 
is a national challenge that is more complex when the target population 
resides in rural setting. The country's largest health care delivery 
system, the Veterans Health Administration (VRA) has long led efforts 
to meet these challenges.
    The University of Nebraska Medical Center (UNMC) requests funding 
for a VRA Geriatric Research Education and Clinical Center (GRECC) at 
the Omaha Veterans Affairs (VA) Medical Center. A GRECC program would 
provide support for 12 full-time employee equivalents at roughly $1 
million annually. This core support would be used to:
          (1) develop unique research programs on rural aging veterans 
        and on alcohol use disorders in aging veterans
          (2) educate health providers in practice and those still in 
        training on care of the aged
          (3) provide innovative clinical care and services to benefit 
        both rural and urban aging veterans.
Need
    Between the year 2010 when the first baby boomers turn 65 years of 
age and 2030, the population over the age of 65 years will more than 
double. The greatest growth will be among persons aged 85 and older. 
Nebraska and Iowa already lead the nation in the proportion of the 
population over 85 years. This mid-western region is additionally 
challenged to serve an aging population that is dispersed in rural and 
thinly populated frontier areas. As is true elsewhere, there are far 
fewer health professionals trained than are needed to serve the 
burgeoning older population.
    The Veterans Health Administration in 1970 initiated a strategy to 
focus attention on the aging veteran, increase basic knowledge of 
aging, transmit that knowledge to health care providers and improve the 
quality of care to the aged. The Geriatric Research Education and 
Clinical Center (GRECC) program is the cornerstone of this strategy. 
Public Law 99-166 expanded this program with the intent of establishing 
25 of these centers geographically dispersed across the US. Every 
network was to have a GRECC program. Prior to the merger of the 
Nebraska/Iowa Veterans Service Network with the Minnesota/North and 
South Dakota Network in January 2002, Nebraska/Iowa was one of 3 
Veterans Networks nationally without a GRECC program. Congressional 
approval of 2 more GRECCs in the 2002 budget should have allowed UNMC 
and the Omaha VA to compete for this program with the two other 
unfunded networks. With the merger, our ability to compete for this 
program will be lost unless the criteria are changed to allow us to 
file an application. Moreover, the merger of two rural networks has not 
reduced the important regional need for a GRECC program to serve our 
aging rural veteran population or the intent of Congress to place these 
programs in geographically dispersed regions.
Requested action
    Response to the GRECC application submitted an behalf of UNMC/OVAMC 
to serve the veterans of Nebraska and Iowa region by the provision of:
          12 full time employee equivalents, approximately $1 million 
        annually.
    Designation as a GRECC also allows: competitive application for 
ongoing research awards in aging and geriatrics; request for training 
stipends in medicine, nursing, pharmacy and allied health; and 
application for continuing education funds.
Institutional uniqueness
    The Omaha Veterans Affairs Medical Center is a leader in the 
conduct of research, education, and tertiary care for veterans in this 
region. Roughly 630 medical trainees study at the Omaha VA each year 
for nearly 27,000 hours annually. Since 1991, the Omaha VA and its 
affiliated program in geriatric medicine from UNMC have laid the ground 
work for a GRECC through health professional education, outpatient and 
inpatient services, quality improvement projects and through education, 
research and training at the affiliated state veterans' home. 
Throughout these activities service to rural veterans has been 
emphasized.
     UNMC has a federally funded Rural Research Center that has 
a major interest in service delivery to older people. No VA GRECC has a 
program addressing rural veterans.
     The Omaha VA has one of three Alcohol Research Center's in 
the VA system. Alcohol related disorders are an important problem in 
older veterans and one that has not been addressed at any VA GRECC 
program.
     The Omaha VA is in a unique position to address alcohol 
use problems and rural veterans under a GRECC.
    The UNMC Section of Geriatrics has been a regional leader in 
education and training for the last 20 years.
     Gerontology and geriatric medicine has been taught as part 
of the curriculum for medical students at UNMC since 1981. Training in 
geriatrics has been mandatory for Internal Medicine residents and 
Family Practice residents since 1985 and 1987, respectively.
     Since 1993, the Omaha VA has served as the primary 
geriatric-training site for residents of Internal Medicine from 
Creighton University.
     In 1986 UNMC initiated the first (and still the state's 
only) advanced training program in geriatric medicine for physicians, a 
program which also employs the Omaha VA as a training site.
     In 2000 the UNMC College of Medicine was one of 20 U.S. 
medical schools to receive support from the American Association of 
Medical Colleges to develop model programs for geriatrics education in 
medical schools.
     In April 2001, the College received a $2 million grant 
from the Reynold's Foundation to increase enthusiasm among medical 
students for care of the aged and to provide training within each year 
of primary care residency training in programs across the state and 
within the surgical specialties.
     In 2002, the UNMC will complete plans for a geriatric 
center located between UNMC and the VA. This facility will house the 
UNMC education, research and clinical, and community outreach program 
in close proximity to the proposed GRECC.
    A GRECC program at the Omaha VA would focus on two unique research 
areas. health services research for rural veterans and on research on 
aging and alcohol use disorders. The Omaha VA has a strong geriatrics 
program and is affiliated with a nationally recognized program in 
geriatrics at UNMC, making our application for a GRECC unique in the 
region.
Conclusion
    The Omaha VA serves an essential role in health professions 
education for this region and in the health care of its aging 
population. Under a GRECC program, the Omaha VA Medical Center in 
partnership with UNMC is uniquely qualified and prepared to raise the 
standard of care for both rural and urban veterans, conduct unique 
research an two important problems of aging, and serve as a regional 
resource in geriatric education. Resources under a GRECC program would 
provide annual support of one million dollars to meet the challenge of 
caring for our aging veteran population.

    Senator Nelson. Thank you very much, Dr. Potter.
    Mr. Secretary, do you have any questions you would like to 
ask of any of the panelists?
    Secretary Principi. No, not at this time, Mr. Chairman.
    Senator Nelson. Thank you very much for your presentations. 
I appreciate your being here. Thank you.
    As the next panel is arriving, I would like to introduce 
them. First of all, we have Greg Kulm, Chapter 260 Officer, 
Military Order of the Purple Heart, Nebraska Chapter; Jerry 
Bove, the Nebraska Department Commander, The American Legion; 
Alfonso G. Martinez, Jr., Nebraska State Council President, the 
Membership Chair of the Vietnam Veterans of America; Howard 
Braman, the Commander of the Nebraska Disabled American 
Veterans; and Craig Enenbach, Treasurer and Member, Board of 
Directors, Great Plains Chapter of the Paralyzed Veterans of 
America.
    Howard, you drew the long straw.

   STATEMENT OF HOWARD BRAMAN, COMMANDER, DISABLED AMERICAN 
                            VETERANS

    Mr. Braman. Yes, sir, it sure looks that way, sir.
    Mr. Nelson and Mr. Principi. My name is Howard Braman. I'm 
the Commander of the Disabled American Veterans Department in 
Nebraska. I'm a retired 26-year-plus military man, 70 percent 
disabled. I am here because I'm kind of upset the way VISN 13 
and 14 was combined. I would like to know why the veterans were 
not notified in the two districts. I would like to know why the 
people had to travel so far from one element to another element 
to another element. I would also like to know why the moneys 
are lost between the two elements, VISN 13 and 14, and why we 
cannot have more CBOC's.
    We had two elements out west, one is in North Platte across 
a CBOC. It's a regional hospital, bigger than any hospital here 
in Omaha. We have another one in Scottsbluff, the same way, and 
yet again, we send people from Scottsbluff all the way up to 
Hot Springs and Cheyenne.
    Why can't we send them across the street in Scottsbluff and 
North Platte? And why do we have to send people from North 
Platte to Omaha when we have three--as you said, two hospitals 
between here and there and they're not being used, and yet, 
again, they want to take and combine 13 and 14 into one 
humongous VISN. I don't understand that, and I want you to 
explain to me why this was done so that I will be able to 
understand it and let the Disabled American Veterans, 
Department of Nebraska, know why you did this. So please 
explain to me why.
    Senator Nelson. If we could go forward then, we will take 
notice of that.
    Mr. Braman. I'm done.
    Senator Nelson. Thank you, now Al.

STATEMENT OF AL MARTINEZ, STATE PRESIDENT, VIETNAM VETERANS OF 
              AMERICA AND LEGISLATIVE COORDINATOR

    Mr. Martinez. Yes. My name is Al Martinez. I'm State 
President of Vietnam Veterans of America and Legislative 
Coordinator for the State as well.
    Honorable dignitaries and distinguished fellow colleagues, 
comrades, ladies and gentlemen. Our concern that the 200,000 
veterans in our VISN that use the VAMC is--even through at 
great lengths of cutting budgets, employee reduction, 
readjusting staff and increasing the number of veterans that 
use the VA health care system, we were merged with a larger 
VISN that is also failing according to the VA data and reports. 
How can two wrongs make a right? Because they are larger, we 
are not merged, we are absorbed. This is bad enough that we 
will be competing for moneys funding on a lager scale and that 
Nebraska and Western Iowa on the lower scale half would make 
things and matters worse.
    We will now compete among the VAMC's in our area for 
survival. It has been proved more than once time and time again 
that the problem was not with the employees, staff or veteran 
patients, but rather the upper administrative task force 
employed by the VA and health care system. Do not chastise our 
VAMC employees and patients for the lack of competence in the 
upper administrative and operating system that have caused the 
VA to lose money in care of funding by the Federal Government.
    Not long ago our VISN Director Vincent Ing was transferred 
to us in Nebraska to help us and it turned out that he brought 
problems from previous VISN's and when it was all said and 
done, we lost Vincent because of the inadequacies and problems 
that came with him. Now you bring us a new VISN person, Mr. 
Petzel, and we don't know him as well, but our concern is that 
this is not a failing VISN coming to help another failing VISN 
and that the veterans will not be taken in at the expense of 
inadequacy of administration and policy of administration in 
care of the infrastructure.
    We now have a better understanding of the 44 
classifications of veteran patients. I believe they might have 
even added a few more. But they are only three forms of amounts 
of VERA reimbursement, approximately $105, $2,800, and $3,200 
per patient. Over the previous past years our VISN lost moneys 
in over 50,000 patients to a negative because of the lack of 
oversight administratively. Since then, over 20-plus employees 
were resigned, terminated, or transferred. This is only one 
level and everything goes wrong at the highest management 
level. Staff and employees take the pressure, but higher level 
positions are transferred and become someone else's problem. 
This needs to be addressed.
    Already the Omaha VAMC is overwhelmed with parking space 
from priority veterans. A smaller staff and employees are 
serving a greater number of increase in veteran patients. Even 
though a greater number of veterans are using the VA health 
care, VAMC's are competing in our area to stay open. Once 
again, this kind of stress on employees and staff at the 
expense of saving a dollar and jeopardizing health care for the 
veteran is not acceptable. Furthermore, transferring and 
rearranging upper level management to cover mistakes at the 
expense of the VA is not helping our cause.
    Just recently President Bush approved $107 million and 
added $400 million to our emergency funding for the VA health 
care system. This should not be about asking for a loan or a 
handout. This should be about capitalizing on the hard work and 
effort that VISN 14 originally made and continues to make for a 
better present, future of our VAMC's. Therefore, if our VISN 14 
was merged by VISN 13, absorbed to make 23, make sure we are 
not dissolved in the process and when moneys funding is 
allocated on a priority basis, we in Nebraska and Western Iowa 
find ourself at the bottom of this number scale.
    My time is out and I have a few more things to read, but 
the only thing I will ask you is this: With the merger of 13 
and 14, what are the benefits the VA and veterans of both 
VISN's who are in will lose or win? With the shortfalls of VERA 
funding, what efforts will this have on the merger of 13 and 
14? Where do we stand on an opening at--admitting centers of 
excellence for Hepatitis C and where will the closest one be to 
us? How do you account for the VISN directors and the hospital 
directors who fall with a golden parachute and can't be 
touched? Should they be held more accountable? What are the 
long-term plans to improve the VA system and to back up the 
shortfall of moneys that we have lost in the past?
    Thank you.
    [The prepared statement of Mr. Martinez follows:]
Prepared Statement of Al Martinez, State President, Vietnam Veterans of 
                  America and Legislative Coordinator
    Our concern, the 200,000 Veterans of our VISN 14 that use the VAMC 
system, is that even though VISN 14 went through great lengths of 
cutting budgets, employees, readjusting staff and increasing the number 
of Veterans that use the VAMC Healthcare; we were merged with a larger 
VISN 13 that is also failing according to V.A. data and reports. How 
can two wrongs make a right? Because they are larger, we were not 
merged--we were absorbed. It is bad enough that we will be competing 
for monies funding on a larger scale with Nebraska and Western Iowa on 
the lower half, but, to make things/matters worse, we will now compete 
among the VAMC's in our area for survival. It has been proven more than 
once, time and time again, that the problem was not with the employees, 
staff or Veteran patient, but rather the upper administrative task 
force employed by the V.A. Healthcare System. Do not chastise our VAMC 
employees and patients for lack of competence in upper administrative 
operations that have caused the V.A. to loose money c/o funding by 
federal government. Not too long ago our VISN Director Vincent Ing was 
transfered to us in Nebraska to help us and it turned out he brought 
his problems with him from his previous VISN. Now you bring us Mr. 
Robert A. Petzel from another failing VISN to help us again? Not all 
Veterans are highly educated especially in the areas of the V.A., but 
they see what is happening to their healthcare system.
    Examples:
    1. We now have a better understanding of the 44 classifications of 
Veteran Patients, I believe they might have even added a few more. But 
there are only 3 forms (amounts) of VERA Reimbursement--approximately 
$105.00/patient, $2,800.00/patient, or $3,200.00/patient. Over the 
previous/past years our V.A. system lost monies on over 50,000 patients 
to the negative because of this lack of oversight administratively. 
Since then over 20+ employees were resigned, terminated or transferred. 
This is only on one level. Everytime something goes wrong on a higher 
management level, staff and employees take the pressure. But higher 
level positions are transferred and become someone else's problem. This 
needs to be addressed.
    2. Already the Omaha VAMC is being overwhelmed with parking space 
for priority Veterans. A smaller staff and employees are serving a 
greater number/increase in Veteran patients. Even though a greater 
number of Veterans are using the V.A. Healthcare. VAMC's are competing 
in our area to stay open. Once again, this kind of stress on employees 
and staff at the expense of saving a dollar and jeopardizing healthcare 
for the Veteran is not acceptable. Further more, transferring and 
rearranging upper level management to cover mistakes at the expense of 
the V.A. is not helping our cause to stay open and functional. As for 
priority 7 affecting the budget at this time 1-3 become service 
connected changing their state.
    3. Just recently the President of the U.S. Honorable Bush approved 
$107 million with and added $400 million c/o our Emergency Funding for 
the V.A. Healthcare System. This should not be about asking for a loan 
or a handout. This should be about capitalizing on the hard work and 
effort that VISN 14 originally made and continues to make for a better 
present and future of our VAMC's. Therefore, if our VISN 14 was merged 
by VISN 13 / absorbed to make VISN 23. Make sure we are not dissolved 
in the process when monies/funding are allocated on a priority basis 
and we in Nebraska and Western Iowa find ourselves at the bottom of the 
numbers scale.
    4. Satellite clinics were established in Norfolk, Nebraska and 
other areas to save on transportation and facilitate service to 
Veterans in rural areas. This is great up to the point when funding 
allows for 200+ and the needs are 300+ as an example. Enrollment and 
the bulk of services and special clinics remain at the Omaha VAMC which 
is fine as long as the increase of services and patients is equal by 
funding, staff and employees to provide these services. Quality of 
LPN's, RN's, PA's, and specialized staff/personnel should also be 
maintained and monitored based on their qualifications and not on the 
work-overload.
    5. Recently areas of special need were addressed. Example: 
Pharmacy--The question extra personnel needed to evaluate the issue of 
overmedications was brought up and keeping up with waiting time for 
medications. This is fine as long as time and money is not shifted and 
over concentrated/spent on higher paid (evaluations) employees/staff to 
supervise and less effort on actual pharmacy service and time element/
waiting for medications to be dispensed to Veterans.
    6. When Veterans are transported from one end of the state to 
another, without informing them of doctor cancellations, this is burned 
to the Veteran especially if Veteran is told he will be seen later that 
day and later told to come back the next day and no provisions are made 
to cover the cost of overnight lodging for that Veteran.
    7. Numbers of Veterans using the V.A. will continue to grow/
increase based on older Veterans, Millennium Bill and approved service 
connected disabilities long over due c/o radiation; Agent Orange; 
P.T.S.D.; diabetes; heart, lung and cancer medical problems; Persian 
Gulf Syndrome and more. But they (V.A.) will not meet the needs of 
these Veterans if the VAMC's are not allowed to maintain the needed 
funding budget to continue services so that Veterans can continue to 
come back and want to come back. Keep in mind that our V.A. Healthcare 
System has not only improved nation wide in comparison, quote, to the 
private sector. But is actually a very important factor in the future 
of this country/nation regarding Biological/Chemical Hazards c/o 
treatment, P.T.S.D. c/o terrorism of victims, the Security of the Land 
Plan should include the knowledge and experience the V.A. has not the 
private sector in dealing with combat and biochemical hazards of war. 
If anything, the more you invest in our V.A. Healthcare System now the 
better you secure and insure the needs of our future Veterans and 
Citizens of this country/nation.
    8. Regarding questions and answers about the VISN merger, I have 
attached the VISN's response and will write my response.
    Question A. Why the study was done?
    VISN Answer. There in fact is an increase in Veterans using the 
V.A. not because of the declining Veteran population but rather more 
Veterans using the V.A. due to age, loss of civilian healthcare due to 
income, increased eligibility of benefits c/o service connection and 
the Millennium Bill.
    My Answer. VA is constantly looking for ways to improve services 
for veterans and to expand programs to more veterans. Moreover, VISNs 
13 and 14 have small, declining veteran populations as well as 
overlapping populations in several areas. By merging the management 
teams at the VISN levels, VA can continue to serve veterans with 
quality medical care while reducing overhead cost, and combining their 
strengths to form what we expect wilt be an exceptional network. 
Essentially, the consolidation at the management level should be 
transparent to the veteran.
    Question B. How much money will be saved?
    VISN Answer. Prior to the merger, money was saved due to a 
reduction in V.A. spending and employees being reduced to a smaller 
staff. A better understanding of the VERA Program c/o Veteran 
classification as patient vs. reimbursement. Unfortunately, our farmers 
were penalized in eligibility of benefits.
    My Answer. The goal of the merger is not to save money, but to 
redirect resources toward patient care. How much will be redirected to 
more patient care is unknown.
    Question C. Why aren't other VISN's merging?
    VISN Answer. We are not unique, unless it is because we are the 
smallest, or the easiest one to work with and use for an example to the 
rest.
    My Answer. The VISN 13-14 merger is unique due to the 
characteristics and geographic proximity of the two networks. No other 
mergers are under consideration at this time.
    Question D. How many employees will be affected by this?
    VISN Answer. That is not the question. The question is how many 
more now and how many more in the future.
    My Answer. Only a small number of employees at the VISN level will 
be immediately affected at the time of the merger. The exact number of 
employees is yet to be determined. We will make every effort to find 
continued employment for affected employees within VA.
    Question E. How will the merger be managed?
    VISN Answer. The Integration Advisory Committee Team is composed of 
10 to 15 people who have survived being transformed, resigned and 
retired. They will now be led by a new VISN Director who comes from a 
failed VISN. What is wrong with this picture?
    My Answer. A joint, VISN 13-14 Integration Advisory Committee will 
be formed to develop the plan. This will be a team of 10 to 15 people.
    Question F. Will services at some locations be closed or 
consolidated at other locations?
    VISN Answer. This question should not be a question. Especially 
since steps are already being taken to do the above and since employees 
already feel the need to compete or risk being closed.
    My Answer. No facilities are scheduled to be closed under this 
merger.
    Question G. What will the new network be called?
    VISN Answer. VISN 23 c/o 22 VISN'S.
    My Answer. VISN 23.
    Question H. Office to be located and consolidated?
    VISN Answer. Originally in Lincoln, that has now changed.
    My Answer. That will be decided by the Joint advisory committee.

    I am only one (1) of 200,000 Veterans that will be affected.
    Hopefully this will give you some ideas of my/our concerns. I have 
more documentation and data I will have at the hearing.

    Senator Nelson. Thank you, Al.
    Jerry.

   STATEMENT OF JERRY P. BOVE, STATE COMMANDER, THE AMERICAN 
                 LEGION, DEPARTMENT OF NEBRASKA

    Mr. Bove. Secretary, Mr. Congressman.
    My name is Jerry Bove. I'm a State Commander for the 
Department of Nebraska, American Legion. I've got about 55,000 
people that call me occasionally. I'm here today representing 
not only to bring forth some of their concerns, but my own 
experiences as the veterans across the State do call. First of 
all, I will discuss my personal experiences.
    I must say at this time that prior to the merger of VISN 13 
and 14, I was well satisfied with the service and treatment 
that I received from the VA medical facilities. Since 1986 I 
have had 10 surgeries in Minneapolis, Lincoln, and Sioux Falls. 
I'm a 100-percent disabled veteran that was taken care of. I 
have had various procedures including physical therapy at non-
VA facilities and payment to these facilities was no problem 
until now.
    I'm receiving a bill from a non-VA facility for services in 
September 2001. I contacted Des Moines and their comment was, 
well, it wasn't preapproved, we are going to deny it. When the 
letter gets there, appeal it. We will have the board look at it 
and probably approve it since you are service-connected. The 
problem is that it is already too old and interest is 
multiplying. One problem seems to be that county veterans 
service officers don't call in in a timely manner and they say 
it's not preapproved. I think this is part of the county 
veterans service officers' job, but when I asked Des Moines 
about it, they said, well, they don't work for us and it's your 
responsibility. If I'm in an ambulance going to a hospital, am 
I supposed to say wait a minute, am I supposed to call Des 
Moines and get this thing approved before you can drop me off?
    Appointments are being canceled and rescheduled regularly. 
According to the VA medical center, this is due to a personnel 
problem. I call the hospital about rescheduling an appointment 
with my primary care doctor and was told October would be the 
earliest that I could get in. Six months seems to be a bit too 
much here.
    I spent some time years ago working on combining 
appointments as I live 250 miles from a hospital. It was 
working until the changes. They want me to drive over 500 miles 
for a 10-minute chat for the doctor. I get paid mileage, I 
spend over 8 hours driving. It doesn't make a lot of sense to 
me.
    It seems as though the doctors are on kind of a part-time 
schedule, although clinics are scheduled every day. It's a 
different one every day, so you can't combine your appointments 
to 1 day. They want you there all week.
    Now, it might be my imagination, but things seem to have 
gone awry after the integration. Do we blame the problem on the 
merger or do we blame the hospital administration? Some of 
these problems are not hospital related.
    The current administration budget calls for the Category 7 
veterans already in the system to pay the first part--to pay 
part of the first $1,500 of their annual health care. Now, as I 
understand, this has been dropped now. They want to drop the 
Category 7 veterans. Well, that got shot down. They did raise 
the co-payment on their drugs $2 to $7 per prescription. Now, I 
understand if they drop Category 7 this year, do you look at 6 
the next year as a cost-seeking matter? It doesn't really make 
sense to me, but----
    Many veterans are receiving inaccurate insurance and co-
payment bills from the VA. Now, this is an administrative 
problem. The VA is not making timely payments, nor are they 
submitting insurance claim forms in a timely manner.
    As Commander of the American Legion, I have received 
letters from veterans about their problems. I received a letter 
from a lady veteran who was treated, but the bill took so long 
to get to her, her insurance refused to pay it because it was 
not submitted in a timely manner. In other words, it didn't 
make the 6-month cutoff. One of the first questions asked of 
you when you check in at the VA is do you have insurance. They 
then forget to send the bill to the insurance company. Nine, 12 
months is not unusual now. And when the insurance company 
refuses to pay, who gets stuck? The veteran.
    Another veteran was in an ambulance. He was taken to a non-
VA facility. He needed immediate help. And he's a 40-percent 
service-connected veteran, but he was told that treatment was 
not preapproved, the bill was his responsibility and he cannot 
afford it.
    Now, I understand there are rules and regulations and 
hospital administrators have their problems. VISN 23 has its 
problems, but who loses through all of it? It's the veteran. 
Now, I understand there are veterans in Florida who wait up to 
3 years to see a doctor, so maybe we are the lucky ones.
    Thank you for the opportunity to speak. I appreciate it. 
Thank you.
    Senator Nelson. Thank you, Jerry.
    Greg.

STATEMENT OF GREG KULM, ON BEHALF OF THE MILITARY ORDER OF THE 
                          PURPLE HEART

    Mr. Kulm. OK. Senator Nelson, Secretary Principi. My name 
is Greg Kulm and I'm here representing the Military Order of 
the Purple Heart. I would like to thank you for allowing me the 
opportunity to voice my concerns and personal opinions 
regarding the veterans of this region as well as the rest of 
the country. While serving with the U.S. Marine Corps at the 
age of 18 in Vietnam as a rifleman, I was severely near fatally 
wounded while patrolling in an area that was filled with land 
mines. I lost both my legs and suffered multiple complications 
while being cared for immediately after my injury occurred. I 
have been coming to the same VA medical facility since 1970, 
over 32 years, for all the medical complications I have 
incurred because of my injuries in Vietnam.
    Regarding the merger of VISN's 13 and 14 to one VISN, my 
first concern is how does it affect the veterans seeking 
medical care. This is a management change. You are taking two 
regions--correction--VISN's that are currently underfunded and 
combining them into one larger VISN that will nearly be under--
that will be underfunded. The veterans seeking care at the 
medical facility will not see any difference in the daily 
operation and care with this merger. Will there be an increase 
in budget in combining these VISN's? There's only two ways to 
solve the problem, increase the funding for the hospitals, cut 
back on the patient load by turning certain veterans away.
    In the last few years I have personally seen and have been 
affected myself by the deteriorating care for the veterans at 
the Omaha VA Medical Center. It's not the VA employees, it's 
the overbooked schedules and the lack of staff that provides 
the care in a proper and timely manner. I know the solution and 
I think that Washington knows the solution. It's money. And 
it's my opinion that the current politicians don't want to 
appropriate funding for adequate medical care that the veterans 
so deserve, why give funding to people who will not be around 
in 5 to 10 years to vote for them.
    Is it who you know in Washington because it just took 1 
year to get $17 million for Nebraska to build a foot bridge 
over the Missouri River? Just how many people are going to walk 
over the river from Omaha to Council Bluffs? Think of how much 
medical care that amount of money would have provided to the 
veterans of the VA medical center.
    I ask you, have the politicians lost sight of where their 
priorities should be? Holding hearings, setting up committees 
and changing management is a waste of time. All of these things 
do nothing to assist the veterans with their medical care. It 
just delays it until the problem disappears.
    Thank you.
    Senator Nelson. Thank you.
    Craig.

STATEMENT OF CRAIG F. ENENBACH, NATIONAL DIRECTOR, GREAT PLAINS 
                 PARALYZED VETERANS OF AMERICA

    Mr. Enenbach. Senator Nelson, Secretary Principi and staff 
and others responsible for conducting this hearing, I want to 
thank you on behalf of the members of the Great Plains 
Paralyzed Veterans of America. The merger of VISN's 13 and 14 
into a new VISN 23 represents a major reorganization of the 
Department of Veterans Affairs Health Care Delivery System for 
the upper midwest and the Great Plains of Iowa and Nebraska. 
The merger also affords the VA with opportunities for 
efficiencies and improved services to veterans. However, for 
veterans with spinal cord injuries, several issues must be 
addressed.
    PVA members and all veterans with SCI rely upon the VA for 
a lifetime of health care ranging from acute care, immediate 
postinjury care, through rehabilitation, sustaining care and 
finally, Various options for long-term care. VA and Congress 
have over the years clearly recognized the need for this full 
continuum of care and have created the VA's unique spinal cord 
injury system. This system is a nationwide system with 
centralized guidance and not constrained by VISN alignments. 
This is clearly evidenced by the fact that neither VISN 13 nor 
VISN 14 has a spinal cord injury center and veterans with 
spinal cord injury residing here must travel significant 
distances for their care.
    Many of the members of Great Plains PVA travel to 
Milwaukee, St. Louis, and even Seattle for their care at a VA 
spinal cord injury center. In fact, as we speak, one of our 
members is recovering from surgery in Milwaukee. This care has 
been augmented by the creation of a hub-and-spoke feeder system 
that relies upon specialty teams of clinicians who serve as 
primary care providers directing veterans with spinal cord 
injury to VA spinal cord centers when medically appropriate and 
necessary. This system must be maintained with the merger and 
the overall provision of care for veterans with SCI must be 
assessed in an effort to more clearly facilitate access and 
decrease travel times.
    The Minneapolis VAMC has evolved into an exceptional source 
of care for many veterans with SCI and its elevation to a fully 
recognized VA spinal cord center is strongly supported by PVA. 
A center in Minneapolis will greatly enhance the availability 
of SCI care in the new VISN 23 by significantly reducing travel 
distances. PVA has analyzed current patient demographics and 
SCI center utilization and has determined that the creation of 
a center in Minneapolis can be achieved without the patient 
base of other centers being eroded. This center must, however, 
be established and operated consistent with VA policy and 
guidance currently established in VA Handbook 1176.
    Finally, Senator Nelson, I would be remiss if I did not 
point out that regardless of efficiencies and opportunities 
created by the merger of 13 and 14, this area and all of the VA 
needs more money if it is going to continue to meet the needs 
of enrolled veterans in a timely and appropriate manner. PVA is 
a coauthor of the Independent Budget with AMVETS, Disabled 
American Veterans, and the Veterans of Foreign Wars, and this 
year we are calling upon the administration and Congress to 
adequately fund VA. A supplemental appropriation is currently 
being considered by Congress for this current year, fiscal year 
2002, and it is our firm belief that VA needs at least $400 
million to meet its present obligations. We also believe that 
an increase of $3.1 billion over next year's level is necessary 
to fund VA health care for fiscal year 2003.
    Thank you for this opportunity to present the views of 
Great Plains PVA and I will try to answer any questions you may 
have.
    Senator Nelson. Thank you very much.
    First of all, Mr. Secretary, any questions or comments you 
would like to make in connection with this panel?
    Secretary Principi. Well, Mr. Chairman, I too appreciate 
the testimony of the men sitting before me today, and I 
appreciate their insights and their concerns.
    Maybe a general observation. And I don't want to sound 
defensive--I want to sound positive. There is no nation on 
Earth, no nation, and I have looked because I was chairman of 
the Congressional Commission on Service Members and Veterans 
Transition Assistance a few years ago, known as the Transition 
Commission, and I was chairman of that Commission, and our 
congressional commission summoned representatives from all of 
our allied countries around the globe to Washington to receive 
testimony from them as to what their countries do for their 
Nation's veterans, and it was extraordinary how little they do 
and how much we do. Now, that's not to say that we can ever 
repay the debt that we owe to any man or woman who serves in 
uniform or combat, especially someone like Mr. Kulm who lost 
half of his anatomy in Vietnam. You just cannot repay that 
debt. There is simply no way to do that. But our Nation is a 
generous nation. Our President, our Members of Congress are 
very, very generous to VA.
    I happen to lead the second largest department in all of 
Government, and with this year we'll probably be close to $60 
billion in appropriations. Again, is it enough? No. 220,000 
employees. No department has that many people other than 
Defense, and they have a lot more. They're in a class all by 
themselves. But I just believe, and I don't want to say I 
disagree, but I just believe that our Nation cares very, very 
deeply about men and women in uniform. I mean, the fact that 
more and more veterans are coming to us for care is not an 
indication the care is lousy, it's an indication that the care 
is darn good. It is so good, as a matter of fact, that they 
want to come. Their benefit package is so attractive and, as 
you know, many Americans have to spend $300, $400 a month, who 
are not veterans, to get their prescriptions filled. My mother 
is one of them. I sent her a check every month for $400 so she 
could buy her medication. Any veteran in this Nation, whether 
they are someone like Mr. Kulm who is 100 percent service-
connected and paid almost the ultimate price, or someone who is 
making $50 million a year and never saw combat, doesn't have 
any disabilities, no military service disabilities are treated 
equally under the law. No one has a priority for care, and they 
can get the nonservice-connected wealthy veteran who can come 
to VA and get his or her drugs for $7 and can be in front of 
the line. But that's the way the system has evolved, and as a 
result of it, we have so many more veterans coming to us in 
places like the Sun Belt and Florida, and we try to do the best 
we can with the resources we are given. And I'm not going to 
sit here and say to you that we have all the dollars we need. 
We don't. I have been very, very honest about it, and I said 
hard choices have to be made. One is Medicare subvention. If we 
don't get Medicare subvention, then copayments for those who 
are nonservice-connected high-rank help to share in the cost of 
their care. Another is to suspend enrollments for Priority 7 
veterans. I came very close to doing that last year because I 
felt that the quality of health care in VA was being impacted, 
and veterans are not well served when they have to wait 6 
months or a year to get into an outpatient clinic for care. We 
are not meeting their expectations, and that's not the way we 
should be conducting ourselves. So I said rather than disenroll 
anybody, I should suspend enrolling new Priority 7's so those 
who are enrolled can at least get into the clinic on a timely 
basis. But fortunately the President and Members of Congress 
came to my aid, and we have a supplemental pending before 
Congress, and hopefully that will be approved soon, and we'll 
be able to continue to keep the doors open to everyone. But 
those are just some of the dynamics of the challenges we face 
in providing health care. There are no easy answers. If there 
were easy answers, they would have been done a long time ago. 
The easy answer for me is to do nothing, argue for more money 
and not make the tough decisions that have to be made, but I 
felt that suspending enrollment was the right decision. Tough 
politically to do, but I think the right decision.
    Consolidating the two networks is an issue. Now, network 
people are very important people. They're wonderfully dedicated 
people. They're support people, and you need support people. 
Just like in the military, we needed support people. You know, 
you have the folks in the trenches, and you had the folks in 
the rear echelon providing support. But I want to make sure 
that our truth-to-detail ratio is balanced as well. That's when 
I saw we had two networks that were really quite small relative 
to the others and with veterans, of course, declining not only 
in Nebraska and Iowa, but everywhere else as well. I felt it 
made sense to be more efficient, to be more effective, that we 
can consolidate those support functions into one network rather 
than hiring a new network director at a relatively high level. 
But I insist, I insist that the veterans of this area of 
Nebraska be treated fairly and equitably, and if they're not, 
then I will take steps to ensure that happens. But I have every 
reason to believe that under Dr. Petzel's leadership, that will 
be the case. The fact that he has been here so many times is 
ample evidence to me that he cares deeply about the veterans of 
this area, and he's not going to shortchange them to send the 
money to Minneapolis. Minneapolis is an important medical 
center. And if I need open heart surgery, I may want to get on 
a plane to go to a place like Minneapolis where I know that 
you've got some superb surgeons there, not that you don't have 
them in Omaha or other parts of this wonderful State, you do. 
Obviously I just saw the magnificent hospital down the road, I 
believe the University of Nebraska. So we do have that here. 
But the fact is that we've got to make some tough choices 
gentlemen, and I'm not going to shy away from making them. I 
mean--I only have one concern at heart and that is veterans. 
I've got two sons on active duty in the Air Force, one in 
Southwest Asia, I've got a son who's joining the Marines. I 
care deeply, very deeply about men and women in uniform who are 
our Nation's veterans, and I would do nothing at all ever to 
compromise that concern, and I believe that the people who work 
for me feel the same way. It's not to say it's easy, but I feel 
that we're going in the right direction and I feel with support 
from people like Senator Nelson and the members of this 
delegation, Chuck Hagel, another great Vietnam veteran, and Mr. 
Bereuter and Osborne and the rest of this delegation, that 
you're in good hands. Thank you.
    Senator Nelson. Thank you very much, Mr. Secretary. And as 
we draw to a conclusion, there are a couple of observations I 
would like to make. First of all, I think that the concern here 
is that there's a question of whether it's a merger or 
absorption--to merge or to absorb. Based on what you're telling 
us and what Dr. Petzel is telling us, is that we're not going 
to be absorbed in Nebraska and be a subset of Minneapolis 
administration and management. You'll continue to provide the 
kinds of services as close to home for our veterans as is 
entirely possible, recognizing that there are some challenges 
in a State like Nebraska. We are geographically challenged; a 
large area and a smaller population. We're not alone in that 
regard, but we are affected that way.
    Also, there is a concern about funding. There's no question 
that what we must fund these programs in the most appropriate 
and generous way possible. While recognizing all the needs we 
have as an American government, challenges with war, but also 
challenges with needs here at home. You have my full commitment 
to work with you as a member of the Veterans' Affairs Committee 
to make sure that we work in every way possible to get adequate 
funding for our veterans, and particularly as it relates to 
this area.
    I often hear how bad things are, as we all do, because 
there are challenges here and challenges there. I know we must 
identify and deal with those challenges as quickly and as 
appropriately as possible.
    I know you have been on Capitol Hill talking to us about 
the challenges that you have. You're hearing from people right 
here on the ground, the folks who receive the benefits, about 
their challenges. I hope we can always continue to work 
together, as we have, to try to deal with each of the 
particular situations we find, but to also try to improve 
overall. We can reduce the number of challenges that we have by 
better management, but also by the delivery in the quality and 
quantity of care.
    I think today's hearing has been productive. I certainly 
have learned more. It's important to hear specifics. In 
Washington, all too often we deal with generalities, but I 
think it's good for us to be here. We are talking to people who 
have the availability of those services, who have used them, 
and who hear from their peers about what their experiences are, 
otherwise, we're looking at numbers and I'm one who likes to 
put faces together with numbers every time that I possibly can.
    I want to thank you very much for being here with us today 
for your testimony and also for staying with us to hear panels 
II and III.
    I would also like to thank my staff, particularly Eric 
Pierce, my staff in DC and the staff here in the Nebraska 
offices for your help in putting this together, and, of course, 
the staff from the Veterans' Affairs Committee who are here 
today making sure that this is, in fact, an appropriate hearing 
conducted under the auspices of the Senate Veterans' Affairs 
Committee.
    With that, I get to do this again now, [raps gavel] with 
that, I call the hearing concluded.
    [Whereupon, at 12:11 p.m., the committee was adjourned.]

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