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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

               THE STATE OF VA'S FISCAL YEAR 2015 BUDGET

=======================================================================

                                 HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        THURSDAY, JUNE 25, 2015

                               __________

                           Serial No. 114-29

                               __________

       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               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Minority Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

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.
                            
                            
                            C O N T E N T S

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                        Thursday, June 25, 2015

                                                                   Page

The State of VA'S Fiscal Year 2015 Budget........................     1

                           OPENING STATEMENTS

Jeff Miller, Chairman............................................     1
    Prepared Statement...........................................    39
Corrine Brown, Ranking Member....................................     3
    Prepared Statement...........................................    41

                               WITNESSES

Hon. Sloan Gibson, Deputy Secretary, U.S. Department of Veterans 
  Affairs........................................................     5
    Prepared Statement...........................................    41

        Accompanied by:

    James Tuchschmidt, M.D., Interim Principal Deputy Under 
        Secretary for Health, Veterans Health Administration, 
        U.S. Department of Veterans Affairs,
    Edward Murray, Acting Assistant Secretary for Management and 
        Interim Chief Financial Officer, U.S. Department of 
        Veterans Affairs,

        And

    Gregory Giddens, Principal Executive Director, Office of 
        Acquisitions, Logistics, and Construction, U.S. 
        Department of Veterans Affairs

 
               THE STATE OF VA'S FISCAL YEAR 2015 BUDGET

                              ----------                              

                        Thursday, June 25, 2015

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                                           Washington, D.C.
    The committee met, pursuant to notice, at 11:04 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[chairman of the committee] presiding.
    Present:  Representatives Miller, Lamborn, Bilirakis, Roe, 
Benishek, Huelskamp, Coffman, Wenstrup, Walorski, Abraham, 
Zeldin, Costello, Radewagen, Bost, Brown, Takano, Brownley, 
Titus, Ruiz, Kuster, O'Rourke, Rice, Walz, and McNerney.

           OPENING STATEMENT OF CHAIRMAN JEFF MILLER

    The Chairman. The committee will come to order. I want to 
thank everybody for coming today to talk about the state of 
VA's fiscal year 2015 budget. Members, I called this hearing 
two weeks ago following a series of concerning and inconsistent 
reports from veterans and Department of Veterans Affairs 
employees around the country about the current state of VA 
funding. I don't believe anybody was aware then of the 
troubling extent of VA's current budget crisis, except maybe 
those in the central office. And, unfortunately, I suspect that 
had I not called this hearing, we would still not be aware 
today of the $2.6 billion funding shortfall that the Veterans 
Health Administration is currently estimating, largely as a 
result of increased veteran demand for non-VA care and rising 
costs of hepatitis C treatments that VA did not properly plan 
for or manage.
    Given the extensive pent-up demand for care that was 
exposed during last year's hearings on wait time manipulation, 
VA had ample time to adjust its budgetary needs with the Office 
of Management and Budget to prevent what we are now seeing 
today. February through April of this year, Secretary McDonald 
appeared at four separate budget hearings. Since those have 
concluded, the Secretary and I have met and spoken regularly on 
a number of important emerging issues. At no point in those 
discussions or hearings has the Secretary expressed to me that 
the Department had a budget shortfall of a magnitude of $2.6 
billion, one that threatens VA's ability to meet its 
obligations to the veterans of this country, nor did other VA 
leaders or officials communicate how much in the red VA was 
either even though the committee was informed late last week 
that the Department knew as early as March that there were 
giant disparities between the amount of money that VA was 
spending and the amount of money that had been budgeted.
    The only message that Congress received in March regarding 
the state of VA's budget was the quarterly financial report 
that VA submitted to the Appropriations Committee for the first 
quarter of fiscal year 2015, which showed that VA was actually 
under plan in terms of its spend-out rate. Meanwhile, just 2 
weeks ago, VA proposed a plan that Congress authorized at the 
Department's urging to transfer $150 million in fiscal year 
2015 funding to support the continued construction of the 
replacement center in Aurora, Colorado. VA also proposed an 
across-the-board rescission of just under 1 percent in fiscal 
year 2016 funds to devote to the Aurora project, a proposal, by 
the way, that the Veterans Health Administration's chief 
financial officer told committee staff last week that she did 
not even know about until after it had already been transmitted 
to Congress.
    I think these actions clearly show that VA leaders believe 
that moving forward with the Denver project, which is not 
scheduled to open to veteran patients until 2017 at the 
earliest, is a higher priority to the Department than ensuring 
that veterans who need care now are able to access that care. I 
have come to expect a startling lack of transparency and 
accountability from VA over the last years. But failing to 
inform Congress of a multibillion dollar funding deficit until 
this late in the fiscal year while continuing to advance what I 
believe are lower priority needs that further deplete the 
Department's coffers in support of a construction project that 
benefits no veteran for at least 2 more years is disturbing on 
an entirely different level.
    Earlier this week, VA issued a fact sheet that claims that 
VA formally requested limited budget flexibility in February 
and in March and in May of this year and that plainly 
articulated VA's need for additional resources. Now, buried on 
page 167 of the second volume of VA's budget submission is a 
single statement that reads, and I quote: ``In the coming 
months, the administration will submit legislation to 
reallocate a portion of Choice program funding to support 
essential investments in VA's system priorities,'' end quote. 
Secretary McDonald repeated this testimony without providing 
any additional supporting details or justification. And to 
date, there has been no legislative proposal that has been 
submitted by the administration to the Congress.
    In May of 2012, a letter was sent to the chairmen and 
ranking members of the House and Senate Veterans Affairs 
Committees and Appropriation Committees regarding the Denver 
project. And VA stated that the Department, quote, ``requests 
flexibility to make the Choice program work better for veterans 
through limited authority to use funds from section 802 of the 
Choice Act to fund care in the community to the extent it 
exceeds our fiscal year 2015 budget,'' end quote. Again, no 
further information or supporting materials have been provided.
    If those two statements, absent of any other supporting 
evidence or details, are what VA calls ``formally requesting 
budget flexibility and plainly articulating the Department's 
needs,'' then I understand why VA has, in fact, found 
themselves suffering nothing but string after string of 
failures since last year. Is more, it proves to me once more, 
that VA's current problems reflect a management issue far more 
than they represent a money issue. This committee cannot help 
VA solve its problems if VA refuses to be honest, to be 
upfront, and to be transparent with us and with the American 
people about the position it is in, the struggles that it is 
facing, and the help that it needs.
    Congress has consistently provided VA with the funding that 
the Department has requested. And as a result, VA funding has 
risen 73 percent since 2009 while the number of veterans using 
VA for care has grown by only about 2 percent. And this comes 
from VA's own testimony. I know that I speak for every member 
of this committee when I say that we are committed to ensuring 
that VA has the funding it needs to deliver the world-class 
healthcare our veterans deserve. But VA has got to do its part 
to confront and correct its poor budget planning and poor 
management issues, to hold poor-performing executives and 
employees accountable, and, perhaps most importantly, to 
prioritize our veterans' needs over the wants of a bureaucracy.
    And if the current shortfall shows us anything, it is that 
what our veterans need and what they want is to have a say in 
when and where they get their healthcare. Assuming VA's numbers 
are true, non-VA care appointments now make up 20 percent of 
all of VA appointments, with veterans receiving more than 1 
million appointments from community providers each month. In 
the coming weeks, I will work with my colleagues on the 
Appropriations Committee to try to give the VA flexibility it 
is seeking to use a limited amount of Choice funds for non-VA 
care and ensure that no veteran suffers as a result of VA's 
mismanagement of the generous budget the American taxpayers 
have provided. However, going forward, there has to be a 
dedicated appropriation account to fund non-VA care under a 
single streamlined integrated authority with a dedicated 
funding stream contained within VA's base budget, rather than 
the seven disparate, ill-executed, non-VA care programs that 
are outlined in VA's testimony.
    This morning, I look forward to discussing the proposal 
with my friend, Deputy Secretary Sloan Gibson, and with 
committee members who all share the same concerns and want the 
same outcomes. I want to thank you all for coming back so 
quickly. I appreciate the ranking member being here today. And 
I will yield to Ms. Brown for her opening statement.

    [The prepared statement of Chairman Jeff Miller appears in 
the Appendix]

       OPENING STATEMENT OF RANKING MEMBER CORRINE BROWN

    Ms. Brown. Thank you, Mr. Chairman. Today's hearing is on 
the State of VA's Fiscal Year 2015 budget. I can tell you all 
that the state of VA's budget is not strong.
    The VA is facing a shortfall of $2.6 billion for veterans' 
healthcare. This shortfall must be addressed immediately. We 
cannot put the health and lives of our veterans at risk by 
spending our time and attention pointing fingers and assigning 
blame.
    The VA is facing shortfall at the start of the next fiscal 
year in October. A shortfall that will be made worse by the 
cost-saving steps that VA is taking right now. We must address 
this upcoming shortfall.
    I know that this Committee, as we have done so many times 
in the past, will work together to solve this crisis and fix 
this mess. I know that we all recognize that sometimes it takes 
new money to really fix a problem, and not just slapping some 
tape on it and calling it a day.
    So in the words of Deputy Secretary Gibson, we will ``get 
our checkbooks out.'' But I am concerned that there may be 
nothing left in the account as long as we continue to pretend 
that we can fund the essential requirements of government with 
our arbitrary budget caps. We seem to be heading, I am sorry, 
let me be clear, we are heading toward a government shutdown. 
Let me say that again: We are headed toward a government 
shutdown. I am concerned over the effects such a shutdown will 
have on veterans seeking healthcare.
    Ten years ago, we addressed another VA shortfall. That 
shortfall was due to lack of sufficient planning and years of 
not providing the VA the resources that it needed. Today's 
shortfall also seemed to be caused by the lack of proper 
planning regarding the demand of veterans for VA healthcare. I 
am also concerned that inadequate planning leads to 
insufficient resources requests. We need to begin to fix these 
problems.
    My bill, the Department of Veterans Affairs Budget Planning 
Reform Act of 2015, passed the House in March 420 to 0. It is a 
much needed reform in how the VA plans and budgets for the 
future. It is time that our colleagues in the Senate pass the 
bill and send it to the President.
    If the VA is going to be there for our veterans, then we 
are going to have to fix the problems. This will call for more 
than us just opening our checkbooks or writing blank checks to 
the VA. It will require thoughtful and major reform so that we 
can ensure that in the years ahead the VA is worthy of our 
veterans.
    But today, right now, we have veterans that need healthcare 
and checks we need to write to pay for that. And we need to 
make sure that these checks are not returned because we don't 
have sufficient funds in the account.
    Then, and only then can we start the reform efforts so that 
VA is the model of how we care for those who have sacrificed 
for us and honored us with their service. Thank you.
    And I yield back the balance of my time, Mr. Chairman.

    [The prepared statement of Ranking Member Corrine Brown 
appears in the Appendix]

    The Chairman. I thank the ranking member for her comments. 
And I associate myself with the vast majority of them, 
especially the one where we call on the Senate to please move 
and pass Ms. Brown's budgeting bill. I think we all agree that 
it is the appropriate thing to do. And at the same time, while 
I call on the Senate to do that, I hope Ms. Brown will join me 
on in calling on the Senate to pass the VA-MILCON 
appropriations bill over there that is so critical to funding 
for our veterans so they, can get the healthcare that they have 
earned. Thank you for your comments. Joining us on our first 
panel this morning is the Honorable Sloan Gibson, Deputy 
Secretary of the Department of Veterans Affairs. Joining him 
today is Dr. James Tuchschmidt, the Interim Principal Deputy 
Under Secretary for Health; Edward Murray, the Acting Assistant 
Secretary for Management and Interim Chief Financial Officer; 
and Gregory Giddens, the Principal Executive Director of the 
Office of Acquisitions, Logistics, and Construction.
    Thank you all for being here with us today.
    Mr. Gibson. you are now recognized for your opening 
statement.

STATEMENT OF THE HONORABLE SLOAN GIBSON, DEPUTY SECRETARY, U.S. 
     DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY JAMES 
TUCHSCHMIDT, M.D., INTERIM PRINCIPAL DEPUTY UNDER SECRETARY FOR 
  HEALTH, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF 
VETERANS AFFAIRS; EDWARD MURRAY, ACTING ASSISTANT SECRETARY FOR 
MANAGEMENT AND INTERIM CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT 
 OF VETERANS AFFAIRS; AND GREGORY GIDDENS, PRINCIPAL EXECUTIVE 
DIRECTOR, OFFICE OF ACQUISITIONS, LOGISTICS, AND CONSTRUCTION, 
              U.S. DEPARTMENT OF VETERANS AFFAIRS

                 STATEMENT OF HON. SLOAN GIBSON

    Mr. Gibson. One year ago today, 290,000 veterans were 
waiting more than 30 days for care. That number represented 
veterans needs we were unable to meet timely. For the past 
year, improving access to care has been among VA's top 
priorities. And we have made real progress: We completed 7 
million more appointments for care inside VA and in the 
community than in the previous 12 months, double the additional 
capacity to required to meet those veterans' needs of a year 
ago; average wait time for completed appointments, 4 days for 
primary care, 5 days for specialty care, 3 days for mental 
health; scheduled appointments inside VA are up 12 percent; 
authorizations for VA care in the community are up 44 percent; 
97 percent of appointments inside VA are completed within 30 
days of the clinically indicated date or the date that the 
veteran requested.
    We know that for many veterans, 30 days is far too long to 
wait. So we track shorter timeframes: 93 percent completed 
within 14 days; 88 percent completed within 7 days; and 22 
percent of appointments completed on the same day. After hours 
and weekend appointments are up 12 percent. We have expanded 
the use of virtual care; secure messaging up 36 percent; mental 
health up 19 percent; e-consults up 36 percent; the NEAR list, 
the New Enrollee Appointment Request list, down 93 percent; the 
electronic wait list down 47 percent, all clear indications of 
improving access.
    To achieve this, VA has been executing a strategy focused 
on building capacity through staffing, space, productivity and 
VA community care. Highlights: We have grown VHA staffing by 
12,000 since April last year, including 1,000 physicians and 
2,700 nurses. We activated 80 new VHA leases that add 1.3 
million square feet to our healthcare footprint, plus another 
400,000 square feet in VA-owned properties. Our relative value 
units, a standard measure of clinical output, have increased 10 
percent, while our healthcare budget is up less than 3 percent. 
And 1.5 million veterans have been authorized for care in the 
community, a 36-percent increase year over year.
    Clearly, we are improving access, providing more care to 
more veterans. What is the challenge? As we improve access, 
even more veterans are coming to VA for their care. As a 
result, appointments pending over 30 days are now up 50 percent 
from where they were a year ago. Consider Phoenix, after adding 
337 staff, completing 100,000 more appointments, and a 91-
percent increase in care in the community, wait times are 
actually up. Why? In the same period of time, the number of 
veterans in Phoenix receiving primary care is up 11 percent, 
specialty care up 17 percent, and mental healthcare up 16 
percent. We also saw it in Las Vegas, where we opened a new 
facility 2 years ago. Since then, the number of veterans 
receiving care there has jumped 18 percent.
    Now, as we think about what is going on, let us not lose 
sight of the broader context. We are dealing with an aging 
veteran population. Over half of those veterans that are 
receiving care at VA are over 65. More veterans are filing 
disability claims for more conditions. The average degree of 
disability today is near 50 percent. Among veterans receiving 
disability, the average disability is 50 percent, meaning that 
many more veterans are eligible for healthcare in VA.
    We also know that many veterans prefer VA healthcare. VFW's 
March survey of veterans reports that 47 percent of veterans 
who were offered Choice elected to wait to get their care 
inside VA; 78 percent said they were satisfied with their VA 
care experience; and 82 percent would recommend VA to a felony 
veteran.
    One more thing that is very important for all of us to keep 
in mind, most veterans already have a choice: 81 percent have 
either Medicare, Medicaid, TRICARE, or some form of private 
insurance. Many come to VA because of the disparity in out-of-
pocket costs between their insurance and VA care. For example, 
the average Medicare reimbursement for a knee replacement is 
about $25,000, with a copay of 20 percent. Choosing VA saves 
veterans $5,000.
    So as VA improves access, which we are continuing to do, 
more veterans are going to come to VA because they either want 
to come or because they have a financial incentive to come. 
Now, as we look inside VA, what you are seeing here is evidence 
of is a sea change in the way we operate. Historically, as many 
of you heard me say, in the past, we managed to a budget number 
instead of managing to requirements based on veterans' needs. 
As we improve access to see veterans within 30 days, veteran 
response is placing extraordinary demands on resources.
    Could we have managed this transition more effectively? I 
think we could have and should have. But, remember, we are 
running the largest healthcare organization in the country on a 
20 year-old financial management system. We have had a hard 
time effectively factoring into our predictive analysis market 
penetration, changing veteran reliance on VA, and improving 
access and the impact that that has on veterans' choices. We 
didn't fully appreciate the challenge associated with changing 
internal VA processes quickly enough to accommodate the shift 
to Choice. We underestimated the time required for third-party 
administrators to build provider networks and the resistance 
that many providers would have to join those networks. 
Notwithstanding our best efforts and much help from our VSO 
partners, many veterans still don't understand how Choice 
works. The limitations, particularly around geographic burden, 
which Congress has recently amended, made it impossible to use 
Choice in many instances and created additional demand for VA's 
traditional community care programs.
    Lastly, veterans are demonstrating very clearly that their 
decision cycle timeline for care far outpaces the Federal 
budget cycle timeline. Likewise, medical breakthroughs don't 
follow the budget cycle timeline either. Hepatitis C treatment 
is an example of a new requirement impossible to forecast when 
our 2015 budget was first proposed. The first of the new 
generation of drugs to cure hepatitis C was approved by the FDA 
in early fiscal year 2014, over a year after we began the 
fiscal year 2014-2015 advanced appropriations budgeting process 
and less than a year before the fiscal year actually began. 
After adding these drugs to our formula in April of 2014, we 
soon realized we wouldn't have enough money to pay for them in 
2015.
    In September, we alerted Congress to the impending 
shortfall. Since then, the FDA has approved two more hep C 
drugs, all oral, no injections, fewer side effects, greater 
rate of cure, but expensive. To cure veterans of hep C in 2015, 
we moved $697 million from VA community care. But it wasn't 
enough. Veterans' desire for this treatment has been 
extraordinarily strong. And, simultaneously, we built capacity 
internally to meet veterans' needs quicker than we anticipated 
we would.
    In May, to keep hep C veterans from needlessly waiting, we 
asked for some budget flexibility to use a limited amount of 
Choice program funding. Secretary McDonald raised the 
flexibility issue with this committee in February when he asked 
to use some Choice funding to meet the needs of veterans as 
they arose. Now, the Choice program is making a positive 
difference in the lives of veterans. And in every instance, if 
a veteran is eligible for Choice, we want to use Choice rather 
than any other community care option. I would point out that in 
February, approximately 5 percent of Choice-eligible care in 
the community was being authorized through Choice. By the time 
you get to the first week in May, that number was 10 percent. I 
now receive daily updates on our Choice penetration for Choice-
eligible care. As of the 19 of June, we were up to 33 percent 
of the authorizations that were Choice-eligible. And I expect 
that number to continue to climb. But we still need flexibility 
in the use of Choice funds for the balance of 2015 and for 
2016.
    Further, we expect to need Congress' help as we consolidate 
community care channels as the chairman alluded to, including 
fewer program-by-program restrictions on those channels. 
Existing Choice Act funding can help meet these needs, needs 
more urgent now than when we first made the request in 
February.
    But our investments have paid off. We are providing more 
care to more veterans. To keep progressing and providing 
veterans greater access to care today, we need the flexibility 
to use as much as $2.5 billion of Choice funds that were 
appropriated for veterans' care to pay for veterans' community 
care, exactly what Choice is for. And we already anticipate 
that we will rely heavily on Choice in fiscal year 2016 to meet 
veterans' growing needs in that fiscally tight year.
    For our part, our strategy will remain the same, leverage 
staffing space, productivity, and VA community care to its 
maximum capacity. We are going to do the right thing for 
veterans and be good stewards of taxpayer resources. And we are 
going to continue to work to make Choice a success. But to 
succeed, we need the flexibility to use funds to meet veterans 
as those needs arise. We look forward to working 
collaboratively with this committee and with Congress. And we 
look forward to your questions.

    [The prepared statement of Mr. Sloan Gibson appears in the 
Appendix]

    The Chairman. Can you tell us when you first became aware 
of the major budget shortfall, what is now becoming a 
multibillion dollar shortfall, at what point was that evident 
to you or the Secretary?
    Mr. Gibson. I actually brought with me in my folder a memo 
that I received from the VHA CFO dated 16 of March which 
indicated that, based on our financial system, we were still 
showing that we were underobligated. From that time forward, a 
process launched that covered several months during which 
millions of individual transactions in the fee-based care 
system were audited and reconciled in order to be able to 
determine the magnitude of the shortfall. It has only been 
within the last 3 or 4 weeks that we have been begun to get 
clarity around the magnitude of this disconnect.
    Three issues here: One has to do with the push to 
accelerate access to care. One has to do with an antiquated 
financial system that doesn't have the automated interfaces 
that it needs with other systems like the fee-basis care 
system. And the third fundamental change that affected us this 
past year is the requirement in the Choice Act that we pull all 
of the budgeted funds for care in the community out of the 
medical centers and consolidate it in the chief business 
office. Those three factors together created this disconnect 
and the lack of clarity around what was actually going on in 
the fee-basis care area.
    The Chairman. I was looking at a document that encapsulates 
the first quarter, which would have been the last quarter of 
last year, that was provided to the appropriators in March, of 
this year. And it is showing everything is on track at that 
point.
    Mr. Gibson. We were still showing everything was 
underobligated through February. And the questions that I kept 
asking were how can we be underobligated when we have got a 40-
percent increase in authorizations for care in the community.
    The Chairman. What was the response?
    Mr. Gibson. And that is what launched the review and 
reconcilement of the millions of transactions that were sitting 
out in the fee-basis care system to determine actually what had 
been obligated.
    The Chairman. So you can see why the questions that are 
going to come from this committee today are absolutely----
    Mr. Gibson. Absolutely right. Inexcusable. But find a 
healthcare company out in the private sector of our order of 
magnitude that is operating under a 20-year-old financial 
management system, you are not going to find that.
    So part of what we have to do is we have to find 
workarounds. We did what Congress asked us to do, pulled all 
the budget money in. What had historically happened was that 
care in the community against the budgeted funds got managed 
out in the medical centers. Well, care in the community 
decisions were still being made out in the medical centers, but 
all the budget dollars were sitting centrally. And so you had a 
fundamental disconnect between those two elements. Now, what we 
are going to have to do is build a workaround. Should we have 
built a workaround? Yes, we should have. Should we have asked 
Congress for relief from that requirement? Yes, we should have. 
We see that clearly with the benefit of hindsight.
    The Chairman. Have you requested any specific legislation 
or changes at this point? Or is the central office still 
working on a detailed request? Because, again, as I stated in 
my opening statement, we have gotten very few statements that 
say VA would like to get more, money and would like to reform 
the Choice program. But I haven't seen any requests from VA 
yet.
    Mr. Gibson. We will, we have done briefings with staff. We 
will deliver very promptly a written request asking for 
flexibility in the utilization of Choice funds to pay for care 
in the community for veterans.
    The Chairman. If we go down this path, and it is not a path 
that I want to go down, but it may be the only solution to a 
problem that has been coming for a considerable amount of time, 
reforms have got to be made and they have to be specific. We 
want to work with you as we go through that process.
    Ms. Brown.
    Mr. Gibson. Thank you. Thank you. And we appreciate that.
    Ms. Brown. Thank you. I am going to ask a question because 
I want something cleared up. Explain the difference to us 
between the fee-based and the Choice.
    Mr. Gibson. The fee-basis care system is a system that we 
use to track individual authorizations for care. And that is 
where we ultimately wind up reconciling all the way back to an 
in invoice and ensuring that we receive the clinical 
information from the individual veteran's care. Unless I am 
mistaken, I think fee-basis care system also captures Choice 
authorizations----
    Ms. Brown. We need to be clear what is fee-based. I cannot 
go to a doctor before we passed Choice in the community.
    Mr. Gibson. That is, there is an authorization process that 
veterans would pursue, either working directly through their 
medical center when they are calling to ask to schedule an 
appointment, and if we can't schedule it timely, they get 
referred to the third-party administrator to schedule an 
appointment in the community. Or, alternatively, if they are 40 
miles from their facility, then they would just call the third-
party administrator directly to get that appointment for care 
scheduled.
    Ms. Brown. And Choice.
    Mr. Gibson. That is Choice. That is Choice. And other, 
there are six or seven--it is in the written testimony--six or 
seven different programs. The chairman alluded to this, and I 
completely and totally agree, we have got do reconcile the six 
or seven different programs that we utilize for Choice in the 
community. It confuses veterans. It confuses our staff. It is 
confusing to providers, different payment reimbursement rates, 
different payment mechanisms, different requirements for 
authorization, different processes. It is thoroughly confusing.
    Ms. Brown. I understand that it is. But are the veterans 
getting the care in the community?
    Mr. Gibson. We are estimating right now that in fiscal year 
2014, we will see somewhere in the neighborhood of between 21 
million and 23 million appointments for care in the community. 
That is up from about 16.5 million in 2014. And, as I 
mentioned, there are a record number of veterans who are 
receiving authorizations for care in the community, 1.5 million 
over the last 12 months, a 36-percent increase over the prior 
period.
    Ms. Brown. Is any of that in the mental health area?
    Mr. Gibson. Yes, ma'am. It is.
    Ms. Brown. What percentage?
    Mr. Gibson. Mental health for us historically has been a 
relatively smaller percentage of care referred into the 
community because oftentimes veterans experience issues that VA 
providers are potentially better positioned and more 
knowledgeable to be able to respond to. There is certainly 
mental healthcare out there. But the vast majority of that care 
is delivered inside VA.
    Ms. Brown. Okay.
    I am going to yield back my time. And I hope we are going 
to have a second round.
    The Chairman. I think we will have an opportunity to do 
that.
    One question real quick, Mr. Secretary.
    Mr. Gibson. Yes, sir.
    The Chairman. Over the past months, we have examined 
improper procurement practices, failures to pay providers in a 
timely fashion, gross mismanagement of construction projects. 
We all know about Aurora. And I am going to be yielding to the 
gentleman from Colorado in a second. These are all big news 
stories. But this committee has also heard many instances of 
simple, smaller waste, fraud, and abuse by poor management and 
bureaucratic inertia that appears to be the culture within the 
system. I know you are trying to root it out. But one in my 
State--in particular, is the Augustine and the CBOC that is 
there right now. How can VA continue to justify paying 
thousands and thousands of dollars in fines and penalties each 
month to retain a CBOC in a facility when they knew a long time 
ago that they were going to have to relocate from that 
facility? How does that happen?
    Mr. Gibson. It happens when we fail to forecast far enough 
in advance the need to relocate from an expiring leased 
facility. And what happens is we wait too long. And then we 
start working to define requirements and run through all the 
process. And we find, for instance, here, I think there were 
issues associated with site selection that delayed it. And we 
wound up in the situation precisely that you are describing.
    We have got--I don't know how many--hundreds of lease 
transactions in the pipeline right now. That has become a major 
part of our business. We have under allocated resources to that 
part of our business. And we have got to better manage it, as 
well as streamlining the processes, as well as developing more 
standardization in lease design so that we can work through 
these, through the process and the design more expeditiously.
    The Chairman. Ms. Brown, since it is your part of the 
State.
    Ms. Brown. It is my part of the State. And, in addition, we 
had a briefing on that when you, and I were in Orlando. And it 
is not as simple, it is more complicated in that the city and 
the county and how we can, and this is something we need to 
address, that if a city wants to give us some property to 
relocate, we can't just take it. That is something that we need 
to address.
    Mr. Gibson. Yes, ma'am.
    Ms. Brown. All apples are not the same.
    Mr. Gibson. But the chairman's point is an accurate point. 
And St. Augustine is just one examine. In fact, this happens 
all too often, where we have not made plans far enough in 
advance to be able to run through all the process--and it is a 
long process--to get to the point where we have actually got, 
we are ready to replace the facility before the lease actually 
expires.
    Ms. Brown. And this not only happened in St. Augustine. It 
happened in Tallahassee also. So this is something that we, as 
a committee, need to address.
    Mr. Gibson. Yes, ma'am.
    Ms. Brown. And change the process.
    Mr. Gibson. We are working it. And that is the guy right 
there that is principally responsible for fixing it.
    The Chairman. I saw him point at you, Mr. Giddens.
    Mr. Giddens. Sir, yes, sir.
    Mr. Gibson. I point at him quite often these days. We are 
going to talk about supply chain at some point. I am going to 
point at him again.
    The Chairman. Thank you very much.
    St. Augustine is very important not only to the veterans 
that are in that area but also to trying to change this culture 
that has been allowed to go on for too long.
    Mr. Lamborn. you are recognized.
    Mr. Lamborn. Thank you, Mr. Chairman. I want to thank you 
and the ranking member for your leadership.
    Secretary Gibson, although I am glad to see in your written 
statement that the VA is, quote, ``committed to doing what is 
right for the veterans in the Colorado region and completing 
this major construction project without further delay,'' 
unquote, I am still deeply disturbed and disappointed by the 
additional time and money that it is going to take. Thanks to 
recent legislation and a reallocation of funds, we are now good 
through the end of the fiscal year, but much more remains to be 
funded. This is a critical facility that our Colorado veterans 
have earned and need. And I remain committed, along with my 
colleague, Representative Coffman, and others to ensure that we 
bring this project to completion.
    However, as we are sitting here talking budget shortfalls 
and mismanagement. I have to ask, where is the accountability? 
When we have poor management, whether it is forecasting the 
budget, or whether it is poor construction projects, where is 
the accountability? We have given you additional legislative 
authorization, you and the Secretary. And we really don't see 
that being used. Where is the accounted ability, Mr. Gibson?
    Mr. Gibson. If you look back, as I have, at the entire 
chain of command, from the Secretary all the way down to the 
project engineer, I believe there is only one person that was 
substantively involved in the project who still remains at VA. 
And I think that is the project--not project engineer but 
project executive. There has been an AIB that is in the process 
of wrapping up. I think we have talked earlier in this 
committee about early evidence that was gathered by that AIB, 
which was being used to prepare charges against a senior 
executive who then retired in the face of that impending 
personnel action.
    A similar process happened recently with the senior 
attorney that was involved very heavily in Denver. And I expect 
the AIB to wrap up very quickly. And we will consider the 
evidence raised by the AIB for any additional individuals that 
are still on the payroll in the Department.
    Mr. Lamborn. Okay. Thank you.
    And also, Secretary Gibson, you have asked for additional 
flexibility in allocating your funds but haven't provided what 
I believe is the supporting data needed for that. More 
importantly, I want to ensure that there isn't the impression 
that the VA has decided to fund the Denver Hospital project 
ahead of hepatitis C treatment or any other veteran medical 
care. That won't be the case, will it? And can you clarify?
    Mr. Gibson. Certainly, there is not any intention to trade 
off hep C care for Denver. We have gone through a whole series 
of proposals on Denver, starting with what I continue to 
believe was the best proposal for veterans and for taxpayers, 
which was to utilize construction funds, nonrecurring 
maintenance and minor construction, that were provided as part 
of the $5 billion under Choice. That got nowhere. There were 
other alternatives considered where we would reprogram dollars 
from major construction projects, projects that aren't due to 
start construction for 3 years or 4 years. That got nowhere.
    We have looked at alternatives to reduce, to move proposed 
funds in 2016 from nonrecurring maintenance and minor 
construction. That got nowhere. So what we have finally gotten 
to is the tactic of an across-the-board cut with an intention 
that VA would have the time over the course of the year to be 
able to manage those reductions on a very micro level so that 
we ensure that we are not adversely impacting veteran care.
    Mr. Lamborn. Well, I want to speak for myself and I am sure 
every member of the committee would agree, we can't do any fix 
that in any way compromises veterans' healthcare. Thanks for 
being here.
    Mr. Chairman, I yield back.
    The Chairman. Mr. Takano, you are recognized.
    Mr. Takano. Thank you, Mr. Chairman.
    And thank you, Secretary Gibson, for your acknowledgment 
that things could have been better planned out. And there could 
have been better management. When you talk about this financial 
management system, are you talking mainly about administration 
or outdated software? What is it you are referring to?
    Mr. Gibson. We have, like companies in the private sector, 
we have a major technology system, IT system, software system, 
that we use to account for all of the financial activity of the 
Department. I recently interviewed a candidate to come in and 
head IT who was astounded to learn that we were still using it 
because he had helped develop it back when he was a beginning 
software engineer 30 years ago.
    Mr. Takano. We are talking about IT?
    Mr. Gibson. Yes, we are.
    Mr. Takano. And I know that there is problems engaging non-
VA providers. The VA has the obligation to manage 
accountability with those providers. And there is a lack of 
ability to use electronic medical records with the system. So 
we definitely need to look at investing and upgrading that 
system. I understand a large part of the shortfall comes from 
increased payments for fee-based care or contracts with non-VA 
providers. When you say ``community care in the community,'' 
you mean non-VA providers, right?
    Mr. Gibson. That is exactly what I mean.
    Mr. Takano. Do you have an estimate for how much of that 
care could have been provided through the Choice program but 
wasn't? In other words, how many of those veterans would have 
qualified for Choice but received care by another means because 
of the slow rollout of the Choice program? If you don't have 
that number, you can get it to me later.
    Mr. Gibson. Let me take that for follow up. But I will tell 
you it is not 100 percent because we can't use Choice dollars 
for long-term care. We can't effectively use it for dentistry 
because you can't find many Medicare-approved dentists out 
there. We can't use it for obstetrics because, as you might 
expect, there aren't many obstetricians who are Medicare 
providers. But it is a very substantial amount that could have 
been channeled to Choice.
    Mr. Takano. So a big chunk of this money we are talking 
about----
    Mr. Gibson. Yes.
    Mr. Takano [continuing]. Could have been used for Choice?
    Mr. Gibson. Yes.
    Mr. Takano. Could have qualified them?
    Mr. Gibson. Yes.
    Mr. Takano. And you are saying that there is all those 
different reimbursement rates out there for the different kinds 
of non-VA care. My next question was of the remainder of the 
folks that would not have qualified, how much of that, could 
you quantify that in terms of how much of that was attributable 
to a lack of capacity at the VA, that were not fully staffed up 
at the VA? If you were fully staffed up, could we have taken 
care of more people who would not have qualified for the Choice 
Act?
    Mr. Gibson. I think the short answer is yes. If we were 
fully staffed up, if we had all the facilities we needed, yes, 
we could have. But there are instances, for example, we have 
relied and come to rely heavily, for example, on state nursing 
homes to care for veterans. And so that winds up being I am 
going to say $1.5 billion, round numbers.
    Ed, is that in the neighborhood?
    Mr. Murray. It is close. It is $1.1 billion.
    Mr. Gibson. And so that is a substantial portion of that 
that we have come to rely on outside providers for that.
    Mr. Takano. I want to turn to hepatitis C for a moment. I 
am very concerned to hear about the lack of funds to continue 
to provide treatment for veterans with hepatitis C. It is 
estimated that more than 184,000 veterans are infected with 
hepatitis C. And these men and women served their country and 
should not be denied access to a cure. And I commend the work 
that the VA has done to build capacity to treat veterans with 
hep C. And we can't lose ground. The new treatments for hep C 
can be extremely expensive. It can cost as much as $1,000 a 
pill commercially. Fortunately, I understand the VA has been 
able to negotiate with the drug companies to a lower cost. I 
have heard estimates that VA is, instead, paying closer to $600 
a pill, is that correct? You may not have an----
    Mr. Gibson. I would like to not have to answer that 
question. We work very closely and collaboratively with the 
manufacturers of those drugs and have been able to reach 
attractive arrangements for the continued purchase of those 
drugs. And we continue to have those conversations.
    Mr. Takano. What I am curious about is if maybe our 
veterans are maybe choosing to go to VA as opposed to the 
private care or TRICARE or other options because they might get 
access to this medication more easily, and the doctors might be 
able to get the treatment done in a more timely manner.
    Mr. Gibson. I think that is certainly the case. If a 
veteran who is Medicare-eligible was to go to a private 
provider, he would wind up with a very substantial copay that 
he would have to pay in order to be able to receive that care.
    Mr. Takano. Thank you.
    The Chairman. Thank you very much, Mr. Takano.
    For the record, this Congress has provided hundreds of 
millions of dollars in the past few years, in fact, one 
particular system was called Core FLS. This money was 
squandered. And we actually have nothing to show for it. I 
think that additional investments are going to have to be made 
to be brought up to par.
    Mr. Takano. Can you explain more to me about the Core FLS?
    The Chairman. It was a financial system.
    Mr. Takano. Oh, you are talking about the IT?
    The Chairman. Yes. I agree with what you are saying. I am 
just saying there have been, again, hundreds of millions of 
dollars spent in error somewhere, never been used.
    Mr. Takano. I appreciate that. And my sense, since I have 
been here, that the rollout, I kind of had this feeling that if 
they didn't have this ability to have electronic medical 
records and doing it all by paper and photocopying things, that 
they were going to have a hard time engaging non-VA providers 
then. That is my point.
    The Chairman. And an excellent point. Thank you very much.
    Mr. Bilirakis. You are recognized.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate very 
much.
    And thank you, Mr. Secretary, for your testimony. The VA 
has estimated a $2.6 billion shortfall for the remainder of the 
year, which will impact the delivery of care to veterans and 
may affect the following year's budget. How accurate, how firm 
are you on that $2.6 billion?
    Mr. Gibson. I think it is a very, at this point in the 
fiscal year, we are just slightly over 3 months away, I would 
say it is a very accurate forecast. It does, it does assume 
business as usual.
    Mr. Bilirakis. How do you come to that conclusion?
    Mr. Gibson. Well, this was built, as I alluded to earlier, 
we have had people go back and look and do reconcilements, 
millions of transaction reconcilements in the fee-basis care 
system looking at past patterns of authorization and numbers of 
appointments per and the cost of each of those appointments, 
looking at the month-by-month track record and the numbers of 
authorizations, so it is really a forecast that is built from 
the bottom up.
    Mr. Bilirakis. Okay. Considering VA's inability to 
adequately plan to implement programs and construction projects 
resulting in cost overruns, such as the Denver project, how 
much of the shortfall in your estimation would you say was due 
to mismanagement of funds as opposed to the level of funding 
appropriated by Congress? Because, again, since 2009, we are up 
40 percent. Do you agree with that? How much is due to 
mismanagement?
    Mr. Gibson. I don't think any of it is due to 
mismanagement. Should we have done a better job of managing the 
buckets of different money that had been appropriated? 
Absolutely, the answer is yes. But what we have basically done 
here is pushed to accelerate access to care. This issue, what 
has happened is we have, back to my point earlier, a 36-percent 
increase in the number of veterans that have been authorized 
for care in the community.
    Mr. Bilirakis. None of it is due to mismanagement?
    Mr. Gibson. This is about providing more care to more 
veterans. That is what this is about.
    Mr. Bilirakis. How much has the VA spent in performance, 
retention, and relocation bonuses for fiscal year 2015?
    Mr. Gibson. I will have to take that for the record. I 
don't know the answer.
    Mr. Bilirakis. Can anyone on the panel, can they answer 
that question?
    Mr. Gibson. I think most of the performance awards are paid 
at the end of a fiscal year. But there are some that are paid 
on an ongoing cases to physicians, as I understand it. I will 
get you a number.
    Mr. Bilirakis. Can you get that information to me?
    Mr. Gibson. Sure. Yes, sir.
    Mr. Bilirakis. I appreciate that very much. Can't some of 
these unobligated funds in those accounts be reprogrammed for, 
to address a portion of the budget shortfall? Again, do you 
need specific authority from Congress to do that, to reprogram 
some of these funds?
    Mr. Gibson. I would not expect that we would need authority 
from Congress to reprogram some of those funds. And as we 
work----
    Mr. Bilirakis. Is that your intention to reprogram some of 
those funds?
    Mr. Gibson. We are looking everywhere we can look to 
identify funds to be able to support care for veterans in the 
community.
    Mr. Bilirakis. Thank you.
    I yield back, Mr. Chairman.
    The Chairman. Ms. Brownley.
    Ms. Browney. Thank you, Mr. Chairman.
    I was back in my district last week and had a meeting with 
our veterans and TriWest came out and we talked a lot about the 
Choice program and provided more information and education to 
our veterans there.
    And I also had a meeting with the VISN network director in 
my district as well. And she provided me with some information. 
I am hearing from my veterans, I heard from her as well, that a 
group, private group called the Oxnard Family Circle, that 
provides adult day services in my district, they happen to be 
right next door to our CBOC. So there is a certain synergy 
there between the CBOC and the adult day center for our 
veterans. And we have been told now, because of lack of funds 
from the VA, that the Oxnard Family Circle is not going to be 
receiving any more funds. And we now have a queue of 15 
veterans who are waiting to get into that facility. And the VA 
has said: Sorry, we are not going to be able to accommodate 
that. Maybe on a case-by-case basis, given extenuating 
circumstances, we might be able to accommodate a few.
    That is a certain for me because I am beginning to already, 
at least in my district, feel the implications of the dilemma 
that you are presenting here. And I am concerned that that is 
going to, you know, bleed into other areas, in-home healthcare 
services, other kinds of things. At the same time, we have 
providers in the district, mental health providers that VA has 
contracted with, and yet we are not utilizing them to the 
extent that they can be utilized. And we are not pushing our 
veterans to those contracts.
    And, thirdly, I would say that TriWest I think is very 
committed to administering the Choice program. They have 
indicated that they plan on hiring lots and lots of folks to do 
a better job of providing the Choice program. So all of these 
issues that I am raising right now are sort of fighting against 
each other. We are going to need resources for the Choice 
program in order to increase and enhance the program. And we 
wouldn't want TriWest to hire a lot of people and then tell 
them: Sorry, we have got to push more people to the people that 
we have already contracted with.
    And yet my veterans in Ventura County are not receiving the 
services and are beginning to feel this dilemma. So I am not 
sure that I have a question. I am not sure I have a question 
except to say I thank you for your leadership. I do believe 
that if you weren't asking the hard questions, your issue 
around financial, the financial management system and 
continuing to ask those hard questions, you and the Secretary 
both, that we still might not be aware of this problem 
surfacing the way it is surfacing. So I appreciate that.
    I don't think we can look back in terms of our past 
mistakes. We have got to look forward. And so I do believe that 
we need the flexibility because the money really needs to 
follow the veteran in terms of what he or she selects in terms 
of their service. So, again, I am just very, very concerned 
about what is happening in my district to my veterans as we 
speak and wondering if there is any remedy to that.
    Mr. Gibson. Well, we are concerned as well. Two of the 
categories that you mentioned, adult daycare and home-based 
care, are two services that we are not able to use Choice to be 
able to fund. That would be part of the flexibility that we 
would really love to be able to have because we don't want to 
see that care disrupted. We will do some homework on the mental 
health providers and look into that. The other point that I 
would make is, I mentioned earlier that across VHA, we are up 
to about 33 percent of all authorizations for care in the 
community are going to Choice. And TriWest territory, they are 
up to 41 percent. And I think it is because of that determined 
effort that they are making out on the ground day in and day 
out to see that we are using Choice in every case we possibly 
can.
    Dr. Tuchschmidt. If I could just add on about the mental 
health providers, we do have relationships, long-standing 
relationships with 87,000 providers around the country. And we 
are doing everything in our power to reach out to those folks. 
We have sent them a letter. We have asked local leadership to 
meet with those providers, encouraging them to sign up and 
become Choice providers. So we want the patients that--the 
providers that our patients have been seeing to continue to be 
able to see those people under the Choice program.
    Ms. Browney. Thank you.
    And I yield back, Mr. Chairman.
    The Chairman. Ms. Brown.
    Ms. Brown. On that, I had a similar situation. And I 
brought in the HUD vouchers, and we were able to get 30 of our 
veterans signed up because they had no income and now they will 
have that income. So that is something that we need to keep in 
mind because these agencies need to work together.
    Ms. Browney. Thank you.
    Ms. Brown. I yield back.
    The Chairman. Dr. Benishek.
    Dr. Benishek. Thank you, Mr. Chairman.
    Thanks for your testimony, Mr. Gibson. Frankly, I am a 
little bit shocked by the fact that you sit there and tell me 
there has been no mismanagement, and we have got $1 billion 
cost overrun on the hospital in Denver. That can't be, if it is 
not mismanagement, then it is just the standard way of doing 
things at the VA.
    And, frankly, I was really hoping that the new Secretary 
would be able to revamp the VA because I think that business as 
usual has not been working very well for the last 30 years and 
that the layers of the bureaucracy, where there is so many 
layers of the bureaucracy at the VA as compared to, say, a 
private sector corporation of a similar size would be much more 
streamlined. And I was hoping to see a dramatic change in the 
organization of the VA so that things would be much leaner and 
meaner and that 20 year-old IT systems wouldn't be used as an 
excuse to explain why we are hearing at a late date there is a 
$2.7 billion cost overrun.
    So, you know, I still have a level of hope that something 
like that is still in the offing. Is anything like that in the 
offing, a complete revamping of the bureaucracy of the VA? Or 
is it going to continue the way it is? I am just not happy with 
the progress that we are seeing today, another instance of a 
surprise cost overrun, not being able to figure out that 
hepatitis C is going to cost us money, and all of the things 
that you mentioned.
    Mr. Gibson. Yes, sir. First of all, to be very clear, there 
was gross mismanagement in Denver. The question, as I heard it, 
that I was being asked had to do with the $2.5 billion----
    Dr. Benishek. That is part of the whole deal, right? There 
is $2.5 billion missing and----
    Mr. Gibson. It is not missing. No, sir, it is not missing. 
It is money that is going to pay for veteran care in the 
community. That is what we are talking about.
    Dr. Benishek. I understand that. But it is a cost overrun 
that somehow money in your Department has been spent on all 
kinds of stuff. We don't know what most of it is because it all 
disappears. IT, we spent hundreds of millions of dollars, it 
hasn't been updated. It just disappears within your system. 
That is what I mean about having more control over what is 
happening with the money.
    Mr. Gibson. We would love to come brief you on My VA, which 
is the long-term plan for the transformation of the Department. 
We would relish the opportunity to do that, the organizational 
changes, the culture changes, the training, the staffing.
    Dr. Benishek. I would like to see something dramatic done 
to change the status of the VA so that it is much better than 
this bureaucracy that we have here now and that we are hearing 
another example of. I want to go----
    Mr. Gibson. Well, I would just, I would just mention, you 
alluded to the fact that it has been going on for 30 years. 
Secretary McDonald has had 10 months. So that doesn't mean that 
we don't need to be getting things done. We do. But I think we 
have to take into account the fact that changing an 
organization as large as VA in less than a year, I am not sure 
who would be able to do that, inside the Federal Government no 
less.
    Mr. Benishek. I have another question about this fee--or, 
not actually the fee basis--the Choice Act, okay, and, you 
know, the slow implementation of the Choice Act. And I think 
part of it is the problem with, you know, getting a provider 
list up there.
    And it is my understanding that, you know, we were going to 
be paying Medicare rates for care. But it is also my 
understanding that, you know, the third-party providers are 
getting Medicare rates, but the actual people that are doing 
the care are not getting Medicare rates. They are getting a 
less-than-Medicare rate. And some of the provider people that I 
have talked to said that the rates are 30 percent less than 
Medicare rates. So they are reluctant to sign up for it 
because, you know, they are losing money.
    Mr. Gibson. That is the issue that I alluded to in my 
opening statement about providers' reluctance to sign on to 
Choice.
    There is a widely held misperception, and I think a lot of 
it has to do with the fact that we wound up having to use the 
two third-party administrators for Choice off of the PC3 
contract, where it is below Medicare. And so providers out 
there associate Health Net and TriWest signing them up with PC3 
below Medicare rates, but, in fact, what we pay in Choice is 
Medicare. That is what we are paying.
    And I have personally had conversations with providers and 
academic affiliates where they go, ``Oh, well, we didn't know 
that.''
    Mr. Benishek. Well, that is not the information that I have 
had, okay? Because the people that I have talked to, hospital 
administrators for example, have told me that, well, we had a 
better deal before when we were doing the fee-for-service stuff 
or we had a contract with the VA. And then they don't want to 
sign up----
    Mr. Gibson. They probably had a better deal before when 
they were doing a one-off contract with VA. But I doubt 
seriously that they had--I know they would not have had a 
better deal under PC3.
    We would be glad to share with you the letter that has gone 
to providers, which makes it explicit, very clear in the 
letter----
    Mr. Benishek. I would like to see that, then, because that 
runs contrary to the information that I have received 
anecdotally from individuals.
    Mr. Gibson. And----
    Mr. Benishek. I will yield back my time.
    Sorry.
    The Chairman. Ms. Titus, you are recognized.
    Ms. Titus. Thank you, Mr. Chairman.
    Thank you, Mr. Gibson, for being here. You are always 
amazingly patient, coolheaded, and straightforward, and I 
appreciate that.
    I know that the VA has just been overwhelmed by dealing 
with problems of the past, but it seems to me that a real 
problem, in addition to an old IT system or an old financial 
system, is a lack of a planning system.
    You know, we didn't have the planning for the cost of 
treating the hepatitis, and yet medical technology is changing 
so rapidly, and new medicine is being developed. And we didn't 
really plan for this backlog that is developing now with the 
appeals process, which is a result of resolving the backlog 
with the original filing.
    And, as you mentioned, we don't have a very good way to 
plan for demographic and geographic shifts. I have been saying 
since the first day that I worry about places like Las Vegas, 
where the demand is increasing. The New York Times said it was 
a 20-percent increase in Las Vegas. You said in your opening 
statement that it is 18 percent, but, you know, give or take a 
few.
    We are going through money quicker. Our VISN is burning 
through the RVUs. Will we run out of the money sooner? If that 
happens, what will I say to veterans in Las Vegas? How did you 
make up for that kind of money?
    And is there anything in the works to look at the whole 
planning process?
    Mr. Gibson. That is a great question and a great issue.
    The staff brought me my briefing deck to give 2017 budget 
guidance to the organization. And when I got to the 
recommendation page, my choices were to nudge number up a 
little bit, nudge another number down a little bit. And I said, 
wait a minute, that is not the way we are going to do this. We 
are going to build a requirements-based budget, and the 
requirements starts with what we expect to deliver to the 
veteran, the veteran's experience.
    So I am going to take appeals as an example. You mentioned 
it. Let's say, hypothetically, we want to give a veteran an 
appeal decision within a year of the filing of their notice of 
disagreement. Right now, it is more like 4 years, 5 years, 
something like that. We obviously can't meet that standard 
immediately. We decide how long it is going to take to meet 
that standard. And then the conversation that we wind up having 
is about the requirement and the resources needed to meet that 
requirement.
    Same conversation on hep C. The last time I was here in 
this committee, I proposed the idea that, let's take hep C 
prevalence among veterans that are getting care at VA to 
functional zero within 3 years. Let's let that be the 
requirement that we manage to. We all agree to that, and we all 
understand what it would cost to do that, and then VA executes 
to that requirement.
    That is how you build a plan that starts with the veteran 
experience that you are trying to deliver. You are absolutely 
right.
    Ms. Titus. I hope so.
    And just for the record, I agreed to go along with the 
bridge money for the Aurora hospital that gets us to the end of 
the fiscal year. It was a patch, a little here, a little there, 
you took from other projects around the country.
    But I cannot vote for a 1-percent across-the-board cut. I 
think that is a bad way to do budgeting. I have always voted 
against amendments that just do across-the-board cuts. I think 
you have to look at where you need the money and where you 
don't, not just slice it across.
    So I hope you will come with another proposal, because, 
when the time comes, I cannot cut other veterans benefits 
across the board to bail out a bad construction project in 
Denver.
    Thank you. I will yield back.
    The Chairman. Mr. Huelskamp, you are recognized.
    Dr. Huelskamp. Thank you, Mr. Chairman.
    Mr. Secretary, I want to follow up on a few things that 
have been discussed here. I think the opening questions from 
the chairman of the committee was about when did you know, and 
I didn't ever quite hear exactly the answer of when you were 
actually informed about an approximately 40-percent cost 
overrun in this budgetary fund.
    Mr. Gibson. It became clear that there was a very large 
variance, I would say, in mid- to late May, in that general 
timeframe.
    Dr. Huelskamp. Okay.
    Mr. Gibson. Mid-May probably. And we began working with 
OMB, looking at a whole series of alternatives and different 
possible solutions within funds that we may or may not have had 
direct control over.
    Dr. Huelskamp. My second question would be--and I 
appreciate that--where are we at today on the Choice fund? How 
much have you used? I know the President had submitted a 
budget, and there was some strong pushback about raiding the 
Choice funds. Can you tell me where we are at on those funds?
    Mr. Gibson. I think, under 802, it is a little over a 
billion dollars.
    Is that right? I can't read that without my glasses.
    Mr. Murray. 437----
    Mr. Gibson. For care.
    Mr. Murray [continuing]. For care. And $402 million under 
the 801 section. So it is 940 total.
    Mr. Gibson. So $940 million. I was close. I was estimating 
about----
    Dr. Huelskamp. So is it used or underused or overused? 
Which is the----
    Mr. Gibson. Well, I would tell you that back when we did 
our first estimates on Choice we were looking at utilization 
somewhere on the order of $3 billion in the first year. So it 
is interesting to us, as we step back and we look at what we 
have done in accelerating care in the community and looking at 
what we had originally forecasted for Choice utilization----
    Dr. Huelskamp. But compared to February, though, when you 
came in and proposed that you raid the Choice fund and use it 
for other funds--which sounds like what you are talking about 
doing here today. Is it where you predicted it was in February 
when the President proposed to raid the Choice fund?
    Mr. Gibson. I am sorry. I don't understand the question.
    Dr. Huelskamp. In the President's budget, he had proposed 
to raid the Choice fund and use it elsewhere, including non-VA 
care, if I understood his proposal.
    Mr. Gibson. Correct.
    Dr. Huelskamp. You are here today to say, well, we ran 
short, even though we really didn't know about it till May, 
even though the President proposed to do that for 2016 in his 
February budget proposal. My question is----
    Mr. Gibson. I think there was----
    Mr. Huelskamp [continuing]. Where are you at today, really, 
on Choice funds? You said $940 million. What did you project 
you were going to spend?
    Mr. Gibson. Between now and the end of the year?
    Dr. Huelskamp. Yes.
    Mr. Gibson. I would say we will be--an optimistic spend is 
a total of a billion and a half dollars, an additional $500 
million worth of care. And if we are able to spend that $500 
million for care inside Choice, that reduces the two-and-a-
half-billion-dollar shortfall.
    Dr. Huelskamp. And following up on when you knew about the 
shortfall and when you told Congress, what is typical practice? 
You wait till the end of the fiscal year and add up all the 
bills and see where you are at?
    It sounded like you did something out of the ordinary to 
say, hey, let's see where we are at, because it looks like, 
eyeballing it, we are 40 percent over. Is that normally--well, 
how often do you figure out where you are at on the budget?
    Mr. Gibson. We are looking inside the financial management 
system, as was mentioned earlier, and providing reports to 
appropriators at least on a monthly----
    Dr. Huelskamp. Well, how often?
    Mr. Gibson. At least on a----
    Dr. Huelskamp. You find out in May you are 40 percent 
over----
    Mr. Gibson. At least on a monthly basis. The point that I 
made earlier is, as of the middle of March, March the 16th, I 
have a memo that says through the first 5 months of the year we 
are under-obligating. And it didn't make sense. And that is why 
we had people go back and do manual reconcilements literally of 
millions of transactions inside the fee-basis care system to 
figure out exactly what had been obligated, because we don't 
have the automated interfaces between----
    Dr. Huelskamp. I still don't understand what happened in 
the--so the March memo you are talking about, was the data 
falsified? Inaccurate? Are they----
    Mr. Gibson. The data was--they were reporting what was in 
the financial management system. And what was in the financial 
management system didn't take into account all of the specific 
details of every single individual authorization for care.
    Dr. Huelskamp. And that is business as usual. They give you 
reports, even though they know----
    Mr. Gibson. No. In fact, historically, a lot of this 
reconcilement would have been done at the medical-center level, 
where we used to keep the budget. But when Congress passed the 
Choice Act, they required us to take all the money out of the 
medical centers and consolidate it into the Chief Business 
Office. So we were faced with----
    Dr. Huelskamp. And you knew that in March. You knew that in 
March.
    Mr. Gibson. We knew it in September.
    Dr. Huelskamp. That was not a change in March. That was a 
change last summer.
    Mr. Gibson. We knew it when Choice passed.
    Dr. Huelskamp. And so I am still trying to figure out how 
you can have a 40-percent cost overrun in this budget, come to 
Congress in June and say, oh, by the way, we have a couple 
months left, and, oh, by the way, don't forget we asked to raid 
Choice in February.
    And I am concerned about that. I am concerned about the 
implementation of Choice and----
    Mr. Gibson. I think that the allusion in the budget 
document was an allusion to--and the Secretary has said this 
repeatedly--give us the flexibility to be able to use money to 
follow the veterans.
    And that was my comment about veterans make decisions 
faster than the budget cycle. And, quite frankly, we can't 
change as fast as we need to change to accommodate the needs 
of----
    Dr. Huelskamp. And, lastly, a little bit more. If I 
understand you correctly, you mentioned about 12,000 
individuals you hired?
    Mr. Gibson. Net increase. That is net.
    Dr. Huelskamp. How many of those were direct care 
providers?
    Mr. Gibson. More than 1,000 are physicians. More than 2,700 
are nurses. I can't tell you how many were psychiatrists, 
psychologists, but----
    Dr. Huelskamp. Well, I would like to know that, because----
    Mr. Gibson. Okay.
    Dr. Huelskamp [continuing]. Based on the figures you gave 
us, only a third of what you hired was for direct care----
    Mr. Gibson. We can certainly do that.
    Dr. Huelskamp [continuing]. Two-thirds for something else.
    Mr. Gibson. One of the biggest challenges we have 
throughout VA is we don't leverage our providers with 
sufficient support staff. And that means they can't be as 
productive as they need to be.
    Dr. Huelskamp. All right.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Dr. Ruiz, you are recognized.
    Mr. Ruiz. Thank you, Mr. Chairman and Ranking Member, for 
holding this hearing.
    Thank you to our guests for being here.
    My question is more in line with the implementation of the 
Choice program.
    So we have some money that you want to take from that 
program and put it into other non-VA care and other types of 
care. And I am always of the view that we need to take care of 
our patients, take care of the VA. So if you need to take care 
of them by purchasing more medications for certain ailments or 
illnesses, then that is what we have to do.
    However, what I am concerned about is why there is this 
money that is not being utilized with the Choice program, when 
I know, in my district, after speaking with 70 specialists in 
high-demand specialties with the TriWest and Loma Linda VA, 
like other members here have done, that there is not a clear 
understanding of the process or of the implementation or 
outreach. There are no education efforts by the VA as much as 
we would like to see. And so the actual implementation is, you 
know, very slow and not very efficient and effective.
    So why is there money left over now from that Choice 
program? And is that money that could be used with the 
implementation of the Choice program?
    Mr. Gibson. Well, I think we are on the same wavelength 
here, actually.
    First of all, a fine tune: We are not looking to move money 
out of Choice. We are looking to be able to use Choice funds to 
pay for care in the community. So we don't want to move it 
someplace else; we just want to be able to access it to pay for 
care in the community.
    In the opening statement, I went through a litany of seven 
or eight different factors that have gotten in the way. Many of 
them have to do directly with the implementation of Choice.
    I was actually surprised the other day in one of our daily 
standup meetings on access to care when folks were describing 
to me the 5-year process that has been underway to put in place 
the procedures for utilizing care in the community, our old 
traditional program. And they are still working on them after 5 
years.
    We roll Choice out in 90 days. And, you know, I am reminded 
that, when we first went to the industry about Choice to look 
for third-party administrators, they said, what you are talking 
about is going to take 18 months to put in place. And the idea 
that we would put it in place in 90 days, they said it will 
never happen.
    And I think, 8 months into this, part of what we are 
learning is the time required to recruit providers, the time 
required to change internal processes, the fact that every one 
of our processes has different payment mechanisms, many have 
different reimbursement rates, as we have alluded to before--I 
think every one of these issues have gotten in the way of our 
ability to route care to Choice.
    But, as I mentioned before, day by day, that penetration 
into Choice is improving.
    Mr. Ruiz. So how about the idea of maybe consolidating 
these seven different community care programs----
    Mr. Gibson. Yes.
    Mr. Ruiz [continuing]. And streamlining them----
    Mr. Gibson. Yes.
    Mr. Ruiz [continuing]. And doing similar processes?
    Mr. Gibson. Yes.
    Mr. Ruiz. Is that underway?
    Mr. Gibson. That is exactly what I referred to in the 
opening statement. We want to do precisely that. We are going 
to need Congress' help to do that.
    Do you want to make a comment on that, too?
    Dr. Tuchschmidt. Yes.
    I was going to say, so we have actually informed the field 
that we want Choice to be the number-one mechanism by which we 
send people into the community for care.
    We have work to do, we know that, to try and streamline 
some of those processes. We are training our staff today in 
some of those streamlined processes so that we will do more 
coordination of that care, the way we have in our purchased 
care programs in the past. But that movement to streamline 
those various channels is already underway.
    Mr. Ruiz. You know, whenever a system wants to change, they 
usually have champions or coaches that go into, like, a 
hospital or something else. I think that there should be some 
coaches that go into a community or a region and help set it up 
for the providers, set up training for the veterans, and also 
work with the Members of Congress so that we can help others do 
that same thing.
    Dr. Tuchschmidt. I think you are absolutely correct. And, 
as I said earlier, TriWest, for example, and our folks are 
going around the country meeting with providers in the 
community, trying to get those providers to sign up to be 
Choice providers. And I think that has been a pretty successful 
effort on our part. And I have to laud TriWest because they 
have worked very hard to try and make that work.
    Mr. Ruiz. Thank you.
    The Chairman. Okay, members, we are going to take a short 
recess. We have two votes. We will resume the hearing 
immediately following the last vote.
    [Recess.]
    The Chairman. Okay, members, if we could resume the 
hearing. We have members that are still making their way back 
from the last series of votes.
    I thank everybody for your indulgence.
    Ms. Kuster, are you prepared to go ahead and begin with 
your line of questions?
    Ms. Kuster. I am.
    The Chairman. Ms. Kuster, you are recognized.
    Ms. Kuster. Thank you very much.
    Thank you to our witnesses for being here.
    I was just looking real quick for an email that I just 
received from New Hampshire and wanted to thank you because it 
is a little bit of good news. We have signed up an important 
community partner of ours in the north country in New 
Hampshire, a sparsely populated area with lots of veterans, to 
be part of the Choice program.
    And I just wanted to reference that because we have talked 
quite a bit today about this transition and how long it takes. 
And part of that, I know, is to line up these private community 
partners, healthcare providers, and, particularly, as we get 
into care for seniors, adult daycare, as we get into home care.
    Where I want to go, if we could, is looking forward, 
because I think we can all agree and there is bipartisan 
concern about this transition, but some of my colleagues may 
not be familiar with this notion of the other six types of 
programs. And as I have sat down with my VA, we have talked 
about when the Choice program is applicable, when the other 
programs are applicable.
    And it seems to me there is a multitude of dimensions, but 
if we could just take two, one is the availability of services, 
so whether it is a network or whether it is a local provider 
that is willing and able and available to provide service. And 
the other, not surprisingly, is cost, and both the cost to the 
taxpayer to provide the service, but also I think you made a 
really important point for people to understand about the out-
of-pocket cost to the veteran. Because until we have an 
understanding of these decisions that are being made, we are 
not going to grasp the dimension of opening up access.
    And we had a note in our memo that said, previously, the VA 
has controlled access through distance and delay. And that is 
the reality, right? We made this promise to our veterans, and 
then the way we kept a lid on the cost of it to the taxpayer 
was that for most veterans it was either too far away or it 
took too long to get the service.
    So help me, going forward, with your magic wand here, with 
the change that Secretary McDonald and you, Mr. Gibson, and 
others are bringing to this unwieldy organization, what would 
be the path forward to streamline these programs, provide 
direction within each of these different VISNs in each of these 
different communities, and get access to the veteran in a way 
that is timely and high-quality and cost-effective and 
efficient for the taxpayer?
    Mr. Gibson. If I could ask Dr. Tuchschmidt to start out on 
that one, because he has done an awful lot of work precisely in 
this area.
    Ms. Kuster. And I don't want to get too complex, but what 
is it that you to need from us? Is this going to be a 
congressional change? And how can we get together with you in a 
bipartisan way to make that happen?
    Dr. Tuchschmidt. So we have been working, spending really 
almost the last year since the legislation was put in place in 
November, working with Deloitte. We asked them to bring their 
commercial side of their business in to look at our business 
office and how we manage care in the community against and 
benchmarked against best practices in private-sector health 
insurance industry. They have helped us identify core 
competencies, and they have done a maturity assessment against 
best practices in the private sector.
    We have taken that and are developing a plan to really make 
sure that we can build all of those competencies using our 
current business office function as the foundation on which we 
will build, over the next year or so, some of those 
competencies.
    We will have to make some decisions about do we build that 
ourselves or do we buy that. Because that expertise is out 
there, and it is, you know, more cost-effective and more 
efficient to go out and buy it.
    We have a group right now looking at our TPA processes to 
say, going forward, what do those look like, how do they 
change, what do we want to put into the TPA contract in the 
future to be able to build some of those competencies and 
really run a much more robust program.
    I think part of what we are going to need help with is, in 
fact, rationalizing some of these programs. I mean, I think, 
ultimately, we would want Project ARCH probably folded into the 
Choice program so that, you know, we can get rid of some of 
these multiple channels.
    And I think we are going to need some changes to the Choice 
Act itself, the way the Choice program is structured. I think 
we have alluded to those changes several times, about Medicare 
providers versus providers that we believe are qualified to 
deliver that care, those kinds of things--60-day authorization 
periods.
    I think us being the secondary payer under Choice is 
problematic. And it is very problematic in places where--I was 
just a couple weeks ago in Alaska talking with the DoD folks 
and now are engaged with Dr. Woodson and his folks. That is 
really problematic if we want DoD to be providers for us.
    So I think we have----
    Ms. Kuster. I have to tell you, my time is well past up. 
But this direction, I would love to get a briefing going 
forward, if we could----
    Dr. Tuchschmidt. Absolutely.
    Ms. Kuster [continuing]. And if we could stay on top of 
that. Thank you.
    And I apologize to the chair.
    The Chairman. Thank you very much.
    Mr. Coffman, you are recognized.
    Mr. Coffman. Thank you, Mr. Chairman.
    Secretary Gibson, so what we are, in effect, talking about 
is the shortfall in your budget available for healthcare.
    Mr. Gibson. Correct.
    Mr. Coffman. So, if we look at the VA historically, I think 
initially it was for service-connected issues for our military 
personnel, not means-tested. Then we expanded that at some 
point to low-income veterans on a means-tested basis. Then we 
expanded it again at some point to give automatic eligibility 
to our returning Active Duty leaving for civilian life that is 
not means-tested. I can't remember if that is 4 or 5 years that 
they have eligibility.
    But in March of this year, VA announced that it would no 
longer use the net worth or the asset test to determine VA 
eligibility, thus expanding it again. But you did it at a time 
where the money--it is my understanding you have the statutory 
authority to do that, but you have to make an assessment of 
whether you have the resources available to meet that expansion 
of eligibility. Clearly, you don't have it. And so what are you 
going to do about this?
    Mr. Gibson. You know, I am going to have to follow up on 
this one for the record.
    Mr. Coffman. Okay.
    [The information follows:]
    Mr. Gibson. But my understanding was, what we did is we 
were able to substitute other means tests that we were able to 
access directly, either from the IRS or the Social Security 
Administration or something like that, in place of an annual 
requirement on the part of a veteran to file about net worth.
    So it is my understanding, and we will go validate----
    Mr. Coffman. Sure.
    Mr. Gibson [continuing]. This and come back to you for the 
record, but it is my understanding that this wasn't a move to 
open the aperture. It was actually a move to relieve a burden, 
an administrative burden, on the veteran.
    Mr. Coffman. Okay. We need to find that out. Because I got 
this information through a veterans magazine, one of the VSOs, 
and they were touting it as an expansion of eligibility by 
virtue of relaxing the asset requirement and making more 
individuals eligible for--well, they would be eligible anyway, 
but they would have to pay for a portion of their care. This 
would relax that requirement. And so, obviously, then, it is an 
expansion of care. I think you would assume that more people 
would go through it.
    If you would look at that and get back to the committee on 
that, because I think that is a concern where we don't have the 
resources to meet our current obligations; we really can't 
expand eligibility to new populations.
    Mr. Gibson. I think you are absolutely right. I agree with 
you. And we will follow up for the record.
    Mr. Coffman. Mr. Chairman, I yield back.
    The Chairman. Thank you.
    Mr. McNerney.
    Mr. McNerney. Well, thank you, Mr. Chairman. And thanks for 
bringing this to light, this hearing, such a subject.
    I am going to ask a couple of parochial questions, first, 
if you don't mind.
    Given that cost overruns and mismanagement continue to be a 
problem, do you feel that the VA could benefit from the 
expanded use of public-private partnerships for major 
construction projects, where the VA allows non-Federal 
stakeholders and construction experts to work on projects?
    Mr. Gibson. The short answer, relatively less informed, is 
yes. In fact, Secretary McDonald and I met, I think, about 2 
weeks ago with the leadership of the Association of General 
Contractors and a number of large and smaller contractors that 
work with us on a regular basis. This was one of the very 
specific topics that we talked about. And, in fact, we have 
agreed to come together to look at specifically those 
opportunities.
    We are also actively considering an opportunity in San 
Francisco on a specific project for public-private partnership.
    Mr. McNerney. Okay.
    Will the cost overruns of the Denver Medical Center cause a 
delay of the French Camp community-based outpatient clinic and 
other major construction projects that the President has 
prioritized in his fiscal year 2016 budget?
    Mr. Gibson. I don't expect that what we are doing in Denver 
is going to have any adverse impact on any of our major lease 
transactions.
    And depending on the ultimate funding source that we wind 
up working out with Congress, with both the authorizers and the 
appropriators, I can't unequivocally say that it won't affect 
some major construction projects, because that is at least one 
of the options that has been on the table. But I think there is 
a strong desire on the part of Congress for us to not adversely 
impact those projects. So I think it is less likely that we 
would see that as a source of funding.
    Mr. McNerney. Well, in April, there was an announcement 
about 15 projects, major projects. Five of them were going to 
be too late for the Corps of Engineers to be involved in. Five 
of them were still being questioned.
    Do you have an idea of which projects are still being under 
consideration?
    Mr. Gibson. In terms of engaging the Corps to become our 
construction agent, there were five that the Corps and VA had 
agreed were too far along for it to make sense for the Corps to 
take on. I think we have taken the number from five up to seven 
on the ones that we have agreed with the Corps we would turn 
over to the Corps for them to be the construction agent and 
three that were relatively smaller transactions that we felt 
like made the most sense for us to hang on to.
    Mr. McNerney. Could you identify which ones are which?
    Mr. Gibson. We will get that for you.
    Mr. McNerney. Thank you.
    Mr. Gibson. Be glad to. We have the lists. In fact, he may 
have it in his book over here, so if he does, we will give it 
to you before we walk out the door.
    Mr. McNerney. And I am not sure whether this question has 
been asked before. What is the price deferential between a VA 
medical service versus non-VA medical services by whatever 
metric you may have?
    Mr. Gibson. I am going to defer to our clinician here.
    Dr. Tuchschmidt. I am not sure. I don't have that in my 
head. But we can take that for the record and get that 
information.
    [The information follows:]
    Mr. McNerney. Okay. Well, following up, what about 
healthcare outcomes? What is the difference in healthcare 
outcomes from VA-based service versus non-VA-based service for 
veterans?
    Dr. Tuchschmidt. So, again, I don't know that we actually 
have our own data around that. But there are plenty of research 
studies that have been done looking at outcomes between private 
sector and VA and basically have found that the quality of 
those services are comparable, whether it is in the VA or 
outside the VA.
    Mr. Gibson. One of the things I would suggest that we do, 
let's plan on a SAIL briefing for the Congressman. This is the 
comprehensive tool that we use to evaluate care quality, 
patient safety, access, patient satisfaction. And many of the 
metrics that we use are metrics that are also used in the 
private sector, so we have the ability to be able to compare 
across VA and the private sector.
    And we will get somebody like Peter Almenoff to come give 
you a briefing.
    Mr. McNerney. That would be very informative.
    How about the outcomes of the new hepatitis C treatments? 
Are those showing good healthcare outcomes?
    Dr. Tuchschmidt. Well, it is very early to assess that in 
the process. Most of these are months courses of therapy. But 
all of the studies that were done to approve these drugs show 
that they have very high cure rates, much higher, with much 
lower side-effect profiles than the drugs that we had in the 
past.
    Mr. McNerney. So, I mean, since so much resources are being 
expended in that direction, we need to have a pretty clear 
understanding that it is actually showing improved results.
    Dr. Tuchschmidt. Right.
    Mr. McNerney. Thank you, Mr. Chairman.
    The Chairman. Dr. Wenstrup, you are recognized.
    Dr. Wenstrup. Thank you, Mr. Chairman.
    And thank you all for being here today.
    I want to expound a little bit upon what Mr. McNerney was 
asking about when he was talking about cost, VA versus non-VA. 
And we have had this discussion before, and, at one point, you 
told me you are a ways away from really being able to assess 
that.
    And I think one of the best ways is how much are you 
spending per RVU that you produce. And by that, I mean your 
physical plant, your supplies, your administrators, your 
employees. Because that is what a private practice has to do.
    And I assume we are not at that point yet. Would that be 
correct?
    Mr. Gibson. I don't think we are, but I think we are 
getting closer.
    Jim.
    Dr. Tuchschmidt. I mean, we have done cost per RVU based 
upon--so the data that I am about to quote I think is based 
upon, you know, our salary and benefits direct costs, so it is 
equivalent to what we would be paying the provider. And our 
cost per RVU is much lower than the private-sector benchmark.
    Dr. Wenstrup. Well, sure, it probably would be. But you are 
not taking into account what the private-sector person is 
paying for, for their insurance, for their staff, for their 
supplies, for their physical plant, all those things. That is 
how you can really evaluate what you are paying for RVU.
    Because in a business model, which is really what we are 
trying to get to here, which--I don't think the VA was ever in 
one before--if we want to get to that point, you have to be 
able to assess. Because at some point you have to say, you know 
what, we have more buildings than we need, or we need more 
buildings than we have, to be more productive. I mean, that is 
really where we need to be headed.
    And that is why you have to take into account all of those 
things, because that is what that private person is doing. When 
the VA pays that non-VA provider, they are not accountable for 
all those other expenses----
    Dr. Tuchschmidt. Right.
    Mr. Wenstrup [continuing]. That that person takes in. So we 
are not really comparing apples to apples unless we do that.
    Dr. Tuchschmidt. Right.
    Dr. Wenstrup. So hopefully we will continue to proceed in 
that direction so we can make wise decisions together as to how 
we go forward. You know, and we need to keep looking for--how 
do we reduce our fixed costs and still provide the same level 
of care?
    One thing I was encouraged about today, increase in RVUs 10 
percent. Can you tell me how you did it?
    Mr. Gibson. I think it is a combination of factors. We have 
gone--and, for example, I alluded to extended hours, which has 
allowed us, in many ways, to make more efficient use of our 
space.
    We have gone in and scrubbed primary care panels. We have 
gone in and looked at appointment grids. We have gone through 
that kind of scrubbing process.
    We have developed a couple of different productivity 
assessment tools that now push this data all the way out to the 
individual medical center, down to the clinic, down to the 
provider, so that we are able to look and see how relatively 
productive a particular clinic is in relation to the volume of 
appointment activity and the demand for care. And folks are 
beginning to now make adjustments based on that. They are 
realizing that they have excess capacity that they are not 
utilizing.
    Dr. Wenstrup. Are we reaching out to the providers and 
asking them, what is it that you have to do that makes you less 
efficient as far as seeing patients? You know, what is it that 
we can do?
    We talk about things like, you know--you are working out of 
one treatment room. We know that is inefficient, right? So we 
need that feedback from the providers, especially ones that 
have been in private practice, to say, you know, you are eating 
me up with doing X, Y, Z, restocking the cabinets, when I 
should be seeing patients, those types of things, and all the 
way up the line.
    So I hope we are getting good provider input.
    Mr. Gibson. My sense is that we are. I get it when I am out 
in the field. I know, as we look at different particular 
initiatives--we undertook a major initiative a year ago to look 
at support staff for our specialty providers, which gathered 
vast amounts of input from providers out in the field, with the 
obvious conclusion that we were way underleveraging our 
specialty providers. So one of things we have been doing is 
ensuring that we are adding support staff into our specialty 
clinics, as an example of that.
    Dr. Wenstrup. Thank you.
    One other thought I had, too, with one of the things you 
said today, you know, a lot of veterans do choose to go to the 
VA. They want to be at the VA. And there are a lot of veterans 
who have other care--private insurance or whatever the case may 
be.
    If the VA is their choice, why don't we bill their 
insurance, get on their plan? They have insurance somewhere 
else. And, you know, a lot of veterans don't use VA because 
they want more funds to be there for those who need it more.
    Mr. Gibson. You are singing Jim's song here.
    Dr. Tuchschmidt. Yeah. And we do--so today we do--if they 
have private insurance, we do bill their insurance. Sometimes 
that is Medigap coverage, which without an EOB, Medicare EOB, 
we don't get paid. And then we don't have the authority to bill 
Medicare or Medicaid or TRICARE.
    Dr. Wenstrup. Well, Medicare and Medicaid is robbing Peter 
to pay Paul, as far as the big picture of taxpayer dollars, et 
cetera.
    Dr. Tuchschmidt. Right.
    Dr. Wenstrup. But private insurance is a different story.
    Dr. Tuchschmidt. We do bill those. And, in fact, those 
collection rates have been going up steadily year after year 
after year.
    Dr. Wenstrup. Thank you very much.
    I yield back.
    The Chairman. Dr. Abraham.
    Dr. Abraham. Thank you, Mr. Chairman.
    And thank you for being here, gentlemen.
    I guess a statement first on just fiscal responsibility. I 
was reading in the IG's report last week, and I think he said 
that the VA didn't know they had $43 million in an account, and 
all of a sudden it was just found after it had been sitting 
there for 3 years. So that is, you know, somewhat of an 
astounding thought.
    And then I look at the Choice Act, and correct me if I am 
wrong--I read the act--that there are $360 million put aside in 
the Choice Act for awards and bonuses and that type of deal. 
Now, you know, being a businessman, I totally support a bonus, 
an award, when it is appropriate. But if that is an--is that an 
accurate figure?
    Mr. Gibson. I think what you--no, it is not.
    Dr. Abraham. Okay.
    Mr. Gibson. There is no money set aside in Choice for 
bonuses. What you may be referring to are the caps on the cost 
associated with administration of the plan. It is basically----
    Dr. Abraham. Is that $360 million? Is that an accurate 
figure?
    Mr. Gibson. I want to say the initial tranche was $300 
million, if I am remembering right, which is now somewhat 
higher than that. But it is the money that we wind up paying 
the third-party administrator for basically administering the--
--
    Dr. Abraham. The program.
    Mr. Gibson. Yes, sir.
    Dr. Abraham. Let's talk a little bit about the lack of non-
VA providers, or getting them into the Choice program, of a 
non-VA provider. And I think you had brought up the subject of 
the rate being paid.
    What I am seeing in our district in Louisiana--and you have 
addressed this in a previous hearing, and we will kind of 
redress it again--is not the rate but just actually getting 
paid. And I was in the district last weekend and had three 
separate providers come up and say, I haven't gotten my money, 
and this has been going on for 2 and 3 years.
    So what are we doing about that, Secretary? I know that you 
gave us some good figures before, that the VISN 16, which I am 
a part of, was doing better.
    Mr. Gibson. Yes.
    Dr. Abraham. But the word on the street, so to speak, is 
there are still some issues out there.
    Mr. Gibson. Two things.
    First of all, that is one of the advantages of Choice. The 
provider gets paid by the third-party administrator. And that 
has consistently happening within 30 days. We watch that and 
monitor that. VA has historically been known to pay low and 
slow. And that is not how you want to deal with your provider 
network.
    Dr. Abraham. So we have something in place that that is 
going to get better?
    Mr. Gibson. And so what we have done over the last 9 months 
or so is organizationally consolidate. We were organizationally 
doing this payment processing through 21 separate VISN 
headquarters in 70 different physical locations, processing 
invoices for care. And I would tell you, based on what I have 
heard, we were probably doing it in 150 different ways.
    And so we have consolidated organizationally. We have begun 
to tackle the staffing issues, the process issues, and the 
technology issues, none of which were being tackled unless they 
were being addressed in some kind of a workaround situation in 
some location somewhere.
    We had, for example, locations where, instead of 
establishing a call center that is available to handle inbound 
questions from providers about their payment, we would have a 
processor that is processing a payment, and then the phone 
would ring, and they would answer the phone and, you know, 
doing business in a way that you would never see in the private 
sector.
    Dr. Abraham. Correct.
    Mr. Gibson. So we now have that all organizational 
reporting. We are seeing the times improve. Part of what they 
are doing is they are sailing into a headwind. They have a 40-
percent increase in invoices being presented for payment over 
last year. Now, the good news is they are processing a lot more 
invoices than they did a year ago, but they are barely keeping 
up.
    We have made progress in VISN 16, though.
    Dr. Abraham. Okay. Thank you.
    And one real quick question, because I am running out of 
time. The hepatitis C money for 2016 and 2017 that you are 
projecting, do you think you are pretty much spot on, or do you 
think you will need to come back to us and say we need more 
money?
    Mr. Gibson. We are short in 2016. You know, the budget is, 
what, $650 million, somewhere in that neighborhood, $650 
million to $700 million for 2016, and that won't be adequate 
unless we ration that care.
    The other option is, as we are doing right now, is 
basically when we run out of money to do it inside VA. We refer 
those to care under Choice and rely on that sort of safety 
valve.
    Dr. Abraham. Okay.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Ms. Brown. do you have another question?
    Ms. Brown. I do. However I will pass so, I can be last on 
my side.
    The Chairman. Mr. Takano, do you have another question?
    Mr. Takano. Yes, I do. Secretary Gibson or others or Dr. 
Tuchschmidt, I want to continue some of my line of questioning 
on the hepatitis C issue. Right now, you don't ration hepatitis 
C care, you don't see the need to. And I want to get some idea 
about the experience of, say, a veteran who has hepatitis C, 
does the physician within the VA have full discretion about 
when that medication is supposed to be accessed or prescribed? 
Is there an internal process?
    Dr. Tuchschmidt. So we have guidelines that we have 
published for the treatment of patients with hepatitis C and 
the new drugs, both specifying when certain drugs should be 
used, as well as kind of a hierarchy of people who have 
advanced liver disease should be treated first, et cetera. But 
the decision to treat or not treat is an individual decision 
between a clinician and a patient.
    Mr. Takano. So the doctor, the physician has a considerable 
amount of autonomy in terms of making this decision. I have 
been reading disturbing cases in the L.A. Times recently about 
a woman who has been, and her physician and they are battling 
the private insurer. The insurer would rather provide the 
medication at a later stage of the disease. And, in this case, 
and I don't know what the experience is for people in Medicare, 
whether they are in traditional Medicare or Medicare Advantage 
Plans, but at least in the VA, you are telling me that the 
current situation now is that the physician's judgment is 
pretty much honored?
    Dr. Tuchschmidt. Yes, we respect the clinician judgment. 
There are many places in Medicaid, which will not cover the new 
drugs. There are some private insurances that do and some 
private insurances that don't. We have covered those drugs. And 
for the patient who has advanced liver disease as a result of 
hepatitis C, I mean, you are at risk of cirrhosis. You are at 
risk of liver cancer from the hepatitis C virus. If you have 
advanced liver disease, you are definitely a candidate for 
therapy. If you are infected but don't have active liver 
disease, right now, you are kind of lower down kind of in a 
priority list perspective. But as a patient, I potentially am 
infectious to other people. So I am infectious. It is a 
bloodborne disease, through contact with my wife and my kids 
and other people in my household, people I might be working 
with, et cetera. So I think you may not have active liver 
disease, but you may still as a patient have a lot of concerns.
    Mr. Takano. Secretary Gibson, you were reluctant to reveal 
what you actually pay for this drug. Is my understanding 
correct that we have just one manufacturer that manufactures 
the hepatitis C drug? Or are there more than one manufacturer?
    Mr. Gibson. There is more than one manufacturer.
    Mr. Takano. Okay. I was under the understanding there was 
only manufacturer and maybe one patent. I didn't realize there 
was this competition.
    Mr. Gibson. There is multiple manufacturers of multiple 
drugs, but they each make one patented drug.
    Mr. Takano. I see. Now, my understanding is that Medicare 
can't negotiate in the way that the VA can and that Medicare 
spent $4.5 billion in hepatitis C treatments, 15 times over 
what it spent the year before. I don't know what the experience 
of the VA is or just what you are spending per patient because 
I realize you are not willing to reveal that. And I am looking 
at what people are experiencing with private healthcare 
insurance. It seems to me that people are making some rational 
decisions, especially our seniors that our veterans, who are 
low income, that they are probably getting access to a doctor 
who can make a decision and not have to wait on an insurance 
company and that, in this case, the VA is providing a much more 
superior service to those veterans.
    And you mentioned, Secretary Gibson, the case of knee 
replacement, the out-of-pocket costs. I am just wondering what 
the out-of-pocket costs are for the seniors who are limited to 
Medicare if they have to get this hepatitis C medication versus 
the veteran.
    Mr. Gibson. My understanding is that Medicare has an annual 
cost ceiling of $7,200. And somebody that is more expert than 
me can correct that. And so that would be, you would get capped 
out at that amount under Medicare.
    Mr. Takano. So the senior would have to pay that 
difference?
    Mr. Gibson. Yes.
    Mr. Takano. Wow. For that low-income senior, that would be 
a big problem.
    Mr. Gibson. It is clearly a very strong incentive. And it 
applies not to just this hep C treatment but it applies to 
whatever a veteran may be pursuing. There is some preventive 
treatment that Medicare has no copay on. And so, in that 
instance, the veteran truly has a choice without any different 
economic consequences. So he can go to VA or he can go to his 
private provider and use Medicare. But if it is a procedure 
with the copay, then the veteran is going to be making a 
rational, economic decision, as you are referring to.
    Mr. Takano. Mr. Chairman, I yield back.
    Ms. Brown. May I respond to your comments?
    Because I don't think you were here when we passed the 
prescription drug bill. When we passed it, we directed the 
Secretary not to negotiate the price of the drugs. That was a 
part of the bill.
    Mr. Takano. Oh, Ms. Brown----
    Ms. Brown. It would be the illegal for the Secretary to 
address that issue. I am just clearing up what happened. You 
weren't here when we did it. But in addition to that, in the 
Affordable Care Act that is now standing, we are doing away 
with that doughnut hole that you are talking about so seniors 
will not be out of pocket for that additional money.
    Mr. Takano. Ms. Brown, I was aware of that. And I was 
merely trying to suggest that the VA is doing business in a 
better way.
    Ms. Brown. Oh, absolutely. Thank you.
    The Chairman. Ms. Radewagen, do you have any questions?
    Ms. Radewagen. Thank you, Mr. Chairman and ranking member.
    Good afternoon, Secretary Gibson. And thank you for your 
testimony, especially about the improvements in access to 
healthcare for all veterans. I would also like to extend my 
sincere thank you to you and Secretary McDonald for sending Dr. 
Wayne Pfeffer, Medical Center Director for the VA Pacific 
Islands, to represent your Department during the most important 
holiday in American Samoa, Flag Day, commemorating the 115th 
anniversary of the raising of the United States flag on our 
island.
    It meant the world to our veterans. So thank you very much. 
I will be very brief. I don't know if you are aware of some of 
the shortages of medical personnel affecting the services being 
provided in our VA clinic back home in American Samoa. For 
example, we have got audiology equipment on hand in the clinic 
but no specialist to operate it. We also have brand new 
physical therapy equipment on hand but no PT specialist. So I 
was wondering how many, if any, of those new VHA staff members 
you hired were for the VA clinic in American Samoa?
    Mr. Gibson. I am not able to answer your question off the 
top of my head. I see Dr. Tuchschmidt writing over here, and I 
am sure there are some folks behind be writing. We will get you 
an answer back to let you know.
    And I will also look into the vacancies in our clinic 
there.
    Ms. Radewagen. Okay. Thank you. I had another quick 
question. How can VA improve its budget planning to ensure that 
the Department is better able to anticipate and react to higher 
than expected demands for care and/or increased costs of 
medications or other necessities?
    Mr. Gibson. That is a great question. I alluded in my 
opening statement to the challenges that we have as a 
Department forecasting reaction to improving access, being able 
to forecast changes in reliance on VA care, and then being able 
to factor into those forecasts information about market 
penetration, where we look at the number of veterans in a 
particular market, how many are enrolled for care at VA.
    I happen to know from my early visits to Phoenix that 
Phoenix was dramatically underpenetrated in the market. So 
there is a part of me that looks at the kind of response that 
we saw, that I described earlier, that is not necessarily 
surprise. But we don't typically factor those elements in or 
measure them very effectively. I think when we go through a 
process like we are now, where we are dramatically improving 
access to care in a relatively short period of time, it is 
giving us an opportunity to gain better insight and 
understanding and data.
    So that as we are forecasting future instances, we are able 
to look at those and understand a little bit better what the 
anticipated response might be. And I would tell you, lastly, on 
medications, I think the lesson, one of the lessons we have 
learned from hep C is very early on where we identified what 
you might characterize as blockbuster drugs that have a high 
price tag is that we start thinking and building into our 
planning as early as we possibly can the potential financial 
impact of those. There are a couple of cardiology drugs that 
are in the pipeline right now that are supposed to be 
blockbusters coming down the pipe that we are already talking 
about and trying to make allowances for.
    Ms. Radewagen. Thank you.
    Dr. Tuchschmidt. If I could just add to that, I think today 
we use one of the best actuarial firms in the world, Milliman, 
to do our modeling and projections. I think those models work 
well in very stable environments. But when that environment is 
perturbed by changing the benefit structure in some way, it 
becomes very hard to predict. And I think we have been doing a 
lot of work to look at and try and understand what would happen 
if we, a lot of interest in making the 40-mile benefit 40 miles 
from a place that can deliver that service, we have been doing 
a lot of work to try and understand what that does that look 
like. But you have to make a lot of assumptions that may or may 
not be correct. And I think that in very dynamic, fluid 
conditions, it is very hard to do some of the modeling that you 
might be talking about.
    Ms. Radewagen. Thank you.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you very much.
    Ms. Brownley. For a very short question.
    Ms. Browney. Thank you, Mr. Chairman and Ranking Member, 
for your indulgence. I really appreciate it. I had highlighted 
earlier in my earlier testimony some of the impacts that my 
district is already feeling. One of the other issues that they 
raised too was that the C&P evaluations are beginning to slow 
down as well. I know the folks the work in my congressional 
office are feeling that impact. I think you have said that $600 
million, you found $600 million, I am wondering will that $600 
million begin to mitigate these impacts that my district is 
feeling in the short term? And then if Congress doesn't act on 
the fiscal year 2015 budget shortfall, what is it going to look 
like in the VA in July and August and on October 1.
    Mr. Gibson. I think the number I should have used, $348 
million, is the amount of the--that we have provided Congress 
notice on that we intend to transfer into cover additional 
costs for care in the community. I think the farther we go in 
the fiscal year without the ability to open the aperture and 
utilize additional Choice funds, we get into very dire 
circumstances. Before we get to the end of August, we are, we 
are in a situation where we are going to have to start denying 
care to veterans in the community because we don't have the 
resources to be able to pay for it. And that is, I don't think 
anybody wants to see that happen. It will be a very unpleasant 
and unsatisfactory situation.
    Ms. Browney. And will you be giving us any of that 
information so that we have, you know, the real data to 
understand what those severe impacts are?
    Mr. Gibson. As best as we can, I am hoping that we wind up 
not having to go there and that we are able to use Choice 
dollars that were appropriated for care in the community to pay 
for care in the community. And if that is the case, then I 
think we are going to be absolutely fine. And we are going to 
be able to sustain care for veterans, even in the context of 
this increasing demand that we are experiencing. I think 
failing that, yes, there will have to be an awful lot of 
communication that goes all the way down to the medical center 
level so that Members understand what is happening in their 
particular districts.
    Ms. Browney. So, with this transfer of money, 358, whatever 
you said it was, can I go back to my district and tell my folks 
who are waiting for adult daycare that we have got some extra 
money, and we will be able to address their issue?
    Mr. Gibson. Part of what we are going through right now is 
some leveling across all of our different locations. So a lot 
of that is happening inside of VISN, where a VISN may have one 
center that has got some additional resources available, more 
than another medical center would. So there is leveling 
happening there. There is leveling happening at the top of VHA. 
We are going to continue to look internally in the very short 
term for opportunities at the top of VHA that we are able to 
distribute out to the field while we are waiting for the 
appropriator's nod on the additional $350 million that we have 
asked that they allow us to transfer. So it is hard for me to 
say at this point down to an individual medical center level: 
Here's what that $348 million is going to mean to you.
    Ms. Browney. Thank you, Mr. Secretary.
    And thank you, Mr. Chair.
    The Chairman. Thank you.
    Ms. Brown. For some final comments.
    Ms. Brown. Thank you. I am going to say right up front that 
I don't support across the budget cuts. I would not be 
supportive of across-the-board cuts. We gave you all $15 
billion, and you have $5 billion is that for healthcare?
    Mr. Gibson. For staff and facilities, yes, ma'am.
    Ms. Brown. I thought it was just for veterans' care. Did it 
just say for----
    Mr. Gibson. There is $10 billion for veterans' care, $5 
billion for staff and facilities.
    Ms. Brown. I need to know what it is that you need from us, 
the Congress, what do you need us to do to put VA where it 
needs to be? I don't want a constituent calling me saying we 
are not providing care for veterans. That is unacceptable.
    Mr. Gibson. Yes, ma'am.
    Ms. Brown. When I talked to my colleagues on the floor, 
they say: We don't understand what is the problem, we give you 
everything you all asked us for, and so I am at that page too. 
If you ask us and say this is what you need, I am going to 
fight for it. I don't want my veterans saying that we are not 
providing care. I have read those stories about me and my 
district.
    Mr. Gibson. Yes, ma'am.
    Ms. Brown. When you opened up the clinic in my district, 
then it just, the demand went through the roof.
    Mr. Gibson. Yes, ma'am. Yes, ma'am.
    Ms. Brown. So help me here.
    Mr. Gibson. We owe you a formal request. The specific 
request in the context that we are talking about here is a 
request to allow VA to utilize Choice program funds, section 
802 funds, to be able to cover costs for care in the community 
that might not otherwise qualify for Choice, meet those 
criteria for Choice. I think that will be the central feature 
of the formal request to Congress for support that will allow 
us to avoid disrupting care for veterans.
    Ms. Brown. I hear staff in the back of me saying the 
Committee are going to need a number.
    Mr. Gibson. Well, the number that we have offered and that 
was included in my testimony is $2.5 billion. That is the 
forecast--it is not what we are in the hole today--it is the 
forecast as we continue to deliver care in the community 
between now and the end of the year of what our shortfall would 
be.
    Ms. Brown. I am confused. If we give you $2-point-something 
billion or give VA the authority to move the money around, will 
it stop the calls I get from veterans saying they are being 
denied care? Because that is how we got to the $15 billion is 
because we want to take care of the veterans. When we send them 
to war, we have an obligation and a responsibility to take care 
of them.
    Mr. Gibson. We agree and we feel that same sense of 
obligation. What the $2.5 billion will do will allow us to 
basically continue on the path that we are on right now. But as 
I mentioned earlier, every step we take to improve access to 
care, much like your comment about opening a new outpatient 
clinic and the demand goes through the roof, that is the same 
thing we are experiencing across VHA.
    We do something, whether it is additional staffing, 
additional facilities or space, whether it is improving 
productivity so that we can provide appointments more quickly 
and what happens is all of that additional capacity gets more 
than consumed with additional demand. And that is why the total 
wait times are up. It is the accelerating demand that we are 
dealing with.
    So you may still get a phone call from a veteran that says 
I am not getting timely care. And the veteran is going to be 
right because he is not getting timely care. That is because we 
improve access to care as fast as we can and the demand grows 
even faster.
    Ms. Brown. Well, if that veteran wants care at the VA, it 
may not be in the time that he wants. But if he wants Choice, 
he or she wants Choice, that should be within 30 days.
    Mr. Gibson. It absolutely should. And if we get the 
additional flexibility so that different kinds of care are 
Choice eligible, then you are absolutely right, there shouldn't 
be a reason for a veteran to have to wait if he is willing to 
go get care in the community. You are right.
    Ms. Brown. Thank you, Mr. Chairman.
    The Chairman. The one thing that I am a little confused 
about as it relates to the shortfall, you have talked about in 
your testimony when you use mitigating factors is the shortfall 
of 2.6 or 2.7, whatever the number is, is that after you have 
implemented the mitigating procedures?
    Mr. Gibson. The $2.5 billion basically assumes, the biggest 
mitigant is that we are successful in shifting care into 
Choice. That is the biggest factor. And we think, we think that 
the current estimates are that we may be able to shift $500 
million worth of Choice-eligible care, based on today's 
eligibility criteria, into Choice between now and the end of 
the year. That is included in the $2.5 billion. So if we were 
successful in doing that, that number comes down to $2 billion. 
But it is still basically a pool of $2.5 billion for care in 
the community where we want to be able to sustain that care for 
veterans.
    The Chairman. Very good. And one thing that concerns me 
about the answer to one of the questions where you talked about 
with Mr. Takano getting to a point where you are going to have 
to begin rationing care to folks with hepatitis C, I hope it 
was not your intent to infer that you would not go to something 
that you have already testified today to the fact that you can 
go in and take money out of the bonus program to plug that 
budget hole if necessary. Surely, you would choose to draw 
money out of the bonus plan in order to provide hepatitis C 
drugs and not keep that program whole and cause veterans not to 
get treatment.
    Mr. Gibson. We are not doing any rationing of care today. 
We don't expect to do any rationing of care with hepatitis C. 
The thing that is allowing us to do that, frankly, is Choice. 
If we can't provide, if we don't have the resources to provide 
the care within 30 days, then we refer that veteran to a 
provider in the community. We stay close and work----
    The Chairman. I understand that. But you are still dancing 
around the $360 million worth of bonus money that is sitting 
there that you can go to. And I don't want to hear anybody say 
we choose bureaucrat bonuses over veteran healthcare. And I 
know that is not what you----
    Mr. Gibson. I understand the point, yes, sir.
    The Chairman. Everybody, thank you for being here. We wish 
you a happy Independence Day. We have another hearing in this 
room in 15 minutes.
    So, with that, this meeting is adjourned.
    [Whereupon, at 1:41 p.m., the committee was adjourned.]

                                 -------

                                APPENDIX

               Prepared Statement of Chairman Jeff Miller

    Thank you all for joining us for today's oversight hearing, ``The 
State of VA's Fiscal Year 2015 Budget.''
    I called this hearing two weeks ago following a series of 
concerning and inconsistent reports from veterans and Department of 
Veterans Affairs (VA) employees in the field regarding the current 
state of VA funding.
    I was not aware then of the troubling extent of VA's current budget 
crisis.
    And, unfortunately, I suspect that had I not called this hearing, I 
would still not be aware today of the two point six billion dollar 
funding shortfall that the Veterans Health Administration is currently 
estimating, largely as a result of increased veteran demand for non-VA 
care and rising costs of Hepatitis C treatments that VA did not 
properly plan for or manage.
    Given the extensive pent-up demand for care that was exposed during 
last year's hearings on wait time manipulation, VA had ample time to 
adjust its budgetary needs with the Office of Management and Budget to 
prevent what we are now seeing.
    In February through April of this year, Secretary McDonald appeared 
at four separate budget hearings.
    Since those have concluded, the Secretary and I have met and spoken 
regularly on a number of important, emerging issues.
    At no point in those hearings or in our subsequent discussions 
since, has the Secretary expressed to me that the Department had a 
budget shortfall of such a magnitude--one that threatens VA's ability 
to meets its obligations to our nation's veterans.
    Nor did other VA leaders or officials communicate how much in the 
red VA was either--even though the Committee was informed late last 
week that the Department knew as early as March that there were giant 
disparities between the amount of money that VA was spending and the 
amount of money budgeted.
    The only message that Congress received in March regarding the 
state of VA's budget was the quarterly financial report VA submitted to 
the Appropriations Committee for the first quarter of fiscal year 2015, 
which showed that VA was actually under plan in terms of its spend out 
rate.
    Meanwhile, just two weeks ago VA proposed a plan--that Congress 
authorized at the Department's urging--to transfer one hundred and 
fifty million dollars in fiscal year 2015 funding to support the 
continued construction of the replacement medical center project in 
Denver, Colorado.
    VA also proposed an across the board recession of just under a one 
percent in fiscal year 2016 funds to devote to the Denver project--a 
proposal, by the way, that the Veterans Health Administration's Chief 
Financial Officer told Committee staff last week that she did not even 
know about until after it had already been transmitted to Congress.
    Those actions clearly show that VA leaders believe that moving 
forward with the Denver project--which is not scheduled to open to 
veteran patients until 2017 at the earliest--is a higher priority for 
the Department than ensuring that veterans who need care now are able 
to access that care.
    I have come to expect a startling lack of transparency and 
accountability from VA over the last years; but failing to inform 
Congress of a multi-billion dollar funding deficit until this late in 
the fiscal year while continuing to advance what I believe are lower 
priority needs that further deplete the Department's coffers in support 
of a construction project that benefits no veteran for at least two 
more years is disturbing on an entirely different level.
    Earlier this week, VA issued a ``fact sheet'' that claims that VA 
``formally requested limited budget flexibility'' in February and March 
and May of this year and, ``plainly articulated'' VA's need for 
additional resources.
    Buried on page one hundred and sixty seven of the second volume of 
VA's budget submission is a single statement that reads: ``[i]n the 
coming months, the Administration will submit legislation to reallocate 
a portion of Choice program funding to support essential investments in 
VA system priorities . . . ''
    Secretary McDonald repeated this statement in his budget testimony 
without providing any additional supporting details or justification 
and, to-date, no legislative proposal has been submitted by the 
Administration.
    In a May 12th letter to the Chairmen and Ranking Members of the 
House and Senate Veterans' Affairs and Appropriations Committees 
regarding the Denver project, VA stated that the Department, `` . . . 
requests flexibility to make the [Choice] program work better for 
veterans through limited authority to use funds from Section 802 of the 
Choice Act to fund care in the community to the extent it exceeds our 
FY 2015 budget.''
    Again, no further information or supporting materials were 
provided.
    If those two statements--absent any data or details--are what VA 
calls ``formally requesting'' budget flexibility and ``plainly 
articulating'' the Department's needs, then I understand why VA has 
found itself suffering nothing but string after string of failures in 
the last year.
    What's more, it proves to me once again that VA's current problems 
reflect a management issue far more than they represent a money issue.
    This Committee cannot help VA solve its problems, if VA refuses to 
be honest, upfront, and transparent with us and with the American 
people about the position it is in, the struggles it is facing, and the 
help that it needs.
    Congress has consistently provided VA with the funding that the 
Department has requested and, as a result, VA funding has risen seventy 
three percent since 2009 while the number of Veterans using VA for care 
has grown by only about 2 percent per year, per VA's own testimony.
    I know that I speak for every Member of this Committee when I say 
that we are committed to ensuring that VA has the funding it needs to 
deliver the world class healthcare our veterans deserve.
    But VA must do its part--to confront and correct its poor budget 
planning and poor management issues, to hold poor performing executives 
and employees accountable, and--perhaps most importantly--to prioritize 
our veteran's needs over the bureaucracy's wants.
    And if the current shortfall shows us anything it's that what our 
veterans need and want is to have a say in where and when they receive 
their healthcare.
    Assuming VA's numbers are true, non-VA care appointments now make 
up twenty percent of all VA appointments, with veterans receiving more 
than one million appointments from community providers each month.
    In the coming weeks, I will work with my colleagues on the 
Appropriations Committee to give VA the flexibility it is seeking to 
use a limited amount of Choice Funds for non-VA care and ensure that no 
veteran suffers as a result of VA's mismanagement of the generous 
budget the American taxpayers have provided.
    However, going forward, there must be a dedicated appropriation 
account to fund non-VA care under a single, streamlined, integrated 
authority with a dedicated funding stream contained within VA's base 
budget--rather than the seven disparate, ill-executed non-VA care 
programs outlined in VA's testimony.
    This morning, I look forward to discussing this proposal with 
Deputy Secretary Gibson and with my fellow Committee Members.
    I thank you all for being here and I now recognize Ranking Member 
Brown for any opening statement she might have.

      Prepared Statement of Ranking Minority Member Corrine Brown

    Thank you Mr. Chairman.
    Today's hearing is on the ``State of VA's Fiscal Year 2015 
budget.'' I can tell you all that the state of VA's budget is not 
strong.
    The VA is facing a shortfall of $2.6 billion for veterans' 
healthcare. This shortfall must be addressed immediately. We cannot put 
the health and lives of our veterans at risk by spending our time and 
attention pointing fingers and assigning blame.
    VA will be facing an additional shortfall at the start of the next 
fiscal year in October, a shortfall that will be made worse by the 
cost-saving steps VA is taking right now. We must address this upcoming 
shortfall.
    I know that this Committee, as we have done so many times in the 
past, will work together to solve this crisis, and fix this mess. And I 
know that we all recognize that sometimes it takes more money to really 
fix a problem, and not just slap some tape on it and call it a day.
    So, in the words of Deputy Secretary Gibson we will ``get our 
checkbooks out.'' But I am concerned that there may be nothing left in 
the account as long as we continue to pretend that we can fund the 
essential requirements of government within arbitrary budget caps. We 
seem to be heading toward a government shutdown, and I am concerned 
over the effect such a shutdown would have on veterans seeking 
healthcare.
    Ten years ago we addressed another VA shortfall. That shortfall was 
due to a lack of sufficient planning, and years of not providing the VA 
the resources it needed. Today's shortfall also seems to be caused by 
the lack of proper planning regarding the demand of veterans for VA 
healthcare. I am also concerned that inadequate planning led to 
insufficient resource requests.
    We need to begin to fix these problems. My bill, the Department of 
Veterans Affairs Budget Planning Reform Act of 2015 passed the House in 
March 420-0. It is a much needed reform in how the VA plans and budgets 
for the future. It is time that our colleagues in the Senate pass this 
bill and send it to the President.
    If the VA is going to be there for our veterans, then we are going 
to have to fix the problems. This will call for more than us just 
opening up our checkbook, or writing blank checks to the VA. It will 
require thoughtful and major reforms so that we can ensure that in the 
years ahead the VA is worthy of our veterans.
    But today, right now, we have veterans that need healthcare and 
checks we need to write to pay for that, and we need to make sure that 
these checks are not returned because we do not have enough money in 
our account.
    Then, and only then, can we start the reform effort so that VA is 
the model of how we care for those who have sacrificed for us, and 
honored us with their service.
    We have got to work together to ensure we are not giving our 
veterans a check that will bounce because of insufficient funds.
    Failure is not an option!
    Thank you and I yield back the balance of my time.

                                 -------

  Statement of Hon. Sloan Gibson, Deputy Secretary of Veterans Affairs

    Good morning Chairman Miller, Ranking Member Brown, and Members of 
the Committee. Thank you for the opportunity to discuss the Department 
of Veterans Affairs' (VA's) execution of its Fiscal Year (FY) 2015 
budget. I am accompanied today by Dr. James Tuchschmidt, Interim 
Principal Deputy Under Secretary for Health; Mr. Edward Murray, Acting 
Assistant Secretary for Management and Interim Chief Financial Officer; 
and Mr. Gregory Giddens, Principal Executive Director, Office of 
Acquisitions, Logistics, and Construction.
    Caring for our Nation's Veterans, their Survivors, and dependents 
continues to be the guiding mission of VA. Each year, VA executes our 
budget to ensure we deliver timely, high quality services and benefits 
to fulfill this mission. As we emerge from one of the most serious 
crises the Department has ever experienced, we face continuing 
challenges to ensure our Veterans receive the timely care they have 
earned through their service. However, we believe that these challenges 
are surmountable and will continue to work with Congress to reach 
resolution and develop plans to move forward in achieving our mission.

Improving Access to Care

    Before reviewing the challenges to VA's budget this fiscal year, it 
is essential to understand the context in which VA is executing its 
resources. In response to unacceptable delays in Veterans receiving 
medical services, in May 2014, VA launched the Accelerating Access to 
Care Initiative, which included immediate actions to improve Veterans' 
access to care. Our strategy has focused on four critical activities: 
staffing, space, productivity, and VA Care in the Community. While more 
work remains to be done, real progress has been made. For example:

         In the area of staffing, the Veterans Health 
        Administration (VHA) has increased onboard staff by 12,179 
        since April 2014, including 1,086 physicians, 2,724 nurses, and 
        4,671 other select critical occupations. As part of this 
        initiative, VHA has hired over 3,700 medical center staff using 
        the new resources provided in the Veterans Access, Choice, and 
        Accountability Act (``Choice Act'').
         In order to create additional space, during the last 
        fiscal year VA activated 80 new leases in VHA, totaling 1.3 
        million square feet and activated newly owned facilities 
        totaling 420,000 square feet. We have dozens of emergency lease 
        transactions in process to more quickly increase available 
        space for Veteran care. Wherever possible, we are increasing 
        the number of primary care exam rooms per provider in order to 
        allow providers to see more Veterans each day.
         We have extended clinic hours into nights and weekends 
        in order to best use our limited space and enhance convenience 
        for Veterans.

    Our efforts to improve access to care have been successful. 
Nationally, VA completed more than 51.8 million appointments between 
June 1, 2014 and April 30, 2015. This represents an increase of 2.7 
million more appointments completed than during the same time period in 
FY 2013 or FY 2014. In April 2015, VA completed 97 percent of 
appointments within 30 days of the clinically indicated or Veteran's 
preferred date; 93 percent within 14 days; 88 percent within 7 days; 
and 22 percent on the same day. Not only are more appointments being 
completed, but Relative Value Units (RVUs), a standard measure of 
clinical output, have increased 10 percent year over year, twice the 
increase in providers during the same time, confirming improved 
productivity.
    We are managing to complete these appointments while more Veterans 
continue to come to VA for their care, even though 81 percent have 
Medicare, Medicaid, Tricare, or private insurance. While the number of 
Veterans using VA for care has grown about 2 percent per year, many 
locations where space, staffing, productivity, and community care 
enhancements have been emphasized are growing at multiples of that 
rate. Essentially, as we are improving Veterans' access to care across 
VA, Veterans are responding and seeking VA care at higher rates. Our 
workload has increased by 10.5 percent in total, for VA care and Care 
in the Community combined.

The Veterans Choice Program and Purchased Care Reform Legislation

    The Veterans Choice Program is helping VA to meet some of the 
demand for Veterans healthcare in the short-term, and VA is thankful 
for the Choice Act's funding to help us address our access issue. In 
February 2015, when VA transmitted the 2016 Budget to Congress, we 
noted that the Choice Act investments provide the authorities, funding, 
and other tools to enhance services to Veterans in the short-term, 
while strengthening the underlying VA system to better serve Veterans 
in the future. We also noted that more resources in certain areas would 
be required to ensure that the VA system can provide timely, high-
quality healthcare into the future.
    As we gain more experience with executing the Choice Program, we 
continue to learn how the program can be improved to better serve 
Veterans. We appreciate Congress passing legislation regarding the 
driving distance calculation methodology and the increased flexibility 
for the Secretary to grant waivers for Veteran eligibility for the 
Choice Program; we hope Congress will consider the other requests we 
have made identifying solutions to help operate the Choice Program more 
effectively.
    We are also focused on looking internally at the business rules and 
processes that govern the Veterans Choice Program. When we step back to 
revise our own practices and focus on long-term work plans, we are 
creating more efficient processes that will not only support providing 
better and timelier care to Veterans, but also provide better business 
relationships with our VA community care providers.
    On May 1, VA sent Congress an Administration legislative proposal 
entitled the ``Department of Veterans Affairs Purchased Healthcare 
Streamlining and Modernization Act.'' This bill would make critical 
improvements to the Department's authorities to use provider agreements 
for the purchase of VA community medical care--in order to streamline 
and speed the business process for purchasing care for Veterans when 
necessary care cannot be purchased through existing contracts or 
sharing agreements. This proposal would ensure that VA is able to 
provide local care to Veterans in a timely and responsible manner, 
while including explicit protections for procurement integrity, 
provider qualifications, and price reasonableness. We urge your 
consideration of this bill, which will provide VA the right legal 
foundation on which to reform its purchased care program-- which 
remains critical for Veterans' access to healthcare.

Care in the Community

    For years, VA has used various authorities and programs in order to 
provide care to Veterans more quickly and closer to home. In FY 2014, 
Veterans completed 55 million appointments inside VA and 16.5 million 
appointments for Care in the Community. Each month, VA completes over 1 
million appointments through doctors and clinics in the community, 
which represents over 20 percent of total appointments. We have 
succeeded in providing increased access to care by way of Care in the 
Community by issuing over 2.9 million authorizations in the last 12 
months, which is a 44 percent increase over the same period in the 
previous year. This increase in authorizations will result in millions 
of additional episodes of care for Veterans should sufficient resources 
be available.
    This unprecedented increase in Veteran access to care has come at a 
cost. VHA now expects to spend $10.1 billion in FY 2015 for Care in the 
Community, \1\ an increase of $1.9 billion (24 percent) from the $8.2 
billion in FY 2014. Our FY 2015 Medical Services budget includes $7.3 
billion for Care in the Community, and VA had expected the Choice 
Program to finance a surge in demand for Care in the Community.
---------------------------------------------------------------------------
    \1\ Care in the Community includes all inpatient and outpatient 
care, as well as community nursing homes, dialysis, and emergency care 
(Millennium Bill) by providers outside the VA. It also includes CHAMPVA 
and other dependent programs, State Homes, Project ARCH, and Indian 
Health Service.
---------------------------------------------------------------------------
    In the past eight months of implementing the Choice Program, we 
accomplished a significant amount in a short period of time: we have 
produced and distributed over 8.5 million Veterans Choice Cards, 
determined Veterans' eligibility, authorized care, coordinated care and 
managed utilization, established new provider agreements, processed 
complex claims, and stood up a call center, all with the goal of 
providing Veterans with the best possible care-experience, while also 
meeting our obligations to be good stewards of the Nation's tax 
dollars. We have also been modifying our referral processes to create 
efficiencies in the system to ensure Veterans are able to receive care 
timely. We are proud of what we have accomplished; and Veterans are as 
well, with more of them coming to VA for their healthcare needs.
    Unfortunately, the Choice Program has not fully absorbed the 
additional Veteran demand for care, both inside and outside of the VA. 
We have had challenges redirecting the flow of care from Care in the 
Community to the Choice Program. Part of this is due to the fact that, 
even prior to passage of the Choice Act, we were leveraging Care in the 
Community to ensure that Veterans were not experiencing excessive wait 
times. We understand that some of these challenges are also due to 
employees not fully understanding how the Choice Program works. We 
continue our outreach to VA facility leadership to improve employees' 
understanding of the Choice Program and to address any reluctance our 
staff may have to send Veteran patients into the community to use the 
Choice Program. Our staff are more familiar and comfortable with 
assisting Veterans with existing VA community care programs, many of 
which are long-standing. We must ensure they are just as adept with the 
Choice Program as well.
    We also recognize that the number and different types of VA 
community care programs and authorities may be confusing to Veterans, 
our stakeholders, and our employees. We currently have 7 different 
programs that we utilize to provide care to Veterans, including:

    1. Agreements with the Indian Health Service, Department of 
Defense, Other Federal Agencies, and Academic Affiliates;
    2. Veterans Choice Program;
    3. Patient Centered Community Care (PC3);
    4. Project ARCH;
    5. Other national contracts (such as dialysis);
    6. Local contracts and local sharing agreements; and
    7. Individual authorizations.

    Navigating these programs to determine the best fit for a Veteran 
may be challenging. Therefore, we are currently working to streamline 
channels of care, billing practices, and mechanisms for authorizations, 
with the goal of creating a more unified and integrated approach to 
community care.
    We are making efforts to improve how we are managing our Care in 
the Community program while continuing to do the right thing for 
Veterans and provide essential access to care. In order to continue 
these efforts, we have determined that, at the current rate, expected 
demand for Care in the Community in FY 2015 will cost approximately an 
additional $2.5 billion. We are currently taking the following actions 
to mitigate this need.
         First, we have issued guidance to our facilities to 
        maximize the use of the Veterans Choice Program by, to the 
        extent possible, directing all eligible care to the Choice 
        Program. We estimate that this could reduce the requirement by 
        $500 million, although this estimate is highly uncertain and 
        depends significantly on Veterans' desires to use the Choice 
        Program instead of waiting for an appointment within VA.
         Second, we have analyzed prior obligations for Care in 
        the Community to determine whether the services provided were 
        eligible for and met all of the requirements of the Choice 
        Program; this analysis revealed approximately $24 million that 
        could retroactively be recorded against the Choice Program.
         Third, we have identified approximately $170 million 
        in Medical Services resources, such as funds for travel and 
        training and other areas deemed less critical than paying non-
        VA care bills that have been reallocated to the Care in the 
        Community program without adverse consequences to patient care.

    In addition, we plan to request a transfer of unobligated funds 
from the Medical Facilities account to the Medical Services account. 
This transfer will not have an immediate impact to any VA services 
provided to Veterans. To ensure Veterans are receiving their requested 
care, we request flexibility through limited authority to use funds 
from section 802 of the Choice Act to fund Care in the Community, to 
the extent these costs exceed our FY 2015 budget.

Hepatitis C

    One example of these evolving Veteran needs can be seen in the 
recent advancements in the treatment of the Hepatitis C virus (HCV). 
Studies indicate that when these new treatments are used in combination 
with existing treatment regimens, there is a higher chance of 
successful treatment in patients with HCV. VA is a leader in the U.S. 
in HCV care, including screening, treatment, and prevention. We want to 
ensure our Veterans are provided with the best treatment options 
available to them, so we successfully set up an infrastructure capable 
of ensuring treatment can be provided whenever appropriate. However, in 
providing this critical care, we are facing a funding shortfall for the 
cost of HCV treatment.
    As you know, the Veterans healthcare Budget Reform and Transparency 
Act of 2009 (P.L. 111-81) established funding for VA's medical care 
accounts through an Advance Appropriation (AA). Under this process, VA 
must estimate funding needs two years in advance of their execution. 
While the AA provides VA with timely and predictable funding, the 
process can introduce additional risk of variance between projected and 
actual costs. The shortfall for HCV treatment is evidence of this risk 
that can be shown by a timeline of events:

         In the summer 2012, VHA developed the internal budget 
        requirements for its FY 2015 AA request.
         In April 2013, we submitted our FY 2014 budget, which 
        included the FY 2015 AA request for VA Medical Care.
         In summer 2013, VHA developed its internal budget 
        requirements for its FY 2015 revised appropriation request, to 
        be submitted with its FY 2015 budget.
         In November and December 2013, the Food and Drug 
        Administration (FDA) approved two antiviral medications for use 
        as part of combination regimens which offer shorter treatment 
        durations and decreased side effects in addition to increased 
        cure rates, but are more expensive than prior treatments.
         In January 2014, Congress passed the final FY 2014 
        appropriations bill (Consolidated Appropriations Act, 2014) 
        which did not identify a specific amount of funding designated 
        for HCV treatment as part of the FY 2015 AA.
         In March 2014, we submitted our FY 2015 budget, which 
        included the FY 2015 revised appropriation request for VA 
        Medical Care.
         In April 2014, we added the most recently approved 
        FDA-approved treatments to our formulary.
         In September 2014, we alerted Congress to the 
        impending FY 2015 shortfall in funding for HCV treatment in a 
        ``Sufficiency Letter'' which provided an evaluation of the 
        sufficiency of the FY 2015 AA request.
         In December 2014, the FDA approved additional HCV 
        drugs that were proven to be more effective in treating HCV 
        than the previous treatments. In December 2014, Congress passed 
        the final FY 2015 appropriations bill (Consolidated and Further 
        Continuing Appropriations Act, 2015) which did not identify a 
        specific amount of funding designated for HCV treatment.

    In our September 10, 2014, Sufficiency Letter, VA stated that it 
had reviewed the capacity and resource requirements to determine if 
additional funding was required in FY 2015 for known emergent needs. We 
stated that we had ``identified additional resource requirements that 
cannot be funded through the resources allocated in Public Law 113-146, 
or within existing resources'' and estimated that new drug treatment 
for HCV would increase VA's drug costs in FY 2015 by $673 million. The 
Sufficiency Letter also noted that, due to the timing of the Food and 
Drug Administration's approval for new HCV medications, the 
Administration was unable to incorporate their impacts when developing 
the 2015 President's Budget.
    To be clear, VA is committed to ensuring that patients with HCV 
receive the treatment they need. Therefore, to meet the unfunded need 
in 2015, VHA reallocated $697 million out of other activities to fund 
HCV treatments. However, this funding is not sufficient to ensure we 
are providing the best care to HCV-infected Veterans. We now expect the 
cost of HCV treatment to be approximately $1.1 billion in 2015. We are 
currently addressing the $400 million funding shortfall by referring 
Veterans who need HCV treatment to the Choice Program, but we are 
concerned that Veterans who would prefer to receive this care within 
the VA system are not able to do so. In addition, referring HCV-
infected Veterans to the Choice Program is not the best model to 
provide care that meets both Veterans' needs and taxpayers' interests 
because of the increased costs, complexities, and requirements for 
coordination of care. It is in our Veterans' interest for VA to provide 
these life-saving treatments. This is a point where adding flexibility 
in the use of funds appropriated for the Choice Program could help 
Veterans receive care in timely fashion. For the reasons discussed 
above, we would like to continue our discussions with the Committee on 
this concept.

Construction

    VA acknowledges the challenges we have experienced in building the 
Denver Replacement Medical Center facility in Aurora, Colorado. We are 
committed to doing what is right for the Veterans in the Colorado 
Region and completing this major construction project without further 
delay. VA is dedicated to getting the project back on track in the most 
effective and cost efficient manner possible.
    As I have stated previously, the delays and cost overruns that have 
plagued the Denver Replacement Medical Center campus are inexcusable. 
In order to prevent a recurrence of the unacceptable mistakes made on 
the Denver project, VA is expanding its relationship with the U.S. Army 
Corps of Engineers (Corps) regarding management of future VA major 
construction projects. Out of the 15 major construction projects that 
VA anticipates will be in active construction within the next three 
years, five are already underway and past the logical transition point 
for the Corps to take over. VA expects to designate the Corps as our 
construction agent for seven other projects, which total 86 percent of 
the value of the 10 active major construction projects. In the future, 
VA believes that the Corps should be designated as our construction 
agent for all new medical facilities with a cost of $250 million or 
greater that have not yet started construction.
    In addition, VA has also instituted a number of other specific 
reforms based on best practices from the private and public sector, 
including:

         Integrated master planning to ensure that the planned 
        acquisition closes the identified gaps in service and corrects 
        facility deficiencies.
         Requiring major medical construction projects to 
        achieve at least 35 percent design prior to cost and schedule 
        information being published and construction funds requested.
         Implementing a deliberate requirements control 
        process, where major acquisition milestones have been 
        identified to review scope and cost changes based on the 
        approved budget and scope.
         Institutionalizing a Project Review Board (PRB) that 
        is similar to the structure at the Corps District Offices. The 
        PRB regularly provides management with metrics and insight to 
        indicate if/when a project requires executive input or 
        guidance.
         Using a Project Management Plan for accomplishing the 
        acquisition from planning to activation to ensure clear 
        communication throughout the project.
         Establishing a VA Activation Office to ensure the 
        integration of the facility activation into the construction 
        process for timely facility openings.
         Conducting pre-construction reviews wherein major 
        construction projects must undergo a ``constructability'' 
        review by a private construction management firm to review 
        design and engineering factors that facilitate ease of 
        construction and ensure project value.
         Integrating Medical Equipment Planners into the 
        construction project teams. Each major construction project 
        will employ medical equipment planners on the project team from 
        concept design through activation.

    We believe that these reforms will allow us to avoid the mistakes 
of the past and ensure VA construction projects are executed in a 
manner that will better serve Veterans and American taxpayers.
Budget Process Improvements

    We fully recognize that there are areas where VA could have managed 
our FY 2015 budget more effectively. A continuing challenge is that 
historically, VA has not operated as an integrated enterprise and 
relies on old or inadequate enterprise-wide systems. For example, our 
financial management system is more than 20 years old; we require an 
integrated logistics system to provide supplies and services on an as-
needed basis; and we require an integrated human resources system to 
fully manage our recruitment, hiring, and staffing processes. VA also 
does not have a modern medical claims management system for accurate, 
actionable data on obligations for Care in the Community. VHA relies on 
staff-intensive transactions to execute its budget for Care in the 
Community. Manual processes cannot keep pace with the unprecedented 
surge in demand that VHA is experiencing in FY 2015.
    In the future, we are taking a close look at our business practices 
for the Care in the Community program, with an eye to streamlining and 
automating processes. We also are pursuing a different approach to 
better identify resource requirements in the future and tie them to 
Veteran-centric outcomes.

Closing

    Veterans are VA's sole reason for existence and our number one 
priority. In today's challenging fiscal and economic environment, we 
must be diligent stewards of every dollar and apply them wisely to 
ensure that Veterans--our clients--receive timely access to the highest 
quality benefits and services we can provide and which they earned 
through their sacrifice and service to our Nation. We also acknowledge 
the responsibility, accountability, and importance of showing 
measurable returns on that investment. You have my pledge that we will 
do everything possible to ensure that VA is a responsible steward of 
taxpayer resources, and that funds appropriated will continue to be 
used to improve the quality of life for Veterans and the efficiency of 
our operations. We are proud to be part of this VA team and feel 
privileged to be here serving Veterans at this key time in history. 
Thank you for the opportunity to appear before you today and for your 
steadfast support of Veterans.

                                 [all]
```