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S. HRG. 111–327 

HEARING ON VA CONTRACTS FOR 

HEALTH SERVICES 

HEARING 

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 30, 2009 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate 

(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

DANIEL K. AKAKA, Hawaii, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

PATTY MURRAY, Washington 

BERNARD SANDERS, (I) Vermont 

SHERROD BROWN, Ohio 

JIM WEBB, Virginia 

JON TESTER, Montana 

MARK BEGICH, Alaska 

ROLAND W. BURRIS, Illinois 

ARLEN SPECTER, Pennsylvania 

RICHARD BURR, North Carolina, Ranking 

Member 

LINDSEY O. GRAHAM, South Carolina 

JOHNNY ISAKSON, Georgia 

ROGER F. WICKER, Mississippi 

MIKE JOHANNS, Nebraska 

WILLIAM E. BREW, Staff Director 

LUPE WISSEL, Republican Staff Director 

(III) 

C O N T E N T S 

SEPTEMBER 30, 2009 

SENATORS 

Page 

Akaka, Hon. Daniel K., Chairman, U.S. Senator from Hawaii ........................... 1 

Tester, Hon. Jon, U.S. Senator from Montana ...................................................... 2 

Begich, Hon. Mark, U.S. Senator from Alaska ..................................................... 9 

Burr, Hon. Richard, Ranking Member, U.S. Senator from North Carolina ....... 17 

Prepared statement .......................................................................................... 17 

Burris, Hon. Roland W., U.S. Senator from Illinois ............................................. 20 

Prepared statement .......................................................................................... 20 

WITNESSES 

Williams, Hon. Joseph A., Jr., RN, BSN, MPM, Acting Deputy Under Secretary for Health for Operations and Management, Veterans’ Health Administration, U.S. Department of Veterans Affairs; accompanied by Frederick Downs, Jr., Chief Procurement and Logistics Officer, Veterans Health 

Administration; Gary Baker, Chief Business Officer, Veterans Health Administration; Bradley Mayes, Director, Compensation and Pension Service, 

Veterans Benefits Administration; and Jan Frye, Deputy Assistant Secretary for Acquisition and Logistics ................................................................... 3 

Prepared statement .......................................................................................... 5 

Response to questions arising during hearing by: 

Hon. Jon Tester ............................................................................. 12–14, 25, 27 

Hon. Mark Begich ..................................................................................... 47 

Hon. Daniel K. Akaka ............................................................................... 48 

Response to post-hearing questions submitted by Hon. Daniel K. Akaka ... 58 

Attachments ............................................................................................... 70 

Curtis, Mary A., APRN, BC, Boise VA Medical Center, representing the 

American Federation of Government Employees .............................................. 137 

Prepared statement .......................................................................................... 140 

McClain, Tim S., President and Chief Executive Officer, Humana Veterans 

Health Care Services ........................................................................................... 142 

Prepared statement .......................................................................................... 144 

Appendix .................................................................................................... 151 

Response to questions arising during hearing ............................................... 178 

Shahani, Marjie, Chief Executive Officer, QTC Management, Inc. ..................... 151 

Prepared statement .......................................................................................... 153 

Earnest, John L., President and Chief Executive Officer, Ambulatory Care 

Solutions ............................................................................................................... 155 

Prepared statement .......................................................................................... 157 

Attachment ................................................................................................ 162 

(1) 

HEARING ON VA CONTRACTS FOR 

HEALTH SERVICES 

WEDNESDAY, SEPTEMBER 30, 2009 

U.S. SENATE, COMMITTEE ON VETERANS’ AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 9:30 a.m., in room 

418, Russell Senate Office Building, Hon. Daniel K. Akaka, Chairman of the Committee, presiding. 

Present: Senators Akaka, Tester, Begich, Burris, and Burr. 

OPENING STATEMENT OF HON. DANIEL K. AKAKA, CHAIRMAN, 

U.S. SENATOR FROM HAWAII 

Chairman AKAKA. Good morning. Please be seated. The hearing 

of the Senate Committee on Veterans’ Affairs on VA Contracts for 

Health Services will come to order. 

This hearing will explore how VA purchases health care services. 

The Committee is interested in gaining a better sense of the process by which services are purchased and how VA oversees and 

manages those outside services. 

While VA has authority to buy services for veterans in the community through various means, it is not clear if VA compares the 

cost of providing these services in-house to the costs of outsourcing. 

This raises a question as to whether VA gets value for the more 

than $3 billion spent annually on purchased care. 

There are also concerns about how the VA monitors the quality 

of contract services to ensure that veterans are receiving timely 

and appropriate care. Whether contract care is obtained through a 

national contract with a large HMO, through a local contract for 

care at a community clinic, or for compensation and pension exams, 

VA remains responsible for insuring that the care or services are 

of high quality. This includes making sure that VA and contract 

providers share accurate and complete medical information. 

Another area of concern is the extent to which individual VA hospitals and their networks have contracts for care which are unknown to managers here in DC. In an effort to increase accountability and oversight of contract services, VA recently restructured 

the contracting process to move contracting authority from the local 

level to more centralized points. The Committee hopes to learn 

today about how this reorganization will help VA ensure that contractors supply quality services at a fair price to the benefit of the 

VA and the taxpayers. 

It is also important to focus on what mechanisms are in place so 

that VA contracts for services only if it does not make sense for VA 

2 

to supply the services directly. Today’s hearing is part of the Committee’s oversight of how VA provides health services outside of 

VA. No matter the setting, the Nation’s veterans deserve timely access to the highest quality services available. 

At this time I would like to welcome the witnesses on our first 

panel. Joseph Williams, Acting Deputy Under Secretary for Health, 

Operations and Management of the Veterans’ Health Administration, will lead the discussion on VA contracts for health services. 

He is accompanied by Frederick Downs, who is Chief of Procurement and Logistics Officer at VHA; Gary Baker, Chief Business Officer at VHA; Bradley Mayes, Director, Compensation and Pension 

Service at VBA; and Jan Frye, Deputy Assistant Secretary for Acquisition and Logistics. 

I thank all of you for being here this morning and want you to 

know that your full testimony will appear in the record. 

Before we begin with your testimonies, I want to call on Senator 

Tester for his opening remarks. 

STATEMENT OF HON. JON TESTER, 

U.S. SENATOR FROM MONTANA 

Senator TESTER. Thank you, Mr. Chairman. 

I guess I made it just in time. I wish I could have heard your 

comments, yet I want to thank you very much for having this hearing on this important issue. And, as always, I want to thank the 

folks who came to testify and give their perspective for being here 

also. I appreciate it very much. 

I start from the same perspective as the American Legion when 

it comes to the VA health system. The Legion called it a system 

worth saving and I could not agree more. 

It is clear to me that the Legion speaks for an awful lot of veterans who want to see the system strengthened, not dismantled. 

But I recognize that there are limits to what the VA can do. We 

see it all over rural and frontier America; contracting of mental 

health services in Montana is an absolute necessity. 

There is only one mental health professional in the entire State 

east of Billings, and Billings is not the eastern edge of Montana. 

Contracting of speciality care and emergency services in rural and 

frontier areas makes sense as well because we simply do not have 

the providers. 

It does not do anyone any good to put the VA and the private 

sector in direct competition for the doctors and nurses and other 

medical professionals that are increasingly in short supply in rural 

America. 

Contracting out can sometimes simply be the right thing to do 

for the veteran. You do not put a veteran from Billings with a back 

injury on an 8-hour bus ride to Denver for surgery; at least I would 

hope you better not. You find a way to get him surgery in his own 

neighborhood. 

But contracting is not a cure-all even in rural America. I know 

that the VA in Montana has had to cancel a couple of CBOC contracts for poor performance or failure to adapt to the VA electronic 

medical records, which are the linchpin of VA’s health care system. 

I am particularly concerned about reports regarding VA’s overpayment of contracted services for compensation and pension 

3 

exams. I see that private companies are doing more and more of 

these exams at an average cost of $850 per veteran. That might 

make some sense and it might not. I guess that is what this hearing is about. 

I am very worried that we do not have the data we need to understand whether privately performed C&P exams actually lead to 

more efficient C&P claims processing. I hope we can get information on that during this hearing. 

We are in tight budget times so let us make sure we are not tolerating waste, fraud, or abuse in the contracting process before we 

think about trying to raise copayments and fees on veterans, as the 

Bush administration had proposed, or before we think about forcing VA health costs onto veterans private insurance, as the Obama 

Administration proposed. 

Finally, Mr. Chairman, I would just add that contracting out 

medical services is hardly a cure-all for the private providers. 

Many of these folks in my State wait for reimbursement well beyond the VA’s goal of 30 days after the claim is submitted. Many 

of these facilities are small critical access hospitals that have little 

or no margin for error in their cash-flow. 

So, I want to commend you, Mr. Chairman, for holding this hearing. I look forward to hearing from the witnesses and the questions 

thereafter. 

Thank you very much. 

Chairman AKAKA. Thank you very much, Senator Tester. 

At this time I would like to call on Mr. Williams for your statement. 

STATEMENT OF JOSEPH A. WILLIAMS, JR., RN, BSN, MPM, ACTING DEPUTY UNDER SECRETARY FOR HEALTH FOR OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY FREDERICK DOWNS, JR., CHIEF PROCUREMENT AND LOGISTICS OFFICER, VETERANS HEALTH ADMINISTRATION; GARY BAKER, CHIEF BUSINESS OFFICER, VETERANS HEALTH ADMINISTRATION; BRADLEY MAYES, DIRECTOR, COMPENSATION AND PENSION SERVICE, VETERANS 

BENEFITS ADMINISTRATION; AND JAN FRYE, DEPUTY ASSISTANT SECRETARY FOR ACQUISITION AND LOGISTICS 

Mr. WILLIAMS. Mr. Chairman, Ranking Member, Members of the 

Committee. Thank you for the opportunity for us to discuss the 

Veterans’ Affairs oversight of health care contracting. 

The VA provides care to veterans directly in a VA medical center 

or indirectly through either fee-basis care or through contracts with 

local providers. This strategic mix of in-house and external care 

provides veterans with a full continuum of health care services. 

VA medical center directors determine when additional resources 

are required. It is VHA policy to hire clinical staff whenever feasible. But when this is not possible or inadvisable, the medical center director must first consider sending patients to another VA 

medical center. If contracting of services are required, a competitive bid is the first option considered. 

There are two principal avenues of contracting for health care 

services: conventional commercial providers and academic affiliVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
4 

ates. VA academic affiliates provide a large portion of contract care 

and critical care. 

In either approach, VA is ultimately responsible for the quality 

of care delivered in its facilities for veterans. VA exercises this responsibility through credentialing and privileging, quality and patient safety monitoring, and specific quality of care positions within 

a contract itself. 

All applicable VA quality and patient safety standards must be 

met for medical services provided under contract in a VA facility. 

Ensuring quality standards for VA-contracted care when services 

are provided outside of the VA facility is more complex, but VAcontracted care includes language that allows for industry standards of accreditation, certification requirements, clinical reporting, 

and oversight. VA also includes clauses in their contract that allows it to negotiate additional terms as the new clinical requirements are instituted within the department. 

VA understands the importance of closely managing its contracts 

and has initiated multiple efforts to address this. Project HERO is 

a cornerstone of those efforts. Project HERO, which is available in 

four VISNs, four of our networks, is a contracting pilot to increase 

quality oversight and reduce the cost of purchased care. 

In Project HERO, VA contracts with Humana Veterans’ Health 

Care Services and Delta Dental Federal Services to provide veterans with prescreened networks of doctors and dentists who meet 

VA quality standards. This is done at negotiated rates. 

In fact, 89 percent of Project HERO contact medical prices with 

HVHS are below the Medicare rates and contracted rates with 

Delta Dental are less than 80 percent of the National Dentistry Advisory Services Comprehensive Fee for dental services. 

Project HERO contracts require that Humana and Delta Dental 

meet VA standards for credentialing and privileging. Timely reporting of access to care, timely return of clinical information to 

VA, patient safety and patient satisfaction, and quality programs 

including peer review are all components of this process. 

There are no known instances where VA medical centers have reduced staff following the introduction of Project HERO contracts. 

While Project HERO is only in the second year of a 5-year pilot, 

VA has found that patient satisfaction is comparable to VA and robust quality programs including peer review with VA participation 

while meeting Joint Commission and other industry standards. 

While VHA recognizes the continuous need for improvement, this 

project has validated our ability to resolve key oversight issues. 

Mr. Chairman, you also asked us to discuss contracting for compensation and pension examinations. Medical examination reports 

are an important part of VA’s disability claim process. 

Although the majority of these examinations are conducted by 

VHA, C&P Service has the authority to contract with the outside 

for medical providers in an examination process. 

During fiscal year 2008, medical disability examination contractors conducted approximately 24 percent of all the compensation 

and pension exams. C&P Service has contracted with two medical 

disability examination providers: QTC Medical Services and MES 

Solutions. 

5 

QTC was first awarded a contract in 1998. QTC successfully competed for rebid of a contract in 2003. During fiscal year 2008 QTC 

completed 117,089 examinations. 

Six VA regional offices order at least some of their examinations 

from MES. This contractor currently performs approximately 1,550 

examinations per month. 

C&P Service oversees both of these contracts. The oversight involves three standards: performance; quality and timeliness; and 

customer service, which are evaluated quarterly. 

Mr. Chairman, VA prides itself on providing consistent, highquality care to veterans; and contracting and fee-basis arrangements and agreements are important components of the VA’s national system of health care. 

We recognize the importance of our responsibilities in the oversight of care purchased outside our facilities or provided by contractors within our facilities. We will continue to work to develop initiatives intended to improve the oversight of these agreements. 

Thank you for this opportunity. My colleagues and I are prepared 

to answer your questions. 

[The prepared statement of Mr. Williams follows:] 

PREPARED STATEMENT OF JOSEPH A. WILLIAMS, JR., RN, BSN, MPM, ACTING DEP- UTY UNDER SECRETARY FOR OPERATIONS AND MANAGEMENT, VETERANS HEALTH

ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

Mr. Chairman, Ranking Member, and Members of the Committee: Thank you for 

providing me this opportunity to discuss the Department of Veterans Affairs’ (VA) 

oversight of health care organizations contracting with VA to provide health services 

to Veterans. I am accompanied today by Jan Frye, Deputy Assistant Secretary for 

Acquisition and Logistics, Department of Veterans Affairs; Fred Downs, Chief Procurement and Logistics Officer, Veterans Health Administration; Patricia Gheen, 

Deputy Chief Business Officer for Purchased Care, Chief Business Office, Veterans 

Health Administration; and Bradley Mayes, Director of the Compensation and Pension Service, Veterans Benefits Administration. 

VA provides care to Veterans directly in a VA medical center or indirectly through 

either fee-basis care or through contracts with local providers. This strategic mix of 

in-house and external care provides Veterans the full continuum of health care services covered under our benefits package. My testimony today will focus on VA’s oversight of health care organizations contracting with VA to provide health services to 

Veterans, VA’s obligations and procedures for ensuring quality care through contracts, VA’s Project on Healthcare Effectiveness through Resource Optimization 

(Project HERO), oversight of compensation and pension examinations conducted by 

QTC Management, Inc., and other large-scale contracts. 

OVERSIGHT OF HEALTH CARE CONTRACTS

All VA health care resource contracting is accomplished under the provisions of 

VA Directive 1663, ‘‘Health Care Resources Contracting.’’ VA’s Directive 1663 further implements provisions of Public Law 104–262, ‘‘The Veterans Health Care Eligibility Reform Act of 1996,’’ which significantly expanded VA’s health care resources sharing authority in title 38 United States Code (U.S.C.) sections 8151 

through 8153. 

VA medical center directors determine when additional health care resources are 

required. It is the policy of the Veterans Health Administration (VHA) to provide 

Veterans care within the VA health care system, whenever feasible. 

When VA is unable to provide care within the system, for example because a 

qualified clinician cannot be recruited the medical center director must first consider 

sending patients to another VA medical center. Contracting for necessary services 

will only be considered if these options are not appropriate or viable. If contracting 

for services is required, a competitive bid is the first option to be considered. 

There are two principal avenues to contract for health care services: conventional 

commercial providers and academic affiliates. VA’s academic affiliates (schools of 

medicine, academic medical centers and their associated clinical practices) provide 

a large proportion of contracted clinical care both within and outside of VA. 

6 

All VA health care resource contracts are reviewed through a thorough process 

that includes the Office of General Counsel (for legal sufficiency), VHA’s Patient 

Care Services (for quality and safety), VHA’s Office of Academic Affiliations (for affiliate relations assessment), and VHA’s Procurement and Logistics Office (for acquisition technical review for policy compliance). A formal Medical Sharing Review 

Committee, consisting of senior executives from those VA organizations, approves or 

disapproves the concept of contracting for care and provides management oversight 

of the health care contracting requirements and acquisition process. 

QUALITY MANAGEMENT FOR CONTRACTED CARE

VA retains ultimate responsibility for the quality of care delivered within its facilities to Veterans. VA exercises this responsibility through several clinical and administrative oversight mechanisms, including credentialing and privileging, quality 

and patient safety monitoring, and the inclusion of specific quality of care provisions 

in the contract itself. 

Quality assurance is a shared responsibility of VA and the vendor. The joint and 

separate responsibilities of VA and the vendor must be defined in advance so that 

medical care delivery under a sharing agreement (contract) can be effectively monitored (VA Directive 1663, Health Care Resources Contracting—Buying, Sections 

4.d.1 and 4.d.2). The VISN Director is responsible for ensuring that each facility 

Chief of Staff has appropriate quality assurance standards in place; appropriate 

data methods have been defined; and data collection, analysis and reporting are performed as specified. 

VA Central Office’s Sharing Contract Review Committee is responsible for providing an additional level of review, including review of the quality assurance provisions. Within this Committee, VHA’s Patient Care Services has primary responsibility for assuring that medical sharing contracts contain appropriate quality and 

patient safety provisions. 

Facility Directors must ensure that these oversight mechanisms are consistently 

and effectively applied to all in-house contracted care. All contracts for physician 

services provided at VA must state that credentialing and privileging is to be done 

in accordance with the provisions of VHA Handbook 1100.19, ‘‘Credentialing and 

Privileging.’’ Facility Service Chiefs are responsible for the quality of care within 

their clinical disciplines pursuant to VHA Handbook 1100.19 and Joint Commission 

Standards MS. 03.01.01, MS. 04.01 .01, LD.04.03.01 and LD.04.03.09. Facility Service Chiefs exercise this responsibility through such actions as oversight of 

credentialing and privileging, and review of provider-specific data and peer review 

processes. 

The Joint Commission also has specific standards for focused monitoring whenever new procedures or new technology are involved (Joint Commission Standards 

MS. 08.01 .01 and LD.04.03.01). As noted above, Clinical Service Chiefs and/or the 

Chief of Staff have primary responsibility for the oversight of quality and safety 

monitoring. 

Quality and safety standards and monitoring procedures will vary as a function 

of the specific service being provided. However, all applicable VA quality and patient 

safety standards must be met for medical services provided under contract in a VA 

facility. Ensuring quality standards for VA-contracted care when services are provided outside of a VA facility is more difficult, but VA includes language in contracts 

that allows for industry standard accreditation or certification requirements, clinical 

reporting and oversight. VA also includes clauses that allow it to negotiate additional terms as new clinical requirements are instituted by the Department. 

PROJECT ON HEALTHCARE EFFECTIVENESS THROUGH RESOURCE OPTIMIZATION

(PROJECT HERO)

Given our desire for patient-centered care and recognizing that it may not always 

be able to provide Veterans care within our facilities, VA has a continued need for 

non-VA services. This purchasing of health care services represents a key component in our health care delivery continuum. VA understands the importance of 

closely managing the services purchased and has initiated multiple efforts around 

improving that management. Project HERO is a cornerstone of those efforts. 

House Report 109–305, the conference report to accompany Public Law 109–114, 

provided that VA establish at least three managed care demonstration programs to 

satisfy a set of health care objectives related to arranging and managing care. The 

conferees supported VA’s expeditious implementation of care management strategies 

that have proven valuable in the broader public and private sectors, and to ensure 

care purchased for enrollees from community providers is cost-effective and complementary to the larger VA health care system. The conferees encouraged VA to 

7 

collaborate with industry, academia, and other organizations to incorporate a variety of public-private partnerships. 

Project HERO is in year two of a proposed five-year contracting pilot to increase 

the quality oversight and decrease the cost of purchased (fee) care. It is currently 

available in four Veterans Integrated Service Networks (VISN): VA Sunshine 

Healthcare Network (VISN 8), South Central VA Health Care Network (VISN 16), 

Northwest Network (VISN 20) and VA Midwest Health Care Network (VISN 23). 

These VISNs have historically had high expenditures for non-VA purchased care 

(fee care) and substantial Veteran enrollee populations. When VA cannot readily 

provide the care Veterans need internally, VA medical centers utilize the traditional 

fee basis program or, in selected VISNs, Project HERO. 

Project HERO is one of our most comprehensive pilot programs intended to improve the management and oversight of the purchase of non-VA health care services. It represents a significant and proactive approach to assessing timeliness, quality, and clinical information sharing for purchased care services, resolving potential 

deficiencies in this area. In Project HERO, VA contracts with Humana Veterans 

Healthcare Services (HVHS) and Delta Dental Federal Services to provide Veterans 

with pre-screened networks of doctors and dentists who meet VA quality standards 

at negotiated contract rates. 

Project HERO is predominantly an outpatient program for specialty services such 

as dental, ophthalmology, physical therapy, and other services not always available 

in VA. For every patient, VA medical centers determine and authorize the specific 

services and treatments to Project HERO contracted network doctors and dentists. 

Project HERO’s demonstration objectives have been shared with a number of key 

stakeholders, including Veterans Service Organizations, the American Federation of 

Government Employees, academic affiliates, and industry. The VHA Project HERO 

Program Management Office presented the following objectives to the House Appropriations Committee and House Veterans’ Affairs Committee in the second quarter 

of 2006: 

• Provide as much care for Veterans within VHA as practical; • Refer Veterans efficiently to high-quality community-based care when 

necessary; • Improve the exchange of medical information between VA and non-VA 

providers; • Foster high-quality care and patient safety; • Control operating costs; • Increase Veteran satisfaction; • Secure accountable evaluation of demonstration; and • Sustain partnerships with university Affiliates. 

The VHA Chief Business Office oversees purchased care programs, including fee 

care and Project HERO. This Office meets with internal and external stakeholders 

and monitors and evaluates program metrics. The Project HERO Governing Board 

oversees program activities and is composed of the Acting Deputy Under Secretary 

for Health Operations and Management, the VHA Chief Business Officer, and network directors from the four participating VISNs. The Board also has advisors from 

General Counsel, the Office of Academic Affiliations, and the Office of Acquisition, 

Logistics, and Construction. 

The Contract Administration Board provides contract guidance as needed and includes contracting and legal representatives. The Project HERO Program Management Office (PMO) oversees the contracts to help ensure quality care, timely access 

to care, timely return of clinical information to VA, patient safety and satisfaction. 

The PMO includes contract administration, project management, performance and 

quality management; data analysis, reporting and auditing; and communication and 

training. 

Project HERO contracts require HVHS and Delta Dental to meet VA standards 

for: 

• Credentialing and accreditation; 

• Timely reporting of access to care; 

• Timely return of clinical information to VA; 

• Reporting patient safety issues, patient complaints and patient satisfaction; and 

• Robust quality programs including peer review with VA participation, while 

meeting Joint Commission and other industry requirements. 

Humana Veterans Healthcare Services utilizes the Agency for Health Research 

and Quality patient safety indicators as well as complaints, referrals and as sources 

for initiating peer review. The Project HERO PMO monitors contract performance, 

audits credentialing and accreditation, and evaluates HVHS and Delta Dental performance compared to VA Survey of Healthcare Experiences of Patients (SHEP), 

8 

Joint Commission measures, and proxy measures based on HEDIS measures. This 

analysis indicates that Project HERO facilities are equal to or better than the national average for all non-VA hospitals that report to the Joint Commission. 

Project HERO has negotiated contract rates with HVHS and Delta Dental. 

Eighty-nine percent of Project HERO contracted medical prices with HVHS are at 

or below Medicare rates, and contracted rates with Delta Dental are less than 80 

percent of National Dentistry Advisory Service Comprehensive Fee Report for dental 

services. 

While Project HERO is only in the second year of a 5 year pilot, the program is 

meeting its objectives and improving quality oversight, access, accountability and 

care coordination. As a demonstration project, VA has gained invaluable experience 

in developing future health care contracts, managing both the timely delivery of 

health care and the quality of the care provided. Specifically, VA has found: 

• Patient satisfaction is comparable to VA; 

• HVHS and Delta Dental providers meet VA quality standards and maintain extensive quality programs. The Project HERO PMO audits for compliance and participates in their quality councils and peer review committees. 

• HVHS and Delta Dental provide timely access to care, providing specialty or 

routine care within 30 days 84 percent and 100 percent of the time respectively. 

• Both vendors are contracted to return medical documentation to VA within 30 

days for more informed, continuous patient care. The Project HERO PMO worked 

with HVHS, Delta Dental and VA medical centers to make electronic clinical information sharing available at all Project HERO sites. 

These significant improvements, gained through Project HERO, have resulted in 

a more robust oversight of these key programs. While VHA recognizes the continuous need for improvement, the initial demonstration has validated our ability to 

resolve the key oversight issues identified as a program goal. 

COMPENSATION AND PENSION SERVICE OVERSIGHT OF CONTRACT MEDICAL

EXAMINATIONS BACKGROUND

Medical examination reports are an important part of VA’s disability claims process. They provide VA regional office rating personnel with a means to establish 

service connection if a medical opinion is needed and evaluate the severity of a Veteran’s disabling symptoms for compensation purposes. A standardized protocol with 

specific worksheets for various types of examinations was developed jointly by the 

Compensation and Pension (C&P) Service and VHA. Although the majority of these 

examinations are conducted by VHA, C&P Service has authority to contract with 

outside medical providers in the examination process. During fiscal year 2008, medical disability examination (MDE) contractors conducted approximately 24 percent 

of all compensation and pension examinations. 

MDE Contractors 

C&P Service has contracted with two MDE providers: QTC Medical Services, Inc. 

(QTC) and MES Solutions, Inc. (MES). The initial authority for use of contract examinations is found in Public Law 104–275, enacted in 1996. The authority is limited to ten VA regional offices and authorizes use of mandatory funds for the examinations. QTC was first awarded the contract in 1998. This authority required a report to Congress on the feasibility and efficacy of contracting for examinations from 

non-VA sources. VA selected the ten regional offices to reflect a broad range of 

claims activity, including: (1) offices participating in the Benefits Delivery at Discharge Program (BDD), (2) offices in remote and medically underserved areas where 

Veterans had to travel long distances for examinations, and (3) offices in areas of 

high demand for examinations that may require longer waiting periods to get appointments. Two of the ten offices selected are involved with BDD and process QTC 

pre-discharge examinations for separating servicemembers that are conducted at 40 

different military base sites. 

Following submission of the VA report in the autumn of 1997, Congress took no 

further action to modify, expand, or rescind the authority. QTC successfully competed for a rebid of the contract in 2003 and this is the contract currently in force. 

During fiscal year 2008, QTC completed 117,089 examinations. 

Public Law 108–183 provided VA with supplemental contracting authority that 

differed from the existing authority in the following ways: (1) funding for examinations under this authority utilizes discretionary funds, (2) the number of locations 

at which VA may use contract examiners is not limited, and (3) the authority currently will expire on December 31, 2010. Pub. L. 110–389, section 105 extends the 

authority of Pub. L. 108–183 until December 31, 2010. MES has been awarded the 

contract under this authority and began performing examinations in August 2008. 

9 

Six VA regional offices order at least some of their examinations from MES. This 

contractor currently performs approximately 1,550 examinations per month. 

VA Oversight 

C&P Service oversees both of these contracts. The oversight involves three standards of performance: quality, timeliness, and customer satisfaction. These performance standards are evaluated quarterly. The contract provides for financial incentives and disincentives for superior and below standard performance respectively. 

The quality performance measurement for both contractors involves a review of examinations to determine how closely they follow the approved examination protocols 

for each medical disability. In addition to performance evaluations, C&P Service 

oversight includes an audit of the financial reimbursement process. An independent 

auditor monitors the billing statements presented by QTC and MES to VA and 

assures that they are accurate and appropriate for the work performed. Oversight 

audits are performed twice yearly. 

There are three primary performance measures for assessing contractors: 

• The QTC quality performance standard requires at least a 92 percent accuracy 

rate. Quarterly, 384 examination reports are randomly selected from the ten VA regional offices and their BDD sites. Reviews are conducted by the Medical Director 

of Contract Examinations and C&P Service rating experts for accuracy. 

• The timeliness performance standard is 38 days measured from the time the 

contractor receives the examination request until the final examination report is entered into the electronic system for retrieval. 

• The customer satisfaction performance standard is based on a survey questionnaire given to the Veteran as part of the examination. An independent contractor 

distributes, receives, and analyzes the results. The questionnaire asks for information on the following: medical office wait time; performance of medical administrative and support staff; reasonableness of medical office visit time and place; cleanliness of the medical office; performance and responsiveness of the medical examiner; 

and the overall satisfaction with the medical office visit. Answers provided by Veterans are converted to an overall percentage rate. A customer satisfaction standard 

of at least 92 percent is required. 

CONCLUSION

Mr. Chairman, VA prides itself on providing consistent, high quality care to Veterans, but we know there are times and locations where we cannot meet every possible medical need for our Veterans. In these situations, contracting and fee-basis 

agreements are important complements to VA’s national system of health care. We 

recognize the importance of our responsibilities in the oversight of care purchased 

outside our facilities or provided by contractors within our facilities, and we continue to develop initiatives intended to improve the oversight of these agreements. 

We are exploring opportunities across the Department and across the government. 

Thank you again for the opportunity to testify. My colleagues and I are prepared 

to answer your questions. 

Chairman AKAKA. Thank you very much for your testimony, Mr. 

Williams. 

I would like to, before asking questions, ask Senator Begich for 

any opening remarks he may have. 

STATEMENT OF HON. MARK BEGICH, 

U.S. SENATOR FROM ALASKA 

Senator BEGICH. Mr. Chairman, I do not have any. I will look 

forward to the questions because Senator Tester told me to say 

that. 

[Laughter.] 

Chairman AKAKA. Thank you very much, Senator Begich. 

Mr. Williams, I thank you for bringing others to accompany you 

here at this hearing. I just want to mention to you to feel free to 

call on them as we move along with the questions, though I will 

pose the questions to you. 

Mr. Williams, what is the total amount that the VA spends on 

outside providers including all health services? 

10 

Mr. WILLIAMS. Mr. Chairman, I would like to defer that to Mr. 

Baker. 

Mr. BAKER. The answer is in 2008 we spent approximately $3 

billion on contracted services and fee services, and this year we estimate that we will spend approximately $3.8 billion. 

Chairman AKAKA. Can you describe how VA is able to monitor 

such large spending? 

Mr. BAKER. We have standard financial controls in place. Over 

the last 21⁄2 years, we have developed a financial data warehouse 

of information at our Veterans’ Service Center. We use that information to provide detailed financial information concerning the use 

of fee-basis and contracted services available with information at 

the medical center level, at the division level, and at the national 

level. This information is not at those levels and used for internal 

review and for financial reporting across the organization, sir. 

Chairman AKAKA. Does VA have access to and routinely review 

quality assurance information by contractors? 

Mr. WILLIAMS. Yes, sir, we do; and we do that through a number 

of means. Mr. Downs would be able to share with you some of the 

aspects of contract oversight. 

Mr. DOWNS. The contracting officer and the COTR, their responsibility is to work with the program as they build those quality 

measures into the contract for performance standards and metrics. 

The COTR then monitors that contract on a regular basis, reports back to the contracting officer if there are any difficulties, in 

which case then the contracting officer then works with the vendor 

to correct those. We have regular reviews that are conducted internally to ensure that the contractor is performing up to the metrics 

he or she is supposed to. 

We then also have outside reviewers. The OIG and GAO will 

come by and review those contracts. They have a CAP review that 

they conduct now on a regular bases, certainly among the CBOCs. 

We have those internal reviews that we are using. Yes, sir. 

Chairman AKAKA. Recently, Mr. Williams, a review by the Inspector General found that a contractor providing services at a 

community clinic, did not follow VA’s credentialing and privileging 

policies. The question is: What will VA do to ensure that contract 

providers are following these policies? 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

There are several actions that we have initiated. One is to ensure 

that the appropriate language is included in contracts going 

forward. 

The second is the medical center, in addition to the COTR, has 

a responsibility to review this information and make sure it is incorporated into leadership discussions and appropriate actions are 

communicated up through the channels to be taken. 

At various levels in the contracting process, we have individuals 

that also are reviewing the contracts against the deliverables of 

that contract and decisions will be made based upon those as to 

what training, education, or other actions that may be necessary 

are taken. 

I will defer to Mr. Downs for any additional comments. 

Chairman AKAKA. Mr. Williams, on overcharges for CBOC contract care, a recent report from the Inspector General found that 

11 

VA had been charged by a clinic contractor for over 4,000 veterans 

who are no longer enrolled in that VA clinic. 

What did VA do to address that specific problem and what steps 

will the department take to prevent similar situations from occurring in the future? 

Mr. WILLIAMS. Mr. Chairman, I would like to defer to Mr. Frye. 

Chairman AKAKA. Mr. Frye. 

Mr. FRYE. I have to admit that I am not familiar with the CBOC 

operation, and I just looked at that IG report yesterday. 

Those contracts are put in place by Veterans Health Administration in the local contracting offices. Again, Mr. Downs has outlined 

the fact that he has contracting officer technical representatives 

looking at the performance of these contractors and they are the 

first line of defense. They are the eyes and ears of the contracting 

officer. If they see something awry with the performance of the contractor, they are to immediately bring that to the attention of the 

contracting officer—the government contracting officer—so that remedial action can take place. 

Chairman AKAKA. Thank you. 

Mr. BAKER. Mr. Chairman, if I might, in answer to your question, one of your concerns was do we preclude this from occurring 

going forward. 

We do take these lessons learned from IG reports and outside reviews and share them across our networks with our network directors and facility directors. We have regular conference calls and we 

have summary reports of these type of reviews to make sure that 

information is shared so it can integrate and the lessons learned 

can be shared with our leadership. We make sure we do not repeat 

the same mistakes in the future. 

Mr. WILLIAMS. Mr. Chairman, if I may, in addition, from an operations standpoint, we review the contracts. Every 2 weeks we look 

at all of the contracts from the beginning of the process through 

to the end of the process. 

In addition to that, we have an advisory group that will review 

contracts and bring them to me directly at this point through the 

reorganization where we will review those contracts and determine 

what additional actions—be it training, education, or reconfiguration—that need to take place. 

Chairman AKAKA. Thank you. 

I would like to call on Senator Tester for his questions. 

Senator TESTER. Thank you, Mr. Chairman. 

We have learned from previous hearings that the disability exam 

can be quite complicated, especially when exams involve multiple 

body systems and a complex rating system. 

Can you tell me how long it takes for a VA physician to learn 

how to conduct the exams? 

Mr. WILLIAMS. Sir, I do not have that specific information with 

regard to the actual time it would take. I would add, though, that 

we have a time requirement relative to the completion of an examination—the actual completion of examination. 

Senator TESTER. But I mean as far as what kind of regimen the 

VA physician has to go through in order to be competent when they 

step into the exam room. 

Mr. WILLIAMS. Mr. Baker will address that. 

12 

Mr. BAKER. We do have a certification program that was begun 

approximately 11⁄2 years ago for compensation and pension exam 

providers. It was designed through our compensation and pension 

exam program in Nashville. 

Senator TESTER. Typically how long does it take for a physician 

to go through that program? 

Mr. BAKER. It depends to a certain extent on the specialty. There 

is a general medical examination module, but there are modules I 

think for approximately 29 specialty type exams. 

I do not have the specific amount of time that each of those modules is, but we will take that as a note for the record to provide 

to the Committee. 

Senator TESTER. That would be good. 

[The additional information requested during the hearing follows:] 

TIME TO COMPLETE CPEP CERTIFICATION/TRAINING MODULES

In 2007, the Compensation and Pension Examination Project (CPEP) developed 

six web-based certification modules for Compensation and Pension (C&P) exams; the 

certification process began in 2008. These certification modules are designed to instruct providers on how to effectively conduct and document C&P exams for rating 

purposes. The intent is to provide a thorough understanding of the C&P process, 

terminology, types of requests and strategies for writing exam reports and opinions 

in order that providers can help ensure that Veterans receive timely, thorough and 

fair evaluations of their claimed conditions. 

CPEP has produced a total of 19 training modules on performing and documenting C&P exams. There are six certification modules: General Certification, 

Musculoskeletal, Initial PTSD, Review PTSD, Initial Mental Disorders and Review 

Mental Disorders. 

There are 13 other informational CPEP modules: Aid and Attendance, Cold Injury 

Exam, Diabetes Exam, Foot Exam, General Medical Exam, Genitourinary Exam, 

Hand, Fingers & Thumbs Exam, Heart Exam, Muscle Exam, Nerve/Neurology 

Exam, Prisoner of War Exam, Respiratory Exam and Skin & Scar Exam. 

The intended audience for the modules is C&P examiners, physicians, physician 

assistants, psychiatrists, psychologists, nurses and nurse practitioners. The clinicians can receive Accreditation Council for Continuing Medical Education (ACCME) 

or American Nurses Credentialing Center (ANCC) continuing education credits for 

each of the modules. 

TIME TO COMPLETE MODULES

The average time required to view each CPEP module and answer the accompanying questions is provided below, but the time may vary depending on the 

clinician. 

• General Certification module: 1.5 hours 

• Musculoskeletal Certification module: 1 hour 

• Initial Mental Disorders Certification module: 1.5 hours 

• Review Mental Disorders Certification module: 1 hour 

• Initial PTSD Certification module: 2 hours 

• Review PTSD Certification module: 1 hour 

• Other informational training modules: 1 hour each 

All C&P clinicians must complete the one and-a-half (1.5) hour General Certification module. Those performing musculoskeletal exams must complete that module 

also, for a total time of two and-a-half (2.5) hours. Mental health specialists performing only review mental health exams must complete the General Certification 

plus the two review mental health modules for a total time of three and-a-half (3.5) 

hours. Mental health specialists performing all four types of mental health exams 

must complete the General Certification plus all four mental health modules for a 

total time of seven hours. 

13 

TIME TO LEARN TO CONDUCT EXAMS

(REGIMEN TO BE COMPETENT WHEN CLINICIAN STEPS IN THE ROOM)

From the summary above, we know that it takes one and-a-half to seven hours 

to complete the CPEP certification process. Completing the appropriate CPEP certification modules should provide a clinician with the background and overview that 

he or she needs to perform a competent C&P disability exam and report. 

However, expertise in the C&P process is something that takes time to acquire. 

Most clinicians are experienced in performing treating exams, but not C&P disability exams, which are unique medical-legal exams. Many new C&P clinicians will 

go through the certification process and then shadow another clinician for a week 

or so. New C&P clinicians often have their exam reports critiqued by more experienced C&P clinicians for several weeks or longer. 

As clinicians take time to attend C&P conferences, review results from CPEP’s 

quality reviews, discuss cases with colleagues, and gain experience in interviewing 

and examining Veterans specifically for C&P disability purposes, their expertise and 

skill as C&P clinicians increases. 

Senator TESTER. You have 29 specialty exams. Does each veteran 

have 29 docs take a look at him? 

Mr. BAKER. No. In terms of the rating requests that we receive 

from the Veterans Benefits Administration, there are approximately 29 templates for types of exams that are requested from 

them. I think 29 is the correct number. I may be off one or two. 

Senator TESTER. Typically how many docs look at a vet when 

they do their exam? 

Mr. BAKER. My understanding is that for recently discharged veterans, there are up to 11 disabilities that have been requested; and 

in general, they require two or three exams at least to complete the 

review of their body systems for the disability exams that have 

been requested. 

Senator TESTER. Do you have any idea how long those exams 

take? 

Mr. BAKER. I do not have that information, really. 

Senator TESTER. That is fine. Does the VA train the contractor 

physicians in the same way they train the VA physicians? 

Mr. BAKER. I cannot speak for QTC as to whether or not they 

use our training modules or not. Mr. Mayes may have the answer. 

Mr. MAYES. We did not specifically train the contract exam providers but there are certain credentialing requirements that they 

have to have before they can conduct a C&P examination. All of 

the examiners or the contract providers that are conducting C&P 

exams are physicians. 

The other point that I would make is that the criteria by which 

the exam is conducted is based on exam templates and exam worksheets. This is a collaboration between the Veterans Benefits Administration and the Veterans Health Administration. 

We work with the medical experts to come up with the protocol 

for the C&P exams, such that it gives us an exam report and exam 

findings that allow us to match that up against the VA rating 

schedule. 

Senator TESTER. So, what I am hearing you say—and you may 

correct me—the critical component of this is not necessarily the 

physician’s level of expertise on how to conduct the exam, but rather the template? 

Mr. MAYES. I would not characterize it exactly that way, Senator. 

I think it is critical that an examiner be properly credentialed, be 

familiar, and understand how to apply that. 

14 

Senator TESTER. When it comes to quality control, I am sure you 

do assessments on the docs that do these 29 different types of 

exams. Does the VA do quality control on those docs to make sure 

that there is a level of adequacy and accuracy there? 

Mr. BAKER. The compensation and pension exam program that I 

mentioned in Nashville has a comprehensive quality assurance program for examinations conducted by VHA physicians. We do a sample review of exams from each medical center for all providers on 

a monthly basis and provide that information to VBA and internally to VHA. 

[Additional information provided by VA follows:] 

Question. How does VBA ensure that field stations send accurate examination requests to the contractors? 

Response. The C&P Contract Management Staff reviews examination requests on 

a daily basis. If the examination request is incomplete, it is immediately sent back 

to the field station of jurisdiction for correction. The Contract Management staff is 

in contact with the examination coordinators at the regional offices daily to answer 

questions and provide guidance. The staff holds monthly conference calls with the 

examination coordinators to review any error trends and update them on changes. 

Senator TESTER. What quality assurance process do you have for 

the QTC folks? 

Mr. MAYES. There are three elements to the measurement of 

quality with respect to QTC and MES, the other contractor that 

provides exam services. 

We measure the contractor on timeliness. We measure the contractor on quality. It is very similar to what we do under the VHA 

exams with respect to quality—do they comply with the criteria 

that is established for the exam report that then allows our rater 

to evaluate the veteran’s disability claim. And then, also, we evaluate the provider on customer satisfaction. 

[Additional information provided by VA follows:] 

Question. How does VBA ensure that contractors properly complete examination 

requests? 

Response. Both medical disability examination contractors are reviewed for compliance on exam quality (92% or better), exam timeliness (38 days to complete the 

request on average), and overall customer satisfaction (90% or better). 

To measure compliance with examination quality, the C&P Contract Management 

Staff completes quality review on 530 completed examinations quarterly. These reviews are in addition to reviews completed by the contractors. 

To measure examination timeliness, completed examinations are pulled from the 

contractor’s computer system into VA’s system on a nightly basis, and VA measures 

the number of days between the exam request and delivery. 

Overall customer satisfaction is measured through a Customer Survey Card contract with AMTIS. AMTIS produces customer survey cards that are sent to the contractors for insertion in the Veteran’s examination appointment letter. AMTIS compiles the card results and submits a report to the Contract Management staff on 

a monthly basis. The average return rate on the customer survey cards is 40 percent. 

The Contract Management Staff also holds monthly conference calls with both 

contractors to discuss issues and provide guidance on any changing policies. 

Senator TESTER. Do you compare the outcomes of the disability 

ratings between the contractors and the VA? 

Mr. MAYES. For our purposes in making an entitlement determination, we are concerned that the output—the exam report—is 

adequate for us to evaluate the veteran’s claim. To that extent, we 

have standards in place for quality and we are checking that both 

in VHA and with our contract providers. 

15 

Senator TESTER. I did not note it and you do not have to say it 

again. Are the outcomes of the disability ratings that are given by 

VA and QTC, are they tracked? 

Mr. MAYES. Yes, Senator, they are tracked. The quality is 

tracked both for VHA exams, C&P exams, and contract-provided 

exams. 

Senator TESTER. OK. My time is up. Thank you, Mr. Chairman. 

Chairman AKAKA. Thank you very much, Senator Tester. 

Let me call on Senator Begich for your questions. 

Senator BEGICH. Thank you very much, Mr. Chairman. 

First, I have a more general question on HERO versus the traditional fee-basis program. I know you are 21⁄2 years into the HERO 

program, and it seems to have—or at least in the process of having—some success. 

What is the long-term outlook that you would see in the HERO 

program in the sense that it is on a 5-year demonstration project; 

so what is next? 

Mr. WILLIAMS. Sir, Mr. Baker will answer that question. 

Mr. BAKER. The HERO program, as you know, is a pilot program 

with a potential of 5 years. We are getting ready and, in fact, have 

exercised the third year of the contract, which will start actually 

tomorrow. 

We believe that the HERO contract has given us a wonderful opportunity to learn some valuable lessons on our ability to have 

national- or regional-level contracts, the type of specifications we 

need for that contract, and how to interact with our partners in 

providing those services. 

I would say that going forward I would not expect that if we 

were to recompete a HERO contract that it would be exactly the 

way that we specified in our original contract. 

There are many lessons that we have learned from both sides of 

the equation, both from a VA perspective—in terms of specifying 

the pricing schedule, some of the criteria in terms of how we refer 

patients, and what our expectations are of the provider—and I am 

sure the provider side has some feelings on that as well. 

We have used this as a test bed to learn lessons going forward 

and we expect to continue to do that through the life of the existing 

contract. 

Senator BEGICH. Great. I just want a clarification on one point. 

I do not remember who said it, but on the amount of contracted 

services, you indicated $3 billion this year and next year $3.8 billion. When I look at the IG report, it talks about I think $1.6 billion. So, just help me understand. 

Mr. BAKER. The IG report was on outpatient pre-authorized care 

only. 

Senator BEGICH. So, a portion of the total—— 

Mr. BAKER. Right, a portion of the total. But, the question we 

were asked was about total cost of non-VA care, or purchased care, 

so the numbers I provided were for that amount. 

Senator BEGICH. Great. I do not know who would answer this, 

maybe Mr. Williams. Do you agree with the IG report in their analysis of what they have calculated in overpayments and those kinds 

of issues? 

Mr. WILLIAMS. I will defer to Mr. Baker. 

16 

Mr. BAKER. You are talking about the fee-basis IG report rather 

than the CBOC? 

Senator BEGICH. Yes. 

Mr. BAKER. In general we agree with the IG report. We think 

that there are some specific numbers, in terms of their 37 percent 

figure, that probably are an overstatement. 

Senator BEGICH. How much overstatement would you say? I 

mean is it double what you think it is; because I am going to drive 

to the next question which is further discussion of the accountability measures that you have in place or will have in place. 

So, is it a little bit over? 37 percent is a lot. 

Mr. BAKER. We agree with that. 

Senator BEGICH. Give me an idea of what you think. 

Mr. BAKER. I cannot give you an exact number, but I can tell you 

a couple of factors that I think need to be taken into consideration. 

One is that we have a mechanism where on our fee authorizations we specify a certain payment amount and that payment 

amount may not be in line with the 75th percentile that is our fee 

schedule. 

The IG considered that as an error on our part, saying we should 

have paid on the 75th percentile. We actually have a General 

Counsel opinion that says that we were correct in using the authorized amount. So, that will have an impact of that number. 

They also included any discrepancy between the paid amount 

and the amount that they calculated would be accurate, even if it 

was less than a dollar. The industry standard is that many of those 

would not have been counted. 

So, we are doing a detailed review of their information. We expect the number will go down but it still will be a number that requires us to follow up with actions. 

Senator BEGICH. Have you at any point in the last 3 or 4 years— 

I think this was a 4-year study—have any folks that you do business with been canceled in the sense of outpatient care? 

In other words, because of double billing or inappropriate expenditures that appear for reimbursement? Have you ever canceled 

anybody? Have you ever said, you know what, you have an error 

rate that is too high, you are out? Have you ever done that? 

Mr. BAKER. Not to my knowledge. 

Senator BEGICH. OK. You can see where I am going here. It is 

great to have a report and let us say it is 15 percent, let us say 

it is half, say it is 181⁄2 percent; it is still tens of millions of dollars. 

And if the contractor continues to perform the service and all it 

amounts to is a lot of paper going back and forth but you do not 

actually lay down hard on them and say, you know what, we are 

not doing business with you anymore; that will send a message and 

create a ripple effect to people who inappropriately bill. 

So, I guess I would urge you in your process of reevaluating your 

procedures that is part of it: that you make it clear that if you continually send poor records you are out, period. 

Then the next question I would have is do you have any numbers 

that you can share with me or the Committee on how much you 

have recouped in any of the overbillings or accounting errors on the 

part of physicians or outpatient services? 

17 

Mr. BAKER. I think we have some apples and oranges that are 

being mixed here. In terms of the IG report and the 37 percent, the 

vast majority of that was a determination that we had inappropriately processed those bills internally, not that they had been billed 

incorrectly by the providers. 

So, in terms of saying that because of the IG report we should 

have taken action against providers, I do not think that is the case. 

Senator BEGICH. OK. My time is pretty much up. But when I 

read it, there is an amount overpaid—maybe it is defined differently, how you define it—and then there is underpaid. 

So, are you telling me all the overpaid are just VA mistakes on 

the proper report paperwork and that everyone should have been 

paid? 

Mr. BAKER. I am saying that in the IG report when they said 

there were overpayments, they are saying that VA inappropriately 

applied either its fee schedule or a Medicare schedule that should 

have applied for what was billed to us, and that was not a fault 

of the vendor but rather an internal fault of VA, and that we need 

to improve our procedures. 

Senator BEGICH. Let me end there. So in no case, a vendor has 

received double payment for any services? 

Mr. BAKER. No. There were some situations where VA should recoup and we are following up on those specific cases—— 

Senator BEGICH. That is the question. 

Mr. BAKER [continuing]. As identified in the IG report and we 

will be requesting repayment to VA where that overpayment has 

occurred. 

Senator BEGICH. I will end there. Thank you, Mr. Chairman. I 

am sorry I went over a little bit. 

Chairman AKAKA. Thank you, Senator Begich. 

Senator Burr, your opening statement and your questions. 

STATEMENT OF HON. RICHARD BURR, RANKING MEMBER, 

U.S. SENATOR FROM NORTH CAROLINA 

Senator BURR. Mr. Chairman, I thank you and I apologize to our 

witnesses for my tardiness. I would ask unanimous consent that 

my opening statement be a part of the record and I will use the 

time for questions. 

[The prepared statement of Senator Burr follows:] 

PREPARED STATEMENT OF HON. RICHARD BURR, RANKING MEMBER, 

U.S. SENATOR FROM NORTH CAROLINA

Thank you Mr. Chairman. Welcome to our witnesses this morning. 

We are here to look at how VA ensures veterans are receiving quality, cost-effective healthcare services when it purchases those services from the private sector. 

I think many would be surprised to learn the extent to which VA relies on outside 

providers to deliver services to veterans and certain survivors of veterans. 

Of course contract care should never be used to supplant the VA health care system. VA provides services that are specialized to the unique needs of veterans and 

is now known as one of the top providers of medical care in the country. But, in 

some cases, it does make sense to complement that care with the help of community 

providers. 

I welcome this discussion. I’ve heard from many North Carolinians who live in 

rural communities who tell me that while they like the VA health care system, 

they’d rather avoid the long trip and just see their community doctor in some cases. 

For this reason I’m excited about the rural health contract pilot program that was 

part of Public Law 110–487. VISN 6 will be a part of that pilot, which will give vetVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
18 

erans residing long distances from VA medical facilities the option of receiving their 

care in their community. 

Using local community providers can save rural veterans from long, tiresome 

trips. It can also be a way to deal with veterans’ healthcare needs in rural America, 

especially when there are very few providers to meet the current need, particularly 

in specialty care. Therefore, establishing relationships with community providers is 

essential. 

Of course when VA uses taxpayer dollars to purchase care for veterans we must 

ensure that we’re getting three key things in return: timely access; quality care; and 

a fair price for the contracted services. 

I look forward to hearing from our witnesses to see if the contracts which are the 

focus of today’s hearing address these three key elements. A couple of other points I think are worth noting. VA spends more than $3 billion 

on healthcare provided outside its doors. Obviously some of this care is governed 

under a contract relationship. But the bulk of it is regular fee-based care. 

I’m interested to see what quality and cost mechanisms are in place for fee-based 

care as well. A comparison between care purchased under contract and regular feebased care will help determine whether VA should favor one approach over the 

other. 

Finally, I’m interested to see VA’s own measures when it comes to performance, 

quality, and cost. We should hold those VA does business with to the same standard 

as VA holds itself. To ensure that VA healthcare continues to serve our veterans 

well, VA must set meaningful measures in place to compare itself with the private 

sector and vice versa. 

Mr. Chairman, I look forward to the testimony and, again, thank you for calling 

the hearing. I yield back. 

Senator BURR. Mr. Baker, I will direct this at you. Well, let me 

pickup on what Senator Begich was asking. Does the VA track 

error rates in fee-for-service health care provided? With fee-based 

health care, do you track the error rates? 

Mr. BAKER. We do not have an effective mechanism of identifying 

the error rate to track at this point, Senator. 

Senator BURR. That is in large measure because the patient may 

only go to the fee-based physician once or the times that are prescribed by the VA and there is no requirement by the provider to 

supply the medical outcome from a standpoint of what their observation was or their treatment was. Is that correct? 

Mr. BAKER. In contracted care and we do—— 

Senator BURR. I am separating contract care from fee-based. In 

contracting care, you can stipulate in the contract that they have 

to report their error experience. 

Mr. BAKER. With our past practice, we may or may not have gotten the medical information, which I think is your point. We have 

modified our directions to the local facilities indicating that they 

should indicate on the individual authorization forms a requirement that providers provide to VA the medical information generated by the treatment that was authorized. 

Senator BURR. Is it not safe to say that if we do not capture the 

treatment that was provided, then we have an incomplete medical 

history on that veteran? 

Mr. BAKER. That would be correct, sir. 

Senator BURR. Within the VA system, if the rest of their care 

was delivered there, it would be delivered without the knowledge 

of that one, two, or three times that they went outside the system 

at the direction of the VA? 

Mr. BAKER. If that information is not available nor sent back to 

us, you are correct, sir. 

Senator BURR. I have been contacted by a urologist in North 

Carolina who is now refusing to see any new VA patients. He indiVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6601 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
19 

cates that it is due to a history of VA diagnosing patients and then 

sending them outside with less than complete evaluations required 

and no additional clinical surveillance. 

I do not want to practice medicine in this hearing. But my point 

would be this: are we asking for the right things when we send 

people out and do we attempt to do any post-treatment surveillance 

that is beneficial to the overall health care treatment of the veteran? 

Mr. BAKER. My reaction, sir, is that we do try to do that. That 

the fee-basis and contract care both are considered an integral part 

of our treatment of veterans and that we do have monitoring systems and quality performance standards in place so that whether 

the care is outside of VA or inside the VA that we monitor the outcome for the patient. 

Senator BURR. But there is no requirement on any fee-based 

service to provide the medical records to the VA, am I correct? 

Mr. BAKER. If we indicated that on the authorization form as I 

indicated earlier, then we would expect that that is an implied contract and they would provide that information to us, sir. 

Senator BURR. What are the three things that trigger within VA 

the decision to contract outside or to arrange for a fee-based service 

outside? 

Mr. BAKER. Availability within VA and geographic accessibility 

are the principal issues. 

Senator BURR. OK. Any other ones? 

Mr. BAKER. I cannot remember off the top, sir. 

Senator BURR. Good. According to the National Council for Community Behavioral Health Care, VA is competing for the limited 

number of mental health providers, a situation that may be, and 

I quote, ‘‘. . . exacerbating an existing mental health workforce 

shortage, and potentially compromising the long-term treatment 

and rehabilitation needs of returning veterans.’’ 

What has been suggested is a model of collaboration versus a VA 

attempt to take all of the health care professionals in mental 

health and bring them under the VA’s ownership. 

What are your thoughts about the idea of creating these targeted 

partnerships with existing community providers? 

Mr. WILLIAMS. Senator, I would suggest we look for every opportunity to partner within the community to find a way to improve 

our access for our veterans and to provide the care that they need. 

We work very closely with our affiliations in universities and 

medical schools across the country to meet many other specialty 

care needs. 

With regards to the idea of a model where we can improve our 

access to care and to be a greater partner in the delivery of that 

service, I would think that would be a good idea. 

But, we continue to be afforded the opportunity to meet or exceed 

the expectations of the mental health community. We work diligently to try to get those providers, those specialist, that staff on 

board, and oftentimes as an adjunct to the recruitment and retention that we enjoy, we still have to rely on our universities and our 

community partners to provide that service. 

To answer your question, again I think we look forward to the 

opportunity to explore partnership opportunities to improve access. 

20 

Senator BURR. I appreciate that because I think it is an important component. I hope you understand that we are concerned 

about what the council raised and that is, if the VA absorbs 99 percent of the mental health providers into the VA system, there is 

nobody to partner with on the outside. 

I think they are raising a red flag very early to say maybe the 

goal within the Veterans Administration—from the standpoint of 

having all the mental health providers on the employment of the 

Veterans Administration—might cause a real problem. 

I mean statistically, 25 percent of enrollees in the VA seek all 

their care within the VA, while 75 percent treat some combination 

of care with both the VA and outside. 

For mental health we are getting to a point with the number of 

providers available outside of the VA system that vets are going to 

have to seek 100 percent of their mental health care within the VA 

because that is going to be where the only providers are. 

I understand the unbelievable requirements within the system 

now to treat mental health. Much of it emanates from this Committee. I would only say it is time to understand why the council 

is releasing this red flag for us to rethink whether we want a good 

balance of private providers in mental health matched with employees of the Veterans Administration. If not, we are limited to 

one path and that path is not necessarily always the most cost-effective or the most effective from the standpoint treatment. 

I thank the Chairman for allowing me to go over. 

Chairman AKAKA. Thank you very much, Senator Burr. 

I would like to call on Senator Burris for his questions. 

STATEMENT OF HON. ROLAND W. BURRIS, 

U.S. SENATOR FROM ILLINOIS 

Senator BURRIS. Thank you, Mr. Chairman. 

Mr. Chairman, I have an opening statement. I would ask for 

unanimous consent that it also be included in the record. 

Chairman AKAKA. It will be included in the record. 

[The prepared statement of Senator Burris follows:] 

PREPARED STATEMENT FROM HON. ROLAND W. BURRIS, U.S. SENATOR FROM ILLINOIS

Thank you, Mr. Chairman. I am glad that our committee has decided to tackle 

this important issue today, because I believe that we are not seeing the proper 

transparency and accountability in the VA’s contracting procedures. 

I fully appreciate that in some cases the VA must seek services outside of VA facilities. For example, it would not be cost-effective for the VA to staff every potential 

medical specialist in every geographic area. 

It is perfectly reasonable to use outside providers in these cases. 

However, I am concerned that VA may be relying on outside entities too heavily, 

and that some contracts may not provide the best possible service or value to our 

veterans. 

Contracts should be used sparingly, and only in cases where the VA is unable to 

effectively provide a necessary service. 

As I have said many times, our veterans deserve the best possible care, and no 

entity is in a better position to understand the unique needs of our veterans than 

VA providers. 

Through this hearing, I hope we can clarify the VA’s method for determining the 

costs and benefits of contract services and work toward improvements in that 

process. 

Senator BURRIS. I will go straight to my questions to follow up 

on what Senator Burr and Senator Begich asked. 

21 

I am concerned about—could you give me an accounting of the 

costs associated with the HERO project when compared to the feefor-service model. Is there an accounting that you can give for that? 

Mr. WILLIAMS. Mr. Baker will take that question, sir. 

Mr. BAKER. We have done an analysis of the HERO contract. I 

think you heard Mr. Williams indicate that at a very high level the 

Humana contract in general 89–90 percent are at Medicare level or 

below and that Delta Dental is 80 percent or below of the dental 

standard. 

In terms of actual costs per patient—— 

Senator BURRIS. Yes. 

Mr. BAKER [continuing]. The cost per patient for the HERO patient is something over $1,000 for medical care—outpatient medical 

care. The gross fee per patient is over $4,200. 

I am not sure that the comparison of patient to patient in HERO 

and all of the fee programs is necessarily a direct comparison but 

those are how the numbers come out. 

In terms of Delta Dental, the fee average cost of $1,600 and the 

average for HERO was approximately $1,500. So approximately 

$100 less. 

Senator BURRIS. So, that is the side-by-side fee for service. 

Mr. BAKER. Comparison of fee versus the HERO costs per 

patient. 

Senator BURRIS. Why is it that the contract services are necessary for 20 percent of compensation and pension medical examinations? 

Mr. WILLIAMS. Mr. Mayes. 

Senator BURRIS. Mr. Mayes. 

Mr. MAYES. Yes, Senator. Essentially, it is the same criteria that 

Mr. Baker pointed out earlier. It is an access issue. We looked 

around the country at areas where the VHA was having a challenge in I guess providing the C&P exams in a timely manner. 

Some of those challenges were related to securing adequate folks 

to do those exams. 

When we analyzed the lay of the land with regard to providing 

those needs, we collaborated with VHA and we put contracts in 

place that covered those jurisdictions. 

Senator BURRIS. So, why cannot the VA hire those physician directly? You said there is a problem with the VA staffing and recruitment in this regard? 

Mr. MAYES. I cannot speak to whether or not VHA can hire the 

physicians directly. What I can say is that when we were trying to 

target where it was we were going to utilize the contracted services, we were looking at the performance of the VHA exams at the 

time. This goes back to, initially, 1998 with the QTC contract. 

So, that was the basis for where it was within the country that 

we were going to target these contracted services. I would defer to 

my colleagues with respect to the hiring. 

Senator BURRIS. What about the QTC contract that is in close 

proximity to Washington, DC, in Alexandria, VA? Why is the VA 

unable to directly hire examiners in our Nation’s capitol? I mean 

you are contracting right out here in the vicinity? 

Mr. MAYES. We are utilizing, for example, QTC exam providers 

in support of our BDD program. Two of the regional offices handle 

22 

our BDD and quick start claims. So we have an opportunity to 

have exam providers in close proximity to military installations 

where we have servicemembers who are separating. 

Senator BURRIS. Is there a VA hospital here in the vicinity? VA 

facilities here? 

Mr. MAYES. Yes, Senator, there is. 

Senator BURRIS. Is there a staffing problem there? 

Mr. MAYES. Again I would have to defer to my colleagues on 

staffing the C&P exams directly. 

Mr. WILLIAMS. Senator, I am not aware of any specific staffing 

problems, particularly at the DC facility. There are only three facilities in the immediate area: the DC facility which handles the 

primary catchment area for the District and some of the surrounding counties; Martinsburg VA Medical Center, which is a 

much smaller facility; and then we have a Baltimore facility, which 

is an acute care facility. 

With regards to, and again I cannot speak to QTC, but with regards to the recruitment piece, typically where we have challenges 

is in the specialty area where we are trying to find neurologists 

or where we might be looking at audiology, and some of those 

specialties. 

When we look at this, we look at it from a couple of standpoints. 

One is, are we able to complete an examination in 35 days. That 

is one of our marks that we have been looking at. So, it is a rate. 

On average on a national basis, we complete these physicals in 

about 30 days, but we do have outliers. We do have a monitoring 

system in place where if we see a trend of 2 months where there 

is an increase in the rate, if it goes beyond the 35 days, then we 

intervene from a leadership standpoint. Many of our facilities are 

able to complete those physicals in less than 30 days. 

The other piece is a quality measure. I think VBA might be able 

to speak more definitively to that. But in the quality measure, we 

look at the number of returned physicals. 

If we get a significant number, whatever that threshold may be, 

then there is an indication there with regard to the amount of 

staffing, training and education of the staffing, and possibly of the 

availability of specialists that can address these issues. 

The third component is the satisfaction piece, what feedback we 

get from the veterans that are receiving these types of services and 

benefits. 

But with regard specifically to the Washington area, I am not 

personally aware of any hiring challenges. From time to time, depending on the rate and volume of physicals that we get at any one 

time, we do have some challenges with getting those out in a timely manner. Then we rely on QTC and other means to address those 

physical exam needs. 

Senator BURRIS. Thank you, Mr. Chairman. I am sorry my time 

did go over. Thank you very much. 

Chairman AKAKA. Thank you, Senator Burris. 

Mr. Williams, I understand VA is creating four new regional offices to oversee local contracts. My question is: what are the advantages of this new structure and how will it fix some of the issues 

that are being discussed at this time: over billing; quality-control; 

and access to care? 

23 

Mr. WILLIAMS. Thank you, Mr. Chairman. I will defer to Mr. 

Downs. 

Chairman AKAKA. Mr. Downs. 

Mr. DOWNS. Mr. Chairman, this is a whole movement toward 

professionalism of acquisition in the Veterans Health Administration and throughout VA. 

We have implemented a number of initiatives. Mr. Frye, when he 

came on board in his position, he had PriceWaterhouseCooper do 

a review of all VA acquisition. They came forth with a number of 

recommendations that would improve the efficiency of our operation and improve acquisition in the areas of quality, oversight, 

monitoring, policy, procedures, standardization, and business practices, and put all of the acquisition people into one chain of command from the facility level all the way up to Washington and remove the influence of the local directors, the network directors, and 

others so that the acquisition officer, the contracting officer, could 

concentrate on his job—fulfilling the requirements of the program 

managers in developing the requirements, getting the contracts 

out, and making sure that they are properly monitored and that 

oversight was conducted. 

This whole process is going to make us much more efficient. We 

are dealing with nearly 22,700 active contracts this year. These individuals who do these contracts with this new organization—we 

will be able to make sure that they receive all the training that is 

required; that they will be properly certified. In fact, that is a requirement. They cannot perform their jobs unless they are certified. They will have continuing education. 

The four regional offices. Their job is to: monitor the quality of 

the contracts; do the audits; make sure that they are compliant 

with all the regulations; and make sure they follow up on the 

COTRs, which the contracting technical representatives who are 

the program folks responsible for monitoring the contract to make 

sure it is being met, which relates to some of the earlier questions. 

So, this is a whole movement toward professionalizing and moving our acquisition organization up in line, not only with the other 

agencies in the government, but to move us forward into the 21st 

century. 

Chairman AKAKA. Thank you. 

Mr. Williams, the Office of Management and Budget directed 

Federal agencies to end their overreliance on contractors. What has 

VA done to comply with this direction? 

Mr. WILLIAMS. Mr. Chairman, I defer to Mr. Jan Frye. 

Mr. FRYE. Thank you, Mr. Chairman. In accordance with the Office of Management and Budget’s direction of July 29, 2009, each 

agency subject to the CFO Act—the Chief Financial Officer Act— 

must conduct a pilot under which they perform a multi-sector, 

human capital analysis of at least one organization, program, 

project, or activity where there are concerns about the extent of reliance on contractors and take appropriate steps to address any 

identified weaknesses. 

The VA is in the process of identifying a program or activity that 

will serve as VA’s pilot program. The VA is due to notify OMB of 

its candidate organization for the pilot employee program tomorrow, October 1. 

24 

Chairman AKAKA. I am glad to hear this. It was mentioned during the testimony that there is, as you said, a policy not to rely entirely on contractors. 

Mr. Williams, QTC was awarded additional years on its contract 

for good performance. Yet a report by the Inspector General on 

payment issues under the contract resulted in QTC paying VA millions of dollars because of overbilling. Can you explain this apparent inconsistency? 

Mr. WILLIAMS. Sir, I will defer to Mr. Mayes. 

Chairman AKAKA. Mr. Mayes. 

Mr. MAYES. Mr. Chairman, I will take that question. First of all, 

I would like to point out that the VA had brought in an auditor 

and had discovered the overbilling in the first place. The OIG then 

came in following the audit that we had implemented and identified or confirmed some of that overbilling. 

Following that, we sent a bill of collection to QTC and they did 

repay the government for the overbilling. They not only repaid the 

overbilling for the term of the initial audit that we had initiated, 

but also going back to the beginning of the contract. So, QTC was 

very forthcoming and repaid the government. 

Regarding the award terms, the way the contract was structured 

was based on performance from the veteran’s perspective: the timeliness of the exam; the quality of the exam report, as we talked 

about; and then customer satisfaction. 

So, the award terms based on that contract were not linked to 

billing. QTC has met the performance targets that were established 

in the contract. I would mention that they did not receive award 

terms for all of the years of the contract, which were one base year 

and four option years. They only received award terms for 3 out of 

those 5 years. 

I hope that answers your question, Mr. Chairman. 

Chairman AKAKA. Thank you. 

Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman. 

I wanted to go back to my previous round of questions and get 

clarification. I assume we go through Mr. Williams, though I think 

you are probably going to refer it to Mr. Mayes because it was a 

question he answered. 

The VA does track the outcomes of disability ratings by the contract and by the VA. I believe that is what I heard you say and 

I just want to make sure that that is correct. 

Mr. MAYES. We track the exam quality, not the rating outcome. 

The quality of the exam in many cases forms the basis for the rating decision. 

Senator TESTER. OK. But ultimately in the end you track the 

outcomes of those exams that are done as far as potential problems 

that the vet would have. Do you track those kind of things, if they 

are appealed, all that stuff? 

Mr. MAYES. No, sir, we do not track whether they are appealed. 

Senator TESTER. So, not to put words in your mouth, but what 

you are tracking is performance and timeliness of the exams, to 

refer to the Chairman’s question? 

25 

Mr. MAYES. Performance in terms of timeliness, performance in 

terms of quality as measured with compliance to the exam template, and then performance with respect to customer satisfaction. 

Senator TESTER. How do you determine the customer satisfaction? That is what I am getting at. 

Mr. MAYES. Understood, Senator. I am sorry if I created—— 

Senator TESTER. No, you have not. 

Mr. MAYES. The customer satisfaction—we have a separate contract with another vendor. They administer customer satisfaction 

questionnaires. Those questionnaires are provided to the veteran 

prior to—— 

Senator TESTER. Can you tell me what the results of those questionnaires are as far as the contractor versus the VA exams? 

Mr. MAYES. I can only speak to the contractors. C&P Service administers the contracts for QTC and for MES, the two providers. 

Veterans say they are consistently highly satisfied. 

Senator TESTER. They are consistently highly satisfied with the 

work that the contractors are doing. How about the VA? Are they 

consistently highly satisfied with the work the VA is doing? 

Mr. MAYES. I cannot speak to that, Senator. I will have to defer 

to my colleagues. 

Mr. BAKER. We do not have a systemwide customer satisfaction 

specifically for C&P exams. We do have individual medical centers 

and some networks that have established focus groups, interviews, 

and some customer satisfaction. 

We do have an initiative to initiate such a customer satisfaction 

program in 2010. 

Senator TESTER. All right. I want to go back to the previous 

round of questions. I just want to make sure my understanding is 

correct; and this is probably for Mr. Mayes again. 

You give the contractors a VA template or form but you do not 

train them, and I assume you do not train them how to use that 

form either; or if I am wrong on that, clarify in any way. 

Mr. MAYES. I will take this for the record and provide a fully developed response, Senator. We are interacting with the contractors 

on a regular basis and we have a staff within C&P Service that is 

monitoring the exam requests because those requests come from 

VBA regional office personnel. Then we have a statistical quality 

control mechanism on the reports that come back. 

So, we are looking at if there are problems meeting the quality 

indicators as the exams come back. We then, are constantly in communication with vendors with respect to any findings that we discover on the reports that are coming back—really with our people 

too—because we have got to make sure that it is an adequate request. We have to ask for the right exam. 

RESPONSE TO REQUEST ARISING DURING THE HEARING BY HON. JON TESTER TO

BRADLEY MAYES, DIRECTOR, COMPENSATION AND PENSION SERVICE, VETERANS

BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

Question. How do the medical disability examination contractors (QTC and MES) 

train their medical examiners? 

Response. Both Medical Disability Examination contracts require the contractors 

do the following in consultation with VA: 

• Prepare and implement a training program for all examiners; 

• Provide orientation and instructions for conducting examinations based on VA 

worksheets; 

26 

• Provide training to ensure that examiners have an appropriate attitude toward 

veterans and their unique circumstances; 

• Explain the concept of presumptive diagnoses in view of the unique circumstances of military service; 

• Ensure that examiners understand how to assess and document pain in accordance with VA regulations; 

• Provide training to explain the differences between VA disability examination 

protocols versus examination protocols for treatment purposes; 

• Demonstrate a quality assurance program; 

• Monitor physicians’ offices to ensure veterans are seen within 30 minutes of the 

appointment time; and 

• Make any corrections and return them to VA within 14 business days. 

Senator TESTER. It would seem to me that the appeals rate 

would be something that you would use as a method by which to 

determine adequacy. 

Do you use appeals rates? I am talking about VA versus 

contractor. 

Mr. MAYES. Appeal with the decision? 

Senator TESTER. Appeal with the examination. That is correct, 

when they come back. 

Mr. MAYES. The exam is used to form the basis for our entitlement determination. 

Senator TESTER. That is correct. 

Mr. MAYES. We are not measuring a notice of disagreement with 

the entitlement determination. We are not looking at that in those 

cases where that entitlement determination is based on a contract 

exam as opposed to a VHA-provided exam. 

Senator TESTER. Why not? It just seems to me—and just tell me 

Mr. Williams or Mr. Mayes, if you can tell me what you do now. 

There is probably a good reason for it. 

Mr. MAYES. Senator, I am back to—it is a legal decision. The entitlement determination is a legal decision that is made by our raters in VA regional offices. 

Senator TESTER. Based on that exam. 

Mr. MAYES. Based on that exam, yes, sir. 

If the exam is returned as adequate, whether it comes from VHA 

or it comes to the contract exam provider, then we have received 

the information—the medical information, limitation of motion, or 

the impairment of functioning or medical impairment—we have received what information we need for us then to make the legal determination. 

So, we are looking at the quality of the exam to see if it meets 

our needs, but we are not then going beyond that to look at appeal 

rates. That is something I can take back. 

Senator TESTER. I just want to make sure the vet is treated fairly. Appealing stuff is not fun. And if the appeal rate—and I do not 

know that it is or is not—if the appeal rate is higher with the contracted versus the in-house examiners, then maybe we need to take 

a look—or if it is the other way around—take a look at what is 

going on because that is a big thing. 

One last question. The VA budget, does it differentiate—and this 

probably is not a question for you, Mr. Mayes, so you can take a 

break. 

Mr. MAYES. I appreciate that. 

Senator TESTER. Does it differentiate the submission between the 

costs of providing CBOC contract care and CBOC care provided by 

27 

the VA? Can you tell me why there is not a differentiation between 

those costs provided in the budget? 

Mr. WILLIAMS. No, sir, I am not able to answer that specifically. 

I will take that for the record. 

Senator TESTER. If somebody can get back to me on that I would 

be very appreciative. I appreciate you folks being here today. I appreciate the work you do. I am sorry I cannot be here for the second panel because we could further clarify some of these questions. 

Thank you very much. 

[The requested information follows:] 


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Chairman AKAKA. Thank you, Senator Tester. 

Senator Begich. 

Senator BEGICH. Thank you very much, Mr. Chairman. 

I just have some follow-up. And like Mr. Tester, I have to preside 

at 11 o’clock, so I will not be able to stay for a sizable amount of 

the second panel. 

Mr. Mayes, I hate to put you back on the spot here but you made 

a good point. I want to follow up on it in regard to what sounded 

like you did an internal audit. When was that done? 

Mr. MAYES. We did an internal audit. It was for the period June 

2005 to May 2006. We have subsequently put in a regular audit 

process and we are auditing both of our contract exam providers 

twice a year at this point which we will continue in the future. 

These are some of the lessons we are learning. 

Senator BEGICH. The process of repaying the billing or the inappropriate billing or however you want to categorize it, do you extend that contract every single year then? 

Explain the contract procedure. Did you make modifications to 

the contract with the vendors in order to have a process to ensure—I understand your internal audit—that they have a certain 

responsibility or change in their procedures or a change in the way 

they operate; did you change anything in the contract? 

Mr. MAYES. We have modified the contract to, I guess, refine the 

billing procedures is maybe the best way to say it, to make sure 

there is no ambiguity in what charges can be made for what services. We have done that. We are in the process of recompeting both 

contracts, so we are further refining that. 

The contracts with the auditors are obviously separate and apart 

from the contracts for the vendors. So, what we wanted to do was 

not rely on just our internal quality controls—or for that matter 

the vendor’s internal quality controls—but bring in a disinterested 

third party to take a look and protect our investment. 

Senator BEGICH. Within the contracts that are about to go out, 

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lates, you know, if they have a certain error rate or percent of their 

amount allocated that goes in the wrong direction, meaning as you 

go through a process in theory if you are auditing and you are looking at the numbers, the problems should go down. 

Otherwise you are just burning up money to verify what you 

probably can already identify. Is that part of the new contracting 

procedure? I do not know who can answer that. 

Mr. MAYES. It is a very good point. We have an integrated product team that involves people from acquisitions and the program, 

and that is one of the issues that we are in the process of discussing. 

Senator BEGICH. Let me put it another way. Should it be and 

will it be? 

Mr. MAYES. Yes, I think that vendors should be accountable. 

Senator BEGICH. Good. The customer satisfaction, again I know 

Senator Tester put you on the spot. I know customer satisfaction. 

I know when I was the chair of the Alaska Student Loan Corporation for 7 years, we did an analysis every quarter of our customers 

in determining the satisfaction of the quality of work, processing, 

and all the stuff that goes with it. 

It also drove everything from how long they held on the phone 

waiting for service, how long it took them to get an appointment 

for loan processing—everything we did then helped us develop a 

better product and a better service. 

Do you have that kind of robust customer service analysis? I 

know that is all you are in, the business of customer service, basically. I mean you are a service agency. 

Mr. MAYES. Yes, Senator, that is exactly right. I can tell you 

what we look at in terms of customer satisfaction. In the contract 

90 percent of the appointments—the veterans should not wait more 

than half an hour to get into the appointment. That is a component 

of our customer satisfaction. 

Senator BEGICH. That is a benchmark, a measurement tool. 

Mr. MAYES. Also there are actually five statements on that card 

that I referenced earlier in my response: the performance of administrative staff—the question is are you very satisfied, somewhat 

satisfied with that; reasonableness of appointment time and place; 

cleanliness of examiner’s office; concern and attention demonstrated by the examiner; and then overall satisfaction with the 

services provided. 

Senator BEGICH. Let me end with you there and say I would love 

to see annual numbers for the last few years, a trend line of what 

that looks like in some of those categories. 

Mr. MAYES. It is very high. 

Mr. BEGICH. That is great. If you can share with me that. 

Mr. MAYES. We can do that, yes, sir. 

[The additional information requested during the hearing follows:] 

47 

Senator BEGICH. The last thing. I will just end on this and that 

is the whole issue of credentialing folks who do service for the VA, 

and this could be just a very simple yes or no or you can get back 

to me. 

If someone is already doing services for like Indian Health Services, are they automatically credentialed in the VA for the services 

provided to VA? 

If they are providing the exact same service to the Indian Health 

Services, can they just go right over or do you create a whole new 

process? If you do not want to answer to the detail now—— 

Mr. WILLIAMS. Senator, I will take that for the record. 

Mr. BEGICH. That would be great. Just of those services because 

that is the general question. I will leave it at that. 

Thank you very much, Mr. Chairman. 

RESPONSE TO REQUEST ARISING DURING THE HEARING BY HON. MARK BEGICH TO JOSEPH A. WILLIAMS, JR., ACTING DEPUTY UNDER SECRETARY FOR HEALTH, OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT

OF VETERANS AFFAIRS

Question. If someone is doing services for Indian Health Services, are they automatically credentialed in the VA for the services provided to VA? If they are providing the exact same service to the Indian Health Services, can they just go right 

over or do we create a whole new process? 

Response. VA requires all practitioners delivering care in VA medical facilities to 

be credentialed and privileged by VA in accordance with VA policy prior to delivering care in the facility. This includes not only VA employees, but also all contract 

providers working on site. VA does not accept credentialing completed by another 

agency. In those instances where VA contracts for care with a specific provider outside of the VA facility, VA similarly requires that the specific provider be 

credentialed and privileged by the VA medical facility contracting for the provider 

to deliver care. 

There are instances where VA plays the role of payer for care outside of VA 

through contractual agreements that do not list a specified provider. VA facility directors must ensure that there are oversight mechanisms in place to demonstrate 

consistent and effective care in accordance with the Joint Commission standards for 

accreditation, but there is not a requirement for VA credentialing and privileging, 

since the agency is not directing the care. 

We note that, for the specific situation of providers shared between VA and the 

Department of Defense (DOD), there is currently a workgroup charged by the VA/ 

DOD Executive Committee that is developing a Memorandum of Understanding 

(MOU) for the exchange of credentialing information between the two departments. 

The MOU will establish the guidelines for the sharing of credentialing data collected 

by one department to be used in the privileging of the practitioner by the other department, therefore facilitating the utilization of personnel across both departments. 

Chairman AKAKA. Thank you very much, Senator Begich. 

Mr. Williams, apparently VA recently published a directive barring the release of a contractor’s inspections of VA nursing homes. 

I understand the VA said that the records contain protected information. Since taxpayers paid for those reports, should not that inVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6601 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN

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48 

formation be made public and how is the information in them protected if it has not disclosed the identity of either the patient or 

the provider? 

Mr. WILLIAMS. Mr. Chairman, I am not intimately knowledgeable 

about that situation. 

Chairman AKAKA. I am referring to the long-term care institute. 

Mr. WILLIAMS. I will have to take that question for the record, 

sir, and get back to you. 

Chairman AKAKA. Thank you. 

RESPONSE TO REQUEST ARISING DURING THE HEARING BY HON. DANIEL K. AKAKA

TO JOSEPH A. WILLIAMS, JR., ACTING DEPUTY UNDER SECRETARY FOR HEALTH, OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS

Question. Since taxpayers paid for those reports, should not that information be 

made public and how is the information in them protected if it has not disclosed 

the identity of either the patient or the provider? I am referring to the long-term 

care institute. 

Response. The reports that VA generates from its unannounced review program 

are for the purpose of managing quality of care and quality of life in VA Community 

Living Centers (CLC), formerly known as VA Nursing Homes. There is no directive 

barring the release of these documents. Rather, the documents are internal quality 

management documents and are therefore not subject to release under the Freedom 

of Information Act (FOIA) as stated in 38 U.S.C. § 5705. 

38 U.S.C. § 5705 provides that records and documents created by VHA as part of 

a designated medical quality assurance program are confidential and privileged and 

may not be disclosed to any person or entity except when specifically authorized by 

statute. When requested under FOIA, the Act’s Exception 3 provides that records 

should be withheld from disclosure when such records are specifically exempted 

from disclosure by another statute. Thus, the CLC reports must be withheld under 

FOIA Exemption 3, providing 38 U.S.C. § 5705 as the applicable statute. 

The requirements for documents to be protected by 38 U.S.C. § 5705 include the 

following: 

• First, the activity that generated the document must be conducted by or for VA 

to improve the quality of health care. The CLC reports are conducted as a means 

to perform unannounced program monitoring of quality of care provided in the 

CLCs. 

• The final requirement for a document to be confidential under 38 U.S.C. § 5705 

is that the document generated must have been previously designed in writing as 

a quality management document which can produce confidential documents. In VHA 

Directive 2008–077, Quality Management (QM) and Patient Safety Activities that 

can Generate Confidential Documents, the Under Secretary for Health specifically 

designates under paragraph 4(a)(1)(k) that documents resulting from service and 

program monitoring activities are confidential. The Directive is enclosed. 

A verbal reminder of the FOIA restriction on release of quality management documents was given on a VA national conference call on Friday, September 25, 2009, 

to ensure VA’s compliance with statutory requirements. 

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Chairman AKAKA. Under contract management, in light of some 

high-profile pass/failures like CoreFLS, what is being done to contract management in VA? 

Mr. WILLIAMS. I will refer to Mr. Frye. 

Chairman AKAKA. Mr. Frye. 

Mr. FRYE. Thank you, Mr. Chairman. 

First of all, I would like to distinguish between contract management and program management. Program managers are responsible for the cost schedule, performance, and quality of their 

programs. 

Contracting officers support program managers by putting contracts in place and that is the tool that the program manager uses 

to get to his or her objectives. 


53066va107.eps
56 

So, oftentimes we intermix program management and contract 

management, and I just wanted to make that distinction if you 

will. 

We have made a number of improvements in our overall VA contracting in the last year. For instance in the area of training, we 

have known we have had a training shortfall for sometime. We 

have stood up the VA Acquisition Academy in Frederick, Maryland. 

This is the only acquisition academy that I am aware of outside of 

the Department of Defense. 

In this academy we train our contracting officers. Very soon we 

will begin training program and project managers. We train our 

contracting officer technical representatives; and we have also implemented an intern program where we are recruiting 30 interns 

per year. 

This is a 3-year program. It is very robust. We have just recently 

brought on our second group of 30. So, at the end of 3 years, we 

will have approximately 100 interns in our program. 

We are doing everything we can within our budget to raise up 

some of the younger folks coming straight out of school, and in 

some cases older people, as well, who decided to change career 

fields. 

But the point is, we need to fill our pipeline with some very well 

trained professionals. It is very difficult, impossible as a matter 

fact, to just take someone off the street and put them to work in 

the contract arena. It takes time and money to get it done. 

In addition, we have stood up three new procurement organizations in the VA. As you are well aware, we have had problems in 

the information technology arena. 

We took advantage of the Army’s base realignment and closure 

of Fort Monmouth, NJ. As you may know, they are moving to Aberdeen Proving Ground. We decided about a year ago to open up an 

office there in Eatontown, NJ. We are in the process of hiring over 

200 contracting professionals as well as attorneys, engineers, and 

program managers; and this will greatly assist us in the execution 

of our information technology mission across the VA. 

In addition, we have stood up an office that we termed the Center for Acquisition Innovation in Frederick, MD. The strategy there 

is that it is easier to have people drive against traffic. Instead of 

coming to Washington, DC, stay in Frederick, MD, or drive against 

the grain of traffic. We have recruited thus far over 30 contracting 

professionals there. They are mostly involved in the VA central office procurement requirement. 

We have also stood an office up in Austin, TX. That office will 

be engaged primarily in support of the Office of Information 

Technology. 

We have recently fielded a contract writing system across the VA 

that was fully operationally capable in July 2007. But just a few 

years ago we had no contract writing system. That has been a large 

undertaking for us. 

We are installing business intelligence tools on top of that contract writing system so that we can measure things like procurement action lead time. 

And we can actually go to our customers and say, look, we have 

your requirement and we predict that we will have your requireVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
57 

ment on contract in a given period of time instead of leaving them 

guessing when we would get it done. 

We are developing the acquisition corps, that is, c-o-r-p-s, much 

like the U.S. Army’s. This is a process where we will identify critical program management and contract positions across the VA. We 

will then assign only certified acquisition corps members for those 

critical positions. 

As also indicated earlier, we have developed processes like integrated product teams. The most difficult piece of the procurement 

business, the acquisition business, is developing the requirement. 

We no longer do that by allowing someone to go in the corner 

and write a requirement by themselves. We now use integrated 

product teams so we have a collaborative effort in writing the requirements up front. 

We are also moving to seek a lot of information from industry 

partners. We recently held a forum at the Ritz Carlton near the 

Pentagon, which we invited 120 vendors, and we have ongoing efforts with them to assist us. We had them identify areas where 

they think we are deficient. We are going to have them help us 

hopefully come to some means to improve our processes. 

I would like to take a couple of minutes to say something about 

what we are doing on the program management side of the house. 

You may or may not know that the Assistant Secretary for Information and Technology is reviewing all IT programs in the VA. 

They recently put, I believe, 27 programs ‘‘on pause’’ as they are 

calling it. They are taking a very close look at these programs. The 

programs may be canceled, but obviously they are under duress either in terms of performance or schedule, or perhaps cost. 

The OIT is reviewing all of the IT programs. They are applying 

their program management accounting assistant or PMAS system 

to these programs. Again, some programs may be canceled or restructured if they are behind schedule or over budget. 

Program managers across the VA will soon be trained in our VA 

Acquisition Academy. We are planning on training several thousand program managers next year. This will not be done alone at 

our academy. We will have industry partners help us do that. 

It will be an attempt to bring up all program managers at a 

given level, and then we will go from there. There is further training to be done but we want to make sure that all of them have a 

common grounding in program management skills. 

I think all of those things take a holistic approach to improving 

the big ‘‘A,’’ Acquisition, not only for contracting or procurement, 

but program management and all of the other skill sets that we 

need to effectively manage our programs across the VA. 

Chairman AKAKA. Thank you very much, Mr. Frye. 

I want to thank you very much for your responses. Before I dismiss this panel, I would like you to take back to VA my concern 

about the situation in American Samoa and the Philippines. 

I want to know that VA is doing everything possible to help in 

the wake of the recent natural disaster there. Many veterans in 

American Samoa and the Philippines have served this country honorably and all of those affected deserve any help we can give them. 

I thought I would mention it to you and to the VA through you. 

58 

So, I want to thank you very much again. This area of contracting, of course, is a huge concern to all of us and we need to 

look at the challenges that we are facing in contracting and begin 

to try to improve the system. No one knows better than you what 

needs to be done, but we certainly want be a part of that. However 

we can help, legislatively even, we would like to do that. 

Again, I thank you very much first panel. 

RESPONSE TO POST-HEARING QUESTIONS SUBMITTED BY HON. DANIEL K. AKAKA TO

HON. JOSEPH A. WILLIAMS, JR., ACTING DEPUTY UNDER SECRETARY FOR HEALTH

FOR OPERATIONS AND MANAGEMENT, VHA, U.S. DEPARTMENT OF VETERANS

AFFAIRS

Question 1. VA has over 2000 active contracts. At the hearing, ACS testified that 

each of their 6 contracts was interpreted differently by local contracting officials. 

What will the restructuring of the acquisitions organization do to remedy this problem for ACS and all other VA contractors? 

Response. It is important the Department of Veterans Affairs (VA) industry partners receive the same general guidance and interpretations from the Department’s 

acquisition workforce. To begin achieving this the has Secretary directed that the 

Office of Acquisition, Logistics and Construction establish a plan that moves the Department’s contracting operations to an integrated model with the potential to go 

to a centralized model based on a series of performance measures to be reviewed 

in 18–24 months. Organizing the VA Acquisition Enterprise in an integrated fashion 

and commodity-driven Centers of Excellence will enhance VA’s ability to deploy uniform guidance to all contracting officers, regardless of geographic location. While organizational change will play a role in our relationships with suppliers the key driver is educating our contracting staffs on how they relate to our customers. To provide our contracting officers these critical skills the VA Acquisition Academy has an 

in-depth program that offers contracting officers across the Department the necessary courses to hone their skills in performing their jobs. As a condition of maintaining their buying warrants contracting officers must take 80 hours of continuing 

education courses every twenty four months to remain certified. 

Question 2. Please provide a written description of how you are complying with 

OMB’s directive to reduce agency reliance on contractors, including a detailed description of the implementation status of OMB’s required pilot program. 

Response. VA is complying with OMB’s directive to reduce agency reliance on contractors by implementing OMB’s required pilot program. VA identified the Office of 

IT Enterprise Strategy, Policy, Plans and Programs in the Office of Information & 

Technology to oversee its Multi-Sector Workforce pilot. VA assembled a pilot team 

with representation from the Office of Information Technology; Office of Human Resources and Administration; Office of Budget; Office of Policy and Planning; Office 

of Acquisition and Logistics; Veterans Health Administration; National Cemetery 

Administration; and Veterans Benefits Administration. The team has followed the 

‘‘Framework for Managing the Multi-Sector Workforce’’ in OMB Memorandum M– 

09–26. The team has analyzed the strategic plans, contracts, FAIR Act Inventory 

classifications, cost models, workforce competencies and sources of talent. The team 

has identified the limitations on the number of authorized Federal positions and the 

cumbersome hiring process as obstacles to bringing work in-house. An action plan 

to address these obstacles to recruitment and hiring is currently under development. 

Question 3. Cardinal Health, Inc. holds a contract with VA worth $136 million. 

What services are provided to VA under this contract, and in what facilities? Please 

include the location of the facilities (city, state). 

Response. The Cardinal Health, Inc. (Cardinal) contract is a prime vendor contract for the distribution of medical and surgical products. Medical Surgical Prime 

Vendors (MSPVs) warehouse and distribute products for VA identified on various 

VA national, regional and local contracts, and agreements. MSPVs deliver products 

to VA facilities within 24–72 hours. This allows VA to obtain the medical and surgical products specified, from a single prime vendor for all facilities under the contract. This provides ease of ordering, reduces the number of purchase orders, reduces the number of shipments received, the number of invoices processed by medical centers, and helps reduce facility inventory levels. 

The following VA facilities [Veterans Integrated Service Network (VISN)] and 

other Government Agencies are covered by the Cardinal contract: 

59 

VISN 3 

• VA Medical Center 

130 W. Kingsbridge Road, Bronx, NY 10468 • VA Hudson Valley Healthcare System 

– Castle Point, NY 12511 

– 622 Albany Post Road, Montrose, NY 10548 • VA New Jersey Healthcare System 

– 385 Tremont Avenue, East Orange, NJ 07018 

– 151 Knollcroft Road, Lyons, NJ 07939 

– Outpatient Clinic, 970 Route 70, Brick, NJ 08724 • VA New York Harbor Healthcare System: 

– 800 Poly Place, Brooklyn, NY 11209 

– 423 E. 23rd Street, New York, NY 10010 

– 179th Street and Linden Boulevard, St. Albans, NY 11425 • VA Medical Center 

79 Middleville Road, Northport, NY 11768 

VISN 4 

• VA Medical Center 

2907 Pleasant Valley Boulevard, Altoona, PA 16602 • VA Medical Center 

325 New Castle Road, Butler, PA 16001 • VA Medical Center 

One Medical Center Drive, Clarksburg, WV 26301 • VA Medical Center 

1400 Black Horse Hill Road, Coatesville, PA 19320 • VA Medical Center 

135 E. 38 Street, Erie, PA 16504 • VA Medical Center 

1700 S. Lincoln Avenue, Lebanon, PA 17042 • VA Medical Center 

University & Woodland Avenue, Philadelphia, PA 19104 • VA Pittsburg Healthcare System 

– Progressive Care Center (Aspinwall Division) 

Delafield Road, Pittsburg, PA 15260 

– 7180 Highland Drive, Pittsburgh, PA 15206 

– University Drive, Pittsburgh, PA 15240 • VA Medical Center 

1111 E. End Boulevard, Wilkes-Barre, PA 18711 • VA Medical Center 

1601 Kirkwood Highway, Wilmington, DE 19805 

VISN 5 

• VA Maryland Healthcare System: 

– 10 N. Greene Street, Baltimore, MD 21201 

– Bldg. #11, Perry Point, MD 21902 

• VA Medical Center 

510 Butler Avenue, Martinsburg, WV 25401 

• VA Medical Center 

50 Irving Street, N.W., Washington, DC 20422 

VISN 6 

• VA Medical Center 

1100 Tunnel Road, Asheville, NC 28805 

• VA Medical Center 

200 Veterans Avenue, Beckley, WV 25801 

• VA Medical Center 

508 Fulton Street, Durham, NC 27705 

• VA Medical Center 

2300 Ramsey Street, Fayetteville, NC 28301 

• VA Medical Center 

100 Emancipation Drive, Hampton, VA 23667 

• VA Medical Center 

1201 Broad Rock Road, Richmond, VA 23249 

• VA Medical Center 

1970 Roanoke Blvd., Salem, VA 24153 

• VA Outpatient Clinic 

190 Kimel Park Drive, Winston-Salem, NC 27103 

60 

• VA Medical Center 

1601 Brenner Avenue, Salisbury, NC 28144 • Charlotte Outpatient Clinic 

8601 University East Drive, Charlotte, NC 28213 

VISN 7 

• VA Medical Center 

1670 Clairmont Road, Decatur (Atlanta), GA 30033 • VA Medical Center 

Uptown Warehouse, 1 Freedom Way, Augusta, GA 30904 • VA Medical Center 

(Downtown), 800 Bailie Drive, Augusta, GA 30901 • VA Medical Center 

700 S. 19th Street, Birmingham, AL 35233 • VA Central Alabama Healthcare System 

– 215 Perry Hill Road, Montgomery, AL 36109 

– 2400 Hospital Road, Tuskegee, AL 36083 • VA Medical Center 

109 Bee Street, Charleston, SC 29401 

(Ship to: 1001 Trident Street, Trident Industrial Park, Hanahan, SC 29406) • VA Medical Center 

6439 Garners Ferry Road, Columbia, SC 29209 • VA Medical Center 

1826 Veterans Boulevard, Dublin, GA 31021 • VA Medical Center 

3701 Loop Road E, Tuscaloosa, AL 35404 

VISN 9 

• VA Medical Center 

1540 Spring Valley, Huntington, WV 25704 • VA Medical Center 

1101 Veterans Drive, Lexington, KY 40502 • VA Medical Center 

2250 Leestown Road, Bldg. 12, Lexington, KY 40511 • VA Medical Center 

800 Zorn Avenue, Louisville, KY 40206 • VA Medical Center 

1030 Jefferson Avenue, Memphis, TN 38104 • VA Medical Center 

Sidney & Lamont Street, Mountain Home, TN 37684 • Tennessee Valley Healthcare System 

– 3400 Lebanon Pike, Murfreesboro, TN 37129 

– 1310 24th Avenue S., Nashville, TN 37212 

• VA Outpatient Clinic 

9031 Cross Park Drive, Knoxville, TN 37923 

VISN 10 

• VA Medical Center 

10000 Brecksville Road, Brecksville, OH 44141 

• VA Medical Center 

Bldg. 23 (Warehouse) & Bldg. 24 (SPD) 17273 State Rt. 104 

Chillicothe, OH 45601 

• VA Medical Center 

3200 Vine Street, Cincinnati, OH 45220 

• VA Medical Center 

10701 E. Boulevard, Cleveland, OH 44106 

• VA Ambulatory Care Center 

420 N. James Road, Columbus, OH 43219 

• VA Outpatient Clinic 

543 Taylor Avenue, Columbus, OH 43203 

• VA Medical Center 

4100 W. 3rd Street (Buildings #126 & #330), Dayton, OH 45428 

VISN 11 

• VA Ann Arbor Healthcare System 

2215 Fuller Street, Ann Arbor, MI 48105 

• VA Medical Center 

5500 Armstrong Road, Battle Creek, MI 49015 

• VA Illiana Healthcare System 

61 

1900 E. Main Street, Danville, IL 61832 • VA Medical Center 

4646 John R. Detroit, MI 48201 • VA Medical Center 

1481 W. 10th Street, Indianapolis, IN 46202 • VA Northern Indiana Healthcare System 

2121 Lake Avenue, Fort Wayne, IN 46805 

1700 E. 38th Street, Marion, IN 46953 • VA Medical Center 

1500 Weiss St., Saginaw, MI 48602 

VISN 12 

• Chicago Healthcare System 

2030 W. Taylor Street, Chicago, IL 60012 • VA Medical Center 

5th & Roosevelt Road., (Supply Warehouse and Bldg. #4), Hines, IL 60141 • VA Medical Center 

325 East ‘‘H’’ Street, Iron Mountain, MI 49801 • VA Medical Center 

2500 Overlook Terrace, Madison, WI 53705 • VA Medical Center 

– 5000 W. National Avenue (Bldg. 111), Milwaukee, WI 53295 

– Appleton CBOC, 10 Tri-Park Way, Appleton, WI 54914 • VA Medical Center 

– 3001 Green Bay Road, (Bldg. 138) North Chicago, IL 60064 

– Green Bay CBOC, 141 Siegler Street, Green Bay, WI 54303 • VA Medical Center 

– 500 E. Veterans Street (Bldg. #452), Tomah, WI 54660 

– Emergency Pharmacy Service, Bldg. 37, Hines, IL 60141 

VISN 15 

• VA Medical Center 

800 Hospital Dr, Columbia, MO 65201 • VA Eastern Kansas Healthcare System 

– 4101 S. 4th Street Trafficway (Leavenworth Campus) 

Leavenworth, KS 66048 

– 2200 Gage Boulevard (Topeka Campus), Topeka, KS 66622 • VA Medical Center 

4801 Linwood Boulevard, Kansas City, MO 64128 • VA Medical Center 

2401 West Main Street, Marion, IL 62959 • VA Medical Center 

1500 N. Westwood Blvd., Poplar Bluff, MO 64128 • VA Medical Center 

915 N. Grand Blvd., St. Louis, MO 63106 • VA Medical Center 

5500 E. Kellogg, Wichita, KS 67218 

VISN 16 

• VA Medical Center 

Alexandria, LA 713306 • VA Medical Center 

1100 N. College Avenue, Fayetteville, AR 72703 • VA Gulf Coast Healthcare System 

400 Veterans Avenue, Biloxi, MS 39531 • VA Medical Center 

2002 Holcombe Boulevard, Houston, TX 77030 • VA Medical Center 

1500 E. Woodrow Wilson Drive, Jackson, MS 39216 • Central Arkansas Veterans Healthcare System 

– 2200 Forts Roots Drive (NLR), Building #182, N. Little Rock, AR 72114 

– 4300 W. 7th Street, (LR), Little Rock, AR 72205 • VA Medical Center 

1011 Honor Heights Drive, Muskogee, OK 74401 

• VA Medical Center 

1601 Perdido Street, New Orleans, LA 70112 

• VA Medical Center 

921 NE 13th Street, Oklahoma City, OK 73104 

• VA Medical Center 

62 

510 E. Stoner Avenue, Shreveport, LA 71101 

VISN 17 

• VA North Texas Healthcare System 

– 1201 E. 9th St., Bonham, TX 75418 

– 4500 S. Lancaster Road, (Bldg. #44), Dallas, TX 75216 

– 4500 S. Lancaster Road, (Bldg 2j Dock), Dallas, TX 75216 • VA Central Texas Veterans Healthcare System 

1901 Veterans Memorial Drive, Temple, TX 76504 • VA South Texas Veterans Healthcare System 

7400 Merton Minter Blvd, San Antonio, TX 78229 • VA Outpatient Clinic 

2901 Montopolis Drive, Austin, TX 78741 • VA Outpatient Clinic 

300 West Rosedale Street, Fort Worth, TX 76104 • VA Supply Warehouse 

3600 Memorial Boulevard, Kerrville, TX 78028 • Brownwood CBOC 

2600 Memorial Park Drive, Brownwood, TX 76801 • Cedar Park CBOC 

701 E. Whitestone Boulevard, Cedar Park, TX 78613 • College Station CBOC 

1605 Rock Prairie Road, College Station, TX 77845 • Palestine Community CBOC 

3215 W. Oak Street, Palestine, TX 75801 

VISN 18 

• VA Amarillo Healthcare System 

6010 Amarillo Boulevard, W. Amarillo, TX 79106 • VA El Paso Healthcare System 

300 N. Piedras Street, El Paso, TX 79930 • VA New Mexico Healthcare System 

1501 San Pedro Drive SE, Albuquerque, NM 87108 • VA N. Arizona Healthcare System 

500 N. Hwy 89, Prescott, AZ 86313 • VA Medical Center 

650 E. Indian School Road, Phoenix, AZ 85012 • VA S. Arizona Healthcare System 

3601 S. 6th Avenue, Tucson, AZ 85723 • VA W. Texas Healthcare System 

300 Veterans Boulevard, Big Spring, TX 79720 • VA Outpatient Clinic 

6104 Avenue, Q South Drive, Lubbock, TX 79412 

VISN 19 

• VA Medical Center 

2360 E. Pershing Boulevard, Cheyenne, WY 82001 

• Eastern Colorado Healthcare System 

1055 Clermont Street, Denver, CO 80220 

• VA Montana Healthcare System 

1892 Williams Street, Fort Harrison, MT 59636 

• VA Medical Center 

2121 N. Avenue, Grand Junction, CO 81501 

• VA Salt Lake City Healthcare System 

500 Foothill Drive, Salt Lake City, UT 84148 

• VA Medical Center 

1898 Fort Road, (Bldgs. #35 & #71), Sheridan, WY 82801 

• VA Outpatient Clinic 

1300 Fortino Boulevard, Suite B, Pueblo, CO 81008 

• Miles City Clinic and Nursing Home 

210 S. Winchester, Miles City, MT 59310 

VISN 20 

• VA Medical Center 

500 W. Fort St., Boise, ID 83702 

• VA Medical Center 

3710 SW US Veterans Hospital Road, Portland, OR 97239 

• VA Medical Center 

4th Plain & St. Johns Road, Vancouver, WA 98661 

63 

• VA Roseburg Healthcare System 

913 NW Garden Valley Boulevard, Roseburg, OR 97470 • VA Puget Sound Healthcare System 

1660 S. Columbian Way, Seattle, WA 98108 • VA Medical Center 

4815 N. Assembly Street, Spokane, WA 99205 • VA Medical Center 

77 Wainwright Drive, Walla, Walla, WA 99362 • Southern Oregon Rehabilitation Center & Clinics 

8495 Crater Lake, White City, OR 97503 • Oregon Veterans Home 

700 Veterans Drive, The Dalles, OR 97058 

VISN 22 

• VA Loma Linda Healthcare System 

11201 Benton Street, Loma Linda, CA 92357 • VA Long Beach Healthcare System 

5901 E. 7th Street, Long Beach, CA 90822 • VA Greater L.A. Healthcare System 

11301 Willshire Boulevard, Los Angeles, CA 90073 • VA So. Nevada Healthcare System 

P.O. Box 360001, N. Las Vegas, NV 89036 • VA San Diego Healthcare System 

3350 La Jolla Village Drive, San Diego, CA 92161 • VA SepuAE1lveda Ambulatory Care Center 

Bldg. 200, 16111 Plumber, N. Hills, CA 90073 

Hawaii 

• VA Pacific Island Healthcare System 

459 Patterson Road, Honolulu, HI 96819 • VA CBOC—Hilo 

1285 Waianuenue Avenue, Suite 211, Hilo, HI 96720 • VA PTSD Residential Rehabilitation Program—Hilo 

891 Ululani Street, Hilo, HI 96720 

• VA CBOC—Kona 

75–5995 Kuakini Highway, Suite 413, Kailua-Kona, HI 96740 

• VA CBOC—Kauai 

3367 Kuhio Highway, Suite 200, Lihue, HI 96766 

• VA CBOC—Maui 

203 Ho’ohana Street, Suite 300, Kahului, HI 96732 

• VA CBOC—Guam 

US Naval Hospital, Bldg. 1, E–200, Box 7608, Agana Heights, Guam 96919 

Alaska 

• Alaska VA Healthcare System 

2925 Debarr Road, Anchorage, AK 99508 

OTHER GOVERNMENT AGENCY (OGA)

Indian Health Services 

• National Supply Service Center 

501 NE 122nd Street, Suite F, Oklahoma City, OK 73114–8138 

• WW Hasting Hospital 

100 S. Bliss, Tahlequah, OK 74464 

• Claremore Indian Hospital 

101 S. Moore Street, Claremore, OK 74017 

• Choctaw Nation Health Care Center 

1 Choctaw Way, Talihina, OK 74571 

• Lawton IHS Hospital 

1515 Lawrie Tatum Road, North of Lawton, Lawton, OK 73507 

• Choctaw Nation Health Clinic 

902 East Lincoln Road, Idabel, OK 74745 

• Choctaw Nation Health Center 

P.O. Box 340, 410 North M. Hugo, OK 74743 

• Rubin White Health Clinic 

109 Kerr Avenue, Poteau, OK 74953 

• Choctaw Nation Clinic 

1300 Martin Luther King Drive, Broken Bow, OK 74728 

• Choctaw Nation Health Center 

64 

1127 S. George Nigh Expressway, McAlester, OK 74501 • Choctaw Health Center 

210 Hospital Circle, Philadelphia, MS 39350–6781 • Wewoka Clinic 

P.O. Box 1475, US State Highway 56 & 270 Junction, Wewoka, OK 74884–1475 • Clinton IHS Health Center 

Rt. 1, Box 3060, Clinton, OK 73601–9303 • El Reno Health Center 

1631-A East Highway 66, El Reno, OK 73036–5769 • Watonga Health Center 

Rt. 1, Box 34-A, 1 Mile S on Highway 281, Watonga, Oklahoma 73772 • Cherokee Indian Hospital 

HC–1 Box 9700, Kickapoo Tribal Health Reservation, Rosita Valley Road, 

Cherokee, NC 28771 

Federal Bureau of Prisons 

• Federal Correctional Complex 

5880 State Highway 67 South, Florence, CO 81226–7500 • Federal Correctional Complex 

Federal Medical Center, Old North Carolina Highway 75, Butner, NC 27509 

Question 4. In a staff briefing, VA stated that their industrial fee was lower than 

any other Federal agencies. Do you intend to adjust this fee in light of the increased 

costs associated with restructuring the Acquisitions Department? What do you anticipate the cost of the restructuring to be? 

Response. At this time, VA does not plan to increase the industrial funding fee 

(currently at 0.5 percent). The Department plans to charge fees for contractual services provided by the new organization and to use the flexibility of the Supply Fund 

to manage restructuring costs. The Department will have better projections of the 

cost of restructuring as we continue to define the new organization. The implementation plan for this restructuring is anticipated to be complete by the end of the 

third quarter of FY 2010. 

Question 5. Mr. Brown testified that program officers are responsible for oversight 

of the programs, while contracting officers are only responsible for the contracts. 

How do contracting officers communicate with program managers to ensure that the 

terms of the contract comply with the quality standards of the program? 

Response. (Please note this question references testimony given by Mr. Brown. 

However, this testimony was actually provided by Mr. Frederick Downs, Jr., Chief 

Prosthetics and Clinical Logistics Officer, Veterans Health Administration.) Contracting officers (CO) are actively engaged with program managers in the acquisition planning phase of the procurement process to ensure that appropriate contract 

administration procedures are established including: (a) a list of terms and conditions related to administration functions; b) contract milestones; (c) Quality Assurance Guidelines; (d) Inspection and Acceptance procedures; and (e) modification 

process. Contracting Officer’s Technical Representatives (COTRs) are subject matter 

experts in given program offices and communicate and serve as a bridge between 

the Contracting Officers and Program Offices. The CO delegates limited oversight 

functions to the COTR to ensure the contractors’ performance and delivery schedule 

are in accordance with the terms and conditions of the contract. Any issues related 

to the terms and performance of the contract is reported to the CO by the COTR. 

The CO then communicates with the program office based on the method of communication established at the pre-award meeting. 

Question 6. VA employs individuals who purchase goods or services for the agency 

who are not GS–1102 contract specialists. In what acquisitions and purchasing roles 

are these individuals currently utilized? 

Response. Warranted non–1102 purchasing agents are used for small purchasing 

activities of supplies, services, and prosthetics equipment for open market procurements below the simplified acquisition threshold (SAT) ($100,000), and delivery and 

task orders up to the maximum order limit against Federal supply schedule contracts. 

Question 7. VA informed staff in a briefing that VA intends to certify purchasing 

agents who are not GS–1102 contract specialists. What are the advantages to certification? Has VA engaged AFGE or other employee organizations about this potential 

change? 

Response. Certifying non–1102 purchasing agents offers several advantages and 

benefits to VA including: 

(a) Standardizing core training, education and experience requirements to assure 

uniformity of performance and acquisition standards; 

65 

(b) Developing a trained, professional corps of acquisition professionals skilled and 

dedicated to deliver the best value in supplies and services to the agency and the 

Government; 

(c) Certifying supports the implementation of the Office of Federal Procurement 

Policy Letter 05–01, Developing and Managing the Acquisition Workforce to better 

train and establish contracting and procurement personnel; and 

(d) Standardizing small purchasing procedures and processes across VA constituent agencies and offices. 

VA will reach out to AFGE and relevant employee groups once certification standards and practices are established to preserve collective bargaining agreements and 

to enhance employee participation in improving agency acquisition practices. 

Question 8. If contractors for dialysis services change, are veterans already receiving dialysis offered the option of continuing at the same facility, or are they required 

to change to a new facility? 

Response. When contracts are established, VHA will make an assessment on the 

appropriate timeframe to move patients to a new contract. These decisions are 

based on clinical needs of the Veterans. If there are no clinical concerns, VA will 

transition Veterans to new contract providers, which may entail referring patients 

to a different facility. This change will also consider an appropriate transition time 

to assure quality of care is not impacted. In the case of this specific dialysis contract, assessments are made concerning the most clinically appropriate setting, Veterans are notified in advance of VA’s decision and when appropriate, provided clinical appeal rights and due process. 

Question 9. In the Independent Budget for FY10, the following statement appears 

on p. 145: ‘‘VA does not track this care [purchased care], its related costs, outcomes, 

or customer satisfaction levels.’’ Is this true for care purchased by VA on a fee-forservice basis? If so, does VA intend to change the current process? 

Response. VHA does track and monitor purchased care, including those services 

purchased under contracts or in the traditional fee-for-service program. Monitors of 

expenditures occur on a routine basis, both at the VA Medical Center level and the 

enterprise level. Within contracts, VHA track results based on the clinical services 

purchased. For example, when diagnostic services are purchased under a contract, 

VHA includes this documentation in its electronic medical record. Contractual 

metrics are tied to each contract. Within Project HERO, metrics are received on a 

monthly and quarterly basis. Monthly metrics include items such as patient wait 

times, appointments received within 30 days of request, and return of clinical information (30 day standard). 

At present, customer satisfaction is routinely assessed as a component of the 

Project HERO program. VHA is developing an initiative to expand this customer 

satisfaction assessment to all purchased care services. This initiative is currently in 

the initial planning phases. 

Question 10. Do all facilities process claims from private providers for fee services 

in the same way? If not, how do processes vary, and what is being done to create 

an IT infrastructure that would permit standardization? 

Response. Although the organizational structure for processing claims varies 

among facilities, VA uses its standardized software product, known as ‘‘VistA Fee’’ 

to process Fee Basis claims for payment. The processing of claims for services purchased by contract or sharing agreement may be accomplished using means other 

than VistA Fee, such as online certification. 

VistA Fee was developed in the mid-1990s. Its automated processing capabilities 

need modernization to keep abreast of coding, billing and payment changes in the 

industry, such as automated code-editing practices, as well as updates to its processing capabilities to accommodate legislative changes. 

A full analysis of the existing and future needs of a claims processing replacement 

system for all VA-purchased care is underway. In the interim, VA is installing a 

commercial off-the-shelf (COTS) product on top of VistA Fee, the Fee Basis Claims 

(FBCS) that improves inventory management through use of scanning capabilities, 

claims editing, and automated processing capabilities in the payment of non-VA 

health care claims. 

Question 11. Exactly how many current contracts for health services does VA 

have, and how does VA track performance under those contracts? This should include two categories: all contracts paid for out of the medical services appropriation, 

and a second category for those contracts paid for from other sources. 

Response. The VA Electronic Contract Management System (eCMS) currently contains 4,524 active Health Care Resources contracts. Contracting Officers (COs) assign a designation of health care when entering contract records into eCMS based 

on the type of service being procured, not by funding/appropriation. VA eCMS, 

66 

owned by the Office of Acquisition and Logistics (OA&L), is the official system of 

record for VA contract actions. The system currently does not have the functionality 

to allow VA to pull databased on the funding/appropriation codes. 

COs track contract performance by obtaining contract performance information 

from their designated Contracting Officer Technical Representative (COTRs). 

Through the issuance of the COTR delegation of authority, COs delegate routine 

contract administration functions, which includes monitoring contract performance 

to their COTRs. The role of the COTR is to monitor the contractors’ performance 

to ensure performance conforms to the contract’s terms and conditions, and to elevate any concerns, issues, or suggested actions to the COs as necessary. COs also 

advise contractors of identified performance issues and request action plans to resolve issues. COs utilize all remedies available under VA and Federal Acquisition 

Regulations to deal with contractors that fail to perform. Performance issues are 

documented accordingly in the contract file. 

Question 12. VA has a goal of completing contract renewals in 140 calendar days 

or 240 calendar days in the event a pre-award review is necessary. Vendors have 

reported to the Committee that GSA completes this process in 60 days or less. Why 

does it take VA longer to complete contract renewals? 

Response. VA’s Procurement Reform Taskforce (PRTF) established a metric of 180 

calendar days to complete a Federal supply schedule (FSS) offer negotiation, which 

is the standard used to measure progress under the program. Procedural Guideline 

#22, an internal VA document establishing contract audit procedures, also provides 

for an additional 90 calendar days for the Office of Inspector General to complete 

any required pre-award reviews. General Services Administration (GSA) confirmed 

with VA that its normal processing times are in line with what VA experiences. 

There are two major differences between VA and GSA program management. These 

are: 

(a) GSA implemented a Quick Program allowing for some offers to be streamlined 

and completed within 30 work days. These offers must meet specific criteria to include having a structured commercial pricing scheme and a straight forward, 

streamlined proposal. Also, these vendors must complete pre-offer training assignments requiring completion of various compliance checks prior to even submitting 

offers for consideration. VA is currently moving toward implementing a similar program, limited to select offers that can be identified as straight forward and meeting 

pre-offer training requirements. VA is currently formulating the requirements and 

processes needed for this type of program. The program draft is expected to be completed in June 2010. Once approved, all FSS solicitations will be updated to include 

the provisions for the Quick Program including the requirement for pre-offer training. We expect the program will be in place by December 2010. 

(b) For offers that do not meet the criteria for the Quick Program, mainly those offers from current or past FSS contractors who had annual Federal sales of $3 million or more, a pre-award review must be performed. VA, with GSA’s approval, continues to maintain the requirement for pre-award reviews. This adds time to the 

process, increasing overall workload and overall processing times. VA not only establishes and awards the FSSs for health care related products and services; it also 

has a vested interest as a buyer. Because the health care industry has a complex 

matrix of customers and related terms and conditions, VA performs these pre-award 

reviews to ensure a fair and reasonable price is attained. It should be noted that 

the GSA timeline for processing offers which do not fall under the Quick Program, 

is comparable to VA’s timeline. 

Question 13. VA’s Office of Inspector General Report 05–01670–04 (October 15, 

2007), as well as an earlier report from 2001, recommends that medical device manufacturers be required to contract directly with the Federal Government. What is 

VA’s position on this recommendation? 

Response. VA believes mandating that all medical device manufacturers deal directly with VA would prevent many small businesses from doing business with VA 

and/or other Federal agencies. Many manufacturers do not have a distributor network to sell and fill orders. Additionally, those manufacturers with an established 

distributor network may be forced to renegotiate contracts with distributors as a VA 

mandate may put the firms in ‘‘breach of contract’’ with those distributors. 

Question 14. In VISN 23, the Black Hills VA Health Care System was budgeted 

for $17 million in FY10 for non-VA care, but spent $25 million in FY09. How much 

of the spending in FY09 is for care furnished under Project HERO, and how is it 

that this system would budget for less non-VA care in FY10 than was incurred in 

FY09? 

Response. In FY09, Black Hills Health Care System (BHHCS) spent $185,254 on 

care purchased through the Project HERO contracts with Humana Veterans 

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Healthcare Services and Delta Dental Federal Services. Overall spending for care 

purchased in the community by Black Hills in FY09 was just over $25M. The budget 

for FY2010 in Black Hills for purchased care is $24M. Throughout VISN 23, VAMCs 

are working to maximize the use of ‘‘within VA network’’ resources where possible 

and to assure efficient use of non-VA Healthcare dollars when referrals into the 

community are necessary. Black Hills is expected to gain efficiencies through effective screening to assure referrals are in line with evidence-based care and use of 

Project HERO where available and when there is a cost-benefit. Therefore, the 

budget for FY10 is less than the FY09 actual spending. 

Question 15. How many complaints has VA received from veterans concerning the 

timeliness or quality of compensation and pension examinations provided by VHA 

compared to those provided under contract? Describe the actions taken to address 

such complaints. 

Response. VA sends customer surveys to Veterans for each contract medical exam 

they attend. The majority of complaints or comments are received through this medium, although Veterans occasionally contact their local Regional Office (RO) with 

a concern. The chart on the next page summarizes surveys received regarding timeliness and quality. 

Table 1.—Contract Exams Customer Service: Timeliness and Quality 

January 26, 2009–September 25, 2009 

Contractor Surveys 

Returned 

Veterans waiting 

> 1 hour 

Veterans 

‘‘very dissatisfied’’ 

with examiner 

Veterans 

‘‘somewhat dissatisfied’’ 

with examiner 

MES 4,456 91 81 52 

QTC 34,199 754 617 661 

To address complaints, Compensation & Pension (C&P) contacts the contractors 

and asks them to contact the Veteran. The contractor then reports the status to 

VBA. If an acceptable outcome is not achieved, the contractor is either asked to not 

utilize the examiner again or to put the examiner on notice. 

VA has no record of receiving Veterans’ complaints about the timeliness or quality 

of compensation and pension examinations performed by VHA vis-a-vis those performed by contract providers. However, the Compensation and Pension Examination 

Program (CPEP) is in the process of developing a VHA C&P customer satisfaction 

survey. The survey questions have been field-tested and are awaiting OMB 

approval. 

Question 16. Describe the procedures for identifying VHA and contracted C&P examiners whose examinations or reports do not comply with VA policy, and the actions taken when non-compliance is identified. 

Response. VBA does not have access to information from VHA for a comparison. 

Each medical disability examination administered by a contractor for C&P is reviewed for quality based on Automated Medical Information Exchange (AMIE) 

worksheet compliance. Each contractor’s Quality Analysis staff completes a review 

prior to releasing the examination for RO use. If the RO finds a problem with the 

completed examination, they notify the contractor and the C&P Service Contract 

Exam staff. The contractor will have the sub-contractor fix the issue, and the Contract Exam staff will request retraining of the examiner on the particular issue. If 

the situation arises again after retraining has been attempted, the contractor is 

asked not to use the examiner again. 

Question 17. What actions does VA take when non-compliance with VA policy or 

procedure is identified? 

Response. When VBA finds that contracted medical disability exams were not 

compliant with VA policy and procedures, the contractor is instructed to cease sending Veterans to the sub-contractor for C&P examinations. 

Question 18. How many examiners were identified during the past three years 

which resulted in VHA taking corrective action, such as performance improvement 

plans? 

Response. The CPEP exam review process is used as an aggregated measure of 

performance, tracked by exam type and rolled-up at the VISN level for performance 

measure tracking. Between 700–800 unique examiners are evaluated each month 

through random sampling of C&P examinations. CPEP releases individual examination report scores, which can be used by medical center management to identify and 

address specific performance issues. However, there is no centralized authority for 

remediation or tracking of individual performance-related actions at VHA field sites. 

68 

Recognizing this is an issue, VHA is in the process of re-examining the CPEP Program with the intent of re-designing the quality review process to incorporate fieldbased peer reviews, larger numbers of monthly reviews, and the ability to identify 

deficits and implement a central remediation program. Implementation of this 

change should begin within the next calendar year. 

CPEP has addressed the issue of improving provider performance through multiple education strategies. Over the past three years, CPEP has conducted three 

multi-day training conferences (attended by VBA and VHA staff) and a number of 

regional and local training sessions. CPEP evaluates approximately 160–300 monthly requests for scoring appeals, which serves as an educational tool through the appeals feedback mechanism. In addition, the CPEP examination quality and timeliness scores are part of the VISN and medical center leadership’s performance plan. 

CPEP reporting demonstrates improvement from around 40 percent for the quality review scores in 2003 to a high of above 90 percent approximately 3 years ago. 

It is recognized that, although there has been significant improvement, a plateau 

has been reached and changes to the review process and educational efforts must 

be instituted. CPEP’s educational material is under evaluation with new training 

modules in development for Muskuloskeletal, General Medical and Foot examination types. Audiology is being evaluated as a fourth training module effort. 

ATraumatic Brain Injury module has been activated within the past 45 days. 

Question 19. How does VA determine and monitor the amount of time needed to 

conduct compensation and pension examinations? 

Response. For C&P medical disability examination contracts, times are based on 

the Current Procedural Terminology (CPT) codes. The following codes are used to 

report evaluation and management services provided in the physician’s office or in 

an outpatient clinic: 99203: 30 minutes, 99204: 45 minutes, and 99205: 60 minutes. 

An initial post-traumatic stress disability examination time of 90 minutes is built 

into the contracts. C&P MDEs take more time than standard medical exams due 

to their complexity. 

Question 20. Provide a list of the amount and percentage of budget allocated to 

the conduct of compensation and pension examinations in each VISN, broken down 

by VA and local contractors. 

Response. The information below covers medical disability examination contracts 

administered by C&P Service. 

Table 2.—FY 2009 Expenditures at QTC Sites 

VISN % Amount 

Boston (VISN 1) ..................................................................................................................... 1.6 $1,778,348 

Roanoke (VISN 6) .................................................................................................................. 13.5 15,004,813 

Winston-Salem (VISN 6) ........................................................................................................ 11.1 12,337,290 

Atlanta (VISN 7) .................................................................................................................... 13.2 14,671,372 

Muskogee (VISN 16) .............................................................................................................. 12.5 13,893,345 

Houston (VISN 16) ................................................................................................................. 12.8 14,226,785 

Salt Lake City (VISN 19) ....................................................................................................... 1.5 1,667,201 

Seattle (VISN 20) .................................................................................................................. 10.9 12,114,997 

Los Angeles (VISN 22) .......................................................................................................... 5.5 6,113,072 

San Diego (VISN 22) ............................................................................................................. 8.4 9,336,328 

Louisville (VISN 9) ................................................................................................................. 0.8 889,174 

Nashville (VISN 9) ................................................................................................................. 0.5 555,734 

St. Petersburg (VISN 8) ......................................................................................................... 2.4 2,667,522 

Waco (VISN 17) ..................................................................................................................... 0.3 333,440 

Phoenix (VISN 18) ................................................................................................................. 2.9 3,167,683 

St. Paul (VISN 23) ................................................................................................................. 0.1 111,147 

Lincoln (VISN 23) .................................................................................................................. 2.0 2,222,935 

Total ......................................................................................................................... 100.0 $111,091,188 

Table 3.—FY 2009 Expenditures at MES Sites 

VISN % Amount 

Cleveland (VISN 10) .............................................................................................................. 9.6 $1,002,319 

Indianapolis (VISN 11) .......................................................................................................... 23.3 2,438,242 

Des Moines (VISN 23) ........................................................................................................... 1.8 192,713 

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Table 3.—FY 2009 Expenditures at MES Sites—Continued 

VISN % Amount 

Lincoln (VISN 23) .................................................................................................................. 7.8 821,126 

St. Louis (VISN 15) ............................................................................................................... 19.0 1,993,116 

Waco (VISN 17) ..................................................................................................................... 38.4 4,022,890 

Total ......................................................................................................................... 100.0 $10,470,406 

Question 21. How does VA determine and monitor the amount of time needed to 

conduct compensation and pension examinations? 

Response. Please see the response to #19. 

Question 22. At the hearing, Mr. Baker said that the total amount VA spent on 

outside providers last year, including all health services, was $3 billion. Does this 

number include all contract and fee basis services, including Project HERO? 

Response. Yes, the $3 billion number Mr. Baker quoted is the FY 2008 amount 

VA spent on outside providers, including Fee Basis and Project HERO care paid for 

through the VistA Fee claims processing system. By comparison, FY 2009 expenditures were approximately $3.8 billion. 

Question 23. Project HERO been described in the media as a $915 million project. 

What is the total amount of money spent on Project HERO annually since its inception? 

Response. The $915 million described in the media at the inception of the Project 

HERO contracts was an approximation of the maximum amount that would be 

spent for care services purchased through the Humana Veterans Healthcare Services award over a five-year contract period. 

The following tables show the actual amount of dollars disbursed on Project 

HERO annually since its inception in FY 2008. 

Sources: VSSC Non-VA Care cube was used for disbursed dollars for healthcare, and HVHS 

and Delta Dental report directly on value-added fees invoiced. 

Question 24. How many providers, by specialty and location, have agreed to provide services to veterans through Project HERO? 

Response. (See Attachment 1 with Delta Federal Services and Attachment 2 with 

detailed lists for Humana Veterans Healthcare, which follow). 


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Question 25. Does VA consider Project HERO a success? If so, does VA anticipate 

expanding the project, or similar projects? 

Response. Project HERO has had many successes and challenges, but VA cannot 

expand the current contract. As a demonstration pilot, it has been a vehicle to gather invaluable information for VA to better understand methods to utilize contracted 


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networks to meet its needs when purchasing needed care outside VA medical centers. The Project HERO Program Management Office (PMO) gathers, applies and 

shares these lessons learned in this program and other purchased care contracts. 

VA does anticipate a need to continue purchasing health care services in the community at some level. Similar projects will be planned to improve purchasing capability, impose quality standards, and leverage pricing where possible. 

Question 26. How many Project HERO providers work in highly rural areas? 

Response. (See Attachments 3 with detailed list of Project HERO providers who 

work in rural areas and Attachment 4 with Project HERO Delta Federal Services 

in rural areas, which follow). 

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ATTACHMENT 4 FOR QUESTION 26 

Question 27. How would VA improve Project HERO if VA decided to expand it 

or create similar projects in other VISNs? 

Response. While VA cannot expand the existing Project HERO pilot, if we were 

to create similar contracts in other VISNs, we have collected many lessons learned 

that would be applied to future purchased care contracts: 

(a) Include broader and more in-depth stakeholder research and analysis through 

facilitated focus group sessions, requirements sessions, and improved bi-directional 

communications. 

(b) Create contracts that are more adaptable to changing VA needs and regulations. 

(c) Improve expected clinical quality standards and methods for capturing clinical 

quality information and measures. 

(d) Establish care categories and definitions per industry, Centers for Medicare 

& Medicaid Services, and American Medical Association definitions. 

(e) Consider making contract use mandatory as the first care purchasing option 

and if the contracted network cannot meet the need, defer to other purchased care 

methods. 

(f) Establish health care pricing and payment methodologies that better reflect 

commercial market payment processes and rates. 

(g) Include travel time and distance standards for purchased care, based on 

urban, rural, and highly rural situations. 

(h) Create an environment that encourages and promotes physician-to-physician 

communication between the VA and community providers. 

(i) Increase the use of VA’s Computerized Patient Record System so VA and community providers have access to the same patient medical documentation, enhancing their ability to optimize Veteran care services. 

(j) Implement a provider relations program to improve understanding and communication between community and VA providers 

We currently are in the process of assessing future options, using a lessons 

learned survey to begin this process. We intend to use the results of the survey to 

begin an additional independent evaluation of the pilot. Both the prior evaluation 

as well as our future evaluations will be comparing the Project HERO results with 

our control group (traditional Fee Basis). Throughout our evaluations, we have used 

this control group to assess impacts of change as well as determine future options 


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for improving health care purchasing. Our next independent evaluation will assist 

VA in understanding the full results of the demonstration and how these results 

will inform future health care purchasing processes. As the demonstration contract 

has two remaining years, we intend to initiate this external review in Q1, FY11. 

Question 28. Are there widespread delays in the process to relocate existing 

CBOCs? For example, I have been told that the relocation of the Raton CommunityBased Outpatient Clinic (CBOC) in New Mexico has been especially delayed. 

Response. There have indeed been delays in obtaining leased community based 

outpatient clinics (CBOC) in New Mexico (NM) and these lease process delays are 

of significant concern to facility and Veterans Integrated Service Network (VISN) 

18 leadership. Setbacks in particular locations such as Raton, NM, occurred while 

seeking leases for facilities that would enable the level of care our Veteran clients 

deserve. Five lease extensions were recently executed and VISN 18 leadership is 

taking swift and strong action to improve contracting for leases so that every patient in every clinic receives the highest level of care possible. Enclosed is a fact 

sheet that provides details on the status of leases in New Mexico. 

Prior to 2008, contracting officers (COs) in VISN 18 operated in a decentralized 

model at each medical center, and the COs accomplished both contracts and leases, 

functioning in a generalist approach to tasks. The Network Director determined that 

creating centralized VISN-wide teams specializing in areas such as leases, construction, and medical sharing would be more productive and enhance staff skills in 

these complex areas. As part of this centralized approach, 19 additional staff were 

approved including a Deputy Contract Manager position established to improve 

oversight in NM and west Texas. The Deputy was hired in October 2009, and one 

of her top priorities is to manage the lease program to assure activities are completed timely and in accordance with prioritized needs. Directed and streamlined attention to the leasing process will expedite the implementation of proposed new 

lease contracts. 

VA is committed to providing quality services to rural Veterans. In addition to the 

planned clinic expansions, there have been many advances in service across NM 

over the past three years. These include: implementation of state-of-the-art Telemedicine equipment used for Tele-mental health in eight CBOCs; implementation 

of teleretinal cameras to provide retinal exams for diabetic patients in five CBOCs; 

and increased implementation of Care Coordination Home Telehealth (CCHT) care. 

The CCHT program provides devices for Veterans to use in their own home to communicate health status to dedicated physician and nursing staff at the Albuquerque 

VA Medical Center, minimizing the need to travel for care. An average of 177 patients used this program on a daily basis in 2009, and additional funding of $2.3 

million will be used to further expand this program in 2010. 

VA will continue to explore and implement methods to better serve Veterans in 

rural areas of New Mexico, minimizing the need for travel wherever possible. 

DEPARTMENT OF VETERANS AFFAIRS (VA) 

FACT SHEET

STATUS OF NEW MEXICO COMMUNITY BASED OUTPATIENT CLINIC (CBOC) LEASES

Artesia: Extension of the current lease was executed on January 1, 2010, and will 

expire on December 31, 2010. A new lease for expanded and improved space will 

be awarded with occupancy no later than December 2011. 

Farmington: Extension of the current lease was executed on January 1, 2010, and 

will expire on December 31, 2010. A new lease to expand and relocate to improved 

space will be awarded with occupancy no later than June 2011. 

Gallup: The current lease expires on February 28, 2013. A new lease for expanded 

and improved space will be awarded with occupancy no later than February 2013. 

Raton: Extension of the current lease was executed for a start date of February 

1, 2010, and will expire on January 31, 2011. Contracting is currently procuring the 

new lease for expanded and improved space, which is anticipated to be awarded by 

June 2010, with occupancy by January 2011. 

Rio Rancho: This is a new lease procurement. Contracting will begin the procurement process in February 2010; anticipates an award by July 2010, and occupancy 

by January 2011. The Business Plan originally developed for this CBOC, approved 

in June 2008 using Capital Asset Realignment for Enhanced Services (CARES) Priority CBOC criteria, underestimated demand by Sandoval County Veterans. With 

the addition of anticipated demand for specialty care and dental services, it was necessary to revise the Business Plan space requirements and seek approval on the corrected plan, which was received during the third quarter of Fiscal Year 2009. The 

137 

VISN has strengthened their Strategic Planning process to more accurately project 

workload growth in order to avoid such situations in the future. 

Santa Fe: The current lease expires on October 31, 2012. An additional 800 

square feet to expand the CBOC at the same location for Mental Health services 

was procured on January 1, 2010, to temporarily address needs. A new lease for improved space will be awarded with occupancy no later than October 2012. 

Silver City: Extension of the current lease was executed on January 1, 2010, and 

will expire on December 31, 2010. An additional extension will be issued on January 

1, 2011, until December 31, 2011. The lease for new space will be awarded on December 1, 2010, for anticipated occupancy of January 1, 2012. 

Veterans Health Administration 

January 2010 

Chairman AKAKA. I would like to call the second panel. 

Mary A. Curtis of the Boise VA Medical Center, testifying on behalf of the American Federation of Government Employees. 

Tim McClain, President and Chief Executive Officer at the 

Humana Veterans Health Care Services. Mr. McClain served previously as VA general counsel. 

Marjie Shahani, Chief Executive Officer at QTC Management, 

Incorporated. 

John L. Earnest, President and Chief Executive Officer of the 

Ambulatory Care Solutions. 

I want to thank all of you for being here this morning. Your full 

testimony will appear in the record. 

Ms. Curtis, will you please begin with your testimony. 

STATEMENT OF MARY A. CURTIS, APRN, BC, BOISE VA MEDICAL CENTER, REPRESENTING THE AMERICAN FEDERATION 

OF GOVERNMENT EMPLOYEES 

Ms. CURTIS. Chairman Akaka, Ranking Member and Members of 

the Committee. Mary Curtis is my name. I have been employed at 

the Boise VA since 1989. I am a long-timer I guess you would say. 

I am a Psychiatric Clinical Nurse Specialist since 1997. I am also 

a Clinical Application Coordinator working with the information 

technology department and closely working with CPRS which is 

our Computerized Patient Record System, our electronic medical 

record. I am on numerous committees including quality management and process improvement. 

I am really concerned about the way the VA has been using more 

fee-basis care than it needs to. The VA providers do the best job; 

they do a great job and are much more experienced in the unique 

needs of the veterans. But due to staff shortages our capacity has 

not kept up with the need. 

I did hear testimony earlier about C&P exams being contracted 

out. We are fortunate at Boise. Although a very small community, 

we do not contract out our C&Ps. We hire retired physicians from 

the community and bring them in as VA employees. They are on 

a part-time basis. They seem to really enjoy doing this. 

They use our computer software which interacts very closely with 

CPRS, so that really improves the quality of the exams. 

But back to the other contracting issues. I will bring up an example of our dental services. Our veterans could easily be treated by 

a part-time endodontist within the VA. This would not only save 

money but it would also eliminate the convoluted process required 

to contract out the care and then finalize the payment. 

138 

If a veteran is seen by our VA dentist and then requires more 

dental work, a consult and an authorization paperwork have to be 

filled out while the patient is still there. Then the VA staff contacts 

the fee-basis provider for an appointment and to verify the treatment plan. 

Many times the reimbursement needs to be negotiated too because the VA cap for dental services in Idaho is lower than the VA 

cap for dental services in eastern Oregon, which is part of our 

catchment area. 

Later with the patient in the contract dentist’s chair, the VA may 

be contacted to authorize additional procedures which increase the 

dentist’s reimbursement but may actually not always be needed. 

Our person who authorizes sometimes feels kind of trapped to go 

ahead and authorize that payment since the patient is in the dentist’s chair. 

So, I surely hope that the VA implements the recommendations 

that the IG made to make sure that the fee-basis program is properly authorized and reimbursed. 

I am also concerned about Project HERO, which has been up and 

running in the Boise VA for over 2 years now. AFGE received a 

briefing from the HERO program office last week, but, unfortunately, a lot of data they provided was incomplete and confusing. 

Overall the briefing raised a lot more questions than it really did 

answer. 

There is so much we do not know about this project. Management gets regular briefings but those who are actually providing 

the care have never gotten a briefing. 

No one has ever asked our opinion about the HERO contractors 

prior to renewing their contract to second and third years. 

Basically, those of us on the front lines are pretty much kept in 

the dark when it comes to Project HERO even when it affects the 

veterans we care for. 

When we are contacted by the patients who have been referred 

to HERO and have questions or problems, we are not allowed to 

intervene or talk directly to Humana or to Delta Dental to smooth 

things out. All we can do is transfer the veteran to our fee-basis 

office. 

I really think that the veterans and the VA health care system 

would be better served if the clinicians on the front lines, myself 

included, were involved more in the contract care process and received training on how this process actually should work. 

My colleagues in VISN 23 tell me that their directors have mandates to send all contract care referrals through Project HERO first 

even when we have a fee-basis provided we already know and trust 

lined up. 

If HERO cannot find a network provider, the veteran’s care is delayed until they can find one or decide that the case has to be sent 

back to the VA. 

In my VISN, which is VISN 20, there has been a similar push 

to use HERO over our own fee-basis providers during the last 2 

years. HERO claims that they save the VA about $3 million, but 

it appears that they charge referral fees for each appointment they 

arrange even if they call them ‘‘fees for value-added services’’ like 

139 

appointment setting, clinical information return, and claims payment, which are not applied to really the reduced savings. 

They say they are increasing access for rural veterans, but 

HERO has sent some of our veterans hundreds of miles away for 

procedures that could have been done in the community with closer 

fee-basis providers or even right at the VA if we were fully staffed. 

The problem is Humana has not been able to build a big enough 

rural network. I suspect that many providers are unwilling to contract with Humana or Delta Dental because of their low reimbursement rates and other contract terms. 

This is really in the news lately with the million med march that 

is coming tomorrow—providers being unhappy with the Medicare 

fees, Medicaid fees, let alone reduced fees from other companies. 

Humana also sold this project to VA based on the promise that 

it would improve access for our rural veterans, but in fact, Project 

HERO is taking over a lot of care for our veterans in the urban 

areas. 

Boise VA is sending veterans to Project HERO for dermatology, 

GI procedures, audiology and podiatry regardless of where they live 

because the VA is short-staffed. 

I maintain a part-time private practice myself in the community 

in addition to my full-time VA job. I was very surprised when I was 

contacted by Humana to join the Project HERO provider network 

since my office is only five miles away from the VA. 

In fact, HERO claims that veterans referred to them travel 

roughly the same distance as fee patients. So, why are we paying 

HERO all these extra fees? And that is in their handout here. 

HERO also claims that veterans are better off under HERO because all clinical information is sent to the VA within 30 days. But 

the HERO provider has to first send the records through Humana, 

which increases the risk of delay and lost records. 

In contrast, when care is provided inside the VA all providers 

have immediate access to the full electronic medical record. 

HERO touts higher patient satisfaction scores, called SHEP 

scores, than the VA; but HERO also acknowledges that, although 

similar, these measures should not be used as direct comparisons 

between Project HERO and SHEP satisfaction scores. 

So, this is only one of many areas where the HERO program 

made confusing or unsubstantiated claims. And I must say also 

that the Boise VA SHEP scores are much higher than what was 

claimed in the Project HERO data. 

In closing, I hope Congress will demand more oversight of the 

HERO Program and do an independent investigation of its claims 

about producing great benefits for veterans within the VA. 

I would really like to see the VA return to a time where they 

only used contract care as Congress intended, that is, only when 

the care was truly not available through the VA system—where direct patient services would be fully staffed and adequately funded 

with an educated staff. Thank you. 

[The prepared statement of Ms. Curtis follows:] 

140 

PREPARED STATEMENT OF MARY A. CURTIS, APRN, BC, PSYCHIATRIC CLINICAL

NURSE SPECIALIST AND CLINICAL APPLICATION COORDINATOR, BOISE VA MEDICAL

CENTER, BOISE, IDAHO, ON BEHALF OF AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL–CIO 

Chairman and Members of the Committee: Thank you for the opportunity to 

share AFGE’s concerns regarding VA contracts for health care services. My name 

is Mary A. Curtis. Since 1997, I have worked as a Psychiatric Clinical Nurse Specialist at the Boise (Idaho) VA Medical Center, one of the facilities participating in 

Project HERO. I am also a Clinical Application Coordinator working with computer 

applications, including the Computerized Patient Record System. I work closely with 

Quality Management identifying external peer review and Joint Commission issues. 

I also have a private practice in the community as an advanced practice nurse. 

OVERUTILIZATION OF CONTRACT CARE

AFGE is a long time supporter of the veterans’ Independent Budget (IB). Every 

day, my colleagues and I on the front lines of the VA health care system strive to 

achieve the health care principles of the IB: ensuring that veterans have access to 

timely, high quality care and a full range of services from a health care system that 

focuses on specialized care, conducts veteran focused research and supports health 

professional education. 

As a mental health provider caring for veterans in a highly rural state, I frequently experience the challenge of providing veterans with adequate access to 

health care—a challenge that has increased with the growing number of rural OIF/ 

OEF veterans returning home. 

Health care contracts are one of many tools available to the VA to increase access 

for rural veterans and address other gaps in care. The Veterans Health Administration (VHA) Office of Care Coordination Services has a highly developed Telehealth 

program. The Office of Rural Health is focusing on education and training, workforce recruitment and retention and new technologies to develop innovative solutions to rural access problems. AFGE thanks Chairman Akaka and Senator Begich 

for introducing the Rural Veterans Health Care Access and Quality Act of 2009 

(S. 734) to attract more health care providers to rural areas and increase quality 

controls over contract care. 

The Boise VA has a strong Community Care Home Telehealth program which 

treats veterans with congestive heart failure, diabetes and other chronic conditions 

utilizing remote equipment for blood pressure readings and other tests. We also use 

telehealth for our implantable defibrillator clinic. Our mental health team travels 

to the Community Based Outpatient Clinics (CBOC) and other outpatient settings 

to provide care. Our Vet Center has a new mobile clinic that is able to reach veterans in rural areas. 

When choosing between contract care and other means of providing care to rural 

veterans, the VA should balance the benefits of contract care against its risks. Contract care requires that the VA give up a certain degree of control to a for profit 

outside entity. In the short term, the effect is that the VA may be less able to control costs, quality of care, provider qualifications and medical privacy or ensure that 

care is delivered timely and is geographically accessible. In the long term, excessive 

use of contract care may deplete the VA health care system of the staff, equipment 

and other resources it needs to continue to provide veterans with a full range of 

services. The diversion of large numbers of veterans to contract providers may also 

weaken VA’s research capacity and academic affiliations. 

Congress clearly recognized the risks of sending veterans outside the VA for care, 

limiting the use of health care contracts to specific circumstances: geographic inaccessibility, lack of in-house capability to furnish the type of care required and medical emergencies (38 U.S.C. §§ 1702, 1725 and 1728). 

Unfortunately, medical center directors seeking short term fixes for patient wait 

lists and staff shortages often ignore these criteria and opt for fee basis and other 

costly contract care arrangements without adequately considering alternatives that 

would better serve the veteran and VA health care system. As a result, contract care 

is over-utilized and under-scrutinized by many VA medical facilities in both rural 

and urban areas. 

FEE BASIS CARE

Many medical center directors justify the increased use of costly fee basis care in 

recent years as the only means of providing care to veterans in a timely manner 

and accessing specialty care, in the face of physician recruitment and retention 

141 

problems. As a result, management may end up paying more on a fee basis that 

it would cost to attract providers to the VA workforce. 

AFGE members report that the increased use of fee basis care is causing budget 

shortfalls at a number of facilities, despite record funding increases by Congress. 

Cost overruns from fee care produce a vicious cycle: directors impose hiring freezes 

and defer equipment purchases, which trigger the need for more costly contract 

care. 

The Boise VA would be able to reduce a large number of fee-basis consults if we 

had more providers on staff. Although Boise is a smaller facility, we still have a GI 

clinic staffed by in-house providers who perform colonoscopies. Due to limited staffing and space, a high number of these procedures have been sent out to the community. Our dental department is also short staffed. 

We commend the VA Office of the Inspector General (IG) for its comprehensive 

study of the VA Fee Program (VA OIG Report No. 08–02901–185). The IG found 

that the fee program is ‘‘complex, highly decentralized and rapidly growing,’’ with 

extensive noncompliance with requirements for justifying and authorizing fee services. AFGE strongly endorses the IG’s recommendation that VHA strengthen controls over this program to reduce payment, justification and authorization errors. 

PROJECT HERO

This pilot project is supposed to manage VA contract care more effectively than 

the VA can manage it with its own staff and infrastructure. Project HERO essentially injects for profit contractors into the contract care process as the intermediary 

between the VA and veterans who may need to be referred outside the VA for care. 

Both the implementation and ongoing operations of Project HERO have been conducted largely behind closed doors. Based on the limited objective data available and 

observations by our members in facilities participating in HERO, it appears that 

HERO has little or no ‘‘value added:’’ HERO contractors are simply not doing a better job managing contract care than the VA. 

In fact, there are early signs that the insertion of another layer in the contract 

care process and the use of for profit care coordinators have delayed care, left veterans confused and dissatisfied, required some veterans to travel further and depleted VA’s internal capacity to directly manage fee basis care (in addition to the 

larger budget problems resulting from increased spending on contract care, as already discussed.) 

It also appears that HERO contract care referrals cost the VA more than fee basis 

referrals it makes directly. The HERO program pays its network providers less than 

they would be paid if they were contracting directly with the VA under its fee basis 

program. Then, it appears that HERO contractors bills the VA at a higher rate and 

also tacks on hefty referral fees. 

HERO has failed to build adequate provider networks, especially in rural areas 

where the need is greatest. In fact, it appears that providers are reluctant to do 

business with HERO contractors (especially given the low reimbursement rate already mentioned). For example, last year, the Idaho Medical Association cautioned 

its members about the problematic terms of the Humana provider contract. An 

AFGE nurse involved with contract care at another VISN 23 participating facility 

reported that several dialysis providers refused to contract with Humana. Last year, 

VISN 23 data indicated that the vast majority of veterans referred to HERO had 

to be referred back to the VA because HERO providers were not available. 

We have seen no justification for awarding contracts to Humana and Delta for all 

four pilot VISNs; the use of a different contractor in each VISN would have yielded 

useful comparative information and may have better served the unique needs of 

each area. 

Similarly, despite AFGE’s request, HERO has provided no justification for renewing the Humana and Dental contracts of the second and third years. (The third pilot 

project year begins on October 1, 2009; HERO has the option to renew these contracts for a total of five years.) 

AMONG THE CRITICAL QUESTIONS THAT REMAIN UNANSWERED: 

• How much is Project HERO costing the VA in terms of program administration 

at the national, VISN and local facility levels? The Nation magazine (April 9, 2008 

issue) described HERO as a $915 million program, but AFGE is not aware of any 

specific appropriations for the program. 

• What does HERO cost the VA compared to fee care arranged directly by the 

VA? What do HERO contractors charge the VA for different medical services, and 

how are referral fees set? 

142 

• What share of VA provided care and VA fee basis care has been shifted to 

HERO? Last year, HERO program officials reported to the media that the program 

covered 30% of all veterans enrolled with the VA. At a September 23rd briefing for 

AFGE, HERO program staff told AFGE that ‘‘HERO contract use is less than 2% 

of VA unique outpatients receiving medical care.’’ • What criteria were used to award Humana and Delta Dental an exclusive contract for all 4 pilot VISNs? What criteria were used to renew these contracts year? 

It does not appear that Project HERO has achieved any improvements in the 

Boise VA’s fee basis program. The Boise VA has had a good relationship with contract providers within our catchment area, including dentists for our OIF/OEF veterans. But Project HERO has made arrangements with providers for reimbursement 

of less than the Medicare rate and it can be difficult to find willing providers within 

a reasonable distance. For example, a veteran referred to HERO was expected to 

get his colonoscopy 500 miles away from his home. 

At Boise, the use of an outside entity to arrange contract care has added another 

unnecessary administrative layer for staff who act as liaisons between patients and 

community providers. VA staff is prohibited from contacting Humana when patients 

have questions or need to change their appointments. All we can do is refer them 

to Fiscal Services. We are not allowed to give any phone numbers to the patients. 

As a result, patients get very frustrated and upset with us, but there isn’t much 

we are permitted to do to assist them. 

Also, Project HERO dentists in the Boise area have refused to see a patient until 

additional procedures are approved in order to increase their reimbursement, which 

has not been a problem with local contracts under the fee program. 

CONCLUSION

On July 29, 2009, the Office of Management and Budget directed Federal agencies 

to end their overreliance on contractors, conduct an inventory of their in-house and 

contract workforces, and bring appropriate work back into the government. AFGE 

urges the Committee to ensure that the VA aligns its health care contract policies 

with this historic new directive, including an inventory of all pending contracts for 

health care and an assessment of contract care functions are more appropriately 

performed in-house. 

More specifically, through Project HERO, the VA has outsourced a function that 

has traditionally been performed in-house: determining whether a veteran should 

receive medical care from an outside provider rather than the VA. Second, the VA 

has outsourced the operation of a large number of CBOCs; the IG recently identified 

a number of problems associated with contract outpatient clinics (Report Number 

09–01446–226, 9/23/2009). Third, Congress continues to authorize the use of contractors to conduct C&P exams for disability claims, despite mixed evidence of using 

the benefits of using a for profit contractor rather than providing the VA with additional staff and training to perform more of these exams in-house. 

AFGE also recommends joint labor-management training on the VA fee program. 

Informed staff working on the front lines of VA health care can play a valuable oversight role in assessing whether fee basis determinations are properly justified and 

authorized. 

Finally, Congress should withhold funding for the fourth and fifth option years 

of Project HERO and any further expansion of the pilot pending an investigation 

of its actual costs, its impact on health care quality and access, and on VA’s internal 

capacity to manage contract care. We commend Senate appropriators for including 

HERO oversight language in the FY 2010 VA appropriations bill report (Senate Report 111–040), and urge this Committee to ensure that the VA complies with the 

requirement to report to Congress by October 30, 2009. 

Thank you for the opportunity to testify on this issue. 

Chairman AKAKA. Thank you very much, Ms. Curtis. 

Mr. McClain. 

STATEMENT OF TIM S. MCCLAIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HUMANA VETERANS HEALTH CARE 

SERVICES 

Mr. MCCLAIN. Thank you, Mr. Chairman. 

I am Tim McClain, President and CEO of the Humana Veterans 

Health Care Services, Inc., the contract partner with VA in Project 

HERO. 

143 

I am accompanied today by my Chief Operating Officer, Mr. Brad 

Jones, and also present is Joanne Webb, a member of our advisory 

board and a tireless advocate for veterans. 

On behalf of the dedicated employees of Humana Veterans, we 

appreciate the opportunity today to discuss this very important 

demonstration project. 

As you are aware, the veteran-friendly concept for Project HERO 

was congressionally inspired. VA was asked to develop a pilot 

project in partnership with a commercial company to focus on improved administration and outcomes for veterans referred to community providers for specialty health care or other services. 

Through collaborative efforts and a close partnership, Humana 

Veterans and VA concentrated on three areas that became the hallmarks for Project HERO: quality health care services; timely access 

to care; and cost-effective care. 

The collaboration with VA has resulted in what we described as 

the HERO model. The model is more fully described in my written 

statement, but it is specifically designed to enhance the veteran’s 

overall experience and ensure the quality of health care delivery by 

a community provider. 

Since my arrival at Humana Veterans as CEO in July of this 

year, I have emphasized that the model must be veteran centric. 

I can best describe the theory of the HERO model as an extension 

of the respect and atmosphere shown to veterans within VA’s four 

walls. 

Many veterans feel a special sense of belonging when they are 

in VA facilities as they are surrounded by other veterans and VA’s 

very caring staff. That feeling may go missing for the most part 

when a veteran goes into the civilian community. 

The Project HERO model is designed to metaphorically place a 

firm but gentle hand on the veteran’s shoulder and guide the veteran through the maze of care outside VA. The hand remains on 

his or her shoulder until the veteran returns to the primary care 

VA doctor. 

During the journey the veteran receives various personalized 

services that comprise the HERO model, as I stated in my written 

statement. 

The employees of Humana Veterans are proud of what we have 

accomplished in the past 21 months. However, we realize that 

there have been bumps and hurdles along the way and certain individuals and organizations have expressed concern about Project 

HERO. Through collaboration and innovation, we are working 

through each of the concerns and issues with our VA partners. 

For example, although not required in the written contract, we 

have implemented a data repository, called ‘‘Data Mart.’’ One of the 

major advantages of the Project HERO model is data availability 

and accountability through the contract metrics. 

Another advantage is the planned online issue resolution system 

that is under development at Humana Veterans. Issues raised at 

any VA site by veterans, by the fee office, or indeed by Humana 

Veterans, will be given a tracking number, assigned to a responsible office, and tracked until a resolution has been formed and implemented. In our view, each issue resolved contributes to better 

quality health care for veterans. 

144 

One significant issue we have identified is the unexpected low 

volume of HERO utilization in the four demonstration VISNs. We 

believe the HERO model has now developed to the point where an 

increase of referral volumes is required to fully test the HERO 

model. 

I want to emphasize this is not an increase in outsourced care. 

The fee office decides whether to send a preauthorized veteran to 

regular fee-based care or to Project HERO. So, we are simply asking for an increase of the number of veterans already going into 

community care to go to HERO. 

We encourage the Committee to recommend VA fully engage in 

this demonstration project to show what a true veteran-centric 

model can do for veteran services in the community. 

Mr. Chairman, thank you for the opportunity to discuss Project 

HERO and the important contributions it is making to quality veterans health care, and I will be glad to answer any questions. 

[The prepared statement of Mr. McClain follows:] 

PREPARED STATEMENT OF TIM S. MCCLAIN, PRESIDENT AND CEO, HUMANA

VETERANS HEALTHCARE SERVICES, INC. 

INTRODUCTION

Chairman Akaka, Ranking Member Burr, and Distinguished Committee Members, Thank you for the opportunity to address the Committee on Project HERO 

(Health Care Effectiveness through Resource Optimization) and the supporting role 

Humana Veterans Healthcare Services plays in the delivery of excellent health care 

to our Nation’s Veterans. 

On behalf of the dedicated men and women of Humana Veterans, I appreciate the 

opportunity to provide information to the Committee on the three hallmarks of 

Project HERO: 1) Quality health care services for Veterans; 2) timely Access to care; 

and, 3) Cost effective care. 

I am President and CEO of Humana Veterans, the contractor responsible for providing health care services for the Veterans Affairs Project HERO demonstration 

and welcome this opportunity to discuss the objectives, successes and efficiencies of 

Project HERO, that make it a clear benefit to the Department, and most importantly, to the Veterans relying on VA for excellent medical care. 

HUMANA VETERANS BACKGROUND

Humana Veterans, headquartered in Louisville, Kentucky and incorporated in 

2007, was established to develop and implement solutions for Veterans’ health care 

issues. It provides an organizational structure that is flexible, agile, and responsive 

to the emerging requirements of the Department of Veterans Affairs and the Veterans who rely on VA services. 

OVERVIEW OF PROJECT HERO CONTRACT

Project HERO is a demonstration project (pilot) currently implemented in four 

Veteran Integrated Service Networks (VISNs). The project is congressionally inspired and has developed into a partnership between the U.S. Department of Veterans Affairs, Veterans Health Administration (VHA) and Humana Veterans. 

Humana Veterans was awarded the contract for medical/surgical, mental health, 

diagnostics and dialysis for Project HERO on October 1, 2007. Delta Dental Federal 

Services (Delta Dental) was awarded the contract for dental services. My testimony 

today addresses only the partnership between the VA and Humana Veterans and 

does not intend to address the contract awarded to Delta Dental. 

The purpose of the project is to determine how a personalized services approach 

to care provided outside the VA (traditionally termed ‘‘fee-based care’’) can improve 

and complement timely access to care, quality of care, and preserve the fiscal integrity of VA health care expenditures, while maintaining high customer satisfaction. 

Project HERO has succeeded in all of these areas. 

As displayed in the map in the attached Appendix, HERO is currently a fourVISN demonstration including the Sunshine Healthcare Network (VISN 8); South 

Central Healthcare Network (VISN 16); Northwest Healthcare Network (VISN 20); 

145 

and the Midwest Healthcare Network (VISN 23). We understand VA selected these 

four VISNs for Project HERO based on their considerable fee-based populations and 

the significant amount of health care funds expended on Veterans care through the 

VA’s regular fee-basis program. 

OBJECTIVES

The Project HERO solicitation, sent out to bid in late December 2006, clearly 

identified a number of overall objectives for the demonstration. These objectives remain steadfast today and are objectives Humana Veterans strives to attain as we 

collaborate with VA to improve the level of care provided to our Nation’s Veterans 

outside VA facilities. The objectives outlined in the solicitation included: 

• Cost—providing cost-effective, consistent, and competitive pricing 

• Quality of Care—ensuring the quality of community care provided 

• Patient Satisfaction—achieving high patient satisfaction 

• Clinical Information—improving the exchange of patient care information between community providers and the VA 

• Patient Safety—fostering high quality care and patient safety 

• Transparency—improving care coordination so all care, including care provided 

outside of the VA, is perceived by the patient as VA care 

• Clinical Coordination—ensuring efficiency in the VA referral process and timely 

appointments for patients 

• Coverage—providing health services to Veterans where and when the VA does 

not have capacity or capability to deliver services internally. 

It is important to highlight that we believe Humana Veterans has met or exceeded each of the contract objectives to date. The result is better health care services 

to Veterans. While these objectives are crucial in providing services for the men and 

women who have honorably served our Nation, there is a more implicit goal of 

Project HERO. That goal is to combine all of these elements and create a standardized method of providing fee-basis care to ensure eligible Veterans gain timely access to care, in a manner that is cost-effective to the VA, and most importantly, preserves the level of service Veterans have come to rely on inside the VA. After nearly 

eighteen months of working diligently with our partners at VA, we believe we are 

delivering on these objectives. 

CONTRACT PERFORMANCE REQUIREMENTS

The following are the specific performance metrics enumerated in the Project 

HERO contract: 

Access 

Appointments with specialists and routine diagnostics are scheduled for patients 

within 30 days of receipt of the referral by the provider and the provider will see 

patients within 20 minutes of their scheduled appointment. 

Accreditation 

Unless a waiver exists, all network providers must be accredited by the Joint 

Commission (JCAHO), the Commission on Accreditation of Rehabilitation Facilities 

(CARF), the Intersocietal Commission on the Accreditation of Vascular Laboratories 

(ICAVL), or the American Osteopathic Association (AOA). Humana Veterans must 

provide proof of accreditation to the VA for providers. 

Clinical Information 

All routine clinical information and test results must be returned within 30 days 

from the day of care. For inpatient care, clinical information must be returned within 30 days of the patient’s discharge. 

Credentialing 

Humana Veterans provides written certification to the VA validating network providers are credentialed, including physician assistants, registered professional 

nurses, nurse practitioners, and other personnel in the network providing health 

care services to Veterans. The VA conducts random inspections of our credentialing 

files guaranteeing this compliance. 

Patient Safety 

Humana Veterans reports all patient safety reports/incidents to the VA and Contracting Officer Technical Representative (COTR). All patient safety events are investigated, confirmed, and resolved and we keep the VA informed of the progress 

in resolving patient safety events. 

146 

Patient Satisfaction 

Humana Veterans designated a Patient Advocate with the responsibility of receiving patient grievances. We submit all patient complaints regarding quality of care 

to the VISN Patient Advocate and COTR. We developed materials outlining the 

grievance process and we assist patients with complaints. 

Reporting Requirements 

Humana Veterans submits a monthly report to the VA including metrics on contract performance standards plus a variety of other metrics. We maintain a data repository (Data Mart) and provide unlimited access to the VA. Anyone in the PMO 

or Fee Office at the VAMC level has access to the data and may pull reports on 

the metrics, after they have been granted access by the Contracting Officer Technical Representative. 

MISCONCEPTIONS

Mr. Chairman, now that I have established the rationale for the development of 

the demonstration, at this point I feel it is also very important to address some serious, ongoing misconceptions regarding Project HERO. I firmly believe the perpetuation of these misconceptions is a disservice to Veterans enjoying the many benefits 

of Project HERO, to VA as it executes this demonstration project, and to Humana 

Veterans as we continue serving Veterans through our HERO Model. I will address 

two misconceptions that emerged early on in the demonstration project and continue 

to linger to some degree today. It is a ‘‘Myth vs. Fact’’ phenomenon. 

Myth Number 1 

Project HERO seeks to undermine the care currently provided inside VA facilities, 

leading to greater levels of care in the community, and ultimately diminishing the 

VA health care delivery system as a national treasure for Veterans. 

Fact 

VA and Humana Veterans are clearly in agreement that is false. I want to explain 

why we think this claim is erroneous. As you know, traditional VA fee-basis care, 

and care now provided through Project HERO, are authorized and provided only 

when the requisite capacity inside VA does not support the timely access to care 

or a specialty is not available in VA. Simply translated, this means the VA retains 

ultimate control over who enters the community for care, including which patients 

are referred to HERO for personalized services. We understand the statutory mandate that the VA must provide care inside its’ proverbial four walls whenever possible. HERO, and the processes developed under it, was created to serve as an effective complement to the high quality care VA provides internally, not an initiative 

to supplant it. 

Having said that, we are also aware the VA spends more than three billion dollars 

per year nationally on care outside VA facilities. We recognize that the demand for 

services is often times beyond the control of the VA—in such instances as Veterans 

residing in rural areas or the lack of specialty providers available to the VA in a 

given geographic area. HERO could serve as an effective backstop at times when 

the VA’s internal capacity is limited and the Veterans’ needs temporarily exceed the 

VA’s ability to deliver services in a timely fashion. This is a clear advantage to the 

veteran. 

Myth Number 2 

Project HERO reduces the need for the VA’s current fee-basis offices and staff due 

to services being ‘‘outsourced.’’ 

Fact 

Mr. Chairman, we have heard this concern for some time, and while at face value 

it may sound like a reasonable suggestion, there is one major reason it is not accurate. The reason is the way referrals or authorizations for care outside VA are provided to Humana Veterans under the HERO Model. All referrals provided to 

Humana Veterans are generated out of the fee-basis offices at local VA facilities. 

Once a VA physician sends a referral to the fee office, it has already been determined that the VA does not have the capacity to provide for the care of the veteran. 

In response, the fee office determines what specific services are required for a veteran, and then decides what avenues are available to the veteran for care rendered 

outside the VA. In contrast to the myth, and based on these well-established, longstanding processes, the fee office becomes indispensable in the process of generating 

HERO referrals or authorizations, not endangered by it. 

147 

Humana Veterans supports the Veterans Health Administration (VHA) in achieving delivery of high quality, accessible, seamless, and cost efficient health care services to our Nation’s Veterans. 

PROJECT HERO MODEL

Humana Veterans, in collaboration with VA, coordinates quality, timely health 

care services through Project HERO. VA refers patients to civilian health care providers when there is a need for specialty care or other treatment that is not readily 

available at the VA facility. This is accomplished through a model developed by both 

VA and Humana Veterans, with contract metrics tracked and reported on a monthly 

basis. 

The Project HERO Model includes a personalized service process for Veterans and 

is outlined below. 

(1) First, the veteran receives authorization for care from the VA. Before issuing 

an authorization, the VA determines if the specialty or other care is available at 

a VA facility, if the veteran lives a significant distance from that facility, or makes 

a determination based on other medical reasons. The VA then determines whether 

to send the authorization directly to the veteran, send it to the Project HERO office 

at Humana Veterans, or refer the veteran directly to a civilian provider. 

(2) When an authorization is sent to Project HERO, the veteran receives personal 

assistance and specialized services. Initial contact with the veteran is made by a 

Customer Care Representative (CCR) at Humana Veterans. This appointment specialist provides an explanation of the HERO process and determines when the veteran is available for the medical appointment. 

In terms of making the encounter more veteran friendly, we developed our personalized services approach for three reasons: (a) to ensure the veteran is comfortable 

with what the medical appointment will entail; (b) the veteran understands where 

the civilian provider is located; and, (c) ensure maximum reliability in terms of the 

appointment date established between the veteran and HERO contract provider. 

(3) The CCR then conducts a three-way conference call with the veteran and a 

Humana Veterans network provider’s office. This call occurs within five days of receiving the authorization form from the VA. As part of the Humana Veterans network agreement, network providers must schedule appointments within 30 days of 

the conference call. In any event, the veteran must agree to the scheduled date. 

(4) The veteran receives a letter confirming the provider’s name, address, telephone number, date and time of appointment, including how to obtain directions to 

the provider’s office and Humana Veterans customer service number should questions or problems arise. The referring VA facility is also informed of the appointment details. 

(5) The veteran goes to the scheduled appointment. An agreement with our network providers limits the veteran’s wait time to no longer than 20 minutes when 

they are in the office for their scheduled appointment. If a copy of the veteran’s 

medical records is required, we contact the VA to inform them of the provider’s request. 

(6) After the appointment, we actively track the provider’s written consult report 

and ensure it is returned to the VA for inclusion in the veteran’s electronic health 

record. The average time for a consult report to be returned to VA is 15 days. 

(7) If the provider recommends the veteran have additional tests, procedures or 

services, Humana Veterans communicates the recommendation to the VA for review 

and action. When providers submit their claims to us, we pay the provider directly 

within 30 days of receipt of the claim. We then submit the claim for services under 

the contract and VA pays Humana Veterans. 

(8) Finally, we are committed to a seamless ‘‘hand-off’’ of the veteran back into 

the VA system and their primary care providers. This personalized approach is beneficial to the veteran. The return of clinical information in a timely manner ensures 

quality and continuity of care. 

COST SAVINGS AND EFFICIENCIES

Efficiencies 

The topic of efficiencies as it relates to health care for Veterans generally results 

in a discussion about timeliness of the care provided. While that is undeniably one 

of the most important metrics and successes of HERO to date, efficiencies go well 

beyond how quickly a veteran is seen in a clinician’s office. 

A great deal of work goes into scheduling an appointment and making the veteran 

comfortable with the nature and location of his or her appointment. Having a reliable, credentialed network of providers sufficient to handle the care required in the 

148 

community and providing a smooth clinical transition of the veteran back to their 

primary care provider at the VA is equally important. 

The Humana Veterans provider network has grown to include over 27,000 providers across the four VISNs. A greater concentration of potential VA providers exists today than at any time in the past—for both urban and rural areas—because 

of Project HERO. 

Cost Savings 

Although we are not able to make a direct comparison to VA’s costs for fee-based 

care, we nonetheless believe VA is benefiting from cost savings through Project 

HERO. Health care services provided under HERO are priced as a percentage of the 

applicable Medicare Fee Schedule. Under the current contract, 92% of all contract 

line items for health care services are priced below the corresponding Medicare Fee 

Schedule. 

A comparison of our network costs to Medicare rates shows significant savings. 

Subjectively speaking, reimbursement rates under HERO are generally more favorable than the traditional fee-based structure at the VA, and commonly below Medicare reimbursement rates in the geographic regions where HERO is operational. We 

attribute this to: 

(1) Humana Veterans is respected in the civilian community and has developed 

a reputation for on-time payments to providers; and, 

(2) Even with the indefinite delivery/indefinite quantity (IDIQ) nature of the contract, Humana Veterans is successful in garnering deeper discounts, across the four 

VISNs, due to corporate presence, reputation and ongoing relationships with provider groups. 

It is important to state at this point that even if the cost was the same for VA 

between Project HERO and the regular fee-based program, the advantage to Veterans through the HERO Model ensures personalized service, quality, timely access, 

and convenience resulting in superior value to the VA and Veterans. There is a 

clear advantage in the HERO Model, which should be extended beyond the four 

VISNs and institutionalized nationally across VA facilities. 

WHAT IS QUALITY HEALTH CARE?

I am sure that if you asked 10 Veterans for their definition of quality health care 

in VA you would receive many different answers. The answers may differ significantly from a medical professional’s definition. There are certain attributes, however, that would be common in most responses from Veterans and form elements 

of quality health care. The elements would likely include: 

1. Respect for the individual veteran and her or his service to our Nation. 

2. State-of-the-art services from the health care provider 

3. A level of comfort that the provider is licensed and credentialed for the services 

provided. 

4. Timely and convenient access to the provider. 

5. Assurance that the civilian provider has access to the veteran’s medical records, 

if needed, to ensure excellent continuity of care and to avoid the need for multiple 

incidents of the same test or procedure. 

6. Timely return of the clinical information to the VA primary provider and inclusion in the electronic health record. 

We at Humana Veterans believe the Project HERO Model delivers on each of 

these quality indicators. 

Humana Veterans works tirelessly with VA to ensure care provided through our 

HERO networks reflect the level of quality provided inside VA facilities, but our 

goal and the real goal of the demonstration, is to raise the bar compared to VA’s 

traditional fee-basis care. A number of existing initiatives undertaken in the Project 

HERO Model contribute to this goal including personalized appointment services, 

timely access to care and the return of vital clinical information to VA. 

Return of Clinical Information 

Accurate accounting for outside consult reports and other clinical information is 

a critical component of quality health care. VA’s decentralized approach to its normal fee-based care makes it difficult to track metrics on the timeliness of outside 

provider consult reports. Humana Veterans, in partnership with VA, has established 

a benchmark requirement for the return of clinical information to VA. Humana Veterans expends considerable administrative effort in tracking clinical consult reports 

and has established a standard for reports to be returned to VA within 30 days. 

This ensures that treatment information and test results contained in the clinical 

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other indication of the quality that Project HERO brings to care delivered outside 

of VA facilities. 

Currently, the process of entering clinical consult reports into VA’s electronic 

health record is a manual process. In the future, the Project HERO Model could be 

institutionalized across VA, electronic consult records could be contractually required, entered directly into the system, and directed to the VA primary provider’s 

desktop. 

I would like to share some metrics associated with this largely electronic exchange. Based on our latest data extraction, reporting all data from the beginning 

of HERO in January 2008 through the end of August 2009 shows: 

• Seventy-two percent (72%) of clinical information is returned within 15 days. 

• Eighty-eight percent (88%) return of routine clinical information to the VA within 30 days of the HERO encounter; 

• Ninety-two percent (92%) return of routine clinical information within 45 days 

• On average, clinical information is returned to VA within 15 days. 

More needs to be done to facilitate an increasingly electronic, workable exchange 

with Veterans Health Information Systems and Technology Architecture (VistA)/ 

Computerized Patient Record System (CPRS), the VA’s electronic health record. 

However, we are convinced efforts made to date represent significant progress in enhancing the continuum of care for Veterans outside of VA facilities through this 

project. 

MANAGEMENT OF QUALITY CARE

Clinical Quality Management Committee (CQMC) 

Humana Veterans understands the importance of ensuring quality health care delivery to our Nation’s Veterans. As a result, we initiated the Humana Veterans Clinical Quality Management Committee (CQMC). 

The CQMC is an interdisciplinary committee that meets at least quarterly and 

comprised of Humana associates, VA representatives, and representatives of delegated CQM and Credentialing services. The CQMC oversees and directs activities 

of the Clinical Quality Management Program (CQMP) on behalf of the Humana Veterans Executive Committee. The CQMC acts as an interface between the VA and 

delegated subcontractors and ensures compliance with the VA contract. The findings 

of the CQMC are reported quarterly to the Humana Veterans Executive Committee. 

Credentialing Committee (CC) 

Credentialing of Humana Veterans providers is performed by the Credentialing 

Committee. The Credentialing Committee is responsible for evaluating the qualifications of professional health care practitioners based on appropriate industry standards. Evaluations may include data related to alleged misconduct, performance or 

competence of a provider. The Committee reviews credentialing reports and makes 

final determinations on all provider applicants and delegated groups. The recredentialing of contracted providers is conducted at least every three years. The decision to accept, retain, deny or terminate a provider shall be at the discretion of 

the Committee, which meets as often as necessary to fulfill its responsibilities. 

Patient Safety Peer Review Committee (PSPRC) 

The Humana Veterans PSPRC provides peer review for any potential clinical 

quality of care issue identified and delineates steps to resolve problems and the ongoing monitoring of these issues. The Committee performs peer review of patient 

safety and quality of care issues identified through the Potential Quality Indicator 

(PQI) process and provides input for communicating and educating providers of concerns related to patient safety or clinical improvement. Upon confirmation of a quality issue the PSPRC will assign an appropriate severity level, determine intervention(s) to address the issue, and review and monitor intervention(s) to completion. 

The levels of severity utilizes by Humana Veterans include: 

Level Adverse Effect On Patient 

1 Quality issue is present with minimal potential for significant adverse effects on the patient. 

2 Quality issue is present with the potential for significant adverse effects on the patient. 

3 Quality issue is present with significant adverse effects on the patient. 

4 Quality issue with the most severe adverse effect(s) and warrants exhaustive review. 

Quality issues with minimal potential for significant adverse effects on the patient 

are assigned a Severity Level 1 by the Chief Medical Officer. This information is 

150 

entered into the Provider Trend Data base (PTD) for tracking and trending purposes. Cases assigned a Severity Level 2 are presented in summary to the Committee for informational purposes and entered into the PTD. Cases recommended 

as a Severity Level 3 or 4 are presented to the Committee for peer review and final 

determination. 

FUTURE OF THE HERO MODEL

Given the attributes mentioned in my testimony, Project HERO has the potential 

to go beyond its current form. However, the Model has not been adequately tested 

under conditions of a full-load of referrals. The numbers of Project HERO referrals 

continue to steadily decline and have for the past six months. It would be difficult 

to draw many conclusions on the ultimate future of HERO without a true test of 

its capabilities. The current monthly volume of referrals has fallen below 6,000 total 

from all four VISNs. A minimum number of referrals per month should be 10,000– 

12,000 in order to validate the HERO Model. 

We encourage the Committee to recommend VA utilize the services offered in 

Project HERO to the greatest extent practicable to enhance the demonstration 

project and validate the HERO Model. 

In addition to increasing usage of the current HERO contract, we see other potential areas of benefit to Veterans. These include: 

(1) Humana Veterans has established networks in areas VA might consider rural 

or highly rural. Given the emerging demographics as it relates to new Veterans 

from Operations Iraqi and Enduring Freedom, our rural footprint could be advantageous as VA seeks to provide care closer to where the veteran population. 

(2) Women’s health is another example of where we can positively affect the 

emerging requirements of the VA. Women are among the fastest growing segment 

of eligible Veterans and expected to double over the next five years. The VA may 

be at a disadvantage when it comes to building the requisite infrastructure to meet 

the emerging demands and requirements of women depending on the VA for care. 

Humana Veterans, due to our large reach into the provider community, could be an 

effective ‘‘backstop’’ for the VA when they lack the capacity to deliver this care. 

(3) Finally, we have made great progress ensuring Veterans’ clinical information 

is returned in a timely fashion to the VA after a clinical encounter with a HERO 

provider. It would be more effective if we could provide it electronically through 

VistA and have it compatible with CPRS as the VA is at the forefront of enterprisewide electronic health records. We want to partner with the VA to ensure clinical 

information associated with the more than three billion dollars spent in clinical care 

provided outside of VA facilities, is increasingly available to providers inside the VA, 

thus improving the clinical continuum of care for our Veterans. 

CONCLUSION

Mr. Chairman and Ranking Member Burr, I would again like to thank you for 

the opportunity to come before the Committee today to discuss, for the first time, 

the value Project HERO brings to Veterans, and the value Humana Veterans adds 

through the HERO Model. I am confident at this early stage in the demonstration 

contract that Project HERO has delivered, and will continue to deliver, value on its 

three hallmarks: Quality, Access and Cost effectiveness. Our Nation’s heroes deserve quality health care services and that is our ultimate mission at Humana Veterans. 

Thank you, Mr. Chairman. I would be glad to answer any questions from the 

Committee. 

151 

Chairman AKAKA. Thank you very much, Mr. McClain. 

Ms. Marjie Shahani. 

STATEMENT OF MARJIE SHAHANI, CHIEF EXECUTIVE 

OFFICER, QTC MANAGEMENT, INC. 

Ms. SHAHANI. Good morning, Chairman Akaka and Members of 

the Committee. Thank you for the opportunity to testify this morning. QTC provides compensation and pension medical examinations 

and administrative services to VBA in support of ten VA regional 

offices. 


App930McC.eps
152 

Our contract with VBA is to provide medical evidence that is 

used by the VA rating specialists to determine a veteran’s disability rating. 

Our testimony today addresses the Committee’s request to understand how this VA contract ensures both high-quality and costeffective services. 

Our VA contract is a performance-based contract with financial 

incentives and disincentives. The intent of performance-based acquisitions is to encourage contractors and the government to work 

together to achieve the contract objectives and provide the best 

services to our customers, the veterans and servicemembers. 

The VA contract ensures high-quality services through both performance requirements and performance metrics. Performance requirements include: using licensed and credentialed physicians and 

other specialists to conduct medical exams; adherence to over 50 

VA exam protocols which are also used by VA medical center providers who perform C&P exams; and a quality assurance program 

to ensure exam reports comply with VA requirements. 

There was a question about training earlier. Training doctors regarding VA programs, how to conduct a C&P exam and on the differences between disability and treatment protocols are included in 

the requirement. 

Performance metrics in our contract include standards for timeliness, quality, and customer satisfaction that were discussed by Mr. 

Mayes. Timeliness standards provide VBA with timely delivery of 

the exam reports and support efforts to improve average claims 

processing timeliness. 

The timeliness standard is 38 days on average from receipt of 

exam request to report delivery, and it is measured at the VA 

VERIS system. Quality standards ensure examination reports are 

complete and can be used by the VA rating specialist to make a 

sound rating decision. 

The quality standard is a minimum of 92 percent defined as complete adherence to VA exam protocols, and is measured by VA 

through a random sample of reports on a quarterly basis. 

Customer satisfaction standards are used to determine the veteran’s overall satisfaction with QTC service. Satisfaction is measured by a survey of each veteran, as mentioned. Responses are 

tracked by an independent third party. 

There are two metrics. Veterans are to be seen within 30 minutes of their appointment a minimum of 90 percent of the time, 

and veterans must be satisfied with QTC services at least 92 percent of the time. 

I am proud to state that QTC has met or exceeded timeliness and 

quality standards in the last 25 quarters and has achieved 100 percent of customer service standards for the past 6 years. 

There was a question about the cost of contractor services. The 

Committee should be aware that the contracted cost of C&P medical exam services include more than the cost of the exam itself. 

Associated program costs are also included such as scheduling 

the appointment, mileage reimbursement, management of the veteran’s case file, expert quality review, provider credentialing and 

training. 

153 

In addition to ensuring high-quality, the VA contract ensures 

cost-effective services through three mechanisms. One is a competitive contracting process. By following the Federal Acquisition Regulation for full and open competition, VA is able to receive a competitive price. 

Two, paying for services only when they are needed. The volume 

of exams based on our experience in any given week or month, the 

number of claimed conditions for each veteran, and the location of 

veterans including remote and rural areas, all vary dramatically. 

Permanently staffing for these variances at locations would be extremely difficult and costly for any medical entity. 

And three, paying for services when they meet or exceed contract 

standards. Financial penalties are assessed when performance does 

not meet the standards. 

In conclusion, our VBA contract contains stringent performance 

requirements and metrics and is designed to incentivize quality 

and cost-effective services. 

Our contract is successful as a result of our high level of performance and the extraordinary role our VBA customer has displayed 

in achieving the objectives. 

We are dedicated to serving veterans and active duty servicemembers, and we have invested the time and resources to automate the exam protocols and process to positively impact the experience of our veterans. 

We are proud to have played a role in VBA’s mission in providing 

quality and timely C&P services. We have enjoyed our partnership 

with VA as we work collaboratively to serve our Nation’s heroes. 

Thank you again for the opportunity to testify here today, Mr. 

Chairman. 

[The prepared statement of Ms. Shahani follows:] 

PREPARED STATEMENT OF MARJIE SHAHANI, MD, CHIEF EXECUTIVE OFFICER, 

QTC MEDICAL SERVICES, INC. 

Good morning Chairman Akaka, Ranking Member Burr and Members of the Committee. On behalf of QTC Medical Services, Inc. (QTC), I would like to first and foremost thank you for the opportunity to discuss our support of the Department of Veterans’ Affairs (VA’s) Compensation and Pension Service, and how we provide medical examination services to the VA in a cost-effective and high quality manner. We 

have been honored to serve our Nation’s veterans and active duty servicemembers 

since 1998. We consider ourselves a partner of the VA and are committed to providing excellent quality, timeliness and customer service to the VA and to our Nation’s veterans and servicemembers. 

QTC was founded in 1981. Over the past 28 years, we have grown to be a nationwide provider of disability and occupational health evaluation services. QTC has 

long-term contracts with Federal, state and local government agencies and manages 

a nationwide credentialed network of private health care providers. 

QTC provides Compensation and Pension (C&P) medical examinations and administrative services to the Department of Veterans Affairs in support of 10 VA Regional Offices in 9 states consisting of Texas, Oklahoma, Massachusetts, Virginia, 

North Carolina, Georgia, Washington, Utah and California. Our contract is with the 

Veterans Benefit Administration (VBA) to provide the medical evidence used by the 

VA Rating Specialists to determine the disability rating of a veteran. The primary 

contract deliverable is the narrative report and associated results from a medical 

examination performed in accordance with VA requirements. 

Our testimony today addresses the Committee’s request to understand how this 

VA contract for C&P medical examinations ensures both high quality and cost effective services. 

The VA contract is a performance-based contract with financial incentives and 

disincentives. The intent of performance-based acquisitions is to encourage contracVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00157 Fmt 6633 Sfmt 6621 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
154 

tors and the Government to work together to achieve the contract objectives and 

provide the best services to customers—veterans and servicemembers. 

The VA contract ensures high quality services through performance requirements 

and performance metrics. It describes the required results in clear, specific and objective terms with measurable outcomes as well as the method for monitoring performance. The management of contract performance is guided by the contract’s 

terms and conditions and is achieved with the support of the business relationships 

and communications established between QTC and the VBA. 

Performance requirements include: 

• Conducting medical examinations using licensed and credentialed physicians, 

audiologists, psychologists, optometrists and other specialists as applicable. 

• Adherence to over 50 VA Automated Medical Information Exchange (AMIE) 

worksheets which are also used by VA Medical Center (VAMC) medical providers 

performing C&P exams. 

• Quality Assurance program to ensure that exam reports comply with VA requirements for a ratable report. 

• Training program for examiners regarding VA programs, conducting C&P 

exams and differences between disability and treatment protocols. 

Performance metrics include standards for timeliness, quality and customer satisfaction. The contractor must meet or exceed the defined standard for each metric. 

QTC monitors its operational metrics on a daily basis and the VBA formally measures and report results to QTC in Quarterly Performance Reports. 

Timeliness standards provide the VBA with timely delivery of exam reports to 

support their efforts to improve average claims processing timeliness: 

• The standard is 38 days average cycle time from receipt of exam request to submission of final exam report to the VBA. 

• It is measured by quarterly reports from the VA’s Veterans Examination Request Information System (VERIS). 

Quality standards are used to ensure examination reports meet AMIE worksheet 

requirements needed for VA Rating Specialists to complete rating decisions: 

• The standard is a minimum of 92% quality defined as complete adherence to, 

VA’s AMIE worksheets. 

• It is measured by quarterly reviews of a random sample of exam reports performed by the VA Medical Director and VA Central Office rating experts. 

Customer satisfaction standards are used to determine the veteran’s overall satisfaction with QTC’s services to include scheduling, appointment notification and the 

examination itself: 

• Satisfaction is measured by a customer survey provided to each veteran that is 

tracked by an independent third party under contract to the VA. Results are provided to QTC quarterly. 

o Metric 1: Veterans are seen by the examiner within 30 minutes of their appointment. 

• The standard is a minimum of 90% of veterans are seen by the examiner within 30 minutes of their appointment. 

o Metric 2: Satisfaction scores on contractor’s services. 

• The standard is a minimum of 92% of respondents are very satisfied 

or somewhat satisfied responses. 

In addition to the contract requirements and performance metrics, QTC imposes 

its own extensive internal quality assurance processes to every aspect of the contract from scheduling the examination to submission of the complete medical report 

to the VBA. We are focused on consistent achievement of the contract objectives and 

strive for continual improvement. 

Effective contract management by the VBA and QTC, ongoing oversight by the 

VBA and constant dialog and communication assures the focus on results. Formal 

monthly reports and meetings between VBA and QTC are used to track achievement toward the performance metrics and discuss upcoming exam needs to assist 

planning efforts. 

The VA contract ensures cost-effective services through three mechanisms: 

(1) A competitive contracting process, 

(2) Paying for services only when they are needed, and 

(3) Paying for services only when they meet or exceed contract performance 

standards. 

The contract ensures cost effective services by following the Federal Acquisition 

Regulations (FAR) for full-and-open competition requirements. Through a competiVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00158 Fmt 6633 Sfmt 6621 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
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tive contracting process, the VA receives a competitive price for the services it 

requires. 

The Committee should be aware that the contracted cost of C&P medical exam 

services includes more than the cost of the medical examination. Associated medical 

administrative activities are also included, such as scheduling, management of the 

veteran’s case file, expert quality review, provider credentialing and training. The 

contract specifies that contractors are to charge the VA a fixed price per examination to include fully loaded labor costs, fringe benefits, equipment, locality adjustments, necessary reports, overhead, general and administrative and profit. 

Contracting for C&P medical examination services provides an essential service 

as the volume of exams, the number of claimed conditions and specific location of 

the exams varies dramatically. Permanently staffing for these variances at all locations would be extremely difficult, and costly, for any medical entity or program office. The VA contract is a fixed price contract which provides the VBA complete control on ordering examinations as needed with no commitment of volume from the 

government to the contractor. Contracting for these services is a cost effective way 

to ensure the VA only pays for services when and where they are needed. The use 

of volume discounts on our contract also provides a mechanism for the VA to receive 

cost-effective services during periods with high examination requests. 

Additionally, the contract performance requirements and metrics—that we have 

reviewed with you—ensure the VA only pays for high quality services and results. 

Financial penalties are assessed when performance does not meet the defined 

standard. 

The VBA contract is designed to incentivize quality and cost-effective services. 

QTC is proud of the partnership that has been developed with the Department of 

Veterans Affairs while working together in achieving the contract objectives. 

Finally, QTC believes the reasons this contract is successful include our performance over the past decade and dedication to our veterans and the VA’s mission. Of 

equal importance is the twofold effort from VBA—to have effectively executed a performance-based contract with focused performance metrics and clear requirements, 

and the extraordinary role our VBA customer has played in working alongside us, 

providing ongoing communications, collaboration and support. We are partners: both 

working to provide excellent, ratable examinations for veterans filing claims for disability compensation—with quality, timeliness and veteran satisfaction. 

Thank you again for the opportunity to testify today. I look forward to answering 

any questions you may have. 

Chairman AKAKA. Thank you very much, Ms. Shahani. 

Mr. Earnest. 

STATEMENT OF JOHN L. EARNEST, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, AMBULATORY CARE SOLUTIONS 

Mr. EARNEST. Thank you, Mr. Chairman, and I thank the Committee for the opportunity to testify in front of you. 

My name is John L. Earnest. I am the President and Chief Executive Officer of Ambulatory Care Solutions. We are a small business and we are headquartered in Marion, Indiana. 

In 2006 we received a call from the VA Secretary’s office stating 

he wanted to visit one of our clinics in Bloomington, Indiana. We 

thought oh my gosh what did we do now. 

Then 2 weeks ago we received a call from Dr. Andrea Buck stating that she would like for us to testify in front of your Committee, 

and here we go again. 

We have always prided ourselves in flying under the radar 

screen, but it looks like the radar hit us today, so please bear with 

us. 

Our senior management has been involved in physician staffing 

and practice management for over 30 years. When the Veterans 

Health Care Eligibility Reform Act came out in 1996, we looked at 

the Act and we thought there were some things that we could be 

doing in contracting with the VA. 

156 

Our first contact was in South Bend, Indiana, and that was in 

2004. We now have six contracts which include Terre Haute, 

Bloomington, and Goshen, IN, and also St. Clairsville, OH, and 

Jonesboro, AK. We have over 25,000 veterans enrolled in these six 

clinics. 

We are a small business, and as such, we have a management 

philosophy of being hands on. We want to maintain a conservative, 

managed growth strategy. We do not want to be exceeding our 

means when we go to contract with the VA. 

There are two or three items we want to highlight today. One of 

them is the quality of care. First of all, there are multiple levels 

of oversight in terms of a CBOC that includes the parent hospital; 

it includes the Joint Commission; and most recently we were inspected by the Office of Inspector General. 

The key point I want to make here is that as a VA contractor 

we operate in a fish bowl. By operating in a fish bowl, both VA and 

its contractors know that their operations are subject to a transparency that providers in the private sector never have to worry 

about. 

Here is a copy of our Jonesboro contract. In that contract there 

are many performance measures and many reports that we supply 

on a monthly basis to the VA. 

With regard to performance measures, in August 2004 after 

being in practice management for several years, I felt that I knew 

everything that there was to know about practice management. 

Wow, what a surprise. 

What I found by working with the VA is the VA is ahead of the 

private sector in so many ways. This includes the electronic medical records, CPRS system. It includes the number of performance 

measures that we must attain on a monthly and quarterly basis, 

and we are graded on these performance measures. 

All of our contracts have incentives or penalties involved with 

them—performance measures. The interesting thing is our incentive is 3 percent of a monthly bill if we attain a good score. Our 

penalty is 10 percent of a monthly bill if we do not attain a good 

score. Needless to say, we want the incentive and not the penalty. 

In our opinion, the integration of performance measures make 

the quality of care in VA’s primary care operations difficult to 

match in similar operations in the private sector. 

From a contracting standpoint, we learned the hard way. We put 

in multiple bids and then we finally were able to get a contract. 

The single most important thing that the VA can do to promote 

greater interest in its contracting opportunities is to allow more 

time for proposal preparation. 

In summary, we would like to say that the VA engineered a remarkable transformation over the last decade. Many times the VA 

does not tell its story. There is a high-quality of care that extends 

through its contractors. 

Again we want to thank you for this opportunity and we also 

want to thank the Veterans Administration and Northern Indiana 

Health Care System, the Richard A. Roudebush VA Medical Center, the VA Pittsburgh Health Care Center, and the Memphis VA 

Health Care Center. 

157 

It is a privilege and honor to work with these professionals and 

we invite any Members of the Committee to join us at any time in 

any of our clinics. 

Thank you. 

[The prepared statement of Mr. Earnest follows:] 

PREPARED STATEMENT OF JOHN L. EARNEST, PRESIDENT/CEO, 

AMBULATORY CARE SOLUTIONS, LLC 

INTRODUCTION

Good morning. My name is John L. Earnest and I am the President and Chief 

Executive Officer of Ambulatory Care Solutions, LLC (ACS). ACS is a small business headquartered in Marion, Indiana. We currently operate six Community Based 

Outpatient Clinics (CBOCs) under contract to the Department of Veterans Affairs 

(VA). 

We appreciate the invitation to offer comments to the Committee about VA health 

care contracts. While VA contracts for almost every different type of health care 

service imaginable, my comments this morning will be limited primarily to our experience under the VA’s CBOC initiative. 

Senior management of ACS has been involved in the operation of emergency care, 

urgent care and primary care clinics in the private sector for over 30 years. In previous positions prior to ACS, I was responsible for the recruitment and staffing of 

85 hospital emergency department contracts and was involved in the startup of over 

50 walk-in medical facilities east of the Mississippi, including the first urgent care 

center in the state of Indiana in 1980. 

Following enactment of Public Law 104–262, the Veterans Health Care Eligibility 

Reform Act of 1996, the legislation that gave the VA additional contracting flexibility, we began to notice the VA’s expansion into community based primary care. 

My colleagues and I believed that our operational experience was directly relevant 

to the kind of care sought for veterans under CBOC contracts and that we were 

well-positioned to respond to this rapidly growing demand. Ambulatory Care Solutions was established in 2004 specifically to provide primary care for veterans 

through the CBOC initiative. 

ACS was awarded its first CBOC contract in South Bend, Indiana in August 2004. 

Since then we have added contracts in Terre Haute, Indiana in February, 2006; 

Bloomington, Indiana, in March, 2006 and Goshen, Indiana in July, 2008. We were 

awarded our first CBOC contract outside of Indiana in St. Clairsville, Ohio in December 2008, and the contract for Jonesboro, Arkansas in April of this year. At the 

present time, through our six CBOC contracts in three states, we serve over 25,000 

veteran enrollees and provide in excess of 125,000 patient visits annually. 

ACS is a small business whose management philosophy is characterized by a 

‘‘hands-on’’ approach. We emphasize on-site presence by senior management 

throughout the life of our CBOC contracts. We maintain a conservative managedgrowth strategy that ensures we devote the time necessary to bring each new CBOC 

contract online smoothly. While ACS now looks carefully at most CBOC opportunities that come up, we have historically declined to pursue any new opportunity until 

we are confident that our existing contracts are running smoothly. We have actually 

withdrawn one of our bids after submission, as a result of simultaneous, but unanticipated changes in multiple procurement schedules, rather than proceed with a 

project where changes threatened our ability to deliver as promised. While this was 

a difficult management decision, it was one that we felt was ultimately in the best 

interests of veterans, the VA and ACS. 

Although ACS is not veteran owned, we place a priority on recruiting and hiring 

vets at both the corporate level and each of our delivery sites. For example, ACS’ 

Chief Financial Officer, Jerry Jones, is an Army veteran. 

There are several key points I wish to emphasize in my testimony today about 

VA contracts for health services. They are as follows: 

• To Contract or Not Contract? That is the Question... Under the right circumstances, contracting for a CBOC may be the best solution for veterans and the 

VA in a given market area. 

• The Procurement Process is a Barrier to Entry—The procurement process is 

complex and serves as a significant barrier to entry for many qualified firms. 

• Contract Operations—While we find the requirements of VA CBOC contracts to 

be very demanding, we believe that they ultimately serve to significantly enhance 

overall performance and quality of care. 

158 

• Contract Oversight—The potential for public oversight of most VA contracts is 

significant. In many respects, the degree of transparency now available to the public 

for CBOCs operated both by VA and by contract is unmatched in the private sector. • Future Considerations—Improved access to veterans in rural and more remote 

areas through partnerships or relationships with local providers may call for the VA 

to relax some of the demanding contractual requirements that have been largely responsible for the agency’s successful transformation over the last decade. 

TO CONTRACT OR NOT TO CONTRACT? THAT IS THE QUESTION

One of the age old questions in every Federal agency responsible for providing 

some type of service is the perennial ‘‘make or buy’’ dilemma. This remains a complex question for the VA in particular, as the longstanding tradition of having medical care for veterans provided primarily by VA employees in VA facilities has been 

put to a challenge by economic rules that guide such decisions. 

It was a much easier decision to make in the ‘‘old days’’... when most health 

care for veterans was provided in inpatient settings. But as the demand for care 

shifted to outpatient settings, the economics changed as well. While we readily acknowledge and respect the preference on the part of many veterans and veterans’ 

organizations for the privilege of being treated by VA staff in VA facilities, we know 

of no formula that incorporates the powerful emotional attachment to ‘‘our facilities’’ 

and ‘‘our staff’’ into the ‘‘make or buy’’ decision model. In general, we think that 

most constituencies, including veterans, Veterans Services Organizations, as well as 

Congress, ultimately recognize the need for, and benefits of contracting to supplement the VA’s system of care in appropriate circumstances, but there remain pockets of strong opposition based on principle . . . if not economics. 

It is much too easy to suggest that only VA itself can provide the quality of care 

and respect that veterans deserve, or, that, conversely, no contractor is capable of 

demonstrating the same degree of respect, concern or quality as veterans receive in 

VA facilities. 

We think the most appropriate response to the ‘‘make or buy’’ question is what’s 

best for the local veteran population in question on a case-by-case basis. So while 

the decision to have the VA staff and operate a CBOC in one location may be the 

right decision, the best solution in another location may indeed be a contractor-operated CBOC. Neither the VA nor its contractors have a perpetual ‘‘lock’’ on delivering 

high quality care. Issues can, and do arise from time to time, regardless of the 

source of care or location; the most important consideration is to put in place the 

management controls to continuously review and monitor performance so that it remains at or above target levels. VA does this for its own services, and those protocols extend to their contracted services as well. 

VA utilizes a comprehensive evaluation process to make such make-or-buy decisions, as described in VHA Handbook 1001.6, Planning and Activating Community 

Based Outpatient Clinics. ACS carefully evaluates those opportunities where VA 

has decided that the best alternative is to acquire the services via contract. 

THE PROCUREMENT PROCESS IS A BARRIER TO MARKET ENTRY

The Federal contracting and procurement process is a tremendously complex, 

highly bureaucratic, intimidating process that is always changing... and not for 

the feint-of-heart. That is a lesson we learned the ‘‘old fashioned’’ way. ACS submitted multiple bids over several years before we successfully entered this market. 

We have become more adept at the process since then. It wasn’t easy then... and 

it remains a challenge to this day. 

As an example, the last Request for Proposal (RFP) we bid on for a CBOC was 

170 pages long, not including the hundreds of pages of internal VA documents cited 

in the RFP itself, or most of the Federal Acquisition Regulation (FAR) or VA Acquisition Regulation (VAAR) clauses cited ‘‘by reference’’. The latest printed version of 

the FAR is 1,969 pages and the VAAR, a ‘‘quick read’’ by comparison, turns in at 

a mere 370 pages. To its credit, part 873 of VA’s own regulations provide ‘‘Simplified 

Acquisition Procedures for Health care Resources’’, although they are to be used ‘‘in 

conjunction with’’ the FAR and VAAR. When the level of complexity is combined 

with the limited time available to prepare bids, many otherwise well-qualified providers make a rational decision... they simply walk away. 

Over time, like IRS regulations, Federal Acquisition Regulations have grown not 

only in volume, but in complexity. Figuring out how to ‘‘muddle though’’ the procurement process is a necessary hurdle to overcome for any contractor and invariably a nightmare for the uninitiated. 

Most experienced Federal contractors eventually learn how to manage the procurement process. But for the health care organization that doesn’t routinely pursue 

159 

Federal contracts, the procurement process is a daunting and intimidating hurdle. 

The reality is that the acquisition process is a very real barrier to market entry for 

many of the kinds of health care providers VA would like to encourage to bid on 

its contracts. The single most important step VA can take to promote greater interest and participation in its health contracting opportunities is to allow more time 

for proposal preparation. The three to four-week window typically available for proposal preparation is simply insufficient for most organizations unfamiliar with the 

process, and often a struggle for those with experience. 

CONTRACT OPERATIONS

VA’s CBOC contracts include numerous requirements to help ensure that the contractor meets target performance levels for key measures. As a contractor, while we 

‘‘moan and grown’’ about such requirements, we readily acknowledge they have ultimately raised our level of performance and enhance our ability to offer high quality 

service. 

One of the characteristics generally associated with the overall improvements in 

quality and outcomes in the VA since the early 1990s is the almost obsessive-like 

focus on the achievement of target performance measures. Part of the transformation of the VA from a system of last resort to a provider of choice has been 

the successful cultural transformation to an organization that established target 

performance measures and then aggressively and consistently monitored performance at local, VISN-wide and national levels. Another key element of the VA’s success is the development, application and deployment of the Veterans Information 

System Technology Architecture (VISTA), it’s version of the electronic medical 

record. In our opinion, the emphasis on performance measures and the deployment 

of an electronic medical record systemwide, are probably the two most significant 

characteristics that account for the VA’s ability to achieve the remarkable turnaround that it has over the last decade. 

These practices are inextricably woven into all aspects of VA care, including contractor-operated CBOCs. For example, in most CBOC contracts, there are many key 

performance measures (e.g., performing specific preventative tests; access requirements; requirements for accuracy and completion of data entry into the medical 

record; patient satisfaction; credentialing documentation, etc.) that are routinely 

compared to target goals. These are aggressively monitored and carefully watched 

and require prompt corrective action if not achieved. Performance measures are calculated for each facility, compared within each VISN, across all VISNs, and 

nationally. 

Having been involved with, and managing primary care operations in the private 

sector for over 30 years, I can unequivocally confirm the positive impact of the VA’s 

emphasis on performance measures in the primary care setting. In our opinion, the 

integration of and reliance on performance measures make the quality of care in 

VA’s primary care operations difficult to match in similar operations in the private 

sector. 

With respect to contracted CBOCs, certain performance measures are actually 

greater than those for VA staffed and managed primary care operations. As an example, one key aspect of contracted CBOCs is VA’s practice of linking financial incentives to the achievement of target performance measures. Most of our contracts 

include nominal bonuses if we significantly exceed certain performance measures, 

or penalties if we fail to meet minimum performance measures. 

CONTRACT OVERSIGHT

The level of agency oversight embedded into most VA health care contracts is distinguishing characteristic of VA health care contracting. 

For example, the parent hospital associated with a CBOC performs semi-annual 

safety inspections on the CBOC as well. In addition, when the parent hospital is 

surveyed by The Joint Commission, the accreditation survey also extends to the 

CBOC. 

One of the ironic elements of VA health care, however, is that the level of transparency that allows the public to see some of the agency’s operational deficiencies 

and weaknesses, is, in fact, one of the system’s major strengths. While some of the 

same elements of transparency exist in the private health sector, the nature and 

depth of information that is publicly available about VA operations, whether it be 

through routine reports and incident-specific investigations by the Government Accountability Office (GAO) or the VA Office of the Inspector General (OIG), is unmatched in the private sector. 

For example, the VA OIG has, for years, conducted regular, periodic reviews of 

the VA’s health care operations through its Comprehensive Assessment Program 

160 

1 H. Rpt. 110–775, to accompany H.R. 6599, Military Construction, Veterans Affairs and Related Agencies Appropriation Bill, Fiscal Year 2009. 2 ‘‘Informational Report, Community Based Outpatient Clinic Cyclical Reports’’, Department 

of Veterans Affairs Office of Inspector General; Report No. 08–00623–169; July 16, 2009. 3 As an example, a contractor awarded a contract for a new CBOC typically has anywhere 

from 60–90 days to begin operations after award. During that time, the contractor must typically finalize negotiation of leases, renovate or buildout anywhere from 3,000–10,000 square feet 

of clinical space, recruit, hire and credential as many as 25 clinical and administrative staff, 

undergo comprehensive background checks, conduct exhaustive training and certification on 

VISTA and related IT security provisions, and pass multiple state, local and VA facility inspections. In general, completion of these startup tasks is a requirement of every CBOC contract. 

To the best of our knowledge, VA would have a very difficult time meeting the same kind of 

CBOC startup requirements as it imposes upon contractors. 

(CAP) reports. These reports are similar to an internal audit of program operations 

and identify both strengths and weakness. They are scheduled so that every VAMC 

is reviewed every couple years. Until recently, CAP reports included evaluation of 

selected aspects of both VA and contract CBOCs under the jurisdiction of a particular VAMC. 

In response to legislative language from last year VA,1 the OIG began a new series of inspections specifically for CBOCs to provide a systematic examination of 

these clinics on a routine, periodic basis, much in the same way as medical centers 

are reviewed under the CAP.2 Two of ACS’ clinics in Indiana were among the first 

CBOCs in the country subject to this new type of inspection by the OIG. The OIG 

made eight recommendations about our clinics in particular, some of which involved 

elements of operations that we, as the contractor are responsible for, while other 

recommendations were for VA management. The recommendations have since been 

adopted and the issues resolved. 

The key point here is that as a VA CBOC contractor, we ultimately operate in 

a fishbowl unlike comparable operations in the private sector. Once completed, the 

OIG reports are available on the VA’s web site and to the public at large through 

the internet. We note that the same degree of scrutiny exists for any element of VA 

operations subject to review by the OIG. Both VA and its contractors know that 

their operations are subject to a degree of transparency that most providers in the 

private sector simply never have to worry about. While most large health care systems in the private sector conduct routine internal audits similar to those performed 

by the VA, for the most part they remain ‘‘internal’’ upon completion, and any results or findings, unsubstantiated or not, remain hidden from public view. By contrast, the VA’s version of internal audits are routinely made public. I might add that 

the OIG inspection of our clinics recently were the most thorough of any we have 

experienced. While the prospect of undergoing any type of operational audit or inspection by an unrelated party can be intimidating, the prospect of going through 

that and having the results available for the world to see cannot help but instill 

a greater sense of discipline that helps ensure the achievement of target performance measures. 

We believe that the transparency of program operations through these various 

levels of oversight, not only of our contract operations, but indeed, of all aspects of 

VA health care, is a tremendous strength of the VA health care system as it forces 

a higher level of accountability that ultimately, is in the VA and veterans’ best 

interests. 

FUTURE CONSIDERATIONS

As the VA looks to reach more veterans in rural and remote locations, we see increasing challenges from a health care contracting standpoint. Much of the success 

that the VA has enjoyed over the last decade is attributable to its focus on performance measures and the use of VISTA, its electronic medical record system. Many 

of the demanding requirements that apply to VA facilities and for VA staff are extended to its contractors. In our experience, contractors are sometimes held to higher standards than VA facilities and staff.3 As VA moves into rural and more remote 

communities with the hope of negotiating various kinds of contracts and partnerships, the burdens of the procurement process and demanding contract requirements will become potentially significant deterrents to establishing the kind of business relationships sought. VA may be forced to relax many of its existing requirements in order to recruit the number and mix of providers that it seeks in certain 

locations. To the extent that VA hopes to address the needs of rural veterans by 

different kinds of contracts with local providers, it will have to rethink some of its 

contracting approaches to meet them halfway. 

161 

SUMMARY

The VA has engineered a remarkable transformation over the last decade to become a national model of high quality care through its emphasis on performance 

measures and the use of an electronic medical record. Those practices extend to 

most of its contractors and force them to operate with the same set of performance 

and quality expectations. Contracts, when justified through a make-or-buy analysis, 

represent a legitimate approach to provide care when and where such services are 

not available in a VA facility by VA employees. While the system is now considered 

among the nations’ best, reports of clinical problems or quality issues nevertheless 

continue to be uncovered as others are resolved. That deficiencies remain as visible 

and transparent as they do is, in fact, a major strength of the system, one that leads 

to quicker resolution and a level of accountability that is not seen in the private 

sector. The demanding practices that have improved performance and outcomes 

within VA over time, however, will be burdensome for rural and remote providers 

and may require a rethinking of VA’s contracting strategies. 

Thank you again for the opportunity to share our thoughts about VA contracts 

for health care. We want to acknowledge the extraordinary level of support we receive from the VA staff and management at the parent facilities of our CBOCs: the 

VA Northern Indiana Health Care System in Marion, Indiana; the Richard A. 

Roudebush VA Medical Center in Indianapolis; the VA Pittsburgh Health Care System, and Memphis VA Health Care System. It is a privilege to work with these professionals and an honor to serve the veteran population. I would be pleased to answer any questions. 

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ATTACHMENT: COMPANY BRIEFING, AMBULATORY CARE SOLUTIONS, LLC 


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Chairman AKAKA. Thank you very much, Mr. Earnest. 

Mr. McClain, how do you respond to Ms. Curtis’s comments 

about the problems that Project HERO has creating a large enough 

network in rural areas? 

Mr. MCCLAIN. Mr. Chairman, I will be glad to comment on that. 

Obviously Ms. Curtis has a tremendous amount of experience in 

the VA and in Boise, which is a very rural area. Many of her comments, I think, were directed at the fact that some of this care 

must be sent outside the VA, and most of it should be kept inside 

VA. 

That certainly is an issue that this Committee has addressed and 

other committees have addressed and VA talks about considerably 

inside; and I know that funding has been provided over the years 

to do just that—to do more treatment inside. 


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So, we are simply talking about care that for whatever reason 

VA has decided to send outside its walls that they cannot handle 

either because of access issues or because the specialty does not 

exist inside the VA walls. 

From what I have learned of the start of Project HERO and 

Humana Veterans there were issues with the network, and indeed, 

issues in rural areas. In fact, we have pretty much the same issues 

anyone else does. 

I believe that Senator Tester stated that in one large geographic 

region there was one provider in his area. 

Well, Humana runs into the same problem. If the providers are 

not there, we certainly cannot contract with them. But we have increased our network now in the four VISNs to where we have over 

27,000 providers in our network. 

There are patches and holes in that, which we are trying to fill 

right now. But for the most part we believe that we provide a very 

good experience for the veteran who is referred to outside care by 

VA in a rural setting. 

Chairman AKAKA. Ms. Curtis, do you have any further comments 

on that? 

Ms. CURTIS. Yes. I am one of those mental health providers that 

Senator Tester spoke about. Again I mentioned that I live only five 

miles away from the VA, and Project HERO attempted to obtain 

my services for the project. 

I felt that, first off, it would be a conflict of interest obviously for 

me, and second off, I felt that they would be much much better 

served within the VA to eliminate fragmentation of treatment that 

might occur with outside providers. 

Speaking of the highly rural areas, our Vet Center just recently 

initiated a mobile vet clinic for those mental health needs of veterans throughout our extensive rural network. 

We also have several CBOCs and our mental health providers 

will actually go to those CBOCs to provide the health care. We also 

have mental health tele-health so that they can provide the treatment such as in Salmon. Actually we have a CBOC in Salmon, 

which is like 4 hours away from Boise. We have the mental health 

treatment capabilities within the VA practically with the mobile 

clinics and the tele-help. 

Chairman AKAKA. This question is for Mr. Earnest and Mr. 

McClain. Has the VA asked your organizations to verify that you 

are complying with VA quality and performance measures? Will 

you please describe the level of VA’s oversight? 

Mr. Earnest. 

Mr. EARNEST. Thank you, Mr. Chairman. 

With regard to the VA oversight in the contracts that we presently have, we work very closely with the local hospital. In terms 

of performance measures, we even go to the point where we are 

proactive. 

We pull identified performance measures every other week to see 

how we are scoring and if we are having any problems with those 

performance measures. Then, in addition, we work closely with the 

parent hospitals to make sure that those performance measures are 

met. 

175 

We have biweekly meetings in-house and we have monthly meetings with each one of the hospitals that we serve. 

Chairman AKAKA. Mr. McClain. 

Mr. MCCLAIN. Thank you, Mr. Chairman. 

In Project HERO there are quite a few contract requirements 

and metrics that Humana Veterans must meet. One of them is the 

fact that our providers, the medical care providers, are all 

credentialed. That may or may not be the case in the normal feebased referral out in the community. But in our case we go through 

an extensive credentialing process. 

As far as VA oversight is concerned, VA actually comes out and 

audits our credential files on a regular basis. In fact, they were just 

at our office about 3 weeks ago to conduct their audit and found 

no deficiencies in our credentialing system. 

Also we have a very active quality management oversight committee that includes VA representation. So, whenever there is a potential quality indicator—in other words some issue that arises, 

and this includes a peer review type of process—it will actually go 

to these committees for resolution. If any remedial action is required, we, in conjunction with our VA partner, would recommend 

that remedial action. 

Chairman AKAKA. This question is for all of the panelists. From 

your perspectives, how can VA improve its contracting process? 

Project HERO had a difficult time getting off the ground so let us 

hear from Mr. McClain first. 

Mr. MCCLAIN. Mr. Chairman, yes, it did have a difficult time. I 

think part of it was the short ramp-up time that we had. The contract was actually awarded, I believe, in early October 2007 and 

went online January 2, 2008. So, that is a little less than a 3- 

month period. 

In order to implement in such a large geographic area with so 

many providers needed, that was probably too short of a time and 

therefore the network was lacking initially. 

As I said, that has been corrected. But, I think that more collaboration with the contractor to determine exactly what an adequate 

ramp-up time should be, so that when you go live everything is 

lined-up for the veteran and the veteran is the one who gets the 

benefit of the contracted services. 

Chairman AKAKA. Ms. Curtis. 

Ms. CURTIS. The VA could best improve contract services by 

going back to Congress’s intent, only for emergent services that VA 

is unable to provide. 

If the VA were given the staffing that we need or the space— 

which sometimes that is the issue—then we would not be required 

to buy down the wait list. And that is basically what has happened 

at Boise. We wanted to get our colonoscopy wait list reduced. Instead of building another suite for colonoscopies, we bought it down 

through contract services. That is really unnecessary. 

Chairman AKAKA. Ms. Shahani. 

Ms. SHAHANI. As I mentioned, our VA contract is performancebased and monitoring of quality, timeliness, and customer service 

has been very good. 

There was a question about the IG report and the IG audit. I 

think it is very good that VA finally put a billing audit in place. 

176 

It was conducted first in 2005, and currently we are undergoing another audit based on an independent third party contracted by the 

VA. 

The initial issue with the IG report, if I may, Mr. Chairman, was 

a difference in contract language interpretation. Once VA brought 

this to our attention, what we did was we really sat down with VA 

and the contracting office—both the program office and contracting 

office. We went through the issues and we both resolved them mutually. Once everybody was on the same page—because there is an 

inherent difference between using Medicare for treatment guidelines versus a disability program—so, once we were able to resolve 

those issues and define the differences, QTC offered a payment to 

VA to reimburse them. This was even before the IG got involved. 

Since then QTC has reimbursed the monies, and basically we 

have ongoing quality process improvement based on our billing and 

audit standards. So, I am glad to hear Mr. Mayes say that they are 

going to do it twice a year now. 

The other thing that I would recommend is to involve the contractor every time they update the VA examination protocols. Our 

physicians and experts basically conduct the C&P examinations on 

a regular basis. They have developed expertise, and I know there 

is a partnership between VBA and VHA in updating these protocols. But we too would like to play a role in it because we have a 

lot of lessons learned that we would like to share with them. 

Thank you, Mr. Chairman. 

Chairman AKAKA. Thank you. 

Mr. Earnest, please. 

Mr. EARNEST. Thank you, Mr. Chairman. 

One of the points that we heard when we first started contracting with the VA was the slogan, ‘‘One VA.’’ We have six different contracts. We have four different hospitals, and those four 

different hospitals interpret those contracts in different ways. 

So, the point I am making here is that we need to learn to be 

consistent. 

I also echo what was mentioned earlier. There needs to be 

stronger communication between the VA and its contractors. 

Whether we are talking about changes in the way that physical examinations are made or the ways that the contract is being interpreted, those are things that we feel just need to be happening. 

The last point I will make is that we are facing these four regional offices for contracting. 

I believe just the opposite works. Local communication makes a 

big difference. If I know that I can meet with my contracting officer—whether I drive to Indianapolis or I drive to Fort Wayne—it 

is a lot easier than having to worry about meeting with my contractor in Washington, DC, or wherever those four offices are. 

It is potentially a much closer relationship with the people that 

you do business with on a daily basis. 

Chairman AKAKA. Thank you. 

This question is for Ms. Curtis. In your written testimony you 

point out that OMB has directed Federal agencies to reduce their 

reliance on contractors. Are you aware of any instances in which 

VA has failed to fill vacancies, laid off workers, or otherwise reduce 

staff in favor of contracting out services? 

177 

Ms. CURTIS. I am not aware of any reduction of staff at my facility based on contracting out, but it appears that there is a perception that contracting out may be quicker and easier than actually 

putting the staff in place at our facility. 

However, the contracting out, as far as I am concerned, is just 

a stopgap method to take care of this wait list that we talked 

about. The much better way to treat our veterans in a facility that 

truly understands their unique needs is by hiring the staff, providing education that they require—the credentialing, the privileging—all as if we were one VA I guess you would say. 

Thank you. 

Chairman AKAKA. Ms. Curtis, are the problems with the Project 

HERO you describe in your testimony limited only to Boise, Idaho? 

Ms. CURTIS. No, they are not. This is happening throughout the 

Nation and particularly in the rural treatment areas. 

Chairman AKAKA. As a follow-up, was the system for providing 

care outside VA better before Project HERO? 

Ms. CURTIS. I feel it was. We have personal relationships with 

our contractors. Personal relationships really go a long way in helping the veteran feel at ease when he is receiving treatment there. 

I believe it also helped us keep their medical record from being 

as fragmented. We would quite quickly get the results of any procedures that were done and scan it into our medical records so when 

the veteran came back to their primary care provider, they had the 

complete information. 

I worry with that second layer between the provider and the VA 

with the records going through Humana that something might get 

dropped. It would be much easier for that to happen and then the 

veteran’s care would definitely suffer. 

Thank you. 

Chairman AKAKA. Thank you very much for appearing here 

today. 

Contracts for services will almost certainly be part of VA’s efforts 

to provide care to veterans. But the VA is obligated to ensure that 

the Nation’s veterans receive the best health care services in any 

setting regardless of whether such services are provided at a hospital, a contract clinic, or during a compensation and pension exam. 

VA must also be a good steward of the taxpayers dollars and obtain 

these services at a reasonable cost. 

We wanted this hearing to try to flush out what needed to be 

done to improve the whole program. So, my final question to all 

four of you—and you may or may not wish to comment—is do you 

have any recommendations or even suggestions to make about this 

process to us, that is Congress, as well as the VA? 

Ms. CURTIS. Mr. Chairman, obviously my suggestion would be to 

bring the treatment back to the VA in-house. 

Chairman AKAKA. Thank you. 

Mr. McClain. 

Mr. MCCLAIN. Mr. Chairman, I do have some suggestions I 

would like to, if I could provide those after the hearing. 

Chairman AKAKA. We would appreciate that, yes. 

[The additional information requested during the hearing follows:] 

178 

HUMANA VETERANS HEALTH CARE SERVICES, INC., 

October 7, 2009. 

Hon. DANIEL K. AKAKA, 

Chairman, 

Committee on Veterans’ Affairs, 

U.S. Senate, Washington, DC. 

HVHS #09–0051 

DEAR MR. CHAIRMAN: This letter is a follow-up to the hearing on September 30, 

2009, entitled ‘‘VA’s Contracts for Health Services,’’ and is in response to your solicitation of recommendations from the second panel to improve outcomes in contracted 

health care and to fully realize the benefits and efficiencies of Project HERO. We 

appreciate the opportunity to provide this input. I want to emphasize at this point 

that Humana Veterans and the VHA Program Management Office (PMO) for Project 

HERO have an excellent working relationship. The following recommendations are 

put forth to enhance Project HERO and are submitted for your consideration in legislating for a 21st Century Project HERO. 

1. Approach Project HERO as a true demonstration project. Demonstration 

projects take on many forms, but most have the common attribute of implementing 

a procedure or set of procedures, an evaluation of the processes with sufficient workload to emulate real world conditions, and ultimately, the implementation of identified improvements. Then the process is replicated, using the newly-identified best 

practices while continually improving the model. 

We believe Congress desired such a demonstration process with the ultimate goal 

of improved service to veterans who are referred to community providers for evaluation or care. VA has implemented the Congressional directive by awarding a single 

contract for all four VISNs and simply administering the contract. There is currently no provision or contractual mechanism that allows for a mandatory workload 

adjustment after either (1) a specific period of performance; or (2) the effective implementation of improved processes. In other words, VA is not required to improve 

their larger, institutional processes as lessons are learned during the demonstration. 

Further, they are required only to send a minimal workload to the demonstration, 

thereby defeating the true purpose of a demonstration project, (i.e., testing new and 

innovative management initiatives and implementing best practices and lessons 

learned). There is still plenty of time, under HERO, to conduct a true demonstration 

project within the existing contract. Three years remain on the five-year demonstration and a world class fee-based process can be realized if VA is willing to commit 

to realistic workloads and process adjustments to test proposed process improvements. 

It is difficult to run a demonstration project when there is a competing process 

in the same fee office. We suggest that Project HERO become a first and preferred 

option in at least one VISN, perhaps VISN 8 or 16. Project HERO currently runs 

alongside VA’s normal fee-based processes. The only manner to truly test the demonstration concept is to make referral to Project HERO the first or preferred option 

in a busy VISN fee office. 

2. Access to VHA’s CPRS. Currently, Humana Veterans as the project HERO contractor does not have access to VHA’s Computerized Patient Record System (CPRS). 

The written consult reports from the outside medical specialists are transmitted via 

secure email or faxed to VHA and either manually downloaded or scanned into 

CPRS. While this represents significant progress beyond VA’s current fee based efforts, this imperfect process can result in delay or lost records and remains subject 

to human error. VHA should be directed to provide direct access to CPRS for the 

Project HERO contractor. This will result in increased efficiencies, reduce the time 

for the written consult to be returned to the primary VA provider, and reduce delay 

in providing vital diagnostic and expert opinions to the veteran’s VA primary provider. With direct access to CPRS, the contractor can enter an electronic or scanned 

consult into CPRS and send it directly to the VA primary care provider. It will also 

reduce the time it takes to provide a veteran’s medical records required for the outside consult. 

3. VA would benefit from standardized processes, procedures and forms. The existing fee-based process in VA is completely decentralized. Standard forms exist, but 

many are locally modified. Further, there is no standard language for authorizations 

for care outside VA. The phrase ‘‘Evaluate and treat’’ means different things in different fee offices. Standard electronic forms and language would greatly enhance 

VA’s legacy, fee-based system. 

179 

4. VA should track metrics in their legacy Fee-based process. One of the most significant lessons learned from Project HERO to date is the importance of metrics in 

the delivery of quality healthcare both inside and outside of VA. The Project HERO 

contractor has developed a data repository called the Data Mart to assist in tracking 

the metrics required for quality healthcare and facilitating analysis of that data. 

These metrics include: 

a. Length of time until appointment is scheduled. 

b. Length of time from receipt of an authorization for care until the veteran 

is seen by the network provider. 

c. Length of time until the network provider’s written consult report is returned to VA. 

Implementing similar metrics would greatly enhance fee-based care in VHA. 

5. The HERO Model of personalized services for veterans should be implemented 

at each VHA Fee office. The HERO Model as developed by Humana Veterans in 

partnership with VA includes the following services to veteran patients: 

a. First, the veteran receives authorization for care from the VA. Before 

issuing an authorization, the VA determines if the specialty or other care is 

available at a VA facility, if the veteran lives a significant distance from that 

facility, or makes a determination based on other medical reasons. The VA then 

determines whether to send the authorization directly to the veteran, send it 

to the Project HERO office at Humana Veterans, or refer the veteran directly 

to a community provider. 

b. When an authorization is sent to Project HERO, the veteran receives personal assistance and specialized services. Initial contact with the veteran is 

made by a Customer Care Representative (CCR) from Humana Veterans. This 

appointment specialist provides an explanation of the HERO process and determines when the veteran is available for the medical appointment. In terms of 

making the encounter more veteran friendly, we developed our personalized 

services approach for three reasons: (a) to ensure the veteran is comfortable 

with what the medical appointment will entail; (b) the veteran understands 

where the civilian provider is located; and, (c) ensure maximum reliability in 

terms of the appointment date established between the veteran and HERO contract provider. 

c. The CCR then conducts a three-way conference call with the veteran and 

a Humana Veterans network provider’s office. This call occurs within five days 

of receiving the authorization form from the VA. As part of the Humana Veterans network agreement, network providers must schedule appointments within 30 days of the conference call. In any event, the veteran must agree to the 

scheduled date. 

d. The veteran receives a letter confirming the provider’s name, address, telephone number, date and time of appointment, including how to obtain directions to the provider’s office and Humana Veterans customer service number 

should questions or problems arise. The referring VA facility is also informed 

of the appointment details. 

e. The veteran goes to the scheduled appointment. An agreement with our 

network providers limits the veteran’s wait time to no longer than 20 minutes 

when they are in the office for their scheduled appointment. If a copy of the 

veteran’s medical records is required, we contact the VA to inform them of the 

provider’s request. 

f. After the appointment, we actively track the provider’s written consult report and ensure it is returned to the VA for inclusion in the veteran’s electronic 

health record. The average time for a consult report to be returned to VA is 15 

days. 

g. If the provider recommends the veteran have additional tests, procedures 

or services, Humana Veterans communicates the recommendation to the VA for 

review and action. When providers submit their claims to us, we pay the provider directly within 30 days of receipt of the claim. We then submit the claim 

for services under the contract and VA pays Humana Veterans. 

h. Finally, we are committed to a seamless ‘‘hand-off’’ of the veteran back into 

the VA system and their primary care providers. This personalized approach is 

beneficial to the veteran. The return of clinical information in a timely manner 

ensures quality and continuity of care. 

Humana Veterans stands ready to assist the Committee and VA in every way possible to ensure enhanced quality and personalized healthcare services to our NaVerDate Nov 24 2008 14:31 Jun 09, 2010 Jkt 000000 PO 00000 Frm 00183 Fmt 6633 Sfmt 6621 H:\ACTIVE\093009.TXT SVETS PsN: PAULIN
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tion’s heroes. Please do not hesitate to contact me directly at 502–301–6984 or 

tmcclain2@Humana.com if there are any questions. 

Sincerely, 

TIM S. MCCLAIN, 

President & CEO. 

Chairman AKAKA. Ms. Shahani. 

Ms. SHAHANI. Mr. Chairman, I would recommend that there is 

a role for contractors. I believe there is a role for contractors and 

there is also a role for the VHA. There are a lot of veterans and 

active duty servicemembers who need to be serviced in remote 

areas and in areas where VHA is unable to staff and provide the 

services for our veterans and active-duty servicemembers, especially for compensation and pension services. I suggest that the 

Committee maybe invite us so that we can share with you what we 

have done to actually bring the physician to the active duty servicemember and to the veteran, and how we’ve improved access, thereby improving services to them. 

So, we are here if you need us to elaborate on things and discuss 

things better. We would like to share with you. And at the end of 

the day, I believe we are all here to service our veterans and active-duty servicemembers. 

So, anything we can do please let us know. 

Chairman AKAKA. Mr. Earnest. 

Mr. EARNEST. Thank you again, Mr. Chairman. 

The two points I would make is, number 1, management. We feel 

it is very strong within our organization, that is, management. 

There is management at all levels and there should be management of the contractor by the VA. 

We welcome that management. In terms of an OIG inspection, 

we cannot correct it if we do not know about it. We want to know 

those things so that we can be an even better contractor for the 

VA. 

The second point I would make is communication. We said that 

two or three times already this morning. It is important that the 

two entities—whether it is the VA or the contractor or the employees group—communicate with one another so that we all know 

what the agenda is and we can all better serve our veterans. 

Chairman AKAKA. Thank you very much. You are right that all 

of us here are trying to do the best we can to provide for our veterans. That is the bottom line. So, I thank you so much for what 

you are doing and look forward to continuing to work with you. 

This hearing is adjourned. 

[Whereupon, at 11:36 a.m., the Committee was adjourned.] 

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