U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office,

http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,

U.S. Government Printing Office. Phone 202–512–1800, or 866–512–1800 (toll-free). E-mail, gpo@custhelp.com.

i 

86–970 2014

[H.A.S.C. No. 113–80] 

DEFENSE HEALTH AGENCY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MILITARY PERSONNEL 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

FEBRUARY 26, 2014 
(II) 

SUBCOMMITTEE ON MILITARY PERSONNEL 

JOE WILSON, South Carolina, Chairman 

WALTER B. JONES, North Carolina 

JOSEPH J. HECK, Nevada 

AUSTIN SCOTT, Georgia 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

CHRISTOPHER P. GIBSON, New York 

KRISTI L. NOEM, South Dakota 

SUSAN A. DAVIS, California 

ROBERT A. BRADY, Pennsylvania 

MADELEINE Z. BORDALLO, Guam 

DAVID LOEBSACK, Iowa 

NIKI TSONGAS, Massachusetts 

CAROL SHEA-PORTER, New Hampshire 

JEANETTE JAMES, Professional Staff Member 

DEBRA WADA, Professional Staff Member 

COLIN BOSSE, Clerk 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2014 

Page 

HEARING: 

Wednesday, February 26, 2014, Defense Health Agency ..................................... 1 

APPENDIX: 

Wednesday, February 26, 2014 .............................................................................. 19 

WEDNESDAY, FEBRUARY 26, 2014 

DEFENSE HEALTH AGENCY 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Davis, Hon. Susan A., a Representative from California, Ranking Member, 

Subcommittee on Military Personnel ................................................................. 2 

Wilson, Hon. Joe, a Representative from South Carolina, Chairman, Subcommittee on Military Personnel ........................................................................ 1 

WITNESSES 

Farrell, Brenda S., Director, Defense Capabilities and Management, U.S. 

Government Accountability Office ...................................................................... 7 

Robb, Lt Gen Douglas J., USAF, Director, Defense Health Agency .................... 5 

Woodson, Hon. Jonathan, M.D., Assistant Secretary of Defense for Health 

Affairs, Department of Defense .......................................................................... 3 

APPENDIX 

PREPARED STATEMENTS: 

Farrell, Brenda S. ............................................................................................. 47 

Wilson, Hon. Joe ............................................................................................... 23 

Woodson, Hon. Jonathan, M.D., joint with Lt Gen Douglas J. Robb ........... 25 

DOCUMENTS SUBMITTED FOR THE RECORD: 

Statement of the American Clinical Laboratory Association ........................ 69 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Dr. Heck ............................................................................................................ 75 

Mr. Wilson ......................................................................................................... 75 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Barber ......................................................................................................... 84 

Mr. Castro ......................................................................................................... 85 

Mr. Scott ............................................................................................................ 83 

Ms. Tsongas ...................................................................................................... 83 

Mr. Wilson ......................................................................................................... 79 

(1) 

DEFENSE HEALTH AGENCY 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE ON MILITARY PERSONNEL, Washington, DC, Wednesday, February 26, 2014. 

The subcommittee met, pursuant to call, at 2:00 p.m., in room 

2212, Rayburn House Office Building, Hon. Joe Wilson (chairman 

of the subcommittee) presiding. 

OPENING STATEMENT OF HON. JOE WILSON, A REPRESENTATIVE FROM SOUTH CAROLINA, CHAIRMAN, SUBCOMMITTEE 

ON MILITARY PERSONNEL 

Mr. WILSON. Ladies and gentlemen, welcome to a meeting of the 

House Armed Services Committee, Military Personnel Subcommittee. Today the subcommittee meets to hear testimony on the 

Defense Health Agency [DHA]. I would like to begin by acknowledging the remarkable military and civilian medical professionals 

who provide extraordinary care to our service members and their 

families here at home and around the world, often in some of the 

toughest and most austere environments. 

I have firsthand knowledge of their dedication and sacrifice from 

my son, Lieutenant Commander Addison Wilson, Jr., who is a 

Navy orthopedic surgeon stationed in Naples, Italy. 

In June 2011, the House passed legislation establishing a joint 

unified medical command as a method of making a streamlined 

and efficient Military Health System [MHS], which has been shown 

by multiple studies to be a potential source of great cost savings. 

Ultimately, the Department of Defense [DOD] rejected the option 

of a joint command, deciding instead to establish the Defense 

Health Agency as part of an overall restructure of governance of 

the Military Health System to drive efficiencies and cost savings. 

This was done, despite concerns raised by the Government Accountability Office [GAO] about the Department’s analyses of options for restructuring the Military Health System. 

I am anxious to hear from our witnesses how the Defense Health 

Agency is progressing, including your forecast for accomplishing 

the goals of increased efficiency and cost reduction. To that end, I 

would like the witnesses to address the following: First, the Government Accountability Office offered several recommendations regarding implementation of the Defense Health Agency. How has 

the Department addressed these recommendations? Was a comprehensive cost analysis of the Defense Health Agency conducted? 

And what were the results? 

Second, in June of 2013, the Department estimated that the Defense Health Agency staffing requirement would be 1,081. By Octo-
2 

ber 2013, that estimate nearly doubled to 1,941. What is the current DHA staffing level? If it has been deviated from the estimate, 

please explain why. Are further increases in staffing required? 

Pardon me. The phone has come to life. 

Third, given that 7 of the 10 shared services were implemented 

at the beginning of this fiscal year, are current savings and spending levels on par with projections, especially the pharmacy program, which was projected to attain early savings? 

Finally, I would like to hear how the military surgeons general 

were involved in the implementation process. 

I hope that our witnesses will address these important issues as 

directly as possible in their oral statements and in response to 

Member questions. 

Before I introduce our panel, let me offer Ranking Member 

Susan Davis from California an opportunity to make opening remarks. 

[The prepared statement of Mr. Wilson can be found in the Appendix on page 23.] 

STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE 

FROM CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON 

MILITARY PERSONNEL 

Mrs. DAVIS. Thank you, Mr. Chairman. I also want to welcome 

Assistant Secretary Woodson, General Robb, and Ms. Farrell. 

Given the recent budget released by the Secretary of Defense on 

Monday, I am certainly looking forward to and I am sure many 

people here are, to hearing from our DOD witnesses on the state 

of the Defense Health Agency and its efforts to consolidate functions, to better coordinate care, and reduce resources. 

As we all know, military healthcare budget is nearly $50 billion 

a year. And while we have a budget agreement for 2014, sequestration still remains in effect for 2015 and future years. 

So difficult decisions will need to be made on how reductions are 

going to be implemented and how the impact of these reductions 

will be minimized as to not adversely impact beneficiaries or their 

quality of care provided to them. However, such achievements can 

only occur if there is transparency and accountability of how the 

Department makes and implements their decisions. The establishment and the implementation of the Defense Health Agency is a 

case study before us on where the Department can achieve transparency and accountability within the Military Health System. 

Ms. Farrell, thank you for coming. I look forward to hearing 

GAO’s assessment on the establishment of the DHA and whether 

there are further areas of concern that the subcommittee should 

continue to conduct oversight activities. 

And I also look forward to hearing from Secretary Woodson, of 

course, good to see you again, and General Robb on how the DHA 

is moving forward, what efficiencies and savings have been 

achieved to date, what is expected over the long term, and where 

the DHA is in implementing all of the GAO’s recommendations. 

So we thank you very much. Mr. Chairman, and look forward to 

the discussion today. 

Mr. WILSON. Thank you, Mrs. Davis. 
3 

We have three witnesses today. We would like each witness the 

opportunity to present his or her testimony and each Member an 

opportunity to question the witnesses. I would respectfully remind 

the witnesses that we desire you to summarize to the greatest extent possible the high points of your written testimony in 3 minutes. I assure you that your written comments and statements will 

be made part of the hearing record. 

I also want to announce that to ensure all Members have an opportunity to question our witnesses we will use the 5-minute rule 

when recognizing Members for questioning. 

At this time, without objection, I ask unanimous consent that an 

additional statement from the American Clinical Laboratory Association be included in the record of this hearing. 

Without objection, so ordered. 

[The information referred to can be found in the Appendix on 

page 69.] 

Mr. WILSON. Let me welcome the panel. Returning, the Honorable Dr. Jonathan Woodson, M.D., Assistant Secretary of Defense, 

Health Affairs, Department of Defense. 

Thank you for being here. 

Lieutenant General Doctor Douglas J. Robb, Director, Defense 

Health Agency, U.S. Air Force, and Ms. Brenda S. Farrell, Director 

Defense Capabilities and Management, U.S. Government Accountability Office. 

And before we begin, I would like to extend a special welcome to 

General Robb, as this is his first appearance before this subcommittee, and we appreciate your service to our country. 

As we begin, Dr. Woodson, and then we will shift over, and then 

we will begin our questions. Thank you. 

STATEMENT OF HON. JONATHAN WOODSON, M.D., ASSISTANT 

SECRETARY OF DEFENSE FOR HEALTH AFFAIRS, DEPARTMENT OF DEFENSE 

Dr. WOODSON. Well, thank you very much, Chairman Wilson, 

Ranking Member Davis, members of the committee. It is indeed a 

privilege to be here today and update you on the Department’s implementation of an important reform in the Military Health System, a needed reform in this era of significant challenges for the 

Department and American health care at large. 

Our national security and defense strategies must be supported 

by a strong, relevant, agile, and forward-leaning Military Health 

System. Our service members deserve and the American people expect excellent care delivered reliably, effectively, efficiently, and 

compassionately anywhere our service members are stationed or 

deployed. We have good evidence that joint integrated care improves results in combat. 

Today, if a Marine unfortunately is wounded in combat, he or 

she will be treated by a Navy corpsman immediately; transported 

by an Army medevac unit to a level 2 or 3 facility, staffed by Air 

Force, Army or Navy personnel working together; further strategically evacuated, receiving critical care en route by Air Force assets, 

to a level 4 or 5 facility where again definitive advanced care will 

be given by a multiservice healthcare team. This integrated, synchronized, coordinated combat casualty care system transcends 
4 

service and command distinction and has resulted in the highest 

survival rates and the lowest case fatality rates in recorded warfare. 

This has come about not by chance but by designing a datadriven integrated system focused on wounded warrior care and improving outcomes. The system reduces variability and provides for 

evidence-based common clinical and business processes reform. Together with the surgeon generals, we have moved forward to bring 

this design to all of our healthcare operations. 

Secretary Hagel has outlined his priorities for managing the significant change needed in the coming years. These include introducing institutional reforms, reevaluating our military force planning construct, preparing for prolonged readiness challenges, protecting investments in emerging military capabilities, balancing 

forces between Active and Reserves, and reforming personnel and 

compensation policies. 

In order to meet our mission in these changing times, I have outlined six lines of effort for the Military Health System in support 

of the Secretary’s priorities. These include modernize the Military 

Health System’s management with an enterprise focus, define and 

deliver the medical capabilities and manpower needed in the 21st 

century, invest in and expand strategic partnerships, assess the 

balance of our medical force structure, modernize the TRICARE 

health program, and define the Military Health System’s global 

health engagement requirements. 

These strategic lines of effort will help us deliver on our overwhelming—or our overarching quadruple aims of readiness, improving the health of the populations we serve, improving the experience of care in our system, and responsibly managing the costs. 

Today we will focus on the first priority, modernizing our management structure. The establishment of the Defense Health Agency represented a major milestone in the Department, and it serves 

as a starting point for comprehensive enterprise-wide reform. 

In a few moments, General Robb will be sharing with you steps 

we have taken and some early successes. But I also want to provide 

additional context to our current situation. In addition to the significant changes underway in our national security posture, there 

is also dramatic change occurring in American health care that will 

affect how we do business and require us to refresh our thinking 

of health, health care, and healthcare delivery systems. In addition 

to rising costs, technology, subspecialization, information management, access, and workforce issues are challenging the American 

healthcare system. Health systems across the country, including 

ours, are focused on ways to reduce variation in care, improve patient safety, and more effectively use health information technology 

to improve clinical decisionmaking and outcomes. 

Within the military, there are additional imperatives for designing an integrated health system, which includes more joint basing, 

joint operations, and maintaining readiness. My office, the service 

medical departments, and the Defense Health Agency are partners 

in this process. We have created an agile governance for policy and 

enterprise-wide operational decisionmaking. We are holding ourselves accountable, using a disciplined process for identifying opportunities and using common enterprise-wide performance meas-
5 

ures to see and check what we are doing. We use the Government 

Accountability Office’s approach to conducting our business case 

analyses and business process reengineering efforts. The GAO’s reports to Congress have been helpful, and we have taken continuous 

corrective action to improve our analytic work and our project management. 

The Department is proud of its progress and the progress it has 

made, but we need to be persistent in these efforts. I thank you for 

the opportunity to speak today, and I look forward to your questions. 

[The joint prepared statement of Dr. Woodson and General Robb 

can be found in the Appendix on page 25.] 

Mr. WILSON. Thank you, Secretary Woodson. 

And again, welcome, General Robb. 

STATEMENT OF LT GEN DOUGLAS J. ROBB, USAF, DIRECTOR, 

DEFENSE HEALTH AGENCY 

General ROBB. Chairman Wilson, Ranking Member Davis, members of the committee. It is indeed an honor to be here for the first 

time and to join Dr. Woodson in updating you on the Defense 

Health Agency and our way forward over the coming months and 

years. Dr. Woodson has already provided the overarching strategy 

to make the MHS stronger, better, and more relevant for our future. I am pleased to share with you how the Defense Health Agency is going to contribute to that effort. 

This agency came about after 18 studies over 50 years. The vast 

majority of the 17 previous studies had recommended greater integration of the Army, the Navy, and the Air Force assets. However, 

little or no change occurred from those earlier reports. However, we 

are proud that this, in the 18th study, conducted in the summer 

of 2011, that I served as the co-chair, the senior civilian military 

leaders in our Department did indeed come together. And we analyzed almost every possible organizational structure for the Department of Defense. The Department then took action and selected the 

Defense Health Agency as the best possible option to improve the 

effectiveness and the efficiency without the cost and disruption that 

would have accompanied other options. 

In addition to providing the structure to create a more integrated 

system of care, the Department also designated the Defense Health 

Agency as a combat support agency. This is important. It makes 

me accountable to the Chairman of the Joint Chiefs of Staff, as 

well as Dr. Woodson, for ensuring that the medical readiness needs 

of our combatant commanders are met. And every 2 years, I will 

be graded by the chairman on how well we are meeting that mission. 

This is the central principle that I have conveyed to the chairman, to the services, and to my own staff. The DHA stands as a 

supporting organization, ensuring that the combatant commanders 

and the service medical departments have the resource support 

they require to meet their mission. Consistent with the joint governance processes that Dr. Woodson outlined a few minutes ago, 

the DHA’s role as an integrator is to enhance the ability of the 

services to accomplish their mission. 
6 

We have made significant progress in the first 150 days of this 

reform effort. And we are on track with most of our major milestones. Dr. Woodson mentioned the discipline and the rigor of our 

approach in improving how we do business. This approach has also 

provided all of us with insight into our most challenging issues. In 

some instances, this process has allowed us to rapidly introduce 

new processes, and we have accelerated timelines for implementation and achieved savings, reduced variation, and streamlined processes earlier than initially projected. Our written testimony provided examples of the status of all 10 of our shared services that 

comprise the Defense Health Agency. I will not repeat that summary here, but, rather, I want to highlight a few examples that illustrate the value of the path that we are on and the reason for 

optimism regarding the future. 

In medical logistics, for example, we initially believed fiscal year 

2014 would require nominal investments or additional costs to 

achieve the downstream savings in the fiscal year 2015 through fiscal year 2019 period. However, the DHA medical logistics community shared service implementation effort identified opportunities 

to change the buying behaviors even as we launched the agency in 

October. As a result, we are on a path to cover our investment 

costs and save over $10 million when we previously projected no 

savings for this year. 

Similarly, in the health information and technology shared service, there are a number of initiatives to reduce redundancy and 

consolidate IT contracts. The consolidation of the service medical 

chief information officers into the DHA has allowed to us move 

more quickly than we had anticipated, and we have identified savings of almost $25 million in this fiscal year. 

Of course, the most significant cost savings potential for the Department still remains in the purchase healthcare sector. Our efforts to improve the execution of the TRICARE health plan are focused on long-term systemic challenges and how we better integrate our direct care and private care health services delivery and 

contracts for healthcare support. As this generation of TRICARE 

contracts nears the end of its current term, the Department is looking to reshape contracts in ways that take advantage of strategic 

sourcing, improving integration with military medical facilities, reduce unnecessary overhead, and achieve greater simplicity and 

flexibility for the beneficiary and for the government. 

A final personal observation, after 5 months in this position, as 

I work with my colleagues in the Army, the Navy, and the Air 

Force, and with my own team in the Defense Health Agency, we 

spend many hours studying how we can develop even more common clinical and business efforts in support of our warfighters. And 

at the end of each review, we can see progress that we are making, 

the differences that we are making. And more times than not and 

to a person, I hear the same thing: this is the right way to go. In 

my personal experience interacting with our partners, such as the 

Director of the Defense Logistics Agency, is that they clearly see 

the benefit of us operating as a single enterprise, and they are 

pleased that we can present a single point of contact for Military 

Health System issues. And the refrain from our internal team and 
7 

external partners is the same: we should have been doing this 

sooner. 

But we are not looking backwards, we are looking to the future. 

Proud of the work we have accomplished, but even more eager to 

identify ways that we can integrate our system on behalf of the incredible people that we are privileged to serve. Again, I appreciate 

the opportunity to be with you today, and I look forward to your 

questions. 

[The joint prepared statement of General Robb and Dr. Woodson 

can be found in the Appendix on page 25.] 

Mr. WILSON. Thank you, General. 

Director Farrell. 

STATEMENT OF BRENDA S. FARRELL, DIRECTOR, DEFENSE 

CAPABILITIES AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. FARRELL. Thank you, Mr. Chairman. 

Chairman Wilson, Ranking Member Davis, and members of the 

subcommittee, thank you for the opportunity to be here today to 

discuss whether the Defense Health Agency is positioned to achieve 

the goals of DOD’s effort to reform its Military Health System. Let 

me briefly summarize my written statement. 

DOD’s Military Health System costs almost $50 billion annually. 

The system’s governance structure has been the subject of many 

studies since 1949, some recommending major changes to improve 

the cost efficiency of the system. GAO has conducted a body of 

work reviewing efforts to reform the system since 2006. In 2012, 

DOD announced the creation of the Defense Health Agency by October 1, 2013. Congress required DOD to provide its reform plans 

before the agency began initial operations. Further, GAO was mandated to review DOD’s reform plans. My testimony today is based 

primarily on our report issued in November 2013 that assessed 

DOD’s plans. My main message today is that DOD’s senior leadership needs to take additional actions to increase transparency and 

enhance accountability of DOD’s reform plans. These actions address staffing, cost, and performance measures. 

First, DOD has not determined its staffing requirements, military, civilians, and contractors, for the new Defense Health Agency. 

DOD did not have the data to determine how the creation of the 

Defense Health Agency will affect the total number of the system’s 

headquarters staff because it does not have a baseline assessment 

for current staff. 

Notwithstanding, in 2011, using data that DOD later noted was 

inaccurate, DOD identified estimated personnel savings as part of 

the rationale for creating the new agency and identified a resulting 

savings of almost $46 million. Our previous work highlighted the 

need for Federal agencies to have valid, reliable data, and to be 

aware of the size of their workforce, its deployment across the organization, and the knowledge, skills, and abilities needed for the 

agency to accomplish its mission. A baseline assessment of a number of current headquarters personnel is a crucial first step for developing an estimate of the number of personnel that will be required once the DHA is fully operational. 
8 

Second, DOD’s cost savings estimates are unclear, as they were 

missing key details, such as the sources for savings for the various 

functions of its 10 shared services it is planning as part of the reform effort. DOD aggregated the separate business lines of its 

shared services, which obscures the size and the cost of planned efficiencies for each business line. A business case analysis requires 

detailed information to convince customers and stakeholders that 

the selected business process is the appropriate means for achieving performance. 

In addition, DOD has not clarified its plans to monitor implementation costs. In major reengineering efforts, implementation 

costs can be the dominant cost element and the area of greatest uncertainty. DOD’s past experience with large-scale projects, such as 

its initiative to acquire an electronic health records system, demonstrates the difficulties in controlling rising implementation costs. 

Greater clarity with regard to the sources of cost savings is also 

needed to allow senior leaders to monitor progress in achieving estimated savings. 

Third, DOD did not include critical details in performance measures it developed to assess progress in achieving the seven goals of 

the reform effort. Specifically, DOD did not develop explanations 

for how each measure relates to the goals of the reform effort, did 

not define the specific measure to be developed, did not provide a 

baseline assessment of the current performance that is to be measured and, most importantly, did not identify quantifiable targets 

for assessing progress. Fully developed performance measures are 

key to senior leaders’ ability to assess if DOD’s reform effort is 

achieving the goals or if corrective action is needed. 

Let me conclude by noting that our November 2013 report included recommendations in each of these areas to DOD, and DOD 

concurred with our recommendations. DOD has taken action to address these recommendations, but it has not completed them. We 

continue to believe that it is imperative for DOD to complete these 

actions so that decisionmakers will have accurate and complete information to gauge reform progress toward controlling costs versus 

adding to them. 

Thank you, Mr. Chairman. I will be pleased to take questions 

when you are ready. 

[The prepared statement of Ms. Farrell can be found in the Appendix on page 47.] 

Mr. WILSON. Thank you very much, Ms. Farrell. 

And we will begin now with each member of the subcommittee 

asking questions for 5 minutes. 

And a person above reproach, Jeanette James, is going to keep 

the time. 

And so this will be right on schedule. And we have votes within 

the next possible 45 minutes. So that is why the time is so important. 

For each one of you, beginning with Secretary Woodson, when 

the Department announced its decision to stand up the Defense 

Health Agency as a more efficient governance structure, the Government Accountability Office offered several recommendations on 

improving the Department’s decision process. In response, the Department agreed to develop a comprehensive cost analysis of the 
9 

Defense Health Agency structure. What were the results of the cost 

analysis? 

Dr. WOODSON. Thank you very much for that question. 

And I want to reiterate that we have appreciated the GAO review of our work. Some of the reports are a little out of sequence 

in terms of the work that was actually done. And we have clearly 

done a lot more work in terms of the analysis relative to the questions that have been asked. 

The issue about the cost investment is a significant one. And one 

of the issues relative to that is that we are dealing with a lot of 

shifting sets of program. We know what the base cost and the base 

issues were relative to, let’s say, TRICARE Management Activity 

[TMA]. But, in fact, what we are doing is we are layering on the 

shared services and bringing folks over from the service headquarters. 

I think the issue really is that, as we look at all of the work that 

is done and we look at just fiscal year 2014, we projected about 

$148 million in savings this year. And through the first quarter, we 

have already achieved $80 million dollars of that savings. 

And so the issue is that we are ahead of schedule in terms of the 

savings. And then, as we look at all of the areas, particularly related to the shared services, again, we are outpacing our projections. So, in the pharmacy area, of course, we are projecting about 

$437 million in savings in fiscal year 2014. And we can submit for 

the record our estimation of these savings. 

So the bottom-line message that I am saying is that—giving is 

that this is really, was complicated stuff in trying to identify what 

was being done and what was the cost in each of the headquarters, 

what was the baseline cost within the Defense Health Agency. But 

the performance to date has been better than projected. 

And we can provide for you, again, a detailed assessment for 

every shared service, what the estimate was and where we are performing at this time. And, of course, to date, we have incorporated 

a total for OIC [officer in charge] of six of the shared services with 

four more to come on board. 

[The information referred to can be found in the Appendix on 

page 75.] 

Mr. WILSON. Thank you, Dr. Woodson. Actually, complicated but 

very impressive numbers. 

General Robb. 

General ROBB. In regards to—I will cover specific recommendations from the GAO report. And again, as Dr. Woodson had mentioned, it only covered the first two reports to Congress. In many 

of the issues that were raised by the GAO, and appropriately so, 

were addressed in the third MHS report to Congress. And what 

was good about their recommendations is it allowed us to focus on 

what we needed to concentrate on. 

So, in the first GAO recommendation, we have established analytics function in the DHA. And that is key. We have never done 

that in MHS. And that is key because that is going to drive the 

standardization of the metrics across the enterprise. So we are well 

down the, again, the road to standardizing, again, an analytic function for our defense agency, which then will drive, like you said, 

the measures, quantifiable, objectable in a baseline assessment. 
10 

And then, just for some specific accomplishments, as far the execution, our MHS enterprise core dashboard has been developed. 

And, again, we are working its way through our new governance 

structure to get buy-in from the services. And then our multiservice 

market dashboard, where the rubber meets the road, where those, 

again, the joint execution of health care is going to occur, has also 

been approved and is currently being used. And, again, we are 

using that to help drive and to support our 5-year business plans. 

On our second recommendation, we have—one of the objectives 

is that, you know, our 10 shared services are well on their way. 

Five of them stood up at IOC [initial operating capability] when 

four were actually scheduled, and one of them said, Hey, we are 

ready. And then, recently, we had budget and accounting just came 

on board ahead of time, and we have three more to go. So we have 

got that timeline, and we are staying on track. And again, for the 

record, we would be glad to give that to you. 

And then more potential sources of cost savings. We had projected the cost savings for the 10 shared services. Again, 2014, we 

are—again, we weren’t—you know, we are 2015 to 2019, we have 

predictions. We are looking at 2014. In fact, I review that monthly, 

and so does our new governance system. Again, as we are tracking 

the savings that are actually going to cover many of our initial investments. Been a long time since I have been in the military when 

we have been able to cover our costs actually ahead of time. And 

so we are excited about that. Because the folks out there, again, 

are dedicated to make this happen. And then, again, we are going 

to—we can share again the timelines for all our five shared services, actually the four that remain and where we are going with 

that. 

And then the—each of our shared services has—and we talked 

about the specifics of it. Each one of them has started out with a 

minimum of five business case analysis and five businesses plus 

engineering. And again, the four that are already on board, plus 

the fifth one—I gave logistics as an example. You know, this isn’t 

the future, this is already executing and already getting a return 

on investment. So, again, we track those monthly. 

Our new governance system. We roll that up quarterly. We just 

had the quarterly review. Again, we are 120 days, now 150 days 

into this. And again, they are very transparent on being on target 

and on time and on glide slope to make sure that we meet those 

recommended savings that we said that we were going to do. 

And then, number four, monitor implementations. Like I talked 

about, these reviews, that the transparency is none like I have ever 

seen it in my tenure in the MHS. One inside the DHA, working its 

way up through the directors in the shared services, and then, two, 

the new governance system that Dr. Woodson had shared with you 

where our ones, you know, our threes and fives, you know, our 

eights get together, almost like a joint staff model, and again work 

out the issues. And again transparency across the services, again, 

unheard of in my tenure in the MHS. 

And then, finally, develop and present to Congress baseline assessment. So we—the staffing model for the DHA, again, is a work 

in progress. But Dr. Woodson, and I will allow Dr. Woodson to actually probably elaborate more on this. But we—there will be no 
11 

growth. I mean, my folks look at me, and I go, if you say that you 

need something and where is it coming from. I mean, it is clear 

there is no growth going to occur, especially in both the military 

and civilian as we walk this through. 

So our DHA, and all our folks understand this, is made up of formerly known as TMA. But the shared services are the men and 

women, again, who do the dedicated work inside each service. 

Mr. WILSON. Thank you, General. 

My time is up. 

General ROBB. Yes. 

Mr. WILSON. Ms. Farrell, if you could just provide for the record 

later. 

[The information referred to was not available at the time of 

printing.] 

Mr. WILSON. And we proceed to our ranking member, Susan 

Davis. 

Mrs. DAVIS. Thank you very much, Mr. Chairman. 

I must say, I know that for a lot of people that are just deep in 

the weeds of this in the audience, I think that they have a good 

level of understanding. But if anybody else is watching, they may 

be a little confused, because it is difficult to sort of get a handle 

on this. 

And I think one of the things that jumps out at me, I have a 

sense, Ms. Farrell, that you are trying to get much more detailed 

information, particularly in the staffing area. And yet, you know, 

we are hearing that that is being provided. And I am not exactly 

clear about that. So I am wondering, are you satisfied with the 

sources of savings in that arena? 

Ms. FARRELL. It is true that our November 2013 report was 

based on the first two submissions to Congress. But for this testimony today we did obtain and review the third submission. 

DOD noted in the comments to our 2013 report that many of 

the—that they agreed with our findings, and many of the actions 

would be taken and included in the third submission. However, our 

review of that submission shows that it is still lacking. 

I do not want to take away from the very complex work under 

the leadership of Dr. Woodson and Lieutenant General Robb. This 

is a movement that we have seen much further than any of the 

other reform efforts. But we still do not see a baseline assessment, 

for example, that we were told would be in the third submission. 

It is our understanding that that might be in the 2014 strategic 

plan. Perhaps they can elaborate on that. We do not believe that 

at this time DOD officials can determine whether or not there will 

be an increase or a decrease in staffing, since they do not have that 

baseline. And we emphasize that the baseline should include not 

only military and civilians, but the contractor workforce. We issued 

a report last year that noted that the contractor services for DOD 

was about 90 percent of the DOD Federal employees. The contractor workforce is a significant part of the total workforce. DOD’s 

guidance even instructs them to consider all personnel resources 

when making the manpower mix decisions, including that of contractors. So we would encourage them to get that inventory down. 
12 

Mrs. DAVIS. To include that. Because I guess, going to Dr. Woodson and General Robb, if we are trying to get a 20 percent savings 

and you don’t have the baseline, how do we get there? 

Dr. WOODSON. So, you know, that is an excellent question. And 

let me just give you sort of the idea of the complexity of this. We 

have to map what is a new agency. Right. This has never been 

done before. 

Mrs. DAVIS. I want to say as well, I am delighted to see the shift. 

Dr. WOODSON. Yes. It has, you know, got a core of, let’s say, 

TMA. And we can map those numbers, so we know we are on a 

glide path to reducing those numbers down by 20 percent. We—the 

reason being is that we were under a previous mandate to do that 

under some Track Four Efficiencies and the like that the Secretary 

had outlined some time ago. 

But the issue really is, never before in the history of the Military 

Health System have we had to map it back to the headquarters of 

the individual service headquarters and some of their sub-headquarters because of where the functions were being performed. 

And so that is a complicated process, and we do have better fidelity on that now. But this will continue to be a work in progress. 

Anecdotally, though, what we are—— 

Mrs. DAVIS. Excuse me, Dr. Woodson. 

Can I just interrupt for a second because we are almost out of 

time. Because some of the information I have would suggest that 

in the IT consolidated services alone that we have seen the numbers really increase significantly there. 

Dr. WOODSON. Yes. 

Mrs. DAVIS. So how is that? 

Dr. WOODSON. That is a great example. That is a great example. 

Because one of the agreements between the services is that the 

services wanted to get out of the health IT issue. And so all of their 

folks transferred to DHA. So you are going to see that swell. But 

what we found in the process is that we immediately see duplications in positions. And so we are working through what should be 

the glide path for reducing those positions. So it is the first time 

really that we have great—or understanding of this duplication 

that was occurring within the service. So that is an absolute great 

example. So, on the surface, it looks like a large bolus, and the reason is that the service divested themselves of those people, but at 

the same time, we immediately see where the duplications are. 

Mrs. DAVIS. Okay. We will stop it there for now. 

Thank you, Mr. Chairman. 

Mr. WILSON. Thank you, Ms. Davis. 

We now proceed to Congressman Dr. Joe Heck of Nevada. 

Dr. HECK. Thank you, Mr. Chairman. 

Thank you all for being here. I can just—can’t even begin to fathom the task. I mean, it is not like somebody handed you a TDA 

[Table of Distribution and Allowances] and said, go build Defense 

Health Agency. So I understand the numbers are going to swing 

wide, like you just said. As you consolidate and people come into 

your house, that is—the good side is now you have increased visibility of where all these positions are. Now you can start to rightsize the force. 
13 

And I have no doubt, Dr. Woodson, that based on your distinguished civilian and military career, that you are the right guy to 

get this done. 

And, General Robb, being a fellow D.O. [Doctor of Osteopathy], 

I am sure you will be up to the task as well. 

One of the shared lines of effort listed was medical research and 

development. How will that, if it will at all, impact, or what is the 

plan as it pertains to the congressionally directed medical research 

program? 

Dr. WOODSON. I don’t think that will negatively impact that at 

all. But what it does do is it brings again great focus on the research enterprise and allows us to set priorities more effectively 

and achieve efficiencies in carrying it out. What we have done, of 

course, is that in the old scheme, MRMC [Medical Research and 

Materiel Command] was the basis on which the services actually 

relied for many of its infrastructure operations and carrying out research. Although, of course, Navy had its assets and Air Force had 

its assets. 

What we have done is we have linked the Defense Health Agency 

to MRMC so the director of the Defense Health Agency is now the 

deputy commander of MRMC. And it brings great clarity and great 

unity in the issue of setting research priorities. It actually allows 

us to leverage our dollars more effectively in setting the priorities, 

get out the waste and the infrastructure. Everything from, like, assurances to multiple IRBs [independent review boards] will be 

dealt with and will produce an efficiency in the research program 

that I don’t think has ever been seen before. 

Dr. HECK. Great. That is very encouraging and I think long overdue. 

Now, I just want to ask, before I ask the question, were you all 

aware of the statement from the Clinical Laboratory Association 

that was going to be put into the record or what the issue is that 

is contained herein? 

Dr. WOODSON. No. 

Dr. HECK. Okay. So, evidently—there have been a lot of questions, and this is probably going to be something that is more at 

the tactical level than the strategic level, so if you need to take it 

for the record, please do. Questions about the TRICARE reimbursement on the laboratory-developed tests and the lack of reimbursement for some of the molecular genetic tests. And the question of 

why those tests were no longer being covered if they were performed by an outside provider vice if they were performed at an 

MTF [military treatment facility] and whether or not they were or 

are not FDA-approved, how that all came in. Some of the questions 

were, why was that decision made? How was that decision made? 

And what are we going to do to make sure that our beneficiaries 

have access to those tests when needed? 

Dr. WOODSON. Thank you very much. I wasn’t aware about the 

submission for the record, but I do know about the subject. I will 

take it and respond back to you fully. But let me give you the bottom line up front. We have recognized sort of a discrepancy. We 

have a program in place actually to fix it. And none of the beneficiaries will be denied the tests that they need to get great care. 
14 

[The information referred to can be found in the Appendix on 

page 75.] 

Dr. HECK. Regardless of whether it is done at an MTF or a civilian location? 

Dr. WOODSON. Exactly. We are going to harmonize that whole 

issue. It has to do with an issue of what we can pay for under 

TRICARE care versus what can be done within the direct-care system. It is a technical question that should never have come into 

play with actually administration. It should be an evidence-based 

decision about the test, not—— 

Dr. HECK. Great. I appreciate the quick response; look forward 

to the full response for the record. Thanks. 

Yield back, Mr. Chair. 

Mr. WILSON. Thank you very much, Dr. Heck. 

We really appreciate you being here today. And so we will—I was 

conferring with the ranking member, Susan Davis. We will continue for another round, and then we will recess and run across the 

street. 

For Dr. Woodson and General Robb, in June of 2013, the Department estimated the Defense Health Agency staffing requirement 

would be 1,081. By October 2013, that estimate nearly doubled to 

1,941. What is the current Defense Health Agency staffing level? 

Please explain any deviation from the estimate. Are further increases in staffing requirements expected? 

Secretary Woodson. 

Dr. WOODSON. Thank you, Chairman, for that question. 

Again, this gets back to the issue of mapping individuals, where 

they are coming from and what category they fall in. So let me try 

and walk you through this. First of all, we need to understand that 

the Defense Health Agency again is—was much more than TMA. 

We are laying on shared service and bringing in people from the 

services to do this work. 

The baseline staffing for TMA had been estimated in previous reports at over 2,800, basically. And this admittedly took civilians 

and uniformed people and contractors. 

Again, as it looks now, right with the six shared services that are 

in, we are at 1,900. It looks like the core staffing, though, is, again, 

at a glide slope of about 900, with a look to reduce them to about 

754. And what we are going to have to do is map out all of these 

various categories and again matrix it back to the headquarters to 

make sure that the headquarters are not growing when they 

shift—even when they shift people over. So it is a complicated process. 

The data we have thus far suggests that we are on a glide slope 

to reduce. We do understand, as mentioned before, that we have 

gotten in duplications, if you will. So health IT is again that issue 

where we are going to have to sort these individuals out. But never 

before has anyone attempted to look at the grand scheme of the 

MHS and map the FTEs [full-time equivalents] and the duplication. And we are in that process. But I really feel very sure that 

we are going to produce the efficiencies just simply because they 

are showing up almost every day in terms of the duplications. 

Mr. WILSON. That is encouraging. 

General Robb. 
15 

General ROBB. Again, I will support Dr. Woodson in the sense of 

we are building this. And as you see, an agency isn’t headquarters. 

An agency is an institution that provides a service that we are supporting our organization. So when you look at it from that perspective, for example, HIT [healthcare information technology] was a 

prime example. And it depends on the shared service. Some of it 

would be just executive oversight and management. But the rest, 

like HIT, they are the ones doing the work. They are the ones that 

are the CIO [chief information officer] shops for the services. So, 

before, they used to be in the service; now they are in our agency. 

And so—and there has been no—there is no growth in the sense 

that the numbers. 

Now, Dr. Woodson talks about once we bring all those CIOs together, they have already identified redundancies, and they have 

already—again, as they do the business case analysis and the business process reengineering, this is realtime; in other words, this 

wasn’t all done last summer, much less at IOC. And again, there 

is work to be done in R&D [research and development] and education training. But HIT is a great example. So we have identified 

civilians for reduction. We have identified military members for a 

reduction because of the duplication. And again, as you can imagine—and, ma’am, to your point, contracts. And so there is—that 

area there is ripe for, one, inventory, and, two, reset. 

Dr. WOODSON. If I might add just one other example to give sort 

of clarity on these numbers and how we have moved in a positive 

direction. If you were to take, let’s say, just the movement of the 

NCR [National Capital Region] Directorate into the DHA, JTF 

CAPMED [Joint Task Force National Capital Region Medical] had 

probably about 130, 140-plus individuals with a manning document 

that was probably about 176 or so. We have reduced that to 42. 

Mr. WILSON. My goodness. 

Dr. WOODSON. Forty-two. And this is the power of the construct 

and the shared entity. 

Mr. WILSON. We appreciate your oversight. 

And we now proceed to Ranking Member Susan Davis. 

Mrs. DAVIS. Thank you. I know we have talked about those 

shared services. Could you share a little bit more about the consolidation of education and training services as well, and how is that 

figuring in with these cost savings? Where can we go with that? 

Dr. WOODSON. So, thank you, again, for that question. 

So one of the I think enabling factors in standing up the DHA 

was the fact that we had begun in certain isolated pockets to go 

to joint entities. The Medical Education and Training Center in 

San Antonio is one of those issues. In my opening statement, where 

I talked about that medic who first attended to the wounded Marine, although he was a Navy corpsman, he probably was trained 

at the Medical Education Training Center next to the Air Force 

buddy and an Army buddy, basically. So it was an easy move for 

that entity to come into education and training. 

But beyond that, we educate all the time medical personnel. And 

so the money we spend on continuing medical education and elearning, graduate medical education, and the like, are all opportunities to harmonize, synergize, and produce efficiencies in that 

area. 
16 

Mrs. DAVIS. And you feel that—where—because—in some ways, 

we want to be sure that we are—we are really allowing the kinds 

of, I guess, creativity to come forward. And do you think that is 

going to be better served? 

Dr. WOODSON. That is an excellent question. And I think that is 

probably the most pertinent question we can ask. 

We have been talking about standardization, efficiencies, reducing variability. And sometimes that is considered counter to innovation and, you know, really moving, advancing ahead. 

The truth of the matter is that if you manage the processes correctly, one helps the other. So reducing variability is about identifying the best standard and then making sure we create wisdom 

without—in the system so everybody operates at that best standard. 

But at the same time, I have stood up an innovation cell to ensure that we are linking the appropriate communities of interest so 

that we can find new ideas, whether it is advances in strategies for 

education or strategies for care, we can feed it and resource those 

appropriately, see if they are validated by measuring, putting 

metrics against them, and then, at the earliest opportunity, spreading it across the enterprise. So we have not neglected the issue of 

innovation. 

Mrs. DAVIS. Can you overlay employee satisfaction on that? Because it is my understanding, again, that as we look at that right 

now that the Defense Health Agency is kind of ranked fairly low. 

And I don’t know whether that is just because we are in a transition. I mean, this is a difficult time for everybody. But how are you 

evaluating morale? And where you see that it is low, to what do 

you attribute that? 

Dr. WOODSON. So another great question. 

I think, you know, our experience is that when you talk to folks 

in the field, they are excited about the change. They recognize that 

they have been working with their brothers and sisters in the other 

services for some time. And they recognize the opportunities of 

working in fellow service institutions. 

I think the issues—we have to be careful at this time in our history. We have been at war for 13-plus years. We have got all of 

these budget issues in the news. Everybody is talking about 

downsizing and the like. And it gets to be a very confusing picture 

about what is driving morale. 

I think in the medical community, what we are hearing when 

you talk to the individual, everybody is nervous about change. We 

are human beings; we get nervous about change. But the issue is 

they are excited about the possibilities I think that this new endeavor creates. So I have a different take on it. I think there is 

some general anxiety out there about all that is going on. I don’t 

see the morale within the medical community as having suffered. 

Mrs. DAVIS. Director Farrell, do you pick up that also when you 

are doing your gathering information? Is that something you could 

weigh in on? 

Ms. FARRELL. We have ongoing work that is driven by this committee specifically looking at the integration of medical education 

in San Antonio. I would note that that is an effort that actually 

started with BRAC in 2005, for consolidation of facilities, not nec-
17 

essarily the education itself, that being the courses. So we are currently looking at what integration has actually taken place. What 

is the morale of the students? What are the strengths? Are there 

any issues that are developing? And we will be reporting that back 

to this committee next month. 

Mrs. DAVIS. All right. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. WILSON. Thank you, Ms. Davis. 

Now Congressman Dr. Joe Heck. 

Dr. HECK. Thanks, Mr. Chair, for the second round of questioning. Actually, my questions are in response to some of the other 

answers to the other questions. 

On medical education, is USUHS [Uniformed Services University 

of Health Science] going to be within your wiring diagram now? 

Dr. WOODSON. So USUHS is—yes, it is a report to me. 

Dr. HECK. And as you move these other entities now, like using 

IT from the services into DHA, who is the bill payer? Do they stay 

on the services’ books or are you picking up the tab? 

Dr. WOODSON. So a lot of that we have been picking up the tab 

for, anyway. That is DHP [Defense Health Program] money. And 

so it is very interesting. This project is just fascinating in some 

sense. 

So one of the things we had to figure out is, you know, where 

the money goes. And so one of the initiatives, of course, is we have 

developed a common cost accounting system. Never been done before. So that we can track. 

The bottom-line answer to your question, though, is that it is 

DHP money, so we have been the bill payer. It is just that we are 

now being able to centralize the portfolios, clean up the portfolios 

so that we don’t have duplicate IT programs and the like. And it 

is just much more efficient. But we are the bill payer. 

Dr. HECK. And then, lastly, the whole concept for this was put 

into place or developed prior to sequestration passing. With the advent of sequestration, how do you see that, or does it impact your 

ability to move forward on what you need to do with DHA? 

Dr. WOODSON. Thank you, again, for another good question. 

I hope everyone realizes that last year was a very challenging 

year for us, right? We had the program cuts for the Budget Control 

Act. We had sequestration. We had furloughs. We had—this agency 

stood up in the middle of a government shutdown. And yet it has 

delivered on the promise of the savings and is getting the job done. 

In direct answer to your question, though, thank God we started 

down this path. Because if we had not and we had these budgetary 

concerns and all of the issues in forced management, forced reduction and the coming concerns, it would have spelled disaster, I 

think, for the Military Health System. So we started with vision in 

mind about what we need to do, because it was right. It turns out 

it serves a purpose of efficiency and meeting the budgetary issues 

as well. 

Dr. HECK. Great. Again, thank you all for what you are doing. 

Yield back. 

Mr. WILSON. Thank you very much, Dr. Heck. 

And thank you all for being here today. 
18 

And indeed, we appreciate your promoting efficiencies, as you indicated, in an extraordinarily disruptive environment. That is very 

impressive. 

If there is no further comment, we shall be adjourned. 

[Whereupon, at 3:31 p.m., the subcommittee was adjourned.] 
A P P E N D I X 

FEBRUARY 26, 2014 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

FEBRUARY 26, 2014 

(23) 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 
51 
52 
53 
54 
55 
56 
57 
58 
59 
60 
61 
62 
63 
64 
65 

DOCUMENTS SUBMITTED FOR THE RECORD 

FEBRUARY 26, 2014 

(69) 
70 
71 
72 
WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

FEBRUARY 26, 2014 

(75) 

RESPONSES TO QUESTIONS SUBMITTED BY MR. WILSON 

Dr. WOODSON and General ROBB. GAO recommended that DOD develop (1) a comprehensive cost analysis for its potential MHS governance options, (2) a business 

case analysis and strategy for implementing its shared services concept, and (3) 

more complete analyses of the options’ strengths and weaknesses. DOD concurred 

with developing a business case analysis for its shared services concept. DOD did 

not concur with the other 2 recommendations, stating that further analysis would 

not alter its conclusions. Section 731 of the FY 2013 required that the Department 

report to Congress on the progress achieved in standing up the Defense Health 

Agency and Shared Services. In our first report to the congressional defense committees, dated March 15, 2013, we identified our reform efforts and provided detailed 

goals, milestones and schedules for implementing the Defense Health Agency 

(DHA), the enhanced multi-Service markets (eMSMs), and the National Capital Region (NCR) Directorate. In our second report, dated June 27, 2013, we provided our 

strategic objectives, success measures, and business case analyses for four of the initial ten identified shared services. In the third report, dated October 25, 2013, we 

provide specific information for each shared service, including our assessments for 

the remaining six shared services, to be implemented in FY 2014. [See page 9.] 

RESPONSES TO QUESTIONS SUBMITTED BY DR. HECK 

Dr. WOODSON and General ROBB. Providing safe and effective care for our beneficiaries is our top priority. The DOD is committed to ensuring that our beneficiaries 

have access to the full array of proven health services, technologies, and products 

available in the United States. Title 32, Code of Federal Regulations (CFR), Section 

199.4(g)(15)(i), provides that TRICARE cannot cost-share unproven drugs, devices, 

medical treatments, or procedures, and that a drug, device, or medical treatment or 

procedure is unproven if the drug or device cannot be lawfully marketed without 

the approval or clearance of the United States Food and Drug Administration 

(FDA). The Federal Food, Drug, and Cosmetic Act (FFDCA) provides for the regulation of medical devices. These medical devices are defined broadly in Title 21, 

United States Code, Section 321, to include: ‘‘an instrument, apparatus, implement, 

machine, contrivance, implant, in vitro reagent, or other similar or related articles, 

including any component, part or accessory which is . . . intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease.’’ A laboratory developed test (LDT) is a test developed by a single 

clinical laboratory that provides testing to the public, but does not sell the lab kit 

or its technological processes to other labs. LDTs are considered to be medical devices by the FDA and the Defense Health Agency (DHA). 

The FDA has stated that clinical laboratories developing LDTs are acting as manufacturers of medical devices and are subject to FDA jurisdiction under the FFDCA, 

thus requiring either a Premarket Notification 510(k) or Premarket Approval. However, the FDA has chosen to exercise ‘‘enforcement discretion’’ regarding regulatory 

oversight of LDTs, meaning the FDA has not required the removal of these tests 

from the market. As a result, LDTs are available in the market without FDA approval or clearance. However, when the FDA elects to exercise enforcement discretion, this choice does not change the fact that the law applies to those products. 

Consequently, and in accordance with the federal regulations governing the 

TRICARE program, medical devices, including LDTs, that require FDA approval or 

clearance for marketing when such approval or clearance has not been given may 

not be cost-shared by TRICARE. 

As stated above, there has not been a change in TRICARE’s underlying coverage 

policies regarding non-FDA approved LDTs. Our managed care support contractors 

(MCSCs) and beneficiaries are aware of TRICARE’s existing coverage policies, including the exclusion for devices that are not FDA cleared/approved. The adoption 

of new Current Procedural Terminology (CPT) codes, effective January 1, 2013, provided payers, including the DOD, with greater transparency in billing for laboratory 

tests. These coding changes allowed the DHA to identify specific LDTs that: (1) have 

not been approved or cleared by the FDA, and/or (2) failed to meet TRICARE cri-
76 

teria for coverage (e.g. demand genetic testing that is not medically necessary and 

does not assist in the medical management of the patient). While the revised codes 

allowed TRICARE to accurately determine TRICARE coverage for specific tests, 

there was no change in TRICARE’s underlying coverage policies. Consistent with 

the change in CPT coding, the DHA moved LDTs that were not FDA approved or 

otherwise failed to meet TRICARE coverage criteria to the Government’s No Pay 

Procedure Code List. 

The DHA recognizes that some non-FDA approved LDTs may be useful to providers and patients with certain treatment decisions. This is due, in part, to the ongoing development of new medical tests and technologies. In the absence of FDA approval/clearance of LDTs, we need to establish an alternative process to ensure safety and efficacy. As a result of beneficiary and provider input, TRICARE has chosen 

to initiate a new demonstration project to review the safety and efficacy of a broad 

range of non-FDA approved LDTs with potential high utilization and potential high 

clinical impact for our beneficiaries. This demonstration project will collect data to 

support potential future regulatory revisions and enhance the flexibility of the MHS 

in responding to emerging technologies. This new effort will expand upon our existing demonstration project, which provides coverage for certain LDTs that inform 

clinical decision making in cancer diagnosis and treatment. Under the new demonstration project, we will assess the safety and efficacy of a broader range of LDTs 

with potential high utilization and potential high clinical impact on our TRICARE 

beneficiaries. This demonstration project will also collect the additional and necessary data to support future regulatory revisions. In keeping with other demonstration projects, LDTs approved under the new demonstration project will be covered 

by TRICARE during the demonstration period and will also be available in Military 

Treatment Facilities (MTFs). Once formalized, details of the demonstration project 

will be published in the Federal Register. 

We recognize there are differences between the purchased care sectors and direct 

care sectors (MTFs) in the ability to obtain certain LDTs; however, this is due to 

differing functions and specific federal regulatory requirements for the purchased 

care sector. The new demonstration project is an important first step in ensuring 

patients seen in either the direct or purchased care sectors have the same access 

to non-FDA approved LDTs that are determined to be safe and effective. LDTs approved under the new demonstration for our purchased care sector will be integrated into the direct care sector providing more consistency between both systems.

[See page 14.] 
QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

FEBRUARY 26, 2014 

(79) 

QUESTIONS SUBMITTED BY MR. WILSON 

Mr. WILSON. Families report significant barriers and delays to enroll in the ABA 

Pilot and that care is often delayed by months. Can you please tell me how many 

beneficiaries are currently receiving services under the ABA Pilot? Please provide 

explanation for treatment delays. 

Dr. WOODSON. Based on contractor feedback (TRICARE purchased-care claims can 

be submitted up to one year after the service is provided and, therefore, claims data 

incomplete and not a reliable indicator of current ABA Pilot participation), as of 

January 31, 2014 there were 94 beneficiaries approved to receive Applied Behavior 

Analysis (ABA) for treatment of Autism Spectrum Disorder (ASD) under the ABA 

Pilot and another 168 pending approval. Completion of psychometric testing and assessment is required for approval. Obtaining the required psychometric testing—Autism Diagnostic Observation Schedule, Second Edition (ADOS–2) and/or Vineland 

Adaptive Behavior Scale II (Vineland-II), is the primary reason for reported delays. 

There have been several meetings between the Managed Care Support Contractors 

and the Director, TRICARE Health Plan to address this issue. Also, individual outreach has been conducted to families in the approval process to assist them in completing any needed actions to include completion of psychometric testing. 

Mr. WILSON. Why are the enrollment and authorization requirements for the ABA 

Pilot more burdensome than authorizations under the Autism Demonstration and 

the TRICARE Basic program? 

Dr. WOODSON. In sum, the enrollment and authorization requirements for the Applied Behavior Analysis (ABA) Pilot are more burdensome than authorizations 

under the Autism Demonstration as the ABA Pilot will evaluate the feasibility of 

using standardized measures, not currently a requirement under the ECHO Autism 

Demonstration, to assess ABA treatment progress and report its findings to Congress concerning the ABA Pilot for Non-Active Duty family members (NADFMs). 

One objective of the ABA Pilot is to evaluate the use of standardized measures 

to assess ABA treatment progress based on the Behavior Analyst Certification 

Board (BACB) Guidelines for Health Plan Coverage of Applied Behavior Analysis 

Treatment of Autism Spectrum Disorders (2012). The guidelines recommend that 

data from standardized tests are helpful to ‘‘inform issues related to selection and 

prioritization of treatment goals and determining a response to treatment.’’ This 

standardized psychological testing requirement applies only to beneficiaries who 

choose to participate in the ABA Pilot. There is no change for any other TRICARE 

beneficiaries—whether Active Duty family members (ADFMs) or NADFMs—receiving ABA under the TRICARE Basic Program, or for ADFMs receiving autism-related services under the Extended Care Health Option Autism Demonstration. 

An on-going series of focus groups is being held to solicit feedback in hopes of 

using this information to optimally meet the needs of beneficiaries. 

Mr. WILSON. Families report that dollar caps under the Autism Demonstration 

and the ABA Pilot prevent them from accessing recommended treatment services. 

Can you please explain why so many families cannot obtain coverage for treatment 

services that have been medically prescribed? 

Dr. WOODSON. The National Defense Authorization Act for FY 2009 section 732, 

established the limit of Government liability for Extended Care Health Option 

(ECHO) benefits at $36,000 per year. This change was implemented on April 1, 

2009. In FY 2013, 4.2 percent of Active Duty Family Members using only ECHO 

program services (218 of 5,131 users) had annual expenditures at or near the 

$36,000 annual cap (we define this as those with more than $35,000 annually). The 

$36,000 annual cap for ABA services under the ABA Pilot mirrors the Extended 

Care Health Option (ECHO) cap. 

Under the TRICARE program, all necessary medical care is provided without a 

cap or dollar limit. This medical or behavioral health care is provided through the 

basic TRICARE program whether the beneficiary has chosen TRICARE Prime or 

TRICARE Standard. These medical and behavioral therapies include those which 

are provided for ABA services. The tutor services which are a part of some ABA approaches are provided through the ECHO. 
80 

Mr. WILSON. Based on the testimony of Dr. Woodson and General Robb savings 

from the consolidation of Medical Logistics is projected to be $10 million. What is 

the amount of savings at this time? 

Dr. WOODSON. Defense Health Agency Medical Logistics initiatives have resulted 

in $8.2M in FY14 savings to date. 

Mr. WILSON. Based on the testimony of Dr. Woodson and General Robb $24.7 million is the projected savings from consolidation of Health Information Technology. 

In what fiscal year will this savings be attained? Please provide a detailed explanation of where these savings come from. 

Dr. WOODSON. As of February 26, 2014, the Defense Health Agency has achieved 

$24.7M in Health Information Technology (IT) savings for FY 2014. 

These savings are attributable to efficiencies implemented in FY14 in the following areas: 

Reengineering IT Management: $3.8M is attributed to reductions in the operations and consultant contracts 

Infrastructure Consolidation: $12.2M is attributed to contract efficiencies in Service medical software licenses, help desk operations, and information assurance activities 

Portfolio Rationalization: $8.7M is attributed to contract efficiencies in Service 

medical systems trainers and systems support 

Mr. WILSON. The Department has outlined how closing walk-in customer service 

centers in favor of call center based customer service will provide savings. How does 

the Department plan to gauge customer satisfaction with the new process? What 

method will the Department use to survey, including how the survey will be conducted and what population of customers will be queried. 

Dr. WOODSON. The Department uses a survey to monitor how well our contractors’ 

Customer Service Call Centers are performing. Monthly a random survey of recent 

TRICARE users (those with a claim within the past 30 days) is conducted. The 

beneficiaries selected are called and asked if they used the Call Center in the past 

month and, if so, to please rate the services provided on a scale of 1–6. Since December 2013, 86% to 98% of those surveyed each month rated services provided by the 

call centers as ‘‘completely satisfied, very satisfied or somewhat satisfied.’’ 

Additionally, the Department has made several changes to the tricare.mil website 

and the online enrollment portal to ensure the other ‘‘self-service’’ options are userfriendly. The website usage has increased each month since December 2013 (27,000 

daily users to 32,000 users) and the online enrollment and enrollment change application from 36,000 to 55,000 monthly users. 

The survey results and feedback received from our military treatment facilities, 

military associations, and beneficiary inquiries are closely monitored by the Defense 

Health Agency leadership to ensure TRICARE beneficiaries continue to receive 

prompt, quality customer services. 

Mr. WILSON. Please discuss, in detail, the cost savings to date from changes in 

purchased care accounts 

Dr. WOODSON. Prior Year Initiatives: The following savings initiatives were implemented in previous years to slow the growth in DOD’s health care costs. 

• Federal Ceiling Price: Beginning in 2008, the Department implemented regulations and extensive administrative procedures to implement a change in law 

(known as Federal Ceiling Price) that required pharmaceutical manufacturers 

to provide discounts for drugs for TRICARE beneficiaries through retail network pharmacies. 

— Federal Ceiling Price discounts for drugs are at least 24% less than the average manufacturer’s price for its non-Federal customers. 

— Discounts are achieved through quarterly collection of refunds from pharmaceutical manufacturers based on the quantity of their brand name drug utilized in the TRICARE retail network pharmacies. 

• TRICARE Home Delivery: The Department implemented a comprehensive 

pharmaceutical Home Delivery (mail order) marketing program in 2010, which 

has contributed to an overall increase in Home Delivery of pharmaceuticals and 

a decline at retail locations. FY 2013 results continued to build on FY 2012 

positive trends: 

— In FY 2013, mail order use increased by 15.6% compared to FY 2012. The 

monthly volume of over 1.5M prescriptions continued the upward trend from 

2012 for TRICARE Home Delivery. 

— Retail prescription volume fell 6% in FY 2013 as compared to FY 2012. 

• TRICARE For Life Pilot: A FY 2013 NDAA-directed TRICARE For Life Pharmacy Pilot will start mid-February 2014. This pilot will require TRICARE For 

Life beneficiaries who fill prescriptions for select maintenance medications at a 
81 

retail network pharmacy to switch to either home delivery or a military pharmacy. • Outpatient Prospective Payment System: In 2009, by aligning its payments 

with Medicare rates (known as the Outpatient Prospective Payment System), 

the Department instituted changes in the way it reimburses private hospitals 

for outpatient services provided to TRICARE. 

— Over a four-year transition period that commenced in mid-2009, TRICARE 

pays hospitals on a prospective payment basis for hospital outpatient services, which allows for a reasonable profit and eliminates excessive facility 

charges. • TRICARE Prime Enrollment Fees: In FY 2012, the Department was allowed to implement a modest increase in Prime enrollment fee ($30/$60 per year increase for individual/family coverage), indexed to annual retiree COLA starting 

in FY 2013. • Pharmacy co-pay adjustment: The Department implemented pharmacy copay changes in FY 2012 and the FY 2013 National Defense Authorization Act 

included some additional adjustments to the TRICARE pharmacy co-pay structure. • U.S. Family Health Plan (USFHP): In FY 2013, we implemented a lower and 

more accurate capitation rate to reimburse USFHP plans for health care delivery. As part of the FY 2012 President’s Budget Request, the Department submitted a legislative proposal requiring new USFHP enrollees to move to the 

TRICARE for Life (TFL) Program upon becoming eligible for Medicare like all 

other military retirees. This proposal was enacted as part of the FY 2012 National Defense Authorization Act. This change is reducing demand on the Medicare Eligible Retiree Health Care Fund (MERHCF) because, previously, 

TRICARE was the primary payer for TFL-eligible retirees enrolled in USFHP 

instead of the second payer to Medicare as is the case for all other TFL retirees 

not residing overseas. • Managed Care Support Contract (MCSC) Specific Initiatives and Demos 

— The third generation of TRICARE contracts (known as T3) requires network 

discount guarantees and other utilization management strategies which show 

significant positive results and are holding the rate of purchased sector 

health care cost growth below the national average. 

— Two demonstration projects (in the North Region and South Region) were initiated to enroll beneficiaries in network Primary Care Medical Homes to discover if this will increase quality and coordination of care and decrease costs 

as per the literature. 

— Managed Care Support Contractors each instituted care coordination systems/initiatives and utilization management initiatives as enhancements in 

the contracts that drive cost savings through better care coordination and 

management. 

— A demonstration project was initiated to reduce emergency room costs by allowing U.S. Coast Guard beneficiaries in the South region to access urgent 

care center visits without authorization where medically appropriate. 

— A comprehensive model to assist MTFs to identify healthcare recapture opportunities was developed. The model is now in use in all three regions. 

— An initiative that places reasonable limits on services, such as physical therapy, has resulted in significant savings without diminishing the outcome of 

the care provided. 

— The implementation of improved use of information, coupled with outreach 

to both patients and providers, has demonstrated initial results of a decrease 

of over ten percent in inpatient hospital care. Inpatient hospital care is the 

most expensive form of care provided. 

Current Year Initiatives: The following savings initiatives have started or are 

planned to start in FY 2014 to slow the growth in DOD’s health care costs. 

• Sole Community Hospital: The Department has revised its payment rules to 

reimburse inpatient care claims at sole community hospitals by complying with 

federal law and aligning its reimbursement more closely with Medicare rates. 

— Previously, we reimbursed at rates that were, on average, 75–85% higher 

than rates used by Medicare. 

— New payment rules went into effect on January 1, 2014. Reimbursement 

changes will phase-in over multiple years that will help hospital’s reduce potential impacts, reducing the Department’s health care costs and leading to 

significant cost savings for the agency. There is also an adjustment available 

to qualifying network hospitals serving a disproportionate number of Active 

Duty Service members and Active Duty family members, and deemed essential for readiness. 
82 

• Electronic Prescribing: TRICARE’s focus is on implementing electronic prescribing from civilian providers to MTF pharmacies. Implementing e-prescribing 

at MTFs will result in an increase in MTF filled prescriptions, which is the 

least expensive point of service, and a decrease in retail pharmacy-filled prescriptions which is the most expensive point of service. A 1% shift in non-specialty maintenance medications (270,000 prescriptions) to MTFs from retail 

pharmacies has substantial cost-avoidance to the MHS. The electronic prescribing is currently in a test phase with a projected roll out date of mid-2014. 

• Other Health Insurance: Beneficiaries do not always provide their Other 

Health Insurance (OHI) information to ensure TRICARE pays second on any civilian claims or to allow MTFs to bill for care rendered. The Defense Health 

Agency (DHA) will contract with a commercial vendor to identify missing OHI 

policy information to decrease the cost of purchased care claims and increase 

the MTF’s revenues. 

• Prime Service Area Reduction: On October 1, 2013, the Department reduced 

the number of TRICARE Prime Service Areas (PSAs) in the Unites States. 

PSAs are now being maintained only around MTFs and base realignment and 

closure (BRAC) sites. This initiative has been planned since 2007. 

— No beneficiary lost TRICARE health care benefits. The retirees and their 

family members living in an affected area could re-enroll to a more distant 

PSA, if one was available within 100 miles from their residence, or they had 

immediate access to TRICARE Standard. TRICARE Standard is the basic entitlement by law. 

— Fiscal Year 2014 NDAA also allows each affected eligible beneficiary who 

was enrolled in TRICARE Prime as of September 30, 2013, to may make a 

one-time election to continue such enrollment in TRICARE Prime contingent 

upon certain provisions. 

• TRICARE Service Center (TSC) Initiative: The TSCs will no longer provide 

walk-in customer service at the 189 TSCs in all 50 States, as of April 1, 2014. 

— TSCs were established 20 years ago to assist beneficiaries with questions 

concerning enrollment, billing benefits, etc., when TRICARE replaced 

CHAMPUS. They are regional contractor-operated offices, with a limited 

number of staff providing face-to-face customer services. 

— With more and more beneficiaries now using electronic communications for 

assistance (internet, mobile applications, telephone, etc.), walk-in customer 

service is no longer deemed necessary or cost effective. It is the most expensive customer service option available. 

— Few, if any, commercial health plans offer a similar walk-in customer service. Due to the unique nature of the overseas environment, all overseas TSCs 

will continue providing walk-in customer services. 

— All TSC walk-in services can be provided by long-standing and well tested 

toll-free call centers or multiple internet and mobile sites. 

• Health Plan Headquarters Initiatives: 

— Consolidation of the MCSC under a single TRICARE Regional Office Director 

has resulted in increased consistency in the award fee process and savings 

in awards. 

— Initiatives to decrease print materials and the move to increased electronic 

communications have resulted in substantial savings over previous years. 

Mr. WILSON. Based on the testimony of Dr. Woodson and General Robb savings 

from the consolidation of Medical Logistics is projected to be $10 million. What is 

the amount of savings at this time? 

General ROBB. Defense Health Agency Medical Logistics initiatives have resulted 

in $8.2M in FY14 savings to date. 

Mr. WILSON. Based on the testimony of Dr. Woodson and General Robb $24.7 million is the projected savings from consolidation of Health Information Technology. 

In what fiscal year will this savings be attained? Please provide a detailed explanation of where these savings come from. 

General ROBB. These savings are attributable to efficiencies implemented in FY14 

in the following areas: 

Reengineering IT Management: $3.8M is attributed to reductions in the operations and consultant contracts 

Infrastructure Consolidation: $12.2M is attributed to contract efficiencies in Service medical software licenses, help desk operations, and information assurance activities 

Portfolio Rationalization: $8.7M is attributed to contract efficiencies in Service 

medical systems trainers and systems support 
83 

QUESTIONS SUBMITTED BY MS. TSONGAS 

Ms. TSONGAS. What can TRICARE do to help address the issue of obese and overweight DOD dependents and obese or overweight Active Duty personnel? 

Dr. WOODSON. The Department is addressing the issue of obese and overweight 

DOD dependents and obese or overweight Active Duty personnel by actively screening weight as part of the Military Health System (MHS) strategy to provide improved patient-centered delivery of healthcare services in place within our Patient 

Centered Medical Homes. Adults with a Body Mass Index (BMI) of 25 or adolescents 

and children with a BMI greater than the 85th percentile are typically encouraged 

to receive nutritional and physical activity counseling as part of the primary care 

visit. Additionally, as part of the National Prevention Strategy, we are working to 

shape the physical and nutritional environment on installations making the healthy 

choice the easy choice. Specifically, a demonstration project called The Healthy Base 

Initiative (HBI), is designed to test pilot initiatives to inform a strategic way ahead 

to improve the health of the community. For example, the Military Nutrition Environment Assessment Tool (m-NEAT) built in collaboration with the Services will assist individuals with evaluating the nutritional quality of foods provided at all military and commercial dining environments on installations. This approach will pay 

dividends in both readiness and in better health for our beneficiaries. 

Ms. TSONGAS. What are TRICARE’s processes and procedures for the review of 

new medical treatments including new categories of FDA-approved pharmaceutical 

products not currently covered by TRICARE? 

Dr. WOODSON. TRICARE only covers medically necessary services and supplies for 

which the safety and efficacy have been proven. In order to ensure our beneficiaries 

are receiving safe and effective care, TRICARE uses a ‘‘hierarchy of reliable evidence’’ to determine when a drug, device, or medical procedure is safe and effective. 

This also prevents our beneficiaries from being exposed to less than fully developed 

and tested medical procedures and to avoid the associated risk of unnecessary or 

unproven treatment. The below list shows the documentation TRICARE utilizes 

during coverage reviews. 

TRICARE uses the following hierarchy of reliable evidence: 

1. Well controlled studies of clinically meaningful endpoints, published in refereed 

medical literature. 2. Published formal technology assessments. 3. Published reports 

of national professional medical associations. 4. Published national medical policy 

organization positions; and 5. Published reports of national expert opinion organizations. 

Specifically not included in the meaning of reliable evidence are reports, articles 

or statements by providers or groups of providers containing only abstracts, anecdotal evidence or personal-professional opinions. 

Ms. TSONGAS. What is the medical cost to TRICARE for conditions and diseases 

associated with obesity? 

Dr. WOODSON. Regarding the medical cost to TRICARE, a cost of disease model 

published in 2010 of the cost of overweight and obesity for TRICARE estimated a 

charge to TRICARE of approximately $1.1 billion annually. This analysis incorporated the role of excess weight in the development of a range of chronic medical 

conditions such as type 2 diabetes, cardiovascular disease, stroke and some types 

of cancers, all of which increase medical costs, impact quality of life, and contribute 

to premature mortality. This estimate, which focused on TRICARE prime beneficiaries, represents a significant proportion of cost but likely underestimates the 

total annual medical costs to the DOD. 

QUESTIONS SUBMITTED BY MR. SCOTT 

Mr. SCOTT. In response to a recent Congressional inquiry, the DOD stated they 

were only immunizing military personnel stationed in Asia against Japanese encephalitis (JE) ‘‘based on Service guidance, unit mission or other occupational requirements (for example those who operationally deploy to a high-risk field environment)’’, which is resulting in extremely low vaccine coverage rates except for the 

Marines and a few other special operations units. Why is the DOD Not following 

the recommendations issued by the CDC and Dr. Woodson to immunize all ‘‘Service 

members, Department of Defense civilians, and beneficiaries who are, or will be, 

stationed or visiting for more than 30 days in JE endemic areas’’? 

Dr. WOODSON. The Department of Defense follows the Centers for Disease Control 

and Prevention (CDC) recommendations and the Health Affairs guidance. The 

Health Affairs guidance mirrors the recommendations from the CDC. Individuals 

deploying to endemic or rural areas in the U.S. Pacific Command (PACOM) should 

be administered the JE vaccine in accordance with the latest PACOM Force Health 
84 

Protection guidance. The Services and PACOM may issue more specific requirements based on a medical threat within the area of operations and have done so 

for certain Marine and special operations units. 

QUESTIONS SUBMITTED BY MR. BARBER 

Mr. BARBER. Numerous newspaper articles indicate an adversarial relationship 

between the TRICARE contractor, beneficiaries and local providers in the Philippines. Constituents complain about a lack of reliable information on the benefit 

and a lack of responsiveness to customer support. Major national pharmacy firms 

and the Red Cross and all of its field offices have refused to work with the contractor denying beneficiary access to numerous pharmacies and a major source of 

blood. One of four internationally accredited hospitals and the only one in the southern Philippines cannot be used by beneficiaries for what appears to be nothing more 

than a paperwork exercise as it is obviously a licensed and legitimate hospital with 

better quality than many currently certified and hospitals. 

In 2008 the beneficiaries were promised an onsite employee that would listen to 

their issues and learn the nuances of the local health care industry so access to care 

could be restored. In 2011 the DODIG, as the result of a multi-year investigation 

of the contractor, recommended to the TRICARE Management Activity, ‘‘Consider 

establishing a TRICARE presence in the Philippines to service military retirees and 

their dependents.’’ Their response was ‘‘TMA is in the process of selecting a location 

for a TRICARE Satellite Office in Manila, Philippines to provide assistance to military retirees and their dependents residing there. The office will be staffed by a 

TMA Government employee, and TMA is currently in the process of advertising that 

position.’’ Yet in 2014 there is no such position and my constituents indicate DHA 

is now silent when questioned about the promised position. 

Given the adversarial relationship that has developed between the contractor, 

beneficiaries and the local health care industry and the current ongoing Demonstration, that also appears to be in trouble, wouldn’t it be prudent to take immediate 

action to place the promised employee on the ground so they can work with beneficiaries and the local health care industry to finally insure good access to care to 

these beneficiaries? 

General ROBB. All three of the major national pharmacy firms operating in the 

Republic of the Philippines are TRICARE certified. Mercury Drug was certified in 

September 2010; Rose Pharmacy in April 2012; and Watsons Pharmacy in July 

2013. Certification of these pharmaceutical companies at the corporate level allow 

TRICARE beneficiaries to access any of these pharmacies’ stores, regardless of 

where in the country they are located. The Philippine National Red Cross is 

TRICARE certified effective February 19, 2014. Similar to the certification of the 

pharmacy companies, certification of the Red Cross at the national level allows 

TRICARE beneficiaries to access any of the 80 Red Cross Chapters in the Philippines to obtain the necessary testing and blood supplies they may need. Due to 

the delay in certifying the Philippine National Red Cross, the Defense Health Agency has directed the TRICARE Overseas Program contractor to reprocess all previously submitted claims since September 2010 and provide the appropriate reimbursement to the beneficiaries for their out of pocket expenses for testing and blood 

supplies obtained from any Philippine Red Cross chapter. 

In 2008, the Deputy Director, TRICARE Management Activity (TMA), visited the 

Republic of the Philippines. Based on what he saw and heard from the retired beneficiaries, as well as his awareness of significant fraud issues in the Philippines, the 

Deputy Director directed establishment of a satellite office in the Philippines to enable the TRICARE Area Office-Pacific to better support beneficiaries living there. 

At that time, office space was identified at the old Clark Air Force Base, and coordination was completed to have a U.S. citizen who would staff the office fall under 

the protection of the U.S. Embassy. Since that time, the space at the old Clark Air 

Force Base is no longer available. 

In 2012, the Deputy Director, TMA reversed the previous decision to establish a 

satellite office in the Philippines in light of several factors. These factors included 

the award of the TRICARE Overseas Program (TOP) contract in 2009 to International SOS Assistance (International SOS). This contract requires the operation 

of a 24/7 Regional Call Center, staffed with customer service representatives trained 

to assist beneficiaries and host nation providers with questions about claims, locating a provider, benefit determinations, and authorizations for care. Additionally, the 

agency had decided to implement the Philippine Demonstration Project which is designed to increase access to quality health care, eliminate the need for beneficiaries 

to file their own claims, and control costs. The Demonstration Project began in Jan-
85 

uary 2013. Nowhere else do we have a TRICARE office specifically to support the 

retiree population in any other overseas location and establishing one in the Philippines would be potentially precedent-setting, resulting in retirees living in other 

overseas locations expecting to have a satellite office established specifically to support them. And finally, in this resource constrained environment, establishing a satellite office in the Philippines was not a fiscally sound decision. 

The purpose of the Philippine Demonstration is to test an alternative method for 

the delivery of health care in the Philippines to continue to control costs, reduce aberrant billing activity, and eliminate balance-billing issues while providing quality 

health care to TRICARE Standard beneficiaries residing in the Philippines and receiving care in designated demonstration area(s). This will be accomplished by using 

approved demonstration providers who have agreed to accept TRICARE reimbursement as payment in full, file the claim on behalf of the beneficiary, collect only the 

applicable cost-share and deductible, and agree to on-site verification and provider 

certification. 

Selection of Approved Demonstration Providers was based on a thorough review 

of claims history over the past two years with the objective to recruit and retain 

a sufficient number and mix of Approved Providers in designated demonstration 

areas. Criteria for the selection of approved providers consisted (1) the number of 

claims submitted by the providers/facilities and (2) whether or not the providers/facilities were under any type of pre-payment review. As of March 2014, there are 11 

approved institutional facilities that provide inpatient services and 323 approved individual providers in designated demonstration areas. Additionally, throughout the 

Philippines there are 301 certified institutional facilities that provide inpatient services and 4,335 individual certified providers. 

QUESTIONS SUBMITTED BY MR. CASTRO 

Mr. CASTRO. DOD has had great success with the creation of the Armed Forces 

Institute of Regenerative Medicine (AFIRM), a medical research consortium established to bring the best minds across military and civilian research communities to 

focus on a high priority area for the military. DOD has recently joined with the Department of Veteran’s Affairs to create consortiums in Traumatic Brain Injury and 

Post Traumatic Stress which are also high priority areas for the military. What are 

the next priority areas of research where these civilian/military consortiums should 

take place, especially in looking to maintain advances in military medicine and 

translating the lessons learned from Iraq and Afghanistan into civilian medicine? 

Dr. WOODSON and General ROBB. The DOD is exploring the feasibility of research 

collaborations or research consortia for a systems approach to all transport, equipment, and clinical aspects of en-route trauma care, hearing loss, prosthetics, and artificial vision. 

Civilian-military consortia would focus on medical (e.g., medications, blood products, oxygen-carrying substitutes) and procedural (e.g., devices to control pain and 

hemorrhage and to promote perfusion to the brain and heart) strategies in the prehospital and en-route care setting. These consortia would synergize the development 

of new monitoring and triage devices (e.g., predicting those in the early stages of 

shock) as well as expand data gathering and telemedicine capabilities. 

Mr. CASTRO. In this era of declining budgets what steps is the Defense Health 

Agency taking to assure that its medical research and development remains focused 

on the high priority gaps defined in the 2008 Guidance for the Development of the 

Force? Have these gaps been resolved and if not, how are we resolving them and 

are they properly resourced? 

Dr. WOODSON. The Office of the Assistant Secretary of Defense for Health Affairs 

(OASD(HA)) conducts regular reviews and analyses of the medical research and development (R&D) portfolio to assure that investments are aligned to capability gaps, 

to assess the current state of science in a gap area, and to identify R&D gaps and 

needs that inform future resource strategies. 

The Military Health System strategic priorities that drive R&D investments are 

based on the Joint Capabilities Integration and Development System (JCIDS) that 

informed the 2008 Guidance for the Development of the Force gaps. Using the 

JCIDS, the DOD re-validates and re-evaluates joint force health protection and 

readiness capabilities through the Capabilities Based Assessments (CBA) process. A 

CBA, sponsored by the OASD(HA), will re-validate, revise, or establish new capability requirements and associated capability gaps based upon operational lessons 

learned, changing needs, and gap assessment. Gap resolution is an on-going process. 

Over the last five years, considerable progress has been made in specific gap resolution for the 2008 guidance but the CBA will revise existing gaps or create new gaps. 
86 

Mr. CASTRO. In this era of declining budgets what steps is the Defense Health 

Agency taking to assure that its medical research and development remains focused 

on the high priority gaps defined in the 2008 Guidance for the Development of the 

Force? Have these gaps been resolved and if not, how are we resolving them and 

are they properly resourced? 

General ROBB. The Office of the Assistant Secretary of Defense for Health Affairs 

(OASD(HA)) conducts regular reviews and analyses of the medical research and development (R&D) portfolio to assure that investments are aligned to capability gaps, 

to assess the current state of science in a gap area, and to identify R&D gaps and 

needs that inform future resource strategies. During this fiscal year, the Defense 

Health Agency will begin to assume management responsibility for medical R&D. 

The Military Health System strategic priorities that drive R&D investments are 

based on the Joint Capabilities Integration and Development System (JCIDS) that 

informed the 2008 Guidance for the Development of the Force gaps. Using the 

JCIDS, the DOD re-validates and re-evaluates joint force health protection and 

readiness capabilities through the Capabilities Based Assessments (CBA) process. A 

CBA, sponsored by the OASD(HA), will re-validate, revise, or establish new capability requirements and associated capability gaps based upon operational lessons 

learned, changing needs, and gap assessment. Gap resolution is an on-going process. 

Over the last five years, considerable progress has been made in specific gap resolution for the 2008 guidance but the CBA will revise existing gaps or create new gaps. 

Æ