Department of Veterans Affairs 

Office of Inspector General 

Audit of the Acquisition and Management 

of Selected Surgical Device Implants 

Report No. 06-03677-221 September 28, 2007

VA Office of Inspector General 

Washington, DC 20420 
To Report Suspected Wrongdoing in VA Programs and Operations 

Call the OIG Hotline – (800) 488-8244 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Table of Contents 

Page 

Executive Summary ..............................................................................................i 

Introduction ..........................................................................................................1 

Purpose............................................................................................................................. 1

Background...................................................................................................................... 1

Scope and Methodology .................................................................................................. 1

Results and Conclusions ....................................................................................4 

Issue 1: VHA Could Reduce the Prices Paid for Selected Surgical Device Implants.... 4

Issue 2: Inventory Controls Would Improve Accountability ......................................... 8

Issue 3: Patient Data Needs Safeguarding.................................................................... 10

Issue 4: Recall Procedures Need Improvement............................................................ 12 

Appendixes 

A. Price Survey and Cost Estimate Methodology.................................................... 15 

B. Monetary Benefits in Accordance with IG Act Amendments .................................. 16

C. Under Secretary for Health Comments..................................................................... 17

D. OIG Contact and Staff Acknowledgments................................................................ 30

E. Report Distribution.................................................................................................... 31

VA Office of Inspector General 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Executive Summary 

Introduction 

The Office of Inspector General (OIG) conducted an audit to assess the effectiveness of 

the Veterans Health Administration’s (VHA) acquisition and management of selected 

surgical device implants (SDI). The audit assessed whether VHA facilities obtained the 

best prices for SDI purchased through local contracts and the open market as well as the 

effectiveness of SDI management controls for inventories, patient data, and implant 

recalls. 

VHA’s Prosthetics and Sensory Aids Service (PSAS) provides a full range of prosthetics 

and sensory aids services to veterans, including durable medical equipment, artificial 

limbs, sensory aids, and SDI. SDI are medical devices that are implanted in the body to 

replace and act as missing or defective biological structures. To monitor the procurement 

and utilization of orthotic, prosthetic, and sensory devices for VA patients, PSAS 

maintains information such as implant type, device cost, quantity purchased, and 

manufacturer in the National Prosthetics Patient Database (NPPD). In fiscal year 

(FY) 2006, PSAS spent $340 million (31 percent) of its $1.1 billion in funding on SDI. 

As of September 2007, PSAS estimated that SDI spending will exceed $562 million (46 

percent) of its $1.23 billion budget. 

In accordance with the purchasing hierarchy established by the Secretary’s Procurement 

Reform Task Force in May 2002, VA purchases the majority of its SDI under national 

contracts or Blanket Purchase Agreements (BPAs) to leverage its buying power. 

However, VHA facilities purchase selected SDI—aortic valves, coronary stents, and 

thoracic grafts—through local contracts and the open market. For the 12-month period, 

July 2005 through June 2006, the NPPD reported that VHA facilities purchased 

28,830 aortic valves, coronary stents, and thoracic grafts at a cost of about $71.3 million. 

Results 

VHA could reduce its procurement costs for aortic valves, coronary stents, and thoracic 

grafts and should strengthen key SDI management controls in the areas of inventory, 

patient privacy, and recalls. Based on the purchasing hierarchy established by VA’s 

Procurement Reform Task Force in May 2002, national contracts and BPAs are the 

preferred methods for procuring SDI because they allow VA to leverage its buying 

power. (A BPA is a method of acquiring products at discounted prices, typically by 

agreeing to quantity or market share purchase requirements.) The National Acquisition 

Center (NAC) in VA’s Office of Acquisition and Materiel Management and PSAS are 

responsible for determining the most economical method to supply centrally managed 

items, including SDI. However, the establishment of national contracts and BPAs for 

aortic valves, coronary stents, and thoracic grafts has not been a high priority. 

VA Office of Inspector General i 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Consequently, VHA facilities use local contracts and the open market to purchase these 

selected SDI. 

Our survey of VHA facilities that purchased the selected SDI disclosed that implant 

prices varied significantly among VHA facilities due to factors such as the experience 

and negotiation skills of the contracting staff, the volume of purchases, and the 

relationship between the manufacturer and VHA facility. Although PSAS uses NPPD 

data to monitor the utilization and procurement of SDI, it did not detect these price 

differences because VHA facilities did not use standardized naming conventions when 

they identified purchased devices in the NPPD. Consequently, PSAS lacked the 

device-specific information needed to compare procurement data across the different 

VHA facilities. 

If VHA leveraged its buying power and established national contracts and BPAs for these 

devices, we believe that it could negotiate national prices at least equal to the lowest 

prices identified during our survey. Based on our survey results and SDI purchases made 

during the review period, the use of national contracts and BPAs instead of local 

contracts and open market purchases could reduce VHA’s costs for these selected SDI by 

as much as $4.34 million annually or $21.7 million over 5 years. 

After the VHA facilities procured the SDI, we found that they lacked inventory controls 

needed to effectively manage and account for the devices. VHA facility staff did not 

conduct physical inventories and use VHA’s Prosthetics Inventory Package (PIP) to 

maintain perpetual inventory records for SDI as required by VHA policy. As a result, 

staff lacked reliable information regarding SDI stock stored in various locations at the 

VHA facilities and could not effectively manage purchased stock to prevent implants 

from expiring. Inventories of VHA-purchased aortic valves, coronary stents, and thoracic 

grafts conducted during our site visits identified expired devices and devices set to expire 

unused within 6 months of our visit based on the VHA facilities’ usage rates. 

Furthermore, the lack of inventory records prevented us from identifying the amount of 

stock that had expired prior to our onsite visits and its disposition. 

VHA facility staff also routinely disclosed more private medical information and 

sensitive personal data to implant manufacturers than the manufacturers needed. VHA’s 

Privacy Program requires Privacy Officers to ensure compliance with privacy statutes. In 

addition, VHA’s Privacy Program and the Health Insurance Portability and 

Accountability Act (HIPAA) require VHA staff to limit the disclosure of patient 

information to the minimum amount necessary. However, seven (88 percent) of eight 

VHA facilities we reviewed had no procedures in place to identify specific Food and 

Drug Administration (FDA) and SDI manufacturers’ information requirements and 

ensure the release of only the minimum amount of relevant patient information. 

Consequently, staff at the seven VHA facilities often provided SDI manufacturers 

patients’ medical information and personal data that the manufacturer did not need to 

VA Office of Inspector General ii 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

meet FDA requirements, thus placing the patients at risk for identity theft or other misuse 

of information for commercial advantage, personal gain, or malicious harm. 

Finally, some VHA facilities lacked effective SDI recall procedures to ensure that all 

patients with recalled SDI received prompt follow-up care. VHA policy requires its 

facilities to have procedures in place to address, review, and take action on defective 

medical device and medical product recalls. These requirements include maintenance of 

a system of records to document resolution of the recalls and notification of any 

additional parties needed to assist in implementation of the recalls. Despite these 

requirements, one (25 percent) of the four VHA facilities reviewed did not have an 

effective system in place to identify and track cardiology patients subject to SDI recalls 

and to document actions taken to resolve the recalls. Staff at this VHA facility believed 

the affiliated university providing the follow-up care for the VHA facility’s VA patients 

was responsible for resolving the recalls. Consequently, the VHA facility did not take 

needed actions to follow up on its cardiology patients with recalled SDI, and our audit 

confirmed that at least two patients did not receive timely follow-up care. VHA officials 

reported other instances where its facilities had problems recalling other types of SDI 

when we conducted our follow-up for these two patients. Hence, we believe a VHA 

initiative to develop a national implant registry will significantly strengthen local and 

national VHA SDI recall processes. 

Conclusion 

VHA needs to use national contracts and BPAs to reduce its SDI costs. VHA also needs 

to strengthen management controls related to SDI inventory, patient privacy, and recalls. 

Our audit found that VHA could reduce its costs for aortic valves, coronary stents, and 

thoracic grafts if it procured them through national contracts and BPAs instead of local 

contracts and the open market. The standardization of NPPD data would strengthen 

PSAS’s monitoring of SDI procurement and utilization. Moreover, VHA facilities need 

to implement SDI inventory controls before staff can adequately account for purchased 

devices and manage stock levels to reduce losses due to expired devices. Finally, VHA 

also needs to strengthen SDI patient safeguards to prevent the unnecessary release of 

sensitive patient data and to ensure VA patients affected by recalls receive timely 

follow-up care. 

Recommendations 

1. We recommended that the Under Secretary for Health, within a year, evaluates 

VHA’s aortic valve, coronary stent, and thoracic graft purchases; studies the 

feasibility of establishing national contracts and BPAs; and where indicated, initiates 

national contracts and BPAs. 

VA Office of Inspector General iii 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

2. We recommended that the Under Secretary for Health establish management controls 

to standardize NPPD data used to monitor SDI procurement and utilization. 

3. We recommended that the Under Secretary for Health conduct physical inventories of 

SDI and use PIP to track inventory, monitor stock levels, and reduce inventory losses. 

4. We recommended that the Under Secretary for Health develop and implement local 

SDI patient data release processes to ensure compliance with Federal privacy statutes. 

5. We recommended that the Under Secretary for Health provide appropriate clinical 

staff refresher training on VHA privacy and HIPAA requirements and their 

applicability to the release of SDI patient information. 

6. We recommended that the Under Secretary for Health ensure that there are effective 

local policies and procedures to identify and follow up on all VA patients receiving 

post-operative care at non-VA facilities. 

7. We recommended that the Under Secretary for Health submit the implant registry 

initiative to the Office of Information and Technology (OI&T) for development when 

funding becomes available. 

Under Secretary for Health Comments 

The Under Secretary for Health agreed with the findings and recommendations of the 

report and provided acceptable implementation plans. (See Appendix C, pages 17–29, 

for the full text of the Under Secretary’s comments.) The Under Secretary also agreed 

with our estimated monetary benefits, with the caveat that the savings would be 

contingent upon the feasibility of obtaining national contracts and/or BPAs. He outlined 

plans to implement the National Item File (NIF), a management information and tracking 

system for all supplies, including SDI inventories, and efforts to standardize SDI 

nomenclature. He stated that VHA is reevaluating policies concerning the use of the PIP 

in managing prosthetics inventory. He also stated that the VHA Privacy Office has taken 

immediate action to address concerns raised about SDI patient data release practices. 

Lastly, the Under Secretary reported that VHA is completing the final revisions on two 

directives related to the recall of defective SDI, and it has submitted an implant registry 

initiative to OI&T for development to enhance VHA SDI recall processes. We 

incorporated technical comments provided by the Under Secretary into the report as 

appropriate. We will follow up on the implementation of the planned improvement 

actions.

 

 (original signed by:)

BELINDA J. FINN 

Assistant Inspector General for Auditing 

VA Office of Inspector General iv 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Introduction 

Purpose 

The purpose of the audit was to assess the effectiveness of VHA’s acquisition and 

management of selected SDI. The objectives of the audit were to determine whether 

VHA facilities: (1) obtained the best prices for SDI not purchased under national 

contracts, (2) had adequate SDI inventory control procedures, (3) provided SDI 

manufacturers only the minimum amount of sensitive patient data needed for recalls, and 

(4) had effective policies and procedures to follow up on recalled SDI. 

Background 

Under the Servicemen's Readjustment Act of 1944 (commonly known as the GI Bill of 

Rights of 1944), VA was charged with providing healthcare and rehabilitative services to 

veterans. On June 19, 1948, the 80th Congress passed Public Law 729 authorizing 

appropriations for VA to conduct research in prosthetics and sensory aids. VHA’s PSAS 

provides a full range of prosthetics and sensory aids services to veterans, including 

durable medical equipment, artificial limbs, sensory aids, and SDI such as pacemakers 

and coronary stents. SDI are medical devices that are implanted in the body to replace 

and act as missing or defective biological structures. To monitor the procurement and 

utilization of orthotic, prosthetic, and sensory devices for VA patients, PSAS maintains 

information such as implant type, device cost, quantity purchased, and manufacturer in 

the NPPD. 

During FY 2006, PSAS spent $340 million (31 percent) of its $1.1 billion in funding on 

SDI. In FY 2007, PSAS projects SDI spending will exceed $562 million (46 percent) of 

its $1.23 billion budget. In accordance with the purchasing hierarchy established by the 

Secretary’s Procurement Reform Task Force in May 2002, VA purchases the majority of 

its SDI under national contracts or BPAs to leverage its buying power. However, VHA 

facilities purchase selected SDI—aortic valves, coronary stents, and thoracic grafts—

through local contracts and the open market. For the 12-month period, July 2005 through 

June 2006, the NPPD reported that VHA facilities purchased 28,830 aortic valves, 

coronary stents, and thoracic grafts at a cost of over $71.3 million. 

Scope and Methodology 

To address our audit objectives, we identified applicable Federal regulations and VHA 

policies and procedures related to the acquisition and management of SDI. We also 

interviewed responsible VA, VHA, and PSAS program officials about SDI acquisition 

processes, inventory controls, the release of sensitive patient data, and implant recall 

policies and procedures. Our audit examined available NPPD data for the period 

July 2005 to June 2006; SDI recalls issued during calendar years 2005 and 2006; and SDI 

policies, procedures, and management controls in place during our onsite visits. 

VA Office of Inspector General 1 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

To determine if VHA facilities obtained the best prices for the selected SDI purchased 

through local contracts and the open market, we conducted a price survey of the 87 VHA 

facilities—medical centers, healthcare systems, and Veterans Integrated Service 

Networks (VISNs)—that reported purchases of aortic valves, coronary stents, and 

thoracic grafts in the NPPD during our review period. To conduct this price survey, we 

contacted each of the 87 VHA facilities to verify the selected SDI product lines they had 

purchased during our review period and the prices they had paid for each product line. 

(For the purposes of this report, a “product line” refers to a specific device offered by a 

manufacturer.) Using information from our price survey and the NPPD data for the 

28,830 purchased SDI during our review period, we identified the lowest price a VHA 

facility had paid for each of the product lines included in the NPPD data. We considered 

the lowest or best prices identified for each product line to be reasonable estimates of 

what the prices would be if VHA negotiated national SDI contracts and BPAs. 

Consequently, we benchmarked the prices of the 28,830 SDI reported in NPPD against 

the best prices identified by our price survey to determine whether national contracts and 

BPAs might be more cost effective than local contracts and open market purchases. (See 

Appendix A on page 15 for a detailed description of our price survey and cost estimate 

methodology.) 

From January through March 2007, we conducted onsite work at the Ralph H. Johnson 

VA Medical Center (VAMC) in Charleston, SC; the James A. Haley VAMC in Tampa, 

FL; the Palo Alto Health Care System (HCS) in Palo Alto, CA; and the Eastern Colorado 

HCS in Denver, CO. We also conducted a telephone survey of four additional VHA 

facilities and collected documents from these sites to assess controls over sensitive data 

of SDI patients and to evaluate the reliability of NPPD data and SDI price survey data we 

collected earlier. 

To ensure that the NPPD data collected during our survey was sufficiently reliable for the 

purposes of our audit, we randomly selected transactions from the four sites we visited 

and four additional randomly selected sites using the Department of Health and Human 

Services (HHS) OIG’s RAT-STATS computer software. (RAT-STATS is a package of 

statistical software tools designed to assist a user in selecting random samples and 

evaluating audit results. The HHS OIG has used it since the early 1970s.) Table 1 lists 

the eight sites and the number of NPPD purchases we randomly selected at each VHA 

facility to verify the accuracy of the price data collected during our price survey. 

VA Office of Inspector General 2 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Table 1. Sample by Location and Surgical Implant 

Surgical Implant 

Location

Coronary 

Stents 

Aortic 

Valves 

Thoracic 

Grafts 

 

Atlanta VAMC Purchases 156 20 127 

 Sample Size 30 20 30 

Eastern Colorado HCS Purchases 243 17 4 

 Sample Size 30 17 4 

 

James A. Haley VAMC Purchases 343 1 29 

 Sample Size 30 1 29 

 

Jesse Brown VAMC Purchases 205 0 32 

 Sample Size 30 0 30 

Montana HCS Purchase 166 0 1 

 Sample Size 30 0 1 

Palo Alto HCS Purchases 215 21 11 

 Sample Size 30 21 11 

 

Ralph H. Johnson VAMC Purchases 185 31 19 

 Sample Size 30 30 19 

 

Washington, DC VAMC Purchases 148 27 14 

 Sample Size 30 27 14 

Totals Purchases 1,661 117 237 

Sample Size 240 116 138 

For each of the eight VHA facilities, we reviewed selected transaction data including 

purchase orders, invoices, and other supporting documents. We also collected and 

reviewed additional documents, such as contracts, memorandums, and correspondence to 

ensure the accuracy of our SDI price data. Our data reliability tests conducted on site and 

during our telephone survey disclosed that the computer-generated NPPD data and our 

price survey data were sufficiently reliable to address the objectives of this audit. To 

evaluate controls over SDI patient data security and recalls, we expanded our reviews in 

these areas to include implantable cardioverter defibrillators (ICDs) and pacemakers. 

Our assessment of internal controls focused only on those controls related to our audit 

objectives. We reported lapses in patient data security identified during this audit, which 

did not directly address the audit’s national scope and objectives, to VHA officials in a 

separate management advisory letter dated September 6, 2007. We conducted the audit 

in accordance with generally accepted government auditing standards. 

VA Office of Inspector General 3 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Results and Conclusions 

Issue 1: VHA Could Reduce the Prices Paid for Selected SDI 

Findings 

VHA could obtain lower prices for aortic valves, coronary stents, and thoracic grafts if it 

used national contracts and BPAs to procure these SDI. Although national contracts are 

the preferred method of procurement under VA’s purchasing hierarchy, PSAS and the 

NAC had not made it a priority to pursue national contracts or BPAs for these selected 

SDI. As a result, VHA facilities procure these SDI through local contracts and the open 

market. Our review of NPPD data and our price survey of all 87 VHA facilities that 

purchased the selected SDI during our review period identified significant price 

differences among VHA facilities for the same implants. Some VHA facilities obtained 

significantly lower prices for the same implants than other VHA facilities. Negotiation of 

national contracts and BPAs for these selected SDI would reduce the variability in the 

prices VHA facilities pay for them. More importantly, it would allow VHA to leverage 

its buying power and obtain better prices nationwide. If VHA established national 

contracts and BPAs for these SDI and negotiated prices that approximated the lowest 

prices identified by our price survey, VHA could reduce its SDI costs by as much as 

$21.7 million over the next 5 years.

Local Procurement of the Selected SDI Created Significant Price Variances. During 

the 12-month review period, the 87 VHA facilities purchased 28,830 aortic valves, 

coronary stents, and thoracic grafts at a cost of about $71.3 million. Our price survey 

identified significant variances in prices VHA facilities paid during this period for 

171 product lines. For example, within 3 months of each other, one VHA facility paid 

$7,065 while another paid $3,850 for the same aortic valve, a $3,215 price variance. 

Table 2 presents summary price variance data for each of the reviewed SDI types. 

Table 2. Price Variances for SDI Product Lines

Surgical Implant Number of 

Product Lines 

Average Low Median High 

Aortic Valves 28 $ 1,726 $ 33 $ 1,840 $ 3,250 

Coronary Stents 45 $ 655 $ 57 $ 550 $ 1,810 

Thoracic Grafts 98 $ 198 $ 3 $ 96 $ 1,478 

At the local level, factors such as the experience levels and negotiation skills of the local 

contracting officers, the volume of the VHA facilities’ SDI purchases, relationships 

between the SDI manufacturers and VHA facilities, as well as other variables influenced 

prices. At one VHA facility, we found that a VISN contracting officer’s mistake in 

VA Office of Inspector General 4 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

recording a stent’s price as $2,890, instead of the negotiated price of $2,600, on a 

contract’s price schedule, increased the cost of each stent by $290. Over the life of the 

contract, this error will increase the VHA facility’s cost for this stent by more than 

$197,261. However, the VHA facility cannot recoup the funds because the legally 

binding contract contains the higher price and includes terms and conditions that make it 

unfeasible for the VHA facility to terminate and renegotiate the contract. 

At the time of our audit, the NAC had not negotiated national contracts and BPAs for 

these SDI because they believed the coronary stent market lacked the competition needed 

to effectively negotiate national contracts and that aortic valves and thoracic grafts were 

not a high priority compared to other high-volume items procured by VA. PSAS officials 

who monitor SDI procurements also did not identify the price variances and possible 

benefits of using national contracts and BPAs because VHA facilities did not use 

standardized naming conventions when entering product line information into NPPD. 

For example, different VHA facilities listed the same coronary stent product line in 

NPPD under multiple names such as “stent, coronary (SI523),” “stent 2.25MM X 12MM 

M-L Mini Vision RX,” and “stent 4.0MM X 12 MM Cobalt Chromium RX.” 

Consequently, PSAS officials could review general SDI information in the NPPD, such 

as type, quantity, price, and total purchases by VHA facility, but they could not compare 

information from different VHA facilities by product line. 

VHA Should Establish National Contracts and BPAs for Selected SDI. VHA could 

reduce its annual costs for selected SDI by about $4.34 million annually or $21.7 million 

over 5 years. To estimate the cost differences between using national contracts and BPAs 

and local contracts and the open market to purchase the selected SDI, we first 

recalculated the costs of the 28,830 SDI purchased during our review period using the 

lowest product line prices identified during our price survey. Then we compared these 

estimated prices with the purchase prices reported in the NPPD during our review period. 

Table 3 compares the reported costs of the selected SDI purchased during the 12-month 

period with the estimated costs if the same SDI had been purchased under national 

contracts and BPAs. (See Appendix A on page 15 for a detailed discussion of our price 

survey and cost estimate methodology.) 

Table 3. Annual Estimated Cost Benefits from Negotiating National Contracts

Surgical 

Implant 

Number of 

Purchased 

Implants 

Costs of Locally 

Purchased 

Implants 

Estimated Costs 

Under National 

Contracts 

Estimated Cost 

Reduction 

Aortic Valves 1,383 $8,014,889 $7,166,175 $848,714 

Coronary Stents 21,463 53,359,006 50,033,135 3,325,871 

Thoracic Grafts 5,984 9,944,749 9,776,030 168,719 

Totals 28,830 $71,318,644 $66,975,340 $4,343,304 

We believe that the significant price variances identified by our audit demonstrate that 

VHA could reduce its costs if it established national contracts and BPAs for these 

VA Office of Inspector General 5 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

selected SDI. In addition, the arrival of another SDI manufacturer, Medtronic, to the 

coronary stent market later in calendar year 2007 should alleviate the NAC’s concerns 

regarding the lack of competition in the coronary stent market. It could also stimulate 

enough market competition to decrease the negotiated prices of any national VHA stent 

contracts and BPAs to below those prices identified by our price survey. 

Finally, besides the benefits of lowering SDI prices, national contracts could also reduce 

VHA’s SDI expenses by promoting the consistent use of consignment agreements. 

Consignment agreements reduce VHA facilities’ expenses by shifting the carrying costs 

of SDI inventory and inventory losses to the manufacturer. In a consignment agreement, 

vendors maintain a stock of supply items at the VHA facilities and charge the VHA 

facilities only when the items are used. VHA facilities can return unused or expired 

items to the vendors free of charge. None of the four VHA facilities we visited 

consistently used consignment agreements to procure SDI. 

Conclusion 

VHA should establish national contracts and BPAs for aortic valves, coronary stents, and 

thoracic grafts to achieve lower SDI prices and reduce SDI expenses. Furthermore, 

PSAS could strengthen its oversight of VHA’s procurement and utilization of SDI by 

standardizing NPPD to allow VISN-wide and national data analysis. 

Recommendations 

1. We recommended that the Under Secretary for Health, within a year, evaluates 

VHA’s aortic valve, coronary stent, and thoracic graft purchases; studies the 

feasibility of establishing national contracts and BPAs; and where indicated, initiates 

national contracts and BPAs. 

The Under Secretary for Health agreed with our recommendation and stated that 

VHA fully endorses the establishment of national contracts and BPAs whenever 

possible for all high-use items, including surgical device implants. A Prosthetics 

Integrated Product Team has been actively pursuing opportunities to establish a 

national contract for coronary stents for almost 2 years. However, the few existing 

manufacturers of the coronary stents did not have an incentive to participate in 

requests for bids due to limited competition. Prosthetics and Clinical Logistics Office 

(PCLO) will renew efforts to pursue a national contract for the purchase of coronary 

stents now that other manufacturers may have recently entered the stent market. At 

the same time, the PCLO will establish a work group to assess the feasibility of 

establishing national contracts and/or BPAs for aortic valves and thoracic grafts. We 

find the improvement plans acceptable, and we will follow up on the planned actions 

until they are completed. 

VA Office of Inspector General 6 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

2. We recommended that the Under Secretary for Health establish management controls 

to standardize NPPD data used to monitor SDI procurement and utilization. 

The Under Secretary for Health agreed with the recommendation and stated that 

PCLO is developing a management information and tracking system, NIF, to identify 

all supply items, including SDI, by distributor and manufacturer part numbers. NIF 

will provide VHA standardized naming conventions and device-specific information 

needed to compare like items and perform in-depth analyses of national procurement 

trends. The Under Secretary also reported that PCLO will continue its efforts to 

standardize the nomenclature of selected surgical device implants identified in this 

report and to monitor the procurement and utilization of these devices via NPPD. We 

find the improvement plans acceptable, and we will follow up on the planned actions 

until they are completed. 

VA Office of Inspector General 7 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Issue 2: Inventory Controls Would Improve Accountability 

Findings 

VHA needs to ensure that its facilities have inventory controls to effectively manage and 

account for SDI. Although VHA policy requires VHA facilities to maintain perpetual 

inventory records for SDI in PIP, staff at three of the four VHA facilities we visited did 

not use PIP or any type of inventory control system to monitor and account for SDI. As a 

result, PSAS staff lacked reliable information regarding SDI stock stored in various 

locations at the VHA facilities, could not effectively manage purchased stock to prevent 

implants from expiring, and had no records regarding the disposition of expired SDI. 

During our 4 site visits, we inventoried 147 VHA-purchased aortic valves, coronary 

stents, and thoracic grafts valued at $290,836. We found that 18 valves and grafts valued 

at $34,381 (12 percent) had expired or would expire unused within the next 6 months 

after our site visits. 

VHA Facilities Needed To Establish Inventory Management Controls. VHA 

required its facilities to use PIP to manage prosthetic inventory items, in response to the 

OIG’s Audit of Management of Prosthetics Supply Inventories at VA Medical Centers 

and the Denver Distribution Center, (Report No. 99-00188-13, November 15, 1999). 

Nevertheless, three of the VHA facilities did not have any inventory system in place, and 

one used a locally developed inventory system, instead of PIP, to manage SDI. PSAS 

staff at the four VHA facilities chose not to use PIP for the selected SDI because they 

believed inclusion of the items in PIP would adversely affect their performance relative 

to VHA’s 30-day inventory supply standard. They stated that they did not use PIP 

because surgical implants normally have a shelf life of 5 years, but items recorded in PIP 

were subject to the 30-day on-hand stock limit. The local PSAS staff were not aware that 

PIP allowed users to exclude a percentage of inventory items from the 30-day supply 

limit and that they could request an increase in the number of exclusions, if necessary, 

from PSAS. The VHA facilities’ PSAS and Supply, Processing, and Distribution staff 

also expressed confusion about who was responsible for inventorying SDI. 

Our inventories of SDI stock identified expired implants and implants that would expire 

within 6 months of our visit based on the VHA facilities’ historical SDI usage rates. Of 

the 147 aortic valves, coronary stents, and thoracic grafts on hand that cost $290,836, 18 

items costing $34,381 (12 percent) had expired or would expire within the next 6 months. 

Table 4 shows the expired SDI identified during our inventories and the related cost 

savings if staff used physical inventories and PIP to reduce expired stock. 

VA Office of Inspector General 8 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Table 4. Cost Savings from Implementing Inventory Controls and Reducing Expired SDI 

Surgical 

Implant 

Expired 

Implants 

Cost of 

Expired 

Surgical 

Implants 

Implants 

Expiring 

Within 6 

Months 

Cost of 

Expiring 

Surgical 

Implants Total Cost 

 Aortic Valves 0 0 4 $24,400 $24,400 

 Coronary Stents 0 0 0 0 0 

 Thoracic Grafts 5 3,249 9 6,732 9,981 

 Totals 5 $3,249 13 $31,132 $34,381 

The use of physical inventories and PIP would provide VHA facility staff the information 

they need to better manage SDI and reduce expired stock. Staff would be less prone to 

overstocking the selected SDI if they had accurate inventory information. Even if VHA 

facilities’ must keep certain SDI in stock in order to provide emergent care, accurate 

inventory information would give them the opportunity to arrange credits and exchanges 

with manufacturers or to make SDI available to other VHA facilities before devices 

expire. 

Conclusion 

If VHA established effective inventory controls to properly account for SDI, it could 

manage SDI inventory to minimize the amount of stock kept on hand and the risks of 

having missing, damaged, or expired SDI. 

Recommendation 

3. We recommended that the Under Secretary for Health conduct physical inventories of 

SDI and use PIP to track inventory, monitor stock levels, and reduce inventory losses. 

The Under Secretary for Health agreed with the recommendation and stated that 

PCLO is in the process of reevaluating and revising “VHA Directive 2001-005, 

National Prosthetic and Sensory Aids Service SHG Inventory Package,” to facilitate 

compliance with inventory management mandates. The directive will include quality 

assurance and performance monitoring requirements for inventory management and a 

new requirement for facilities to conduct wall-to-wall inventories of all devices, 

including SDI. Furthermore, PCLO will develop an annual certification process to 

ensure that facilities comply with the new physical inventory requirements. The 

Under Secretary also reported that PCLO program managers will assess SDI 

inventory management practices during all upcoming medical facility site visits, with 

special emphasis on the facilities’ use of PIP. Based on the site visit findings and the 

trending of compliance results, VHA will take necessary corrective actions. We find 

the improvement plans acceptable, and we will follow up on the planned actions until 

they are completed. 

VA Office of Inspector General 9 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Issue 3: Patient Data Needs Safeguarding 

Findings 

VHA needs to ensure that facility staff provide only the minimum necessary private 

medical information and sensitive personal data to implant manufacturers. VHA’s 

Privacy Program requires privacy officers to ensure compliance with privacy statutes. 

Also, VHA’s Privacy Program and HIPAA require VHA staff to limit the disclosure of 

patient information to the minimum amount necessary to fulfill legitimate requests. 

However, seven (88 percent) of the eight VHA facilities we reviewed had no procedures 

in place to identify specific SDI manufacturers’ information requirements and to ensure 

the release of only the minimum amount of relevant patient information. As a result, 

clinical staff at the seven VHA facilities often provided SDI manufacturers patients’ 

medical information and personal data that exceeded FDA requirements, placing veterans 

at risk for identity theft or other misuse of information for commercial advantage, 

personal gain, or malicious harm. 

VHA Facilities Did Not Limit Patient Sensitive Information Provided to SDI 

Manufacturers. Clinical staff at the VHA facilities were aware of VHA privacy policies 

and related HIPAA requirements that require them to limit the disclosure of sensitive 

patient information to the minimum amount needed to satisfy requests. Yet staff at seven 

of the eight VHA facilities routinely provided sensitive patient data, such as patients’ full 

names, social security numbers (SSNs), addresses, and dates of birth, to manufacturers 

verbally during procedures or through use of patient inquiry sheets. These disclosures 

occurred even though the SDI manufacturers had not requested all of this information and 

did not need the information to meet FDA recall requirements. 

For example, two manufacturers of pacemakers and ICDs did not require patients’ SSNs, 

but staff at the seven VHA facilities routinely provided SSNs to all SDI manufacturers. 

In addition, some manufacturer representatives received patient inquiry sheets to copy 

required patient information also received additional information shown on the sheets, 

such as the patients’ service-connected disability ratings, religion, race, eligibility for VA 

benefits, employability ratings, and service-connected disabilities. Based on the patient 

information disclosure practices described above and the number of SDI implanted 

during our review period, we believe that as many as 156 patients at the 7 VHA facilities 

had more than the minimum amount of necessary medical information and personal data 

released to SDI manufacturers.

Local VHA Privacy Officers responsible for providing guidance on privacy related 

matters and for reviewing programs that collect, maintain, and store individually 

identifiable information had not developed or reviewed processes used to release SDI 

patient information to manufacturers. Also, clinical staff familiar with VHA privacy and 

HIPAA requirements did not properly apply this knowledge to ensure the release of only 

VA Office of Inspector General 10 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

the minimum amount of relevant patient data to manufacturers’ representatives. These 

problems at seven of the eight reviewed VHA facilities indicate that other facilities could 

also be providing more than the minimum amount of needed medical information and 

sensitive patient information to SDI manufacturers. 

Conclusion 

VHA did not ensure that clinical staff limited sensitive patient information provided to 

SDI manufacturers to information needed to comply with FDA recall requirements. 

Unnecessary disclosures of sensitive SDI patient information occurred because VHA 

facilities did not effectively implement VHA Privacy Program requirements governing 

the disclosure of information. 

Recommendations 

4. We recommended that the Under Secretary for Health develop and implement local 

SDI patient data release processes to ensure compliance with Federal privacy statutes. 

The Under Secretary for Health agreed with the recommendation and stated that on 

September 17, 2007, the VHA Privacy Office issued a Privacy Fact Sheet and Release 

of Information to Device Vendors Form (See Appendix C, Attachment 1, pages 

27-29) to all facilities outlining the process for releasing SDI patient health 

information. The fact sheet emphasizes that staff must only release the minimum 

amount of personal identification information that vendors need to observe or assist in 

implantable device surgeries or to track their products. Facility Privacy Officers are 

responsible for ensuring that the fact sheet is widely distributed and implemented in 

their facilities and for revising local privacy policies to reflect language from VHA’s 

newly revised Privacy Policy and Procedure template that restricts the release of SDI 

patient data. We find the improvement plans acceptable, and we will follow up on the 

planned actions until they are completed. 

5. We recommended that the Under Secretary for Health provide appropriate clinical 

staff refresher training on VHA privacy and HIPAA requirements and their 

applicability to the release of SDI patient information. 

The Under Secretary for Health agreed with the recommendation and stated that the 

VHA Privacy Office has developed training material on the proper release of SDI 

patient information and that facility Privacy Officers will utilize the material during 

planned clinical staff refresher training. The Privacy Officers will train clinical staff 

within 90 days of receipt of the training material. We find the improvement plans 

acceptable, and we will follow up on the planned actions until they are completed. 

VA Office of Inspector General 11 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Issue 4: Recall Procedures Need Improvement 

Findings 

VHA needed to ensure that all VHA facilities implemented required recall procedures to 

prevent lapses in SDI patient care. The FDA issues a Class I recall when there is a 

reasonable chance that a device will cause serious health problems or death and a Class II 

recall when a device could possibly cause temporary or reversible health problems or 

there is a remote chance that the device will cause serious health problems. As a result, 

VHA policy requires VHA facilities to have procedures to address, review, and take 

action on defective medical device and medical product recalls. These requirements 

include maintenance of a system of records to document resolution of the recalls and 

notification of any additional parties needed to assist in implementation of the recalls. 

One (25 percent) of the four VHA facilities reviewed did not have an effective system in 

place to identify and track cardiology patients who were subject to SDI recalls. The 

VHA facility also lacked adequate documentation to show that it had taken action to 

resolve recalls. These lapses in the VHA facility’s recall procedures occurred because 

staff believed that the recalls were the responsibility of the affiliated university providing 

the patients’ post-operative care. Subsequently, it could not document that cardiology 

patients affected by SDI recalls had received follow-up care, and we confirmed that two 

patients had not received timely follow-up care. 

VHA Facility Did Not Establish Effective Recall Procedures. At the 1 VHA facility 

that lacked adequate recall procedures for cardiology patients, we determined that 44 

patients received timely, appropriate follow-up care, but 2 patients had not promptly 

received needed care after the recall of their ICDs.

• On June 17, 2005, a Class I recall for a Guidant® ICD indicated that a short circuit in 

the device could place patients’ health and safety at risk. Accordingly, VHA issued 

guidance on July 7, 2005, stating that VA clinicians should identify affected VA 

patients within 2 weeks and provide follow-up care within 45 days. The VHA 

facility’s staff identified a patient affected by this recall, but they did not ensure the 

patient received timely and appropriate follow-up care in accordance with the VHA 

guidance. As a result, the patient did not receive follow-up care until he came in for a 

routine cardiology appointment on October 27, 2006, 477 days after VHA issued the 

recall guidance. 

• On February 11, 2005, a Class II recall for a Medtronic® ICD indicated that a short in 

the device’s battery could place patients’ health and safety at risk. VHA issued 

guidance on February 16, 2005, stating that VA clinicians should identify affected VA 

patients within 2 weeks and provide follow up within 90 days. However, neither the 

VHA facility nor the affiliated university identified the patient to provide prompt and 

appropriate follow-up care in accordance with the VHA guidance. As a result, the 

VA Office of Inspector General 12 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

patient did not receive follow-up care until his ICD “fired,” causing him to seek care 

on December 8, 2006, 660 days after VHA issued the recall guidance. When an ICD 

detects an abnormal heartbeat, it “fires” or gives the patient’s heart an electrical shock 

to return the heart to its normal rhythm. Although it is not required, many patients 

seek medical attention after their ICDs “fire.” 

The National Program Director for Cardiology and the Director of the VA Western 

Pacemaker Program, who reviewed these cases at our request, concluded that the delayed 

follow-up care did not harm the two patients. However, we concluded that the VHA 

facility’s inadequate recall procedures and follow-up processes placed patients at 

unnecessary risk. According to the Director of the National Center for Patient Safety 

(NCPS), VHA has had problems recalling a variety of SDI because it has not established 

effective tracking systems at local and national levels. In response to this concern, VHA 

has proposed the establishment of an implant registry that will allow VHA facilities to 

easily identify and track patients affected by recalls. The VHA Informatics and Data 

Management Committee reviewed this initiative in July 2007 and assigned it “priority 

status” for development. Subsequently, VHA is currently waiting for the receipt of its 

FY 2008 funding allocations to determine if it has sufficient funding for all of the 

“priority status” development initiatives. 

Conclusion 

VHA needs to ensure that VHA facilities have implemented recall processes and 

procedures that allow them to promptly identify and follow up on VA patients affected by 

recalled SDI. Furthermore, the development of an implant registry would improve 

VHA’s facility and national SDI recall processes by making it easier for staff to identify 

and track patients affected by recalls. 

Recommendations 

6. We recommended that the Under Secretary for Health ensure that there are effective 

local policies and procedures to identify and follow up on all VA patients receiving 

post-operative care at non-VA facilities. 

The Under Secretary for Health agreed with the recommendation and stated that the 

NCPS, through its Product Recall Office, will be responsible for establishing and 

coordinating national policy for the recall of defective medical devices and medical 

products. In addition, VHA will revise two directives to address the responsibilities 

of medical facility leadership in establishing and implementing local surgical implant 

recall policies and procedures. These revised directives will make it clear that all 

affected patients, including those patients receiving post-operative care at non-VA 

facilities, must be identified and personally contacted in the event of a recall. We find 

the improvement plans acceptable, and we will follow up on the planned actions until 

they are completed. 

VA Office of Inspector General 13 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

7. We recommended that the Under Secretary for Health submit the implant registry 

initiative to the OI&T for development when funding becomes available. 

The Under Secretary for Health agreed with the recommendation and stated that the 

Medical-Surgical Strategic Health Group in the Office of Patient Care Services has 

submitted the implant registry initiative to the OI&T. Pending funding availability, 

OI&T will develop the implant registry as part of the Prosthetics Enhancement 

project. We find the improvement plans acceptable, and we will follow up on the 

planned actions until they are completed. 

VA Office of Inspector General 14 
Audit of the Acquisition and Management of Selected Surgical Device Implants

Appendix A 

Price Survey and Cost Estimate Methodology 

Survey Methodology 

To determine whether VA purchased coronary stents, aortic valves, and thoracic grafts at 

the lowest available price, we reviewed pricing data contained in the NPPD. We also 

conducted a price survey of the 87 VHA facilities that had purchased at least 1 of the 3 

selected types of implants during our review period. During the price survey, we 

contacted each of the 87 VHA facilities to verify the accuracy of NPPD data, generate 

SDI price lists for each VHA facility, and identify the lowest price paid within VHA for 

the 171 product lines included in our population. 

Population 

The population consisted of 28,830 aortic valves, coronary stents, and thoracic grafts 

purchased by VA from July 1, 2005, to June 30, 2006, at a cost of $71,318,644. 

Estimate Methodology 

We used data obtained from the 87 VHA facilities during our price survey to generate 

price lists for each of the 171 different SDI product lines and 28,830 SDI items in our 

population. Using these price lists, we identified the lowest or “best” price VHA had 

paid for each product line. We considered the “best” product line prices to be reasonable 

“target” prices for the negotiation and establishment of national contracts and BPAs. By 

adding the costs of the 28,830 SDI using the “best prices” identified for each product 

line, we estimated what the annual cost would be if VHA had negotiated national 

contracts and BPAs for these selected SDI. 

To determine whether national contracts and BPAs might yield better SDI prices and 

lower SDI costs than local contract and open market purchases, we compared current SDI 

costs reported in NPPD with estimated SDI costs using the lowest or “best” prices 

identified during our price survey for the different product lines. Based on our 

calculations and cost comparisons for the 28,830 SDI, we estimated that VHA could 

reduce its annual costs for the 3 selected types of SDI by $4.34 million if it established 

national contracts and BPAs for these SDI instead of using the open market and local 

contracts. Over a period of 5 years, this would equate to a cost reduction of about 

$21.7 million. 

VA Office of Inspector General 15 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Appendix B 

Monetary Benefits in Accordance with 

IG Act Amendments 

Recommendation Explanation of Benefits

Better Use of 

Funds

Questioned 

Costs

1 Better use of funds resulting from 

VHA leveraging its buying power 

over 5 years. $21,716,520 

1 Questioned costs because of 

contracting error. $197,261

3 Cost savings resulting from better 

use of PIP. 34,381 

 Total $21,750,901 $197,261 

VA Office of Inspector General 16 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Appendix C 

Under Secretary for Health Comments 

Department of 

Veterans Affairs Memorandum

Date: September 25, 2007 

From: Under Secretary for Health 

Subject: Audit of the Acquisition and Management of Selected 

Surgical Device Implants

To: Assistant Inspector General for Auditing (52) 

1. Thank you for the opportunity to respond to this draft 

report, which I have carefully reviewed. I concur in your 

findings and recommendations. Attached is Veterans Health 

Administration (VHA) plan of corrective actions in response 

to each recommendation. Based on findings from your price 

survey, I also agree with your estimate of monetary benefits if 

established national contracts and Blanket Purchase 

Agreements (BPA) were used in the purchase of SDIs rather 

than the open market and local contracts. Naturally, these 

savings estimates are contingent upon whether or not national 

contracts or BPAs are actually feasible when considering the 

surgical device implants highlighted in your audit. 

2. In this regard, I want to emphasize a few points. VHA 

strongly encourages the use of national contracts and BPAs, 

and our Prosthetics and Clinical Logistics Office (PCLO) 

actively pursues such options in all areas of medical device 

and product purchasing, including SDIs. Your statement that 

“establishment of national contracts and BPAs for aortic 

valves, coronary stents, and thoracic grafts has not been a 

high priority” is somewhat misleading. In fact, a Prosthetics 

Integrated Service Team has attempted for almost 2 years to 

establish national contracts for the purchase of coronary 

stents, but to no avail, since the few manufacturers who 

produce stents were disinterested in bidding because they had 

no competitive incentive to do so. We have recently been 

advised that other manufacturers might be involved in 

VA Office of Inspector General 17 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

production of the stents, and the PCLO will again pursue 

possible national contract options. The PCLO also plans to 

establish a work group to explore the feasibility of 

establishing national contracts for aortic valves and thoracic 

grafts. Again, this possibility has been considered in the past, 

but the broad range of valve types, as well as the wide 

national variability in valve choice by surgeons, have made 

the possibility of national contracts seem unlikely. However, 

every effort will be made to establish the contracts. I am 

concerned about the wide variances in costs that you report 

for these items, and will direct the PCLO to offer possible 

purchasing alternatives if national contracts or BPAs are not 

feasible. 

3. As our action plan details, many of the issues you identify 

involving standardization of data included in the National 

Prosthetics Patient Database (NPPD) and national monitoring 

of SDI procurement and utilization, will be successfully 

resolved with systematic implementation of the National Item 

File (NIF), a key management information and tracking 

system that will ultimately encompass tens of thousands of 

items, including SDI inventories. The NIF is being populated 

on an ongoing basis, and medical facilities are accessing the 

system throughout the building process. At the same time, 

PCLO will continue efforts to standardize the nomenclature 

of selected surgical device implants identified in your report 

and monitor procurement and utilization trends through the 

NPPD. Another key initiative, the implant registry, will 

further enhance overall surgical implant management. VHA 

has formally submitted a request for this initiative to the 

Office of Information and Technology. 

4. VHA is also aware that facilities are frequently inconsistent 

in monitoring SDI inventories and in using the Prosthetics 

Inventory Package (PIP) in consolidating inventory records. 

The PCLO is currently re-evaluating related policies to 

identify and address existing administrative roadblocks. In 

this regard, VHA Directive 2001-005, dealing with the use of 

the package, is being revised to reflect expanded quality 

management monitoring requirements for inventory 

management. PCLO will also devise an annual certification 

process for facilities to ensure that the new inventory 

requirements are actually being accomplished at the local 

VA Office of Inspector General 18 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

level. In addition, PCLO program managers will routinely 

assess compliance during all scheduled medical facility site 

visits. 

5. The VHA Privacy Office has also taken immediate action 

to address concerns you raise about SDI patient data release 

practices in some of our facilities. The attached Fact Sheet 

(Attachment A) was issued to all facility Privacy Officers on 

September 17, 2007, outlining processes for releasing 

personal patient data. The Privacy Policy and Procedure 

template that is used by facilities to draft local policies is also 

being revised to reflect restrictions on releasing SDI patient 

data. In the meantime, the Privacy Officers have been alerted 

that the template is being revised, and have been provided 

with the proposed language (Attachment B) that should be 

added to local privacy policies on this matter. In addition, the 

Privacy Office has developed relevant training material that 

will be used by facility Privacy Officers during clinical staff 

refresher training. 

6. Lastly, I also support your recommendation that local 

policies and procedures be consistently developed and 

implemented to identify and follow-up on all VA patients 

with recalled SDI. The National Center for Patient Safety, 

the Office of Patient Care Services, the Office of Public 

Health and Environmental Hazards, the National Center for 

Ethics in Healthcare, and the Office of the Deputy Under 

Secretary for Health for Operations and Management, are 

currently completing final revisions to two related directives 

dealing with the recall of defective medical devices and 

medical products and with the disclosure of adverse events to 

patients. Both of these directives will update existing 

directives and specifically address national and local 

requirements for identifying and following up on VA patients 

with recalled surgical implants, including patients who might 

be receiving post-operative care in a non-VA facility. 

7. In summary, I appreciate your assistance in highlighting 

improvement opportunities for our program managers. A 

copy of your report will be provided to all Network Directors 

for review and appropriate follow-up action. Identified 

concerns will also be widely communicated through 

established modes such as national conference calls, e-mail 

VA Office of Inspector General 19 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

distributions and web site postings. If additional information 

is required, please contact Margaret M. Seleski, Director, 

Management Review Service, at 565-7638. 

(original signed by:) 

Michael J. Kussman, MD, MS, MACP 

Attachment 

VA Office of Inspector General 20 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Under Secretary for Health Comments 

to Office of Inspector General’s Report 

The following comments are submitted in response to the 

recommendations in the Office of Inspector General’s report: 

OIG Recommendations

Recommended Improvement Action 1. We recommended 

that the Under Secretary for Health, within a year, evaluates 

VHA’s aortic valve, coronary stent, and thoracic graft 

purchases; studies the feasibility of establishing national 

contracts and BPAs; and where indicated, initiates national 

contracts and BPAs. 

Concur 

Target Completion Date: December 2007 

The Veterans Health Administration (VHA) fully endorses 

establishment of national contracts and Blanket Purchase 

Agreements (BPA) whenever possible for all high use items, 

including surgical device implants. A Prosthetics Integrated 

Product Team (IPT) has been actively pursuing opportunities 

to establish a national contract for coronary stents for almost 

2 years. However, because of limited competitive incentive, 

the few existing manufacturers of the stents declined to 

participate in requests for bidding. The Office of Prosthetics 

and Clinical Logistics (PCLO) will renew efforts to pursue a 

national contract for the purchase of coronary stents. 

Opportunities for competitive bidding might be more 

successful since there is evidence that other manufacturers 

may have recently entered this competitive arena. At the 

same time, the PCLO will establish a work group to assess 

the feasibility of establishing national contracts or BPAs for 

aortic valves and thoracic grafts. While the high cost and 

volume of these devices certainly support the potential 

economic incentive for national contracts, other complexities 

make standardization difficult, including wide variation 

throughout the system in surgeon preference for specific 

devices. In addition, there are literally dozens of different 

VA Office of Inspector General 21 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

types of valves and grafts on the market, and the grafts are not 

limited to cardiac use. Nevertheless, the proposed work 

group will explore all aspects of contract feasibility and 

submit recommendations for future action. 

Recommended Improvement Action 2. We recommended 

that the Under Secretary for Health establish management 

controls to standardize NPPD data used to monitor SDI 

procurement and utilization. 

Concur 

Target Completion Date: October 2008 and Ongoing 

PCLO is in the midst of building a core management 

information and tracking system that is designed to ultimately 

capture tens of thousands of items, including SDI inventories. 

The National Item File (NIF) will identify all items by the 

distributor and manufacturer part numbers, thereby allowing 

VHA to have available the device specific information 

needed to compare like items and perform more in-depth 

analyses of national procurement trends. Significant 

resources, including a full-time technical staff, have been 

assigned to support development of this system, which is 

being populated on an ongoing basis; beginning with high 

cost, high quantity items and items included on national 

contracts. It is anticipated that the NIF will be completed 

early in FY 2009. Once the system is fully implemented, it is 

anticipated that issues dealing with lack of standardized 

naming conventions among facilities will be eliminated. 

In the meantime, however, PCLO will continue efforts to 

standardize the nomenclature of selected surgical device 

implants identified in this report, and to monitor the 

procurement and utilization of these devices via the National 

Prosthetics Patient Database (NPPD). PCLO has already 

standardized NPPD data for other surgical device implants, 

such as pacemakers, implantable cardioverter-defibrillators 

(ICDs) and implant leads, and continues quarterly monitoring 

of these items. 

Recommended Improvement Action 3. We recommended 

that the Under Secretary for Health conduct physical 

VA Office of Inspector General 22 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

inventories of SDI and use PIP to track inventory, monitor 

stock levels, and reduce inventory losses. 

Concur 

Target Completion Date: December 2007 and Ongoing 

VHA is aware that facilities do not consistently apply 

adequate inventory controls in maintaining and accounting for 

SDI or follow VHA policy in utilizing the Prosthetics 

Inventory Package (PIP) to maintain inventory records for 

SDI. Recognizing the barriers that facilities frequently 

encounter in using PIP, the PCLO is in the process of reevaluating existing policy with the goal of facilitating 

compliance with required inventory management mandates. 

For example, VHA Directive 2001-005, National Prosthetic 

and Sensory Aids Service SHG Inventory Package, is 

currently being reassessed and revised, with anticipated 

publication by the end of the First Quarter, FY 2008. 

Particular attention will be given to specifying quality 

assurance/performance monitoring requirements for inventory 

management, with a new requirement that facilities conduct 

wall-to-wall inventories of all devices, including SDIs. An 

annual certification process will also be developed by PCLO 

for feedback in ensuring that facilities are in compliance with 

the new physical inventory requirements. 

In addition, PCLO program managers will conduct an 

assessment of surgical implant inventory management 

practices during all upcoming medical facility site visits that 

are conducted, with special emphasis on compliance by the 

facilities in utilizing the PIP. Based on the site visit findings, 

compliance trends will be evaluated, with corrective actions 

taken as indicated. 

To further communicate expectations for facility tracking of 

all surgical device implants in the PIP, the PCLO will issue a 

memorandum to all prosthetic representatives, VISN Chief 

Logistics Officers and Chiefs of Staff re-emphasizing the 

importance of tracking all surgical implants in the PIP. A 

copy of this report will also be provided to all VISN Directors 

for review and follow-up. 

VA Office of Inspector General 23 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Recommended Improvement Action 4. We recommended 

that the Under Secretary for Health develop and implement 

local SDI patient data release processes to ensure compliance 

with Federal privacy statutes. 

Concur 

Target Completion Date: October 2007 and Ongoing 

On September 17, 2007, the VHA Privacy Office issued a 

Privacy Fact Sheet (Attachment 1) to all facilities outlining 

the process for releasing SDI patient health information, 

emphasizing that only minimum necessary standards are 

followed in releasing personal identification information to 

vendors assisting with implantable device surgery or 

observing surgery, or to vendors for the purpose of product 

tracking. VHA’s Privacy Policy and Procedure template, 

which is used by facilities to draft local privacy policies, is 

also being revised to appropriately address restrictions on the 

release of SDI patient data. Prior to release of the revised 

template, the Privacy Office supplied the Privacy Officers 

with the proposed language that should be added to local 

privacy policies on this matter. This document, which is 

included in Attachment 1, was also distributed on September 

17, 2007. The Privacy Officers are responsible for ensuring 

that the fact sheet is widely distributed and implemented in 

their facilities, especially in the surgical services, and that 

revisions to local privacy policies are made to reflect 

language included in the new template. 

Recommended Improvement Action 5. We recommended 

that the Under Secretary for Health provide appropriate 

clinical staff refresher training on VHA privacy and HIPAA 

requirements and their applicability to the release of SDI 

patient information. 

Concur 

Target Completion Date: January 2008 

The VHA Privacy Office has also developed training material 

on the proper release of SDI patient information that facility 

VA Office of Inspector General 24 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Privacy Officers will be directed to utilize during planned 

clinical staff refresher training. As part of this effort, the 

Privacy Officers will be instructed to provide this training 

within 90 days of receipt of the training material. 

Recommended Improvement Action 6. We recommended 

that the Under Secretary for Health ensure that there are 

effective local policies and procedures to identify and follow 

up on all VA patients receiving post-operative care at non-VA 

facilities. 

Concur 

Target Completion Date: December 2007 

A revised VHA Directive, Recall of Defective Medical 

Devices and Medical Products, is currently undergoing final 

review prior to publication. When approved, this Directive 

will make the National Center for Patient Safety (NCPS), 

through its Product Recall Office, responsible for establishing 

and coordinating national policy for the recall of defective 

medical devices and medical products. Another related VHA 

Directive, Disclosure of Adverse Events to Patients, is also 

undergoing final review that will revise and update the 

current version. Both of these directives will address the 

responsibilities of medical facility leadership to establish and 

implement local policies and procedures to ensure that in the 

event of official recall of surgical implants (including SDIs), 

involved patients will be identified and personally contacted, 

including those patients who might be receiving postoperative care at non-VA facilities. Also, OIG’s report will 

be distributed to all Network Directors, who will share the 

information with relevant staff, including the Network Recall 

Coordinators, for follow-up communication with the 

facilities. 

Recommended Improvement Action 7. We recommended 

that the Under Secretary for Health submit the implant 

registry initiative to the Office of Information and 

Technology for development when funding becomes 

available. 

Concur 

VA Office of Inspector General 25 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Target Completion Date: Completed 

The Medical-Surgical Strategic Health Group, Office of 

Patient Care Services has submitted the implant registry 

initiative request to the Office of Information and 

Technology. Pending funding availability and approval, the 

initiative will be developed as part of the Prosthetics 

Enhancement project. 

 

VA Office of Inspector General 26 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Attachment 1 

Under Secretary for Health Comments 

Health Data and Informatics 

VHA Privacy Office 

Privacy Fact Sheet 

September 2007 Volume 07, No. 4 

Disclosing the Minimum Amount of Protected Health Information (PHI) 

to Vendors Assisting with Implantable Devices or Observing Surgery 

Often, when implantable devices such as stents or heart pacemaker devices are being placed into patients 

during a surgery, the vendor who supplies these devices is in attendance to assist with the implantation or 

the calibration of the implanted device. In these cases, these vendor representatives are considered to be 

health care providers assisting with the care of the patient and any disclosures to them are as health care 

providers. In addition, after the surgery, VHA often discloses information to the vendor in order for them 

to contact the patient in the event of a recall of the implanted device and will ask for specific information 

for their records in order to contact the patient, if needed. Though the minimum necessary standard in the 

HIPAA Privacy Rule does not apply to disclosures to or requests by a health care provider for treatment 

(Ref. 45 CFR §164.502(b)(2)(i)), VHA will still apply the minimum necessary standard when disclosing 

information to vendors. The disclosure to the vendor is made not only for treatment purposes but also for 

public health tracking required by the Federal Drug Administration (FDA) for implantable devices. 

Although there is sufficient legal authority to make the disclosure under the HIPAA Privacy Rule for 

these two purposes, it is vital that only the minimum necessary amount of information be disclosed to the 

vendor. 

In some recent cases, VA Medical Center Operating Room staff has given more information to these 

vendors than was requested by the vendor which breaches the HIPAA Privacy Rule minimum necessary 

standard. It is critical that only the requested amount of information is provided to these vendors 

and that VHA maintain an accounting of these disclosures in the Release of Information 

department. 

Vendors may also request to be allowed to observe the implantation of devices that their company sells in 

order to learn about these surgeries or learn how to assist in the future. In these cases where the vendor is 

not actually participating in the surgery, but is only observing, a signed, written authorization from the 

patient must be obtained before allowing disclosures to the vendor or allowing the vendor to view the 

surgery. This is because they will be allowed to hear information, see the patient being operated on and 

as a result, have information disclosed to them. See the December 2003 Privacy Fact Sheet, Vol. 04, No. 

1 - Vendor Reps in Surgical Suites, available at http://vaww.vhaco.va.gov/privacy/FactSheets.htm for 

additional information. Since the vendor is not acting in the capacity of a health care provider and is only 

an observer for their own purposes and not for the purpose of assisting VHA in the surgery, the only 

authority to allow them to have access to the information disclosed during the surgery is by having the 

patient sign a HIPAA-compliant authorization. This must be accomplished in the following manner: 

VA Office of Inspector General 27 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

• The patient must be informed that the vendor wants to observe the surgery for the purpose of 

learning how the device is implanted; 

• The patient must be willing to have the vendor in attendance; and 

• The patient must complete VA Form 10-5345 prior to their surgery authorizing the disclosure of 

information to the vendor. 

Note: For information on photos taken during surgery or suggested readings on this topic -Surgical 

Setting Fact Sheet which can be found on the VHA Privacy Office web site at: 

http://vaww.vhaco.va.gov/privacy/Communications/FactSheetVol04No1.doc

Privacy Office at a glance... VHA-specific privacy questions: VHA personnel should contact their 

Privacy Officer or VHA Privacy Office at 321-504-4574. Website: http://vaww.vhaco.va.gov/privacy 

VA Office of Inspector General 28 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Under Secretary for Health Comments 

Release of Information to Implantable Device Vendors 

When implantable devices such as stents or heart pacemaker devices are being placed 

into patients during a surgery, the < INSERT Facility Name> will follow the minimum 

necessary standard as outlined in VHA Handbook 1605.2 when making disclosures to 

vendors assisting with the implantation or calibration of these devices. Though the 

minimum necessary standard in the HIPAA Privacy Rule does not apply to disclosures to 

or requests by a health care provider for treatment (Ref. 45 CFR §164.502(b)(2)(i)), VHA 

will still apply the minimum necessary standard when disclosing information to vendors. 

The disclosure to the vendor is made not only for treatment purposes but also for public 

health tracking required by the Federal Drug Administration (FDA) for implantable 

devices. Therefore, only the requested amount of information will be disclosed to the 

vendor when providing or releasing information for the purpose of tracking the device in 

the event of a recall. 

Vendors may also request to be allowed to observe implantation of devices that their 

company sells in order to learn about these surgeries or learn how to assist in the future. 

In these cases where the vendor is not actually participating in the surgery, but is only 

observing, a signed, written authorization from the patient must be obtained before 

allowing disclosures to the vendor or allowing them to view the surgery. This must be 

accomplished in the following manner: 

• The patient must be informed that the vendor wants to observe the surgery for the 

purpose of learning how the device is implanted; 

• The patient must be willing to have the vendor in attendance; and 

• The patient must complete VA Form 10-5345 prior to their surgery authorizing the 

disclosure of information to the vendor. 

If the vendor requests to take a photograph of the implantation, the patient must also sign 

VA Form 10-3203 for authorization to take the photograph in addition to the VA Form 

10-5345 for authorization to disclose information. 

All disclosures made to implantable device vendors must be reported to the Release of 

Information Department for inclusion in the ROI Records Management Software so that 

an accounting of the disclosures is maintained. 

VA Office of Inspector General 29 
Audit of the Acquisition and Management of Selected Surgical Device Implants 

Appendix D 

OIG Contact and Staff Acknowledgments 

OIG Contact Janet Mah (310) 268-4335 

Acknowledgments Randy Alley 

Corina Riba 

Andrew Hamilton 

John Powers 

Andrea Lui 

VA Office of Inspector General 30 
Audit of the Acquisition and Management of Selected Surgical Device Implants

Appendix E 

Report Distribution 

VA Distribution

Office of the Secretary 

Veterans Health Administration 

Assistant Secretaries 

Office of General Counsel 

VHA Prosthetics and Clinical Logistics Office 

Deputy Assistant Secretary for Acquisition and Materiel Management 

VA National Center for Patient Safety 

VHA Privacy Office 

Office of Patient Care Services 

Non-VA Distribution

House Committee on Veterans’ Affairs 

House Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

House Committee on Oversight and Government Reform 

Senate Committee on Veterans’ Affairs 

Senate Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

Senate Committee on Homeland Security and Governmental Affairs 

National Veterans Service Organizations 

Government Accountability Office 

Office of Management and Budget 

This report will be available in the near future on the OIG’s Web site at 

http://www.va.gov/oig/publications/reports-list.asp. This report will remain on the OIG 

Web site for at least 2 fiscal years after it is issued. 

VA Office of Inspector General 31