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[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

                 POTENTIAL BUDGETARY SAVINGS WITHIN VA:
          RECOMMENDATIONS FROM VETERANS' SERVICE ORGANIZATIONS

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

                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 15, 2011

                               __________

                           Serial No. 112-34

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

CLIFF STEARNS, Florida               BOB FILNER, California, Ranking
DOUG LAMBORN, Colorado               CORRINE BROWN, Florida
GUS M. BILIRAKIS, Florida            SILVESTRE REYES, Texas
DAVID P. ROE, Tennessee              MICHAEL H. MICHAUD, Maine
MARLIN A. STUTZMAN, Indiana          LINDA T. SANCHEZ, California
BILL FLORES, Texas                   BRUCE L. BRALEY, Iowa
BILL JOHNSON, Ohio                   JERRY McNERNEY, California
JEFF DENHAM, California              JOE DONNELLY, Indiana
JON RUNYAN, New Jersey               TIMOTHY J. WALZ, Minnesota
DAN BENISHEK, Michigan               JOHN BARROW, Georgia
ANN MARIE BUERKLE, New York          RUSS CARNAHAN, Missouri
TIM HUELSKAMP, Kansas
MARK E. AMODEI, Nevada
ROBERT L. TURNER, New York

            Helen W. Tolar, Staff Director and Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________

                           November 15, 2011

                                                                   Page
Potential Budgetary Savings Within VA: Recommendations from 
  Veterans' Service Organizations................................     1

                           OPENING STATEMENTS

Chairman Jeff Miller.............................................     1
    Prepared statement of Chairman Miller........................    36
Hon. Michael H. Michaud, Democratic Member.......................     2
Hon. Corrine Brown, Acting Ranking Democratic Member.............     9
    Prepared statement of Congresswoman Brown....................    37

                               WITNESSES

Joseph A. Violante, National Legislative Director, Disabled 
  American Veterans..............................................     4
    Prepared statement of Mr. Violante...........................    37
Carl Blake, National Legislative Director, Paralyzed Veterans of 
  America........................................................     5
    Prepared statement of Mr. Blake..............................    41

Accompanied By:

Ian de Planque, Deputy Director, National Legislative Commission, 
  The American Legion............................................     4
Raymond C. Kelley, Director, National Legislative Service, 
  Veterans of Foreign Wars of the United States..................     4
Diane M. Zumatto, National Legislative Director, American 
  Veterans (AMVETS)..............................................     4
Todd Grams, Executive in Charge for the Office of Management and 
  Chief Financial Officer, U.S. Department of Veterans Affairs...    27
    Prepared statement of Mr. Grams..............................    46

Accompanied By:

Diana M. Rubens, Associate Deputy Under Secretary for Field 
  Operations, Veterans Benefits Administration, U.S. Department 
  of Veterans Affairs............................................    27
William Schoenhard, FACHE, Deputy Under Secretary for Health for 
  Operations and Management, Veterans Health Administration, U.S. 
  Department of Veterans Affairs.................................    27
Belinda J. Finn, Assistant Inspector General for Audits and 
  Evaluations, Office of Inspector General, U.S. Department of 
  Veterans Affairs...............................................    29
    Prepared statement of Ms. Finn...............................    53

Accompanied By:

Linda Halliday, Deputy Assistant Inspector General for Audits and 
  Evaluations, Office of Inspector General, U.S. Department of 
  Veterans Affairs...............................................    27
Sondra McCauley, Deputy Assistant Inspector General for Audits 
  and Evaluations, Office of Inspector General, U.S. Department 
  of Veterans Affairs............................................    27

                   MATERIAL SUBMITTED FOR THE RECORD

Deliverable from the Department of Veterans Affairs..............    60

Post-Hearing Questions and Responses for the Record:

    Hon. Bob Filner, Ranking Member, Committee on Veterans' 
      Affairs, Letter to Joseph A. Violante, National Legislative 
      Director, Disabled American Veterans.......................    62
    Hon. Bob Filner, Ranking Member, Committee on Veterans' 
      Affairs, Letter to Carl Blake, National Legislative 
      Director, Paralyzed Veterans of America....................    63
    Responses from Joseph A. Violante, National Legislative 
      Director, Disabled American Veterans and Carl Blake, 
      National Legislative Director, Paralyzed Veterans of 
      America....................................................    64
    Hon. Jeff Miller, Chairman, Committee on Veterans' Affairs, 
      Letter to Honorable Eric K. Shinseki, Secretary, U.S. 
      Department of Veterans Affairs.............................    67
    Response from Honorable Eric K. Shinseki, Secretary, U.S. 
      Department of Veterans Affairs to Hon. Jeff Miller, 
      Chairman, Committee on Veterans' Affairs...................    68
    Follow-Up Questions from Hon. Jeff Miller, Committee on 
      Veterans' Affairs and Responses from Honorable Eric K. 
      Shinseki, Secretary, U.S. Department of Veterans Affairs...    74
    Hon. Bob Filner, Ranking Democratic Member, Committee on 
      Veteran's Affairs, Letter to Honorable Eric K. Shinseki, 
      Secretary, U.S. Department of Veterans Affairs.............    75
    Response from Honorable Eric K. Shinseki, Secretary, U.S. 
      Department of Veterans Affairs to Hon. Bob Filner, Ranking 
      Democratic Member, Committee on Veterans' Affairs..........    78
    Question 8 Attachment 1 for Hon. Bob Filner, Ranking 
      Democratic Member, Committee on Veterans' Affairs..........    90
    Question 11 Attachment 2, Fee Data Disbursed Amounts.........    94
    Question 11 Attachment 3, Wait Times.........................    95

 
 POTENTIAL BUDGETARY SAVINGS WITHIN VA: RECOMMENDATIONS FROM VETERANS' 
                         SERVICE ORGANIZATIONS

                              ----------                              

                       TUESDAY, NOVEMBER 15, 2011

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[Chairman of the Committee] presiding.
    Present: Representatives Miller, Bilirakis, Roe, Stutzman, 
Denham, Runyan, Benishek, Buerkle, Huelskamp, Turner, Brown, 
Reyes, Michaud, Sanchez, McNerney, Donnelly, Walz, and Barrow.

              OPENING STATEMENT OF CHAIRMAN MILLER

    The Chairman. Good morning, everybody. Welcome to this 
morning's hearing. Ms. Brown will be the Ranking Member when 
she arrives but I want to go ahead, in view of the witnesses 
that are here with us today, so thank you for joining each of 
us this morning. We are going to review recommendations from 
several veterans' service organizations for possible savings 
within the Department of Veterans Affairs. And I want to say at 
the onset, thank you to the VSOs for answering the call and 
sending some information in that we could have a hearing on and 
talk about ways that money can be saved at VA.
    We are in an unprecedented time of fiscal restraint in 
America, one that is long overdue. The Budget Control Act is 
the law of the land. It has put in place caps for the next 
decade. It is on discretionary spending for every account in 
government, including VA. These caps will permit overall 
government spending to grow at roughly 2.5 percent annually. 
Needless to say, the next 10 years that we are looking at will 
look very differently than the last decade.
    Now it is my belief that veterans spending and defense 
spending remain an absolute top priority to this Nation and to 
this Congress. Maintaining our defense is a clear 
constitutional charge of this Congress and I include the care 
for those who have fought for our freedom as an inextricable 
part of that constitutional charge.
    With that said, no agency should ever be exempt from a 
constant effort to become more efficient or root out waste, 
fraud, and other questionable spending. It is with this in mind 
that I solicited the help of the veterans' service 
organizations, some of which are here today, to help find 
savings within VA which then could be redirected to provide 
better care and benefits to our veterans. The VSO response was 
outstanding. And again, I say thank you for that response.
    They provided nine areas for us to examine. And I am so 
pleased that they are here today to discuss those savings and 
other areas of potential savings within our government. Some of 
what they recommended, such as VA's questionable payment of 
bonuses that go to already well paid employees, are addressed 
in legislation reported from this committee and has already 
been passed by the House.
    Other recommendations require ongoing scrutiny and today's 
hearing continues our committee's oversight to that end. I want 
to also thank the VA for its participation in today's hearing. 
I believe that there are sincere efforts underway. It has been 
documented in several ways, the successes that they have 
already enjoyed which shows that Secretary Shinseki is in fact 
serious about VA's stewardship of taxpayer dollars.
    Nevertheless there are areas that need improvement and 
continued oversight. The VA Office of Inspector General's 
testimony will confirm that this morning what we have talked 
about in regards to bonuses being paid, and I want to thank the 
VA OIG for its work with the Committee with VA and with 
veterans advocates in all of our common purpose.
    Before I close let me touch on one other issue that is on 
everyone's mind, one that Carl Blake raises in his opening 
statement for the Paralyzed Veterans of America. Namely, the 
question of whether VA medical care is exempt from 
indiscriminate cuts that would occur across government accounts 
under a sequester order. Now it is my firm hope and my 
expectation that the Joint Select Committee will rise to its 
calling and produce a bill which saves a minimum of $1.2 
trillion over the next decade that can clear the Congress and 
be signed by the President. However, should that not happen a 
week from tomorrow veterans and their loved ones deserve to 
know now whether VA will be affected by a looming sequester 
order. It is my belief that VA is absolutely exempt. But only 
the Office of Management and Budget is vested with the 
authority to determine the sequester rules. To date, OMB has 
not been clear on this point. Mr. Grams, I hope that you can 
shed some light on the administration's position when you 
appear on our second panel this morning
    Again, I thank all of our witnesses for their attendance 
this morning. I now turn to our Ranking Member for his opening 
statement. Mr. Michaud, you are recognized.
    [The prepared statement of Jeff Miller appears on p. 36.]

OPENING STATEMENT OF HON. MICHAEL H. MICHAUD, DEMOCRATIC MEMBER

    Mr. Michaud. Thank you very much, Mr. Chairman, for holding 
this hearing today. I also would like to thank our witnesses 
for joining us and helping this committee continue its 
important work ensuring that veterans get the resources they 
need while making sure that the VA is a careful steward of 
these resources. Some of my colleagues here in Congress look at 
potential budget savings within the VA as a way to reduce our 
overall budget deficit. In my view, we should be looking at 
ways to provide services and benefits that are more cost 
effective in order to provide resources where we need them the 
most down the road, as we continue to ensure that the VA has 
what it needs, but needs what it gets.
    This way, the VA's budget request will be better aligned to 
meet the needs we are all hearing about from our veterans and 
our constituents. I applaud our VSOs for being active 
participants in this conversation and in this process as well. 
It is vital that you continue to point out where improvements 
in VA programs are necessary and continue to identify programs 
that are not working as well as they should be. I also want to 
thank the VA Inspector General for the fine work your office 
has done in identifying where improvements can be made and 
areas where the VA can improve.
    One of my foremost concerns is to make certain that the 
resources get to the veterans. There simply must be oversight 
and accountability within the VA system. This is also important 
to ensure that all of you get the accurate information you need 
in order to formulate realistic budgets that are truly need 
based. I am troubled that in the audits and reports that we get 
from the Inspector General's Office there seems to be a 
consistent pattern in what they find wrong, in lack of 
financial controls, and in lack of policies and procedures to 
ensure that staff follow management directives.
    I would like to know what the VA is doing to fix these 
problems. And even more importantly, what the VA is doing to 
proactively identify problems that lead to wasteful spending 
and lack of accountability. This is the key role of effective 
management. And I would like to be assured that these issues 
are being identified and addressed routinely and not merely in 
response to the IG reports and congressional oversight.
    One of the areas of concerns identified by the VSOs is the 
issue of funding holdbacks at the VA central office and in the 
VISNs. We all have heard anecdotal stories of local hiring 
freezes or our local facilities not having the resources that 
they need. I look forward to the discussion on this issue.
    I also look forward to learning how the VA is currently 
doing with its budget projections and third party collections 
estimates, and what in general terms we should expect in 
looking forward to the budget submission in February.
    I have the utmost faith in Secretary Shinseki and 
wholeheartedly support his efforts to transform the VA. The VA 
faces many problems and I understand it takes time to change 
course. I just want to be sure that we are heading in the right 
direction and moving in the right direction we will need the 
input from the VSOs as you go back and talk to your members 
about where they think the VA has gone astray and where we can 
continue trying to get it back on track.
    So once again, Mr. Chairman, I want to thank you for having 
this hearing and I want to thank our panelists as well for 
coming. And I yield back the balance of my time.
    The Chairman. I thank Mr. Michaud for his fine comments. I 
associate myself with them. And I thank the first panel for 
being here. We have two witnesses that are here with us. First, 
Joe Violante, National Legislative Director for the Disabled 
American Veterans; and Mr. Carl Blake, the National Legislative 
Director for the Paralyzed Veterans of America. They are 
accompanied by other folks with them today. We appreciate all 
of you appearing. And I don't know if Joe, you are first? We 
will recognize you for your opening statement.

    STATEMENTS OF JOSEPH A. VIOLANTE, NATIONAL LEGISLATIVE 
DIRECTOR, DISABLED AMERICAN VETERANS; AND CARL BLAKE, NATIONAL 
     LEGISLATIVE DIRECTOR, PARALYZED VETERANS OF AMERICA; 
   ACCOMPANIED BY IAN DE PLANQUE, DEPUTY DIRECTOR, VETERANS 
  AFFAIRS AND REHABILITATION COMMISSION, THE AMERICAN LEGION; 
  RAYMOND C. KELLEY, DIRECTOR, NATIONAL LEGISLATIVE SERVICE, 
  VETERANS OF FOREIGN WARS OF THE UNITED STATES; AND DIANE M. 
         ZUMATTO, NATIONAL LEGISLATIVE DIRECTOR, AMVETS

                STATEMENT OF JOSEPH A. VIOLANTE

    Mr. Violante. Thank you, Mr. Chairman. And thank you for 
holding this hearing this morning about inefficiencies, 
duplication, and waste within the VA. Mr. Chairman, earlier 
this year in response to your request our organizations 
developed and presented to the Committee a number of 
recommendations regarding possible waste and inefficiency 
within VA and we appreciate the opportunity today to discuss 
these further.
    First, however, it is important to recognize that simply 
cutting VA's budget in the absence of detailed justifications 
and evidence of savings will more likely result in a loss of 
accessibility, quality, and safety of services veterans depend 
on rather than lead to true deficit reduction. For example, a 
decade earlier VA proposed and Congress approved several 
successive budgets that cut billions based primarily on the 
presumption of unspecified management efficiencies. In the end, 
no savings were actually realized and Congress was forced to 
provide supplemental appropriations. But not before thousands 
of veterans were turned away or forced to wait for VA health 
care services.
    So in order to ensure that VA actually eliminates 
duplication, inefficiency, and waste rather than just cut 
services we must begin with an accurate and transparent budget 
process to measure whether savings are achieved. Based on VA's 
fiscal year 2012 budget proposal there are a number of 
questions about the year ahead, such as: did VA's planned 
carryover funding from fiscal year 2011 to fiscal year 2012 and 
2013 actually occur? And how will VA measure whether savings 
from proposed operational improvements materialized?
    In addition, as you look for savings in VA keep in mind 
that there exists sufficient unfunded and underfunded needs. 
For example, VA's Strategic Capital Investment Planning Process 
identified about 5,000 capital projects that should be 
completed within 10 years at a cost estimated between $50 
billion and $60 billion.
    Looking ahead as this Committee, the Supercommittee, and 
Congress look to reduce the national debt, we hope you will 
draw the line at taking money away from disabled veterans. Both 
the Senate and the House recently passed legislation to provide 
a COLA increase to veterans disability compensation without one 
dissenting vote. It would be disgraceful if the Supercommittee 
now tried to take this money back.
    Mr. Chairman, in the spirit of eliminating duplication of 
our own my colleague from PVA will focus on the first five 
areas discussed in our letter and I will focus on the last 
four, beginning with inspection at state veterans homes.
    Currently most state homes undergo regular inspection by 
both the VA and the Centers for Medicare and Medicaid services. 
Given that the CMS inspections already cover 150 of the 158 
criteria required by VA, why not consider eliminating this 
overlap of effort to reduce the administrative burden of both 
the VA and state veterans homes?
    Turning to VBA, we regularly hear reports that the regional 
offices spend an inordinate amount of time and resources 
shredding nonessential paperwork sometimes right down to Post-
it notes, and even assigning senior GS level employees to 
oversee this work. It is our understanding that VBA has made 
changes over the past 6 months. However, we recommend the 
Committee examine whether current shredding practices are 
appropriate to protect and preserve veterans' records.
    Another area that merits scrutiny is the practice of 
brokering claims between VBA regional offices, particularly the 
cost of transporting these brokered claims. According to the 
Inspector General report released in September VA brokered over 
200,000 claims in fiscal year 2010 and it is our understanding 
that these claims are usually transported via FedEx. Why not 
consider reallocating the money spent on shipping paper files 
to digitizing them instead, especially considering VBA's 
ongoing transition to paperless processing?
    We also have concerns about VBA's use of mandatory or 
authorized overtime as a regular practice to address increased 
workloads. Is mandatory overtime the most effective way to 
increase employee productivity? And does heavy reliance on 
overtime have negative effects on the quality of the work 
performed? We would recommend that the Committee ask VBA for 
answers to these important questions.
    Mr. Chairman, that concludes my testimony. I will be more 
than happy to respond to questions.
    [The prepared statement of Joseph A. Violante appears on p. 
37.]
    The Chairman. Thank you. Mr. Blake.

                    STATEMENT OF CARL BLAKE

    Mr. Blake. Chairman Miller, Members of the Committee, on 
behalf of Paralyzed Veterans of America I am pleased to be here 
today to discuss the ongoing debate about deficit and debt 
reduction and how it might affect the Department of Veterans 
Affairs.
    As you know and as Joe mentioned, PVA along with AMVETS, 
the Disable American Veterans, the American Legion, and the 
Veterans of Foreign Wars addressed this issue in a letter 
provided to the Committee in April of 2011. Since my statement 
fully explains the ideas addressed in our joint letter from 
earlier this year I will limit my comments to the issues of 
immediate concern. However, we all here on the panel look 
forward to questions as it relates to the many issues that we 
outline in our letter.
    Once again this year Congress has failed to fulfill its 
obligations to complete work on the appropriations bill funding 
the Department of Veterans Affairs by the start of the new 
fiscal year on October 1, 2011, nearly 2 months ago. Meanwhile, 
the VA is operating based on the parameters of Public Law 112-
36, the Continuing Appropriations Act for Fiscal Year 2012. As 
we understand it the VA has implemented an across the board 
reduction in all program spending of approximately 1.5 percent.
    For the advance appropriation for VA health care to be 
superceded or misinterpreted by short term CRs and result in a 
reduction of VA health care funding that was already approved 
is absolutely outrageous. This concern is further amplified by 
the points we raised in our letter concerning the growth in 
various levels of administration, the holdbacks that occur at 
the VA, and the SES bonus levels. And yet we are here today to 
further discuss savings that can be realized within the VA. As 
we outlined in our letter to the Committee earlier this year 
the veterans' service organizations are not so naive as to 
think that cost savings cannot be found within the VA. But the 
question remains, to what end?
    The context of this hearing is to identify savings within 
the VA that can presumably be returned to the Treasury for 
deficit and debt reduction. However, we believe the VA is 
already failing to meet the demands being placed on its health 
care and benefits systems. And I do not even need to go into 
great detail to discuss those concerns. We would argue that any 
savings realized by the VA should be used to fill gaps in 
services now or be immediately reinvested into the system to 
make it function more effectively and efficiently.
    Ultimately discretionary spending in the VA accounts for 
approximately $62 billion. Of that amount nearly 90 percent of 
that funding is directed towards the VA health care programs. 
As the Joint Select Committee addresses the possibility of 
reductions in discretionary spending across the entire Federal 
Government, including the VA, it is important to emphasize that 
any cuts to VA spending will have a direct impact on the 
delivery of health care services and benefits to veterans and 
their families.
    Additionally we are concerned that in the event the Joint 
Select Committee fails to agree to a bipartisan solution or the 
House or Senate fails to approve the Committee's 
recommendations, an automatic trigger would occur that would 
immediately cut an additional $1.2 trillion in Federal 
spending. The triggers would target two principal areas of the 
Federal budget, national security spending and all other 
domestic programs. While we believe all VA programs are 
excluded from automatic cuts by Public Law 111-139 the 
statutory Pay As You Go Act of 2010 questions remain about 
whether or not VA health care spending in particular could be 
included broader discretionary spending reductions. And Mr. 
Chairman, we appreciate your comments in your opening about 
your view on how this should be handled.
    However, we have been informed that the final arbiter that 
will determine whether or not spending is cut from VA programs 
is the Office of Management and Budget. To say that this fact 
is worrisome would be a major understatement. As you know, the 
VA is the best health care provider for veterans, providing 
primary care and specialized health services is an integral 
component of VA's core mission and responsibility to veterans. 
Across the Nation VA is a model health care provider that has 
led the way in various areas of medical research, specialized 
services, and health care technology. Any reduction in spending 
on VA health care programs would only serve to degrade these 
critical services. In the end it is easy to forget that the 
people who are ultimately affected by the wrangling over the 
budget and this ongoing debate about cutting the deficit are 
the men and women who have served and sacrificed so much for 
this Nation. We hope that you will consider these men and women 
as you continue to investigate areas for potential savings 
within the VA.
    This concludes my testimony. I would be happy to answer any 
questions about my statement and the letter that we have 
provided. Thank you.
    [The prepared statement of Carl Blake appears on p. 41.]
    The Chairman. Thank you, Mr. Blake. Mr. Blake, you talked 
about the VSO recommendation on fee basis care coordination. 
And I am trying to kind of wrap my head around how we can 
encourage VA to move on this front. And I guess the question 
that I ask is are you suggesting that VA move towards having a 
large network of regional providers? Where we can be assured 
that the same prices are being paid to all of the providers? 
And how do we move forward? I mean, I am an advocate, as many 
know, for being able to provide that health care as close to 
home as we can possibly get it. And if necessary in the private 
sector and outside the VA network. So could you expound on 
that? And Mr. Violante, if you would add to it as well I would 
appreciate it.
    Mr. Blake. Well I will do my best to answer that question. 
I am not sure that we are suggesting a large regional network 
that might look something like TRICARE in the way it provides 
its benefits to servicemembers. However, you know, one of the 
complaints that we hear quite often is when particularly PVA 
members get fee service out in the community there are 
complications because more often than not that VA has no 
provider agreements with providers in the area. Which 
complicates the pay for the care that's provided. And it can 
ultimately lead to higher costs because I guess you could argue 
that with some competition or with the provision of agreements 
that you might have a better system.
    There has also been some ongoing discussion, and I am not 
saying that we, or the Independent Budget, or the American 
Legion have advocated for it, there has also been some 
discussion about more of a nationalized plan for how fee basis 
care gets done. Which we just do not believe actually occurs at 
this time. So I do not know if that really answers the 
question.
    Mr. Violante. I do not know that I could add any more to 
that. I mean, what we would like to see is a more effective 
program out there when individuals are sent out to the private 
sector to ensure, number one, that the care will be totally 
provided for, the payments will be provided for, and that VA 
continues to manage that veteran's care instead of just sending 
them out to any doctor that is out there.
    The Chairman. And I concur that VA does need to continue to 
help manage that veteran's care. But I, in listening to both of 
your answers I think it is clear that there probably needs to 
be some type of a network that is established where you do know 
where the providers are, that VA knows what the reimbursement 
rate is going to be for those providers, and you will actually 
have, as you said Mr. Blake, competition where folks will be 
wanting to get onto that provider list so that they too can be 
providing health care to our veteran population.
    I wanted to talk a little bit, yesterday, I am sure you 
probably already have seen it, but the Office of Inspector 
General has released their report on retention bonuses. It was 
not a very positive result. I think basically they said 80 
percent of the bonuses that were given either were not, I think 
the term not justified or appropriate. And there is a lot of 
money out there that unfortunately does not appear to meet the 
test that those of us on this committee would want them to 
meet, nor the veterans' service organizations. So I would like 
to ask, and I know this is a softball to you, but what do you, 
if you have seen this report, what do you think about what the 
report says?
    Mr. Violante. Mr. Chairman, I have not seen that report 
yet. One thing though I think we do want to make clear is when 
you are looking at the bonuses that VA not be singled out. 
Because we certainly do not want to put VA at a disadvantage 
throughout the government. But we certainly would like the 
structure of who gets what and why they get it looked at. And 
we would hope that Congress would do the same government wide.
    The Chairman. Let me just take a moment and read to you the 
summary portion, where it says that VA lacked clear guidance, 
oversight, and training to effectively support the program. VHA 
and VHCO approving officials did not adequately justify and 
document retention incentive awards in accordance with VA 
policy. VA officials did not effectively use the personnel and 
accounting integrated data system to generate timely review 
notices. And VA officials also did not always stop retention 
incentives at the end of set payment periods. Mr. De Planque?
    Mr. de Planque. Well, thank you, Mr. Chairman. And I think, 
and dovetailing on what Mr. Violante said, I think this is a 
problem that is kind of endemic across the board. But one of 
our greatest concerns, and this is exactly what you were 
addressing there, is that there is not a clear indication of 
what the standards are for these things. I think the VA put 
out, the Secretary put out their goal of 125 days, no case 
pending more than 125 days and 98 percent accuracy. And in the 
year 2010 where both of those figures went back the number of 
cases over 125 days almost doubled and the accuracy rate 
dropped several percentage points, that all of these bonuses 
were still going out. And so if that was kind of your mission 
statement, this is what was concerning I think to the American 
Legion and to the other groups as well, if that is your mission 
statement, 125 days and 98 percent accuracy, and you fail in 
both of those categories, why are there still bonuses going 
out?
    I understand the importance of retention and that you want 
to be able to keep employees in place and that it is a 
competitive job market and there are things that are there. But 
I think there is also a natural reaction on behalf of people, 
and you have seen this in Wall Street companies that took a 
bail out and their executives were getting bonuses and a lot of 
people were very angry about things like that in other 
organizations. When you see that attitude, that you are not 
meeting the goals that are apparent and yet people are still 
getting bonuses for that, that is what causes the confusion. 
And if we could get a more clear indication of what are these 
bonuses based on? Are they not based on the stated mission 
statement of 125 days and 98 percent? That is what we are 
looking for as organizations, is more clarity in that range.
    Mr. Blake. And Mr. Chairman I think, you know, there are 
sort of two levels of questions here. Because our letter 
addresses SES bonuses but that trickles down even to the lower 
levels and individuals who receive bonuses. And it is sort of 
a, there are two ways of looking at this. One is our concern 
about whether they should get bonuses if they are failing to 
presumably meet performance standards which may or may not 
exist. The other is, and we have had this discussion with the 
VA, sometimes it just does not seem to pass the smell test. And 
Ian referenced this. You know, when times are tight and people 
are struggling people do not want to be reminded that, you 
know, some people are going to get bonuses regardless. And 
whether they are justified or not, because we are not here to 
suggest that some folks in the VA, and maybe many folks in the 
VA, do not deserve a bonus. But sometimes you have to make hard 
choices. And this falls into that category also. 
Notwithstanding the comments that Mr. DePlanque made about our 
concerns about performance standards and whether bonuses are 
even justified in the first place.
    The Chairman. Thank you very much. Ms. Brown, I understand 
that you have to leave us a little early so Mr. Michaud has 
passed to you for the first questions.

  OPENING STATEMENT OF CORRINE BROWN, ACTING DEMOCRATIC MEMBER

    Ms. Brown. Thank you, and I want to thank you for holding 
this hearing. We just had Veterans Day and I know we all were 
involved in many, many activities around Veterans Day. I want 
to thank all of the veterans for their service. I ask that my 
full statement be submitted for the record. There are a few 
things here I want to focus in on. We ran two wars on the 
credit card. And so the idea that we are going to penalize 
veterans who have already paid their dues is totally 
unacceptable to me. My grandmama always said when you have your 
head in the lion's mouth, you ease it out. And so we cannot 
penalize people that have already paid their dues.
    I am very proud of the fact that I was involved in the 
Congress that gave veterans advanced appropriations and gave 
the Department of Veterans Affairs the largest budget increase 
in the history of the United States. And this Office of 
Management and Budget, I do not know exactly who they report 
to, I mean, they do not, I do not necessarily think they report 
to the Congress or the administration. They make the decisions 
independent it seems. How to find out who is in charge of them 
is something I have not found out in nineteen years. Because 
when we send certain bills, or we pass certain bills, they come 
back and say, ``We are not doing it.'' And it is not 
implemented. So, you know, that is a challenge.
    I want to focus in on the fact that one-third of the 
veterans on the streets are homeless. And I have been working 
with different agencies. And I want to know what we can do as 
far as getting the VA to work with these different agencies. 
Because I understand that they are the hardest to get 
refinanced, or get them from foreclosing. Not the VA but 
working with them and that administration.
    And another area as far as how we get additional employees. 
One of the problems is how long it takes, let us say a nurse, 
to go through the system. The nurse is already certified by the 
state, certified by the organization. But yet we are losing to 
other hospitals because it takes so long for the processing. So 
we have many, many challenges. The Secretary is working on it. 
We have other safety issues pertaining to how we do certain 
procedures in the hospitals, in the VA. Those are the things 
that I am interested in. And any savings that we have from 
deficit reduction, and we can all look at how we can cut back, 
should go directly into veterans programs, assistance, and you 
know, when you talk about rules and regulations, that is where 
we need to cut down on some. So with that, does anyone wish to 
respond to my comments?
    [The prepared statement of Corrine Brown appears on p. 37.]
    Mr. de Planque. Thank you, Congresswoman. I would actually 
like to address specifically where you were just mentioning 
homeless veterans, which is definitely a very big concern. And 
I know Mr. Blake and Mr. Violante also brought up our concerns 
about sequestration. While VA programs may be protected from 
sequestration as we believe, Department of Labor and Housing 
and Urban Development programs, many of which help homeless 
veterans, are not necessarily going to be protected by this. 
And so this is a big concern of the American Legion with the 
sequestration issue looming. In that sometimes we fail to see 
that the issues of veterans encompass more than just the 
Department of Veterans Affairs.
    Ms. Brown. And we are just getting HUD to start working 
with the VA, which is major. So that we can work in conjunction 
to stop them from becoming homeless vets. So we are now getting 
HUD, Labor, and VA working together. And when you cut, even 
though if you do not cut VA, when you cut these programs some 
of my colleagues do not see a correlation between the three. 
Does anyone else have anything to add? I have 35 seconds.
    Mr. Violante. I would just like to say we certainly agree. 
And we said in our letter that any savings that are found 
should be reinvested in VA because there are so many unmet 
needs that need to be addressed. And personally I agree that, 
you know, we are fighting a war off budget. We should be able 
to care for those men and women who we have put in harm's way 
when they come back. And hopefully Congress will continue to 
keep VA funded at the proper levels.
    Ms. Brown. Well you can rest assured I will continue to do 
my part. Thank you, sir, for your service.
    The Chairman. Mr. Roe.
    Mr. Roe. Thank you, Mr. Chairman. And thank the Committee 
for being here. I, too, want to associate myself with the 
remarks of Ms. Brown. I feel like that veterans who carried the 
war, that we have as a country placed in harm's way to do what 
we have asked them to do to protect our freedoms, that now we 
provide the benefits we promised them, period. Very simple. We 
do need to be more efficient, however, though. I mean we had an 
Oversight and Investigation Subcommittee hearing not long ago 
where a wounded warrior had eight different caregivers. I could 
not figure that many of them out and neither could the wounded 
warrior. So there are things that we need, to be streamlined 
within the balance.
    Secondly, Ms. Brown is absolutely right. I happened to be 
sitting next to a veteran yesterday who works at the VA and 
spoke with him. I will not say what he does, but he is fairly 
high up in our local VA, who had taken almost 6 months to hire 
a physician and, actually no, this was a nurse practitioner. 
And he had lost several to the private sector because they 
could not make a decision. About how he had interviewed them, 
but they could just not get them through the steps. And so he 
is losing quality people. The VA needs to look at its own, get 
in a mirror and look at how it can do its own business more 
efficiently. Because I can tell you in the private sector, if I 
find a good employee, I hire them. Period. If I find somebody 
that is good here in the Congress, I hire them and I put them 
to work. And I do not know what the VA does to take 6 months to 
hire a nurse practitioner, but that is ridiculous. There are 
things we can do to improve that.
    I totally agree with everyone who said that savings that we 
find in the VA should be reinvested in the program. Because 
there are needs out there that are going to be coming forward 
in the very near future when these soldiers matriculate out of 
the military and into the VA system that we do not have the 
resources right now budgeted to take care of them. And I think 
those efficiencies should be placed back in. I 100 percent 
agree with you on that. Any comments on those things?
    Mr. Blake. Well I would first address the point about the 
efficiencies. The one caution I would have is if we are going 
to find efficiencies they cannot be vague, they have to be 
specific. We have to know exactly where the VA is finding those 
dollars from and how they are going to be reinvested. To simply 
say, ``Well, we are going to save $500 million,'' that is a 
little too vague for our liking. Because inevitably without 
some clear understanding of how that is going to happen that 
may never actually be realized. And so it is a false 
assumption.
    Your point about hiring, it is no coincidence that the 
House is getting ready to take up the Vow to Hire Heroes Act, 
which I believe all of us here have supported. And you spoke 
not only to the problem of hiring in the VA, there was a 
gentleman who spoke at the press conference last week who was 
an Iraq veteran who talked about the problems in getting hired 
in the private sector. Who has all the skills to presumably 
perform a function in the health care field and yet no job 
opportunity opened itself up because of the problems with 
certification, and licensure, and stuff like that. So we look 
forward to all these opportunities to allow veterans in 
particular to come back into the workforce. And I think the VA 
is, I think the VA has set a pretty good example already. And 
it could certainly help improve its workforce we believe by 
bringing a lot of these newer veterans back into the workforce, 
its own workforce.
    Mr. Roe. One of the things we worked on while I was home 
was some veterans homeless issues. And where they, the veteran 
had a case coordinator in the HUD VASH program. If they slipped 
down into the HUD system they did, but they did not have case 
coordinator if they had just the voucher program. I looked at 
that and I said, ``Well how many people would it take here 
locally at our VA medical center to solve that problem?'' 
Because without the care coordinator, someone to do that with 
them, they just slip right back to where they were. You do not 
gain anything. You actually go backwards. And it looks like it 
is not that many people, where you could get a case coordinator 
with that veteran who is just on the voucher program. I did not 
realize it until I was walked through it exactly how that 
worked. Where HUD VASH has got a clinical case coordinator. The 
HUD system does it, they fall down there, they cannot get the 
HUD VASH just yet. But if you are just out where you are in a 
voucher program you do not have that case coordinator. I think 
that is something we definitely need to look at that would help 
reduce homelessness. And it would not take that many more 
people, I think, to do that. Are you all aware of that?
    Mr. Violante. I am not. But we certainly would be willing 
to take a look at that and see how we can improve that program.
    Mr. Roe. Thank you. I yield back.
    The Chairman. Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman. If I recall 
correctly the Appropriations Committee mandated that the VA get 
a handle on the fee based services that the VA provides. And 
the underpinning of the program that the VA undertook was 
Project HERO, which I understand has not been a big success. My 
question is, do you believe that the VA should get back to the 
original intent and actually try to standardize fee-based 
services?
    Mr. Blake. I do not think I can give a yes or no 
specifically, but it is certainly something we think needs to 
be addressed further. Since you mentioned HERO, I cannot say 
that I know for certain but I believe we have been told that 
they are looking at now rolling out HERO onto a national level, 
which is of real concern to us given the questions you just 
raised. So while that is going on we are not convinced that 
that necessarily fixes any of the problems as it relates to the 
fee based problem.
    Mr. Michaud. Do you agree?
    Mr. Violante. I agree with Carl.
    Mr. Michaud. My second question, you mentioned the survey 
for state veterans nursing homes. Actually, I was at the 
Caribou State Veterans Nursing Home in August. CMS came in 1 
week and did their survey and rated them 100 percent. The VA 
came in the next week, did their survey, and they also got 100 
percent. So there is a lot of duplication within two sister 
Federal agencies. It is my understanding also that there are 
about 43 state veterans nursing homes that CMS does not come in 
to do their survey. How would you address that issue with these 
43 state veterans nursing homes? I agree that they should get 
rid of that duplication, but there could be a problem with the 
43.
    Mr. Blake. VA would have to sign a contract. They already 
signed a contract with all the nursing homes. Just reduce the 
number of contracts that they do and still continue to have 
those 43 under contract.
    Mr. Michaud. Okay. My question relating to nursing home as 
well, when you look at cost it is also my understanding that it 
is a lot cheaper with state veterans nursing homes than VA 
nursing homes themselves. Would you comment on the fact that we 
might want to look at utilizing state veterans nursing homes if 
the beds are available versus VA since it is more costly?
    Mr. Blake. I think the fact that it is more cost effective 
is definitely something worth considering. The problem is 
ensuring you have the capacity. One of the challenges we have 
dealt with in recent years is the VA has a mandate to have a 
certain number of beds capacity within its own system and it is 
woefully under the number that it is mandated to have. And yet 
it becomes an excuse to sort of get out of the long term care 
business altogether because you are not backfilling the 
capacity outside of the VA, which goes back to my original 
point about our concern about whether that demand could be met 
outside of the VA system or not. Even though it is certainly 
more cost effective.
    Mr. Michaud. And my next question, and I know we are 
focused on the VA, but if you look at the other sister agency 
where there is a lot of cost is the Department of Defense. When 
you look at cost efficiencies within the VA system is there a 
way that you might be able to utilize the Department of 
Defense? A good example is for instance one of the problems 
with troop readiness among the Guard and Reserves is dental 
care. However, the VA in some of their facilities does not 
offer dental care because they say the need is not there. Here 
might be a situation where they could actually do a joint 
project with the Department of Defense on dental care. And that 
is just one example. Any comments?
    Mr. de Planque. Well I think we certainly need to look at 
all sorts of things. However, historically the Department of 
Defense and VA do not have a very good record of communicating 
well with each other. This is something that has been a point 
of contention I think for all of our organizations for several 
years now. And so if we were going to move towards a direction 
towards that I think we would want to make sure that we had 
really clear lines of communication sorted out. Because as it 
is now in terms of virtual lifetime electronic record and 
everything, that seems so far behind at this point. And so the 
ability of those two organizations to communicate with each 
other is really troubling. And if you were going to double down 
on that bet with other efficiencies you may be creating more 
problems. And that would be a concern that we would want to 
look at.
    Mr. Michaud. Thank you. I see I have run out of time, Mr. 
Chairman. Thank you very much.
    The Chairman. Mr. Stutzman.
    Mr. Stutzman. Thank you, Mr. Chairman. And thank you to the 
panel for being here today, and thank you for your work, and 
what you do for our veterans. And thank you for your service as 
well. I had a really good couple of weeks over the past couple 
of weeks meeting with veterans across the district and also in 
Iowa with Mr. Braley where we did a Subcommittee hearing on 
economic opportunity in both Waterloo and in Fort Wayne. And 
the challenges that we see for our veterans right now is they 
face a tough economy.
    I want to talk a little bit about some of the notes in your 
letter, joint letter. And as, obviously as the Economic 
Opportunity Subcommittee focuses on utilizing the VA for 
connecting veterans with businesses and those who are looking 
to hire, some of the challenges that we heard during these 
hearings and also during the open house that I had in Fort 
Wayne was some of the frustration with just the delay in the 
care, from our local hospital, and just the challenges. They 
are trying to figure out what are the challenges that our VA 
has. And you mention in here, while funding was indeed reduced 
the demand and need for resources were not. And, you know, our 
veterans are obviously the ones that we want to make sure are 
receiving these services that they need. Could you talk a 
little bit about that. Is it just funding? Is it administrative 
costs? What is taking some of the time for VA to make sure the 
services are provided and are prompt and are making sure that 
it is in a timely fashion for veterans? Are there budget 
challenges? I mean, I know there is a lot to go on. But I would 
like to comment a little bit about that.
    Mr. Violante. Well certainly there are budget challenges. 
And one of the things that we talk about is transparency in the 
budget process. And we are very grateful for the fact that we 
were able to get advance appropriations for VA because that has 
been helpful. But one of our concerns was that while VA's model 
is excellent and we believe that if you put the right numbers 
in you get the right numbers out, but there is tinkering that 
goes on. And I think the GAO report shows that the numbers that 
come out are not always what is presented to Congress for the 
needs. And OMB shaves some dollars off.
    So we need transparency in the process. We need to know 
that the assumptions that VA are making are accurate. And that 
what is coming out, their needs, the veterans' needs, are being 
accurately presented to Congress for VA's needs. We have seen 
too many gimmicks that have gone on over the years in 
efficiencies, where we can save $1 billion here. But we have 
never seen any of those savings put forth to show us that the 
money was indeed saved. So what happens is services are cut 
back. So what we need is to see some transparency in this 
process. And we hope that we can see that over the next year. 
Again, with the GAO reporting on VA's model and the numbers. 
But if you look at last year, the last one that GAO did you can 
see that we are not getting an accurate reflection of what is 
needed.
    We also have concerns too about some of the carryover that 
is going on from the current year, or from 2011, and whether or 
not that was actual savings that were generated or just cut 
back. And we are seeing examples down in Florida, in Arizona, 
of fee based care that is being denied because they do not have 
sufficient funding.
    Mr. Blake. And I think it is, it all can sort of be traced 
back to a budget concern. But it has an impact on staffing and 
capacity concerns. And it has a trickle down effect. You know, 
we hear fairly frequently from a lot of local facilities that 
say I have run out of money, or I cannot hire the people, or, 
you know, have these issues. And it is impacting their ability 
to meet demand. And yet the Under Secretary for Health 
testified earlier this year during the budget hearings that a 
lot of these complaints that come from the facilities are a 
conflict between what they want and what they need. Well that 
makes for a good sound bite but how do you qualify that? 
Because if a facility comes to me and says they are running out 
of resources and they cannot meet the demand, where is the 
disconnect?
    You know, it kind of boggles our mind when, you know, when 
every year in July we start hearing from facilities who are 
saying, ``I am going to be out of money by the end of the month 
and the fiscal year starts 2 months from now.'' And it 
certainly runs a red flag up the pole for us and we start 
asking questions. And there is no clear answer as to how that 
happens. We have pointed to some of this in our letter and in 
discussions in the past about, you know, it is a fact that the 
VA has seen substantial increases in its overall budget in the 
last several years. And yet it seems like on a regular basis 
when we talk to people at the local facility what might have 
been a 10 percent increase at the national level translates to 
a 1 percent at the hospital. And that is sort of 
oversimplifying it because there is obviously more to it than 
that. But if it is simply based on some demonstrated need 
qualify that a little better for us so that we understand. 
Because we are not convinced that that is happening the way it 
should.
    Mr. Stutzman. Thank you very much. I appreciate both of 
your comments. I yield back.
    The Chairman. Mr. Reyes.
    Mr. Reyes. Thank you, Mr. Chairman. And thank you, 
gentlemen, for being here. One of the, in a series of meetings 
with veterans, and including town halls, one of the big 
frustrations expressed to me, and I have a veteran population 
basically of about 70,000 in the West Texas, Southern New 
Mexico area, is the inconsistency in terms of, through the 
veterans grapevine, in terms of the types of services that 
veterans get in different VA facilities. That, I was wondering 
if you could comment on that? And I am trying to get hold of 
whether or not it is an isolated complaint, or is it something 
that you hear collectively through your organizations?
    Mr. Blake. I would say it is a vague complaint because 
veterans all have their own view of what their services should 
be and then there is ultimately a determination of what 
services they are eligible for and what benefits they are 
eligible for. And so it is, it is hard to say. It could be an 
isolated situation. We certainly hear on at least a few 
occasions from other facilities around the country where people 
are concerned about whether they are getting consistent 
services. But I, I am not sure that there is a clear answer to 
the problem. We would almost have to hear directly from them 
and let them explain to us exactly what the problem is that 
they see and sort of dig down deeper than that.
    Mr. de Planque. One of the things that we have come across 
in the System Worth Saving Reports, and you know we will talk 
about if you have seen one VA facility you have seen one VA 
facility. And you know there is a balance in, I have a healthy 
respect for VA and what they try to do in balancing a level of 
standardization so that you are getting the same quality of 
care everywhere that you get but also reflecting different 
regional areas have different regional challenges. You know, 
the challenges you would face running a health care system in 
the State of Montana are going to be different from the State 
of New Jersey, just in terms of access to urban centers and 
things like that.
    So it is difficult, again, and I think Carl made an 
excellent point about, without knowing specifics and being able 
to compare that I think it is a difficult line that VA walks. 
And I have a respect for that they are trying to do that. I 
know we would like to see more standardization and more 
consistency VISN to VISN in terms of delivery of what they can 
do. But also you have to reflect that there are going to be 
different challenges in different areas, and not everything is 
going to necessarily be feasible in every area. And so we also 
try to recognize that as well.
    Mr. Reyes. Anybody else? The other question most often 
addressed to me, deals with the Secretary's priority for 
identifying homeless veterans. We have made a concerted effort 
in my district to try to get to as many of the homeless as 
possible to identify them. Is, do you have any recommendation 
individually as organizations about what else we might be 
trying to do that? I mean, it is a major priority. But it is 
very frustrating because we seem to be missing many of the, 
many of the people with the most urgent needs in the homeless 
community.
    Mr. Violante. That is a very tough question, Congressman. I 
mean it, I know the Secretary has put a big emphasis on 
reducing the number of homeless vets and eliminating them in 5 
years. How do you find them is another question. I do not know 
the answer to that. I know that people are trying to do 
everything they can, even at the local levels, chapters, going 
out and trying to find them. But as to how we find them all, I 
just do not know the answer to that one.
    Mr. de Planque. One of the things that, and I think Dr. Roe 
made the point earlier in terms of coordinators and that is 
something we want to look into. Coordination I think is a big 
thing. When you have multiple organizations like the Department 
of Veterans Affairs, you also have the Housing and Urban 
Development. But then you also have community organizations, 
the American Legion, VFW, all of our veterans' organizations 
that are out there in the community trying to reach out. You 
have faith based organizations that are doing a lot of work 
that are out there. So the tricky part is coordination of so 
many moving pieces. I think you hope that if enough people are 
out there casting nets, you are going to get everything. But, 
it is a concern that there will always be people who are going 
to slip through. And it is just aggressively being out there 
and trying to coordinate that.
    Mr. Reyes. Good. Thank you, Mr. Chairman. Thank you, 
gentlemen.
    The Chairman. Mr. Denham.
    Mr. Denham. Thank you, Mr. Chairman. First of all I also 
chair the Committee on Public Buildings. One of the things we 
are looking at across the Nation is all of the government owned 
buildings for each different agency on where we can 
consolidate, where we can sell off things that we do not need, 
and bring revenue back to the government. Has VA inventories 
surplus or underutilized properties that could either be sold 
off or rehabilitated to accommodate increasing needs of our 
veteran community?
    Mr. Kelley. Yes, they have. There are, I do not have the 
number off the top of my head, but they have over 1,000 
buildings that are being evaluated for repurposing or being 
demolished. And every time, they have a list of criteria to try 
to find some other use for it either internally or externally 
through a partnership with either another government 
organization or a private organization to use that. And the 
majority of those are being used for homeless veterans.
    Mr. Denham. Thank you. And I would request that this 
committee receive a list of that evaluation. Secondly, cost of 
brokering, it seems like that has become a standard practice 
and continues to escalate in price as well as overtime is 
continuing to be reauthorized. Every veteran town hall that we 
have conducted in the district and throughout the state, the 
issue always comes up about how quickly or how long it takes, 
to process a claim. And at the same time, it seems like it 
continues to come at a great expense. What efforts are being 
done to digitize that and make sure that we are not going back 
over and over and over on the same information?
    Mr. de Planque. Well I know one of the things that was 
addressed earlier was the idea of taking some of the money that 
they are using for brokering, and hopefully VA can look at 
this, and moving it towards digitizing the claims. We all have 
a lot of hope that as they move to a fully electronic system, 
as that process continues that it is going to make it a lot 
easier if they do have to broker or share information between 
offices. That you can do it instantaneously once that system is 
up. VA has been very good about meeting with the veterans' 
organizations and keeping us posted on the capabilities of the 
electronic system. And it certainly should have the capability 
to do that. And hopefully there will be some savings there and 
they can start turning that towards getting a lot of these 
cases moved towards that. VA can probably answer better exactly 
what they are doing on that, though.
    Mr. Violante. And there may be legitimate reasons for the 
brokering, such as the Agent Orange Nehmer cases. But the 
question becomes then in a lot of different offices what we 
hear from our national service officers is that their regional 
office is brokering 150 cases to some other offices. And then 
in turn they are receiving 200 cases from some other office 
that they are working on now. So it creates quite a problem for 
the representatives of the veterans and for the veterans in 
some cases when their case is being dealt with at another 
regional office instead of their local one.
    Mr. Denham. My concern and my frustration continues to be 
that we have the Department of Defense not working with the VA, 
who is not working with the local veterans' centers. And if we 
had one system that we were able to have communication you 
would not only decrease the backlog and create more efficiency 
in the case work but you would reduce costs at the same time. 
Congressman Roe and I just went over to a, and Mr. Walz, 
Congressman Walz, went over to Afghanistan recently. And one of 
the things we saw was the lack of communication between the 
various parties. You know, it started with me going to get 
shots. And, you know, we all do not keep our shot records over 
the decades. And yet there is no reason that information should 
not be in the system itself. So rather than create casework for 
every single instance that we need information we ought to have 
that accessible throughout the process and reduce costs at the 
same time.
    The same situation came up with disabled veterans that were 
at Ramstein. There was no question that they were disabled. But 
yet they were going to have to go through an exhaustive process 
to transfer from DoD to VA. One would think that this would not 
only be our number one priority in the case of making sure our 
veterans are receiving the proper benefits, but the best 
opportunity to save costs at the same time.
    Mr. Violante. Well the administration announced a couple of 
years ago I believe that one of their lofty, long term goals 
was to have essentially a seamless system, from the day you 
enter the military until the day you died as a veteran. And 
that should be the ultimate goal and fashion----
    Mr. Denham. I understand. And the frustration is that is 
the long term goal. We are going to have more veterans 
returning home in the next year than we have since Vietnam. We 
cannot afford for the long term.
    Mr. Violante. Congressman, I agree wholeheartedly. And what 
I was going to say is it has been my experience since that one 
of the real roadblocks in this has been DoD's reluctance to 
come to the table and really work with the VA on getting some 
of these things done. I think the VA, the VA is ultimately in 
the business of serving the veteran and anything that can make 
that process better they are working towards that end. But you 
have to have a willing partner. And in my time here in 
Washington, I would argue that DoD has not been the most 
willing partner in fixing that problem.
    Mr. Denham. And I would agree in my short time that I have 
been here. But this committee is looking at cost savings for 
the VA. And you have a Supercommittee that is meeting, as well 
as sequestration that is on the horizon that between the two of 
them we ought to have many willing partners to reduce costs. 
And I think that there is a way to increase benefits and 
decrease costs at the same time. So what we are looking for is, 
you know, that best case scenario. You know, timing is 
everything in politics. And right now we have the timing to be 
able to push something through that should not be based on the 
long term but should be based on right now. So we are looking 
for recommendations in that area and we would look forward to 
seeing your recommendations on digitizing the entire system.
    Mr. de Planque. One really quick note, and I just think we 
would also be remiss at this point if when we talk about DoD 
and VA here, we cannot forget that the states are involved in 
this. The National Guards and the communication of those 
records, that often gets overlooked. And that is a big problem. 
And we run into that a lot where you have a veteran coming back 
who has records that are in Afghanistan, and Landstuhl, and 
whatever active duty post that they mobilized through, and 
their state has got the records. And DoD and VA communication 
is its own problem, but we also cannot forget the state 
National Guards. That is a big component of that and has 
especially been over the last 10 years.
    The Chairman. Ms. Sanchez.
    Ms. Sanchez. Thank you, Mr. Chairman. I want to thank our 
panelists for being here today. Over the break that we just had 
I had an opportunity to visit the VA facility in Long Beach, 
which is undergoing quite a bit of modernization and 
construction. And it's nice to see the upgrade of that 
facility. And just in speaking with veterans during the past 
week there seems to be an agreement generally speaking that 
services at the VA are improving. So it looks like there is a 
path of improvement that VA is undergoing that folks seem to be 
happy with. However, there are still many areas that are ripe 
for improvement and there are still many veterans that are 
underserved in many capacities. It strikes me that if we could 
find efficiencies, or find the inefficiencies rather, in the VA 
in terms of how it delivers care and help fix those then there 
would not be a need for cuts overall because the savings that 
you get from inefficiencies could be put towards trying to do 
more outreach, or trying to make sure that the need is being 
met for returning veterans. And it seems to me that that is the 
better case scenario than just random overall cuts which are 
not targeted and could cut some essential programs where in 
fact more resources are needed.
    And while I am heartened to hear about the improvements, 
and one of the things that I got a chance to see firsthand were 
these new patient centered care models, where patients are not 
having to run all over the place to different specialists that 
they need but the doctors are actually brought to the patients 
themselves. There is still this, the IG has still identified a 
consistent pattern regarding the lack of financial controls and 
the lack of procedures to ensure that staff are following 
management directives. And that seems to be a persistent theme 
with the IG.
    I am curious, and I know there are many areas that people 
have discussed where there could be cost savings, what you 
think the single best approach is to trying to confront that 
intractable problem would be with respect to the lack of 
financial controls and making sure that staff are following 
management directives? Because it seems to me that if we could 
fix that one problem there are a lot more efficiencies that 
would follow. Any of the panelists?
    Mr. Violante. I certainly agree with your assessment. But 
you probably need to ask VA what problems they are seeing in 
getting the word down to all of their employees to follow what 
has to be done. I mean, in this Committee and the Subcommittee 
on Oversight has a big part to play in that, too, by getting VA 
in here and exploring some of these areas. And that was 
basically the hope of our letter was to identify some areas to 
get the Committee to start focusing on and getting VA in here 
to explain. I mean, they may have some legitimate reasons for 
why things are happening the way they do, or what is going on. 
But you know, we would like to see those areas explored. And 
certainly what you are speaking about is one of those areas.
    Ms. Sanchez. So your belief is that through increased 
congressional oversight of VA you think that those 
inefficiencies can be identified and dealt with?
    Mr. Violante. Well it would certainly help to identify 
those inefficiencies. I mean, you know, we get information from 
our members, from our employees who are out there. But we do 
not have, you know, all the answers. We do not know why certain 
things are happening, if there is legitimate reasons for it. 
But certainly to get VA in here to explain those is what we are 
really looking for. Because we do not have all the 
explanations. We just have a lot of questions.
    Ms. Sanchez. Anybody else?
    Mr. Blake. I do not think congressional oversight is the 
magic bullet. You know, the GAO and the Inspector General do 
reports quite frequently on the internal workings of the VA and 
more often than not there are lists of recommendations. And the 
question becomes, what steps has the VA taken to address any of 
those recommendations? As sort of a side example, PVA has an 
agreement with the VA where we do site visits with the spinal 
cord injuries around the country. Long Beach is one of them. We 
identify problems and we raise questions. And the VA takes 
steps to address the problems that we raise. But I am not, but 
when the GAO or the IG provides a similar report I am not sure 
that similar actions take place. And so----
    Ms. Sanchez. So it would be, would you say if there were 
some kind of enforcement mechanism that would correlate to 
findings and recommendations, that that might----
    Mr. Blake. Well I am not sure what enforcement is because 
it sort of implies punishment. And I am not sure that you want 
to punish the VA for not taking active steps towards some end. 
But I guess something down that road is what we are looking 
for.
    Mr. de Planque. I think if we all look at this as 
partnership. I think all of the groups that are here, we have a 
partnership with your committee here, we have a partnership 
with the VA. And we can offer advice. And when we write a 
letter and come up with things, we are meaning to start a 
dialogue. And to start that process back and forth. And you are 
right, you do not want to create the idea of punishment. But 
consequences.
    Ms. Sanchez. Well that is what I am saying. I mean----
    Mr. de Planque. And there needs to be some sort of follow 
through. And I do feel like we may have a lot of these 
hearings, and we may say a lot of the same things at a lot of 
the hearings, and it does not seem like things get done 
sometimes. And so, that can lead to a lot of frustration with 
people. But as long as we maintain the idea that we have a 
partnership, and that we have an open dialogue, and that we are 
all working towards the same end, trying to deliver the best 
services we can get for the veterans, I think making sure that 
all of the partners at the table maintain that attitude towards 
partnership and towards being open with their dialogue 
discussions, and being receptive to saying to the critiques and 
different viewpoints offered by others. I think keeping an open 
mind about that will certainly help.
    Ms. Sanchez. Thank you. Thank you, Mr. Chairman.
    The Chairman. Mr. Runyan.
    Mr. Runyan. Thank you, Mr. Chairman. And thank you all for 
your testimony. I raise it all the time when ultimately you are 
talking about partnerships, and Secretary Shinseki says it all 
the time, it is accountability. I mean, it is holding each 
other accountable throughout those partnerships. But it is 
ironic that in your access to care example you used Montana and 
New Jersey. Because, quite frankly, my constituents a lot of 
time their biggest problem is access to that care. Whether in 
South Jersey you have to go to East Orange, Philadelphia, or 
Wilmington. It is an issue.
    The thing that puzzles me about it, because the chairman 
kind of spoke about it earlier, you know, do we develop a 
network? Obviously, you know, the signature injuries of this 
conflict we have been in, and will continue to be, PTSD and 
TBI. Are we prepared to tackle that? We still have not 
conquered what veteran came back from Vietnam with, with Agent 
Orange. And we are going to pile this on top of that. Are we 
able to tackle that? And without the access to the care, are we 
pushing these medical decisions, are veterans pushing them off 
just because they do not want to make the commitment to travel? 
Specifically our young ones coming back where they are still 
out, they are trying to battle this, you know, 20 percent, 40 
percent unemployment thing. They cannot take two, three, two 
days off to go try to get the treatment and figure out what it 
is. Is there an avenue there that we can possibly, you know, 
look at something like this to help them? And not to prolong 
these issues? Because we know when we prolong health decisions 
they pile up and become more costly at the end of the day.
    Mr. Blake. I am not sure if I am going to answer your 
question but I am going to try. I think the problem is framing 
the question of access. I am a regular user of the VA and I 
talk to a lot of veterans when I go to the VA on a regular 
basis. And you hit the nail on the head. It is always a 
question of access. And generally the complaint I hear is 
actually getting into the VA in a timely fashion, their access. 
I rarely if ever hear a complaint about the quality of the 
services that are provided. However, that gets spun into their 
concern about access so they want to go to their local 
provider. That is not the same thing. And I think the question 
of access differs depending on whether you are talking about 
Montana or New Jersey. Because the access problem in Montana 
is, there is no health care. But there may not be a VA 
facility, but there may not be any health care in some rural 
areas. Look at Alaska and the options they have there.
    Whereas in New Jersey the problem is you have a very 
centralized population and massive demand into a single 
facility. And most of those people still want to go to that 
facility. So it is hard to satisfy their concerns because at 
the end of the day they want to get into the VA because they 
know that is where the best care is. And so I am not sure that 
even if you give them another, a different opportunity, that 
addresses their ultimate access concern. I don't know I 
answered that question.
    Mr. Runyan. Well but giving them the opportunity could 
potentially avoid critical health care decisions that have to 
be made down the road.
    Mr. de Planque. Mr. Runyan, I think part of the issue is, 
for access is the amount of service. Right now VA is at 121 
percent capacity at their VA facilities. In 2002 they were 
around 90 percent capacity. So growth of demand, the facilities 
have not grown at the same rate.
    VA has an exceptional capital assessment plan in place. 
They have really studied hard, understand where the gaps are, 
what needs to be done to fill those gaps. Funding is the issue, 
we continually underfund VA, to make sure that they can fill 
those gaps. To make sure there is enough facilities in New 
Jersey to cover everybody that comes in, make sure that there 
are CBOCs in rural Montana. We do not have the funding to do 
that right now. And at the end of the day, that is your access 
issue.
    Mr. Blake. And there is another problem. Because you could 
also look at it in terms of if I want to go see my primary care 
doctor I want to just go see my local primary care doctor. But 
then if a veteran incurs something much more significant, a 
serious illness, or a spinal cord injury, or incurs some other, 
much more specialized type of service is required, they are not 
going to have access to that in the private setting, no matter 
where they are at. The fact is the VA is the best in this 
country when it comes to providing all the broad array of 
specialized services. And so while we might allow for 
convenience, which is going to see your local provider, then 
you could ultimately have a negative impact on that veteran's 
care if they cannot then get into the VA when they need real 
serious health care services.
    Mr. de Planque. One thing to bring up on this, and this is 
something we used to deal with on a regular basis in the Army, 
is that when a problem would come up you could easily develop a 
work around that would work for that moment. Which is good, and 
you have to adapt, and overcome. The problem was all too often 
the work around became the standard at that point. And so you 
basically set up a flawed system. So rather than saying there 
is a flaw in the system right now, we all understand that it is 
very important to be able to get that care to those veterans 
immediately and we want to do that. But we want to make sure 
that we are not overlooking that flaw because we came up with a 
work around and we do not have to pay attention to it anymore.
    And so as a long term system I think most of us agree that 
we want to be able to deliver VA care. And there is a lot of 
things when we talked about making sure VA management is still 
available, if people were getting outside care, because there 
are things with VA's record keeping that they do that no other 
health care system in the world does in terms of being able to 
oversee total patient management and see potential issues 
outside of things and identify things that might slip by hidden 
as unseen wounds. There are things VA can do with that. And so 
I think ultimately we want to be able to get VA access for 
those people. However, in the short term we still have to get 
the care to the people. And so we want to look at a system that 
is going to be able to get care to the people right now when 
they need it but not overlook the error that there is a, say a 
cadre of people that are not getting care in the Pine Barrens 
or wherever it is. And that is the thing that we want to 
remember. Is not forget the error that caused us to do that 
work around.
    Mr. Runyan. Thank you, Chairman. I yield back.
    The Chairman. Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman. You know the 
Committee and the Congress has increased the VA budget 
significantly over the last four or 5 years. And I really like 
hearing from your point of view that it is a partnership 
between this committee, the VSOs, and the VA, because that is, 
while we do not always have the same thing in mind, we want the 
veterans to get the best service we can, but we also want to 
see the best bang for the buck. My first question is general, 
have we gotten the best bang for the buck over the last 5 
years? Has that increase in spending really filtered down to 
increased benefits? Mr. de Planque, do you want to take a shot 
at that?
    Mr. Blake. Somebody mentioned earlier that the capacity of 
the VA is at 120 percent. Well that would suggest to me that we 
are getting far more bang for the buck than we might have 
anticipated. Is there some unsatisfaction? Sure. But the VA 
must be doing something right if there is that kind of demand 
on the system even with it being apparently seriously 
overburdened.
    Mr. de Planque. People are using it and wanting to use it. 
And we are, and this is something we definitely have to keep 
track of, because they are talking about big force scale downs 
and things like that. So we are putting a lot more veterans who 
are going to be out there into the system and there is going to 
be a lot more load on the VA. I think we have seen the volume 
even of VBA, and what VBA is dealing with, the number of claims 
that they are having to deal with, their volume is increasing 
exponentially. And so we are sympathetic in some ways to what 
they are trying to deal with as far as that. However, we do 
have concerns. Carl mentioned earlier and he was picking random 
numbers out but the idea that you might increase a budget 8 
percent but only 1 percent is trickling down. And that is where 
I think a lot of us have concerns, that the budgets are going 
out there.
    And you know, my colleague Ray just talked about that we 
are not meeting the construction budgets. And all of us sitting 
here at this table back in the budget talks in the spring 
mentioned that we thought that the construction budgets, major 
and minor construction, were underfunded. And that the proposal 
was not going to meet the needs that they need to meet their 
infrastructure needs for the future.
    So spending is going there but there are probably concerns 
that not all of it is getting to the right places. And we are 
still raising the flags about those things. So that is 
infrastructure spending that you have to do if you want to be 
able to maintain the system to deal with the volume. The demand 
for veterans is there, and there was a time when I think 
veterans were afraid of or did not want to go to the VA. I 
think that is largely changing. I think that you know we have 
all talked about, when you can get the access to the care, and 
when you can get there, I know Carl mentioned it, I use the VA 
as my health care provider and I could not be happier with the 
care that I get. So we are delivering a good quality product 
when we can get the veterans to it. But I think we are falling 
short in some places of getting those dollars down to the 
street level and making sure that the investment is getting to 
all the places it needs to get to.
    Mr. McNerney. Thank you. Well I appreciated the effort that 
went into the letter, the VSO letter. One of the things you 
mentioned was the size of the general administration budget. Is 
there some concern there that that could be an area where 
trimming could be done?
    Mr. Violante. That is a question we hope you are going to 
ask VA when their panel gets here. Our estimation is that there 
may be too many administrative staff. I mean, obviously you 
need administrative staff. But are they at a number that far 
exceeds the benefit? Should some of those people doing hands on 
service, whether it is claims work for veterans, or health care 
work on the medical side, it is a real issue. When you look at 
the increases over the years in admin I think they are growing 
at a very rapid rate. And the question becomes can we get a 
better bang for our buck if those people were in different 
positions?
    Mr. Blake. And it is not to say that there might not be a 
logical reason for that increase. The VA sort of tried to 
explain back in the beginning of the year, when that was the 
first question that popped up in a lot of people's minds is 
this does not, I got back to it does not pass the smell test. I 
look under their chart and directly underneath general 
administration is the Veterans Benefits Administration, which 
was recommended at a decrease from the previous year. And that 
may be justified as well but we all know the struggles that VBA 
is obviously facing with regards to processing claims. And 
those two things just do not seem to line up with the world 
view of what is going on within the VA.
    Mr. de Planque. And you know when they are talking about 
kind of record amounts of overtime for VA employees. And yet 
when they are asked, you know, do you have the number of 
employees on the ground level to meet the needs and they say 
yes, and then they start plussing up the central office staff, 
but all the people out in the regional office are working 
overtime, and double shifts, and things like that. That is what 
raises flags for us. And obviously, VA is going to be better 
able to answer that. And there may be very, very good answers 
for why the expansion is where it is. But these are the reasons 
that these flags come up for groups like us as we look at this, 
is because we see that they are struggling out on the pointy 
end of things dealing with the situation. And we want to make 
sure that the resources are getting there so they can deal with 
that. And so that you are not overtaxing the employees who are 
having to deal with that on a daily basis. Because if you are 
working 60, 70 hour weeks, the quality of those individual 
hours may be going down a little bit. And we do not want that 
to be happening either.
    The Chairman. Mr. Walz.
    Mr. Walz. Well thank you, Mr. Chairman, for holding this, 
and thank you to all of you. As a veteran I cannot tell you how 
happy I am that you are out there. This has been very good for 
me again. I know you are always there. Ian, I had at the top of 
my sheet, ``Great partners with VA and us,'' this partnership 
idea that we have always been there. And I think the best 
partners are those that are holding us accountable to every 
dollar. That we are the strongest supporters of the VA and the 
harshest critics, and I think it should run amongst all of us. 
So I think you brought up some great points.
    I think there are some, and you brought up some great 
truisms. My frustration with the whole, you know, this is such 
great stuff I wish the Supercommittee could be here. But since 
we are not on the politburo we are here to try and pass that 
on, to pass it on.
    But it is very frustrating to me that this, these false 
choices or whatever that all spending is created equal. We are 
here to make sure that no taxpayer dollar is wasted. And I said 
the VA is a sacred responsibility because that is one less 
dollar going to the care of veterans. That is the way you see 
it, about making sure the needs are there, making sure they are 
accountable. So this is not harsh criticism about that. I want 
to know this too, where they are going. But we do these blanket 
statements, that all spending is bad, we cut it, we do all 
this, without asking what are your specifics? Where would you 
say that? What about the need? And yes, we need to get 
processing times down but we added an awful lot of Agent Orange 
folks to that. And did we give them the resources to address 
that need?
    So I guess for me, and I think all of us know this, I just 
came out of a meeting before this one started without outgoing 
Surgeon General Schumacher and the great work that has been 
done in Army medicine. The incredible work that has been down 
range identifying mild traumatic brain injuries and percussive 
blast with the idea that addressing them early will reduce the 
long term costs and the long term danger and loss of 
productivity to those members.
    But my frustration, and all of us have beat our heads 
against the wall over this issue, we all know this is a 
seamless transition, where the heck is Armed Services? We sit 
here and hold these hearings by ourselves, talking about DoD, 
and talking about they do not cooperate, they do not get along 
together, VA and DoD do not cooperate. Are we doing it? Are we 
making a strong effort here to hold that joint meeting, to 
bring those folks in, to make the decision makers there, get 
that in. I know you guys have been there. You are absolutely 
right on, you are spot on on this, you are at the point. I hear 
your concerns too on this, Carl, you are talking about this, 
the nine to one. I hear it from folks out there and I go right 
to the point of where they are delivering it. How many more 
nurses have been added to this ward? None since then. Well we 
gave money out there. How many more patients have been added? 
Seventeen percent more. That is the issues I am looking at, the 
numbers we are out trying to look at.
    So I do think VA needs to have some answers on that. I am 
one, the teacher in me always was complaining any time the 
principals got something, or whatever. Or why are they getting 
it? Or whatever. Well I know the research shows the best 
schools are the ones that have the best principals. I also know 
that administration means a lot and it does a lot, it allows 
our people to do their jobs. But it has to be appropriate.
    And somehow we are going to have to crack this 
congressional barrier between Armed Services and VA, get 
serious about this. I don't know, we, and this was last 
Congress, Mr. Chairman, it was all of us in this, but the 
previous one before your chairmanship we had offers from 
Secretary Shinseki and Gates to sit together here with this on 
that. We never brought them. They have never been here.
    So I apologize for my frustration on this. I am not telling 
you anything. I am preaching to the choir. Keep where you are 
at. Keep talking about this. Force these accountabilities. Make 
us more efficient. Make a realization. As Mayo Clinic says, we 
have two of the most fantastic hospitals in the world 90 
minutes from each other, Mayo Clinic and the VA hospital in 
Minneapolis. Those are two, not just the best VA hospital, the 
best hospital. And that is what we owe to these warriors.
    So I do not necessarily have a question but you brought up 
some great suggestions. I just want you to know that I think my 
responsibility, maybe you could respond to this, would it help 
if we collaborated here with Armed Services? If you want to, I 
am the one who will get in trouble for complaining so you can--
--
    Mr. Violante. I think that would help greatly. It is 
something we would like to see is this Committee and Armed 
Services Committee sit down with VA and DoD and find out where 
the glitch is. I think about what Senator Webb said when he 
first came into the Senate that when he was a staffer on the 
Committee 25 years ago, 30 years ago, they were talking about 
seamless transition and here we are still talking about it. And 
I do not quite understand why there is a problem. But I think 
having both of the parties sit down in front of the Committees 
and talk about where the problems are may help to resolve the 
situation.
    Mr. Walz. Well I, this is important, your institutional 
knowledge is critical on this. Because when I came, you know, 
oh, I'm cutting edge here, I am asking, because I could see 
people looking at me, ``Really? You are the first guy who ever 
mentioned seamless transition.'' You know? And now I see new 
members getting excited about it. But they get it, they are 
there. But we seem to keep passing this on to each new members 
and then members of Congress leave, and a new one comes in, and 
say, ``I have this great idea. DoD and VA should communicate.'' 
And at some point it has got to go. We have to get it done.
    So I yield back, Mr. Chairman. Thank you for indulging me 
in that mini-rant, there.
    The Chairman. Thank you, Mr. Walz. Point well taken. An 
invitation is in the printer as we speak, and we will work on 
doing that as quickly as possible. Mr. Bilirakis has waived his 
questions and we appreciate you being here to testify at this 
hearing. And with that, you are excused.
    I would like to call the second panel forward. As they are 
making their way to their seats I will go ahead and introduce 
them. Mr. Todd Grams, Executive in Charge of the Office of 
Management and Chief Financial Officer for the U.S. Department 
of Veterans Affairs. He is accompanied by Diana Rubens, the 
Associate Deputy Under Secretary for Field Operations of 
Veterans Benefit Administration. Mr. William Schoenhard, the 
Deputy Under Secretary for Health Operations and Management of 
the Veterans Health Administration. We have Belinda Finn, the 
Assistant Inspector General for the Audits and Evaluations for 
the VA Office of Inspector General, who is accompanied by Ms. 
Linda Halliday, the Deputy Assistant Inspector General for 
Audits and Evaluations, and Sondra McCauley, the Deputy 
Assistant Inspector General for Audits and Evaluations for the 
VA Office of Inspector General. Mr. Grams, you are recognized.

STATEMENTS OF TODD GRAMS, EXECUTIVE IN CHARGE FOR THE OFFICE OF 
  MANAGEMENT AND CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF 
  VETERANS AFFAIRS; ACCOMPANIED BY DIANA M. RUBENS, ASSOCIATE 
DEPUTY UNDER SECRETARY FOR FIELD OPERATIONS, VETERANS BENEFITS 
   ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND 
 WILLIAM SCHOENHARD, FACHE, DEPUTY UNDER SECRETARY FOR HEALTH 
OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. 
DEPARTMENT OF VETERANS AFFAIRS; AND BELINDA J. FINN, ASSISTANT 
    INSPECTOR GENERAL FOR AUDITS AND EVALUATIONS, OFFICE OF 
    INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; 
   ACCOMPANIED BY LINDA HALLIDAY, DEPUTY ASSISTANT INSPECTOR 
    GENERAL FOR AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR 
   GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND SONDRA 
  MCCAULEY, DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDITS AND 
 EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF 
                        VETERANS AFFAIRS

                    STATEMENT OF TODD GRAMS

    Mr. Grams. Good morning, Chairman Miller, Ranking Member 
Filner, and Members of the Committee, and Congressman Michaud. 
I am accompanied today by Bill Shoenhard, VHA's Deputy Under 
Secretary for Health for Operations and Management; and Diana 
Rubens, VBA's Deputy Under Secretary for Benefits for Field 
Operations. I am pleased to be here with my colleagues and to 
be at the table with Belinda Finn and her colleagues from VA's 
Inspector General's Office. I also want to recognize our 
partners and friends, the Veterans' Service Organizations. They 
continue to serve as tireless advocates for our Nation's 
veterans.
    Mr. Chairman, today's letter is centered on a joint VSO 
letter provided to this committee earlier this year. The letter 
responded to your request for ways that VA could identify areas 
where there are opportunities for greater value of VA resources 
and in the end provide more and better services to veterans. I 
have two central points in my remarks this morning. First, VA 
has taken significant steps over the past 3 years to become 
more effective and efficient. And second, there is more we need 
to do.
    Any large organization intent on maximizing value must have 
strong financial management operations. The release today of 
our auditors' fiscal year 2011 report on VA's financial 
statements marks the second year in a row of strong 
improvement. The most significant problems auditors can find 
are referred to as material weaknesses and the second most 
significant are called significant deficiencies. In 2008 VA had 
three material weaknesses and 16 significant deficiencies in 
financial management. Today we have no material weaknesses in 
financial management and two significant deficiencies.
    These and other accomplishments have strengthened our 
financial management and we must continue to get better. For 
example, although we have reduced improper payments in pension 
and education programs, the continuing issues in fee basis care 
have to be effectively addressed to stop unnecessary 
expenditures. And while we have reduced retention allowances 
across the VA, an audit released by the IG yesterday confirms 
that this is an area for improvement.
    Collections by VA are a major funding source for our health 
care systems and we are working to turn the tide in our revenue 
collections with initiatives such as the Consolidated Patient 
Accounting Centers which centralize and standardize collection 
activities.
    The Veterans Equitable Resource Allocation system, or VERA, 
is the way we ensure that health care dollars get to where 
veterans need care. There is a belief however that the recent 
increases in health care funding are not reaching veterans who 
need it when in fact over 97 percent of our medical care budget 
goes either to the field or to national health care programs 
like CHAMPVA. It is also worth mentioning that if at any time 
during the year a VAMC or a VISN director believes they require 
more funding we have an open and equitable process to ensure 
those needs are analyzed and, if justified, funded.
    For performance awards at the Senior Executive Service 
level we have taken action to make our executives more 
accountable and to tie performance to results. More 
specifically the percentage of executives at the VA who receive 
a top outstanding rating has been reduced by one-third since 
2008. The VSOs also raised questions about the growth in staff 
offices. A strong headquarters is required to drive 
transformation. It is important to note that increases in staff 
offices have increased proportionately with the VA system over 
the past 3 years and, as such, staff offices continue to 
consume about 1 percent of VA's total staffing. The increases 
we have made in staff offices have allowed us to establish 
organizations that are leading efforts to provide outreach to 
let veterans know about what benefits they have earned, to 
address our wounded warriors' transition from DoD, to eliminate 
homelessness, and to provide greater assistance to survivors.
    On conference and travel expenditures, VA has tightened its 
guidelines to demand examination of teleconference 
alternatives, use of local venues, and trainer approaches 
before approval of each conference event.
    My written statement, Mr. Chairman, also highlights changes 
underway at VBA that are centered on eliminating the disability 
claims backlog, changes that focus on our people, our 
processes, and our technology, all at the same time. The 
written statement also responds in some detail to the benefits 
issues raised by the VSOs in their letter.
    Mr. Chairman, in closing, I do believe the VSO letter that 
is the center of attention today raises the right question. How 
do we do more for veterans and how do we do it better, in a 
time of fiscal constraint? Thank you for the opportunity to 
appear before your committee this morning.
    [The prepared statement of Todd Grams appears on p. 46.]
    The Chairman. Thank you, sir. Ms. Finn.

                  STATEMENT OF BELINDA J. FINN

    Ms. Finn. Thank you, Chairman Miller. Chairman Miller and 
Members of the Committee, thank you for the opportunity to 
testify this morning. With me today are Linda Halliday and 
Sondra McCauley, the Deputy Assistant Inspectors General who 
are directly responsible for the work I will be discussing. As 
auditors we are deeply committed to identifying budgetary 
savings in the Department of Veterans Affairs and we have read 
the recommendations from the veterans' service organizations 
with great interest.
    Of the many issues raised by the VSO, we believe the 
improved management and oversight of medical care provided 
outside of VA facilities, commonly known as fee care, offers 
the greatest opportunity for savings. Under the program VA 
medical centers authorize veterans to receive treatment from 
non-VA health care providers when VA cannot provide the care. 
Fee care costs increased from $1.6 billion in fiscal year 2005 
to $4.4 billion in 2010. And this amount will continue to grow 
as health care costs rise and the demand for health care 
increases.
    Our findings in the area of fee basis care have addressed 
the processes to authorize and pay fee claims, inefficiencies 
in VHA's payment processing organization, controls to prevent 
and detect fraud, and opportunities to bill third party 
insurers for fee care claims. We estimated that VA could save 
$293 million annually from improving authorization and payment 
procedures and $134 million annually from streamlining its 
payment model. Also, VA could be paying at least $114 million 
in fraudulent payments and missed revenue opportunities of 
about $110 million annually. Between these four reports we 
identified approximately $650 million in annual potential 
savings. VHA has agreed with all of our recommendations and is 
taking action to streamline its fee care payment process.
    Our written statement also outlines the results of our 
audit work related to other issues raised by the VSOs, such as 
claims brokering, employee compensation issues, and the use of 
overtime in VBA. As Chairman Miller just mentioned, we just 
released our latest report on employee retention incentives 
yesterday. In this report covering retention incentives at the 
VA central office and VHA, we questioned the appropriateness of 
126 out of 158 incentives, or approximately 80 percent. These 
problems happened because the VA personnel needed guidance, 
oversight, and training to effectively administer the program. 
Both VHA and VA have agreed with our recommendations and 
findings and will be taking corrective actions.
    In addition to the issues raised by the VSOs we believe VA 
can reap substantial benefits by improving its processes in 
acquisition, delivery of health care and compensation benefits, 
information technology management, and workers compensation for 
employees injured on the job. Improving acquisition practices 
seems particularly prone to savings since VA purchases goods 
and services in excess of $10 billion annually.
    VA has also long experienced challenges in managing its 
information technology investments. In response to these 
problems VA implemented the Program Management Accountability 
System, known as PMAS, in 2009. In September of this year we 
reported that VA lacks controls to ensure data reliability of 
the information in PMAS, verify project compliance with the 
PMAS process, and track the project cost. Until these issues 
are addressed VA risks further IT cost overruns, schedule 
slippages, and performance problems.
    Several of our ongoing audits address other concerns raised 
by the VSOs, or have the potential to identify significant 
savings. We expect to issue final reports on these audits in 
calendar year 2012.
    Mr. Chairman and Members of the Committee, thank you again 
for the opportunity to be here. We will be pleased to answer 
any questions that you may have.
    [The prepared statement of Belinda J. Finn appears on p. 
53.]
    The Chairman. Thank you very much, Ms. Finn. I would like 
to start, Mr. Grams, with you. I told you in my opening 
statement that I was going to ask a question in regards to 
sequestering. We all know that it is OMB that actually is the 
one that interprets the sequester rules. And so our question, 
the VSOs raised it, this committee has raised it, are veteran 
dollars exempt if we go into sequestering?
    Mr. Grams. Thank you, Mr. Chairman. We did note that in the 
letter that you and Ranking Member Filner sent to the 
Supercommittee you indicated your view that existing law 
exempted all VA programs from sequestration. The administration 
and the Secretary are committed to ensuring veterans get the 
care that they need. Your letter to the Supercommittee also 
noted possible legal ambiguities to the Budget Control Act and 
how it applies to VA with regard to sequestration.
    We are researching those ambiguities. We are working with 
OMB. As soon as we have the resolution to that legal question 
we will inform the Committee right away.
    The Chairman. We have been working on the issue now for 3 
months. How long do you think it is going to take to get an 
answer? I mean, the Supercommittee has to make their 
recommendations next week. And this Congress has to approve or 
disapprove of them right before Christmas. So I mean, 90 days 
is not long enough to get a ruling from OMB?
    Mr. Grams. Mr. Chairman, we are hoping to have the issue 
resolved shortly so that we can know----
    The Chairman. Could you give us an idea of when the request 
was made to them as to whether or not veterans were exempt?
    Mr. Grams. Mr. Chairman, that request went from our General 
Counsel's Office to OMB General Counsel's Office. I will go 
back and get you that date, sir.
    The Chairman. I think all of us would appreciate if that is 
something that immediately when the law was signed by the 
President, if it was something that VA recognized was important 
to get an answer to this committee. I think all members of this 
committee certainly expect to know something very quickly. So I 
would like to hear something as quickly as possible.
    Mr. Grams, in your testimony you highlighted the importance 
of conferences, because they enable VA to among other things 
share best practices and provide opportunities for your 
employees to establish and enhance their professional contacts 
with relationships within VA. From a cost standpoint, fiscally 
only, how much does VA spend annually on conferences of 50 
people or more? And what over the last few years has been the 
trend of conferences? Are we having more of them or are we 
having less of them?
    Mr. Grams. Mr. Chairman, in 2011 we spent a little over 
$100 million for conferences at the VA. Those conferences are 
used for a variety of goals and objectives. They can include 
symposia. They can include leadership meetings. For example, in 
VBA when their leadership and teams get together to evaluate 
the updating and the reevaluation of the VBA compensation 
schedules, that falls under the title of conferences. When 
VHA's leadership gets together to set and discuss major 
clinical and health care policy and financial policy across 
VHA, that also falls under that category.
    You asked for the trend, sir? In looking at this, in 2009 
it was about $92 million so it has gone up a bit over the last 
2 years. And I think that reflects our efforts to try to 
integrate the VA, have better communication, and better 
coordinate among leaders and managers.
    The Chairman. Is that the dollar amount has increased? Or 
the number of conferences have increased?
    Mr. Grams. That is the dollar amount that I was giving you.
    The Chairman. Do you know whether or not conferences have 
increased? Or is that something you need to take for the record 
as well?
    Mr. Grams. If I could take that for the record, I will get 
that for you.
    The Chairman. Absolutely. You have mentioned 
teleconferencing. I know that the Chief of Staff has called, or 
submitted a directive calling for maximizing the use of 
teleconferences. Can you give the Committee an idea of where VA 
is now? Has that risen? And because of the maximization have we 
seen fewer conferences?
    Mr. Grams. Mr. Chairman, we are making greater use of VTC 
through the efforts of our Chief Information Officer. And not 
only was teleconferencing part of the August memo that you are 
referring to from our Chief of Staff tightening up on 
conferences, he is requiring a detailed business case for each 
conference as well as ensuring that we are selecting economical 
venues. We are looking at holding things, if possible, within a 
50-mile radius of the vast majority of the people who need to 
be at the conference--having those events being at VA venues, 
as opposed to having to buy the venue from the private sector.
    It is also worth noting in that same memo that you referred 
to, Mr. Chairman, that the Chief has charged us with reducing 
the costs of travel and conferences by 25 percent below the 
2010 level. That is consistent with the President's new 
executive order that is requiring a 20 percent reduction across 
a variety of areas such as multiple IT units, printing, travel, 
and what they call swag.
    The Chairman. No $16 muffins, though?
    Mr. Grams. No, sir.
    The Chairman. Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman. Mr. Grams, 
I would like to follow up on the chairman's question as far as 
the sequestration issue. What is the VA's position and General 
Counsel's?
    Mr. Grams. Our General Counsel is, has looked at the 
history of everything building up all the way back to I think 
Gramm-Rudman, up to the act for today. They are continuing to 
discuss this with OMB, sir. And as soon as they have an answer 
to that question we will let the Committee know.
    Mr. Michaud. When you deal with OMB on this issue but other 
issues, do you say this is the way you feel it should be?
    Mr. Grams. Our General Counsel will be providing to OMB 
during that exchange what they have found as they have looked 
at the law and the statute.
    Mr. Michaud. And what is that? Do you support the 
Committee's understanding of what the law is?
    Mr. Grams. I think as the Committee pointed out in their 
letter that, based on history, it would appear that VA would at 
least to a large extent be exempt from sequestration. But as 
the Committee also noted in your letter, there are ambiguities 
to the law and that is what we have asked our lawyers to----
    Mr. Michaud. Okay. I do not know how to make this question 
clearer. Do you agree with the Committee's recommendation? 
Because the problem that I see is if we are saying this is our 
interpretation of the law. You are saying you are waiting for 
OMB to answer. But on the sideline you are saying well we 
really do not care. Do you have a position or do you not have a 
position on this?
    Mr. Grams. At this point we do not have an official 
position, Congressman. We are working with OMB to develop the 
administration's interpretation of the law.
    Mr. Michaud. So your General Counsel does not know what the 
laws say? They do not have a position?
    Mr. Grams. Have they taken a position? No, sir. That is not 
their role before they discuss these matters with OMB. They 
have researched the law and my understanding is that they are 
working with OMB to come up with the right answer to that 
question.
    Mr. Michaud. So they do not have a position on it? They are 
waiting, well I guess my only concern is what is the use of 
having your General Counsel if they cannot take a position and 
make a recommendation to OMB?
    Mr. Grams. Well, I think it, if I am misunderstanding you 
or if it is semantics, I apologize, sir, I think it is not our 
General Counsel's role to take a position, per se. This has to 
be worked out within the administration so the administration 
provides Congress with one consistent answer. The General 
Counsel has taken a technical review of the law and provided 
their information to OMB as part of those deliberations.
    Mr. Michaud. Okay. So in their technical review of the law, 
what is that? What is their recommendation under their 
technical review of the law?
    Mr. Grams. The General Counsel with the information that 
they have provided to OMB will lead to their final conclusion 
in working this out, sir, so that we can give Congress one 
answer.
    Mr. Michaud. So they provided their technical review to OMB 
already?
    Mr. Grams. That is my understanding.
    Mr. Michaud. Can you provide the Committee with a copy of 
that?
    Mr. Grams. I will go back and make that request of our 
General Counsel, sir.
    The Chairman. Will the gentleman yield?
    Mr. Michaud. Yes.
    The Chairman. A 2010 law, it says this specifically, and 
this is where I do not understand why there is so much 
consternation. Veteran programs, the following programs shall 
be exempt from reduction under any order issued under this 
subchapter. The subchapter being emergency powers to eliminate 
budget deficits. All programs administered by the Department of 
Veterans Affairs. And that is why I am trying to, I do not 
think any of us understands where the fogginess is coming from 
in regards to that comment.
    Mr. Grams. Mr. Chairman, as you know when interpreting the 
law, it is not only looking at a particular provision at a 
given time but it is going back and looking at the history and 
other provisions that it may or may not reference. I would, if 
I recall right, believe that in the letter going to the 
Supercommittee, it raised issues about potential ambiguities 
and that is what we are trying to work out, sir, so that when 
we give Congress the answer we give you, the right answer one 
time.
    The Chairman. So using that rationale if I went up to 
subsection A it says benefits payable under old age, survivors, 
and disability insurance program established under Title 2 of 
social security it also says shall be exempt from reduction 
under any order issued under this sub, so social security 
beneficiaries better be concerned too, correct?
    Mr. Grams. Sir, as the CFO of the VA I am hesitant to 
comment on the law as it applies to social security. But I 
appreciate your question and concern.
    Mr. Michaud. So what you are telling me is the General 
Counsel does not have a legal opinion on this matter?
    Mr. Grams. Congressman Michaud, if it is okay I would like 
to go back and relay your concern to our General Counsel's 
Office and request that they respond appropriately.
    Mr. Michaud. I just want to know if they have a legal 
opinion on the matter. I mean, if they do not have a legal 
opinion then why do we have a General Counsel? Probably we 
could save money there. I mean that is why you have a General 
Counsel, to give you legal opinions. And this appears to be a 
question of whether or not it is, whether or not we will have 
to comply with sequestration. but if you could get back to the 
Committee I would appreciate it.
    My other question when you look at cost savings, and it is 
an issue that was brought up by the VSOs. And I know the Under 
Secretary as well had talked about saving costs. It gets back 
to the nursing home issue. Is that something that you are 
looking at? Is trying to streamline the process so if there is 
duplications with CMS and the VA as far as the surveys for 
nursing homes, to eliminate duplication?
    Mr. Grams. Congressman, I will ask Mr. Schoenhard to 
respond to that.
    Mr. Michaud. Thank you.
    Mr. Schoenhard. Congressman, yes, we are looking at that. 
As you pointed out, sir, in the earlier panel there is a number 
of facilities that are not CMS certified. And we take very 
seriously the oversight and the review of veterans for which we 
have fiduciary responsibility for their care as we are 
providing these funds. So we would need to work through the 
large number of facilities that are not certified. We need to 
balance how we would do that with access. I guess one could 
take the position they should all be CMS certified. That might 
restrict access. I am not sure that is the answer. There are a 
number of areas that we look at that CMS does not look at, but 
we appreciate the efficiency with which that might be achieved. 
And we will continue to study that. But we need to do so most 
mindful of the safety and the quality of care for our veterans.
    Mr. Michaud. I agree. And if I recollect when I saw the two 
surveys they are very similar, number one. Number two, actually 
there was a report, and I believe it was a former admiral, a 
former member of Congress, talked about a nursing home facility 
the VA operated that was not very good. When you looked at the 
safety, as matter of fact, I think the report talked about 
maggots coming out of wounds of a veteran that was in a VA 
facility. And that was a couple of years ago. And it was 
Admiral Sestak, I believe, that brought that forward to the 
Committee. So if you really could look at that. And I would 
like to see a side by side of what the VA asks as well as the 
CMS. Because I think this is an area we might be able to save, 
you know, some money. So.
    Mr. Schoenhard. We will certainly do that, sir.
    Mr. Michaud. Thank you. I yield back.
    Mr. Bilirakis [presiding]. Mr. Grams, I am concerned about 
the antiquated process the VA is using to broker claims. 
Approximately how much does the VA spend per year on brokering 
claims?
    Mr. Grams. Thank you, Congressman. I am going to ask Ms. 
Rubens from VBA operations to address your question.
    Mr. Bilirakis. Very good. You are recognized.
    Ms. Rubens. Thank you, Mr. Grams. The prospect of brokering 
is one that VBA utilizes currently. I say currently because we 
have some longer-term plans in place, allowing us to increase 
some organization capacity and ensuring that veterans are being 
served as effectively as possible. The stations that we 
currently broker to are our more effective and efficient 
offices.
    Long-term, though, we also understand and having heard the 
comments from the first panel as well, the need to move away 
from physical shipment. The issue becomes one of establishing 
that paperless approach to allow us to do away with brokering 
to ensure that that is a cost that we no longer have to incur. 
As we establish that capacity to manage surges, if you will, in 
a handful of regional offices we've also had the opportunity to 
benefit from the IG's report on brokering. Some of its 
recommendations will allow us to see some savings by avoiding 
shipping cases that have been prepared for a rating decision to 
another office to be rated. This has been put in place at the 
IG's suggestion as well as the suggestion that we consolidated 
the Nehmer readjudication claims during fiscal year 2011. We 
felt as though we needed to ensure we had the most effective 
utilization of those resources.
    Mr. Bilirakis. Approximately how much would it cost to 
implement a paperless system?
    Ms. Rubens. Mr. Bilirakis, I apologize. I do not have the 
full figures with me for implementing that full paperless 
implementation. It is an overarching approach that VBA is using 
to engage in transformation, recognizing that we cannot 
continue to do business as we have and expect to meet the needs 
of today's veterans. The receipt of claims has increased 
tremendously in the last 3 years. As we change not only the 
training that we provide people, we are changing the process 
that we are utilizing, and implementing technology; we have 
components for each of those. I will need to get for you the 
record, the technology portion, for implementing our Veterans 
Benefits Management System.
    Mr. Bilirakis. Give me a time frame. I know you want to 
implement this. When will it become reality? Give me an 
approximate time frame.
    Ms. Rubens. Certainly. For the efforts that are all 
encompassing, across people, process, and technology, we are in 
the midst of the implementation for it. The full component, 
that will begin in January. For the technology piece, the 
implementation of the Veterans Benefits Management System is 
actually a three-phased approach. We are into the third phase. 
We have two offices that are currently engaged in helping us to 
establish the appropriate requirements, provide testing and 
feedback to ensure that the new paperless system provides us 
what we need from the repository where the electrons will be 
housed and that the systems themselves will allow us to operate 
in that paperless environment, replacing our current processing 
systems.
    Mr. Bilirakis. How much time do you think we will save as 
far as for the constituents regarding processing of claims if 
we move to a paperless system?
    Ms. Rubens. Yes, sir. Today as we look at the overall 
transformation we are targeting to meet the Secretary's very 
ambitious goals of completing all claims within 125 days at 98 
percent quality by 2015.
    Mr. Bilirakis. Very good. Thank you very much. Anyone else 
want to ask a question? Did you have any? I think we are 
basically finished here. On behalf of the Committee I thank 
each and every one of you for your testimony and we look 
forward to working with you of course in the future. Based on 
what I have heard today there is no small amount of work. It 
can be done. In other words, we have to keep working on it. I 
repeat my earlier desire to work with members on both sides of 
the aisle to ensure America's veterans have access to the 
benefits and services that they deserve.
    I ask unanimous consent that all members have five 
legislative days in which to revise and extend their remarks. 
Hearing no objection, so ordered. I want to thank the panel for 
their testimony. Thanks again for your attendance at today's 
hearing. And the Committee is adjourned. Thanks so much.
    [Whereupon, at 12:00 p.m., the Committee was adjourned.]

                            A P P E N D I X

                              ----------                              

           Prepared Statement of Hon. Jeff Miller, Chairman,
                     Committee on Veterans' Affairs
    Good morning everyone. Welcome to this morning's hearing.
    Today we will review recommendations from several veterans service 
organizations for possible savings within the Department of Veterans 
Affairs.
    As everyone knows, we are in an unprecedented time of fiscal 
restraint in America, one that is long overdue. The Budget Control Act, 
now the law of the land, has put in place for the next decade caps on 
discretionary spending for every account in government, including VA. 
These caps will permit overall government spending to grow at roughly 
2.5 percent annually.
    Needless to say, the next 10 years will look vastly different than 
the last 10 in terms of spending. Now, it is my belief that veterans' 
spending and defense spending remain the absolute top priority going 
forward. Maintaining the Nation's defense is a clear constitutional 
charge of the Congress--and I include the care of those who have fought 
for our country's freedom as an inextricable part of that charge.
    With that said, no agency should ever be exempt from a constant 
effort to become more efficient in its operations, or root out waste, 
fraud, and other questionable spending.
    It is with this in mind that I solicited the help of the leading 
veterans' organizations to highlight areas of potential savings within 
VA, which could be redirected to provide better care and benefits to 
veterans.
    The VSO response was outstanding. They provided nine areas for the 
Committee to examine, and I am so pleased they are here today to 
discuss those and other areas of potential savings. Some of what they 
recommended, such as VA's questionable payment of bonuses to already 
well-paid employees, were addressed in legislation reported from the 
Committee and passed by the house.
    Other recommendations require ongoing scrutiny, and today's hearing 
continues the Committee's oversight function to that end. I also want 
to thank the participation of VA at this hearing.
    I believe there are sincere efforts underway--and documented 
success in several areas already--which show that Secretary Shinseki is 
serious about VA's stewardship of taxpayer dollars.
    Nevertheless, there are many areas that need improvement and 
continued oversight.
    The VA Office of Inspector General's testimony will confirm that 
this morning and I thank the VA OIG for its work with the Committee, 
VA, and veterans' advocates in our common purpose.
    Before I close, let me touch on one other issue that is on 
everyone's mind, one that Carl Blake raises in his opening statement 
for the Paralyzed Veterans of America. Namely, the question of whether 
VA medical care is exempt from indiscriminate cuts that would occur 
across government accounts under a sequester order.
    Now, it's my firm hope and expectation that the Joint Select 
Committee will rise to its calling and produce a bill which saves a 
minimum of $1.2 trillion over the next decade that can clear the 
Congress and be signed by the President. Should that not happen a week 
from tomorrow, however, veterans and their loved ones deserve to know, 
now, whether VA will be affected by a looming sequester.
    It's my belief that VA is absolutely exempt. But only the Office of 
Management and Budget is vested with the authority to determine the 
sequester rules. To date, OMB has not been clear on this point.
    Mr. Grams, I hope you can shed some light on the Administration's 
position when you appear on our second panel.
    Again, I thank all of our witnesses for their attendance this 
morning.
    I now turn to our Ranking Member for her opening statement. Ms. 
Brown, you are recognized.
                                 
                Prepared Statement of Hon. Corrine Brown
    Chairman Miller, Ranking Member Filner, thank you for holding this 
hearing today.
    It is important to make sure that veterans get the resources they 
need while making sure the resources are not wasted.
    I am pleased to have been a member of this Committee who worked 
with leadership to increase the VA budget by its largest amount in its 
history. We need to continue to support these increases while not 
wasting the resources that need to help both current and future 
veterans. And at no time have I ever advocated to balance the budget on 
the backs of our veterans. When the VA saves money, it puts those 
resources back into the veteran, not the General Fund.
    I thank the VSOs for the work they do and their involvement in this 
process. Their Independent Budget helps keeps this committee honest 
when allocating resources for the upcoming fiscal year and makes sure 
the accounts that need funding, get it.
    One of my foremost concerns is to ensure that the resources get to 
the veterans. It is important that the Departments of Veterans Affairs, 
Housing and Urban Development and Labor work together to help veterans. 
Housing and Veterans. Homeless veterans are one of the worst marks on 
our policies. How can these young men and women be cast off to the side 
after serving their country? The three departments need to work 
together to solve the problem, because it is not happening separately.
    I fully support the work that Secretary Shinseki has begun at the 
VA. As this committee has said repeatedly, the culture of working 
against the veterans needs to change to where they are the advocate for 
the veteran. The Secretary is moving the VA in that direction. It takes 
time.
    I look forward to hearing the testimony of the witnesses today.
    Thank you Mr. Chairman.

                                 
           Prepared Statement of Joseph A. Violante, National
            Legislative Director, Disabled American Veterans
    Chairman Miller, Ranking Member Filner, and Members of the 
Committee:
    Thank you for inviting me to testify about areas within the 
Department of Veterans Affairs (VA) that should be scrutinized by 
Congress to ensure that inefficiency, duplication and waste are 
minimized or eliminated. On behalf of the Disabled American Veterans 
(DAV), and in partnership with my colleagues from The American Legion, 
Veterans of Foreign Wars (VFW), AMVETS, and Paralyzed Veterans of 
America (PVA), I am pleased to appear before you this morning.
    Earlier this year, in response to your request, DAV, VFW, PVA, 
AMVETS and The American Legion worked together to develop 
recommendations for areas within VA where inefficiency or waste might 
be uncovered and eliminated. We have been pleased to see that since we 
submitted our recommendations on April 4, both the General 
Accountability Office (GAO) and VA's Office of Inspector General 
(VAOIG) have produced reports that touch on several of our 
recommendations, and we have incorporated some of their comments into 
our testimony. Like you and all members of this Committee, we believe 
that the precious resources allotted to VA must be wisely and 
efficiently spent, especially when our Nation faces fiscal and economic 
crises resulting from massive government deficits and debt. Every 
dollar that is misspent is one that cannot be used to help a veteran in 
need.
    However, it is also important to recognize that simply cutting VA's 
budget in the absence of detailed justifications or evidence of 
savings, is more likely to result in a loss of accessibility, quality 
and safety of the services veterans depend on, rather than true deficit 
reduction. Furthermore, we believe such an approach will likely lead in 
the future to additional, avoidable spending to ``fix'' problems that 
manifest as a direct result of underfunding essential services for 
veterans.
    For example, a decade ago, the Bush Administration proposed several 
successive VA budgets, each of which proposed to make substantial 
``management efficiencies'' and thereby reduce the need for billions of 
dollars in direct appropriations. Although funding was indeed reduced, 
no efficiencies were ever documented to have been achieved while the 
demand and need for resources continued to rise. As a consequence, 
after several such budget cycles, newly-confirmed Secretary Nicholson 
in 2005 returned to Capitol Hill just weeks after presenting the FY 
2006 budget and admitted VA was seriously underfunded by more than a 
billion dollars. In the end, Congress provided the requested 
supplemental appropriations to cover the unmet demand, but not before 
thousands of veterans were turned away or forced to wait for vital VA 
health care services.
    For these reasons, we urge this Committee to closely examine a 
number of troubling elements of VA's budget and appropriations that 
seem to echo these same problems from the past. For example, the FY 
2012 budget presented in February for VA health care by the Obama 
Administration relies on several ``gimmicks'' to reduce the real dollar 
appropriations provided by Congress, including a projected $1.2 billion 
in savings from ``operational improvements,'' $500 million in carryover 
funding from FY 2011, an unexplained or justified reduction in non-
recurring maintenance, and an approximate $1 billion contingency fund 
for medical care that may or may not be released to VA. All of these 
assumptions have been built into VA's FY 2012 budget, thereby lowering 
the level of appropriations approved by Congress, yet there are serious 
questions about whether these ``savings'' will indeed reduce VA's need 
for direct funding.
    Further straining VA's medical care budget, receipts from the 
Medical Care Collections Fund (MCCF) have been dropping. In February of 
this year, VA indicated that contrary to prior assumptions used to 
build the FY 2012 advance appropriation for medical care, MCCF receipts 
were expected to drop by $600 million. Later in July, Secretary 
Shinseki reported to Congress that ``MCCF collections are 8.5 percent 
below plan . . . ,'' further reducing funding available to VA for FY 
2012 medical care programs.
    In July, the Secretary reported that implementation of the new 
caregiver programs would cost almost $100 million more in FY 2012 than 
previously estimated. He also stated that VA's ``. . . ability to 
achieve operational improvements . . . remains an element of risk to 
the sufficiency of the FY 2012 budget.'' In a report released in June, 
GAO raised these same concerns about the ``operational improvements,'' 
citing similarities to ``management efficiencies'' proposed by VA in 
prior years that did not materialize and were never documented as 
having been achieved. In addition, GAO reported that in VA's FY 2012 
medical care budget submission, funding for non-recurring maintenance 
had been lowered $900 million below the level that VA's own Enrollee 
Health Care Projection Model (EHCPM) had already projected was needed 
to maintain its health care facilities.
    Mr. Chairman, if we are to ensure that VA actually eliminates 
duplication, inefficiency and waste from its budget, rather than just 
cutting services for veterans, we must have an accurate and transparent 
budget process to measure whether savings are achieved. First, did the 
carryover funding from FY 2011 to FY 2012 actually take place? What is 
the current projection for MCCF in FY 2012? How will VA measure whether 
savings from proposed ``operational improvements'' actually 
materialize? Does VA anticipate requesting the funding designated for 
contingency purposes?
    Moreover, as we work to find areas where real savings might 
actually be achieved, we must keep in mind that VA has significant 
underfunded needs that are essential to the integrity of the system 
itself, especially its health care infrastructure. VA's Strategic 
Capital Investment Planning (SCIP) process has estimated that VA space 
is over-utilized at 114 percent of its intended capacity. SCIP has 
identified at least 4,808 capital projects that should be completed 
within 10 years, at a cost estimated to be between $53 and $65 billion. 
Yet funding for major and minor construction has gone down, not up, and 
funding for non-recurring maintenance and equipment purchases are being 
cut below what VA's own actuarial model estimates is needed.
    Although Congress has funded a significant number of new facilities 
in recent years, the vast majority of existing VA medical centers and 
other associated buildings are, on average, more than 60 years old. 
Aging facilities create an increased burden on VA's overall maintenance 
requirements. All facilities must be maintained aggressively so that 
their building systems--electrical, plumbing, capital equipment, etc.--
are up to date and that these facilities are able to continue to 
deliver health care in a clean and safe environment.
    Unless VA effectively responds to these needs, we fear that VA's 
capital programs and the significant effects on the system as a whole, 
as well as the veterans individually, will go unchanged; ultimately 
risking a diminution of the care and services provided by VA to sick 
and disabled veterans in substandard facilities. Older, out dated 
facilities do not only present patient safety issues, but from VA's 
perspective, older buildings often have inefficient layouts and 
inefficient use of space and energy. This means that even with 
modification or renovation, VA's operational costs will be higher than 
they would be in a more modern structure. For these reasons, we believe 
that if Congress is able to find true ``savings'' the first obligation 
must be to use them to help fund the essential long-term maintenance 
needs of the VA health care system.
    Mr. Chairman, I would also like to comment on one proposal to make 
``savings'' that may be considered by the so-called ``Super 
Committee:'' to take back all or part of the cost-of-living-adjustment 
(COLA) increase for veterans disability compensation and survivors' 
disability indemnification compensation (DIC) payments that Congress 
just approved. As you know, disabled veterans have not had a COLA 
increase since December 2009.
    On October 19, it was announced that there would be a 3.6 percent 
COLA for Social Security recipients next year, and the Senate 
immediately and unanimously passed legislation (S. 894) to apply this 
same COLA increase to veterans disability compensation payments. On 
November 2, the House also passed this COLA legislation unanimously, 
just as it had done with companion House legislation (H.R. 1407) 
earlier this year. We expect the President will sign this legislation 
any day now. Mr. Chairman, we want to thank you and all members of this 
Committee for helping to pass this vital legislation. As you have 
stated, for the past ``. . . 2 years, our veterans have not received an 
increase. This additional income will help them make ends meet in the 
coming year.''
    However, we are distressed to hear that the ``Super Committee'' may 
consider a proposal to freeze, delay or cut this very COLA that 
Congress just passed without one dissenting vote. While we recognize it 
is difficult to make reductions in Federal spending, we believe it 
would be irresponsible to target cuts at those who have already 
sacrificed so much for their country. For many of these veterans, 
particularly those with severe and catastrophic disabilities, these 
payments may be their primary or even their only source of income.
    For the past 2 years, disabled veterans have seen no COLA 
increases, and for many it has become increasingly harder to make ends 
meet. While the official COLA may have been zero for those years, it is 
important to understand that the CPI index upon which the COLA is 
calculated does not take into account increases in the cost of food or 
gasoline. In addition, as disabled veterans grow older, their needs may 
also increase due to declining health and increased morbidity. We agree 
with the sentiment that Mr. Filner expressed on the House floor when he 
said, ``. . . [Congress] would be derelict in our duty if we failed to 
guarantee that those who sacrificed so much for this country are able 
to receive benefits and services that keep pace with their needs and 
inflation.''
    Mr. Chairman, in this context, our veterans organizations have 
worked together to identify specific areas throughout VA where we 
believe the Committee could focus additional attention to find 
inefficiency, duplication and waste. Many of the ideas we developed 
were already on the Committee's oversight agenda, so in our joint 
letter of April 4, we focused on nine additional areas that offered new 
opportunities for the Committee to consider. In the spirit of 
eliminating duplication and being efficient, my colleague from PVA will 
focus on the first five areas from our letter and I will focus on the 
last four.

Duplicative Surveys of State Veterans Homes

    Currently, State Veteran Homes must undergo regular evaluation by 
VA inspection teams. Many of these same veterans' homes are also 
inspected by the Centers for Medicare and Medicaid Services (CMS). The 
CMS survey has approximately 185 criteria and is considered the more 
stringent survey. The VA survey has 158 criteria, 150 of which are 
already contained in the CMS survey. VA could quickly review its eight 
unique criteria as part of the CMS survey team or on its own, in order 
to cease such duplication of efforts. Such overlap in inspection 
regimes appears unwarranted and we understand that VA itself has been 
seeking to engage CMS to consider ways to eliminate this duplication, 
however so far they have been unable to make much progress. We urge the 
Committee to examine this overlap of efforts in order to reduce the 
administrative burden on both VA and State Veterans Homes and 
potentially achieve savings.

VBA Records Management and Shredding Practices

    In response to alarming instances of security lapses and the 
discovery of the destruction of veterans' claims files by employees, 
VBA in recent years has instituted a number of new security protocols, 
including records management practices. While VBA absolutely needed to 
take corrective action to ensure that essential veterans' records were 
never again destroyed in the future, we have heard credible reports 
that some VA Regional Offices (VARO) may have gone too far and spent 
too much time and resources on shredding non-essential paperwork. We 
understand each VARO has designated a ``Records Management Officer,'' 
often at one of the higher GS levels, who spends an inordinate amount 
of time focused on the shredding of documents. We have been told that 
such records management practices have become overly complicated; in 
fact, some VAROs even have procedures for shredding Post-It notes, 
further burdening VBA employees struggling to properly adjudicate 
hundreds of thousands of pending claims. It is our understanding that 
VBA has made some changes over the past 6 months in this area, however, 
we would recommend that the Committee continue to investigate whether 
current records management practices are effective and appropriate to 
meet the requirements of protecting and preserving veterans' records, 
without wasting precious VA resources.

The Costs of Brokering VBA Claims Work

    Another area of the VBA claims process that needs scrutiny is the 
practice of brokering claims between and amongst VBA regional offices, 
and particularly the significant costs of transporting such brokered 
claims files. Brokering has become a standard practice in recent years 
as some VAROs have been overwhelmed with the sheer volume of work. VBA 
has created more than a dozen specialized Resource Centers at VAROs to 
handle brokered claims; four doing development phase work, eight doing 
rating, award and authorization work, and one ``Tiger Team'' that does 
all phases of the claims process on the oldest and most complex 
brokered claims. According to a VA Inspector General (VAOIG) report in 
September, the number of brokered claims has been rising in recent 
years, reaching 18 percent in FY 2010. Although that number has dropped 
over the past 18 months as these resource centers have been shifted to 
work on Nehmer claims, but as the Nehmer workload ends later this year 
the resource centers will once again start to receive large numbers of 
brokered claims.
    While VBA is still awaiting a paperless solution to its claims 
processing problems, it must maintain and process virtually all claims 
using paper files, many of which contain hundreds of pages. It is our 
understanding that claims are transported using FedEx services in both 
directions. Furthermore, some claims are brokered twice: once from the 
home VARO to a resource center doing development, then after being 
returned to the home VARO, the claims file is sent to another resource 
center for the rating, award and authorization work, and then back 
again to the home VARO. The costs of transporting these claims using 
express delivery services must be quite substantial. In addition, the 
number of personnel involved in locating, organizing, delivering, 
receiving and distributing these paper files must also be quite 
substantial. The VAOIG report also found other areas of concern related 
to the timeliness and quality of the work done through this brokering 
process that the Committee needs to review.
    We would recommend that the Committee examine the entire brokering 
system, particularly the paper-centric logistical demands of the 
current practices. We believe that VA should consider transitioning 
rapidly to digitizing all claims files that are to be brokered. If 
feasible, such a change could redirect spending from shipping paper 
files to digitizing files in anticipation of future paperless 
processing.

Regular Use of Authorized Overtime

    One additional area in VBA that merits scrutiny by the Committee is 
the use of mandatory or ``authorized overtime'' as a regular practice 
to address increased workload. While VBA continues its myriad efforts 
to develop a new paperless, rules-based process for developing and 
adjudicating claims, it has relied on increased manpower to meet the 
current workload requirements. As the total number of claims filed has 
grown to over 1.2 million per year, VBA has hired several thousand new 
employees to try and keep pace. In addition, we understand that most 
VAROs have also increased the regular use of ``authorized overtime'' by 
employees in an attempt to meet production goals. We have concerns 
about whether sufficient and cost-effective productivity gains can be 
achieved through heavy reliance on overtime. More importantly, we have 
concerns about the effects on quality if employees are being mandated 
to work under the pressure and strain from extended hours. We recommend 
that the Committee examine VBA's use of overtime and further examine 
whether VBA's personnel projections and staffing models are accurately 
meeting their workload requirements.
    Finally, I do want to add one comment about the issue of Senior 
Executive Service (SES) bonuses that was discussed in our joint VSO 
letter and in my colleague's testimony today. While it is important for 
Congress and VA to consider whether it is appropriate to provide SES 
bonuses at a time when Federal employees are in the midst of a 2-year 
Federal pay freeze, we would not want to see VA put at a competitive 
disadvantage to other Federal agencies. If Congress were to consider 
reducing or eliminating SES bonuses for any time period, it must do so 
across all Federal agencies, not just target VA. We must ensure that 
those dedicated men and women who choose work that serves our veterans 
are equally valued and compensated as those who work elsewhere in the 
Federal Government.
    Mr. Chairman, as we have pledged to you previously, we will 
continue to work with this Committee and others in Congress to identify 
areas within VA where there may be duplicative, ineffective, 
inefficient or wasteful use of VA resources. We share your desire to 
ensure that the precious funding dedicated to the care of America's 
veterans, especially disabled veterans, achieve its intended purposes.
    That concludes my testimony and I would be happy to respond to any 
questions you may have.

                                 
               Prepared Statement of Carl Blake, National
          Legislative Director, Paralyzed Veterans of America
    Chairman Miller, Ranking Member Filner, and Members of the 
Committee, Paralyzed Veterans of America (PVA) is pleased to be here 
today to discuss the ongoing debate about deficit and debt reduction 
and how that might affect the Department of Veterans Affairs (VA). This 
Committee has expressed an interest in this issue since the beginning 
of the year. In fact, as you know, PVA, along with AMVETS, Disabled 
American Veterans, The American Legion, and Veterans of Foreign Wars, 
addressed this issue in a letter provided to the Committee in April 
2011. Today, we will address the various issues that were outlined in 
our letter to the Committee. Additionally, we will address the larger 
budget and appropriations process and ongoing activities within the VA 
related to this process.
    Before discussing the ideas put forth by the five veterans service 
organizations represented here today, I would like to focus my comments 
on the current status of the budget and appropriations process. Once 
again, Congress has failed to fulfill its obligations to complete work 
on appropriations bills funding all Federal departments and agencies, 
including the VA, by the start of the new fiscal year on October 1, 
2011. Fortunately, as has become the new normal, last year the 
enactment of advance appropriations shielded the VA health-care system 
from the political wrangling and legislative deadlock. However, the 
larger VA system is still negatively affected by the incomplete 
appropriations work. VA still faces the daunting task of meeting ever-
increasing health-care demand as well as demand for benefits and other 
services.
    Meanwhile, the VA is operating based on the parameters of P.L. 112-
36, the ``Continuing Appropriations Act for FY 2012.'' As we understand 
it, the VA has implemented an across-the-board reduction in all program 
spending of approximately 1.5 percent. As you know, one of the main 
reasons that Congress passed, and the President signed, legislation 
creating advance appropriations was precisely to allow the VA health 
care system to be able to function efficiently and without 
interruptions caused by budget showdowns and stop-gap continuing 
resolutions. That is why Congress included a full year FY 2012 advance 
appropriations for VA medical care in P.L. 112-10, the ``Full Year 
Continuing Appropriations Act for FY 2011,'' passed in April 2011. For 
this legislation to be superseded or misinterpreted by short term CRs 
and result in a reduction of VA health care funding that was already 
approved is absolutely outrageous.
    Moreover, we are particularly concerned about steps the VA has 
taken in recent years to generate resources to meet ever-growing demand 
on the VA health care system. In fact, the FY 2012 and FY 2013 advance 
appropriation budget proposal released by the Administration earlier 
this year includes ``management improvements,'' a popular gimmick used 
by previous Administrations to generate savings and offset the growing 
costs to deliver care. Unfortunately, these savings were often never 
realized leaving the VA short of necessary funding to address ever-
growing demand on the health care system. We believe that continued 
pressure to reduce Federal spending will only lead to greater reliance 
on gimmicks and false assumptions to generate funding. In fact, the 
Government Accountability Office (GAO) outlined its concerns with this 
budget accounting technique in a report released to the House and 
Senate Committees on Veterans' Affairs in June 2011. In its report, GAO 
states:

         If the estimated savings for fiscal years 2012 and 2013 do not 
        materialize and VA receives appropriations in the amount 
        requested by the President, VA may have to make difficult 
        tradeoffs to manage within the resources provided.\1\
---------------------------------------------------------------------------
    \1\ U.S. Government Accountability Office. (2011, June). GAO-11-
622. Veterans' Health Care Budget Estimate: Changes Were Made in 
Developing the President's Budget Request for Fiscal Year 2012 and 
2013.

    This observation reflects the real possibility that exists should 
VA health care, as well as other programs funded through the 
discretionary process, be subject to spending reductions.
    And yet, we are here today to further discuss savings that can be 
realized within the VA. As we outlined in our letter to the Committee 
earlier this year, the veterans service organizations are not so naive 
as to think that cost-savings cannot be found within the VA, but the 
question remains: ``To what end?'' The context of this hearing is to 
identify savings within the VA that can be presumably returned to the 
Treasury for deficit and debt reduction. However, we believe the VA is 
already failing to meet the demands being placed on its health care and 
benefits systems. We would argue that any savings realized by the VA 
should be used to fill gaps in services now or be immediately 
reinvested into the system to make it function more efficiently and 
effectively. This is especially true when discussing the maintenance 
and modernization of the infrastructure necessary to deliver the 
benefits and services authorized under current law.
    In response to your budget hearing questions posed after the 
release of the Administration's budget request in February about 
``savings'' and ``waste'' within VA, we presented our shared views on 
the need for Congress to conduct aggressive oversight of Federal 
veterans' programs and services to ensure that they are providing 
maximum value to our Nation's veterans. Like you, we are committed to 
working collaboratively to identify areas of inefficiency, duplication 
or waste so that the resources provided by Congress to the VA are 
effectively and efficiently used to deliver the benefits and services 
due to our Nation's veterans. However, to simply cut spending across-
the-board, in the absence of detailed justifications or evidence of 
savings, will likely result in the loss of accessibility, quality and 
safety of the services veterans depend on, rather than true deficit 
reduction. We believe such an approach will likely lead to additional, 
unnecessary and avoidable spending to ``fix'' problems created by 
underfunding essential services for veterans.
    Within this context, we have worked together to identify specific 
areas throughout VA where we believe the Committee should focus its 
attention in efforts to find inefficiency, duplication and waste. Many 
of our ideas are already on the Committee's oversight agenda. My 
comments will focus on the issues identified in our joint letter 
targeted at the administration of the VA and the health care system.

Growth of General Administration

    In recent years, increased scrutiny has been placed upon the 
administrative sections of the VA, most notably on General 
Administration. The VA's General Administration budget request includes 
funding for the Office of the Secretary, the Board of Veterans' 
Appeals, the General Counsel, and the Offices of Management, Human 
Resources, Policy and Planning, Operations and Security, Public and 
Intergovernmental Affairs, Congressional and Legislative Affairs, and 
Acquisitions, Logistics, and Construction. In FY 2012, the 
Administration recommended an 11.3 percent increase in funding for its 
General Administration accounts, the largest account increase within 
the VA. As we expressed, and as the Committee likewise emphasized, 
during the hearing held in conjunction with the release of the FY 2012 
Budget Request in February, we have serious concerns that rising VA 
Central Office (VACO) management budgets and expanding personnel 
comprise a significant portion of FY 2012 budget growth. In fact, it 
was particularly troubling to our organizations that the Administration 
requested a considerable increase in funding for General Administration 
while simultaneously requesting a decrease in funding for the Veterans 
Benefits Administration
    The scale of the increases sought in General Administration do not 
appear reasonable and we have concerns about whether such bureaucratic 
growth is necessary during a time when veterans face delays in 
accessing medical care and proper claims adjudication. However, we 
would like to impress upon the Committee that some of the changes to 
administrative funding in the VA are the result of new requirements and 
programs authorized by Congress. It is not surprising that the VA might 
choose to direct more funding to its administrative functions in order 
to respond to the actions of Congress. Ultimately, when budgets are 
limited, it is essential that every penny reach the veteran at the 
ground level. We urge this Committee to scrutinize the General 
Administration account, including travel and meeting costs, and to 
limit funding increases only where necessary, and to redirect these 
funds to the services and programs that immediately impact veterans. 
Moreover, it is imperative that the Committee consider the 
ramifications of any new programs authorized or requirements placed 
upon the VA.

Size of VISN Administrations

    Similarly, we are concerned about the size and growth of the VISN 
(Veterans Integrated Service Networks) bureaucracies within the 
Veterans Health Administration (VHA). When this new organizational 
model was developed, the plan called for VISNs to employ a small number 
of managers and support staff, perhaps a dozen or so, and any 
additional expertise needed would come from existing personnel at 
medical centers and other existing facilities. Today, however, some 
VISNs employ hundreds of administrative personnel and have built 
enormous buildings to serve as their permanent headquarters.
    We understand that VA leadership is beginning to take steps that 
will better align the VISN administrative structure with the duties and 
responsibilities placed upon those offices. However, we hope that as 
the VA reorganizes its personnel alignment at the VISN level that these 
changes do not translate to simply administrative staff at a different 
location. Any change in VISN organization should have quality, timely 
health care delivery as its priority. Ultimately, while we believe 
there is certainly value in the regional network model that VHA 
employs, we urge the Committee to carefully examine the growth of VISNs 
and the increasing share of the budget that they currently consume.

Funding ``Hold Back'' at VACO and VISNs

    Related to concerns about VACO and VISN growth is the manner in 
which Congressionally-appropriated funds for medical care are 
distributed to the field. In particular, we have concerns about the 
practice of ``hold back'', by which VACO or VISNs may withhold medical 
care appropriations from being distributed to facilities as directed by 
the Veterans Equitable Resource Allocation (VERA) system. VERA 
determines the level of funding each facility should receive annually 
based upon the quantity and value of services provided in prior years, 
relative to the amount of medical care appropriations in the current 
budget. However, it has become a common practice that VACO ``holds 
back'' a significant amount of this funding and retains it to be 
distributed as it determines for special programs or projects, or to 
meet contingencies that may arise throughout the year. Similarly, VISNs 
``hold back'' portions of the VERA funding they receive to fund their 
operations and for other programs and projects that they manage.
    In fact, as we have already explained in this testimony, the VA is 
currently holding back approximately 1.5 percent of the advance 
appropriations (as well as other VA funding) for health care as a 
result of its interpretation of the current ``Continuing Resolution.'' 
Preventing funds from being disbursed to the field ultimately 
diminishes the care being provided. As we have already testified, all 
of our organizations have received credible reports from VHA facilities 
across the country in recent years that despite significant year-to-
year increases for VA medical care, local facilities received only 
small or no increases.
    This is particularly troublesome when we continue to hear about 
funding shortfalls occurring at medical centers around the country. 
Likewise, there continue to be reports everyday of the VA falling short 
in provision of various health care services. In fact, The New York 
Times recently reported on a survey of VA mental health professionals 
in an article on October 24, 2011:

         Only 29 percent of respondents--272 psychologists, 
        psychiatrists, nurses and social workers at dozens of hospitals 
        and clinics--said their workplace had enough staff to meet 
        demand. Nearly 40 percent said they could not schedule an 
        appointment for a new patient within the 2-week window the 
        veterans department requires. Nearly 70 percent said they 
        lacked enough space. And nearly half said some patients were 
        being denied care because no appointments were available 
        outside regular office hours.

    We regularly hear reports of hiring freezes that seem inconsistent 
with the growth of VA's medical care appropriations. Several VA medical 
center (VAMC) directors have reported budget shortfalls that would 
preclude them from moving forward with hiring. In fact, the American 
Federation of Government Employees (AFGE) testified earlier this year 
that in the VAMC in Delaware, budget shortfalls resulted in leadership 
leaving beds empty in emergency rooms and therefore limiting the 
ability to provide necessary care to the community's veterans. Last 
fall, the Director of the Indianapolis VAMC, in a newsletter to his 
staff, informed them that the facility expected to be $28 million short 
of the resources required for FY 2011; this despite VA having received 
a significant funding increase through advance appropriations. And yet, 
the VACO response has been that directors ``want'' more money than they 
``need.'' We would beg to differ with this assertion. We urge the 
Committee to examine how VA ``holds back'' medical care appropriations 
from being distributed through VERA, how VISNs do similar ``hold 
backs,'' and whether such practices are properly using medical care 
funding, including focusing on the growth of administrative personnel 
and ``special projects.''
    Additionally, we must reemphasize that often the VA is forced to 
withhold funding to VISN and local levels in order to address new 
program requirements created through Congressional authorization.

SES Bonuses

    Another area that has drawn significant scrutiny in recent years is 
the distribution of bonuses to the Senior Executive Service (SES) 
employees at a time when there are serious questions about management 
performance, particularly in an environment where Federal funding is 
constrained. For example, last year the Veterans Benefits 
Administration (VBA) distributed $417,152 in bonuses to 30 SES 
employees while veterans wait interminably long periods to receive 
their proper disability benefits. During 2010, the backlog of 
compensation and pension entitlement claims pending over 125 days 
(VBA's standard) rose from just less than 180,000 to over 290,000 
claims. Furthermore, a March 2010 GAO report found that accuracy as 
noted by VBA's own STAR program had not increased, but fallen from 86 
percent accuracy to below 84 percent accuracy. When every metric of 
VBA's performance drops, it appears unreasonable that management should 
be rewarded.
    Given that the VA's workforce has dealt with a pay freeze for all 
Federal employees for the last 2 years, the payment of bonuses seems 
completely unjustified. Overall, focused solely on bonuses paid to the 
SES employees, last year VA paid out over $3.4 million dollars to 238 
SES employees with an average SES Performance Bonus exceeding $14,000. 
This is nearly half of the Bureau of Labor Statistics estimate of the 
average American salary of $32,708 for 2010.
    We understand that executive bonuses serve an important purpose. In 
order for the VA to be competitive in the marketplace for senior 
executive leadership, it must be able to provide financial incentives 
to candidates and employees. However, given the tight fiscal situation 
facing the VA, rather than taking $3.4 million dollars to reward senior 
executives of VA, we believe this funding might be better directed to 
ensure essential programs are funded to assist those who have fought to 
defend our Nation. We urge Congress to scrutinize the bonus practices 
within VA, particularly while a Federal pay freeze is in effect. 
Additionally, we believe Congress should not limit its scrutiny of SES 
bonuses to the VA, but to all other Federal agencies which you have 
oversight authority over in other committees.

Care Coordination for VA Fee-Based Care

    Another area we urge the Committee to address is the lack of 
coordination of non-VA purchased care and the process of referring 
veterans to local providers. A veteran who is approved for fee-based 
care is not currently provided a list of providers who are certified, 
licensed, or accredited to practice. Furthermore, VA does not identify 
local providers in the veteran patient's community that accept VA's 
payment rate. VA's General Counsel has indicated that this 
``identification and referral'' process may not adhere to full and open 
competition requirements as well as other quality oversight issues. 
Failure to adopt such an identification and referral process can lead 
to veterans being unable to find qualified providers. It can also lead 
to VA paying higher rates than necessary because savings could have 
been achieved if VA would identify and contract with local networks or 
providers at lower rates. We urge Congress to conduct oversight of non-
VA purchased care to ensure coordination of care and to avoid improper 
payments.

Joint Select Committee on Deficit Reduction

    Ultimately, discretionary spending in the VA accounts for 
approximately $62.0 billion. Of that amount, nearly 90 percent of that 
funding is directed towards VA medical care programs. As the Joint 
Select Committee addresses the possibility of reductions in 
discretionary spending across the entire Federal Government, including 
the VA, it is important to emphasize that any cuts to VA spending will 
have a direct impact on the delivery of health care services and 
benefits to veterans and their families.
    We are concerned that in the event that the Joint Select Committee 
fails to agree to a bipartisan solution or the House or Senate fails to 
approve the Committee's recommendations, an automatic ``trigger'' would 
occur that would immediately cut an additional $1.2 trillion in Federal 
spending. The triggers would target two principle areas of the Federal 
budget--national security spending and all other domestic spending. For 
FY 2012 and FY 2013, the VA would be included in the national security 
category along with the Department of Defense, Department of Homeland 
Security, Department of State, and similar agencies. While we believe 
all VA programs are excluded from automatic cuts by P.L. 111-139, The 
``Statutory Pay-As-You-Go Act of 2010,'' questions remain about whether 
or not VA health care spending in particular could be included in 
broader discretionary spending reductions. In fact, Section 11 (Exempt 
Programs and Activities) of P.L. 111-139 specifically states:

         (b)  VETERANS PROGRAMS--The following programs shall be exempt 
        from reduction under any order issued under this part:

         ``All programs administered by the Department of Veterans 
        Affairs.''

    We believe this language is crystal clear in outlining the priority 
that Congress has placed on funding for VA programs, even in the face 
of pressure to reduce the deficit.
    The VA is the best health care provider for veterans. Providing 
primary care and specialized health services is an integral component 
of VA's core mission and responsibility to veterans. Across the Nation, 
VA is a model health care provider that has led the way in various 
areas of medical research, specialized services, and health care 
technology. The VA's unique system of care is one of the Nation's only 
health care systems that provide developed expertise in a broad 
continuum of care. Currently, VHA serves more than 8 million veterans, 
and provides specialized health care services that include program 
specific centers for care in the areas of spinal cord injury/disease, 
blind rehabilitation, traumatic brain injury, prosthetic services, 
mental health, and war-related polytraumatic injuries. Such quality and 
expertise on veterans' health care cannot be adequately duplicated in 
the private sector. Any reduction in spending on VA health care 
programs would only serve to degrade these critical services.
    In the end, it is easy to forget, that the people who are 
ultimately affected by wrangling over the budget are the men and women 
who have served and sacrificed so much for this Nation. We hope that 
you will consider these men and women as you continue to investigate 
areas for potential savings within the VA budget.
    This concludes my testimony. I will be happy to answer any 
questions you may have.

Information Required by Rule XI 2(g)(4) of the House of Representatives

    Pursuant to Rule XI 2(g)(4) of the House of Representatives, the 
following information is provided regarding Federal grants and 
contracts.
                            Fiscal Year 2011
    Court of Appeals for Veterans Claims, administered by the Legal 
Services Corporation--National Veterans Legal Services Program--
$300,000 (estimated).
                            Fiscal Year 2010
    Court of Appeals for Veterans Claims, administered by the Legal 
Services Corporation--National Veterans Legal Services Program--
$287,992.
                            Fiscal Year 2009
    Court of Appeals for Veterans Claims, administered by the Legal 
Services Corporation--National Veterans Legal Services Program--
$296,687.

                                 
           Prepared Statement of W. Todd Grams, Executive in
        Charge for the Office of Management and Chief Financial
              Officer, U.S. Department of Veterans Affairs
    Good morning, Chairman Miller, Ranking Democratic Member Filner, 
and Members of the Committee. I am accompanied today by Mr. William 
Schoenhard, FACHE, Deputy Under Secretary for Health for Operations and 
Management, Veterans Health Administration and Ms. Diana Rubens, Deputy 
Under Secretary for Benefits for Field Operations, Veterans Benefits 
Administration.
    I am pleased to be here with my colleagues and to share this forum 
with representatives of the Department of Veterans Affairs (VA) Office 
of Inspector General (OIG). I also want to recognize as our partners 
and friends, the Veterans Service Organizations (VSO). They serve as 
tireless advocates for Veterans and support, in so many ways, VA's 
mission to serve Veterans across the array of health care, disability 
compensation, memorial benefits and other services they have richly 
earned. The VSOs also provide VA with useful observations on VA's 
performance, from their own professional staff as well as their 
members.
    This hearing is centered on a joint VSO letter sent to you, Mr. 
Chairman, on April 4, 2011, spurred by your questions at the budget 
hearings earlier this year. Their letter states our central challenge 
very well: how do we provide the maximum value and excellence of 
service to Veterans, at the same time we are becoming more efficient, 
reducing waste, and respecting every dollar entrusted to us by the 
taxpayer? The letter also explains why this has to be a careful and 
studied exercise to avoid taking actions that, while appearing to be 
fiscally responsible, would ``likely result in the loss of 
accessibility, quality, and safety of the services Veterans depend on'' 
and actually could lead to additional avoidable spending. It is clear 
this Committee is--and has been--committed to taking a careful and 
deliberate path, as we strive to achieve fiscal discipline while 
improving quality and access for those returning Servicemembers and for 
Veterans of all eras--as well as their families and survivors.
    We set out in this testimony some of our more significant 
initiatives that are already delivering better services to Veterans and 
cost savings. While acknowledging our successes, we must also recognize 
that in an organization with missions as large, complex, and varied as 
VA, there are times when these operations and systems need improvement 
or correction. In those circumstances we must take action. The 
Congress, the VSOs, and our OIG are important contributors in our 
efforts to always learn and improve, as they provide an outside view of 
how we are living up to the commitments the Nation makes to Veterans.
    The hearing invitation asked VA to testify on the recommendations 
made in the VSO letter. We would like to do so in the context of 
speaking to the Department's broader transformational efforts that are 
central to both improving our benefits and services and using resources 
wisely. The Secretary began these efforts after taking over the helm of 
VA when he focused the Department to be ``people-centric, results-
driven, and forward-looking.'' It is hard to overstate how important 
the `people-centric' element is in the work we do. We live necessarily 
in the world of systems, processes, organizations, and policies--but 
they all exist--and we all at VA are here--to serve Veterans. This 
personal dedication is exhibited every day in extraordinary ways by our 
employees. Being a People-centric organization means having our 
leadership, management, and systems be as good as our individual 
employees--to empower that sense of mission, and not frustrate it.
    Being results-driven means that we do more to measure our 
performance and hold ourselves accountable. We will be measured by our 
accomplishments, not by our promises. VA's leadership has been 
developing systems and processes to better measure the results we are 
securing for Veterans. And being forward-looking means modernizing VA's 
business practices and using technology to its fullest advantage. We 
will seek out opportunities to deliver the best services with available 
resources, continually challenging ourselves to do things smarter and 
more effectively.

VA Efficiencies and Savings through Transformation--Office of 
        Management

    With those principles in mind, I will first highlight those 
transformation efforts I am responsible for as VA's Chief Financial 
Officer (CFO). These are not issues in the VSO letter, but it is 
important for the Committee to know that these significant improvements 
in financial management systems and integrity serve as a foundation in 
securing efficiencies and savings across the Department.
    Shortly after joining VA in November 2009, I led the CFO team in 
establishing a set of top priorities for VA financial management. It 
has been my pleasure to brief this Committee's staff of the status of 
these initiatives on a quarterly basis. Our priorities included fixing 
long-standing issues in financial management, which have been concerns 
for VA and this Committee. These included material weaknesses in our 
financial systems as well as a lack of adequate internal controls over 
$14 billion in spending categorized as miscellaneous obligations, VA's 
independent auditor certified at the end of fiscal year (FY) 2010, we 
had remediated our three material weaknesses related to financial 
management. In terms of internal controls and financial integrity, this 
was a major accomplishment. It has been over a decade since VA had no 
financial management material weaknesses. We have also dramatically 
reduced the number of financial issues the auditors categorize as 
significant deficiencies. Since 2008, VA has reduced those significant 
deficiencies from sixteen to two.
    Internal controls related to `miscellaneous obligations' have been 
a long-standing issue of concern to this Committee, VA's OIG and the 
Government Accountability Office (GAO). About 18 months ago, I made 
this a top priority for VA financial management. With a comprehensive 
plan and the dedication of our VA team, we have increased compliance in 
this program dramatically from 49 percent in 2009 to nearly 100 percent 
today. And we can account and report on how these funds are being spent 
across the VA system.
    There are many other improvements we have been able to make in 
financial management, including a thorough revision and standardization 
of VA financial policies, and improved financial management training.
    Today, our Financial Services Center processes over 1 million 
payments annually to commercial vendors. Payment timeliness, measured 
by the amount of interest penalties paid per million dollars disbursed 
for late payments in accordance with the Prompt Payment Act, 
dramatically improved from $48 per million in FY 2008 to just $18 per 
million in FY 2011. At the same time, VA earned $5.1 million in 
discounts for prompt payment (nearly 97 percent of the discounts 
offered by vendors)--savings that we are able to use to provide 
additional funding for Veterans programs. This past fiscal year 23 
percent of the vendor payments VA processed used data obtained from 
electronic invoices, which improved both the timeliness and accuracy of 
our payment process.
    VA continues to aggressively use the Government-wide purchase card 
program as a cost effective method of acquiring goods and services. We 
processed nearly 7 million purchase card transactions valued at $3.6 
billion during FY 2011 compared to 4.8 million transactions worth $3.0 
billion during FY 2008. We pay our credit card provider daily for 
credit card purchases, allowing VA to maximize the bank rebate offered 
for prompt payment. As a result, during FY 2011 VA earned $73.8 million 
in purchase card rebates, a dramatic increase over the $49.4 million 
earned in FY 2008. The benefit of those rebates goes directly to 
Veterans programs.
    VA aims to save even more by essentially eliminating all paper 
check payments to vendors by the end of FY 2012. We made a significant 
down payment towards that goal. Over 97 percent of commercial vendors 
now receive payment by electronic funds transfer (EFT). We are reducing 
check payments to our medical providers supporting the fee basis and 
Civilian Health and Medical Program of the Department of Veterans 
Affairs (CHAMPVA) programs. Our outreach to medical providers helped 
these programs improve EFT usage by 20 percent this year and eliminated 
1.5 million checks VA-wide.
    We are proud of these achievements in financial management, but 
realize there is always more we can do to be more effective and 
efficient across the Department.
    The VSO letter raised questions about recent staff increases in 
some offices. Many of these increases in staffing are tied to the very 
transformation efforts to modernize VA, and are items that the VSOs 
have historically supported. For example, staff increases enhanced VA's 
outreach to Veterans and tribal governments as well as improved VA's 
ability to manage costs and programs that deliver services to Veterans, 
their families and survivors. Other staff office increases are tied to 
meeting the needs of Congress for extensive and significantly expanding 
information requirements to conduct oversight, formulate policy, and 
serve individual constituents. Especially now, taxpayers need to be 
assured that staffing levels are justified as a good return on 
investment for Veterans.
    I would also like to address the issue of travel and conferences, a 
subject of Congressional interest that has been in the news for VA as 
well as other agencies. For a Department with many different and 
complex missions, and with facilities throughout the country, travel 
and conferences provide important opportunities to train and conduct a 
range of other essential activities to include: share best practices, 
maintain critical clinical skills and readiness, conduct oversight and 
compliance inspections, increase professional certification of our 
employees, and provide opportunities for our employees to establish and 
enhance their professional contacts and relationships within the VA and 
with other Federal, state and local agencies as well as private sector 
stakeholders. These all are important to activities that enable VA to 
provide high quality care and services to Veterans. The role of 
conferences is too important for us to treat casually--that is why VA 
requires a very strong business case supporting each conference. Since 
FY 2009, the VA has mandated VA Chief of Staff review and approval for 
all conferences involving 100 or more VA employees. For FY 2012, the VA 
Chief of Staff issued guidance requiring his office's pre-approval of 
any conference involving 50 or more employees. His directive calls for 
maximizing teleconferencing, and for managers to challenge the 
assumption that an event needs to occur, including making a business 
case analysis of the benefits of a meeting, and consideration of 
alternatives that might serve the same purpose. We would be glad to 
share with your staff the scrutiny that proposed conferences and travel 
receive and welcome VSO and Congressional staff analysis of what 
reductions could be taken without adverse impact to the programs and 
proficiency we seek in the delivery of care and benefits.
    For the past 3 years, spending for Senior Executive Service (SES) 
bonuses has been reduced, as well as the number of outstanding ratings 
issued. VA understands the need for fiscal restraint, and is following 
the Secretary's guidance, as well as Office of Personnel Management and 
Office of Management and Budget limitations. Mr. Chairman, VA has 
detailed to you in a letter dated October 14, 2011 what it has done to 
ensure the integrity of the performance awards process. We emphasized 
in that letter the importance of VA being able to attract and retain 
the most talented leaders and managers from within the Federal 
workforce and from the private sector. We are especially wary of 
restrictions on performance awards that would not be undertaken as a 
government-wide policy--in that case VA would be specifically 
disadvantaged with respect to other Federal employers, weakening our 
ability to compete for and retain the talent we need to best manage VA 
and serve our Nation's Veterans.

VA Efficiencies and Savings Through Transformation--Veterans Health 
        Administration

    VHA is undertaking its most significant transformation since the 
1990's by realigning the organization to focus and target resources on 
delivering clinically appropriate, quality care for eligible Veterans 
when they want and need it. These efforts are supporting our goals of 
improving access and quality of care. Systems Redesign is one of the 
key tools we are using to achieve these goals--it involves multiple 
strategies that address transportation, options for Veterans to improve 
access, use of advances in medical technology, and local partnerships.
    Complementing the Systems Redesign initiatives, we are instilling a 
culture throughout our system that pursues continuous improvement and 
empowers staff members to solve problems at the front line or at any 
point in the health care system. As a result of these steps, VHA is 
improving efficiency and reducing costs by consolidating data, 
analytic, and reporting systems, and using the power of our electronic 
health record to collect clinical performance measures using fully 
automated processes.
    VA is using telephone care, telemedicine, secure messaging, My 
HealtheVet, and traditional postal mail to reduce the need for 
additional clinic visits concerning relatively simple matters. 
Telehealth is a particularly critical area where VHA is identifying 
significant potential for cost savings. Home Telehealth provides non-
institutional care and chronic care management services. It is 
predicated upon proactively intervening when a patient's symptoms, 
behavior, or lack of knowledge about his or her conditions places them 
at a high risk for hospital admission or institutional care. Home 
Telehealth helps to reduce unnecessary hospital bed days of care and 
provides Veterans with additional support at home.
    Clinical video telehealth (CVT) provides services through clinical 
video conferencing between VA medical centers (VAMC) and community-
based outpatient clinics (CBOC) or other VAMCs. VA has established that 
use of CVT reduced the total number of hospital bed days of care for 
patients needing mental health by more than 20 percent. Telehealth not 
only improves the quality of care available to Veterans but also 
reduces the cost to VA for providing such care. For Veterans living in 
rural areas, expanded telehealth services improve their access to high 
quality specialty care services previously only offered at major 
medical centers.
    Moreover, the infrastructure that supports telehealth also supports 
the training and education needs of our staff; for example, specialists 
can more easily provide ongoing medical education to primary care staff 
about the management of Veterans with complex needs. We are also 
gaining additional value from this allied infrastructure by using it to 
deliver training to administrators, analysts, and users of our IT 
systems through video-conferencing.
    Another critical technology to improve care and reduce costs is an 
integrated electronic health record (iEHR) between VA and DoD. The two 
Departments are already in the process of jointly modernizing our 
respective EHR systems, but an integrated joint system will allow both 
Departments to achieve economies of scale. It will enable us to acquire 
needed functionality and reduce future sustainment costs, increase the 
amount of patient information shared through the use of national data 
standards, and improve the delivery of health care and services to more 
than 15 million VA and DoD patients.
    VA operates a world class pharmacy program that excels in several 
key areas: Clinical pharmacy practice, pharmacy automation, medication 
safety, drug formulary management and the strategic sourcing of 
pharmaceuticals. In several of these areas, VA is an innovator and 
benchmark within the pharmacy profession. VA's pharmacy activities have 
yielded many billions of dollars in savings over the past 15-plus 
years. While aggressively pursuing savings, VA's customer service 
performance remained excellent, as evidenced by an independent customer 
survey conducted by J.D. Powers and Associates. This survey ranked VA's 
Consolidated Mail Outpatient Pharmacy (CMOP) as ``Among the Best'' in 
2009; for 2010 and 2011. VA's CMOPs scored higher than any other mail 
order pharmacy in the country. Based on customer feedback from 20 
industries and 800 brands, in 2011 CMOP was one of only 40 brands 
designated as Customer Service Champions by J.D. Powers.
    Effective earlier this year, VHA adopted the Centers for Medicare 
and Medicaid Services (CMS) payment methodologies for outpatient 
services. This aligned VHA with standard Federal payment methodologies 
and ensures all payments from VA utilize the same structure. VA 
estimates that this change will result in savings of almost $1.5 
billion over FYs 2011-2015. Veteran care will remain uninterrupted, and 
existing contracts will not be affected. We are using the savings from 
this change to reinvest into our health care system and provide more 
accessible and better quality care to America's Veterans.
    VA's Consolidated Patient Account Center (CPAC) business model is 
designed to enhance VHA billing and collection activities by 
consolidating traditional revenue program functions into seven 
regionalized centers of excellence. Four CPACs are already operational, 
and the final three CPACs will be activated in FY 2012. By 
standardizing and improving business processes, VA has improved key 
revenue metrics from FY 2010 to FY 2011. The average number of days to 
bill for the Nation declined by 3.5 (8.3%), while the percentage of 
accounts receivable greater than 90 days was reduced 3.3 percent. 
However, VHA has not seen the same level of collections recently for a 
variety of reasons--an increase in the number of hardship waivers and 
copayment exemptions connected to the condition of the economy, a 
reduction in third party ``collections to billings'' ratios, and 
movement of Veterans from lower Priority Group enrollment categories to 
higher levels. An aging Veteran population receiving coverage from 
Medicare, which becomes the primary insurance provider when a Veteran 
becomes 65 years old, has also significantly reduced the amount of 
funds VA can collect. Even with these challenges, VHA's improved 
business practices are capturing available collections more 
efficiently. Continued improvements are a necessity to maximize this 
critical piece of our medical care budget.
    The VSO letter raised issues relating to VA's purchase of fee-basis 
care. 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. VHA provides Veterans care within VA's 
health care system, whenever feasible. When VA is unable to provide 
care within the system, the VA medical center director first considers 
sending patients to another VA medical center. Contracting for 
necessary services is considered only if these options are 
inappropriate or not viable. If contracting for services is required, 
VA's first option is to use a competitive bid. This step ensures that 
taxpayer funds are used to the greatest effect.
    VA appreciates Congress' support of the use of fee-basis care as a 
complement to VA services; the Department has been able to provide 
services closer to Veterans' homes as a result of a number of 
congressionally mandated programs and directives intended to improve 
the management and oversight of fee-basis and to expand access to care 
for Veterans in rural areas.
    Earlier this year, VA conducted a pilot program that used 
standardized templates for purchasing care, ensured more consistent 
assessment of other VA options, and resulted in better control over and 
management of the care we purchased. We have instituted controls to 
track timeliness of initial approvals for non-VA care, appointments, 
and return of clinical information. Pilot results have seen positive 
improvements in each of these areas. For example, pilot sites document 
initial approvals for use of non-VA care at 4 days, appointments made 
within 8 days and return of clinical information within 20 days.
    VA will realize approximately $200 million in savings for fee basis 
care in FY 2012 through the use of electronic re-pricing tools, 
contract and blanket ordering agreements, reduced duplicate payments, 
and other efforts. We are also consolidating contracting for multi-
facility, Veterans Integrated Service Networks (VISN) or regional 
contracts, increasing the use of competitive contracts, bringing back 
contracted functions in house, reutilizing existing VA property, and 
related measures.
    We would also like to address the role of VISNs in ensuring 
Veterans receive top quality health care in the most efficient way 
possible. The VISN structure encourages innovation and has been the 
basis for many of the significant advances within VHA over the last 15 
years. The responsibilities of VISNs have grown, which has necessitated 
corresponding staffing adjustment. This increase in the number of 
employees is mostly the result of a consolidation of functions 
previously performed at the facilities within the Network to achieve 
economies of scale. For example, some VISNs have created service lines 
dedicated to either specialty care areas or to administrative functions 
that provide support to all VHA facilities within the Network. This 
approach more effectively utilizes our resources and allows us to 
achieve efficiencies not otherwise possible. For example, by 
consolidating equipment purchasing at the VISN level, some Networks 
have saved millions of dollars by negotiating high volume contracts 
with low per unit prices and saved money on maintenance costs while 
improving the consistency of quality of care through equipment 
uniformity.
    One of VHA's most important tools in ensuring the fair distribution 
of resources is the Veterans Equitable Resource Allocation (VERA) 
model, which helps VA provide equitable access to care for the Nation's 
Veterans. In short, VERA ensures we put the money where the work is. 
VERA has been assessed positively in independent reviews by 
PricewaterhouseCoopers, the RAND Corporation, and the Government 
Accountability Office (GAO).
    VERA addresses the many complexities of Veterans' health care by 
recognizing differences in patients (those who use some health care but 
are less reliant on VA care exclusively, those who seek routine care 
from VA, and those with special or complex health care needs), 
variations in costs of care across the country, movement of Veterans 
across the country, research and education demands, and the need for 
investments in non-recurring maintenance. The system must also account 
for differences in the types of funds--including general purpose funds, 
which are allocated based on patients treated, and specific purpose 
funds, which are allocated to comply with statutory or programmatic 
requirements.
    After VISN Directors receive the Network's allocation, they are 
responsible for making the allocations to their facilities. In 2011, VA 
implemented a standard VISN work-performed allocation model to ensure 
VISNs provided resources to facilities in a consistent, timely, and 
efficient manner. This enables the VISN Director to hold a portion of 
the allocation for such requirements as central equipment purchases, 
central management of non-recurring maintenance (NRM) projects, and for 
changing workload requirements among facilities. VISN Directors have 
the discretion to make appropriate adjustments to that model to reflect 
local realities, such as the activation of new CBOCs and changes in 
patient demand.
    To help ensure the Department achieves its financial and program 
performance goals, VA conducts monthly reviews that include metrics 
that measure financial performance, workload, and access. These reviews 
provide data for risk analysis and serve as a warning system to 
highlight potential operational or funding problems. VHA facility and 
VISN directors also maintain frequent oversight of their budgets and 
communicate with VHA Central Office to provide timely information to 
ensure necessary resources are available. The Secretary also meets with 
each VISN Director at least twice during the year to ensure each VISN 
has sufficient resources to provide services consistent with the needs 
of Veterans.
    The VSO letter cites reports of local budget shortfalls or ``hiring 
freezes.'' VA will be glad to discuss any of these specific reports 
with the Committee or with our VSO partners.

VA Efficiencies and Savings through Transformation--Veterans Benefits 
        Administration (VBA)

    VBA is committed to achieving the Secretary's 2015 strategic goals 
of completing all rating-related compensation and pension claims within 
125 days at a 98 percent accuracy level. VBA has embarked on a wide-
scale Transformation Plan to achieve new efficiencies, greater 
effectiveness, improved quality and consistency, and a workplace that 
is recognized as an ``employer of choice.'' Our transformation strategy 
builds on VA's strategic plan, goals, and integrated objectives. 
Initiatives that help improve our business processes are encouraged. 
Ideas are solicited from employees and other internal and external 
stakeholders including VSO's, state and county service officers, 
industry partners, as well as Veterans themselves.
    Our plan incorporates an integrated approach to people, process, 
and technology solutions, including a strong focus on a career-ready 
military transition program, national training standards, paperless 
rules-based systems, case management, and automated capability to 
process an increased number of claims and a greater number of complex 
conditions per claim--all at a high quality level for our Veterans, 
their families, and survivors. Best practices in claims processing are 
being tested at regional offices to validate the potential of the 
initiatives to help us achieve our 2015 strategic goals. The effective 
implementation of this transformation plan is driving VBA to achieve 
standardization among all regional offices and a methodology for 
governing implementation. Our implementation strategy includes 
effective communications and change management, detailed implementation 
planning, and effective and measurable training, ensuring that new 
ideas are sustainable for the future.
    A primary focus of our plan is managing our relationships with 
Veterans throughout their lives--from the day they join the military 
service, and well into their transition to Veteran status and beyond. 
Seventy-three percent of our Veterans seek new ``on-line'' ways of 
engaging with VA to facilitate their claims and benefits. In September 
2011, VA and DoD, in a collaborative partnership, registered its one-
millionth user on eBenefits, the one-stop shop that provides 
information about military and Veterans benefits and serves as the 
client-services portal for lifelong engagement.
    Today, the eBenefits portal provides an on-line capability to check 
the status of a claim, an appeal, the history of VA payments, request 
and download personnel records, secure a certificate of eligibility for 
a VA home loan, and numerous other benefit actions. In the next 6 
months, Veterans will be able to file a claim online in a ``Turbo 
Claim'' like approach, where claims data can be entered by prompting 
software that self-checks for data errors, and upload supporting claims 
information that feeds our paperless claims process. Every 3 months, VA 
and DoD release additional eBenefits functionality that provides new 
ways for our Veterans, their families, and survivors--with support if 
they choose from their representatives--to conduct self-service benefit 
actions at a time and place of their choosing.
    VBA's organizational transformation will be deliberate, sweeping, 
and multifaceted. Specific initiatives incorporated in the 
transformation plan include:

      The Veterans Benefits Management System (VBMS), a 
holistic and integrated technology solution delivering paperless 
processing capability in 2012 to support our business process 
transformation. Combining a paperless processing system with improved 
business processes is key to providing Veterans with timely and high-
quality decisions.
      The Veterans Relationship Management (VRM), an initiative 
to expand eBenefits access and self-service capabilities, improve VBA 
call center technology, increase initial call resolution, and establish 
life-long relationships with our Veterans.
      Rules-based calculators for automated adjudication of 
basic compensation, pension, and dependency claims. These calculators 
will guide decision makers through the process with intelligent 
algorithms similar to tax-preparation software.
      New evidence-gathering tools, known as Disability 
Benefits Questionnaires, which allows VBA to bring new efficiencies to 
the collection of medical information needed for claims decisions.
      An 8-week national Challenge training program for 
recently hired claims processors, as well as refresher training for 
more experienced staff, that ensures intense, high-quality and 
standardized training of the VBA workforce.
      Simplified rating decisions and notification letters to 
more effectively communicate with Veterans and streamline the decision-
making process.
      Systemic Technical Accuracy Review STAR-trained local 
Quality Review Teams to conduct ``in-progress'' quality checks and 
regular end-of-month reviews.
      Cross-functional teams (case management) of cross-trained 
raters, co-located to increase knowledge transfer, speed, and accuracy.
      Specialized processing ``lanes'' based on claims 
complexity and priorities (``Express Lane'' for less complex work; 
``Core Lane'' for the majority of the workload; and ``Special 
Operations Lane'' to case manage special missions, such as former 
prisoners of war and military sexual trauma cases).
      Intake Processing Centers for quick, accurate triage of 
claims.

    These major transformations will be implemented using multi-year 
timelines. Changes in people, processes, and technology will be rolled 
out in a progressive, intentional sequence that enables efficiency 
gains while minimizing risks to performance.
    We would like to address the three VBA management issues mentioned 
in the VSO letter: records management, cost of brokering of claims 
work, and use of authorized overtime.
    The VSO letter notes concern that, ``too much time and resources 
are now being devoted to the protection and/or shredding of non-
essential paperwork.'' Based on findings from VA's OIG in 2008, VBA 
took action to ensure that Veterans' records are protected, maintained, 
and disposed in accordance with Federal regulations, statutes and 
policies. While VA's policy was initially based on OIG findings, 
updates have been made to incorporate lessons learned. In FY 2011, VBA 
established the Records Management Technician (RMT) position. The RMT 
position has enabled VBA to reduce the supervisory review and approval 
process to ``claims-related material only,'' providing the supervisors 
more time to facilitate increased claims productivity. The RMT assists 
the Records Management Officers (RMO) in managing, maintaining, and 
properly disposing of Veterans' records and personally identifiable 
information. The duties of RMOs and RMTs are absolutely vital in 
protecting Veteran, employee, and other sensitive information.
    A second VBA area of concern identified in the VSO letter is the 
cost of brokering claims. For a number of years, VBA has pursued this 
strategy to allocate additional resources to regional offices that 
perform at a higher level. This strategy is intended to increase VBA 
organizational performance and capacity by assisting regional offices 
experiencing workload challenges and performance difficulties. To do 
this, claims are brokered for processing to Resource Centers at 13 
high-performing offices throughout the country.
    This past fiscal year was challenging because VBA utilized our 
Resource Center brokering capacity to readjudicate previously denied 
claims for newly established Agent Orange presumptive conditions (B-
cell leukemia, Parkinson's disease, and Ischemic heart disease). Due to 
the complexity of readjudicating these claims, they are all being 
processed at VBA's Resource Centers. Our Resource Centers were 
therefore temporarily unavailable for brokering work during FY 2011.
    VA recognizes that transporting paper claims is neither ideal nor 
sustainable. VBMS will significantly reduce our reliance on the 
receipt, movement, and storage of paper. By eliminating the dependence 
on paper, VBA will be better positioned to make use of available 
resources, regardless of geographic location.
    The third VBA area of concern noted in the VSO letter is the use of 
authorized overtime. While VA works to transform the delivery of 
benefits and services, overtime funding is essential to manage claims 
workload and put VA on a path to achieve our ultimate goal of having no 
Veteran wait longer than 125 days to receive a quality rating decision. 
Although VBA has significantly increased the numbers of primary 
decision makers through internal promotions and external recruitment 
actions to address the growing workload, the normal training time for 
these positions is 18 to 24 months. While in training status, these 
individuals are not fully productive and often require 100 percent 
review of their cases by a more experienced employee with greater 
technical knowledge. Overtime is a necessary tool to allow VBA to 
maintain production as we continue to work to increase our productive 
capacity and ensure thorough training.
    VBA's workload continues to dramatically increase due to the 
unprecedented volume of disability claims being filed. This growth is 
driven by a number of factors, including our successful outreach 
efforts, improved access to benefits, the growing number of returning 
Veterans from 10 years at war, the aging Veteran population, economic 
conditions prompting Veterans to pursue the benefits they earned during 
military service, and presumptive disabilities for Veterans who were 
exposed to Agent Orange or other herbicides during military service.
    In FY 2011, VBA received nearly 230,000 additional claims as a 
result of the approval of three new Agent Orange presumptive conditions 
(B-cell leukemia, Parkinson's disease, and Ischemic heart disease) 
based on the latest evidence of an association between those illnesses 
and exposure to herbicides. Of the over 180,000 Agent Orange claims 
processed last year, approximately 93,000 were covered by the Nehmer 
court settlement requiring readjudication of previously denied claims. 
Pursuant to a court order from the U.S. District Court for the Northern 
District of California in Nehmer v. U.S. Department of Veterans 
Affairs, C.A. No. C-86-6160 TEH (N.D. Cal.), VA provides retroactive 
benefits to certain Nehmer class members (Vietnam Veterans and their 
survivors) who filed claims for the three new presumptive conditions 
during the period from September 25, 1985, to the effective date of the 
VA regulation establishing a presumption of service-connection for 
these diseases. These claims are very complex and take more than twice 
the resource levels to complete, which significantly slowed production 
in 2011. As we have nearly completed processing Nehmer claims, overtime 
funding related to claims processing will be reduced.
    We continue to devote significant resources, including overtime 
resources, to processing claims for our wounded, ill, and injured 
Servicemembers separating from active duty through the Integrated 
Disability Evaluation System (IDES). Overtime resources are essential 
if we are to meet our processing goal of 100 days for IDES claims. 
Additionally, overtime allows our regional offices to increase 
production while VBA's pilot initiatives are tested, enabling us to 
determine which concepts are suitable for nationwide deployment.
    Overtime funding is also critical to the delivery of education 
benefits in all of the education programs VA administers. Because of 
the fluctuations in workload inherent in the processing cycles 
associated with school enrollment periods, it is essential that we 
continue to make effective use of overtime funds to ensure our Veteran-
students and their schools timely receive their benefit payments. With 
full automation of Post-9/11 GI Bill enrollment processing through the 
Long Term Solution, we anticipate that our need for overtime funds in 
the education program will be reduced.

Closing

    VA appreciates this opportunity to have this exchange with the 
Committee, with the participation of the VA OIG and our VSO partners. 
As noted at the beginning of the testimony, the key question is an 
important one: how does VA provide the maximum value and excellence 
service to Veterans, at the same time we are becoming more efficient, 
reducing waste, and respecting every dollar entrusted to us by the 
taxpayer? VA is committed to keep this question foremost across every 
administration and office, in Washington and at medical facilities, 
regional offices, and national cemeteries in every area of the Nation.

                                 
            Prepared Statement of Belinda J. Finn, Assistant
        Inspector General for Audits and Evaluations, Office of
        Inspector General, U.S. Department of Veterans' Affairs
    Mr. Chairman and Members of the Committee, thank you for this 
opportunity to testify on the potential for budgetary savings within 
the programs and operations of Department of Veterans Affairs (VA). We 
read the recommendations made by Veterans Service Organizations (VSOs) 
for budgetary savings within VA with great interest and can comment on 
VA's performance in several of these areas. My testimony today will 
highlight a broad range of programs and issues where we have identified 
possible cost savings, recoveries, better uses of funds, and 
opportunities for VA to achieve economies and efficiencies.

VA FEE CARE PROGRAM

    Of the many issues raised by the VSOs, improved management and 
oversight of medical care provided outside of VA facilities, commonly 
known as fee care, offers the greatest opportunity for savings. Under 
the program, VA medical centers authorize veterans to receive treatment 
from non-VA health care providers when certain services are unavailable 
at VA facilities; cannot be economically provided in the veteran's 
geographic area; or in emergencies when delays may be hazardous to life 
or health. The cost for fee care has increased from $1.6 billion in 
fiscal year (FY) 2005 to $4.4 billion in FY 2010. This amount is 
expected to increase further in future years as both the demand and 
cost of health care rises. We have issued four audit reports related to 
fee care since August 2009.
    In August 2009, we reported that the Veterans Health Administration 
(VHA) improperly paid 37 percent of outpatient fee claims, resulting in 
$225 million in overpayments and $52 million in underpayments in FY 
2008 and an estimated $1.1 billion in overpayments and $260 million in 
underpayments over a 5-year period. Also, serious weaknesses in the 
processes for authorizing outpatient fee care resulted in 80 percent of 
payments lacking proper justification. Clinicians typically documented 
the diagnosis and treatment plan but no rationale for using fee care. 
Fee staff did not conduct required cost analyses to determine if lower 
cost alternatives, such as transporting patients to other VA 
facilities, were available. In August 2010, we reported that VHA 
improperly paid 28 percent of inpatient fee claims, resulting in net 
overpayments of $120 million in FY 2009 and an estimated $600 million 
in improper payments over a 5-year period. Between these two audits of 
inpatient and outpatient medical care, we estimated potential improper 
payments of $1.5 billion through FY 2015 could be avoided by more 
effective policies and procedures to oversee and manage fee care 
services. (Audit of Veterans Health Administration's Non-VA Outpatient 
Fee Care Program, August 3, 2009, and Veterans Health Administration--
Audit of Non-VA Inpatient Fee Care Program, August 18, 2010)
    During the audit of inpatient claims, we found the Fee Program's 
inadequate payment processing system, Veterans Health Information 
Systems and Technology Architecture (VistA) Fee, contributed to the 
high rate of payment errors. VHA was aware of the shortcomings of VistA 
Fee and has fielded an integrated claims processing and management 
system. Further, the average cost per claim for the Fee Care Program 
was $9.96 compared to $2.55 for Civilian Health and Medical Program of 
the Department of Veterans Affairs (CHAMPVA), a difference of $7.41 per 
claim. In addition, sites that processed fee payments for a single VA 
medical center (VAMC) had an average cost per claim of $10.78. 
Consolidated sites, which processed claim payments for multiple VAMCs, 
had an average cost per claim of $6.85, or about one-third less. As a 
result, we conservatively estimated that current claims processing 
inefficiencies cost VHA $134 million through FY 2015 and recommended VA 
evaluate alternative organizational models and payment processing 
options, which they agreed to do.
    Consolidation of processing activities is one solution to lowering 
the average cost per claim, but not the only alternative. Commercial 
claims processing organizations already process claims for Federal 
Government agencies, such as Medicare and TRICARE. Since our first 
audit in 2009, VA has adopted Medicare payment methodologies for common 
services such as ambulatory surgery, anesthesia, dialysis, and the 
payment of professional services. With business changes, VA may be able 
to leverage competition for the claims processing services. In response 
to our recommendation, VA contracted with the National Academy of 
Public Administration to study organizational alternatives, including 
consolidation or contracting out for services.
    We also evaluated VHA's controls to prevent and detect fraud and 
reported VHA had not identified fraud as a significant risk to the Fee 
Care Program. Health care industry experts have estimated that 3 to 10 
percent of all claims involve fraud and we see VA facing similar risks. 
We estimated that VA could be paying between $114 million and $380 
million annually for fraudulent claims and recommended VA establish a 
fraud management program with data analysis and high-risk payment 
reviews, system flags for suspicious payments, employee fraud awareness 
training, and fraud reporting. (Veterans Health Administration--Review 
of Fraud Management for the Non-VA Fee Care Program, June 8, 2010)
    In the 2\1/2\ years since our 2009 report on the Fee Care Program, 
VHA has made many changes to the program. However, fundamental controls 
are still problematic, as illustrated by our recent report, Review of 
Alleged Mismanagement of Non-VA Fee Care Funds at the Phoenix VA Health 
Care System (November 8, 2011). We reported the medical facility 
mismanaged fee care funds and experienced a budget shortfall of $11.4 
million, which was 20 percent of the health care system's FY 2010 fee 
care program funds. One cause of the shortfall was the lack of 
effective pre-authorization procedures, the same problem we reported in 
2009. In fact, the facility processed about $56 million in fee claims 
without adequate review to ensure services were medically necessary.
    Our most recent national audit on VA's fee care program reported 
VHA missed opportunities to bill third-party insurers for 46 percent of 
billable fee care claims, reducing third-party revenue by $110.4 
million annually or by as much as $552 million through FY 2016. VA 
bills third-party health insurers for nonservice-connected medical 
services provided by VA or non-VA care as part of the Medical Care 
Collection Fund (MCCF) Program, which supplements VA's medical care 
appropriations. In FY 2010, the MCCF Program collected approximately 
$1.9 billion in total third-party revenue, which was about 69 percent 
of the total $2.8 billion revenue. The potential for third-party 
revenue from the Fee Care Program is expected to increase in future 
years due to increased demand for care and increased health care costs. 
(Audit of Veterans Health Administration's Medical Care Collection Fund 
Billing of Non-VA Care, May 25, 2011)

CLAIMS BROKERING

    The VSOs noted the potential inefficiencies of the Veterans 
Benefits Administration's (VBA) claims brokering process. We have 
testified several times on the many challenges that VBA faces to 
improve the accuracy and timeliness of disability claims decisions, 
managing an ever-increasing inventory of claims, and maintaining 
efficient VA Regional Office (VARO) operations. One of the steps VBA 
has taken to address these challenges is to establish 13 resource 
centers that process compensation claims brokered from other VAROs. VBA 
believes effectively shifting claims from one VARO to another allows 
VBA to better align workload with available staffing resources and 
reduce claims backlogs by expediting claims processing.
    Our nationwide audit of the brokering process identified 
opportunities for VAROs to improve brokering effectiveness (Audit of 
VBA's Compensation Claims Brokering, September 27, 2011). We evaluated 
the overall effectiveness of claims brokering and reviewed available 
documentation on the costs of transporting hardcopy claims folders from 
one location to another. VBA and VAROs do not consistently track or 
report the costs of transporting brokered claims between VAROs. In 
fact, only one of seven audited VAROs was tracking the costs of 
transporting brokered claims. During 1 year, this VARO spent about 
$40,000, or approximately $2.00 per claim, for the one-way 
transportation of approximately 18,500 brokered claims folders. Based 
on the one VARO's cost information, we estimated that VBA could have 
spent almost $740,000 to transport brokered claims using express 
delivery services during FY 2009.
    We also reported VBA can improve brokering effectiveness by 
addressing ineffective practices such as untimely brokering of claims 
by the original regional office, reducing excess inventories of 
unprocessed claims at resource centers, brokering to separate 
facilities for development and rating, and brokering claims to resource 
centers with lower claim processing accuracy rates than the original 
office. For nearly 171,000 brokered claims completed during FY 2009, we 
projected the average processing time of 201 days would have been 49 
days less, or 152 days, if VBA had avoided the claims-processing delays 
identified during the audit. VBA agreed it can improve the overall 
effectiveness of brokering. We will monitor the implementation of the 
recommendations.
    VBA could eliminate transportation costs associated with brokering 
claims and improve claims processing timeliness by digitizing claims 
folders. We caution that even digitized claims will require 
infrastructure and management controls to ensure VAROs consistently and 
accurately maintain documents to allow claims processing personnel 
complete and timely access to veterans' claims folders documents.

VA EMPLOYEE COMPENSATION ISSUES

    The VSOs noted concerns with general administrative costs and 
overly generous employee bonus programs. We have issued several reports 
dealing with retention incentives that identified consistent themes 
regarding where VA falls short in its administration of this program.
    Retention incentives are a valuable tool to retain quality and 
critical employees. VA uses retention incentives to retain employees in 
hard-to-fill positions and employees who possess high-level or unique 
qualifications that VA does not want to lose. Our review of retention 
incentives at the VA Medical Center in Providence, Rhode Island, 
concluded that for 17 (85 percent) of 20 cases, justification for 
retention incentive awards was not available or was inadequate, 
resulting in approximately $179,000 in questioned costs annually and 
over $895,000 over the next 5 years (Review of Retention Incentive 
Payments at VA Medical Center, Providence, Rhode Island, January 20, 
2011). In response to our report recommendations, VHA outlined actions 
to accomplish a 100 percent review of Providence employees' retention 
incentives, establish controls to ensure incentives meet VA policy, 
develop standard operating procedures, and establish a system for 
maintaining this information.
    In FY 2010, VA paid nearly $111 million in retention incentives to 
16,487 employees. In a nationwide audit of VHA and VA Central Office 
(VACO) retention incentives that was recently issued, we questioned the 
appropriateness of 96 (80 percent) of 120 VHA incentives, and 30 (79 
percent) of 38 VACO incentives, totaling approximately $1.06 million 
during FY 2010. (Audit of Retention Incentives for Veterans Health 
Administration and VA Central Office Employees, November 15, 2011)
    As with the Providence review, we determined VHA and VACO approving 
officials did not adequately justify and document retention incentive 
awards. This occurred because VA lacked clear guidance, oversight, and 
training to effectively support the program. Also, VA did not 
effectively use the Personnel and Accounting Integrated Data system to 
generate timely incentive re-evaluation notices and did not always stop 
retention incentives at the end of set payment periods. VHA and VA 
officials agreed with our report recommendations and outlined 
corrective actions to address the issues identified.

VBA OVERTIME

    The VSOs' letter raises concerns about VBA's use of overtime to 
meet claims production goals. In 2010, the OIG conducted a review to 
assess VBA's efforts to meet its hiring goals and the impact of VBA's 
increased workforce on Compensation and Pension (C&P) claims workload. 
We found that VBA could not assess the impact of overtime on its 
capacity to complete claims and recommended that VBA collect data on 
the number of overtime hours worked to assess the capacity of its 
current workforce and project future workforce needs. VA agreed and 
have reported to us that they have implemented a plan to address this 
issue. (Review of New Hire Productivity and the American Recovery and 
Reinvestment Act Hiring Initiative, February 18, 2010)

OTHER AREAS FOR POTENTIAL SAVINGS

    In addition to the potential improvements identified by the VSOs, 
VA can reap substantial benefits by improving its processes in several 
areas: acquisition, delivery of health care and compensation benefits, 
information technology system development, and workers' compensation 
for employees injured on the job.

Acquisition Process

    VA purchases goods and services in excess of $10 billion annually. 
In November 2009, the Secretary reported to the Office of Management 
and Budget that he had established a 2-year departmental goal of $958 
million in acquisition savings by FY 2011. We have identified issues 
with processes at all levels and all phases of the procurement 
process--planning, solicitation, award, and administration.
    Historically, problems in VA procurement have led to inadequate 
competition for many contracts and a general lack of assurance that VA 
has obtained fair and reasonable prices or the best value for goods and 
services. In the past, only about 50 percent of VA's contract awards 
were competitive. We strongly believe competition is a proven strategy 
to achieve better value for the Government. For example, VA originally 
planned to contract for approximately 940 non-recurring maintenance 
projects with its $1 billion in American Recovery and Reinvestment Act 
(ARRA) funds. VA reported that as they executed the ARRA program, it 
competed approximately 98 percent of these contracts, which resulted in 
cost savings that allowed VA to fund almost 1,125 projects, a 19 
percent increase in projects to improve VA medical facilities. We 
validated the completion rate in our report, ARRA Oversight Advisory 
Report Review of VHA's Efforts to Meet Competition Requirements and 
Monitor Recovery Act Awards, (September 17, 2010).
    VA can achieve savings by fully leveraging its buying power and 
improving the administration of contracts. The following examples 
highlight opportunities where VA can strengthen the integrity of its 
contracts and realize significant acquisition-related cost savings over 
5 years:

      Savings of about $22 million by procuring aortic valves, 
coronary stents, and thoracic grafts through consolidating requirements 
using national contracts and blanket purchase agreements instead of 
making open market purchases. (Audit of the Acquisition and Management 
of Selected Surgical Device Implants, September 28, 2007)
      Savings of about $41 million through improved acquisition 
planning and oversight processes to increase the use of the Federal 
Supply Schedules for the purchase of medical equipment and supplies. 
(Audit of Veterans Health Administration Open Market Medical Equipment 
and Supply Purchases, July 21, 2009)
      Savings of about $60 million through improved clinical 
sharing agreement monitoring and negotiation practices when using 
noncompetitive clinical sharing agreements for professional medical 
personnel. (Audit of Veterans Health Administration Noncompetitive 
Clinical Sharing Agreements, September 28, 2008)
      Savings of about $38.5 million in health care staffing 
costs through increased competition, better price evaluations, and 
improved ordering practices. (Review of Federal Supply Schedule 621I--
Professional and Allied Healthcare Staffing Services, June 7, 2010)
      Reduce unsupported costs and improper payments by about 
$16.8 million by strengthening contract administration practices in 
VHA's Home Respiratory Care Program. (Audit of Veterans Health 
Administration's Home Respiratory Care Program, November 28, 2007)
      Preventing $85.3 million in overpayments by effectively 
competing, awarding, and administering patient transportation 
contracts. (Veterans Health Administration--Audit of Oversight of 
Patient Transportation Contracts, May 17, 2010)

Management of Rural Health Initiatives

    In addition to identifying potential savings, we also evaluate how 
funds are managed and used to meet a program's intended outcomes. In 
FYs 2009 and 2010, VA's Office of Rural Health (ORH) received $533 
million in funds designated for improving access and quality of care 
for veterans residing in rural areas. We reported ORH lacked reasonable 
assurance that its use of $273 million of the $533 million improved 
access and quality of care for veterans residing in rural areas. For 
example, ORH provided $200 million of rural health funds to VISNs to 
cover fee expenditures for rural veterans through a project called the 
Rural Health Fee Usage Plan. ORH's goals for the use of these funds 
were to improve the percentage of fee care dollars spent on rural 
veterans and the percentage of rural patients utilizing VHA services. 
However, the health care facilities were unable to demonstrate that the 
use of these funds improved access to care for rural veterans. For 
example, one VAMC received $3.2 million of Fee Usage Plan funds. The 
VAMC transferred $3 million of these funds to their general account 
then used the funds without any restrictions. By the end of FY 2010, 
the VAMC's overall planned fee care expenditures increased only about 
$252,000.
    We also noted concerns with the project review and selection 
process used to select projects for execution in FYs 2010 and 2011. In 
addition to improved organizational and management controls, we 
recommended that VA reassess ORH's FY 2012 budget requirements to align 
planned use of resources to their greatest rural health needs. As a 
result of our report, the Government Accountability Office recommended 
to the Appropriations Committees that ORH's budget resources for FY 
2012 be restricted. VA has taken our recommendations seriously and 
strengthened its controls to provide increased oversight and 
transparency to ensure that future funds will be used as intended.

Temporary 100 Percent Disability Evaluations

    Veterans' disability compensation payments are not usually an 
avenue for cost savings. We have, however, identified one area where a 
systemic problem leads to veterans receiving long-term payments to 
which they are not entitled. VBA grants veterans a temporary 100 
percent disability evaluation for service-connected disabilities 
requiring surgery, convalescence, or specific treatment. At the end of 
a mandated period of convalescence or cessation of treatment, VA staff 
are required to review the veteran's medical condition to determine 
whether to continue the temporary evaluation. If a medical exam shows a 
change in the veteran's condition, and VARO staff determines that a 
reduced benefit is warranted, then VBA staff initiate action to reduce 
benefits. In January 2011, we issued a report detailing our concerns 
with VBA's processing of temporary 100 percent disability evaluations. 
We projected that regional office staff did not correctly process 
claims of about 27,500 (15 percent) veterans with temporary 100 percent 
evaluations and that since January 1993 VBA overpaid these veterans a 
net amount of about $943 million. Without timely corrective action, we 
conservatively projected that VBA will overpay veterans $1.1 billion 
over the next 5 years.
    The primary message in our report is that VBA paid veterans a 
temporary 100 percent benefit without adequate medical evidence. 
Further, VBA rarely attempts to recover any monies paid to the veteran 
in error and once a temporary 100 percent rating has been in place for 
20 years, VBA cannot reduce the rating unless the veteran committed 
fraud in obtaining the benefits. The then Acting Under Secretary for 
Benefits did not agree with the projected overpayment amounts, but 
agreed to implement the recommendations we made. We stand behind our 
statistical projection as a reasonable and conservative estimate of 
overpayments and potential future overpayments based on our review of 
compensation records available at the time of the audit. We monitor 
VBA's actions to correct this condition during the OIG's VARO Benefits 
Inspections program and we continue to find claims files without 
suspense dates for reexaminations. VBA has just recently started work 
to identify veterans who need reexamination, and to establish suspense 
dates to drive timely examinations.

Information Technology Issues

    Information technology (IT) is critical to support VA in 
accomplishing its mission of providing benefits and services to 
veterans. For FY 2012, VA requested approximately $655 million for new 
product development out of a total budget of $3.2 billion for IT 
systems and support. If managed effectively, these IT capital 
investments can significantly enhance operations and increase 
efficiency in a range of VA programs, from medical care to compensation 
and pensions.
    However, IT management at VA is a longstanding high-risk area. VA 
experienced significant challenges in managing its IT investments, 
including cost overruns, schedule slippages, performance problems, and 
in some cases, complete project failures. For example, VA spent over 14 
years and $308 million developing the Veterans Services Network 
(VETSNET) to consolidate compensation and pension benefits processing 
into a single system. Although VETSNET has now achieved most of the 
planned functionality, VA has yet to identify a date for migrating all 
claims and decommissioning the legacy system, which costs about $7 
million a year to maintain.
    Also, VA has tried twice to develop an integrated financial 
management system. In 2004, after 6 years and spending more than $249 
million, VA halted the Core Financial and Logistics System (CoreFLS) 
project due to significant project management weaknesses. In 2005, VA 
began work on the Financial and Logistics Integrated Technology 
Enterprise (FLITE) program, comprised of an accounting system, an asset 
management system, and a data warehouse component--all scheduled for 
deployment by FY 2014 at an estimated cost of approximately $609 
million. In July 2010, VA cancelled two FLITE components, partly 
because of the same project management issues that had plagued CoreFLS. 
In October 2011, VA cancelled the remaining component after spending 
more than $127 million on the entire FLITE program.
    VA recently began planning for a new financial system. Reviewing 
and applying the lessons learned from the previous failed attempts will 
be crucial to any future success. In September 2009, we reported VA 
needed to better manage its major IT development projects, valued at 
that time at over $3.4 billion, in a more disciplined and consistent 
manner (Audit of VA's System Development Life Cycle Process, September 
30, 2009). In general, we found that VA's processes were adequate, but 
VA's Office of Information Technology (OI&T) did not communicate, 
comply with, or enforce its mandatory requirements.
    In June 2009, OI&T implemented the Program Management 
Accountability System (PMAS) to proactively manage VA's IT projects to 
complete system development efforts on time and within budget. PMAS was 
designed as a performance-based management discipline that provides 
incremental delivery of IT system functionality--tested and accepted by 
customers--within established schedule and cost criteria. In September 
2011, we reported OI&T had not established key management controls to 
ensure PMAS data reliability, verify project compliance, and track 
project costs. Until these issues are addressed, VA will risk cost 
overruns, schedule slippages, and poor performance in future efforts to 
deliver the systems essential to accomplishing the Department's 
missions and programs.

Workers' Compensation Program Case Management

    Ineffective workers' compensation program (WCP) case management 
leads to potential program fraud, as well as increased costs to VA. 
Over the past two decades, VA's WCP costs have increased 57 percent to 
approximately $182 million; VHA comprises 93 percent of these total 
costs.
    We recently reported that VHA could reduce WCP costs by an 
estimated $264 million over the next 5 years through improved program 
case management oversight. (Audit of VHA's Workers' Compensation Case 
Management, September 30, 2011) While VHA submitted employee 
compensation forms timely, it often lacked the medical evidence 
necessary to support the employee's continued disabilities. VHA also 
missed opportunities to return able employees to work. Overall, we 
attributed these issues to a lack of oversight to ensure compliance 
with WCP statutory requirements.
    We recommended that VHA provide oversight and assign dedicated 
resources to control costs and reduce the potential for future waste 
and abuse. The Assistant Secretary for Human Resources and 
Administration and the Under Secretary for Health agreed with our 
findings and recommendations and plan to complete all corrective 
actions by December 31, 2011. We will assess and monitor the 
implementation of corrective actions.
    We also recommended that VA support legislation currently pending 
to convert claimants 65 years of age or older to more appropriate 
benefit programs. VA responded that they will contact the Department of 
Labor in support of its proposed change in legislation.

WORK IN PROGRESS

    The VSOs expressed concerns about the size and growth of Veterans 
Integrated Service Networks (VISN) in VHA. We have ongoing audit work 
to examine VISN management structures and fiscal operations. Although 
our work is not yet complete, we believe the VSOs have raised valid 
concerns. When VHA created the VISNs in 1995, VHA specifically 
decentralized budgetary, planning, and decision-making functions to the 
Networks to promote accountability and improve oversight of the daily 
operations of its medical facilities. VHA estimated the overall size of 
the original 22 VISNs would range between 154-220 FTE with total 
operating costs of about $26.7 million annually. Today, we estimate the 
existing 21 VISNs employ at least 1,098 staff at an annual cost of over 
$165 million.
    We also have concerns about the existence of national and regional 
fiscal controls and data that would allow VHA to effectively evaluate 
and compare the reasonableness of VISN staffing levels and costs. 
Strong financial management and fiscal controls would provide VHA the 
opportunity to identify inefficiencies in VISN operations and possibly 
reallocate funds back to direct patient care.
    While not referenced in the VSOs' letter, we also have ongoing 
projects in several areas that could potentially result in cost 
savings. We are currently examining the extent to which the MCCF 
program effectively bills third-party health insurers for VA provided 
medical care. VHA is currently centralizing MCCF billings and 
collections processes nationwide, however medical centers are 
continuing to perform some MCCF functions. Although our work is 
ongoing, VHA continues to miss opportunities to increase MCCF revenue 
by not billing third-party insurers for billable fee care services 
provided. We expect to issue a final report by the spring of 2012.
    We are also evaluating the effectiveness of VHA's acquisition and 
management practices used to purchase prosthetic limbs. Our preliminary 
results show that VA is paying more for prosthetic limbs than the 
agreed upon prices in the contracts in place. VA can reduce its risks 
for paying excessive prices by strengthening its oversight and controls 
with actions to ensure the review of vendor quotes, purchase orders, 
and to verify the costs of items billed on invoices match agreed upon 
prices in the associated contracts. We expect to issue a final report 
on this early in 2012.

CONCLUSION

    As an agency whose primary mission is to deliver benefits and 
services, it is a challenge to achieve meaningful cost savings but it 
is not insurmountable. The suggestions from the VSOs are a good 
starting point for the discussion but we believe the Committee and VA 
should consider other areas, including those we have raised. The VA OIG 
is committed to continue reviewing VA programs and operations to ensure 
that they function economically, efficiently, and effectively. We will 
continue to put forth recommendations that not only produce savings but 
more importantly provide better services to our Nation's veterans.
    Mr. Chairman and Members of the Committee, this concludes my 
statement today. I will be pleased to answer any questions you may 
have.
                                 
                   MATERIAL SUBMITTED FOR THE RECORD
         Deliverables from House Committee on Veterans' Affairs
           Hearing on Potential Budgetary Savings within VA:
           Recommendations from Veteran Service Organizations
                           November 15, 2011
    Below are VA's responses to questions asked during the November 15, 
2011 HVAC hearing on potential budgetary savings within the Department 
of Veterans Affairs.
    Question 1: Please provide a legal conclusion from OMB on the 
application of sequestration to VA.

    Response: This question will be addressed in VA's responses to the 
post-hearing questions stemming from this hearing.

    Question 2: Please provide the trend in the number of conferences 
over the past several years.

    Response: Leadership of the Department has centralized the approval 
process for all conferences involving more than 50 employees, and 
applied much greater scrutiny to them, requiring a strong business case 
to show a clear purpose and desired outcomes from the proposed 
conference, as well as encouraging wider use of teleconferences. When 
there is a case made for an in-person conference, there is a strong 
push for more economical venues and ensuring the number of participants 
is appropriate. The future trendline for both conference expenditures 
and the number of conferences will be downward. With regard to the 
request on historical information, however, an accurate, reliable 
figure on the number of conferences is not available.

    Question 3: Please provide a side-by-side review of CMS and VA 
survey questions for State Homes for certification.

    Crosswalk--38 CFR 51 VA's State Veteran Home (SVH) Survey Areas 
with Centers for Medicaid & Medicare Services (CMS) SVH Survey 
Standards (38 CFR 483)--(8) eight areas of difference:

11-18-11

    Below are the 8 areas identified by Ascellon which differ between 
the VA's SVH Survey Standards and those of CMS. Each of these (8) eight 
areas are discussed and provided below.

    1. VA area--Administration

    38 CFR 51.210 Notification of change of administration to 
Geriatrics and Extended Care
    Compliance with Section 504 of the Rehabilitation Act 1973, Annual 
Certification of Drug Free workplace, Annual Certification r/t 
lobbying, Annual certification compliance with Title VI of Civil Rights 
Acts, percentage of Veterans, State employee if contract out management 
of SVHs.
    These are VA specific with no correspondence in CMS.

    2. VA area--Credentialing and Privileging (C&P)

    38 CFR 51.210 j. Credentialing and Privileging.
    VA Specific area--no corresponding Credentialing & Privileging 
process in CMS.

    Specific to VA is (38 CFR 51.10); the CMS SVH survey regulation 38 
CFR 483 does not identify a C&P process, it simply states: ``The 
facility must operate and provide services in compliance with 
applicable Federal, State, and local laws, regulations, and codes, and 
with accepted professional standards and principles that apply to 
professionals providing services in such a facility.

    3. VA area--Basic Per Diem

    Basic Per Diem 51.41

    VA Specific area--no corresponding CMS area

    4. Per Diem and drugs and medicines: 38 CFR 51.42 & 43 (all VA 
specific)

    VA--specific--no corresponding CMS area.

    5. Social Worker qualifications

    VA's qualifications are more comprehensive than those of CMS as 
described below:

VA Social Work Qualifications

    38 CFR 51.100 (h) Social Services.

    (1)  The facility management must provide medically related social 
services to attain or maintain the highest practicable mental and 
psychosocial well-being of each resident.
    (2)  A nursing home with 100 or more beds must employ a qualified 
social worker on a full-time basis.
    (3)  Qualifications of social worker. A qualified social worker is 
an individual with----

         (i)  A bachelor's degree in social work from a school 
        accredited by the Council of Social Work Education (Note: A 
        master's degree social worker with experience in long-term care 
        is preferred), and
         (ii)  A social work license from the State in which the State 
        home is located, if offered by the State, and
        (iii)  A minimum of 1 year of supervised social work experience 
        in a health care setting working directly with individuals.

    (4)  The facility management must have sufficient support staff to 
meet patients' social services needs.
    (5)  Facilities for social services must ensure privacy for 
interviews.

CMS Social Work Qualifications:

    Sec. 483.15 Quality of life.

    ``(3) Qualifications of social worker. A qualified social worker is 
an individual with----

         (i)  A bachelor's degree in social work or a bachelor's degree 
        in a human services field including but not limited to 
        sociology, special education, rehabilitation counseling, and 
        psychology; and
        (ii)  One year of supervised social work experience in a health 
        care setting working directly with individuals.''

    6. Registered Nursing Services Coverage--VA more specific than CMS 
in required coverage

    VA Nursing Service Standards--38 CFR 51.130 Nursing services

    ``(b)  The facility management must provide registered nurses 24 
hours per day, 7 days per week.
    (d)  The facility management must provide nursing services to 
ensure that there is direct care nurse staffing of no less than 2.5 
hours per patient per 24 hours, 7 days per week in the portion of any 
building providing nursing home care.
    (e)  Nurse staffing must be based on a staffing methodology that 
applies case mix and is adequate for meeting the standards of this 
part. (Authority: 38 U.S.C. 101, 501, 1710, 1741-1743).''

    CMS Nursing Service:

    38 CFR 493 483.30

    States that: ``facility must provide services by sufficient numbers 
of each of the following types of personnel on a 24-hr basis to provide 
nursing care to all residents in accordance with resident care plans,'' 
with waivers to this requirement by the State for a variety of reasons-
ex. when the state determines that doing so will not endanger the 
health of the residents, when the facility has been unable to recruit 
appropriate personnel, etc.

    7. Issue: Nursing Services: Issue of designation of a supervising 
nurse for each tour of duty--

VA more specific than CMS

VA Nursing Service Standards

    Sec. 51.130 Nursing services.

    ``Facility must designate a supervising nurse for each tour of 
duty.''

CMS Nursing Service Standard

    See Item #6 above for CMS Nursing Service--38 CFR 493.30 states a 
facility must designate a licensed nurse to serve as a charge nurse on 
each tour of duty except when waived.

    8. Nursing Services Issue: VA's Hours Per Patient per 24 Hours 
(HPPD) of no less than 2.5 hours:

VA more specific than CMS

VA Nursing Service Standards

    38 CFR Sec. 51.130 Nursing services.

    ``(d) The facility management must provide nursing services to 
ensure that there is direct care nurse staffing of no less than 2.5 
hours per patient per 24 hours, 7 days per week in the portion of any 
building providing nursing home care.''
    See Item #6 for CMS Nursing Service standards--does not specify 
hours of nursing care per patient.

    Question 4: Please provide a complete cost to implement paperless 
claims.

    Response: The Veterans Benefits Management System (VBMS) lifecycle 
cost estimate (as revised in the September 2011 E300A submission) is 
$934,795,000. This cost estimate consists of VBMS development, 
technology, operation and maintenance (O&M), and government full time 
employees from fiscal year 2010 through 2017. The top cost and schedule 
drivers are development, technology, and O&M.
    Development: The major cost driver is the Workflow and Business 
Rules development costs. Man-hours required to interpret the vast set 
of business rules surrounding Workflow and Workload management will be 
more extensive than any other functional component of the system. This 
is where the most ``custom'' code development will most likely be 
incurred. Another major driver is the security required for a HIGH 
system accreditation. The development activities surrounding these 
controls and the additional documentation will be a larger cost than 
most systems incur.
    Technology: By far, the largest cost driver is the Document 
Repository (FileNET) and associated technology required for the image-
processing. Scanning and, more to the point, back-scanning of image 
data will be a large cost. The physical requirements to store and 
transmit this data, operationalize in a performant manner and deliver 
end capability will be a major long term cost and initial 
operationalizing cost. The network connectivity required along with the 
associated hardware and software are all major drivers for cost.
    O&M: Scanning will also be one of the larger cost drivers along 
with data storage. VA 6500 and Legal requirements to store data within 
accessible means impact long term storage requirements and transmission 
needs. Licensing and repeated incurring costs to support the document 
management will be an operational cost.

                                 
                 Questions and Responses for the Record
         Questions for Joseph A. Violante, National Legislative
          Director, Disabled American Veterans and Carl Blake,
     National Legislative Director, Paralyzed Veterans of America:
                           November 30, 2011
Joseph A. Violante
National Legislative Director
Disabled American Veterans
807 Maine Avenue, SW
Washington, DC 20024

Dear Joe:

    In reference to our full Committee hearing entitled, ``Potential 
Budgetary Savings Within the U.S. Department of Veterans Affairs: 
Recommendations from Veterans' Service Organizations,'' that took place 
on November 15, 2011, I would appreciate it if you could answer the 
enclosed hearing questions by the close of business on January 11, 
2012.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.
    Due to the delay in receiving mail, please provide your response to 
Carol Murray at [email protected], and fax your responses to 
Carol at 202-225-2034. If you have any questions, please call 202-225-
9756.
            Sincerely,

                                                         BOB FILNER
                                          Ranking Democratic Member

                               __________
                        Questions for the Record
                           November 15, 2011
          Questions for Joseph Violante, National Legislative
                  Director, Disabled American Veterans
    Question 1: Out of the nine recommendations discussed in your 
testimony, please tell the Committee your top three issues that you 
believe the Committee should focus on in order of priority.

    Question 2: Does your organization generally support the VISN 
structure or do you think it is time to take another look at how the 
provision of medical care is organized and managed? If you are 
generally supportive of the current VISN structure, do you believe that 
the present VISN boundaries are optimally drawn or do you have 
suggestions as to how to better draw these boundaries to reflect local 
needs and national centralization?

                                 
          Letter to Carl Blake, National Legislative Director,
                     Paralyzed Veterans of America
                           November 30, 2011
Carl Blake
National Legislative Director
Paralyzed Veterans of America
801 18th Street, NW
Washington, DC 20006

Dear Carl:

    In reference to our full Committee hearing entitled, ``Potential 
Budgetary Savings Within the U.S. Department of Veterans Affairs: 
Recommendations from Veterans' Service Organizations,'' that took place 
on November 15, 2011, I would appreciate it if you could answer the 
enclosed hearing questions by the close of business on January 11, 
2012.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.
    Due to the delay in receiving mail, please provide your response to 
Carol Murray at [email protected], and fax your responses to 
Carol at 202-225-2034. If you have any questions, please call 202-225-
9756.
            Sincerely,

                                                         BOB FILNER
                                          Ranking Democratic Member

                               __________
                        Questions for the Record
                           November 15, 2011
        Questions for Carl Blake, National Legislative Director,
                     Paralyzed Veterans of America
    Question 1: Out of the nine recommendations discussed in your 
testimony, please tell the Committee your top three issues that you 
believe the Committee should focus on in order of priority.

    Question 2: Does your organization generally support the VISN 
structure or do you think it is time to take another look at how the 
provision of medical care is organized and managed? If you are 
generally supportive of the current VISN structure, do you believe that 
the present VISN boundaries are optimally drawn or do you have 
suggestions as to how to better draw these boundaries to reflect local 
needs and national centralization?

                                 
        Responses from Joseph A. Violante, National Legislative
     Director, Disabled American Veterans and Carl Blake, National
          Legislative Director, Paralyzed Veterans of America:
    Question 1: Out of the nine recommendations discussed in your 
testimony, please tell the Committee your top three issues that you 
believe the Committee should focus on in order of priority.

    Answer: On behalf of The American Legion, AMVETS, Disabled American 
Veterans, Paralyzed Veterans of America and Veterans of Foreign Wars: 
Ranking Member Filner, our organizations believe it is imperative that 
the funding provided to VA must be efficiently and effectively spent in 
order to care for our Nation's veterans. Every dollar that is misspent 
or wasted is a dollar that cannot be used to provide benefits or 
services to veterans in need. For this reason, we worked jointly to 
identify a number of areas that the Committee might examine as possible 
ways to reduce waste and achieve savings within certain VA programs. In 
both our letter to the Committee dated April 4, 2011, and in our 
subsequent testimonies offered on November 15, 2011, we stressed the 
overriding importance of maintaining sufficient funding for VA health 
care and infrastructure remediation, each of which requires significant 
focus by the Committee over the coming year.

Health Care Funding

    Our organizations have worked with you and your colleagues for a 
number of years to gain sufficient, timely and predictable funding for 
VA's many programs. One extraordinary success was the passage of the 
Veterans Health Care Budget Reform and Transparency Act, Public Law 
111-81, an Act that created the advance appropriations process to 
govern VA health care funding. That Act was designed to allay the 
Veterans Health Administration's (VHA) chronic annual anxiety about the 
availability of funds on the first day of a fiscal year, and has begun 
to change management behaviors in a very positive way for the 
betterment of health care for veterans.
    However, as detailed in our testimony, the Administration and the 
Office of Management and Budget continue to introduce budget variables 
and make individual decisions irrespective of VA's internal Enrollee 
Health Care Projection Model and the advance appropriations process, 
actions that undermine our joint efforts to stabilize VHA funding. We 
have grave concerns about a number of budgetary ``gimmicks'' that were 
proposed by the Administration and accepted by the Congress. Moreover, 
the entire benefit of advance appropriations was recently overridden by 
Congress itself when a provision in the short-term continuing 
resolutions approved at the beginning of FY 2012 forced VA to spend 
less than Congress had previously provided to VHA through the advance 
appropriations process.
    Thus, we believe a clear priority for the Committee's time and 
resources in the new Session and the next Congress should be allocated 
to the Administration's VA budget formulation practices, with oversight 
of any new variables, ``management improvements,'' or other budget 
gimmicks that may threaten the advance appropriations process--which 
functions optimally when based on honest and transparent actuarial 
forecasting. Therefore, we believe this must be the Committee's top 
oversight function for the foreseeable future.

Maintaining and Improving VA's Physical Plant

    VA's capital infrastructure is another top concern of our 
organizations. Diminution of VA through neglect and attrition of 
capital infrastructure, whether in the health or benefits systems, will 
over time reduce the quality and quantity of services for veterans. 
Without properly functioning buildings and major building systems, VA 
cannot sustain quality programs. Without these investments, VA will 
experience steadily increasing inefficiencies and ever-greater 
difficulty attracting talented people to work within the VA system.
    Over the past two decades (with the partial exception of seismic 
improvements), no Administration or Congress has adequately funded VA's 
infrastructure needs. While VA buildings today are still serviceable, 
they and their component parts need to be maintained, renovated, 
replaced and kept contemporary in order for VA facilities to remain 
viable institutions for veterans who need services and for the staffs 
who work in them. We believe that it is a major responsibility of 
Congress and, more specifically, this Committee, to ensure that VA 
receives adequate funding to keep its infrastructure safe and 
functional. Congress has reserved to itself the sole power to approve 
and authorize appropriations for major medical facility construction on 
a per-project basis, and provides oversight on minor construction and 
VA's maintenance and repair accounts. We believe this critical area of 
VA weakness and lack of resources warrants much closer attention and 
leadership by the Committee.
    While all the recommendations discussed in our testimony are 
important, these two items are a priority.

    Question 2: Does your organization generally support the VISN 
structure or do you think it is time to take another look at how the 
provision of medical care is organized and managed? If you are 
generally supportive of the current VISN structure, do you believe that 
the present VISN boundaries are optimally drawn or do you have 
suggestions as to how to better draw these boundaries to reflect local 
needs and national centralization?

    Answer: VA's adoption of VISNs as a regional health care 
organization was derived from the geographic service area concept of 
the 1991 VA Commission on the Future Structure of Veterans Health Care, 
a Federal advisory commission chartered by then-VA Secretary Edward J. 
Derwinski to make recommendations for organizational, structural, 
quality, safety and cultural improvement in VA health care, among other 
aims. VA considered the Commission's recommendations for 3 years before 
implementing this one as a part of VHA's 1995 administrative 
reorganization. Initially, 22 VISNs were established but two of them--
the smallest in terms of patient workload, staff and funding--were not 
independently viable and were consolidated, so that today 21 networks 
remain, covering the continental U.S., Hawaii, Puerto Rico and U.S. 
possessions.
    We supported the VA's decision to restructure the VA health care 
system, the principal benefit being a regionalization of health care 
delivery, coordination of leadership and decentralization of decision-
making with a corresponding reduction of VA Central Office's 
involvement in local health care management matters. Like Congress, we 
believed that health care decisions were best left to local VA facility 
managers and clinicians, while VA Central Office should focus on 
national strategy and policies, program development, practices and 
standards-setting. The idea was simple: policy is set at the top; 
implementation occurs at the local level.
    Recent testimony before the Senate Committee on Veterans Affairs 
suggested VA facility managers are ``gaming the system'' to meet goal 
numbers established by the VISNs, rather than providing needed care to 
veterans as provided for by law and is also one of our concerns. We 
receive much anecdotal information from our members and VA employees 
that is consistent with such allegations--although these troubling 
reports are difficult to prove in any systematic way. The Committee's 
recent oversight hearing on chronic problems at the Miami VA Medical 
Center is illustrative of how such challenges can fester undetected 
because of lack of adequate public reporting and the general 
unavailability of documentary data.
    A second concern and one about which we wrote you in our April 2011 
letter and testified at your November 15 hearing, is the number of 
staff now assigned to the VISNs. When the networks were formed, VA 
asserted that they would be staffed by network directors with small 
cadres of staff. Management functions that exceeded this staff's 
ability to perform them were to be accomplished by working groups 
composed of VAMC staffs on temporary assignments. Over the past 15 
years, however, the network offices have grown dramatically, and have 
morphed into 21 permanent mini-central offices, staffed with full-time 
professional staffs focused on operations, clinical care, human 
resources, quality, safety, internal and external review, media, press, 
public affairs, budget, academic affairs, and numerous other functions.
    Perhaps the most worrisome concern with the VISN organization is 
the enormous administrative overhead that is being incurred by these 
seemingly bloated numbers of staff. We believe thousands of VA 
permanent, full time staff may now be assigned to VISN offices (but 
exact numbers are elusive due to lack of publicly available 
information). Within VA these network positions are popular because 
they represent opportunity for career mobility, professional 
advancement, and promotion of local VA employees. We believe a large 
number are clinicians who in their network assignments no longer 
provide clinical care to veterans. While we believe that clinical 
leadership is a strength of VA health care, we believe that the size 
and complexity of the current VISNs depart from the recommendations of 
the Commission's report, and from the original vision of those who 
implemented the geographic service area recommendation. Not only are 
clinical staff members being taken away from front line positions but 
also valuable technical and administrative staff have been drained from 
medical centers to VISN offices.
    Many of the additional positions were VACO-mandated to respond to 
the ``crisis of the day'' phenomena. Instead of developing thoughtful 
solutions for recognized problems, previous Administrations simply 
added new mandatory positions, functions or new offices.
    Our third concern with the networks deals with the geographical 
boundaries of VISNs. With the exception of the one major consolidation 
change mentioned above, no adjustment of VISN boundaries has occurred 
in the 15-plus years of the life of this organizational model. The 
original VISN geographic boundaries were drawn based on VA patient-
referral patterns and delivery systems from well over 20 years ago; 
these may well have changed. Also, some historical anomalies of the 
VISN map seem to cry out for review, for example, the small state of 
West Virginia remains subdivided into parts of four VISNs; the western 
Panhandle of Florida is part of the eight-state VISN 16, while the 
remainder of the large state of Florida is in VISN 8. We see other 
examples in the current VISN map that raise questions as well.
    Another concern is the allocation of appropriated medical care 
funds below the level of the network offices. VA's VERA system is a 
risk-adjusted capitation model that allocates Congressional 
appropriations to the networks rather than the facilities. 
Theoretically, this model enables regional coordination and funding of 
highly specialized, scarce medical resources, while the facilities 
remain the major delivery systems and serve as VHA's basic building 
blocks to formulate VHA's annual budget request. VHA's appropriations 
have grown dramatically over the past several years--yet VA facilities 
often indicate to us that they are significantly underfunded and must 
ration spending for numerous categorical needs across the operating 
year. We believe the resource allocation model or the systems being 
employed by the VISN offices to allocate resources to the VAMCs might 
need scrutiny and possibly re-balancing for their effects on local 
operations.
    With these thoughts in mind, we would recommend the Committee 
commission an independent, outside review of the VA network concept, 
subsequent implementation and current status, with recommended changes 
that may be warranted by review findings. We believe the time has come 
for a critical review of the organization, functions, operations, and 
budgeting process at the VISN and VAMC levels. We recommend the review 
be conducted by the Institute of Medicine (IOM) rather than by VA or a 
private contractor. Involving the IOM would ensure a thoroughgoing, 
apolitical and unbiased review. In addition to examining the current 
referral patterns, the analysis should account for future demand, 
changes in veteran and family expectations, and the changing trends in 
health care delivery.
    Also, we would recommend that the IOM's review and analysis be 
comprehensive to include a review of the VHA Central Office 
organization. This evaluation should address a value-based analysis of 
those programs that are optimally managed and funded at a national, 
VISN or VAMC service level.
    While the IOM's report should be made to the Committee, VA should 
be permitted to comment on the report. We would also recommend the 
Committee hold hearings on the results of this review to include 
testimony from this community and other interested parties. The IOM 
reviewers should be carefully instructed as to the goals of the study, 
which we believe should focus on ways to improve health care quality, 
safety, satisfaction, consistency and access. The study should focus on 
delivery of comprehensive, patient-centered care to today's veterans 
that builds on the obvious progress VA has made over the past 16 years. 
The IOM's work on this project should be closely monitored by the 
Committee as the process occurs to ensure your goals are met.
    We thank the Ranking Member for your questions, and we would be 
happy to furnish any additional information that might be of use to the 
Committee as it conducts its oversight of VA programs.

                                 
          Letter from Hon. Jeff Miller, Chairman, Committee on
           Veterans Affairs to Hon. Eric Shinseki, Secretary,
                  U.S. Department of Veterans Affairs
                           November 30, 2011
The Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our full Committee hearing entitled, ``Potential 
Budgetary Savings Within the U.S. Department of Veterans Affairs: 
Recommendations from Veterans' Service Organizations,'' that took place 
on November 15, 2011, I would appreciate it if you could answer the 
enclosed hearing questions by the close of business on January 11, 
2012.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.
    Due to the delay in receiving mail, please provide your response to 
Bernadine Dotson at [email protected]. If you have any 
questions, please call 202-225-3527.
            Sincerely,

                                                        JEFF MILLER
                                                           Chairman

                                 
                 Post-Hearing Questions for the Record
                   Submitted by Chairman Jeff Miller
           Hearing on Potential Budgetary Savings Within the
          U.S. Department of Veterans Affairs: Recommendations
                  from Veterans' Service Organizations
                           November 15, 2011
    1.  According to the VA IG testimony, VHA estimated in 1995 that 
the original size of all 22 VISNs would range between 154 to 220 with 
total operating costs of about $26.7 million annually. The IG now 
estimates the existing 21 VISNs employ at least 1,098 staff at an 
annual cost of over $165 million.

        1.  Please detail what is being done to assess this growth in 
        VISN staffing levels.
        2.  What is the FTE range of VISN headquarter staff nationwide?
        3.  Is there a correlation between a growing headquarter staff 
        and VISNs meeting key performance measures?

    2.  Please provide information on newly hired employees in the VHA 
positions of Medical Center Director, Associate Network Director, and 
Network Director for the years 2008 through 2011, broken down by year 
and the Pay Grade and Step at which these individuals were hired.
    3.  Please provide information on the number of VA employees, 
broken down by Administration, whose work-related business activities 
permit such employee to receive reimbursement for travel and other 
expenses incurred for having a temporary duty location (basically 
having two residences) and the cost to the Department as a result of 
payments for air fare; per diem; or mortgage, interest, property taxes 
and utility costs for purchasing a home at the temporary duty location.
    4.  The IG testimony stated that fundamental controls continue to 
be problematic for the fee care program. Why is that? What is being 
done about it?
    5.  How many individual fee-basis care contracts does VHA have? 
Would consolidation of contracts into larger networks of providers 
(similar to a Tricare model) be more economical and improve care 
coordination? Has there been any analysis of the feasibility of moving 
to a Tricare-like model for VA's fee-basis program? What about moving 
to a larger network model for only certain kinds of care, e.g., mental 
health?
    6.  In the past year the VA IG has uncovered instances of fraud in 
VA's beneficiary travel program. In essence, veterans who lived only a 
few miles from a medical center claimed residences that were over 100 
miles away, then obtained a travel reimbursement based on the 
fictitious residence.

        1.  What methods does VA have to guard against this kind of 
        fraud? Are veterans' addresses matched against other government 
        records to ensure valid residences are reported?
        2.  What oversight is conducted on individual medical centers' 
        beneficiary travel offices in terms of correct determinations 
        being made regarding a veteran's eligibility for travel 
        reimbursement?
        3.  How much money is spent annually on VA's beneficiary travel 
        program? How much is spent administering the program? Has any 
        thought been given to consolidating the beneficiary travel 
        function (similar to a CPAC model) to improve efficiency and 
        promote consistent decision-making?

    7.  Do VA employees ever fly business class to conferences or other 
VA-sponsored travel destinations?
    8.  Please provide the Administration's position regarding whether 
VA programs are exempt from sequestration. Please provide the Office of 
General Counsel legal opinion/recommendation to the Office of 
Management and Budget regarding whether all VA-administered programs, 
including VA medical care, are exempt from sequestration.
    9.  In the November 14, 2011 IG report regarding VA retention 
incentives, Dr. Petzel committed to a 100 percent review of all SES/SES 
Equivalent retention incentives by November 30, 2011. Please provide 
the Committee with the results of that review.

                                 
                        Questions for the Record
                          Chairman Jeff Miller
                  House Committee on Veterans Affairs
                 Potential Budgetary Savings within the
                  U.S. Department of Veterans Affairs:
        Recommendations from the Veterans' Service Organizations
                           November 15, 2011
    Question 1: According to VA IG testimony, VHA estimated in 1995 
that the original size of all 22 VISNs would range between 154 to 220 
with total operating costs of about $26.7 million annually. The IG now 
estimates the existing 21 VISNs employ at least 1,098 staff at an 
annual cost of over $165 million.

    1.  Please detail what is being done to assess this growth in VISN 
staffing levels.
    2.  What is the FTE range of VISN headquarter staff nationwide?
    3.  Is there a correlation between a growing headquarter staff and 
VISNs meeting key performance measures?

    Response:

    1.  Please detail what is being done to assess this growth in VISN 
staffing levels.

    In 1995, VHA began a reorganization that included the establishment 
of 22 VISNs. Staffing began with each VISN having ten core staff. Over 
time, staffing has grown commensurate with increased VISN 
responsibilities. In August 2011, VHA conducted a preliminary review of 
VISN management variation and staffing data, and determined that a more 
detailed analysis was necessary. VHA established work teams to examine 
the following sub-areas:

      VISN Role and Function
      VISN Core Staff
      VISN Regional Variations
      VISN Strong Practice Sharing
      Structured Business Reviews of VISNs

Expected deliverables

    VISN Role and Function. Since the mid-1990s, the VISN's role has 
evolved into that of a fundamental operating unit of VHA. VISNs have 
been charged with increased oversight responsibilities and programmatic 
implementation, which vary according to complexity of care, specialized 
services, staff sizes and other local factors. A specific and 
comprehensive definition of the role and functions of the VISN Network 
Office will be developed, to ensure that the VISN Network Office role 
relative to operation, oversight and implementation of programs within 
facilities is adequately covered.
    VISN Core Staff. VHA has increasingly come to rely on VISNs to 
provide ``reach'' into the field, for added oversight and operational 
direction for the Deputy Under Secretary for Health for Operations and 
Management (DUSHOM), program office implementation efforts and VHA 
leadership. A work team will formally match this and other 
responsibilities into the broader VHA organizational structure. As form 
follows function, the organizational structure (form) will be mapped to 
the explicit roles and functions of the VISN. The work team will 
generate a document that maps the VISN role and function to an 
organization structure. The structure will include a breakdown of types 
of positions (core/leadership, mandated, discretionary, etc.).
    VISN Regional Variations. Develop a methodology to identify and 
monitor positions that provide (direct) support to facilities through 
coordinated regional effort for those positions or services that do not 
meet the criteria for core VISN staff.
    VISN Strong Practice Sharing. Develop a process (to include 
expected outcomes) for VISN identification, validation (measurement) 
and sharing of strong practices in the VISN.
    Structured Business Reviews of VISNs. Develop a management agenda 
that will serve as the DUSHOM (10N) structured business review of the 
VISNs.
    Work teams comprised of VISN and VHACO leadership are expected to 
report the results of their efforts to the Office of the DUSHOM during 
the first quarter of calendar year (CY) 12.

    2.  What is the FTE range of VISN headquarter staff nationwide?

    VISN staffing ranges between a high of 104 fulltime-equivalent 
employees (FTEE) and a low of 38. A November 2011 survey of VISNs 
indicates there is a direct correlation between the complexity of the 
VISN (number of campuses) and the number of Veterans the VISN serves 
(coverage area).

    3.  Is there a correlation between a growing headquarter staff and 
VISNs meeting key performance measures?

    As VHA undertakes new and expanded initiatives, the variance in 
interpretation and assignment of functions and personnel assigned to 
the VISN has increased. Compounding this situation, the escalating role 
of the VISN in the oversight and implementation of programs and 
policies has led to substantial variation in VISN structure.
    While geographic and Veteran population differences provide for 
valid reasons for some level of variation among VISN structures, the 
incremental expansion of VISN mission, coupled with variation in 
structures, creates variations in both the functions performed by VISNs 
and interpretation about the purpose of the VISN. While it is desirable 
that VISN structure and function are evaluated and standardized to 
disseminate strong practices across all VISNs that align in mission, 
VHA's current efforts to assess VISN staffing will accommodate those 
geographic and population differences that are found among the 
Networks.
    A corollary to VHA's VISN staffing assessment will be the 
identification of candidate reporting sources for use in the 
development of a balanced view of VISN performance. VHA anticipates 
that structured business reviews will guide the integrated outcome, 
process and associated measurement framework to incorporate the 
following traditional dimensions of a balanced scorecard: client, 
process/quality, financial, operational efficiencies and employee/
learning. A team was formed to develop this complementary activity, 
whose timeline for completion is also first quarter CY 12. A 
significant factor in VHA's VISN staffing assessment is the finding 
that the appropriate VISN-level FTEE to provide leadership and 
expertise has contributed to better performance at the VAMC-level in 
such areas as mental health, geriatrics, prosthetics and patient 
safety.

    Question 2: Please provide information on newly hired employees in 
the VHA positions of Medical Center Director, Associate Network 
Director, and Network Director for the years 2008 through 2011, broken 
down by year and the Pay Grade and Step at which these individuals were 
hired.

    Response: Please see attached.

    Question 3: Please provide information on the number of VA 
employees, broken down by Administration, whose work-related business 
activities permit such employee to receive reimbursement for travel and 
other expenses incurred for having a temporary duty location (basically 
having two residences) and the cost to the Department as a result of 
payments for air fare; per diem; or mortgage, interest, property taxes 
and utility costs for purchasing a home at the temporary duty location.

    Response: VA does not have access to records that identify 
individuals who own a second home at the TDY location. Under that 
scenario, the traveler should not claim lodging costs for the period of 
travel. Also, there would be no lodging receipt for review/approval by 
the supervisor as required by travel regulations. The travel voucher 
should reflect no lodging costs.
    However, such travelers could receive a Travel Savings Award. These 
incentives are not exclusively provided to individuals who own a home 
in a temporary duty location and could include situations where 
travelers stayed with friends or stayed in lower cost accommodations as 
well. VA's Travel Savings Award policy can be found at: http://
10.222.13.221/scan/jobs/13320/DC-260-80B7761018.pdf
    VA records show that in 2011 a total of $59,795 was paid out to 105 
employees as ``Travel Savings Awards.''

    Question 4: The IG testimony stated that fundamental controls 
continue to be problematic for the fee care program. Why is that? What 
is being done about it?

    Response: VHA has been developing and implementing initiatives to 
resolve program issues. Most significant issues center on the manual 
nature of the program and variability in business practices. VHA's 
Chief Business Office for Purchased Care has taken several steps to 
improve this program, focusing in several areas. The program has been 
supported by manual processes; key changes described below are underway 
to standardize, reduce or eliminate manual processes supporting the 
program.
    Technology Improvements: Fee Basis Claims System (FBCS): The VistA 
Fee package was developed more than 20 years ago and was not designed 
for the sophistication and volume of claims that the VA is now 
processing. As a result, VA has implemented an interim automation 
system, FBCS, to support and improve the Purchased Care claims 
management operations. VA has seen improvements in payment accuracy and 
timeliness since this implementation began in October 2009, with 
significant reductions in the manual work required to manage this 
program. In addition, enhancements are underway that will address the 
top audit findings, reducing the significant manual processes currently 
supporting the program. These are planned to be implemented in late 
calendar year 2012.
    Program Integrity Tools: VA has implemented an aggressive Fraud/
Waste/Abuse (FWA) Program with specific awareness and training efforts 
accomplished in FY 2011 through the creation of the VHA CBO Program 
Integrity Department which combats fraud, waste and abuse using various 
system safeguards, detailed auditing and the development of fraud 
detection and awareness training classes. During FY 2011, quarterly 
Fraud, Waste and Abuse training sessions were conducted through Live 
Meeting presentations, which covered: code gaming, ambulance upcoding, 
``bundled'' billable claims, common fraud schemes, and detection and 
prevention of health care fraud. In addition, VA has developed routine 
monthly reporting that provides detailed information on FWA cases to 
each facility for review; if payment errors are validated, these 
results are included in the quarterly High Dollar Overpayment report to 
the Office of Management and Budget (OMB). Finally, VA has procured 
industry standard technology tools that utilize known health care 
industry algorithms to identify potential fraudulent or erroneous 
claims. VA will implement these tools by the end of calendar year 2012 
which will consist of the following:

      Claims Scoring Tool
      Data Repository
      Data Integration/Extraction, Transform and Load (ETL) 
tool, and
      Reporting Tool

    Business Process Changes:

    Non-VA Care Coordination: VHA is implementing the following 
standardized business processes to reduce variability and inefficiency 
across all program areas including:

      Consult/Referral review: initial decision point for use 
of Non-VA Care.
      Appointment Management: control and oversight of the Non-
VA appointments.
      Clinical Documentation Management: assure appropriate 
clinical information is received in a timely manner.
      Emergency Care: assure appropriate oversight and 
management of emergent care provided at Non-VA facilities; assure 
claims associated with emergent care are adjudicated in a standardized 
manner.
      Appeals Management: assure timeliness and quality 
standards are met when Veterans appeal benefit decisions.

    These standardized business processes are scheduled to be fully 
deployed throughout all 21 VISNs by the end of FY 2012. Early results 
have seen positive progress in the timeliness of approvals and 
appointments for non-VA care, and the receipt of clinical documentation 
for these non-VA care visits.
    Site Assessment Visits: VA's Chief Business Office has expanded its 
Non-VA Care Field Assistance Program to provide enhanced assistance 
visits designed to assist with site specific process improvements and 
assessment of key business practices supporting the program. In FY 
2011, 30 site assistance visits were performed, which included 
providing staff guidance and training to approximately 180 Fee field 
facility staff. The site assistance visits also included an extensive 
analysis of the clinical utilization review aspect of Fee care, proper 
authorizations, obligations of funds, staff understanding of payment 
methodologies and the Fee Basis Claims System (FBCS) and an overview of 
management controls within the Fee office. Upon conclusion of the 
visit, a final report and extensive action plan for process improvement 
is shared with the facility leadership and follow-up conducted to 
ensure that action plan findings are implemented.
    Training and Education: The Fee Academy is the primary training 
program provided to VISN and VAMC Non-VA Care (Fee) employees 
nationwide. The Fee Academy is organized into a four-tiered, 
progressive level of curriculums designed to improve performance, 
enhance internal controls and be in compliance with program policies--
461 employees completed this training in FY 2011. The Fee Academy is 
augmented by `just in time' mini-courses delivered via LiveMeeting on 
myriad topics concerning new or changed processes--over 13,000 
employees attended 60+ mini-courses in FY 2011. Future efforts will 
include a link to core competencies and associated mandatory training 
requirements.
    Non-VA Purchased Care Claims Audit Contract (CCAC): This external 
contract conducts post-payment reviews and analysis that identify 
errors in payment methodologies and procedures for Non-VA Care (Fee) 
claims processing. In FY 2011, 12 VISNs were audited, addressing 
findings at 24 VA facilities. Each VISN prepared an action plan 
specific for their findings. In addition, the findings from audits have 
been utilized to prioritize technology and business process changes 
required to support overarching program improvement initiatives.
    Recovery Audit: The Purchased Care Business Line (PCBL) manages the 
national contract for an external audit of non-VA care inpatient 
payments. These audits have been in place since 2002, with recoveries 
exceeding $100 million. In March 2011, PCBL expanded the recovery audit 
to include outpatient services. To date, this audit has identified 
approximately 1,800 cases with the potential for $557,000 in 
collections to the government. The results will be used to reinforce 
training and field communications and develop additional audit and 
corrective actions plans.

    Question 5: How many individual fee-basis care contracts does VHA 
have? Would consolidation of contracts into larger networks of 
providers (similar to a Tricare model) be more economical and improve 
care coordination? Has there been any analysis of the feasibility of 
moving to a Tricare-like model for VA's fee-basis program? What about 
moving to a larger network model for only certain kinds of care, e.g. 
mental health?

    Response: On a national basis, VA currently has fee-basis care 
national contracts for Dialysis/End Stage Renal Disease (ESRD) services 
and pilot contracts in select VISNs for Project HERO (medical, 
surgical, and dental care), mental health services, and Project ARCH 
(Access Received Closer to Home) pilot program. Also, within VA Medical 
Centers, specific contracts do exist on a limited basis and they are 
developed, awarded and managed at the local level based on need. 
Approximately 30 percent of Non-VA Care (Fee) payments are covered 
under a contract or local agreement. VA facilities also issue 
individual authorizations, which serve as contracts once accepted by 
non-VA providers. The Project HERO pilot, while different than TRICARE, 
has some similarities to the broader model of contracting with larger 
networks of providers.
    VA will be moving to a larger network model of contracts for health 
care services with awards anticipated in late calendar year 2012 and 
operations beginning in the mid-year 2013. These contracts utilize 
lessons learned from Project HERO and other pilot efforts and the 
effort is referred to as Patient-Centered Community Care (PCCC). This 
new effort seeks to connect VA with networks of providers across the 
country through centrally supported health care contracts. The 
contracts will leverage economies of scale to provide community-based 
care that is coordinated, timely and of high clinical quality. The 
requirements for the contract are in development and are based on 
lessons learned from Project HERO and other Purchased Care pilot 
programs, such as:

      Standardize business processes;
      Require medical documentation return;
      Include timeliness and access standards to ensure best 
possible access to care;
      Ensure provider quality by requiring they meet 
credentialing, licensure and board certification standards; and
      Establish performance measures and objectives.

    Question 6: In the past year the VA IG has uncovered instances of 
fraud in VA's beneficiary travel program. In essence, Veterans who 
lived only a few miles from a medical center claimed residences that 
were over 100 miles away, then obtained a travel reimbursement based on 
the fictitious residence.

    1.  What methods does VA have to guard against this kind of fraud? 
Are Veterans' addresses matched against other government records to 
ensure valid residences are reported?
    2.  What oversight is conducted on individual medical centers' 
beneficiary travel offices in terms of correct determinations being 
made regarding a Veteran's eligibility for travel reimbursement?
    3.  How much money is spent annually on VA's beneficiary travel 
program? How much is spent administering the program? Has any thought 
been given to consolidating the beneficiary travel function (similar to 
a CPAC model) to improve efficiency and promote consistent decision-
making?

    Response:
    1.  What methods does VA have to guard against this kind of fraud? 
Are Veterans' addresses matched against other government records to 
ensure valid residences are reported?
    VA acknowledges that the Beneficiary Travel Program (BT) is a high 
risk area. Veterans in accordance with BT regulations at 38 Code of 
Federal Regulations (CFR) 70.30 (b) may receive travel benefits for 
travel from either their residence or other point travel initiated; 
however, payment cannot exceed the amount payable from the Veteran's 
residence. Also, current Health Insurance Portability and 
Accountability Act (HIPAA) laws provide for an individual to have a 
mailing address that does not reflect their residence. In addition, 
some rural residences do not have an established street address.
    VA currently does not have address-matching capabilities with other 
Federal agencies. However, for reasons noted above, another agency's 
address on file may or may not reflect where the Veteran currently 
resides or initiated travel. Therefore, such matching could be of 
limited value. As such, when a questionable address is identified by 
the local VA Medical Center, program office guidance has been for the 
VA Medical Center, in accordance with 38 CFR 70.20 (e), to request from 
the Veteran a document, generally a utility bill, in his or her name 
indicating current residence. If the Veteran does not have such a 
document, a notarized letter from an individual where the Veteran is 
staying may be requested. VA is also exploring the use of web-based 
services which provide automated real time verification of residence. 
This may include use of HHS or SSA address verification tools.
    In addition, VA released to the field in June 2011, a tool that 
provides the ability to analyze BT mileage reimbursement data at the 
facility or Network (VISN) level to determine: total and average cost 
per patient; total and average cost per zip code; different patient 
populations according to total number (count) of payments made and 
total amount paid (sum); total and average number of claims per clerks; 
and patient behavior and clinic usage trends. As such, stations can 
identify: clinic and patient population outliers by sum and count; 
total amount paid in mileage reimbursement within pre-determined 
parameters; how efficiently travel clerks are performing; geographic 
travel trends; and possible patient behavior trends. Feedback obtained 
from VHA field staff is that this tool has proven extremely beneficial 
in identifying potential BT issues for further evaluation and 
appropriate action by the using station. VA is also currently in the 
final production test of a ``BT Dashboard'' tool that will allow field 
stations to more effectively and efficiently process beneficiary travel 
claims. The tool will expedite claims process to reduce waiting time 
for patients and increase accuracy of mileage determinations through 
system-wide use of a standardized mileage calculator and creation of a 
detailed clinical inventory for surrounding facilities and VISNs.
    2.  What oversight is conducted on individual medical centers' 
beneficiary travel offices in terms of correct determinations being 
made regarding a Veteran's eligibility for travel reimbursement?
    VA is currently in the final stages of implementing internal 
controls for the BT program by both descriptive/deductive and inductive 
modeling through 6 identified Veteran behaviors relating to BT 
reimbursement. Behaviors describe Veterans who:

    1.  ``Unbundle'' appointments by scheduling them on multiple days 
even though they could be scheduled on the same day; and drop-in for 
medical services without a scheduled appointment.
    2.  Provide incorrect income information, which may render them 
eligible for BT benefits irrespective of their service-connected (SC) 
rating; have a SC disability rating of less than 30 or have a non-
service-connected (NSC) disability; and have an annual income higher 
than the VA pension level.
    3.  Frequently change their addresses in order to increase their BT 
payments.
    4.  Choose a VA facility for care that is further than the closest 
VA facility providing the same care; and Veterans receiving care at 
multiple facilities concurrently or sequentially; some of these 
Veterans may have been denied BT benefits at some of the facilities; 
moreover, the care sought may be similar at each facility.
    5.  Travel together (in the same vehicle) but file BT claims 
separately.
    6.  File for BT benefits for multiple visits occurring on the same 
day. Improper BT payments may occur when the time needed to travel 
roundtrip is longer than the time between the appointments.

    Behaviors are to be run against national VA data and then 
distributed to VISNs on a monthly basis for review, action and 
reporting back to the program office to track, trend, and provide 
national level reports regarding results. Information will also assist 
the program office to identify potential deficiencies for review and 
take corrective action, if required. Development is anticipated to be 
completed by the end of January 2012 with first reporting expected in 
March 2012.
    3.  How much money is spent annually on VA's beneficiary travel 
program? How much is spent administering the program? Has any thought 
been given to consolidating the beneficiary travel function (similar to 
a CPAC model) to improve efficiency and promote consistent decision-
making?
    While BT is generally thought of as mileage reimbursement, Title 38 
United States Code (U.S.C.), Sec. 111, ``Payments or allowances for 
beneficiary travel'' as regulated in 38 CFR Part 70 authorizes VA to 
pay for special mode (ambulance, wheelchair, van, etc.) and common 
carrier (plane, bus, train, ferry, etc.) transportation of certain 
eligible Veterans and other beneficiaries. VA can provide or reimburse 
for the actual cost of bridge tolls, road tolls, tunnel tolls, parking, 
and in case of air transport luggage costs, when supported by a 
receipt. The actual cost for meals, lodging or both, not to exceed 50 
percent of the amount allowed for government employees may also be 
provided in limited circumstances. As such, VA tracks costs via three 
cost centers which are:

      Inter-FacilityTravel (Budget Object Code (BOC) 2112): 
Travel costs associated with the transfer of a patient from one 
facility to another when the transfer is necessary for the continuation 
of care. The transfer may occur between VA facilities, non-VA 
facilities or any combination as long as the treatment is at VA 
expense;
      Other than Mileage (BOC 2119): All beneficiary travel 
charges, except mileage. This includes special mode transport and 
certain eligible associated costs of travel: lodging, meals; and
      Mileage (BOC 2120): Mileage reimbursement and associated 
costs: road, bridge, tunnel tolls, parking.

    Obligations for the past three Fiscal Years (FY) are:

------------------------------------------------------------------------
                                     FY 2009      FY 2010      FY 2011
               Type                   (000)        (000)        (000)
------------------------------------------------------------------------
Inter-Facility                         $69,910      $71,752      $63,201
------------------------------------------------------------------------
Other Than Mileage                    $244,275     $242,045     $276,803
------------------------------------------------------------------------
Mileage                               $314,754     $431,518     $484,829
------------------------------------------------------------------------
Total                                 $628,939     $745,315     $824,833
------------------------------------------------------------------------

    VA has previously given consideration to consolidating certain 
aspects of the BT program; however, because of the eligibility 
requirements of the program, unique clinic needs, physical layout of 
medical center and associated community based outpatient clinics and 
available resources at each facility (as well as unique local 
resources), program operations and functions are better suited for 
local implementation. VA, is however, currently evaluating several 
options to increase oversight, and this may lead to centralizing 
certain aspects of the BT program. The Chief Business Office has 
estimated FY 2012 administrative costs for managing the Beneficiary 
Travel program to be $645,263. In addition, during FY 2012, the Chief 
Business Office expects to award an analytics support contract for BT 
program, at an estimated cost of $624,000. Total FY 2012 administrative 
costs for the program office are estimated to be $1,269,263. These 
figures do not include the costs incurred at VA health care facilities 
for administering the program.

    Question 7: Do VA employees ever fly business class to conferences 
of other VA-sponsored travel destinations?

    Response: Yes, but only on a very infrequent basis. The Federal 
Travel Regulations (FTR) and VA travel policy permit employees, under 
certain circumstances, to use business or first class ``other-than-
coach'' (OTC) class travel with proper justification and approval. OTC 
travel is always to be the exception, and approval is strictly limited. 
VA recently tightened the authorization process for obtaining such 
approval. VA employees are required to exercise the same care in 
incurring expenses that any person would exercise if traveling on 
personal business and consider the least expensive class of travel that 
meets his or her needs. Authorization for OTC travel may be justified 
as a result of a traveler's medical condition, properly documented by a 
medical authority; a total flight time in excess of 14 hours (business 
class, but not first class); or other reason allowed under the FTR. 
Approved use of OTC travel entails authorization by the employee's 
direct supervisor, a senior approving official, the respective Under 
Secretary or Assistant Secretary, and VA's Chief Financial Officer. 
Otherwise, if OTC travel does not fall within one of the exceptions to 
the FTR, the only way an employee could fly OTC is using personal funds 
to pay for the upgrade.

    Question 8: Please provide the Administration's position regarding 
whether VA programs are exempt from sequestration. Please provide the 
Office of General Counsel legal opinion/recommendation to the Office of 
Management and Budget regarding whether all VA-administered programs, 
including VA medical care, are exempt from sequestration.

    Response: This issue remains under Administration legal review.

    Question 9: In the November 14, 2011, IG report regarding VA 
retention incentives, Dr. Petzel committed to a 100 percent review of 
all SES/SES Equivalent retention incentives by November 30, 2011. 
Please provide the Committee with the results of that review.

    Response: In September 2011, the Under Secretary for Health 
established a VHA Retention Incentive Technical Review Board (RITRB) to 
review all proposals for retention incentives for SES and SES 
Equivalent employees. All VHA entities were directed to review 
retention incentives currently in place and determine if all 
requirements were met for the retention incentives to be continued. If 
all criteria were not met, the retention incentives were to be 
terminated. Requests for continuation of retention incentives were to 
be submitted for RITRB review by October 31, 2011. The RITRB completed 
their review by November 30, 2011.
    The RITRB reviewed all submissions and made recommendations. The 
Under Secretary for Health has also made his recommendations to the 
Department, which are now under consideration.

                                 
                 Follow-up to Questions for the Record
                          Chairman Jeff Miller
                  House Committee on Veterans Affairs
  Potential Budgetary Savings within the U.S. Department of Veterans 
                                Affairs:
        Recommendations from the Veterans' Service Organizations
                           November 15, 2011
    Question:
    A question was asked to Mr. Grams at the Nov. 15 hearing regarding 
the date VA sent it's legal review/recommendation to OMB on the 
sequestration issue. We still need VA's response to that question. 
Further, a request was made for the Committee to receive a copy of VA's 
review/recommendation. That request was repeated in Chairman Miller's 
post-hearing questions as part of question 8. That was not responded to 
as well.
    Understanding that the broader question on sequestration is still 
under legal review (according to the responses to Mr. Miller's post 
hearing questions), we still await responses on the two issues above. 
Since Mr. Grams spoke of a review that had already been completed and 
submitted, I suspect letting the Committee know of its contents and 
date submitted shouldn't take any time at all.

    Response:
    The Administration continues to believe that balanced deficit 
reduction, not across-the-board sequestration, is the way to put the 
Nation on the path to fiscal stability.
    The President's Budget includes a comprehensive and balanced 
deficit-reduction proposal. Congress should enact that proposal and 
then halt the sequestration scheduled to take place on January 2, 2013.
    If Congress does not Act on the President's deficit-reduction 
proposals, the Administration will provide guidance on the 
implementation of the sequestration. It is committed to doing so well 
in advance of January 2, 2013, to facilitate orderly planning.

                                 
             Letter to Hon. Eric Shinseki, Secretary, U.S.
          Department of Veterans Affairs from Hon. Bob Filner,
                           November 30, 2011
The Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Secretary:

    In reference to our full Committee hearing entitled, ``Potential 
Budgetary Savings Within the U.S. Department of Veterans Affairs: 
Recommendations from Veterans' Service Organizations,'' that took place 
on November 15, 2011, I would appreciate it if you could answer the 
enclosed hearing questions by the close of business on January 11, 
2012.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for materials for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively and single-spaced. In 
addition, please restate the question in its entirety before the 
answer.
    Due to the delay in receiving mail, please provide your response to 
Carol Murray at [email protected], and fax your responses to 
Carol at 202-225-2034. If you have any questions, please call 202-225-
9756.
            Sincerely,

                                                         BOB FILNER
                                          Ranking Democratic Member

                                 
                        Questions for the Record
                           November 15, 2011
    Questions for W. Todd Grams, U.S. Department of Veterans Affair
    Question 1: Your written testimony states that VA is ``instilling a 
culture throughout our system that pursues continuous improvement and 
empowers staff members to solve problems at the front line or at any 
point in the health care system.'' Please provide the Committee with 
the specific policies or procedures VA has implemented or issued, Since 
January 1, 2011, to achieve this change in culture. Which specific 
policies or procedures can you point to as being of primary importance 
in instituting this change? In what other ways are you ``instilling'' 
this culture?

    Question 2: In February, Secretary Shinseki testified regarding the 
VA's reliance on ``carryover'' funding, or funding not obligated in the 
previous fiscal year. For many years, a small portion of VA's medical 
care budget was provided in the form of 2-year authority to better 
enable the VA to manage its resources. Arguably, the need for 2-year 
authority for a portion of the VA's medical care budget is not as 
strong in the era of advance appropriations. The continued reliance of 
the VA on carryover funding may provide a perverse incentive at the 
local level not to obligate funds in order to provide VA Central Office 
with carryover funding to plug funding gaps in the next fiscal year. 
What specific steps has VA Central Office taken to negate this 
incentive? What specific steps has VA Central Office taken, and 
communicated to the VISN level, to ensure that funds are obligated when 
needed and on a timely basis?

    Question 3: VAOIG audits and reports have identified hundreds of 
millions of dollars in potential savings through better management of 
VA programs. Please explain to the Committee why these savings and 
improvements were not identified by VA prior to being identified by 
VAOIG audits or reports. What specific steps has the VA taken to 
improve day-to-day internal management in order to proactively identify 
program deficiencies? Does VA feel confident that it is better able 
today to identify future problems?

    Question 4: According to your testimony, earlier this year VA 
``conducted a pilot program that used standardized templates for 
purchasing care, ensured more consistent assessment of other VA 
options, and resulted in better control over management of the care 
[VA] purchased.'' What was the impetus behind starting this pilot 
program, and why wasn't this degree of standardization implemented in 
the past?

    Question 5: VAOIG testified that improved management and oversight 
of the Fee Basis program offers the greatest opportunity for savings. 
VAOIG also states in testimony that the Fee program, still lacks 
fundamental controls. Please explain what VA is doing to tighten up the 
pre-authorization process and management controls? What has VA done 
proactively that will prevent the same mistakes happening in the 
future?

    Question 6: VAOIG evaluated the Veterans Health Administration's 
controls to prevent and detect fraud. VHA had not identified fraud as a 
significant risk to the Fee Care Program. Health care industry experts 
have estimated that 3 to 10 percent of all claims involve fraud. What 
is your progress on the VAOIG's recommendations from the Veterans 
Health Administration--Review of Fraud Management for the Non-VA Fee 
Care Program, June 8, 2010 report that VA should establish a fraud 
management program with data analysis and high-risk payment reviews, 
system flags for suspicious payments, employee fraud awareness 
training, and fraud reporting?

    Question 7: VSOs have raised concerns with the VA's practice of 
holding back medical care appropriations from being distributed to the 
field. Particularly they mention VA is currently holding back 1.5 
percent of the advance appropriations for health care. Please explain 
the policy rationale for this practice.

    Question 8: In testimony, the VAOIG listed several other areas for 
potential savings. One of these areas was the management of rural 
health initiatives. In FYs 2009 and 2010, the VAOIG reported that the 
Office of Rural Health (ORH) lacked reasonable assurance that its use 
of $273 million of the $533 million it received improved access and 
quality of care for veterans. Please provide the Committee with a 
progress report on the six recommendations listed by the VAOIG in the 
report Veterans Health Administration--Audit of the Office of Rural 
Health dated April 29, 2011

    Question 9: According to a New York Times article dated September 
12, 2011, entitled ``Government Pays More in Contracts, Study Finds,'' 
a study, conducted by the Project on Government Oversight ``found that 
in 33 of 35 occupations, the government actually paid billions of 
dollars more to hire contractors than it would have cost government 
employees to perform comparable services.'' In what areas is VA 
currently studying the differences in contracting costs comparable to 
providing services in house? In those areas where the VA has contracted 
out services in the past, has the VA undertaken any follow-up studies 
to ascertain if projected savings were indeed realized?

    Question 10: It is our understanding that the Veterans Benefits 
Administration has recently awarded a contract to ACS, Inc. It is also 
our understanding that VBA is training this company on how to develop 
claims and that at some time next year, ACS employees will be charged 
with developing 190,000 claims. Please provide the Committee with 
details of the contract, including cost, and the policy rationale for 
contracting this function out.

    Question 11: According to the National Academy of Public 
Administration's white paper entitled ``Veterans Health Fee Care 
Program,'' dated September, 2011, ``VA's Fee Care Program expenditures 
have grown 275 percent since [FY] 2005. There are now approximately 
2400 Full Time Employees (FTEs) working in the program. Paid claims 
rose from $3 billion in FY 2008 to $4.4 billion in FY 2010 (46 percent 
increase), while the number of unique patients served increased from 
820,000 to 952,000 (16%) in the same period. NAPA also reported that in 
``recent years, Fee Care has been increasingly used to meet patient 
wait-time standards. That is, when a medical service cannot be provided 
at a VA facility within wait-time performance standards, VA Medical 
Centers (VAMCs) often use the Fee Care Program.
    Please detail why paid claims increased 46 percent while the number 
of unique patients served increased only 16 percent. How much of this 
46 percent increase in paid claims is attributable to VA attempts to 
meet patient wait-time performance standards? Please provide the 
Committee with wait-time reports from FY 2008 to the present, and a 
detailed breakdown, by VISN, of Fee Care Program expenditures since FY 
2008 and the amount expended, by VISN, since FY 2008 of Fee Care 
Program expenditures utilized to meet wait-time performance standards.

    Question 12: The NAPA white paper recommended that substantial 
changes be made in the VA Fee Care Program and that a strategic change 
management plan be developed as quickly as possible. Does VA agree that 
substantial changes should be made in the Fee Care Program? Is the VA 
developing, or planning on developing, a strategic change management 
plan? What is the specific timetable for changes that have been 
identified as needed in the Fee Care Program to be implemented?

    Question 13: The NAPA white paper states that ``[g]iven the 
significant organizational and productivity challenges within the Fee 
Care Program, VHA has a limited understanding of the services it is 
procuring through its program and their cost. The Fee Care Program does 
not appear to have been well managed at any level of VA. VHA provides 
limited VISN-wide executive oversight of its purchased care program, 
and the program lacks clearly defined operational objectives or goals, 
and it is not guided by a coherent strategy for managing program 
expenditures.'' Does VA believe the Fee Care Program has been well 
managed? Does VA believe that there is sufficient level of VISN-wide 
executive oversight? Does VA believe that the Fee Care Program has 
clearly defined operational objectives and goals and a coherent 
strategy for managing program expenditures?

    Question 14: The NAPA white paper states that the ``Chief Business 
Office estimates the error rates (that is, erroneous payments) at 12 
percent per year, which equates to approximately $500 million in FY 
2011. By contrast, TRICARE has a reported error rate of 0.42 percent. 
Productivity varies across operating sites by nearly ten folds between 
the most and least efficient sites [footnotes omitted].'' Please 
provide a detailed explanation to the Committee as to why the VA 
experiences such a high error rate compared to TRICARE and why there is 
a divergence across the VA system in the level of error rates. What 
policies or procedures are currently in place, or have been in place 
previously, that contribute to this high error rate and divergence, and 
what specific policy and procedural steps is the VA taking to address 
this high error rate and divergence?

    Question 15: During the hearing, VA stated that it was going to 
roll-out Project HERO nationwide. What are the detailed policy 
rationales behind implementing this program nationwide? Please provide 
the Committee with a detailed plan on the proposed nationwide roll-out 
including detailed time frames, benchmarks, and costs associated with 
the roll-out. In addition, please provide the Committee with any 
detailed cost studies that have been prepared estimating any cost-
savings, by VISN, that VA will achieve with Project HERO. If VA has not 
prepared detailed cost estimates, please provide the Committee with 
estimates regarding these proposed savings.

                                 
                        Questions for the Record
                  Ranking Democratic Member Bob Filner
                  House Committee on Veterans Affairs
                 Potential Budgetary Savings within the
                  U.S. Department of Veterans Affairs:
        Recommendations from the Veterans' Service Organizations
                           November 15, 2011
    Question 1: Your written testimony states that VA is ``instilling a 
culture throughout our system that pursues continuous improvement and 
empowers staff members to solve problems at the front line or at any 
point in the health care system.'' Please provide the Committee with 
the specific policies or procedures VA has implemented or issued, since 
January 1, 2011, to achieve this change in culture. Which specific 
policies or procedures can you point to as being of primary importance 
in instituting this change? In what other ways are you ``instilling'' 
this culture?

    Response: The creation and nurturing of a culture of continuous 
improvement and organizational learning is a multifaceted 
organizational imperative in health care. The Veterans Health 
Administration (VHA) understands that drivers of sustained change 
include the organizational impetus to change over time, leadership 
commitment and support of the change, improvement initiatives that 
actively engage staff in meaningful problem solving, alignment from the 
top to bottom to achieve consistency of organizational-wide goals with 
resource allocation and actions, and integration to bridge traditional 
intra-organizational boundaries between individual components.
    VHA is moving forward with a variety of organizational initiatives 
and training efforts to influence culture in a way to harness its power 
to speed the capacity for the provision of safe, high quality care 
characterized by continuous improvement and learning. VHA's Offices of 
Quality, Safety, and Value (QSV), Workforce Services, Office of Patient 
Centered Care & Cultural Transformation, and Nursing Services are key 
partners in these efforts. The functions and activities of all of these 
offices are fundamental to the success of efforts to facilitate 
cultural transformation as these functions draw upon the belief that 
culture is related to organizational performance.

Quality, Safety, and Value

    VHA has had a long history of commitment to, and development of a 
culture of safety through the establishment of the National Center for 
Patient Safety (NCPS) in 1999. This culture of safety provides the 
foundation of improvement and learning. Over the years since NCPS was 
established, and with the support of VHA, the elements of a culture of 
safety have been developed and expanded. These include the following:

      Just Culture--a just culture is the lynchpin of any 
safety culture and is one in which human error is recognized as an 
inevitable product of highly complex processes. With the 2011 
establishment of the Office of QSV, VHA has clearly re-committed to the 
continued support and expansion of the just culture.
      Understand Complexity--human error occurs because of the 
complex environment in which individuals operate. To improve the safety 
of this environment, a deep understanding of why errors occur must be 
developed so that improved systems may be created. Because people have 
difficulty discussing the errors they make, it is imperative for a just 
culture to exist so that people may admit to, and discuss, the errors 
they have made without fear of retribution. Only with such a culture 
may health care professionals and staff completely understand the 
systems issues that lead to medical errors. VHA leadership has fully 
supported NCPS in developing and training VA staff and leadership in 
the concepts of a just culture and this has helped improve the 
willingness of front line providers to report errors when they see 
them. NCPS conducts a Safety Culture Survey to track perceptions of 
patient safety at the facility and Veterans Integrated Service Network 
(VISN) level over time.
      High Functioning Teams--because of the inherent 
complexity of medical systems, it is difficult for even the most 
intelligent and diligent individual to catch all possible failures that 
may occur. Highly functioning teams are imperative to improve patient 
outcomes. To this end, VHA strongly supported NCPS in the development 
of programs to enhance team performance. Medical Team Training (MTT) 
focuses on enhancing the performance of teams in high risk areas such 
as intensive care units (ICU), operating rooms, and emergency 
departments. The face-to-face training sessions have been running since 
2005 and help develop the skills that improve team functioning. In 
2011, the program was expanded to other areas of VHA where well defined 
teams must interact together such as dental, podiatry, and orthopedic 
clinics. The training results in improved safety attitudes, higher 
morale, and reduced staff turnover. A key outcome of VHA's training has 
been reductions in risk-adjusted surgical mortality rates (VA's 
findings were published in JAMA 2010; 304 (15); 1693). Another team 
program, Clinical Crew Resource Management (CCRM) has recently been 
added to focus on the more informal teams that interact at the ward 
level. This training focuses on the empowerment of the 
multidisciplinary front line staff that come together to care for 
patients at the ward level. Over 800 people have been trained since the 
pilot in 2010 and as of 2011 the program will be introduced in an 
additional 5-7 sites. Results pre- and post-training note improved 
average teamwork scores as well as improvement in the error reporting 
culture. This strongly suggests that people feel more comfortable in 
discussing errors when a just culture exists. This training has also 
resulted in reductions of unit acquired pressure ulcers, medication 
errors per patient day, hyper- and hypo-glycemic events, and failure to 
rescue.
      Engaged Leadership--as part of any team training that a 
facility undertakes there must be leadership support and engagement. 
NCPS ensures that facility leadership understands that for a culture of 
safety to be fully developed leadership must engage in walk rounds so 
that they may hear about safety and quality concerns from front line 
providers and show them that their concerns have been heard. VHA 
leadership has supported such training and with the 2011 reorganization 
has specifically created an arm within VHA that focuses on QSV--
concepts of teamwork and leadership have been reinforced in vision and 
mission of the new Office of QSV.

    Additional initiatives focusing on a culture of safety and 
continuous improvement include:

      Select executive leadership teams have participated in a 
variety of site visits to non-Department of Veterans Affairs (VA) 
health care entities. These medical organizations (Virginia Mason, 
ThedaCare, Henry Ford, Baptist Health care, Barnes-Jewish, et al.) have 
been nationally recognized for successfully navigating change 
management and commitment to knowledge sharing. Eight Veterans 
Integrated Service Networks (VISNs) have participated, and site visits 
will continue to all remaining Networks.
      In support of VA's transformational initiatives, senior 
leaders from all VISNs are participating in customized Leading 
Organizational Improvement workshops. These workshops include an 
organizational assessment of the existing leadership structure and 
function, and then combine didactic training with real-time strategic 
planning to facilitate cultural transformation towards a culture of 
continuous improvement. To date, 10 of 21 VISNs have completed the 
workshop. More than 90 percent of the FY 2011 workshop participants 
rated the materials, instruction, and exercises as ``Good to 
Excellent.''
      In July 2011, VHA leaders participated in a conference 
entitled ``VHA Culture of Improvement'' to thoughtfully develop action 
plans to help change the culture.
      The Enhancing a Culture of Continuous Improvement 
Guidebook will be piloted in early 2012 with plans for widespread 
deployment later that same year. VHA's Systems Redesign function within 
the QSV Office is developing the guidebook with the assistance of a 
multidisciplinary committee of field-based and national experts 
(Systems Redesign Leadership Committee). The guidebook focuses on how 
to change organizational culture to foster a culture of continuous 
improvement.
      Approximately 25 hospital teams per year participate in 
training academies in order to learn and apply systems redesign and 
operations management techniques to leadership-identified strategic 
priorities. Academy sessions focus on outpatient access, inpatient 
flow, and systems redesign methodologies that include the application 
of systems engineering principles.
      Veteran Engineering Resource Centers conduct Rapid 
Process Improvement Workshops (RPIWs), which enable facility-based 
teams to apply improvement principles to real projects. More than 300 
staff attended RPIWs in FY 2011.
      VHA continues to use Learning Collaboratives to engage 
and train facility based teams in achieving patient-centered, 
continuously improving, team-based care in a data driven health care 
delivery organization.
      Patient Aligned Care Teams (PACT) improved access, care 
coordination, and redesigned practices;
      The Human Resources (H.R.) Recruitment Community of 
Practice initiative built upon the FY 2008-FY 2009 H.R. Recruitment 
Collaborative to continue support, training, and sharing of information 
and strong practices in improving recruitment and hiring of skilled 
health care workers;
      The FIX/Flow Collaborative is transforming inpatient ward 
care and building cohesive care teams through innovative improvements 
in quality, safety, nurse and physician communication, and work 
efficiencies;
      The Patient Flow Collaborative focuses on management of 
hospital flow, communications, and coordination, and incorporation of 
the deployment of the electronic bed management system within VA 
medical centers.
      The Transitioning Levels of Care Collaborative improved 
and smoothed the transitions of patients between levels of care. The 
main focus was on movement from acute care to lesser acuity settings 
such as home, long term care, etc.
      Ensuring Correct Surgery (ECS) continues to be offered to 
facility teams. This training program was developed in 2011 in 
collaboration with Surgical Service and resulted in a series of virtual 
training modules available to all operating room/procedure area staff. 
While this training is still new, VISN leadership in surgery and 
anesthesia have all been trained in this high-risk area.
      QSV is aggressively pursuing implementation of the 
International Standards Organization (ISO) 9001 quality standards. ISO 
9001 is the preeminent international standard for quality management 
systems that ensure reliable delivery of services and products. These 
standards are created, updated, and sustained through the International 
Organization for Standardization (ISO). Starting with the reprocessing 
of reusable medical equipment, VHA is one of the few health care 
organizations bringing non-health care industry rigor and discipline to 
the execution of scope cleaning processes.
      VHA is successfully changing the culture in primary care 
practices to include patient-centered, team-based primary care. PACT 
aims to improve patient access to appointments with health care 
providers, enhance access to providers through the telephone, secure 
messaging, group visits and home telehealth, and engage patients more 
aggressively in care for chronic disease to keep more patients out of 
the emergency department and hospital.
      The Office of QSV is leading the revision of VHA's 
``Framework for Excellence'' overarching policy on quality functions.

    VHA partners with the Office of Inspector General (OIG) on numerous 
actions that result in reported change and continual improvement. 
Specifically, OIG has verified organizational improvement for more 
effective operations in areas specific to procurement; improvement in 
how the Workers Compensation Program is managed and monitored to 
maximize savings and efficiencies; implementation of significant 
controls over the payment of executive retention incentives; and 
reduction in the number of improper payments with new monitoring 
processes involving VHA Finance.

Workforce Services

    VHA's Office of Workforce Services is another fundamental component 
of instilling a culture of continuous improvement and empowering staff 
to solve problems in the health care system. The primary function of 
Workforce Services is managing and developing human capital, supporting 
organizational health, and transforming VA into a learning 
organization. Achievements in 2011 encompass four core themes: improved 
recruitment and appointment processes, transformation and system 
redesign, ensuring a sense of workplace psychological safety and 
engagement, and development of the future clinical workforce.
    Recruitment and appointment processes:
      In FY 2011, VA implemented a new WebHR system in response 
to enterprise-wide assessment and modernization of processes and 
systems to enhance recruitment, management, and retention of VA's 
300,000-person workforce and to support VA's human capital investment. 
The WebHR application has been identified as foundational in VA's 
overall human capital management systems modernization initiative by 
providing a singular point of automatic document creation. WebHR 
provides a starting point, via the information contained in the SF-52, 
for many key H.R. functions. WebHR and the Form SF-52 are common to all 
VA H.R. components, with the result of centralizing and facilitating 
management of information across VA for applicants, trainees (including 
affiliates), and employees.
      The Under Secretary for Health granted authority to VISN 
Directors to approve leadership positions prior to review by the 
Leadership Management & Succession Board (LMSB). This new process has 
accelerated the selection and placement of Executive Career Field 
senior leadership positions at Medical Centers throughout VHA.
      Professional clinical recruiters were hired and placed in 
each VISN to engage local H.R. staff and clinical hiring managers in a 
concerted effort to resolve long-term staffing issues. Over 1,700 
qualified candidates were referred, and over 350 selections were made 
in the past 18 months.

    Transformation and system redesign:
      VHA is transforming to provide health care excellence for 
the 21st century, and in doing so, more than 30 percent of the 
programs, products, and services delivered in FY 2011 were related to 
transformational initiatives.
      Employee Education Service (EES) manages the clinical 
training needs of fifteen major VHA health care transformational 
initiatives. For example, in FY 2011, EES conducted 132 Center of 
Excellence trainings resulting in PACT education of 8,087 participants.
      A strategic partnership with VHA's Office of QSV to 
implement critical organizational improvement initiatives was 
developed. As detailed above, these initiatives included improving 
access to care, improving inpatient flow, and implementation of PACT.
      Significant training has been provided to VHA leadership 
on improvement principles and how to create a culture of improvement 
throughout the organization.

    Psychological safety and engagement in the workplace:

      VHA offers on-site executive coaching expertise to 
current and developing leaders within the organization, including the 
creation of personal development plans, and offers on-site consultation 
and assistance. In 2010, the National Center for Organizational 
Development (NCOD) provided executive coaching to 630 VA clients. In 
2011, NCOD provided one-time executive coaching to 223 VA clients and 
ongoing executive coaching to 116 VA clients.
      Civility, Respect, and Engagement in the Workplace (CREW) 
was initiated in 2005. As of 2011, over 1,000 workgroups at 109 VA 
Medical Centers have participated in CREW. Each cohort of CREW has 
reported statistically significant improvements in civility as a result 
of the CREW intervention. CREW is now available to Veterans Benefits 
Administration (VBA), National Cemeteries Administration (NCA), and VA 
Central Office (VACO) staff as a Human Capital Investment Plan 
initiative.
      The VA All Employee Survey (AES) has been administered 
annually to all VHA employees from 2006. In 2010, the AES was expanded 
to all VA employees across all VA administrations (VACO, VHA, VBA, and 
NCA).
      In FY 2010, NCOD provided 360-Degree Assessment reports 
to 1,800 VA employees, including 560 VA executives, and provided 180-
Degree Assessment reports to 1,000 VA employees. In FY 2011, it is 
projected that NCOD will provide 360-Degree Assessment reports to 1,500 
VA employees, the Executive 360-Degree Assessment reports to 550 VA 
employees, and the 180-Degree Assessment reports to 900 VA employees.
      In 2011, NCOD provided ongoing, intensive consultation 
services to 67 VA organizations (including VISN offices, Medical 
Centers, VA program offices, VBA, and NCA). Additionally, NCOD experts 
provided focused, one-time consultative services to 106 VA 
organizations (including VISN offices, Medical Centers, VA program 
offices, VBA, and NCA).
      In FY 2011, VHA developed an executive team model to 
support the provision of services that are Veteran-centric, evidence-
based, and delivered by engaged, effective, collaborative teams in an 
integrated environment that supports learning, discovery, and 
continuous improvement. To date, a total of 162 executive teams, 
including 704 executives from medical centers and network offices in 
the field, have completed a new Executive Team Assessment. The 
Executive Team Assessment is currently being administered to all 
executive teams in VHA Central Office.

    Development of the future clinical workforce:

      One of the primary missions of VA is to have the 
leadership in place today to lead us into the future. But it is equally 
important to educate health care professional trainees for practice in 
the 21st century health care workplace.
      In FY 2011, VHA stood up five Centers of Excellence in 
primary care education with the goal of transforming care delivery and 
the education of VA's future clinical workforce.
      In FY 2011, VA also expanded the size of the Chief 
Residents in Quality and Safety program, which is designed to introduce 
the foundational principles of patient safety and quality improvement 
to medical residents.

Nursing Services

    The Office of Nursing Services (ONS) is implementing the Clinical 
Nurse Leader role (CNL), a new master's prepared general RN provider at 
the point of care. The CNL will coordinate and deliver complex clinical 
care; improve clinical and cost outcomes, and provide continuous 
quality and safety improvements at the Microsystems level; translate 
and apply research findings at the point of care; and enhance staff 
competence and empowerment to solve problems at the front line. Since 
2009, VHA has demonstrated significant positive CNL outcomes related to 
quality, safety, value, cost savings, cost avoidance and innovative 
clinical practice. CNL practice aligns with both the Patient Aligned 
Care Team and Specialty Care Transformation, thereby creating an 
efficient, transparent, and collaborative health care environment. As 
of December 2011, ONS has made significant progress implementing the 
CNL role throughout the entire VA health care system.

The Office of Patient Centered Care & Cultural Transformation

    The Office of Patient Centered Care & Cultural Transformation was 
created in January 2011. A vision, strategy, and implementation plan 
has been formulated, and many presentations have taken place at all 
levels of our system (National Leadership Council, VISN, Medical 
Center, program offices) to communicate this plan and engage the 
organization. Nine Centers of Innovation have been identified and 
established to pilot new models of care and approaches to enrich the 
Veteran's experience. Since August 2011, Field Based Implementation 
Team members have been hired and are undergoing intensive training. As 
a result, the Office has a framework and strategic plan established to 
implement this significant cultural transformation.

Health Equity

    Following a multidisciplinary work group meeting in August, 2011, 
the Under Secretary for Health committed to support for a new 
initiative to champion the advancement of health equity and reduction 
of health disparities for our Veterans. This initiative will position 
VHA as a national leader in achieving equity in health care and 
outcomes among disadvantaged patient populations and lead efforts to 
address health disparities by promoting and providing education/
training, communications and information to Veterans and our workforce. 
VHA will coordinate programs, projects and other activities to bring 
synergy within the organization. Representatives from the work group 
will represent VA and VHA to serve as liaison to other governmental and 
non-governmental organizations working to achieve health equity. They 
will capitalize on the existing network of Minority Veteran 
Coordinators, Operation Enduring Freedom/Operation Iraqi Freedom/
Operation New Dawn (OEF/OIF/OND) Coordinators, Women Veterans Program 
Managers, Homeless Veterans Coordinators, Center for Faith-based and 
Neighborhood Partnerships, Office of Rural Health, Office of Diversity 
and Inclusion, Office of Patient-Centered Care and Cultural 
Transformation and other key partners to coordinate efforts to advance 
health equity.
    This initiative will be implemented using the framework provided in 
the National Stakeholder Strategy for Achieving Health Equity, using 
five VHA goals for a Veteran-centric approach. These goals include:

      Leadership--Strengthen and broaden the ability of VA 
leadership to address health inequalities and reduce health disparities 
through operations, policy oversight and research.
      Awareness--Increase awareness of the significance of 
health inequalities and disparities, their impact on the Nation and the 
actions necessary within VHA to improve health care and health outcomes 
for disadvantaged populations.
      Health Outcomes--Improve health and health care outcomes 
for Veteran sub-populations experiencing health disparities.
      Diversity and Cultural Competency of the Workforce--
Improve cultural and linguistic competency and the diversity of the VA 
workforce involved in advancing the health and well-being of Veterans.
      Data, Research and Evaluation--Improve the availability, 
coordination and utilization of data and the diffusion of research and 
evaluation outcomes in order to track progress towards the achievement 
of health equity.

    Question 2: In February, Secretary Shinseki testified regarding the 
VA's reliance on ``carryover'' funding, or funding not obligated in the 
previous fiscal year. For many years, a small portion of VA's medical 
care budget was provided in the form of 2-year authority to better 
enable the VA to manage its resources. Arguably, the need for 2-year 
authority for a portion of the VA's medical care budget is not as 
strong in the area of advance appropriations. The continued reliance of 
the VA on carryover funding may provide a perverse incentive at the 
local level not to obligate funds in order to provide VA Central Office 
with carryover funding to plug funding gaps in the next fiscal year. 
What specific steps has VA Central Office taken to negate this 
incentive? What specific steps has VA Central Office taken, and 
communicated to the VISN level, to ensure that funds are obligated when 
needed and on a timely basis?

    Response: The Department of Veterans Affairs (VA) Central Office 
allocates all available funds, including funds carried over from the 
previous fiscal year, at the beginning of each year. The exception is a 
small National Reserve that is used to fund emerging requirements 
during the fiscal year.
    In previous years, Congress has provided a small portion of each VA 
Medical Care appropriation (Medical Services, Medical Support and 
Compliance, and Medical Facilities) as being available for two fiscal 
years. This has allowed VA to accommodate unanticipated delays in 
implementation of new programs, acquisition delays, activation of new 
facilities that have experienced construction delays, and other 
activities that have crossed fiscal years. This has enabled VA to 
ensure that the funds appropriated by Congress are used for purposes 
that best enhance health care for Veterans, rather than for items that 
can be obligated by the end of the current fiscal year.
    In Fiscal Year 2011, VA implemented a new resource allocation 
process called the VA Medical Center Allocation System that includes a 
standardized model for VISNs to use in allocating funding to their 
medical facilities. The model was designed to provide consistency in 
the allocation process across VISNs but still allow necessary 
flexibility to make adjustments to medical facility allocations.

    Question 3: VAOIG audits and reports have identified hundreds of 
millions of dollars in potential savings through better management of 
VA programs. Please explain to the Committee why these savings and 
improvements were not identified by VA prior to being identified by 
VAOIG audits or reports. What specific steps has the VA taken to 
improve day-to-day internal management in order to proactively identify 
program deficiencies? Does VA feel confident that it is better able 
today to identify future problems?

    Response: VA is committed to mitigating risk, ensuring compliance, 
and improving the identification of program deficiencies. While an 
Office of the Inspector General (OIG) review may identify issues that 
are not already being addressed by program offices and leadership, many 
issues identified in these reports are those that the Department has 
already begun to address prior to the review.\1\
---------------------------------------------------------------------------
    \1\ For example, the VHA response to the OIG report ``Review of 
Sole-Source Contracts with Affiliated Institutions'' indicated:

    It is important to note that the Veterans Health Administration has 
within the last year, after also identifying significant concerns about 
health care contracting and spending with affiliates for health care 
services, taken aggressive action to address these issues. Steps 
include:

      Bolstering leadership and employment in the Medical 
Sharing Office;
      Instituting new processes and procedures for tracking 
this health care contracting and spending;
      Improving training;
      Beginning to develop updated standard operating 
procedures for acquisition planning, establishment of backup plans for 
alternate sources for services, additional scrutiny of sole source 
justifications, and implementation of new checklist processes.
---------------------------------------------------------------------------
    VA action plans to address OIG recommendations and findings often 
indicate efforts that VA has proactively taken to address self-
identified concerns. A good example is the recent response to the OIG 
Report ``Audit of Veterans Integrated Service Network Contracts'' that 
noted a number of actions VHA had already taken to address concerns 
such as:

      creation and implementation of the Acquisition Quality 
Compliance Audit Program;
      creation of Quality Assurance (QA) positions at the 
Network Contracting Activity (NCA), Service Area Office (SAO) and 
National levels; and
      implementation of a Responsibility Determination Standard 
Operation Procedures (SOP).

    Also, OIG reviews often help to accelerate those processes that 
have already begun. Throughout this review, VHA was able to identify 
how VHA had already identified areas for improvement and solutions that 
were underway. In a collaborative effort, the OIG auditors advised VHA 
officials about their views of what VHA was doing or planned to do. In 
the end, the solutions were improved.
    The recent establishment of the Office of QSV is a proactive way to 
identify and address concerns sooner, rather than later. QSV enhances 
the quality, safety, reliability, and value of VHA's clinical and 
business systems by enabling innovative, enterprise-wide approaches to 
compliance, risk awareness, and continuous improvement. QSV is 
currently implementing educational and consultative resources for the 
deployment of the ISO 9001 Quality Management System standard. The 
deployment provides a framework in which VHA may implement and sustain 
consistent quality management systems.
    VA must also continue its efforts to identify efficiencies, seek 
improvement, and strengthen day-to-day internal management in order to 
proactively identify program deficiencies. To this end, several steps 
have been initiated. VA recently engaged a system-wide review of 
existing programs, structures, and skill sets that support the 
development of an Enterprise Risk system. Building upon the background 
research provided from this overview, the Under Secretary for Health 
asked the Office of QSV to introduce the concept of Enterprise Risk 
Management (ERM) to VHA leadership. Following this introduction, QSV 
has been further educating VHA leadership on the ERM concepts. The 
education process will be followed by a roll-out of the operational 
details that may help guide implementation of ERM at the VISN and 
hospital levels.
    ERM is broadly understood to be a practice that helps organizations 
understand their risks so as to better identify, analyze, mitigate, 
monitor, and evaluate those risks. Thus, the benefits of ERM include 
more effective strategic planning and understanding of risk exposures. 
ERM represents an opportunity for VHA to begin to better manage risks 
across the organizational structure and function, rather than within an 
individual office or facility. While ERM is in the early roll-out phase 
in VHA, it has been well received by much of the VISN leadership, and 
interest in how such the ERM process will work across the VISNs has 
been high.
    As is the case with VHA, VBA officials work closely with the Office 
of Inspector General and value its critical role and diligence in 
helping to meet that commitment to mitigate risk, ensure compliance, 
and improve the identification of program deficiencies.
    VBA partners with OIG through all phases of its audits. OIG reports 
identify specific areas in need of process and/or systemic 
improvements, as well as compliance issues. At the regional office 
level, the OIG Benefits Inspection reports identify compliance issues 
and important areas where additional training is needed.
    Often, issues identified in OIG reports are already in the process 
of being addressed by VBA program offices. The OIG reviews also have 
the benefit of looking at the administration of our programs 
retroactively. For all reports, VBA provides action plans addressing 
OIG recommendations and quarterly status updates for OIG validation and 
ultimate closure. Each VBA business line performs regular site visits 
to regional offices to review compliance with policy and procedures as 
well as to provide assistance and training where necessary.
    VBA's ongoing transformation efforts also focus on improving 
decision quality, mitigating risk, and strengthening day-to-day 
internal management. For example, VBA has developed rules-based 
calculators for automated adjudication. Calculators will guide decision 
makers through the process with intelligent algorithms similar to tax-
preparation software. VBA has also started to use new evidence-
gathering tools, known as Disability Benefits Questionnaires, which 
allow us to bring new consistency to the collection of medical 
information needed for claims decisions. Additionally, local Quality 
Review Teams are being implemented to conduct ``in-process'' quality 
checks as well as regular end-of-month reviews. Throughout our change 
management efforts, we will identify risks up front and build in 
necessary controls and procedures to avoid potential deficiencies. 
Proactive risk management, recurring quality reviews, and compliance 
inspections will enable VBA to avoid potential program deficiencies.
    VA is committed to building compliance and risk management into 
every process, policy, and procedure before implementation. We must 
identify risks and ensure compliance proactively, not rely on 
inspections after something is implemented. Inspections have a role, 
and we need to review lessons learned and then retool what we are doing 
when we do identify an ongoing concern. By ensuring enterprise risk 
management, building in compliance, and appropriately inspecting and 
measuring success, VA can and will be a system of continuous 
improvement.

    Question 4: According to your testimony, earlier this year VA 
``conducted a pilot program that used standardized templates for 
purchasing care, ensured more consistent assessment of other VA 
options, and resulted in better control over management of the care 
[VA] purchased.'' What was the impetus behind starting this pilot 
program, and why wasn't this degree of standardization implemented in 
the past?

    Response: The Non-VA Care Coordination (NVCC) initiative was 
established in October 2010 in response to findings from the Managing 
Variation Workgroup which identified organizational weaknesses and 
variations in both business and clinical areas. Non-VA Care was 
identified as one of several focus areas and included in the Health 
Care Efficiency Transformational Initiative. The Non-VA Care 
Coordination model was developed to reduce and/or eliminate variations 
and inefficiencies among Fee programs nationally. Prior efforts to 
standardize the program focused on back-end claims processing. This 
2010 effort was a natural progression of the many programmatic changes 
previously underway for improving this program.
    The pilot resulted in positive improvements in business processes, 
including improved controls in the timeliness of initial approvals for 
Non-VA Care, appointments for these services, and return of clinical 
information. Examples include improving initial approvals for Non-VA 
Care within 4 days, appointments made within 8 days and return of 
clinical information within 20 days.
    Due to these positive results, VHA has initiated deployment of 
these standardized business practices in FY 2012. Deployment has been 
completed at the champion sites in VISNs 11, 18 and 16. Deployment will 
continue at all sites with completion prior to the end of FY 2012.

    Question 5: VAOIG testified that improved management and oversight 
of the Fee Basis program offers the greatest opportunity for savings. 
VAOIG also states in testimony that the Fee program still lacks 
fundamental controls. Please explain what VA is doing to tighten up the 
pre-authorization process and management controls. What has VA done 
proactively that will prevent the same mistakes happening in the 
future?

    Response: The objective of the national deployment of the Non-VA 
Care Coordination initiative is to establish standardized business 
processes and tools within all Fee programs across VA, with a strong 
focus on the pre-authorization process. A primary goal is to reduce or 
eliminate program variations and inefficiencies, thereby providing 
consistent and equitable delivery of Fee services to eligible Veterans. 
These changes will provide much greater management controls over this 
key programmatic component. This will be accomplished by facilitating 
and coordinating the Veteran's Fee care, and following up by ensuring 
care was rendered and supporting documentation is returned to VA, and 
appropriate follow-up is scheduled that returns the Veteran to VA 
health care. VA is currently deploying this initiative across all 
Veterans Integrated Service Networks (VISNs), with full implementation 
expected prior to the end of FY 2012. These significant efforts to 
standardize the program will provide VA with more stringent controls 
over the entire program scope.

    Question 6: VAOIG evaluated the Veterans Health Administration's 
controls to prevent and detect fraud. VA had not identified fraud as a 
significant risk to the Fee Care Program. Health care industry experts 
have estimated that 3 to 10 percent of all claims involve fraud. What 
is your progress on the VAOIG's recommendation from the Veterans Health 
Administration--Review of Fraud Management for the Non-VA Fee Care 
Program, June 8, 2010 report that VA should establish a fraud 
management program with data analysis and high-risk payment reviews, 
system flags for suspicious payments, employee fraud awareness 
training, and fraud reporting?

    Response: VA has implemented an aggressive Fraud/Waste/Abuse (FWA) 
Program with specific awareness and training efforts accomplished in FY 
2011. Within VHA's Chief Business Office, this new FWA Program works 
with all stakeholders to identify and mitigate health care fraud, waste 
and abuse, provide training, research fraud cases, and assist in the 
development of process solutions to prevent and recover all improper 
payments. The program provides detailed fraud, waste, and abuse 
training to all Purchased Care personnel, VA Compliance Business 
Integrity staff, and other VA stakeholders. Prevention strategies 
include publications, VA and Medicare conferences, numerous training 
opportunities, employee orientation, and national conference calls. In 
addition, VA has developed routine monthly reporting that provides 
detailed information on potential FWA cases to each facility for 
review; if payment errors are validated, these results are included in 
the quarterly High Dollar Overpayment report to the Office of 
Management and Budget (OMB). Finally, VA has a contract with IBM to 
implement a ``state-of-the-art'' Program Integrity Tool, which will 
evaluate medical claims data and provide pre-payment notifications to 
aggressively monitor improper payments. This is a significant 
improvement and will eliminate the need for ``pay and chase'' 
activities and identify providers that engage in fraud, waste, and 
abuse. VA anticipates implementing these tools by the end of 2012.

    Question 7: VSOs have raised concerns with the VA's practice of 
holding back medical care appropriations from being distributed to the 
field. Particularly they mention VA is currently holding back 1.5 
percent of the advance appropriations for health care. Please explain 
the policy rationale for this practice.

    Response: The Veterans Equitable Resource Allocation (VERA) 
methodology is used by VA Central Office to fund each of VA's 21 
Veterans Integrated Service Networks (VISNs). VERA does not allocate 
funds to the medical centers. VERA ensures that the funds are equitably 
distributed based on the number of Veterans who use the health care 
system. Its objectives are to provide health care to the greatest 
number of Veterans having the highest priority for health care, and 
provide for special health care needs. VERA makes adjustments for VISN 
variances in the case-mix/complexity of care provided, labor and 
contract costs, research support, education support, equipment, non-
recurring maintenance (NRM), and high-cost patients.
    In Fiscal Year 2011, VA implemented a new resource allocation 
process called the VA Medical Center Allocation System that includes a 
standardized model for VISNs to use in allocating funding to their 
medical facilities. The model was designed to provide consistency in 
the allocation process across VISNs but still allow necessary 
flexibility to make adjustments to medical facility allocations.
    VISNs retain some resources allocated to them by VERA for centrally 
managed VISN activities and initiatives and for ensuring that medical 
facilities meet their mission requirements. This includes, but is not 
limited to, start-up costs for new VISN initiatives to reduce non-VA 
care costs; the funding of consolidation of services shared across the 
Network; and up to a maximum of 1.5 percent of the total allocation 
amount for a contingency reserve. The contingency reserve is used for 
unanticipated medical facility costs, such as increased patient 
workload for a non-declared natural disaster or high-cost non-VA care 
patients, and is normally all allocated to the medical facilities 
during the course of the year to provide health care services to 
Veterans.

    Question 8: In testimony, the VAOIG listed several other areas for 
potential savings. One of these areas was the management of rural 
health initiatives. In FYs 2009 and 2010, the VAOIG reported that the 
Office of Rural Health (ORH) lacked reasonable assurance that its use 
of $273 million of the $533 million it received improved access and 
quality of care for Veterans. Please provide the Committee with a 
progress report on the six recommendations listed by the VAOIG in the 
report Veterans Health Administration--Audit of the Office of Rural 
Health dated April 29, 2011.

    Response: VA's Office of Rural Health (ORH) successfully completed 
the six recommendations listed by the VAOIG in the report Veterans 
Health Administration-Audit of the Office of Rural Health (ORH) dated 
April 29, 2011. ORH developed and deployed a robust set of financial 
and program controls and measures to monitor continuously and trend ORH 
performance and outcomes. These measures are evaluated proactively to 
ensure effective and efficient operations, cost savings and positive 
health care outcomes for Veterans served in rural and highly rural 
areas. Please see Attachment 1--the ORH report to the Appropriations 
Committees, dated November 17, 2011, which provides a status update of 
all six VAOIG recommendations.

    Question 9: According to a New York Times article dated September 
12, 2011, entitled ``Government Pays More in Contracts, Study Finds,'' 
a study, conducted by the Project on Government Oversight ``found that 
in 33 of 35 occupations, the government actually paid billions of 
dollars more to hire contractors than it would have cost government 
employees to perform comparable services.'' In what areas is VA 
currently studying the differences in contracting costs comparable to 
providing services in house? In those areas where the VA has contracted 
out services in the past, has the VA undertaken any follow-up studies 
to ascertain if projected savings were indeed realized?

    Response:
    1.  In what areas is VA currently studying the differences in 
contracting costs comparable to providing services in-house?
    The Consolidated Appropriations Act of 2010 required civilian 
Federal agencies to complete an annual inventory of their service 
contracts for review and analyze that information to understand how 
contracted services are being used and whether contractors are being 
used in an appropriate manner. In compliance with this Act, VA 
submitted its fiscal year (FY) 2010 annual service contract inventory 
to the Office of Management and Budget (OMB) in December 2010.
    VA is actively participating in the government-wide OMB led effort 
to ``buy less'' and ``buy smarter.'' Toward this end, VA is actively 
working on several initiatives to improve acquisition practices and 
avoid inefficiency and waste. These initiatives are as follows:

      Reduction of High Risk Contracts: OMB challenged agencies 
to reduce the use of contracts which, if not managed appropriately, can 
result in excessive cost increases to the government. Contracts 
considered high risk are sole source, competitive one bid, cost 
reimbursement, and Time and Material/Labor hours. Since FY 2010, VA has 
been able to reduce contracting in each high risk category.
      Review of Management Service Contracts: OMB noted a 
government-wide increase in the use of service contracts over the past 
decade. Of particular concern is the use of professional and management 
services contracts. These functions were identified by OMB for 
heightened management consideration, based on concerns of increased 
risk of losing control of mission and operations. VA is currently 
conducting an extensive review of the need for all management service 
contracts.
      In July 2009, the VA Office of Human Resources and 
Administration in conjunction with the Office of Information and 
Technology (OI&T) conducted a pilot study in accordance with OMB 
memorandum M-09-26, Managing the Multi-sector Workforce, which required 
all agencies to develop a pilot study on insourcing. OI&T was selected 
for the pilot due to the high ratio of contractors to Federal employees 
and their interest in changing the ratio. This study found that the 
average salary for contractors was 29 percent more expensive than the 
Federal employee. As a result of the study OI&T was able to transition 
9 contracting positions to government FTE.

    2.  In those areas where VA has contracted out services in the 
past, has VA undertaken any follow-up studies to ascertain if projected 
savings were indeed realized? Yes. However, VA has not converted any 
functions from in-house to contract via a standard or streamlined A-76 
study since 2003 when the Veterans Benefits Administration converted 
their property management function from in-house to contract under an 
A-76 ``standard competition,'' due to a legal prohibition for 
conducting cost comparisons that can be found in appropriations law. VA 
was required by Section 647(b) of Division F of the Consolidated 
Appropriations Act, FY 2004, Public Law 108-188, to report savings from 
the conversion to contract for 5 years after the conversion.

    Question 10: It is our understanding that the Veterans Benefits 
Administration has recently awarded a contract to ACS, Inc. It is also 
our understanding that VBA is training this company on how to develop 
claims and that at some time next year, ACS employees will be charged 
with developing 190,000 claims. Please provide the Committee with 
details of the contract, including cost, and the policy rationale for 
contracting this function out.

    Response: VBA identified a temporary need for claims processing 
support following the Secretary's decision to add three new Agent 
Orange presumptive conditions (Parkinson's disease, ischemic heart 
disease, and chronic B-cell leukemia) for Veterans who were exposed to 
herbicides used in the Republic of Vietnam during the Vietnam era. The 
influx of new claims for these conditions significantly increased VBA's 
claims workload and backlog. More than 1.3 million claims were received 
in FY 2011, including over 230,000 claims for the new Agent Orange 
presumptive conditions. To assist VBA in addressing the dramatic growth 
in the pending inventory and claims backlog, VBA decided to pursue a 
one-time professional services contract to assist with claims 
development. This contract was funded in FY 2011. ACS was awarded a 1-
year contract on September 12, 2011. The total cost of the contract is 
$18.6M.
    This services contract includes expedited development of evidence 
to support certain types of claims, including claims for increase, 
original compensation claims, original pension claims, and dependency 
verification. The required development also includes providing an 
evidence summary and medical index, and return of the claims 
development package electronically in OCR readable format (paperless) 
for decision by VBA. The contractor performs claims development 
activities only--all claims decisions remain the responsibility of VA 
employees. Having the contractor gather the needed evidence will allow 
VBA claims processors to focus on review of the claims and increasing 
decision output. If full contract volume is achieved, ACS will develop 
300,000 claims.
    Additional components to the contract include:

      Veteran self-service communications plan/outreach for 
increased enrollment in eBenefits (level II) self-service portal--
target goal is 805,000 new enrollees.
      Process improvement (Lean Six Sigma based) capture and 
presentation to VBA stakeholder/leadership.
      Transformational training--2,400 hours of process 
improvement/change management training for field staff.

    These additional services complement our plan to reduce the 
backlog.

    Question 11: According to the National Academy of Public 
Administration's white paper entitled ``Veterans Health Fee Care 
Program,'' dated September 2011, ``VA's Fee Care Program expenditures 
have grown 275 percent since [FY] 2005. There are now approximately 
2400 Full Time Employees (FTEs) working in the program. Paid claims 
rose from $3 billion in FY 2008 to $4.4 billion in FY 2010 (46 percent 
increase), while the number of unique patients served increased from 
820,000 to 952,000 (16%) in the same period. NAPA also reported that in 
``recent years, Fee Care has been increasingly used to meet patient 
wait-time standards. That is, when a medical service cannot be provided 
at a VA facility within performance standards, VA Medical Centers 
(VAMCs) often use the Fee Care Program.'' Please detail why paid claims 
increased 46 percent while the number of unique patients served 
increased only 16 percent. How much of this 46 percent increase in paid 
claims is attributable to VA attempts to meet patient wait-time 
performance standards? Please provide the Committee with wait-time 
reports from FY 2008 to the present, and a detailed breakdown, by VISN, 
of Fee Care Program expenditures since FY 2008 and the amount expended, 
by VISN, since FY 2008 of Fee Care Program expenditures utilized to 
meet wait-time performance standards.

    Response: Numerous changes have occurred over this time frame to 
include new clinical treatment/technology tools, our aging population 
(requiring complex specialty treatment), additional services for 
returning OEF/OIF/OND Veterans, expanded authority for payment of 
emergency claims, expanded initiatives within the Women's Health arena 
including coverage for newborn care (up to 7 days), a significant 
number of initiatives to improve claims processing timeliness, and 
other key initiatives to assure key controls are in place to manage and 
monitor the program. Payment files likely include prior year payments 
and are not always correlated to patients treated. VA's desire to 
provide Veteran centric care closer to home (such as our Rural Health 
initiatives) and increased use of home health services are focused on 
providing the right care in the right location. These efforts to 
provide Veteran centric care result in additional Non-VA costs. VA is 
analyzing options to assure the right care is provided at the right 
time--standardization of the initial decision points to utilize non-VA 
care is a major initiative to improve this area.

    In addition, VA saw increases in billed charges during this time 
frame. In certain areas, VA addressed this issue by developing 
contracts to stabilize pricing. In addition, VA recently published 
regulations that permit VA in certain situations to utilize the same 
payment methodology as Medicare, resulting in significant cost 
avoidance in this program.
    Please see spreadsheets listed as Attachment 2 for more details on 
Fee Data and Attachment 3 for more details on Wait Times.

    Question 12: The NAPA white paper recommended that substantial 
changes be made in the VA Fee Care Program and that a strategic change 
management plan be developed as quickly as possible. Does VA agree that 
substantial changes should be made in the Fee Care Program? Is the VA 
developing, or planning on developing a strategic change management 
plan? What is the specific timetable for changes that have been 
identified as needed in the Fee Care Program to be implemented?

    Response: VA does agree that substantial changes are needed in the 
health care claims processing systems as pointed out by NAPA. A work 
group, formed and represented by senior members of VHA, is in place to 
study the issues, identify and recommend a solution to health care 
claims processing for VA. The complexities of such a significant 
organizational change will likely require approximately 3 to 5 years 
for full implementation. VA intends to have a plan in place by mid-year 
2012.
    This work group is charged to deliver:

      Recommendations on deployment of a regional/central 
approach to the back office claims processing functions to support the 
Non-VA Care Program (Fee Care Program);
      A tentative deployment schedule, to include pilot 
assessment;
      An assessment of capital investment requirements; and
      Recommendations for additional teams for research/
analysis, planning, and implementation of selected solutions.

    Question 13: The NAPA white paper states that ``[g]iven the 
significant organizational productivity challenges with the Fee Care 
Program, VA has a limited understanding of the services it is procuring 
through its program and their costs. The Fee Care Program does not 
appear to have been well managed at any level of VA. VA provides 
limited VISN-wide executive oversight of its purchased care program, 
and the program lacks clearly defined operational objectives or goals, 
and it is not guided by a coherent strategy for managing program 
expenditures.'' Does VA believe the Fee Care Program has been well 
managed? Does VA believe that there is sufficient level of VISN-wide 
executive oversight? Does VA believe that the Fee Care Program has 
clearly defined operational objectives and goals and a coherent 
strategy for managing program expenditures?

    Response: VA acknowledges the management and oversight of the Fee 
Care program could be improved and is actively pursuing program 
changes, IT solutions, and other initiatives to improve the oversight 
of the program. However VA believes the Fee Care Program does have 
clearly defined operational objectives and goals established at the 
enterprise level and several of these improvements are included below.
     Program Improvement Initiatives:

      Non-VA Care Coordination;
      Use of Contracts to Stabilize or Reduce Pricing;
      Internal Controls/Audit tools;
      Program Integrity/Fraud, Waste, Abuse training and 
technology; and
      External audits to assure positive results from 
programmatic changes.
      Technology Enhancements
      Implementing key technology changes to reduce payment 
errors and address key audit findings; expected delivery end of 2012.

    Question 14: The NAPA white paper states that the ``Chief Business 
Office estimates the error rates (that is, erroneous payments) at 12 
percent per year, which equates to approximately $500 million in FY 
2011. By contrast, TRICARE has a reported error rate of 9.42 percent. 
Productivity varies across operating sites by nearly ten folds between 
the most and least efficient sites [footnotes omitted].'' Please 
provide a detailed explanation to the Committee as to why the VA 
experiences such a high error rate compared to TRICARE and why there is 
a divergence across the VA system in the level of error rates. What 
policies or procedures are currently in place, or have been in place 
previously, that contribute to this high error rate and divergence, and 
what specific policy and procedural steps is the VA taking to address 
this high error rate and divergence?

    Response: The high payment error rate in the Non-VA Care program 
can be attributed to the manual nature of the technology within a 
decentralized claims processing system that is the root cause for many 
errors. The payment program has more than 2,000 claims processors 
distributed across 153 medical centers. Given such a working 
environment, with multiple decentralized software products in place and 
technology that relies on manual payment processing, significant 
changes are being implemented to resolve these issues.

    VA is currently pursuing technology changes that will address the 
top payment errors identified with our Improper Payments Elimination 
and Recovery Act IPERA and other audits conducted in FY 2011. These 
technology changes are expected to be released by the end of 2012.

    Question 15: During the hearing, VA stated that it was going to 
roll-out Project HERO nationwide. What are the detailed policy 
rationales behind implementing this program nationwide? Please provide 
the Committee with a detailed plan on the proposed nationwide roll-out 
including detailed time frames, benchmarks, and costs associated with 
the roll-out. In addition, please provide the Committee with any 
detailed cost studies that have been prepared estimating any cost-
savings, by VISN, that VA will achieve with Project HERO. If VA has not 
prepared detailed cost estimates, please provide the Committee with 
estimates regarding these proposed savings.
    The Project HERO contracts with Delta Dental Federal Government 
Programs and Humana Veteran Health care Services are scheduled to end 
September 30, 2012. Once those contracts are closed, Project HERO will 
end.
    Detailed cost studies/expenditures for health care services through 
Project HERO have been completed for fiscal years (FY) 2009-2011. 
Project HERO has realized a net cost-avoidance of $24,380,746 in the 
three measured fiscal years. Cost savings, by FY, are noted below:

----------------------------------------------------------------------------------------------------------------
                                                              FY09          FY10          FY11         Totals
----------------------------------------------------------------------------------------------------------------
Totals                                                      $1,864,834   $16,197,039    $6,318,873   $24,380,746
----------------------------------------------------------------------------------------------------------------

    VHA is leveraging the lessons learned from Project HERO and other 
pilot programs to develop requirements for new competitively awarded 
contracts. The effort to create these contracts, Patient-Centered 
Community Care, is focused on creating centrally supported, regional 
health care contracts available throughout the VHA. The goal is to 
provide Veterans coordinated, timely access to high quality care from a 
comprehensive network of high quality non-VA providers. Patient-
Centered Community Care is still in the requirements development stage. 
An Independent Government Cost Estimate (IGCE) will be prepared as 
requirements are known. We are confident that within the cost of the 
program we will be able to assure high quality, access, and timely 
return of medical documentation not always seen in traditional Non-VA 
Care (Fee) programs.
    The schedule for development of the contracting vehicles, 
solicitation, evaluation, award, and implementation are as follows:

     Requirements development: August 2011--January 2012
     RFP Development, review and finalization: December 2011--April 
2012
     RFP Release: May 2012
     Evaluations: June 2012--July 2012
     Award of new contracts: September 2012
     Implementation/Start up: September 2012--February 2013

                                 
             Honorable Bob Filner, Question 8 Attachment 1
    OIG Recommendation 5: ``. . . that the Under Secretary for Health 
establish procedures to monitor performance measures to determine the 
impact of rural health care funding on improving access and quality of 
care for rural Veterans.''
    Actions Taken: ORH has put in place a robust system of policies and 
procedures to monitor projects and their costs and measure performance 
for all funded projects and activities. To ensure appropriate 
monitoring, VA staff regularly visits Veterans Integrated Service 
Networks (VISN) to validate project activity and formally measure 
project status quarterly or as needed. ORH requires performance and 
impact data in the funding request application, and the Office assesses 
this required data in each application submission. As a result of this 
process, ORH evaluated the measurement and performance data and 
information when reviewing and approving rural health initiatives for 
FY 2012 project funding, to determine project performance and impact on 
rural Veterans. Based on these data, ORH was able to identify the 
greatest rural health needs and support projects with the greatest 
impact on Veterans.
    In March 2011, ORH completed implementation of the Microsoft Access 
database and project monitoring system. The monitoring system uses a 
Microsoft Excel spreadsheet to collect and track project activity, 
progress, and performance. Because both tools have strengths and 
weaknesses, ORH continues to improve and develop them to ensure 
efficiency and effectiveness of use and response to customer needs. An 
electronic database system is needed to improve efficiency of 
measurement and performance collection, analysis, and reporting.
    ORH has defined quality measures and applied them to all projects. 
The measures are dynamic and change over time to ensure accurate 
demonstration of performance and accountability. Some measurement data 
are difficult to access (e.g., the number of Native American unique 
patients seen for treatment) because they are self reported and often 
unreliable; other data are difficult to collect because specific 
tracking systems have not been developed yet in VA. Also, some clinical 
measures are not conducive to data collection and tracking currently at 
the CBOC or rural health clinic level. In response to these challenges, 
ORH is working with VA's Offices of Quality Management and Business 
Intelligence to establish and implement this capability. In addition, 
at this time, VISN Rural Consultants (VRC) and local project leaders 
manually report project-specific data.
    To ensure accountability for funded projects, equipment, and 
programs, ORH Program Analysts are making site visits to the VISNs to 
evaluate project and program performance.
    In coordination with the VHA Support Service Center (VSSC), ORH 
completed and deployed a Rural Health Briefing Book in April 2011. The 
following month, ORH deployed a Rural Health Dashboard in May 2011. 
These new information resources provide timely and relevant information 
on socio-demographics, service use, diagnosis, clinical quality, 
outcomes, and cost data about over three million Veterans living in 
rural and highly rural areas.
    Quality Measurement is an ongoing process. Further plans for action 
steps and follow-up include the following:

    1.  Ensure VISNs and VRHRCs report quarterly measures and 
accomplishment of any relevant milestones.
    2.  Develop the ORH Microsoft Access database output reports by 
December 31, 2011.
    3.  Evaluate data quality each quarter.
    4.  Establish a mechanism to over-sample patient satisfaction data 
in rural and highly rural areas by December 31, 2011.
    5.  Continue to develop standardized measures for all VISN projects 
and align them with national program measures when possible.

OIG RECOMMENDATION 3:

    OIG Recommendation 3: ``. . . that the Under Secretary for Health 
implement an effective communication plan to effectively coordinate and 
collaborate with key rural health care stakeholders in the use of rural 
health care funds.''
    Actions Taken: ORH has fully complied with the IG recommendation to 
implement an effective communication plan.
    For internal stakeholders and partners, ORH leadership maintains: 
1) bi-monthly teleconferences with leadership of the Veterans Rural 
Health Resource Centers (VRHRC); 2) monthly calls with VRCs; and 3) 
weekly meetings with ORH VA Central Office (VACO) staff. Minutes are 
taken and distributed. In addition, ORH hosts a face-to-face meeting 
with VRCs, VRHRC Leadership, and VACO staff twice a year, most recently 
in Iowa City, Iowa, on September 12-14, 2011.
    For both external and internal stakeholders, ORH staff develops 
content for and manages both an Internet and Intranet Web site, 
publishes a quarterly newsletter featuring ORH-sponsored initiatives 
and demonstration projects, publishes a monthly fact sheet highlighting 
recently published research studies and policies relevant to rural 
Veterans' health issues, and utilizes Webinars to help educate VA 
health care providers. In addition, ORH staff create videos 
demonstrating the impact of ORH-sponsored programs on health care for 
rural Veterans and develop policy briefs based on evaluations of ORH-
funded programs.
    The latest addition to the ORH Web site is a new section devoted to 
the ORH Veterans Rural Health Resource Centers. These pages include 
information on each Center's focus, initiatives, leadership, and staff. 
The most recent newsletter was published in July 2011 and focuses on 
ORH-sponsored outreach programs for rural Veterans. It can be accessed 
online at: http://www.ruralhealth.va.gov/news3/
ORH_The_Rural_Connection_Newsletter.asp.
    ORH distributes quarterly newsletters via an e-mail contact list, 
which resides in the ORH Contacts Database (see below). The most recent 
ORH Fact Sheet features up-to-date statistics on the number of rural 
Veterans enrolled in VA's health care system, the number of Veterans 
impacted by ORH projects, and the percentage of rural Veterans who 
served in Operation Enduring Freedom/Operation Iraqi Freedom/Operation 
New Dawn. An additional nine Fact Sheets are available on the ORH Web 
site for download. Archived ORH newsletters and fact sheets are 
available on the ORH Web site for download at: http://
www.ruralhealth.va.gov/publications.asphttp://www.ruralhealth.va.gov/
publications.asp.
    Finally, ORH has created five videos about ORH and ORH-sponsored 
initiatives and how they impact rural Veterans. These are currently 
available on the ORH Web site for viewing at: http://
www.ruralhealth.va.gov/index.asp. ORH distributed these videos at the 
National Rural Health Association (NRHA) annual meeting in Austin, 
Texas, as well as at the VHA Open House in New Orleans, Louisiana, this 
past August 2011.
    ORH has used its Contacts Database to send several targeted 
messages to key stakeholders, who can in turn forward or print these 
messages for other interested parties. For instance, ORH sends e-mails 
to staff at rural VA CBOCs and Outreach Clinics. We suggest they print 
out copies of the ORH newsletter for Veterans to read while in the 
waiting area. Stakeholder groups in the database include:

      the general public
      Veterans Service Organizations (e.g., Disabled American 
Veterans, Paralyzed Veterans of America, etc.)
      Veterans Service Offices (state and local)
      Rural Health Program Offices (Federal, state, and local)
      Rural Health Associations (National and state)
      Other Federal agencies (e.g., Health Resources and 
Services Administration, U.S. Department of Education, etc.)
      Academic institutions
      Representatives and Senators
      Native American Tribal organizations
      VA program offices and facilities, including:

      VISN Offices
      VA Medical Centers
      VA CBOCs
      Vet Centers
      Office of Public and Intergovernmental Affairs
      My HealtheVet staff
      All ORH staff (VACO, VRHRCs, VRCs)
      Veterans Rural Health Advisory Committee

    ORH continually updates and supplements contact data, and there are 
currently 1,466 active stakeholder e-mails sent each quarter, an 
increase from the initial 1,017. In late March 2011, we added a 
subscription function to the ORH Newsletter Web page, which has 
resulted in an additional 140 contacts. We continue to work to identify 
key stakeholders who should be informed about ORH initiatives and 
improvements to access and quality of care for rural Veterans.
    Use of Social Media: ORH staff are utilizing social media to 
provide even greater outreach and communication. For example, ORH has 
used the VA blog ``VAntage Point'' (http://www.blogs.va.gov/VAntage/) 
twice this year to discuss VA rural health initiatives and impacts. The 
first blog post was focused on increasing access to rural Veterans 
(April 5, 2011), and the second was an update on the work of ORH (June 
28, 2011).
    Rural health-related posts have appeared on the VHA Facebook page 
five times since February 2011 under the following titles:

      VA Reaching Out to Rural Veterans With Telehealth (August 
19, 2011)
      VA's Mobile Clinics--``Grillin' on the River'' Video 
(July 3, 2011)
      Rural Health: Exchanging Information--Health Care (April 
23, 2011)
      Rural Health: A Health Frontier (March 28, 2011)
      ``The Rural Connection'' Newsletter (February 2, 2011)

    Rural health-related posts have appeared on the VA Facebook page 
(www.facebook.com/VeteransAffairs) six times since February 2010 under 
the following titles:

      Rural Veterans and the Tyranny of Distance (August 6, 
2011)
      VA Reaches Out to Tribal Governments (July 5, 2010)
      Update: VA's Office of Rural Health--Mary Beth Skupien 
(June 29, 2011) (also on the VA Blog, VAntage Point, http://
www.blogs.va.gov/VAntage/)
      Salem VAMC Holds Ribbon Cutting Ceremony for Wytheville, 
VA. CBOC (June 20, 2011)
      VA Secretary Learns What''Rural'' Means for Alaska Vets 
(May 31, 2011)
      Reaching Out to Tribal Governments (February 1, 2010)

    VA has also begun using Twitter to inform others about ORH. The 
following rural health-related ``tweets'' have been distributed through 
VA's Twitter account (@DeptVetAffairs) since October 1, 2010:

      Rural Veterans and the Tyranny of Distance: http://t.co/
akpBxM9 (August 8, 2011--Re-tweeted by 5 others).
      VA is taking measures to improve health care for Vets in 
rural areas. Learn more: http://t.co/qPZjNu9 (July 1, 2011--Re-tweeted 
by 22 others).
      Guest post on VAntage Point: Increasing Access: Reaching 
Out to Rural Veterans http://go.usa.gov/TlM (April 6, 2011--Re-tweeted 
by 4 others).
       If you live in a rural area & it's a pain for you to 
reach the nearest VA facility, Project ARCH will be welcome news. 
http://go.usa.gov/agz (October 9, 2010--Re-tweeted by 18 others).

ORH Communications--FY 2012

    For FY 2012, communications plans include regular ``IN THE 
SPOTLIGHT: Rural Health Publications'' e-mails, as well as special 
edition e-mails, such as ``Bringing Ethics Consultation Services to 
Rural Veterans.'' ORH will continue to use the social media tools 
outlined above.
    ORH will develop and implement a Project Access Received Closer to 
Home (ARCH) Communication Plan by December 2011 and will have a booth 
at the National Rural Health Association (NRHA) 2012 Annual Rural 
Health Conference in Denver, Colorado, April 17-20, 2012.

OIG RECOMMENDATION 6:

    OIG Recommendation 6: ``. . . that the Under Secretary for Health 
reassess the rural health initiatives approved for funding by Office of 
Rural Health in their fiscal year 2012 budget to align planned use of 
resources to their greatest rural health needs.''
    Actions Taken: ORH has reassessed the rural health initiatives 
requested in the FY 2012 budget to align planned use of resources to 
the greatest rural health needs.
    (1) As discussed previously, ORH has instituted a robust system of 
measurement and performance monitoring for the budget and for all 
projects and activities it funds.
    (2) ORH has completed needs assessments for health care and 
geographic areas and evaluated and trended them for all VA VISNs (see 
trend reports below). ORH has used this information to identify the 
greatest rural health needs and posted it on the ORH SharePoint site, 
and will continue to use it throughout the year for planning and 
program evaluation purposes. During the September 2011 ORH bi-annual 
meeting, ORH staff and leaders evaluated the needs assessment process 
to determine how it might be improved in the future.
    (3) From the geographic needs assessment, ORH has developed a 
detailed national geographic map and used it to assist ORH and VISNs 
with aligning their use of resources with identified health care needs. 
The map demonstrates that 96.5 percent of all VA enrollees are within 
60 minutes travel time to VHA primary care services. It also shows, by 
VISN, the percent of enrollee coverage meeting FY 2010 access standards 
(see attachment below).
    (4) In FY 2011, ORH has funded projects and activities identified 
as priorities, including the Secretary's initiatives to address women 
and homeless Veterans, and through priorities established by the ORH 
Advisory Committee and the ORH Strategic Plan. This Strategic Plan 
addresses efforts to improve outreach, mental health, telehealth, and 
recruitment and retention of providers into rural and highly rural 
areas. ORH has completed the ``refresh'' of its Strategic Plan and 
finalized it at the end of FY 2011.
    (5) Finally, ORH completed several Veteran and community agency 
focus groups in FY 2011 to help determine the greatest needs for 
funding. The Western and Central Region VRHRCs are continuing outreach 
activities targeting rural and highly rural Veterans and have planned 
further focus groups to assess the needs of Veterans within the 
community-at-large for both enrolled and non-enrolled Veterans.
             OFFICE OF RURAL HEALTH STRATEGIC PLAN, FY 2012
    Overview: The Senate Appropriations Committee recommended that VA's 
reassessment take into consideration both geographic and specific 
health needs and encourages the Department to compile Veterans' records 
from multiple systems to create a single view of Veterans and the 
geographic area in which they live.
    Actions Taken: ORH has compiled Veterans' records from multiple 
systems to create a single view of Veterans and the geographic areas in 
which they live. This profile of rural Veterans helped VA target 
funding to programs for FY 2012. In FY 2011, ORH implemented a plan to 
meet with and collect data and information directly from Veterans in as 
many geographic locations, systems, and regions nationally as possible.
    ORH leadership and staff have participated in a variety of events 
(including town hall meetings, listening sessions, outreach events, and 
round table discussions) with Veterans, to increase awareness and 
understanding of Veterans' needs, issues, and perceptions. To obtain 
more information, ORH invited Veterans to participate in the health 
care needs assessment processes by contributing ideas at informational 
meetings, providing data on comment cards, and answering satisfaction 
and perception questionnaires.
    In 2011, the ORH Director and staff have participated in town hall 
events and listening sessions in Montana, Texas, South Dakota, Florida, 
and Maine. The VRHRCs in Eastern and Central regions have provided 
outreach events and have held numerous Veterans' focus groups in Utah, 
California, Nevada, Iowa, and Illinois, and more are planned. ORH has 
integrated and evaluated information from the geographic and health 
care needs assessments by identifying local, regional, and national 
trends and connecting these findings with the Secretary's initiatives, 
the ORH Advisory Committee recommendations, and the ORH strategic 
priorities. All of these sources of information help ORH determine as 
objectively as possible the areas of greatest need for funding. During 
the FY 2012 proposal review sessions, all reviewers were required to 
utilize findings from the sources to help guide them in making funding 
decisions in an informed and effective way.
    ORH has refreshed its Strategic Plan with details for all rural 
health activities in FY 2012. The full plan is embedded. A summary of 
the Strategic Plan follows.
    Prior studies indicate that Veterans who live in rural settings 
have greater health care needs than their urban counterparts. 
Specifically, compared to urban Veterans, rural Veterans have lower 
health-related quality-of-life scores and experience a higher 
prevalence of physical illness. While prevalence of most psychiatric 
disorders is lower for rural Veterans compared to urban Veterans, rural 
Veterans with psychiatric disorders are sicker as measured by lower 
health-related quality-of-life. These differences in health-related 
quality-of-life scores, which equate to lower self-rated health status 
among rural dwelling Veterans, are substantial, clinically meaningful, 
and associated with increased demand for health care services. Despite 
greater health care needs, rural Veterans are less likely to access 
health services for both physical and mental illness, either through VA 
or the private sector. In particular, rural Veterans have lower access 
to care for chronic conditions such as hypertension and post-traumatic 
stress disorder.
    To ensure that ORH programs and initiatives are meeting the health 
care needs of rural Veterans, ORH used several different sources to 
develop a profile on rural Veterans. First, ORH conducted a 
geographical needs assessment to determine VA facility gaps in rural 
areas. It then conducted a clinical needs assessment to better 
understand unmet clinical needs. ORH leadership has participated in 
numerous town hall meetings and listening sessions to better understand 
the perspective of rural Veterans on accessing VA health care and has 
met with the Veterans Rural Health Advisory Committee (VRHAC) on 10 
occasions to discuss its recommendations on how to improve the ORH 
program. This information, together with the Secretary's priorities on 
improving care for women, Native American, and homeless Veterans, 
provided the framework for the refresh of the ORH 2012 Strategic Plan.
    In FY 2011, ORH formed a committee of internal and external 
stakeholders to refresh the ORH Strategic Plan for FY 2012 through FY 
2014. Committee members represented the following groups: the VRHAC, 
VRCs, the VRHRCs, ORH Central Office, VA medical center directors, the 
Office of Telehealth Services, the Office of Mental Health Services, 
the Office of Geriatrics and Extended Care, the Utah State VA Office, 
VA's Office of Health Informatics, VA's Office of Academic 
Affiliations, VA's Employee Education System, and VA's Health care 
Retention and Recruitment Office. Six workgroups were created from the 
Committee to refresh the initiatives and action items associated with 
the strategic goals of ORH. ORH disseminated the draft compilation of 
all recommendations to a broad spectrum of VA field and program offices 
including all VISN directors and VISN planners.
    Veterans Health Administration
    November 2011

                                 
            Honorable Bob Filner, Question 11 Attachment 2,
                       Fee Data Disbursed Amounts
       Filner Question 11 Attachment 2 Fee Data Disbursed Amounts

   All  Payment
     Locations               FY08                    FY09                    FY10                   FY11

                        $3,028,962,367          $3,818,112,936          $4,416,267,157         $4,561,833,762
          V01             $139,641,704            $168,825,720            $188,174,706           $169,174,226
          V02              $51,489,344             $69,644,612             $81,036,946            $65,054,534
          V03              $45,040,208             $51,824,172             $52,159,050            $49,001,434
          V04             $150,207,208            $194,650,669            $209,107,662           $213,771,370
          V05              $51,766,320             $69,997,271             $67,925,599            $66,693,619
          V06             $171,051,337            $227,459,348            $262,310,696           $244,605,261
          V07             $173,436,112            $216,977,473            $316,154,124           $345,743,207
          V08             $271,965,844            $299,863,068            $372,462,614           $413,079,860
          V09             $159,000,541            $203,506,465            $215,568,620           $210,201,823
          V10             $122,347,224            $167,294,344            $237,650,491           $172,680,508
          V11             $109,686,203            $153,285,222            $163,211,029           $145,382,413
          V12              $84,189,137            $108,029,431            $128,735,652           $131,510,900
          V15             $161,454,995            $200,388,460            $209,312,890           $252,454,316
          V16             $229,161,049            $289,354,762            $361,412,448           $328,289,259
          V17             $111,111,520            $167,465,263            $233,663,473           $252,076,371
          V18             $162,456,908            $205,022,885            $222,857,447           $242,174,849
          V19             $112,950,006            $137,654,118            $163,636,814           $174,346,824
          V20             $196,148,762            $219,976,592            $231,026,120           $297,091,637
          V21             $166,685,471            $194,384,255            $210,417,304           $254,719,719
          V22             $183,267,837            $214,861,462            $250,646,232           $239,626,188
          V23             $175,904,636            $257,647,345            $238,797,237           $294,155,442

                                 
         Hon. Bob Filner, Question 11 Attachment 3, Wait Times

----------------------------------------------------------------------------------------------------------------
FY 2011                       Primary Care                         Specialty Care
----------------------------------------------------------------------------------------------------------------
                          # of Pt       Total       # of Pt      # of Pt      Total      % of Pt
  VISN      Patient      Appts 

```