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98–639 2016

CIRCUMVENTION OF CONTRACTS IN THE 

PROVISION OF NON-VA HEALTHCARE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MONDAY, JUNE 1, 2015 

Serial No. 114–22 

Printed for the use of the Committee on Veterans’ Affairs 

( 


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COMMITTEE ON VETERANS’ AFFAIRS 

JEFF MILLER, Florida, Chairman 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking 

Minority Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

JON TOWERS, Staff Director 

DON PHILLIPS, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

MIKE COFFMAN, Colorado, Chairman 

DOUG LAMBORN, Colorado 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

JACKIE WALORSKI, Indiana 

ANN M. KUSTER, New Hampshire, Ranking 

Member 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

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

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

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

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

various electronic formats may introduce unintentional errors or omissions. Such occurrences 

are inherent in the current publication process and should diminish as the process is further 

refined. 


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C O N T E N T S 

Monday, June 1, 2015 

Page 

Circumvention of Contracts in the Provision of Non-VA Healthcare .................. 1 

OPENING STATEMENTS 

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

Prepared Statement ......................................................................................... 29 

Ann Kuster, Ranking Member ................................................................................ 2 

WITNESSES 

Mr. Edward J. Murray, Acting Assistant Secretary for Management and 

Interim Chief Financial Office, Office of Management, Department of Veterans Affairs ......................................................................................................... 4 

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

Accompanied by: 

Mr. Gregory Giddens, Principal Executive Director, Office of Acquisition, Logistics and Construction, Department of Veterans Affairs 

Mr. Norbert Boyle, Chief Procurement & Logistics Officer, Veterans 

Health Administration, Department of Veterans Affairs 

And 

Ms. Phillipa Anderson, Assistant General Counsel, Government Contracts, Office of General Counsel, Department of Veterans Affairs 

Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement Executive, 

Office of Acquisition and Logistics, Department of Veterans Affairs .............. 5 

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

Mr. Randall Williamson, Director, Healthcare, United States Government 

Accountability Office and GAO Highlights ........................................................ 7 

Prepared Statement ......................................................................................... 34 

Mr. Christopher LaBonte, United States Army Veteran ..................................... 9 

Prepared Statement ......................................................................................... 61 

FOR THE RECORD 

Questions From: Hon. Walorski and Responses From: VHA ............................... 87 


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CIRCUMVENTION OF CONTRACTS IN THE 

PROVISION OF NON-VA HEALTHCARE 

Monday, June 1, 2015 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON VETERANS’ AFFAIRS, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, D.C. 

The subcommittee met, pursuant to notice, at 4:02 p.m., in Room 

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

of the subcommittee] presiding. 

Present: Representatives Coffman, Lamborn, Benishek, 

Walorski, Kuster, O’Rourke, Rice, and Walz. 

OPENING STATEMENT OF MIKE COFFMAN 

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

I want to welcome everyone to today’s hearing, titled ‘‘Circumvention of Contracts in the Provision of Non-VA Healthcare.’’ 

This hearing is the second in a series of hearings examining illegal 

VA procurement practices resulting in massive waste of limited 

taxpayer resources and serious jeopardy to the quality of 

healthcare received by our Nation’s veterans. 

In our previous hearings on procurement on May 14, 2015, we 

focused on the mismanagement and misuse of purchase cards and 

avoidance of contract requirements, spending limitations, and warrant authority. VA’s Senior Procurement Executive, Mr. Jan Frye, 

testified that these unauthorized commitments were in the billions 

of dollars. Mr. Frye has indicated similar levels of mismanagement 

and abuse in the procurement of non-VA healthcare services by 

VHA. 

By far, the most prevalent method by which veterans receive 

non-VA care is through the individual authorization, so-called ‘‘feebasis process.’’ Under Title 38 of the Code of Federal Regulations, 

section 17.52, VA is authorized to obtain non-VA medical services 

when demand is infrequent and the needed healthcare is not available in-house or through an existing contract. Unfortunately, VA 

uses this process even when these requirements are not at issue. 

Moreover, VA admits that the execution of these authorizations 

does not comply with the contract requirements of the Federal Acquisition Regulation, or FAR, and Veterans Affairs Acquisition 

Regulation, VAAR, V-A-A-R. 

Mr. Frye will testify that, by the longstanding and massive circumvention of the FAR and VAAR in the fee-basis authorization 

process, VA has illegally obligated billions of dollars. He will explain that VA incurs billions in improper payments that represent 


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material weaknesses in VA internal audit controls. Significantly, in 

2009 and 2010, the OIG reported on serious problems with the accuracy and efficiency of claims paid through the fee-basis program. 

The OIG reported that VA medical centers made hundreds of millions of dollars in improper payments, including duplicate payments and incorrect amounts. 

Most troubling is that VHA had not established fraud prevention 

or detection controls because it didn’t consider the program to be 

at significant risk. OIG estimated that VA could be paying as much 

as $380 million annually for fraudulent claims. And, in May 2014, 

contrary to VA’s assertion that previous illegal purchases can be institutionally ratified, OIG reported that VA further violated the 

law by institutionally ratifying illegal purchases and avoiding important checks and balances. 

Today, GAO director of healthcare Randall Williamson will testify about the continuing limitations in oversight of healthcare 

service contracts and will focus particularly on the inadequate 

management of clinicians who provide services under contract with 

VA facilities. 

We will also hear from United States Army veteran Christopher 

LaBonte, whose horrific experience with VA represents a case 

study in the risk associated with noncompetitive contracts with affiliates and the importance of quality control and oversight of contract performance standards. 

As I said in the purchase card hearing, violations of procurement 

laws are not mere technicalities. It is not just a matter of paying 

a little more for needed supplies and services, as some apologists 

for VA have asserted. Among other things, without competition, 

businesses may be awarded based on—business may be awarded 

based on cronyism and the directing of business to favored vendors, 

including those who may be employees or former VA officials. 

Without contracts, patient safety provisions are not legal requirements. VA’s mismanagement of the fee-basis program is not a justification to dispense with FAR or VAAR requirements. If the atom 

bomb can be built and wars conducted under the acquisition regulations, surely VA can deliver patient care under them, as well. 

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

[THE PREPARED STATEMENT OF CHAIRMAN MIKE COFFMAN APPEARS IN THE APPENDIX] 

OPENING STATEMENT OF RANKING MEMBER ANN KUSTER 

Ms. KUSTER. Thank you, Mr. Chairman. 

This afternoon’s hearing is a followup to our hearing 2 weeks 

ago, and today our focus will be on the legal basis underlying VA’s 

purchase of non-VA healthcare and the practice of VA in obtaining 

this care. 

At the end of the day, we can all agree we want to see our veterans receive the healthcare they need at precisely the moment 

they need it. But I want to make clear that neither I nor my colleagues view this laudable intent as a blanket rationale for not following laws, regulations, or proper procedure. 

Federal and VA acquisition regulations exist for a reason. They 

exist to ensure that there is proper competition when appropriate 


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and that the best practice and price possible is obtained when the 

government purchases goods and services. For the VA, these laws 

protect veterans, save taxpayer dollars, and ensure our veterans receive the highest possible quality of care. 

VA states in its testimony that it has had a 30-year practice of 

using individual authorizations without applying Federal acquisition processes and procedures. At the same time, it seems that the 

VA has taken the position that individual authorizations are indeed contracts and should be viewed as such, even when acknowledging that VA officials appear to have acted in a manner inconsistent with procurement law. 

Now VA is arguing that it needs new statutory authority, quote, 

to resolve what has emerged as serious legal questions to its purchased care authorities. This new authority would explicitly exempt VA from procurement regulations and requirements and 

allow the VA to continue with the same practices that it has been 

following for the past 30-years. 

I personally am not convinced that this is the best solution, given 

VA’s significant lack of oversight in this area. In fact, I would 

argue that the problem is not that legal questions have arisen over 

VA’s Purchase Care Program but that for too long VA has operated 

a program where the legal basis has been challenged and yet VA 

has never changed course or modified its procedures. 

VA’s authority to purchase care without having a contract in 

place is predicated on individual authorizations being used, quote, 

‘‘when demand is only for infrequent use,’’ period, close quote. I 

would be interested in finding out how much of the $7 billion expenditure for non-VA care in fiscal year 2014 has been obligated 

under this authority as compared to situations where contracts are 

in place. 

As we examine the current legal authority for VA’s Purchase 

Care Program and whether this authority must be modified, we 

must first get to the bottom of how this program has been operated 

over the last number of years. It is absolutely critical that we understand how VA’s legal interpretations changed and were communicated and enforced. It is hard to expect accountability when there 

are no clear signs pointing out the way. 

The testimony of Mr. Frye and the various legal arguments made 

by the VA in litigation makes it seem unlikely that over the last 

number of years clear policies and procedures were in place. GAO’s 

testimony points out, quote, significant weaknesses in VA monitoring and oversight of its non-VA medical care program. 

Perhaps it is now time to stop applying quick band-aids and resolve right now to fix what is wrong. It took years for VA to get 

into this problem, and it will take time to fix it. But the first step 

in addressing the problem is to acknowledge these problems and 

quickly and forthrightly come up with a concrete plan to fix them. 

Finally, I would like to thank Mr. LaBonte for appearing before 

us today to relate his story, which is absolutely horrendous. Mr. 

LaBonte reminds us that the bottom line is the quality of care for 

our veterans. This quality can certainly be impacted by lack of accountability and process when it comes to making sure that all relevant laws, regulations, and policies are followed. 

And, with that, Mr. Chair, I yield back the balance of my time. 


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[THE PREPARED STATEMENT OF RANKING MEMBER ANN KUSTER

APPEARS IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

I ask that all members waive their opening remarks, as per this 

committee’s custom. 

With that, we have the first and only panel at the witness table. 

On the panel, we have Mr. Edward Murray, Acting Assistant 

Secretary for Management and Interim Chief Financial Officer of 

VA Office of Management; Mr. Greg Giddens, Principal Executive 

Director of VA’s Office of Acquisition, Logistics, and Construction; 

Mr. Norbert Doyle, Chief Procurement and Logistics Officer of the 

Veterans Health Administration; Ms. Phillipa Anderson, Assistant 

General Counsel for Government Contracts of VA’s Office of General Counsel; Mr. Jan Frye, VA’s Senior Procurement Executive 

and Deputy Assistant Secretary for the Office of Acquisition and 

Logistics; Mr. Randall Williamson, director of GAO’s healthcare 

team; and Mr. Christopher LaBonte, a United States Army veteran. 

I ask the witnesses to please stand and raise your right hand. 

[Witnesses sworn.] 

Mr. COFFMAN. Thank you. Please be seated. 

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

TESTIMONY OF EDWARD J. MURRAY, ACTING ASSISTANT SECRETARY FOR MANAGEMENT AND INTERIM CHIEF FINANCIAL OFFICER, OFFICE OF MANAGEMENT, DEPARTMENT OF 

VETERANS AFFAIRS; JAN FRYE, DEPUTY ASSISTANT SECRETARY AND SENIOR PROCUREMENT EXECUTIVE, OFFICE 

OF ACQUISITION AND LOGISTICS, DEPARTMENT OF VETERANS AFFAIRS; RANDALL WILLIAMSON, DIRECTOR, 

HEALTHCARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 

AND CHRISTOPHER LABONTE, UNITED STATES ARMY VETERAN 

TESTIMONY OF EDWARD J. MURRAY 

Mr. MURRAY. Good afternoon, Chairman Coffman, Ranking Member Kuster, and members of the committee. Thank you for the opportunity to discuss the Department of Veterans Affairs’ care to 

veterans by contracting with community providers. 

Mr. Chairman, the subject of this hearing involves some complex 

territory related to procurement process, legal interpretations, and 

the processing of hundreds of thousands of purchased care transactions per year. I know we will be discussing these areas in detail 

and that the committee’s oversight is important. 

VA will always depend on a mix of in-house and community care, 

with care in the community continuing to grow to ensure veterans 

get the care they need in a timely way as close to home as possible. 

So while the discussion here may be technical, we’re discussing 

transactions that represent the purchase of healthcare for a veteran who needs it. 

When purchasing care in the community, VA depends on both 

Federal acquisition-based contracts and non-FAR-compliant agreements, also referred to as individual authorizations. These agreements are used in many situations because a provider may have 


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a relatively small number of veterans referred by VA as a part of 

their total patient mix. For those providers, it may not make business sense for them to enter into a FAR-based contract to provide 

care. This is especially true in rural areas. 

Although these agreements are not FAR-compliant, VA utilizes 

internal controls to ensure that care is obtained from a qualified 

provider and the services billed are consistent with VA regulation 

before a claim is paid. These practices safeguard veterans and protect taxpayer dollars. 

The VA’s use of community care has risen dramatically. In fiscal 

year 2006, it was roughly $2.7 billion. For fiscal year 2015, we estimate $10.4 billion. 

Over those years, the different authorities for purchased care 

have not been applied consistently and have been marked by conflicting interpretations. With the determination by the Department 

of Justice that individual authorizations are contracts and therefore must be FAR-compliant, VA began reviewing its internal processes, working towards development of a plan to improve integration, transparency, and oversight of all purchased care. 

We have recognized these problems and proposed a solution. Last 

year, in informal discussions with committee staff, VA noted issues 

that would need to be addressed by statute. In February’s budget 

submission, we noted the Department would be putting forward a 

legislative proposal. 

On May 1, we provided a formal proposal for comprehensive reform, including very specific requirements for non-FAR-based 

agreements. The legislation would authorize the Secretary to enter 

into veteran care agreements when FAR-based contracts are not 

practical, with payment rates tied to Medicare rates—similar to 

community care purchased throughout the Veterans Choice Program. 

The legislation recognizes that FAR-based contracts should be 

used when they can but also allows the responsible use of nonFAR-based agreements. Every 2 years, VA would review all of its 

non-FAR-based agreements of a certain size and evaluate whether 

changing to FAR-based contracts is more appropriate. 

I believe you will find the legislation provides strong protections 

for veterans and taxpayers. 

Mr. Chairman, we look forward to answering the committee’s 

questions. 

[THE PREPARED STATEMENT OF EDWARD J. MURRAY APPEARS IN

THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Murray. 

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

TESTIMONY OF JAN FRYE 

Mr. FRYE. Chairman Coffman, Ranking Member Kuster, and 

members of the subcommittee, thank you for inviting me to testify 

today. 

You just heard Mr. Murray provide the Department’s position on 

the illegal purchases of billions of dollars in non-VA care over multiple years. If you’re not now confused, I am surprised. I would be 

completely confused if I were not familiar with the facts. 


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We obviously do not intend to admit our collective failures in the 

leadership and stewardship of public funds. Mr. Murray stated 

there was and is confusion, inconsistent application, and conflicting 

interpretations. As VA’s senior leaders, we have had many years to 

correct these deficiencies. 

Mr. Murray also stated there were conflicting interpretations of 

the law. Here are some facts that may help you decide if conflicting 

interpretations exist. 

In October 2012, a very senior VHA official informed me trouble 

was looming, as they had been violating the law on a wholesale 

basis with regards to the purchase of non-VA care. I asked him for 

details about legal documents he hinted of. He declined to reveal 

anything. 

On October 22, 2012, I began a personal inquiry into the matter. 

I sent this same VHA senior official and his subordinate a written 

statement addressing his plight, hoping I would receive additional 

information from him. He declined to respond. 

On December 3, 2012, I sent a note to a senior executive from 

the Office of General Counsel requesting a legal opinion as to 

whether individual authorizations for non-VA care were considered 

FAR-based contracts. I received no response. Receiving no response, I followed up again on December 31 and for a third time 

on January 15, 2013. 

On February 28, 2013, nearly 3 months after I requested the initial opinion, the Office of General Counsel provided me a legal 

opinion dated September 10, 2009. This opinion categorically declares procurements of non-VA fee-basis care to be FAR-based. 

There is absolutely no confusion in this legal opinion in spite of 

what you’ve just heard to the contrary. Neither my predecessors 

nor myself have ever granted authority for VHA to acquire non-VA 

healthcare except by FAR-based methods. 

You may wonder why, as VA’s Senior Procurement Executive, I 

had never previously seen this legal opinion and why there was 

such obvious reluctance to provide it to me. That is an enigma. 

Mr. Murray and myself testified under oath to this subcommittee 

in 2010, stating fee-basis care was not FAR-based. If this legal 

opinion existed in 2009, why was it kept from us in preparation for 

the hearing? 

Given the apparent recalcitrance to engage by VHA and counsel, 

I submitted a hotline complaint to the Office of Inspector General 

in March 2013. The OIG initially refused my submission, questioning my motive for submitting the complaint. I stubbornly persevered, and they subsequently accepted it. I am unaware if OIG 

ever investigated. 

In April 2013, I requested senior leadership assistance from VHA 

and the Office of General Counsel in conducting ratification actions 

for these massive violations of Federal law. I received no offer of 

assistance from either office. 

In May 2013, Secretary Shinseki was briefed on non-VA care authority options. He was made aware of our illegal actions. I was not 

invited to the meeting. 

In June 2013, I wrote a letter to Representative Issa, then serving as chairman of the House Oversight and Government Reform 

Committee, outlining my concerns in these illegal matters and othVerDate Aug 31 2005 11:34 Jul 22, 2016 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 Y:\98-639.TXT PAT

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ers. My letter was never—my letter never made it to him. Two senior officials, who were apparent friends, one from the House Oversight Committee and one from VHA, conspired to keep Chairman 

Issa and the American public from learning of these matters and 

other serious VA violations of Federal laws. 

In April 2014, the VA Senior Assessment Team voted to close ongoing discussions of the illegal purchases of non-VA medical care 

with mine as the lone opposing vote. 

In that same meeting, the VA Office of Management sponsored 

a motion, which passed, to raise the reporting level for VA material 

weaknesses from approximately $400 million to $1 billion. I believe 

this was an effort to avoid reporting emerging illegal matters to the 

American public through the annual statement of assurance process. 

From July to November 2014, we collaboratively developed a legally sufficient method to acquire non-VA healthcare. VHA’s senior 

leadership rejected the method in November 2014. The illegal activity continues unabated. 

This past Friday, Deputy Secretary Gibson elected to make my 

disclosure of these and other illegal acts a personal issue with me. 

His demeanor and actions in both an open and one-on-one meeting 

were clearly meant to intimidate me and to cast a chill over me 

and others who might be tempted to report violations in the future. 

I will allow you and the court of public opinion to decide for yourselves if what I briefly described constitutes corruption, malfeasance, or dereliction. No investigation has been conducted. No ratifications of illegal procurements have been executed. Improper payments continue. Veterans receive healthcare without protection of 

mandatory terms and conditions. And no one is liable. 

I believe these are two relevant questions: How can we hold subordinate VA employees accountable if we, as senior leaders, selectively pick and choose the laws we want to observe for sake of convenience? When will the VA senior leaders be held accountable? 

There were more than a dozen of VA’s most senior leaders in the 

July 11, 2014, meeting. The issue of illegality was positively affirmed. Not a single leader, save one, subsequently acted in any 

way to protect the government’s interests or resources. 

We’ve lost our way. Senior leader is required to obey and enforce 

Federal laws. Our actions and inactions do not fit anything I have 

previously experienced in over 40 years as a military officer and civilian public servant. 

Mr. Chairman, this concludes my statement. I am prepared to 

answer all questions the subcommittee may have for me. 

[THE PREPARED STATEMENT OF JAN FRYE APPEARS IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Frye. 

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

TESTIMONY OF RANDALL WILLIAMSON 

Mr. WILLIAMSON. Thank you, Chairman Coffman, Ranking Member Kuster, and members of the subcommittee. I am pleased to be 

here today to discuss our work on VA’s programs for delivering 

care through non-VA providers. 


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Non-VA providers treat Americans in community hospitals or 

doctors’ offices using either a fee-for-service arrangement or a prearranged provider network. Non-VA providers also render care in 

VA facilities under a contracting arrangement or affiliation agreements with university medical schools. In fiscal year 2013, VA spent almost $5 billion for non-VA provider medical care for more than 1 million veterans. As more veterans seek care outside the VA system, it is important to ensure 

that non-VA care is of the highest quality and it is reliable, accessible, and efficient. 

Three recent GAO reports identified numerous weaknesses in 

VA’s management of its non-VA medical care program, and today 

I will focus on issues VA needs to resolve in this area. 

In May 2013, GAO reported that VA does not collect data on wait 

time for veterans referred to non-VA providers. Therefore, VA cannot assure that veterans are receiving access to medical care that 

is comparable to veterans receiving care at VAMCs. 

Also, VAMCs do not have automated systems capable of collecting data for all services and charges tied to a specific episode 

of care during a veteran’s office visit or in-patient stay. As a result, 

VA does not know how much it is paying for episodes of care from 

non-VA providers and cannot ensure that non-VA providers are appropriately billing VA for veterans’ care. 

In October 2013, we reported on weaknesses in VA’s process for 

contracting with non-VA providers to provide care at VA facilities 

in specialties that are difficult to recruit, that supplement VA clinicians in high-volume areas, or fill critical staffing vacancies. 

Specifically, we found that contracting officer representatives at 

VAMCs who monitor contract performance on a variety of contracts 

for goods and services, including clinical contracts, had heavy workloads and lacked training on how to gauge in post-award monitoring of clinical contractors, which compromised diligent oversight 

of non-VA providers. Robust VA oversight is essential to ensure 

that non-VA providers deliver high-quality care and fulfill the responsibilities of their contracts. 

Finally, in March 2014, we reported serious weaknesses in the 

way VA was administering and overseeing its program for reimbursing non-VA providers for emergency services for non-serviceconnected veterans. 

In processing and reimbursing claims for non-VA providers, we 

found patterns of VA noncompliance with its own processing requirements, attributed largely to poor oversight at both the local 

and national levels. Therefore, some veterans were likely billed for 

care that VA should have paid for, and many were not informed 

that VA had rejected their claims for reimbursement for care from 

non-VA providers. As a result, many may have been denied their 

appeal rights. 

While VA has made progress in addressing recommendations we 

made on these three reports, only about one-third of them have 

been fully implemented. 

Moving forward, as new components are added to VA’s non-VA 

medical care program, such as patient-centered community care, 

referred to as PC3, and provisions of the Choice Act, it is anticipated the number of veterans seeking medical care through non-VA 


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providers will continue to grow. It is vital that VA establish robust 

oversight and accountability in its non-VA medical care program 

such that relevant VA staff at every level understand the importance of and are held accountable for ensuring that veterans receive high-quality, accessible, and cost-effective care from non-VA 

providers. 

This concludes my opening remarks. 

[THE PREPARED STATEMENT OF RANDALL WILLIAMSON APPEARS IN

THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Williamson. 

Mr. LaBonte, first of all, thank you so much for your service to 

the United States Army. And you are now recognized for 5 minutes. 

TESTIMONY OF CHRISTOPHER LABONTE 

Mr. LABONTE. Thank you for giving me the opportunity to speak 

to this committee today. 

I, Christopher Kevin LaBonte, had upper and lower orthognathic 

jaw surgery on August 16, 2013, at the Atlanta VA Medical Center. 

In my specific case, there have been numerous unethical and negligent issues I’ve had to face. I’ve provided a written statement 

which explains in detail these events and issues. 

I was coerced into a highly invasive surgery, which was performed by a student with no qualifications or educational background to even be present in the room, let alone the Emory OMFS 

Residency program. I have submitted evidence to prove this statement in the index of evidence in my written statement. 

The Atlanta VA Medical Center has also been negligent in my 

healthcare. They have been complicit in allowing unqualified personnel to gain entry into the VA Medical Center and also provided 

some of the worst healthcare I’ve ever experienced. 

I have also submitted an index of medical evidence along with 

my written statement with imaging proving the willful negligence 

from not only the VA medical doctors but the administration and 

their corruption. 

On the day of my surgery, the Atlanta VA Medical Center 

changed the consent-for-surgery paperwork to allow Ibrahim 

Mohamed Haron, a student from Kuwait, to be the primary surgeon performing my surgery. I have no recollection of signing this 

document, as medication was already administered for anxiety 

presurgery by the doctors. 

In surgery, not only were bone shards left in my mouth, which 

caused further infection and bone loss months down the line, 

Ibrahim Mohamed Haron cut my inferior alveolar nerve. As a result of this surgery, I now have a medical condition called 

trigeminal neuralgia from damage to multiple branches of my 

trigeminal cranial nerve. Trigeminal neuralgia, also known as suicide disease, is described as one of the most painful medical conditions known to man. The VA surgical report admits to damaging 

a portion of this nerve, cutting it during the surgery on August 16, 

2013, by Ibrahim Mohamed Haron. 

According to Ibrahim Mohamed Haron’s social media pages, he 

has devout Islamic views. I am an Army combat veteran that deployed to both Kuwait and Iraq. I was deployed to Kuwait at the 


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same time that Ibrahim Mohamed Haron was attending the University of Kuwait. 

It is no secret that many people from this region and religion 

want to harm U.S. soldiers. My question to the VA is, why was 

Ibrahim Mohamed Haron allowed to operate on combat vets, whom 

he very likely would have had difficulty treating objectively or even 

had ill intentions towards? 

The Veterans’ Affairs medical centers should be sensitive to the 

need for veterans to feel comfortable and safe with their doctors. 

The VA medical centers, in fact, should be even more sensitive to 

this issue than any other facility in the country. As a combat veteran, I should have been given the choice to have Ibrahim 

Mohamed Haron involved with my care on any level, especially performing a highly dangerous surgical procedure that required me to 

be unconscious for an extended period of time. 

I wake up every day in chronic pain due to the failed system and 

procedure. If you can imagine the worst tooth pain you have ever 

felt, that is how all the teeth on the right side of my mandible feel 

constantly. I have to take muscle relaxers three times a day for the 

facial pain—for the facial pain and muscle spasms. I take narcotic 

pain medications four times a day for the chronic pain, musculoskeletal pain, and nerve pain. I have to take anxiety medication to 

keep my facial muscles from tensing and compressing my nerves, 

which not only cause sharp facial pain but also cause severe migraines. These migraines feel like someone is kicking me in the 

skull. 

I struggle with facial deformity due to the extreme cant of my 

lower jaw. My diet is limited to soft foods that do not require much 

chewing. According to my current team of non-VA doctors, I will 

not only need continual medical care for my mouth and jaw, but 

I will have to wear oral prosthetics in my mouth the rest of my life 

due to the surgery and also have chronic pain and require pain 

management for the rest of my life. 

I am extremely disappointed in the VA healthcare system. The 

VA’s priorities seem to be in the following order: one, profit; two, 

hospital reputation; three, protecting high-level bureaucrats; four, 

protecting negligent doctors; five, cutting costs at the expense of 

veteran healthcare; and, finally, six, veteran healthcare. 

I refer to it as ‘‘death care,’’ as health is barely taken into account. From my experience, the Atlanta VA Medical Center’s motto 

should read, ‘‘Delay, deny, and hope you die.’’ 

[THE PREPARED STATEMENT OF CHRISTOPHER LABONTE APPEARS

IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. LaBonte. 

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

Mr. LaBonte, how long have you been waiting for VA and/or 

Emory to address the situation created by the surgery? 

Mr. LABONTE. Since August 16 of 2013. 

Mr. COFFMAN. Okay. So nearly 2 years. 

Mr. LABONTE. Nearly 2 years. It will be 2 years this August. 

Mr. COFFMAN. Okay. 


VACREP0180 with DISTILLER
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Mr. Murray, in the September 2011 FHA Fee Care Program 

white paper, it was recommended VA conduct a cost-benefit analysis of contracting out the processing of claims, as with other payer 

models like TRICARE, Medicare, Medicaid, Blue Cross Blue Shield, 

et cetera, and their applicability for VA. 

What was the result of the cost-benefit analysis? 

Mr. MURRAY. Thank you for your question. 

I’m not aware of that being conducted, but I believe I’ll ask my 

VHA head of contracting activity if he’s aware of that analysis. 

Mr. DOYLE. Sir, I’m not aware of that analysis. 

Mr. COFFMAN. Mr. Frye, any comment? 

Mr. FRYE. I’m not—I’m not aware—I can’t give you an answer on 

that. 

Mr. COFFMAN. Okay. 

Mr. Frye, VA Secretary McDonald was publicly critical of you 

after the last hearing conducted by this subcommittee on May 14, 

2014. The Secretary—is this 2015? 

Voice. Yes, sir. 

Mr. COFFMAN. I’m sorry. May 14, 2015. The Secretary stated that 

he was aware of the problems and characterized your memo as, 

quote, ‘‘just showing what he,’’ meaning Mr. Frye, ‘‘needs to improve,’’ unquote. He further stated it is your, quote, ‘‘responsibility 

to fix it,’’ unquote. 

What is your response to Secretary McDonald’s statement? 

Mr. FRYE. Well, I think all of us make comments sometimes and 

then wish we could retract them. I’m not sure that Mr. McDonald 

had read my 35-page statement to him at that point. Since that 

time, Mr. McDonald—Secretary McDonald came to see me last 

week, and he expressed appreciation for me raising these issues. 

In answer to your question specifically, I don’t run contracting. 

I’m responsible for overall policy in the VA, and I have one of six 

heads of contracting activity who does report to me. But I do not 

run contracting for VA. 

I think anyone who reads the document that I provided to the 

Secretary will see that I have struggled in trying to right the ship. 

And I certainly was asking for assistance from he and the Deputy 

Secretary, given that I have been unable to, on my own, to fix what 

was wrong. 

So, you know, again, I make comments sometimes that I wish I 

could withdraw, and perhaps he does, as well. But I sincerely believe at this point that the Secretary appreciates and probably is 

more angry than I am at seeing this waste, given that he is trying 

to move us forward, and every time we move forward one step and 

this malfeasance is uncovered, we move backward 12. 

Mr. COFFMAN. Sure. I hope you are right that he is upset. 

Mr. Williamson, your testimony states VA didn’t collect data on 

wait times from non-VA providers, leaving the Department unable 

to analyze such critical data, and did not provide critical oversight 

and monitoring of related claims or even the performance of the 

services provided. 

GAO made 22 recommendations to address VA’s shortfalls, but 

how is the Department—how is the Department addressing them 

at this time? 


VACREP0180 with DISTILLER
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Mr. WILLIAMSON. On all 22? I could provide that for the record, 

but I will say that they have made progress. 

Mr. COFFMAN. Okay. 

Mr. WILLIAMSON. It’s not like they’re ignoring us. They are meeting with us. They’re making progress. 

But to consider a recommendation closed, from our perspective, 

requires some rigorous documentation, and VA hasn’t provided that 

documentation as of now on many of those. 

Mr. COFFMAN. Okay. Thank you, Mr. Williamson. 

Ranking Member Kuster. 

Ms. KUSTER. Thank you, Mr. Chairman. 

I have a question at the top just to get to the bottom of the issue 

as to what legal authorities provide the basis for the purchase of 

non-VA care. And so I am asking our representatives from the VA 

to provide the following documents: the 2008 guidance from the 

Chief Acquisition Officer and Office of General Counsel that nonVA care was not governed by FAR—I think that was the original, 

2008; and then the May 2013 white paper provided to Secretary 

Shinseki on non-VA care authority options; and then, finally—and 

I don’t have a date for this, but I think from the testimony it is 

2014—the Department of Justice ruling that referenced that VA 

must consider all fee-based care actions as being FAR-based. 

So I want to—I am interested in going back, but I also want to 

try to go forward, where we go from here. I think whenever we are 

talking about healthcare, we are talking about sort of a triangle of 

access, quality, and cost. And it seems to me part of the problem 

that we have in terms of public policy going forward is the sheer 

scope of this problem. Because part of what the Choice Act entails 

is to bring in private-sector network coordination through TriWest 

and Health Net. 

Essentially, that is what we are talking about here. I mean, it 

is massive in scope to have individual contracts. And my district 

is a rural district in New Hampshire. I know about these contracts. 

I know about these authorizations. 

Could you comment—and we will start with Mr. Murray, but I 

would be interested, Mr. Williamson, with your knowledge of reviewing this, if you have—even if it is an opinion at this point— 

do you think we can get out of this morass by simply changing the 

rules of contracting? Or do you think that we should try to bring 

in the authorizations and even the FAR-based contracts into these 

private-sector networks? 

And I will just put it—set it up to Mr. Murray, if you would. 

Mr. MURRAY. So the Choice Act does have TriWest and Health 

Net as the two what we call third-party administrators. And, as 

you know, we have not got off to the start—as quick a start with 

those programs as we would like. Rest assured that all leadership—the Deputy, the Secretary—are doing our utmost to exercise 

those programs to the maximum ability, extent, to get care to those 

veterans that urgently need it, that have earned it, that deserve it. 

The model looks like it—I go to the access meetings every morning. Many of the members of this committee have been invited to 

the morning access meetings. We believe it will be a very effective 

model for providing care in the community to our veterans. 


VACREP0180 with DISTILLER
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Ms. KUSTER. Can you envision a time in the future where those 

networks would be sufficiently extensive where you would have 

dealt with the cost issue, whether it is Medicare reimbursement 

rates, whether you would have the quality issue addressed via the 

oversight by these third-party administrators? Can you envision a 

time where we wouldn’t need to have these one-off individual contracts? 

Mr. MURRAY. I will defer that question in a moment to acquisition folks and the VHA gentleman here, Norb Doyle. But, you 

know, it’s about signing up—building the network, having those 

providers in the network, the right type of providers in the network 

in certain geographical areas of the country. We see this in the 

morning through our meetings with the Dep Sec and senior leadership in the Health Administration, that it is all about ensuring you 

have the right clinical care, right physicians, in the right parts—— 

Ms. KUSTER. Is there an attempt to get the physicians that you 

are already dealing with through these individual authorizations— 

is there an attempt to get those physicians into these networks? 

Mr. MURRAY. Absolutely. Absolutely. So if the Health Administration leadership, if Dr. Tuchschmidt was here, he could tell you 

all about the options they’re exercising, reaching out to their current provider network and getting them signed up or encouraging 

them to get signed up for Choice through TriWest or Health Net. 

So, you know, it’s all hands on deck, everybody moving full bore to 

do that. 

Ms. KUSTER. We will have to come back to Mr. Williamson on another round. My time is up, but thank you. 

Mr. COFFMAN. Dr. Benishek, you are recognized for 5 minutes. 

Mr. BENISHEK. Thank you, Mr. Coffman. 

Thank you all for being here this afternoon. 

I think, to me, what I have learned from this is that it is not as 

easy to get healthcare in the private sector for the VA as one might 

think. I think the TRICARE model is interesting, but, you know, 

they pay TRICARE the Medicare rate, and then TRICARE pays the 

actual providers less than the Medicare rate. In my district, nobody 

really wants to sign up for any of this stuff because it doesn’t pay 

very well. And it has been, you know, problematic. Some of the 

Choice people offer Choice, but there’s no providers that will do 

Choice because they are actually getting paid less than Medicare 

rates, because they pay TriWest Medicare rates, but TriWest 

doesn’t pay the actual people that are providing that care of those 

rates. And to get those numbers, it has been tough for me to figure 

that out. 

But my concern more is about this—for today, a little bit, is 

about this apparently illegal activity that has been happening. And 

I am just wondering—let me ask Mr. Doyle. 

Are you aware that some of these things were illegal, Mr. Doyle? 

I mean, that is what Mr. Frye seems to—is telling us, that a lot 

of these purchases are illegal. And then you got a legal opinion that 

this is not the way it should be done, from a long time ago, which 

he didn’t know that was the case. 

You’re sort of in charge of procurement of outside care, right? 

Mr. DOYLE. Yes, sir. As the Chief Procurement and Logistics Officer for VHA, I do do—we do contracts for non-VA care—— 


VACREP0180 with DISTILLER
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Mr. BENISHEK. So is your opinion different than that of Mr. Frye, 

that this is not illegal? Is that what is going on? 

Mr. DOYLE. No, sir. I’m not a lawyer, so I’m not a judge, but I 

refer to my legal counsel, and I don’t believe they would say it’s illegal what we’re doing. (I don’t recall using the word delinquent). 

Mr. BENISHEK. So there’s a difference between what you believe 

and what Mr. Frye believes. 

Is that right, Mr. Frye? Is there a basic difference here, or am 

I talking about two different things? It is a little bit confusing to 

me. 

Mr. FRYE. Yes. I think what counsel will tell you is these aren’t 

illegal; they’re improper. Now, it’s illegal to go through a stop sign 

in my neighborhood, but it’s improper to spend billions of dollars 

outside the law in the VA. It makes no sense. 

This is the same argument that counsel—the same specious argument that counsel used several years ago when there was an argument in these chambers about the buying of pharmaceuticals 

without contracts. And, at that time, the Deputy Secretary was 

here at the table, and he in his oral statement was about to make 

the statement that it was improper and not illegal, and this body 

absolutely confirmed that it was illegal. 

If we are going to a court of law, the Supreme Court, I’d love to 

have the argument made that these are improper not illegal. But 

this is the court of public opinion—the court of public opinion, not 

a court of law. These are—— 

Mr. BENISHEK. Let me—isn’t fee for service providing—different 

than contract? I mean, I am a private physician, and I worked at 

the VA for 20 years. And I was a fee-for-service physician, so I 

didn’t have a contract. I agreed to a fee. 

And, frankly, I wanted to do a contract, but it was so difficult 

to get the contract, it would take months or more than a year to 

get the contract negotiated and completed, so that they couldn’t get 

it done. So they actually preferred to do it fee-for-service because 

they could get that done right away. And, you know, I don’t know 

what exactly the details were, but—— 

Mr. FRYE. I’m sorry to hear that you weren’t on contract. It 

sounds like an unauthorized commitment. I’m not familiar with 

the—with the methodology that they used to bring you on, but if 

we’re required to have a contract, we’re required to have a contract. 

Mr. BENISHEK. All right. 

Well, let me go to a different thing. Mr. LaBonte, let me ask you 

a question about your care. You say that you don’t think you signed 

a consent form before you had narcotics or some sedative—— 

Mr. LABONTE. Oh, I signed a consent form after I was administered an anesthetic to calm me down before the surgery. I had to 

sign a digital pad. I wouldn’t really call it a consent form, considering I never saw any paperwork. I don’t recall signing it, but apparently I scribbled on a digital pad, under the anesthesia, to give 

the resident, Ibrahim Haron, the primary surgeon slot during my 

surgery instead of Martin B. Steed, the surgeon that was supposed 

to be conducting the surgery. To me, that sounds illegal, but I’m 

not a lawyer. 

Mr. BENISHEK. Well, it’s highly unusual, in my experience, that 

anyone—I mean, nobody—where I come from, nobody’s allowed to 


VACREP0180 with DISTILLER
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sign a consent after they had any drugs. So I’m just—you know, 

that’s usually witnessed by somebody. 

I imagine you have all these documents. Is there—are you doing 

a lawsuit in reference to all this stuff? 

Mr. LABONTE. There’s a court claim pending. 

What’s also unusual is that Ibrahim Haron is the only—is the 

only resident in the entire OMFS program that has a bachelor’s degree instead of a doctorate. So I find that unusual too. There’s lots 

of things that are unusual about the Atlanta VA Medical Center. 

So—— 

Mr. BENISHEK. Well, I think maybe that needs a little more work 

than we’ve seen here today, Mr. Chairman. 

I’m out of time. Thank you. 

Mr. COFFMAN. Thank you, Dr. Benishek. 

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

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

Ms. Anderson, I will ask you—because Mr. Frye earlier summarized what he thought your response would be to the question— 

was this or was this not legal? 

Ms. ANDERSON. And not to put too fine a point, this—these were 

not illegal actions or illegal activities. Yes, they were not FAR-compliant. An illegal contract—and I’m speaking as a lawyer—an illegal action or an illegal activity, it’s not enforceable. These commitments are enforceable. 

In fact, the Federal Acquisition Regulations acknowledge, understand that there are times when officials not authorized to commit 

the government, they do commit the government. And there is a 

formal ratification process. 

The courts and the boards have recognized that when the government makes a commitment, pays, receives the services, that the 

government can’t hide behind the fact that you didn’t follow the 

FAR. The government received the benefit. And there is a legal 

theory for recovery on that. 

So I respectfully disagree with Mr. Frye’s position that these are 

illegal contracts. 

Mr. O’Rourke. It sounds like—I may or may not be following the 

distinction. It sounds like this is a obligation by which the VA is 

legally bound to fulfill. 

Did someone at the VA do anything illegal in committing the VA 

to this obligation? 

Ms. ANDERSON. If we’re addressing merely the fact that a person 

not committing—not authorized to perform—enter into a contract, 

the answer is there was no illegal activity. 

Mr. O’Rourke. Okay. 

And then, so, for Mr. Murray, then, to follow up, if this was not 

illegal, was this improper? 

Mr. MURRAY. Thank you for your question. 

‘‘Proper’’ is an interesting question, because if you establish the 

obligation, the provider provided the service, the provider billed 

correctly, and the provider was paid, one would argue that it was 

proper but not FAR-compliant. 

Mr. O’Rourke. Should the obligation have been entered into in 

the first place? Was that proper? 

Mr. MURRAY. It—so thank you again for your question. 


VACREP0180 with DISTILLER
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So was it proper? If it was—so, ‘‘proper.’’ I’m struggling with the 

word ‘‘proper.’’ 

Ms. ANDERSON. May I—— 

Mr. MURRAY. Yes. 

Ms. ANDERSON. I’d like to address that. And this is going afield 

on the appropriations—the appropriation area. 

So that just—if funds are available, one, we have the authority 

to contract. Done improperly, but we do have the authority to contract for these services. If funds are available, then they’re proper. 

The payments are proper, from an appropriations and authorities—— 

Mr. O’ROURKE. So let me ask this followup question, Mr. Murray. 

Have these actions, these obligations been ratified? In other words, 

has this been blessed by the VA? 

I am just trying—so I think we are all concerned about what has 

happened here, and I think we just want to know the basic question of whether you are concerned and you think this was appropriate or not. 

Mr. MURRAY. So, as we know, the Office of Inspector General recently reviewed unauthorized commitments in the purchase card 

program. For those that were identified by the OIG, we did 100 

percent of review of that entire sample, and we referred those to 

the head of contracting activity for a ratification review and ratification if appropriate. So that’s where those are. 

Now, those were with respect to purchase card transactions 

above the micro purchase threshold. So if they were identified as 

being—we didn’t have the authority under the VA acquisition regulations—which said you can go to 10K, right? Mr. Frye will tell you 

about that. If they were above the $10,000 authorization for fee 

care and they were non-FAR-based, one could logically say that 

they probably require ratification. And if they require ratification, 

one could make an argument that they perhaps were not proper. 

Mr. O’ROURKE. Okay. I will allow a colleague to pursue this because I—if they choose, because I am out of time. 

And, for the record, I will ask Mr. Williamson what is knowable 

about the cost of purchasing this care without contract. Seven billion dollars, do we know it, or is it knowable. But I realize I don’t 

have time now, so we will ask this question for the record. 

And I yield back to the chair. 

Mr. COFFMAN. Thank you Mr. O’Rourke. 

Mrs. Walorski, now 5 minutes. 

Mrs. WALORSKI. Thank you, Mr. Chairman. 

I am aiming this in the direction of Mr. Murray and Mr. Doyle, 

I am not sure which. But there is a business in my district that 

supplies specialized shoes, diabetic shoes, and custom inserts to 

vets through the VA. However, this business didn’t have a contract. 

In November of 2014, VISN 11 notified them that the custom 

orthotic appliance and related service released a request for proposals. The business filled out all the paperwork. They were denied 

for not meeting the minimum technical requirement of having a 

certified, not podiatrist, but pedorthist on staff. 

My question is, who sets the technical requirements for these 

contracts, the VISN or the main VA office? 


VACREP0180 with DISTILLER
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And then my second question is, since this business did not have 

a contract, how do you think the VA was paying them for the services they provided? 

It doesn’t matter—— 

Mr. DOYLE. I’ll take that. 

Mrs. WALORSKI. Okay. 

Mr. DOYLE. One, I’ll need to explore more the specifics in this 

case. But the requirements, if it was done by VISN 11, it was probably done by the local contracting office that supports VISN 11, 

and they work for me in my organization. They probably worked 

very closely with the prosthetic folks in that VISN or at that medical center to develop the requirements. It is not set by the central 

office, I don’t believe, in this particular case. 

Now, I don’t know about the contract situation or not, but it is 

possible that they were being bought under the micro purchase 

threshold of $3,000 by the local prosthetics folks with the government purchase card. 

Mrs. WALORSKI. Well, and I guess, you know, my followup question to that is the owner did say they would receive a purchase 

order that would have a credit card number on it and an expiration 

date. They could purchase—they couldn’t purchase more than one 

set of shoes, though, or inserts per time. 

And my question is, when you’re talking about—this particular 

organization serviced about 200 veterans in my district, and now 

they can no longer do that. There really is no competitor. And, you 

know, when businesses that are highly specialized that service veterans get stuck in this cycle in the VA between—they don’t know— 

they are not setting the rules. They are responding to an organization saying, you know, yes, we will join with you in partnership to 

provide some kind of specialized care. 

Mr. DOYLE. Yes. 

Mrs. WALORSKI. And so, you know, it is harmful to the folks on 

the other end of this trying to comply, getting an RFP in the mail 

saying, you know, now you have to sign up for this. They had been 

providing this for a couple years already, and then they get thrown 

out because they didn’t have a minimum certification. But it was 

okay and it was fine as long as they were being paid through the 

credit card number and the purchase order. 

It just—don’t you see an inequity in that, when you are trying 

to keep service providers even available? They have no idea what 

you guys are doing and what is complicit and not complicit. 

Mr. DOYLE. Right. I understand. I would say this sounds like, if 

they were doing repetitive orders with a government purchase 

card, one could make a logical argument that that is a split requirement. If it’s a split requirement that goes above the micro 

purchase threshold of $3,000 in this case, there should be a FARbased contract in place. 

Mrs. WALORSKI. And you can check this out for me if I give you 

the info, the personal info on it—— 

Mr. DOYLE. Yes, I’m happy to do so. 

Mrs. WALORSKI. Okay. I appreciate it. 

I yield back, Mr. Chairman. Thanks. 

Mr. COFFMAN. Thank you, Mrs. Walorski. 

Ms RICE. you are recognized for 5 minutes. 


VACREP0180 with DISTILLER
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MS RICE. Thank you, Mr. Chairman. 

I feel like I missed something here. I’m just trying to figure out 

why—and maybe, Mr. Murray, you can answer this question. Why 

is there such a reluctance to apply FAR regulations when you are 

talking about non-VA care? If you can give that answer succinctly, 

because I have a lot of other questions. 

Mr. MURRAY. I don’t sense there’s a reluctance at, you know, the 

leadership levels. In fact, all the leadership levels I see, you know, 

PC3, Choice, provider agreements, seem to be the preferred approach for providing care in the community. And if you want to 

delve into this, I think that Chief Acquisition Officer, the head of 

contracting activity for the Health Administration, might have 

some sense for why this is true or could be true in the field. 

Mr. GIDDENS. Ma’am, one of the things that we tried to address—and we tried to do it with the legislation request that came 

in—was to recognize that there are some vendors that may shy 

away from doing business with the government. We’re not known 

as being the most streamlined and the most easiest to deal with. 

Vendors have to get Dun & Bradstreet numbers. They have to 

apply for Federal contract wage statutes. There’s a lot of additional 

activity they do to do business with the government. 

And what we tried to recognize with the legislation is there’s an 

order of precedence. We want to start and deliver and provide care 

in our VA medical centers. Next is with contracts; next with agreements. Our last preference would be what has been termed the individual authorizations. 

So we want to have that as really kind of the backstop that, as 

we go through this priority, this hierarchy of providing care, we see 

that as the least preferred option but one that we don’t want to 

take away from approximately 400,000 veterans that are being 

served by some of those small providers—— 

Ms RICE. But it’s become a $7 billion backstop, right? 

Mr. GIDDENS. I don’t know all seven of that—all seven, I believe, 

is for overall fee, and some of that is happening through FAR and 

non-FAR. I don’t have the breakout. 

Ms RICE. Well, the problem is that there is no comprehensive auditing that has been done. 

I guess, Mr. Williamson, if you could—I mean, what I see a pattern of is either GAO or the inspector general saying, here’s a problem, here is how you fix it, and an intentional or negligent failure 

on the part of the VA to take recommendations and actually implement them. 

So can you just tell us what you recommended the VA do and 

where they are still lacking? 

Mr. WILLIAMSON. Well, of course, as you know, we put VA on our 

high-risk list very recently, and part of the justification for that 

was that they are not implementing many of the recommendations. 

In fact, there were over 100 recommendations we’ve made that VA 

has not implemented just in the healthcare area alone. 

So there are 22 recommendations from 3 reports on Non-VA provider care. I don’t want to use all your time up, but let me give 

you a couple examples. One is that we recommended that VA keep 

track of wait times for veterans that went to non-VA providers. 


VACREP0180 with DISTILLER
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They have not yet done that. We have talked to them about it. 

They still haven’t done that. 

Ms RICE. What is the reason for them not having done it? 

Mr. WILLIAMSON. We don’t really know. 

Ms RICE. Well, when you ask them, you tell them how to do 

it—— 

Mr. WILLIAMSON. I think what they’re looking at—VA wants to 

close a case from the time the veteran starts the process of getting 

an appointment until the time the claim is paid. They want to do 

that in 90 days. And VA is tracking that, but for some reason 

they’re reluctant to track the 30 days. 

Ms RICE. Why? 

Mr. WILLIAMSON. Good question. I don’t know that they’ve given 

us a great answer on that. 

Ms RICE. What would be a good answer? Is there a good answer? 

Mr. WILLIAMSON. They probably don’t have the systems to do it. 

It takes a lot of work. It requires having some good data. But that’s 

not a good reason, necessarily, for not doing it. 

Ms RICE. Mr. Williamson, so you have laid out a blueprint for 

how the VA can improve, whether it is tracking wait times, doing 

better audits to see where these multi-billion-dollar expenditures 

are going. And I guess maybe there isn’t an answer to this. 

But it seems to me that you have not been able to get any satisfactory answers as to why your recommendations have not been 

implemented. And maybe you are not the right person to answer 

this, but I don’t know if anyone at the VA—I haven’t heard Mr. 

Murray give any explanation as to why. 

Mr. WILLIAMSON. Well, I think part of it always comes back to 

the same issues, no matter what program you’re reviewing in VA. 

The data is often insufficient. The automated systems they have, 

in many cases, cannot produce the kinds of things they need. And 

it comes down to a lack of oversight both at the local level and at 

the headquarters level. It happens time and time again; the claimsprocessing problems we found on the emergency care for non-service-connected veterans, is a good example. 

Ms RICE. The problem is that there will be no overall cultural 

shift at the VA unless there is meaningful oversight, whether you 

are talking about this issue or you are talking about how whistleblowers are treated or anything else. 

And that is really part of the problem, isn’t it? 

Mr. WILLIAMSON. It comes down to accountability, and it’s not 

there. 

Ms RICE. Thank you, Mr. Williamson. 

I yield back, Mr. Chair. 

Mr. COFFMAN. Thank you, Ms. Rice. 

Mr. Lamborn, you are recognized for 5 minutes. 

Mr. LAMBORN. Thank you, Mr. Chairman. 

And I appreciate your leadership in pursuing yet another scandal, basically. Here it is June 1. It is another month, and we have 

got another scandal. And it seems like the whole year has been like 

this, and I, for one, am getting sick and tired of it. 

Mr. Williamson, I would like to ask you for some background in 

this whole issue. Whether we call the contracts illegal or just improper or noncompliant, what can go wrong when the VA doesn’t 


VACREP0180 with DISTILLER
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follow the proper procedures as regards these contracts? Mr. 

Williamson. 

Mr. WILLIAMSON. You’re talking to me? 

Mr. LAMBORN. Yes. 

Mr. WILLIAMSON. Oh, okay. I thought you were saying Mr. 

Giddens. 

Mr. LAMBORN. But from a GAO perspective. 

Mr. WILLIAMSON. You know, I’m not a lawyer or a procurement 

expert either. And in listening to what I’ve heard today from the 

VA witnesses, I’m a bit confused because, on one hand VA says 

there’s no impetus or there’s no reluctance to go to a FAR-based 

kind of process for purchased care for VA non-providers, and I 

think there obviously is or, otherwise, Mr. Frye would not have had 

the difficulty he’s had. 

I think I would want a FAR-based system would impact the access for veterans because the end game here is still providing highquality, accessible, and cost-effective care for veterans. 

And so, if a remedy to solve the problem is a FAR-based—if it’s 

determined that a FAR-based system should be used here I would 

want to know how long would it take in this process for a contract 

to be executed and what the process means. I would want to know 

how it would affect the accessibility to care for veterans. 

Also, one thing we haven’t mentioned yet is the whole idea of 

what it would mean for VA’s acquisition workforce. When we did 

our clinical contract care work, we found that the contracting officers and the contracting officer representatives who do most of the 

legwork for the contracting officers are already stressed in terms 

of workload. 

If you increase that workload, you double it, tenfold, whatever it 

would mean to get a FAR-based system implemented, then— what 

would it mean in terms of VA’s budget for hiring new people? 

I just don’t know what a FAR-based system would mean in terms 

veterans’ of accessibility to care and VA’s acquisition workforce, 

and that’s what we need to know. 

Mr. LAMBORN. Well, it is interesting that GAO has identified six 

categories of problems that can arise when proper oversight is not 

provided by the VA: the type of provider care, credentialing and 

privileging, clinical practice standards, medical record documentation, business processes, and maybe the most important, to me, access to care. 

So let me turn now to Mr. Frye. Would you agree that those six 

areas are called into question when proper procedures are not followed? 

Mr. FRYE. Well, yes. Absolutely. 

And, in addition to that, when Federal contracts are required 

and you don’t use them, there are terms and conditions that are 

completely missing from the contract. By Federal statute, you’re required to have terms and conditions. 

These include the termination for convenience, termination for 

default, the disputes clause, fair and reasonable price determination, just a whole host of issues not—and probably even more important in terms of healthcare, the safety and efficacy terms and 

conditions that are required to be followed by the specific contracVerDate Aug 31 2005 11:34 Jul 22, 2016 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 Y:\98-639.TXT PAT

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tors. Without a contract, without those terms and conditions, the 

contractor is free to do what he or she wants. 

Mr. LAMBORN. Well, and that is my concern. 

And, Ms. Anderson, in regards to your statement earlier, I have 

to agree with you. The government is obligated to pay for services 

that are rendered, even if the proper foundation wasn’t followed— 

you know, the procedures weren’t followed in soliciting those services. 

Ms. ANDERSON. Thank you for the opportunity to respond to that. 

We were comparing a FAR-based contract and what it will take 

to become FAR-compliant and then, to Mr. Williamson’s point, to 

what end. Will that result in immediate care to the veteran? 

And I chaired a work group in July of 2014, and that work group 

was responsible, tasked, with identifying measures in how do we 

become FAR-compliant. 

We realized after 3-hour weekly sessions over 4 months that 

there are lots of hurdles to overcome, not the least of which, labor 

issues, consultation with labor, hiring a contracting officer workforce, estimate 600. Then it’s how immediate can we really give the 

care at that point. Still, we need to go through the hurdles. 

So we quickly realized that we need to really begin aggressively 

pursuing legislation. And in aggressively pursuing legislation, 

working with the Department of Labor, working with OMB, working with the Department of Justice, we’ve embedded in the legislation protections, credentialing, quality of care—— 

Mr. LAMBORN. Ma’am, maybe you are getting into another issue 

that is a very important issue, the proposed legislation. My time 

is way over. I just wanted to make the point. 

No one is arguing that the government should not pay these contracts. I am concerned about what GAO and Mr. Frye have identified as what can go wrong when the procedure is not followed. 

Mr. Chairman, thank you for your indulgence. I yield back. 

Mr. COFFMAN. Thank you, Mr. Lamborn. 

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

Mr. WALZ. Thank you, Mr. Chairman. 

And, first of all, Mr. LaBonte, my deepest apologies for you. And 

what I understand and you understand much more clearly is that 

veterans’ care is a zero-sum proposition. If one veteran doesn’t receive the care that they are entitled to and the best quality, then 

it is a failure. So your situation is unacceptable. 

The thing I would encourage you on is—and I looked into this— 

the tort issue. That is your recourse on this. And they will always 

try and throw barriers up both in the private sector and in the 

public. But there are a lot of good folks out there that can help 

with that. So I would hope you would pursue that. 

Mr. LABONTE. Well, the efficacy of the tort program is that the 

VA essentially investigates themselves. I mean, their attorney acts 

as an investigator, which is—— 

Mr. WALZ. Well, trust me. People win these. And what I am saying is, if this was wrong, there are people out there to assist you. 

There are veteran attorneys that are veterans themselves that 

their job is to try and help make this right. 


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Mr. LABONTE. Yes. But the VA has a 6-month head start to 

coach witnesses, ‘‘Well, you’re not allowed to file a Federal lawsuit.’’ 

Mr. WALZ. Yes. And I agree. And it is never easy. I think, as you 

are sitting here listening to this, the issue for you is that all the 

rest of this is kind of irrelevant. 

Mr. LABONTE. Yes. 

Mr. WALZ. The issue is what happened to you. 

Mr. LABONTE. Yes. 

Mr. WALZ. And I would just say, from your perspective, there are 

two things happening here. We are kind of at the 40,000-foot reform discussion here. My advice to you is that go down that road, 

pursue that hard, and that is where you can get—redress your—— 

Mr. LABONTE. That’s what I’m doing now. And I’m witnessing 

that that program is ineffective as far as VA investigating themselves. 

The VA attorney sends the information that I send the attorney/ 

investigator to the actual hospital risk management coordinator, 

who then tells the privacy officer which records they need to keep 

or manipulate or lose and then tells the Department head how to 

coach their residents specifically to the legal matter. 

So I would say that that recourse is ineffective and it’s designed 

to protect the hospital’s reputation rather than actually help the 

veteran—— 

Mr. WALZ. I wouldn’t disagree with you. There is folks out there 

to advocate for you—stick with it—veterans’ service organizations, 

others. So stick with it. 

Mr. LABONTE. Thank you. 

Mr. WALZ. I am going to move back to, again, our 40,000-foot— 

and I appreciate you all being here. 

And my colleague from New York, Ms. Rice, was hitting on this, 

Mr. Williamson. I have seen this before. GAO puts out 22 recommendations. 

What exactly is the weight of a GAO recommendation? Exactly 

what does that do? 

Mr. WILLIAMSON. We report to the Congress and the Congress 

provides the leverage we need, and it’s forums like this that we use 

bring those things to light. 

Mr. WALZ. Exactly. 

And this is why—and, again, Mr. Murray, I could go down here 

and ask why some of these, but I do think—and I don’t think it 

was necessarily even a rhetorical question. I do think you are the 

wrong person to answer this because what we are in is—and this 

needs to be fixed and somebody needs to deal with this. 

But this is a much broader issue. This is the reform issue. This 

goes back to the VA being all things for all people. And not to antagonize my chairman, but this is the VA trying to build hospitals. 

This is the VA trying to do everything for everybody. 

And I have been saying we need to have that discussion to figure 

out how do we best leverage both the private sector, the public sector, our promises to our veterans, get quality care, and do it in the 

most cost-effective manner. 


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So we are here, I would argue, dealing with a very important 

issue. And it is very granular, and we are discussing inappropriate 

versus illegal. And they do matter. 

The bigger issue here is that, if I would ask the questions—and, 

again, I don’t think they are fair to you, Mr. Murray—what should 

be the VA be doing, how do we fix this contracting, what is the purpose of this, and we will get back into Mr. Frye pointing out where 

those holes are in there, this is probably not the forum for that. 

So I appreciate you all being here. I don’t question that we are 

all trying to get to the same point. But you heard Mr. LaBonte. 

This is what happens when you break faith. He doesn’t believe that 

anybody is going to get good care. And we can tell him countless 

stories of the highest quality healthcare delivered in the country by 

a VA hospital, and it would be irrelevant to him. 

And I think that is a noble goal for us to continue to strive for, 

but I don’t think we are going to get there in the current system. 

I am quite confident your 22 recommendations will be recommended in 2 years from now and we will still be trying to implement them, and that is a horrible condemnation on the entire process. 

Mr. WILLIAMSON. They have implemented seven of them. 

Mr. WALZ. Yeah. Well, and it is. And, again, it is not because the 

motive is to not provide quality care. I think it goes back to the 

institutional design and some of the issues on culture that we are 

trying to get to. And I think that level over the top of this is going 

to make answering many of these questions very difficult. 

So I thank you, Chairman, for your time. 

Mr. COFFMAN. Well, again, Mr. LaBonte, I certainly apologize for 

your situation, and I think you personalize the problems in this 

contracting process. 

I am stunned by the kind of bureaucratic incompetence, the corruption, the lack of leadership demonstrated here today where 

what I have heard is, ‘‘Yeah. We have these rules, but they are 

really not important.’’ The kind of lawlessness that exists in this 

Department is just extraordinary. 

Mr. Frye, what you heard here today was essentially, splitting 

hairs, ‘‘Oh, it is really kind of not improper,’’ ‘‘Oh, it is really not 

illegal, but we don’t follow the law here because we are somehow 

above the law.’’ 

I mean, Mr. Frye, could you comment on what you have heard 

today. 

Mr. FRYE. That’s exactly right. Let’s talk about those purchases 

above $10,000. They are using the same methodology that is used 

from $1 to $10,000 above $10,000. That authority has never existed. 

Every purchase, every acquisition in healthcare above $10,000, 

must have a FAR-based contract in place. It must be signed by a 

duly appointed contracting officer. And I will take issue with Ms. 

Anderson. We can’t pay that unless it’s been ratified by a contracting officer. 

A ratification is a requirement where a contracting officer must 

do an investigation. We can’t liquidate that obligation willy-nilly, 

but we are. We’re going ahead without doing ratifications and liquidating the obligation. 


VACREP0180 with DISTILLER
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Those are improper payments, by the way. Our own regulations 

in the GAO Red Book and other statutes state that we will not pay 

unauthorized commitments until they are ratified. We’ve done it 

wholesale. 

To my knowledge, not a single one of these requirements above $10,000 has ever been ratified, and we bought billions of dollars’ 

worth of healthcare. If that isn’t illegal, I don’t know what is. But 

I guess we can—we can parse words here. 

Mr. COFFMAN. Mr. Frye, is there anybody else in senior leadership, besides yourself, that actually cares about getting this right? 

Mr. FRYE. It doesn’t appear that there’s anyone outside my organization that cares. I come to work every day, and I watch this 

malfeasance. I watch this malpractice. You know, they’ve made a 

mockery of the Federal acquisition system. 

The FAR has the same force and effect as the law. We all know 

that, those of us who were trained in its use, and certainly the attorneys know that. And we’re just ignoring it. 

This isn’t done in any other government agency. If you were to 

bring other government agencies, senior procurement executives or 

chief acquisition officers, you wouldn’t get this same story. This is 

just another example of us trying to blow smoke up your sleeve. 

Mr. COFFMAN. Is Secretary McDonald just a placeholder? I don’t 

sense that he is working to make a difference here. Does he care? 

Mr. FRYE. I hope Secretary McDonald cares. Again, I think Secretary McDonald dislikes these scandals, this malfeasance, more 

than anybody else because he’s got a very short window here to 

move the VA forward. And, again, he moves us 2 steps forward and 

we move 12 steps backwards every time one of these scandals 

arises. 

Mr. COFFMAN. Thank you. 

Ranking Member Kuster, you are recognized for 5 minutes. 

Ms. KUSTER. Thank you. 

Mr. Frye, let me just follow up on this. If every single one of 

these contracts was FAR-qualified or whatever the verb would be, 

what would the time commitment and cost to the VA be for that 

process? 

Mr. FRYE. Thank you for asking that question. So from $1 to $10,000, we have a non-FAR-compliant—however, 

it is FAR-based—system in place. It’s like falling off a rock. It’s 

non-FAR-compliant. The appropriate terms and conditions are in 

that contract. 

It is simply a process where authorized personnel, not contracting officers, sign this document, and they are on their way to 

the doctors. It’s not hard at all. And it’s been this way for years. 

Now, we all recognize, including counsel, that it is not compliant 

with the FAR. And so a year ago in July, we began a 4-month effort to bring it in compliance. 

But in November, after all that effort, Veterans Health Administration summarily rejected it. It didn’t go far enough for them, even 

though it was FAR-compliant. So—— 

Ms. KUSTER. But that is my concern, is that—we have heard 

from my colleague, Ms. Walorski, that a company that had been 

providing services was—obviously, somebody draw attention to 

that. They didn’t have a contract. They tried to go through a conVerDate Aug 31 2005 11:34 Jul 22, 2016 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 Y:\98-639.TXT PAT

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tract. But, in fact, the process was so burdensome, what ended up 

happening was that the veterans didn’t get the podiatry that they 

needed because that company was disqualified. There was no other 

company available. 

So I want to try to understand how do we get from here—I recognize the problem. I agree with you we have got a problem. How do 

we get from here to veterans all across the country getting timely 

care in a cost-efficient, high-quality manner? 

Mr. FRYE. Sure. And I realize there are issues sometimes with 

veterans getting care no matter what system we have, whether it’s 

in the VA hospital—— 

Ms. KUSTER. But would you agree that there is an added cost for 

all this administrative procedure on top? I mean, I am not—I am 

not condoning it. 

I am just asking you—— 

Mr. FRYE. I have no idea if there’s an added cost. But I will tell 

you this. 

Ms. KUSTER. Well, we talked about—— 

Mr. FRYE. There is a requirement. 

Ms. KUSTER. We talked about 600 additional people. 

Mr. FRYE. There is a requirement under the Federal acquisition 

regulation to do it. I don’t make the laws, but I—— 

Ms. KUSTER. I understand the requirement. 

Mr. FRYE. I comply with the laws. 

Ms. KUSTER. I am not asking you about the requirement. That 

is up to us. 

Mr. FRYE. Right. 

Ms. KUSTER. What I am asking you is: What is the cost to the 

system for each one of these authorizations to be compliant? 

Mr. FRYE. You’re asking the wrong person. You’d have to ask the 

program officials. 

Ms. KUSTER. Do you agree that there is—— 

Mr. FRYE. They’re the ones that make the business decision. 

Ms. KUSTER.—a cost, that there is potential delay, there is an administrative procedure that has to go on, there are individuals that 

have to be involved? Do you agree that there—— 

Mr. FRYE. I agree—— 

Ms. KUSTER [continuing]. Is a cost? 

Mr. FRYE.—there is a cost of doing business using any system, 

whether it’s the Federal acquisition regulation or any other system. 

By the way, I am ambivalent. If the Federal acquisition regulation 

wasn’t used, that’s fine. 

But we have to have a system. We can’t just spend money like 

drunken sailors willy-nilly. If we’re going to have a non-FAR system, then let’s put a non-FAR system in place. Let’s go through the 

rulemaking process at OMB. Let’s then promulgate those rules. 

And then let’s comply with the rules. It’s as simple as that. 

Ms. KUSTER. What do you think is the correct dollar amount that 

we would have the balance of being able to supervise contracts, but 

not have every last paper clip be covered by this contractual obligation? 

Mr. FRYE. Again, I have no idea. I’m not the program official. 

But I can tell you this. We have FAR-based contracts in place. 


VACREP0180 with DISTILLER
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PC3, which you may be familiar with, is a FAR-based contract. 

It provides specialty care, and it goes up into the hundreds of thousands of dollars. And veterans are getting care every day using 

PC3. 

Ms. KUSTER. And do all the providers in the PC3 network have 

a FAR-based contract? 

Mr. FRYE. Have a what contract? 

Ms. KUSTER. A FAR-approved contract—— 

Mr. FRYE. If they’re in the—— 

Ms. KUSTER [continuing]. Even in a rural area like I am in, individual provider? 

Mr. FRYE. No. There are some rural areas—for instance, there’s 

another FAR-based contract, which you’re familiar with, called 

ARCH. I am not that familiar with it because I am not a program 

official, but I know it exists because of care that’s required out in 

rural areas. 

Ms. KUSTER. Well, my time is nearly up. 

But I think what I am interested in, going forward, is let’s separate out the ones that are possible. I would like to hear more about 

the PC3 FAR-based contracts and then not chase every last one 

down a rabbit hole with 600 new employees. But let’s try to use 

a public-private arrangement. 

Because I know it is expensive. I have been in healthcare for the 

past 25 years. It is expensive to supervise these contracts, and we 

are going to have to get to the bottom of it. So thank you. 

Mr. COFFMAN. Mr. Lamborn, you are now recognized for 5 minutes. 

Mr. LAMBORN. Thank you, Mr. Chairman. 

Mr. Murray, I have got a question or two for you. I want to ask 

you about the proposed legislation that the VA has come up with— 

and I think Ms. Anderson made reference to it—basically, to let VA 

off the hook and say, ‘‘You don’t have to follow FAR anymore for 

these kinds of contracts.’’ 

And that really bothers me because one of the potential abuses 

that can happen when FAR or something the equivalent of FAR is 

not followed is that there is the potential for cronyism or higher 

prices. It is sort of like sole-sourcing of contracts and the taxpayer 

isn’t given the benefit of competing bids and that kind of thing. 

So would you agree with me that the legislation—or I won’t put 

it that way. Are you concerned that the legislation VA is proposing 

could allow for those problems to arise? 

Mr. MURRAY. I am. And I’m concerned about that sort of thing, 

fraud, cronyism, paying more than you should across programs, 

whether it’s travel or conference spending or whether it’s payroll, 

get a major initiative to make sure, you know, payroll is where it 

needs to be in terms of controls. 

So, absolutely, which is why it’s so important that controls that 

we suggested—and perhaps more are required in these—in this 

legislation—be implemented. You know, reviews. 

The control that I am intrigued with is that we review these individual authorizations to see if they pass the threshold, a million 

dollars annually, and, if so, we start thinking right away maybe 

this needs to be FAR-based. We’re doing a lot of this, for instance. 


VACREP0180 with DISTILLER
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Mr. LAMBORN. Well, but the specific language that concerns me 

in the proposed bill says, quote, ‘‘that healthcare can be awarded,’’ 

quote, ‘‘without regard to any law that would otherwise require the 

use of competitive procedures for furnishing of care and services,’’ 

unquote. So, to me, that opens the door for potential cronyism. 

Mr. Frye, would you like to comment on that same question? 

Mr. FRYE. Well, that piece disturbs me as well. But I think, in 

the background, there may be some additional information. Counsel, down at the end of the table, was involved in putting that together. 

But, certainly, again, if you give us legislation that allows us to 

do something besides the FAR, I am ambivalent, but we have got 

to develop those rules, go through the rulemaking process, put 

those rules in place, and then we have to enforce the rules and hold 

people accountable. 

We don’t hold people accountable for anything right now. Yet, 

you know, we come down here. I read the newspapers every day. 

Chairman Miller says, you know, why aren’t things working, why 

don’t we follow the rules? 

It’s because no one is held accountable. No one. No one has been 

held accountable at all for these violations of Federal regulations 

in law in the course of events with these obligations for fee basis 

care, and I suspect no one will ever be held accountable. 

There are hundreds of thousands of these transactions that 

should have been ratified. There are billions of dollars that have 

been spent, and we’ll just sweep it under the carpet. 

Mr. LAMBORN. Well, I am truly concerned about that. 

Mr. Chairman, I appreciate your leadership on this issue. And I 

yield back. 

Mr. COFFMAN. Thank you, Mr. Lamborn. 

Mr. O’Rourke, you are recognized for 5 minutes. 

Mr. O’ROURKE. Passes. 

Ms RICE. you are recognized for 5 minutes. 

Ms RICE. Thank you, Mr. Chairman. 

Mr. Williamson, I just want to follow up on Ms. Kuster’s line of 

questioning in terms of the VA’s position that was stated previously, that following FAR would impact a large number of veterans by compromising immediate access to care in our community 

providers. 

Now, forgive me if this was already spoken about. But do you 

share that? 

Mr. WILLIAMSON. I share your view; it’s very much of a concern. 

Again, unless I know more about how a FAR-based system would 

work for purchased care for non-VA providers and I know how long 

it would take to execute these contracts, I can’t give you an answer. 

If I had that, I would. But my concern is that it’s going to take 

a longer period of time for the process. In the meantime, the access 

to care that veterans have to non-VA providers may be degraded. 

Ms RICE. So we have to figure out a way to either not have FAR 

apply, right, and implement your recommendations? 

Mr. WILLIAMSON. But what is our recommendation on that particular aspect? I am listening to all of the dialogue here, and I 

think that whatever is decided upon we have to know some facts 

first about how such a system would work. 


VACREP0180 with DISTILLER
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Ms RICE. Where can you get those facts from? 

Mr. WILLIAMSON. Please repeat. 

Ms RICE. Where can you get those facts from? 

Mr. WILLIAMSON. Well, first of all, for the care that’s given—and, 

by the way, if 80 percent of the veterans used the PC3 network of 

providers, it would solve a lot of the FAR-based issues. But they 

don’t. A very minute number of veterans currently use PC3 providers for a lot of reasons. 

In any case—— 

Ms RICE. You think that is the answer—that could be one of the 

answers here? 

Mr. WILLIAMSON. Well, it’s one of the answers. Certainly it is. 

But for every other form of non-VA provider care there is, this 

issue of what’s FAR-based and whether it’s being done illegally or 

not. 

Questions need to be answered such that there is clarity not only 

on the accessible care issue, but also on the cost, because I think 

that the impact on the acquisition workforce in VA would be potentially quite a bit in terms of having to hire more people. But you 

have got to get those answers first, and I haven’t heard it here. 

Ms RICE. Well, that is the problem at these hearings. A lot of 

questions are asked and very few answers actually are received. 

Thank you. 

I yield back, Mr. Chairman. 

Mr. GIDDENS. Ma’am, could I follow on to your question, please? 

Ms RICE. Mr. Chairman. 

Mr. COFFMAN. Go ahead. 

Ms RICE. Sure. 

Mr. GIDDENS. So I find myself in complete agreement with Mr. 

Williamson, that we have to balance this need for access and provide the right structure that represents the interest of the taxpayers so it’s balancing what’s good for veterans and what’s good 

for taxpayers. 

And the answer to his question about how we look at that and 

how we balance that is I own that for the Department. I am going 

to work to put that together. I would love to meet with the committee and/or the staff as we do this and get your input. 

But I have to find a way that allows us to balance this, to meet 

the needs of the veterans, to manage their access, while at the 

same time representing the interests of the taxpayer and recognizing the Federal acquisition regulations and all the appropriate 

laws. I own that for the Department. 

Ms RICE. Well, thank you for that offer. 

Mr. COFFMAN. Well, I would like to thank the witnesses. You are 

now excused. 

And let me just say it really doesn’t matter how the system’s 

changed because, if you are not going to follow whatever system is 

there, because if you don’t have the discipline, you don’t have the 

leadership, it really just doesn’t matter. 

I mean, at the end of the day, there has got to be a rule of law. 

And this is just—I think some of the witnesses today just, you 

know, really demonstrated how lawless this organization is. You 

are now excused. 


VACREP0180 with DISTILLER
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Today we have had a chance to hear about problems that exist 

within the Department of Veterans Affairs with regard to oversight 

of its non-VA healthcare programs. 

This hearing was necessary to accomplish a number of items: 

number one, to identify the continuing widespread problems with 

procurement of non-VA healthcare; two, to allow VA to provide answers as to why these problems still exist and have been allowed 

to continue for so long; and, three, to assess next steps that must 

be taken by the Department in order to stem the continued waste 

of taxpayer dollars and jeopardized services provided to veterans. 

I ask unanimous consent that all members have 5 legislative 

days to revise and extend their remarks and include extraneous 

materials. Without objection, so ordered. 

I would like to once again thank all of our witnesses and audience members for joining us at today’s conversation. 

With that, this hearing is now adjourned. 

[Whereupon, at 5:30 p.m., the subcommittee was adjourned.] 

f 

APPENDIX 

PREPARED STATEMENT OF CHAIRMAN MIKE COFFMAN

Good afternoon. This hearing will come to order. 

I want to welcome everyone to today’s hearing titled, ‘‘Circumvention of Contracts 

in the Provision of Non-VA Healthcare.’’ This hearing is the second in a series of 

hearings examining illegal VA procurement practices resulting in massive waste of 

limited taxpayer resources and serious jeopardy to the quality of healthcare received 

by our Nation’s veterans. 

In our previous hearing on procurement, on May 14, 2015, we focused on the mismanagement and misuse of purchase cards in avoidance of contract requirements, 

spending limitations, and warrant authority. VA’s Senior Procurement Executive, 

Mr. Jan Frye, testified that these unauthorized commitments were in the billions 

of dollars. Mr. Frye has indicated similar levels of mismanagement and abuse in 

the procurement of non-VA healthcare services by VHA. 

By far, the most prevalent method by which veterans receive non-VA care is 

through the individual authorization, so-called fee basis, process. Under title 38 of 

the Code of Federal Regulations, section 17.52, VA is authorized to obtain non-VA 

medical services when demand is infrequent and the needed healthcare is not available in-house or through an existing contract. Unfortunately, VA uses this process 

even when these requirements are not at issue. Moreover, VA admits that the execution of these authorizations does not comply with the contract requirements of the 

Federal Acquisition Regulation (FAR) and Veterans Affairs Acquisition Regulation 

(VAAR). 

Mr. Frye will testify that by longstanding and massive circumvention of the FAR 

and VAAR in the fee basis authorization process, VA has illegally obligated billions 

of dollars. He will explain that, VA incurs billions in improper payments that represent material weaknesses in VA internal audit controls. Significantly, in 2009 and 

2010, the OIG reported on serious problems with the accuracy and efficiency of 

claims paid though the fee basis program. The OIG reported that VA medical centers made hundreds of millions of dollars in improper payments—including duplicate payments and incorrect amounts. Most troubling is that VA had not established 

fraud prevention or detection controls because it didn’t consider the program to be 

at significant risk. OIG estimated that VA could be paying as much as $380 million 

annually for fraudulent claims and in May 2014—contrary to VA’s assertion that 

previous illegal purchases can be institutionally ratified—OIG reported that VA further violated the law by institutionally ratifying illegal purchases and avoiding important checks and balances. 

Today, GAO’s Director of Healthcare, Randall Williamson, will testify about the 

continuing limitations in oversight of healthcare service contracts and will focus 

particularly on the inadequate management of clinicians who provide services under 

contract within VA facilities. We will also hear from United States Army veteran, 


VACREP0180 with DISTILLER
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Christopher Labonte, whose horrific experience with VA represents a case study in 

the risk associated with non-competitive contracts with affiliates and the importance 

of quality control and oversight of contract performance standards. 

As I said in the purchase card hearing, violations of procurement laws are not 

mere technicalities. It is not just a matter of paying a little more for needed supplies 

and services as some apologists for VA have asserted. Among other things, without 

competition, business may be awarded based on cronyism and the directing of business to favored vendors, including those who may employ former VA officials. Without contracts, patient safety provisions are not legal requirements. VA’s mismanagement of the fee basis program is not a justification to dispense with FAR and VAAR 

requirements. If the atom bomb can be built and wars conducted under the acquisition regulations, surely VA can deliver patient care under them as well. 

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

may have. 


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PREPARED STATEMENT OF EDWARD MURRAY

Good morning, Chairman Coffman, Ranking Member Kuster, and Members of the 

Committee. Thank you for the opportunity to discuss the Department of Veterans 

Affairs’ (VA) provision of care to Veterans by contracting with community providers. 

I am accompanied today by Mr. Gregory Giddens, Principal Executive Director, Office of Acquisitions, Logistics and Construction (OALC), Mr. Jan Frye, Deputy Assistant Secretary for Acquisition and Logistics, Mr. Norbert Doyle, Chief Procurement and Logistics Officer for the Veterans Health Administration (VHA), and Ms. 

Phillipa Anderson, Assistant General Counsel. 

Introduction 

VA is a provider of healthcare services for Veterans. By statute, 38 United States 

Code (U.S.C.) § 1710, VA is authorized to provide ‘‘necessary’’ care to Veterans. With 

respect to hospital and outpatient care, VA has defined what is ‘‘necessary’’ by regulation, 38 Code of Federal Regulations (CFR) § 17.38, the medical benefits package. 

VA has been given authority, pursuant to 38 U.S.C. § 1703, to contract for that care. 

These contracts are governed by Federal acquisition statutes and the Federal Acquisition Regulations (FAR). This mix of in-house and community care provides Veterans the full continuum of health-care services covered under our available medical 

benefit offerings. 

Last year VA in informal discussions with House and Senate Veterans Committee 

staff noted possible confusion regarding its purchased care authorities that would 

need to be addressed by statute. VA in its February budget noted the Department 

was putting forward a legislative proposal that would update its purchased care authorities to address confusion and uncertainty surrounding its current authorities. 

After a period of interagency discussions, VA on May 1, 2015, provided the House 

and Senate Veterans Affairs Committees with a formal proposal for comprehensive 

reform of its purchased care authorities, including very specific requirements for 

non-FAR based agreements. 

VA Procurement: Care in the Community 

Care in the community is used to augment VA provided healthcare in order to 

meet clinical demand as well as address wait times for providing medical services, 

while also considering patient convenience. When VA facilities are not capable of 

furnishing economical care because of geographic inaccessibility or otherwise are not 

capable of providing the care or services required, they may contract for hospital 

care or medical services in accordance with 38 U.S.C. § 1703. When the demand is 

for infrequent or limited use, VA, through the use of individual authorizations, as 

described in VA Acquisition Regulation 801.670-3, may purchase hospital care or 

medical services from the community. VA has had a 30 year practice of using individual authorizations without applying Federal acquisition processes and procedures. This practice allows Veterans to get the best care they can get in the most 

efficient way possible. VA’s legal basis to use non-FAR based contracts to purchase 

care in the community for Veterans has been challenged. Because of possible confusion regarding the authority for this practice, VA sought to clarify the authority 

through proposed legislation, because VA believes this practice is critical to ensuring 

that veterans receive healthcare in a timely fashion, and from locations that are 

close to where they reside. 

In FY 2006, we spent roughly $2.7 billion for care in the community. Since 2006, 

there has been a steady increase in individual authorizations for care in the community. In FY 2014, we spent over $7.0 billion, which represents an increase of 160 

percent. This includes care purchased using individual authorizations, emergency 

care, and care purchased via FAR-based contracts, the majority of which was for 

services priced at or below comparable Medicare rates. However, VA often finds it 

difficult to purchase care at Medicare rates for specialty and primary care services 

in underserved areas. Currently, the FY 2015 estimate is approximately $10.4 billion, which represents an increase of 55 percent over the last year. 

When VA issues an individual authorization for care in the community, regulations 38 CFR 17.55 and 38 CFR 17.56 are the relied upon payment authorities. Both 

regulations align VA with Federal government payments under the Medicare program for preauthorized outpatient and inpatient care to eligible Veterans. VA has 

a comprehensive internal audit program to review claims submitted by community 

providers. VHA’s Chief Business Office conducts multiple audits to ensure proper 

eligibility determinations and accurate payment of claims for care in the community. 

VA’s Office of Business Oversight, an audit office external to VHA, conducts enterprise-wide payment accuracy and internal control reviews of non-VA care claim payments. 


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Finally, VA acknowledges that our long-standing procurement processes for care 

in the community need improvement. We will continue to work to improve our procurement practices by identifying items that should be transitioned into national 

contracts, maximizing the use of current national contracts, adopting a standard nomenclature, and looking for best practices to be applied across the enterprise. 

Purchased Healthcare Streamlining and Modernization Act 

On May 1, 2015, VA submitted proposed legislation that would authorize the Secretary to enter into Veterans Care Agreements with providers, physicians and suppliers that have enrolled with Medicare and entered a provider agreement or participation agreement with Medicare; providers participating in Medicaid; and other 

providers the Secretary determines to be qualified. These agreements would provide 

relief from certain Federal contracting requirements, including competitive acquisitions procedures, but similar to VA’s existing authority, payment rates for these 

agreements will be tied to comparable Medicare rates. Veterans Care Agreements 

will allow VA to provide care in a way that is similar to the operation of the Medicare and Medicaid programs as well as community care purchased for those eligible 

for care through the Veterans Choice program. The legislation is designed to provide 

a clear legal foundation for VA’s continuing use of individual authorizations and 

provider agreements. At the same time, the legislation includes explicit protections 

for procurement integrity, provider qualifications, and price reasonableness. We note 

that Congress enacted a similar authority that is restricted to use in the Veterans 

Choice Program in Public Law (P.L.) 113–146, as amended by P.L. 113–175. 

Many Veterans receive care under individual authorizations. If we were to stop 

providing these authorizations, it would impact a large number of Veterans by compromising immediate access to care and our community providers that we rely on 

to care for Veterans. Because small practices and individual providers of health 

services would not be willing to enter into complex procurement contracts just to 

treat one veteran, it is likely that veterans will be deprived of care that is best for 

them. 

Enactment of this legislation will resolve what has emerged as serious legal questions in our purchased care authorities. Without this change, Veterans will lose access to many community providers across the board in primary care, specialty care, 

mental healthcare, and extended care. 

Conclusion 

In conclusion, VA strongly values its relationship with community providers. We 

realize the important role they play in assisting us in providing timely and high 

quality care to Veterans. Our priority always has been to put Veterans’ health and 

well-being first. Without the use of individual authorizations, Veterans would not 

receive the care they need. We look forward to working with Congress toward enactment of the proposed legislation and the critical aspect of ensuring Veterans’ timely 

access to healthcare. 

Mr. Chairman, I appreciate the opportunity to appear before you today. My colleagues and I look forward to answering any questions you or other Members of the 

Committee may have. 

f 

PREPARED STATEMENT OF JAN R. FRYE

Chairman Coffman, Ranking Member Kuster, and Members of the Subcommittee, 

thank you for inviting me to testify today. 

You have just heard Mr. Murray provide the Department’s position on the illegal 

purchases of billions of dollars in non-VA care over multiple years. If you are not 

now confused, I am surprised. I would be completely confused if I were not familiar 

with the facts. We obviously do not intend to admit our collective failures in leadership and stewardship of public funds. Mr. Murray stated there was and is confusion, 

inconsistent application, and conflicting interpretations. As VA senior leaders, we 

have had many years to correct these deficiencies. 

Mr. Murray also stated there were conflicting interpretations of the law. Here are 

some facts that may help you decide if conflicting interpretations exist. In October 

2012, a very senior VHA official informed me trouble was looming, as they had been 

violating the law on a wholesale basis with regards to purchase of non-VA care. I 

asked him for details about legal documents he hinted of; he declined to reveal anything. 

On October 22, 2012 I began a personal inquiry into the matter. I sent this same 

VHA senior official and his subordinate a written statement, addressing his plight, 

hoping I would receive additional information from him. He declined to respond. 


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On December 3, 2012, I sent a note to a senior executive from Office of General 

Counsel, requesting a legal opinion as to whether individual authorizations for nonVA care were considered FAR-based contracts. I received no response. 

Receiving no response, I followed up again on Dec. 31, and for a third time on 

January 15, 2013. 

On February 28, 2013, nearly three months after I requested the initial opinion, 

the Office of General Counsel provided me a legal opinion dated September 10, 

2009. This opinion categorically declares procurements of non-VA, Fee Basis Care 

to be FAR-based. There is absolutely no confusion in this legal opinion, in spite of 

what you just heard to the contrary. Neither my predecessors nor myself have ever 

granted authority for VHA to acquire non-VA healthcare except by FAR-based methods. 

You may wonder why, as VA’s Senior Procurement Executive, I had never previously seen this legal opinion, and why there was such obvious reluctance to provide it to me. That is an enigma. Mr. Murray and myself testified under oath to 

this subcommittee in 2010, stating fee-basis care was not FAR based. If this legal 

opinion existed in 2009, why was it kept from us in preparation for the hearing? 

Given the apparent recalcitrance to engage by VHA and Counsel, I submitted a 

Hotline Complaint to the Office of Inspector General in March 2013. The OIG initially refused my submission, questioning my motive for submitting the complaint. 

I stubbornly persevered, and they subsequently accepted it. I am unaware OIG ever 

investigated. 

In April 2013, I requested senior leadership assistance from VHA and the Office 

of General Counsel, in conducting ratification actions for these massive violations 

of Federal law. I received no offer of assistance from either office. 

In May 2013, Secretary Shinseki was briefed on non-VA care authority options. 

He was made aware of our illegal actions. I was not invited to the meeting. 

In June 2013, I wrote a letter to Representative Issa, then serving as Chairman 

of the House Oversight and Government Reform Committee, outlining my concerns 

in these illegal matters and others. My letter never made it to him. Two senior officials who are apparent friends, one from the House Oversight Committee, and one 

from VHA, conspired to keep Chairman Issa and the American public from learning 

of these matters and other serious VA violations of Federal laws. 

In April 2014, the VA Senior Assessment Team voted to close ongoing discussions 

of illegal purchases of non-VA medical care, with mine as the lone opposing vote. 

In that same meeting, the VA Office of Management sponsored a motion, which 

passed, to raise the reporting level for VA material weaknesses from approximately 

$400M to $1B. I believe this was an effort to avoid reporting emerging illegal matters to the American public through the annual statement of assurance process. 

In July 2014 I was threatened and coerced on multiple occasions in a two-hour 

meeting headed by the VA Chief of Staff, in an effort to force me to authorize illegal 

actions on a major scale concerning fee-basis care. 

From July to November 2014, we collaboratively developed a legally sufficient 

method to acquire non-VA healthcare. VHA’s senior leadership rejected the method 

in November 2014. The illegal activity continues unabated. 

This past Friday, Deputy Secretary Gibson elected to make my disclosure of these 

and other illegal acts a personal issue with me. His demeanor and actions in both 

an open and one-on-one meeting were clearly meant to intimidate me, and to cast 

a chill over me and others who might be tempted to report violations in the future. 

I will allow you and the court of public opinion to decide for yourselves if what 

I have briefly described constitutes corruption, malfeasance or dereliction. No investigation has been conducted. No ratifications of illegal procurements have been executed. Improper payments continue. Veterans receive healthcare without protection 

of mandatory terms and conditions. No one is liable. 

I believe these are two relevant questions: How can we hold subordinate VA employees accountable, if we as senior leaders selectively pick and choose the laws we 

want to observe for sake of convenience? When will VA senior leaders be held accountable? There were more than a dozen of VA’s most senior leaders in the July 

11, 2014 meeting. The issue of illegality was positively affirmed. Not a single leader 

present, save one, subsequently acted in any way to protect the Government’s interests or resources. 

We have lost our way. Senior leaders are required to obey and enforce Federal 

laws. Our actions and inactions do not fit anything I have previously experienced 

in over 40 years as a Military Officer and civilian public servant. 

Mr. Chairman, this concludes my statement. I am prepared to answer all questions this Subcommittee may have for me. 


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DELIVERABLE HVAC O&I HEARING TITLED ‘‘CIRCUMVENTION OF CONTRACTS IN THE

PROVISION OF NON-VA HEALTHCARE’’ 

Congresswoman Walorski’s asked a question regarding a constituent vendor who 

is no longer eligible for a VA contract for orthotics. 

VHA Response: 

The VISN 11 Prosthetics Integrated Service Line has been working for some time 

to move vendors to firm contracts that require a standard level of quality from approved vendors. VISN 11’s effort is part of a VHA-wide initiative. The goal of the 

initiative is to: 

• Ensure quality patient care to provide a satisfactory Veteran experience; 

• Improve timely Veteran care; 

• Assure compliance with Medicare prices. 

The VISN’s seven (7) medical centers and their CBOC’s have been relying on purchase card micro-purchases to fill Veteran prosthetics needs for many years. The 

Prosthetics Integrated Service Line has used firm contracts to ensure quality, timeliness and price for many years on artificial limbs procurements. This initiative 

closely aligns the Orthotic procurements with the standards already set for Prosthetics artificial limb purchases via historical contracts and Medicare patient guidelines. It also follows the national accrediting bodies’ scope of practice for OrthoticProsthetics-Pedorthic patient care. 

Leather Banana, the vendor mentioned (unnamed) at the hearing, has provided 

satisfactory Orthotic goods and services in the past to VISN 11. However, Leather 

Banana is a retail store that sells handbags, wallets, belts, etc. They do not have 

a certified pedorthist on-site to ensure orthotics are properly fitted and perform in 

the intended function. Other vendors have been unscrupulous, and provided nontherapeutic shoes in place of diabetic shoes, as one example. This causes a delay 

in the Veteran’s treatment when a new order must be made. Furthermore, the 

wrong shoe or ill-fitting shoe can lead to an amputation for an at risk Veteran patient. 

To be qualified for the advertised contracts, Leather Banana was informed they 

needed to have a certified Pedorthist on staff. They were unable to meet this requirement even though VHA extended the response date by an additional 30 days 

at the request of Leather Banana. 

The VISN 11 Prosthetics Integrated Service Line decided to create firm contracts 

with qualified vendors across their region. To be deemed qualified, VISN 11 follows 

Medicare guidelines for clinical practice, coding and billing. Also, VISN 11 Prosthetics used the national accrediting bodies in Orthotic-Prosthetics-Pedorthic scope 

of practice for certified clinicians. 

VISN 11 Prosthetics decided it was important to allow as many vendors as possible, and manageable, to be eligible to ensure sufficient regional coverage. They selected a minimum quality standard of having a certified Pedorthist on staff. The 

terms and conditions of the contracts allow VHA to inspect vendor facilities, review 

patient records, and billing practices to ensure the vendors stay within the scope 

of practice established under the contract. VISN 11 Prosthetics has a certified Contracting Officer Representative to monitor each contract. Each Veteran patient order 

will be paid using the purchase card to minimize the time from VHA consult to vendor order. Some responding vendors have offered prices lower than Medicare rates 

resulting in savings for VHA. 

Æ 


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